Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre at nef dedicated to raising awareness of peak oil.
The shale gas ‘revolution’ suffered another blow this week as the US Securities and Exchange Commission announced an investigation into dealings between industry leader Chesapeake Energy and its chief executive Aubrey McClendon. It emerged recently that McClendon had been taking a private stake in each well the company drills and, unbeknownst to shareholders, borrowed over $1 billion against them. Now the SEC has announced an informal probe and asked the company and McClendon to retain “certain documents”. Chesapeake stock has fallen 25% since the end of March.
McClendon has suffered significant financial losses as the gas price slumped to $2.40/MMBtu, but sceptics may be forgiven for concluding this is merely the tip of the iceberg. Critics like Art Berman have long argued the boom in US shale gas production is not sustainable at current prices because the industry is bleeding red ink.
In the UK Lord Browne banged the drum for shale gas this week by assuring the public that drilling hundreds of wells would not result in the industrialisation of the rural landscape. In his words “It’s not the whole countryside, it’s little tiny bits of it”. Browne is hardly independent, being both a director of Cuadrilla, the company trying to develop shale gas in Lancashire, and a partner at Riverstone LLC, the private equity firm which backs it, but his views will carry weight with government as it decides policy.
With luck that policy will also take into account two important publications this week. A report from the World Bank showed the US shale gas industry has led to the first increase in gas flaring since 2008; and another from peer-reviewed Ground Water journal concluded that – contrary to industry assurances – it would be possible for toxic chemicals to enter aquifers as a result of hydraulic fracturing.
The possibility of a new source of domestic gas has been putting further pressure on government clean energy policy. On the green side, battle was rejoined this week as former Energy Secretary Chris Huhne and Chairman of the Commons Energy Committee Tim Yeo pressed the government to stick to its plans. Huhne argued that the only sensible economic policy in a world of rising resource costs is one which prioritises “green growth” and reduces our reliance on fossil fuels.
This argument rather jars with Shell’s announcement last week that it can’t “make the numbers work” on offshore wind energy in the UK. Given the stupendous profits it is currently generating from oil at $120 per barrel it is difficult to see how renewables could ever “work” for a supermajor oil company — short of a meaningful carbon price. But with Germany and Japan shaping up to make radical energy shifts in the next decade it could be that Britain’s legacy of a dominant domestic fossil fuels industry turns out to be a liability. And our newly discovered shale could be a millstone.
Oil
Gulf of Mexico oil spill: BP wins victory over US government as trial is postponed until 2013
BP has won a legal fight with the US government after a judge ruled that the trial to apportion blame for the Gulf of Mexico oil spill will not happen until 2013.
US District Judge Carl Barbier, who has been overseeing the complicated case since the autumn of 2010, scheduled the new trial for January 14…
OPEC says pumping hard to bring oil price down
OPEC is working hard to bring down oil prices that jumped towards $130 a barrel earlier this year, its secretary general said on Thursday, and is pumping much more than its official target even as exports from cartel-member Iran dwindle.
Oil surged in March to $128 a barrel, the highest since 2008, as increased concern over the loss of Iranian oil due to tighter sanctions combined with supply hitches elsewhere…
Iran Embargo Impossible to Meet as Ships Need Its Oil
Europe’s oil embargo on Iran is having unforeseen consequences in the shipping market, making it almost impossible to determine if vessels are using fuel that violates the sanctions.
Supplies from Iran are a “vital blending component” to make ship fuel, known as bunkers, according to Barclays Capital. The nation accounted for about 8 percent of bunkers exported last year to Asia, the largest market, and about a third of the supply at Fujairah in the United Arab Emirates, the Middle East’s biggest refueling port, Barclays estimates…
Oil Trades Near Two-Week Low on U.S., Europe Economic Concern
Oil traded near a two-week low in New York, heading for a weekly decline, as worse-than-forecast U.S. economic data and concern that Europe’s outlook is faltering boosted speculation that demand for fuel may ease.
Futures were little changed after dropping 2.6 percent yesterday, the most since December. European Central Bank President Mario Draghi said the region’s economic prospects had downside risks while reports showed service industries in the U.S. grew less than projected and consumer confidence weakened…
ConocoPhillips to pay $191 million more to China over oil spill
Months after agreeing to a $160 million settlement, ConocoPhillips and China announced that the energy giant will pay an additional $191 million in the wake of oil spills last year in north China’s Bohai Bay.
Money from the latest agreement goes to the State Oceanic Administration, which overseas waters off China. It follows a separate deal, announced in January, in which ConocoPhillips agreed to give about $160 million to China’s agricultural ministry, funds that are intended for fishermen and others affected by the incident…
Gas
Fracked: Why Chesapeake Energy’s Aubrey McClendon is in Hot Water
Aubrey McClendon, the billionaire CEO of natural gas giant Chesapeake Energy, opened his company’s first-quarter conference call on Wednesday by describing the last two weeks as “very challenging.” That may be an understatement — the last 48 hours alone have been dizzying.
Last week, the Securities and Exchange Commission opened a probe into a billion-dollar personal loan tied to McClendon’s controversial compensation plan, which he now stands to lose, along with the title of board Chairman. Then on Wednesday, Reuters published a startling expose revealing that McClendon ran a $200 million hedge fund trading oil and gas at the same time he was leading the energy giant — raising questions of conflict-of-interest. And now, a U.S. Senator has called for the Justice Dept. to investigate Chesapeake for potential “fraud, price manipulation, conflicts-of-interest, or other illegal activities.” Meanwhile, McClendon has bet the future of Chesapeake, which is carrying over $12 billion in debt, on a rise in natural gas prices that not one analyst polled by Bloomberg — zero — expects will happen…
Fracking ‘Health Challenges’ to Be Examined by U.S. Advisers
The Institute of Medicine will examine whether the process of hydraulic fracturing to extract natural gas from rock “poses potential health challenges,” a Centers for Disease Control and Prevention official said.
Health concerns related to fracking, in which millions of gallons of chemically treated water are forced underground to break up rock and free gas, include the potential for water contamination and air pollution, Christopher Portier, director of CDC’s National Center for Environmental Health, said at a workshop in Washington today…
Drilling chemicals could move quickly to aquifers, study says
Chemicals injected into the ground by natural gas drillers could migrate toward drinking water supplies much more quickly than previously thought, according to a new study that raises questions about West Virginia’s ongoing Marcellus Shale boom.
Some scientists and industry officials have argued that thick layers of impermeable rock would keep “fracking fluids” used by modern natural gas operations tucked safety away underground, far below aquifers used for residential drinking water…
Shale causes rise in waste gas pollution
The shale energy boom is fuelling a rise in the burning of waste gas after years of decline, a World Bank source told Reuters ahead of the release of new data, giving environmentalists more ammunition against the industry.
Global gas flaring crept up by 4.5 percent in 2011, the first rise since 2008 and equivalent to the annual gas use of Denmark, preliminary data from the World Bank shows…
Lord Browne: fracking would only impact “tiny bits” of countryside
Drilling hundreds of wells to frack for shale gas would only impact “tiny bits” of the countryside, Lord Browne has claimed, insisting there was no rational cause for concern over the controversial process.
The former chief executive of BP, said the Government should not “get in the way” of shale gas companies such as Cuadrilla Resources, of which he is now a director…
Wyoming pushed EPA to delay study on fracking: report
The governor of Wyoming pressed the top U.S. environmental regulator to delay its December, 2011 release of a draft study linking fracking for natural gas to contamination of drinking water, a news report said on Thursday.
Governor Matt Mead contacted Environmental Protection Agency Administrator Lisa Jackson and persuaded her to delay for about a month releasing the study that found fluids used in hydraulic fracturing, or fracking, had likely polluted an aquifer in the small town of Pavillion, the Associated Press report said…
Electricity
Feed-in Tariffs as zombie-killers?
Energy campaigners and solar enthusiasts know it: now Giles Parkinson, an Australian analyst, has quantified it. By slashing wholesale prices, electricity microgeneration from green sources kicks a gaping hole in the financial viability of centralised energy companies. In consequence, Europe’s energy executives fight tooth and nail — usually behind the scenes — persuading public officials to resist the democratising, consumer-liberating effects of the Feed-in Tariff.
Germany’s wholesale prices for electricity have collapsed by over 20 per cent since 2008, on the heels of extensive new renewables capacity, Parkinson has found. The analyst’s evidence comes from real-world trades on the EPEX wholesale market, a snapshot of the rates at which Germany’s interconnected generators buy and sell electricity. Hour by hour across two Tuesdays in mid-March — one in 2008, the other in 2012 — the profiles for traded prices are radically different…
US warns Bolivia that nationalisation of Red Electrica company will damage investment
The US has warned Bolivia that its nationalisation of Spanish energy firm Red Electrica’s local grid will damage the country’s investment climate.
The Bolivian President, Evo Morales, seized the Red Electrica subsidiary on Tuesday, just 15 days after Argentine President Cristina de Kirchner announced the expropriation of Spanish oil giant Repsol’s YPF subsidiary…
Nuclear
Japan facing uncertain nuclear future
With Japan’s last operating nuclear reactor due to go offline for maintenance, the BBC’s Roland Buerk looks at the ongoing debate in the country on its nuclear future.
The Kashiwazaki-Kariwa plant was built when Japan believed in a nuclear-powered future.
There are seven reactors stretched along a vast expanse of coastline feed electricity lines that run to Tokyo, far away on the other side of the country…
Japanese energy policy stands at a crossroads
Japan will close its last nuclear power plant on Saturday, at least temporarily.
Before the Fukushima disaster in 2011, there were 54 reactors providing one-third of the country’s electricity. The unprecedented speed and extent of Japan’s current denuclearisation offers an important lesson: society is a powerful force for implementing policies it supports, but also for blocking unwanted policies…
• Catherine Mitchell is professor of energy policy at the University of Exeter. Antony Froggatt is a senior research fellow at Chatham House. Shunsuke Managi is professor of environmental studies at the University of Tohuku.
Renewables
Shell’s stance on wind power reveals a profound truth of capitalism
They couldn’t “make the numbers work”. There’s something so blithe — and enormously telling – about the excuse offered by the oil company Shell to explain why they were not investing in wind power in Britain.
Presented with an accounting fact — that, on Shell’s terms, wind power is deemed insufficiently profitable — observers are expected to automatically understand their logic, nod in agreement and move on…
Japan targets 13 per cent rise in green energy in a year
Japan aims to increase domestic renewable energy capacity by 13 per cent by March 2013 through a new price incentive programme for generators, the country’s government said last week.
The Ministry of Economy, Trade and Industry expects to add 2,500MW of solar, geothermal, wind, biomass, and hydropower capacity after the feed-in tariff scheme comes into force in July. Japan currently has 18,750MW of capacity…
Wind farms affect local weather
Wind farms can affect weather in their immediate locality, raising night-time temperatures on the ground, researchers working in Texas have shown.
They used satellite data to show that land around newly constructed wind farms warmed more than next-door areas…
Biofuels
RHI could trigger biomass ‘gold rush’ in 2015, says report
The renewable heat market could see a “gold rush” for biomass boilers in the middle of the decade, as a growing number of businesses and individuals take advantage of the government’s Renewable Heat Incentive (RHI).
That is the conclusion of a new report by consultancy Sustainable Venture Intelligence (SVI), which aims to map the renewable heat market for technologies supported by the RHI, such as heat pumps, solar thermal panels and biomass boilers…
Biofuels in the balance as EU fails to conclude carbon impacts
Biofuel producers have been “left in limbo” by EU policymakers’ failure to agree on how to measure the industry’s environmental impact at a meeting in Brussels yesterday.
Officials were attempting to thrash out a method of accounting for indirect land use change (ILUC), which occurs when areas are cleared to grow crops for energy. Green groups claim this has the potential to raise emissions and push up food prices, negating the emissions savings that should result from switching from fossil fuels to biofuels…
UK
UK must go green to stimulate growth, says Chris Huhne
Former cabinet minister Chris Huhne has issued a stark warning that the UK’s economic growth strategy will not work unless the government pursues “green growth” by investing in industries such as energy efficiency and clean energy.
Writing in the Guardian, Huhne says: “Much of our economic debate implies we must choose between going green or going for growth. That view may be the opposite of the truth. There is now hard evidence that the real choice is between green growth or no growth at all.”…
Tim Yeo calls for urgent action over wind farms
A senior Conservative has warned that dithering ministers and weak civil servants were risking the lights going out in Britain.
Tim Yeo, the chairman of the Commons energy committee, said there could be no further delays on taking vital decisions needed to build wind farms and nuclear stations…
Report: Government to delay electricity market reforms
The government is reportedly poised to delay the long-awaited energy bill that would underpin proposed electricity market reforms designed to drive investment in new low carbon generation such as wind farms and nuclear power plants.
However, the Department of Energy and Climate Change swiftly denied the BBC reports, branding them as “categorically untrue”…
Wind industry dismisses “misplaced” fears of turbines coating the countryside
The renewable energy industry has hit back at a report claiming a “dramatic proliferation” of wind turbines is blighting the English countryside, warning “an unrepresentative minority using exaggerated statistics” should not be allowed to derail public support for the technology.
Polls published during the past two weeks have highlighted the popularity of wind and other renewable energy sources as a means of cutting long-term energy bills and reducing the UK’s reliance on insecure energy imports…
Economy
Mileage Rules May Cut Gasoline Tax Income by $57 Billion
A proposed rule requiring automakers to double average fuel economy by 2025 may reduce gasoline-tax collections for U.S. highway and transit systems by $57 billion over 11 years, the Congressional Budget Office said.
President Barack Obama’s administration proposed in November that the average fuel economy of U.S. fleets rise to 54.5 miles per gallon. That would reduce the amount of money available for the Highway Trust Fund by 13 percent from 2012 to 2022, the CBO said in a report released today…
