Peak oil review – July 2

Dear Peak Oil Review Readers:

“As you know, the world runs on finite fossil fuels – but whatever fuels Tom Whipple seems to be infinite. Tom is the chief editor of ASPO-USA’s flagship publications, Peak Oil News and Peak Oil Review, both of which reach subscribers around the world. A task he has tirelessly taken on since 2006. Tom has risen early to work on these publications nearly every day – Peak Oil News on mornings from Monday through Saturdays and work preparing Peak Oil Review on Sundays before its release Monday morning. So it’s wonderful that we can report that Tom is finally taking a few very well-deserved weeks off. The daily Peak Oil News will continue as normal. For this edition of Peak Oil Review, we present an expanded briefs section. Tom’s column will return as usual on July 9.”

-Ray Long, ASPO-USA Assistant Director

Quote of the Week

“The age of “cheap oil” is probably behind us, but it is still uncertain what the future level of oil prices might be. Technology may turn today’s expensive oil into tomorrow’s cheap oil.”

– Leonardo Maugeri, in the Harvard energy study “Oil: The Next Revolution” (responses have been written by Dave Summers and Richard Heinberg)

The Briefs(clips from recent Peak Oil News dailies are indicated by date and item #)

• Oil surged on Friday in heavy trading to the fourth biggest daily gain on record, as a deal by European leaders to shore up euro zone banks triggered frantic short-covering by funds that had been riding crude’s price collapse over the last quarter. Despite the sharp gains, both international benchmark Brent and U.S. oil futures posted their biggest quarterly declines since the fourth quarter of 2008 due to weak demand, ample supply and economic worries. (6/30, #1)
• OPEC’s oil output has remained close to its highest since 2008 in June as extra oil from Saudi Arabia and Iraq has compensated for a drop in Iranian supply to its lowest level in more than two decades. (6/30, #4)
• Iran is declaring that it has an “inalienable right” to enrich uranium, reasserting a stand that is rejected by world powers and may prevent a deal to resolve Western suspicions it seeks to build nuclear weapons. Iran’s ambassador to the United Nations, Mohammad Khazaee, said in New York that Iran’s position is that international law and the Nuclear Nonproliferation Treaty guarantee its right to enrich uranium for peaceful purposes and allow it to obtain nuclear-related technology from any country that’s signed the treaty. (6/30, #6)
• The U.S. said China and Singapore have “significantly reduced” their purchases of Iranian oil, earning exemptions from U.S. financial sanctions that otherwise would have been imposed. China was the biggest importer of Iranian crude last year, and Singapore is Asia’s oil trading and refining hub. The U.S. granted renewable, 180-day exemptions on March 20 to Japan and 10 European Union nations. India, South Korea, Turkey, South Africa, Malaysia, Sri Lanka and Taiwan won exemptions June 11. “A total of 20 world economies have now qualified for such an exception,” Secretary of State Hillary Clinton said in an e-mailed statement. “Their cumulative actions are a clear demonstration to Iran’s government that Iran’s continued violation of its international nuclear obligations carries an enormous economic cost.” (6/29, #4)
• Over the past month, the bulk of Iran’s fleet of oil supertankers suddenly disappeared off the map. When they re-emerged on the high seas, the freshly-painted tankers had new names, new flags and new home ports. The ships’ new identities – changed, for example, from Hoda, Honar and Nesa to Precious, Victory and Truth – is the latest episode of a cat-and-mouse game between Tehran and Western officials tracking Iranian oil exports. The rebranding of the tankers, owned by Iran’s NITC, has perplexed and amused the oil trading and shipping community. “To use former Vice-president Cheney’s favorite phrase, ‘It’s like lipstick on a pig’, and will fool nobody,” says Ed Morse, head of commodities research at Citigroup and a former oil official at the US State Department. (6/29, #11)
• Amid Iranian threats to close the Strategic Strait of Hormuz, the only gateway to the Persian Gulf, the United Arab Emirates is ready to pump oil through a new pipeline bypassing the waterway, while Saudi Arabia plans to reopen a long-disused pipeline to the Red Sea. (6/29, #13)
• Turkey’s crude oil imports from Iran dropped by more than 35 percent in May from April as it steps up efforts to ensure the United States waives sanctions on its imports of Iranian oil for the remainder of this year. (6/29, #15)
• Iran acknowledged for the first time on Wednesday that its oil exports have fallen sharply, down 20-30 percent from normal volumes of 2.2 million barrels daily. A National Iranian Oil Company official in Moscow denied exports had been hit by sanctions against Iran’s nuclear program, saying that oilfields were under maintenance and crude production was being diverted for refining. But the admission that exports have fallen substantially is a change of tack from Tehran which until now has denied that the U.S. and European measures have had much or any impact. (6/27, #4)
• South Korea will stop importing Iranian crude oil from July due to an imminent EU insurance ban on tankers carrying Iranian crude, making it the first Asian country to suspend oil purchases from Tehran. The world’s fourth-largest buyer of Iranian crude said it has no plans to provide sovereign insurance guarantees, like Japan, to continue Iranian oil imports but would step up efforts to diversify its sources of oil supplies. (6/26, #11)
• ExxonMobil CEO Rex Tillerson says fears about climate change, drilling, and energy dependence are overblown. In a speech, Tillerson acknowledged that burning of fossil fuels is warming the planet, but said society will be able to adapt. The risks of oil and gas drilling are well understood and can be mitigated, he said. And dependence on other nations for oil is not a concern as long as access to supply is certain, he said. Tillerson blamed a public that is “illiterate” in science and math, a “lazy” press, and advocacy groups that “manufacture fear” for energy misconceptions in a speech at the Council on Foreign Relations. He highlighted that huge discoveries of oil and gas in North America have reversed a 20-year decline in U.S. oil production in recent years. He also trumpeted the global oil industry’s ability to deliver fuels during a two-year period of dramatic uncertainty in the Middle East, the world’s most important oil and gas-producing region. “No one, anywhere, any place in the world has not been able to get crude oil to fuel their economies,” he said. (6/28, #5)
• Rex Tillerson’s acknowledgement that fossil fuel consumption contributes to climate change should have been a PR coup for ExxonMobil when the company’s CEO gave a major address this week. Instead, environmentalists blasted Tillerson’s assertion that the impact of climate change is not as serious as “lazy” journalists and an “illiterate” public believe. Tillerson won praise for reversing the company’s long-standing denial of a correlation between climate change and the burning of fossil fuels. But environmentalists said Tillerson’s remarks won’t sit well with many Americans, especially those affected by extreme weather, climate-related natural disasters and pollution. (6/29, #5)
• Exxon Mobil Corp. is making “no money” on U.S. natural gas due to low prices that have fallen below the cost of production, Exxon Chief Executive Rex Tillerson said Wednesday. He said energy companies won’t be able to continue drilling unless there is a recovery for U.S. natural-gas prices, which fell below $2 per million British thermal units earlier this year to the lowest level in a decade. “We are losing our shirts,” said Mr. Tillerson, speaking at a breakfast event in New York. (6/27, #11)
• The Brent crude oil price at $100 a barrel would be “favorable” for both producers and consumers, Iraq’s Deputy Prime Minister for Energy said, reinforcing a price target set by top OPEC producer Saudi Arabia earlier this year. “Hundred-dollar Brent, I think will allow the world economy to grow and also encourage other producers to produce at a reasonable profit,” Hussain al-Shahristani told CNBC in an exclusive interview. (6/29, #9)
• Oil companies need to address local, national and global concerns before moving ahead with offshore arctic development, a BP official said in Norway. Warmer average global temperatures are melting arctic sea ice and glaciers, exposing vast areas that could hold oil and natural gas reserves. Mike Daly, executive vice president of exploration for BP, told an arctic energy summit that transparency is paramount for energy companies examining arctic reserves. “For the exploration and production industry to address local, national and global concerns around arctic offshore development, it will need to listen carefully to the needs of a number of distinct stakeholders and respond to them,” he said in a statement. (6/28, #6)
• China National Petroleum Corp. needs to start work on parts of the South Pars natural gas field by next March, the Iranian oil minister said. The South Pars gas complex in the Persian Gulf forms one of the largest offshore natural gas fields. By Iran’s estimate, its portion of the field, which it shares with Qatar, holds about 8 percent of the world’s natural gas reserves. Iranian Oil Minister Rostam Qasemi said the government was frustrated with delays by CNPC for work in its section of the offshore field. (6/28, #7)
• Some of the world’s biggest energy companies, including ExxonMobil and Gazprom, have been thrust into the deteriorating territorial dispute between China and Vietnam in the resource-rich South China Sea. Vietnam on Wednesday accused China of acting “illegally” after state-owned China National Offshore Oil Corporation (Cnooc) invited foreign companies to tender for exploration rights in an area that Hanoi says infringes on blocks that it has already licensed to America’s ExxonMobil and Russia’s Gazprom. (6/28, #10, #11)
• Two drill ships are on their way to the Alaskan coast to explore for oil in arctic waters. Shell announced that its Kulluk and Noble Discoverer drill ships left Seattle for Dutch Harbor, Alaska, to wait for sea ice to clear. “Upon arrival in Dutch Harbor, the fleet will await the opportunity to make entry into the Beaufort and Chukchi Seas,” Pete Slaiby, vice president of Shell Alaska, said in a statement. “Once open water allows, the rigs will sail to their respective theaters and commence exploratory drilling.” (6/28, #14)
• Petroliam Nasional Bhd, Malaysia’s state-owned oil and natural-gas company, agreed to buy Progress Energy Resources Corp. (PRQ) for C$4.8 billion in cash ($4.67 billion), advancing its plan to export Canadian gas by ship. (6/28, #15)
• Democratic lawmakers in the United States introduced a measure that would require oil companies to reveal how much they spent on campaign contributions. U.S. Reps. Ed Markey, D-Mass., Rush Holt, D-N.J., and Paul Tonko, D-N.Y., introduced legislation that would require oil companies to disclose campaign contributions made during the last five years. “This bill simply says that, if big oil companies want to drill on more of America’s public lands, they owe fair compensation to the American people,” Holt, ranking member of the House Energy and Mineral Resources Subcommittee, said in a statement. “They should disclose, clearly and publicly, the money that they are spending to influence our political debate.” (6/28, #17)
• The Italian government said it overturned a ban on offshore oil and natural gas development that was enacted after the 2010 oil spill in the Gulf of Mexico. The measure lifts restrictions on exploration licenses for work within 5 miles of the Italian coast and within 12 miles of protected coastal areas. (6/28, #19)
• World oil inventories have risen over the past two months, aided by increased output from Iraq and Libya, but spare production capacity remains tight, the U.S. government said. Global fuels output exceeded consumption by an average of 1 million barrels per day in May and June, helping to push oil inventories higher and prices lower, the Energy Information Administration said in a report. (6/27, #3)
• Oil producing nations should establish a global incident database and share more information to reduce accident risk even as the global offshore exploration sector booms, U.S. Secretary of the Interior Ken Salazar said on Wednesday. “This is a global industry and most of the companies operate all across the world,” Salazar told Reuters in Norway’s third largest city. “The oceans of the world are connected, it’s all one ocean.” “The more information that can be shared around the Earth, the better equipped all nations will be in terms of preventing new accidents.” (6/27, #5)
• BP is set to invest in two pipeline projects vying to carry Caspian natural gas to Europe, the clearest indication yet of how an ambitious plan to lessen Europe’s dependence on Russian gas may play out. (6/27, #6)
• Iraq’s crude output rose to the highest in 20 years as the Halfaya field increased production. Output exceeded 3.07 million barrels a day this month. That compares with a government figure of 2.92 million barrels a day for May published in OPEC’s monthly report on June 12. Iraq, seeking to more than double oil output by 2015, is poised to overtake Iran as OPEC’s second-largest producer by the end of the year. (6/27, #8)
• The U.S. Energy Department predicted carbon dioxide emissions from U.S. energy consumption should remain less than 2005 levels for the next 23 years. The Energy Department’s Energy Information Administration, in its annual report, said energy-related CO2 emissions grow slowly because of economic factors, improvements in energy efficiency and the increased use of low-carbon energy forms. “Emissions remain below their 2005 level from 2010 to 2035, even in the absence of new federal policies designed to mitigate greenhouse gas emissions,” the EIA said in its reports. (6/26, #3)
• British energy company BP announced it was selling oil and natural gas assets in the United States and the North Sea worth at least $1.2 billion. BP said it was selling its minority stake in the Alba and Britannia fields in the British waters of the North Sea to Mitsui and Co. for $280 million in cash. (6/26, #17)
• There’s no reason for IEA members to tap into strategic petroleum reserves given current market conditions, a director said. U.S. and European sanctions targeting Iran’s oil industry are to go into force in the coming days, leaving oil exports from one of the top members of the Organization of Petroleum Exporting Countries sidelined from the energy markets. Maria van der Hoeven, executive director of the International Energy Agency, was quoted by the Platts news service as saying there wasn’t a need to take into strategic reserves to compensate for Iranian sanctions. “There is no reason for that,” she said from Russia. “Given the market situation, there is no justification.” (6/25, #3)
• An agreement between the IEA and Russia in the electricity sector should help ensure Russian markets are transparent, a director said. International Energy Agency Executive Director Maria van der Hoeven signed a memorandum of understanding with officials at Russia’s Energy Forecasting Agency to share data and best practices in the electricity sector. The program would give both sides an opportunity to share information on efficiency, renewable energy and clean-coal production under the terms of a 3-year deal. “This should help enhance the exchange of information and raise transparency of Russian electricity markets,” van der Hoeven said in a statement. (6/25, #4)
• Saudi Arabian Oil Co., the world’s largest crude exporter, is forming a venture capital company to invest in international startups developing new drilling technologies, a person with knowledge of the plan said. Saudi Aramco, as the state-owned producer is known, wants to adopt the latest techniques and expertise for boosting output at older oil fields and fracturing rocks in underground reservoirs to speed the extraction of crude, the person said, declining to be identified because the project is confidential. The investment company will start operating soon, the person said, without specifying a date or indicating how much money it would have to invest. (6/25, #8)
• Italian energy company Eni announced it signed a deal for offshore work in two exploration blocks in the Vietnamese waters of the Gulf of Tonkin. Eni said it signed an agreement with KrisEnergy and Neon Energy for work in the Song Hong and Phu Khanh basins in the Gulf of Tonkin. The agreement, the Italian energy company said, gives it a larger footprint in the Far East and Pacific region following similar developments in Indonesia and Australia. (6/25, #9)
• A stagnant U.S. economy and trouble in the eurozone is keeping demand for fuel products at lower levels, an economist from trade group API said. The American Petroleum Institute stated that U.S. gasoline demand for the first five months of the year was down 0.6 percent compared with the same period last year. API Chief Economist John Felmy said part of the slump in demand may be attributed to better fuel efficiency but most of it was because of a weak economy. “Despite the positive movement, fuel demand is still not strong,” he said in a statement. “Weak growth in the United States, stubborn unemployment and a world economy doing little better than treading water are contributing to this.” (6/25, #10)
• The US natural gas rig count slid another seven rigs to 534 in the week that ended Friday, Baker Hughes said in its weekly report. The gas rig count is at the lowest level it has been at in 13 years, when the total was 531 in August 1999. The US oil rig count was unchanged at a record high of 1,421. (6/30, #5)

Conferences

10^th Annual ASPO Conference videos are available via Youtube: http://www.aspo2012.at/conference-presentations/

Slides are available on the speaker pages: http://www.aspo2012.at/speakers/

ASPO-USA Conference 2012, Nov. 30 – Dec. 1, at the University of Texas at Austin.

Ten to Follow On Twitter

@richardheinberg – Richard Heinberg

@ENERGY – US Department of Energy

@EIAgov – US Energy Information Administration

@postcarbon – Post Carbon Institute

@TransitionVoice – Transition Voice

@Energybulletin_ – Energy Bulletin

@stuartstaniford – Stuart Staniford

@stevelevine – Steve LeVine

@gailtheactuary – Gail Tverberg

@IEA – International Energy Agency<

Five Featured Videos

Michael Klare speaks on “The Race for What’s Left” (3/20/12) at the Carnegie Council in New York City.

Byron King of Agora Financial on the Capital Account program (6/14/12).

Australia’s ABC Catalyst program reports on Peak Oil (4/28/11).

Interviews and topic videos from the SWITCH energy project.

Peak Oil Review editor, Tom Whipple, on what will motivate Americans to face reality (5/24/11).