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.
There appeared to be signs of growing panic behind the latest declaration from the International Energy Agency. The statement calls on oil producing countries to increase production and reduce costs in order to avert economic crisis. To date Opec members have been insisting that the market is well supplied and that prices are being driven by speculation. Saudi Arabia actually reduced production substantially in April on claimed lack of demand. However, it is becoming clear that high oil prices are currently attractive to Opec leaders confronted with social unrest as it allows them to increase subsidies and other financial transfers to their populations. As a result of recently increased payments to the population in Saudi Arabia the Centre for Global Energy Studies now estimates the cost of running the Saudi state equates to $91/barrel.
The call for action from OPEC is all the more interesting in the light of news that Iranian President Mahmoud Ahmadinejad is likely to chair the meeting in his new temporary role overseeing the country’s oil industry, following the sacking of oil minister Masoud Mir-Kazemi. Iran, which relies on oil revenues for the majority of its budget is unlikely be arguing vociferously for lower prices.
It emerged this week that the UK Department for Energy and Climate Change (DECC) has been undertaking some research on the likely effects on the UK economy of an oil price spike. The story was broken by The Times [article behind a paywall] who obtained the documents via the Freedom of Information Act [view documents]. The Times reports that “A sudden huge increase in oil prices would cut more than £102 billion from the economy over the next five years, wrecking Britain’s economic recovery, increasing unemployment and provoking industrial action, according to government research.” The report demonstrates that the effects of peak oil are known to Whitehall, the urgency to take serious action however still appears to be missing.
In other UK energy news this week, Chris Huhne announced that the government would accept the recommendations of the 4th carbon budget—albeit with a proviso that there will be a review in 2014 to assess alignment with Europe. There was also hedging on how much of the emissions reduction would come from domestic action rather than carbon trading.
The government received a green flag to continue with new nuclear this week from the Weightman commission, set up to review safety in the wake of the Fukishima disaster. The report assessed that what happened in Japan was simply not a credible risk in the UK. Critics argued that the report is premature given that the Fukishima plant is yet to be stabilised and so learnings from the accident aren’t yet available.
The government’s commitment that there will be no subsidies for new nuclear were in the spotlight this week in a review of proposals for electricity market reform by the Committee of Climate Change released on Monday. The committee was critical of the possible distortion of the reforms to hide the subsidies “merely to save political face.” Tim Yeo, Chair of the Committee wrote in the Guardian that “ministers are tinkering at the margins of the electricity market instead of bringing forward the radical reforms that are needed.”
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Oil
West’s oil agency urges OPEC: pump more, or else
The West’s energy watchdog urged oil producers to boost supply to cut fuel costs, to protect economic recovery, and appeared to suggest its members could release emergency stockpiles if OPEC does not act.
“The governing board urges action from producers that will help avoid the negative global economic consequences which a further sharp market tightening could cause, and welcomes commitments to increase supply,” the International Energy Agency (IEA) said after a governing board meeting on Thursday…
Iran’s President Ahmadinejad to Run Oil Ministry After Minister Dismissed
Iran President Mahmoud Ahmadinejad said he will oversee the country’s Oil Ministry following the dismissal of its minister, Masoud Mir-Kazemi, as part of a plan to shrink government administration.
“I am the caretaker for the Oil Ministry,” Ahmadinejad said in an interview on Iran state television late yesterday…
Libya rebels eye OPEC meeting as oil minister ‘defects’
Libya’s rebels said on Wednesday they want to represent the oil-rich country at the June meeting of OPEC, amid reports Oil Minister Shukri Ghanem has defected from Moamer Kadhafi’s regime.
“We want to attend, and will study the legal procedure,” Mahmud Shammam, media spokesman for the rebels’ National Transitional Council (NTC) told AFP in Dubai…
Saudi seen needing $91 oil to fund gov’t spending plans
Saudi Arabia, the world’s largest crude exporter, needs oil to trade at about $91 a barrel this year to cover the cost of government programmes, according to the Centre for Global Energy Studies.
The country has “ratcheted up” spending and requires high prices to maintain the commitments, CGES chief economist Leo Drollas said on Friday at the Platts Crude Oil Markets conference in London…
Senate Refuses to End Tax Breaks for Big Oil
The Senate on Tuesday blocked a Democratic proposal to strip the five leading oil companies of tax breaks that backers of the measure said were unfairly padding industry profits while consumers were struggling with high gas prices.
Despite falling eight votes short of the 60 needed to move ahead with the bill, top Democrats said they would insist that eliminating the tax breaks to generate billions of dollars in revenue must be part of any future agreement to raise the federal debt limit…
Obama Shifts to Speed Oil and Gas Drilling in U.S.
President Obama, facing voter anger over high gasoline prices and complaints from Republicans and business leaders that his policies are restricting the development of domestic energy resources, announced on Saturday that he was taking several steps to speed oil and gas drilling on public lands and waters.
It was at least a partial concession to his critics, who say he has shackled domestic energy development at a time when consumers are paying near-record prices at the gas pump. The Republican-led House passed three bills in the last 10 days that would significantly expand and accelerate oil development in the United States, saying the administration was driving up gas prices and preventing job creation with anti-drilling policies…
Alberta urges US to back oil pipeline
The Canadian province of Alberta could be one of the seven largest oil producers in the world by the end of the decade, its energy minister has said, as he urged the US to back a pipeline project that is vital for the industry’s expansion plans.
Ron Liepert, Alberta’s minister of energy, said that the US “has to make a decision” about whether it wanted the province’s oil, and that he was “proceeding all-out to find alternative markets for our product”, particularly in China…
Battle for Arctic oil intensifies as US sends Clinton to polar summit
The US government has signalled a new determination to assert its role in Arctic oil and gas exploration by sending secretary of state Hillary Clinton and other ministers to a summit of the region’s powers for the first time.
Clinton and the US secretary of the interior, Ken Salazar, were both at the biennial meeting in the Greenland capital of Nuuk amid fears by environmentalists of a “carve up” of Arctic resources that could savage a pristine environment…
BP Defeat Puts Arctic Trove Back in Play for Shell, Exxon
The collapse of BP Plc (BP/)’s alliance with Russia’s state-run oil company brings one of the world’s largest untapped drilling opportunities back onto the market.
Royal Dutch Shell Plc (RDSA), Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) are potential candidates should OAO Rosneft look for a new partner to explore the Kara Sea in Russia’s Arctic, a person with knowledge of the company’s plans said, declining to be named because the matter is private. Rosneft will start talks with replacements immediately, another person said yesterday…
Crude Oil Declines as U.S. Economic Reports Signal Fuel Demand May Weaken
Oil fell for the third day this week after the index of U.S. leading indicators dropped for the first time in 10 months in April and sales of existing U.S. homes declined, signals that fuel demand may weaken as the economy struggles to recover.
Oil tumbled 1.7 percent as the index, the New York-based Conference Board’s gauge of the economic outlook for the next three to six months, unexpectedly decreased by 0.3 percent after a revised 0.7 percent gain in March. Japan’s economy shrank more than estimated in the first quarter, a government report showed…
Gas
Alaska Pipeline Scrapped
Oil giants BP PLC and ConocoPhillips have abandoned plans to build a $35 billion pipeline to carry natural gas from Alaska to the lower 48 states because of weak customer demand.
The decision, though not a complete surprise, was nonetheless a blow to Alaska’s long-delayed hopes of exporting more of its gas…
Kazakhs threaten to halt BG gas field
Kazakhstan has threatened to freeze development on BG’s $23bn (£14.2bn) gas project unless the company backs down in a long-running dispute with the government.
“Without reaching agreement, phase three of the project will not be set in motion. Full stop,” said Sauat Mynbayev, the Kazakh oil and gas minister. “If we fail to reach agreement, the project will be frozen.”…
Poland to develop shale gas despite environment risk
Poland reaffirmed its commitment to developing its shale gas reserves on Wednesday despite French plans to ban drilling, but officials and industry experts said tough regulatory and environmental challenges lie ahead.
The U.S.-based Energy Information Administration (EIA) said last month Poland’s technically recoverable reserves of shale gas are the biggest in Europe at an estimated 5.3 trillion cubic meters, though some experts are skeptical about the figure…
Electricity
China forced to ration electricity
Chinese provinces are rationing electricity as soaring coal prices squeeze power generation companies, underlining the challenges facing the world’s largest energy consumer as global fuel prices rise.
While China experiences power cuts each summer, some provinces have started rationing earlier than usual this year. In recent days Hunan, Zhejiang, Jiangsu and Anhui provinces have implemented cuts, alongside Shanghai and Chongqing…
Saudi Aramco Plans to Double Power Supply, Conserve Energy to Save Crude
Saudi Aramco, the world’s largest state-owned oil company, plans to double its power-generating capacity to 4,000 megawatts by 2015 to supply all the electricity it expects to need to produce crude and natural gas.
The company is expanding power plants at existing oil and gas sites and aims to build generators for refineries and other facilities that are under development, Ziyad Al Shiha, the executive director of Aramco Power Systems, told reporters today at a conference in Dhahran, Saudi Arabia…
Nuclear
Japan’s nuclear embrace is looser but not yet broken
As the radioactive dust continues to settle from the world’s worst nuclear accident for 25 years, it would be easy to imagine that Japan’s love affair with atomic energy is officially over.
The romance has certainly gone out of the relationship. The failure of the Fukushima Daiichi plant after the earthquake and tsunami in March destroyed faith in official safety promises. Two months later, workers are still battling to restore vital cooling systems and stem radiation leaks…
Tepco revises plan for cooling reactors
Confronted with worse-than-expected damage at its battered nuclear plant, Tokyo Electric Power Co. on Tuesday revised its strategy for cooling Fukushima Daiichi’s reactors. However, the utility company reaffirmed its goal of stabilizing the facility — and ending the country’s nuclear crisis — within six to nine months.
Tepco was forced to overhaul its road map after learning last week of a substantial meltdown in the unit 1 reactor at the Fukushima Daiichi plant, on Japan’s northeastern coast. Fuel pellets had collected at the bottom of the pressure vessel, burning small holes or cracks in the containment vessel that allowed coolant to leak out. Japanese authorities say they fear similar scenarios have occurred at units 2 and 3, though engineers have not entered those reactor buildings…
Renewables
Tidal energy — the UK’s best kept secret
The latest report on Renewables from the Committee on Climate Change (CCC) offers lukewarm support for electricity generation from tidal streams. The UK has some of the fiercest tidal currents in the world, but the CCC says the tidal turbines will deliver energy at a higher cost than PV in 2040. The assumptions behind this pessimism are questioned in this article.
The tides around Britain’s coasts sweep huge volumes of water back and forth at substantial speeds. The energy contained in the tidal races off the west of the UK is as great as anywhere in the world. Because water is a thousand or so times heavier than air, the maximum speeds of perhaps 6 metres a second are capable of generating far more electricity per square metre of turbine area than a windmill. The Pentland Firth, the narrow run of water between the north-east tip of Scotland and the Orkney islands, is possibly the best place in the world to turn racing tides into electricity. The challenges are immense: massive steel structures need to be made that survive huge stresses, day after day…
Hydropower’s Resurgence and the Controversy Around It
Hydropower, a renewable energy source often overshadowed by excitement about wind and solar power, is enjoying something of a global resurgence.
Huge, controversial dam projects have recently made headlines in Brazil, Chile and Laos. Many developing countries, hungry for energy to supply their growing economies over the long term, are determined to keep building more modest-sized dams too…
Biofuels
Brazil’s ethanol production in focus
Sir John Beddington, chief scientific adviser to the UK government, might not have realised it but his visit to Brazil this week came at a crucial time for the Brazilian ethanol market.
At a conference on climate change, Sir John reminded those present that “Brazil is the largest producer of research in agricultural science … and is the world leader in bio energy”. Ethanol accounts for about half the non-diesel fuels market in Brazil…
UK
Chris Huhne briefs MPs on long-term carbon target
Chris Huhne has committed the UK to halving carbon emissions by 2025, from 1990 levels, and changing the way that the country produces energy.
The energy secretary – who is battling claims he asked someone close to him to take speeding points for him – briefed MPs on the UK’s fourth “carbon budget”…
UK’s nuclear reactors ‘won’t need major changes’ following Japan earthquake
Britain’s new nuclear reactors are not likely to need major structural changes in the light of Japan’s nuclear accident, according to the UK’s top inspector.
Mike Weightman, chief inspector of Britain’s nuclear sites, said he believed Britain’s atomic power generation “does not need to be curtailed”…
Nuclear inspector accused of complacency after reactors get all-clear
An enormous row broke out on Wednesday after the chief nuclear safety inspector gave Britain’s reactor fleet the all-clear and made modest “recommendations” to be incorporated in the planned new plant design.
Critics immediately accused Mike Weightman of rushing to judgment and “complacency” in his interim report on the lessons to be learned from the Fukushima atomic crisis…
UK energy market reform plans must be more ambitious
The UK is at a critical juncture in the way it uses energy. More than £100bn of investment is needed by 2020 to replace our ageing power stations, cut carbon emissions, upgrade the grid and create new incentives to make this happen.
Government proposals for electricity market reform were published for consultation in December and the cross-party energy and climate change committee has looked at the plans in detail. This Monday we publish our verdict…
• Tim Yeo MP is chair of the energy and climate change select committee
Government warned off secret nuclear subsidies
Chris Huhne has been warned that the Energy Department, which he runs, needs to be “upfront” about whether the Government proposes to subsidise new nuclear power stations. The Coalition plans 10 new reactors, although before the election it was Liberal Democrat policy to oppose them. Maintaining and cleaning up after Britain’s older nuclear stations cost billions, and the Government said that the new ones must pay their own way.
However, a report out today by the Commons Energy and Climate Change Committee warned against hidden subsidies that could distort the electricity market…
Geopolitics
Price Tag for Somali Piracy Surges
International piracy is emerging as a market in its own right, one that cost the global economy an estimated $8.3 billion in 2010. Efforts to contain the problem are having little impact, and the costs of lost booty, ransom and other costs associated with pirates could double within a few years.
Pirates of yesteryear have been romanticized in literature through books like “Treasure Island” and in films like “Pirates of the Caribbean”. But the modern day piracy off the coast of Somalia is no swashbuckling fun and adventure. It is an expensive and dangerous problem that is escalating at an alarming rate…
Transport
Berlin plans powerful spark for electric car sector
The German government wants to see one million electric cars on the nation’s streets by 2020 and is doubling its investment in research and development. But some wonder if government intervention is the right strategy.
Berlin wants to see one million electric automobiles rolling quietly down German roads by 2020 and is revving up research and development to achieve that goal, even though some experts warn subsidies can lead to market distortion…
Natural-Gas Trucks Face Long Haul
An 18-wheeler can burn as much fuel in a year as 40 cars. What if it burned domestic natural gas instead of imported oil?
That is hardly as arresting a vision of America’s energy future as electric cars, whose power could conceivably could come from the wind or the sun. But a growing chorus of fans, including President Obama, says natural gas might deliver more bang for the buck—and they want taxpayers to spend billions of dollars to subsidize the shift…