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The Story of the Walker Sisters in the Smoky Mountains
February 16, 2017
https://tinyurl.com/y6j89vl3
The seven Walker Sisters - Margaret, Polly, Martha, Nancy, Louisa, Sarah Caroline, and Hettie - spent their entire lives in a cabin in Little Greenbrier Cove that was built by their grandfather in the 1840s.
The cabin was obtained by their father, John Walker, after he returned to the area after fighting for the Union in the Civil War. John and his wife Margaret had eleven children: seven daughters and four sons!
When John Walker died in 1921, the property was left to his unmarried daughters. Without any men around, the Walker Sisters assumed all of the responsibilities on the farm and so for the next 40+ years, the sisters raised livestock, grew vegetables, and made their own clothes.
The Walker sisters at home in Sevier County, Tennessee, c.1962 ~ Margaret Jane (seated) & Louisa Susan.
walkersisters
The National Park Moves In…
Although Nancy died in 1931, the five remaining Walker Sisters were still going strong when the Great Smoky Mountains National Park was officially dedicated in 1940. While most locals moved away after the creation of the park, the Walker Sisters refused to give up their family farm. Eventually, a deal was struck in which the sisters received $4,750 for their land and permission to continue living in their cabin for the rest of their lives.
With the establishment of the national park came a host of new restrictions. The Walker Sisters weren’t allowed to hunt, fish, cut wood, or graze livestock. To compensate, the sisters became quasi-ambassadors for the national park. When visitors came to Little Greenbrier, they would say hello and sell their handmade products, such as fried apple pies, crocheted doilies, and children’s toys. Louisa even wrote poems that were available for purchase!
The Old Ways are the Best Ways
Why did the Walker Sisters insist on living like they were still in the 19th century? For the sisters, if the old ways were good enough for their father and grandfather, it's good enough for them. The sisters put it best themselves when they said, “Our land produces everything we need except sugar, soda, coffee, and salt.”
Polly Walker passed away in 1946, with Hettie following her the next year. When Martha died in 1951, the two remaining sisters asked the National Park Service to take down the “Visitors Welcome” sign at their cabin, because they were simply too old to do all of their chores and entertain tourists as well. Margaret died in 1962 at the age of 92, and Louisa lived in the house until she passed in 1964. Sarah Caroline, the only sister who got married and moved away, died in 1966.
See the Walker Sisters Place for Yourself
cabin
The Walker Sisters may be gone, but their historic cabin is still standing in the national park. The Walker Sisters Place is located along the Metcalf Bottoms Trail. To get to the homestead, first take the 0.7 mile hike from Metcalf Bottoms to the Little Greenbrier School, which was built by John Walker. Then, continue on the trail for 0.6 mile, where the path crosses over a footbridge. After 1.1 miles, hikers will reach the 0.2 mile side trail that leads to the Walker Sisters Place.
Peak Oil Review 19 February 2019
By Tom Whipple, originally published by Peak-Oil.org
https://www.resilience.org/stories/2019-02-19/peak-oil-review-19-february-2019/
Quote of the Week
“Washington doesn’t like cartels like OPEC. But then how can you have one market [the oil trade] dominated by one currency – the dollar?”Participant at an EU industrial working group convened to promote the euro and fight the monopoly of the US dollar in oil and commodities trading (2/14)
1. Oil and the Global Economy
Prices moved higher last week as the markets perceived that production problems in Venezuela and elsewhere might outweigh any decline in demand that could take place if global economic growth slows. London oil climbed by nearly $5 a barrel last week to close at $66.25. This is still about $20 a barrel lower than the recent peak set last October, but up about $16 a barrel from the early January low.
On the face of it, the 800,000 b/d OPEC+ production cut plus 400,000 b/d of Venezuelan production that is having trouble finding a market due to the US sanctions, should be enough to move prices higher. Glimmers of an end to the rapid growth in US shale oil production are starting to emerge.
Saudi Arabia’s energy minister said this week that the kingdom’s production would decline to near 9.8 million b/d next month. That is more than 1 million less than it pumped in November before agreeing with the rest of OPEC and Russia to cut production, and 500,000 b/d below its output target from the group. The country’s exports will also fall to the lowest level for March since 2011, a testimony to the effect US shale oil production and growing political tensions with the US are having on the Saudis.
However, there are threats to global economic growth looming which could overwhelm any cuts in oil production should a global recession emerge. We already see economic slowdowns in major industrial countries, and there are several large shoes out there waiting to drop – Brexit and the Sino/US trade war to name two.
The OPEC Production Cut:
There seems to be a split emerging in Moscow as to whether the production cut “alliance” with OPEC is doing Russia any good. Rosneft’s chief executive Igor Sechin wants Russia to quit the deal with OPEC. Sechin sees it as a threat to Russia that benefits the United States. However, for now, the likelihood of his opinion leading to a pullout from the deal probably is not in the cards as Moscow is only making limited cuts slowly.
Russian Energy Minister Alexander Novak said on Thursday that there are risks for global oil markets from the political crisis in Venezuela, yet there are no proposals to reverse the global oil production cut deal. Novak said Russia had cut its oil production under a pact between OPEC and non-OPEC producers by 80,000-90,000 barrels per day from its level in October.
The world’s need for OPEC crude is shrinking, suggesting that they will need to extend the deal through the second half of the year. The latest forecasts from supply-and-demand studies of the oil industry’s most-watched organizations – the International Energy Agency, the US Energy Information Administration, and the Organization of Petroleum Exporting Countries itself – show the need for OPEC crude diminishing as demand forecasts are trimmed and US supply outlooks are increased. This, of course, depends on whether the optimistic forecasts for US shale oil production this year come to fruition.
Moscow said last week that there were no substantial talks currently taking place to establish a formal alliance between Russia and OPEC. This is due to the additional red tape it would create, as well as the risk of US sanctions against monopolies.
US Shale Oil Production:
The US Energy Information Administration last week raised its forecasts for average US production in 2019 to 12. 4 million b/d, an annual increase of 1.45m b/d. This is also 350,000 b/d higher than predicted three months ago, despite warnings that shale oil is slowing down. Twelve months ago, the EIA forecast 2019 growth would be just 590,000 b/ d. This raises the issue of whether the EIA projections for this year and next are overly optimistic as they do not seem to be backed up by the detailed data regarding production trends.
The decline in shale oil production from legacy wells that are more than a month old is getting to be steeper and faster all the time. According to Rystad Energy’s forecast, if no new wells were to be completed in 2019-20, shale oil production would decline by 62 percent or 4.5 million b/d. This means that unless the shale oil industry drills and fracks enough wells to produce 4.5 million b/d in the next two years, US shale oil production would actually decline.
According to Rystad Energy partner Artem Abramov, “It is evident that without an increase in activity levels in terms of new completions, or further increases in oil well productivity, the pace of growth will decelerate in 2019-20. In fact, if the activity and productivity levels seen in the fourth quarter of 2018 prevail, US light oil production will increase by less than 1.5 million b/d between the fourth quarter of 2018 and the fourth quarter of 2020. This corresponds to a 50 percent lower growth rate than what was achieved over 2018.”
Drilling curbs by oil producers in the Permian Basin will continue until transport bottlenecks ease and investors stop punishing companies for increased capital spending, executives at an energy conference said last Thursday. The price of crude in the Permian fell sharply last year, selling as much as $18 below US benchmark prices, as a lack of pipeline capacity landlocked some oil output and as investors pushed producers to reduce spending and boost shareholder returns.
Pioneer Natural Resources Co, one of the Permian’s largest producers, said this week it plans to reduce 2019 capital expenditures by 11 percent, or about $350 million, slowing its production growth from prior years. “There aren’t nearly as many drilling dollars available,” said Bobby Whiteside, president of Midland, Texas-based oil producer Regions Permian LLC. “If Wall Street wants you to drill within cash flow, you’re going to have slower growth.”
As Standard Chartered analysts said last week, “In our view, there is a large gap between the generally downbeat views of the US oil industry itself and its investors and the upbeat tone of much media coverage and many analysts.”
2. The Middle East & North Africa
Iran: After 3 months of sanctions, the US has succeeded in reducing Tehran’s oil production by about 1 million b/d to 2.75 million where it has stabilized. In early May, the waivers that Washington granted to eight countries so that they could continue importing some oil without increasing world oil prices will expire. Few expect to see much of decline after the expiration of the waivers so that the US goal of forcing significant changes to Iran’s foreign policies is still some time off.
There is little doubt that Iran’s economy has been hurt by the sanctions. However, with nearly the whole world looking for ways around the sanctions without hurting trade with the US, not much is likely to happen in the immediate future. Increasing tensions between Iran and Israel over the Syrian situation could eventually lead to more trouble than the sanctions.
Iraq: Per the OPEC production freeze agreement, Iraq has made steep cuts at state-run fields, but those reductions are offset by increases at international oil company operated projects. Iraq sustained record-high oil production in January, despite efforts to begin limiting output in accordance with the agreement. The federal government and the autonomous Kurdistan together produced about 4.94 million b/d in January – the same as overall output in December.
The Kurdistan Regional Government issued an order Thursday to end all oil and refined product exports to Iran immediately. The directive will stop the flow of hundreds of tanker trucks that have been carrying crude and heavy fuel oil from Kurdistan across the Iranian border each day. This trade has drawn complaints from Washington as it seeks to tighten sanctions against Iran.
Saudi Arabia: The government plans to develop an international energy exploration and production business for the first time, even as the kingdom seeks to curb its reliance on hydrocarbons. Khalid al Falih, Saudi Arabia’s energy minister, said an overseas expansion would be a critical part of the company’s future. “We are no longer going to be inward-looking and focused only on monetizing the kingdom’s resources,” Falih said. “Going forward the world is going to be Saudi Aramco’s playground.”
While Saudi Aramco is the world’s largest oil producing company, it has never gone overseas to drill for oil, relying on its massive domestic reserves. Now the Saudis want to become an international energy player like Royal Dutch Shell or Exxon Mobil, pumping oil as well as gas overseas. How this plan squares with Crown Prince Mohammed bin Salman’s efforts to wean the kingdom off what he has called its “dangerous addiction to oil” remains to be seen.
Riyadh would need oil prices at $80-85 per barrel to balance its 2019 budget, Jihad Azour, Director of the Middle East and Central Asia Department at the International Monetary Fund told Reuters. Saudi Arabia’s officials, including Energy Minister Khalid al-Falih, don’t discuss publicly ‘targeted oil prices’ or the desired level of oil prices that would be comfortable to the Kingdom’s finances, but analysts and the IMF have estimated what oil price level would be necessary to cover Saudi Arabia’s budget spending.
Saudi Arabia’s Safaniyah offshore oil field is producing at reduced capacity after a ship’s anchor cut the main power cable. An earlier report suggested that production at the field had stopped completely, sparking worry about global heavy oil supply. With Venezuela sliding into chaos and with US sanctions reducing the flow of Venezuelan heavy crude to refineries, another heavy crude-producing field outage only adds to the problem.
Libya: Eastern Libyan military forces have full control of Libya’s biggest oilfield, El Sharara, a spokesman said. There was no immediate confirmation or comment from the state oil firm which operates with foreign partners the 315,000 b/d field deep in Libya’s southern desert. Libya’s state oil firm NOC is committed to a swift resumption of oil output at the El Sharara oilfield, but only after its workers’ safety is assured. So far, there is no word that production at the field has resumed.
The UN-backed government says that joint Libyan and US forces have bombed alleged al-Qaida militants in a southern desert town. Tripoli-based government spokesman Mohammed al-Salak said late Wednesday the bombing took place in the town of Ubari, about 950 kilometers, or 590 miles, south of the capital, Tripoli.
3. China
US and Chinese negotiators concluded the sixth round of cabinet-level negotiations in Beijing on Friday with no indication of substantial progress on core issues that President Donald Trump has said must be part of any “real deal” to end the trade war between the world’s two biggest economies. The US negotiating team was expected to sit down with President Xi Jinping later on Friday, reciprocating Mr. Trump’s courtesy meeting with Vice Premier Liu He in Washington late last month.
The impasse is increasing pressure on the US administration to delay a scheduled increase in tariffs on March 2 to facilitate a possible summit meeting with President Xi Jinping. If an agreement is not reached by March 1, President Trump has said he will increase the punitive tariff rate on $200 billion of Chinese imports from 10 percent to 25 percent.
China’s crude oil imports in January grew 5.1 percent year on year to 10.07 million b/d, preliminary data from the General Administration of Customs showed last Thursday. This was the third time China’s monthly crude imports were above 10 million b/d, despite dropping 2.7 percent from 10.35 million b/d in December 2018.
China’s natural gas imports in January, comprising LNG and pipeline gas, rose 26.8 percent year on year to 9.81 million tons — the equivalent of 13.53 Bcm.
4. Russia
The US is still deciding which sanctions to impose on Russia as part of mandatory penalties triggered in 2018 that could include blocking Russian petroleum imports into the US and banning US bank loans to Moscow. Blocking US imports of Russian oil would not have a significant market impact but banning Russia’s access to international debt and other measures to hamper Russian exports could deliver a severe blow to its economy. The US imported about 317,500 b/d of refined products and 67,500 b/d of crude from Russia in the first 11 months of 2018.
Energy Minister Novak said on Thursday that there are risks for global oil markets from the political crisis in Venezuela, yet there are no proposals to reverse the global oil production cut deal.
Moscow said last week there were no substantial talks currently taking place to establish an alliance between Russia and OPEC. Energy Minister Novak had said earlier it was highly unlikely OPEC and other oil producers would set up a joint structure due to the additional red tape it would create, as well as the risk of US sanctions against monopolies. Reuters reported last week that OPEC and its allies had drafted a document for setting up a new alliance but had carefully avoided any mention of sensitive issues such as oil prices.
5. Nigeria
Politicians and voters across Nigeria expressed dismay on Saturday after the government postponed the national election hours before polls were due to open. One opposition leader called the move a ploy to keep President Muhammadu Buhari in power. The chairman of the Independent National Electoral Commission told reporters the one-week delay was needed “to hold a free and fair election.”
The Niger Delta Avengers—the militant group responsible for most of the attacks on Nigeria’s oil infrastructure in 2016— resurfaced a few days before the now postponed Nigerian presidential elections, saying that they are backing the opposition candidate and would attack oil facilities if incumbent president Muhammadu Buhari is re-elected. Four years ago, the Avengers were able to reduce Nigeria’s oil production by several hundreds of thousands of barrels of oil per day.
The Nigerian Navy says it has destroyed no fewer than 637 illegal refineries, 104 speed boats and arrested 340 suspects in the Niger Delta during 2018. The illegal refineries, which for the most part consist of an oil drum or two, are claimed to have stolen some 277,000 barrels of oil last year. Even if these numbers are wildly exaggerated, illegal pipeline tapping and refining are still a significant problem which is slowly destroying Nigeria’s onshore oil industry and forcing it offshore.
Shell announced the release of a tender for the development of the Bonga South West Aparo oil field. The project’s initial phase includes a new Floating, Production, Storage, and Offloading (FPSO) vessel; more than 20 deep-water wells and related subsea infrastructure. The field lies 15km Southwest of the existing Bonga Main FPSO and is expected to produce 150,000 b/d.
6. Venezuela
The US increased pressure on President Maduro on Friday by sanctioning some of his top security officials and the head of the state oil company and unveiling plans to airlift humanitarian aid to the Colombian border. The 250 tons of food supplies, hygiene kits, and nutritional supplements began arriving Saturday to the border city of Cucuta, where tons of boxes of emergency aid already are warehoused awaiting delivery into Venezuela. Last year, the US sent more than $100 million in assistance to Cucuta to help Colombian authorities absorb some of the estimated 3 million Venezuelans fleeing hyperinflation and food shortages.
US sanctions on PDVSA continue to alter global crude and diluent flows and are accelerating the collapse of the South American nation’s oil sector. The sanctions, which the Trump administration announced January 28 and are expected to remain in effect until Venezuelan President Nicolas Maduro leaves office, have caused US Gulf Coast refiners to scramble for new sources of heavy crudes and have cut off flows of US refined products and diluents to Venezuela. But the sanctions have yet to affect oil prices significantly.
Estimates abound as to how fast Venezuela’s oil production is going to slip. Rystad Energy’s base case is that Venezuelan production drops by 340,000 b/d year-on-year to 1 million bpd in 2019 and slides even further to 890,000 b/d in 2020. In the low case scenario, where the status-quo continues, and Venezuela is unable to offset the effects of US sanctions and secure new financing, the country could see an additional 20 percent reduction in crude output this year, dropping to about 800,000 bpd, before sliding to 680,000 bpd in 2020.
However, according to the US State Department’s Special Envoy to Venezuela, Caracas’ oil production could fall to just 500,000 b/d by year’s end. Venezuelan production dropped 10,000 b/d to 1.16 million b/d in January from 2.4 million b/d in December 2015, according to the latest S&P Global Platts OPEC production survey.
Due to the US sanctions, one of the world’s largest commodity traders, Trafigura, has decided to halt its oil trade with Venezuela. Losing Trafigura is a severe blow to PDVSA, which has been working with Trafigura and other trading houses to sell crude oil and to import refined oil products. In 2018, Trafigura took 34,000 b/d of crude oil and products from Venezuela, most of which it resold to refineries in the US and China. The US sanctions now block all payments to PDVSA accounts, and buyers of Venezuelan crude are directed to deposit payments in a separate escrow account.
PDVSA is telling its customers to deposit the money for purchases in Russia’s Gazprom bank. However, Gazprom said over the weekend it would not handle PDVSA money due to the harm US sanctions could do to its other business.
China has been holding talks with Venezuela’s political opposition to safeguard its investments as pressure builds on Nicolás Maduro. Its diplomats are worried over the future of its oil projects in Venezuela and nearly $20 billion that Caracas owes Beijing.
7. Mexico
A package of $3.5 billion worth of tax cuts was granted last week to the state oil company Pemex to be spread over the next six years. In addition, the government will inject $3.9 billion into Pemex, officials said on Friday. This move could strengthen its finances and prevent a further credit downgrade, although investors saw the plan as only a short-term fix.
Falling oil output, corruption and high labor costs have contributed to the decline of the company that was once a symbol of national pride. It now holds roughly $106 billion in financial debt, the highest of any national oil company in Latin America. Fitch and Moody’s rate Pemex’s credit one notch above junk. For years the Mexican government used Pemex’s pockets as a personal piggy bank, without ever fully repaying what was taken out of the coffers.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)
The European Union has convened a wide-ranging industrial group to work on promoting the euro and fighting the monopoly of the US dollar in oil and commodities trading, reflecting broader tensions with Washington over trade and sanctions. (2/14)
BP bullish on oil: Global oil demand will prove resilient over the next two decades even if ambitious targets set in the Paris climate change accord are met and the adoption of renewable energy is “off the charts,” according to BP’s annual energy outlook. (2/15)
German LNG: Germany will likely build two terminals to import liquefied natural gas, in a move to appease the US while Berlin also supports the Russia-led Nord Stream 2 gas pipeline, which has divided the European Union member states in recent years. (2/13)
EU LNG: The European Union reached a provisional deal on Wednesday on new rules governing import gas pipelines including Russia’s planned Nord Stream 2, in a move that cast doubts over the project’s current operating plan. In the deal, Europe is closing a loophole in its laws as its dependency on natural gas imports increases. The new rules ensure that EU law will be applied to pipelines bringing gas to Europe and that everyone interested in selling gas to Europe must respect European energy law. (2/13)
Turkish exploration ships will soon start drilling for oil and gas offshore the northern part of Cyprus, a move that could reignite tension between Turkey, Cyprus, and Greece regarding the exploration rights off the eastern Mediterranean island. Turkey claims that part of the Cyprus offshore area is under the jurisdiction of Turkish Cypriots or Turkey. (2/14)
In Yemen, the Saudi-backed government hopes to scale up its crude production to 110,000 b/d in 2019, with exports touching about 75,000 b/d. The government of Abd-Rabbu Mansour Hadi controls the southern port city of Aden and areas holding Yemen’s oil-and-gas fields. The Iranian-aligned Houthi group controls the capital Sanaa and the oil terminal of Ras Issa on the western coast. Yemen’s oil output has collapsed since 2015 when the Saudi-led military coalition intervened in Yemen’s war to try to restore Hadi’s government to power. (2/11)
India’s largest LNG importer may invest in Tellurian Inc.’s proposed Driftwood LNG liquefaction and export facility near Lake Charles, La. The approximately 27.6-million ton per annum Louisiana project would also include natural gas production, gathering, and processing infrastructure as well as the 96-mile Driftwood Pipeline. (2/16)
The US oil rig count increased by three to 857, according to Baker Hughes. Gas rigs declined by one to 194. (2/16)
US crude oil output is expected to rise 1.45 million b/d this year and 790,000 b/d more next year, bringing total output to 13.2 million b/d, the EIA said in a monthly forecast on Tuesday. US oil production this year is forecast to be at a record 12.41 million b/d. (12/13)
Texas Independent Producers Royalty Owners Association reported that Texas oil wells produced more than 1.54 billion barrels of crude in 2018, well above the previous record of 1.28 billion barrels set in 1973. (2/13)
Crude exports: Sentinel Midstream on Monday became the latest contender in the race to build a crude export terminal off the US Gulf Coast, announcing plans to develop a facility off Freeport, Texas that could load a supertanker in one day. The company’s announcement follows seven other proposed crude export terminals. (2/12)
US dry natural gas production will rise to an all-time high of 90.16 billion cubic feet per day (bcfd) in 2019 from a record high of 83.26 bcfd in 2018, according to the EIA’s Short-Term Energy Outlook on Tuesday. (2/13)
Biogas: Southern California Gas Co. and biogas producer Calgren Dairy Fuels announced that renewable natural gas produced at Calgren’s dairy digester facility in Pixley, California is being injected into SoCalGas pipelines. The renewable natural gas from a cow manure digestion facility is already being used to fuel about 400 waste hauling trucks. (2/16)
A biofuel win: The European Commission, the entity responsible for negotiating trade deals on behalf of the European Union, announced last week that they will now allow soybeans grown in the United States to be used for biofuel in the EU. This move came as part of a campaign to improve trade relations with the United States. (2/15)
KY coal closures: The board of the Tennessee Valley Authority voted Thursday to close its Paradise 3 coal plant in western Kentucky by the end of 2020 and to close its Bull Run plant in eastern Tennessee by 2023. The two plants combined employ about 270 people, according to the TVA. In a tweet earlier this month, President Trump urged the TVA to “give serious consideration to all factors before voting to close viable power plants, like Paradise #3 in Kentucky!” (2/15)
The US solar power industry workforce expanded by 150,000 jobs in the period 2010 to 2018, the latest census from the Solar Foundation found. Last year alone, however, the sector shed almost 8,000 jobs, and it contracted by more than 9,000 jobs during 2017. (2/14)
Solar from space: Chinese scientists have revealed plans to build and launch into orbit a space solar station that could capture the Sun’s rays 24/7. China has already started to build an early experimental space power plant in the city of Chongqing. Such solar power technology could supply reliable energy 99 percent of the time and have six times the intensity of the solar farms that work on the earth. (2/16)
A French wind power tender has attracted interest from international energy firms, signaling that France’s offshore wind industry could finally be taking off after years of missteps. While Britain and Germany have already built 8,200 and 6,400 megawatts (MW) of offshore wind capacity, France does not have a single turbine in the water. In two previous French tenders, projects worth $12.4 billion were awarded but have not materialized because of public opposition and contract disputes. (2/16)
New H2 angle: The Dutch Institute for Fundamental Energy Research is partnering with Toyota Motor Europe to develop a device that absorbs water vapor and splits it into hydrogen and oxygen directly using solar energy. Researchers have already developed small solid-state photoelectrochemical cells that capture water from ambient air and then generate hydrogen upon illumination by sunlight. Working with gas instead of liquid has several advantages. Liquids introduce some technical problems, like unwanted bubble formation. Furthermore, by using water in the gas phase instead of the liquid phase, there is no need to purify the water. And finally, since only the water that is present in the surrounding air is used, the technology is applicable in remote places where no water is available. (2/13)
Population, soil, fertilizer, fuels: A painful truth is that we may need to reduce population. Some demographers tell us that human population will peak at mid-century and then gently decline through 2100. Others say that population will continue to grow through 2100. Neither of them may be right if we as a civilization don’t figure out how to preserve the fertility of the soil. And, that’s before considering the effects of worsening climate change and other resource depletion including fossil fuels. (2/12)
10 Things You Need in Your Cheapskate Survival Kit
https://www.theorganicprepper.com/cheapskate-survival-kit/
by Daisy Luther
If you enjoy fixing, mending and MacGuyvering like any self-respecting Cheapskate, you need a special survival kit just for your frugal activities. You know the old adage, use it up, wear it out, make it do, or do without. Well, to follow that to the max, you need some inexpensive gear.
Making things last longer by repairing them is one of the most important pillars of thrift. I write about all sorts of different survival kits on this website, but I recently realized I never wrote about my Cheapskate’s Survival Kit. There are certain tools and supplies that will help you make things last longer and best of all, they don’t cost a fortune.
What goes in your cheapskate survival kit?
Without further ado, here are the things that every thrifty soul should keep close at hand.
Duct tape: It sounds like a cliché, but there are so many things that duct tape can quickly repair. I have duct-taped the back of a sofa after it got ripped during a move, the leg of a table, tarps, backpacks, sneakers, and much, much more. Was it sexy and beautiful? No, probably not. But the value of your ability to eke out just a little bit more wear from an item cannot be overlooked.
WD-40: It doesn’t have to be name brand. Any kind of lubricant can be worth its weight in gold. From silencing squeaks to making hinges work again, lubricating fluid is a valuable repair asset. It can also be used to loosen up formerly moving parts that are stuck, although if they’re rusted tight, you may need a penetrating fluid.
At least once a year, I run all of our black clothing through the washing machine with a package of black fabric dye. It makes faded clothes look brand-spankin’ new. It doesn’t have to be name brand Rit dye. Any black dye will work this magic. (Be sure to run a load of darks as your next load after this so that you don’t stain light colored clothing.
Aluminum foil: It’s good for more than just tin foil hats! You can cut aluminum foil with scissors to sharpen them. You can also ball it up and use it as a scrubber for pots and pans, and you can throw a ball of foil into the dryer to reduce static cling. Wrap furniture feet in foil before moving heavy items to prevent scratching the floor. You can craft a speedy makeshift funnel or you can make a heat reflector by wrapping a big piece of cardboard in foil and sliding it behind your radiators.
Hot glue gun: Not only can you use these for all sorts of DIY crafts, but you can also use it for a multitude of repairs. I have used my hot glue gun to “weld” plastic bread tags onto plastic clothing hampers that have split. I’ve also used it to repair shoes, books, and toys. A dollop on each side of a plastic hanger can give clothing a little something to cling to. You can quickly attach decorations to costumes with hot glue. I’ve even seen YouTube videos of people repairing electrical cords with hot glue, although I have not done this myself.
Zip ties: Plastic zip ties have a multitude of uses. I use them in my garden every year to hold my tomato tipis together and also to secure wobbly plants to the piece of bamboo I stuck in the ground to stabilize them (Be sure not to tighten it too much – they need room to grow. You can use zip ties to make all sorts of redneck contraptions, like attaching a teeny flashlight to the side of your glasses or holding a trouble light overhead on the beams of your basement. You can also use them to tame the mass of cords at the back of your entertainment center. In a pinch, I have even been known to put my long hair in a ponytail using zip ties. (This was back in the days when I worked in an automotive shop.)
Staple gun: What CAN’T you do with a staple gun? I’ve used one to reupholster furniture, to cover a piece of plywood with fabric, to attach posters to backing before putting them in a frame, and to attach “skirts” over some lower kitchen cabinets with long-lost doors.
Vinegar: You can clean with it, cook with it, pickle with it, and kill weeds with it. It’s as multipurpose as a kitchen item can get. Here are more brilliant ideas for using white vinegar.
Safety pins: You can use safety pins for all sorts of things. A lot of them relate to clothing, like a quick fix for a dropped hem, holding a blouse shut between the buttons, or taking something that is too loose in at the sides when you don’t have time to sew the item. However, they have other uses too. You can turn a scarf into a pillow cover, attach fake flowers to a blouse or jacket, remove garlic from a garlic press, or stash them in a first aid kit to keep bandages in place. Last but certainly not least, safety pins can be used to re-thread a drawstring through pajama pants.
Cooking oil: It’s good for more than just cooking. It can be used to remove all sorts of sticky stuff from all sorts of surfaces. Cooking oil can take off tar, tree sap, chewing gum, grease, sticky labels or price tags, and even eye makeup. It can also be used as an ingredient in homemade furniture polish or wood floor cleaner.
What’s in your Cheapskate Survival Kit?
There are probably lots more of these thrifty tools, but the things are above are the ones I would personally feel lost without. I certainly didn’t just get them and put them away – I use them all the time.
Use this list as inspiration to put together your own cheapskate survival kit!
About the Author
Daisy Luther
Daisy Luther is a coffee-swigging, gun-toting blogger who writes about current events, preparedness, frugality, voluntaryism, and the pursuit of liberty on her website, The Organic Prepper. She is widely republished across alternative media and she curates all the most important news links on her aggregate site, http://www.PreppersDailyNews.com Daisy is the best-selling author of 4 books and lives in the mountains of Virginia with her two daughters and an ever-growing menagerie. You can find her on Facebook, Pinterest, and Twitter.
Potting Bench Made From Repurposed Wooden Pallets
July 8, 2018
https://www.1001gardens.org/2015/08/potting-bench-made-from-repurposed-wooden-pallets/?fbclid=IwAR3AmzxeWZM3yOg3tkNDuDYpj_7fflDrOB9w7Y9tQP5yiwBEM23enk0-zXw
Thanks, Gmenfan, I have the "Alone in the Wilderness" video plus the related book titled "One Man's Wilderness."
Cabin Alone in the Alaskan Wilderness - Dick Proenneke
This film is a documentary profile of conservationist and wildlife photographer, Dick Proenneke, at his home in the Lake Clark area of Alaska. It features close-up scenes of native wildlife, dramatic panoramas of the change of seasons and clips of Proenneke carving his log cabin out of the wild Alaskan wilderness.
DIRECTION OF THE U.S.
“It has been a slow burn since 1945, when most of our food was grown on small farms and gardens [and I can vividly remember those gardens.]
Over the ensuing 10 years, the older gardeners began dying off and/or discontinued gardening because of the convenience of big box grocery stores and the movement of food by plane from California, Texas, and Florida.
Then in 1956 the Federal Aid Highway Act was passed thus adding new highways and widening existing highways; consequently more trucks began moving food to big box grocery stores.
Farms, large and small near large cities, began disappearing replaced by housing developments for a huge post World War II population expansion plus a flight from cities to the suburbs. Earliest was the first Levittown in 1947 on 1200 acres of potato fields on Long Island.
With many of these housing developments, the pesticides market no longer needed on disappearing farms was switched to the crazy notion that every new house needed a green lawn. Some kept making gardens, but it was my experience that the children did not often follow suit; growing food was no longer the “in thing.”
Also, along came the big box consumer stores located in large malls to be accessed with more roads and more cars. More farms succumbed to the “urgent need” to supply Americans a place to fulfill their consumerism supported by higher wages.
I recall the late 1950s and 1960s the period of when "Progress Began Regress" for the U.S. as it developed its foundation for further regress through excessive consumerism.
The 1970s included: Peak Oil on the continental U.S. 1970; abandoning the Gold Exchanged Standard in 1971 [due to costly guns and butter policies of the 1960s]; in 1973 Secretary of Agriculture, Earl Butz, advised farmers to "get big or get out … adapt or die," believing that bigger farms were more productive; plus Petrol Dollar recycling went into action in 1974 allowing the U.S. to expand its debt capacity aided by all oil contracts being made in U.S. dollars.
We now look back at a large societal destructive mess. Four percent of Americans now feed the other ninety-six percent, a dangerous situation. The U.S. nation debt exceeds $22 trillion and there is massive debt on all other fronts for unfunded liabilities, plus local, municipal, and state debts in most governmental units. PLUS our high and once mighty industrial system has been greatly transferred outside our borders, a national disgrace.
We on converging on many fronts of a collapse: we will again reach Peak Oil after the fracking fields dwindle out; we have Peak Water; Peak Soil; Colony Collapse Bee Disorder; Peak Infrastructure; and more. “
On the surface, all seems fine, but the next financial collapse will be shock us and the world. It will be bad, real bad!
I've seen the same collapse trend over many decades! Being just a gardener now without much traveling, I will confine my comments to my garden.
Most or the Monarch butterflies are now gone.
I still see honey bees, but they are in decline.
Bumblebees are still abundant. Never been stung by one in 36 years and the 2 stings in each of the last two years. They've become aggressive and my activities have not changed.
To aid the bees over time, I've added many annuals, perennials, and let herbs to to seed to satisfy them. I seem to have more bees than most neighbors.
There is an abundance of squirrels and chipmunks; with gentrification, there is little wild land left and they gravitate to gardens to augment their diets. I have to fence in everything now.
Last summer my rain barrels had constant levels and I did not have to use any municipal water.
The societal progress since the mid 1950s, in my opinion, has been its regress for the environment and our spirit of living. Gone are the days of a kitchen garden in most yards and making food from scratch. Our agrarian past has been severed for most people and many youngsters are not taught gardening. It is a shame.
sumi
Interesting life in Alaska, but the winter months with limited sun would drive me insane.
Thanks for sharing!
sumi
Canadian Winter Garden -PUAA
Cold weather "harvest" garden with cold frames inside a greenhouse. Leslie Field talks with videograher Rita Montgomery. Cold hardy varieties are started from seed mid August to ensure they are large enough when cold weather hits. With double insulation from our Canadian winter and heat only from the soil, the plants freeze and thaw with no damage. This small greenhouse provides all the greens desired for 2-3 people till spring. This is part of a series of informative videos in support of (PUAA) Penticton Urban Agriculture Association. http://puaa.wordpress.com/
Harvesting vegetables during the Nova Scotia winter
Author and gardener Niki Jabbour sheds light on how to keep a winter garden.
Niki Jabbour poses with kale outside her polytunnel.
By Piper MacDougall
February 14, 2019, 3:20 pm AST
https://signalhfx.ca/harvesting-vegetables-during-the-nova-scotia-winter/
easglesurvivor, it's been a while. Please update us on your projects.
sumi
Yes, and here is a post from 2008:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=34012728&txt2find=Maxwell
There are postings on #board-6609
PEAK-OIL-EPOCHAL-EVENT-OF-OUR-LIVES
I will catch up with you later.
Thanks,
sumisu
Massachusetts here, copytele. My state is well noted for its incessant potholes. Since I don't drive, it doesn't bother me, but I always hear the complaints of drivers around me.
Stay safe in your area.
sumisu
Sea Kale Growing: Learn About Sea Kale Plants In The Garden
By: Mary H. Dyer
https://www.gardeningknowhow.com/ornamental/flowers/sea-kale/sea-kale-growing.htm
PLANTING AND GROWING SEAKALE
Sea Kale
by DEANE
http://www.eattheweeds.com/sea-kale/
Transplanting Asparagus Plants: Tips For How To Transplant Asparagus
Asparagus
By: Nikki Tilley
https://www.gardeningknowhow.com/edible/vegetables/asparagus/transplanting-asparagus-plants-tips-for-how-to-transplant-asparagus.htm?fbclid=IwAR0UI1vGKTBjHuGPxMpSixf5gAlb68cLfZI8DEn96HvT09ou9BfjuvnhN10
Ultimate Guide to Different Types of Kale and How to Use Them
ByAmy Sowder
January 11, 2019
https://www.chowhound.com/food-news/177634/ultimate-guide-to-the-different-kale-types-and-how-to-use-them/?fbclid=IwAR3HG7OliMVVcfP6YBEgaew1R9dHNJwtt2EN4AaCVNXyMpsE4QZdOn5bmgE
Your response to the video has very valuable information!
I have a "PEAK WATER #board-12656
I just posted the same video on the PEAK WATER board. Could you please copy and paste your response there to support drought developments.
Glad that you're reviewing this Sustainability board too.
Thanks,
sumisu
WARNING: The Coming Food Crisis | Be Ready 2019
Are you ready for the collapse of the agricultural system? In this video I go over all of the factors which threaten the global food supply. Consumerism, overpopulation, urbanization, pollution, biodiversity, monoculture, farming practices, water shortages, herbicides, pesticides, fungicides, overfishing, geopolitics, bee extinction, monopoly (big agri), genetically modified food, global warming, soil erosion, land loss. drought, are just some of the many challenges to our way of life. GET READY.
Watch this man build a log cabin from scratch
Shawn James didn't even use power tools to build this Ontario retreat.
Noel Kirkpatrick
January 30, 2018, 3:06 p.m.
https://www.mnn.com/your-home/at-home/videos/watch-man-build-log-cabin-without-any-power-tools?fbclid=IwAR1sZE0bwDreWHRmPIW12i5j1_zfLwo5LRv4YNuM3ZjEC7rCe1jQiR77hHI
Watch this man build a log cabin from scratch
Shawn James didn't even use power tools to build this Ontario retreat.
Noel Kirkpatrick
January 30, 2018, 3:06 p.m.
https://www.mnn.com/your-home/at-home/videos/watch-man-build-log-cabin-without-any-power-tools?fbclid=IwAR1sZE0bwDreWHRmPIW12i5j1_zfLwo5LRv4YNuM3ZjEC7rCe1jQiR77hHI
What type of sunflowers appeal to you most?
Will be placing an order this afternoon or evening.
Good luck
Why Rohrer Seeds?
Consistently Great Growth
We test every new seed variety in our own company garden before we even consider selling it. By doing this, we make sure it meets our strict guidelines for quality and consistency.
I have a friend on Long Island, New York. He visits the Amish country around Lancaster, PA for seed potatoes and seeds. I will give this seed company a try for a few things.
https://www.rohrerseeds.com/
PS: Yes, I ignore those who question my seed orders.
My reputation skyrocketed two season's ago when I gave a fourth stage bone cancer village friend a lot of veggies and abundant garlic. He got sick the following winter and swears that the garlic saved him and reduced his pain.
Peak Oil Review 11 February 2019
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2019-02-11/peak-oil-review-11-february-2019/
Quote of the Week
“[W]ith President Trump’s poll numbers in negative territory, whichever candidate emerges from the Democratic primary will have a decent shot at winning the presidency. If that occurs, they will be on record having supported the Green New Deal and will most likely push for some version of it in 2021. That means that oil and gas companies, having enjoyed a deregulatory bonanza under Trump, could see rougher waters ahead. But with the climate debate getting momentum, that pressure is not going away, no matter what happens with the Green New Deal.”
Nick Cunningham, Oilprice.com
Graphic of the Week
1. Oil and the Global Economy
Oil prices have moved very little in the past month closing on Friday at $52.72 in NY and $62.10 in London or about where they were in the first week of January. Several factors such as the recent price drop, the OPEC+ production cut, the US sanctions on Tehran and Caracas, and the outage of Libya’s largest field should be pushing prices higher. However, concerns about slowing global economic growth, the US/China trade dispute, and the possibility of turmoil resulting from the UK’s exit from the EU suggest that the demand for oil could drop significantly in the coming year.
The US-China trade dispute is still the most important factor as we are only two weeks away from higher tariffs coming into effect. President Trump said last week that he would not meet Chinese President Xi before the March 1 trade deadline. Such a meeting would be an indication that the US and China were close to reaching a deal. Trump has promised to hike tariffs on $200 billion worth of Chinese imports from 10 to 25 percent. White House economic advisor Larry Kudlow said that there is a “pretty sizable distance” to go on the trade talks.
Last week, the European Commission sharply cut its forecasts for eurozone economic growth due to global trade tensions, an array of domestic downturns, and the possibility that an unregulated Brexit will result in chaos.
The OPEC Production Cut: The cartel’s oil production fell by nearly 1 million b/d from December to 30.86 million b/d in January, marking the lowest output for OPEC since March 2015. The monthly drop in the cartel’s crude output was the steepest since December 2016. Saudi Arabia’s oil production in January stood at 10.21 million bpd, or 100,000 b/d below its pledged ceiling of 10.311 million b/d, and the lowest Saudi production since May 2018.
Much of the 1 million b/d production drop is from Libya, Venezuela, and Iran where the output is dropping for geopolitical reasons and not from the attempt to force prices higher. As the Venezuelan situation deteriorates, we can expect further production drops this month. Indeed, much of OPEC’s apparent success in lowering production over the last few years is due to geopolitical problems for some of its members which resulted in lower production. Should the situation get worse, much of Caracas’s roughly 1 million b/d of oil production could come to a halt.
The relationship between US lawmakers and two of President Trump’s staunchest supporters, Saudi Crown Prince Mohammed bin Salman and Abu Dhabi’s Sheikh Mohammed bin Zayed, is worsening. Legislation that aims to prevent OPEC from coordinating production and influencing oil prices is advancing on Capitol Hill. On Friday at least one senior Trump administration official expressed support for the legislation, signaling a potential change in the decades-old White House opposition to the measure. The bills would make it illegal for foreign nations to work together to limit fossil fuel supplies and set prices. They would authorize the US Justice Department to sue oil producers for antitrust violations by stripping foreign actors of sovereign immunity protections. Barclays said last week that the passage of NOPEC legislation could see the oil market return to a period of instability.
Saudi Arabia and its Persian Gulf allies are backing a formal partnership with a 10-nation group of oil exporters led by Russia, according to OPEC officials. Such a formal alliance would transform the nature of the 60-year-old cartel. The cartel is facing pressure from President Trump to keep prices low and the increasing flow of American shale oil.
TASS news agency cited Russian Energy Minister Alexander Novak as saying last week that OPEC and non-OPEC countries could discuss a charter outlining open-ended cooperation in April. Reuters is reporting that Igor Sechin, head of Russian oil giant Rosneft, has written to the Russian president saying Moscow’s deal with OPEC to cut oil output is a strategic threat and plays into the hands of the United States.
US Shale Oil Production:
Forecasters had been projecting a substantial increase in US oil production in 2019. The size of this increase ranged from four hundred and twenty thousand b/d (Citibank) to 1.7 million (OPEC) with the most recent IEA forecast coming in with an increase of almost eight hundred thousand b/d. The optimism expressed in these forecasts is understandable when considering just how spectacular the production in US shale oil regions has been. The most recent EIA drilling productivity report on US shale oil production sees an addition of only 62,000 b/d to 8.17 million b/d this month. Given the extremely cold weather in North Dakota in the past few weeks, the chances are that production in the Bakken will fall in February rather than grow when the actual output for February becomes available in mid-April.
The US shale oil industry is changing. The immediate problem is the low price of oil resulting from the 30 percent price drop last fall. In North Dakota, the wellhead price for crude fell from $58.43 in October to $26.25 in December before rebounding to about $36 in January. This is the same oil that went s high as $136 a barrel back in the summer of 2008. Add to the low-price problem, the shortage of pipeline capacity (albeit temporary) to move oil out of the US most productive Permian Basin and you have cash flow problems for many of the small producers that have dominated the industry for the past decade.
In the last few years, however, large oil companies such as Exxon and Chevron have entered the shale oil business in a big way. These giants do not have the problems of the smaller drillers. Their cash flows from conventional oil are so large that they can afford to lose a bit on the production of shale oil. As integrated companies, they can make money on downstream activities, such as transportation, refining, and retail to offset any losses on shale oil production (if any). These companies maintain that the size of their operations can lead to so many efficiencies that they can make money where smaller companies fail. They do not need to beg investors for more capital to keep drilling, nor do they need to cook the books to make shale oil drilling look profitable.
In recent weeks, we have started to see some of the consequences of lower prices. Liberty Oilfield Services estimates that roughly 20 percent of the hydraulic fracturing fleets that were active in mid-2018 have now been idled or are being idled, as producers to tighten their budgets. This report is backed up by estimates that the cost of fracking sand used in the Permian will fall by 19 percent this year due to lower demand. Sand pricing is important for drillers because fracking is the most expensive phase in drilling a shale oil well.
How much the US shale oil industry will grow in the next five years is an open question. Given the rapid depletion of shale oil wells, the industry must constantly drill to replace depleted wells. In the older Bakken and Eagle Ford shale oil regions, new production is just barely ahead of the decline in production from older wells. The situation in the Permian where production is now on the order of 3.8 million b/d, is not far behind. As production grows, the depletion problem grows so that someday soon, the industry will not be able to keep up and production will start to fall.
2. The Middle East & North Africa
Iran: Tehran exported about 1.28 million b/d of crude and condensate last month, according to tanker-tracking data compiled by Bloomberg. According to a former State Department official who managed sanctions on Iran during the Obama administration, Tehran will be able to export some 800,000 to 1 million b/d after the US waivers are lifted in April. Iran can slip some of its oil exports past the sanctions, and a few countries will purchase the crude with or without waivers because they “don’t care about exemptions.”
Iran’s oil customers should not expect new US waivers in May, the US Special Representative for Iran, Brian Hook, said last week, urging buyers to stop importing Iranian oil. “What we have announced is the policy to get to zero imports of Iranian crude as quickly as possible. We are not looking to grant any future waivers or exceptions to our sanctions regime, whether it is oil or anything else.”
Germany, France, and the UK have set up a special payment channel to handle trade with Iran that would allow transactions with Iran, including oil, as the EU still tries to salvage the nuclear deal with Iran.
Iran has recoverable crude oil reserves of 160 billion barrels according to the National Iranian Oil Company. Recoverable natural gas reserves came in at 33.33 trillion cubic meters. This data, according to the Iranian media, makes Iran the third-largest holder of oil and gas reserves after the United States and Russia.
Syria/Iraq: US withdrawal of its troops from Syria will not give Islamic State an opportunity to retake oil fields in the war-torn country, US Secretary of State Mike Pompeo said last week. In September 2017, U.S.-backed Syrian forces seized the Conoco gas plant from Islamic State in the Deir Ezzor area, depriving the militants of an important revenue source. In August 2018, the second-largest oil field in Syria, the Tanak field in the Deir Ezzor region, restarted after U.S.-backed Kurdish forces recaptured the field from ISIS. The Tanak field, which has around 150 wells and the capacity to produce up to 40,000 b/d, was captured from the Islamist militants by the Syrian Democratic Forces in November of 2017.
Iraqi crude sales in January hit their second-highest monthly average ever, as the federal government and the Kurdistan Regional Government combined to sell 4.081 million b/d. Basra Oil Co., the state-owned operator of the Majnoon field, plans to boost production from it to 450,000 b/d by 2021 by drilling 40 new wells. This project would be more than double Majnoon’s current production, which averages 240,000 b/d. The 40 new wells will be in addition to another 40 already contracted to Schlumberger last month. Basra Oil Co. took over Majnoon last year, after Shell, the previous operator of the field, pulled out.
Kurdistan’s two dominant political parties have made a breakthrough in their long-running negotiations to form the next Regional Government. Under the agreement, the new KRG Parliament will meet for the first time on Feb. 18, paving the way for Masrur Barzani – currently Kurdistan’s intelligence chief, and the son of former President Massoud Barzani, who leads the Kurdistan Democratic Party – to become prime minister.
Saudi Arabia: The government has backed up the pledge of its energy minister Khalid al-Falih to slow oil output, with January production falling to 10.21 million b/d – down 400,000 b/d from December. The January figure is below its allocation of 10.31 million b/d under the production cut deal, and crude exports declined by around 500,000 b/d to 7.20 million b/d in January. This was the lowest output figure since May 2018 when the kingdom produced 10.01 million b/d.
The Trump administration is confident that the Saudis will fill any oil supply gap caused by US sanctions on Venezuela. White House officials are “certain” that Saudi Arabia will boost crude exports to the US in coming weeks, but Saudi officials have indicated no such plans, with OPEC in the midst of a production cut accord aimed at boosting oil prices.
The Saudis have stepped up efforts to woo investors disturbed by the killing of journalist Jamal Khashoggi, as it seeks to raise more than $426 billion in private capital to modernize its economy. Officials say the government said it would offer financing and other unspecified incentives to local and international investors to help develop its mining, logistics and manufacturing sectors. The new plan, dubbed the National Industrial Development and Logistics Program, is part of Crown Prince Mohammed bin Salman’s ambitious social and economic overhaul announced in 2016. Since then, Saudi Arabia has introduced new laws and created funds to invest jointly with international companies to attract foreign cash to diversify the economy away from oil.
However, the departure of more than 1 million foreign workers since 2017 has added to a sense of uncertainty. Workers from Asia and the Middle East, often on short-term contracts, have provided the labor to fulfill the Saudi government’s ambitious development plans for decades. Recent shifts in government policy, however, have imposed fees on the dependents of expatriate workers and restricted foreigners from working in certain sectors. Rising costs have hit low-wage foreign workers especially hard, forcing many from the country.
A vital part of the new government development plan involves creating employment for Saudi citizens in the private sector, where jobs are overwhelmingly held by foreigners. In the short term, though, Saudi citizens have not filled the positions that expatriates are vacating, adding to the pressure on business.
Libya: The Libyan National Army—a militia led by Khalifa Haftar, whose forces control the eastern part of the country—took over the giant Sharara oil field last week according to an official at Libya’s National Oil Corp. The Sharara facilities, which can pump 315,000 b/d, about a third of Libya’s normal output, were shut down in early December by a small group who demanded better living conditions in the region. On Friday, however, the National Oil Corp. said military clashes near the Sharara oil field have made conditions unsafe and production isn’t likely to restart soon.
3. China
There is growing concern over China’s economic growth. If the slowdown continues, it will threaten economic activity around the world. Growth in the German economy has already cooled in part due to its exports of machinery to China dropping precipitously. Beijing’s economic growth has been a key driver of global crude oil consumption accounting for one-third of the IEA’s projected increase in global oil consumption for 2019. Lower oil demand growth in China comes just when independent refining capacity there is rising. As demand slows, these independent refiners will begin to dump oil products abroad to earn hard cash. In doing so, they could plunge the global refining industry into a recession and drive down crude prices.
The White House said Friday that deputy-level talks would start Monday in Beijing, followed by high-level talks February 14-15 attended by US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The next round of talks that could signal whether crude and LNG flows will pick up between the two countries this year or remain mired in the trade war. The talks come just two weeks before the next potential round of tariff increases. US crude exports to China disappeared in August, after hitting 510,000 b/d in June, with none reported through November.
China’s LNG imports broke another record last month amid rising stockpiles that are making importers nervous. The January total reached 6.55 million tons, up by 2 percent from the previous record set in December. However, the winter turned out milder than would justify this scale of LNG imports so that some importers are stuck with more LNG than they can sell. Imports of LNG rose by 41 percent throughout 2018, as China sought to prevent a repeat of the 2017 gas shortage that left several million households in northern China without heating.
China’s state energy companies plan to increase spending on domestic drilling this year to the highest levels since 2016, focusing on adding natural gas reserves in a concerted drive to boost local supplies. Responding to President Xi Jinping’s call last August to increase domestic energy production, China’s of oil majors are adding thousands of wells at oil basins in the remote deserts of the northwest region of Xinjiang, shale rocks in southwest Sichuan province and deepwater fields of the South China Sea.
In a new twist, the Chinese are planning to apply the technology used to detonate nuclear bombs to access its massive shale gas reserves in Sichuan province. According to the South China Post, scientists have developed an ‘energy rod’ that can fire multiple shock waves to frack sedimentary rock at depths of up to 3.5km. While China is supposed to have the world’s largest reserves of natural gas, it is found so deep underground that the current fracking technology cannot be used.
The first field test is to take place in Sichuan in March or April. The test could be a dud, producing little or no gas; it could be a breakthrough in gas extraction technology making China energy independent; or it could trigger earthquakes as the tests are taking place in seismically active regions of China.
PetroChina is looking to drop Venezuela’s state-owned oil firm PDVSA as an equity partner in a planned and long-delayed US$10-billion oil refinery and petrochemical complex in southern China. The plan to dump the ailing Venezuelan oil firm is a result of the continuously deteriorating finances of Venezuela’s oil company in recent years.
Gazprom has not been able to obtain a loan from the China Development Bank for part of the $14 billion financing the company aims to raise for the construction of its Amur gas processing plant, which will be Russia’s largest. Gazprom will use bridge loans for the construction of the Amur plant, but these will not come from the Chinese Development Bank. Moscow says it could reach an agreement with the Chinese over the terms of the loan.
4. Russia
Oil output declined to 11.38 million b/d in January, or by around 35,000 b/d from the October 2018 level — the baseline for the global oil accord. Alexei Sazanov, head of the finance ministry’s tax department, said Russian oil production has not yet reached its peak and expectations that it could decline in the next few years are not justified. Sazanov also said the government would take necessary steps if it saw risks of a decline in oil production. Russia’s energy ministry said earlier that Russian oil output could fall significantly in the next few years if some tax and other measures are not taken.
US oilfield services giant Schlumberger said on Tuesday it would continue looking for alternative ways to work in Russia’s onshore drilling market despite its bid for Eurasia Drilling Company (EDC) falling apart. Russia’s Federal Anti-monopoly Service said on Monday that Schlumberger had withdrawn its bid for a stake in EDC, one of the largest private drilling companies in the country.
Chancellor Angela Merkel said last week that Germany will not become dependent on Russia for gas due to the completion of Russia’s Nord Stream 2 pipeline. She stressed that it was crucial to ensure Ukraine remained a transit country for gas. “Do we become dependent on Russia due to this second gas pipeline? I say ‘no,’ if we diversify at the same time.”
Republican and Democratic US senators unveiled a resolution calling for the cancellation of Russia’s Nord Stream 2 natural gas pipeline. Leaders of the Senate Foreign Relations Committee said they would take up the resolution at their next business meeting. Opponents of the pipeline worry it will weaken support for Ukraine by depriving Kiev of gas transit fees along the traditional route for Russian supplies, which meet more than a third of the European Union’s gas needs.
5. Venezuela
Events have been moving rapidly since the US imposed sanctions on Caracas two weeks ago, cutting off the oil and product flows between the two countries and making it difficult for Venezuela to sell its oil elsewhere. Venezuela is preparing to shut down more than a quarter of its oil production in the coming weeks, with US sanctions preventing PDVSA from importing diluent needed to extract its extra-heavy crude. Sources at PDVSA say the company expects it will not be able to produce some 300,000 b/d of diluted crude oil without supplies of naphtha that are blended with the thick crude from the Orinoco Belt to make it transportable. As a result, Venezuela’s total oil output will fall to below 800,000 b/d by the end of February from the estimated 1.17 million b/d the country pumped in December.
PDVSA is looking to sell more of its oil to customers in Europe and Asia as the US sanctions are cutting off US buyers. They were exporting about 500,000 bpd to the US but will redirect exports to other customers in Europe and Asia. As of last week, PDVSA and oil traders were having trouble finding customers with refineries that can handle the heavy oil outside of the US. These exist in China, but the transportation costs are high.
Tankers carrying about 7 million barrels of Venezuelan oil are sitting in the Gulf of Mexico, some holding cargoes bought ahead of the latest US sanctions on Venezuela and others whose buyers are weighing who to pay. Venezuela’s domestic refineries remain mostly idle due to lack of crude supplies and damaged equipment, with rampant fuel shortages in the country. PDVSA began partial rationing of gasoline at gas stations in some regions on Sunday, as many gas stations in Caracas ran out of fuel as customers nervously filled up their tanks in anticipation of shortages.
Russia has stood by the Venezuelan leader for years and has poured billions of dollars in the Latin American country in the form of loans and oil investments, even when all other Venezuelan allies—including China—have shown reluctance to continue lending money to Maduro’s regime. Rosneft is reportedly sending some oil products to Venezuela to keep production from collapsing; however, sources in Moscow say the government is becoming pessimistic that it can save the Maduro government in the current crisis.
The international effort to rush food and medicine into Venezuela is becoming a high-stakes standoff between President Maduro and the U.S.-backed opposition, essentially holding hostage lifesaving shipments of humanitarian aid at the border. Maduro has defiantly vowed to block more than $60 million worth of assistance organized by the opposition and provisioned by the United States, Colombia, Canada, and other countries. Even as truckloads of aid from the United States began arriving at warehouses at the border crossing of Cucuta, Colombia, Maduro loyalists pledged to use force to keep it out.
6. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)
Global deepwater liquid production is set to jump by 700,000 b/d from 2018 to reach a record-high of 10.3 million b/d in 2019, thanks to new fields coming on stream in Brazil and the US Gulf of Mexico, research firm Rystad Energy said on Friday. In addition to Brazil and the United States, the other biggest deepwater producers will be Angola, Norway, and Nigeria. (2/2)
ExxonMobil, driven by its significant investment in Guyana, is leader of the pack among the top oil and gas explorers of 2018, according to Rystad Energy’s annual exploration review. (2/2)
Demand peak: According to Bank of America Merrill Lynch, the annual increase in global oil consumption slows dramatically in the years ahead. By 2024, demand growth halves, falling to just 0.6 million b/d, down from 1.2 million this year. But by 2030, demand growth zeros out as consumption hits a permanent peak, before falling at a relatively rapid rate thereafter. The main driver of the destruction in demand is the proliferation of electric vehicles. (2/6)
The European car market remained stable during 2018, as 15.6 million vehicles were registered—just 346 more than in 2017— according to JATO Dynamics. Diesel vehicles posted their lowest market share since 2001, as demand fell by double digits in 20 of the 27 markets included in JATO’s analysis. Throughout 2018 Jato continued to see the effects of a “diesel crisis,” as announcements of policy changes by governments led to confusion and panic among consumers. Almost one million more consumers opted for a gasoline vehicle in 2018 than in 2017, while alternative fueled vehicles also benefitted with almost 200,000 more registrations than in 2017. Norway was the biggest market for electric vehicles, where they held a 31% market share. (2/4)
UK fracking standoff: Britain’s government has no plans to review regulations for fracking gas in the country, it said on Thursday, following calls from industry to revisit the rules. Chemical giant Ineos and fracking firm Cuadrilla earlier this week said current restrictions around seismic events at fracking sites could force the industry to close. Under the so-called traffic light system fracking must be paused for 18 hours following any seismic event of magnitude 0.5 or above, something which forced Cuadrilla to halt its operations several times last year. (2/6)
In northwest England, tests of the first shale well at Cuadrilla’s site show a rich reservoir of high quality and recoverable gas, the British firm said on Wednesday, adding that rules that have constrained its testing work should be eased. (2/7)
Nord Stream 2: European Union nations backed a plan to regulate Russia’s Nord Stream 2 pipeline on Friday, a move that will likely slow but not rule out its construction. The long-stalled agreement comes after a last-ditch German and French push to amend the draft and give Berlin a greater say in how to ensure the pipeline to carry Russian gas to Europe under the Baltic Sea complies with EU law. (2/9)
Qatar Petroleum and Exxon Mobil Corp are expected to announce plans next week to proceed with a $10 billion project that will expand a liquefied natural gas (LNG) export facility in Texas. LNG demand is soaring. Worldwide consumption of the fuel is expected to more than double to 550 million tons a year by 2030, triggering a race among oil and gas companies eager to dominate the market. (2/2)
Mozambique LNG: Tokyo Gas Co, Japan’s largest gas utility and a major LNG player, and British energy supplier Centrica agreed on Tuesday to jointly purchase 2.6 million tons of LNG per year from Mozambique LNG Company Pte Ltd. The two companies said that LNG will be delivered ex-ship from Mozambique LNG from the start-up of production until the early 2040s. Mozambique LNG1 is owned by US oil and gas producer Anadarko Petroleum Corporation and partners. (2/7)
Offshore South Africa, French oil and gas major Total’s discovery could be around 1 billion barrels of total resources and is “probably quite big”, the company’s chief executive Patrick Pouyanne, said on Thursday. Total said it had made a significant gas condensate discovery after drilling its Brulpadda prospects. (2/7)
Offshore Guyana, an ExxonMobil-led consortium has made two more discoveries they call Haimara and Tilapia, the partners said Wednesday, bringing the number of finds on their prolific Stabroek block to an even dozen. The discoveries add to an earlier-announced recoverable resource estimate on the block of more than 5 billion barrels of oil equivalent. (2/7)
Canada’s struggling oil industry is looking to what is known as partial upgrading technology to thin its sludge-like crude and squeeze more of it through congested pipelines. It is the latest effort by the Alberta provincial government to rescue an industry hurt last year by steep discounts for its oil, as production far exceeded pipeline capacity. (2/7)
In Canada, a Supreme Court ruling that bankrupt oil and gas companies must clean up their abandoned wells before paying creditors might sound like good news, but it doesn’t solve a growing crisis in Western Canada’s aging oil patch. Just how will an increasingly indebted industry, hobbled by low energy prices and rising costs, find the up to $260 billion needed to clean up its inactive pipelines, wells, plants and oilsands mines as it enters its sunset years? (2/7)
The US oil rig count increased by 7 to 854 units while the gas rig count dropped by three to 195, according to Baker Hughes, a GE company. That follows the previous week when there was a net decline of 14 rigs (-15 oil, +1 gas). The oil and gas rig count is now 74 up from this time last year, 63 of which is in oil rigs. (2/9, 2/2)
LNG exports to grow in 2019: The US is on the verge of becoming a much bigger global player in the supply of LNG produced from shale gas, with as many as three terminals expected to start up this year in addition to the three currently operating. (2/7)
Green ‘New Deal’: Democratic officials and activists are pushing the party to unify behind a plan to quickly wean the US economy off fossil fuels and cement climate change as a central issue in the 2020 election. The plan, released on Thursday and dubbed the “Green New Deal,” aims to dramatically overhaul the country’s energy and transportation infrastructure to “achieve net-zero greenhouse gas emissions” in the next 10 years. (2/9)
More Green New Deal: The plan, which takes the form of a non-binding congressional resolution, outlines some of the most aggressive climate goals ever put forward by Democratic lawmakers and clashes dramatically with the Trump administration’s efforts to advance domestic oil, gas and coal production by rolling back environmental protections. The non-binding resolution outlines several goals for the United States, including meeting 100 percent of power demand from zero-emission energy sources like wind and solar within 10 years. The plan also calls for new projects to modernize US transportation infrastructure, cut carbon emissions from the manufacturing and agricultural sectors, make buildings and homes more energy efficient and increase land preservation. (2/8)
Climate intensifies storms: A group of top hurricane experts, including several federal researchers at the National Oceanic and Atmospheric Administration, published striking new research Thursday suggesting that hurricanes in the Atlantic Ocean have grown considerably worse, and climate change is part of the reason why. The study focused on rapid intensification, in which hurricanes may grow from a weak tropical storm or Category 1 status to Category 4 or 5 in a brief period. (2/8)
Shifting climate: State officials along the East and Gulf Coasts are pushing for projects worth billions of dollars to protect populous coastal regions from rising oceans and extreme weather, write the Journal’s Jennifer Levitz and Cameron McWhirter. (2/5)
UK’s power struggle: Now that Japanese giants Toshiba and Hitachi have walked away from UK nuclear power projects that had previously been abandoned by others, it has forced the government to reassess the pro-nuclear bias of its energy policy. Nuclear power is no longer cost competitive with renewable energy, but don’t expect any extra push into the cheaper technology. There is easily enough solar and wind energy available to make up for the cancellation of the nuclear projects and to produce the low-carbon electricity required to make the UK’s 2030 carbon emissions targets achievable. Instead, however, the country’s incentives and regulations favor developing more power plants driven by natural gas. (2/8)
The UK’s CO2 emissions peaked in the year 1973 and have declined by around 38% since 1990, faster than any other major developed country. The most significant factors include a cleaner electricity mix based on gas and renewables instead of coal, as well as falling demand for energy across homes, businesses and industry. Declines in the UK’s CO2 have persisted despite an economic recovery from the financial crisis a decade ago. (2/5)
Venezuela’s Collapse is a Window into How the Oil Age will Unravel
By Nafeez Ahmed, originally published by Insurge Intelligence
February 4, 2019
https://www.resilience.org/stories/2019-02-04/venezuelas-collapse-is-a-window-into-how-the-oil-age-will-unravel/
Collapse is Already Here
By Chris Martenson, originally published by Peak Prosperity
January 31, 2019
https://www.resilience.org/stories/2019-01-31/collapse-is-already-here/
Is Transition Worth It?
By Chris Nelder, originally published by Energy Transition Show
January 30, 2019
https://www.resilience.org/stories/2019-01-30/is-transition-worth-it/
Peak Oil Review: 28 January 2018
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2019-01-28/peak-oil-review-28-january-2018/
Quote of the Week
“Because energy can be generated by technologies, using the sun and wind, rather than concentrated natural resources in the form of oil and gas, which is not ubiquitous in geographic terms, many countries will be able to reduce their vulnerabilities to price spikes and outright supply disruptions by pivoting to renewable energy. Moreover, the strategic importance of chokepoints – the Straits of Hormuz, or the Straits of Malacca for instance – will diminish as fossil fuels lose their grip.” – Global Commission on the Geopolitics of Energy Transformation
1. Oil and the Global Economy
Oil prices continue to hover in the low $50s in the US and low $60s in London – about where they have been since early January. The main issue affecting prices remains the efficacy of the OPEC+ production cut vs. US shale oil production and the slowing Chinese economy. Last week a political upheaval occurred in Venezuela, raising the possibility that Caracas would no longer be able to export 500,000 b/d to the US or that its production might fall below its current 1 million b/d level. So far, the Venezuelan turmoil has not moved oil prices, but with the world’s major powers lining up for or against the Maduro government, prices seem likely to be affected.
Last week saw some of the most optimistic forecasts for the future of US shale oil production ever published. Rystad Energy announced that the US is on track to produce some 24 million b/d of oil, more than Russia and Saudi Arabia combined by 2025 – assuming that oil prices stay above $58 a barrel. The growth in US liquids production will be driven by major shale basins such as the Permian, Rystad’s report said.
The EIA also joined the optimism last week. In its Annual Energy Outlook 2019, the administration forecast that US crude oil production will keep setting annual records until 2027 and will remain higher than 14 million b/d through 2040, thanks to continuously growing shale production. “Near the end of the projection period (2050), the United States returns to being a net importer of petroleum and other liquids as a result of increasing domestic gasoline consumption and falling domestic crude oil production in those years,” according to the EIA.
It seems that the EIA and Rystad Energy are taking the US Geological Survey’s (USGS) new assessment of the resources available in the Permian Basin. The USGS now estimates that over 46 billion barrels of oil, 280 trillion cubic feet of gas, and 20 billion barrels of natural gas liquids are trapped in the Permian’s shale formations. At the end of 2017, total US proven reserves of crude oil were only around 40 billion barrels, so the new estimate adds to that significantly representing a more than 100% and 65% increase in US oil and gas reserves, respectively — if they can be extracted economically. The USGS estimate is of technically recoverable reserves and does not consider cost of extraction.
There is much skepticism over whether such massive amounts of oil will ever be produced from the Permian Basin. Outside observers who have looked at the potential of the Permian Basin note that it would take hundreds of thousands of costly wells to extract this oil. Current trends suggest that the costs of shale oil production are increasing as the most productive drilling locations have already been drilled.
The OPEC Production Cut: The International Energy Agency said last week that the OPEC+ cuts that started this month are likely to put a floor beneath oil prices, but that it would still take time before the reductions balance the oil market. According to the latest edition of the IEA’s monthly Oil Market Report, Russia produced 11.5 million barrels of crude daily last month and “It is unclear when it will cut and by how much.” Russia undertook to reduce its production by 228,000 b/d beginning this month, with the cuts to last until April, when OPEC+ will meet to review the results of its latest price-boosting effort. However, Energy Minister Alexander Novak warned early on—and recently repeated—that it would be difficult for Russian producers to cut quickly and by a lot. Recent reporting suggests that Russia’s oil production was continuing to climb slowly in January.
OPEC and its allies do not rule out taking further action at their next meeting in April should oil inventories build up in the first quarter, OPEC’s secretary general told Reuters. “We remain focused on the supply-demand balance,” Barkindo told Reuters TV at the World Economic Forum in Davos. “Our challenge is to maintain supply-demand balance.”
US oil producers are trying to soothe OPEC’s worries about losing market share, telling the group that investors in the US firms want a reduction in growth and higher payouts. With US output approaching 12 million b/d, OPEC’s forecasts and even US government predictions have repeatedly underestimated US shale oil growth. The CEOs of Occidental Petroleum and Hess Corp, attending a session at the World Economic Forum in Davos, said that growth of US shale oil output would slow. The meeting was a rare occasion when US shale oil producers and an OPEC representative, Secretary-General Mohammed Barkindo, sat on the same panel.
US Shale Oil Production: All indications suggest that there will be a significant slowdown in the growth of US shale oil production in 2019. After growing by 1.6 million b/d last year, even the ever-optimistic EIA now is saying that growth will slow to 950,000 b/d in 2019 and to less than 500,000 b/d in 2020. In its monthly Drilling Productivity Report, the EIA forecasts Permian oil production to grow by only 23,000 b/d from 3.83 million b/d in January to 3.85 million in February. That would be the lowest rate of monthly growth the EIA has forecast for the Permian since September 2016. Growth of oil production from the Bakken is forecast to be up by 9,000 b/d next month and Eagle Ford to be up by 11,000.
Industry insiders are saying much the same. Continental Resources’ Harold Hamm said that shale growth could decline by as much as 50 percent this year compared to 2018, although he added that it was just a “wild guess.” Hamm said that a lot of shale E&Ps are trying to keep spending within cash flow. Shares of oilfield service firm Halliburton fell sharply last week after the company forecast lower revenues in the first quarter. Clients in North America, Halliburton’s biggest market by revenue, began pulling back on some drilling services last year amid transportation bottlenecks in the largest US production region and after oil prices slid sharply in the fourth quarter.
Of more interest is that capital raising by US oil E&P companies has fallen sharply following the decline in crude prices, pointing to cutbacks in capital spending budgets and a continuing slowdown in activity. The US shale industry has relied heavily on debt to finance its growth, with E&P companies raising about $300 billion by issuing bonds during the past ten years. As crude prices started to slide last October, that source of capital was choked off, with just three bond sales by exploration companies that month, and none at all since November. For the time being debt and equity investors are encouraging oil producers to pursue cash generation rather than borrowing more to pursue growth. Weak share prices have also been a deterrent to raising capital.
With the decline in the growth of US shale oil production, the end of US waivers on Iran, and the OPEC production cut, it seems likely that oil prices will be heading higher this year. The one event that could derail this scenario is more economic problems that would reduce the demand for oil this year.
2. The Middle East & North Africa
Iran: Subsidiaries of the National Iranian Oil Company signed agreements with Iran-based companies aimed at maintaining and increasing the production capacity of nine aging oil and gas fields in deals worth a total of $1 billion. The agreements are part of a plan to launch 33 projects for enhancing the production capacity at Iranian oil and gas fields. The 33 projects will be worth a total of $6 billion. According to S&P Global Platts, the nine deals are expected to add nearly 90,000 b/d to Iran’s production capacity within the next three years, while the 33 projects are designed to raise Iran’s production capacity by 281,000 b/d.
Japanese refiners have resumed imports of Iranian crude after halting purchases because of sanctions by the US. Japan is the last of the four biggest Iranian oil buyers in Asia to resume imports after receiving a waiver from US sanctions that started in November. China and India maintained their imports after November while South Korea halted imports for four months.
Syria/Iraq: Before the war, Syria produced 387,000 b/d of which 140,000 b/d were exported. Most of this oil came from Eastern Syria, which is now under the control of the U.S.-backed SDF. Currently, the Syrian oil industry is a shadow of its former self due to the civil war. This provides an opportunity for Russian energy companies, notably Gazprom, to start exploiting the Syrian oil and gas reserves. The instability of the oil and gas regions, however, would require military protection for oil workers. Gazprom may be on track to become the world’s first militarized oil company.
Shortages of cooking gas, electricity, and fuel are hitting Damascus hard this winter, prompting Syrian members of Parliament to slam the government for its inability to tackle the crisis. In September 2018, the US Treasury Department imposed sanctions on petroleum shipments and financing to the Syrian government and took additional measures in November against Iran. “The gas crisis is mostly caused by Western sanctions which prevent us from acquiring gas shipments for Syrian homes,” according to the Syrian MP, who also heads the energy committee in parliament. Syria needs to import half of its requirements.
Iraq’s Supreme Court ruled that several articles of the law to revive the Iraqi National Oil Company were unconstitutional – effectively sending the government back to the drawing board in its efforts to restructure the country’s oil sector. The verdict strikes down so many key provisions in the law that, to create INOC, the Cabinet will first have to produce an amended draft, and the Parliament will have to re-legislate the new text, according to senior government officials.
The Supreme Court also is seeking more information from both sides in a landmark, seven-year-old case before ruling on legal challenges to the autonomous Kurdistan Regional Government’s independent oil policy. In explaining the delay, Chief Justice Medhat al-Mahmoud appeared to suggest the court might be reluctant to rule on the case because of the possibility that disagreements could be resolved by political means.
Iraq’s Parliament passed a 2019 budget law last week – breaking through political gridlock by authorizing massive increases in spending, including new revenue guarantees for the autonomous Kurdistan region. The legislation features the largest deficit and the second-highest annual spending in the post-Saddam Hussein era.
Saudi Arabia: The International Monetary Fund cut its forecast for Saudi Arabia’s economic growth this year to 1.8 percent, down by 0.6 percentage point from the October outlook, due to lower oil prices and lower oil production. The IMF lifted its 2020 economic growth forecast by 0.2 percentage point from October to 2.1 percent.
In November, the Saudis exported their most oil in two years, according to the latest figures from the Joint Organizations Data Initiative, as the kingdom boosted its supplies to offset the re-imposition of sanctions on Iran by the US. Exports are reported to be down in December and January after the US issued temporary sanctions waivers to some of Iran’s best customers.
Saudi Arabia isn’t buying into the peak oil demand narrative. Riyadh continues to expect global oil demand will keep rising at least until 2040 and sees itself as the oil producer best equipped to continue meeting that demand, thanks to its low production costs. Saudi Arabia will be the one to pump the last barrel of oil in the world, but it doesn’t see the ‘last barrel of oil’ being pumped for decades and decades to come according to Amin Nasser, president, and chief executive officer of Saudi Aramco.
3. China
A 30-member Chinese delegation plans to come to Washington this week, US Commerce Secretary Wilbur Ross said on Thursday, as the world’s two largest economies try to meet a March 1 deadline to resolve their trade disputes. Ross tried to tamp down expectations for the talks by saying that while “there is a very large group coming, there’s been a lot of anticipatory work done and we’re miles and miles from getting a resolution.” If a deal cannot be reached by March 2 to increase China’s protection of US intellectual property, curb industrial subsidies and open Chinese markets to US companies, President Donald Trump has vowed to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports.
This year could be different for China’s economy. After growth in 2018 slackened to its slowest pace since 1990 and annual auto sales fell for the first time since that same year, some analysts predict sales will fall further in 2019. Those factors will limit gasoline demand, as will environmental initiatives, such as steps to increase fuel efficiency. Financial services group, Nomura, forecasts gasoline demand growth of 0.5 percent this year, slowing from an estimated 4% last year. At the same time, Chinese refineries will increase production capacity by some 6%, according to Fitch Solutions.
China’s refinery throughput rose 4.4 percent year on year to an average 12.10 million b/d, in December, according to preliminary data released by the National Bureau of Statistics. The December crude throughput was down 1.9 percent from November, the third consecutive month-on-month decline since hitting a record high of 12.54 million b/d last September, according to S&P Global Platts calculations.
4. Russia
Moscow increased its oil production slightly to an average 11.39 million b/d between Jan. 1 and Jan 22, a source familiar with the Energy Ministry data told Reuters last week. Russian oil output averaged 11.38 million b/d between Jan. 1-10. Under a global oil supply cut deal, Russia agreed to cut its oil production from the 11.41 million b/d it pumped in October.
Speaking at the Davos Conference, Kirill Dmitriev, head of the state-backed Russian Direct Investment Fund, said “For US shale production to go down, you need oil prices at $40 per barrel and below. That is not healthy for the Russian economy. We should not take competitive action to destroy US shale production.”
5. Nigeria
France’s Total will proceed with the development of a new project offshore Nigeria, the Ikike project, Patrick Pouyanné, the chief executive of the oil and gas supermajor, said on Monday. “There is a huge potential in Nigeria, it is probably the most prolific country in West Africa in terms of oil and gas, and it is time to launch new projects and we are working on many of them.” Pouyanné’s comments come a few weeks after Total started up oil production from Nigeria’s ultra-deepwater oil field Egina, which is expected to produce 200,000 b/d at peak output.
Nigeria is banking on the startup of its 650,000 b/d Dangote Petroleum refinery to solve many of its economic problems. The refinery is designed for Nigerian crude with the flexibility to process others, and it will meet 100 percent daily Nigerian consumption of all refined products and also would have a surplus for export. The $12 billion refinery and its petrochemical projects include the world’s second largest urea plant with the capacity to produce three million tons per year and the largest sub-sea pipeline infrastructure in the world.
Billionaire Aliko Dangote, who built his fortune on cement, said last week that he hoped to finish building his refinery in 2019 and to begin production in early 2020. However, sources who have been on the site many times said they do not expect gasoline or diesel output before early 2022 and even then, many units at the refinery and accompanying petrochemical plant would not be complete.
A new report by Nigeria Natural Resources Charter claims International Oil Companies (IOCs)operating in the Niger Delta region steal and siphon large volumes of crude oil from the country undetected by authorities. The report revealed the revenue losses over the last few years and estimated that the government loses some $3 billion annually to oil theft. Although the report does not say how much oil IOCs steal, it, explained that when they do, they always resort to a network of onshore and offshore operators, sellers, and financiers.
6. Venezuela
The crisis in the country finally came to a head last week when Washington and a string of countries in the region recognized Venezuelan opposition leader Juan Guaidó as head of state and urged Venezuelan President Nicolas Maduro to step down. Guaidó declared on Wednesday that Maduro’s government was illegitimate and that as president of the country’s National Assembly, he was assuming power in accordance with the country’s constitution. Almost instantly President Trump issued a statement recognizing Guaidó as the country’s rightful leader. Soon after came similar pronouncements from Canada, Brazil, Argentina, Colombia, Chile, Peru, and others.
Needless to say, the move by Guaidó in coordination with foreign powers has set off turmoil. Venezuela’s military seems to be backing Maduro as does Moscow and Beijing which have billions of dollars and a lot of prestige invested in making the Maduro government Russia’s closest ally in the Western Hemisphere. Cuba’s secret police have been deeply involved in protecting the Chavez and Maduro regimes for many years and could be an important factor in the fate of the country. Washington and the Maduro government have broken diplomatic relations, but some American diplomats remain in Caracas.
The Trump administration seems poised to back its candidate by imposing sanctions on US imports of Venezuelan crude oil, a move which will leave US Gulf Coast refiners scrambling to replace the 500,000 b/d that is exported to the US. The revenue from these sales represents most of the country’s earnings as the exports going to Russia and China are to repay old loans and do not earn revenue. If sanctions are imposed, flows of heavy crudes into the US are most likely to increase from Mexico, Canada, Saudi Arabia, and Iraq. “US refiners would likely pay a premium due to infrastructure constraints, competition for market share in Asia, and continued OPEC supply limits,” analysts with Rapid Energy Group said in a note Friday. The sanctions would also likely be imposed at a time when heavy barrels are trading at a premium to light crudes.
7. Mexico
Five years after former president Enrique Peña Nieto ended Pemex’s monopoly and opened Mexico’s oil industry to private foreign investment, the new administration is betting again on the state oil firm PEMEX to turn around the country’s production which is now around 1.7 million b/d, down from its 3.4-million-b/d peak in the early 2000s. Mexico’s new President Andrés Manuel López Obrador—in office since December 1—is opposing his predecessor’s energy reforms and wants a greater role for Pemex in reversing the downward trend in Mexican oil production.
López Obrador suspended new oil auctions for three years, shelving one auction that was slated to be held next month. Mexico is not rescinding the contracts that have already been awarded, but López Obrador wants foreign firms to invest and show they can start production from fields they have discovered. Pemex aims to boost exploration spending by some 10 percent annually in order to achieve its production goal.
Several foreign firms are making progress with their development plans at newly discovered offshore oil fields but drilling and developing offshore resources takes years to complete. Italy’s Eni had its phased development plan for Area 1 in the shallow waters of the Campeche Bay approved by Mexico in the summer of 2018, with an early production startup planned in mid-2019. Full field production will start in early 2021. Talos Energy is reporting promising results from its Zama appraisal program.
A new strategic plan aims to guarantee “the country’s energy security and sovereignty” and aims to raise crude oil production to 2.48 million b/d by the end of 2024. Some observers say an increase of this size is not going to happen. Fitch Ratings estimates that it would take an annual capital expenditure of $15-$18 billion to replenish its reserves.
The fuel shortage sparked by government efforts to curtail theft of crude and gasoline by closing vulnerable pipelines continues. The government said Thursday it had purchased 670 distribution trucks amid its fight against fuel theft. The trucks will be able to move 144,000 barrels of refined products. The first 58 vehicles will be delivered in the coming days, 140 will arrive in February, and the full fleet will be in Mexico by the end of March. The government is looking to reinforce Mexico’s fuel logistics system in an effort to avoid disruption amid pipeline shutdowns aimed at fighting gasoline siphoning.
The government is looking to reinforce Mexico’s fuel logistics system in an effort to avoid disruption amid pipeline shutdowns aimed at fighting gasoline siphoning. Pemex 1,400 fuel trucks with a combined capacity of 176,000 barrels. moved 12 percent of Mexico’s refined products in 2017 and pipelines 76 percent. Unless the theft from pipelines is confined to certain areas, the additional trucks may not do much good.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org )
EVs vs. petroleum fuels: Electric vehicles (EVs) today are not the end of global oil demand growth, nor are they the key solution to reducing carbon emissions, Fatih Birol, IEA’s Executive Director said at the World Economic Forum in Davos on Tuesday. Analysts need to put things into perspective and consider that five million EVs globally is nothing compared to 1 billion internal combustion engine cars. “This year we expect global oil demand to increase by 1.3 million barrels per day. The effect of 5 million cars is 50,000 barrels per day. 50,000 versus 1.3 million. Cars are not the driver of oil demand growth. Full stop,” Birol said. The drivers of oil demand growth are trucks, the petrochemical industry, and planes, with Asia just starting to fly, the IEA’s head said. (1/23)
Renewables ease burden: The rise of renewable energy can dramatically enhance the degree of energy independence, according to the Global Commission on the Geopolitics of Energy Transformation, which authored a report at the request of the International Renewable Energy Agency. (1/22)
A talent crunch is coming to the oil and gas industry, with nearly half of all respondents saying that they were “either quite worried or very worried about an impending talent crisis,” according to the survey of 17,000 energy professionals across the oil and gas, petrochemicals, power, renewables, and nuclear industries. (1/23)
Euro gasoline glut: The rise of US shale oil is choking off a historic gasoline trade, dealing a blow to European refineries that for decades have relied on American drivers to buy their excess supplies. (1/23)
In the UK, decommissioning the offshore platforms that have reached the end of their productive life will cost taxpayers some $31.46 billion (24 billion pounds) over the next 45 years, according to the National Audit Office. (1/26)
UK rule to be eased? Britain could safely raise the limit for tremors at gas fracking sites, two seismologists said on Tuesday. Fracking at Cuadrilla’s Preston New Road site in Lancashire, northwest England was halted several times last year after seismic activity exceeded limits put in place under Britain’s traffic light regulation system. (1/23)
In Qatar, the capacity expansion of the world’s largest liquefied natural gas (LNG) exporter has attracted a lot of interest, and oil and gas majors who are Qatar’s long-standing partners, as well as majors that would be new to Qatar’s LNG, are expected to bid for a lucrative share of the expansion project. Qatar announced last year plans to increase its LNG production capacity by 43 percent. The new export capacity projects are expected to be completed in 2024. (1/24)
India’s crude oil demand this year will continue to rise at the same rate it rose by in 2018, which made it the second-biggest driver of global demand growth, energy consultancy Wood Mackenzie has forecast. Last year India’s demand growth accounted for 14 percent of the global total, at 245,000 bpd year-on-year, making it second only to the US and ahead of China in terms of oil demand growth. In 2018, India’s crude oil consumption exceeded 4 million bpd. (1/23)
Canadian crude-by-rail exports edged higher to a record in November, topping the 300,000 b/d level for only the second time since the government has kept statistics on shipments. (1/25)
The US oil rig count increased by ten while the gas rig count slipped by 1 to 197, according to the Baker Hughes weekly report. Active oil-targeting rigs have dipped from a cyclical high of 888 in mid-November to 862 in the fourth week of January. (1/26)
2018 crude boom: A year ago, the US government saw American crude production averaging 11.95 million barrels a day in 2042. Shale drillers are set to exceed that this year. The EIA now estimates output will top out at 14.53 million barrels a day in 2031, according to its Annual Energy Outlook released Thursday. (1/26)
2025 crude sky-is-the-limit: The United States is on track to produce more crude oil and liquids than Russia and Saudi Arabia put together by 2025, consultancy Rystad Energy said on Thursday. US liquids output is expected to surpass 24 million b/d over the next six years, Rystad said, assuming average US crude prices of $58 a barrel during the period. (1/25)
Export terminal: Magellan Midstream Partners LP has begun talks with companies developing crude transportation assets in Freeport, Texas, as it considers building a US crude export terminal there instead of its previously planned spot off Corpus Christi. (1/25)
Export options: Intercontinental Exchange has two new delivery points in the Houston area, a move giving further options for WTI Midland crude exports from the US Gulf Coast, ICE said Tuesday. The delivery points are in addition to the contract’s original delivery point to the Magellan East Houston terminal. (1/23)
Shutdown shuts down permitting: A federal court on Friday blocked the Trump administration from issuing any permits to conduct seismic testing for offshore oil and natural gas drilling during the partial government shutdown. (1/23)
Biofuels: ExxonMobil and Renewable Energy Group (REG) signed a joint research agreement with Clariant to evaluate the potential use of cellulosic sugars from sources such as agricultural waste and residues to produce biofuel. (1/24)
Biofuels benefit questioned: A study commissioned by the Urban Air Initiative has found that measured and modeled effects of ethanol blending on gaseous and particulate emissions have varied widely between studies, to the point that it is difficult to reach any summary conclusions on ethanol’s emissions effects. (1/23)
Nuke building halted: Japanese technology giant Hitachi on Thursday Jan 17 announced it was suspending all further work at its Wylfa Newydd nuclear project in Anglesey, north Wales. This decision by Hitachi’s Board of Directors yesterday in Tokyo included writing off the $2.8 billion already invested in site preparation work. The board also decided to cancel a second nuclear project in the UK at Oldbury in Gloucestershire. (1/22)
H2 boost: Saudi Aramco, in partnership with US Air Products and Chemicals, will build the first hydrogen fuel cell station in the Kingdom, leveraging Air Products’ SmartFuel hydrogen fueling technology. The station, to start operating in the second half of this year, will fuel a fleet of hydrogen vehicles supplied by Toyota. (1/26)
H2 + electricity: In South Korea, amid increasingly urgent calls for more radical climate change action, a team of scientists has found a way to kill two birds with one stone by converting carbon dioxide into electricity and hydrogen. (1/23)
EV $$: Volkswagen said it would create a unit to manufacture electric car batteries, as it prepares to mass produce electric cars and overhaul its components division which currently makes engines, gearboxes and steering components. (1/25)
Self-flying small vehicles? Boeing Co said its flying car prototype hovered briefly in the air during an inaugural test flight on Wednesday, a small but significant step as the world’s largest planemaker bids to revolutionize urban transportation and parcel delivery services. Boeing is competing with arch-rival Airbus SE and numerous other firms to introduce small self-flying vehicles capable of vertical takeoff and landing. (1/24)
Climate action advocates have underestimated the strength and sophistication of decades-long fossil fuel-funded misinformation campaigns and need a coordinated set of strategies to fight back, say leading academics. Among those strategies, say the three researchers from Yale and Brown University, are promoting financial transparency, suing misinformers and their funders, and researching the vast networks of think tanks and front groups. (1/24)
Greenland’s enormous ice sheet is melting at such an accelerated rate that it may have reached a “tipping point,” and could become a significant factor in sea-level rise around the world within two decades, scientists said in a study published on Monday. The study is the latest in a series of papers published this month suggesting that scientific estimates of the effects of a warming planet have been, if anything, too conservative. (1/22)
Has U.S. shale oil entered a death spiral?
By Kurt Cobb, originally published by Resource Insights
January 27, 2019
https://www.resilience.org/stories/2019-01-27/has-u-s-shale-oil-entered-a-death-spiral/
Peak Oil Review: 21 January 2019
By Tom Whipple, originally published by Peak-Oil.org
https://www.resilience.org/stories/2019-01-21/peak-oil-review-21-january-2019/
Quote of the Week
“The fracking industry has helped set new records for US oil production while continuing to lose huge amounts of money — and that was before the recent crash in oil prices. But plenty of people in the industry and media make it sound like a much different, and more profitable, story… The explanation is pretty simple: Shale companies are not counting many of their operating expenses in the “break-even” calculations. Convenient for them, but highly misleading about the economics of fracking because factoring in the costs of running one of these companies often leads those so-called profits from the black and into the red.” Justin Mikulka, DeSmog Blog (1/19)
1. Oil and the Global Economy
Oil prices continue to climb steadily closing up about $3-4 a barrel by the end of last week. Behind the move are concerns that US shale oil production this year may not be as strong as forecast; lower OPEC production; and reports that the US and China are making progress towards ending their trade war. New York futures closed at $53.80 on Friday, while London closed at $62.70. This leaves London’s Brent about $12 a barrel higher than it was at the end of December, but $22 lower than it was in September. These prices should make the OPEC exporters happier but may not be high enough to keep shale oil production increasing as fast as predicted.
The International Energy Agency continues to insist that global oil demand will be stronger this year than in 2018 as lower fuel prices counter slowing economic activity. Some observers are not sure that this analysis is valid. They point to the growing gap between the price of gasoline and middle distillates (diesel and jet fuel) that run much of the global industrial and transportation systems. Last week diesel in the US was selling for 68 cents a gallon more than regular gasoline. Last year the difference was 41 cents. The EIA reports that US gasoline inventories are about 6 percent above the five-year average, while distillate inventories were 3 percent below.
Concerned observers note that the supply of very heavy crude, which is blended with very light shale oil to make middle distillates, is shrinking in Canada, Venezuela, and Mexico, its primary sources. The mandate to reduce emissions from shipping, which comes into effect soon, will further exacerbate the middle distillates situation. Some are starting to speculate that the middle distillates sector of the fuel industry will turn out to be the place where peaking of world oil production first becomes a problem.
The OPEC Production Cut: The cartel published the list of oil production quotas for each country in the OPEC+ deal last week. With the exception of Iran, Venezuela, and Libya which are exempted from the cuts due to their precarious economic or political situations, the bulk of the cutting will be done by the Saudis and their Gulf Arab neighbors. Five of OPEC’s current 14 member’s oil production has been trending down for years and is largely inconsequential in the global 100 million b/d oil market.
Riyadh will cut 322,000 b/d from its October baseline of 10.633 million b/d and keep output at 10.311 million b/d. According to OPEC’s secondary sources, the Saudis produced 10,553 million b/d in December, down by 468,000 b/d from November. They certainly seem to be doing their part in contrast with the Russians who are saying it is impossible to cut production during the winter or parts of their production infrastructure will freeze.
Qatar, which has been producing about 600,000 b/d, has left OPEC and is no longer included in the cartel’s production data. The OPEC 14 production was down by 751,000 barrels per day in December. That was after November production had been revised downward by 23,000 barrels per day. Iran is now at about the average they held during the previous sanctions period. Iraq reached a new all-time high in December of 4,714,000 b/d. That was up 88,000 b/d from November. Kuwait also increased production in December, up 29,000 b/d to 2,800,000 b/d while Libya and Nigeria are back to having political problems slowing their production.
In its monthly Oil Market Report, the IEA increased its non-OPEC supply growth number for 2019 to 1.6 million b/d, from 1.5 million b/d in last month’s report, thereby lowering the fabled “call on OPEC.” The agency raised its estimate of the US’ crude output growth this year to 1.1 million b/d, from 1 million b/d in last month’s report, adding that US crude output would probably be higher than the production capacities of Russia and Saudi Arabia by mid-year.
OPEC has decided to hold an extraordinary full ministerial meeting on April 17 in Vienna to discuss the state of the oil market and the production cut deal, while the cartel’s non-OPEC partners will join for a full OPEC+ meeting on the following day, April 18.
US Shale Oil Production: Evidence is mounting that low oil prices are beginning to slow the growth of US shale oil output. The optimistic pronouncements of the IEA and other prognosticators that US production will increase by a million or more b/d this year may not come to pass. The US rig count dropped by 21 oil rigs last week, marking the third consecutive week of declines and the biggest drop since early 2016. Although oil prices have rebound by about $10 a barrel since late December, they are still more than $30 below the recent highs set in September. As one headline writer put it, “Fracking in 2018: Another Year of Pretending to Make Money.”
The newest trend in the shale oil industry is large oil companies buying out the Permian’s smaller operators and pumping out the basin’s crude with in a more efficient manner. The large oil companies can bring vast resources and economies of scale to the shale oil business, and generally know what they are they are doing. They do not need to cook the books to convince lenders that they will soon be profitable. Indeed, they can bury their shale oil operations amidst the millions of barrels of oil they already produce from conventional wells.
The supermajors are used to investing billions of dollars in projects that may return nothing for five or six, or sometimes, even ten years. Most importantly, they appreciate better than most that there has been insufficient investment in finding new oil so that shortages are almost certain to come in the early to mid-2020s, which will bring much higher oil prices.
Drilling in Texas, even if it is for short-lived shale oil wells is much more attractive than production sharing agreements with the few countries around the world that will grant them access on money-making terms. The problem with investing in the Permian Basin is how many sweet spots are left to drill and how rapidly the cost per barrel will climb when companies are forced to drill less productive rock. If oil prices climb back well above $100 a barrel, and consumers can still afford to buy it, there may be profits in producing expensive shale oil. The supply and price of middle distillates may be the critical problem for the next decade.
2. The Middle East & North Africa
Iran: There is a consensus that Tehran currently is exporting about 1 million b/d, down from 2.7 million last May when the US withdrew from the nuclear deal. The Iranians are going to considerable lengths to circumvent the sanctions and to hide exports. The government continues to maintain that the sanctions are not seriously hurting it.
The current waivers that Washington has granted to major importers of Iranian crude are due to expire at the end of May. The current thinking in Washington is that the waivers will be extended if there is a significant increase in oil prices by May. The Trump administration is pleased that it has been able to take over a million b/d of Iranian oil from the market without raising prices and hopes to keep it this way by judicious use of waivers.
China’s largest refiner, Sinopec, has offered $3 billion to Iran’s state oil company to jointly expand the development of a major field in Iran. The sources of this information say Sinopec considers itself to be safe from US sanctions because the initial deal was signed back in 2007.
Syria/Iraq: Iraq’s oil sector ended a record-setting year with its most prolific single month of crude production ever. Overall crude output from fields controlled by both the federal government and the autonomous Kurdistan Regional Government totaled 4.94 million b/d in December, according to an Iraq Oil Report analysis.
Saudi Arabia: The Saudis now plan to take Aramco public in 2021 according to Energy Minister Khalid al-Falih. Gulf News quoted al-Falih as saying Aramco was the world’s most important and most valuable oil company. The minister said earlier that Aramco was planning to issue its first international bond, now worth around $10 billion – down from the $40 billion that was discussed last year — to fund part of the acquisition of a majority stake in petrochemical giant Sabic from the Saudi sovereign wealth fund.
The larger bond issue was canceled after Aramco became concerned about having to make its accounts and reserves public. Recently, a third-party reserve audit by DeGolyer and MacNaughton found that Aramco had reserves of 263.1 billion barrels, a bit over 2 billion barrels more than the company has been reporting for years. Unless the Saudis can find a way around the requirement, a bond issue would also require the company to make its accounts public for the first time since its nationalization back in the 1970s.
Libya: crude oil production and exports have been disrupted since early December due to port closures caused by bad weather as well as security incidents and issues at the country’s largest oil field Sharara, which has been shut in since December 8. As a result, Libya’s crude oil production in December fell to 928,000 b/d from 1.1 million b/d, according to OPEC’s Monthly Oil Market Report released last week. Last Thursday the national oil company opened all its oil loading terminals after nearly a week’s suspension due to bad weather.
Libya produced an average of 1.107 million b/d in 2018, the oil company’s chairman Mustafa Sanalla said earlier this month. Total revenues reached $24.4 billion, the highest since 2013. If the security situation improves, Libya plans to produce 2.1 million b/d by 2021.
3. China
Beijing’s economic woes continue. According to the Financial Times editorial board, the warnings we saw last year are a sign of the deepening economic distress, and that this will have a far more significant external impact in the coming year than it did in 2018. Despite more than a decade of efforts to rebalance the economy and wean itself off the stimulus introduced in the wake of the 2008 financial crisis, China remains addicted to ever-higher levels of debt and construction. The Institute of International Finance estimates China’s total debt exceeded 300 percent of gross domestic product by the end of last year. Last week, China’s central bank announced that it was injecting a record $84 billion into the economy to boost liquidity and promote increased lending.
Despite hopes that a US/China trade deal will be reached soon, it may still not be enough to offset China’s lagging economic growth. Sources told Reuters last week that Beijing is planning to lower its economic growth target to 6.3 percent. This comes as China saw its exports fall unexpectedly in December by 4.4 percent, the most in two years, with imports also dropping 7.6 percent in their biggest decline since July 2016.
For many years China’s economic growth has driven the global demand for oil. This year started well, with China’s crude oil imports for 2018 posting a 10.1 percent growth to 9.28 million b/d and imports for December at 10.35 million b/d, the second time it has ever breached the 10 million b/d mark.
However, the imports are not consistent with actual domestic demand; much of the crude imported in the fourth-quarter went into building inventories, and imports mask high product re-exports. For 2019 S&P Global Platts Analytics expects China’s crude imports to rise to 9.7 million b/d, up from 9.2 million b/d last year. The growth in China’s demand for oil slowed to 590,000 b/d in 2018 versus 720,000 b/d in 2017 and demand growth is expected to fall further to 450,000 b/d in 2019.
4. Russia
Due to weather and geological conditions in the cold Russian winter, Moscow cannot cut its oil production too quickly, Energy Minister Novak said last week, reiterating Russia’s commitment to stick to the new OPEC+ deal and to reduce output gradually. A few days before, Saudi energy minister al-Falih said that Russia was moving with the cuts but “slower than I’d like, but they’ve started, and I am sure as they did in 2017, they’ll catch up and be a positive contributor to re-balancing the market.”
However, The Paris-based International Energy Agency on Friday cast doubt on whether Russia would meet its agreement with OPEC to cut crude oil output. In its Oil Market Report, the IEA said: “Data show that Russia increased crude oil production in December to a new record near 11.5 million barrels per day and it is unclear when it will cut and by how much.”
5. Nigeria
The Nigerian National Petroleum Corporation is worried about the rising incidents of pipeline vandalism across the country. In October 2018, its pipeline network suffered a 42.9 percent increase in the incidents of pipeline vandalism compared to the previous month. Giving a breakdown of the breaches in its infrastructure in a statement, a company official said the corporation recorded 219 pipeline vandalizations in October, compared to 125 incidents it suffered in September of the same year.
An election for a new Nigerian President and General Assembly will take place on February 16th. Presidential candidate Atiku Abubakar on Wednesday branded the state-run oil company a “mafia organization” and pledged to privatize it if he is elected. Abubakar said he had tried without success to end the opaque administration of the National Petroleum Company (NNPC) when he was vice-president under Olusegun Obasanjo from 1999 to 2007. The NNPC and other state-run organizations have been widely criticized as slush funds for successive governments, particularly around election time. Abubakar said “unless we dismantle these mafia organizations, we cannot progress, let’s privatize them.”
With a population of 191 million, Nigeria still ranks among the top 10 among countries with the lowest gasoline prices in the world. According to the Global Economic Policy Initiative, Nigeria presently ranks number six behind only Venezuela, Sudan, Iran, Kuwait, and Algeria.
6. Venezuela
Venezuelan crude oil production continued its steady decline and hit a new low in December with just 1.15 million b/d produced. Venezuela’s December month-over-month production declined 33,000 b/d, according to reports by secondary sources in OPEC’s latest report issued on Thursday. The new production figure represents a decline from over 1.2 million b/d in October, and an average of 1.25 million barrels in the third quarter.
Citgo, Chevron, PBF, and Valero are major importers of Venezuelan crude, and the Trump administration has been resisting sanctions on Caracas’s oil exports. However, last week National Security Council staff told some US refiners that sanctions on Venezuelan crude exports are under consideration, a signal that opposition within the administration to sanctions on Venezuela’s oil sector may be weakening. While Washington has sanctioned state-owned PDVSA, restricting its access to new debt financing, the country’s gold sector, and sanctioned multiple government officials, it has resisted direct sanctions on oil flows. This reluctance was due to both the potential impact on oil prices and US refiners and the fear that oil sanctions could worsen Venezuela’s humanitarian crisis and allow it to place blame on the US. In addition, Trump remains resistant to any action that could increase oil prices.
In October, US refiners imported an average of 505,870 b/d of Venezuelan crude, down from about 629,480 b/d in September, but only about 5,000 b/d less than US refiners imported in October 2017. Meanwhile, US refiners are bidding up prices for heavy grades of crude oil such as those produced by Venezuela. These crudes are needed to blend with the very light shale oils to work efficiently in US refineries along the Gulf Coast. Without heavier crudes to blend, it is difficult to produce diesel and other middle distillates. Venezuela also needs the light US shale oil to blend with the very heavy Orinoco crudes to make them suitable for shipping.
“It’s more serious than I’ve heard before,” said a refining industry executive familiar with the White House discussions. “They are setting the table to pull the trigger if they have to.” US refiners would have few supply alternatives if the Trump administration were to cut off crude imports from that country. Supplies of the heavy oils have been harder to secure in recent months because of cutbacks and production curbs in Western Canada, Mexico, and Venezuela. One type of US heavy oil, called Mars, traded at a $6.80 per barrel premium to US crude futures on Thursday, the strongest in nearly five years and up from a $4.50 per barrel premium on Tuesday, a US oil broker said.
7. Mexico
The crackdown by Mexico’s new president on rampant fuel theft has turned into a battle to prevent economic chaos after state governments, businesses and consumers were caught by surprise by the decision. On Dec. 27th President Lopez Obrador unveiled a plan to increase military protection of oil installations and began cutting shipments through pipelines that have been bled for years by thieves. So far, the result has been more than a week of severe fuel shortages, shuttered gas stations, and lines of motorists snaking around city blocks waiting hours to fill their tanks. Lopez Obrador said that the government was looking at purchasing an additional 500 tanker trucks to distribute gasoline and that officials were asking private companies to increase fuel imports.
Officials in three affected states told Reuters they were not warned about the supply cuts. “There was zero coordination,” said Alejandro Guzman, head of economic development in the government of Jalisco, home to the country’s second-biggest city, Guadalajara. “We started to notice when the gas stations began closing.” He estimated only a quarter of gas stations in the western half of Guadalajara had fuel to sell during the past week. Still, once the shortages became apparent, Pemex’s new management started to work well with the state to try to address the problem.
Meanwhile, fuel continues accumulating at Mexico’s ports and storage terminals as the government struggles to accelerate deliveries to gas stations via truck instead of speedier pipelines. Mexico currently has almost 7 million barrels of gasoline, diesel, and jet fuel in dozens of tankers anchored around Pemex’s ports waiting to discharge. Some 5.3 million barrels more are stored at terminals, said Pemex Chief Executive Octavio Romero.
Mexico’s government, dealing with fuel shortages stemming from this crackdown on theft, is expected to postpone a new rule requiring pumping stations to sell cleaner diesel, according to sources with knowledge of the decision and documents from the regulator. This marks the first delay of a 2016 regulation that had been expected to go into effect at the end of 2018. It has lost traction mainly due to lack of infrastructure, but also because of fears that it would exacerbate fuel shortages.
Last Friday, a massive fireball engulfed people scooping up fuel spilling from a pipeline that was drilled into by thieves in central Mexico, killing 21 people and badly burning 71. Illegal taps into pipelines occurred 12,581 times in the first ten months of 2018, an average of about 42 per day. With crowds of townspeople often involved, either aiding thieves or collecting spilled fuel in primitive containers, it was only a matter of time before a fire occurred.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)
Britain has rejected the case for a relaxation of fracking regulations despite warnings that the current system is “strangling” the industry, the Financial Times reported on Sunday. Energy Minister Claire Perry has dismissed pleas by shale gas developer Cuadrilla for rules to be loosened, citing a letter from Perry to the company’s chief executive. (1/14)
In Norway, OMV, the operator of the nation’s northernmost oil discovery offshore —Wisting in the Barents Sea—could begin production in 2026. That could provide some relief for Norway’s oil industry amid current forecasts that production will decline from the mid-2020s in the absence of new major oil discoveries. (1/17)
Northern Cyprus wants to resolve a dispute over natural gas drilling with Greek Cypriots to avoid the possibility of its leading to wide instability, the breakaway state’s deputy prime minister said after visits with Trump administration officials and US lawmakers. “We believe this is an unfair situation … which may put the stability of the region at risk,” Kudret Ozersay said last week. (1/19)
China’s CNOOC Group said it aims to double its exploration projects and proven oil and gas reserves in seven years, the company said on Friday. The announcement was a direct response to President Xi Jinping’s call to improve the country’s national security by boosting domestic production and reserves, CNOOC said in the post. (1/18)
Nigeria ranks among the top 10 cheapest petrol selling countries in the world, a policy group has revealed in its latest report. In its report released on 15 January, the Global Economic Policy Initiative said Nigeria presently ranks number six in the world only behind Venezuela, Sudan, Iran, Kuwait and Algeria. (1/18)
Angolan efforts: With production declining and investment scarce, the Angolan leadership has put in place a number of new policies to reboot its oil industry and propel economic development. However, those changes take time and renewed deep-water oil and gas exploration for fresh reserves will take years to yield the desired results and stop the daily production crunch. (1/19) [Ed. note from BP data: Angolan production peaked at 1.88 million b/d in 2008 and has declined 11 percent, in bumpy fashion, through 2017.]
A week after Venezuelan President Nicolas Maduro was sworn in for a second term in office, the option of a complete oil embargo against Venezuela has been put back on the table, according to two unnamed sources who spoke to CNN. The sources also said President Trump was mulling over a declaration that recognizes the President of the Venezuelan National Assembly, opposition politician Juan Guaido, as the legitimate president of the country. (1/17)
Heavy crude shortage–really? Just two or three months after a glut in Canada, there is now robust demand for Canadian heavy crude from US refiners—which process more than 50% of the world’s heavy crude—but not enough capacity to transport it across North America to the Gulf Coast cheaply. The good news for Canadian producers is that cheap or not, if the refineries need it, the refiners will buy it. Bloomberg reports some heavy crude grades such as Heavy Louisiana Sweet are already trading at a premium to lighter and typically more expensive grades. (1/16)
The US oil rig count dropped a whopping 21 rigs to 852, with the gas rig count also declining by four to 198, according to Baker Hughes’s report at week’s end. The oil and gas rig counts are still up by 114 up from this time last year, 105 of which is in oil rigs. (1/19)
Crude production climbing: The EIA has estimated that US crude oil production averaged 10.9 million b/d in 2018, rising by 1.6 million b/d from 2017 and reaching its highest level and seeing its largest volume growth on record. This year, America’s crude oil production is expected to average 12.1 million b/d in 2019, while crude production in 2020 is seen averaging 12.9 million b/d, with most of the growth coming from Texas and New Mexico. (1/17)
Net oil exporter? Continuously rising US shale production will make the US a net exporter of crude oil and petroleum products in the fourth quarter of 2020, the EIA said in its January Short-Term Energy Outlook, which offered a first glimpse into the administration’s forecasts for 2020. Last year, US net imports of crude oil and petroleum product are estimated to have dropped to an average of 2.4 million b/d, from an average of 3.8 million b/d in 2017. (1/17)
Offshore to grow in 2019: Rystad Energy forecasts offshore spending will outgrow spending on onshore shale activities this year. At current oil price levels, spending on land rigs, fracking and other services for the shale industry is likely to stay essentially flat in 2019. The offshore service market, too, will feel the effects of the recent oil price slide, but this sector is nevertheless projected to grow by a robust 4% this year. (1/17)
Oil majors will spend US$208 billion on offshore drilling and other oilfield services this year, according to Rystad Energy. All in all, Rystad told Bloomberg that Big Oil would probably approve about 110 offshore projects this year, up from 96 last year and 43 in 2016. (1/14)
Seismic boost: Buoyed by the success of seismic imaging that found an extra billion barrels of oil in the Gulf of Mexico, BP is looking to take its latest technology to Angola and Brazil. The software used in the Gulf led to BP discovering the crude in an area where it had long thought there was none to be found. Industry experts said the scale of the discovery 8 km below BP’s Thunder Horse field, announced last week, marked a major leap forward for deepwater exploration. (1/18)
US natural gas prices continue their rollercoaster ride at the height of the heating season, after extreme volatility gripped the market in the fall amid more-than-a-decade low natural gas inventories ahead of the winter. Analysts believe that volatility in the natural gas market will continue to be high through the winter, as inventories below the five-year average and seasonal storage draws make natural gas prices highly vulnerable to changes in the short-term weather models and forecasts. (1/18)
VW’s EVs: Volkswagen AG announced that Chattanooga, Tenn. will be the company’s North American base for manufacturing electric vehicles based on the modular electric toolkit MEB. This expansion of Volkswagen’s US footprint will include an investment of $800 million into the Chattanooga facility and create 1,000 jobs at the plant, plus additional jobs at suppliers. EV production at the site will begin in 2022. (1/14)
EV semi-trucks: The Tesla Semi has two versions, one with a range of 300 miles and one with a range of 500 miles. The price tags are, respectively, US$150,000 and US$180,000 but CEO Elon Musk said Tesla is aiming for even higher ranges of up to 600 miles. The Semi is not yet in production. Last year, Musk said it was scheduled to begin mass production this year and no updates to this timeline have been announced. (1/18)
PG&E’s bankruptcy is likely the first climate-change bankruptcy but probably not the last. In October, its market value was $25 billion. This week, it was removed from the S&P 500 as its value tumbled below $4 billion and its shares fell to their lowest level since at least 1972. The PG&E bankruptcy could be a wake-up call for corporations, forcing them to expand how they think about climate-related risks. (1/19)
Nukes are slowing: In the United States nuclear simply can’t compete with cheap natural gas and other renewables growing more affordable all the time in the nation’s wholesale electricity markets. In fact, just within the last five years six nuclear plants in the United States have closed and almost 35% of the nuclear plants that remain are being met with the possibility of early closure or are facing retirement. (1/17)
Coal shut down momentum: More US coal-fired power plants were shut in President Donald Trump’s first two years than were retired in the whole of Barack Obama’s first term, despite the Republican’s efforts to prop up the industry to keep a campaign promise to coal-mining states. The number of US coal plants has continued to decline every year since coal capacity peaked at just over 317,400 MW in 2011, and is expected to keep falling as consumers demand power from cleaner and less expensive sources of energy. (1/14)
Germany has mined and burnt lignite for hundreds of years and has the physical scars to show for it. A government-appointed task force is set on February 1 to release a plan on ending the use of lignite, or brown coal, in a crucial decision for Germany’s energy industry and its standing in the fight against climate change. Lignite — one of the dirtiest sources of energy — accounts for almost a quarter of electricity generated in Europe’s largest economy and 20,000 jobs. (1/14)
Global spending on solar energy declined by almost a quarter last year to US$130.8 billion, mainly on the back of a regulatory policy overhaul in China that led to an oversupply of solar panels, driving prices down. This, in turn, resulted in an 8-percent slide in overall renewable energy investments to US$332 billion. (1/18)
Shell on climate targets: Clean energy solutions are not moving fast enough to meet the UN targets for curbing the effects of global warming, and alternative energies are unlikely to meet those targets without policy support, Charles Holliday, the chairman of oil supermajor Shell, said. (1/18)
Australian heatwave: An extreme heatwave has afflicted the nation since Saturday, causing wildlife deaths, bushfires and an increase in hospital admissions. (1/19)
Creative innovation: Chevron and Occidental Petroleum recently announced they will invest in Carbon Engineering Ltd., a Squamish, B.C. clean energy start-up company backed by among others, Bill Gates. Carbon Engineering has developed a process, the Direct Air Capture technology, that removes carbon dioxide directly from the atmosphere. According to the company, the facilities are industrially scalable. The second technology, Air to Fuels, aims to lower the carbon footprint of the transportation sector through the creation of synthetic fuels. This process combines clean hydrogen produced via electrolysis from water with the CO2 captured from the atmosphere to produce hydrocarbon fuels such as gasoline, diesel and Jet-A. (1/14)
Peak Oil Review: 14 January 2019
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2019-01-14/peak-oil-review-14-january-2019/
Quote of the Week
“Global automakers are planning an unprecedented level of spending to develop and procure batteries and electric vehicles over the next five to 10 years, with a significant portion of their budgets targeted at China… Automakers’ plans to spend at least $300 billion on EVs are driven largely by environmental concerns and government policy, and supported by rapid technological advances that have improved battery cost, range and charging time.”Paul Lienert and Christine Chan, Reuters
1. Oil and the Global Economy
Oil prices continued to climb last week and are now some $10 a barrel higher than they were just before Christmas when recent lows were set. Prices now have retraced about 30 percent of the $35 a barrel drop that took place between late September and late December. Part of the recent price correction likely is due to technical factors such as closing out long positions in the futures markets. The news that the Saudis will cut even more production than specified in their recent pledge in hopes of raising world prices to $80 a barrel was an important part of last week’s price jump. Hopes that the US and China would settle their trade dispute during on-going talks was also an important factor in the recent price jump.
Looming over the talk about OPEC+ production cuts and how fast US shale oil production might grow are the prospects for the global economy. A major recession could drive the demand for oil so low that even current prices would be difficult to maintain. While there have always been people convinced that a major economic crash is in the offing, in recent weeks there has been a noticeable increase in the number and stridency of these predictions.
While the US economy has been bumping along nicely in recent months, the same is not true for the other major centers of economic power – China and Europe. The Washington Post headlines that “Economic growth is slowing all around the world,” citing declines in the equity markets; sputtering German factories, and Chinese retail sales growing at their slowest pace in 15 years. Even Beijing is looking for its GDP to grow by 6-6.5 percent this year which is way off from the heady days of double digits ten years ago.
Eurozone economic forecasts fell last Monday again after a survey of economists found that GDP is expected to grow just below 1.6 percent this year, 0.4 percentage points lower than an already conservative estimate from March. A new report from the World Bank, citing a variety of data, including softening international trade and investment, ongoing trade tensions, and financial turmoil concludes that “the outlook for the global economy in 2019 has darkened.”
Among the darker forecasts for the future are those that speculate on a global depression on the scale of the 1930s where GDPs fall by 10 to 25 percent. Others are saying that the global economy may be approaching “The Limits to Growth” as discussed in the famous 1972 book.
Base scenario from The Limits to Growth, using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil.” The 2019 line is drawn based on where the world economy seems to be now, rather than on precisely where the base model would put the year 2019.
In addition to the concerns about whether economic growth can continue, there are the ever-increasing costs of climate change and the recent round of predictions that the situation is soon to get much worse.
The OPEC Production Cut: The major news from last week was the report that the Saudis, who now need $95 oil to balance their state budget, are planning to cut their oil production by up to 800,000 b/d to get prices back up into the $80s. Concerns continue about the fate of Venezuelan oil production which seems to be dwindling to insignificance taking a million b/d of crude off the global oil market.
US Shale Oil Production: Last week saw numerous stories in the financial press questioning the viability of the US shale oil industry with prices now around $50 a barrel. Rystad Energy’s analysis of preliminary data suggests that nationwide fracking activity was mostly stable from April 2018 to August 2018 at an average daily level of 48 to 50 fracked wells. However, the fracking rate has slipped since and remains between 44 and 46 from September through November 2018. “After reaching a peak in May/June 18, fracking activity in the Permian has gradually decelerated throughout the second half of 2018,” says a senior analyst at Rystad. “There is evidence that seasonal deceleration might have started in all major plays except Eagle Ford. There has been a considerable slowdown in Bakken and Niobrara in November based on our estimation.”
Some major drillers, however, are bucking the general slowdown. The largest operator, ExxonMobil, experienced a strong uptick in October. Energen Corporation is also unaffected by the slowdown. “In general, many of the key operators have exhibited a largely flat trend from June to October 2018, which implies that the market-wide deceleration in fracking activity has a more significant implication for smaller operators in contrast to the major players in the Permian.”
Virendra Chauhan of Energy Aspects told CNBC last week that “$50 oil is not a level at which US producers can generate cash flow and production growth, so we do expect a slowdown.” In a Bloomberg radio interview John Kilduff, founding partner of Again Capital Management, said “we were getting into the zone where U.S. shale producers stop making money… particularly when you sort of add in all the costs, not just the pure say drilling and extraction. It’s going to start to get tough for them right now.”
The volume of drilled but unproduced wells continues to increase across the US to record levels, but market sentiment is mixed on whether oil prices need to recover from levels now around $50 a barrel to entice fracking and production from these wells. Evercore ISI noted in its 2019 Global E&P Spending Outlook released last month that E&P operators drilled more than 15,000 wells in seven major US shale basins during the previous year but completed less than 13,000 as DUC inventory increased by nearly 30%.
Most operators consider DUC production a bargain. Roughly 30-40 percent of a well’s total cost is drilling, so paying less when it comes time to produce is an attractive prospect, especially when oil prices are lower, and they want to maximize cash flows so that lower oil prices might trigger a round of DUC.
2. The Middle East & North Africa
Iran: Iran’s crude exports dropped to 1 million b/d in November from 2.5 million b/d in April, taking exports back to where they stood during the 2012-2016 sanctions. According to three companies that track Iranian exports, Tehran’s crude shipments remained below 1 million b/d in December and are unlikely to exceed that level in January. Tracking Iranian exports has become harder since the sanctions began as ships switch off tracking systems keeping some of the shipments hidden. Tanker trackers can partially make up for this problem by using satellite photography and harbor observers to keep track of tanker movements.
Shipments for the first part of January seem to be running about 500,000 b/d but are expected to pick up towards the end of the month. If natural gas condensates are included, however, Iran is exporting about 1.35 million b/d. Tehran, however, continues to claim that its exports have not declined as much as estimated by the industry because it was selling oil to new buyers but refused to disclose them because of a fear of new sanctions.
The US will grant no more waivers for Iranian oil sanctions, the US special representative for Iran said on Saturday, underlining Washington’s intentions to choke off Tehran’s sources of income. Last year, the Trump administration granted waivers to eight countries who were already established buyers to continue buying specified amounts of Iranian oil for 180 days. Now, however, a senior Iranian energy official in Tehran recently complained that these countries are not making use of the waivers and are instead complying fully with the strict zero-oil sanctions.
According to Iran’s deputy oil minister, “China, India, Japan, South Korea and other countries that were granted waivers from America to import Iranian oil are not willing to buy even one barrel more from Iran.” Despite favorable terms, some countries are finding it too difficult to work out new ways to pay for Iran’s oil when other hassle-free sources are available.
Iraq: Baghdad posted its highest monthly export total to date in December and, combined with Kurdistan, set a nationwide annual record of 4.15 million b/d — more than 100,000 b/d above the previous record, set in December 2016. The government said on Friday it is committed to the OPEC+ output-cutting deal and would keep its oil production at 4.513 million b/d for the first half of 2019.#
Baghdad plans to raise output from its southern Majnoon oilfield to 290,000 b/d by the end of 2019 and to 450,000 b/d by the end of 2021 from a current 240,000 b/d, the director of the Basra Oil Company said on Friday. Baghdad is still aiming to increase production, especially from its southern fields.
Hyundai Engineering is now the front runner to win a tender to build a vital water injection project in southern Iraq. Basra Oil Co. began preparing to tender for the project in February of last year if talks with Exxon Mobil, which was to build the system, failed. The oil ministry received bids from three foreign contractors for the project, the oil minister said in November. A deal was reached with US’s Schlumberger Ltd to drill 40 wells at Majnoon last month. Basra Oil is also planning to activate a new offshore oil export pipeline with a capacity to transport 700,000 b/d by the end of 2019.
Saudi Arabia: According to OPEC officials, Saudi Arabia is planning to cut crude exports to around 7.1 million b/d by the end of January in hopes of lifting oil prices above $80 a barrel. This news was, in part, responsible for the increase in oil prices last week. The new plan comes as the kingdom seeks to step up its expenditures by $20 billion or 7 percent in 2019 as the country struggles to fund ambitious plans to diversify beyond petroleum products. The sharp decrease in oil prices since October and the murder of journalist Jamal Khashoggi by Saudi operatives has deterred many foreign companies from working in the kingdom and investing in its economic development plans.
In addition to efforts to force up oil prices, the Saudis are entering the bond market once again. Despite jittery market conditions, banks are lining up bonds for the Kingdom, maturing in both 2029 and 2050. The deals will be a test of the willingness among international investors to put money to work in Saudi Arabia despite concerns over the fate of Yemen and the violent death of Khashoggi.
The Dallas-based consultants DeGolyer and MacNaughton certified reserves in Saudi Aramco’s concession area, as of the end of 2017, at 263.2 billion barrels of oil, or 2.2 billion barrels higher than a previous estimate, according to a report by Saudi Gazette. Once the Kingdom’s share of a Partitioned Zone jointly owned by Saudi Arabia and Kuwait are added, Saudi Arabia’s total proven oil reserves are supposed to be 266.1 billion barrels of oil and 324.4 trillion standard cubic feet of gas.
For almost 30 years Riyadh has annually reported the same number for reserves at around 261 billion barrels, according to the BP statistical review. There is much skepticism about this unchanging number despite the involvement of the Dallas firm.
Saudi Arabia is nearing a deal to invest in US liquefied natural gas. Aramco has narrowed its focus to a shortlist of at least four US LNG projects and intends to announce a deal in the first half of this year. Companies with projects being considered include Tellurian Inc., a Houston-based LNG developer known for its intention to ship gas from its planned Driftwood terminal in Louisiana. In addition, Sempra Energy, which is developing five LNG projects in the US and Mexico, has had discussions with Aramco concerning its Port Arthur project in Texas. Aramco is considering equity stakes in the projects, the people added. It wasn’t clear what the value of the potential investments was.
Libya: Tripoli plans to pump 2.1 million b/d of crude oil by 2021 if the security situation improves, the chairman of the National Oil Corporation said last week. The plan would represent a doubling of the current rate of production, which currently stands at 953,000 b/d. That’s less than what the country produced earlier this year, prior to the latest blockade of the largest field, Sharara, which removed more than 300,000 b/d from the market. However, it’s more than what Libya pumped in the summer when violent clashes at its oil terminals crushed oil production by almost half from the 1 million b/d earlier in the year.
3. China
China plans to set a lower economic growth target of 6 to 6.5 percent in 2019 compared with last year’s goal of “around” 6.5 percent. The proposed target will be unveiled at the annual parliamentary session in March and was endorsed by the top leaders at the annual Central Economic Work Conference in mid-December, according to sources with knowledge of the meeting’s outcome. Data coming later this month is expected to show the Chinese economy grew around 6.6 percent in 2018 – the weakest since 1990.
As China’s economy loses momentum, its leaders are closely watching employment levels as factories could be forced to shed workers amid a trade war with the US. A growth rate of about 6.2 percent is needed in the next two years to meet the ruling Communist Party’s longstanding goal of doubling gross domestic product and incomes in the decade to 2020, and to turn China into a “modestly prosperous” nation.
Oil demand, car sales, and consumer confidence are strongly correlated, and as an economic indicator, vehicle sales are also one of the first to show signs of a downturn. S&P Global Platts expects China’s total car sales to grow by 4.7 percent in 2019 to 31.1 million units, comprising 25.85 million gasoline-fueled cars, 3.28 million diesel-fueled cars and 1.97 million cars running on other fuels. But it said this growth would not help gasoline demand much, as fuel efficiencies grow and Chinese consumers switch from sport utility vehicles to sedans and electric vehicles. This means China’s gasoline demand will likely grow by less than 3 percent year on year to 3.5 million b/d in 2019 and by 2.5 percent to 3.6 million b/d in 2020. Demand growth is likely to be halved to 3.2 percent in 2018, with consumption reaching 3.43 million b/d.
Environmental authorities in China said last week that Beijing and its surrounding industrial province of Hebei cut smog emissions by at least 12 percent in 2018 after a long crackdown on polluters as well as campaigns to reduce household coal use. Beijing’s local government said that the city’s emissions of small, hazardous particles known as PM2.5 fell 12 percent to 51 micrograms per cubic meter (mcg) over the whole of 2018. The government said that average emissions are still significantly higher than China’s official air quality standard of 35 micrograms. It added that 656 polluting enterprises were forced to relocate last year. Beijing’s method of measuring pollution, however, involves taking the average of the pollution readings over a wide area, thereby hiding the fact that the pollution may be many times higher than safe levels in parts of the region.
China’s population will peak in 2029 at 1.44 billion before beginning a period of “unstoppable” decline, a government report said. The study by China Academy of Social Sciences warned that the country must implement policies to handle a smaller workforce and an older population.
4. Russia
Moscow has already lowered its oil output by around 30,000 b/d compared with October volumes, which is used as the baseline under the latest OPEC/non-OPEC crude production agreement. Russian energy minister Novak said Friday: “We are gradually lowering output; our plan is that overall production in January will be 50,000 b/d less than in October.”
Russia’s production and exports of coal hit last year their highest levels since 2013, according to S&P Global Platts estimates of data from Russia’s Energy Ministry. Coal exports increased last year by 3.4 percent compared to 2017, to reach 191 million tons. Coal production also reached its highest level since 2013—at 431.76 million tons, an increase of 6 percent in 2018 compared to 2017. Moscow continues to seek domination on the European market and has been putting in a lot of effort to obtain more market shares on the Asian markets such as South Korea and Taiwan.
Norway will step up preparations to claim its share of oil and gas resources if Russia finds petroleum on its side of a border in the Barents Sea. In 2010, Norway and Russia agreed on a maritime boundary in the Barents Sea, ending a 40-year long dispute, and also agreed to share oil and gas resources spanning that border. Russia has allowed oil and gas exploration all along the border, including in the Arctic where it has already awarded exploration rights to Rosneft and Italy’s Eni. Norway currently only allows oil firms to explore in the southern part of the Barents Sea but if Russia makes any discoveries in the northern part of the sea, Norway wants a share.
5. Nigeria
Suspected militants may have renewed hostilities against oil companies operating in the Niger Delta. A group last week claimed it was behind the attack on an oil pipeline at Koluama community in the Southern Ijaw Local Government Area. The explosion reportedly damaged the pipeline belonging to Conoil.
A new report by the Secretary-General of the UN says Nigeria lost an estimated $2.8 billion in revenues in 2018, mainly due to oil-related crimes. The report, which covered from July 1, 2018, to December 31, 2018, said: “Maritime crime and piracy off the coast of West Africa continued to pose a threat to peace, security, and development in the region. There were 82 reported incidents of maritime crime and piracy in the Gulf of Guinea.” The report said that conflicts between farmers and herders resulted in a loss of lives, destruction of livelihoods and property, population displacements, human rights violations, and abuses.
Another new report that says that Nigeria’s petroleum products pipelines are in a state of disrepair and need to be fixed or replaced. The study commissioned by the Nigerian National Petroleum Corporation to determine the status of the country’s network of petroleum products pipeline was recently obtained by a local newspaper. The report indicated that the lines are mostly broken-down and would need to be replaced or fixed at the cost of $13.1 billion.
The federal government will spend over $8 million on fuel, emergency generators, and plants across its 602 ministries, departments and agencies this year. These figures do not include money voted by the agencies for payment of electricity charges during the year. Only four federal agencies have zero allocation for plants and generators. This huge figure for generators and fuel is coming at a time the Minister of Power, Works, and Housing is saying that the power supply had improved and that there was more power coming to the grid this year.
6. Venezuela
President Nicolas Maduro was inaugurated for a second term on Thursday, despite presiding over an economic meltdown of historic proportions and his status as an international pariah. The presidents of Cuba, Bolivia, and Nicaragua were among the few foreign dignitaries to attend. A coalition of 13 countries, dubbed the Lima Group, announced in early January that they would not recognize Maduro as legitimate. The Group includes Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Guyana, Honduras, Panama, Paraguay, Peru, and St. Lucia. These countries issued a joint statement that says the May 2018 reelection of Maduro “lacks legitimacy,” and they condemned “the breakdown of the constitutional order and the rule of law in Venezuela.”
Seismic research vessels hired by Exxon Mobil to explore for oil off Guyana’s coast have not returned to the site of a December incident with Venezuela’s navy, but they may do so in the future, Guyana’s foreign minister said on Thursday. Guyana, with no history of oil production, has become the focus of interest since Exxon announced the discovery of over 5 billion barrels of oil and gas off its shores. The discovery has reignited a century-old territorial dispute with neighboring Venezuela.
A new US company set up only last year is supposed help Venezuela turn around its falling oil production. According to contracts, Erepla Services will provide the drilling rigs and crews necessary to increase crude oil production at the Tia Juana, Rosa Mediano, and Ayacucho 5 fields during the next 25 years. The US company will buy all the oil produced from these fields and resell it, giving Venezuela’s PDVSA 50.1 percent of the proceeds and keeping 49.9 percent.
Erepla is part-owned by a prominent Florida Republican. The new arrangement faces significant hurdles, including obtaining an exemption from Trump administration sanctions that block US companies from providing financing to Venezuela. It is a further sign that Caracas is tapping inexperienced firms to stem massive declines in crude output as more established oil companies steer clear of the troubled country due to concerns about US sanctions and overall dysfunction.
7. Mexico
Mexico’s Army has taken control of 58 key fuel installations in the country, including refineries, upon orders by new President Lopez Obrador, who has vowed to fight corruption and fuel theft from within Pemex. Criminal groups have been tapping pipelines and stealing tanker trucks laden with diesel and gasoline in the oil-producing country for years, often operating with impunity.
Obrador unveiled his plan in late December to use of the army in fighting fuel theft from Pemex, which the President says cost the firm $3 billion last year. The government shut some pipelines at the end of December and distributed fuel by truck instead. That move led to delays in fuel arriving at petrol stations this week, with queues of motorists waiting to fill up their cars and hundreds of gasoline stations across the country had to close.
The President claimed last week, however, that the military-assisted crackdown had dramatically reduced fuel theft and had uncovered a secret pipe that was used to siphon gasoline out of one of the country’s refineries. He says fuel theft has dropped from 787 truckloads per day to 177 since the soldiers were sent to Pemex’s installations last month.
However, declining output at Pemex’s refineries is forcing the firm to rely more heavily on imported motor fuels. Pemex owns and operates six oil refineries in Mexico with a joint capacity of 1.63 million b/d of crude processing, which last year processed crude at below half capacity. Overall, Pemex’s refineries currently are producing about 200,000 b/d of gasoline according to official numbers, while another 600,000 b/d are being imported, mostly from US refiners. Meanwhile, bottlenecks for discharging imported fuel have formed at key Mexican import hubs where more than 7 million barrels of fuel wait to be unloaded according to traders and Refinitiv Eikon data.
8. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)
Global transportation demand for crude oil is expected to peak in the late 2020s due to the rise of electric vehicles (EVs), improved efficiency standards for internal combustion engine cars, and consumer preferences, Wood Mackenzie said. EVs will displace around 5 to 6 million b/d of oil demand by 2040—some 5 percent of total oil demand. (1/9)
On Europe’s inland waterways, a ban on single-hull barges carrying oil products came into force at the end of 2018 — a year that saw double-hull barges unable to navigate the shallow Upper Rhine for prolonged periods due to a severe drought, causing acute supply shortages of oil products in southwest Germany and Switzerland. (1/9)
The Trans-Adriatic Pipeline (TAP) has completed its $4.5 billion project financing, paving the way for construction to be completed. TAP, the final leg of a $40 billion project called the Southern Gas Corridor to transport gas from Central Asia to Western Europe, is a cornerstone of the European Union’s energy security policy to wean the bloc off Russian gas supplies. Start-up is expected in 2020. (1/11)
In Argentina, the Vaca Muerta has attracted $165 billion in investment commitments as companies like Chevron, ExxonMobil and Total bet on the production growth potential of Argentina’s biggest shale play, but bottlenecks are emerging that could limit a ramp-up in activity. An expert said companies must work on reducing costs over the next two to three years to show that “real money” can be generated out of the play. (1/10)
Curacao’s 335,000-b/d Isla refinery has resumed work after eight months of paralysis caused by a dispute between its operator, Venezuela’s PDVSA, and US producer ConocoPhillips. Isla restarted one of its crude distillation units and its thermal cracker. The plant suffered a fire early last year and fell idle after ConocoPhillips brought legal actions against PDVSA over a $2-billion arbitration award linked to the nationalization of Conoco’s projects in Venezuela. (1/9)
The Panama Canal Authority announced last Monday that the maximum draft for a ship transiting the Neopanamax locks would be restricted to 49 feet, or 14.94 meters, as of February 11, due to rainfall that was 90 percent below the December average. (1/8)
Alberta is looking to another solution to alleviate the crude oil glut—having a new oil refinery built in the province that would absorb part of the crude and unlock some space on congested pipelines shipping oil out of the province. (1/9)
The US oil rig count declined by four oil rigs in the week to Jan. 11, bringing the countdown to 873, Baker Hughes said. The oil rig count is still much higher than a year ago when 752 rigs were active. Drillers added 138 oil rigs in 2018 and 222 in 2017. They cut 11 rigs in 2016. Last week, gas rigs also increased by four to 202. (1/12)
Oil exports: News that the US Army Corps of Engineers has placed a $93-million order with Great Lakes Dredge & Dock Company for the deepening and widening of its ship channel at the Port of Corpus Christi broke last week. This is the first step the federal government has made to support efforts to boost crude oil exports. (1/9)
In the Gulf of Mexico, BP has approved a $1.3 billion expansion for the Atlantis Phase 3 development. The development, which includes the construction of a new subsea production system from eight new wells, will boost production at the platform by as much as 38,000 barrels of oil equivalent per day. (1/9)
The Trump administration is pursuing its plans of opening up more federal lands in Alaska to oil and gas drilling. Reuters reports the Alaska Bureau of Land Management had not canceled a scheduled public meeting on the topic on Wednesday despite the shutdown which has affected the Department of Interior. (1/11)
US gasoline prices have now fallen for 12 straight weeks, with the national average as of Monday at $2.24 per gallon, alongside reports indicating the weakest demand since February 2017. As of January 7, gas prices have dropped 20 cents from a month ago. (1/9)
Haynesville comeback: Gas production in the state of Louisiana in the southern US will soon reach record heights thanks to a resurgence of the Haynesville shale play. Rystad Energy research shows that the Haynesville Shale alone was able to add 1.85 billion cubic feet per day of gross gas production (Bcfd) between the fourth quarter of 2016 and the fourth quarter of 2017. Another 1.3 Bcfd was added last year. Study authors conclude that new all-time high gas production levels should happen within months. (1/12)
Boosting natgas productivity: A new computational model could potentially boost efficiencies and profits in natural gas production by better predicting previously hidden fracture mechanics while accurately accounting for the known amounts of gas released during the process. (1/12)
Cadillac’s EVs: GM said that Cadillac will be GM’s lead electric vehicle brand and will introduce the first model from the company’s all-new global battery electric vehicle architecture (BEV3), GM’s foundation for an advanced family of profitable EVs. The mission of the new architecture is to support a range of more than 300 miles (482 km) and to be profitable. (1/12)
RE to dominate: In the U.S., new utility-scale generating capacity will be led by wind power, which will account for 46 percent of the additions, followed by natural gas with a 34-percent share of new capacity, and solar photovoltaics, which will make up 18 percent of new electric capacity, the EIA said.
RE in Indiana: Northern Indiana Public Service concluded that phasing out coal sooner was worth it because it would move the company to what is becoming a cheaper source of power, and ultimately reduce costs for its 470,000 customers by as much as $4 billion over 30 years. The transition would require raising average rates by a proposed $11 a month starting later this year, because of higher short-term costs related to closing the plants, but the company expects the shift would reduce its overall generation costs starting in 2023. (1/10)
Saudi Arabia has made a first tangible step to generate electricity from sources other than oil and gas, awarding a contract on Thursday for the Kingdom’s first utility-scale wind farm. A consortium led by France’s EDF and Abu Dhabi’s Masdar won the tender to build a 400-megawatt US$500-million wind farm in northern Saudi Arabia. (1/11)
Damage from dams worldwide: Dam construction involves higher environmental and social costs than previously estimated. A new study from Michigan State University found that when a large dam is built, the result is a downstream loss of a great many fish species that are important to riverine populations. (1/12)
Melting permafrost: In just one human generation, citizens of the far north could find themselves on shifting soils as the region’s permafrost thaws. Roads will slump. Buildings will buckle. Pipelines will become at risk of fracture. And in 2050, around three-fourths of the people of the permafrost could watch their infrastructure collapse, as what was once hard frozen ground turns into mud. More than 4 million people live in the pan-Arctic permafrost landscape: at least 3.6 million of them, and 70% of their transportation and industrial infrastructure are at risk. (1/11)
India’s coal boom: India’s 12 major government-owned ports handled around 78.24 million tons of thermal coal between April to December period, up 17% from the same period a year ago. (1/7)
H2 break-thru? Researchers from the US Department of Energy’s Argonne National Laboratory have combined two membrane-bound protein complexes to perform a complete conversion of water molecules to hydrogen and oxygen. Sunlight-driven production of hydrogen from water provides a sustainable approach to achieve a clean, renewable alternative fuel to fossil fuels. (1/11)
H2 trains for the UK: France-based Alstom presented Monday a new hydrogen train design for the U.K. market with the aim to build a fleet that will be up and running by 2022, following its introduction in Germany in September. The new model, named Breeze, is based on a conversion of existing Class 321 trains which are conventionally powered and used for commuter service in the U.K. (1/8)
US carbon dioxide emissions rose an estimated 3.4 percent in 2018 — a jarring increase that comes as scientists say the world needs to be aggressively cutting its emissions to avoid the most devastating effects of climate change. The findings mean that the US now has a diminishing chance of meeting its pledge under the 2015 Paris climate agreement to dramatically reduce its emissions by 2025. 9 President Trump has said he plans to officially withdraw the nation from the Paris climate agreement in 2020 and has rolled back Obama-era regulations aimed at reducing the country’s carbon emissions. (1/8)
Peak Oil Review: 7 January 2019
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2019-01-07/peak-oil-review-7-january-2019/
Quote of the Week
“Shale companies have attracted huge amounts of capital from Wall Street over the past decade. So far, investors have largely lost money. Since 2008, an index of US oil and gas companies has fallen 43%, while the S&P 500 index has more than doubled in that time, including dividends. The 29 companies in the Journal’s analysis have spent $112 billion more in cash than they generated from operations in the last 10 years, according to data from FactSet, a financial-information firm.” Bradley Olson, Rebecca Elliott and Christopher M. Matthews, The Wall Street Journal (1/2/19)
1. Oil and the Global Economy
Since hitting a recent low on Dec 22nd, oil prices have climbed by $5-6 a barrel as the markets tried to sort out where supply and demand are going. With US oil prices still below $50 a barrel, it is hard to imagine that the optimistic forecasts for US shale oil production will be reached in 2019. There are continuing indications that China’s economy is headed for a dip, but there are reports that US/China trade negotiations are making progress. The US sanctions on Iran seem to be hurting Tehran’s exports, and the OPEC+ production cut is slow getting off the ground.
The US stocks report, which was delayed by two days, showed an unexpectedly large increase in US gasoline inventories last week, while crude stockpiles were unchanged. Distillate stockpiles, which include diesel and heating oil, rose by 9.5 million barrels, the greatest one-week jump since December 2016 and gasoline inventories were up by 6.9 million barrels. The surprise increase in petroleum products was the result of an unusually high refinery utilization rate of 97.2 percent which was a record for this time of year. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 641,000 barrels. Net US crude imports rose last week by 468,000 b/d, while crude production was unchanged at 11.7 million bpd.
A British firm, Apex Consulting Ltd, has released an updated report on the costs of producing oil for some of the major oil companies between 2015 and 2017 when oil prices declined significantly, and oil companies were forced to cut back on exploration and drilling for oil. Between 2011 and 2014, when the oil industry was making an all-out effort to increase production, the average cost of production for the major oil companies almost doubled from $10 a barrel to around $20. With oil selling for over $100 they did well, but costs of production got out of control as the supermajors went after ultra-deepwater, and heavy oil resources. The boom stretched the resources of the oil service companies who raised prices significantly.
Following the mid-2014 price collapse, there were numerous project cancellations and cuts in investments across the industry. As could be expected the most expensive per barrel projects went first so that the average cost fell significantly. According to Apex, its Supermajor Cost Index fell by more than 41 percent to an average of about $13 a barrel in 2017 compared to 2014. These costs are mostly for commercial oil production as little of the US’s shale oil production, which is substantially more expensive, is included in this number.
Cost of production likely increased in 2018 as the major oil companies’ capital expenditures were higher, but the sharp price drop late in the year has again confused the picture.
The OPEC Production Cut:
In December, the US imported the lowest volume of OPEC crude in five years, according to market intelligence firm Kpler. Only 1.63 million b/d of crude arrived during the months, down from 1.80 million b/d in November and 1.78 million b/d in October. Saudi Arabia shipped 534,000 b/d to the US in December, nearly a 100,000 b/d drop from November. Algeria’s shipments were also down almost 100,000 b/d, and Nigeria’s shipments to the US dipped by almost 50,000 b/d. Iraq, on the other hand, increased crude oil shipments to the United States by 140,000 b/d.
Algeria’s energy minister said last week he was confident oil prices would return to between $65 and $70 a barrel by April but stressed that the OPEC alliance would cut production further if the market had not responded by then. Many observers are skeptical that the 1.2 million b/d OPEC+ production cut will be sufficient to offset rising US shale oil production and the slowing global economy. J.P. Morgan said prior to the OPEC meeting early December, that “if OPEC didn’t really cut by more than around 1.2 million b/d, and they did so just for the first half, (not) for the full year, that we could gravitate toward … our low-oil-price scenario, which is $55 Brent for 2019.”
US Shale Oil Production: Given that US oil prices are still below $50 a barrel and that producers have started to cut back on operational drilling rigs, the EIA did not estimate that there was an increase in US oil production last week – leaving the number at 11.7 million b/d.
The major news last week was in a Wall Street Journal story with the title “Fracking’s Secret Problem – Oil Wells Aren’t Producing as Much as Forecast.” The subtitle was Data analysis reveals thousands of locations are yielding less than their owners projected to investors; ‘illusory picture’ of prospects. As three reporters were involved in producing the story, it is clearly an important one that has been well massaged by editors. Based on analysis by Rystad Energy and confirmed by two other energy consulting firms, the story concludes that “thousands of shale wells drilled in the last five years are pumping less oil and gas than their owners forecast to investors, raising questions about the strength and profitability of the fracking boom. Based on an analysis of some 16,000 wells operated by the 29 largest shale oil producers, it seems that two-thirds of the projects of how much oil would come from these wells are overly optimistic.
That sales pitches to potential investors by shale oil drillers are optimistic is not particularly news unless the estimate of how much less shale oil we can expect is specific enough to gain an insight as to where the industry will be five or ten years from now. The Journal does not want to undercut conventional wisdom that the shale oil boom is leading America to “energy independence,” so it is rather circumspect in discussing specifics. Early in the story, the Journal says that “flawed forecasting doesn’t mean US oil output is about to drop;” however, much of the story points at the conclusion that a lot of the oil that the US shale oil industry is supposed to produce in the next ten years will not be coming.
The Journal notes that Schlumberger reported in a research paper that secondary shale wells completed near older, “initial” wells in West Texas had been as much as 30 percent less productive than the initial ones. This problem threatens to undercut growth projections for the Permian Basin as the recent boom involves drilling more wells closer to the most productive ones.
Three years ago, Pioneer Natural Resources told investors that it expected wells in the Eagle Ford shale of South Texas to produce 1.3 million barrels of oil and gas apiece. Those wells now appear to be on a pace to produce about 482,000 barrels, 63 percent less than forecast, according to the Journal’s analysis. An average of Pioneer’s 2015 forecasts for wells it had recently fracked in the Permian Basin suggested they would produce about 960,000 barrels of oil and gas each. Those wells are now on track to produce about 720,000 barrels, according to the Journal’s review, 25% below Pioneer’s projections. Pioneer disputes these conclusions, noting that it assumes its wells will produce for at least 50 years. Given that most authorities say that shale oil wells are pretty well empty in five years or less, it is not clear where the 50-year lifetime is unless they are planning costly re-drilling and re-fracking.
There are other examples, but they all suggest that shale oil wells may not be able to produce enough oil at recent prices to cover the costs of land acquisition, drilling, fracking, and production. The Journal notes that the 29 companies it follows closely have spent $112 billion more in cash than they generated from operations in the last ten years. While lenders continue to finance shale oil production, equity stakes in shale oil companies have fallen from some $35 billion in 2016 to circa $6 billion last year. At some point, Wall Street may figure out that the days of $100+ oil that is needed for profitable oil production is not going to return and that the best places to drill profitable shale oil wells are all gone.
2. The Middle East & North Africa
Iran: Iran’s Parliament Research Center is predicting negative growth for Iran in the current fiscal year that ends March 20 due to its falling exports. The contraction could be as much as 5.5 percent or, with the best-case scenario, only 2.6 percent. The 5.5 percent contraction assumes that Tehran’s exports will shrink by 1.6 million b/d while the optimistic number assumes 800,000 b/d fewer exports.
Imports of Iranian crude oil by Asian buyers hit their lowest in more than five years in November according to government and ship-tracking data. China, India, Japan, and South Korea last month imported about 664,800 b/d from Iran, according to the data, down 12.7 percent from the same month a year earlier. South Korea cut imports to zero for a third month in November while Japan followed suit. India’s November imports are down about 40 percent from October. Imports are expected to be larger in December because of the sanction waivers.
The US sanctions and the ensuing waivers seem to be working. According to Iran’s deputy oil minister, “China, India, Japan, South Korea and other countries that were granted waivers from Washington to import Iranian oil are not willing to buy even one barrel more from Iran.” Always optimistic, but giving few details, the minister said “Despite US pressures on the Iranian oil market, the number of potential buyers of Iranian oil has significantly increased due to a competitive market, greed, and pursuit of more profit.”
Iraq: Baghdad posted its highest monthly export total to date in December and, combined with Kurdistan, set a nationwide annual record. The federal government and the Kurdistan Regional Government together exported a total of 4.159 million b/d last month, more than 100,000 b/d above the previous high-water mark, set in December 2016. The average sale price in December was $52.8 per barrel, generating around $6.1 billion in revenue.
Iraq says it was committed to the OPEC+ output-cutting deal and would keep its oil production at 4.513 million b/d for the first half of 2019. OPEC, Russia and other non-members, an alliance known as OPEC+, agreed in December to reduce supply by 1.2 million b/d in 2019. OPEC’s share of that cut is 800,000 b/d.
Libya: The Sharara oilfield, which was taken over on Dec. 8 by tribesmen, armed protesters, and state guards, is expected to lose 8,500 b/d to looting, state oil company NOC said on Thursday. NOC chairman Mustafa Sanalla warned on Thursday that attacks on the field could destroy the Sharara system and damage the economy.
3. China
Crude oil prices were higher last week, partly on reports that China plans to hold talks with the US this week to settle their trade balance differences. The trade war is one of the biggest reasons for heightened uncertainty around oil prices. As China is one of the world’s top importers of crude, any sign that demand for it might waver immediately puts pressure on prices.
In recent years, China has become the largest market for many consumer, luxury and durable goods, as its expanding middle class entered the consumer goods markets for the first time. Now as the economy starts to falter, oil producers, electronics makers, travel services and many other sectors are feeling the pinch. Apple is the latest company to sound the warning, attributing a sharp falloff in iPhone revenue to China’s rapidly decelerating economy. Ford and GM have reported significant sales drops for China in a slump that has hit foreign and domestic automakers alike. E-commerce is feeling the slump, cutting its revenue forecast and JD.com reporting a fall in active customer accounts.
China issued its first batch of crude oil import quotas for 2019 last week at a lower volume than for the same batch a year ago. The Ministry of Commerce granted quotas totaling 89.84 million tons to 58 companies. This is down from the 121.32 million tons in the first batch of allowances for 2018, although allocations may increase the overall volume for 2019 in a second batch of quotas later this year. Lower import quotas may signal slower growth in the demand for oil.
4. Russia
Russian oil production rose to a post-Soviet record high of 11.16 million b/d last year on an annual average basis. The total surpassed the previous record average of 10.98 million bpd set in 2017. All the Russian majors increased their oil production last month. Rosneft, the world’s largest listed oil producer by output, raised its oil production by 4.6 percent year-on-year in December, while Lukoil and Surgutneftegaz both increased their output by 2.5 percent.
5. Nigeria
On January 1, France’s Total had started up oil production from Nigeria’s ultra-deepwater oil field Egina, which is expected to produce 200,000 b/d at peak output. Oil was first discovered in the field 15 years ago. The field is located 93 miles offshore Nigeria’s coast at 5,250-feet water depth. Total Upstream Nigeria Limited operates the field with a 24 percent interest, in partnership with Nigerian National Petroleum Corporation, South Atlantic Petroleum, China’s CNOOC and Petrobras.
The Floating Production, Storage, and Offloading (FPSO) unit used to develop the field is the largest one Total has ever built. This project has also involved a record level of local contractors. Six of the eighteen modules on the FPSO were built and integrated locally, and 77% of hours spent on the project were worked locally.
Nigeria’s crude oil daily production increased last year by about 2.09 million b/d, translating to a 9 percent improvement, compared with the 2017 average daily production of 1.86 million barrels. In the last two years. the government has reached settlements with the militant groups that were blowing up oil facilities across the Niger Delta. The Egina field which is some 100 miles offshore should be much less vulnerable to militant attacks than pipelines running through the swamps.
6. Venezuela
Thirteen nations announced last Friday that they would not recognize the legitimacy of the new presidential term of Nicolás Maduro, who is set to be inaugurated this week for a second time. Diplomats from Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Guyana, Honduras, Panama, Paraguay, Peru, and St. Lucia issued a joint statement, denouncing last year’s election as flawed and urging Mr. Maduro to hand power to the opposition-controlled National Assembly until another election could be held.
Although the US is not part of the Lima Group which issued the declaration, US Secretary of State Mike Pompeo participated in Friday’s meeting by video conference and recently held meetings across Latin America which included discussions of the Venezuelan situation.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)
ICEs peaked in 2018? Sales of internal combustion engine cars in 2018 are unlikely to be surpassed in any future year, as demand in the world’s three largest markets stalls and carmakers seek to ramp up production of electric cars. (12/31)
The international rig count, excluding North America, was 991 at the end of November 2018, down 26 from the month prior but up 49 from November 2017, according to the Baker Hughes site.
Scrapping crude tankers: Companies around the world have scrapped a record number of large crude tankers in 2018. About 100 vessels of the industry’s main crude carriers have been sent to India and Bangladesh for demolition. The shipping bust is no surprise; the vessels, which transport 40 percent of the world’s crude, were on course for the worst charter rates in three decades. The implosion of charter rates was due to a two-year reduction of OPEC cargoes plus environmental regulations. The global growth slowdown has certainly not helped. (1/2)
In Mozambique, Exxon has secured long-term purchasing commitments for liquefied natural gas from its Rovuma project, moving closer to a final investment decision on a facility that will add as much as 15.2 million tons of LNG to global capacity. If approved, production would begin in 2024. (1/2)
In Ecuador, President Lenin Moreno said that a special audit into $4.9 billion worth of oil-related infrastructure investment in the last decade reveals that about half of it was lost to corruption. (1/5)
Canada’s oil rig count crashed during the last full week of December, declining by 61 rigs during the week to finish at 70 oil rigs operating. (1/1)
Canadian blame game: In Canada, the National Energy Board (NEB) said on Friday that pipeline capacity constraints were not the only thing plaguing Canada’s oil industry. It instead shifted the blame onto increased oil production in the last couple of years, saying that if its oil producers weren’t producing so much oil—which came in at 4.3 million barrels per day in September—pipeline capacity at 3.95 million b/d would not have been an issue. The NEB also cited lower demand from US refineries—a significant market for Canadian oil producers—due to maintenance season. Western Canada’s largest customer in the US, BP’s Whiting Refinery in Chicago, went offline in September, exacerbating the discount of WCS to WTI. (1/5)
The US oil rig count declined by 8 rigs last week to hit 877 while the gas rig count held steady at 198, according to Baker Hughes’ weekly report. The combined oil and gas rig count of 1,075 is still up 151 from this time last year, 135 of which is in oil rigs. Canada’s rig count rebounded, up 6 to start the year off at 76; that’s still down 98 rigs year-over-year. (1/5)
In Alaska, Italy’s Eni said Thursday it will buy the rights of all of the Oooguruk oil field in shallow waters offshore Alaska and become its operator because its proximity to the Nikaitchuq field will provide synergies. The second field that Eni will now own and operate in Alaska yields 10,000 barrels of oil equivalent per day from 25 oil wells and 15 gas/water injector wells. The additional field is only eight miles from the Nikaitchuq field it developed in 2011, which produces 18,000 barrels of oil equivalent per day. (1/4)
California imported an average 447,063 barrels of crude oil by rail over the first nine months of last year. The jump was driven by increased overall exports from New Mexico, Wyoming, and Canada, California’s three oil-by-rail suppliers. (1/5)
Refiners go light: US light oil has become too cheap for Gulf Coast refiners to pass up. Fuel makers on the Gulf, home to the largest cluster of refineries in the world, processed oil with an average API gravity of 33.06 in October–the lightest crude in 26 years thanks to a surge in domestically produced light barrels. Growing US output has sent imports to a 3-year low, as domestic barrels are cheaper than imported ones. West Texas Intermediate, the US benchmark oil, is being traded at a discount of $8.10 per barrel compared with Brent, the benchmark used to price imported oil. (1/3)
Permian flaring grows: So much gas has bubbled up from the oil wells in the area that it has overwhelmed pipelines needed to take it to market. Rather than wait for new gas pipelines to arrive, bottling up lucrative oil production in the process, energy companies are incinerating the methane. Flaring means the gas will never be used by consumers. It is also forgone revenue for energy producers and tax authorities. The pollution emitted is significant, even if carbon dioxide released in flaring traps far less heat in the atmosphere than methane gas. (1/5)
New pipeline: The Mariner East 2 natural gas liquids (NGL) pipeline extending from Eastern Ohio to the Philadelphia area is in service, owner Energy Transfer LP reported Saturday. The 350-mile pipeline transports ethane, propane and butane east from processing plants in Ohio to the company’s Marcus Hook Industrial Complex in Delaware County, Pa. (1/1)
Trump’s talent re oil prices: President Donald Trump said OPEC “is essentially a monopoly,” even as he credited his own “talent” for having brought down oil prices. “Four months ago, oil hit $83 a barrel,” Trump told reporters in the Rose Garden after meeting with Congressional leaders to try and reach a deal on the partial government shutdown. Oil “was heading to $100 and then it could have gone to $125.” Trump repeated his statement from earlier this week that his efforts made the difference in bringing down the oil price. “After I made some phone calls to OPEC…all of a sudden, it started coming down. Didn’t happen by luck, it happened through talent.” (1/5)
Oil & gas regs rollback: one area where the Trump administration has been ruthlessly effective has been in promoting the interests of the energy industry. His federal agencies have succeeded in gutting a long list of environmental regulations affecting drilling and mining companies. Two-years in and the regulatory climate for oil, gas and coal companies is a lot friendlier than it used to be. (1/3)
The partial government shutdown is increasing the chances of delays in US energy initiatives including the release of President Donald Trump’s proposed offshore drilling plan and allowing higher levels of ethanol in gasoline during summer months, energy industry groups said on Friday. (1/5)
CA on EV mileage tax: A research report submitted to the California legislature this week by the University of California, Davis’ Institute of Transportation Studies proposes switching EVs to a mileage-based road-funding fee while continuing to have gasoline-powered cars pay gasoline taxes. (1/4)
US EV sales up: During 2018, total plug-in EV sales were more than 354,000 vehicles, or 72.5% more than the 199,000 EVs sold in the US in 2017. Sales of best-selling Tesla’s three battery-powered models were reported January 3 by InsideEVs to have totaled just over 191,000 vehicles in 2018, compared with just over 50,000 in 2017. The Edison Electric Institute said the transition to electric vehicles is well underway with more than 1 million EVs on US roads as of October 2018. (1/4)
Norway’s EV push: Almost a third of new cars sold in Norway last year were pure electric, a new world record as the country strives to end sales of fossil-fueled vehicles by 2025. (1/3)
Tesla going to China: In a sign that Tesla is preparing to start construction of its first factory in China, Elon Musk said on Monday that he would be visiting China soon for the groundbreaking ceremony. Tesla’s China factory in Shanghai will be its first production facility outside the US (1/2)
Biofuels innovation: a new discovery by a team of scientists based in the west Indian city of Pune at the National Chemical Laboratory offers a quicker, eco-friendly technique for converting industrial biomass into biodiesel. (1/3)
CA planning for H2: The California Energy Commission and California Air Resources Board have released a joint report on the planning, design, development, and deployment of hydrogen refueling stations critical to supporting the adoption of fuel cell electric vehicles. (1/3)
China doing H2: the hilly city of Yun Fu in China’s southern Guangdong province decided in 2009 to lop the top off the surrounding hills and build a 13.4 sq. km industrial park focused on fuel cells — a rival technology to internal combustion engines and electric batteries. A whole suite of companies covering the supply chain have now set up in the park, which is producing hundreds of buses and small trucks using fuel cells that run on hydrogen gas. So successful has it been that local officials now plan to flatten two more hills to create a neighboring vehicle manufacturing plant and a chemicals facility. (1/2)
Indian state-run Coal India Limited said Tuesday that output over April-December rose 7.4 percent year on year to 412.45 million tons. (1/2)
India pushes RE: Indian power companies spent much of the past decade rushing to build coal-fired power plants in anticipation of surging electricity demand as economic growth took off. Now, many of those projects are mired in deep financial distress and private investment in coal power has ground to a near halt. The biggest driver of long-term uncertainty for the industry is one that few anticipated 10 years ago: an explosive take-off in the renewable power sector, as India joins the global push to tackle climate change by shifting towards green energy. (1/1)
Assaults in AZ on driverless cars: A Waymo autonomous vehicle, while idling recently in Chandler, Ariz., was attacked by an assailant who slashed its tires. Some 21 attacks have been carried on driverless cars by some disgruntled residents in Chandler who object to the technology and the field testing in their town. Most residents and officials welcome the tests. (1/1)
ZEV push: The California Air Resources Board will conduct a public hearing 21 February to consider approving for adoption a proposed Zero-Emission Airport Shuttle regulation. The regulation as currently written would require fixed route airport shuttles, that serve California’s 13 largest airports, to transition to 100% ZEVs by 2035. (1/1)
Peak Oil Review 2 January 2019
By Tom Whipple, Steve Andrews, originally published by Peak-Oil.org
https://www.resilience.org/stories/2019-01-02/peak-oil-review-2-january-2019/
Quote of the Week
“Some geologists harbor doubts about ANWR’s prospective resources. ‘I don’t see (in the refuge’s geology) what I hear in the political talk,’ about the refuge’s potential, said Richard Garrard, an Alaskan-based exploration geologist. said. Geologically, the region is an extension of the Brooks Range, which is to the south. ‘How many oil fields have been discovered in the Brooks Range? None.’”
1. Oil and the Global Economy
It was a volatile week for oil prices with WTI falling on Monday to nearly $42 a barrel and London falling to $51. Oil surged on Wednesday, after posting on Christmas day its strongest daily gain in more than two years from the steep losses on Monday that pushed crude benchmarks to lows not seen since 2017. Both US and Brent crude rose about 8 percent, their largest one-day increase since Nov. 30, 2016, when OPEC signed a landmark agreement to cut production. The week closed out with oil at $45.33 a barrel in New York and $53.21 in London.
By Friday, oil was selling for some $8-10 a barrel lower than where it had been trading in the first weeks of December. The decline was motivated by a sharp drop in global equities which in turn was caused by concerns over economic growth next year and the US government shutdown. US shale oil production continues to surge while the Iranian sanctions and the OPEC+ production cuts will take several months to become fully effective.
The EIA’s weekly stocks report, which was delayed until Friday due to the Christmas holiday, showed almost no change in US petroleum stocks as rising production just balanced an increase in exports. Analysts surveyed by S&P Global Platts on Wednesday expected a 1.4 million-barrel decline, while the American Petroleum Institute on Thursday called for a 6.9 million-barrel build. Crude inventories along the Gulf Coast declined by 2.46 million barrels as US exports increased by 644,000 b/d to 2.97 b/d. Stocks at the Cushing, Oklahoma, storage depot grew by 799,000 barrels to a 49-week high at 41.3 million barrels.
Despite the surge in US exports two weeks ago, US crude exports to Europe fell to an 11-month low this month as a shrinking discount and rising shipping costs cut the demand for US oil. Only 17 tankers carrying about 298,000 b/d departed from Texas and Louisiana for European ports this month, the fewest since last January. This is down from 404,000 b/d last month. The spread between US crude and Brent has narrowed from above $10 per barrel in November to $6.63 on Friday, the smallest discount for US crude since early August.
Most major investment banks are forecasting a rebound in oil prices in 2019. However, forecasts vary widely. Bank of America Merrill Lynch, for instance, sees WTI averaging $59 per barrel in 2019; Citi is at the bearish end with a forecast of oil averaging $49 per barrel; and Barclays, along with half a dozen others, says the WTI benchmark will average around $72 next year.
The OPEC Production Cut: The continued decline in oil prices this month has raised concerns among oil exporters who had been expecting that their announcement of a 1.2 million b/d production cut would send prices higher. Implementation of the production cut, however, has been somewhat lackadaisical, with exemptions for several members, and Moscow is waiting until spring before fully lowering its. Now we are told that OPEC and allied oil producers are ready to hold an extraordinary meeting and will do what is needed if the current cut in oil output by 1.2 million b/d does not balance the market next year.
The United Arab Emirates’ energy minister said last week “If we are required to extend for (another) six months, we will do it … I can assure you an extension will not be a problem.” Saudi Arabia’s OPEC governor, Adeeb Al-Aama, said his country is fully committed to the reduction agreement, adding that Saudi production in January was seen at 10.2 million b/d, lower than its output target of 10.3 million b/d under the recent pact. The kingdom has over-committed with previous cuts, reducing by more than its share and reaching compliance of 120 percent from January 2017 until May 2018, Al-Aama said.
OPEC and Russia-led non-OPEC oil producers are unlikely to create a formal joint organization for managing the oil market, Russia’s Energy Minister Novak said last Thursday. Although Russia and OPEC have been touting the idea of “institutionalizing” their cooperation in the oil market by forming some kind of organization, Novak said the idea had now been discarded.
“There is a consensus that there will be no such organization. That’s because it requires additional bureaucratic brouhaha in relation to financing with the US side,” Reuters quoted Novak as saying at a briefing with reporters. Russia has been concerned with the possibility that the US could pass the so-called No Oil Producing and Exporting Cartels (NOPEC) Act that could pave the way to antitrust lawsuits in the US against the cartel and its national oil companies. According to analysts, the possibility of a NOPEC Act has been a big concern for OPEC members lately as it could damage their relations with the US and result in sanctions similar to those imposed on Iran.
In addition to NOPEC, the cartel is facing several other problems in the coming year. Its rotating presidency is due to fall to Venezuela who will send a general with zero oil industry experience to lead the cartel. The alliance with Russia means that any effective policy will require that Moscow be on board indicating that the Saudis and their allies are no longer in complete control. The continuing growth of US shale oil production in the coming year suggests that the US alone could nullify much of an OPEC+ production cut. Oil traders are becoming apathetic to announcements from OPEC as to what the cartel plans to do. In the past, a leak or hint from an OPEC official was enough to send oil prices off in the desired direction. In today’s world, this is no longer true.
US Shale Oil Production: The shale oil industry has a fan in Fatih Birol, the Executive Director of the International Energy Agency (IEA). Birol told the Turkish news agency last week that total US oil production around 2025 will almost equal the combined production of Russia and Saudi Arabia or some 20 million+ b/d. US production is seen growing by 3.7 million b/d by 2023, more than half of the total global production capacity growth of 6.4 million b/d expected by then. Total liquids production in the United States—including conventional oil, shale, and natural gas liquids—will reach nearly 17 million b/d by 2023, “easily making it the top global producer, and nearly matching the level of its domestic products demand,” the IEA said in March this year. The US’s EIA sees US crude oil production averaging 10.9 million b/d this year, jumping from 9.4 million b/d in 2017. The forecast for next year’s US crude oil production currently stands at 12.1 million b/d. These forecasts were made before the recent price drop which makes much of the US shale oil industry unprofitable and cast doubts on some of the more optimistic forecasts.
The financial model that has dominated the US shale oil industry has been that of exploration and production companies using debt raised from bond markets and bank loans secured on oil and gas reserves. Often, they use derivatives to hedge some or all of their revenues, giving lenders confidence in their ability to make interest payments if oil and gas prices fall. For most of the shale boom, that financial infrastructure has been underpinned by the low-interest rates and quantitative easing that followed the financial crisis.
As its output has grown, the industry has been unable to finance its drilling programs from its operating cash flows, and a constant inflow of capital has been essential for keeping it afloat. Now, with stock markets and oil prices falling, and while the Federal Reserve is still signaling its intention to keep raising interest rates, the financial conditions that have kept the shale industry afloat may be evaporating.
It is standard practice in the shale oil industry for companies to put a floor under the effective price of some or all of their production by buying put options. The investment banks and others that sold those put options have to hedge their own positions, typically by selling oil futures. The more likely it is that the options will be exercised, the more oil the finance companies have to sell, in a practice known as “delta hedging.” That creates a positive feedback loop: as prices fall, financial companies that have sold puts need to sell more oil, which drives the price down further. Once oil prices started to fall, because of the US administration’s decision to ease off on blocking exports of Iranian oil, and concerns about global growth, the delta hedging effect turned falling prices into a rout.
While prices may be bottoming out, it may become more difficult for shale oil companies to hedge their output and borrow money in the coming year. All this seems to imply that the growth foreseen by the IEA and the EIA may not be as robust as forecast.
A discussion has begun on the recent US Geological Society (USGS) report stating there are an estimated 46.3 billion barrels of theoretical, technically recoverable, as yet undiscovered shale oil in various sections of the Permian Basin. Texas geologist, Art Berman, reviewed the study in detail and found that the USGS itself estimates it will take 318,000 wells to recover this oil, costing over $3.0 trillion.
The US shale oil industry has drilled almost 70,000 wells the past decade across the US and is fast exhausting its sweet spots in the major shale oil basins. It has recovered a little less than 10 billion barrels of oil so far and is somewhere around $300 billion in long-term debt. There seems to be a good reason to be skeptical about this assessment.
2. The Middle East & North Africa
Iran: Iran’s proposed state budget for the coming year points to a 3.7 percent decline in revenues, as US sanctions continue to cut oil revenues. Expectations of lower oil exports as a result of Mr. Trump’s moves prompted the IMF to predict a shrinkage of 3.6 percent in Iran’s economy next year. Expectations of lower oil exports as a result of the US sanctions led the IMF to predict shrinkage of 3.6 percent in Iran’s economy next year. President Rouhani said in a televised speech, “No one can say sanctions don’t inflict a negative impact on the country’s economy and people’s lives, but no one can say that the US will achieve its objectives either. The US will definitely fail.”
Iran began selling crude oil to private companies for export in late October, just before the US sanctions came into effect. “Those who bought oil on the bourse have been able to export, and there have been no problems in this regard,” according to Oil Minister Zanganeh.
Syria/Iraq: Before the war, Syria produced 387,000 b/d of which 140,000 b/d were exported. Most of this oil came from Eastern Syria, which is now under the control of the U.S.-backed SDF. Government forces have regained control over much of Syria with the aid of Russian air support and Iranian ground forces. Only Idlib and the territories east of the Euphrates river remain out of the hands of President Assad’s regime. With the US planning an imminent withdrawal from Syria, things could soon shift again.
Iraq is making progress in negotiations with ExxonMobil and the China National Petroleum Corp for a multi-billion-dollar deal that is key to expanding the country’s oil production and export capacity. Talks over the “Southern Iraq Integrated Project” have been ongoing since at least 2015, but for the first time, officials on both sides are expressing optimism that a contract will be signed in 2019.
Iraq is willing to extend the OPEC+ oil production cut agreement in April, oil minister Thamir Ghadhban said on Sunday. Ghadhban said he agreed with the Saudi oil minister’s expectation that the decision would be renewed.
Exports from Iraq’s northern Kirkuk oilfields to the Turkish port of Ceyhan will stay at between 80-90,000 b/d as most of the crude produced is being diverted to refineries in the north, Iraq’s oil minister said last week. Current production at the Kirkuk oilfields is around 370,000 b/d. BP’s technical team is now in Kirkuk and is preparing a study for increasing production by the end of 2019.
Saudi Arabia: King Salman shook up the kingdom’s cabinet on Thursday, naming new ministers and security chiefs but keeping the levers of power firmly in the hands of his son and designated heir, Prince Mohammed bin Salman. Saudi officials didn’t respond to requests for comment. The moves show that the Saudi monarchy is rallying behind Prince Mohammed despite the widespread international criticism that followed the killing of journalist Jamal Khashoggi.
The recent drop in oil prices could have serious consequences for the Kingdom. After the decision in late 2014 to ramp up production in the midst of an oil supply glut mostly due to increased US shale oil production, prices dipped below the economically damaging $30 per barrel. The results were cataclysmic, with problems ranging from historically high budget deficits to being forced to institute politically unpopular austerity measures and holding its first international bond sale to raise funds. Whether the OPEC+ production cut will be enough to make the Riyadh solvent again remains to be seen.
China’s crude imports from Saudi Arabia rose to 1.596 million b/d in November, making the Saudis China’s largest crude supplier. Russia was in second place, supplying 1.593 million b/d of crude to China last month.
Libya: Despite crude output recently hitting a five-year high of 1.15 million b/d and expectations that production could average just over 1 million b/d next year, the critical risk of civil conflict is unlikely to fall anytime soon. Areas like the southwest of the country where the Sharara and El Feel oil fields are located remain particularly prone to outages caused by chronic fuel shortages and security problems. Last week, suicide attackers hit the headquarters of Libya’s foreign ministry in Tripoli, opening fire before blowing themselves up after killing three people and wounding six. (The health ministry confirmed one dead and nine wounded.) The three attackers were suspected to be Islamic State militants.
Libya’s National Oil Corporation chairman Mustafa Sanalla and the country’s internationally recognized Prime Minister Fayez al-Sarraj agreed last week to a new security plan to protect El Sharara oilfield, which is still closed. The plan includes establishing green zones inside the oil facilities to prevent anyone from entering without a permit. Until Libya can establish a national government with enough military power to control the numerous well-armed militias and “security guards” that have been running rampant since the end of the Gadhafi regime, these plans are likely to be ineffective, and oil production will continue to see a series of ups and downs.
3. China
Profits fell at China’s industrial concerns for the first time in nearly three years last month, the latest sign of an economic slowdown from weak consumption and lower infrastructure investment. Beijing announced last week its intention to enact new fiscal and monetary stimulus measures, in a bid to mitigate a weakening economy and the US threat to raise tariffs on $200 billion worth of exported goods to 25 percent. One Chinese economist noted that the trend toward slower credit growth would probably result in further deterioration of corporate profitability and economic fundamentals.
The slump in car sales is leaving China’s foreign automobile makers with idle factories. At a Ford plant, workers’ shifts have been reduced to a few days a month, according to employees. In recent years, China became the world’s biggest motor vehicle market, with sales often growing by double digits; in 2016, auto sales grew 14 percent to 28 million, eclipsing the US’s 17.5 million sales. Global automakers rushed in, despite rules requiring them to take on Chinese partners. Domestic auto companies proliferated, too, building plants of their own. China now has enough factories to build 43 million cars but will produce fewer than 29 million this year, according to consulting firm PwC.
Electric vehicles may make the situation worse. A government plan to make China the world leader in EVs is opening up floodgates of financing for domestic companies. At least 32 new car plants with a combined yearly capacity of more than 7.5 million vehicles—mostly electric—are in the pipeline, according to announcements made by 26 firms.
Chinese LNG imports soared by 48.5 percent in November 2018, compared to the same month last year, as China continues to have parts of the country switch to natural gas from coal for heating. LNG imports into China in the first eleven months of this year jumped by 43.6 percent compared to January-November 2017, to 47.52 million tons and on course to easily beat the full-year LNG import record of 38.13 million tons from 2017.
4. Russia
The state budget has received an additional $120 billion since Moscow’s cooperation deal with OPEC started two years ago, Russian Energy Minister Alexander Novak said last week. Discussing the initial and the latest deals between OPEC and the cartel’s Russia-led non-OPEC partners, Novak noted that although the specific price of oil is not as important for Russian companies as it is for other countries, low oil prices create additional challenges for Russia’s state budget.
One of the key reasons for Moscow’s relative immunity to higher oil prices is that the Russian currency is flexible, so it weakens when oil prices fall. That cushions the blow during a downturn, allowing Russian oil companies to pay expenses in weaker rubles while still taking in US dollars for oil sales. Second, tax payments for Russian oil companies are structured in such a way that their tax burden is lighter with lower oil prices.
Energy Minister Alexander Novak said on Tuesday that oil prices, which fell by more than a third this quarter, would become more stable in the first half of 2019. “I think that during the first half, due to joint efforts, which were confirmed by the OPEC and non-OPEC countries this December, the situation will be more stable, more balanced,”
5. Venezuela
Offshore oil discoveries since 2015 by an Exxon-led consortium, accounting for 5 billion barrels of crude, have turned Guyana into one of the Latin America’s hottest oil frontiers. However, the discovery of oil in Guyanese waters has resurfaced a century-old border controversy stemming from Venezuela’s claims of two-thirds of Guyana’s territory. Although the claims were settled years ago by an international court, the Maduro government seems intent on getting a share of the new oil finds.
A seismic-survey vessel owned by Norway’s Petroleum Geo-Services, and bearing a Bahamian flag, was stopped by a Venezuelan Navy ship in Guyanese waters, about 90 miles from a provisional border and told that they had no authorization to work in the area and that their permit from the Guyanese government was invalid in waters claimed by Caracas. The work of the vessel was briefly halted, but on Wednesday Exxon said its oil drilling and development activities offshore Guyana were unaffected by the weekend incident.
In exchange for modest loans and bailouts over the past decade, Russia now owns significant parts of at least five oil fields in Venezuela, which holds the world’s largest oil reserves, along with 30 years’ worth of future output from two Caribbean natural-gas fields. Venezuela also has signed over 49.9 percent of Citgo, its wholly owned company in the United States — including three Gulf Coast refineries and a countrywide web of pipelines — as collateral to Russia’s state-owned Rosneft for a reported $1.5 billion in desperately needed cash. Russian advisers are working inside the Venezuelan government, helping direct the course of President Nicolás Maduro’s attempts to escape from bankruptcy.
However, Venezuela may well turn out to be a money-loser for Russia. The IMF estimates that inflation could surpass 1 million percent by the end of 2018 and that its economy will suffer a third straight year of double-digit decline in gross domestic product. Oil production continues to fall.
6. The Briefs(selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)
World LNG growth: Uncontracted demand by the world’s seven largest liquefied natural gas buyers could increase four-fold to 80 million tons per annum by 2030, according to Wood Mackenzie. As China pushes on towards a lower-emission economy, its demand for gas and LNG has grown significantly; that trend should continue. (12/29)
Asian LNG boom: Since the start of December, LNG imports into China, Taiwan, Japan, and South Korea have reached 20.5 million tons, breaking the previous record of 19.5 million tons, set last January. Cold weather and China’s consistent gasification efforts drove the increase. (12/28)
In Australia, Royal Dutch Shell said on Wednesday it has begun output at its Prelude floating liquefied natural gas facility, the world’s largest floating production structure and the last of a wave of eight LNG projects built in the country over the last decade. Though the project started up later and cost more than originally estimated, it is expected to further cement Australia’s lead as the world’s biggest LNG exporter, after the country took the crown in November. (Dec 26)
Offshore Senegal and Mauritania, BP has made a final investment decision to move ahead with the first phase of the project to develop the Greater Tortue Ahmeyim gas field located in the shared ultradeep waters. The project involves extraction of the gas by a floating production storage platform that will ship the fuel to a floating liquefied natural gas facility near the shores of the Mauritania and Senegal maritime border. (12/25)
In Ghana, sixteen oil and gas firms have submitted applications for one or more of five offshore blocks in the West African country’s first exploration licensing round. The interest is a major vote of confidence in Ghana, which is keen to unlock more resources after it began pumping from its flagship offshore Jubilee field in 2010. (12/25)
Shell Argentina, which two months ago sold a refinery and fuel stations, said Thursday it will move to develop unconventional oil fields in the Vaca Muerta basin, aiming at 70,000 barrels of oil equivalent per day by 2025. The first phase of development will consist of drilling and infrastructure expansion to increase production and processing capacity. Argentina’s state-run YPF will also be investing as much as $30 billion over the next four years, with stated expectations of increasing daily production by 5 percent a year. (12/28)
In Mexico, the downward trend in output from Pemex continued in November as oil and gas production fell 2.7 percent and 2.3 percent respectively, from the previous month. November oil production fell by 47,500 b/d month on month to 1.71 million b/d. Year on year, production fell by 150,000 b/d. This was the lowest production level since 1980. (12/27)
Solving Canada’s conundrum: As the US oil industry reels from the collapsing oil prices, Canada’s oil business is seeing its oil prices rallying. How can that be? It is the result of strong political intervention in Alberta’s oil business in an attempt to save it from devastation. When the oil price differential between Western Canadian Select and West Texas Intermediate swelled to $52 a barrel in November, the impending devastation of the Canadian oil industry demanded swift and decisive action. Following an OPEC-like production cut, the oil price differential has shrunk to only $16.60 a barrel, in line with what existed last spring.
Between 2016 and 2018, Canada’s oil production grew by nearly 800,000 barrels a day, a 20 percent increase. The increased output, especially this year, contributed to ballooning of oil storage volumes. Today, Canada has roughly 35 million barrels of oil in storage, twice the normal volume. Without more export egress, Canadian wellhead prices fell as US shale oil output soared, cutting the need for more Canadian oil.
In May, Canada’s WSC sold at a $17.25 a barrel discount to WTI. By September, the differential had expanded to over $30.50, and in November it averaged $39.25. At times, the differential reached $52 a barrel, as wellhead prices fell to $11 a barrel. The Canadian Association of Petroleum Producers estimates that cost the Canadian economy $13 billion for the first 10 months of 2018. Daily cost estimates for the industry ranged upwards of $80 million a day – cash flow critical to the operation of companies and the health of the entire Canadian oil business. When oil prices failed to react to announcements about expanding rail movement of oil, Alberta Premier Rachel Notley embraced an 8.7 percent mandated production cut for the province’s producers. Oil prices soared in response, even though the cuts are not effective until January 1, 2019.
Western Canada is producing 365,000 b/d more crude oil than current pipeline capacity can handle, National Energy Board reported. As of September this year, Western Canada produced a daily average of 4.30 million barrels of crude, while pipeline capacity stood at 3.95 million barrels per day. Alberta, the largest oil producer in Canada, has turned to oil trains to offset the pipeline capacity shortage. (12/29)
The Canadian oil industry could be in for another turbulent year in 2019, depending on how some pivotal events pan out. Government-mandated production cuts and the potential startup of a key crude pipeline during the fourth quarter are among key developments to watch for next year. (12/28)
Canada’s oil and gas rigs for the week decreased by 61 rigs this week after losing over 50 rigs in the two weeks prior. Canada’s total oil and gas rig count is now just 70, which is 66 fewer rigs than this time last year, with a 43-rig decrease for oil rigs, and a 18-rig decrease for gas rigs for the week as Canada’s oil patch gears up for winter season. (12/29)
The US oil rig count grew by two to 885 while the gas rig count increased by one to 198, Baker Hughes reported. For the month the rig count fell by two, its first decline in six months. But for the quarter, the count was up 22, the fourth increase in a row. For the year the count was up 138. That compares with an increase of 222 rigs in 2017 and a decline of 11 rigs in 2016. (12/29)
Alaska’s upstream oil industry expects a surge in exploration and development in 2019 as companies drill to delineate new North Slope and National Petroleum Reserve-Alaska discoveries. But some are concerned that high-profile federal initiatives, like exploration in the Arctic National Wildlife Refuge and the opening of prospective parts of NPR-A, could get bogged down by increased opposition as Democrats gain a majority in the US House of Representatives. Alaska oil production is expected to increase in 2019 (to 529,000 b/d) and 2020 to (533,000 b/d) thanks to new North Slope oil discoveries being brought online, up from 505,000 this year. (12/29)
US LNG exports vs. imports: The US may be exporting natural gas at a record clip, but that hasn’t stopped it from accepting new imports. A tanker with fuel from Nigeria has berthed at Maryland’s Cove Point import terminal, while a second ship with Russian gas is idling outside Boston Harbor. Pipeline constraints, depleted stockpiles and a 98-year-old law barring foreign ships from moving goods between US ports is opening the way for liquefied natural gas to be shipped from overseas with prices expected to spike as the East Coast winter sets in. (12/29)
Free natgas? Shale drillers in the Permian Basin are producing vast amounts of natural gas as a byproduct of prospecting for oil. But there aren’t enough pipelines to take all the gas to market, causing some of it to become landlocked, and sending local prices into free fall. Gas prices in parts of the prolific region hovered near zero last month and some trades went negative, to as low as a negative 25 cents per million British thermal units. (12/27)
When refiners can make significant sums selling diesel and heating oil (distillates), they become less sensitive to the profitability of each barrel of gasoline, which typically accounts for about half of US oil use. Today, refiners are generating plenty of distillate and storing the gasoline. As a result, US gasoline inventories have climbed about 3 percent above their five-year seasonal average. If the gasoline overhang gets too large, it could push refiners to cut back on processing rates, reducing a key element of demand for crude and likely further weighing on US oil prices that have already fallen about 40 percent since early October. (12/24)
Exxon Mobil Corp., its stock price down about 20 percent for the year, is headed for its worst annual performance since 1981, when the U.S was in recession and a 20-year crude glut was just beginning. The decline comes as Exxon pursues one of the largest restructurings in its modern history, a seven-year, $200 billion push for oil in South America and natural gas in Mozambique and Papua New Guinea. (12/28)
Peak car? It is quite possible that we have reached Peak Car in North America and Europe. Companies that want to succeed in this new environment will need to be different, and especially better in some way. If car volumes drop by 30 per cent over the next 10 years, there better be something special about the car company that hopes to survive, let alone prosper —like better technology, better comfort or better service. (12/26)
US generation: Coal made up 29.6 percent of US electricity generation during the month, up from 27.1 percent in September and 28 percent last year. Natural gas made up 38.1 percent of US power generation in October, down from 40 percent in the previous month and 33.4 percent last year. Total US generation at utility-scale facilities was up 3.3 percent from the five-year average for the month, while year-to-date generation is up 4.3 percent compared with last year. Wind made up 6.5 percent of total US power generation in October, down 14.8 percent from last year, while utility-scale and distributed solar made up 2.3 percent of US generation, up from 2.1 percent last year. (12/27)
CO2 emissions from the US electric power sector have declined 28 percent since 2005 because of slower electricity demand growth and changes in the mix of fuels used to generate electricity, according to the US Energy Information Administration. EIA calculated that CO2 emissions from the electric power sector totaled 1,744 million metric tons in 2017, the lowest level since 1987. (12/24)
Weekly US coal production totaled 15.9 million tons in the week ended December 22, reaching the 2018 peak in weekly production unless the final week of the year tallies higher, data from the US EIA showed Thursday. (12/28)
Easing coal rules: The Trump administration announced on Friday a plan designed to make it easier for coal-fired power plants to release into the atmosphere more mercury and other pollutants linked to developmental disorders and respiratory illnesses. The limits on mercury, set in 2011, were the first federal standards to restrict some of the most hazardous pollutants emitted by coal plants and were considered one of former President Barack Obama’s signature environmental achievements. The vast majority of utility companies have said the proposed changes are now of little benefit to them, because they have already spent the billions of dollars needed to come into compliance and have urged the Trump administration to leave the mercury measure in place. (12/29)
Air pollution hits children hard: Researchers at Columbia University, with colleagues at Boston University and Abt Associates, have identified concentration-response (C-R) functions for a number of adverse health outcomes in children associated with air pollutants largely from fossil fuel combustion. The study organized the available scientific evidence on the effects of air pollution on children’s health. The paper is the first comprehensive review of the associations between various fossil fuel combustion pollutants and multiple health effects in children in the context of assessing the benefits of air pollution and climate change policies. (12/26)
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WARNING: The Coming Food Crisis | Be Ready 2019
Are you ready for the collapse of the agricultural system? In this video I go over all of the factors which threaten the global food supply. Consumerism, overpopulation, urbanization, pollution, biodiversity, monoculture, farming practices, water shortages, herbicides, pesticides, fungicides, overfishing, geopolitics, bee extinction, monopoly (big agri), genetically modified food, global warming, soil erosion, land loss. drought, are just some of the many challenges to our way of life. GET READY.
WARNING: The Coming Food Crisis | Be Ready 2019
Are you ready for the collapse of the agricultural system? In this video I go over all of the factors which threaten the global food supply. Consumerism, overpopulation, urbanization, pollution, biodiversity, monoculture, farming practices, water shortages, herbicides, pesticides, fungicides, overfishing, geopolitics, bee extinction, monopoly (big agri), genetically modified food, global warming, soil erosion, land loss. drought, are just some of the many challenges to our way of life. GET READY.