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.
Brent crude surged to $104 this week as anti-government protests spread to Libya and Bahrain, prompting a violent reaction from the authorities in both countries. 24 protesters are reported killed in Libya, and in Bahrain 4 have been killed and hundreds injured. Unlike Libya, Bahrain is not a significant oil producer, but there are fears that instability there could spread to its neighbour Saudi Arabia.
Anyone looking for reassurance of business as usual from the usually ebullient big oil companies was in for sobering news this week. Shell’s update to its 2008 Energy Scenarios forecast warns that the world faces an energy supply crunch. Meanwhile Exxon, like all the major oil companies, is struggling to replace its oil reserves: it has managed to replace only 95 of every 100 barrels produced over the last decade, and is increasingly forced to replace oil with gas. Meanwhile, as we reported last week, many analysts predict the North American shale gas bubble will soon burst.
In the face of growing evidence of oil supply constraints we were recently asked by one our readers to explain our position on when peak oil will occur. Why, he asked, since the BP Statistical Review shows oil production was lower in 2009 than 2008, did we not accept his view that the peak has already passed? Here’s our position:
Just because output was lower in 2009 than 2008 does not necessarily mean the fall was geologically imposed. We think oil production was lower in 2009 than 2008 because of lower demand caused by the recession, itself caused in part by the spike in the oil price to $147/barrel. That in turn appears to have been the result of an effective plateau from around 2005 to 2008. What’s more, output has risen strongly in 2010, rising by 2.8 million b/d in 2010 over 2009, and is forecast to rise by a further 1.5 million b/d this year (IEA – see http://omrpublic.iea.org/). In January this year, IEA figures, which are based on an all-liquids definition similar to the BP Stats, showed production at 88.5 mb/d, against 87.8 mb/d in July 2008. So already we are 700,000 b/d above the previous peak. Chris Skrebowski, ODAC trustee and independent forecaster, suggests the crunch will come in 2012/2013 at 92-94 mb/d. More generally we think that forecasting the precise date is now less important than preparing for the event. Whenever it comes, peak oil is far too close for comfort.
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Oil
Oil Rises in New York as Unrest in Mideast Fuels Supply Concern
Crude oil rose in New York, headed for its first weekly gain in three weeks, as escalating protests in Bahrain and Libya fueled concern that supplies from oil- producing nations may be disrupted.
Futures gained after protesters in Bahrain called for the fall of the government as unrest in the Middle East spread to Libya, where 20 were reported dead in clashes. Oil in New York also gained as the dollar declined against the euro, enhancing the appeal of commodities price in the U.S. currency…
The coming misery that Big Oil discusses behind closed doors
When big-thinkers at companies with the most skin in the energy game are behind closed doors and they discuss how the world really looks going forward, do they say that there are bumps in the road but that things will be fine, just fine, as they suggest publicly? Three years ago, we got a glimpse into the room when Royal Dutch/Shell issued a scenario forecasting the world in 2020. Based on current economic and energy-use patterns around the world, Shell said that energy supplies will be so tight that they will tip the world into a full-blown crisis in which governments will force their populations to reduce driving, use less electricity, and pay an extremely steep increase for what they do consume. There will be a massive, decade-long economic slowdown, and geopolitical power will shift dramatically to energy-producing nations, the company said.
Today, Shell returned with an update. The company said that the 2008 financial crisis interrupted the slide it predicted, but that the clock has begun ticking again. If the world does not change how it uses energy, its scenario will hold true…
Exxon Struggles To Find New Oil
Exxon Mobil Corp., the world’s largest publicly traded oil company, is struggling to find more oil.
In its closely watched annual financial report released Tuesday, the company said that for every 100 barrels it has pumped out of the earth over the past decade, it has replaced only 95…
High oil prices ‘here to stay’ says EU energy commissioner
High oil prices are here to stay, the European Union’s energy commissioner has warned. Guenther Oettinger said on Thursday that the lower prices of the past three years had been the result of the financial crisis and recession, and that companies should plan for higher prices.
“The oil price will not go back to $60 [a barrel],” as it did in 2008, Oettinger said. “As a normal perspective, you have to accept the oil price will be near to $90 a barrel or some more.”…
Iraq to auction 12 energy fields in 2011: ministry
Iraq will offer 12 oil and gas exploration sites later this year in a fourth energy auction since mid-2009, oil ministry spokesman Assem Jihad told AFP Wednesday.
“The ministry is getting ready to offer 12 exploration sites for auction this year,” Jihad said, noting that the fields included both oil and gas resources, but did not specify how many of each…
Chevron’s $17 Billion Ecuador Judgment May Be Unenforceable, Analysts Say
Chevron Corp., the second-largest U.S. oil company, may never pay a cent of the award of more than $18 billion levied by an Ecuadorean court for environmental damage dating back to the 1960s.
Chevron doesn’t have any refineries, storage terminals, oil wells or other properties in Ecuador that could be seized to pressure the company to pay, said Mark Gilman, an analyst at Benchmark Co. in New York. In anticipation of an adverse ruling, Chevron went to court in New York last week to obtain an order temporarily shielding the company anywhere in the world from collection efforts related to the case…
How much oil does Saudi Arabia actually have?
Does anyone know how much oil Saudi Arabia has left? Last week a series of US diplomatic cables from 2007-2009 and released by WikiLeaks suggested that senior US embassy staff were warning Washington that reserves could be 40% less than stated and that “peak oil” might be imminent.
The source of this new information was Sadad al-Husseini, a senior geologist and former head of exploration at the Saudi oil monopoly Aramco who, the cables revealed, disputed the official figure of 716bn barrels of total reserves. In further cables, the US embassy suggested that Saudi Arabia would not be able to prevent oil prices from going through the roof because it could not produce enough…
North America
Lawmakers blast Obama’s energy budget
Energy Secretary Steven Chu came under fire from Democrats and Republicans on Wednesday for his department’s plan to seek a sharp rise in funding for clean-energy projects while paring research on fossil fuels.
Chu told a congressional committee that a nearly 12 percent increase in the Energy Department’s new budget was necessary to make the United States competitive against other countries, create thousands of U.S. jobs and enhance national security…
Gas
EU could meet carbon targets more cheaply with gas than renewables, say gas firms
Europe could save €900bn (£762bn) and still hit its 2050 carbon reduction targets if it built fewer wind farms and more gas plants, a coalition of gas producers including Gazprom, Centrica and Qatar Petroleum has told the European commission.
The industry is lobbying against the possibility of the commission setting new renewable energy targets and phasing out the use of gas. Next month, it will publish a draft “road map” energy strategy to 2050…
Gas Buyers Seek End of Europe’s Two-Tier Pricing: Energy Markets
The biggest difference between natural gas and crude oil prices in eight months is fanning calls by Europe’s largest power producers to scrap the almost 40-year-old system for setting their fuel costs.
E.ON AG, Germany’s biggest gas importer, asked suppliers last year to sell it fuel at spot-market rates rather than at prices tied to oil products, two people with knowledge of the matter said this week. GDF Suez SA, operator of Europe’s largest natural-gas network, said in September it was negotiating a stronger link to spot prices for long-term purchases. North Sea Brent crude costs $55 a barrel more than U.K. gas, the most since May 3, according to data compiled by Bloomberg…
Coal
China’s coal imports set records in month, year
China’s coal imports hit a record 17.3mn metric tonnes in December, up 25pc from November on higher volumes from Vietnam, Australia and Indonesia.
The strong finish brought China’s coal imports to a record 166mn mt for all of 2010, a 32pc increase from a revised 125.8mn mt for 2009, according to data from the China Coal Transportation and Distribution Association (CCTD). The December imports were 5.8pc higher than a year prior when the previous monthly record was set…
Coal’s Hidden Costs Top $345 Billion In U.S: Study
The United States’ reliance on coal to generate almost half of its electricity, costs the economy about $345 billion a year in hidden expenses not borne by miners or utilities, including health problems in mining communities and pollution around power plants, a study found.
Those costs would effectively triple the price of electricity produced by coal-fired plants, which are prevalent in part due to the their low cost of operation, the study led by a Harvard University researcher found…
Powerfuel revives UK clean coal hopes
Britain’s hopes of becoming a world leader in “clean coal” have been revived with nine companies bidding for the collapsed British mining company, Powerfuel.
But despite the wave of interest in the company’s assets, most creditors of Powerfuel — which could be eligible for £800m in subsidies —are likely to lose their money…
Nuclear
China enters race to develop nuclear energy from thorium
Imagine how the nuclear energy debate might differ if the fuel was abundant and distributed across the world; if there was no real possibility of creating weapons-grade material as part of the process; if the waste remained toxic for hundreds rather than thousands of years; and if the power stations were small and presented no risk of massive explosions.
What you’re imagining could fairly soon be reality judging from a little-noticed development in China last month…
Administration to Push for Small ‘Modular’ Reactors
The Obama administration’s 2012 budget proposal will include a request for money to help develop small “modular” reactors that would be owned by a utility and would supply electricity to a government lab, people involved in the effort say.
The department is hoping for $500 million over five years, half of the estimated cost to complete two designs and secure the Nuclear Regulatory Commission’s approval. The reactors would be built almost entirely in a factory and trucked to a site like modular homes…
Nuclear industry windfall feared
The nuclear industry could receive a £3.4bn windfall as a result of plans to set a carbon floor price, according to green campaigners.
WWF and Greenpeace argue the coalition’s move to make low-carbon technologies more profitable by setting a minimum carbon price would provide a big boost to the nuclear sector. They argue the move breaches its promise not to provide subsidies for new nuclear power…
Renewables
Windfarms to bring communities average £20,000 a year
Local communities in England which agree to site an onshore windfarm will receive payment backed by the government, under new plans.
Renewable UK, the renewable energy trade association, will launch a “wind energy industry guarantee” that will average £20,000 per year per project…
Global solar power growth doubled in 2010: study
The world added about 16 gigawatts of new solar photovoltaic (PV) power in 2010, double the growth seen a year earlier, the European Photovoltaic Industry Association told Reuters on Monday.
Uncertainty about Italian figures made a precise figure difficult, after an end-of-year rush to qualify for a higher solar power price premium, called a feed-in tariff…
Solar companies mull legal challenge to Huhne
Solar power companies are considering a legal challenge to Government plans for a review of the “feed-in tariff” (FIT) scheme, set up last year to boost investment in green energy schemes.
After months of uncertainty, the announcement by the Energy Secretary Chris Huhne last week of a fast-track review has created “pandemonium” in the industry, critics claim, leaving all but the smallest domestic projects “impossible to finance” and costing Britain’s stuttering economy anything up to 18,000 new jobs…
UK
Nobody seems to like the carbon floor price
Another day, another complaint about the carbon floor price. This controversial policy has united an unlikely alliance of green campaigners and heavy industry in opposition.
Greens don’t like it because it benefits the nuclear industry, while manufacturers are disgruntled about having to pay more for electricity…
Crematorium To Heat Water For Town’s Swimmers
A local authority in England has given the go ahead for a swimming pool to use energy created by the next-door crematorium to heat its water.
The plan, the first of its kind in Britain, will see waste heat from the incinerator chimney used to warm up the neighboring leisure center and its new pool…
Warning of skills threat to green energy aims
A leading industrialist has warned that a shortage of engineers threatens the UK’s ambitions to develop renewable energy and upgradiits power generation and transmission systems.
Ignacio Galan is chairman and chief executive of Iberdrola, the Spanish energy group that owns Glasgow-based ScottishPower. Last year Iberdrola established its global headquarters for offshore wind projects in Glasgow, which is expected to create hundreds of jobs…
Geopolitics
Mideast Protests Spread to Libya Amid Bahrain Apologies, Clashes in Yemen
Pro-democracy demonstrations stretched into a third day in Bahrain, while police and anti- regime protesters clashed in Yemen and Libya, the latest country in the region hit by demands for change.
Hundreds of Bahrainis gathered yesterday at the funeral of a demonstrator, who died in protests Feb. 15. They are demanding democracy and the ouster of Prime Minister Sheikh Khalifa bin Salman al-Khalifa, a member of the Sunni Muslim royal family who has held the post for four decades…
Bahrain: why it matters to Saudi Arabia
Bloody clashes between anti-government protesters and riot police in Bahrain have got many people outside the Middle East looking at the island state for the first time. But does it matter to business and investors?
The answer is yes. Not so much because Bahrain is a financial centre and home to the US Navy’s Fifth Fleet. But because Bahrain has the potential — belied by its tiny size — to inspire political ructions in Saudi Arabia, the world’s biggest oil producer. That explains why the protests have exacerbated jitters in the Middle East’s already shaky stock markets…