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Schlumberger CEO: energy prices to stay high on demand

Citing the political weakness of energy conservation efforts, the chief executive officer of Schlumberger Ltd. (SLB) said Monday he saw little in the offing to quell the bullish energy market.

Despite high energy prices, world oil demand rose by 1.3% in 2005, a level made possible by the relatively ineffectual push for energy conservation by consuming nations, said Andrew Gould CEO of the oil services firm.

“Economies in the OECD countries proved remarkably resilient to high oil prices,” Gould said in the kickoff speech at the Howard Weil conference. “Governments everywhere recognize the need for energy conservation, but in general do not seem ready to assume the political consequences of serious energy conservation policies.”
(20 March 2006)

New Zealand – Running out of gas and time

Andrew Janes,
Will New Zealand need soon to turn to imported Ing, coal or wind power to run its industry?
In the hunt to find more natural gas, time is running out.

It’s running out not only for the exploration companies hoping to find another Maui-sized field but also for the main electricity generators faced with a decision about whether to import liquefied natural gas.

And it may also be running out for leading electricity and gas consumers staring down the barrel of much higher prices in a post-Maui world.

Assuming there are no big gas finds in the next two to three years, the shortfall will start to bite from as early as 2010. At present, gas provides 24 per cent of New Zealand’s primary energy, about half of which is used to generate electricity.

According to an Economic Development Ministry briefing last year to incoming Energy Minister David Parker, the wind-down of Maui and yearly electricity demand growth of 2 per cent will result in a gap between supply and demand. This is likely to emerge between 2010 and 2014.

The timing and severity of the shortfall will depend on how quickly Maui fades out, says the ministry’s deputy secretary of resources and networks, David Smol.

So what will replace natural gas?

Imported liquefied or compressed natural gas, greater use of coal and a lot more wind farms are the three most likely options. But all have cost and environmental drawbacks.
(20 March 2006)

Ethanol industry braces for growing pains

Associated Press via MSN Money
… The ethanol industry might not be ready to satisfy the expected summertime jump in demand. And by crimping the overall supply of motor fuel, this could contribute to a spike in gasoline pump prices at the start of the country’s peak driving season.

That, at least, is the view of the Energy Department, which issued a report last month detailing the challenges midwestern ethanol producers will have in getting their fuel to key markets along the East Coast because of railroad, trucking and other distribution bottlenecks. The report also highlighted concerns about the limited output capacity of an industry still in its infancy.
(20 March 2006)

Sugar, not oil or stocks, may be best investment

Saijel Kishan and Carlos Caminada, Bloomberg
Sugar, the best-performing commodity the past 12 months, may beat bonds, stocks and oil for a second straight year.

“Sugar could quadruple from here and it would still be below its all-time high,” said former George Soros partner James Rogers, 63, who founded Lausanne, Switzerland-based Diapason Commodities Management SA, which oversees $3.5 billion. “The rally hasn’t even started yet. And the fundamentals are changing dramatically in a positive way.”

Prices are soaring as record gasoline costs prompt Brazil, the world’s biggest sugar producer, to devote more than half of its crop to ethanol production to meet a goal of eliminating gas-fueled cars in four years. A drought in Thailand, the second-biggest exporter, and a 50 percent rise in Chinese sugar demand the past decade are compounding the supply squeeze.
(20 March 2006)

Deep pockets in Gulf of Mexico
Flush with profits, companies spend billions to hunt for crude and drill more wells

David R. Baker, SF Chronicle
…Oil companies flush with the largest profits in their corporate lives — $36.1 billion for Exxon Mobil last year, $14.1 billion for Chevron — are spending billions to hunt for crude oil and drill more wells in the gulf, even as they struggle to repair what the hurricanes smashed.

In the search for oil, they are pushing to the edge of what is possible, exploring ever farther from shore and drilling deeper than before. Technological improvements let the oil companies bore wells 30,000 feet down. And with crude oil prices doubling in the last three years, projects that didn’t make financial sense in the past now do.

The companies need the oil. Asia’s hard-charging economies have strained supplies, and worldwide production has struggled to keep up. In most of the United States, including Alaska, oil production has dwindled for years.

But it has surged in the gulf, rising roughly 70 percent in the last decade. In 2004, the last year for which complete government statistics are available, the gulf produced about 531.9 million barrels of oil compared with 313.8 million 10 years earlier. In 2003, before Hurricane Ivan damaged rigs and undersea pipelines, production was even higher, 569.1 million barrels.

The gulf produces more than any other oil patch in the nation, even though its 4.1 billion barrels of proven reserves rank behind those in Alaska and Texas. And, compared with Saudi Arabia’s 261.9 billion barrels in reserves, it’s a mere pittance.
(19 March 2006)
Related sidebar to the above article: Royalty waiver on some oil has lawmakers blowing their tops:

Oil companies have an added incentive to drill in the Gulf of Mexico — they don’t have to pay royalties on some of what they produce there.

The federal government decided 10 years ago to waive some royalties for companies pumping oil in the gulf’s deep water, a perk designed to encourage exploration during an era of low oil prices.

Gov.’s plan divides oil firms
Schwarzenegger’s initiative to reduce greenhouse gases has set off a culture clash between European and U.S. producers

Marc Lifsher, LA Times
SACRAMENTO — Gov. Arnold Schwarzenegger’s pledge to fight global warming has opened a rift as wide as the Atlantic Ocean between two groups of oil companies in California.

The governor’s high-profile initiative, which sets firm targets to reduce the greenhouse gas pollution that contributes to global warming, is supported by BP, the London-based oil giant whose Arco gasoline is the state’s biggest seller, and Royal Dutch Shell of the Hague, Netherlands, owner of the Shell brand.

U.S. companies such as Chevron Corp. of San Ramon, Calif., and Exxon Mobil Corp. of Irving, Texas, oppose the directive. In private, the Americans, who generally bristle at state intervention in the market, snidely refer to their transatlantic cousins as “the Europeans,” who have adapted to a culture back home of stiff government regulation, expensive social welfare networks and heavy taxes.

The greenhouse gas clash, which is just beginning to build momentum, marks a rare dispute among the large petroleum companies that give millions of dollars a year in political contributions. The row threatens to weaken the industry’s legendary unity in lobbying on air quality rules, gasoline taxes and highway funding.
(20 March 2006)