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.
Oil demand appears to finally be responding to high oil prices, most significantly in the US where petrol prices have hit $4/gallon. The IEA cut its 2011 demand forecast by 190,000 barrels/day on news of increased US stockpiles and reduced consumption, and prices dropped back from recent highs to around $110/barrel for Brent.
Plans to revolutionise energy markets through shale gas fracking provoked mixed reactions this week. A study by scientists from Duke University found evidence that methane leaks from fracking are polluting drinking water, though they found no evidence of fracking fluids in the water. The study is likely to be used by both supporters and opponents of the technology. A new report by the Post Carbon Institute focuses on what it argues are unrealistic projections for shale gas production in the US, calling into question plans to use gas to reduce US dependence on foreign oil. Energy Information Administration (EIA) production scenarios anticipate 45% of US gas to come from shale by 2035, which would require unprecedented rates of drilling especially given the fast depletion rates of shale plays, safety concerns, and higher costs.
Even within the gas industry there are those who are anticipating a slowdown in the shale boom. In the words of Neal Anderson of Wood MacKenzie, “They’re starting to wake up that a lot of companies are just simply churning cash here. And the real winners in this are the service companies…. I’ll remind you of that old adage from the California gold rush: The guys that really made the money were the guys selling the shovels. It looks a little bit like that.” Meanwhile, in France, MPs bowed to public pressure by voting through a ban on fracking which, if passed by the Senate would make France the first country to disallow the technique.
Germany and Japan took further steps this week towards reducing their reliance on nuclear power in response to public concern following the Fukishima disaster. A draft report from Germany’s ethics commission set up by Angela Merkel is to recommend a complete shutdown of Germany’s nuclear fleet by 2021. In Japan, Prime Minister Naoto Kan announced the abandonment of Japan’s plans to expand its nuclear industry, as well as requesting the closure of the Hamaoka nuclear plant, which lies on a fault line near Tokyo, “for the safety of the Japanese people”.
With two of the world’s leading industrial and high-tech nations apparently set to abandon nuclear, is this the start of a radical new energy paradigm, or a knee-jerk reaction? It will be interesting to see how they replace the lost nuclear power, especially since one of the early impacts of Germany’s nuclear moratorium — it has mothballed 7 of its 17 nuclear stations — was to raise emissions by some 10% because of increased power imports from the coal-heavy Czech Republic.
In the UK this week, where rising energy costs look set to push inflation higher still, a review of renewable energy options by the Committee on Climate Change (CCC) was widely reported as concluding that offshore wind, the backbone of UK renewables policy, is “too expensive”. But a closer reading of the report shows this was not its meaning at all.
True, the report says nuclear is the most cost effective of the low carbon technologies, and that offshore wind is “significantly more expensive”. However, it also called for the government to make firm commitments to support less mature technologies during the 2020s, and that with a carbon price of £70/tCO2 offshore could be competitive with fossil fuels by 2030. It also found that renewable could make up 45% of the energy supply by 2030, although the central forecast is for 30%. What’s more, even if intermittent renewable were to reach 65% of power generation by 2030, and 80% by 2050, the cost of all the storage, interconnectors and back-up generation required to balance the grid would be far less than the cost of generation – just 1p/kWh.
Economic considerations have also caused a split in the cabinet as ministers decide whether to approve the CCCs fourth carbon budget to keep the UK on track with the Climate Change Act. The vote will be a big moment for assessing the coalition’s commitment to its environmental manifesto. Despite the promise to be “the greenest government ever” energy policy is increasingly falling victim to short-term political gain over longer term sustainability.
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Oil
Oil Rises for Second Day, Climbs Above $100, as German Growth Accelerates
Crude oil rose for a second day in New York after Germany said its economy expanded more than forecast in the first quarter, spurring optimism fuel demand in Europe’s largest economy will increase.
Oil climbed as much as 1.1 percent, erasing an earlier decline and touching $100 a barrel. Germany’s gross domestic product jumped 1.5 percent from the fourth quarter, the Federal Statistics Office said today. Economists predicted growth of 0.9 percent, according to the median of 30 estimates in a Bloomberg News survey. Reports yesterday showed U.S. consumer sentiment declined and retail sales rose at the slowest pace in nine months…
Oil prices begin to dent demand
The warnings may finally be coming true. Four months after the OECD warned that the soaring oil price could damage the economic recovery in developed nations (since when Brent has advanced another 19 per cent), the IEA has noticed that global oil demand has begun to flatline.
In its March Oil Market Report, it notes the first month of near-zero growth since the summer of 2009, which was just as the recovery was getting under way…
Big oil targeted in budget fight
Senate Democrats opened debate Wednesday on legislation to cut $21 billion in tax subsidies from big oil companies and use the money to reduce the federal debt — a move designed to put Republicans on the defensive and capitalize on public anger over rising gas prices.
The bill has virtually no chance of winning congressional approval. Analysts believe, however, that Democrats will try to use the issue to their political advantage in both the run-up to the 2012 elections and in the ongoing fight to increase the amount of money the federal government is allowed to borrow before Washington defaults on its financial obligations…
BG Group warns of oil and gas disruption over windfall tax
BG turned up the pressure on the government when it warned future oil and gas exploration projects in the North Sea would be put on hold following a controversial windfall tax on offshore producers.
Frank Chapman, BG chief executive, issued the warning after disclosing that first-quarter figures fell after the energy company took a $265m (£162m) provision to cover the hike in North Sea taxes announced by the chancellor in March…
IEA: Oil’s Bull Run May Continue
High oil prices are curbing demand growth, particularly in the U.S., but prolonged supply disruptions mean the market will remain tight in the second half of 2011 and the “bull run” in prices may continue, the International Energy Agency said in its monthly report Thursday.
The report once again sets the IEA, which represents the interests of the major energy-consuming countries, at odds with the Organization of Petroleum Exporting Countries over whether the group needs to increase its production ceiling at its June meeting. Officials in OPEC member countries say such an increase is unlikely and the group said in its own report Wednesday that last week’s plunge in the oil price is a reflection of a well-balanced oil market…
Shrinking Supplies Are Putting Pipeline In Alaska at Risk
FAIRBANKS, Alaska—When the famed Trans Alaska Pipeline carried two million barrels of oil a day, the naturally warm crude surged 800 miles to the Port of Valdez in three days and arrived at a temperature of about 100 degrees.
Now, dwindling oil production along Alaska’s northern edge means the pipeline carries less than one-third the volume it once did—and the crude takes five times as long to get to its destination…
Shell’s Hopes Raised on Arctic Drill Permits
The White House is ratcheting up its involvement in a looming decision on whether to grant Royal Dutch Shell PLC permission to drill for oil off the coast of Alaska, raising the company’s hopes that it can secure the necessary permits for an expensive and controversial project.
In an interview, Shell’s U.S. president, Marvin Odum, said a meeting last week with senior Environmental Protection Agency officials and top energy aides to President Barack Obama left him more confident Shell would get all the permits it needs to start drilling in the Arctic seas off Alaska next year. The drilling plans have faced fierce opposition from environmental and some indigenous Alaskan groups and, a senior administration official noted, must still secure the approval of multiple federal agencies…
Domestic oil usage to vie with exports
The uprisings in the Middle East mean the immediate prospects of lifting distortive fuel subsidies in the Gulf states are remote, even as increasing government spending drives up the region’s runaway energy consumption, analysts say.
Khalid al-Falih, the head of Saudi Aramco, the kingdom’s state-owned oil group, said last year that domestic energy demand was expected to rise from 3.4m barrels a day of oil equivalent last year to about 8.3m b/d of oil equivalent by 2028…
Gas
Europe’s Nabucco Pipeline Delayed Again
The European Union’s plans to start construction on theNabucco pipeline, which is intended to reduce dependence on Russia for natural gas, have been delayed for another year, until 2013, because the consortium has no gas supply contracts lined up.
Analysts said the latest delay will further undermine confidence in the viability of Nabucco, which is already facing soaring costs well beyond the initial €7.9 billion, or $11 billion, estimate, while potential investors are holding back because of competing pipelines and the lack of signed supply contracts…
France to ban fracking of fossil fuels
French lawmakers have voted to ban a controversial technique used to extract shale gas and oil that opponents say contaminates the environment.
If the vote by the lower house of parliament passes the Senate next month, France will be the first country to ban hydraulic fracturing, also known as fracking. The process injects water, chemicals and sand into rock formations to break them open and extract previously unattainable fossil fuel deposits…
Methane in water near US shale gas drillers: study
Methane leaks are contaminating drinking water near shale gas drilling sites in the northeastern United States, scientists said Tuesday, placing a further question mark over this fast-growing energy source.
Scientists tested water samples taken from 68 private wells in five counties in Pennsylvania and New York to explore accusations that “hydro-fracking” — a contested technique to extract shale gas — has contaminated groundwater…
Energy players debate shale drilling’s prospects
Energy players sparred Wednesday over whether the global boom in shale drilling is heading for a bust.
While one consultant compared the shale gas market to the fever of the 19th-century California gold rush, a technology manager for Halliburton dismissed the skeptical outlook…
Coal
Coal’s future suddenly looks brighter in Germany
The debate about the timing of Germany’s nuclear exit strategy has made coal’s future look much rosier than before. Public subsidies for the coal industry end in 2018, but private investors could pick up the slack.
The public debate over an accelerated phase-out of Germany’s nuclear energy program has pushed the nation’s domestic coal industry back into the spotlight. Nuclear energy provides over 23 percent of Germany’s electricity, and if nuclear plants go offline soon, renewable energy sources are not going to be able to completely cover the shortfall…
Electricity
The soaring cost of making sure the lights don’t go out
Outlook: It is not at all clear the firms in the business of building nuclear power plants are yet persuaded they want to invest the sums required in Britain
Centrica’s warning yesterday could not have been much clearer. Unless we see a dramatic fall in prices on the wholesale energy markets in the next few weeks — unlikely — households will see a round of bill increases before the end of the year…
How nuclear disaster forced Japan to be frugal with energy
Japan’s decision not to build more nuclear reactors is understandable given the explosions and leaks at the Fukushima power plant. But how will the country make up the massive energy shortfall? Prime minister Naoto Kan says supply can be sustained by investing more in renewables like wind, solar and geothermal. But there is a far simpler, cheaper and cleaner solution: use less power.
As I learned on a trip to Tokyo and Tohoku last week, this is already happening. In the wake of a disaster that knocked out six reactors, Japan’s businesses and people have been forced to scale back their electricity consumption…
Only an ‘energy internet’ can ward off disaster
This year has seen ever-higher prices at the pump, rebels seizing Libyan oilfields and a nuclear facility crippled in Japan. Yet few have realised that these disparate events are part of a larger unfolding drama. Our global energy economy, long-powered by fossil fuels and nuclear, is spiralling into a dangerous and unstable endgame…
Nuclear
IEA: The world needs nuclear
A global backlash against nuclear power in the wake of the Fukushima crisis would lead to higher prices, less energy security and higher carbon emissions, according to Fatih Birol, chief economist at the International Energy Agency.
Birol was speaking as part of the FT’s weekly energy podcast, and told us that if countries around the world scaled back their nuclear ambitions, it would be highly damaging…
Japan nuclear power expansion plans abandoned
Japan is to abandon plans to expand its nuclear power industry and make renewables a key part of its energy policy, the prime minister, Naoto Kan, said as the country marked two months since the tsunami disaster.
As workers continued efforts to stabilise the Fukushima Daiichi nuclear power plant, Kan said he would “start from scratch” a policy that initially envisaged nuclear making up more than 50% of Japan’s energy needs by 2030…
Nuclear commission pinpoints 2021 for German atomic shutdown
A draft report from Germany’s ethics commission on nuclear power says the country could and should close down all its nuclear power stations by 2021. And it says this date could even be moved forward by some time.
The 22-strong ethics commission set up by Chancellor Angela Merkel to debate the pros and cons of nuclear energy in Germany seems likely to recommend that all nuclear power stations in the country be taken from the grid within the next decade – at the latest…
‘World’s most dangerous’ nuclear power plant is closed down
Prime Minister Naoto Kan has stunned Japan’s power industry by asking for the closure of the country’s most controversial atomic plant, eight weeks after a huge earthquake and tsunami triggered the world’s worst nuclear crisis since Chernobyl.
Mr Kan said the authorities in Japan have long accepted the high probability of a major jolt underneath the Hamaoka complex, about 200km south-west of Tokyo. “This is a decision made for the safety of the Japanese people when I consider the special conditions of the Hamaoka plant,” he told reporters…
Renewables
Can Designer Power Masts Win Over the Public?
Europe is undergoing a revolution in energy production that requires massive new infrastructure to support the shift to renewables. But do new power lines always have to result in blight? Some utility companies are hoping that designer power masts can help overcome local opposition.
Erik Bystrup gets enthusiastic when the talk turns to power transmission masts. Standing in front of one of his masts, the Danish architect uses words like “elegance” and “beauty” and talks about how pleased he is that transmission masts are finally no longer dotting the landscape like “giant sad men.”…
Protests after Chile backs giant dams in Patagonia’s valleys
Chilean authorities have approved a £1.8bn plan to dam two rivers in Patagonia for hydroelectricity, triggering angry protests and claims that swathes of pristine wilderness will be destroyed.
The HidroAysén project envisages five dams to tap the Baker and Pascua rivers, an isolated area of fjords and valleys, and generate 2.75 gigawatts of power for Chile’s booming economy…
Renewable energy can power the world, says landmark IPCC study
Renewable energy could account for almost 80% of the world’s energy supply within four decades – but only if governments pursue the policies needed to promote green power, according to a landmark report published on Monday.
The Intergovernmental Panel on Climate Change, the body of the world’s leading climate scientists convened by the United Nations, said that if the full range of renewable technologies were deployed, the world could keep greenhouse gas concentrations to less than 450 parts per million, the level scientists have predicted will be the limit of safety beyond which climate change becomes catastrophic and irreversible…
Mining and Minerals
Canada’s Quebec province opens up north for mining
A large area of northern Canada is to be opened up to mining, energy and forestry projects.
The government of Quebec has unveiled a massive plan to develop a largely inhospitable but untouched area in the north of the province…
UK
Nuclear ‘cheapest low-carbon option’ for UK energy
Nuclear power will remain the cheapest way for the UK to grow its low-carbon energy supply for at least a decade, according to government advisers.
But renewables should provide 30-45% of the nation’s energy by 2030, says the Committee on Climate Change (CCC)…
Cameron must intervene in carbon row, say businesses and campaigners
A chorus of businesses, politicians and green campaigners have called on the prime minister, David Cameron, to intervene in a deepening row over the government’s climate change targets, as warring departments have put the UK’s future emissions cuts in jeopardy.
The call came as the renewable energy industry called on ministers to “put up or shut up”, after Vestas, the world’s leading wind turbine maker, dangled the possibility of creating more than 2,000 green energy manufacturing jobs in the UK — but only if the right policies were set up…
Vestas says offer of 2,000 new UK jobs depends on energy policy
The world’s biggest wind turbine manufacturer is offering to create over 2,000 jobs at the Kent port of Sheerness but warned the green energy project could be killed off by any uncertainty over government policies.
Vestas has obtained exclusive rights to land — the equivalent to 93 football pitches — that would enable it to construct a huge new production facility to build a generation of mega-turbines to be used in the North Sea…
Key parliamentary moment for energy bill’s ‘green deal’
The centrepiece of the UK government’s green strategy will be laid out on Tuesday, as the energy bill enters its second reading in the House of Commons.
At the heart of the proposals is the “green deal”, under which households and businesses will be able to have their buildings upgraded with energy efficiency measures at no cost upfront — the costs will be paid for in instalments through extra payments on their energy bills…
