National policy – Feb 25

February 25, 2008

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Many more articles are available through the Energy Bulletin homepage

Australia and the Export Land Model

aeldric, The Oil Drum: Australia/New Zealand
I normally try to be a “Good News” kind of guy, but today I bring bad tidings. Despite my previous claims that Australia is The Place To Be, we are in for some tough times here.

TOD has featured the Export Land Model (ELM) on several occasions. A summary can also be found in Wikipedia.

The concept is deceptively simple:
Oil producing countries service internal markets first, and then export their surplus. Observations of oil exporting countries show that their internal markets continue to grow rapidly even after the peak. So their exports are hit by 2 factors – declining production and increasing domestic consumption. As a result, their export capacity drops with unexpected rapidity.

… Conclusion.

It is likely that Australia faces some tough choices. This crisis has slipped “under the radar” because the ELM is a relatively new model and we are only now coming to grips with the consequences.

In 5 years our oil demand is likely to increase by a modest amount – perhaps as little as 5-10% – but the ability of our suppliers to export to us is likely to be substantially diminished. The degree to which the exports will be diminished will depend on the success and flow rates of new projects. My estimate, based on current trends and future projects planned by our suppliers, is that a cut in exports by 35-45% is not beyond the realms of reason.

So we are likely to have less oil, and we are going to pay much more for it. We can expect locally produced oil to meet 30-40% of our needs in 5 years. If we accept that we are limited to our “share” of the diminished exports then we can expect to face a shortfall of around 20-30%.

If it is closer to 20%, then we face an extremely difficult time. However, if it is 30% we face an economic catastrophe. Which is it?

Unfortunately, the “error bars” on this estimate are significant, and even 20-30% is more precise than I can justify.
(22 February 2008)

Ryan’s oil security review will cost government €224,000

Dick O’Brian, The Sunday Business Post (Ireland)
Energy minister Eamon Ryan is spending almost a quarter of a million euro on a review of the security of Ireland’s oil supplies, which will include assessing the possibility of constructing an oil pipeline to Britain or continental Europe.

The €224,000 contract has been awarded to Texas-based energy consultants Purvin & Gertz, which will conduct the study in partnership with Dublin-based engineering consultancy Byrne O’Cleirigh.

One issue the consortium has been asked to examine is the cost and benefits of a possible oil interconnection to Britain or continental Europe. It has also been tasked with assessing possible pipeline distribution within Ireland, gauging refining capability and examining possible impacts of alternative liquid fuels.

… “‘We need to know exactly how and from where Ireland can expect its oil in the coming years,’’ Ryan said.’ ‘We need to mitigate against dependency on resources that will peak and then decline. The place to start is with this exercise, so we know exactly where we are and can plan from there.”

The study was commissioned following the publication last year of the government’s white paper ‘Delivering a Sustainable Energy Future for Ireland’. It made a commitment to review the security of oil supplies and assess strategies in relation to being prepared for energy supply disruptions.

A spokeswoman for the minister said that, while the government’s overall objective was progressively to reduce Ireland’s dependence on oil through energy efficiency measures, oil would continue to be very important for electricity generation and the transport sector.
(24 February 2008)

Iceland’s Heated Debate

Marguerite Del Giudice, National Geographic
The people of Iceland awaken to a stark choice: exploit a wealth of clean energy or keep their landscape pristine.

… Iceland happens to be situated right on top of the intersection of two of Earth’s tectonic plates, straddling a volcanic boundary called the Mid-Atlantic Ridge.

Consequently, a third of all the lava that has erupted from the Earth in the past 500 years has flowed out right here, and there are so many natural hot springs that almost all the homes and buildings are heated geothermally. On the surface, meanwhile, sit giant glaciers and the abundant rivers that flow from them. This hot-and-cold combination, of churning activity beneath the surface and powerful rivers above it, makes Iceland one of the most concentrated sources of geothermal and hydroelectric energy on Earth-clean, renewable, green energies that the world increasingly hungers for.

The thing is, very little of that energy has been tapped, because it’s stranded in the middle of the nowhere between continental Europe and Greenland. So, since the 1960s, the government has been wooing heavy industry to Iceland with the promise of cheap electricity, no red tape, and minimal environmental impact. But-except for two small smelters and a ferrosilicon plant-getting companies to come here has been a hard sell. The labor force is very small, highly paid, and probably overeducated. Add to that the remoteness of the place, the long, dark winters, and the inhospitable weather. Only an industry requiring the most intensive use of energy, and which could get a heckuva good rate for it over a long period, would find it economical to set up shop all the way in Iceland. The most obvious fit was the aluminum industry. And so it was-to the alarm of environmentalists who want to save that rare land and the thrill of industrialists who want to use some of it to finally produce something-that the paths of aluminum smelting and unspoiled Iceland were fated to cross.

According to Sigurður Arnalds, the spokesman for Landsvirkjun, the national power company-an avuncular engineer everyone calls “Siggi,” whose hooded eyes and white-fringed balding head give him the same soft appeal as Mr. Magoo-the grand idea was to “export electrical power on ships in the form of aluminum.”

Now elsewhere in the world, Iceland may be spoken of, somewhat breathlessly, as western Europe’s last pristine wilderness. But the environmental awareness that is sweeping the world had bypassed the majority of Icelanders
(March 2008 issue)

Can Turkish economy survive high energy prices?

Metin Gezen, Turkish Weekly
One of the test beds of peak oil, or supply constraints, is Turkey. The country is not gifted with many hydrocarbon reserves and faces a decline in its oil production. The rising thirst of energy for this developing country relies on exports from close countries. Natural gas, which is not peaking soon, is also a twin brother of oil in terms of pricing of the contracts, yet Turkey has no chance on this front either.

Turkey has already paid more that 30 billion US dollars last year for its energy exports (more than 7% of GDP). The advocates of “free market” has not mitigated the solution, yet made it worse. A typical transition from 90s “liberalization, privatization” doctrines to “security of supply, climate change” has not reached the bookshelves, so most of the market fans are repeating the chanting of 90s. On the other hand, the foreign investors are looking for those distribution and generation privatizations.

… Unfortunately, this may not even save the day and Turkey may find itself in the queue for energy crises. “We are working” says the Minister for Energy frequently, but high prices are not something state can sort neither Iran can make a surprise by not cutting gas exports in winter.

The liberal markets are hungry for more gas and imported coal, the record oil prices has not affected car sales and there are no sound policies to stop any of this. The only solution seems like “let the price move freely” which can cost dearly to economy. The whole picture with double gas prices, triple oil prices is a simulation of “peak oil” in a country which fails to adopt the whole package of measures to prevent it in the hands of liberal markets. Awakening can be hoped, only after the yearly economic indicators sing the drama of ignorance.
(25 February 2008)

Tags: Energy Policy, Fossil Fuels, Geothermal, Oil, Renewable Energy