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.
What do you do if you’re an energy consultancy that finds itself on the wrong side of the peak oil argument just as much of the oil industry and the rest of the world embraces the idea? The solution devised by eternal optimists IHS CERA, hosting a conference in Houston this week, is to sidestep this embarrassing development by simply rebranding the problem: ‘peak demand’. However, as analyst and journalist Chris Nelder explains this week, that peak demand actually looks remarkably similar to peak supply. Demand and supply are always in lock-step, and peak demand won’t be the cause, it will be the effect of a permanently high-cost, dwindling supply.
At first glance, IHS CERA’s views on the US shale gas revolution – outlined in a report published this week – look better considered. They discuss not only the unexpected size of the resource, but also some of the practical and environmental risks. But they appear to miss some major drawbacks.
One issue is how much of the resource can actually be produced, and at what rate. This is a relatively new technology which has achieved dramatic increases in gas production in a short time, but well decline rates are high, so it is unclear how long such growth can be maintained. The jury is also currently out on whether the success with the technology in the US can be replicated in more densely populated areas like Europe.
More fundamentally, it is unlikely the world can afford to burn much if any of its unconventional oil and gas resource and hit climate targets. Modelling by Jim Hansen, director of the NASA Goddard Institute, and Pushker Kharecha of Columbia University, shows that if we burn all the world’s conventional oil and gas – which must be overwhelmingly likely – we could still hold atmospheric CO2 to 400-450 parts per million and temperature rise to less than 1°C above the present – rather than pre-industrial – levels, provided we progressively eliminate coal emissions by 2030 and avoid emissions from non-conventional oil and gas altogether. If we burn the unconventionals, we can kiss all that goodbye.
For shale gas to benefit the climate, even in the short term, it would have to displace more polluting forms of generation like coal. But in the absence of tough policy, this seems unlikely, and shale gas consumption will turn out to be additional, and so raise overall emissions rather than cut them. CCS is in its infancy, unlikely to be installed to all coal fired stations, and in any case can never be 100% efficient – it’s physically impossible – so there will always be emissions from CCS plants. All in all it’s hard to see a boom in shale gas being compatible with achieving climate targets.
In other news this week, while the political fencing match between Washington and Tehran over the latter’s nuclear programme continues, the prospect of sanctions looked more likely as Shell joined Vitol, Trafigura and Glencore in ceasing petrol supplies to Iran. Iran is still looking to China for protection against potentially more damaging UN sanctions. It remains to be seen where Beijing feels its interests lie.
Oil
Crude Oil Poised for Second Weekly Gain on Recovery Optimism
Crude oil traded above $82 a barrel in New York, poised for a second weekly gain, on optimism fuel demand will recover as China’s economic expansion accelerates.
Oil was little changed amid expectations the Organization of Petroleum Exporting Countries will increase shipments this month on strong demand from China, the world’s second-biggest energy user. China’s inflation last month outstripped returns on household savings, threatening to spur asset purchases…
Peak Oil Demand Is Coming, But Here’s Why It’s Not Good News
When oil crossed $120 a barrel for the first time in May 2008, oil cornucopians knew they were in trouble. Prices had quadrupled in just five years, yet had failed to bring new production online. Regular crude had flatlined around 74 million barrels per day (mbpd). The case for peak oil was looking stronger with every new uptick in crude futures.
The following month, prominent peak oil critic and cornucopian Daniel Yergin of IHS-CERA changed his stance: The peak oil threat would be neutralized by peak demand. Gasoline consumption had peaked in the U.S. and Europe, he argued, due to the combined effects of increasing efficiency, biofuels, and the recession…
World crude oil production may peak a decade earlier than some predict
In a new study, scientists in Kuwait have predicted that world conventional crude oil production will peak in 2014 – almost a decade earlier than some other predictions.
Ibrahim Nashawi and colleagues point out that rapid growth in global oil consumption has sparked a growing interest in predicting “peak oil” – the point where oil production reaches a maximum and then declines…
‘Market can absorb spare Saudi capacity’ – Al Falih
Saudi Arabia’s 4 million barrels a day of spare capacity can easily be absorbed into the market when global energy demand recovers after the recession, the head of the kingdom’s state owned oil company said today.
In a speech at a Cambridge Energy Research Associates confernce in Houson, Khalid al Falih, chief executive officer, Saudi Arabian Oil Co, said: “Oil supply will decline if there is no investment, so that 4 million could be absorbed by demand alone.”…
China Starts Work on Guangdong Strategic Oil Reserves
China has started “preliminary work” on the second phase of its emergency oil reserves in Guangdong to help bolster energy security and meet demand, the head of the province’s economic planning agency said.
Construction of storage bases in the cities of Zhanjiang and Huizhou will begin “as soon as possible,” Li Miaojuan, director of Guangdong’s development and reform commission, said after attending a parliamentary meeting in Beijing today. “Everything is progressing as planned.”…
Iraq
Iraq election turnout 62%, officials say
The voter turnout in Iraq’s general elections was 62%, officials said, despite attacks that killed 38 people.
Preliminary results are not expected for several days but the turnout figure is down from the 75% who voted in the 2005 general elections.
Prime Minister Nouri Maliki’s State of Law Coalition is widely expected to win the most seats…
Gas
CERA Week:Natural Gas Focus Is Likely To Change Big Oil’s Face
Big Oil is bent on making natural gas the core of its business, arguing that its abundance, cheapness and environmental friendliness will change the energy landscape forever. The fuel seems bound to reshape an industry known for its booms and busts into a more predictable, staid creature.
Companies such as Exxon Mobil Corp., Royal Dutch Shell PLC and ConocoPhillips are making the transition from dealing mostly in oil, a commodity that’s increasingly scarce and difficult to produce, to natural gas, a fuel that’s suddenly become ubiquitous. Their profits, which can reach unfathomably high levels during good times, are likely to go down accordingly, executives and analysts say. So will the companies’ adventurous ventures in the deep waters and in dangerous regions of the globe…
Europe the new frontier in shale gas rush
The dash for unconventional gas deals by the oil majors signals a shift in strategy in the hunt for new sources of energy. FT Reporters assess the prospects for the main sources of these forms of oil and gas…
US EPA chief concerned about gas drilling fluids
The top U.S. environmental regulator said she was “very concerned” about fluids blamed by some for polluting water supplies near sites where drillers use them to extract natural gas from shale deposits.
U.S. Environmental Protection Agency chief Lisa Jackson said she hopes her agency will launch a study this year into the nature of fluids used in the hydraulic fracturing process of natural gas drilling…
Chinese demand spurs Shell bid for Arrow’s coal gas
China’s new-found thirst for gas is behind Shell and PetroChina’s A$3.3bn (£2bn) bid for Australian producer Arrow Energy, according to analysts.
Arrow, which extracts gas trapped in mines, known as coal-bed methane, from Australia’s Queensland region, advised shareholders to “take no action”…
Electricity
Energy groups to launch plan for European ‘super-grid’
An ambitious plan for an electricity “super-grid” in the North Sea will be launched in London on Monday by a group of 10 leading European companies.
Such a super-grid connecting the UK, Germany and Norway is expected to cost €34bn ($46bn)…
Nuclear
New generation of nuclear in doubt
The Institution of Mechanical Engineers (IMech) said the UK needs to have the first new nuclear power stations up and running by the end of this decade to avoid the lights going out.
However a lack of skilled engineers, delays in the planning process and a shortage in funds mean the building programme is in danger of stalling…
Hybrid fusion: the third nuclear option
THE long-anticipated nuclear renaissance has arrived. In his State of the Union address last month, President Barack Obama announced plans for the US to build a new generation of nuclear power plants, and his budget for 2011 proposes large funding increases for the industry.
Several European countries are also likely to restart their nuclear power programmes soon. The UK plans to increase to 20 per cent the proportion of its electricity generated from nuclear…
UK
Ed Miliband sinks millions into carbon
BRITAIN’s £9.5 billion plan to bury power station pollution under the sea will move a step closer this week.
Ed Miliband, the energy secretary, is ready to give tens of millions of pounds to Eon and Scottish Power, the utility groups, to finish designs for so-called carbon capture and storage (CCS) equipment that would be fitted to coal-fired power stations…
Energy consumer debt ‘hits £132’
Energy consumers in debt to their suppliers now owe an average £132 – 5% more than last year, according to a study.
However, the poll for comparison website uSwitch.com found the number of UK households owing money has dropped from 6.5 million last year to 5.5 million – or 21%…
Grimsby to host a biofuel blockbuster
Grimsby or Hollywood? For most, it’s not much of a choice. Tim Levy is the exception.
As head of Future Capital Partners, a Mayfair investment firm, he has spent the past decade lining up financing for more than 300 films, including blockbusters such as Iron Man 2 and The Bourne Ultimatum. Today he is excited about a vacant lot in the gritty Lincolnshire port.
Levy wants to build a refinery there that will turn wheat into petrol. The plant, he argues, will be a boon to British farmers, who will provide the feedstock, and produce millions of litres of low-carbon fuel for our cars and lorries…
Windfarms find a home near Britain’s eyesores
IT started as an idea over lunch. Richard Nourse, who had made millions as a top energy banker at Merrill Lynch, had just retired at the ripe old age of 42. Sharing a celebratory meal with the finance director of ESB, Ireland’s state electricity giant and a former client, they chewed over how the company planned to clean up its dirty power-generation business.
“If we need to decarbonise the power sector by 2030, it’s a big challenge,” said Nourse. “[The finance director] said that each year ESB looked at about 700 opportunities in new technologies and projects but maybe it needed a more formalised way to assess them.”…
Economy
China’s exports up 46% in February
China’s exports jumped by 46% in February compared with a year ago, raising hopes of a strong recovery in global trade.
The increase was higher than analysts’ expectations of a rise of between 35% and 40%…
Pound takes new beating on growing trade gap
Fresh concerns were raised over the strength of Britain’s economic recovery this morning after it was revealed that the country’s trade deficit with the rest of the world unexpectedly widened during January.
Britain’s deficit in global goods grew to £7.987 billion during January — the biggest total since August 2008…
Transport
£30bn high-speed rail network gets go-ahead
A new £30 billion high-speed rail (HSR) network, with 250mph trains, was announced today by the Government.
Transport Secretary Lord Adonis gave Labour’s backing to a new 335-mile London to Scotland HSR network which would drastically reduce rail journey times….
Beijingers get back on their bikes
Office worker David Dai is one of a growing army of Beijing residents returning to two-wheeled transport.
But the 28-year-old does not rely on his own pedal power – like hundreds of thousands of others, he has bought an electric bike…
Korea unveils the ‘future of transport’ — the Online Electric Vehicle
Its inventors believe that this is the future of urban transport — but it was hard not to be underwhelmed as the test vehicle trundled around a circuit on the edge of the South Korean capital.
The first public demonstration of the Online Electric Vehicle, or Olev, was, however, as much about the road on which it travelled as the prototype bus itself. Electric power strips have been buried 30cm (12in) under the surface and connected to the national grid…
Geopolitics
Traders cut Iran petrol line
The world’s largest oil traders have quietly stopped supplying petrol to Iran in a clear sign that the threat of sanctions and Washington’s behind-the-scenes efforts to convince companies not to sell to Tehran are paying off…
Iran says hopes China won’t bow to sanctions pressure
Iran said on Tuesday it hoped China would not give in to pressure to agree to new sanctions that the United States and its allies hope to win U.N. approval for over its nuclear program.
Washington and other Western powers want China to approve a proposed U.N. resolution imposing new sanctions on Iran, a big source of oil for China, after Iran refused an offer to enrich its uranium abroad…
Vladmir Putin forging ahead with vision of Eurasian empire
The Soviet Union is gradually being rebuilt as Vladimir Putin eyes a return to the Kremlin. The man who declared the collapse of the Communist state to be the “greatest geopolitical catastrophe of the century” appears determined to forge a new empire.
The latest evidence emerged in a suggestion by Igor Shuvalov, First Deputy Prime Minister in Mr Putin’s Government, that Russia may abolish the rouble and create a common currency with Kazakhstan and Belarus…