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.
‘Peak Oil Scare Fades as Shale, Deepwater Wells Gush Crude‘ was the title of one of the lead articles in Bloomberg’s newly launched ‘Sustainability’ section this week. The report echoes a growing number of press reports announcing the end of the “myth” of peak oil. So what gives?
That conventional oil has peaked and will be in decline over the next decades is no longer controversial — so in that sense peak oil has been and gone, and the economic consequences are evident. On the other hand, the peak-oil-is-dead argument goes that the market has worked just as it should. As oil supplies became tight prices rose making previously uneconomic resources viable — this together with technical advances in extracting those more difficult to produce resources mean that global reserves are now bigger than ever. The poster child of this turnaround is North America where tar sands, shale oil, and deepwater off-shore oil appear to have reversed a decades-long production decline, while shale gas has created a gas glut – though this may be a mirage produced by bad data, according to one recent analysis.
But the important question for the future is, does this mean our problems are behind us and life can get back to normal? Peak oil is about rates of production, so can oil be brought to market in a timely fashion at a price which the economy can bear but which also covers the costs?
On this front there is still a great deal of insecurity — depletion rates demand that new production equivalent to about a third Saudi output must be brought online each year, just to stand still — and of course demand is expected to increase. Replacing this is a big ask — especially with unconventional oil which is both slower and more expensive to produce — and as yet untested as global liquids production has remained essentially static since 2004. Recent analysis from consultants Douglas Westwood suggests demand growth in the developing world — especially China — cannot be met without causing violent oil price spikes, which in turn cause recessions in the developed economies. The recessions are necessary, argue DW, to shift consumption from the old economies of the west to the rising stars of the east. This is another example of the market ‘working’, but also clear evidence that there is not enough oil to go round.
There is also growing dependence on OPEC, as evidenced in BP’s recent Energy Outlook. One commentator, perhaps surprisingly sounding a wary note this week was Saadallah Al Fathi – former head of the Energy Studies Department in Opec Secretariat in Vienna. Al Fathi warned that “Optimism is important for human progress but that does not mean we should ignore what the numbers are telling us” … he then went on to question both unconventional reserve numbers and more tellingly, those of OPEC.
In other news this week, new Energy Secretary Ed Davey announced the government’s plans for revising the FiT scheme. Current rates will be kept until the end of March before being cut by 50%. Rates could be cut further if installation prices continue to fall. The plans got a mixed reaction from industry. Meanwhile, despite being busy with QE3 (a 3rd round of quantitative easing) Mervyn King is to review claims that the fossil fuel industry is an investment risk in the face of carbon reduction targets.
Oil
Debate rages on when oil will peak
The discussion about the peak oil proposition is as lively as ever across the divide between proponents and opponents.
Peak oil is when the maximum rate of world oil production is reached and the rate enters terminal decline. The idea was proposed by King Hubbert in 1956. He accurately predicted that US oil production would peak between 1965 and 1970 and that world oil production would peak in 1995. However, it did not, due to the rise in oil prices and the persistent substitution of oil by other energy sources in the 1970s and 1980s, thus shifting the time when the peak would be reached…
Peak Oil Scare Fades as Shale, Deepwater Wells Gush Crude
When Daniel Lacalle, in his early 20s, took a job with Spanish oil company Repsol YPF SA in 1991, friends chided him for entering a field with no future. “They all said, ‘Why do you want to do that? Don’t you know only 20 years of oil is left in the whole world?'” he recalls.
Two decades and four energy crises later, the U.S. Geological Survey estimates that more than 2 trillion barrels of untouched crude is still locked in the ground, enough to last more than 70 years at current rates of consumption…
Oil, Food, Water: Is Everything Past Its Peak?
An unprecedented crisis faced America. Oil production was going to peak in just three to five years, resulting in foreign oil addiction and economic calamity. The scientist responsible for slapping the nation into consciousness implored industry and government to act: “The smug complacency that habitually blinds the American public must be torn,” wrote David White, chief geologist of the U.S. Geological Survey. It was 1920.
More than 90 years later, tempers still flare over the prospect of global “peak oil.” Last week a commentary in the prestigious journal Nature argued, “oil’s tipping point has passed.” It’s the most recent high-profile salvo about whether, or how soon, the petroleum extraction that drives the global economy will reach a plateau and then, inevitably, decline…
The Real Cost of ‘Peak Oil’
No, we’re not running out of oil, as some predicted. But petroleum—like some other commodities, including copper—is getting more expensive to find and produce, writes MoneyShow’s Jim Jubak, who also writes for Jubak’s Picks.
Now that oil is a long way from the $145 per barrel peak it hit in July 2008, and nobody on Wall Street is predicting—as Goldman Sachs did in 2008—that oil is headed to $250 a barrel, we’re not hearing much about peak oil anymore…
Oil Falls From Three-Week High as Economic Concern Counters U.S. Outlook
Oil fell from the highest level in three weeks, trimming a weekly advance, as concern that Europe’s debt crisis will worsen and curb global commodity demand countered signs of an economic recovery in the U.S.
West Texas Intermediate futures declined as much as 0.7 percent, snapping the longest run of gains since December. Greece won’t get financial aid until it implements an austerity plan, Luxembourg Prime Minister Jean-Claude Juncker said yesterday. China’s exports fell for the first time in more than two years and OPEC cut its demand forecast. U.S. applications for first-time jobless benefits slid by 15,000 in the week ended Feb. 4, Labor Department data showed yesterday…
China to Increase Domestic Diesel, Gasoline Prices First Time in 10 Months
China, the world’s second-biggest oil consumer, raised domestic fuel prices for the first time in 10 months to spur production by refiners including China Petroleum & Chemical Corp. (386) and PetroChina Co. (857)
Retail gasoline and diesel cost 300 yuan ($47.58) a metric ton more starting today, the National Development and Reform Commission said on its website yesterday. The increase is equivalent to 0.22 yuan a liter on average nationwide for gasoline and 0.26 yuan a liter for diesel, China’s top economic planning agency said…
BP raises dividend and defends plans to drill deeper
BP has raised its dividend for the first time in a year as it continues to recover from the Deepwater Horizon disaster — and defended its ambitions to drill deeper wells than ever before.
The oil major reported full-year profits for 2011 of $23.9bn (£15.1bn), compared with the $4.9bn loss it made in 2010 — the year of the accident that killed 11 men and spilled millions of barrels of crude into the Gulf of Mexico…
Statoil Net Rises as Reserves Replaced for First Year in Six
Statoil ASA (STL), Norway’s largest oil producer, said fourth-quarter profit more than doubled as the explorer found more oil and gas than it produced for the first time since 2005.
New resources from exploration climbed above 1.1 billion barrels of oil equivalent in 2011, a so-called reserve replacement ratio of 117 percent compared with about 300,000 barrels in 2010, Chief Executive Officer Helge Lund said at a press conference today…
EIA boosts 2012, 2013 oil demand growth forecast
The U.S. Energy Information Administration on Tuesday boosted its forecast for global oil demand growth for the first time since October and forecast the market would tighten as gains in non-OPEC production lag.
The U.S. government agency hiked estimates for 2012 oil demand growth from last month’s report by 50,000 barrels per day for this year to 1.32 million bpd. It revised 2013 growth up by 20,000 bpd to 1.49 million bpd…
Gas
BG cuts back on fracking for shale gas as prices slide
BG Group has become the latest major energy giant to scale back on shale gas production amid falling prices.
The oil and gas producer, created by a demerger from British Gas 15 years ago, has joined US rivals Chesapeake and ConocoPhillips in cutting back on the controversial production process known as fracking, where a combination of chemicals, water and sand is pumped into the ground to hydraulically fracture or “frack” the rock and release trapped gas. However, concerns over the process have not been a factor in the companies’ decisions…
Everything you know about shale gas is wrong
Everything you know about America’s shale gas “miracle” is wrong.
I have already shown that we do not have a 100-year supply of natural gas, and that gas production is not profitable at today’s prices. I also noted that the U.S. Energy Information Administration recently slashed its resource estimate by 42 percent.
But now there’s even more bad news: U.S. gas production appears to have hit a production ceiling, and is actually declining in major areas…
Electricity
There’s inefficient, and then there’s really inefficient
The 106 mostly Tory MPs who think wind power is a bad idea have had their day in the Sunday Telegraph, and new Secretary of State Ed Davey has been robust in his defence of wind as part of a mixed renewable portfolio. It is, of course, local planning that these MPs are after, as well as subsidies, and rumours are that the government is to produce guidance that ‘rebalances’ national and local planning considerations when it comes to the siting of onshore wind.
Rebalancing, that is …er.. the shredding of planning guidance by the government down to just 50-odd pages, thereby, among other things giving national policy planning guidance a sharp tilt away from local vetoes on planning. The localising of planning demand is set out in an annex to the MPs letter not apparently published in the Sunday Telegraph and is well dissected in a ‘mole’ piece in The Week…
Belgian battery can power 1,400 homes
Chemicals giant Solvay hailed Monday the successful entry into service in Flanders of what it said was the largest fuel cell of its type in the world.
A super-battery that produces enough electricity to power nearly 1,400 homes, the Proton Exchange Membrane (PEM) fuel cell has been producing clean electricity at a “steady rate” for weeks at a SolVin plant part-owned by Germany’s BASF in Antwerp, northern Dutch-speaking Belgium…
Nuclear
Federal Regulators Approve Two Nuclear Reactors in Georgia
The Nuclear Regulatory Commission voted 4 to 1 on Thursday to grant a license to build and operate two reactors at a nuclear plant in Georgia, a crucial threshold for an industry that has not had a new start since 1978.
The $14 billion project, of which $4 billion was already spent on steps like digging a foundation and laying water pipes, will be closely watched by utilities around the country, many of which are leery of nuclear construction because of huge cost overruns in the last round of construction in the 1960s, ’70s and ’80s…
Biofuels
EU energy chief against higher biofuel target for now
The EU’s energy chief said on Tuesday for now he was opposed to raising the bloc’s 10 percent biofuel target due to environmental concerns and urged the bloc to agree 2030 energy goals within two years.
“During the life of this Commission, we want to be able to reach a conclusion on targets for 2030,” Guenther Oettinger said, referring to the current EU executive, whose mandate expires in 2014…
UK
Barker tells solar industry to “get real” over feed-in tariff cuts
Climate Change Minister Greg Barker has defended government plans to cut the feed-in tariff for solar PV three times this year, potentially seeing rates reach 12.9p/kWh by October, insisting the industry will continue to grow.
The government today launched a package of changes to the feed-in tariff scheme for all renewable technologies, including a consultation to introduce automatic cuts designed to ensure the tariff remains in-line with the falling cost of technology…
Solar industry players attacked the proposals, which could see the tariff for installations with less than 4kW cut to 21p/kWh in April, then cut again to between 16.5p/kWh and 13.6p/kWh in July, and once again to between 15.7p/kWh and 12.9p/kWh in October, depending on rates of installation.
U.K. to Open Biggest Offshore Wind Farm in $52 Billion Expansion
The U.K. will open the world’s biggest offshore wind farm today, marking the start of a 33 billion-pound ($52 billion) push to expand sea-based generation more than 10-fold by the end of the decade.
Energy Secretary Edward Davey will inaugurate Dong Energy A/S’s Walney farm, located in the Irish Sea about 9 miles off the coast. The 367-megawatt project will produce enough power for 320,000 homes, according to Fredericia, Denmark-based Dong…
Bank of England Says to Evaluate Fossil-Fuel Investment Risk
The Bank of England will evaluate whether the U.K.’s exposure to investments in greenhouse gas- emitting industries poses a risk to financial stability, Governor Mervyn King said.
Responding to a Jan. 19 letter from Climate Change Capital Ltd. and more than 20 other investors, academics and campaign groups urging a probe, King said that while there is a “question” about whether any danger exists, he’ll try to investigate investments in polluting industries further…
KPMG refuses to release controversial green energy report
Consultancy will not publish full findings of report, after leaked press release criticising green energy costs sparked media storm
KPMG is refusing to publish the full findings of a controversial study examining the cost of the government’s green energy policies, which was originally used as a basis for a series of media reports attacking the cost of renewable energy…
UK emissions rose 3.1% as economy recovered in 2010
The dramatic fall in the UK’s greenhouse gas emissions caused by the recession has proved to be a blip, with national emissions rising 3.1% in 2010. The new energy and climate change secretary, Ed Davey, attributed the rise, the first in almost a decade, to increased home heating during a cold winter and shutdowns at nuclear power stations after technical problems.
“One year won’t knock the UK off meeting its long-term emission reduction targets, but it serves to underline the importance of the coalition’s policies for insulating homes to cut bills and emissions and moving to greener alternative forms of energy,” said Davey, a Liberal Democrat who took over from Chris Huhne, who resigned on Friday after being charged over an alleged attempt to avoid prosecution for a speeding offence…
Bank of England injects another £50bn into UK economy
The Bank of England has agreed to extend its quantitative easing (QE) programme by £50bn to give a further boost to the UK economy.
When completed, it will bring the total amount of QE stimulus to £325bn…
Transport
Airline industry split widens over EU carbon ‘tax’ row
A split widened within the aviation industry Tuesday over EU charges for carbon emissions, as Europe’s low-cost carriers accused Chinese and US rivals of “gunboat” diplomacy against the system.
A day after China barred its airlines from complying with what many consider a tax, the head of the International Air Transport Association (IATA) warned that several nations view the EU scheme as an “attack on sovereignty”…
China bans airlines from paying EU carbon charges
China said Monday it has banned its airlines from complying with an EU scheme to impose charges on carbon emissions opposed by more than two dozen countries including India, Russia and the United States.
Beijing has said repeatedly that it opposes the new European Union plan, which was imposed with effect from January 1, and which Chinese state media have warned would lead to a “trade war” in the sector…
