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Exploring emotional reactions to peak oil
by Kathy McMahon
The first blog post is usually the toughest, especially when you are trying to write about something that has no existing ‘experts.’
I’m a psychologist, I’m not a geologist, financial expert, political analyst or economist.
Yet, my world was dramatically changed when I learned about Peak Oil and began to read about all the related issues. Before learning about PO, my specialization was sex and couples therapy. I saw the world through the eyes of a middle-class US citizen. Electricity came from light switches. Oil was brought by a truck or pumped from a service station. I bought my food at the supermarket, albeit an organic food market, and my water was from my tap or in bottles. The value of my house kept going up, as did the taxes. I felt secure with a middle-class income, a home, and a healthy daughter that just finished college and was happy in a new job.
Then I learned about PO.
After that, I could no longer see the world in the same way. I realized that psychotherapy, while helpful to people in a ‘normal’ world, could easily become destructive to those with a PO view of the world. I call it “psychological terrorism.”
I realized how electricity was intimately linked to (in my case) gas or other fuels. As the price of gasoline began to rise, I was well aware of why and what it meant. I could see how food in the supermarket required fossil fuels for fertilizers, farming equipment, trucks, cold storage, heat and utilities. I began to worry about chemical companies buying up seed companies and taking out patents on common food seed. I learned how agribusiness treats animals that enables us to eat so cheaply and at what cost. I learned about the water shortage and water itself became a more precious commodity to me. I saw debt, any debt including my mortgage, as a threat to my future financial independence. I saw my spending habits and lifestyle for what it was: wasteful, thoughtless, excessive and leaving a huge environmental ‘footprint.’
As I looked around, I began to see the world with a ‘before and after PO’ view. I would say to myself “We won’t have that around anymore after PO.” The more I looked around, the more things I realized would go, like plastics or kiwi fruit. The more I looked into becoming more self-sufficient, the more awe I had at how ‘easy I had it.’ I realized how insulated I was from skills that were commonplace in my grandmother’s era. At times I became overwhelmed (and still do) at the amount of information I don’t possess. I would get dizzy trying to figure out what I needed to know from what would continue to be available to me for a long time to come.
I watched myself go through a wide range of emotions. I went through periods of shifting denial, and an attempt to find believable critics. I would work diligently on a permaculture project, and watch my spending carefully, then “forget” and go out to dinner or another unnecessary expense. I’d feel hopeful and elated, depressed and worried, busy and determined, overwhelmed and frozen. All the while, the stock market continued to ’soar’ and everything looked ‘normal’ in the culture around me.
My actions seemed ‘irrational’ to those who couldn’t accept the concept of PO. I had to make decisions about how I could talk to them and based on their responses, whether I should keep up the conversation. Some friends instantly understood the concept. Others were willing to be supportive, but had no intention of doing anything differently themselves. Still others refused to even discuss the issue with me.
I searched the PO sites and the internet to find out more about the kind of feelings and reactions I was having. I found people talking about their own individual reactions to learning about PO. I’d hear people on sites say “Ya, I know, I went through the same thing when I first heard” and I’d think, “Yes, I did too,” but none of my colleagues were talking about it. In fact, as a psychologist, I know what my reaction might have been if a client began to describe ‘the end of the world as we know it’ and all the action they were taking, and I was ignorant of PO. Several diagnostic categories would fit neatly.
But reactions to PO aren’t ‘diagnostic indicators.’ I now believe that there is a way to begin to understand the emotional impact of PO and to share that knowledge with others to help them move forward. I believe that there are different reactions depending on your age and circumstances. A twenty year old in college in an urban area who just found out about peak oil is going to react differently than a 60 year old farmer in the Mid-West who has been expecting it for some time. Someone making minimum wage is going to react differently than the professional with a substancial 401k and a large house in the suburbs. I believe there are ‘fuzzy sets’ that aren’t rigid categories saying “If you are in this situation, you will react this way” but nevertheless, there are generalizations that can be made about people at different:
stages of Peak Oil awareness,
life stages,
economic circumstances,
gender,
professions,
living environments,
parental status
… to name a few.
I wrote a story for a contest about the future without fossil fuels that was published at www.beyondpeak.com, and won second place. You can read it here:
www.beyondpeak.com/scenarios/grandnana.html.
The point of my story was to suggest that there were constructive actions that could be taken today to put oneself in the best circumstances to weather the upcoming ’storm.’ These actions required community building and using the skills each of us have toward mutually beneficial action. This blog, and www.peakoilblues.com is my contribution.
I’ve tried to gather up people who I feel are eloquent speakers of their own experiences and invited them to share their own thoughts, opinions, reactions, and emotions as they live in these ‘interesting times.’ If you also have something to contribute, join us. Together, we can help each other move forward toward a future we want to live in.
Kathy McMahon
--------------------------------------------------------------------------------
Kathy McMahon, Psy.D. is an adjunct professor, a clinical psychologist, certified sex therapist, trainer, and a newbie chicken farmer in Massachusetts.
Believing that the 'personal IS political,' she thinks a lot about the elements of emotionally preparing for a post-fossil fuel age. Despite being pessimistic about the future of cheap energy she's very hopeful about the power of small groups of people creating a simpler but more meaningful life together, while simultaneously annoying each other in the process. She has been quoted as saying "If I can't dance, I don't want the Armageddon." Read her at www.peakoilblues.com and reach her at peakshrink AT peakoilblues DOT com
http://www.energybulletin.net/19718.html
Helping cities, towns and municipalities adapt to peak oil
by Randy White
Hubbert's Prescription for Survival, A Steady State Economy...
Bringing the Food Economy Home...
As a member of the Portland Peak Oil Task Force, I am excited to see the amazing progress our team is making. The twelve members of the Task Force come from various backgrounds, including land use planners, social workers, business executives, farmers, environmental experts, and more.
For readers who understand the dire consequences we face with fuel and food shortages in the not too far off future, rest assured this team has a deep understanding of complex eco and business systems.
Currently, the team is interviewing businesses and organizations to understand the impacts of peak oil from a systems level down to individual citizens.
While I am excited about the progress our group is making, the challenges ahead of us are staggering. The biggest issue facing the Task Force (in my opinion) is how to help businesses and citizens make changes for a reality many of them are unaware of and unprepared for. With such a complex system oil based system interdependencies, small changes will not be enough to offset the anticipated devastating impacts of peak oil.
At the end of the Task Force's mission, we will submit a report to the city council with a shortlist of recommendations. While the following list of recommendations are NOT the recommendations of the Portland Peak Oil Task Force, they are my own - available to any local governments with the intestinal fortitude to heed the advice.
For readers interested in what can be done on a local level, please consider taking the following suggestions and recommendations to your local government leaders. I truly believe there is no time to lose.
Change school curriculum for High schoolers in grades 9 - 12 to prepare for a fast changing world
Mandate classes for students in 9th - 12th grade that teach everything from basics of earth's ecosystems to Biointensive food growing practices.
Recommended texts for students: When Technology Fails, The Long Emergency, sustainable agriculture books
(We will need new textbooks for schoolteachers based on sound principles of earth's reality, complete with questions and tests for students. It would be based on both needed changes to adapt to the earth's changes.)
Create awareness campaigns and encourage homeowners to buy products and services from local companies that can help convert parts of or their entire lawn(s) to food gardens
(May need to lobby Homeowners Associations)
The city can create assistance and learning programs catered to biointensive food growing practices appropriate for geographical areas. For citizens without land access, create bond measures or taxes for land / home buy-back programs and fund the growth of community gardens in the city and surrounding suburbs.
Continue fostering growth of Farmers Markets and Community Supported Agriculture
This can also expand to work with local grocers / council national grocery chains to offer shelf space for local growers
Create "food preparation, storage and nutrition" classes for citizens
Based on seasonal growing patterns, what can be grown when, and how to keep your health and nutrition all year long.
Expand business and residential composting programs
Helps turn waste into useful, natural soil boosters to grow more food
Mandate energy efficiency inspections for homes and buildings
Create achievable standards. For businesses and citizens that can't afford to retrofit and upgrade to these standards - create neighborhood volunteer programs and create incentives to boost volunteer participation and assistance.
Offer consulting for businesses and citizens looking to prepare and make changes for Peak Oil
This can be paid for by citizens and businesses by passing a reasonable "Peak Oil Preparation" tax or diverting funds from other programs
Assess local food production abilities
Study and prepare plans to begin relying on food generated and transported within a 100 mile radius of the city. Adjust the radius depending on available farmland
Encourage neighborhood grown food swaps
Foster neighborhood food swaps based on produce grown within the city.
Create program for sustainable year round water usage for urban farming
Assuming increased usage due to increased urban farming. Create action plan including rainwater harvesting and efficiencies based on existing water system.
Create or expand neighborhood introduction programs
Foster programs that help neighbors get to know one another (like City Repair)
Continue to encourage use of public transportation, biking, walking, and carpooling
Cities can learn from other cities leading the charge with success (Portland, San Francisco, etc.)
Foster neighborhood co-op owned fueling stations
Pair farmers making alcohol in their own micro-refineries / distilleries with neighborhoods that purchase the fuel from their own alcohol fuel co-op. (Fact: Alcohol can be used as a fuel)
Offer "Earth Shift" support groups
Help people cope with change to help prevent a rise in crime, violence and drug use.
Create "Wisdom of the Elders" program
Like a "Big Brother / Big Sister" program, match eldery citizens that survived the Great Depression with today's youth leaders.
Create a re-use storage program
Instead of recycling, collect used plastic containers and glass from citizens and businesses normally setting them out on the curb. Clean out waste product from these containers and begin storing them in empty city owned wearhouses for future use and distribution to citizens.
Randy White is a member of the Portland Peak Oil Task Force. He works as an advertising executive for AM620 KPOJ, Portland's Progressive Talk Station
Spellbound,
I remain cautiously optimistic about West Hawk.
As I indicated in prior posts, there is an immediate demand for its products, and the demand will increase tremendously with Peak Oil. This is definitely my Peak Oil play, at this point. And it's still a penny stock.
The private placement announcement immediately diluted the price of the stock, but it has rebounded somewhat. But in the end, I'd rather have the dilution to propel the company into a revenue producer. Otherwise, the stock price would die.
Also, the coal reserves are vast for a company of this size. I do believe that they will someday become a target for joint ventures, as the price of oil increases.
Governments must push for clean coal technology. This could be part of a worldwide effort to meet Peak Oil head on, imo.
Further, the Federal Government should begin investigating different ways to wean General Motors and Ford off of car production and into producing alternative energy products, such as windmills, solar panels, etc. etc., again in my opinion.
Stay tuned, a lot will be happening over the next few years.
I just hope that it is positive.
sumisu
The Dirty Secret
Better technologies exist for extracting coal, a major source of carbon dioxide emissions. The challenge is getting people to adopt them.
By David Talbot
Smog in Shanghai results from the burning of low-grade coal. Chinese coal consumption is rising sharply. (Credit: Sherlyn Menez/WPN)
Coal is the black sheep of the energy family. Uniquely abundant among the fossil fuels, it is also among the worst emitters of greenhouse gases. Mindful of coal's bad reputation, President Bush promised the world three and half years ago that the United States would develop a superclean coal plant in an initiative known as FutureGen. The plant would have zero emissions; even the carbon dioxide it released would be pumped underground.
Today there is a patch of land in Great Bend, OH, where an advanced coal plant may one day be built. The plant could eventually include equipment for siphoning off carbon dioxide. But it's not FutureGen, which today remains a collection of research projects. No FutureGen plant has been constructed, and no site for one has been chosen. The proposed plant at Great Bend could more appropriately be called "PresentGen." The technology involved doesn't demand a White House neologism suggesting that clean coal is something for which we must wait.
Great Bend is owned by American Electric Power (AEP), the largest coal-burning company in the United States. The company proposes to build what's called an integrated gasification combined-cycle (IGCC) plant. IGCC is frequently referred to as a "new technology," but it's really a combination of two well-established technologies -- both of which are also intended for FutureGen. The first is gasification, in which coal is partly combusted under carefully controlled temperatures and pressures and turned into a concentrated "syngas" of mainly carbon monoxide and hydrogen. (From syngas, impurities such as sulfur dioxide can readily be removed.) The second is the "combined cycle" -- the electricity generation technology already ubiquitous in natural-gas power plants, where turbines are driven both by a stream of gas and by steam produced from waste heat. Most importantly, carbon dioxide can be captured from a gas stream far more easily than from the smokestacks of a conventional coal plant.
IGCC plants are vastly more advanced than today's pulverized-coal plants -- which are planned in ever larger numbers around the world -- but they're hardly futuristic. "We've done a pretty thorough due diligence on the technology, and we didn't casually come to the conclusion that IGCC was ready," says Robert Powers, AEP's executive vice president for generation. "Gasifiers have been used since the turn of the last century, in a crude sense, and used in the petrochemical industry and refining industry for years. And certainly, on the generating end of the plant, combined-cycle combustion turbines -- we own combined-cycle combustion plants now. Each of those pieces is a mature and developed technology."
Indeed, coal gasification, developed about a century ago, has long been the technology of last resort for countries unable to gain access to oil. The Nazis used it to fuel the Luftwaffe; South Africa adopted it during apartheid. In North Dakota, a coal gasification plant went online in the early 1980s after the Arab oil embargo, later began capturing and selling its carbon dioxide for use in oil recovery, and is still humming today.
And AEP is not alone in revisiting the technology. In Pennsylvania, an industrial consortium is proposing a 5,000-barrel-per-day coal-to-liquid plant, using technology from South African gasification giant Sasol. Peabody Energy is talking about a plant in Illinois that would produce natural gas from coal. The governor of Montana, Brian Schweitzer, is trying to jump-start a coal-to-liquids industry in his state. Abroad, a few companies are planning "oxy-fuels" plants, in which coal is burned in pure oxygen. (The exhaust gases are mainly carbon dioxide and water vapor; water can be condensed and removed, allowing collection of the concentrated carbon dioxide.)
What's lacking is broad action to build such plants in significant numbers. Coal presents the world's single largest opportunity for carbon dioxide mitigation. Coal consumption produces 37 percent of the world's fossil-fuel-related emissions of carbon dioxide, the chief greenhouse gas. While oil consumption produces more -- nearly 42 percent -- much of that comes from cars, trucks, planes, and other means of transportation for which carbon dioxide capture is practically impossible. In the United States, coal contributes 51 percent of the electricity but 81 percent of the carbon dioxide related to power generation. The technology for cleaner coal plants and carbon dioxide capture exists. But in a story repeated across many energy sectors, little of it is actually being used.
AEP expects the Great Bend IGCC plant to cost 15 to 20 percent more overall than a conventional coal plant, but it could recoup the difference from customers under pending regulation in Ohio and West Virginia (site of a second proposed AEP IGCC plant). Capturing the carbon dioxide emitted by the plant, however, is another story. This part of AEP's site plan is literally a blank space, reserved for some future day when carbon dioxide emissions might be regulated. AEP says it is already deploying its own strategies to cut carbon dioxide emissions by 6 percent. But like the White House, it opposes carbon dioxide limits -- on the grounds that the United States shouldn't do anything China and India aren't doing. Yet the technology for carbon capture is mature, too. For years, the Norwegian company Statoil has been capturing and sequestering carbon dioxide produced by its natural-gas wells in the North Sea. And AEP maintains the position that underground sequestration seems feasible in regions it serves.
If IGCC is more than ready, its benefits are apparent, and sequestration seems plausible, why aren't plants that at least make carbon dioxide capture simpler getting built? "I don't necessarily think the technology is the limiting step. What's not there is the economic incentive, of course," says Howard Herzog, a chemical engineer at MIT, who manages an industrial consortium called the Carbon Sequestration Initiative. AEP estimates that IGCC plants with carbon sequestration could carry a 50 percent overall cost premium compared with traditional plants. But IGCC plants are also a little more efficient than traditional plants, and their cost might come down when they're built in volume, or if improved designs and materials boost their efficiency further. Markets might even emerge for carbon dioxide, which can be pumped into oil wells to enhance production. Still, the proliferation of better coal-fired power plants will need kick-starting. "You are not going to do this without some policy changes," Herzog says. "But technology-wise, I think we can do this quickly."
The Coal Menace
Coal supplies 24 percent of all global energy and 40 percent of all electricity, and it spews more carbon than any other fossil source -- kilowatt for kilowatt, twice as much as natural gas. Yet coal is the most abundant fossil fuel, and its use is intensifying. While estimates of remaining fossil supplies vary, the World Coal Institute says there are 164 years' worth of coal still in the ground, in contrast to just 41 years' worth of oil. Coal is being enthusiastically mined not only in the United States but also in India and China (where at least 79 percent of electricity comes from coal). The equivalent of more than 1,400 500-megawatt coal power plants are planned worldwide by 2020, according to the Natural Resources Defense Council. This includes 140 U.S. plants of various sizes. "Coal is going to be used. It was a bad joke played by God that oil and gas were put where there is no demand, and coal was put in China, India, and the United States," says Ernest J. Moniz, an MIT physicist and a former under-secretary of the U.S. Department of Energy.
In short, we're stuck with coal. Since there's little reason to expect that humankind will stop digging for it, we will have to find cleaner ways to burn it. This was made clear by a Princeton University analysis that showed immediate ways to reduce carbon dioxide emissions. The analysis goes like this: Already, humankind is pumping about seven billion tons of carbon per year into the atmosphere, about three times as much as in the 1950s, and that figure looks likely to double by 2055. (These tonnages are for carbon; for carbon dioxide, multiply by 3.7.) At that rate, we're on track to triple atmospheric carbon dioxide concentrations from preindustrial levels, creating temperatures not seen since three million years ago, when sea levels were 15 to 35 meters higher (see "The Messenger").
But the Princeton group, called the Carbon Mitigation Initiative, showed that it's possible, with today's technologies, to deploy a variety of strategies that would each save one billion tons of carbon emissions per year. Deploy seven over the next 50 years and you've at least stopped the increase in carbon emissions. The group calls each billionton saving a "wedge." Its report showed that sequestering carbon from 800 coal power plants -- or 180 coal-based synfuels plants, which make liquid fuels -- would furnish a wedge each. So would tripling nuclear power, doubling automotive efficiency, and implementing the best available energy efficiency technologies in buildings (see "The Un-Coal"). "These aren't pipe dreams. These are here today and could be deployed at scale," says Princeton's Robert Socolow, a professor of mechanical engineering and codirector of the Carbon Mitigation Initiative.
But not all wedges are created equal. If we "get the automobiles wrong," says Socolow, it's not an insurmountable problem, because "they are not going to be there 20 years from now. But when we build a power plant -- a new one -- it's going to be around for 50 or 60 years." And that -- along with coal's impending status as the remaining cheap fossil fuel -- is why a discussion of wedges very soon becomes a discussion of coal.
The Plug
We still need even better clean coal technology, but when it comes to reducing carbon emissions, the overriding research question is geological. No clean coal technology can forestall climate change without the aid of carbon dioxide sequestration. Unless the carbon dioxide from coal-fired plants is permanently stored somewhere, it will go into the atmosphere and worsen global warming. Sequestration proposals include pumping carbon dioxide underground, pumping it under the sea, and mineralizing it for burial. But significantly reducing carbon emissions while still increasing fossil fuel consumption will require a massive effort: liquid carbon dioxide would have to be sequestered on the same general scale on which the original fossil fuel sources were removed. It's a staggering proposition.
To date, pumping carbon dioxide underground has mainly been a way to push more oil to the surface; the primary objective wasn't really to store carbon dioxide permanently. So a critical question remains unanswered: will carbon dioxide stay where you want it?
In an old steel-walled lab at Los Alamos National Laboratory in New Mexico, geochemist George Guthrie holds out a smooth chunk of cement the size of a sea scallop. The chunk was recently drilled out of cement poured more than 50 years ago to plug the pipe in an old Texas oil well that had been crammed with carbon dioxide to enhance oil recovery. Guthrie holds up the chunk: a quarter-inch swath of it is the color of an orange Creamsicle. This staining, Guthrie says, is acid corrosion induced by carbon dioxide, which forms carbonic acid when it mixes with groundwater.
The chunk is a kind of Rorschach test. On the one hand, it could be read to imply that the carbon dioxide damaged the cement plug. On the other hand, it might imply that the damage was minimal -- and may not progress further. There's a lot riding on the answer. If the plug on a reservoir blew, the carbon dioxide could be released -- and the climate benefits of sequestration would, as it were, vanish into thin air. "There are significant consequences for doing this wrong," Guthrie observes. "On the other hand, it may be that much of the technology for doing this right already exists. There has been such enthusiasm behind [sequestration] that it is easy to forget about the implications of doing this on such a large scale."
There is reason for guarded optimism. The Statoil project and the Dakota gasification plant have already stored 20 million tons of carbon dioxide each; a gas field in Algeria has stored 17 million tons; a project in the Netherlands, eight million. The U.N.'s Intergovernmental Panel on Climate Change estimates -- based on experience and on models -- that properly engineered systems could retain 99 percent of their carbon dioxide over 100 years and would "likely" do so over 1,000 years. AEP's Powers, too, seems confident. "If you look at the science, it suggests that our footprint in the U.S. is blessed with the right geologic formations to sequester hundreds of years' worth of CO2 emissions," he says. "I'm not trying to trivialize the public-policy aspect of this, but you get a picture painted that the geology is there."
What carbon dioxide we can't sequester, or sell to oil companies hoping to use it to force out more oil, we could use to produce alternative fuels. Specifically, it could help make methanol, which could be a more practical fuel than hydrogen. Hydrogen is merely an energy carrier; energy is required to create it in the first place, either by splitting water molecules with electricity or by extracting it from fossil fuels. To make the transition to a "hydrogen economy," not only would you need to produce the hydrogen, but you'd also need an entirely new infrastructure for delivering and storing it, plus vast improvements in fuel cell technology to make it useful.
But if you took hydrogen and combined it with carbon dioxide (which would be, admittedly, another energy-consuming step), you could produce methanol, essentially creating a liquid energy carrier. Unlike hydrogen, methanol could be transported using today's infrastructure and burned in slightly modified versions of today's vehicles. "The president says nice things about moving from a carbon-based economy to a new one. I think it's said easily, but it's not so easily done," says George Olah, a Nobel laureate in chemistry and director of the Loker Hydrocarbon Research Institute at the University of Southern California. Olah is an active proponent of the "methanol economy": "What I'm saying is that we have the basis of carbon dioxide that can be recycled," he says.
Carbon's Price
After President Bush told the nation it was addicted to oil in the State of the Union address this year, he reeled off several clean-energy research ideas and said we were "on the threshold of incredible advances." The implication seemed to be that we need these "incredible advances" before we can really get serious about replacing fossil fuels or dealing with climate concerns.
The reality is that we already have several good technological options. The question remains one of policy. No energy company will reduce carbon dioxide emissions unless carbon dioxide has a cost. But because emissions are a classic example of what economists call a "negative externality," where the cost of a thing is not borne by the parties involved in a transaction (here, energy producers and buyers), the government must impose that cost through regulation. One approach would be a "cap and trade" system -- used successfully for sulfur dioxide -- in which an overall limit is set on emissions from all regulated sources. Companies work out where best to cut emissions, then trade emissions credits in order to stay under the collective national "cap," which can be gradually lowered as cleaner technologies emerge.
The first halting steps toward carbon dioxide regulation are being taken. California has moved to limit greenhouse-gas emissions from vehicles -- but is facing court challenges from the auto industry. And the European Union has launched a carbon-trading system, now in its initial phase (see "Rocky Start for CO2 Trading"). But in the U.S., there is little imminent likelihood that carbon dioxide emissions from vehicles or power plants will be federally regulated.
In the summer of 2006, there is good reason to think that technology available today can significantly mitigate the carbon dioxide problem. But the technology is not enough. "People think you can do this without the policy, and that's a myth," says Herzog of MIT. Without public policy that imposes a cost on carbon emissions, he points out, "it's always going to be cheaper to put it in the atmosphere than to do capture and storage." Still, he and Socolow believe that regulatory help may be on the way. "We are at the point where some carbon dioxide policy is going to come out," Socolow says.
In Great Bend, AEP is preparing for a possible new regulatory climate. It sees clean coal technology as more than ready -- in this case, combined-cycle power plants from GE married to gasification technology purchased from Chevron. But without a policy incentive, AEP will not do any carbon dioxide sequestering. As the world digs for more coal, and the atmospheric concentrations of carbon dioxide inexorably rise, the part of the Great Bend plant that would capture and store carbon dioxide -- forming a key wedge against worsening climate change -- remains an empty space on an engineer's drawing.
David Talbot is Technology Review's chief correspondent.
Copyright Technology Review 2006.
BHP Coal Operations at Whim of Markets
By Charlotte Mathews and Viwe Tlaleane
24 Aug 2006 at 09:02 AM EDT
JOHANNESBURG (Business Day) -- BHP reported record profits yesterday, however two commodity sectors underperformed, coal being one of them. In “energy coal”, prices and volumes were flat and BHP Billiton’s [ASX:BHP; NYSE:BHP; LSE:BLT] coal operations experienced the same cost pressures as the rest of the industry.
Cost pressures affected underlying earnings before interest and tax by 5.7%, excluding the effects of inflation. About a third of this was structural and the remainder was one-off costs, he said. About a quarter of cost pressures came from higher energy and fuel prices, more than offset by higher prices BHP Billiton received for the sale of energy products.
The recovery plan at SA’s Ingwe Coal was “taking hold” BHP Billiton chief financial officer, Alex Vanselow said, and improved results were expected from Ingwe in the medium term.
BHP Billiton executive president Mike Salamon insisted yesterday that energy coal, and Ingwe Coal in particular, were core parts of the group’s overall strategy.
There is continued suspicion in South Africa that BHP Billiton is planning to withdraw from its coal operations in the country.
The speculation has been fuelled by Ingwe’s sales of assets such as Koornfontein and part of its Richards Bay Coal Terminal export allocation.
But it would be an odd decision in view of South Africa’s growing demand for electricity, much of which would come from coal-fired power stations.
Salamon said that although energy coal for BHP Billiton meant its operations in South Africa, Colombia and Australia, more significant growth was expected from Australia and Colombia.
Ingwe Coal had been through “a tough few years”, aggravated by heavy rainfall in the Witbank area this February and March, which had affected all coal producers in the area, he said.
The focus had been on reestablishing production, which was now going well, and bringing costs down. The expansion of the Douglas and Middelburg collieries was at feasibility stage, and there was no doubt BHP Billiton’s executive committee would be happier to give the green light to major projects at Ingwe if there was an overall performance improvement, Salamon said.
The sale of Koornfontein was part of Ingwe’s portfolio management activities, but the group was looking at building good relationships with Eskom, said Salamon. Ingwe’s Khutala, Middelvlei, Optimum and Klipspruit collieries were all Eskom suppliers and export businesses.
Salamon said longer-term prospects lay in exploration in sub-Saharan Africa and the former Soviet Union, where it was looking at copper, nickel and diamonds.
Salamon added that “China is very important - it’s now 17% of our turnover in the last year. Interestingly over 3% was India - so the rate of change in India is actually faster than the rate of change in China. That’s 20% to two markets which five years ago hardly featured - so they’re very important.” With Classic Business Day.
The Peak Oil Crisis: Conserving Light
By Tom Whipple
Thursday, 24 August 2006
This week the UN is to come up with a sanctions resolution that will keep Iran's two million barrels a day of exports flowing and at the same time convince Tehran to give up on uninspected nuclear enrichment.
Crafting such a resolution is likely to take some doing as the Chinese, who are more concerned about losing oil imports than whether or not Tehran comes up with an atomic bomb, have to sign off on any sanctions plan.
Therefore, there is still time to explore some of the things we are going to have to do to keep functioning in the post-peak oil world. This week I would like to talk about our electric lights. Discussion of this topic is occasioned by the recent release by the International Energy Agency (IEA) of a 500-page report exhaustively exploring the world's electric lighting and the energy it takes to keep it glowing.
The IEA contends that in the 100 years or so we have had electricity, we have let massive waste creep into the lighting of our buildings, streets and open spaces. The fundamental cause of this waste was the abundance of cheap electricity, cheap fixtures and cheap bulbs. The cost of over-lighting an individual room, structure or area was small. It is only when we realize there are billions of us on the earth consuming many times more electric light than we actually need, that it becomes apparent that collectively our lighting systems are wasting very large quantities of fossil and other electricity-generating fuels we will soon need desperately.
As is the case with liquid fuels, here in America we are at the top of the lumen per capita consumption list: the average American uses 101 megalumen-hours per year, while the average Englishman gets by with 60. Worldwide, the average person connected to an electric grid uses 20 megalumen-hours but the average Indian gets by with only three per year.
Energy waste through improper lighting can take many forms. It can be as simple as leaving lights burning in an empty room, or equipping a room with oversized or too many lights, or continuing to use obsolete and inefficient lighting technology. Where a standard incandescent bulb will provide only 6-18 lumens per watt, a compact fluorescent will provide 35 to 80, and modern fluorescent tubes can approach 100 lumens per watt. On the horizon are white light-emitting diodes that may be capable of 150 - 200 lumens per watt and have lifetimes of 50-100,000 hours.
An important factor in efficient lighting is the switching. In too many rooms a single switch controls a large bank of lights. Providing more switches, timers, and light and motion sensors would save considerable energy each year by ensuring that light is used only when and where it is needed. I recently visited Italy and was surprised to find that in recently renovated hotels, the room door key-card also doubles as an electricity activation card. Leave your hotel room and you have no choice but to kill every light, TV, and appliance in the room until you return.
One day, our civilization will be remembered for its outdoor lighting. A flight across America on a clear night is a thing of beauty for there is light, and light pollution, everywhere— streets, highways, sidewalks, parking lots, malls, signs, freeways, thruways, toll roads and even 400 million car and truck headlights all twinkling in the darkness. We sure know how to light up the night.
From the peak oil perspective, however, all this excess luminescence is a major asset. By turning off unnecessary lights and dimming down the rest to only what is really needed, we can have a quickly available and inexpensive source of electrical energy that can partially substitute for reductions in the availability liquid fuels.
Lighting currently consumes about 19 percent of total global electrical production. There is no reason why major reductions in the consumption of lighting couldn’t take place immediately in the case of an energy emergency. Considerably larger reductions in the energy used for lighting could take place over the next 10-20 years as more efficient systems and appliances come into common use. Over the long run, we should be able to have adequate lighting using only a few percent of the electricity we currently use.
There are still some 1.6 billion people on earth who do not have access to lights from an electric grid. Most of these use highly inefficient kerosene or small diesel electric generators for their lighting. As subsidies are removed from kerosene, many are going to be priced out of lighting altogether. However, the IEA believes the recent development of book-sized photovoltaic panels coupled to highly efficient LED nights may soon offer a cost-competitive substitute for the kerosene lamp.
In most cases, replacing older lighting systems makes economic sense, as payback periods can be very brief. There are a number of structural obstacles, however, to the widespread deployment of efficient lighting systems that may require increased government regulation— especially when energy becomes tight.
In the case of commercial real estate, the organization paying the lighting bill usually is not the one that owns the building and pays the capital cost of the lighting. While it may be easy for a homeowner to screw in a compact fluorescent bulb, more extensive changes involving ballasts or fluorescent fixtures may require expensive professional help. More incentives and better standards may be necessary.
Lighting, of course, is not the only way to cut back electricity consumption. Continuously operating home computers, ventilation systems, clothes dryers, and central air conditioners are prodigious users of power. When peak oil forces the world to power down, much more efficient use of our existing electricity supply is likely to be the only readily available source of additional energy for a while.
hina Makes Huge Breakthrough in Wind Power Technology
by Zijun Li
July 4, 2006
[Contributed by Spellbound on the Coal board.]
--------------------------------------------
Sumisu, here's another article that might apply to your Peak Oil board...
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Beijing, China [Worldwatch Institute] Chinese developers unveiled the world's first full-permanent magnetic levitation (Maglev) wind power generator at the Wind Power Asia Exhibition 2006 held June 28 in Beijing, according to Xinhua News.
When compared with the operational hours of existing wind turbines, the new technology will add an additional 1,000 hours of operation annually to wind power plants in areas with an average wind speed of 3 m/s. Regarded as a key breakthrough in the evolution of global wind power technology-and a notable advance in independent intellectual property rights in China -- the generator was jointly developed by Guangzhou Energy Research Institute under China's Academy of Sciences and by Guangzhou Zhongke Hengyuan Energy Science & Technology Co., Ltd.
The Maglev generator is expected to boost wind energy generating capacity by as much as 20 percent over traditional wind turbines. This would effectively cut the operational expenses of wind farms by up to half, keeping the overall cost of wind power under 0.4 yuan ($US 5 cents), according to Guokun Li, the chief scientific developer of the new technology.
Further, the Maglev is able to utilize winds with starting speeds as low as 1.5 meters per second (m/s), and cut-in speeds of 3 m/s, the chief of Zhongke Energy was quoted as saying at the exhibition. When compared with the operational hours of existing wind turbines, the new technology will add an additional 1,000 hours of operation annually to wind power plants in areas with an average wind speed of 3 m/s.
Xinhua News reports that more than 70 million households in China lack access to electricity, with most of them living in areas unconnected to power grids. The widely scattered nature of rural localities makes it difficult to supply grid-based power to these areas. The use of the full-permanent Maglav generator could potentially fill the power void in these locations by harnessing low-speed wind resources that were previously untappable.
With an increasing number of Chinese and international investors joining the global booming wind power market, the technology is expected to create new opportunities in low-wind-speed areas worldwide such as mountain regions, islands, observatories, and television transfer stations. In addition, the Maglev generator will be able to provide roadside lighting along highways by utilizing the airflow generated from vehicles passing by, said Xinhua News.
The global wind power market has seen tremendous growth in recent years, with Germany, Spain, and the United States ranking as the top producers in 2005. The output of wind turbines is increasing rapidly thanks to the world's ramped-up wind power capacity. Global sales of wind power equipment reached $10 billion in 2004 and are estimated to reach $49 billion per year by 2012, reports Worldwatch researcher Janet Sawin in Vital Signs 2005.
China Watch columns, a joint initiative of the Worldwatch Institute and Beijing-based Global Environmental Institute, report on energy, agriculture, population, water, health, and the environment in China -- with an emphasis on analysis relevant to policy makers, the business community, and non-governmental organizations.
Ron Paul on Gas Prices
Ron Paul, Texas straight talk in "What Congress Can Do About Higher Gas Prices":
"Gasoline prices are soaring and the American people are angry. They want something done about it -- now!
"$100 rebate checks to American motorists won't cut it, nor will mandatory mileage requirements for new vehicles. Taxing oil profits will only force prices higher. But there are some very important things we can do immediately to help.
"First: We must reassess our foreign policy and announce some changes. One of the reasons we went into Iraq was to secure oil. Before the Iraq war, oil was less than $30 per barrel; today, it is over $70. The sooner we get out of Iraq and allow the Iraqis to solve their own problems, the better. Since 2002, oil production in Iraq has dropped 50%. Pipeline sabotage and fires are routine; we have been unable to prevent them. Soaring gasoline prices are a giant unintended consequence of our invasion, pure and simple.
"Second: We must end our obsession for a military confrontation with Iran. Iran does not have a nuclear weapon, and, according to our own CIA, is nowhere near getting one. Yet the drumbeat grows louder for attacking certain sites in Iran, either by conventional or even nuclear means. An attack on Iran, coupled with our continued presence in Iraq, could hike gas prices to $5 or $6 per gallon here at home. By contrast, a sensible approach toward Iran could quickly lower oil prices by $20 per barrel.
"Third: We must remember that prices of all things go up because of inflation. Inflation by definition is an increase in the money supply. The money supply is controlled by the Federal Reserve Bank, and responds to the deficits Congress creates. When deficits are excessive, as they are today, the Fed creates new dollars out of thin air to buy Treasury bills and keep interest rates artificially low. But when new money is created out of nothing, the money already in circulation loses value. Once this is recognized, prices rise -- some more rapidly than others. That's what we see today with the cost of energy.
"Exploding deficits, due to runaway entitlement spending and the cost of overseas engagements, create pressure for the Fed to inflate the money supply. This contributes greatly to the higher prices we're all paying at the pump.
"If we want to do something about gas prices, Congress should greatly reduce federal spending, balance the budget, and eliminate regulations that interfere with the market development of alternative fuels. All subsidies and special benefits to energy companies should be ended. And in the meantime, let's eliminate federal gas taxes at the pump.
"Oil prices are at a level where consumers reduce consumption voluntarily. The market will work if we let it. But as great as the market economy is, it cannot overcome a foreign policy that is destined to disrupt oil supplies and threaten the world with an expanded and dangerous conflict in the Middle East."
It is good to see that our one true friend in Congress understands what inflation is. Most people still do not have a clue.
I have to disagree about $20 per barrel oil, though. It seems Ron Paul is forgetting about a little thing called "Peak Oil." Demand is rising worldwide, and supplies are falling. In that scenario, oil prices are bound to rise. Yet a rise caused by normal market forces (supply/demand), as opposed to throwing money around, will not have anything to do with inflation.
As Ron Paul suggests, the market if left alone will provide a solution. It always does. When the government interferes with market forces, things happen, and they are always bad. Supposedly, our invasion of Iraq would "pay for itself" in lower gas prices. Well, not only did it not pay for itself, but we wasted close to a half trillion dollars in that sinkhole, and the flow of oil out of Iraq is only half of what it was before we invaded. We also started a civil war. Even the most optimistic administration supporter can no longer deny that truth. Many unforeseen consequences of our meddling in Iraq have not even been felt. They are coming.
Ron Paul is not the only one asking for troops to be pulled out of Iraq.
Whiskey & Gunpowder
August 4, 2006
by Mike Shedlock ~ "Mish"
Illinois, U.S.A.
John D. Rockefeller and the Age of Oil
IF WE ARE reaching the Peak Oil phase of the Age of Oil, perhaps it is useful to return to its origins to understand how it all began. So in a recent article in Whiskey & Gunpowder, I discussed Col. Edwin Drake and his role in ushering onto the world stage the Age of Oil. After examining some aspects of Col. Drake’s efforts to put down an oil well at Titusville, Pa., in 1859, I asked why do some things happen the way that they do? What is it that makes history? In particular, what is it that brought mankind into the Age of Oil?
People knew about oil long before Col. Drake ever set foot near Oil Creek, in Venango County, Pa. For many centuries, people had dug holes in the ground in search of oil. People knew the rudiments of making a hole in the ground, and there were other people at about the same time, in what is now West Virginia and southern Ontario, moiling for oil in the rock formations of the Earth. But Col. Drake’s well is the one that gets much of the credit for bringing in, if not inaugurating, the Petroleum Age. Why is that?
The U.S. Civil War and Its Oil Boom
In previous articles, I also discussed how the U.S. Civil War was a key element in the creation of the world’s first oil boom. The federal spending boom between 1861-1865 sparked the classic wartime phenomenon of fiat currency flooding the national economy. Many of the Union’s greenback paper dollars found their way into speculation on oil leases, and then into the capital equipment and labor necessary to develop those leases. Had there been no U.S. Civil War, one can only wonder if there would have been the Pennsylvania oil boom of the 1860s, or the resultant Age of Oil. Where would the money have come from to pay for it?
In addition to speculation on oil leases, much of the federal spending for the Civil War wound up in the pockets of New York bankers and Pittsburgh industrialists. New York was where the biggest banks were located. Pittsburgh hosted the bulk of the nation’s nascent iron industry. In addition to equipping and provisioning the Union Army to fight a war, this mixture of New York capital and Pittsburgh industry became focused upon the oil-bearing formations of northwest Pennsylvania.
The marketplace had evolved to where there was demand for oil and oil products. That is, oil was no longer just a humble patent medicine to be consumed in small spoonfuls. By the early 1860s, there was industrial demand for oil, for purposes of lubrication and illumination in a world in the throes of an Industrial Revolution, as well as growing consumer demand. There was a scientific-based use and application for the substance, due to contemporaneous developments in the field of chemistry. And of course, Col. Drake had come up with his novel means for extracting oil from the ground. The time was ripe.
Thus, the world’s first true oil boom occurred in the midst of the general Civil War. New York money flowed to the iron mills of Pittsburgh to purchase pipe and other equipment to install in the oil patches of Titusville. The foundries of Pittsburgh rolled tubular goods for the oil fields. The equipment shops of western Pennsylvania manufactured pumps and gear drives and sucker rods, all shipped up the Allegheny River and eventually to the workings along Oil Creek. The Civil War also created a vast class of itinerant laboring men, deserters from the armies of both sides, as well as draft dodgers, foreign immigrants, and freed slaves. Capital, equipment, and labor all came together.
Booms and Busts
And as the wells came in, an oil boom occurred in Pennsylvania in the early and mid-1860s. Oil derricks spread across the farms and fields of northwest Pennsylvania like mushrooms after a rainstorm. As is the case with most booms, oil production soared and prices soon crashed. In the early 1860s, the price of oil gyrated wildly, reaching a high of $20 per barrel in 1861 (equivalent to over $600 per barrel today) to a low of as little as 10 cents (about $3 in today’s devalued currency) within just a few months. When the price of oil crashed, investment waned for a time. But also in consequence of underinvestment, by 1864, the price of oil was again drifting upward toward a high of $13 per barrel. And by 1866, just a year after the Civil War ended, oil was selling for all of $1.65 per barrel.
Whatever its price, there was hardly anything to do with crude oil straight from the ground. Aside from the tiny market for patent medicine, you cannot drink oil. (It is poisonous. It will kill you.) Even the Pennsylvania grade of rock oil, which is a smooth green nectar that is among the finest earthly products in all of nature, required some sort of refining process. And by the early 1860s, people had been experimenting with just such processes for several decades. One of America’s earliest refiners was a man named Samuel Kier, who in 1847 established a primitive refinery in Pittsburgh, about two blocks from the office building in which I work as a lawyer and on occasion write Whiskey & Gunpowder articles.
Oil Boiling and Refining
At first, refiners simply boiled the oil and condensed the fractions, not unlike distilling whiskey or other fine moonshine. And people in western Pennsylvania, the location of the 1794 “Whiskey Rebellion” of early American history, knew a few things about distilling moonshine. (I mean real moonshine, the kind you drink, and not the stuff that politicians put out whenever they make a speech.)
Early oil refiners used color, smell, and even taste in order to decide which fractions of the boiled oil were suitable for lubrication, illumination, or other purposes. To be sure, they did not taste much of it, because the stuff they were brewing was and is toxic. The earliest refining processes were entirely haphazard, not to mention very dangerous.
There was one petroleum fraction called gasoline that was rather explosive, and it was initially simply discarded as too difficult to handle or use. But the kerosene was good for use in lamps, as long as there was not very much gasoline mixed in. (It makes you wonder if it was Mrs. O’Leary’s cow that kicked over the lantern and started the Chicago Fire or perhaps just some bad lamp oil?) There were lubricating fractions and waxes and white oils, the latter being the origin in 1872 of an everyday product still in use, called Vaseline. Add carbon black to it and you have a cosmetic product called Maybelline, still available at fine stores. And the heavy fractions at the end of the distillation process could be used for boiler fuel.
The economics of refining were quite good. In the mid-1860s, despite the demands for equipment to fight the Civil War, a modest-sized refinery could be constructed for the rather astonishingly low capital cost of about $15 per barrel, or about $450 per barrel in today’s funds. (And by way of comparison, a modern oil refinery typically costs in excess of $10,000 per barrel per day of capacity.) With the low initial capital costs, a refinery could recover its entire cost of capital in just a couple of runs of oil. Many a fine house in Oil City or Franklin, Pa., or Pittsburgh or Cleveland or New York was constructed with the profits from relatively small refining operations.
These early refinery operations were less costly to construct because they were far simpler than today’s industrial behemoths. There was a primitive firebox and entirely unexceptional boiler, coupled with various condensation pipes and gauges, all feeding into storage vats. So hundreds of refineries were constructed during the 1860s, some with a capacity of as little as five barrels per day. These contraptions sprang up all over oil country. Some of them were near the sources of production in the oil patch itself, and many more were sited along the transportation routes to Pittsburgh and Cleveland.
Why Pittsburgh and Cleveland? That is where the railroad connections were located. Pittsburgh was the major east-west hub of the mighty Pennsylvania Railroad, and Cleveland was where the New York Central and Erie railroads passed through. The bulk of the freight traffic on these lines was grain and manufactured goods. But once refined oil products came to be available, there were more than a few carloads of these novel substances heading in all directions. By the late 1860s, both Philadelphia and New York were major destination points for refined oil products. This was because about 70% of U.S. production of these refined products was exported to foreign markets.
The Man From Cleveland
Still, for all its success and spectacular growth, the oil business and associated refining operations were creatures of a rapid business cycle marked by boom and bust. The industry was economically irrational, which is another way of saying that, then as now, it offered opportunities for anyone who had an eye for efficiency and consolidation. Something had to happen, and something did happen in the form of a man who desired and acted to bring some semblance of order to a chaotic scene.
That “something” was a businessman from Cleveland, Ohio, named John D. Rockefeller. Rockefeller conceived a method of bringing standardization to the oil industry, and, eventually, he did exactly that.
By the late 1860s, a number of refiners had started to figure out what was going on within the boilers. Using accepted scientific methods, they came to understand heating cycles and the nature of the fractionating process. Mechanical engineers designed improved and substantially larger systems of refining stacks, which operated at higher temperatures and pressures with less waste of energy input and product coming out. Engineers figured out how to use catalysts and additives to improve the yields and product qualities. Even the mundane aspects of operating a refinery, such as chipping coke and cleaning sludge, came under scrutiny, which led to dramatic improvements in efficiency.
During this time, Cleveland’s Mr. Rockefeller began to buy up refineries. After each purchase, he would keep on running the more efficient plants and simply shut down the less efficient operations. With every refinery he purchased, he was gaining more control over a chaotic situation.
Rockefeller was a consummate promoter of refined products, and among the first businessmen ever to promote a so-called “brand.” In order to reassure his customers that his product was what was advertised, in 1870, he went so far as to rename his operations the “Standard Oil Co.” In other words, if you purchased kerosene lamp oil, it would be a “standard” product, no matter which refinery was the source, and, more importantly to the end user, not adulterated with explosive gasoline. There is a consensus among business historians that Standard Oil’s lamp kerosene was the first truly global consumer product.
By the early 1870s, Rockefeller was certain that the refining business was on the verge of a massive shakeout. Thus, he was consumed with a focus on efficiency in his operations. Rockefeller missed no chance to reduce costs, eliminate waste, and sell, sell, sell. Every last drop of a barrel of refined oil was for sale, in some form, at some price.
The profit margin was a key focus as well for Rockefeller. Believing that his suppliers were charging too much (don’t they always?), Rockefeller purchased his own pipe and machinery. He built his own barrel plants and bought his own rail cars. When he saw the opportunity to acquire a supplier and “capture” the profit margin, upstream or downstream, he acted.
Rockefeller’s Standard Oil Co. acquired pipeline systems, storage tanks, railroad loading facilities, and wholesale shipping and distribution companies. Standard Oil declined to enter into the oil drilling business, because drilling wells was too risky in Rockefeller’s view. But Standard was first in line to purchase the oil at the wellhead, transport it by rail or pipeline to a storage facility, then to a refinery, then to a packaging facility, and then to wholesalers and retailers around the world.
Eventually, Standard Oil found itself in a position to balance oil production in the field against its own refinery output. In a remarkable evolution of events, Standard was able to control most of its costs from wellhead to the final consumer point of purchase. Standard Oil simply accumulated economic efficiencies from the wellheads of the oil patch to the last ring of the cash register, and, in turn, became an almost impregnable business presence.
Within a period of about a single decade, between 1865-1875, John D. Rockefeller, the man from Cleveland, and his business associates at Standard Oil Co. literally created a global industry for refined petroleum products. In later years, some business historians and polemicists would call Rockefeller “ruthless” and other such names. But they did so in a world that was lit, lubricated, and powered by the Standard Oil business model.
It is not overstating the case to say that while Col. Edwin Drake ushered the industrial scale extraction of petroleum onto the stage of history with his efforts at Titusville, it was Rockefeller and Standard Oil Co. that invented the Age of Oil as we know it.
Products and Prisoners of History
Why do some things happen the way that they do? And what makes history? As I have written before, we are all both products and prisoners of history.
Think of Col. Drake and John D. Rockefeller in the context of Peak Oil. We are where we are, of course, living in a world where conventional oil production is peaking. Within the next few years, conventional oil production will go into absolute, irreversible decline. Should we somehow blame Drake and Rockefeller? Certainly, absent the efforts of Drake and Rockefeller at oil extraction and refining, this would be an entirely different world. Or would it? What if there had been no U.S. Civil War to serve as the source of funds for the initial oil boom? What then?
But still, keep on looking. Keep on asking. How did we get here? We need to know and to understand, because the next question is where do we go from here? What will life be like in a post-Peak Oil world, a world in which the production of conventional crude oil follows a pathway of irreversible decline? How does one begin to plan for it? Have we in essence “built the wrong world,” based on false assumptions? How does one just “unwind” the historical trends, if that is even possible? Is it too facile just to say that mankind will somehow “invent” another future? Yes, of course, the sun will surely rise tomorrow morning, as it has risen each morning for the past 4.5 billion years. But upon what sort of world will it shine?
Whatever you do, please do not lose sight of your fundamental assumptions. What is the aperture of your viewpoint? Is the energy future of mankind one of simply connecting the dots of the past 140 years and following the soaring curve ever upward? Or is the energy future of mankind one of looking at the past 5,000 years of recorded history, and wrestling with the uncomfortable notion that the human progress of the past 140 years has been an energy-consuming anomaly in the long-term trends of human life on Earth? At root, are you an optimist or a pessimist? Or are you some of both?
I wish I had the answers for you. Right now, as I sit here just down the street from the site of Mr. Samuel Kier’s pioneering oil-boiling refinery, all I can do is ask the questions.
Until we meet again…
Byron W. King
Whiskey & Gunpowder
August 18, 2006
Pittsburgh, U.S.A.
Plexmar Resources Inc.: Update on Escondida Project, Ecuador
Thursday August 24, 10:53 am ET
SAINTE-FOY, QUEBEC--(CCNMatthews - Aug. 24, 2006) - Plexmar Resources Inc. (TSX VENTURE:PLE - News), is pleased to announce that it has successfully completed its due diligence on the Escondida block of properties. Plexmar announced last June 26 that it signed a letter of intent to acquire a block of over 907.5 km2 or prime exploration land located in southeastern Ecuador. It had a period of 60 days to carry out a full due diligence on the property.
The legal due diligence was successfully completed. A team of geologist visited only a small portion of the large property. They focused on an area located within 5 km northeast of Aurelian's Fruta del Norte deposit and took 44 samples (See maps attached). The visit confirmed that all of the visited areas contained primary and secondary gold. An alluvial gold deposit has been identified grading a minimum of 0.3 g/m3. Some of the Escondida concessions are crossed by volcanic rocks from the jurassic period similar to Aurelian's Fruta del Norte deposit.
The samples were taken on surface and in small pits. Four samples returned valued of over 10 g/t Au, final values are still pending from the Assay lab. Fiver other samples returned values ranging from 0.30 g/t to 1.23 g/t Au. Below are the best chosen samples
Sample Au ppm Cu ppm Depth (m) Remarks
No.
10 1,23 - 6.0 Coarse sand with clay
24 0.49 - 6.0 Intrusive
25 0.43 - surface Intrusive
33 greater than 10.0 - surface Alluvial
40 greater than 10.0 1,460 surface boulders, pebbles
41 0.302 - surface heavy sands/pans
42 greater than 10.0 423 surface intrusive in contact
with SiO2
43 greater than 10.0 189 surface intrusive in base of
waterfall
44 0.56 - surface sand at base of fall
Guy Bedard, president says: "We are very encouraged by the good results found on this first field trip. They confirm the high potential of the area as only a small portion of the project was visited."
The Company is currently negotiating final terms with the Owner to acquire an important interest in the property.
108 M shares outstanding
Maps and pictures available at the following address:
http://www.ccnmatthews.com/docs/maps%26photos.doc
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
Contact:
Guy Bedard
Plexmar Resources Inc.
President
(418) 658-6776
1 (866) 460-0408
Paradox Public Relations
1 (514) 341-040
www.plexmar.com
--------------------------------------------------------------------------------
Source: Plexmar Resources Inc.
Miramar Identifies New Mineralized Zone at Boston and Continues to Extend Naartok East
Wednesday August 23, 2:02 pm ET
http://biz.yahoo.com/iw/060823/0156785.html
Miramar Identifies New Mineralized Zone at Boston and Continues to Extend Naartok East
Wednesday August 23, 2:02 pm ET
http://biz.yahoo.com/iw/060823/0156785.html
Miramar Identifies New Mineralized Zone at Boston and Continues to Extend Naartok East
Wednesday August 23, 2:02 pm ET
http://biz.yahoo.com/iw/060823/0156785.html
Col. Drake and the Age of Oil
THERE HE WAS, as big as life and looking quite good for a man who died in 1880. I was on a visit to the Drake Well Museum, just south of Titusville, Pa. I was walking into the museum compound, and whom should I encounter but Col. Edwin Drake, dressed in the period garb one is accustomed to seeing in the grainy old photos. “Well, hello, Col. Drake.”
OK. It was not the real Col. Drake. This fellow is an actor who has been playing the role of Col. Drake for about 10 years. He gives talks to museum visitors and appears in films or news articles that call for a Drake look-alike. He has read much of the literature available on the life and times of Drake, he dresses for the part, and he is just the plain old spitting image of the famous man, down to his bushy brown beard. He is as near as one can get to being in the company of the famous man, and his life and remarkable times.
The Oil of Titusville
“Let me make something clear,” said Drake. “It was not I who found the oil of Titusville fame. The area is one of many oil seeps, from which petroleum simply flows from the ground and then runs down into the creeks and streams. The Seneca Indians had been gathering oil from the local creeks for several centuries, and there is evidence that other more ancient tribes also gathered the oil of these parts even before then.”
Drake is referring to the archaeological evidence that goes back about 1,500 years indicating that people were digging oil pits and gathering Pennsylvania rock oil since A.D. 500 or so. In all likelihood, the oil was used as a patent medicine, as a body rub, and for purposes such as caulking canoes. There is documentary evidence that white settlers were shipping small quantities of Seneca oil south for sale in Pittsburgh as early as 1790.
“Before my arrival in 1858,” said Drake, “there was an immense amount of timber in these parts. One of the largest firms in the area was a sawmill working on Oil Creek. The operators of the sawmill knew also of the oil, and gathered it up when it formed pools on top of the water. They too used the oil as patent medicine, and in the course of things noted its very good lubricating properties on the moving parts of the sawmill machinery. This had much to do with my eventually being here.”
Drake continued: “For many years, people had performed simple experiments on the oil, such as boiling it and collecting the various fractions that condensed. They noted that the different fractions had different properties. One of the owners of the sawmill, Mr. Brewer, was acquainted with certain members of the scientific faculty of Dartmouth College. Mr. Brewer sent to that school a sample of the local rock oil. One of the professors at Dartmouth forwarded the sample to the famed chemist Benjamin Silliman of Yale.
“Professor Silliman evaluated the oil and determined that it had many useful properties. It was, of course, well known as a lubricant, but it also could be used for purposes of illumination by burning it in lamps. There was at that time a growing demand for some substance to burn in lamps for the purposes of illumination. Professor Silliman prepared a report on the Seneca oil for a banker and investor from Connecticut named Mr. Townsend. It was Mr. Townsend who hired me and sent me to Titusville. My job was to determine if we could extract oil in large quantities.”
Pits and Holes
Drake went on with his discussion. “My first effort to recover oil was simply to dig a large pit into the ground in an effort to gather the oil at the bottom. But after several feet of digging, the hole started to fill with water from the very shallow water table. We were, after all, right next to a creek. So I lined the pit with wood planks, but even that did not keep out the water. We tried to drain the pit, but the water entered faster than the pumps could remove it. A pit was not going to work.
“It was then that I began to travel to other places and observe how people were mining substances and harvesting the products of the Earth. Near the town of Tarentum, on the Allegheny River, I encountered salt drillers. They would pound down an iron pipe into the salt beds and pump out brine water. After evaporating the water, they were left with salt. But some wells also produced an oily residue with the salt, so it became apparent to me that the oil might be flowing underground with other fluids. I decided to adapt the use of the iron pipe in an effort to push down a hole for oil near Oil Creek.
“Also, I heard of men working near what is now Parkersburg, W.Va. (it was Virginia back then), who were pounding down holes into the ground with iron tools. I hired a tool smith, named ‘Uncle Billy’ Smith, appropriately, to obtain or manufacture for me such similar tools.
“When I returned to Titusville, I immediately set about to drive down a hole into the ground using the digging tools. Shortly after starting the hole, I lined its walls with an iron pipe that we pushed down along with our drilling tool. This kept the walls from caving down into the hole, and also served to keep out most of the water from the adjacent soil. Once we hit bedrock, we kept on pounding down our hole.
“On Aug. 27, 1859, from a depth of 69 feet, we lifted our first quantities of oil from the hole, about 25 barrels in total.
“Thus, my achievement was not really in discovering oil, because the oil was already there for the taking. Nor was it my idea to use the oil for whatever purpose, because there were others who came before me. It was not even my role in history to extract the oil by digging downward for it, because others were already attempting the same thing. But my most notable accomplishment was in applying the concept of using a conductor pipe to protect the walls of the drill hole on the way down to the oil-bearing formation. This technique is still in use today, and is the foundation of the technology upon which is built the modern oil industry.”
Why an Oil Age?
Col. Drake brings up many good points that serve to explain the origins of the oil age, if not the origins of modern history. Why do some things happen the way that they do? What makes history?
People had known about the oil of the Titusville region for at least many centuries, certainly long before it was called Titusville. Why did the Seneca Indians, or their more ancient forebears, not usher in the Age of Petroleum? In another part of the world, by comparison, starting in the 16th century, the Spanish were importing barrels of oil from what is now Trinidad and Tobago, as well as from Venezuela. The queen of Spain, among others, used the oil to treat various family ailments. Why did this not usher in the Age of Petroleum?
And people certainly knew about digging pits, if not making holes in the ground, as well, long before Col. Drake muddied his boots along the banks of Oil Creek. Again, why does the credit for ushering in the Age of Petroleum go to Col. Drake? At about the same time that Drake was drilling his well in Titusville, other people were drilling holes in the ground in what is now West Virginia and eastern Ohio and southern Ontario near Petrolia. Within a year of Drake’s well at Titusville, other people achieved similar results in extracting oil from the rocks of New Brunswick, and there were even oil wells put down in Romania and southern Russia.
Even the initial news of Drake’s well at Titusville was overshadowed by events just two months later, when abolitionist John Brown took over the U.S. federal arsenal at Harpers Ferry, Va. (now West Virginia). Most people had other things about which to think than some oil prospector driving down a hole in the backwoods of northwest Pennsylvania.
A Confluence of Events
What created the modern petroleum industry was a confluence of circumstances, and certainly of events. Col. Drake’s innovation in driving a hole into the earth was just one of many things along a long chain of events.
The oil, of course, had to be there, and Titusville was the right place with its relatively shallow oil-bearing rock formations. And one of the principal virtues of the Seneca oil was that it was (and is) devoid of asphaltic fractions. It is light, sweet, and even smells kind of good. But science also had to advance to the point at which there was a rational, if not economic, purpose behind the demand for what Col. Drake called “large amounts” of oil. Here is where Professor Silliman’s report to Mr. Townsend comes in, a scientific basis for an economic investment.
Backed by the Connecticut investors, Col. Drake perfected a means to extract oil by drilling a hole lined with conductor pipe. But Col. Drake may not have been the first person to do this either. There were similar attempts ongoing near Parkersburg, W.Va., and Petrolia, Ontario.
But after Drake’s well came even more wells in 1860, drilled into the Devonian bedrock of northwest Pennsylvania by Drake’s imitators, albeit with great caution and trepidation, because the Drake well may have been a fluke for all anyone really knew. By late 1860, the wells were starting to come in on a regular basis and oil drilling was becoming a relatively predictable business.
And then came the U.S. Civil War. U.S. federal expenditures skyrocketed, and the central government rapidly exhausted its reserves of gold and silver. The U.S. government resorted to issuing paper currency, the well-known “greenbacks.” These fiat dollars flooded the U.S. economy, causing a general inflation in price levels. People who understood the nature of inflation were keen to find some means of protecting their purchasing power. Then as now, money flowed into hard assets, and there are fewer assets harder than bedrock sandstone filled with oil.
The World’s First Oil Boom
Much of the federal spending for the Civil War would end up in the pockets of two classes of people: New York bankers and Pittsburgh industrialists.It was this mixture of capital and industry, building upon the presence of oil, a scientific use for the substance, and a novel means for extracting it, that sparked the world’s first true oil boom.
Even in the midst of a general Civil War, the New York money flowed to the iron mills of Pittsburgh to purchase pipe and other equipment to install in the oil patches of Titusville. The foundries of Pittsburgh could just as easily roll tubular goods for the oil fields as cast cannon for the Union Army. The equipment shops of western Pennsylvania could just as easily manufacture pumps and gear drives and sucker rods as any other implement of war. And so they did.
The federal spending boom sparked the classic wartime phenomenon of currency flooding the national economy. Much of this money found its way into speculation on oil leases, and then into the capital equipment for developing those leases. Had there been no Civil War, one can only wonder if there would have been the Pennsylvania oil boom of the 1860s.
As a necessary concomitant of the oil boom, the Civil War itself created a vast underground army of laborers for the oil fields. To be sure, the development of those fields required an immense amount of backbreaking labor. This labor force included deserters from combat on both sides of the fight, draft dodgers, immigrants from foreign shores, and freed slaves who were searching for work away from the sound of the guns.
Thus did the U.S. Civil War bring together a large amount of new money, invested in leaseholds in the oil country of Titusville, plus capital equipment and a ready supply of labor. Here was the confluence of events that sparked the modern petroleum industry.
As the oil wells came in, they sparked an oil boom in the mid-1860s. Production soared and prices crashed. Investment waned, and by the late 1860s, the price of oil was drifting upward again. There was another boom and another bust in the early 1870s. The industry was irrational from an economic perspective, and something had to happen.
Something did happen, in the form of a man who desired, and eventually acted, to bring some semblance of rationality to a chaotic industry. He was a businessman from Cleveland, Ohio, named John D. Rockefeller. He conceived a method of bringing a certain sense of standardization to the oil industry, and eventually did exactly that.
So this takes us from Col. Drake to Mr. Rockefeller. We will discuss Rockefeller in my next article in Whiskey & Gunpowder . Without Rockefeller’s effort, one wonders where the oil boom would have gone. Where would we be today? We are all both products and prisoners of history.
Until we meet again…
By Byron W. King
Whiskey & Gunpowder
August 16, 2006
Titusville, U.S.A.
Costs surge threatens Big Oil's output plans
LONDON, Aug 18 (Reuters) - The world's top oil firms are struggling to expand oil and gas output, hit by a tight market for drilling rigs and rising costs, hampering development of new supply at a time of record prices.
Production is falling at many companies even as capital spending rises. Crude oil has more than tripled since early 2002 to $70 a barrel, driven by worries about supplies and growing world demand.
Norway's Norsk Hydro (NHY.OL: Quote, Profile, Research) cut its 2006 output goal in June and Statoil (STL.OL: Quote, Profile, Research) in July said it may miss its target -- signs that a tight market for rigs and other services is hitting firms' ability to develop projects on time.
"Company production targets and market expectations for production growth are at risk of disappointment," Deutsche Bank analysts said in an August 10 note.
"Delays to drilling programmes and project start-up seem increasingly likely."
Oil and gas output at eight major European oil firms dropped a collective 530,000 barrels of oil equivalent a day in the second quarter, Deutsche estimates. That is equal to half of daily oil demand in The Netherlands.
Royal Dutch Shell (RDSa.L: Quote, Profile, Research) and BP (BP.L: Quote, Profile, Research), the world's second- and third-largest fully publicly traded oil firms, both indicated in July they may miss their 2006 output targets.
Both firms cited the effect of production-sharing contracts under which they get fewer barrels at high prices. Shell's output was hit by attacks on oil installations in Nigeria, where it is the top foreign producer.
Other analysts say rising costs pose a risk of delays to projects, potentially deferring new supply.
"The upward pressure on costs is just huge," said Bruce Evers, oil analyst at Investec Securities. "A lot of projects are going to get delayed. It's a fact of life these days."
RIG COSTS
Soaring costs due to high demand for oilfield services is prompting firms to consider mothballing some investments to avoid hitting returns.
Shell said in May it might postpone some deepwater projects because of rising costs. The cost of hiring a rig has more than doubled in the past two years, according to BP.
Rigs are only part of the picture. Costs of materials like steel for pipelines and equipment such as pumps and valves been rising too, analysts say.
Cost inflation is partly a result of a jump in spending now after cutbacks years ago when prices slumped, analysts say.
Oil prices slid to $10 in 1998 because of the Asian economic crisis, sparking predictions of low prices for good and prompting companies to cut back on investment.
"That put a lot of small service companies out of action," Investec's Evers said. "So when companies put their foot to the floor, surprise surprise, service companies couldn't deliver."
RIG COUNT RISES
The number of rigs drilling worldwide averaged 3,155 in July, the highest monthly average so far this century, according to oil services firm Baker Hughes.
It was much higher in the early 1980s, when oil companies were drilling hell for leather for new supplies. The rig count rose above 6,000 in late 1981.
But any tightness in the rig market is unlikely to last as more are built, analysts say.
"There is a scenario whereby rig capacity is a lot more comfortable by the end of 2007, because there are rigs being constructed," said Jason Kenney of ING.
He said that rig availability is unlikely to hinder growth plans, but a lack of workers to build projects like liquefied natural gas (LNG) plants may lead to delays.
"From a rigs point of view, I don't see a problem," Kenney said. "Manpower to do complex projects, that's a different thing. In the Persian Gulf, the number of complex LNG and gas projects is presenting a serious manpower issue."
Oil Poised to Climb 20% as BP Shutdown Shows Industry Distress
By Tom Cahill and Sonja Franklin
Aug. 21 (Bloomberg) -- BP Plc's shutdown of the largest U.S. oil field may be the first of many, as decaying pipelines threaten to add 20 percent to energy prices in the next decade.
``We'll look back on this event as the Pearl Harbor Day in energy,'' said Matthew Simmons, chairman of energy investment bank Simmons & Co. International in Houston. The chance that the leaks and corrosion found at Prudhoe Bay by BP, Europe's second- largest oil company, are an isolated occurrence is ``zero,'' said Simmons, who's writing a book on aging oil infrastructure.
A growing minority of analysts, oil executives and government officials say the current system for producing and transporting crude will be unable to deliver the energy needed in the next 10 years. Repairs and replacement of pipes, valves and refineries will help push oil to $93 a barrel by 2015, from around $70 today, says Barclays Capital analyst Kevin Norrish in London, the most accurate price forecaster in a survey by Bloomberg News last year.
Internal corrosion is the biggest reason for pipeline spills in the U.S. this year, causing 16 percent of all accidents through Aug. 9, according to U.S. Department of Transportation's Office of Pipeline Safety. Since 1990, the portion of oil lost because the inside of a pipe has been eaten away has grown to 78 percent from 4.7 percent, with 68,624 barrels spilled this year, the agency said.
`Incredible' Neglect
London-based BP's admission that some pipes in Prudhoe Bay hadn't been inspected internally for corrosion in more than a decade was ``incredible,'' said oil analyst Charles Maxwell at Weeden & Co. ``They are in deep trouble.'' BP may face criminal charges in the U.S. over an oil spill in Alaska in March, which prompted inspections that found the Prudhoe Bay corrosion.
Repair of the oil production facilities built in the 1970s is part of the $6 trillion that needs to be spent by 2030 to meet global oil and gas needs, according to the Paris-based International Energy Agency.
Record oil prices are encouraging producers throughout Europe and the U.S. to keep old rigs running, rather than shut them down. BP's leaky pipeline, built to last 25 years, is now in its 29th year. The average pipeline in the U.S. is about 50 years old, according to NACE International, formerly the National Association of Corrosion Engineers.
``What we have is an entire generation of oil infrastructure that more or less came on stream at the same time,'' said Deborah White, an analyst at Societe Generale in Paris who helped plan the Prudhoe Bay field development in the 1970s. ``It's now all of a certain age, fragile, and can't be pushed quite as hard.''
Norway's Leaks
In the Norwegian North Sea, 8 percent of wells have weaknesses that disrupt production, according to a study for the nation's Petroleum Safety Authority.
A similar amount of offshore oil and gas output probably is being lost worldwide because of faulty wells, said Jan Andreassen, an author of the Norwegian study. Russia's pipeline monopoly, OAO Transneft, estimates its program to improve its pipeline system will take almost three decades to complete.
Oil consumers depend more than ever on regions such as Alaska and the North Sea that were developed in the 1970s, after the Arab oil embargo led the U.S. and Europe to seek alternative supplies. Oil prices more than doubled in the past three years as demand accelerated.
Benchmark New York crude oil futures jumped 3 percent on the day BP revealed the extent of corrosion in the Prudhoe Bay pipeline, which caused leaks and ate away as much as 81 percent of the steel. They fell 4.3 percent last week to $70.14 a barrel on the New York Mercantile Exchange.
North Sea Shutdowns
Stavanger, Norway-based Statoil ASA, the country's largest oil and gas provider, said production this year may be as much as 25,000 barrels a day below forecast because of extensive maintenance and lower output from older North Sea fields.
Andreassen's study, published in June, found that 18 percent of 406 wells tested in Norway's section of the North Sea had weaknesses, and 8 percent had faults that demanded they be shut.
``This is a subject people don't like to talk about,'' he said in an Aug. 16 phone interview. ``This is not particular to Norway. This is an industry problem.''
The U.K. and Norway combined pump 4 million barrels a day, most from the North Sea, more than every OPEC member except Saudi Arabia.
BP increased its training for management and monitoring of North Sea wells, Jan Erik Geirmo, a spokesman for the company's Norwegian subsidiary, said in an Aug. 18 e-mail. Andy Corrigan, a spokesman for Royal Dutch Shell Plc of The Hague, said maintenance spending has been ``stepped up significantly in recent years.'' He wasn't more specific.
`Fragile' Pipes
``Corrosion is a complicated business,'' said Lois Epstein, senior engineer and oil industry specialist at Cook Inlet Keeper, an environmental group in Anchorage, Alaska. Programs to detect and prevent corrosion can keep it in check, she said. ``It can be done well, and they weren't doing it well,'' she said of BP.
The company had judged that internal surveillance wasn't needed because the pipelines on Alaska's frozen North Slope are above ground, allowing for direct inspection.
``We thought it was an adequate program,'' BP America President Robert Malone told a press conference in Anchorage on Aug. 7. ``Clearly it is not.'' BP said it spent $72 million combating corrosion in North Slope pipes this year, up from $60 million in 2005.
A U.S. grand jury is investigating the pipeline spill BP discovered in March, which dumped about 270,000 gallons of crude oil onto Alaska's tundra, according to an e-mail BP Alaska President Steve Marshall sent to employees.
Decades-old pipelines can be productive and safe ``with proper corrosion control maintenance,'' said Cliff Johnson, director of public affairs for NACE International in Houston. ``That's not a problem.''
U.S. pipelines nationwide may be subject to increased inspections or maintenance requirements as BP's failings in Alaska attract the attention of regulators and lawmakers.
`Chronic Neglect'
The shutdown showed ``chronic neglect,'' Joe Barton, the Texas Republican who chairs the U.S. House Energy and Commerce Committee, said in an Aug. 11 letter to BP Chief Executive John Browne. He has scheduled a hearing on the matter next month.
Oil companies may end up spending more as they combat corrosion, patch pipelines and try to extend the life of wells, according to Tina Vital, an energy analyst at Standard & Poor's in New York who worked as a refinery engineer for Exxon Mobil Corp. in the early 1980s.
BP said on July 25 that it will spend between $15.5 billion and $16 billion this year on maintenance and new oil and gas projects, up from a previous forecast of $15 billion. Browne at the same time cut his production forecast by about 2.3 percent.
Shell in February said its capital spending will rise 27 percent this year, to $19 billion. The company, the world's second-largest oil company by market value, last month said production will be lower than expected.
Skeptics
Some analysts and investors said the corrosion at BP's Prudhoe Bay field doesn't mean all equipment the same age will fail. The lifespan of a pipe, valve or storage tank can vary.
``Within any mature field there's going to be a mix of brand new and old,'' said Patrick Gibson, a global oil supply analyst at consultants Wood Mackenzie in Edinburgh. ``It really depends how it's been maintained.''
Oil infrastructure ``is certainly vulnerable because it is aging,'' Weeden analyst Maxwell said in a phone interview from his office in Greenwich, Connecticut. Still, he said he doesn't expect the failures seen at Prudhoe Bay to crop up elsewhere. The situation there is probably a ``one-off,'' he said. ``I've been in this business for 40 years and we have never had a scare like this before.''
Slow Repairs
Shutdowns continue to occur. Russia's Transneft, the world's biggest pipeline operator, in July closed the Druzhba-1 line connecting Russia with Lithuania because of a leak, cutting supply to the only refinery in the Baltic states. The 42-year-old pipeline was beyond its expected lifespan, Deputy Chief Executive Officer Sergei Grigoryev said in an Aug. 16 telephone interview in Moscow.
The Druzhba pipeline will be permanently closed, according to a report in the Moscow Times. Grigoryev wouldn't comment on whether the pipeline will be shut.
Transneft spends $1.2 billion a year maintaining its network. The company replaces 600 to 1,000 kilometers of its 50,000 kilometers (31,075 miles) a year.
``Going at the same rate as we are now, the last station will have its upgrade completed 28 years from now,'' Semyon Mikhailovich, president of Transneft, said in an interview posted this month on the company's Web site. ``It should have been yesterday.''
To contact the reporters on this story: Tom Cahill in Paris at tcahill@bloomberg.net ; Sonja Franklin in Calgary at at sfranklin6@bloomberg.net
Last Updated: August 20, 2006 23:03 EDT
Chariot Provides Mina Justa Project Update and Announces Cu Drill Intercepts of 64 Metres at 2.03% Including 26 Metres at 3.26%; and 28 Metres at 1.88% Including 8 Metres at 3.95%
Wednesday August 23, 9:15 am ET
TORONTO, ONTARIO--(CCNMatthews - Aug. 23, 2006) - Chariot Resources Limited ("Chariot") (TSX:CHD - News) is pleased to provide an update on the Mina Justa project and regional exploration program and announces further drill results from its 2006 drilling campaign at the Marcona Copper Property.
Project Update:
Marcobre SAC (Chariot's 70% owned Peruvian subsidiary) has awarded the Feasibility Study for the Mina Justa project to a consortium of companies led by GRD Minproc. Also included in the consortium is Grana y Montero, a prominent Peruvian construction and engineering company and Knight Piesold who will be responsible for the design of the waste and heap leach dumps and the tailings area. During the next two months the consortium will be concentrating on port evaluations, infrastructure and geotechnical evaluations.
Marcobre SAC has also initiated a regional exploration program on lands surrounding the Mina Justa project. The Marcona Copper Property covers approximately 32,899 hectares. The Mina Justa project, which is the focu of the feasibility Study, is located on the "Target Area 1" property which covers approximately 3,969 hectares. The "Rio Tinto Claims" which consist of 44 contiguous claims around Target Area 1 cover approximately 28,930 hectares.
Four copper prospects have, to date, been identified on lands surrounding the Mina Justa project. These are:
- Achupallas prospect, located on Target Area 1, about 6 km north of Mina Justa
- Miramar prospect, located on the Rio Tinto Claims about 18 km northwest of Mina Justa
- Clavelinas prospect, located on the Rio Tinto Claims about 5 km east from Mina Justa, and
- La Appreciada prospect, located on the Rio Tinto Claims about 15 km east of Mina Justa.
The initial regional exploration program will consist of geological mapping, surface sampling, geophysical surveys and trenching in order to better define these prospects and to develop additional drill targets.
Drilling Campaign:
The drill results outlined in this press release are from two zones. One of these zones, the HG Sulphide zone, lies within the ultimate pit boundary of the Mina Justa Main Pit as defined in the Scoping Study released on May 3, 2006. The second zone, Magnetite Manto, lies approximately 1 km from the Mina Justa Main Pit.
HG Sulphide zone: The HG Sulphide zone, including the high-grade core, has both copper oxide mineralization and copper sulphide mineralization with both types often occurring in the same drill hole. The most recent drill results from the high-grade core of the HG Sulphide zone where released on July 11, 2006.
Notable highlights from the HG Sulphide zone are (all copper sulphide mineralization):
- MJV-06-170 64 metres at 2.03% Cu (356 to 420 m),including
26 metres at 3.26% Cu (360 to 386 m).
- MJV-06-184 28.2 metres at 1.16% Cu (202.4 to 230.6 m),&
21.6 metres at 1.88% Cu (241.6 to 263.6 m),
including 11.1 metres at 2.76% Cu (247.5 to
258.7 m).
- MJV-06-175 11.7 metres at 1.28% Cu (177.6 to 189.3m), and
44.9 metres at 1.57% Cu (196.9 to 241.7m), including
19.7 metres at 2.20% Cu (219.1 to 238.8 m), &
23.5 metres at 1.26% Cu (249.1 to 272.6 m).
-MJV-06-168 62 metres at 1.22% Cu (296 to 358 m), including
10 metres at 1.66% Cu (322 to 332 m).
Magnetite Manto zone: The Scoping Study has identified this area as having the potential to add value to the Mina Justa base case if additional drilling can identify a high-grade copper oxide resource that may be incorporated into the mine plan. Magnetite Manto is located approximately 1 km west of the Mina Justa Main Pit. The current drill results come from a depth of between 4 to 144 metres. The surface expression of the Magnetite Manto is approximately 350 metres long and approximately 300 metres wide. The most recent drill results from the Magnetite Manto area were released on August 1, 2006.
Notable highlights from the Magnetite Manto area are (all copper oxide
mineralization):- MJV-06-169 28 metres at 1.88% Cu (12 to 40 m), including
8 metres at 3.95% Cu (24 to 32 m)- MJV-06-174 18 metres at 1.03% Cu (126 to 144 m), including
2 metres at 2.35% Cu (128 to 130 m), and
4 metres at 1.54% Cu (134 to 138 m).- MJV-06-188 16 metres at 0.71% Cu (4 to 20m), including
2 metres at 2.34% Cu (8 to 10 m).
All intersections were determined using a rolling 0.25% Cu cut-off and up to 2 metres of internal waste. High-grade intersections in copper oxide mineralization were calculated using a rolling 1% Cu cut-off and up to 2 metres of internal waste. Higher-grade intersections in copper sulphide mineralization were determined using a rolling 2% Cu cut-off. All intercepts are down-hole length and intersection true widths have not been calculated.
Sampling procedures for the current drilling program are the same as previously reported and in summary: All RC chips are logged at the Mina Justa project site. Holes are sampled in their entirety in two metre runs and split at the drill site. A 1/8 split or approximately 5 kilograms of a two metre sample is submitted to the on-site SGS Lakefield Research ("SGS") preparation facility where samples are crushed to 95% passing 10 mesh and riffle split from which a 250 gram sub-sample is taken. The sub-sample is submitted to SGS, in Lima, for analysis. The coarse sample prep reject is bagged and stored on site and following analysis the analytical pulp sample is returned to Chariot for on-site storage.
All diamond drill core is photographed and geologically and geo-technically logged prior to sampling. Holes are sampled based on mineralization and geology and sample limits do not cross lithological boundaries. Core is marked and cut with a diamond core saw and half-core is submitted to the laboratory for analysis. The remaining half core and un-sampled intervals are stored at a secure location at the Marcona site where it remains available for further logging and verification sampling, if required.
All samples are analyzed for copper (Cu) using sequential leach resulting in four Cu analyses per sample (Cu total, Cu soluble in sulphuric acid, Cu soluble in sodium cyanide and a Cu residual). Gold is sampled using a 30 gram Fire Assay with an AA finish. Sulphide samples are submitted for 38 element ICP analysis with aqua-regia digest. Quality control procedures include insertion of certified project standards at the drill site (1 in 30), field, crush and pulp duplicate samples (1 in 30 each), laboratory duplicates (1 in 30) and reagent blanks and reference material (1 in 30 each).
Data contained in this news release was validated and intersections calculated by John D. Kapusta, P. Geo, Vice-President Exploration and Geological Services, Chariot Resources Limited, the designated Qualified Person as defined in National Instrument 43-101.
Chariot Resources Limited (TSX:CHD - News) is developing its 70% owned Marcona Copper Property in Peru. With exceptional infrastructure, a significant resource and strong financial and commercial partners, the Mina Justa project is scheduled to be a mid-tier copper producer by 2009.
Additional details about Chariot can be viewed at the Company's website, www.chariotresources.com.
A Map of the Mina Justa project can be viewed on CCNMatthews' website at http://www.ccnmatthews.com/docs/char0823.pdf.
CHARIOT RESOURCES LIMITED.
Ulrich (Ulli) Rath
President & CEO
Contact:
Toronto, Canada Office
Chariot Resources Limited
Alex Black - Chairman
Office: +1 (416) 363-4554
Cell Phone: +1 (647) 287-4980
Toronto, Canada Office
Chariot Resources Limited
Ulli Rath - President & CEO
Office: +1 (416) 363-4554
Cell Phone: +1 (416) 270-4481
Lima, Peru Office
Chariot Resources Limited
John Kapusta - VP Exploration & Geological Services
Office: +51-1-617-1313
--------------------------------------------------------------------------------
Source: Chariot Resources Limited
Re: News Release - Wednesday, August 23, 2006
Title: Corani Silver Resource Increased Measured & Indicated Up 477 Percent Deposit Still Open
--------------------------------------------------------------------------------
Vancouver, B.C. - Bear Creek Mining (TSX Venture: BCM) ("Bear Creek" or the "Company") is pleased to announce the results of its recently completed resource estimate for the Corani project. The resource estimate is based on drilling and assay results received by the Company up to July 14, 2006 and include the results from 236 drill holes and 25 surface trenches. Highlights of this release include:
The total resource has increased by 27% since March 2006 to 257 million ounces of silver, 2.80 billion pounds of lead and 1.58 billion pounds of zinc (measured and indicated categories) and 60 million ounces of silver (inferred category).
The Measured and Indicated resource has increased 477% to 140.4 million tonnes at 56.9g/t silver, 0.90% lead and 0.51% zinc.
High-grade cores in each of the 3 deposits cumulatively contain a resource of 71.3 million tonnes at 82 g/t silver, 1.17% lead and 0.62% zinc (measured and indicated categories) and 10.2 million tonnes of 71g/t silver, 0.84% lead and 0.34% zinc (inferred).
Corani Este, Minas Corani and Main Corani all remain open and drilling continues to encounter high grade silver base-metal mineralization.
Andrew Swarthout, President and CEO, stated "we are very pleased that in only a few months we have not only added significantly to the Corani silver resource but, as we have approached the drilling in a very deliberate manner, we have also converted large areas of Inferred resources into Measured and Indicated resources. We continue to focus on extending the resource into the many areas where the deposits remain open and exploring new targets. Future updates will include new drilling that we anticipate will extend and increase the total resource as well as convert Measured and Indicated resources into a Minable Reserve which should only require limited in-fill drilling given the continuity of mineralization. Metallurgical testing and a project scoping study are well underway, to be followed by a preliminary feasibility study expected in Q1-2007."
The following block model estimate was prepared by Independent Mining Consultants of Tucson Arizona. John Marek P.E. acted as the independent qualified person as defined by Canada's National Instrument 43-101. Additionally the methods used in determining and reporting the resources are consistent with the CIM Best Practices Guidelines for the estimation of mineral resources and mineral reserves.
Bear Creek Mining, Corani Project
Mineral Resource Based on 16 g/t Ag Cut-off and Prudent Open Pit Constraints
23 August 2006
The resource is based on 236 diamond drilled core holes at a nominal drill hole spacing of 50 meters and 25 surface trenches; all the data in the possession of Bear Creek as of July 14, 2006. Fifty drill holes have been completed on site since the cut-off date for results. A complete list of drill holes used in this resource estimate can be found at Bear Creek's website (www.bearcreekmining.com). All analyses of the samples were performed by ALS Chemex in Lima Peru and a strict quality control and chain of custody protocol has been maintained throughout the project development. (To access the silver drill hole resource map directly please refer to: http://www.bearcreekmining.com/i/pdf/2006-08-20_CDR.pdf.)
Since the Corani project is a poly-metallic silver-lead-zinc project a cut-off grade of 16 g/t Ag has been used in the reporting of the resource. The 16 g/t Ag cut-off was chosen as it reflects what is considered to be a prudent cut-off level to take into account the additional metal values. See footnote below for the assumptions used in the resource model.
High Grade Core
There are high grade cores to each of the 3 deposits and these zones could be mined separately to enhance project economics. At a 45 gm/t silver cutoff, the high grade cores contain a resource of 71.2 million tonnes of ore at a silver grade of 82 g/t Ag, 1.17% Pb and 0.62% zinc (Measured and Indicated), containing 188 million ounces of silver, 1.84 billion pounds of lead and 1.07 billion pounds of zinc. There is an additional 23 million ounces contained in the inferred category. These cores lie within a computer generated pit shape able to be mined with a stripping ratio of 2:1, or less.
Bear Creek Mining, Corani Project
High Grade Core at 45 g/t cut-off Contained in Smaller Open Pit Shapes
23 August 2006
Corani Este
Corani Este has the highest grade and remains open to the west and northwest. The Inferred resource reported in March 2006 has been converted to a resource that contains 92% Measured and Indicated categories. One drill continues to extend the deposit to the west and northwest.
Minas Corani
The Minas Corani resource occurs in two separate zones; the West Limb and the East Limb. Exploration since March 2006 has demonstrated that there is economic mineralization between the two limbs where potential to increase resources exists. Additionally, the deposit remains open to the north, east and west. Two drill rigs continue to expand the resource at Minas Corani.
Main Corani
The resource includes additional material in both the foot wall and hanging wall of the main vein. The hanging wall of the main vein, in particular, remains open along much of its strike length.
High Grade Zinc
The zinc at the Corani project tends to occur in discrete high-grade zones. Applying a 1% zinc cut-off to the material within the 16 g/t silver model, there are 26.6 million tonnes resource (measured and indicated) averaging 1.94% Zn representing 72% (1.14 billion pounds) of the contained zinc in 19% of the tonnes. This is important for enhancing the economics of zinc recovery as these areas can be specifically targeted in the flotation flow-sheet to optimize recovery of the higher zinc grades.
Exploration Upside
Upside continues to exist in all three deposits as well as in new areas such as La Curva. The source for the mineralization has yet to be found and more exploration drilling is being performed under thin, prospective post-mineral cover.
Future Work
Bear Creek continues to explore the Corani project with 4 drill rigs; one on Corani Este, two on Minas Corani and one on the La Curva prospect. These drilling results are expected to further increase the resources of the project as new data is included into future resource estimates, the next of which is expected prior to year end.
Bear Creek has moved its Lima, Peru offices to Av Parque Sur 420, San Isidro, Lima, Peru. Our new numbers are: telephone: (511) 476-1674 fax (511) 223-2231.
Please see news release dated 13 March 2006 for previously announced resource estimate.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
- End -
Andrew Swarthout - President and CEO, or Patrick De Witt - Investor Relations
Phone: 604-685-6269 Direct: 604-628-1111
E-mail: info@bearcreekmining.com
For further information, please visit the Company's website (www.bearcreekmining.com)
Regulatory footnotes:
Resource methodology utilized linear kriguing with grade restraint boundaries. Assumptions used in Resource model by IMC are as follows:
Silver Price= $9.35/oz; Zinc Price= $0.82/lb; Lead Price= $0.44/lb; Silver Recovery= 85%; Zinc Recovery= 65%; Lead Recovery= 65%; Smelter charges: Silver= $0.40 per ounce; Zinc= $0.135 per pound; Lead= $0.113 per pound; Mining Costs per tonne= $1.10; Process cost per tonne= $8.50; G&A per processed tonne= $0.85; Pit Slopes= 42 degrees. Actual results will vary based upon completion of metallurgical testing:
All of Bear Creek's exploration programs and pertinent disclosure of a technical or scientific nature are prepared by or prepared under the direct supervision of David Volkert, P.Geo., Bear Creek's Vice President of Exploration, who serves as the qualified person (QP) under the definitions of National Instrument 43-101. All diamond drilling has been performed using HQ diameter core with recoveries averaging greater than 95%. Core is logged and split on site under the supervision of Bear Creek geologists. Sampling is done on two-meter intervals and samples are transported by Company staff to Cusco, Peru for direct shipping to ALS Chemex, Laboratories in Lima, Peru. ALS Chemex is an ISO 9001:2000-registered laboratory and is preparing for ISO 17025 certification. Silver, lead, and zinc assays utilize a multi-acid digestion with atomic absorption ("ore-grade assay method"). The QC/QA program includes the insertion every 20th sample of known standards prepared by SGS Laboratories, Lima. A section in Bear Creek's website is dedicated to sampling, assay and quality control procedures.
Certain disclosure in this release, including management's assessment of Bear Creek's plans and projects, constitutes forward-looking statements that are subject to numerous risks, uncertainties and other factors relating to Bear Creek's operation as a mineral exploration company that may cause future results to differ materially from those expressed or implied in such forward-looking statements. *Any reference to the potential quantity & grade of mineralization at Corani is conceptual in nature, there has been insufficient exploration to define a mineral resource on the property and it is uncertain if further exploration will result in discovery of a mineral resource on the property. Readers are cautioned not to place undue reliance on forward-looking statements. Bear Creek expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
--------------------------------------------------------------------------------
Copyright © 2006 BEAR CREEK MINING CORPORATION (BCM) All rights reserved. For more information visit our website at http://www.bearcreekmining.com/ or send email to info@bearcreekmining.com .
Spellbound,
I was very impressed with the Brian Marsden article. From the beginning I was not enthused with ethanol; it steals from the food supply to aid car transportation. Just my opinion, but if I was starving, I'd rather be eating than driving.
sumisu
By Brian Marsden, Tue, 08 Aug 2006
Global warming and scarce energy supplies seriously threaten our future. Corn growers, ethanol producers, carmakers, politicians and some environmentalists promote ethanol as a clean, green fuel that reduces energy dependence on foreign sources. This is a tragic mistake. It creates the illusion of positive action while actually making matters much worse.
Fossil fuels, which supply almost 90%1 of our energy, are stores of ancient solar energy, accumulated over millions of years. They are finite and non-renewable. The world uses “more prehistoric plant matter in a day than [it] produces in a year”.2 Plants receive energy directly from the sun. Animals, including humans, get their energy from plants and other animals. For most of human existence, all our food was derived from sunlight.3 In the 20th century, tractors replaced draft animals and synthetic nitrogen fertilizers replaced natural sources, significantly increasing world grain production.
According to the most definitive study I know, more fossil energy is consumed growing corn and making ethanol from it than the ethanol produces and greenhouse gas emissions are 50 percent higher than those from gasoline. Corn uses 40% of all nitrogen fertilizer, made from natural gas. Corn cultivation, like the rest of fossil-based agriculture, is not sustainable and ethanol from corn is not sustainable. Ethanol yields only 68 percent as much energy as the same volume of gasoline.4
Even using a more optimistic analysis that estimates a small net energy gain for corn ethanol, the entire US corn crop could replace only two percent of our annual gasoline demand.5 Corn production receives $4.1 billion per year in federal subsidies and ethanol gets another 51 cents per gallon. One of the worst aspects of the ethanol boondoggle is promotion of E85 (85% ethanol) fuel and flexible fuel vehicles, which burn E85 or straight gasoline. Corporate Average Fuel Economy mileage for light trucks (SUVs, pickups and minivans) is increasing to a level that most of them cannot meet on gasoline. Their E85 mileage is even lower by about 25 percent. But the government, with a little mathematical trickery, calculates an inflated CAFE rating more than 50 percent above the measured gasoline-only number. As a result, auto manufacturers have greatly increased their flex-fuel vehicle production at the expense of genuine fuel efficiency.6
We should make better use of our solar energy income. Available low-efficiency solar cells could produce, annually, about 100 times more electrical energy than corn ethanol could deliver in a hypothetical 60 percent efficient fuel cell. Solar cells don’t need prime agricultural land.7
The most expedient way to reduce dependence on fossil fuels is conservation and increased efficiency. Our present life style is enormously wasteful. We live in one place, drive, mostly alone, to a distant workplace, and shop in dozens of other places. Most of what is consumed in any region is imported and most of what is produced is exported. Greater local self-sufficiency is essential. We must buy local products where feasible and convince government at all levels that growth and trade are not unmitigated benefits.
-------------------
References:
1. Energy Information Administration/Monthly Energy Review, July 2006, Table 1.3 Energy Consumption by Source
http://www.eia.doe.gov/emeu/mer/pdf/pages/sec1_7.pdf
2. Jeffrey S. Dukes*, Department of Biology, University of Utah, 2003: Burning Buried Sunshine: Human Consumption of Ancient Solar Energy
* Dukes is now at Dept. of Biology, University of Massachusetts, Boston
http://globalecology.stanford.edu/DGE/Dukes/Dukes_ClimChange1.pdf
3. Dale Allen Pfeiffer, From the Wilderness Publications, 2004: Eating Fossil Fuels
http://www.fromthewilderness.com/free/ww3/100303_eating_oil.html
Pimental, David and Pimental, Marcia, Focus, Spring 1991: Land, Energy and Water: the constraints governing Ideal US Population Size
http://dieoff.org/page136.htm
4. Tad W. Patzek, Dept. of Civil and Environmental Engineering, University of California, Berkeley, June 25, 2006: Thermodynamics of the Corn-Ethanol Biofuel Cycle
http://petroleum.berkeley.edu/papers/patzek/CRPS416-Patzek-Web.pdf
Patzek, July 11, 2006: The Real Biofuel Cycles
http://petroleum.berkeley.edu/patzek/BiofuelQA/Materials/RealFuelCycles-Web.pdf
5. Robert Rapier, Energy Bulletin, May 24’ 2006: E85: Spinning our Wheels http://www.energybulletin.net/16400.htm
6. Patrick Bedard, Car and Driver Magazine, July 2006: Tech Stuff: Ethanol Promises: Farm-Raising our own energy independence: Could it happen? http://www.caranddriver.com/features/11174/tech-stuff-ethanol-promises.html
Henry Payne, Detroit News Online, June 8, 2006: Loophole fuels Detroit’s ethanol fixation
http://www.detnews.com/apps/pbcs.dll/article?AID=/20060608/OPINION03/606080306/1008/OPINION01
Tara Baukus Mello, Edmunds.com, 02-07-06: Fueling up with Ethanol: Are flexible fuel vehicles the answer to out oil addiction
http://www.edmunds.com/advice/fueleconomy/articles/109194/article.html
Sharon Silke Carty, USA Today, 6/30/2006: Ford backs away from its hybrid auto sales target
http://www.usatoday.com/money/autos/2006-06-29-ford_x.htm
7. See reference 4
Bibliography:
Howard T. Odum 1970, Environment Power and Society
Nicholas Georgescu-Roegen 1971, The entropy Law and the Economic Process
Donella H. Meadows, Dennis L. Meadows, Jorgen Randers, William H. Behrens III 1972: The Limits to Growth
Donella Meadows, Jorgen Randers, Dennis Meadows 2004, Limits to Growth: The 30-Year Update
Herman E. Daly 1973, Toward a Steady-State Economy
Jeremy Rifkin 1980, Entropy: A New World View
Jeremy Rifkin 2002, The Hydrogen Economy: The Creation of the Worldwide Energy Web and the Redistribution of Power on Earth
Hazel Henderson 1981, The Politics of the Solar Age: Alternatives to Economics
C.J. Campbell 1988, The coming Oil Crisis
James M. Day 1988, What Every American Should Know About The Mid East and Oil
Daniel Yergin 1991, The Prize: The Epic Quest for Oil, Money and Power
Vaclav Smil 1991, General Energetics: Energy in the Biosphere and Civilization
Vaclav Smil 1999, Energies: An Illustrated Guide to the Biosphere and Civilization
Vaclav Smil 2002, The Earth’s Biosphere: evolution, dynamics, and change
Vaclav Smil 2003, Energy at the Crossroads: Global Perspectives and Uncertainties
Walter Youngquist 1997, GeoDestinies: The inevitable control of Earth resources over nations and individuals
Thom Hartmann 1998, The Last Hours of Ancient Sunlight: Waking up to a Personal and Global Transformation
Michael Economides and Ronald Oligney 2000. The Color of Oil: The History, the Money and the Politics of the World’s Biggest Business
Kenneth S. Deffeyes 2001, Hubbert’s Peak: The Impending World Oil Shortage
Kenneth S. Deffeyes 2005, Beyond Oil: The View from Hubbert’s Peak
Michael T. Klare 2002, Resource wars: The New Landscape of Global Conflict
Vijay V. Vaitheeswaran 2003, Power to the People: How the Coming Energy Revolution Will Transform an Industry, Change Our Lives and Maybe Even Save the Planet
Richard Heinberg 2003, The Party’s Over: Oil, War and the Fate of Industrial Societies
Julian Darley 2004, High noon for Natural Gas: The New Energy Crisis
Paul Roberts 2004, The end of Oil: On the Edge of a Perilous New World
Richard Heinberg 2004, Power Down: Option and Actions for a Post-Carbon World
Matthew R, Simmons 2005, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy
Al Gore 2006, An Inconvenient Truth: The Planetary Emergency of Global Warming and What We Can Do About It
december,
I had the same reaction; know what caused it?
I only have 10,000 shares, but I feel good that I have them now.
Watch out for the day traders hit it tomorrow.
Good luck,
sumisu
Spellbound,
When I attempted to set up the Peak Oil board, my only option was to set it as a premium room. Sorry about that.
Thanks for the article; I will post it there.
sumisu
PS Maybe that is why I'm the only one posting there!!
A Forbes.com Interview link below:
Natalie Pace interviews former CEO and Chairman of Goldcorp, Rob McEwen, and now CEO and Chairman of U.S. Gold.
(You will have to endure two short advertisements)
The message is that it is not too late to get into gold even though gold is just beyond $600, and the the reasons to substantiate this statement.
http://tinyurl.com/pc6nh
sumisu
Emgold Announces 7.5 Million Unit Non-Brokered Financing
Tuesday August 22, 9:30 am ET
<< TSX Venture Exchange: EMR OTC Bulletin Board: EGMCF U.S. 20-F Registration: 000-51411 Frankfurt Stock Exchange: EML >>
VANCOUVER, Aug. 22 /CNW/ - Emgold Mining Corporation (EMR-TSX-V)
("Emgold") is pleased to announce that it will carry out a non-brokered private placement of up to 7,500,000 units (the "Units) at a price of CAD $0.60 per Unit for aggregate gross proceeds of up to CAD $4,500,000 (the "Offering"). Each Unit will be comprised of one common share in the capital of Emgold and one-half of one non-transferable share purchase warrant. Each share purchase warrant will entitle the holder to purchase one additional common share of Emgold for a period of 24 months from closing, at an exercise price of CAD $1.00 per share.
The Offering is subject to certain conditions including, but not limited to, final documentation and receipt of all necessary approvals to the transaction. Finders' fees of up to 6% of the proceeds of the Offering may be payable. All shares, warrants and any shares issued upon exercise of the warrants with respect to the Offering are subject to a hold period and may not be traded for four months plus one day from the date of issuance.
The securities offered have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This press release is not an offer of securities for sale in the United States or Canada. These securities may not be offered or sold in the United States or Canada absent registration or qualification or an exemption from registration or qualification. Any public offering of securities to be made in the United States and Canada will be made by means of a prospectus that may be obtained from Emgold and that will contain detailed information about Emgold and management, as well as financial statements.
Proceeds from the Offering will be used to fund further exploration, permitting and development of the Company's Idaho-Maryland project in Grass Valley, California, on-going development and commercialization of the Ceramext(TM) process, exploration of Emgold's properties in British Columbia and for general working capital. Expenses for the Idaho-Maryland project include the activities associated with the applications for a Mine Use Permit, on-going geologic investigations and exploration, mine planning and design, property acquisitions and public outreach activities. The further development of the Ceramext(TM) process includes research and development, operation of the pilot plant, design and construction of a demonstration plant, marketing studies, feasibility and protection of intellectual property. Additional testing of the Ceramext(TM) process is being conducted on other feed materials for a wide range of new applications.
For more information about Emgold, the Stewart, Rozan and Jazz Properties in British Columbia, the Idaho-Maryland Project in California and the Ceramext(TM) Process, please visit www.emgold.com or www.sedar.com.
On Behalf of the Board of Directors,
William J. (Bill) Witte, P.Eng.
President and Chief Executive Officer
No regulatory authority has approved or disapproved the information
contained in this news release.
For further information
Michael O'Connor, Manager, Investor Relations, Tel: (604) 687-4622, Fax: (604) 687-4212, Toll Free 1-888-267-1400, Email: info@emgold.com
--------------------------------------------------------------------------------
Source: Emgold Mining Corporation
CERA's Rosy Oil Forecast – Pabulum to the People
by Randy Udall and Matthew R. Simmons
RELATED NEWS:
The Countdown for the Peak of Oil Production has Begun – but what are the Views of the Most Important International Energy Agencies...
Pentagon and Peak Oil: A Military Literature Review...
Kuwait considers Oil Depletion Protocol?...
Top oil groups fail to recoup exploration costs...
Peak Oil - Aug 16...
(Note: Commentaries do not necessarily represent ASPO-USA's positions; they are personal statements and observations by informed commentators.)
At a moment when a tank full of gasoline costs $75, the Chinese are eagerly trading bicycles for cars, and Americans are consuming their body weight in petroleum each week, it would be nice to know how much oil will be readily available a decade from now. In a thirsty world, will supply be adequate to satisfy demand?
A new study from Cambridge Energy Resources Associates, a prominent research firm, says not to worry. “Capacity growth will accommodate rising world oil demand so long as there are no major disruptions in the actual flow of oil,” said CERA’s Chairman Daniel Yergin. Global supply could increase 25% by 2015 to 110 million barrels a day, he says. This surge of new oil would meet forecast increases in demand, with a surplus to spare, putting downward pressure on prices, the study notes.
The report might be reassuring if CERA did not have a checkered forecasting record, and if its findings were not hedged six ways to Sunday. “Our focus is on physical capacity, not actual production which can fluctuate for political, economic, or technical reasons,” Yergin explains. In CERA’s feel-good scenario, “there are no problems below ground” and the myriad problems aboveground, although real, are likely to be short-lived, and thus can be ignored in their Reference Case. This is an absurd and dangerous nostrum, false on both counts.
In truth, the energy business is plagued by problems in Nigeria (violent insurgency), Venezuela (Chavez), Alaska (pipeline corrosion), the Gulf of Mexico (hurricane damage), Canada (cost overruns), Iraq (civil war), Sudan (ditto), Mexico (declining production), the North Sea (ditto), and Iran (new project delays, saber rattling). While prices should remain volatile in the short term, it’s exceedingly difficult to foresee a return to anything resembling CERA’s orderly market, abundantly supplied with a surplus of cheap oil for the next decade. Indeed, we think oil will be in shorter supply and much more costly in 2015 than it is today.
For the past decade, CERA, the U.S. Energy Information Administration, and the Paris-based International Energy Agency have produced important forecasts whose predictions would be comic if they hadn’t been so tragically misleading. In an effort to reassure politicians, these groups have become purveyors of petro-prozac.
In 1998, the IEA, struggling to balance its forecasts of future demand with supply, created a mysterious new category of “unidentified unconventional” oil which would supposedly provide 19 million barrels a day by 2020. When independent analysts ridiculed this fudge factor, the agency deleted the category, but continued to insist that the 11 OPEC nations could double supply, a geopolitical improbability and a geological impossibility, since production in half of them has already peaked.
At home, the EIA has surrendered serious credibility since its late 1990s predictions that natural gas would sell for $2.50 +/- in 2015. Tell that to grandma in Duluth, since the futures market expects gas to bring 12 bucks next March. For its part, in 2002 CERA forecast that North American gas supply would increase by 15 percent. In reality, production has fallen by 4 percent, forcing CERA to admit that “gas production in the United States appears to be in permanent decline.”
These erroneous forecasts are not just embarrassments, they have had profound real world impacts, misleading politicians, misallocating capital, and obscuring the growing dangers that energy shortfalls pose to national prosperity. The EIA’s don’t-worry, be-happy forecasts of cheap natural gas prices helped entice independent power producers to spend $150 billion on gas-fired power plants, some of which have now become too costly to operate. IEA and CERA’s forecasts of long-term cheap oil have misled automakers like Ford and GM into believing their markets for gas guzzling SUVs were secure, even as Toyota and Honda hit the market with fuel thrifty, gas-electric hybrids.
What's going on here, how can so many bright people get it so wrong?
In the EIA’s case, it turns out that the computer model it used to forecast natural gas supplies lacked serious resource constraints. CERA, too, seems to have difficulty grasping the havoc that declines in production are wreaking on aging oil fields. Petroleum engineers are intimately familiar with depletion; it’s what keeps them awake at night. But depletion is inexhaustible; it’s an implacable foe that never sleeps, yet grows stronger each day. Even if CERA’s forecasted 21 million barrels a day of new supply were to appear, world oil supplies might grow only a bit or perhaps not at all due to depletion in existing fields.
Despite a growing body of evidence to the contrary, CERA has concluded that world oil production will not peak until after 2020, that “peak oil remains firmly out of sight.” Meanwhile a long list of informed observers, including T Boone Pickens, Henry Groppe, Charlie Maxwell, Jeremy Gilbert, Tom Petrie and Chris Skrebowski, have come to believe that a peak is likely between now and 2015. The Chinese agree, and there’s nothing inscrutable about what they are doing, in their race to secure petroleum assets all around the world.
At peak, the world will not be “running out.” Indeed, more than half the world’s conventional oil and a larger share of its unconventional oil will remain to be extracted. . What the world is running out of is cheap oil, the $20 oil we built our civilization around. Suggesting that there are no insurmountable problems for the oil industry above or below ground and that a return to inexpensive oil and orderly oil markets is in the cards is a fool’s forecast. Taking such Pollyannish scenarios at face value threatens economic prosperity and national security.
Abe Lincoln once said, “I’m a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts, and beer."
CERA offers us a stout panacea, but on closer inspection it’s not so much a forecast as a vision in search of reality. Its predictions for Russian additions are larger than those of the Russian government, its forecast for OPEC higher than OPEC's own.
What are the real facts? Today, twenty nations produce 85% of the world’s oil, and production in half of these nations has already peaked, as it did in the United States 35 years ago. Despite new production in places like Angola, Kazakhstan and Brazil, two thirds of the world’s remaining conventional oil is in the tinderbox of the Middle East. Oil is becoming more difficult to find; 2005 was the worst exploration year since World War II. Globally, new discoveries turn up only one barrel for every three barrels we use, which is the reason large oil companies continue doing much of their prospecting on Wall Street. As Chevron notes in its recent ad campaign, “the era of easy oil is over.”
As they struggle to afford the next fill-up, Americans deserve a frank appraisal of our energy circumstances, not pablum and happy talk. With respect to petroleum, America has been sleepwalking toward disaster for twenty years. The nation desperately needs a wakeup call, not a fairy tale masquerading as a forecast.
Randy Udall directs the Community Office of Resource Efficiency in Aspen (CO) and co-founded ASPO-USA. Matthew R. Simmons is Chairman of Dallas-based Simmons & Company International—an investment bank specializing in the energy industry—and a member of ASPO-USA’s Advisory Board.
~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~
Contributor Steve Andrews writes:
ASPO-USA is preparing a more detailed rebuttal of the CERA report; this commentary precedes that effort.
ASPO-USA's Peak Oil Review is a free weekly newsletter. Subscribe at the ASPO-USA website: www.aspo-usa.org
Goldmarca Drilling Hits High Grade Zone at the Condor Gold Project Ecuador Intersecting 24 Metres of 12.6 Grams per Tonne of Gold
Monday August 21, 6:13 pm ET
http://biz.yahoo.com/ccn/060821/200608210343535001.html?.v=1
Goldmarca Drilling Hits High Grade Zone at the Condor Gold Project Ecuador Intersecting 24 Metres of 12.6 Grams per Tonne of Gold
Monday August 21, 6:13 pm ET
http://biz.yahoo.com/ccn/060821/200608210343535001.html?.v=1
Goldmarca Drilling Hits High Grade Zone at the Condor Gold Project Ecuador Intersecting 24 Metres of 12.6 Grams per Tonne of Gold
Monday August 21, 6:13 pm ET
http://biz.yahoo.com/ccn/060821/200608210343535001.html?.v=1
UPDATE ON WEST HAWK DEVELOPMENT
Trading symbol: WHD.V
Audio Interview with Michael Townsend, Chairman, West Hawk Development Corp. on 08 19 06
http://www.marketmattersradio.com/mp3player.php?name=20060819_3_whd_mike_townsend.mp3
company website:
http://www.westhawkdevelopment.com/
sumisu
Oil Market Becoming Immune to Terrorism, Future Still Unclear
By Cyril Widdershoven
18 Aug 2006 at 10:30 AM EDT
AMSTERDAM (ResourceInvestor.com) -- Even after temporary hikes in crude oil prices worldwide, based on terrorism threats to American bound carriers, and ongoing tensions between Israel and Hezbollah, overall oil market developments are showing a movement towards consolidation.
The last week’s increased violence in the Middle East and growing crude oil supply worries have not been of real influence on current oil price developments. In stark contrast to former price spikes, oil price have receded to levels below $72.50 per barrel. Oil traders and speculators are more inclined to take OPEC and IEA announcements about a possible slow down of economic development and demand as a basis for price setting than reoccurring violence around the world. Within last few days, NYMEX and Brent crude oil prices have showed an overall price decline. Consumers are optimistic that these price slumps are a sign for a long-term low price scenario.
Main stream analysis is currently indicating that demand for crude oil and petroleum products is feeling the impact of high price levels, resulting in global demand slumps. American figures show a U.S. gasoline demand decrease of 1.7%, even at the height of the so-called driving season. Traders have stated that worries about an increase in violence between Israel and its Arab neighbours has receded, as Israeli troops are leaving Lebanon and UN troops are set to take over. Geopolitical threats are currently being interpreted as less worrisome than before.
Global oil market realities are, however, different. Although a UN cease-fire between Israel and Hezbollah is still holding, first signs of increased tensions are already on the wall. Lebanon’s government has already indicated that it will not disarm the Hezbollah troops, which was a crucial demand of the UN cease fire. Israel’s reaction until now has been calm, but possible further conflict seems to be looming beyond the horizon.
At the same time, Iran’s international position has also declined, showing a potential confrontation as a real possibility. Iraq’s overall security has become a main issue which has not been taken into account by most analysts. African production also is still lagging behind expectations, as Nigeria’s Niger Delta conflict is still going on. Production shut-ins of Nigeria already are set at more than 800,000 barrels per day (bpd), 30% of total production.
Even if demand growth is slowing down, all signs show that increased production is still lagging behind. At the same time, most of new production generates heavy crudes, which are not having any real effect on Western supplies. Even Iranian officials have indicated that increased OPEC production, as stated by Saudi Arabia, will have no effect on the total picture at present.
Demand and supply growth is still not equal, resulting in unequal developments worldwide. Even that OPEC indicates that prices will decrease, the latter is based on a general assessment that economies worldwide will slow down. Currently European, African, Middle Eastern and even several Asian economies don’t support this.
Most security analysts see instability globally to increase the coming years. Taking into account potential conflict in Nigeria (presidential elections), Iran (sanctions), Lebanon (Hezbollah), Algeria (new hydrocarbon law), Iraq, Venezuela, Cuba (Castro) and global terrorism, it seems fair to expect that possible price decreases will soon be countered by unexpected price hikes.
Conclusion
At present, the global oil market is in a flux. Speculation is still the main basis behind price hikes; trading and investment operations of hedge-funds and oil traders seem to be more important that global security, demand and supply issues.
Long-term investors should take into account that temporary instability or threats have been used to increase profits for short-term players, but should not be seen as the real price makers of the future. A growing discrepancy between supply and demand still exists.
Peak Oil Passnotes: Supply 'Cushionitis'
By Edward Tapamor
18 Aug 2006 at 11:49 AM EDT
PARIS (ResourceInvestor.com) -- You have seen what Resource Investor was mooting about the oil market last week, basically come true. Oil has actually fallen a little faster than we expected - to around $71 - but it still has an important couple of barriers to break before it goes really wild to the downside. So let us take a little look at some recent history and see if we can figure out why.
On April 21st the Nymex WTI price reached $75.17 on the back of worries over Iran and general supply tightness. By June the Nymex WTI was at $69 before it set off on its latest run. In other words it had hit a strong high before falling back. It then surged back once more to hit $78.40 on July 14th before dropping off once again. Then we reached an odd moment a few days ago, on August 7th when some genuine myopic hysteria set in around the crude markets.
Brent crude had broken up past the WTI by August 7th as supplies of Brent became constrained by declines and increasing seasonal demand, pushing up past its historically higher-priced relative. The price was spurred by a number of reasons, not of which were crystal clear. One being the Israeli attack on Lebanon, others being the problems in Nigeria and the first signs of the difficulties for BP [NYSE:BP; LSE:BP] at Prudhoe Bay.
At the time we pointed out that although significant these events were underpinned by the - now seemingly age old - supply cushion absence. As there was no supply cushion the market had driven itself into hysteria. The Prudhoe Bay outage was not that significant although it was not helpful. Lebanon did not produce oil even though indirectly the invasion was about energy being a proxy war between the U.S. and Iran. Nigeria was going on the same as it has been in recent months.
Brent boomed up to an all time record of $78.64 intraday and $78.30 at the close with the WTI chipping in at a healthy $77.05 at the end of trading.
Now just 10 days or so later Nigeria actually seems to have got worse, armed men stormed a bar in Port Harcourt (who calls a bar Goodfellas in a place like that?) although the short-term outage at Nembe Creek of around 180,000 barrels per day has been restored. Meanwhile the Lebanon situation is still not really impacting oil and its supply. BP on the other hand has managed to keep somewhere around half of its Prudhoe Bay output online, even so you will note that is a loss of some 200,000 barrels per day. A loss is after all a loss.
Yet we are seeing the WTI hit exactly $70 intraday, some seven dollars off its high in around eight days active trading. Brent is around $72. A big, big move to the downside.
There is one other reason, Goldman Sachs. They are not excited about the new gasoline contract for - cough - reformulated gasoline blendstock for oxygenate blending or RBOB. New regulations in the U.S. have meant that RBOB is replacing methyl tertiary butyl ether (MTBE) in gasoline. Sachs are not about to risk a load of cash on this new contract so they have simply stopped playing.
The result of such a big player leaving the table is that there is no liquidity - or relatively little - in the gasoline market. This has pulled down the price of gasoline which has impacted on the price of crude. So the combination of events, Lebanon ceasefire, Prudhoe Bay, staying half-online, Nembe Creek being repaired and RBOB illiquidity have stuck a knife in the gut of the oil price. Then we hear stuff like this.
"Some of the factors and disruptions that helped drive us to very high levels have been resolved now," according to a statement by from Eoin O'Callaghan at the French bank BNP Paribas.
No they have not.
Lebanon is not resolved, Nigeria is not resolved, Prudhoe Bay and BP's general behaviour is not resolved, Iran is still awaiting the outcome of its nuclear enrichment programme and demand is still healthy. What has happened is the market has seen a great time to take a big chunk of profits. A breather. That is all.
If we were smart guys we would open a book on the first “Oil Makes Dramatic Surge” headline. No doubt you will see it in the next sixty days. We will be told all the stories about collapse, markets imploding, frenetic activity on the trading floor and ‘peak oil freaks’ will be telling us to ride Oxen to work. Then we will do the same dance all over again. Isn't energy great?
Portland prepares peak oil briefing book
http://www.energybulletin.net/18634.html
Portland Takes the Lead
By Tom Whipple
Falls Church News-Press, On-Line Issue
August 3 - 9, 2006
The Middle East , home to a third of the world's oil production, is coming unglued in so many ways and in so many places that it is nearly impossible to track. One would have to be a complete fool, however, not to recognize one of the manifold costs of all this chaos is going to show up on that big sign over your neighborhood gas station— shortly.
The roots of these conflicts go back two thousand years. They are not going to be settled in our lifetime or many lifetimes. There is very little any of us can do except to prepare for the consequences. As yet, with exception of Sweden , none of the major world governments have officially recognized that a decline in world oil production with potentially devastating consequences is imminent.
In the US , it is politically unthinkable for a government confronted by Iraq , Hezbollah , Iran , global warming, and numerous other woes to openly acknowledge peak oil and all that it implies. From time to time, they have dropped hints — "Energy Independence," "Advanced Energy Initiative," need to drill more, "addicted to oil" — but the administration has yet to openly acknowledge that one of the greatest crises the country has ever known is just over the horizon.
This total abrogation of responsibility by the federal government has led to a handful of local governments to start considering action on their own to prepare for what is sure to come. The furthest along is Portland , Oregon . In May, the City Council passed a resolution establishing a peak oil task force "to assess Portland 's exposure to diminishing supplies of oil and natural gas and make recommendations to address vulnerabilities."
The twelve "WHEREAS's" in Portland 's resolution (#36407 should you want to Google it) are a thing of beauty, for they make the case for an imminent and dangerous peaking of world oil production in a succinct and convincing manner. The City's planners have clearly done their homework well.
The charges to Portland 's peak oil task force are also worth noting:
To acquire and study current and credible data and information on the issues of peak oil and natural gas production and the related economic and other societal consequences;
To seek community and business input on the impacts and proposed solutions;
To develop recommendations to City Council in this calendar year on strategies the City and its bureaus can take to mitigate the impacts of declining energy supplies in areas including, but not limited to: transportation, business and home energy use, water, food security, health care, communications, land use planning, and wastewater treatment; and
To propose methods of educating the public about this issue in order to create positive behavior change among businesses and residents that reduce dependence on fossil fuels.
And there, in a nutshell, is a plan. At this stage, the plan may only be to study peak oil and its local consequences, but you have to start somewhere.
At last count, there were 87,576 governments in the United States (one federal, 50 state, 38,976 general-purpose local governments, and the rest special-purpose local governments such as school boards). Thus far, only Portland seems to be planning in public for peak oil.
Last week Portland 's government released a 93-page briefing book prepared by the city to acquaint their new task force with the basis for the City Council's concerns and to amplify on the guidance given in the resolution. The report discusses 14 areas that will be impacted by loss of cheap oil and gas and asks the task force to assess which are most relevant to Portland .
The areas of concern discussed are: Transportation, Land Use, Local Economy, Housing, Food, Public Services, Population shifts, Social Services, Health Services, Education, Electricity, Manufacturing, Retail and Communications.
In preparing this list, the City of Portland have done us all a big favor for they have moved the thinking about how to cope with the post-peak oil world forward another step. The message in the Portland report is that while we are all going to face peak oil, the effects on every one of those 87,576 governments is going to be slightly or a lot different.
Areas with sprawl will face massive commuting problems as gasoline becomes unaffordable, but in New York City , so long as the subway works, most people could care less. While feeding New York City may one day become a giant problem, rural America will continue to grow food way beyond what they consume. We are going to need 87,000 different solutions to mitigating peak oil.
As individuals, there is little most of us can do to keep oil flowing in the face of turmoil in the Middle East and nothing any of us can do in the face of peaking world production — other than to conserve.
There are however, still 87,575 governments in the US that, thus far, are doing absolutely nothing (at least in public) to prepare for peak oil. The chances are excellent that you live in one or more of them. Some day soon, each of these governments is going to have to face the consequences of peak oil. The sooner we can get governments thinking about it, the better off we, our children, and our grandchildren are going to be when that day comes.
The Guns of August (Redux)
By Tom Whipple
Falls Church News-Press, On-Line Issue
July 27 - August 2, 2006
The guns began early. By mid-July, Israel and her various adversaries were locked in combat with bombs falling, rockets flying, reserves mobilizing and casualties mounting. As the fighting increased, observers noted the similarities between the assassination of Archduke Ferdinand in 1914 and the provocative abduction of two Israeli soldiers by Hezbollah this month. In 1914 repercussions from the assassination quickly spread to engulf the major European powers. The ensuing wars and their aftershocks continued for the rest of the century. Europe was never to be the same again.
This time, it does not take much imagination to envision passions rising higher and higher as Tel Aviv’s adversaries launch rockets at her cities and the Israeli Defense Forces bomb, fire off barrages and launch armored incursions in return.
Currently, there is much discussion of a UN/EU/NATO or whatever “peacekeeping” force being sent to Lebanon . The usual UN contingents from small and innocuous countries clearly are not up to dealing with the situation is southern Lebanon . Peacekeeping there is likely to be far more difficult than the typical UN observer mission of recent years.
The Israelis, of course, will heartily approve the arrival of outside peacekeepers in southern Lebanon as they can turn the whole mess over to somebody else. Hezbollah, of course, will find that Jihad and martyrdom will work against peacekeepers just as well as Israelis. It is difficult to conceive the current level of conflict going on for long without dragging in some Middle East country with oil wells and then, the world will change.
Given the lack of spare capacity in the world’s oil market, any slowing or cessation of oil exports from the Middle East, no matter what the cause, would rank anywhere from a major catastrophe on up, should all or most of the Middle East’s oil exports be shut-in for a prolonged period.
Is this likely to happen? All we can responsibly say is the chances are a lot better than they were around the 4 th of July.
Putting aside Lebanon for a minute, what are the best thoughts about oil production peaking in the near future? First, let’s note that the average price of gasoline in the US recently hit a new all-time high of $3.02 (unleaded regular).
Last week in Pisa , Italy , there convened a meeting of several hundred people belonging to some 19 national Associations for the Study of Peak Oil. They met to review the situation and to exchange the latest thoughts and research.
There is a growing sense of urgency as oil depletion, global warming, debt burden and peak food all seem to be coming together as part of the same interconnected, looming disaster. Oil and gas depletion is real. It’s very close if not here already, and it’s going to be bad. Around the world most governments are not taking the issue seriously and in fact, are largely in denial, disseminating bad information about oil reserves and the possibility of future production increases.
A number of people continue to work on the question of just when and at what level world oil production is likely to peak. The most prominent of these researchers, Chris Skrebowski of the UK ’s Energy Institute, has reworked and expanded the scope of his research during the past year. He now believes that, unless some major geopolitical interruption takes place, world oil production will peak in late 2010 at somewhere around 93 million barrels a day (b/d). Current production is 85 million b/d.
Although a few prominent observers are still talking about the peak coming in 2015 or 2020, Skrebowski is one of the few independent analysts who actually has done a field by field, year by year, inventory of depletion vs. likely new production.
If one is optimistic then you assume that none of the brewing geopolitical crises —Lebanon, Iraqi meltdown, Iranian enrichment, Nigerian militancy, Venezuelan nationalism — will actually lead to a significant reduction in oil exports during the next few years. If this turns out the be the case, then Skrebowski’s estimate of 1,500 days from now seems like a reasonable upper limit for the period within which peak oil is likely to occur.
The most important theme to emerge from the conference was reinforcement of the notion that oil “reserves” are an academic exercise, and that only ability to produce and deliver oil counts. Given the increasing scarcity of production resources and rapidly increasing costs of getting oil from the dark and frigid places where it is being found these days, a peak of 93 million b/d circa 2010 is more likely to be too high than too low.
So there you have it. The best students of peak oil currently put the peak somewhere between last December and 1,500 days hence. Moreover, Hezbollah vs. Israel has an excellent potential to spin out of control resulting at best in a significant reduction in Middle East oil exports.
The last piece of bad news is to keep in mind that the most active period of the hurricane season starts next week.
Where is the Washington Post?
By Tom Whipple
Falls Church News-Press, On-Line Issue
July 20 - 26, 2006
If you live around Washington , DC and have much do with the federal government, then you probably read the Post. There are a few exceptions. If you are into finance or securities you reach for the Wall StreetJournal each day. If your politics are more than a few degrees to the right, you are going to be happier with the Washington Times, and if you are a deep thinker, then your day is not complete without the New York Times.
As a general rule, however, the tens of thousands who run our nation, or talk frequently to those that do, absorb their world outlook each day from the pages of the Washington Post.
For decades, the management and staff of the Post have always taken this responsibility very seriously, as "the" newspaper of our nation's capitol they have a special responsibility to see that our leaders and their advisors are kept fully informed with the latest information and best thinking about nearly everything our federal government must confront. In most cases they have handled this responsibility very well amidst the shifting sands and political pressures of Washington .
However, for those of us who take seriously the possibility, or if you will, the probability, that further increases of any significance in world oil production are looking less likely all the time, the Post's near silence on the issue is an major anomaly.
Other national papers such as the New York Times (at least the editorial board) have examined peak oil in depth. Last March in a lengthy Op Ed the Times concluded that indeed world oil production will peak one of these days with dire consequences. The Times, however, suggests only three opinions as to when peak oil will arrive: 1) already; 2) ten years; and 3) 30-40 years from now. The Times, however, does leave their readers with the impression that the best estimate of "when" might just be the US Government's official estimate of 2037 or 2047.
The Wall Street Journal's treatment of peak oil is the complete opposite. They don't want to even think about it. They would rather read that a giant meteor is heading for the earth and it will all be over next week than to contemplate the possibility that the GDP just might stop growing because there is no longer enough oil. Last week the Journal ran a story about how the Saudis were experimenting with steam injection in an effort to loosen and pump out very heavy oil deposits. After noting that if this technique works it would add significantly to Saudi reserves, the reporter gloats that "it would also be a blow to so-called peak-oil theorists who have forecast that world oil production is on the brink of peaking." So there! Take that you pessimists!
Somewhere between the New York Times, who are starting to admit that we just might have a very big problem ahead, and the Wall Street Journal, who see the good times rolling on endlessly, lies the Washington Post. Now the Post clearly does not ignore the oil market. Their chief oil writer has produced some 50 stories in the last six months chronicling every twist and turn in the oil story -- prices, OPEC, off-shore drilling, you-name-it.
Conspicuously absent from the Post is the notion that 150 years of steadily increasing world oil production and the cornucopia it has brought to many of us might just be coming to an end. Last week, for example, when the price of oil was reaching new highs amidst the thunderous blasts of Israel and Hezbollah tearing into each other the Post attempted to explain what was behind the new highs in the price of oil.
It seems those gas prices we are experiencing, or at least the top third of the price, is simply a fear premium. There is plenty of oil for sale; there are no production peaks in sight; nobody is guzzling anything; all that bombing and rocketing is nowhere near the oil fields. If only the speculators would stop all this needless worrying gasoline would be back to $2 a gallon and all would be well.
The Post once again trots out Daniel Yergin of Cambridge Energy Research Associates, the chief apostle of boundless oil in our lifetime, to assure us that the "fundamentals of the oil market are actually getting better" and that high oil prices only come from geopolitical fears and perhaps a shortfall in investment.
Last October the Post gave a Yergin, a contributor of long standing, a full Op Ed piece in which to push the notion that peak oil is a false premise and that there will be oil for every conceivable want for the foreseeable future.
So what is going on here? Have the managers, editors, and writers of the Post seriously looked at the evidence and prospects for world oil production peaking in the next few years? Are they aware that there has been little if any increase in world oil production for the last 18 months? Do they really think that Iraq will still be exporting oil a few years from now? Or that Israel-Hamas-Hezbollah can go on much longer without somebody, somewhere pulling the plug on some amount of oil exports to punish somebody or other?
Has the Post come to the realization that peak oil is not just geology or investment in drilling holes, but that it is also hurricanes, assassinations, coups, religious wars? Peak oil production is peak oil production. It does not really matter what causes the peak. In a world that burns 31 billion barrels of oil every year and is incessantly demanding more and more, any major, prolonged cut in production is likely to be the beginning of peak oil.
Does it matter that the Washington Post, for whatever reason, is ignoring the possibility of imminent peak oil? The answer is a resounding YES. If the Post understands, then, given time, Washington will understand. For the time being, Washington is in a position to do something about peak oil. Washington can tax, spend, conserve, legislate, lead, regulate, admonish, punish and invent. As the capitol of the largest oil-consuming nation the world has, or will ever know, it is in a unique position to get mankind through the painful transition to the post peak oil world.
But first, Washington has got to understand. And that is where the Post comes in.
Independence Day 2006 – America's last fling?
By Tom Whipple
Falls Church News-Press, On-Line Issue
July 13 - 19, 2006
The final reckoning isn’t in yet, but by early accounts we had a bang up 4th of July this year. A record 40 million of us got into our cars, SUVs and pickups and went forth. We went to the beach, to the mountains, to grandma’s, to our national parks, to our state parks, to amusement parks. Anywhere there was a “destination” worth driving to, we went to it.
Three-dollar gasoline didn’t bother most of us one bit. Gasoline supplies were ample and so long as the pump still accepted the credit card, we had a great time. Here and there were a few dark clouds. Those lucky enough to own a large power boat with a 300+ gallon gas tank and a one-mile-per-gallon or less cruise speed, were reported to have been taken aback when boat fuel at the marina rose to $4 per gallon ($5 in Canada ). Many spent the weekend at anchor— just enjoying the view and pondering what it would be like to own a sailboat.
On July 5 we paid for our profligacy when the commodities markets, having learned we had gas-guzzled ourselves to a new consumption record and were showing few signs of easing up, sent the price of oil to over $75 a barrel— a new all-time high.
As we cross the halfway mark of 2006, it’s time for another quick review. Was this the last gas-guzzling 4 th or will Mother Nature let us get one or more under our belts before the inevitable year when many of us can no longer afford to drive in the manner to which we have become accustomed.
Last week the US Energy Department released the stats on how it's going with oil supply and consumption so far in 2006. The first piece of news is bad. Daily US oil production for the first half of 2006 dropped by 7.1 percent to 5.1 million barrels a day vs. 2005 when we produced 5.4 million. Those hurricanes last fall coupled with aging, depleting, oil fields are really doing a number on us. Not much progress on the “energy independence” front so far in 2006.
Our overall oil consumption for the first six months is down just a smidgeon, but unfortunately the big drop was in heating oil. Remember that warm January we had last winter. Where it really counts, gasoline and jet fuel, we are still forging upward, with gasoline consumption in June up 1.4 percent over last year and jet fuel up 3.3 percent. The biggest energy surprise of 2006 is that $3 gasoline is only slowing the poorest among us. For the rest of us, $3 is cheap, (our Canadian cousins are paying $4) or we are finding ways to compensate.
We are not refining as much as we used to, but that’s OK because our imports of refined gasoline and blending components are now running about 1 to 1.3 million barrels a day. That’s about double what it was 10 years ago. This week the average price of gasoline in the US made it to $2.97, just a few cents below the hurricane high last fall.
In thinking about the state of peak oil and all it implies, it is difficult to foresee any good news that would delay the arrival of much higher prices and shortages.
World oil production has been basically stagnant for the last year. If this production reaches a new high in the next year it is likely to be a minimal increase of a few hundred thousand barrels a day or less. It is becoming increasing difficult to envision just where production increases on the order of millions of barrels per day that we saw a few years ago are going to come from. Every few weeks another report of actual oil depletion or new statistics looking suspiciously like depletion, surfaces.
In the meantime, consumption in China , some parts of Asia , the rich Middle East Oil producers, and the US shows little sign of slowing. By the next 4th of July, another 31 billion barrels will have gone into somebody's fuel tank, somewhere. There is simply not enough slack in the system or oil currently being consumed by poor nations that will soon be priced out of the market to make up for the supply demand imbalance. Some are beginning to talk about a dollar a year addition to the price of a gallon of gasoline as what we might expect for a while.
If this rate of increase proves to be the case, we can look for circa $4 gasoline next July and $5 in July 2008, just prior to the Presidential election. The new President can then deal with the $6 or $7 gasoline that many believe will do some real damage to the economy.
These supply vs. demand increases, of course, presuppose nothing particularly bad happens in the interim-- a hurricane across the oil fields, a well placed explosive, a diplomatic miscalculation, a timely assassination, or a civil war in an oil exporting country. While it is hard to imagine any geopolitical development that would significantly lower the price of oil, there are half a dozen festering situations that are screaming "serious trouble ahead."
From Baghdad to Gaza to Basra to Tehran there are situations deteriorating by the week. To these we might add the Niger Delta and perhaps even Mexico , should oil production drop precipitously in coming months.
Taken together, all the evidence suggests there are so many developments likely to reduce oil production significantly, just waiting to happen, that it is highly unlikely that world oil production will get through another year or so unscathed.
Thus, the evidence seems to be mounting that from both the supply/demand/depletion perspective as well as several decaying geopolitical situations, Independence Day 2007 might involve much less freedom to travel than that one we just celebrated.
Energy & Buildings
By Tom Whipple
Falls Church News-Press, On-Line Issue
July 6 - 12, 2006
When worldwide oil depletion sets in, initial concern will be with transportation. First attention will be fixated on the “unbelievable” gas prices, then, what to do with the SUVs, miles per gallon, public transit, bicycles, telecommuting, and anything else having to do with getting ourselves and our stuff around.
In time however, it will dawn on us that cheap oil played a bigger role in our daily lives than just propelling cars. It won’t be long before other concerns arise such as growing, raising, transporting, and preparing food, and keeping our buildings habitable. I would like to talk about buildings in an era without cheap oil, without cheap natural gas, and without cheap electricity.
Keep in mind that in North America , we spend 90 percent of our time inside some building or other, where the temperature, moisture, and even the oxygen content of the air we breath are all kept at acceptable levels by – you guessed it – cheap energy. Take away the energy and, under some circumstances, a cave, tent, or even sitting under a big tree might be preferable to being indoors.
Now buildings have been around for quite some time and have served civilization well without much more than firewood, candles, coal and a touch of whale oil to keep them habitable. In the last century however, and particularly during the last 50 years, cheap, abundant energy has brought major changes to our buildings. They have become taller, bigger, brighter and most have one thing in common: they now require massive amounts of energy to keep functioning— particularly here in North America , the epicenter of energy consumption. Take away or markedly reduce the availability of energy and our relationship with our buildings becomes a big problem.
In the good old days of five or six years ago, utility costs ran about 20 percent of the cost of operating an office building depending, of course, on a large number of variable factors. When the costs of oil, natural gas and electricity begin their inevitable several fold or more increase, the choice will quickly become: get along with a lot less energy or abandon the structure. This applies to tall, fully “conditioned” office buildings, retail and manufacturing establishments, and homes.
The energy crises of the 1970s led to a lot of thinking and research on how to construct buildings that use little or no energy. Some have been built that are “super-insulated,” nearly air-tight, structures carefully controling their exhaust and air intake flows. Where suitable, you can add some solar power or perhaps a wind generator and have a very livable building using little or no outside energy. While this would be great for a post peak oil world, there is a problem. Outside of a handful demonstration projects, we have built only a few such buildings. To replace a significant portion of the world’s existing building inventory with ultra efficient models will take many decades if not centuries. There may not be enough energy left to accomplish this task.
The heart of the problem is that 99+ percent of the tens of millions of buildings in which we spend so much time are energy guzzlers and unless we can find some way to massively reduce their consumption of energy, large swaths of post peak oil civilization could quickly become very unpleasant places.
The first steps on the path to sustainable buildings are relatively simple and inexpensive, turn down the heat, turn up the air-conditioning and turn off the lights. Wide-spread air conditioning is only 40 or 50 years old and central heating not much more than 100. For most of us, the relentless rise in heating and electric bills should be sufficient incentive to make do with less heat, cool air, and light. The first steps towards conservation will cost nothing and can be accomplished instantly. It may take a little temporary discomfort before we become used to temperatures five, ten, or more degrees above or below what we are currently accustomed.
The next relatively inexpensive step we will need to take is getting rid of the excessive lighting in our buildings, especially the incandescent kind. I suspect increasing electricity prices will be enough to make this happen, but somewhere along the line Congress might see the light, and start phasing out sales of the incandescent bulb and perhaps even mandate some lighting standards more suitable for the times.
After adjusting the thermostat and unscrewing or replacing outmoded light bulbs, our journey to as-close-to-zero-energy buildings as we can get becomes more complicated— and a lot more expensive. If money is no object, or your building is close to a good source of sun, wind, or wood, simply tear down and replace or modify the building into a structure that can sustain itself.
While, for most of us, total replacement of an existing building is not an option, it is almost certain rising heating, cooling, ventilating, and electricity costs eventually will force most of us into taking costly measures to conserve building energy.
There are dozens of ways to reduce the amount of energy required to keep an existing building habitable. Weatherization (plugging cracks), more and still more insulation, triple-glazed windows, and efficient heating/cooling units are among the more prominent options. The major issues in all this will be: 1. choosing wisely among the many options so we can get the most energy savings per dollar of building upgrade and 2. where to start.
While “upgrade wisely” is a technical issue to be decided through engineering analysis, the “who gets upgraded first” is a political/economic issue. The issue starts with climatic conditions and how much energy is needed to keep people alive and then, alive in relative comfort. In southern Florida, the climate requires 500 or less degree (C)-days a year to keep people warm while in northern Alaska the number is over 10,000 degree days. If rationing of building energy and upgrade resources takes place only by price, you will have situations where all the available insulation is going to reduce rich-guys’ air conditioning bills in Key West, while pensioners in Maine are freezing to death. They simply cannot afford the energy to stay alive or the resources to reduce their need for heating energy.
An important factor in all this will be how fast the energy-for-buildings crisis comes upon us. An abrupt disruption of energy supplies either by a geopolitical event or an act of Mother Nature, coupled to an unusually cold winter, could quickly lead to crisis level fuel shortages. A similar, but probably less serious event, could come in the middle of a summer heat wave.
The message is clear, the vast amounts of energy being used to support our buildings in the style to which we have become accustomed simply will not be available much longer. In a few years, solutions, or at least attempts to find solutions, to this problem will start making their way to the top of many political agendas.
Our Government Forecasts the Future
By Tom Whipple
Falls Church News-Press, On-Line Issue
June 29 - July 5, 2006
Last week the US Government released the International Energy Outlook 2006 (IEO). As it has been doing annually since 1985, the Energy Information Administration uses this document to expound its view of world energy supply and demand for the next 25 years.
Unfortunately, however, from a peak-oil-is-imminent perspective, one is forced to say that many of this report's projections are so far from reality that the EIA must be talking about some other world. Early on the report makes it clear the government is not buying into imminent "peak oil." While acknowledging that oil prices have been climbing rather unexpectedly in recent years, the report places the blame on the lack of sufficient investment by the "oil rich" countries to increase production and not on any shortage of supply.
The authors assume that "for the period out to 2030, there is sufficient oil to meet worldwide demand." "Peaking of world oil production is not anticipated until after 2030." They also assume there will be no long-lasting disruptions to the steady growth of oil and other forms of energy production for the next 25 years. The report says flat out, "A business-as-usual oil market environment was assumed. Disruptions in oil supply for any reason (war, terror, weather, geopolitics) were not assumed."
For many of us, these statements alone are enough to question whether we are dealing with a serious effort to project the future of the world's energy situation, or whether the projections contained in this report have a foundation in reality.
The fundamental conclusion of the report is that world oil production is to grow from the current 85 million barrels a day (b/d) to around 98 million b/d by 2015 and thence to 118 million b/d in 2030. One way the EIA gets to such spectacular numbers is to posit very large growth in unconventional oils— ethanol, biodiesel, tar sands, and coal to oil conversion. These are to grow by 10 million b/d in the next 25 years and are to account for nearly 10 percent of total world "petroleum" supply.
To be fair, the EIA's usual optimism is gradually subsiding. In last year's report, the 118 million b/d of oil production was to be attained in 2025, but now this has slipped to 2030. In contrast to the EIA projection, most people who have tried to calculate when, and at what level, world oil production will peak, come out somewhere between 85 and 90 million b/d and not much higher. For them, the notion that world oil production will smoothly move on up by an additional 30 million b/d (even if a lot of this is to be "unconventional" oil) is a fantasy.
The underlying assumption that the administration's policies are working like a charm, the Middle East is not on the verge of devolving in chaos and that unprecedented period of peace and economic prosperity will endure for the next 25 years does certainly not square with the daily news.
The report, of course, discusses and projects the future of coal, natural gas, and electricity production in addition to the sections on oil. There is also a section on energy-related carbon dioxide emissions and their relationship to the Kyoto Protocol. Internally these may all be soundly based projections continuing historical trends. The fatal weakness is the oil projection and their underlying assumptions.
Given the basic assumption of peace, prosperity and 118 million b/d of oil production to sustain them, much of the report becomes an exercise in trying to find ways that world energy production can meet this goal. In a number of instances, the resulting country by country projections have countries that are already well into depletion either halting the decline or increasing production. Alternative projections that oil could either drop to a steady $30 per barrel or take another 25 years to work up to $95 per barrel are obviously unrealistic.
The preamble to the IEO says that it is published pursuant to the Department of Energy Organization Act of 1977 and is intended to be used by "international agencies, Federal and State governments, trade associations, and other planners and decision makers." Given the preposterous assumptions the report posits and the reams of evidence that world oil production is almost certain to peak well before 2030, this report does not appear to be particularly useful for planning anything beyond a few years from now.
Even if the coal, natural gas, and electricity numbers have some validity, the precipitous decline in the availability of oil is almost certain to engulf other sources of energy in ways that are unknowable. If ways are found to quickly substitute other sources of energy for oil, then the demand for these resources will obviously explode in an unpredictable fashion. Should a major economic slump occur, then the demand for other sources of energy could melt with the GDP. It is all inter-related in complex and admittedly difficult-to-forecast ways.
Returning to the question as to whether the IEO for 2006 is a useful or dangerous document, I was struck by a conclusion in the sub-head to chapter 1. "Energy resources are thought to be adequate to support the growth expected through 2030."
This conclusion epitomizes the core of the contention between those who believe peak oil is both real and imminent and those who are still in denial. Those who understand peak oil believe that a major break point, change, paradigm shift based on the end of cheap freely available oil is imminent. The others are not yet ready or willing to entertain this thought.
Recognizing the Peak
By Tom Whipple
Falls Church News-Press, On-Line Issue
June 15 - 21, 2006
It is conventional wisdom among students of peak oil that worldwide peak oil production will not be recognized, and certainly not "officially" certified by some organization or other, until some years after the event has passed. The exception to this, of course, is if some natural or man-made catastrophe shuts down a lot of oil production in a manner not likely to be restored for many years.
Without such a catastrophe, recognition of peak oil will be gradual, with month after month of volatile production statistics trending downward. At some point, even the most optimistic prognosticator will be forced to admit it is unlikely that world production will ever again climb above the highest production record previously achieved.
The world is currently producing somewhere around 84-85 million barrels a day of oil. Pessimists say the current production rate is beginning to look a lot like a peak. Maybe another million or so a day, but that’s it. Moderates on the issue will allow that another five million barrels per day looks possible and see a peak around 90 million barrels a day. Until recently, the optimists were talking 120 million barrels day, 20 or 25 years down the line, but numbers like this are appearing less frequently.
Currently, there is a fair sized discrepancy regarding total world oil production between the world's two major production compilers, the International Energy Agency in Paris (IEA) and the Energy Information Administration in Washington (EIA). The IEA says we are currently producing 85 million barrels a day while the EIA says it’s closer to 84 million.
Now, I am not privy to the methodology used by these two agencies to compile their worldwide production statistics each month, but even from the outside, some problems are obvious. There is a distinction between those countries that make every effort to publish accurate and timely production statistics and those who, for a variety of reasons, want to give out a false (usually higher) impression of their actual production.
In the former category are North America , Europe , Russia and China and countries where most production is carried out by the major international oil companies]/b]. Here the statistics are, given the complexities of compiling such data, reasonably timely and accurate. Corrections are made promptly when new information is acquired. Production numbers from these countries shows that they jump up and down on a month-to-month basis. Old wells dry up; new ones are drilled; equipment breaks down; storms or extreme temperatures appear. By their very nature, oil production numbers are volatile. It is the trend that counts.
Then there are a group of countries where a state run oil company controls production and the local government feels it is in its interest to keep a tight reign on any official release of production statistics. The most prominent of these are Saudi Arabia , Venezuela and Iran , although a couple of other Middle East producers, such as Qatar and Kuwait , do not appear to be particularly forthcoming.
The non-cooperating countries are easy to spot, for their purported production remains the same month after month in the tables produced by the major compiling agencies. Rock steady production numbers means that even organizations with major resources behind them cannot come up with better numbers (at least that they can publish openly) and are forced to make educated guesses or go with the previous month's production number.
In a number of cases, the IEA and EIA are forced to use the estimates of "tanker trackers." These are private organizations maintaining contacts in the major oil exporting nations who simply note whenever a tanker leaves, where it is supposed to be going, and how heavily loaded it appears. As most of these ships are hard to miss, one can assume that counting departing tankers is about as an effective way as any of tracking country's exports.
In response to many complaints about the production data, a database called the Joint Oil Data Initiative was set up about a year ago. This is a public online database to which all producing countries are supposed to submit their production statistics. A quick perusal of the web site shows that it has many critical gaps and that the concept still has a ways to go.
You may wonder why we should really care if a country's production is going up, going down, or remaining flat. The answer of course is that, until recently, it really didn't make much difference to anyone, but the Saudis, if they produced 8 million, 10 million, or 12 million barrels of oil in a given day. If they didn't fulfill demand for their product, somebody else would. As long as there was sufficient oil to fulfill demand without forcing up prices too much, that was all that mattered.
As the worldwide oil supply and demands tightens however, the need for timely accurate production statistics becomes increasing important— so much so that at some point, timely and detailed knowledge of world energy supplies may become a matter of critical importance.
The reason behind this assertion is simple. As oil depletion nears, we are all —from the highest levels of governments to the individual citizen— going to have to make many, many decisions as we rearrange our lives and our livelihoods in response to cope with life in a world with declining availability of oil and all deriving from it.
To get through this transition, good and timely information as to when and how fast the energy situation is changing is going to change will soon become vital to all of us.
One Year in Review
By Tom Whipple
Falls Church News-Press, On-Line Issue
June 8 - 14, 2006
As the world oil situation is rather quiet at the minute, it's a good time for a review. The price of oil continues to bounce around $70 a barrel and shows no sign of moving very far in either direction until the next big development occurs. The Iranians are busy trying to decide how much they really want an atomic bomb (or at least the ability to make people think they have one). The wrong decision by either side could impact world oil supplies and prices for years to come. Finally, the Nigerian militants have managed to abduct and probably ransom a group of foreign oil workers from an exploration platform 40 miles offshore.
The most obvious-to-everybody development in the past year is that the average US price for gasoline has managed to climb by 77 cents a gallon. So far the economic damage has been well below what many observers had thought $3 a gallon would do to the economy. However, there are signs of trouble ahead. Sales of large SUVs are on their way down, inflationary numbers are starting to appear, and Wall Street is having bad days. While for many people $3 a gallon is something one gets used to, many others are rapidly on the way to maxing out their credit cards or hocking the family heirlooms to get to work.
The other hard-to-miss events of the past year were the big Gulf of Mexico hurricanes. Whether you believe in global warming or not, the waters in the Gulf and mid-Atlantic have gotten a lot warmer in recent years resulting in two consecutive seasons in which Gulf oil production was badly torn up. Last year's hurricane season resulted in the permanent loss of some 200,000 barrels a day of oil production. While no one knows as yet if this year's hurricanes will do damage comparable to the last two years, all the climatological prerequisites for another bang-up hurricane season are in place. Gulf oil and natural gas production has grown into a mighty big target.
During the past year, a pair of internal company documents were leaked in Mexico and Kuwait . The Mexican document suggests that production from the giant Cantarell oil field from which the US imports 1.6 million barrels a day is about to collapse catastrophically. In the case of Kuwait , the leaked study claims that the country's oil reserves may only be 25 to 50 percent of the official number. In the meantime, Kuwait has announced that production from their giant Burgan oil field has started to decline.
The status of Saudi oil production, which many believe to be the key to any further growth in world oil production, remains a well-guarded state secret. Here too, however, there are tantalizing hints of trouble ahead. Riyadh continues optimistic claims about future production capabilities and has embarked on major new onshore and offshore drilling projects, paying top dollar to lease the required equipment. For most of the last year, Saudi oil production has been steady at 9.5 million barrels a day at a time when world oil prices and presumably demand has increased. Recently a firm of "tanker trackers" announced that it looked to them as if Saudi production had dropped to around 9.1 million barrels a day in April and May. The number for April has been confirmed by the Saudis who claims they simply can't find buyers for their oil.
It may be perfectly true that the Saudis can't find a market for some of their oil. A lot of it is difficult to refine and a growing share of the world's oil consumers simply can't afford the going rate these days, even as the richer countries continue to grow nicely. A number of outside analysts are saying that it is just about time for Saudi production to go into decline, perhaps catastrophically. In a year or so, we should know who is right.
Also, keep in mind that stopping Saudi oil production is still Al Qaida's top objective. They failed in an attempt to blow up a key chokepoint a few months back, but they are still out there and not getting any friendlier.
We all know where the Iraqi situation is going and that it is only a matter of time until oil exports, which are doing nicely at the minute, are drastically reduced or come to a complete stop. The Iranian situation is in limbo at the minute. Decisions in the next few weeks should settle whether exports and further oilfield development continue or the situation deteriorates into any of several possibilities that will increase to price of oil or perhaps markedly reduce the amount of oil coming out of the Middle East .
A major phenomenon of the past 12 months has been the scramble for secure oil supplies that has been taking place around the world. The Chinese have been particularly active in seeking out new deals and signing contracts for oil. Close behind China in the search for bilateral agreements have been the Japanese and the Koreans who are faced with the problem of growing industrialized economies and no indigenous oil. There appears to be a trend getting underway from market-based oil sales, where “he who pays the most gets the oil,” to a situation where exporters are selling to customers under direct bilateral agreements.
Thanks in part to the hurricanes, US oil production thus far in 2006 is down by 400,000 barrels a day (7.3%) as compared to 2005. Our net imports of crude and finished products are up by a comparable amount. This means that roughly two thirds of US oil consumption is now being imported and therein lie the seeds of a problem more serious for the US than the peaking of world oil production: peak US oil imports.
Let's face it, during the last year, the popularity of the US around the world has not been doing too well. Many see a way to do us real harm through cutting or slowing our access to oil. Nationalism is on the march in many places. A few countries led by Venezuela are saying that as soon as they can figure out how to stop exporting oil to the US , they will.
It is gospel that when an exporting country goes into depletion they will keep supplying the domestic market first so that their exports will drop much faster than their total production. Moreover, we are starting to hear talk about cutting back on exports just to save it for another day. The message of rapidly rising prices is that an exporter can earn growing revenues and keep more of his oil safely in the ground too, simply by slowing exports. The only obstacles to deliberately slowing exports are long term contracts, other trade relationships, security guarantees, and the fear that they could end up like Baghdad .
So what does the past year tell us? First of all, world oil production has moved up very little. While new wells and new oil fields continue to be drilled, this increased production has been largely offset by hurricane damage, insurgencies, and general oil depletion. The year of peak oil production will be determined by the balance of how fast the drillers can open increasingly more expensive and difficult to drill wells vs. mother nature, insurgents bent on closing down production, and increasing rates of world oil field depletion.
The US and other industrialized countries, most of which are, or soon will be, major importers, are facing the double whammy of rapidly reducing supplies of oil available for import. In the meantime, and for the moment, the worldwide demand for oil, even in the US , continues to increase.