Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.
Oil prices were buffeted this week by escalating violence in Libya and fear of further disruption in the Middle East on the one hand, and a new debt crisis in the Eurozone threatening further economic turmoil on the other. In Libya this week the Gaddafi regime has launched a full scale military offensive against the rebels and appeared on Thursday to be gaining the upper hand. On Friday all eyes will be on Saudi Arabia where activists have called for a ‘day of rage’. So far protest, in Saudi, where public demonstrations are banned, has been minuscule. No doubt the authorities are planning to keep it that way, but it is likely that pressure will continue to build in a country which is surrounded by revolution and where 70% of the population under is 20.
The role of Saudi spare oil production capacity to balance oil prices was in the news again this week, as Goldman Sachs analyst Jeff Curie suggested the kingdom has been producing 700,000 b/d more than it has admitted for some months. Taking depletion and the shut-in Libyan production into account, this would mean that OPEC spare capacity is now likely to be under 2 million barrels per day rather than the 5 mb/d usually claimed. If so, global spare capacity is down to the levels seen in 2008, when OPEC was unable to raise capacity despite prices of $147/barrel — even without any disruption in Saudi.
With energy so prominent in the news, Prime Minister David Cameron and Deputy Nick Clegg joined Chris Huhne on Tuesday to launch the government’s new carbon plan. The plan summarises current and announced government initiatives, and doesn’t really contain any surprises, but a date of April 2011 was set for the announcement of the carbon floor price framework.
On Thursday came the release of the Renewable Heat Incentive scheme— a global first, claims the government — aimed at incentivising low carbon heat technologies. The £860m fund will initially benefit industry, business and the public sector, opening up to households in October 2012. The initiative was broadly welcomed by the industry and environmental groups, though there is some concern of the sustainability of biomass and waste incineration.
Oil
Oil markets brace for Saudi ‘rage’ as global spare capacity wears thin
Those exhorting OPEC to boost output should be careful what they wish for. The cartel card can be played once only, and it risks exposing the fragility of the global energy system if the Gulf powers are seen struggling to deliver.
Goldman Sachs suspects that OPEC has been pumping far above its agreed quota since November and therefore cannot easily raise output much without cutting deep into global spare capacity…
The Saudi capacity puzzle
Could Saudi Arabia be telling porkies when it comes to its spare capacity capabilities?
It’s something Goldman Sachs analysts are wondering on Tuesday.
For example, they’ve deduced — from reverse-engineering the kingdom’s production levels — that Saudi may have raised output before the crisis in Libya ever broke out…
Libya’s main oil terminal ablaze after raid
Libya’s main oil terminal was in flames on Wednesday night after Muammer Gaddafi’s airforce bombed the complex, in an escalation that pushed the cost of the benchmark Brent above $115 a barrel.
The attack on the Es Sider terminal, in the country’s rebel-controlled eastern region, was the first against a critical oil facility since unrest in the North African nation erupted last month…
For Big Oil, Libya is just another fix it’s in
The global oil industry is in a fix. It’s still trying to persuade Washington to revive access to the Gulf of Mexico, one of the world’s sole remaining dictator-free oil-rich zones, and it’s locked out of Libya for the foreseeable future. Meanwhile, its greatest recent coup — a technological breakthrough that has unlocked a bonanza of natural gas locked in shale in the United States — is under threat by homeowners and activists across the country who question whether the method is environmentally safe. On top of all this, global oil demand is rising fast along with robust economic recovery, and the world will pour terrible scorn on the industry if, despite the hurdles, it fails to supply sufficient oil and natural gas to fuel everyone’s cars, homes and factories…
Obama Considers Tapping Oil Reserve
The Obama administration is considering tapping the Strategic Petroleum Reserve in response to rapidly rising gasoline prices brought on by turmoil in the Middle East, the White House chief of staff, William M. Daley, said on Sunday.
“It’s something that only has been done on very rare occasions,” Mr. Daley said on “Meet the Press” on NBC, adding, “It’s something we’re considering.”…
Crude Oil Declines a Fourth Day After Earthquake in Japan Shuts Refineries
Oil fell in New York, headed for the first weekly decline in a month, after Japan’s refiners shut processing plants following an 8.9-magnitude earthquake off the northern coast.
Futures slipped for a fourth day, losing as much as 1.8 percent, after the temblor in the world’s third-largest crude user. A fire at Cosmo Oil Co.’s oil refinery in Chiba, outside Tokyo, is spreading, a Fire Department spokesman said. JX Nippon Oil & Energy Corp. shut its refineries in Sendai, Kashima and Negishi. Prices had dropped before the earthquake on speculation the economic recovery in the U.S. may falter…
Rising Gas Cost Finds The Nation Better Prepared
The increase in energy prices is beginning to resemble the rise in 2008. But this time, the American economy may be better prepared for higher fuel costs.Related in Opinion
Gasoline prices have risen by nearly a third in the last year, and oil costs more than $100 a barrel for the first time in more than two years, driven by fears of extended Middle East supply disruptions and increased demand from an improving global economy…
Shell oil exploration threatens one of the world’s great wonders
Anglo-Dutch conglomerate applies for permit to drill just 30 miles off World Heritage-listed coral reef in Western Australia
Shell Oil has come under heavy criticism for planning an oil and gas drilling site that could threaten a coral reef off the coast of Australia that is among the most valuable marine ecosystems on the planet…
Making Every Oil Calorie Count
AS turmoil in Libya pushes up the price of oil, American consumers are once again feeling the sting of $3.50-a-gallon gasoline. But the impact of costly crude on our lives and economy extends far beyond the pump. Virtually everything we consume — from hamburgers, running shoes and chemotherapy to Facebook, Lady Gaga MP3s and “60 Minutes” — is produced from or powered by fossil fuels and their byproducts, all of which could grow more costly as the price of petroleum rises…
Norway Oil Drillers Suffer Worst Dry Spell in Decades as Reserves Dwindle
Statoil ASA (STL) and Eni SpA (ENI) are among companies with plans to drill a record number of wells in Norway’s far north this year to help the world’s second-largest gas exporter to sustain output. So far, they’ve struck out.
All four wells drilled in the Barents and Norwegian seas this year have failed to find oil or gas, adding to two dry wells in the North Sea, the biggest number of failures to start the year since the country’s oil era began in 1966, according to government data. Oil companies plan as many as 22 wells in Norway’s Arctic this year, up from 12 last year…
Gas
Algeria eyes huge domestic shale gas reserves
Oil and gas producer Algeria is sitting on huge undeveloped reserves of shale gas that the country now intends to develop with the help of international partners, the OPEC member’s energy minister said on Wednesday.
The African nation of Algeria, already a major exporter of oil and natural gas, could become an even bigger exporter in the coming years as it develops up to 1,000 trillion cubic feet of natural gas trapped in shale rock more than 1,000 meters (3,280 feet) below the surface…
Shale Gas Needs to Allay Environmental Doubts
Safe havens are the rarest commodity in the energy patch. So oil and gas companies have been drawn to the hydraulic fracturing revolution in the United States by the perception of low political hazard. They’ve committed more than $70 billion to shale deals over the last two years, the consultancy IHS reckons.
But an environmentalist backlash is gaining momentum. One disaster along the lines of BP’s Macondo spill in the Gulf of Mexico, and the whole investment thesis could crumble. Instead of stonewalling new regulations and calls for transparency, the industry — gathering this week in Houston for the annual conference of IHS’s Cambridge Energy Research Associates unit — may want to get out in front by voluntarily accepting some safeguards…
Turkmenistan won’t allow foreign firms into onshore gas production sharing deals
Turkmenistan will not invite foreign oil companies to invest in the exploration or production of its prized onshore gas fields, its energy minister said on Friday.
International energy firms will be restricted to offshore blocks in Turkmenistan’s sector of the Caspian Sea and service contracts at onshore gas fields…
Coal
Carbon capture projects up in 2010, despite costs
The number of projects for capturing greenhouse gases from power plants and factories edged up in 2010 despite soaring costs and slow progress in U.N.-led efforts to slow climate change, a study showed on Tuesday.
The focus of carbon capture and storage (CCS) projects also shifted more to the United States from Europe even though U.S. President Barack Obama has failed to persuade the Senate to legislate caps on U.S. greenhouse gas emissions, it said…
Biofuels
‘Gasoline Summit’ Solves Nothing as Biofuel Chaos Continues
German politicians met Tuesday in a hastily arranged ‘Gasoline Summit’ to discuss public distrust over the introduction of fuels with higher concentrations of ethanol. Politicians pledged to better inform the public about which cars can use the new fuel, but German commentators and drivers remain wary.
The introduction of a new biofuel with 10 percent ethanol content continues to provoke controversy in Germany, where consumers are rejecting the fuel in the fear that it will damage their cars. Meanwhile, supplies of regular unleaded gasoline are running low at stations across the country…
China ready to quell disquiet over new environmental policies
China has announced plans to tighten environmental controls and ramp up internal security spending. Though no link was made between these two developments, the government may be anticipating one.
At first sight, the issues of environment and security could not be further apart, at least in terms of their very different contributions to China’s international image. This was evident this weekend, when the government of prime minister Wen Jiabao drew plaudits from green groups and anger from human rights organisations…
UK
UK launches world-first Renewable Heat Incentive to boost green living
Energy Minister Chris Huhne has today unveiled details of the Renewable Heat Incentive (RHI), which is aimed at boosting the UK’s uptake of renewable energy.
The Cabinet Secretary announced details of the scheme this morning, which is the world’s first financial incentive of its kind to revolutionise the way heat is generated and used in buildings…
Q&A: Renewable heat incentive
What’s the Renewable Heat Incentive?
The Renewable Heat Incentive, or RHI, is a government scheme designed to encourage the take-up of low-carbon heating systems. The RHI was originally a Labour policy, but full details were published by the coalition government in March 2011.
Why do we need it?
The UK has a number of targets for reducing its contribution to global warming — including a commitment to reduce carbon emissions by 80% by 2050. Burning fossil fuels to provide heat and hot water in buildings accounts for a large slice of current emissions. The RHI is the government’s attempt to kick-start a move towards heating systems that use renewable energy sources and produce fewer emissions…
UK govt to create carbon floor price rules in April
Britain’s Treasury will set a legal framework next month to create a floor price for carbon emissions, the government said on Tuesday, whilst announcing a wider plan for encouraging low-carbon investments.
The floor price is a substantial part of the government’s electricity market reform (EMR) proposal as it puts a minimum tax on carbon-intensive power generation, which indirectly rewards producers of greener energy…
Thousands of charging points to be installed across UK over next two years, Government to say
The scheme is part of a new Carbon Plan, launched today by deputy Prime Minister Nick Clegg and Energy secretary Chris Huhne, which sets deadlines to help turn Britain into a greener economy.
The Government’s plan says it wants to have developed a “nationwide strategy to promote the installation of electric vehicle infrastructure” by June this year…
How are motorists saving fuel?
Petrol prices have risen to record levels and the UK government has hinted it may postpone a planned 1p fuel duty increase due next month. But how much have driving habits already changed in an effort to save fuel?
In 2000, fuel protests sparked by rising petrol prices nearly brought parts of the country to a standstill. The price at the pump was about 80 pence a litre…
UK energy use fell by 5% in eight years
The UK is one of the top performers in Europe on energy efficiency, according to a European commission report.
Energy use fell by more than 5% from 2000 to 2008 in the UK — the only major European economy to see a drop. Germany’s consumption held level, while France’s rose 7%. Overall, energy use in the 27 EU countries increased by more than 4%…
Climate
Connie Hedegaard wins battle for 25% carbon emissions cut
Europe’s climate chief has beaten off intense lobbying from businesses to secure a key victory in the battle over greenhouse gas targets.
Connie Hedegaard, the EU climate change commissioner, published on Tuesday afternoon her long-awaited report into how the EU can toughen its climate targets in a cost-effective manner, with a proposal that the EU could raise its current targets on emissions cuts from 20% emissions cuts to 25% cuts by 2020…
Economy
Euro zone debt crisis intensifies on summit eve
The euro zone’s debt crisis flared on the eve of a summit of the currency bloc when Moody’s downgraded Spain’s credit rating on Thursday and bond markets heaped pressure on Portugal to seek a bailout.
Leaders of the 17-nation currency area are expected to back a watered-down version of a German-French plan to boost economic competitiveness at Friday’s Brussels summit but seem unlikely to resolve sharp differences over the size and scope of the euro zone’s rescue fund…