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Peak oil, prices & supplies - Jan 1

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Many more articles are available through the Energy Bulletinhomepage


Gazprom Set to Halt Gas to Ukraine

Andrew E. Kramer, New York Times
Negotiations over gas prices between Russia and Ukraine unraveled Wednesday and executives at Gazprom, the Russian natural gas monopoly, said they were preparing to halt supplies early Thursday morning.

If they do, customers in Western Europe will see shortages as the same pipelines in Ukraine are used for export and internal distribution. It is a problem that has bedeviled Europe’s energy supplies from Russia for years.

How quickly Western Europe would feel a shortage of natural gas was unclear, and would depend on the scale and duration of any Russian embargo of Ukraine. The fuel is used for heating and to generate electricity, and winter is the period of peak demand.

As in the past, the dispute blends political and economic grievances.
(31 December 2008)
At Bloomberg: Russia Will Halt Gas to Ukraine as Talks Fail to Solve Dispute



For Big Oil, a Day of Reckoning

Steve LeVine, Business Week
,,, focusing for now on oil companies big and small, matters are about to get worse. As others are pointing out, that will become clear in just a few days — on Dec. 31 to be precise. One might call it the day of reckoning. The Wall Street Journal’s Ben Casselman was ahead of the pack in writing about this.

But what these reports aren’t pointing out is that, if projections are anywhere near correct, this isn’t a one-year matter. The companies may be in for trouble for at least the next couple of years. (After alarming the skittish market in the summer by forecasting $200-a-barrel oil, Goldman Sachs is now predicting average $45-a-barrel oil next year. The World Bank expects an average of $75 a barrel oil over the next two years.)

Here’s why: It’s the price of oil on Dec. 31 that all oil companies — at least those that sell shares to the public — must use as a measuring stick of just just how much in the way of proven oil and gas reserves they own. The most important factor in this calibration is how much it costs a company to drill a barrel of oil in, say, Canada, or the Gulf of Mexico. If they cannot drill that barrel economically at $40 a barrel (presuming that’s about the price the day after tomorrow), it must be stricken from the books. Along with that number, the companies report their so-called “reserve replacement” — to what degree they managed to replenish the oil and natural gas they drilled during the year.

Those numbers must be reported to the Securities and Exchange Commission on a company’s 10-K statement. That’s where the trouble begins: When the companies go public with their reports in February and March, Wall Street will use the numbers to help calculate how much their share price is worth; and banks and venture capitalists will do the same to determine whether to lend to oil drillers in this tight financial environment, and if so at what interest rate.

Lee Fuller, vice president of government relations for the Independent Petroleum Association of America, says that credit is the key issue for the independent producers whom he represents. “To the degree you are getting credit, you are getting it [as a function of] your resource base,” Fuller said in an interview. When that base is much lower, he said, “you are vulnerable to someone coming in and taking you over.”

An Exxon spokesman said the company declines to comment. But credit isn’t going to be an issue for Exxon and most of the other Big Oil companies — Exxon for example has more than $36 billion in cash on hand. Rather, for the half-dozen mega-majors, the issue is going to be justifying their share price to Wall Street when a chief component of their asset base has dropped considerably.
(28 December 2008)



Top Story of the Year: Global Oil Production Peaked in 2008

Clifford J. Wirth, Ph.D., Surviving Peak Oil, Preparations, and Relocation
Top Story of the Year: Global Oil Production Peaked in 2008
The top story of the year is that global crude oil production peaked in 2008.

The media, governments, world leaders, and public should focus on this issue.

Global crude oil production had been rising briskly until 2004, then plateaued for four years. Because oil producers were extracting at maximum effort to profit from high oil prices, this plateau is a clear indication of Peak Oil.

Then in July and August of 2008 while oil prices were still very high, global crude oil production fell nearly one million barrels per day, clear evidence of Peak Oil (See Rembrandt Koppelaar, Editor of "Oil Watch Monthly," page 1). Peak Oil is now.

Credit for accurate Peak Oil predictions (within a few years) goes to the following (projected year for peak given in parentheses):

* Association for the Study of Peak Oil (2007)
* Rembrandt Koppelaar, Editor of “Oil Watch Monthly” (2008)
* Tony Eriksen, Oil stock analyst and Samuel Foucher, oil analyst (2008)
* Matthew Simmons, Energy investment banker, (2007)
* T. Boone Pickens, Oil and gas investor (2007)
* U.S. Army Corps of Engineers (2005)
* Kenneth S. Deffeyes, Princeton professor and retired shell geologist (2005)
* Sam Sam Bakhtiari, Retired Iranian National Oil Company geologist (2005)
* Chris Skrebowski, Editor of “Petroleum Review” (2010)
* Sadad Al Husseini, former head of production and exploration, Saudi Aramco (2008)
* Energy Watch Group in Germany (2006)

Oil production will now begin to decline terminally.

Within a year, it is likely that oil prices will skyrocket as supply falls below demand. OPEC cuts could exacerbate the gap between supply and demand and drive prices even higher.

Cliff Wirth is a policy analyst who writes and speaks about Peak Oil impacts, alternatives, survival, preparations, and relocation. He holds a Ph.D. in Policy Analysis and a Master of Public Administration (MPA) degree and taught policy analysis, energy policy, public administration, global urban politics, and Mexican politics at the University of New Hampshire for 27 years.
(30 December 2008)



CAPP'S Crude Oil Forecast December 2008 Interim Update

Canadian Association of Petroleum Producers
Key Points ...

  • Clearly now on our Moderate Growth (base case) path

    • not on the higher Pipeline Planning path
  • Even the June 2008 Moderate Growth case is reduced
    • Still growing but at a slower pace

    • Minimal change in the first five years 2008-2012 period
    • Up to 300,000 barrels per day less in 2012-2017 period
  • Deferrals in upgrader projects means more heavy blend and less upgraded light produced
  • Defferals are intended to bridge the current high level of uncertainty (financial & credit crunch, cost, price, policy)

(11 December 2008)
EB contributor writes; "Nice presentation that shows earlier Oil Sands projections will not be met."

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