Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre at nef dedicated to raising awareness of peak oil.
This week saw further confirmation that all is not well in the shale gas industry as ExxonMobil CEO Rex Tillerson admitted “We are all losing our shirts today.”…”We’re making no money. It’s all in the red.” The news comes as little surprise since the price of production is estimated to be around $4-7/per million BTUs and prices have been languishing around $2. Exxon is however not giving up on gas — Tillerson described the biggest risk to the industry as “an illiterate public”. He will no doubt be less than pleased with the new publicly available lesson provided by Josh Fox, director of Gasland. Fox’s new documentary, The Sky is Pink, points to confidential industry documents which contradict assertions around fracking safety.
As oil prices continue to fall there are an increasing number of commentators anticipating that the rise of unconventional oil production is about to have the same effect on the oil market as it has had on US gas. A report released this week by an ex senior manager at Eni SpA, Leonardo Maugeri claims that the stage is set for an oil price crash due to an impending glut of oil. He projects a rise in global oil supply of 17.6mb/d by 2020 from a combination of unconventional sources and enhanced oil recovery from existing wells. The essence of the argument is that high oil prices have stimulated technology and investment such that supply could considerably outstrip demand in the coming period.
The speed at which shale oil production has ramped up in the US has taken even Mr Tillerson by surprise — nevertheless there is huge uncertainty about what can actually be produced — shale gas wells have shown extremely fast decline rates, which means that a huge amount of wells are required to offset decline. The cost of production of much new oil — deepwater, tar sands – is likely to be adversely affected by any significant price crash, and many OPEC countries have become reliant on $80+ prices for stability. In addition Maugeri’s projected conventional oilfield depletion rates are lower even than the ever bullish CERA. Overall the report is on message with the energy industry mantra that energy security is assured, but only if politicians clear the way for them to drill.
In the UK this week the government received considerable advice on the upcoming energy reform bill. Friends of the Earth released a report warning against gas dependence, while Consumer Focus, SSE, University of Exeter and WWF led on a communiqué urging a series of measures to strengthen the bill, including a greater emphasis on demand reduction, and a review of the planned contracts for difference CfDs (which are to replace ROCs). The signs are that elements of the forthcoming bill are being hard fought between No 11 Downing Street and DECC, which could result in significant changes. Tim Yeo chair of the Energy Select Committee showed some frustration with the Treasury this week for declining to come and defend the bill claiming that “It looks to me as though they don’t want to come because they would find the questions difficult to answer”. If one of those questions was on why they might want to further cut subsidies on windpower, then news that renewables hit record levels of electricity generation in Q1 wouldn’t be very helpful.
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Oil
Oil Rises From Nine-Month Low on Supply, Europe Measures
Oil rebounded from the lowest close in almost nine months in New York amid speculation a European Union embargo on Iran, OPEC’s second-largest exporter, and a strike in Norway will tighten crude supplies.
Futures increased as much as 2.9 percent, trimming the biggest quarterly decline since the final three months of 2008. Prices may advance after the EU’s ban on the purchase, transportation, financing and insurance of Iranian crude starts on July 1, a Bloomberg survey showed. Norway’s first industrywide strike by energy workers since 2004 entered its sixth day today. Oil extended gains after euro-area leaders announced measures aimed at stemming the region’s debt crisis…
Oil supply surge could risk price collapse: Harvard analysis
Global oil supplies are growing so fast that they could outstrip demand and lead to a collapse in world prices, a former energy executive who is now a Harvard research fellow said on Tuesday.
“Most analyses today are still marked by this obsession with oil running out,” Leonardo Maugeri, formerly a senior manager at Italy-based oil and gas giant Eni SpA (ENI.MI), said at a discussion at the Center for Strategic and International Studies think tank in Washington…
France criticised over oil drilling as environment minister removed
France’s new Socialist government has been accused of bowing to big business and the energy lobby after the environment minister was removed from her post following her order to freeze international oil exploration off the coast of French Guiana.
Shell, Europe’s biggest oil producer, and its partners including Total, have got the go-ahead to begin drilling at four sites off the coast of French Guiana, an overseas département on the north-east coast of South America. But their long-standing plans had been thrown into doubt earlier this month after the newly appointed French environment minister, Nicole Bricq, announced a suspension of oil-drilling permits, saying the Shell project “insufficiently … took into account environmental problems”. With Arnaud Montebourg, the French minister for re-industrialisation, she issued a statement saying: “We are very keen to protect marine life and the environment, and we have no guarantees regarding them.”…
City investors are getting cold feet about Arctic oil prospecting
Sir Paul McCartney and Greenpeace want to turn the Arctic into a no-go area for oil companies — but there are already signs that the City financial groups are getting cold feet about polar drilling.
Shell, which wants to lead the exploration charge off Alaska, has repeatedly declined to say what the potential cost of an oil spill would be, but some lenders are voting with their feet…
Exxon CEO: Fossil fuels will warm planet, but humans can adapt; drilling risks are overstated
ExxonMobil chief executive Rex Tillerson has said fears about climate change, drilling and energy dependence are overblown.
In a speech on Wednesday, Tillerson acknowledged that burning of fossil fuels is warming the planet, but said society will be able to adapt. The risks of oil and gas drilling are well understood and can be mitigated, he said. And dependence on other nations for oil is not a concern as long as access to supply is certain, he said…
Gas
Exxon: ‘Losing Our Shirts’ on Natural Gas
Even energy titan Exxon Mobil Corp. is showing signs of strain from low natural-gas prices.
On Wednesday Exxon Chief Executive Rex Tillerson broke from the previous company line that it wasn’t being hurt by natural gas prices, admitting that the Irving, Texas-based firm is among those hurting from the price slump…
Obama’s Interior chief: State regulation of fracking ‘not good enough for me’
Interior Secretary Ken Salazar is striking back at oil-and-gas companies that claim state-level regulation of “fracking” is strong enough to render federal rules that he’s crafting a pointless layer of red tape.
Reuters caught up with Salazar off the coast of Norway, where he’s on a visit to meet with industry officials and his Norwegian counterparts about offshore drilling safety practices…
Gazprom Biggest Loser As Shale Gas Upends World Markets
The natural-gas boom reshaping America is rocking Russia, where state producer OAO Gazprom (GAZP) is slow to react and at risk of becoming the world’s biggest loser from the new technology to drill shale rock.
The U.S. no longer needs Russia’s gas, leaving President Vladimir Putin fighting to salvage Gazprom’s $20 billion Shtokman project in the Arctic. China, the biggest energy consumer, is exploring its own shale reserves and hesitating to accept a pipeline from Russia. Gazprom’s shipments fell about 14 percent so far in 2012, and the stock has lost 9.6 percent…
BP safety back in spotlight as explosion kills worker in US
BP faces fresh scrutiny over its safety record after an explosion at a gas plant in America killed one worker and injured two more.
The blast at BP’s natural gas compression station in Colorado represents a setback for the company as it attempts to rebuild its reputation following the 2010 Gulf of Mexico disaster…
BP sells Wyoming gas fields for $1bn
BP has sold more than 250 gas wells in the US state of Wyoming for $1bn (£643m) as it continues to sell assets in the wake of the Gulf of Mexico disaster.
The wells in the Jonah and Pinedale fields in the east of the state have been purchased by LINN Energy, a Houston-based oil and gas explorer. The sale is expected to be completed by the end of next month…
Electricity
Risk of Greek blackouts increases as traders cut or halt power supplies
Power traders in at least four countries have reduced or halted electricity exports to Greece due to non-payments, helping to force market prices sharply higher in a potential blow to struggling industries and raising the risk of blackouts during the tourist season.
With Greece deep in crisis, power grid operator LAGHE owes foreign and domestic suppliers 3 27 million euros ($410 million), a court document obtained by Reuters showed, as its revenue falls due to the recession and a refusal by many Greeks to pay their bills…
Nuclear
Seismologists warn Japan against nuclear restart
Two prominent seismologists said on Tuesday that Japan is ignoring the safety lessons of last year’s Fukushima crisis and warned against restarting two reactors next month.
Japan has approved the restart of the two reactors at the Kansai Electric Power Ohi nuclear plant, northwest of Tokyo, despite mass public opposition…
Germany’s energy giants: Don’t mention the atom
WHEN Germany decided a year ago, after the Fukushima disaster, to phase out nuclear energy by 2022, economists were worried. Would the country be able to replace its 17 nuclear plants, which supplied 23% of its electricity in 2010, with renewable forms of energy? Would electricity prices go through the roof? Would the move endanger Germany’s industry?
It will be years before the answers are known for sure. But the Energiewende, as Germans call the energy U-turn, has already produced one certainty: the country’s four giant power companies, which were already compelled last year to shut eight of their nuclear plants for good, are among the big losers. And their fate may revive heretical thoughts of a reprieve for atomic power…
Biofuels
Biofuels caught in price squeeze
Rising crop costs are squeezing biofuel margins and may see production fall or stagnate in the United States for the first time since 1996, adding to challenges in Brazil and Europe.
A long-run correlation between U.S. corn and crude oil broke down this month, stemming from new fears for the world economy coupled with harsh conditions in key corn growing areas…
UK
‘Fracking’ safe with strong regulation, report says
A gas extraction method which triggered two earth tremors near Blackpool last year should not cause earthquakes or contaminate water but rules governing it will need tightening, experts say.
“Fracking” involves pumping water and chemicals into shale rock at pressure…
Ed Davey urged to take ‘foot off the gas’ and focus on renewables
The government will today be urged to “take its foot off the gas” and bolster efforts to increase supplies of renewable energy, in a new report warning ministers they will fuel further geopolitical and price uncertainty through their proposed electricity market reforms.
The report, to be published today by Friends of the Earth, aims to assess the role of gas in the UK’s future energy mix by examining how varying levels of demand would impact Britain’s energy security…
UK energy policy “not up to the job”, warn businesses
Government energy policy is failing to deliver the energy savings and growth in renewable generation necessary to meet the UK’s climate objectives and runs the risk of failing to capitalise on vital economic opportunities.
That is the view of energy companies, consumer organisations, academics, and investors, who participated in a series of roundtables organised by WWF, SSE, Consumer Focus, and the University of Exeter…
Treasury ministers ‘avoiding’ committee grilling over Energy Bill
The Treasury is refusing to testify to MPs about its crucial involvement in energy reforms because it wants to avoid difficult questions, Tim Yeo, the chair of the Energy Select Committee has claimed.
Mr Yeo’s committee is scrutinising the draft Energy Bill, which the Government wants to stimulate £110bn of investment in new power plants…
PM under pressure from own cabinet to boost green energy investment
Two Conservative cabinet members have asked the prime minister to do more to boost investment in low carbon energy and other green infrastructure.
The latest intervention comes after the foreign secretary, William Hague, urged David Cameron to provide more support to help green industries boost the economy, stop the UK falling behind international rivals, and avoid losing its global leadership on the environment…
Government reveals surge in UK renewable energy generation
Renewable energy generation during the first quarter of the year hit record levels, providing more than 11 per cent of electricity generation as output from wind farms, hydro-electric plants, and solar panels all soared.
The government today published its Energy Trends and Quarterly Energy Prices report confirming that output from all renewable sources, including renewable heat, reached 11.08TWh during the quarter, an increase of 39 per cent compared to the first quarter of 2010…
Government delays fuel duty hike until January
Chancellor George Osborne said on Tuesday he would freeze a planned rise in fuel duty this year to help reduce costs for businesses and families, yet another U-turn by a Conservative-led government struggling in opinion polls.
The Conservative-Liberal Democrat administration will be hoping the move helps it win back some favour after a poorly received March budget triggered a fierce backlash over unpopular tax rises, several of which were subsequently reversed…
Vestas scraps Kent offshore wind factory plan
The UK’s emerging offshore wind sector has been dealt a major blow, after Danish turbine manufacturer Vestas scrapped plans to build a factory in Kent that had been expected to create 2,000 jobs.
Vestas and the Port of Sheerness today issued a joint a statement announcing they had halted plans for the facility at a 70-hectare site where the manufacturer had planned to build its new 7MW V164 offshore wind turbines…
Plans for carbon-capture power station abandoned
Controversial plans to build a major coal-fired power station in Ayrshire using unproven “clean coal” technology have been abandoned, to the delight of environmental campaigners.
The developers, Ayrshire Power, blamed their unexpected decision to withdraw plans for a new 1852MW carbon-capture power station at Hunterston on the recession and anxieties about winning funding from the government and European commission…
Climate
EPA Greenhouse-Gas Rules Upheld By U.S. Appeals Court
The U.S. Environmental Protection Agency was “unambiguously correct” in moving to set limits on industrial and automotive emissions of greenhouse gases including carbon dioxide, a federal appeals court said.
A three-judge panel of the U.S. Court of Appeals in Washington ruled today that the EPA properly concluded that greenhouse gases are pollutants that endanger human health and that opponents don’t have the legal right to challenge rules determining when states and industries must comply with regulations curtailing emissions of them…
