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Checking In On Peak Oil – Chapelboro.com

Checking In On Peak Oil – Chapelboro.com.

By Jeff DannerJeff has worked in both the chemical and biotech industries and is the veteran of thousands of science debates at cocktail parties and holiday dinners across the nation. In his Common Science blog, Jeff aims to make technological and scientific concepts accessible to all.
Posted March 3, 2014 at 9:23 am

In last week’s column, The Case of the Missing Propane, I explained how the widespread use of hydraulic fracturing (fracking) of shale oil deposits since 2008 has led to a 30% increase in the production of crude petroleum in the United States. While that statistic makes for snappy headlines, it is not particularly meaningful to the overall world oil supply or the phenomenon known as Peak Oil.

If you are not familiar with Peak Oil, I published a column in June of 2011 called Peak Oil in Five Paragraphs or Less. Here are the key points:

• Peak Oil refers to the time at which we reach the global maximum rate of oil production, which is followed by decades of declining rates of production.
• Due to oil’s pivotal role as a transportation fuel and (as I explained in Everything Comes from Oil) the key raw material for most consumer goods, the global economy can only grow if oil supply continues to grow.
• In order to keep producing more and more oil, you must keep discovering more and more and more. This is not possible. Eventually you are exhausting oil fields at a rate faster than the new ones can be discovered.
• The global peak for conventional oil sources occurred in approximately 2005, requiring us to turn to unconventional sources such as shale oil and oil sands. These sources are expensive to exploit and will not last for very long.
• The economic disruptions cause by the impending oil supply constraints will be very challenging for the global community.

The graph below was the key feature of Peak Oil in Five Paragraphs or Less. This graph is pivotal to understanding both the history and economics of the last century as well as the challenges coming in the next; everyone should be familiar with it. Its peaks and valleys tell stories as varied and interesting as the growth of suburbia in the U.S. and the role of Saudi Arabia in the post World War II era. But I never see this graph in the papers. It’s not hard to understand. As you can see from the bars, the peak year for global oil discovery occurred in 1965, the year before I was born, and has been generally declining ever since. Due to extraordinary efforts by the oil companies, the rate of production has yet to start declining, but as those old fields continue to be exhausted, it will.

growing_gap

Beginning in 2007, you see a small, but temporary, increase in “discoveries” which corresponds to shale oils such as the Bakken Shale in North Dakota. I put discoveries in quotations because shale oil deposits have been known about for decades but were simply not counted as petroleum reserves due to their low quality. The oil sands in Alberta, for which the Keystone XL pipeline is intended, fall into this same low-grade category.

Before I show you some additional graphs (I love graphs), we need a brief aside on definitions and sources. The data I use below is from the U.S. Energy Information Administration (EIA) and is, therefore, reliable for past data. Different sources define “oil” differently, which can cause confusion. Some, such as this column, restrict the definition of oil to crude petroleum – think gushers from old movies. Other sources add in liquids that are collected during natural gas refining – we discussed those last week – as well as biofuels, resulting in larger totals.

The graph below shows U.S. crude petroleum production in millions of barrels a day since 1980. From 1980 through 2008, there was a steady decline from 9 million to 5 million barrels a day. In 2008, fracking of shale oil began in earnest, which has increased U.S. petroleum production from a low of 5 million to 6.6 million barrels a day, an increase of 30%.

USA Oil Production

Extracting petroleum from shale formations is an expensive business. After you go through all the effort and expense to drill downward and then horizontally, and break up the rock below with high pressure fluids (fracking), the production from the well falls off by an average of 65% during the first year. Therefore, in order to keep production going, you’ve got to keep drilling and drilling and drilling. In 2011, 16,000 fracking wells were drilled in the U.S. In 2012, it was 19,000.

While doing the research for this column, I decided to have a look at the Bakken Shale Field formation, which spans the North Dakota-Montana border just south of Canada, on Google Earth. I could not get a nice looking picture for you, but it is somewhat fascinating to see. If you use the satellite map feature, follow the existing rural roads, then look for secondary dirt roads which lead to dirt rectangles. Each rectangle will contain a well with a pump on top, four tanks for collecting the oil, and some other equipment. You generally will not find any people or vehicles, because these units run automatically. As you pan around, you can find them by the hundreds.

The increase in petroleum production in the U.S. has not provided any meaningful relief from high gasoline prices, which remain steadfastly above $3.00 per gallon. There are two main reasons for this: petroleum is a global commodity (more on that below) and fracking is an expensive technique. Consider that in 2004, oil sold for about $40 per barrel. The break-even price for a barrel of oil produced from fracking is $80.

The graph below shows world crude petroleum production along with the same data I showed for the U.S. in the previous graph. As you can see, petroleum production in the U.S. is only a small fraction of the global total. Therefore, the 30% increase in U.S. production has only increased the global supply by two percent. A two percent increase in global supply, especially an expensive supply, is not sufficient to result in a reduction in U.S. fuel prices.

US and World Oil Production

So where does this leave us? Overall global supply of petroleum is being maintained near 76 million barrels a day based on the extraordinary efforts to extract unconventional oils. Sometime between now and 2025, the supply will begin to decline and cause social and economic dislocations. As we continue to exploit the unconventional sources during this time, carbon dioxide concentration in the atmosphere will grow from 400 to 450 parts per million, causing even more dramatic changes in our weather patterns and challenging our ability produce enough food for eight billion people. Dealing with these parallel challenges will be the defining features of the 21 century.

The well is running dry for big oil – Jeff Reeves’s Strength in Numbers – MarketWatch

The well is running dry for big oil – Jeff Reeves’s Strength in Numbers – MarketWatch.

JEFF REEVES’S STRENGTH IN NUMBERS Archives | Email alerts

March 3, 2014, 6:00 a.m. EST

The well is running dry for big oil

Opinion: Supply, efficiency and demand concerns weigh

By Jeff Reeves


Bloomberg

Last week, I mused on the death of cars and big-picture factors working against the auto industry, including urbanization and declining driving rates in younger Americans.

Now, I’ll trot out my crystal ball again and offer you another prediction: This is the beginning of the end for Big Oil, too.

Now before you jump down my throat for trolling you again with hyperbole, I will state up front that I don’t expect Exxon Mobil XOM -0.31%  , BP BP -1.82%  and ChevronCVX +0.29%   to disappear tomorrow any more than I expect I-95 to start sprouting daisies.

But as with the decline of automobile ownership — and in part because of it — we may also be witnessing a protracted decline in major energy stocks and fossil fuel demand.

That’s bad for big oil, and bad for investors in these stocks.

Efficiency and alternatives sap demand

The first big reason big oil is in trouble: Oil demand keeps dropping.

Technology continues to help us do more with less and implement cleaner alternatives to crude oil.

Consider that U.S. oil demand fell to a 16-year low in 2012 despite energy-hungrygadgets and the addition of some 40 million people to the total population.


U.S. Energy Information Administration

Also consider that fuel oil demand was the lowest on record in 2013 and has been steadily declining since the 1970s as the energy source has fallen out of favor for cleaner, greener options.

It’s not just the U.S., either. Even with a bullish outlook for the global economy fueling oil demand this year, the IEA has boosted consumption targets a meager 1.3% as efficiencies in the West offset faster-growing demand in emerging markets.

However you slice it, global crude oil appetites simply aren’t what they used to be. Even energy-hungry emerging markets aren’t making up for the weak demand in the developed world.

The easy supply is gone

I don’t pretend to know when supplies in the ground will run out, or whether we are truly living after the era of “peak oil.”

But one thing is clear: Oil production is getting much more costly as easy-to-access fields are drilled dry, and new production is reliant on more difficult and costly extraction for the fossil fuel.

Take the shale oil boom. Margins are lower thanks to the cost of production. The story is the same for oil sands production , same for offshore drilling, same for oil in Africa as opposed to oil in Canada.

The well is running dry for big oil – Jeff Reeves's Strength in Numbers – MarketWatch

The well is running dry for big oil – Jeff Reeves’s Strength in Numbers – MarketWatch.

JEFF REEVES’S STRENGTH IN NUMBERS Archives | Email alerts

March 3, 2014, 6:00 a.m. EST

The well is running dry for big oil

Opinion: Supply, efficiency and demand concerns weigh

By Jeff Reeves


Bloomberg

Last week, I mused on the death of cars and big-picture factors working against the auto industry, including urbanization and declining driving rates in younger Americans.

Now, I’ll trot out my crystal ball again and offer you another prediction: This is the beginning of the end for Big Oil, too.

Now before you jump down my throat for trolling you again with hyperbole, I will state up front that I don’t expect Exxon Mobil XOM -0.31%  , BP BP -1.82%  and ChevronCVX +0.29%   to disappear tomorrow any more than I expect I-95 to start sprouting daisies.

But as with the decline of automobile ownership — and in part because of it — we may also be witnessing a protracted decline in major energy stocks and fossil fuel demand.

That’s bad for big oil, and bad for investors in these stocks.

Efficiency and alternatives sap demand

The first big reason big oil is in trouble: Oil demand keeps dropping.

Technology continues to help us do more with less and implement cleaner alternatives to crude oil.

Consider that U.S. oil demand fell to a 16-year low in 2012 despite energy-hungrygadgets and the addition of some 40 million people to the total population.


U.S. Energy Information Administration

Also consider that fuel oil demand was the lowest on record in 2013 and has been steadily declining since the 1970s as the energy source has fallen out of favor for cleaner, greener options.

It’s not just the U.S., either. Even with a bullish outlook for the global economy fueling oil demand this year, the IEA has boosted consumption targets a meager 1.3% as efficiencies in the West offset faster-growing demand in emerging markets.

However you slice it, global crude oil appetites simply aren’t what they used to be. Even energy-hungry emerging markets aren’t making up for the weak demand in the developed world.

The easy supply is gone

I don’t pretend to know when supplies in the ground will run out, or whether we are truly living after the era of “peak oil.”

But one thing is clear: Oil production is getting much more costly as easy-to-access fields are drilled dry, and new production is reliant on more difficult and costly extraction for the fossil fuel.

Take the shale oil boom. Margins are lower thanks to the cost of production. The story is the same for oil sands production , same for offshore drilling, same for oil in Africa as opposed to oil in Canada.

The Peak Oil Crisis: A Winter Update

The Peak Oil Crisis: A Winter Update.

Posted Feb 20, 2014 by Tom Whipple

As the years go by, those studying peak oil are beginning to develop a better understanding of what has been happening since the concept of limits to oil production came to widespread attention. First of all, it is important to understand that in one sense, production of what had been thought of as “conventional oil” really did peak back in 2005. While there has been growth in certain sectors of the “oil” industry in the last nine years it has come in what are known as “unconventional liquids”; and, as we shall see, the maintenance of existing conventional oil production has come at a very high price.

The recent growth in the “oil” production has been nowhere near what had been normal prior to the “Great Recession,” so that if anyone should wonder why our economy has been stagnant in recent years, one can take the price and availability of oil as a good starting point. US consumption has been falling at 1.5 percent a year since 2005 as opposed to a normal growth rate of 1.8 percent in prior years.
In the last decade global oil production grew by only 7.5 percent and not the 23 percent that would have been needed to support the growth in the world’s GDP at a rate we would have liked to have seen. Since 2005, total “oil” production has grown by 5.8 million b/d, of which 1.7 million consists of natural gas liquids (NGL). While NGL’s are valuable and a useful form of what we now call “oil” they do not contain the same energy as crude and have a more limited range of uses, thereby contributing less to economic growth.
US unconventional liquids (shale oil and NGL’s) are up by 5.1 million b/d since 2005. Along with an additional million b/d from the Canadian tar sands, North American non-conventional liquids constitute nearly all the growth in the world’s oil supply in recent years. Production of conventional crude has remained essentially flat during the period. Moreover, OPEC production has dropped by nearly two million b/d in the last three years largely due to wars, insurgencies, and embargoes, and another 1.7 million b/d of its “oil” production has been NGL’s and not crude.
The world’s existing fields are depleting at rate of circa 4 million b/d each year, so without constant drilling of new wells in new fields global production will quickly wither and prices will climb still more. A good estimate is that the oil which now costs about $110 a barrel will be at $140 or above by the end of the decade unless some major geopolitical upheaval sends it still higher.
To keep the oil flowing, the world’s oil companies have invested some $4 trillion in the last nine years to drill for oil. About $2.5 trillion of this was spent on simply replacing production from existing oil fields. Even this gigantic expenditure was not enough since conventional oil production fell by 1 million b/d during the period.
About $350 billion went to drill shale oil and gas wells in the US, and increase Canadian oil sands production. This was clearly a bargain as compared to maintaining conventional oil production which is now focused on ultra-expensive deep water wells.
Recent announcements by the major oil companies indicate that they have reached their limit. Profits and production are falling. Expenditures for finding and developing oil fields have tripled in the last decade and the return from these expenditures has not been enough to justify the costs. Nearly all of the major oil companies have announced major reductions in their exploration and drilling programs and several are selling off assets as they are caught in a trap between steady oil prices and rapidly rising operating costs.
Note that the major oil companies do not constitute the whole oil industry as most of the world’s oil production is now in the hands of state-owned companies and small independent producers. These firms are obviously facing the same problems as the large publicly traded companies, without as much publicity.
What is going to happen in the next few years? First, investments in future production are going down, meaning that in a few years depletion likely will overwhelm new production and output of conventional oil will drop.
Then we have the Middle East which, to put it mildly, is coming unglued. Oil exports from several countries have nearly disappeared and the spreading sectarian violence is likely to reduce exports from other countries before the decade is out.
Venezuela, from which the US still imports some 800,000 barrels of crude a day, is not transitioning to the post-Chavez era gracefully. The current student riots could easily morph into reduced oil exports.
With much of the growth in global oil production coming from US shale producers, a fair question is just how long fracked shale oil production will continue to grow. Opinions vary. Some foresee the possibility that growth will slow considerably this year, while others think there are two or three years of large production increases ahead. The three months of extremely cold and snowy weather we have had this winter is already hurting production, but most believe production will rebound in the spring.
Even though production of conventional oil peaked nine years ago, massive investment and a five-fold increase in oil prices has allowed the economical production of shale and deepwater oil at a profit since 2005. Further growth in shale oil production, however, clearly has a half-life, be it one, three or five years.
Recent news concerning deepwater oil production is not encouraging. Brazil’s deepwater oil fields which are thought to contain many billions of barrels of oil are not looking too good at the minute due to the very high costs and risks of production. All in all, the recent news from the oil industry tends to be one of growing pessimism.
Originally published at Falls Church News-Press
Barnett peak image via Post Carbon Institute

Oil Spill Shuts New Orleans Port & Mississippi River | Zero Hedge

Oil Spill Shuts New Orleans Port & Mississippi River | Zero Hedge.

65-mile stretch of the Mississippi near New Orleans remained closed Monday after two vessels collided and caused an oil spill on Saturday in foggy conditions about 30 miles west of New Orleans. As NBC news reports, the Lindsay Ann Erickson crashed with the Hannah C. Settoon, which was pushing two barges carrying barrels of light crude oil that spilled into the river. Clean-up efforts are underway.

In this aerial photo, river traffic is halted along the Mississippi River between New Orleans and Vacherie, La., due to a barge leaking oil in St. James Parish, La., Sunday, Feb. 23, 2014. The collision happened Saturday afternoon near Vacherie.

 

Via UPI,

The U.S. Coast Guard said the source of an oil spill was secured but 65 miles of the Mississippi River including the Port of New Orleans remained closed Sunday.

The Coast Guard said in a news release the oil spill occurred Saturday when a barge collided with another vessel near Vacherie, between New Orleans and Baton Rouge.

“Lightering operations on the damaged barge concluded early Sunday morning and the source of the spill was secured,” the release said. “Oil spill response vessels and recovery equipment are deployed in the river.”

The Coast Guard said the Captain of the Port closed the river from mile marker 90 to mile maker 155 “to avoid possible contamination of passing vessels and to reduce the amount of oil spreading further down the river.”

A unified command including the Coast Guard, the Louisiana Oil Spill Coordinator’s Office, the environmental cleanup company ES&H and the Louisiana Department of Environmental Quality was cooperating on the response to the spill, the Coast Guard said.

Peak oil is not a myth | Chemistry World

Peak oil is not a myth | Chemistry World.

20 February 2014
One might have the impression that hydraulic fracturing (fracking) of shale deposits is the answer to world energy security. Certainly fracking has received much attention and investment, but its prospects must be considered in a broader context.
In the US, where practically all such operations have been conducted to date, fracking now accounts for 40% of domestic gas production and 30% of oil production. The price of natural gas has plummeted, and overall US oil production has increased for the first time since 1970, which had otherwise been falling in accordance with the predictions M King Hubbert made in 1956.
© Shutterstock

However, this last point is the salient one. Sources of unconventional oil (listed below) such as tight oil (or ‘shale oil’ in popular discourse) are only commercially viable because the need to match the declining rate of conventional oil production has raised oil prices. It is the rate of production of oil that determines its supply, rather than the size of the reserves: ‘The size of the tap, not the tank.’

Oil check

Current data for the decline in oil fields’ production indicates that around 3 million barrels per day of new production must be achieved year on year, simply to sustain supply levels. This is equivalent to finding another Saudi Arabia every 3–4 years. In this context, fracking is at best a stop-gap measure. Conventional oil production is predicted to drop by over 50% in the next two decades and tight oil is unlikely to replace more than 6%.
Once conventional oil’s rate of loss exceeds unconventional oil’s rate of production, world production must peak. Production of sweet, light crude actually peaked in 2005 but this has been masked by the increase in unconventional oil production, and also by lumping together different kinds of material with oil and referring to the collective as ‘liquids’. (More recently, the term ‘liquids’ is often upgraded to ‘oil’, which is highly disinformative since the properties of the other liquids are quite different from crude oil.)
Fracking produces mostly shale gas (rather than oil), and the major growth in global ‘oil’ production has been from natural gas liquids (NGL; in part from shale gas). But the principal components of NGL are ethane and propane, so it is not a simple substitute for petroleum.

Energy in, energy out

The energy return on energy invested (EROEI) is worse for all unconventional oil production methods than for conventional oil.

‘Oil production is predicted to drop by over 50% in two decades’

This means that more energy must be invested to maintain output. As a rough comparison, conventional crude oil production has an EROEI in the range 10–20:1, while tight oil comes in at 4–5:1. Oil recovered from (ultra)deepwater drilling gives 4–7:1, heavy oil 3–5:1, and oil shale (kerogen) somewhere around 1.5–4:1. Tar sands is around 6:1, if it is recovered by surface mining, but this falls to around 3:1 when the bitumen is ‘upgraded’ by conversion to a liquid ‘oil’ substitute.

As conventional oil production has fallen, so has oil’s EROEI as we recover it from increasingly inhospitable locations, and with new technologies. The price of a barrel of oil has trebled over the past decade, but output has effectively flatlined. We may be close to the ceiling of global oil production, and the prospect of filling the gap with oil from alternative sources is daunting.

Different rocks

Although fracking has produced sizeable volumes of oil and gas in the US, there is no guarantee that a similar success will be met elsewhere, including the UK, in part because the geology is different. Even in the US, it is the sweet spots that have been drilled, and the shale plays elsewhere across the continent are likely to prove less productive.
The shale gas reserves in Poland have been revised down from 187 trillion cubic feet (tcf) to 12–27 tcf: at best, a mere 14% of the original estimate. And most of the production is likely to be gas. Even if we can exhume large volumes of gas at a generous production rate, converting our transport system to run on it would be a considerable undertaking, particularly given the timescale imposed by conventional oil production’s rate of decline. And there are many uses for oil other than to provide liquid fuels, for which substitutes must also be found.
Renewables do not provide a comparable substitute for crude oil and the liquid fuels that are refined from it, since the potential contribution from biofuels is relatively minor. Replacing the UK’s 34 million oil-powered vehicles with electric versions is an unlikely proposition, given the limitations of time and resources such as rare earth metals. Mass transit is the more likely future for electric transport than personal cars. The end of cheap, personal transport is a real possibility and may seed changes in our behaviour, such as building resilient communities that produce more of their essentials, such as food and materials, at the local level.
There are many uncertainties, but it seems clear that the age of cheap oil is over. We are entering a very new and different phase of human experience.
Chris Rhodes is an independent consultant based in Reading, UK, and author of  University shambles

RIGZONE – Report: US Energy Secretary Favors Reducing Oil Shipped By Rail

RIGZONE – Report: US Energy Secretary Favors Reducing Oil Shipped By Rail.

 

by  Reuters
|

Wednesday, February 19, 2014

Reuters

NEW YORK, Feb 19 (Reuters) – U.S. Energy Secretary Ernest Moniz supports reducing the amount of crude oil shipped by rail in favor of pipelines that are safer, cheaper and cleaner, Capital New York reported on Wednesday.

“What we probably need is more of a pipeline infrastructure and to diminish the need for rail transport over time,” he said in an interview published on the Capital New York website.

He said the infrastructure is “not there” to handle the surge in North Dakota Bakken oil production from near zero to 1 million barrels per day (bpd).

“Frankly, I think pipeline transport overall probably has overall a better record in terms of cost, in terms of emissions and in terms of safety.”

A Department of Energy spokesman was not immediately available to provide more detail on Moniz’s comments.

His comments are among the first by a senior Obama Administration official to signal an apparent preference for shipping oil from places like the Bakken shale by means other than rail lines, in the wake of a series of explosive derailments that have alarmed the public.

While pipelines are generally a much cheaper form of transport, shipping crude in mile-long trains has become a popular alternative since new terminals can be built more quickly than pipelines to serve booming remote shale patches, and offer greater flexibility for refiners.

Moniz has bemoaned the lagging pace of infrastructure development before, but has not been so blunt in backing pipelines over rail shipments.

President Barack Obama has been considering whether to greenlight construction of the Keystone XL pipeline from Canada, without which there could be a significant increase in crude moved by rail, according to a State Department report.

U.S. regulators are considering imposing tougher standards on older models of oil tank cars. Moniz said the U.S. Department of Transportation could issue new regulations this year.

“There’s been a handful of train accidents and that’s been quite troubling,” he said. “We have been transporting oil products by train with a decent safety record over time and there’s a lot of it.”

(Reporting by Jonathan Leff; Editing by David Gregorio)

The Golden Age of Gas… Possibly: An Interview With The IEA | Zero Hedge

The Golden Age of Gas… Possibly: An Interview With The IEA | Zero Hedge.

Submitted by James Stafford via OilPrice.com,

The potential for a golden age of gas comes along with a big “if” regarding environmental and social impact. The International Energy Agency (IEA)—the “global energy authority”–believes that this age of gas can be golden, and that unconventional gas can be produced in an environmentally acceptable way.

In an exclusive interview with Oilprice.com, IEA Executive Director Maria van der Hoeven, discusses:

  • The potential for a golden age of gas
  • What will the “age” means for renewables
  • What it means for humanity
  • The challenges of renewable investment and technology
  • How the US shale boom is reshaping the global economy
  • Nuclear’s contribution to energy security
  • What is holding back Europe’s energy markets
  • The next big shale venues beyond 2020
  • The reality behind “fire ice”
  • Condensate and the crude export ban
  • The most critical energy issue facing the world today

Interview by. James Stafford of Oilprice.com

Oilprice.com: In 2011, the IEA predicted what it called “the golden age of gas,” with gas production rising 50% over the next 25 years. What does this “golden age” mean for coal, oil and nuclear energy—and for renewables? What does it mean for humanity in terms of carbon emissions? Is the natural gas boom lessening the sense of urgency to work towards renewable energy solutions?

IEA: We didn’t predict a golden age of gas in 2011, we merely asked a pertinent question: namely, are we entering a golden age of gas? And we found that the potential for such a golden age certainly exists, especially given the scale of unconventional gas resources and the advances in technology that allow their extraction. But the potential for a golden age of gas hinges on a big “if,” and we elaborated on this in 2012 in a report called “Golden Rules for a Golden Age of Gas”. Exploiting the world’s vast resources of unconventional natural gas holds the key to golden age of gas, we said, but for that to happen, governments, industry and other stakeholders must work together to address legitimate public concerns about the associated environmental and social impacts. Fortunately, we believe that unconventional gas can be produced in an environmentally acceptable way.

Under the central scenario of the World Energy Outlook-2013, natural gas production rises to 4.98 trillion cubic metres (tcm) in 2035, up nearly 50 percent from 3.38 tcm in 2011. But we have always said that a golden age of gas does not necessarily imply a golden age for humanity, or for our climate. An expansion of gas use alone is no panacea for climate change. While natural gas is the cleanest fossil fuel, it is still a fossil fuel. As we have seen in the United States, the drastic increase in shale gas production has caused coal’s share of electricity generation to slide. Of course, there is also the possibility that increased use of gas could muscle out low-carbon fuels, such as renewables and nuclear, from the energy mix.

OP: When will we see “the golden age of renewables”?

IEA: Although we have not yet predicted a “golden age” of renewables, the current, rapid growth of renewable power is a bright spot in an otherwise bleak picture of global progress towards a cleaner and more diversified energy mix. Still, the investment case for capital-intensive, low carbon power technologies carries challenges. We need to distinguish between two situations:

•    In emerging economies, renewable power often provides a cost-competitive alternative to new fossil based generation and are perceived as part of the solution to questions of energy supply, diversification, and economic development. In China, for example, efforts to reduce local pollution are stimulating major investments in cleaner energy.

•    By contrast, in stable systems with sluggish demand, no technology is competitive with marginal electricity prices, due to overcapacity. Governments are nervous about increasing investment in low-carbon options which impact on consumer prices, and this is causing policy uncertainty. But long term energy security and environmental goals need to be kept in mind.

The overall outlook for renewable electricity remains positive, even as the outlook can vary strongly by market and region. However, the electricity sector comprises less than 20% of total final energy consumption. The growth of renewables in other sectors such as transport and heat has been more sluggish. For a golden age of renewables to materialise, greater progress is needed in these areas, for example, with the development of advanced biofuels and more policy frameworks for renewable heat.

OP: How is the shale boom reshaping the global financial and economic system? Who are the winners and losers in this emerging scenario?

IEA: One of the key messages of our World Energy Outlook-2013 is that lower energy prices in the United States mean that it is well-placed to reap an economic advantage, while higher costs for energy-intensive industries in Europe and Japan are set to be a heavy burden.

Natural gas prices have fallen sharply in the United States – mainly as a result of the shale gas boom –  and today they are about three times lower than in Europe and five times lower than in Japan. Electricity price differentials are also large, with Japanese and European industrial consumers paying on average more than twice as much for electricity as their counterparts in the United States, and even Chinese industry paying  almost double the US level.

Looking to the future, the WEO found that the United States sees its share of global exports of energy-intensive goods slightly increase to 2035, providing the clearest indication of the link between relatively low energy prices and the industrial outlook. By contrast, the European Union and Japan see their share of global exports decline – a combined loss of around one-third of their current share.

OP: The IEA has noted that the US is no longer so dependent on Canadian oil and gas. What could this mean for pending approval of TransCanada’s Keystone XL pipeline? How important is Keystone XL to the US as opposed to its importance for Canada?

IEA: The decision on the Keystone matter is one that must be taken by the United States Government. I am afraid it is not for the IEA to comment.

OP: With the nuclear issue taking center stage in Japan’s election atmosphere, is Japan ready to pull the plug entirely on nuclear, or is it too soon for that?

IEA: This year’s World Energy Outlook, which we will release in November 2014, will carry a special focus on nuclear energy, so please stay tuned. While I won’t discuss what Japan should do, I will say that every country has a sovereign right to decide on the role of nuclear power in its energy mix. Nevertheless, nuclear is one of the world’s largest sources of low-carbon energy, and as such, it has made and should continue to make an important contribution to energy security and sustainability.

A country’s decision to cut the share of nuclear in its energy mix could open up new opportunities for renewables, particularly as some phase-out plans envision the replacement of nuclear capacity largely with renewable energy sources. However, such a decision would also likely lead to higher demand for gas and coal, higher electricity prices, increased import dependency on fossil fuels and electricity, and a more difficult path towards decarbonisation. Such a scenario would therefore make it much more difficult for the world to meet the 2°C climate stabilisation goal, and have potentially negative impacts on energy security.

OP: What is the key factor holding back European energy markets?

IEA: Europe has quite a few advantages but also many hurdles to overcome. If I had to pick one key factor that is holding back European energy markets, I would say it is the lack of cross-border interconnections. Let me explain what I mean. As we showed in WEO 2013, Europe’s competitiveness is under pressure, as energy price differences grow between Europe and its major trading partners – the US, China and Russia. High oil and gas import prices combined with low gas and electricity demand, following the recession, are impacting European economies.

Europe should accelerate the use of its indigenous potential and reap the social and economic benefits from energy efficiency, renewable energies and unconventional oil and gas. In open economies, there are significant advantages to be gained from free trade and a large energy market. One example: Today, we cannot make use of competitive electricity prices across the EU, as physical trade barriers exist and markets remain national. Europe is failing to achieve its potential. The electricity grid and system integration is very low, which also serves as a barrier to the full and efficient exploitation of renewable energy potentials. This is why addressing the issue of cross-border interconnections is so important.

OP: Where do you foresee the next “shale boom”?

IEA: According to WEO projections, there will be little non-North American shale development before 2020 due to the much earlier stage of exploration and the time needed to build up the oil field service value chain. Beyond 2020, we project large-scale shale gas production in China, Argentina, Australia as well as significant light tight oil production in Russia. The current reform proposals in Mexico have the potential to put Mexico on the top of that list as well, but they need to be properly implemented.

OP: What is the realistic future of methane hydrates, or “fire ice”?

IEA: Methane hydrates may offer a means of further increasing the supply of natural gas. However, producing gas from methane hydrates poses huge technological challenges, and the relevant extraction technology is in its infancy. Both in Canada and Japan the first test drillings have taken place, and the Japanese government is aiming to achieve commercial production in 10 to 15 years.

One thing I always mention when I am asked about methane hydrates is this: It may seem far off and uncertain, but keep in mind that shale gas was in the same position 10 to 15 years ago. So we cannot rule out that new energy revolutions may take place through technological developments and price incentives.

OP: Have we hit the “crude wall” in the US, the point at which oil production growth may end up slowing due to infrastructure and regulatory constraints?

IEA: In January 2013, the IEA’s Oil Market Report examined the possibility that as surging production continues to move the US closer to becoming a net oil exporter, there may come a time when various regulations, particularly the US ban on exports of crude oil to countries other than Canada, could have an adverse impact on continued investment in LTO – and thus continued growth in production. We called this point the “crude wall”.

A year later, in our January 2014 Oil Market Report, we noted that with US crude oil production exceeding even the boldest of expectations in 2013 by a wide margin, the crude wall now seems to be looming larger than ever. Having said that, challenges to US production growth are not imminent. Potential US growth in 2014 seems a given, even against the backdrop of resurgent non-OPEC supply growth outside North America.

OP: How is this shaping the crude export debate and where do you foresee this debate leading by the end of this year?

IEA: You are better off asking my friends and colleagues in Washington! This is obviously a sensitive topic. Different people feel differently about it, often very strongly. Oil policy always is the product of multiple, sometimes-competing considerations.

OP: What would lifting the ban on crude exports mean for US refiners, and for the US economy?

IEA: Many refiners and other major oil consumers have said they support keeping the ban amid worries that allowing exports would result in higher feedstock costs and erode their competitive advantage, or shift value-added industry abroad. On the other hand, oil producers have in general come out in favour of lifting the ban, arguing that the “crude wall” may become so large that it cannot be overcome; they see the possibility of a glut causing prices to slump and thereby choking off production. We have not produced any detailed analysis on the economic impact of lifting the ban, so I cannot comment on that part of your question.

OP: Are there any other ways around the “crude wall” aside from lifting the export ban?

IEA: As we wrote in our January 2014 Oil Market Report, much of the LTO is produced in the form of lease condensate, which is most optimally processed in a condensate splitter. There is currently only one such facility in the United States, although at least five others are in various stages of planning and construction.

I mention this issue because one could imagine a scenario under which lease condensate is excluded from the crude export restriction. The US Department of Commerce, which enforces the export ban, includes lease condensates in the definition of crude oil. However, this definition could be changed, or the Commerce Department could simply issue lease condensate export licenses at the behest of the President.

OP: How will the six-month agreement to ease sanctions on Iran affect Iranian oil production? And if international sanctions are indeed lifted after this “trial period”, how long will it take Iran to affect a real increase in production?

IEA: The deal between P5+1 and Iran doesn’t change the oil sanctions themselves. The oil sanctions remain fully in place though the P5+1 agreed not to tighten them further. Relaxing insurance sanctions doesn’t mean more oil in the market.

As for the second part of your question, I am afraid I can’t answer hypotheticals and what-ifs.

OP: What is the single most critical energy issue in the US this year?

IEA: I think that if you take the view that the energy-policy decisions you make now have ramifications for many decades to come, and if you believe what scientists tell us about the climate consequences of our energy consumption, then the single most critical energy issue in the US is the same issue for every country: what are you going to do with your energy policy to mitigate the risk of climate change? Energy is responsible for two-thirds of greenhouse-gas emissions, and right now these emissions are on track to cause global temperatures to rise between 3.6 degrees C and 5.3 degrees C. If we stay on our present emissions pathway, we are not going to come close to achieving the globally agreed target of limiting the rise in temperatures to 2 degrees C; we are instead going to have a catastrophe. So energy clearly has to be part of the climate solution – both in the short- and long-term.

OP: What is the IEA’s role in shaping critical energy issues globally and how can its influence be described, politically and intellectually?

IEA: Founded in response to the 1973/4 oil crisis, the IEA was initially meant to help countries co-ordinate a collective response to major disruptions in oil supply through the release of emergency oil stocks to the markets.

While this continues to be a key aspect of our work, the IEA has evolved and expanded over the last 40 years. I like to think of the IEA today as the global energy authority. We are at the heart of global dialogue on energy, providing authoritative statistics, analysis and recommendations. This applies both to our member countries as well as to the key emerging economies that are driving most of the growth in energy demand – and with whom we cooperate on an increasingly active basis.

Long-Term Charts 1: American Markets Since Independence | Zero Hedge

Long-Term Charts 1: American Markets Since Independence | Zero Hedge.

Sometimes, perhaps all too often; investors, traders, economists, and mainstream media anchors miss the forest and see only the trees (growing to the sky or crashing to the floor). To provide some context on the markets, we present the first of three posts of long-term chart series (and by long-term we mean more than a few decades of well-chosen trends) – stock, bond, gold, commodity, and US Dollar prices for the last 240 years

American Markets Since Independence

 

Stock Prices

 

Interest Rates

 

Commodity Prices

 

The Gold Price

 

The Crude Oil Price

 

The US Dollar

 

 

H/t @Macro_Tourist for these increble charts

 

Of course, as we have noted in the past, Nothing lasts forever… (especially in light of China’s earlier comments )

Proposed Energy East Pipeline Could Exceed Keystone XL in GHG Emissions, Finds Report | DeSmog Canada

Proposed Energy East Pipeline Could Exceed Keystone XL in GHG Emissions, Finds Report | DeSmog Canada.

Fri, 2014-02-07 10:08INDRA DAS

Indra Das's picture

Proposed Energy East Pipeline Could Exceed Keystone XL in GHG Emissions, Finds Report

Climate Implications of the Proposed Energy East Pipeline: A Preliminary Assessment

A new report from Pembina Institute says that the proposed TransCanada Energy East pipeline could generate up to 32 million tonnes (Mt) of additional greenhouse gas (GHG) emissions from the crude oil production required to fill it. Thirty-two million tonnes of carbon emissions is the equivalent of adding 7 million cars to Canada’s roads, exceeding the projected emissions of the Keystone XL pipeline proposal.

The Keystone XL pipeline, in comparison, would generate 22 Mt of additional GHG emissions through oilsands production, according to a previous report by Pembina. The estimated emissions impact of Energy East is “higher than the total current provincial emissions of five provinces.”

The $12 million Energy East pipeline, proposed by TransCanada in August 2013, would have the capacity to transport 1.1 million barrels per day (bpd) of oilsands and conventional crude oil from Alberta to New Brunswick. According to the report, the volume of new oilsands production associated with Energy East would represent up to a 39 per cent increase from 2012 oilsands production levels.

Figure 1: Greenhouse gas emissions associated with Energy East compared to those of selected
provinces. Climate Implications of the Proposed Energy East Pipeline: A Preliminary Assessment. The Pembina Institute, 2014.

Oilsands production is currently Canada’s fastest growing source of GHG emissions, and is set to nearly triple between now and 2030, according to Environment Canada. Report authors Clare Demerse and Erin Flanagan told DeSmog Canada that this growth is “the single largest barrier to achieving [Canada’s] 2020 climate target.”

Given that Canada is set to miss its 2020 emissions reduction target by 122 Mt with current measures, Demerse and Flanagan see the Energy East proposal’s potential to add a new source of GHGs from the oilsands as “significant and troubling.”

The authors stress that the report, titled Climate Implications of the Proposed Energy East Pipeline, only assesses the pipeline’s upstream, “Well-to-Refinery Gate” emissions impact, rather than the downstream, “Well-to-Wheel” emissions of the crude oil being transported, which would include emissions released by its combustion in vehicle engines. The actual climate impact of Energy East would therefore be even greater than figures in the report.

“The oilsands are already Canada’s fastest-growing source of carbon pollution and the Energy East pipeline would help to accelerate production. Any regulatory review should include not only the impact of the pipeline itself, but also the impact of producing the crude that would flow through it,” said Demerse, Federal Policy Director at Pembina.

Figure 2: Change in GHG emissions by economic sector, 2005-2020. Climate Implications of the Proposed Energy East Pipeline: A Preliminary Assessment. The Pembina Institute, 2014.

Demerse and Flanagan hope that the report will urge the National Energy Board (NEB) to undertake a more thorough appraisal of Energy East’s environmental impact than its review of Enbridge’s Northern Gateway proposal, saying that they wanted to submit their findings “before the National Energy Board decides on the format of its review.”

The authors note that “many Canadians asked for consideration of the impacts of oilsands production in the Northern Gateway hearings,” so if the NEB chooses a “more complete and balanced review of the Energy East proposal – one that looks at the environmental impacts of filling the pipeline as well as the pipeline infrastructure itself – I think the regulators would simply be catching up to where Canadians already are.”

TransCanada is set to submit its regulatory application for Energy East to the NEB later this year.

The report recommends that the NEB “include the pipeline’s full upstream impacts in the scope of its review, and that the federal government should end its delays and adopt strong emissions regulations for the oil and gas sector.”

The report mentions that carbon capture and storage (CCS) technologies have been found to lower oilsands production emissions, but adds that “Canada lacks the kind of stringent climate policies that would provide a strong incentive for those kinds of investments,” especially considering the high cost of such technology.

ICO2N, a group of energy companies invested in developing CCS technology, estimates that a carbon price of $125/tonne is necessary to justify capture of approximately 15 per cent of oilsands CO2.

The authors believe that approving projects like Energy East and Keystone XL could “see less emphasis on, and less encouragement of, clean energy investment in Canada” when the country needs to be “starting the transition to a clean energy future.”

“The oilsands industry plans to triple production by 2030 and building new pipelines is necessary to realize those ambitions. We need to look at the full scope of impacts when evaluating pipelines,” said Flanagan.

In its 2013 World Energy Outlook, the International Energy Association (IEA) modelled a scenario where countries take the action required to keep global warming below 2 degrees C, and found that global demand for oil would likely peak in 2020 and fall thereafter. Demerse and Flanagan suggest that Canada needs to “keep that kind of long-term picture in mind when we’re considering a pipeline proposal that could last for 30, 40 or 50 years.”

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