The Oil Drum - Discussions about Energy and Our Future

Drumbeat: June 19, 2013

Leanan — Wed, 19 Jun 2013 13:22:18 +0000

U.S. Considers Exporting More Oil for First Time Since ’70s

The U.S. oil boom is moving Congress closer than it has been in more than three decades to easing the ban on exporting crude imposed after the Arab embargo.
Advances such as hydraulic fracturing are leading to record production that may outstrip refinery capacity within 18 months to three years, said Benjamin Salisbury, a senior energy policy analyst at FBR Capital Markets Corp. in Arlington, Virginia. Net petroleum imports now account for about 40 percent of demand, down from 60 percent in 2005, according to the U.S. Energy Information Administration, the Energy Department research unit.
Congress has limited oil exports since the 1973-74 Arab oil embargo triggered shortages that pushed up prices and led to long lines at gas stations. An increase in domestic production last year by a record 766,000 barrels a day is challenging a notion that Americans need foreign oil, while setting up a debate policy makers may be reluctant to begin.
“Americans are unbelievably politically sensitive to oil and more specifically to gasoline prices,” Salisbury said in an interview. “For politicians to do anything, the pain has to come first. You have to see the rig count fall and then and only then can we have a decision about whether we want to export crude.”

U.S. oil boom helps thwart OPEC

NEW YORK (CNNMoney) - Surging U.S. oil production and greater energy conservation are helping keep a lid on oil prices worldwide and may be limiting the sway OPEC holds over world markets.
U.S. oil output rose by 14% in 2012, BP reported last week in its annual statistical review. The million barrel-per-day jump in output was the largest increase for any country in 2012, and the fastest single year increase in U.S. history.
"The tidal wave of oil coming out of the United States helped to [quench] the market's thirst," said Blake Clayton, a Fellow for Energy and National Security at Council on Foreign Relations. "Tremendous increases in energy efficiency in the United States and Europe are helping to soften the market."

Keystone Seen Failing to Sop Up Canada Oil Glut

“Keystone will help alleviate the lack of pipeline infrastructure but only temporarily,” David Bouckhout, a senior commodity strategist at TD Securities in Calgary, the securities unit of Canada’s second-largest bank, said in a telephone interview. “Growth of supply on both sides of the border, Bakken and Canadian supply, will outpace what Keystone’s capacity will provide in likely two to three years.”

Utilities Switch Off Investment in Fossil Fuel Plants

LONDON — On the outskirts of Scunthorpe in northern England, workers at the large power station known as Keadby 1 are preparing to shut it down at the end of the summer, with the loss of about 40 jobs.
Its owner, the British utility Scottish & Southern Energy, says fluctuations in global energy markets have made the natural gas power plant unprofitable despite a multi-million pound renovation, as demand for electricity has plummeted since the financial crisis.
In response, the company plans to keep Keadby shut down until at least 2015. It has also delayed new energy investments and is planning to close almost a quarter of its fossil fuel power plants, including parts of the Ferrybridge coal power station near Leeds in northern England.

WTI Advances to Nine-Month High as U.S. Stockpiles Drop

West Texas Intermediate crude rose to a nine-month high after an industry report showed U.S. inventories dropped last week.
Futures rose as much as 0.6 percent. Crude stockpiles fell by 4.3 million barrels in the week ended June 14, the American Petroleum Institute said. An Energy Information Administration report today may show supplies shrank by 500,000 barrels, according to a Bloomberg News survey. Russian President Vladimir Putin agreed to sign a statement at the Group of Eight summit calling for a “transitional government” in Syria. The U.S. Federal Reserve will release a statement and economic forecasts when its meeting ends today.

U.S. Natural Gas Gains for Third Day on Warm Weather Forecasts

Natural gas rose for a third day in New York on forecasts for rising temperatures in the Northeast and Midwest that may boost demand from power plants.
Gas for July delivery gained as much as 0.6 percent to $3.929 per million British thermal units in electronic trading on the New York Mercantile Exchange, and was at $3.926 per million Btu at 2:03 p.m. Singapore time. The contract jumped 0.8 percent yesterday to $3.905.

Gas Prices Moving Away From Link to Oil

Unlike oil, which is a globally traded commodity, natural gas is priced depending on location and the arrangement under which it is sold.
In North America, gas is a traded commodity whose price is usually linked to benchmarks set at the Henry Hub, a meeting point of pipelines in Louisiana. In the rest of the world, gas prices are often indexed to oil products that gas might replace — a system that was developed to sell gas from the giant Groningen field in the Netherlands, in the 1960s.
But the linkage to oil is eroding, especially in Europe, as competition increases and multiple sources of gas emerge, largely through the increased use of liquefied natural gas, which can be transported globally by specialized ships. A surge of gas exports from the United States — not a sure thing — would add to the pressures on the indexed system.

Oil-Tanker Surplus in Persian Gulf Seen Smallest in Two Weeks

The surplus of tankers competing to ship 2 million-barrel oil cargoes from ports in the Persian Gulf fell to a two-week low, according to a Bloomberg News survey.
There are 15 percent more very large crude carriers seeking charters over the next 30 days than probable shipments from the world’s largest cargo-loading region, the median in the survey of four shipbrokers and two owners showed today. The glut was the lowest since June 4 and compared with 18 percent last week.

The Shrinking Road, Part 2: Fuel-Tax Tango

"States are scrambling for funds, especially as it comes to motor-fuels excise taxes," said David Zahn, vice president of marketing at FuelQuest, a Houston-based provider of fuel management and tax automation products. "Largely those taxes are tied to infrastructure, and from an infrastructure perspective, the maintenance costs alone … are exceeding what we are getting from those excise taxes. So there's a scramble for those additional funds."
The choices for policymakers are limited and each has its challenges. They include raising state and/or federal fuel excise taxes--not a politically palatable option--or tying fuel excise taxes to inflation.

1 in 9 U.S. bridges in need of repair

More than one in nine bridges in the USA — at least 66,405, or 11% of the total — are structurally deficient, according to a new report.
These are not rarely used, out-of-the way structures: Each day, Americans take 260 million trips over structurally deficient bridges, says the report from Transportation for America, a Washington, D.C.-based coalition that works to improve transportation.

Shale revolution grows stronger

There seems no end to the stream of good news coming out of the energy sector.
After the International Energy Agency (IEA) last November hailed the United States shale revolution by predicting that the country would become the biggest producer of oil by the end of the decade, the compliments have now been returned.
The Energy Information Administration (EIA), the US government department that releases energy data, this week released a report updating on the world's shale potential.

The kaleidoscope of fossil fuel abundance

Like children looking through a kaleidoscope who are unaware of its actual workings, the media and the public have been misled into believing that early production results in the shale natural gas and tight oil formations in the United States will be repeated again and again across the United States and the world. This has led to exuberant forecasts of energy independence for the United States, an end to the dominance of OPEC in world oil supplies, and fossil fuel abundance for decades to come.

Energy Geek Week: Peak Oil RIP Edition

Since BP makes its data available on downloadable spreadsheets, I can freak freely crunching the data for myself, and noticing fun things. I’ll roll out a few things here over the next few days.
Like the end of the whole peak oil hypothesis. The first figure below displays the 60 percent growth in proven global oil reserves over the last 20 years. This is not just the result of recent technological advances such as directional drilling and fracking: the second figure takes BP’s data back to 1980, which shows a steady increase in reserves throughout the period amounting to a 144 percent increase.

Delaying Peak-Oil With Nanoparticles

When petroleum companies abandon an oil well, more than half the reservoir's oil is usually left behind as too difficult to recover. Now, however, much of the residual oil can be recovered with the help of nanoparticles and a simple law of physics.

NL: More exploration needed, Dunderdale tells NOIA

Speaking to the room, packed with oil and gas industry people, Dunderdale celebrated the growth of the offshore industry in the past few years.
"We are experiencing a great momentum right now in Newfoundland and Labrador's oil and gas industry," she said. "We have hit our stride."
At the same time, she stressed that the province's success has been "hard fought" both by the government and by people in the industry.
But she also said the industry is past peak oil on existing fields, and more exploration is needed.

Billionaire Tshuva’s Delek Kept From Debt Gush by Israel Gas

With gas finds at Tamar and the larger offshore Leviathan field in 2010, Libyan-born Tshuva, now worth at least $2 billion according to data compiled by Bloomberg, is helping Israel reduce its reliance on imports for about 95 percent of gas consumption and position itself to start exporting. UBS forecasts Tamar will generate more than $1 billion in sales in 2013, translating into revenue of $180 million this year for Delek, whose units own 31.2 percent of the project.
“The Israeli economy will be able to exploit the advantages of natural gas environmentally, geopolitically, socially and economically,” Tshuva, who started working in agriculture and construction in Israel at the age of 12 and is now 65, said in a May 22 interview at Delek Group’s offices in Netanya, Israel. It will “turn Israel into an important international player,” he said.

Saudi crude output, exports rise in April vs. March

Oil production in Saudi Arabia, the world's largest exporter of crude, rose to 9.310 million barrels a day in April, compared with 9.136 million barrels a day a month earlier, while exports edged 0.3% higher during the same period, official data showed Wednesday.
The kingdom exported 7.444 million barrels a day of crude oil and condensate in April, up from 7.420 million barrels a day in March, according to figures posted on the Joint Organization Data Initiative, or JODI, website.

Adnoc 'not worried' by EU's jet fuel tariff

The Abu Dhabi National Oil Company (Adnoc) is confident of finding enough buyers for its jet fuel despite a planned tariff on Middle East supplies by its top customer, the European Union.
Last week, the EU announced it would levy a 4.7 per cent duty on jet fuel from the region as it tries to throw momentum behind reviving talks for a free-trade agreement with the GCC. The new tax came as the World Bank upgraded the GCC to upper-middle-income status, prompting Europe to remove Arabian Gulf nations from its generalised scheme of preferences, a tranche of developing countries whose goods are exempt from import duties.

Russian Gazprom to maintain oil-indexed pricing for gas supplies to China

Moscow (Platts) - Russia's Gazprom has no plans to link the price of gas to be supplied to China under a long term contract to US spot gas prices, the company said in a statement Wednesday, citing Gazprom CEO Alexei Miller.

After Gazprom snub, Greece to sell gas company to Azerbaijan

Having failed to woo Gazprom, Greece is to sell a 66 percent share in DESFA, a fully owned subsidiary of state-run natural gas company DEPA, for €400 million to Azeri state-owned SOCAR.

Women May Get Into Augusta Easier Than Energy CEO Role

Women may have better odds of getting a membership at Augusta National Golf Club than becoming the chief executive officer of an energy company in the Standard & Poor’s 500 Index.
With its decision to name Lynn J. Good as its first female CEO, Duke Energy Corp. will be the largest U.S. energy business by market value led by a woman. Good will be only the second female energy leader on the index, raising the amount to 0.4 percent, according to data compiled by Bloomberg. At Augusta National, home of the annual Masters Tournament, two women were allowed to join when the club changed its rules last year, accounting for 0.7 percent of an estimated 300-member roster.

Mexican oil producer Pemex evacuates headquarters after bomb threat

Mexico City: Mexico's state oil producer, Pemex, said on Tuesday it had evacuated its Mexico City headquarters, the site of a deadly explosion in January, after a bomb threat.

Indian crew kidnapped in pirate attack off Nigeria - sources

(Reuters) - Pirates in speedboats attacked an oil supply vessel and kidnapped four Indian and Polish crew members in increasingly dangerous waters off Nigeria's coast last week, two security sources said on Wednesday.
The gunmen launched their assault on the Singapore-flagged tugboat MDPL Continental One around 30 nautical miles from land on June 13, the security sources said.

Total extends reach in Kurdish Iraq

The French oil major Total has widened its operations in the Kurdish region of Iraq by becoming the operator of a concession in the autonomous area.
The company bought an 80 per cent stake in the Baranan block, with the Kurdish Regional Government (KRG) holding the remainder, as the presence of oil majors into the Kurdish region continues to grow in spite of Baghdad's objections. Total has held a 35 per cent stake in the Harir and Safen blocks in the region since last June.

Iraq’s Kurds to Export Oil by New Pipeline ‘Very Soon’

Iraq’s Kurds will start exporting crude by pipeline “very soon” after the completion of a new link to the Turkish border by the end of September, the Kurdistan Regional Government Natural Resources Minister said.
The pipeline to Fishkabour near the frontier with Turkey, will eventually have a capacity of 1 million barrels a day by 2015, Ashti Hawrami said today at a conference in London. The semi-autonomous region in northern Iraq is “well on its way” to have enough oil to fill the line’s capacity, he said.

Abu Dhabi accelerating diversification from oil as US shale booms

US shale gas and oil exploration is prompting Abu Dhabi, where the hydrocarbon industry accounts for more than half of the economy, to speed efforts to bolster non-oil output, a senior government official said.
The holder of 6 per cent of the world's proven oil reserves "isn't underestimating the potential impact" of higher US hydrocarbon output, Mohammed Omar Abdullah, undersecretary of the emirate's Department of Economic Development, said in an e-mailed response to questions. The government "is accelerating its efforts toward the more diversified economy," he said.

Uganda says to build 30,000 bpd refinery by 2016/17

NAIROBI (Reuters) - Uganda said on Wednesday it would build a 30,000 barrels per day refinery by 2016/17 and double this capacity two years later in a move towards commercial output of the country's oil.
Explorers struck oil in east Africa's third largest economy in 2006 and Uganda estimates its crude reserves at 3.5 billion barrels but wrangling over taxes and the viability of a local refinery have since stalled production.

Dart Says Centrica Deal May Spur Talks for U.K. Shale Partner

Dart Energy Ltd., an explorer with shale gas prospects in northwest England, said Centrica Plc’s deal last week to acquire a 25 percent stake in a license in the region may help accelerate its talks to find a partner.
Dart’s acreage in the U.K.’s Bowland Basin has attracted “a lot of interest,” Chief Executive Officer John McGoldrick said in a phone interview from Singapore. Centrica, the largest U.K. energy supplier, bought part of Cuadrilla Resources Ltd.’s Bowland shale license for 40 million pounds ($63 million) and will pay exploration costs of as much as 60 million pounds.

"Catastrophe that people are educated for the oil industry"

“It’s a disaster for the Norwegian economy that we educate people to work in oil rather than focusing on renewable energy more heavily,” the Liberal Party leader said during a seminar on higher education, Monday.

No confirmation yet, but signs point to west-east pipeline

TransCanada Corp. won’t confirm whether or not it’s proceeding with the Energy East pipeline from Alberta to New Brunswick, but there are signs the company is well into the planning process.

Keystone XL Pipe Shuns Infrared Sensors to Detect Leaks

TransCanada Corp., which says Keystone XL will be the safest pipeline ever built, isn’t planning to use infrared sensors or fiber-optic cables to detect spills along the system’s 2,000-mile (3,200-kilometer) path to Texas refineries from fields in Alberta.
Pipeline companies have been slow to adopt new leak detection technology, including infrared equipment on helicopters flying 80 miles an hour or acoustic sensors that can identify the sound of oil seeping from a pinhole-sized opening. Instead of tools that can find even the smallest leaks, TransCanada will search for spills using software-based methods and traditional flyovers and surveys.

High levels of radiation found in groundwater at Fukushima

High levels of a toxic substance called strontium-90 have been found in groundwater at the devastated Fukushima Daiichi power plant in Japan — coming to light even as the country moves closer to bringing its nuclear reactors back online.
Strontium-90 was detected in groundwater near the plant at levels 30 times above the government safety standard, officials said Wednesday.

Consumption on super-charged Electric Highway increases 45-fold

“Electric cars have massive potential for growth if we can put the right charging technology in the right place”, says Ecotricity founder Dale Vince – after consumption on their Electric Highway motorway charging network jumped 45-fold in the final quarter of 2012/13.

L.A. Breaks Driving Addiction as Bike-Train Commutes Grow

Los Angeles embodied America’s love affair with the automobile in the last century. In this one it’s trying to kick the car to the curb.
The city that put drive-thru restaurants on the map has doubled its network of bike lanes to 292 miles (470 kilometers) and expanded light rail by 26 percent in the past eight years, with another 18 miles of track coming by 2015. Bus and train ridership is on the rise, while the total number of passenger cars registered has declined in Los Angeles County -- evidence more commuters are breaking their dependence.
“I feel pretty spoiled by the transit system in L.A.,” said Madeline Brozen, a 26-year-old transplant from New Orleans who uses a bicycle and buses to make a 12-mile trek from the Los Feliz neighborhood to the University of California, Los Angeles in Westwood, where she researches urban transportation.

Masdar inaugurates Seychelles windfarm

Masdar has inaugurated a 6 megawatts windfarm in the Seychelles, sufficient to power more than 2,000 homes.
The project will satisfy 8 per cent of the electricity needs of Mahé, the country's most populated island. The eight-turbine windfarm was funded by the Abu Dhabi Fund for Development. It will help the Seychelles to meet its target of producing 15 per cent of its energy from renewable sources.

Making Energy Efficiency Attractive for Owners of Older Seattle Buildings

Switching to less power-hungry light bulbs is relatively easy, and the payoff relatively swift. But replacing furnaces or boilers or reconfiguring the building’s shell involves sinking millions of dollars into an asset that the owner may want to get rid of long before the investment has paid off.
In a new twist, some investors, a technology company, a municipal utility and an environmentally oriented foundation have joined forces to show that major energy-efficiency improvements in commercial buildings may provide alluring new revenue to all involved.

Harnessing the Net to Power a Green Revolution

LONDON — At the intersection of clean power and information technology, a new breed of digital start-ups is harnessing the power of the Internet to make smarter, more efficient use of energy and other resources.
Proponents call it “cleanweb,” and they say the sector is poised to bring about huge leaps in efficiency, saving money and cutting planet-warming carbon emissions.

New Effort to Quantify ‘Social Cost’ of Pollution

WASHINGTON — The Obama administration is making a second attempt to systematically account for the dollar damage from greenhouse gas pollution, even with no consensus on how to forestall global warming or whether to do so.
Supporters of the idea acknowledge the tremendous difficulties of trying to translate slippery estimates into a single mathematical factor, difficulties that perhaps help explain why there is little hope of consensus now on climate policy.

EU politicians to try again to rescue carbon market

BRUSSELS (Reuters) - European Union politicians are likely to back a plan to support prices on the EU carbon market on Wednesday, in a step towards resolving debate over whether to prop up the world's largest emissions scheme.
Even if the vote, expected after 3 p.m., is positive, the proposal to temporarily remove some of a glut of allowances from the EU Emissions Trading Scheme (ETS) faces further hurdles.

Groundbreaking Analysis Reveals Route for Businesses to Uncover Billions in Hidden Profits From Climate Change Action

WASHINGTON, DC--(Marketwired) - Smart companies innovate their way through business challenges. A new analysis shows they can also innovate to solve a global challenge - and profit along the way.
The 3% Solution: Driving Profits Through Carbon Reduction (www.the3percentsolution.org), released today by World Wildlife Fund (WWF) and CDP, provides a groundbreaking assessment of how companies can reap big profits from cutting their carbon emissions, simultaneously helping the world avoid runaway climate change.

China's change of fortune in focus

One of the hot topics in China these days is balancing the need for economic expansion while encouraging sustainable innovation. How do firms create a new set of tools that will permit economic growth without putting too much stress on the environment and on increasingly scarce natural resources?

China Introduces Local Program for Reducing Emissions

BEIJING — China unveiled its first pilot carbon emissions exchange Tuesday, though plans for a nationwide rollout and efforts to apply the program to some heavy industries could be undermined by a slowdown in the nation’s economy.
High-emission industries like aluminum and steel are likely to resist higher costs as they are already battling weak prices caused by tepid demand and too much supply.

Obama to prod West to take on global challenges in Berlin speech

BERLIN (Reuters) - In the city where John F. Kennedy and Ronald Reagan gave defiant Cold War speeches, President Barack Obama will call on Wednesday for a renewed spirit of activism by the West in tackling 21st century challenges from nuclear proliferation to climate change.

U.S. states, greens delay lawsuit, await Obama climate plan

WASHINGTON (Reuters) - Environmental groups and a dozen states and cities said Monday they will delay planned legal action against the U.S. Environmental Protection Agency, saying they will wait to see if the White House soon unveils a climate policy strategy.
The attorney generals of New York and nine other states, along with three major green groups, had planned to sue the EPA this week because it missed a deadline in April to finalize emissions standards for new electric power plants.

Small global warming rise would have 'alarming' impact - World Bank

WASHINGTON (Reuters) - Much of Bangkok could flood within the next two decades if global warming stays on its current trajectory, as sea levels rise and cyclones intensify, the World Bank said in a new report on Wednesday.
The flooding of 40 percent of the Thai capital was just one of dozens of negative effects the Washington-based World Bank warned would happen if the world grew warmer by just 2 degrees Celsius (3.6 Fahrenheit), which it said is likely to occur in the next 20 to 30 years under a "business-as-usual" scenario.

Energy Export Databrowser Updated to BP 2013 Data

Jonathan Callahan — Tue, 18 Jun 2013 06:31:56 +0000

The Energy Export Databrowser has been updated to the latest version of the BP Statistical Review. A few charts are provided below the fold that help illuminate the following stories evident in the data:

The US is less reliant on imports from across the globe
UK energy production from all sources continues its decline
Brazil is unlikely to become a major oil exporter

The databrowser is available in the following languages:

Deutsch English Español Français Italiano Nederlands Svensk

Happy Exploring!

A few of the stories found in the data include:

1) The US is less reliant on imports from across the globe

North American oil production (including natural gas liquids) is up while consumption is steady, leading to reduced imports from overseas. Individual components include

Increased production of Canadian tar sands.
Increased production of US tight oil and gas.
Minimal declines in Mexican oil fields.
Reduced consumption in the US.

2) UK energy production from all sources continues its decline

Excluding alternative fuels, the United Kingdom now produces only 40% of the energy it did in 2000. This is energy poverty on a national scale!

3) Brazil is unlikely to become a major oil exporter

Despite the hoopla a few years a go about Brazil’s offshore, sub-salt discoveries, Brazil looks unlikely to become an oil exporter any time soon.

Tech Talk - A June TWIP and the OPEC MOMR

Heading Out — Sun, 16 Jun 2013 08:35:24 +0000

The EIA has noted in This Week in Petroleum that, for the first time, the sum of non-OECD country demand contributed more than half to the total of liquid fuels consumed in the world.

Figure 1. Changes in the relative shares of liquid fuel consumption between the countries in and out of the OECD. (EIA)

It does, however, point out that the projections of the Short Term Energy Outlook are for the two curves to re-intersect at the end of 2014.

Figure 2. Projected changes in liquid fuels consumption, through 2014 (EIA)

The reality of that second assumption is, I rather suspect, more based on hope than reality. Once you start providing power and all its benefits to the general population, you are on a slippery slope that it is almost impossible to back away from. Consider as a small example, the problems that Egypt is currently having with the supply of subsidized bread to the general populace. Once you start supplying a commodity at a subsidized price it becomes very hard to change the equation, and too much of the non-OECD world is now living in an economy where energy use is subsidized. The problem that the above graph fails to recognize is that you cannot wean a culture from subsidies in the immediate short term and still expect their government to survive in its present condition.

Thus, when the EIA project that global demand will grow to over 92 mbd in the next year, they are likely only being realistic. Their assumption that it may then decline is perhaps more in the nature of wishful thinking.

Figure 3. EIA anticipated growth in demand and supply over the near term (EIA)

There are, however, a couple of caveats to that last statement, the first of which is that the decline in demand may be more reflective of a lack of supply capacity (our raison d'être) and alternatively it may reflect, as a result of the first, that prices will rise to influence demand. Nevertheless we remain in a condition where the harsh realities that lie just over the horizon remain obfuscated by other events.

As with many other international agencies, the EIA continue to anticipate continued growth in the North American supply of liquid fuels. Outside of that growth the increased demand for more than an additional mbd of liquid fuels seems more likely to be desperately hunting for an invisible savior.

Figure 4. Anticipated growth in liquid fuels supply over the next two years (EIA)

The decline in supply from OPEC in the two years ahead should be noted. It should also be remembered that this is likely to be as much a voluntary control, to ensure price stability in the face of increased North American production, rather than as a result of a short-term supply shortage. However the reality of continued domestic growth in demand in the Middle East, as Westexas has reminded us, is something that cannot be neglected. It has been noted that Saudi Arabia, although having less than a third of Germany’s population, recently surpassed it in terms of oil consumption. It will add several new oil-fired power stations including those at Yanbu and Jeddah. This will feed into an anticipated continued growth in Saudi domestic demand of 5.1% pa.

And this brings us to the OPEC Monthly Oil Market Report (MOMR) for June. OPEC continues to anticipate a global demand growth of 0.8 mbd this year, though they note that there will likely be a growth of 1.2 mbd in the non-OECD nations, requiring a reduction in OECD demand to match the overall forecast. Major growth in demand will continue to be in China (at 0.4 mbd and the Middle East at 0.3 mbd). On the other hand OPEC anticipate cutting their supply (to match anticipated need) by 0.4 mbd over the course of this year. OPEC, therefore, has slightly dropped their projection for year end; however, it will still crest above 90 mbd.

Figure 5. Estimates of global oil demand (OPEC June 2013 MOMR)

A large part of demand projection is tied to growth in the global and individual nation economies, and that is a murky crystal ball to view. But OPEC anticipates that these economies will continue to grow at an increasing rate, while recognizing that this projection is in an area with a high level of risk in the estimate.

The continue, and perhaps growing unrest in the Middle East continues to cast a further shadow over predictions over both supply and the reality of future demand in those countries. And, as one of the less frequently discussed topics, future output from Russia is not as assured as the average analyst appears to assume.

OPEC is anticipating a relatively strong growth in demand in the second half of the year to almost reach 91 mbd by the end of the year. Overall the growth in supply to meet this demand continues to come from North America.

Figure 6. Anticipated oil supply for 2013. (OPEC June 2013 MOMR)

OPEC itself is reporting a slight increase in overall production (by about 128 kbd) although, as always, there are differences in the numbers between those supplied by the countries themselves, and those reported from other sources.

Figure 7. OPEC crude oil production as reported directly (OPEC June 2013 MOMR)

There continues to be a significant disparity between the numbers reported from Iran and Venezuela, for example, when other sources are reported to the tune of around 1.5 mbd roughly. In the short term, Iraqi production appears stable.

Figure 8. OPEC crude oil production as reported by others (OPEC June 2013 MOMR)

With the continued global reliance on increased production from North America, and in turn, that reliance on improved production from tight formations, I would be a little more confident of the future were it not for plots such as this, which I recently found.

Figure 9. Chesapeake typical well decline curve (Eagle Ford Forum)

It is a curve that I rather suspect continues to be optimistic.

Low energy return on investment (EROI) need not limit oil sands extraction

Rembrandt — Mon, 10 Jun 2013 08:27:40 +0000

This is a guest post by Adam Brandt, Assistant Professor from Stanford University, Department of Energy Resources Engineering.

1. Introduction

Low energetic returns (e.g., EROI, NER) from oil sands extraction and upgrading have been noted as a potential limit to the development of the oil sands as a substitute for depleting conventional oil resources (e.g., Herweyer and Gupta, 2008). In this article we will examine this claim from a variety of perspectives. Specifically, we will examine the following questions:

Are the energetic returns from oil sands extraction lower than conventional oil?
How have the energy returns from oil sands extraction varied over time?
What energy sources are used in oil sands extraction, and what are the implications of this sourcing for net energy availability from the oil sands?
Will low energy returns limit the net output of energy from the oil sands industry?

This article is based on the peer-reviewed journal article: Brandt A.R., J. Englander and S. Bharadwaj (2013). The energy efficiency of oil sands extraction: Energy return ratios from 1970 to 2010. Energy.

2. Are energy returns from oil sands extraction lower than conventional oil?

Previous works have calculated the energy returns from oil sands production using a variety of methods (Peter 2010; Herweyer and Gupta 2008; Rapier 2008; Peter 2012; DOE 2006). These studies estimate EROI from the oil sands at values ranging from 2.5 GJ/GJ to 7 GJ/GJ. Most of these estimates were generated quite simply, relying on a limited amount of data. Because of the different system boundaries used in each study, as well as other methodological differences, determining the exact reasons for variation in these estimates is challenging.

Our recent work (Brandt et al. 2013) utilized detailed energy production and consumption data reported by oil sands producers from 1970 to 2010 to examine trends in historical energy returns from oil sands extraction. The system diagram and flows considered are shown in Figures 1 and 2. Data are available on a monthly basis for most flows, with limited interpolation required in mining datasets, and some back-extrapolation required for in-situ energy intensities (see Brandt et al. (2013) for methodological details). The resulting energy inputs and outputs from mining and in situ production are shown in Figures 3 and 4. Mine mouth (e.g., extraction only, excluding refining) net energy returns (NER) for the entire industry were found to be 5.23 GJ/GJ in 2010. In situ NERs were approximately 3.5 to 4 GJ/GJ in 2010 while mining NERs were approximately 5.5 to 6 GJ/GJ.

Conventional oil EROI metrics commonly show energy returns of order 10-20 GJ/GJ (Gagnon 2009 et al.; Guilford et al., 2011; Dale et al. 2011). Therefore, oil sands projects exhibit demonstrably lower energy returns than conventional oil operations.

Figure 1. System diagram for mining and upgrading pathways showing primary product flow (capital letters A-F) and consumptive flows (lower-case letters k-z). Source: Brandt et al. (2013).

Figure 2. System diagram for mining and upgrading pathways showing primary product flow (capital letters A-F) and consumptive flows (lower-case letters k-z). Source: Brandt et al. (2013).

Figure 3. Energy inputs (left) and outputs (right) from oil sands mining operations, measured in GJ/mo. Source: Brandt et al. (2013).

Figure 4. Energy inputs (left) and outputs (right) from oil sands in situ operations, measured in GJ/mo. Source: Brandt et al. (2013).

3. How have energy returns from oil sands extraction changed over time?

Net energy returns from mining and in situ operations (again, measured at a mine-mouth system boundary) have increased steadily over time, growing from 1.0 GJ/GJ in 1970 (entirely from the Suncor mining operation) to 2.95 GJ/GJ in 1990 and then to 5.23 GJ/GJ in 2010. As shown in Figure 5, significant improvements in mining energy returns have been realized.

Figure 5. Net energy returns (NER) and net external energy returns (NEER) for mining and in situ operations, measured at the “mine mouth” system boundary. Source: Brandt et al. (2013).

4. What are the implications of oil sands energy sourcing for limitations due to low energy returns?

The net energy returns reported above are just one metric to assess the energy returns from oil sands operations. Using the key provided in Figure 1 for mining operations (top), a mine-mouth NER compares the net output from the mining and upgrading operation to the total energy inputs into the mining and upgrading stage. Symbolically, this can be written as:

where B, k…q are defined for the mining pathway shown in Figure 1. However, this might not be the main point of interest from a societal net energy perspective. If one is concerned about the ability of the oil sands to provide net energy to society relative to the energy that they consume from other sectors, then one may actually more concerned with a ratio that we define as the net external energy return (NEER). Symbolically, we can state that:

That is, if we are concerned about the ability of the oil sands to provide energy to society, what we are concerned about is parasitic consumption of natural gas (flow k) and electricity (flow m) by the operations, relative to how much unrefined energy they provide to society (flow B). Energy consumed on site that is produced as by-products from the production process (e.g., coke or still gas) may not be a concern from the perspective of energetic availability (although may be a major concern from an environmental perspective).

Measured in this way, the NEER from mining operations was approximately 20 GJ/GJ in 2010, significantly higher than the corresponding NER (see Figure 5).

5. Will low energy returns limit the output of net energy from the oil sands?

These data suggest that oil sands processes exist that have reasonably high energetic returns relative to external energy provided by other energy sectors. That is, relative to the amount of energy that they consumed from the rest of society (e.g., natural gas, imported diesel, and electricity), these processes produce a significant amount of net energy output. This is partly a result of historical development and geographic considerations: the oil sands mining operations developed in a remote and poorly-integrated part of Alberta, and therefore were designed to be largely energy self-sufficient. Importantly, these conclusions are not just limited to mining operations. In situ operations such as the Nexen Long Lake project produce steam using upgrader by-products (asphaltene residues).

Our results suggest that it is not realistic to expect oil sands extraction to be limited by their calls on natural gas and other resources. If natural gas becomes expensive, processes can be adopted to use byproducts of the processing of bitumen to fuel extraction (e.g., integrated operations). However, these integrated processes have implications for the amount of oil sands resource available (e.g., not all barrels able to be produced will be available as “net” barrels of output) and can have important climate implications (e.g., using coke for fueling bitumen separation or steam production is more GHG intensive than using natural gas).

6. Works cited

Peter CJ. Enbridge northern gateway pipeline project energy return on investment. In the matter of NEB file: OF-Fac-Oil-N304- 2010-01 01 Northern Gateway Pipelines Inc. Application for Enbridge northern gateway project, certificate of public convenience and necessity  2011. http://www.ceaa-acee.gc.ca/050/documents/54603/54603E.pdf.

Herweyer M, Gupta A. Unconventional oil: tar sands and shale oil e EROI on the web, part 3 of 6. Technical Report. The Oil Drum, http://www.theoildrum.com/node/3839; 2008.

Rapier R. The energy return of tar sands. 2008. http://robertrapier.wordpress.com/2008/11/14/the-energy-return-of-tar-sa....

Peter C, Jacob N. Alberta to China: what’s the energy return? C.J. Peter Associates Engineering; 2012. http://www.bcsea.org/sites/default/files/webinars/20120522-Peter-Jacob-G...

DOE. Fact sheet: energy efficiency of strategic unconventional resources. DOE Office of Petroleum Reserves e Strategic Unconventional Fuels; 2006. http://fossil.energy.gov/programs/reserves/npr/Energy_Efficiency_Fact_Sh....

Brandt A.R., J. Englander and S. Bharadwaj. The energy efficiency of oil sands extraction: Energy return ratios from 1970 to 2010. Energy. 2013. DOI: 10.1016/j.energy.2013.03.080

Gagnon N, Hall CA, Brinker L. A Preliminary Investigation of Energy Return on Energy Investment for Global Oil and Gas Production. Energies 2009; 2: 490-503.

Guilford MC, Hall CA, O’Connor P, Cleveland CJ. A New Long Term Assessment of Energy Return on Investment (EROI) for U.S. Oil and Gas Discovery and Production.Sustainability 2011;3: 1866-87.

Dale M, Krumdieck S. Bodger P. Net energy yield from production of conventional oil Energy Policy 2011; 39: 7095-7102.

Tech Talk - Concerns over Future Oil Production from Iraq

Heading Out — Sun, 09 Jun 2013 15:15:15 +0000

Let me begin with two brief apologies – first, my last post on Iraq on TOD was hit with a vast quantity of spam that made it difficult to find all the pertinent comments; hopefully this post will have a little easier time. And secondly, although I used an EIA graph to show Iraqi production and consumption, Westexas was kind enough to point to an error in the domestic consumption plot. The more accurate consumption plot can be found here through 2011, and the figures for last year are up to 880 kbd, higher than the plot I showed, and close to the current capacity (900 kbd) of the refineries in the country. Some of the difference between the two plots comes about because Iraq continues to import significant quantities of refined oil products.

Figure 1. Domestic consumption of oil in Iraq (H/t Westexas, EIA )

Last week I mentioned that while the potential production from current contracts in Iraq held great promise for the future, that it was unlikely that those targets would be reached. This post is meant as an explanation for that pessimism, but it should be noted that Iraq itself is now seeking to revise the initial targets since it perceives that too much oil in the market may well be destabilizing. This, even though growth is spread over the next decades, and demand is projected to increase at more than 1 mbd/year for the next few years.

Figure 2. Projected Oil Exports from Iraq over the next two decades (OGJ)

The problems that Iraq faces, beyond those of dealing with internal politics and violence (which continues at a new and higher level than in the recent past), are related in part to the problem referred to in the first paragraph, namely that the country is starting to bump up against infrastructure bounds on the volumes that can be moved and processed relative to that which might technically be brought out of the ground.

And even as projects move forward to get the oil out of the ground, there is an underlying issue that remains to be fully addressed. This is the need to inject water, and the basic explanation of that need can be found in an earlier post written about the problems that Saudi Aramco had to overcome to reach the levels of production they now have. (Stuart Staniford wrote a long post on the Saudi situation back in May 2007.)

Simplistically, as oil comes out of the ground, so the pressure in the reservoir falls. Without means to sustain it, the oil production rate would soon fall off dramatically. In order to sustain pressure, water is pumped into the reservoir even as the oil leaves, with the idea being that the water not only helps to sustain the driving pressure in the formation, but that it also helps displace the oil and move it towards the production wells.

Figure 3. Reservoir pressure and recovery factors in two Iraq fields, before and after water injection began (IEA)

Iraq has the same upcoming problem if it is to increase production to the levels projected. This is not to question the size of the resource available; rather it is to inject a note of caution into assumptions that this oil will soon appear on the world market.

Figure 4. Iraqi oil resources by region and super-giant field (IEA )

The above table does not reflect the potential from future discoveries and developments in the country. Geophysical surveys have found 530 potential prospects, of which only 113 have been drilled, with oil being found in 73 of the wells. However, over the next twenty years it is likely that the majority of production will come from Rumaila, West Qurna, Zubair and Majnoon.

But the scale of this increase in production will require large volumes of water, estimated at 1.5 barrels of water for every barrel of oil produced. Given the growth in production, this will require, in time, a flow of up to 12 mbd of water into the fields. This cannot be fresh water, since the country already has some problems supplying domestic needs, but rather must be seawater supplied from the Persian Gulf. Plans for this, through the Common Seawater Supply Project, have been in the works for a number of years. Yet it was only recently that the management contract for the Project was signed. The original plan was to have the water flowing from the Persian Gulf by the end of this year. At present the goal remains to have 2mbd of the water available by 2017 which should technically be feasible, given the relative simplicity of the technical needs. However, the delays that have already been caused by political and bureaucratic problems are likely to persist. As an example the initial announcement concerning the management contract was made last October, but it was not confirmed until this March. Tenders for the design were to be issued in April, but this is already a year late for the 120 km pipeline and distribution network that will be required. In addition the drilling rigs in the country will increasingly also have to drill water injection wells to match the production wells and even surpass this number to provide enough pressure in the ground.

Figure 5. Number and types of wells needed in Iraq for the “Central Scenario” of production that the IEA projects (IEA)

The IEA notes, euphemistically, that it will be “a considerable challenge” for Iraq to find sufficient rigs and crews to achieve production levels much above the numbers required for the above scenario in the years surveyed.

And there remain the problems relating to infrastructure. Iraq is finding some difficulty in constructing new refineries within the country, and the infrastructure required to move oil, once produced, to ports where it can be shipped to customers is also lagging behind initially projected schedules. The Oil Export terminal is being expanded, with new single point mooring systems being located roughly 120 km offshore, and raising the ultimate loading capacity from 1.8 mbd to 4.5 mbd.

Figure 6. Actual and proposed infrastructure in Southern Iraq, showing the single point moorings (IEA)

Yet the slow pace of contracting and the other problems that the country faces make it hard to remain optimistic that even the targeted production of 6mbd that the IEA projects for 2020 is likely to be achieved. And if Iraq is unable to meet the production projections on which the balance of supply and demand has been predicated, then the world may be in trouble faster than is currently projected.

Tech Talk - Future Oil Production from Iraq: An Optimistic View

Heading Out — Sun, 02 Jun 2013 08:54:15 +0000

There is often quite a debate in the Peak Oil community over the difference between a reserve and a resource. Simplistically a resource is, for the sake of discussion, the amount of oil that is in the ground in a certain country, while the reserve is the amount of oil that can be both technically and economically recovered from that resource. The numbers can differ quite markedly, and the judgment as to whether a certain body is a reserve is finally made when a well is drilled down, and production (or not) begins.

Just having the reserve available is not, however, within the global discussion of Peak Oil, an adequate sufficiency. Because oil well flow declines over time, it is important that the rate of oil production from that reservoir, and the timeliness of its arrival within the supply chain, be considered. This is particularly true in discussions about the help that the reserve will provide in ensuring that there is an adequate supply available when the global demand needs it. Normally, as noted, the decisions about production are made on geologic and economic grounds, but it would be foolish not to recognize that there are other factors. Consider the case of Iraq. It is a common the assumption that Iraqi oil production will rise considerably, with some suggesting it will reach the levels currently only achieved by Russia and Saudi Arabia, although there are some who project it might even rise to as much as 13 mbd, given that there are contracts in place, which if fulfilled on time, would raise Iraqi production four-fold to 12 mbd by 2017.

In their Special Report on Iraq last year, the IEA noted that the country is already the world’s third-largest oil exporter, with the potential and intent to increase production much further. And, as the EIA notes, Iraq became the second largest oil producer in OPEC when it passed Iran at the end of last year.

Figure 1. Iraqi production of oil since 1990. (EIA)

Iraq is currently producing around 3.1 mbd of crude and thus the potential production levels, and their contribution to reserves and to the daily global need for supply, still has a way to go. With so much oil potentially available, and yet with considerable question over the rate at which it will arrive, it is worth examining the conclusions that the IEA came to, before the current increase in violence occurred. This new spate of attacks comes after an interval when violence was decreasing in the country, and may prove a further impediment to significant growth in production.

Figure 2. Level of violence in Iraq showing the number of attacks each week since 2007. (IEA )

The IEA built three different scenarios in their report, for which there was extensive consultation in the country. The main or Central Scenario they project anticipates that GDP in the country will continue to rise, though tapering off as stability is achieved in the out years.

Figure 3. Anticipated growth rates for Iraqi GDP under the different models the IEA used. (IEA )

The Iraqi GDP grew 10.2% last year, and has been growing at an increasing rate over the past few years.

Figure 4. Actual annual growth rate in Iraq GDP. (Trading Economics )

The oil fields in the country are largely concentrated in two separate regions, down around Basra in the south of the country, and in the region around Kirkuk and Mosul in the North.

Figure 5. Oil and gas fields in Iraq. (IEA ).

This division is somewhat unfortunate from a politically stable point of view since the region in the south is predominantly Shiite, while the reserves in the north lie in the Kurdish region of the country. There is significantly less within the Sunni communities which are largely found in the central region of the country.

In recent times Euan Mearns has written of the potential for oil production in the Kurdish region in the north. In total this is estimated to hold around 4 billion barrels of oil, or around 17% of the national reserve. However, as exploration of the potential fields in Kurdistan continues, this estimate has been increased by the local government to a possible 45 billion barrels. Euan, for example, wrote about the development of the Shaikan oil field and the potential size of between 8 and 13.4 billion barrels that it showed in January 2012. Current plans are for production to reach 40,000 bpd “soon”, with production ramping up to 400,000 bpd. The Kurdistan Regional Government (KRG) see it playing a considerable role in achieving their target of 400 kbd this year, 1 mbd by 2015, and 2 mbd by 2019. The field is being developed by Gulf Keystone Petroleum.

In the south, current production is centered around the Rumaila oil fields. BP has committed $2.85 billion toward improvements in Rumaila this year, with the intent of raising production from the current 1.4 mbd, through 1.45 mbd at the end of this year, up to 6 mbd by 2017. Three hundred new wells will be drilled in the field over the next five years, to meet the goal, with 150 of these being drilled in the second half of this year. BP operates the field in partnership with CNPC.

Figure 6. Detail showing the location of the Rumaila fields in south Iraq. (Energy-pedia)

The overall scale of Chinese involvement is of concern to some, since as oil supplies tighten in the years to come, it is expected that up to 80% of future Iraqi production will head towards Asia, and particularly to China.

With the growing development of the Majnoon field, with an estimated reserve of 38 billion barrels, it might thus appear that the country is well on its way to meeting the projections that the contracts might suggest. However, there are many constraints on future production, including infrastructure and water availability, and I will discuss these and why they limit the IEA to an optimistic assessment that the country will produce 6 mbd by 2020, and only reach 8.3 mbd by 2035 in the next post.

Tech Talk - Cutting Back on Supply in the Presence of Optimism

Heading Out — Sun, 26 May 2013 09:28:33 +0000

We have reached, I would suppose, a period of complacency in the perception of the coming of Peak Oil. We are in a period where, as recent posts have shown, the promises of bountiful supply are built on increasingly tenuous propositions. Unfortunately, the evolving story of the mess that we are heading into is at a point where the critical aspects of the problem rate minor paragraphs in articles that largely talk about something else. And the potential of the fossil fuels that lie within shale have commentators drooling over the benefits that will come from this abundant resource. Unfortunately, within this euphoria there are sufficient concerns that need airing, since overall, the situation has not changed that much since the Hirsch Report was published, just over eight years ago.

One of the points that was made in that report was that it would take some twenty years for new technologies to mitigate the foreseen shortages of liquid fossil fuels, made when gasoline prices averaged some $2 a gallon. Driven by concerns over climate change, there has been a significant effort to find alternate fuel options that can provide a renewable option. And the hopes for these producers lead to predictions of a different future.

The British Department of Energy and Climate Change (DECC) has just released a report on the future of coal-fired power plants in Germany, Spain and the Netherlands. It notes that although Germany will open more coal-fired power plants this year than at any time within the past twenty years, the future for coal is not that promising. In rough numbers, Germany has a peak demand of 85 GW of electricity with coal and lignite capacity of around 47.6 GW in 2011. From then until 2015, an additional 10.7 GW of coal-fired plant will come on line. The DECC report notes that while an additional 2.7 GW of plant are in development they have not advanced and, it is suggested, they will likely be cancelled. Some 22 coal-fired projects have been cancelled, and four postponed in recent years. A new plant does not spring, like corn, fresh out of the ground within months of planting. Rather there are years of effort, and millions invested, before power starts to flow. The report brings these views to the following:

We conclude that further new projects to build coal-fired generation in Germany, the Netherlands, and Spain are all very unlikely.

The three major oil companies each had different technologies on which they hung their hats to ease any fears of the future – including the widespread development of either methane hydrates or the oil shales of Colorado. (Neither of which can be realistically expected to come to pass in the next twenty years). The British National Grid in their view of the future seems to put is faith more in the widespread use of high-efficiency heat pumps.

Figure 1. Projected growth of heat pumps in the UK, under three future scenarios (National Grid)

The also anticipate considerable growth in future sales of electric vehicles, though admitting that their earlier projections for these numbers were overly optimistic.

Figure 2. Projected growth in electric vehicle usage in the UK (National Grid)

As a result they anticipate significant reduction in the needs for fossil fuels, although the least optimistic of the scenarios (the Slow Progress one) means that:

In the Slow Progression scenario developments in renewable and low carbon energy are comparatively slow, and the renewable energy target for 2020 is not met until some time between 2020 and 2025. The carbon reduction target for 2020 is achieved but not the indicative target for 2030.

The concern with these optimistic projections, is that it also impacts the investment strategies of those who will need to supply those fuels in the future. Just as it takes time and money to build a power station, so it also takes time to permit and build a coal mine, or an oil or gas well, and the infrastructure to support it.

The current situation in the United States has proponents of the natural gas boom urging the development of export terminals to ship LNG to a global market at a very competitive price. By last December there were plans for a dozen such terminals in the works.

Figure 3. Proposed new LNG Export terminals in the United States (Oil and Gas Journal)

This additional supply, and the likely impact of cheaper natural gas into the European market has already caused Gazprom to rethink its strategy for natural gas development over the next few years.

The major Russian current development is taking place in the Yamal Peninsula, where the Bovanenkovo field, which came on stream last October had been projected to yield 4 Tcf by 2017, increasing 5 Tcf in the out years. Other adjacent fields, Kharasaveyskoye, Kruzensternskoye, Tambey and Nonoportskoye, were scheduled to follow in order to meet anticipated demand.

But those plans are now being scaled back. Russia has already lost some of their Chinese natural gas market to Turkmenistan, and now it can see that the US might take some of the European market. It cost $41 billion to develop Bovanenkovo, which made it “one of the most expensive industrial projects in the world.” Gazprom is cutting production by around 83% of capacity this year, and expects it may have to go lower. The natural follow-on to this will be a slowing of investment and development in Yamal, which also produces oil.

At present Russia is closing in on a record post-Soviet oil production
() reaching a level of 10.49 mbd (the Soviet peak was 11.48 mbd in 1987). Rembrandt recently noted that it is going to take a significant and ongoing investment in order to have any hope of sustaining those numbers.

My concern is that in the current Western euphoria, if all the current plans and projections for alternative supplies and conservation fail, those who must invest to build the alternative infrastructure that will provide sufficient fuel will not be motivated to make those investments in a timely manner. If they do not, or have not, then we will still need the 20-years that Robert Hirsch and his committee projected, when we run out of that time. (That clock is ticking). Unfortunately, those whosing this song, like Cassandra, are less likely to be heard in this interval.

Global Energy Systems - June 26-28 2013

Rembrandt — Mon, 20 May 2013 09:05:25 +0000

Our energy system is evolving due to depletion of cheap fossil fuels and the need for carbon emission constraints. Government and business are under pressure to tackle the energy challenges of rising energy costs, energy security, and reducing greenhouse gas emissions. We witness rapid changes across countries as this evolution takes place, steered both by markets (investment decisions) and government (policy decisions).

It is essential for energy professionals to stay well informed with the latest insights in this evolving world. For this reason, Euan Mearns of The Oil Drum, myself and several others, are organizing the first three-day Global Energy Systems conference, which will take place in Edinburgh, United Kingdom from June 26 - 28 2013. The conference is meant to deliver key updates on the most pressing energy issues and challenges facing our energy system, as well as providing a forum for exchange of substantially different viewpoints. It is supported by several universities and research institutes including University of Aberdeen, University of Edinburgh, Oxford Research Group, Chatham House and others.

The scope is deliberately very broad, covering most primary energy sources, so that a global view of the current energy system can be presented. Session topics include “the limits to easily accessible fossil fuels”, “frontier fossil fuel technologies and basins”, “the viability of nuclear power”, “the costs and benefits of fossil versus renewable electricity”, and “the economics and policy of energy systems”. A few of our confirmed speakers include Michael Kumhof (IMF), Sir David King (former Head Smith School Oxford University), Friedrich Schulte (Head of Technologies RWE), Dr. William Blyth (Director Oxford Energy Associates) , Peter Jackson (IHS CERA), Lord Ron Oxburgh (House of Lords UK Parliament), Richard Stainsby (Chief Technologiest UK National Nuclear Laboratories), Alexander Naumov (Group Economics BP), Guy de Kort (Shell Vice President GTL), and Tatiana Mitrova (Head Oil & Gas Energy Research Institute Russian Academy of Sciences).

Read below the fold for an overview of the conference programme and confirmed speakers to date.

General information
1st Global Energy Systems Conference

Our Dynamic Earth, Edinburgh, United Kingdom

Wednesday June 26 to Friday June 28, 2013

Registration open - early bird deadline passed

General interest, media and sponsorship enquiries
The conference is organized on a non-profit basis by a group of energy professionals concerned about the challenges that we face. Any expressions of interest, suggestions for content and analysis, and contributions of sponsorship, are most welcome. Your content, media, and sponsorship related communication can be directed to: alexr at scenetwork.co.uk

Conference Programme

Day 1 | Wednesday 26 June | Fossil Fuels: Can we turn Unconventional into Conventional?

Day 2 | Thursday 27 June | The Future of the Electricity System

Day 3 | Friday 28 June | The Economics and Policy of Energy Systems

Day 1 – Fossil Fuels: Can we turn Unconventional into Conventional?
Conference Opening
08:00 – 09:00	Registration \| Coffee & tea
09:00 – 09:40	Welcome and Sponsor address Programme Committee and Sponsors
09:40 – 10:25	Keynote Address on the Global Energy Challenges Lord Ron Oxburgh, House of Lords UK Parliament
10:25 – 10:50	Coffee & tea
The Limits to Easily Accessible Fossil Fuels
10:50 – 11:15	Fossil Fuel Production forecasts: analysis of resource and reserve assumptions and model mechanics Joint Paper convened by Dr. Roger Bentley
11:15 – 11:40	Perspectives on China's Coal Industry and Future Kevin Jianjun Tu, Senior Associate Carnegie
11:40 – 12:05	The Architecture and Drivers of Future Oil Supply Dr. Peter Jackson, Head of Research IHS CERA
12:05 – 12:30	Russia's Natural Gas Production & Export Policy Dr. Tatiana Mitrova, Head Oil & Gas, Energy Research Institute Russian Academy of Sciences
12:30 – 13:30	Lunch Break
Frontier Fossil Fuel Technologies and Basins
13:30 – 13:55	The future of US shale/tight oil Dr. Kenneth Chew
13:55 – 14:20	Oil and gas recovery from continuous (unconventional) resources: Technology innovation options for improving the economic baseline Dr. Ruud Weijermars, Director TU/Delft Unconventional Gas Research Initiative
14:20 – 14:55	Key developments and challenges of Enhanced Oil Recovery techniques and CO2 Solutions Prof. Mehran Sohrabi, Institute of Petroleum Engineering, Heriot-Watt University
14:55 – 15:10	Refreshment Break
15:10 – 15:35	The current status of Underground Coal Gasification as a Commercial Technology Dr. Peter Dryburgh, Wardell Armstrong
15:35 – 16:00	Gas to Liquids - an opportunity to convert natural gas for use in the transport sector Guy de Kort, Shell Vice President GTL
16:00 – 16:30	Coffee & tea
Debate: Energy Scarcity, Threat or Fiction?
16:30 – 17:30	Chaired By - Paul McConnell, Wood MacKenzie Consulting
	Viewpoint A: "Upcoming technologies will unlock the unconventional resource base" Panelist to be announced Dr. Roberto F. Aguilera, Research Fellow Curtin University, Australia.
	Viewpoint B: "We can’t afford the energy, labour and capital cost to prolong the fossil fuel era" Dr. Michael Kumhof, Deputy division chief, Modeling Unit International Monetary Fund (IMF) Kjell Aleklett, Professor, Global Energy Systems Group, Uppsala University
Day Summary
17:30 – 18:00	Closing of Day 1 Program Committee
18:00 – 21:00	Drinks & Networking Event Separate tickets available

Day 2 – The Future of the Electricity System
Conference Opening
08:00 – 09:00	Registration \| Coffee & tea
09:00 – 09:40	Welcome and Sponsor addressProgram Committee and Sponsors
09:40 – 10:25	Keynote Address Dr. Jeremy Leggett, non-Executive chairman Solarcentury, Chairman Solaraid
10:25 – 10:50	Coffee & tea
The viability of Nuclear Power
10:50 – 11:15	Should the UK nuclear programme be a model for the rest of Europe? Prof. Steve Thomas, Greenwich University
11:15 – 11:40	The costs and economic viability of nuclear energy David Shropshire, Head Planning and Economic Studies, International Atomic Energy Agency
11:40 – 12:05	Trends towards Sustainability in the nuclear fuel cycle Dr. Ron Cameron, Head Nuclear Development Division, OECD Nuclear Energy Agency
12:05 – 12:30	Generation IV fast reactors and the re-use of long-lived nuclear waste Dr. Richard Stainsby, Chief Technologist, UK National Nuclear Laboratories
12:30 – 13:10	Lunch Break
The challenges of a renewables based electricity grid
13:10 – 13:30	The Renewables Policy Challenge: Scottish context Dr. Nicola McEwen, Director of Public Policy, Academy of Government, University of Edinburgh
13:30 – 13:55	The Benefits and Costs of Renewable Energy deployment Dr. Ulrike Lehr, Institute of Economic Structures Research GWS
13:55 – 14:20	Grid balancing and development in an era of renewable energies Andrew Hiorns, Network Strategy Manager, National Grid UK
14:20 – 14:55	Demand side electricity grid management Alastair Martin, Founder, Flexitricity
14:55 – 15:10	Refreshment Break
15:10 – 15:35	The potential and costs of electricity storage Friedrich Schulte, Head of Technologies, RWE AG
15:35 – 16:00	Electrochemistry and the energy storage gap Dr. David Fermin, University of Bristol
16:00 – 16:30	Coffee & tea
Debate: Where to invest in for the electricity system of the future? A choice between Shale Gas, Nuclear, Renewables, and Coal with CCS?
16:30 – 17:30	Chair to be announcedPanelists: Dr. Jerome Guillet, Managing Director Green Giraffe Energy Bankers Prof. Stuart Haszeldine, Professor in Carbon Capture and Storage, University of Edinburgh Prof. Alex Kemp, Chair in Political Economy, University of Aberdeen
Day Summary
17:30 – 18:00	Closing of Day 2 Programme Committee
18:00 – 19:30	Policy Workshop: the information, data, and policy gaps on meeting the Energy Challenges Breakout group of speakers plus invited delegates

Day 3 – The Economics & Policy of Energy Systems
Conference Opening
08:30 – 09:00	Coffee & tea
09:00 – 09:15	Welcome and Sponsor address Programme Committee and Sponsors
09:15 – 10:00	Keynote Address Professor Sir David King, Former Director Smith School Oxford University
Understanding Energy Supply, Demand, Price, and the role of policies
10:00 – 10:25	The energy outlook to 2030: Global Trends in energy-economic relations Dr. Alexander Naumov, Group Economics, BP plc
10:25 – 10:50	The influence of price risks on policy design and investment Dr. William Blyth, Director Oxford Energy Associates
10:50 – 11:15	Coffee & tea
11:15 – 11:40	The capital cost requirements of energy transitions Dr. Michael Dale, Stanford University
11:40 – 12:00	The demand side: energy intensity of the economy Dr. Sgouris Sgouridis, Masdar Institute
Panel Discussion on Key Knowledge, Data & Policy Gaps in the Energy sphere
12:00 - 12:45	Honorary Panel Leader - Professor Charles Hendry MP Professor Michael Jefferson, University of Buckingham Professor Zoe Shipton, University of Strathclyde Professor (Emeritus) Stephen Salter, University of Edinburgh
12:45 – 13:00	Conference Summary Final Sponsor Thanks
Energy Modelling workshop
14:00 – 14:15	Introduction
14:15 – 14:45	Selected Individual Presentation rounds
14:45 – 16:00	Discussion Dr. M. Kumhof, IMF Modeling Group Dr. N. Goddard, University of Edinburgh, Arup 4-see model J. Glynn, University College, Cork, Irish-TIMES model S. Lochran, UCL Energy Institute, TIAM-UCL model Dr. J-F. Mercure, Cambridge University Centre for Climate Change Mitigation Research, 4CMR modelling Simon Davidsson, Dept. of Earth Sciences, Uppsala University, limits to rate of energy change Dr. Mikel Gonzalez, BC3 Basque Centre for Climate Change, BC3-GCAM model

Predicting the Weather, Corn, Ethanol and Oil Production

Heading Out — Sun, 19 May 2013 08:10:28 +0000

News of the future was, in my youth, something that one found by crossing the palm of a lady in a dark tent with a piece or two of silver (or the modern equivalent) at one of the fairs that came to town. Such opportunities still exist, with all the caveats that existed back then likely still being in force. However, projecting the future, whether of the weather, the likely corn crop this year in the United States, or the production of crude oil by the nations of the world has become a much bigger business with copious tables, graphs and theories replacing the rather worn pack of cards or crystal ball of my youthful experience.

Our part of the world underwent a drought last year severe enough to kill several trees in our yard, for example, as well as hurting the corn crop. This year, corn plantings have been severely impacted by the heavy rains and cold weather, so that decisions on crop plantings have become more complicated and delayed, with follow-on impacts on the ultimate yield in a number of Midwestern states. Corn yield apparently falls at an average rate of 2.3 bushels per acre per day of delay in northern Wisconsin. These changing conditions make it difficult to assess how much ethanol, for example, will be available to meet demand, although the latest EIA TWIP holds out some optimism for this year.

The impact of the drought on corn prices, and the consequent fall in ethanol production, as production costs rose, are directly visible from their plot of the two over the last year.

Figure 1. A comparison of corn prices and ethanol production in the USA (EIA TWIP )

However, with the weather impacts still being assessed, it is already being concluded that the US corn crop is unlikely to reach the record level of close to 14.6 billion bushels that were earlier projected. It still, however, has the potential to reach around 12.3 billion bushels, which would satisfy the just under 5 billion bushel need for ethanol, as well as other demands of the market. By May 12 only 28% of this year's expected crop had been planted, in contrast with a normal year where 65% would be in the ground. Thus, even the relatively short-term projections of the EIA could yet be in trouble for this year.

Moving to the slightly longer-term, the nations that form OPEC must try to estimate global demand for their products and the amount that other non-OPEC nations will produce, so that they can balance supply and demand at such a level that will sustain prices they are comfortable with. Their estimates come out as Monthly Oil Market Reports and in the latest (May) version they continue to expect global demand to increase by 0.8 mbd over 2013, but are beginning to hedge that bet as the global economy continues to appear anemic, with Russian and Asian economies slowing. Yet by the fourth quarter of the year, they anticipate that global demand will reach 90.9 mbd.

Figure 2. Global oil demand by region (OPEC MOMR)

OPEC anticipates that with the major increase coming from the Americas, that non-OPEC oil production will increase by just under 1 mbd to reach an a level of 54.41 mbd in the fourth quarter of the year. The majority of that growth (some 0.59 mbd) will come from the United States, with the Permian, Bakken and Eagle Ford being cited as the anticipated source of these gains. OPEC, having looked at current rig counts, project that these numbers may be revised upwards over the course of the year. And yet it is worth noting this:

On a quarterly basis, US oil supply is seen to average 10.62 mb/d, 10.67 mb/d, 10.62 mb/d and 10.61 mb/d respectively.

The sustained gain in North American production comes about because:

On a quarterly basis, Canada’s production is anticipated to average 4.02mb/d, 3.97 mb/d, 4.02 mb/d and 4.12 mb/d respectively.

Russia is expected to continue to lead in oil production over the course of the year, although it is not longer expected to increase production above current levels.

On a quarterly basis, Russian oil supply is seen to average 10.45 mb/d, 10.43 mb/d, 10.43 mb/d and 10.43 mb/d respectively.

And this brings us back around to OPEC as they try and balance their production against the gap between global demand and non-OPEC supply. As has been the case for a while, OPEC produced two separate tables showing production, as reported by secondary sources as well as those directly reported by the countries themselves.

Figure 3. OPEC member production as reported by secondary sources (OPEC MOMR)

Figure 4. OPEC member production as reported directly (OPEC MOMR)

It would appear with Manifa coming on line, that Saudi Arabia is increasing production again, while Venezuela and Iran would have you believe they are producing more than they are, and Iraq, which is now producing above 3 mbd, is directly reporting less (though that could be because some of that production is coming from the north, and there are some communication problems between there and Baghdad).

As long as OPEC has available reserves, it can continue this balance to keep enough oil available at an acceptable price to allow the world economy to continue at its present pace. And with that ongoing adjustment available, their projections for this year of a relatively stable price would seem fairly founded, absent some major change in one of the larger producing states.

Iraq overtook Iran as the second largest producer in OPEC last year (according to secondary sources) and expects that with production from Majnoon, it will increase production capability by upwards of 200 kbd by the end of the year. Ultimately the goal is to achieve a target production of 1.8 mbd. However, as overall production levels increase, Iraq may join with the Kingdom in controlling production to maintain price.

Yet even with those abilities, OPEC is becoming cautious about predicting that their estimate of the demand:supply balance numbers for this year will be accurate over that time interval.

With these uncertainties in even short-term projections of future production, whether it be corn, ethanol or crude, it is perhaps wise to continue a somewhat cynical view of projections over a longer time period. Although the bounding bar of a decline in existing field production continues to exist, and will continue to require an offset in increased production from new wells to offset. Perhaps that lady in the tent of my youth may prove as prescient as some of the more optimistic forecasts that we continue to see.

Tech Talk - The Dangers of Complacency

Heading Out — Sun, 12 May 2013 17:20:56 +0000

Perceptions based on perhaps too small a collection of information can lead into opinions that, on investigation, turn out to be incorrect. Just recently a couple of friends had mentioned that charities that they are associated with were seeing a decline in donations. I built this into a picture of the general public being less able to afford earlier levels of giving, perhaps because of the continued impact of higher costs of fuel. However, the perception is as a general statement, wrong, and (via the National Park Service from The Giving Institute) I learned that:

Americans gave more than $298.42 billion in 2011 to their favorite causes despite the economic conditions. Total giving was up 4 percent from $286.91 in 2010. This slight increase is reflective of recovering economic confidence.

The greatest portion of charitable giving, $217.79 billion, was given by individuals or household donors. Gifts from individuals represented 73 percent of all contributed dollars, similar to figures for 2010.

In the perception that is becoming increasingly prevalent on the future of energy supplies, and particularly on crude oil, the current adequacy of supply is projected forward to anticipate no problems with supply in the future. Peak oil is now suggested to occur not because the supply is limited, but because with the increasing use of renewable energy, demand will peak, and then decline. Bloomberg New Energy Finance founder Michael Liebreich is quoted as projecting that the growth in fossil fuel use will almost stop by 2030, while Citi Commodity Researchers are suggesting that the increases in prices will drive increases in efficiency that will bring a peak in oil demand “much sooner than the market expects.”

Figure 1. Projected changes in global oil demand (Citi Commodity Researchers)

This anticipation of future gains in efficiency of use is a common thread to pictures of the future from the three major oil companies that I recently reviewed. All three, ExxonMobil, Shell and BP expect that energy efficiency gains will have a major impact on demand. BP, for example, anticipates that through 2030 energy demand will increase 36 percent, but that without this improvement in efficiency global energy would have to double by 2030.

One of the problems in assessing the changes in efficiency over time is that when looking at the past decade, one has to recognize the significant impact of the recession. For example, the Odyssee project looked at energy use in Europe and clearly showed the impact of the recession on demand.

Figure 2. Changes in electricity use in the countries of Europe following the start of the recession (Odyssee)

What also caught my attention in looking where most of the energy savings were occurring was that it was in countries catching up to Western Europe, rather than in the more established West, and that when the overall savings are totaled these appear to have slowed significantly.

Figure 3. Overall energy savings in the EU relative to a 2000 baseline (Odyssee)

The second problem with the curve that Citi projects lies in the rate at which vehicles are switched from diesel and gasoline to natural gas power. There is currently an economic incentive in parts of the world to make this change. It currently sells at around the equivalent of $2.10/gallon in the USA. Yet it requires both infrastructure and an investment of capital to make the change at any level of significance. Nevertheless it remains a key ingredient of the Pickens Plan that Boone Pickens has been selling around the country for a number of years now.

The fact that Clean Energy Fuels can list all 22 stations that added natural gas pumps along the “Natural Gas Highway” in the November-January period, this does not indicate a great rush to build that infrastructure. It is easier to change the local distributor networks, with companies such as Waste Management indicating that they will use CNG in 80 percent of their new trucks, than it is to see the rapid change of the longer distance haulers, and for passenger vehicles. A recent article in the Washington Post noted that only 20,381 vehicles ran on natural gas of the 14.5 million new cars and trucks sold last year. Further not only does a CNG vehicle cost more to purchase, it also has a lower range, although for some applications that may not be much of a handicap.

Figure 4. Average Annual Vehicle miles travelled by category (Alternate Fuels Data Center)

Yet, at the moment, it is the use of ethanol that is having the most impact on alternate fuel use. Other than that, there has been little indication of much change in the market.

Figure 5. Alternate Fuel Vehicles in use from 1995 to 2010 (Alternate Fuels Data Center )

And in this regard, Europe has also seen little movement toward the use of natural gas in contrast with the use of biofuels, and neither has made large gains.

Figure 6. Comparative penetration of liquid fuels market in Europe by biofuels and natural gas (Odyssee)

The problem, of course, is that if these improvements in efficiency and switches to alternate fuels do not occur, then the demand will continue along the Business-As-Usual line, and, as BP forecasts, demand will double by 2030.

The question as to what will be available to meet that enhanced demand remains one of the great imponderables that folk seem, again, unwilling to face. Certainly with a steadily increasing demand, and the constraints on supply that these pages have continued to document over the years, it becomes very difficult to see how price stability can be maintained where demand exceeds supply at a given price. The problems that this will bring, particularly to those nations that now subsidize fuel, a policy that is unlikely to change in Asia, are likely to be major. Yet for countries such as India, which last year spent the allocated fuel subsidy budget for the year by the end of July, the political costs of change remain very high and could well remain in place until the financial burden becomes intolerable.

Unfortunately, with the current complacency, at that point it will then be too late to start searching for alternate answers.

The Oil Drum - Discussions about Energy and Our Future

Drumbeat: June 19, 2013

Energy Export Databrowser Updated to BP 2013 Data

1) The US is less reliant on imports from across the globe

2) UK energy production from all sources continues its decline

3) Brazil is unlikely to become a major oil exporter

Tech Talk - A June TWIP and the OPEC MOMR

Low energy return on investment (EROI) need not limit oil sands extraction

Tech Talk - Concerns over Future Oil Production from Iraq

Tech Talk - Future Oil Production from Iraq: An Optimistic View

Tech Talk - Cutting Back on Supply in the Presence of Optimism

Global Energy Systems - June 26-28 2013

Day 1 | Wednesday 26 June | Fossil Fuels: Can we turn Unconventional into Conventional?

Day 2 | Thursday 27 June | The Future of the Electricity System

Day 3 | Friday 28 June | The Economics and Policy of Energy Systems

Conference Opening

The Limits to Easily Accessible Fossil Fuels

Frontier Fossil Fuel Technologies and Basins

Debate: Energy Scarcity, Threat or Fiction?

Day Summary

Conference Opening

The viability of Nuclear Power

The challenges of a renewables based electricity grid

Debate: Where to invest in for the electricity system of the future? A choice between Shale Gas, Nuclear, Renewables, and Coal with CCS?

Day Summary

Conference Opening

Understanding Energy Supply, Demand, Price, and the role of policies

Panel Discussion on Key Knowledge, Data & Policy Gaps in the Energy sphere

Energy Modelling workshop

Predicting the Weather, Corn, Ethanol and Oil Production

Tech Talk - The Dangers of Complacency