PEAK OIL - EPOCHAL EVENT OF OUR LIVES

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Peak Oil Review: 11 March 2019

By Tom Whipple, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-03-11/peak-oil-review-11-march-2019/

GRAPHIC OF THE WEEK



Quote of the Week

“All the climate arguments are real, urgent and important.” Spencer Dale, group chief economist at supermajor BP, told the Washington Post.


1. Oil and the Global Economy

The struggle between declining economic growth and falling oil supplies continued to affect oil prices last week. The failure of a significant portion of Venezuela’s electricity grid has already been a significant blow to the country’s roughly 1 million b/d of oil production, and the situation seems likely to get worse. However, part of this decline could be offset by the return to production of Libya’s 300,000 b/d Sharara oilfield after being offline for three months.

There was mixed economic news last week. The US jobs report does not bode well for the future, and China’s exports were some 20 percent lower last month than in 2018. This news was offset by talk of a settlement to the US-China trade dispute later this month. These factors balanced each other off resulting in London futures falling about 1 percent to $65.74 and New York futures climbing by a similar amount to close the week at $56.07.

The major domestic news for the week was the announcement by Chevron that it plans to increase its production from the Permian Basin by 900,000 b/d in the next five years and a similar statement by Exxon that it will expand its Permian output by 1 million b/d. These announcements came in response to a Wall Street Journal story that US shale oil production is starting to falter due to wells being drilled too close together.

For the next few weeks, the course of the Venezuelan power outage and the US-China trade talks could impact oil supplies and prices. Should Venezuela’s multiple problems lead to the loss of a major part of the country’s exports, then oil prices will likely move higher. Coupled with the OPEC+ production cuts, signs that the rapid growth of US shale oil production may be about to slow, and even the furor over Brexit, we may be on the verge of geopolitical changes that will affect the oil markets before the year is out.

The OPEC Production Cut: Russia plans to speed up oil output cuts this month, and by the end of the month it will bring its oil production cut to 228,000 b/d from the October level. Energy Minister Novak told reporters on Monday “We have an understanding that in March there will be higher compliance rate than in previous months.” Moscow maintains that the extreme cold in which most of its oil is produced prevents it from cutting production in the winter without damaging its equipment and oil fields.

US Shale Oil Production: Last week began with a report in the Wall Street Journal that the “shale companies’ strategy to increase oil and gas production by drilling thousands of new wells more closely together is turning out to be a bust.” Not only is less oil than expected coming from wells being drilled too close to an older well, but the production from older wells in the vicinity of the new ones is “threatening the US oil boom and forcing the maturing industry to rethink its future.” The practice of bunching wells in close proximity to other wells has been going on for some time, but now we have the prestigious Wall Street Journal, which is read carefully by lenders to shale drillers, alleging that the practice has become so widespread that it threatens the industry.

The Journal, which has verified the problem by examining production reports for thousands of recently drilled wells, says that engineers are warning that the new “child” wells could produce as much as 50 percent less oil than more widely spaced wells. These “child” wells, however, cost the same to drill and frack as more isolated wells, raising the issue of whether the capital cost of “child” wells will turn out to be more than the value of the oil that they will ever produce. Most of the wells planned for the next decade will be “child” wells.



One driller who was planning to drill 32 wells in each drilling block of roughly two square miles is now planning to drill 16 to 24. A recent study by the Society of Petroleum Engineers found child wells could produce between 15 and 50 percent less oil, depending on how close the wells are packed. Another study by Rystad Energy found that the first “parent” wells will produce 10 to 12 percent less oil and gas on average when a “child” well is drilled nearby. Much lower production from “child” wells becomes important as over 50 percent of the wells in the Permian Basin are now “child” wells.

Drillers have finite acreage from which to produce oil, so it’s not always possible to stretch out the same number of planned wells over a larger area. Companies will have to drill fewer wells than they had anticipated, which means that we are likely facing “an industry-wide write-down” if drillers are forced to downsize the estimates of wells they can drill and soon will have trouble coming up with enough new production to offset the notoriously rapid depletion of shale oil wells.

The story brought an immediate reaction from Chevron and Exxon who are heavily invested in the Permian and are counting on production from the basin for much of their profitability in the coming decade. These companies have deep pockets, so they are not dependent on a constant infusion of new capital and bring with them more technical expertise than the smaller drillers. Both companies are expecting a Permian basin oil boom in the next five years.



Chevron says it expects to double its production to 900,000 b/d in the Permian and Exxon expects to be producing 1 million b/d by 2024. Chevron says it does not have the problem of lower production from child wells that is plaguing the smaller drillers as it is using “sophisticated machine learning technology” to plan where and how to drill and frack its wells. Chevron is becoming increasingly dependent on shale oil production and says its Permian resources of 16.2 billion barrels are about a quarter of its total reserves.

Exxon says its Permian reserves are now about 10 billion barrels out of global reserves of 100 billion. The company claims it is so good at producing shale oil from the Permian that it can be profitable even if prices fall to $35 a barrel. However, last year the Australian mining giant BHP pulled out of the US shale oil business after writing off roughly $20 billion saying they had better opportunities for making money than producing shale oil. Perhaps Chevron and Exxon will be better managers of shale oil properties and will be able to extract oil at a profit where others have failed. It will be an interesting decade ahead.

Last week US oil drillers cut the number of operating oil rigs for a third week in a row to the lowest level in 10 months as the smaller producers cut spending even though oil majors plan to spend more. Drillers cut nine oil rigs in the week to March 8, bringing the total rig count down to 834, the lowest since May.

2. The Middle East & North Africa

Iraq: Iraq maintained near-record levels of oil exports in February, with overall sales averaging 3.996 million b/d. The export total includes 3.621 million b/d by the federal government and 375,000 b/d by the autonomous Kurdistan Regional Government.

At least six paramilitary fighters died in an insurgent ambush on in Iraq’s disputed northern territories, which remain fertile ground for Islamic State militants to continue the insurgency. This is the region which had been controlled by the Kurds until they were forced out by government troops last year.

Saudi Arabia: The kingdom produced 10.1 million b/d of crude in February, well below its quota under the OPEC+ supply quota 10.31 million b/d. A government official told S&P Global Platts that “March will be lower.” Saudi Energy Minister al-Falih said last month that March production would fall to 9.8 million b/d, with exports at 6.9 million b/d.

Large volumes of natural gas have been found in the Red Sea, according to the Energy Minister al-Falih. Aramco also is considering opportunities for acquisitions of liquefied natural gas projects in the United States. Earlier this year, Aramco’s chief executive Amin Nasser told Reuters that the company was looking to spend billions of dollars on natural gas acquisitions in the US as part of a strategy to bolster its gas business.

The listing of Saudi Arabia’s Aramco is on track to take place in 2021 according to Energy Minister al-Falih. In January, Al-Falih said the company would issue an international bond in the second quarter of this year, mostly to fund the acquisition of a majority stake in petrochemicals major Sabic, valued at $70 billion, but also to tap “multiple sources of capital.” Given Aramco’s reluctance to make its accounts public, as befits a company preparing for a listing, many are skeptical that the bond issue will ever take place since international bond investors are just as interested in a company’s financial health as stock investors.

Libya: The country’s biggest oil field resumed production last week, adding another complication to OPEC’s effort to trim a global supply glut. Sharara is expected to produce 80,000 b/d immediately, and the regular output of 300,000 b/d will be restored now that the site has been secured. The first export cargos of Sharara crude since the lifting of force majeure will be loaded this weekend, according to trading sources and shipping reports.

The field, which was shut down in December after guards seized it while demanding more money, was taken over last month by forces loyal to eastern militia leader Khalifa Haftar. The National Oil Company “has received assurances that site security has been restored, verified by our inspection team, enabling staff to return to work,” Chairman Mustafa Sanalla said in the statement. The shutdown led to $1.8 billion in lost production.

In a new development, forces from eastern Libya loyal to Haftar have now reinforced a base in the center of the country and signaled to Tripoli that they might move to take over the capital. The UN is attempting to mediate between Haftar and Tripoli’s internationally-recognized government led by Prime Minister al-Serraj, Western diplomats say. They fear it may be the last UN attempt to unify the rival administrations and end the chaos that followed the overthrow of Muammar Gaddafi in 2011.

Haftar, a 75-year-old former general, is increasingly taking the situation into his own hands, backed by the United Arab Emirates and Egypt who see him as the man to restore order to Libya. For many, especially in the east, the general is the only one who can end fighting by numerous small militia groups with ever-changing names. His enemies in western cities see him as the new Gaddafi.

3. China

China lowered its economic growth target this year to between 6 and 6.5 percent, acknowledging a deepening slowdown. A paper published last Thursday by the Brookings Institution reinforced longstanding skepticism about the government’s statistics. According to the paper, China’s economy is about 12 percent smaller than official figures indicate, and its real growth has been overstated by about 2 percent annually in recent years suggesting that Beijing’s economy currently is growing at around 4 percent.



Beijing reported its steepest year-on-year decline in exports in three years on Friday, the latest sign that a global slowdown and the trade dispute with the US are hurting its economy. Exports sank 20.7 percent last month compared with February 2018, the biggest monthly fall since February and four times steeper than the 4.8 percent decline forecast in a Reuters poll of economists. Imports fell 5.2 percent, compared with a forecast drop of 1.4 percent, leaving China with the smallest trade surplus in 11 months.

China’s CNPC plans to increase its oil and gas exploration budget five-fold over last year as the country’s dependence on foreign-sourced energy commodities deepens to nearly 70 percent for oil and over 45 percent for natural gas. CNPC will spend $740 million (5 billion yuan) on exploration to pursue the goal of reducing import dependence.

US-based LNG exporter Cheniere Energy is in talks with China’s state-run Sinopec about a long-term LNG supply agreement, with the parties awaiting further instructions from government authorities. The Wall Street Journal reported that Cheniere is expected to sign an $18 billion supply agreement with Sinopec that might be announced as part of a broader US-China trade deal at a summit between President Trump and Chinese President Xi Jinping at the end of March.

The supply of domestic coal is expected to tighten further as authorities in China’s northwestern province had ordered open-pit mines to shut down. According to a document released by local authorities in Shenmu and Fugu, counties in Shaanxi’s Yulin city, all open-pit coal mines will have to be shut by the end of this year.

China’s coal imports in February fell sharply from January due to uncertainty over Beijing’s policies, while the week-long lunar new year holiday also cut into business. Coal arrivals were nearly halved in February to only 17.6 million tons, down from 33.50 million tons in January.

4. Russia

Russian exports of oil and oil products to the United States surged in the last week of February to their highest level since 2011, with Russia taking advantage of the Venezuelan collapse. At least nine tankers delivered 3.19 million barrels of oil and oil products of Russian origin to US ports in the week February 23 to March 1.

5. Venezuela

On Thursday evening the San Geronimo B substation in the center of the country, which supplies electricity to four out of five Venezuelans from the massive Guri hydropower plant, went down. The San Geronimo B substation connects eight out of ten Venezuela’s largest cities to the Guri hydropower plant via one of the longest high-voltage lines in the world.

So far, the government has said nothing about the cause of the blackout, except to blame it on Washington and the opposition. Venezuela gets about two-thirds of its power from four hydro dams along the Caroni river including the Guri dam which is one of the largest in the world. The nearby San Geronimo A backup substation, which transmits current from the smaller Matagua hydropower plant, operated intermittently on Sunday. Supplies from Matagua and few unreliable thermoelectric plants allowed the government to send sporadic power to parts of Caracas throughout the weekend.

Unless repairs to the to the substation can be made quickly, which seems increasingly unlikely, due to the lack of spare parts, the country is facing a humanitarian crisis on a scale not seen since World War II. Food is spoiling due to the lack of refrigeration and there no way to pump or transport fuel so that food supplies can be maintained. Much of the oil industry has come to a halt due to the lack of power for pumps.

In other news, opposition leader Juan Guaido had returned to the country despite threats to arrest him. The US is considering imposing more sanctions and is discussing emergency economic aid. The World Bank says that Venezuela must pay ConocoPhillips more than $8 billion to compensate Conoco for assists expropriated by Hugo Chavez back in 2007.

In recent years, PDVSA’s fleet of 15 oil tankers has been operated by a German ship-management company that supplied the crews and operated the ships. This worked well until Caracas stopped paying the German firm and the various port charges that tankers accrue during normal operations. The German firm has already abandoned several oil tankers that have been detained in foreign ports for non-payment of local bills. The Germans say they will return ten tankers to Venezuela and remove their crews, but there are no crews in Venezuela immediately available to operate the giant ships. Unless a solution is found, Venezuela will soon be out of the tanker business.

As the political and economic situation deteriorates to unimaginable levels, Moscow has reaffirmed its support of the Maduro government. This support includes threatening the US against military intervention and facilitating payments for Venezuelan oil that skirt the US sanctions. In recent years, Russia has invested billions of dollars in supporting the Maduro regime and fears it will lose its money and its influence in the country should the government fall. Over the weekend, however, there were signs that Moscow is backing off on its support for the Maduro government as the power shortage makes its situation ever more hopeless.

6. Mexico

Standard & Poor’s cut the credit rating for Mexico’s national oil company, Pemex, last week. The move reflects concerns that the government’s plan to clean up Pemex’s finances is insufficient, and that the company will continue to be subjected to political decisions that conflict with its financial objectives. Newly elected Mexican President Obrador has said he will inject $3.9 billion into the company which is currently $106 billion in debt. S&P says this is not enough and that it will take at least $20 billion in government aid to revive Pemex.

Despite the efforts of the new Mexican government to reduce the country’s dependence on US natural gas, a new report says this will be impossible in the foreseeable future. Mexico now imports over 50 percent of its natural gas requirement from the US, and this seems likely to increase. Mexico does not have the capital to develop sufficient gas production to reduce that being piped in from the US.

7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)

BP on oil’s future: Despite the forecast that peak oil demand could come in the 2030s, BP noted that under all scenarios oil will continue to play a significant role in the global energy system by 2040. Moreover, BP wrote that significant levels of investment are required for there to be sufficient supplies of oil to meet demand in 2040, adding that in all scenarios, trillions of dollars of investment in oil is needed. (3/6)

Norway’s $1 trillion sovereign-wealth fund took a major step toward selling off some of its substantial holdings in oil-and-gas companies, a move to shield the oil-rich nation from the risk of permanently lower crude prices. The Norwegian finance ministry proposed that the fund remove energy-exploration and -production companies from its portfolio, following a 2017 recommendation made by the central bank, which uses the fund to invest the proceeds of the country’s oil industry. (3/9)

Russia’s Gazprom Export said Thursday it had made its first ever sale of gas to a western European company priced in rubles, as the company continues to use its Electronic Sales Platform as a tool for diversifying its European gas sales. (3/8)

The US oil rig count decreased by nine to 834, the lowest since last May and the third straight weekly decline, according to GE’s Baker Hughes. Gas rigs declined by two to 193. (3/9)

Exports growing: The US is poised to export more oil and liquids than Saudi Arabia by year-end, according to Rystad Energy. The shift, Rystad explains, comes from continued rising production from US shale plays and increased oil export capacity from the US Gulf Coast. (3/8)

Offshore brouhaha? The Trump administration is set to unleash its offshore, five-year oil drilling plan within weeks, making it perfectly clear that it would like to open more acreage to drillers along the coast of the country. That has drawn opposition from both Democratic and Republican leaders in the coastal states. (3/8)

South Dakota’s governor, Kristi Noem, has proposed legislation seeking to uncover where out-of-state funds for pipeline protests come from and “cut them off at the source;” Republican Noem also said she would set up a fund for extraordinary costs for law enforcement that usually accompany pipeline protests. (3/6)

Colorado is overhauling the laws governing how the oil and gas industry operates in the state. The legislation seeks to put more protections on public health, safety and the environment as it relates to oil and gas development. (3/7)

Oil busting: The Colorado State Senate Transportation & Energy Committee has passed a bill which the American Petroleum Institute (API) says “threatens hundreds of thousands of jobs.” In an organization statement posted on its website, the API said bill SB19-181 would “at the very least hinder, if not prohibit” energy development in Colorado. (3/8)

Sage grouse habitat issue: The US government received bids for about 70 percent of the land it offered at a large oil and gas lease sale in Wyoming last week, held over the protests of conservationists who argued the area was critical habitat for wildlife, including a threatened bird. (3/4)

Alaska’s dream of building a massive liquefied natural gas (LNG) export terminal could be coming to an end. For years, former Alaska Gov. Bill Walker pushed the massive $44 billion capex intensive project as a way to offset decades of dwindling oil production in the country’s largest state. To date, some $260 million has been spent by the AGDC on the Alaska LNG project. New governor Michael Dunleavy, who took office in December, is taking a different approach. (3/6)

Alaska Gas Line Development Corp said on Wednesday it received the last major federal permit needed before it can decide on its proposed $10 billion Alaska Stand Alone Pipeline to supply natural gas to in-state consumers. (3/7)

The first US floating liquefied natural gas (LNG) project continues to plan future steps in its progress despite the U.S.-China trade war, a top manager at one of the project’s partners told Reuters on Thursday. The first US floating LNG project, Delfin LNG, is planned to be located nearly 50 miles off the Louisiana coast in the US Gulf of Mexico. (3/8)

EV supercharging: Tesla announced that it is introducing V3 Supercharging, which will support peak rates of up to 250 kW per car. V3 represents a new architecture for Supercharging. A new 1MW power cabinet with a similar design to Tesla utility-scale products supports the peak rates of up to 250kW per car. At this rate, a Model 3 Long Range operating at peak efficiency can recover up to 75 miles of charge in 5 minutes. (3/8)

VW and EVs: One of the world’s largest carmakers, Germany’s Volkswagen AG, is betting big on electric vehicles and e-mobility with a war chest of around US$50 billion to challenge Tesla, which, for the time being seems unfazed by the increasingly crowded EV market. (3/7)

UK wind: The UK has announced a new target to source a third of its electricity from offshore wind by 2030 but faces criticism for not setting more ambitious goals to reduce carbon emissions. The agreement is the first sector deal for renewable energy and follows a period of rapid growth of wind power, which accounted for 17 per cent of the country’s electricity generation last year. (3/7)

Germany’s RE: Combined wind and solar generation in Germany is forecast to reach a record high this week after Monday’s total narrowly missed the country’s daily all-time high. Wind power covered 64 percent of German power demand on Monday and has been Germany’s single biggest source of electricity year to date. The surge in renewables is expected to push average German weekly spot power prices down to levels seen last spring. Widening the view, across Europe wind power covered 24 percent of electricity demand Monday. (3/6)

Efficiency backsliding: LED light bulbs are already on the shelf, work great, last longer, use one-sixth of the power of an incandescent bulb, and are gaining sales dramatically. Efficiency advocates worry that the Trump administration could slow the pace of this lighting revolution by pushing back some supportive rules established during the Obama administration. (3/9)

Greenland’s 660,000-square mile ice sheet contains enough fresh water to flood coastal cities around the world. Warm air over the sheet is causing it to melt, but new work reveals that rainfall is also causing more melting than previously thought. (3/9)

BP climate strategy: BP said that it would support a call from a group of institutional investors to expand its carbon emissions reporting and to describe how BP’s strategy is consistent with the goals of the Paris Agreement in yet another pledge by Big Oil to start taking investor demands on climate action seriously. (3/6)

[sumisu]

Peak Oil Review 4 March 2019

By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-03-04/peak-oil-review-4-march-2019/

Quote of the Week

“The once-powerful partnership between fracking companies and Wall Street is fraying as the industry struggles to attract investors after nearly a decade of losing money. Frequent infusions of Wall Street capital have sustained the US shale boom. But that largess is running out. New bond and equity deals have dwindled to the lowest level since 2007. Companies raised about $22 billion from equity and debt financing in 2018, less than half the total in 2016 and almost one-third of what they raised in 2012.
Bradley Olson and Rebecca Elliott, Wall Street Journal, 2/24/19

Graphics of the Week





From Ron Patterson’s web site Peak Oil Barrel


1. Oil and the Global Economy

The struggle between lower crude output and the prospects for a global economic setback that could reduce the demand for oil continued last week. Prices rose on bullish news early in the week and then fell to close only slightly higher for the week at $55.80 in New York and $65.07 in London. Most analysts are predicting that oil prices will continue to rise as the case for lower production later this year seems stronger than the case for lower demand.

For some time now analysts have been noting that for the last few years, global oil production outside of the US has been generally stagnant. (Note the trailing average in the graphic above) While oil prices have varied during this period, they have not spiked due to the spectacular increase in US shale oil production. In recent years the demand for oil has been increasing at about 1.5 million b/d each year which has been satisfied by US production. Unless there is a global economic recession or a substantial increase in oil prices, demand for oil seems destined to continue increasing for the foreseeable future despite growing concerns about carbon emissions.

Currently, there is no evidence that a spectacular jump in global oil production is in the offing and new oil discoveries remain well below the world’s annual oil consumption of some 36 billion barrels per year.

Leaving aside the concerns about carbon emissions, the heart of the global oil availability issue in the immediate future seems to center on whether US shale oil production can keep growing. The government and the oil industry say that it can; qualified outside observers say it is highly unlikely that it will. We are likely to be entering a period of considerable uncertainty and volatility of oil prices.

The OPEC Production Cut: The cartel’s production fell to 30.68 million b/d in February, a four-year low, as Saudi Arabia and its Gulf allies over-delivered on the group’s supply agreement while Venezuelan output continued to decline, and 300,000 b/d remain offline in Libya. The drop came despite criticism from President Trump, who on Monday tweeted a call for the group to ease its efforts to boost prices, saying they were “getting too high.” These figures are from a Reuters survey as OPEC will not release its official data for February production until March 14th.

The most significant drop in supply came from Saudi Arabia, which pumped 130,000 b/d less than in January. Saudi supplies had hit a record 11 million b/d in November after Trump demanded more oil be pumped to curb rising prices and make up for losses from Iran. OPEC and the kingdom then changed course as prices slid on the prospect of oversupply in 2019.

The Saudis have already signaled that they plan to cut production further to around 9.8 million b/d in March, some 500,000 b/d below its commitment in the OPEC+ deal. Energy Minister al-Falih said last month that Saudi Arabia also would be cutting its crude oil exports to near 6.9 million b/d this month, down from 8.2 million just three months ago.

Al-Falih’s comments suggest that OPEC will not back down in the face of pressure from Washington. The standoff with the Saudis is coming at a time when the US Congress is pushing forward on the “NOPEC” legislation, which would open up OPEC members to antitrust regulation by the US Justice Department. A confluence of events has come together in favor of the bill, including a President who used to beat up on OPEC.

However, US Energy Secretary Perry said Thursday that anti-OPEC legislation under consideration in Congress could lead to an oil price spike by preventing the world’s producers from managing supply. Perry essentially defended OPEC’s role of balancing oil supplies and delivered a critique of the proposed bill for which President Trump has repeatedly expressed support, although not since taking office.

US Shale Oil Production: America’s crude oil production will keep setting annual records until 2027 and will remain higher than 14 million b/d through 2040, thanks to continuously growing shale production, according to the EIA’s Annual Energy Outlook 2019. This projection is very optimistic and does not square with what outside observers are saying about the long-term prospects for shale oil production.

US crude production edged lower in December to 11.85 million b/d, posting its first official decline since May, according to the EIA’s monthly report issued on Thursday. Production fell 56,000 b/d from a record 11.91 million in November. While output rose by 53,000 b/d in Texas and North Dakota, the gains were offset by a production decline of 125,000 b/d in the Gulf of Mexico. Production numbers from the EIA’s monthly report,which are delayed by two months, are considered to be more accurate than the EIA’s weekly estimates.

The EIA’s weekly production estimates, however, continue to express optimism with the latest release saying that US crude oil production rose 100,000 b/d the week before last to a record 12.1 million b/d. This forecast comes despite a harsh winter in North Dakota’s Bakken oilfield which is likely to see a decline in production during the winter due to the extreme cold. Some analysts are saying that while total US shale oil production is still snowballing, it could well flatten out by mid-year.

The US oil rig count has been dropping of late due to decisions made several months ago. The US rig count is already in decline. Total oil rigs are stood at 853 for the week ending on February 22, down from a peak of 888 in November. In particular, the Permian –on which most of the hope for the shale oil industry rests – has seen the rig count decline to a nine-month low.



Moreover, the industry is awash in stories of cutbacks in capital spending due to the need to show bankers and investors a real profit rather than just deficit-financed production gains. Several firms, however, are saying that they will be able to increase production despite less capital spending this year due to “efficiencies.” Some observers are skeptical, as most of the technical “efficiencies” gained from longer laterals and the use of more fracking sand have already been realized. One “efficiency” that seems to be real is the squeezing of the oil service companies by drillers.

One unknown in the future of shale oil production is the increasing share of output that is coming from the major oil companies, particularly in the Permian Basin.

Companies such as Exxon and Chevron do not need to make a profit on every well drilled and can finance their drilling from the profits of conventional production. These companies can profit from the scale of their operations, refining, transporting, and marketing any shale oil they produce and are not dependent on selling crude at market rates. Chevron, which increased its Permian production to 377,000 b/d in the fourth quarter, is expressing much optimism about the future of shale oil and says it will be profitable in 2020 – implying that it will lose money this year.

A recent study found that a group of 32 mid-sized drillers spent nearly $1 billion more on drilling and related capital expenditures during the third quarter of 2018 than they generated in sales. This is notable because selling prices were higher last summer than currently. As few small and mid-sized drillers have ever made any money from drilling operations, it will be interesting to see how the large oil companies do in the next few years. The future of global oil production may hang on this question for if the shale oil boom fizzles from the lack of profitability, global oil production may peak soon thereafter.

2. The Middle East & North Africa

Iran: Asia’s crude oil imports from Iran slipped in January to the lowest in two months after China and India slowed purchases and as Japan recorded zero imports for a third month. However, in February, Japanese buyers were back in the market to buy as much Iranian crude as they can before the US sanction waivers close in May. Cosmo Oil has ordered a cargo of 900,000 barrels of Iranian heavy crude for March delivery and this will likely be the last cargo of Iranian crude to be shipped to Japan. Asia’s top four buyers of Iranian oil – China, India, Japan, and South Korea – imported a total 710,699 b/d of Iranian crude in January, 49 percent lower than the same month in 2018.

Two days after saying he intended to step down, Iran’s foreign minister, Mohammad Zarif, returned to his post after President Rouhani rejected the resignation. Zarif has been Iran’s public face and brokered the deal curtailing Iran’s nuclear program. After President Trump withdrew from the nuclear deal last year Zarif lost standing with Iran’s leadership, and he was relegated to the sidelines. Given his good relationship with most of the world’s leaders, the government likely realizes that they may need his skills to help negotiate the hard times ahead.

Iraq: Last week the Kurds resumed trading crude and fuels across the border with Iran. This trade was halted at Washington’s request as part of the sanctions on Iran. After receiving a new order from the KRG Ministry of Natural Resources on Feb. 20, border officials at the three main crossing points between Iraqi Kurdistan and Iran began letting tanker trucks through.

The Bashiqa exploration block – which straddles the line between the autonomous Kurdistan region and the rest of Iraq –is fraught with political and geological problems. ExxonMobil sold half of its stake in the project in 2017, and now, Norway’s DNO has taken over as operator, under a contract with the Kurds. This action will likely set off another round of problems with Baghdad.

Saudi Arabia: Energy Minister Khalid al-Falih said on Wednesday that he was leaning toward an extension of the OPEC+ production cuts after June, although he noted that the producer group would take a measured approach not to tighten the oil market too much. President Trump tweeted last Monday his latest criticism of OPEC’s cuts aimed at rebalancing the market and lifting prices. The tweet sent oil prices tumbling by more than 2 percent on Monday, but a surprise draw in crude oil inventory of 4.2 million barrels as reported by the API lifted prices again.

Saudi Arabia’s crude oil exports to the US are falling sharply, with shipments in February at just 1.6 million barrels versus 5.75 million barrels a year ago. For January, Saudi Arabia exported just 2.69 million barrels of crude to the United States. The decline follows Saudi Arabia’s decision to cut its crude oil production—primarily heavy grades of oil —by more than it agreed to at the December OPEC+ meeting as it seeks higher oil prices.

Aramco aims to export as much as 3 billion cubic feet of gas per day by 2030, Amin Nasser, the company’s CEO, said on Tuesday. Aramco will solely develop the kingdom’s conventional and unconventional gas reserves and will control exports via pipelines and LNG tankers.

Last week, in a speech at the International Petroleum Week in London, Nasser rebuked all those who predict the demise of the oil industry in the near future, saying that those claiming that the world will soon run on anything but oil “are not based on logic and facts, and are formed mostly in response to pressure and hype.” “While most forecasts see peak oil demand at some point in the 2030s, the oil industry still sees itself as being relevant for decades to come.”

Libya: Workers at Libya’s El Sharara oilfield are ready to resume production with an initial output of 80,000 b/d but are still waiting for approval from the state oil firm, a field engineer and trader said on Wednesday. “There is no technical obstacle to the restart of production. The issue is security,” a NOC spokesman said.

At least 19 people were killed during the fighting in southern Libya, according to a member of parliament, as forces loyal to strongman Khalifa Haftar fought for control of oilfields in the region. Haftar’s Libyan National Army (LNA) killed civilians, including children, and set fire to more than 30 houses in the southern city of Murzuq. The member of parliament from the region claims that farms were also destroyed, and more than 100 cars were stolen. The battle for Murzuq, a city 900km south of the Libyan capital, Tripoli, was the first battle for a city fought by the LNA since it started a campaign to take control of oilfields in the south a month ago.

If these claims of extensive fighting are true, it would explain why it is taking so long to resume production from the 300,000 b/d oilfield. Libya’s state-run National Oil Corp announced last week that its chairman, Mustafa Sanalla, traveled to the United Arab Emirates to meet with a number of Libyan and international parties to discuss the Sharara oilfield crisis.

3. China

The Xinhua news agency reports that China has found “massive” shale oil reserves in the northern Tianjin municipality. Two wells at a field have been flowing for more than 260 days, according to Dagang Oilfield, a subsidiary of state-owned China National Petroleum Corporation (CNPC). According to the state company, the newly found shale reserves will help boost China’s national energy security and economic development. As part of a government push to expand domestic energy supply, CNPC and Sinopec are raising investments to increase local oil and gas production and are increasing drilling at tight oil and gas formations in western China. The Chinese have been looking for shale oil and gas fields similar to those that have revolutionized US oil and gas production for the last ten years – with little success. After years of exploring for commercial tight oil deposits, it seems doubtful that any on the scale found in the US or possibly Argentina will be found in China.

China’s leader, Xi Jinping recently told a national gathering of senior party officials that the country faces significant risks on all fronts. Whether dealing with foreign policy, trade, unemployment, or property prices, he declared, officials would be held responsible if they slipped up and let dangers spiral into real threats. The speech, which was one of Mr. Xi’s starkest warnings since he came to power in 2012, underscores how slowing growth and China’s grinding trade fight with the United States have magnified the party leadership’s deep-seated fears of social unrest.

China imported 9.8 million tons of natural gas in January, up 6.2 percent from December, and 26.8 percent year on year, according to the General Administration of Customs. China imported 6.58 million tons of LNG in January, up 4.6% month on month, and increased 27.8 percent year on year, and 3.23 million tons of natural gas via pipeline in January, up 9.7 percent month on month and 24.8 percent year on year. Australia was the biggest supplier of natural gas to China in January at 2.34 million tons, followed by Turkmenistan at 2.25 million tons and Qatar at 1.40 million tons.

China is about to announce the creation of a state-held oil and gas pipeline company combining the assets of national firms. Such a firm would allow energy companies to focus on boosting exploration and production rather than worrying about distribution. China’s National Development and Reform Commission —the economic planning body—has already approved the plan, while the State Council has yet to issue final approval. A national pipeline firm would be the most significant energy ‘reform’ in China since 1998 when the country restructured its oil and gas sector.

China’s coal consumption rose for the second year in a row in 2018, but coal’s share of total energy consumption fell below 60 percent for the first time as cleaner energy sources gained ground. The world’s biggest coal consumer used 1 percent more coal in absolute terms last year than in 2017, China’s National Bureau of Statistics said in an annual communique. Coal consumption had risen for the first time in four years in 2017. This increase is not good news for efforts to control carbon emissions which all projections show rising in future years despite the UN agreements to cut carbon emissions.

An oil tanker carrying US crude oil is offloading its cargo at a Chinese port on Friday, marking China’s first import from the United States since late November, according to trade sources and Refinitiv data. Trade tensions between the United States and China cut US oil exports to Asia to a trickle in the second half of last year. No US crude volumes were recorded going into China during October, December, and January, according to China customs. President Trump asked China in a tweet on Friday to lift all of its tariffs on American agricultural products, pointing to his decision to delay the second round of tariffs and to improving trade relations with China.

4. Russia

Russian oil output was 11.34 million b/d in February, down some 75,000 from the October level, its baseline for the OPEC+ production cut. This production level was down from 11.38 million bpd in January. All the Russian majors reduced their output. Russia’s largest oil producer Rosneft and No.2 Russian oil company, Lukoil, cut their output by 0.6 percent and 0.5 percent month-on-month, respectively. Production at Gazprom Neft, the oil arm of gas giant Gazprom, was down by 1.9 percent.

Russia’s energy ministry met with domestic oil companies on March 1 to discuss the deal between OPEC and other leading global oil producers to reduce production. A Gulf OPEC source said that OPEC and its allies would stick with their agreement to cut oil supply, pushing for more adherence despite a demand by US President Donald Trump that the producer group eases its efforts to boost crude prices.

5. Nigeria

Nigerian President Muhammadu Buhari won a second term as the chief executive of Africa’s largest economy and top oil producer. However, the former general now faces a dizzying array of challenges including a divided population, moribund economy and a rejuvenated Islamist insurgency. Nigeria’s electoral commission reported that Buhari beat his opponent, Atiku Abubakar by a margin of four million votes, 15.2 million vs. 11.3 million, in an election marred by delays, ballot manipulations, and violence that left 39 people dead. However, no independent observer has reported electoral fraud. Turnout was a record low at just 35.6 percent. Atiku Abubakar criticized what he called a “sham election” and has vowed to go to court.

In an effort to help out its fiscal situation in a time of low oil prices, Nigeria is seeking nearly $20 billion from international oil majors in back taxes. The government has asked Shell, Chevron, ExxonMobil, Total, Eni, and Equinor to pay from $2 billion to $5 billion each. So far Shell has said that the country’s tax claims lacked merit and could see the Final Investment Decision on Bonga South West 200,000 b/d oil project slip into 2020 from 2019 while the claim is disputed. Underpayment of taxes and theft of oil through accounting fraud by the international oil companies is a frequent theme in Nigerian political discourse.

For example, a recent report claims that Nigeria’s oil and gas sector is responsible for 92.9 percent of illicit financial flows out of the country of over $217.7 billion between 1970 and 2008. Illegal money sometimes flows into Nigeria. Shell is facing prosecution from the Dutch authorities over its acquisition of an offshore oil and gas block in Nigeria a few years ago. The Anglo-Dutch firm is already a defendant in a trial for the same deal in Italy. The 2011 acquisition of block OPL 245 in Nigeria by Shell and Eni, according to Italian and Nigerian prosecutors, involved a transfer of money to personal accounts held by the Nigerian oil minister at the time. The official, Dan Etete, was later convicted of money laundering by a French court in a separate, unrelated case.

Nigeria does not seem to be taking its OPEC production cut pledge very seriously. The national oil company announced last week that production from the recently started Egina deepwater field would remain outside Nigeria’s commitment to OPEC’s production cuts. Nigeria, which currently produces around 1.8 million b/d of crude oil and another 400,000 b/d of condensate, is due to cut by about 40,000 b/d at the same time it is increasing production from its new 200,000 b/d field. It seems as if the only way Nigeria will be adhering to its share of the production cut will come if the Nigeria Delta Avengers stick to their pledge to start blowing up oil facilities in the Delta.

There may be yet another gasoline shortage soon. The National Petroleum Corporation says that Nigerians consume an average of 333,000 b/d of gasoline daily. Only one tanker carrying gasoline is due into Nigeria in the next two weeks.

6. Venezuela

It was relatively peaceful in Venezuela last week as the fighting over allowing food supplies building up at the borders is on hold. Moscow announced that it is helping Venezuela with shipments of wheat as the government is not letting other humanitarian aid into the country. The United States announced new sanctions against Venezuelan government officials last week as tensions in the country continue to escalate. The latest sanctions, against four governors close to President Nicolas Maduro, came after clashes at the border prevented humanitarian aid from entering Venezuela. Vice President Mike Pence had called on the Lima Group—a group of governments trying to resolve the Venezuelan crisis peacefully—to increase pressure on the Maduro government by seizing PDVSA assets as well as other government-owned assets of Venezuela and transfer the ownership to Juan Guaido’s interim government from the Venezuelan opposition.

Citgo is formally cutting ties with its parent company PDVSA, to avoid running afoul of US sanctions on PDVSA and to keep Citgo’s refineries and pipeline systems in operation.

Venezuela has shifted some of its crude exports from American refiners to India and Europe, according to the country’s oil minister and ship-tracking firms. However, it will difficult for the Maduro government to generate a profit from these sales. Since late January, the regime’s oil exports have come under US restrictions aimed at redirecting crude revenue to opposition leader Juan Guaidó, whom the US recognizes as the country’s legitimate president. China’s crude imports from Venezuela surged 50.7 percent month on month to 411,000 b/d in January, posting the fifth month in a row of increases after hitting a four-year low last September. In the past, shipments to China did not generate any revenue as they were going to pay off past loans. It is likely that China is suspending loan payoff as without some revenue from this oil Caracas would have little with which to pay for food imports.

7. Mexico

State oil company Pemex said last week that its losses narrowed in 2018, helped by currency exchange gains as crude production and refining rates continued to decline. Mexico’s largest company still reported a loss of $7.6 billion in 2018, down by nearly half from losses of about $14.3 billion the previous year, according to a filing with the Mexican stock exchange. The company posted a $6.4 billion loss in the fourth quarter and is facing mounting scrutiny from investors after its credit rating was cut by Fitch Ratings in late January to one notch above junk status.

Mexico’s central bank on Wednesday cut its economic growth forecasts for this year and next, pointing to the risk of rating downgrades to the country and state-run oil firm Pemex. In a quarterly report, the bank lowered its Mexican growth forecast to between 1.1 percent and 2.1 percent for 2019 and between 1.7 percent and 2.7 percent for 2020, echoing increasing skepticism among private-sector economists on the outlook.

Auctions scheduled later this year to pick joint venture partners for Pemex will proceed, an official at the national oil regulator said on Thursday, despite the president’s apparent cancellation of the tie-ups.

The equivalent of 1,145 truckloads of oil is stolen in Mexico per day from Pemex. That’s $7.4 billion in lost revenue since 2016 – a significant hit for a country where 3.8 percent of GDP comes from oil exports.

8. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)

BP on US oil market: The US shale industry responds only to oil price signals and is like “a market without a brain,” BP’s chief executive Bob Dudley said on Tuesday. He stated that unlike Saudi Arabia and Russia, which adjust their output in response to gluts or shortages in oil supplies, the US shale market responds purely to oil prices. (2/27)

Global oil and gas companies are increasingly facing an uphill battle as global warming policies are taking their toll. Most analysts and market watchers are focusing on peak oil demand scenarios, but the reality could be much darker. International oil companies are likely to face a Black Swan scenario, which could end up being a boon for state-owned oil companies. Increased shareholder activism, combined with global warming policies of institutional investors and NGOs, are pushing IOCs in a corner, constricting financing options for oil companies. (2/25)

Exxon’s climate pushback: Exxon is trying to block an investor initiative seeking to force the supermajor to commit to a reduction in harmful emissions, especially carbon emissions. Exxon calls the investor initiative misleading and saying it was trying to “micro-manage” the business. The investors are the endowment fund of the Church of England and the New York State pension fund. (2/26)

Global liquefied natural gas trade will rise 11 percent to 354 million tons this year as new facilities increase supplies to Europe and Asia, Royal Dutch Shell said in an annual LNG report on Monday. Shell, the largest buyer and seller of LNG in the world, said trade rose by 27 million tons last year, with Chinese demand growth accounting for 16 million tons of those volumes. (2/25)

Offshore Cyprus, ExxonMobil added another giant gas discovery to the east Mediterranean region after finding a gas-bearing reservoir, but infrastructure bottlenecks and geopolitical disputes mean output from the field could be far off. (3/1)

Indian refiners processed 21.94 million mt, or an average 5.2 million b/d, of crude oil in January, down 3.6% year on year. (2/27)

Thailand’s natural gas depletion problems are causing the southeast Asian country to make significant changes to its energy mix. The capacity of non-hydro renewables in Thailand—mostly driven by the biomass and solar sectors—may expand to 21 percent of the country‘s total power capacity mix at 14,858 MW by 2028. (2/27)

In Mozambique, militants have attacked Anadarko’s LNG project in what is the first attack on the oil and gas industry in the African country. More than a dozen masked, armed men—suspected to be members of an Islamic militant group—attacked a convoy near the project, which is still under construction, and injured four people. (2/26)

In Nigeria, Shell is facing prosecution from the Dutch authorities over its acquisition of an offshore oil and gas block a few years ago. (3/2)

The US oil rig count declined by 10 to 843 while the number of active gas rigs grew by 1 to 185, according to GE’s Baker Hughes. The oil and gas rig count is now 57 up from this time last year, 43 of which is in oil rigs. (3/2)

Heavy crude okay: A tight market for heavy sour crude, exacerbated by US sanctions on Venezuela, has yet to negatively impact operations at Saudi Aramco’s Port Arthur refinery on the Gulf Coast. The 630,000 b/d Port Arthur facility in Texas, operated by Aramco subsidiary Motiva, is the US’ largest refinery. (3/1)

Exxon Mobil Corp said it added 4.5 billion oil-equivalent barrels of proved oil and gas reserves in 2018, driven mainly by increases in its holdings in the US Permian Basin, Guyana, and Brazil. The oil major said its proved reserves totaled 24.3 billion oil-equivalent barrels at the end of 2018, with liquids accounting for 64 percent, up from 57 percent in 2017. (3/1)

Digital oilfield: In the post-2014 world, digital technology and Big Oil have teamed up to bring in the era of the digital oilfield, which just a couple of decades ago must have sounded like science fiction. Earlier this month, Schlumberger announced it had struck a partnership with Rockwell Automation, a company specializing in automation solutions for industrial applications. (2/28)

SPR sale: The US Energy Department said it is offering up to six million barrels of sweet crude oil from the national emergency reserve in a sale mandated by a previous law to raise funds to modernize the facility. (3/1)

Three new natural gas-to-methanol plants are expected to start up in the US in 2019 and 2020—two in the Gulf Coast and one in West Virginia. The higher methanol production capacity will boost the US production of the fuel which can be used as an alternative transportation fuel or blended into gasoline to increase engine efficiency and cut air pollution; the higher capacity will also increase the industrial use of natural gas. (2/26)

WV pipeline moving forward: TransCanada said on Friday that the US Federal Energy Regulatory Commission approved the full in-service of the Mountaineer XPress natural gas pipeline project, which will help link the Appalachian basin’s natural gas supplies and growing markets in the US and beyond. The Mountaineer XPress project includes a 170-mile natural gas pipeline in West Virginia that will increase natural gas capacity by 2.7 billion cubic feet per day and together with related infrastructure—new compressor stations and modifications to existing compressor stations—represents a total investment of US$3.2 billion. (3/2)

Alaska gas pipeline plan fading: The new CEO of Alaska’s state gas corporation told legislators Thursday he is prepared to shut down the project and return unused funds to the state treasury if customers or investors do not appear in the next few months. (3/1)

Electricity evolution is slow: A study conducted by a team led by Robert Gross of Imperial College London and published in December 2018, concluded that, on average, the adoption time of the last four major power-generation technologies was 43 years. And by the end of that time, these technologies were well established, but not yet in a dominant position. (2/28)

The contribution of nuclear power to the global power mix in mature markets is set for a significant decline under current policy frameworks, as there are limited investments in new plant construction, the IEA said. China and India are responsible for more than 90 percent of net growth to 2040. However, outside of Japan, nuclear power generation in mature economies is seen dropping by 20 percent by 2040. (2/28)

Global EV growth: In 2018, 4.28 million BEVs, PHEVs, and HEVs were sold globally—an increase of 28.6% over the year prior—amounting to 5.2% of total global passenger vehicle sales, according to Adamas Intelligence. Not only is the EV market growing rapidly, the modern EV itself is also undergoing rapid technological evolution, from model to battery pack to cell and cell chemistry, Adamas says. (2/26)

The EV battery race intensified this week with the announcement that a startup financially supported by the US Department of Energy had released a lithium-ion battery that stores more energy than the 250 Wh EV industry benchmark. The company, 24M, said its semi-solid-state nickel-manganese-cobalt battery had achieved an energy density of 280 Wh and that its approach to battery building would allow it to hit a target of 350 Wh by the end of the year. (3/1)

Record cold: Temperatures as much as 30 to 50 degrees below normal are entering the Northern Plains as we close out the workweek. Through the weekend, brutal conditions you might expect in a frigid January overtake the central portion of the country, from the Mexican to the Canadian borders. Heading into the first full week of March, Arctic air takes up residence in the East as well. When it’s all done, most of the contiguous US will endure a punishing blow of frigid air from this Arctic blast. Records for cold are likely. (3/2)

[sumisu]

Peak Oil Review 25 February 2019

By Tom Whipple, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-02-25/peak-oil-review-25-february-2019/

Quote of the Week

“While Exxon invested $12.5 billion on international upstream capital expenditures (CAPEX) to produce 1.7 million barrels a day of total liquid oil production in 2018, it spent a staggering $7.7 billion in US upstream CAPEX to supply only 551,000 b/d of oil. Thus, Exxon spent nearly double the amount of CAPEX for each barrel of US oil production versus its international oil supply… ExxonMobil’s US oil and gas sector is heading toward a financial disaster. It’s US oil and gas CAPEX spending will choke the living hell out of its profits. While some may think I am fermenting hype, the financial results shown above point to a pretty clear trend… and it ain’t good. If one of the world’s largest oil companies can’t make money producing US shale, then what does that say for the rest of the industry?” Steve St. Angelo, independent precious metals and energy researcher

Graphic of the Week



1. Oil and the Global Economy

Brent crude futures briefly touched $67.73 a barrel on Friday, their 2019 high. The London contract then fell 5 cents to settle at $67.12 a barrel while US futures US gained 30 cents to settle at $57.26 per barrel, after hitting $57.81 earlier in the day. Despite forecasts that US shale oil production will continue to increase rapidly next month, supply disruptions in Venezuela and Libya, the 1.8 million-barrel OPEC+ production cut, and hopes that the US-China trade dispute may be settled soon, were enough to push prices higher last week. Prices have now gained about $5 a barrel since mid-February but are still some $20 a barrel below the recent highs set last October.

Fears of a global economic slowdown appear to have waned for the minute in hopes that a settlement of the US-China trade dispute will result in a period of faster global economic growth. While European oil consumption has been flat a long time, demand has declined year-on-year in the past few months, which suggests a slowdown is underway in the European economy. While China seems to be settling into a planned growth of around 6.5 percent, many observers note that in China, economic growth, and the statistics to back it up, is more a political target than a reflection of the actual state of the economy. For years, Chinese officials at all levels of government cooked statistics to meet those political objectives. For now, China’s economy seems to be perking along, but many are warning of problems ahead.

The OPEC+ Production Cut: The monitoring committee for the OPEC+ supply reduction deal on Wednesday found compliance with the cuts at 83 percent. Just what they are measuring remains to be seen. Libyan production is down about 300,000 b/d due to unrest at its largest oilfield, and Venezuelan production is likely down hundreds of thousands of barrels a day due to the US sanctions. While Caracas’ production is likely to fall in the foreseeable future, Libyan could pop back to around 1 million b/d at any time.

The Saudis are undertaking the bulk of the production cut on behalf of OPEC and have pledged to cut production further in March. In contrast to the Saudis, Moscow is saying it is impossible to reduce output during the frigid Russian winter months and that they will be in full compliance with their pledge by May.

The lack of enthusiasm for the cuts, coupled with reports that a major Russian oil firm is saying that the cuts are unnecessary, is raising questions as to whether the alliance between the Saudis and Moscow will hold. Reports that the relationship will be formalized by a treaty are being denied in Moscow as unnecessary. A complete collapse of the Venezuelan oil industry would produce much the same results as the OECP+ production freeze.

According to President Muhammadu Buhari, Nigeria could start reducing its crude oil production in line with the output cut. This time the country was not exempted from the cuts and was assigned a reduction of about 40,000 b/d. However, instead of reducing its production, Nigeria boosted it with the start of production at the giant Egina offshore field, operated by French Total.

US Shale Oil Production: The EIA’s February Drilling Productivity Report, which was released last week, has spawned a raft of analysis and commentary as to just where US shale oil production is headed and at what costs. The EIA expects US shale production will grow by 84,000 b/d in March 2019. The gains are forecast to be led by the Permian (+43,000 b/d), followed by smaller contributions from the Niobrara (+16,000 b/d), the Bakken (+13,000 b/d), the Eagle Ford (+9,000 b/d) and Appalachia (+3,000 b/d).

There are some interesting numbers showing up in the EIA’s Drilling Productivity Report. The report says that new-well production by rig is around 1,400 b/d in the older Bakken and Eagle Ford shale oil deposits, while only about 600 b/d in the Permian shale oil deposits. This discrepancy seems to imply that it takes more than twice as many wells in the Permian to end up with the same amount of oil at the end of the first month. The large difference in initial productivity needs some explanation if we are to accept that the Permian Basin is to drive the US increase in oil production in the coming years.

While still impressive, the growth of US shale oil production is slowing. EIA forecasts US crude oil production will average 12.4 million b/d in 2019 and 13.2 million b/d in 2020, with most of the growth coming from the Permian region of Texas and New Mexico. The EIA currently projects February Permian growth at 23,000 b/d and March at 43,000 b/d. By contrast, a year ago, EIA forecasted February 2018 basin growth at 76,000 b/d and March 2018 increase at 75,000 b/d, so there is quite a decline in expectations.

Expenditures in the shale oil industry are starting to contract as investors put increased pressure on drillers to make money and not just increase money-losing production. The rig count for February fell by nine. That was the first-time drillers removed rigs for three months in a row since October 2017. The rig count declined by two in December and 23 in January. Financial services firm Cowen & Co said last week that early indications from the exploration and production companies it tracks point to a 6 percent decline in capital expenditures for drilling and completions in 2019.

Whether the industry will live up to the EIA’s projections remains to be seen. Many firms are saying they will be producing more oil this year with fewer resources. Frigid weather in the Bakken this winter is likely to slow production considerably.

The problem of moving the associated natural gas from the Permian to market may become a limiting factor in the next year to two. The startup of Plains All American Pipeline’s 350,000 b/d Sunrise expansion at the end of 2018 marked the start of a period that should bring higher prices and more takeaway capacity for Permian crude and problems of what to do with the associated gas. According to Platts Analytics, about 3 million b/d is expected online in the next 18 months, bringing total takeaway capacity from the Permian to market to approximately 6 million b/d by 2020.

According to Platts Analytics, Permian gas production becomes fully constrained around 9.4 billion cf/d, considering that effective takeaway capacity on pipelines exiting the basin is about 8.7 billion cf/d, with local demand capable of absorbing another 700 million cf/d. Until Kinder Morgan’s 2 billion cf/d Gulf Coast Express expansion comes online in October, price volatility is likely to increase as the available capacity for production growth remains limited.

2. The Middle East & North Africa

Iran: Iranian crude exports in January were higher than expected, while February shipments may be even higher. According to tanker-tracking data from Refinitiv Eikon, Iran’s exports in February have averaged 1.25 million b/d so far, while the January exports were between 1.1 million b/d and 1.3 million b/d. These are considerably higher than the 1-million-b/d level, which was seen in December. Higher Iranian shipments would weigh on oil prices and work against the effort to cut supply in 2019 led by the OPEC+ alliance. Much of the recent increase may be due to the US waivers to the most important of Iran’s customers. These waivers are due to expire at the end of March.

Oil Minister Bijan Zangeneh said last week that Iran had completed the third phase of the new Persian Gulf Star Refinery, making the country self-sufficient in gasoline production. Tehran has been importing gasoline for its domestic needs for years. Under the previous Western sanctions, Tehran couldn’t buy spare parts for refinery maintenance, and had reduced gasoline production capacity in the wake of the Iran/Iraq war. Most of Iran’s fuel imports have been coming from refiners in India, Southeast Asia, and North Asia. According to the minister, Tehran could export some of the gasoline, but it will not do so as it wants to boost its domestic stockpiles.

Tehran is holding its annual naval drill in the Strait of Hormuz. The three-day exercise with maneuvers extending as far as the Sea of Oman and the Indian Ocean began last Friday with warships, submarines, helicopters, and surveillance aircraft taking part.

Iraq: Negotiations between Kurdistan’s two leading political parties have broken down in their efforts to form a new government in Erbil and elect a new governor of Kirkuk. The setback further extends a period of political uncertainty and lame-duck administration of the semi-autonomous region, although officials from both the ruling KDP and the PUK expressed hope that they can regenerate some forward momentum.

Saudi Arabia: Saudi Arabia’s crude oil exports fell by nearly 550,000 b/d to 7.687 million b/d in December, as the Kingdom started to limit supply after the US granted waivers to eight Iranian customers. Saudi oil production also dropped in December to 10.6 million b/d from an all-time high of 11.09 million b/d the month before. During November, Saudi Arabia’s crude oil exports had jumped by 534,000 b/d month on month to 8.24 million bpd—the highest level in two years as the Kingdom moved to offset supply losses from Iran with the return of the US sanctions.

Saudi Arabia’s Energy Minister Khalid al-Falih told CNBC in January that Moscow had moved “slower than I’d like. In response, Russian Energy Minister Alexander Novak said Russia was “completely fulfilling its obligations in line with earlier announced plans to gradually cut production by May this year.” However, the numbers say Russia is not shouldering its part of the new deal. The OPEC+ members agreed to cut supply by 1.2 million barrels per day.

Saudi Arabia agreed to make up for most of the cut among OPEC members and has also said it will drop its crude oil production by a further 400,000 b/d to 9.8 million in March. If that output cut is reached, it would mean that since December (one month before implementation of the deal), Saudi Arabia has become responsible for 70 percent of the total OPEC+ target.

State-owned Saudi Aramco has signed an agreement to form a joint venture with Chinese conglomerate Norinco to develop a refining and petrochemical complex in Panjin city, saying the project is worth more than $10 billion. Aramco and Norinco, along with Panjin Sincen, will form a new company called Huajin Aramco Petrochemical Co as part of a project that will include a 300,000 barrels per day refinery with a 1.5 million metric tons per annum ethylene cracker, Aramco said on Friday.

Over the weekend Saudi Arabia appointed Princess Reema bint Bandar as ambassador to the US, making her the first woman envoy in the country’s history. The kingdom seems to be trying to repair its image in the US media and Congress.

Libya: There was no news last week as to whether the 300,000 b/d Sharara oilfield has reopened after General Haftar’s Libyan National Army took control of the region two weeks ago.

3. China

After months of concerns that the global economy and oil demand would suffer from a US-China trade war, renewed hopes that an agreement could be reached buoyed optimism last week. China’s Vice Premier Liu He was in Washington last week and if progress is made these discussions might be followed by a Trump/Xi meeting in March. US officials note that there are still significant issues outstanding. In the meantime, the US has eased off the plan to impose tariffs on Chinese imports beginning on March 1st.

PetroChina achieved production rate of 733 b/d, from the Jimsar oil field in the western Xinjiang province, which suggests that shale drilling could finally have commercial potential in China, according to Morgan Stanley. China has been attempting to find commercial shale oil and gas deposits for the past ten years will little result. Much of China’s oil has been found in geology that is not conducive to forming shale oil deposits.

Saudi Crown Prince Mohammed bin Salman concluded a $10 billion deal for a refining and petrochemical complex in China on Friday while meeting Chinese President Xi Jinping. The Saudi delegation, including top executives from Saudi Aramco, arrived on Thursday on an Asia tour that has already seen the kingdom pledged to invest $20 billion in Pakistan and seek to make additional investments in India’s refining industry. Saudi Arabia signed 35 economic cooperation agreements with China worth a total of $28 billion at a joint investment forum during the visit. The Saudis are looking for or trying to buy, new friends in the wake of the Khashoggi murder which has soured relations with the US, Europe, and other countries.

4. Nigeria

The country, which now has a population of 191 million, voted for president over the weekend. Organizing for an election where 73 million are supposed to vote in an underdeveloped nation is some undertaking and the election was delayed for a week as officials got their act together. The ruling party, represented by Muhammadu Buhari, a 76-year-old former army general, whose health is not good, is likely to win as the incumbent rarely loses in Nigeria. Buhari has a reasonably good reputation in a country noted for corruption while his opponent Atiku Abubakar has a long history of involvement in crime even in the US where he has been the subject of FBI investigations.

Both candidates are from the northern part of the country and are disliked in the oil-producing south. The Delta Avengers, who did a respectable job of shutting down several hundred b/d of Nigeria’s oil production a few years back are talking about renewing attacks on the oil infrastructure if Buhari is re-elected. Whoever wins will have many problems, including the Boko Haram insurgency, which is reported to be killing more people each year than the wars in Yemen or Afghanistan.

The government is trying to develop a new source of revenue from suing international oil and financial companies that have been working in Nigeria for decades. Last week, a High Court in London granted Nigeria’s plea to allow it to proceed with the trial of JPMorgan Chase. The bank is alleged to have enabled the misappropriation of state funds totaling $875 million during the procurement of an oil drilling license.

Even more lucrative could be a new government effort to collect “back taxes” from the oil companies doing business in Nigeria, including Royal Dutch Shell, Chevron, Exxon Mobil, Eni, Total and Equinor. Each of the firms has been ordered to pay the government between $2.5 billion and $5 billion for a total of around $20 billion. Sending out tax bills is a lot easier than suppressing insurgencies to maintain oil production.

Nigeria is currently producing about 1.8 million b/d. Production has been going up recently due to the opening of a new offshore oilfield, which is a lot less vulnerable than oil coming from the Niger Delta. The country is supposed to cut 40,000 b/d as part of the OPEC+ production agreement, but so far seems to be increasing production despite occasional claims that it plans to comply with the deal.

5. Venezuela

Troops loyal to President Maduro violently drove back foreign aid convoys from Venezuela’s border on Saturday, killing at least two protesters and prompting opposition leader Juan Guaido to propose that Washington consider “all options” to oust him. Trucks carrying US food and medicine that was not torched by Venezuelan troops returned to warehouses in Colombia after opposition supporters failed to break through lines of soldiers.

The opposition had hoped Venezuelan soldiers would balk at turning back supplies desperately needed in the country, where a growing number of its 30 million people suffer from malnutrition and treatable diseases. But while some 60 members of the security forces defected on Saturday, the lines of National Guard soldiers at the frontier crossings held firm. During the confrontation, President Maduro addressed thousands of his supporters in Caracas warning that any US effort to use military force against his government would result in another Vietnam.

The state of Venezuela’s oil production is mired in confusion. Oil production in January was around 1.1 million b/d but has declined rapidly in the last three weeks. PDVSA is partnered with several international oil companies in heavy crude projects in the Orinoco, ranging from the US’ Chevron to Russia’s Rosneft and China National Petroleum Corp. Together, those joint ventures produced just over half of Venezuela’s total oil output. A decline of as much as 400,000 b/d due to the US embargo on diluent exports to PDVSA is currently underway. PDVSA oil production, in conventional assets outside the Orinoco, is likely to drop to minimal levels, if not shut down completely, as US sanctions take hold.

Some are saying that Caracas’s production could be as low as 500,000 b/d by the end of the year. If there is a total collapse of Venezuela’s economy, it could be close to zero. The withdrawal of foreign oil workers from the country would likely hasten the collapse. As Venezuelan refineries are barely working, widespread fuel shortages are emerging. Moscow and Europe continue to sell fuels to Caracas but at very high prices.

The long-term prospects for Venezuela’s oil industry are not good. Most of Venezuela’s future oil production will likely come from the Orinoco tar sands. This crude is extremely heavy and requires considerable processing and diluting with imported hydrocarbon liquids before it can be shipped. Most Orinoco operations are in partnership with foreign operators who can do little if diluents are not available in quantity.

Given the country’s current economic, political, and humanitarian state, it is doubtful that international oil companies will want to invest much money in Venezuela for a while. There are better opportunities elsewhere and given concerns about climate change and dirty oil, there may not be much of a future for Oronoco oil. Should a new anti – “socialist” government emerge in Caracas, it may not be interested in paying off the billions of dollars that Moscow and Beijing have loaned their fellow “socialist” country in recent years. Reviving the Venezuelan oil industry after the current troubles may find few friends.

6. Mexico

Pemex produced 1.62 million b/d in January, less than any month in almost three decades, the state-owned oil company said on Friday. The company’s crude output for the month was the lowest since at least 1990, when Pemex’s publicly available records begin. The company’s crude oil exports also fell in January to total 1.07 million bpd, down nearly 10 percent from 2018.

President Lopez Obrador, who took office in December and ran on a promise of strengthening the ailing company, said he will grow its output to around 2.5 million b/d by the end of his six-year term in 2024. Lopez Obrador has yet to fully outline how Pemex alone would be able to reverse the long-standing slide, but he did push through a larger budget for the company this year, in addition to a fresh capital injection from the government and a lower tax bill.

Pemex burned through $665 million at its fertilizer unit, ignored consultants and made high-risk investments with no discernible business strategy, according to a government audit of its 2017 operations. The report, published on Wednesday, offers insight into how Pemex ended up creaking under $106 billion of debt during the six-year term of former President Enrique Pena Nieto.

In addition to its oil production, Mexico is looking for ways to reduce its dependency on US natural gas imports, which currently satisfy over 50 percent of its demand. This is the highest foreign gas dependency rate in the world. That’s especially true because Mexico uses natural gas for over 60 percent of its power generation: a much higher portion than other gas import-dependent countries.

7. The Briefs(selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)

2019 overview: The number of greenfield oil and gas projects to get their final investment decision could rise threefold on 2018, Norwegian energy consultancy Rystad Energy has forecast. Most of these will be offshore projects. The number, which only covers conventional oil and gas deposits, could open up production reserves to the tune of 46 billion barrels of oil and gas, including around 14 billion barrels of oil equivalent in deepwater blocks, some 20 billion barrels in shallower waters, and the rest in onshore deposits. (2/23)

BP Outlook 2019: BP forecasts that the global war on plastics will be the main factor in cutting global oil demand faster than previously expected. As such, for the first time BP’s outlook predicted a “peak” in oil use. At 13 million b/d, global petrochemical feedstock is 13% of total oil demand. This is part of a growing trend in recent years where BP continues to see “much slower” growth in new oil demand going forward. (2/23)

Decommissioning obligations in the global oil and gas industry rose to $11.7 billion last year and are projected to hold steady at an average of about $12 billion per year from 2019 through 2021, according to Rystad Energy. (2/22)

Plastics: The oil industry appears to have spent little time thinking about a change in demand for oil that could have just s large an effect as electric vehicles: the war on plastic. As businesses eliminate plastic straws and bags, and governments act to reduce disposable packaging, this will have profound implications on demand for crude oil. Plastics make up 15% of crude oil demand, far less than transportation’s over-50% share, and were expected to create major demand growth through 2040. (2/18)

Egypt’s oil and gas future looks very bright. The large-scale concessions awarded during the recent EGYPS 2019 conference in Cairo shows the appetite of IOCs, such as Shell, BP and ENI in this emerging energy hotspot. After years of a major slump, partly due to continuing payment and security issues, the Pharaohs are again back in the top league. Continuing concerns about security in Egypt’s Western Desert or the Sinai no longer seem to be a breaking point for investors. (2/18)

Offshore Somalia, Norwegian consultancy firm Spectrum Geo says that it only gathered data in Somali territory regarding Mogadishu’s oil stock in the Indian Ocean. It avoided studying the regions contested by Kenya. The information was used to market the blocks to investors in London. (2/21)

The Kenyan government has warned that it will not cede an inch of its soil in the disputed maritime border with Somalia even as it affirmed that it is committed to a peaceful resolution of the row. The Cabinet discussed and agreed on a roadmap for resolving the maritime border dispute with Somalia and measures for safeguarding Kenya’s territorial integrity, and marine resources including offshore oil and gas exploration acreage in the Indian Ocean. (2/23)

In Guyana, when ExxonMobil begins oil production next year–mining crude from its seven new deep-water wells–life may change dramatically in this small South American country. The mega deal is expected to increase Guyana’s gross domestic product from US$3.4 billion in 2016 to US$13 billion by 2025. (2/23)

Brazil is second in terms of production growth among non-OPEC nations, where several new start-ups and production ramp-ups are set to deliver the country’s highest annual oil output growth in at least two decades. (2/22)

Canada’s National Energy Board recommended approval of the government-owned Trans Mountain pipeline expansion, clearing one of the major obstacles for the project to move forward. The Trans Mountain expansion would roughly triple the capacity of the more than 60-year-old line, helping carry almost 600,000 more barrels of oil and fuels a day from Edmonton to a shipping terminal near Vancouver. (2/23)

Heavy Canadian crude prices widened to the biggest discount against New York futures this year as pipeline-operator Enbridge Inc. reported that rationing on its heavy oil lines would increase next month. Western Canadian Select, an oil sands benchmark, traded at $15 a barrel below West Texas Intermediate futures Tuesday, $1.50 wider than on Friday and the biggest discount this year. (2/21)

The US oil rig count fell by 4 to 853 and the number of gas rigs stayed at 194, according to Baker Hughes. For the month, the rig count fell by nine. That was the first-time drillers removed rigs for three months in a row since October 2017. The oil and gas rig count is now 69, up from this time last year, 54 of which is in oil rigs. (2/23)

Chevron Phillips Chemical may build a steam cracker and at least one derivative unit in far southeastern Texas. The company is evaluating whether to buy a 1,700-acre project site near Orange, Texas, as the location for a cracker, one or more derivative units, administrative buildings, utility and logistics infrastructure and other improvements necessary to operate the production facilities. The complex is estimated to cost about $5.8 billion. (2/23)

Federal fight w/ CA: The Trump administration is moving ahead with a planned rollback of vehicle fuel economy standards after breaking off talks with California, which wants to continue to follow stricter targets along with a dozen other states. The policy would increase US oil demand by 500,000 b/d, according to the EPA and Dept. of Transportation. (2/22)

The Three Mile Island nuclear power plant will be closing its door on September 30th of this year unless the state of Pennsylvania can pull it out of its financial hole, according to the Chicago-based owner Exelon Corp. The TMI plant would soon be followed by Beaver Valley nuclear power plant in western Pennsylvania and two nuclear plants in Ohio, which Ohio-based owner FirstEnergy Corp. said they will close within the next three years if Pennsylvania can’t pass a financial package to save them. (2/22)

Coal squeeze: Glencore has become the latest energy heavyweight to succumb to climate change pressure and has announced it will stop raising its coal production capacity, CNBC reports. The Swiss company’s current thermal coal production capacity is 150 million tons annually, which makes it the biggest single exporter of the commodity. Glencore plans to use the capital that will be freed thanks to the capacity cap to increase its production of basic metals such as copper, cobalt, nickel, vanadium, and zinc, all of them used in EV batteries and other technology that enables the shift to cleaner energy generation. (2/22)

India’s demand for electricity is expected to double in the next two decades, and coal has been long forecast to be the fuel of choice for power generation. But this may no longer be the case. Yes, India is still a large producer of coal. Yet the main reason coal may battle to fuel India’s future energy needs is that it’s simply becoming too expensive relative to renewable energy alternatives such as wind and solar. (2/20)

Wind power capacity additions in Europe fell in 2018 to their lowest level since 2011, according to a report Thursday from industry group WindEurope. “Europe installed 11.7 GW (10.1 GW in the EU) of gross additional wind power capacity in 2018. This is a 32% decrease compared to 2017,” it said. Growth in onshore wind capacity additions fell by over half in Germany and collapsed in the UK. (2/21)

“HES” generation: Thanks to continuously declining costs, a hybrid renewable electricity generation system that combines wind, solar, and storage could become competitive with the cheapest fossil fuel electricity in the U.S.—combined-cycle natural gas generation—according to John Deutch, an Institute Professor at MIT. Last year, renewable energy—including hydropower—provided 18 percent of total US power generation, up from 11 percent back in 2009. Wind and solar capacity has more than quadrupled since 2009—from 36.2 GW to 164.6 GW (2/21)

Big battery: Borden County, Texas, is set to become the home of the world’s largest battery storage system in 2021. IP Juno has recently outlined plans to build a 495-MW storage system together with a solar farm of the same size in Borden County, a small community in West Texas in the very heart of the most important US oil field, the Permian. The pairing will relieve ever-growing demands for electricity in the US most prolific oil field. (2/21)

Shell moves on batteries: Last week, Shell became the latest supermajor to make a big bet on battery storage with the announced acquisition of German energy storage startup Sonnen. Sonnen focuses specifically on household energy storage, a nascent market but one with a huge potential if ambitious renewable power plans by governments around the world work out. (2/19)

Wave energy 4.0? Engineers from Scotland and Italy have developed a new wave energy technology that could generate low-cost electricity. Few wave energy converters have moved past pre-commercial stage because of the high costs and the often harsh marine environment. So the team designed the so-called Dielectric Elastomer Generator (DEG) using flexible rubber membranes. The device is cheaper than conventional designs, has fewer moving parts, and uses durable materials. (2/19)

Battery tech: BMW is seeking alternative cooling technologies for vehicle batteries to further improve peak cooling capacity during fast charging while reducing cooling components’ vibration and noise emission. Faster charging creates more heat to be dissipated within a short period of time. Current technologies use electric refrigerant compressors. Rising cooling capacities would generate significantly higher vibrations through fans and other moving components, and thus more noise. (2/19)

E-plane: Bye Aerospace’s electric Sun Flyer 2 successfully completed the first official flight test with a Siemens electric propulsion motor 8 February at Centennial Airport, south of Denver, Colo. The Sun Flyer family of aircraft, including the 2-seat Sun Flyer 2 and the 4-seat Sun Flyer 4, aims to be the first FAA-certified, practical, all-electric airplanes to serve the flight training and general aviation markets. Siemens will provide electric propulsion systems for the Sun Flyer 2 airplane—the 57 lb. SP70D motor with a 90 kW peak rating (120 HP), and a continuous power setting of up to 70 kW (94 HP). The all-electric operation requires no aviation fuel and results in zero emissions and significantly lower noise pollution compared to conventional aircraft. (2/19)

[sumisu]

Garrett relation

The relationship between energy consumption and wealth.



By Tim Garrett

https://en.wikipedia.org/wiki/Garrett_relation?fbclid=IwAR1sV9kL6maxD6HK5i6yyWAQUC5dK-4T3ndpQXkg6lYtOjCftp8EHZFSl_E#/media/File:Garrett_Relation.tif

[sumisu]

Another powerful message from Charles Hugh Smith!

"If we add in the loss of natural capital and the full lifecycle costs of our "growth"-dependent global system, we're losing ground and becoming poorer by the day. Having central banks create more "money" can generate a phantom wealth for a short time, but as the saying has it, Nature Bats Last. Counting on phantom wealth to power an unsustainable system is delusional."

Simply stated, we're eating up the planet!

And the following depicts our problem!



We will never change until we hit the wall!

sumi

[HowardHughs]

Is the World Becoming Wealthier or Poorer?
March 27, 2019

"the expansion of "money" creates an illusion of rising wealth when in fact the natural capital we depend on is declining rapidly."

the degradation of wild fisheries, the loss of soil fertility,the decline of fresh water tables and the shrinkage of glaciers that feed fresh water rivers don't make it into "price discovery" of markets.

The problem is we have based our entire civilization on "growth," the never-ending expansion of consumption of resources, energy and capital, the the permanent expansion of everything: jobs, consumers, credit and so on.

The planet's natural capital and buffers are being exploited and consumed at a rate that guarantees disruption of essentials such as grain and fresh water. There are no cheap technological fixes to the depletion of natural capital. No robot or AI software can restore depleted soil or replace soil that washed away.


If we add in the loss of natural capital and the full lifecycle costs of our "growth"-dependent global system, we;re losing ground and becoming poorer by the day. Having central banks create more "money" can generate a phantom wealth for a short time, but as the saying has it, Nature Bats Last. Counting on phantom wealth to power an unsustainable system is delusional.

https://www.oftwominds.com/blogmar19/world-wealth3-19.html

[sumisu]

Ron Patterson and Gail Tverberg are certainly two people well in the know of what's going on in the entire energy sector.

Had it not been for the shale revolution brought about by high fuel prices earlier this century, I had expected Peak Oil to occur around 2008.

Sadly the Hirsch report of 2005 [Feb.] officially titled "PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT" written for the Department of Energy and giving recommendations for preparing for the future has been largely ignored. It's sad that 14 bonus years of preparation has been largely wasted.

The energy cataclysm, whenever it begins, will be too late for food and other preparation for 7-plus billion people. I can only hope for a slow decline, so that some degree of survival preparations can be accomplished, but governments seem not to want to confront reality.

HIRSCH REPORT

https://en.wikipedia.org/wiki/Hirsch_report

Thanks for the message!

[HowardHughs]

2 of the best agree on 2018 Peak

Ron Patterson "I am now of the opinion that 2018 will be the peak in crude oil production, not 2019 as I earlier predicted."

So he agrees with:
Gail Tverberg"Given the nearly worldwide problem of falling affordability of goods by non-elite workers, we should not be surprised if the peaks in oil production in October and November 2018 ultimately prove to be the maximum production ever recorded. In fact, it seems quite likely that the year 2018 will prove to be the year with the highest-ever oil production."



https://oilprice.com/Energy/Energy-General/Was-2018-The-Peak-For-Crude-Oil-Production.html

Was 2018 The Peak For Crude Oil Production?
By Ron Patterson - Mar 14, 2019

Have We Already Passed World Peak Oil and World Peak Coal? Gail Tverberg February 22, 2019
https://ourfiniteworld.com/2019/02/22/have-we-already-passed-world-peak-oil-and-world-peak-coal/#more-43590

That's my two favorites on Peak Oil.

[sumisu]

Solve this or you solve nothing (1)

03 19 2019

Tim Watkins on nonrenewable renewables aka green denial...

http://consciousnessofsheep.co.uk/2019/03/19/solve-this-or-you-solve-nothing-1/?fbclid=IwAR1m8nAb_dGyulbrQH1rD-rkxo-eZDWdogXQvuFAgT54KFK4wQAl5ktwQFI

[sumisu]

2020: A Marker For Collapse

11/6/2017

http://articulatingthefuture.weebly.com/home/2020-a-marker-for-collapse#comments

[HowardHughs]

Or:Peak Food Is Near,When Grains Hit New Highs Its Time To Kiss It All Goodbye.

IMO that's the "energy crisis" to end life as we know it.The world is focused on global warming and carbon capture while winter weather records are pointing to a new cooling cycle.

Grains could go up 4 fold in the next 2 years.

That's when the decision to cull the herd quickly or risk an uncontrollable Mad Max scenario gets made.

Bio weapons will be the favored option I suspect.

500 million in the first culling
a few billion in the next
and a few more billion after that....

Peak Oil won't matter for the next one hundred years.

Preppers need to be prepositioned away from densely populated areas.Travel restrictions could be put in place overnight. Quarantines could last for months.World trade could come to a standstill until the viruses burn themselves out.

Cheers

[sumisu]

IEA 2018 World Energy Outlook: Peak oil is here, oil crunch by 2023

Posted on March 10, 2019 by energyskeptic

http://energyskeptic.com/2019/iea-2018-world-energy-outlook-peak-oil-is-here-oil-crunch-by-2023/?fbclid=IwAR0o8YrlnPLgi7n5n3Ele9QEn9cYOtuvMfoDS1XuE4vGirg8SXFfcA5A09A

[sumisu]

Stop being so focused or anxious about climate change

Posted in Tendenser på kollaps

Redaktören mars 9, 2019

http://kollapsologen.se/stop-being-so-focused-or-anxious-about-climate-change/?fbclid=IwAR2ciPbdI2np2yipFqSaXMo8uqNUaawIn-Qskw0ik2XMcm7fp0HgbBql_iU

[sumisu]

Spot The Peak Oil Denier Test Criteria (pt.1)

http://peakoilmatters.com/2011/11/15/spot-the-peak-oil-denier-test-criteria-pt-1/?fbclid=IwAR1JJEXDCsbTBuq3yBsM28eBsZ0XRB-lfzr_tzIh94MDB5vknGrTcPlCD9Y



Spot The Peak Oil Denier Test Criteria (pt.2)

http://peakoilmatters.com/category/hirsch-report/?fbclid=IwAR0riPVuvutqxSrIr1mwbaMF2hmBPXzYPfgxzYeRpHUxpqpJcWUN8dy7fpw

[sumisu]

The Future is Rural: The Unexpected Consequence of Energy Descent

By Jason Bradford, originally published by Resilience.org

February 26, 2019

https://tinyurl.com/y4ps3kgh

[sumisu]

Be Wary Of Unrealistic Shale Growth Expectations

By Nick Cunningham - Mar 04, 2019, 4:00 PM CST

https://oilprice.com/Energy/Crude-Oil/Be-Wary-Of-Unrealistic-Shale-Growth-Expectations.html?fbclid=IwAR3ZK7Enieb0H1PQe0csUS9seLGk6XrA3ro5NMuKEHc1Ibw_CT8VOGIcKdI

[sumisu]

We Might Not Have Enough Materials for All the Solar Panels and Wind Turbines We Need

We'll need to be mining a dozen times as many metals to meet demand for wind turbines and solar panels by 2050.

By Avery Thompson

Dec 13, 2018



https://www.popularmechanics.com/science/energy/a25576543/renewable-limits-materials-dutch-ministry-infrastructure/?fbclid=IwAR35N5g2R2IXTojieUCaKJ7D4PfjczOYSR75C_wc7Blpn60TzoJ6TEwRCig

[sumisu]

James Burke BBC Connections - Technology Traps Scene

[HowardHughs]

Have We Already Passed World Peak Oil and World Peak Coal? Gail Tverberg February 22, 2019
https://ourfiniteworld.com/2019/02/22/have-we-already-passed-world-peak-oil-and-world-peak-coal/#more-43590

Gail Tverberg"Given the nearly worldwide problem of falling affordability of goods by non-elite workers, we should not be surprised if the peaks in oil production in October and November 2018 ultimately prove to be the maximum production ever recorded. In fact, it seems quite likely that the year 2018 will prove to be the year with the highest-ever oil production."

"This is a frightening situation, because it could be an indication of collapse in the next few years. This would likely be much worse than the Depression of the 1930s."

"Financial systems are likely to collapse; international trade will be scaled way back; world population is likely to fall."

[sumisu]

Mexico's Pemex crude output lowest since records began

February 22, 2019 / 7:33 PM / Updated 17 hours ago

https://tinyurl.com/yxh28md3


FILE PHOTO: An aerial view of Pemex's storage and distribution terminal on the outskirts of Mexico City, Mexico February 1, 2019. REUTERS/Edgard Garrido/File Photo

MEXICO CITY (Reuters) - Mexico’s Pemex produced 1.62 million barrels of crude per day in January, less than any month in almost three decades, the state-owned oil company said on Friday, underscoring the challenges facing a government that vows to pump far more in a few years.

The company’s crude output for the month was the lowest since at least 1990, when Pemex’s publicly available records begin.

The firm’s crude oil output has declined for 14 consecutive years since hitting a peak of 3.4 million bpd in 2004, as Mexico’s most prolific fields have dried up and new ones to replace them have not been discovered.

Pemex’s crude production averaged 1.81 million bpd in 2018.

The company’s crude oil exports also fell in January to total 1.07 million bpd, down nearly 10 percent from 2018 average shipments of 1.18 million bpd.

President Andres Manuel Lopez Obrador, who took office in December and ran on a promise of strengthening the ailing company, long a national treasure, has said he will grow its output to around 2.5 million bpd by the end of his six-year term in 2024.

Lopez Obrador has yet to fully outline how Pemex alone will be able to reverse the long-standing slide, but he did push through a larger budget for the company this year, in addition to a fresh capital injection from the government and lower tax bill.

The veteran leftist has canceled oil and gas auctions open to private and foreign oil companies and he has said he will not allow Pemex to enter into any additional near-term joint venture partnerships with other firms.

Both strategies were linchpins of the previous government’s efforts to grow oil output in Mexico from both Pemex’s operations as well as those of new entrants into the market like U.S.-based major Exxon Mobil and France’s Total .

Reporting by Ana Isabel Martinez; Editing by David Alire Garcia
Our Standards:The Thomson Reuters Trust Principles.

[sumisu]

Fifty Shades Of Shale Oil

By Nawar Alsaadi - Feb 12, 2019, 6:00 PM CST

https://tinyurl.com/y6y9wo4l



The rise of U.S. tight oil production over the last several years has upended the oil market and challenged OPEC’s hold on oil prices. This seemingly relentless growth in U.S. tight oil production has created the impression that oil prices will remain forever capped as each price spike is met by a massive wave of US tight oil supply.

Overview

U.S. tight oil supply has grown from a mere 500K barrels in 2010 to just under 6M barrels in 2018. Following the oil crash of late 2014, U.S. tight oil growth experienced a brief pause in 2015-2016 before resuming its growth in 2017 and climbing to a new high by 2018. This latest growth spurt to a new record is even more impressive when we take in consideration the fact that WTI averaged $65 a barrel in 2018 as compared to $95 a barrel in the three years (2012-2014) preceding the oil crash.


(Source: OPEC WOO – 2018)

Most observers attribute this strong shale industry performance to technology and improved drilling and completion practices. We are told that American oil and gas companies have become more efficient. The widespread utilization of pad drilling, the introduction of longer laterals, pumping ever more sand per foot, closer and better well spacing, and smart fracture targeting are often mentioned as the driving factors behind the industry record beating performance. This narrative of technological prowess and innovation is an attractive one, but a deeper examination of the data reveals a different picture.

Analysis

This fallacious narrative of the U.S. tight oil industry overcoming the oil price crash of 2014 through innovation and better efficiency is the product of bundling various tight oil basins under one umbrella and the presentation of the resulting production data as a proof U.S. shale resiliency.

To properly understand the impact of the oil price crash of 2014 on U.S. tight oil production one must focus on shale basins with sufficient operating history prior to the oil price crash and examine their performance post the crash. To that end, the Bakken and the Eagle Ford are the perfect specimen. The Bakken and the Eagle Ford are the two oldest tight oil basins in the United States, with the former developed as early as 2007 and the latter in 2010. Examining the production performance of these two basins in the 4 years preceding the oil crash and contrasting it to the 4 years subsequent to it, offers important insight as to the resiliency of U.S. tight oil production in a low oil price environment.

Related: Oil Jumps As Saudis Plan Further Production Cuts


(Source: OPEC WOO 2018)

Both the Bakken and the Eagle Ford grew at a phenomenal rate between 2010 and 2014. The Eagle Ford grew from practically nothing in 2010 to 1.3M barrels by 2014, while the Bakken grew five fold from 190K barrels to 1.08M barrels. Following the collapse in oil prices in late 2014, the Bakken and Eagle Ford growth continued for another year, albeit at a slower pace, as the pre-crash momentum carried production to new highs. However, by 2016, both the Bakken and the Eagle Ford went into a decline and have hardly recovered since. It took the Bakken three years to match its 2015 production level, meanwhile the Eagle Ford production remains 22% below its 2015 peak. During the pre-crash years these two fields grew by a combined yearly average of 600K to 700K barrels from 2012 to 2014. Post the oil price collapse, this torrid growth turned into a sizable decline by 2016 before stabilizing in 2017. Growth in both fields only resumed in 2018 at a combined yearly rate of 210K barrels, a 70% reduction from the combined fields pre-crash growth rate.

The dismal performance of these two fields over the last few years paints a different picture as to U.S. tight oil resiliency in a low oil price environment. The sizable declines, and muted production growth in both the Bakken and the Eagle Ford since 2014 discredit the leap in technology and the efficiency gains narrative that has been espoused as the underlying reason beyond the strong growth in U.S. oil production. As we expand our look into other tight oil basins, it becomes apparent that it was neither technology or efficiency that saved the U.S. tight oil industry, although these factors may have played a supporting role. In simple terms, the key reason as to the strength of U.S. production since the 2014 oil crash is better rock, or rather, the commercial exploitation of a higher quality shale resource, namely the Permian oil field.


(Source: OPEC WOO 2018)

The Permian oil field, unlike the Bakken and the Eagle Ford, was a relative latecomer to the U.S. tight oil story. It was only in 2013, only a year before the oil crash, that the industry commenced full scale development of that giant field’s shale resources. Prior to 2013, the Permian lagged both the Bakken and the Eagle Ford in total tight oil production and growth. As can be seen from the preceding graph, the oil crash had only a minor dampening effect on the Permian oil production growth. By 2017, Permian tight oil growth resumed at a healthy clip, and by 2018, Permian tight oil production growth shattered a new record with production skyrocketing by 860K barrels in a single year to 2.76M barrels. This timely unlocking and exploitation of the Permian oil basin masked to a large degree the devastation endured by the Bakken and the Eagle Ford post 2014. In essence, the U.S. tight oil story has two phases masquerading as one: the pre-2014 period marked by the birth and rise of the Bakken and Eagle Ford, and the post-2014 period, marked by the rise of the Permian. To speak of the U.S. tight oil industry as one is to mistake a long-distance relay race for the accomplishment of a single runner.

Related: Which Oil Giant Generates The Most Cash?

The performance divergence between the Bakken, Eagle Ford, and the Permian has major implications as to the likelihood of U.S. tight oil production suppressing oil price over the medium and long term. A close examination of U.S. tight oil production data leads to a single indisputable conclusion: without the advent of the Permian, the U.S. tight oil industry would have lost the OPEC lead price war. Hence, it’s a misnomer to treat the U.S. tight oil industry as a monolith, in many ways, the Bakken and the Eagle Ford tight oil fields are as much a victim of the Permian success as the OPEC nations themselves.

Implications

This discordant panoply of shale fields known as the U.S. tight oil industry has been the key source of global non-OPEC oil supply growth over the last several years and is expected to be for years to come:



Considering that the majority of U.S. tight oil production growth is generated by a single field, the Permian, changes in the growth outlook of this basin have major implications as to the evolution of global oil prices over the short, medium and long term. Its important to keep in mind that the Permian oil field, despite its large scope, is bound to flatten, peak and decline at some point. While forecasters differ as to the exact year when the Permian oil production will flatten, the majority agree that a slowdown in Permian oil production growth will take place in the early 2020s.

According to OPEC (2018 World Oil Outlook), the Permian basin oil production curve is likely to flatten by 2020, with growth slowing down from 860K barrels in 2018 to a mere 230K barrels by 2020:
(Source: OPEC WOO 2018)



There are many factors that can accelerate or delay the projected flattening phase, but there is no doubt that sooner or later Permian oil production will flatten. An eventual plateau in Permian oil supply effectively translates into a flattening of non-OPEC global oil supply, the importance of this event can’t be overstated. The year the Permian flattens is the year OPEC will regain control of the market, this seminal event will have major implications on long term oil prices. There is no doubt that Saudi Arabia and Russia are aware of the Permian growth and flattening dynamic and are co-managing their oil supply over the short term and medium term to allow for an orderly entrance of U.S. tight oil supply, aka Permian oil supply, into the market. It’s indeed telling that OPEC is attempting to extend its alliance with Russia for another three years, exactly the time window required for growth in the Permian oil field to flatten and for pricing power to return to it.

The U.S. tight oil story is far more complex than meets the eye, and the oil market, like any market, is prone to the appeal of simple narratives and false conclusions. Those willing to drill behind the headlines stand to capitalize on the treasures buried in the details.

By Nawar Alsaadi for http://www.Oilprice.com

[sumisu]

Peak Oil Review 19 February 2019

By Tom Whipple, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-02-19/peak-oil-review-19-february-2019/

Quote of the Week

“Washington doesn’t like cartels like OPEC. But then how can you have one market [the oil trade] dominated by one currency – the dollar?”Participant at an EU industrial working group convened to promote the euro and fight the monopoly of the US dollar in oil and commodities trading (2/14)


1. Oil and the Global Economy

Prices moved higher last week as the markets perceived that production problems in Venezuela and elsewhere might outweigh any decline in demand that could take place if global economic growth slows. London oil climbed by nearly $5 a barrel last week to close at $66.25. This is still about $20 a barrel lower than the recent peak set last October, but up about $16 a barrel from the early January low.

On the face of it, the 800,000 b/d OPEC+ production cut plus 400,000 b/d of Venezuelan production that is having trouble finding a market due to the US sanctions, should be enough to move prices higher. Glimmers of an end to the rapid growth in US shale oil production are starting to emerge.

Saudi Arabia’s energy minister said this week that the kingdom’s production would decline to near 9.8 million b/d next month. That is more than 1 million less than it pumped in November before agreeing with the rest of OPEC and Russia to cut production, and 500,000 b/d below its output target from the group. The country’s exports will also fall to the lowest level for March since 2011, a testimony to the effect US shale oil production and growing political tensions with the US are having on the Saudis.

However, there are threats to global economic growth looming which could overwhelm any cuts in oil production should a global recession emerge. We already see economic slowdowns in major industrial countries, and there are several large shoes out there waiting to drop – Brexit and the Sino/US trade war to name two.

The OPEC Production Cut:

There seems to be a split emerging in Moscow as to whether the production cut “alliance” with OPEC is doing Russia any good. Rosneft’s chief executive Igor Sechin wants Russia to quit the deal with OPEC. Sechin sees it as a threat to Russia that benefits the United States. However, for now, the likelihood of his opinion leading to a pullout from the deal probably is not in the cards as Moscow is only making limited cuts slowly.

Russian Energy Minister Alexander Novak said on Thursday that there are risks for global oil markets from the political crisis in Venezuela, yet there are no proposals to reverse the global oil production cut deal. Novak said Russia had cut its oil production under a pact between OPEC and non-OPEC producers by 80,000-90,000 barrels per day from its level in October.

The world’s need for OPEC crude is shrinking, suggesting that they will need to extend the deal through the second half of the year. The latest forecasts from supply-and-demand studies of the oil industry’s most-watched organizations – the International Energy Agency, the US Energy Information Administration, and the Organization of Petroleum Exporting Countries itself – show the need for OPEC crude diminishing as demand forecasts are trimmed and US supply outlooks are increased. This, of course, depends on whether the optimistic forecasts for US shale oil production this year come to fruition.

Moscow said last week that there were no substantial talks currently taking place to establish a formal alliance between Russia and OPEC. This is due to the additional red tape it would create, as well as the risk of US sanctions against monopolies.

US Shale Oil Production:

The US Energy Information Administration last week raised its forecasts for average US production in 2019 to 12. 4 million b/d, an annual increase of 1.45m b/d. This is also 350,000 b/d higher than predicted three months ago, despite warnings that shale oil is slowing down. Twelve months ago, the EIA forecast 2019 growth would be just 590,000 b/ d. This raises the issue of whether the EIA projections for this year and next are overly optimistic as they do not seem to be backed up by the detailed data regarding production trends.

The decline in shale oil production from legacy wells that are more than a month old is getting to be steeper and faster all the time. According to Rystad Energy’s forecast, if no new wells were to be completed in 2019-20, shale oil production would decline by 62 percent or 4.5 million b/d. This means that unless the shale oil industry drills and fracks enough wells to produce 4.5 million b/d in the next two years, US shale oil production would actually decline.

According to Rystad Energy partner Artem Abramov, “It is evident that without an increase in activity levels in terms of new completions, or further increases in oil well productivity, the pace of growth will decelerate in 2019-20. In fact, if the activity and productivity levels seen in the fourth quarter of 2018 prevail, US light oil production will increase by less than 1.5 million b/d between the fourth quarter of 2018 and the fourth quarter of 2020. This corresponds to a 50 percent lower growth rate than what was achieved over 2018.”

Drilling curbs by oil producers in the Permian Basin will continue until transport bottlenecks ease and investors stop punishing companies for increased capital spending, executives at an energy conference said last Thursday. The price of crude in the Permian fell sharply last year, selling as much as $18 below US benchmark prices, as a lack of pipeline capacity landlocked some oil output and as investors pushed producers to reduce spending and boost shareholder returns.

Pioneer Natural Resources Co, one of the Permian’s largest producers, said this week it plans to reduce 2019 capital expenditures by 11 percent, or about $350 million, slowing its production growth from prior years. “There aren’t nearly as many drilling dollars available,” said Bobby Whiteside, president of Midland, Texas-based oil producer Regions Permian LLC. “If Wall Street wants you to drill within cash flow, you’re going to have slower growth.”

As Standard Chartered analysts said last week, “In our view, there is a large gap between the generally downbeat views of the US oil industry itself and its investors and the upbeat tone of much media coverage and many analysts.”

2. The Middle East & North Africa

Iran: After 3 months of sanctions, the US has succeeded in reducing Tehran’s oil production by about 1 million b/d to 2.75 million where it has stabilized. In early May, the waivers that Washington granted to eight countries so that they could continue importing some oil without increasing world oil prices will expire. Few expect to see much of decline after the expiration of the waivers so that the US goal of forcing significant changes to Iran’s foreign policies is still some time off.

There is little doubt that Iran’s economy has been hurt by the sanctions. However, with nearly the whole world looking for ways around the sanctions without hurting trade with the US, not much is likely to happen in the immediate future. Increasing tensions between Iran and Israel over the Syrian situation could eventually lead to more trouble than the sanctions.

Iraq: Per the OPEC production freeze agreement, Iraq has made steep cuts at state-run fields, but those reductions are offset by increases at international oil company operated projects. Iraq sustained record-high oil production in January, despite efforts to begin limiting output in accordance with the agreement. The federal government and the autonomous Kurdistan together produced about 4.94 million b/d in January – the same as overall output in December.

The Kurdistan Regional Government issued an order Thursday to end all oil and refined product exports to Iran immediately. The directive will stop the flow of hundreds of tanker trucks that have been carrying crude and heavy fuel oil from Kurdistan across the Iranian border each day. This trade has drawn complaints from Washington as it seeks to tighten sanctions against Iran.

Saudi Arabia: The government plans to develop an international energy exploration and production business for the first time, even as the kingdom seeks to curb its reliance on hydrocarbons. Khalid al Falih, Saudi Arabia’s energy minister, said an overseas expansion would be a critical part of the company’s future. “We are no longer going to be inward-looking and focused only on monetizing the kingdom’s resources,” Falih said. “Going forward the world is going to be Saudi Aramco’s playground.”

While Saudi Aramco is the world’s largest oil producing company, it has never gone overseas to drill for oil, relying on its massive domestic reserves. Now the Saudis want to become an international energy player like Royal Dutch Shell or Exxon Mobil, pumping oil as well as gas overseas. How this plan squares with Crown Prince Mohammed bin Salman’s efforts to wean the kingdom off what he has called its “dangerous addiction to oil” remains to be seen.

Riyadh would need oil prices at $80-85 per barrel to balance its 2019 budget, Jihad Azour, Director of the Middle East and Central Asia Department at the International Monetary Fund told Reuters. Saudi Arabia’s officials, including Energy Minister Khalid al-Falih, don’t discuss publicly ‘targeted oil prices’ or the desired level of oil prices that would be comfortable to the Kingdom’s finances, but analysts and the IMF have estimated what oil price level would be necessary to cover Saudi Arabia’s budget spending.

Saudi Arabia’s Safaniyah offshore oil field is producing at reduced capacity after a ship’s anchor cut the main power cable. An earlier report suggested that production at the field had stopped completely, sparking worry about global heavy oil supply. With Venezuela sliding into chaos and with US sanctions reducing the flow of Venezuelan heavy crude to refineries, another heavy crude-producing field outage only adds to the problem.

Libya: Eastern Libyan military forces have full control of Libya’s biggest oilfield, El Sharara, a spokesman said. There was no immediate confirmation or comment from the state oil firm which operates with foreign partners the 315,000 b/d field deep in Libya’s southern desert. Libya’s state oil firm NOC is committed to a swift resumption of oil output at the El Sharara oilfield, but only after its workers’ safety is assured. So far, there is no word that production at the field has resumed.

The UN-backed government says that joint Libyan and US forces have bombed alleged al-Qaida militants in a southern desert town. Tripoli-based government spokesman Mohammed al-Salak said late Wednesday the bombing took place in the town of Ubari, about 950 kilometers, or 590 miles, south of the capital, Tripoli.

3. China

US and Chinese negotiators concluded the sixth round of cabinet-level negotiations in Beijing on Friday with no indication of substantial progress on core issues that President Donald Trump has said must be part of any “real deal” to end the trade war between the world’s two biggest economies. The US negotiating team was expected to sit down with President Xi Jinping later on Friday, reciprocating Mr. Trump’s courtesy meeting with Vice Premier Liu He in Washington late last month.

The impasse is increasing pressure on the US administration to delay a scheduled increase in tariffs on March 2 to facilitate a possible summit meeting with President Xi Jinping. If an agreement is not reached by March 1, President Trump has said he will increase the punitive tariff rate on $200 billion of Chinese imports from 10 percent to 25 percent.

China’s crude oil imports in January grew 5.1 percent year on year to 10.07 million b/d, preliminary data from the General Administration of Customs showed last Thursday. This was the third time China’s monthly crude imports were above 10 million b/d, despite dropping 2.7 percent from 10.35 million b/d in December 2018.

China’s natural gas imports in January, comprising LNG and pipeline gas, rose 26.8 percent year on year to 9.81 million tons — the equivalent of 13.53 Bcm.

4. Russia

The US is still deciding which sanctions to impose on Russia as part of mandatory penalties triggered in 2018 that could include blocking Russian petroleum imports into the US and banning US bank loans to Moscow. Blocking US imports of Russian oil would not have a significant market impact but banning Russia’s access to international debt and other measures to hamper Russian exports could deliver a severe blow to its economy. The US imported about 317,500 b/d of refined products and 67,500 b/d of crude from Russia in the first 11 months of 2018.

Energy Minister Novak said on Thursday that there are risks for global oil markets from the political crisis in Venezuela, yet there are no proposals to reverse the global oil production cut deal.

Moscow said last week there were no substantial talks currently taking place to establish an alliance between Russia and OPEC. Energy Minister Novak had said earlier it was highly unlikely OPEC and other oil producers would set up a joint structure due to the additional red tape it would create, as well as the risk of US sanctions against monopolies. Reuters reported last week that OPEC and its allies had drafted a document for setting up a new alliance but had carefully avoided any mention of sensitive issues such as oil prices.

5. Nigeria

Politicians and voters across Nigeria expressed dismay on Saturday after the government postponed the national election hours before polls were due to open. One opposition leader called the move a ploy to keep President Muhammadu Buhari in power. The chairman of the Independent National Electoral Commission told reporters the one-week delay was needed “to hold a free and fair election.”

The Niger Delta Avengers—the militant group responsible for most of the attacks on Nigeria’s oil infrastructure in 2016— resurfaced a few days before the now postponed Nigerian presidential elections, saying that they are backing the opposition candidate and would attack oil facilities if incumbent president Muhammadu Buhari is re-elected. Four years ago, the Avengers were able to reduce Nigeria’s oil production by several hundreds of thousands of barrels of oil per day.

The Nigerian Navy says it has destroyed no fewer than 637 illegal refineries, 104 speed boats and arrested 340 suspects in the Niger Delta during 2018. The illegal refineries, which for the most part consist of an oil drum or two, are claimed to have stolen some 277,000 barrels of oil last year. Even if these numbers are wildly exaggerated, illegal pipeline tapping and refining are still a significant problem which is slowly destroying Nigeria’s onshore oil industry and forcing it offshore.

Shell announced the release of a tender for the development of the Bonga South West Aparo oil field. The project’s initial phase includes a new Floating, Production, Storage, and Offloading (FPSO) vessel; more than 20 deep-water wells and related subsea infrastructure. The field lies 15km Southwest of the existing Bonga Main FPSO and is expected to produce 150,000 b/d.

6. Venezuela

The US increased pressure on President Maduro on Friday by sanctioning some of his top security officials and the head of the state oil company and unveiling plans to airlift humanitarian aid to the Colombian border. The 250 tons of food supplies, hygiene kits, and nutritional supplements began arriving Saturday to the border city of Cucuta, where tons of boxes of emergency aid already are warehoused awaiting delivery into Venezuela. Last year, the US sent more than $100 million in assistance to Cucuta to help Colombian authorities absorb some of the estimated 3 million Venezuelans fleeing hyperinflation and food shortages.

US sanctions on PDVSA continue to alter global crude and diluent flows and are accelerating the collapse of the South American nation’s oil sector. The sanctions, which the Trump administration announced January 28 and are expected to remain in effect until Venezuelan President Nicolas Maduro leaves office, have caused US Gulf Coast refiners to scramble for new sources of heavy crudes and have cut off flows of US refined products and diluents to Venezuela. But the sanctions have yet to affect oil prices significantly.

Estimates abound as to how fast Venezuela’s oil production is going to slip. Rystad Energy’s base case is that Venezuelan production drops by 340,000 b/d year-on-year to 1 million bpd in 2019 and slides even further to 890,000 b/d in 2020. In the low case scenario, where the status-quo continues, and Venezuela is unable to offset the effects of US sanctions and secure new financing, the country could see an additional 20 percent reduction in crude output this year, dropping to about 800,000 bpd, before sliding to 680,000 bpd in 2020.

However, according to the US State Department’s Special Envoy to Venezuela, Caracas’ oil production could fall to just 500,000 b/d by year’s end. Venezuelan production dropped 10,000 b/d to 1.16 million b/d in January from 2.4 million b/d in December 2015, according to the latest S&P Global Platts OPEC production survey.

Due to the US sanctions, one of the world’s largest commodity traders, Trafigura, has decided to halt its oil trade with Venezuela. Losing Trafigura is a severe blow to PDVSA, which has been working with Trafigura and other trading houses to sell crude oil and to import refined oil products. In 2018, Trafigura took 34,000 b/d of crude oil and products from Venezuela, most of which it resold to refineries in the US and China. The US sanctions now block all payments to PDVSA accounts, and buyers of Venezuelan crude are directed to deposit payments in a separate escrow account.

PDVSA is telling its customers to deposit the money for purchases in Russia’s Gazprom bank. However, Gazprom said over the weekend it would not handle PDVSA money due to the harm US sanctions could do to its other business.

China has been holding talks with Venezuela’s political opposition to safeguard its investments as pressure builds on Nicolás Maduro. Its diplomats are worried over the future of its oil projects in Venezuela and nearly $20 billion that Caracas owes Beijing.

7. Mexico

A package of $3.5 billion worth of tax cuts was granted last week to the state oil company Pemex to be spread over the next six years. In addition, the government will inject $3.9 billion into Pemex, officials said on Friday. This move could strengthen its finances and prevent a further credit downgrade, although investors saw the plan as only a short-term fix.

Falling oil output, corruption and high labor costs have contributed to the decline of the company that was once a symbol of national pride. It now holds roughly $106 billion in financial debt, the highest of any national oil company in Latin America. Fitch and Moody’s rate Pemex’s credit one notch above junk. For years the Mexican government used Pemex’s pockets as a personal piggy bank, without ever fully repaying what was taken out of the coffers.

7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)

The European Union has convened a wide-ranging industrial group to work on promoting the euro and fighting the monopoly of the US dollar in oil and commodities trading, reflecting broader tensions with Washington over trade and sanctions. (2/14)

BP bullish on oil: Global oil demand will prove resilient over the next two decades even if ambitious targets set in the Paris climate change accord are met and the adoption of renewable energy is “off the charts,” according to BP’s annual energy outlook. (2/15)

German LNG: Germany will likely build two terminals to import liquefied natural gas, in a move to appease the US while Berlin also supports the Russia-led Nord Stream 2 gas pipeline, which has divided the European Union member states in recent years. (2/13)

EU LNG: The European Union reached a provisional deal on Wednesday on new rules governing import gas pipelines including Russia’s planned Nord Stream 2, in a move that cast doubts over the project’s current operating plan. In the deal, Europe is closing a loophole in its laws as its dependency on natural gas imports increases. The new rules ensure that EU law will be applied to pipelines bringing gas to Europe and that everyone interested in selling gas to Europe must respect European energy law. (2/13)

Turkish exploration ships will soon start drilling for oil and gas offshore the northern part of Cyprus, a move that could reignite tension between Turkey, Cyprus, and Greece regarding the exploration rights off the eastern Mediterranean island. Turkey claims that part of the Cyprus offshore area is under the jurisdiction of Turkish Cypriots or Turkey. (2/14)

In Yemen, the Saudi-backed government hopes to scale up its crude production to 110,000 b/d in 2019, with exports touching about 75,000 b/d. The government of Abd-Rabbu Mansour Hadi controls the southern port city of Aden and areas holding Yemen’s oil-and-gas fields. The Iranian-aligned Houthi group controls the capital Sanaa and the oil terminal of Ras Issa on the western coast. Yemen’s oil output has collapsed since 2015 when the Saudi-led military coalition intervened in Yemen’s war to try to restore Hadi’s government to power. (2/11)

India’s largest LNG importer may invest in Tellurian Inc.’s proposed Driftwood LNG liquefaction and export facility near Lake Charles, La. The approximately 27.6-million ton per annum Louisiana project would also include natural gas production, gathering, and processing infrastructure as well as the 96-mile Driftwood Pipeline. (2/16)

The US oil rig count increased by three to 857, according to Baker Hughes. Gas rigs declined by one to 194. (2/16)

US crude oil output is expected to rise 1.45 million b/d this year and 790,000 b/d more next year, bringing total output to 13.2 million b/d, the EIA said in a monthly forecast on Tuesday. US oil production this year is forecast to be at a record 12.41 million b/d. (12/13)

Texas Independent Producers Royalty Owners Association reported that Texas oil wells produced more than 1.54 billion barrels of crude in 2018, well above the previous record of 1.28 billion barrels set in 1973. (2/13)

Crude exports: Sentinel Midstream on Monday became the latest contender in the race to build a crude export terminal off the US Gulf Coast, announcing plans to develop a facility off Freeport, Texas that could load a supertanker in one day. The company’s announcement follows seven other proposed crude export terminals. (2/12)

US dry natural gas production will rise to an all-time high of 90.16 billion cubic feet per day (bcfd) in 2019 from a record high of 83.26 bcfd in 2018, according to the EIA’s Short-Term Energy Outlook on Tuesday. (2/13)

Biogas: Southern California Gas Co. and biogas producer Calgren Dairy Fuels announced that renewable natural gas produced at Calgren’s dairy digester facility in Pixley, California is being injected into SoCalGas pipelines. The renewable natural gas from a cow manure digestion facility is already being used to fuel about 400 waste hauling trucks. (2/16)

A biofuel win: The European Commission, the entity responsible for negotiating trade deals on behalf of the European Union, announced last week that they will now allow soybeans grown in the United States to be used for biofuel in the EU. This move came as part of a campaign to improve trade relations with the United States. (2/15)

KY coal closures: The board of the Tennessee Valley Authority voted Thursday to close its Paradise 3 coal plant in western Kentucky by the end of 2020 and to close its Bull Run plant in eastern Tennessee by 2023. The two plants combined employ about 270 people, according to the TVA. In a tweet earlier this month, President Trump urged the TVA to “give serious consideration to all factors before voting to close viable power plants, like Paradise #3 in Kentucky!” (2/15)

The US solar power industry workforce expanded by 150,000 jobs in the period 2010 to 2018, the latest census from the Solar Foundation found. Last year alone, however, the sector shed almost 8,000 jobs, and it contracted by more than 9,000 jobs during 2017. (2/14)

Solar from space: Chinese scientists have revealed plans to build and launch into orbit a space solar station that could capture the Sun’s rays 24/7. China has already started to build an early experimental space power plant in the city of Chongqing. Such solar power technology could supply reliable energy 99 percent of the time and have six times the intensity of the solar farms that work on the earth. (2/16)

A French wind power tender has attracted interest from international energy firms, signaling that France’s offshore wind industry could finally be taking off after years of missteps. While Britain and Germany have already built 8,200 and 6,400 megawatts (MW) of offshore wind capacity, France does not have a single turbine in the water. In two previous French tenders, projects worth $12.4 billion were awarded but have not materialized because of public opposition and contract disputes. (2/16)

New H2 angle: The Dutch Institute for Fundamental Energy Research is partnering with Toyota Motor Europe to develop a device that absorbs water vapor and splits it into hydrogen and oxygen directly using solar energy. Researchers have already developed small solid-state photoelectrochemical cells that capture water from ambient air and then generate hydrogen upon illumination by sunlight. Working with gas instead of liquid has several advantages. Liquids introduce some technical problems, like unwanted bubble formation. Furthermore, by using water in the gas phase instead of the liquid phase, there is no need to purify the water. And finally, since only the water that is present in the surrounding air is used, the technology is applicable in remote places where no water is available. (2/13)

Population, soil, fertilizer, fuels: A painful truth is that we may need to reduce population. Some demographers tell us that human population will peak at mid-century and then gently decline through 2100. Others say that population will continue to grow through 2100. Neither of them may be right if we as a civilization don’t figure out how to preserve the fertility of the soil. And, that’s before considering the effects of worsening climate change and other resource depletion including fossil fuels. (2/12)

[sumisu]

Peak Oil Review 11 February 2019

By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-02-11/peak-oil-review-11-february-2019/

Quote of the Week

“[W]ith President Trump’s poll numbers in negative territory, whichever candidate emerges from the Democratic primary will have a decent shot at winning the presidency. If that occurs, they will be on record having supported the Green New Deal and will most likely push for some version of it in 2021. That means that oil and gas companies, having enjoyed a deregulatory bonanza under Trump, could see rougher waters ahead. But with the climate debate getting momentum, that pressure is not going away, no matter what happens with the Green New Deal.”
Nick Cunningham, Oilprice.com


Graphic of the Week



1. Oil and the Global Economy

Oil prices have moved very little in the past month closing on Friday at $52.72 in NY and $62.10 in London or about where they were in the first week of January. Several factors such as the recent price drop, the OPEC+ production cut, the US sanctions on Tehran and Caracas, and the outage of Libya’s largest field should be pushing prices higher. However, concerns about slowing global economic growth, the US/China trade dispute, and the possibility of turmoil resulting from the UK’s exit from the EU suggest that the demand for oil could drop significantly in the coming year.

The US-China trade dispute is still the most important factor as we are only two weeks away from higher tariffs coming into effect. President Trump said last week that he would not meet Chinese President Xi before the March 1 trade deadline. Such a meeting would be an indication that the US and China were close to reaching a deal. Trump has promised to hike tariffs on $200 billion worth of Chinese imports from 10 to 25 percent. White House economic advisor Larry Kudlow said that there is a “pretty sizable distance” to go on the trade talks.

Last week, the European Commission sharply cut its forecasts for eurozone economic growth due to global trade tensions, an array of domestic downturns, and the possibility that an unregulated Brexit will result in chaos.

The OPEC Production Cut: The cartel’s oil production fell by nearly 1 million b/d from December to 30.86 million b/d in January, marking the lowest output for OPEC since March 2015. The monthly drop in the cartel’s crude output was the steepest since December 2016. Saudi Arabia’s oil production in January stood at 10.21 million bpd, or 100,000 b/d below its pledged ceiling of 10.311 million b/d, and the lowest Saudi production since May 2018.

Much of the 1 million b/d production drop is from Libya, Venezuela, and Iran where the output is dropping for geopolitical reasons and not from the attempt to force prices higher. As the Venezuelan situation deteriorates, we can expect further production drops this month. Indeed, much of OPEC’s apparent success in lowering production over the last few years is due to geopolitical problems for some of its members which resulted in lower production. Should the situation get worse, much of Caracas’s roughly 1 million b/d of oil production could come to a halt.

The relationship between US lawmakers and two of President Trump’s staunchest supporters, Saudi Crown Prince Mohammed bin Salman and Abu Dhabi’s Sheikh Mohammed bin Zayed, is worsening. Legislation that aims to prevent OPEC from coordinating production and influencing oil prices is advancing on Capitol Hill. On Friday at least one senior Trump administration official expressed support for the legislation, signaling a potential change in the decades-old White House opposition to the measure. The bills would make it illegal for foreign nations to work together to limit fossil fuel supplies and set prices. They would authorize the US Justice Department to sue oil producers for antitrust violations by stripping foreign actors of sovereign immunity protections. Barclays said last week that the passage of NOPEC legislation could see the oil market return to a period of instability.

Saudi Arabia and its Persian Gulf allies are backing a formal partnership with a 10-nation group of oil exporters led by Russia, according to OPEC officials. Such a formal alliance would transform the nature of the 60-year-old cartel. The cartel is facing pressure from President Trump to keep prices low and the increasing flow of American shale oil.

TASS news agency cited Russian Energy Minister Alexander Novak as saying last week that OPEC and non-OPEC countries could discuss a charter outlining open-ended cooperation in April. Reuters is reporting that Igor Sechin, head of Russian oil giant Rosneft, has written to the Russian president saying Moscow’s deal with OPEC to cut oil output is a strategic threat and plays into the hands of the United States.

US Shale Oil Production:

Forecasters had been projecting a substantial increase in US oil production in 2019. The size of this increase ranged from four hundred and twenty thousand b/d (Citibank) to 1.7 million (OPEC) with the most recent IEA forecast coming in with an increase of almost eight hundred thousand b/d. The optimism expressed in these forecasts is understandable when considering just how spectacular the production in US shale oil regions has been. The most recent EIA drilling productivity report on US shale oil production sees an addition of only 62,000 b/d to 8.17 million b/d this month. Given the extremely cold weather in North Dakota in the past few weeks, the chances are that production in the Bakken will fall in February rather than grow when the actual output for February becomes available in mid-April.

The US shale oil industry is changing. The immediate problem is the low price of oil resulting from the 30 percent price drop last fall. In North Dakota, the wellhead price for crude fell from $58.43 in October to $26.25 in December before rebounding to about $36 in January. This is the same oil that went s high as $136 a barrel back in the summer of 2008. Add to the low-price problem, the shortage of pipeline capacity (albeit temporary) to move oil out of the US most productive Permian Basin and you have cash flow problems for many of the small producers that have dominated the industry for the past decade.

In the last few years, however, large oil companies such as Exxon and Chevron have entered the shale oil business in a big way. These giants do not have the problems of the smaller drillers. Their cash flows from conventional oil are so large that they can afford to lose a bit on the production of shale oil. As integrated companies, they can make money on downstream activities, such as transportation, refining, and retail to offset any losses on shale oil production (if any). These companies maintain that the size of their operations can lead to so many efficiencies that they can make money where smaller companies fail. They do not need to beg investors for more capital to keep drilling, nor do they need to cook the books to make shale oil drilling look profitable.

In recent weeks, we have started to see some of the consequences of lower prices. Liberty Oilfield Services estimates that roughly 20 percent of the hydraulic fracturing fleets that were active in mid-2018 have now been idled or are being idled, as producers to tighten their budgets. This report is backed up by estimates that the cost of fracking sand used in the Permian will fall by 19 percent this year due to lower demand. Sand pricing is important for drillers because fracking is the most expensive phase in drilling a shale oil well.

How much the US shale oil industry will grow in the next five years is an open question. Given the rapid depletion of shale oil wells, the industry must constantly drill to replace depleted wells. In the older Bakken and Eagle Ford shale oil regions, new production is just barely ahead of the decline in production from older wells. The situation in the Permian where production is now on the order of 3.8 million b/d, is not far behind. As production grows, the depletion problem grows so that someday soon, the industry will not be able to keep up and production will start to fall.

2. The Middle East & North Africa

Iran: Tehran exported about 1.28 million b/d of crude and condensate last month, according to tanker-tracking data compiled by Bloomberg. According to a former State Department official who managed sanctions on Iran during the Obama administration, Tehran will be able to export some 800,000 to 1 million b/d after the US waivers are lifted in April. Iran can slip some of its oil exports past the sanctions, and a few countries will purchase the crude with or without waivers because they “don’t care about exemptions.”

Iran’s oil customers should not expect new US waivers in May, the US Special Representative for Iran, Brian Hook, said last week, urging buyers to stop importing Iranian oil. “What we have announced is the policy to get to zero imports of Iranian crude as quickly as possible. We are not looking to grant any future waivers or exceptions to our sanctions regime, whether it is oil or anything else.”

Germany, France, and the UK have set up a special payment channel to handle trade with Iran that would allow transactions with Iran, including oil, as the EU still tries to salvage the nuclear deal with Iran.

Iran has recoverable crude oil reserves of 160 billion barrels according to the National Iranian Oil Company. Recoverable natural gas reserves came in at 33.33 trillion cubic meters. This data, according to the Iranian media, makes Iran the third-largest holder of oil and gas reserves after the United States and Russia.

Syria/Iraq: US withdrawal of its troops from Syria will not give Islamic State an opportunity to retake oil fields in the war-torn country, US Secretary of State Mike Pompeo said last week. In September 2017, U.S.-backed Syrian forces seized the Conoco gas plant from Islamic State in the Deir Ezzor area, depriving the militants of an important revenue source. In August 2018, the second-largest oil field in Syria, the Tanak field in the Deir Ezzor region, restarted after U.S.-backed Kurdish forces recaptured the field from ISIS. The Tanak field, which has around 150 wells and the capacity to produce up to 40,000 b/d, was captured from the Islamist militants by the Syrian Democratic Forces in November of 2017.

Iraqi crude sales in January hit their second-highest monthly average ever, as the federal government and the Kurdistan Regional Government combined to sell 4.081 million b/d. Basra Oil Co., the state-owned operator of the Majnoon field, plans to boost production from it to 450,000 b/d by 2021 by drilling 40 new wells. This project would be more than double Majnoon’s current production, which averages 240,000 b/d. The 40 new wells will be in addition to another 40 already contracted to Schlumberger last month. Basra Oil Co. took over Majnoon last year, after Shell, the previous operator of the field, pulled out.

Kurdistan’s two dominant political parties have made a breakthrough in their long-running negotiations to form the next Regional Government. Under the agreement, the new KRG Parliament will meet for the first time on Feb. 18, paving the way for Masrur Barzani – currently Kurdistan’s intelligence chief, and the son of former President Massoud Barzani, who leads the Kurdistan Democratic Party – to become prime minister.

Saudi Arabia: The government has backed up the pledge of its energy minister Khalid al-Falih to slow oil output, with January production falling to 10.21 million b/d – down 400,000 b/d from December. The January figure is below its allocation of 10.31 million b/d under the production cut deal, and crude exports declined by around 500,000 b/d to 7.20 million b/d in January. This was the lowest output figure since May 2018 when the kingdom produced 10.01 million b/d.

The Trump administration is confident that the Saudis will fill any oil supply gap caused by US sanctions on Venezuela. White House officials are “certain” that Saudi Arabia will boost crude exports to the US in coming weeks, but Saudi officials have indicated no such plans, with OPEC in the midst of a production cut accord aimed at boosting oil prices.

The Saudis have stepped up efforts to woo investors disturbed by the killing of journalist Jamal Khashoggi, as it seeks to raise more than $426 billion in private capital to modernize its economy. Officials say the government said it would offer financing and other unspecified incentives to local and international investors to help develop its mining, logistics and manufacturing sectors. The new plan, dubbed the National Industrial Development and Logistics Program, is part of Crown Prince Mohammed bin Salman’s ambitious social and economic overhaul announced in 2016. Since then, Saudi Arabia has introduced new laws and created funds to invest jointly with international companies to attract foreign cash to diversify the economy away from oil.

However, the departure of more than 1 million foreign workers since 2017 has added to a sense of uncertainty. Workers from Asia and the Middle East, often on short-term contracts, have provided the labor to fulfill the Saudi government’s ambitious development plans for decades. Recent shifts in government policy, however, have imposed fees on the dependents of expatriate workers and restricted foreigners from working in certain sectors. Rising costs have hit low-wage foreign workers especially hard, forcing many from the country.

A vital part of the new government development plan involves creating employment for Saudi citizens in the private sector, where jobs are overwhelmingly held by foreigners. In the short term, though, Saudi citizens have not filled the positions that expatriates are vacating, adding to the pressure on business.

Libya: The Libyan National Army—a militia led by Khalifa Haftar, whose forces control the eastern part of the country—took over the giant Sharara oil field last week according to an official at Libya’s National Oil Corp. The Sharara facilities, which can pump 315,000 b/d, about a third of Libya’s normal output, were shut down in early December by a small group who demanded better living conditions in the region. On Friday, however, the National Oil Corp. said military clashes near the Sharara oil field have made conditions unsafe and production isn’t likely to restart soon.

3. China

There is growing concern over China’s economic growth. If the slowdown continues, it will threaten economic activity around the world. Growth in the German economy has already cooled in part due to its exports of machinery to China dropping precipitously. Beijing’s economic growth has been a key driver of global crude oil consumption accounting for one-third of the IEA’s projected increase in global oil consumption for 2019. Lower oil demand growth in China comes just when independent refining capacity there is rising. As demand slows, these independent refiners will begin to dump oil products abroad to earn hard cash. In doing so, they could plunge the global refining industry into a recession and drive down crude prices.

The White House said Friday that deputy-level talks would start Monday in Beijing, followed by high-level talks February 14-15 attended by US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The next round of talks that could signal whether crude and LNG flows will pick up between the two countries this year or remain mired in the trade war. The talks come just two weeks before the next potential round of tariff increases. US crude exports to China disappeared in August, after hitting 510,000 b/d in June, with none reported through November.

China’s LNG imports broke another record last month amid rising stockpiles that are making importers nervous. The January total reached 6.55 million tons, up by 2 percent from the previous record set in December. However, the winter turned out milder than would justify this scale of LNG imports so that some importers are stuck with more LNG than they can sell. Imports of LNG rose by 41 percent throughout 2018, as China sought to prevent a repeat of the 2017 gas shortage that left several million households in northern China without heating.

China’s state energy companies plan to increase spending on domestic drilling this year to the highest levels since 2016, focusing on adding natural gas reserves in a concerted drive to boost local supplies. Responding to President Xi Jinping’s call last August to increase domestic energy production, China’s of oil majors are adding thousands of wells at oil basins in the remote deserts of the northwest region of Xinjiang, shale rocks in southwest Sichuan province and deepwater fields of the South China Sea.

In a new twist, the Chinese are planning to apply the technology used to detonate nuclear bombs to access its massive shale gas reserves in Sichuan province. According to the South China Post, scientists have developed an ‘energy rod’ that can fire multiple shock waves to frack sedimentary rock at depths of up to 3.5km. While China is supposed to have the world’s largest reserves of natural gas, it is found so deep underground that the current fracking technology cannot be used.

The first field test is to take place in Sichuan in March or April. The test could be a dud, producing little or no gas; it could be a breakthrough in gas extraction technology making China energy independent; or it could trigger earthquakes as the tests are taking place in seismically active regions of China.

PetroChina is looking to drop Venezuela’s state-owned oil firm PDVSA as an equity partner in a planned and long-delayed US$10-billion oil refinery and petrochemical complex in southern China. The plan to dump the ailing Venezuelan oil firm is a result of the continuously deteriorating finances of Venezuela’s oil company in recent years.

Gazprom has not been able to obtain a loan from the China Development Bank for part of the $14 billion financing the company aims to raise for the construction of its Amur gas processing plant, which will be Russia’s largest. Gazprom will use bridge loans for the construction of the Amur plant, but these will not come from the Chinese Development Bank. Moscow says it could reach an agreement with the Chinese over the terms of the loan.

4. Russia

Oil output declined to 11.38 million b/d in January, or by around 35,000 b/d from the October 2018 level — the baseline for the global oil accord. Alexei Sazanov, head of the finance ministry’s tax department, said Russian oil production has not yet reached its peak and expectations that it could decline in the next few years are not justified. Sazanov also said the government would take necessary steps if it saw risks of a decline in oil production. Russia’s energy ministry said earlier that Russian oil output could fall significantly in the next few years if some tax and other measures are not taken.

US oilfield services giant Schlumberger said on Tuesday it would continue looking for alternative ways to work in Russia’s onshore drilling market despite its bid for Eurasia Drilling Company (EDC) falling apart. Russia’s Federal Anti-monopoly Service said on Monday that Schlumberger had withdrawn its bid for a stake in EDC, one of the largest private drilling companies in the country.

Chancellor Angela Merkel said last week that Germany will not become dependent on Russia for gas due to the completion of Russia’s Nord Stream 2 pipeline. She stressed that it was crucial to ensure Ukraine remained a transit country for gas. “Do we become dependent on Russia due to this second gas pipeline? I say ‘no,’ if we diversify at the same time.”

Republican and Democratic US senators unveiled a resolution calling for the cancellation of Russia’s Nord Stream 2 natural gas pipeline. Leaders of the Senate Foreign Relations Committee said they would take up the resolution at their next business meeting. Opponents of the pipeline worry it will weaken support for Ukraine by depriving Kiev of gas transit fees along the traditional route for Russian supplies, which meet more than a third of the European Union’s gas needs.

5. Venezuela

Events have been moving rapidly since the US imposed sanctions on Caracas two weeks ago, cutting off the oil and product flows between the two countries and making it difficult for Venezuela to sell its oil elsewhere. Venezuela is preparing to shut down more than a quarter of its oil production in the coming weeks, with US sanctions preventing PDVSA from importing diluent needed to extract its extra-heavy crude. Sources at PDVSA say the company expects it will not be able to produce some 300,000 b/d of diluted crude oil without supplies of naphtha that are blended with the thick crude from the Orinoco Belt to make it transportable. As a result, Venezuela’s total oil output will fall to below 800,000 b/d by the end of February from the estimated 1.17 million b/d the country pumped in December.

PDVSA is looking to sell more of its oil to customers in Europe and Asia as the US sanctions are cutting off US buyers. They were exporting about 500,000 bpd to the US but will redirect exports to other customers in Europe and Asia. As of last week, PDVSA and oil traders were having trouble finding customers with refineries that can handle the heavy oil outside of the US. These exist in China, but the transportation costs are high.

Tankers carrying about 7 million barrels of Venezuelan oil are sitting in the Gulf of Mexico, some holding cargoes bought ahead of the latest US sanctions on Venezuela and others whose buyers are weighing who to pay. Venezuela’s domestic refineries remain mostly idle due to lack of crude supplies and damaged equipment, with rampant fuel shortages in the country. PDVSA began partial rationing of gasoline at gas stations in some regions on Sunday, as many gas stations in Caracas ran out of fuel as customers nervously filled up their tanks in anticipation of shortages.

Russia has stood by the Venezuelan leader for years and has poured billions of dollars in the Latin American country in the form of loans and oil investments, even when all other Venezuelan allies—including China—have shown reluctance to continue lending money to Maduro’s regime. Rosneft is reportedly sending some oil products to Venezuela to keep production from collapsing; however, sources in Moscow say the government is becoming pessimistic that it can save the Maduro government in the current crisis.

The international effort to rush food and medicine into Venezuela is becoming a high-stakes standoff between President Maduro and the U.S.-backed opposition, essentially holding hostage lifesaving shipments of humanitarian aid at the border. Maduro has defiantly vowed to block more than $60 million worth of assistance organized by the opposition and provisioned by the United States, Colombia, Canada, and other countries. Even as truckloads of aid from the United States began arriving at warehouses at the border crossing of Cucuta, Colombia, Maduro loyalists pledged to use force to keep it out.

6. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)

Global deepwater liquid production is set to jump by 700,000 b/d from 2018 to reach a record-high of 10.3 million b/d in 2019, thanks to new fields coming on stream in Brazil and the US Gulf of Mexico, research firm Rystad Energy said on Friday. In addition to Brazil and the United States, the other biggest deepwater producers will be Angola, Norway, and Nigeria. (2/2)

ExxonMobil, driven by its significant investment in Guyana, is leader of the pack among the top oil and gas explorers of 2018, according to Rystad Energy’s annual exploration review. (2/2)

Demand peak: According to Bank of America Merrill Lynch, the annual increase in global oil consumption slows dramatically in the years ahead. By 2024, demand growth halves, falling to just 0.6 million b/d, down from 1.2 million this year. But by 2030, demand growth zeros out as consumption hits a permanent peak, before falling at a relatively rapid rate thereafter. The main driver of the destruction in demand is the proliferation of electric vehicles. (2/6)

The European car market remained stable during 2018, as 15.6 million vehicles were registered—just 346 more than in 2017— according to JATO Dynamics. Diesel vehicles posted their lowest market share since 2001, as demand fell by double digits in 20 of the 27 markets included in JATO’s analysis. Throughout 2018 Jato continued to see the effects of a “diesel crisis,” as announcements of policy changes by governments led to confusion and panic among consumers. Almost one million more consumers opted for a gasoline vehicle in 2018 than in 2017, while alternative fueled vehicles also benefitted with almost 200,000 more registrations than in 2017. Norway was the biggest market for electric vehicles, where they held a 31% market share. (2/4)

UK fracking standoff: Britain’s government has no plans to review regulations for fracking gas in the country, it said on Thursday, following calls from industry to revisit the rules. Chemical giant Ineos and fracking firm Cuadrilla earlier this week said current restrictions around seismic events at fracking sites could force the industry to close. Under the so-called traffic light system fracking must be paused for 18 hours following any seismic event of magnitude 0.5 or above, something which forced Cuadrilla to halt its operations several times last year. (2/6)

In northwest England, tests of the first shale well at Cuadrilla’s site show a rich reservoir of high quality and recoverable gas, the British firm said on Wednesday, adding that rules that have constrained its testing work should be eased. (2/7)

Nord Stream 2: European Union nations backed a plan to regulate Russia’s Nord Stream 2 pipeline on Friday, a move that will likely slow but not rule out its construction. The long-stalled agreement comes after a last-ditch German and French push to amend the draft and give Berlin a greater say in how to ensure the pipeline to carry Russian gas to Europe under the Baltic Sea complies with EU law. (2/9)

Qatar Petroleum and Exxon Mobil Corp are expected to announce plans next week to proceed with a $10 billion project that will expand a liquefied natural gas (LNG) export facility in Texas. LNG demand is soaring. Worldwide consumption of the fuel is expected to more than double to 550 million tons a year by 2030, triggering a race among oil and gas companies eager to dominate the market. (2/2)

Mozambique LNG: Tokyo Gas Co, Japan’s largest gas utility and a major LNG player, and British energy supplier Centrica agreed on Tuesday to jointly purchase 2.6 million tons of LNG per year from Mozambique LNG Company Pte Ltd. The two companies said that LNG will be delivered ex-ship from Mozambique LNG from the start-up of production until the early 2040s. Mozambique LNG1 is owned by US oil and gas producer Anadarko Petroleum Corporation and partners. (2/7)

Offshore South Africa, French oil and gas major Total’s discovery could be around 1 billion barrels of total resources and is “probably quite big”, the company’s chief executive Patrick Pouyanne, said on Thursday. Total said it had made a significant gas condensate discovery after drilling its Brulpadda prospects. (2/7)

Offshore Guyana, an ExxonMobil-led consortium has made two more discoveries they call Haimara and Tilapia, the partners said Wednesday, bringing the number of finds on their prolific Stabroek block to an even dozen. The discoveries add to an earlier-announced recoverable resource estimate on the block of more than 5 billion barrels of oil equivalent. (2/7)

Canada’s struggling oil industry is looking to what is known as partial upgrading technology to thin its sludge-like crude and squeeze more of it through congested pipelines. It is the latest effort by the Alberta provincial government to rescue an industry hurt last year by steep discounts for its oil, as production far exceeded pipeline capacity. (2/7)

In Canada, a Supreme Court ruling that bankrupt oil and gas companies must clean up their abandoned wells before paying creditors might sound like good news, but it doesn’t solve a growing crisis in Western Canada’s aging oil patch. Just how will an increasingly indebted industry, hobbled by low energy prices and rising costs, find the up to $260 billion needed to clean up its inactive pipelines, wells, plants and oilsands mines as it enters its sunset years? (2/7)

The US oil rig count increased by 7 to 854 units while the gas rig count dropped by three to 195, according to Baker Hughes, a GE company. That follows the previous week when there was a net decline of 14 rigs (-15 oil, +1 gas). The oil and gas rig count is now 74 up from this time last year, 63 of which is in oil rigs. (2/9, 2/2)

LNG exports to grow in 2019: The US is on the verge of becoming a much bigger global player in the supply of LNG produced from shale gas, with as many as three terminals expected to start up this year in addition to the three currently operating. (2/7)

Green ‘New Deal’: Democratic officials and activists are pushing the party to unify behind a plan to quickly wean the US economy off fossil fuels and cement climate change as a central issue in the 2020 election. The plan, released on Thursday and dubbed the “Green New Deal,” aims to dramatically overhaul the country’s energy and transportation infrastructure to “achieve net-zero greenhouse gas emissions” in the next 10 years. (2/9)

More Green New Deal: The plan, which takes the form of a non-binding congressional resolution, outlines some of the most aggressive climate goals ever put forward by Democratic lawmakers and clashes dramatically with the Trump administration’s efforts to advance domestic oil, gas and coal production by rolling back environmental protections. The non-binding resolution outlines several goals for the United States, including meeting 100 percent of power demand from zero-emission energy sources like wind and solar within 10 years. The plan also calls for new projects to modernize US transportation infrastructure, cut carbon emissions from the manufacturing and agricultural sectors, make buildings and homes more energy efficient and increase land preservation. (2/8)

Climate intensifies storms: A group of top hurricane experts, including several federal researchers at the National Oceanic and Atmospheric Administration, published striking new research Thursday suggesting that hurricanes in the Atlantic Ocean have grown considerably worse, and climate change is part of the reason why. The study focused on rapid intensification, in which hurricanes may grow from a weak tropical storm or Category 1 status to Category 4 or 5 in a brief period. (2/8)

Shifting climate: State officials along the East and Gulf Coasts are pushing for projects worth billions of dollars to protect populous coastal regions from rising oceans and extreme weather, write the Journal’s Jennifer Levitz and Cameron McWhirter. (2/5)

UK’s power struggle: Now that Japanese giants Toshiba and Hitachi have walked away from UK nuclear power projects that had previously been abandoned by others, it has forced the government to reassess the pro-nuclear bias of its energy policy. Nuclear power is no longer cost competitive with renewable energy, but don’t expect any extra push into the cheaper technology. There is easily enough solar and wind energy available to make up for the cancellation of the nuclear projects and to produce the low-carbon electricity required to make the UK’s 2030 carbon emissions targets achievable. Instead, however, the country’s incentives and regulations favor developing more power plants driven by natural gas. (2/8)

The UK’s CO2 emissions peaked in the year 1973 and have declined by around 38% since 1990, faster than any other major developed country. The most significant factors include a cleaner electricity mix based on gas and renewables instead of coal, as well as falling demand for energy across homes, businesses and industry. Declines in the UK’s CO2 have persisted despite an economic recovery from the financial crisis a decade ago. (2/5)

[sumisu]

Venezuela’s Collapse is a Window into How the Oil Age will Unravel

By Nafeez Ahmed, originally published by Insurge Intelligence

February 4, 2019

https://www.resilience.org/stories/2019-02-04/venezuelas-collapse-is-a-window-into-how-the-oil-age-will-unravel/

[sumisu]

Collapse is Already Here

By Chris Martenson, originally published by Peak Prosperity

January 31, 2019

https://www.resilience.org/stories/2019-01-31/collapse-is-already-here/

[sumisu]

Is Transition Worth It?

By Chris Nelder, originally published by Energy Transition Show

January 30, 2019

https://www.resilience.org/stories/2019-01-30/is-transition-worth-it/

[sumisu]

Peak Oil Review: 28 January 2018

By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-01-28/peak-oil-review-28-january-2018/

Quote of the Week

“Because energy can be generated by technologies, using the sun and wind, rather than concentrated natural resources in the form of oil and gas, which is not ubiquitous in geographic terms, many countries will be able to reduce their vulnerabilities to price spikes and outright supply disruptions by pivoting to renewable energy. Moreover, the strategic importance of chokepoints – the Straits of Hormuz, or the Straits of Malacca for instance – will diminish as fossil fuels lose their grip.” – Global Commission on the Geopolitics of Energy Transformation


1. Oil and the Global Economy

Oil prices continue to hover in the low $50s in the US and low $60s in London – about where they have been since early January. The main issue affecting prices remains the efficacy of the OPEC+ production cut vs. US shale oil production and the slowing Chinese economy. Last week a political upheaval occurred in Venezuela, raising the possibility that Caracas would no longer be able to export 500,000 b/d to the US or that its production might fall below its current 1 million b/d level. So far, the Venezuelan turmoil has not moved oil prices, but with the world’s major powers lining up for or against the Maduro government, prices seem likely to be affected.

Last week saw some of the most optimistic forecasts for the future of US shale oil production ever published. Rystad Energy announced that the US is on track to produce some 24 million b/d of oil, more than Russia and Saudi Arabia combined by 2025 – assuming that oil prices stay above $58 a barrel. The growth in US liquids production will be driven by major shale basins such as the Permian, Rystad’s report said.

The EIA also joined the optimism last week. In its Annual Energy Outlook 2019, the administration forecast that US crude oil production will keep setting annual records until 2027 and will remain higher than 14 million b/d through 2040, thanks to continuously growing shale production. “Near the end of the projection period (2050), the United States returns to being a net importer of petroleum and other liquids as a result of increasing domestic gasoline consumption and falling domestic crude oil production in those years,” according to the EIA.

It seems that the EIA and Rystad Energy are taking the US Geological Survey’s (USGS) new assessment of the resources available in the Permian Basin. The USGS now estimates that over 46 billion barrels of oil, 280 trillion cubic feet of gas, and 20 billion barrels of natural gas liquids are trapped in the Permian’s shale formations. At the end of 2017, total US proven reserves of crude oil were only around 40 billion barrels, so the new estimate adds to that significantly representing a more than 100% and 65% increase in US oil and gas reserves, respectively — if they can be extracted economically. The USGS estimate is of technically recoverable reserves and does not consider cost of extraction.

There is much skepticism over whether such massive amounts of oil will ever be produced from the Permian Basin. Outside observers who have looked at the potential of the Permian Basin note that it would take hundreds of thousands of costly wells to extract this oil. Current trends suggest that the costs of shale oil production are increasing as the most productive drilling locations have already been drilled.

The OPEC Production Cut: The International Energy Agency said last week that the OPEC+ cuts that started this month are likely to put a floor beneath oil prices, but that it would still take time before the reductions balance the oil market. According to the latest edition of the IEA’s monthly Oil Market Report, Russia produced 11.5 million barrels of crude daily last month and “It is unclear when it will cut and by how much.” Russia undertook to reduce its production by 228,000 b/d beginning this month, with the cuts to last until April, when OPEC+ will meet to review the results of its latest price-boosting effort. However, Energy Minister Alexander Novak warned early on—and recently repeated—that it would be difficult for Russian producers to cut quickly and by a lot. Recent reporting suggests that Russia’s oil production was continuing to climb slowly in January.

OPEC and its allies do not rule out taking further action at their next meeting in April should oil inventories build up in the first quarter, OPEC’s secretary general told Reuters. “We remain focused on the supply-demand balance,” Barkindo told Reuters TV at the World Economic Forum in Davos. “Our challenge is to maintain supply-demand balance.”

US oil producers are trying to soothe OPEC’s worries about losing market share, telling the group that investors in the US firms want a reduction in growth and higher payouts. With US output approaching 12 million b/d, OPEC’s forecasts and even US government predictions have repeatedly underestimated US shale oil growth. The CEOs of Occidental Petroleum and Hess Corp, attending a session at the World Economic Forum in Davos, said that growth of US shale oil output would slow. The meeting was a rare occasion when US shale oil producers and an OPEC representative, Secretary-General Mohammed Barkindo, sat on the same panel.

US Shale Oil Production: All indications suggest that there will be a significant slowdown in the growth of US shale oil production in 2019. After growing by 1.6 million b/d last year, even the ever-optimistic EIA now is saying that growth will slow to 950,000 b/d in 2019 and to less than 500,000 b/d in 2020. In its monthly Drilling Productivity Report, the EIA forecasts Permian oil production to grow by only 23,000 b/d from 3.83 million b/d in January to 3.85 million in February. That would be the lowest rate of monthly growth the EIA has forecast for the Permian since September 2016. Growth of oil production from the Bakken is forecast to be up by 9,000 b/d next month and Eagle Ford to be up by 11,000.

Industry insiders are saying much the same. Continental Resources’ Harold Hamm said that shale growth could decline by as much as 50 percent this year compared to 2018, although he added that it was just a “wild guess.” Hamm said that a lot of shale E&Ps are trying to keep spending within cash flow. Shares of oilfield service firm Halliburton fell sharply last week after the company forecast lower revenues in the first quarter. Clients in North America, Halliburton’s biggest market by revenue, began pulling back on some drilling services last year amid transportation bottlenecks in the largest US production region and after oil prices slid sharply in the fourth quarter.

Of more interest is that capital raising by US oil E&P companies has fallen sharply following the decline in crude prices, pointing to cutbacks in capital spending budgets and a continuing slowdown in activity. The US shale industry has relied heavily on debt to finance its growth, with E&P companies raising about $300 billion by issuing bonds during the past ten years. As crude prices started to slide last October, that source of capital was choked off, with just three bond sales by exploration companies that month, and none at all since November. For the time being debt and equity investors are encouraging oil producers to pursue cash generation rather than borrowing more to pursue growth. Weak share prices have also been a deterrent to raising capital.

With the decline in the growth of US shale oil production, the end of US waivers on Iran, and the OPEC production cut, it seems likely that oil prices will be heading higher this year. The one event that could derail this scenario is more economic problems that would reduce the demand for oil this year.

2. The Middle East & North Africa

Iran: Subsidiaries of the National Iranian Oil Company signed agreements with Iran-based companies aimed at maintaining and increasing the production capacity of nine aging oil and gas fields in deals worth a total of $1 billion. The agreements are part of a plan to launch 33 projects for enhancing the production capacity at Iranian oil and gas fields. The 33 projects will be worth a total of $6 billion. According to S&P Global Platts, the nine deals are expected to add nearly 90,000 b/d to Iran’s production capacity within the next three years, while the 33 projects are designed to raise Iran’s production capacity by 281,000 b/d.

Japanese refiners have resumed imports of Iranian crude after halting purchases because of sanctions by the US. Japan is the last of the four biggest Iranian oil buyers in Asia to resume imports after receiving a waiver from US sanctions that started in November. China and India maintained their imports after November while South Korea halted imports for four months.

Syria/Iraq: Before the war, Syria produced 387,000 b/d of which 140,000 b/d were exported. Most of this oil came from Eastern Syria, which is now under the control of the U.S.-backed SDF. Currently, the Syrian oil industry is a shadow of its former self due to the civil war. This provides an opportunity for Russian energy companies, notably Gazprom, to start exploiting the Syrian oil and gas reserves. The instability of the oil and gas regions, however, would require military protection for oil workers. Gazprom may be on track to become the world’s first militarized oil company.

Shortages of cooking gas, electricity, and fuel are hitting Damascus hard this winter, prompting Syrian members of Parliament to slam the government for its inability to tackle the crisis. In September 2018, the US Treasury Department imposed sanctions on petroleum shipments and financing to the Syrian government and took additional measures in November against Iran. “The gas crisis is mostly caused by Western sanctions which prevent us from acquiring gas shipments for Syrian homes,” according to the Syrian MP, who also heads the energy committee in parliament. Syria needs to import half of its requirements.

Iraq’s Supreme Court ruled that several articles of the law to revive the Iraqi National Oil Company were unconstitutional – effectively sending the government back to the drawing board in its efforts to restructure the country’s oil sector. The verdict strikes down so many key provisions in the law that, to create INOC, the Cabinet will first have to produce an amended draft, and the Parliament will have to re-legislate the new text, according to senior government officials.

The Supreme Court also is seeking more information from both sides in a landmark, seven-year-old case before ruling on legal challenges to the autonomous Kurdistan Regional Government’s independent oil policy. In explaining the delay, Chief Justice Medhat al-Mahmoud appeared to suggest the court might be reluctant to rule on the case because of the possibility that disagreements could be resolved by political means.

Iraq’s Parliament passed a 2019 budget law last week – breaking through political gridlock by authorizing massive increases in spending, including new revenue guarantees for the autonomous Kurdistan region. The legislation features the largest deficit and the second-highest annual spending in the post-Saddam Hussein era.

Saudi Arabia: The International Monetary Fund cut its forecast for Saudi Arabia’s economic growth this year to 1.8 percent, down by 0.6 percentage point from the October outlook, due to lower oil prices and lower oil production. The IMF lifted its 2020 economic growth forecast by 0.2 percentage point from October to 2.1 percent.

In November, the Saudis exported their most oil in two years, according to the latest figures from the Joint Organizations Data Initiative, as the kingdom boosted its supplies to offset the re-imposition of sanctions on Iran by the US. Exports are reported to be down in December and January after the US issued temporary sanctions waivers to some of Iran’s best customers.

Saudi Arabia isn’t buying into the peak oil demand narrative. Riyadh continues to expect global oil demand will keep rising at least until 2040 and sees itself as the oil producer best equipped to continue meeting that demand, thanks to its low production costs. Saudi Arabia will be the one to pump the last barrel of oil in the world, but it doesn’t see the ‘last barrel of oil’ being pumped for decades and decades to come according to Amin Nasser, president, and chief executive officer of Saudi Aramco.

3. China

A 30-member Chinese delegation plans to come to Washington this week, US Commerce Secretary Wilbur Ross said on Thursday, as the world’s two largest economies try to meet a March 1 deadline to resolve their trade disputes. Ross tried to tamp down expectations for the talks by saying that while “there is a very large group coming, there’s been a lot of anticipatory work done and we’re miles and miles from getting a resolution.” If a deal cannot be reached by March 2 to increase China’s protection of US intellectual property, curb industrial subsidies and open Chinese markets to US companies, President Donald Trump has vowed to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports.

This year could be different for China’s economy. After growth in 2018 slackened to its slowest pace since 1990 and annual auto sales fell for the first time since that same year, some analysts predict sales will fall further in 2019. Those factors will limit gasoline demand, as will environmental initiatives, such as steps to increase fuel efficiency. Financial services group, Nomura, forecasts gasoline demand growth of 0.5 percent this year, slowing from an estimated 4% last year. At the same time, Chinese refineries will increase production capacity by some 6%, according to Fitch Solutions.

China’s refinery throughput rose 4.4 percent year on year to an average 12.10 million b/d, in December, according to preliminary data released by the National Bureau of Statistics. The December crude throughput was down 1.9 percent from November, the third consecutive month-on-month decline since hitting a record high of 12.54 million b/d last September, according to S&P Global Platts calculations.

4. Russia

Moscow increased its oil production slightly to an average 11.39 million b/d between Jan. 1 and Jan 22, a source familiar with the Energy Ministry data told Reuters last week. Russian oil output averaged 11.38 million b/d between Jan. 1-10. Under a global oil supply cut deal, Russia agreed to cut its oil production from the 11.41 million b/d it pumped in October.

Speaking at the Davos Conference, Kirill Dmitriev, head of the state-backed Russian Direct Investment Fund, said “For US shale production to go down, you need oil prices at $40 per barrel and below. That is not healthy for the Russian economy. We should not take competitive action to destroy US shale production.”

5. Nigeria

France’s Total will proceed with the development of a new project offshore Nigeria, the Ikike project, Patrick Pouyanné, the chief executive of the oil and gas supermajor, said on Monday. “There is a huge potential in Nigeria, it is probably the most prolific country in West Africa in terms of oil and gas, and it is time to launch new projects and we are working on many of them.” Pouyanné’s comments come a few weeks after Total started up oil production from Nigeria’s ultra-deepwater oil field Egina, which is expected to produce 200,000 b/d at peak output.

Nigeria is banking on the startup of its 650,000 b/d Dangote Petroleum refinery to solve many of its economic problems. The refinery is designed for Nigerian crude with the flexibility to process others, and it will meet 100 percent daily Nigerian consumption of all refined products and also would have a surplus for export. The $12 billion refinery and its petrochemical projects include the world’s second largest urea plant with the capacity to produce three million tons per year and the largest sub-sea pipeline infrastructure in the world.

Billionaire Aliko Dangote, who built his fortune on cement, said last week that he hoped to finish building his refinery in 2019 and to begin production in early 2020. However, sources who have been on the site many times said they do not expect gasoline or diesel output before early 2022 and even then, many units at the refinery and accompanying petrochemical plant would not be complete.

A new report by Nigeria Natural Resources Charter claims International Oil Companies (IOCs)operating in the Niger Delta region steal and siphon large volumes of crude oil from the country undetected by authorities. The report revealed the revenue losses over the last few years and estimated that the government loses some $3 billion annually to oil theft. Although the report does not say how much oil IOCs steal, it, explained that when they do, they always resort to a network of onshore and offshore operators, sellers, and financiers.

6. Venezuela

The crisis in the country finally came to a head last week when Washington and a string of countries in the region recognized Venezuelan opposition leader Juan Guaidó as head of state and urged Venezuelan President Nicolas Maduro to step down. Guaidó declared on Wednesday that Maduro’s government was illegitimate and that as president of the country’s National Assembly, he was assuming power in accordance with the country’s constitution. Almost instantly President Trump issued a statement recognizing Guaidó as the country’s rightful leader. Soon after came similar pronouncements from Canada, Brazil, Argentina, Colombia, Chile, Peru, and others.

Needless to say, the move by Guaidó in coordination with foreign powers has set off turmoil. Venezuela’s military seems to be backing Maduro as does Moscow and Beijing which have billions of dollars and a lot of prestige invested in making the Maduro government Russia’s closest ally in the Western Hemisphere. Cuba’s secret police have been deeply involved in protecting the Chavez and Maduro regimes for many years and could be an important factor in the fate of the country. Washington and the Maduro government have broken diplomatic relations, but some American diplomats remain in Caracas.

The Trump administration seems poised to back its candidate by imposing sanctions on US imports of Venezuelan crude oil, a move which will leave US Gulf Coast refiners scrambling to replace the 500,000 b/d that is exported to the US. The revenue from these sales represents most of the country’s earnings as the exports going to Russia and China are to repay old loans and do not earn revenue. If sanctions are imposed, flows of heavy crudes into the US are most likely to increase from Mexico, Canada, Saudi Arabia, and Iraq. “US refiners would likely pay a premium due to infrastructure constraints, competition for market share in Asia, and continued OPEC supply limits,” analysts with Rapid Energy Group said in a note Friday. The sanctions would also likely be imposed at a time when heavy barrels are trading at a premium to light crudes.

7. Mexico

Five years after former president Enrique Peña Nieto ended Pemex’s monopoly and opened Mexico’s oil industry to private foreign investment, the new administration is betting again on the state oil firm PEMEX to turn around the country’s production which is now around 1.7 million b/d, down from its 3.4-million-b/d peak in the early 2000s. Mexico’s new President Andrés Manuel López Obrador—in office since December 1—is opposing his predecessor’s energy reforms and wants a greater role for Pemex in reversing the downward trend in Mexican oil production.

López Obrador suspended new oil auctions for three years, shelving one auction that was slated to be held next month. Mexico is not rescinding the contracts that have already been awarded, but López Obrador wants foreign firms to invest and show they can start production from fields they have discovered. Pemex aims to boost exploration spending by some 10 percent annually in order to achieve its production goal.

Several foreign firms are making progress with their development plans at newly discovered offshore oil fields but drilling and developing offshore resources takes years to complete. Italy’s Eni had its phased development plan for Area 1 in the shallow waters of the Campeche Bay approved by Mexico in the summer of 2018, with an early production startup planned in mid-2019. Full field production will start in early 2021. Talos Energy is reporting promising results from its Zama appraisal program.

A new strategic plan aims to guarantee “the country’s energy security and sovereignty” and aims to raise crude oil production to 2.48 million b/d by the end of 2024. Some observers say an increase of this size is not going to happen. Fitch Ratings estimates that it would take an annual capital expenditure of $15-$18 billion to replenish its reserves.

The fuel shortage sparked by government efforts to curtail theft of crude and gasoline by closing vulnerable pipelines continues. The government said Thursday it had purchased 670 distribution trucks amid its fight against fuel theft. The trucks will be able to move 144,000 barrels of refined products. The first 58 vehicles will be delivered in the coming days, 140 will arrive in February, and the full fleet will be in Mexico by the end of March. The government is looking to reinforce Mexico’s fuel logistics system in an effort to avoid disruption amid pipeline shutdowns aimed at fighting gasoline siphoning.

The government is looking to reinforce Mexico’s fuel logistics system in an effort to avoid disruption amid pipeline shutdowns aimed at fighting gasoline siphoning. Pemex 1,400 fuel trucks with a combined capacity of 176,000 barrels. moved 12 percent of Mexico’s refined products in 2017 and pipelines 76 percent. Unless the theft from pipelines is confined to certain areas, the additional trucks may not do much good.

7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org )

EVs vs. petroleum fuels: Electric vehicles (EVs) today are not the end of global oil demand growth, nor are they the key solution to reducing carbon emissions, Fatih Birol, IEA’s Executive Director said at the World Economic Forum in Davos on Tuesday. Analysts need to put things into perspective and consider that five million EVs globally is nothing compared to 1 billion internal combustion engine cars. “This year we expect global oil demand to increase by 1.3 million barrels per day. The effect of 5 million cars is 50,000 barrels per day. 50,000 versus 1.3 million. Cars are not the driver of oil demand growth. Full stop,” Birol said. The drivers of oil demand growth are trucks, the petrochemical industry, and planes, with Asia just starting to fly, the IEA’s head said. (1/23)

Renewables ease burden: The rise of renewable energy can dramatically enhance the degree of energy independence, according to the Global Commission on the Geopolitics of Energy Transformation, which authored a report at the request of the International Renewable Energy Agency. (1/22)

A talent crunch is coming to the oil and gas industry, with nearly half of all respondents saying that they were “either quite worried or very worried about an impending talent crisis,” according to the survey of 17,000 energy professionals across the oil and gas, petrochemicals, power, renewables, and nuclear industries. (1/23)

Euro gasoline glut: The rise of US shale oil is choking off a historic gasoline trade, dealing a blow to European refineries that for decades have relied on American drivers to buy their excess supplies. (1/23)

In the UK, decommissioning the offshore platforms that have reached the end of their productive life will cost taxpayers some $31.46 billion (24 billion pounds) over the next 45 years, according to the National Audit Office. (1/26)

UK rule to be eased? Britain could safely raise the limit for tremors at gas fracking sites, two seismologists said on Tuesday. Fracking at Cuadrilla’s Preston New Road site in Lancashire, northwest England was halted several times last year after seismic activity exceeded limits put in place under Britain’s traffic light regulation system. (1/23)

In Qatar, the capacity expansion of the world’s largest liquefied natural gas (LNG) exporter has attracted a lot of interest, and oil and gas majors who are Qatar’s long-standing partners, as well as majors that would be new to Qatar’s LNG, are expected to bid for a lucrative share of the expansion project. Qatar announced last year plans to increase its LNG production capacity by 43 percent. The new export capacity projects are expected to be completed in 2024. (1/24)

India’s crude oil demand this year will continue to rise at the same rate it rose by in 2018, which made it the second-biggest driver of global demand growth, energy consultancy Wood Mackenzie has forecast. Last year India’s demand growth accounted for 14 percent of the global total, at 245,000 bpd year-on-year, making it second only to the US and ahead of China in terms of oil demand growth. In 2018, India’s crude oil consumption exceeded 4 million bpd. (1/23)

Canadian crude-by-rail exports edged higher to a record in November, topping the 300,000 b/d level for only the second time since the government has kept statistics on shipments. (1/25)

The US oil rig count increased by ten while the gas rig count slipped by 1 to 197, according to the Baker Hughes weekly report. Active oil-targeting rigs have dipped from a cyclical high of 888 in mid-November to 862 in the fourth week of January. (1/26)

2018 crude boom: A year ago, the US government saw American crude production averaging 11.95 million barrels a day in 2042. Shale drillers are set to exceed that this year. The EIA now estimates output will top out at 14.53 million barrels a day in 2031, according to its Annual Energy Outlook released Thursday. (1/26)

2025 crude sky-is-the-limit: The United States is on track to produce more crude oil and liquids than Russia and Saudi Arabia put together by 2025, consultancy Rystad Energy said on Thursday. US liquids output is expected to surpass 24 million b/d over the next six years, Rystad said, assuming average US crude prices of $58 a barrel during the period. (1/25)

Export terminal: Magellan Midstream Partners LP has begun talks with companies developing crude transportation assets in Freeport, Texas, as it considers building a US crude export terminal there instead of its previously planned spot off Corpus Christi. (1/25)

Export options: Intercontinental Exchange has two new delivery points in the Houston area, a move giving further options for WTI Midland crude exports from the US Gulf Coast, ICE said Tuesday. The delivery points are in addition to the contract’s original delivery point to the Magellan East Houston terminal. (1/23)

Shutdown shuts down permitting: A federal court on Friday blocked the Trump administration from issuing any permits to conduct seismic testing for offshore oil and natural gas drilling during the partial government shutdown. (1/23)

Biofuels: ExxonMobil and Renewable Energy Group (REG) signed a joint research agreement with Clariant to evaluate the potential use of cellulosic sugars from sources such as agricultural waste and residues to produce biofuel. (1/24)

Biofuels benefit questioned: A study commissioned by the Urban Air Initiative has found that measured and modeled effects of ethanol blending on gaseous and particulate emissions have varied widely between studies, to the point that it is difficult to reach any summary conclusions on ethanol’s emissions effects. (1/23)

Nuke building halted: Japanese technology giant Hitachi on Thursday Jan 17 announced it was suspending all further work at its Wylfa Newydd nuclear project in Anglesey, north Wales. This decision by Hitachi’s Board of Directors yesterday in Tokyo included writing off the $2.8 billion already invested in site preparation work. The board also decided to cancel a second nuclear project in the UK at Oldbury in Gloucestershire. (1/22)

H2 boost: Saudi Aramco, in partnership with US Air Products and Chemicals, will build the first hydrogen fuel cell station in the Kingdom, leveraging Air Products’ SmartFuel hydrogen fueling technology. The station, to start operating in the second half of this year, will fuel a fleet of hydrogen vehicles supplied by Toyota. (1/26)

H2 + electricity: In South Korea, amid increasingly urgent calls for more radical climate change action, a team of scientists has found a way to kill two birds with one stone by converting carbon dioxide into electricity and hydrogen. (1/23)

EV $$: Volkswagen said it would create a unit to manufacture electric car batteries, as it prepares to mass produce electric cars and overhaul its components division which currently makes engines, gearboxes and steering components. (1/25)

Self-flying small vehicles? Boeing Co said its flying car prototype hovered briefly in the air during an inaugural test flight on Wednesday, a small but significant step as the world’s largest planemaker bids to revolutionize urban transportation and parcel delivery services. Boeing is competing with arch-rival Airbus SE and numerous other firms to introduce small self-flying vehicles capable of vertical takeoff and landing. (1/24)

Climate action advocates have underestimated the strength and sophistication of decades-long fossil fuel-funded misinformation campaigns and need a coordinated set of strategies to fight back, say leading academics. Among those strategies, say the three researchers from Yale and Brown University, are promoting financial transparency, suing misinformers and their funders, and researching the vast networks of think tanks and front groups. (1/24)

Greenland’s enormous ice sheet is melting at such an accelerated rate that it may have reached a “tipping point,” and could become a significant factor in sea-level rise around the world within two decades, scientists said in a study published on Monday. The study is the latest in a series of papers published this month suggesting that scientific estimates of the effects of a warming planet have been, if anything, too conservative. (1/22)

[sumisu]

Has U.S. shale oil entered a death spiral?

By Kurt Cobb, originally published by Resource Insights

January 27, 2019

https://www.resilience.org/stories/2019-01-27/has-u-s-shale-oil-entered-a-death-spiral/

[sumisu]

Peak Oil Review: 21 January 2019

By Tom Whipple, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-01-21/peak-oil-review-21-january-2019/

Quote of the Week

“The fracking industry has helped set new records for US oil production while continuing to lose huge amounts of money — and that was before the recent crash in oil prices. But plenty of people in the industry and media make it sound like a much different, and more profitable, story… The explanation is pretty simple: Shale companies are not counting many of their operating expenses in the “break-even” calculations. Convenient for them, but highly misleading about the economics of fracking because factoring in the costs of running one of these companies often leads those so-called profits from the black and into the red.” Justin Mikulka, DeSmog Blog (1/19)


1. Oil and the Global Economy

Oil prices continue to climb steadily closing up about $3-4 a barrel by the end of last week. Behind the move are concerns that US shale oil production this year may not be as strong as forecast; lower OPEC production; and reports that the US and China are making progress towards ending their trade war. New York futures closed at $53.80 on Friday, while London closed at $62.70. This leaves London’s Brent about $12 a barrel higher than it was at the end of December, but $22 lower than it was in September. These prices should make the OPEC exporters happier but may not be high enough to keep shale oil production increasing as fast as predicted.

The International Energy Agency continues to insist that global oil demand will be stronger this year than in 2018 as lower fuel prices counter slowing economic activity. Some observers are not sure that this analysis is valid. They point to the growing gap between the price of gasoline and middle distillates (diesel and jet fuel) that run much of the global industrial and transportation systems. Last week diesel in the US was selling for 68 cents a gallon more than regular gasoline. Last year the difference was 41 cents. The EIA reports that US gasoline inventories are about 6 percent above the five-year average, while distillate inventories were 3 percent below.

Concerned observers note that the supply of very heavy crude, which is blended with very light shale oil to make middle distillates, is shrinking in Canada, Venezuela, and Mexico, its primary sources. The mandate to reduce emissions from shipping, which comes into effect soon, will further exacerbate the middle distillates situation. Some are starting to speculate that the middle distillates sector of the fuel industry will turn out to be the place where peaking of world oil production first becomes a problem.

The OPEC Production Cut: The cartel published the list of oil production quotas for each country in the OPEC+ deal last week. With the exception of Iran, Venezuela, and Libya which are exempted from the cuts due to their precarious economic or political situations, the bulk of the cutting will be done by the Saudis and their Gulf Arab neighbors. Five of OPEC’s current 14 member’s oil production has been trending down for years and is largely inconsequential in the global 100 million b/d oil market.

Riyadh will cut 322,000 b/d from its October baseline of 10.633 million b/d and keep output at 10.311 million b/d. According to OPEC’s secondary sources, the Saudis produced 10,553 million b/d in December, down by 468,000 b/d from November. They certainly seem to be doing their part in contrast with the Russians who are saying it is impossible to cut production during the winter or parts of their production infrastructure will freeze.

Qatar, which has been producing about 600,000 b/d, has left OPEC and is no longer included in the cartel’s production data. The OPEC 14 production was down by 751,000 barrels per day in December. That was after November production had been revised downward by 23,000 barrels per day. Iran is now at about the average they held during the previous sanctions period. Iraq reached a new all-time high in December of 4,714,000 b/d. That was up 88,000 b/d from November. Kuwait also increased production in December, up 29,000 b/d to 2,800,000 b/d while Libya and Nigeria are back to having political problems slowing their production.

In its monthly Oil Market Report, the IEA increased its non-OPEC supply growth number for 2019 to 1.6 million b/d, from 1.5 million b/d in last month’s report, thereby lowering the fabled “call on OPEC.” The agency raised its estimate of the US’ crude output growth this year to 1.1 million b/d, from 1 million b/d in last month’s report, adding that US crude output would probably be higher than the production capacities of Russia and Saudi Arabia by mid-year.

OPEC has decided to hold an extraordinary full ministerial meeting on April 17 in Vienna to discuss the state of the oil market and the production cut deal, while the cartel’s non-OPEC partners will join for a full OPEC+ meeting on the following day, April 18.

US Shale Oil Production: Evidence is mounting that low oil prices are beginning to slow the growth of US shale oil output. The optimistic pronouncements of the IEA and other prognosticators that US production will increase by a million or more b/d this year may not come to pass. The US rig count dropped by 21 oil rigs last week, marking the third consecutive week of declines and the biggest drop since early 2016. Although oil prices have rebound by about $10 a barrel since late December, they are still more than $30 below the recent highs set in September. As one headline writer put it, “Fracking in 2018: Another Year of Pretending to Make Money.”

The newest trend in the shale oil industry is large oil companies buying out the Permian’s smaller operators and pumping out the basin’s crude with in a more efficient manner. The large oil companies can bring vast resources and economies of scale to the shale oil business, and generally know what they are they are doing. They do not need to cook the books to convince lenders that they will soon be profitable. Indeed, they can bury their shale oil operations amidst the millions of barrels of oil they already produce from conventional wells.

The supermajors are used to investing billions of dollars in projects that may return nothing for five or six, or sometimes, even ten years. Most importantly, they appreciate better than most that there has been insufficient investment in finding new oil so that shortages are almost certain to come in the early to mid-2020s, which will bring much higher oil prices.

Drilling in Texas, even if it is for short-lived shale oil wells is much more attractive than production sharing agreements with the few countries around the world that will grant them access on money-making terms. The problem with investing in the Permian Basin is how many sweet spots are left to drill and how rapidly the cost per barrel will climb when companies are forced to drill less productive rock. If oil prices climb back well above $100 a barrel, and consumers can still afford to buy it, there may be profits in producing expensive shale oil. The supply and price of middle distillates may be the critical problem for the next decade.

2. The Middle East & North Africa

Iran: There is a consensus that Tehran currently is exporting about 1 million b/d, down from 2.7 million last May when the US withdrew from the nuclear deal. The Iranians are going to considerable lengths to circumvent the sanctions and to hide exports. The government continues to maintain that the sanctions are not seriously hurting it.

The current waivers that Washington has granted to major importers of Iranian crude are due to expire at the end of May. The current thinking in Washington is that the waivers will be extended if there is a significant increase in oil prices by May. The Trump administration is pleased that it has been able to take over a million b/d of Iranian oil from the market without raising prices and hopes to keep it this way by judicious use of waivers.

China’s largest refiner, Sinopec, has offered $3 billion to Iran’s state oil company to jointly expand the development of a major field in Iran. The sources of this information say Sinopec considers itself to be safe from US sanctions because the initial deal was signed back in 2007.

Syria/Iraq: Iraq’s oil sector ended a record-setting year with its most prolific single month of crude production ever. Overall crude output from fields controlled by both the federal government and the autonomous Kurdistan Regional Government totaled 4.94 million b/d in December, according to an Iraq Oil Report analysis.

Saudi Arabia: The Saudis now plan to take Aramco public in 2021 according to Energy Minister Khalid al-Falih. Gulf News quoted al-Falih as saying Aramco was the world’s most important and most valuable oil company. The minister said earlier that Aramco was planning to issue its first international bond, now worth around $10 billion – down from the $40 billion that was discussed last year — to fund part of the acquisition of a majority stake in petrochemical giant Sabic from the Saudi sovereign wealth fund.

The larger bond issue was canceled after Aramco became concerned about having to make its accounts and reserves public. Recently, a third-party reserve audit by DeGolyer and MacNaughton found that Aramco had reserves of 263.1 billion barrels, a bit over 2 billion barrels more than the company has been reporting for years. Unless the Saudis can find a way around the requirement, a bond issue would also require the company to make its accounts public for the first time since its nationalization back in the 1970s.

Libya: crude oil production and exports have been disrupted since early December due to port closures caused by bad weather as well as security incidents and issues at the country’s largest oil field Sharara, which has been shut in since December 8. As a result, Libya’s crude oil production in December fell to 928,000 b/d from 1.1 million b/d, according to OPEC’s Monthly Oil Market Report released last week. Last Thursday the national oil company opened all its oil loading terminals after nearly a week’s suspension due to bad weather.

Libya produced an average of 1.107 million b/d in 2018, the oil company’s chairman Mustafa Sanalla said earlier this month. Total revenues reached $24.4 billion, the highest since 2013. If the security situation improves, Libya plans to produce 2.1 million b/d by 2021.

3. China

Beijing’s economic woes continue. According to the Financial Times editorial board, the warnings we saw last year are a sign of the deepening economic distress, and that this will have a far more significant external impact in the coming year than it did in 2018. Despite more than a decade of efforts to rebalance the economy and wean itself off the stimulus introduced in the wake of the 2008 financial crisis, China remains addicted to ever-higher levels of debt and construction. The Institute of International Finance estimates China’s total debt exceeded 300 percent of gross domestic product by the end of last year. Last week, China’s central bank announced that it was injecting a record $84 billion into the economy to boost liquidity and promote increased lending.

Despite hopes that a US/China trade deal will be reached soon, it may still not be enough to offset China’s lagging economic growth. Sources told Reuters last week that Beijing is planning to lower its economic growth target to 6.3 percent. This comes as China saw its exports fall unexpectedly in December by 4.4 percent, the most in two years, with imports also dropping 7.6 percent in their biggest decline since July 2016.

For many years China’s economic growth has driven the global demand for oil. This year started well, with China’s crude oil imports for 2018 posting a 10.1 percent growth to 9.28 million b/d and imports for December at 10.35 million b/d, the second time it has ever breached the 10 million b/d mark.

However, the imports are not consistent with actual domestic demand; much of the crude imported in the fourth-quarter went into building inventories, and imports mask high product re-exports. For 2019 S&P Global Platts Analytics expects China’s crude imports to rise to 9.7 million b/d, up from 9.2 million b/d last year. The growth in China’s demand for oil slowed to 590,000 b/d in 2018 versus 720,000 b/d in 2017 and demand growth is expected to fall further to 450,000 b/d in 2019.

4. Russia

Due to weather and geological conditions in the cold Russian winter, Moscow cannot cut its oil production too quickly, Energy Minister Novak said last week, reiterating Russia’s commitment to stick to the new OPEC+ deal and to reduce output gradually. A few days before, Saudi energy minister al-Falih said that Russia was moving with the cuts but “slower than I’d like, but they’ve started, and I am sure as they did in 2017, they’ll catch up and be a positive contributor to re-balancing the market.”

However, The Paris-based International Energy Agency on Friday cast doubt on whether Russia would meet its agreement with OPEC to cut crude oil output. In its Oil Market Report, the IEA said: “Data show that Russia increased crude oil production in December to a new record near 11.5 million barrels per day and it is unclear when it will cut and by how much.”

5. Nigeria

The Nigerian National Petroleum Corporation is worried about the rising incidents of pipeline vandalism across the country. In October 2018, its pipeline network suffered a 42.9 percent increase in the incidents of pipeline vandalism compared to the previous month. Giving a breakdown of the breaches in its infrastructure in a statement, a company official said the corporation recorded 219 pipeline vandalizations in October, compared to 125 incidents it suffered in September of the same year.

An election for a new Nigerian President and General Assembly will take place on February 16th. Presidential candidate Atiku Abubakar on Wednesday branded the state-run oil company a “mafia organization” and pledged to privatize it if he is elected. Abubakar said he had tried without success to end the opaque administration of the National Petroleum Company (NNPC) when he was vice-president under Olusegun Obasanjo from 1999 to 2007. The NNPC and other state-run organizations have been widely criticized as slush funds for successive governments, particularly around election time. Abubakar said “unless we dismantle these mafia organizations, we cannot progress, let’s privatize them.”

With a population of 191 million, Nigeria still ranks among the top 10 among countries with the lowest gasoline prices in the world. According to the Global Economic Policy Initiative, Nigeria presently ranks number six behind only Venezuela, Sudan, Iran, Kuwait, and Algeria.

6. Venezuela

Venezuelan crude oil production continued its steady decline and hit a new low in December with just 1.15 million b/d produced. Venezuela’s December month-over-month production declined 33,000 b/d, according to reports by secondary sources in OPEC’s latest report issued on Thursday. The new production figure represents a decline from over 1.2 million b/d in October, and an average of 1.25 million barrels in the third quarter.

Citgo, Chevron, PBF, and Valero are major importers of Venezuelan crude, and the Trump administration has been resisting sanctions on Caracas’s oil exports. However, last week National Security Council staff told some US refiners that sanctions on Venezuelan crude exports are under consideration, a signal that opposition within the administration to sanctions on Venezuela’s oil sector may be weakening. While Washington has sanctioned state-owned PDVSA, restricting its access to new debt financing, the country’s gold sector, and sanctioned multiple government officials, it has resisted direct sanctions on oil flows. This reluctance was due to both the potential impact on oil prices and US refiners and the fear that oil sanctions could worsen Venezuela’s humanitarian crisis and allow it to place blame on the US. In addition, Trump remains resistant to any action that could increase oil prices.

In October, US refiners imported an average of 505,870 b/d of Venezuelan crude, down from about 629,480 b/d in September, but only about 5,000 b/d less than US refiners imported in October 2017. Meanwhile, US refiners are bidding up prices for heavy grades of crude oil such as those produced by Venezuela. These crudes are needed to blend with the very light shale oils to work efficiently in US refineries along the Gulf Coast. Without heavier crudes to blend, it is difficult to produce diesel and other middle distillates. Venezuela also needs the light US shale oil to blend with the very heavy Orinoco crudes to make them suitable for shipping.

“It’s more serious than I’ve heard before,” said a refining industry executive familiar with the White House discussions. “They are setting the table to pull the trigger if they have to.” US refiners would have few supply alternatives if the Trump administration were to cut off crude imports from that country. Supplies of the heavy oils have been harder to secure in recent months because of cutbacks and production curbs in Western Canada, Mexico, and Venezuela. One type of US heavy oil, called Mars, traded at a $6.80 per barrel premium to US crude futures on Thursday, the strongest in nearly five years and up from a $4.50 per barrel premium on Tuesday, a US oil broker said.

7. Mexico

The crackdown by Mexico’s new president on rampant fuel theft has turned into a battle to prevent economic chaos after state governments, businesses and consumers were caught by surprise by the decision. On Dec. 27th President Lopez Obrador unveiled a plan to increase military protection of oil installations and began cutting shipments through pipelines that have been bled for years by thieves. So far, the result has been more than a week of severe fuel shortages, shuttered gas stations, and lines of motorists snaking around city blocks waiting hours to fill their tanks. Lopez Obrador said that the government was looking at purchasing an additional 500 tanker trucks to distribute gasoline and that officials were asking private companies to increase fuel imports.

Officials in three affected states told Reuters they were not warned about the supply cuts. “There was zero coordination,” said Alejandro Guzman, head of economic development in the government of Jalisco, home to the country’s second-biggest city, Guadalajara. “We started to notice when the gas stations began closing.” He estimated only a quarter of gas stations in the western half of Guadalajara had fuel to sell during the past week. Still, once the shortages became apparent, Pemex’s new management started to work well with the state to try to address the problem.

Meanwhile, fuel continues accumulating at Mexico’s ports and storage terminals as the government struggles to accelerate deliveries to gas stations via truck instead of speedier pipelines. Mexico currently has almost 7 million barrels of gasoline, diesel, and jet fuel in dozens of tankers anchored around Pemex’s ports waiting to discharge. Some 5.3 million barrels more are stored at terminals, said Pemex Chief Executive Octavio Romero.

Mexico’s government, dealing with fuel shortages stemming from this crackdown on theft, is expected to postpone a new rule requiring pumping stations to sell cleaner diesel, according to sources with knowledge of the decision and documents from the regulator. This marks the first delay of a 2016 regulation that had been expected to go into effect at the end of 2018. It has lost traction mainly due to lack of infrastructure, but also because of fears that it would exacerbate fuel shortages.

Last Friday, a massive fireball engulfed people scooping up fuel spilling from a pipeline that was drilled into by thieves in central Mexico, killing 21 people and badly burning 71. Illegal taps into pipelines occurred 12,581 times in the first ten months of 2018, an average of about 42 per day. With crowds of townspeople often involved, either aiding thieves or collecting spilled fuel in primitive containers, it was only a matter of time before a fire occurred.

7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)

Britain has rejected the case for a relaxation of fracking regulations despite warnings that the current system is “strangling” the industry, the Financial Times reported on Sunday. Energy Minister Claire Perry has dismissed pleas by shale gas developer Cuadrilla for rules to be loosened, citing a letter from Perry to the company’s chief executive. (1/14)

In Norway, OMV, the operator of the nation’s northernmost oil discovery offshore —Wisting in the Barents Sea—could begin production in 2026. That could provide some relief for Norway’s oil industry amid current forecasts that production will decline from the mid-2020s in the absence of new major oil discoveries. (1/17)

Northern Cyprus wants to resolve a dispute over natural gas drilling with Greek Cypriots to avoid the possibility of its leading to wide instability, the breakaway state’s deputy prime minister said after visits with Trump administration officials and US lawmakers. “We believe this is an unfair situation … which may put the stability of the region at risk,” Kudret Ozersay said last week. (1/19)

China’s CNOOC Group said it aims to double its exploration projects and proven oil and gas reserves in seven years, the company said on Friday. The announcement was a direct response to President Xi Jinping’s call to improve the country’s national security by boosting domestic production and reserves, CNOOC said in the post. (1/18)

Nigeria ranks among the top 10 cheapest petrol selling countries in the world, a policy group has revealed in its latest report. In its report released on 15 January, the Global Economic Policy Initiative said Nigeria presently ranks number six in the world only behind Venezuela, Sudan, Iran, Kuwait and Algeria. (1/18)

Angolan efforts: With production declining and investment scarce, the Angolan leadership has put in place a number of new policies to reboot its oil industry and propel economic development. However, those changes take time and renewed deep-water oil and gas exploration for fresh reserves will take years to yield the desired results and stop the daily production crunch. (1/19) [Ed. note from BP data: Angolan production peaked at 1.88 million b/d in 2008 and has declined 11 percent, in bumpy fashion, through 2017.]

A week after Venezuelan President Nicolas Maduro was sworn in for a second term in office, the option of a complete oil embargo against Venezuela has been put back on the table, according to two unnamed sources who spoke to CNN. The sources also said President Trump was mulling over a declaration that recognizes the President of the Venezuelan National Assembly, opposition politician Juan Guaido, as the legitimate president of the country. (1/17)

Heavy crude shortage–really? Just two or three months after a glut in Canada, there is now robust demand for Canadian heavy crude from US refiners—which process more than 50% of the world’s heavy crude—but not enough capacity to transport it across North America to the Gulf Coast cheaply. The good news for Canadian producers is that cheap or not, if the refineries need it, the refiners will buy it. Bloomberg reports some heavy crude grades such as Heavy Louisiana Sweet are already trading at a premium to lighter and typically more expensive grades. (1/16)

The US oil rig count dropped a whopping 21 rigs to 852, with the gas rig count also declining by four to 198, according to Baker Hughes’s report at week’s end. The oil and gas rig counts are still up by 114 up from this time last year, 105 of which is in oil rigs. (1/19)

Crude production climbing: The EIA has estimated that US crude oil production averaged 10.9 million b/d in 2018, rising by 1.6 million b/d from 2017 and reaching its highest level and seeing its largest volume growth on record. This year, America’s crude oil production is expected to average 12.1 million b/d in 2019, while crude production in 2020 is seen averaging 12.9 million b/d, with most of the growth coming from Texas and New Mexico. (1/17)

Net oil exporter? Continuously rising US shale production will make the US a net exporter of crude oil and petroleum products in the fourth quarter of 2020, the EIA said in its January Short-Term Energy Outlook, which offered a first glimpse into the administration’s forecasts for 2020. Last year, US net imports of crude oil and petroleum product are estimated to have dropped to an average of 2.4 million b/d, from an average of 3.8 million b/d in 2017. (1/17)

Offshore to grow in 2019: Rystad Energy forecasts offshore spending will outgrow spending on onshore shale activities this year. At current oil price levels, spending on land rigs, fracking and other services for the shale industry is likely to stay essentially flat in 2019. The offshore service market, too, will feel the effects of the recent oil price slide, but this sector is nevertheless projected to grow by a robust 4% this year. (1/17)

Oil majors will spend US$208 billion on offshore drilling and other oilfield services this year, according to Rystad Energy. All in all, Rystad told Bloomberg that Big Oil would probably approve about 110 offshore projects this year, up from 96 last year and 43 in 2016. (1/14)

Seismic boost: Buoyed by the success of seismic imaging that found an extra billion barrels of oil in the Gulf of Mexico, BP is looking to take its latest technology to Angola and Brazil. The software used in the Gulf led to BP discovering the crude in an area where it had long thought there was none to be found. Industry experts said the scale of the discovery 8 km below BP’s Thunder Horse field, announced last week, marked a major leap forward for deepwater exploration. (1/18)

US natural gas prices continue their rollercoaster ride at the height of the heating season, after extreme volatility gripped the market in the fall amid more-than-a-decade low natural gas inventories ahead of the winter. Analysts believe that volatility in the natural gas market will continue to be high through the winter, as inventories below the five-year average and seasonal storage draws make natural gas prices highly vulnerable to changes in the short-term weather models and forecasts. (1/18)

VW’s EVs: Volkswagen AG announced that Chattanooga, Tenn. will be the company’s North American base for manufacturing electric vehicles based on the modular electric toolkit MEB. This expansion of Volkswagen’s US footprint will include an investment of $800 million into the Chattanooga facility and create 1,000 jobs at the plant, plus additional jobs at suppliers. EV production at the site will begin in 2022. (1/14)

EV semi-trucks: The Tesla Semi has two versions, one with a range of 300 miles and one with a range of 500 miles. The price tags are, respectively, US$150,000 and US$180,000 but CEO Elon Musk said Tesla is aiming for even higher ranges of up to 600 miles. The Semi is not yet in production. Last year, Musk said it was scheduled to begin mass production this year and no updates to this timeline have been announced. (1/18)

PG&E’s bankruptcy is likely the first climate-change bankruptcy but probably not the last. In October, its market value was $25 billion. This week, it was removed from the S&P 500 as its value tumbled below $4 billion and its shares fell to their lowest level since at least 1972. The PG&E bankruptcy could be a wake-up call for corporations, forcing them to expand how they think about climate-related risks. (1/19)

Nukes are slowing: In the United States nuclear simply can’t compete with cheap natural gas and other renewables growing more affordable all the time in the nation’s wholesale electricity markets. In fact, just within the last five years six nuclear plants in the United States have closed and almost 35% of the nuclear plants that remain are being met with the possibility of early closure or are facing retirement. (1/17)

Coal shut down momentum: More US coal-fired power plants were shut in President Donald Trump’s first two years than were retired in the whole of Barack Obama’s first term, despite the Republican’s efforts to prop up the industry to keep a campaign promise to coal-mining states. The number of US coal plants has continued to decline every year since coal capacity peaked at just over 317,400 MW in 2011, and is expected to keep falling as consumers demand power from cleaner and less expensive sources of energy. (1/14)

Germany has mined and burnt lignite for hundreds of years and has the physical scars to show for it. A government-appointed task force is set on February 1 to release a plan on ending the use of lignite, or brown coal, in a crucial decision for Germany’s energy industry and its standing in the fight against climate change. Lignite — one of the dirtiest sources of energy — accounts for almost a quarter of electricity generated in Europe’s largest economy and 20,000 jobs. (1/14)

Global spending on solar energy declined by almost a quarter last year to US$130.8 billion, mainly on the back of a regulatory policy overhaul in China that led to an oversupply of solar panels, driving prices down. This, in turn, resulted in an 8-percent slide in overall renewable energy investments to US$332 billion. (1/18)

Shell on climate targets: Clean energy solutions are not moving fast enough to meet the UN targets for curbing the effects of global warming, and alternative energies are unlikely to meet those targets without policy support, Charles Holliday, the chairman of oil supermajor Shell, said. (1/18)

Australian heatwave: An extreme heatwave has afflicted the nation since Saturday, causing wildlife deaths, bushfires and an increase in hospital admissions. (1/19)

Creative innovation: Chevron and Occidental Petroleum recently announced they will invest in Carbon Engineering Ltd., a Squamish, B.C. clean energy start-up company backed by among others, Bill Gates. Carbon Engineering has developed a process, the Direct Air Capture technology, that removes carbon dioxide directly from the atmosphere. According to the company, the facilities are industrially scalable. The second technology, Air to Fuels, aims to lower the carbon footprint of the transportation sector through the creation of synthetic fuels. This process combines clean hydrogen produced via electrolysis from water with the CO2 captured from the atmosphere to produce hydrocarbon fuels such as gasoline, diesel and Jet-A. (1/14)

[sumisu]

Peak Oil Review: 14 January 2019

By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-01-14/peak-oil-review-14-january-2019/

Quote of the Week

“Global automakers are planning an unprecedented level of spending to develop and procure batteries and electric vehicles over the next five to 10 years, with a significant portion of their budgets targeted at China… Automakers’ plans to spend at least $300 billion on EVs are driven largely by environmental concerns and government policy, and supported by rapid technological advances that have improved battery cost, range and charging time.”Paul Lienert and Christine Chan, Reuters



1. Oil and the Global Economy

Oil prices continued to climb last week and are now some $10 a barrel higher than they were just before Christmas when recent lows were set. Prices now have retraced about 30 percent of the $35 a barrel drop that took place between late September and late December. Part of the recent price correction likely is due to technical factors such as closing out long positions in the futures markets. The news that the Saudis will cut even more production than specified in their recent pledge in hopes of raising world prices to $80 a barrel was an important part of last week’s price jump. Hopes that the US and China would settle their trade dispute during on-going talks was also an important factor in the recent price jump.

Looming over the talk about OPEC+ production cuts and how fast US shale oil production might grow are the prospects for the global economy. A major recession could drive the demand for oil so low that even current prices would be difficult to maintain. While there have always been people convinced that a major economic crash is in the offing, in recent weeks there has been a noticeable increase in the number and stridency of these predictions.

While the US economy has been bumping along nicely in recent months, the same is not true for the other major centers of economic power – China and Europe. The Washington Post headlines that “Economic growth is slowing all around the world,” citing declines in the equity markets; sputtering German factories, and Chinese retail sales growing at their slowest pace in 15 years. Even Beijing is looking for its GDP to grow by 6-6.5 percent this year which is way off from the heady days of double digits ten years ago.

Eurozone economic forecasts fell last Monday again after a survey of economists found that GDP is expected to grow just below 1.6 percent this year, 0.4 percentage points lower than an already conservative estimate from March. A new report from the World Bank, citing a variety of data, including softening international trade and investment, ongoing trade tensions, and financial turmoil concludes that “the outlook for the global economy in 2019 has darkened.”

Among the darker forecasts for the future are those that speculate on a global depression on the scale of the 1930s where GDPs fall by 10 to 25 percent. Others are saying that the global economy may be approaching “The Limits to Growth” as discussed in the famous 1972 book.

Base scenario from The Limits to Growth, using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil.” The 2019 line is drawn based on where the world economy seems to be now, rather than on precisely where the base model would put the year 2019.

In addition to the concerns about whether economic growth can continue, there are the ever-increasing costs of climate change and the recent round of predictions that the situation is soon to get much worse.

The OPEC Production Cut: The major news from last week was the report that the Saudis, who now need $95 oil to balance their state budget, are planning to cut their oil production by up to 800,000 b/d to get prices back up into the $80s. Concerns continue about the fate of Venezuelan oil production which seems to be dwindling to insignificance taking a million b/d of crude off the global oil market.

US Shale Oil Production: Last week saw numerous stories in the financial press questioning the viability of the US shale oil industry with prices now around $50 a barrel. Rystad Energy’s analysis of preliminary data suggests that nationwide fracking activity was mostly stable from April 2018 to August 2018 at an average daily level of 48 to 50 fracked wells. However, the fracking rate has slipped since and remains between 44 and 46 from September through November 2018. “After reaching a peak in May/June 18, fracking activity in the Permian has gradually decelerated throughout the second half of 2018,” says a senior analyst at Rystad. “There is evidence that seasonal deceleration might have started in all major plays except Eagle Ford. There has been a considerable slowdown in Bakken and Niobrara in November based on our estimation.”

Some major drillers, however, are bucking the general slowdown. The largest operator, ExxonMobil, experienced a strong uptick in October. Energen Corporation is also unaffected by the slowdown. “In general, many of the key operators have exhibited a largely flat trend from June to October 2018, which implies that the market-wide deceleration in fracking activity has a more significant implication for smaller operators in contrast to the major players in the Permian.”

Virendra Chauhan of Energy Aspects told CNBC last week that “$50 oil is not a level at which US producers can generate cash flow and production growth, so we do expect a slowdown.” In a Bloomberg radio interview John Kilduff, founding partner of Again Capital Management, said “we were getting into the zone where U.S. shale producers stop making money… particularly when you sort of add in all the costs, not just the pure say drilling and extraction. It’s going to start to get tough for them right now.”

The volume of drilled but unproduced wells continues to increase across the US to record levels, but market sentiment is mixed on whether oil prices need to recover from levels now around $50 a barrel to entice fracking and production from these wells. Evercore ISI noted in its 2019 Global E&P Spending Outlook released last month that E&P operators drilled more than 15,000 wells in seven major US shale basins during the previous year but completed less than 13,000 as DUC inventory increased by nearly 30%.

Most operators consider DUC production a bargain. Roughly 30-40 percent of a well’s total cost is drilling, so paying less when it comes time to produce is an attractive prospect, especially when oil prices are lower, and they want to maximize cash flows so that lower oil prices might trigger a round of DUC.

2. The Middle East & North Africa

Iran: Iran’s crude exports dropped to 1 million b/d in November from 2.5 million b/d in April, taking exports back to where they stood during the 2012-2016 sanctions. According to three companies that track Iranian exports, Tehran’s crude shipments remained below 1 million b/d in December and are unlikely to exceed that level in January. Tracking Iranian exports has become harder since the sanctions began as ships switch off tracking systems keeping some of the shipments hidden. Tanker trackers can partially make up for this problem by using satellite photography and harbor observers to keep track of tanker movements.

Shipments for the first part of January seem to be running about 500,000 b/d but are expected to pick up towards the end of the month. If natural gas condensates are included, however, Iran is exporting about 1.35 million b/d. Tehran, however, continues to claim that its exports have not declined as much as estimated by the industry because it was selling oil to new buyers but refused to disclose them because of a fear of new sanctions.

The US will grant no more waivers for Iranian oil sanctions, the US special representative for Iran said on Saturday, underlining Washington’s intentions to choke off Tehran’s sources of income. Last year, the Trump administration granted waivers to eight countries who were already established buyers to continue buying specified amounts of Iranian oil for 180 days. Now, however, a senior Iranian energy official in Tehran recently complained that these countries are not making use of the waivers and are instead complying fully with the strict zero-oil sanctions.

According to Iran’s deputy oil minister, “China, India, Japan, South Korea and other countries that were granted waivers from America to import Iranian oil are not willing to buy even one barrel more from Iran.” Despite favorable terms, some countries are finding it too difficult to work out new ways to pay for Iran’s oil when other hassle-free sources are available.

Iraq: Baghdad posted its highest monthly export total to date in December and, combined with Kurdistan, set a nationwide annual record of 4.15 million b/d — more than 100,000 b/d above the previous record, set in December 2016. The government said on Friday it is committed to the OPEC+ output-cutting deal and would keep its oil production at 4.513 million b/d for the first half of 2019.#

Baghdad plans to raise output from its southern Majnoon oilfield to 290,000 b/d by the end of 2019 and to 450,000 b/d by the end of 2021 from a current 240,000 b/d, the director of the Basra Oil Company said on Friday. Baghdad is still aiming to increase production, especially from its southern fields.

Hyundai Engineering is now the front runner to win a tender to build a vital water injection project in southern Iraq. Basra Oil Co. began preparing to tender for the project in February of last year if talks with Exxon Mobil, which was to build the system, failed. The oil ministry received bids from three foreign contractors for the project, the oil minister said in November. A deal was reached with US’s Schlumberger Ltd to drill 40 wells at Majnoon last month. Basra Oil is also planning to activate a new offshore oil export pipeline with a capacity to transport 700,000 b/d by the end of 2019.

Saudi Arabia: According to OPEC officials, Saudi Arabia is planning to cut crude exports to around 7.1 million b/d by the end of January in hopes of lifting oil prices above $80 a barrel. This news was, in part, responsible for the increase in oil prices last week. The new plan comes as the kingdom seeks to step up its expenditures by $20 billion or 7 percent in 2019 as the country struggles to fund ambitious plans to diversify beyond petroleum products. The sharp decrease in oil prices since October and the murder of journalist Jamal Khashoggi by Saudi operatives has deterred many foreign companies from working in the kingdom and investing in its economic development plans.

In addition to efforts to force up oil prices, the Saudis are entering the bond market once again. Despite jittery market conditions, banks are lining up bonds for the Kingdom, maturing in both 2029 and 2050. The deals will be a test of the willingness among international investors to put money to work in Saudi Arabia despite concerns over the fate of Yemen and the violent death of Khashoggi.

The Dallas-based consultants DeGolyer and MacNaughton certified reserves in Saudi Aramco’s concession area, as of the end of 2017, at 263.2 billion barrels of oil, or 2.2 billion barrels higher than a previous estimate, according to a report by Saudi Gazette. Once the Kingdom’s share of a Partitioned Zone jointly owned by Saudi Arabia and Kuwait are added, Saudi Arabia’s total proven oil reserves are supposed to be 266.1 billion barrels of oil and 324.4 trillion standard cubic feet of gas.

For almost 30 years Riyadh has annually reported the same number for reserves at around 261 billion barrels, according to the BP statistical review. There is much skepticism about this unchanging number despite the involvement of the Dallas firm.

Saudi Arabia is nearing a deal to invest in US liquefied natural gas. Aramco has narrowed its focus to a shortlist of at least four US LNG projects and intends to announce a deal in the first half of this year. Companies with projects being considered include Tellurian Inc., a Houston-based LNG developer known for its intention to ship gas from its planned Driftwood terminal in Louisiana. In addition, Sempra Energy, which is developing five LNG projects in the US and Mexico, has had discussions with Aramco concerning its Port Arthur project in Texas. Aramco is considering equity stakes in the projects, the people added. It wasn’t clear what the value of the potential investments was.

Libya: Tripoli plans to pump 2.1 million b/d of crude oil by 2021 if the security situation improves, the chairman of the National Oil Corporation said last week. The plan would represent a doubling of the current rate of production, which currently stands at 953,000 b/d. That’s less than what the country produced earlier this year, prior to the latest blockade of the largest field, Sharara, which removed more than 300,000 b/d from the market. However, it’s more than what Libya pumped in the summer when violent clashes at its oil terminals crushed oil production by almost half from the 1 million b/d earlier in the year.

3. China

China plans to set a lower economic growth target of 6 to 6.5 percent in 2019 compared with last year’s goal of “around” 6.5 percent. The proposed target will be unveiled at the annual parliamentary session in March and was endorsed by the top leaders at the annual Central Economic Work Conference in mid-December, according to sources with knowledge of the meeting’s outcome. Data coming later this month is expected to show the Chinese economy grew around 6.6 percent in 2018 – the weakest since 1990.

As China’s economy loses momentum, its leaders are closely watching employment levels as factories could be forced to shed workers amid a trade war with the US. A growth rate of about 6.2 percent is needed in the next two years to meet the ruling Communist Party’s longstanding goal of doubling gross domestic product and incomes in the decade to 2020, and to turn China into a “modestly prosperous” nation.

Oil demand, car sales, and consumer confidence are strongly correlated, and as an economic indicator, vehicle sales are also one of the first to show signs of a downturn. S&P Global Platts expects China’s total car sales to grow by 4.7 percent in 2019 to 31.1 million units, comprising 25.85 million gasoline-fueled cars, 3.28 million diesel-fueled cars and 1.97 million cars running on other fuels. But it said this growth would not help gasoline demand much, as fuel efficiencies grow and Chinese consumers switch from sport utility vehicles to sedans and electric vehicles. This means China’s gasoline demand will likely grow by less than 3 percent year on year to 3.5 million b/d in 2019 and by 2.5 percent to 3.6 million b/d in 2020. Demand growth is likely to be halved to 3.2 percent in 2018, with consumption reaching 3.43 million b/d.

Environmental authorities in China said last week that Beijing and its surrounding industrial province of Hebei cut smog emissions by at least 12 percent in 2018 after a long crackdown on polluters as well as campaigns to reduce household coal use. Beijing’s local government said that the city’s emissions of small, hazardous particles known as PM2.5 fell 12 percent to 51 micrograms per cubic meter (mcg) over the whole of 2018. The government said that average emissions are still significantly higher than China’s official air quality standard of 35 micrograms. It added that 656 polluting enterprises were forced to relocate last year. Beijing’s method of measuring pollution, however, involves taking the average of the pollution readings over a wide area, thereby hiding the fact that the pollution may be many times higher than safe levels in parts of the region.

China’s population will peak in 2029 at 1.44 billion before beginning a period of “unstoppable” decline, a government report said. The study by China Academy of Social Sciences warned that the country must implement policies to handle a smaller workforce and an older population.

4. Russia

Moscow has already lowered its oil output by around 30,000 b/d compared with October volumes, which is used as the baseline under the latest OPEC/non-OPEC crude production agreement. Russian energy minister Novak said Friday: “We are gradually lowering output; our plan is that overall production in January will be 50,000 b/d less than in October.”

Russia’s production and exports of coal hit last year their highest levels since 2013, according to S&P Global Platts estimates of data from Russia’s Energy Ministry. Coal exports increased last year by 3.4 percent compared to 2017, to reach 191 million tons. Coal production also reached its highest level since 2013—at 431.76 million tons, an increase of 6 percent in 2018 compared to 2017. Moscow continues to seek domination on the European market and has been putting in a lot of effort to obtain more market shares on the Asian markets such as South Korea and Taiwan.

Norway will step up preparations to claim its share of oil and gas resources if Russia finds petroleum on its side of a border in the Barents Sea. In 2010, Norway and Russia agreed on a maritime boundary in the Barents Sea, ending a 40-year long dispute, and also agreed to share oil and gas resources spanning that border. Russia has allowed oil and gas exploration all along the border, including in the Arctic where it has already awarded exploration rights to Rosneft and Italy’s Eni. Norway currently only allows oil firms to explore in the southern part of the Barents Sea but if Russia makes any discoveries in the northern part of the sea, Norway wants a share.

5. Nigeria

Suspected militants may have renewed hostilities against oil companies operating in the Niger Delta. A group last week claimed it was behind the attack on an oil pipeline at Koluama community in the Southern Ijaw Local Government Area. The explosion reportedly damaged the pipeline belonging to Conoil.

A new report by the Secretary-General of the UN says Nigeria lost an estimated $2.8 billion in revenues in 2018, mainly due to oil-related crimes. The report, which covered from July 1, 2018, to December 31, 2018, said: “Maritime crime and piracy off the coast of West Africa continued to pose a threat to peace, security, and development in the region. There were 82 reported incidents of maritime crime and piracy in the Gulf of Guinea.” The report said that conflicts between farmers and herders resulted in a loss of lives, destruction of livelihoods and property, population displacements, human rights violations, and abuses.

Another new report that says that Nigeria’s petroleum products pipelines are in a state of disrepair and need to be fixed or replaced. The study commissioned by the Nigerian National Petroleum Corporation to determine the status of the country’s network of petroleum products pipeline was recently obtained by a local newspaper. The report indicated that the lines are mostly broken-down and would need to be replaced or fixed at the cost of $13.1 billion.

The federal government will spend over $8 million on fuel, emergency generators, and plants across its 602 ministries, departments and agencies this year. These figures do not include money voted by the agencies for payment of electricity charges during the year. Only four federal agencies have zero allocation for plants and generators. This huge figure for generators and fuel is coming at a time the Minister of Power, Works, and Housing is saying that the power supply had improved and that there was more power coming to the grid this year.

6. Venezuela

President Nicolas Maduro was inaugurated for a second term on Thursday, despite presiding over an economic meltdown of historic proportions and his status as an international pariah. The presidents of Cuba, Bolivia, and Nicaragua were among the few foreign dignitaries to attend. A coalition of 13 countries, dubbed the Lima Group, announced in early January that they would not recognize Maduro as legitimate. The Group includes Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Guyana, Honduras, Panama, Paraguay, Peru, and St. Lucia. These countries issued a joint statement that says the May 2018 reelection of Maduro “lacks legitimacy,” and they condemned “the breakdown of the constitutional order and the rule of law in Venezuela.”

Seismic research vessels hired by Exxon Mobil to explore for oil off Guyana’s coast have not returned to the site of a December incident with Venezuela’s navy, but they may do so in the future, Guyana’s foreign minister said on Thursday. Guyana, with no history of oil production, has become the focus of interest since Exxon announced the discovery of over 5 billion barrels of oil and gas off its shores. The discovery has reignited a century-old territorial dispute with neighboring Venezuela.

A new US company set up only last year is supposed help Venezuela turn around its falling oil production. According to contracts, Erepla Services will provide the drilling rigs and crews necessary to increase crude oil production at the Tia Juana, Rosa Mediano, and Ayacucho 5 fields during the next 25 years. The US company will buy all the oil produced from these fields and resell it, giving Venezuela’s PDVSA 50.1 percent of the proceeds and keeping 49.9 percent.

Erepla is part-owned by a prominent Florida Republican. The new arrangement faces significant hurdles, including obtaining an exemption from Trump administration sanctions that block US companies from providing financing to Venezuela. It is a further sign that Caracas is tapping inexperienced firms to stem massive declines in crude output as more established oil companies steer clear of the troubled country due to concerns about US sanctions and overall dysfunction.

7. Mexico

Mexico’s Army has taken control of 58 key fuel installations in the country, including refineries, upon orders by new President Lopez Obrador, who has vowed to fight corruption and fuel theft from within Pemex. Criminal groups have been tapping pipelines and stealing tanker trucks laden with diesel and gasoline in the oil-producing country for years, often operating with impunity.

Obrador unveiled his plan in late December to use of the army in fighting fuel theft from Pemex, which the President says cost the firm $3 billion last year. The government shut some pipelines at the end of December and distributed fuel by truck instead. That move led to delays in fuel arriving at petrol stations this week, with queues of motorists waiting to fill up their cars and hundreds of gasoline stations across the country had to close.

The President claimed last week, however, that the military-assisted crackdown had dramatically reduced fuel theft and had uncovered a secret pipe that was used to siphon gasoline out of one of the country’s refineries. He says fuel theft has dropped from 787 truckloads per day to 177 since the soldiers were sent to Pemex’s installations last month.

However, declining output at Pemex’s refineries is forcing the firm to rely more heavily on imported motor fuels. Pemex owns and operates six oil refineries in Mexico with a joint capacity of 1.63 million b/d of crude processing, which last year processed crude at below half capacity. Overall, Pemex’s refineries currently are producing about 200,000 b/d of gasoline according to official numbers, while another 600,000 b/d are being imported, mostly from US refiners. Meanwhile, bottlenecks for discharging imported fuel have formed at key Mexican import hubs where more than 7 million barrels of fuel wait to be unloaded according to traders and Refinitiv Eikon data.

8. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)

Global transportation demand for crude oil is expected to peak in the late 2020s due to the rise of electric vehicles (EVs), improved efficiency standards for internal combustion engine cars, and consumer preferences, Wood Mackenzie said. EVs will displace around 5 to 6 million b/d of oil demand by 2040—some 5 percent of total oil demand. (1/9)

On Europe’s inland waterways, a ban on single-hull barges carrying oil products came into force at the end of 2018 — a year that saw double-hull barges unable to navigate the shallow Upper Rhine for prolonged periods due to a severe drought, causing acute supply shortages of oil products in southwest Germany and Switzerland. (1/9)

The Trans-Adriatic Pipeline (TAP) has completed its $4.5 billion project financing, paving the way for construction to be completed. TAP, the final leg of a $40 billion project called the Southern Gas Corridor to transport gas from Central Asia to Western Europe, is a cornerstone of the European Union’s energy security policy to wean the bloc off Russian gas supplies. Start-up is expected in 2020. (1/11)

In Argentina, the Vaca Muerta has attracted $165 billion in investment commitments as companies like Chevron, ExxonMobil and Total bet on the production growth potential of Argentina’s biggest shale play, but bottlenecks are emerging that could limit a ramp-up in activity. An expert said companies must work on reducing costs over the next two to three years to show that “real money” can be generated out of the play. (1/10)

Curacao’s 335,000-b/d Isla refinery has resumed work after eight months of paralysis caused by a dispute between its operator, Venezuela’s PDVSA, and US producer ConocoPhillips. Isla restarted one of its crude distillation units and its thermal cracker. The plant suffered a fire early last year and fell idle after ConocoPhillips brought legal actions against PDVSA over a $2-billion arbitration award linked to the nationalization of Conoco’s projects in Venezuela. (1/9)

The Panama Canal Authority announced last Monday that the maximum draft for a ship transiting the Neopanamax locks would be restricted to 49 feet, or 14.94 meters, as of February 11, due to rainfall that was 90 percent below the December average. (1/8)

Alberta is looking to another solution to alleviate the crude oil glut—having a new oil refinery built in the province that would absorb part of the crude and unlock some space on congested pipelines shipping oil out of the province. (1/9)

The US oil rig count declined by four oil rigs in the week to Jan. 11, bringing the countdown to 873, Baker Hughes said. The oil rig count is still much higher than a year ago when 752 rigs were active. Drillers added 138 oil rigs in 2018 and 222 in 2017. They cut 11 rigs in 2016. Last week, gas rigs also increased by four to 202. (1/12)

Oil exports: News that the US Army Corps of Engineers has placed a $93-million order with Great Lakes Dredge & Dock Company for the deepening and widening of its ship channel at the Port of Corpus Christi broke last week. This is the first step the federal government has made to support efforts to boost crude oil exports. (1/9)

In the Gulf of Mexico, BP has approved a $1.3 billion expansion for the Atlantis Phase 3 development. The development, which includes the construction of a new subsea production system from eight new wells, will boost production at the platform by as much as 38,000 barrels of oil equivalent per day. (1/9)

The Trump administration is pursuing its plans of opening up more federal lands in Alaska to oil and gas drilling. Reuters reports the Alaska Bureau of Land Management had not canceled a scheduled public meeting on the topic on Wednesday despite the shutdown which has affected the Department of Interior. (1/11)

US gasoline prices have now fallen for 12 straight weeks, with the national average as of Monday at $2.24 per gallon, alongside reports indicating the weakest demand since February 2017. As of January 7, gas prices have dropped 20 cents from a month ago. (1/9)

Haynesville comeback: Gas production in the state of Louisiana in the southern US will soon reach record heights thanks to a resurgence of the Haynesville shale play. Rystad Energy research shows that the Haynesville Shale alone was able to add 1.85 billion cubic feet per day of gross gas production (Bcfd) between the fourth quarter of 2016 and the fourth quarter of 2017. Another 1.3 Bcfd was added last year. Study authors conclude that new all-time high gas production levels should happen within months. (1/12)

Boosting natgas productivity: A new computational model could potentially boost efficiencies and profits in natural gas production by better predicting previously hidden fracture mechanics while accurately accounting for the known amounts of gas released during the process. (1/12)

Cadillac’s EVs: GM said that Cadillac will be GM’s lead electric vehicle brand and will introduce the first model from the company’s all-new global battery electric vehicle architecture (BEV3), GM’s foundation for an advanced family of profitable EVs. The mission of the new architecture is to support a range of more than 300 miles (482 km) and to be profitable. (1/12)

RE to dominate: In the U.S., new utility-scale generating capacity will be led by wind power, which will account for 46 percent of the additions, followed by natural gas with a 34-percent share of new capacity, and solar photovoltaics, which will make up 18 percent of new electric capacity, the EIA said.

RE in Indiana: Northern Indiana Public Service concluded that phasing out coal sooner was worth it because it would move the company to what is becoming a cheaper source of power, and ultimately reduce costs for its 470,000 customers by as much as $4 billion over 30 years. The transition would require raising average rates by a proposed $11 a month starting later this year, because of higher short-term costs related to closing the plants, but the company expects the shift would reduce its overall generation costs starting in 2023. (1/10)

Saudi Arabia has made a first tangible step to generate electricity from sources other than oil and gas, awarding a contract on Thursday for the Kingdom’s first utility-scale wind farm. A consortium led by France’s EDF and Abu Dhabi’s Masdar won the tender to build a 400-megawatt US$500-million wind farm in northern Saudi Arabia. (1/11)

Damage from dams worldwide: Dam construction involves higher environmental and social costs than previously estimated. A new study from Michigan State University found that when a large dam is built, the result is a downstream loss of a great many fish species that are important to riverine populations. (1/12)

Melting permafrost: In just one human generation, citizens of the far north could find themselves on shifting soils as the region’s permafrost thaws. Roads will slump. Buildings will buckle. Pipelines will become at risk of fracture. And in 2050, around three-fourths of the people of the permafrost could watch their infrastructure collapse, as what was once hard frozen ground turns into mud. More than 4 million people live in the pan-Arctic permafrost landscape: at least 3.6 million of them, and 70% of their transportation and industrial infrastructure are at risk. (1/11)

India’s coal boom: India’s 12 major government-owned ports handled around 78.24 million tons of thermal coal between April to December period, up 17% from the same period a year ago. (1/7)

H2 break-thru? Researchers from the US Department of Energy’s Argonne National Laboratory have combined two membrane-bound protein complexes to perform a complete conversion of water molecules to hydrogen and oxygen. Sunlight-driven production of hydrogen from water provides a sustainable approach to achieve a clean, renewable alternative fuel to fossil fuels. (1/11)

H2 trains for the UK: France-based Alstom presented Monday a new hydrogen train design for the U.K. market with the aim to build a fleet that will be up and running by 2022, following its introduction in Germany in September. The new model, named Breeze, is based on a conversion of existing Class 321 trains which are conventionally powered and used for commuter service in the U.K. (1/8)

US carbon dioxide emissions rose an estimated 3.4 percent in 2018 — a jarring increase that comes as scientists say the world needs to be aggressively cutting its emissions to avoid the most devastating effects of climate change. The findings mean that the US now has a diminishing chance of meeting its pledge under the 2015 Paris climate agreement to dramatically reduce its emissions by 2025. 9 President Trump has said he plans to officially withdraw the nation from the Paris climate agreement in 2020 and has rolled back Obama-era regulations aimed at reducing the country’s carbon emissions. (1/8)

[sumisu]

Peak Oil Review: 7 January 2019

By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-01-07/peak-oil-review-7-january-2019/

Quote of the Week

“Shale companies have attracted huge amounts of capital from Wall Street over the past decade. So far, investors have largely lost money. Since 2008, an index of US oil and gas companies has fallen 43%, while the S&P 500 index has more than doubled in that time, including dividends. The 29 companies in the Journal’s analysis have spent $112 billion more in cash than they generated from operations in the last 10 years, according to data from FactSet, a financial-information firm.” Bradley Olson, Rebecca Elliott and Christopher M. Matthews, The Wall Street Journal (1/2/19)


1. Oil and the Global Economy

Since hitting a recent low on Dec 22nd, oil prices have climbed by $5-6 a barrel as the markets tried to sort out where supply and demand are going. With US oil prices still below $50 a barrel, it is hard to imagine that the optimistic forecasts for US shale oil production will be reached in 2019. There are continuing indications that China’s economy is headed for a dip, but there are reports that US/China trade negotiations are making progress. The US sanctions on Iran seem to be hurting Tehran’s exports, and the OPEC+ production cut is slow getting off the ground.

The US stocks report, which was delayed by two days, showed an unexpectedly large increase in US gasoline inventories last week, while crude stockpiles were unchanged. Distillate stockpiles, which include diesel and heating oil, rose by 9.5 million barrels, the greatest one-week jump since December 2016 and gasoline inventories were up by 6.9 million barrels. The surprise increase in petroleum products was the result of an unusually high refinery utilization rate of 97.2 percent which was a record for this time of year. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 641,000 barrels. Net US crude imports rose last week by 468,000 b/d, while crude production was unchanged at 11.7 million bpd.

A British firm, Apex Consulting Ltd, has released an updated report on the costs of producing oil for some of the major oil companies between 2015 and 2017 when oil prices declined significantly, and oil companies were forced to cut back on exploration and drilling for oil. Between 2011 and 2014, when the oil industry was making an all-out effort to increase production, the average cost of production for the major oil companies almost doubled from $10 a barrel to around $20. With oil selling for over $100 they did well, but costs of production got out of control as the supermajors went after ultra-deepwater, and heavy oil resources. The boom stretched the resources of the oil service companies who raised prices significantly.

Following the mid-2014 price collapse, there were numerous project cancellations and cuts in investments across the industry. As could be expected the most expensive per barrel projects went first so that the average cost fell significantly. According to Apex, its Supermajor Cost Index fell by more than 41 percent to an average of about $13 a barrel in 2017 compared to 2014. These costs are mostly for commercial oil production as little of the US’s shale oil production, which is substantially more expensive, is included in this number.

Cost of production likely increased in 2018 as the major oil companies’ capital expenditures were higher, but the sharp price drop late in the year has again confused the picture.

The OPEC Production Cut:

In December, the US imported the lowest volume of OPEC crude in five years, according to market intelligence firm Kpler. Only 1.63 million b/d of crude arrived during the months, down from 1.80 million b/d in November and 1.78 million b/d in October. Saudi Arabia shipped 534,000 b/d to the US in December, nearly a 100,000 b/d drop from November. Algeria’s shipments were also down almost 100,000 b/d, and Nigeria’s shipments to the US dipped by almost 50,000 b/d. Iraq, on the other hand, increased crude oil shipments to the United States by 140,000 b/d.

Algeria’s energy minister said last week he was confident oil prices would return to between $65 and $70 a barrel by April but stressed that the OPEC alliance would cut production further if the market had not responded by then. Many observers are skeptical that the 1.2 million b/d OPEC+ production cut will be sufficient to offset rising US shale oil production and the slowing global economy. J.P. Morgan said prior to the OPEC meeting early December, that “if OPEC didn’t really cut by more than around 1.2 million b/d, and they did so just for the first half, (not) for the full year, that we could gravitate toward … our low-oil-price scenario, which is $55 Brent for 2019.”

US Shale Oil Production: Given that US oil prices are still below $50 a barrel and that producers have started to cut back on operational drilling rigs, the EIA did not estimate that there was an increase in US oil production last week – leaving the number at 11.7 million b/d.

The major news last week was in a Wall Street Journal story with the title “Fracking’s Secret Problem – Oil Wells Aren’t Producing as Much as Forecast.” The subtitle was Data analysis reveals thousands of locations are yielding less than their owners projected to investors; ‘illusory picture’ of prospects. As three reporters were involved in producing the story, it is clearly an important one that has been well massaged by editors. Based on analysis by Rystad Energy and confirmed by two other energy consulting firms, the story concludes that “thousands of shale wells drilled in the last five years are pumping less oil and gas than their owners forecast to investors, raising questions about the strength and profitability of the fracking boom. Based on an analysis of some 16,000 wells operated by the 29 largest shale oil producers, it seems that two-thirds of the projects of how much oil would come from these wells are overly optimistic.

That sales pitches to potential investors by shale oil drillers are optimistic is not particularly news unless the estimate of how much less shale oil we can expect is specific enough to gain an insight as to where the industry will be five or ten years from now. The Journal does not want to undercut conventional wisdom that the shale oil boom is leading America to “energy independence,” so it is rather circumspect in discussing specifics. Early in the story, the Journal says that “flawed forecasting doesn’t mean US oil output is about to drop;” however, much of the story points at the conclusion that a lot of the oil that the US shale oil industry is supposed to produce in the next ten years will not be coming.

The Journal notes that Schlumberger reported in a research paper that secondary shale wells completed near older, “initial” wells in West Texas had been as much as 30 percent less productive than the initial ones. This problem threatens to undercut growth projections for the Permian Basin as the recent boom involves drilling more wells closer to the most productive ones.

Three years ago, Pioneer Natural Resources told investors that it expected wells in the Eagle Ford shale of South Texas to produce 1.3 million barrels of oil and gas apiece. Those wells now appear to be on a pace to produce about 482,000 barrels, 63 percent less than forecast, according to the Journal’s analysis. An average of Pioneer’s 2015 forecasts for wells it had recently fracked in the Permian Basin suggested they would produce about 960,000 barrels of oil and gas each. Those wells are now on track to produce about 720,000 barrels, according to the Journal’s review, 25% below Pioneer’s projections. Pioneer disputes these conclusions, noting that it assumes its wells will produce for at least 50 years. Given that most authorities say that shale oil wells are pretty well empty in five years or less, it is not clear where the 50-year lifetime is unless they are planning costly re-drilling and re-fracking.

There are other examples, but they all suggest that shale oil wells may not be able to produce enough oil at recent prices to cover the costs of land acquisition, drilling, fracking, and production. The Journal notes that the 29 companies it follows closely have spent $112 billion more in cash than they generated from operations in the last ten years. While lenders continue to finance shale oil production, equity stakes in shale oil companies have fallen from some $35 billion in 2016 to circa $6 billion last year. At some point, Wall Street may figure out that the days of $100+ oil that is needed for profitable oil production is not going to return and that the best places to drill profitable shale oil wells are all gone.

2. The Middle East & North Africa

Iran: Iran’s Parliament Research Center is predicting negative growth for Iran in the current fiscal year that ends March 20 due to its falling exports. The contraction could be as much as 5.5 percent or, with the best-case scenario, only 2.6 percent. The 5.5 percent contraction assumes that Tehran’s exports will shrink by 1.6 million b/d while the optimistic number assumes 800,000 b/d fewer exports.

Imports of Iranian crude oil by Asian buyers hit their lowest in more than five years in November according to government and ship-tracking data. China, India, Japan, and South Korea last month imported about 664,800 b/d from Iran, according to the data, down 12.7 percent from the same month a year earlier. South Korea cut imports to zero for a third month in November while Japan followed suit. India’s November imports are down about 40 percent from October. Imports are expected to be larger in December because of the sanction waivers.

The US sanctions and the ensuing waivers seem to be working. According to Iran’s deputy oil minister, “China, India, Japan, South Korea and other countries that were granted waivers from Washington to import Iranian oil are not willing to buy even one barrel more from Iran.” Always optimistic, but giving few details, the minister said “Despite US pressures on the Iranian oil market, the number of potential buyers of Iranian oil has significantly increased due to a competitive market, greed, and pursuit of more profit.”

Iraq: Baghdad posted its highest monthly export total to date in December and, combined with Kurdistan, set a nationwide annual record. The federal government and the Kurdistan Regional Government together exported a total of 4.159 million b/d last month, more than 100,000 b/d above the previous high-water mark, set in December 2016. The average sale price in December was $52.8 per barrel, generating around $6.1 billion in revenue.

Iraq says it was committed to the OPEC+ output-cutting deal and would keep its oil production at 4.513 million b/d for the first half of 2019. OPEC, Russia and other non-members, an alliance known as OPEC+, agreed in December to reduce supply by 1.2 million b/d in 2019. OPEC’s share of that cut is 800,000 b/d.

Libya: The Sharara oilfield, which was taken over on Dec. 8 by tribesmen, armed protesters, and state guards, is expected to lose 8,500 b/d to looting, state oil company NOC said on Thursday. NOC chairman Mustafa Sanalla warned on Thursday that attacks on the field could destroy the Sharara system and damage the economy.

3. China

Crude oil prices were higher last week, partly on reports that China plans to hold talks with the US this week to settle their trade balance differences. The trade war is one of the biggest reasons for heightened uncertainty around oil prices. As China is one of the world’s top importers of crude, any sign that demand for it might waver immediately puts pressure on prices.

In recent years, China has become the largest market for many consumer, luxury and durable goods, as its expanding middle class entered the consumer goods markets for the first time. Now as the economy starts to falter, oil producers, electronics makers, travel services and many other sectors are feeling the pinch. Apple is the latest company to sound the warning, attributing a sharp falloff in iPhone revenue to China’s rapidly decelerating economy. Ford and GM have reported significant sales drops for China in a slump that has hit foreign and domestic automakers alike. E-commerce is feeling the slump, cutting its revenue forecast and JD.com reporting a fall in active customer accounts.

China issued its first batch of crude oil import quotas for 2019 last week at a lower volume than for the same batch a year ago. The Ministry of Commerce granted quotas totaling 89.84 million tons to 58 companies. This is down from the 121.32 million tons in the first batch of allowances for 2018, although allocations may increase the overall volume for 2019 in a second batch of quotas later this year. Lower import quotas may signal slower growth in the demand for oil.

4. Russia

Russian oil production rose to a post-Soviet record high of 11.16 million b/d last year on an annual average basis. The total surpassed the previous record average of 10.98 million bpd set in 2017. All the Russian majors increased their oil production last month. Rosneft, the world’s largest listed oil producer by output, raised its oil production by 4.6 percent year-on-year in December, while Lukoil and Surgutneftegaz both increased their output by 2.5 percent.

5. Nigeria

On January 1, France’s Total had started up oil production from Nigeria’s ultra-deepwater oil field Egina, which is expected to produce 200,000 b/d at peak output. Oil was first discovered in the field 15 years ago. The field is located 93 miles offshore Nigeria’s coast at 5,250-feet water depth. Total Upstream Nigeria Limited operates the field with a 24 percent interest, in partnership with Nigerian National Petroleum Corporation, South Atlantic Petroleum, China’s CNOOC and Petrobras.

The Floating Production, Storage, and Offloading (FPSO) unit used to develop the field is the largest one Total has ever built. This project has also involved a record level of local contractors. Six of the eighteen modules on the FPSO were built and integrated locally, and 77% of hours spent on the project were worked locally.

Nigeria’s crude oil daily production increased last year by about 2.09 million b/d, translating to a 9 percent improvement, compared with the 2017 average daily production of 1.86 million barrels. In the last two years. the government has reached settlements with the militant groups that were blowing up oil facilities across the Niger Delta. The Egina field which is some 100 miles offshore should be much less vulnerable to militant attacks than pipelines running through the swamps.

6. Venezuela

Thirteen nations announced last Friday that they would not recognize the legitimacy of the new presidential term of Nicolás Maduro, who is set to be inaugurated this week for a second time. Diplomats from Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Guyana, Honduras, Panama, Paraguay, Peru, and St. Lucia issued a joint statement, denouncing last year’s election as flawed and urging Mr. Maduro to hand power to the opposition-controlled National Assembly until another election could be held.

Although the US is not part of the Lima Group which issued the declaration, US Secretary of State Mike Pompeo participated in Friday’s meeting by video conference and recently held meetings across Latin America which included discussions of the Venezuelan situation.

7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)

ICEs peaked in 2018? Sales of internal combustion engine cars in 2018 are unlikely to be surpassed in any future year, as demand in the world’s three largest markets stalls and carmakers seek to ramp up production of electric cars. (12/31)

The international rig count, excluding North America, was 991 at the end of November 2018, down 26 from the month prior but up 49 from November 2017, according to the Baker Hughes site.

Scrapping crude tankers: Companies around the world have scrapped a record number of large crude tankers in 2018. About 100 vessels of the industry’s main crude carriers have been sent to India and Bangladesh for demolition. The shipping bust is no surprise; the vessels, which transport 40 percent of the world’s crude, were on course for the worst charter rates in three decades. The implosion of charter rates was due to a two-year reduction of OPEC cargoes plus environmental regulations. The global growth slowdown has certainly not helped. (1/2)

In Mozambique, Exxon has secured long-term purchasing commitments for liquefied natural gas from its Rovuma project, moving closer to a final investment decision on a facility that will add as much as 15.2 million tons of LNG to global capacity. If approved, production would begin in 2024. (1/2)

In Ecuador, President Lenin Moreno said that a special audit into $4.9 billion worth of oil-related infrastructure investment in the last decade reveals that about half of it was lost to corruption. (1/5)

Canada’s oil rig count crashed during the last full week of December, declining by 61 rigs during the week to finish at 70 oil rigs operating. (1/1)

Canadian blame game: In Canada, the National Energy Board (NEB) said on Friday that pipeline capacity constraints were not the only thing plaguing Canada’s oil industry. It instead shifted the blame onto increased oil production in the last couple of years, saying that if its oil producers weren’t producing so much oil—which came in at 4.3 million barrels per day in September—pipeline capacity at 3.95 million b/d would not have been an issue. The NEB also cited lower demand from US refineries—a significant market for Canadian oil producers—due to maintenance season. Western Canada’s largest customer in the US, BP’s Whiting Refinery in Chicago, went offline in September, exacerbating the discount of WCS to WTI. (1/5)

The US oil rig count declined by 8 rigs last week to hit 877 while the gas rig count held steady at 198, according to Baker Hughes’ weekly report. The combined oil and gas rig count of 1,075 is still up 151 from this time last year, 135 of which is in oil rigs. Canada’s rig count rebounded, up 6 to start the year off at 76; that’s still down 98 rigs year-over-year. (1/5)

In Alaska, Italy’s Eni said Thursday it will buy the rights of all of the Oooguruk oil field in shallow waters offshore Alaska and become its operator because its proximity to the Nikaitchuq field will provide synergies. The second field that Eni will now own and operate in Alaska yields 10,000 barrels of oil equivalent per day from 25 oil wells and 15 gas/water injector wells. The additional field is only eight miles from the Nikaitchuq field it developed in 2011, which produces 18,000 barrels of oil equivalent per day. (1/4)

California imported an average 447,063 barrels of crude oil by rail over the first nine months of last year. The jump was driven by increased overall exports from New Mexico, Wyoming, and Canada, California’s three oil-by-rail suppliers. (1/5)

Refiners go light: US light oil has become too cheap for Gulf Coast refiners to pass up. Fuel makers on the Gulf, home to the largest cluster of refineries in the world, processed oil with an average API gravity of 33.06 in October–the lightest crude in 26 years thanks to a surge in domestically produced light barrels. Growing US output has sent imports to a 3-year low, as domestic barrels are cheaper than imported ones. West Texas Intermediate, the US benchmark oil, is being traded at a discount of $8.10 per barrel compared with Brent, the benchmark used to price imported oil. (1/3)

Permian flaring grows: So much gas has bubbled up from the oil wells in the area that it has overwhelmed pipelines needed to take it to market. Rather than wait for new gas pipelines to arrive, bottling up lucrative oil production in the process, energy companies are incinerating the methane. Flaring means the gas will never be used by consumers. It is also forgone revenue for energy producers and tax authorities. The pollution emitted is significant, even if carbon dioxide released in flaring traps far less heat in the atmosphere than methane gas. (1/5)

New pipeline: The Mariner East 2 natural gas liquids (NGL) pipeline extending from Eastern Ohio to the Philadelphia area is in service, owner Energy Transfer LP reported Saturday. The 350-mile pipeline transports ethane, propane and butane east from processing plants in Ohio to the company’s Marcus Hook Industrial Complex in Delaware County, Pa. (1/1)

Trump’s talent re oil prices: President Donald Trump said OPEC “is essentially a monopoly,” even as he credited his own “talent” for having brought down oil prices. “Four months ago, oil hit $83 a barrel,” Trump told reporters in the Rose Garden after meeting with Congressional leaders to try and reach a deal on the partial government shutdown. Oil “was heading to $100 and then it could have gone to $125.” Trump repeated his statement from earlier this week that his efforts made the difference in bringing down the oil price. “After I made some phone calls to OPEC…all of a sudden, it started coming down. Didn’t happen by luck, it happened through talent.” (1/5)

Oil & gas regs rollback: one area where the Trump administration has been ruthlessly effective has been in promoting the interests of the energy industry. His federal agencies have succeeded in gutting a long list of environmental regulations affecting drilling and mining companies. Two-years in and the regulatory climate for oil, gas and coal companies is a lot friendlier than it used to be. (1/3)

The partial government shutdown is increasing the chances of delays in US energy initiatives including the release of President Donald Trump’s proposed offshore drilling plan and allowing higher levels of ethanol in gasoline during summer months, energy industry groups said on Friday. (1/5)

CA on EV mileage tax: A research report submitted to the California legislature this week by the University of California, Davis’ Institute of Transportation Studies proposes switching EVs to a mileage-based road-funding fee while continuing to have gasoline-powered cars pay gasoline taxes. (1/4)

US EV sales up: During 2018, total plug-in EV sales were more than 354,000 vehicles, or 72.5% more than the 199,000 EVs sold in the US in 2017. Sales of best-selling Tesla’s three battery-powered models were reported January 3 by InsideEVs to have totaled just over 191,000 vehicles in 2018, compared with just over 50,000 in 2017. The Edison Electric Institute said the transition to electric vehicles is well underway with more than 1 million EVs on US roads as of October 2018. (1/4)

Norway’s EV push: Almost a third of new cars sold in Norway last year were pure electric, a new world record as the country strives to end sales of fossil-fueled vehicles by 2025. (1/3)

Tesla going to China: In a sign that Tesla is preparing to start construction of its first factory in China, Elon Musk said on Monday that he would be visiting China soon for the groundbreaking ceremony. Tesla’s China factory in Shanghai will be its first production facility outside the US (1/2)

Biofuels innovation: a new discovery by a team of scientists based in the west Indian city of Pune at the National Chemical Laboratory offers a quicker, eco-friendly technique for converting industrial biomass into biodiesel. (1/3)

CA planning for H2: The California Energy Commission and California Air Resources Board have released a joint report on the planning, design, development, and deployment of hydrogen refueling stations critical to supporting the adoption of fuel cell electric vehicles. (1/3)

China doing H2: the hilly city of Yun Fu in China’s southern Guangdong province decided in 2009 to lop the top off the surrounding hills and build a 13.4 sq. km industrial park focused on fuel cells — a rival technology to internal combustion engines and electric batteries. A whole suite of companies covering the supply chain have now set up in the park, which is producing hundreds of buses and small trucks using fuel cells that run on hydrogen gas. So successful has it been that local officials now plan to flatten two more hills to create a neighboring vehicle manufacturing plant and a chemicals facility. (1/2)

Indian state-run Coal India Limited said Tuesday that output over April-December rose 7.4 percent year on year to 412.45 million tons. (1/2)

India pushes RE: Indian power companies spent much of the past decade rushing to build coal-fired power plants in anticipation of surging electricity demand as economic growth took off. Now, many of those projects are mired in deep financial distress and private investment in coal power has ground to a near halt. The biggest driver of long-term uncertainty for the industry is one that few anticipated 10 years ago: an explosive take-off in the renewable power sector, as India joins the global push to tackle climate change by shifting towards green energy. (1/1)

Assaults in AZ on driverless cars: A Waymo autonomous vehicle, while idling recently in Chandler, Ariz., was attacked by an assailant who slashed its tires. Some 21 attacks have been carried on driverless cars by some disgruntled residents in Chandler who object to the technology and the field testing in their town. Most residents and officials welcome the tests. (1/1)

ZEV push: The California Air Resources Board will conduct a public hearing 21 February to consider approving for adoption a proposed Zero-Emission Airport Shuttle regulation. The regulation as currently written would require fixed route airport shuttles, that serve California’s 13 largest airports, to transition to 100% ZEVs by 2035. (1/1)

[sumisu]

Peak Oil Review 2 January 2019

By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org

https://www.resilience.org/stories/2019-01-02/peak-oil-review-2-january-2019/

Quote of the Week

“Some geologists harbor doubts about ANWR’s prospective resources. ‘I don’t see (in the refuge’s geology) what I hear in the political talk,’ about the refuge’s potential, said Richard Garrard, an Alaskan-based exploration geologist. said. Geologically, the region is an extension of the Brooks Range, which is to the south. ‘How many oil fields have been discovered in the Brooks Range? None.’”


1. Oil and the Global Economy

It was a volatile week for oil prices with WTI falling on Monday to nearly $42 a barrel and London falling to $51. Oil surged on Wednesday, after posting on Christmas day its strongest daily gain in more than two years from the steep losses on Monday that pushed crude benchmarks to lows not seen since 2017. Both US and Brent crude rose about 8 percent, their largest one-day increase since Nov. 30, 2016, when OPEC signed a landmark agreement to cut production. The week closed out with oil at $45.33 a barrel in New York and $53.21 in London.

By Friday, oil was selling for some $8-10 a barrel lower than where it had been trading in the first weeks of December. The decline was motivated by a sharp drop in global equities which in turn was caused by concerns over economic growth next year and the US government shutdown. US shale oil production continues to surge while the Iranian sanctions and the OPEC+ production cuts will take several months to become fully effective.

The EIA’s weekly stocks report, which was delayed until Friday due to the Christmas holiday, showed almost no change in US petroleum stocks as rising production just balanced an increase in exports. Analysts surveyed by S&P Global Platts on Wednesday expected a 1.4 million-barrel decline, while the American Petroleum Institute on Thursday called for a 6.9 million-barrel build. Crude inventories along the Gulf Coast declined by 2.46 million barrels as US exports increased by 644,000 b/d to 2.97 b/d. Stocks at the Cushing, Oklahoma, storage depot grew by 799,000 barrels to a 49-week high at 41.3 million barrels.

Despite the surge in US exports two weeks ago, US crude exports to Europe fell to an 11-month low this month as a shrinking discount and rising shipping costs cut the demand for US oil. Only 17 tankers carrying about 298,000 b/d departed from Texas and Louisiana for European ports this month, the fewest since last January. This is down from 404,000 b/d last month. The spread between US crude and Brent has narrowed from above $10 per barrel in November to $6.63 on Friday, the smallest discount for US crude since early August.

Most major investment banks are forecasting a rebound in oil prices in 2019. However, forecasts vary widely. Bank of America Merrill Lynch, for instance, sees WTI averaging $59 per barrel in 2019; Citi is at the bearish end with a forecast of oil averaging $49 per barrel; and Barclays, along with half a dozen others, says the WTI benchmark will average around $72 next year.

The OPEC Production Cut: The continued decline in oil prices this month has raised concerns among oil exporters who had been expecting that their announcement of a 1.2 million b/d production cut would send prices higher. Implementation of the production cut, however, has been somewhat lackadaisical, with exemptions for several members, and Moscow is waiting until spring before fully lowering its. Now we are told that OPEC and allied oil producers are ready to hold an extraordinary meeting and will do what is needed if the current cut in oil output by 1.2 million b/d does not balance the market next year.

The United Arab Emirates’ energy minister said last week “If we are required to extend for (another) six months, we will do it … I can assure you an extension will not be a problem.” Saudi Arabia’s OPEC governor, Adeeb Al-Aama, said his country is fully committed to the reduction agreement, adding that Saudi production in January was seen at 10.2 million b/d, lower than its output target of 10.3 million b/d under the recent pact. The kingdom has over-committed with previous cuts, reducing by more than its share and reaching compliance of 120 percent from January 2017 until May 2018, Al-Aama said.

OPEC and Russia-led non-OPEC oil producers are unlikely to create a formal joint organization for managing the oil market, Russia’s Energy Minister Novak said last Thursday. Although Russia and OPEC have been touting the idea of “institutionalizing” their cooperation in the oil market by forming some kind of organization, Novak said the idea had now been discarded.

“There is a consensus that there will be no such organization. That’s because it requires additional bureaucratic brouhaha in relation to financing with the US side,” Reuters quoted Novak as saying at a briefing with reporters. Russia has been concerned with the possibility that the US could pass the so-called No Oil Producing and Exporting Cartels (NOPEC) Act that could pave the way to antitrust lawsuits in the US against the cartel and its national oil companies. According to analysts, the possibility of a NOPEC Act has been a big concern for OPEC members lately as it could damage their relations with the US and result in sanctions similar to those imposed on Iran.

In addition to NOPEC, the cartel is facing several other problems in the coming year. Its rotating presidency is due to fall to Venezuela who will send a general with zero oil industry experience to lead the cartel. The alliance with Russia means that any effective policy will require that Moscow be on board indicating that the Saudis and their allies are no longer in complete control. The continuing growth of US shale oil production in the coming year suggests that the US alone could nullify much of an OPEC+ production cut. Oil traders are becoming apathetic to announcements from OPEC as to what the cartel plans to do. In the past, a leak or hint from an OPEC official was enough to send oil prices off in the desired direction. In today’s world, this is no longer true.

US Shale Oil Production: The shale oil industry has a fan in Fatih Birol, the Executive Director of the International Energy Agency (IEA). Birol told the Turkish news agency last week that total US oil production around 2025 will almost equal the combined production of Russia and Saudi Arabia or some 20 million+ b/d. US production is seen growing by 3.7 million b/d by 2023, more than half of the total global production capacity growth of 6.4 million b/d expected by then. Total liquids production in the United States—including conventional oil, shale, and natural gas liquids—will reach nearly 17 million b/d by 2023, “easily making it the top global producer, and nearly matching the level of its domestic products demand,” the IEA said in March this year. The US’s EIA sees US crude oil production averaging 10.9 million b/d this year, jumping from 9.4 million b/d in 2017. The forecast for next year’s US crude oil production currently stands at 12.1 million b/d. These forecasts were made before the recent price drop which makes much of the US shale oil industry unprofitable and cast doubts on some of the more optimistic forecasts.

The financial model that has dominated the US shale oil industry has been that of exploration and production companies using debt raised from bond markets and bank loans secured on oil and gas reserves. Often, they use derivatives to hedge some or all of their revenues, giving lenders confidence in their ability to make interest payments if oil and gas prices fall. For most of the shale boom, that financial infrastructure has been underpinned by the low-interest rates and quantitative easing that followed the financial crisis.

As its output has grown, the industry has been unable to finance its drilling programs from its operating cash flows, and a constant inflow of capital has been essential for keeping it afloat. Now, with stock markets and oil prices falling, and while the Federal Reserve is still signaling its intention to keep raising interest rates, the financial conditions that have kept the shale industry afloat may be evaporating.

It is standard practice in the shale oil industry for companies to put a floor under the effective price of some or all of their production by buying put options. The investment banks and others that sold those put options have to hedge their own positions, typically by selling oil futures. The more likely it is that the options will be exercised, the more oil the finance companies have to sell, in a practice known as “delta hedging.” That creates a positive feedback loop: as prices fall, financial companies that have sold puts need to sell more oil, which drives the price down further. Once oil prices started to fall, because of the US administration’s decision to ease off on blocking exports of Iranian oil, and concerns about global growth, the delta hedging effect turned falling prices into a rout.

While prices may be bottoming out, it may become more difficult for shale oil companies to hedge their output and borrow money in the coming year. All this seems to imply that the growth foreseen by the IEA and the EIA may not be as robust as forecast.

A discussion has begun on the recent US Geological Society (USGS) report stating there are an estimated 46.3 billion barrels of theoretical, technically recoverable, as yet undiscovered shale oil in various sections of the Permian Basin. Texas geologist, Art Berman, reviewed the study in detail and found that the USGS itself estimates it will take 318,000 wells to recover this oil, costing over $3.0 trillion.

The US shale oil industry has drilled almost 70,000 wells the past decade across the US and is fast exhausting its sweet spots in the major shale oil basins. It has recovered a little less than 10 billion barrels of oil so far and is somewhere around $300 billion in long-term debt. There seems to be a good reason to be skeptical about this assessment.

2. The Middle East & North Africa

Iran: Iran’s proposed state budget for the coming year points to a 3.7 percent decline in revenues, as US sanctions continue to cut oil revenues. Expectations of lower oil exports as a result of Mr. Trump’s moves prompted the IMF to predict a shrinkage of 3.6 percent in Iran’s economy next year. Expectations of lower oil exports as a result of the US sanctions led the IMF to predict shrinkage of 3.6 percent in Iran’s economy next year. President Rouhani said in a televised speech, “No one can say sanctions don’t inflict a negative impact on the country’s economy and people’s lives, but no one can say that the US will achieve its objectives either. The US will definitely fail.”

Iran began selling crude oil to private companies for export in late October, just before the US sanctions came into effect. “Those who bought oil on the bourse have been able to export, and there have been no problems in this regard,” according to Oil Minister Zanganeh.

Syria/Iraq: Before the war, Syria produced 387,000 b/d of which 140,000 b/d were exported. Most of this oil came from Eastern Syria, which is now under the control of the U.S.-backed SDF. Government forces have regained control over much of Syria with the aid of Russian air support and Iranian ground forces. Only Idlib and the territories east of the Euphrates river remain out of the hands of President Assad’s regime. With the US planning an imminent withdrawal from Syria, things could soon shift again.

Iraq is making progress in negotiations with ExxonMobil and the China National Petroleum Corp for a multi-billion-dollar deal that is key to expanding the country’s oil production and export capacity. Talks over the “Southern Iraq Integrated Project” have been ongoing since at least 2015, but for the first time, officials on both sides are expressing optimism that a contract will be signed in 2019.

Iraq is willing to extend the OPEC+ oil production cut agreement in April, oil minister Thamir Ghadhban said on Sunday. Ghadhban said he agreed with the Saudi oil minister’s expectation that the decision would be renewed.

Exports from Iraq’s northern Kirkuk oilfields to the Turkish port of Ceyhan will stay at between 80-90,000 b/d as most of the crude produced is being diverted to refineries in the north, Iraq’s oil minister said last week. Current production at the Kirkuk oilfields is around 370,000 b/d. BP’s technical team is now in Kirkuk and is preparing a study for increasing production by the end of 2019.

Saudi Arabia: King Salman shook up the kingdom’s cabinet on Thursday, naming new ministers and security chiefs but keeping the levers of power firmly in the hands of his son and designated heir, Prince Mohammed bin Salman. Saudi officials didn’t respond to requests for comment. The moves show that the Saudi monarchy is rallying behind Prince Mohammed despite the widespread international criticism that followed the killing of journalist Jamal Khashoggi.

The recent drop in oil prices could have serious consequences for the Kingdom. After the decision in late 2014 to ramp up production in the midst of an oil supply glut mostly due to increased US shale oil production, prices dipped below the economically damaging $30 per barrel. The results were cataclysmic, with problems ranging from historically high budget deficits to being forced to institute politically unpopular austerity measures and holding its first international bond sale to raise funds. Whether the OPEC+ production cut will be enough to make the Riyadh solvent again remains to be seen.

China’s crude imports from Saudi Arabia rose to 1.596 million b/d in November, making the Saudis China’s largest crude supplier. Russia was in second place, supplying 1.593 million b/d of crude to China last month.

Libya: Despite crude output recently hitting a five-year high of 1.15 million b/d and expectations that production could average just over 1 million b/d next year, the critical risk of civil conflict is unlikely to fall anytime soon. Areas like the southwest of the country where the Sharara and El Feel oil fields are located remain particularly prone to outages caused by chronic fuel shortages and security problems. Last week, suicide attackers hit the headquarters of Libya’s foreign ministry in Tripoli, opening fire before blowing themselves up after killing three people and wounding six. (The health ministry confirmed one dead and nine wounded.) The three attackers were suspected to be Islamic State militants.

Libya’s National Oil Corporation chairman Mustafa Sanalla and the country’s internationally recognized Prime Minister Fayez al-Sarraj agreed last week to a new security plan to protect El Sharara oilfield, which is still closed. The plan includes establishing green zones inside the oil facilities to prevent anyone from entering without a permit. Until Libya can establish a national government with enough military power to control the numerous well-armed militias and “security guards” that have been running rampant since the end of the Gadhafi regime, these plans are likely to be ineffective, and oil production will continue to see a series of ups and downs.

3. China

Profits fell at China’s industrial concerns for the first time in nearly three years last month, the latest sign of an economic slowdown from weak consumption and lower infrastructure investment. Beijing announced last week its intention to enact new fiscal and monetary stimulus measures, in a bid to mitigate a weakening economy and the US threat to raise tariffs on $200 billion worth of exported goods to 25 percent. One Chinese economist noted that the trend toward slower credit growth would probably result in further deterioration of corporate profitability and economic fundamentals.

The slump in car sales is leaving China’s foreign automobile makers with idle factories. At a Ford plant, workers’ shifts have been reduced to a few days a month, according to employees. In recent years, China became the world’s biggest motor vehicle market, with sales often growing by double digits; in 2016, auto sales grew 14 percent to 28 million, eclipsing the US’s 17.5 million sales. Global automakers rushed in, despite rules requiring them to take on Chinese partners. Domestic auto companies proliferated, too, building plants of their own. China now has enough factories to build 43 million cars but will produce fewer than 29 million this year, according to consulting firm PwC.

Electric vehicles may make the situation worse. A government plan to make China the world leader in EVs is opening up floodgates of financing for domestic companies. At least 32 new car plants with a combined yearly capacity of more than 7.5 million vehicles—mostly electric—are in the pipeline, according to announcements made by 26 firms.

Chinese LNG imports soared by 48.5 percent in November 2018, compared to the same month last year, as China continues to have parts of the country switch to natural gas from coal for heating. LNG imports into China in the first eleven months of this year jumped by 43.6 percent compared to January-November 2017, to 47.52 million tons and on course to easily beat the full-year LNG import record of 38.13 million tons from 2017.

4. Russia

The state budget has received an additional $120 billion since Moscow’s cooperation deal with OPEC started two years ago, Russian Energy Minister Alexander Novak said last week. Discussing the initial and the latest deals between OPEC and the cartel’s Russia-led non-OPEC partners, Novak noted that although the specific price of oil is not as important for Russian companies as it is for other countries, low oil prices create additional challenges for Russia’s state budget.

One of the key reasons for Moscow’s relative immunity to higher oil prices is that the Russian currency is flexible, so it weakens when oil prices fall. That cushions the blow during a downturn, allowing Russian oil companies to pay expenses in weaker rubles while still taking in US dollars for oil sales. Second, tax payments for Russian oil companies are structured in such a way that their tax burden is lighter with lower oil prices.

Energy Minister Alexander Novak said on Tuesday that oil prices, which fell by more than a third this quarter, would become more stable in the first half of 2019. “I think that during the first half, due to joint efforts, which were confirmed by the OPEC and non-OPEC countries this December, the situation will be more stable, more balanced,”

5. Venezuela

Offshore oil discoveries since 2015 by an Exxon-led consortium, accounting for 5 billion barrels of crude, have turned Guyana into one of the Latin America’s hottest oil frontiers. However, the discovery of oil in Guyanese waters has resurfaced a century-old border controversy stemming from Venezuela’s claims of two-thirds of Guyana’s territory. Although the claims were settled years ago by an international court, the Maduro government seems intent on getting a share of the new oil finds.

A seismic-survey vessel owned by Norway’s Petroleum Geo-Services, and bearing a Bahamian flag, was stopped by a Venezuelan Navy ship in Guyanese waters, about 90 miles from a provisional border and told that they had no authorization to work in the area and that their permit from the Guyanese government was invalid in waters claimed by Caracas. The work of the vessel was briefly halted, but on Wednesday Exxon said its oil drilling and development activities offshore Guyana were unaffected by the weekend incident.

In exchange for modest loans and bailouts over the past decade, Russia now owns significant parts of at least five oil fields in Venezuela, which holds the world’s largest oil reserves, along with 30 years’ worth of future output from two Caribbean natural-gas fields. Venezuela also has signed over 49.9 percent of Citgo, its wholly owned company in the United States — including three Gulf Coast refineries and a countrywide web of pipelines — as collateral to Russia’s state-owned Rosneft for a reported $1.5 billion in desperately needed cash. Russian advisers are working inside the Venezuelan government, helping direct the course of President Nicolás Maduro’s attempts to escape from bankruptcy.

However, Venezuela may well turn out to be a money-loser for Russia. The IMF estimates that inflation could surpass 1 million percent by the end of 2018 and that its economy will suffer a third straight year of double-digit decline in gross domestic product. Oil production continues to fall.

6. The Briefs(selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)

World LNG growth: Uncontracted demand by the world’s seven largest liquefied natural gas buyers could increase four-fold to 80 million tons per annum by 2030, according to Wood Mackenzie. As China pushes on towards a lower-emission economy, its demand for gas and LNG has grown significantly; that trend should continue. (12/29)

Asian LNG boom: Since the start of December, LNG imports into China, Taiwan, Japan, and South Korea have reached 20.5 million tons, breaking the previous record of 19.5 million tons, set last January. Cold weather and China’s consistent gasification efforts drove the increase. (12/28)

In Australia, Royal Dutch Shell said on Wednesday it has begun output at its Prelude floating liquefied natural gas facility, the world’s largest floating production structure and the last of a wave of eight LNG projects built in the country over the last decade. Though the project started up later and cost more than originally estimated, it is expected to further cement Australia’s lead as the world’s biggest LNG exporter, after the country took the crown in November. (Dec 26)

Offshore Senegal and Mauritania, BP has made a final investment decision to move ahead with the first phase of the project to develop the Greater Tortue Ahmeyim gas field located in the shared ultradeep waters. The project involves extraction of the gas by a floating production storage platform that will ship the fuel to a floating liquefied natural gas facility near the shores of the Mauritania and Senegal maritime border. (12/25)

In Ghana, sixteen oil and gas firms have submitted applications for one or more of five offshore blocks in the West African country’s first exploration licensing round. The interest is a major vote of confidence in Ghana, which is keen to unlock more resources after it began pumping from its flagship offshore Jubilee field in 2010. (12/25)

Shell Argentina, which two months ago sold a refinery and fuel stations, said Thursday it will move to develop unconventional oil fields in the Vaca Muerta basin, aiming at 70,000 barrels of oil equivalent per day by 2025. The first phase of development will consist of drilling and infrastructure expansion to increase production and processing capacity. Argentina’s state-run YPF will also be investing as much as $30 billion over the next four years, with stated expectations of increasing daily production by 5 percent a year. (12/28)

In Mexico, the downward trend in output from Pemex continued in November as oil and gas production fell 2.7 percent and 2.3 percent respectively, from the previous month. November oil production fell by 47,500 b/d month on month to 1.71 million b/d. Year on year, production fell by 150,000 b/d. This was the lowest production level since 1980. (12/27)

Solving Canada’s conundrum: As the US oil industry reels from the collapsing oil prices, Canada’s oil business is seeing its oil prices rallying. How can that be? It is the result of strong political intervention in Alberta’s oil business in an attempt to save it from devastation. When the oil price differential between Western Canadian Select and West Texas Intermediate swelled to $52 a barrel in November, the impending devastation of the Canadian oil industry demanded swift and decisive action. Following an OPEC-like production cut, the oil price differential has shrunk to only $16.60 a barrel, in line with what existed last spring.

Between 2016 and 2018, Canada’s oil production grew by nearly 800,000 barrels a day, a 20 percent increase. The increased output, especially this year, contributed to ballooning of oil storage volumes. Today, Canada has roughly 35 million barrels of oil in storage, twice the normal volume. Without more export egress, Canadian wellhead prices fell as US shale oil output soared, cutting the need for more Canadian oil.

In May, Canada’s WSC sold at a $17.25 a barrel discount to WTI. By September, the differential had expanded to over $30.50, and in November it averaged $39.25. At times, the differential reached $52 a barrel, as wellhead prices fell to $11 a barrel. The Canadian Association of Petroleum Producers estimates that cost the Canadian economy $13 billion for the first 10 months of 2018. Daily cost estimates for the industry ranged upwards of $80 million a day – cash flow critical to the operation of companies and the health of the entire Canadian oil business. When oil prices failed to react to announcements about expanding rail movement of oil, Alberta Premier Rachel Notley embraced an 8.7 percent mandated production cut for the province’s producers. Oil prices soared in response, even though the cuts are not effective until January 1, 2019.

Western Canada is producing 365,000 b/d more crude oil than current pipeline capacity can handle, National Energy Board reported. As of September this year, Western Canada produced a daily average of 4.30 million barrels of crude, while pipeline capacity stood at 3.95 million barrels per day. Alberta, the largest oil producer in Canada, has turned to oil trains to offset the pipeline capacity shortage. (12/29)

The Canadian oil industry could be in for another turbulent year in 2019, depending on how some pivotal events pan out. Government-mandated production cuts and the potential startup of a key crude pipeline during the fourth quarter are among key developments to watch for next year. (12/28)

Canada’s oil and gas rigs for the week decreased by 61 rigs this week after losing over 50 rigs in the two weeks prior. Canada’s total oil and gas rig count is now just 70, which is 66 fewer rigs than this time last year, with a 43-rig decrease for oil rigs, and a 18-rig decrease for gas rigs for the week as Canada’s oil patch gears up for winter season. (12/29)

The US oil rig count grew by two to 885 while the gas rig count increased by one to 198, Baker Hughes reported. For the month the rig count fell by two, its first decline in six months. But for the quarter, the count was up 22, the fourth increase in a row. For the year the count was up 138. That compares with an increase of 222 rigs in 2017 and a decline of 11 rigs in 2016. (12/29)

Alaska’s upstream oil industry expects a surge in exploration and development in 2019 as companies drill to delineate new North Slope and National Petroleum Reserve-Alaska discoveries. But some are concerned that high-profile federal initiatives, like exploration in the Arctic National Wildlife Refuge and the opening of prospective parts of NPR-A, could get bogged down by increased opposition as Democrats gain a majority in the US House of Representatives. Alaska oil production is expected to increase in 2019 (to 529,000 b/d) and 2020 to (533,000 b/d) thanks to new North Slope oil discoveries being brought online, up from 505,000 this year. (12/29)

US LNG exports vs. imports: The US may be exporting natural gas at a record clip, but that hasn’t stopped it from accepting new imports. A tanker with fuel from Nigeria has berthed at Maryland’s Cove Point import terminal, while a second ship with Russian gas is idling outside Boston Harbor. Pipeline constraints, depleted stockpiles and a 98-year-old law barring foreign ships from moving goods between US ports is opening the way for liquefied natural gas to be shipped from overseas with prices expected to spike as the East Coast winter sets in. (12/29)

Free natgas? Shale drillers in the Permian Basin are producing vast amounts of natural gas as a byproduct of prospecting for oil. But there aren’t enough pipelines to take all the gas to market, causing some of it to become landlocked, and sending local prices into free fall. Gas prices in parts of the prolific region hovered near zero last month and some trades went negative, to as low as a negative 25 cents per million British thermal units. (12/27)

When refiners can make significant sums selling diesel and heating oil (distillates), they become less sensitive to the profitability of each barrel of gasoline, which typically accounts for about half of US oil use. Today, refiners are generating plenty of distillate and storing the gasoline. As a result, US gasoline inventories have climbed about 3 percent above their five-year seasonal average. If the gasoline overhang gets too large, it could push refiners to cut back on processing rates, reducing a key element of demand for crude and likely further weighing on US oil prices that have already fallen about 40 percent since early October. (12/24)

Exxon Mobil Corp., its stock price down about 20 percent for the year, is headed for its worst annual performance since 1981, when the U.S was in recession and a 20-year crude glut was just beginning. The decline comes as Exxon pursues one of the largest restructurings in its modern history, a seven-year, $200 billion push for oil in South America and natural gas in Mozambique and Papua New Guinea. (12/28)

Peak car? It is quite possible that we have reached Peak Car in North America and Europe. Companies that want to succeed in this new environment will need to be different, and especially better in some way. If car volumes drop by 30 per cent over the next 10 years, there better be something special about the car company that hopes to survive, let alone prosper —like better technology, better comfort or better service. (12/26)

US generation: Coal made up 29.6 percent of US electricity generation during the month, up from 27.1 percent in September and 28 percent last year. Natural gas made up 38.1 percent of US power generation in October, down from 40 percent in the previous month and 33.4 percent last year. Total US generation at utility-scale facilities was up 3.3 percent from the five-year average for the month, while year-to-date generation is up 4.3 percent compared with last year. Wind made up 6.5 percent of total US power generation in October, down 14.8 percent from last year, while utility-scale and distributed solar made up 2.3 percent of US generation, up from 2.1 percent last year. (12/27)

CO2 emissions from the US electric power sector have declined 28 percent since 2005 because of slower electricity demand growth and changes in the mix of fuels used to generate electricity, according to the US Energy Information Administration. EIA calculated that CO2 emissions from the electric power sector totaled 1,744 million metric tons in 2017, the lowest level since 1987. (12/24)

Weekly US coal production totaled 15.9 million tons in the week ended December 22, reaching the 2018 peak in weekly production unless the final week of the year tallies higher, data from the US EIA showed Thursday. (12/28)

Easing coal rules: The Trump administration announced on Friday a plan designed to make it easier for coal-fired power plants to release into the atmosphere more mercury and other pollutants linked to developmental disorders and respiratory illnesses. The limits on mercury, set in 2011, were the first federal standards to restrict some of the most hazardous pollutants emitted by coal plants and were considered one of former President Barack Obama’s signature environmental achievements. The vast majority of utility companies have said the proposed changes are now of little benefit to them, because they have already spent the billions of dollars needed to come into compliance and have urged the Trump administration to leave the mercury measure in place. (12/29)

Air pollution hits children hard: Researchers at Columbia University, with colleagues at Boston University and Abt Associates, have identified concentration-response (C-R) functions for a number of adverse health outcomes in children associated with air pollutants largely from fossil fuel combustion. The study organized the available scientific evidence on the effects of air pollution on children’s health. The paper is the first comprehensive review of the associations between various fossil fuel combustion pollutants and multiple health effects in children in the context of assessing the benefits of air pollution and climate change policies. (12/26)

[sumisu]

Thanks for your visit to the Peak Oil board, 222. Your arrival has motivated me to keep up with my posts. HowardHughs has been with me since the beginning.

You might be interested in #board-9881 titled SUSTAINABLE LIVING FOR CHALLENGING TIMES

If you have any questions, please contact me.

sumisu

[sumisu]

A Farm for the Future

https://vimeo.com/136857929?fbclid=IwAR1OwXsdTDNn6SNEYbYWqI9QgghyRvMTbghVh6cjN-G-_zFS0bWaN0H5xQY

[222]

Just thought l’d say - that’s an excellent post. Add to that, history doesn’t seem to be thought in schools anymore unless it has a political bias in favor of, on average, unionized teachers. We’re in trouble.

[sumisu]

Tax Cuts Or Not, Mexico’s Pemex Is Doomed

By Haley Zaremba - Feb 10, 2019, 4:00 PM CST



https://oilprice.com/Energy/Energy-General/Tax-Cuts-Or-Not-Mexicos-Pemex-Is-Doomed.html?fbclid=IwAR31KTZPyjTHMhkZ0dVxhXZ-H-HO4BPrj-0jEAu3iIriqfJtt4RUeLX6Nk8

[HowardHughs]

I hope you are keeping busy with things you enjoy more than the internet.This web thing isn't all we had hoped and in many ways it's made things worse.What are we doing to ourselves?We are training terrorists and aiding their recruiting.We are giving our children addiction conditioning and poor social skills.We are becoming more tribal and less tolerant to differences.We are getting drug induced pleasure from "likes" and responses to pictures and posts.We substituted book learning with articles and 10 min videos. LOL or WTF We have unlimited free porn and President Twitter.Markets can crash and wars get started with one tweet. Instability is the new normal and things can change in a fraction of a second.It seems we are on a high speed train that is out of control and rushing towards a wall.
I don't see this ending well.
Cheers

[sumisu]

Thanks, and I need to catch up on my postings.

[HowardHughs]

That is a great article.EOM

[sumisu]

Muscle Power

Posted on February 5, 2019 by energyskeptic

http://energyskeptic.com/2019/muscle-power/?fbclid=IwAR02bwFlLQRg5O0XHl6R2uvX6rRABol6ckhQFvMpsAK1qgEsiZGbU5sAZQk

[sumisu]

Peak Oil Review 26 December 2018

By Tom Whipple, originally published by Peak-Oil.org

https://www.resilience.org/stories/2018-12-26/peak-oil-review-26-december-2018-2/

Quote of the Week

[about proposed seismic testing off the east US coast] “Almost every single one of those states is pretty adamant about not wanting that activity off their shore. The administration is pushing through the industry agenda on expanded oil and gas leasing despite all evidence that other stakeholders have other viewpoints about the appropriateness and the scope of that activity.” Elizabeth Klein, deputy director, State Energy and Environmental Impact Center, NYU School of Law


1. Oil and the Global Economy

Oil prices fell by more than 11 percent last week to their lowest since mid-2017 with London futures closing at $53.82 and New York at $45.59. There is much debate as to whether the rapid fall in prices is due to oversupply or fears of a global economic recession slowing the demand for oil. Forecasts of rapidly growing US shale oil production next year that could offset much of the OPEC+ production cut and growing political chaos in Washington, London, Paris, and other world capitals is adding to concerns about the future.

While most financial institutions are forecasting lower oil prices next year, a few are looking for a price rebound to $70 or $80 a barrel as the OPEC+ production cut comes into effect. Add this to reports that the Saudis will cut more than expected, Venezuela continues to implode, Libyan production is down by a third, and given the selling price of crude, US shale oil production may not increase as much as government forecasters are predicting.

Outside of consumers happy with low gasoline prices, and the boost that low energy costs always give to industry’s bottom line, the major consequence of the 40 percent oil price decline is what it will do to US shale oil production in the coming year. Some observers are calling the situation a “bloodbath” for shale oil producers noting that at $45 a barrel or lower, nearly all the independent shale oil producers are losing a substantial amount on nearly every barrel they produce.

Some of this gloom can be mitigated by the increasing involvement of the major international oil companies such as Exxon and Chevron into production from the Permian Basin. These firms have multi-billion-dollar profits from their conventional oil operations and can afford to wait for the higher oil prices that are sure to come in the next decade. These firms have no need to convince investors to lend them more money by using dubious accounting procedures and are attracted by the speed at which shale oil wells can be brought into production, in contrast to the years and billions of dollars involved in deepwater offshore oil production which is about their only alternative these days.

In recent years, a handful of observers have begun expressing fears about what will happen to global diesel production. These concerns are based on the premise that as an ever-increasing share of global “oil” production is coming from unconventional sources such as shale oil and natural gas liquids which in general are not suited for producing diesel, the industrial fuel that keeps trucks, farm tractors, ships, some trains, and many automobiles running. Observing a decline in global diesel production is difficult because some refineries that have access to cheap natural gas can turn heavy oil into the lighter “middle distillates” such as diesel and jet fuel by breaking down longer molecules into shorter ones.

We are already seeing the spread between gasoline and diesel increasing. Last year at this time, diesel was retailing in the US for 39 cents a gallon more than gasoline. This year the spread is 60 cents a gallon. Should the assertion that global diesel production is already at or near a peak prove to be true, it has many implications for the future of economic growth and the need to make rapid changes in our energy consumption. For now, the data, except for the price spread, is not sufficient to reach a conclusion. In a few years, we should have a better idea as to whether diesel shows signs of peaking.

The OPEC Production Cut: The cartel plans to release a table detailing output cut quotas for its members and allies OPEC’s secretary-general said in a letter seen by Reuters on Thursday. OPEC had initially said it would not publish individual quotas; however, “In the interests of openness and transparency and to support market sentiment and confidence, it is vital to make these production adjustments publicly available,” OPEC Secretary-General Barkindo said in a letter to members. Barkindo said to reach the proposed cut of 1.2 million barrels per day, the effective reduction for member countries was 3.02 percent which is higher than the 2.5 percent initially discussed; however, Iran, Libya, and Venezuela are exempt from the cut. The Secretary-General also commended Saudi Arabia for pledging to cut its production to 10.2 million b/d starting in January, a deeper reduction than allocated.

US oil production in the most recent week was 11.6 million b/d. If production expands at the rate that the EIA has forecast, it will effectively swamp the 1.2 million b/d OPEC+ cut by the end of next year. This gloomy outlook for oil prices depends on how much US production increases. Some of EIA forecast is based on several long-awaited offshore projects that are due to start producing in the latter part of next year. While the 2014-15 price slump led to sharp declines in US shale oil production, large well financed international oil companies have a foothold in the US shale oil industry and are unlikely to stop drilling due to a temporary decline in prices.

US Shale Oil Production: During the past week, the financial press has been filled with stories about what the $30 price drop is going to do to the shale oil industry. The thrust of most stories is that shale oil drillers are making major cuts in the plans for their capital expenditures in the coming year. For nearly a decade, the costs of producing shale oil have been controversial. With the constant need to raise capital to replace rapidly depleting wells, drillers have a strong incentive to publicize break-even costs below the selling price of oil. As many observers have pointed out, this usually involves creative accounting in which many costs of producing shale oil are put aside, and attention is focusing on direct costs of producing from the best wells.

In the last few years, longer laterals and more fracking sand have been touted as leading to higher initial production, but most of these wells have not been in production long enough to tell whether they produce more oil by the end of their useful lives. Longer laterals and more sand increases the cost of these wells which may or may not be more profitable than early shale oil wells. Although industry consultants say that oil produced in parts of the Permian Basin currently costs from $32 to $47 to produce, we will have little idea if these are actual costs until financial statements appear later next year showing whether individual firms are making or losing money.

The EIA says that US shale oil production will increase by 113,000 b/d in December and 134,000 b/d in January. The Bakken is to increase production by 18,000 b/d next month; Eagle Ford by 19,000 b/d; the Permian by 73,000 b/d; Anadarko by 10,000 b/d and Niobrara by 10,000 b/d. We are already getting reports that production from North Dakota’s Bakken shale is expected to level off early next year, but local officials are still optimistic that peak output is still years away.

Exxon Mobil presence in the Permian has grown to become the most active driller in the Basin. The company’s increased presence in the Permian is a bet that it can drill wells so cheaply that they’ll be profitable. The company says its shale wells can make double-digit returns with oil at just $35 a barrel. Nearly all of the companies concentrating on shale oil drilling seem to be losing money at $45 a barrel. While Exxon can hide any losses in shale oil among its massive production of conventional oil, it will be interesting to see if it will be so efficient that it will make money where others have failed. Exxon is coming late to shale oil, and many of the best locations have already been drilled. Moreover, Exxon is subject to the same problems of moving oil to markets and shortages of workers and other infrastructure in the region. Exxon’s CEO Darren Woods, however, expects strong growth through 2025 when he’s expecting to produce much as 800,000 b/d from the Permian and the Bakken Basins.

2. The Middle East & North Africa

Iran: Iran’s revenues from crude and oil products grew by 55 percent between March and October compared to the same period of the previous year, according to data from the Central Bank of Iran. Between March and October, Iran’s oil revenues were helped by record exports in April and May, and later by high oil prices in the late summer and early fall.

After July, however, Iran’s oil exports started to drop as buyers were unwilling to commit amid uncertainties over whether anyone would be receiving a US waiver to continue importing oil from Iran. The US’s announced policy of driving Iranian oil exports down to ‘zero’ led to fears of a supply crunch, and oil prices shot up to four-year highs in early October. In October, however, crude oil exports from Iran to Asian countries—its biggest clients—sank to average 762,000 b/d, according to customs data and shipping reports. This was the lowest monthly average for Iranian crude oil exports to Asia in five years and a 56.4-percent decline on an annual basis. The US sanctions appear to have cut Iran’s crude exports by around 1 million b/d, but Tehran is still estimated to be exporting more than 1 million b/d.

Switzerland is close to launching an initiative to let companies sell food, medicine, and medical devices to Iran using a payments channel that would be the first such mechanism to win Washington’s approval. Berne’s humanitarian supplies plan comes as leading EU powers plan to set up a mechanism to finance broader trade with Tehran.

A court in Paris fined France’s Total $572,000 for having bribed public officials in 1997 in exchange for securing oil and gas contracts in Iran. Total has been accused of paying 30 million in bribes under the cover of a consultancy contract to obtain a deal to develop the gas field South Pars in Iran. In 2017, Total became the first major to have returned to do business in Iran after the earlier sanctions were lifted, with the multi-billion-dollar South Pars 11 gas development project. However, after the US withdrawal from the Iran nuclear deal this year, Total said in May that it would not continue to participate in the South Pars 11 gas project and would be out of Iran before November 2018.

Iraq: Iraqi Oil Minister Thamir announced last week that US’s Schlumberger Ltd will drill 40 wells in the giant Majnoon oilfield which currently produces some 240,000 b/d. In June, Royal Dutch Shell exited Majnoon and handed the field’s operations over to Basra Oil.

The Trump administration has granted Iraq a new, 90-day exemption from sanctions targeting Iran, enabling Baghdad to continue energy imports that account for about one-third of the country’s electricity supply. When the sanctions first came back into effect, on November 5th, the US granted a 45-day waiver that has now been extended by another 90 days.

Saudi Arabia: The kingdom’s crude oil exports jumped to a 22-month high of 7.70 million b/d in October, as the country increased shipments ahead of the return of the US sanctions on Iran. Exports in October rose by 268,000 b/d from September to the highest level since January 2017, when the initial OPEC/non-OPEC production cut deal began. Saudi Arabia’s crude oil exports in September had also increased from August – by 219,000 b/d to 7.43 million b/d. The high Saudi oil exports in September and October are believed to be a response to the US pledge to drive Iranian exports down to ‘zero,’ which oil traders interpreted as an imminent supply crunch.

After oil prices plummeted again last week amid fears of oversupply, Saudi Energy Minister al-Falih said that he expects global oil inventories to drop by the end of the first quarter next year and that we will achieve a balance between supply and demand in 2019.

King Salman announced that the Kingdom will spend 7 percent more next year, or around $295 billion. This breaks the record 2018 budget $261 billion and sparks concerns about the economy’s sustainability as the increase for next year includes a hefty bill for cost-of-living allowances introduced this year. The cost-of-living allowances were instituted at the start of this year to stimulate economic growth, but also to strengthen support for Crown Prince Mohammed whose policies have met with mixed reactions. It’s no coincidence that the allowances target public servants and military personnel, besides pensioners and the poorest segments of society.

After the kingdom announced the record government budget for 2019, analysts warned Saudi Arabia will require oil prices higher than $84 per barrel, some $30 above current world prices, to avoid running another deficit.

Libya: The National Oil Company (NOC) declared force majeure on operations at El Sharara oilfield last week, a week after the company declared force majeure on the field’s exports. The 315,000 b/d oilfield located in the south of the country was seized by a local militia group trying to get on the payroll as oilfield guards. This is a recurring theme in Libya, where many see seizing NOC facilities as an easy way to get the attention of weak governments.

The oilfield remained closed at the end of last week with the state oil firm NOC still resisting pressure from some officials to pay off the protesters which shut the field down. Prime Minister Fayez al-Sarraj flew to the oilfield last week to meet protesters who seized the southern facility and called the demands of the protestors legitimate. Preparations were being made to restart output, but conflict erupted between the government and NOC which wants to stop getting blackmailed by protesters, who occupy fields to demand cash and jobs.

3. China

Beijing will buy little or no crude from the US in the early weeks of 2019 despite a truce in a trade war between the two countries. This means that the US will continue to hold only a sliver of China’s market even as a wave of new refining capacity starts up there. It also suggests that China is unlikely to use crude purchases to help plug a widening trade gap with the United States, which remains a core source of tensions between the two.

Sinopec Economics & Development Research Institute expects China’s oil product exports to rise 9 percent year on year to 51 million tons in 2019, as an increase in domestic product supplies surpasses demand growth. The institute noted that “Oil product surplus will surge, and competition will be more intensive, as two greenfield independent refining and petrochemical firms will bring about 10 million tons of new oil product supplies to the domestic market, which will be much higher than the domestic demand growth of 6 million tons.”

China National Offshore Oil Corporation (CNOOC) has signed agreements for oil and gas exploration offshore China with nine international companies including oil majors Chevron, ConocoPhillips, Shell, Total, and Equinor. CNOOC and the nine companies will share development opportunities in areas located in the Pearl River Mouth Basin offshore China.

China is set to tighten its sulfur-limit restrictions for ships by extending the 0.5percent bunker fuel sulfur limit from the initially designated Emission Control Areas (ECAs) to the entire coastline. Given the rising concerns over environmental pollution, tightening sulfur-limit restrictions was to be expected. Meanwhile, rising coal imports may lead to higher coastal coal freights. Despite the restrictive measures taken by the government, China imported 271 million tons of coal in the first 11 months of 2018, up 9.3 percent over 2017.

4. Russia

Russian energy minister Novak expects his country’s crude oil output in 2019 to be around 555-556 million tons (11.145-11.165 million b/d) but said this figure could be revised downwards due to OPEC+ agreements to cut production. A lot will depend on Russia’s oil production policy after the first half of 2019. The new OPEC+ deal, under which Russia will be cutting 228,000 b/d, is for six months with an option to review in April. Russian oil companies will reduce their production by that amount during the first quarter of 2019. Novak said this reduction would be achieved during the first quarter as production has exceeded 11.42 million b/d so far in December.

Russia’s oil production has been on an uninterrupted upward trend, thanks to new oilfields coming onstream after 2008 when it declined amid a worldwide financial crisis and plunging oil prices. If production turns out to be around 11.15 million b/d next year, it will be the first decline in ten years.

5. Nigeria

An Italian judge said last week that international oil companies Eni and Royal Dutch Shell were fully aware that their purchase of a Nigerian oilfield in 2011 would result in corrupt payments to politicians and officials. The companies bought an offshore field for about $1.3 billion in a deal that spawned one of the industry’s largest corruption scandals. It is alleged that about $1.1 billion of the total went to agents and go-betweens.

France’s Total is set to begin exports from the new ultra-deep Egina oil field offshore Nigeria in February 2019, at an initial rate of just over 100,000 b/d. The Egina oil field is based on a subsea production system connected to a floating production, storage and offloading (FPSO) unit. The field’s production capacity is forecast at 200,000 b/d—around 10 percent of Nigeria’s total oil production. According to Bloomberg estimates, 200,000 b/d in exports will make Egina the fourth biggest Nigerian crude grade in terms of volumes. The international oil companies working in Nigeria are doing their best to move their operations offshore where they are relatively immune to theft and sabotage by militant groups. It has been about ten years since an offshore facility was attacked by militants.

6. Venezuela

Oil output is down from over 2.2 million b/d in January 2018 to some 1.1 million in November. That represents a fall of over 68 percent from the country’s peak production of almost 3.5 million b/d in 1998. Some believe that production is already below 1 million b/d.

President Maduro has replaced the official running PDVSA’s oil-production joint ventures, two people familiar with the matter said on Friday. Rafael Urdaneta, who became vice president of PDVSA, will be replaced by current oil ministry official Radames Gomez. Urdaneta, a former housing official, has been in frequent disputes with foreign partners over payment delays involving oil-for-loan pacts.

A group of investors is demanding the Venezuelan government pay off both the interest and principal of a defaulted $1.5 billion bond that won’t mature until 2034, escalating the battle between bondholders and President Nicolás Maduro’s administration. The group of five investment firms owns about $380 million worth of the sovereign debt that has been in default since January, according to S&P Global Ratings. The default, plus the size of the firms’ stake, gives the group the right to call for immediate payment, according to Mark Stancil, an attorney in Washington who represents the investors.

The investor group is the first to demand full payment of Venezuelan debt since the country began spiraling into widespread default late last year. US sanctions, a paucity of seizable assets, and the abundance of creditors have made investors reticent to push for payment, which will likely touch off complicated and costly legal battles.

7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)

Qatar Petroleum, the country’s state energy major, is looking to invest as much as $20 billion in LNG projects in the United States over the next few years. The investment is separate, apparently, from Qatar’s plans to boost its local production capacity from the current 77 million tons of LNG annually to 110 million tons by the early 2020s. (12/18)

Qatar Petroleum signed a deal with Italy’s Eni late Sunday to acquire a 35% stake in three offshore oilfields in Mexico, QP said in a statement. QP already holds some stakes in Area 1, as part of a Shell-Eni consortium participating in the exploration of five offshore blocks in the Perdido and Campeche basins. (12/17)

India imported 4.2 million b/d of crude oil in November, down 11.4 percent year on year. Crude imports were also down 19.4 percent from October. Analysts said the biggest decline in nearly four years was mainly due to lower overseas purchases by refiners after US sanctions on Iran, and also due to maintenance shutdowns by some refiners. (12/21)

In North Korea, coal gasification may have freed supplies of imported fuel for the military, among other uses, experts said. A fresh drive since 2016 to generate chemical products from coal was also designed to allow them to face down sanctions—in perpetuity if necessary. China, North Korea’s longtime ally, has provided technology and expertise for the coal-conversion efforts. (12/18)

Mexico’s Pemex will focus on existing shallow water assets and refining next year at the expense of riskier, deepwater projects under a new government that has vowed to turn around the ailing company. The 2019 budget blueprint presented on Saturday by officials of President Andres Manuel Lopez Obrador calls for some $23 billion in discretionary spending for the company known as Pemex, up about 14 percent from this year. (12/17)

Canada’s federal government will provide a $1.2-billion lifeline to Alberta’s energy industry, adding that most of the funds will be used for “job support.” The report comes on the heels of protests in Alberta against the lack of oil transport capacity that has seen the price of Canadian crude take a nosedive, hitting not just producers’ bottom lines but their workforce as well. (12/19)

In British Columbia, ExxonMobil has withdrawn its Canadian liquefied natural gas (LNG) export project WCC from an environmental impact review, effectively meaning that the plan has been shelved. The WCC LNG project, led by Exxon and also participated in by Imperial Oil Resources Ltd, withdraws from the Environmental Assessment process in British Columbia. (12/21)

The US oil rig count increased by nine to 883 while the gas rig count decreased by one to 197, Baker Hughes reported. This was a turnaround after three losses in a row in the three weeks prior. The total number of active oil and gas drilling rigs now stands at 1,080. (12/22)

GOM: Activity booms, first-ever production, and key sanctions are some of the factors leading to a grand year for the US Gulf of Mexico. The Gulf is on track to have a stellar 2019, with increases in drilling and merger and acquisition activity, new project sanctions and first-ever production from a Jurassic play. (12/21)

ANWR: The Coastal Plain of the Arctic National Wildlife Refuge has nearly 428,000 acres with high potential for petroleum resources, according to a draft environmental impact statement. A tax reform bill signed into law roughly a year ago by President Donald Trump requires Interior to hold at least two lease sales in ANWR by the end of 2024. These sales must both offer at least 400,000 acres of the “highest hydrocarbon potential lands” within the Coastal Plain and allow for 2,000 surface acres of federal land to be used for production and support facilities. (12/21)

East coast lockdown: Attorneys general from nine coastal states are intervening in a lawsuit aimed at blocking seismic surveys that could help pinpoint oil under Atlantic waters but also imperil whales and dolphins. The move brings the heft and resources of top state law enforcement officials to a fight over the future of oil and gas exploration along the US East Coast. (12/21)

Gasoline prices fell another 5 cents last week, to $2.37 per gallon, and the price drops that have been going on for about 10 weeks straight may continue at least to the end of the year, thanks to slowing demand and plentiful supplies. (12/19)

Inventories of ultra-low sulfur diesel on the US Gulf Coast hit a four-year low during the week ended December 14, EIA data showed Wednesday. USGC ULSD stocks plunged 1.37 million barrels to 30.23 million barrels last week. The last time they were reported lower was November 7, 2014, at 30.03 million barrels. The draw came on the back of USGC production rates falling 30,000 b/d to 2.76 million b/d. (12/20)

ExxonMobil Corp. is calling on the EPA to regulate emissions of methane from all new and existing oil and gas wells across the country. Exxon has two reasons to back such a regulation. First, it is facing pressure from investors and lawsuits over climate change. By calling for regulations, it’s an attempt to show Exxon wants gas to be as clean as possible, even if those regulations never happen. Second, as a massive global company, Exxon is positioned to benefit financially over smaller companies. It can easily afford pollution-control equipment that others have a harder time obtaining. (12/18)

Bunker fuel conundrum: When the International Maritime Organization announced it would introduce a new, lower sulfur emission ceiling for bunkering fuel, many in the energy industry worried that demand for high-sulfur fuel oil would suffer a blow from which it would not be able to recover. But by January 2020, when the new emission rules come into effect, the number of scrubbers both installed and ordered could reach nearly 2,300. And all these vessels will be producing sulfur acid-rich wastewater from the scrubbers and will need high-sulfur fuel. (12/18)

The Port of Houston has grown thanks to its hometown energy industry but has also recently invested hundreds of millions in new infrastructure to attract the potentially more lucrative larger container ships. Houston is the largest US port for energy exports, and exports of oil and byproducts such as natural-gas liquids are booming now that the US is pumping crude at a record of more than 11 million b/d. In contrast to the energy exports, some of the container ships are unloaded by the port, bringing it substantial revenues. (12/20)

US liquefied natural gas export capacity is on the brink of doubling in 2019, which will boost the super-cooled fuel’s influence on the US natural gas market, where volatility surged in 2018 after several years of slumber. LNG exports have been the fastest growing source of US natural gas demand since the country started ramping up exports in 2016 and are expected to expand deliveries in the coming years as several more export terminals enter service. Its imprint is being felt in the US gas futures market, which in November experienced its longest stretch of extreme volatility in nine years due to demand, low inventories and unseasonably cold US weather. (12/20)

Biofuels bypass: The US EPA granted oil major Exxon Mobil a financial hardship waiver this year temporarily freeing its Montana refinery from US biofuel laws, three sources familiar with the matter told Reuters. Exxon, which reported earnings of almost $20 billion in 2017, became the largest known company to be awarded a such a waiver by the Trump administration’s EPA under a program meant to protect the smallest fuel facilities from going bust. (12/20)

E-truck: Daimler Trucks North America has delivered the first vehicle in its Freightliner Electric Innovation Fleet—a Freightliner eM2—to Penske Truck Leasing, fulfilling its promise to put an electric commercial truck in customer’s hands in 2018. The Freightliner eM2 106 is intended for local distribution operations in the food sector and last-mile delivery services. The batteries of the new electric version provide 325 KwH for up to 480 hp. The range of the eM2 is around 230 miles. (12/21)

Global demand for coal, an energy source that has raised air quality concerns, is set to rise for the second year in a row in 2018 and will remain stable in the next five years. Declines in Europe and North America are offset by strong growth in India and Southeast Asia, according to a report from the IEA, which expects 0.2%/year growth over the next five years. (12/20)

The future of the nuclear power industry lies in China. The Chinese are presently building more nuclear electric power generating stations than any other country. This year, the Chinese will add three more nuclear power stations to their fleet bringing their total up to 40, while eighteen nuclear plants are also under construction. According to MIT estimates, the Chinese can erect a nuclear plant for half the cost of a plant here in the US. If so, what’s the problem? First, let’s put the numbers into perspective. Nuclear power accounts for about 4 percent of Chinese electric power production. (Nuclear accounts for about 20 percent of electric power generation in the US.) Solar and wind generation accounts for 7 percent of production in China and the renewable component has been growing far faster than nuclear. (12/20)

EDF Renewables North America said on Wednesday it had formed a joint venture with oil and gas firm Royal Dutch Shell’s new energies division to co-develop a lease area for offshore wind energy in New Jersey. The area, spread over 183,353 acres and located off the coast of Atlantic City, has the potential to produce about 2,500 megawatts of offshore wind energy. (12/20)

Climate team: A collection of US northeastern states already has a regional cap-and-trade program for major power plants. Now, the region is pursuing a similar approach for transportation, an ambitious and challenging endeavor, but one that is an outgrowth of frustration with inaction at the federal level. The aim of the Transportation and Climate Initiative, as the program is called, would be to reduce greenhouse gas emissions from cars and trucks while structuring the program in such a way that it leads to net economic and social benefits. (12/21)

[sumisu]

Ten Charts Show How the World is Progressing on Clean Energy

By Iain Staffell, originally published by Carbon Brief

December 21, 2018

https://www.resilience.org/stories/2018-12-21/ten-charts-show-how-the-world-is-progressing-on-clean-energy/

[sumisu]

Peak Diesel or no Peak Diesel? The Debate is Ongoing

By Antonio Turiel, Gail Tverberg, Ugo Bardi, originally published by Cassandra's legacy

December 19, 2018

https://www.resilience.org/stories/2018-12-19/peak-diesel-or-no-peak-diesel-the-debate-is-ongoing/

[sumisu]

Richard Heinberg on Our Bonus Decade

By Alex Wise, Richard Heinberg, originally published by Sea Change Radio

December 18, 2018

https://www.resilience.org/stories/2018-12-18/richard-heinberg-on-our-bonus-decade/

[sumisu]

Peak Oil Review 17 December 2018

By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org

https://www.resilience.org/stories/2018-12-17/peak-oil-review-17-december-2018/

Quote of the Week

“Last week’s meeting reminded us that the Big Three of oil – Russia, Saudi Arabia, and the United States – whose total liquids production now comprises about 40 percent of the global total, are the dominant players.” International Energy Agency (12/14)


1. Oil and the Global Economy

Oil prices were volatile last week trading inside a narrow range of about $1.50 a barrel and climbing or falling in response to the news of the day. Reports of the OPEC production freeze, the Iran sanctions, or production slowdowns in Libya and Venezuela push prices up while news of economic problems and falling equity markets tend to push prices down. At week’s end, New York futures settled at $51.20, about where they have been since the $7 a barrel price in mid-November. London futures closed $9 higher at $60.28 which is about they have been since November 22nd.

For the past three weeks, oil prices have been relatively steady. Fears of the reduction in oil supplies stemming from the Iranian sanctions have been abated for a while as the US has issued partial waivers. The OPEC+ production freeze will not take hold until next spring, and US shale oil output is still rising despite the $25 decline in prices during October and November. While there are signs that US shale oil production is starting to slow, this will not become apparent until later this winter. While oil prices are still $30 above the lows hit three years ago, a prolonged period of US prices hovering around $50 a barrel is likely to result in lower US oil production as it did 3-4 years ago.

The big unknown is the global economy. While the US has been doing well of late, likely due to the stimulus of tax cuts that took place earlier this year, the situation in Europe and China is not looking so good. There are numerous indications that China’s economy is slowing despite the glowing GNP numbers Beijing keeps publishing. This pullback is spooking the global equity markets as is the uncertainty about the effects of the already imposed and impending new US and Chinese tariffs. As we have seen so many times in the past, a significant economic recession is likely to reduce the demand for oil by so much that all the sanctions, production cuts, and local production outages the markets worry about today are likely to become minor issues in the determination of oil prices.

OPEC: Concerns are rising that the OPEC+ production freeze may not be as effective as thought. The announcement by Moscow that it would only cut production slowly starting with 50,000-60,000 b/d in January suggests that it may be many months before the effects are seen. The non-OPEC group is expected to reduce output by 400,000 b/d, but if Russia is only going to do its part gradually, the non-OPEC cuts might not reach the promised levels anytime soon. Because there are no country-specific allotments, it will be hard to hold any producer accountable. Even if OPEC+ were to adhere to its promised cuts, it still might not be enough. The fears that the global economy is faltering are growing, demand is showing signs of strain, and supply continues to rise. The EIA still expects significant production growth from US shale despite the downturn in prices.

The nature of the nearly 60-year-old cartel is changing as it becomes more involved in shifting world geopolitics. The recent meeting to initiate another production freeze to drive up prices shows that OPEC by itself can no longer be effective without help from Moscow and its associates in the former Soviet Union. Outside of the Saudis, Kuwait, the UAE, and the troubled Iran and Iraq, the rest of the coalition exports so little oil these days they are meaningless as world production hits 100 million b/d. Most of the world’s oil production now comes from Saudi Arabia, Russia, the US and the handful of countries associated with the big producers.

Given the nature of US and Canadian economic organization, they are unsuited to play the same role in regulating oil production as s do those countries with state-owned national oil companies. The developing Moscow-Riyadh duumvirate together control enough oil production to push up prices; however, it is doubtful that they can increase production enough to lower prices in a worldwide market that already consumes some 100 million barrels per day. The special relationship that the US has had with the Saudis since World War II is fracturing as the new crown prince is pursuing policies that are distasteful to the US and other Western nations. This situation, in turn, is driving the Saudis and the Russian closer as they have a common interest in oil prices and a similar approach to governing.

US Shale Oil Production: The industry press is still discussing the implications of the United States Geological Survey’s announcement that the Permian Basin contains 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas and 20 billion barrels of natural gas liquids. An important caveat in the announcement is that these figures represent technically recoverable resources. “Whether or not it is profitable to produce these resources has not been evaluated.” This is the issue of “sweet spots” and whether or not it costs more to drill, frack, and operate a well than the value of the oil or gas that is ultimately produced. In North Dakota and south Texas, drillers are already being forced to drill in less profitable locations. Given that all the “new technology” that is being touted by industry does not come for free and adds to the cost of each barrel produced, it may be sometime before the announcement of more oil being assessed as existing in the Permian is significant. Given that the world is currently consuming some 36 billion barrels of oil per year, the newly “found” oil would only cover a year’s consumption even if it can all be produced.

With oil prices back down to circa $50 a barrel in the US, several major oil companies have announced that they plan to increase their investment in shale oil. They do not have much choice if they plan to stay in the oil business. Offshore oil production is very expensive and takes many years of work before the oil begins to flow, while shale oil wells can be drilled quickly and can produce oil in a matter of months. Unlike the smaller producers, larger oil companies have incomes from conventional wells drilled years ago and do not risk bankruptcy if some newly drilled shale oil wells are not particularly profitable at first. These companies are banking on the efficiencies a larger company can bring to the shale oil business and on oil prices spiking to profitable levels in the next five years.

In the meantime, there are indications that US shale oil production is slowing and may even contract as it did three years ago. The US rig count continued to drop last week, and layoffs are in the offing for hundreds of oil and gas workers in Texas. While North Dakota’s oil output averaged over 1.39 million b/d in October, up nearly 32,600 b/d from September, the state government warned that a combination of low oil prices, limited gas capture infrastructure, and cold weather could slow future production. The state’s oil regulator said, “The signals I’m hearing from industry … they’re going to slow investment through the first quarter of next year.”

2. The Middle East & North Africa

Iran: The China National Petroleum Corp (CNCP) suspended investment in Iran’s South Pars natural gas project in response to US pressure last week. South Pars is the world’s largest gas field, and CNPC’s investment freeze is a blow to Tehran’s efforts to maintain financing for energy projects amid the re-imposition US sanctions. In August, CNPC company replaced France’s Total in the project for development of Phase 11 of South Pars Gas Field, increasing its stake in the deal to as much as 80 percent, with Iran holding the rest. Iranian officials said they would determine whether China’s CNPC has broken accords related to the development of South Pars.

The loss of Chinese involvement in the development of South Pars could be a major blow to Tehran’s plans to develop the world’s largest natural gas field and become a major exporter of natural gas to Europe and India.

Iran has set the official selling price of its light crude for its Asian buyers at 30 cents above the Oman/Dubai average for January, $1 lower than the previous month. Tehran has also cut prices for the other three crude grades it sells to Asia, keeping Iranian oil prices at the largest discounts in more than a decade against Saudi crude.

According to data released Wednesday by OPEC, citing secondary sources, Iranian crude oil production showed the biggest decline among members in November, as it fell by 380,000 b/d from October to 2.95 million b/d. India’s monthly oil imports from Iran plunged to their lowest in a year in November with Tehran dropping two places to become only the sixth biggest supplier after New Delhi cut purchases due to the US sanctions.

Japanese refiners plan to resume loadings of Iranian oil next month but won’t take the risk of loading cargoes beyond March amid doubts over whether Washington would extend the 180-day sanctions waiver.

Iraq: Iraqi oil exports in November fell by 80,000 b/d to 3.80 million. Increased exports through the Kurdistan region was offset by a fall in loadings from the Persian Gulf terminals due to bad weather. November crude production was only marginally lower, averaging 4.455 million b/d from 4.46 million b/d the previous month. With crude oil exports in November from Iraq’s Gulf terminals and Ceyhan falling to a seven-month low of 3.3372 million b/d, the latest data implies that exports by the Kurdistan Regional Government totaled 437,000 b/d in November up from 420,000 b/d the previous month.

Baghdad says total domestic consumption for power generation and refining was 646,000 b/d, compared with 571,000 b/d and 507,000 b/d in October and September respectively. With US pressure to stop importing Iranian natural gas to produce electric power, Baghdad is going to have to consume more crude domestically to keep the lights on.

Iraq has increased production at its southern Halfaya oilfield operated by PetroChina by 100,000 b/d to a total of 370,000 b/d. Production rose after the completion of a new oil processing facility. The new facility can process 200,000 b/d of crude oil and will help further boost output from Halfaya to reach 470,000 b/d. Iraq is one of the last places on earth with shallow, easy-to-produce conventional oil. This is the reason why major foreign oil companies have been able to increase Iraq’s oil production so rapidly in the last decade.

Saudi Arabia: Saudi Arabia’s oil minister Khalid Al-Falih said last week the kingdom produced 11.1 million b/d in November but should reduce production by 400,000 b/d in December amid lower demand and the production agreement. In December, the kingdom is expected to produce 10.7 million b/d, and then reduce its production by 500,000 b/d in January, to average 10.2 million, he said. The commitment is for Saudi Arabia to cut its production by 2.5 percent from its October levels, which would mean roughly 267,000 b/d. Demand in Saudi Arabia is dropping due to cooler weather, but Al-Falih also said international demand for its crude has been falling. The peak seen in mid-2018 was driven up by anticipation of the effect of sanctions on Iraqi production on the market, he said. Buyers ordered more Saudi crude to fill their inventories, and now are asking for fewer shipments as the US sanctions on Iran have been “relaxed.

A combination of the Khashoggi affair and the war in Yemen are starting to weigh on the Saudis’ position in the world. The Trump administration still is standing behind King Salman and his son; however, in a historic rebuke of the Trump administration’s Saudi policy, senators voted to end US support for the Yemen war, then unanimously held Saudi Arabia’s crown prince responsible for the murder of Jamal Khashoggi. While the Senate vote will change little, it is a harbinger of growing congressional unease with aspects of the U.S.-Saudi partnership, which Trump has made the pillar of his entire Middle East strategy, particularly with regard to confronting Iran. The discomfort will grow only more urgent next month when a new, Democratic-led House convenes.

For now, little seems likely to happen to the US-Saudi relationship or the power structure in Riyadh; however, as Western interest decreases in investing in the Saudis new economic initiatives, this could change. The recent drop in oil prices has put that Saudi government back into the red. Given that the Saudis and their Gulf Arab associates control a major part of world oil exports, any political disorders in the area are always a matter of concern.

Libya: Last Monday the National Oil Company (NOC) declared force majeure on exports from the 315,000 b/d El Sharara oilfield after it was seized ten days ago by a local militia group. The nearby El-Feel oilfield, which uses the same power supply as El Sharara, was still producing normally, a spokesman for the company said, without giving an output figure. The field usually pumps around 70,000 b/d. On Friday, the NOC announced that it is against paying a ransom to an armed group that has halted crude production at the oilfield. “Any attempt to pay a ransom to the armed militia which shut down El Sharara would set a dangerous precedent that would threaten the recovery of the Libyan economy.”

3. China

China’s crude imports averaged more than 10 million b/d for the first time in November, as they beat the previous record for highest crude imports set in October. Imports were up by 8.5 percent compared to November 2017 and surpassing the previous record of 9.61 million b/d, which was established in October 2018. Demand was driven by independent refiners who were rushing to fulfill their 2018 oil import quotas before they expire. In November, the independent refiners—the so-called teapots—continued to buy high volumes and some of them increased intake as they start trial runs at newly-built oil refineries. An independent refiner Hengli is planning trials at its new 400,000 b/d refinery at Dalian, in northeastern China.

Despite the increase in oil imports, a sharp slowdown in Chinese spending growth and manufacturing is adding to the gathering gloom for the international economy, sending financial markets lower around the world at the prospect of global loss of momentum. Retail sales grew at the slowest pace in 15 years in November, while factory output was the weakest in nearly three years, suggesting economic stimulus measures enacted by Beijing earlier this year have failed to reverse dwindling growth. Car sales have plunged 10 percent from last year and are down 14 percent in November from October. The housing market is stumbling. Some factories are letting workers off for the big Lunar New Year holiday two months early. Many economists say the slowdown is the worst since the global financial crisis a decade ago when Beijing was forced to plow trillions of dollars into its economy to keep growth from derailing.

The big question is what will happen next year, particularly in coastal areas dependent on exports to the United States. Many supply chains have been stockpiling with extra inventory so that American importers may need fewer goods in the months ahead. If any of this economic decline is due to the US administration’s trade war is unknown. Most believe the impact of the reciprocal tariffs has not yet been felt. One well-known factor is that the oil markets have become very sensitive to the ups and downs in the news about the Sino/US trade negotiations.

4. Russia

Russia will cut its liquids output by 50,000-60,000 b/d in January under the latest agreement with OPEC, Energy Minister Novak said Tuesday. Russia committed to reducing output step by step, as freezing winter temperatures in the country make a rapid reduction impractical. The minister did not elaborate on the plan for subsequent months, which is supposed to see Russia eventually reduce output by 228,000 b/d. Novak also said that the OPEC+ group of oil-producing countries maintains its target to keep global stocks at around the five-year average under the new deal, agreed last week in Vienna. Moscow’s immediate production cut is only a fraction of what the Saudis say they are cutting next month, but Russia’s demand for heating oil spikes in the winter, while the Saudis need for air conditioning plummets.

Talks about a possible asset swap deal between Royal Dutch Shell and Gazprom have been suspended, Kommersant business daily reported on Wednesday. The memorandum on the possible asset swap was signed in 2015 and was seen as a coup for Gazprom at a time when many Western companies were reducing their exposure to Russia because of Western sanctions over Moscow’s actions in Ukraine. Plans for the expansion of the Sakhalin-2 plant, which produces 11 million tons of liquefied natural gas per year, hinge on the outcome of the talks with the Sakhalin-1 consortium led by Exxon Mobil Corp and Rosneft about gas supplies.

5. Nigeria

Despite assurances that Nigeria is working to diversify its economy away from oil, the country continues to depend heavily on oil exports, and consequently, on oil prices, for revenues. The value of Nigeria’s crude oil exports in the third quarter accounted for 85.4 percent of the value of all exports. Other oil products accounted for 11.2 percent of Nigeria’s total exports, while non-oil products made up a mere 3.4 percent of the country’s exports in the third quarter.

Petroleum product Marketers and Depot Owners Associations gave the government yet another ultimatum the week before last, to redeem their long overdue balance for over N800bn for fuel, already sold at Government regulated retail price of N145/liter. The N800bn is the difference between government’s regulated price and the actual open market price that the retailers have to pay for their imported gasoline. The marketers are also demanding compensation for exchange rate differentials and relief from the extended burden of interest on their bank loans.

The open market price for gasoline in neighboring countries is presently between N305 – N360/liter while the government regulated retail price is N145/liter in Nigeria. This difference caused gasoline wholesalers and retailers to suffer an N800 billion loss in recent years. The much lower gasoline price in Nigeria has encouraged large-scale cross-border smuggling of Nigeria’s gasoline imports to neighboring nations such as the Republics of Benin, Togo, Cameroun, Niger, and Chad.

Minister of State for Petroleum Resource Kachikwu said that President Muhammadu Buhari-led government had not spent a dime on the country’s four refineries. More than N264 billion was spent on maintenance of the refineries by successive governments before the present administration but the refineries are in terrible condition, and the bulk of the country’s oil products must be imported. The minister said all the efforts made so far to fix the refineries have been to find private investors to collaborate with government to put these refineries in order and then save the government money. “What is important is that for the first time, the president had been able to say that he would repair the refineries without government money.”

For an oil exporting country of 191 million people, the lack of much refining capacity is ridiculous. The government is spending billions each year to import refined oil products and is leaving much of the costs of these imports on the back of the oil importing firms.

6. Venezuela

Following a three-day visit to Moscow two weeks ago and meetings with dozens of Russia’s top officials, President Maduro boasted of $6 billion worth of investment pledges and a string of other deals designed to help prop up its collapsing economy. Maduro said Moscow had pledged to invest $5 billion in joint ventures in the country’s oil sector, $1 billion in mining projects and to export 600,000 tons of wheat to Venezuela to cover its 2019 needs. He said that Russia had also agreed to modernize Venezuela’s armed forces and to look into potential projects in the country’s diamond industry.

However, following Maduro’s visit, Russian officials sought to damp expectations of any major financial support. “Quite obviously Rosneft would have made a statement and bragged about a deal of that size had it really happened,” a Rosneft official said. “Besides, the amount of investment in the joint oil projects Maduro named sounds suspiciously close to the amount in the existing deal.”

Several years ago, Rosneft lent $6 billion to PDVSA partly as pre-payment for crude. More than half of this debt remained outstanding as of the end of September. Last November Moscow agreed to restructure $3.15 billion worth of this debt after international rating agencies said the country had defaulted on $60 billion worth of obligations. In recent months there have been reports that Rosneft wants its money back as the amount of oil being shipped to Russia has dwindled.

A joint venture with a state-owned Chinese company, Sinovensa, accounting for around 10 percent of Venezuela’s oil output has nearly doubled production in the past seven months, PDVSA said last week. “They are managing to recover so-called ‘deferred output’ which they had lost due to issues like equipment theft,” said Antero Alvarado, Venezuela director at consultancy Gas Energy Latin America. “But this will have a short-term impact because output will fall again, and they will need to drill more wells.”

Venezuela told OEPC it produced 1.46 million b/d in November, up from 1.43 million in October. Data from secondary sources showed a decline to 1.1 million b/d in November, according to the OPEC report, published last Wednesday.

Canadian miner Crystallex has accused Venezuela of breaching a $1.4 billion settlement agreement as PDVSA continued to try and overturn a court order that allowed Crystallex to take control of the stock of Citgo’s parent company. Crystallex had already hired banks to organize a forced sale of Citgo stock in order to get its $1.4 billion, a lawyer for the Canadian mining company said, but the process has been suspended because Venezuela is appealing Crystallex’ accusation.

The issue is the ownership of Citgo. While Citgo is a unit of PDVSA, PDVSA is a state-owned company, according to a court ruling from earlier this year. The court’s decision was unique: government assets such as Citgo’s parent, PDVSA, are as a rule protected from lawsuits targeting a state. The judge said that Venezuela had blurred the lines between the government and the state oil firm, with a military official at the helm of PDVSA.

ConocoPhillips also won a case against Venezuela and earlier this year stepped up its efforts to obtain the money awarded by the courts by seizing PDVSA assets in the Caribbean. The strategy worked, and PDVSA coughed up US$345 million as the first part of a US$2-billion settlement.

7. Climate Change Conference

The rules that will govern the climate pact were approved on Saturday by the nearly 200 countries that signed the Paris agreement. The agreement passed over the weekend includes a universal system for measuring and reporting emissions, whereby all countries will abide by the same rules that will take effect in 2024. The rules will eliminate an earlier distinction between developed and developing countries over their commitments, but the final agreement failed to include provisions on a global carbon market mechanism.

Earlier in the week, objections from the US, Saudi Arabia, Russia and Kuwait over a recent scientific report from the Intergovernmental Panel on Climate Change sparked a heated debate that resulted in watered down language used to describe the study. The policy director at the Union of Concerned Scientists said that the deal was “a bit of a mixed bag”. “When you turn to climate ambition it is a fairly weak response to the clarion call from scientists just over two months ago.”

The major disagreement in the final hours of the meeting was over carbon markets — a provision for a global scheme that would allow countries to trade emissions reductions. The article related to this issue was largely deleted from the final agreement due to opposition from Brazil, with the carbon market discussion delayed to next year.

Absent leadership from Washington, the meeting did little to speed up the reduction in carbon emissions in response to the IPCC report. While several European governments are planning serious and expensive efforts to reduce carbon emissions, the major emitters, China, the US, India, and Russia, are doing little or nothing. It seems like the world’s climate will have to get far worse before people and their governments are ready to make major sacrifices.

(selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)

8. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)

The cut agreement: Last week, major oil producers meeting in Austria agreed to cut oil production by 1.2 million b/d. OPEC producers and non-OPEC oil exporting countries including Russia agreed last Friday to make the cut, which will be done during the first six months of 2019. (12/14)

War on diesels: Jürgen Resch is upending the German car industry— one court case at a time. The white-haired veteran of the country’s environmental movement is behind a sweeping legal campaign to uphold air quality by imposing driving bans in German cities. His main target: diesel cars made by the likes of Volkswagen, Daimler, and BMW. There is no dispute over his record: an unbroken string of courtroom victories, millions of furious vehicle owners and an industry reeling from reputational and financial blows, with potential losses running to billions of euros. (12/14)

EU car sales drop: Volkswagen, Renault, and Fiat Chrysler led an 8.1 percent decline in European car sales in November as the introduction of tougher new emissions tests continued to weigh on demand. Registrations fell to 1.16 million cars in the European Union and European Free Trade Association countries last month from 1.26 million in the year-earlier month. (12/14)

In Singapore, around $150 millions’ worth of oil was stolen from Shell’s biggest global refinery over four years, far more than the $10 million reported when police first revealed the heist earlier this year. Raids last January led to over a dozen arrests, including of several former employees of the local unit of Royal Dutch Shell. (12/14)

Australia overtook Qatar as the world’s largest exporter of liquefied natural gas (LNG) for the first time in November. The surge in Australian exports follows the start-up of many export projects in the country over the past three years, most recently the Ichthys start-up offshore its northern coast. In November, Australia loaded 6.5 million tons of LNG for exports while Qatar exported over 6.2 million tons. (12/10)

Off French Guyana, Total S.A. said Monday it dispatched a ship to begin drilling off the coast and assured it won’t damage coral reefs in the area. The move comes just days after Brazil denied it a license for work on its offshore portion, and despite warnings from environment protection organizations. (12/12)

In Mexico, new President Andrés Manuel López Obrador’s ultimatum to his country’s oil industry: pump more oil in three years. He has announced an ambitious $3.7bn cash injection to reverse cratering production at debt-laden national oil champion Pemex, as well as a goal to halt oil exports, become self-sufficient in fuel and build a new $8bn refinery. (12/15)

Mexico’s energy regulator on Tuesday canceled two oil field auctions scheduled for February after the new leftist government said it would not hand over more resources to private companies until they proved themselves as producers. (12/12)

Since Alberta Premier Rachel Notley announced an oil production cut of 325,000 b/d beginning next month, the spot price for Western Canadian Select has gained over 70 percent. The deep discount, at certain times more than US$40 a barrel, had closed by more than half over the last eight days since the cut was announced. (12/12)

In Canada, Suncor Energy said it expects average upstream production to rise 10 percent in 2019, even after implementing Alberta’s mandated output cuts. Alberta has mandated temporary output cuts of 325,000 b/d until excess crude in storage is drawn down. Suncor forecast average upstream production of 780,000 to 820,000 barrels of oil equivalent per day (boe/d), an increase from about 730,000 boe/d in 2018. (12/15)

The US dropped oil rigs for the second week in a row, according to weekly data compiled by Baker Hughes, a GE Company. After declining by ten oil rigs the previous week, the US dropped another four rigs last week, bringing the total oil rig count to 873. Gas rigs remained flat this week, with no rigs added or cut. (12/15)

US crude oil output growth was expected to slow slightly for this year compared with previous forecasts, the US EIA said, but at a record 10.88 million b/d, the nation will end 2018 as the world’s top producer. Output this year was forecast to rise by 1.53 million b/d. (12/12)

US net imports have averaged 3.1 million b/d in 2018 to date. Ten years ago, just ahead of the shale revolution, the figure was 11.1 million b/d., the IEA said. (12/12)

LNG boom: The US is poised to become a much bigger player in the global supply of LNG. Cheniere and Dominion Energy are both exporting LNG produced from shale gas, and three more developers are expected to have export terminals up and running next year in Texas, Louisiana, and Georgia. (12/12)

Gas pipeline: Dominion Energy has suspended construction on the full 600-mile route of the Atlantic Coast Pipeline, except for some ‘stand-down’ activities, after an appeals court stay last week. Dominion said its action to halt work on the natural gas project was in response to the 4th US Circuit Court of Appeals’ stay of implementation of the US Fish and Wildlife Service’s biological opinion and incidental take statement. Both documents relate to the project’s impact on vulnerable species. (12/10)

Oil rig batteries: Siemens last week announced the launch of the first hybrid power plant for offshore rigs combined with energy storage featuring lithium-ion batteries. The company first unveiled the Blue Vault power supply and storage system in May this year in yet another sign of its growing focus on energy storage at just the right time. In the case of Blue Vault, Siemens said the system could reduce a rig’s fuel consumption by 12 percent with carbon dioxide emissions down by 15 percent. (12/11)

Dealing re vehicle mpg: When the Trump administration laid out a plan this year that would eventually allow cars to be less efficient and emit more pollution, automakers, the obvious winners from the proposal, balked. The changes, they said, went too far even for them. But it turns out that there was a hidden beneficiary of the plan that was pushing for the changes all along: the nation’s oil industry. Marathon Petroleum, the country’s largest refiner, worked with powerful oil-industry groups and a conservative policy network financed by the billionaire industrialist Charles G. Koch to run a stealth campaign to roll back car emissions standards. (12/14)

CA pushes EV buses: California on Friday became the first state to mandate a full shift to electric buses on public transit routes, flexing its muscle as the nation’s leading environmental regulator and bringing battery-powered, heavy-duty vehicles a step closer to the mainstream. Starting in 2029, mass transit agencies in California will only be allowed to buy buses that are fully electric under a rule adopted by the state’s powerful clean air agency. (12/15)

German EV truck: A battery-powered eTruck from MAN will be used by Porsche for logistics in the Stuttgart area. The truck is an 18-ton semitrailer tractor that can haul 32 tons. Lithium-ion batteries with a storage capacity of 149 kWh allow the eTruck to cover a range of 130 kilometers (81 miles). The truck can be charged in 45 minutes to go an additional 100 km. (12/15)

Battery boom: Daimler will buy more than $23 billion of battery cells for electric drive vehicles by 2030. The suppliers are already producing battery cells in Asia and Europe and are continuing to expand in Europe and additionally in the US. Daimler currently has battery cell supply deals with SK Innovation, LG Chem and China’s Contemporary Amperex Technology.

China’s output of new energy vehicles rose to 173,000 units in November, up 18.5% year on year. Production of NEVs, which are purely electric and plug-in hybrid vehicles that use lithium-ion batteries, in November was up 36.9% month on month. Over January-November, NEV output totaled 1.05 million units, up 63.6% year on year. (12/12)

EV fast-charging: In Germany, the FastCharge research consortium has presented a prototype for a charging station with an output of up to 450 kW. The new charging station is suitable for electric models of all brands with the European standard Type 2 variant of the widely used Combined Charging System (CCS). A Porsche research vehicle with a net battery capacity of approximately 90 kWh achieved a charging capacity of more than 400 kW on the new charging station, allowing for charging times of less than 3 minutes for the first 100 km range. An innovative cooling system makes this possible by ensuring even gentle temperature control in the battery cells. (12/14)

TX wind record: The Electric Reliability Council of Texas set a new wind output record of 19.2 GW in late Thursday, as a storm system was moving into the area with high wind. High wind generation broke the previous all-time high of 17.9 GW set in mid-November and broke the record several hours in a row before topping out at 19.2 GW. At the time when the record was set, more than 51% of the total load was served by wind generation. (12/15)

Offshore wind bid: A US government auction for three wind leases off the coast of Massachusetts ended on Friday with record-setting bids totaling more than $400 million from European energy giants including Royal Dutch Shell Plc and Equinor ASA. The two-day sale attracted 11 bidders and lasted 32 rounds. (12/15)

China’s climate chief Xie Zhenhua has warned that the UN climate talks are “deadlocked” in certain areas, as ministers from around the world scramble to reach an agreement before the talks end this weekend. China has been thrust into the spotlight at this year’s UN climate talks in Katowice, Poland, amid a leadership vacuum created by the US, which has said it planned to withdraw from the Paris agreement. In unusually strong language, Mr. Xie said he was “disappointed” at the US withdrawal and urged the country to reclaim its place at the climate talks. (12/14)

Air pollution killer: A new animal study by a team at Ohio State University suggests that a parent’s exposure to dirty air before conception may result in cardiac dysfunction in adult male offspring. The open-access paper is published in the Journal of the American Heart Association. The study used an in vivo mouse model of preconception exposure to PM 2.5 to investigate the adverse cardiac effects on male offspring. (12/10)

[sumisu]

Peak Oil Review: 10 December 2018

By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org

https://www.resilience.org/stories/2018-12-10/peak-oil-review-10-december-2018/

Quote of the Week

“As a matter of our policy, we want to end all of those subsidies [for electric vehicles]. And by the way, other subsidies that were imposed during the Obama administration, we are ending, whether it’s for renewables and so forth…It’s just all going to end in the near future. I don’t know whether it will end in 2020 or 2021. Larry Kudlow, White House economic advisor


1. Oil and the Global Economy

Oil prices surged briefly on Friday after the announcement of a 1.2 million b/d OPEC+ production cut; however, by the close NY futures were up only $1.61 to close at $52.61, and London was up about the same to close at $61.67. The bulk of the cut is to come from the Saudis and their Gulf Arab allies. Moscow is to cut production by 228,000 b/d but does not expect its cuts to start until spring, and the Iranians were exempted from the cut. Despite the announcement, oil prices were still down slightly for the week.

Last week was marked by concerns that the OPEC+ coalition would be unable to agree on an adequate cut or even any cut at all. Prices fell almost 3 percent on Thursday after the first day of the OPEC meeting ended with only a tentative deal to tackle weak prices. Analysts had only been expecting a cut of 1 million b/d, so the extra 200,000 barrels came as a surprise and led to a price rally. The cuts are not to start until the first of the year, and even Russian Energy Minister Novak admitted that the markets would be oversupplied for the first half of the year.

Opinions are split over the efficacy of the production cut with some saying that a fully-implemented cut will clear the oversupply while others fear that growing US shale oil production will offset the cuts.

The state of the global economy is still of concern to many oil traders. With signs of an economic slowdown coming in Asia, Europe, and the US, a million b/d production cut may not be enough to offset a drop in the demand for oil products if the economic situation turns really sour.

The OPEC+ Production Cut: The story of last week’s OPEC meeting seems to be one of concessions on the part of the Saudis who are taking by far the largest share of the cut while giving in to demands for exemptions by Iran, Libya, and Venezuela. Moscow stated its opposition to a reduction several times in the last few weeks, but in the end, agreed to a slow starting cut of 228,000 b/d. The Saudis were under pressure from President Trump who kept tweeting his opposition to any production cut that might drive prices higher. The Khashoggi affair and anti-Saudi bills floating around the US Congress are yet another aspect of the pressures the Saudis are facing. Following the meeting, Saudi energy minister Khalid al-Falih tried to calm Washington by saying “We try to keep the market within a reasonable band for consumers.”

US Shale Oil Production: Unless the OPEC+ production cut results in a significant retracing of the nearly $25 a barrel drop in oil prices that has taken place in the past two months, next year may not be a good one for US shale oil producers. Oilfield service companies this year have been hit by a slowdown in demand as regional oil prices have fallen with transportation bottlenecks faced by producer customers.

Schlumberger expects sales in the US to drop 15 percent in the final three months of the year compared with the third quarter due to several factors including the swift decline in crude prices, exhausted exploration budgets, and maxed-out pipelines moving oil from the Permian Basin. “We are seeing a significantly larger drop in activity than we expected,” said Patrick Schorn, executive vice president of wells at Schlumberger.

The cost of producing shale oil vs. its selling price is still a major issue despite the boom in shale oil production. Despite boasts of low breakeven prices, many shale companies have failed to take a comprehensive look at the all-in expenses of producing oil. According to the Wall Street Journal and consulting firm R.S. Energy Group, accurate breakeven prices that incorporate costs such as land acquisition come out to about $51 per barrel in the Permian, $57 per barrel in the Eagle Ford, and $64 in the Bakken. Most of the oil and gas pipelines planned for 2019 and 2020 will connect the Permian Basin with consumers and export terminals in the Gulf of Mexico. Until those pipelines arrive, shale oil producers in the Permian basin will continue receiving $10 to $13 less for each barrel compared to WTI levels. With oil trading in the low $50s, it is evident that little money is being made to generate the dividends that will attract new investment for capital expansion.

Unless oil prices rise above $100 a barrel again and stay there, it is difficult to foresee a future in which the US shale oil industry continues to produce oil at the pace various government agencies are predicting.

A new US Geological Survey study estimates undiscovered, technically recoverable resources in Wolfcamp and Bone Spring Formations in Permian Basin are more than two times larger than the size determined in a 2016 study. The Wolfcamp shale and overlying Bone Spring Formation in the Permian Basin contain an estimated mean of 46.3 billion barrels of oil. In addition, the USGS analysis finds that the Wolfcamp holds 281 trillion cubic feet of natural gas and 20 billion barrels of natural gas liquids. The Geologic Survey says that the higher estimate of recoverable oil comes from recent innovations in hydraulic fracking.

The new report was hailed by the Secretary of the Interior as proof that “American energy dominance is now within our grasp as a nation.” The CEO of the API commented that “Now the world’s largest producer of natural gas and oil, the United States is a global energy leader at the same time we are driving down GHG emissions.”

2. The Middle East & North Africa

Iran: Tehran was spared the pain of cutting production under the new OPEC agreement ostensibly because of the US sanctions. Given the problems facing Iran’s oil production under US sanctions in the coming year the 2.5 percent cut that was applied to most OPEC members likely will turn out to be insignificant.

Iran hopes that the special purpose vehicle that would allow the European Union to continue buying Iranian oil despite the US sanctions will become operational by the end of the year. The “special purpose vehicle” is to act as a cut out for European buyers of Iranian oil, allowing the EU refiners to buy oil with Iran without having to pay Iran directly.

Although Iraq would like to take over a large share of Iran’s oil exports, Baghdad’s overwhelming dependence on Iranian natural gas for its power stations gives Tehran considerable leverage. Last summer, when Baghdad was late with payments for the Iranian gas, Tehran turned off the flow, which led to power outages, which, in turn, ignited the protests that shook southern Iraq.

Iranian President Rouhani yet again threatened to close the Strait of Hormuz, which affects some one-third of all global oil shipping as it’s a key transit choke point in the Persian Gulf. On Tuesday Iranian state broadcasts carried his words, saying “if someday, the United States decides to block Iran’s oil (exports), no oil will be exported from the Persian Gulf.” He further vowed that the United States would not be able to prevent Iran from exporting its crude.

Iraq: Oil revenues fell steeply in November, as exports fell by an average 85,000 b/d. Even the resumption of Kirkuk oil sales via Turkey was not enough to offset southern export disruptions and sinking oil prices. For the first time in more than a year, Baghdad exported oil northward to Turkey’s Kirikkale refinery. But those gains were more than offset by a 3 percent drop in exports via the Basra Gulf, from 3.47 million b/d in October to 3.36 million b/d in November.

Improvised explosive devices were found in the vicinity of two oil fields in southern Iraq last week, as renewed protests over a lack of jobs and services continued. There were no casualties or operational interruptions at any of the impacted fields.

Saudi Arabia: At the end of the OPEC meeting last week Saudi Energy Minister Falih said Saudi Arabia’s oil production would fall to 10.2 million b/d in January, down from 10.7 million b/d in December as it takes the largest reduction as part of the1.2 million b/d production cut agreement. A 500,000 b/d cut would be about 60 percent of OPEC’s share of the cut leaving the other Gulf oil producers and Nigeria to cut most of the remaining 300,000 b/d. Iran, Libya, and Venezuela are exempt from the cuts.

Members of the Organization of the Petroleum Exporting Countries are upset over the close ties between Saudi Arabia and Russia as the group looks to cut output to offset falling crude prices. OPEC delegates say they are growing increasingly concerned that Saudi Arabia is giving nonmember Russia too much leverage over prices, OPEC officials are saying. Many cartel members, including Venezuela, Algeria, Kuwait, and Nigeria, feel sidelined as the bond between the world’s two largest oil exporters strengthens and together, they make the decisions affecting all of OPEC’s members.

Libya: Tripoli’s oil production has fallen by about 300,000 b/d since the start of this month due to the closure of export terminal amid harsh weather and full storage tanks. Libya has been suffering severe rainfall that closed all its oil export terminals along with roads. Flooding and high waves on the coast made the docking of tankers impossible, stranding more oil in storage.

3. China

China’s imports of crude oil hit a new monthly high of 10.43 million b/d in November, beating the record set in October of 9.61 million on heavy buying from private refiners and startup of new mega-refineries. For the first 11 months, China imported 418.11 million tons of foreign crude oil, or 9.17 million b/d, putting it on track to make this year a record high for imports. Chinese oil imports from Iran are expected to rebound this month from the lows of October and November as China’s state-held companies have already started to use US waivers to continue importing Iranian oil.

China’s consumption of oil products rose 4.1 percent year on year to 28.13 million tons in October, according to data released by the National Development and Reform Commission. The growth was mainly led by gasoline consumption, which rose 11.1 percent year over year, while gasoil consumption fell 2.2 percent over the same period. Over January-October period, China’s oil product consumption was up 5.3 percent on year, with consumption of gasoline rising 6.9 percent and gasoil rising 3.1 percent. The oil product consumption growth in the first ten months was slower than the 6.8 percent year-on-year increase seen in the same period of last year.

A number of the concessions that officials in Washington claimed to have secured from the Chinese president were either unsupported by any official confirmation from the Chinese side or were mired in confusion. Doubts about the solidity of the deal rose when it was announced that Robert Lighthizer, the US trade representative who is considered to be a hardliner on China, would be leading the upcoming talks. However, Unipec, the trading arm of Sinopec, plans to resume imports of US crude oil during the 90-day trade truce window, as the tentative halt to additional tariffs and lower oil prices are making American oil attractive again.

Although crude is not on China’s tariff list, Chinese buyers have been staying away from US crude oil purchases since the summer, when the trade war escalated. According to the EIA, the US didn’t export any crude oil to China in August and in September, compared to 384,000 b/d in July and a record-high 510,000 b/d in June.

4. Russia

Russian oil production was 11.37 million b/d in November, down from the post-Soviet record high of 11.41 million in October, accord to data released by the Energy Ministry last week. At the OPEC meeting last weekend, Russia agreed to accept a 2 percent cut based on the October high of 11.4 million b/d. This equates to a reduction of 228,000 b/d. Moscow said it would reach this commitment gradually due to winter demand and technical conditions.

The seizure by Russian forces of three Ukrainian vessels and their crews in the Kerch Strait at the entrance to the Sea of Azov has turned a harsh spotlight on the Nord Stream 2 gas pipeline project. Some European lawmakers suggested curtailing the project to punish Moscow for its seizure of Ukrainian ships. However, Berlin’s foreign minister said last week that Germany would not withdraw its support for the Nord Stream 2 gas pipeline project.

Nord Stream 2 has been contentious since its inception in 2015 because it would deprive Ukraine of most of the estimated $2 billion it earns annually in gas transit fees. It is opposed by the US, while most of eastern Europe is also against it. Concern has also been expressed by France, the UK, Sweden, and Canada. Last month lawmakers in the German and European parliaments signed a letter to Angela Merkel asking her to stop the pipeline. Last week, all three candidates to replace Merkel as leader of her Christian Democratic party spoke out against the pipeline.

5. Venezuela

Russia will invest $5 billion to raise Venezuela’s oil production by 1 million b/d under a new economic agreement, Venezuelan President Maduro said last Thursday. The deals would involve joint ventures between Venezuela’s state-owned company PDVSA and its Russian partners in Venezuela, although Maduro did not specify which companies would be involved. Maduro also said Russia would supply 600,000 tons of wheat to Venezuela in 2019 and signed mining contracts, including a $1 billion investment for the production of gold. Observers are skeptical that $5 billion will go very far in healing Venezuela’s oil production problems which include the lack of diluent for its heavy oil, unreliable power, human resources, and the lack of sufficient cash flow.

White House officials are urging Trump to hit Venezuela with sanctions that could further cripple its state-owned oil company PDVSA. The 30 percent decline in crude prices over the last two months could embolden the president. Trump had avoided sanctions on Venezuela’s oil sector for fear of causing a price spike. For now, it appears that the US is still reluctant to do anything that would contribute to higher oil prices. In September, the US imported 650,000 b/d of Venezuelan crude.

Venezuelan officials are traveling to London with plans to meet with the Bank of England over the repatriation of $550 million in gold held in the bank’s vaults. The Maduro government wants gold back to Venezuela because of fears it could be caught up in international sanctions on the country and seized to satisfy a court judgment.

Venezuela’s President Maduro said that Venezuela would put in place in 2019 a program to sell all its oil production in the Petro cryptocurrency, which the leader is touting as the first state-backed oil-backed digital currency. According to Maduro, Venezuela will free itself from the dollar which used by Washington “to create economic pain” to other countries, and to “persecute countries, as it does with Venezuela, Cuba, Iran, and Russia.” The Petro, however, is seen by analysts and experts as nothing but a scam and another effort by Venezuela to skirt sanctions and mask the inability to overhaul its economy.

6. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)

In the Netherlands, gas production at the earthquake-prone Groningen field will drop by at least 75 percent in the next five years, ahead of schedule towards the projected end of extraction. The Dutch government decided this year to shut down in 2030 what was once Europe’s largest natural gas field because decades of extraction had caused dozens of earthquakes each year, damaging thousands of homes and buildings. (12/4)

France’s cancellation of the fuel tax increases this week in the aftermath of increasingly violent protests signaled the perils and political headwinds that governments worldwide may face as they try to wean their citizens from fossil fuels. The French government’s tax increase, written into law before President Emmanuel Macron was elected, proved a tipping point for hard-pressed families already laboring under some of Europe’s highest overall tax burdens. (12/7)

In Azerbaijan: Exxon Mobil and Chevron are seeking to sell their stakes in that nation’s largest oilfield, marking the retreat of the US majors from the former Soviet state after 25 years as they re-focus on domestic production. (12/5)

From Australia, exports of LNG from the east coast during November were the second highest since shipments began at the beginning of 2015 as volumes to China set a record. (12/6)

Argentina’s state oil and gas company YPF and Malaysian Petronas will invest jointly $2.3 billion in an oil production project in the Vaca Muerta shale play, one of the largest in the world. The project envisages daily production of 60,000 barrels of crude oil and gas, to be reached by 2022. The two companies have already spent $550 million on exploration in the La Amarga Chica area and have achieved production at a daily rate of 9,800 boe. (12/6)

Offshore Cuba, Australia’s Melbana oil exploration company, which has rights in an area known as block 9, will now also work to enhance production from the separate Santa Cruz offshore field, which has been producing oil for over a decade. Cuban production of crude oil in 2017 was about 50,000 b/d. Its consumption was about 172,000 b/d in 2015, which means it is dependent mostly on imports with Venezuela playing a key role. (12/6)

If Mexico halts auctions for two years as President Andres Manuel Lopez Obrador plans, its crude output will only reach 2.46 million b/d by 2027, not 3.07 million b/d, the previous administration said in a transition report. (12/5)

In Alberta last week, with the market saturated and prices depressed, the premier announced that her government would temporarily curtail the province’s oil production, chiefly from the tar sands. There isn’t enough pipeline capacity to ship the crude to market. New oil sands projects that were planned years ago have continued to come online over the past year, boosting production. Those projects were launched with the expectation that new pipelines would be completed by now. But most of the major pipeline proposals have been either delayed or canceled. The result has been a glut of oil filling storage tanks in Canada. (12/7)

In Canada, the pipeline shortage that has been strangling the oil industry is weighing on spending plans for next year, with Canadian Natural Resources slashing its capital budget for 2019 by $750 million, due to the lack of shipping options. (12/6)

Canada’s central bank plans to hold special, targeted meetings with members of Canada’s energy industry to discuss how the situation will affect their plans for investment and determine whether layoffs are a possibility. (12/7)

The US oil rig count declined by ten last week to 877, the biggest such cut since May 2016, according to Baker Hughes. The number of gas rigs increased by nine to 198, making a total rig count of 1075. Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,029. That keeps the total count for 2018 on track to be the highest since 2014. Canada’s oil and gas rigs for the week decreased by 17 rigs this week after losing five rigs last week, bringing its total oil and gas rig count to 186, which is 33 fewer rigs than this time last year. (12/8)

US oil exports: The Louisiana Offshore Oil Port (LOOP) is pushing out the most oil it’s shipped in any one month since the terminal began supertanker exports in February—three Very Large Crude Carriers carrying 6 million barrels of oil overseas. LOOP’s ability to handle VLCCs could help the US exceed 3 million barrels a day by this time next year. The dramatic rise in LOOP exports this month could be a fluke caused by fewer incoming tankers. (12/8)

Oil exports #2: The US became a net oil exporter last week for the first time in 75 years, and even if it is likely to be for just one week, the achievement highlights the increasing global influence of the soaring US crude oil production. (12/7)

Pipeline boom: Globally, the US ranks no. 1 in pipelines planned and under construction. Most of the oil and gas pipelines planned for 2019 and 2020 will connect the Permian Basin with consumers and export terminals in the Gulf of Mexico. Until those pipelines arrive, shale oil producers in the Permian basin will continue receiving $10 to $13 less for each barrel compared to WTI levels. (12/6)

The NYMEX January natural gas futures contract jumped 16.1 cents to settle at $4.48/MMBtu Friday as current and upcoming weather trumped a storage withdrawal that was largely in line with the five-year average. (12/8)

New chemical hub: Royal Dutch Shell gave the green light to a massive $6 billion ethane cracker facility just outside of Pittsburgh, one of numerous planned petrochemical facilities for the region. Taken together, the chemical and petrochemical boom could turn Appalachia—a region exporting inexpensive natural gas—into a new “hub” of sorts of plastics and other petrochemical products. The federal government is hoping to egg this on. The Department of Energy just published a report for the US Congress trumpeting the case for a new petrochemical hub. (12/7)

The Trump administration published documents last week detailing its plan to roll back Obama-era protections for the vast habitat of the greater sage grouse, a chicken-like bird that roams across nearly 11 million acres in 10 oil-rich Western states. (12/7)

Biofuels downside: Biodiversity conservationists have revealed that at least ten percent more land than what is currently being used to grow green crops will be required to successfully replace fossil fuels with alternatives derived from natural sources such as biofuel. The increase in the need for land for energy-related uses could undermine natural habitats across the world. Some scientists also argue that there is not enough marginal land left to grow enough biofuels to replace fossil fuels significantly. (12/7)

Nukes in Argentina? Russia signed a new nuclear cooperation agreement with Argentina, which is already negotiating with China about building nuclear reactors. The deal is not a contract to build nuclear reactors, but a framework agreement like ones Russia has signed with many countries. (12/5)

Killing EV/RE subsidies: White House economic adviser Larry Kudlow said on Monday the US will end subsidies for electric cars and other items including renewable energy sources. Kudlow said he expected subsidies for buying electric cars will end in 2020 or 2021. (12/5)

In Georgia, South Korea-based SK Innovation, a developer of lithium-ion batteries for electric vehicles, will invest $1.67 billion to build a new electric vehicle (EV) battery manufacturing plant. (12/5)

E-buses, taxis, and trucks: Some Chinese automakers have emphasized commercial EV development because they hope an early lead in the segment could eventually translate into success in the larger passenger market—and having almost no foreign competition at home for commercial EVs has helped them build early momentum. (12/3)

Electric aircraft: Amprius, Inc., a manufacturer and developer of high energy and high capacity lithium-ion batteries, announced that the company is supplying advanced lithium-ion cells to the Airbus Defense and Space Zephyr Program. Using Amprius’ cells, which contain a 100% silicon anode, the unmanned Zephyr S flew more than 25 days, setting a new endurance and altitude record for stratospheric flight. (12/6)

The world’s greenhouse gas emissions are rising at a faster pace in 2018 than they did last year, the latest evidence that planet-warming pollution is proliferating again after a three-year lull in the middle of the decade. (12/6)

Global carbon dioxide emissions are accelerating at their fastest pace in seven years and hit a record high in 2018, despite pledges by nearly 200 countries to limit global warming to well below 2C. Carbon emissions rose 2.7 percent in 2018 mainly due to emissions growth in China, India and the US. The data come as the annual UN climate talks are underway in Katowice, Poland. (12/6)

Royal Dutch Shell will set carbon emissions targets next year and link these to executive pay, reversing its chief executive’s opposition and following intense pressure from shareholders who want fossil fuel companies to take greater responsibility for their contribution to global warming. Investors such as the Church of England and Robeco have pushed Shell to make firm commitments to cut its carbon footprint, saying last year’s announcement of a long-term “ambition” to halve carbon emissions by 2050 did not go far enough. (12/3)

[sumisu]

Peak Oil Review 3 December 2018

By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org

https://www.resilience.org/stories/2018-12-03/peak-oil-review-3-december-2018/

Quote of the Week

“Total US oil reserves in 2017 exceeded a … 47-year-old record, highlighting the importance of crude oil development in shales and low permeability plays, mainly in the Southwest.” US EIA


1. Oil and the Global Economy

US oil production continued to climb in September with oil companies producing a record 11.47 million b/d, 1.98 million b/d higher than in September 2017 (it takes two months to get reliable numbers accumulated). This rapid growth is raising concerns around the world about overproduction. Coupled with slower economic growth in China and Europe, the surge in production has resulted in a $25 a barrel decline in world oil prices during the last two months. New York futures closed at $50.93 on Friday and London closed at $59.46.

With gasoline prices down by 30 cents a gallon and approaching $2 in some states, President Trump is calling for even lower prices, calling the rapid price decline “a big Tax Cut for America and the World.” If many shale oil drillers were unable to make a profit with oil at $75 a barrel, then they certainly won’t with $50 oil. The same holds true on the international market where $60 oil is well below what many exporters need to sustain their national budgets.

With US oil production doubling since 2008, America’s economy has received a substantial economic boost with the opening of new export markets for US-produced oil and gas. With the help of the additional boost from the recent tax cut, the US economy has been doing well of late, but there are signs that this may be coming to an end.

For the immediate future, much depends on what the OPEC-Russia coalition decides this week. If they can make real production cuts sufficient to reverse the increase in world crude inventories, and force prices higher, then we could see the oil industry continue to grow. However, it was only four years ago when an oil price slide sent crude down from $110 a barrel to $30. This drop in prices led to a reduction of employment in the US oil industry by more than 160,000 workers, bankrupted hundreds of small drillers, and caused problems for the firms supporting the oil industry.

Even though most expect OPEC to cut output this week, a recent Reuters poll shows oil analysts are increasingly pessimistic about the prospect of a price rally next year, when the outlook for demand is uncertain, and supply is growing rapidly.

When the price of crude oil goes through one of its periodic downturns, as it is doing now, it sends a shiver through the oil industry. History promises that higher prices will return. Until then, US shale companies are under severe pressure, and big oil companies wonder about the viability of new projects. There is more to worry them this time: not just the 29 percent fall in the price of Brent crude but the fear of this bear market enduring.

The OPEC Production Cut: Many observers are saying that decisions reached at the G20 meeting held over the weekend will be more important than what is decided at the OPEC meeting in Vienna on Dec. 6-7. The Saudis are facing a major decision: cut oil production and enrage Donald Trump who is helping them weather the Khashoggi crisis or keep pumping and risk ultra-low prices that will do great harm to their economy. Moscow is becoming convinced it needs to reduce oil output along with OPEC but is still bargaining with Saudi Arabia over the size and the timing of any cut.

Many analysts expect this week’s meeting to culminate with an official statement that leaves the market uncertain over just how many barrels OPEC intends to take off the market. That could result in a repeat of OPEC’s June meeting. With oil prices rising rapidly, the group agreed to reverse course and increase output but offered nothing about the size of the cut. This situation left the markets to wait for evidence as to what was going on with oil production

The OPEC/non-OPEC coalition may be counting on increasing troubles in the US shale industry to tamp down the rhetoric from US President Trump, who warned Saudi Arabia and OPEC several times to keep oil prices low to benefit the US. Costs of producing conventional oil in the major oil-exporting nations are generally believed to be well below costs of producing fracked shale oil.

US Shale Oil Production: Despite much bravado from the industry, there is little doubt that prices below $60/b are hurting US shale producers and potentially strengthening OPEC’s hand to introduce tighter quotas. Many US shale companies are already below their breakeven prices for production, with looming pipeline takeaway constraints in both the key Permian and Bakken regions. Many have hedged their exposure for this year in the $55-$60/b range but weakening prices in 2019 remain a significant threat. Meanwhile, crude inventories in the US keep rising, with the US Energy Information Administration reporting last week that there was a 10th consecutive weekly build in crude inventories.

Analysts are saying that many shale oil companies will likely cut spending budgets next year for the first time since the last price crash as crude spirals down again. West Texas Intermediate is now selling just above $50 a barrel, down from averaging almost $67 this year through September. This is the minimum price most big shale companies plan their growth around. Some companies will sacrifice production growth to keep a lid on expenditures, according to Wood Mackenzie Ltd. “Something has to give.”

While surging oil production in the Permian basin has helped crash oil prices, however, natural gas production is growing so fast that drillers are trying to give it away — when they can’t, they burn it off into the atmosphere. There is a pipeline bottleneck for crude oil, but there is also a shortage of pipeline space for natural gas. The glut has become so bad that next-day prices for gas at the Waha hub fell to a record negative 25 cents last week so that producers were paying to take away the gas.

There have been reports for some time that the “gas cut” from Permian Basin production is turning out to be larger than anticipated. While more-than-expected-natural gas is better than nothing, too much changes the profitability calculations for Permian wells and generally brings less revenue than higher-valued oil.

The race to export US shale oil is about to get fierce, with at least nine proposed terminals angling for a piece of a very limited pie. Within 18 months, new pipelines promise to carry an additional 2 million b/d to the Gulf Coast. But the extra crude will arrive at a time when existing terminals in the Corpus Christi area can already offer only about 300,000 barrels a day of unused capacity. Several of the proposed terminals are being designed to load a supertanker every other day, each capable of carrying 2 million barrels. More likely, only one or two new terminals are needed.

Lost in all the optimism for the future of Permian Oil production and the willingness to spend billions to take away the oil it is supposed to produce in the future, is the possibility that the finite number of “sweet spots” that can produce shale oil at economical prices will be running out in the next five years.

2. The Middle East & North Africa

Iran: The impact of the US sanctions on Tehran’s exports is still up in the air. According to a Bloomberg analysis, the six-month partial waivers that Washington issued to Iran’s best customers still allows them to import 1 million b/d until next May without any reprisals from the US. France or Germany are planning to establish a corporation that would handle the payments channel for trade with Iran under the US sanctions. The payments channel would use a system of credits to facilitate compensation for goods traded between Iran and Europe—allowing some trade to proceed without the need for European commercial banks which could be sanctioned by the US.

Tehran has been selling its crude at a discount to maintain market share, and it will be difficult for importers to find crude at the prices they have been paying. Countries such as Japan and South Korea have close economic ties to the US and are reluctant to go against Washington’s wishes. Both seem to be importing Iranian crude below the levels allowed by the waivers and seem likely to comply fully with the sanctions next May. India and China have different concerns. China is opening new pipelines to Russia which will significantly increase imports from Moscow and reduce the need for Iranian oil.

India has more of a problem. For now, it has a waiver and has seen the cost of imported oil drop significantly in the last two months. If prices climb in the spring as the sanctions become effective, New Delhi will have problems paying for its oil.

The China National Petroleum Corporation (CNPC) is replacing France’s Total in developing Iran’s multi-billion-dollar South Pars gas project. After the US withdrawal from the nuclear deal, Total said it would not be in a position to continue the South Pars gas project and would have to unwind all related operations before November 4, 2018. The Chinese state firm, however, has not started work on the project yet, as Iran has yet to hold talks with CNPC about when operations will begin, the minister added.

Before Total quit Iran, it had a 50.1 percent stake in the project and was its operator, while CNPC owned 30 percent, and Iran’s national oil company held the remaining 19.9 percent. The South Pars project is aimed initially at meeting Iran’s domestic gas demand. Production capacity is envisaged at around 2 billion cubic feet per day of gas, with the project due to come on stream in 2021. When fully operating, the project is also expected to deliver around 70,000 b/d of condensate.

Iraq: Iraq’s crude oil exports from its southern ports on the Gulf will be around 3.3 million b/d in November, down from the 3.47 million b/d exported in October. Iraq is OPEC’s second-largest producer after Saudi Arabia and pumps around 4.6 million b/d. The bulk of Iraq’s oil is shipped via the southern terminals.

Baghdad has signed a $156.74 million drilling deal with China’s Bohai Drilling Co. for the West Qurna Two oilfield, two Iraqi oil officials said on Tuesday. Bohai is to drill 28 production oil wells at West Qurna Two, operated by Russia’s Lukoil. Production at West Qurna Two is now about 400,000 b/d, according to an oil official with knowledge of the field’s output operations. Iraq is in talks with Bohai to award it a second drilling contract for West Qurna 2, which could be worth up to $148 million. Iraq is one of the last places in the world with easy-to-drill conventional oil fields and should be able to increase production provided it can build the infrastructure to export the oil.

Iraq has allocated its oil sales for 2019, with 67 percent of exports going to Asian markets, 20 percent to Europe and 13 percent to North America, the oil ministry announced last week. Earlier last month, an Iraqi official told Bloomberg that Iraq is intensifying efforts to build up its market share in Asia and aims to boost its oil supply to China by around 60 percent. Iraq currently ships about 900,000 b/d to buyers in China and is ready to send some 1.45 million b/d next year.

The US wants to use its sanctions on Iran to move Iraq out of Tehran’s orbit but fears it could weaken the country. Too much pressure could also backfire by ultimately driving Iraq closer to Iran, officials and analysts say. The US granted Baghdad a 45-day exemption from Iranian sanctions, allowing it to keep importing natural gas. Last week, a 6.3-magnitude earthquake in Iran’s western Kermanshah province near the border with Iraq injured more than 700 people. Tehran is trying to repair the damages to the gas pipeline to Iraq which supplies the power to generate 2,500 MW of electricity. Iraq’s oil ministry is providing the power plants dependent on Iranian gas with fuel to keep them working during the Iranian supply halt, but there could be power cuts in provinces.

Saudi Arabia: Saudi Arabia’s oil production has been at a record high this month— between 11.1 million and 11.3 million b/d on some days in November, but whether the Saudis pumped an all-time average monthly high will not be known until later this month.

Saudi Aramco will spend US$500 billion over the next ten years to expand internationally, with a fifth of the total amount earmarked for petrochemical projects and $160 billion for natural gas projects. This investment would be separate from the $70 billion it is planning to spend on the acquisition of a majority stake in local petrochemical major Sabic. This program will increase the Saudi’s natural gas production from a current rate of 14 billion cubic meters per day to 23 billion some of which is to be used for the production of petrochemicals.

The announcement of multi-billion-dollar investments in gas-related operations indicates a new move by Riyadh to make Saudi Arabia a major gas exporter. This ‘strategic pivot’ may come as a surprise, as Aramco is mainly known as a producer of crude oil. The reality, however, is that the Kingdom has not only been quietly investing in upstream gas projects, it is also sitting on some of the largest natural gas reserves in the world.

The Saudi plan to build a nuclear power plant will speed up the Kingdom’s economic development as it would diversify its over-reliance on crude oil. “The decision to build a nuclear power plant in the kingdom is the result of serious research that confirmed the need for this step,” Saudi energy expert Said al-Shahrani said last week. Earlier this month, Crown Prince Mohammed bin Salman launched several new strategic projects in the country, including one to build a nuclear research reactor.

Libya: Libya’s crude oil exports to China are already worth twice as much as what it exported to Beijing last year, the head of the National Oil Corporation said last week. Since January, exports to Beijing have amounted to $3.5 billion. This compares with $1.7 billion for all of 2017 when Libyan fields were suffering regular outages.

Several crude oil terminals in Libya have been closed due to high waves, with oil production in the country already down by 150,000 b/d and likely to drop by a further 50,000 b/d, Libya’s National Oil Corporation said on Friday. The state oil firm confirmed today that four oil port terminals—Ras Lanuf, Zueitina, Zawiya, and Es Sider—are currently non-operational.

In a surprise move, Algeria’s state oil and gas company has pulled out of Libya citing deteriorating security conditions. Sonatrach had partnered with the Libyan National Oil Corporation to drill seven oil wells in Libya. The Algerian company returned to Libya relatively soon after the 2011 civil war to explore for oil in the Ghadmes basin, where Sonatrach held a 25-percent stake that was awarded to it back in 2005. In general, the security situation in Libya seems to be improving with an agreement between the Eastern and Western governments under discussion and European oil companies talking about making more investments in the country.

3. China

Russia exported record volumes of crude to China in October as independent refiners continued to fill import quotas, while Iranian oil shipments fell on uncertainty over the sanctions on Tehran. China’s imports from top supplier Russia jumped 58 percent from a year earlier to about 1.73 million b/d, marking the highest ever. For the first ten months, Russian imports were 1.39 million b/d, up 16.6 percent. Chinese customs last month began updating an online database with commodity imports by country of origin.

Iranian shipments, however, tumbled 64 percent in October from the year-ago month to 1.0496 million tons, about 247,160 b/d, ahead of US sanctions that came into effect on Nov. 4. Month-on-month, imports from Iran in October marked their third fall in a row as China’s state oil firms came under growing pressure to scale back purchases ahead of the sanctions.

New Sino/American talks might focus on what both sides are calling trade “architecture,” a broad term that could encompass many issues the US wants Beijing to address, including intellectual property protection, coerced technology transfer, subsidies to state-owned enterprises, and even non-trade issues such as cyberespionage. Over the weekend, the two sides agreed that in return for the suspension of US tariffs, Beijing would lift restrictions on China’s purchases of US farm and energy products.

China’s coal imports are set to drop in December as utilities wind back purchases following signals from Beijing that it will stop clearing shipments until next year. Coal imports rose in the first 10 months of 2018 to 252 million tons, up 11 percent from a year ago and not far below last year’s total of 279 million tons, according to official data.

Residents of Jincheng in northern China’s coal heartland are enjoying cleaner air after campaigns to reduce pollution forced dozens of collieries and chemical plants to close. However, Jincheng has paid a heavy price. Factories and coal mines have shut down, devastating the local economy. The migrants have drifted away, and jobs are hard to find. Even the air is still not clean enough, falling short of the government’s pollution targets. That means that as another anti-pollution campaign gets underway this winter, Jincheng will be under even more economic pressure.

4. Russia

Moscow’s position on an OPEC initiative to cut back on oil production in order to eliminate the growing oil glut and force prices higher was the top issue last week. Early in the week, President Putin was saying that Russia is comfortable with the current level of oil prices at around $60 a barrel. The state budget is balanced at $40 oil price, and for next year, that budget-balance oil price is calculated at $43 a barrel according to Putin.

Gazprom Neft, Russia’s third-biggest oil producer, wants a production hike of 20 percent developing once-forgotten and depleted fields, key to its plans to increase its oil production by 8 percent to 2 million barrels per day. A mandated cut in oil production would throw a wrench in these plans. On Tuesday, Russian Energy Minister Novak met Russian oil companies to discuss cooperation between OPEC and non-OPEC oil producers and presumably the rapidly falling price of oil. In recent years, a weak ruble has been of great help to the oil industry as revenues for exported oil comes in dollars and production expenses are in rubles.

With the Saudis taking the position that they won’t make a production cut alone and that rest of OPEC/non-OPEC coalition must participate too, Moscow had a difficult decision. By week’s end, Moscow seemed to be coming around to the position that a production cut will have to be made at this week’s meeting.

Russia has emerged this year as a major player in the rapidly expanding market for liquefied natural gas. Meanwhile, Moscow has been pumping gas into Europe at a record pace in existing pipelines, and to the East, it’s close to opening a major pipeline into China, the world’s fastest-growing major gas market.

Supplying natural gas to Europe, and increasingly to Asian countries like China and India, gives Russia hard cash and a seat at the geopolitical table. “Our main goal is to preserve our current markets, primarily Europe, and to gain a foothold in new ones, especially Asia,” said Alexey Teksler, Russia’s first deputy Minister of Energy in an interview at his Moscow office. A giant map of Russia’s gas connections to Europe and Asia covered one wall.

Gazprom will soon complete the bulk of the work for one of its most ambitious projects ever that involves building a natural gas pipeline from Siberia to its border with China. The pipeline will ship 38 billion cubic meters annually of natural gas to China for 30 years.

5. Nigeria

Last week Nigeria’s energy ministers announced that plans to fix the country’s deteriorating refineries and make them work to capacity would not materialize until 2020. This is contrary to the minister’s earlier claim that Nigeria’s refinery capacity will reach the expected 1.1 million b/d in 2020. The minister said this would be achieved when Dangote Petrochemical’s new 650,000 b/d refinery, Nigeria’s four refineries of 450,000 b/d capacity are overhauled, and three modular refineries come on stream. Given Nigeria’s track record in building and renovating dying refineries it seems doubtful that the country will no longer need to import the bulk of its petroleum products by the year after next.

The local press is saying Nigeria will lose an estimated $6 billion in revenue to international oil companies, Shell and Eni, over the deal on the controversial oil block. According to leaked emails and confidential documents, the oil giants might have used unethical means to secure the deal as they altered earlier terms on the oil block with the intention of depriving Nigeria of billions of dollars. The report draws on an analysis from leading experts at Resources for Development Consulting commissioned by NGOs. Two weeks before the deal was signed in 2011, the then Director of Department of Petroleum Resources advised the Federal Government not to accept the deal.

6. Venezuela

Rosneft’s chief executive, Igor Sechin, flew to Caracas last week to discuss with President Maduro the continuing delays in the shipments of Venezuelan crude that Caracas had agreed to send to Russia as repayment for cash loans. Sechin brought information showing that Venezuela is meeting obligations with China but not with Russia according to a source of Reuters. A Chinese delegation was also there. Russia and China are pretty much the only countries left that are willing to help Caracas with US sanctions and falling oil production. China is the bigger benefactor, having loaned as much as $50 billion to Venezuela in recent years.

Venezuela has reached a settlement with Canadian gold miner Crystallex to hold onto its US refiner Citgo but will have to stay on top of payments through early 2021 to protect its ownership of the refiner. PDVSA’s control of Citgo, the state-owned company’s most valued asset, was thrown into uncertainty in August when a US judge said the defunct Crystallex could go after the Citgo shares to collect on a $1.2 billion judgment related to Venezuela nationalizing its mine. Venezuela has paid Crystallex $500 million of the total judgment, which has grown to $1.4 billion with interest. A January 10 deadline looms for the next payment.

7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)

In Germany, Volkswagen has been testing the newly developed R33 BlueDiesel fuel blend at its in-house filling station in Wolfsburg since January. The fuel, jointly developed by Volkswagen, the Coburg University and other project partners, contains up to 33 percent renewable components based exclusively on residual and waste materials and enables CO 2 savings of at least 20 percent compared to conventional diesel. (12/1)

North Korea: Reviews of confidential U.N. documents and interviews with US officials uncovered dozens of ships and companies that international authorities link to illegal North Korean trade. The behavior of the vessels and changes in their ownership reveal an expanding toolbox of strategies designed to keep North Korea’s shipping, and economy, afloat. (11/28)

The Zimbabwean oil crisis, largely caused by poor government planning, has reached an all-time low, which has resulted in the dwindling fuel supplies reaching a critical point of a crisis. The country now has less than a week of fuel left, this after a long strenuous week for consumers, who have stood in long winding lines nationwide. (12/1)

Brazil’s Petrobras said Wednesday it has sold onshore and shallow offshore fields in Brazil for $823 million, part of the company’s efforts to divest assets to focus on deepwater. (11/29)

In Brazil, President-elect Jair Bolsonaro wants to open more of the pre-salt assets—an area currently exclusively in the hands of state oil firm Petrobras—to private investors, hoping to earn US$31 billion that could help narrow Brazil’s massive budget deficit. (11/27)

In Argentina, Mexico-based Vista Oil & Gas plans to invest $157.4 million in its first pilot projects in Vaca Muerta, betting on the Argentinian shale play for oil and natural gas production growth. (11/27)

Mexican discovery: Pemex is set to add a billion barrels of oil equivalent to reserves after discovering a gas field that, within four years, will yield 80,000 b/d of condensates and 700 million cubic feet per day of gas to feed petrochemical units in southern Mexico. The company claims the discovery in the Ixachi field, state of Veracruz, is the most important made in the inland portion in the last 25 years and the fourth biggest at a worldwide level in the last decade. (11/29)

Alberta’s blues: Under pressure from falling WCS prices that are now around $15 per barrel and zero spare takeaway capacity to ship oil to its largest purchaser, the United States, Alberta revised downward its economic growth forecasts for 2019 from 2.5 percent to 2.0 percent. (12/1)

The Government of Alberta has been forced into buying more oil trains to move crude from the province, the Calgary Sun reports, quoting Premier Rachel Notley as describing the situation with Alberta’s oil as “fiscal and economic insanity.” The trains will have a total capacity of 120,000 b/d and will cost Alberta $263.77 million. The trains should reach their full capacity late next year and help reduce the discount of Western Canadian Select to West Texas Intermediate by about $3 per barrel. That’s not a lot given the current discount between WCS and WTI is more than $40 a barrel. (11/30)

The US oil rig count increased by two to 887, according to Baker Hughes. For the month, the rig count was up 12 in November, matching last month and its fifth monthly increase in a row. The gas rig count fell by five to 189. The total number of active oil and gas drilling rigs now stands at 1,076 according to the report, which is now up 147 from this time last year. Of that total, 138 of the gross increase is in oil rigs. (12/1)

US crude oil and natural gas proved reserves rose to record highs in 2017, driven by stronger energy prices and the continuing development of shale formations, the US EIA said on Thursday. Crude reserves increased 6.4 billion barrels, or 19.5 percent, to 39.2 billion barrels at year-end 2017, marginally higher than the previous record of 39 billion barrels set in 1970. Natural gas reserves jumped 123.2 trillion cubic feet (tcf), or 36.1 percent, to 464.3 tcf last year. (11/30)

US is world’s sweet spot? The US holds nine out of the top 10 global locations for investment in the upstream oil and gas sector in 2018, according to a wide-sweeping survey released Thursday by Canada’s Fraser Institute. In last year’s survey, the US represented six of the top 10 spots. The ranking is based on the policy perception index, which is created by compiling respondents’ answers to the various potential barriers to investment facing each region. The highest score a region can score is 100, which was only achieved by Texas this year, followed closely by Oklahoma. For the first time in five years no Canadian province made the top 10; the top two producing provinces in the nation, Alberta and British Columbia, ranked 43rd and 58th, respectively, of regions to invest out of 80 worldwide locations. (12/1)

TX infrastructure boom: Proposals on the table would be part of a historic buildout of oil and gas infrastructure in the US as it becomes a top exporter of both fuels. Texas, home to the most prolific oilfield in the country, is at the epicenter of the frenzy. More than 80 plants, terminals, and other projects are in the works or planned up and down the state’s Gulf Coast, from Port Arthur to Brownsville, according to a Center for Public Integrity and Texas Tribune review of corporate plans. (12/1)

Permian pipeline: Jupiter Energy Group has launched its 90-day open season for binding shipper commitments on the Jupiter Pipeline. The company says the 650-mile-long Jupiter Pipeline will be the only pipeline out of the Permian Basin that will access all three of Texas’ deepwater ports – Houston, Corpus Christi, and Brownsville. The 36-inch pipeline, which could begin service in the fourth quarter of 2020, could boast a capacity of up to 1 million barrels per day of crude oil. (12/1)

In Texas, the Corpus Christi Ship Channel Improvement Project will cost an estimated $360 million. Nearly one-half of the $360 million needed to widen and deepen the Corpus Christi Ship Channel to accommodate greater energy export volumes from Texas’ Coastal Bend region has been secured. (11/27)

Quake; pipeline shut down: A magnitude 7 earthquake struck Alaska early Friday, shutting the state’s most important oil pipeline. The temblor struck 8 miles north of Anchorage. The 800-mile Trans Alaska pipeline that carries crude from the Arctic coast to the marine terminal in Valdez was shut as a precaution. Operators were not aware of any damage to the line, which transported 530,000 barrels on Thursday. (12/1)

Keystone continuance: TransCanada Corp.’s long-delayed Keystone XL oil pipeline will face another round of environmental scrutiny, all but dashing company plans to begin construction in February. In a filing on Friday, the US State Department indicated it’s going to undertake a new review of the $8 billion project. The analysis, formally known as a supplemental environmental impact statement, will look at potential effects on greenhouse gas emissions, crude spills, cultural resources, and the overall market. (12/1)

Seismic off east coast: The Trump administration is taking a major step toward allowing a first-in-a-generation seismic search for oil and gas under Atlantic waters, despite protests that the geological tests involve loud air gun blasts that will harm whales, dolphins and other animals. (12/1)

More storage for Louisiana: The Plaquemines Liquids Terminal would open up to 20 million barrels of storage for both crude oil and refined products and export facilities capable of loading Suezmax and VLCC vessels. Tallgrass Energy, LP reported Tuesday that it had acquired a 600-plus-acre site to build its planned terminal along the Mississippi River south of New Orleans. (11/28)

Biofuels waivers: The Trump administration has decided to keep waiving some oil refineries from US biofuel mandates, despite pressure from ethanol advocates to end the practice. (11/30)

Corn fuel tiff: The EPA has rejected requests from the corn lobby to reallocate biofuel volumes waived under its small refinery exemption program into its 2019 mandate, an agency official told Reuters on Tuesday. The powerful corn lobby has complained for months that an expansion of the EPA’s refinery waiver program under the Trump administration threatens demand for crucial farm products like corn-based ethanol. (11/28)

EPA on biofuels: The EPA on Friday increased by 15% its annual blending mandate for advanced biofuels, drawing praise from the US biofuels industry, but disappointment that the government had not done more to protect the agricultural market. Under the US Renewable Fuel Standard, oil refiners must blend increasing amounts of biofuels into their fuel each year or purchase blending credits from those that do. The volume for conventional biofuels like corn-based ethanol was not increased. (12/1)

Shell on EVs: Oil supermajor Shell sees electric vehicle (EV) enthusiasts buying into the ‘cool factor’ of zero-emission vehicles, driving EV fleet growth regardless of the oil price fluctuations. Shell noted that EV enthusiasts are emphasizing the social desirability of zero-emission fun-driving-experience cars—a factor important enough to ignore the fact that EVs are currently more expensive than vehicles with internal combustion engines. (11/28)

Battery electric cars emit fewer greenhouse gases and air pollutants over their entire life cycle than petrol and diesel cars, according to a European Environment Agency (EEA) report. (11/26)

H2 for CA: France-based Air Liquide, a 65,000-employee company that sells gases to industrial and medical customers worldwide, will build for $150 million the “first world-scale liquid hydrogen” plant in the US to help efforts to replace gasoline with a cleaner fuel. The plant, to be built in the west, will have enough capacity to power “35,000 fuel cell electric vehicles.” Construction will begin in early 2019. (11/27)

In Bulgaria, more than 1,000 people urged the government to guarantee it would not shut mines and power plants at Maritsa East lignite coal complex in southern Bulgaria, despite a European Union push to decarbonize the bloc’s economy by 2050. (11/30)

Air pollution and cancer: A team at the University of Stirling in the UK has found new evidence of the link between air pollution and cancer as part of a new occupational health study. The team analyzed the case of clusters of women working as border guards at the busiest commercial border crossings in North America. (11/30)

Brazil this week pulled out of hosting next year’s United Nations global summit on climate change, the latest signal that Latin America’s largest nation no longer aspires to be an influential player in efforts to mitigate the effects of a warming planet. The decision comes about a month before the inauguration of president-elect Jair Bolsonaro, who has vowed to empower commercial ventures in the Amazon and other Brazilian biomes while weakening enforcement of environmental laws. (11/29)

EU climate progress slowing: Progress on increasing the use of renewable energy and improving energy efficiency is slowing across the European Union, putting at risk the EU’s ability to achieve its energy and emissions reduction targets. Rising energy consumption, particularly in the transport sector, is to blame for the slowdown, according to preliminary data released in the European Environment Agency’s (EEA) annual analysis on the EU’s progress towards its targets on renewables and energy efficiency.

Cutting carbon emissions to zero in line with the Paris climate accord could require up to €290bn a year in additional investment in Europe, the EU will say as it prepares the ground for a bruising battle at next week’s UN climate talks. (11/28)

Palm oil was supposed to save the planet; instead, it has unleashed a catastrophe. Indonesia’s biggest export, palm oil—used increasingly in biodiesel—has twice the carbon emissions as conventional diesel fuel, according to some expanded life-cycle analyses. The tropical rainforests of Indonesia have large amounts of carbon trapped within their trees and soil. Slashing and burning the existing forests to make way for oil-palm cultivation had a perverse effect: It released more carbon, a lot more carbon. The accelerated destruction of Borneo’s forests contributed to the largest single-year global increase in carbon emissions in two millenniums, an explosion that transformed Indonesia into the world’s fourth-largest source of such emissions. Researchers at Columbia and Harvard later estimated that the fires led to 100,000 premature deaths.

The American biofuels mandate of 2007 is what got Indonesian palm off the ground. The resulting unprecedented palm-oil boom, meanwhile, has enriched and emboldened many of the region’s largest corporations, which have begun using their newfound power and wealth to suppress critics, abuse workers and acquire more land to produce oil. Global Witness has counted at least eight assassinations of Indonesian environmentalists fighting palm oil. (11/26)

[HowardHughs]

"Around 2023, the falling demand for oil should trigger an oil glut"

"Today, the total transportation fuel market is about 56 Mbbl/day. (The total oil market is conveniently close to 100 Mbbl/day).

"It is interesting to know that if oil prices followed business as usual, EVs would replace ICE within about 13 years from today. This is dramatically faster than 3 or 4 decades as most oil and auto predictions forecast.

"By 2022, the 4 million EVs installed base will have grown to 40 million and the 0.1Mbbl/day will grow to about 1Mbbl/day. By that date, a glut is almost certain to have begun."

From:
EVs, Oil, And ICE: Impact By 2023 And Beyond
Nov. 28, 2018 Ross Tessien


https://seekingalpha.com/article/4225153-evs-oil-ice-impact-2023-beyond


Summary
This article explores the timings and various impacts of EVs on Big Oil, and the ICE automotive industries, including shale oil plays, Ford, GM, Tesla, Rivian and others.

I find that ICE auto sales will drop 50% by 2025. Passenger car sales are down already with SUVs and Pickup sales to follow with Rivian and Tesla entering the space.

EV penetration into the global auto fleet should initiate an oil glut by 2023. Shale oil (high extraction cost) operations should become stressed first.

By 2031, there will be ~1 billion EVs in the global fleet of cars. This timing is 2 decades faster than many analysts are projecting.

Caveats: Dramatically lower oil prices will delay these projections and operational autonomous vehicle control will accelerate them. Some companies will soar, others will collapse.

Summary
This article describes expectations derived from a graph I created that estimates the pace at which EVs will disrupt ICE. Of note is that ICE vehicle sales should drop much faster than most analysts are projecting. Companies like Ford (F) and GM (GM) will be severely stressed if new ICE car sales trend toward 0 around 2026.

Legacy auto companies are planning on the EV disruption taking several decades. But disruptions never take that long once the new technology can match the old.

While Tesla (TSLA) is leading the disruption in the US, the majority of EV sales are being made in China. Whether Tesla will become the leading EV brand sold in China following the Shanghai Tesla factory starting sales remains to be learned.

Every graph I've seen that attempts to project the shift from ICE to EV all adopt the same, likely incorrect, idea. In the following graph, notice that the tops of the light blue bars follow a smooth trajectory.

The idea analysts are using is that the market for new cars will remain the same as usual, while there will be a shift from 100% ICE vehicles to some percentage of those cars being EVs by some future date. The BNEF graph above estimates that the shift will have reached 55% plug in vehicles by 2040.

I disagree with graphs that have this smooth top for total new cars sold for two reasons, in particular.

The time scale is far longer than is typical for historic disruptions. Disruptions normally play out in less than a decade.
The decision to - purchase a new car - is separate from and independent of the decision to - purchase an EV instead of an ICE vehicle -.
When someone decides their next car will be an EV, sales of ICE vehicles drop immediately. However, EV sales do not grow until that person finds an EV with features and price that meets the person's needs. The result is a drop in total new car sales as I show below.

In this article, I study the likely timings for these shifts in consumer preference from ICE to EV and from Oil to Electricity. There are around 90M new cars sold per year, and there are around 1 billion ICE cars in the global fleet.

Based on the information studied, I estimate new ICE car sales will be approaching 0 around 2026 and that the installed base of EVs will approach 1 billion by about 2032. I also find that a surplus of oil production should manifest around 2023. These projections are dramatically faster than most analysts.

I explore the potential ramifications of these estimates being correct and compare them to expectations of others that study historic technology disruptions like Tony Seba.

The curves are,

ICE sales (in blue) down 20% ~2021 and approach 0 ~2027
EV sales (in red) reach 20% ~2024 and pass 90M ~2028
ICE plus EV sales (in green) show a 35% decline in new auto sales around 2025. Some assumptions sets I made showed new cars sold dropping by 55% in 2025 for one year. The dip shown is a "best case" scenario for new car sales and assumes a rapid growth in EV production capacity.

Transportation Oil Demand (in purple) indicates a glut will form around 2023 with >2Mbbl/day demand displaced by the global EV fleet.
IEA estimates current global oil demand is around 100 million barrels per day. The projection is that the demand for oil is rising slowly, but with the changing markets, I use a fixed figure of 100 Mbbl/day. If actual demand rises, the effect will be to delay the downturn in oil demand slightly, but the EV effect is much larger than the projected rise in demand, making the rise insignificant compared to the EV penetration.

BP estimates that the global oil demand for transportation is around 56% of the crude oil demand. This means that around 56Mbbl/day go to the transportation sector, and this is the portion I consider in my graph below.

Plotting transportation oil demand out to 2032 and assuming a 1 billion car global fleet yields

"For my study, I chose the red curve in this plot as being most likely.

"I chose 2026 as the year when essentially all new cars sold are EVs.

"Tony Seba, who specializes in the study of disruptive technologies, now estimates that, by 2025, essentially all new vehicles will be EVs."

"I anticipate that, by 2030, around 700 million EVs will be in the global fleet. This is 3 times the cars in a decade less time than the OPEC estimate above."

"For this disruption to play out over the next 7 years should not come as a surprise to anyone that has studied past disruptions. EV sales are just now entering the rapid growth phase where consumer acceptance has flipped from one technology to the next.

Every legacy auto company has run advertisements now, indicating that they too plan to convert their line up to EV. From a consumer's perspective, this is proof that EVs are superior."

GM and Ford are right now at risk of following Kodak into the American history books.

A sudden drop in pickup and SUV sales greater than 10% of the market will financially stress Ford and GM as well as others. This is half the drop already experienced by many passenger car models. Ford, with most of its profits coming from its pickup trucks, should suffer the worst.

Does this mean Ford will continue the decline in stock value toward $0? I think the answer is yes. So, this makes Ford a long-term short stock.
o avoid this fate, GM and Ford would need to take drastic and immediate action to convert their entire line up to EVs. They would need to build enormous battery factories. And they would need to build a decent charging network that Tesla is NOT ABLE TO USE.

I see zero motion in these directions. When action is finally taken, the question will be whether there is enough time. When sales drop suddenly, the first thing to disappear are net profits on operations. And without those, legacy auto won't be able to develop their own EV entrants to compete in the new industry. Game, set, match to EVs will be the result.

If the downturn happens as fast as I project, it is already too late to react. Profits are about to disappear with declining sales.

If it takes a couple decades as the linear thinking analysts project, then sure, they will be fine. The problem is, as Seba points out in every talk, disruptions are never linear in spite of the smartest analysts at the largest companies repeatedly making linear projections for how things will play out. They are never right when it is a technology disruption taking place.

GM at least as the Bolt while Ford is in a denial haze, wandering off in "dead end hybrid land" with the market racing off in the opposite "BEV" direction.

Am I wrong? We'll know soon. Let's keep a close eye on pickup sales. The numbers should begin to drop by late 2019.

Could Tesla acquire Ford?.............

Time until a glut of oil results from EV sales.......

Which oil companies are likely to collapse first?..........

read it all!

https://seekingalpha.com/article/4225153-evs-oil-ice-impact-2023-beyond

[sumisu]

BREAKING AMERICA'S ADDICTION TO OIL & FOSTERING AN AGE OF ENERGY INDEPENDENCE:

https://sustainableamerica.org/downloads/whitepapers/Energy_White_Paper.pdf?fbclid=IwAR1FQO0NiZRndGvpOAWfE99_4pBORKZ3_LOwWJ0L43IrS7X1CjK20XFjhxE

[sumisu]

Could Fracking Debt Set off Big Financial Tremors?

Sept 21, 2018

http://knowledge.wharton.upenn.edu/article/will-fracking-industry-debts-set-off-financial-tremors/