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On Oil
Author Rob Mielcarski Posted on July 29, 2018
Categories Denial, Economy, Energy, Essay, Favorite, Overshoot
https://un-denial.com/2018/07/29/on-oil/
JT Roberts recently made an important and insightful observation which I paraphrase and elaborate here.
Oil is a non-renewable resource that we extract from the earth. Oil companies are motivated by profit so they start with low-cost reservoirs and as those deplete they move to increasingly higher cost sources like water injection, offshore, tar sands, and fracking.
All economic activity depends on energy, as the laws of thermodynamics explain, and as the near perfect correlation between GDP and energy consumption confirms.
Oil is the keystone energy because oil is required to extract or capture all other forms of energy including coal, natural gas, wood, solar, wind, nuclear, and hydroelectric energy.
The cost of oil can be viewed as a tax on economic activity. Our economy is configured to operate profitably on about $20 per barrel oil. We have already captured most feasible energy efficiency gains making it difficult for our economy to operate profitably on oil over $20.
Thus, as the cost of extraction due to depletion of low-cost reserves pushes the price of oil above $20, the difference must be made up with debt.
At today’s $70 oil, which we burn about 96 million barrels per day, that works out to 96 * 365 * ($70-$20) = $1.8 trillion, which as predicted, is about the rate that global debt is increasing.
If you believe we have many years of oil left, then you must also believe that debt can increase exponentially for many years without consequence on the value of money.
Money has value because we have confidence that the debt which creates our money will be repaid with interest, which can only occur when the economy grows, which can only occur when the quantity of energy we burn grows, which due to continually increasing extraction costs, can only occur when debt grows faster than the economy, which at some point will erode our confidence, which will reduce the value of money, which will reduce the amount of energy we can afford to burn, which will reduce economic activity, which will further erode our confidence in the value of money.
Do you see our energy and climate predicament?
Do you see why our leaders deny we have a problem?
Do you see why the longer we deny the problem the worse the outcome will be?
Soylent Green Opening Titles
Sure thing!
The You Tube mentions four other weeds at the very end.
6 Edible Weeds that are More Nutritious than Store-Bought Veggies
June 6, 2018 at 1:06 pm
https://returntonow.net/2018/06/06/6-edible-weeds-that-are-more-nutritious-than-store-bought-veggies/
These six common “weeds” are loaded with more vitamins, minerals, antioxidants and protein than almost any vegetable at the grocery store… and better yet, they’re free!
6 Edible Weeds that are More Nutritious than Store-Bought Veggies
June 6, 2018 at 1:06 pm
https://returntonow.net/2018/06/06/6-edible-weeds-that-are-more-nutritious-than-store-bought-veggies/
These six common “weeds” are loaded with more vitamins, minerals, antioxidants and protein than almost any vegetable at the grocery store… and better yet, they’re free!
4 Incredibly Valuable Trees Smart Preppers Plant in Their Survival Garden
https://www.preppedsurvivalist.com/4-trees-preppers-should-plant-in-their-garden/
4 Incredibly Valuable Trees Smart Preppers Plant in Their Survival Garden
https://www.preppedsurvivalist.com/4-trees-preppers-should-plant-in-their-garden/
19 ‘Must-Haves’ Most Everyone Forgets To Stockpile
Written by: Rich M
https://www.offthegridnews.com/extreme-survival/19-must-haves-most-everyone-forgets-to-stockpile/
19 ‘Must-Haves’ Most Everyone Forgets To Stockpile
Written by: Rich M
https://www.offthegridnews.com/extreme-survival/19-must-haves-most-everyone-forgets-to-stockpile/
The Water Wars of Arizona
Attracted by lax regulations, industrial agriculture has descended on a remote valley, depleting its aquifer — leaving many residents with no water at all.
By Noah Gallagher Shannon
July 19, 2018
https://www.nytimes.com/2018/07/19/magazine/the-water-wars-of-arizona.html
Peak Oil Review 16 July 2018
By Tom Whipple, Steve Andrews, originally published by ASPO - USA
https://www.resilience.org/stories/2018-07-16/peak-oil-review-16-july-2018/
Quote of the Week
Our goal is to increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales.” Brian Hook, US State Dept, director of policy planning
1. Oil and the Global Economy
Oil prices dropped suddenly last Wednesday on the news that yet another dispute in Libya had been settled so that the traditional Libyan National Oil company was back in business exporting oil from its major terminals. New York futures fell by $3.50 a barrel on the news, and the London price decreased by $6.50, with New York closing out the week at $71 and London at $75.33.
The underlying forces moving the oil markets are still firmly in place. Demand still seems fairly strong supporting the estimates that the demand for oil will increase by circa 1.5 million b/d for 2018 and at least through 2019. Russia, Saudi Arabia, and the Gulf Arab states are increasing production again as the production freeze seems to be of less interest now that oil is selling in the $70’s again. Most OPEC members have peaked out and can do little to increase oil production in the immediate future, if ever.
Production from the US’s Permian Basin, which has been increasing rapidly in recent years, seems to be topping out due to the lack of pipeline capacity to move the oil from new wells to market. The pipelines should be close to full by the end of summer, and it will be another 18 months before new pipelines are ready to move oil out of the Permian Basin. Any significant increases in world oil production in the next year or so will have to come from Russia and the Gulf Arabs, although production from Iraq is moving up steadily.
The most important downside to global production in the immediate future is Iran, which will come under sanctions from Washington, and those states with problems of political instability – Venezuela, Nigeria, and Libya. Flare-ups in any or all of these counties could cut global oil exports by 1 or 2 million b/d in the next year or so. If the IEA is to be believed, then three or four years from now the lack of sufficient investment in finding and developing more oil production will lead to shortages. This is about the timeframe when independent observers say US shale oil production will be peaking and begin a rapid plunge.
The big unknown, however, is the course of the trade wars that Washington has launched with China, North America, and Europe. The dispute with China is particularly troublesome as many believe that it could result in a measurable drop in global GDP and demand for oil if the dispute continues indefinitely.
The IEA’s Warning: The International Energy Agency warned on Thursday that spare oil production capacity risks being “stretched to the limit” as supply disruptions and US sanctions against Iran tighten the market. “Rising production from Middle East Gulf countries and Russia comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit.” The agency sees no sign of higher production from elsewhere that might ease market tightness. Indeed, the problems in Venezuela, Nigeria, and Libya could easily take additional oil off the market.
The IEA says there are only 2.1 million b/d of quickly available spare capacity in three OPEC members: Saudi Arabia, Kuwait, and the United Arab Emirates. If the Saudis increase output towards record levels of near 11m b/d this summer, as it has indicated, it would cut the kingdom’s spare capacity to “unprecedented” levels.
In the past low spare global oil production capacity has led to spikes in oil prices as was last seen in 2008 when prices touched $140 a barrel. There are so many forces in play today that it is nearly impossible to predict whether or not we will see a large price spike in the next two years.
US Shale Oil Production: In last week’s Petroleum Status Report, the EIA estimated that US oil production remained steady the week before last at 10.9 million b/d after having grown by 1.5 million b/d during the last 52 weeks. As these weekly production figures are estimates rather than actual reported production, it is difficult to say whether or not problems moving oil out of the Permian Basin have brought the rapid growth in US oil production to at least a temporary halt.
Increasing crude oil and natural gas production in the Permian Basin and not enough pipeline capacity to move the products to market has widened the discounts at which oil and natural gas produced in the basin are trading relative to the US benchmarks. Pipeline companies continue to announce plans for more oil and natural gas pipeline projects in the area to ship oil and gas from the Permian to the Gulf Coast. However, many of those pipelines will not come on stream before late in 2019 and 2020. Analysts believe that the WTI vs. Midland, Texas price discount and the Waha natural gas discount to Henry Hub prices will become worse before they become better, at some point in 2020.
Analysts at Morgan Stanley are saying that crude oil production growth in the Permian could shrink by nearly two-thirds next year because of limited pipeline capacity that will increase the already wide price differentials in the region. At the same time, the EIA is saying that US oil production will average 11.8 million b/d next year, up from the current 10.9 million.
If these analysts are right, pipeline constraints will cap 2019 output growth in the Permian at 360,000 b/d, well below Wall Street expectations of about 634,000 b/d, and down from this year’s projected 960,000 b/d growth. The inability to move oil to market will push 12-month forward Midland-to-WTI differentials to a discount of $25 to $30 a barrel, from the prompt month $15.50 a barrel discount now.
A side effect of the Permian shale oil boom is the voracious demand for fracking sand to prop open the cracks in the shale made by high-pressure water. In the last twelve months, 11 firms that dig and supply fracking sand have opened within sight of each other in West Texas, and another 10 or so are hustling to get started.
Together, these new firms will mine and ship some 22 million tons of sand this year to shale drillers all around them in the Permian Basin. This amount of sand is equal to almost a quarter of the total US supply. Within a couple of years, industry experts say, the figure could climb to over 50 million tons, provided the boom continues and there is as much oil that can be economically extracted from the Permian as the industry and EIA predicts.
2. The Middle East & North Africa
Iran: Washington government continues its attempts to shut down Iran’s oil exports, and there are indications that it may be having some success. In recent week, the general consensus of how much Iranian exports will be hurt by the US sanctions has been changing from a loss of around 500,000 b/d by the end of the year, to something more like 1 million b/d, or even as high as 2.0 million in a worst-case scenario in which all countries comply.
There are several reasons why the Trump administration may not succeed in cutting Iran’s exports by a significant amount, say 1 million b/d or more. These mostly center on the EU, Russia, and China seeking to shield Iran from the US sanctions, but only the Chinese government has the ability to decree purchases from Iran should exports slow elsewhere.
Last week, the US restated its intentions to drive Iranian oil from the market, when Treasury Secretary Steven Mnuchin told Congress that the United States intends to impose sanctions on all customers of Iranian oil, including China, the EU, and Russia. Washington initially said that it might refuse to issue waivers, but later clarified that position by saying that it would “work with those countries importing Iranian crude oil to get as many of them as possible down to zero by Nov. 4.”
During the past week, there were indications that South Korea, Japan, India, and some European refiners and associated companies are already cutting back on dealings with Tehran. French-based CMA CGM, one of the world’s largest cargo shippers, announced it would be pulling out of Iran for fear of being entangled in US sanctions. CMA CGM operates the third largest container shipping fleet in the world, with 445 ships, capturing 11 percent of global container ship capacity. The French company’s move comes as international firms have left Iran amid pressure from Washington. It seems that harshly enforced sanctions may have more impact than many initially believed.
The sanctions are having repercussions in Iran where hopes for a brighter economic future have been curtailed. President Rouhani based his presidency on the nuclear treaty and more investment from the West so his political survival is now in question. Rouhani is sounding a lot like Iran’s hard-liners. During a visit to Switzerland he threatened to disrupt the flow of Middle Eastern oil through the Persian Gulf.
Iran, which has few places to turn these days, has been touting $50 billion worth of potential Russian investments in its oil and gas sector as it seeks to deepen its relationship with Moscow amid mounting US pressure. Ayatollah Ali Khamenei’s top diplomat used a media interview during his visit to say that a Russian oil company had already signed a $4 billion deal with Iran that “will be implemented soon.” He added that: “Two other major Russian oil companies, Rosneft and Gazprom, have started talks with Iran’s oil ministry to sign contracts worth up to $10bn.” Moscow is hard pressed for cash these days, and it seems unlikely that it would be investing large amounts of money in Iran unless the terms were very favorable.
Iraq: In Basra, security forces fired on protestors frustrated by a lack of jobs and services, as well as the salty water that shut down the Basra refinery. One demonstrator was confirmed dead, and at least two others and five members of security forces were injured outside the West Qurna 1 oil field last week. The lack of steady work, electricity, and potable water have been compounded by 120 degrees Fahrenheit heat and the reduced quantity and quality of water flowing from the Euphrates and Tigris rivers and tributaries. Increased salinization in the Shatt al-Arab – the confluence of the Tigris and Euphrates Rivers – shut down the country’s largest operational refinery.
Five days of protest came to an end on Thursday after the government promised jobs, electricity and clean water. Oil production stayed normal, and ExxonMobil, Lukoil, and BP remained in control of the respective fields, according to Oil Ministry and Basra Oil Company officials.
In the north, production has fully resumed at the Bai Hassan field outside Kirkuk. The field is part of a complex of oilfields in Northern Iraq that were shut down mid-October 2017 after the Kurdistan Regional Government unilaterally voted for independence from Baghdad, causing Iraqi troops to move in on the oil facilities in the Kirkuk area under Kurdish control.
Saudi Arabia: Oil and gas analysts at BMI Research say “The Kingdom has reaffirmed that it holds 2 million b/d of spare capacity”, which implies a total production capacity of around 12 million b/d. “However, bringing all its spare capacity into play would incur a significant cost, while production would take time to bring fully online.” “Increasing crude output from 11 million to 12 million b/d would likely take on the order of six to 12 months.” BMI added that it was unclear that there will be a market for the additional barrels, and how sustainable that market would be.
In early 2016, Crown Prince Mohammed bin Salman said he planned to sell shares in Saudi Aramco, the company that produces 10 percent of the world’s oil and finances the Saudi state. The initial public offering—planned for 2018—would raise more than $100 billion for a new sovereign wealth fund, creating the world’s most valuable listed company, and funneling hundreds of millions of dollars in fees to Wall Street’s elite banks. The company would be worth at least $2 trillion and perhaps as much as $2.5 trillion.
However, Saudi Arabia’s willingness and preparedness for a stock market listing of Saudi Aramco is now in doubt amid concerns about legal exposure and an inability to generate the $2tn valuation sought by crown prince bin Salman. “It is a sovereign decision.” Amin Nasser, chief executive of Saudi Aramco, said that Riyadh had yet to determine whether an IPO would take place.
For some time now the Saudis have reiterated what the IEA has been saying about the future of the global oil industry — there is not enough investment going on and shortages will develop. Amin Nasser, chief executive of Saudi Aramco, said rising investment into a short-cycle output, which ebbs and flows faster than conventional projects, would not be enough to meet rising crude demand. “Something like shale oil . . . it is not going to really create a major dent in total global supply requirements up until 2040.”
International energy majors are prioritizing cutting costs and returning money to investors through dividends and share buybacks after the industry downturn. “It is an indication that companies are worried about meeting shareholder requirements,” said Mr. Nasser of a reluctance to invest in projects that are costly and take more time to develop but tend to last longer.
Libya: On Wednesday Libya lifted its force majeure on the Ras-Lanuf, Es Sider, Marsa, El Hariga, and Zueitina oil terminals, according to a statement by National Oil Corporation Chairman Mustafa Sanalla. Libya’s oil production slowed significantly at the beginning of July after the Tripoli-based NOC declared force majeure on crude oil loadings at the Hariga and Zuetina oil terminals, adding to the force majeure at the Ras Lanuf and Es Sider terminals. The NOC said on July 2 that the total daily production loss amounted to 850,000 b/d of crude oil.
After the ports reopened, the NOC said that the company and its subsidiaries “are concentrating on managing the buildup of operations, to maximize production, and overcome obstacles and losses incurred during the crisis of the last four weeks.”
The NOC also lifted the force majeure at the El-Feel oil field, which had been in place since February 23, 2018, over a dispute over pay and benefits. Oil pumping at the field—operated by a joint venture of Italy’s Eni and NOC—is expected to resume to 50,000 b/d within two days, and to 72,000 b/d three days later. With these announcements, Libya’s oil production should be back over 1 million b/d.
3. China
The trade war between Washington and Beijing remains the top issue affecting the world oil market. Last week China warned it would hit back after the Trump administration raised the stakes in their trade dispute, threatening 10 percent tariffs on $200 billion of Chinese goods. US officials on Tuesday issued a list of thousands of Chinese products to be hit with the new duties. The top items by value were furniture at $29 billions of imports in 2017, network routers worth $23 billion last year and computer components to the amount of $20 billion. The list is subject to a two-month public comment period.
As the US does not sell China a sufficient quantity of goods to fully retaliate, Beijing is looking at ways to harass US firms doing business in China by withholding licenses and audits. Beijing has already cut back on imports of US crude oil but is leaving LNG imports from the US alone because of its desperate need for more natural gas.
China’s crude oil imports fell for the second month in a row in June to the lowest since December, as shrinking margins and volatile oil prices led some independent refiners to scale back purchases. Beijing has always been patient in waiting for lower crude prices before making purchases for its strategic reserves.
How the Chinese economy will fare if exports to the US are substantially curbed due to the new US tariffs is another great unknown. In recent weeks Beijing seems to have relaxed its efforts to keep a lid on debt as it faces a softening economy and the trade tensions with the US. The State Council has started urging local governments speed up already approved investment projects to re-energize growth.
An air monitoring report last week by the Chinese government showed particulate matter in the air of major urban areas declined by nearly 23 percent last year when compared with 2013. The report attributed the change in part to an 8.1 percent decline in the use of coal and the 6.3 percent increase in clean energy consumption over the last five years.
The Chinese government recognizes that controlling air pollution is one of its tougher goals as it looks to continue industrialization and economic growth at the same time. Last week, legislators held a two-day extraordinary session to consider additional air pollution controls. The reduction in the use of coal has been largely confined to cities, and its use continues to grow elsewhere to provide the electric energy needed for economic growth.
4. Russia
Moscow’s energy minister, Alexander Novak, was busy last week holding press conferences and prognosticating on the state of the oil markets. On Friday Novak said that Russia and other leading oil producers might boost oil output further if supply shortages hit the global oil market. He also said Russia might surpass the 200,000 b/d production increase that is currently underway if there is a need for it. Novak said higher crude prices this year would add $40.14 billion to Russian state revenues this year.
Novak is also concerned that higher oil prices brought on by the US sanctions on Iran and various production shortfalls around the world will be negative for the global economy. Russia’s Finance Ministry also warned last week that if prices remain at their current level, another collapse could be coming soon.
5. Nigeria
For the foreseeable future, Nigeria is likely to remain a concern to the global oil markets because of the volatility of its roughly 2 million b/d of oil production. The country’s population is projected to grow from more than 190 million today (50 million greater than that of Russia) to 392 million in 2050. The country is composed of more than 250 ethnic groups and has developed a tradition of government corruption since gaining independence in 1960. Very little of the revenue from 2 million b/d of oil sales makes its way down to Nigeria’s villages, and every year billions in oil revenue paid by foreign oil purchasers disappear so that not even the world’s best auditors can track it.
Nearly every day attacks by thieves, vandals, and dissidents take place along some portion of thousands of miles of pipelines carrying crude, natural gas, and finished oil products. Last week the Nigerian National Petroleum Corporation issued a rare report outlining the cost to the country of the “vandalism” to the pipelines and the lack of money to perform necessary maintenance on oil facilities. The company says that last February Nigeria’s oil sector lost over 754,000 b/d due to production shut-in occasioned by pipeline vandalism.
Not all of this loss is due to thieves drilling holes in pipelines to steal oil or militants blowing them up to pressure the federal government for a larger share of the revenue, but simply from lack of timely maintenance on facilities. According to the report, about 160,000 b/d were shut-in throughout February due to the aging facilities/integrity issues at the Qua Iboe Terminal. This situation of constant oil theft, insurgent sabotage, and lack of maintenance is unlikely to end soon. In recent years, the major international oil companies have been quietly selling off their interests in onshore Nigerian oil production in favor of offshore production which is relatively secure from thieves and dissidents.
Last week The British Foreign and Commonwealth Office issued a warning to Nigerian states in the delta region ahead of the coming elections. The head of the Africa research program at Verisk Maplecroft told UPI that “The multibillion-dollar question is whether militant groups in the Niger Delta will resume their pipeline bombing campaign to hurt the Buhari government ahead of the elections,” he said. “Some of these groups are capable of carrying out highly sophisticated attacks, and in 2016 they succeeded in slashing Nigeria’s oil production by at least one third.”
6. Venezuela
Venezuela’s oil production fell by another 47,500 b/d in June, compared to a month earlier. An exodus of workers and field shutdowns were reported for the month, pointing to a grim near-term future that could see total production dip below 1 million b/d by the end of the year. Officials from state-owned PDVSA said unofficially that workers are fleeing operations. “More production wells are being shut down, the skilled oilfield labor force declined in all upstream divisions by at least a combined 1,000 workers in June, and scheduled maintenance continues to be postponed.”
A separate official said that production continued to fall in the first 11 days of July as more rigs were scrapped and more wells were shut down. PDVSA is “dying operationally,” the official said. While OPEC’s secondary sources estimated average output at 1.34 million b/d in June, the Venezuelan government reported production figures at 1.531 million, the same as May levels.
“Output from Venezuela’s aging conventional oil fields is in rapid decline and upgraders operated by foreign joint-venture partners in the Orinoco heavy oil belt are malfunctioning and running below capacity,” the IEA said in its latest Oil Market Report. “In total, upgrading projects in Venezuela can turn roughly 600 kb/d to 700 kb/d of extra-heavy Orinoco crude into export grades. Recently they have been largely out of action due to bottlenecks at loading facilities.”
More than $9 billion in bond payments fall due this year; inflation is set to top some 13,000 percent this year, and GDP could shrink by a further 15 percent. By the end of the year, GDP will have contracted by nearly 50 percent since 2013.
Venezuela has been losing around 50,000 b/d of its oil production each month so far this year, which means it could lose another 300,000 b/d before the end of 2018. The losses are tightening the oil market; others will have to increase production to make up for the declines.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
International shipping owners may, in 18 months, be instructing their ship captains to slow their vessels down. The reason? A rule to combat the merchant fleet’s emissions of sulfur oxides starting in January 2020. While such a slowdown might shave billions of dollars off shipowners’ single largest expense — fuel — it would also effectively limit the number of available vessels, risking an upward spiral in freight costs. (7/13)
Dire freight rates are pushing shipowners to scrap a record number of the biggest oil tankers this year, making it a bumper period for recycling yards in South Asia. Very large crude carriers, or VLCCs, move much of the world’s oil across the oceans. But there are far too many in operation in a shrinking market. Major oil producing countries have curbed production in recent years, and the US is importing less crude as it increasingly covers its needs with local oil. (7/9)
India’s oil products demand rose almost 9 percent in June on the year to 17.99 million tons, or 4.7 million b/d, primarily driven by higher consumption of diesel (+7.8%) and gasoline (+15%). The higher demand is a reflection of buoyant local consumption for oil and oil products due to the Indian government’s thrust on infrastructure development and surging auto sales. India’s oil demand is set to grow by 300,000 b/d in 2018, compared with only 120,000 b/d in 2017. (7/13)
In northeast China, the expansion of underground gas storage could alleviate distribution network bottlenecks in the country’s key winter demand centers, and help stabilize seasonal demand and price fluctuations in the wider Asian LNG markets. (7/13)
Vietnam exported 1.88 million tons of crude oil in the first six months, down 49.9 percent from a year ago, mostly to China, Thailand, and Australia. State-owned PetroVietnam has said that production from major aging fields will continue to shrink this year while complex geographical conditions at the remaining marginal fields are creating difficulties for the company. (7/12)
In Egypt, a new oil discovery in the Western Desert could unlock a new area for productivity gains in the country, Italian energy company Eni said Monday. Eni said it made its second oil discovery in the B1-X exploration area in the Western Desert. (7/11)
In Sudan, a fuel crisis has returned to the three states of Kordofan, affecting transportation within towns and travel to other states. Rationing is common. Black market prices for fuel are high. (7/12)
Offshore Mozambique, liquefied natural gas will be processed from a field by 2024 now that the government has the development plans, partners Exxon Mobil and Italian energy company Eni said. (7/10)
Mexico’s President-elect Andres Manuel Lopez Obrador will seek to end the country’s massive fuel imports, nearly all from the US, during the first three years of his term while also boosting refining at home. The winner of the country’s recent election told reporters that he will also prioritize growing crude oil production domestically, which has fallen sharply for years. (7/9)
In Canada, Syncrude on Friday told buyers it would cut crude deliveries in August by about 35 percent after an outage last month at its oil sands site in northern Alberta. Canada is the world’s fourth-largest oil producer and Syncrude’s nameplate capacity of up to 360,000 barrels per day represents about 10 percent of the country’s supply. (7/14)
Canadian energy company Suncor said its Syncrude oil sands facility, crippled by a June power outage, will be back at full capacity by September. The company said a preliminary investigation indicated a transformer tripped. (7/10)
The US oil rig count stayed flat at 863 while the gas rig count increased by two to 189, according to Baker Hughes. The combined oil and gas rig count now stands at 1,054—up 102 from this time last year, with the number of oil rigs accounting for 98 of that 102. Canada gained 15 oil and gas rigs for the week, 13 of which were oil rigs. Canada’s oil and gas rig count is now up just six year over year. Oil rigs are up by 33 year over year in Canada, while the number of gas rigs is down by 27. (7/14)
The US Gulf of Mexico has begun to stir recently after three years of low prices, attracting private equity money alongside a new set of players. The US Gulf — which had been expected to fade silently into the background — continues to grind forward and will reach a peak this year. Currently, total US Gulf production is projected at 1.725 million b/d of crude in July, nearly 18 percent of current domestic production. The figure is expected to rise to a peak of 1.874 million b/d in January 2019 before declining slightly and ending that year at 1.825 million b/d. (7/14)
GOM mega-lease: The US government put millions of acres on the table for drillers looking to tap into the billions of barrels of oil yet to be discovered offshore. Deputy Interior Secretary David Bernhardt said the next lease in a five-year plan includes 79 million acres off the coast of Alabama, Florida, Louisiana, Mississippi and Texas. All told, the US waters of the Gulf of Mexico hold about 48 billion barrels of undiscovered technically recoverable oil and 141 trillion cubic feet of natural gas. (7/14)
LNG futures: CME Group Inc said on Tuesday it would develop the first physically deliverable US liquefied natural gas futures contract as growing worldwide demand has made the US a key LNG exporter. Overall world LNG consumption has risen to a record 39.0 billion cubic feet per day (bcfd) in 2017 from just 29.1 bcfd in 2010 and is expected to keep growing by about 3 percent a year through 2050. (7/11)
So-called “orphan” oil and gas wells, which have been abandoned by defunct companies that can no longer pay to plug them, are a growing problem in many states thanks to a recent slump in energy prices that has forced marginal operators out of business. (7/11)
Exxon Mobil faces many challenges, including investigations of its accounting and tax practices as well as lawsuits by cities and states seeking funds to pay for the effects of climate change. Its biggest problem is one the giant has seldom faced in its 148-year history: It isn’t making as much money as it used to. (7/14)
Gas vs. coal: EIA expects natural gas-fired power plants to supply 37 percent of US electricity generation this summer (June, July, and August), near the record-high natural gas-fired generation share in summer 2016. EIA forecasts the share of production from coal-fired power plants will drop slightly to 30% in summer 2018, continuing a multi-year trend of lower coal-fired electricity generation. (7/12)
Wind costs: Between 2010 and 2016, the capacity-weighted average cost (real 2016$) of US wind installations declined by one-third, from $2,361 per kilowatt (kW) to $1,587/kW, based on analysis by the US DOE. The reasons for this decline include improving technology and manufacturing capability and an increasing concentration of builds in the regions of the US with the lowest installation costs. (7/14)
China imported 146 million tons of coal and lignite in the first half of 2018, up 9.9 percent from the previous year and a three-year high. This rebound in coal demand is underpinned by tight supply stemming from ongoing safety and environmental checks at major coal mines amid firm summer electricity demand. (7/13)
China’s dominant role in electric vehicle manufacturing and sales has yet to be curtailed by the trade war launched by President Donald Trump. The lack of impact can be demonstrated by Tesla CEO Elon Musk’s trip to Shanghai this week to sign a factory deal. (7/13)
China’s BYD recently delivered five electric buses to the Vineyard Transit Authority (VTA) in Martha’s Vineyard, Massachusetts; a sixth is scheduled to be delivered by the end of the July. VTA had placed the order for the buses in August 2017. The BYD buses will replace six diesel buses as part of the VTA’s plan to convert its fleet. VTA is the first transit agency in Massachusetts to commit to going all-electric. (7/12)
EV leader: A policy adviser to Washington Gov. Jay Inslee said the state wants to be as prolific as low-carbon Norway when it comes to electric vehicle deployment. There are around 28,000 electric vehicles on state roads now. The goal is to nearly double that to 50,000 by 2020. The Norwegian government said electric vehicles make up about 5 percent of the passenger fleet, compared with 3.7 percent at the end of 2016. Norway is a global leader in oil and gas production but leans on renewable resources for the domestic market. (7/13)
Downfall of US nukes? A new, shocking report by researchers at four universities discovered that the US nuclear power industry could be on the verge of collapse — a reality that many have yet to realize. Published in Proceedings of the National Academy of Science (PNAS), “US nuclear power: The vanishing low-carbon wedge” examined 99 nuclear power reactors in 30 states, operated by 30 different power companies. As of 2017, there are two new reactors under construction, but 34 reactors have been permanently shut down as many plants reach the end of their lifespan. (7/13)
The UK should back renewables and support only one more nuclear plant after Hinkley Point C before 2025, because renewable energy is the safest bet for a low-cost energy system for Britain in the long-term, the National Infrastructure Commission—an independent advisory group set up in 2015 to give recommendations to the UK government—said in its first report on Tuesday. (7/11)
The Uzbekistan government and Rosatom have reached an agreement to build the first nuclear power plant in the country, with commercial operations targeted to start by 2028, to free up natural gas for export. The nuclear power plant would comprise two 1,200-MW units. Uzbekistan needs the nuclear power plant to decrease the share of natural gas used in the domestic power generation industry. Currently, 85% of the country’s estimated 69 billion kWh of demand is met by coal- and gas-fired generators, the statement added. (7/12)
Germany’s RE: For the first time in history, renewable power sources have overtaken coal in Germany’s energy mix, the German Association of Energy and Water Industries reports, saying the share of wind, solar, hydro, and biomass in the country’s energy production mix reached 36.3 percent as of end-June this year, versus a combined 35.1 percent for hard coal and lignite coal. (7/13)
CA erosion nightmare: Like an ax slowly chopping at the trunk of a massive tree, waves driven by sea-level rise will hack away the base of cliffs on the Southern California coast at an accelerated pace, a recent study says, increasing land erosion that could topple some bluffs and thousands of homes sitting atop them. California officials from Santa Barbara to San Diego will face an awful choice as the sea rises: save public beaches enjoyed by millions, or close them off with boulders and concrete walls to armor the shore and stop the waves in a bid to save homes. (7/13)
Western drought: Arizona is the odd state out in agreeing to dramatically curtail water use from the Colorado River, raising tensions in the Southwest as extreme drought conditions return. At issue are falling water levels at the West’s biggest reservoir, Lake Mead. Having already dropped by more than 150 feet over the past two decades to 1,077 feet, the Nevada reservoir is two feet shy of falling below a federal threshold that can trigger mandatory cutbacks by US officials. (7/9)
Future climate impacts worse: A recent assessment of past warm periods shows that future global warming may be twice as warm as projected by climate models and sea levels may rise six meters or more with 2°C of warming. (7/9)
Climate research finding: Thirteen thousand years ago, an ice age was ending, the Earth was warming, the oceans were rising. Then something strange happened – the Northern Hemisphere suddenly became much colder and stayed that way for more than a thousand years. Based on new research—from measurements taken off the northern coasts of Alaska and Canada in the Beaufort Sea–scientists say they detected the signature of a huge glacial flood event that occurred around the same time. The research underscores that as the Earth warms and its ice melts, major changes can happen in the oceans. And could happen again. (7/13)
Earth Overshoot Day: Humans are using Earth's resources faster than ever, group warns
“There are consequences of busting the ecological budget of our one and only planet," the CEO of the Global Footprint Network network said.
by James Rainey / Jul.21.2018 / 5:05 AM ET
https://www.nbcnews.com/news/us-news/earth-overshoot-day-humans-are-using-earth-s-resources-faster-n892996
The Long Emergency up Close and Personal - with Author James Howard Kunstler
To Feed the World Sustainably, Repair the Soil
A reconceived farming system can rapidly improve fertility without chemical fertilizers, and without sacrificing crop yields
By David R. Montgomery on July 16, 2018
https://blogs.scientificamerican.com/observations/to-feed-the-world-sustainably-repair-the-soil/
To Feed the World Sustainably, Repair the Soil
A reconceived farming system can rapidly improve fertility without chemical fertilizers, and without sacrificing crop yields
By David R. Montgomery on July 16, 2018
https://blogs.scientificamerican.com/observations/to-feed-the-world-sustainably-repair-the-soil/
That die-off between 2040-2050 will be a high price to pay for the oil abundant life of prior generations! Steps could be take to abate the situation, but the speeding train of modern life cannot be stopped!!
thanks
sumi
What, is peak oil dead?
Then show me the body!
(of statistical evidence)
ecolonomics no.16
Paul Mobbs, Mobbs' Environmental Investigations
May 2015
http://www.fraw.org.uk/mei/ecolonomics/01/ecolonomics_16-peak_oil_dead-show_me_the_body.shtml
Peak Oil Review 9th July 2018
By Tom Whipple, originally published by ASPO - USA
https://www.resilience.org/stories/2018-07-09/peak-oil-review-9th-july-2018/
Quote of the Week
[About climate-related class action lawsuits against Big Oil:] “It’s sort of bizarre that the users of our [petroleum] products say: ‘Well actually we didn’t want your product. So why did you force it on us?’ I don’t think also that in the end it will solve anything other than maybe redistributing wealth to a certain class of the economy.” Ben van Beurden, CEO of Royal Dutch Shell [Environmentalists counter that this resembles the reaction of Big Tobacco to class action lawsuits decades ago.]
Graphic of the Week
Updated graphic by Mike Mushalik, Australian petroleum engineer, and commentator. He shows actual production by Saudi Arabia vs. forecast production in 2004 by Saudi Aramco, as shown in a CSIS presentation and then published in the Oil & Gas Journal. Mushalik also shows how far off Saudi production is today from an EIA forecast of 2005 (figures include NGLs).
1. Oil and the Global Economy
Oil prices traded in a narrow range last week, between $73-$74 a barrel in New York, and $77-78 in London. A surprise increase in the US crude stocks balanced off the uncertainties of the US-China trade war that began on Friday. The announcement that the Saudis had increased production by 500,000 b/d in June helped keep the lid on prices despite the worsening prospects for global trade.
The US-China trade war is showing no signs of a settlement, and comes at a time when global trade is slowing, raising threats to global economic growth. As China moves to put tariffs on US crude, refiners are looking elsewhere for oil imports. China is expected to import around 400,000 b/d from the US in July.
The most notable development last week was that fears are rising among Wall Street analysts that inadequate investment in finding and developing new oil fields will soon lead to shortages. According to Sanford C. Bernstein & Co. analysts, “any shortfall in supply will result in a super-spike in prices, potentially much larger than the $150 a barrel spike witnessed in 2008.”
Heretofore, most observers have assumed that continuing rapid increases in US shale oil production will be sufficient to offset the global depletion of oil production from existing fields. However, bottlenecks on moving oil out of the Permian Basin suggests that any additional growth in supplies from the area will be limited for the next 18 months.
The OPEC Production Cut: A highlight of the news last week came when President Trump tweeted that the Saudis had agreed to increase their oil production by 2 million b/d replacing most of the Iranian crude that Washington is trying to force from the market. Many observers noted that the Saudis probably had told the president only that they had 2 million b/d of spare capacity, but that it was highly unlikely that they told him they would start producing that amount short of a major shortage. The Saudis later clarified that they would not be producing an additional 2 million b/d, and most observers believe that 600,000 b/d is a more likely figure.
On Wednesday, President Trump tweeted that OPEC should lower oil prices and that this would be the quid pro quo for the US security ties that many OPEC members enjoy. This threat raised the hackles of some OPEC members as it comes at a time when the President is trying to kill Iranian oil exports. Iran’s oil minister later accused Trump of insulting OPEC by ordering it to increase production and reduce prices, adding Iranian oil production and exports had not changed as a result of US pressure.
US Shale Oil Production: According to updated EIA data, US crude production fell by 2,000 b/d to 10.467 million in April from the highest on record in March. US monthly crude oil exports jumped to a record 1.76 million b/d in April compared with 1.67 million in March. Weekly US crude exports surged to a high of 3 million b/d the week before last, but Chinese tariffs on US crude may reduce this number until the trade dispute is settled.
BP has joined a handful of US geologists in pointing out that future growth of oil production from the Permian Basin may not be as rosy as the EIA and industry sources have been claiming. BP’s chief economist, Spencer Dale, said last Wednesday that as US shale oil and natural gas liquids production increased by almost 2 million b/d since late 2016, drillers have been forced to move out from the most productive areas, or “sweet spots.”
Tight oil well productivity has now flattened out in the Permian Basin based on initial output per completed well. But tight oil productivity from the basin fell last year when measured by output per lateral foot of each completed well. “It does perhaps suggest that the very rapid increases in tight oil productivity that characterized much of the initial phase of the shale revolution may be beginning to fade,” Dale said.
BP predicted in February that US tight oil would grow by around 5 million b/d to 2040, peaking at close to 10 million b/d in the early 2030s. The forecast, however, is consistent with the number of rigs remaining around current levels and productivity levels improving by around 40% over the next ten years.
The growing number of supply outages around the world makes the infrastructure bottlenecks in West Texas a global concern. There already is a debate about what’s going on in the Permian, and whether or not the shale industry will be able to keep up with production forecasts. The IEA predicts the US will add 1.7 million b/d in 2018, followed by another 1.2 million b/d in 2019. The bulk of this increase is expected to come from the Permian, and while the IEA acknowledges pipeline bottlenecks there, it has not significantly altered its supply forecast.
2. The Middle East & North Africa
Iran: Iranian officials spent last week denouncing the impending US sanctions on Tehran’s oil exports and trying to line up support for their side of the issue. President Rouhani visited Europe to line up support and reiterated that Tehran would remain in the 2015 nuclear deal with world powers as long as its interests are guaranteed by other signatories. On July 6th, the foreign ministers of Iran and the five world powers still party to the nuclear deal — Britain, France, Russia, China, and Germany — met in the Austrian capital to discuss ways to preserve the agreement in the wake of the US withdrawal. However, the next day the Iranian president said the European package of support for the U.N-backed nuclear agreement was disappointing and offered nothing beyond general commitments.
As more oil importers, including many in the EU, India, and South Korea succumb to Washington’s threat to cut economic relations with anyone buying Iranian oil, Tehran is becoming increasingly desperate. While Russia and China will stand behind Iran, Moscow can do little except swap some oil with the Iranians, and Beijing is unlikely to put too many of its eggs in the Iranian basket by buying up all the oil Iran has to offer.
While in Switzerland last Tuesday President Rouhani stated that his country could block the Strait of Hormuz for all Arab shipping traffic if Washington fully implements its zero oil export targets for Iran in the coming months. The next day Iranian Revolutionary Guards commander said Tehran will block oil shipments through the Strait of Hormuz in the Gulf if the United States bans Iranian oil sales. “If they want to stop Iranian oil exports, we will not allow any oil shipment to pass through the Strait of Hormuz.”
While Tehran may have few threats left to make against the new US policy, blocking nearly all oil shipments leaving the Gulf, some 17 million b/d, is way over the top. The US navy signaled it was ready to confront Tehran militarily in response and even Beijing chided the Iranians over their threats. Saudi Arabia, Iraq, and Kuwait are among China’s most important oil suppliers, while Qatar supplies liquefied natural gas to China, so any blockage of the strait would have severe consequences for its economy. If there is one issue that every country in the world with a gas station, excepts perhaps for Russia, can agree on, it is that the Straits of Hormuz will not be closed.
Concerns are rising about the stability of the Iranian government. With the economic promises of the nuclear deal melting away and the collapse of its currency, many see the beginning of an economic death spiral that will bring political upheaval.
Iraq: Oil exports were virtually flat in June from a 2018 peak in May, with the largest monthly tanker loadings of the year offset by a multi-day outage in the pipeline sending Kurdistan oil to Ceyhan. The mandate for Iraq’s parliament has expired – with no new leadership confirmed. The country’s still waiting for the results of a manual recount of suspect ballots from last month’s election that’s due to get underway in some regions on Tuesday. The recount will take about two weeks – leaving the country in political limbo until a new government is confirmed.
The future of Iraq, however, may have more to do with the amount of water flowing down the Tigris and Euphrates Rivers than political maneuvering in Baghdad or the amount of oil the country can produce each day. This month, engineers are scheduled to start filling the reservoir behind the giant Ilisu dam in southern Turkey. The Ilisu is one of a decades-long project to build 22 dams due to be completed by the end of next year along the Tigris and the Euphrates that will produce energy and jobs.
Water that stays in Turkey does not make it into Iraq where water is critical. Over 80 percent of Iraq’s water goes to agriculture which provides a livelihood for more than a third of its 37 million people. Even before the filling of Ilisu, Iraq’s water ministry reported that inflows had this year dropped 40 percent below the median. Ministers limited the planting of rice and other water-intensive crops to minimize the damage.
Researchers estimate that Middle East temperatures are rising twice as fast as the world average, due to the amplifying effect of desert conditions, which could make swaths of the region uninhabitable by the end of the century.
Saudi Arabia: Saudi Arabia told OPEC it pumped 10.488 million b/d of crude oil last month, an increase of 458,000 b/d from the level it said it produced in May. Consultants Kpler estimated the kingdom’s oil exports rose by 407,000 b/d in June to 7.62 million b/d compared with May.
OPEC agreed with Russia and other oil-producing allies last month to raise output from July, with Saudi Arabia pledging a “measurable” supply boost but giving no specific numbers.
After months of reporting on how the Saudis would reboot their economy by selling off 5 percent of Saudi Aramco to raise cash for economic development, it seems that the IPO may not happen after all. Last week, a senior Aramco executive told the Wall Street Journal that “everyone is almost certain it (IPO) is not going to happen.”
Initially touted as the biggest IPO in history, the Aramco listing was to be twofold—a listing at home on the Saudi stock exchange, Tadawul, and abroad, in New York, London, or Hong Kong. However, problems with these locations have emerged since then. New York has become an unlikely listing destination because of post-9/11 legislation allowing US citizens to sue Saudi citizens for the attacks. London, which has been particularly active in promoting itself as the best listing destination, has failed as of yet to win a commitment from Riyadh, as has Hong Kong.
Saudi Arabia has turned its oil market fortunes around over the past 1 ½ years. From facing potential financial collapse due to a historic supply overhang of crude, Riyadh cleverly formed a new partnership with Russia to force oil prices higher. Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices. Arab Light Crude had already been trading near three-year highs, even as the state-owned oil giant had lowered official selling prices for medium and heavier crude grades.
Saudi Aramco said on Wednesday that the move represents the first change to benchmarks for its Official Selling Price since the mid-1980s. The new Asia price marker will replace the Platts Oman marker with Dubai Mercantile Exchange marker effective Oct. 1, 2018, creating a hybrid between two major Asian price benchmarks.
Months after the start of an anti-corruption crackdown, Saudi authorities are still holding a senior prince and several dozen businessmen and former officials in detention and recently have made new arrests. Hundreds of prominent Saudis were arrested last November and detained at the Ritz-Carlton hotel in Riyadh. Most were released after agreeing to make payments Saudi officials say totaled more than $100 billion.
Those still in custody include some of Saudi Arabia’s wealthiest men and some who once held influential government positions until their arrests last November. Among them are the chairman of the construction giant Saudi Binladin Group; the former head of Saudi Arabia’s investment agency; and a former economy minister and once a trusted aide to Prince Mohammed. Also detained is a senior royal, Prince Turki bin Abdullah, who served as governor of Riyadh and is a son of the previous monarch, King Abdullah.
Critics of the government say the new arrests and continued detentions are an effort by Prince Mohammed to consolidate power and sideline potential opponents one year after his father installed him as the country’s de facto ruler in a precedent-breaking move. They also serve as a reminder that Saudi Arabia remains an absolutist monarchy subject to the course of family politics.
Libya: There was little new information on the status of Libyan oil production last week with some reports saying production has nearly ground to halt and others talking about production remaining around 300,000 b/d. After General Haftar’s Libyan National Army turned control over the five eastern export terminals, which handle 75 percent of the country’s exports, to the newly established eastern rival to the Libyan National Oil Company, there has been little reliable news. The Tripoli-based company, which has been exporting oil for decades, and has all the contracts is forbidding foreign customers from buying oil from the new company.
Last Thursday, a joint venture between the NOC and Italian energy company Eni announced the start of natural gas production from the second phase of the Bahr Essalam project off the coast of Libya. More offshore production of oil and gas which is far less vulnerable being taken over by groups seeking a bigger share of the pie is what Libya needs today.
Britain’s National Crime Agency reported that there are 700,000 migrants waiting in Libya to cross the Mediterranean to Europe. Over the weekend, Italy and Libya have agreed to reactivate a friendship treaty signed in 2008 with the Gadhafi government that allowed migrants to be returned to Libyan territory. The original agreement envisaged unlocking 4.2 billion euros of Italian investment in Libya as compensation for colonization by Rome. In exchange, Libya would work to stop illegal migrants embarking from its shores — and receive those sent back to it. The two ministers did not say if the text of the reactivated treaty had been amended.
3. China
The trade war between China and the US officially began on Friday morning as the Trump administration followed through with its threat to impose tariffs on $34 billion worth of Chinese products. The penalties, which went into effect at 12:01 a.m., prompted quick retaliation by Beijing. As part of a wave of retaliation for Friday’s US tariffs, China has threatened a 25 percent duty on imports of US crude which had reached 300,000 b/d.
Beijing’s omission of LNG from its list of US products that face import duties underscores its desire to ensure supplies of gas as it pushes to switch millions of households and businesses away from using coal as a critical part of its ‘war on pollution’.
India and China are in talks about forming an oil buyers’ club. The boom in US oil and gas production gives the two, which account for a combined 17 percent of global oil consumption, greater leverage against OPEC. The two countries are the ones that would be the hardest hit if prices rise as a result of OPEC’s actions, and would have massive leverage if they forced oil exporters to bid for their business.
China’s independent refineries were awarded a second batch of crude import quota allocations for 2018 totaling 9.68 million tons, bringing the total quota allocated to the independent sector to 129.23 million for the year to date. So far the allocation is about 31.4 percent higher than the 98.34 million tons allocated last year.
This year’s selloff in China’s stocks and currency is reviving memories of the rout in the summer of 2015. Shares in Shanghai are the world’s worst performing among major markets this year, tumbling 17 percent. The yuan has slumped 3.6 percent against the dollar since the start of June due to selling by nervous investors and the central bank’s efforts to guide the currency lower as a trade conflict with the US escalates.
4. Russia
Moscow’s oil companies are preparing to boost crude output significantly this summer. Alongside Saudi Arabia, Russia is one of just a few countries that can quickly ramp up production. Russian Energy Minister Alexander Novak said his country could add about 175,000 barrels of oil per day to the market in the second half of the year.
“I would like to note that in the first five months of this year the macro-economic situation has been generally stable,” Russian President Vladimir Putin said Thursday, “Positive trends are being posted in key areas.” Russia’s economy was in recession in 2016 and the ruble, declined in value after crude oil prices dipped below $30 per barrel. In June, however, the Central Bank of Russia maintained its key rate at 7.25 percent per year, adding it wasn’t concerned about volatility in the price of oil.
5. Nigeria
Nigeria was recently rated as the poorest country in the world, ahead of India, despite several hundred billion dollars in oil earnings over the last decade. The Nigerian Extractive Industries Transparency Initiative, as quoted by local media, said Nigeria had earned some $484 billion from oil in the previous ten years, but the state of its population and infrastructure has only deteriorated. According to the organization, the oil earnings were sufficient to meet the need for an annual $15-billion investment in infrastructure for the next 33 years, but the funds were not used to do that. In its latest report on poverty, the Brookings Institution estimated that the number of people living in extreme poverty in Nigeria had grown to 87 million people, versus 73 million in India.
The Nigerian National Petroleum Corporation said the country would increase crude oil reserves by one billion barrels yearly from the current 37 billion barrels to 40 billion barrels by 2020 and also increase national oil daily production to three million b/d by 2020.
The 650,000-b/d refinery being built in Nigeria will not be at its full capacity until the middle of 2020, which would be one and a half years later than originally planned. When complete, the refinery would aim to meet all of Nigeria’s daily demand for fuels of up to 550,000 b/d and the remainder would be exported. Currently, the country is importing nearly all of its requirements for oil products.
6. Venezuela
The China Development Bank is to invest $250 million in Venezuela’s Orinoco Belt to stave off further the decline of the country’s heavy oil production. China is also mulling a $5 billion investment plan in Venezuela, where oil production has fallen by more than half in the last few years, with output down to around 1.36 million b/d in June. Venezuela has been sending China several hundred thousand barrels per day of oil for several years as repayment for past loans; however, the catastrophic decline of Venezuela’s oil production has curtailed those shipments. China is in danger of never being paid back for the tens of billions of dollars it loaned to Venezuela.
Whether an additional $5 billion of Chinese money can come in time or do any good in a country that is slowly starving and is only months away from a total collapse remains to be seen. It seems more likely that Beijing will resist throwing good money after bad.
7. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org)
Leaders of the world’s largest oil companies want everyone to know it won’t do anyone any good to make them pay for the damages of climate change. Executives have been making the argument after a series of US states and municipalities filed class action lawsuits against Royal Dutch Shell, Exxon Mobil, and others in recent months, arguing it should be the companies that pay for the sea walls, levees, and other infrastructure climate change is sure to require. A judge in California dismissed suits from Oakland and San Francisco arguing climate change was too broad a topic for a single court to decide, and that it should be left to legislators. He also argued the world has prospered because of fossil fuels and it didn’t make sense to now turn against the companies that provide products in high demand. (7/6)
Seismic on uptick: A growing fleet of ships is scanning oceans in search of new oil and gas fields as energy companies, now with more cash thanks to stronger crude prices, gradually resume spending on seismic services after a four-year downturn. A doubling in the area contracted for seismic work in the first quarter this year from the last three months of 2017 has injected optimism into surveillance firms, with a global fleet of about 24 vessels, most of whom struggled to survive in the past years. (7/5)
Offshore UK, the international majors are sharpening their UK focus on the more prospective west of Shetland area, with BP raising its stake in the Clair field and Chevron hoping to sell its legacy North Sea fields as it plans the West of Shetland Rosebank deepwater project. The announcements Wednesday by BP and Chevron follow Shell’s purchase in May of a 30 percent stake in another West of Shetland project, Cambo, thought to hold “in place” 600 million barrels. The West of Shetland area is characterized by some of the harshest sea conditions faced by the industry anywhere and has mostly been the preserve of the majors due to higher costs. (7/5)
In the UK, efforts by opponents of shale gas are diminishing the national significance of British shale natural gas work, and they create unnecessary delays for developing the fledgling industry, a trade group said. (7/6)
French consultancy Cedigaz sees global gas demand growing by 1.4 percent/year between 2016 and 2040, a major reduction cumulatively from last year’s 1.8 percent compound annual growth rate. It does, however, see the fuel playing a growing role in the energy mix at the expense of the other fossil fuels. (7/5)
Russian Novatek-led Yamal LNG project has sent two Arc7 ice-class LNG carriers destined to China via the Northern Sea Route in just nine days with no ice-breaking support, marking the start of regular LNG shipments without an ice-breaking escort. (7/6)
Offshore the Gaza strip, Greek oil and gas company Energean is ready to buy and operate a 45 percent stake in the offshore gas field Gaza Marine as soon as both the Israeli and Palestinian authorities give their green light. Gaza Marine, located about 30 km off the Gaza coast between the giant gas fields Leviathan and Zohr, is estimated to hold over 1 trillion cubic feet of natural gas. But plans to develop it has been put off several times over the past decade. (7/6)
Asian “buyers’ club”: When reports emerged that India and China were in talks about forming an oil buyers’ club, OPEC was probably too busy with its upcoming June 22 meeting to concern itself with that alliance. Now, it may be time for it to start worrying. The boom in US oil and gas production gives India and China greater leverage against OPEC, the Times of India quoted an Indian official as saying last month after the formal start of said talks. The two countries account for 17 percent of global oil consumption. (7/4)
In Egypt, the World Bank supports the country’s efforts to be a regional oil and gas trading hub, the Egyptian Ministry of Petroleum said on Monday. Following the start-up of the giant gas field Zohr, along with several other projects, Egypt has become an important player in the Mediterranean. (7/3)
South African motorists are in for another shock. Minister of Energy Jeff Radebe has announced a 23 cents price increase for 93 octane while 95 octane will cost 26 cents more per liter. Diesel prices are also set to go up, increasing by 26 cents per liter. The price hikes will take effect on Wednesday and comes after an 82 cents increase introduced in June. The spikes are attributed to a weaker rand. (7/3)
For offshore Guyana, services company SBM Offshore said Tuesday that an Exxon Mobil subsidiary in Guyana gave it a contract to start front-end engineering and design work on a second floating production, storage, and offloading vessel for the giant Liza field. (7/4)
In Cuba, a window for drilling at an oil prospect near the northern shore could open up as early as December. The Cuban government gave Australian energy company Melbana Energy the environmental license for planned activities at its Alameda-1 exploration well on the north shore in April. The company is targeting a reservoir with more than 2.5 billion barrels of oil in place, and the environmental license is part of the regulatory requirements needed before the company can start drilling. The company has completed a tender for a drilling rig that could be deployed later this year. (7/3)
The Mexican people, fed up with widespread corruption, poverty, and violence, have handed Andrés Manuel López Obrador (AMLO) a stronger mandate than any Mexican president in decades. AMLO has long supported a nationalistic outlook on energy and spent years criticizing the liberalization of Mexico’s energy reform. (7/3)
In Mexico, Alfonso Romo, Lopez Obrador’s future chief of staff, told Bloomberg that the incoming president wouldn’t use his vast legislative powers to reverse energy reforms. If any modifications end up being made, they wouldn’t harm private participation in Mexico’s energy sector. (7/7)
The US oil rig count increased by five rigs in the week to July 6, bringing the total count to 863, according to Baker Hughes’s weekly analysis. With gas rigs flat at 189, the total oil and gas rig count stood at 1052. So far this year, the total number of oil and gas rigs active in the United States has averaged 1,005. That keeps the total count for 2018 on track to be the highest since 2014, which averaged 1,862 rigs. (7/7)
US oil exports: Two and a half years after the US removed export restrictions on its crude oil, its exports hit 3 million b/d —the latest all-time high set in recent months. The volume of US exports last week was higher than the individual country exports of 12 out of 14 OPEC members. Only Saudi Arabia and Iraq export more than 3 million b/d of crude oil to international markets. (7/3) (NOTE: the US is still a net importer of crude oil and petroleum products, recently around 2.5 million b/d.)
Methane leaks: Environmentalists, regulators, and many in the industry itself warn of a dirty underbelly to natural gas. Before it is burned, it is one of the most potent greenhouse gases—up to 80 times more impactful than CO2 emissions—and can reach the atmosphere through leaks in wellheads, compressor stations, and chemicals plants. A study published in the scientific journal Nature last week put methane emissions from the US oil and gas industry at about 13 million metric tons per year, 60 percent higher than the official US EPA estimate. Carbon dioxide emissions from US energy sources, meanwhile, are around 5 billion tons. While some have challenged the methane study’s conclusions, energy executives at the triennial natural gas summit said the industry should instead review them and learn. (7/3)
The US Dept. of Energy has abandoned plans to build petroleum product reserves on the West Coast and in the Southeast, citing high costs and the potential for market distortion, according to Steven Winberg, the agency’s assistant secretary for fossil energy. (7/3)
Refinery comeback: Owners of an idled oil refinery in St. Croix, US Virgin Islands, that was once among the world’s largest, plan to invest $1.4 billion to refurbish and restart a portion of the plant. ArcLight Capital Partners, a private equity firm, expects the former Hovensa refinery on St. Croix to be able to process 200,000 barrels per day of crude and deliver fuels to market by January 2020. (7/3)
Suing big oil: Rhode Island on Monday sued several major oil companies, including Exxon Mobil Corp and BP, accusing them of contributing to climate change that is damaging infrastructure and coastal communities in the state. The lawsuit announced by Rhode Island was the first by a state seeking to hold oil companies responsible for costs associated with climate change and followed similar cases by several local governments nationally. (7/3)
When it comes to big paychecks, Big Oil now looks like the best bet for US workers. Spurred partly by the shale boom, energy companies paid their median workers $123,000 last year, according to data newly mandated by the US That topped all sectors, including utilities, tech, and healthcare. (7/6)
US biodiesel production fell to 140 million gallons in April from 147 million gallons a month earlier, the US EIA said in a report. Soybean oil remained the largest biodiesel feedstock at 48%, with 520 million lbs. used in April. (7/3)
China’s ambitious push to use biofuel in cars nationwide by 2020 is in doubt amid concerns about supplies of raw material such as corn, complicated by an escalating trade dispute with Washington, producers and analysts say. (7/6)
Peak sand? It seems odd to talk about Peak Sand. The problem is that concrete is 26 percent sand, and we are still making huge amounts of concrete—about two cubic meters every year for every man, woman, and child on the planet. China leads the charge in today’s sand-fueled construction boom, consuming half the world’s supply of concrete. Between 2011 and 2014 it used more concrete than the US did in the entire 20th century. Desert sand has been wind-blown and eroded and smoothed out, so that huge potential resource doesn’t make good concrete. And fracking requires growing amounts of high-quality sand as well. (7/3)
Offshore wind race: The Trump administration wants to fire up development of the US offshore wind industry by streamlining permitting and carving out vast areas off the coast for leasing – part of its ‘America First’ policy to boost domestic energy production and jobs. The Europeans have taken note. The drive to open America’s offshore wind industry has attracted Europe’s biggest renewable energy companies, who see the US East Coast as a new frontier after years of success across the Atlantic. Less experienced US wind power companies, meanwhile, have struggled to compete in their own backyard. (7/6)
Fully cost-competitive electric vehicles will be on European roads by 2024-25 if battery costs continue to fall at current rates, according to speakers at Oxford City Council’s EV Summit 2018. Lithium-ion battery costs in China, which meets a major tranche of global demand, are falling at around 10% a year. That meant battery-driven electric vehicles were on course to reach cost parity with diesel and gasoline cars by 2024 at the earliest, and 2030 at the latest depending on take-up of EVs and nickel and cobalt costs. (7/5)
EV news: US and especially global demand for the Chevrolet Bolt EV have been strong in 2018, with global sales estimated to be up more than 35 percent year over year in the second quarter and up more than 40 percent in the first half, according to GM. In response, GM is increasing fourth-quarter production by more than 20 percent compared to the average of the first three quarters. (7/7)
A red-hot electric vehicle market has triggered a face-off between Big Oil and utilities. Oil majors, who’ve sold fossil fuels to cars for a century, are now moving into an electricity sector that’s preparing for exponential growth. The problem is that utilities, the primary power suppliers for a century, have the same idea. BP predicts electric vehicle sales will surge by an eye-watering 8,800 percent between 2017 and 2040, making it an attractive business for oil companies as demand for gasoline and diesel are forecast to slow. (7/5)
EV players: Oil companies and utilities won’t dispute that electric vehicles are on the cusp of becoming mass market. Their battle will be more over which business will dominate the booming charging infrastructure that will go along with it. BP and Shell have charging company acquisitions in the works, with Europe being a key market for EV infrastructure growth. (7/5)
BP + EV: BP’s acquisition of Britain’s largest electric vehicle charging company gives the supermajor an edge in a changing retail segment, an analytics company said. The British energy company announced Thursday it reached an agreement to purchase EV charging company Chargemaster and rebrand it as its own. Chargemaster operates more than 6,500 charging points across the United Kingdom. (7/3)
Self-driving bus: Chinese tech giant Baidu announced that its newly developed self-driving bus would begin mass production as the 100th bus came off the production line Wednesday. The bus, which lacks a steering wheel, driver’s seat and brake, is instead equipped with a Baidu Apollo autonomous driving system, which can perceive its surroundings, predict the movements of vehicles and pedestrians, and plan optimized routes based on high-definition maps and intelligent sensing capability. (7/5)
Fuel cell cars: The global race to reduce carbon emissions and use sustainable energy has rekindled the debate on whether fuel cell electric vehicles can carve out a niche in the ‘green mobility’ market and overcome the cost and scale challenges to become a player in the energy transition. (7/5)
Fusion update: There may be lingering disagreements among China, the European Union, India, Japan, South Korea, Russia and the U.S., but there is one complex project these seven entities have in common that is on track – the world’s largest nuclear fusion facility. This first global collaboration on building a nuclear fusion reactor is taking place at Cadarache in the south of France. Construction of the reactor began in 2017 and is now 55 percent complete. (7/5)
Last year, hurricane season disrupted a lot of oil production and refining capacity along the US Gulf Coast, sending oil prices soaring. This year, however, oil bulls may be in for a disappointment as forecasts are for a quieter hurricane season. Colorado State University recently revised its forecast for the number of named storms this season to 11 from 14. (7/5)
The European commissioner for climate action said Friday it’s time to start looking beyond the horizon outlined in the Paris climate agreement. The European Commission said it was setting a new bar for renewable energy use with a 32 percent target for 2030, with additional consideration for further revisions in 2023. The governing body said this step puts more strength behind European President Jean-Claude Juncker’s ambition for Europe to become the world leader in renewable energy use. (7/7)
The Net Energy Time Bomb
Thanks, I try to visit different community gardens for ideas to apply in my gardens.
sumi
Big oil is sowing the seeds for a 'super-spike' in crude prices above $150, Bernstein warns
Tom DiChristopher
Published 11:16 AM ET Fri, 6 July 2018 Updated 12:15 PM ET Fri, 6 July 2018
Daniel Acker | Bloomberg | Getty Images
A Nabors Industries worker uses a power washer to clean the floor of a rig drilling for Chevron in the Permian Basin near Midland, Texas, March 1, 2018.
https://www.cnbc.com/2018/07/06/big-oil-sowing-the-seeds-for-crude-prices-above-150-bernstein-warns.html
Peak Oil Review: 5 July 2018
By Tom Whipple, Steve Andrews, originally published by ASPO - USA
https://www.resilience.org/stories/2018-07-05/peak-oil-review-5-july-2018/
Quote of the Week
“So, the peak oil theorists got lucky in that the industry experienced a large number of supply disruptions that raised prices, which seemed to confirm their arguments—just as the Iranian Oil Crisis of 1979 incorrectly convinced many that ever-higher crude prices were unavoidable and resource optimists naive. But by understanding that supply disruptions in Iraq, Libya, Venezuela and so on were responsible for higher prices, it is possible to recognize that political trends in oil exporting countries will determine prices, not resource scarcity. Recognizing the former means coping with cyclical prices, believing in the latter means getting blindsided by every major price decline.” Michael Lynch, energy economist, from Forbes magazine article—“Whatever Happened to Peak Oil?”
1. Oil and the Global Economy
In the two weeks since the OPEC+ coalition decided to increase oil production by an undefined amount, oil prices have risen steadily on fears that there will be oil shortages and higher prices in the coming months. New York oil futures closed above $74 a barrel last week and London closed above $79 on Friday. Driving the markets higher are disruptions to oil production in Venezuela, Libya, Canada, Nigeria, and the US efforts to force Iran to zero exports this fall. The situation is not helped by the slowdown in the increase in US shale oil production due largely to bottlenecks in moving Permian shale oil to markets. There is no sign of a letup in the global demand for oil which is expected to increase by 1.5 million b/d this year.
Taken together, it seems unlikely that Russia and the Gulf Arab states, which are the only countries with significant capacity to increase oil production, will be able to offset the increase in demand and supply disruptions elsewhere. Some observers are even talking about a return to $100 oil next year. The United States aims to reduce Tehran’s oil revenue to zero in an effort to force the Iranian leadership to change its behavior; Washington maintains there is enough spare global oil capacity to make up for lower supply from Iran.
Saudi Arabia is moving to increase production to a record high 11 b/d in July, according to Reuters. If this increase can be realized, it would be an incredibly rapid jump in production by more than 1 million b/d from May levels. President Trump said in a tweet on Saturday that the Saudis agreed to boost oil production by 2 million b/d. This assertion came as news to the Saudis. The White House quickly walked back the President’s tweet to say that “In response to the President’s assessment of a deficit in the oil market, King Salman affirmed that the Kingdom maintains a two million b/d spare capacity, which it will prudently use if and when necessary to ensure market balance and stability.”
Historically, the Saudis have been reluctant to increase oil production to their maximum ability for fear there would be too little a supply buffer should there be more unplanned supply outages. Other gulf Arab countries, as well as Russia, have extra output capacity, but these capacities are far smaller than that of the Saudis.
According to Goldman Sachs an outage at Syncrude Canada’s oil-sands facility may lead to a 360,000 b/d shortage for July and shrink stockpiles at the US storage hub at Cushing, Oklahoma.
The OPEC Production Cut: Oil prices jumped 5 percent the Friday before last after the OPEC+ group announced a vague decision to maintain its collective oil production target while lifting country-specific limits. The result was viewed as only a modest increase, which could lead to tighter supplies. Saudi officials later sought to clarify the decision by noting that the move would lead to an increase of 1 million b/d. That caused prices to fall back a bit on Monday.
OPEC oil output rose last month as Saudi Arabia pumped at a near-record rate, a Reuters survey found on Monday. The cartel pumped 32.32 million b/d in June, up 320,000 b/d from May.
Saudi Arabia has invited Russia to become an observer member of OPEC. Russia and Saudi Arabia have increased ties in recent years out of a mutual desire to increase oil prices that underpin their economies. The OPEC /non-OPEC coalition now controls almost half of global crude production.
US Shale Oil Production: US crude production fell marginally by 2,000 b/d to 10.467 million in April from the highest on record in March, the EIA said in a monthly report last Friday. Baker Hughes reported another dip in the number of active oil and gas rigs in the US. Oil rigs decreased by four last week and the number of gas rigs by one. The pipeline constraints on Permian shale oil production are finally starting to bite, threatening to derail the boom that has been underway for the last few years. According to Bloomberg Permian drillers are “quitting new wells at a record pace.” The region’s pipeline network is nearly full, forcing steep and ever-widening discounts for the price of oil coming from West Texas. The number of drilled but uncompleted wells remains very high.
Oil production in the Permian is rising by 800,000 b/d annually, with current production at 3.3 million b/d. The total pipeline capacity is 3.6 million b/d, so producers—especially those that don’t have firm deals for pipeline transportation—will be hitting the limit of takeaway capacity in the next three to four months. Significant increases in pipeline capacity are not expected for another 18 months, suggesting that Permian production will plateau at 3.3 million b/d for the next year or so. While production at other shale oil basins continues to grow, nobody is expecting a substantial increase in oil production from these aging shale oil deposits.
2. The Middle East & North Africa
Iran: The US is pressing Iran’s oil customers to zero out their imports by November 4 and has no plans to issue sanctions waivers according to an announcement by the State Department. Tehran replied to the announcement by saying that removing Iranian oil from the global market by November as called for by the US is impossible. An Iranian official said, “Iran exports a total of 2.5 million b/d of crude and condensate and eliminating it easily and in a period of a few months is impossible.” The tone of Tehran’s reply suggests that the Iranians are worried that the pressure Washington is putting on its customers may have its intended consequences.
Last week India’s oil ministry told local refiners to get ready for a “drastic reduction or zero” oil imports from Iran, a sign that India—Tehran’s second-largest oil customer—is bowing to pressure from the US. European refiners also are cutting purchases of Iranian oil faster than expected as the US prepares to reimpose sanctions on Iran, with far more severe impact than the last round of punitive measures in 2012. Foreign companies would have to wind down their activities with Iran by November 4 or risk exclusion from the US financial system eliminating threatening sales and purchases to the US which in most cases are far more than any benefits to be gained from purchasing Iranian oil.
President Rouhani promised Iranians last Tuesday that the government would be able to handle the economic pressure of new US sanctions. This promise came a day after crowds massed outside parliament to protest at a sharp fall in the value of the national currency. The new protests are a fresh challenge to President Rouhani’s government just months after widespread street demonstrations. The rial is now at an all-time low, implying an inflation rate of 147 percent. Some believe that the Islamic Republic is in the ever-tightening grip of an economic death spiral and is more vulnerable to internal and external shocks than ever. Climate change which is eating away at Iran’s water supplies and its ability to grow crops remains a long term problem.
Iraq: The contested parliamentary election remains the top concern in Baghdad. Last week the Supreme Court issued a much-anticipated decision that substantially supported the Iraqi Parliament’s legislation, passed on June 6, which amended the country’s election law to mandate a full manual recount of all votes. Until the election is sorted out, there will be little movement in the country’s oil policy or new oil projects. A 12-person committee will study international best practices and develop recommendations for implementing a new law to re-create the Iraq National Oil Company. This is the first concrete step toward establishing a new national oil company which comes three months after the Parliament passed legislation that could restructure the management of Iraq’s oil sector.
The Federal Supreme Court has given lawyers until Aug. 4 to present additional documents in the federal government’s case against the Kurdistan region’s independent oil policy, and set the next hearing for Aug. 14.
Nationwide oil exports were virtually flat in June from a 2018 peak in May, with the largest monthly federal Iraq tanker loadings of the year offset by a multi-day outage in the pipeline sending Kurdistan oil to Ceyhan. Shell has handed over the operations of the Majnoon oilfield to the state-run Basra Oil Company. Last year, Shell said that it would sell its interest in the Majnoon oilfield after it and Iraq failed to agree on future production plans and investment budgets. Shell was the operator and holder of 45 percent of Majnoon, with Malaysia’s Petronas owning 30 percent, and Iraq’s Missan Oil Company holding the remaining 25 percent.
Saudi Arabia: Khalid al-Falih, the Saudi energy minister, told journalists that it was substantially increasing oil production to cool down rising prices and head off potential future shortages. The national oil company is already ramping up production to increase exports from Saudi ports in July. “Ships have been scheduled, and it will be hitting the markets. While declining to give a specific number, Falih said the kingdom would be increasing output by “hundreds of thousands, not tens of thousands, of barrels” — a substantial amount.
Russia and Saudi Arabia have agreed to extend their oil partnership indefinitely, with the agreement stipulating that they could move to regulate oil production at any time. The news is a confirmation that only Saudi and Russia are in a position to swing the markets and prices, while much of the rest of OPEC is largely window dressing representing declining ability to produce oil.
Crown Prince Mohammed bin Salman, the architect of Saudi Arabia’s economic overhaul, wants to speed up growth and create more opportunities for Saudi citizens. Companies, however, are struggling to meet the government’s demands to employ them. For decades, expatriate workers from countries such as India and the Philippines helped sustain Saudi Arabia’s high living standards by doing jobs Saudis wouldn’t do in kitchens or at construction sites. The kingdom has endowed citizens with what are essentially jobs for life in the public sector, which means the labor force doesn’t always have the skills, and lacks the motivation, to fill private-sector jobs. The new Saudi leadership has vowed to transform the kingdom into a dynamic economy. For the transformation to succeed, the Saudis must cut the bloated bureaucracy and find jobs for its citizens in the private sector. About two-thirds of working Saudis currently are employed by the state.
Libya: The future of Libya’s crude oil exports has fallen into greater uncertainty because of the widening rift opening between the Tripoli/Benghazi based National Oil Corporation and the so-called Libyan National Army over which controls the key eastern oil export terminals recently recaptured from a renegade militia. After driving out the renegades, Libyan National Army (LNA) handed over control of the ports to the new eastern National Oil Company. The LNA controls most of eastern Libya and backs a parallel government in Tobruk, but has supported the internationally recognized NOC based in Tripoli for the last two years. The uneasy accord between the LNA and NOC had been a key factor in allowing Libya to raise its crude oil production to stabilize at around 1 million b/d. But that now seems to have fallen apart.
Libya’s oil production was cut on Monday by 850,000 b/d from the 1 million the country had been producing because operations at two major oil terminals were suspended over the control dispute. The western Libyan National Oil Corp. suspended its contractual obligations for loading oil at the Hariga and Zueitina oil ports on Monday and declared force majeure. The suspension followed port blockades imposed by the Libyan National Army in violation of U.N. Security Council resolutions giving the traditional NOC control. A production cut of this size is nearly equivalent to the expected increase in Saudi production this month.
3. China
China has increased purchases of LNG, as it shores up supplies to avoid power shortages during a prolonged heat wave. Buying has picked up more than it usually would in the warmer summer months, as households are cranking up their air conditioners in the face of scorching temperatures in many areas. Some cities have rationed electricity. Beijing’s push to switch households and factories to cleaner fuel as part of a drive to clear the country’s toxic air and curb coal use has also stoked demand.
When China last set out a list of US exports threatened with retaliatory tariffs, almost all fossil fuels were covered, including oil, coal and liquefied petroleum gases such as propane. There was, however, one important exemption: liquefied natural gas. Beijing’s decided not to impose additional tariffs on US LNG. However, last week plans to export increased volumes of liquefied natural gas from the US to China were thrown into doubt because of the escalating trade dispute. Patrick Pouyanné, chief executive of Total, told reporters in Washington last week that a trade war with China would be “very bad news” for US exports of liquefied natural gas.
The International Energy Agency said in its Gas 2018 annual report last week that China will become the world’s top natural gas importer by next year. The government has mandated gas must make up around 10 percent of the country’s power generation energy mix by 2020, with further increases by 2030. Chinese demand for natural gas will rise by almost 60 percent between 2017 and 2023 to 376 billion cubic meters (bcm). This increase includes a rise in its LNG imports to 93 bcm by 2023 from 51 bcm in 2017. Global LNG imports will rise to 505 bcm by 2023 from 391 bcm in 2017, an increase of some 114 bcm.
Guidelines published by the Communist Party last week outline efforts to cut emissions by at least 15 percent by the end of the decade. The Central Committee outlined goals for air quality and the broader environment beyond 2020. President Xi has put health at the forefront of government policy.
Electricity output in May from China’s thermal power plants, mostly coal-fired units, rose 10.3 percent year on year and 3.6 percent from April. Total electricity output in China stood at 544.3 TWh in May, up 9.8 percent year on year. Strong electricity demand due to hot weather drove greater coal-fired power generation even as hydropower output reversed its downward trend of the previous two months, rising 6.9 percent year on year. “Hydropower is not picking up fast enough to derail thermal power generation growth.”
4. Russia
Russia’s budget received more than $63.5 billion in additional revenues thanks to the production cut deal which boosted oil prices according to Kirill Dmitriev, chief executive of the Russian Direct Investment Fund. “Thanks to the work of President Putin with the King and Crown Prince of Saudi Arabia, relations are in a unique phase, and this gave great boost to the budget.” In February, Russia’s Energy Minister said that due to the higher oil prices Russia’s federal budget had received so far $27 billion more, while the oil companies earned a combined $11 billion more since the beginning of 2017. Oil and gas exports account for around 40 percent of Russia’s federal budget revenues.
Germany has been assured by the US that any sanctions imposed on Russia will not affect the building of Nord Stream 2 gas pipeline to Europe. “We have received assurances that gas pipeline projects will be excluded from the sanctions,” the government spokeswoman said during a regular government news conference.
5. Venezuela
Long-term pressures on the oil sector in Venezuela won’t be resolved anytime soon, so production woes are expected to continue, according to a country report from the US Energy Information Administration. The report says the Venezuelan oil industry has been mismanaged for decades. More recently, some of the workers at state-run oil company PDVSA have been jailed on corruption charges. “This has caused a near-complete paralysis at the company.” For the Venezuelan economy, oil revenue was $22 billion last year, compared with about $70 billion in 2011.
The government continues to say that Venezuela can boost crude output by 1 million b/d by the end of the year in its bid to recover lost production, but the oil minister admits that this goal would be “a challenge.” PDVSA notified 11 of its international customers last month that it wouldn’t be able to meet contractual obligations of 1.5 million b/d. According to S&P Global Platts, PDVSA had only 694,000 b/d available for shipments. As workers have fled the country, PDVSA has had a difficult time maintaining crude output, let alone boosting production
6. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: http://www.news.peak-oil.org )
CAPEX growing: Higher oil prices, lower offshore development costs, and improved gas demand outlook have made the oil and gas industry more confident in approving investment in new projects whose total worth has exceeded $110 billion since the beginning of 2017, research and consulting firm Rystad Energy said. After oil and gas projects worth just US$50 billion were approved in 2016, the industry has vastly accelerated the pace of approving investments for new projects over the past 18 months. (6/28)
French oil and gas company Total SA expects the global natural gas market to grow far faster than that for crude oil over the next two decades thanks to booming demand for the cleaner-burning fuel in Asia, an outlook that underpinned Total’s recent big investments in the space. Total expects to close a $1.5 billion acquisition of Engie SA’s liquefied natural gas assets in July, making it the second-biggest producer of the super-cooled gas in the world behind Royal Dutch Shell Plc. (6/26)
Saudi Aramco agreed to supply Egyptian refineries with crude oil for another six months from July, Egypt’s Petroleum Minister Tarek El Molla said on Tuesday. Aramco would supply 500,000 to one million barrels per month. (6/19)
New Zealand’s ban on new offshore oil and gas exploration could cost it billions in lost revenues, the head of the country’s oil and gas industry body Pepanz said, adding that interest in New Zealand oil and gas had begun to recover after the oil price slump right before the ban was introduced. (6/26)
Ethiopia began on Thursday, June 28th, its first-ever crude oil production under a test production scheme that will see initial production of 450 barrels of oil per day. Ethiopia also plans to start in September the construction of a pipeline that would export natural gas via Djibouti, Ethiopia’s neighbor to the northeast that lies on the Bab-el-Mandeb Strait; the pipeline should be completed in two years. (6/29)
In Uganda, at least four in every 10 oil and gas contracts will be awarded to Ugandans, the government said. A Cabinet meeting reached the decision at State House Entebbe on Monday. The policy will help boost the human resource capacity in the industry. The Local Content Policy for the Oil and Gas Industry in Uganda demands that companies awarded oil contracts start training locals in the next two weeks in readiness for oil production by 2021. (6/27)
Offshore Angola, Italian energy company Eni said it discovered oil in its Kalimba prospect. The company said the discovery holds between 230 million and 300 million barrels of oil. (6/27)
The Panama Canal Authority will boost the number of daily reserved transit slots available for LNG vessels starting October 1 and will make improvements that will allow it to increase the number again by 2022 as it looks to keep ahead of demand, especially from US exporters. (6/28)
Canada has the world’s third-largest crude oil reserves, but production growth is slowing, especially when compared to its southern neighbor. In the US the number of oil and gas rigs is increasing. In Canada, on the other hand, there has been an exodus of oil majors including Shell, ConocoPhillips, and Equinor, among others. In the US, capex in the oil industry is forecast by an Oil & Gas Journal poll to rise by 9.1 percent to US$132.5 billion this year. In Canada, total oil investment is seen falling by 2 percent to US$30.11 billion. (6/28)
The US oil rig count fell by four to 858 rigs, and the gas rig count fell by one to 187, according to Baker Hughes. Oil rigs declined for the second consecutive week and gas rigs were down for the fifth time in six weeks. The US oil rig count has stalled as increasing discounts for oil in the Permian Basin deter developers from adding more rigs.(6/28)
US natural gas production edged up to a fresh record high this week, largely due to gains in Texas, the Southeast, and the Appalachia region. Modeled US production surpassed 79.8 Bcf/d on Sunday. (6/28)
U.S. natural gas production from shale fields can keep growing for decades, giving Washington a powerful diplomatic tool to counter the geopolitical influence of other energy exporters such as Russia, industry executives and government officials said at a conference. Already the world’s largest gas producer, the US can expand shale gas output another 60 percent in the coming decades, according to at least one estimate. (6/28)
GE offloading BHI: When General Electric Co bought oilfield services giant Baker Hughes last July, it created a global industry colossus with $22 billion in annual revenue. GE promised to digitalize oilfields worldwide, marrying its expertise in big data, analytical software and subsea equipment with Baker Hughes’ experience in drilling services, chemicals, and tools. Less than a year later, GE is bailing out of the deal, planning to sell its 63 percent stake in the combined firm over time as part of a larger move to simplify its business and reduce debt. The retreat comes amid slipping market share, management missteps and culture clashes that have unsettled employees and frustrated suppliers and customers. (6/27)
President Trump on Wednesday ended an eight-year-old policy to protect oceans, which was created as hundreds of millions of gallons of oil spilled into the Gulf of Mexico from a broken well, covering more than 65,000 square miles, killing untold numbers of wildlife and devastating fisheries in several Gulf Coast states. (6/25)
Pipeline bypass? The US government should help the natural gas industry push back against opposition by environmental groups to pipeline projects by adopting new regulations or laws that favor infrastructure, backers of the industry said at a conference this week. Suppliers have had a difficult time in recent years getting shipments to some regions, including fuel-hungry New England, as environmental lawsuits by states, green groups and property owners have tied up pipeline construction. (6/29)
A federal judge on Monday threw out a closely watched lawsuit brought by two California cities against fossil fuel companies over the costs of dealing with climate change. The decision is a stinging defeat for the plaintiffs, San Francisco and Oakland, and raises warning flags for other local governments around the United States that have filed similar suits. (6/26)
U.S. nuke sunset? There are 99 nuclear reactors producing electricity in the US today (down from 112 back in 1990). Collectively, they’re responsible for producing about 20 percent of the electricity we use each year. But those reactors are aging. The average age of a nuclear power plant in this country is 38 years old (compared with 24 years old for a natural gas power plant). Some are shutting down. Twelve nuclear reactors have closed in the past 22 years. Another dozen have formally announced plans to close by 2025. New ones aren’t being built. Since 1996, only one plant has opened in the US — Tennessee’s Watts Bar Unit 2 in 2016. At least 10 other reactor projects have been canceled in the past decade. And the ones still operational can’t compete with other sources of power on price. Combine age and economic misfortune, and you get shuttered power plants. (6/26)
Coal/nuke push: US Energy Secretary Rick Perry said on Thursday that bailing out struggling coal and nuclear power plants is as important to national security as keeping the military strong and that the cost to Americans should not be an issue. The DOE is currently studying ways to bail out coal and nuclear facilities, including potentially by mandating grid operators to purchase power from them. Federal energy regulators rejected a previous effort by Perry to require them to subsidize nuclear and coal plants for providing “resilience” to the grid. (6/29)
Huge wind farm: Turkey said on Thursday that it would be accepting applications for the construction and operation of a 1,200-MW offshore wind farm— the world’s biggest —by October 23. Turkey’s Ministry of Energy and Natural Resources set the ceiling for the price of one megawatt-hour at US$8. (6/22)
Power transmission: A new study commissioned by EIA examines the role of high-voltage direct current (HVDC) lines in integrating renewables resources into the electric grid. The review indicates that, although applications in the current electric transmission network are limited, HVDC lines have a number of potential benefits including cost-effectiveness, lower electricity losses, and the ability to handle overloads and prevent cascading failures. These attributes mean that HVDC lines could if properly configured, help mitigate some operational issues associated with renewable generation. (6/29)
Battery R&D: Rechargeable lithium-ion batteries have one big problem that researchers are dedicating a lot of time to: their cathodes. Now, a team from the University of Maryland, the Brookhaven National Laboratory, and the US Army Research Lab claims to have made a breakthrough in solving the problem. Cathodes, unlike anodes, tend to have a very limited capacity; cathode materials are seen as the bottleneck to further improving the energy density of lithium-ion batteries. So the team set out to improve the energy density of the cathode by using an unlikely material: iron. (6/19)
H2 avenue? Army researchers have developed a novel, structurally-stable, aluminum-based nano galvanic alloy powder that, when combined with water or any water-based liquid, reacts to produce on-demand hydrogen for power generation at room temperature without chemicals, catalysts or externally supplied power. (6/25)
The South Korean government and businesses will invest some $2.33 billion over the next five years in a public-private partnership to speed up the development of the country’s hydrogen fuel cell vehicle ecosystem, according to the Ministry of Trade, Industry, and Energy (MOTIE). The target is to be able to install 310 hydrogen stations by 2022 to supply 16,000 fuel cell vehicles. The funds will be spent on building plants for fuel cell vehicles and fuel cell stacks, manufacturing fuel cell buses and developing hydrogen storage systems. (6/26)
India is suffering from the worst water crisis in its history and around 600 million people face a severe water shortage, according to a government think tank. Approximately 200,000 people die every year due to inadequate access to clean water and it’s “only going to get worse” as 21 cities are likely to run out of groundwater by 2020. (6/18)
Iraqi drought: Iraq has informed farmers of a ban on planting rice and other water-intensive crops in the face of increasing shortages because of drought and shrinking river flows. A letter from the Minister of Water Resources Hassan al-Janabi to Prime Minister Haider al-Abadi’s office showed the ministry had decided to exclude rice and corn from the government’s summer agriculture plan to prioritize drinking water, industry and vegetables. (6/19)
Art Berman: Think Oil Is Getting Expensive? You Ain't Seen Nothing Yet.
ChrisMartensondotcom
Published on May 29, 2018
Peak Oil Review: 18 June 2018
By Tom Whipple, Steve Andrews, originally published by ASPO-USA
https://www.resilience.org/stories/2018-06-18/peak-oil-review-18-june-2018/
Quote of the Week
“To the extent that developing countries aspire to reach motorization levels comparable to those in developed countries, the number of vehicles will likely continue to climb rapidly. We in the developed countries cannot successfully argue that the mobility afforded to us by personal vehicles is something to be curtailed in the developing countries for the benefit of us all. As a consequence, the required raw materials and energy will challenge our resources, and the resulting vehicle emissions will strain our ecological systems.”
Michael Sivak, former director of Sustainable Worldwide Transportation at the University of Michigan (6/12)
1. Oil and the Global Economy
Oil prices, which have been falling since mid-May, fell more than $2 on Friday to settle at $65.06 in the US and $73.44 in London. For now, the chief concern is that the OPEC + coalition will raise or lift the production cap this coming Friday and allow as much as another 1.5 million b/d of crude to enter the market. Additional pressure on oil prices is coming from the looming Sino-American trade war which could damage the global economy and lower the demand for oil. The announcement that Beijing might impose a hefty tariff on the 360,000 b/d of crude that the US has been sending to China in recent months did not help the situation nor did the continual increase in US shale oil production despite the bottleneck on getting crude out of the Permian Basin. While the renewed US sanctions on Iran may eventually reduce its ability to export oil, these sanctions do not start up until later this year so that it will be well into 2019 before we have some idea of their effectiveness.
The case for weaker oil prices in the next year or so rests on the rapid increase in US shale oil production. The EIA forecasts that the US will increase its oil production by another 80,000 b/d in June from a month earlier. In 2018, the US is on course to produce an average of 10.8 million b/d, and then increase production by a further 1 million b/d in 2019 to an average of 11.8 million b/d. The IEA says that oil demand will grow by 1.4 million b/d this year, but non-OPEC supply (mostly US shale) will increase by 2 million b/d. Roughly the same situation will obtain next year with a 1.4 million b/d growth in demand being offset by a 1.7 million increase in non-OPEC production. Toss in the likelihood that the OPEC+ production freeze will be ended by next year at the latest to offset any further losses of production from Venezuela and other struggling OPEC members and we would seem to have the global demand for oil pretty well satisfied until at least 2020.
The case for higher oil prices assumes that Venezuelan oil production will nearly cease in the next 18 months and that Libya and Nigeria will have trouble maintaining production due to endemic insurgencies. The end of the OPEC production freeze may not mean that the full 1.8 million b/d returns to the market. Moreover, the bottleneck problems in the Permian Basin may become so severe and the value of Permian shale so low that the rapid increases in production that are forecast for the next 18 months may not come to pass. In which case, oil prices would likely surpass recent highs.
The OPEC Production Cut: Based on announcements from Moscow and Riyadh, the markets are assuming that the OPEC+ consortium will increase oil production this week: however, the exact amount is still unknown. A glance at the OPEC production charts shows that OPEC is dividing into two factions. For nine of the 14 OPEC members oil production is trending down and is unlikely to revive soon, if ever. For these countries, increasing production is impossible, and the only hope for higher revenues is a substantial price increase, hopefully back into three figures. These countries want the Saudis and the other Gulf Arabs who have plenty of oil to keep production low as they are doing the bulk of the production cutting.
The better-off oil exporters, namely Russia, the Saudis, Kuwait, the UAE and Iraq which can increase oil production significantly have a different agenda. They realize that much higher prices would likely bring more US shale oil the markets and slow demand and see balanced markets and moderate prices in the $60-80 range as a medium-term solution to maximize revenues.
While the meeting this week is likely to be contentious, there are several possibilities as to the outcome. A small production increase of circa 500,000-600,000 b/d would offset Venezuela’s imminent collapse and would leave the markets at status quo. Russia and the Saudis seem to be pushing for a larger increase of circa 500,000 b/d immediately and another 500,000 later this year. This could offset losses from Venezuela, Iran, and from stronger demand, leaving the markets balanced. The final possibility would come if Moscow and Riyadh succumb to the demands of the majority of members and allow only small increases in production. This could result in higher prices.
The most interesting recent development is that Saudi Arabia plans to host a leaders’ oil summit later this year for OPEC and non-OPEC countries participating in a supply cut pact. This is suggesting that OPEC, which has been around for nearly 60 years, may no longer be a meaningful way to manipulate the oil market. An informal arrangement between Moscow and its vassals in the former Soviet Union and the Saudis and their Arab friends along the Gulf could become more important in determining oil prices and production levels in coming years.
Another interesting development is that India and China are considering forming an “oil buyers” club to negotiate jointly for better prices with oil exporting countries including the growing US oil export market. Between them, India and China currently are importing some 13-14 million b/d which is larger than the EU at 11.6 million b/d and the US at 7.9 million.
US Shale Oil Production: The bulk of the record 10.9 million b/d produced last week came from the Permian Basin. This crude typically goes to the Gulf Coast for refining or export, but those pipelines are full. Thus more oil is going to the storage hub at Cushing, Okla. where US futures are priced. As a result, northbound pipelines also are nearing capacity. Cushing inventories seem likely to rise as there is no end in sight to the increase in Permian production and it will be some 18 months before new pipelines to the Gulf are open. This situation could further widen the price differential between West Texas Intermediate and Brent crudes. This gap reached $10.25 last Thursday but closed at $8.38 on Friday. New York futures are down 8 percent from their 2018 high while Brent slipped about 5 percent from its peak.
For the week ending June 1, pipeline utilization from Cushing to the Gulf Coast was about 92 percent, compared with about 89 percent and 88 percent in April and May, respectively. So far, however, a buildup has not taken place at Cushing as Midwest refiners process record amounts of crude to meet summer demand. Last week, inventories there fell 687,000 barrels to 33.9 million barrels.
Many of the largest US shale oil producers are missing out on the rally in oil prices to $65-70 a barrel – because they sold their oil through futures contracts at about $55 last year when that looked like a good deal. The sale of hedged barrels at $10-15 below what they could have brought will hold down revenues and frustrate Wall Street investors, who have been disappointed by slow returns from the Permian boom. The top 25 shale producers will forego about $1.7 billion in combined revenues in the second quarter due to premature hedging. Another problem is the discount for oil sold in Midland, Texas relative to Houston has surpassed $10 per barrel. Given the various discounts and problems from the bottleneck, many drillers are not doing as well as could be expected from the recent price increases.
The most recent data for the Permian Basin suggests that the enormous gains in productivity may have started to flatten out said Spencer Dale, BP’s Group chief economist, at the presentation of the BP’s annual Statistical Review of World Energy. According to the most recent data about the Permian ‘initial output per rig’ fell sharply in the second half of 2016 and the first half of 2017, before recovering somewhat in the second half of last year. Much of the fall in this measure of productivity was driven by a sharp decline in the rate at which drilled wells were fracked and completed rather than by a fall in the underlying productivity of the wells drilled. “It is perhaps not surprising that as US tight oil output has increased rapidly, causing production to spread out from the sweetest spots, productivity has begun to flatten out,” Dale said. This measure of productivity doesn’t link directly to profitability, if the cost of drilling continues to fall or if acreage is drilled more intensely. But it does suggest that the very rapid increases in tight oil productivity that characterized much of the initial phase of the shale revolution may be beginning to fade.
2. The Middle East & North Africa
Iran: Most of the news last week dealt with Tehran’s maneuvering to prevent the OPEC+ meeting this Friday from increasing production. The Iranians are also asking the meeting to help thwart Washington’s plans to slow their oil exports. It is in Iran’s interest to keep oil prices moving higher as it is unlikely to be increasing exports significantly in the next year or so. Saudi Arabia and Russia say they are prepared to pump more to calm consumer worries about supply and prices, which recently hit $80 a barrel, the highest since 2014.
Tehran continues to make efforts to mitigate the impact the US sanctions will have on its economy. India’s largest bank told local refiners last week that it will no longer handle payments for oil imports from Iran beginning in November. Refiners in India currently use the State Bank of India and the Germany-based Europaeisch-Iranische Handelsbank to purchase oil from Iran in euros. “Once the current payment channel is blocked, Iran has to decide if it wants to trade with us in rupees or sell oil on credit in anticipation of channels re-opening in the future.” Tehran announced last week that agreements were made with China to use their national currencies for trade. In April, the Central Bank of Iran opened a line of credit with Turkey that could give Iran a way to continue trading.
Iran announced a new project to improve its oil output within three years. The plan is to up the output from 29 existing oilfields with the bulk of the work to increase output carried out by Iranian companies using mostly Iranian equipment. This announcement suggests that Tehran is concerned that the US sanctions will throttle foreign investment in Iran and delay increases in oil production.
Iraq: Oil production in May rose to its highest level so far this year, with the combined production of the federal government in the south and the autonomous Kurdistan Regional Government in the north producing 4.59 million b/d. Baghdad says it will look at whether to increase oil output if OPEC decides to lift production at the meeting on June 22. The country’s oil minister said last Monday that Iraq’s current oil output was within the agreed limit with OPEC at around 4.325 million b/d. However, the field by field analysis shows higher production than the government is claiming.
Baghdad, along with Tehran, continues to maintain that OPEC and allies should not bow to the pressure to increase production to offset supply disruptions. Oil Minister al-Luiebi “rejects unilateral decisions by some oil producers without consulting the rest of the members.
Saudi Arabia: In addition to taking the lead to raise the OPEC+ production cap, there were several announcements from Riyadh last week of long-term significance. The Saudis plan to boost investments in refining and petrochemicals to secure new markets for its crude and sees growth in chemicals as central to its downstream strategy to lessen the risk of a slowdown in oil demand. Aramco is moving ahead with multi-billion-dollar projects in China, India, and Malaysia. The company has entered a 50 percent joint venture with three Indian refiners to build a $44 billion, 1.2-million-b/d refinery integrated with petrochemical facilities on India’s west coast. These investments would raise Aramco’s refining capacity to between 8 million and 10 million b/d from its current 5 million b/d, and double its petrochemicals production by 2030.
Saudi Aramco is restructuring its non-oil businesses into subsidiaries and possible spin-offs as it attempts to streamline operations and achieve a higher valuation for its profitable core oil business ahead of the IPO. The company has set up a new subsidiary to manage its multi-billion dollar pension fund unit and the retirement fund. Other restructurings include spin-offs of the aviation and the healthcare divisions by either forming joint ventures or bringing other companies to operate the aviation fleet. The Saudis have been using Aramco as an investment vehicle in undertaking government projects such as building schools and infrastructure. This practice detracts from the company’s IPO value as it is not using money and other resources efficiently for the benefit of shareholders.
Libya: The major Libyan oil ports of Ras Lanuf and Es Sider were closed and evacuated last Thursday due to attacks by armed brigades opposed to eastern government commander Khalifa Haftar. At least two large storage tanks at Ras Lanuf terminal containing some 440,000 barrels of crude were set alight, and fighting continued through the weekend.
Haftar’s forces took control of Es Sider and Ras Lanuf along with other oil ports in Libya’s oil crescent in 2016, allowing them to reopen after a prolonged blockade and significantly lifting Libya’s oil production. More than half the storage tanks at both terminals were badly damaged in the previous fighting and have yet to be repaired, though there have been regular loadings from Es Sider. Libya’s National Oil Corporation said it had evacuated all staff from the two terminals “as a precautionary measure.”
The immediate production loss was around 240,000 barrels, and a tanker due at Es Sider on Thursday was postponed. NOC Chairman Mustafa Sanalla noted that the loss of output could rise to 400,000 b/d if the shutdown continued, calling it a “national disaster” for oil-dependent Libya. A loss of this size has significance on the global scale and will contribute to the decision to change the OPEC+ production cap later this week.
3. China
Beijing announced on Friday that it would retaliate against new US tariffs on $50bn in Chinese imports that will go into effect within days. This action takes the world’s two largest economies to the brink of a full-scale trade war. The new American import duties, aimed at forcing Beijing to stop what the White House claims has been systematic theft of US intellectual property, will apply to products ranging from cars and helicopters to bulldozers and industrial tools and machinery. In response, China’s finance ministry said it would begin imposing its own 25 percent tariffs on 545 categories of US products worth $34bn including soybeans, beef, whiskey and off-road vehicles on July 6. It also threatened to add a further $16 billion later, targeting US energy exports such as coal and crude oil. The tariffs on energy came as a surprise as China has risen to the top of the list of importers of oil from the US.
As Iran’s top oil consumer, China will likely attempt to evade sanctions that the US has re-imposed on Tehran, but ongoing trade disputes and diplomatic talks could motivate Beijing into limited compliance. “I do think the Chinese are going to evade US sanctions and even just ignore some of them,” said Richard Nephew, a principal deputy coordinator for sanctions policy at the State Department during the Obama administration. “But, depending on how North Korea and other trade issues are going, they may (I must emphasize, may) throw a few bones to the Trump Administration by reducing a small number of purchases, cooperating on a handful of evasion cases, etc.” Another former State Department official said that China would not cooperate with re-imposed sanctions unless they got a “big concession” from the Trump administration.
Chinese refineries processed a daily average of around 12.37 million barrels in May. This is an 8.2-percent annual increase. Over the first five months of 2018, refinery throughput stood at an average 12.2 million b/d. So far this year, China—along with India—has 69 percent of the forecast growth in crude oil demand. Independent refiners, commonly called teapots, were instrumental for this increase as they received higher import quotas from Beijing. But with rising oil prices this year, teapots found their margins squeezed lower and additionally pressured by the tax reform and stricter enforcement of crude oil taxes across the country.
4. Russia
Moscow plans to propose to the OPEC+ meeting this week that they reverse the group’s production to the October 2016 levels—the baseline for the cuts of most pact participants when they had pumped as much oil as they could to blunt the cuts’ impact. Moscow will propose that OPEC and its Russia-led non-OPEC partners in the deal increase their combined production by 1.8 million b/d, starting as early as July. Yet, even with the 1.8 million-b/d production rollback, the total OPEC/non-OPEC level would still be around 1 million b/d below the October 2016 levels. Some producers, such as Saudi Arabia, have cut more than intended. Other countries, most notably Venezuela, have seen involuntary production declines and are unable to lift production.
A major tax overhaul for Russia’s oil industry is about to start pressuring the earnings of major oil companies. Refiners will be hit hardest as the overhaul will increase the tax burden on downstream operations while the upstream sector will see taxes shift from production-based to profit-based. Last week, the Finance and Energy Ministries announced that they had agreed with oil companies to begin phasing out oil export duties by 5 percent annually over the next six years, from 30 percent now to zero in 2023. The producers are happy about this: the taxes—along with a so-called mineral resource tax based on production size—will be replaced by a profit-based tax that, oil companies say, will stimulate investments in production expansion.
5. Venezuela
Venezuela’s oil production fell again in May by 42,500 b/d to 1.392 million b/d according to OPEC’s secondary sources The EIA says Venezuelan production was 1.43 million b/d last month, down from 1.46 million in April and 1.98 million b/d in May of last year. The EIA’s specialist on Venezuela expects Venezuela’s production to fall to 1 million b/d in the second quarter of 2019 but is waiting to see June export numbers from Venezuela. If exports are lower than expected, Venezuelan production could sink to 1 million b/ d even sooner. The International Energy Agency forecasts that Venezuela’s oil production could drop to 800,000 b/d or even lower.
The New York Times reports that thousands of workers are fleeing PDVSA, abandoning jobs made worthless by the worst inflation in the world. Desperate oil workers and criminals are stripping the oil company of vital equipment, vehicles, pumps and copper wiring, carrying off whatever they can to make money. Offices at the state oil company are emptying out, crews in the field are at half strength, pickup trucks are stolen and materials vanish.
Platts reported last week that Venezuela has already warned eight international customers that it wouldn’t be able to meet its crude oil commitments to them in June. PDVSA is contractually obligated to supply 1.495 million barrels per day to those customers in June, but only has 694,000 barrels per day available for export. Venezuela is considering refining foreign crude for the first time to produce gasoline or diesel. PDVSA has drawn up a plan to process up to 57,000 b/d of foreign crude in June at the country’s largest refinery to fulfill export contracts and reduce purchases of fuels for domestic use.
All this suggests that Venezuela’s exports could easily be close to zero sometime next year.
6. The Briefs (selections from the press – date of article in Peak Oil News is in parentheses – see more here: news.peak-oil.org)
?Vehicle overload: The world first reached the 10-million-vehicle level in the world in 1920, about 34 years after the first motor vehicle appeared on the road. From that level, a 10-fold increase to 100 million vehicles was reached by 1956, 36 years later. The next 10-fold increase took an additional 44 years. By 2010, we were at 1 billion vehicles. By 2015, there were 1.3 billion vehicles. (6/13)
Europe’s liquefied natural gas imports have surged sixteen percent (from 40.9 bcm in 2016 to 47.4 bcm in 2017) to become the third largest source of gas supply after Russia and Norway. The re-emergence of Europe as a major LNG market came after years of coal and nuclear power plant retirements as well as steep declines in the Netherlands largest gas field. (6/15)
Europe’s floating oil storage: While many analysts and agencies have already called the end of the global oil glut, oil held in floating storage in Europe is at an at least 18-month-high, also due to the booming US oil exports that have displaced some of the traditional crude oil routes in the world. Oil in ships around European shores was 12.9 million barrels on average in May, accounting for 26 percent of all global floating storage. (6/14)
A European economy that’s self-sufficient in energy and low-carbon could be shielded against the shock of higher crude oil prices, an Irish minister said. Minister Denis Naughten told European energy ministers in Luxembourg that the European economy should break its link to oil in order to ensure long-term sustainability. (6/12)
In the UK, some 30% of the natural gas fueling the nation’s homes and businesses could be replaced by hydrogen without requiring any changes to the nation’s boilers and ovens, a study by Swansea University researchers has shown. (6/11)
Russia could be collaborating with Seoul on the construction of a natural gas pipeline through North Korean territory, a Gazprom official said Friday. South Korean officials hinted earlier this year that a thaw in tensions on the Korean Peninsula could open the door to the construction of a Russian gas pipeline through North Korea. (6/16)
Offshore Australia, Royal Dutch Shell has introduced gas to its 490 meter (1,600 ft) long Prelude floating liquefied natural gas (FLNG) unit as part of the cooling process before start-up. The Shell spokeswoman declined to comment on the estimated start-up date but reiterated that the oil major expects to get cash flow from Prelude in 2018. (6/13)
Egypt raised gasoline prices by up to 50 percent, the oil ministry said on Saturday, under an IMF reform plan that calls for the slashing of state subsidies on some consumer products. The price hike, the third since Egypt floated the pound currency in November 2016, is expected to add more pressure on Egyptian consumers struggling to make ends meet amid high unemployment and price volatility. (6/16)
In Kenya, six years after British firm Tullow Oil announced that it had struck oil in Kenya, four tanker trucks, each carrying 156 barrels arrived in Mombasa on Thursday. It is East Africa’s first commercial oil. Transportation of the early oil by road will cost $15 million. It takes each truck ten days to complete a round trip. At least 2,000 barrels of crude is expected to be transported every day from the Lokichar oilfields to the refinery, where they will be stored. Exports will begin once 400,000 barrels arrive at the facility. (6/16)
Nigeria and Morocco on Monday signed three agreements, which includes a regional gas pipeline that will see Nigeria providing gas to countries in West Africa sub-region that extend to Morocco and Europe. (6/12)
For Angola, economic recovery for Angola, an OPEC member coping with declining production, is progressing but it’s still uncertain over the long term, the International Monetary Fund found. (6/13)
In Brazil, Equinor, formerly known as Statoil, said Friday it completed a transaction with Brazilian company Petrobras for a 25 percent stake in the Roncador oil field in the Campos basin off the Brazilian coast. Announced in December, the $2 billion deal included $550 million in contingent payments for projects meant to boost field recovery. Through the deal, Equinor increases its equity production in Brazil from around 40,000 barrels of oil equivalent per day to around 100,000 boe per day. (6/16)
Offshore Cuba, new data taken from an oil reservoir on the northern coast confirm the assessment of a highly prospective site, Australia’s Melbana Energy announced. Melbana said a new study of the reserves in the Zapato prospect inside so-called Block 9 confirms its interpretation of a 71 million barrel reservoir. (6/13)
The US oil rig count increased by one this week to 863, General Electric Co’s Baker Hughes energy services firm said Friday. It was the 10th time in the last 11 weeks that oil drillers added rigs, although the increases have slowed in June to roughly one a week. At the same time, the gas rig count declined by four. So far this year, the total number of oil and gas rigs active in the United States has averaged 999, up sharply from 2017’s average of 876. (6/16)
In Alaska, oil production from the Alaskan National Wildlife Refuge (ANWR) won’t take place for another decade at least, and domestic needs by then are uncertain, a federal report found. Murkowski’s office said the 1002 Area is a non-wilderness portion of the refuge and her provision carved out only a “small portion” of the acreage for oil and gas drilling. The area in question represents about 8 percent of total ANWR acreage. (6/16)
The US exported 186,000 b/d of jet fuel in 2017, the eleventh consecutive year of increasing gross jet fuel exports. Almost two-thirds of US jet fuel exports went to countries in Latin America and the Caribbean. (6/14)
The Permian, Marcellus and Utica shale plays will supply 55 percent of the North American gas market by 2030. That’s the forecast of McKinsey Energy Insights in their latest report “North America Gas Outlook to 2030.” (6/15)
Gas storage low: The NYMEX July natural gas futures contract rose Monday on concerns about storage tightness. Inventories sit at 1.817 Tcf, a 30.5% deficit to year-ago levels of 2.616 Tcf and a 22% deficit to the five-year average of 2.329 Tcf, according to EIA data. (6/12)
Nuke/coal plan: A plan requested by US President Donald Trump to prevent struggling nuclear and coal power plants from shutting is still being “fleshed out” by the US Department of Energy and the White House, Energy Secretary Rick Perry said on Friday. What would amount to an unprecedented intervention in US power markets has drawn a backlash from environmentalists as well as oil, gas and renewable energy companies. (6/16)
Carbon capture with a twist: President Trump’s plan to revive failing power plants with mandatory purchases has proven divisive. The latest pro-coal-and-nuke episode features a new twist, though: some of the angriest pushback has come from the same conservative base that usually lambasts progressives and environmentalists over climate change. As it turns out, there is at least one major area of agreement among those divergent groups: investing in and developing carbon capture technologies. (6/11)
New solar generation capacity in the U.S. hit 55 percent of total new generation capacity additions in the first quarter of the year, despite the tariffs on imported PV panels that worried the industry, a study by the Solar Energy Industries Association and GTM Research revealed. At 2.5 GW new solar additions were up an impressive 13 percent on the year. (6/15)
In sunny Texas, German utility E.ON said Tuesday it was making its solar energy debut with plans for a 100-megawatt facility in Reeves County in the western region of the state. (6/13)
Global spending on renewable energy is outpacing investment in electricity from coal, natural gas and nuclear power plants, driven by falling costs of producing wind and solar power. More than half of the power-generating capacity added around the world in recent years has been in renewable sources such as wind and solar, according to the IEA. In 2016, about $297 billion was spent on renewables—more than twice the $143 billion spent on new nuclear, coal, gas and fuel oil power plants, according to the IEA. The Paris-based organization projects renewables will make up 56% of net generating capacity added through 2025. (6/12)
The European Commission said it was setting a new bar for renewable energy use with a 32 percent target for 2030, with additional consideration for further revisions in 2023. The governing body said this step puts more strength behind European President Jean-Claude Juncker’s ambition for Europe to become the world leader in renewable energy use. (6/15)
Floating wind farm: Norway’s Petroleum and Energy Minister Terje Søviknes will meet next week with companies and other stakeholders to discuss the potential construction of offshore floating wind farms in Norwegian waters. The floating offshore wind parks are not fixed to the seabed and can be installed in deeper waters. (6/16)
Solar Vietnam? As China tightens the noose over Vietnam’s ability to drill for oil and gas in its own UN-mandated 200-nautical mile Exclusive Economic Zone, the country is turning to solar energy and other renewables to make up for lost ground. Over the weekend, Singapore-based Sunseap Group broke ground on Vietnam’s largest solar farm, a 168-MW project. (6/13)
EV issue: The growing adoption of electric vehicles is expected to cost Germany’s key auto industry about 75,000 jobs by 2030, a study released Tuesday shows, with parts suppliers set to suffer the most. Germany’s car industry currently employs about 840,000 people, with 210,000 of them working on powertrain production, the sub-sector set to be the worst hit. (6/11)
E-buses: The Toronto Transit Commission, the third largest transit agency in North America and the most heavily used system in all of Canada, purchased ten Proterra Catalyst E2 buses in support of the transit agency’s goal to convert its entire fleet of 1,926 buses to zero-emission buses by 2040. Canada has around 24,000 public transit buses in circulation, and around 2,000 buses turn over each year. (6/16)
More E-buses: The Chicago Transit Board awarded a $32-million contract to Proterra for the purchase of 20 new, all-electric buses. The new electric buses will give the CTA one of the largest electric bus fleets in the country. CTA has been testing two electric buses since 2014. (6/15)
Antarctica’s melt is speeding up. The rate at which Antarctica is losing ice has more than doubled since 2012, according to the latest available data. Between 60 and 90 percent of the world’s fresh water is frozen in the ice sheets of Antarctica, a continent roughly the size of the United States and Mexico combined. If all that ice melted, it would be enough to raise the world’s sea levels by roughly 200 feet. (6/14)
Peak Oil Review: 11 June 2018
By Tom Whipple, originally published by ASPO-USA
Editors: Tom Whipple, Steve Andrews
https://www.resilience.org/stories/2018-06-11/peak-oil-review-11-june-2018/
Quote of the Week
“Climate change is a global problem with grave implications: environmental, social, economic, political and for the distribution of goods.”
Pope Francis, who will meet with Big Oil execs the week of June 11, from a 2015 statement
1. Oil and the Global Economy
Oil futures traded in a narrow range last week, at circa $65 a barrel in New York, and $76 in London. The standoff between higher and lower oil prices continues apace. Those saying that prices will soon be higher are looking at the rapid decline of Venezuela’s oil production; the damage to Iran’s oil exports that could come from the new US sanctions; and the mounting obstacles to further rapid increases in US shale oil production. Those seeing lower prices ahead are citing the likelihood that OPEC+ will increase production later this month and the dangers to global demand stemming from the possible trade wars.
Of all the potential developments affecting oil prices, the Venezuelan situation seems the most serious. Reports from Caracas suggest that crude exports could fall well below 1 million b/d this month offsetting any increase in OPEC production that could be expected in the near future. While Russia and the Gulf Arab states are in a position to increase oil production, most of the other adherents to OPEC’s production freeze agreement are not. Indeed, much of the “OPEC” production cut has come from the faltering Venezuelan oil industry helped along by production problems in Nigeria and Angola.
The OPEC Production Cut:
The meeting in Vienna on June 22nd between OPEC and non-OPEC oil producers is shaping up to be one of the most controversial OPEC meetings ever as competing interests debate whether to lift all or part of the production freeze before the end of the year. While the coalition leaders, Russia and Saudi Arabia, seem willing and able to increase production immediately, other oil exporters, without the ability to raise production significantly, would like to see oil prices rise much further.
Other cross currents will be at play. Iran, which is facing new sanctions designed to limit its oil exports in the fall, is demanding that the meeting discuss the sanctions and take steps to protect Tehran. The conflict between Iran and the Arab oil producers over Tehran’s intervention in regional conflicts is part of the equation as are the interests of the US, Russia, and China. The fight between Qatar and the Saudis is back on the table with Riyadh threatening their neighbor if it purchases Russia’s S-400 anti-aircraft missile system.
Some countries are satisfied with world oil prices back in the mid-$70s realizing that if oil goes much higher, there will be demand destruction and more incentives for the US shale oil industry to step up production. Others feel that higher prices will not hurt demand and that increased revenues are the best hope for a prosperous future. Few oil exporters have expressed much concern about the prospects for global warming.
In the background is the realization that the new alliance between Russia and the Saudis, which between them produce around 20 million barrels of crude a day, has come to control the oil markets. In comparison to the two giant producers, the interests of other members no longer count. While the two countries found common ground when it came to eliminating the global oil glut, they are divided by many other issues, so the future of this alliance is not solid.
US Shale Oil Production: Problems keep arising for oil producers in the Permian Basin. In addition to a shortage of pipeline capacity to move the production from newly drilled oil and gas wells to market, we now have a severe labor shortage in West Texas. To attract new workers, drillers are now offering 100 percent pay hikes to people living in the region. The need for truck drivers (it takes 1000 truckloads of supplies to drill and frack a well) has denuded surrounding counties of everyone with a commercial driver’s license. New workers are given crash courses at local community colleges and sent into the field to drill and frack new wells.
According to Rigzone, shipping constraints from the Permian Basin are costing drillers more than $1 billion a day. Eight of the Permian’s “pure-play” drillers lost $15.6 billion in combined market value in the 15 days through last Tuesday, as shipping constraints eat up the profits they make due to lower local prices and delays in moving oil to market. Last Wednesday, oil in Midland, Texas, was trading for about $19 a barrel below Brent crude, the global benchmark price.
Currently, the pipelines taking natural gas from the Permian are 98 percent full, so there is a serious problem about what to do with the gas coming from new wells. The Railroad Commission of Texas is considering whether to keep the strict gas flaring limits or to loosen them. The Commission issues flare permits for 45 days at a time, for a maximum limit of 180 days. if the Commission keeps the current flaring limits intact, some producers may be forced to shut wells because the limit for individual oil well flaring is a maximum of 45 days—after which drillers must either pipe the gas or shut the well.
If the limits are loosened, it would hurt air quality, increase environmental protests, and possibly invite lawsuits. According to the Environmental Defense Fund, a Clean Air Task Force report has ranked seven counties in Permian Basin in the top 10 worst U.S. counties for asthma attacks. The Permian natural gas glut also is depressing prices in West Texas, where spot prices have fallen 49 percent so far this year, to $2.03 per million BTUs.
Industry representatives still maintain that the best years for the Permian Basin are still ahead and that new pipelines will eliminate the bottlenecks in a year or two. The greater Permian Basin currently produces around 3.64 million b/d of crude oil, which is projected to jump to 4.49 million b/d by the end of the year and 5.42 million b/d by the end of 2019. Major oil companies — Chevron, ExxonMobil, and Shell — are just starting to get into the Permian, These three companies alone are expected to achieve a combined production growth in the basin of over 600,000 b/d of oil equivalent in the next year and a half.
2. The Middle East & North Africa
Most of the news this week has been about the impending US sanctions on Iran and preparations for the OPEC meeting later this month.
Iran: Tehran is becoming increasingly concerned about what will happen to its economy when the US sanctions fully set in and spent last week issuing a stream of threats, accusations, and bluster. Supreme leader Khamenei said he had ordered preparations to increase uranium enrichment capacity if a nuclear deal falls apart and he vowed never to accept limits on Tehran’s ballistic missile program. According to Iran’s OPEC governor Ardebili oil prices could jump to $140 a barrel due to the US sanctions against Iran and Venezuela.
Although the European Union has vowed to maintain the Iran nuclear deal despite the US decision, EU efforts to broker a settlement are making little progress. Last week the CEO of Total which has a massive natural gas development project in Iran, said that the chances of a US waiver to continue the project are very slim. The Saudis are helping Total’s withdrawal from Iran along by signing a $44 billion joint venture between Aramco and Total for a development project in India.
The US Treasury has advised businesses to begin unwinding their business in Iran immediately, and European refiners are starting to slow purchases from Iran after tanker providers, insurers, and banks began avoiding becoming involved in deals with Iran for fear of exposing themselves to secondary US sanctions. Unless it gains an exemption SWIFT, the Society for Worldwide Interbank Financial Telecommunication will be required by the US to cut off targeted Iranian banks from its network by early November or face possible countermeasures against both its board members and the financial institutions that employ them. This could have a devasting impact on Iran later this year as much of its international economic activity passes through SWIFT.
Iraq: Crude exports rose nearly 5 percent last month, from 3.62 million b/d in April to 3.8 million in May, as tanker loading rates increased from Iraq’s southern terminals and Turkey’s Ceyhan terminal. Revenue from the crude sales averaged $69.93 per barrel, a nearly 8 percent increase from April, earning a total of $7.56 billion in May.
Iraq’s parliament retroactively amended Iraq’s election law last week to require a full manual recount of the May 12 voting results. The legislation also calls for removing the leaders of the Independent High Electoral Commission, which is responsible for administering the election, and replacing them with a judicial panel. This development adds a new uncertainty to the volatile political landscape and will postpone indefinitely essential decisions about the further development of the country’s oil resources. Some newly elected Iraqi lawmakers, linked with Shiite cleric Moqtada al-Sadr, are not sure that Baghdad’s participation in the OPEC production cut is good for Iraq. This only adds to calls to close down the agreement before the end of the year.
The Oil Ministry is denying that it has activated an agreement to export crude oil from Kirkuk to Iran, even though several Iraqi officials and an Iranian state news outlet say tanker trucks have crossed the border. “We have a deal with Iran, but so far we are still making preparations.”
Saudi Arabia: Riyadh has started increasing oil production again after two years of curtailed production. Last month, production increased by 100,000 b/d which is small in comparison with total production, but the move sends a message that the kingdom is ready to make changes to the OPEC+ production freeze later this month. Tanker trackers say that Saudi exports were up by 300,000 b/d last month as Riyadh came under pressure from Washington to increase production to keep rising US gasoline prices under control before the US mid-term elections. Rapidly falling Venezuelan production has resulted in OPEC producing about 700,000 b/d less oil than envisioned under the agreement.
A day before President Trump withdrew from the Iran nuclear deal a US senior official phoned the Saudis to ask that it help to keep prices stable if Washington’s move disrupted supply. Until the phone call, Saudi officials had been saying it was too early to raise output. In the past, the Saudis have been reluctant to raise output in response to US requests. Now with the Iran confrontation going full steam, Riyadh may be more willing to cooperate with Washington’s needs.
Saudi Aramco is restructuring its non-oil businesses with the aim of streamlining the business to make its shares more attractive to investors and achieve a higher valuation for its shares. In the past Aramco has been involved in many government social projects which have diverted personnel and assets from its core business.
There was disturbing news out of the kingdom concerning dissension in the royal family. Dozens of important Saudis are in jail and many more are barred from leaving the country. While Crown Prince bin Salman has gone further than any of his predecessors to relax the kingdom’s strict social rules, he is also overseeing a ruthless crackdown on perceived dissenters. Last week there was a report, which has not been confirmed by any mainstream media outlet, about a recent shootout in a royal palace between rival family members and their bodyguards that resulted in the death of senior officials. If true, not only have Saudis done a remarkable job of covering up the incident, but it shows there are deep divisions among the 15,000 members and the 2,000 elite members of the Saudi royal family that runs the country. A civil war between factions of the royal family would obviously have serious consequences for oil exports and the global economy.
3. China
The US and China remain on course to open a $100 billion trade war later this month after the third round of negotiations ended in failure. President Trump said he would implement previously threatened tariffs on $50 billion worth of Chinese industrial exports “shortly” after June 15th and Beijing promised to reciprocate. Widening price discounts have boosted the attractiveness of US oil exports to China, but Beijing may hold off on US oil imports in retaliation for the new US tariffs despite their increasing need for fuel imports.
In the meantime, Beijing continues to import oil and other fuels at a healthy pace. China’s May crude oil imports of 9.2 million b/d were slightly less than the record high of 9.6 million hit the month before. The year-to-date oil imports, however, represent an increase of 7.8 percent over a year earlier.
China’s coal imports in May were almost unchanged at 22 million tons from last year as tight government policies kept a lid on foreign coal buying. The Trump administration is hoping that China may soon be buying a lot more coal from the US as part of a larger plan to narrow the merchandise trade deficit with Washington of $375 billion. The administration would like to see the coal come from West Virginia, but at last report, there is not much coal left there to mine in the quantities needed to make a dent in the trade deficit.
Concerns are rising about the size of China’s corporate and consumer debt. Fitch Ratings Service recently pointed out that Beijing’s ratio of corporate debt to GDP was very high last year at 168 percent. Since the 2008 economic crisis, Beijing has followed a loose monetary policy and made trillions of dollars’ worth of loans to keep economic growth going. Now that government efforts are underway to rein in these excessive debt levels, Fitch believes that a debt crackdown could be a major risk to the country’s economic growth and have significant effect for the global economy, including oil imports.
4. Russia
President Putin said last week that higher oil prices were putting Russia’s economy on more solid ground. Although growth is still slow, it’s sustainable, and inflation is low,. Investments in the Russian economy, meanwhile, are up 4.4 percent from last year. Putin has pushed a theme of recovery this year. Growth in Russia’s GDP is forecast at 1.8 percent this year, compared with 1.5 percent in 2017. By contrast, the US economy is expected to grow by 2.7 percent this year, according to OPEC economists.
Moscow’s energy and finance ministries agreed with oil companies to start cutting the export duty on crude to bring it from the current 30 percent to zero over the next six years. The duty will be cut by 5 percent annually over the period, as part of a wider tax reform that seeks to replace the export duties and mineral resources extraction taxes with a tax based on the profits that oil companies in Russia make.
Gazprom said it received the necessary permit to advance construction of the Nord Stream 2 gas pipeline through Swedish waters and that “this is an important milestone for our project.” The major impediment to the project still is Denmark’s reluctance to give the Russians a permit as Europe would become even more dependent on Russian energy that would be delivered through a new Moscow-controlled pipeline.
Last week Ukraine’s Naftogaz said that a Dutch court had approved its petition to freeze Gazprom assets in the Netherlands. Ukraine is seeking to enforce the payment of the $2.6 billion award it was handed by an arbitration court earlier this year over the payment dispute with Gazprom. Actions like this will certainly inspire Moscow to push hard on getting Nordstream 2 into operation.
In the long run, Gazprom will likely get its permit as Europe has few choices for sources of natural gas. While there is a lot of LNG around these days, that pace at which China is buying it up to clean up its air will likely preclude the EU ever being in a position to replace the bulk of its need for natural gas with LNG.
5. Nigeria
With the introduction of amnesty and training for youths in the Niger Delta, expectations were high that the development would result in an end to vandalism, oil theft, and illegal refining. But this has not been the case. Nigeria has managed to restore its oil production to around 1.8 million b/d, following a series of militant attacks on oil infrastructure in 2016. However, sabotage in parts of the Niger Delta continues to plague its oil production and the oil majors operating there.
Facilities operated by indigenous and international oil companies continue to be vandalized by attacks and other illegal activities such as crude-oil theft. Crude oil theft resulted in losses of around 9,000 b/d in 2017, more than the 6,000 b/d lost in 2016, but less than the rate of 25,000-b/d loss in 2015, Shell said two months ago.
In the middle of May, Shell declared force majeure on Bonny Light exports because of the shutdown of the Nembe Creek pipeline, which led to the accumulation of unsold crude. Following disruptions of the oil flows on the pipeline feeding the Forcados oil terminal, the facility faces more than two weeks of delays for oil cargo loadings and no official June or July loading schedules have been released.
Last week, a coalition of militant groups in Niger Delta, the “Joint Revolutionary Council,” threatened to resume hostilities, if the Federal Government fails to address the problems in the region. A spokesperson for the group said “There is nothing good to show in the region, in spite of the increase in the price of oil, and the relative peace that we have guaranteed in the Niger Delta. Poverty has been on the rise in the Niger Delta. Environmental degradation has become the order of the day, even as young people have resorted to illegal ways of fractionating crude oil to cater for their families.”
In past periods of rampant insurgency, the militants succeeded in reducing Nigeria’s oil production by nearly 1 million b/d. Recently, however, more production has been coming from offshore fields which are more difficult to sabotage. Some foreign oil companies have been slowly turning over onshore production to local companies and concentrating on offshore.
6. Venezuela
Venezuela’s state oil company, PDVSA, told eight foreign customers it would be unable to supply the contracted volumes of crude oil in the immediate future. Among the affected refiners are Nynas, Tipco, Chevron, CNPC, Reliance, Conoco, Valero, and Lukoil, which will receive only part of the oil shipments specified in their contracts. PDVSA’s crude commitments for June total 1.49 million b/d, but the company only has 694,000 b/d available to export. This situation suggests that Caracas will have to declare force majeure on its oil exports as production falls, and its ports are unable to ship crude.
Tankers are sitting off the country’s main oil port waiting to load more than 24 million barrels of crude, almost as much as PDVSA shipped in April. The clogged ports are largely the result of the seizure of terminals on several Caribbean islands by ConocoPhillips last month to enforce court judgments. The lack of other options has forced PDVSA to ship oil from its coastal terminals which cannot handle very large tankers.
The company has begun testing ship-to-ship oil transfers, to be carried out in the sea 6 miles from Venezuela’s Cardon refinery. This method of delivery entails specialized equipment, additional training for tanker captains, and higher costs for ship owners and customers. However, PDVSA is pushing ahead over customer doubts given the congestion at its ports and a desperate need to complete sales. This situation is unlikely to end well.
7. The Briefs (date of the article in Peak Oil News is in parentheses)
Pope meeting Big Oil: At a time when investors are piling pressure on Big Oil to take climate change seriously, top executives from some of the major global oil companies discussed climate change last week at the Vatican with Pope Francis, who called on Catholics in 2015 to join the fight against climate change. Attendees included, among others—BP’s chief executive Bob Dudley; Eldar Sætre, CEO at Equinor (formerly Statoil); Larry Fink, chief executive at the world’s largest asset manager, BlackRock; Ernest Moniz, former US Energy Secretary under President Obama; and a representative of ExxonMobil. (6/4)
Offshore Ireland: More interest in the oil and gas basin off the western coast is expected after reserve estimates nearly doubled. Europa Oil & Gas, which currently holds a 100 percent stake in the FEL 3/13 prospect in the Irish waters of the Atlantic Ocean, said data show the reserve estimate at 2.9 billion barrels of oil equivalent, 93 percent more than initially expected. (6/6)
The Norwegian Petroleum Directorate, the nation’s energy regulator, confirmed a discovery was made by Equinor in a wildcat well, one drilled in an area not previously known to contain oil or natural gas. (6/9)
Royal Dutch Shell took the top spot among oil and gas companies on the Forbes Global 2000’s list of the biggest and most powerful public companies, surpassing last year’s leader Exxon Mobil Corp. Shell climbed from 20th to 11th while Exxon slipped to 13th. (6/8)
Qatar Petroleum bought an equity stake in the Vaca Muerta shale natural gas basin in Argentina. That marks a debut in unconventional resources. The state-owned petroleum company in Qatar said it reached an agreement with US supermajor Exxon Mobil to take a 30 percent stake in its operations in Argentina. (6/5)
In China, a report by consultant group Wood Mackenzie found the Chinese market is looking at trucking to make up for the lack of pipeline coverage inland. They expect China’s gas demand to reach 9.3 trillion cubic feet this year. Similar to 2017, 12 percent of that demand will be supported by LNG trucking. (6/5)
Namibia, just south of Angola, could be a focal point for potential reserves. Atlantic-focused Chariot Oil & Gas was upbeat about prospects in Namibia. The company said it was fully funded for fourth quarter drilling at the prospect in Namibia that has 459 million barrels of prospective reserves. (6/7)
Offshore Brazil, Equinor, formerly known as Statoil, completed a transaction with Exxon that puts the latter in an equity partnership at the BM-S-8 block with a 36.5 percent stake. The block is within the Carcara oil field, which has an estimated 2 billion barrels of reserves. (6/7)
Canadian oil production from a facility in Alberta has the same greenhouse gas intensity as US oil, the head of producer Suncor said. Suncor said it has completed its $13 billion overhaul of its Fort Hills facility north of Fort McMurray. As of Thursday, the company said its production figures were strong, with second quarter rates averaging 636,000 b/d, up from early-year startup figures of around 194,000 b/d. (6/9)
Anti-corruption pushback: A refusal by US oil companies including ExxonMobil and Chevron to disclose their US tax payments is undermining the international effort to fight corruption in natural resources industries worldwide, according to transparency campaign groups. (6/6)
The US oil rig count increased by one last week to 862 while the gas rig count also increased by one to 198, according to Baker Hughes. Canada, for its part, gained 13 oil rigs for the week—after last week’s gain of 18 oil and gas rigs. Despite two weeks of significant gains, Canada’s oil and gas rig count is still down year over year. (6/9)
ANWR: The Trump administration has allocated $4 million for construction work ahead of the start of oil and gas drilling in the Arctic National Wildlife Refuge. ANWR is the largest in the US wildlife refuge system, and also the wildest: there are no roads or buildings at all in the 19-million-acre expanse. However, President Trump is pushing for a lease sale in the ANWR to be scheduled for as early as next year, despite fierce opposition from environmental groups. (6/9)
Bizarre lifejacket: The Trump administration is pulling out all the stops to give a leg up to the coal and nuclear industries. Trump is moving to take unprecedented action to intervene in the US electricity markets to essentially bail out failing plants as they face an existential threat from natural gas and renewable energy. FERC rejected a lifeline proposal earlier this year. But Trump isn’t giving up yet. Last week, the President ordered Secretary Perry to come up with some way to keep unprofitable plants open. (6/6)
Oil and gas drillers in Colorado will tweak their drilling and completion schedules for the summer as a way of supporting the state’s efforts to reduce ozone emissions, which seasonally grow during the summer. The efforts of the Colorado Oil & Gas Commission were aimed at reducing the likelihood of the state’s Front Range area receiving a “serious” ozone nonattainment area status. (6/6)
US retail gasoline prices are pulling back in line with declines in crude oil prices, but continue to put a crimp on people’s wallets. Motor club AAA lists the national average price for regular unleaded gasoline at $2.94 per gallon on Tuesday, only a couple of cents less than last week. (6/6)
Jet fuel prices are at six-year highs, and part of the reason is linked to record US shale crude production, and the unique properties refiners contend with when they refine that oil. The US produced about 4.7 million b/d of crude from shale formations in 2017. Refiners have found that when using shale oil to making diesel, their second-most common product after gasoline, they need to take measures to offset waxiness to make the fuel usable for truck and car engines. One option is to add kerosene and other components commonly found in jet fuel. However, that reduces the available pool of jet fuel at a time when economic growth has boosted air travel. (6/8)
Jet-fuel prices have surged more than 50% over the past year, pushing carriers to raise fares and Delta Air Lines to cut its profit expectations. (6/7)
Shale oil, which the Energy Information Administration projects will represent a rising proportion of American oil supplies in the coming decades, has a surprising Achilles heel: its low octane levels, which make it a poor fit for the high-efficiency car engines of the future. For financially troubled shale drillers, that’s bad news, since it suggests demand for their oil could fall even if the price of a higher-octane oil barrel rises. (6/7)
Distillate fuel continued to be the most exported US petroleum product in 2017, averaging 1.4 million b/d of gross exports. In 2017, the United States exported 27 percent of total domestic distillate production. (6/7)
Exxon Mobil Corp. is trying to give itself a green facelift. Chief Executive Darren Woods has called for Exxon to become “part of the solution” on climate change, a point he is expected to make when he and other oil and gas executives meet with Pope Francis at the Vatican to discuss the issue. The company is touting its research into fuels made from algae. It pledged last month to cut its methane emissions 15 percent by 2020. Exxon is now calling for global action to address climate change, and it has begun publicly promoting a US carbon tax. (6/8)
Biofuels win? The Trump administration was on the verge of releasing a major change in US biofuels policy, but a last-minute political assault from corn states might have shelved the proposal indefinitely. The proposal was an effort to water down biofuels requirements while trying to prevent a full-blown outcry from corn country. (6/8, 6/6)
E school buses: The California Energy Commission School Bus Replacement Program is making up to $78.7 million in grant funding available for the replacement of California’s oldest school buses, and it is favoring electric buses. Additionally, the Energy Commission’s Alternative and Renewable Fuel and Vehicle Technology Program has up to $13 million in grant funds for e-bus infrastructure and $2.4 million in grant funds for compressed natural gas fueling infrastructure for the replacement school buses. (6/8)
Volvo Cars said that by the middle of the next decade, it expects to generate half of all sales annually from fully electric cars and one-third of all cars sold to be autonomous driving cars. (6/8)
GM’s EV’s in China: On World Environment Day, General Motors mapped out its electrification path in China. GM is on track to deliver ten new energy vehicle models in China between 2016 and 2020. From 2021 through 2023, GM will maintain momentum by doubling the number of new energy vehicles available. (6/5)
Battery buddies: General Motors and Honda are partnering on new advanced chemistry battery components, including the cell and module, to accelerate both companies’ plans for all-electric vehicles. The next-generation battery will deliver higher energy density, smaller packaging and faster-charging capabilities for both companies’ future products, mainly for the North American market. The collaboration will support each company’s respective and distinct vehicles. (6/8)
E-rail: Italy’s Enel and Russian Railways will team up to develop a battery energy storage solution for electric railways in the hopes that it could help stabilize the Russian railway electricity grid, improve train operations, and avoid expensive grid upgrades that might otherwise be required. The power company plans to couple the energy storage system with regenerative braking technology. The energy will be stored in the batteries for later use, which could help the railway network to reduce its overall energy consumption. (6/4)
Solar tariff hit: President Donald Trump’s tariff on imported solar panels has led US renewable energy companies to cancel or freeze investments of more than $2.5 billion in large installation projects, along with thousands of jobs. That’s more than double the about $1 billion in new spending plans announced by firms building or expanding US solar panel factories to take advantage of the tax on imports. (6/7)
Colorado’s largest electricity provider said it wants to retire two coal-fired units a decade early and nearly double the share of power it gets from renewable sources. Xcel Energy said the changes would reduce its carbon pollution in the state by 60 percent and increase its share of renewable energy to almost 55 percent, up from about 28 percent now. Xcel said the plan would save consumers $215 million by 2054, citing the “historically low” cost of renewables. (6/9)
In Arizona, the main buyer of electricity from a coal plant on the verge of closure said it would instead source its electricity largely from a solar power project, ignoring an appeal by the US Interior Department to buy more power from the plant to keep it open. (6/9)
UK becalmed: Britain’s gone nine days with almost no wind generation, and forecasts show the calm conditions persisting for another two weeks. The wind drought has pushed up day-ahead power prices to the highest level for the time of year for at least a decade. (6/8)
Slower hurricanes: Hurricane Harvey stalled over Texas in August 2017 and dropped nearly 50 inches of rain in some places. With wind speeds that can top 180 miles per hour, hurricanes are not usually thought of as slow. Yet between 1949 and 2016, tropical cyclone movement speeds declined 10 percent worldwide. The storms, in effect, are sticking around places for a longer period. (6/7)
New CO2 removal: Carbon Engineering founder David Keith and his colleagues say that they have demonstrated for the first time a scalable and cost-effective solution for removing CO2 from the atmosphere. They are commercializing a process which uses water electrolysis and fuels synthesis to produce clean liquid hydrocarbon fuels that are drop-in compatible with existing transportation infrastructure. The company, with funding from Bill Gates, has published a peer-reviewed study showing that they can capture carbon for under $100 a ton. This would be a major advance on the current price of around $600 per ton. (6/8 and 6/9)
Different nukes: TerraPower, which has partnered with the China National Nuclear Corporation, plans to start building a test reactor using the traveling wave concept in China in 2019. If all goes well, it would start operation in the mid-2020s. So far, everything is being done in the lab. The test reactor will reveal whether the traveling wave reactor design as developed by Bill Gates’ TerraPower has a future as a reliable, economically viable alternative to coal, gas, and existing nuclear power technology. But as one prominent critic points out, traveling wave reactors using sodium as coolant carry a very high risk of explosion as the sodium is extremely flammable upon contact with oxygen. (6/5)
Peak Oil Review: 4th June 2018
By Tom Whipple, Steve Andrews, originally published by ASPO-USA
June 4, 2018
https://www.resilience.org/stories/2018-06-04/peak-oil-review-4th-june-2018/
Quote of the Week
“Since the beginning of the shale revolution a decade ago, the world has discovered 110 billion barrels of oil. Meanwhile, consumption has totaled 360 billion barrels. This 250 billion barrel deficit between discoveries and consumption seems sure to grow in the years ahead, given recent oil discovery trends.
“It is understandable why people would be complacent about this scenario. After all, didn’t the world face similar risks a decade ago, only to have shale oil save the day? But it isn’t clear that there is another ‘shale oil miracle’ that is ready to save the day. There are indeed more high-cost oil resources out there that can be developed, but these projects take a long time to complete. That’s why we can look out two to three years and see an impending supply crunch. The longer investments in the industry remain depressed, the more unavoidable this scenario becomes.”
Robert Rapier, a chemical engineer and industry commentator (3/23/18, in Forbes magazine)
1. Oil and the Global Economy
In a short trading week, oil prices closed mixed with London futures holding steady but New York declining on higher US oil output. US oil prices continue to fall well behind world prices, as booming shale oil production deals with pipeline constraints, leading to the biggest discount to North Sea Brent in three years. On Thursday, the discount climbed to over $11 a barrel. The weekly US stocks report showed that while oil production grew by 44,000 b/d, a drop in US imports and a surge in exports to 2.1 million b/d resulted in a decline in US commercial crude inventories of 3.6 million barrels from the week before last.
The regional discount problem is not confined to Permian Basin oil production. Western Canada Select consistently trades at a substantial discount to US futures prices. Last week the Canadian heavy crude was trading at only $41 per barrel or $25 below New York futures. These discounts are good for refiners and exporters but are causing problems for the drillers who are struggling to break even.
US natural gas futures are rallying to levels not seen in May since 2010 as hot weather boosts the demand from power plants and exports continue to increase. US storage of natural gas now is about 23 percent below the five-year average, the most for this time of year since 2014. Prices are heading towards $3 per million BTUs as the unexpectedly hot weather in May followed a cold April. The sudden temperature swing which demands more natural gas for heating and then cooling is hindering the normal seasonal ramp-up of the fuel going into storage.
Although the recent decline in prices is based on the possibility the OPEC production freeze will be modified or lifted and steadily increasing US oil production, many authoritative voices are saying that these developments will not be enough to prevent much higher oil prices later this year. It currently appears that Saudi Arabia and Russia are talking about adding somewhere between 300,000 and 1 million b/d to the world’s oil supply which should hold down prices. However, Goldman Sachs is arguing that inventories are already back down to the five-year average and that demand is being underestimated. Venezuela is losing production and infrastructure bottlenecks in the Permian Basin could foretell that US shale production for the rest of the year will not be as high as expected. Without OPEC and Russia increasing supply from current levels, inventories would fall “to historically low levels by the first quarter of next year”. In addition to the Venezuelan meltdown, growing tension surrounding the new US sanctions on Iran have led to Iranian threats to resume enriching uranium in the next few months. The impact of the growing US trade war with China is unknown, but some are suggesting this alone could force all prices towards $100 a barrel this summer.
The fundamental principle underlying the future of oil prices is that worldwide we are not finding as much oil as is being demanded at current prices and reserves are depleting faster than ever before. A supply crunch is coming. The only issue is when not if. In the US, we’ve been drawing down inventories steadily February of 2017, because our net imports are not sufficient to meet demand.
The OPEC Production Cut: The cartel’s oil production dropped in May by 70,000 b/d to 32.00 million b/d largely due to militant attacks in Nigeria and the ongoing decline in Venezuela that dragged total production to the lowest level since April 2017. The decision that will emerge from the OPEC plus meeting to set new oil productions levels will depend on policy decisions in Moscow, Riyadh, and Washington. These three countries, each of which can produce over 10 million b/d or one-third of the world’s oil supply, have differing price objectives that will determine where the oil markets go in the immediate future. Russia and the Saudis would like much higher prices to help their lagging economies while President Trump is already demanding that OPEC increase production to keep prices lower before the US mid-term elections.
Washington is saying that there is so much oil in the world that its new Iranian sanctions, which kick in this fall, would not be significant. Tehran is saying that OPEC members at their meeting later this month should protect members targeted by US sanctions. The Iranian government is busy courting European, Russian and Chinese leaders for continued support of the nuclear agreement and is threatening to resume nuclear enrichment if Washington’s new initiative hurts its exports.
US Shale Oil Production: Drillers added two oil rigs in the week to June 1, bringing the total count to 861, the highest level since March 2015. The US rig count, an early indicator of future output, is much higher than a year ago when 733 rigs were active. However, decisions to activate or mothball rigs have to be taken at least several weeks in advance; we could be seeing a carryover from steadily rising prices last spring.
The surge in shale oil production continues to run into bottlenecks. From West Texas pipelines to Oklahoma storage centers and Gulf Coast export terminals, the delivery system for American crude is straining to keep up with production, limiting the industry’s ability to take full advantage of growing demand. Last week Barclays analysts predicted, “a new shock” for energy markets as a lack of pipeline capacity near the Cushing, Okla. storage hub threatened the flow of oil. Pipeline shortages in the Permian basin, meanwhile, may not be overcome by new construction for another 18 months. These problems are undercutting the conventional wisdom that US shale oil production will stabilize global prices as crude exports from Venezuela and probably from Iran seem likely to decline.
The recent increase in oil prices to above $60 a barrel is helping oil companies refinance some $138 billion in debt due this year and a total of $400 billion is coming due before the end of 2019. Between 2012 and 2014 there was an “an irrational exuberance” going on when oil prices were high, and interest rates were low resulting in a surge of borrowing that must be paid back. Conventional wisdom on Wall Street says that shale oil is profitable above $60 a barrel, but this may not be the case. As bottlenecks grow, many drillers are being forced to accept large discounts for their oil and the industry as a whole is far from profitable.
The Wall Street Journal recently reported that only five of the Top 20 US oil companies that focused on hydraulic fracking generated more cash than they spent in the first quarter of this year. This continues a trend that has been ongoing throughout the fracking boom where companies are spending $1.13 for every $1 they take in. While lenders are hoping that much higher prices will soon wipe out the massive debts drillers are accumulating, it could be a question of whether drillers are forced to default before the days of $100+ oil prices return.
2. The Middle East & North Africa
Iran: Last week, Tehran’s most notable production was threats of what would happen to the world if its oil production is harmed by the new US sanctions. Iranian diplomats and media outlets have been active in lining up support from China, Russia, and India, while Tehran’s propagandists have been telling the EU that it is up to them to stop the impact of Washington’s sanctions immediately. Chinese and Russian state-backed companies are maneuvering to profit from European firms leaving Iran, threatening Washington’s effort to raise economic pressure on Tehran.
Iran’s Oil Minister Bijan Zangeneh said that France’s Total has 60 days to secure a waiver from the new US sanctions to stay in the multi-billion-dollar South Pars gas development project. Total, the first supermajor to have returned to Iran after the previous sanctions were lifted, said it would not be able to continue the South Pars gas project and would have to unwind all related operations before November 4, 2018 unless US authorities grant it a waiver supported by the French and European authorities. This project waiver should include protection of the Company from any secondary sanction as per US legislation. As the US has few economic ties to Iran, it is the threat of secondary sanctions against any company doing business with the country that gives the US a significant potential impact on Tehran’s economy.
The biggest threat from the current confrontation is that Tehran could pull out of the 1968 Treaty on the Non-Proliferation of Nuclear Weapons (NPT) —a treaty in which 93 countries, including Iran, have vowed never to obtain nuclear weapons. Two weeks before the U.S. sanctions were announced, a senior Iranian official said that Tehran might withdraw from the NPT treaty if President Trump pulled out of the nuclear agreement.
If the Iranians pull out of the NPT, it will signal that not only are they are going to resume their nuclear enrichment program but that they would be resuming the development of nuclear weapons. This, in turn, would increase the likelihood of a new arms race in the Middle East and increasing concerns about what Israel could do to stop an Iranian nuclear weapons program.
Saudi Arabia: Other than the negotiations over the fate of the OPEC+ production freeze agreement there was little news from Saudi Arabia last week. Saudi Aramco awarded a contract to Halliburton for unconventional gas stimulation services, as Saudi Arabia seeks to reduce further its domestic crude oil burn, freeing barrels for export or refining. The contract, which includes hydraulic fracturing and well intervention operations, will “further improve the economics of Saudi Aramco’s unconventional resources program,” Aramco said in a statement last week. In recent years, the Saudis have found it necessary to burn increasing quantities of valuable crude oil in their power plants to generate enough electricity for summer air conditioning. New solar and natural gas programs are aimed at finding other sources of energy and stop the massive waste of burning raw crude in power plants.
Energy Minister Khalid al-Falih said last Friday Saudi Arabia is most likely to hold the initial public offering of stock in Aramco during 2019. This confirms a delay from the initial plan to list the company in 2018.
Libya: Last week, the government announced a “maximum security” alert over possible terrorist attacks against oil ports and oilfields. The country faced oil production outages too, as severe weather caused turbines to stop working. Approximately 120,000 b/d was shut in as a result of that outage, at a time when Libya is trying to raise its production above the 1 million b/d mark. Armed guards are now standing by at oil ports ready to thwart any terrorist attack in the oil crescent region—Libya’s most prolific oil area.
3. China
The Trump administration sent a sudden, harsh message to its China last Tuesday, saying the US was moving forward with its threat to apply tariffs on Chinese imports and restricting Chinese access to sensitive US technology. The move surprised many observers after the White House said any trade war with China would be put on hold while negotiators worked on a deal that would reduce the $375 billion Chinese annual trade advantage by buying more US goods. The White House said it would announce by June 15 a final list of $50 billion in Chinese imports that would be subject to tariffs of 25 percent. The next day, Beijing lashed back at the renewed threats from the White House, warning that it was ready to fight back if Washington was looking for a trade war.
At least five independent refineries in Shandong, China’s northern province, have been ordered to cut operating rates as Beijing aims for blue skies for a regional summit in port city Qingdao next month, showing that polluted air is still a top concern. China typically takes such steps ahead of major political events to ensure they proceed with clear air. The cuts range between 30 percent and 50 percent of the plants’ capacities, removing about 45,000 b/d of processing capacity, a fraction of the 1.9 million b/d that independent refiners, known as teapots, imported in April.
China’s thermal coal prices jumped more than 4 percent last Tuesday and were on track for their biggest one-day gain since November 2016 due to strong demand by industrial and electric power plants. Despite efforts to switch to natural gas and renewables, China is still heavily dependent on coal to keep its economy growing at six-plus percent a year.
China’s carbon emissions are on track to increase at the fastest pace in more than seven years during 2018 according to Greenpeace. Carbon emissions in the country increased 4 percent in the first quarter of this year. If that pace continues, it would be the fastest increase since 2011.
4. Russia
An energy ministry official said last week that Russia would be able to raise its oil output back to pre-cut levels within months if there is a decision to unwind the production cut deal with OPEC and other producers. Moscow agreed to cut Russian output by 300,000 b/d from a 30-year high of 11.247 b/d starting in 2017.
Rosneft increased its crude oil production by 70,000 b/d last week, in preparation for an OPEC+ decision to start easing production quotas. The company has a spare production capacity of between 120,000 and 150,000 b/d, and its average daily production during the first quarter was 4.57 million b/d. The company is still producing with the quota assigned it under the OPEC+ deal, but the fast ramp-up is a clear indication Russia’s largest oil producer is eager to return to higher production now that oil prices are approaching $80 a barrel.
There’s been a lot of talk about the US efforts to use LNG to replace a share of Russia’s natural gas market in Europe. President Trump has pushed for U.S.-sourced LNG to become so much of the EU’s energy security that several European states, notably Germany, have accused the president of playing energy geopolitics, cloaking concerns for European energy security to the benefit of US LNG producers. Last week, however, Gazprom and the European Commission resolved a resolved a seven-year-old anti-trust dispute after Gazprom agreed to change its operations in central and Eastern Europe making it more likely that Russian natural gas will dominate the EU energy market for many years to come.
5. Nigeria
The flow of crude oil to the Forcados terminal is said to have resumed last week, but loading delays have continued to accumulate, also delaying the release of June and July loading programs. Two weeks ago, the Trans-Forcados pipeline that ships between 200,000 and 240,000 b/d of crude to the Forcados terminal was shut down for repairs of a minor leak. Trading sources said that loadings were delayed by at least one week. Two days later, the Nigerian subsidiary of Shell declared force majeure on Bonny Light on exports because of the shutdown of the 150,000 b/d Nembe Creek pipeline.
Shut-in pipelines have remained the most significant challenge to Nigeria’s oil production. Latest data from the Nigerian National Petroleum Corporation showed that about 163,000 b/d was shut-in for the entire month of December 2017. In January 2018, a total of 194 pipeline points were vandalized, 22 pipeline points were either failed to be fixed or ruptured/clamped. Thus, 216 pipeline points were destroyed during January against the 176 points recorded in the previous month. Port Harcourt-Calabar-Aba and Aba-Enugu pipeline segments accounted for 187 points or 86 percent of the affected pipeline points. Last week Shell confirmed four leak points on the 100,000 b/d Trans Ramos Pipeline.
International Oil Companies operating in Nigeria may have devised a way to compel the Federal Government into changing its fiscal policy on the long-considered Petroleum Industry Governance Bill. The IOCs have deliberately put on hold the Final Investment Decision on five offshore oil and gas projects to force the government to alter terms in the new bill deemed unfavorable to deepwater projects. Estimated to be worth over $23.5 billion, the offshore projects were expected to assist Nigeria achieve a daily production of four million b/d. The decisions on these projects ought are supposed to be taken before the end of 2018.
6. Venezuela
During his inauguration speech, President Maduro said he would seek the help of OPEC to double Venezuela’s oil production, which is currently at 70-year lows. Maduro said the current production rate—about 1.5 million b/d—would need to increase by 1 million barrels daily by the end of this year.
India doesn’t plan to use Venezuela’s ‘petro’ cryptocurrency to pay for crude oil imports. India’s central bank has issued an order saying that it doesn’t allow trade in cryptocurrency. India’s average oil imports from Venezuela have recently slumped to their lowest level since 2012.
7. The Briefs (date of the article in Peak Oil News is in parentheses)
Airline executives are gathering in Sydney’s winter chill under the shadow of higher oil prices and a string of accidents after enjoying a near-spotless 2017 in terms of profits and safety. (6/1)
Kenya took a step toward building an export pipeline from its oil fields to the port city of Lamu with the award of an early-phase design contract. A third-party review found reserves in the South Lokichar basin of an estimated gross of 766 million barrels of oil, a 24 percent increase from earlier estimates. (5/31)
Offshore Senegal, there is a strategic interest emerging in oil where a project can break even at $35 per barrel, the chairman of Australian developer FAR Ltd. said. With 11 successful wells drilled to date, plus the results from a recent geotechnical study, the company revealed another 198 million barrels added to the estimated 641 million barrels in the best estimate scenario of contingent reserves. (5/31)
For Angola, Total announced it’s made a $1.5 billion final investment decision to get more oil out of a field in the deep waters off the coast. Total leads a consortium developing the Zinia 2 offshore development in Block 17 of the Pazflor field. A budget of $1.2 billion will be used to tap nine wells connected to an existing floating production storage and offloading unit. Zinia 2 has a production capacity of 40,000 barrels of oil per day. (5/29)
South African secret: A natural harbor to the northwest of Cape Town keeps a secret that oil tracking professionals are still trying to uncover. The secret is exactly how much oil is in storage at any given moment at the Saldanha Bay array of tanks that can hold up to 45 million barrels. These tanks, unlike oil storage facilities elsewhere, are half underground, making it harder to collect enough satellite imagery to venture an estimate. Oil traders, apparently, appreciate this rare privacy of stocks. The Saldanha Bay storage hub is among the largest in the world. (5/31)
In Brazil, French oil major Total said on Wednesday that its plans to drill in the ecologically sensitive Foz do Amazonas basin were still alive, despite Brazil’s decision to reject its drilling application. It is the fourth time that Brazilian environmental agency Ibama has rejected that drilling application and requested additional information. (5/30)
Brazil received no bids in the first tender for a total 1.63 million barrels of crude extracted from the pre-salt zone. The state received the oil as payment from operators of fields in the zone and planned to sell it under three-year contracts. However, interest was lacking, with only Shell registering as a bidder. The lack of interest in the tender was likely a result of changes approved by parliament last week. Under the changes, companies can no longer sell crude at prices lower than those set in a reference range by the energy industry regulator, ANP. (6/1)
Brazil’s oil workers ended a 72-hour warning strike at state-led oil producer and refiner Petrobras a day early after a Labor Court judge increased fines for not adhering to an injunction prohibiting the walkout. (6/2)
LNG Canada: Malaysia’s Petronas said on Thursday it had agreed to buy a 25 percent stake in the LNG Canada project located in British Columbia. LNG Canada is a joint venture between Royal Dutch Shell Plc, PetroChina Co Ltd, Mitsubishi Corp and Korea Gas Corp. Upon completion, Shell will be the biggest shareholder with a 40 percent stake in LNG Canada. (5/31)
Canada will buy Kinder Morgan Canada’s Trans Mountain oil pipeline and its proposed expansion project in an attempt to ensure that it is built. Kinder Morgan had stopped all non-essential work on the $5.70 billion project in April, citing permitting delays and political opposition in British Columbia, and said it would scrap the expansion unless the legal challenges are resolved by May 31. Expansion of the Trans Mountain pipeline, which takes crude from Alberta’s oil sands to a facility in the Pacific province of British Columbia, has also faced opposition from environmental groups and some aboriginal groups. The minority left-leaning New Democratic government in British Columbia, citing the risks of a major spill, opposes the project. So the central government is buying the stalled project and will sell it after completion. (5/29 and 5/30)
The US oil rig count added two rigs, growing to 861, according to GE’s Baker Hughes. While that was the 8th increase during the last nine weeks, analysts do not expect any big changes in the rig count for the rest of the year. A year ago, 733 oil rigs were active. (6/2)
US crude oil production hit a record 10.8 million b/d last week, while on a monthly basis, it peaked at 10.47 million in March, the EIA said. (6/2)
Exxon vs. Wall Street: ExxonMobil has outlined aggressive plans to step up spending and boost production. In March, Exxon said it would hike capital expenditures to $24 billion this year, $28 billion in 2019, and $30 billion between 2023 and 2025. All told, the company could spend $200 billion through 2025. Wall Street is clearly not impressed with the strategy. Exxon’s share price is off 11 percent since the start of 2017, while Chevron is up roughly 7 percent and Shell is up 27 percent. But Exxon may not have much of a choice other than to increase spending. Its production base has eroded, dipping in five of the last six years. (5/28)
Exxon Mobil Corp’s Darren Woods says his company is at the center of a delicate balancing act between those who want a cleaner environment and those seeking economic growth that depends on rising energy utilization. Exxon is planning to invest more than $200 billion in major oil and gas projects around the world over seven years, a signal that growth carries a bit more weight in company plans. (6/1)
Shell said on Thursday that it had started early production at a deepwater subsea development in the US Gulf of Mexico a year ahead of schedule and at a forward-looking, break-even price of less than $30 per barrel of oil. Shell began early production at the Kaikias development that has an estimated peak production of 40,000 barrels of oil equivalent per day (boe/d), adding more production in its key deepwater focus area, the Gulf of Mexico. (5/31)
EPA hits MPG: The Environmental Protection Agency on Thursday formally submitted its proposal to roll back rules that required automakers to nearly double the fuel economy of passenger vehicles to an average of 54.5 miles per gallon by 2025. (6/1)
Biofuel waivers: Continuing a national trend, the US’s second-largest oil refining company has recently requested a biofuel hardship waiver from the EPA. The waiver, if granted, would allow refining giant Marathon Petroleum Corp. to exempt one of its facilities from Obama-era federal biofuel quotas. This move coincides with a recent campaign by the EPA to expand biofuel waivers, to the delight of the oil industry and the equally strong dismay of the corn lobby and its 15 billion gallon a year corn-based ethanol market. (5/31)
Fiat Chrysler will phase out diesel engines in its passenger cars sold in the Europe, Middle East, and Africa markets by 2021. The company, however, will still offer diesel in its light commercial vehicles across its brands. Company executives also laid out broad as well as brand-specific electrification plans—running the gamut from 48V mild-hybrids and high voltage hybrids, plug-in hybrids, and battery-electric vehicles. (6/2)
EV report: A report from the IEA on the global outlook for electric vehicles found sales passed 1 million last year, a record level and a 54 percent increase over 2016. Norway has the largest concentration, with EV sales accounting for 39 percent of new vehicle sales. While the global electric vehicle market is expanding, IEA reports the supporting metals and refining markets are becoming a problem. (6/1)
Power sector CO2 down: Because of the increased use of natural gas, carbon dioxide emissions from the US power sector were at their lowest in 30 years. The US EIA reported total fossil fuel consumption in the national power sector was at its lowest level since 1994. EIA anticipates a 29 percent share for coal in total electricity generation in both 2018 and 2019, down from the 30 percent last year. The share for natural gas, meanwhile, grows from 32 percent last year to 34 percent through 2019. (5/30)
MidAmerican Energy, a company of Berkshire Hathaway, is on track to become the first investor-owned utility in the US whose electricity production from renewable source is equal to the electricity needs of its customers—if a major wind project gets the go ahead and is competed. The company is awaiting approval from the Iowa Utilities Board on a large-scale wind farm project, worth $922 million, which should be completed in 2020. MidAmerican will keep its gas-fired, coal, and nuclear power plants due to the intermittent nature of wind power generation. (6/1)
Keynesian Economics Is an Artifact of Cheap Energy
Charles Hugh Smith
July 2, 2018
"The connection between currency and energy is: "money" is nothing but a claim on future energy. Without energy to power the future economy, the "value" of "money" vanishes."
https://www.oftwominds.com/blogjuly18/keynes-energy7-18.html
THE ENERGY CLIFF APPROACHES: World Oil & Gas Discoveries Continue To Decline
Posted by SRSrocco in Energy, News on June 30, 2018
https://srsroccoreport.com/the-energy-cliff-approaches-world-oil-gas-discoveries-continue-to-decline/
Family farm in Houlton honored by Maine Potato Board
Courtesy / Maine Potato Board
June 22, 2018
http://www.mainebiz.biz/article/20180622/NEWS01/180629969/family-farm-in-houlton-honored-by-maine-potato-board
The Maine Potato Board named the Donald Fitzpatrick family of Houlton as the 2018 "Farm Family of the Year."
Fitzpatrick has been growing potatoes for 66 years and is credited with innovations to minimize the impact on the soil and the environment, including creation of the first certified compost operation in Maine and receiving organic certification for parts of his acreage of grain and potatoes.
Twenty-five years ago, Donald's father Anthony was recognized as "Farmer of the Year."
"My family and I are honored to represent our potato industries' many farm families. It is my pleasure to accept and to share this recognition with Dorothy and all our family," Fitzpatrick said in a news release.
"Donald Fitzpatrick and his family are very appropriate representatives of our Maine potato industry," said Donald Flannery, executive director of the Maine Potato Board. "We will enjoy sharing this recognition with him."
Fitzpatrick planted his first crop as a freshman in high school, starting on six acres. That fall potatoes were $5 a barrel, according to the Maine Potato Board. He held out for more money and ended up taking a big loss, selling at $1 a barrel, with some of his crop going to a starch factory at 50 cents a barrel. A high school friend planted a similar plot and sold his crop at the peak, at $5 a barrel, and bought a new car. Fitzpatrick bought an old pickup — and learned a lesson, according to the news release.
In the early 1980s, Fitzpatrick began to take soil conservation seriously by implementing various practices to improve his soils and increase crop yields, according to the potato board. He planted a winter cover of oats, spreading hay to reduce soil erosion, established grassed waterways and working toward a three-year rotation on most of his acreage. He was the first grower in Aroostook County to use a technique known as the one-pass hiller, which saves fuel, causes less root damage and reduces soil compaction. He has dedicated some of his acreage for organic grain and potato production, certified through MOFGA, or Maine Organic Farmers and Gardeners Association.
Today, four generations of Fitzpatricks have worked on the farm, including son Toby, who is involved in operations, and Chris, who works on the farm part-time, as a second job. He and his wife Dorothy, who also grew up on a farm, have been married 60 years.
She was advised when they married, "'Don't start milking the cow, because you'll always have to.' Lucky for me, we had no cows," she said.
Fitzpatrick has served on the county committee with the Farm Service Agency and served on the board of directors for the Southern Aroostook Soil and Water Conservation District for more than 20 years. In 2008 he was presented with the "Lifetime Conservation Farmer" award.
Masterful setup in using the earth for heat and cool depending on season. Amazing growing for the winter time for that climate.
Thanks for sharing.
The Olduvai theory and catastrophic consequences
By James Leigh, originally published by Energy Bulletin
June 24, 2008
Introduction
Our century-old industrial civilization and its luxurious standard of living may be about to end. The energy prime mover of this civilization, oil, is about to drastically dwindle in supply.
This dwindling oil supply in the face of escalating demand has rocketed up the price of oil. Ted Trainer (1997) predicted large and permanent increases in oil prices after the year 2000 due to increasing scarcity. In fact in March 2008, oil broke through the psychological ceiling of $100 a barrel, and later in early June rose to around $140 on the way to $150. Even the president of OPEC (Organization of Petroleum Exporting Countries) has warned of oil reaching $200 a barrel (Robertson, 2008). Goldman Sachs has announced that the $200 barrier could be hit any time within the next two years (Foroohar, 2008). Alexey Miller, head of the world’s largest energy company, the Kremlin-owned gas giant Gazprom, has predicted that oil will reach $250 a barrel “in the foreseeable future” (Fortson, 2008). Ferris-Lay (2008) has forecast that the black liquid gold could climb to an incredible $300 a barrel in the foreseeable future. In the slightly longer term we have been warned of an economically lethal price of $380 (Porter, 2005). The major cause for all these price hikes is the dwindling supplies as oil reaches exhaustion point around the world.
In this paper we will consider the implications of the dwindling supply of oil in light of the Olduvai Theory.
Dwindling Supplies
History, current changing world circumstances and dwindling energy-resource supplies suggest that the oil-fired industrial age is destined to be short lived. The bell curve below shows the levels of historic and prospective oil production over two millennia. This graph highlights the assertion that the life expectancy of Industrial Civilization is around 100 years – from 1930 to 2030 (Duncan, 2000; Rempel).
It has been the plentiful supply of cheap oil (increasingly from less developed countries) that was the main factor, along with the necessary natural resources and skilled manpower, that made the miracle of the industrial era, of about 100 years, possible in the Western more developed countries, and particularly in Europe and the United States.
However, the plentiful supply of cheap oil has been short lived. Even as predicted by Dr. M. King Hubbert’s bell curve method, the peak for oil production in the United States was reached way back in 1970. This “Peak Oil” method began with Hubbert, a Shell Oil geophysicist who determined that when an oil field was half depleted, it had hit peak production and was set for production decline. Not only did he estimate, in 1956, that U.S. oil production would peak around 1970, but also with this method he later predicted the world peak would be between 1995 and 2000 (Anderson, 2008).
Several internationally known and respected petroleum experts, Colin Campbell, Jean Laherrere, Brian Fleay, Roger Blanchard, Richard Duncan, Walter Youngquist, and Albert Bartlett (with various methodologies) all estimated a peak in conventional oil production would hit around 2005. Further, the CEOs of Agip and ENI SpA, (Italian oil companies) and ARCO (a BP subsidiary since 2000) also published estimates for peak oil to be reached in 2005. In November 1997, the International Energy Agency (IEA) convened an Oil Conference in Paris. Among the various papers presented, Jean Laherrere and Colin Campbell presented three empirical papers on oil depletion.
As a result of this conference, the IEA prepared a paper for the G8 Energy Ministers’ Meeting in Moscow, March 31, 1998. The IEA adopted Laherrere and Campbell’s view, and forecast an imminent peak in conventional oil for 2012. This represents a significant reversal of the IEA position from the no-limits stance of previous years (Hanson, 2001). In general support of the imminent peak in world oil heralding declining production levels, Hirsch (2005, p. 9) lists twelve highly respected oil studies, and eight of these predict peak oil by 2012.
In fact by 2006 not only had most countries reached their peak oil production and its subsequent fall-off in production, but declining world oil production levels set in, heralding dwindling oil on world markets and shrinking reserves in the ground. The graph below shows this state of affairs with world oil production having peaked in early 2006, and from there we see a trend of continual slow decline, and by 2030 oil production is predicted to drop to 40 mbpd, less than half today’s production (Bowman, 2008). Other analysts (for example most recently Zittel and Schindler, 2007) give similar analyses for oil supply drop-off beginning around now. This all shows that the general trend for conventional oil production over the last couple of years was one of overall decline. Actually the industry is harboring pent up forces for permanent steeper decline to set in.
Various comments are now being heard from high in the oil industry. Ali Naimi, the Saudi Oil Minister said, “Limited capacity along the entire supply chain is the real source of current global supply tightness and represents the greatest threat to ensuring adequate energy to fuel future economic growth”. Head of Libya’s NOC (National Oil Corporation), Shokri Ghanem admitted that “Very little can be done by anyone, there is not enough spare capacity” (Hoyos, 2008).
Olduvai Theory and Societal Implications
Obviously for the world there are critical implications for lifestyle and economic development of its peoples as a result of the emerging drastic shortfall in oil supplies and the impact on the Industrial Civilization.
Duncan (2000) elaborates in detail on the Olduvai Theory which predicts that the life expectancy of Industrial Civilization is around a hundred years, as measured by the world average energy production per person per year. In this theory Industrial Civilization began in 1930 and is predicted to end around 2030.
The following graph (Duncan, 2000) shows the Olduvai curve and events from 1930 to 2030. When published, the graph was historic from 1930 to 1999 and hypothetical values and events are shown from 2000 to 2030. Of course the first eight years of the third millennium is now history for us.
Eight anchor point events are highlighted. The first in 1930 (Note 1) marks the beginning of Industrial Civilization. The second event in 1979 (Note 2) shows the historic all-time world peak in energy production per capita. The third event in 1999 (Note 3) marks the depletion of cheap oil, when oil prices hiked over the year with a series of cuts in OPEC production. The fourth event on September 28, 2000 (Note 4) marks the escalation of Middle Eastern violence — the “Jerusalem Jihad” and this signals the end of the Olduvai “slope”. Subsequently the world reaches the Olduvai “slide”. This begins in 2000 with war escalating in the Middle East, possibly a harbinger of the looming civilization clash between the West and Islam. The fifth event in 2006 (Note 5) heralds the all-time world peak of oil production. The sixth event in 2008 (Note 6) warns of the OPEC crossover event when the OPEC nations produce more than half of the world’s oil and increasingly control the world’s oil exports. Whenever this does actually occur, it will give incredible “petropower” to the OPEC cartel. Then in 2012 (Note 7) we come to the end of the Olduvai “slide” – the beginning of the next interval – the “cliff”.
This “cliff”, beginning 2012, is the final interval when permanent blackouts spread worldwide – first with rolling brownouts and temporary blackouts and then the electric power networks themselves fail. The final event in 2030 (Note 8) predicts a decline in world energy production per capita to the 1930 level – which was the beginning of the Industrial Civilization. The average rate of decline of energy production from 2012 to 2030 will cause increasingly dramatic effects.
The power shortages and interruptions will be the result of over-demand for energy from economic boom – the increasing use of energy-thirsty machines, and population growth – all in the face of falling energy supplies.
According to the Olduvai theory, Industrial Civilization is reliant on electricity: electricity is the quintessence of Industrial Civilization. World energy production per capita increased from 1945 to its all-time world peak in 1979. Then from 1979 to 1999 energy production per capita declined. Subsequently from 2000 to 2011, according to the Olduvai schema, world energy production per capita will maintain a steady decrease trend (the “slide”). Finally from around year 2012 there will be a host of permanent electrical blackouts around the world. These blackouts will then parallel falling energy production per capita, until by 2030 it will have declined to the same level it was a hundred years before, in 1930. The rate of decline from 2012 to 2030 is an unprecedented continuous decline of around 5% per annum (the “cliff”). The total duration of Industrial Civilization therefore is around 100 years.
The Olduvai “slide” from 2001 to 2011 may culminate in events that resemble the “Great Depression” of the 1930s – unemployment, breadlines, and homelessness. As for the Olduvai ‘cliff” from 2012 to 2030, there may be no precedent in human history. The instant the power goes out, you are back in the Dark Ages.
The permanent blackout of electricity is crippling. Without oil to continue to fire up our industrial society we will be without: public electricity, transport, industry’s processed products (food, clothing, packaging, and machinery), communication and computer services. A little bit of brainstorming shows that the society and its systems would come eventually to a standstill. A totally paralyzing set of circumstances with hunger and deprivation on an unprecedented worldwide scale.
Conclusion
Pause for a moment – just imagine the catastrophic consequences of no electricity: no phones or computers, no industry which is electricity based, no dairy products or processed foods, no refrigeration, no water as the water pumps won’t work, no cars or transport because the petrol pumps won’t work, no schools or universities, no banks which can’t electronically process transactions, no employment, no income – dwindling stocks of everything as society collapses to unprecedented levels of chaos and deprivation.
These critical levels of human suffering, accruing from this worsened state of affairs, could massively frustrate the world at the geopolitical level, leading to, not only heated political engagement, but also military confrontation.
The post-2012 era of Olduvai has no precedent in history, and therefore the world will soon be entering totally uncharted waters. For sure nations and groups of nations will attempt to protect and maintain their economic development and living standard.
However, what we really need is for us all to cooperatively take urgent steps to ameliorate this looming situation and prepare for how we will live in a post-energy world and its civilization. A whole new sustainable, localized and agricultural based civilization is needed; with a new mindset of cooperation and care, and harmonious social behavior, along with alternative fuels for a less fuel-hungry society. And that is the topic of another paper.
References
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The End of More
co-author Norman Pagett
https://medium.com/@End_of_More/the-oilparty-is-over-c06d3c723655
"The oilparty is over
and so is our food party
But how can we define an oil age? It has been about 170 years since the first deep oilwells were sunk, and just over 250 years since the viable steam engine was developed. The two are linked, because the steam engine made deep drilling of oilwells possible and gave us access to a hundred million years worth of fossilized sunlight. Perhaps we have not strictly had an oil age, but rather the first and only age where we enjoy vast amounts of surplus energy that we have extracted from hydrocarbon fuels, of which oil is the most energy dense.
It has brought us material wealth, and the means to indulge in wholesale killing of each other and all other species. It gave excesses of food and a population that consumed that food and grew to five or six times the sustainable level of the planet. In the timespan of human existence, the ascendance of modern industrialised man has been a short flash of light and heat that has briefly lifted us out of the mire of the middle ages, but at a considerable cost to the environment.
The supernova of our industrial existence is neither divine nor permanent.
But that certainty of permanence explains the mad scramble to come up with ‘alternatives’ and ‘renewables’ in the last decade or two. Something to keep current politicians in office and the masses pacified. It is important that we accept the seductive indoctrination that prayers will be answered and technology will continue to deliver fulfilment of our fantasies.
The majority have come to believe in the economics of cornucopianism, where wishing for something will make it happen, while ignoring the reality that everything we have is derived from finite hydrocarbon fuels. If we spend enough money, alternatives will always be found to sustain our lifestyle. They won’t of course, and the conflicts fought over oil are proof that they won’t.
Money is merely a token of energy exchange. Without energy, money can have no value.
The pivot of world oil economy is Saudi Arabia, (the concept of ‘Saudi America’ is too ludicrous for discussion here), but that fantasy land of sand dunes and tall towers is being encircled by fanatics who know that when the jugular of global oil is cut, the industrial complexity of the developed west will die.
When (not if) that happens, we might be lucky to hold onto an existence akin to that of the 14th century, which is what the religious zealots want to inflict on all of us. If we’re unlucky, then we must expect something that will be much darker and as yet inadmissible to modern minds that do not have the scope to deal with its implications. That infers an unpleasant imagery of pre-history that we prefer to ignore. Understandably, most think the same way; this is why we cling to the comforting promise of ‘infinite growth’.
The alternative is just too awful to contemplate.
Instead we have been encouraged to believe that we can do without oil and not only still run around on wheels, but have a purpose for doing so. And by some means yet to be invented, keep our wings as well.
Our oil age will not end through lack of it, but by fighting over what’s left.
So choose your luck-factor and take that thought where you will, you are on your own with it. Many reasons are given for starting wars, but ultimately there is only one: the pursuit of (energy) resources.
Human greed drove improvements in weaponry, and the means of destruction and acquisition became more deadly over thousands of years even though there was more than enough for everyone. The input of oil was the game changer of warfare; history over the last century has shown that conflict was not diminished, but amplified by the prosperity and technology created by oil. Since the 1860s when black gold gushed from the earth, the economic and political thinking of the pre-oil era was seamlessly grafted onto the industrial potential of the 19th century, thereby enabling Rockefeller, Ford, Carnegie, Vanderbilt and many others to accumulate fabulous wealth. Their business acumen was undeniable, but none of it could have been brought into existence without energy-rich oil.
Warfare sustains profits
The use of fossil fuels in our military machines industrialised our methods of killing while at the same time becoming synonymous with progress and commerce. War became a business, the purpose of which was the acquisition of more energy in the pursuit of profit. Battlefield deaths on an industrial scale are always an unlisted debit on the balance sheets of conflict.
WWI started with the muscle power of horses and ended with tanks and aircraft, demonstrating the murderous scope of mechanized warfare. Recognizing the critical value of oil and its sources, leaders carved up the Middle East after the war to ensure its supply. An exercise in map making in the 1920s by the English and French civil servants Sykes and Picot set the scene for carnage that has raged throughout the Middle East ever since. Arbitrary lines in the sand were drawn, artificial oil states in the Persian Gulf region were created without regard to tribal affiliations, and a quarrelsome orphan Israel was dumped into the lap of unwilling Bedouins. It still suckles on the milk of the USA.
As the quantity of oil there became apparent, all the major nations were drawn into the race for it because those who controlled this key resource were certain to subjugate those who did not.
The critical nature of oil made WWII inevitable. To sustain their empires, the Germans and Japanese slaughtered their way across Europe and Asia in a grab for resources, primarily oil. They promised infinite prosperity and their peoples cheered them on while deaths elsewhere were being counted in millions. With most of the world’s known oil supplies in the hands of his enemies, Adolf Hitler knew he had to have the oilfields of southern Russia and the Middle East to sustain his war machine.
He failed, and his dream of a ‘Greater Germany’ collapsed not because of inferior soldiers but because there was insufficient energy input to sustain his plan for world domination.
Hitler’s perception of infinite growth in his ‘thousand year Reich’ was clear: vast quantities of oil had to be burned to sustain his fantasy.
it mirrors our present-day view of ‘permanent affluence’.
We still burn it to fulfil our fantasies.
In our desperate scramble for ever-diminishing energy resources, we are in the same mad race to perpetuate the delusion of infinite economic growth. The oil pendulum has swung the other way with roughly 85% of accessible world oil now outside the borders of the USA and Canada in countries not always of a friendly disposition towards the ‘infidels’ of the west.
And just like the Fuhrer, political leaders of today are promising that which is beyond their means to provide. To mask this reality, they have invaded oil-producing nations in the name of ‘freedom’, claiming ‘victories’ which have left only wreckage and simmering animosity behind. So too did Hitler spread a similar line of propaganda that he was liberating other nations from the threat of communism.
The second world war that left Europe and Japan flattened in 1945 might be seen as history, but it was just the first of many oil wars, and the politics of it were a side issue. WWII serves as a grim reminder of how violent and destructive humans can be in their ruthless pursuit of energy resources. Hitler’s own ‘oil age’ lasted just twelve years, but it set the pattern for the world oil age that is now in terminal decline.
Don’t be deceived by the democratic righteousness that defeated Hitler’s fascism. 150 years earlier the American empire was created with the same kind of energy grab.
The European immigrant peoples who forced their way across America from the 1700s onwards needed resources on which to survive and to sustain the prosperity of an expanding nation just as the Germans and the Japanese did in 1940. The native inhabitants of the American continent were in the way of civilization and progress; their subjugation was a precursor to what happened later in Europe and Asia. Expansive prairies had to be cleared to convert the energy locked in grain and meat to feed the invaders and underpin negotiable currency.
This self-perpetuating process went into overdrive with the discovery of oil, and the ultimate conversion of that oil into more food resources and hardware added to the wealth of the growing nation. An expanding population needed employment, and the raw energy from oil, coal, and gas supplied it. America and the rest of the industrialised world had the means to build bigger, better, faster machines in endless succession, and created the most powerful country on earth. Everybody was going to be rich, forever.
The universal law of consumption was relentless: more demanded more.
Meat and grain grew with relatively little human intervention, but other crops needed to be worked with human muscle. So the slave trade came into being.
Slavery might be given many unpleasant names, but essentially it is the acquisition of one energy form to convert it into another for profit. Buy and feed the slave, use slave labour to do work, sell the product of that work. By the time the slave is worn out, several more will have been produced. This was simple economics by 18th century standards but the human consequences were again horrific, costing more millions of lives. It also brought on the American civil war where the slave-muscled South was overwhelmed by the industrialised muscle that drove the armies of the North.
All the European empires forged out of so-called ‘empty lands’ across the world followed a similar pattern of resource acquisition and an absolute disregard for weaker peoples. The African continent was effectively appropriated to serve the needs of European masters.
That is an unpleasantness that we choose to ignore, but it confirms the killing force that drives us to acquire and convert energy to our own use. The seemingly limitless amount of oil and its energy density appeared to be the answer to all our labour problems.
Oil became our ultimate slave. Or so we thought.
We now have maybe 20 years worth of usable oil left. There are certainly no more than 30, perhaps as little as 10. If one of the crazy sects running loose in the Middle East managed to get hold of a nuclear device, setting it off on the Gharwar oilfield of Saudi Arabia would end our industrialised infrastructure overnight. That is perhaps too bleak a prospect, but we should not discount that notion entirely.
We eat oil
Before our oil to food arrangement, the planet supported something over one billion people. We now have over seven billion, and the mothers of the next two billion are alive now and approaching the age of reproduction. Preachers, scientists and politicians will not stop the basic human function of eating and procreation, so if unchecked nine billion people will be here by 2040/50, and set to go on rising after that. Every new arrival expects to be fed, watered, clothed and housed, but by no stretch of the imagination will the global food system be able to feed that number let alone sustain them with what would be expected by way of the most basic material comfort.
No one dares to stand up and make the rather obvious point that we are not going to reach 9 billion. Something has to give, and that giving is going to be very unpleasant.
In the first decade of the 21st century, numerous wars have been fought over oil, and are being fought now.
Wars are fought over resources because on nature’s terms, gentle contentedness is not a good strategy for survival; we are collectively powerless against genetic forces that dictate our lives no matter how much we protest otherwise.
Downsized to whatever level, nature will ultimately force the choice of survival or death, and the outcome will be of no consequence other than to you and yours. Humankind has existed in its current recognisable form for a million years or so. In all that time, we have been engaged in a fight for survival. To expect humankind to change within a single generation is stretching credibility beyond breaking point.
Those who look forward to a life of bucolic bliss in a downsized oil-less world might do well to think about that.
Whether killing and butchering an animal to eat it, or invading another nation to secure oil supplies, we must appropriate energy sources to facilitate survival. You may think there’s a choice about doing that, but there isn’t, other than in the matter of scale. Whether paying a butcher to cut and wrap your steak, or paying soldiers to grab oil supplies, securing sufficient energy to live is what we have to do to survive.
For the moment, nature keeps us supplied with oil, and we’ve pulled off the neat trick of converting it directly into food. Not knowing when our oil is finished and our food supply will run out is the little teaser for the early 21st century. Right now, most people think that food comes from supermarket shelves and freezers, which is just as well. The food trucks moving around the country are basically mobile warehouses, delivering food just in time for it to be consumed. When the realization dawns that the food trucks have stopped, the food held in stock by retailers will be stripped bare in hours. The oil age for everyone will have come to an end.
But oil carries man’s destiny in far more subtle ways than food supplies. It holds nations together. The USA is a vast territory of disparate peoples and ideas, held together by a common (if tenuous) bond of prosperity and a basic consensus that government and law generally works for the good of all. And the inhabitants of empires are always convinced that theirs is permanent and protected by gods. That definition can be applied to many large nations to a greater or lesser degree. But the bonds that hold them together, godly or otherwise, are entirely subject to availability of affordable energy. Empires (and the USA is an empire) remain whole so long as the means exists to maintain them.
Oil has become that means.
Without oil, the nation will begin its decline into disparate regions. Without interconnecting transport, the United States of America cannot remain united. The force necessary to prevent a breakup will not be there, so within a decade (probably far less) of oil supply failure, the USA will cease to exist. The cracks are already there along linguistic, economic, racial, political and geographic lines. Even now it would be possible to take a pretty good guess at where those regions will split off.
This will be denied and resisted of course, but armies and police forces have power only as long as their fuel lasts. They will be unable to prevent secession in whatever form it takes. It might just be that Washington will come to govern not much more than the original colonies.
God will not allow the demise of humankind
To further this fallacy, Christian militancy has infiltrated the United States government. Executive decisions are now given credibility by bible references. The christian right, for the first time, sees real power as within its grasp.
Clearly, the ultimate intention is to forge church and state into a single entity, where justification for all law is based on bible text.
Or to give it its full horror, a Theocratic dictatorship
A suitably deranged political leader is now in office who cares for nothing other than personal gain, and consolidating his position.
To that end, the actions of his god-smitten underlings are of no consequence. If they manage to create a theocracy by default, then as long as profits flow, it is of no consequence to the current incumbent.
With prayers to the right god, there is a certainty that the ‘American Dream’ can be restored, with the expectancy of eternal bliss and the blessing of their god. Such demagoguery sets the stage for years of regional violence over the basics of life, particularly food and water. The horror of it will be justified by warped views of right and wrong, just as they were by Germany and Japan in WW2, clinging to a denial mentality magnified beyond any imagining by the privation that an oil-less society will bring.
This scenario is not exclusive to the USA. The British Empire was built on coal. When the coal was gone the empire faded away. Then in the 80s and 90s the UK became awash with cheap oil from the North Sea, and everyone was reasonably prosperous, particularly Scotland. Now the oil surplus has gone, and the UK is in decline again as a net importer. The ‘oil prosperity’ is fading away.
The link between oil and the ability to eat is clear. The UK has to import 40% of its food, and much of the rest depends on oil to produce it, which also has to be imported. It is the end of the UK’s oil age, but few admit to it being the end of a food age as well.
As the UK detaches itself from Europe, under the delusion that the ‘great’ will be put back into Britain, the reality will hit home that without oil surplus, the UK will be reduced to a third world country at starvation level. British farms cannot feed 65 million people.
The same problem is being revealed in the current fiasco of the rest of the European union, Oil-fueled prosperity is falling dramatically in the poorer southern countries. Greece, Spain, Italy and Portugal and a swathe of smaller nations have to import all their oil which only worked when oil was cheap. Now it’s expensive, and they are facing bankruptcy. 50 years of ‘unity’ is dissolving like a mirage in the face of the difficulties that smaller states are suffering. Without cheap oil, their economies cannot function, and so are disintegrating.
United Europe needs oil to stay united just as the USA does.
Russia’s oil dependent economy is crumbling, and Putin is having to make threatening postures to divert attention from his problems. His oil age is ending in a different way and yet we cannot tell if his posturing is just that, but a shortage of resources in the past has invariably brought conflict.
Move to the Far East and the nations around the South China Sea are all threatening one another, again the focus of the argument being the oil and gas fields of the region. They all know that without oil they cannot survive, and are prepared to fight for every last drop of the stuff, no matter what the cost. As a measure of what the dispute is about, the volume of oil in question is 11 billion barrels. One billion barrels is less than a month of world consumption. They are preparing to fight over the last dregs in confirmation of man’s desperation over oil shortages. Eventually, this problem will hit every nation and individual on earth as our oil-crutch is kicked away. And with the oil age fading into history for us all, there will be no shortage of violent resistance to this inconvenient truth."
The 3 ‘Forever Foods’ You Need To Stockpile
https://www.diehardsurvivor.com/the-3-forever-foods-you-need-to-stockpile/2/
Peak oil in Asia Pacific (part 1)
By matt
June 18, 2018
Posted in: Asia, BP Statistical Review, China, South East Asia
http://crudeoilpeak.info/peak-oil-in-asia-pacific-part-1
Many interesting graphs on Peak Oil in Asia.
Looks like the Middle East will be the last "watering hole" for Asian oil.
sumisu
Understanding the Behavior and Function of Plant Leaves to Increase Growth
https://www.benefunder.com/environment-causes/elizabeth-van-volkenburgh/understanding-the-behavior-and-function-of-plant-leaves-to-increase-growth
That is really a bummer with your onions. We use the same vendor, yet my climate in New England has been cooler and more rainy. Here is my onion bed today:
My main tomato bed of six tomatoes is doing fine.
My bitter melon, a tropical melon, is woefully behind:
I resorted to growing the bitter melon in a round raised bed fashioned out of a half of a composter plus using a teepee trellis, which I have never seen before. Anyway, the black composter heats up the soil pretty well.
I'll report on my potato experiments in another post and after a harvest.
Hope your other crops are doing better than your onions.
sumisu
For me, Hawaii's Kilauea volcano is a clarion call to begin preparing for a cold period. Had this volcano lasted for a day or two, I would be lulled into not reacting. But since it began on May 3, 2018 and has been spewing lava and poisonous gases for a long while, I began posing a "what if" series of volcanoes erupting world-wide and their potential impact on weather.
The summer of 1816 was known as the "Year without a summer" and had devastated attempts to grow food in the northern hemisphere. "The aberrations are now generally thought to have occurred because of the April 5–15, 1815, Mount Tambora volcanic eruption[21][22] on the island of Sumbawa, Indonesia.[23]
https://en.wikipedia.org/wiki/Year_Without_a_Summer#Causes
Things are lagging somewhat in my garden this summer, but I should not be suffering. My worry is what happens next year, if there are other volcanoes of long duration that put a crimp on growing in the future to possibly create another "year without a summer" experience.
As I once told you plus maybe others on this board, my Grandma always used the expression of "Food Insurance" in relating her experience going into the winter of 1930 after my Grandpa's construction business was bankrupted by The Great Depression. Henceforth in the 1930s she had a large productive garden with canning a must to survive the cold winters. She had connections with small farms to get chickens regularly, but her security after surviving that one year was attributed to canning and her filled root cellar. When I bought my small property, she brought up gardening as "Food Insurance" and over time I added that "Soil is nature's refrigerator."
Once again, I have saved your post and will take appropriate action to secure my "Food Insurance."
Thanks,
sumisu
The limits to growth – Donella Meadows, Dennis Meadows, Jørgen Randers and Behrens William W. III – 1972
MEADOWS Donella, MEADOWS Dennis, RANDERS Jørgen, BEHRENS William W.III, The limits to growth, Universe books, 1972
https://jancovici.com/en/readings/societies/the-limits-to-growth-donella-meadows-dennis-meadows-jorgen-randers-and-behrens-william-w-iii-1972/
Charles Krauthammer, conservative commentator and Pulitzer Prize winner, dead at 68
http://www.foxnews.com/politics/2018/06/21/charles-krauthammer-conservative-commentator-and-pulitzer-prize-winner-dead-at-68.html
Charles Krauthammer, a longtime Fox News contributor, Pulitzer Prize winner, Harvard-trained psychiatrist and best-selling author who came to be known as the dean of conservative commentators, has died. He was 68.
His death had been expected after he wrote a heartbreaking letter to colleagues, friends and viewers on June 8 that said in part “I have been uncharacteristically silent these past ten months. I had thought that silence would soon be coming to an end, but I’m afraid I must tell you now that fate has decided on a different course for me…
““Recent tests have revealed that the cancer has returned. There was no sign of it as recently as a month ago, which means it is aggressive and spreading rapidly. My doctors tell me their best estimate is that I have only a few weeks left to live. This is the final verdict. My fight is over.”
In recent years, Krauthammer was best known for his nightly appearance as a panelist on Fox News’ “Special Report with Bret Baier” and as a commentator on various Fox news shows.
But Krauthammer was arguably a Renaissance man, achieving mastery in such disparate fields as psychiatry, speech-writing, print journalism and television. He won the Edwin Dunlop Prize for excellence in psychiatric research and clinical medicine. Journalism honors included the Pulitzer Prize for Commentary for his Washington Post columns in 1987 and the National Magazine Award for his work at The New Republic in 1984. His book, “Things That Matter: Three Decades of Passions, Pastimes and Politics,” instantly became a New York Times bestseller, remaining in the number one slot for 10 weeks, and on the coveted list for nearly 40.
Krauthammer delivered his views in a mild-mannered yet steady and almost philosophical style, befitting his background in psychiatry and detailed analysis of human behavior. Borrowing from that background, Krauthammer said in 1990, after the fall of the Berlin Wall, that the post-Cold War world had gone from bipolar to “unipolar,” with the United States as the sole superpower. He also coined the term “The Reagan Doctrine,” among others.
Krauthammer harbored no compunction about calling out those in power, whether they were Democrats or Republicans or conservatives.
During the Democratic National Convention, he assailed lack of substance in the build-up to nominating Hillary Clinton.
“As for the chaos abroad, the Democrats are in see-no-evil denial. The first night in Philadelphia, there were 61 speeches. Not one mentioned the Islamic State or even terrorism.”
“In this crazy election year, there are no straight-line projections,” he noted, adding presciently, “As Clinton leaves Philadelphia, her lifelong drive for the ultimate prize is perilously close to a coin flip.”
At the same time, Krauthammer was quick to express disagreement with President Donald Trump in no uncertain terms.
He denounced Trump’s handling of the violence that erupted at Charlottesville, Va. protests over the planned removal of a Robert E. Lee statue, saying that most Americans were "utterly revolted by right-wing white supremacist neo-Nazi groups.” Krauthammer said that Trump’s failure to strongly denounce the supremacist group, and to say that both sides in the protest shared blame, “was a moral disgrace.”
The man who wore many hats, figuratively, throughout his life -- excelling at just about everything he tried, even when he was still a rookie -- easily took himself in new directions when curiosity or instinct struck.
Krauthammer’s intellectual heft belied an ability to be candid and witty about his quirks.
"Everything I've gotten good at I quit the next day to go on to do something else," he quipped in a 1984 interview with The Washington Post.
Krauthammer embraced a strong personal constitution that kept him determined and resilient, even in the face of extraordinary physical limitations.
He spent most of his life confined to a wheelchair, the result of a snap decision -- when he was 22 years old and a first-year student at Harvard – to go for a quick swim with a friend before a planned game of tennis.
“We go for a swim, we take a few dives and I hit my head on the bottom of the pool,” he said in a Fox News special in 2013 that looked at his life. “The amazing thing is there was not even a cut on my head. It just hit at precisely the angle where all the force was transmitted to one spot…the cervical vertebrae which severed the spinal cord.”
Unable to move, and at a time when his studies happened to focus on the spinal cord, Krauthammer instantly knew the consequences of the accident would be severe.
“There were two books on the side of the pool when they picked up my effects,” he recalled. “One was ‘The Anatomy of the Spinal Cord’ and the other one [was] ‘Man’s Fate’ by Andre Malraux.”
A lifelong opponent of being stereotyped in any fashion, Krauthammer was not going to let being in a wheelchair define him.
"I don't like when they make a big thing about it," he told the Washington Post. "And the worst thing is when they tell me how courageous I am. That drives me to distraction."
"That was the one thing that bothered me very early on," Krauthammer said. "The first week, I thought, the terrible thing is that people are going to judge me now by a different standard. If I can just muddle through life, they'll say it was a great achievement, given this.”
"I thought that would be the worst, that would be the greatest defeat in my life -- if I allowed that. I decided if I could make people judge me by the old standard, that would be a triumph and that's what I try to do. It seemed to me the only way to live.”
As soon as he could after the accident, Krauthammer forged ahead with his studies, finishing medical school and going on to do a three-year residency at Massachusetts General Hospital, where he wrote about a condition he called “secondary mania,” which gained wide acclaim.
Then Krauthammer realized his heart was not really in health care, and after going to Washington D.C. and making some connections, he ended up as a speech writer for Democrat Walter Mondale during Jimmy Carter’s re-election campaign.
Later, as a writer for The New Republic, Krauthammer, then a self-styled Democrat, exhibited the kind of willingness to criticize political leaders regardless of their party.
"I'm very unhappy with the Democratic foreign policy," he told the Post. "And I'm very unhappy with Republican domestic policy."
"If I have to choose between Republican foreign policy and Democratic foreign policy I would choose the Republican. That's not to say there's a lot in it I don't find wrong, but they have done certain good things in foreign policy."
About a decade ago, Krauthammer joined Fox News, drawing praise from conservatives, moderates, and liberals for his thoughtful and meticulously framed remarks.
New York Times columnist David Brooks called him “the most important conservative columnist.”
When his book became a fixture on the New York Times bestseller list, Newsweek observed: “To those who are trying to make sense of the rise of the conservative movement, Krauthammer’s success is a triumph for temperate, smart conservatism.”
Krauthammer politely downplayed the accolades.
“I don’t know if I have influence,” he was quoted as saying in Michellbard.com. “I know there are people who read me and people who make decisions who read what I write and they may be affected…my role is to challenge them, but people don’t come up to me on the street and say ‘I used to be a liberal until I read you.’”
“My goal is to write something parents will clip and send to their kids in college.”
Charles Krauthammer was born in New York in 1950, and grew up in Montreal, steeped in the Jewish faith.
His father, Shulim Krauthammer, was Austro-Hungarian and his mother, Thea, was born in Belgium. His parents met in Cuba.
Before going to Harvard Medical School, Krauthammer attended McGill University, and Oxford, where he met his wife, Robyn.
They had a son, Daniel. Both his wife and son survive him.
Despite his busy professional life, Krauthammer enjoyed baseball and chess, and made his family a priority.
He often spoke of growing up in a happy, tight-knit family, and spoke proudly of his wife and son.
Elizabeth Llorente is Senior Reporter for FoxNews.com, and can be reached at Elizabeth.Llorente@Foxnews.com. Follow her on Twitter @Liz_Llorente.