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.
Iran’s announcement on Sunday that it was cutting off oil sales to Britain and France ahead of the EU embargo sent Brent crude oil prices soaring to a 9 month high of $124/barrel and an all-time UK high of over £78. The price of oil is now firmly back in the news alongside a rash of articles rejecting peak oil, declaring imminent US energy independence, and discussing the changing balance of geopolitical power away from OPEC.
For some interesting perspective on the ‘peak oil is over’ story, most recently expounded by a Citigroup report, take a look at the fascinating debate between John Hofmeister former President of Shell vs Dr. Tad Patzek, incoming president of the Association of the Study of Peak Oil (ASPO). Patzek argues compellingly that oil reserves, especially non-conventional reserves, don’t equate to oil production and that it is global production in the face of rising demand that matters. Hofmeister appeared to have taken at least some of this on by the time he was interviewed by CNBC this week — “Demand globally is not down. That’s the issue. Demand continues to rise in Asia and whether we use less or not, doesn’t matter. The price is going up because supply can’t keep up with the demand”. For more on US oil prospects see ‘Energy independence, or impending oil shocks?‘.
Al Jazeera had a feature article on peak oil this week which focused on the insecurity behind OPEC reserve figures — with so much reliance on Saudi spare capacity it was interesting to note this week that Saudi Aramco is to reopen its oldest oilfield which it closed in the early 80’s — the field is relatively small (500 million barrels), and contains heavy oil. Saudi oil exports and production for December 2011 reportedly fell from November’s 30 year record.
In other news the EU’s controversial vote on whether to label oil from the tar sands as highly polluting failed to reach a majority decision— the decision will now be referred to ministers. In the UK Prime Minister David Cameron defended that government’s onshore wind policy in a response to 100 backbench MPs who had recently published an open letter challenging the policy. Meanwhile marine renewables received a ringing endorsement from the Commons Committee on Energy and Climate Change. The Committee urged the government to adopt policies to exploit the UK’s position as the world leader in the field.
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Disclaimers
Oil
Oil reaches record euro high on Iran
Brent crude oil powered to a nine-month high above $124 per barrel on Thursday and reached its highest ever price in euro terms, lifted by heightened tension between Iran and the West.
The U.N. nuclear watchdog’s latest mission to Iran failed to budge a defiant Tehran over its disputed nuclear programme, heightening fears that possible military confrontation could lead to supply disruption…
Threat to economy could force IEA to release oil: Kemp
Political leaders in the United States and Europe could soon face an uncomfortable choice between raising the pressure on Iran further or taking steps to safeguard their economies from the damage wrought by rising oil prices.
Confrontation with Iran and a series of supply disruptions in South Sudan, Syria and Yemen have pushed prices back to levels that derailed the recovery in the United States and Europe last year, and could do again in the first half of 2012…
Has the United States beaten peak oil? Not so fast.
In the past five years, warnings about peak oil have gained a lot of traction. U.S. oil production, after all, has fallen sharply since 1970. Global oil output has plateaued of late, even as China and India are demanding ever more crude. And that’s all caused prices to soar.
Yet the recent shale-oil boom in North Dakota has some analysts brushing off this gloomy perspective. A new research note (pdf) from Citigroup argues that the recent surge in North American production has “buried” the peak-oil hypothesis. New drilling technology has allowed companies to extract oil from once-inaccessible shale rock, which has, in turn, allowed the U.S. to slash its oil imports dramatically. What’s more, there are tantalizing shale deposits all around the world — in Argentina, Australia, and even France. So does that mean that, as the Citigroup analysts say, the peak-oil hypothesis is “dead”? Well, not so fast…
Energy independence, or impending oil shocks?
Gasoline is back over $4 a gallon here in California and U.S. crude is holding firm over $100 a barrel, even though domestic demand is off more than 8 percent from the 2005 peak on an annual basis, and a whopping 16 percent on a monthly peak-to-trough basis. And that can only mean one thing: We’re entering the silly season in oil punditry.
A deluge of recent articles have asserted that the U.S. is on its way to energy independence thanks to the miracle of shale oil, or “tight oil.” (Shale oil is actual crude oil produced from tight shale formations like the Bakken. Tight oil is a broader term including shale oil and natural gas liquids produced from shale gas plays. Horizontal drilling and “fracking” are used in both kinds of shale production.) None of them, however, have demonstrated how we would get there…
Interview with ex-Shell CEO Hofmeister
CNBC: Joining us now, John Hoffmeister, former President and CEO of U.S. operations at Shell Oil, founder for citizens for affordable energy.
Great to have you on the broadcast this morning. You heard Mr. Trump describe it [oil] as the nation’s blood. What is the price of that blood going to be, let’s say, over the next six months?
JH: I think we’re headed for 120, $130 West Texas…
Oil: In perpetuity no more
Oil touches nearly every single aspect of the lives of those in the industrialised world. Most of our food, clothing, electronics, hygiene products and transportation simply would not exist without this resource.
There is a reason why oil giants such as ExxonMobile, BP, Total and Royal Dutch Shell, year in and year out, generate more profit than most other companies on the planet…
Saudi Aramco to Re-Open Oldest Field to Tap Heavy Oil, EIU
Saudi Arabian Oil Co. plans to re- open the Gulf kingdom’s oldest oil field and produce there for the first time in 30 years as the company boosts output of heavy crude, the Economist Intelligence Unit said.
The state-owned producer, known as Saudi Aramco, may revive a plan from 2008 to restore production at the mothballed Dammam field, the EIU said in a report. Dammam contains some 500 million barrels of oil and may yield as much as 100,000 barrels a day of Arabian Heavy crude, according to the report…
Saudi Arabia Cut Oil Output, Exports in December, JODI Says
Saudi Arabia, OPEC’s largest crude producer, reduced oil output and exports in December from November when it produced the most in more than 30 years, according to the Joint Organization Data Initiative.
The country reduced output by 237,000 barrels a day or 2.4 percent to 9.81 million barrels a day of crude compared with 10.047 million in November, statistics posted today on JODI’s website show. The kingdom’s exports were cut 7.36 million barrels a day from 7.8 million barrels, according to the figures, which include condensates and exclude natural-gas liquids…
Venezuela’s oil industry: Spilling over
ON FEBRUARY 4th Hugo Chávez, Venezuela’s president, held festivities to celebrate the anniversary of a failed coup attempt he led in 1992. He had busloads of public workers brought into Caracas for the occasion. Among them were high-ranking employees of PDVSA, the state oil company.
That same day, a pipeline carrying pressurised oil fractured in the state of Monagas. The crude soared 25 metres (82 feet) into the air and flowed for a full day. Anywhere from 40,000-120,000 barrels poured into a river that supplies drinking and irrigation water. Some 550,000 people now lack water at home. Although city-dwellers can fetch it from drums that PDVSA is leaving in streets, people in remote areas are going without. It may take months to clean the supply…
Shell Clears Major Hurdle in Its Bid for New Arctic Drilling
In a crucial step toward the ultimate approval of new oil drilling off the North Slope of Alaska, the Interior Department on Friday tentatively approved Shell’s plans for responding to a potential spill in the frigid Arctic waters.
Shell still needs to cross several more regulatory barriers before it will be permitted to begin drilling as many as six exploratory wells in the Chukchi Sea in July. But the green light from the Interior Department on the company’s oil spill response plan is a clear sign that the Obama administration is disposed toward allowing the drilling despite the dogged opposition of many environmentalists…
Gas
Natural-Gas Glut Could Bypass Europe
A major transformation of the global market for natural gas is under way. Fresh international supply routes are being drawn, new exporters are emerging and established trade patterns are being turned on their heads.
Yet Europe, the world’s second-largest natural-gas market behind the U.S., stands apart from much of this change. It looks likely that new sources of internationally traded natural gas will be largely gobbled up by Asia, leaving both the U.K. and Europe stuck in their codependency with Russia…
Gas-Fracking Ban in Upstate New York Upheld by State Court Judge
A central New York town can block natural-gas drilling after a state judge, in the first test of local laws, upheld the Town of Dryden’s ban on hydraulic fracturing.
State Supreme Court Judge Phillip Rumsey in a ruling released yesterday said the town’s zoning amendment on gas drilling wasn’t pre-empted by state law. Denver-based Anschutz Exploration Corp. sued in September, seeking to overturn the ordinance, which bans gas and oil exploration in the town about 200 miles (322 kilometers) northwest of Manhattan…
Nuclear
Hendry: UK’s nuclear reactor fleet could be extended beyond 2025
The UK’s ageing nuclear reactors look likely to have their lives extended beyond the mid-2020s as the country looks to tackle a looming energy gap, energy minister Charles Hendry said today.
Nuclear power is a cornerstone of the government’s low carbon energy policy, but of the UK’s 19 reactors, only Sizewell B in Suffolk is currently scheduled to keep running beyond the middle of the next decade, leading to plans for 16GW of new plants at eight sites across the country…
Centrica faces big questions on nuclear despite Franco-British summit
David Cameron and Nicolas Sarkozy invoked the spirit of entente cordiale on Friday in Paris, reaffirming their countries’ commitment to building Britain’s new fleet of nuclear power plants.
There were supporting statements from blue-chip corporate names such as Rolls-Royce on this side of the English Channel and EDF and Areva on their side of la Manche. All was fusion…
Renewables
Europe’s Biggest Solar Power Incentive Bolsters Ukraine: Energy
Solar-power capacity in Ukraine is forecast to double this year, spurred by the completion of Europe’s biggest photovoltaic plant in December and incentives a third higher than anywhere else in the region.
Developers in the former Soviet republic may add panels with 300 megawatts of capacity after last year installing about 200 megawatts, according to the Association of Alternative Fuels and Energy Market Participants, the main lobby group tracking PV installations in the nation. It had just 2.5 megawatts in 2010…
China Energy Consumption Rises at Fastest Pace in Four Years
China’s energy use rose at the fastest pace in four years in 2011 and efficiency improved, according to the National Bureau of Statistics.
Consumption climbed 7 percent to 3.48 billion metric tons of standard coal equivalent, a report on the bureau’s website showed today. That’s the fastest rate since 2007, when it was 7.8 percent, according to data compiled by Bloomberg. Consumption per unit of gross domestic product fell 2.01 percent from 2010, the bureau said, without elaborating…
UK
Britain must act fast to rule wave-power world
UK’s marine energy firms will be left trailing in their rivals’ wake unless ministers take more visionary approach, MPs warn
Britain’s dream of leading the world in harnessing the power of the sea is in danger of being sunk by risk-averse, under-ambitious policymakers who are letting foreign rivals dominate a multibillion-pound industry. An influential Commons committee warns that without a “more visionary” approach from ministers and officials, the development of wave and tidal technology will stall and other countries will steal a march on British firms…
Gas Swings at Two-Year High Expose U.K.’s LNG Dependence: Energy Markets
Traders in U.K. natural gas are grappling with the most changeable prices in more than two years as investors weigh Britain’s growing dependence on imports and a waning ability to respond to surges in demand.
Price swings in day-ahead gas, as measured by 30-day historical volatility, more than tripled to 156 percent in the two weeks to Feb. 13, the highest since October 2009, broker prices compiled by Bloomberg show. A cold snap strained the U.K. storage network this month and exposed its reliance on liquefied natural gas from the Middle East, according to Sabine Schels, a commodity strategist at Bank of America Corp…
Drax mixes up biomass plan with mooted £700m co-firing project
Drax’s game of brinkmanship with the government over biomass subsidies has intensified, after the owner of the UK’s largest coal-fired power station said it had scrapped plans to build a dedicated biomass plant, but would invest £700m in co-firing biomass-coal technology depending on the outcome of a major subsidy review.
Announcing its preliminary final year results, Drax chief executive Dorothy Thompson, yesterday revealed the company had cancelled plans for a 290MW biomass plant in Selby, North Yorkshire, blaming a lack of financial support from the government for the emerging technology…
David Cameron defends windfarm plans to Tory MPs
The prime minister has mounted a strong defence of the government’s plans to build huge wind farms around the country in the face of strong opposition from his own members of parliament.
David Cameron has written to more than 100 of his own backbenchers who published an open letter to the PM asking for subsidies for “inefficient” on-shore wind power to be slashed, and complaining about planning policies putting national energy policies ahead of local objections…
British Gas owner stokes profit anger
Energy provider’s results set to prompt backlash as fuel poverty grows and utility bills rise
The backlash against the “big six” energy providers will intensify this week when British Gas-owner Centrica announces a profit leap in the face of growing fuel poverty and high utility bills…
Climate
EU tar sands fight not over, experts at stalemate
Years of fierce lobbying against draft EU rules that would label fuel from tar sands as more polluting than from other sources produced a stalemate on Thursday when a committee of technical experts failed to agree on the proposal.
The European Union’s executive and environmentalists say the “dirty” label is necessary to help fuel buyers choose the least carbon-intensive energy forms and help to curb global warming…
Cut all fossil-fuel use: scientists
Two Canadian climate-change scientists from the University of Victoria say the public reaction to their recently published commentary has missed their key message: that all forms of fossil fuels, including the oilsands and coal, must be regulated for the world to avoid dangerous global warming.
“Much of the way this has been reported is (through) a type of view that oilsands are good and coal is bad,” said climate scientist Neil Swart, who co-wrote the study with fellow climatologist Andrew Weaver…