ODAC News
Monday 07 May
The Oil Depletion Analysis Centre
1a/ Natural Gas Market Review 2007 -- Security in a globalising market
to 2015 [IEA new book] (International Energy
Agency, Thu 03 Apr)
1b/ IEA
gives warning of global gas shortage
(The Independent, Fri 04 May)
2/ Power station harnesses
Sun's rays (BBC News, We 02 May)
3/ Exxon Mobil Says Peak
Oil Unlikely in the Next 25 Years
(Daily Reckoning, Thu 03 May)
4/ European Summer
Electricity Prices May Reach Records (Update1)
(Bloomberg, Thu 03 May)
5/ U.K. Natural Gas Rises
on Lower Imports, Britannia Maintenance
(Bloomberg, Thu 03 May)
6a/ The
Peak Oil Crisis: Week Twelve (
6b/ Gasoline
crack hits 20 month high (Platts, Wed 02 May)
7/ Event:
USA, 2007 Houston World Oil
Conference, Houston, Texas, 17-20 October 2007
8a/ PetroChina shares spurt on oil find
(Financial Times, Fri 04 May)
8b/ China
claims major oil field find
(BBC News, Fri 04 May)
9/ OTC: Operators told to
prepare for storm season
(Oil and Gas Journal, Wed 02 May)
10/ It
isn't over yet for Lord Browne [Lord Browne and Peak Oil]
(The Independent on Sunday [
11/ Biofuels:
The great green con
(The Independent on Sunday [
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1a/ Natural Gas Market Review 2007 -- Security in a globalising market to
2015 [IEA new
book]
(International Energy Agency, Thu 03 Apr)
Executive Summary http://www.iea.org/Textbase/npsum/GasMarket2007SUM.pdf
View the Press Release http://www.iea.org/Textbase/press/pressdetail.asp?PRESS_REL_ID=223
Table of Contents http://www.iea.org/Textbase/nptoc/GasMarket2007TOC.pdf
Buy the book http://www.iea.org/w/bookshop/add.aspx?id=310
Comment: One handy thing about IEA
publications is that sometimes there is so much publicity info on their
website, you can get the gist of the contents without having to buy the
publication. The following headings from the Executive Summary give the
gist: Investment outlook worsens; Gas demand drops in 2006, but gas
remains expensive; Gas-fired power demand stays strong; Gas security is
deteriorating; The world “dodged a bullet” in 2006 but gas remains vulnerable
and expensive. In a nutshell – natural gas shortages are on the horizon.
This is from the Press Release:
<<As a result, the growing links between gas and
electricity markets need to be recognised by everyone, as gas-fired power now
sets the price and provides security to power supplies. “Cheap and secure
electricity is better ensured with cheap and secure gas,” said Mr. Mandil.
Another result is that gas demand will increase
steadily in the coming years. “The northern hemisphere winter has been very
mild, temporarily reducing gas demand and disguising the underlying tightness
of the market. But gas remains vulnerable and expensive,” said Mr.
Mandil.>>
“ensured with cheap and secure gas… But gas
remains vulnerable and expensive” - Maybe Mandil means no more cheap and secure
electricity?
Article: These quotes are taken from
the Executive Summary, link above.
Investment outlook worsens
Investment in the gas sector is a serious cause for concern,
having worsened in comparison to the GMR 2006. Current upstream investment to
2015 is considerably below the amount required, with particular weakness in
several regions. Gas investments everywhere are suffering higher costs and
construction delays, in keeping with energy investments generally, although
proposed LNG projects seem especially affected. A selection of these LNG
projects shows production delays averaging almost a year, with average cost
overruns of more than USD 2 billion per project. Furthermore, only one major
new LNG liquefaction project has been sanctioned in more than a year and a
half, a marked slowdown compared to previous years. Reports pointing towards
the formation of a gas producers’ association, analogous to OPEC, will do little
to improve this situation.
... As well as affecting existing projects, increasing
costs have been blamed for the postponement and cancellation of significant new
developments worldwide. At the same time, the companies with the skills to
deliver these increasingly complex projects are seeing reduced access to
reserves...
The world “dodged a bullet” in 2006 but gas
remains vulnerable and expensive
A very mild winter in 2006 and in some regions 2007
took significant pressure off gas demand in what was becoming a strong
suppliers’ market. This should not lure decision makers into a false sense of
security. Supplies remain tight, and new projects under development are subject
to rising costs and increasing delays. A return to more normal winter conditions
in consuming countries will put strong pressure on gas supplies.
Colder-than-normal weather in the winter (or indeed hotter weather in the
summer) could quickly see supply difficulties re-emerge in some areas. There
are very real concerns that upstream investments and long distance pipelines
will not develop quickly enough to meet growing demand, especially if power
generation investment continues to favour gas.
1b/ IEA gives warning of global gas shortage
(The Independent, Fri 04 May)
http://news.independent.co.uk/business/news/article2510922.ece
Comment: The Independent is one
of the few media outlets (the only one so far?) that has picked up on what should
be on the front page of every newspaper. We are heading for permanent natural
gas shortages.
“It also advocated a more efficient use of gas and a
diversification of supply sources and routes.” – the
‘diversification of supply sources’, in the case of the EU, usually means
diversify away from
Article: The world's leading energy
watchdog has warned of a looming global gas shortage unless more money is
poured into investment.
The Paris-based International Energy Agency said the
fuel would take a more dominant role over the next decade and supply must be
expanded to match it. It said that while consuming countries could consider
building up emergency stocks, this would not be "a silver bullet".
The comments, made in the IEA's second annual Natural
Gas Market Review published yesterday, follow similar warnings last year.
"While the 2006 review expressed concern about insufficient investment, we
are even more worried this year and see it as the major threat to secure
affordable global gas supplies over the medium to longer term," said the
IEA executive director Claude Mandil. "Cost increases and delays are
hitting investment hard in many places, and this phenomenon is not limited to a
specific producing region."
The IEA called on the governments of its 26 member
countries, which include the
"The northern hemisphere winter has been very
mild, temporarily reducing gas demand and disguising the underlying tightness
of the market. But gas remains vulnerable and expensive," Mr Mandil added.
British gas and power prices have been rising this
week, driven by reduced gas flows. Imports through the Norwegian and Dutch
pipelines have dropped sharply in response to maintenance work and lighter
summer contracts. But forecasts for gas demand are higher than usual for the
time of year.
Rob Laughlin, an energy broker at Man Financial, said
British Gas and Powergen were unlikely to pump
millions more pounds into investment until they had a clear idea of the Government's
future energy policy, including its plans for renewables.
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2/ Power station harnesses Sun's rays
(BBC News, We 02 May)
http://news.bbc.co.uk/1/hi/sci/tech/6616651.stm
Comment: A good description of how
solar power stations work, in this case, southern
Article: From a distance, as we
rounded a bend and first caught sight of it, I couldn't believe the strange
structure ahead of me was actually real.
A concrete tower - 40 storeys high - stood bathed in
intense white light, a totally bizarre image in the depths of the Andalusian countryside.
The tower looked like it was being hosed with giant
sprays of water or was somehow being squirted with jets of pale gas. I had
trouble working it out.
In fact, as we found out when we got closer, the rays
of sunlight reflected by a field of 600 huge mirrors are so intense they
illuminate the water vapour and dust hanging in the air.
... It is
It works by focusing the reflected rays on one
location, turning water into steam and then blasting it into turbines to
generate power.
As I climbed out of the car, I could hardly open my
eyes - the scene was far too bright. Gradually though, shielded by sunglasses,
I made out the rows of mirrors (each 120 sq m in size) and the focus of their
reflected beams - a collection of water pipes at the top of the tower.
... So far, only one field of mirrors is working. But
to one side I could see the bulldozers at work clearing a second, larger field
- thousands more mirrors will be installed. Ultimately, the entire plant should
generate as much power as is used by the 600,000 people of
... What happens when the Sun goes down? Enough heat
can be stored in the form of steam to allow generation after dark - only for an
hour now but maybe longer in future.
Anyway, the solar power is most needed in the heat of summer
when air conditioners are working flat out.
Is it true that this power is three times more
expensive than power from conventional sources? Yes, but prices will fall, as
they have with wind power, as the technologies develop.
Also, a more realistic comparison is with the cost of
generating power from coal or gas only at times of peak demand - then this
solar system seems more attractive.
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3/ Exxon Mobil Says Peak Oil Unlikely in the Next 25 Years
(Daily Reckoning, Thu 03 May)
http://www.dailyreckoning.com.au/exxon-mobil-peak-oil/2007/05/03/
Comment: Byron King, who writes on
Peak Oil regularly for Whiskey and Gunpowder, reviews in some detail Exxon Mobil’s
position on Peak Oil. See where ExxonMobil stands regarding the timing of Peak
Oil compared to others: Peaking of world oil production: Recent forecasts (R.
Hirsch, World Oil, April 2007. See Table 3).
Richard Vierbuchen is the
Chief of Exploration at Exxon Mobil. He gave the talk, which Byron is referring
to, at the Offshore Technology Conference in
Article: Exxon Mobil’s (NYSE: XOM)
position is to disagree that the current state of affairs represents any sort
of present or imminent “peaking” in world oil output. In fact, Exxon’s stated
position is this:
“A peak in petroleum liquids production, resulting
solely from resource limitations, is unlikely in the next 25 years. Predictions
of an imminent peak based on [the methodology developed by Shell Oil Co.
geologist M. King Hubbert] in 1956 do not adequately
account for resource growth from application of new technology, knowledge and
capability, which combine to increase recovery, open new producing areas and
lower economic thresholds.
“Supplies from OPEC and non-OPEC countries,
gas-related liquids and unconventional resources are growing. Furthermore,
nations with the largest remaining resources produce under long-term restraints
not envisioned in Hubbert’s method. The ultimate peak in petroleum production
may result from factors other than resource limitations.”
Exxon Mobil forecasts an increase in demand for
petroleum liquids from about 85 million b/d in 2006 to 115 million b/d in 2030,
or average growth in demand of about 1.2 million b/d per year. Worldwide, over
the next 25 years, the ability of the petroleum industry to meet this demand
will depend, in great measure, on what Exxon calls “adequate access to petroleum
resources.” This latter term includes ensuring that the oil industry has access
to drill in areas not previously explored or exploited, such as geographically
or politically isolated areas, as well as areas of deep water or extreme
climate, that require the development of new technology.
... Exxon Mobil also notes that “it is possible that
the peak, when it occurs, may result from a cause other than resource
limitation (e.g., government policies, lack of access to existing resources,
competition from alternative energy sources, improvements in energy
efficiency).”
So Exxon Mobil is not claiming that there is no Peak
Oil problem. It is just a question of timing and time frames, and according to
the world’s largest publicly traded oil company, the time for Peak Oil is not
now or in the immediate future. To the extent that there is an oil supply
problem anywhere on the near horizon, the Exxon Mobil view is that it derives
from limited access to prospective regions and under-investment in exploration,
development and other related extractive infrastructure. To the extent that
prices are rising, it is because global demand for liquid hydrocarbon has been
strong and growing, particularly in the developing world, and certainly in
Whether Mr. Vierbuchen and
Exxon Mobil are correct or wildly incorrect about the timing of a peak in world
oil production is something that many of us will probably live to see.
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4/ European Summer Electricity Prices May Reach Records (Update1)
(Bloomberg, Thu 03 May)
http://www.bloomberg.com/apps/news?pid=20601109&sid=aJAhz6SyZO0M&refer=exclusive
Comment: A repeat of last summer?
Article: Electricity prices may reach
record highs in
``The chances are we will see significant increases in
prices,'' Kim Keats, head of power and fuels at ICF International Inc. in
... Hot weather affects supplies as well as demand.
Rising temperatures reduce water levels on
... Warmer waters also restrict how much cooling water
power plants can discharge for environmental reasons. Such limits force power
plants to generate less electricity.
Power Cuts
A ``severely hot'' summer in Europe could lead to
output cuts at French nuclear power plants, Mark Daubney,
a strategic specialist in the European Energy Services department of John Hall
Associates Ltd., said two days ago in a phone interview.
``It could lead to very high prompt prices in July and
August,'' he said. ``There could be a knock-on effect to the Benelux countries,
... Prices of next-quarter power contracts may fall if
meteorologists change their forecasts or temperatures fall in
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5/
http://www.bloomberg.com/apps/news?pid=email_en&refer=energy&sid=ahTWSx9KmfIM
Comment: The journalist who wrote this
article has obviously cottoned on that there is something not quite right here.
Namely, gas exports from
“…indicating
The implications could not be clearer. Less gas for
the
Comment from an ODAC News reader: “It seems Langeled
gas can go to the continent, so bidding wars to come?”
Article: U.K. natural-gas prices rose
for a fifth consecutive day as supplies were curbed by reduced imports from
Norway and after ConocoPhillips said it will shut the second-largest British gas
field for maintenance this quarter.
... Flows through Langeled, a pipeline that carries
Norwegian gas to the
Within-day prices in the
... Norwegian gas was flowing through the Langeled
pipeline at a rate of 25.8 million cubic meters a day, little changed from
yesterday's average, according to
``There are no production issues,'' Lars Nermoen, a spokesman for Norsk Hydro ASA, one of the
exporters of Norwegian gas said in a phone interview today. ``We produce when
demand is high.''
Average flows through Langeled since it started
operating in October last year have been about 46 million cubic meters a day,
according to grid data. The link will become
Tori Lindbol, a spokeswoman for
``It's probably lower nominations,'' she said by phone
yesterday. ``Our customers are all covered.''
Aging gas fields in Britain means the nation has to
rely more on imports and gas stored underground to make up for its shortfall as
energy consumption grows.
**********************************************************************************************************
6a/ The Peak Oil Crisis: Week Twelve
(
http://www.fcnp.com/index.php?option=com_content&task=view&id=1217&Itemid=33
Comment: While Peak may be years away,
or not, there is a strong possibility that the USA may be short on
gasoline/petrol later this year, due to insufficient refining capacity and lack
of imports, leading to much higher prices.
Article: For three months now, US
gasoline stockpiles have been dropping steadily. Nationwide, gasoline prices
jumped 10.2 cents a gallon last week to an average of $2.97 and $3.46 around
6b/ Gasoline crack hits 20 month high
(Platts, Wed 02 May)
http://www.platts.com/Oil/Resources/Podcasts/europe/index.xml
Comment: This is a Platts podcast, 3m
36s long. You do not have to download the file, just click and listen. If
Platts are suggesting much higher
Article: Price at highest level since
Hurricane Katrina in 2005.
In this podcast Simon Thorne, managing editor for
Platts European oil, and Alan Hayes, Platts light ends team leader, discuss why
gasoline crack swaps have hit $23.50/b, the impact of this on petrol prices in
the
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7/
Event:
We are pleased to
announce that ASPO-USA will hold its 2007 World Oil Conference, October 17-20, at the Hilton
Americas in downtown
Honorary Co-chairmen of the Conference are Houstonians Matt Simmons of Simmons & Company International, and Art Smith of John S. Herold, Inc.
ASPO Week in
The Houston Conference agenda will feature technical sessions on Reserves and Production; Substitute Fuels; Peak Oil & Climate Change; Peak Oil Reports from the GAO, National Petroleum Council, and AAPG; a Natural Gas/LNG Update; a Net Energy Update; Mitigation Scenarios; Smart Policy Initiatives (local, state & national); and Smart Money & Investment in the Age of Peak Oil.
Registration will open on or about June 1st. For more information on agenda details, speakers and activities as they become available, as well as a review of past Conferences, please see our website at www.aspousa.org.
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8a/ PetroChina shares spurt on oil find
(Financial Times, Fri 04 May)
Comment: This must be the first 3B+
barrel oil field to be found in years. Anti-peak oilers
will be beside themselves- “We told you so, lots more oil to be found”. One 3B
barrel oil field per decade, or whatever, does not a global oil boom make. The
fact that we now find so few is a reason to be concerned, not celebrating.
“Annual production is now nearing a peak of about
3.7bn barrels a day.” – should be 3.7mn barrels a day. See IEA Data for China. Note that the article acknowledges
Article: Shares in PetroChina,
the overseas-listed unit of
PetroChina
said that it had confirmed in principle “proven reserves” of oil of 405m
tonnes, or about 3bn barrels, and gas of 111m tonnes of oil equivalent.
The total amount of oil and gas in the Jidong Nanpu field, including
“probable” and “possible” reserves, was equal to 1,020m tonnes. “The company
believes the Jidong Nanpu
oilfield is a bulk, quality and efficient oilfield,” it said.
... As oil demand and imports have soared in recent
years, Chinese domestic production and reserves have increased only modestly,
despite extensive exploration efforts. Annual production is now nearing a peak
of about 3.7bn barrels a day.
... Nearly half of PetroChina’s
existing output is from Daqing, the company’s
traditional base in the north-east of the country. But in recent years, it has
become increasing difficult to lift production out of Daqing.
The new field itself is also well situated, in shallow
waters near the large northern centres of
8b/
http://news.bbc.co.uk/1/hi/business/6623179.stm
Comment: Over the last year, there
were various reports of new 1B+ barrel oil fields that subsequently turned out
to be no such thing, including two 10B barrel fields - one in
Article:
PetroChina
said the find off
Western analysts said that while the field, called Jidong Nanpu, would probably
produce less than a quarter of that amount, it was still a major find.
Energy consultant Andrew Hayman
of IHS said that under Western standards, Jidong Nanpu would probably have nearer to 650 million barrels of
commercially recoverable reserves.
"This field obviously will be a major asset to
the Chinese economy given its proximity to domestic markets," he said.
"And since it is located in [just] three metres
of water the costs of development and exploitation will be relatively cheap."
PetroChina
is 90% owned by the state-run China National Petroleum Corporation.
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9/ OTC: Operators told to prepare for storm season
(Oil and Gas Journal, Wed 02 May)
Comment: OTC = Offshore Technology Conference
According to Wikipedia, “In the North Atlantic, a distinct hurricane
season occurs from June 1 to November 30, sharply peaking from late August through
September”.
Article: With less than 30 days to
another hurricane season, operators need to ready themselves for what is
forecast to be another "very active" storm period, said oil and gas
professionals during a panel discussion at the Offshore Technology Conference.
The 2007 hurricane season could produce as much as 17
storms, 5 of which could be major hurricanes. Meteorologists further estimate a
74% chance of a major hurricane hitting the
The "Storm Warnings" panelists
made assessments and suggestions which operators could consider or implement to
ensure that their various facilities are prepared to weather the looming
Hurricane season.
... Frank Puskar, president
of Energo Engineering Inc., Houston, said companies
may need to increase deck elevation on new platforms and should be concerned
about deck elevation of existing platforms. He explained that of 120 platforms
destroyed during Hurricanes Ivan in 2004, Katrina, and Rita, "60% had wave
in the deck."
Puskar
said platforms designed using the modern American Petroleum Institute RP 2A
guidelines with new design deck elevations had a "good chance of not being
destroyed." API RP 2A is the recommended practice for planning, designing,
and constructing fixed offshore platforms...
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10/ It isn't over yet for Lord Browne [Lord Browne and Peak Oil]
(The Independent on Sunday [
http://news.independent.co.uk/business/analysis_and_features/article2516620.ece
Comment: David Strahan, author of
recently published The Last Oil Shock, writes on Lord Browne’s Peak Oil
legacy.
Article: Is it possible that Lord
Browne's humiliation is not yet complete? It may be hard to credit in a week
when he was forced to resign with immediate effect - at a personal cost of £15m
- after lying in a witness statement about a lover he met through a male escort
agency. But however salacious the details, the scandal is about the least
interesting aspect of his reign as the "Sun King" of BP. Far more
significant was his vociferous rejection of the growing evidence that global
oil production will soon go into terminal decline, with potentially devastating
consequences. That position now looks equally untenable. Lord Browne may be
about to lose not only his throne and his payoff, but also his rose-tinted
spectacles.
No oilman likes the idea that his might be the next
sunset industry, but more than any other executive, Lord Browne has made it his
business to denounce this growing school of thought. In one typical speech in
2004, he proclaimed: "We have to demonstrate that there has been no
shortage of oil, and that there is no shortage of oil, and that there never
need be a shortage ... there is no reason why there should be any shortfall in
the foreseeable future."
... The company's growth came, in large part, through
a series of massive takeovers around the turn of the century as it snapped up
Amoco, Arco and Burmah Castrol
in quick succession. But adding reserves and production capacity by
cannibalising other groups does nothing to increase the total oil available to
humanity. Once growth by acquisition is stripped out, the world's biggest oil
companies were producing no more of the black stuff in 2005 than a decade
earlier. And that's despite the world market having grown by 20 per cent, and
the spending of billions of dollars on their upstream operations. These figures
speak louder than Lord Browne's bullish words.
Even more suggestive are Lord Browne's own spectacular
gambles in
... For the time being the gamble appears to be paying
off, having boosted BP's oil production by around half a million barrels per
day. But closer inspection of the figures shows that had Lord Browne flinched
and not done the deal, the company's output would have fallen by almost as
much. Given the dearth of opportunities elsewhere, it looks as if he had little
choice.
But the true scale of the gamble is now becoming
clear, as
... His [Lord Browne's] denial matters in particular
because of his influence over Tony Blair. With luck, the departure of both men
will herald a more realistic attitude to the oil supply outlook and galvanise
policymakers into preparing for the inevitable global peak that Total chairman
Thierry Desmarest expects by 2020 - and others much
sooner. If not, we may find out the hard way the true meaning of BP's slogan,
Beyond Petroleum.
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11/ Biofuels: The great green con
(The Independent on Sunday [
http://news.independent.co.uk/business/analysis_and_features/article2516619.ece
Comment: Reports over the last few
months suggest that food prices (meat and poultry) in the
Article: So by blending crops such as
sugar and corn with petrol, biofuels will slash carbon emissions and save the
planet. Right? Not when the price is escalating food prices and the clearing of
the rainforests.
Arnold Schwarzenegger, the Governor of California,
uses it in one of his Hummers. Sir Richard Branson, the Virgin boss, wants to
fuel his planes with it. American President George Bush hopes it can wean his
country off oil imports from the
Biofuel is the latest green craze. It is made from
crops such as wheat, rapeseed, corn and sugar, and less commonly, waste
products such as used cooking oil and tallow (animal fat). According to biofuel's many fans, blending conventional petrol and
diesel with these crops or waste reduces the amount of crude oil needed and the
overall amount of carbon released into the atmosphere.
Everyone is jumping on the biofuel bandwagon. In his
State of the Union address in January, Mr Bush announced a 15 per cent target
for the replacement of petrol by biofuels in US vehicles. Over the next 18
months, American biofuel production capacity will double to some 7 per cent of
the petrol that the country consumes. The EU has set a less ambitious target of
just under 6 per cent by the end of the decade; this could rise to 10 per cent.
But questions are starting to be raised about just how
green biofuels really are. They encourage deforestation - responsible for
around a quarter of the world's carbon emissions - as land is cleared to grow
the crops. Biofuels have also driven up food prices, hitting the world's poor
the hardest. According to the International Grain Council, at the end of this
financial year the world's grain stocks (corn, wheat and barley) will be the
lowest since the 1970s, mainly because of soaring demand from biofuels. Some of
these "green" energy sources also use up more energy during the manufacturing
and refining process than they save.
... It does not necessarily follow that sugar cane
grown in
... The British Government has admitted that a
"significant proportion" of
... Chris Brodie, a partner
at the
... It is also estimated that to feed ethanol
consumption of 7 per cent (by volume) will take up 40 per cent of total
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