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How to Plant a Perennial Food Garden – 20 Fruits & Veggies That Will Keep Coming Back Year After Year
https://www.naturallivingideas.com/perennial-food-garden/
11 Time Wasting Things You Are Doing In The Garden That You Should Stop Right Now
https://www.naturallivingideas.com/11-time-wasting-things-you-are-doing-in-the-garden/
20 Convincing Reasons To Keep Backyard Chickens
https://www.naturallivingideas.com/20-convincing-reasons-to-keep-backyard-chickens/
12 Compelling Reasons To Grow Chives + How To Use Them
https://www.naturallivingideas.com/grow-chives/
Breed the Best Tomatoes
Mother Nature will do most of the work for you.
Kristen Davenport
July/August 2008
https://www.grit.com/farm-and-garden/breed-the-best-tomatoes
A garden full of tomatoes can be beautiful.
iStockphoto.com/Jerry Horbert
Ripe romas are ready for eating right from the vine.
iStockphoto.com/Vincent Voigt
Blooms catch the sunlight.
iStockphoto.com/dirkr
Tending seedlings is an important first step when growing tomatoes, and labeling’s a good idea when you raise more than one variety.
iStockphoto.com/Eric Naud
When I finally moved to the country about 10 years ago, I had only one thing in mind: I wanted to grow a gigantic garden. After years of city living, where I was forced to cram fields of corn and squash into small backyard beds and limited (mournfully) to only a handful of tomato plants, I was eager to expand.
Like many people who grow vegetables, I was lured into the garden by the desire for homegrown tomatoes. I was raised in a hot little Southwestern town where my mom cultivated tomatoes in raised beds. One of my favorite childhood memories is heading out to the backyard on a summer afternoon, plopping down on the ground and eating just-picked tomatoes – still warm from the August sun.
As I started my vegetable garden that first year in the country, I dreamt of re-creating that experience. We are located high in the Rocky Mountains with rich soil, plenty of water and room enough for a huge garden. I decided to start my own tomato plants from seeds. I didn’t just want your basic Big Boy from a Big Nursery. I wanted heirloom tomatoes. I wanted 50 of them. A hundred, maybe.
I had a little sunroom attached to the house, the perfect place to start tomatoes. I spent all of March and April tending the seedlings, gently potting them up to bigger sizes, religiously feeding them kelp, even singing them little botanical hymns. By the time late May rolled around, I had several dozen Brandywines, Cherokee Purples and Boxcar Willies. I was thrilled.
I was eager to get them out into the ground, but in our high-country climate, we worry about late spring frosts. I waited patiently. Finally, on May 21, with some fanfare, I planted them in the garden – rows and rows of fancy tomatoes, with a couple handfuls of organic fertilizer carefully tossed in each hole.
And, on June 14, a freak frost came along. My sweet little tomato plants froze and died. Every last one of them.
But I am a persistent person, and so, after a period of mourning, I took some remaining tomato plants that I had planned to give to a friend, and I planted them on June 16. These plants survived, and even grew to be rather large, but when the first frost came in September, here’s what I had:
Zero tomatoes. Not a single fruit.
Not even a green one.
Thus began my education in the art?– not science – of growing tomatoes. And thus began my effort to find a tomato that would not just grow, but set fruit and ripen, at 8,000 feet in the Rocky Mountains.
Why bother?
Here’s a hint: The tomatoes that you find in the grocery store are really yucky. Oh, sure, in deep February, even I, a confirmed tomato snob, will go to the supermarket and buy tomatoes for salsa or salad. But these are not really tomatoes. These are … well, tomato-like fruits.
They bear no comparison to a fresh, ripe-on-the-vine, homegrown tomato?– especially if you eat it when it’s still warm from the sun.
The kind you get in the grocery store are hybrid tomatoes bred to look ripe even when they aren’t – because it might take a week or more from farm to table, growers need a tomato that looks red but remains firm like a green tomato. They’ve been bred so they are all precisely the same size to fit in plastic packaging. Producers have even bred a square tomato so it will fit more neatly in boxes. In other words, the fruit often have had the good tomato flavor bred right out of them. So no matter the hard road to get there, it’s worth it to grow your own tomatoes.
The year after my first Brandywine fiasco, I started searching seed catalogues, nurseries and the Internet for cold-hardy, short-season tomatoes.
It’s all about biology
To find the right tomato for your garden – whether you have a cool climate like me, or whether your tomatoes wilt and fizzle under the glare of the Phoenix sun – you have to understand the basics of tomato biology.
Most tomatoes are perfect for growing in places like, say, Missouri. The nights in midsummer in Missouri are warm – above 60 degrees – but days don’t go much over 90. Most tomatoes in the seed catalogues and nurseries want a fairly long season – you’ll need more than 100 frost-free days – and they want nights above 60 degrees. Cold nights cause the tomato blossoms to fritz out and fail to set fruit. That’s why I didn’t get a single Brandywine. Hot nights can do the same; days over 100 degrees often scald tomato plants and cause the fruit to crack.
That means, if you live in a place where your nighttime temperatures are chilly in the summer, you need a cold-hardy tomato. If, on the other hand, you live in Phoenix, where summer temperatures fry all plants that don’t have sharp spines, you need a tomato that can handle the heat. Luckily, about 25,000 varieties of tomatoes are grown worldwide. That means that somewhere out there, there’s a tomato that is just right for you.
Because even within a climate zone, every garden has its own environment?– its own soil, its own wind, its own nearby maple tree that shades half the afternoon. Sometimes, what works for your neighbor won’t work for you. My neighbor highly recommended a tomato called ‘Glacier,’ which she grew in her similarly chilly garden?– it grew, it produced delicious fruit. She swore it was the hardiest tomato in history. Presumably it would set fruit growing next to Alaskan glaciers. But it wouldn’t grow in my field. I tried it three years in a row and didn’t get much besides some mealy, misshapen lumps of something like tomatoes on yellowish, sickly plants.
After giving up on Glacier (and several others), I found a seed company that was growing tomatoes in the high country of Idaho – Seeds Trust High Altitude Seeds (www.SeedsTrust.com). The founders of Seeds Trust had been to Siberia – about as cold as you can get – and had brought back dozens of tomato varieties from Siberia and mountainous areas of the Ukraine.
I started trying the tomatoes from Seeds Trust, five or six at a time. ‘Gregori’s Altai’? Nothing – no tomatoes. ‘Sasha’s Altai’? The plants were ugly – but covered in ripe red fruit. Other varieties that have worked for me, over the years, include ‘Aurora,’ ‘Stupice,’ ‘Oregon Spring,’ ‘Nepal,’ ‘Ida Gold’ and ‘Principe Borghese.’ Some of these varieties – in particular those from Siberia – have survived mild frosts that killed more tender varieties.
Mother Nature’s selection
Beyond the variety names, after a few years, I discovered the real secret to growing good tomatoes at my altitude: Saving my own seed.
When you save your own seed – easy to do with tomatoes – what you’re doing, in essence, is breeding your own tomato varieties. Technically, it’s called “selection” – you are selecting the tomatoes that please you most, which taste the best, from plants that grow the fastest. This is the way humans have developed vegetable and fruit varieties for nearly 10,000 years – by saving seed from the plants that performed the best.
Here’s an example. Most of the tomatoes I’ve been able to grow have so far been rather small and red. I wanted to grow a tomato that was both cold-hardy and big.
One year, from Seeds Trust, I ordered seed for a variety called ‘Orenberg Giant.’ It reportedly compared to ‘Brandywine’ in both size and taste. I planted about 10 Orenberg plants. Of those, for whatever reason, nine produced no fruit – just like Brandywine. But one plant – one glorious, beautiful plant – churned out a dozen fat, red, absolutely delicious tomatoes.
I saved seed from several of the first tomatoes that ripened on that vine and planted them the next year. That year, about 25 percent of my Orenberg Giant plants made fruit. Hopefully, in a few years, I’ll have a fairly consistent strain of a big tomato that sets fruit at 8,000 feet. Miracle? In my mind, yes. But it’s also common sense.
Tomato seeds are easy to save (see “Saving Tomato Seed” on Page 43) and, over time, you’re creating a plant that contains genes well-adapted to your particular garden.
You can do the same thing with flavor, with color, with size, with disease resistance – or all of these. Some tomatoes are more resistant to common diseases, such as fusarium and verticillum. And, of course, you want to save seed from tomatoes that taste the best.
Plant a few varieties you like, either from seed or from the nursery – but make sure they are open-pollinated, not hybrid, varieties. Read up a bit on tomato varieties in seed catalogues or online. Find some that appeal to you, either for their shape or color or taste or speed. Then, as you grow them, keep an eye out for the healthiest plants, and the best fruit. Select the plants that do best in your garden – the most vigorous, the earliest to flower or fruit, the tastiest.
Whatever survives in your garden and tastes great, save seeds from that tomato, and plant the seeds again next year.
That is, if you can resist eating them, every last one, straight off the vine.
Kristen Davenport raises tomatoes, garlic, goats, geese, chickens, vegetables, cut flowers and several human kids (not necessarily in that order) on a 32-acre farm in the mountains of northern New Mexico.
Peak Oil Review: 10 Sept 2018
By Tom Whipple, Steve Andrews, originally published by ASPO-USA
https://www.resilience.org/stories/2018-09-10/peak-oil-review-10-sept-2018/
Quote of the Week
“[T]he fortunes of energy companies are highly dependent on a single, highly-salient, well-understood, widely-available, plausibly exogenous factor – the price of oil….This is a market where firm value hinges to a large degree on observable luck, so the fact that we observe little filtering of luck from [the size of] executive pay is particularly striking.” Lucas W. Davis and Catherine Hausman, the Energy Institute in Haas
1. Oil and the Global Economy
Oil prices fell by another $1-2 a barrel last week to settle at $67.75 in New York and $76.83 in London as the struggle between lower demand occasioned by the Sino-American trade war balanced against falling Iranian exports. Last week saw a storm in the Gulf of Mexico which did less damage than expected and a 4.3 million barrel drop in US crude inventories which brought them to the lowest since 2015. However, prices were driven lower as US gasoline stocks rose by 1.8 million barrels and distillate stockpiles by 3.1 million barrels, suggesting that the summer driving season has come to an end.
Last week saw several stories in the financial press laying out the case for higher oil prices ahead. Barclays now expects Brent to average $75 per barrel in 2020 and $80 in 2025. The bank noted that the market is dramatically different than it was at this point last year. The forecasts of the major financial institutions, however, are rather mild in comparison to those arguing for much higher prices ahead.
Most of these analyses focus on the Iranian sanctions combined with a generally tight oil market, rising demand and the over-dependence on steadily increasing production from the Permian Basin to balance the market. Some believe there are limits to how much OPEC can increase production in response to falling Iranian, Venezuelan, and possibly Libyan and Nigerian exports. Some see considerable potential for a military conflict in the Persian Gulf as Iran faces internal dissent due to falling oil exports. Others talk about the lack of sufficient capital investment in finding new oil, but the consequences of this are still a few years off. However, some are throwing around numbers, like $90, $95, or even $150 a barrel within the next year without having any real insight into which of many possibilities could cause a price spike.
The OPEC Production Cut: An OPEC and non-OPEC technical committee will meet on September 17th to discuss proposals for sharing the agreed-upon output increase of 1 million b/d. There are four suggestions on how to distribute the increase, presented by Iran, Algeria, Russia and Venezuela, one of the sources said, suggesting agreement will not be straightforward. One idea, to share it pro-rata among participating countries, is unlikely to be approved by Russia and Saudi Arabia since it would give them less than the supply boosts of 300,000 and 400,000 b/d that they respectively want, the source said.
OPEC, Russia and other non-members agreed in June to return to 100 percent compliance with oil output cuts that began in January 2017. Months of underproduction in Venezuela and elsewhere had pushed adherence above 160 percent. The June meeting concluded with disagreement between Saudi Arabia and Iran, longtime rivals in OPEC. Any proposals agreed to by the technical committee will be presented to ministers attending a monitoring meeting in Algeria on Sept. 23,
OPEC’s crude oil production hit a 10-month high in August, as Iraq including Kurdistan pumped at record levels and Libya recovered from weeks of port blockades. The total OPEC-15 oil production came in at 32.89 million b/d last month, including 320,000 b/d output from its newest member, Congo, which joined OPEC in June this year.
US Shale Oil Production: At a Barclays conference in New York last week The CEOs of Schlumberger and Halliburton said they see activity in the Permian slowdown. Pipeline constraints have not yet curtailed production growth, but the oilfield service companies have already felt the impact.
Oil producers in the Permian Basin are increasingly turning to trucks and rail to ship the crude to refineries and export terminals on the Gulf Coast. Crude oil production in the Permian is in the vicinity of 3.6 million b/d, while pipeline capacity out of the region is just 3.5 million according to Wood Mackenzie. Crude is selling for as much as $10 more a barrel in South Texas, the Gulf Coast and other markets outside of West Texas.
Last week saw several critical newspaper stories on the future of the shale oil industry. An opinion piece in the New York Times pointed out that the 60 biggest exploration and production firms are not generating enough cash from their operations to cover their operating and capital expenses. In aggregate, from mid-2012 to mid-2017, they had negative free cash flow of $9 billion per quarter. Amir Azar, a fellow at the Columbia University Center on Global Energy Policy, calculated that the industry’s net debt in 2015 was $200 billion, a 300 percent increase from 2005.
Another recent publication uses Hubbert Linearization and concludes that US shale oil production will be down from 5 million b/d and will start to drop in a year or so to around 1 million by 2025. This analysis is indeed not the industry’s nor the EIA’s appraisal of the situation, but the number questioning just how long the shale oil “bubble” will last is starting to grow given the lack of profits.
2. The Middle East & North Africa
Iran: Tehran’s oil exports may have declined as much as 600,000-700,000 b/d in August, to as low as 1.66 million, according to the Wall Street Journal and SVB Energy International. SVB expects Iran’s oil exports to fall as far as 0.8 million b/d by November. That will amount to the loss of nearly 1 million b/d from April, the month before Washington withdrew from the nuclear accord. The supply disruptions have been more severe than many had expected because the US is taking a tough line on sanctions, sending signals that Washington will grant few if any, waivers to Iran’s customers. This stance is making it difficult for Iran to find insurance for its shipments and financing for oil deals.
Resistance to Washington’s plans for Iran has come mainly from the EU and China. However, there are limits to the EU’s influence over European oil companies who have interests in keeping good ties with the US and can purchase oil elsewhere. The EU is preparing for the hit its economies will have to absorb once the full weight of Washington’s punitive measures comes into effect in the fourth quarter of this year.
India imported about 523,000 b/d of oil from Iran in August, down 32 percent from a month earlier, according to preliminary tanker arrival data. Pompeo said Thursday that come November, however, the sanctions on Iran will “ratchet up to yet another level,” so that nations choosing to continue accepting imports of Iranian oil will face US sanctions themselves. Washington will consider waivers for Iranian oil buyers such as India, but they must eventually halt imports.
Economies from North America to Europe and East Asia are seeing growing economic activity, causing global oil consumption in 2017 to rise by 1.5 million b/d, further tightening the market. As Tehran has already warned, OPEC will be unable to meet shortfalls if the US pursues its policy of reducing Iranian oil exports to zero. This goal is highly unlikely, however, as China has refused to abide by the new US sanctions.
Iraq: Civil unrest fueled by anger against corruption and misrule by Baghdad spread across the south of the country last week as protesters stormed the Iranian consulate in Basra while others took workers hostage at a nearby oilfield. After five days of deadly demonstrations in Basra in which government buildings have been ransacked and burned, protesters broke in and damaged the consulate’s offices, shouting condemnation of what many perceive as Iran’s sway over Iraq’s political parties.
Terminals in the Basra Gulf and Kurdistan-controlled Ceyhan in August combined for a record average of 4.028 million b/d of oil exports, representing a 4 percent increase from July. The federal government exported 3.583 million b/d – its highest monthly average ever – and earned $7.7 billion on an average $69 per barrel.
Despite production and export figures showing a significant improvement, optimism is not warranted. The country continues to head towards a major showdown between the two main political rival blocks, led by Prime Minister Al Abadi and former PM Al Maliki. Both are currently in a race to lead the country while being confronted by internal and external threats.
Saudi Arabia: In the latest twist, the Saudis now want to keep oil prices between $70 and $80 a barrel as they try to strike a balance between maximizing revenue and keeping a lid on prices until US congressional elections, according to OPEC and industry sources. Urged by President Trump to cool what was then a heating market, Saudi Arabia pledged June 23 along with the rest of OPEC, Russia and nine other non-OPEC partners to boost crude output by a collective 1 million b/d, in anticipation of supply shortages caused by US sanctions on Iran and Venezuela’s economic crisis.
The Saudis could earn $161 billion this year from oil exports, versus a budgeted $131 billion. Financial services provider Al Rajhi Capital noted in a report that the economic growth of the Kingdom is doing well due to higher oil prices. The company also forecast growth in non-oil revenues that will contribute to a further narrowing of the fiscal deficit, which the firm sees at around $22 billion, 58 percent lower than the budgeted deficit.
Saudi Aramco awarded Baker Hughes the first integrated services contract for the expansion of its offshore Marjan oilfield, the most significant development program this year. This project is the first of three planned offshore expansions aimed at expanding its production capacity to offset natural declines at maturing fields.
Yemen’s Houthi rebels are claiming a successful attack on an unidentified oil facility belonging to Saudi Aramco in Jizan, according to a report from the Iranian state news agency. The strike with Badr 1 missiles took place last week, two days after an earlier one that targeted a Saudi frigate in Jizan.
A senior adviser to Crown Prince bin Salman appeared to be confirming that the kingdom is considering digging a canal along the border with the Qatari peninsula, effectively turning it into an island. Reports of the canal first emerged back in April on a news website with close links to the Saudi royal family. However, the official’s remarks were the most unambiguous reference yet that the Saudi regime is serious about the project.
Libya: A ceasefire was signed between armed factions fighting over the Libyan capital, the United Nations announced last Tuesday, after more than a week of violence inside Tripoli. Dozens of people have been killed in fighting engulfing the capital as rival armed groups vie for power and money.
Some 400 prisoners escaped from a facility near the Libyan capital Tripoli during the fighting between militia groups in the city, police say. “The detainees were able to force open the doors” to leave the Ain Zara prison, the local police said. They added that guards, fearing for their lives, were unable to prevent the breakout. Many of the prisoners held at the Ain Zara prison in south-east Tripoli were supporters of the former Libyan leader Muammar Gaddafi and had been found guilty of killings during the uprising.
There were no reports of disruptions to oil production last week which is around 1 million b/d.
3. China
China’s crude oil imports rose 6.5 percent in August from a month earlier to their highest since May, boosted by a rebound in demand from smaller, independent refiners. Arrivals last month were 9.04 million b/d, according to the General Administration of Customs. This was up from 8.0 million b/d a year ago and 8.48 million in July. For the first eight months of the year, crude purchases stood at 299 million tons, up 6.5 percent from last year.
The White House is gearing up to hit China with tariffs of 25 percent on as much as $200 billion in Chinese goods, on top of the $50 billions of Chinese exports already facing 25 percent levies. China has pledged to retaliate against US tariffs in “equal scale and equal strength.”
Chinese officials and executives of ExxonMobil Corp discussed a $10 billion investment by the US firm in the southern province of Guangdong, according to Chinese state television. Exxon said last Thursday it signed a preliminary deal to build a petrochemical complex and invest in a liquefied natural gas terminal in China. It said the investment would be worth billions of dollars but did not give a specific figure.
PetroChina is betting big on boosting natural gas production in line with the government’s policy to increase its gas production and use by industrial firms and residencies. However, the planned production increases will not even come close to reducing China’s dependence on oil and natural gas imports—they are set to rise further as the country’s energy demand grows. However, less dynamic coal-to-gas switching, improved gas storage, and a boost in imports will help China avoid a repeat of the heating crisis seen in the past winter according to Wood Mackenzie analysts.
4. Russia
Russia’s oil production in August was virtually flat at 11.21 million b/d compared to July as Moscow kept output at a near post-Soviet record, after having reversed most of its production cuts under the OPEC+ deal the previous month. After the OPEC meeting in June decided to ease compliance rates, Russia increased production in July and pumped at its highest level since the OPEC/non-OPEC agreement came into force in January 2017. At 11.215 million b/d, Russia’s oil production in July was very close to the post-Soviet record-high of October 2016, the month used as a baseline for the production cuts. Russia’s oil production in July increased by 148,000 b/d from June, according to government data.
Russia’s oil industry has plenty of cash and will be able to withstand the planned $15 billion in extra taxes over the next six years. The government is looking for extra money to implement President Vladimir Putin’s pledges of higher social spending and better infrastructure over the next six years, expected to cost around $120 billion. The new oil tax changes will see an increase in the mineral extraction tax and a gradual reduction in oil and oil products export duty.
5. Nigeria
Nigeria’s oil production fell by 14.56 million barrels in the second quarter. The drop, which accumulated from 160, 000 b/d production shortfall was a result of 1.84 million b/d production average in the second quarter, a 3.95 percent decline between April and June. This decline from a 2 million b/d average in the first three months of the year had also reduced the country’s economic growth to 1.50 percent year-on-year between April and June.
In recent weeks there have been threats by militant groups to resume disruption of oil production in the Niger Delta if the federal government fails to restructure the country. Acting under the auspices of the Coalition of Niger Delta Agitators, militant leaders said new actions would be initiated against the interest of the Nigerian government in the Niger Delta region if the country remained the way it is. In 2016, Nigeria lost hundreds of thousands of barrels of oil production each day following a series of militant attacks on oil facilities.
The Nigerian Navy has deployed 16 newly bought ships to the Niger Delta to guard critical oil infrastructure. In August, a report from the Nigeria Natural Resource Charter revealed that the country had lost some $7.23 billion from theft during 2016 and 2017. Data from Chatham House suggests that in addition to oil theft in the Delta, Nigeria is also losing $1.5 billion a month from pirates stealing oil. The situation is so bad that Nigeria has been ranked the world’s worst performer in terms of oil theft, ahead of Mexico, Russia, and Iran.
Shell has reportedly initiated negotiations with local oil producers for selling two of its Nigerian oil licenses in the Niger Delta, worth about $2 billion. After the sale, Shell will focus on its deepwater operations where the frequency of theft and threat of attacks on infrastructure are low. Shell’s tenure in Nigeria dates to 1936 back when Shell D’Arcy was founded, the group’s first company in Nigeria.
6. Venezuela
Caracas’s production fell by 20,000 b/d to 1.22 million b/d last month. Compared to August last year, Venezuelan oil production was down by 680,000 b/d.
A new analysis of the Venezuelan situation says that the most likely force that will cause a political change comes from bondholders and their lawyers as they move to seize the country’s foreign assets. Venezuela owes about $65 billion US in outstanding bonds, according to Caracas Capital, a financial advisory firm. That’s in addition to other debts owed by the government and state companies — an estimated total of about $150 billion US. Holders of that debt include some of the biggest names in US finance, such as BlackRock, T. Rowe Price, Northern Trust, and the U.K.-based Ashmore Group. Venezuela also owes tens of billions of dollars to Russia and China, after borrowing heavily from the two countries in recent years, mainly through oil-for-loan deals.
Venezuelan drivers faced long lines for gasoline in border states on Tuesday as the government struggled to roll out a new payment system that is supposed to reduce smuggling of heavily-subsidized fuel. The pilot program that began last Tuesday in eight states was supposed to provide service stations with wireless devices that use a state-backed identification document called the Fatherland Card to carry out fuel transactions. The payment system will pave the way for charging international prices for fuel – a massive increase given that gas is now almost free. Gasoline prices are set so low that the equivalent of $1 buys nearly 400,000 gallons of fuel. Experts estimate Venezuela – where shortages of food and medicine have fueled hunger, disease and a mass exodus of citizens – loses at least $5 billion per year as a result of not selling gasoline at international prices.
ConocoPhillips is still awaiting payment from Venezuela on a $2 billion arbitration settlement reached last month with the country’s state-run PDVSA. Conoco suspended legal attachment efforts last month that had cut Venezuela’s oil exports from several Caribbean facilities following a deal that allowed Caracas 90 days to make an initial $500 million payment. Conoco says it would resume its legal efforts to collect the debt if the payments are not made.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
A wave of contaminated fuel that has clogged and damaged engines on between 200 and 300 oil tankers and container vessels in the past months has pushed shippers to demand stricter quality controls around the world. The calls are shining a light on the notoriously opaque shipping fuel sector, where any contamination can spread quickly and be difficult to trace back to its source. That is because large volumes of fuel oil are blended with so-called “cutter stocks” by suppliers and sold through an extensive network of middlemen before finding their way into ships’ fuel tanks. (9/5 and 9/6)
Scotland’s leader Nicola Sturgeon launched on Friday a major renewable energy project boasting the world’s most powerful wind turbines, which she hopes will propel the independence ambitions of her nationalist party. The 11,191-meter-high turbines in the waters of Aberdeen Bay will eventually produce 312 GWh of power a year – enough to power 80,000 households – helping to reduce Scotland’s reliance on its oil industry. (9/8)
Syrian sanctions: The US Department of Treasury announced sanctions against five Syrian companies and four individuals on allegations of facilitating crude oil shipments and financing to the Assad government. (9/8)
Qatar’s energy minister on Thursday called for oil-producing countries to boost investment in the oil and gas sector given a recovery in the price of oil, but said he did not back setting any specific targets for such investment. The Minister said he expected the issue to be addressed during a meeting of OPEC and non-OPEC countries in Algeria at the end of the month. (9/7)
In Yemen, the governor of a southern province pumping 100,000 bpd—half of Yemen’s total oil production— threatened on Thursday to suspend oil shipments from the region if the internationally recognized Yemeni government doesn’t meet the demands of protesters in Yemen’s south who have been protesting against government policies as the economic and humanitarian situation continues to deteriorate and the local currency to plunge. (9/7)
Turkmenistan completed an upgrade of its largest electric power plant on Saturday, which it hopes will help boost exports and eventually allow supplies to Pakistan, which would require the construction of a new transmission line. The Central Asian nation, which sits on the world’s fourth-biggest natural gas reserves, has been hit hard by the plunge in global hydrocarbon prices and is seeking to diversify exports in order to increase its hard currency earnings. (9/8)
African boom: There are at least 41 billion untapped barrels of crude oil in sub-Saharan Africa, the US Geological Survey estimated two years ago. During the downturn, oil companies bought licenses there and waited for the price environment to improve to advance their drilling plans. Independents such as Tullow Oil and Kosmos Oil expanded on the continent alongside supermajors such as BP. Now, these drilling plans are gathering pace, Uganda is one of the hot spots. Senegal, Kenya and even Namibia are other centers of attention. (9/7)
In Brazil, the outcome of their upcoming presidential election is astoundingly unclear, with scenarios that range from a winner from the far-right, center or left. The energy industry is certainly not at the core of the debate by any means, but there could be significant ramifications for Brazil’s oil and gas industry. (9/7)
Falkland’s kerfuffle: The Royal Navy of the U.K. has intercepted an Argentinian survey ship that a Navy commander suggested had been ‘snooping for oil’ on the edge of British territorial waters off the Falkland Islands in the South Atlantic. Navy officials and experts called it a minor incident in an area with a long-standing territorial dispute between the UK and Argentina, who also staged a brief war over the Falklands in 1982. (9/7)
Ecuador loses court ruling: Chevron Corp said on Friday an international tribunal ruled in its favor in an environmental dispute with Ecuador, finding the South American nation had violated its obligations under international treaties. The tribunal unanimously held that a $9.5 billion pollution judgment by Ecuador’s Supreme Court against Chevron “was procured through fraud, bribery and corruption and was based on claims that had been already settled and released by the Republic of Ecuador years earlier.” (9/8)
The US oil rig count fell by two to 860 on Friday while the gas rig count increased by two to 186, according to Baker Hughes data. Canada’s oil and gas rigs for the week fell sharply, by 24, bringing its total oil and gas rig count to 204, with an 18-rig decrease for oil and a 6-rig decrease for gas for the week. (9/8)
In Powder River Basin, compared to the Permian, Big Oil has found less-congested pipelines, cheaper land, and more importantly, a whole lot of oil. It’s not the first time that the Powder River Basin has garnered industry attention. In 2014, when oil prices were soaring, many industry players were already eyeing the basin as the next big thing, but when oil prices waned in the following years many drilling plans in Powder River were abandoned for established operations. Now with higher prices for crude, there has been a renewed rush for land deals in oil-rich areas, and the Powder River Basin is no exception. (9/5)
Delta’s Trainer refinery: Delta Air Lines, parent of refinery owner Monroe Energy, is moving forward with strategic options to sell a 49% stake in its 190,000 b/d Trainer, Pennsylvania, refinery, but will continue to operate the plant. (9/8)
Oil industry executives are rewarded for the strong performance of their companies. This “pay-for-performance” model incentivizes CEOs to maximize company value. But in the oil and gas industry, much of a company’s value is determined by the price of oil, which is entirely outside of management’s control—in other words, pay is in part based on luck. (9/6)
Colorado ballot issue: Oil and gas companies have pumped millions this campaign cycle into an effort to defeat a Colorado ballot measure that would increase new drilling setbacks by five-fold and cripple the future of the industry there. The pro-industry group Protecting Colorado’s Environment, Economy and Energy Independence, received $7.9 million during August alone, according to data from the state’s secretary of state. If the ballot issue is approved, drilling setbacks would increase from the current 500-foot setback to 2,500 from all occupied structures as well as vulnerable areas, including waterways and parks. (9/8)
Fuel-switching: In the U.S., the capability of the manufacturing sector to switch the fuels it uses declined continuously between 1994 and 2014, according to the EIA. Among the most commonly substitutable fuels used in manufacturing, the amount that could readily be switched in less than 30 days dropped from 24% in 1994 to 10% in 2014. Shifting use of these energy sources was likely the result of increased availability of natural gas, generally lower natural gas prices relative to other fuels, and the ability of natural gas to comply with environmental regulations. These factors led manufacturers to focus on natural gas use and to discount the value that fuel switching capability had provided in earlier years. (9/7)
German EV’s launching: While it’s taken them two years to join the race, German automakers are poised and ready to take on Tesla during a particularly vulnerable time for the electric carmaker. Mercedes-Benz is set to unveil its much-anticipated electric SUV on Tuesday. Then BMW will be flying the autonomous iNEXT electric crossover to press events in Munich, New York, San Francisco, and Beijing. Audi will unveil its first all-electric SUV at a world premiere in San Francisco on Sept. 17. (9/5)
North American railroads have begun to invest in improving rail efficiency and better infrastructure due to in part to increased demand from coal shipments. Canadian National will buy an additional 60 locomotives from GE after ordering 200 in December 2017, citing demand for higher rail capacity from commodities, the railroad said Wednesday. (9/8)
US offshore wind growing: The US East Coast is leading the nation’s charge toward developing an offshore wind industry, and while the country only has 30 MW of offshore wind capacity installed currently, if goals are met and announced projects are built, the East Coast could have nearly 9 GW of offshore wind capacity by the 2030s. (9/8)
Pushing batteries: China is looking to boost its energy storage market and projects as it adds growing renewable power capacities. At the end of last year, the Chinese authorities issued a unified national policy to boost the energy storage industry that has been lagging behind other countries despite the fact that China is leading global investments in renewable energy. Also thanks to the central government policy boost, and to some regional storage policies, China added nearly as much battery storage capacity in the first half of 2018 as it had in total at the end of 2017. (9/3)
The California Fuel Cell Partnership’s (CaFCP) 2030 vision statement describes a self-sustaining market in 2030 for fuel cell electric vehicles and renewable hydrogen, and the strategic priorities necessary for realizing it. The CaFCP document envisions 1,000 hydrogen stations enabling upwards of 1,000,000 electric vehicles on California roads in 2030. As of July 2018, nearly 5,000 fuel cell cars are already on the road in California. These first adopters currently have access to 35 retail hydrogen stations, with another 29 stations in development. (9/6)
Global emissions risk: The world is not making nearly enough progress in reducing greenhouse gas emissions to achieve the goals for limiting global warming agreed at the Paris climate summit in 2015, a group of political and business leaders has warned. The Global Commission on the Economy and Climate said on Wednesday the next decade or so would be “a unique ‘use it or lose it’ moment in economic history”, creating an opportunity to put the world on a path of low-emissions growth. If that opportunity was not grasped, however, the group warned that “by 2030 we will pass the point by which we can keep global average temperature rise to well below 2C”, the objective set at Paris. (9/6)
Solar H2 R&D: A new study, led by academics at St John’s College, University of Cambridge, has used semi-artificial photosynthesis to explore new ways to produce and store solar energy. They used natural sunlight to convert water into hydrogen and oxygen using a mixture of biological components and manmade technologies.
Peak Oil Review 4 September 2018
By Tom Whipple, Steve Andrews, originally published by ASPO-USA
https://www.resilience.org/stories/2018-09-04/peak-oil-review-4-september-2018/
Quote of the Week
“The [California] legislature finds and declares that the Public Utilities Commission, State Energy Resources Conservation and Development Commission, and State Air Resources Board should plan for 100 percent of total retail sales of electricity in California to come from eligible renewable energy resources and zero-carbon resources by December 31, 2045.” Senate Bill 100 reads
1. Oil and the Global Economy
Oil prices had two down and three up days last week closing out Friday a dollar or so higher with NY futures at $69.80 and London at $77.64. The struggle between the soon-to-be-implemented Iran sanctions and the threat to demand posed by the trade war continues as the primary factor driving prices. An unexpectedly large drop in the US crude inventory of 2.6 million barrels last week and a four-unit increase in the US oil rig count last week contributed to the volatility of the market.
Reuters reports that oil analysts cut their price forecasts for 2018 for the first time in almost a year amid growing concern over the impact on crude demand from escalating trade tensions. Iranian oil exports are already falling rather smartly; however, there is a floor under how far they will fall probably somewhere between 1 and 2 million b/d. Chinese demand alone will ensure that they do not drop any further.
The US-China trade war, however, does not seem to have a definite end in the immediate future and many are wondering just how much economic damage the standoff will do. There are too many factors, such as the pace of oil production from Venezuela, Libya, and the Permian Basin, to say whether any decline in the global demand for oil will offset looming production problems.
OPEC: News from the organization has been sparse since the Cartel+ decided to raise its production caps in June. OPEC oil output increased last month to a 2018 high as Libyan production recovered and Iraq’s southern exports hit a record, although a cut in Iranian shipments due to US sanctions limited the increase. The cartel pumped 32.79 million b/d in August, the survey on Friday found, up 220,000 b/d from July’s revised level and the highest this year.
OPEC and non-OPEC oil producers will attempt to formalize their long-term cooperation later this year by approving a charter that will make possible further joint action on output controls. Russia and several other non-OPEC countries joined OPEC producers in reducing oil output since 2017 in a move that has helped raise oil prices to nearly $80 per barrel from a low $30 in early 2016.
OPEC and its allies announced last week that they would review the monitoring mechanisms of its output agreement at the Joint Ministerial Monitoring Committee meeting in Algiers on September 23 but said it sees the current oil market as mostly balanced. In December, OPEC will discuss whether its members can compensate for a sudden drop in Iranian oil supply after US sanctions against Tehran begin in November.
US Shale Oil Production: US crude oil production rose 231,000 b/d in June to a record 10.674 million b/d, according to the US Energy Information Administration in a pair of monthly reports on Friday. This data comes two months after the end of June and is usually more accurate than the weekly estimates which are proving to be too high.
However, figures by the Railroad Commission of Texas showed production in Texas dropped in June 2018 and was down 7 percent from May, the first yearly drop since February 2017. Initial data from the Texas Commission is usually far too low because of rules allowing producers to keep some of their production secret to avoid tipping off local competitors as to how well they are doing. For example, the initial Texas production number for June 2017 was 75.2 million barrels, but a year later that figure has been revised upwards to 90 million.
Other news concerning oil production from the Permian Basin, which is the only US oil field from which significant production increases are expected, has not been so good. Last week, prices for WTI in Midland slumped to their widest discount to WTI elsewhere since August 2014. Reuters estimates that the price discount of WTI in Midland to the U.S. benchmark exceeded $18 a barrel. Some West Texas producers say they will pull back on activity and delay well completions as a result of falling local oil prices.
The number of drilled but uncompleted wells (DUCs) in the Permian rose by 167 in July, to 3,470, accounting for around 43 percent of all the DUCs in the US, according to the EIA. The Keane Group, which fractures shale wells, said it expects DUCs to rise as operators continue to drill wells to hold onto specialized rigs. When prices are weak, producers hold off on completing wells.
The current pipeline capacity for moving crude out of the Permian is 3.1 million b/d. The EIA estimates that the Permian will have pumped 3.387 million b/d in August, and expects production to rise to 3.421 million b/d in September. If these numbers are valid, there is a severe shortage in the ability to move newly produced oil out of the Permian. Vista Proppants and Logistics say they have made a deal with logistics firm JupiterMLP to transfer crude oil from trucks to rail tanker cars at Pecos, Texas, and then ship crude on the Union Pacific Railroad until pipeline capacity catches up with rising production. Even if this scheme should work, it is likely that crude output from the Permian and hence from the US will not be growing as fast in the next year as has been forecasted.
2. The Middle East & North Africa
Iran: Iran oil shipments are declining at a faster-than-expected pace ahead of US sanctions set to begin in November. In the first half of August, Iran’s oil exports fell by 600,000 b/d, going from 2.32 million b/d to 1.68 million. Tehran’s exports have been falling all year, reaching their lowest level in four months by July and then dropping more rapidly last month. Indications are that August exports will be around 2.06 million b/d vs. a peak of 3.09 million in April.
South Korea, India, the EU, and Japan are cutting imports; however, Tokyo remains firmly committed to seeking US exemption for Iranian oil imports as it sees the Iranian oil as necessary for the country’s energy security. India will “definitely” not cut off entirely its crude oil imports from Iran, but it expects to reach some agreement with Washington at a meeting with US officials this week.
Beijing has been posturing over the US demand that every nation halt Iranian oil purchases, but most believe that China will continue to import at the pre-sanctions level, rather than attempting to undercut the sanctions by buying up oil that cannot be sold elsewhere.
The breadth of the US sanctions is having an impact on the Iranian economy. The threat of sanctions against tanker companies transporting Iranian oil, insurance companies covering Iranian cargoes, and financial institutions doing business with Iran are causing considerable trouble. Iran’s currency has fallen by more than half since the start of the year. The economic pressures have the government in turmoil with top officials being purged. The hardliners in Tehran seem to be gaining ground against the government of moderate President Hassan Rouhani. Rouhani’s real failure in the eyes of the hardliners was in trusting the United States when it agreed to the 2015 nuclear deal. The Trump administration’s withdrawal from the pact earlier this year was proof in Tehran that opening up and negotiating with the US was a mistake.
OPEC will discuss in December whether producers can compensate for a sudden drop in Iranian oil supply after US sanctions against Tehran start in November. Despite all the fuss, Iran has remained within the main restrictions on its nuclear activities imposed by the 2015 nuclear deal, a report by the UN indicated last week.
Iraq: In the meantime, Baghdad is waiting in the wings to increase its exports and seize Iran’s share of the oil market. OPEC’s Joint Ministerial Monitoring Committee is expected to discuss an increase in oil production during the next meeting, which is expected to take place on September 11th. The Monitoring Committee’s production plans will likely include a formula for how to divvy up the increased production limits by country, and Iraq wants to make sure it is included in those plans.
Iraq’s oil production has been increasing according to OPEC’s Monthly Oil Market Report, averaging 4.476 million b/d in the first quarter of 2018, increasing to 4.556 million for July. Iraq’s August crude oil exports are nearing 3.595 million b/d, according to the chief of Iraq’s state marketing organization. A settlement with the Kurds would enable Baghdad to increase its exports even further.
Saudi Arabia: The perturbations in Saudi oil production continue. Riyadh will report to OPEC that its crude oil production in August averaged 10.424 million b/d, up 136,000 from the July level of 10.288. However, the Saudis supplied 10.467 million b/d to the market in August, drawing on stored oil to supply more crude to the market than it produced.
Russian Deputy Foreign Minister Mikhail Bogdanov said on Friday that Vladimir Putin is preparing to visit Saudi Arabia. Global oil markets likely will be on the top of the agenda as will developments in Syria (where Moscow and Riyadh are on opposing sides in the ongoing Syrian Civil War), as well as talk about US sanctions on Iran.
Reuters released a new report last week concerning a split between Saudi King Salman, and his 32-year-old son and de facto ruler, Crown Prince Mohammed bin Salman. For the past two years, Saudi Arabia had been preparing to place up to 5% of its national oil company, Saudi Aramco, on the market. The planned listing was to be the cornerstone of the kingdom’s promised economic overhaul and, at a targeted $100 billion, the biggest IPO ever. The IPO was the brainchild of 32-year-old Crown Prince Mohammed bin Salman.
In late June, work on launching the Aramco IPO was halted. According to Reuters, King Salman stepped in and ordered the IPO stopped after he met with family members, bankers, and senior oil executives who told him that the IPO, far from helping the kingdom, would undermine it. The shelving of the Aramco IPO was a significant blow to the prince’s reform program, which aims to transform Saudi Arabia’s oil-dependent economy.
The question is whether the Aramco IPO fiasco is an indication of a fallout between the aging King and his favorite son. For now, Reuter’s sources say “No,” but this could change if the crown prince pursues policies that the King considers dangerous to his legacy. A split within the royal family could quickly evolve into a threat to the world’s oil supply.
Libya: Clashes broke out in Tripoli last week as rival militias vied for control over territory in parts of the capital city. A temporary truce is in place, though it may be tenuous as neither side is willing to give up territorial gains. An August report from the International Crisis Group found government unity in Libya is lacking given the mounting distrust running in leadership circles since the end of civil war. For some form of political agreement to take place, the group said everything from more transparency at the nation’s central bank to a more significant role for the UN mission might be necessary.
Libya’s oil production has been holding at around 1 million b/d for the past couple of weeks, rising slightly this week thanks to increased production at two small oilfields in the east. Libyan media is reporting that Ibrahim Jadhran, who led the devastating June attacks on Libya’s export terminals, is now teaming up with tribes and forces loyal to Muammar Gaddafi and Chadian rebels to plan a new strike on the oil region.
3. China
The Sino-American trade war and the Iranian sanctions remain important issues for China’s oil industry. Sinopec, China’s largest refiner which imports about 85 percent of its crude, says it will continue to buy crude oil from both the United States and Iran as keeping diversified sources of crude is essential to China’s well-being. Recent reports suggest that Chinese oil buyers can swap purchases of US crude for cargoes that are not encumbered by the tariff war.
US crude exports to China appear set to slow dramatically in September, with vessel-tracking data compiled by Thomson Reuters Oil Research and Forecasts showing about 6.12 million barrels, or about 204,000 b/d, scheduled for arrival. This would be down from around 363,000 b/d in August, and would also be the weakest month since March this year.
However, the pricing of the various grades of crude oil rather than impending tariffs explains why China stocked up on US crude in August, and appears to have backed off in September, and probably October as well. The discount of front-month WTI crude oil futures to Brent futures widened to $11.39 a barrel on June 6th and traded close to level for around a three-week period from late May to mid-June. May-June was the time that oil for September-October import into China would have been purchased.
Chinese refiners could buy WTI last spring at a substantial discount to Brent in the paper market, which would allow them to take physical cargoes. However, by the time September cargoes for China would have been purchased, the numbers had moved in the other direction, with Nigeria’s Bonny Light trading at $73.52 a barrel on June 25, putting it at a discount of $1.47 to WTI Houston. This price shift would have made buying West African light crudes more attractive than cargoes from the US even without the political considerations.
China’s near-desperate need to reduce the burning of coal which is poisoning the atmosphere of nearly all its large cities was highlighted last week by a new study showing that chronic exposure to air pollution could be linked to the cognitive performance of the Chinese people. Researchers believe that the negative impact of air pollution increases with age, and affects men with less education the worst. The results have global relevance, with more than 80 percent of the world’s urban population breathing unsafe levels of air pollution.
For now rapidly increasing the use of natural gas in China’s cities seems the only short-term fix for the pollution problem. PetroChina is aiming to grow its gas output at a much faster rate than oil over the next five years, however, “Domestic oil and gas resources are not good enough for significant production increases,” according to Zhang Jianhua PetroChina’s vice chairman. So far Beijing has not added LNG to the list of US exports targeted for tariffs.
The government is becoming increasingly concerned about the demographic slide which will leave a country of retirees being supported by fewer and fewer workers. Beijing now appears poised to scrap the limit on the number of children couples can have., A state-run newspaper has cited a draft civil code that would end decades of controversial family planning policies including fines and forced abortions. A new population policy would not have an impact for at least two decades by which time China’s economy and its demand for energy are likely to have changed radically.
4. Nigeria
For many years now a bill has been winding its way through the Nigerian legislature that would bring about a comprehensive reform for Nigeria’s perennially troubled petroleum industry. Last week President Buhari refused to give his consent to the Petroleum Industry Governance Bill (PIGB) and has returned it to the Senate. Given the current impasse between the executive and legislative arms of government, this bill will not be revived for the next two years. In the meantime, Nigeria’s petroleum industry will continue to be incredibly corrupt and is unlikely to make much progress in increasing oil production.
The Nigerian National Petroleum Corporation wants to build two condensate refineries with 200,000 b/d refining capacity. While the initiative would increase the NNPC refining capacity from 445,000 b/d to 645,000 b/d, its current refineries are only operating at a fraction of their rated capacity due to lack of maintenance. The company would be far better off in getting its existing refineries fully operational again before it undertakes to build new ones.
5. Venezuela
There was not much good news last week. PDVSA says it will increase oil output by 640,000 b/d by bringing in seven service companies to raise production from existing wells. Despite the claim that “a new era” has arrived for the company, it seems more likely that production will continue to decline. Last week a ship-handling accident at the PDVSA’s main export terminal shut down one-third of its capacity for an indeterminate period. The closing of the dock could delay as much as 5 million barrels in crude deliveries to Russian company Rosneft, further complicating Venezuela’s oil-for-loans agreements with Moscow. Shipments to the US’s Valero and Chevron are also delayed.
Under a contingency plan, oil tankers that were assigned to load diluted and upgraded crudes at the damaged dock are being diverted to a neighboring terminal. However, only ships carrying under 500,000 barrels can be accommodated at the smaller terminal.
As could be expected, PDVSA filed an appeal requesting that a Delaware court vacate a decision on Aug. 23rd granting Canadian miner Crystallex the right to seize the company’s US assets including the Citgo refineries.
6. The Briefs(selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
Petro-dollar war: The main front where the future of the dollar will be decided is the global commodity market, especially the $1.7 trillion oil market. In the midst of America’s economic euphoria, it is worth remembering that one of every four people on the planet lives today in a country whose government is committed to ending the dollar hegemony. (8/28)
Offshore Norway, Equinor has raised the resource estimate for its giant oil field Johan Sverdrup in the North Sea and said it was able to drive development costs for the project further down. The estimated recovery for the entire Johan Sverdrup field is raised to 2.2-3.2 billion barrels of oil equivalent (up 0.1 bboe). The first phase of the Johan Sverdrup project is slated to start production in November 2019 and will be the main contributor to Norway’s rising oil production until 2023. (8/28)
In German coastal waters, construction work for Nord Stream 2, the planned Russian gas pipeline to Europe, has started, despite the threat of sanctions from US president Donald Trump and condemnation from across the EU. The contentious pipeline, which will double Russian gas imports to Germany across the Baltic Sea and reduce shipments through Ukraine, has heightened geopolitical tensions between Europe, the US and Russia, souring relations between Berlin and Washington and highlighting the EU’s fractured stance towards Moscow. (8/31)
Offshore Australia, ExxonMobil said on Monday it had commenced an $88 million offshore exploration drilling off the country’s southeast coast to search for new sources of natural gas. ExxonMobil Australia is also actively considering a potential gas import project to bring additional supply to the country’s east coast market. (8/27)
Brazil’s Petrobras and France’s Total on Friday agreed to buy millions of barrels of oil from the Brazilian government. It was the country’s first successful auction of its share of output from the pre-salt offshore play. The auction was the second attempt to sell its share of oil from three fields in the Santos offshore basin. The first attempt in May yielded no bids. (9/1)
In Brazil, investing $8 billion in waning offshore Campos Basin could boost its oil production by 230,000 barrels of oil equivalent per day (boepd) by 2025, consultancy Wood Mackenzie said. Production in the Campos Basin, where activity began about forty years ago, has fallen by a third over the last seven years to 1.3 million boepd, raising the specter of hefty outlays to close down operations. (8/28)
Onshore Colombia, six mostly foreign companies have so far made bids to explore for oil in 21 areas—many of them new—under a new system that seeks to boost investment and find new deposits to increase the nation’s reserves. (9/1)
In Mexico, a document drafted by advisors to incoming Mexican president Andres Manuel Lopez Obrador proposes withdrawing Mexico from the International Energy Agency and moving closer to OPEC. (8/30)
Mexico’s president-elect Andres Manuel Lopez Obrador will reportedly suspend oil auctions for at least two years, with some experts believing that his administration won’t hold any new oil auctions at all during his six-year term. He has also vowed to review the 107 contracts already awarded to companies through auctions over the last few years to check for corruption, although he has said he would not try to invalidate them so long as they check out. (8/27)
To Mexico, new pipeline capacity additions on both sides of the border have helped US natural gas pipeline exports to jump to their highest level on record in July, with a number of pipelines expected to become operational by 2020. For the U.S., more pipeline takeaway capacity gives the Permian an additional export outlet from West Texas to Mexico as producers are looking at ways to ease pipeline constraints on booming natural gas production. For Mexico, natural gas imports help to meet its rising gas demand as the country is adding gas-fired electricity generation capacity at a rapid clip while it faces a decline in its domestic gas production. (8/27)
A Canadian court on Thursday overturned approval of the Trans Mountain oil pipeline expansion, ruling that Ottawa failed to adequately consider aboriginal concerns, putting the future of the C$7.4 billion ($5.71 billion) project in jeopardy. The decision is a blow to Prime Minister Justin Trudeau’s government, which agreed in May to buy the pipeline from Kinder Morgan Canada for C$4.5 billion, and to the country’s oil sector. (8/31)
In Canada, with one surprise court ruling Prime Minister Justin Trudeau faces the risk of contesting next year’s election with key pieces of his economic and environmental plans in ruins. The Federal Court of Appeal overturned on Thursday the Liberal government’s 2016 approval to expand Trans Mountain, a critical pipeline to link Canadian crude with foreign markets, followed hours later by Alberta’s tit-for-tat withdrawal from Trudeau’s climate plan. The day’s events amplified criticism that Trudeau has failed to produce a regulatory system in which oil pipelines stood a chance of approval and undermined the PM’s ambitions to reduce emissions. (9/1)
The US oil rig count grew by two last week to 862, the first increase in three weeks, according to energy services firm Baker Hughes. Drilling has steadied over the last three months; the oil rig count rose by one in August after gaining three rigs in July and losing one in June. (9/1)
In Alaska, crude oil output on the North Slope could increase by as much as 40 percent in the next eight years. Fewer bureaucratic barriers and recent technology advancement continue to make the North Slope popular among oil exploration operators. Alaska has the infrastructure for oil production. The oil lurking under the surface of the historically oil-rich region is enough to turn the state’s economy around and reinstate it as a major player in the oil industry, according to new research from IHS Markit. (8/28)
In Wyoming, oil companies looking for the next big find are wading into the Powder River Basin, where pipelines are not congested, and land is cheaper than in Texas’ Permian Basin, the world’s fastest-growing oil-producing region. A series of largely undisclosed land deals is fueling interest in its conventional and shale formations. (9/1)
The earthquake link: In a new study in the journal Science, scientists describe for the first time how earthquakes can be triggered so far away from wastewater injection wells. That efficient practice by the oil and gas industry is creating a ripple effect far beyond its drilling locations. Geologists have linked injection wells to quakes, with findings based on years of observation. Human-made earthquakes, however, are mostly moderate in size, but put 1 in 50 people in the United States at risk, according to a recent U.S.G.S. analysis. (8/31)
Colorado voters will decide in November whether to increase land setbacks from new oil and gas development, a measure that could sharply limit future production from the DJ Basin. The setbacks would have the biggest impact on Weld County northeast of Denver, the most prolific production area in the state. Colorado is the seventh top oil-producing state and sixth top natural gas producer. (9/1)
Trump trumped in CA: Earlier this week, the California State Assembly passed SB 884, a bill that would prohibit the States Lands Commission from allowing any new wharfs, piers, pipelines and other facilities in state waters from the shoreline out to three miles offshore that could be used to expand oil production, effectively blocking Trump’s plans to drill for oil in federal waters off the California coast. (8/31)
California legislators scored a win against the Trump administration by passing one of the nation’s most ambitious clean energy bills. The bill, introduced last year by Sen. Kevin de León, D.-L.A., increases the state clean energy target from 50 percent of the state mix by 2030 to 60 percent and moves the target to 100% by 2045. (8/30)
US gasoline prices, as well as demand, remain high for the Labor Day weekend, the US EIA reported on Friday. The US average retail price for regular gasoline, reported on Aug. 27, was $2.83 per gallon, the highest it has been the Monday before Labor Day since 2014 — when it was $3.45 per gallon. (9/1)
EV support: By a unanimous vote, California lawmakers approved Assembly Bill 2127, as amended, that calls for a biannual update on electric vehicle charging infrastructure. The bill mandates the review to gauge progress on a state-wide effort to put at least 5 million zero-emission vehicles on California roads by 2030. (8/28)
Sales of battery electric vehicles and plug-in hybrids in Europe jumped by 42 percent annually in the first half of 2018, hitting the 1-million milestone, with the plug-in share of the European light vehicle market at 2 percent, data compiled by sales database and analytics firm EV-Volumes showed. The sales of battery electric vehicles (BEV) and plug-in hybrids (PHEV) in Europe came in at 195,000 units in the first half of this year. (8/28)
In Europe, the car market is also softening as demand returns to pre-recession levels. That is making profits harder to come by in a region where many car companies have long struggled to make money. President Donald Trump’s trade policies are undermining consumer confidence in many markets outside the US and are widely seen as the biggest threat to continued economic growth. (8/28)
Russian EV? Well-known arms and military equipment giant Kalashnikov—perhaps best known for its AK-47 assault rifle—took the world of cars by surprise last week, unveiling what it says will rival Tesla: an electric vehicle that can go 220 miles on a single charge. Critics note that the CV-1 is an ugly retro-design and that Kalashnikov hasn’t yet let observers look under the hood. (8/27)
Coal consumption continues dropping: The US EIA reported that the nation’s power sector consumed 661 million short tons of coal last year, the lowest level since 1983. (8/30)
Wind energy player: The US would be key to Ørsted’s efforts to grow its global footprint. The company has installed about 25% of the installed offshore-wind capacity in the world. Earlier in August, Ørsted made its first major investment in the US when it agreed to buy Lincoln Clean Energy LLC, a Chicago-based onshore wind, and solar company, for $580 million. Bidding for capacity in the US is next on the agenda. (9/1)
Since China has tapped all of its near-shore capacity for wind, Norwegian certification body DNV GL said it would help China develop additional power resources offshore. Huadong Engineering Corp. has contracted DNV GL to provide technical training and feasibility studies for an offshore wind farm. (8/30)
Aussie H2? Australia, one of the world’s top LNG exporters, has a bright future as a hydrogen economy. This is the conclusion from the Commonwealth Scientific and Industrial Research Organization, a federal agency that has, with a new roadmap, joined a growing interest in hydrogen as a renewable alternative to fossil fuels. (8/31)
Ultra air pollution: The Pacific Northwest, sandwiched between Canada’s smoldering British Columbia to the north and six fire-wracked Western US states, is feeling the side effects of one of the worst fire seasons on record. For much of the past several weeks, clouds of choking smog have upended daily life and posed a health hazard for millions here. (8/30)
When heat really hurts: A recent meta-analysis of 60 prior studies showed that unstable temperatures tend to be correlated with conflict. In the US, for example, there is good evidence that road rage, domestic assault, and murder are higher during heatwaves. (8/31)
Tankers with sails? In the 1980s, French ocean explorer Jacques-Yves Cousteau commissioned the Alcyone which used turbo-sails that provided thrust in the direction of travel along with the engines. Shipping executives said similar efforts didn’t catch on with tanker operators because either the costs of such technologies were too high or tests didn’t yield the expected fuel savings. But modern, lightweight and relatively cheap rotating sails show more promise. The cylinders on a Maersk tanker are made with composite materials by Finland-based Norsepower Oy Ltd. and cost 1.2 million to $2.3 million to fit on a vessel, depending on the size of the ship. (8/31)
Could Oil Demand Peak in Just Five Years?
Recent forecasts point to oil growth ending far earlier than many in the industry expect
New estimates are putting increased pressure on big oil companies to clarify how they intend to confront a looming energy transition. Photo: Justin Sullivan/Getty Images
By Sarah Kent
Sept. 10, 2018 7:01 p.m. ET
https://www.wsj.com/articles/debate-heats-up-over-when-era-of-oil-will-end-1536620460
LONDON—The Era of Oil is coming to a close but experts and corporate analysts disagree about just when that will happen.
The time left before global demand for crude peaks is increasingly tightening, according to new projections from industry analysts. Two reports published this week point to an end of oil’s growth within the next five years, far earlier than many in the industry are expecting.
Though most forecasts of oil’s demise project a long tail, the estimates put increased pressure on big oil companies to clarify how they intend to confront a looming energy transition.
Demand for fossil fuels will peak around 2023, as increasingly cost-competitive solar and wind are buoyed by supportive government policies to displace growth in oil, coal and natural gas, according to an analysis by London-based think tank the Carbon Tracker Initiative.
“It’s not a scenario; it’s just obvious,” said Kingsmill Bond, new energy strategist and author of the Carbon Tracker report.
Norwegian risk-management company DNV GL takes a similar view in an analysis released in London on Monday. It predicts oil demand will max out in five years’ time, making way for renewables to dominate an increasingly electrified and efficient energy system.
“The transition is undeniable,” said DNV CEO Remi Eriksen.
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The aggressive forecasts add to a raging debate among energy executives and analysts over what the coming decades may hold for the industry. Mainstream views have shifted from a decade ago, when many fretted over the prospect that oil supply could run out. Now, global ambitions to curb global warming, coupled with cheaper and better renewable technologies, are pressuring assumptions about long-term demand.
Investors are increasingly sitting up and taking notice, demanding big oil companies outline how resilient their businesses are to an energy transition. While the industry unsurprisingly has a more bullish outlook on the commodity, even some big oil companies acknowledge a tipping point may be coming sooner than previously anticipated.
Earlier this year, BP PLC said the world’s appetite for oil could plateau and then begin to decline between 2035 and 2040, acknowledging that renewables like solar power are growing faster than expected. Previously, the company had said crude demand would keep growing into the 2040s. Royal Dutch Shell PLC has said if serious global action is taken to combat global warming, consumption could peak by the mid-2020s. Both companies look at a range of scenarios when planning their strategies and don’t treat such numbers as forecasts.
“As an industry we will have to deal with radical uncertainty on a scale which we have not experienced before,” Shell CEO Ben van Beurden told an industry conference in March. “We ignore that at our peril.”
The International Energy Agency—whose outlooks are often used as an industry benchmark—has also published scenarios in which oil consumption peaks in the 2020s on the basis of aggressive climate action. But its central assumption is still that oil demand will continue to grow into the 2040s. That is also the view of U.S. oil giants Exxon Mobil Corp. and Chevron Corp.
“The oil companies and the IEA think we have decades to go,” Carbon Tracker’s Mr. Bond said. “This is a real turning point…[and] it’s jolly soon.”
Peak Pique
Within the oil industry, the amount of time left before demand peaks is the subject of hot debate
Carbon Tracker: fossil fuel demand to peak in 2023
DNV: 2023
IEA: demand continues to grow out to 2040
Equinor: around 2030
Shell: as soon as 2025, as late as 2040
BP: 2035-40
Exxon: demand continues to grow out to 2040
Chevron: no peak in the near or intermediate future
Wood Mackenzie: mid-2030s
Source: The Companies
Write to Sarah Kent at sarah.kent@wsj.com
Appeared in the September 11, 2018, print edition as 'New Fuels Bring End of Oil Era Nearer.'
Do the Math
Using physics and estimation to assess energy, growth, options
by Tom Murphy
Posted on 2011-10-18
https://dothemath.ucsd.edu/2011/10/the-energy-trap/
Root Pruning Ripens Green Tomatoes
September 21st, 2015
Western Gardener
Jodi Torpey, contributor
http://www.vegetablegardener.com/item/61898/root-pruning-ripens-green-tomatoes
How To Scarify Seeds For Spring Planting
June 5, 2017 by Amanda.
https://www.americanmeadows.com/blog/2017/06/05/how-to-scarify-and-soak-seeds-for-spring-planting/
DIY Chicken Tunnel
See more at: http://www.goodshomedesign.com/diy-chicken-tunnel/
In 2011 the dacha gardens of Russia produced 40% of the nation's food.
How much land do you need to grow all your food? This is a dacha garden in Russia where there is a strong tradition of growing your own food.
http://naturalhomes.org/naturalliving/russian-dacha.htm
Michael Klare: Finite Resources And The Geography of Conflict
No More
Our existence is predicated on the conversion of one energy form into another. In the process of doing that, we give ourselves employment and wages.
Norman Pagettco-author of The End of More, in paperback and kindle on Amazon http://www.amazon.co.uk/dp/B00D0ADPFY email pagett.communications@blueyonder.co.uk
https://medium.com/@End_of_More/no-more-e837750bb035
Our existence is predicated on the conversion of one energy form into another. In the process of doing that, we give ourselves employment and wages
Whether engaging in trafficking human beings, or ferrying vast quantities of oil around, the intent has always been the same, to get rich by that conversion process. To make it work, the process must run faster year on year.
That is the basis of the society we live in. It is all we (collectively) have and do. We might fantasise about a lifestyle that consumes less, but we cannot remain prosperous by taking in each other’s washing and mending each other’s shoes.
If every fuelpump and oilbarrel since oil went into commercial production in 1859, had had OIL KILLS PLANETS printed on it in letters a foot high, we would still have burned the stuff as fast as possible, with or without Rockefeller’s help. We may see him as the epitome of greed, but we’ve all shared in it, willingly and eagerly, even though the wars it spawned killed millions and destroyed the planet we live on.
Wailing weeping and handwringing now will not rectify the mess we’re in, neither will we stop burning oil, despite exhortations from those of learned bent to “do something’?—?-aimed and governments as well ourselves. That ‘something must be done’ is engaging in wish politics, together with a liberal dash of wish economics and wish science.
Oil consumption is not like smoking, with health warnings printed on packets.
Smoking is a lifestyle choice.
Oil is the choice of life or death. Except that we don’t have a choice. We must now consume oil to stay alive.
We have pulled off the neat trick of converting petroleum into food, (to quote prof. Albert Bartlett.)
That has put 7.4 billion people on the planet, 6 billion of whom would not be here without hydrocarbon support.
Remove hydrocarbon fuels, and those 6 billion don’t have a future.
1 Bn people are at starvation level now. We are on course to reach 9 or 10 bn by 2050.
Common sense says that we cannot sustain that number, so something has got to happen within the next 30 years to stop it. This is going to be our ultimate holocaust.
Our lines of growth are promised to climb towards infinity, despite living on a finite planet.
And thinking oneself into a utopian future of renewable energy systems is not going to prevent it. Windfarms and solar panels deliver electricity. Without our (hydrocarbon based) infrastructure, electricity is of very little use, and cannot sustain civilization in any sense that we know it.
Doubters should imagine electric cars running on unmade roads. Or making a single lightbulb. We are headed back to the ‘naked light’ society from whence we came only a few generations back.
We are perhaps expecting to have a future where we will be only mildly inconvenienced by changed (energy) circumstance?—?-where ‘they’ will fix things. Or to extend the fantasy into the surreal, that some ‘new technology’ will be developed to allow business as usual.
We must get real here. Your future, my future is dependent on that business as usual supporting us through a healthy lifespan and into secure old age.
We are all complicit in the madness, everyone demanded (and is demanding) that oil should make princes of us all; governments of whatever stripe have had no choice but to concede to everyone’s demands.
Trump has offered what might be the final straw to clutch at, promising to ‘make America great again’, in denial that it was cheap energy that provided that greatness, (such as it was) in the first place.
And having no other straw to clutch at, millions reach out in desperation.
But of course, we are navigating through the rear view mirror of history, where we see that the faster we burned oil, the richer we got. It seemed to good to be true, which it was. We called everything ‘GDP’, as though the act of work delivered infinity prosperity; when in fact GDP and ‘growth’ were exclusively a result of consuming fossil fuels.
But our leaders still offer that future.
Whether saint or charlatan, they can offer no other.
There is no other.
We might agree that ‘things must change’. They will of course change, but not in ways of our choosing. I can offer the certainty that humankind has never collectively changed unless forced to do so.
That change has invariably been unpleasant, and driven by (short lived) dictators intent on tribal supremacy.
Homo sapiens has existed for 100,000 generations, give or take. Those countless generations have had one overriding factor, that of homicidal intent, driven by the genetic force of survival. That drive has brought us to where we are now. We have perhaps a single generation left in which we might alter our destructive habits.
Can we manage that?
I’d like to believe it to be possible, but oil driven resource wars of the past 100 years would suggest otherwise.
Peak Oil Review 27 August 2018
By Tom Whipple, originally published by ASPO - USA
https://www.resilience.org/stories/2018-08-27/peak-oil-review-27-august-2018/
Quote of the Week
[In Mexico] “Production peaked in 2004/2005 at just over 3.5 million b/d, so the overall decline is approaching 50%…Only three years since 1999 have had reserve replacement ratios greater than 100%. Many years’ numbers have actually been negative, some of them significantly so, and the estimated ultimate recovery has been revised slightly downwards overall.” George Kaplan, oil industry analyst
1. Oil and the Global Economy
The oil price surge which began two weeks ago continued last week with prices rising by $4-5 a barrel to settle on Friday at $68.72 in New York and $75.82 in London. The markets are still conflicted as to whether a reduction in demand occasioned by the trade war or a drop in supply stemming from the Iranian sanctions, the Venezuelan collapse, and the slowing growth of US shale oil production will dominate the immediate future. Last week we learned that China may continue buying US crude, but will swap or sell the oil to third countries so that crude imports to China would not come directly from the US. Third party crude would not be subject to any tariffs imposed on US crude or give the appearance that Beijing is backing down in the trade confrontation with Washington. Any crude that comes from the US would reduce China’s dependence on the volatile Middle East.
Last week’s price rise was helped by a weaker US dollar, a 13-rig decline in the number of active oil and gas rigs in the US, and an unexpected 5.8 million barrel drop in US commercial crude inventories. Refinery utilization rates remained unchanged at 98.1 percent of total capacity, the highest since 1999. Gasoline stocks rose 1.2 million barrels, compared with analysts’ expectations in a Reuters poll for a 488,000-barrel drop. Distillate stockpiles, which include diesel and heating oil, rose by 1.8 million barrels, versus expectations for a 1.5 million barrels increase, the EIA data showed.
The EIA estimated that US crude production rose by 100,000 b/d to 11 million b/d the week before last. These weekly estimates are becoming controversial as actual production which takes several weeks to compile has been showing a much lower production figure. Coupled with the increasing costs of producing and shipping shale oil, these weekly EIA estimates should be taken with a grain of salt until real data is released.
OPEC: The EIA estimates that members of OPEC earned about $567 billion in net oil export revenues in 2017. This increase of about 29 percent from the $441 billion made in 2016 came mainly as a result of the increase in average prices during the year and the rise in OPEC net oil exports. Saudi Arabia accounted for the largest share of total OPEC earnings with $167 billion in 2017, representing nearly one-third of total OPEC oil revenues. EIA expects that OPEC net oil export revenues will rise to about $736 billion in 2018 due to much higher prices and increased exports.
OPEC and the other participating oil exporting producers are expected to agree on a mechanism to monitor their crude production before the end of the year. A committee that will meet in Algeria on Sept.23, known as the JMCC, is chaired by Saudi Arabia and includes OPEC members Algeria, Kuwait, United Arab Emirates and Venezuela, as well as non-OPEC members Oman and Russia. Iran asked to attend the meeting to defend its market share which could be impacted by US sanctions due to take effect in November. Tehran is asking that other OPEC members do not steal its share of the global market while its exports are sanctioned.
US Shale Oil Production: Drillers cut nine oil drilling rigs this week, the largest reduction since May 2016, following a recent decline in crude prices. The oil rig count, which fell to 860 last week, is still much higher than last year when only 759 rigs were active.
Drilling activity in the Bakken has seen a gradual expansion this summer on higher oil prices, but it now faces growing problems as the region struggles to process a rising volume of associated gas and an increasing water cut. It’s not an issue if water production increases along with oil. However, it’s a severe problem if by-product wastewater rises a great deal more than oil production, and that seems to be what has taken place in the Bakken over the past two years. According to the North Dakota Department of Mineral Resources, the Bakken produced 201 million barrels of oil in the first six months of 2018. However, it also created 268 million barrels of wastewater.
The trend of an increasing water cut is not good. It costs drillers some $4-5 a barrel to get rid of the wastewater down disposal wells. In Oklahoma, these disposal wells have been blamed for causing minor earthquakes, and their use is now regulated. This situation will have to be followed closely for some are saying that it suggests that peak production from the Bakken is coming soon. Others are saying that the increasing water cut is an artifact of the new drilling technology which has raised the amount of water used to frack a well from 60,000 barrels per completion to 200,000. Simple arithmetic suggests that it is difficult to believe that an extra 140,000 barrels forced down each new well during the fracking process will account for the massive increase in the water cut in recent years.
A new Duke University study of the water used for fracking and the wastewater cut coming from shale oil wells finds that the amount of wastewater increased by 1,440 percent between 2011 and 2016. Over the same period, the total amount of water used for fracking rose roughly half as much, 770 percent. Drillers have been making an effort to increase the quantity of fossil fuels they can extract from each well by drilling longer horizontal laterals and using more sand, water, and chemicals when fracking. But the water use and wastewater production per well have been growing even faster than the per-well fossil fuel production, the researchers found, labeling the water demand and wastewater growth “much higher” than the oil or gas increases. This increased demand for water is bad news for arid areas like the Permian Basin in Texas and New Mexico, where underground water supplies are already taxed by residential and agricultural demand.
Some observers are starting to say that water for fracking, and the disposal of wastewater from shale oil and gas wells, are about to become the primary factors that will limit production from fracked wells in coming years.
A survey of 33 shale companies by Rystad Energy found that while the group increased spending by about 8 percent, they only increased their expected amount for this year by 1.4 percent. “This disconnect might suggest that the shale industry requires more capital than before to achieve healthy production growth.” There are some signs that the Permian, for instance, is running into some productivity problems, raising the possibility that the highly touted “efficiency gains” over the past few years are reaching their limit.
2. The Middle East & North Africa
Iran: The efficacy of the US sanctions on Tehran’s oil exports remain the top issue. The evidence is mounting that secondary sanctions that Washington says it will place on any nation or company doing business with Iran is starting to have an effect. There have been reports that Tehran’s exports are already down by 700,000 b/d suggesting that the current US goal of cutting crude shipments by 1 million b/d may be feasible.
The war of words between Washington and Tehran continues. Last Wednesday Iran warned it would hit US and Israeli targets if it were attacked by the US after President Trump’s security adviser said Washington would exert “maximum pressure” on Tehran going beyond economic sanctions.
China’s shipowners are avoiding carrying Iran’s oil, forcing Tehran to use its own tankers to supply top customers. All 17 ships used to transport oil from Iran to China in July and August are owned by the state-run National Iranian Tanker Co., according to ship-tracking data compiled by Bloomberg. Almost half the vessels used in the prior three months were owned by Chinese. The shift in carriers shows how trade is being affected even before US sanctions come into effect in early November.
Two of Iran’s biggest OPEC rivals, Saudi Arabia and Iraq, are taking over its European oil market share by increasing production of their lookalike crude grades. Iran’s crude has been normally purchased by refiners in China, India, Japan and South Korea, and some customers in Turkey and the European Union. Buyers seeking an alternative cannot just opt for any crude on the market but must import crude grades compatible with, and optimized for their refineries.
Tehran is already complaining about the shift to OPEC saying that no member country should be allowed to take over another member’s share of oil exports. As Washington reimposes sanctions aimed at cutting off Iran economically from the world, the Iranian people are feeling isolated. A recent spike in the cost of airfare is making travel to the world expensive, and major air carriers are now suspending service to Iran. On Thursday, British Airways and Air France announced they would end direct flights to Tehran, following a similar decision by KLM last month.
Iran’s oil minister announced last week that France’s Total has officially left Iran after the United States threatened to impose sanctions on companies that do business in the country. Total is holding talks to transfer its 50.1 percent stake to state-owned China National Petroleum Corp. but is having trouble reaching an agreement on price. Total’s pullout from the South Pars project is the most substantial blow Iran has suffered as yet from the threat of renewed US sanctions.
Iraq: Southern Iraqi exports in the first 19 days of August averaged 3.7 million b/d, up 160,000 b/d from July’s 3.54 million – the existing monthly record. The increase follows the June OPEC+ meeting that allowed oil producers to increase production after they had been curbed during the previous 18 months. Before the June OPEC meeting, however, Iraq had been boosting exports from southern terminals to offset a halt in shipments from the northern Kirkuk region last October after Iraqi forces seized control of oilfields there from Kurdish fighters.
Northern exports also increased in August, averaging about 350,000 b/d so far, up from about 300,000 b/d in July. That is still far below levels of more than 500,000 b/d in some months of 2017.
Iraq’s state-run Basra Oil Company and the US’s Chevron agreed to begin implementing a memorandum of understanding to develop fields in the south of the country. The agreement outlines a program to develop two oil fields in southern Iraq, including studies to survey the reservoirs and extraction operations. In the last few years, most American participation in the development of southern Iraqi oil fields has declined due to the unfavorable terms that Baghdad has required foreign oil companies to accept.
Saudi Arabia: Most of the news from the Kingdom last week concerned the fate of the Aramco IPO which was the be the centerpiece of Crown Prince bin Salman’s efforts to finance reforms to strengthen his economy. Early last week, there were reports that Saudi Arabia had called off the domestic and international stock listing of Aramco, which had been touted as the most significant such deal in history. The Saudi government continues to insist that it remains committed to an initial public offering of Aramco, but says the listing would go ahead “at a time of its own choosing when conditions are optimum.”
The King instructed Saudi Aramco to acquire the Public Investment Fund’s 70 percent stake in Saudi petrochemicals maker Sabic, raising some $70 billion for the fund by moving money from one state coffer to another. To pay for the stake in Sabic, Saudi Aramco is planning to raise tens of billions of dollars from international banks, which some advisers say is an alternative to an Aramco IPO that achieves much of the same objectives.
Some are saying that the decision to shelve what was billed as the most significant share sale ever is a major blow to the credibility of Crown Prince Mohammed bin Salman. The decision raises doubts about the management of the process as well as the broader reform agenda, sapping the momentum generated by Prince Mohammed’s dramatic 2030 Vision announcement in 2016 that helped propel him to power as the de facto head of the Saudi government.
3. China
On Thursday China implemented tariffs on the second round of US goods, targeting oil products and coal for the first time. This move is in retaliation for US tariffs effective the same day and paving the way for crude oil and LNG to be hit next. These tariffs come in the midst of trade talks between the US and China on Wednesday-Thursday in Washington. The two days of talks aimed at easing trade tensions ended without an apparent breakthrough, ensuring that the dispute will continue indefinitely. At the end of the negotiations on Thursday evening, Lindsay Walters, the White House deputy press secretary, said the two sides had “exchanged views on how to achieve fairness, balance, and reciprocity in the economic relationship” but gave no indication that any progress had been made.
The world’s two largest economies have now slapped tit-for-tat tariffs on a combined $100 billion of products since early July, with more in the pipeline, adding to the risks for global economic growth. US businesses are not happy with the Trump administration. The new tariffs on $200 billion of Chinese imports will force Americans to pay more for many items they use throughout their daily lives.
China’s banking regulator has ordered banks to boost lending to infrastructure projects and exporters as the government seeks to bolster economic confidence. Since the tariffs were announced on July 6, China’s currency and stock markets have fallen, reflecting investor nervousness about slowing economic growth and the longer-term impact of the trade war. The benchmark CSI 300 index has fallen more than 15 percent, and pressure has been building on the renminbi, which fell almost 7 percent against the dollar to a low of 6.93 on August 15.
While China’s imports of crude and LNG from the US have fallen considerably since the trade war began in July, Beijing backed off on the idea of sanctioning US oil earlier in August when the government pulled oil from a proposed tariff list. Last week Reuters reported that China’s Unipec, the trading arm of Asia’s biggest refiner Sinopec, will resume purchasing “some” US crude in October after a two-month halt. Before the trade dispute broke out, China overtook Canada as the largest importer of US crude in the first five months this year, importing an average of nearly 350,000 b/d.
As China’s domestic oil production shrinks and its need for LNG to replace the coal smoke which is befouling its largest cities increases, the need to keep open diversified sources of oil and natural gas is becoming more critical every day. Given the political instability in the Middle East with frequent threats to close the Straits of Hormuz, Beijing can no longer afford to shut itself off from a significant source of crude and LNG merely to score points in a trade war. Should oil exports from the Middle East ever be restricted, Beijing’s economy would be seriously harmed.
4. Russia
At US Senate hearings last week, a Treasury official said that Washington’s sanctions have curtailed investment in Russian oil and gas exploration projects necessary to grow Russia’s production. Total foreign direct investment into Russia has declined more than 5 percent since 2013, while US investment has fallen by 80 percent since then. There are bills in Senate committees which seek to increase economic pain throughout Russia’s banking and energy sectors and sovereign debt markets.
According to Russia-based analysts, the ‘bill from hell’ of hard-hitting sanctions against Russia that US senators introduced earlier this month is unlikely to have a wide-ranging impact on Russia’s oil industry, because Russian firms now rely almost entirely on domestic and Chinese banks for funding, and have lessened their dependence on Western drilling technology.
However, it was Russia’s natural resources ministry that said last week that the sanctions had hampered natural gas project developments in the country. In a report on oil and gas resources and their development for the period 2016-2017, the ministry said that sanctions limit the flow of foreign investment, new technologies, and equipment for the sector and complicate the development of new projects especially in offshore areas and in hard-to-extract resources such as shale oil. In the period 2016-2017, not a single significant gas project was launched, while gas firms focused instead on working on already operational projects.
5. Nigeria
Shell shut-in the Trans Ramos pipeline which feeds into Nigeria’s Forcados oil export terminal, to clean up crude oil spilled from a rupture in the pipeline last week. The pipeline, which has remained shut-in since the incidents, supplies 100,000 b/d of crude to the 200,000-250,000 b/d Forcados Oil Export Terminal in the western Niger Delta. As usual, Shell is forbidden by the government from revealing the cause of the “spill,” however, attacks on the Forcados pipelines as well as on the export terminal halted exports for most of the period between February 2016 and May 2017.
A report titled Stabilizing Nigeria’s Volatile Economy, says that between 1970 and 2014, Nigeria benefitted from five oil booms but never used the $1 trillion it earned during this period to expand the country’s economic base. The Obasanjo Administration’s economic reforms of 2003 to 2007 was the first attempt to break the pattern through innovation of a savings mechanism known as the “Excess Crude Account” into which extra oil revenue from oil was kept. The account was so successful that at the end of that administration in 2007, it had accumulated $17 billion in excess revenue; however, this effort was not sustained by governments.
6. Venezuela
A growing number of migrants are fleeing the economic meltdown and political turmoil in Venezuela, threatening to overwhelm neighboring countries. Officials from Colombia, Ecuador and Peru will meet in Bogota next week to seek a way to deal with the crisis. Ecuador and Peru have tightened entry rules for Venezuelans, requiring them to carry passports instead of just national ID cards. In Brazil, rioters drove hundreds of emigrants back over the border. The UN estimates that 2.3 million people, some 7 percent of the population, have left Venezuela since 2015. On Friday, The UN’s migration agency said the situation is building toward a “crisis moment” comparable to events involving refugees in the Mediterranean.
Last week the government issued new bank notes, with five fewer zeros on them. However, the biggest denomination bill, the 500-bolívar note, is worth only $8.3, even at the official exchange rate. The government also announced a 3,000 percent rise in the minimum wage which is likely to raise prices further. PDVSA is preparing to increase fuel prices in the domestic market to international levels next month after two decades of frozen rates and untold millions of dollars lost in subsidies and smuggling. Daily gasoline consumption is estimated at 190,000 b/d in Venezuela, of which 83,000 b/d are imported.
The only good news for the country recently is that PDVSA settled with ConocoPhillips over a long-standing debt issue that was allowing ConocoPhillips to seize PDVSA’s refining assets in the Dutch Caribbean, a devastating blow that compounded fiscal and operational problems. Without the processing facilities on the islands of Curacao and Aruba, PDVSA’s oil exports plunged deeper in the second quarter.
On the flip side, however, A US judge has granted a Canadian company the right to go after the US refineries of Citgo which belong to Venezuela. This judgment is intended to collect on a $1.4 billion award stemming from the nationalization of a gold mining operation by Caracas ten years ago. The refineries have already been pledged as collateral for a loan from Russia and a Venezuelan bond issue.
The Bolivarian Republic of Venezuela is still producing somewhere between 1 million and 1.3 million barrels of crude per day. Should that be reduced substantially due to the domestic turmoil, this development along with the new sanctions on Iran could move oil prices significantly higher in the coming year.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
Already tough transport conditions for barges operating in low water on the River Rhine look set to worsen in the coming weeks. The drought is fueling concerns over the supply of commodities such as oil products, coal, and petrochemicals that are shipped on the major Northwest European transport artery. (8/23)
Merkel rethinking? Castigated by US President Donald Trump as relying too much on Russian gas supplies, German Chancellor Angela Merkel headed to Azerbaijan last week to discuss the development of a southern pipeline to deliver gas to Europe from the Caspian. The visit underscores Merkel’s openness to finding alternative sources of affordable gas even as she remains committed to the Nord Stream 2 pipeline, which will carry gas directly from Russia under the Baltic Sea to Germany. (8/23)
Kuwait expects to sign an agreement with Iraq on the two countries’ joint oil fields by the end of this year and to return to producing oil in the region that it shares with Saudi Arabia soon. Production from Kuwait’s joint oil fields has been shut down since the 1990 invasion by Iraq. After years of squabbles over how to divide and operate the fields, it looks like Kuwait and Iraq may have finally had a breakthrough in talks. (8/23)
Sudan and China are close to signing new deals on oil and gas exploration that Chinese companies would carry out in the African country. The first project of Chinese companies overseas was in Sudan, and China has long been a strategic partner in the oil and gas sector of Sudan. (8/25)
South Korean refiners’ ability to process some of the densest crude grades continues to shine with Hyundai Oilbank’s latest plan to expand and further upgrade some of its cracking facilities, painting a rosy picture for Mexico’s Maya crude exports to Asia’s fourth-biggest energy consumer. (8/20)
Papua New Guinea’s LNG: After several months of what can only be only called bad PR and troubling news coming out of the ExxonMobil-led $19 billion Papua New Guinea LNG project, finally some good news has broken. Project partner Oil Search, which holds a 29 percent stake, said the project had agreed to a deal to supply LNG to a unit of British oil giant BP. (8/30)
Egyptian dominance? The natural market gas in the Eastern Mediterranean is in full ebullition – with Egypt determined to be the center of this regional marketplace. The country faces challenges, including maintaining equidistance from the region’s various tensions, reforming its legal framework for regional gas deals and effectively communicating its activities to the Egyptian population. (8/20)
Panama is carrying out studies for potential oil exploration, hoping that recently discovered oil fields in neighboring Colombia close to Panama’s border could extend into Panama. Panama is 100-percent dependent on crude oil and refined oil products imports. A geological survey, the first in 30 years, found signs that there could be oil and gas in Panama’s section of the Caribbean Sea in an area connected with three natural gas wells in Colombia. (8/25)
In Mexico, the incoming administration won’t propose changes to the nation’s constitution, which was amended in 2013 to allow for private investment in oil and gas, but will use its majority in Congress to tweak the hydrocarbons law. (8/23)
Mexico’s oil production is in decline, though not as steep as it was expected to be. For June crude and condensate production was 1.87 million b/d, down 25,000 b/d from May and 170,000 b/d year over year. Production peaked in 2004/2005 at just over 3.500 million b/d, so the overall decline is approaching 50%. (8/21)
Mexico and NAFTA: oil and gas is proving to be a sticking point in the NAFTA renegotiations, with the incoming Mexican president hoping to exclude the chapter on energy from the trade deal. (8/23)
In Canada, the nation’s energy regulator reported the average daily amount of crude oil exported by rail has nearly doubled from the previous year. Canada ships nearly all of its oil exports to the United States. (8/24)
Canada’s gas-rich province of Alberta is looking to recreate the building boom spreading along the US Gulf Coast, where inexpensive natural gas generated billions of dollars in investment by petrochemical companies. Alberta’s prices that are about one-third those at the US Gulf Coast could turn into a competitive advantage to attract petrochemical companies. Such investment would provide a badly needed market for oil and gas within the landlocked province, where energy companies struggle to reach buyers farther away. (8/23)
The US oil rig count decreased by nine last week, the biggest reduction since May 2016. It now sits at 860, according to Baker Hughes energy services firm. (8/25)
Alaska’s North Slope is a “Super Basin” awaiting a “resurgence” in oil production, according to a new report by IHS Markit. Over the next eight years, oil production could rise by 40 percent, even though output has been in decline for decades. Prudhoe Bay can claim to be the most productive oil field in US history, having produced 12.5 billion barrels of oil as of last year. But it also peaked in the 1980s and has been losing output ever since. Yet based on recent discoveries, IHS estimates that the North Slope Basin holds 38 billion barrels of oil equivalent (boe) in remaining recoverable resources. That figure includes 50 trillion cubic feet of natural gas and 28 billion barrels of oil. (8/24)
TX oil exports: The Texas Gulf Coast oil terminals sent abroad more crude than they received in April for the first time ever. During that month, crude oil exports from the Houston-Galveston port district exceeded imports by 15,000 b/d. Over the next month, the advantage of exports over imports welled further, to an impressive 470,000 b/d. Total US oil exports in May hit a record of 2 million b/d, with Houston-Galveston’s share of the total at a record-breaking 70 percent. The bulk of crude oil exports from the Houston-Galveston area went to China, Canada, Italy, and the UK, with exports to China averaging 300,000 b/d in both June and July. (8/22) [Pop quiz: what is the U.S.’s current rate of net imports of crude oil and petroleum liquids? In the 3 million b/d range…]
GOM lease: The Trump administration on Wednesday held a new auction for offshore drilling in the Gulf of Mexico (GOM), yielding some $178 million in winning bids, a slight improvement from its last major lease sale in March which was at the time was called a major setback for the president’s plan to increase oil and gas investment in the region. (8/21)
Utah is a yawn amid the drilling frenzy that has upended the energy picture in recent years. It accounts for just one of every 100 barrels of oil produced nationwide. But a couple of executives who have spent decades hunting for oil across the Middle East, South America and Canada are betting that the next energy patch will be near here, in a remote stretch of craggy desert known as Asphalt Ridge. They are trying something that has repeatedly failed in Utah: mining the state’s enormous deposits of oil sands, an arduous process of extracting oil from hard rock. (8/22)
Cheaper gasoline: With some exceptions, motorists throughout the United States are gradually paying less for regular unleaded gasoline. According to AAA, the national gasoline price average for August 20 is $2.84 per gallon – three cents lower than the price at the beginning of the month. With the exception of several states, most US motorists are enjoying “slow, but steady pump price drops” as summer draws to a close. (8/21)
Trumping efficiency: Conserving oil is no longer an economic imperative for the US, the Trump administration declares in a major new policy statement that threatens to undermine decades of government campaigns for gas-thrifty cars and other conservation programs. The position was outlined in a memo released last month in support of the administration’s proposal to relax fuel mileage standards. The government released the memo online this month without fanfare. (8/21)
SPR release: The US Dept. of Energy is offering 11 million barrels of oil for sale from the nation’s Strategic Petroleum Reserve ahead of sanctions on Iran that are expected to reduce global supplies of crude. The delivery period for the proposed sale of sour crudes will be from Oct. 1 through Nov. 30. The sale appears to be designed to show the Trump administration is taking measures to restrain energy price increases ahead of the sanctions. Trump has proposed the sale of half of the stockpile — which currently totals 660 million barrels — to cut the budget deficit. Congress has so far authorized the sale of around 240 million barrels between 2017 and 2027. (8/21)
Political release? An 11-million-barrel sale from the Strategic Petroleum Reserve over two months—or 183,000 b/d—likely won’t do much to offset the impact of sanctions, which the administration estimates will remove 700,000 to 1 million barrels a day of Iranian crude from the global market by early November. (8/22)
The turnover of household vehicles has slowed since 2009, based on US Department of Transportation surveys of household vehicle travel. The 2017 National Household Travel Survey reported that the average vehicle age—including cars, trucks, and vans—has increased from 9.3 years in 2009 to 10.5 years in 2017. The slowing of vehicle turnover has implications for transportation fuel consumption because newer vehicles tend to have better fuel economies. (8/22)
Gas vs. coal in MISO: After several years of increased coal-to-gas switching across the Midcontinent Independent System Operator service area, the region is expected to become even more bullish for gas as additional coal retirements loom while multiple new gas-fired plants are slated to enter service over the next few years. Through August of 2014, coal plants has a 61% share of the total MISO market. This year, during the same time period, coal share had dropped to just 40%. (8/25)
India’s coal imports appear headed for another strong month in August, raising the question as to why the usually cost-sensitive market hasn’t scaled back purchases given a surge in prices to the highest in nearly seven years. (8/20)
Wind turbines have been getting bigger as industry players vie for ever more powerful designs, climbing from under a megawatt to the brink of the double-digit threshold. (8/25)
Army going solar: The US Army has increased its investments in solar power and is eyeing further opportunities to work with the private sector to develop projects, despite the Trump administration’s skepticism about renewable energy. Michael McGhee, who leads the US Army’s Office of Energy Initiatives, told the Financial Times that installing solar panels at army bases could improve resilience against attacks or natural disasters, and provide cost-effective electricity supplies. (8/25)
Battery progress: Researchers at Jülich Forschungzentrum have introduced a new concept battery that allows currents up to ten times greater during charging and discharging than previously described in the literature. Their battery takes less than an hour to recharge. The battery, described in a paper in the journal ACS Applied Materials and Interfaces, uses a monolithic all-phosphate concept. (8/21)
Battery progress #2: Researchers at the University of Michigan have developed a new rechargeable technology for batteries that could have double the power output compared to today’s most widely used batteries, without catching fire or taking up additional space. This new breakthrough—using a ceramic, solid-state electrolyte in lithium metal batteries–could dramatically extend the range of electric vehicles. (8/20)
PM 2.5 pollution shortens human lives by more than a year, according to a new open-access study from a team of environmental engineers and public health researchers published in the ACS journal Environmental Science & Technology Letters. Better air quality could lead to a significant extension of lifespans around the world. (8/25)
Clean air mandate: The City of London is considering banning non-electric vehicles from a special “low-emission” street, in a pilot program that underscores the severity of the air pollution crisis plaguing the financial heart of the British capital. The City of London, often known as the Square Mile, is home to several of London’s worst hot spots for nitrogen dioxide pollution, because of its narrow roads, high buildings and congested traffic. (8/21)
Scorcher! The entire continental US ranked hottest in 123 years of records for the 3-month period May-June-July at 70.9 degrees F. Those records go back to 1895. (8/21)
Aussie denial: Mile after mile of the Great Barrier Reef is dying amid rising ocean temperatures. Hundreds of bushfires are blazing across Australia’s center, in winter, partly because of a record-breaking drought. The global scientific consensus is clear: Australia is especially vulnerable to climate change. And yet on Monday, Australia’s prime minister, Malcolm Turnbull, abandoned a modest effort to reduce energy emissions under pressure from conservatives in his party. And on Tuesday, those same conservatives just missed toppling his government. What on earth is going on? (8/21)
The Arctic Ocean’s thickest and oldest sea ice is located to the north of Greenland and in the Canadian Archipelago. The seawater in this area is frozen, even in the summer. During the current freakish weather year, records have been broken for heat waves, floods, droughts, and wildfires in the world’s temperate zones; it also broke records in the Arctic, the fastest warming region on Earth. In an ominous sign of biosphere collapse, The Guardian reports that these frozen waters have been opened up not once, but twice so far this year due to warm winds (that tear the ice from where it’s fastened at the coastal bedrock) as well as climate change driven heatwaves in the northern hemisphere. This has never happened before and prompted Thomas Lavergne, a scientist at the Norwegian Meteorological Institute in a retweet to describe the phenomenon as “scary”. (8/22)
Peak Oil Review 20 August 2018
By Tom Whipple, Steve Andrews, originally published by ASPO - USA
https://www.resilience.org/stories/2018-08-20/peak-oil-review-20-august-2018/
Quote of the Week
“Climate change is no longer coming, it’s here. And we are living with it every day.” Geisha Williams, CEO of PG&E, wrote in an email, hoping to offload some of the blame for several of the last 12 months’ fires from PG&E itself.
1. Oil and the Global Economy
Crude prices were up Thursday and Friday of last week but still closed with a seventh consecutive weekly loss for WTI — the longest losing streak since 2015. Fears that the multiple escalating trade wars will lead to a drop in global demand are trumping the warnings that the lack of sufficient investment and the beginning of problems with US shale oil output could lead to production shortfalls in the months ahead.
However, Chinese demand for oil still tops the list of trader concerns. “One of the biggest concerns is that China’s demand numbers are coming down if China’s GDP growth is slowing,” said one US observer. US futures closed out the week at $65.91 and London closed at $71.83. Due to transportation problems, some US shale oil is selling for as much as $10 or more below the NY futures prices. These prices are not helping the profitability of some US shale oil producers.
Even some well-informed speculators have been caught off guard by the sudden and unexpected drop in prices during the last two months. Two of the world’s largest energy-focused hedge funds, Andurand Capital and BBL Commodities, suffered double-digit percentage losses in July as oil prices plunged.
Despite the prices declines of late, some bullish speculators believe that we will see much higher oil prices within two years. The logic is that the Iranian sanctions seem to be on course to take roughly 1 million b/d off the oil market and that there is insufficient quick ramp-up spare capacity elsewhere to make up for the difference. Some are talking of oil prices reaching $150 a barrel, especially if the US sanctions do succeed in cutting Iranian exports by more than 1 million b/d.
Bank of American recently said that although trade wars are a significant downside risk to oil demand, it remains “much more concerned” about the sanctions on Iran. “For every 1 million b/d imbalance, we see a price impact on Brent of around $17.” For the next year or so, the fate of oil prices seems to be in the interaction of the various trade wars with the efficacy of the Iranian sanctions. This interaction could leave prices anywhere from $60 to $150 a barrel which is why the markets are so confused. We seem to be in unknown territory.
OPEC: According to its monthly report, the cartel’s crude oil production was up 41,000 b/d in July, but that was after June production was revised down by 43,000 b/d leaving production down 2,000 b/d from what was reported last month. Secondary sources say Saudi Arabia production in July, was down by 52,800 b/d; however, the Saudis claim they produced some 200,000 b/d less. Both numbers have been called into question as Saudi production has become a major political football in the Iran sanctions controversy. Secondary sources say Iranian production was down 56,300 b/d in July, but Tehran says said they were up 4,000 b/d.
US Shale Oil Production: The EIA is backing off on some of the optimistic overestimates it has been making about the growth of US shale oil output. US unconventional oil production is forecast to increase to 7.522 million b/d in September, up 93,000 b/d from August – the smallest month-on-month growth projection since November 2017. Last month, the EIA projected domestic oil output to grow in August by a relatively high 143,000 b/d. Now, “We more and more worry …that production growth is slowing,” EIA Senior Analyst Jozef Lieskovsky said recently.
Of all the US shale oil basins, the EIA projects the Permian to show the biggest monthly growth in September at 34,000 b/d, to 3.421 million b/d, although that is less than half the 73,000 b/d increase that was projected for August, according to the EIA’s latest Drilling Productivity Report. The EIA also expects the Eagle Ford Shale play to grow by 24,000 b/d to 1.448 million b/d in September. That is less than the 35,000 b/d of oil growth that the agency predicted last month.
While output in the Permian basin is already starting to slow down, primarily due to pipeline constraints, there is information that suggests that shale drillers are bumping up against a ceiling for gains in productivity and efficiency. New data from the EIA shows a slowdown in the amount of oil that the average rig can produce from a new well in the Permian. In September, the EIA expects new-well production per rig to fall by 10,000 b/d in the Permian, compared to August levels. That means that when a company drills a new well, that rig will produce a little less oil than it did when compared with how much oil the average rig produced a month earlier.
One industry observer recently noted that, “We believe that the short-cycle nature of shale exploitation and the intensity of activity in the Permian means that production from Tier 1 geological locations (e.g., those with the best pay, the optimum pressure) is starting to move to Tier 2, which is unable to achieve the same rates of productivity.” The availability of Tier 1 geological locations in the Permian is one of the most critical issues for the future of global oil production. The IEA and the EIA have been saying that rapid growth of oil production in the Permian over the next few years will be enough to offset production declines elsewhere and is the key to preventing shortages and much higher prices. If the Permian is indeed running out of Tier 1 “sweet spots” then peaking of global oil production may be closer than many believe.
EIA did increase its outlook for the Bakken Shale over last month, predicting 17,000 b/d of increased production with September, coming in at 1.314 b/d. That compares to 15,000 b/d EIA had projected for August. It should be noted, however, that the more accurate North Dakota State report for June says that oil production fell by 20,000 b/d from May due to the associated production of more natural gas than can be flared legally. According to the North Dakota government, some drilling companies voluntarily shut in some oil production during June to stay in compliance with the gas flaring policy.
June was the third straight month producers were unable to keep flaring within state regulations of 15 percent or less of total natural gas production. Producers burned off 15.5 percent in April, 17 percent in May, and 16.8 percent in June. Starting November 1st, only 12 percent of associated gas can be flared before fines for over-flaring begin. Associated natural gas production has increased by about 200 million cf/d since March to 2.3 billion cf/d. Some new wells are coming online in areas where there are not adequate gathering lines and processing facilities to process the natural gas. Some observers have noted that in some areas, shale oil wells are producing more gas than originally expected.
Another problem is starting to be recognized by close observers of the shale oil industry. Oil producers are drilling too many horizontal wells near one another, and when they frack the newer wells — known as child wells — they “steal” oil from the older wells thereby lowering the older wells productivity or even killing their production completely. The potential costs of these “frac hits” and tight well spacing aren’t currently known by the industry, but there is no doubt that they are costing money and contributing to production declines.
The issue of shale oil profitability is still with us. This year was supposed to be different in that the US shale industry would finally start earning profits due to more efficient production techniques and higher prices. However, a new report in the Wall Street Journal says that the shale industry is still mostly unprofitable. The paper found that roughly 50 major US oil producers burned through $2 billion more cash than they generated in the second quarter.
While shale drillers succeeded in lowering costs during the oil market downturn that began in 2014, those efficiency gains are inadequate to support profitable shale oil production today. Beginning last year, a renewed drilling frenzy, particularly in the Permian, has led to a rebound in costs. Many shale executives had promised that the cost efficiencies were structural, locked in, and would not reverse. But that is now looking to be overly optimistic.
The Journal reports that more than a dozen shale companies announced in their second-quarter earnings reports that they either would have to spend more to produce the same amount of oil and gas, lowered this year’s production guidance, or they missed second quarter production figures. When more pipelines come online over the next few years, drilling activity likely will pick up again and drillers will rush to complete the backlog of drilled but uncompleted wells which has exploded over the past 18 months. Whether this helps the lack of profitability remains to be seen.
2. The Middle East & North Africa
Iran: The pressure of the impending US sanctions is increasing discord in Tehran as the country braces for another period of hardships and austerity. Last week, Iran’s Supreme Leader Ayatollah Ali Khamenei accused his government of economic mismanagement and said it needed to improve its performance to help the country better weather the newly reimposed sanctions. He also rejected President Trump’s offer of unconditional talks to improve bilateral ties.
There is much discussion in the press of just which countries will, or will not, abide by the US sanctions and Washington’s efforts to reduce Tehran’s oil exports to zero. German state-owned rail operator Deutsche Bahn announced that it is phasing out projects in Iran. These projects involved restructuring and reorganizing the Iranian state railway, RIA. Several European companies have suspended plans to invest in Iran due to the US sanctions, including French oil major Total as well as carmakers PSA, Renault, and Daimler.
Other Iranian customers are having trouble complying with the US request to cut economic ties with Iran. South Korea is seeking a sanctions waiver from the US to continue importing Iranian condensate, saying that it is hard to find alternative sources. A major question mark is India, a fast-growing energy market and a major consumer of Iranian oil and natural gas. When the new sanctions were announced, India, which depends on Iran for 80 percent of its energy requirements, began cutting imports from Tehran. However, last week, Bloomberg reported that India was only preparing to reduce its imports of Iranian oil by half, to earn a waiver from US sanctions. New Delhi plans to argue that it can’t obtain energy products from any other producer at competitive prices.
The major issue is what China will do about the sanctions. The new US special representative for Iran said last week that the Trump administration is prepared to impose sanctions on all countries that buy oil from Iran after the November deadline, including China. Beijing has said many times that it has no plans to comply with the US sanctions that are due to be reimposed on Nov. 4
As pushback from India, South Korea, and China mounts, Washington is beginning to reconsider the scope of its Iran embargo. The administration now is projecting a 50 percent reduction in Iranian exports when sanctions are fully imposed. Under this scenario, Iran’s oil exports would fall to about 1 million b/d, the level reached during the 2012-2014 sanctions.
Iraq: Kurdish officials are saying that Iraq and Turkey must reach a deal with Erbil to export oil from the Kirkuk fields in northern Iraq via Kurdistan and Turkey. Around 300,000 b/d that was pumped and shipped from the Kirkuk region have been shut in since Baghdad moved in last October to take control over the oil fields in Kirkuk from Kurdish forces.
The Basra Oil Company and Chevron announced last week that they have agreed to terms of an agreement that could help boost production from the state-run Luhais, Tuba, and Subba fields.
Unrest continues around Basra. On Thursday, dozens of Iraqis staged a sit-in to protest the reported death of a protester and the injury of several others by the security forces. Earlier last week, Iraqi security forces forcibly dispersed two demonstrations in Basra — one near the West Qurna 2 Oilfield and another in the city’s Ezz al-Din Salim district. According to an Iraqi military source, the protest dispersals left at least one demonstrator dead and another 20 in police custody. The protesters had set up tents outside the governor’s office on Wednesday and announced the launch of an open-ended sit-in “to protest police heavy-handedness.
Saudi Arabia: Saudi Arabia lowered its oil production in July even as the kingdom has pledged to raise output significantly to make up for an expected decline in Iranian exports. Riyadh pumped just under 10.4 million b/d last month, a drop of 52,000 b/d from June, according to numbers submitted by analysts and consultants to OPEC. Saudi’s official numbers showed an even lower figure, below 10.3 million.
These production numbers, however, have come under scrutiny by some energy analysts and price reporting agencies claiming they are much higher – above 10.6 million b/d. The kingdom claims it has lowered production because it has not seen sufficient demand for its crude, as Tehran offers heavy discounts for its crude ahead of the new US sanctions.
The kingdom’s Energy Minister Khalid Al Falih said in a company report on Friday that Aramco remains committed to meeting future oil demand through continued investments. Despite an improved market picture, the oil industry’s preparedness for the future remains in question as the industry has lost an estimated $1 trillion in planned investments since the start of the market downturn, Al Falih wrote in his report.
Libya: Tripoli’s crude oil production exceeded 1 million b/d for the first time since June when port blockades and a kidnapping caused production outages that brought production to as low as 670,000 b/d. The improvement came from production growth at the country’s largest producing field, Sharara. Last week, Sharara pumped 218,000 b/d, but this has now grown to more than 250,000 b/d. The field has a capacity to pump 340,000 b/d.
Militants tried to take a couple of the country’s oil export terminals in June, but were pushed back by the Libyan National Army, which then decided to not hand over control of the ports to the internationally recognized National Oil Corporation (NOC) but to the entity of the same name that is affiliated with the eastern Libyan government. Eventually, the LNA and the legitimate oil company agreed, and NOC resumed control of the export ports, which put an end to the production suspensions. However, the situation in the divided country remains highly volatile politically, which means other outages are more a question of time than anything else. Late last week there were new protests at the oil terminal and refinery servicing the Sharara oil field, with sources telling Platts they expect another complete shutdown of the field.
With militias fighting at ports and oil export disruptions, many shipowners avoid transportation of Libyan oil cargoes. This situation, in turn, raises the premiums of freight on Libyan routes compared to freight rates on shipments in the Mediterranean that don’t involve Libya.
3. China
As China prepares for a trade fight with the US, it is facing increasing trouble from a slowing economy. Spending on fixed assets such as factory machinery and public works projects cooled to the lowest point in nearly two decades, the government reported on Tuesday. Retail sales grew, but not as sharply as analysts had expected. The data suggest that China can’t go toe-to-toe in retaliating against US tariffs, according to an economist with Standard Chartered Bank in Hong Kong.
China and the US had a small breakthrough in their standoff over trade, saying they will hold lower-level talks later this month. China’s Commerce Ministry said Thursday that a vice minister would come to the US at the invitation of the Treasury Department, to discuss trade. Shortly afterward, President Trump declared that the tariffs would go ahead.
China has backpedaled on imposing tariffs on US crude imports, a move indicative of its need to maintain diversified sources of crude as its domestic production falters. However, last week, Dongming Petrochemical, an independent Chinese refiner, said it has halted crude purchases from the US and turned to Iranian imports. US crude oil exports to China reached 400,000 b/d at the beginning of July, but Beijing has recently threatened a 25 percent duty on imports.
As the US-China trade war escalates, a growing number of analysts and organizations have increased warnings that further trade tensions could dent economic growth, consumer spending, and investment flows globally—all of which could curtail the world’s oil demand growth.
In a recent paper, a team of Chinese researchers studying the water flow coming from melting glaciers made a surprising discovery. As they tried to estimate the effects of global warming on glacier thinning, glacier retreat and local supply of water resources, they found that the glacier is expected to reach “peak water,” with runoff shrinking by half of its 1980 flow in the next 30 years.
As glaciers shrink, runoff increases but then decreases after the size of the glacier has shrunk permanently. Peak water, or the tipping point of glacier meltwater supply, comes when runoff into glacier-fed rivers reaches the maximum. This event now is estimated to occur around 2020 in some parts of China. A decline in the water flow coming from glaciers has serious implications for China, which has invested heavily in hydroelectric dams in recent decades.
4. Russia
Events of the past few days showcased the way President Putin can exploit differences between the US and its allies. However, these events have also highlighted the downside to Mr. Putin’s policies and accentuated where he falls short on matters of importance to both the president and ordinary Russians. He has yet to translate divisions in the West into reduced Western sanctions against Russia.
The sanctions he hoped to get lifted have only been tightened this past week, pushing the ruble down to its lowest levels in years. The US State Department moved last week to enact yet another round of such measures, just days after the United States Senate brandished its own. The “bill from hell” that US Senators from both parties introduced on August 2 contains proposals for wide-ranging sanctions, including on goods, services, technology, financing, and support that directly and significantly contributes to Russia’s ability to develop crude oil resources located in the Russian Federation.
However, Moscow maintains that the Senate’s new US sanctions against Russia would only have a limited impact on its oil industry because it has drastically reduced its reliance on Western funding and foreign partnerships and is lessening its dependence on imported technology. This situation has forced Russian oil companies to increase drilling in aging oil fields and has delayed efforts to develop Arctic oil resources in partnership with Western firms that have the deepwater experience.
5. Nigeria
The Nigerian National Petroleum Corporation (NNPC) plans to float 40 percent of its stock on the local stock exchange once the President signs the Petroleum Industry Governance Bill. The bill, which has been under consideration for years is at the heart of an overhaul aimed at making the corruption-ridden state company profitable.
To do this, the company needs to be more commercially driven. It needs cash, which would be raised through the listing. As part of the overhaul, the NNPC will be split into two: the Nigerian Petroleum Company, which will be an integrated oil company taking all assets of the NNPC except for production-sharing contracts, and the Nigerian Petroleum Assets Management Company. Based on the history of the Governance Bill, it seems likely that the new arrangements are years away.
Nigeria produced 1.67 million b/d in July, below the 1.8-million-b/d quota it had agreed with OPEC after it joined the production cut effort. Total says it will increase Nigeria’s oil production by 200,000 b/d by the end of the year with the increase coming from the Egina Deep project. The Egina field was discovered in 2003 by Total, which partnered with China’s CNOOC and Brazil’s Petrobras. Its development will have an estimated cost of $16 billion and will feature a floating production, storage, and offloading vessel that arrived at the location earlier this year. Egina is the largest deepwater offshore development in Nigeria to date.
The Nigerian National Petroleum Corporation and a Chinese consortium have met in Dubai, United Arab Emirate, to complete the arrangements for the financing of the 381-mile Ajaokuta-Kaduna-Kano pipeline project. The new AKK gas pipeline would bring natural gas to key commercial centers in the northern corridor of Nigeria.
6. Venezuela
Venezuela made a payment to Canadian mining company, Crystallex, using government bonds instead of cash, potentially the first time it has done so since US sanctions last year barred similar transactions. The payment on Tuesday was made as creditors scramble to move in on the remaining assets of a country that is already in widespread default and enmeshed in an economic crisis.
Venezuela’s heavily subsidized domestic gasoline prices should rise to international levels to avoid billions of dollars in annual losses due to fuel smuggling, President Maduro said last on Monday. At the black-market rate, gasoline is now selling in the vicinity of one-third of a US cent per gallon.
On Friday Venezuelans rushed to shops and lined up at gas stations on concerns that a monetary overhaul to lop off five zeros from prices in response to hyperinflation could wreak financial havoc and make commerce impossible. Shoppers sought to ensure their homes were fully stocked with essentials such as food and dry goods and their tanks full before the measure decreed by President Maduro takes effect on Monday. Inflation hit 82,700 percent in July, according to the opposition-run congress, as the country’s socialist economic model continued to unravel, meaning purchases of essential items such as a bar of soap or a kilo of tomatoes require piles of cash that is often difficult to obtain.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
Tough new rules on marine fuel are forcing shipowners to explore liquefied natural gas as a cleaner alternative and ports such as Gibraltar are preparing to offer upgraded refueling facilities in the shipping industry’s biggest shake-up in decades. From 2020, International Maritime Organization rules will ban ships from using fuels with a sulfur content above 0.5 percent, compared with 3.5 percent now, unless they are equipped to clean up sulfur emissions. Using LNG to power ships instead of heavy fuel oil or the lighter marine gasoil can reduce polluting emissions of nitrogen oxides and sulfur oxides by 90 to 95 percent, according to industry estimates. (8/16)
Norway’s company DNO said it was paying its first dividend in 13 years, pointing to a high level of success for its assets in the Kurdish north of Iraq. The company said the fast-track development of its Peshkabir field alone will accelerate average production by more than 40 percent by the end of the year. (8/17)
Russia’s Gazprom leads a consortium working to twin the Nord Stream natural gas pipeline running through the Baltic Sea to Germany. The consortium now has the permits to build a 70-mile section of the second phase of the pipeline in Russian territorial waters. Nord Stream 2 is a 759 mile (1,222 km) natural gas pipeline running on the bed of the Baltic Sea from Russian gas fields to Germany, bypassing existing land routes over Ukraine, Poland, and Belarus. It would double the existing Nord Stream pipeline’s current annual capacity. (8/17)
In India, a cheaper rupee could increase the nation’s crude oil bill by as much as US$26 billion in FY 2018/19. The currency hit a low of 70.32 to the US dollar last week, which will also push up fuel prices at the pump and prices of cooking gas. (8/17)
China Gas plans to increase its annual imports of liquefied petroleum gas from 2.8 million tons to 10 million tons during the next five years as it enters the petrochemicals industry, S&P Global Platts reports, quoting industry sources. The company’s plans also have to do with higher demand, with LPG sales to households forecast to grow by over 12 percent per year. (8/17)
In Australia, energy company Melbana said Tuesday that a survey of the Beehive prospect, with more than 1 billion barrels of estimated reserves, is complete. The survey was conducted in coordination with Australian energy company Santos and French supermajor Total. (8/15)
In Egypt, Italian energy company Eni said it is strengthening its position in Egypt. The company stated Tuesday that its plans to oversee an exploration license on the Nile Delta basin in the Egyptian waters of the Mediterranean Sea were approved by the government in Cairo. (8/15)
In southeast Niger, the latest confirmed oil discovery in a basin makes it four in a row for Savannah Petroleum’s exploration campaign in the Agadem Rift basin. Reserve estimates won’t be released until production testing is completed. (8/16)
Mexico’s intentions: On July 27, Mexican president-elect Andrés Manuel López Obrador said his government will earmark more than $9 billion for state-run energy companies next year and start working on a new oil refinery in southern Mexico. The moves seek to reduce reliance on fuel imports from the United States while boosting the country’s oil production, which has significantly fallen off in recent years. (8/17)
The US oil rig count stayed flat on Friday at 869, following a 10-rig jump the previous week. Gas rigs also remained flat at 188. (8/18)
GOM auction dud: Oil companies bid on less than 1 percent of the parcels offered in a sweeping US auction of Gulf of Mexico exploration leases on Wednesday, showing tepid interest in the region for the second time this year. (8/16)
Keystone approval pretzel: A US federal judge ruled that the State Department must conduct a new environmental review of the project after the pipeline’s route was changed. The project was forced to change routes in Nebraska to avoid sensitive areas. Nebraska regulators gave the project approval, but only for the revised route. But the rerouting of the project subjects the project to new legal, and environmental, scrutiny. (8/17)
The US Gulf Coast refining complex processed more crude than ever before last week, according to data from the US Energy Information Administration. Those refineries, which make up more than half of all US capacity, averaged a net crude-input of 9.649 million b/d, roughly 175,000 b/d more than the previous high during 2017. (8/16)
Exxon to face the music: A federal judge rejected Exxon Mobil Corp’s motion to dismiss a securities suit alleging the company and top executives misled investors about the impact of climate change on its business. (8/16)
When US natural gas futures passed a milestone this month, they did so quietly: volatility fell to the lowest levels since the market’s debut nearly 30 years ago. The event seemed improbable. Volatility usually fades when commodity stocks are ample. Yet US gas stocks are 19.5 percent below average. When the winter starts they are set to be at their lowest in more than a decade. This situation is the latest example of how the world’s largest gas market has been transformed by shale drilling. While demand for gas is galloping, it has been met by waves of supply that show no sign of abating. Conditions that put traders on edge a decade ago get shrugs. (8/15)
US pipeline exports: The US is sending via pipelines record volumes of natural gas to Mexico, and although pipeline capacity to Mexico and production and exports have jumped in recent years, delays at some pipelines on Mexican territory have been slowing down the rise in US piped natural gas exports. US exports to Mexico have been at 4.9 billion cubic feet per day (Bcf/d) so far in August as demand for the power sector in Mexico rises. The volume of US natural gas exports to Mexico has tripled over the past ten years. (8/14)
LNG export capacity: The US energy regulator has approved a request by Cheniere Energy to feed the first gas into its new liquefied natural gas (LNG) facility in Corpus Christi, Texas, marking the beginning of a commissioning phase for the export terminal. The approval from the Federal Energy Regulatory Commission means Cheniere will be able to produce the first commissioning cargo by this year’s fourth quarter. Train 1 at the Corpus Christi facility will become the first LNG export terminal in Texas and the third functioning one in the U.S., including Cheniere’s Sabine Pass (Louisiana) operation which began exports in February 2016. (8/18)
Texas environment regulators should coordinate shutdowns of oil refineries and other petrochemical plants during major storms to avoid big releases of air pollution like during last year’s Hurricane Harvey, a report said on Thursday. (8/16)
Coal call: The Trump administration next week plans to formally propose a vast overhaul of climate change regulations that would allow individual states to decide how, or even whether, to curb carbon dioxide emissions from coal plants. The plan would also relax pollution rules for power plants that need upgrades. (8/18)
India’s solar surge: A new report by Power Technology shows that India is taking the race very seriously, with five of the nine largest solar installations in the world. China and the US had taken the lead in the past, making up two-thirds of global growth in solar power in recent years. But India is investing heavily to beat them. (8/17)
Peak lithium? Nah… A temporary tightness in lithium supply in the near future is a possibility, but this would more likely be a result of available production capacity combined with booming demand for EV batteries than irreversible depletion of reserves. There are plenty of reserves. Peak lithium is not happening any time soon. (8/13)
Nevada’s Lake Mead, the biggest reservoir in the West, is on track to fall below a critical threshold in 2020. The Bureau of Reclamation, a multistate agency that manages water and power in the West, said Wednesday there is a 52 percent probability that water levels will fall below a threshold of 1,075 feet elevation by 2020. If so, it could trigger the first ever federal shortage declaration on the Colorado River—which experts say could undermine the Southwest’s economy. (8/16)
Western water curtailment threat: Lake Powell, created by the Glen Canyon Dam in Arizona, is only at 43 percent of its capacity this year. The reservoir is part of a system that supports 40 million people in seven western states who benefit from water from the Colorado River Basin. A forecast from the US Bureau of Reclamation echoes previous warnings that a nearly 20-year trend toward a drier regional climate coupled with rising demand could drain so much water from the Lake Mead reservoir that cutbacks as soon as the end of 2019 could be mandatory. (8/18)
Does climate have a big role in CA fires? Scientists tend to agree with that assessment. But California’s biggest utility, PG&E, has an especially compelling reason to link the fires to the environment. State investigators have tied PG&E equipment, such as trees hitting power lines, to some of the blazes in October 2017 that in total destroyed nearly 9,000 structures and killed 44 people. It faces damage liabilities totaling as much as $17 billion, and possible financial ruin — its stock is down about 37 percent since the fires — unless CEO Geisha Williams can convince California lawmakers that the company’s problem is, in fact, a climate change problem. (8/14)
Peak Oil Review 13 August 2018
By Tom Whipple, originally published by ASPO - USA
https://www.resilience.org/stories/2018-08-13/peak-oil-review-13-august-2018/
Quote of the Week
“A ballot measure requiring greater setbacks could have a dramatic effect on drilling in Colorado. In Weld County, Colorado, where much of the drilling in Colorado’s DJ Basin takes place, the greater setback distances would put roughly 78 percent of the surface land off limits to drilling. ‘That is effectively a ban on the industry,” Dan Haley, president of the Colorado Oil & Gas Association, told Bloomberg in a July interview. “You’d basically have no new wells drilled in Colorado.’” Nick Cunningham, Oilprice.com
1. Oil and the Global Economy
Oil prices slid about 3 percent last Wednesday as the trade dispute between the US and China escalated and after Chinese import data showed a slowdown in energy demand. However, prices recovered a bit on Friday as US sanctions against Iran looked as if they would tighten oil supplies ending up the week with New York futures at $67.63 and London at $72.81.
Goldman Sachs believes that the case for higher oil prices ahead remains strong despite concerns about the Sino-American trade war. The demand for oil remains robust, with the global economy growing at 4.3 percent, and could go higher. Low stockpiles of crude mean supply shortages could develop in the face of today’s strong demand. The Saudis are not flooding the markets with as much oil as anticipated and Beijing has not yet added oil to the list of US exports subject to heavy tariffs.
China has announced plans to apply a 25 percent tax to US LNG; however, natural gas is still selling below $3 per million BTU’s in Louisiana compared with $10 in Asia. This differential could allow US exporters to compress the gas, transport it, and swallow the 25 percent tariff while still making a profit. Demand for LNG is strong across Asia so that China needs the US’s LNG worse than the US needs the Chinese LNG market.
With the ever-growing demand for oil; the likelihood that US shale oil production will not be growing as fast as was anticipated; and the uncertainty surrounding the sanctions on Iran, the case for higher prices this winter looks stronger than the one for lower prices.
IEA’s Oil Market Report: The Agency see the global increase in the demand for oil falling slightly to 1.4 million b/d this year, but rebounding to 1.5 million next year. These forecasts are caveated with warnings about the uncertainties in the various trade disputes and sanctions that are ongoing. The global oil supply in July rose about 300,000 b/d and is now at 99.4 million or about 1.1 million above July of last year. OECD commercial oil stocks are now approximately 32 million barrels below the five-year average, although the previous three years were a time of unusually high commercial stocks.
The IEA points out that ample oil supplies have contributed to the Brent price falling from just over $79 a barrel at the end of June to below $72 this week. The agency takes note of the increasing climate turmoil with record high temperatures causing disruptions such as low water levels hampering barge movements; the lack of sufficient cooling water for nuclear power plants; and soaring demand for air-conditioning.
While there currently is relative calm in the oil markets, this could change when the US sanctions on Iran kick in next November. The agency also sounded its recurrent concern that there is not enough investment in energy taking place around the world. It noted that global energy investment fell by 2 percent in 2017, the third consecutive year of a decline. According to the IEA’s executive director, Fatih Birol, “The overall trend of energy investment remains insufficient for meeting energy security, climate, and air quality goals, and is not spurring an acceleration in technologies needed for the clean energy transition.”
US Shale Oil Production: While US crude production has climbed dramatically, production may rise more slowly as prices drop, transportation bottlenecks develop and the best places to drill are used up. US output was expected to increase by 1.31 million b/d to 10.68 million in 2018, lower than last month’s forecast of growth of 1.44 million b/d to 10.79 million, according to the EIA. The administration slightly increased its expectation for 2019 production growth to 1.02 million b/d from 1.01 previously. It expects crude production to average 11.7 million b/d in 2019, compared with 11.8 million it forecast in its last report.
The downward revisions in the EIA’s forecasts come after recently released data from the agency shows that output growth during this past spring was not as much as it had been estimating. Until recently the agency was saying that shale oil output was growing at a blistering rate, with production rising by over 200,000 b/d between the beginning of April and the end of May. But more recent data suggests that production actually dipped a bit over that period.
The recent revisions to the EIA’s data from months ago raise questions about the production figures being released each week. Right now, that weekly data says that the US is producing a little less than 11 million b/d. But because those weekly figures are repeatedly revised down as time passes, there is a good chance that US production is not that high right now.
There are more issues facing increased US shale oil production than just an overestimation of output. In addition to pipeline constraints, drillers face other operational problems. “Escalating costs, logistical constraints, decreasing cash flows, and the pace of drilling forcing a downwards move in the quality of new drill sites from Tier 1 to Tier 2 locations. All these may be just a few of the reasons for initial well productivity in the Permian reaching a plateau over the past few months.”
The only good news recently was the announcement by Plains All American Pipeline that two West Texas projects would begin partial operations slightly ahead of their original schedules. The Sunrise expansion project is expected to go into partial service in the fourth quarter this year while the Cactus II line will begin partial service in the third quarter of 2019. The Sunrise extension will add about 500,000 b/d of capacity from Midland to Colorado City and Wichita Falls, Texas, and provide connections to the oil-storage hub at Cushing, Oklahoma. The 670,000 b/d Cactus II line from the Permian basin to Corpus Christi is expected to be complete in April 2020. By late this year, a portion of the line, from Wink to McCamey, Texas, will begin partial service.
2. The Middle East & North Africa
Iran: How well Tehran will succeed in avoiding the renewed US sanctions remained the top issue last week. China, Russia, and India say they will continue to buy oil from Iran, despite US sanctions. However, there are reports that Indian refiners are cutting back on purchases out of fear of losing access to American financial institutions. Japan’s largest refiner may be forced to stop imports of Iranian crude oil loading in September without clear guidance from the government. Tehran’s oil exports dropped by 7 percent to 2.32 million b/d in July—their lowest level in four months—as South Korea and Europe cut imports ahead of sanctions.
Washington now expects that it will be able to persuade Iran’s oil customers to cut their Iranian crude imports by as much as 1 million b/d. A 1-million-b/d reduction would be roughly half of the average Iranian oil exports over the past year, but well below the US administrations target of reducing the Islamic Republic’s oil sales to “zero.” Analysts say a 1 million b/d drop in the global oil supply in early November would boost oil prices.
Under the new sanctions that took effect last week, Iran is barred from purchasing or acquiring US dollars and limited in what it can do with its currency outside of Iranian territory. This is making it exceptionally difficult to invest in Iran’s oil fields. Asian investors in Iranian projects have discovered that they can no longer rely on their usual banking partners in the United Arab Emirates to transfer funds for projects in Iran. This blockage of funds has delayed several deals worth billions, according to the companies involved, and foreign development officials.
With its oil customers already backing away ahead of the next round of sanctions in November, Iran is facing severe economic problems and growing internal dissent. The Iranian rial has lost half of its value against the US dollar on the unofficial market this year, while the price of fruit and vegetables has increased by 50 percent since the start of the year. The commander of Iran’s Revolutionary Guards Major General Mohammad Ali Jafari has acknowledged the gravity of the situation, declaring that “domestic weaknesses and threats are more serious” than the foreign military threat posed by the US or other countries.
Iraq: The State Oil Marketing Organization said last week that Iraq’s crude oil production rose to its highest level in 13 months in July—to 4.46 million b/d. Since the fourth quarter of 2017, Baghdad has been consistently reporting to OPEC that its production was 4.36 million b/d each month. According to OPEC’s secondary sources, however, in July Iraq’s oil production jumped by 71,500 b/d in June over May, to 4.533 million b/d. This was the second largest increase within the cartel for June, after the Saudi production jump of 405,400 b/d, according to the secondary sources—the ones that OPEC uses for calculating quotas and compliance. According to the latest S&P Global Platts survey, Iraq’s oil production in July was 4.57 million b/d. Much of this discrepancy is due to the Iraqi government’s desire to keep within its OPEC commitments while still exporting as much oil as it can.
Iraq’s election commission has completed a manual recount of votes from a parliamentary election held in May. Parliament ordered the recount in June after a government report concluded there were serious violations in an initial count using an electronic vote-counting system. However, a fire that broke out in the warehouse where the votes were stored made a complete recount impossible.
Three months after the vote, the winning parties are still embroiled in negotiations over forming the next governing coalition. A group of Iran-backed Shi’ite militia leaders placed second behind cleric Moqtada al-Sadr’s bloc, with incumbent Prime Minister Haider al-Abadi’s bloc in third place. Major policy changes, likely involving the oil industry, are coming soon.
A high-voltage power line in Iraq was attacked by Islamist militants eight times over the past two months according to the Electricity Ministry. Power outages have been among the reasons for protests in several Iraqi cities over the past month. While some outages have resulted from terrorist attacks, most of them seem to result from the poor state of the Iraqi electric grid which has suffered years of neglect.
Demonstrations continued in Basra, Missan, and Dhi Qar provinces last week as protesters criticized slow government response to complaints of unemployment and poor services. The most volatile protests took place outside the gates of West Qurna 1 and West Qurna 2 oil fields, operated by ExxonMobil and Lukoil respectively, where protesters sporadically blocked roads and prevented employees from accessing the facility.
Saudi Arabia: The Saudis told OPEC it cut output in July to 10.29 million b/d, but estimates from the US government and independent agencies say it boosted production—amounting to a difference of as much as half a million barrels a day. Traditionally, the summer months are the season of peak local consumption of crude as air conditioning demand hits a high. However, this year temperatures have been below the five-year average for the period, and exports have not registered any marked increases, either. If Saudi export and domestic consumption data are correct, Aramco may have started to fill up its oil tanks again. The truth of the claims and counterclaims are difficult to sort out.
Saudi Aramco announced that after a halt due to militant attacks, oil shipments through a Red Sea strait near the coast of Yemen resumed last week.
3. China
The great US/China trade war continued unabated last week with China’s state media lashing out at the policies of President Trump in an unusually direct attack. US crude oil exporters appear to have found an alternative buyer for cargoes no longer heading to China, with India on track to import record volumes in August. US exports of LNG to China in July fell to their lowest level in a year and are expected to decline further as the trade dispute forces utilities to seek alternative supplies.
Last week, Beijing announced the decision to remove crude oil from its latest tariff list in the trade war with the US. Sources in Beijing say this move was prompted by a strong lobbying effort by the main importer Sinopec Group. Dropping crude oil from the final tariff list on $16 billion in US goods announced late on Wednesday underscores the growing importance of the US as an alternative supply source for China, which is seeking to diversify its oil purchases as domestic production sinks.
China increased its coal imports in July by 14 percent to their highest in 4-1/2 years as rising temperatures boosted demand for coal-fired power to run air conditioners. The China Meteorological Administration has been issuing regular heat alerts over the past few weeks. Last Wednesday, it warned that regions in western and southern China could see temperatures reaching as high as 104°F, which would continue to support demand for coal-fired electricity.
During the first seven months of this year, China imported some 8.98 million b/d of crude oil, up 5.6 percent from a year earlier. Total natural gas imports, including both pipeline gas and LNG, rose to 7.38 million tons during the same period, up 28.3 percent from a year ago. Economic growth as well as Beijing’s mandate that natural gas makes up at least 10 percent of the country’s energy mix by 2020has increased demand. The growing use of these two fossil fuels will pose problems for the country in the years ahead as it becomes increasingly dependent on imported oil and gas, especially from the volatile Middle Eastern OPEC states. Awareness that hostilities between Middle Eastern OPEC members would devastate its economy is likely behind China’s aggressive moves to establish a foothold in the South China Sea and its reluctance to place tariffs on oil imports from the US.
4. Russia
IEA said last week that Russian crude and condensate production climbed by 150,000 b/d last month, to 11.21 million b/d. That “significantly sharper acceleration than expected” put Russian production 265,000 b/d higher year-on-year and just 14,000 b/d lower than Russia’s October 2016 record high.
New US sanctions, mandated by a 1990 US law, were imposed on Moscow last Wednesday in retaliation for the use of a chemical weapon to poison a former Russian agent and his daughter in the UK. The second round of sanctions that the law could trigger after three months would block many Russian exports to the US, including crude and oil products. The Russian stock market fell on Thursday, and the ruble hit a two-year low after the new sanctions were announced. While the impact of US and EU sanctions imposed after Moscow’s 2014 annexation of Crimea may have only cut the Russian gross domestic product by just half a percentage point a year, they add pressure when growth is already stagnating.
Years of failure to diversify Russia’s economy away from reliance on energy and natural resource exports is taking a toll on economic development. The lack of a real rule of law and protection for property rights is deterring foreign investment. Oligarchs allied with senior government officials are slowly looting the country of the money needed for investment. The new sanctions will further deprive Russia of western know-how and financing vital to modernize the economy. Rosneft said last Tuesday that it had completed the acquisition of ExxonMobil’s stakes in joint projects set up to the develop the offshore Arctic, deepwater Black Sea, and West Siberian tight oil reserves.
Separate legislation introduced last week by Republican and Democratic senators proposes curbs on the operations of several state-owned Russian banks in the United States and restrictions on their use of the dollar. This move caused Prime Minister Dmitry Medvedev to declare that Russia would consider any US move to curb the operations of Russian banks or their foreign currency dealings a declaration of economic war. He also said that Moscow would take economic, political or other retaliatory measures against the US.
Denmark, one of the last countries yet to sanction Russia’s Nord Stream pipeline, is reviewing new route plans, the country’s energy agency stated Friday. Sweden’s government has already issued the permit necessary for Gazprom to build and operate the 315-mile section of the second leg of the Nord Stream gas pipeline in its territorial waters leaving approval by Copenhagen as the key obstacle to building the pipeline. The pipeline is controversial as it would allow Russia to pipe natural gas directly to Germany, bypassing Ukraine and Poland, and would increase the EU’s reliance on Moscow.
5. Nigeria
In recent weeks, the anticipated completion of the 650,000 b/d Dangote Refinery next year has been touted as the way to help Nigeria save over $7.5 billion a year by halting the importation of the bulk of the country’s oil product consumption. Along with the overhaul of Nigeria’s current refineries, the completion of Dangote would put the country on the map as a major oil and gas hub in Africa. Last week sources with direct knowledge of the matter said that the Dangote refinery, being built in Nigeria by Africa’s richest man, cement baron Aliko Dangote, is unlikely to start production until 2022, two years later than the target date.
Last month, Shell signed an agreement with the Nigerian National Petroleum Company and two other companies for the development of natural gas projects worth some $3.7 billion, as part of Nigeria’s efforts to deal with a looming domestic shortage of the fuel. However, it looks like this deal is just the start of a much larger-scale strategy. In a recent interview, Shell Gas Nigeria’s managing director Ed Ubong said the company eyes a complete transformation of the Nigerian energy system by further development of its massive gas reserves, estimated by BP to be the largest in Africa at 5.2 trillion cubic meters.
6. Venezuela
Venezuela’s prospects suffered another blow last week when a judge in the US gave a Canadian mining company permission to seize the shares of the Venezuelan holding company that owns Citgo. The case dates back to 2011 when Venezuela nationalized Las Cristinas, a gold reserve owned by Crystallex. The Canadian company took Venezuela to the international arbitration tribunal ICSID and won, but Venezuela refused to pay up. Crystallex, then, went after Citgo as compensation, arguing that PDV Holding Inc, which is owned by Venezuela’s state-owned oil company PDVSA, is essentially a part of the Venezuelan state. PDVSA’s depends on its US unit, Citgo, for refined products and diluent. These arrangements could be put in jeopardy by a US court order.
Despite a steady decline in its crude oil production, Venezuela increased exports of oil to the US. Between February and June, Venezuelan shipments to the Gulf Coast refineries increased by 43 percent. The recovery in Venezuelan exports is confined to the Gulf Coast where refineries are equipped to process heavier crudes, and their choice of suppliers is limited. Mexico’s oil production is stagnating and, while Canada’s heavy crude production is growing, its pipeline capacity is not.
PDVSA has limited the damage from its slump in crude exports by transferring oil between tankers at sea and loading vessels in neighboring Cuba to avoid asset seizures. PDVSA’s problems increased in in May when ConocoPhillips began seizing PDVSA assets in the Caribbean as payment for a $2 billion arbitration award. The seizures left PDVSA without access to facilities such as Isla refinery in Curacao and BOPEC terminal in Bonaire that accounted for almost a quarter of the company’s oil exports. Conoco’s actions also forced PDVSA to stop shipping oil on its own vessels to terminals in the Caribbean, and then onto refineries worldwide, to avoid the risk the cargoes would be seized in international waters or foreign ports.
The company then asked customers to charter tankers to Venezuelan waters and load from the company’s terminals or from anchored PDVSA vessels acting as floating storage units.
PDVSA told some clients in early June it might impose force majeure unless they agreed to such ship-to-ship transfers.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
The world’s biggest oil companies are systematically over-valuing their assets based on excessively optimistic forecasts of future prices, according to a leading investor. UK asset manager Sarasin & Partners has asked the oil companies in which it invests, BP, Shell, and Total, to reveal the full risk they face should demand for crude peak as the trend towards decarbonization grows. Sarasin oversees almost £14 billion of investments, including funds from many top charities. (8/6)
LNG gaining steam: A new race to build multi-billion dollar liquefied natural gas plants is gaining momentum after a long hiatus in investments as energy giants sense a widening supply gap within five years. Spending on new, complex facilities dried up following the collapse in energy prices in 2014. Appetite was further dampened by fears that a plethora of LNG plants built since the late 2000s would lead to a large supply glut until early in the next decade. But sentiment has radically changed over the past year, buoyed by rising oil prices and exceptionally strong demand from rapidly growing economies such as China and India. Global demand for LNG surged by 12 percent in 2017, far exceeding forecasts, and is expected to grow by up to 10 percent in 2018. Liquefaction capacity additions are expected to fall sharply by the end of 2019 as newly commissioned plants reach their maximum capacity (8/7)
In the UK, four senior geologists are calling for a moratorium on oil and gas drilling in Surrey, southeast of London, after 12 earthquakes were registered in the area over the past four months. (8/7)
In Portugal, which doesn’t produce oil domestically. several oil wells will be drilled during the next few months—a controversial point. The overarching fear of opponents is that it will transform the nation to the worse, tainting the pristine beaches that tourists are increasingly fond of and bring about environmental damage not seen before. Additionally, Portugal produces 44 percent of its electricity from renewable energy. For many, developing oil deposits would be tantamount to compromising past successes in emissions-free energy sectors. (8/9)
The United Arab Emirates will build an oil pipeline connecting Eritrea’s port city of Assab with Ethiopia’s capital Addis Ababa. The announcement is the latest sign of the UAE’s increasing involvement in the Horn of Africa. The UAE played a behind-the-scenes role in helping Ethiopia and Eritrea end a two-decade state of war last month. (8/10)
In Pakistan, ExxonMobil is close to discovering huge oil reserves near the border with Iran, and those reserves could even be larger than the oil reserves of Kuwait, the Pakistani Minister for Maritime Affairs and Foreign Affairs, Abdullah Hussain Haroon, said. According to Arab News, if the oil discovery in Pakistan turns out to be as large as expected, the country would rank among the world’s top ten oil-producing countries. (8/7)
With Taiwan, US liquefied natural gas company Cheniere Energy Inc said on Friday it had signed a 25-year deal to supply the nation’s CPC Corp, which CPC valued at roughly $25 billion. Cheniere said it will sell 2 million tons of LNG per year on a delivered basis to the state-owned oil and gas company, starting in 2021. It said the purchase price will be pegged to the Henry Hub monthly average, plus a fee. (8/11)
The Philippines is trying to curb its inflation running at five-year highs by ordering the companies to make available for sale cheaper but dirtier fuel, backtracking on a ban on such dirty fuels introduced two years ago and aimed at improving air quality. (8/11)
In Niger, the government said Wednesday it’s eager to capitalize on the potential launch of new crude oil production as soon as possible. British energy company Savannah Petroleum, which has a core focus on Africa, signed a memorandum of understanding with Niger’s government to move forward with an early production scheme for discoveries made in the southeast of the country. Savannah Petroleum said it has made oil discoveries at three wells in its license area in Niger’s Agadem Rift basin. (8/9)
In Cuba, Melbana Energy, one of the few Western companies with an established footprint in the country, said its best estimate of reserves there improved more than 10 percent. The company, which has headquarters in Australia, said an independent assessment found the best estimate for oil in place for the Block 9 prospect on the northern coast of Cuba was 15.7 billion barrels of oil, a 24 percent increase from the previous estimate. (8/8)
In Mexico, when the National Hydrocarbons Commission scheduled its first-ever shale tender for September this year, the July elections were obviously not front and center in the thoughts of its management. Yet now, this tender may be as good as gone after President-elect Andres Manuel Lopez Obrador said last week, “We will no longer use that method [hydraulic fracturing] to extract petroleum.” (8/9)
Canadian nightmare: Western Canada Select (WCS) recently fell below $40 per barrel, dropping to as low as $38 per barrel last Tuesday. That put it roughly $31 per barrel below WTI, the largest discount since 2013. The sharp decline in WCS prices is a reflection of a shortage of pipeline capacity that’s growing worse. Even as pipeline takeaway capacity hasn’t budged, Canadian oil production continues to rise. Output could jump by around 230,000 b/d in 2018, followed by another 265,000-b/d increase in 2019. (8/10)
The US oil rig count grew by 10 last week, bringing the total count to 869, General Electric Co’s Baker Hughes energy services firm said. Gas rigs increased by 3 to 186. The combined oil and gas rig count now stands at 1,057—up 108 from this time last year. (8/11)
American refiners are posting their best second-quarter profits in years, thanks to soaring domestic oil production and regional pipeline bottlenecks that are allowing them to buy crude on the cheap. (8/7)
Ethanol #s: The EIA on Tuesday adjusted its forecast for US ethanol blending with gasoline in the remainder of 2018 but left the production forecast unchanged. The outlook showed blending ticked higher in July than originally forecast, which bumped the forecast average for the whole year slightly higher to 945,000 b/d from 941,000 b/d in the July outlook. (8/8)
Diesel will dominate the commercial truck industry for years to come, but when will the switchover to electrified, automated trucks seriously impact the demand for this fuel? It’s a pressing question for the US in particular, where 70 percent of the goods use traditional diesel engine medium- and heavy-duty trucks (and some of the medium- and light-duty work trucks use gasoline engines). (8/6)
SPR release? Even if the US Administration decides to release crude oil from the Strategic Petroleum Reserve, American drivers are unlikely to see gasoline prices coming down, because US refiners already have enough oil to run at maximum rates, and much of the oil products that would be produced could be exported, analysts briefed by Reuters say. (8/11)
GOM leases: A federal auction of exploration leases in the Gulf of Mexico next week will test energy companies’ appetite for acreage after the Trump administration left royalty rates for deepwater parcels unchanged, bucking an industry call to lower them. Oil companies had lobbied for lower royalty payments for deepwater acreage because of the projects’ high cost and long lead time before production can begin. (8/11)
Drilling restraint looming: In Colorado, an initiative to expand the setback distance required for oil and gas drilling just received a boost, potentially making the November ballot. Initiative 97 would require oil and gas wells to be a minimum of 2,500 feet away from “occupied structures,” which means houses, and “vulnerable areas,” which includes parks, public spaces and fresh water, among other areas. That distance is much greater than the current distance of just 500 feet for “occupied structures,” and 1,000 feet for “high occupancy buildings,” such as hospitals and schools. (8/10)
Tariff issues: US President Donald Trump’s proposal to double tariffs on steel and aluminum from Turkey could push up costs even further for domestic oil and gas pipeline projects, as energy executives said they were already struggling from earlier tariff rises. There are more than a dozen US energy pipelines on the drawing board, some of which are still seeking financing. The projects would pave the way for greater US oil and gas exports and relieve a bottleneck in West Texas shale fields that is starting to pinch output in the region. (8/11)
Nuke bind: When Exelon’s Oyster Creek nuclear unit disconnects from the grid at the end of September and permanently shuts, it will mark the start of a busy period of US nuclear power plant closures driven by low power prices that are placing dozens more units at risk. As utilities threaten to shut nuclear units, a patchwork of state subsidies has emerged, and DOE and the US Federal Energy Regulatory Commission are mulling separate actions to prevent reactors from closing. (8/11)
TX wind: Strong wind generation helped the Electric Reliability Council of Texas (ERCOT) system cope with the mid-July heat wave with high prices, but such wind capacity is unlikely to be available if another heat wave strikes in August, board members were told Tuesday. ERCOT set a new all-time power demand record of 73,259 MW on July 19 and a new all-time weekend demand record of 71,444 MW on July 22. (8/8)
RE generation costs: Based on 2016 EIA data for newly constructed utility-scale electric generators (those with a capacity greater than one megawatt) in the US, annual capacity-weighted average construction costs for solar photovoltaic systems and onshore wind turbines declined, while construction costs for natural gas generators increased slightly. These three technologies accounted for about 93% of total electric generating capacity added in 2016. (8/9)
EV uptake: A new report by ABI research forecasts that a proportionately higher uptake of EVs in car-sharing fleets, and the higher utilization rates of those EVs, will result in global electric mileage share to exceed 20 percent by 2030. While consumer adoption of EVs continues to disappoint with only 2 percent of all vehicles shipping in 2018 expected to be electric, city governments are increasingly becoming aware of their benefits in terms of sustainability, reduced environmental impact, and improved air quality. (8/11)
EU carmaker fines coming? New analysis by IHS Markit suggests that automakers failing to meet 2021 fleet CO 2 emissions compliance for passenger vehicles sold in the European Union (EU) could be fined more than €14 billion (US$16 billion) in 2021. (8/7)
More battery promise? Researchers at the University of Cambridge have identified an entirely new class of materials that could allow lithium-ion batteries to charge faster and deliver higher power performance—and at lower costs—than the nanoparticles used in battery electrodes. This new class of materials—known as niobium tungsten oxides—could allow not only our smartphones to charge in minutes but could also make higher-power batteries that charge faster and more safely than those used in today’s EV and energy storage systems – thus potentially overcoming the battery barrier to mass adoption of EVs and solar power. (8/7)
Japan may eventually import hydrogen from Australia to help boost the use of hydrogen in power supply and hydrogen fuel cell powered vehicles. Hydrogen can be produced with excess renewable energy that would otherwise be wasted, and can be transported like natural gas. (8/8)
Tesla is working on a “mini-car that can squeeze in an adult,” a new tweet from chief executive Elon Musk told the world. The tweet, like another recent one about the addition of new AI to Teslas, came in response to a fan question about “Radio Flyer Model X”. This is not the first announcement of a new Tesla model by Musk in the past year. The earlier ones, about the Tesla Semi electric truck and a future SUV, have been met with mixed feelings. (8/7)
Climate extremes: Researchers believe we could soon cross a threshold leading to boiling hot temperatures and towering seas in the centuries to come. Even if countries succeed in meeting their CO2 targets, we could still lurch on to this “irreversible pathway”. Their study shows it could happen if global temperatures rise by 2o C. (8/7)
Heat wave: Eight places in Portugal broke local temperature records as a wave of heat from North Africa swept across the Iberian peninsula — and officials predicted the scorching temperatures could get even worse over the weekend. Temperatures built to around 45 degrees Celsius (113 degrees F.) Friday in many inland areas of Portugal. (8/6)
Peak Oil Review 6 August 2018
By Tom Whipple, Steve Andrews, originally published by ASPO - USA
https://www.resilience.org/stories/2018-08-06/peak-oil-review-6-august-2018/
Quote of the Week
“Weekly data had shown a strong 324,000 b/d output rise [in US oil production] from March to May. The revised data shows that this rise was a mirage: output actually fell 19,000 b/d over the period. It is time to deal with the statistical gorilla on the oil trading floor. We think US crude oil production has not reached the 11 million b/d shown in recent weeks in the Energy Information Administration weekly data, and that it is significantly below 11mb/d, with growth slowing.” Paul Horsnell, head of commodities research at Standard Chartered
1. Oil and the Global Economy
Oil prices fell last week mostly on concerns that the looming US-China trade war would stifle demand. There was a short-lived rally on Thursday after the stocks report showed a 3.8 million barrel increase in total crude stocks mostly due to lower exports, but a 1.1 million drop in the inventory at Cushing, Okla. For now, the markets seem well supplied with production by Russia, the Saudis and the Gulf Arabs increasing after the relaxation of the market cap, and there has not yet been a significant reduction in Iranian exports in response to the new US sanctions. The week ended with New York oil futures down to $68.49 and London down to $73.21.
U.S. crude prices rose in 13 of last month’s trading 21 sessions, while London was up in 13 of the 22 trading days. However, most of the gains were moderate, and the drops more severe. Brent lost nearly $11 over three sessions spread throughout the first four weeks of July. U.S. crude lost almost $8 over as many days during the same period. A final day of heavy losses last Tuesday left both markets with their worst monthly drop since July 2016 with London futures trading at close to $79 a barrel in late June and ending up around $73 at the beginning of August. Several of the down days clearly were due to comments from the White House such as on July 2nd when the President announced on Twitter that Saudi Arabia’s king had agreed to pump up to 2 million more barrels per day to tame fuel prices.
A new market assessment from S&P Global Platts concludes that two-year production highs from Saudi Arabia and other OPEC producers are more than offsetting declines from Iran, Libya, and Venezuela. According to Platts, production from Iran last month averaged 3.72 million b/d, its lowest level in a year and a half. US sanctions on Iran have hit its oil sector, and some European customers are already curtailing purchases of Iranian crude.
Libya’s production average of 670,000 b/d in June was its lowest since April 2017 as Africa’s largest producer struggles with national security problems. Venezuela, meanwhile, is coping with what the International Monetary Fund said was a “profound” economic crisis and aging infrastructure, pushing oil production to the lowest level since Platts started keeping track 30 years ago. Outside of Saudi Arabia, meanwhile, Kuwait and the United Arab Emirates produced the most oil since December 2016, the month before OPEC and other non-member states, including Russia, agreed to curtail production to balance an oversupplied market.
US Shale Oil Production: The most interesting news of last week came when the EIA published its revisions to US oil production for May revealing that US crude output actually fell by 30,000 b/d during the month rather than increasing by over 100,000 b/d. The monthly total of 10.442 million b/d for May is considerably lower than what EIA itself thought at the time. EIA weekly estimates for May have production increasing from 10.703 million b/d in early May to 10.769 million at the end of the month. The weekly assessments are known to be less accurate than the retrospective monthly numbers. That involves a lot of guesswork. Yet, the discrepancy is a major one. Not only did the EIA estimate that production in April and May was much higher than it actually was, but the agency also thought production was rising quickly. If the weekly estimates were to be believed at the time, production would have climbed from 10.525 million b/d in early April to 10.769 million b/d by the end of May, an increase of 244,000 b/d over an eight-week period.
The main reason for the decline in overall US output was a 75,000-b/d decline in production from the Gulf of Mexico. But Texas production only rose by 20,000 b/d, a figure far below what the EIA and most analysts had expected. It has been known for some months that rapidly increasing production from the Permian Basin was running into troubles.
Most of these troubles concern shortages of pipeline capacity to move increasing quantities of oil and gas production to market. While new pipelines are under construction, it will be another 18 months to two years before the capacity problem is mitigated. The basin also is seeing increasing costs of production, shortages of labor and limited capacity to rapidly frack newly drilled wells. This is leading to a large increase in drilled but uncompleted wells in the Permian.
A more subtle problem is the issue of whether developers are running out of the most productive “sweet spots” to drill in the Permian. While the EIA continues to tell us that newly drilled wells are producing more oil in the first few months than ever before, some observers note that these more productive wells are considerably longer and more expensive to drill than those being brought online a few years ago. At some point, albeit months, years, or decades away, the cost-effective places to drill for shale oil will be gone and the great US shale oil boom of the early 21stcentury will be over.
Most forecasters still see rapidly increasing production from the Permian Basin as the key to sustaining global oil production in the face of severe declines in capital expenditures on finding and developing new sources of oil elsewhere in the world. Other US shale oil fields are believed to be at or close to peak production and are no longer capable of significant growth. While there have been several large new deepwater discoveries in the last two years, these discoveries are many years away from producing large quantities of oil and global demand for crude still seems to be increasing at the rate of circa 1.5 million b/d each year.
It is still too early to tell if the unprecedented increases in production from US shale oil fields that we have seen in the last ten years is coming to a close. If monthly US production figures continue to fall substantially short of expectations, that would have serious global ramifications. The oil market could end up being a lot tighter than we all expect and oil prices could be considerably higher.
2. The Middle East & North Africa
Iran: President Trump said last Monday he was willing to meet the leaders of Iran without any preconditions, opening the door to possible negotiations with Tehran. Senior Iranian officials and military commanders replied on Tuesday by rejecting President Trump’s offer as worthless and “a dream,” saying his words contradicted his action of re-imposing sanctions. Iranian President Rouhani added that Trump’s repudiation of the international nuclear deal was “illegal” and Iran would not readily yield to Washington’s renewed campaign to strangle Iran’s oil exports.
An Iranian naval commander again threatened hostilities by saying, “The cruel sanctions being imposed on Iran will affect the Strait of Hormuz functions.” The US says Iran has started carrying out naval exercises in the Gulf, apparently moving up the timing of annual drills due to the heightened tensions.
The issue now is which oil importers will follow Washington’s demands and stop or cut back on purchases of Iranian oil. US officials are attempting to persuade Washington’s allies to suspend imports of Iranian crude, but analysts doubt the push will be ultimately successful, as Iran’s return on international oil markets provided a welcome diversity of oil supplies for buyers from Asia to Europe. Beijing already has declined the request by US officials to stop importing crude oil from Iran; however, the critical question is whether the Chinese are willing to increase their imports of Iranian oil to make up for any loss of sales to other countries.
Ahead of the impending US sanctions, India’s state refiners boosted their Iranian oil purchases, pushing up Indian oil imports from Iran by 30 percent from June to a record 768,000 b/d in July.
Iran is also said to have started to offer Indian cargo insurance for tankers operated by Iranian companies as some Indian insurers have refused to cover oil cargoes from Iran in the face of the returning U.S. sanctions on Tehran. However, Indian oil refiners reduced their orders for Iranian crude oil in June by 12 percent compared to May. Some large Indian refiners worry that their access to the US financial system could be cut off if they continue to import Iranian oil, and have started to reduce purchases. It will be several months before we know how this confrontation turns out.
In the meantime, Iran’s economy is not doing well, and Iranians are taking to the streets in protest. The country’s currency hit another record low against the US dollar last week on concerns about new American sanctions. The rial traded at 119,000 to the US dollar last Monday and has almost halved since early May. Iranian officials clearly are concerned with the head of the Central Bank saying “Enemies are out to destroy the country’s assets and instill disappointment in public through sanctions.” Over the weekend sporadic protests took place in several cities.
Iraq: Iraq’s oil exports hit an annual high in July as the country sold 3.87 million b/d – an increase of more than 70,000 b/d compared to June. Baghdad exported 3.54 million b/d via the Basra Gulf, earning $7.597 billion – its largest monthly revenue figure since July 2014. All the oil Baghdad shipped in July came from the southern fields. and there were no exports during the month from the Kirkuk fields, located in northern Iraq but under the control of the federal government.
Protests continued around Basra last week, as demonstrators threatened to shut down all roads leading to the super-giant West Qurna 1 oil field. Outraged protesters have flocked back to several oil sites in Basra following a message Friday from Grand Ayatollah Ali al-Sistani, who encouraged his followers to express their displeasure about the Iraqi government’s failures to address problems of corruption, unemployment, and lack of basic services.
As protests spread in southern Iraq, there have been renewed demands for autonomy for the governorate. The concept of autonomous regions is a thorny issue among Iraqis, many of whom resist the idea of the division of Iraq. However, it may be argued that calls for an autonomous Basra governorate are merely an attempt to pressure the central government to disburse the governorate’s budget allocation and provide better services.
Basra is economically the most important province in Iraq, the third largest governorate with a population of more than 1.5 million people, situated between Iran and the Gulf states. The governorate contributes a major part of Iraq’s federal budget. In June 2018, the central government exported 105 million barrels of oil from Basra, which produces 2.8 million barrels on a daily basis. However, the governorate’s residents do not benefit much from the revenue.
Saudi Arabia: The Aramco IPO was put on indefinite hold several weeks ago, but Saudi Arabia’s funding needs have never been greater. Now Crown Prince Mohammed bin Salman has come up with a scheme to raise tens of billions for the government by forcing Aramco to issue debt to buy a controlling stake in a petrochemical company from the country’s sovereign-wealth fund. Should the deal go through, it would give the Public Investment Fund (PIF) between $50 billion and $70 billion for all or part of its stake in Saudi Basic Industries, or Sabic. Controlled by the state, Sabic is also the country’s largest publicly listed company, with a market cap of about $100 billion.
The Aramco IPO with its required disclosures would have shed light on the inner workings of the company for the first time since it was nationalized in 1980 and lead to the independent verification of its oil reserves and other assets. It would be a significant step in unmasking the murky world of national oil companies, whose reserves are thought to represent 90 percent of global reserves of oil and natural gas according to one estimate. Some are saying that an international sale of bonds to finance the purchase of the Sabic petrochemical company would also require disclosure of the company’s financial information, but many doubt the new scheme to finance the Saudi government will ever take place.
3. China
The impending Sino-American trade war continues to be one of the world’s top issues. Last week US President Trump sought to ratchet up pressure on China for trade concessions by proposing a higher 25 percent tariff on $200 billion worth of Chinese imports. US Trade Representative Robert Lighthizer said Trump directed the increase from a previously proposed 10 percent duty because China refused to meet US demands and has announced retaliatory tariffs on US goods. On Friday, China proposed retaliatory tariffs on $60 billion worth of US goods ranging from liquefied natural gas (LNG) to some aircraft, as a senior Chinese diplomat cast doubt on prospects of talks with Washington to solve the trade conflict.
China’s proposed tariffs on US liquefied natural gas and crude oil exports opens a new front in the trade war. China included LNG for the first time in its list of proposed tariffs at the same time that its biggest US crude oil buyer, Sinopec, suspended US crude oil imports.
The first official data reflecting the impact of US tariffs on China’s economy was released last week with surveys of factories and service providers pointing to sluggish domestic demand. The official manufacturing purchasing managers’ index fell to a five-month low of 51.2 from June’s 51.5, slightly lower than economists’ expectations. The import sub-index of the PMI slipped to a 23-month low, while the export sub-index held steady thanks to a weaker yuan. An official measure of activity outside China’s factory gates, also released Tuesday, declined to an 11-month low in July, as cooling manufacturing and construction activities weighed on the sector.
A meeting of the Politburo last week highlighted the challenges Beijing faces. Without mentioning the trade conflict with the US, a statement issued after the meeting made it clear that the dispute is a threat to China’s growth and stability.
4. Russia
Russia’s crude oil and condensate output during July rose by 148,000 b/d, to 11.215 million b/d, in line with Russia’s pledge to boost output under the OPEC agreement. Under the original deal in force since January 2017, Moscow had agreed to cut 300,000 b/d from its October 2016 output of 11.247 million b/d. On Wednesday, Energy Minister Novak said his crude and condensate output in July was 40,540 b/d below the October 2016 level. The October 2016 level of 11.247 million b/d came as the result of an unusual monthly surge in production from 10.7 million b/d meaning that after the supposed “cut” Moscow’s production was still close to pre-agreement levels.
Production may remain around the 11.2 million barrels a day level for the remainder of the year, a government official said, citing the oil ministry’s most recent calculations. Supply could even increase if there are further agreements with OPEC+ to change current output policy and boost supplies, though there haven’t been any detailed talks on this yet. OPEC+ may discuss whether a bigger production increase is needed when they meet in September, Novak said last month.
5. Nigeria
Between March 2017 and March 2018 the Nigerian National Petroleum Corporation incurred a loss of US$663 million as an under-recovered expenditure in importing gasoline at the international market price and selling at the federal government’s regulated pump price of $.40 per liter. The report, which showed that 80.26 million liters of gasoline were consumed in March 2018, also indicated that in February 2018, Nigeria’s oil production volumes declined by about 7.588 million barrels on account of many production shut-ins mostly on crude oil export terminals and pipelines.
The Minister of State for Petroleum Resources says that new and upgraded oil refineries in Nigeria would place a lot of demand on the country’s oil production, so that it may find it difficult to meet the needs of the soon-to-be-completed refineries. The imminent recovery of refining capacity of the four refineries owned and operated by the Nigerian National Petroleum Corporation is part of the expected pressure on the country’s oil production which is currently around 2.3 million b/d.
Government’s statistics had indicated Nigeria currently has a 445,000 b/d refining capacity in the NNPC’s four refineries. This number is however projected to rise with the coming on stream of refineries such as the 650,000 b/d Dangote refinery; the Omsa Pillar Astex Company (OPAC) refinery in Delta; as well as the 12,000 b/d Azikel refinery, amongst others. At a recent meeting in Abuja, where Nigeria and Niger Republic penned agreements to build a 150,000 b/d refinery in Katsina, the Minister predicted that Nigeria could have challenges providing crude oil for the refineries when they all become operational.
Nigeria’s crude oil production is expected to rise further if Shell and its partners, next year, decide whether to go ahead with the development of the nation’s Bonga Southwest offshore oilfield. The project, one of the country’s largest with an expected production of 180,000 b/d, is expected to generate a profit above $50 a barrel. Shell is negotiating a production sharing contract with the Nigerian government which will determine the viability of the project,
6. Venezuela
According to the Miami Herald, a US probe into the laundering of $1 billion from Venezuela’s state-owned oil company PDVSA has involved President Maduro. Although Maduro was not named in the criminal complaint filed earlier this month, the president along with other senior Venezuelan officials are being investigated for their alleged participation in the scheme that involved channeling hundreds of millions of dollars from PDVSA into US and European banks.
As the economic crisis continues to deepen, President Nicolas Maduro is promising a new policy on gasoline which is currently generously subsidized by the government. Given the rate in inflation in Venezuela, it is difficult to put a meaningful price on anything, but the current authority on world gasoline prices puts the price of a gallon in Venezuela at $.01(1 cent). Maduro promised last week a new plan to ease the economic crisis and hyperinflation. The president didn’t elaborate on the gasoline policy plan, but said: “I’m committed and with a new national hydrocarbon policy we’ll have enough money, cash, in this country to invest in everything our people need. We’ll have money to spare.”
Maduro didn’t say that gasoline prices would be increased but warned that people who don’t take part in a nationwide car census that began last Friday would not be eligible to receive state subsidies for gasoline. It sounds a lot like rationing of that one cent gasoline is on the way.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
In Yemen, despite a worsening humanitarian crisis amid a war between the Houthi rebels and a coalition of Saudi Arabia and the UAE, the poorest Arab country has found a way to restart oil production and has even exported the first cargo: 500,000 barrels sold to a Chinese company. This is the first outbound shipment of crude oil from Yemen since 2015 when a civil war broke out. (8/4)
India’s cabinet approved a policy to allow companies to explore and exploit unconventional oil and gas resources such as shale oil and gas and coalbed methane under the existing production sharing contracts, as it aims to reduce its dependency on energy imports. (8/2)
In China, reductions to subsidies for hybrid and battery-powered vehicles that came into effect mid-June are already having a dramatic impact. According to government data, some 64,000 battery-electric vehicles rolled off production lines in June 2018, a drop of 16 percent compared to May. June sales of BEVs fell by 23 percent. (8/3)
South Korea is planning to cut taxes on LNG by 74 percent and raise taxes on coal for power generation by 27 percent next year in an effort to cut the country’s heavy reliance on coal for power production and shift towards gas. (7/31)
The Indonesian government has moved to reclaim its prolific Rokan oil block from Chevron in 2021. When Chevron’s contract is set to expire, the government will then turn it over to state-run Pertamina. Chevron Pacific Indonesia is just the latest oil major casualty in Indonesia’s determination to nationalize its natural resources, including oil. (8/2)
In Argentina, energy industry participants are set to meet August 13 in Neuquen with labor leaders and politicians to discuss the future of the Vaca Muerta, as issues mount that could slow development of one of the world’s largest shale oil plays. (8/1)
Offshore Mexico, the outcome from a potential $1.9 billion commitment by Italy’s ENI could realize 90,000 barrels of oil per day from 2021. The so-called Area 1 basin is located in the shallow waters of the Campeche Bay. (8/2)
Canada’s gross domestic product grew at a faster pace than forecast in May, led by the oil and gas industry and more specifically, oil sands. Statistics Canada reported that the national GDP expanded by 0.5 percent in May, with 19 out of 20 industries booking improved results compared to April, with oil and gas posting a 2.5-percent improvement and the oil sands industry recording growth of 5.3 percent. (8/3)
Canada secondary? Like most other elements of President Trump’s America First policy, there should be little expectation that Mr. Trump has any commitment to Canada when it comes to energy. Reaching non-US global markets directly is clearly in the strategic interest of Canadian energy producers, for both expanded sales opportunities and capturing better prices. But without adequate pipeline and shipping infrastructure, Canadian energy producers will remain dependent on a single buyer, the U.S., with a fickle and self-absorbed energy agenda. (8/1)
Canadian heavy oil prices are the weakest in almost five years, leading Canada’s largest producer—Canadian Natural Resources Ltd.—to focus on drilling for lighter crude. Western Canadian Select’s discount to benchmark West Texas Intermediate widened to $31 a barrel Friday, the biggest gap since December 2013. Prices have tumbled amid constraints on pipeline and rail capacity out of Western Canada and as the US Midwest’s biggest refinery prepares for maintenance later this month on its largest crude distillation unit. (8/4)
The US oil rig count declined by two to 859, the second such decline in three weeks, according to Baker Hughes. Gas rigs dropped by three to 183. The rate of oil rig growth has slowed over the past couple of months with recent declines in crude prices. So far this year, the total number of oil and gas rigs active in the US has averaged 1,010, the highest since 2014 but well below that year’s average of 1,862 rigs. (8/4)
BP’s $10.5 billion move to acquire most of BHP Billiton’s shale acreage in North America “signals a bold return by the UK oil giant to the lower 48 states,” according to Rystad Energy. The energy research company said the action gives BP a prominent position in the North American tight oil play and secure access to new projects that can contribute on a large scale to growing its production. (8/1)
Oil export tools: Tallgrass Energy on Wednesday joined a growing list of midstream companies that plan to load US crude directly onto supertankers by building an offshore pipeline. The company said it will build an 800,000 b/d crude pipeline that will carry oil from the Cushing, Oklahoma, hub to the St. James, Louisiana, refining complex and then link that line to an export-capable liquids terminal being built near the mouth of the Mississippi River. The proposed terminal will then be linked to a separate offshore pipeline extension that would allow for the loading of VLCCs that can transport about 2 million barrels of oil. (8/2)
US natural gas demand is rising on a structural basis, as coal plants shut down and more gas-fired generation comes online. In addition, gas exports in the form of LNG are steadily on the rise. That means that while demand continues to follow a cyclical pattern, both the peaks and the valleys of this pattern are rising steadily over time. (8/3)
Gasoline prices: The AAA warned that consumer gasoline prices in the US could be on the rise given signs in government data of robust demand. The EIA reported earlier this week that demand for gasoline for the week ending July 27 was 1,000 b/d short of setting an all-time record. So far, consumer demand for gasoline is about 1.5 percent higher than last year, while gasoline supplies have moved lower. (8/3)
US energy expenditures declined for the fifth consecutive year, reaching $1.0 trillion in 2016, a 9 percent decrease in real terms from 2015. Adjusted for inflation, total energy expenditures in 2016 were the lowest since 2003. Expressed as a percent of gross domestic product (GDP), total energy expenditures were 5.6 percent in 2016, the lowest since at least 1970.(8/3)
Oil + drugs: The fastest-growing oil region in the US is fueling not only the second American shale revolution—it’s fueling a subculture of drug and alcohol abuse among oil field workers. The Permian shale play in West Texas is once again booming with drilling and is full of oil field workers, some of whom are abusing drugs and alcohol to help them get through long shifts, harsh working conditions, and loneliness and isolation. (7/30)
Miners’ $$ doldrums: Brent crude prices are up 40 percent in the past year, cheering oil industry executives but causing concern among their customers in the mining sector. Miners use heavy fuel oil to generate electricity at remote sites; they also use it for transport, with large trucks and other equipment guzzling down millions of gallons each day across the industry. (8/4)
Electric power sector coal consumption in 2017 was 36 percent (376 Million ton) lower than in 2008 when US coal production reached its highest level. The 661 million tons of coal consumed in the electric power sector in 2017 was the lowest amount of coal consumed since 1983, and 2017 was the fourth consecutive year that US coal consumption and coal shipments by all transport modes declined. (8/4)
US coal exports totaled 9.2 million tons in June, up 5.1% from May and up 38.6% from the year-ago month, according to US Census data out Friday. Relatively high seaborne prices for both metallurgical and thermal coal, in addition to a possible ban on petcoke in India, have opened the door for US exports. (8/4)
State-owned Coal India Ltd increased its production to 40.56 million tons in July, up 10.6 percent on the year. (8/2)
Nordic nuke slow-down: This year’s unusually warm summer in the Nordic region has increased sea water temperatures and forced some nuclear reactors to curb power output or shut down altogether, with more expected to follow suit. The summer has been 6-10 degrees Celsius above the seasonal average so far and has depleted the region’s hydropower reservoirs, driving power prices to record highs, boosting energy imports from continental Europe and driving up consumer energy bills. Reactors need cold sea water for cooling but when the temperature gets too high it can make the water too warm for safe operations. (8/2)
Germany has added over 2 GW of new solar capacity over the past year as the rebound for the sector accelerates and annual additions are on track for the strongest growth since 2013, the latest monthly data from the federal grid regulator showed Tuesday. Additions in the first six months of 2018 are up by over 40% on the year at 1.3 GW. Overall solar growth is still well below levels seen during the boom years 2010-12 when Germany added some 20 GW in just three years. (7/31)
Offshore Maryland, Deepwater Wind, which operates a wind farm in waters off Rhode Island, wants to build another wind farm. But before its proposal can go forward, the company needs to know what lies on the sea floor here. So, geologists, marine biologists, and archaeologists will spend the next couple of months seeking answers, scouting the potential footprint of a wind-energy project planned near the mouth of the Delaware Bay. (8/1)
Hoover Dam for pumped storage? The Los Angeles Department of Water and Power, an original operator of Hoover Dam when it was erected in the 1930s, wants to equip it with a $3 billion pipeline and a pump station powered by solar and wind energy. The pump station, downstream, would help regulate the water flow through the dam’s generators, sending water back to the top to help manage electricity at times of peak demand. The net result would be a kind of energy storage — performing much the same function as the giant lithium-ion batteries being developed to absorb and release power. (7/30)
EV push needed? A new report by the progressive policy institute Center for American Progress estimates that the US needs to add 14 million new PEVs and more than 330,000 new public charging outlets by the end of 2025 in order to meet its Paris Agreement targets. According to the authors, the existing state and VW funds can provide only about 50% of the funding needed to deploy adequate public charging infrastructure through 2025. (7/31)
CA pushing ZEVs: California Governor Jerry Brown has directed the California Air Resources Board (ARB) to assess possible regulatory requirements to ensure greater inclusion of zero-emission vehicles in public and private light- and heavy-duty vehicle fleets. California is looking for ways to meet a 5-million zero-emission vehicle target by 2030. (8/4)
EV deliveries: UPS announced a collaboration with Thor Trucks to develop and to test a fully-electric class 6 delivery truck in Los Angeles, Calif. The truck is expected to be ready for deployment later this year. The Thor medium-duty truck will have a driving range of approximately 100 miles powered by a Thor-designed and built battery that will be lightweight, durable and allow long-range driving distances. (8/2)
EV solution: Honda is introducing a new Honda SmartCharge beta program that allows electric vehicle customers to reduce the environmental footprint of charging their car while earning monetary rewards. Honda SmartCharge computes the best time to charge a vehicle from the electric grid, dynamically taking into account the driver’s daily schedule, the amount of renewable energy being generated, and the amount of CO2 emitted from power plants on the grid. (8/1)
Tesla goes to China: Tesla plans to build a $5-billion car-manufacturing plant near Shanghai in China, and is weighing possibly raising part of the funds for the factory from local partners, Bloomberg reported on Wednesday. Tesla expects to begin production of its Model 3 in the new Chinese plant by 2020. (8/2)
Recycling EV batteries: While scores of research labs around the world look for ways to replace lithium-ion batteries with cheaper and more reliable alternatives, China has started a pilot EV battery recycling program in anticipation of a boom in EV adoption in the next few years. Seventeen cities and regions will work to encourage car producers to build battery recycling facilities and join forces with battery makers, used car dealers, and scrap traders to set up recycling networks. (8/1)
H2 status in CA: The California Air Resources Board has released the 2018 issue of its annual report on fuel cell vehicles and fueling stations. The report describes an uptick on both fronts. There are 4,411 FCEVs registered to the Department of Motor Vehicles as of 4 April. Industry estimates a total of 4,819 vehicles deployed through May of 2018. The hydrogen fueling network has gained seven additional Open-Retail stations for a total of 36 locations. (8/1)
Hot as Hades: In Northern Europe, this summer feels like a modern-day version of the biblical plagues. Cows are dying of thirst in Switzerland, fires are gobbling up timber in Sweden, the majestic Dachstein glacier is melting in Austria. In London, stores are running out of fans and air-conditioners. In Greenland, an iceberg may break off a piece so large that it could trigger a tsunami that destroys settlements on shore. Temperatures in Spain and Portugal are expected to reach 105-110 degrees F this weekend. The preliminary results of an Oxford study found that, in some places, climate change more than doubled the likelihood of this summer’s European heat wave. (8/4)
Emissions targets: The EU’s energy chief is pushing for member states to adopt a more aggressive carbon reduction target ahead of UN climate talks later this year. The EU already has some of the most ambitious carbon emission reduction targets in the world but Miguel Arias Cañete, the EU energy commissioner, wants the bloc to go further. To reach the new energy and climate change targets will require a mixture of public and private investment of €379bn a year between 2021 and 2030, as well a 50 percent increase in the number of new renewables installed each year. (7/30)
Peak Oil Review 30 July 2018
By Tom Whipple, originally published by ASPO - USA
https://www.resilience.org/stories/2018-07-30/peak-oil-review-30-july-2018/
Quote of the Week
“The economic collapse I predict will occur because the world’s petroleum industry lacks the capacity needed to supply additional low-sulfur fuel to the shipping industry [in 2020] while meeting the requirements of existing customers such as farmers, truckers, railroads, and heavy equipment operators.” Phillip Verleger, oil industry economist, and analyst
1. Oil and the Global Economy
Oil prices climbed steadily through Thursday last week, supported by easing US-EU trade tensions and a temporary shutdown by the Saudis of a critical crude oil shipping lane. On Friday prices fell in sympathy with the US equities market to end the week at $74.29 in London and $68.69 in New York. Crude prices were unfazed last week by the unexpectedly robust US GDP figure, or the threatening rhetoric exchanged between Tehran and Washington.
There are so many issues affecting oil prices these days that analysts are all over the map on forecasts for oil prices. At the bottom of the forecast range is Citi bank which says that Brent soon could fall back into a trading range of $45 to $65 a barrel. Goldman Sachs is in the middle forecasting a $70-80 range for Brent, while Bank of America says that Brent could rise to $90 by the second quarter of next year. However, the Bank says that should Iranian exports be completely cut off then there would be a price spike above $120 a barrel. An interesting outlier from economist Philip K. Verleger suggests that oil prices could increase to $200 a barrel solely because of new regulations on sulfur emissions for maritime fuels which begin in 2020.
Some believe that the markets are ignoring the risks of tightening supplies. These analysts note that the expected increase in oil exports from OPEC and Russia has not materialized and that reports of spare Saudi capacity that will be brought into production are overblown. The attack on two Saudi oil tankers in the Strait of Bab El Mandeb by Yemeni Houthi forces could presage more troubles in the area. The Bab El Mandeb is not militarized by US-NATO naval forces – which means it is far more exposed to attacks than the Strait of Hormuz.
OPEC: Last May a bill was introduced in the US Congress that would let the US sue OPEC for oil price fixing. The proposed law is called “No Oil Producing and Exporting Cartels Act,” or NOPEC. Last week, two Republican Senators and two Democrats introduced legislation aimed at allowing the government to bring lawsuits against OPEC members for antitrust violations. If passed, this bill would be an amendment to the Sherman Anti-trust Act of 1890. One of this act’s central provisions outlaws all combinations that restrain trade between states or with foreign nations. This prohibition applies not only to formal cartels but also to any agreement to fix prices, limit industrial output, share markets, or exclude competition.
In 2007, a similar bill passed in the House of Representatives with a 345-72 vote, and in the Senate by 70-23, only to fail afterward in the face of White House opposition. This time around, however, there is a good chance that Trump would sign such a bill into law. Such a US law could cause considerable mischief by endangering US-Saudi relations.
US Shale Oil Production: In its biggest deal in nearly 20 years, BP has agreed to buy US shale oil and gas assets from Australian miner BHP Billiton for $10.5 billion. The acquisition will give BP access to some of the most desirable acreage in the US shale basins where BP’s scale of operations can provide a considerable advantage. Big oil companies have historically focused more on large offshore projects, but they are increasingly sinking money into shale developments that start producing and making money faster. BHP will book a roughly $2.8-billion charge against assets for its 2018 fiscal year. BHP paid a combined $20 billion to acquire its US shale assets in 2011, and then spent billions more to explore and develop them. But a collapse in oil prices in 2014 resulted in significant losses, including a more than $7-billion pretax charge in 2016 that is its largest-ever single write down.
The BHP experience in US shale oil once again raises the issue as to where US shale oil is going and just who is making money from wells that are mostly used up in two to three years. While the US reached a new record of 11 million barrels of oil production per day last week, the top five shale oil fields also suffered the highest monthly decline rate ever. This is terrible news for the US shale industry as it must produce more and more oil each month to keep oil production from falling. According to the newest EIA Drilling Productivity Report, the top five US shale oil fields monthly decline rate is set to surpass a half million b/d in August. Thus, the companies will have to produce at last 500,000 barrels of new oil next month to keep production flat.
In the charts that are shown above, the UP arrows denote the forecasted new output added from new wells opened during August while the figures above the DOWN arrow provide the monthly decline in production from wells opened any time before the current month. For example, the chart on the bottom right-hand side is for the Permian Region. The EIA forecasts that the Permian will add 296,000 b/d of new shale oil production in August, while production from the existing wells in the field will decline by 223,000 b/d during August from the previous month. Thus the whole Permian Basin is forecast to produce 73,000 b/d more oil in August than in July.
If we add up these top five shale oil fields monthly decline rate for August will be 503,000 b/d. Thus, US shale oil companies must produce at least 503,000 b/d of oil from newly opened wells in August to keep production from falling. This decline rate will continue to increase as shale oil production rises. Again, according to the EIA’s figures, the top five US shale oil fields monthly legacy decline rate increased from 398,000 b/d in January to 503,000 b/d for August:
However, the EIA forecasts that these five largest US shale oil fields will produce 635,000 b/d of oil from newly drilled wells during August resulting in a net increase of 360,000 b/d for the month. For September, the 635,000 b/d from these new wells will start to decline rapidly and add to the decline from “legacy” (more than one month old) wells. At some point in the months ahead, the shale oil industry will not be able to drill enough new wells in a month to keep up with the rapid decline from existing wells. Like the red queen in Alice in Wonderland, the shale oil industry must drill faster and faster just to keep production level.
Pioneer Resources is the largest shale oil producer in the Permian. The company spent $818 million on capital expenditures for additions to oil and gas properties (drilling and completion costs) during the first quarter of 2018, opened 63 new horizontal wells in the Permian, but added 9,000 b/d of oil equivalent over the previous quarter. Pioneer reported $554 million in cash from operations and spent $818 million drilling and completing oil wells in the Permian and a few other locations. Therefore, the largest shale oil producer in the Permian spent $264 million more than they made from operations drilling 63 new wells in the Permian and only added a net 9,000 barrels per day of oil equivalent.
Of the ten shale companies in the chart above (in order: Continental, EOG, Whiting, Concho, Marathon, Oasis, Occidental, Hess, Apache & Pioneer), only three enjoyed positive free cash flow, while seven had free cash flow losses. The net result of the group was a negative $455 million in free cash flow. These losses are taking place even with oil prices at levels that are supposed to be profitable. It is going to take many years of much higher oil prices to recoup the losses the shale oil industry is suffering. Even if oil prices increase significantly in the years ahead, the question is whether there will be enough shale oil left to ever pay back the losses.
2. The Middle East & North Africa
Iran: Last week was marked by threats and counter-threats between Washington and Tehran over the impending US sanctions. At times the rhetoric reached unprecedented levels. The most interesting feature of the week was how little reaction there was in the oil markets which have long been accustomed to inflammatory rhetoric emanating from Tehran, but are getting used to the same class of threats from Washington.
Tehran’s most potent bargaining chip is the ability to halt, or at least attempt to block, oil exports through the Straits of Hormuz. As this would cut off roughly 30 percent of the world’s seaborne oil supplies and much of the oil going to many nations, major hostilities would almost certainly result within hours of an Iranian effort to stop oil tankers transiting the Straits. The exchange of harsh rhetoric resulted in many commentaries as to whether Tehran would ever undertake such a move as it would surely result in unprecedented hardships for Iran.
More sophisticated analyses point out that while blocking the Straits would be tantamount to suicide for Tehran, they have other options such as the attacks on two Saudi oil tankers transiting the Bab al Mandeb Strait in Yemen and Djibouti last week. These attacks resulted in the Saudis temporarily closing the Straits to their oil tankers. By using the Houthi insurgents in Yemen as cutouts in attacks on oil traffic going through the Suez, Tehran could obtain some additional leverage in its dispute with Washington without the risks of open confrontation. This confrontation has months or even years to play and there are many dangers along the way.
Iraq: For the past three weeks, Iraq was rocked by protests. They began in the southern province of Basra, home to over 70 percent of Iraq’s oil reserves, and quickly spread to the rest of the country. Despite Basra’s oil wealth, people lack basic amenities such as clean water, electricity and waste management. They accuse the government of widespread corruption and are demanding sweeping changes.
Electricity service collapsed across several provinces in Iraq on Thursday due to technical failures, as protesters continue to rail against government corruption and incompetence, including renewed demonstrations at oil fields. Power generation came to a halt in Basra, Dhi Qar, and Missan provinces mid-day on Thursday, but began to come back online by early evening. Kirkuk and Ninawa provinces were also affected, according to statements from the Ministry of Electricity.
Saudi Arabia will ship fuel to Basra in order to help Iraq through its electricity crisis and to keep its power flowing, according to reports on Saudi Arabian state TV. The report said large amounts of fuel would be transported to Iraq from the port of Dammam in Saudi Arabia. Power cuts started last week across Iraq after Iran cut electricity and fuel supplies to the country over payment disputes and protests continue across the country as a result of the electricity crisis.
Despite the protests, Iraq’s oil exports continued to increase last week and averaged around 3.5 million b/d; however, the energy sector remains vulnerable if the protests continue. Last week at least two minor attacks including a small roadside bomb were launched against oil facilities.
The political crisis stemming from the disputed election results continues with no end in sight and few important decisions about the future of the country being taken.
Saudi Arabia: Riyadh said on Thursday it was suspending oil shipments through the Red Sea’s Bab al-Mandeb Strait, one of the world’s most important tanker routes, after Yemen’s Iran-aligned Houthis attacked two ships in the waterway. Saudi Energy Minister Khalid al-Falih said the Houthis attacked two Saudi oil tankers in the Red Sea on Wednesday, one of which sustained minimal damage. A senior oil source said Saudi Arabia had already beefed up security and that all crude vessels in the area are accompanied by warships.
Saudi crude exports through Bab al-Mandeb are estimated at around 500,000-700,000 b/d. Most Gulf oil exports that transit the Suez Canal and SUMED Pipeline pass through the strait. Industry and shipping sources said the suspension was unlikely to impact Saudi crude supplies to Asia, but could add shipping costs to Saudi vessels heading to Europe and the United States due to a longer transit. Traders said the suspension order was only for Saudi-owned vessels, so Saudi Aramco could still charter foreign ships to move its crude. Saudi Arabia also has a 5 million b/d pipeline route to the city of Yanbu on the Red Sea which bypasses the Strait.
The latest price rally is particularly good news for Saudi Arabia, whose budget deficit this year should to shrink to 5.6 percent from 9.3 percent last year. Saudi Aramco, the main revenue source for the Kingdom, is rumored to be seeking a majority stake in one of the world’s largest petrochemical giants – SABIC. Saudi Aramco is said to be weighing use of the international bond market for the first time to finance the acquisition of SABIC, a move into global capital markets that could offer an alternative to an initial public offering of Aramco stock. If Aramco goes ahead with an international bond — potentially among the biggest ever done by a corporate issuer — the sale would force Aramco to disclose its accounts to investors for the first time since nationalization 40 years ago as well as many other details about oil reserves and operations.
3. China
As the U.S.-China trade war escalates and policymakers around the world warn that tariffs and counter-tariffs could weaken global economic growth, China is looking to boost its economy with measures to expand domestic demand and promote investments, including in infrastructure. Last week, Beijing announced a mix of tax cuts and infrastructure spending citing “uncertainty,” as it increases efforts to stimulate demand and counteract a weakening economy. The move, late Monday, came the same day as an injection of $74 billion into the banking system by the People’s Bank of China— the central bank’s largest ever, single-day cash injection using that tool. These moves provide growing evidence that China’s policymakers are concerned about how the trade war with the US will exacerbate a domestic slowdown and follow a series of monetary loosening actions in recent weeks.
China’s crude oil imports from the US for July have fallen sharply from June, and are expected to drop even further for August, according to vessel tracking data, as Beijing’s tariffs on US crude imports get closer to implementation. The decline is seen in the procurement activity of state-run Unipec, the trading arm of China’s Sinopec, the world’s largest refiner. “Sinopec will continue to take deliveries of crude from the US in August, but will reduce buying for the rest of the year,” said an executive at a Sinopec refinery,
The EIA’s International Energy Outlook 2018 points out that China’s energy consumption is tied to both its rate of economic growth and the size of its energy-intensive manufacturing industries. Chinese policy goals call for a move away from heavy industry toward a less energy-intensive economy with a greater focus on service industries suggesting that the pace of growth of its demand for oil could be slowing in coming years.
4. Russia
Moscow’s oil production this year will increase to 11.02 million b/d, a new 30-year high, Energy Minister Alexander Novak said on Wednesday. He said Russia would further raise production to somewhat higher in 2019 after OPEC and other oil producers agreed last month to ease production curbs. Last year Russia’s oil production reached a new 30-year average annual high of 10.98 million b/d despite the country’s participation in the OPEC agreement. While “new highs” may sound impressive, the 300,000 b/d increase is not that significant when compared to increasing global demand of circa 1.5 million b/d.
6. Venezuela
The IMF recently called the economic crisis in Venezuela “profound” as a substantial drop in oil production takes its toll. The Fund noted that real gross domestic product for Venezuela is on pace to drop 18 percent this year, the third year in a row for a double-digit decline. Racing to keep up with hyper-inflation which the IMF forecasts will hit 1,000,000 percent this year, the Venezuelan government announced that it would knock five zeros off its currency, the Bolívar — not the three it had previously planned.
Even after the new bills come into circulation, they will not be worth much. At the current rate of inflation, which the opposition-controlled National Assembly estimated at an annualized 46,305 percent in June, the highest denomination bill would be worth only $6 by the end of August. By the end of this year it would be worth 20 cents.
President Maduro also announced that part of the country’s oil reserves in the Orinoco Basin would be transferred to the central bank and would be included in the country’s international reserves. This move could be symbolic, designed simply to inflate the reserves number, or the government might be planning to convert ownership of the oil reserves into a tradable asset. “This would be tantamount to the government’s selling the country’s oil under the ground as a source of financing.” Venezuela currently is in the midst of one of the worst economic meltdowns in Latin American history.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
Oil prices could spike as high as $200 per barrel over the next 18 months, which would cause an “economic crash of horrible proportions,” according to a new report. A research paper from economist and oil market watcher Philip K. Verleger predicts there could be a shortage of low-sulfur diesel fuel in 2020 as a result of regulations from the International Maritime Organization aimed at cutting sulfur emissions. (7/25)
China’s decision to regulate maritime fuels could have a significant impact on international efforts to lower emissions from shipping, analysis finds. Following its so-called Blue Sky initiative, the Chinese Ministry of Transport announced extensions to emission control areas along the coastline. (7/25)
Big oil’s best threesome: Investors should feel confident about BP’s, Eni’s and Shell’s increased wave of new project approvals during the recent downturn. A Rystad Energy review of the performance of their recent projects against those of other operators shows that the three European oil giants have outperformed their peers. (7/25)
The Norwegian government gave Equinor consent to start production drilling in an oil field in the Norwegian Sea set for a production start next year. Equinor submitted a field development plan for Trestakk in 2016, outlining capital spending for the program of around $675 million. Discovered in 1986, production is slated for 2019. (7/27)
In the UK, shale gas developer Cuadrilla on Tuesday became the first operator in Britain to receive final consent from the government to frack an onshore horizontal exploration well, paving the way for commercial production. (7/25)
British energy company Cuadrilla Resources is still facing protests over shale gas work, despite work that was pumping millions of dollars into the local economy. The company said Tuesday it was taking legal action against six protestors who blocked access to its shale exploration site in Lancashire earlier this month. (7/26)
Russia’s Gazprom said Wednesday that just over 90 percent of its Power of Siberia gas pipeline to China is completed. Gazprom said construction on the facilities for gas production from fields feeding the 1,350-mile pipeline is about halfway completed. Pipeline testing and installation of a power supply is scheduled for 2019. Gazprom has a 30-year sales agreement with China National Petroleum Corp. (7/26)
In Israel, the Trump administration is pressing for a go-ahead on a gas pipeline deal it signed with Jordan a few years ago. The deal has been frozen due to a rekindling of tensions between Tel Aviv and Amman. The Israeli Prime Minister’s chief economic adviser is a staunch opponent of the Red-Dead pipeline that will link the two seas, believing it is not worth the $150 million to be invested. Of this, the US has undertaken to provide $100 million. (7/28)
Saudi Arabia will invest $10 billion in energy projects in South Africa. The funds will be used to build refineries and will also be used to advance petrochemicals and renewable energy projects in the developing economy. The funds can’t come soon enough for South Africa, whose power sector outages likely represent the African nation’s number one problem—99 days of rolling blackouts during 2016. (7/23)
In India, Iran has overtaken Saudi Arabia as the nation’s number two oil supplier in the April-June quarter. Iraq remains India’s number-one supplier of crude. While Iran ousted Saudi Arabia as the number two oil supplier, Iran’s oil shipments to India year over year are down. Iraq’s, on the other hand, have increased, perhaps as India looks to wind down shipments ahead of US sanctions on Iran that go into effect in November 2018. (7/24)
Sri Lanka will pay down its oil debt held by Iran with tea—a full year’s worth—in response to new regulations that Sri Lanka has issued in order to comply with a UN Security Council Resolution. (7/24)
Australian energy company Melbana said surveys have started in the Beehive prospect, one of the largest undrilled prospects in the country. Melbana has 20 percent of the options in Beehive, alongside Total and Australian energy company Santos. Melbana says the Beehive prospect is potentially the largest undrilled hydrocarbon prospect in Australia. (7/25)
In Kenya, Tullow Oil had threatened over the weekend to shut down its oil wells in the Lokichar basin if the government does not act soon to remedy production, security, and transportation problems. Tullow pulled the trigger not even three days later as it finds it difficult to transfer oil to the Kenyan coast as locals continue to interfere with transportation and operations unabated. (7/26)
In Guyana, gross discovered recoverable resources for Hess Oil’s Stabroek Block has been revised upward to 4 billion barrels of oil equivalent—up from the previous estimate of 3.2 billion barrels. Since the end of 2016, the estimate for recoverable resources on the block has quadrupled. (7/24)
In Mexico, president-elect Andres Manuel Lopez Obrador said on Friday his administration will look to boost the country’s crude oil production to 2.5 million barrels per day (bpd) from 1.9 million bpd now. Mexico’s oil and gas output has declined steadily over the past 14 years due to a lack of investment and natural depletion of oil fields. (7/28)
Mexico’s Pemex on Friday reported a 163.16 billion peso ($8.2 billion) net loss for the second quarter due to foreign exchange losses and higher costs. That compares with a profit of 32.76 billion pesos in the year-ago period. Pemex’s crude production slipped 7.3 percent in the quarter to an average of 1.866 million barrels per day, while natural gas production fell 9.7 percent to 3.915 billion cubic feet per day. (7/28)
Canadian oilsands boost: Despite continued takeaway capacity constraints, Canada’s top two oil producers raised their production in the second quarter, as demand for heavy Canadian oil among US Gulf Coast refiners has been rising at a time when Venezuelan heavy oil supply is dwindling. (7/27)
Canadian provinces Newfoundland and Labrador have agreed with Norway’s Equinor to develop a deepwater oil project off Canada’s eastern coasts that will cost US$5.2 billion ( C$6.8 billion. Equinor Canada is the operator of the Bay du Nord oil discovery, made in 2013 and estimated to hold more than 300 million barrels of light, high-quality crude oil. The Bay du Nord oil project aims for first oil in 2025. Bay du Nord is the first remote, deepwater project in the province’s offshore. It is located 500 kilometers (311 miles) from shore at a depth of around 1,200 meters (3,937 feet). (7/27)
The US oil rig count increased by 3 to 861 last week while the gas rig count dipped by 1 to 186, according to Baker Hughes. The oil and gas rig count now stands at 1,048—up 90 from this time last year, with oil rigs accounting for all of that increase. Canada gained 12 oil and gas rigs for the week, all of which were oil rigs. Canada’s oil and gas rig count is now up just 3 year over year. (7/28)
Chesapeake Energy Corp. is selling its last remaining oil and gas holdings in Ohio’s Utica Shale, a move aimed at whittling down the company’s debt and enabling it to focus increasingly on crude production. The roughly $2 billion sale to Houston-based Encino Acquisition Partners, announced Thursday, is the latest in a series of deals by Oklahoma City-based Chesapeake to improve its finances. (7/27)
Phillips 66 is running all the heavy Canadian crude oil the independent refiner can handle at its US refineries and will not seek additional supply from a new pipeline, CEO Garland said on Friday. “We’re bringing over 500,000 barrels a day of Canadian crude in today.” (7/28)
Nat-gas exports: The US Energy Department on Wednesday cleared the way for faster approval of small-scale exports of natural gas, including liquefied natural gas to Latin American countries, by issuing a rule that does away with a public interest review of the shipments. (7/26)
Inventories of distillate fuel, a category that includes both diesel and home heating oil, were 117.7 million barrels at the end of June, the lowest end-of-June level since 2004. Relatively low inventory levels reflect growth in distillate consumption during 2018 that has not been fully offset by increased domestic refinery production or by lower net exports of distillate. EIA estimates that US consumption of distillate fuel averaged 5% higher than in the same period of 2017. This increase is largely attributable to an increase in trucking activity, which is the leading use of diesel fuel. (7/28)
Airline fuel cost blues: Many of the biggest US airlines are cutting flights and raising fares to counteract rising fuel prices that are threatening a long run of profitability. American Airlines, the world’s largest airline by revenue, on Thursday trimmed its profit outlook for 2018 and pledged to cut capacity and delay delivery of some new Airbus SE jetliners after fuel costs rose 40% in the second quarter compared with last year. (7/27)
Colorado ballot hammer? There’s a good chance that a ballot initiative to significantly expand the buffer zones between oil and gas wells and homes and other buildings could be up for voting by Colorado residents in the November election. In the politically mixed state of Colorado, residents still remember last year’s deadly explosion at a home in Firestone, and people in some towns have tried to ban fracking operations—and almost succeeded. (7/25)
Exxon exodus: Following a public spat over climate change legislation, oil giant ExxonMobil has pulled its membership from the Koch brothers-backed anti-climate-change lobbying group, American Legislative Exchange Council. Neither ExxonMobil nor ALEC has commented publicly on the reasons for the company’s departure. (7/25)
MPG rollback: Trump administration officials are preparing to issue a proposal within days to freeze fuel-efficiency standards for cars and light trucks for six years and challenge the right of California and other states to set their own standards. The move would amount to one of the biggest regulatory rollbacks of the Trump presidency. In late 2016, the agencies concluded that stricter fuel-efficiency targets would save consumers money without compromising safety. Now, the current and former officials said, the government is poised to project that these goals would boost vehicle price tags and could endanger Americans by encouraging them to stick to driving older, less-safe cars and trucks. (7/25)
Air-conditioning equipment is used in 87% of homes in the US and, according to the latest EIA Residential Energy Consumption Survey (RECS), home air-conditioning costs averaged $265 in 2015, or 12% of total home energy expenditures. (7/24)
Russia-China coal megaproject? Some 80km from the Chinese border, the tiny Russian village of Yerkovtsy might provide the setting for a new Russo-Chinese megaproject. The $10 billion coal-fueled+ 4 GW Yerkovetskaya power plant, a joint project of Inter RAO and the State Grid Corporation of China, is back on the agenda, with high-profile state-owned financial institutions ready to back the project. The transmission lines from the Yerkovetskaya plant would go all the way down to Beijing, some 1500 km southwards, a sufficient distance to keep all burning-related contaminants far away from the Chinese capital. (7/25)
India’s coal imports up: India’s 12 key state-run ports handled 28.29 million mt of thermal coal imports during April-June, up 19% year on year, latest data from Indian Ports Association released Saturday showed. (7/23)
The future of nuclear energy may well be much smaller. Dozens of companies are working on a new generation of reactors that, they promise, can deliver nuclear power at lower cost and reduced risk. These small-scale plants will on average generate between 50MW and 300MW of power compared with the 1,000MW-plus from a conventional reactor. (7/25)
Tidal power: The European Commission said Thursday it supported a French effort to work to demonstrate the potential benefits of producing electricity through tidal energy. A plant operated by British energy company EDF aims to test the potential for tidal energy. The demonstration plant in the English Channel could generate as much as 14 megawatts of energy. (7/27)
Electrify Canada: Volkswagen Group Canada has formed Electrify Canada, a new company that will build an ultra-fast electric vehicle direct current (DC) charging network across Canada. Volkswagen expects the network to be operational starting in the second quarter of 2019. (7/24)
UK’s EV pushback: Despite the many announcements for new electric vehicle models coming to the market and government initiatives to support EV adoption, UK motorists remain reluctant—if not stubborn—to make the switch to electric cars. Of 200 people surveyed, just 15 percent said they would definitely be making the switch to an EV or hybrid vehicle when they next purchase a car or choose an alternative company vehicle. Almost 50 percent said that they don’t see themselves considering switching to an EV or a hybrid vehicle for another 10 to 15 years, if not longer. (7/27)
$$ killing climate bills: Legislation to address climate change has repeatedly died in Congress. But a major new study says the policy deaths were not from natural causes — they were caused by humans, just like climate change itself is. Climate action has been repeatedly drowned by a devastating surge and flood of money from the fossil fuel industry — nearly $2 billion in lobbying since 2000 alone. (7/24)
Peak Oil Review 23 July 2018
By Tom Whipple, Steve Andrews, originally published by ASPO - USA
https://www.resilience.org/stories/2018-07-23/peak-oil-review-23-july-2018/
Quote of the Week
“Climate change is a fact of life, as is not contested by Defendants. But the serious problems caused thereby are not for the judiciary to ameliorate. Global warming and solutions thereto must be addressed by the two other branches of government.” US District Judge John Keenan in Manhattan, in dismissing a lawsuit by New York City against major oil companies
1. Oil and the Global Economy
The $3 drop in US oil prices last Monday was a signal that the forces moving the oil market are changing. Last year, the main forces pushing the oil markets higher were the agreement by OPEC and its partners to lower production and the growth of global demand. This year, an array of factors are pressuring the oil markets: the US sanctions that threaten to cut Iranian oil exports; US-China trade tensions; OPEC’s decision to raise crude output; and dwindling oil production from Venezuela. Moreover, there are supply disruptions in Libya, the Canadian tar sands, Norway, and Nigeria that add to the uncertainties as does erratic policymaking in Washington, complete with threats to sell off part of the US strategic reserve and a weaker dollar.
After the sharp drop last Monday, prices climbed about a dollar a barrel to close at $68.26 in New York and $73.07 in London. Goldman Sachs continues to expect that Brent Crude prices could retest $80 a barrel this year, but probably only late in 2018. “Production disruptions and large supply shifts driven by US political decisions are the drivers of this new volatility, with demand remaining robust so far.” Brent Crude is expected to trade in the $70-$80 a barrel range in the immediate future.
The OPEC Production Cut: Saudi Arabia plans to reduce crude exports next month by 100,000 b/d in August according to a Reuters report. Saudi Arabia—and Russia—had started to raise production even before the June 22 meeting with OPEC that sought to address the shrinking global oil supply and rising prices. Earlier this year, OPEC was over-complying with the cuts agreed to at the November 2016 meeting thanks to additional cuts from Saudi Arabia and Venezuela. The June 22nd meeting decided to increase production to more closely reflect the production cut agreement. After the meeting, Saudi Arabia pledged a “measurable” supply boost but gave no specific numbers. According to Iran’s news agency, Tehran’s oil minister warned his Saudi Arabian counterpart that the June 22nd revisions to the OPEC supply pact do not give member countries the right to raise oil production above their targets.
The Saudis, Russia, and several of the Gulf Arab states increased production in June, but seem reluctant to expand much further. During the summer months, the Saudis need to burn raw crude in their power stations to combat temperatures that will be on the order of 110o to 115o Fahrenheit during the next few weeks.
Wood Mackenzie’s latest long-term outlook for the worldwide oil supply says that OPEC and its partners will continue to play a crucial role in oil supply and prices in the global oil market through 2040, despite expectations for production increases in the US and other non-OPEC countries in the 2020s.
US Shale Oil Production: According to the EIA’s latest Drilling Productivity Report, US unconventional oil production is projected to rise by 143,000 b/d in August to 7.470 million b/d. The Permian Basin is seen as far outdistancing other shale basins in monthly growth in August, at 73,000 b/d to 3.406 million b/d. However, drilled but uncompleted (DUC) wells in the Permian rose 164 in June to 3,368, one of the largest builds in recent months. Total US DUCs rose by 193 to 7,943 in June. US energy companies last week cut oil rigs by the most in a week since March as the rate of growth has slowed over the past month or so with recent declines in crude prices.
Included with the optimistic forecast for US shale oil was the caveat that the DUC and production figures are sketchy as current information is difficult for the EIA to obtain with little specific data being provided to Washington by E&Ps or midstream operators. Given all the publicity surrounding constraints on moving oil from the Permian to market, the EIA admits that it “may overestimate production due to constraints” in oil and gas takeaway capacity and that they “have watched [well completions] filings coming in and they are disappointing” over the last few weeks.
The increasing DUC count in the Permian is an important concern. If oil and gas cannot find a way out of the basin, a growing number of wells will need to be banked for the next year or so and left uncompleted until new pipeline capacity comes online in Q3 2019. The number of DUCs has increased steadily in the last six months, with each month adding over 110 DUCs to inventory, month-on-month. Completion crews are scarce in the Permian and haven’t been able to keep up now for the last two years. Labor shortages also have helped contribute to delays in setting up facilities on site – that is, processing, pipelines, storage tanks — so some producers must wait to bring some wells online.
An EIA analyst noted that it is fair to say that the scarcity of fracking crews and labor shortages, and impending pipeline constraints will be the primary contributor to the rise in DUC counts and a plateau of rig growth. However, he would not say that the 164 DUC increase seen last month is strictly because of the pipeline constraints.” “Rather, I see it as just the continuation of an 18-month trend.”
Production in the Eagle Ford Shale of South Texas is forecasted to grow 35,000 b/d in August to 1.436 million b/d, while the Bakken Shale of North Dakota and Montana is forecast by the EIA to grow 15,000 b/d to 1.297 million b/d. The Anadarko Basin of Oklahoma and the Texas Panhandle is predicted to grow 10,000 b/d to 559,000 b/d, while the Niobrara Shale in Colorado and Wyoming is pegged to increase by 6,000 b/d to 611,000 b/d. The Appalachian Basin in Pennsylvania, Ohio and West Virginia is forecast at 4,000 b/d of oil growth in August to 118,000 b/d. The Haynesville Shale, in northeast Louisiana and east Texas, is expected to remain flat in oil output in August at 43,000 b/d.
2. The Middle East & North Africa
Iran: Last week Iran’s supreme leader, Ayatollah Ali Khamenei, called on state bodies to support the government of President Hassan Rouhani in fighting US economic sanctions. The likely return of US economic sanctions has triggered a rapid fall of Iran’s currency and protests by bazaar traders usually loyal to the Islamist rulers, and a public outcry over alleged price gouging and profiteering. Khamenei said “the government’s economic team is the axis of all activity in the country, calling all the bodies to coordinate with it,” the website reported.“ He advised state radio and TV to reflect a correct image of government activities.”
This speech to members of Rouhani’s cabinet is clearly aimed at the conservative elements in the government who have been critical of the President and his policies of cooperation with the West and a call for unity in a time that seems likely to be one of great economic difficulty for Iran. In late December, demonstrations which began over economic hardship spread to more than 80 Iranian cities and towns. At least 25 people died in the unrest, the most significant expression of public discontent in almost a decade. Demonstrators initially vented their anger over high prices and alleged corruption, but the protests took on a rare political dimension, with a growing number of people calling on Supreme Leader Khamenei to step down.
The US has rebuffed high-level pleas from the European Union to grant exemptions to European companies from its sanctions against Iran. Secretary of State Pompeo said the US rejected the appeal because it wants to exert maximum pressure on Iran. He said exemptions would only be made if they benefited US national security. The EU fears that billions of dollars’ worth of trade could be jeopardized as a result of Washington’s new sanctions.
Although there is much debate over the effectiveness of the impending US sanctions, some analysts are saying that Iran’s oil exports could fall by as much as two-thirds by the end of the year putting oil markets under massive strain amid supply outages elsewhere in the world. Some of the worst-case scenarios are forecasting a drop to only 700,000 b/d with most of Tehran’s exports going to China, and smaller shares going to India, Turkey and other buyers with waivers. China, the biggest importer of Iranian oil at 650,000 b/d according to Reuters trade flow data, is likely to ignore US sanctions.
However, some in Washington now expect that China will import much of the Iranian oil that other nations won’t buy, according to a senior US government energy official. Beijing’s purchase of extra Iranian crude would dull the economic impact of Washington’s sanctions.
Iraq: Iraq’s future is again in trouble as protests erupt across the country. These protests began two weeks ago in southern Iraq after the government was accused of doing nothing to alleviate a deepening unemployment crisis, water and electricity shortages and rampant corruption. The demonstrations are spreading to major population centers including Najaf and Amirah, and now discontent is stirring in Baghdad.
The government has been quick to promise more funding and investment in the development of chronically underdeveloped cities, but this has done little to quell public anger. Iraqis have heard these promises countless times before, and with a water and energy crisis striking in the middle of scorching summer heat, people are less inclined to believe what their government says.
Over the weekend the civil unrest has begun to diminish in southern Iraq, leaving the country’s oil sector shaken but secure – though protesters have vowed to return. Operations at several oil fields have been affected, as international oil companies and service companies have temporarily withdrawn staff from some areas that saw protests. The government claims that the production and exporting of oil has remained steady during the protests.
With Iran refusing to provide for Iraq’s electricity needs, Baghdad has now also turned to Saudi Arabia to see if its southern Arab neighbor can help alleviate the crises it faces.
Saudi Arabia: Saudi Aramco’s potential acquisition of a stake in petrochemicals company Sabic will affect the timing of an initial public offering, its chief executive said, throwing further doubt on the kingdom’s plans to sell shares in its state giant. The IPO has been touted for the past two years as the centerpiece of an ambitious economic reform program driven by crown prince Mohammed bin Salman to diversify the Saudi economy beyond oil.
Saudi Arabia expects its crude exports to drop by roughly 100,000 b/d in August as the kingdom tries to ensure it does not push oil into the market beyond its customers’ needs, the Saudi’s OPEC governor said on Thursday. An industry source familiar with the matter said Saudi oil exports in June were about 7.2 million b/d, while the latest official figures show May exports at 6.984 million b/d.
The Iran-backed Houthi rebels in Yemen say that they targeted Saudi Aramco’s refinery in the capital of Riyadh with a long-range drone on Wednesday. The Houthis are saying that the “new long-range Drone, Sammad 2, that targeted Aramco in Riyadh is a successful and qualitative experience.” Saudi Aramco said later on Wednesday that “fire protection crews and Civil Defense successfully controlled a minor fire due to an operational incident at the Riyadh Refinery today. No personnel were injured and there was no impact on operations.”
Libya: Just a few days after Libya reopened its eastern oil ports and started to ramp up production that had been offline for weeks, the National Oil Corporation (NOC) declared force majeure on crude oil loadings at the Zawiya port in the west, following an attack and abduction of oil workers at the Sharara oil field. Production at Sharara was expected to drop by 160,000 b/d after oil workers were abducted and oil wells closed as a precaution.
Libya, however, is ramping up oil output at its eastern fields, offsetting the 160,000 b/d lost from the partial shutdown of the country’s biggest deposit after gunmen kidnapped workers there. Overall production rose from 650,000 to 700,000 b/d last week and is expected to rise further after shipments resume at eastern ports that re-opened after a political standoff.
3. China
China’s economy expanded by 6.7 percent in the second quarter, its slowest pace since 2016. The pace of annual expansion announced is still above the government’s target of “about 6.5 percent” growth for the year, but the slowdown comes as Beijing’s trade war with the US adds to headwinds from slowing domestic demand. The gross domestic product had grown at 6.8 percent in the previous three quarters.
The pace of growth in China’s crude imports may slow in the second half as lower runs at independent refiners, potential delays in the startup of some refineries and higher inventories curb demand. The first signs of weaker demand appeared in the June data, which showed imports falling 4.9 percent to a six-month low of 8.39 million b/d, marking the first year-on-year drop in 2018.
Higher oil prices play a role in the slowing of demand, but the main factor is higher taxes on independent Chinese refiners, which is already cutting into the refining margins and profits of the ‘teapots’ who have grown over the past three years to account for around a fifth of China’s total crude imports. Under the stricter tax regulations and reporting mechanisms effective March 1, however, the teapots now can’t avoid paying a consumption tax on refined oil product sales—as they did in the past three years—and their refining operations are becoming less profitable.
4. Russia
According to Reuters, Russia used stocks held at its oilfields to help boost crude production in June, as Saudi Arabia pushed other major producers to increase output. Russian oil production last month rose by around 100,000 b/d from May. From July 1-15, the country’s average oil output was 11.215 million b/d, an increase of 245,000 b/d from May’s production.
Amid growing speculation that President Trump will attempt to weaken US sanctions on Russia’s oil sector, US congressional leaders are pushing legislation to strengthen sanctions on Russian export pipelines and joint ventures with Russian oil and natural gas companies. These efforts, still in their early stages in the House and Senate, could increase investment risk in Russia’s oil and gas sector and, potentially, hinder some export growth, analysts said this week. However, according to congressional sources, the US oil and gas industry already is lobbying against tighter sanctions on Russia that could impact US investments there.
Ukraine and Russia said they would hold further European Union-mediated talks on supplying Europe with Russian gas, in a key first step toward renewing Ukraine’s gas transit contract that expires at the end of next year.
Gazprom is planning to develop more of the huge natural gas resources on Yamal peninsula as it would expand its northern gas transmission corridor. With more natural gas from the Arctic feeding the northern export route to European markets Gazprom would be in a better position to feed the Nord Stream pipeline and the planned Nord Stream 2 project. Last week, Gazprom approved the development of the Kharasaveyskoye gas and condensate field and the gas transmission system, expected to begin in 2019 and to ship first gas in 2023. The company is betting that Yamal will become the largest natural gas production center in Russia and replace the dwindling reserves of the Nadym-Pur-Taz region.
5. Nigeria
Constant pipeline breakages in the Niger Delta oil fields have increased oil and gas companies’ average shut down days from 45 to 160 days according to a former Director at the Department of Petroleum Resources, Osten Olorunsola. “There are operations around the world where you can almost guarantee 330 days for production. You can’t do all through the year because you have scheduled maintenance, but usually, it is not more than 30 to 45 days. “In terms of real operational shutdowns, we are seeing something between 80 and 160 days in Nigeria.”
Shell has again started talks for the $2-billion sale of two Nigerian oil licenses and their infrastructure assets, according to Bloomberg, after four years of failed attempts to offload the contentious assets. This latest round of talks are taking place with a Nigerian entity that has not secured financing for the deal, and like similar talks before this, they may collapse. Shell has been trying to refocus its Nigerian operations offshore to avoid unending local opposition to its activities, on-again-off-again militant attacks on its assets, and a quagmire surrounding accusations that it destroyed the Niger Delta with spills and failed to clean up after itself. Offshore, everything is less risky. But these remaining two onshore licenses have proven difficult to unload.
6. Venezuela
Venezuela’s Oil Minister Manuel Quevedo has been talking about plans to raise the country’s crude oil production in the second half of the year. However, no one else thinks or claims that Venezuela could soon reverse its steep production decline which has seen it losing more than 40,000 b/d of oil production every month for several months now. According to OPEC’s secondary sources in the latest Monthly Oil Market Report, Venezuela’s crude oil production dropped in June by 47,500 b/d from May, to average 1.340 million b/d in June.
In the midst of a collapsing regime, widespread hunger, and medical shortages, President Nicolas Maduro continues to grant generous oil subsidies to Cuba. After the fall of the Soviet Union, Cuba turned to Venezuela for subsidized crude oil, in exchange for sending skilled laborers and medical personnel to work in Venezuela. Havana also provided the Chavez government with intelligence and security personnel which helped the government control dissidence, which may be a factor in Maduro’s reluctance to cut ties with Havana.
Last year Venezuela cut off exports to Cuba for eight months, but then began sending shipments of light oil to Cuba in March 2017 at a great cost to their own refineries, which are running at just a small fraction of their capacity thanks to lack of funds for maintenance. Last week, there was a reported shipment of 500,000 barrels of Venezuelan crude to northwestern Cuba. It is believed that Venezuela continues to supply Cuba with around 55,000 barrels of oil per day, costing the nation around $1.2 billion per year.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
Energy investment slowdown: The IEA in its world energy investment report found total global energy investments declined 2 percent from 2016 to reach $1.8 trillion last year. Of that, most went toward the electricity sector and oil and gas supply. The IEA said there were signs of a continued slowdown. Financial support for renewable energy, which accounted for about 60 percent of the total spending for power generation, declined 7 percent last year. (7/18)
Flaring down: World Bank data show the total volume of natural gas flared last year was down about 5 percent from the previous year. For Russia, the largest gas-flaring country in the world and among the world leaders in oil production, the volume of associated gas burned off declined 11 percent from 2016. From the US, on pace to pass Russia as an oil producer, flaring increased nearly 7 percent, putting it at No. 3 behind Iran and Libya, respectively, for major producers bucking the trend. (7/18)
Ireland is planning to move 200,000 tons of its oil reserves from Britain as part of its Brexit preparations and will sign off on the move this week. (7/16)
Italy’s imports of US crude oil vaulted to a record in June after attacks by armed groups shuttered two major Libyan oil ports and cut off most deliveries from the OPEC country, a key supplier to Europe, according to Thomson Reuters trade flow data and shipping intelligence firm Kpler. The flows reflected the US oil industry’s growing ability to serve as an alternative supplier when contained regional conflicts pinch oil supplies to allies. (7/21)
New Russian LNG: Russian energy company Novatek said Thursday it shipped its first batch of liquefied natural gas to China using the Northern Sea Route. The northern passageway is a shipping lane in Russia’s economic zone that runs along the Arctic coast to the Bering Strait. (7/20)
In the UAE, the Abu Dhabi National Oil Co. awarded a subsidiary of China National Petroleum Co. with a $1.6 billion contract to conduct seismic surveys covering about 20,000 square miles onshore and offshore. ADNOC said that makes it the largest survey of its kind in the world. (7/21)
The US oil rig count decreased by 5 in the week to July 20, bringing the total count down to 858, Baker Hughes energy services firm said. The number of gas rigs dipped by 2, hitting 187. Canada gained 14 oil and gas rigs for the week, 11 of which were gas rigs. Canada’s oil and gas rig count is now up just 5 year over year. Oil rigs are up by 24 year over year in Canada, while the number of gas rigs are down by 19. (7/21)
US crude oil production last week hit 11 million b/d for the first time in the nation’s history, the Energy Department said on Wednesday, as the ongoing boom in shale production continues to drive output. Note: weekly production figures from the US EIA are notorious for revisions, as monthly data, released on a lag, shows US production at 10.5 million b/d as of April. Even as production ramps up, the US, the world’s top oil consumer, still depends on imports. Net US crude imports rose last week by 2.2 million b/d to about 9 million bpd. (7/20)
Fracking sand rush: While most are busy watching all land grabs by oil and gas producers in the Permian, much less attention has been paid to the secondary land rush for the sandy wasteland that could ease some of the bottlenecks for producers who need fracking sand to make anything happen. (7/19)
New oil futures tool: Intercontinental Exchange Inc. (ICE) announced plans to launch an oil futures contract with physical delivery in Houston. The contract could launch as soon as this quarter. The Permian futures contract will provide price discovery, settlement and delivery at Magellan Midstream Partners, L.P.’s terminal in East Houston, ICE said. (7/19)
New VLCC terminal: To capitalize on the growing US exports to Asia and Europe, Houston-based Enterprise Products Partners plans to develop an offshore crude oil export terminal 80 miles off the Texas Gulf Coast. It would be able to fully load the biggest oil tankers in the world capable of carrying 2 million barrels of oil. Currently, the Louisiana Offshore Oil Port is the only oil port in the US capable of fully loading the so-called Very Large Crude Carriers (VLCC). (7/19)
Crude on rails: A shortage of pipeline takeaway capacity from the Permian Basin in West Texas is creating opportunities for Union Pacific to move crude oil in tank cars. (7/20)
Chevron’s new CEO Michael Wirth has said the company plans to maintain a tight grip on capital spending, despite the surge in oil prices over the past year and warnings that they could rise even higher over the next few years. (7/18)
Tariff relief denied: The Permian basin has run up against a bottleneck for pipeline capacity. One of the crucial pipeline projects slated to relieve the bottleneck in Permian pipeline capacity next year is the Plains All American Pipeline LP’s Cactus II 585,000 b/d project. Plains All American asked the Trump administration for an exemption from the 25 percent tariffs on imported steel. An industry estimate finds that about three-quarters of all the steel used in oil and gas pipelines comes from abroad, often because projects use a special type of steel that is hard to find domestically. The Trump administration just shot down the request from Plains All American, the first rejection for a major oil and gas project. (7/20)
In Texas, homes and businesses used record amounts of power last Wednesday and are expected to use even more in the coming days as consumers crank up their air conditioners to escape a brutal heat wave. The Electric Reliability Council of Texas (ERCOT) said demand reached 72,192 megawatts on Wednesday, topping the prior all-time high of 71,110 in August 2016. (7/20)
Nuke/coal study: Providing financial support to uneconomic US coal and nuclear power plants, as the Trump administration has ordered, could cost $16.7 billion annually, according to a study commissioned by a group of renewable energy, oil and gas trade associations and released Thursday. (7/20)
Wind winning cost war: Apart from diehard environmentalists, most consumers have been opposed to renewables on the basis they cost significantly more, and turbines are an eyesore on the landscape. Opposition has softened as we have become more familiar with the realization that its costs are falling dramatically. A recent article in The Telegraph reports on how the cost of power production from onshore wind farms has dropped so far it undercuts conventional coal, natural gas and nuclear options. (7/19)
Solar industry decline: Goldman Sachs is predicting that global solar installations will decline by 24 percent this year. And Goldman isn’t alone, even if it is throwing around the worst numbers. (7/21)
Norway’s hydro: An unusually hot, dry second quarter saw Statkraft’s hydro-based power production fall 22 percent to 11.5 TWh for the period, the state utility said Thursday. The decline mirrors a north European trend this summer with little rainfall and settled high pressure weather conditions bearing down on hydro and wind production. (7/19)
Tariffs to hit cars: Consumers should expect higher prices on imported cars if President Donald Trump’s proposed 25 percent tariff on foreign-built vehicles shipped into the US is enacted, according to car sellers. Car makers said they plan to pass on the added costs to customers, which dealers and car sellers said could lead to a decline in sales. About 44% of all U.S.-sold cars were imported into the country last year. (7/18)
Euro EVs: Sales of electric vehicles and plug-in hybrids in Europe’s top car markets rose by just 33 percent in the first half this year, compared to a 54-percent surge in the same period last year, as customers are still wary of limited driving ranges of the models and an insufficient charging network. (7/19)
Climate suit dismissed: a US judge on Thursday dismissed a lawsuit by New York City seeking to hold major oil companies liable for climate change caused by carbon emissions from burning fossil fuels. In dismissing the city’s claims, US District Judge John Keenan in Manhattan said climate change must be addressed through federal regulation and foreign policy. The City plans to appeal the position. (7/20)
CO2 and US policy: The signs don’t look favorable for carbon dioxide emissions controls under the Trump administration, which along with much of the Republican party, do not believe in climate change. However, the new acting head of the EPA, Andrew Wheeler, has conceded that the 2009 court decision that requires the EPA to regulate carbon dioxide emissions is “settled law.” How aggressively the agency interprets and ultimately enforces its mandate bears watching. (7/20)
Carbon capture: A British task force said Thursday that carbon capture and storage (CCUS) is ready for deployment, provided investments materialize by the early 2020s. Their report states that CCUS can already be deployed at a competitive cost, through the development of CCUS clusters in key UK regions. (7/20)
Big Dairy emissions? A new report by two agricultural players found that the five largest meat and dairy corporations combined—JBS, Tyson, Cargill, Dairy Farmers of America, and Fonterra—are already responsible for more annual greenhouse gas emissions than ExxonMobil, Shell, or BP. (7/19)
Biogenic solar cells: Researchers at the University of British Columbia have found that a genetically modified E. coli could soak sunlight just as well under an overcast sky as under a sunny one. This means bionic solar cells could be used in places where the weather conditions are not suitable for synthetic PV panels. (7/16)
Confusion Looms As Iran Claims Control Over Key Oil Waterway
Profile picture for user Tyler Durden
by Tyler Durden
Mon, 08/27/2018
https://www.zerohedge.com/news/2018-08-27/confusion-looms-iran-claims-control-key-oil-waterway-stoking-tensions
Thanks for this link, Derrick. You introduced a thought which I keep putting off, i.e., more crocus. The crocus is the psychological lift that I need in late winter. Next comes my garlic growing out of the straw in late March.
My onions did rather poorly again making it three years in a row. I will see what seeds a local farm uses for my area and give that a try. The first year from Dixondale was outstanding, but now I'm striking out too much.
Another heat wave this coming week and I hope that it's the last of the summer.
I was going to finally preserve my tomatoes, but the heat in my house provoked me into another direction. I processed the tomatoes through a juicer and put the pulp into freezer bags. I will be having a lot of spaghetti meals this winter.
Hope all is well with your harvests!
7 Amazing Benefits of Cabbage Juice, the New Health Tonic
Priya Deesh | Updated: May 02, 2018 14:32 IST
https://food.ndtv.com/food-drinks/7-amazing-benefits-of-cabbage-juice-the-new-health-tonic-1652552
The multi-layered veggie parcel and powerhouse of vitamins and minerals, cabbage is very well known for its properties in Ayurveda. Its high content of Vitamin A, B1, B2, B6, E, C, K, calcium, iron ,iodine, potassium, sulphur, phosphorus and foliate makes it a superhero among the category of leafy vegetables.Belonging to the Brassica family, it is a cruciferous vegetable with cousins like bok choy, broccoli, Brussel sprouts and garden cress among others. It can be consumed by various means, be it boiled, cooked, steamed, sautéed, or even juiced. It has numerous medicinal properties which could be credited as God's gift to mankind.
Coming to cabbage juice, 'the bitter the better' phrase is really apt for this beneficial vegetable, which is not only good for health, but works wonders for the skin and hair as well. No matter how much your skin is damaged or how many bad hair days you are facing, you can totally depend on cabbage juice for its healing properties.
It helps in making our immune system strong, has a good amount of potassium which reduces blood pressure, delays ageing and makes hair stronger, reducing hair fall.
Benefits of Cabbage Juice
1. Powerhouse of Vitamins and Minerals
"Being a green vegetable, cabbage juice is high in mineral content. As such it helps in making the skin stronger, and its dose of Vitamin C boosts immunity," says Dr. Shalini Manglani, a Bangalore-based Nutritionist.
cabbage 625
2. Fights Free Radicals
Cabbage juice is an excellent source of vitamin K and C, which help in fighting free radicals. Free radicals are the main cause of diseases such as cancer and heart issues. These vitamins are also essential to keep hair follicles healthy and circulate scalp oil," says Dr. Komal, Nutritionist at SCI International Hospital.
cabbage juice
3. Detoxifies the Skin
"Both purple and green cabbage are rich in silicon and sulphur, the beauty minerals. Sulphur is particularly present in every cell as it is responsible for pulling in nutrition and removing waste from your cells. This is what is called osmosis. For clear skin, you need to have good osmosis," says Shilpa Arora, a leading Nutritionist based in New Delhi.
According to Dr Shalini, cabbage juice helps in flushing out toxins from the body. Thus it helps in detoxifying, making dull skin appearance go away, giving you a glowing look.
glowing skin
4. Aids in Weight Loss
If you are on a weight loss schedule, then cabbage juice could be your health fix when you need to rejuvenate. Not only will it help you feel refreshed but keep a tab on problems related to obesity. Dr. Komal says, "Cabbage juice can be very effective in helping you reduce kilos if you drink it on a daily basis. It helps in purifying the upper section of the intestines, which makes the elimination of waste material from the body easy, thus helping with digestion."
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5. Builds Immunity
"Body immunity gets better with cabbage juice and it helps in fighting against harmful pathogens," says Dr Shalini.
6. Aids Liver Function
Cabbage juice contains 'Indole-3 carbonile' antioxidant which plays a role in detoxifying your liver. The liver plays a crucial role in various metabolic functions of the body - protein synthesis, hormone production, glycogen storage regulation, etc. "Cabbage juice helps in improving the bowel movement as well and as such keeps the lever in a good condition," adds Dr Komal.
liver
7. Prevents Risks of Cancer
Sulforaphane, found in cabbage, helps in preventing cells from carcinogens. Cabbage juice contains isocyanate, which helps in preventing the risks of breast cancer, lung, stomach, prostate and colon cancer. According to a study done by Georgetown University Medical Center, a compound called DIM derived from cruciferous vegetables such as cabbage, cauliflower and broccoli may protect against harmful effects of radiation during cancer therapy. DIM has been studied as a cancer prevention agent for years, but this study gave indication that DIM can also act as a radiation protector.
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How to Make Cabbage Juice
It's very simple to make fresh cabbage juice at home. Take a firm cabbage and peel the leaves gently. Wash well with cold water and then pat dry. If there are any brown spots, cut out the damaged area. Place the leaves in a blender and blend well. Strain and drink up. You can also add mint leaves, honey and lemon to play around with the flavour.
Disclaimer:
The opinions expressed within this article are the personal opinions of the author. NDTV is not responsible for the accuracy, completeness, suitability, or validity of any information on this article. All information is provided on an as-is basis. The information, facts or opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.
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Tags: CabbageCabbage JuiceCabbage Juice BenefitsHealth Tonic
Study shows honeybees are starving because of Roundup
06/27/2016 / By Vicki Batts
http://www.glyphosate.news/2016-06-27-study-shows-honeybees-are-starving-because-of-roundup.html
Ogallala Aquifer - Wikipedia
From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Ogallala_Aquifer
Ogallala Aquifer - Water Encyclopedia
The Ogallala Aquifer occupies the High Plains of the United States, extending northward from western Texas to South Dakota. The Ogallala is the leading geologic formation in what is known as the High Plains Aquifer System. The entire system underlies about 450,000 square kilometers (174,000 square miles) of eight states. Although there are several other minor geologic formations in the High Plains Aquifer System, such as the Tertiary Brule and Arikaree and the Dakota formations of the Cretaceous, these several units are often referred to as the Ogallala Aquifer.
Water Encyclopedia
http://www.waterencyclopedia.com/Oc-Po/Ogallala-Aquifer.html
What Happens to the U.S. Midwest When the Water's Gone?
The Ogallala aquifer turned the region into America's breadbasket. Now it, and a way of life, are being drained away.
By Laura Parker
Photographs by Randy Olson
This story appears in the August 2016 issue of National Geographic magazine.
https://www.nationalgeographic.com/magazine/2016/08/vanishing-midwest-ogallala-aquifer-drought/
A Vanishing Aquifer
What Happens When The Water Runs Out?
08 2016
https://www.nationalgeographic.com/magazine/2016/08/vanishing-aquifer-interactive-map/
Leaking Las Vegas: West's Biggest Reservoir Nears Critical Threshold
Lake Mead - the West's largest reservoir - is running dry again and is on track to fall below a critical threshold in 2020, according to a new forecast by the Bureau of Reclamation.
Profile picture for user Tyler Durden
by Tyler Durden
Fri, 08/17/2018 - 17:05
https://www.zerohedge.com/news/2018-08-17/leaking-las-vegas-wests-biggest-reservoir-nears-critical-threshold
‘We Bleed Diesel:’ Truckers Nearing Worst Price Shock Since 2008
By Erin Douglas
August 15, 2018, 5:00 AM EDT
*Tighter ship-fuel rules seen boosting diesel demand, prices
*‘Everyone missed this in our industry’: trucking association
https://www.bloomberg.com/news/articles/2018-08-15/truckers-asleep-at-the-wheel-as-diesel-price-shock-creeps-closer
The One Oil Industry That Isn't Under Threat
Profile picture for user Tyler Durden
by Tyler Durden
Thu, 08/16/2018
https://www.zerohedge.com/news/2018-08-16/one-oil-industry-isnt-under-threat
With sub-$60 oil, fracking and tar sands losses threaten the whole financial system
Paul Mobbs
17th December 2014
A new financial crisis is threatening to dwarf the 'subprime' mortgage debacle, writes Paul Mobbs. Cheap money from central banks has fuelled some $1.3 trillion of risky investments in high-cost 'unconventional' oil and gas. Now, with oil sinking below $60, all that paper is turning to junk - and that's putting the entire economic system at risk.
https://theecologist.org/2014/dec/17/sub-60-oil-fracking-and-tar-sands-losses-threaten-whole-financial-system
After ‘Peak Water,’ the Days of Plenty Are Over
Sabrina Ho Yen Yin
15 August 2018
http://glacierhub.org/2018/08/15/after-peak-water-days-of-plenty-over/
Old Oil Is New Again
Companies say conventional wells can be profitable, no fracking required
Conventional drilling in old fields is starting to look more attractive as low crude prices make some fracking operations too expensive to pursue. Shown, an oil well outside Bakersfield, Calif.
Conventional drilling in old fields is starting to look more attractive as low crude prices make some fracking operations too expensive to pursue. Shown, an oil well outside Bakersfield, Calif. Photo: Getty Images
By Lynn Cook
Aug. 20, 2017 6:00 a.m. ET
https://www.wsj.com/articles/old-oil-is-new-again-1503223201
From California’s Central Valley to the Native American lands of Oklahoma, more small- and mid-sized oil firms—many backed by private equity—are forgoing expensive shale drilling projects and opting for old-school wells instead.
As crude prices languish under $50 a barrel, and with increasing costs for land, labor and infrastructure, some shale fracking operations are starting to look expensive. That has some investors turning to conventional drilling to make a profit.
Tapping shale involves fracking, drilling horizontal wells that extend for more than a mile, then using a highly pressurized mixture of water and chemicals to break open underground rock layers. The process has attracted billions of dollars in capital because it can unleash huge volumes of oil, but at today’s prices most producers are losing money on every barrel they pump.
Some oil companies are choosing instead to apply newer technology and methods to vertical wells in century-old American oil fields, betting they can wring out faster and safer returns. The trick, they say, is finding the special locations where stranded oil can be profitably extracted from conventional wells, which are cheaper. They tend to cost less than $1 million, compared to between $6 million and $8 million for an average shale well.
As a result, smaller outfits drilling traditional wells in and around California and Oklahoma say they can make the investments work even at $10 to $30 a barrel.
White Knight Production LLC, a driller based in Lafayette, La., is re-activating 60-year-old wells in Louisiana and Texas that were turned off in the 1980s, when the last major oil bust dropped prices to $10 a barrel.
It made sense to turn them back on and invest in newer artificial lift systems and other technology that can push more oil to the surface, said White Knight Chief Executive Jerry F. Wenzel.
In California, the company was able to get some old wells that were producing just five or 10 barrels a day up to 100 barrels a day by using gravel packs to keep silt and sand from building up inside flow lines. The cost of the packs: $100,000 a well, which White Knight recouped in a few months.
White Knight also has drilled new wells in California for roughly $800,000 each, finding that many spots were tapped extensively, but only shallowly, last century, leaving 20 to 30 different layers that can produce crude.
“That’s the real magic,” Mr. Wenzel said.
He estimates that reactivating old wells costs about $15 a barrel in direct expenses like leasing land, lifting oil out of the ground and transporting it to market. After covering other costs including staff, debt, taxes and general overhead, these projects typically pay off and are profitable in less than a year.
Most U.S. oil still comes from conventional wells. In 2016, 4.6 million barrels, or 52% of the U.S. total, was pumped from conventional wells while 4.25 million barrels a day, or 48%, was pumped from shale wells, according to the federal Energy Information Administration.
Will McMullen, founder of Bayou City, a private equity firm with $1 billion to deploy, and which has backed White Knight, said with all the focus on shale in recent years, it has become a crowded space.
The Kern River Oil Field near Bakersfield, Calif. Photo: MARK RALSTON/Getty Images
“And we don’t know where the price of oil is going to be in 10 years,” he said, arguing that it is risky to favor shale based on a hope of longer-rate returns.
Petro River Oil , a small New York-based company traded over the counter, is reprocessing old data and making new underground maps in California to find overlooked crude. It recently scoured an old prospect near Bakersfield known as Sunset Boulevard, and found several additional oily zones to tackle this summer.
“We’re taking new technology and going in and looking for what they missed,” said Stephen Brunner, president of Petro River.
Mr. Brunner, who ran Constellation Energy Partners , a shale company that fracked in Oklahoma before Sanchez Energy Partners took it over in 2014, said he understands why many investors are drawn to shale: unlike conventional drilling, there’s little risk of a dry hole.
Even so, he said Petro River’s goal is to find untapped oil in old fields and get it out of the ground for roughly $20 a barrel, allowing the company to achieve as much as a 100% return in a year, at current prices.
Such investment looks attractive to some in light of the costs to lease shale land in places like the Permian Basin in Texas and New Mexico, which has topped $50,000 per acre.
But it is hard to generate huge-scale production picking over old fields, said Robert Clarke, an analyst with Wood Mackenzie.
“For a company looking to generate a return on capital the opportunity is tremendous,” Mr. Clarke said. “But it can’t move the production needle for a bigger company.”
Still, some big companies sense opportunity in older fields.
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