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Urgent planting of wildflowers will attract pollinators and boost farmers’ food crops, expert to tell UN
Bee populations have plummeted worldwide. The UN conference will debate ways of reducing use of harmful pesticides. Photograph: Michael Kooren/Reuters
Jonathan Watts
Fri 23 Nov 2018 01.30 EST
Last modified on Fri 23 Nov 2018 01.38 EST
https://www.theguardian.com/environment/2018/nov/23/scientist-unveils-blueprint-to-save-bees-and-enrich-farmers?fbclid=IwAR1-lYkJHFp-EBhdZ6mds-hlcU2VISfoTt9iCq2Ti8D2NlSYfHbWDO6M1j4
No supply side route out of climate chaos
"Among the many disagreements between environmental campaigners, government ministers and business leaders, there is one central point of agreement – renewable energy harnessing technologies are the solution. While campaigners may rail against the lack of commitment to deploy these technologies, only a minority among them is prepared to contemplate an alternative route. In the same way, while governments and businesses are dragging their feet about deploying the technologies, few (beyond the climate change deniers) are offering an alternative approach to tackling climate change."
http://consciousnessofsheep.co.uk/2018/11/28/no-supply-side-route-out-of-climate-chaos/?fbclid=IwAR05UavFKg9aBzyZ20Cvr_eMzzU3Eq2GUteyrkqO7V2Gld7Pm9K267_ngi4
PS: New solar minimum could change the world economy
http://ktar.com/story/1995130/new-solar-minimum-could-change-the-world-economy/
Low Oil Prices: An Indication of Major Problems Ahead?
Posted on November 28, 2018
by Gail Tverberg
"In recent years, we have heard a great deal about the possibility of Peak Oil, including high oil prices. If the issue we are facing is really prices that are too low for producers, then there seems to be the possibility of a different limits issue, called Collapse. Many early economies seem to have collapsed as they reached resource limits. Collapse seems to be characterized by growing wealth disparity, inadequate wages for non-elite workers, failing governments, debt defaults, resource wars, and epidemics. Eventually, population associated with collapsed economies may fall very low or completely disappear. As Collapse approaches, commodity prices seem to be low, rather than high."
https://ourfiniteworld.com/2018/11/28/low-oil-prices-an-indication-of-major-problems-ahead/?fbclid=IwAR0o5cGKsyjQ8zFjlKwZ7auzwVxKZMHV4Nu-C2q_Vjf2dvQ34SwKm4g2R3E
Peak Oil & Drastic Oil Shortages Imminent, Says IEA
November 22nd, 2018 by Guest Contributor
https://cleantechnica.com/2018/11/22/peak-oil-drastic-oil-shortages-imminent-says-iea/?fbclid=IwAR24rEYurcD9KvIza4YMhf2UhkPCwmRAtdXW9e00NaE08c-Kix_S-eU-7CQ
While the IEA got a lot of coverage for its World Energy Outlook 2018 (WEO 18), there might be a little snippet that got way underappreciated.
On page 159 of its Outlook, accessible only behind a payment barrier, the following graph can be found:
It is clear to see that Peak Oil will be hit well before 2020, while demand keeps on rising, unless the world’s Oil Majors and State Owned Oil Companies would massively invest in new exploration, according to the IEA.
However, the Oil Majors did already heavily spend on new oil exploration in the years after 2000, where a fossil fuel hype with an accompanying coal boom lead up to an oil price of over $150 in 2008. While this oil price proved unsustainable for a crashing world economy, this oil exploration boom lead to very little new findings in the big scheme of things:
So what does that mean?
It means that a collapse of oil supply to half of its current size within only six years simply cannot be compensated by new oil findings and certainly not by unconventional oil sources like oil sands and fracking. That the Oil Majors did not pick up with new oil exploration after the oil price rose again to $100 per barrel in the years after 2008 is another sign that the world is already “overexplored,” as geologists put it. Instead the Oil Majors concentrated on a stock buyback, knowing full well that further exploration would be a waste of money while they are sitting on oil that will become very valuable even though the amount of oil they will extract will decline significantly.
In summary, the Oil Majors and State Owned Oil Companies (in this field notably the Initial Public Offering (IPO) of Saudi-Aramco, the world’s biggest oil company, has been scrubbed) are waiting for an oil price bonanza to happen, while the IEA is very concerned about future oil supply.
While the IEA has no credibility left when it comes to renewables (see following graph), because its forecasts historically have all been absurdly wrong, the IEA should possess some knowledge in the oil business and especially concerning the decline rates of existing conventional fields, which have been studied in depths for decades.
Notably the Peak Oil graph from the IEA (first graph in this article) has been unearthed by the Association of Study of Peak Oil and Gas (ASPO), which as an organization has itself published multiple studies on Peak Oil. While ASPO has put Peak Oil sooner than the IEA, in its latest study already at 2011 for conventional crude, it is remarkable that the IEA refuted this claim back then with the statement that Peak Oil would not be reached before 2020. Well, it surely looks like they corrected that statement for themselves now.
So what does that mean for investors in oil and the world economy?
Surely there could a handsome profit be made by riding the coming oil shortages, but one has to keep in mind that while the oil price may go through the roof, the barrels that can be sold also shrink fast and drastically. So there remains the question of how high the profits of the Oil Majors will rise and how much will this be appreciated by the stock price for these clearly dying companies. Furthermore, with these rapid stock swings, you compete with banking supercomputers that act in a millisecond timeframe, so you would have to be alert night and day for the point when the crash will come because of the world economy not being able to take the oil price anymore. As a conservative long term investor, this can only mean to get out of these stocks as soon as possible, while risk-loving investors can try to make a quick buck on the coming stock volatility, with the world economy crashing a couple of times due to ongoing undersupply in oil.
For the climate, this is excellent news, because the adoption of electric vehicles and clean transport in general will get a major boost and surely blow all current predictions out of the water. As an investor this is imho, where your money should be.
About the author: Dr. Harry Brinkmann got a Ph. D. in Physics in the working group “Applied Physics” from the Justus-Liebig-University in Gießen. In his free time he is contributing to working groups of Bündnis90/Die Grünen such as Bundesarbeitsgemeinschaft Energie (Federal working group energy) and likes arguing with people online over energy solutions and a sustainable future. Based in Berlin, he also writes and publishes German novels.
Peak Oil Review: 26 November 2018
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2018-11-26/peak-oil-review-26-december-2018/
Quotes of the Week
“In my 36 years in this [petroleum] business, I have never seen such a wide differential in sentiment between Canada and the US. I’ve never seen more frustration among our customers and our competitors and in our peer-group companies than right now.” Kevin Neveu, chief executive officer of the oilfield-service company Precision Drilling Corp.
“The assumption that current and future climate conditions will resemble the recent past is no longer valid…With continued growth in [greenhouse gas] emissions at historic rates, annual losses in some economic sectors are projected to reach hundreds of billions of dollars by the end of the century – more than the current gross domestic product (GDP) of many US states,” The Fourth National Climate Assessment Volume II, compiled through combined efforts of 13 US government agencies
1. Oil and the Global Economy
Oil prices slid more than 6 percent on Friday to the lowest levels in more than a year. New York futures closed at $50.42, down almost $26 a barrel since early October, and London closed at $58.80, down more than $27. The reasons for the plunge, which some observers are calling excessive, are well known. Inventories continue to build as US shale oil production increases; there are signs of a weaker global economy ahead; Washington has granted six-month waivers for Iranian oil importers; Moscow is not interested in cutting production; and there are doubts that the Saudis will make a significant cut in production while under pressure from President Trump to keep up production. Trump’s support for Crown Prince bin Salman in the wake of the killing of journalist Jamal Khashoggi is likely to complicate decision-making in Riyadh, to say the least.
Saudi Arabia, Moscow, and the OPEC members are considering a compromise plan to cut production that would retain official output targets, first set in 2016, but would imply a quiet production pullback because Saudi Arabia is overproducing by nearly 1 million b/d. While the Saudis could cut a million b/d on their own, a cut of this size combined with the lower oil prices would be a significant blow to their budget and force a dip into their monetary reserves again. With Moscow and Baghdad both talking about increased production next year, the Saudis have a difficult path ahead.
Many observers remain skeptical that the OPEC meeting in Vienna on Dec. 6 will be able to cut oil supplies by enough to push prices significantly higher. There seems to be general agreement that ever-increasing US shale oil production— total US oil production has nearly doubled since the start of 2012—has increased concerns about a global glut of crude.
Concerns are rising about what the $27 a barrel price drop will do to drilling budgets for 2019. As recently as September, North American oil producers had been increasing spending to take advantage of this year’s higher prices. Now with the revenue per barrel down some 27 percent, and even more due to logistical difficulties in the Permian and Canada, there are concerns about the 2019 drilling budgets and the profitability of the shale oil industry. Drillers that were not making money at $75 a barrel are not making money at $50. Rising interest rates are also leading to the the realization by investors and lenders that it may be a long time and much higher prices before shale oil drilling becomes generally profitable.
OPEC: Next week’s OPEC meeting in Vienna has the potential of being a memorable one. It seems likely that there will be a formal agreement that will link Moscow and its oil-producing allies to OPEC. This agreement could morph into a situation where the Saudis (and a few allies) and the Russians (and their former Soviet partners) together call the shots no matter what the interests of the other OPEC states.
An OPEC/non-OPEC monitoring committee co-chaired by Saudi energy minister Khalid al-Falih on November 11 hinted that the coalition would consider production cuts of up to 1.4 million b/d to shore up prices. But that was before President Trump this week voiced his political support for Saudi Arabia, repeatedly calling out the kingdom to keep oil prices low, as it deals with the global fallout from the murder of dissident and journalist Jamal Khashoggi. Many analysts believe that OPEC will find it difficult to go against the wishes of the US administration and make the necessary production cuts.
In a related issue, the US Department of Justice is reviewing antitrust legislation aimed at reining in OPEC’s power over oil markets. The House Judiciary Committee in June approved the “No Oil Producing and Exporting Cartels Act,” or NOPEC bill, which would give the attorney general the authority to file a suit against OPEC for trying to control oil production or to affect crude prices. This would amend the Sherman Antitrust Act of 1890; the law used to break up Rockefeller’s Standard Oil. A similar Senate bill hasn’t seen any action yet. Although past presidents have threatened to use their veto power to prevent similar measures from becoming law, President Trump has repeatedly attacked the cartel over high prices.
US Shale Oil Production: More than a dozen top U.S. energy companies have pledged $100 million toward easing stresses on health care, education and civic infrastructure from the shale oil and gas boom in West Texas and New Mexico. Chevron, EOG Resources, Exxon Mobil and Royal Dutch Shell are among 17 companies backing the Permian Strategic Partnership. The group seeks to address labor and housing shortages, overtaxed health care, and traffic congestion caused by rapidly increasing drilling in the Permian Basin.
The Permian continues to be the most desired area for shale oil drillers, but competition for the most productive regions has intensified, driving land and drilling costs significantly higher. Now some independent and smaller firms are looking to gain access to drilling rights outside of the Permian because this year’s higher oil prices have made other U.S. shale plays profitable – at least until recently.
North Dakota recently reported that its September production hit a new record and that while drilling had been confined mostly to the four most productive counties, it was now expanding in less productive areas of the Bakken. Three-mile-long laterals were now being drilled to get the initial production up to that of the more productive areas. As the report on September production came six weeks into the recent price drop, North Dakota officials already knew that increasing production from the Bakken, which had been going on since June, was unlikely to continue in a period of lower prices and warned of trouble ahead.
Climate: A major scientific report issued by 13 federal agencies last week presents the starkest warnings to date of the consequences of climate change for the United States. The study, which was mandated by Congress and made public reluctantly by the White House, is notable not only for the precision of its calculations and bluntness of its conclusions but also because its findings are directly at odds with President Trump’s agenda of environmental deregulation.
The 1,656-page assessment lays out the devastating effects of a changing climate on the economy, health, and environment, including record wildfires in California, crop failures in the Midwest and crumbling infrastructure in the South. The report finds that US exports and supply chains could be disrupted, agricultural yields could fall to 1980s levels by midcentury, and the fire season could spread to the Southeast.
According to the official figures of the International Energy Agency, the current combined share of solar photovoltaic energy and solar thermal energy, wind and tidal energy, and geothermal energy in global energy production is 1.5 percent. Other non-fossil fuels such as nuclear, hydro, and biofuels bring the non-carbon emitting energy sources to about 14 percent, but these sources of energy are unlikely to grow very much in the coming decades.
2. The Middle East & North Africa
Iran: The status of Tehran’s oil exports remains uncertain after the announcement that Washington was granting partial six-month waivers to regular importers of Iranian oil. Iran’s oil exports in November appear to have dropped by several hundred thousand barrels per day compared to October, as many Iranian customers had not made November purchases amid uncertainty whether they would get US waivers.
China is set to continue importing robust volumes of Iranian crude at least through the end of this year thanks to the US waivers. Although there is no clarity on volumes on Iranian crude that Chinese buyers can ship in under the US waiver, sources said that the waiver would allow some of the key Chinese buyers, such as Sinopec, to honor term contracts they have for Iranian supplies.
The waivers and the likelihood that Iran’s exports will not drop as much as expected has been one factor contributing to the sharp oil price drop in the last two months.
Iraq: After Kurdistan’s independence referendum passed overwhelmingly last year, Baghdad seized the Kirkuk oil fields and stopped exporting some 300,000 b/d of oil through the Kurds’ pipeline to Turkey. After a year of negotiations, an agreement was reached to resume exporting Kirkuk oil through Kurdistan. While the initial flow to the north is only some 50,000-60,000 b/d, this could soon be increased to 400,000 b/d.
This is a significant quantity of oil and is yet another factor in an emerging oil glut and lower prices.
The US granted Baghdad a 45-day exemption from Iranian sanctions, allowing it to keep importing the natural gas used to generate electricity. It is not clear what is to happen after the 45 days, as it will take Iraq much longer to find another source of supply. A reduction in the electricity supply could easily lead to a destabilization of the country.
Saudi Arabia: A combination of the Khashoggi affair and the rapid drop in global oil prices is causing major problems for the Saudi government. For now, President Trump seems ready to ignore any involvement of the crown prince in the assassination plot in return for a promise to keep oil prices low by pumping more oil. According to Energy Minister Khalid Al-Falih, Saudi Arabia currently is producing oil in excess of 10.7 million b/d, considerably more than in recent years.
The recent $26 a barrel price drop likely will force the Saudis to reduce production as the government is again operating at a deficit. International oil prices have fallen to $58 a barrel, far below the $88-a-barrel level that the International Monetary Fund says Saudi Arabia needs to balance its budget.
On Thursday, Khalid al-Falih said that if he sees weak oil demand in January, the kingdom would respond accordingly to cool the global market’s anxiety. Caught between pleasing Washington with policies that won’t lead to price spikes and cutting back the flow of oil to rebalance oversupplied global markets, it appears that OPEC and the Saudis will announce that they are cutting back to the official 2016 targets which imply a cut of nearly 1 million b/d from current production levels for Riyadh.
The cut “would be more discrete,” said an OPEC official, who added the production cut would satisfy the US on oil prices “would be a quid-pro-quo” between the Saudis and Mr. Trump. It also would avoid a confrontation with Russia, which wants to continue increasing production. The situation may become clearer after the OPEC meeting in early December.
Saudi Arabian Oil Co had considered issuing up to $40 billion in bonds to help buy 70 percent of Saudi Basic Industries Corp. However, people familiar with the situation say the government is now worried about the level of disclosure required for a bond issue and whether the uncertain outlook for the oil market might damp demand for debt or increase the cost of borrowing. Aramco executives also have raised concerns that the recent diplomatic fallout from the Khashoggi murder might affect investors’ appetite for Saudi debt.
Libya: The National Oil Corporation will soon resume the Phase 2 development of the offshore natural gas producing Bahr Essalam field. The second phase of development of the field began in July this year and according to Eni will add 400 million cu ft of natural gas to its daily production of 700 million cu ft. Offshore oil and gas production in Libya these days is a much better bet as it is out of reach of the various insurgent groups that are forever trying to interrupt production.
Last week there was news that Libya’s UN-recognized government and the eastern rival government might just be willing to settle their differences and hold elections early next year. While nothing is certain as yet, a settlement between the two government would go a long way towards stabilizing the situation and allowing the country to increase its oil production from the current 1.3 million b/d. Libya probably has the largest oil reserves on the continent, and its oil is relatively easy and cheap to develop if the security situation improves.
3. China
Crude stockpiles in China rose by 29 million barrels last month from September and are likely to continue up, according to S&P Global Platts calculations. The inventory build was a result of rising imports combined with lower refinery activity, which led to the 416 percent surge in October from September. China’s crude oil imports averaged 9.61 million barrels a day last month, the highest on record.
Industrial gas demand in North China is showing signs of a sharp slowdown as small manufacturers shut their doors or buy less gas, unable to cope with a drop-off in export orders and costs related to Beijing’s pollution control measures. The unexpected fall-off in demand from hundreds of small factories from a key industrial region could end up forcing Asian LNG spot prices even lower. One factory manager said he is facing his toughest year in 20 years of business, blaming Beijing’s campaign to switch users from coal to gas – which makes gas prices volatile – falling export orders, and frequent forced shutdowns in response to heavy smog.
Russia’s Gazprom will soon complete the bulk of the work for one 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 a 30-year period.
Chinese buyers have returned to buying US crude oil after halting all imports of US grades in August and September. China bought 15 million barrels and 13 million barrels of US crude in June and July, respectively. Official export data for October is not yet available.
The effect that President Trump’s tariffs will have on US LNG exports to China is still unclear. Beijing is the world’s second largest importer of LNG after Japan and has been an important customer for US LNG. This year between January and August, China purchased 1.6 of the 14.9 million tons of US LNG, but September 24th was the start of President Trump’s imposition of tariffs on $200 billion worth of Chinese goods and China’s retaliatory levy of 10 percent on imports of US LNG. Wholesale prices are already near their highest levels in a decade, driven by rising shipping costs, low European gas stocks and Chinese purchases to avoid a recurrence of last winter’s shortages.
4. Russia
Energy Minister Novak said last Monday that the country was planning to sign a partnership agreement with the Organization of the Petroleum Exporting Countries (OPEC) and that it would be discussed at OPEC’s Dec. 6th meeting. A formal alliance between Moscow and OPEC, which in reality means with Riyadh, would mark an important change in global oil policies. Although Russia and the Saudis have many different concerns, they are both dependent on their oil and gas exports to keep solvent. This means keeping prices as high as the markets will bear without reducing the demand for oil.
Construction of the offshore part of the TurkStream pipeline that will carry Russian gas across the Black Sea to Turkey has been completed, Russian gas producer Gazprom said on Monday. TurkStream is part of Moscow’s efforts to bypass Ukraine as a gas transit route to Europe, which imports around a third of its gas needs from Gazprom.
Gazprom has stopped natural gas auctions on its electronic sales platform because all the natural gas available until the end of 2018 has already been sold. Gazprom started its Electronic Sales Platform in August for physical natural gas sales to European consumers. Sales in this manner would be in addition to supplies under existing contracts. Sales via the electronic platform began on September 20, and according to Gazprom Export data, no auctions have been held since last Friday, November 16.
The global demand for natural gas has been increasing quickly as a more environmentally friendly substitute for coal as city after city become burdened with unbreathable air. The LNG industry is growing rapidly but will have trouble keeping up with demand. As Moscow opens new pipelines to China which cannot produce enough gas to meet demand, an increasing number of shortages are likely to develop.
5. Venezuela
PDVSA has reopened a dock at the country’s main oil terminal of Jose that had been closed for almost three months due to a tanker collision. Dozens of tankers waiting to load Venezuelan oil were diverted to other PDVSA’s terminals since Jose port’s South dock was shut in late August, causing delays in deliveries to customers and cutting export revenue. Venezuela’s crude exports fell to 1.06 million b/d last month and is probably below 1 million today.
Talks with shipping firms to set up a second ship-to-ship oil transfer operation off the country’s eastern coast have begun. Earlier this PDVSA year began sea-borne oil transfers off its western coast, to move crude and fuel oil to Asia, after its ports clogged with tankers waiting to load and tanker loads in its Caribbean terminals faced seizure by creditors. Ship to ship transfer of oil at sea is difficult and dangerous. Insurers will only allow certified captains and mooring masters to undertake such operations.
6. The Briefs (date of article in Peak Oil News is in parentheses)
The global LNG market could move into a state of undersupply earlier than expected, the head of industry body GIIGNL warned Thursday. Jean-Marie Dauger said the LNG market was “covered” for the next few years given the expected startup of several new supply projects. But a shortage of final investment decisions for new supply trains in the past few years has left the market potentially undersupplied “in the early 2020s, not the mid-2020s.” (11/23)
Offshore UK: Oil giants like BP have turned their attention to the region west of the Shetland Islands—a remote North Sea archipelago—where the company’s newest project is located. Once thought too difficult to develop, it’s now a key area of growth for the U.K. For instance, the Clair Ridge development is part of a field that was first discovered in 1977—an estimated 7-billion-barrel whale that for years proved too challenging and costly to exploit. (11/23)
France’s energy plan for the coming decade to be presented by President Emmanuel Macron November 27 will set more ambitious targets to cut fossil-fuels by 2030—by 40% instead of the 30% cut specified in 2015—despite major fuel tax protests, energy minister Francois de Rugy said Friday. Also, the share of electricity to come from renewable energy will be doubled. (11/24)
In Paris, police fired tear gas and used water cannon to disperse several hundred protesters who are angry over rising fuel costs and President Emmanuel Macron’s economic policies, the second weekend of “yellow vest” protests that have caused disruption across France. (11/24)
India’s crude imports surged to 5 million b/d in October to register the highest monthly inflows in more than seven years as refiners rushed to ship in cargoes amid doubts on whether New Delhi would win a waiver on Iran. But with India having secured temporary waivers from Washington, analysts and market sources said that the urgency to bring in cargoes had subsided, meaning overall imports from November onwards could ease. (11/23)
South Korea’s oil products demand fell 8.5 percent year on year in October due to higher retail prices and a domestic economic slowdown. The country consumed 73.35 million barrels, or an average of 2.37 million b/d, of oil products in October, down from 80.15 million barrels a year earlier. It was the fourth consecutive month of decline in demand since July. (11/23)
South Korea is continuing to hold its dominant position in tanker delivery of liquefied natural gas (LNG) by winning major large-scale tanker building orders. The 50 tankers, due for delivery over the next three years, are valued at more than $9 billion. It’s all part of an economic sector expected to see substantial growth as LNG becomes an attractive power source for several global markets. These new ships are expected to increase the global LNG fleet by around 10 percent. (11/22)
In South Sudan, Russia’s Gazprom Neft has signed a memorandum of understanding to explore four oil blocks, South Sudan’s petroleum minister said. Other foreign firms active in South Sudan’s oil industry include China National Petroleum Corporation, Malaysia’s Petronas and India’s Oil and Natural Gas Corporation. The minister said the country’s oil production had risen to 135,000 b/d from 130,000 b/d in August. South Sudan wants to push production back up to 350,000 b/d, the level achieved in 2011 when the country secured independence from Sudan and before it slid into civil conflict. (11/23)
Argentina will be joining the ranks of exporters of liquefied natural gas (LNG) next year when it stars exporting gas from its Vaca Muerta shale play, one of the few shale gas plays in production outside the US. Belgian energy shipping company Exmar will deploy a floating LNG unit (FLNG) to the Port of Bahía Blanca in the second quarter of 2019. Argentina will then become an LNG exporting nation, with an initial plan to export 500,000 tons of LNG per year to overseas markets. (11/22)
Canadian crisis: While the US oil industry has hit a speed bump with the recent $20 drop in oil prices in New York, producers in Canada are in a full-blown crisis. Heavy Canadian crude has been on a downward spiral since mid-May, with prices plummeting by more than 60 percent as an onslaught of new production from the oil-sands overwhelms the nation’s pipelines. The result is the worst pricing environment in the Canadian oil industry’s history and a disaster for a sector that accounts for about a 10th of the nation’s economy and a fifth of its exports. The crisis is threatening oil producers’ profits, causing deep divisions within the industry and putting pressure on Justin Trudeau’s government to act. (11/22)
Canada’s oil on rails: Canada’s oil industry is facing record-low prices for its exports, a glaring lack of infrastructure to bring its product to market, and an uncertain long-term outlook. And as one pipeline project after another fails to launch, the industry is relying more heavily than ever to ship its oil by rail—up to 20,000 rail carloads in August 2018. The volume of oil on Canada’s railroads has soared by 64.6 percent in just the past year. And in the past seven years, the number of rail cars carrying oil across Canada has quadrupled. (11/23)
Train fix nix? Justin Trudeau’s government is unlikely to heed Alberta’s plea for new trains to alleviate the country’s oil crisis, federal officials say. Buying new locomotives and rail cars isn’t a short-term fix to the glut that has sent prices plunging because it would take at least a year to get the new trains in place. (11/23)
Alberta’s oil producers are facing an extraordinary challenge caused by pipeline bottlenecks combined with growing production, Scotiabank Economics said in a report released this week. The bottlenecks could pressure the industry’s 2019 earnings by as much as US$11.33-29.45 billion, and government revenues could suffer a loss of between US$1.13 billion and US3.1 billion. This scenario, the bank said, factored in all other relevant circumstances remaining equal, with the only variable being pipeline capacity. (11/23)
The US oil rig count declined by three rigs to 885, the Baker Hughes firm said on Wednesday. After the rig additions stalled at five during the third quarter, drillers have added 22 rigs so far this quarter. Baker Hughes released the weekly report two days early due to the US Thanksgiving Day holiday. (11/22)
Alaska rule rollback: The Trump administration is moving to expand the territory open for oil exploration in Alaska’s National Petroleum Reserve, a process that could shift drilling rigs closer to herds of caribou and flocks of threatened birds. With a notice Tuesday, the Interior Department is taking the first formal step toward rewriting a five-year-old Obama administration management plan that put roughly half of the 22.1-million-acre reserve off limits. (11/21)
GOM oil spill blowback: The federal government issued an ultimatum to an energy company to stop an oil spill that has been leaking thousands of gallons into the Gulf of Mexico every day for more than 14 years. In an order issued by the US Coast Guard, Taylor Energy Co. was told to “institute a system to capture, contain, or remove oil” from the site or face a $40,000 per day fine for failing to comply. (11/21)
In Florida, the US Federal Energy Regulatory Commission has granted Eagle LNG Partners a draft environmental impact statement (DEIS) for their Jacksonville Export Project. The small-scale project would be capable of processing 1.5 million gallons of LNG per day and storing 12 million gallons of LNG on-site. The developers claim it will be the lowest cost source of LNG available for marine bunkering and for small-scale LNG projects in the Caribbean. (11/22)
Biofuels dance: The US EPA granted oil major Chevron Corp a 2017 hardship waiver from US biofuel laws for its Utah refinery earlier this year. Chevron becomes the largest known company to be awarded a hardship waiver from the Renewable Fuel Standard, which requires refiners to blend biofuels like ethanol into their fuel pool or buy compliance credits from competitors that do. The waivers, which have grown significantly under the Trump administration, have angered corn-belt farmers who say it hurts demand for ethanol and other biofuels. (11/21)
R&D plane: MIT researchers have demonstrated that an aircraft with a 5-meter wingspan can sustain steady-level flight using ionic-wind propulsion. The aircraft has no moving parts, does not depend on fossil fuels to fly, and is completely silent. The researchers describe their proof of concept for electroaerodynamic (EAD) airplane propulsion in a paper in the journal Nature.
In the UK, power station operator Drax is partnering with the Smart Green Shipping Alliance, leading dry bulk cargo transporter Ultrabulk, and Humphreys Yacht Design to examine the potential of fitting the innovative sail technology Fastrig onto Ultrabulk ships. The sailing ships would be used for importing biomass into the UK and would cut carbon emissions and costs. The shipping industry emits roughly 3 percent of global CO 2 and other greenhouse gas emissions. (11/22)
Fossil fuel-driven particulate air pollution cuts global average life expectancy by 1.8 years per person, according to a new pollution index and accompanying report produced by the Energy Policy Institute at the University of Chicago. The Air Quality Life Index establishes particulate pollution as the single greatest threat to human health globally. (11/21)
Concentrations of key gases in the atmosphere that are driving up global temperatures reached a new high in 2017. In their annual greenhouse gas bulletin, the World Meteorological Organization (WMO) says there is no sign of a reversal in this rising trend. Carbon dioxide levels reached 405 parts per million (ppm) in 2017, a level not seen in 3-5 million years. (11/22)
In Brazil, deforestation of the Amazon rainforest has hit its highest rate in a decade. About 7,900 sq. km (3,050 sq. miles) of the world’s largest rainforest was destroyed between August 2017 and July 2018 – an area larger than Delaware. Environment Minister Edson Duarte said illegal logging was to blame. The figures come amid concerns about the policies of Brazil’s newly elected president, Jair Bolsonaro. During the 2018 election campaign, Mr. Bolsonaro pledged to limit fines for damaging forestry and to weaken the influence of the environmental agency. (11/24)
A New source of ice melt: A new study suggests there’s a big source of geothermal heat underneath East Antarctica that hasn’t yet factored into calculations. Ice in this area appears to be melting from the bottom up, according to radar readings taken by an aircraft flying over the frozen continent. Thanks to new radar technology, the team of experts thinks radioactive rocks and hot water spurting from inside Earth’s crust is contributing to this additional melt. (11/23)
7. Book Review of Oil, Power, and War: A Dark History by Matthieu Auzanneau
What follows is a review of an English translation of an important book covering the history of the oil age which initially appeared in French three years ago. The English language version was published earlier this month and has been updated to include developments in the world oil industry through the early part of 2018. The review’s author is Jean Laherrère, a noted French geologist-geophysicist who was one of the first to recognize that world oil production will peak in our lifetime. The review incorporates Laherrère’s latest assessment of the global oil situation and prospects for oil in the coming decades. The book is available in hardcover and Kindle editions from Amazon.com.
Thoughts on the Future of World Oil Production
By Jean Laherrère, with Richard Heinberg
I have spent my professional career as a geologist-geophysicist involved in oil and gas exploration on every continent and have been an active participant in the peak oil debate during the past quarter century (petroleum geologist Colin Campbell and I were instrumental in initiating that debate via our article, “The End of Cheap Oil” published in Scientific American, March 1998). The story of oil is in my blood. I would like to state a few observations that came to mind as I was reading Matthieu Auzanneau’s excellent new book, Oil, Power, and War: A Dark History.
Oil and economic growth
Auzanneau reminds us that the story of oil is also the story of the modern industrial era, in which politicians of every stripe have enshrined economic growth as the goal of policy. Every government promises economic growth, without saying where it will come from. Growth is assumed to be GDP growth, and for a long time GDP was supposed to come from capital and labor. But economists Reiner Kummel and Robert Ayres have shown that energy consumption, in particular oil, is the main force behind GDP growth. These economists conclude that our consumer society is based on cheap energy. And the close historic correlation between growth in energy, especially oil, and growth in the global economy supports their conclusion.
The “thirty glorious years,” as it is called in France, covered the period 1945-1973—from the end of the Second World War to the first oil shock—when world oil production growth averaged 7.5 percent per year. Compare that to 1.1 percent average growth (excluding extra-heavy oil) for the period 1983-2017, which could be called the “thirty laborious years.” GDP growth has become harder to achieve, and economists now fret over what they call “secular stagnation,” often without any understanding of the underlying shifts in the oil industry. The maintenance of growth has become highly dependent on quantitative easing, low-interest rates, and tax cuts, all of which are problematic over the long run.
The United States as an energy, economic, and military superpower
Auzanneau tells the story of how, since its beginning, the global petroleum industry has been dominated by the United States; his book also recalls and explains the turbulent dynamics resulting from a continuous fight between the oil companies and oil-producing countries—especially between the “seven sisters” oil companies (six American and one British) and the members of OPEC.
The United States’ continued dominance of the industry is demonstrated by the fact that world oil is still mainly priced in US dollars per barrel (an antiquated volumetric unit defined as “42 US gallons”). Every energy investor knows the current oil price in dollars per barrel, but few know it in dollars per ton or in rubles per ton. Further, while every non-US country (except Liberia and Myanmar) uses the International Unit System (called SI or the metric system), many oil companies use US units and symbols. For example, Rosneft, a Russian oil company, follows the US custom of using mm or MM for million instead of M (short for “mega-” as used in the world computer business in reference to frequency, as in MHz or megahertz), because Rosneft is listed on the US stock exchanges and is therefore required to follow SEC rules.
The US also has the largest number of oil-producing companies with over 18,000 upstream firms (IPAA 2017) against one in Saudi Arabia and three main oil producers in Russia.
The power of the US oil industry is somewhat explained by the fact that the United States’ share of historic world oil production is the highest of all countries. US cumulative crude oil production to date represents 16 percent of all oil ever produced (for Russia, the figure is 13 percent; for Saudi Arabia, 11 percent). Of course, the United States’ share of world production has evolved over time. As of 2017, the US was responsible for 13 percent of total world crude oil production, while Russia provided 13 percent and Saudi Arabia 13 percent.
Finally, despite generally falling production in the years 1972-2011, the US has seen its production recover in recent years due to light tight oil (LTO) produced by horizontal drilling and hydrofracturing (“fracking”), which I’ll discuss at greater length below. As a result of this resurgence, since roughly 2010, American LTO has been the key factor preventing a stagnation or decline in overall world oil production.
Unreliable data
Before delving further into the subject of fracking, it’s important to note that there are some big problems with the reliability of oil data. The first problem is that there are several definitions of “oil,” including crude oil; crude oil plus condensate; crude oil plus natural gas liquids; and crude oil plus other liquids, refinery gain, and biofuels. In 2016 the Energy Information Administration (EIA) at the US Department of Energy listed average world oil production as 80.6 million barrels per day (Mb/d) for crude only, and 97.2 Mb/d for all liquids, implying a 20 percent uncertainty when “oil” is not explicitly defined.
For US oil production, that uncertainty is even greater. In 2017, US production according to EIA was 9.4 Mb/d for crude, and 13.1 Mb/d for crude plus natural liquids; adding refinery gain (1.1) and biofuels (1.2) we arrive at a figure for all liquids of 15.4 Mb/d, which is 6 Mb/d more than for crude alone!
The energy content of oil is variable, but despite the importance of this fact (oil, after all, is used primarily as an energy source and it is the world’s foremost single source of energy), official agencies pay little attention to it. The energy content of LTO, which is often inaccurately called “shale oil,” per volumetric unit is less than that of conventional crude oil; so, as LTO has come to take up a larger proportion of overall US oil production, the overall energy value of the country’s oil production has grown less than its volumetric increase would suggest.
The monthly quantity of crude oil produced in the US comes from EIA estimates. These estimates change over time but are finalized two years after the oil was first drilled. That’s because, in Texas, operators can wait two years before reporting precise values, due to a confidentiality clause in the reporting rules.
Further, production reports from some other countries are often unreliable (though frequently specified down to four decimal points, despite their discrepancies). OPEC’s monthly oil market report from July 2018 gives OPEC members’ oil production in Table 5-9 based on secondary sources, where Nigeria in 2017 has produced 1.658 Mb/d; whereas in table 5-10, based on direct communication, Nigeria claims to have produced 1.536 Mb/d—or 7.5 percent less. For Venezuela in 2016 the difference between self-reported production and secondary reports was 9 percent. In general, direct communication from OPEC reports higher production values than secondary sources. In effect, this means that OPEC members lie about their production.
They also exaggerate their reserves. Since the 1986 oil price counter-shock (when oil prices collapsed), OPEC member production has been subject to quotas, which are based primarily on oil reserves (this is not the case for condensate or natural gas liquids). Between 1985 and 1989 OPEC members added 300 Mb of oil reserves, presumably as a way of each separately increasing their production quotas. In 2007, at the London Oil and Money conference, Sadad al-Husseini, former vice president of Aramco, described these as “speculative resources.”
In sum, everybody in the oil industry is lying, reporting wrong data or no data, except for a few countries like the United Kingdom and Norway that report precise field production and reserves. As a result of these data problems, it is difficult even for energy analysts, much less the general public, to understand current and future trends in the industry.
When “peak oil” peaked
The final chapter of Oil, Power, and War is titled “Winter, Tomorrow?” and describes the arrival of both peak oil (the point when the rate of world oil production reaches its maximum and begins to decline) and the fracking revolution. As noted above, US tight oil has changed everything. Certainly, it served to torpedo the peak oil discussion.
When Colin Campbell and I wrote “The End of Cheap Oil” in 1998, the price of West Texas Intermediate-grade crude (WTI) stood at $11 per barrel. The price then declined to $8 per barrel in January 1999; at that time, the title of our article appeared foolish. In 2000 Colin introduced the term “peak oil” and with Kjell Aleklett (of Uppsala University) created the Association for the Study of Peak Oil and Gas, or ASPO. We began organizing ASPO conferences in Europe. Meanwhile, the price of oil rebounded. As oil prices soared, so did interest in peak oil.
At the 2007 ASPO conference in Cork, it was decided to allow the creation of national ASPO chapters. Many countries soon created nonprofit organizations to study oil depletion, including Argentina, Australia, Belgium, China, France, Germany, Ireland, Israel, Italy, the Netherlands, New Zealand, Portugal, South Africa, Spain, Sweden, Switzerland, and the US (only ASPO USA had a permanent staff).
Colin Campbell issued 100 ASPO monthly newsletters from January 2001 to April 2009, writing in many of them about the geology, historical production, and future prospects of individual oil-producing countries. These country-by-country profiles were collected and republished in his book, The Essence of Oil & Gas Depletion.
At the Cork conference, the former US Energy secretary James Schlesinger said, “The debate on peak oil is over; the peakists have won.” Schlesinger repeated his message in October 2010 at the ASPO USA conference in Washington D.C., telling the audience, “The peak oil debate is over.” In fact, the debate was about to shift decidedly against us peakists.
The last ASPO international conferences took place in Brussels in 2011 and Vienna in 2012. In 2011, thanks to horizontal drilling and hydrofracturing, US tight oil production had risen to over 1 Mb/d. In 2015, US LTO production rates reached 4.7 Mb/d but declined to a low of 4.1 Mb/d in 2016 due to low oil prices. Production is presently a little over 6 Mb/d.
In 2017 Kjell Aleklett retired from the University of Uppsala. By this time ASPO had become inactive in many nations, including the US. Today only ASPO France is active and growing (with three meetings per year and a website that continues to publish new papers). It is clear that ASPO (and the peak oil discussion generally) peaked around 2010 and has been in decline ever since.
In 2007, when the notion of peak oil was becoming generally accepted, and the public started to respond with efforts to conserve oil, the sport utility vehicle (SUV) became an object of scorn—at least in some circles. At the time, SUVs represented only 8 percent of car sales in China and 5 percent in France. In 2017, with oil considered plentiful again as a result of the US fracking industry, SUVs represented 42 percent of light vehicle sales in China and 31 percent of those in France.
Now many energy commentators argue that oil is abundant and that any decline in world oil production should be interpreted as a peak in demand and not a geology-driven peak in supply. But this interpretation ignores the fact that for each deal where oil is sold, price is dependent on both supply and demand, and the price is often confidential. Commentators are also confused because oil is also sold in futures contracts, which change hands many times. For me, geology is still the key, and the debate on peak demand versus peak supply is mostly wrong-headed.
There are only a few countries that have not yet reached their peak of production, namely Brazil, Canada (with its oil sands), Iraq, Kazakhstan, Malaysia, UAE, and Venezuela. In the cases of Saudi Arabia and the US, crude oil may be presently peaking. For the US, natural gas liquids production was 40 percent of crude oil production in 2017, when it was only 33 percent in 2000 and 9 percent in 1950. It is important to check whether “oil” is crude oil or crude plus natural gas liquids because values and trends are quite different.
Before being produced, oil has to be found—so exploration is the first chapter of the story. Discovery of oil has been declining since the 1960s. Discoveries in 2017 were the lowest since the 1940s. For this reason alone, the oil industry is in trouble over the long term.
US tight oil—the last domino to fall?
The big question is when the production of LTO in the US will peak. Within the US, the Permian Basin in Texas will likely turn the tide. As of 2006, that region had already produced up to 32 billion barrels (Gb) of conventional oil; then, from 2007 to 2017, an additional 5.5 Gb of conventional and unconventional oil was extracted. Of the LTO plays in the country, the Permian is currently seeing the highest rate of growth in production and will probably be the last to peak.
Soaring US tight oil production was largely responsible for a fall in global oil prices in 2015; with lower prices, LTO production was unprofitable, and drilling was scaled back, which in turn led to a fall in production. But as oil prices have gradually recovered, so have drilling and production.
Official forecasts of LTO future production are based on a certain number of wells multiplied by the estimated ultimate recovery per well, without bothering to check whether there is enough room to drill all the wells needed. LTO is often described as a continuous petroleum accumulation covering an entire geological region, when in fact only small parts of the region are economically productive; those parts are typically called the “sweet spots.” In the Bakken and Eagle Ford plays, the sweet spots have been almost completely drilled. The Permian basin, with several sub-basins and many reservoirs, is less drilled. Production during the first month increases when operators drill longer lateral well segments, and when they inject more sand (a record amount of 22,000 tons was injected in one well in Louisiana) to prop open the rock fractures. However, with these technological “improvements” it appears that the ultimate recovery per well may decrease and that new wells diminish the production from surrounding wells.
Reserves estimates for LTO that are made using the same approach as for conventional oil are completely unreliable. The best approach for forecasting future production is the extrapolation of past production (called Hubbert linearization). For Eagle Ford, the trend can be extrapolated toward an ultimate quantity of 3 Gb. This is more than double the 2016 proven remaining reserves plus cumulative production. Extrapolation of past US LTO production leads me to guess that LTO will peak again soon and decline definitively so that production will be negligible by 2040, though this is admittedly at odds with what some other analysts are saying.
I am even more pessimistic about LTO production outside the US. In June 2013 the EIA published a report written by the consulting firm ARI, “Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States.” The authors estimated there to be 287 billion barrels of global shale oil “unproved resources,” of which 75 Gb is in Russia, 58 Gb in the US, 32 Gb in China, 27 Gb in Argentina, 26 Gb in Libya, 18 Gb in Australia, 13 Gb in Venezuela, 13.1 Gb in Mexico, 4.7 Gb in France, and 3.3 Gb in Poland.
From the perspective of a few years later it is obvious that this report was mainly wishful thinking. Russia has the world’s largest shale play with the Bazhenov. In the 1960s the government set off three underground nuclear explosions there to free oil from the tight rocks in which it is embedded; this extreme intervention met with no success: the reservoir was vitrified, and natural gas that was subsequently extracted was radioactive. More recently, Gazprom has launched a Bazhenov fracking project, hoping for commercial oil production in 2025. One has to wonder: why is this taking so long, if the existence of the oil has been known for decades? It appears that Gazprom has not yet found the sweet spots (if they exist)!
Shale oil exploration in Poland was a failure, and the operators left. In Argentina the Vaca Muerta is mainly a shale gas play; China has drilled hundreds of wells there, but production levels are well below target (one trillion cubic feet by 2020). This is also the case for the UK, where Cuadrilla has drilled two shale gas wells in England but has not yet fracked them (the practice is now forbidden in Scotland, Wales, and Northern Ireland). Approval for fracking the Cuadrilla wells was finally granted on 24 July 2018.
The main problem with LTO globally is that the US cannot be taken as an example for the rest of the world. This is first because the US is the only country where underground mineral rights (including oil) often belong to owners of the land. Landowners thus receive a huge bonus for signing a deal with an oil operator, plus royalties on the production. LTO drilling, fracking, and producing causes many nuisances (including several hundred truck trips for one fracking job) as well as pollution. Landowners accept these nuisances in the US, but in the rest of the world, landowners have only the nuisances and no money; it is why the NIMBY (not in my backyard) reaction is so strong elsewhere. Many places, including France and even the US state of New York, have forbidden shale oil and shale gas activities. It appears that US LTO production will decline soon while significant production of tight oil in the rest of the world has not yet started—and may never really get off the ground.
The end of an era
Meanwhile, more nations are reaching their peaks and going into decline: Algeria 2015, Angola 2016, Australia 2000, Azerbaijan 2009, Canada crude oil 2014, China 2015, Ecuador 2014, Equatorial Guinea 2005, Indonesia 2016, Mexico 2013, Netherlands 1987, Oman 2016. Only Brazil, Canadian oil sands, Iraq, Kazakhstan, UAE, and Venezuela’s Orinoco have not yet reached a peak. Many countries will decline at an annual rate of 5 percent, as Algeria has done since 2015, Australia since 2000, and the Netherlands since 1987.
It is likely that in the coming years world oil production will decline (at around 5 percent per year) and that LTO will decline more sharply. This will come as a shock because it is contrary to the official forecasts, which see oil production rising to 2040.
Nature is complex and human behavior is irrational; only the past explains the future. Matthieu Auzanneau’s book, Oil, Power, and War: A Dark History, helps us understand the oil industry’s past, which in turn helps us envision the future of not only petroleum but also the global industrial economy.
Jean Laherrère is an exploration geologist-geophysicist. He is the co-founder and an active member of the Association for the Study of Peak Oil and Gas, is President of ASPO France, and continues to contribute detailed analyses and projections of the future of world energy production.
For Whom is Peak Oil Coming? If you own a Diesel Car, it is Coming for you!
Saturday, November 24, 2018
Ugo Bardi's blog
At the beginning, the idea of "peak oil" seemed to be relatively uncomplicated: we would climb from one side and then go down on the other side. But no, the story turned out to be devilishly complex. For one thing, there is no such a thing as "oil" intended as a combustible liquid -- there are tens, perhaps hundreds, of varieties of the stuff: light, heavy, sour, sweet, shale, tight, dumbbell, and more. And each variety has its story, its peculiarities, its trajectory over time. Eventually, all the oil curves have to end to zero but, in the meantime, there is a lot of wiggling up and down that continues to take us by surprise. Mostly, we didn't realize how rabidly the system would deny the physical reality of depletion, much preferring to "legislate scarcity" on the basis of pollution.
Here, Antonio Turiel writes a fascinating post telling us how the peak is coming "from below," affecting first the heavy fraction of crude oil: diesel and fuel oil. That's already causing enormous problems for the world's transportation system, as well as for the owners of diesel cars, and the situation will become much more difficult in the near future. The light fraction, the one that produces gasoline, seems to be still immune from peaking, but that will come, too.(U.B.)
https://cassandralegacy.blogspot.com/2018/11/for-whom-peak-oil-is-coming-if-you-own.html?fbclid=IwAR0rYZhrf9QhMG-cTsQObImBYZ2b51NJf7SMZyz2utldgCKfVYM_nb61Rhg
Heavy oil shock
11 24 2018
For all the talk about electric cars and renewable electricity, global oil production rose above 100 million barrels a day last month. For all the policy pronouncements to the contrary, the stark reality remains that our insatiable demand for oil, the products of oil, and all of the stuff that we transport with oil continues to drive up demand.
Heavy fuel production
Diesel fuel production
http://consciousnessofsheep.co.uk/2018/11/24/heavy-oil-shock/?fbclid=IwAR1nvFtuUhXdd4Cs0AmXAASdoU7iyQcqipy2HETp6jsJGC0e82e7qwnhsdM
Peak Oil Review 19 November 2018
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2018-11-19/peak-oil-review-19-november-2018/
Quote of the Week
“It is likely that in the coming years world oil production will decline (at around 5 percent per year) and that LTO [light tight oil] will decline more sharply. This will come as a shock because it is contrary to the official forecasts, which see oil production rising up to 2040.” Jean Laherrère, retired geologist-geophysicist involved in oil and gas exploration worldwide; from “Thoughts on the Future of World Oil Production,” 11/18
1. Oil and the Global Economy
The $20 a barrel price plunge, which began in early October, continued last week with New York futures closing at $56.46 and London at $66.76. Behind the drop is weaker demand; Washington’s issuance of waivers that would allow Iran to keep exporting at least some of its production for the next six months; increasing production of US shale oil; and the rapid buildup of US crude inventories. The EIA reported last week that the US crude stockpile climbed by 10.3 million barrels during the week before last to 442.1 million barrels, the highest level since early December 2017. The EIA also reported that US crude production climbed by 100,000 b/d to 11.7 million b/d, the highest on record.
One reason behind the large buildup of the US crude inventory is that in response to the Sino/US trade war, China has stopped buying US crude. Earlier this year Beijing was importing at around 500,000 b/d. The very light crude that comes from shale oil deposits is not suitable for use in many US refineries which were designed to process heavier grades. As there is a limited market for shale oil in the US, it winds up in storage unless it can be exported. Another aspect of the shale oil boom is that global oil markets are increasingly over-supplied with light distillates, such as gasoline, while there are not enough middle distillates, such as diesel. To keep meeting the demand for distillates, refiners are processing high volumes of crude and creating a glut of gasoline. U.S. gasoline prices for delivery in June 2019 are trading just $7 per barrel above benchmark Brent futures for the same month, compared with a premium of $18 per barrel for low-sulfur distillate fuel oil.
Until the recent price drop, major oil companies were doing well, yet there was no surge in the money they were spending on large offshore projects that will produce the oil needed in the mid-2020s. Instead, several major oil companies have been investing in shale oil projects which can provide returns in months, provided they can use their expertise to keep costs under control. Wood Mac’s analysts are forecasting that in the next 12 years, large oil companies would need to add 16 million b/d to their combined daily production to be able to respond to demand and replace depleted deposits. This means several hundred new projects that cannot all be in the Permian Basin.
OPEC: The cartel and its allies have all but decided to cut oil production in 2019 to shore up what they see as a weak market ahead. Getting agreement among the 25 members of the OPEC/non-OPEC coalition with their competing agendas, domestic considerations, and geopolitical rivalries will not be an easy task. The group next meets December 6-7 in Vienna, and discussions have already begun on those particulars, delegates say, with talk that between 1 million and 1.4 million b/d may need to be slashed.
OPEC is a different organization than it was two years ago, the last time it agreed to output cuts. Some members have boosted production, others have shrunk. Libya and Nigeria, suffering from internal disruptions, were not given quotas when the coalition instituted 1.8 million b/d in cuts starting January 2017, while Iran was given a cap slightly above its production level at the time. Production from Libya has risen 580,000 b/d from the October 2016 baseline on which the cuts were based, and Nigerian output has risen 120,000 b/d. Venezuelan production has dropped precipitously and may be close to complete collapse.
Some OPEC members are saying that Saudi Arabia and Russia, both of whom have boosted their crude output in recent months, were responsible for a $20 a barrel drop in the price of oil and “should cut at least 1 million b/d instantly.” The two countries, the largest producers in the OPEC/non-OPEC coalition, needed to “get back the loss that they caused” to the rest of the coalition, one OPEC delegate said on condition of anonymity. Moscow is already saying it is not interested in participating in a production cut at this time.
US Shale Oil Production: US crude oil output from the seven major shale basins is expected to hit a record of 7.94 million b/d in December, according to the monthly EIA forecast released last week. The total oil output from the seven basins is forecast to rise by 113,000 b/d from November to December, driven largely by increases in the Permian Basin of Texas and New Mexico, where output was forecast to climb by 63,000 b/d to about 3.7 million b/d in December. Output was also expected to rise in each of the other basins, except for the Haynesville, where it would remain unchanged at 43,000 b/d. US natural gas production, meanwhile, was projected to increase to a record 75.1 billion cubic feet.
Up in North Dakota, state officials announced that oil production for September averaged nearly 1.36 million b/d, up about 66,800 b/d from August and a new record for monthly output. While September marked the fourth straight month for record-breaking oil output in North Dakota, this growth could soon stall due to pipeline congestion, a global supply glut, and potentially major changes in flaring regulation according to state officials. September marked the first time in at least three years that oil increased more rapidly than gas as operators shifted out of core drilling areas in the state where the gas to oil ratios are relatively high, to new wells in Divide, Mountrail and Burke counties in northwest North Dakota. “Those areas had gone for several years without any drilling activity, and now with the advent of the three-mile-long laterals and new completion techniques they’re much, much more economical.”
The announcement that some drilling in the Bakken is moving away from the “core” areas to less productive counties marks a major shift in the history of the Bakken. Whether drillers can compensate for “poorer rock” with three-mile laterals, more sand, and more water remains to be seen. The Bakken may have reached a tipping point.
Optimism about the future of US shale oil production continues to run rampant in the ranks of the official and unofficial forecasters. According to the IEA, “The shale revolution continues to shake up oil and gas supply, enabling the US to pull away from the rest of the field as the world’s largest oil and gas producer. By 2025, nearly every fifth barrel of oil and every fourth cubic meter of gas in the world come from the United States.” The Wall Street Journal adds that the use of hydraulic fracturing to drill for oil in shale rock—known as fracking—has dramatically reshaped the global oil industry over the past decade, and it has allowed the US to rival the Organization of the Petroleum Exporting Countries for market share.
The US will be the biggest contributor to global oil production growth in the period to 2040, accounting for 75 percent of the total, the International Energy Agency said in its latest World Energy Outlook. However, the IEA notes that this would require a lot more investment than what is currently being made in production expansion. “Without such a pick-up in investment, US shale production, which has already been expanding at a record pace, would have to add more than 10 million b/d from today to 2025, the equivalent of adding another Russia to global supply in seven years – which would be an historically unprecedented feat.”
In addition to the concerns the IEA is expressing about the ability of US shale oil to support the world’s demand for oil in coming years, others believe the expansion has been overhyped and that some of most lucrative shale wells may have already peaked. German radio points the recent statements from the CEO of Schlumberger that “The well-established market consensus that the Permian can continue to provide 1.5 million barrels per day of annual production growth for the foreseeable future is starting to be called into question.”
The Germans also point to the recent warning from Mark Papa, one of the pioneers of fracking. At an energy industry conference in Houston, Texas, in March, Papa warned: “The impression of US shale as the big bad wolf is perhaps a bit overstated.” Among his concerns were revelations that drillers in two other major shale regions — Eagle Ford in Texas and the Bakken in North Dakota — had already drilled through their most lucrative assets. “My theory is that you’ve got resource exhaustion that is beginning to take place. It’s no secret that you’ve only got three shale oil plays in the US of any consequence,” Papa said, referring to the Permian, Eagle Ford, and the Bakken. “The rest of them don’t amount to a hill of beans.”
If the skeptics are right that US shale oil production will not continue to grow at its present pace, we should see more evidence of an impending decline in US shale oil production within the next few years.
The IEA’s World Energy Outlook 2018:
The International Energy Agency which is an arm of the OECD is far more attuned to concerns in the EU and other developed countries than is the US Department of Energy’s EIA which generally hones its analysis to the policies of the current administration. As a result the IEA’s annual publication, World Energy Outlook 2018, has a much broader perspective than the US government and digs into the dangers of climate change more deeply than does Washington.
This year’s 600+ page report contains too much information and analysis to recount here. However, there are a few key points that are worth remembering. The Agency continues to warn that there is not enough investment taking place in oil industry. Although it is probably overly-optimistic about the prospects for the US shale industry it clearly understands that trillions must be invested in developing the world’s offshore oil resources in the next 20 years if global oil production is not going to go into decline.
The IEA forecasts three scenarios for the world’s energy. The “Current Policies Scenario” results in large increases in the use of fossil fuels and CO2 emissions over the next 20 years. The “New Policies Scenario” takes into account pledges to reduce emissions made at the Paris climate change meeting. Finally, the “Sustainable Development Scenario” envisions a reduction in annual carbon emissions from the current 32.6 gigatons to 17.6 gigatons. This scenario envisions the use of coal being cut by 50 percent, oil use being reduced by 25 percent, and use of natural gas increasing by 20 percent, while the use of renewables, nuclear power, and hydro increase substantially.
2. The Middle East & North Africa
Iran: It has been two weeks since the US re-imposed sanctions against Iran’s oil exports to punish Tehran for its involvement in several Middle Eastern conflicts. To avoid an oil price spike, Washington granted Iran’s biggest buyers – China, India, South Korea, Japan, Italy, Greece, Taiwan, and Turkey – 180-day sanctions waivers. These countries account for about 75 percent of Iran’s oil exports. Washington and the recipients of the waivers except for Turkey have not disclosed how much oil they are allowed to import during the 6-month waiver. Iraq, which imports natural gas and electricity from Iran, was given a 45-day waiver to continue these imports. Iraq has a severe electricity shortage in the oil-producing region around Basra, and it will be difficult for Baghdad to replace the Iranian energy. Iraq ended its trucked crude to Iran nearly a month ago, leading Washington to issue its waiver for the ongoing gas and power trade between the two countries.
Bernstein Energy forecasts, “Iranian exports will average 1.4-1.5 million b/d” during the exemption period,” down from a peak of almost 3 million in mid-2018. However, people familiar with the sanction waivers say American officials are forecasting that there will only be some 900,000 b/d of Iranian crude sales by April. Reuters’ sources say that China is allowed to purchase 360,000 b/d during the waiver period which is down from an average of 655,000 b/d before the sanctions began. Several countries, including China and India, stepped up their purchases before the imposition of the sanctions.
Most observers believe that the sanctions will send Iran into an economic recession, especially with the recent $20 a barrel drop in oil prices. Whether the sanctions will result in the economic meltdown that the Trump administration hopes will bring Tehran to accept tougher restrictions on its nuclear activity, drop its ballistic missile program and scale back support for militant proxies in the various Middle East conflicts remains to be seen. The EU does not agree with Washington sanctions policy and is working on ways to help Tehran bypass the sanctions.
Iraq: Baghdad is in talks with international companies to upgrade its oil production and export capacities, and an agreement is to be reached soon. Iraq hopes to increase its production capacity to 5 million b/d in 2019 and its export capacity to reach around 3.8 million b/d. The oil ministry also plans to boost export capacity, after upgrading its energy infrastructures, to 8.5 million b/d in the “coming years.”
Last week, Iraq restarted exports of Kirkuk oil, halted a year ago due to a standoff between the central government and the Kurdistan’s semi-autonomous region. The flow of oil from the Kirkuk region resumed at around 50,000-60,000 b/d compared with a peak of 300,000 b/d seen last year. It is not clear when and by how much exports would rise.
Oil Minister Thamir Ghadhban, a longtime proponent of reconstituting an Iraqi National Oil Company, is pushing the Iraqi Cabinet to redraft a more comprehensive law to govern the company. Iraq’s Parliament passed a law in March for a national oil company, such as the one which was founded in 1964 and disbanded in 1987 by Saddam Hussein. The new company would assume operational authority over the oil sector, leaving the Oil Ministry to establish policies.
With the recent successes of the Moscow-backed Syrian government forces, there has been an influx of militants from Syria into Iraq. This is forcing Iraqi security forces to transition into a counter-insurgency mode from the conventional war they have been fighting against ISIS. Iraq’s persistent security problems have caused the US military to conclude it is “years, if not decades” away from being able to withdraw from the country.
Saudi Arabia: When the US asked Saudi Arabia last summer to raise oil production to compensate for lower crude exports from Iran, Riyadh swiftly told Washington it would do so. But Saudi Arabia did not receive a warning when the US began offering waivers to Iran’s major customers that are keeping more Iranian crude on the market. As a result, the angry Saudis are cutting output with OPEC and its allies by about 1.4 million b/d sources told Reuters this week. The Saudis started to reduce shipments to the US in September, and this month they are loading around 600,000 b/d on cargoes for the United States, down from more than 1 million b/d in July and August. According to ClipperData estimates, Saudi oil exports to the US could soon reach their lowest levels on record.
There is a debate going on inside the Saudi government over whether to leave the OPEC someday. The Organization was created 58 years ago mostly to counter very cheap oil prices, which were being fixed by Western oil companies. Since then the cartel has weathered many crises and has played a major role in affecting world oil prices. A significant change came three years ago when Russia, along with several client states, became a de facto member and was successful in pushing up oil prices by withholding production from the market.
In reality, most OPEC members do not have much influence on world prices and have small, and in several cases, shrinking oil industries. The duumvirate of Moscow and Riyadh along with their clients such as the Gulf Arab states control enough of the global export market to exert whatever influence on prices is needed without the need to take into account the needs of the smaller and less well-off exporters who are mainly interested in higher prices. The growing split between Iran and the Sunni oil exporters is another factor in the viability of OPEC. For now, the organization seems safe but and some are already looking beyond the oil age.
Saudi Aramco has approached banks to finance its $5 billion Amiral petrochemical project that Aramco plans to develop with France’s Total. Plans for the Amiral petrochemical complex in the Saudi city of Jubail were announced in April. It will be located next to the Satorp refinery, which is also jointly owned and operated by Aramco and Total.
3. China
China is expected to increase its economic stimulus programs after credit grew at its slowest pace on record last month and property sales contracted. Beijing is concerned about slowing economic growth ahead of the expected US tariffs. Its central bank has already loosened monetary policy in response to the growth slowdown. Chinese exports have remained strong so far this year, despite the US imposition of duties on $250 billions of Chinese goods, but an export slowdown is expected to appear by early next year.
Passenger-car sales in China have fallen for the past four months year-over-year and are on course to an annual decline for the first time in nearly three decades. Most automakers, foreign and domestic, are struggling. Ford Motor Co.’s passenger-car sales in China were down 45 percent in the first nine months of the year, while sales of the Fiat Chrysler Automobiles NV-owned Jeep fell 35 percent, and General Motors Co.’s Buick sales were down 9 percent, according to LMC Automotive. Only the high end of the market has seen consistent growth, with Cadillac sales up 30 percent in the first nine months of 2018, and the German trio of Audi, BMW and Mercedes-Benz all growing by 10 to 13 percent over the same period.
China’s crude oil imports averaged 9.7 million b/d last month, the highest on record. Once again, it was the independent refiners, or teapots, that drove the increase as they seek to fulfill their import quotas before they expire. Beijing announced it would raise by 42 percent the oil import quota for its non-state refiners for 2019 as new refinery capacity is planned to enter into operation next year. Chinese refineries processed an average of 12.43 million b/d last month, a little lower than the September record of 12.49 million but still the second-highest monthly throughput rate on record according to data from the National Bureau of Statistics.
As the world’s second largest LNG importer, China has ramped up preparation for the upcoming winter through early procurement plans and a series of new gas infrastructure projects. Stable central Asian pipeline imports will depress China’s need for LNG spot cargoes in the coming months, as the country officially enters the winter season this week. Centralized heating systems in the north will be switched on until March to counter a region-wide drop in temperatures. State planner, the National Development and Reform Commission, has pledged there will be enough gas supply to the residential areas this winter to avoid a repeat of last year’s winter gas shortage.
4. Russia
Moscow wants to stay out of any oil-production cuts being pushed by some of its partners in the OPEC-led supply consortium. Worried by a decline in oil prices due to slowing demand and record supply from Saudi Arabia, Russia, and the United States, OPEC is talking about a policy shift just months after increasing production. President Putin on Thursday avoided giving a direct answer on whether production should be limited but said he had discussed the situation in global oil markets with President Trump.
Russia has been pumping flat out since June and has returned to drilling new fields, raising production to a post-Soviet high of 11.5m b/d as part of an agreement with Riyadh to keep oil markets well supplied. Riyadh is said to be pushing Moscow to consider cutting back output in 2019 to help underpin prices and keep the market balanced. But Russia is said to be hesitant at this stage to agree to cuts. Its oil companies want to start up new production which has been stymied for the past two years by Moscow’s alliance with Riyadh. Moscow can still add between 200,000 and 300,000 b/d in a short time period — within several months,” one of the people said but added it depended on future decisions with its allies in OPEC.
5. Nigeria
Nigeria will raise its crude oil production to 1.8 million b/d in 2019 from around 1.6 million currently, the head of the Nigerian National Petroleum Corporation told Reuters last week. Following a wave of militant violence in 2016 and early 2017, Nigeria’s oil production started to recover in the latter half of 2017, when attacks on oil infrastructure subsided. This year, after pipeline outages during the spring and early summer, Nigeria’s crude oil production was on the rise in August and September, but oil ministry data showed last week that October’s output down by some 70,000 b/d compared to September, due to increased sabotage attacks on oil infrastructure by oil thieves.
Shell Petroleum Development Company last week complained about the high rate of vandalism on its pipeline network at its oilfields in Bayelsa resulting in oil leaks and pollution of the environment. The oil firm expressed regrets at the incessant spills and is committed to maintaining environmentally sustainable operations. He said that although the May 17 oil spill on the Trans Ramos Pipeline was traced to equipment failure, many other leaks were predominantly caused by sabotage; during April and May 26 spill incidents were reported on that line and out of these 18 were caused by sabotage and eight were operational.
Oil Minister Kachikwu was even more optimistic saying that Nigerian oil production is set for a timely boost, climbing to around 2.2 million b/d by early next year with the startup of the giant Egina offshore oil field. Nigeria has not seen any major new oil projects in the last five years which makes the Total-operated Egina project the key to increasing production. The $16 billion deepwater project is the biggest oil and gas investment in Nigeria and will boost its plateauing crude production by over 10 percent. Production from the Egina field is due to start next month at around 150,000 b/d and could ramp up to 200,000 b/d after about six months.
The Nigerian Senate announced last week it again uncovered illegal withdrawals of $1.15 billion from the dividends accounts of the Nigeria Liquefied Natural Gas by the Nigeria National Petroleum Corporation. This is apart from the $1.05 billion that National Petroleum had admitted to taking earlier.
6. Venezuela
Crude oil production in Venezuela “is in free fall”, Fatih Birol, Executive Director of IEA, told Reuters last week. Its oil production fell to just 1.197 million b/d in September, down 42,000 b/d from a month earlier. However, because things are deteriorating so quickly, that figure is now out of date. With a few weeks left in 2018, many analysts believe production could be below 1 million b/d. Venezuela’s oil exports to the United States declined by 19 percent in October, compared to a month earlier. The decline came as a result of maintenance from the country’s upgraders, which turn heavy oil from the Orinoco Belt into exportable forms of oil. Without the ability to process the Orinoco oil, exports plunged.
For nearly a century, Chevron has had close relations with Caracas and has earned big money in Venezuela—about $2.8 billion between 2004 and 2014, according to cash-flow estimates by analytics firm GlobalData. Recently, executives at the last major US oil company in the country have debated whether it may be time to get out, according to people familiar with their deliberations.
The company is well aware a pullout could trigger a collapse of the government’s finances because a significant chunk of its hard currency earnings comes from joint operations with Chevron. By staying in the country as its economic and humanitarian crises deepen, the company risks damage to its reputation by being seen as supporting an authoritarian regime sanctioned by the US government. It also isn’t making much money in Venezuela anymore.
About 700,000 b/d of the country’s oil production comes from joint ventures between PdVSA and foreign companies. That includes about 200,000 to 250,000 b/d from Chevron ventures. Joint-venture output has generated far more cash for the government in recent years than oil pumped by PdVSA alone because the company’s production has gone to repay debts to allies such as China and Russia or was processed into gasoline the government provides almost free. That means a Chevron withdrawal would take a big bite out of the government’s revenue.
Drivers are reporting long queues to fill their tanks in Venezuela’s western states, as existing gasoline shortages worsened, impacting at least half of Venezuela’s 24 regions. In some provinces, lines extended for over ten hours. Public transport and commercial distribution networks have also been affected. Government spokespeople blamed the situation - which in some states such as Barinas and Merida have persisted with fluctuating severity for nearly three weeks - on supply problems of imported catalysts used in the Paraguana oil refinery complex.
Venezuela has problems importing many goods partly due to US-led financial sanctions which prohibit US citizens and firms from dealings in Venezuelan sovereign and state oil company debt. The sanctions have been felt in US-dominated global financial and banking sectors which process international commercial transactions, with the Caracas government denouncing numerous cases of frozen bank accounts and interrupted payments.
The measures have also caused significant problems for Venezuela’s nationalized oil firm, PDVSA, which has been prevented from repatriating a reported $1 billion in annual profits generated by its US-based subsidiary, CITGO, as well as vital products produced there such as diluents used in crude processing in Venezuela’s refineries. Independent estimates suggest that Washington’s sanctions have to date cost Venezuela $6 billion in lost oil revenues due to falling production, seriously exacerbating budget shortages and lack of investment in the country’s oil industry.
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 Spain new licenses for fossil fuel drillings, hydrocarbon exploitation and fracking wells will be banned. Spain has launched an ambitious plan to switch its electricity system entirely to renewable sources by 2050 and completely decarbonize its economy soon after. By mid-century greenhouse gas emissions would be slashed by 90 percent from 1990 levels under Spain’s draft climate change and energy transition law. To do this, the country’s social democratic government is committing to installing at least 3,000MW of wind and solar power capacity every year in the next 10 years ahead. (11/14)
In Kuwait, loading operations at some of the ports have been suspended owing to rains and severe flooding, shipping sources said Thursday. Oil operations have been suspended since Wednesday and there was no indication as to when they would resume. (11/15)
Abu Dhabi National Oil Company (ADNOC), one of the largest producers within OPEC, is undergoing a dramatic transformation. ADNOC’s CEO has made several statements suggesting that the NOC is set for a more diversified future, in which downstream and natural gas will become a major priority. (11/16)
In Asia, oil traders’ worries over record supplies arriving in the region just as the outlook for its key growth economies weakens have pulled down global crude benchmarks by a quarter since early October. Ship-tracking data shows a record of more than 22 million b/d of crude oil hitting Asia’s main markets in November, up around 15 percent since January 2017, and an increase of nearly 5 percent since the start of this year. (11/14)
Asian LNG: An anticipated warmer winter in north Asia and Japan may be good for residents in these colder climates, but it’s starting to play havoc with LNG spot market prices and LNG shippers. North Asia’s gas inventory typically peaks in October before significant drawdowns begin, but this year there are no signs yet of stocks falling. (11/6)
In Papua New Guinea, France-based oil and gas major Total said Friday it has signed an accord to potentially increase the country’s LNG export capacity by 65 percent. (11/17)
In Angola, nearly two decades after securing the initial rights, Total’s CEO Patrick Pouyanné was in Luanda to snip the ribbon on a $16 billion oil project. It’s not clear when he, or his peers, will be cracking open the bubbly in Angola again. Without another mega-project like Total’s Kaombo on the horizon and fields getting old, Africa’s second-largest crude producer is facing a steep decline unless it can revive exploration in what was once one of the world’s most exciting offshore prospects. (11/15)
In Argentina, the Vaca Muerta Shale Basin is the only unconventional play outside of North America where activity has already made the transition from exploration to full-scale development. The potential prize is huge – geographically, the Vaca Muerta Shale is three times the size of the highly prolific Permian Basin in the US, and it could turn out to be the “next Permian” if the right conditions are established. But much remains to be done before that happens. For all the hoopla, analyst Rystad Energy says production today is about 60,000 b/d (third quarter of 2018) and may rise to between 160,000 and 200,000 b/d in the fourth quarter of 2021. (11/17)
In Canada, the oil glut continues to grow while producers wait for a solution to their constrained pipelines to materialize. With storage maxed out as well, Western Canadian oil prices have fallen dramatically. The differentials that had previously been hitting heavy oil hard (now at below $18 a barrel for the first time since 2016) have now spread to light oil and upgraded synthetic oil sands crude as well, leaving overall Canadian oil prices at record lows. (11/16)
Canada’s price trough: The record low prices of Western Canadian Select—the benchmark price of oil from Canada’s oil sands delivered at Hardisty, Alberta—is an anomaly on the market. Many of the biggest oil producers in Canada expect some relief to come in the short term with US refineries returning from maintenance this quarter and with crude-by-rail shipments to the US continuing to set new records in the coming months. (11/6)
Cuts coming to Canada? Crude oil producers in Alberta appear to be split on a proposed cut in production amid record-low prices. One of the large Canadian oil producers, Cenovus Energy, has cut production and is calling upon the government of Alberta to mandate temporary production cuts at all drillers in a bid to ease Canadian bottlenecks that have resulted in Canada’s heavy oil prices tumbling to a record-low discount of US$50 to WTI. (11/17)
Canadian crude crash: The oil-sands benchmark fell $2.29 to $13.46 a barrel Thursday. The price collapse comes as WTI experienced a record losing streak amid rising US stockpiles and projections for reduced demand. (11/17)
The US oil rig count increased by two in the week to Nov. 16, bringing the total count to 888, General Electric Co’s Baker Hughes energy services firm said. Gas rigs fell by 1 to 194. After rig additions stalled at five during the third quarter, drillers have added 25 rigs half way through this quarter. The EIA also said producers drilled 1,577 wells and completed 1,308 in the biggest shale basins in October, leaving total drilled but uncompleted wells up 269 at a record high 8,545. (11/17)
Natural gas storage: Inventory levels for the Lower 48 states and in each of the US natural gas regions ended the refill season at their lowest levels since October 2005, and these levels were considerably lower than their previous five-year averages. Despite the increased natural gas production, increased demand for natural gas reduced net injections into working gas storage. Natural gas production averaged 83.6 Bcf/day during the refill season in 2018, compared with 74.7 Bcf/day in 2017 during the same period. However, greater-than-average power sector consumption of natural gas during the late spring and summer, combined with increased natural gas demand from US export markets, resulted in lower-than-average weekly net injections of natural gas into storage. (11/16)
US natural gas prices rose 18 percent — their biggest one-day gain in eight years — as the onset of winter tests the ability of shale production to supply the country. Nymex December gas gained 73.6 cents on Wednesday to settle at $4.837 per million BTUs, the highest price for the next month’s contract since early 2014. Futures have risen 48 percent this month. The rise reflects worries that winter heating demand may draw heavily on stocks of US gas in storage. (11/15)
Narrowing gas price elasticity in the US power sector could drive upside risk at the benchmark Henry Hub this winter, adding fuel to a rally that recently lifted the NYMEX to its highest in nearly five years. Already this month, US gas demand from power generation is averaging nearly 24.8 Bcf/d, outpacing demand over the same period last year by 1.6 Bcf/d or nearly 7%. Even controlling for temperatures, which are about 2.8 degrees Fahrenheit colder this November than last, burn levels are exceptionally strong this month. (11/17)
Colorado voters rejected by a 58-to-42 margin a measure which would have required drilling of oil and gas wells to be at least 2,500 feet away from occupied structures and vulnerable areas, such as parks and waterways, instead of 500 feet, after the local oil and gas industry poured more than $30 million into defeating the measure. (11/7)
Florida voters on Tuesday approved an amendment to prohibit drilling, either for exploration or extraction, for oil or natural gas in state waters, according to unofficial results from the state’s Division of Elections. Florida’s Amendment 9, which appeared to pass with more than 68% of the vote, is a state constitutional amendment which required a 60% supermajority vote for approval. (11/7)
Biofuels pushback: A group representing biofuel companies asked a federal judge on Tuesday to force the US Environmental Protection Agency to stop exempting small refineries from renewable fuel laws until a lawsuit challenging the agency’s actions is resolved. (11/16)
Arctic permitting: The US Department of Interior said Thursday it was preparing an environmental impact statement for a 2019 lease sale that would open as much as 65 million acres of federal Arctic waters to oil and natural gas drilling. While it remains uncertain whether the sale will even take place, commercial interest in US Arctic waters appears extremely limited. (11/16)
In Minnesota, a new study found that 70 percent of the state’s electricity could come from wind and solar energy by 2050 — and it would cost about the same as natural gas. State officials plan to use the report, which was commissioned by the Minnesota Department of Commerce, as it considers future energy policy decisions. Today, around 20 percent of the state’s electricity comes from wind, and around 1 percent from solar. (11/17)
Peak coal use? The world may never again use as much coal as during a peak in 2014, according to the latest World Energy Outlook from the IEA. (11/15)
Euro renewables commitment: The European Parliament approved a binding 2030 target for renewables (32%) and an indicative target on energy efficiency (32.5%) that will play a crucial role in meeting the EU’s climate goals. (11/14)
EV push: VW will spend almost $50 billion on developing electric cars, autonomous driving and new mobility services by 2023 and explore further areas of cooperation with US automaker Ford. (11/17)
Nuclear energy in Japan may be making a significant comeback, it is just not going to be able to meet the government’s lofty production goals for 2030, according to a recent Reuters report. The Japanese government had set a target for nuclear to make up at least a 20 percent share of Japan’s total electricity production over the next decade. (11/8)
Innovative wind generator: A spinning turbine that can capture wind traveling in any direction and could transform how consumers generate electricity in cities has won its inventors a prestigious international award and $38,000 prize. Two students at Lancaster University scooped the James Dyson award for their O-Wind Turbine, which — in a technological first — takes advantage of both horizontal and vertical winds without requiring steering. (11/17)
Fusion in China: China’s self-designed “artificial sun,” a device to harness the energy of fusion, has made an important advance by achieving a temperature of 100 million degrees Celsius in plasma and a heating power of 10 megawatts. (11/14)
Warming forecast correction: Scientists behind a major study that claimed the Earth’s oceans are warming faster than previously thought now say their work contained inadvertent errors that made their conclusions seem more certain than they actually are. Two weeks after the high-profile study was published in the journal Nature, its authors have submitted corrections to the publication. (11/16)
Cost of weather disasters: Hurricane Harvey’s extreme rainfall and the most devastating wildfire season on record contributed to $306 billion in damages from climate and weather disasters in the United States in 2017, shattering the previous record by more than $90 billion, according to a federal report released Monday. The National Oceanic and Atmospheric Administration’s recap of the nation’s climate over the past year found that 2017 was the third-warmest on record. (11/15)
CA’s air quality nightmare: The wildfires that have laid waste to vast parts of California are presenting residents with a new danger: air so thick with smoke it ranks among the dirtiest in the world. On Friday, residents of smog-choked Northern California woke to learn that their pollution levels now exceed those in cities in China and India that regularly rank among the worst. (11/17)
Toxic fog in Delhi: Residents awoke on Thursday to find the city blanketed in a toxic fog. Air pollution in the Indian capital has risen to hazardous levels after firecrackers were set off to celebrate Diwali, despite a court ban. (11/8)
Global Coal Use May have Peaked in 2014, Says Latest IEA World Energy Outlook
By Simon Evans, originally published by Carbon Brief
November 14, 2018
https://www.resilience.org/stories/2018-11-14/global-coal-use-may-have-peaked-in-2014-says-latest-iea-world-energy-outlook/
Principles of Energy Transition
By Chris Nelder, David Murphy, originally published by The Energy Transition Show
November 6, 2018
"This episode features something a little different: Chris is the interviewee, and our guest is the interviewer. Dr. David Murphy, a professor of environmental studies at St. Lawrence University, returns to the show to interview Chris about energy transition in this live event, which was held at the University of Colorado, Colorado Springs, on February 13, 2018. This was a fun, loose, casual conversation that newcomers to the subject of energy transition should find very accessible."
https://www.resilience.org/stories/2018-11-06/principles-of-energy-transition/
Peak Oil Review: 5 November 2018
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2018-11-05/peak-oil-review-5-november-2018/
Quotes of the Week
“US crude oil production reached 11.3 million barrels per day (b/d) in August 2018, up from 10.9 million b/d in July. This is the first time that monthly US production levels surpassed 11 million b/d. US crude oil production exceeded the Russian Ministry of Energy’s estimated August production of 11.2 million b/d, making the United States the leading crude oil producer in the world.” US EIA monthly report
“We thought that we got away with not a lot of warming in both the ocean and the atmosphere for the amount of CO2 that we emitted. But we were wrong. The planet warmed more than we thought. It was hidden from us just because we didn’t sample it right. But it was there. It was in the ocean already.” Laure Resplandy, Princeton University research team leader
1. Oil and the Global Economy
The plunge in oil prices, which began in early October, continued last week with New York oil futures closing Friday at $63.14, down about $14 a barrel in the past month. London futures have followed a similar pattern falling from $86 to $72.83 on Friday. During September the threat of the renewed US sanctions on Iranian exports forced world prices into the high $80s with many predicting that we would soon see $100 oil again. During the past month, however, market sentiment changed as it appeared the sanctions might not be as effective as some hoped, the global oil production increase, higher prices and the brewing US-China trade war threaten demand in the coming years.
Most of the world’s top oil trading houses expect prices to decline next year as slowing global economic growth and rising oil supply compensates for fewer Iranian crude barrels on the market. Speculators second this sentiment with hedge funds closing out the bulk of their long positions in the oil market during October. There are a few outliers such as Goldman Sachs which sees oil prices back to $80 a barrel by the end of the year, but for now, the sentiment that demand for oil will fall in the coming year seems to be predominant.
A $14 decline in world oil prices is starting to pressure the budgets of the world’s largest exporters and is likely to restrain in growth in investment in finding and producing from new oil fields.
OPEC: A Reuters survey says OPEC increased oil production in October to the highest since 2016, as higher output led by the United Arab Emirates and Libya more than offset a cut in Iranian shipments due to US sanctions. The cartel pumped 33.31 million b/d last month, up 390,000 b/d from September. Defacto OPEC member Russia added another 50,000 b/d to the total, and the rapid growth of US shale oil production helped too. Early reports of OPEC production are not necessarily valid, and it may be many weeks before a more accurate picture emerges. For example, there are reports that Venezuelan exports fell as much as 200,000 b/d last month.
US Shale Oil Production: Rystad Energy, an oil industry consulting firm, says the oil market should expect significantly better US oil production then found in the EIA’s predictions. “Long-term oil production potential from the US remains dramatic as long as oil prices stay above $50 per barrel. Even in a scenario of $55 per barrel we see US oil output growing to 16.5 million b/d by 2030. Moving to a price environment of $75 per barrel would unlock an additional 5.3 million b/d of volumes in 2030, but it also results in faster acceleration of base decline and an earlier plateau in production.
“The shale industry is still in the middle of a long-term investment cycle,” says Per Magnus Nysveen, Senior Partner and Head of Analysis at Rystad Energy. “If a favorable price environment persists, we will see US oil adding the equivalent of one Saudi Arabia over the next ten years and with healthy profits seen as soon as the early 2020s.” The firm’s report includes the following chart showing US oil production climbing as high as 22 million b/d in the coming decade even at moderate oil prices of $75 a barrel.
US oil production outlook
Such a report, which was likely produced to encourage more investment in the oil industry, contrasts sharply with other forecasts that take into account the growing problems of the shale oil industry. While all indications suggest that the US shale oil industry will continue to grow for the next few years, the profitability of the industry is coming under ever-increasing scrutiny. Last week, Chevron reported that its production from the Permian Basin increased by 80 percent in the third quarter over the same period in 2017, based on tweaks made to its method of drilling and completing wells. As usual, there was no mention as to what these new techniques cost or whether the increased production came from drilling only in a declining pool of “sweet spots.”
While there currently is a shortage of pipeline capacity to move oil from the Permian to markets, several pipeline companies have reported progress in building or expanding their capacity, and most expect that with 18 months there will be sufficient capacity to handle the increased production from the Permian Basin. The downside to this pipeline expansion is that the rapid depletion of the Bakken’s wells will result in excess capacity for the pipeline companies who will be left with unprofitable “stranded assets.”
Up in North Dakota’s Bakken, drillers reported record-breaking crude oil output of 1.29 million b/d in the third quarter and announced plans to ramp up production in the play. Hess produced 118,000 b/d of oil equivalent in Q3 and plans to increase output to more than 175,000 barrels of oil equivalent within three years. Keep in mind that the barrel of oil “equivalent” includes a lot of natural gas, some of which is being flared off for lack of pipelines to carry it to market. Continental Resources, the state’s largest oil producer, doubled its Bakken oil recovery estimates, claiming that as much as 40 billion barrels of crude may ultimately be produced from the play.
Despite the increase in US shale oil production, there continues to emerge a stream of reports describing in great detail the lack of profitability in drilling for shale oil. The situation will only get worse as drillers run through their inventory of productive “sweet spots” in which to drill for oil and are forced to drill in less and less productive areas. In short, the industry is not profitable now and is doomed by the facts of the situation to become even less so in the future as it is forced to drill less productive wells at the same cost as the profitable ones.
The only question is when the people financing shale oil drilling will realize that there is no future and stop supplying the capital which keeps the industry running at a loss.
2. The Middle East & North Africa
Iran: This week, the US will issue temporary sanctions waivers allowing eight countries to keep importing Iranian oil. Two countries have agreed to end those deals within months while the other six have agreed to “greatly reduced levels,” according to Secretary of State Pompeo. He also said that US actions have already cut Iran’s oil exports by more than 1 million b/d before the sanctions take effect. A million-barrel decline—more than a third of international sales—is twice the level achieved over the same period in the Obama era.
The US believes that global oil supplies will exceed demand next year making it easier for countries to cut Iranian oil imports to zero, without a large increase in oil prices according to a senior US official.
The Iranian economy, with oil accounting for 80 percent of its tax revenue and a quarter of gross domestic product, is in trouble. Europe’s largest companies have pulled out. Iranians have rushed to exchange their rials, plunging the currency’s value to record lows and sparking a surge in consumer prices. The International Monetary Fund is forecasting that Iran’s economy will contract by 3.6 percent next year.
The efficacy of the sanctions after they are imposed, and the ability of the US to detect large-scale avoidance is the subject of endless debate in the financial press. It’s been six months since President Trump announced the sanctions, and since then a lot of data has accumulated suggesting that the initial forecasts of losses of between 1.5 and 2 million b/d in Iranian exports may be too high, but it will take several months until the situation sorts itself out. Tehran is already turning off the transponders that track the movement of oil tankers around the world, but improved satellite tracking and big-data technology that weren’t available just a few years ago may make it more difficult to hide the movements of anything as large as an oil tanker.
The EU is firmly against Washington’s re-imposition of sanctions and has been working on ways to circumvent the US financial regulations that would make it difficult for European refiners to keep on purchasing Iranian oil. Last week, however, Danish diplomats briefed EU ambassadors on efforts of Iran’s intelligence services to kill the leader of an Arab separatist group in Denmark. Copenhagen is calling for action to punish Tehran and at least eight countries, including Britain and France, are supporting Danish calls for new sanctions. Tehran’s hope of maintaining customers in the EU seems to have taken a turn for the worse.
Tehran sold 280,000 barrels of crude oil to private companies for export last week as part of its strategy to counter US sanctions. In the past, private refining companies could buy Iranian crude oil for export only if it were to be turned into oil products, leaving the state the monopoly on crude exports. Iran said in July, however, that it would start crude oil sales to private firms as part of its efforts to bypass the sanctions. Analysts point out that this would still leave foreign entities buying the crude liable for penalties from Washington for doing business with Iranian firms.
Iraq: The new Cabinet is proposing a $24 billion in spending increases in a 2019 draft budget, marking a dramatic shift away from the austerity budgets initiated after the price of oil crashed.
Baghdad currently trucks small quantities of crude oil from its northern Kirkuk oil field into Iran in exchange for Tehran delivering the same amount of its oil to Iraq’s southern ports. Both sides benefit from avoiding shipping costs. This month, however, Iraq will halt trucking of crude to Iran to comply with the US sanctions. Although only less than 30,000 b/d is involved, Iraq won’t risk the wrath of Washington which provides much of its security and training of its forces.
Saudi Arabia: Diplomatic pressure from the United States and Britain for a cease-fire in the Yemen war intensified last week. The calls for a halt to the conflict were made by Secretary of State Pompeo, UK Foreign Minister Hunt, and Secretary of Defense Mattis. The request for a ceasefire came against the backdrop of rising global criticism of Saudi Arabia, which has been conducting an ineffective bombing campaign that is a major cause of civilian deaths and widespread destruction in Yemen.
The new initiative comes as relations between Saudi Arabia and the United States have cooled in the month since Jamal Khashoggi was killed by Saudi security personnel. The operatives had close ties to Crown Prince Mohammed bin Salman, Saudi Arabia’s de facto ruler, architect of the Yemen War.
Saudi Arabia reported a fiscal deficit of $1.95 billion for the third quarter, down from $1.97 billion in the previous quarter. Over the first nine months of the year, the deficit shrank by 60 percent, thanks to the improvement in oil revenues and a small increase in non-oil revenues.
Libya: Libya has restarted the eastern al-Bayda oilfield, the latest facility in the so-called Oil Crescent region to resume work after heavy fighting in June. The field has a production capacity of about 12,400 b/d.
Despite frequent production outages as various armed groups vie for a bigger share of the pie, Libya’s National Oil Corporation plans to pump 1.6 million b/d of crude by the end of the year. This was the level of production before the 2011 civil war resulted in chaos across the country. The company says it would like to boost output to 2 million b/d by 2022. To this end, the company has signed agreements with BP and Eni to resume drilling in the country. Libya still has large undrilled reserves, but the question of political instability remains the main roadblock to increasing production anytime soon.
For example, just last week a group of tribesmen staged a protest at the southern El Sharara oil field, threatening to close down production unless their living conditions improve. The field, in Libya’s remote southwest, normally produces around 300,000 b/d but has suffered frequent shutdowns caused by security problems in the past, including raids, kidnappings, and blockages by tribesmen and state-paid guards.
3. China
China’s imports of Iranian crude dropped in September compared to the same month last year and to August, while crude oil imports from the US doubled year-on-year in September despite the trade war, according to data from China’s General Administration of Customs. Oil imports from Iran slumped by 34 percent on the year to 518,300 b/d in September while imports averaged 798,423 b/d in August. Key Asian buyers of Iranian oil dramatically cut their purchases from Iran in September to the lowest level since the previous sanctions on Tehran were lifted in January 2016.
Beijing’s manufacturing sector barely grew last month after stalling in September, while an extended contraction in export orders highlighted rising pressure on the economy as a trade war intensified. The Purchasing Managers’ Index (PMI) for October, released last Thursday, edged up to 50.1 from 50.0 in September. Economists polled by Reuters had forecast a reading of 49.9, just off the 50-mark that divides expansion from contraction. The rather slight growth last month was in line with an official PMI survey showing that China’s manufacturing sector expanded at the weakest pace in over two years.
Though readings above 50 still indicate an expansion in activity, the fall was more precipitous than economists projected, with the October reading at the lowest since July 2016. “Overall, the data confirms that economic fundamentals are weakening. I’m afraid the softness will remain for a long period,” said, an economist at Founder Securities. Indicators and other economic data in recent weeks have shown that the Chinese economy is slipping faster than many officials expected. As the world’s largest oil importer, a sagging Chinese economy has serious implications for world oil prices.
The head of the Japanese steel industry group said on Monday that he is worried about signs of a slowing Chinese economy. “The U.S.-China trade spat still has limited impact on Japanese steelmakers’ business, but we are concerned about signs of a weakening economy in China.” China’s iron ore prices fell for a fourth day on Friday amid expectations that the oncoming winter season will see reduced demand for steel.
4. Russia
Moscow’s oil production increased to 11.41 million b/d in October from 11.36 million in September, setting a new post-Soviet record high. Russia has been raising its production since OPEC, and its allies agreed in June to relax compliance rates with the cuts to 100 percent from the previous over-compliance. The respective leaders of the OPEC and non-OPEC nations part of the deal—Saudi Arabia and Russia—have been interpreting the eased compliance as adding a total of 1 million b/d to the market. Moscow has already reversed its entire 300,000-b/d cut that was pledged as part of the initial deal and has been adding production in recent months. Energy Minister Alexander Novak recently said on Saturday there was no reason for Russia to freeze or cut its oil production levels, noting that there were risks that global oil markets could be facing a deficit.
Russia is set to suffer a large revenue loss from the regulation mandating cleaner marine fuels starting in 2020. Moscow is the world’s top exporter of the sulfurous residual oil that powers ships and is not ready for the change despite many years of notice that it was coming. Refineries across the world are bracing themselves for the once-in-a-generation shift intended to reduce pollution caused by ships. European and the US Gulf Coast refineries are ready to make the change to low-sulfur fuel oil, but Russian companies have done little to prepare.
5. Nigeria
There seems to be no end to the corruption and general malfeasance that plagues Nigeria’s oil industry. A new report that was recently leaked to the press says that $22.06 billion and N481.75 billion in oil and gas revenues are yet to be remitted to the government by the Nigeria National Petroleum Corporation, the Nigeria Petroleum Development Company, and some companies in the oil and gas sector. Audits of the oil industry by foreign accounting firms, including well-known US auditors, have been unable to locate the missing billions due to a lack of an adequate audit trail showing what happened to the money after foreign oil companies pay for the oil they purchase from the national petroleum corporation.
The National Petroleum Corporation said last week that it had signed a six-month crude-for-product deal with BP to supply Nigeria gasoline ahead of the upcoming Christmas celebrations and the February 16, 2019, general elections.
Brazil’s Petroleo Brasileiro will sell its 50 percent stake in a Nigerian oil and gas exploration venture to a consortium led by oil trading firm Vitol for $1.53 billion. This divestment is the latest step in the Brazilian state-controlled oil company’s debt reduction drive.
6. Venezuela
Exports from Venezuela in the first weeks of October were down to 0.99 million b/d, according to Kpler data. This is down some 300,000 b/d from September 2018. While this is a preliminary report, all data sources point to a downward trend. At the beginning of 2018 the average weekly loading volume was between 10 and 12 million barrels; now it is about 6-7 million barrels per week. Venezuela’s production has fallen back 70 years to 1940s levels.
The fuel shortages have expanded across the country as PDVSA’s refineries run at the lowest rates seen this year because of the lack of crude oil and as Cardon, the country’s largest refinery, remains closed after an Oct. 15 blackout. The oil company’s five refineries are operating at less than a quarter of their capacity. Shortages tend to be less frequent in the capital, where the government is trying to prevent unrest. Gasoline lines are one more problem for Venezuela’s people, which includes scarce food, hyperinflation, regular power outages, and lack of public transport.
More than a million Venezuelans have been living in Colombia, taking a heavy toll on its public services in border regions. The World Bank, which praises Colombia’s “open arms” policy and its efforts to register the new arrivals, says the crisis has cost the country around $1.2 billion this year alone. However, the Bank says it could be good for Colombia’s economy in the long run as many of the new arrivals are well educated and possess a range of skills.
At least 6,000 Venezuelans were lined up at Peru’s northern border last week in hopes of entering the country before a deadline for acquiring residency. Another 4,000 were due to arrive by now, according to Peru’s ombudsman’s office. Peru was one of the first countries to offer temporary residency cards for Venezuelans who have been fleeing their crisis-stricken homeland and crossing Colombia and Ecuador to reach Peru. As the number of Venezuelans in Peru has surged to nearly half a million, the government moved the deadline from the end of the year to the end of October.
The collapse of Venezuela’s health system has left many of the emigres with highly contagious diseases, such as malaria, yellow fever, diphtheria, dengue and tuberculosis, and AIDS, as they flood into neighboring countries. By early October, nearly 1,000 Brazilians who lived along the road out of Venezuela had contracted measles here and about 2,000 in the region. All had been infected by infected Venezuelans who crossed into Brazil, the Health Ministry said.
Measles is already spreading beyond the Brazilian Amazon to other Brazilian states, as well as Colombia, Peru and as far south as Argentina, according to recent Pan American Health Organization reports. Other diseases racing through communities in Venezuela are now crossing borders and raising concerns among health authorities as far away as the US. One US medical official called the situation “a perfect storm condition for a catastrophic medical situation.”
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
Risks to oil exporters: A changing energy system is posing “critical questions” for many of the world’s largest oil and gas producing countries, the IEA says. The rise of shale gas and oil in the US, global improvements in energy efficiency, and the response to climate change are leading to “sustained pressure” on countries that rely heavily on hydrocarbon revenues. (11/2)
In northwest England, Cuadrilla extracted its first shale gas after it began fracking operations there just over two weeks ago. Cuadrilla said the gas flows were small but coming at such an early stage of the project were evidence of the potential of the site. (11/3)
Germany will speed up its plans to build a liquefied natural gas terminal as Europe’s largest economy seeks to diversify its energy supply. Chancellor Angela Merkel also said that Ukraine would remain an important gas transit country once the Nord Stream 2 pipeline is built. Critics of the new pipeline project say it will deprive Ukraine of lucrative gas transit fees and increase the dominance of Russian gas monopoly Gazprom. (11/3)
Offshore Turkey, a ship will start drilling for oil and gas in the Mediterranean, a move that could create tensions with neighboring Cyprus and Greece over jurisdiction. Turkey and the internationally recognized Greek Cypriot government in Cyprus have overlapping claims of jurisdiction for offshore oil and gas research in the eastern Mediterranean, a region thought to be rich in natural gas. (10/31)
Zimbabwe’s President Mnangagwa yesterday officially announced the discovery of oil and gas in the greater Muzarabani area by Australian company Invictus Energy, stretching over 200km. The size of the land makes the discovery the largest undrilled gas deposits in Africa so far. The President said if all goes according to plan, Zimbabwe would have its first oil exploration well by 2020. (11/2)
Angola, whose stability was sent reeling by the oil price crash of 2015-2016, is making strides in transforming the national champion Sonangol into a more accountable and competitive business entity. With this, the new presidential administration hopes, the whole of Angola’s oil production would swing back to growth (or at least settle for a lengthy stagnation); its oil production fell from a 2008 level of 1.89 million b/d to the current 1.48 million. (10/30)
Brazil’s state energy giant Petrobras has decided not to go through with a drilling plan at a field operated by Chevron, effectively ruining the supermajor’s plans for the field. Chevron has a 52-percent stake in the Frade field and Petrobras has 30 percent, but for the Brazilian company, this field is not a priority. (11/1)
Mexico’s crude oil production fell to 1.83 million b/d in the third quarter, compared with 1.87 million b/d in the preceding three months, keeping a trend toward a decline that has been going on for several years. (10/30) [Ed. note: production peaked at 3.5 million b/d back in 2004 and is down roughly 48% since then.]
In Mexico, BP and Total are among international gasoline retailers that are facing a supply shortage because of weather issues, especially Hurricane Willa, and soaring fuel theft from illegal taps into pipelines. Repairing pipeline taps takes time and requires pipeline shutdowns, leading to supply shortages. Authorities detected 1,852 illegal taps on pipelines in Guanajuato last year, more than any other state in the country. (11/3)
Pemex’s total refining utilization rate during the third week of October has reached a record low of 25.7%. The company processed 425,800 b/d of crude oil in the second week of October. Light crude oil shortages at simple-configuration refineries and technical problems in the 190,000 b/d Madero and 285,000 b/d Minatitlan refineries have been interfering with Pemex’s overall refining activities. (10/31)
In Canada, drilling for oil and gas will likely decline by 5 percent in 2019, the Petroleum Services Association of Canada has forecast, blaming pipeline capacity shortages and the resultant discount in Canadian heavy to the West Texas Intermediate benchmark for the outlook. The biggest effect of the natural gas shortage will be felt by the Canadian industrial sector, which consumed about double the amount of natural gas used by residential and commercial users according to data gathered by the provincial government in 2016. (11/3)
Canada’s pipeline bottlenecks are pushing Canadian crude prices to the lowest in at least a decade. The highways of Saskatchewan show just how desperate Canadian oil producers are to get their crude to market. Tanker trucks laden with oil are journeying almost 500 miles (800 kilometers) to pipeline and rail terminals. (11/1)
In British Columbia, the pipeline explosion on October 9th has caused FortisBC, one of British Columbia’s largest utilities, to declare that their supply of natural gas will be reduced by a whopping 50 to 80 percent throughout the coldest months of the year. The City of Vancouver will halt work at its gas-guzzling asphalt plant and turn down the thermostats at all buildings occupied by city staff, with the exception of public spaces and libraries. Large agricultural users, such as food-growing greenhouses, may skip the winter growing season. (11/1)
The US oil rig count decreased by 1 to 874 while the active gas rig count held steady at 193, according to Baker Hughes. The combined oil and gas rig count is now 169 up from this time last year. (11/3)
US record production: Monthly US crude oil production reached 11.3 million b/d in August 2018. Monthly crude oil production reached a record high in several states. Texas had the highest record level at 4.6 million b/d, followed by North Dakota at 1.3 million b/d. Other states that had record-high production levels were New Mexico, Oklahoma, Colorado, and West Virginia. Production in the Federal Offshore Gulf of Mexico also hit a record high of 1.9 million b/d. (11/3)
LNG exports: Sempra Energy will join Cheniere Energy and Dominion Energy as a US exporter of LNG produced from shale gas when it ships its first cargo, which is expected to occur in early 2019. The activity comes as the US is poised to become a major player in the global LNG market, providing spot and contract cargoes to high-demand countries in Asia and Europe and greater optionality for traders. Besides Sempra, Kinder Morgan’s Elba Island LNG export facility in Georgia and Freeport LNG’s terminal in Texas are expected to start up in 2019. (11/3)
Exxon Mobil Corp on Friday reported a quarterly profit that topped analysts’ estimate on higher prices received for its oil and natural gas, but its production volumes fell on a year-over-year basis. The company’s third-quarter net income rose 57 percent to $6.24 billion, yet oil production fell 3 percent to 3.8 million barrels of oil equivalent and natural gas output dropped 4 percent. The company’s oil and gas output has dropped in nine of the last 10 quarters. (11/3)
Coal exports out of the terminals in the Hampton Roads region in Virginia were at 3.71 million tons in October, up 20.2% from the eight-month low 3.09 million tons in September. October also marked the eighth time in 2018 that exports out of the region were higher than in the corresponding month of the last three years. (11/3)
A fleet of new coal plants in Asia threatening to derail global emissions targets has exposed the growing “disconnect” between energy markets and climate goals, the IEA said. Asia has 2,000GW of coal-fired power plants that are operating or under construction — more than 10 times as much as the EU — and many of them are inefficient plants. While the coal-powered generating plants in the US and Europe are older, 42 years on average, and near the end of their life, Asia’s coal plants are just 11-years-old on average and most still have decades left to operate. (10/31)
German coal crank down: Vattenfall is considering converting its German coal-fired power stations to use fuels including gas or biomass as utility companies in the country brace for a government deadline for phasing out coal altogether. Vattenfall, owned by the Swedish state, operates 2.9 gigawatts (GW) of coal-fired power stations in Germany, including the 1.7 GW Moorburg site that only opened three years ago and supplies 80 percent of Hamburg’s electricity. Investors are jittery ahead of a December announcement from a government-appointed commission about how coal plants will be phased out of Europe’s largest economy. (10/29)
In Japan, government authorities have announced new plans to start dumping highly radioactive wastewater from the failed Fukushima Daiichi nuclear power facility directly into the Pacific Ocean. Though the amount of radiation in the water far exceeds legally-permitted levels, there’s apparently no other place to put it at the site, which is on the verge of seeing its storage capacity completely maxed out. (11/1)
EV sales concentrated: 25 cities were home to nearly 1.4 million of the world’s 3.1 million passenger electric vehicles. These 25 cities, representing just 12% of world passenger vehicle sales, account for 44% of the world’s cumulative electric vehicle sales through 2017. China is home to half of the global electric market and 11 of the 25 top electric vehicle market cities. The EV capitals use multi-faceted strategies to spur infrastructure investment, such as adopting building and parking codes to ensure broad access to charging over the longer term. (11/1)
Solar boost for EVs: Kia Motors and Hyundai Motor plan to introduce solar roof charging technology on selected Hyundai Motor Group vehicles. Electricity-generating solar panels will be incorporated into the roof or the hood of vehicles and will support internal combustion, hybrid and battery electric vehicles with additional electrical power, increasing fuel efficiency and range. Hyundai will launch the first generation of this technology into its vehicles after 2019. (10/31)
Battery innovation ongoing: In battery development, some undeniable trends have emerged, and chief among them is that lithium-ion battery improvements are nearing their limit. The main problems with Li-ion batteries remain relatively high cost, insufficient energy density in a context of ever-higher energy density demand, and safety issues because of the liquid electrolyte these batteries use. The batteries of tomorrow—perhaps using an air-breathing zinc battery, or silicone anodes instead of graphite, or solid polymer instead of liquid electrolyte, or sodium ion batteries—seek to solve these problems. The air-zinc battery maker NantEnergy announced that its air-zinc battery will move out of the lab to commercialization. (10/30)
CA driverless test: Alphabet’s Waymo has been granted California’s first permit to test fully driverless vehicles on public roads as it races towards commercializing autonomous technology. The permit from the state’s Department of Motor Vehicles will allow Waymo’s cars to test without a human operator during the day and at night on city streets, rural roads and highways with speed limits up to 65 miles an hour. (10/31)
GM’s profits and share prices jumped on news of strong sales for pricier pickups and SUVs. That, along with the strong results in China, where new-car demand is cooling, offered relief to investors worried about GM’s ability to navigate a potential slowdown in global auto sales. (11/1)
New climate data: The world’s oceans have been soaking up far more excess heat in recent decades than scientists realized, suggesting that Earth could be set to warm even faster than predicted in the years ahead. Over the past quarter-century, Earth’s oceans have retained 60 percent more heat each year than scientists previously had thought, said Laure Resplandy, a geoscientist at Princeton University who led the startling study published Wednesday in the journal Nature. The higher-than-expected amount of heat in the oceans means more heat is being retained within Earth’s climate system each year, rather than escaping into space. In essence, more heat in the oceans signals that global warming is more advanced than scientists thought. The research was conducted with experts from the Scripps Institution of Oceanography and several other institutions in the United States, China, France, and Germany. (11/1)
Climate states: North Carolina has committed to upholding the landmark Paris climate agreement by slashing greenhouse gas emissions, a move that comes a little over a month after Hurricane Florence devastated the state. Gov. Roy Cooper (D) signed an executive order on Monday pledging to slash North Carolina’s greenhouse gas emissions 40 percent below 2005 levels by 2025. North Carolina joins 17 other governors who have signed onto the US Climate Alliance. (11/1)
Toxic air: India’s most fabled cities are now among the world’s most polluted. According to some recent rankings, India holds nine of the top 10 spots. Toxic air has become a global menace that kills seven million people each year, the United Nations Environment Program said in a bleak report released Tuesday. The bulk of these deaths are in the Asia Pacific region. (10/31)
Trains powered by hydrogen could be a reality in the UK by the “early 2020s”, according to Transport Secretary Chris Grayling. They’re seen as a cleaner – but pricier – alternative to diesel trains, as the exhaust emission is pure water. The BBC’s Roger Harrabin reports from Germany, where hydrogen trains are already running. (10/29)
Brazilian enviro concerns: Conservationists say Brazil’s far-right President-elect Jair Bolsonaro will merge the ministries of agriculture and the environment, an aide says, in a move which critics say could endanger the Amazon rainforest. Brazil’s highly biodiverse Cerrado is being destroyed for soybean production; critics expect more of the same. (10/31)
Crude oil production from onshore federal lands reached a record high over the first seven months of this year. Reuters reported in June that crude oil production from federal lands and waters rose 7 percent in 2017 to the highest since at least 2007 if not longer. The average daily production stood at 2.22 million barrels, compared with 2.07 million barrels daily a year earlier. Washington has been doing its best to stimulate a second shale boom by rolling back Obama-era regulations that restricted drilling on federal lands. (10/30)
Peak Shale: Is the US Fracking Industry Already in Decline?
By Justin Mikulka, originally published by DeSmog Blog
October 31, 2018
"In 2016, lower oil prices led to an overall drop in production for shale companies, which use horizontal drilling and fracking to extract oil and gas from shale formations such as the Marcellus and Permian. This was one of the few relatively positive financial periods for an industry plagued by high costs and low returns (although it still lost money in 2016)."
https://www.resilience.org/stories/2018-10-31/peak-shale-is-the-us-fracking-industry-already-in-decline/
Shale oil becomes shale fail (and a nice subsidy for consumers)
By Kurt Cobb, originally published by Resource Insights
October 28, 2018
https://www.resilience.org/stories/2018-10-28/shale-oil-becomes-shale-fail-and-a-nice-subsidy-for-consumers/
Peak Oil Review: 29th October, 2018
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2018-10-29/peak-oil-review-29th-october-2018/
Quote of the Week
“To outward appearances, the US oil and gas industry is in the midst of a decade-long boom. [However] America’s fracking boom has been a world-class [financial] bust …. Even after two and a half years of rising oil prices and growing expectations for improved financial results, a review of 33 publicly traded oil and gas fracking companies shows the companies posting $3.9 billion in negative free cash flows through June.” Report from Institute for Energy Economics and Financial Analysis, and the Sightline Institute
1. Oil and the Global Economy
Oil prices fell by nearly 3 percent last week to settle at $77.62 in London and $67.59 in New York. This was the third weekly decline in a row that has taken prices down by about $10 a barrel since early October. As has been the case for several months, prices fall on reports of excess supply or the possibility of lower demand and increase on concerns about what the Iran sanctions due to begin next week will do to supplies.
The 2018 US midterm elections will determine the balance of power over policies affecting the gas and electric sectors across the country, with Republican control hanging in the balance in multiple statewide races as well as in Congress. Initiatives impacting the gas and power sectors include a Washington state carbon fee proposal, a Colorado initiative that would curb fracking, and proposed renewable portfolio standards in Nevada and Arizona are on the ballot.
The idea that there is trouble ahead for the oil industry is slowly making its way across the financial press and the various consultancies that pontificate about the future of the oil industry. Most focus on the lack of investment in finding new oil since the price downturn three years ago although some question just how long the US shale oil industry can lose billions and still receive financial support from Wall Street.
Last week, energy consultancy Wood Mackenzie noted that despite some increase in global spending on oil and gas development, the recovery in capital spending is much slower and shallower than in previous cycles, with current investment levels insufficient to meet future demand growth. Wood Mackenzie says spending on development is expected to rise by 5 percent in 2018, following a 2-percent increase last year. They believe that oil and gas development expenditures will need to grow by around 20 percent to meet future demand growth and make sure that oil and gas firms will sustain their production in the next decade.
It currently appears that capital spending will climb to just above $500 billion in the early 2020s from a low of $460 billion in 2016 but far below the $750 billion peak in 2014, according to the consultancy. WoodMac estimates that annual development expenditure has to rise to around $600 billion to meet future demand for oil and gas through the next decade. However, it doesn’t expect the industry to boost investments significantly.
Wood Mackenzie’s call for another $100 billion or so in annual spending on finding new oil is rather mild in comparison with OPEC and the IEA who have been calling for additional trillions.
OPEC: Last week Saudi Arabia and Russia agreed to form a permanent partnership that would last indefinitely, potentially marking a new era for the oil market. Saudi oil minister Khalid al-Falih said that he hopes to set up an official OPEC+ governing body, including a Secretariat, likely to be based in Vienna. The proposal could be formalized next month. To date, OPEC+ has been a somewhat informal group, or at least a provisional one, intended to address the supply glut that emerged following the 2014-2016 market bust.
This agreement will lead to a far more potent version of OPEC for it brings together the two major oil exporting blocs – Russia and its satellites in the former Soviet Union and the Saudis who have a significant influence over the other Gulf Arabs. In effect the OPEC cartel, which has been a major player in the oil markets since for the last 50 years, seems likely to be supplanted by a two-country organization in which agreement on policies seems much easier to obtain.
For years, the Saudis have been struggling with more than a dozen smaller oil producers to build consensuses preferring a co-presidency with Russia. When asked about who will be the driving force behind establishing a formalized OPEC+ Secretariat, Saudi oil minister Khalid al-Falih said: “I think Russia will have to take the leadership.”
OPEC signaled last Thursday it might have to return to oil production cuts as global inventories rise. An OPEC and the non-OPEC ministerial panel concluded that supply is “very comfortable” compared to demand and warned producers might need a change of tack because of rising inventories and economic uncertainties. Lower production and higher prices will likely sour relations with President Trump who has repeatedly attacked OPEC for not supplying enough oil.
US Shale Oil Production: Last week saw a spate of articles questioning the long-term viability of the US shale oil industry, which has been the major contributor to the growth of global oil production for the last ten years. On Friday, the Wall Street Journal opined, “While this [shale oil] has helped the world meet rising demand for years, it cannot go on forever. Signs are mounting that shale won’t keep growing at the same rate in the US. Drillers face pipeline bottlenecks moving crude out of West Texas. This week, Halliburton Co. Chief Executive Jeff Miller said its oil-producing clients were facing ‘budget exhaustion’ and he expected some to take extended breaks from drilling new shale wells. That is coinciding with warnings of plateauing, or even declining, production elsewhere in the world.”
“For years, shale helped keep enough spare capacity in global markets that volatility began to feel like a relic of the past. In the years to come, the world may no longer have that shale shock absorber, ending a relatively peaceful decade in oil markets.”
One of the harshest criticisms of the shale oil industry came last week in the form of a lengthy analysis from SRSrocco Report. The analysis says that the industry is nothing but a giant “Ponzi Scheme” alluding to the fact that the industry as a whole is not profitable and relies on constant injections of new capital in the form of equity shares and loans to keep functioning. The report notes that all the “new technology” the industry has been using to boost production in recent years is costly and is not paying for itself.
More problems for the shale oil industry continue to arise. Rigzone notes the game plan for cashing in on the US shale boom is shifting from quick flips to long-term commitments, according to one veteran energy investor. Fewer shale oil drillers can sell their money-losing properties to larger firms just because they have started drilling. One observer of the industry noted that “investors may now need to stick around for a decade of drilling and development before companies reach ‘full value.’”
Another problem for the shale oil industry that came in for comment last week was that the amount of water used per well jumped as much as 770 percent between 2011 and 2016. A new study published Wednesday in the peer-reviewed journal Science Advances says that in addition to the increased use of water, wastewater production in each well’s first year increased up to 15-fold during the same years. An observer of the industry comments that the numbers that they project are not sustainable. Something will have to happen if we want to keep the oil and gas production at the level they assume will happen in 10 or 15 years.”
The relatively light density of US shale oil is becoming a problem. Shale oil is closer to condensate in its API density and is unsuitable for making several of the heavier oil products such as diesel and jet fuel unless it is blended with heavier imported crude. Market observers are beginning to note that US refiners may very soon find themselves struggling with excess production of gasoline that exceeds demand for the fuel. Middle distillates are the oil products that everyone is forecasting will drive demand for crude in the coming years.
Another interesting twist to the shale oil business is the $10 differential between the global price for crude which is currently at $77 a barrel and the domestic price which is $67. US shale oil producers, especially in the Permian Basin are looking for ways to get world prices for the oil that is being exported rather than the much lower prices obtaining in the US market.
2. The Middle East & North Africa
Iran: With the US sanctions on Tehran due to begin next week, there has been much discussion about their efficacy and whether the US will be handing out waivers to selected countries. US Treasury Secretary Mnuchin told Reuters that countries importing Iranian crude that want to continue importing it would need to reduce their intake of Iranian crude by more than 20 percent to win a sanction waiver. Others are warning that there may not be any waivers and that Iranian oil exports will fall by more the million or so b/d that the conventional wisdom is saying.
For the past month, there has been a steady stream of reports that several of Iran’s customers have already stopped buying Iranian crude. Reuters is saying that China’s largest refiners, Sinopec and the China National Petroleum Corporation, haven’t booked any crude oil cargoes from Iran for November due to fears of breaching the US sanctions.
While the major oil flow reporting agencies are reporting lower Iranian exports, there are occasional reports that Tehran is finding ways around the sanctions by using secret tanker runs to straw purchasers and being paid through barter and other irregular financial transactions. The Iranian government is saying that their exports are holding up and Moscow is talking about how much damage the sanctions will do to the European economy.
Iraq: Prime Minister-designate Adel Abdul-Mahdi named part of his new cabinet last Wednesday, confirming Thamir Ghadhban as Iraq’s new oil minister and deputy prime minister for energy affairs, and Luay al-Khateeb as the new electricity minister. The 73-years-old, Ghadhban became a field and reservoir engineer in 1973 and moved up the ranks until 2003 when, after the US-led invasion, he was named the head of the ministry by the Americans. He is seen as a capable technocrat, well-respected within Iraq and by the dozens of foreign oil companies operating in the sector.
Former Oil Minister al-Luaibi told the press last week Iraq currently is producing 4.7 million b/d and wants to increase this to 7 million b/d and to reach 8 million by 2025. Luaibi said Iraq hoped to export 1 million b/d through Jordan’s Akaba port, without specifying a timeline. The burning of gas produced as a byproduct of oil extraction would stop by 2021, he said. He added that the northern refinery of Baiji is back online and processing 70,000 b/d. Newly appointed Oil Minister Thamer Ghadhban seconded the words of the outgoing minister in an email saying that Iraq will proceed with plans to increase oil and gas production.
A recent IEA report notes that one of the biggest uncertainties for oil development in Iraq is the lack of progress on projects to supply water for injection into aging oil fields. The Common Seawater Supply Project that was initially planned to be in operation by 2013 has yet to make any real progress, the IEA said, and without additional water injection, Iraq could reach a ceiling in production “well below” the 7 million b/d mark.
Saudi Arabia: The implications of the Khashoggi affair for Saudi Arabia’s future is still up in the air. The government announced that Saudi Arabia has no intention of unleashing a 1973-style oil embargo on Western consumers and will isolate oil from politics. This announcement was to counter a Saudi newspaper story that said the kingdom would retaliate for any sanctions emanating from the Khashoggi murder by cutting oil shipments.
Numerous international business and political leaders withdrew from Saudi Arabia’s Future Investment Initiative conference over the death of Jamal Khashoggi last week. Reporters at the conference described the mood as “somber”, and most of those attending were from Saudi Arabia and other Gulf countries. Despite the absence of most of the top executives from international banks and investment companies, there were still plenty of lower-level bankers working to build relationships and plan for future deals. There were even some announcements of investment agreements. These deals were largely in the oil and related industries, so they will not do much to diversify the kingdom’s economy.
Saudi Arabia would likely carry out an initial public offering for Saudi Aramco in 2021 after it builds up some downstream assets including petrochemical production, Khalid Al-Falih, the country’s energy minister, said last week. While Aramco is the world’s largest company in the upstream, with a production of about 14 million barrels of oil equivalent per day, the downstream refining and petrochemical industries need development.
Libya: Libya’s oil production could rise by several hundred thousand b/d when BP and Eni resume production at a shared field, the head of the country’s state oil company, Mustafa Sanalla, told Bloomberg. Sanalla said Libya’s current oil production was more than 1 million b/d “despite local security challenges.” BP and Eni will begin exploratory drilling in Libya in the first quarter of next year, BP’s chief executive Bob Dudley told Reuters. BP has 85 percent in an offshore oil and gas block in the North African country, and earlier this year the Italian major struck a deal with BP to buy half of it.
Libya held a rare oil conference in the eastern city of Benghazi last Wednesday as its state oil firm NOC reached out to a region home to a parallel government backing a rival oil firm. This was the first international business conference in Libya’s second-largest city since 2014 when it turned into a battlefield. Forces of Khalifa Haftar declared victory in July 2017 over Islamists, ending four years of fighting that destroyed parts of the city. Hotels and Benghazi airport have reopened, but bombings killed dozens of people this year, forcing organizers to postpone the conference until security had improved.
3. China
Concerns about China’s economy still dominate the news. After a nearly 7 percent selloff so far this year, the yuan is at the brink of hitting 7 per dollar—a symbolic threshold that could spark further selling. The yuan last traded below 7 per dollar during the recession in May 2008. The yuan’s decline against the dollar is symptomatic of the diverging directions of each country’s economy and monetary policy. China said last week that its GDP rose by 6.5 percent in the third quarter, the slowest since 2009. In the U.S., GDP growth hit a near four-year high in the second quarter.
Despite an unprecedented surge of investment in alternative energies, together with caps on coal use and the establishment of “no-coal zones” throughout the country, China’s overall consumption and production are again rising. When the US pulled out of the Paris climate accord last year, China reaffirmed its commitments to tackle the problem of coal, by far the biggest source of its climate-warming carbon emissions. China has made efforts to cut the share of coal in total energy use, with the figure expected to drop to 58 percent by 2020, down more than ten percentage points in a decade. It has also already met a 2020 target to cut the amount of carbon dioxide it emits per unit of growth.
However, the absolute volumes of both coal and CO2 remain by far the world’s highest and are still set to rise. Though some studies have suggested total CO2emissions peaked at 9.53 gigatons in 2013, well ahead of its official target of “around 2030”, environmental group Greenpeace says they could reach a new high this year or next. Coal production has also risen 5.1 percent in the first three-quarters of this year to 2.59 billion tons. Steel output from China, the world’s top producer, and consumer rose to 80.8 million tons last month, up 7.5 percent from September 2017.
China’s Hebei province announced that it would ensure sufficient supplies of clean coal during the next three winters to avoid heating fuel shortages and reduce toxic air emissions. Several regions of China encountered fuel shortages last winter as Beijing pushed to switch millions of households to natural gas from coal as part of its anti-pollution campaign, leaving many thousands of homes without heat. In August this year, Chinese Vice Premier Han Zheng urged authorities to be “realistic” in their winter anti-pollution campaign, and “steadily promote clean winter heating in Northern China and ensure people are safe and warm.”
4. Russia
Russian authorities have announced that domestic oil production hit 11.36 million b/d in September. This number marks a new peak, reached despite the poor shape of the Russian economy, the negative impact of Western sanctions, and the restrictions self-imposed on Moscow by the 2016 deal with OPEC. Current Russian production, though a record, is only 1.7 percent above the levels of 1989, the most successful year for the Soviet oil and gas industry.
Russia is well placed to maintain oil production levels above 10 million b/d beyond the next decade, despite western sanctions limiting its access to technology and capital, the International Energy Agency said last Thursday. Aided by favorable exchange rates which allowed consistent capital spending through the oil price downturn, Russia aims to halt declines and improve recovery at its major producing fields Western Siberia and the Volga-Urals basin, the IEA noted in a new long-term outlook. As a result, the IEA said it now expects Russian oil production to remain above 10 million b/d into the 2030s before a gradual decline to 9.4 million b/d in 2040.
Russia produces little beyond oil and gas, forest products minerals, wheat and weapons that can be exported. As a result, maintaining and building its oil and gas industry will be Moscow’s top priority in the coming years.
While US legislators are discussing new sanctions on Russia that would increase economic pressure on Moscow by possibly expanding sanctions to the banking and energy industries, Russia is said to be in talks with ExxonMobil over new oil and gas projects currently beyond the scope of the sanctions. Russia’s discussions with Exxon could potentially lead to increased cooperation with state-owned Rosneft, the country’s biggest oil producer.
5. Venezuela
Two weeks ago, the Washington Post ran a story about how Venezuela’s many foreign creditors are eyeing one of the country’s most valuable assets: Citgo, the Houston-based oil company that it has owned since 1990. If Citgo is ever seized and sold to pay Venezuela’s debts, it could disrupt one of the most reliable sources of cash for a country already reeling from hyperinflation, food and medicine shortages, and a population exodus. However, last week it was reported that although Caracas is regularly delaying or avoiding bond payments and is behind on billions of dollars in such payments, it is preparing to make a rare $949-million payment on one bond, because that bond is backed by a stake in its key asset, Citgo.
It was also revealed last week that ConocoPhillips said in its third-quarter earnings report that it received a $345 million payment from the Venezuelan state oil company and that another payment of $500 million will come later this year. Venezuela’s former President Hugo Chavez expropriated assets of ConocoPhillips in 2007 in the Hamaca and Petrozuata heavy crude oil projects. In April 2018, the ICC tribunal awarded ConocoPhillips approximately $2 billion arising out of PDVSA’s failure to uphold its contractual commitments.
6. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
World oil balance shifting: While the US shale oil boom has helped the world meet rising demand for years, it cannot go on forever. Signs are mounting that shale won’t keep growing at the same rate in the US Drillers face pipeline bottlenecks moving crude out of West Texas. This week, Halliburton Chief Executive Miller said its oil-producing clients were facing “budget exhaustion” and he expected some to take extended breaks from drilling new shale wells. That is coinciding with warnings of plateauing, or even declining, production elsewhere in the world. All the while, global economic growth has been strong for several quarters and oil demand continues to grow. Since its last year-over-year decline at the end of 2011, oil demand has grown annually by 1.5 million b/d, according to IEA data. (10/27)
Petro-states urgently need to begin diversifying their economies, shifting away from oil production, or else they face financial risks in the years ahead. That conclusion comes from the IEA’s new report, “Outlook for Producer Economies,” which warns that a changing energy system threatens the economies of oil-producing countries. (10/26)
LNG $$ volatility coming? The rise of major emerging liquified natural gas buyers led by China has created the need for infrastructure investment and new shipping capacity to avoid price volatility, a report by the IEA said Monday. (10/23)
Bunker fuel worries: The International Maritime Organization has so far resisted pressure to soften or postpone the implementation of new regulations requiring ships to use bunker fuels with a lower sulfur content from the start of 2020. That has prompted warnings from some analysts that the regulations will squeeze the availability of low-sulfur diesel and jet kerosene required by trucks, trains, aircraft, farmers and industry, resulting in big price increases. (10/26)
New maritime fuel rules, put into motion through the ocean transport-regulating arm of the United Nations, take effect Jan. 1, 2020, and are aimed at slashing the amount of sulfur in marine fuel by more than 80%. The Trump administration raised the heat on the International Maritime Organization rules last week, saying it wants to ease the rollout because of the impact it may have on the economy and energy markets. (10/23)
Jet-fuel prices are usually pegged to diesel prices, typically selling for a few cents more a gallon. Airline and refining industry officials are bracing for a surge in diesel demand as shipowners switch from heavier bunker fuels. Should diesel prices rise, jet fuel could follow. Delta Air Lines finance chief Paul Jacobson said earlier this month that rising crude prices and the fuel switch for oceangoing vessels represented a ‘net bad’ for the airlines.” (10/23)
Norway’s crude oil production has not only been sliding this year compared to last year—as expected—but it has also consistently underperformed the production forecasts of the Norwegian Petroleum Directorate (NPD). NPD’s figures for September showed on Friday that Norway’s crude oil production stood at 1.302 million b/d, down by 13 percent compared to August 2018 and down 9.6 percent compared to September last year. (10/22)
In the UK, hydraulic fracturing was temporarily suspended on Tuesday, as very minor seismic activity was recorded near shale pioneer Cuadrilla’s Preston New Road site in Northwest England. Drilling was expected to resume Wednesday. (10/25)
The Ukrainian government plans to raise household gas prices from Jan. 1, 2020 to match what state energy company Naftogaz charges the country’s industrial companies, the government said on Saturday. Gas tariffs are heavily subsidized in Ukraine, which has committed to raise them gradually to qualify for more financial assistance from the International Monetary Fund. (10/27)
Russia’s largest oil producer Rosneft has the capacity to increase its crude oil production by the end of 2018 and will have additional capacity available in 2019, chief executive Igor Sechin said on Thursday. As the biggest Russian oil producer, Rosneft was responsible for a large part of Russia’s production cut of 300,000 bpd under the deal with OPEC to withhold supply to boost prices. (10/26)
In the Middle East, refining and petrochemicals output will grow substantially over the next two decades, boosting the region’s global market share of the two commodities groups, according to a long-term energy outlook from the IEA. Refinery output from the region is set to increase by 60% in the period up to 2040. (10/26)
When Bahrain announced the discovery of an 80bn-barrel oilfield in the spring — its biggest find since the 1930s — it was greeted with only cautious optimism by industry analysts. Bahrain’s current oil production of just 43,000 barrels a day has marked it out as a relative energy minnow among the crude-rich Gulf states, with consultancy Wood Mackenzie warning the new oilfield could prove “technically challenging and potentially high-cost to develop”. But Bahrain’s oil minister is brighter about the prospects of the Khaleej Al Bahrain Basin, believing early signs point to a field with the potential to transform the state’s fortunes. He is now on a push to attract international partners to help develop the resource. (10/23)
Qatar, the world’s largest LNG producer, is on track to expand its LNG production capacity by around 43% to 110 million tons/year. Its current production capacity is 77 million tons/year. The rapid pace of Qatar’s expansion will allow it to maintain its position as the world’s top LNG exporter despite competition from Australia that expects to have 88 million tons/year of nameplate LNG export capacity if all its 10 projects reach full capacity. (10/24)
China will lead global refinery capacity expansion and investments with 3.12 million b/d additional refining capacity and US$67.3 billion capital expenditure through 2022, data and analytics company GlobalData said in a new report. Total refining capacity in the world is expected to grow by 15.1 percent between 2018 and 2022, with global crude distillation unit’s capacity expected to hit 117 million b/d by 2022. (10/27)
Offshore Western Australia, France’s oil and gas major Total said on Tuesday that the first cargo of liquefied natural gas (LNG) from the Ichthys LNG project had left the port of Darwin for the first export of the US$40-billion project that began producing gas in July this year. The planned production volumes at Ichthys will be 8.9 million tons of LNG annually, 1.65 million tons of liquefied petroleum gas (LPG) a year, and around 100,000 b/d of condensate at peak production and full capacity. (10/25)
Australia’s new Ichthys project and others around the globe may help feed surging Asian demand for LNG at a time when China has curbed its purchases from the US as part of their trade conflict. Originally slated to cost $34 billion with a 2016 start date, the Ichthys project comprises an offshore gas field, a 553-mile pipeline and liquefaction facilities in Darwin, Australia. The project is expected to increase production to 8.9 million tons a year over the next two to three years. That is the equivalent to about 10% of Japan’s current LNG imports. (10/24)
Nigeria has lost no less than $10 billion in revenue in the last 18 years due to obsolete laws, dating back to 1950, in the sector. A senator said the country may lose more if the four bills presented before the National Assembly are not passed and signed by the president. (10/27)
Guyana, with a population of fewer than 750,000 people, has always depended on commodities. Sugar, gold, shrimp, timber, bauxite, and rice account for nearly 60 percent of this South American country’s gross domestic product. Now, Guyana is set to add oil production to that list. Three years and dozens of new oil discoveries after hitting first oil in 2015, Guyana is set to produce its own oil for the first time ever, in 2020. (10/24)
Argentina’s state-controlled oil company, YPF, will significantly boost oil and gas production, investing between $4 billion and $5 billion per year through 2022, Chief Executive Daniel Gonzalez told Reuters on Friday. It plans to raise production by between 5 percent and 7 percent per year, with the largest increase in the Vaca Muerta formation, one of the world’s largest reserves of shale oil and gas. (10/27)
Mexico depends too heavily on US oil and gas imports, an energy adviser to President-Elect Andres Manuel Lopez Obrador said Thursday while outlining the country’s plans to build new refining capacity and take stock of its nascent energy reforms. (10/26)
In Mexico, Pemex’s buying of four US Bakken crude cargoes should help it maximize the efficiency of its 330,000 b/d Salina Cruz refinery, although future imports are no sure thing as they are opposed by the incoming administration, This strategic move is key as Mexico seeks to maximize gasoline output and curtail residual fuel oil output from underperforming refineries. (10/24)
Mexico’s president-elect Andres Manuel Lopez Obrador on Tuesday criticized state-run Pemex’s plan to import US light crude from refiner Phillips 66, calling it a sign of the country’s failed economic policies. (10/24)
A small LNG project north of Vancouver is poised to move to construction in the first quarter of 2019, adding momentum to Canada’s efforts to become a significant exporter of the supercooled fuel. The $1.2 billion Woodfibre LNG project, backed by Indonesian billionaire Sukanto Tanoto’s RGE Group, would be Canada’s second LNG project to go ahead, following the approval of the massive LNG Canada project earlier this month. (10/24)
Heavy oil from Canada, Western Canada Select, typically trades at a discount relative to WTI. Canadian oil producers exposed to the low prices are now fetching around $40 to 50 per barrel less than their counterparts in the US. The lower price reflects quality issues, as well as the cost of transport from Alberta to refineries in the US In early 2018, the discount started to grow significantly, the result of Canadian pipelines filled to the brim. The inability of the Canadian oil industry to build a major pipeline from Alberta to either the US or the Pacific Ocean is increasingly dragging down WCS.
In British Columbia, a natural gas pipeline explosion that occurred earlier this month near the city of Prince George will reduce supply to the province by between 20 and 50 percent this winter, the gas distribution company said in a statement. FortisBC said that although it had planned on having the ruptured pipe up and running by mid-November, it will not be able to fill it to capacity. At best, it would operate at 80 percent of capacity for the winter. (10/24)
The US oil rig count increased by two to 875, the highest level since March 2015, General Electric Co’s Baker Hughes energy services firm reported Friday. For the month, the rig count rose 12 in October, the biggest monthly increase since drillers added 34 rigs in May. (10/27)
The US is still the world’s largest natural gas producer, despite a marginal 2017 output increase of 0.7 percent, a new report from Eni has revealed. The world’s top five natural gas producers and their 2017 natural gas production, as highlighted in Eni’s report, can be seen below: US – 26.6 trillion cubic feet; Russia – 24.4 Tcf; Iran – 7.6 Tcf; Canada – 6.5 Tcf; Qatar – 6.3 Tcf. (10/24)
Beaufort Sea drilling okayed: The Bureau of Ocean Energy Management has approved Hilcorp Alaska’s drilling project for the Liberty prospect in the Beaufort Sea; this is the first approval for a drilling project in federal waters. Congress voted to open the Arctic National Wildlife Refuge for drilling last December, after forty years of often heated discussions of the issue. Hilcorp is seeking to build, and then drill from, a nine-acre artificial gravel island in shallow waters of the Beaufort Sea. (10/26)
ExxonMobil has been sued by New York state’s attorney general for allegedly misleading investors over the risks that climate change regulations posed to its business. The suit claims that while Exxon had been telling investors for more than a decade that it had used an implied cost of carbon in its investment decisions, its statements were “materially false and misleading”. The attorney general’s office alleges that Exxon was in fact often using a lower undisclosed carbon price or no price at all when it made decisions. (10/25)
FERC reversal coming? The White House said on Wednesday President Donald Trump has appointed Neil Chatterjee, an avid supporter of subsidizing aging coal and nuclear power plants, as chairman of the Federal Energy Regulatory Commission. Chatterjee, a Republican from coal-producing Kentucky, who was a FERC commissioner, had been a backer last year of a directive by Energy Secretary Rick Perry, that the commission ultimately rejected, to bail out coal and nuclear plants. (10/25)
$$ support for batteries: Fisker Inc., an e-mobility and technology company developing electric vehicles and proprietary solid-state battery technologies, announced a strategic investment from Caterpillar Venture Capital Inc., a wholly owned subsidiary of Caterpillar Inc., the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. (10/24)
3D- printed batteries for cars? A group of scientists from Duke University has developed a new method to 3D-print lithium-ion batteries in virtually any shape. In a paper published in ACS Applied Energy Materials, the researchers explain how they used an electrolyte solution to increase the ionic conductivity of the polymers used for 3D printing, such as poly (lactic acid) or PLA. This process allowed them to print complete lithium-ion batteries with an inexpensive machine. (10/23)
Wind machines slow hurricanes? Simulations have shown that spinning turbine blades of offshore wind farms can actually slow the wind speeds of a hurricane. (10/25)
Record typhoon: In the Marianas Islands, Typhoon Yutu’s 180 mph winds overturned cars, knocked down hundreds of power poles and left an island of thousands without a medical center — and another without an airport. Buildings were reduced to haphazard piles of tin and wood by the most powerful tropical cyclone to hit any part of the US since 1935. (10/26)
In eastern Australia, drought is expected to cut the crop production this year to less than half the average over the past 20 years, with New South Wales to be worst hit. (10/26)
Plastics ban: the European Parliament has overwhelmingly approved a ban on single-use plastics such as straws, plates, cutlery and cotton-swab sticks in Europe by 2021, joining a global shift as environmentalists emphasize the urgency of halting the use of materials that very often end up in the ocean. (10/26)
Global crude steel production rose 4.4 percent to 152 million tons in September from the same month a year ago, figures from the World Steel Association showed on Wednesday. (10/25)
India’s steel industry will face several challenges as the nation is poised to become the next driver in regional economic growth. Challenges like the high cost of raw materials, including coking coal and thermal coal, transportation networks and infrastructure, and the quality of steel, were brought up by leaders in the major Indian steel mills. (10/25)
A Farm for the Future
REPOST
Wildlife film maker Rebecca Hosking investigates how to transform her family's farm in Devon into a low energy farm for the future, and discovers that nature holds the key.
With her father close to retirement, Rebecca returns to her family's wildlife-friendly farm in Devon, to become the next generation to farm the land. But last year's high fuel prices were a wake-up call for Rebecca. Realising that all food production in the UK is completely dependent on abundant cheap fossil fuel, particularly oil, she sets out to discover just how secure this oil supply is.
Alarmed by the answers, she explores ways of farming without using fossil fuel. With the help of pioneering farmers and growers, Rebecca learns that it is actually nature that holds the key to farming in a low-energy future.
https://vimeo.com/136857929
Get a Load of Our Manure Guide
May 28, 2015
Brian Barth
How to choose the right poop and put it to good use.
https://modernfarmer.com/2015/05/get-a-load-of-our-manure-guide/?fbclid=IwAR1R5B8AoCC2toAPlhM302KlsKvBFoYCaqRGGZfBlI8X54Fwoyp2naTllo4
The History of Old Stoves
Old stoves help define the look of kitchens in any era.
Gordon Bock
Aug 3, 2012
https://www.oldhouseonline.com/kitchens-and-baths-articles/history-of-the-kitchen-stove
How organic agriculture in Cuba saved its population from hunger
Society Published on 01 Feb 2018
Elisabetta Scuri
https://www.lifegate.com/people/news/organic-agriculture-in-cuba
Working Steers and Oxen on the Small Farm
by: Tim Huppe
https://smallfarmersjournal.com/working-steers-and-oxen-on-the-small-farm/
The Dirty History of Soil
When we stop treating dirt like dirt, when we accept it’s neither ‘dirt cheap’ nor ‘dirt poor’, we will come to realise it is the most precious resource we have. Treat dirt, or soil, the way you want to be treated.
https://www.forfoodssake.me/podcast/ffs-037-the-dirty-history-of-soil?fbclid=IwAR1ABpqRgc6YIVFs0prKd2BFdhXLQSHe_0h51KypmT2ClVtydCbHndiFnPM
Thanks, Excel. I will resume my subscription. Way back BHM had yearly books of earlier years and I bought a pile of them. Outstanding magazine.
All is well on our planet Earth, isn't it?
Saturday, October 13, 2018
"To compare the WWII industrial effort with the global dislocation necessary to ameliorate some of the effects of climate change is surprisingly naive and proves that the three professors got Ds in their history electives, if they had any. This comparison also neglects to account for the human population that has almost quadrupled between the 1940s and now, and the resource consumption that has increased almost 10-fold. The world today cannot grow its industrial production the way we did during WWII. There is simply not enough of the planet Earth left to be devoured.
How is it that the otherwise formidable scientists can be so blind and talk such nonsense? This is a very complicated question, but in essence it is denial amplified by brainwashing by the decades of service for the global fossil superorgansim. The global amoeba, which we all serve, demands allegiance and selective blindness towards the so many self-evident truths.
"Economic growth" is about to end because its biophysical underpinnings are getting exhausted - all at once. Only the most courageous among us see through the increasingly implausible lies we tell ourselves to obfuscate this truth. It is so much easier for us to fly to the next conference, rent a car, check into an air-conditioned hotel, eat at the air-conditioned restaurants, step over homeless on the sidewalks, and pretend that eternal growth will separate us from hard reality."
https://patzek-lifeitself.blogspot.com/2018/10/all-is-well-on-our-planet-earth-isnt-it.html?fbclid=IwAR1L6Jqg6umA3OrEbpntUVOf44AyuT9bZqukRSlhKsPWb1ZPj6wUO-nENfs
U.S. SHALE OIL INDUSTRY: Catastrophic Failure Ahead
Posted by SRSrocco in Energy, News on October 23, 2018
https://srsroccoreport.com/u-s-shale-oil-industry-catastrophic-failure-ahead/?fbclid=IwAR1OIbu0B0eXf0N-2rRe_Pss1UEzdXl2POf-5tsIsuc1JC3QRwWU5v3Eq_E
Peak Oil Review: 23 Oct 2018
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2018-10-23/peak-oil-review-23-oct-2018/
Quotes of the Week
“The well-established market consensus that the Permian [basin] can continue to provide 1.5 million barrels per day of annual production growth for the foreseeable future is starting to be called into question.” Paal Kibsgaard, CEO of Schlumberger
“Two-thirds of US oil producers failed to live within their means in the second quarter, even as oil prices have risen almost 40% over the past year to more than $70 per barrel. Fifty major US oil companies reported they collectively spent $2 billion more than they took in.” FactSet’s analysis of free cash flow
1. Oil and the Global Economy
Crude oil prices have been volatile thus far in October, hitting a four-year high to start the month before falling nearly $8 a barrel in the two weeks. At the close on Friday, New York futures were at $69.12 and London at $79.78. Market sentiments have changed this month with more traders worrying about the economic problems facing China than how effective the US sanctions on Iranian exports will be.
China’s stock market fell sharply last Thursday, dragged down by a range of concerns that should offer a warning to the broader global economy. The Shanghai Composite Index fell on Thursday, falling to its lowest point in nearly four years. The problems in China are dragging down stock markets across Asia, including in Japan and South Korea. The Shanghai Composite is now down more than 25 percent since the start of the year and lost more than $3 trillion in the last six months.
Multiple problems are facing Beijing including the trade war with the US, vast amounts of debt held by local governments, a broader slowdown in growth, a weakening yuan, and high oil prices. The IMF says that China’s GDP growth could slow from 6.6 percent this year to just 6.2 percent in 2019, and there are additional risks because of the trade war.
In addition to China’s problems, there are growing concerns about the immediate future for the global economy. According to a survey from Bank of America, troubles are multiplying. Tech stocks look inflated. The Fed continues to hike interest rates, which is having ripple effects across the world. Borrowing costs are rising. The strong dollar is putting pressure on emerging market governments and their currencies, making dollar-denominated debt and oil painfully expensive.
The CEO of BP, Bob Dudley said, “There’s a healthy price for oil and energy… it’s somewhere between $50 and $65 a barrel. The world can live with this.” “Emerging and developing economies like India, South Africa, or Turkey are seeing their highest-ever prices for gasoline because their currencies have rapidly depreciated against the US dollar and because oil prices in dollars are high.”
Concerns that $80 oil is unhealthy for the world are shared by major international organizations such as the IEA and the IMF. Expensive energy is back, and it is threatening global economic growth, the IEA said in its Oil Market Report last week, and the IMF slightly downgraded its projection for global growth for this year and next—at 3.7 percent, growth is now expected to be 0.2 percentage point lower than IMF’s forecast from April this year.
OPEC: The cartel continues to assert that “the oil market is well-balanced and well-supplied.” To calm market fears, OPEC spokesmen are saying that there is plenty of oil to go around and that Russia and Saudi Arabia are adding supply as promised in June “to maintain the supply and demand balance.” While on the surface it appears that the US sanctions on Iran are cutting the world oil supply, recent reports suggest that Tehran is finding ways to keep its exports flowing below the purview of tanker trackers and others monitoring Iran’s exports.
Saudi Arabia and Kuwait haven’t made any progress in restarting the jointly operated oil fields that analysts were hoping could soon add 500,000 b/d of oil production to the global supply. The Partitioned Neutral Zone was established between Saudi Arabia and Kuwait in 1922 to settle a territorial dispute. Aramco, the field’s operator, unilaterally shut production down in October 2014, citing new government emissions standards for gas flaring. The output from the zone averaged around 500,000 b/d just before the shutdown of the two oil fields, Khafji and Wafra, in 2014-2015.
The Wafra field is operated by KGOC and Saudi Arabian Chevron and was shuttered in May 2015, with Chevron saying it had encountered difficulties in securing work and equipment permits. Sources say the dispute involved a land-use issue at Wafra unrelated to oil production. Talks to reopen the fields began last month, and Japan’s Toyo Engineering announced that it had been retained to begin preparations for a restart of Khafji in early 2019.
Last week, however, the talks between the Saudis and Kuwait broke down, and the prospects for the fields coming back online is said to be “dead as a doornail.” The Saudis want more control over the operation, and Kuwait is not happy about the Saudi-led embargo of Qatar. An additional, 500,000 b/d of Middle Eastern oil production would be very useful for keeping the lid on prices at this time.
Secretary-General Mohammad Barkindo last week urged oil producing companies to increase capacities and invest more to meet future demand as spare oil capacity shrinks worldwide. OPEC along with the IEA has been in the forefront of those warning that there is insufficient investment being made in finding new oil fields to support the demand that is expected in the next 20 years.
OPEC says the global oil sector needs about $11 trillion in investment to meet future oil needs in the period up to 2040. Crude oil demand is expected to increase by 14.5 million b/d from 2017 to 111.7 million b/d in 2040, OPEC said in its September report.
US Shale Oil Production:
US oil production may rise to as much as 14 million b/d by 2020, Secretary of the Interior Zinke told Fox Business last Wednesday. “Today we are the largest oil and gas producer on the face of the planet, rolling through 11.2 million b/d, on our way to 14,” Secretary Zinke said. There are some hurdles, we have to get the infrastructure, but the production side of it is well within the capability of going to 14 million b/d, he added. The US added four rigs last week, making last week’s count the highest since March 2015. The nation’s total rig count sits at 1,067, which is an increase of 154 from one year ago.
US drillers indeed are confident about the future. “The Permian is huge,” says Vicki Hollub, the chief executive officer of Occidental Petroleum Corp., the basin’s biggest producer, in an email. It “has the capability to sustain its position with respect to the rest of the world for another decade or two at least.”
The EIA is predicting another banner month with shale oil production increasing by 98,000 b/d including 53,000 b/d from the Permian, 13,000 b/d from the Bakken, and 15,000 b/d from Eagle Ford. In a footnote, the EIA comments that “Productivity estimates may overstate actual production which could be limited by logistical constraints.” At least the EIA is reading the press stories bemoaning the lack of pipeline capacity to move the Permian’s oil to market and shortages of many resources need to drill and frack wells. For those watching the phenomenon, the number of drilled but not yet fracked wells increased by 192 between August and September.
The upcoming startup of an expanded crude pipeline from the Permian Basin to Cushing, Oklahoma has strengthened oil prices in West Texas while weighing on futures as traders expect stockpiles to rise in Cushing. WTI Midland’s discount to US crude narrowed to as little as $2.50 per barrel on Thursday, the smallest differential in nearly seven months. WTI Midland sank to the widest in six years at a discount of as much as $18.25 per barrel in late August. Midland crude traded at $9.50 below WTI at East Houston on Thursday, shrinking from as high as $23.75 in early September. Traders closely watch the spread to gauge the economics of transporting crude to the US Gulf Coast. Natural gas production in the Permian Basin also has outpaced pipeline takeaway capacity, but with the rollout of new projects, this trend is expected to change next year.
So much for the optimism. In addition to the short-term pipeline and resource problem, which probably can be overcome in the next couple of years, there is the problem of the lack of profitability of the shale oil industry and signs that drillers are running out of new “sweet spots” that can produce enough oil to justify drilling it in the first place.
The S&P 500 Energy Index has underperformed the wider market by 42 percentage points over the past four years, despite a 35 percent increase in the price of oil. Fund managers have lambasted shale industry executives for their high pay, demanding dividends and share buybacks. In the first quarter of this year, most companies responded with pledges to do either or both, then in the next quarter proceeded to blow through their capital expenditure budgets. Whether investors will continue pouring billions of dollars into losing shale oil drillers remains to be seen.
However, the biggest problem for the industry is the decreasing number of profitable places to drill. If new shale oil wells can’t be profitable when their initial average production is above 700 b/d, then what will happen when this average drops to 300 b/d or even 150 b/d? So far drillers have succeeded in keeping up initial production by drilling longer laterals and using up to four times as much water and sand when they frack a well. While this increases the cost of fracking considerably, it has doubled the initial productivity of the average well since 2012. This gain leaves open the question of how much it has cost to produce each barrel of well when production is finished.
Last week the issue of whether Permian Basin shale oil production will continue to grow by millions of barrels per day into the distant future was raised by the CEO of the oil service firm Schlumberger, Paal Kibsgaard. As Schlumberger drills, fracks, and measures the output of wells on behalf of many drillers, it is in an excellent position to see where the industry is heading. Kibsgaard said in an earnings call, that “the main challenge in the Permian going forward is more likely to be reservoir and well performance.” “The industry has yet to understand how reservoir conditions and well productivity change as we continue to pump billions of gallons of water and billions of pounds of sand into the ground each year,” he said.
Kibsgaard pointed to an increase in the percentage of new infill — or “child” — wells in the Eagle Ford basin. “Today, the percentage of child wells drilled in the Eagle Ford has already reached 70%. And in the three-year period, since this percentage broke the 50% level, we have seen a steady reduction in unit well productivity.” “In the Permian, the percentage of child wells in the Midland Wolf Camp basin has just reached 50 percent, and we are already starting to see a similar reduction in unit well productivity to that already seen in the Eagle Ford, suggesting that the Permian growth potential could be lower than earlier expected,” Kibsgaard said. Assuming oil demand remains high, “we believe that the level of E&P investments must increase both internationally and in North America … to develop and deploy the new technologies needed to overcome the emerging shale oil production challenges,” he said.
S&P Global Platts Analytics is forecasting slower Permian growth as a result of declining efficiencies and poorer rock quality. Production is expected to climb 843,000 b/d in 2018, but that should slow to 320,000 b/d by 2022 and 219,000 b/d by 2023, according to Analytics. Independent analysts of the shale oil industry have been warning for years that the rapid depletion of shale oil fields and the lack of profitability means that the shale oil phenomenon is a speculative bubble that will not last much longer. If Platts forecasts for increases in Permian production five years from now are combined with decreases in production from the older US shale plays, then the shale oil industry may be a distant memory by the end of the next decade due to rapid depletion.
2. The Middle East & North Africa
Iran: US sanctions on Iran take effect in a little over two weeks, and Washington has already had some success in reducing Iranian exports. Iranian oil exports fell to their lowest level in at least two and a half years in September to 1.7 million b/d, from 1.92 million b/d in August, according to S&P Global Platts trade flow software, though some shipments not visible through vessel-tracking data are suspected to be taking place. The size of these undetected shipments is not known, and Tehran is claiming that its shipments have dropped very little.
According to Reuters, “an unprecedented amount of Iranian crude oil is to arrive at China’s Dalian port this month and in early November before US sanctions take effect.” An estimated 20 million barrels are destined to flow from Iran to China over the next few weeks, up from the usual 1 to 3 million barrels each month. There have been indications, however, that China may reduce its shipments during the sanctions.
South Korea did not import any oil from Iran in September for the first time in six years. It is difficult to turn oil production on and off, and with onshore storage filling up, Iran has been forced to store oil at sea. However, while Iran’s floating storage spiked in September, it actually fell back in October, as several cargoes set sail for China and India, according to data from Kpler. It appears that it will be difficult to keep track of Iranian exports during the sanctions as Tehran has considerable experience in avoiding US sanctions. Nobody believes that Washington can attain its goal of reducing Tehran’s exports to zero.
Iraq: Baghdad’s new Oil Minister Jabar al-Luaibi has issued a decree transferring the ownership of nine state-owned oil companies, including state oil marketer SOMO, from the oil ministry to the newly-formed National Oil Company which he also heads. Parliament voted in March to establish the company, which is meant to manage Iraq’s upstream operations, freeing up the ministry to set plans and strategies for developing the sector.
Iraq’s oil production climbed by 1 percent in September, as the federal government and Kurdistan made incremental gains. Countrywide output averaged approximately 4.86 million b/d, according to data gathered from each producing field. Iraq hopes to increase natural gas production by about 340 million cubic feet per day from its southern fields this year. The country urgently needs more gas to help meet unsatisfied electricity demand. The US sanctions on Iran, which currently supplies about 1,250 million cubic feet per day of natural gas and more than 1,200 megawatts of electricity to Iraq, makes increased domestic production more urgent.
Saudi Arabia: In the wake of the Khashoggi murder, Riyadh’s political situation, domestically and internationally, became extremely volatile. How it all will turn out is impossible to predict.
Last week some part of the Saudi establishment briefly threatened to restrict oil exports if President Trump imposed “severe punishment” on the kingdom. As the Khashoggi story unfolded during the week, the “oil weapon” threat dropped from sight. Given that Saudi Arabia’s oil production is somewhere north of 10 million b/d, any upset in the kingdom poses a serious threat to the global economy.
On Thursday, Saudi Aramco signed an agreement to invest $25 billion in a 400,000-b/d refinery and associated petrochemical plants in eastern China. This move is part of an effort to expand Aramco’s downstream business and secure additional markets for its oil.
To protect its ability to export oil in the event of hostilities in the Straits of Hormuz, Saudi Arabia has added 3 million b/d of oil export capacity to its West Coast Yanbu South Terminal on the Red Sea. In July, Iran threatened to close the Straits should the US drive Iranian oil exports to zero. The Strait of Hormuz is the world’s most important chokepoint, with an oil flow of about 18.5 million b/d.
3. China
China’s government on Friday reported that the economy grew by 6.5 percent over the three months that ended in September compared with a year ago. Growth in industrial output and consumption weakened in the quarter, while exports held up despite the country’s trade fight with the US. While fast by global standards, the pace of economic growth is China’s slowest since early 2009, during the depths of the global financial crisis. China’s reported growth figures over the past two years shows an economy that is just getting by with slowing growth, soaring debt and an escalating trade war with the US. Widespread doubts remain over the reliability of the government’s official growth numbers.
The exact numbers aren’t clear, but experts agree that China’s debt load is vast. S&P Global estimates that China’s local governments are carrying as much as $6 trillion in shadowy debt off the books. Analysts at the ratings firm called it “an alarming level.”
As winter approaches, the northern region of Beijing-Tianjin-Hebei needs to make sure there is enough fuel for heating. The region is notorious for its high levels of pollution, but last year it also became notorious for natural gas shortages that left millions of households without heat during the peak of winter. To prevent a repeat of last winter’s problems, the authorities are now in a rush to secure fuel supplies, and not just gas but coal as well. Last year, the central government criticized the local authorities for retiring coal plants before ensuring there would be enough natural gas to provide heating for the region and applying a “one size fits all” approach to the fight against pollution.
The anti-pollution drive is paying off, too. Reuters reports that between January and September this year, the amount of PM 2.5 particulate matter had fallen by a third from a year earlier thanks to the reduction in coal consumption and changes in industrial production practices. Natural gas is a big part of this transformation, including LNG. Last year, China became the world’s second-largest LNG importer, taking in some 38 million tons of the fuel, a 46-percent increase on 2016.
Even so, some parts of the country suffered shortages because the gas could not reach them fast enough. As a result, China is working on expanding its LNG storage capacity and pipeline network. It is also expanding its domestic natural gas production and storage. In the past ten years, China’s natural gas consumption has risen fourfold to more than 25 billion cubic feet per day.
Exxon is cashing in on China’s soaring LNG demand by coupling multi-billion-dollar production projects around the world with its first mainland storage and distribution outlet. By expanding output of LNG from tariff-exempt sources such as Papua New Guinea and Mozambique and creating demand for those supplies with an import and storage hub, Exxon is hoping to prosper even in the midst of a US/China trade war.
4. Nigeria
Every few years Nigeria suffers from one of those horrific disasters in which someone drills a hole in a gasoline pipeline and a whole village comes out to collect the leaking gas. Somebody lights a cigarette and dozens or sometimes hundreds are enveloped in the ensuing fireball. Last week, there was another of these horrors in which somewhere around 150 people were burned to death. Some are accusing the National Petroleum Company for failing to repair the leaking pipeline. For a change, Shell and the other international oil companies were not involved. This time, however, there was an added feature of security officials on the scene collecting bribes to allow villagers to scoop up gasoline rather than forcing them back into safety. Three security officials are said to have died in the blast.
The only disasters comparable to pipeline explosions are the frequent gasoline tanker accidents in which innocent bystanders are killed in when overturned tankers catch on fire and explode.
German radio, Deutsche Welle, has been investigating what happened to the estimated $10 billion in oil and products that have been stolen in Nigeria during the last two years. It turns out that much of the oil is ending up in Cameroon, where many government officials including military, police, and customs officials are involved in the smuggling. Cameroon produces about 30,000 b/d of oil as compared with circa 2 million in Nigeria. Smuggling stolen oil has become a way of life in Cameroon, a country of 25 million people, and is of considerable economic benefit to the country.
5. Venezuela
The US plans to turn up sanctions pressure on Venezuela but sees less need to immediately target its energy sector, given the country’s sagging production. Washington has imposed several rounds of sanctions on Venezuelan military and political figures close to socialist President Nicolas Maduro, who it blames for trampling on human rights and triggering the country’s economic collapse. Earlier this year, the Trump administration had weighed escalating sanctions by targeting a Venezuelan military-run oil services company or restricting insurance coverage for oil shipments.
Foreign creditors are circling one of Venezuela’s most valuable assets: Citgo, the Houston-based oil company that it has owned since 1990. If Citgo is seized and sold to pay Venezuela’s debts, it could disrupt one of the most reliable sources of cash for a country suffering from inflation, food and medicine shortages, and a fleeing population. US sanctions have exacerbated the government’s pain, keeping it from the US financial system. The fight over Citgo is unfolding in courtrooms and boardrooms across North America and Europe — with a decision expected by the end of the year.
6. Climate Change
The UN’s IPCC is being accused of ignoring research into fossil fuel-funded misinformation campaigns that have been key to holding back action on global warming. Several researchers are angry the report did not take account of academic research into the “decades-long misinformation campaign” funded and promoted by fossil fuel interests and so-called “free market” conservative think tanks that have been a major brake on progress. These scientists say the lack of consideration of academic research into misinformation campaigns was a vital but missed opportunity to educate the public and policymakers. The groups that have colluded with the fossil fuel industry have been credited with pushing President Trump to pull the US from the UN’s Paris Agreement.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
The rules for new maritime fuel, set roughly a decade ago through the International Maritime Organization, an arm of the United Nations, take effect on Jan. 1, 2020, and aim to slash the amount of sulfur in marine fuel for oceangoing ships. The Trump administration is seeking to slow down that transition. (10/20)
The UK government should ban sales of virtually all new petrol and diesel cars by 2032, a group of MPs say in a withering report that labels the current 2040 target “vague” and “unambitious”. (10/20)
In Norway, Oceaneering International Inc. thinks it has a promising new technology to gain an edge in what’s still a recovering market. In mid-August, the Houston-based company announced a three-year contract with Norwegian energy giant Equinor (formerly Statoil) to provide an “E-ROV” system for inspection, maintenance and repair services in up to 3,280 feet of water in the Norwegian Continental Shelf. (10/19)
In Germany, water levels on the Rhine River fell to a record low this week amid a severe drought and were forecast to fall even further, hampering oil product barge movements in northwest Europe. (10/20)
Saudi-Russia collaboration increasing: Now that global oil markets have gotten used to Saudi-Russian oil production cooperation that first hit the scene in early 2017 in an effort to rein in global price concerns, it now appears that the two fledgling allies are also going to cooperate in the liquefied natural gas sector. And this time too, it looks as if the alliance could take aim at US energy ambitions. Saudi state-owned Saudi Aramco said it is open to the idea of marketing some of the LNG from the proposed Russian Arctic LNG 2. (10/19)
Saudi Aramco signed on Thursday an agreement to invest in a 400,000 b/d refinery and associated petrochemical plants in eastern China as part of Saudi Arabia’s push to expand its downstream business and secure additional markets for its oil. (10/19)
The Abu Dhabi National Oil Company, the producer of nearly all of the oil in the UAE, began producing and exporting a new crude grade, Umm Lulu, in a move that will help raise the Middle Eastern producer’s exports as OPEC is relaxing the production cuts to offset lost supply from Iran and Venezuela. The capacity of the two new fields will increase to 129,000 b/d by the end of this year, and then to 215,000 b/d by 2023. (10/19)
The breakeven price for Qatari crude oil has risen to $47.10 per barrel this year from $24.20 a barrel ten years ago, a Gulf think-tank has calculated. The Gulf Times reports this represented a 95-percent increase in the breakeven price, which might sound like a lot, but it is below the three-digit breakeven price increases in other producers in the region, including Saudi Arabia and the United Arab Emirates, as well as Kuwait. (10/18)
Libya’s National Oil Corporation warned on Sunday it could be forced to suspend production at its Zawiya refinery due to growing security threats to its staff and facilities. (10/17)
Mozambique: Rome-based Eni, which earlier this decade led the discovery of an estimated 85 trillion cubic feet of natural gas in Mozambique, on Wednesday signed an accord in Maputo that will allow it to begin exploration work in a previously unexplored area in the country’s deep waters. (10/18)
Oil trained into Mexico: Kansas City Southern increased the number of fuel carloads moved into Mexico from the US by 164 percent year over year in the third quarter of 2018, the company said Tuesday. The Missouri-based railroad company moved 13,355 carloads of refined products in Q3 2018. (10/20)
To Mexico: Already strong US gasoline exports are likely to remain high into the fourth quarter, as refineries in Mexico, the largest buyer of US gasoline, are expected to operate well below capacity. The US exported 1.16 million b/d of gasoline last week, marking the second straight week above 1 million b/d, US EIA oil data showed. (10/18)
In Canada, as of last Friday, recreational cannabis consumption is legal. While many Canadian citizens and companies will be celebrating the reform, the Canadian oil and gas industry will be ringing in the new era with considerably less enthusiasm. Canadian oil companies and workers’ unions are busy scrambling to finalize a plan to maintain safe operating standards in an era of legal and easily attainable marijuana. (10/19)
The US oil rig count increased by four to 873 while the gas rig count increased by one to 194, according to reports from Baker Hughes. The total number of active oil and gas rigs is now 1,067, up 154 from this time last year. (10/20)
Throwing the ethanol bone: The Trump administration’s plan to allow year-round sales of higher-grade corn ethanol would have limited impact on the depressed US ethanol market, with record supplies and prices for the fuel hovering near the lowest in a decade, analysts said. With mid-term elections looming, President Donald Trump aimed to give a boost to corn producers in the Farm Belt, who helped secure his narrow 2016 election victory. (10/16)
Another US LNG project: NextDecade Corp. has secured a draft environmental impact statement from the Federal Energy Regulatory Commission for its Rio Grande LNG project near Brownsville, Texas, along with its associated Rio Bravo Pipeline. The 27-million-ton-per-annum Rio Grande LNG export facility would receive natural gas from the Agua Dulce gas hub near Corpus Christi via the company’s 4.5 billion cubic foot per day Rio Bravo Pipeline. (10/16)
Gas vs. coal: With about 21,000 MW of new gas-fired power generation planned in the Appalachian Basin, demand for gas is expected to rise as it overtakes coal in power generation market share. (10/20)
Coal port crossroads: The Trump administration is considering using West Coast military facilities to export coal and natural gas to Asia, according to an Associated Press report on Monday citing US Department of Interior Secretary Ryan Zinke. The move would help fossil fuel producers ship their products to Asia and circumvent environmental concerns in Democratic-leaning states like Washington, Oregon, and California that have rejected efforts to build new coal ports. (10/16)
In the UK, protesters gathered on Monday morning outside a drilling site in northwest England, where fracking is returning for the first time in seven years after a last-minute request for an injunction against Cuadrilla Resources failed at court on Friday. (10/16)
Battery R&D: The EU is planning to allow state aid for electric battery research and will offer billions of euros of co-funding to companies willing to build giant battery factories. Brussels is concerned that the EU auto industry, which employs 13m people, could be left behind in the race to build mass-market electric vehicles because of their reliance on batteries from Asia. (10/15)
More battery R&D: The BMW Group, Northvolt and Umicore have formed a joint technology consortium in order to work closely together on the continued development of a complete and sustainable value chain for battery cells for electrified vehicles in Europe. The chief objective is to make battery cells sustainable by establishing a closed life-cycle loop. (10/16)
India has set targets to have 175 GW renewable capacity installed by 2022, 100 GW of which is solar and 75 GW of which is wind. However, even if costs were to drop significantly, Wood Mackenzie expects that only 76 percent of the 175-GW target will be achieved by 2022, “and this would still be a noteworthy achievement,” the consultancy said. The myriad of challenges includes recently canceled auctions, which could undermine investor confidence. (10/16)
Mega-air-pollution: In northern India, farmers will soon set fire to the straw in their freshly harvested rice fields. Pungent gray smoke will then drift southeast toward New Delhi’s 29 million residents, thickening the smog that has turned India’s capital into the most polluted major city in the world. The government is trying to stop the practice. (10/17)
Cleaner air: A new study led by researchers at the University of North Carolina at Chapel Hill has found that deaths related to air pollution exposure in the US decreased by about 47%, dropping from about 135,000 deaths in 1990 to 71,000 in 2010. Improvements in air quality and public health in the US coincided with increased federal air quality regulations, and have taken place despite increases in population, energy and electricity use, and vehicle miles traveled between 1990 and 2010. (10/20)
Peak Oil Review – 15 Oct 2018
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2018-10-16/peak-oil-review-15-oct-2018/
Quote of the Week
“Higher oil prices seem inevitable and, in our view, $100/barrel is easily within reach.”
Bank of America/Merrill Lynch
Contents
1. Oil and the Global Economy
2. The Middle East & North Africa
3. China
4. Russia
5. The IPCC Report
6. The Briefs
1. Oil and the Global Economy
Oil futures fell by over $4 a barrel on Wednesday and Thursday but then stabilized on Friday to close at $71 in New York and $80 in London. Behind the selloff were a sharp drop in the equity markets, profit-taking in the wake of a $14 a barrel price increase since mid-August, and concerns that the Sino/US trade war may reduce global demand for oil. EIA, IEA, and OPEC revised their forecasts downward for the size of next year’s demand increase. The International Monetary Fund cut its forecast for global growth to 3.7 percent for 2018 and 2019, down from a previous estimate of 3.9 percent, and the EIA reported that US crude stocks increased by 6 million barrels the week before last.
Major players in the oil industry are still in disagreement as to where oil prices will go in the near future. A few weeks ago, many financial writers were talking about $100 oil, but the sudden surge of volatility and turmoil in global financial markets has caused many to rethink their forecasts. Brent futures lost almost $4 per barrel over two days last week. There are plenty of reasons why oil could resume its upward climb, with the supply losses in Iran and Venezuela at the top of the list. But a new report from Barclays argues that even if oil prices spike, the spike would only be temporary.
International Energy Agency: Last week, the agency lowered its oil-demand growth forecasts by 110,000 b/d for 2018 and 2019 to 1.3 million b/d and 1.4 million b/d respectively. It also reported that the global oil supply is growing fast; in September, world oil production, at around 100 million b/d, was 2.6 million b/d higher than a year ago. Non-OPEC output is forecast to expand by 2.2 million b/d and 1.8 million b/d in 2018 and 2019, respectively, led by the US.
The head of IEA, Fatih Birol, told a conference last week that oil prices are set to enter the “red zone” during the fourth quarter of 2018, and are threatening to slow demand growth as the strength of the global economy slows. The loss of Iranian oil supply due to US sanctions and deteriorating output from Venezuela will see oil markets further tightening. Birol said he expects Venezuelan oil production could fall below 1 million b/d “sometime soon.”
OPEC: The cartel’s crude oil production rose by 100 kb/d in September to a one-year high of 32.78 million b/d. Since May, OPEC output has increased by 735 kb/d, led by the main Gulf producers and supported by Nigeria and Libya, offsetting falls in Iran and Venezuela. In its Monthly Oil Market Report, OPEC revised down its global oil demand growth to 1.54 million b/d this year, down by 80,000 b/d from the September estimate. In its latest forecast, OPEC now sees global oil demand growth next year at 1.36 million b/d, down by around 50,000 b/d from last month’s assessment, to reflect expectations for lower economic growth for Turkey, Brazil, and Argentina.
According to OPEC’s monthly report, Venezuela’s September oil production was just under 1.2 million b/d, down by 42,000 from August. While Venezuelan officials say its September crude oil production fell to 1.4 million b/d, other estimates say it is now in the vicinity of 1 million.
Like the IEA, OPEC sees the oil market as currently well supplied and is wary of creating a glut next year. This suggests producers are in no rush to expand a June agreement that allows output to increase.
US Shale Oil Production: In its weekly status report, the EIA estimated that US oil production increased by 100,000 b/d last week to 11.2 million, an increase of 1.7 million b/d over this time last year. While next week’s report will be lower due to the disruption to offshore production caused by hurricane Michael, the EIA’s estimate for shale oil production has it increasing at a spectacular annualized rate of over 5 million b/d. These numbers are still only educated estimates. Better production figures will be available in about six weeks.
EPIC Midstream said it will temporarily convert the multibillion-dollar natural gas liquids pipeline it is building in Texas to transporting crude oil to help alleviate the shortage of pipeline capacity for moving crude from the Permian Basin. EPIC plans to bring its 730-mile NGL pipeline online in the third quarter of 2019 and says the pipeline will deliver crude oil at least until January 2020 when its adjacent crude oil pipeline is supposed to start up.
Last week it was announced that two key pipelines that are to transport US natural gas into Mexico had been delayed by at least three months. When completed, these pipelines will reduce the need to ship LNG into Mexico and are expected to play a significant role in reducing the bottleneck that keeps Permian natural gas from being delivered to markets. There are already reports that limitations on flaring excess natural gas produced in the basin may force drillers to reduce oil production until the bottlenecks are eliminated.
Debt levels among US shale oil drillers have had some industry observers worried in the past few years despite the recent recovery in oil prices. During the oil-price downturn, more than 140 companies filed for bankruptcy with their combined debt reaching US$90 billion. Even with oil prices recovering to over $70 a barrel, the uncertainty remains that despite cost improvements, high debt levels could yet force exploration and production companies that keep borrowing to boost production into economic difficulties.
As one observer put it, “Given the higher decline rate from shale wells and their short life as compared to conventional wells, shale producers need to accelerate CapEx spending to maintain production rates. Accordingly, the rise in capital spending puts the producers deeper in debt, reflecting in rising total debt for these companies amid rising interest rates.”
According to Moody’s, US oil producers are facing a debt of $240 billion maturing in the next five years, of which some 15 percent will be rated with the lowest rating of Caa. Exploration and production companies account for the bulk of the total US$240 billion maturing by 2023, at $93 billion. The lack of profitability and the diminishing number of highly productive “sweet spots” in which to drill new wells are the two primary reasons that the great US shale oil boom will not last as long as many hope.
2. The Middle East & North Africa
Iran: Tehran’s crude oil exports fell to 1.1 million b/d in the first seven days of October, down from 1.6 million b/d in September. Condensate exports fell by 46 percent between March to September according to customs data. Iran, which derives a large part of its foreign currencies and state revenues from oil exports, is seeking creative ways to sell its oil ahead of the re-imposition of US sanctions on November 4. Plans under consideration to circumvent the sanctions include an initiative to revive “middlemen” who would be allowed to buy barrels of crude through a domestic energy exchange, or “bourse,” and sell them in world markets under the guise of Iran’s “private sector.” The measure is a sign of how desperate the government is to maintain even the smallest amount of oil exports.
Iran’s economy is expected to shrink by 1.5 percent in 2018 and by another 3.6 percent in 2019, the International Monetary Fund said in the October update of its World Economic Outlook, heavily downgrading the Islamic Republic’s growth prospects due to the sanctions.
Iran took a step to combat banking isolation by passing a bill to comply with the regulations of the Financial Action Task Force; a group set up in 1989 to combat the financing of terrorism. Iran has long been on the Task Force’s blacklist for supplying funds to “terrorist” groups. If Tehran can convince the organization that it is not laundering money or providing funds to black-listed organizations, it might be in a better position to make its way around US banking restrictions.
Although Iranian oil shipments are believed to have fallen in September and early October, these numbers are compiled from shipments that can be observed through vessel tracking. However, clandestine deliveries may also still be happening, according to shipping and trading sources. There is growing evidence of attempts by Iran to continue shipments to its key buyers while minimizing public visibility.
India hasn’t worked out yet a payment system for purchases of oil from Iran, the economic affairs secretary at India’s finance ministry, said last week. India’s Oil Minister has indicated that his country would continue to buy some Iranian oil and is continuing negotiations with Washington for waivers in return for doing some cutting of its Iranian imports. Analysts at Commerzbank say, “The US appears to be abandoning its tough stance on buyers of Iranian oil, and it appears that consumer countries are to be given more time, after all, to replace their oil shipments from Iran.”
Syria/Iraq: Russia and Syria are discussing the possibility of rebuilding Syria’s gas transportation infrastructure, underground gas storage facilities, oil and gas production, and oil refineries, Russian Energy Minister Alexander Novak was quoted as saying. By intervening in Syria, Moscow now has the responsibility of caring for and feeding a country that has been ravished by war.
Baghdad is planning to contract for major infrastructure projects to add millions of barrels per day of export capacity to keep pace with ambitious plans to raise production. The Oil Ministry is looking to jump-start work on a long-delayed pipeline contract with an Australian company and will contract to build an artificial island which is likely to be built by a Dutch firm.
Lukoil’s massive discovery in southern Iraq will start production in 2021, according to the head of Iraq’s regional oil company. Russia’s Lukoil announced earlier this year that “recoverable reserves of 2.5 billion barrels of crude” from the Eridu-1 well was the biggest find in Iraq in 20 years.
Iraq’s Cabinet has named Jabbar al-Luiebi, the current oil minister, to head the new Iraqi National Oil Company. This appointment should give new momentum to a fundamental restructuring of the country’s oil sector.
Saudi Arabia: The disappearance of a Saudi journalist while visiting the Saudi consulate in Istanbul last week has overshadowed all other news about the kingdom. The Turks are saying they have solid evidence that the journalist was killed in the consulate, but the Saudis deny the allegation. The affair has already disrupted a major economic conference that is to launch a round of massive foreign investment in Saudi Arabia. So many foreign dignitaries have already announced their withdrawal from the conference that the Saudis are no longer posting the attendees list.
This affair has serious implications for US-Saudi relations and perhaps for the future of the kingdom. The Trump administration has very close ties with the Saudi leadership. If the Turks can prove their allegations, then US-Saudi relations are sure to change at a critical time. If, as many believe, the crown prince and de facto day-to-day leader turns out to be involved, his position as the next king could be in doubt. This could lead to political instability in the kingdom with implications for Saudi oil exports. For now, all we know is that the Saudi’s Future Investment Initiative conference is in serious trouble as could be the prospects for large foreign investments in the Saudi economy.
3. China
The UN climate change report has many serious implications for the world but in particular for China’s economy which has been built on coal for the last 70 years. China now consumes close to 4 billion tons of coal a year or nearly half of global coal production. According to the IEA, within five years China will be the world’s biggest renewable energy user. For Beijing, the prime reason for replacing coal with renewables is to clean up the air in the cities where it had become unbreathable. Until recently China has been more concerned with dirty air and economic growth rather than the consequences of climate change. Despite its share of floods, droughts, and massive typhoons slamming into its coasts, the need to sustain economic growth still trumps concerns about global warming. China’s reaction to the IPCC report over the next few years will be interesting. As the largest consumer of coal Beijing has the most to lose as climatic conditions become so bad that its use has to be curtailed.
Some believe that China may already be suffering from the US/China trade war which only seems likely to intensify. Last week the Bank of China said it was cutting the reserve requirement ratio for most banks by 100 basis points, which will result in an injection of $109.2 billion into China’s banking system. The move is intended to provide easier lending and more liquidity in China’s economy as the impact of US sanctions start to hit manufacturing and the overall economy. Analysts are saying that this move shows China is getting nervous about a protracted trade war.
Senior White House officials say that recent exchanges between the US and China in what appears a new Cold War aren’t the exception to President Trump’s China policy. They are exactly what the administration wants. Vice President Mike Pence last week gave a blistering speech on US-China relations, saying “the United States has adopted a new approach to China” with the message to China: “This president will not back down.”
Assuming the US slaps tariffs on all Chinese imports, the effect on consumer and business confidence combined with the negative financial market reaction would cut the GDP of the United States by more than 0.9 percent in 2019. Chinese economic output would be 1.6 percent lower than it otherwise would be, according to the IMF.
Although the Chinese government has not yet gone so far in the trade war as to sanction US oil, imports are drying up anyway as Chinese buyers shy away from US crude. After Washington lifted restrictions on exports at the end of 2015, China began buying large quantities of US crude. Chinese imports represented 23 percent of total US crude exports in 2017 and averaged 22 percent this year–until August. Now imports have completely stopped.
Despite the boycott of US crude, China imported 9.05 million b/d of crude oil in September, which was the highest rate of crude oil imports since May. The amount was 10,000 b/d higher than the August import rate and was also the third monthly increase in a row as teapot refiners prepare for winter. For the first nine months of 2018, crude oil imports into China rose 6 percent on the year to 8.98 million b/d despite worry that demand would slow down this year because of a domestic fuel glut.
4. Russia
Hardliners in the Trump administration have been stepping up their rhetoric against Russia recently. President Trump’s chief economic adviser Larry Kudlow said in a television interview that the US should focus more on the energy sector as a way to challenge Russia. “We are the dominant energy power. We will be producing 15 million barrels of oil per day in a couple of years. We’re passing the Saudis. We’re passing Russia,” Kudlow said. “Get this stuff to the northeast, get this stuff to Europe and challenge Russia’s hegemony on natural gas and LNG,” he added. This is doable.”
American LNG is still expensive compared to Russian piped gas. Using a Henry Hub gas price of $2.85/MMBtu as a base, Gazprom recently estimated that adding processing and transportation costs, the price of U.S.-sourced LNG in Europe would reach $6/MMBtu or higher – a steep markup. Russian gas sells for around $5/MMBtu in European markets and could even trade at lower prices in the future as Gazprom removes the commodity’s oil price indexation.
In the meantime, BP Chief Executive Bob Dudley said if the United States imposed sanctions on Russian energy firms Gazprom and Rosneft such as it did on aluminum producer Rusal, it would virtually shut down Europe’s energy systems. Russia’s energy minister said last week that the Nord Stream 2 pipeline which will transport Russian gas to Germany would be completed on time even if new sanctions are imposed on Moscow.
5. Climate Change
The UN’s Intergovernmental Panel on Climate Change report has significant implications for the future of the fossil fuel industry, either now or in the long run. If, as seems likely, the report’s recommendations are ignored, eventually climatic conditions become so bad that steps to curtail the havoc will have to be taken. The new report says that the climate is deteriorating so rapidly that steps must be taken immediately to keep global warming to a 1.5oC increase from the current goal of “below 2.0oC.” Half a degree may not sound like much. But even that much warming could expose tens of millions more people worldwide to life-threatening heat waves, water shortages, and coastal flooding. Half a degree may mean the difference between a world with coral reefs and Arctic summer sea ice and a world without them. At 1.5°C, sea ice will remain during most summers. At 2°C ice-free summers are ten times more likely.
To avoid the disasters which could be much worse in only 20 years, the scientists say that at least $2.4 trillion a year must be spent between now and 2035 to replace coal as a fuel and seriously reduce the use of other fossil fuels. According to the International Energy Agency, carbon emissions, which plateaued in 2015 and 2016, are likely to increase this year.
As could be expected a report that recommends replacing 85 percent of current energy with something more benign was greeted with global silence. While many newspapers took the report as a sober warning of what is in store, nearly all of the world’s leaders, notably President Trump, remained unmoved by the report. The assertion that trillions in spending would have to be diverted from the fossil fuel industry to developing other sources of energy was too much for some to ignore.
The Wall Street Journal responded with an Op-Ed accusing the UN of ignoring the reality of economics and asserting that no climatic conditions could be so bad that it would be worth spending some $50 trillion to mitigate. Rather than a crash program, the Journal recommends spending more on R&D so that new cheaper sources of energy could be developed. On Capitol Hill, a parade of GOP lawmakers dismissed the report’s policy recommendations as wildly impractical, using ridicule to do so. “They might as well be calling on me to sprout wings and fly to Canada for the summer,” Sen. Roger Wicker (R-Miss.), a climate change skeptic, said of the actions urged by the report. “It’s totally unrealistic,” Sen. John Kennedy (R-La.) said. “They must have parachuted in from another planet.”
From the reactions to the report, it was evident that a critical mass realizing that climate change is a significant threat to human civilization has not yet formed. While the endless succession of drought, floods, and unprecedented storms continues, they are not yet deemed frequent or damaging enough to overcome the costs and dislocations that would be caused by a rapid shift away from the fossil fuels that supply some 85 percent of the world’s energy.
6. The Briefs (date of the article in Peak Oil News is in parentheses)
The oil market’s value is larger than the world’s valuable raw metal markets combined, with an annual production valued at $1.7 trillion. A flourishing black market is no surprise, with about $133 billion worth of fuels stolen or adulterated every year. These practices fund dangerous non-state actors such as the Islamic State, Mexican drug cartels, Italian Mafia, Eastern European criminal groups, Libyan militias, Nigerian rebels and more – and are a major global security concern. (10/12)
Petrochemicals’ role: The debate about peak oil demand always tends to focus on how quickly electric vehicles will replace the internal-combustion engine, especially as EV sales are accelerating. However, the petrochemical sector will be much more difficult to dislodge, and with alternatives far behind, petrochemicals will account for an increasing share of crude oil demand growth in the years ahead. (10/8)
Natural gas to grow: Energy companies are betting demand for natural gas will rise at a break-neck pace for decades, undermining warnings that tackling climate change would require a rapid switch to renewable energy. The majors see oil, and especially natural gas, playing a major role throughout the decades of transition and beyond as demand for electricity and plastics grows. (10/10)
Marine fuels: Gasoil refining margins could spike to $40 a barrel in 2020 as more shippers shift to middle distillate fuels when new rules limiting sulfur emissions take effect, Bank of America Merrill Lynch said on Tuesday. From 2020, the U.N. International Maritime Organization will ban ships using fuels with sulfur content above 0.5 percent, compared with 3.5 percent now, to curb pollution. The bank estimated the current global demand for marine fuels at 5 million b/d, of which 70 percent is comprised of dirtier fuel oil. (10/10)
Fracking in the UK is resuming on Saturday for the first time since 2011—when it was linked to earthquakes—after a court dismissed on Friday a last-minute request for an injunction. (10/13)
UK fracking take two: Cuadrilla Resources has returned with a government-enforced go-slow approach. It has set up a chain of seismic monitors three miles beyond its dig to gauge tremors. Contractors from Schlumberger, the oilfield services firm, plan to pace themselves and spend up to three months stimulating the wells using the process known as fracking. In the U.S., a similar effort would take just a few days. (10/12)
UK fracking protest: Three men have been jailed for up to 16 months for causing a public nuisance during protests at a Lancashire fracking site. The men are believed to be the first anti-fracking protesters in the UK to be jailed. (10/10)
Protesting the sentencing: More than 200 academics have signed a letter calling for a judicial review of “absurdly harsh” prison sentences handed to three fracking protesters on Wednesday. (10/10)
In Norway, Chevron will become the first oil major to formally exit the continental shelf as the company transfers its last stake in an exploration license. Chevron is also seeking to sell assets in the British North Sea in order to focus on growing US onshore shale production as well as the giant Tengiz field in Kazakhstan. (10/11)
Israel’s Energy Ministry unveiled on Tuesday a plan to end the sale of new gasoline and diesel-powered cars by 2030 and replace them with electric vehicles and trucks running on compressed natural gas as part of a more ambitious plan to totally cut Israel off reliance on coal, gasoline, and diesel. The Israeli government is expected to approve by the end of this year the energy ministry’s plan for zero-emission vehicles by 2030. (10/10)
Qatar on LNG: The head of Qatar Petroleum on Tuesday warned there would be a significant shortage of LNG on global markets sooner than expected as he reaffirmed the company’s plans to reach a final investment decision on its domestic LNG expansion project by end-2019.
From Turkmenistan, Russia’s Gazprom plans to resume imports of gas at the start of 2019, CEO Alexei Miller said this week, having ceased purchases in January 2016 on poor economics. Relations between Turkmengaz and Gazprom worsened over 2014 and 2015 when the two became embroiled in a dispute over payments and supply volumes. In January 2016, Gazprom ceased purchases altogether. (10/11)
In Zimbabwe, fuel shortages intensified across the country as long queues formed at service stations that were selling the commodity amid widespread panic-buying of basic goods blamed on government’s new austerity measures. (10/9)
Total Nigeria attributed accidents caused by oil tankers’ in Nigeria to illiteracy among tanker drivers, aging equipment, substandard tank construction and low quality of road infrastructure. Total’s Management System for Transport manager, Mr. Ajibola Alaga, said that in aggregate terms, 120 major tankers accidents had been recorded since 2014, comprising 94 rollovers, 16 collisions, and 10 fires. (19/8)
The US oil rig count increased by 8 to reach 869, Baker Hughes reported. Gas rigs increased by 4 to reach 193, bringing the total number of active oil and gas rigs to 1,063—considerably higher than a year ago when 743 rigs were active. (10/13)
US crude oil exports could increase to 3.9 million b/d by 2020, mostly driven by rising production in the Permian, according to a new report by S&P Global Platts. US crude oil exports are expected to reach 2.2 million b/d next year, according to the estimates. EIA reports that US crude oil exports hit the 2 million-b/d monthly mark for the first time in May this year. (10/10) [Ed note: the US still has net imports averaging just over 3 million b/d during 2018. Further, the US will continue importing oil to meet the mix that our refineries were designed for.]
Colorado’s oil and natural gas industry will likely defeat an effective drilling ban on November’s ballot, a key state lawmaker predicted Friday, but she cautioned that the effort would return stronger in 2020 if state legislators do not find common ground on regulating abandoned wells and other issues. (10/13)
Nymex natural gas prices have jumped nearly 15 percent over the past month, rising to roughly $3.30 per million Btu. The market has clearly grown a little concerned about adequate supplies heading into the winter and that is reflected in natural gas prices rising to their highest point since the beginning of the year. For the week ending on September 28, natural gas inventories stood at 2,866 billion cubic feet (Bcf), or 636 Bcf lower than at the same point a year earlier, as well as 607 Bcf below the five-year average. (10/11)
Most heating bills will be higher this winter season while the weather may also be on average about one percent colder than last year — with potential fuel “supply issues” in cases of severe weather. On average, the US EIA expects natural gas bills to rise by five percent, home heating oil by 20 percent and electricity by three percent. (10/12)
Ethanol dustup: US President Donald Trump said Tuesday before heading to Iowa to announce an end to the summertime ban on higher ethanol blends that he wants lower US fuel prices. But the policy change to allow year-round use of gasoline blended with 15% ethanol, or E15, will not have an immediate impact on fuel prices or trade flows as it will have to go through a long rulemaking process by the EPA. And oil refiners have already promised to challenge it in court. (10/10)
Ethanol issue: The US EPA currently prohibits summer sales of gasoline blended with 15 percent ethanol, or E15, due to smog concerns. Because ethanol is cheaper than gasoline, the administration hopes it will bring down retail prices, which currently average $2.91 a gallon. (10/9)
EV partnership: Audi unveiled last month its first fully electric SUV, the e-Tron, at an event on Tesla’s home turf in San Francisco—the electric vehicle industry’s latest step toward mass adoption of EVs. What’s unusual about this particular launch is that Audi teamed up with Amazon for a home charging solution, letting Amazon into the energy and transportation businesses. (10/12)
A plus for EVs: Tesla’s competition is about to get more crowded next year with many legacy automakers and luxury brands launching a record number of battery electric vehicles and plug-in hybrids. All EV makers will have one common element that could help lift demand for battery vehicles—rising oil prices leading to fuel prices at four-year highs, which could turn consumers towards EVs. (10/8)
Vanadium is lithium on steroids—wildly bigger and the only way forward from here. We may have already reached the peak of our electric revolution through batteries with lithium. We need bigger batteries, preferably the size of a football field—or 20. That’s vanadium—Element 23. The answer to our issue of scale. (10/11)
Looming generation retirements: More than 37 GW of generation capacity—4% of today’s total—has been proposed to retire by September 2021, including 16.3 GW of coal-fired capacity, 12 GW of gas-fired power and 8 GW of nuclear generation, according to the US Federal Energy Regulatory Commission staff’s monthly infrastructure report. There is 897 GW of coal, nuclear and gas-fired capacity online today. (10/10)
Nuke export tighten-up: The US will strengthen controls on nuclear technology exports to China. The new rules, which take effect immediately, include a presumption of denial for the export of nuclear goods to China’s largest nuclear power company, the state-backed China General Nuclear Power Co., or CGN. Officials said they had evidence China was accelerating efforts to gain the technology for its military, including for use on islands in the South China Sea (10/12)
Fusion, again: The International Thermonuclear Experimental Reactor (ITER), the world’s largest experimental fusion facility in which India is a scientific partner, will start generating “a new, clean, safe and unlimited light” by 2025. (10/12)
Renewable energy is growing at a blistering rate, but clean energy is also nowhere near what is needed to avoid some of the worst effects of climate change. Renewable energy accounted for half of the increase in new electricity generation in 2017, a remarkable feat, according to a new report from the IEA. By 2023, renewables will account for 12.4 percent of total global energy demand (not just for electricity), a sign that the adoption of wind and solar around the world is gaining steam. (10/9)
Australia has rejected a call by scientists to phase out coal use by 2050 to prevent the world overshooting targets in the Paris Climate Change agreement with potentially disastrous consequences. The world’s biggest coal exporter on Tuesday said it would be “irresponsible” to comply with the recommendation by the UN’s Intergovernmental Panel on Climate Change (IPCC) to stop using coal to generate electricity. Canberra also reiterated its priority is to cut domestic electricity prices rather than curb greenhouse gas emissions, which have risen for four consecutive years. (10/9)
Climate investment: Exxon Mobil Corp’s latest shift on climate includes a $1 million donation to a political action committee’s lobbying campaign to promote a US tax on carbon-gas emissions, a central factor in global warming. The contribution was disclosed less than a month after Exxon agreed to contribute $100 million to oil companies’ efforts to develop technologies to reduce greenhouse gas emissions. (10/10)
Carbon tax: Exxon sees a carbon tax as an alternative to patchwork regulations, putting one cost on all carbon emitters nationwide, eliminating regulatory uncertainty hovering over Exxon’s business in states that might seek to target oil companies. Exxon’s contribution will go to Americans for Carbon Dividends, a new group co-chaired by former Senate Majority Leader Trent Lott. It is promoting a carbon tax-plus-dividend policy first proposed by two former secretaries of state, James Baker III and George Shultz, last year. All three figures are Republicans. The idea is to discourage companies from emitting carbon through the tax but to avoid burdening consumers by returning the money to Americans through what the group calls a “carbon dividend” that it estimates could be as much as $2,000 annually per family. (10/9)
Emissions target: The European Council agreed on setting a target of a 35 percent average reduction in CO 2 emissions from new cars by 2030. Average CO 2 emissions of new passenger cars registered in the EU will have to be 15% lower in 2025. (10/10)
Aviation target: The EU will miss its 2030 aviation emissions target by almost 100m tons if it adopts a new industry-backed standard being rolled out next year, a transport campaigning group has claimed. (10/9)
Cleaning up big-city air: Many major cities around the world are still engulfed in a daily cloud of smog. Even in a state like California, which demands the toughest emission standards, Los Angeles leads the list of US cities for poor air quality. Today, there is a very dynamic movement to switch to all-electric cars as soon as possible, but that might not be the definite solution to such complex air pollution problems. (10/13)
$240/gal gasoline tax? A new U.N. report suggests a $240 per gallon gas tax equivalent is needed to fight global warming. The U.N. says a carbon tax would need to be as high as $27,000 per ton in the year 2100. If you think that’s unlikely to ever happen, you’re probably right. (10/9)
Insurers on the hook: Extreme weather of one sort or another has been a regular feature of 2018—the same as last year. According to research from Swiss Re, there were $144bn of insured losses from natural catastrophes and man-made disasters last year, making it the most expensive year so far. “We have been looking into climate change for 30 years,” says Edi Schmid, the chief underwriting officer at insurer Swiss Re. “Clearly, there are effects — temperatures are rising, and there are more frequent heat waves and droughts.” Mr. Schmid points out that not all of the costs can be directly connected to climate change. Claims in future years could well be higher if insurance cover spreads. Total economic losses globally from last year’s disasters were $337 billion, meaning that more than half of the damage was not covered by insurance. (10/9)
Peak Oil Review: 8 Oct 2018
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2018-10-09/peak-oil-review-8-oct-2018/
Quote of the Week
“The amazing thing [the Trump administration] is saying is human activities are going to lead to a rise in [atmospheric carbon] that is disastrous for the environment and society [a 7-degree Fahrenheit increase from pre-industrial levels]. And then they are saying they are not going to do anything about it.”
Michael MacCracken, senior scientist at US Global Change Research Program (1993 – 2002)
Contents
1. Oil and the Global Economy
2. The Middle East & North Africa
3. China
4. Russia
5. Nigeria
6. Venezuela
7. The Briefs
1. Oil and the Global Economy
Oil prices continued to climb last week, with London futures hitting $86.74 a barrel on Wednesday, $10 higher than they were a month ago. Later in the week, profit taking and announcements from the Saudis and Russia that they were going to increase production drove prices lower. Whether the Saudis, Russia, and their close allies can increase production by enough to cover the decline in Iranian exports remains contentious. At week’s end, oil prices had settled to $74.34 in New York and $84.16 in London for a $10 a barrel difference.
The question of whether we will see $100 oil before Christmas continues to dominate analytical comment in the financial press. The Iranian sanctions are the main factor that could drive prices substantially higher in the next year or so; however, there are many other forces at work that could lead to lower oil prices. Some are expecting that a large increase in US shale oil production from the Permian Basin combined with higher Saudi and Russian production will create a surplus of oil next year. Others see the increasing prices of oil products in many countries due to weaker currencies as causing a significant drop in the demand for oil products next year.
India, in particular, faces threats in the form of a massive current account deficit, a falling rupee, and its position as the world’s fourth-largest oil importer. This situation obtains in many other developing countries. Lower demand combined with whatever comes from the Sino-US trade war could easily overshadow a drop in Iranian exports. A clue that major speculators are uncertain about the future came last when hedge funds cut their bullish wagers on US crude to the lowest level in nearly a year.
In addition to the Iran sanction, however, there are still many wildcards out there which could send the oil supply lower in the next couple of years. The situations in Venezuela, Libya, and Iraq are far from stable and could result in lower oil supplies.
The OPEC Production Cut: As usual, there is uncertainty regarding OPEC production numbers. According to Reuters, the organization pumped 32.85 million b/d in September, up 90,000 b/d from August’s revised level. However, the Platts survey of analysts says that OPEC increased its production in September to 33.07 million b/d, a 180,000 b/d rise from August. Early estimates of OPEC and even US production are unreliable as we see in the weekly surveys of analysts concerning US inventories which are frequently off from the EIA actual counts by significant amounts. Several OPEC members have political agendas in reporting their oil production figures, so even the official numbers have political biases.
Saudi Energy Minister al-Falih said OPEC is technically able to raise oil output by 1.3 million b/d, the TASS news agency reported on Thursday. Whether an increase of this size ever comes to pass remains to be seen. The Saudis usually couch discussions about spare capacity by saying it will only be used if there is sufficient demand.
Last week, the US accused OPEC of withholding 1.42 million b/d of spare capacity from the world market and was driving up prices as a result. The US and OPEC appear to be talking past each other when it comes to the cartel’s spare output capacity. The two sides don’t agree on the definition of the term, let alone how much spare capacity OPEC even has available. While Saudi Arabia and its allies have much reason to help the US in its sanctions on Iran and would like to see higher oil prices, they realize that when prices get too high demand drops. As we have seen several times in the past few decades, low spare capacities usually drive oil prices much higher until reduced demand brings them back down again.
US Shale Oil Production: A new report by consulting firm Arthur D. Little finds that US drillers will need to adjust their business models to keep up with forecasted growth in the Permian. The report forecasts Permian activity during the next five years to:
Rise by up to 3 million barrels of oil equivalent per day.
Possibly produce up to 5.4 billion barrels of oil equivalent per day.
Have a need for up to 41,000 new wells (mostly unconventional) to be drilled to meet production outlook.
Require more than $300 billion in capital expenditures.
The report called the demands on infrastructure “tremendous,” citing trucking, roads, water usage, power consumption, sand to frack wells, and community services like housing, schools, and hospitals. The biggest problem will be the $300 billion in capital for an industry where few have ever shown a profit and costs are rising.
The biggest hole in the report seems to be an absence of concerns as to whether affordable oil will be available in the highly productive “sweet spots” to permit a doubling of production. Analysts have noted that productivity per foot of horizontal well is already dropping and that the rapid depletion of production from existing wells is already approaching that of production that can be increased each month. To assume that the industry can drill and frack new wells at an ever-increasing pace seem far-fetched. Some are already forecasting that 2019 will see the peak of oil production due to increasing logistical difficulties and a lack of profitable places to drill.
There are also concerns as to whether the very light shale oil, which is better for making gasoline than heavier diesel and jet fuel, will be as much in demand. In a recent article, Wood Mackenzie’s VP for Chemicals and Oil Markets warned that US refiners might very soon find themselves stuck with excess production of gasoline that exceeds demand. At the same time, to make matters worse, the production slump in Venezuela is reducing the availability of heavy crude needed for the middle distillates necessary for economic growth.
2. The Middle East & North Africa
Iran: China’s top refiner Sinopec is halving its oil imports from Iran as of September, bowing to pressure from the United States, which is seeking to bring Iranian oil exports down to zero. Tehran is scrambling to find ways around the sanctions which seem on track to be more effective than analysts had believed. The success of the sanctions program has caused Washington to reevaluate its announced policy of no waivers for countries who are willing to make cuts in their imports of Iranian oil. At week’s end, Washington was “in the midst of an internal process” of considering sanctions waivers for countries that reduce but do not entirely stop importing oil from Iran.
According to the head of the state-run National Iranian Oil Company, Iran has no plans to cut oil production as its exports dwindle. In a new wrinkle, Iran plans to start offering oil for exports via its national stock exchange. Iran accused Saudi Arabia and Russia last week of breaking OPEC’s agreement on output cuts by producing more crude oil. Tehran is saying that the two countries are not able to provide enough oil to make up for a reduction in Iranian exports.
As Iranian natural gas sales are also prohibited under the sanctions, Tehran’s hopes of boosting exports of the commodity do not look good. Iran holds the second-largest natural-gas reserves in the world and was hoping to start selling natural gas to the European Union this year. Iraq is having trouble continuing its natural-gas purchases from Tehran because banks are reluctant to carry the payments due to the US restrictions.
Iraq: Baghdad earned $7.91 billion in oil revenues in September, its highest take in 52 months, despite a small decrease in Basra Gulf exports. Nationwide, exports dropped two percent month-on-month, from 4.02 million b/d to 3.95 million, as Kurdistan loaded fewer tankers despite increased pipeline flows to the Ceyhan port in Turkey.
Despite the Oil Ministry’s optimistic report on the country’s capability to ramp up production, internal political issues could lead to new crises soon. Last week Adil Abd al-Mahdi, Iraq’s former oil minister, was named prime minister-designate on Tuesday, hours after Barham Salih was elected president of Iraq in a political standoff. The controversy surrounding Barham Salih’s election as the new president is threatening to destabilize a strategic relationship between the autonomous Kurdistan region’s two leading political parties. This, in turn, could lead to still more trouble between Erbil and Baghdad.
In an ominous development which could have serious consequences for the future of Iraq, the agriculture ministry said last week that it would reduce its 2018-2019 winter crop planting area by 55 percent due to a water shortage. Water flowing down the Euphrates into southern Iraq has been declining in recent years and is now down to the level where food-planting must be curtailed.
Saudi Arabia: The issue of how much spare production capacity the Saudis have and can sustain remains the question of the day. Saudi officials insist that they can produce up to between 12.0 and 12.5 million b/d if needed; however, there is widespread doubt that level of sustained production is possible. Last week oil minister Khalid al-Falih said that the kingdom currently is producing 10.7 million b/d and has about 1.3 million b/d of spare capacity. Falih said Saudi Arabia’s November output was likely to be slightly higher than October’s projected 10.7 million b/d. He also said that the kingdom plans to invest $20 billion in increasing oil production in the coming years.
Once the US sanctions on Iran go into effect November 5, Platts Analytics expects Iranian crude and condensate exports to fall to 1.1 million b/d, and to 800,000 b/d by the fourth quarter of 2019, down from 2.91 million b/d in April 2018.
Russia pumped at record high levels in September, producing 11.35 million b/d, and energy minister Alexander Novak said Wednesday that his country could add up to 300,000 b/d in the next several months. Kuwait and the UAE are increasing production, but it is doubtful any other countries can respond quickly. Later this coming winter, we should have a better idea of how much the sanctions will cut Iranian production and whether OPEC and Russia can make up for the shut-in Iranian oil.
A $200-billion solar power project that was planned to be the largest solar farm in the world might never happen, government sources told the Wall Street Journal last week. The solar project would have had installed capacity of 200 GW by 2030. However, the WSJ sources said, nobody is working on the project, and the government is planning another set of renewable energy initiatives, to be made public later this month.
Saudi Arabia’s crown prince says the plan to sell shares in Aramco will go ahead, promising an initial public offering by 2021. For the past two years, Saudi Arabia has been preparing to place up to 5 percent of its national oil company on the stock market. After months of setbacks, the prince’s father King Salman stepped in to shelve the project.
3. China
As the trade conflict intensifies, new data shows that privately owned makers of cars, machinery, and other products stopped expanding in September, as export orders dropped the most in more than two years. Output by large, state-owned manufacturers also continues to weaken. The first major gauge of China’s economic performance for the third quarter indicates that the U.S.-China trade fight is beginning to take a bigger bite out of the growth of the world’s second-largest economy.
US crude oil shipments to China have “totally stopped,” the President of China Merchants Energy Shipping Co (CMES) said on Wednesday. Washington and Beijing have placed steep import tariffs on hundreds of goods in the past months. Although US crude oil exports to China, which only started in 2016, have not yet been included, Chinese oil importers have shied away from new orders recently.
China is raising the oil import quota for its non-state refiners for 2019 by 42 percent as new refinery capacity will start up next year. China is allocating a total of up to 4.06 million b/d, of import quota to non-state refineries for next year according to a communication from the Chinese Commerce Ministry. This suggests that Chinese demand for imported crude will continue to keep pressure on the oil markets.
4. Russia
Russia’s crude production in September hit a record high of 11.356 million b/d, exceeding the level of October 2016, the benchmark Moscow used for cutting production under the deal with OPEC. Crude production was up by 146,000 b/d from August. Russia’s crude exports outside the 11 former Soviet Republics fell by 1 percent to 4.798 million b/d in September.
While Russia is producing oil close to post-Soviet highs, because of transportation constraints, it can’t significantly increase its oil supply to Asia, where the loss of Iranian oil exports is being felt, according to deputy energy minister Pavel Sorokin. In Europe, Russia’s Urals is considered to be one of the best replacements for Iranian grades. The price of Urals compared to Brent to which the Urals deliveries are priced off has recently jumped to a five-year high, as European refiners were starting to search for alternative grades to replace imports from Iran. This has also prompted Saudi Arabia to raise last month the prices for Europe for its flagship Arab Light crude grade for October.
Global energy executives assembled in Moscow on Wednesday said the world needs Russian gas to keep the lights on, in a clear message to US President Trump who has warned he may impose sanctions on Russian gas export projects. Trump, citing what it calls Russia’s “failure to act as a good global citizen,” says the US may take steps to block the Nord Stream 2 gas pipeline, which will increase the volumes Russia can export to northern Europe. The US position has prompted a backlash from the Kremlin, and from business groups in Germany, and now from leading figures in the global energy industry.
5. Nigeria
The country’s leading newspaper notes that after 58 years of independence from Britain, the state of the Nigerian oil industry has remained pathetic among other oil producers.
The Nigerian system, regrettably, is supported by obsolete laws: Petroleum Act 1969; Petroleum Profits Tax Act 1959; Deep Offshore & Inland Basin (Production Sharing Contracts) Act, and sundry ad hoc legislation. Other African countries are making giant strides in the quest to regulate their oil industry and optimize the dividends from the industries.
Former World Bank Vice President, Oby Ezekwesili, said it was unfortunate that Nigeria overtook India in May 2018 to become the country with the world’s highest number of people living in extreme poverty amid enormous oil and gas reserves. India’s population of 1.3 billion people now has 5 percent of its population living in extreme poverty. Nigeria with a population of about 191 million has 44 percent in extreme poverty.
Without the requisite laws to coordinate the oil/gas sector, issues like lack of transparency/accountability; low participation by indigenous players; political interference with the Nigerian National Petroleum Corporation; inefficient downstream operations; funding constraints; weak and dependent regulator; overlapping institutional roles; revenue management issues; outdated laws; and environmental degradation, will continue to plague the Nigerian oil/gas space.
6. Venezuela
Repairs to a dock at Venezuela’s main oil export port will take at least another month to complete following a tanker collision more than a month ago. The Jose port’s South dock is one of three used to ship heavy and upgraded oil to customers including Russia’s Rosneft, Valero, and Chevron, and to receive diluents needed for the exports. Jose port typically handles about 70 percent of Venezuela’s total crude exports, which in September declined 14 percent compared with the previous month to 1.105 million b/d, according to Refinitiv Eikon data.
The delay in resuming shipments is due to insufficient funds to make repairs, partially thanks to US sanctions, which have essentially closed access to foreign funding. China, not bound by these restrictions, recently agreed to a US$5-billion lifeline for the Venezuelan government and its oil industry, but this money will take time to become available. Venezuela has officially launched its state and oil-backed cryptocurrency, El Petro, which analysts and experts see as nothing but a scam and another effort to skirt sanctions.
The domestic situation is desperate with 60 percent of the population saying they have lost weight due to the lack of food. Some 2 million people out of a population of 31 million have already left the country — and more are leaving the country, at a rate exceeding 15,000 per day. The Maduro government, which has already survived months of mass demonstrations by killing hundreds of protesters, has blocked five military coup attempts. A Cuban-run intelligence apparatus has proved brutally effective in rooting out internal opposition: Some 600 military officers are believed to be under detention, and much of the civilian opposition leadership has been jailed or driven into exile.
7. The Briefs (date of the article in Peak Oil News is in parentheses)
Big Oil—and its smaller competitors—attracted a lot of praise for their tight financial discipline during the last three years, after Brent collapsed from more than US$100 a barrel to less than US$30 in less than 24 months. Reuters reported this week that big oil companies’ boards are under increasing pressure to boost spending, expand production, and increase reserves. That’s just three years after everyone in oil woke up to the fact that Brent was going nowhere but down for a while longer and belts started tightening. Now, with Brent at $85 and climbing, these belts are getting too tight, it seems. (10/5)
Petrochemicals—components derived from oil and gas that are used in all sorts of daily products such as plastics, fertilizers, packaging, clothing, digital devices, medical equipment, detergents and tires—are becoming the largest drivers of global oil demand, in front of cars, planes and trucks, according to a major study by the International Energy Agency (IEA). Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050. (10/6)
Europe’s natural gas and electricity markets are heading into the winter heating season with prices at record highs amid various supply outages in already tight markets and uncertainty over how much flexibility in gas and power generation there will be. Forward prices for natural gas are factoring in a winter risk premium in the currently tight market, highlighting the concern that another supply outage could strain the market further and send prices even higher. (10/1)
UK shale gas pioneer Cuadrilla Resources is to begin hydraulic fracturing at the first of its two horizontal shale gas wells at its Preston New Road site in Northwest England “in the next week,” the company said Friday. Once the fracking starts, it will represent the first such activity in the UK since 2011. The UK is increasingly dependent on gas imports, with Cuadrilla and its peers saying shale gas can go some way to reducing that dependence. (10/5)
Offshore Cyprus, ExxonMobil plans to begin drilling for oil and gas sometime this quarter, a senior executive said on Friday, while Turkey warned again on Thursday against exploration offshore Cyprus in what it says is ignoring the rights of the Turkish Cypriot people. Turkey, which recognizes the northern Turkish Cypriot government and doesn’t have diplomatic relations with the internationally recognized government of Cyprus, claims that part of the Cyprus offshore area is under the jurisdiction of Turkish Cypriots or Turkey. (10/6)
India’s Vedanta Ltd is investing $4.1 billion to boost oil output to over 400,000 b/d from its flagship Barmer block in the desert state of Rajasthan in 2021, its chairman Anil Agarwal said. Agarwal said oil output from the block would rise next year to more than 300,000 b/d from about 250,000 b/d currently. India, the world’s third-biggest oil importer, ships in 80 percent of its oil needs from overseas as its local output has stagnated for years. The country produces an average of 720,000 b/d oil. (10/2)
India has introduced fuel price relief as prices at the pump rise inexorably, following soaring international benchmarks. The move was made after consultation with local oil companies, which agreed to reduce prices by US$0.034 per liter of gasoline and diesel, of which they will absorb US$0.014 per liter of fuel, and the government will shoulder the rest by cutting excise duties on fuels. (10/5)
India gave the green light to businesses hurt by the rising costs of crude oil to start borrowing up to $10 billion in foreign money that will offset the heavyweight of rising oil prices and the falling rupee, Reuters reported on Wednesday. India’s current commercial borrowing rules prevent businesses from borrowing more than $750 million in foreign money—the previous limit as outlined in April by the Reserve Bank of India. (10/4)
In Singapore, Exxon Mobil Corp is considering a multi-billion-dollar investment at its Singapore refinery, the company’s largest, ahead of new global shipping fuel regulations starting in 2020. (10/3)
Egypt, recently self-sufficient in natural gas, continues to rely on imported gasoline and diesel fuel. Now rising oil prices—at levels today way above prices that Egypt had factored into its budget and state finances ($67/barrel)—mean that the government will be spending more on fuel subsidies this fiscal year through June 2019, when it plans to have phased out the support for fuel prices. The higher price of oil may soon pose a dilemma for the government: either risk public discontent by letting fuel prices reach market-price levels or miss its targets for cutting the deficit. (10/5)
South Africa could experience its biggest fuel price hike in the country’s history in October, the Automobile Association warned on Friday. AA described the increases as “catastrophic” for road users. (10/2)
Argentina is in the midst of an economic and market crisis. Its local currency has lost around 40 percent against the US dollar so far this year. The central bank has raised interest rates to 60 percent to try to stem soaring inflation that is running at over 30 percent. The economy is shrinking, and demand is dropping. Demand for natural gas is also falling. And Argentina’s state-run energy company YPF is responding to dropping demand by scaling back its natural gas output and halting production at some wells. (10/4)
Canadian crude plunged to a record low relative to US crude, hurt by reduced capacity at American refineries and a jump in production from new oil-sands megaprojects that has overwhelmed the nation’s pipeline system. Maintenance work at US refineries over the next six months will lead to stretches when those facilities are offline, giving portions of Canadian heavy crude nowhere to go. (10/6, 10/4)
Western Canadian LNG…again? Royal Dutch Shell Plc and its four partners have agreed to invest in a multibillion-dollar liquefied natural gas project in western Canada — the largest new one of its kind in years that would carve out the fastest route to Asia for North American gas. LNG Canada — comprised of Shell, Malaysia’s Petroliam Nasional Bhd, Mitsubishi Corp., PetroChina Co. and Korea Gas Corp. — is set to announce a final investment decision on the C$40 billion ($31 billion) project as early as Monday. (10/2)
US East Coast oil refiners are ramping up rail deliveries of crude from Western Canada, grabbing stranded barrels that full pipelines have driven to a record discount. That trend is expected to accelerate, as prices will remain weak, with no new Canadian export pipelines expected until late 2019. Rail volumes from Canada to East Coast refineries averaged 35,000 barrels a day for the 12 months ending in July, up from 16,000 b/d for the prior 12-month period. Canada is having difficulty building and expanding pipelines due to the environmental and aboriginal opposition, prompting a swing back to its crude-by-rail delivery system. (10/2)
The US oil rig count fell for a third consecutive week, by two rigs, to 861, General Electric Co’s Baker Hughes energy services firm reported on Friday. More than half the total US oil rigs are in the Permian, the country’s biggest shale oil formation. Active units there declined by one this week to 485. The number of gas rigs held steady at 189. (10/6)
Exxon Mobil Corp is exploring the sale of many of its US Gulf of Mexico assets. Major oil companies have been looking to concentrate development operations in a few key areas. Exxon is focusing on promising acreage in offshore areas such as Guyana and Brazil and onshore in the Permian basin of Texas. Exxon has asked a small number of parties to gauge their potential interest in the company’s Gulf assets, ahead of deciding on how to proceed. (10/3)
In Colorado, oil and gas companies and their supporters have poured $20.3 million since August into a campaign to defeat a ballot initiative that would limit new drilling in populated areas, according to state financial filings released on Tuesday. Colorado, the sixth largest and one of the fastest growing US oil-producing states, votes on Nov. 6 on a citizens’ petition that would require new wells be at least 2,500 feet from homes, schools, and parks. (10/3)
Working natural gas stocks in the Lower 48 states totaled 2,866 billion cubic feet (Bcf) as of September 28, 2018, which is the lowest working natural gas stocks have been at this time of year since 2005. (10/6)
Hybrid electric plane coming: Boeing- and JetBlue-backed Zunum Aero has selected Safran Helicopter Engines as the turbine provider for its hybrid electric commercial aircraft, which will be available in the early 2020s. The turbo-generator will power a 12-seat, hybrid-to-electric 700-mile commercial aircraft. The new aircraft is targeted to deliver breakthrough operating costs of 8 cents per available seat mile or $250 per hour for the aircraft—60-80 percent lower than comparable conventional aircraft of comparable size. The ZA10 aircraft is designed to cruise and land on turbo-generator power alone, offering full redundancy. (10/6)
EV charging race: At its recent electric-car deep-dive in Germany, Volkswagen announced that the solid-state batteries it is working on for 2025 will be able to charge at up to 400-kw—fast enough to recharge a 300-mile battery in the upcoming Porsche Taycan in less than 10 minutes. That’s just a little longer than it takes to refill a gas tank. When the first electric cars launched in 2011, buyers and fans were clamoring for CHAdeMO fast charging that operates at about 50 kilowatts and could recharge a short-range electric car (to 80 percent capacity) in about a half hour. (10/2)
Finland’s Olkiluoto 3 nuclear power plant, which is already more than a decade behind schedule, may face further postponements, plant operator Teollisuuden Voima (TVO) said. The project in western Finland, built by a consortium led by French state-owned nuclear group Areva, has been hit by repeated delays and soaring costs. TVO said the final testing phase is now running late. The plant, Finland’s fifth, is slated to provide 10% of the country’s electricity. It was originally scheduled to come on line in 2009. (10/4)
In the Balkans, year-over-year hydropower production continued to fall in early October, mostly as a result of lower run-of-river output, while reservoir levels also dropped. (10/2)
Iran and Syria signed on Tuesday a memorandum of understanding under which Iran will build a power plant in Syria’s coastal city of Latakia in a project worth US$475 million (411 million euro), Iran’s Islamic Republic News Agency (IRNA) reported today. The project will be launched next year. (10/3)S,
Bad wind rising? In the journal Joule, Harvard researchers report the most accurate modeling yet of how increasing wind power would affect climate. They find that large-scale wind power generation would warm the Continental United States 0.24 degrees Celsius because wind turbines redistribute heat in the atmosphere. (10/5)
Climate change conundrum: Despite the Trump administration’s own prediction that by the end of this century, the world could warm “a disastrous” 7°F, or about 4°C, above pre-industrial levels, the president has decided not to curb greenhouse gas emissions, but instead to use the devastating findings to justify and intensify his pro-fossil fuel agenda, including cutting back on increased mpg vehicle requirements. (10/5)
EU emissions reduction push: Members of the European Parliament approved a proposal which would set a higher target for reducing EU fleet-wide emissions for new cars by 2030 of 40% (compared to the EU Commission’s 30%; year of reference 2021) with an intermediate target of 20% by 2025. Similar targets are set for new vans. Market uptake of electric and low- emission cars should also accelerate, said MEPs. (10/4)
H2 plane: After 12 years developing hydrogen propulsion systems for small unmanned aircraft, HES Energy Systems has unveiled its plans for Element One, the first regional hydrogen-electric passenger aircraft. Element One merges HES’ ultra-light hydrogen fuel cell technologies with a distributed electric aircraft propulsion design. Element One is powered by HES’s Aeropak—a combination of its extremely lightweight fuel cells with high energy density hydrogen energy storage, allowing flight duration extensions by several orders of magnitude compared to lithium batteries. (10/2)
Peak Oil Review: 24 September 2018
By Tom Whipple, originally published by Peak-Oil.org
https://www.resilience.org/stories/2018-09-24/peak-oil-review-24-september-2018/
Quote of the Week
”Assuming that the balancing act between declining and growing [oil producing] countries continues (from Mexico through to Canada) the whole system will peak when the US shale oil peaks (in the Permian) as a result of geology or other factors and/or lack of finance in the next credit crunch, and when Iraq peaks due to social unrest or other military confrontation in the oil-producing Basra region. There are added risks from continuing disruptions in Nigeria and Libya, steeper declines in Venezuela and the impact of sanctions on Iran.” Matt Mushalik, Australian engineer and oil industry analyst
1. Oil and the Global Economy
Oil prices continued to show strength last week but closed in London up by less than a dollar for the week at $78.80. Brent now has closed above $78 a barrel six times since mid-May and has touched $80 a barrel once or twice but failed to close above $80 since mid-2014. As is now routine, traders are split between the increasingly effective US sanctions on Iran and the prospects of a lengthy trade war between the US and China. Last week was complicated by the issue of whether the OPEC+ consortium would officially raise production or leave individual production levels cloudy as they have been since June.
Bloomberg reported last week that Saudi Arabia might allow crude prices to rise above $80 per barrel as the market adjusts to the start of US sanctions on Iran. In response, President Donald Trump sent a tweet on Thursday calling for OPEC to lower oil prices. The general feeling among analysts seems to be that you can’t tweet oil out of the ground and that tighter markets are ahead. Last week’s market strength was bolstered by a fifth weekly US crude inventory drawdown and strong domestic gasoline demand. U.S. crude inventories fell 2.1 million barrels last week to the lowest level since February 2015. Gasoline stocks fell 1.7 million barrels versus forecasts for a 100,000-barrel drop. Gasoline consumption usually picks up in the summer and wanes in autumn, but demand remained strong in the latest report, at 9.5 million b/d.
The OPEC Production Cut: In Algiers, the 24-member coalition including OPEC and Russia ended their meeting on Sunday with no formal recommendation for any additional supply boost. However, Oman’s Oil Minister and his Kuwaiti counterpart told reporters that producers had agreed they needed to focus on reaching 100 percent compliance with production cuts agreed to at an OPEC meeting in June. That “focus” effectively means that the meeting decided to increase production without setting any specific goals for individual countries. Thanks mainly to falling production in Venezuela, the OPEC+ consortium produced at 129 percent of the objective they originally set. Iraq and Russia have been saying that they can increase production quickly.
Tehran is unlikely to be happy with this development, as its OPEC governor has accused Saudi Arabia and Russia of being in cahoots with the US to undermine other OPEC members and destabilize the oil market. Saudi Arabian leaders find themselves in a tight spot. The Saudis, who lead OPEC, face pressure from President Trump to increase production to stabilize crude oil prices. But the Saudis must also appease their fellow OPEC countries, which could threaten their leadership within the oil cartel. OPEC and Russia were unified in their efforts to reduce production the past two years to push prices up. The alliance with Russia is critical for the Saudis and they want to make it a permanent institution.
Some analysts have doubts that the 24-member OPEC+ consortium can raise oil production enough to offset the million barrel + drop in Iranian exports that US sanctions on Iran might bring about. The insurgency situations in Libya and Nigeria could easily lead to lower production in the next year or so. It is perfectly evident that all oil exporting countries want to see oil prices as high as their customers can bear without causing a significant drop in demand as was seen in 2008.
US Shale Oil Production: Crude oil production from US shale deposits will hit 7.59 million b/d next month, according to the EIA’s latest Drilling Productivity Report. This production level is 79,000 b/d more than this month’s estimated production. The most significant increase, once again, is supposed to come from the Permian Basin, where producers will add 31,000 b/d to overall daily output from the current 3.427 million b/d to 3.458 million b/d. The second-largest contributor to the monthly increase will be from the Eagle Ford, where the EIA estimates production will rise by 16,000 b/d to 1.449 million in October.
Countering all the talk of bottlenecks in getting oil to market from the Permian Basin, was the announcement last week by Plains All American L.P. that it will begin operations on an expanded West Texas oil pipeline on Nov. 1. The extended Sunrise pipeline, when completed, will add 500,000 b/d from Midland to Wichita Falls, Texas, with connections to the crude storage hub at Cushing, Oklahoma. The notice did not say how much new oil the extended Sunrise pipeline will be able to carry at the outset. The Sunrise pipeline will be capable of transporting 360,000 b/d by the first quarter of 2019, enough new capacity that Permian producers can expand production over the following six months, according to a research analyst at East Daley Capital Advisors. Pipeline operators are planning to add 3 million b/d of takeaway capacity from the Permian by the end of 2020, almost doubling the region’s current 3.5 million b/d according to energy consultancy Wood Mackenzie.
The Wall Street Journal reports that a new large-scale drilling plan is being pursued by Chevron. The “factory model” for drilling consists of “master planning an entire region of small shale wells by locking up labor, building infrastructure and securing sand and other needed materials, all at once.” Economies of scale for large companies give them an advantage over smaller drillers. “They can transfer technology and skilled people across assets and parts of their portfolio from North America to Argentina.” “These bigger companies have the scale to build or finance infrastructure and secure the best equipment and supplies.”
On the downside, West Texas Intermediate at Midland traded on Thursday at a discount of $15 a barrel to US crude. These deep discounts have been going on in recent months as crude producers in the Permian Basin struggle to find space on pipelines amid rising production. Moreover, a new report from the EIA indicates that the growing shortage of pipeline takeaway capacity in the Permian Basin is resulting in some companies reallocating capital earmarked for Permian drilling to other areas in which they produce.
While drilling in the Bakken basin has increased significantly this year, more activity means that drillers are being forced into less desirable locations. As a result, the majority of wells in the Bakken could shift from having an initial monthly production of 1,000 b/d to a majority of wells with just 500 b/d of peak performance, according to a study from the North Dakota Pipeline Authority. This drop in productivity would require a doubling of well completions to keep production level and increase costs. Outside analysts have been warning for years that large decreases in production would come as the most productive “sweet spots” are used up.
One sign that the fracking industry is becoming concerned about water is that there are now societies and conferences dedicated to the topic of “produced water.” Produced water is the industry term for the toxic water that is “produced” over the life of a fracked oil or gas well. According to a study by Wood McKenzie, the costs of water disposal for the fracking industry could add another $6 per barrel of oil produced. For the US shale oil and gas industry, which has consistently lost money over the past decade, adding another $6 per barrel in costs would have significant effects.
A new Duke University study concludes that from 2011 to 2016 the amount of water used to frack oil and gas wells rose 770 percent. But the amount of toxic wastewater produced in that same period rose 1,440 percent. The headline of a recent Dallas News story on the fracking water crisis in the Permian Basin referred to it as a “Disposal nightmare.”
2. The Middle East & North Africa
Iran: Most of the Iranian oil news last week concerned falling sales due to the US sanctions and how Tehran will fare at the Algiers OPEC+ summit. It now seems that Japan, India, and South Korea will cut back or stop Iranian oil imports. European importers are also likely to cut back, leaving Chinese and other refiners. At least 7 Iranian owned oil tankers have turned off their transponders, which makes it more difficult for commercial “tanker trackers” to figure out where oil leaving Iranian ports is going.
Iran’s LPG shipments in September dipped to 356,000 tons after hitting 568,000 last month, the highest since previous Western sanctions were lifted in January 2016. Iran could lose up to 1.4 million b/d of exports by the end of the year, according to the latest projections by Platts Analytics.
Tehran has already announced that it is opposed to any increase in oil production which it sees as merely aiding the US in finding sources of oil to replace those Washington is attempting to shut in. Because any OPEC agreement requires unanimous consent, Iran could block any changes to the formal oil production cut deal. The specifics of the June agreement, which called for increased production on the order of 1 million b/d, were not hammered out.
Tehran rejected a new US offer of negotiations on Thursday, saying Washington had violated the terms of the 2015 nuclear accord. The US special envoy for Iran said on Wednesday that Washington now wanted to negotiate a treaty that included Tehran’s ballistic missile program and its regional behavior. Hook said the new deal that Washington hoped to sign with Iran would not be a “personal agreement between two governments like the last one”, but a formal treaty.
Gunmen fired on a military parade in Ahvaz, which is in southwestern Iran, on Saturday, killing 24 people, half of them members of the Revolutionary Guards in one of the worst attacks ever on the elite force. More than 60 people were wounded as the attackers targeted a stand where Iranian officials had gathered to watch an annual event marking the start of the 1980-88 war with Iraq.
Iraq/Syria: According to the director general of Iraq’s State Oil Marketing Organization, Baghdad can increase oil production “immediately” to support the market ahead of the implementation of US sanctions on Iran which is expected to lose on the order of 1.4 million b/d in exports by the end of the year. Iraq pumped 4.68 million b/d last month, up 110,000 b/d from July and the highest recorded in the 30-year history of the Platts OPEC survey, as exports from both the country’s southern port of Basra and through the Turkish port of Ceyhan saw increases.
However, a new report on Iraq’s oil production capability says a series of problems, including export bottlenecks caused by a lack of infrastructure, will continue to limit the country’s oil output for years to come. The report, from the London-based consulting firm IHS Markit, found that while Iraq could theoretically produce about 7 million b/d, in practice the connections between its oil fields and storage farms and the export terminals in the south will be bottlenecks. A spokesman for HIS Markit says that Iraq would be lucky to reach 5 million b/d by 2028, and 6 million by 2036.
Before the civil war, Syria produced over 400,000 barrels of oil per day. But by 2013 the number had dropped to 58,000. In January 2018, Syria’s President Bashar al-Assad had signed an agreement with Russian President Vladimir Putin giving Moscow sole rights to oil and gas production in Syria. With a well-armed corporate militia, Gazprom and others can aggressively protect assets at home and abroad and may soon play a significant role in Russia’s energy plans for Syria.
Russia will be expected to pump $30 billion or more into restoring Syria’s energy infrastructure. In exchange, Russia will have a stronger presence in the Middle East and the eastern Mediterranean. Assad has responded generously with an invitation to such firms, promising lucrative incentives for companies willing to restore Syria’s energy infrastructure.
Saudi Arabia: Oil prices were up last Tuesday on reports that Riyadh would be comfortable letting oil prices rise above $80 a barrel and OPEC may not be rushing into further production boost commitments after the one they agreed upon in June. In July, Saudi Arabia’s oil stocks dropped by 5.51 million barrels, after the Kingdom unexpectedly reduced its production compared to June while it kept exports stable. The Saudis pumped 10.49 million b/d in August, far above its quota of 10.06 million b/d under the supply cut agreement, but below the 10.8 million to 11 million b/d that it had signaled it would produce at the June meeting.
Russia and Saudi Arabia will continue co-operating on the design of a framework for long-term relations between OPEC and its external partners, according to a Russian Energy Ministry statement. The statement was released following a meeting between Energy Minister Novak and Khalid al-Falih.
Saudi authorities are seeking the death penalty for three prominent clerics, rights activists and a government official said, testing the unwritten code that has kept the kingdom’s rulers in power. Crown Prince Mohammed bin Salman and his father, King Salman, have jailed activists, businessmen, and government officials as part of their efforts to reshape Saudi society and economics. However, Saudi clerics have been a power unto themselves for decades, with fame and influence beyond that of wealthy, and allegedly corrupt, businessmen including members of the royal family. Moving against clerics could turn public opinion against the kingdom’s rulers.
Signs of political instability in a country producing so much oil is always troublesome.
3. China
US crude oil exports have been temporarily spared from Chinese tariffs, giving state-run oil refineries a short window to import as much as possible. They’re scrambling for US imports because WTI, the US benchmark, is selling at a $6.66 per barrel discount to Dubai crude oil. That’s the biggest price difference of the year.
Although the tariff on LNG announced last week was only 10 percent, rather than the initially threatened 25 percent, it is still bad news for US LNG producers. China’s procurement is widely seen as the major driver for future LNG demand as Beijing’s anti-pollution fight focuses on a shift from oil to gas.
Shipments of LNG from the US to China remain cheaper than other sources despite a 10 percent tariff. However, the political risks may deter Chinese buyers from US cargoes even if they are a lower price. Despite the urgent demand for more natural gas, Chinese buyers are likely to seek longer-term LNG contracts from politically neutral sources such as Qatar and Australia.
China’s demand for diesel has peaked, and gasoline demand will soon follow, research from state energy giant CNPC has revealed. Reuters says CNPC’s research division is also saying that crude oil demand in the country will stop growing at a level of 690 million tons annually—13.8 million b/d—which is set to happen in 2030. Gasoline demand will peak around 2025.
As Beijing tightens environmental regulations, it is dampening demand for fuels. Economic growth is also slowing, further hurting demand. While economic growth could rebound, the environmental regulations are likely to stay in place as the country battles one of the worst pollution levels in the world.
4. Russia
Moscow’s oil production could peak as early as 2021 due to high taxes and costs provided there are no benefits for exploration or tax incentives, Energy Minister Novak said last week. Moscow’s oil production is expected to average around 553 million tons this year, or 11.105 million b/d. The Interfax news agency quoted Novak as saying that by 2021, Russia’s oil production will rise to 570 million tons, which, without more benefits and lower taxes, could be the peak of its oil production. If current production trends continue, and if Russia doesn’t do anything to further stimulate oil exploration and new field development, after 2021 production may start to fall and reach just 310 million tons by 2035, that is, Russia’s oil production could drop by 44 percent in the next 18 years.
Exploration and new oil field development are becoming increasingly important for Russia’s oil industry, Prime Minister Dmitry Medvedev said at the meeting, adding that the government needs to assess reserves and draft measures for incentives. Minister Novak cited “increased production costs and excessively high taxes in West Siberian oil fields” as part of the problem.
Western analysts have been saying for years that without the discovery of major new sources of oil production, Moscow’s aging fields should be slowing soon despite constant in-field drilling. A significant quantity of production from polar fields is still a long way away and, despite talk of massive US-style shale oil deposits, nothing of significance has been announced.
Russia’s Novatek is set to start exporting LNG from its third 5.5 million ton/year train at the Yamal LNG project by the end of 2018, CEO Mikhelson said last week. Mikhelson noted that Novatek could review its strategy to reach 57 million tons/year of LNG production by 2030 in the coming years as it continues to expand its vast gas resource base in northern Russia. He also said he expected some 80 percent of its future LNG production to serve the Asian market, with future sales to China in Yuan under consideration. The company is also close to making a final investment decision on a new LNG plant — Arctic LNG 2 — which would have a production capacity of 19.8 million tons/year.
Gazprom and Tokyo-based conglomerate Mitsui & Co. signed a memorandum of understanding on LNG development last week. The deal includes building an LNG plant on the Baltic Sea coast and would mark the two companies’ second joint LNG project. Currently, Japan – the world’s top LNG importer – is also the largest buyer of Russian LNG, importing a 36 percent share of the Moscow’s LNG production.
So far, 2018 has been a good year for Gazprom, the biggest investor in oil and gas projects in the world, with $160 billion worth of investments. Gazprom has seen an end to its legal battles with the European Commission and additional pipelines are under construction to the east and west. The Nord Stream 2 is continuing despite frictions between the US and Germany and opposition from Eastern Europe. The first phase of Turk Stream for the domestic Turkish market has been completed while the second pipeline for the European market is under construction. In the east, the highly publicized ‘Power of Siberia’ pipeline to north-eastern China is on schedule to be completed on time.
Russia has more of a future in the lower-polluting natural gas world where it can build pipelines to Asia and Europe than in trying to scrape more oil from its aging oil fields.
5. Nigeria
The scandals surrounding Nigeria’s oil industry roll on and on. Last week an Italian court sentenced two intermediaries to four years in prison. The case relates to the 2011 purchase by Italian oil company Eni and Royal Dutch Shell of an offshore oilfield for about $1.3 billion. Prosecutors in Milan noted that there were allegations of bribes totaling around $1.1 billion said to have been paid to win the license to explore the field, which has never entered into production. The prosecutors say that money from the deal wasn’t transferred to Nigeria where the oil field is located but ended up in accounts controlled by former Minister of Petroleum, Mr. Dan Etete. The Nigerian government received only $210 million.
This trial was a separate fast-track one which, under Italian law, allows sentences to be cut by a third. The main trial, which is expected to go on from months, involves Eni CEO Claudio Descalzi and four ex-Shell managers, including former Shell Foundation Chairman Malcolm Brinded. According to one observer, this judgment will send shivers down the corporate spines of the oil industry — and will surely alarm Shell and Eni employees and shareholders who have been repeatedly told that there was nothing amiss with the deal.
In a separate case, Nigerian police announced last Thursday that they had recovered $470.5 million (€400 million) in state oil company funds that had been siphoned off into private bank accounts. Police said they discovered the money linked to the Nigerian National Petroleum Corporation’s Liquefied Natural Gas business unit during a nationwide exercise to recover stolen funds.
6. Venezuela
The government sold 9.9 percent of the shares in joint oil venture Sinovensa to a Chinese oil company, President Nicolas Maduro said after returning from China last week. He also said that Venezuela expects some $5 billion in the joint investment with China to boost its crude output. The Sinovensa sale forms part of a plan to invest $5 billion over the next year in projects to double oil production and be able to send a million b/d to China. Given that Venezuela’s oil production is at a 60-year low and currently is just above 1 million b/d, it is doubtful Caracas will be able to come up with 1 million b/d to pay off the existing Chinese loans much less any new ones.
The exodus of starving people from Venezuela continues to grow and is at the point where neighboring countries can no longer cope with the influx. Three years ago, some 87,000 Venezuelans were believed to have crossed into neighboring countries in search of food. This year the number will be on the order of 1.5 million. Given that Venezuela has a 1400-mile border with Columbia, border crossing is impossible to control. Peru, the No. 2 recipient of Venezuelans in the Americas, has an enclave of more than 350,000 Venezuelans, up from 2,300 just three years ago, the International Organization for Migration said.
Meanwhile, domestic troubles continue to grow. Dozens of Venezuelans on Friday brought the city of San Cristobal to a standstill by blocking roads with their cars to protest gas shortages. Venezuela, where gasoline is selling for around a third of a cent per gallon, has been plagued by intermittent fuel shortages in recent months as its oil industry suffers from lower production and failing refineries. The problem was compounded this month when the government rolled out a new payment-for-gasoline system in eight states near the Colombian border, in an attempt to halt the widespread smuggling of Venezuela’s gas to Colombia. The payment system, which will pave the way to charging international prices for fuel, involves providing gas stations with wireless devices that use a state-issued identification card to purchase gasoline. The new document, called the Fatherland Card, is meant to provide subsidies to motorists to help soften the impact of the steep price increases.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
EU + US LNG: In a bid to deter US President Donald Trump from imposing hefty new trade tariffs on European Union goods, the EU said in July it would work to increase imports of US soybeans and LNG. Trump wants US LNG to compete with Russian natural gas exports in Europe. (9/19)
When low-sulfur rules for ocean tankers take effect in 2020, expectations are, naturally, that high-sulfur fuels demand will take a hit while low-sulfur fuels enjoy higher demand. Diesel is among these latter fuels, as is low-sulfur fuel oil. (9/17)
Offshore Norway, the rise in oil prices brought about the recovery of the nation’s oil industry, with companies lining up plans to invest in boosting oil production on the Norwegian Continental Shelf. This is most welcome news for Western Europe’s biggest oil and gas producer, which faces a decline from the mid-2020s onwards if new large discoveries are not made soon. (9/17)
In Panama, Royal Dutch Shell has won a long-term contract to provide liquefied natural gas to a Chinese company’s 441-megawatt power plant under construction in Colon. (9/21)
In Mexico, President-elect Andres Lopez Obrador has said the country’s oil production will climb to 2.6 million b/d by the end of his six-year term from 1.8 million b/d today. To achieve this, he is expanding Pemex’s exploration and production budget by $4 billion to $11 billion next year and will award new drilling contracts as soon as his administration begins in December. (9/21)
Mexico could be at the precipice of a region-wide energy revolution, and natural gas is the key. Major industry players will meet at a conference in Mexico City from October 9-11 to discuss, among other topics, the country’s potential to become a major energy hub for Latin America. (9/20)
To recover Mexico’s natural gas production, the country’s National Hydrocarbon Commission (CNH) has recommended creating a state-owned upstream company dedicated exclusively to gas. The new company would receive all the non-associated gas areas currently under control of Mexico state oil company Pemex. (9/22)
The US oil rig count declined by one last week to 866, the second decline in three weeks, according to Baker Hughes. Since June, the rig count has held mostly steady at above 860 rigs. So far this year, the combined oil and gas rig count has averaged 1,018. (9/22)
Keystone pipeline: The US State Department on Friday issued an environmental assessment of a revised route for the Keystone XL crude pipeline that concluded it would not harm water or wildlife, clearing a hurdle for the project that has been pending for a decade. Even if the pipeline spilled crude oil along its revised route through Nebraska, a top concern of environmentalists, there would likely be no impact to groundwater, the nearly 340-page draft review said. (9/22)
GOM investment angle: While majors and independents alike have had their sights on red-hot onshore shale plays, it’s left the door open for private equity investments in the Gulf of Mexico. (9/20)
Atlantic offshore drilling angle: Hurricane season is in full swing — and it’s throwing into the spotlight an ongoing debate between industry and environmental groups over expanding offshore drilling. The National Ocean Industries Association warns the country is “rolling the dice” with natural disasters, which can jeopardize the country’s oil supply if bad weather forces companies to shut down oil production and evacuate oil platforms. Drilling offshore the Atlantic coast, Alaska and California would diversify that risk. (9/18)
Royal Dutch Shell, shedding assets to pay for its takeover of BG Group Plc, is in talks to sell its interest in the Gulf of Mexico oilfield Caesar Tonga to Focus Oil for $1.3 billion. (9/21)
Methane rules relaxed. The Trump administration finalized a rollback of Obama-era limits on methane that is leaked, vented or flared from oil and gas wells on federal lands, part of a one-two punch on regulations designed to curb the release of the potent greenhouse gas. (9/19)
CA’s rocket attack: As President Donald Trump weakens one environmental rule after another, the deep green state of California has found a way to fight back: with a rocket. “With science still under attack and the climate threat growing, we are launching our own damn satellite,” declared Governor Jerry Brown, explaining that the craft will track emissions and share the results. One of the pollutants the satellite will measure is methane. Mr. Brown’s declaration on Friday in San Francisco, came just two days after the EPA in Washington said it wanted to relax methane rules. (9/18)
States vs. feds on MPG: Top officials from California, Maryland and Connecticut vowed Friday to take whatever legal action necessary to preserve their stricter tailpipe rules if the Trump administration rolls back federal fuel economy standards. US oil demand would increase by 500,000 b/d under a proposal announced by the Trump administration in August to weaken fuel economy rules for light-duty vehicles by freezing efficiency gains at the 2020 target of 43.7 mpg. (9/22)
In Colorado, proponents of Proposition112—which qualified in end-August for the ballot with enough signatures raised—say that it would limit the health and environmental dangers of fracking. Opponents and analysts say that such setback measures would effectively mean a ban on drilling in the state as it would put a lot of land off limits for new developments. (9/18)
Delta’s refinery: It is on track to make money in 2018, but high regulatory costs and shifting market dynamics that put East Coast refineries at a disadvantage have made the plant more of a hassle than Delta anticipated, even if fuel prices are on the rise. Delta, currently the No. 2 US air carrier by traffic, was the first US airline to make its own fuel. The refinery, which is run by a subsidiary, generated $5 billion of Delta’s $41 billion in revenue last year. (9/22)
Ethanol Trumped: Major US ethanol producer Green Plains Inc. is shutting down two ethanol plants in Iowa and cutting output at another in Minnesota due to low-profit margins, three industry sources told Reuters. The production cuts come after the Trump administration’s escalating trade disputes cut off the US access to ethanol markets in China, contributing to a domestic supply glut that has pushed biofuel prices to near their lowest in over a decade. (9/18)
Sales of electricity in the US have barely increased despite nine straight years of economic growth. Yet for the six months ended June, electric sales to ultimate customers in the US actually rose 3.5 percent. Temperature departures from the heating and cooling norm make a big difference for residential kWh sales. Thus, it looks as if the recent sales surge is weather induced. (9/20)
Solar projects that incorporate storage are becoming cheaper to build per megawatt-hour in parts of the US Southwest than a new gas-fired generation, according to a report Monday by Bloomberg NEF. That positions solar to replace a significant portion of the 7 gigawatts of coal-fired power that’s expected to retire in the region over the next decade. (9/18)
Shutting an NJ nuke: Exelon Generation permanently shut its single-unit 670-MW Oyster Creek nuclear power plant in Forked River, New Jersey, at noon EDT last Monday, the company said in a statement. The boiling water reactor had been the country’s oldest operating nuclear power unit, having received its operating license in April 1969 and beginning commercial operation in December 1969. (9/18)
Nuclear pickle: the Vogtle plant is the only nuclear power plant under construction, or even under serious consideration, in the US. If work on it stops, the prospects for new nuclear power in the US would dim considerably and raise the question of whether the country can revitalize its nuclear industry. The project is billions of dollars over budget and years behind schedule and expected to cost upwards of $27 billion, more than double the original price tag estimated when work began a decade ago. It has received $12 billion in federal loan guarantees, including $3.7 billion from the Trump administration last year.
German coal showdown: the works council and trade unions with Germany’s utility RWE say they oppose plans to end coal-fired power generation in Germany by around 2035, raising questions over a possible compromise between a government commission and environmentalists. RWE said the date was unacceptable and more investments in grids and renewable energy were needed to secure energy supply in the future. (9/17)
In China, the taste for tiny EVs has become a quirky subplot in the nation’s push to become a world leader in electric cars. Roughly 1.75 million micro-EVs were sold in China last year, more than twice the sales of regular EVs, of around 777,000, industry executives estimate. Most of the tiny ones were sold in a handful of rural provinces. The market is still growing rapidly, with some 400 Chinese manufacturers building countless models. (9/22)
Electric planes: After decades in which jets have been powered by fossil fuels, advances in materials, battery technology. and electrical systems are holding out the promise of cleaner, cheaper commercial flight. (9/18)
Climate impact: Temperatures not much warmer than the planet is experiencing now were sufficient to melt a major part of the East Antarctic ice sheet in Earth’s past, scientists reported Wednesday. During one era about 125,000 years ago sea levels were as much as 20 to 30 feet higher than they are now. (9/21)
Industry climate changing: ExxonMobil and Chevron have joined the Oil and Gas Climate Initiative, a group of companies supporting curbs on greenhouse gas emissions. The move is the latest sign of how pressure from the public and investors is forcing the industry to address the threat of global warming. Occidental Petroleum is also joining the initiative, which was launched in 2015 with European companies including Royal Dutch Shell and BP making up most of its members. (9/21)
CO2 conversion to fuel: Columbia University engineers have made a breakthrough in understanding electroreduction of CO2 for conversion to electrofuels. Recent research in electrocatalytic CO2 conversion points the way to using CO2 as a feedstock and renewable electricity as an energy supply for the synthesis of different types of fuel. (9/21)
H2 in the EU: On Tuesday, 25 European nations backed a measure to increase hydrogen use to power factories, drive vehicles, and heat homes. The coalition sees it as an alternative to fossil fuels to cut the continent’s carbon emissions, and to solve the problem for electricity generation caused by fluctuating supply of renewable energies. (9/21)
Peak Oil Review 17 Sept 2018
By Tom Whipple, Steve Andrews, originally published by ASPO - USA
https://www.resilience.org/stories/2018-09-17/peak-oil-review-17-sept-2018/
Quote of the Week
[The Trump administration stated there is a “reduced the urgency of the US to conserve energy.”] I strongly disagree with this argument. It isn’t certain that the US will become a net exporter of petroleum and petroleum products, but in any case, that’s not a reason to forego conservation. There are economic reasons, national security reasons, and environmental reasons for conserving oil.”Robert Rapier, energy industry commentator
1. Oil and the Global Economy
Oil prices climbed for the first three days last week with Brent climbing above $80 a barrel on Wednesday before falling back to close at $78.09 on Friday. An unexpected drop in the US crude stocks of 5.3 million barrels and a warning from the IEA that the global oil market was tightening and that higher prices are coming were behind the spike. However, concerns that the Sino/American trade war is showing no sign of getting better took over and sent prices lower. During the week, the price spread between Brent and WTI climbed above the $10 a barrel mark and closed the week at $9. The size of the price spread should continue the export demand for WTI in the coming weeks sending US crude supplies even lower.
Some analysts are warning that oil prices could reach $100 per barrel after the Iran sanctions are reimposed on November 4th. Oil prices have not been above $100 since 2014. Despite global oil production surpassing the 100 million b/d mark in August, there are problems ahead. Venezuela’s production for August was down to 1.22 million b/d and seems likely to go lower. Iranian exports continue to contract, and there is always trouble in Libya and Nigeria which could reduce their oil production by hundreds of thousands of barrels per day at any time. Even the ever-optimistic EIA is saying that the outlook for US shale oil production no longer looks as good as it did a few months ago.
OPEC: August saw the cartel’s biggest month-on-month increase in more than two years, bringing the supply from the group’s 15 members to a nine-month high. The increase came from higher production in Libya, Iraq, Nigeria, and Saudi Arabia. OPEC’s increase far outweighed, at least for now, falling Iranian production. Global oil production in August climbed above 100 million b/d for the first time.
Russia’s energy minister Alexander Novak says that OPEC, Russia, and their allies within the production cut alliance should sign an agreement on the group’s broader cooperation in December so that the new partnership format comes in force from January 1, 2019. A formal agreement between Russia and its allies in the former Soviet Union would bring about the most significant change to the OPEC cartel since its founding in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Despite its massive oil exports, Moscow has long feared to join the organization for fear that its energy policies could be affected by votes or compromises inside OPEC.
The success of the OPEC+ production freeze during the last two years has brought about a change in thinking for it resulted in a doubling of oil prices and saved some major oil exporters from near-bankruptcy. The addition of circa 15 million b/d to OPEC’s 32 million b/d allows the combined organization to have more impact on the oil markets in the years ahead. This union could become important if the Sino-American trade war results in a significant drop in the demand for oil.
Despite the euphoria over OPEC’s production successes in August, there are still many dangers for the cartel’s production ahead. The 15-member OPEC has not increased its production significantly in the last 15 years and, except for a few bright spots, most of its oil fields are in decline. Several major OPEC oil exporters such as Venezuela, Nigeria, Libya, Iraq, and Iran, are involved in domestic or international situations which could reduce their exports in the next year or two.
US Shale Oil Production: US crude oil production in 2019 is expected to grow at a slower rate than previously forecast, according to a monthly EIA forecast released last week. US crude production now is expected to rise by 840,000 b/d to 11.5 million next year, lower than a previous estimate for it to grow 1.02 million b/d to 11.7 million. Oil demand growth in 2019 is expected to rise by 250,000 b/d, a decrease from EIA’s previous projection for an increase of 290,000 b/d. The agency left 2018 production and demand growth forecasts unchanged. Behind this change is the recognition that drilling activity in the Permian basin has begun showing signs of a slowdown due to limited pipeline takeaway capacity and decreasing well productivity.
Although numerous challenges are facing producers in the Permian Basin, interest remains high. The price rights to drill on the New Mexico side of the Permian Basin soared to $95,001 an acre in a recent federal government auction, a record high for land in the Permian. The state’s previous record was $40,001 an acre set in December, according to a statement yesterday by the US Department of the Interior. The two-day auction saw bids on 142 parcels of land and raised $972 million, more than the whole of 2017 and double the 2008 record.
The recent auction provides a rare insight into how oil producers value drilling rights in the Permian, most of which is in Texas, where land and minerals are privately owned. Record prices show that despite a slowdown in activity due to pipeline shortages, explorers view the Permian as a long-term asset. “The Permian is the center of the oil universe when it comes to investment right now and just because of a few pipeline constraints that’s not going to change.”
New pipelines can’t get built fast enough in the Permian Basin, where oil is selling at a $15 discount and producers are locking in prices for the next two years. Several multi-billion pipeline projects are under construction or planned over the next few years to get the crude oil and natural gas to refineries on the Gulf Coast. However, a new report by Wood Mackenzie suggests that producers don’t have faith that the pipelines will be done on time. The number of Permian producers hedging their bets for 2020 increased by more than five times in the second quarter. According to Wood Mackenzie, “The only reasonable conclusion one can draw from this surge is that Permian producers are concerned that key pipeline projects won’t be completed on schedule.”
US Highway 285 is a major north-south route within the Permian Basin of West Texas and southeastern New Mexico. Thanks to the oil boom in the region, the highway is much busier than it was a decade ago. More flatbed trucks rely on the road to haul equipment and supplies. In addition, the region’s constrained pipeline capacity has led to a large number of tanker trucks hauling crude oil on 285 and other highways in the region. The Texas Department of Transportation is addressing the limitations on 285 through a series of improvements which will take years to complete. The highway department has placed an 11-foot-wide lane restriction on 285 which is forcing the oil industry to modify their routes because they move oversized loads every day. “These alternate routes increase the time and distance to move a rig, so what started out as a short routine move could easily creep into a long-distance rig move, having a substantial impact on the cost associated with the rig moves.”
2. The Middle East & North Africa
Iran: The prospects for Iranian oil exports after US sanctions are imposed remained the top oil market story last week. Iranian crude production fell 200,000 b/d from July to 3.52 million b/d in August as hedging activity indicates some traders are preparing for a price spike above $80 a barrel as a result of further declines in Tehran’s exports. S&P Global Platts Analytics expects 1.44 million b/d of Iranian crude and condensate to leave the market when the US secondary sanctions snap back November 5, compared with April levels. The EIA says Iran’s production already has dropped 310,000 b/d since April.
Tehran’s problems could increase as it meets obstacles in selling its condensate and refined products. Iran is dependent on exports of condensates and fuel oil, while it relies on gasoil and gasoline imports. Unlike when the US imposed sanctions in 2011, the Trump administration has broadened the list of secondary sanctions, to include condensates and other oil products “obtained from the processing of crude oil (including lease condensate), natural gas, and other hydrocarbon compounds.” There have been signs Iran’s exports of fuel oil and LPG have started to fall in the past few weeks.
Iran has started to store oil in its own tankers off its coasts ahead of the US sanctions. According to tanker tracking data, at least five tankers owned by the National Iranian Tanker Company have been sitting fully laden with crude oil off the Kharg Island oil terminal in the Persian Gulf over the past two and a half weeks. Another two tankers full of Iranian condensate, the ultra-light oil Iran produces from its natural gas fields, have been anchored off Dubai for weeks.
While Russia, China, and Turkey remain firm in their commitment to Tehran, there are reports that other countries such as Japan, India, and South Korea are giving in to Washington’s pressure and are reducing their purchases of Iran’s oil.
Last week the issue of whether the sanctions will result in a substantial increase in oil prices came back into the news. During an interview in Moscow last week, US Energy Secretary Perry said last week that Saudi Arabia, the United States, and Russia could between them raise global output in the next 18 months to compensate for falling oil supplies from Iran and elsewhere. Countering this view was Iran’s OPEC governor Hossein Kazempour Ardebili who told Reuters that there is already an emerging “supply shortage” and little spare capacity virtually everywhere means that the US can’t achieve its goal of bringing Iranian oil exports down to zero.
Iraq: Baghdad’s oil production grew steeply again in August, as the federal government continued to unlock field capacity in the wake of loosening OPEC constraints. Combined output from the federal government and the autonomous Kurdistan Regional Government (KRG) hit 4.81 million b/d. Iraq replaced Saudi Arabia in August as the top oil supplier to India as refiners turned to Iraq to compensate for a lower import of Iranian oil. Gulf Keystone Petroleum said it would resume investing in the Shaikan oil field in Iraq’s Kurdistan Region, aiming to boost production to 55,000 b/d in the second half of 2019, from just over 30,000 b/d now.
The political and social situations, however, are not going so well. Demonstrations flared in Basra this month after thousands fell ill because the water supply was contaminated and intensified last week after several protesters were killed. Protesters burned the offices of most political parties in Basra, including Iran-backed paramilitary groups. Prime minister Haider Al-Abadi is facing growing domestic discontent as veiled criticism from the country’s top Shia cleric, and violent street protests threaten his attempts to form a new government. The strife is undermining hopes that elections held in May would mark a turning point and set Iraq on the road to recovery after decades of conflict. In a rare intervention, the office of Ayatollah al-Sistani, Iraq’s top Shia cleric, issued a statement urging politicians in power not to run again, a move interpreted as a call for Mr. Abadi to abandon his efforts to remain prime minister.
Islamic State militants have bombed an oil pipeline in Kirkuk, northern Iraq. It was not immediately clear which pipeline the Islamic State militants had blown up and what the effect on shipments from northern Iraqi fields will be. The Baiji refinery, which was shut down in 2014 during the war with Islamic State, has partially resumed operations. The 70,000 b/d Salahaddin-2 unit of the refinery is operating at full capacity as of last week.
Libya: Several armed men attacked the headquarters of Libya’s National Oil Corporation in Tripoli last week, killing at least two staff members. In the first attack of its kind against the top managers of Libya’s state oil industry, two of the gunmen were killed and at least 10 NOC staff wounded, officials said. Security forces said they had regained control of the building in the center of the city. The attack came less than a week after a fragile truce halted fierce clashes between rival armed groups in Tripoli which has been in turmoil since a 2011 uprising.
The US Treasury Department, along with the United Nations, placed sanctions on Libyan militia strongman Ibrahim Jadhran over the June attacks on the country’s oil ports. The sanctions were proposed by Libya’s Permanent Mission to the UN. Ibrahim Jadhran, former leader of Tripoli-backed Petroleum Facilities Guard (PFG), now finds himself on the wrong end of both the United Nations and the United States.
3. China
Christine Lagarde, the IMF managing director, told the Financial Times that the escalating US-China trade war could deliver a “shock” to already struggling emerging markets, raising the prospect that a crisis ripping through Argentina and Turkey could spread across the developing world. She warned that “things could change rapidly” and cited the “uncertainty and lack of confidence already produced by the threats against trade, even before it materializes.”
Worries about the Chinese economy continue with Investment in factories, railways, and other projects in China so far this year growing at its slowest pace in more than a quarter-century. Fixed-asset investment outside rural households rose 5.3 percent in the January-August period from a year earlier, the National Bureau of Statistics said Friday. The rate was the most sluggish since 1992 when the investment data was first available.
China is the centerpiece of what a growing number of financial analysts warn could be another global economic recession. Bank of England Governor Mark Carney recently said that China is “one of the bigger risks” to global financial stability. Since 2007, China’s debts have quadrupled. According to the IMF, its total debt is now about 234 percent of gross GDP, which could rise to 300 percent by 2022. The significance of China’s dwindling supplies of cheap domestic energy is little understood by mainstream economists.
Beijing is considering allowing its northern provinces to decide on individual output cuts by heavy industry to rein in emissions during the winter. Talk of the move drove down steel and industrial raw material prices and comes as Beijing looks to end its “one-size-fits-all” fight on pollution to limit economic disruptions. “Production cuts on heavy industry will remain this winter, but detailed cutting rates will be set by local authorities based on their own situation,” said a knowledgeable Chinese source.
PetroChina has just signed a deal to buy 3.4 million tons of LNG per year for 20 years from QatarGas. This is China’s largest ever LNG supply deal. State-controlled QatarGas has agreed to supply PetroChina from the QatarGas 2 project, a joint venture between Qatar Petroleum, Exxon Mobil and France’s Total. The first cargo will be delivered later this month. The deal comes as President Trump ramps up the ongoing trade war between the US and China. Trump says he is ready to levy additional taxes on practically all Chinese imports, threatening duties on $267 billion of goods over and above planned tariffs on $200 billions of Chinese products. If China’s retaliation includes a 25 percent duty on US LNG, it would no longer be competitive for Chinese importers.
4. Russia
On Friday, Russia’s central bank raised the key rate from 7.25 percent to 7.5 percent per annum. According to the bank’s statement, the annual inflation is forecast to be 5-5.5 percent in 2019 and to return to 4 percent in 2020. After a week in which the ruble fell to a two-year low against the dollar, investors anxious about emerging market turmoil have been concerned about what the bank would do. The Kremlin has been putting the bank under unprecedented pressure to cut the benchmark rate — which stands at 7.25 percent — to help stimulate growth to pay for President Vladimir Putin’s ambitious spending targets.
The General Court of the European Union upheld sanctions imposed on several Russian oil companies and banks after the annexation of Crimea in 2014 and Russia’s involvement in the Ukraine crisis.
Russia’s largest independent gas producer, Novatek, surpassed in market value state behemoth Gazprom for the first time. Strange as this may seem to casual observers of the Russian gas market, Novatek’s value has been rising consistently over the last years while Gazprom’s has stagnated. The most apparent difference between the two is ownership. Gazprom is majority owned by the Russian state. Government ownership means Gazprom caters more to the government’s political interests rather than the interests of its minority shareholders. It also means the company undertakes projects with uncertain returns as a state company while private shareholders like certain returns.
5. Venezuela
The government has agreed to hand over at least seven oil fields to little-known companies that will be paid to boost output through contracts similar to ones killed off during the Hugo Chavez period. The new plan signals that President Maduro, who is struggling under a hyper-inflationary economic meltdown and fast-declining oil output, is willing to reverse the efforts of his predecessor to expand the state’s role in the energy industry. However, the plan faces significant hurdles because the companies involved have no known experience operating oilfields, and US sanctions would inhibit more experienced firms from getting involved. Venezuela’s production fell in August by 20,000 b/d to 1.22 million b/d. Compared to August last year, Venezuelan oil production is down by 680,000 b/d.
During a rare visit by President Maduro to Beijing, China agreed to several small oil deals with Venezuela last week but gave no public confirmation that it would extend more loans to the country. Venezuela faces a stiff payment schedule over the next two months of about $2 billion to bondholders, some of whom have debt secured against US-based refiner Citgo, and in compensation to western oil companies for past nationalizations in Venezuela.
Simon Zerpa, Venezuelan finance minister, said earlier this week that Beijing would extend a $5 billion loan to Caracas. But Premier Li Keqiang, while saying that China would help Venezuela, made no mention of a loan of that size. China lent the country more than $50 billion over the past 10 years, mostly backed by oil deliveries that are no longer being made. The largest loan, from the China Development Bank in 2010, was worth more than $20 billion. Terms of China’s loans are not made public.
Venezuela resumed supplying a critical domestic crude to political ally Cuba this summer as its refining output fell further. The shipments, which began in June and continued through August, totaled 4.19 million barrels of Venezuela’s Mesa 30 crude, a type used to produce fuel at domestic refineries and to blend with heavier oil for export. Venezuela has supplied Cuba with oil under agreements since 2000. Havana has been deeply involved in providing advice and assistance to Caracas’s intelligence and security services. As Venezuela’s domestic situation deteriorates, Cuban security assistance may be a priority for the embattled President who may be vulnerable to a coup or uprising.
6. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
USA vs. Saudi vs. Russia: The United States likely surpassed Russia and Saudi Arabia to become the world’s largest crude oil producer earlier this year, based on preliminary estimates by the US Energy Information Administration. EIA expects that US crude oil production will continue to exceed Russian and Saudi Arabian crude oil production for the remaining months of 2018 and through 2019. (9/14)
In the UK’s oil and gas industry, despite reduced costs and efficiency improvements, the sector could lose its significance as a key contributor to the UK economy and energy supply, due to record low drilling activity and lack of new project approvals. (9/12)
Oil and Gas UK said in its annual Economic Report that a 50 percent decline in drilling activity over the last five years was a cause for “real concern.” It said the industry had initiated just four exploration wells in the first eight months of 2018 and the expected number for the whole year, at 10-12 wells, would be the lowest since 1965. (9/11)
Offshore North Korea, seven countries have joined together to hunt ships smuggling fuel. More than 50 personnel from allied countries will be hosted aboard the USS Blue Ridge, an American command ship stationed in Yokosuka, Japan. The coalition will include the U.K., Australia, New Zealand and Canada—the U.S.’s partners in the Five-Eyes intelligence alliance—as well as France, Japan, and South Korea. (9/15)
Offshore Egypt, the huge Zohr gas field has increased its production six-fold since it started production in January this year. Production at Zohr has increased to 2 billion cubic feet per day (bcfd) from 350 million bcfd when it began commercial production in January 2018. Italy’s Eni discovered the field in 2015 when it said that it was the largest ever gas discovery in the Mediterranean. Eni and its partners aim to reach plateau production in excess of 2.7 bcfd in 2019. (9/14)
Egypt has signed a deep-water oil and gas exploration deal with Royal Dutch Shell and Malaysia’s Petronas worth around $1 billion for 8 wells in the country’s West Nile Delta. The country also signed a second $10 million deal with Rockhopper, Kuwait Energy and Canada’s Dover Corporation for exploration in the Western Desert. Egypt aims to be a regional hub for the trade of LNG after a string of major discoveries in recent years including Zohr. (9/15)
In South Sudan, China National Petroleum Corporation (CNPC)—which holds stakes in the two joint venture companies pumping nearly all of South Sudan’s current 165,000 b/d—signed at the end of last month a memorandum of understanding (MoU) to boost existing production and consider acquisitions of new acreage. (9/12)
Panama collateral damage? Fewer ships from China and the United States could use the Panama Canal if trade tensions escalate between the two economic giants, but the dip could be offset by grain exports from northern Brazil. The canal, which cuts through Panama creating an essential shipping route between the Atlantic and Pacific oceans, is a major source of revenue for the central American country. (9/15)
In Mexico, incoming Mexican President Andres Manuel Lopez Obrador announced that his government will soon be pouring $3.9 billion of next year’s budget into oil extraction, specifying the allocation of his previously disclosed $16 billion investment plan for Mexican oil in 2019. The investment is part of a broader plan to increase Mexico’s long-waning oil output by 800,000 b/d and bring an end to Pemex’s financial woes. (9/14)
In Canada, China’s Sinopec Corp has joined a group planning to build a 167,000 barrel/day oil refinery in Alberta, the project’s consultant said, an enterprise that would strengthen demand and prices for the Canadian province’s heavily discounted crude. (9/15)
Cyber threats in the US against the energy industry are growing steadily. Jeremy Samide, chief executive officer of Stealthcare, a company which seeks to improve cyberdefenses for a diverse set of US companies, sees the cyber battlefield starkly. He says the threat is very real, and he puts the threat of serious attack at 83 percent. (9/11)
The US oil rig count increased by 7 to reach 867, Baker Hughes reported. With the natural gas rig count staying flat, the total number of active oil and gas rigs climbed to 1,055. The combined rig count is now 119 rigs higher that it was this time last year. (9/15)
Crude by rail is making a comeback as North American crude production outpaces takeaway pipeline capacity in the Permian and lower rail costs make Bakken margins attractive to both US Atlantic Coast and US West Coast refiners. (9/11)
Decade+ GOM leak? Between 250 and 700 barrels of oil per day are leaking into the Gulf at the site where Taylor Energy Co.’s oil platform collapsed in Hurricane Ivan in 2004, new analysis concludes. The same location is where a persistent sheen of oil on the surface has appeared ever since. That leakage rate is higher than previous estimates Taylor has cited, which had the spill emitting around three gallons of oil per day. (9/15)
The Port of Corpus Christi, which is handling booming exports of US crude oil, has invoked a 12-year-old criminal case against the commodities trading house Trafigura as it seeks to slow the latter’s efforts to build an alternative site offshore to load supertankers. (9/12)
California Governor Jerry Brown signed into law this weekend a bill that aims to make drilling for oil and gas off the state’s coast unprofitable. The bill sought to deter oil and gas drillers by banning infrastructure necessary for offshore drilling, including docks, pipelines, and other onshore installations. (9/11)
Natural gas, helped by gains in energy efficiency, will dethrone oil as the biggest energy source that the US uses by the end of this year. That’s according to the chief executive of Norway-based risk management consultancy DNV GL, and it would hardly come as a surprise to anyone who’s been following energy developments in the world’s top gas producer. (9/12)
In Alaska, ExxonMobil has agreed on terms and conditions for the sale of its 13.8 Tcf of natural gas resources in the north slope’s Prudhoe Bay and Point Thomson fields of Alaska’s North Slope to Alaska Gas Development Corp., the state-owned entity leading the development of the Alaska LNG Project. (9/11)
Relaxing methane rules: The proposed changes, among other measures, would give drillers a year to do leak inspections instead of just six months, and 60 days to make repairs instead of 30, the document said. Environmentalists are likely to oppose the plan, asserting the delayed inspections and repair schedules are likely to increase the amount of harmful gases released into the environment, and that the proposal opens the door to further rollbacks of climate regulations. (9/11)
World coal steady: the most striking statement in BP’s analysis is “there has been almost no improvement in the power sector fuel mix over the past 20 years. The share of coal in the power sector in 1998 was 38 percent — exactly the same as in 2017.” (9/12)
Nukes still growing: The world is consuming ever-growing amounts of energy, and consumption is set for a particularly intensive growth in electricity. This fast growth will require more generation capacity, some of which will be nuclear. In fact, according to a report by the International Atomic Energy Agency, the world’s nuclear power generation capacity may grow to 511 GW(e) by 2030 from 392 GW(e) in 2017, and further to 748 GW(e) by 2050. This is a high case scenario. (9/14)
Nuke nix: California lawmakers have passed legislation mandating the replacement of the Diablo Canyon nuclear plant’s 2.2 GW of capacity with greenhouse-gas-free generation, which the governor is expected to approve. The proposal drew mixed reviews Monday from industry observers regarding its impact on power markets. (9/11)
EV trucks: Walmart Canada plans to power its fleet using 100 percent alternative power by 2028. To meet that goal, the company has announced plans to acquire an additional 30 Tesla 18-wheeler semi-trucks, building on its original order of 10 trucks in November 2017. With 40 Tesla Semis in total, the company will reach an initial milestone to convert 20 percent of its fleet to electric power by 2022. (9/11)
UK supporting EVs: The UK government will support the roll-out of fast-charging networks for electric vehicles, Business Secretary Greg Clark said Tuesday. There is to be a competition for commercial partners to work with the government to provide fast-charging facilities on motorways up and down the country, backed by a GBP400 million ($523 million) investment fund to accelerate the process. (9/11)
Battery-powered train: Bombardier Transportation has introduced a new battery-operated train. This train is the first of its kind to enter passenger operation in Europe in more than 60 years. It does not generate any exhaust and sets the standards for smart mobility with peak values of 90 percent in the areas of efficiency and recyclability. It is also around 50 percent quieter than modern diesel trains. A comparative study shows the battery-operated train clearly has an edge with respect to the total costs across the service life of 30 years. (9/13)
CA commitment: The bill that Governor Jerry Brown signed into law, SB 100, requires the state to reach 100 percent clean electricity in less than 30 years, with interim goals along the way, including 60 percent by 2030. Yet, Governor Brown took an even bolder step, not only signing the legislation but also issuing an executive order calling on the entire economy to become carbon neutral by 2045, not just utilities generating electricity. (9/13)
If Europe’s eight largest oil companies want to meet the climate and carbon-reducing goals they have set, their spending on new, low-carbon energies must double by 2020, and then double again within five years, with total spending seen as ‘monumental’, according to JP Morgan. Currently, Europe’s big oil—Shell, Total, BP, Eni, Equinor, Repsol, OMV, and Galp—spend on average around 5 percent of their capital expenditures on “new energies.” If Europe’s Big Oil were to meet climate goals and not lose credibility as they work toward their goals, they would need to raise the share of the ‘new energy’ spending to 9 percent of capital budgets by 2020, and to 17 percent of capex by 2025. (9/13)
United Airlines has become the first US airline to publicly commit to reducing its own greenhouse gas emissions by 50% by 2050, relative to 2005. The airline will continue expanding the use of more sustainable aviation biofuels, welcoming newer, more fuel-efficient aircraft into its fleet and implementing further operational changes to better conserve fuel. (9/14)
Airline fuel efficiency on transatlantic flights has improved by one percent a year since 2014 as carriers buy modern planes, but a new study says the industry still lags its own climate goals. The industry’s average fuel efficiency improved to 34 passenger kilometers per liter of fuel from 33 between 2014 and 2017 as carriers opted for modern aircraft with lower fuel burn and operated fuller planes. (9/12)
Drought has spread upstream on the Colorado River. The river’s Upper Basin – north of Lake Powell – has been largely insulated from the 19-year drought afflicting the giant watershed, thanks to the region’s relatively small water demand and heavy snows that bury Colorado’s 14,000ft peaks each winter. But this year, several major Colorado River tributaries saw record-low snowpack this winter. As a result, many reservoirs on the west slope of the Rocky Mountains have shrunk to mud puddles. In August, the resort city of Aspen, Colorado, imposed mandatory watering restrictions on its residents and visitors for the first time in its history. (9/15)
That Heimlich maneuver is good to know. Saw a guy save someone's life at a restaurant using this maneuver!
Insects Are Rapidly Disappearing Around The World, Leaving Scientists Horrified
October 21, 2018
https://www.thescinewsreporter.com/2018/10/insects-are-rapidly-disappearing-around.html?fbclid=IwAR2gkwKcFr1JagptUzvRes_Inuo_DXKNL-AKuYGPcGdTiB3T6ZzZnm_D7UA
40+ Life Skills to Learn for Basic Survival and Self-Reliance
January 13, 2016 // by Kris Bordessa
https://www.attainable-sustainable.net/essential-life-skills-2/?fbclid=IwAR14Ft3P1BgbWVpjAsybfOzVCgvErcF-frE_JlD3Vd65D6qJF2_H5XcBpRU
These Photos Capture The Startling Effect Of Shrinking Bee Populations
In rural China, humans pollinate flowers by hand.
By Casey Williams
04/07/2016 11:07 am ET
These Photos Capture The Startling Effect Of Shrinking Bee Populations
In rural China, humans pollinate flowers by hand.
https://www.thescinewsreporter.com/2018/10/insects-are-rapidly-disappearing-around.html?fbclid=IwAR2gkwKcFr1JagptUzvRes_Inuo_DXKNL-AKuYGPcGdTiB3T6ZzZnm_D7UA
That was a great article! There are too many food deserts; we need more gardens in the poor areas. I've seen empty lots in Boston with great sun; a concerned government would buy them and get the neighborhoods producing food.
Here is a picture of a village friend, Charlie. He has been on experimental drugs for stage 4 bone cancer. He swears that my hard-neck garlic take away his pain. I give him garlic and a lot of hot peppers to ward off winter infection. I think we all of friends in these situations.
Thanks for the post.
What are the Health Secrets to the Hunza People’s Longevity?
"Apricots are a staple for the Hunza, who are said to go for several months a year on a diet consisting purely of apricot juice. The Hunza are said to not suffer from cancer, due to their consumption of vitamin b-17, also known as amygdalin, found in apricot seeds. Their diet also consists largely of raw fruits and vegetables, and lesser quantities of meat."
https://www.gaia.com/article/hunza-people-longevity-health-secrets
Hunza Valley 2017 chitral valley gilgit valley beautiful places in pakistan
Commerce Resources getting ready to be a major player in Rare Metals and Tantalum
Insight: Rare–earth metals
TRT World
Published on Oct 12, 2016
Hot Economic Warfare: Scrambling For Rare-Earth Minerals
Profile picture for user Tyler Durden
by Tyler Durden
Fri, 10/05/2018 - 21:55
https://www.zerohedge.com/news/2018-10-05/hot-economic-warfare-scrambling-rare-earth-minerals
Authored by Wayne Madsen via The Strategic Culture Foundation,
Just like the gold rushes of California between 1848 and 1855, Canada’s Klonike of 1896 to 1899, and Western Australia’s of the 1890s, the world is experiencing a frenzy to obtain mining rights in pursuit of today’s “gold,” namely rare earth minerals. Used for components of electric vehicle batteries, mobile telephones, flat-screen televisions, flash drives, cameras, precision-guided missiles, industrial magnets, wind turbines, solar panels, and other high-tech items, rare earth minerals have become the type of sought-after commodity that uranium and plutonium were during the onset of the atomic age.
Rare earth minerals do not easily roll off one’s tongue in the same manner as gold, silver, and platinum. For example, yttrium oxide and europium, while sounding unimportant, are what provide the red hue in color televisions.
Nations around the world are scrambling to secure reserves containing rare earth minerals. China, where one-third of the planet’s rare earth minerals are currently found, has severely restricted the export of the minerals to friends and competitors. One of the largest known reserves of rare earths is the Bayan Obo deposit in China’s Inner Mongolia.
China’s export restrictions have sent nations around the world on search missions to secure both known and untapped rare earth deposits. One such mother lode of rare earth minerals has been discovered in the eastern southern Pacific Ocean. The estimates are that the deep ocean region contains twice the amount of rare earths than found in China.
Some of these deposits are in undersea geologically active zones, where deep sea floor vents spew rare earth minerals from expulsions of lava and hot gases. The discovery that the South Pacific region is rich in rare earths has led European nations, including France and Britain, which maintain colonies in the area, re-staking their colonial footprints.
France, for example, is reticent to grant further autonomy or independence to New Caledonia, where an independence referendum is scheduled for November 8, French Polynesia, and Wallis and Futuna. Similarly, Britain has showed a renewed interest in the Pitcairn Islands, where a handful of descendants of the HMS Bounty mutineers continue to live.
In 2015, Australia stamped out self-government of Norfolk Island, turning the island into a hybrid municipality of New South Wales and the Australian Capital Territory. New Zealand has vetoed ambitions by two of its elf-governing “associated states” – the Cook Islands and Niue – for full membership in the United Nations. For these colonial powers, it is not what is about what lies above the sea – island resorts – but what lies under the sea within the marine borders of the territories and that is rare earth minerals.
With the melting of the Greenland Ice Sheet, rare earth reserves have been discovered in Greenland, a “self-governing” territory of Denmark. Moves by the Greenland government to seek independence from Denmark and permit Chinese companies to mine rare earth minerals have met with stiff opposition from Denmark, the United States, and NATO.
Other countries possessing significant deposits of rare earths include India, Russia, Vietnam, Malaysia, South Africa, Australia, Canada, Brazil, and the United States. These nations, as well as China, all have varying degrees of the necessary political, economic, and military might to protect their rare earth resources.
However, some developing nations, where rare earths have been discovered, are candidates for ruthless exploitation by multinational firms, some under the direction of governments, to secure exclusive mining rights. In fact, Toyota, which has a tight relationship with the Japanese government, bought a rare earth mine in Vietnam to ensure such exclusivity rights.
Japan may not have to worry about Vietnam as its major source of rare earths. Earlier this year, a deposit of some 16 million tons of rare earth mineral oxides was discovered in deep sea mud located 1150 miles southeast of Tokyo. The deposit contained much of the rare earths upon which Japan’s consumer electronics industry is reliant: yttrium, dysprosium, terbium, and europium.
In countries like the Democratic Republic of Congo, columbite-tantalite, a mineral used in the manufacture of semi-conductor chips, is such a hot commodity that rival warlords, some acting on behalf of outside players, including Rwanda, Uganda, Israel, Japan, China, and the United States battle one another for control of the mineral’s extraction and export.
The Rwanda Mines, Petroleum, and Gas Board signed a deal in 2017 with a major Japanese rare earth extraction firm for the exploration and mining of rare earths, as well as tungsten, in Rwanda. However, Rwandan President Paul Kagame is known to have backed fellow Tutsi rebels in the DRC, who exploit rare earth mines in South and North Kivu provinces and send the stolen minerals to Rwanda. There have been attempts to curtail the trade in “conflict minerals” in the Great Lakes region of Africa, but they have all come to no avail.
Currently, US and Chinese firms are waging a political and economic influence “war” for access to lithium, cassiterite, and cobalt reserves in the DRC.
Next door to the DRC, in civil war-ravaged Burundi, there was a discovery of exceptionally high-grade “main vein” of rare earth minerals in 2017. Burundi, which was once a German colony, saw Germany’s ThyssenKrupp move in to exploit the mineral resources. ThyssenKrupp also began building a processing plant in Burundi. The German government has come under attack from human rights groups that accuse it of backing the German mining venture, known as the Gakara Project, even though Burundi’s president, President Pierre Nkurunziza, was dubiously elected to a third term in office. German business groups have countered with the argument that if Germany was not mining Burundi’s rare earths, China would be doing so.
The French government is not only concentrating its rare earth mining activities in its traditional Francophone sphere of influence in Africa – Morocco, Burkina Faso, Niger, Madagascar, Guinea – but further afield, including the pursuit of joint venture mining activities in Kazakhstan.
In the United States, the Pentagon has recognized the military importance of rare earths. The Defense Logistic Agency's Strategic Materials department is tasked to ensure a continued supply of rare earths to US defense contractors. The US Energy Department tracks rare earth discoveries and mining operations around the world, thanks to a constant infusion of intelligence from the Central Intelligence Agency and National Security Agency. The Trump administration has moved to open US federal wildlife areas, national parks, and other lands to exploration and mining of rare earths to private companies, much to the chagrin of environmentalists and Native American tribal governments.
In a rush to lessen dependence on Chinese exports of rare earths, which have, in any event, been restricted by Beijing, nations and companies around the world have launched a cut-throat competition to gain leverage over the rare earth market. What peaks the interest of gatherers of economic intelligence are references in email, video conferences, phone calls, faxes, and financial documents to such terms as europium, terbium, dysprosium, yttrium, samarium, and other rare earths.
As the world becomes more dependent on high-tech and an “Internet of things,” consisting of computers, mobile phones, appliances, televisions, security systems, automobiles, etc., the economic war for control of rare earth minerals will increase. There is the extreme possibility that economic warfare could turn into shooting wars, as has already been the case in the DRC.
Australian farmers driving up profits through regenerative agriculture
September 24, 2018
Melissa Howard
Contributing writer
https://www.commercialrealestate.com.au/news/australian-farmers-driving-up-profits-through-regenerative-agriculture/
Regenerative farmer Martin Royds, of Braidwood. Photo: Karleen Minney
While some farmers are struggling with the drought, others are seeing their profits increase – and their farms becoming “effectively drought proof” – by practising a type of farming that promotes soil health and biodiversity.
Regenerative agriculture is a farming system that prioritises the replenishment of the soils, avoids chemicals and industrial fertilisers, advocates for grazing systems modelled on African herds – larger herds on smaller paddocks with faster rotation – and has been heralded as a weapon against climate change because of the ability to store carbon in farm soils.
Advocates of this type of agriculture believe in a “self-organising wisdom that is inherent in the natural system if you allow it,” said fifth-generation Australian farmer and author Dr Charles Massy.
“Landscapes function in certain ways and if we disturb that, we degrade the landscape – simple as that.”
A recent US study found that regenerative cropping systems had 78 per cent higher profits than comparative conventional farms.
The Three Rivers Station in Western Australia has had extensive regenerative farming carried out over the past several decades.
“If it’s cropping, particularly, but also grazing,” said Dr Massey, “they are slashing their costs enormously – usually over 90 per cent – because they’re not using chemicals, industrial fertilisers and lots of fuel.”
The same study also found that pests were almost eradicated in the natural farming system; comparative conventional farms had 1000 per cent more pests.
“The resilience of the landscape has improved, which impacts the bottom line: they store a lot more water, you’ve got more biodiversity, taking out pests, and that all contributes to the bottom line,” said Dr Massy.
Australian non-profit organisation Soils For Life collects and publishes “case studies of farmers who have turned old farming systems on their head and are doing very well,” said communications manager Niree Creed.
The Australian farms covered in their case studies, all of which use regenerative agriculture, are reporting large increases in carrying capacity and in profit.
“Productive farms will always be worth more,” said Ms Creed. “The more productive they are, the more valuable they are.”
While debt has crippled many farmers over the past 12 years, NSW grazier Martin Royds increased his farm’s profits 230 per cent between 2005 and 2014 by practising regenerative agriculture.
“He didn’t want me to highlight it too much,” Ms Creed said, “as so many people around him are in drought.”
Water is recognised as one of the drivers of farm valuations, particularly in current drought conditions and some farmers practising regenerative agriculture are not just turning a profit but “effectively drought-proofing their country”, Ms Creed said.
Braidwood farmer Martin Royds on his property. Photo by Karleen Minney. Braidwood farmer Martin Royds on his property. Photo by Karleen Minney
Profit increase in grazing typically comes down to two things, she said: input reductions, so no expenditure on things like weedicides, fertilisers, and feed – “Martin Royds hasn’t put a chemical on his property for more than 20 years”; and for the increases in the quality of their product, such as better wool and meat, which ensured a higher sale price.
Massy advises farmers who are interested in regenerative agriculture to simply “have a look”. Find someone nearby – “maybe in the next district or something, and see what’s going on”.
A former Australian chief scientist, Professor Robin Batterham, said landscapes were complex, living and highly complex systems so, “in regenerative agriculture, there’s no single formula that works”.
To drive up farm profits, “small changes made across the business is often more achievable and can have a larger overall profit impact,” states the Department of Primary Industries and Regional Development.
Dr Massey advised not to “commit to huge investments in machinery or anything else”, rather simply “fiddle a little bit on little experiments”.
Advocates expect to see the huge interest in regenerative farming continue to rapidly rise as farmers – pushed to the brink by debt and drought – adopt new practises.
“This movement is growing,” Ms Creed said. “We are getting constant requests from farms to be case studies.”
SOILS FOR LIFE
http://www.soilsforlife.org.au/home/
28 Companion Planting Combinations To Grow The Tastiest, Most Bountiful Food & Beautiful Flowers
https://www.naturallivingideas.com/28-companion-planting-combinations/
10 Genius Tips For Successful Organic Gardening
https://www.naturallivingideas.com/10-genius-tips-for-successful-organic-gardening/