Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre at nef dedicated to raising awareness of peak oil.
Oil prices rose this week as geopolitical tensions trumped economic concerns. The Syrian conflict, oil sanctions against Iran, and a suicide bombing of an Israeli tourist bus in Bulgaria, which Israel blamed on Iran, all added to fear of disruption in the region.
A paper from the G20 released this week suggested there might be other factors at work behind the oil price, claiming the market is vulnerable to being rigged like Libor. Maybe so, but the impact on the long term trend in the oil price can only be marginal. A recent paper from economists at the IMF found the only factor that explained the upward march since the turn of the century was the increasing difficulty of extracting oil. Also the cost of the marginal barrel has risen dramatically: tar sands producers require $90-plus for new projects, while Saudi Arabia and other Middle Eastern producers need over $100 to balance their budgets post Arab-spring.
Oil prices could soon slump, according to former Eni executive Leonardo Maugeri, who recently published a report predicting the oil market is about to enter a glut. In our July 6th newsletter ODAC published commentary from Steven Sorrell and Christophe McGlade debunking Maugeri’s work. Now, on further examination, they have found the errors appear even larger than they first thought; Maugeri’s implied decline rate is not 1.6% but 1.4%, in contrast to well-established estimates from the IEA and CERA of more than 4%. Replacing Maugeri’s rate with that of the IEA now entirely eliminates the increased oil supply he projected to 2020. See the updated commentary.
Shell’s controversial Arctic campaign got off to a rather sticky start this week as their drilling vessel slipped its anchor and apparently ran aground, which proved a godsend for Greenpeace’s Save the Arctic campaign. The organization recently launched a spoof website called arcticready.com, and this week its protests shut down 74 Shell petrol stations in Britain. Whether any of this will affect decisions on drilling remains to be seen.
Meanwhile in the UK the government remained at loggerheads about its plans to decarbonize the energy supply. The rumours are that Energy Secretary Ed Davey can’t get a meeting with the Treasury to decide on the level of cuts to onshore wind subsidies.
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Oil
Oil rises above $106 on Middle East tension
Oil rose above $106 a barrel on Thursday to hit a seven-week high as violence in Syria and an attack on Israeli tourists increased tension in the Middle East, bringing supply concerns back into focus.
The killing of top Syrian security chiefs on Wednesday, and the attack on Israeli tourists in Bulgaria, which Israel accused Iran of carrying out, worsened the crisis in the Middle East, the source of more than a quarter of the world’s oil…
Oil prices could be rigged by traders warns G20 report
A report commissioned by the G20 group of the world’s biggest economies has warned oil prices could be vulnerable to a Libor-style rigging scandal.
According to the International Organization of Securities Commissions (IOSCO), the current system of oil price reporting is “susceptible to manipulation or distortion.”…
Markets Beware: Hormuz Still Vital To Global Energy Balance
One of the things global energy analysts love debating is maritime choke points. A few years ago, a piracy ridden Malacca Straits was all the rage carrying up to 15mb/d of oil to Asia. The Bosphorus remained a ‘going concern’ in the Black Sea, even though the poor old Panama Canal was condemned to a footnote of history. The Suez Canal was fast approaching the same status until Egypt had its revolution, threatening the safe transit of 4.5mb/d to the Mediterranean – a development which propelled the Middle East back to the centre stage of maritime (in)security. Having shrugged off Somali piracy as a mild nuisance in the Gulf of Aden, state implosion in Yemen helped to focus analysts’ minds on the 3.5mb/d Bab Al Mandab, connecting the Gulf to the Red Sea. Important arteries for sure, but small beer compared to the mother of all choke points, the Strait of Hormuz, carrying the ‘life line’ of 17.5mb/d global oil supplies. Close that, and don’t even bother trying to put a price on oil…
Iran arrests oil export decline as China buys more
Iran is set to arrest a slide in oil shipments in July as China increases imports to a record high to amount to more than half Iran’s crude exports, an industry report said.
Iran’s oil exports are expected to average 1.084 million barrels a day in July, little changed from 1.094 million bpd in June, in what Geneva-based consultancy Petrologistics said was a preliminary report…
Major embarrassment for Shell as Arctic oil drilling ship slips its anchor and ends up ‘grounded’ in Alaska harbour
No damage has been found on a Shell oil drilling ship that lost its mooring and drifted into an Alaska harbour on Saturday, the Coast Guard has said.
Video captured by divers who examined the hull of the 571ft-long rig Noble Discoverer shows no signs of grounding, it is claimed…
Greenpeace activists shut down 74 UK Shell petrol stations
Greenpeace activists shut down 74 Shell petrol stations in Edinburgh and London in a protest against the company’s plans to drill for oil in the Arctic that saw 24 campaigners arrested on Monday.
The campaigners are attempting to shut off petrol to London’s 105 Shell stations and Edinburgh’s 14. Seventy-one have been closed in London and three in Edinburgh…
Power grid in sea reaches for new depths
Offshore operators racing to extract more oil from under deep waters have a vision of one day running wells remotely from land, reducing the need for multibillion dollar offshore production platforms.
That will take lots of electric power, though, and while the companies don’t have technology to generate electricity underwater, they are developing new ways to get it there from shore or from generators on the ocean’s surface…
Italy Seeks $18 Billion Investment Ditching Offshore Ban: Energy
Mario Monti’s government is trying to attract as much as $18 billion in investment to Italy by relaxing a ban on offshore oil and gas exploration imposed by Silvio Berlusconi after the 2010 Gulf of Mexico spill.
The premier, who must jump-start the economy to help stem Italy’s debt crisis, last month ruled that companies such as Eni SpA (ENI), Edison SpA (EDN) and Royal Dutch Shell Plc (RDSA) can resume shallow- water projects within 12 kilometers (7 miles) of the coast they were forced to abandon in 2010. The decree needs Parliamentary approval and the lower house is set to debate it July 23…
Electricity
Germany May Scrap Energy-Source Goal As Overhaul Stumbles
Chancellor Angela Merkel’s government said it may have to scrap some of its targets for shifting the source of its electricity supply, a move that would water down a commitment to bolster renewable energy in Europe’s biggest economy.
Economy Minister Philipp Roesler told today’s Bild newspaper that Germany may readjust targets linked to the plan to exit nuclear energy-generation by 2022 if jobs are threatened. The comments came a day after Environment Minister Peter Altmaier told Bild the coalition may fail to reach a goal to cut power consumption 10 percent by 2020. Merkel said July 14 that Germany probably won’t use carbon capture and storage facilities after passing the required bill in parliament…
Nuclear
Finland’s Olkiluoto 3 nuclear plant delayed again
The launch of a flagship nuclear power station in Finland has been delayed for a third time, officials say.
Finnish electricity company TVO says the Olkiluoto 3 plant will not be ready by the latest deadline of 2014 and a new timetable has not yet been set…
Emails reveal UK government’s moves to protect nuclear power from bad news
Government officials worked closely with two energy companies to soften the impact of a major blow to ministers’ plans for a new programme of nuclear power stations, internal emails reveal.
The revelation is further evidence of how Westminster has collaborated with the industry to try and protect nuclear power from bad news, first exposed by the Guardian in the aftermath of the Fukushima accident in Japan last year…
UK
CBI voices “mounting frustration” over delay to renewables subsidy decision
The CBI has joined the chorus of criticism over the government’s delay to a crucial decision on changes to renewable energy subsidies that had been expected yesterday.
The Department of Energy and Climate Change (DECC) had intended to announce changes to subsidies issued through the Renewables Obligation (RO) scheme before parliament broke up yesterday. But the department was forced to delay the decision because an agreement on the changes is still yet to be reached with the Treasury…
George Osborne in standoff over coalition’s green energy plans
George Osborne’s Treasury has refused to co-operate with a powerful committee of MPs preparing the coalition’s flagship plans for low-carbon, affordable energy in what is being seen as further evidence of the chancellor’s hostility to the green agenda, the Observer can reveal.
In an extraordinary standoff, the Treasury has refused to send a minister to answer the concerns of the cross-party energy and climate change select committee — prompting a furious response from the committee’s Tory chair, Tim Yeo. Further riling the body, which has been asked by ministers to scrutinise the draft energy bill for parliament, the junior Treasury minister, Chloe Smith, has subsequently even refused to answer a series of written questions, which MPs believe must be addressed if the plans to reform the electricity market are to become workable…
DONG Energy and Siemens ink offshore turbine mega-deal
Siemens’ plans for a new wind turbine manufacturing facility in the UK have taken a significant step forward, after the company announced it has inked a major new offshore-turbine supply deal with developer DONG energy.
The two companies have signed a framework agreement that will see Siemens supply 300 of its 6MW offshore turbines to offshore wind-farm projects planned by DONG for UK waters between 2014 and 2017…
Downing Street calls on regulator to investigate petrol price rigging
Allegations of oil price manipulation should be thoroughly investigated as millions of motorists rely on accurate petrol prices, Downing Street said today.
The Prime Minister’s spokesman said regulators should examine any evidence of oil price-fixing “very carefully”, after the Daily Telegraph revealed fears that banks and traders are likely to have fiddled the oil market…
People power: why we believe in championing community energy
Let’s face it, in the UK, we’re largely passive consumers of energy, subject to the vagaries of wholesale gas prices and large profit-making providers. But this state of affairs doesn’t necessarily have to endure or be endured. Is it not possible to conceive of a model where the relationship between people and energy is reconstituted, so that communities own, control and benefit from their own renewable energy projects? We at the Co-operative think it is, and the bar set by other European countries, such as Germany and Denmark, should be the goal for a revolution in energy ownership in this country.
The Co-operative conservatively estimates the UK potential for community-owned renewable energy to be a significant 3.5 gigawatts, the equivalent of three or four conventional power stations. Such potential could undoubtedly help the UK meet its stated energy and climate change goals (for example, reduce greenhouse gas emissions, improve energy security and competitiveness), but the benefits of community energy extend beyond this. It also offers significant local economic and social benefits, such as improved energy awareness and encouraging changes in individual consumption. Revitalised communities and increased public acceptance of renewable energy infrastructure are just some of the prizes of a community energy revolution…
Energy projects in frame as Treasury announces £50bn in loan guarantees
Low-carbon infrastructure projects could be eligible for a new £50bn package of government support, announced by chancellor George Osborne today as part of his efforts to boost the UK’s flagging economy.
The Treasury has launched a scheme called UK Guarantees, which will offer loan guarantees designed to kick start critical infrastructure projects that may have stalled because of adverse credit conditions…
