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Arctic Oil Still Seen Decades Off as Producers Balk at Costs – Bloomberg

Arctic Oil Still Seen Decades Off as Producers Balk at Costs – Bloomberg.

By Mikael Holter and Niklas Magnusson  Feb 24, 2014 4:41 AM ET

Lundin Petroleum AB (LUPE), the Swedish explorer focused on Norway, said there won’t be any new oil output in the ice-filled waters of the Arctic for at least 15 years because of technical and logistical challenges.

“I don’t think we’ll see any oil production in the Arctic any time soon — probably not this decade and not the next,” Chairman Ian Lundin said in a Feb. 20 interview in Stockholm. “The commercial challenges are too big.”

The Arctic holds 30 percent of the world’s undiscovered natural gas reserves and 13 percent of its undiscovered oil, according to U.S. Geological Survey estimates. Still, exploration of the Arctic ocean floor, where 84 percent of these resources are thought to be trapped, has suffered setbacks in recent years.

Royal Dutch Shell Plc. (RDSA)Europe’s biggest oil company, in January again halted drilling plans off Alaska after a court ruled the area had been illegally opened to exploration. That followed a previous postponement after a series of technical mishaps in 2012, including the stranding of a rig.

Off the coast of Greenland, drilling has yet to resume after Cairn Energy Plc (CNE) spent $1 billion on exploration without making commercial finds in iceberg-ridden waters, while Russia’s Shtokman gas project, 600 kilometers (370 miles) from shore in the Barents Sea, has been stalled for years.

Lower Priority

As companies including Shell and Norway’s state-controlled Statoil ASA (STL) cut planned investments amid rising costs across the industry, expensive Arctic projects could get a lower priority.

“It may take a while to develop the right technology,” Lundin’s chairman said. “Investments are very, very high so it still has to be commercially justified.”

Another factor undermining the appeal of expensive exploration projects is the outlook for crude prices. Brent oil for delivery in 2016 is trading at about $97.45 a barrel, down 11 percent from the current spot price of $110.07 for the global benchmark, according to data compiled by Bloomberg from the Ice Futures Europe Exchange.

An exception to Arctic challenges is the southern part of Norway’s Barents Sea, Lundin said. While inside the Arctic circle, it benefits from a less-harsh climate and shallower and ice-free waters, and may hold 8 billion barrels of oil equivalent in undiscovered resources, more than 40 percent of the country’s total.

Dwindling Reserves

To compensate for dwindling reserves in aging North Sea fields, Norway is pushing into the Barents, which holds 54 of the 61 blocks the government has proposed issuing in its next licensing round. More than half will be in a newly opened area previously disputed with Russia.

“In the Barents Sea we’ll probably see production much sooner because there’s no technological gap,” he said. “It’s now just a matter of having the reserve base that you’re required to have to justify the investment.”

Lundin fell as much as 0.8 percent and traded 0.2 percent lower at 127.3 kronor as of 10:40 a.m. in Stockholm. That curbs the stock’s gain to 1.5 percent so far this year and gives Lundin a market value of 40.5 billion kronor ($6.2 billion.)

Some oil production has already started in Arctic waters. BP Plc (BP/)’s Prudhoe Bay field in Alaska has been producing since the 1970s, while OAO Gazprom in December became the first Russian company to extract oil from the Arctic seabed at the Prirazlomnoye field in the Pechora Sea.

Contrasting Outlooks

Eni SpA (ENI) will become the first company to produce oil in Norway’s Barents Sea when its Goliat field starts in the third quarter this year, even though the Norwegian Petroleum Directorate has said it expects delays. Statoil’s Snohvit gas field, which began output in 2007, is the only producing field in the Norwegian Barents Sea to date.

Lundin discovered as much as 145 million barrels of oil at the Gohta prospect in the Barents Sea last year. That has helped revive optimism among explorers after Statoil postponed an investment decision on its nearby Johan Castberg project because of higher costs, taxes and uncertainty about resource estimates of as much as 600 million barrels of oil.

Gohta was Norway’s first oil discovery in Permian layers with sufficient flow, and opened up a new exploration model for the area with as many as 10 new drilling targets, the Swedish explorer has said. Lundin is planning an appraisal well at Gohta in the second quarter and will drill the nearby Alta prospect in the third.

Lundin’s optimism contrasts with Statoil, which has found oil at just one of four exploration wells designed to boost crude resources for its Castberg project and make it more profitable. Still, current resources are sufficient to be developed and Gohta could even be coupled with Castberg, Lundin has said.

“There are other discoveries in the same area” as Gohta, the chairman said. “After we go through the appraisal phase we’ll hopefully be in a position where we can just press the button for development.”

To contact the reporters on this story: Niklas Magnusson in Stockholm atnmagnusson1@bloomberg.net; Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

California Getting Record Volume of Canadian Oil by Rail – Bloomberg

California Getting Record Volume of Canadian Oil by Rail – Bloomberg.

By Lynn Doan and Dan Murtaugh  Jan 31, 2014 7:34 PM ET

California, the third-largest oil-refining state in the U.S., is bringing in a record volume of oil fromCanada by rail as it faces shrinking supplies from Alaska and within the state.

The most populous U.S. state received 709,014 barrels of crude from Canada by rail in December, a 4.9 percent increase from November and up from zero a year ago, data posted on the state Energy Commission’s website show. Canada made up 67 percent of the state’s total oil-by-rail receipts. North Dakota, where fields in the Bakken formation are producing a record volume of crude, shrank to a 5.9 percent share.

U.S. West Coast refiners from Valero Energy Corp. (VLO) to Tesoro Corp. (TSO), lacking pipeline access to the glut of shale oil in the middle of the country, have been turning to rail to counter declining supplies in California and Alaska. California brought in a record 2.83 million barrels of oil by rail in the fourth quarter from all sources, almost double the amount from the three months prior, the state said.

“We’re seeing a lot of Canadian crude-by-rail loading facilities coming online, so it’s no surprise it’s beginning to show up in California,” David Hackett, president of energy consulting firm Stillwater Associates in Irvine, California, said by telephone. “Refinery configuration in California is oriented toward heavy or medium, sour crude, and the Canadian barrels, which are heavy and somewhat sour, are a better fit than the light Bakken barrels.”

North Slope

Alaska North Slope crude, which made up 12 percent of California’s oil slate in 2012, has traded an average $27.73 a barrel above Western Canadian Select, a heavy sour blend, over the past month, data compiled by Bloomberg show. Bakken oil has traded $16.09 a barrel above Western Canadian.

“The discounts have been pretty big, an indication of how constrained the pipelines are up in Canada,” Gordon Schremp, a fuels analyst at the state Energy Commission, said by telephone fromSacramento. “I’m not surprised to see more Canadian come in. Wait until some of these rail projects get built here. The economics will be even better than what we’re seeing today.”

Oil-by-rail receipts from Wyoming totaled 221,793 barrels in December, making up the second-largest share of the state’s volume at 21 percent. North Dakota sent 62,325 barrels and New Mexico 12,927.

Alaskan oil output has declined every year since 2002 as the yield from existing wells shrinks. Alaska North Slope crude production averaged 567,600 barrels a day in December, down from 582,150 a year earlier, data posted on the Alaska Department of Revenue’s website today showed.

To contact the reporters on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net; Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

Shell Stops Alaska Program in Year of ‘Hard Choices’  |  Peak Oil News and Message Boards

Shell Stops Alaska Program in Year of ‘Hard Choices’  |  Peak Oil News and Message Boards.

Royal Dutch Shell revealed Thursday that 2014 will see the company stop its Alaska program and focus on achieving better capital efficiency by making ‘hard choices’ about new projects and reducing capital spending.

Announcing its results for 2013, Shell said that the landscape the company had expected has changed and it cited factors such as the worsening security situation in Nigeria and delays to non-operated projects in several countries. With North American natural gas prices remaining low, the company said it particularly plans to focus on restructuring and improving profitability in its North American upstream operations.

“Our ambitious growth drive in recent years has yielded a step change in Shell’s portfolio and options, with more growth to come, but at the same time we have lost some momentum in operational delivery, and we can sharpen up in a number of areas,” New Shell CEO Ben van Beurden said in a company statement.

“Our overall strategy remains robust, but 2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance.”

Meanwhile, Shell said the recent Ninth Circuit Court decision against the Department of the Interior “raises substantial obstacles to Shell’s plans for drilling in offshore Alaska”. As a result, Shell has decided to stop its exploration program for Alaska in 2014.

“This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said. “We will look to relevant agencies and the Court to resolve their open legal issues as quickly as possible.”

Shell’s capital spending in 2014 is targeted at around $37 billion, compared with the $46 million it spent in 2013. Meanwhile, the firm plans to increase the pace of its asset sales, which are expected to be $15 billion for 2014-2015 in both its upstream and downstream segments.

“We are making hard choices in our world-wide portfolio to improve Shell’s capital efficiency,” van Beurden added.

RIGZONE

University of Alaska Scientists: Fukushima Radiation May Be Making Alaska Seals Sick Washington’s Blog

University of Alaska Scientists: Fukushima Radiation May Be Making Alaska Seals Sick Washington’s Blog.

Is Fukushima Radiation Making West Coast Wildlife Sick?

American sailors on the USS Reagan got really sick after having snowball fights with radioactive snowblowing off of the coasts of Fukushima.

University of Alaska professors Doug Dasher, John Kelley, Gay Sheffield, and Raphaela Stimmelmayr theorize that radioactive snow might have also caused Alaska’s seals to become sick (page 222):

On March 11, 2011 off Japan’s west coast, an earthquake-generated tsunami struck the Fukushima Daiichi nuclear power plant resulting in a major nuclear accident that included a large release of airborne radionuclides into the environment. Within five days of the accident atmospheric air masses carrying Fukushima radiation were transiting into the northern Bering and Chukchi seas. During summer 2011 it became evidentto coastal communities and wildlife management agencies that there was a novel disease outbreak occurring in several species of Arctic ice-associated seals. Gross symptoms associated with the disease included lethargy, no new hair growth, and skin lesions, with the majority of the outbreak reports occurring between the Nome and Barrow region. NOAA and USFWS declared an Alaska Northern Pinnipeds Usual Mortality Event (UME) in late winter of 2011. The ongoing Alaska 2011 Northern Pinnipeds UME investigation continues to explore a mix of potential etiologies (infectious, endocrine, toxins, nutritious etc.), including radioactivity. Currently, the underlying etiology remains undetermined [i.e. scientists don’t yet know what caused the seals’ sickness, but they think it might have been Fukushima radiation]. We presentresults on gamma analysis (cesium 134 and 137) of muscle tissue from control and diseased seals, and discuss wildlife health implications from different possible routes of exposure to Fukushima fallout to ice seals. Since the Fukushima fallout period occurred during the annual sea ice cover period from Nome to Barrow, a sea ice based fallout scenario in addition to a marine food web based one is of particular relevance for the Fukushima accident. Under a proposed sea ice fallout deposition scenario, radionuclides would have been settled onto sea ice. Sea ice and snow would have acted as a temporary refuge for deposited radionuclides; thus radionuclides would have only become available for migration during the melting season and would not have entered the regional food web in any appreciable manner until breakup (pulsed release). The cumulative on-iceexposure for ice seals would have occurred through externalinhalation, and non-equilibrium dietary pathways during the ice-based seasonal spring haulout period for molting/pupping/breeding activities. Additionally, ice seals would have been under dietary/metabolic constraints and experiencing hormonal changes associated with reproduction and molting.

Here are some pictures of the sick seals:

Harmed: Seals like this one in Barrow, Alaska, have been found with bleeding lesions, damaged fur and flippers thought to have been caused by radiation from Fukushima, Japan.

Many other West Coast animals have gotten sick. Scientists need to get to the bottom of what is making them sick, whether it’s radiation or something else.

Peak Oil Is Dead | Michael T. Klare

Peak Oil Is Dead | Michael T. Klare.

Long Live Peak Oil!

Cross-posted with TomDispatch.com

Among the big energy stories of 2013, “peak oil” — the once-popular notion that worldwide oil production would soon reach a maximum level and begin an irreversible decline — was thoroughly discredited.  The explosive development of shale oil and other unconventional fuels in the United States helped put it in its grave.

As the year went on, the eulogies came in fast and furious. “Today, it is probably safe to say we have slayed ‘peak oil’ once and for all, thanks to the combination of new shale oil and gas production techniques,” declared Rob Wile, an energy and economics reporter for Business Insider.  Similar comments from energy experts were commonplace, prompting an R.I.P. headline at Time.com announcing, “Peak Oil is Dead.”

Not so fast, though.  The present round of eulogies brings to mind the Mark Twain’s famous line: “The reports of my death have been greatly exaggerated.”  Before obits for peak oil theory pile up too high, let’s take a careful look at these assertions.  Fortunately, theInternational Energy Agency (IEA), the Paris-based research arm of the major industrialized powers, recently did just that — and the results were unexpected.  While not exactly reinstalling peak oil on its throne, it did make clear that much of the talk of a perpetual gusher of American shale oil is greatly exaggerated.  The exploitation of those shale reserves may delay the onset of peak oil for a year or so, the agency’s experts noted, but the long-term picture “has not changed much with the arrival of [shale oil].”

The IEA’s take on this subject is especially noteworthy because its assertion only a year earlier that the U.S. would overtake Saudi Arabia as the world’s number one oil producer sparked the “peak oil is dead” deluge in the first place.  Writing in the 2012 edition of itsWorld Energy Outlook, the agency claimed not only that “the United States is projected to become the largest global oil producer” by around 2020, but also that with U.S. shale production and Canadian tar sands coming online, “North America becomes a net oil exporter around 2030.”

That November 2012 report highlighted the use of advanced production technologies — notably horizontal drilling and hydraulic fracturing (“fracking”) — to extract oil and natural gas from once inaccessible rock, especially shale.  It also covered the accelerating exploitation of Canada’s bitumen (tar sands or oil sands), another resource previously considered too forbidding to be economical to develop.  With the output of these and other“unconventional” fuels set to explode in the years ahead, the report then suggested, the long awaited peak of world oil production could be pushed far into the future.

The release of the 2012 edition of World Energy Outlook triggered a global frenzy of speculative reporting, much of it announcing a new era of American energy abundance. “Saudi America” was the headline over one such hosanna in the Wall Street Journal.  Citing the new IEA study, that paper heralded a coming “U.S. energy boom” driven by “technological innovation and risk-taking funded by private capital.”  From then on, American energy analysts spoke rapturously of the capabilities of a set of new extractive technologies, especially fracking, to unlock oil and natural gas from hitherto inaccessible shale formations.  “This is a real energy revolution,” the Journal crowed.

But that was then. The most recent edition of World Energy Outlook, published this past November, was a lot more circumspect.  Yes, shale oil, tar sands, and other unconventional fuels will add to global supplies in the years ahead, and, yes, technology will help prolong the life of petroleum.  Nonetheless, it’s easy to forget that we are also witnessing the wholesale depletion of the world’s existing oil fields and so all these increases in shale output must be balanced against declines in conventional production.  Under ideal circumstances — high levels of investment, continuing technological progress, adequate demand and prices — it might be possible to avert an imminent peak in worldwide production, but as the latest IEA report makes clear, there is no guarantee whatsoever that this will occur.

Inching Toward the Peak

Before plunging deeper into the IEA’s assessment, let’s take a quick look at peak oil theory itself.

As developed in the 1950s by petroleum geologist M. King Hubbert, peak oil theory holdsthat any individual oil field (or oil-producing country) will experience a high rate of production growth during initial development, when drills are first inserted into a oil-bearing reservoir.  Later, growth will slow, as the most readily accessible resources have been drained and a greater reliance has to be placed on less productive deposits.  At this point — usually when about half the resources in the reservoir (or country) have been extracted — daily output reaches a maximum, or “peak,” level and then begins to subside.  Of course, the field or fields will continue to produce even after peaking, but ever more effort and expense will be required to extract what remains.  Eventually, the cost of production will exceed the proceeds from sales, and extraction will be terminated.

For Hubbert and his followers, the rise and decline of oil fields is an inevitable consequence of natural forces: oil exists in pressurized underground reservoirs and so will be forced up to the surface when a drill is inserted into the ground.  However, once a significant share of the resources in that reservoir has been extracted, the field’s pressure will drop and artificial means — water, gas, or chemical insertion — will be needed to restore pressure and sustain production.  Sooner or later, such means become prohibitively expensive.

Peak oil theory also holds that what is true of an individual field or set of fields is true of the world as a whole.  Until about 2005, it did indeed appear that the globe was edging ever closer to a peak in daily oil output, as Hubbert’s followers had long predicted.  (He died in 1989.)  Several recent developments have, however, raised questions about the accuracy of the theory.  In particular, major private oil companies have taken to employing advanced technologies to increase the output of the reservoirs under their control, extending the lifetime of existing fields through the use of what’s called “enhanced oil recovery,” or EOR.  They’ve also used new methods to exploit fields once considered inaccessible in places like the Arctic and deep oceanic waters, thereby opening up the possibility of a most un-Hubbertian future.

In developing these new technologies, the privately owned “international oil companies” (IOCs) were seeking to overcome their principal handicap: most of the world’s “easy oil” — the stuff Hubbert focused on that comes gushing out of the ground whenever a drill is inserted — has already been consumed or is controlled by state-owned “national oil companies” (NOCs), including Saudi Aramco, the National Iranian Oil Company, and the Kuwait National Petroleum Company, among others.  According to the IEA, such state companies control about 80 percent of the world’s known petroleum reserves, leaving relatively little for the IOCs to exploit.

To increase output from the limited reserves still under their control — mostly located in North America, the Arctic, and adjacent waters — the private firms have been working hard to develop techniques to exploit “tough oil.”  In this, they have largely succeeded: they are now bringing new petroleum streams into the marketplace and, in doing so, have shaken the foundations of peak oil theory.

Those who say that “peak oil is dead” cite just this combination of factors.  By extending the lifetime of existing fields through EOR and adding entire new sources of oil, the global supply can be expanded indefinitely.  As a result, they claim, the world possesses a “relatively boundless supply” of oil (and natural gas).  This, for instance, was the way Barry Smitherman of the Texas Railroad Commission (which regulates that state’s oil industry)described the global situation at a recent meeting of the Society of Exploration Geophysicists.

Peak Technology

In place of peak oil, then, we have a new theory that as yet has no name but might be called techno-dynamism.  There is, this theory holds, no physical limit to the global supply of oil so long as the energy industry is prepared to, and allowed to, apply its technological wizardry to the task of finding and producing more of it.  Daniel Yergin, author of the industry classics, The Prize and The Quest, is a key proponent of this theory.  He recently summed upthe situation this way: “Advances in technology take resources that were not physically accessible and turn them into recoverable reserves.”  As a result, he added, “estimates of the total global stock of oil keep growing.”

From this perspective, the world supply of petroleum is essentially boundless.  In addition to “conventional” oil — the sort that comes gushing out of the ground — the IEA identifies six other potential streams of petroleum liquids: natural gas liquids; tar sands and extra-heavy oil; kerogen oil (petroleum solids derived from shale that must be melted to become usable); shale oil; coal-to-liquids (CTL); and gas-to-liquids (GTL).  Together, these “unconventional” streams could theoretically add several trillion barrels of potentially recoverable petroleum to the global supply, conceivably extending the Oil Age hundreds of years into the future (and in the process, via climate change, turning the planet into an uninhabitable desert).

But just as peak oil had serious limitations, so, too, does techno-dynamism.  At its core is a belief that rising world oil demand will continue to drive the increasingly costly investments in new technologies required to exploit the remaining hard-to-get petroleum resources.  As suggested in the 2013 edition of the IEA’s World Energy Outlook, however, this belief should be treated with considerable skepticism.

Among the principal challenges to the theory are these:

1. Increasing Technology Costs: While the costs of developing a resource normally decline over time as industry gains experience with the technologies involved, Hubbert’s law of depletion doesn’t go away.  In other words, oil firms invariably develop the easiest “tough oil” resources first, leaving the toughest (and most costly) for later.  For example, the exploitation of Canada’s tar sands began with the strip-mining of deposits close to the surface.  Because those are becoming exhausted, however, energy firms are now going after deep-underground reserves using far costlier technologies.  Likewise, many of the most abundant shale oil deposits in North Dakota have now been depleted, requiring anincreasing pace of drilling to maintain production levels.  As a result, the IEA reports, the cost of developing new petroleum resources will continually increase: up to $80 per barrel for oil obtained using advanced EOR techniques, $90 per barrel for tar sands and extra-heavy oil, $100 or more for kerogen and Arctic oil, and $110 for CTL and GTL.  The market may not, however, be able to sustain levels this high, putting such investments in doubt.

2. Growing Political and Environmental Risk: By definition, tough oil reserves are located in problematic areas.  For example, an estimated 13 percent of the world’s undiscovered oil lies in the Arctic, along with 30 percent of its untapped natural gas.  The environmental risks associated with their exploitation under the worst of weather conditions imaginable will quickly become more evident — and so, faced with the rising potential for catastrophic spills in a melting Arctic, expect a commensurate increase in political opposition to such drilling.  In fact, a recent increase has sparked protests in both Alaska and Russia, including the much-publicized September 2013 attempt by activists from Greenpeace toscale a Russian offshore oil platform — an action that led to their seizure and arrest by Russian commandos.  Similarly, expanded fracking operations have provoked a steady increase in anti-fracking activism.  In response to such protests and other factors, oil firms are being forced to adopt increasingly stringent environmental protections, pumping up the cost of production further.

3. Climate-Related Demand Reduction: The techno-optimist outlook assumes that oil demand will keep rising, prompting investors to provide the added funds needed to develop the technologies required.  However, as the effects of rampant climate change accelerate, more and more polities are likely to try to impose curbs of one sort or another on oil consumption, suppressing demand — and so discouraging investment.  This is already happening in the United States, where mandated increases in vehicle fuel-efficiency standards are expected to significantly reduce oil consumption.  Future “demand destruction” of this sort is bound to impose a downward pressure on oil prices, diminishing the inclination of investors to finance costly new development projects.

Combine these three factors, and it is possible to conceive of a “technology peak” not unlike the peak in oil output originally envisioned by M. King Hubbert.  Such a techno-peak is likely to occur when the “easy” sources of “tough” oil have been depleted, opponents of fracking and other objectionable forms of production have imposed strict (and costly) environmental regulations on drilling operations, and global demand has dropped below a level sufficient to justify investment in costly extractive operations.  At that point, global oil production will decline even if supplies are “boundless” and technology is still capable of unlocking more oil every year.

Peak Oil Reconsidered

Peak oil theory, as originally conceived by Hubbert and his followers, was largely governed by natural forces.  As we have seen, however, these can be overpowered by the application of increasingly sophisticated technology.  Reservoirs of energy once considered inaccessible can be brought into production, and others once deemed exhausted can be returned to production; rather than being finite, the world’s petroleum base now appears virtually inexhaustible.

Does this mean that global oil output will continue rising, year after year, without ever reaching a peak?  That appears unlikely.  What seems far more probable is that we will see a slow tapering of output over the next decade or two as costs of production rise and climate change — along with opposition to the path chosen by the energy giants — gains momentum.  Eventually, the forces tending to reduce supply will overpower those favoring higher output, and a peak in production will indeed result, even if not due to natural forces alone.

Such an outcome is, in fact, envisioned in one of three possible energy scenarios the IEA’s mainstream experts lay out in the latest edition of World Energy Outlook. The first assumes no change in government policies over the next 25 years and sees world oil supply rising from 87 to 110 million barrels per day by 2035; the second assumes some effort to curb carbon emissions and so projects output reaching “only” 101 million barrels per day by the end of the survey period.

It’s the third trajectory, the “450 Scenario,” that should raise eyebrows.  It assumes that momentum develops for a global drive to keep greenhouse gas emissions below 450 parts per million — the maximum level at which it might be possible to prevent global average temperatures from rising above 2 degrees Celsius (and so cause catastrophic climate effects).  As a result, it foresees a peak in global oil output occurring around 2020 at about 91 million barrels per day, with a decline to 78 million barrels by 2035.

It would be premature to suggest that the “450 Scenario” will be the immediate roadmap for humanity, since it’s clear enough that, for the moment, we are on a highway to hell that combines the IEA’s first two scenarios.  Bear in mind, moreover, that many scientists believea global temperature increase of even 2 degrees Celsius would be enough to produce catastrophic climate effects.  But as the effects of climate change become more pronounced in our lives, count on one thing: the clamor for government action will grow more intense, and so eventually we’re likely to see some variation of the 450 Scenario take shape.  In the process, the world’s demand for oil will be sharply constricted, eliminating the incentive to invest in costly new production schemes.

The bottom line: Global peak oil remains in our future, even if not purely for the reasons given by Hubbert and his followers.  With the gradual disappearance of “easy” oil, the major private firms are being forced to exploit increasingly tough, hard-to-reach reserves, thereby driving up the cost of production and potentially discouraging new investment at a time when climate change and environmental activism are on the rise.

Peak oil is dead!  Long live peak oil!

Michael T. Klare, a TomDispatch regular, is a professor of peace and world security studies at Hampshire College and the author, most recently, of The Race for What’s Left.  A documentary movie version of his book Blood and Oil is available from the Media Education Foundation.

peak oil climate and sustainability: When will US LTO(light tight oil) Peak?

peak oil climate and sustainability: When will US LTO(light tight oil) Peak?.

The rapid rise in oil output since 2008 has the mainstream media claiming that the US will soon be energy independent.  US Crude oil output has increased about 2.8 MMb/d (56%) since 2008 and about 2 MMb/d is from the shale plays in North Dakota ( Bakken/Three Forks) and Texas (Eagle Ford). My modeling suggests that a peak from these two plays may be reached by 2016, other shale plays (also known as light tight oil [LTO] plays) may be able to fill the gap left by declining Bakken and Eagle Ford output until 2020, beyond that point we will see a rapid decline.

US Light Tight Oil to 2040

fig 1

There are two main views:

  1. There will be little crude plus condensate (C+C) output from any plays except the Bakken/Three Forks in North Dakota and Montana and the Eagle Ford of Texas.
  2. The other LTO plays will come to the rescue when the Bakken and Eagle Ford reach their peak and keep LTO near these peak levels to about 2020 with a slow decline in output out to 2040.
Where are these “other LTO plays”?  There are a couple of these in Oklahoma and Texas (in the Permian basin, Granite Wash, Mississippian basin), the Appalachian, the Niobrara in Colorado, and others (see slide 17 of the USGS presentation link below).  Is it possible for these LTO plays to offset future declines in the Bakken and Eagle Ford?  I hope to answer that in this post.
When doing my modeling of the Eagle Ford, I needed an estimate of the technically recoverable resource(TRR) for that play.  The April 2013 USGS Bakken Three Forks Assessment roughly doubled their earlier assessment of that play (mostly this was due to not including the Three Forks in their earlier assessment.)
see slide 17 at the USGS Bakken/Three Forks Assessment presentation.
   In light of this I decided to increase the earlier (1.73 Gb) Eagle Ford estimate of undiscovered technically recoverable resources(TRR) from the USGS by a factor of 2.3 to 4 Gb.  To determine total TRR, the proved reserves and oil already produced need to be added to the undiscovered TRR, in the case of the Eagle Ford output to the end of 2011 was only 0.1 Gb and proved reserves were about 1 Gb (check the EIA data on the change in proved reserves since 2009 in districts 1 and district 2 of Texas):

So for the Eagle Ford estimated TRR would be 4+1=5 Gb.

For the North Dakota Bakken undiscovered TRR is 5.8 Gb, 2.2 Gb of proven reserves, and 0.5 Gb of oil produced for a Total TRR of 8.5 Gb. See my previous post for more details.

For the rest of the US we can deduct Bakken (7.38 Gb), Eagle Ford(1.73 Gb), and Alaska(0.94 Gb) from the US total (13 Gb) which leaves about 3 Gb, now assume that a reassessment by the USGS increases this by a factor of 2.3 to 7.2 Gb, then add the Montana Bakken/Three Forks (1.6 Gb) and reserves from the Permian basin and other plays (1.3 Gb) to get 9.2 Gb for a TRR estimate for US “other LTO”(Total LTO minus [North Dakota Bakken/Three Forks plus Eagle Ford play]). Total TRR for all US LTO is 22.7 Gb. (I have assumed LTO from Alaska’s North Slope will not be produced.)

For the North Dakota Bakken/Three Forks and Eagle Ford plays we use the following economic assumptions to find the Economically Recoverable Resource (ERR):

OPEX (operating expenditure) is $4/barrel, royalty and tax payments are 24.5 % of wellhead revenue, annual discount rate is 12 % (used to find the net present value[NPV] of a well over its 30 year life). Transport costs are $12/barrel for the Bakken and $3/barrel for the Eagle Ford.  Well costs are 9 million for the Bakken in Jan 2013 and fall by 8% per year to 7 million in 2016 and for the Eagle Ford well costs are $8 million in Jan 2013 and fall 8% per year to $6.5 million in mid 2017.  Real oil prices follow the EIA’s 2013 Annual Energy Outlook reference case to 2040 and then continue to rise at the 2030 to 2040 rate to the end of the scenario.  All costs and prices are in May 2013$ so they are real prices rather than nominal prices.
The concept of ERR is discussed in detail in the Sept, 2013 post after figure 3.

Figure 1

fig 2
I will use the Eagle Ford play as my template because it has ramped up much more quickly than the Bakken, this is a very optimistic scenario and it is unlikely that there will be greater output from US LTO than the scenario I will present.

The underlying assumptions are:
-the average well will look like the average Eagle Ford well
-ramp up of additional wells will be slow until the peak of combined Bakken and Eagle Ford output
-in 2015 the Bakken and Eagle Ford peak and reach break even levels of profitability by 2016
-in response to reaching break even the number of new wells per month added in both the ND (North Dakota) Bakken and the Eagle Ford are reduced substantially.
-new wells added in the other US LTO plays ramp up as the rate that wells added to the Bakken and EF are reduced
As before we adjust the decrease in new well EUR (both when it begins and how long it takes to reach its maximum) so that the TRR matches our estimate of 9.2 Gb.  In this case the EUR starts to decrease in July 2018 and reaches its maximum monthly rate of decrease of 2.37 % in June 2020. The “other LTO” peaks in 2020 at about 2 MMb/d.
To determine ERR we make identical economic assumptions as our Eagle Ford case above except that we assume transport costs are $5/barrel on average ($3/barrel in EF case).

Figure 2

fig 3

When we combine our North Dakota Bakken/Three Forks, Eagle Ford, and “other LTO” models we get the following chart:

Figure 3

fig 4

This scenario is indeed optimistic, but not nearly as optimistic as the EIA’s scenario for LTO in the 2013 Annual Energy Outlook.  For comparison I computed the ERR for 2013 to 2040 for my US LTO scenario, it was 17.6 Gb over that period, the EIA scenario has a total output of 24.5 Gb over the same period, 40% higher output than an already optimistic scenario.  My guess is that reality will lie between the blue curve and the green curve with the most likely peak around 2018+/- 2 years at about 3.1+/- 0.2 MMb/d.

Dennis Coyne

 Appendix Bakken and Eagle Ford Details
I am still working on this section, check back for details
Using the USGS TRR estimates as our guide we assume new well estimated ultimate recovery (EUR) eventually decreases as the room for new wells in the most productive areas (the sweet spots) starts to run out.  If new wells are producing an average of 450 kb over 30 years before this decrease begins, we assume at some point, say June 2014 the new well EUR starts to decrease maybe by 0.4% per month, the rate of decrease continues to increase for 18 months so that after 18 months the new well EUR is decreasing at a monthy rate of 7.2 %.

fig 5

fig 6

Mass Die-Off of West Coast Sealife: Fukushima Radiation … Or Something Else? Washington’s Blog

Mass Die-Off of West Coast Sealife: Fukushima Radiation … Or Something Else? Washington’s Blog.

What’s Causing the Unprecedented Weirdness In West Coast Ocean Life?

NBC Nightly News reports that a mass die-off of starfish up and down the West Coast of North America is puzzling scientists:

Brian Williams, anchor: Environmental officials in California say there’s been another highly troubling report about what’s going on in the Pacific.  Something is killing the starfish and they don’t know why. They have been dying in record numbers on the West Coast. […]

Pete Raimondi, marine biologist: It’s happened so rapidly that some species are just missing. […]

Miguel Almaguer, reporter: An epidemic affecting waters from Alaska to Southern California causing millions of starfish to fall apart and melt away. […] Two species that used to thrive here have now vanished. […]

Raimondi: I’ve had probably 100 emails thus far saying, ‘Well, what about Fukushima, because of radiation?’ We haven’t ruled that out yet, but we’re clearly not ruling that in.

AlmaguerThe mysterious disease has now spread to at least 10 species of starfish and is threatening more every day.

King5 news in Seattle reports that scientists have tested for radiation, and found none:

Mon Dec 02 17:19:19 PST 2013

More sea star species dying off

A respected sea star expert released a report showing a deadly disorder has spread to more species. view full article

It’s not just sea stars.

There have been widespread reports of mysterious injury to Alaskan seals.

The Alaska Dispatch reports:

Scores of dead and sick ringed seals — some with open wounds, unusual hair loss and internal ulcers — … began washing up in summer 2011 in Western Alaska.

Even today, a few seals continue to trickle ashore, biologists said. But the cause of the illness remains a mystery, despite an international effort to identify it. Some people believe radiation from the Fukushima nuclear power plant disaster in Japan in March 2011 is a factor. That’s never been proven. It hasn’t been disqualified, either.

A lack of radiation sampling in remote regions after the explosion means no one knows how much airborne radiation fell into the Bering Sea ice, or whether seals were in the vicinity of any fallout, said Doug Dasher, a researcher with the University of Alaska Fairbanks.

If the seals did ingest radiation, much of it would have been excreted out of the body before the testing of the carcasses that occurred several months after the incident, he said. Such testing found radiation levels similar to those found in the mid 1990s.

St. Lawrence Island is “way too far north for the marine transport to occur right now,” Dasher said.

Still, for a community that harvests animals from the Bering Sea, its hard not to think about Fukushima, said Pungowiyi. He said he was getting ready to go seal hunting: Winds blowing in from the north have made for prime seal-hunting conditions.

“It’s always on the backs of our minds,” he said of the radiation.

More than a year ago, 15 out of 15 bluefin tuna tested in California waters were contaminated with radioactive cesium from Fukushima.

Bluefin tuna are a wide-ranging fish, which can swim back and forth between Japan and North America in a year:

news graphics 2005  607819a FDA Refuses to Test Fish for Radioactivity ... Government Pretends Radioactive Fish Is Safe

But what about other types of fish?

Sockeye salmon also have a range spanning all of the way from Japan to Alaska, Canada, Washington and Oregon:

Associated Press reports that both scientists and native elders in British Columbia say that sockeye numbers have plummeted:

Sockeye salmon returns plunge to historic lows.

***

Last month, [the Department of Fisheries and Oceans] noted returns for the Skeena River sockeye run were dire.

[Mel Kotyk, North Coast area director for the Department] said department scientists don’t know why the return numbers are so low…. “When they went out to sea they seemed to be very strong and healthy and in good numbers, so we think something happened in the ocean.”

***

“We’ve never seen anything like this in all these years I’ve done this. I’ve asked the elders and they have never seen anything like this at all.” [said Chief Wilf Adam]

Vancouver News 1130 notes that Alaskan and Russian salmon stocks have crashed as well:

“The sockeye runs way up north in the Skeena are low. The [fish] out of Bristol Bay, Alaska is down 30 to 35 per cent over last year. Russia has got a limited number of fish in the market. They are down about 40 per cent over all their salmon fisheries.”

(Russia’s East Coast sits on the Sea of Japan.  Indeed, Japan is closer to Russia than to Korea.)

Alaska’s Juneau Empire newspaper writes:

We are concerned this hazardous material is hitching a ride on marine life and making its way to Alaska.

Currents of the world’s oceans are complex. But, generally speaking, two surface currents — one from the south, called the Kuroshio, and one from the north, called the Oyashio — meet just off the coast of Japan at about 40 degrees north latitude. The currents merge to form the North Pacific current and surge eastward. Fukushima lies at 37 degrees north latitude. Thousands of miles later, the currents hit an upwelling just off the western coast of the United States and split. One, the Alaska current, turns north up the coast toward British Columbia and Southeast Alaska. The other, the California current, turns south and heads down the western seaboard of the U.S.

The migration patterns of Pacific salmon should also be taken into consideration. In a nutshell, our salmon ride the Alaska current and follow its curve past Sitka, Yakutat, Kodiak and the Aleutian Islands. Most often, it’s the chinook, coho and sockeye salmon migration patterns that range farthest. Chum and pink salmon seem to stay closer to home. Regardless of how far out each salmon species ventures into the Pacific, each fish hitches a ride back to its home rivers and spawning grounds on the North Pacific current, the same one pulling the nuclear waste eastward.

We all know too much exposure to nuclear waste can cause cancer. And many understand that certain chemicals, such as cesium-137 and strontium-9, contained in said waste products can accumulate in fish by being deposited in bones and muscle permanently.

We are concerned our Alaska salmon are being slowly tainted with nuclear waste. We are worried about the impact this waste could have on our resources, and especially the people who consume them.

***

We urge scientists in Alaska to be proactive about conducting research and monitoring our salmon species.

Similarly, the Canadian Broadcasting Corporation reports that salmon are migrating through the radioactive plume, but Canadian authorities aren’t testing the fish:

[Award-winning physician and preventative health expert Dr. Erica Frank, MD, MPH]: There are Pacific wild salmon that migrate through the radioactive plumes that have been coming off of Fukushima. Then those fish come back to our shores and we catch them.

CBC Reporter:  The Canada Food Inspection Agency says it now relies on Japan for test results concerning radiation.

(American authorities aren’t testing fish for radioactivity either.)

Another example – pacific herring – is even more dramatic.   Pacific herring is wide-ranging fish, spanning all the way from Japan to Southern California:

Every single pacific herring examined by a biologist in Canada was found to be hemorrhaging blood.  As ENENews reports:

[Photo credits Alexandra Morton and Vancouver 24 hrs.]

The Globe and Mail, Aug 13, 2013 (Emphasis Added): Independent fisheries scientistAlexandra Morton is raising concerns about a disease she says is spreading through Pacific herring causing fish to hemorrhage. […] “Two days ago I did a beach seine on Malcolm Island [near Port McNeill on northern Vancouver Island] and I got approximately 100 of these little herring and they were not only bleeding from their fins, but their bellies, their chins, their eyeballs.  […] “It was 100 per cent … I couldn’t find any that weren’t bleeding to some degree. And they wereschooling with young sockeye [salmon]

Sun News, Aug 12, 2013: [Morton] dragged up several hundred of the fish this past weekend and found the apparent infection had spread – instead of their usual silver colour the fish had eyes, tails, underbellies, gills and faces plastered with the sickly red colour. “I have never seen fish that looked this bad,” […] In June, the affected fish were only found in eastern Johnstone Strait, but have since spread to Alert Bay and Sointula, she said.

Canada.com, Aug 16, 2013: Morton […] pulled up a net of about 100 herring near Sointula and found they were all bleeding. “It was pretty shocking to see,” said Morton […] Herring school with small sockeye salmon and are also eaten by chinook and coho.

‘Response’ from Canadian Government

Vancouver 24 hrs, Aug 11, 2013: [Morton] says Fisheries and Oceans Canada [FOC] isignoring the problem. […] According to emails from FOC, the federal authority had asked the marine biologist to send in 20 to 30 herring in September 2011, saying that would be “more than sufficient for the lab to look for clinical signs of disease and provide sufficient diagnostics.” She did, and hasn’t heard back since. […] FOC officials did not respond to a request for comment by the 24 hours presstime.

Canada.com, Aug 16, 2013: Fisheries and Oceans Canada is trying to confirm reports from an independent biologist that herring around northern Vancouver Island have a disease that is causing bleeding from their gills, bellies and eyeballs. […] Arlene Tompkins of DFO’s [Department of Fisheries and Oceans’] salmon assessment section said staff in the Port Hardy area have not found bleeding herring. “We are trying to retrieve samples, but [Monday] we were not successful because of heavy fog,” she said. “We haven’t had any other reports of fish kills or die-offs [see salmon report below].” Tompkins has seen photographs provided by Morton […]

And see this report from CBS’ The Doctors:

There have been many other reports of mysterious sickness among West Coast North American sealife … such as dead and dying sea lions.  Sea lions’ main food is herring:

Sea lions will eat a lot of different prey items: octopus, squid, small sharks. But their bread and butter is herring ….

Given that pacific herring are suffering severe disease, it is worth asking whether the “unusual mortality event” among Southern California sea lions is connected.

CBC reports:

There’s something very odd happening in the ocean and in the waters around B.C. — sea creatures are behaving strangely. And species are turning up where they are rarely seen.

***

Extraordinary marine activity…. From California all the way to Alaska.

***

Others point to disasters like Japan’s tsunami that triggered a nuclear crisis, but no one knows for sure.

And the Newcastle Herald carried a report in October from a sailor saying that “the ocean is broken”:

The next leg of the long voyage was from Osaka to San Francisco and for most of that trip the desolation was tinged with nauseous horror and a degree of fear.

“After we left Japan, it felt as if the ocean itself was dead,” [Newcastle, Australia yachtsman Ivan] Macfadyen said.

“We hardly saw any living things. We saw one whale, sort of rolling helplessly on the surface with what looked like a big tumour on its head. It was pretty sickening.

“I’ve done a lot of miles on the ocean in my life and I’m used to seeing turtles, dolphins, sharks and big flurries of feeding birds. But this time, for 3000 nautical miles there was nothing alive to be seen.”

In place of the missing life was garbage in astounding volumes. [There is a huge quantity of debris from Japan heading across the ocean towards the West Coast. But it is unclear whether the sailor is referring to this or something else. After all, there is a lot of man-made garbage floating around the Pacific.]

***

And something else. The boat’s vivid yellow paint job, never faded by sun or sea in years gone past, reacted with something in the water off Japan, losing its sheen in a strange and unprecedented way.

Some – like EneNews – are convinced that the damage to sealife is due to Fukushima*. And – without doubt – the West Coast is being hit by radiation from Fukushima. And governments always cover up the extent of nuclear and other disasters for which they were partially responsible.

On the other hand, the New York Times report that it is an abundance of anchovies near shore which are attracting the whales … and the anchovies may simply be attracted by unusually nutrient-rich waters this year:

 

Others theorize that ocean acidification might be the culprit. It could instead be a pathogen, although it is unlikely it would effect so many species all at once over such a wide area.

EneNews rounds up stories on unusual sealife behavior:

Vancouver Sun, Nov. 27, 2013: Michael Harris, executive-director of the Pacific Whale Watch Association […] said he’s been working in Puget Sound and the Strait of Georgia for 30 years and has “never ever seen this kind of behaviour going on. They must sense this is a safe place to be.” […] Wild Whales Vancouver had up to 10 close encounters this season in the southern Strait of Georgia, mainly near Galiano Island […] The whales typically rolled on their backs and sides next to the boat and looked up at the passengers. One even placed its head on the boat while spyhopping, a behaviour in which the whale rises up vertically to look above the water […]

Global News, Nov. 27, 2013: Capt. Jim Maya […] who runs Maya’s Westside Whale Watch Charters, has been working on the waters of the Pacific since 1965 and says he has never seen anything like what they saw that day. […] Maya says he estimates the whale was about 35 to 40 feet long and was an immature female. She hung around the boat for about an hour […] Chad Nordstrom, a researcher with the Cetacean Research Lab at the Vancouver Aquarium, says they have been receiving more and more reports of humpback whale sightings along the B.C. coast, especially in the lower Strait of Georgia.

Vancouver Sun, Nov. 28, 2013: Andrea Hardaker, manager of Wild Whales Vancouver [said] “The passengers loved it. But they don’t know what to expect on the trip. Whatever they see they think is normal. For our guides and the captains, we know it isn’t normal.” […] [Hardaker] believes these are the first such reports in local waters.

See also: CBS News: 100s of whales in bay on California coast; It’s never been like this, we just can’t even believe it — Experts: We just aren’t sure what’s going on; “A once-in-a-lifetime chance… unheard of, it’s unbelievable, nobody’s seen this” (VIDEO)

And here:

Baldo Marinovic, research biologist at the University of California, Santa Cruz: “It’s a very strange year […] The $64,000 question is why this year? […] Now [the anchovies are] all kind of concentrating on the coast.”

Just a few weeks ago similar sightings were reported along Canada’s Pacific coast:

Vancouver Sun, Nov. 6, 2013: An extraordinary string of recent whale encounters around Vancouver Island is likely due to luck, not one factor, experts say. “This has not been a typical year,” said John Ford, head of the cetacean research program at Pacific Biological Station in Nanaimo. […] The “biggie” of the bunch is the endangered North Pacific right whale, spotted twice in B.C. waters for the first time in 60 years. […] There have been other remarkable whale encounters […]  passengers aboard the B.C. ferry between Galiano Island and Tsawwassen were treated to the sight of a superpod of about 1,000 Pacific white-sided dolphins […]

Nick Claxton, Indigenous academic adviser at the University of Victoria: Recent whale encounters could have a deeper meaning, according to an Indigenous worldview […] “We see them as our relatives, as ancestors. All of these occurrences remind us of our place here and our connection to the natural world. It’s for the better of all of us to listen.”

The bottom line is that more research is needed.   And nuclear experts said 4 days after the Japanese earthquake and that we all need to demand that fish be tested for radiation.

Note:  University of Washington Professor Trevor Branch has previously slammed our reporting on reduction in fish stocks:

I am surprised that an article composed of facts totally unrelated to Fukushima could make it past your editorial process, and the story has been widely derided by blogs and on twitter. Below is my response detailing the latest science, with the article attached in case you are unable to find it.

The scientists you quote repeated their own study on Pacific bluefin tuna in the US and Fukushima radiation testing in June 2013. Here are some highlights from their findings.

1. Radiation in bluefin from Fukushima is 1/1000 to 1/10000 of the radiation in natural seawater.

2. Radiation in bluefin from Fukushima is less than in food you eat every day that is uncontaminated (and much much less than x-rays, flying in a plane etc).

3. If 10,000,000 people each ate 124 kg per yr of bluefin tuna every year (which is a LOT), 2 might die from radiation.

4. However, global catch of Pacific bluefin is 20,000 t a year, allowing only 161,000 people to eat that much, resulting in only 0.03 extra deaths per year.

5. If they ate less, the risk would be much less.

6. Since a single Pacific bluefin tuna sold this year for $1.8 million, they would also be left in poverty. (Not all sell for that
much, I know.)

Now the salmon and herring in U.S. waters do not travel anywhere near Fukushima, and would have a radiation load thousands to millions of times lower. These fish have local populations and are quite distinct from those populations near Fukushima. Radiation from Fukushima is diluted very rapidly within a few km of the leaks (the volume of the ocean is vast), and further than that the radiation is less than the radiation from naturally occurring polonium in the ocean.

All of the scary stories compiled in the article are just that, scary stories completely unrelated to Fukushima. For example the quotes from Morton are specifically about disease in fish that has nothing to do with radiation.

To preserve the integrity of your news blog, I would suggest retracting the article.

We responded at the time:

While we respect Professor Branch’s expertise in fisheries science – his knowledge of fisheries is significantly greater than ours, and he has proven that he is an honestacademic by disclosing his funding sources to us upon request – we believe that he has made several erroneous assumptions.  Specifically:

1. There won’t be nearly as much dilution as assumed.

2.  Low-level radiation is not harmless, there was no background cesium radiation until recently, and our bodies have adapted to excrete radiation from sources such as bananas … but not cesium from fish.

In any event, this post does not argue that the injury to sealife is due to Fukushima … we honestly don’t know the cause or causes of the unusual behavior in ocean life, and are only certain of one thing:  the U.S. and Canadian governments should fund extensive testing to figure out what’s really going on, and then publicly release the results.

* EneNews was the main source of information for this essay. For example, here’s a one-sentence round-up of ocean weirdness from EneNews:

There have been several similar reports about wildlife around the Pacific, includingsardinessealssea lionspolar bearssea starsturtlessalmonherringcoral and more.

Magnitude 6.2 quake hits off western Canada: USGS | Top News | Reuters

Magnitude 6.2 quake hits off western Canada: USGS | Top News | Reuters.

 

The polar bear who died of climate change – big picture | Environment | theguardian.com

The polar bear who died of climate change – big picture | Environment | theguardian.com.

 

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