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DrumBeat: February 8, 2007
Posted by Leanan on February 8, 2007 - 10:25am
Couple of stories about Norway:
Norway Falls from Third to Fifth Place Among World Oil Exporters
Norway dropped to fifth place among the world's crude oil exporters last year as the nation's North Sea production declined, the Norwegian energy ministry said.
Norway January Oil Output Falls to 2.419 Million Barrels a Day
Norway pumped about 2.419 million barrels of crude oil a day in January, falling 1.2 percent from the month before, according to preliminary figures from the Norwegian Petroleum Directorate.
Dale Allen Pfeiffer: The Dirty Truth About Biofuels
In a survey of a large sampling of ethanol studies, the authors found that the average of all these studies taken together showed a net energy loss of 8%. Throwing out the three highest and three lowest outliers cut this loss to 2%.
Scientists develop portable generator that turns trash into electricity
A group of scientists have created a portable refinery that efficiently converts food, paper and plastic trash into electricity. The machine, designed for the U.S. military, would allow soldiers in the field to convert waste into power and could have widespread civilian applications in the future.
Pemex: Mexico's top oil field declining fast
Chief Executive Jesus Reyes Heroles said the company's official production estimate for Cantarell was for an average of 1.526 million barrels per day during 2007, down 15 percent from an average 1.788 million bpd last year.The figure is in line with recent industry talk but bleaker than Pemex's outlook six months ago when it forecast Cantarell's output at 1.683 million bpd for 2007 and 1.430 million for 2008.
Reyes Heroles said that with an exploration and production budget of $15 billion a year, Pemex could keep total crude oil production steady between 3.0 million and 3.1 million bpd -- also a much less rosy forecast than Pemex was making last year.
The Peak Oil Crisis: Connecting the Dots
In the months after 9/11 there was much discussion about the American government's failure to "connect the dots." Hints and clues that Al Qaida was about to launch airborne suicide attacks inside the US abounded but nobody put the bits and pieces together into a convincing warning.Such it may be with peak oil. There are trend lines and clues from across the earth pointing to serious troubles just ahead, but once again they are not generally perceived as making a "convincing case," especially when nobody really wants to contemplate the conclusion.
Venezuela '06 Foreign Oil Investment Plunges; Exploration Up
Foreign oil investment in Venezuela fell 55% in 2006 compared with the year-ago period, indicating that firms halted spending amid contract uncertainty....While foreigners trimmed their budgets last year, state-run PdVSA appeared to be busy with exploration work. The 318-page message to Congress showed a 24% rise in exploration spending to 548 billion bolivars ($255 million) last year from 415 billion ($193 million) in 2005.
Venezuela completed 15 exploration wells last year, up from 10 in 2005. The number of oil production wells completed last year shot up to 450 from 182 in 2005.
Oil sands pumping problems: report
According to Simon Dyer, researcher for the University of Alberta’s Pembina Institute and co-author of the report, Death by a Thousand Cuts, Alberta is facing a serious environmental crisis due to oil sands development in the northern part of the province.
Devon: To Drill Additional Jack Well in 2nd-Half '07
A second delineation well will be drilled at the Chevron Corp.-led Jack project in the second half of 2007, Hadden said. Jack serves as the bellwether for the exploitation potential of the lower Tertiary trend, a rich hydrocarbons layer buried deep beneath the Gulf's subsoil.
Exporters should not fear energy-cost labelling
Major British retailer Tesco has announced that it will soon label all produce that has been airfreighted to Britain with a sticker. Environmentally conscious customers would this way be warned of the energy costs of getting this product to market.
Russia pins energy hopes on new nuclear monopoly
This is a revolutionary event - the state has established control over the entire civilian branch of the nuclear industry. It has revived the old but highly effective Soviet style of management: government control.
El Paso settles oil-for-food allegations
The nation’s largest natural gas pipeline company agreed to pay the federal government $7.7 million to settle corruption allegations related to the U.N. oil-for-food scandal over aid to Iraq, according to a settlement announced Wednesday.
Filipino woman kidnapped in Nigeria - the first female captive. A French engineer has also been seized.
CNN ran a special report on Nigeria last night. Big guns, big oil collide in Nigeria
ExxonMobil signs deal with Libya for offshore oil
US oil giant ExxonMobil announced it had signed an agreement with Libya's National Oil Corporation to start exploration activity in the Sirte Basin off the Libyan coast.
Gore: Nations must take lead in warming
Emerging economies such as China are justified in holding back on fighting greenhouse gas emissions until richer polluters like the United States do more to solve the problem, former Vice President Al Gore said Wednesday.
Is President Bush Changing His Views on Global Warming?
White House issues rare letter defending record on warming, claims climate change has been a top priority since Bush's first year in office. Also, the White House says the U.S. is doing more than Europe to combat global warming.
Don't be fooled. The dirty secret about global warming is this: We have no solution. About 80 percent of the world's energy comes from fossil fuels (coal, oil, natural gas), the main sources of man-made greenhouse gases. Energy use sustains economic growth, which -- in all modern societies -- buttresses political and social stability. Until we can replace fossil fuels or find practical ways to capture their emissions, governments will not sanction the deep energy cuts that would truly affect global warming.
Jeremy Leggett: Let the train take the strain
The theory is this. The world is full of wonderful books, and terrible airports. Drop the airports. Read the books. Take the train.
The US Dollar will Crash during 2007 due to $8.6 trillion debt
As long as foreign lenders are willing to take our paper, Bush will keep expanding our debt. As Chalmers Johnson opined, “We are dependent on ‘the kindness of strangers’”. (The Blanche Dubois economy)Of course, if the central banks grow tired of this pyramid-scheme and dump the dollar; the world can get on with the business of addressing global warming, poverty, AIDs, Peak Oil, nuclear proliferation etc. That won’t happen as long as the dollar reigns supreme and a small cadre of unelected racketeers at the Fed continue Gerry-rig the system.
Gold Prices Rise as Gold Mining Output Drops
But what about "Peak Gold", we wonder. What might it do for investors looking to offset a little of the turbulence caused by Peak Oil...?
Texas-Sized Energy Crisis Looms
The worst of these proposals would limit the natural gas burned in Southern California to a “Wobbe” index of 1360. Current sources of natural gas have a Wobbe rating of 1400 or so, and the State Public Utilities Commission last year set a requirement of getting a Wobbe rating of 1385.What does all of that mean? Practically speaking, it means that natural gas from California, the Rocky Mountains and liquefied natural gas would be verboten across Southern California—and any territory served by Sempra Energy’s So Cal Gas Company. And of course, what is a primary source of electric generation for Southern California—you guessed it…natural gas!
Majority Leader: House Dems 'Not Going to be Locked into One Giant Bill'
House Democrats plan to bring several smaller energy bills to the floor by early summer instead of a single, comprehensive measure, Majority Leader Steny Hoyer (D-Md.) said yesterday.
The budget only has a 1 percent real increase — real means adjusted for inflation — in R&D in energy, atomic energy, natural resources and environment and transportation.
Strickland: Ohio must pursue alternative fuels
When the United States experienced an energy crisis in the 1970s, attention suddenly focused on alternative fuels. However, when the price of gas went down again, much of that attention on alternative energy drifted.
Re-enactor ‘Perfect Storm’ Strikes Shell Station
A group protesting the United States’ dependence on foreign oil had dressed in leisure suits and were lining up outside the station in 1970s-era cars to simulate the gas lines of the first energy crisis in 1973.
Nabors: Canada Drilling, Dayrates Down 20% in '07
Nabors Industries Ltd. (NBR) drilling operations in the U.S. and Canada will decline in 2007, as low natural gas prices and high service costs turn off producers, chief executive Gene Isenberg said Wednesday.
Bush Requests $16.2M Budget Increase for MMS
"This is a critical year for the nation and our growing energy needs," said Johnnie Burton, MMS director."With this budget request, MMS can continue moving forward to ensure safe and clean development of needed ocean energy, as well as an efficient and accurate mineral revenue collection process," Burton said.
China has a rapacious hunger for nearly everything under the sun. Now the Waking Dragon is turning its head-and its wallet-towards Africa.
From Afghanistan to Iraq: Connecting the Dots with Oil
In the Caspian Basin and beneath the deserts of Iraq, as many as 783 billion barrels of oil are waiting to be pumped. Anyone controlling that much oil stands a good chance of breaking OPEC's stranglehold overnight, and any nation seeking to dominate the world would have to go after it.
Iran Nuclear: Weapons or Energy
...the Ford administration strongly supported the Shah of Iran’s plan to develop nuclear energy, according to The Washington Post. President Ford even endorsed a multibillion-dollar deal that would have provided Tehran with substantial quantities of plutonium and enriched uranium, either of which could be used to build nuclear bombs. “The introduction of nuclear power will both provide for the growing needs of Iran's economy and free remaining oil reserves for export or conversion to petrochemicals,” said the Ford strategy paper.
Livestock destroy the environment, so fill your bowl with veggies instead of veal.
Fuel from forests is new clean energy goal
By 2010, China plans to plant an area the size of England, or 13 million hectares, with trees from which biofuel can be extracted as a source of clean energy, according to the State Forestry Administration (SFA).
European blowback for Asian biofuels
New European concerns about the adverse environmental impact associated with Southeast Asian-produced biofuels threatens to scupper the rapidly growing multibillion-dollar industry, just as big new production facilities and cultivation areas come onstream.
U.S. Seeks Partnership With Brazil on Ethanol: Countering Oil-Rich Venezuela Is Part of Aim
Idea to use biofuel to reach rural India
Idea Cellular, which will launch its Initial Public Offering (IPO) on Feb. 12, Ericsson and the GSM Association’s (GSMA) Development Fund have teamed up to develop biofuels as a source of power for wireless networks in rural India. In a pilot project in Pune, the three organizations will begin using biofuels to power mobile base stations located beyond the reach of the electricity grid.
Scholars to consider the shrinking of cities
Scholars gather at UC Berkeley this week to ponder a trend much-studied in Europe but little-discussed in the United States: the shrinking city.The phenomenon touches places as varied as Paris; Youngstown, Ohio; Leipzig, Germany; the Taeback Mountain region of South Korea; and parts of the San Francisco and San Jose metropolitan areas, scholars say.
Jaimini Bhagwati: Strategic oil reserves and other options
Obviously, each country has to work out for itself the tradeoff between costs and benefits of holding strategic oil reserves. The current cost of importing 5 million tonnes of oil is about $2 billion. Assuming a 5 per cent risk-less rate of return, the financial cost of holding 5 million tonnes of oil would be about $100 million per annum. In addition, there would be storage and personnel costs. It appears that no significant hedging benefit would be realised by holding such a low volume of strategic oil reserves.
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No link yet, but DowJones is reporting that OPEC production is down 2.1 million bpd from October to January.
http://futures.fxstreet.com/Futures/news/afx/singleNew.asp?menu=economic...
I am very pleased to see this 2-mbd INCREASE in OPEC Exports! The $64k question is whether it is solely Angola or have others joined in?
Angola's recent record Supply is 1.8-mbd. With Feb 1st quota cuts, OPEC should have dropped to 21 or so. The 24.6 number tells me they are reacting to the record 86.2-mbd Call on Demand i've been watching or else Angola just set a new record of 3.6-mbd ... highly impossible.
January very likely was a new Supply Record with my December OECD Inventory bottoming now validated by EIA.
OPEC could not produce in the Autumn cuz the Inventories were at record highs. Fed by the 1.75-mbd surplus production. Near record Demand in December was fed from Inventories. But the price firmed up the moment Inventories hit recent memory lows.
The world is unfolding as it should...
Prices will slump nicely thru April and May below $50 contract.
QUOTES as of 1043EST
June 2007 5987
December 2007 6232
December 2008 6304
December 2009 6305
December 2010 6272
December 2011 6237
December 2012 6227
http://www.cattlenetwork.com/content.asp?contentid=104343
ENERGY MATTERS: OPEC Cuts Make Big Dent In Global Oil Stocks
This statement lines up with a recent statement by an IEA spokesperson that stated that OECD inventories would drop 200 million in the fourth quarter of 2006 and the first quarter of 2007.
Based on the steep drop in OPEC prodcution in January (including Iraq which was down 400,000 bpd per the Oil Daily), I think that the total two quarter drop may exceed 200,000,000 barrels.
So, currently demand is being met by a combination of (declining) production and inventory drawdowns.
As I noted yesterday, the average monthly spot Brent oil price was about two-thirds higher in the 20 months after 5/05 than in the 20 months prior to 5/05, while the world has produced about 325 million barrels less oil, than if we had just maintained the 5/05 crude + condensate production rate.
..and yet price of crude is still below $60.
How is this counter-intuitive event occurring?
Robert, Robert...where are you? I need an explanation.
We are currently 50% more than the average spot price in the 20 months prior to 5/05.
Could it be that the OPEC production cuts are re-establishing some degree of excess capacity, which is serving to put a ceiling over oil prices (as well as the reduced quantity supplied putting a floor under them)? In other words, excess capacity reduces price volatility and keeps prices in a narrower range.
Of course, if westexas is correct, then the cuts are involuntary, there is no excess capacity and this explanation is not valid.
Excess capacity does not put a ceiling on oil prices or decrease volatility unless that excess capacity is used to do so. That is, unless OPEC dumps more oil on the market if prices hit a certain point, and pull them back off again when oil drops to a certain point, then excess capacity has no effect whatsoever.
At any rate, excess capacity would likely have little to no effect on volatility because the response would be far too slow. By the time OPEC meets, decides what to do, set a date to do it and then the tankers get to their destination, we are looking at two to three months at least. Far too long a time to reduce volatility very much, if at all.
Ron Patterson
Ron, I disagree on this point.
If we believe that all producers are producing at maximum capacity and that maximum rate of production remains unable to meet market demand then we can make the case that this excess of demand over supply will result in an increased future price for the commodity. Since future prices are anticipated to be greater then current prices it makes sense to buy now, i.e. to hoard.
On the other hand, if we observe that market demand is being met by existing rate of production and we also observe that there exists a surplus prodcution capacity that may be brought on stream to meet future demand, then we cannot justify the case for future price rises or for future shortages and it is therefore much harder to make the case for hoarding. In fact, under this scenario, there would be a strong argument to liquidate inventory to reduce the costs of carry.
Your views?
New Account, two things, you edited my post in mid sentence. That is what is called changing the context. Or "quoting out of context". In debating circles that is a real no-no. What I said was:
First, oil traders must believe that the holders of such spare capacity will indeed use that spare capacity if the price reaches a certain trigger point. But even that belief will not affect supply and demand today, or more correctly the price swings that over demand or under supply causes.
The farther out futures contracts follow the front month contracts. True, they reflect the expectations of what prices will be down the road and excess capacity can influence the distant futures contracts and therefore trade either at a premium or discount to the near term contract. But spot prices and the front month prices and most certainly volatility are affected by what can be delivered this month, not three to six months down the road. Observe the price volatility caused by a sudden cold spell if you doubt this.
Simply the knowledge, or more correctly the belief that spare capacity exist and can be brought to the market in a few months, does not affect the spot price of oil or the close in contract or the volatility of the price of oil to any large extent. Think about it, if it did, then there would be no need for OPEC nations to hold oil off the market. That is any increase in price due to tight supply would be driven right back down due to the increase in spare capacity. Spare capacity in the Middle East does not increase the inventory level of gasoline in the US.
Ron Patterson
It was quite clear what you said, and that he was responding to your full statement. While he may not have quoted the full context, he addressed it and did not appear to misrepresent your position in his argument. So it's no big deal.
Pitt, I thought my reply was courteous and resonable. I did not make a big deal of it. But when two parts of a sentence are connected by the conjunction unless, and when one quotes you they leave out that unless along with the entire second half of the sentence, then that is most definitely changing the context. The unless was not dealt with in his reply at all.
And that was the entire point. If a country says that they will, if the price reaches a certain point, dump mass quanities of oil on the market, then that will definitely affect the price of oil and even the volatility. But they have given absolutely no indication that this will happen. And unless they do........well, you get the idea.
Ron Patterson
Ron,
While I totally agree with you in principal, traders make assumptions. They have too. If OPEC reduces exports by 2 million barrels per day to support the price, the thought on the Nymex floor is most likely that if there's a big supply disruption (Hurricane, terrorist) the Saudi's (or whomever) will jump in with additional supplies.
Just because they don't say they will doesn't mean they won't. Just like if they say they are going to increase production by X million barrels per day doesn't mean they really can.
At the end of the day there is a lot of subtlety, nuance, and even bald face lying that goes on in the Oil markets.
Garth
Egg, with all due respect I don't think we are talking about hurricanes here. At any rate there will still be tremendous volatility if a hurricane hits the gulf. It takes about six weeks to transit from Saudi to the US you know. At any rate we are really talking about what effect any excess capacity that exist right now is having on the price of oil and price volatility.
But let me put it a bit different. If there is excess capacity because the market is already flooded with oil, then prices will be low along with volatility. Then if the supply gets tight and any excess capacity disappears then both price and volatility goes up. Then prices get so high that demand destruction sets in and prices begin to fall. Now at this point OPEC decides to take oil off the market, creating some excess capacity, this will neither decrease the price of oil or the volatility. Imagine if it did. Then what would be the purpose of taking the oil off the market if it only resulted in the decrease of the price of oil. Then it would only be counterproductive.
Ron Patterson
I disagree.
When OPEC takes oil off the market due to falling prices, it does not decrease the price (in fact it supports it), but it certainly does have the effect of decreasing volatility. Instead of excess supply causing the price to crash, the decreased supply puts pressures on inventories causing the price to stabilize. How can you not see this as decreased volatility?
That excess capacity can then be used to reduce volatility when prices are surging higher.
Garth
Garth, as Simmons says, data trumps all theories. Check the the volitity since OPEC says they started the cuts on November 1st. There has been no decrease in volatility. The price swings have been just as great the last two months as they were the previous months. As this chart shows, the weekly price swings have been just as great as any time in the last two years. In fact they have been very volatile in the last five weeks. But of course this does not tell the whole story as it only shows weekly swings. The daily swings and interday swings have been just as great.
http://futures.tradingcharts.com/chart/CO/W
The daily price swings have been just as volatile. However I don't claim that this excess capacity, if they really have any, actually reduces volatility. I don't think it has any effect whatsoever. But other factors have certanily increased the volatility in the last two months.
Volatility is the severe swings in the price of the near term contract on the NYMEX. Traders on the floor, as well as hedge fund traders, do not consider how much excess capacity OPEC may or may not have when they trade. The life of a NYMEX crude oil contract is currently less than one day. Last summer it was almost two days. That tells me that volatility is definitely increasing. (The volume of trades on the near term contract is greater than the open interest. This means that there are more trades in one day than contracts open. today open interest was 277,556 while there were 335,594 trades made today on the near term contract.)
Check the volume on the weekly contract above. Weekly charts are composite charts reflecting the near term price of every month and do not reflect only the near term contract as the daily chart does. (Simply put, the volume shown on the weekly and monthly charts reflect all contracts while the daily charts reflect only the volume of the contract being plotted, usually the near term contract.) Therefore the volume you see is the total volume for that day. You will see that volume has dramatically increased since Christmas. It was down Christmas week and New Years week for obvious reasons. And there were only three trading days during New Years week. But you will notice the volume last summer was about half what it is now. Volume is increasing, contract life is shorter and price swings are greater. Volatility is also increasing, in my opinion anyway but any excess capacity in OPEC nations, does not in my opinion even enter the picture.
http://futures.tradingcharts.com/marketquotes/quickquote.php3?sel=Crude+Oil
Ron Patterson
Of course Garth is correct. Normally your reasoning would be right ron looking at the data as u have; but u have neglected to factor in the large Demand Call that i have been warning about for many weeks. Q1 is a record 86.2-mbd Call. The stabilization in volatilty that should have happened could not cuz surplus inventory was exhausted in January.
Q2 was scheduled to be a very light qtr. of 84-mbd Call. But there are reports that the lower prices in january created lotsa orders. We'll know better shortly.
Ron,
I assume you are aware that Deffeyes predicts increased price volatility as excess capacity is squeezed out of the production system? I believe I first read this in Beyond Oil, although I don't have my copy handy. Here's what he said about it in an interview I found that's about two years old:
http://www.energybulletin.net/4483.html
If diminishing excess capacity results in increased price volatility, then it seems reasonable to assume that increasing excess capacity results in reduced volatility.
Calorie, thanks for the post.
When OPEC first decided to cut production last fall, some of the talking heads on CNBC said this would cause the price of oil to drop because this would increase excess capacity. Is that logical? Not in my book but it appears a lot of people are buying into that argument.
But let me put it another way. When there was plenty of oil on the market excess capacity meant little because a surplus of capacity kept prices low. The term "excess capacity" is just another way of saying "the market is fully supplied". Or countries have more oil than they can sell and are holding some of it back. This depresses prices and keeps volatility low.
On the other hand when production drops below demand, prices rise. Very high prices causes demand destruction and therefore prices drop slightly until demand and supply are in balance. So far so good.
But then OPEC cuts back on production. This supposedly increases spare capacity. Yet prices rise and volatility remains about the same and in some cases actually increases. The price of oil jumped $2.00 today because of a fire in California. Does anyone actually believe that the perceived OPEC spare capacity actually diminished that price rise today or the volatility of prices today?
Now IF OPEC had said something like; “Not to worry, we will dump an extra 120,000 barrels per day on the market to compensate for the oil taken off the market by the California fire” then that might have reduced the price rise and volatility. But that’s absurd. We know OPEC will just sit on any spare capacity they might have.
My argument is, the OPEC spare capacity, if it really exists, is not presently reducing the price or the volatility of the market.
Ron Patterson
Pitt: I only agreed with half of the statement and only quoted the half to which I was objecting. Me thinks Ron is having a Hothgor moment.
Cheers!
New Account, I deeply resent that remark. My reply to you was very courtous, without any smart alec remarks whatsoever. I simply pointed out that you changed the context of my statement entirely. You could have stated, in your reply, that you disagreed only with the first half of my sentence. But your reply did not give that indication at all.
At any rate, I think that pointing out a change in context is entirely proper and should be done in all occasions when that happens. On the other hand, calling that a "Hothgor moment" was snide and sarcastic. That is how I would expect Hothgor to behave!
Ron Patterson
Didn't add this to the quoted extract as I agree with it. Excess capacity will not impact short term market volatility as the Elk Hills fire of today demonstrates.
Still disagree with you on the point quoted in the initial comment. Part of the reason for the under-investment in the oil industry in the decade of the 1990s was the fear of surplus capacity under the control of OPEC. OPEC does not have to utilize that surplus capacity, they simply have to convince other producers that they do in fact have such surplus capacity. This is the primary reason they have for not making full disclosure of their actual reserves. Everyone else is left guessing and this works to KSA advantage; nobody wants to bet against them.
The issue is one of market perception. That perception will eventually generate its own reality.
So, after reading this whole thread, Im mostly left in a fog with a nasty little headache. The sparkly gem Ill take away is: '..having a Hothgar moment'
Gonna make tshits ;-)
"Blanche Dubois" economy! Best laugh I've had in a while... :-)
Yup. I don't know if I buy the article's premise, but the author certainly has a way with words. How can you not love phrases like "the Blanche Dubois economy" and "Sleepwalking in the Weimar U.S.A."?
superb.
''Ah hiave alwuys relaad on thu kandness uv stranges''.
but it aint original to this author...
I don't understand the joke, can someone explain me?
"STELLA!!!!!"
Blanche Dubois is a character in the Tennessee Williams play, A Streetcar Named Desire. One of her lines is "I have always depended on the kindness of strangers."
Hence the "Blanche Dubois" economy - we are dependent on the kindness of strangers (China, etc., buying our debt).
Not to be confused with the Scarlet O'Hara peak oil strategy. ("I'll think about it tomorrow.")
That would be "I'll never be hungry again!"
Possibly the current US administration's policy?
OK! In fact, it is very funny!!
I do not live in an English speaking country, so I do not have the same references as the most people here!
I forgot: Thanks for your kindness..!
Mid-Atlantic Offshore Wind Potential: 330 GW
[from Renewable Energy Access, reporting on a U. of Delaware/Stanford study]
100m is quite deep for offshore wind turbines. It is well known that the planning for large offshore wind farms in the North Sea are in delay on account of technical problems, placing the turbines in water depths deeper than 30 or 40m.
Last year I read in a magazine a big wind turbine manufacturer (Vestas) wants to develop a technology which allows the turbines to float in the ocean, chained to the ground. This would allow maintenance by hauling the turbines to the shore instead doing work out in the sea. Does anybody know more about this idea?
I would love to see how these wind turbines would hold up against a major hurricane. How much energy would they generate in a 150 mph wind? Those chains won't keep the turbines in the ocean either. The ocean currents would toss them on the shore ... in need of some major maintenance or the trash heap.
David Mathews
http://www.geocities.com/dmathew1
I just googled a little bit. This seems to be a interesting source...(with link to the primary source)
There is enough place on the sea which is not threatend by hurricanes. For places like the North Sea, which is quite a rough sea, this is worth a try...
Mariotti32: Deepwater semi-submersibles are already capable of riding out storms with 70 foot seas and 100 knot winds. This means that current offshore technology permits wind generation in any offshore location currently being explored (North Sea, Grand Banks).
My hunch is that much of the current North Sea infrastructure will in future host wind generation equipment once the sub surface resource is fully depleted.
Cheers!
The question then remains: What is the energy cost of these behemoths? How much energy was expended to mine, refine, ship, mill, ship, weld, assemble, weld, ship, tow, place, and maintain the windmill? What is the EROEI? Could the energy produced by one windmill produce ALL the energy needed to manufacture itself?
Secondarily one must ask: How does the disturbance of natural airflow affect the environment? Local and global?
Regarding the first question:
Vestas Life Cycle Assessment:
Other things to consider:
All power generation sources cost energy to build. But think of fossil fuel sources that constantly need the burning of additional fossil fuels in order to run, e.g. oil tankers, gas tankers, trains carrying coal, etc. Once a wind turbine is up and running, there are no transportation costs: mother nature brings the energy source to the turbine.
Regarding the second question:
I don't know how much wind turbines disturb the natural airflow. But consider regular structures - skyscrapers, warehouses, etc. They undoubtedly affect wind patterns too, yet we still build them, and there doesn't seem to be any catastrophic effect, relative to wind patterns, from building them.
Cherenkov - you raise an interesting point. In pre-internet days I remember a study done by researchers at University of Chicago (may be wrong on this cite). They studied urban wind flows and found a significant increase in wind velocity due to channelling between the walls of the built environment.
This suggests the possibility of erecting structures between urban buildings at a level above street level to capture the wind energy.
Cheers!
Norsk Hydro (the Norwegian energy and aluminum company) is one company with a project for achieving deep-sea offshore wind.
Information is here and here
Unfortunately the 3-5MW pilot windturbine is not projected to deploy before 2009.
Why not?
We anchored a massive,deep water (for the time), floating tension-leg, cable anchored platform above the Hutton field in UKCS - North back in the 80's.
It was called the Hutton TLP.
Brilliant and innovative at the time.
UKCS-North offered some of the worst conditions in which to drill for oil at the time, and still provide massive challenges.
When that field was depleted, the owners decided to move it off site to use somewhere else.
There is nothing new under the sun.
All you need are good engineers and money.
Float your wind towers on large concrete caissons in batteries of 10.
Anchored using tension leg technology.
That will provide stability.
The centre of gravity will reside in the caisson.
And accommodation for automatic, sensored computers for monitoring, and an accommodation module for peripatetic, ad-hoc maintenance crews.
Piece of Cake.
Expect problems from a seafloor criss- crossed with cables. A high (400kv) voltage direct current undersea cable had to be rebuilt at great cost because oil rigs wanted an earth return included in case of accidental contact. Even with lower voltages cables could be snagged by trawlers.
Bury it with a sub sea back fill trencher
This is just half-analysis which IMO is worse than no analysis at all. I may as well say that the oil shale and tar sands reserves have "the potential" of powering the whole USA for the next 100 years - a statement which is technically true.
Can we really install 166,720 wind turbines in waters up to 100 meters of depth? AFAIK the record now is 20 m. Can we realistically connect them all to the grid, provide for storage and/or backup for all of them? What will be the total costs of such enterprise? How will it compare to the alternatives?
Until these questions are properly addressed (the article shies away from any cost/benefits analysis) that 330GW number as nothing else than meaningless noise.
I think you've misunderstood the point of the study.
You're absolutely right that there are many other very important questions that need to be answered before we know the level of energy that can practically be obtained; however, that is not what this study was intended to answer. From the lead author:
"In doing our surveys and watching the public debate, we saw that no one had solid empirical data on the actual size of the offshore wind resource, and we felt this was important for policy decisions"
They were trying to put a solid number on the total size of the resource - akin to the "Oil In Place" number for an oil field. Obviously, I agree with you that the numbers corresponding to "Possible/Probable" for an oil field are also important to know - maybe even more important - but that doesn't make this number useless. Had they come up with a much smaller number - say, 3GW - we would know that offshore wind power would never be a major factor in east-coast electricity generation. Instead, we now know that the size of the potential resource justifies further exploration of the type required to get the numbers you're demanding.
Not everything can be done at once - have some patience. Rome, as they say, wasn't built in a day.
Maybe I am too demanding but when it comes to wind/solar/oil/nuclear/whatever these are not two questions but just one - how much of the resource is it feasible to exploit in a given resource constrained framework. OOIP is useful only because there are known methods to derive the extractable oil, knowing OOIP... otheriwise it would mean almost nothing - for example what if there were whopping 1 bln.brls OOIP in a deposit but we can realisticaly recover just 0.1%?
Without economical and technical analysis the "original oil/wind in place" may extend to unbelieveble heights, so much as to render the whole number useless. Venezuella is a good example - it has reserves of both conventional and a much larger size of extra-heavy oil. Should it be allowed to include extra-heavy oil in its reserves (putting apples to the oranges) we may get the wrong idea that we don't have impending oil problems at all. Similarly the total wind resource of North America could theoretically power the whole world, and the total uranium supply could allow us to move the whole planet if we decide to.
The study foregoes many assumptions of what is feasible or not and at what price. For example the 100 m depth is totally ridiculous. They may as well include up to 1,000 m depth - bringing half the Atlantic ocean within reach. If it was really intended to help policy makers it would have developed scenarios - up to 10m that much wind with this cost, 10-20 m that much wind etc. etc.
Again without it the 330GW number is useless or should I say misleading. Proclaiming the upper limit or the best of the best cases without justifying the assumptions behind it is sort of skewing the picture, don't you think? What if we could realistically exploit only 3 of these 330GW, are we going to have the same talk here?
That's a good point. I suppose estimating gross wind potential is a bit like estimating hydrocarbon reserves on the basis of geology without drilling any holes. One purpose of putting out numbers like these is to make us feel good, to make us feel that the technology to solve our problems already exists, if only somebody else would do something to build it, and we can happily get on with our lives just as before. Another purpose might be to stimulate research funding towards "incremental technology developments", but that's just a cynical view.
Putting a wind turbine in 100 feet of water off New England and keeping it working there is a non-trivial design challenge.
Source
Besides affordable mooring technology, dealing with winter ice loading in the North Atlantic is also a poorly solved problem AFAIK. I've read that the best approach to ice loading is to incorporate an sensor in the nacelle that causes the blade to stop when icing is detected. I don't think we can plan on having global warming eliminate winter icing conditions any time soon. I'm not saying these problems can't be addressed, but they are examples of why quoting statistics for Offshore Wind In Place can be like, well, whistling in the wind.
It is also like citing the solar energy falling on every square meter of earth as 'solar reserves in place.' Practically harvestable and usable energy might be a tiny fraction of this.
That is one way to approach the problem, but that is not the only way. A more effective alternative way involves two questions:
Question #1 is relatively easy to answer. Question #2 is quite hard and expensive to answer. Answering question #1, then, lets us cheaply and easily tell whether question #2 is even worth asking.
When discussion is at a very abstract stage - as discussion about major wind installations in the USA is right now - then question #1 is crucial: it allows rapid and factual discussion about whether the resource is - even in theory - worth looking into. And it's information that those discussing the question of wind power did not have before this study came out.
So now that we know the resource is - in theory - huge, we have justification for spending the time and effort required to answer the second question, the one you call the only question.
There are known methods to extract some of the total oil in place.
There are known methods to harvest some of the total wind in place.
It's fairly analogous.
Then we call them "tar sands". ;)
Are you sure? Have you read the study, or do you simply believe that's what it does?
Do you have training and experience in a related field, or is that simply your intuition?
One of the first things you learn in science is that our intuition can be strikingly wrong outside our everyday realm of experience.
Thought this may be of interest to Internet people who champion causes, affect people and Gov Policy etc.
Bloggers Who Criticize Government May Face Prison
Just the Start??
http://infowars.net/articles/january2007/180107Bloggers_Prison.htm
"The Pentagon recently announced its effort to infiltrate the Internet and propagandize for the war on terror."
My tax dollars at work. Why do I feel like such a sap?
I think they've been posting here.
Hothgor?
No. It would be someone really clever.
ip? he seems to post during the normal work hours of 9-5.
Dont worry,
can you imagine just what an awful pile of crap a government organised propaganda website will look like?
Have you seen what happens when they try and talk directly to 'Yoof'?
It is toe-curlingly bad.
Anyway, a 12 year old hacker will probably cripple it within an hour.
http://www.ready.gov/
Ha!
how about this for a load of Bollix?
http://www.number10.gov.uk/output/Page1.asp
Tony does this,
Tony does that,
Tony engages with Yoof
Tony saves the world
...By fooking off and going on the US rubber chicken lecture circuit, after getting his Congressional Medal (Iron Poodle 1st class with oak leaves), which he dare not collect while still in power...
Try this one out.
Voice of America special English edition (1500 word vocabulary)
www.voanews.com/specialenglish/
Absolutely riveting!
Now, now. Tony's a good boy. Does as he's told. He's earned his medal. Be kind. After all, have you seen what just ten years in office has done to his "youthful looks?"
Not to mention, he decided to have a scandel to help take the pressure off George. Seeing as you reside in the UK you'd know this. I would like to think you'd admire such courage in helping out a friend.
I prefer bollocks to bollix. Has a more visceral feeling to it, at least for me.
Massaging the data
Looking at the EIA data for C+C here is an interesting point. Since April of 2005 until November of 2006, a period of 19 months, I looked at the four largest oil production gainers for that period of time. These nations were Angola, Canada, Russia and “Other”.
Other is a category in which EIA tosses all the smaller world producers. This includes some declining countries, like Denmark and some countries where production is increasing like the Caspian area. But basically I separated “The Big Four” verses “The Other Twenty Seven” and looked at what has happened in the last 19 months.
The Big Four had a production increase of 1,826,000 barrels per day. That was an increase of 10.06% or an annualized rate of 6.35%. (From 18,151,000 bp/d in 5/05 to 19,977,000 bp/d in 11/06.)
The Other Twenty Seven had a production decline of 2,396,000 barrels per day. That was a decrease of 4.29% or an annualized decline rate of 2.71%. (From 55,829,000 bp/d in 5/05 to 53,433,000 bp/d in 11/06.)
Only seventeen of the Other Twenty Seven actually declined during this period of time. The rest were either flat or had small increases in production. Of the seventeen that actually declined, they had a combined decline of 2,800,000 bp/d. That was a decline of 7.33% or an annualized decline of 4.63%. (From 38,171,000 bp/d in 5/05 to 35,372,000 bp/d in 11/06.)
Although the world peak was, so far, one month later in May of 2005, I used April 2005 because that was when The Other Twenty Seven peaked. But since April 2005 the world oil production is down 0.77%.
And the moral of this story is that, I believe anyway, we can expect a long plateau or more accurately, a decline of less than 1%. This is because that although most nations are in decline, many others are either flat or still increasing production albeit at a very slow rate. And some nations, four in particular, are still increasing production by a considerable amount each year. And each year, as more of the ten flat or slightly gaining nations, go into decline, and the Big Four slow their gain, the decline rate will increase from below 1% to around 2% or greater. And when all nations go into decline, probably within the next decade, only then will the decline rate be 4.5% or greater.
Ron Patterson
Ron,
Russia is the huge wildcard. If you believe the HL method, Russia is about 90% depleted (at least their mature producing basins). For those who consider this to be impossible, consider the fact that the US, the world's third largest oil producer, is about 85% depleted.
Russia is only just recently catching up to where the post-1984 cumulative production should be, based on (Khebab's) HL model that used only production data through 1984 to predict post-1984 cumulative production. As Russia has gotten closer to where it should be, the year over year growth in production has slowed dramatically, and net oil exports, year over year, have already started declining.
The HL model would seem to suggest a net decline rate approaching 10% in Russian crude oil production, while domestic consumption is growing quite rapidly.
Intuitively, it doesn't seem right that Russia would be 90% depleted. I believe they started heavy production after the U.S., yet the U.S. is only 85% depleted. I would expect the U.S. to be further down the curve than Russia. Is there any way to put some sort of independent sanity check on the HL model?
(Repetitive Information Alert)
Russia showed a rock solid HL trend up until the post-Soviet collapse in production, which started in 1990. They hit the 50% of Qt mark in 1984.
Mathematically, the recent rebound in production was just making up for what was not produced after the Soviet Union collapsed.
Khebab generated post-50% of Qt production profiles for both the Lower 48 and Russia (using only production data through the 50% marks to construct the models).
The post-50% Lower 48 cumulative production, through 2004, was 99% of what the HL model predicted.
The post-50% Russian cumulative production, through 2004, was 95% of what the HL model predicted. In other words, through 2004 Russia had still not made up for what was not produced after the Soviet Union collapsed.
We do know that the year over year growth in production has slowed dramatically, and the Russians themselves are reporting lower net oil exports, year over year.
Mathematically, sure, but how does that work physically?
By saying "they're just catching up, so of course they can produce fast", it makes it sound as if the USA could stop production for 2 years and then produce at triple rate in the third year to "catch up", but that's physically nonsensical.
Short of drawing down gargantuan tank farms, how could Russia possibly produce at peak rate while at 90% depletion? How would that work?
Pitt, I will let Jeffery speak for himself but I did not take that sentence that way at all. Russia has never gotten to the level of production that they were before the collapse. They have been merly catching up to where they were before but have never quite made it. And because they were at, or near peak before, it is not likely they will ever completely catch up to that point.
The same thing happened to Saudi Arabia in the early 80's. In 1980 Saudi produced 9.9 mb/d. In 1981 they were just below that point. Then came the Iran-Iraq war and the tanker wars that resulted. Production in the Persian Gulf countries plummeted. Then in the 1990s they began to attempt to catch up to where they were before. Most never made it. Iran produced over 6 mb/d befoe the war but only reached a little over 4 mb/d since. Saudi Arabia got to within 300 kb/d of their former peak but never quite caught up.
Ron Patterson
It's less weird read that way, but there's still exactly the same problem.
If Russia's peak production was X, then Hubbert Linearization suggests they should be able to produce much, much less than X at 90% depletion. The US - which is supposed to be less depleted than Russia - can't manage more than about 50% of its peak production level, so how can Russia be at about 85% of its peak production rate if it's so depleted?
Put another way: at what (post-peak) level does HL suggest a country should be at 85% of peak extraction rate? Is it not the case that HL suggests Russia's depletion is about there, rather than at 90%, a level at which their production should be half of what it is now?
Russia's absolute peak production was in 1989, but they basically hit a plateau in 1984, at 50% of Qt, with five years of production at around 11 mbpd on both sides of 1984.
The collapse that started in 1990 was very steep, and for a number of years they produced at much less than capacity. They have substantially made up for what was not produced after the Soviet collapse, although they are producing at less than their all time peak.
In any case, this is what the HL model shows. As I said before, the post-50% of cumulative production for both the Lower 48 and Russia has basically been exactly what Khebab's models predicted it would be. The key difference between the Lower 48 and Russia is that Russia, from this point forward, should have a much steeper decline rate than the Lower 48. (The Lower 48 is also about 90% depleted. The total US is about 85%.)
Note that the real strength of the HL method is in estimating the area under a production rate versus time curve, so it's much better at estimating cumulative production over a given time period than at predicting the production rate at a specific time.
You haven't answered my questions. The key question is simply this:
Does the HL model allow a region at 90% depletion to produce at 85% of peak rate?
If so, what is the physical explanation for that? If not, how can Russia be 90% depleted?
What do you mean by "made up for"? Oil doesn't know what year it is, so how can there be a "correct" level of cumulative production to get back to? If production rate is so malleable that it can be boosted sharply to "make up for" production that wasn't done before, doesn't that suggest that HL is a poor tool for predicting production decline rates?
Yet most of how we see it used on TOD is to predict (declining) production rate. Are you saying we should consider HL unreliable when used to predict decline rates?
Under the right circumstances, fields can produce at high rates of production right up until the time that a terminal decline sets in, e.g., Cantarell, Yibal and probably Ghawar.
But let's get back to basics. The HL method is basically a tool for estimating the area under a curve. As I have outlined several times, the post-50% of Qt cumulative production for both the Lower 48 and Russia, i.e., a portion of the areas under the respective curves have basically been exactly what the HL models predicted. The Lower 48 showed a smooth decline, while Russia had a collapse, followed by a rebound. It's really just that simple.
Russian production will either continue to increase for a while longer or it won't. We can only wait and see. What I assert about what the HL method can and can't do won't have any effect on this outcome. All we can say is that so far the Russian HL model has been deadly accurate, and it suggests a sharp production decline in the near future, probably starting this year.
You are a gentleman and a scholar, Westexas, and I hope you are never discouraged by the need to repeat your points.
Fidei defensor.
That was uncalled for.
Pitt and WT are having a very calm and rational discussion. True they are talking past each other but there is no sniping, name calling or other uncivilized techniques being used.
Toilforoil is right, WT is a gentleman and a scholar. I think Pitt is doing a good job at keeping the discussion civil as well. And there is nothing wrong with pointing that out.
As for you sir, Moo.
Oh, moo you! ;)
You're absolutely right about the above discussion. This is the way it should be and both Pitt and WT demonstrate for me why TOD is a cut above the average PO site.
TFO, on the other hand, is typical of the partisan doomer cheerleading faction, who throw accusations of troll at everyone they disagree with.
In future I'll do my best to ignore him and the others and not add to the pollution.(But, you've got to admit, my comment above wouldn't have sting if it didn't contain a germ of truth.)
I may be worried, but I'm not a doomer. I don't think Westexas is a doomer. I have the impression that we both share the view, articulated by Kunstler that different living arrangements are on the agenda. Many other participants at TOD, are of this view. It is sadly not uncommon that expressing the need to adapt to probable changed conditions unleashes the doomer charge.
Can you provide two examples of me referring to anyone as a troll?
I certainly do think that Westexas, who combines intuition and inductive reasoning with the less imaginative deductive skills typical of most of us, deserves encouragement.
You still haven't answered my question. All you've done is repeat how HL works, which does nothing to answer questions about apparent deficiencies in its results.
Moreover:
You appear to be suggesting that HL isn't very good at predicting production rates, and then suggest that we use it for exactly that. That doesn't exactly inspire confidence in those predictions.
My understanding is that when oil fields are allowed to 'rest,' the oil, because of what has been pumped out, continues in its natural tendency to migrate upward in the reservoir rock and fill, once again, the top of the 'oil column.' Thus, a field that has been rested for a number of years has a (possibly much) greater quantity of readily 'pumpable' oil near the many well heads (over 1,000,000 in Russia) than was available when the pumping stopped. This would be analagous to sucking a milkshake through a straw. Suck real hard and you suck air. After a pause, suck again and you get a burst of liquified shake that has had time to melt.
In hard-rock mining argot, the Russians are 'high-grading' their oil fields. That is, they are pumping like mad on the easy to get stuff and not investing in expanding infrastructure that will lead to larger future returns. Here is a link that discusses this issue:
http://www.cdi.org/russia/johnson/8236-12.cfm
Anyone more expert than I, please chime in.
Thanks for that link ET.
A key paragraph:
Thanks Rethin, that should certainly clear up any confusion.
That being said, the paragraph certainly backs up WT's prediction that a Russian production decline is coming sooner rather than later.
Thanks for the discussion. I learned some new material today.
That's a possible physical explanation for rebounding production rates, which is one of the things I was looking for, and is one of the necessary conditions for a rapid production crash.
However, it still doesn't solve all the problems regarding the "90% depletion" claim.
In particular, these guys suggest Russia has produced about 150GB so far. 90% depletion means they have about 16GB left to produce.
At a 3.5GB/yr last year, that's only 4.5 years of production at that rate. In other words, claiming Russia is at 90% depletion is effectively claiming that they'll have to have their production rate decline at an average of 22% year-on-year in perpetuity.
Looking at Russian oil production in 2006 (link), we get:
Q1: 9.52MB/d
Q2: 9.67MB/d
Q3: 9.78 MB/d
Q4: 9.80 MB/d (estimated? actual?)
i.e., no decline, as opposed to the 0.5MB/d per quarter decline an 85% production rate at 90% depletion would require.
So perhaps they're still just working off of "easy oil". What if decline sets in after 1 year? They'd then have only 3.5 years left at that production rate, and so would need a decline rate of 30% per year to fit the model.
30% decline per year? Is there any precedent for that in even a major field, much less an entire region, much less a multi-region nation like Russia? Or even for the 22% decline rate which would need to start right now to fit the "90% depleted" claim?
The available data utterly fails to support the notion that Russia is 90% depleted.
Of course, that should hardly be surprising, since no major analysis is suggesting Russia is that depleted. Even the link you gave notes:
"Altogether, a quarter of reserves worked today have 80 percent of the producible oil already lifted and must be replaced in the immediate future (Beskhmel’nitsyn, 2003, p.165)."
25% of the reserves being worked on right now are 80% depleted. i.e., 75% are less than 80% depleted, suggesting that Russia cannot possibly be more than 85% depleted, and is most likely much, much less. Even the APSO folks suggest that Russia is only about 65% depleted, which is a much more plausible number (4.5% annual decline starting in 4 years).
One might argue that oil production in Russia will soon fail to increase or even start declining - and one would likely be right - but to make a statement so bold as "Russia has used up 90% of its oil" - and the implied "Russia will start a permanent 25% production decline within months" - is, frankly, absurd.
This one always gets me. So, the simple question is how do we rationalize that FSU production rate is near what it should be at Qt=50% when HL says its near Qt=80/90%? Do you have any tid-bits on the history of 'enhanced recovery' upgrades to FSU reservoirs that would portend a cliff in production rate??
We need to be careful to differentiate the rest of the FSU, which is less mature in aggregate, from Russia.
In round numbers, the Lower 48 and Russian post-50% cumulative production numbers are basically exactly what Khebab's HL models predicted they would be. We are just in a waiting game.
Re: Norway
I estimate that Norway's C+C exports will be down by over 500,000 bpd from 2005 to 2007 (annual averages in both cases).
The combined drop in net exports by Saudi Arabia, Russia and Norway should easily be on the order of 2.0 mbpd in 2007, relative to 2005.
Westexas, what happens if you add Mexico to the above list? Also, do you expect the rest of the world to stay flat as far as oil exports are concerned?
Thanks in advance for your analysis.
Dozens of people are running, screaming, from their computers. . .
Saudi Arabia (KSA), Russia and Norway accounted for close to half of the net oil exports by the top 10 net oil exporters in 2005. At the end of 2006, based on HL, KSA was 60% depleted, Russia, 90% (at least mature basins) and Norway, 70%. And consumption is growing quite rapidly.
This is a simplified Export Land Model, with conservative assumptions, that Khebab did for me: http://static.flickr.com/97/240076673_494160e1a0_o.png
A 5% decline rate per year for Export Land would result in a 50% drop in production in 14 years. A 2.5% increase in consumption per year would double consumption in about 29 years. However, these two factors combined would result in a 50% drop in net oil exports in less than five years.
Again--key point--we are seeing, and will see, a positive feedback loop in most exporting countries, where their cash flow will probably be increasing (at least for a while) faster than their net oil exports are falling.
David Shields, who has extensively studied Pemex, is predicting a net decline rate of about 16% per year from 12/05 to 12/08 (note that annual averages would yield a lower decline rate). This would result in negligible exports, depending on what happens to consumption, as soon as the end of 2008. Note that consumption is currently going up at about 5% per year (based on 2004 to 2005).
I think that the small number of countries showing increasing exports is being overwhelmed by the tidal wave of countries showing lower exports.
WT: There are unconfirmed reports that the Canadian government may be in negotiations to alter the tax environment for the oil sands producers.
At present the producers can write off all investment in the year it occurred. This is a strong incentive to continue investment as the firm makes a choice between paying taxes or investing the same amount in CAPEX.
Again, this is still unconfirmed.
Cheers!
You are poorly informed on just about all accounts.
Both provincial (Alberta) and federal politicians are trying to appease voters by threatening new tax regimes. But it won't fly anywhere.
Presently, companies can recoup all investments, from oil proceeds, before moving from a 1% to a 25% tax bracket. There is no per year limit, or anything like it. Of course, they will smear out investment, even slow it down, just to get as many years under the cheap tariff as possible. Companies are actively acquiring players with "undeveloped" resources, gaining 24% right off the bat. With dozens of billions in investment, this tends to add up.
On top of that, they have a "flexible" choice between paying taxes over oil or over bitumen.
This tax regime stems from the 1980's, when the tarsands were, once again, one step from death. It makes sense that Canadians want to rethink a thing or two, now that there's profit. After all, up to 4 tons of land are dug up per barrel, which brings 50 cents into provincial coffers. Not a good deal for anyone except the companies.
But they're too late, it will not happen, except in a shape that will see the oil companies pay more in a visible way, while getting it back under the table. Save face for politicians.
The reality: Today's Globe and Mail, Canada's main country-wide paper, has this article:
Going from the low- to the high tax bracket would add at least $10 per barrel to the cost. At today's $58, that means losses.
The biggest problem for Canadians, however, is that they signed NAFTA in the meantime (since the tax laws). An insidious provision in that treaty is the one that enables "foreign" investors (in this case: US) to directly sue the government of the country invested in, over losses due to changes in domestic laws. The provision was alledgedly inserted over fears of Mexican (PEMEX) nationalization schemes.
The effect today is seen in this article over at TODCanada, Feb 2:
The idea should be clear enough: Canada has no room left to move: it can be sued for standing in the way of future profits of trillions of dollars, if it makes oilsands projects seem less profitable today.
$100 billion has been invested to date, with the expectation of 20 times that in profits, and another $300 billion will soon follow, according to federal Finance Minister Flaherty.
Funny, as I obtained my information from the same Globe and Mail article from which you selectively quoted. I guess you missed these two paragraphs:
She added that the accelerated capital cost allowance — which allows companies to depreciate the full cost of equipment in the year it is purchased — was extended to the oil sands projects by the Liberals in 1996 in recognition of high capital costs, long investment horizons and financing risks.
Emphasis added.
Note that the 1996 date quoted above contradicts your statement:
You may also wish to check your understanding of NAFTA. This was was signed on 17 December 1992 and finally ratified by Clinton in November 1993, well after the end of the 1980's.
If you have problems with my comment, I suggest you take it up with Ms. Sendall (as a senior vice-president of Petro-Canada she appears to be poorly informed in regard to her employer) or raise a complaint with the editors of the Globe & Mail. Everybody else can just read the full story here:
http://www.theglobeandmail.com/servlet/story/RTGAM.20070208.wrcapp08/BNS...
As for Canada now having "no room left to move," this only comes about due to the United States lack of respect for its own undertakings and its willingness to act as a rogue state:
Cheers! May you freeze in the dark.
Heis and Newacct,
It appears both of you are upset with NAFTA, I was wondering what the general Canadian concensus was on the treaty. Can NAFTA be repealed by Ottawa if the export requirements of oil and gas become too restrictive? With softwood concerns, I expect the US to remain firm on its dumping stance.
6 months notice
Doug:
I am not a NAFTA expert. In my initial post I was seeking to support WT's export model. Should the economics of the oil sands change then any assumed future production increases are unlikely to occur. All production forecasts that had relied on this production increment would now be in doubt and would need to be revised downward which should bring peak forward.
A key aspect of NAFTA is that once a service or good becomes a "marketable good" then the rules of the market are supposed to apply and the host nation cannot simply withdraw that item from the market. Canada refuses to market fresh water for this reason. Once the first export occurs then all Canadian fresh water has a market price and may be traded, an outcome that Canada wishes to avoid.
Given this aspect of NAFTA I suspect that the resource would sell to the highest bidder.
The US softwood stance acts to invalidate NAFTA in its entirety. If you have a contractual agreement then one party cannot repudiate a portion of that agreement and selectively enforce other parts as it chooses. The problem here is Canada's inability to enforce the any of the provisions or to withdraw entirely.
Doug, NAFTA is the best thing that's happened up here since the Free Trade Agmt. It and the Auto Pact have allowed Ontario to flourish for three decades after floundering in the early 70's.
Ontario has outproduced the Michigan auto sector for the last two years. And another two Toyota plants are under construction in my hometown of Woodstock.
Energy is important. But the jobs (and votes) are in manufacturing rich Southwestern Ontario.
BTW, the softwood dispute was settled out-of-court several months ago. USA sent $4-Billion cheque to Ottawa for illegal tariffs.
A cheque drawn on the $5 billion that the USA had illegally collected from Canada.
I'm sure having to give 80% of it back was a terrible rebuke.
I don't know what kinds of personal problems you have, but reacting without addressing any of the points you react to is strange, and uncalled for at best. Taking it personal refers back to your problems.
There is a difference between provincial and federal laws. Alberta's tax regime for the oilsands stems from the 1980's. Your Ms. Sendall refers to federal legislation, which I did not specifically address. Neither did I "selectively" quote from the article, that is suggestive non-language, I quoted one half-sentence.
I can't see the relevance of the lumber disputes to the implication of lawsuits brought on by private companies under NAFTA in the oilsands. Softwood lumber is a government dispute. I specified the provision that allows private companies and citizens to sue governments, which makes bringing up lumber a strawman. You either didn't read my comment, or know little of NAFTA. Both can be corrected. NAFTA's online, you can catch up.
The problems I have with your original comment is, as I said, that you are poorly informed.
I have other problems with your follow-up, on top of the fact that you are still mostly wrong.
I'm going to have to guess that you were so hurt by the fact that I said you are poorly informed that you forgot to read the rest of my comment. I apologize to a brittle soul.
Oh, the irony.
:-)
And of course the other (slightly smaller) elephant in the room:
Oil producers get wealthy in times of oil prices.
Internal economic activity expands (unless all the money gets sucked into Swiss bank accounts)- (Nigeria).
Internal activity increases internal oil demand. (Russia, BMWs , SUVs, conspicuous consumption etc)
Or it gets blown on Princlings (KSA)
Or it props up regimes (Iran)
Less, therefore for export with time.
One day, we will all be consumers... that is if you believe the economists.
Also to be considered is production and exports being dramatically affected by conflict in the Middle East and Africa. Things are getting worse in Nigeria instead of getting better. And this violence will likely affect Angola very soon.
Declining exports are already killing Iran, and they are going to drop drastically in the next decade. They will drop to zero according to some estimates. And the situation in Iraq is likely to get far worse before it gets better. The EIAs Short Term Energy Outlook, Table 3a, already has Iraqi production dropping by one eighth, from 2 mb/d to 1.75 mb/d from December to January.
http://www.eia.doe.gov/emeu/steo/pub/3atab.html
Remember Iraq is not subject to OPEC cuts, so this decline is definitely not voluntary.
Ron Patterson
This may be old news to TOD but there's an article from the Feb 7th Denver Post about the first commercial cellulosic ethanol plant now in the planning phase.
It's apparently a Colorado based company but the actual plant is going to be built in Georgia.
Weekly natural gas storage data for the lower 48 states:
http://tonto.eia.doe.gov/oog/info/ngs/ngs.html
This week showed a drop of 224 Bcf to 2347 Bcf. This is still near the high end of the five year average, but this week's drop puts gas storage 1% below last year at this point. Cold weather still in the forecast pretty much guarantees significant drops for the next two weeks.
I misread the report - didn't realize storage is now below year ago levels. Will probably drop another 200bcf below in two weeks, maybe more by season's end. Lower exports from canada as consumption rises, not least for tar sands but pretty cold there, lower prod in us and canada both (some rigs are actually idle now), more demand from new gas fired electric generators and ethanol... oh my.
In Madison, running total of degree days is now 92.7% of what a normal heating season would have at this time. Ten days ago that number was about 88%.
My current belief is that, all other things being equal, NG market is 40 bcf/week tighter than last year. Forecasts indicate cold spell will linger through next week. Thus the following predictions:
2/8/07 (covering 1/27—2/3) NG withdrawal 220 bcf -- actual 224 bcf
2/15/07 (covering 2/4—2/10) - NG withdrawal - 260 bcf
2/22/07 (covering 2/11—2/17)- NG withdrawal - 220 bcf
Thus, storage levels should fall 700 bcf over three weeks. It would be a record drop for any three-week period over the last five years. Even after that, however, the storage levels should be 300 bcf above 5-year average. Assuming normal temperatures after next week, I offer the following predictions;
Between May 1 and June 1, NG storage levels will dip below 5-year average.
By July 1st, NG price will exceed $10/dktherm.
Thanks for your comments... will be very interested in seeing if they come true.
Elsewhere on this thread, there is a discussion of the us import tax on canadian lumber, infuriating canadians. Maybe they will impose quotas on the ng exports until the lumber issue is resolved, which would be widely popular in canada and would save ng for local use. I have seen estimates that canadian ng exports will anyway decline 300-500bcf this year.
Do you invest based on your assumptions? If so, look at gmxr, my ng pick.
In Canada, a lot of rigs go idle in the approaching spring - summer period as the ground warms and softens.
But also, a lot of Canadian oil companies are trying to deal with the huge ramping of costs in the tar sand provences. It is a Klondike...
To do so, they may cut back on conventional oil drilling, saving money for the big, long term committed capital costs of tar sands.
My take?
A lot of Canadian Companies will do the shovel-work (literally - hah!) and then get eaten by Exxon, BP , Shell etc , when the dirty work has been done.
But then of course, there is always the Chinese National Oil Operating Company sniffing around in the shadows...
Time will reveal all.
In my January nat'l gas report i upped the Spring trough to 1600-bcf. On the weekend, i raised it to 1700-bcf as the draws were less that we forecast.
I am targeting nat'l gas to trough above the five year band again ... same as last year.
Here's an article from a local paper. Even in the midwest, not all farmers are benefitting from higher corn prices. Land around my parts (southern Ohio) is too hilly for corn production and is better fit for dairy and timber, but I wonder if $4 a bushel will push local farmers to start planting corn on marginal land. If this occurred the local environmental impact would be very bad.
http://www.mariettatimes.com/news/story/new21_27200781929.asp
Is there any possibility that OPEC is trying to save the world by cutting production and forcing up crude prices? That they are going green? Should that be their strategy? OCED's too?
[Thank you Leanan for your time and effort]
The only way to "go green" is to leave that oil in the ground, permanently. It doesn't make much difference to Global Warming whether we burn it fast or burn it slow.
The only way to "go green" is to leave that oil in the ground
Or, extract it, but use it only to make materials like plastic, fibers and carbon composites. But I agree, burning it is foolish :)
we would probably be a lot better off with a whole lot less plastic and a lot more natural materials. i cant think of a single thing made of plastic that is an improvement over natural materials. maybe there are some.
Plastic 2 litre milk containers.
Cheap, light, recylable, and great water containers for the Australian outback.
Sure beats the old milk bottles.
c'mon now don't you have canvas down under. canvas water bags were great for keeping the water cool also the hotter the better.
Latex condoms? .... well, we still have rubber trees... and lots of sheep (for their skins dammit!)
glad you clarified what the sheep were for.
Don't think so.
How about this:
OPEC cuts production to force non-OPEC suppliers to peak faster - Like Mexico and Norway - countries
that still like the USA a LITTLE bit. Countries that the US can pressure into pumping full tilt.
Once they force those countries to their knees (via depletion), then OPEC is in cat-bird seat - they can charge what they want and fill their treasuries.
To Reach for the Moon
A mere 40 tons of He3....oh my, where to even start. Wait, it's not even worth the effort. Sigh.
We could make that much more efficiently by wrapping a molten FLiBe blanket around a liquid chloride fast reactor.
Not that we have any use for He3 with fission fuel being so damned abundant.
Piece of Cake.
1. Send 2000 Chinese astronauts to moon.
2. Build functioning mining base and coal fired power station. (Sh1t! no oxygen?)
3. Get 6 million Chinese seamstresses working on a giant silk tube supported by a 12 million mile wicker spriral frame. (Bamboo should do it), Make sure silk is rubberised. Especially at the seams (you know how fugitive that darned Helium is!)
4. Attach at both ends (Moon and earth)
5. Make sure it is at a pole so it doesnt twist.
6. Flow your Helium.!
...or buy Canada...
OK, I understand your scepticism but this is not so impossible as it may seem at first glance. It can be done by an automatic solar powered machine that goes around and harvests the top several inches of lunar soil for He3. The He can be pressurized in containers and send back to Earth the way Apollo was. Since we did this with humans and all their complex life support equipment several tons of He should not be that difficult.
Personally I think that achieving controlled fusion represents a much harder part of the chalange than this one. And if it turns to be economically viable I expect it could happen some day... if 40 tons of He produce electricity worth $200 billion (more than 10 times NASA budget AFAIK) I think it could be worthed. From Wikipedia:
D + 3He → 4He (3.6 MeV) + p (14.7 MeV)
The reaction is not producing neutrons which are the biggest hurdle for achieving sustained fusion.
Oops. On second reading Wikipedia gives 3He concentration in lunar soil 10 parts per billion. So 40 tons of 3He translates into... 4 billion tons of lunar soil processed. That will have to be a helluva machine up there.
It is amazing how a tiny bit of reality can spoil otherwise brilliant idea :(
Great. Rising sea levels on earth and rising sea levels on the moon.
Now may be the time to buy a Prius...
Hybrids become more of a tough sell
One of my brothers fell into that 0% financing pit. He gave up his car when the serious vig kicked in. I leased once - I'll never do it again.
At roughly half the cost of a Prius, I would be more tempted by the Yaris.
Gasoline is perceived to be cheap right now, why, it's below $3 a gallon. Last time I filled up, it was only $2.85.
So, people are back to buying SUVs and Priuses are not flying off the lots right now.
This coming summer is going to be interesting.
Strange. I bought a Prius last summer and just love it. This is the most fun car I've ever had.
Any ideas why crude prices jumped up this afternoon?
On CNBC they are saying that the fire at Occidental Petroleum was part of the cause.
http://www.kget.com/news/local/story.aspx?content_id=f6c26464-b495-4320-...
And here:
http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2007...
Ron Patterson
Traders and hedge fund managers are starting to read TOD?
Yes, I think so.
Wasn't that what AusTex was doing? Gathering information?
I haven't seen him around recently. Wonder if he didn't like what he was learning?
Wasn't that what AusTex was doing? Gathering information?
Always. Not suprisingly, I have learned nothing useful from you. Goodbye.
Pleasant chap.
Oil up 3.34% to 59.64. Finally there is some action on the market after 2 boring days. The reason for that surge seems to be a fire on a oilfield in California... according to Bloomberg.
Larry Kudlow, on CNBC, will have a debate on a much higher gasoline tax today (5:00 P.M. Eastern). I'm just guessing, but I suspect that Kudlow will be against it.
"I don't know what they have to say
It makes no difference anyway;
Whatever it is, I'm against it!"
- Horse Feathers
Actually, most of the guests were pro gas tax, and Kudlow began to have second thoughts about it.
Nothing so powerful as an idea whose time as come. . . .
ATTN Leanan & our flu-ridden Prof. Goose:
Can you get the free copy for us other TODers to read?
http://mmdnewswire.com/content/view/1257/
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GLOBAL GRAIN SHORTAGE OF HISTORIC PROPORTIONS AHEAD!
Oklahoma City, February 7, 2007 – The world has consumed more corn, wheat and rice than it produced in six of the past eight years.
Global grain consumption expands nearly every year due to increasing population and incomes. However, grain production has fallen behind and reserves have been used to satisfy expanding demand. Total grain use (coarse grains, wheat and rice) increased from 5.11 tonnes per day in 1999-00 to 5.60 in 2006-07. At the same time, global grain reserves declined from 114.7 days of usage to 56.7 days. World grain reserves have fallen to this level only one time inmodern history... from 1972 to 1974. That period is termed the “great grain robbery” as Russia purchased unprecedented quantities from the US. Grain prices were pushed to historic highs in that period and the US government placed an export embargo on further sales to avoid domestic shortages.
The US is not the only nation promoting bio-fuels. Indonesia, Malaysia, India, Brazil, Canada, Europe and China are all aggressively building bio-fuels manufacturing facilities. The rush to bio-fuels promises to tighten global grain supplies even more. With global grain reserves near historic lows, there will be nothing to fall back on in case of crop failure.
Commodity Information Systems (CIS, Inc.) has prepared a detailed study that explains why grain markets will experience extreme tightness and record prices in the year ahead. The study illustrates the growing threat of global grain shortages with tables and graphs.
This valuable report will be sent free of charge to financial and agricultural news editors. Others may receive a copy for $15.00 by contacting: CIS, Inc., 3030 N.W. Expressway, Suite 725, Oklahoma City, OK 73112, (800) 231-0477, info@cis-okc.com.This email address is being protected from spam bots, you need Javascript enabled to view it
Commodity Information Systems has been serving the agricultural investment community since 1969 and is an industry leader in detailed economic analysis of agricultural markets.
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Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/refinery_...
Can anyone (expert in refining) tell me whether in this chart the increase in sulphur barrels represents and increased ability to handle lower quaility crudes in the US?
Did anyone catch Marke Haines getting an orgasm on CNBC as he said " Oil traders tried to break above $60 for 3 days and failed and that makes me very happy.. It is now below $58,"
Whoo-hooooo
BTW does anyone know if Megan is single?
i think crude closed at 59.71 today. maybe break 60 tomorrow?
edit: nevermind, my ticker is showing 60.25 right now
Why does the daily oil price graph so often look like what happened today and yesterday: Open at a level discontinuous from the previous day, quickly jump to a new level where it fluctuates most of the day, then make a big jump back to where it opened? Seems odd.
I think you are imagining things. This candlestick chart shows that on most days the price usually closes quite a distance from where it opened.
http://futures.tradingcharts.com/chart/CO/37?1170996204
On a candlestick chart, the open candlesticks are days that the price closed above the open and the black candlesticks are the days that the price closed below the open. The ends of the candlesticks are the open and close prices with the wicks the distance it traveled, that day above or below the open or close.
If the price closed very near the open, then the candlestick would appear to be almost all wick on both ends with virtually no candle. As you can see, on most days this is not the case.
The whole thing, candle plus wick, gets longer as volatility increases and shorter as volatility decreases.
Ron Patterson
Hello TODers,
This article projects that it won't be long before Zimbabwe implodes:
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/02/09/wzim09.xml
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Zimbabwe on the brink of total collapse
The collapse of Zimbabwe's economy has finally taken its toll on President Robert Mugabe's regime. It is facing a disintegrating army and police, a wave of strikes, power black-outs and the breakdown of every essential service.
Mr Mugabe's elite Presidential Guard, which has extra perks and higher salaries, is also disgruntled, according to the military source.
But the economic collapse has created opportunities for the corrupt elite around Mr Mugabe, who have already benefited from the seizure of white-owned farms.
Senior figures in the ruling Zanu-PF party can buy US dollars from the Reserve Bank at the meaningless official exchange rate – and then sell them on the parallel market at a 2,000 per cent profit. They can buy fuel from the state at one twelfth of the market price. This gives a powerful core of Zanu-PF figures a vested interest in keeping Mr Mugabe in power.
The president, who turns 83 later this month, gambles that by keeping this wealthy handful happy, he can survive the economic collapse and extend his 27-year rule.
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http://www.capetimes.co.za/index.php?fArticleId=3672094
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Zimbabwe's army marching on its stomach
JOHANNESBURG: Zimbabwe is giving out food rations to junior police officers and soldiers to contain rising discontent over poor pay, Zimonline reported yesterday.
It said the move came amid fears of revolt by disgruntled junior security officers.
Army commander Constantine Chiwenga and police commissioner Augustine Chihuri advised the government last year to hike salaries for security forces ten-fold to boost morale.
A soldier at the Imbizo Barracks in Bulawayo confirmed to Zimonline on Wednesday that the government was giving them food rations to complement their salaries.
He said each junior officer received 10kg bag of mielie meal, two litres of cooking oil, 1kg of fish and 1kg of sugar beans.
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The big question: what comes next?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?