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.
Fears of an EU recession gained ground this week with news that the German economy shrank in Q4. In oil markets this dunked oil prices to a New Year low — though they quickly recovered on Thursday in response to renewed concerns of supply disruption. In Nigeria unions threatened to escalate nationwide strikes to the oil production sector at the weekend if the government fails to reverse recent cuts in fuel subsidies. Tension over Iran’s nuclear program also increased on Thursday with news of the assassination of a fourth Iranian nuclear scientist. Meanwhile U.S. Treasury Secretary Timothy Geithner’s tour of the Far East to drum up support for further sanctions produced mixed results, with action promised by Japan and Korea, but a rebuff from China.
China’s oil imports rose 6% in 2011 (compared to 17.5% in 2010) as economic growth slowed from 10.4% to around 9.2%. Chinese power consumption rose 11.7%, mostly delivered by coal, despite significant growth in renewables, including a tripling of solar PV.
China faces the conundrum of balancing its economic ambitions with concerns around severe air pollution and climate change. The director of the National Energy Administration, Liu Tienan, has called for energy use to be capped at 4.1bn tonnes of coal equivalent per year by 2015, but he is expected to face fierce opposition. It is encouraging that Liu made the suggestion; imagine Chris Huhne or Steven Chu even thinking such a thing.
Despite the fall in China’s oil imports the US Energy Information Administration’s short-term forecast released this week predicted increased oil demand this year of 1.3 million barrels/day resulting in a record WTI average price of $100/barrel in 2012 ($5/barrel more than 2011). Next year is predicted to be tighter still, though the agency did warn that there was plenty of possible up or down side to the forecast.
With spare capacity tight, the oil market remains precariously balanced between fear of supply disruption and shortage on the one hand, and worsening economic crisis on the other – especially if this should spread to China – resulting in oversupply and drastically falling prices. While a sudden price drop might give some short-term relief to oil importers, it would render many marginal oil production projects uneconomic, and so create the conditions for a renewed tightening in a few years time. It would also present serious political challenges to oil producing nations reliant on high prices to balance their budgets.
One industry which could be affected by this is the shale gas industry in the US. Bloomberg published an article this week suggesting that shale gas is a hugely overpriced bubble, with the market being supported by oil prices.
The UK’s nascent shale gas industry was in the news again this week as two members of the British Geological Survey stepped up to calm fears about the hydraulic fracturing process, ahead of a government decision on whether to allow its continuation following earthquakes in Lancashire. Geologists Peter Styles and Mike Stephenson saw the risk of water supply contamination from fracking as unlikely, and danger from seismic activity as minor, while calling for greater regulation and monitoring of the industry than has been the case in the US. Importantly they provided radically lower estimates for the size of the resource than drilling company Cuadrilla. The geologists estimate the resource to be 4.7 trillion cubic feet (instead of 200 trillion cubic feet) of which only 5 to 10% would be recoverable. So, you have to ask, where’s the hurry to get it out?
In the meantime much longer term benefit could come from energy spent on studying the findings of two other reports released this week — Heat: Degrees of Comfort from the Royal Academy of Engineering sets out the huge challenge of reducing energy consumption of domestic buildings to meet emissions targets, and The Economics of Low Carbon Futures presents a costed approach to decarbonising a city based on a study of Leeds.
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Oil
Nigeria fuel protests: Union threatens oil shutdown
A trade union for workers in Nigeria’s oil and gas industry has said it will shut down all production from Sunday if the government fails to reverse a decision to end fuel subsidies.
Nationwide strikes over the decision, which has doubled petrol prices, are into their fourth day…
For global gasaholics, ending fuel subsidies is the first step
Fuel subsidies are the crack cocaine of global economic development: easy to get hooked on, hard to give up. And as every addict knows, there are good and bad ways to try to kick the habit.
Consider Nigeria and Iran. In Nigeria, the government’s recent decision to remove fuel subsidies and more than double the price of gasoline has led to riots and now a nationwide strike. Two years ago in Iran, an initiative to cut subsidies and almost quadruple the price of gas (as well as boost the price of food and water) provoked little unrest, lowered oil consumption and bolstered the economy and the government…
Bomb kills Iran nuclear scientist as crisis mounts
An Iranian nuclear scientist was blown up in his car by a motorbike hitman, prompting Tehran to blame Israeli and U.S. agents but insist the killing would not derail a nuclear programme that has raised fears of war and threatened world oil supplies.
The fifth daylight attack on technical experts in two years, the magnetic bomb delivered a targeted blast to the door of 32-year-old Mostafa Ahmadi-Roshan’s car during Wednesday’s morning rush-hour. The chemical engineer’s driver also died, Iranian media said, and a passer-by was slightly hurt…
EIA forecasts oil, gas demand increases through 2013
Worldwide crude oil consumption will increase by 1.3 million b/d this year and by 1.5 million b/d in 2013, with the higher demand met by increased production both from the Organization of Petroleum Exporting Countries and from non-OPEC producers, the US Energy Information Administration said in its latest Short-Term Energy Outlook.
Absent a significant oil-supply disruption, EIA expects the recent tightening of world oil markets to moderate in 2012 and to resume in 2013…
On top of the Arab Spring, petro-tyrants now face perniciously low oil prices
The geopolitics around us — mainly Iran and Nigeria — are keeping oil prices aloft. But should traders lose the fear of Tehran closing the Strait of Hormuz, and Nigeria’s Goodluck Jonathan not managing to make peace with his striking countrymen, look for the air to go out of prices that, despite the continuing European economic crisis, exceed $100 a barrel. And if they drop far enough — into the low-$80s-a-barrel range — some key petro-states are going to be in serious trouble, according to a couple of analysts from the Eurasia Group…
Republicans hope for “yes” on Keystone, prepare for “no”
Congressional Republicans who are urging President Barack Obama to approve the Canada-to-Texas Keystone XL oil pipeline have signaled they will not give up on the issue if the White House says no.
After delaying the project, Obama has been compelled by Congress to decide by February 21 on whether to approve the project that would sharply boost the flow of oil from Canada’a oil sands…
Oil Sands Foes Are Foes of Canada, Minister Says
In an unusual open letter released on Monday, Canada’s natural resources minister charged that “environmental and other radical groups” used “funding from foreign special interest groups to undermine Canada’s national economic interest.”
The remarks by the environment minister, Joe Oliver, apparently refer to donations from charitable foundations based in the United States. His sharply worded letter appeared the day before an independent review panel was to begin hearings on a proposed pipeline to carry production from Alberta’s controversial oil sands project to Canada’s west coast for tanker shipment to Asia…
Western oil firms remain as US exits Iraq
While the US military has formally ended its occupation of Iraq, some of the largest western oil companies, ExxonMobil, BP and Shell, remain.
On November 27, 38 months after Royal Dutch Shell announced its pursuit of a massive gas deal in southern Iraq, the oil giant had its contract signed for a $17bn flared gas deal…
Gas
Shale Bubble Inflates on Near-Record Prices for Untested Fields
Surging prices for oil and gas shales, in at least one case rising 10-fold in five weeks, are raising concern of a bubble as valuations of drilling acreage approach the peak set before the collapse of Lehman Brothers Holdings Inc.
Chinese, French and Japanese energy explorers committed more than $8 billion in the past two weeks to shale-rock formations from Pennsylvania to Texas after 2011 set records for international average crude prices and U.S. gas demand. As competition among buyers intensifies, overseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production, said Sven Del Pozzo, a senior equity analyst at IHS Inc. (IHS)…
Study needed on shale gas effects on health: group
The public health effects of shale gas development need to be rigorously studied as production rapidly spreads in the United States, public health professionals and advocates said on Monday.
Advances in the hydraulic fracturing, or fracking, drilling technique have revolutionized the natural gas industry, but researchers said more must be done to evaluate what the shale boom means for the those living near wells…
Coal
China’s renewables surge outweighed by growth in coal consumption
China tripled its solar energy generating capacity last year and notched up major increases in wind and hydropower, government figures showed this week, but officials are still struggling to cap the growth in coal burning, which is the biggest source of carbon dioxide emissions in the world.
The latest evidence of China’s promotion of renewable energy has been welcomed by climate activists, but they warn that the benefits are being wiped out by the surge in coal consumption…
Nuclear
Obama bans uranium mining around Grand Canyon
The Obama administration banned new uranium mining claims around the Grand Canyon for the next 20 years, a move hailed by conservationists on Monday as key to the president’s environmental legacy but slammed by opponents as a job-killer.
The decision puts more than 1 million acres of public lands outside the Grand Canyon National Park off limits to all hard-rock mining for two decades, the longest moratorium allowed by law. Existing mining operations would continue…
Japan Plans Age Limits, Tougher Tests for Nuclear Plants
Japan said it will set age limits on nuclear plants and require operators to plan for worst-case scenarios, as the country strives to restore public trust pummeled by the world’s worst nuclear accident in a quarter century.
Goshi Hosono, the government minister responsible for overseeing the aftermath of the disaster at Japan’s Fukushima Daiichi nuclear complex, announced the steps Friday, as part of a revamp of nuclear-safety legislation the government aims to submit to parliament early this year…
Renewables
German jobs boom in renewable energy questioned
Optimistic predictions that Germany’s decision to turn its back on nuclear energy will lead to the creation of hundreds of thousands of jobs in the renewable energy sector have met with scepticism.
While renewable energy lobbyists as well as the German government argue one of the upsides of Germany’s planned abandonment of nuclear energy by 2022 will be a rosier employment picture, some experts are unconvinced…
German solar boom strengthens critics of subsidies
New solar installations reached a fresh record of 7.5 gigawatts (GW) in Germany in 2011, playing into the hands of advocates for steeper cuts in tariff subsidies to reduce growth of solar power and the resulting higher costs for consumers.
The figure slightly exceeds the 7.4 GW recorded in 2010, German network regulatory agency Bundesnetzagentur (BnetzA) said in a statement on Monday…
Biofuels
Biofuels become a victim of own success – but not for long
Biofuels have become a victim of own success, it appears: for the first time in a decade global production has dropped. Production in 2011 dropped a touch from 1.822m barrels a day in 2010 to 1.819m in 2011, according to IEA statistics (p30) highlighted by the Financial Times.
The key reason has been the rising cost of the feedstock for most biofuels, corn, sugar and vegetable oil. And the main reason for the rising food prices is, many argue, the huge quantity consumed by biofuels. It’s a big business. The global biofuels business would, if a nation, rank 16th in the world for oil production, just above the UK and Libya and a bit below Norway and Nigeria, all major oil producers. In the US, 40% of the corn crop now gets diverted into fuel tanks, giving the US 50% of global biofuel production…
Lufthansa ends biofuel trial with U.S. flight
German carrier Lufthansa (LHAG.DE) is ending the trial use of a biofuel mix for its planes because it has used up stocks of certified biofuel and no other reliable supplies are available.
The trial, which ran on flights between Frankfurt and Hamburg, will end January 12 on a flight from Frankfurt to Washington…
UK
UK shale gas industry still awaiting clearance for fracking
The UK’s nascent shale gas industry is still awaiting clearance from the UK government to resume fracking operations.
Cuadrilla Resources, one of the lead explorers for shale gas in the UK, in November published a report saying that earth tremors earlier in 2011 in Lancashire had likely been related to its hydraulic fracturing work in the region, but that the circumstances were unusual, and it should be possible to safely resume fracking in the future…
Fracking company chief to face critics in south-east
The chief executive of the company pioneering shale gas “fracking” in the UK is to face his home county critics, as leading scientists urged closer monitoring of new drilling.
Mark Miller, chief executive of Cuadrilla — the shale gas company whose initial drilling near Blackpool was found to be “highly probably” responsible for two minor earthquakes last year — will confront a new set of opponents in the south-east’s stockbroker belt. The company is widening its attention to Sussex, Kent and Surrey, where it believes major resources of shale gas lie trapped in rocks thousands of metres below the surface. But it is already facing local opposition, as it did in Lancashire…
Plumbers unprepared for move to energy-efficient homes, report warns
Plumbers are almost wholly unprepared for the “drastic change” to the way the UK’s homes are heated as part of efforts to cut carbon emissions, leading engineers said on Thursday, meaning householders could need to turn to architects and engineers at a potential cost of over £20,000 per house.
In a report published on Thursday, the Royal Academy of Engineering (RAE) also warned that government plants for insulation and green energy are not adequate for the changes needed for a shift to low-carbon heating. They called for a massive switch to renewable energy such as solar water heaters and wood-burning stoves to a street by street effort to upgrade insulation in Britain’s draughty homes…
Low carbon Leeds City Region would ‘save money and create jobs’
Hopes of turning the Leeds city region into a ‘low carbon area’ have been given useful underpinning by an academic study which shows how cutting energy bills could be both profitable and create jobs.
The two-year project by four universities offers three levels of investment in largely conventional energy-saving measures — everything from park-and-ride schemes to solar panels — which would pay for themselves over terms ranging from four to seven-and-a-half years…
MPs to quiz oil giants BP, Shell and Cairn Energy on Arctic drilling safety
MPs are to question UK oil and gas companies on the safety of drilling in the Arctic, after fears that retreating ice will see a damaging rush to exploit billions of barrels of untapped reserves in the region.
BP, Shell and Cairn Energy are understood to be on a draft list of companies to be called to give evidence to the Environmental Audit Committee in the spring for its Protecting the Arctic inquiry, announced on Sunday…
UK N.Sea oil, gas investment set for record year
UK North Sea oil and gas investment is set to mark an all-time high in 2012 as high oil prices entice investors to boost production, showing that the government’s surprise tax on output introduced last year has not jeopardised profitability.
Edinburgh-based consultants Wood Mackenzie said in a report on Tuesday that energy company investments were expected to exceed last year’s record of 7.5 billion pounds in 2012, which also found that investments should stay consistently high until at least 2014…
RenewableUK slams Civitas wind power report as inaccurate and outdated
The renewable energy industry has today launched a scathing attack on a new study that argues the government should abandon its wind energy targets because the technology is “inordinately expensive” and is hampering efforts to cut carbon emissions.
Economist Ruth Lea, director of the manufacturing renewal project at thinktank Civitas, today published a major new report designed to identify the cheapest means of generating electricity and ensuring the government meets its targets to cut greenhouse gas emissions…
DECC quietly delivers £197m boost to feed-in tariff budget
The government has quietly raised the feed-in tariff spending cap by nearly £200m in a bid to prevent the subsidy scheme exceeding its budget, after re-allocating funds previously earmarked for the Renewables Obligation (RO) incentive scheme.
The Department of Energy and Climate Change (DECC) published a document last month following a parliamentary hearing into solar feed-in tariffs, which detailed changes to the Control Framework for DECC levy-funded spending that covers three energy policies where the Treasury has imposed spending caps intended to help avoid steep rises in energy bills…
Economy
Energy costs push German inflation rate up to 2.3%
Rising energy prices pushed German inflation up to 2.3% in 2011, according to official figures from Destatis.
The inflation rate compares with 1.1% in 2010 and 0.4% in 2009. It was the highest annual figure since 2008, when inflation was 2.6%…
