Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.
Nervousness about the mounting political turmoil in Egypt kept Brent blend above $100/barrel this week. There is concern not only about oil deliveries through the Suez Canal and the Sumed pipeline, but also the wider context. Similar protests have forced Jordan’s King Abduallah to replace his government and President Ali Abdullah Saleh of Yemen to say he will not stand for re-election in 2013. As the demonstrations gather momentum it looks as if major political changes are afoot across the region, with unpredictable impacts on the geopolitics of oil and gas supply.
The rising price of Brent has stretched the persistent differential with WTI to more than $10 per barrel, as high stocks at Cushing, Oklahoma, depress the US benchmark. The tanks there are brimming because of the sluggish US economy, and increasing supply of crude from the Canadian tar sands. A debate about whether the government should approve the proposed Keystone pipeline, to bring in yet more oil from Canada, is hotting up and adding to the political polarisation around energy policy.
The ups and downs of big oil were evident again this week as the supermajors announced their 2010 results. Royal Dutch Shell reported profits almost doubled to $18.6bn as a result of the surging oil price, but BP’s woes continued as it posted its first loss in 19 years because of the costs of the Deepwater Horizon disaster. BP faces more trouble in Russia as TNK-BP won an injunction holding up its new Arctic drilling partnership with Rosneft, and the company continues to provide a case study in the risks oil companies are forced to take as access to resources becomes more difficult.
BP also was under pressure at home this week, cautioned by the UK Health & Safety Executive for not carrying out sufficient safety checks on North Sea rigs. So too was Statoil , which announced that 50 wells at its Gullfaks field will be shut in for another two years following a major emergency last year. The company has been roundly criticised by Norway’s Petroleum Safety Authority, and admitted it “could have been clearer” in its dealings with the watchdog.
Against this backdrop European leaders gather today for the first EU energy summit. Energy Commissioner Guenther Oettinger will use the meeting to call for greater co-ordination of member states’ energy policies to provide a more predictable market for investment. The announcement this week of a feasibility study for an electricity interconnector between Scotland and Norway should provide encouragement. A report from WWF and Ecofys released to coincide with the meeting claims that with the right policies and incentives renewables could meet 95% of energy demand by 2050.
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Oil
Egyptian Riots Add Pressure on OPEC With $100 Oil
OPEC is under pressure from consumers to boost supply as most of the world’s benchmark crudes surpass $100 a barrel amid political unrest in North Africa and the Middle East.
Oil prices are high enough to “derail” the global economic recovery, Fatih Birol of the International Energy Agency said this week. Saudi Arabian Oil Minister Ali al-Naimi said last week prices nearer $75 would be “appropriate.” Goldman Sachs Group Inc. says the Organization of Petroleum Exporting Countries has already raised output…
Let’s get real: cheap oil is never coming back
Oil is back up above $100 again — a level which, coupled with a none-too-strong pound and yet more tax increases, has pushed the price of fuel at the pumps to record levels. The immediate trigger for this rise has been political: the unrest first in Tunisia, now in Egypt and maybe too in Jordan.
But this reaction is not really about politics; it is about economics. In a tight oil market, any possibility of disruption to supply has a disproportionate impact on the price. Though neither Tunisia nor Egypt are significant oil producers themselves, they have set in motion concerns about wider regional instability — and that in turn should remind us that the world is tremendously dependent on the Middle East and will almost certainly become more so over the next couple of decades. And this is not just about oil; it is about the price of energy and raw materials for the next generation…
Shell makes nearly £1.6m profits every hour
Shell stoked up the heated debate about the high cost of fuel on the forecourt today after reporting it made profits of nearly £1.6m an hour over the last three months.
The oil group never gives details of its British forecourt sales but it confirmed today that global profits from all sides of the business rocketed to $5.7bn (£3.5bn) in the last three months compared of 2010 with $1.2bn a year ago…
BP says it may have to pay to settle dispute with Russian partners as it resumes dividend, posts $4.9bn loss
BP, which has resumed its dividend despite posting its first loss since 1992, has acknowledged it may have to pay its billionaire Russian partners to resolve a dispute over its Arctic exploration deal with state-controlled Rosneft.
Bob Dudley, the oil group’s chief executive, said: “I’m sure we will reach a good business resolution. It may be a financial or strategic direction. I think it will resolve itself.”…
TNK-BP billionaires ‘not interested in compensation to end BP battle’
The businessmen, known as Alfa Access Renova (AAR), own half of BP’s Russian operations through a joint venture called TNK-BP.
They argue that BP’s flagship deal to explore the Arctic and swap £5bn of shares with Rosneft, the Russian state oil giant, violates an earlier agreement. They have already won a court order temporarily halting all further negotiations between BP and Rosneft…
BP cautioned over lack of safety checks on North Sea oil rigs
It is the latest in a series of cautions issued to the oil giant, which suffered an accident in the Gulf of Mexico that killed 11 men last April.
The Health and Safety Executive (HSE) has now given the British energy major until May to improve safety at the Clair, Schiehallion and Eastern Trough Area Project wells…
Statoil curbs output over safety fears
Statoil has warned output from one of its most important North Sea oilfields will be restricted for two more years over safety concerns.
The Norwegian energy group said it had shut 50 wells at its Gullfaks field after a serious incident last year when regulators said only luck saved the North Sea from a major disaster…
Investors warn over deep water drilling risks
Oil companies operating in deep water must do much more to reassure shareholders that they are not taking excessive risks that could put them out of business, representatives of investors with $2,500bn under management have warned…
In an Oil Price Gap, the Scent of Tar Sands
In case you haven’t noticed, oil prices in the United States differ from those in the rest of the world. Usually the variance is just a few dollars, but over the last few weeks the difference between West Texas Intermediate prices and Brent crude, which is sourced in Europe’s North Sea, has widened to about $10.
That means that while Americans are buying oil at just over $90 a barrel, the price Europeans and Asians are paying is already over $100. And if the turmoil in Egypt spreads to its oil fields and the Suez Canal, a major transit point for European supplies, that spread could expand even more…
OPEC output hits two-year high in Jan, says survey
OPEC output has risen in January to the highest since December 2008, a Reuters survey found on Friday, suggesting oil prices near $100 a barrel have encouraged the group to pump more oil.
Any extra supply from the Organization of the Petroleum Exporting Countries is likely to be welcomed by consumer nations concerned about the impact of rising oil costs on inflation and economic growth…
US embassy cables: Is Saudi boom reaching its limits?
Cable dated:2007-09-19T15:24:00
C O N F I D E N T I A L SECTION 01 OF 03 RIYADH 001950
SIPDIS
SIPDIS
LONDON FOR TSOU
E.O. 12958: DECL: 09/19/2017
TAGS: ECON, EPET, PGOV, PREL, SA SUBJECT: TOO DARN HOT: SAUDI EP BOOM REACHING LIMITS?
Classified By: Consul General John S. Kincannon for reasons 1.4(b) and (d).
1. SUMMARY (C) With temperatures reaching 115 degrees, the Eastern Province of Saudi Arabia is both literally and metaphorically “too darn hot.” With vast investments being made in oil and petrochemical projects, post hears constant complaints of shortages of materials, qualified workers, and infrastructure. All of the residential compounds in the Eastern Province with adequate security have long waiting lists. Aramco’s CEO in a recent meeting with the CG admitted that one of his most pressing challenges is finding qualified engineers for all of Aramco’s new projects. This cable summarizes data suggesting that the enormous economic boom that the Eastern Province is witnessing may be approaching capacity limits. END SUMMARY…
Cnooc Pays $570 Million for Stake in Chesapeake Energy U.S. Shale Project
Cnooc Ltd., China’s largest offshore energy producer, agreed to pay $570 million in cash for a one- third stake in Chesapeake Energy Corp.’s Niobrara shale project, adding to its U.S. holdings in crude oil production.
The Chinese explorer also agreed to pay as much as $697 million, up to two-thirds of Chesapeake’s costs to drill and complete wells in the area, the companies said in a statement yesterday…
Gas
Gas Drilling Technique Is Labeled Violation
Oil and gas service companies injected tens of millions of gallons of diesel fuel into onshore wells in more than a dozen states from 2005 to 2009, Congressional investigators have charged. Those injections appear to have violated the Safe Water Drinking Act, the investigators said in a letter to the Environmental Protection Agency on Monday.
The diesel fuel was used by drillers as part of a contentious process known as hydraulic fracturing, or fracking, which involves the high-pressure injection of a mixture of water, sand and chemical additives — including diesel fuel — into rock formations deep underground. The process, which has opened up vast new deposits of natural gas to drilling, creates and props open fissures in the rock to ease the release of oil and gas…
Renewables
World Energy Can Be 95% Renewable by 2050, WWF Report Says
Almost all of the world’s demand for energy for electricity, transportation and heating could be met from renewable sources such as wind, solar and geothermal power by 2050, WWF International and Ecofys said.
The share of oil, coal, gas and nuclear power in the global energy mix could be whittled down to 5 percent over the next four decades, the two groups said today in an e-mailed report. Energy saving measures can cut total demand by 15 percent from 2005 levels even as the population, industrial output, freight and passenger travel rise, they said…
U.K. Wind Energy Jobs Surge 91 Percent, Study Says
Employment in the U.K. wind power industry has surged 91 percent in three years, the RenewableUK lobby group said today.
The number of people employed full-time in the large-scale onshore and offshore wind energy industry rose to about 9,200 in 2010 from 4,800 in 2007, RenewableUK said today in an e-mailed report. Belfast Harbour plans to create 300 full-time jobs in a 40-million pound ($65-million) project to build a new quay for use by Dong Energy A/S to assemble turbines and foundations, the port and wind farm operator said today in a separate statement…
Utilities to investigate Scotland-Norway energy cable
Plans for a giant subsea energy cable linking Scotland and Norway have been given a major boost after a group of utilities launched a new government-backed venture to investigate the proposals.
SSE Interconnector, a subsidiary of Scottish and Southern Energy signed a partnership agreement yesterday with Adger Energi, E-Co Energi and Lyse, and Sweden’s Vattenfall to examine the feasibility of installing an interconnector between the UK and Norway…
EU wind power construction slows, coal gains -EWEA
Construction of new wind farms slowed in Europe by about one tenth last year, while coal power construction gathered pace, the European Wind Energy Association (EWEA) said on Monday.
Newly installed wind power capacity was 9.3 gigawatts in 2010, compared to 10.5 gigawatts in 2009, the industry body said in a statement…
Biofuels
Draft EPA report: Biofuels threaten habitat, water quality
A draft Environmental Protection Agency report concludes that expanded production of renewable fuels like ethanol and biodiesel carries an array of ecological risks in the U.S. and other nations, and calls for improved policies to mitigate these harms.
The report is required under a 2007 energy law that vastly increased the national biofuels mandate but also called for new analysis of the ecological effects of expanded development…
UK
UK greenhouse gas emissions fall
The UK’s greenhouse gas emissions dropped by 8.7% in 2009, the latest available official figures showed today.
Carbon dioxide, the most common greenhouse gas, dropped by almost a 10th (9.8%) as the impacts of the recession hit electricity and fuel use across the economy…
Oil spike may force rate rise, Bank deputy warns
The Bank of England may be forced to raise interest rates if commodity prices continue to rise, the deputy governor, Charles Bean, has warned.
The official line from the Bank’s rate-setting Monetary Policy Committee (MPC), of which Mr Bean is a member, is that Britain’s economic recovery is too fragile to withstand a rise in interest rates. Inflation running at 3.7 per cent in December and set to go higher will come back down to the 2 per cent target in 2012, the Bank says…
Climate
Senators vow to strip Obama climate power
Conservative senators vowed Monday to strip President Barack Obama of his power to regulate greenhouse gases, in a move that would cripple US efforts on climate change if successful.
Eleven Republican senators introduced a bill that would stop the Environmental Protection Agency from regulating greenhouse gases, which scientists blame for global warming, without explicit approval by Congress…
EU spot carbon market re-opens, buyers shun it
The European Union’s spot carbon market re-opened on Friday after a three week closure, but no exchange trades were completed in the early morning as traders feared new revelations of stolen emissions permits.
The theft of permits worth at least 45 million euros had forced the EU executive Commission to close last month the electronic warehouses where permits are kept, called national registries…
US states take initiative on cap-and-trade
As Congress fights over whether or not to block the US Environmental Protection Agency from regulating carbon emissions, 23 states are moving ahead on one level or another to take climate legislation into their own hands and institute cap-and-trade schemes at the local level.
California’s is by far the most comprehensive state system being instituted, and cap-and-trade is to begin in the state in 2012. Indeed, Mary Nichols, chairwoman of the California Air Resources Board, the regulator responsible for implementing cap-and-trade, calls it the “capstone of our climate policy”…
Europe
‘Reducing CO2 Emissions Early Can Save Money in the Longer Term’
In an interview, EU Commissioner for Climate Action Connie Hedegaard discusses the upcoming energy summit in Brussels, the need for stronger energy efficiency regulations in Europe, the inevitable use of coal in the foreseeable future and plans for a low-carbon future.
SPIEGEL: European leaders will convene on Friday for a summit on a new European Union energy strategy. Is this yet another European meeting of big talk and little action, like previous announcements to become the most competitive region in the world?
Hedegaard: Well, I hope not. It should be used as an opportunity to tell the 500 million European citizens that we have to think about energy in a new way. It’s not just about new power lines or power plants, it’s more fundamentally about how we can save and how efficiently we can use energy. At the moment, we’re wasting a lot of highly valuable energy because our machines and systems are far from being as efficient as can be. So the summit should focus European research and innovation capacities on this…
EU exec wants green energy subsidies aligned, raised
The European Union’s energy chief called on member states to align their subsidies for green energy and ensure overall investment is doubled to 70 billion euros ($95 billion) a year to meet climate and energy security goals. Leaders meet on Friday aiming to reconcile an EU target of getting 20 percent of their energy from renewable sources by 2020 with a debt crisis that has pushed some countries to the financial brink.
Energy Commissioner Guenther Oettinger told reporters: “We have to consider the financing gap in the energy sector. In 2009, there was 35 billion euros invested in renewable energy. This will have to be doubled in a few years to 70 billion if we are to provide the low-carbon energy we need.”…
EU leaders to coordinate energy policies
EU Energy Commissioner Gunther Oettinger hopes the EU summit in Brussels on 4 February focusing on energy will “send a clear signal” of the EU’s intent to increase efforts to meet its energy efficiency targets.
Addressing a European Policy Centre breakfast on 25 January, he said he also hopes it will set a deadline for the removal of all technical barriers for the completion of a single market in energy…
Transport
Biofuels: Off into the wild, green yonder
SPOOKED by the spike in oil prices in 2008 and warily eyeing the latest spurt in fuel charges, airlines have noted that the costs of not going green are growing. In particular, they fret about the painful levies on carbon-spouting planes to be imposed under the European Union’s Emissions Trading Scheme (ETS). From 2012 all airlines operating in the EU will be expected to cut emissions to 3% below the average annual figure for the period between 2004 and 2006, and by a further 2 percentage points in 2013. Although most emissions allowances up to the cap will be allocated to airlines for free, 15% will have to be acquired in auctions. Any further emissions will require trading in additional permits…
Bus services at risk because of spending cuts
According to the Campaign for Better Transport, 70 per cent of local authorities are planning major cuts to their bus budgets.
In some parts of the country, passengers will see entire routes disappear, while elsewhere cut price travel for young people is being ditched…
