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ODAC Newsletter - June 29

Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre at nef dedicated to raising awareness of peak oil.

This week saw further confirmation that all is not well in the shale gas industry as ExxonMobil CEO Rex Tillerson admitted "We are all losing our shirts today."..."We're making no money. It's all in the red." The news comes as little surprise since the price of production is estimated to be around $4-7/per million BTUs and prices have been languishing around $2. Exxon is however not giving up on gas — Tillerson described the biggest risk to the industry as "an illiterate public". He will no doubt be less than pleased with the new publicly available lesson provided by Josh Fox, director of Gasland. Fox's new documentary, The Sky is Pink, points to confidential industry documents which contradict assertions around fracking safety.

As oil prices continue to fall there are an increasing number of commentators anticipating that the rise of unconventional oil production is about to have the same effect on the oil market as it has had on US gas. A report released this week by an ex senior manager at Eni SpA, Leonardo Maugeri claims that the stage is set for an oil price crash due to an impending glut of oil. He projects a rise in global oil supply of 17.6mb/d by 2020 from a combination of unconventional sources and enhanced oil recovery from existing wells. The essence of the argument is that high oil prices have stimulated technology and investment such that supply could considerably outstrip demand in the coming period.

The speed at which shale oil production has ramped up in the US has taken even Mr Tillerson by surprise — nevertheless there is huge uncertainty about what can actually be produced — shale gas wells have shown extremely fast decline rates, which means that a huge amount of wells are required to offset decline. The cost of production of much new oil — deepwater, tar sands - is likely to be adversely affected by any significant price crash, and many OPEC countries have become reliant on $80+ prices for stability. In addition Maugeri's projected conventional oilfield depletion rates are lower even than the ever bullish CERA. Overall the report is on message with the energy industry mantra that energy security is assured, but only if politicians clear the way for them to drill.

In the UK this week the government received considerable advice on the upcoming energy reform bill. Friends of the Earth released a report warning against gas dependence, while Consumer Focus, SSE, University of Exeter and WWF led on a communiqué urging a series of measures to strengthen the bill, including a greater emphasis on demand reduction, and a review of the planned contracts for difference CfDs (which are to replace ROCs). The signs are that elements of the forthcoming bill are being hard fought between No 11 Downing Street and DECC, which could result in significant changes. Tim Yeo chair of the Energy Select Committee showed some frustration with the Treasury this week for declining to come and defend the bill claiming that "It looks to me as though they don't want to come because they would find the questions difficult to answer". If one of those questions was on why they might want to further cut subsidies on windpower, then news that renewables hit record levels of electricity generation in Q1 wouldn't be very helpful.

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Oil Rises From Nine-Month Low on Supply, Europe Measures

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Oil supply surge could risk price collapse: Harvard analysis

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France criticised over oil drilling as environment minister removed

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City investors are getting cold feet about Arctic oil prospecting

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Exxon CEO: Fossil fuels will warm planet, but humans can adapt; drilling risks are overstated

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Exxon: 'Losing Our Shirts' on Natural Gas

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Obama's Interior chief: State regulation of fracking 'not good enough for me'

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Gazprom Biggest Loser As Shale Gas Upends World Markets

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BP safety back in spotlight as explosion kills worker in US

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BP sells Wyoming gas fields for $1bn

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Risk of Greek blackouts increases as traders cut or halt power supplies

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Seismologists warn Japan against nuclear restart

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Germany's energy giants: Don't mention the atom

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Biofuels caught in price squeeze

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'Fracking' safe with strong regulation, report says

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Ed Davey urged to take 'foot off the gas' and focus on renewables

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UK energy policy "not up to the job", warn businesses

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Treasury ministers 'avoiding' committee grilling over Energy Bill

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PM under pressure from own cabinet to boost green energy investment

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Government reveals surge in UK renewable energy generation

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Government delays fuel duty hike until January

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Vestas scraps Kent offshore wind factory plan

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Plans for carbon-capture power station abandoned

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EPA Greenhouse-Gas Rules Upheld By U.S. Appeals Court

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