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National Oil Firms Take Bigger Role
Governments Hold Most of World’s Reserves
Justin Blum. Washington Post
As the world’s thirst for oil increases, government-controlled national oil companies are challenging international firms such as Royal Dutch Shell PLC and Chevron Corp. in the global competition for oil reserves.
National oil companies are increasingly venturing beyond their home country’s borders in search of reserves. The governments’ motives are varied, but in cases such as China and India, they are seeking more secure oil supplies to meet the needs of their fast-growing economies.
One of China’s government-controlled oil companies, Cnooc Ltd., yesterday withdrew from a bidding war with Chevron to acquire California-based Unocal Corp., which holds reserves of oil and natural gas in Asia, the United States and elsewhere. Although Cnooc pulled out in part due to political pressures in Washington, its aggressive bid underscores the more assertive presence of state-controlled oil firms on the world stage.
About 77 percent of the world’s 1.1 trillion barrels in proven oil reserves is controlled by governments that significantly restrict access to international companies, according to PFC Energy, an industry consulting firm in Washington.
…Several years ago, when oil prices and demand were lower, international oil companies had the upper hand when negotiating with governments controlling access to reserves, analysts said. But with global oil demand now soaring and prices surpassing $60 a barrel, countries holding vast reserves have gained a stronger negotiating position with international oil companies that want to operate in their territory.
“The international companies don’t run the business anymore,” said J. Robinson West, chairman of PFC Energy. “The rulemakers are now the national oil companies. They drive the business.”
(2 August 2005)
ECONOBLOG: Drilling for Broke?
Experts Debate ‘Peak Oil’
James Hamilton and Robert Kaufmann, Wall Street Journal Online
Are we nearing a peak in global oil production?
Soaring demand for oil in the U.S. and in booming economies like China and India has led to increased watchfulness about inventory levels among traders. At the same time, oil companies are scrambling to find new sources for crude, while investors ask more questions about firms’ proven reserves.
Amid all this, oil prices have been racing to nominal highs. Benchmark crude soared to a new intraday record of $62.30 a barrel on Monday after the death of Saudi Arabia’s King Fahd and settled at a new closing high of $61.89 on the New York Mercantile Exchange Tuesday as gasoline futures prices soared.
WSJ.com asked economist blogger James Hamilton of the University of California at San Diego and Robert Kaufmann of Boston University’s Center for Energy & Environmental Studies to take a closer look at the notion of “peak oil” and explore the economic ramifications of a drop in oil production.
(3 August 2005)
Recommended by The Oil Drum (see next entry). An abridged aversion of this discussion appears on James Hamilton’s Econobrowser
Update: Dave Roberts in Gristmill has commentary.
Oil depletions are not created equal
Heading out, The Oil Drum
…This brings the discussion back to depletion, on which I quoted Skrebowski , who used an average depletion rate of 5%, with other sources using 7% for a well in depletion.
These are averages used until now to estimate how long fields will last, and how much new oil is needed to replace such losses in a market where supply exceeded demand. This average held up, where conventional methods of oil removal (primary recovery using vertical wells, then secondary and tertiary recovery) were used. However, there has been a recent change in the way oil was recovered, initially in the Middle East. Rather than get the oil out in a three-step process, as horizontal drilling came into favor, it was combined with the concurrent injection of water below the oil layer to maintain reservoir pressure and more rapidly recover the oil. (For a sectional view of such a field in late development see here , and for a greater discussion here).
The method was very successful and has been adopted in other countries, and in the North Sea, as a way of getting more oil out faster. But here is the rub, because of the success in producing the oil, when the field depletes it drops at a much faster rate.
(2 August 2005)
The Four Great Challenges
Stirling Newberry, The Blogging of the President
I’ve been thinking a great deal about the 22nd Century, for the simple reason that we are now at the end of the age of petroleum, and over the course of the next generation, we will be experiencing a change in our political economy as important as the change from coal to oil was.
There are going to be four great challenges that dominate this century, which must be met and managed, or the result will spiral into war, depression and disaster. We have not been facing these challenges, simply because there has been a pervasive belief that if we just engaged in “business as usual”, everything could be fixed…
1. The End of Extraction
…But oil is just the beginning, in almost every other area of natural resource, the easy extraction is almost over. This includes mineral wealth, and it includes arable land and water…
2. The Collapse of Corporate-Capitalist Socialism
…Thus was born corporate-capitalist socialism. Large corporations bought peace in return for pensions, health insurance and other benefits. … With the death of extraction, means a flood of people into the affluent system. With the death of extraction, in short, comes the end of the reliable labor shortage which drove higher living standards.
3. The Death of Information
For the last 50 years, information has been king. Whether it was code cracking and the atomic bomb, information about where the oil was, or knowing what the government was going to push next – one of the surest roads to victory was having the inside edge.
But information is based on the first two things – one is extraction, in particular knowing what was going to get extracted next – and the other is that there are large, relatively less nimble, organizations that control the economy. Thus it was possible for small players to engage in a land rush, and hope the big players would buy them out.
…But now, paradoxically, two trends are permanent. One is that information processing – both computers and people – is getting incredibly cheap. The other is that the value of the information is getting less and less. There’s not only an infoglut now, there is also info-exhaustion.
4. The Labor Arbitrage Ocean
This is the culminating reality. The one that keeps Chinese party leaders up at night, just as much as it worries everyone whose job is going to China. You see, while it is possible to push 300 million of China’s 1.2 billion into the affluent life style with current supplies of energy and resources, and probably about 150 million of India’s 1 billion, there it stops.
There will still be a wave, an ocean wave, of cheap labor. And already people in Shanghai are worried about what happens when the interior wants jobs. This ocean of labor doesn’t stop there, there are hundreds of millions more in Africa and South Asia… [to be continued Monday] (4 August 2005)
Cross-posted at Daily Kos. Commentary at Mobjectivist.
Leadership, Activism, Mancur Olson, Groups, Localism, and Conferences…
Prof. Goose, The Oil Drum
I’ve been doing a lot of thinking about activism these days…and the best ways to focus that activism to bring about a soft landing for our society in the face of the problems of peak oil. Individual action is all well-and-good, and we can conserve…but it is only going to be when we bring unified voices to bear on policy-makers that tangible changes are going to be made. How do we best do that? There are ideas floating around for courses of action such as demand destruction through tax increases and Heinberg’s plan…but how do we get government(s) to discuss the problems and implement solutions.
There are the obvious courses of action, of course. These being contacting your elected representatives, city planners, resource specialists, and the like…one, just to make them aware, and two, to see if anything has been pondered. (I have done some of that…and as I will post next week, the discussions have been interesting, but really only of any worth at the city and county level. But, I’ll spend more time on that next week…).
(3 August 2005)
Public Peak Oil debate in Canberra
On Wednesday August 10, there will be a public debate on Peak Oil, sponsored by the Federal Department of Transport and Regional Services. DTRS spokesperson Lyn Martin will be presenting a draft of the paper: “Is the world running out of oil? A review of the debate”.
Description: The doubling of world oil prices over the past two years has revived concerns that the world is running out of oil. The issue is of particular relevance to transport as it currently faces few viable alternative sources of energy. BTRE Working Paper 61 aims at dispassionately examining both sides of what is often a highly emotive debate. The key issues are reviewed and the policy implications are discussed, with the surprising conclusion that the “first best” policy making could see the two opposing camps quite closely aligned.
Presenter: Lyn Martin
Date: Wednesday 10 August
Begins: 2:30 PM
Ends: 3:30 PM
(tea and coffee available at end of presentation)
Location: Johnson Auditorium, Pilgrim House, 69 Northbourne Avenue, Canberra
RSVP: Lynnette Philip ext 7818 (+612 6274 7818 external) or [email protected]
(2 August 2005)
Delighting in Energy Poverty
Tim Wood, Resource Investor
MIAMI (ResourceInvestor.com) — Paul Mobbs has written an earnest pamphlet-cum-text book that successfully commingles Peak Oil, climate change, thermodynamic absolutes, and a lot of half-baked politics.
Don’t get us wrong. Energy Beyond Oil belongs on serious reading lists, though its “100% post-consumer recycled paper” won’t wear well if you share the book. The book does read quickly despite the density of the subject matter, which is ironic because I got done with it in about 5 hours in the course of 8 hours of flying in a carbon dioxide liberating machine, otherwise known as a jet airliner.
Mobbs has a gift for lucid distillation of technical subjects which makes his book valuable as a primer on energy; from geology to the formulae for establishing your wind farm (less is more – a cluster of small wind turbines produces more energy than a cluster of large ones though a large one has a better return on investment).
The book does a fine job laying out the case for the imminent decline of traditional energy sources, and more or less succeeds in demonstrating that it is improbable that we can maintain current per capita energy consumption, never mind expect China and India to mimic the US or Europe.
(2 August 2005)
Politics and Economics
Chinese ministry cites crude import needs
China’s demand for crude oil will outstrip domestic supply by some 130 million tonnes in 2005
Eric Watkins, Oil andGas Journal
China’s Ministry of Commerce predicted that the country’s crude oil output would increase by 3% this year to 180 million tonnes but that demand would rise by 6% to 310 million tonnes. Imports will have to fill demand not met by domestic production.
The ministry said demand for refined oil will rise by 5% to more than 230 million tonnes. Within that total, the demand for gasoline will increase by 4% to more than 54 million tonnes, while diesel oil will rise 6.5% to 110 million tonnes, and fuel oil will increase by 5% to 54 million tonnes.
(3 August 2005)
Oil at heart of renewed UAE-Saudi border dispute
Janes Defense Weekly
The United Arab Emirates (UAE) has rekindled a long-standing territorial dispute with Saudi Arabia in a bid to grab a share of a giant border oilfield that contains nearly 1.5 per cent of the world’s total crude resources.
Just eight months after the death of Sheikh Zayid bin Sultan al-Nahyan, its pragmatic leader and founder, the UAE surprisingly declared that a 31-year-old border pact with its giant neighbour was no longer in force. While analysts rule out a military confrontation, they acknowledge that such a declaration by a top royal figure could harm relations and increase tension between the two Gulf oil heavyweights.
At the heart of the dispute is the giant Shaybah oilfield. Discovered in 1968, the field straddles the UAE-Saudi border and is believed to be one of the world’s largest onshore oilfields, with current estimated proven reserves of 15.7 billion barrels.
Up until 25 December 2003, the field had yielded one billion barrels, however oil industry sources believe its recoverable oil potential could rise to 18 billion barrels in a few years with the deployment of new technology, such as horizontal drilling. Besides oil, the field contains in excess of 25 trillion cubic feet of associated gas, almost equivalent to Oman’s total gas reserves.
(2 August 2005)
Washington opposition forces Chinese to withdraw oil offer
David Teather, Guardian
The Chinese energy firm Cnooc yesterday abandoned its $18.5bn (£10.5bn) bid for US oil and gas firm Unocal, citing “unprecedented political opposition” from Washington.
The bid by Cnooc, which is 71% owned by the Chinese government, sparked a furious outcry in Washington where politicians denounced the offer as a threat to national security.
(3 August 2005)
CNOOC Withdraws $18.5-Billion Bid for Unocal
Jesus Sanchez, LA Times
Chinese energy company CNOOC Ltd. today pulled out of the running for Unocal Corp. after its $18.5-billion bid for the California oil company triggered a U.S. political backlash against China.
“This political environment has made it very difficult for us to accurately assess our chance of success, creating a level of uncertainty that presents an unacceptable risk to our ability to secure this transaction,” CNOOC said in a statement. “Accordingly, we are reluctantly abandoning our higher offer to the clear disadvantage of Unocal shareholders and employees.”
(2 August 2005)
Oil politics may not dissipate: China-U.S. relations further strained
Michael Liedtke. The Associated Press via Seattle Times
SAN FRANCISCO – By the time it was resolved yesterday, the battle to buy Unocal had become more than a takeover tussle pitting Chevron, the second-largest U.S. oil company, against CNOOC, China’s third-largest oil concern.
The showdown also underscored the stewing tensions between the United States and China, a pair of international powers whose fortunes are becoming increasingly intertwined despite their vast cultural, economic and governmental differences
(3 August 2005)
Don’t rock the boat with fuel rise, plea
Hundreds of West Midlands marine firms believe they will struggle to stay afloat if the European Union sticks to a plan to more than double the cost of boat fuel.
Boat builders, waterside holiday businesses, and marinas fear the EU’s plan to increase the price of their fuel from 40p to £1.05 a litre by the end of next year would paralyse the region’s leisure marine industry.
Some 162 managers of the 300 marine companies in the West Midlands would consider abandoning their businesses if the fuel rise went ahead, according to research by the Royal Yachting Association and the British Marine Federation.
(2 August 2005)