ODAC News

 

Thursday 22 March

 

ODAC - The Oil Depletion Analysis Centre

 

 

1/   Burning the Furniture            (Global Public Media [Richard Heinberg], Thu 22 Mar)

2/   Iran yet to finish UAE gas pipeline     (Arabian Business, Sun 11 Mar)

3/   UK Gas prices

3a/  Pressure Mounts on LNG? [UK gas imports]  (McCloskey’s UK Powerfocus)

3b/  UK gas consumption plummets        (UK Dept of Trade and Industry statistics, 04 Jan 2007)

3c/  Many UK manufacturing jobs lost in 2006      (Andrew Mackenzie, Oct 2006)

4/   The UK Chancellor’s Speech - UK oil and gas revenues           (BBC website, Wed 21 Mar)

5/   Premier targets the Middle East        (The Times [UK], Thu 22 Mar)

 

1 ton of crude = approx 7.3 barrels of oil (6.6-8.0 bbl. of crude oil with 7.333 bbl. taken as average)

100 million tonnes/year = 2 million barrels/day (approx)

 

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1/         Burning the Furniture      (Global Public Media [Richard Heinberg], Thu 22 Mar)

 

http://globalpublicmedia.com/richard_heinbergs_museletter_179_burning_the_furniture

 

Richard discusses a soon-to-be-published report that suggests we are not as well-endowed with as much global coal reserves as we thought. If true, this would be fairly devastating news (for the global economy, not  the climate):

 

<<A soon-to-be-released study by the Energy Watch Group in Germany on the future of global coal supplies has implications so surprising and far-reaching that energy policymakers may take years to digest it. This essay is intended to help speed that process. The report’s central conclusion is that minable global coal reserves are much smaller than is commonly thought, and that a peak in world coal production is likely within only ten to fifteen years.

 

I will first offer some context for appreciating these conclusions, by way of some general information about global coal usage. Then I will describe the basis for the report’s conclusions, and finally will attempt to draw out some of the implications (not discussed by the report’s authors) for world energy supply and climate policy.>>

 

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2/         Iran yet to finish UAE gas pipeline           (Arabian Business, Sun 11 Mar)

 

http://www.arabianbusiness.com/index.php?option=com_content&view=article&id=9237:iran-yet-to-finish-uae-gas-pipeline&Itemid=1

 

“The deal became controversial in Iran last year after politicians said the country would not benefit from the exports because gas prices had risen sharply since the initial contract was signed. Iran later said it would not export to the UAE until it secured a higher price.”  Various gas-exporting countries are not happy with the contracts they signed a few years ago. Gas prices have gone way up and now they are committed to contracts that they think are too cheap. With a shortage of gas, some contracts will be re-negotiated. Note that the UAE is also desperate for more gas and it is right in the middle of the Middle East. Development in Dubai (in the UAE) over the last 4-5 years has been phenomenal, and the hundreds of thousands of new flats coming on to the market this year and next (see Freehold prices set to fall in ’08) will be unbearably hot without air conditioning – not a prediction, but a possibility if there is not enough gas. Last week’s Middle East Economic Survey (MEES) stated that the Dolphin project, transporting natural gas from Qatar’s North Field to the UEA, has been delayed to 3Q2007. Qatar is in the meantime sending much smaller quantities (400 mn cfd as opposed to 2 bn cfd when Dolphin is commissioned) from elsewhere to Dubai:

 

<<Iran has yet to finish building a platform and pipeline to link its offshore Salman gas field to the United Arab Emirates, some nine months after exports through the line were due to start, a Dana Gas executive said on Sunday.

 

"For technical reasons the platform and the pipeline have yet to be completed," Dana Gas External Affairs Manager Nasser Akram told Reuters.

 

Akram could not say when imports would begin to the UAE, which needs the gas to meet rapidly rising domestic demand.

 

... An extended wrangle over the imported gas price between Iran and Crescent Oil was unlikely to end until the plant and pipeline were ready, industry sources said.

 

The deal became controversial in Iran last year after politicians said the country would not benefit from the exports because gas prices had risen sharply since the initial contract was signed. Iran later said it would not export to the UAE until it secured a higher price.

 

Last month, Iran's oil minister said it would keep the gas for domestic consumption if it does not strike a deal. Industry sources said this was an empty threat, as there is no pipeline linking Salman with Iran's domestic gas infrastructure.

 

... Dana Gas was set up to deliver gas to utilities and industrial users in the UAE. With the agreement to import Iranian gas delayed, the company has virtually no operating income and has looked for new routes for expansion.

 

Dana bought Canada-based oil and gas explorer Centurion Energy International in January for $979 million, a step in its strategy to expand the scope of its operations in the Middle East and North Africa.>>

 

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3/         UK Gas prices

 

It is now clear why UK gas prices are so low. A combination of higher supplies because of the Langeled pipeline, combined with a significant drop in demand.

 

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3a/        Pressure Mounts on LNG? [UK gas imports]        (McCloskey’s UK Powerfocus)

 

No link.

 

The Feb issue of McCloskey’s UK Powerfocus notes that the price of natural gas in the UK is now so low that it is no longer profitable to import LNG. The cause of the low gas prices is the way the UK free markets work. When there is too much gas, the price plummets, not enough the price rockets. This time last year gas prices in the UK were among the highest in Europe. The cause of high prices last year was that the UK govt had not prepared alternative gas supplies to replace the indigenous North Sea supplies that were/are falling at about 10%/annum – they may well have been listening to sources that told them there was not a problem. Last autumn the Langeled pipeline opened up bringing gas from Norway, thus why prices are so low now. For the moment at least, the UK does not need LNG. However, one might hazard a guess that by the end of next year we might. UK gas production will by then have fallen sufficiently low that, including gas supplies from Langeled, total gas supplies will be about the same as they were late 2005.

 

 

3b/        UK gas consumption plummets   (UK Dept of Trade and Industry statistics, 04 Jan 2007)

 

http://www.dtistats.net/energystats/et4_1.xls (Excel spreadsheet)

 

Figures published by the UK Dept of Trade and Industry show that UK gas consumption fell over the first three quarters of 2006, compared to 2005. No wonder after the high prices of last year. The DTI will be publishing data for the 4Q2006 over the next week or two.

 

Total Demand (GWh)

 

            Q1                    Q2                    Q3

2005     358,044             240,202             188,788

2006     355,174             220,513             169,291

% fall    0.8                    8.2                    10.3

 

 

3c/        Many UK manufacturing jobs lost in 2006 (Andrew Mackenzie, Oct 2006)

 

http://www.igem.org.uk/f/1_-_Andrew_Mackenzie_-_presentation_4.pdf  (554 Kb)

 

This presentation given at the IGEM Winter Outlook Seminar in Oct 2006 suggests that thousands of UK manufacturing jobs were lost last year as a result of the high gas prices. See in particular (there are no page numbers):

 

"Impact on UK Manufacturing (1)":           Glass Sector Closures in the last 18 months – 6000 jobs lost

 

Impact on UK Manufacturing (2):             Paper Sector Closures in the last 18 months

 

Impact on UK Manufacturing (3):

 

  • Imerys – china clay, Cornwall – 800 jobs lost
  • Britannia – zinc smelter, Avonmouth – 500 jobs lost
  • Laycast – iron foundry, Sheffield – 150 jobs lost
  • ONS reports 100,000 job losses in manufacturing in last 12 months – citing high energy prices
  • ILEX report for DTI concluded 1.4 million jobs at risk in the event of a prolonged interruption to industrial gas supplies

 

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4/         The UK Chancellor’s Speech - UK oil and gas revenues     (BBC website, Wed 21 Mar)

 

http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/21_03_07_budget_speech.pdf

 

From the Chancellor’s Budget speech yesterday (bottom page 2):

 

<<Our forecasts of the current balance from 2007-08 to 2011-12 are affected by one major change in the last year - the sharply lower levels of production and yet higher costs in the North Sea - which have this year reduced tax revenues from £13 billion to £8 billion and for each year into the future cut them by an average of £4 billion a year.>>

 

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5/         Premier targets the Middle East  (The Times [UK], Thu 22 Mar)

 

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1552212.ece

 

There has been quite a lot of, for want of a better word, propaganda in the UK media over the last few years about ‘how much’ oil there is still left to find in the UK sector of the North Sea, when in fact they mean ‘how little’. This article leaves little doubt:

 

<<Bid-target Premier Oil today joined the growing list of explorers targeting the Middle East as it said there was little of value left to find in the North Sea.

 

... Simon Lockett, Premier Oil’s chief executive, said that while high taxes meant there were few incentives to explore in the North Sea, the bigger problem was that most oil and gas in the UK had already been found.

 

I’m not surprised the Chancellor left the tax regime unchanged, It doesn’t make me happy but unfortunately the oil industry is an easy target,” he said. “But the basic problem is geological, the remaining rocks in the North Sea are simply not that attractive.”

 

... The group said it was well placed to hit a production target of 50,000 barrels a day in the medium term but said UK output had fallen 30 per cent in the past year.>>

 

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