Drumbeat: December 8, 2009

Cash for Caulkers could seal $12,000 a home

NEW YORK (CNNMoney.com) -- President Obama proposed a new program Tuesday that would reimburse homeowners for energy-efficient appliances and insulation, part of a broader plan to stimulate the economy.

The administration didn't provide immediate details, but said it would work with Congress on crafting legislation. Steve Nadel, director at the American Council for an Energy-Efficient Economy, who's helping write the bill, said a homeowner could receive up to $12,000 in rebates.

Big Oil Worries About The Next Boom

What's the biggest concern facing Rostand's clients now? "Whether they will have enough people to face the surge in demand in three to five years from now."

This is interesting for several reasons. First, that oil companies expect a surge in demand when the global economy recovers. Second, that they're not worried about Peak Oil--the pessimist dogma that oil fields have been run down so much that supply growth will soon be impossible. (Says Rostand, "There's enough resources to provide the oil that the world will need for many years to come.") Rather the worry is that oil and gas companies, Schlumberger included, that cut hundreds of staff when prices plunged, won't have enough hands on deck to develop new resources fast enough when demand growth returns.

Logistical nightmares may doom U.S. surge in Afghanistan

Logistics will be the key to introducing 30,000 soldiers and Marines into Afghanistan in the next six to seven months, and to confronting the Taliban over the next 18 months. This reflects an old saying in the military: Amateurs study strategy, and professionals study logistics. Nevertheless, no one on the Senate and House Armed Services and Foreign Affairs committees last week asked either Secretary of Defense Robert M. Gates or Joint Chiefs Chairman Mike Mullen about the significant logistics problems they will face in Afghanistan.

The logistics nightmare will be one of the reasons Afghanistan will turn out to be President Barack Obama's brier patch.

U of A's David Schindler confirms untold levels of oil sands pollution on the Athabasca

After an exhaustive study of air and water pollution along the Athabasca River and its tributaries from Fort McMurray to Lake Athabasca, researchers say pollution levels have increased as a direct result of nearby oil sands operations.

Four incisive essays on the Noughties

At the beginning of the decade, the environment was seen by most politicians as just one minor issue among many, despite an early spike in Green Party votes in 1989. Indeed, during the first debate MSPs held on transport issues, climate change was mentioned only once, but it was still not seen as a reason to refrain from big increases in road-building. Peak oil, the fact of finite supplies, was still dismissed as a fringe idea by the oil companies, which privately knew better, and energy debates in Scotland were typically just sterile disagreements about the ownership of the North Sea's fossil fuel assets, rather than the sustainability of burning the stuff until it was all gone.

But the turn of the millennium saw the UK's first Green parliamentarians elected too, in the now familiar shape of Robin Harper here in Scotland, then joined by Caroline Lucas and Jean Lambert, representing English regions in Europe. In wider activism, the road and runway protests of the previous decade inspired a broader range of environmental direct action, with targets including genetically modified crops and the arms trade. For many activists, these issues joined the dots between straightforward environmental causes and the social and economic consequences of corporate power. Links developed with those who were campaigning on other aspects of global justice, such as health and trade reform; many people who eventually joined the Make Poverty History movement began their political journey with the anti-GM movement and an awareness of food politics.

Lester R. Brown: The Localization of Agriculture

In the United States, there has been a surge of interest in eating fresh local foods, corresponding with mounting concerns about the climate effects of consuming food from distant places and about the obesity and other health problems associated with junk food diets. This is reflected in the rise in urban gardening, school gardening, and farmers’ markets.

With the fast-growing local foods movement, diets are becoming more locally shaped and more seasonal. In a typical supermarket in an industrial country today it is often difficult to tell what season it is because the store tries to make everything available on a year-round basis. As oil prices rise, this will become less common. In essence, a reduction in the use of oil to transport food over long distances—whether by plane, truck, or ship—will also localize the food economy.

3 Bets the DOE Is Placing on Science to Break the Climate Stalemate

The Advanced Research Projects Agency for energy put out its second call for new ideas, and this time, the agency has narrowed its focused to three research fields.

The new arm of the Department of Energy, which is dedicated to high-risk, high-reward innovations, is betting $100 million on batteries for cars, new materials for capturing carbon, and microorganisms that can convert sunlight and carbon dioxide directly into fuels.

U.S. EIA cuts 2010 world oil demand outlook

WASHINGTON (Reuters) - The U.S. Energy Information Administration on Tuesday said it expected world oil demand to rise 1.1 million barrels per day in 2010 from 2009.

EIA sees U.S. natgas production down 3.1 pct in 2010

NEW YORK (Reuters) - The U.S. Energy Information Administration on Tuesday slightly raised its estimate for domestic natural gas production in 2009, noting minimal hurricane disruptions this year and significant growth in onshore shale output have contributed to increased supplies.

Chinese Firms Propose $50 Billion Oil Buy in Nigeria

NEW DELHI -- Chinese companies have proposed investing $50 billion to buy 6 billion barrels of oil reserves in Nigeria, the African nation's presidential adviser on energy said Tuesday.

"Chinese companies have made proposals to buy reserves in Nigeria. Specifically, their application is to acquire 6 billion barrels of oil reserves, which we are currently discussing," Emmanuel Egbogah told reporters on the sidelines of an industry conference.

Iran threatens protesters after detaining 200

TEHRAN, Iran - Iran threatened tougher action against protesters Tuesday after more than 200 were arrested during marches by tens of thousands at universities across the country, the biggest anti-government rallies in months.

The warning suggested that Monday's unrest raised authorities' concern that the protest movement could pick up new steam. The protests Monday turned into fierce clashes between youths throwing stones and riot police and militiamen wielding batons and tear gas.

OIL: A Market Psychology of Fear?

VANCOUVER, Canada (IPS/TerraViva) - With or without a binding deal at the climate talks in Copenhagen this month, it seems the world may have to cut its oil consumption, as emerging geological and economic trends limit the availability and affordability of petroleum.

Back in the 1970s, Saudi Arabia's flamboyant oil minister Sheik Ahmed Zaki Yamani articulated what has become conventional wisdom for policymakers around the planet: ''The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil.''

Today, an increasing chorus of voices is challenging that prediction. While the world isn't running out of oil in any absolute sense, a daunting picture on the availability and thus affordability of supply compared with expected demand increases is beginning to emerge.

Mexico hedges 230 mln bls oil exports for 2010

NEW YORK (Reuters) - Mexico has hedged 230 million barrels of oil exports for 2010 in an effort to provide stability for the federal budget, Finance Minister Agustin Carstens.

The volume hedged represents nearly all of Mexico's anticipated net oil exports, according to Reuters calculations.

ExxonMobil: Large-Scale LNG Projects Needed

Large-scale liquefied natural gas (LNG) projects will be necessary to meet increasing global demand for natural gas, Tom Walters, president of ExxonMobil Gas and Power Marketing Company, said today at a panel presentation at the International Petroleum Technology Conference (IPTC) in Doha.

Walters joined a group of industry leaders in a panel entitled: "The Global Gas Outlook: New Gas Chains." Presenting information from ExxonMobil's 2009 Energy Outlook, Walters noted that despite the current economic environment, economic progress will be a key driver of energy demand over the long term. "We expect global energy demand to grow from about 230 million barrels a day of oil equivalent (MBDOE) in 2005 to over 300 MBDOE by 2030 -- an increase of almost 35 percent," he said.

Brazil to Delay Oil Licenses Auction on Environment Concerns

(Bloomberg) -- Brazil will delay an 11th round of bidding for oil-exploration licenses because of concerns that production in the area may harm the environment, Marcio Zimmermann, the Energy Ministry’s executive secretary, said.

Mothballing refinery buys state some time

Delaware officials believe they have received a small ray of hope about the future of the Delaware City Refinery.

Delaware Economic Development Office Director Alan Levin said Monday that Valero Energy intends to keep the refinery idle but will not tear it down for a year, while the company considers options.

Saudi budget to record high surplus in 2009

Strong oil prices will allow Saudi Arabia to bask in a high budget surplus for the seventh successive year in 2009 despite a sharp increase in expenditure and hidden spending by Saudi Aramco, a Saudi investment firm said yesterday.

The Riyadh-based Jadwa Investments said the surplus would be much higher than had been expected although the world's oil superpower had projected a deficit when it announced its record 2009 budget in late 2008.

Kenya: Diesel shortage looms this season

Kenya Shell says although MT Oriental Green arrived on November 29, 2009, the vessel had been denied priority to discharge 27,013 metric tons (MT) of diesel imported by the firm on behalf of the industry.

Instead, the ministry of Energy had informed Kenya Pipeline Company (KPC) to give priority to another tanker carrying diesel for Kenya Electricity Generating Company (KenGen) emergency generators over the Shell’s contracted vessel.

Pakistan: People face twin problems of gas shortage, hike in LPG price

PESHAWAR: The provincial capital is nowadays facing shortage of natural gas coupled with rise in liquefied petroleum gas (LPG) price, adding to the worries of the crises-hit dwellers. The consumers are facing difficulties because of the gas loadshedding, while LPG prices have already jumped to Rs100 per kilogram.

The hours-long suspension and low pressure of gas have put housewives in trouble as they face difficulty in preparing breakfast and meals. On the other hand, the LPG is being sold at Rs100 per kilogram. Gas pressure remains too low to cook meals, let alone other chores like heating rooms.

Is Thomas Edison’s model still the right one?

Deloitte’s Canadian branch has published a paper (Empowering Ideas) that I feel accurately identifies many of the key issues that are of great consequence to the energy industry as well as energy consumers (i.e. virtually everyone in North America).

Deloitte focuses on 10 specific emerging issues in the paper, each affected by three overarching trends: the need to tackle infrastructure obsolescence, the challenge of keeping the looming energy crisis at bay and the development of divergent ownership models.

An Effort to Spread Green Power to Coasts

WASHINGTON — For 40 years, the North American electric system has operated as three loosely linked grids, but a new transmission company is aiming to unite them. That union, if consummated, could have strong implications for renewable energy.

The company, Tres Amigas, proposes a huge power hub near Clovis, N.M., covering more than 20 square miles. It would be remote from populated areas but near the fulcrum of the continent’s wind and solar resources. Tres Amigas plans to make regulatory filings on Tuesday in pursuit of its goal.

The project could, backers say, transform a region that is a sparse frontier for transmission lines into a robust intersection that would allow immense transfers of power across the country. The direction of flow would depend on where the wind was blowing, the sun was shining and the temperatures were creating extra electrical demand.


A couple I know – we’ll call them Bob and Nancy — lived in a century-old house in the middle of their town, a few miles from their jobs and surrounded by long-time neighbours. When the last of their children left home, they announced it was time they looked for a bigger house.

“Do you mean a smaller house?” I asked.

“No,” they said, surprised. “We mean a bigger house.” They had some extra money now that they were not raising children, and they wanted to invest it for retirement.

Their later years, however, did not turn out as relaxing as they had hoped. Both husband and wife had to work full-time to pay for their massive new house, and their few free hours were spent on the monumental task of cleaning and maintaining it. They gave their old house to their son and his wife, who worked all day to pay for that house’s mortgage and maintenance. The son’s child – my friend’s grandson — was put into day care while parents and grandparents worked long hours. Reading between the lines, I gathered that they ate on the run, often felt ill and depressed, and rarely saw their families.

It was not my business how they lived, and maybe there was more to the story – leaky roof, neighbourhood conflict, who knows. As far as I could tell, though, they had neatly divided an obvious solution into several costly problems.

The Elephants of Doom in Copenhagen

This is the brave new world of "ecological modernization": we can have our cake (economic growth) and eat it too (climate stability). Indeed, economic growth is how we can afford to do all this, and markets are how we will direct it.

This is the official ideology of Copenhagen. This is the agenda.

The Complexity Myth

So, why is complexity a bad thing? The phrase I want to explain here is, “Built-In Complexity”. As you have seen, something we have become conditioned to take for granted, such as a television, is highly complex; but more than that it has complexity built into it simply, as I have said, because it is a product of Industrial Civilization. Civilizations operate on top-down principles, with policy flowing down from those who are the ultimate recipients of the wealth and power that flows up to them. In order to control something as vast as a civilization, especially the one that currently dominates the globe, complexity is inevitable.

Energy industry geoscience and pools of moral hazard

The world is facing some very difficult choices related to the energy industry. Foremost is the possibility of human-induced climate change. Another which is not on people's radar now but will re-emerge as world oil demand recovers is peak oil. CERA states that oil production won't peak until 2030, but wait; that's only 20 years from now. Our society wasted the opportunity of last 36 years since the 1973 - 1974 OPEC oil embargo to insulate ourselves from future oil shocks, so 2030 is not that far off. Water rights also come to mind, especially as they relate to hydrofracing of unconventional reservoirs in the arid U.S. West.

I do not here wish to disclose my positions on any of these issues, nor will I attempt to change yours. You may breathe an appropriate sigh of relief. Rather, I want to point out that our geoscience profession is tip-toeing around, and possibly into, deep pools of moral hazard based on the fact that our industry is one which wields an incredible amount of money, power, and influence. The danger here is that the individual geoscientist may find it easier to at times succumb to the prevailing group mentality and just go along with the program, rather than think and feel things through for himself or herself. This self-silencing could have the deleterious effect of removing a potentially influential voice (one's own) from the debate. There could also be negative long-term mental & emotional effects for the geoscientist - guilt and remorse - for a decision made in conflict with one's inner moral compass.

IHS CERA: Falling Costs for Upstream O&G Facilities Bottoming Out

The costs of building and operating upstream oil and gas facilities -- which fell drastically in Q1 2009 after a prolonged period of escalation -- appear to be bottoming out, according to two cost indexes developed by IHS Cambridge Energy Research Associates (IHS CERA).

The IHS CERA Upstream Capital Costs Index (UCCI), which tracks costs associated with the construction of new oil and gas facilities continued to decline, down 4 percent over the past six months, though costs are approaching their bottom, the report finds. Its index score is now 202. The UCCI's counterpart, the IHS CERA Upstream Operating Costs Index (UOCI), which measures operating costs for those facilities rose by 1 percent in the past six months after falling 8 percent during the prior year. The UOCI index score is now 168.

Pemex Slashes 2010 Chicontepec Budget by 22%, Boosts Cantarell

(Bloomberg) -- Petroleos Mexicanos, the state-owned oil company, cut the proposed 2010 budget for its $11.1 billion Chicontepec field by 22 percent and almost doubled next year’s spending on the aging Cantarell deposit.

Spending at onshore Chicontepec would fall to 21.1 billion pesos ($1.6 billion) from a proposed 27.1 billion pesos this year, according to a company presentation on the Web site of Mexico’s Congress.

Iraq to auction vast oilfields

BAGHDAD (Reuters) - The threat of bombs and violence will compete with the lure of some of the world's most promising oilfields when oil majors fly into Baghdad this week to bid in Iraq's second auction of oil contracts since the U.S. invasion.

The risks, nearly seven years after U.S. forces toppled Saddam Hussein, were on display on Tuesday when a series of car bombs killed 112 people in the capital, rattling the windows of the Oil Ministry where the December 11-12 auction will be held.

Salazar Conditionally OKs Shell's Exploration Plan in Chukchi Sea

Secretary of the Interior Ken Salazar today announced that the Department's Minerals Management Service (MMS) has approved, with conditions, Shell Gulf of Mexico, Inc.'s Exploration Plan to drill three exploratory, information-gathering wells in the Chukchi Sea.

"A key component of reducing our country's dependence on foreign oil is the environmentally-responsible exploration and development of America's renewable and conventional resources," said Salazar. "By approving this Exploration Plan, we are taking a cautious but deliberate step toward developing additional information on the Chukchi Sea."

The Myth of Clean Coal: Analysis

The new buzzword is "clean coal"—and it's being portrayed as the high-tech, low-emissions fuel of the future. Senators John Kerry, D-Mass., and Lindsey Graham, R-S.C., recently wrote a New York Times op-ed piece calling for the United States to become the "Saudi Arabia of clean coal." U.S. energy secretary Steven Chu has called on his counterparts around the world to promote the "widespread affordable deployment" of clean-coal technology. A current climate bill in the U.S. Senate proposes a complex regime of taxes and subsidies intended to cut America's greenhouse gas emissions by 20 percent by 2020. But the bill effectively gives the coal industry a pass on cutting emissions until "sufficient commercial-scale" clean-coal technology has been deployed. Why try to reduce our dependence on coal today, the reasoning seems to be, when fabulous, guilt-free clean coal is just around the corner?

There's just one problem with this scenario: Coal will never be clean. It is possible to make coal emissions cleaner. In fact, we've come a long way since the '70s in finding ways to reduce sulfur--dioxide and nitrogen-oxide emissions, and more progress can be made. But the nut of the clean-coal sales pitch is that we can also bottle up the CO2 produced when coal is burned, most likely by burying it deep in the earth. That may be possible in theory, but it's devilishly difficult in practice.

Burn a Tree to Save the Planet? The Crazy Logic Behind Biomass

It might seem crazy that anyone would think the incineration of wood and its byproducts are a green substitute for toxic fuels such as coal. Think again.

Exxon Says EPA Rules ‘Least Efficient’ Way to Reduce Emissions

(Bloomberg) -- Exxon Mobil Corp., the biggest U.S. oil company, said the Obama administration’s plan to treat carbon dioxide as a health hazard is the “least efficient and least transparent” way to cut emissions tied to climate change.

The U.S. Environmental Protection Agency’s declaration yesterday on regulating carbon dioxide signals rules that would be more harmful to the economy and the oil industry than pending climate legislation in Congress, said Kenneth Cohen, Exxon Mobil’s vice president for public and government affairs.

“I don’t believe the EPA was set up to deal with a problem of this type, a regulatory challenge of this type,” Cohen said yesterday in an interview in Bloomberg’s Dallas bureau. “Every industrial activity will be affected by the decision.”

Bill McKibben: Why Politics-As-Usual May Mean the End of Civilization

When it comes to global warming, however, this is precisely why we’re headed off a cliff, why the Copenhagen talks that open this week, almost no matter what happens, will be a disaster. Because climate change is not like any other issue we’ve ever dealt with. Because the adversary here is not Republicans, or socialists, or deficits, or taxes, or misogyny, or racism, or any of the problems we normally face -- adversaries that can change over time, or be worn down, or disproved, or cast off. The adversary here is physics.

Dark Side of a Natural Gas Boom

DIMOCK, Pa. — Victoria Switzer dreamed of a peaceful retirement in these Appalachian hills. Instead, she is coping with a big problem after a nearby natural gas well contaminated her family’s drinking water with high levels of methane.

Through no design of hers, Ms. Switzer has joined a rising chorus of voices skeptical of the nation’s latest energy push. “It’s been ‘drill, baby, drill’ out here,” Ms. Switzer said bitterly. “There is no stopping this train.”

Across vast regions of the country, gas companies are using a technology called hydraulic fracturing to produce natural gas from previously untapped beds of shale. The push has been so successful that the country’s potential gas reserves jumped by 35 percent in two years. The new supplies have driven down natural gas prices for consumers and might help the global environment by allowing more production of electricity from natural gas, which emits fewer global warming emissions than coal.

What the drilling push will do to local environments is another matter.

Oil extends four day sell-off, falls to near $73

Oil prices dropped to near $73 a barrel Tuesday after a strengthening U.S. dollar extended a four day sell-off in crude to two-month lows.

FACTBOX - What OPEC has said before Dec 22 meeting

REUTERS - The Organization of the Petroleum Exporting Countries meets to consider oil output policy on Dec. 22 in Luanda, Angola.

The 12-member group, which pumps more than a third of the world's oil, has kept its production target unchanged at meetings held earlier this year.

Tough times force OPEC members to close ranks

CAIRO (AFP) – Divisions within OPEC have eased as the dual threat of the global economic crisis and climate change talks force oil producers to be pragmatic and unified, analysts said on Sunday.

Two years ago, when oil prices soared to nearly 100 dollars a barrel, the oil exporters cartel, which includes both allies and foes of the United States, was severely tested.

The Organisation of Petroleum Exporting Countries was then torn between price hawks like Algeria, Iran, Libya and Venezuela on one side and nations like Saudi Arabia which wanted moderate prices in the interests of consumers.

But the stance of the price hawks has since lost support, leading to a convergence of positions within the bloc.

Transocean Rig Rents Seen Sinking as Panic Buying Turns to Glut

(Bloomberg) -- Transocean Ltd. and Diamond Offshore Drilling Inc., the world’s biggest deepwater oil drillers, may face a drop in rig-rental revenue because of a glut of vessels that can operate in oceans two miles (3.2 kilometers) deep.

The oversupply will develop in 2011 as rigs that drillers started building when oil prices surged to a record last year are completed, said Jud Bailey, an analyst at investment bank Jefferies & Co. in Houston. Rig rents are likely to drop 10 to 15 percent and stay down until new deepwater developments create enough demand to end the surplus in 2012 or 2013, he said.

“It was a classic case of panic on the part of operators when oil was over $100,” Bailey said. “A part of that panic was just the fact that they couldn’t get a rig. When that psychology reverses, it can be a pretty powerful dynamic.”

Exxon OKs gas project, despite finance worries

SYDNEY (AFP) – Energy giant Exxon Mobil Tuesday approved a 15 billion US dollar liquefied natural gas (LNG) project in Papua New Guinea, potentially the largest ever such deal for the impoverished Pacific country.

The venture's United States-based lead partner said the green light was conditional on securing binding contracts with two more Asian customers and finalising financial arrangements, expected by early 2010.

Total May Close Dunkirk Oil Refinery as Refining Profits Drop

(Bloomberg) -- Total SA, Europe’s largest refiner, may close its Flanders plant in northern France permanently as falling fuel-processing profits force capacity reductions.

Shutdown is one of four options being considered for the refinery near Dunkirk, a spokesman for the Paris-based company said by phone today. Total may sell, mothball or convert the site into a depot, he said, declining to named because of company policy. The Flanders plant, idled in September, is due for maintenance work in March.

The Philippines: Shell asks court to halt seizure of oil imports

MANILA, Philippines - Pilipinas Shell Petroleum Corp. has asked the Court of Tax Appeals to issue a temporary restraining order (TRO) enjoining the Bureau of Customs (BoC) from seizing the oil company's imports as payment for P7.3 billion in alleged back taxes.

Shell's legal counsel and former Ombudsman Simeon Marcelo argued that such move would restrain the supplies of the company and inevitably, result in higher oil prices.

Trouble in China's little Africa

HONG KONG - In order to tap into Africa's rich mineral and oil resources, China has injected billions of dollars in aid and investment into the continent while at the same time giving a free pass on despotism and human-rights abuses to nations such as Zimbabwe and Sudan. Chinese merchants and laborers are also increasingly a presence.

This has given rise to heated international debate over whether Chinese leaders are practicing a new form of colonialism and whether ordinary Africans, and not just a corrupt elite, are benefiting from China's involvement.

A subplot often overlooked in this larger story, however, is the increasing number of Africans who have come to China to ply their trade. Lured by the promise of China's prolonged economic boom, they have arrived by the thousands seeking cheap goods that they can resell back home for a profit.

Senior Venezuelan minister resigns in bank scandal

Markets recovered on Friday after Chavez stepped back from nationalization threats and made overtures to the owners of the oil exporting nation's top private banks. Monday is a bank holiday in Venezuela, South America's top oil exporter.

Chavez on Sunday accused his critics of trying to spark a bank run. He said he had no plans to nationalize big, healthy banks, but would not hesitate to do so if they broke the law or entered into problems.

"What I have said is that he who slips up, loses. Banker, I don't care if you are the biggest," Chavez said.

Gas engines quietly upstage electric cars at L.A. auto show

But these days green is also an auto marketing tool – and good PR in a time of heavier government involvement in the industry. So the show underway here through Sunday is packed with glitzy alternative-power vehicles.

The truth is, however, that most are hype. The industry's mainstay for many years to come will be the same tried-and-true internal combustion gasoline engine that's powered cars for a century, augmented by a relative handful of diesels in the USA.

The potential life of the petroleum-fueled power plant is actually growing longer as automakers find increasingly sophisticated ways to make gas and diesel engines more efficient. And even with the refinements, they remain more affordable than the alt-power headliners.

Nine European nations agree on wind energy initiative

BRUSSELS (AFP) – The energy ministers of nine European Union nations on Monday signed a deal to develop a massive offshore wind power grid in the North Sea and Irish Sea, as UN climate talks got underway in Copenhagen.

The text was signed on the margins of an EU energy ministers' meeting by Belgium, Britain, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands and Sweden.

Brazil Won’t Cut Renewable Energy Production Mix, Envoy Says

(Bloomberg) -- Brazil, which powers millions of cars using domestic sugar cane, won’t cut production of renewable energy even as the country’s oil output rises, its climate ambassador said.

Renewable energy, especially hydroelectric and biofuel, accounts for about half of the power needs in South America’s biggest economy, Brazilian envoy Sergio Serra said today in an interview.

“There will be no change to the energy mix,” Serra said in Copenhagen, where Brazil is taking part in the second day of the United Nations climate summit that started yesterday and ends Dec. 18.

India, Russia Agree to Boost Atomic Power Cooperation

(Bloomberg) -- Russia and India agreed to increase nuclear energy cooperation, boosting Rosatom Corp.’s prospects as it vies with international rivals to expand the South Asian nation’s atomic capacity a planned 10-fold by 2020.

The deal, signed yesterday in Moscow, will allow Russia’s state nuclear company, to negotiate on a price for additional reactors at the Kudankulam site in southern Tamil Nadu state, where the first two units are under construction. Rosatom can also study new sites for nuclear plants.

Food banks adapting for record demand

Food banks facing record demand from needy Americans are testing new programs and turning to new donors to get food on their holiday tables.

Green on display at Copenhagen summit

COPENHAGEN — From the moment one's airplane descends from the thick fog above Copenhagen, there is no doubt that this city has been given over to the United Nations climate summit.

"Stop climate change!" reads a giant yellow sign on a boat moored just below the flight path. Before travelers even clear customs, they are hit with a barrage of summit-related ads — including one showing an aged President Obama in the year 2020, apologizing for world leaders' failure to stop the planet from warming.

Free bicycles are available on loan. A giant windmill looms over the conference center.

"It's like Disneyland for environmental people," marvels Claude Weisler, 23, a French tourist.

Fix budget? Nah. Solve global catastrophe? Yes!

People in the know here would never be surprised that the effort to launch a utopian, peace-loving, healthy-eating society would start in San Francisco.

But to do it at a time when the country is facing possibly its worst economic crisis since the Great Depression? This may not be the moment to consider turning Lincoln Park Golf Course into a food garden.

Yet here we are, poised this week to unveil a report that has answers for not only San Francisco’s ills, but for the globe’s — and in just 143 pages. And if you can forgive the unwieldy title, “San Francisco Peak Oil Preparedness Task Force Report,” we now have confirmation that the Board of Supervisors, which assigned it, is not just a legislative panel, but a boiling cauldron of social engineering.

Millions in U.S. Drink Dirty Water, Records Show

More than 20 percent of the nation’s water treatment systems have violated key provisions of the Safe Drinking Water Act over the last five years, according to a New York Times analysis of federal data.

That law requires communities to deliver safe tap water to local residents. But since 2004, the water provided to more than 49 million people has contained illegal concentrations of chemicals like arsenic or radioactive substances like uranium, as well as dangerous bacteria often found in sewage.

EPA's carbon dioxide emissions ruling could raise energy costs

The latest step by the government to regulate carbon dioxide emissions saddles industry with uncertainty and potentially higher costs, industry groups said Monday after the Environmental Protection Agency declared carbon dioxide a health hazard.

Russia’s Carbon Credits Seen as Barrier to Warming Curb

Does Russia hold hostage the future of a carbon cap-and-trade system that many experts see as a critical tool for curbing global greenhouse gases? Improbable as it may seem, the answer appears to be yes.

That is because Russia, as a result of the collapse of much of its heavy industry in the 1990s, owns one of the largest stocks of credits to offset carbon emissions.

This Decade Is Warmest on Record, 2009 Ranks Fifth

(Bloomberg) -- This decade is set to be the warmest on record though 2009 won’t be the hottest year, meteorologists said today, lending fuel to both skeptics and supporters of a global warming agreement being negotiated in Copenhagen.

Data from the U.K. Met Office and the United Nations’ World Meteorological Organization show this year will be the fifth- warmest. The global average temperature was 0.44 degrees Celsius above the 1961 through 1990 average temperature of 14 degrees (57 degrees Fahrenheit), the WMO said in the Danish capital.

“This tells us that global warming is still rising,” Vicky Pope, head of climate change advice at the Met Office, said in a telephone interview in Copenhagen, where two weeks of United Nations talks began yesterday to draft a climate deal. “Greenhouse gases continue to increase, and it’s clearly important we reach an agreement in Copenhagen to reduce them.”

Why the amount of oil/NG that might be produced from a well has little bearing on the decision to drill that well. The same can be said for any and all geologic trends in the world.

Yesterday Kurt offered an excellent explanation of the net present value parameter used by virtually every energy company ( Kurt Cobb: Reserves are bunk). Within the piece I pointed out the above fact. It wasn't a big surprise that I've received questions from folks who found such a statement illogical. That's understandable even if they did grasp the NPV concept. The best way to grind home the point IMHO is by real life examples.

First, the obvious:
Prospect A = 100,000 net bbls of oil Prospect B = 10,000,000 net bbls of oil. Which oil gets produced? Prospect A does and Prospect B probably never will. Prospect A costs $2 million to drill and complete. Pays out in less than 18 months and delivers a ROR of 25%. Prospect B would cost $1.2 billion to develop. Do so and you lose money at today's prices. These are not hypothetical. I drilled Prospect A two years ago. I logged the DW GOM Prospect B about 4 years ago. The field was abandoned as noncommercial.

Second, the not so obvious:
Prospect A = 100,000 net bbls of oil. Prospect B = 120,000 net bbls of oil. Both prospects will cost exactly the same to develop. Which oil gets produced by an operator driven only by the profit incentive? Prospect A does and Prospect B doesn't. The daily flow rate from A is many times greater than B. Prospect A pays out in 18 months and delivers a 25% ROR. Prospect B takes 5 years to pay out and delivers a 2% ROR. The operator would be better off buying a Treasury note than drilling Prospect B: no risk/work. Again, real projects I've been involved in. I won't go over NVP...please read Kurt if you need to catch up on this parameter.

Now, the really fun stuff:
Public Company X has an inventory of 50 prospects to drill. One is exactly like Prospect A. The other 49 are exactly like Prospect B. One might think they would drill A and pass on all the B prospects...more profitable to just buy those T bills. But who's going to buy the stock in such a company. They'll make a nice profit by drilling the one A prospect but they'll be rapidly depleting their reserve base if they don't do more drilling. Stock in an oil company with a constantly depleting reserve base is worthless EVEN THOUGH THEY WILL STILL MAKE A NICE PROFIT BY DRILLING THE ONE PROSPECT.

So Company X drills all 49 B prospects and adds 15% to their reserve base. Wall Street is pleased and responds by hyping the stock. Of course, they make very little profit in the process. But the job of the CEO is to increase stock price...not value. Company X is increasing its reserve base, the stock price continues to rise and the company has another 3000 such projects to drill which they proudly, and quit correctly, state will eventually produce 360 million bbls of oil. Damn...who wouldn't buy stock in such a company with that much proven and (marginally) profitable oil reserves... especially if you buy into PO.

Rut roh...oil prices just slipped. And now the ROR is -5%. So what does Company X do now? Easy: suspend most of your drilling program (you still have few sweet spots to drill that do make a profit). You suspend drilling for two reasons: your budget comes from cash flow and your credit line with the bank. Both sources have taken a hit from the price drop. Your obviously aren't going to replace your production with the decreased drilling activity. But you still need to keep the market optimistic about your future so what do you do? You keep reminding folks you have prospects capable of producing 360 million bbls of oil...in the future, of course.

Sounds familiar? Again, this is not an hypothetical scenario. This is the exact position every public company in the shale gas plays found themselves at some point during the last 2 years. Folks like Chesapeake will keep pounding out the future volumes of NG that could be produced from the shale gas plays because they have no other method to bolster stock prices. We have proven there are many trillions of cf of NG that could be produced with current technology from the SG plays. But notice I (nor Chesapeake) didn't say we can produce any of the NG under current pricing.

Please save your comments about how wrong this process is. The process doesn't care nor do I really care. This is the reality...deal with it. This is the main reason I try to avoid the debates over how much shale gas has been proven in the US or how much oil Brazil might have in the DW. How much oil/NG there is out there that might be produced has little bearing on how much will be produced. To steal a term from our macroeconomic types on TOD, you might think more in terms of the velocity of oil/NG development. And this, IMHO, is the basis for PO. And there is no escaping this reality as I see it.

There have been numerous comments since the start of the financial crisis which suggest that the US is bankrupt. Yet, the stock market appears to be recovering. Could it be that the stock market is an illusion and should be abandoned as an indication of the health of the economy? What happened to the days where companies actually paid dividends to their stock holders and the value of their stock reflected this dividend? Isn't the present stock market just another form of a Ponzi Scheme in which the insiders are able to collect money from unsuspecting investors?

Here's a different approach. What if all companies were required by law to pay out half of their profits each year as dividends? Would that not bring the market back to a sense of reality, which is, companies are in business to make profits, not to keep their stock value high to inflate stock market bubbles. If this approach were instituted, I think your example of the choices for "Company X" would change dramatically.

E. Swanson

If this approach were instituted, I think your example of the choices for "Company X" would change dramatically.

From what Rockman said, the choice would be not to bother producing prospect B because the only reason for doing this is to drive the stock price up.

Therefore, we would only be left with propect A that makes a profit. Less oil would end up being produced. This might be a good thing depending on your point of view.

Valid points Dog. But isn't that the basic problem with all economies in the world today: expectation of future growth makes you pay more for a stock or commodity then its current value. So many good examples...the housing bust is an easy one. All that money loaned based upon expected inflation of values. How can the Feds borrow all the money they have without an expectation of growth covering the debt? Thus the absolute need for the gov't to push BAU. Just like covering a bad check with another bad check: stop and you get busted.

There have been numerous comments since the start of the financial crisis which suggest that the US is bankrupt.

US isn't bankrupt - we have huge amounts of untapped resources, daily flows of ecosystem services and low population density. However, we ARE insolvent (don't have the assets to pay off our debts TODAY). With a combination of the right investments and lower consumption we can work out of insolvency over time.

Yet, the stock market appears to be recovering. Could it be that the stock market is an illusion and should be abandoned as an indication of the health of the economy?

Stock market is a measure of the supply and demand for securities. Stock market currently is midwife between individuals/institutions and government backstop - it does not reflect health of economy.

US isn't bankrupt ..... However, we ARE insolvent

Nate as one who has long valued your opinion, I have a question on this.

In addition to the right investments and lower consumption don't we also have to remove imbedded assumptions about pre-peak input costs, leverage ratios based on such costs, and the advent of receeding horizons in all projects no matter how sensible and efficient they may one day be?

It seems that in order to be able to eventually service our accumlated and obligated debts (to avoid a declaration) we will have to take these 'ecosystem services' and actually produce more from them than we coincidentally consume. This, in order to create a surplus of something of real value which our creditors will accept as repayment.

I'm just wondering how successful this can be given that the volume of debt was accummulated at a time when the expectations for future real growth was so high and which we now 'know' to be unrealistic. Many have said it will be much easier to have a defacto bankruptcy based on a valueless dollar.

"US isn't bankrupt - we have huge amounts of untapped resources"

Right. We have many mountain tops that have not as yet been removed. We have some wildlife that still exists. Somewhere a dab of 'pure' water might exist. Some woodlands yet to ravish. We have lots of coal still to burn and pollute with. There might be a few good freshwater fish left. Lets seine them ALL out and have a big fishfry then.

Some day we will perhaps have to learn to eat those Asian carp that are part of our 'untapped resources'.

We have a dearth of taking care of our environment so lets get busy and trash the rest of it.

Does that make sense?

Don't get me wrong. We need the messengers. But sometime we will have to step up to a solution, if that is even possible as our hour glasses slowly run empty.

A slow crash means ZERO resources left at the final end. A fast crash means we retain a few of those resources for a future comeback.

I lived on the back end of the Depression. World War II. Also the 73 embargo. The dot com crash. The Y2K runup,working 70 hr weeks. I have seen riots and city blocks set afire. Protesters shot and beaten and then jailed with no due process. We have all see the Watts,Detroit and the LA riots. We saw Katrina and New Orleans. What next???? What? I forgot the massive Ice Storm of last winter and no electricity for 6 weeks as we wandered around in a foreign world of huge trees crashing and out woodlands decimated. Packing water to drink. Eating my precious canned vegetables. I now see the lack of many forms of wildlife both insect and large forms. No more fruit without pollinators.I could go on and on. Why should I though, I wonder.

If we don't see it all clearly after all this time, then we are doomed right now.

Airdale-when does the charting stop and we finally 'get the message'? Ten more years when our LCD flicker out and the flawed Pentium Processors spin their heatsink fans one last time? As our chilled ,skinny gloved fingers press the Power Off button for good and the UPS batteries finally provide no more power during the moving lengthy blackouts up until finally no more?

Editted: Darwinian where are you?

Some woodlands yet to ravish

My vote for best mental picture of the day

Thank you, airdale, for a good focus on the need to step up with a solution. And for a nice rant. Must be the day for it, eh?

I think a better way to say it is we are in my opinion obviously insolvent today and potentially bankrupt but not obviously so. I'd suggest then the question is when does the US become obviously bankrupt not if.

Given that I'd suggest I think Nates saying its not yet reached the point the US is obviously bankrupt and might not for sometime. Given our large cash flows this even could occur in a number of ways and perhaps could be decades out.

Also I'd add on the global scale which the US plays technically the last man standing is the winner its all relative not absolute. Even if the US eventually become obviously bankrupt as long as most people went down first then so what ?

For the US at least I think the bigger problem is the end of the traditional first world middle class. I don't think the eventual financial pecking order is all that important. If the first world nations become similar to current second and third world nations economically and demographically etc then the old game is over regardless of how you do the accounting. Obviously this pushes a huge amount of the worlds population below survival levels as all economies will be forced downwards.

Now with that said I happen to think that barring some catastrophic event that the US will actually pull off this transition with the resulting concentration of power and complete corruption of the democratic process. In fact the point he makes about splitting out the fact we are insolvent vs bankrupt is the very reason the US can and probably will manage a slow transition into a very different overall economy.

Now with all that said I happen to think the rate at which Americans become impoverished and desperate will quicken significantly. To date the desire has been to avoid social unrest however I think we are now entering the phase where social unrest will be used to tighten the grip on power. What slow means is itself relative.

My best guess from the economic level is nothing will happen until some other major economy crumbles but once the dominoes start falling the pace of change will quicken rapidly.

In general since I expect social unrest to be both fairly limited and quickly squashed with a rapid escalation to a police state the US should manage to continue to remain overall near the end of the queue on the way down.

And last but not least as far as the dollar falling goes its been massively overvalued for years and could lose 50% of its value simply to make it more realistic if not more. I'd say only after it did that if it does does the actual value of the dollar become a concern. A lot of this of course is related to how globalization used to work but thats changing. A re-balancing of currencies from the current relative valuations is not yet a good signal of the end esp for the dollar. However as mentioned above I don't think one of the worlds major economies will make it through with a very very good chance of a big economy crashing next year.

If so then I think its obvious we can't say much about the future until we understand the aftermath of someone going down and or we muddle through long enough to consider the risk of a major economy crashing low.

In general each time this happens the US will benefit relatively from the other failures helping us look a bit better on a relative basis.

And its important to understand that things can and might happen very quickly with little public notice.

I think a better way to say it is we are in my opinion obviously insolvent today and potentially bankrupt but not obviously so. I'd suggest then the question is when does the US become obviously bankrupt not if.

A good bet might be the time when oil exports to us start to dry up, particularly if China either intentionally or unintentionally significantly reduces exports of rare earth metals. Or when our T-bills are called. Or when it becomes clear the rest of the world likes the idea we are falling on our faces and leaves us to do that while Americans refuse to change the way we live. Or when it becomes clear tipping points are happening and the proverbial tide is receding fast and far.

Or all of the above. Or some other Black Swan-ish event.

US isn't bankrupt - we have huge amounts of untapped resources, daily flows of ecosystem services and low population density.

Nate, you are mixing apples and oranges here. You're saying a family is not bankrupt if it has children to sell! Yes, we could sell the remaining resources and the land at some steep discount.

The debt plus obligations we have accumulated amount to tens of trillions of dollars, almost 100 trillion in some ways of counting, a significant multiple of the 14-15 trillion GDP. That amount can only be disposed of by repudiation and inflation, not by paying it down based on future revenues.

Our low population density and remaining soil, water and forests are real assets, but only if we use them in a way that is not constrained by market forces. Large parts of the population need to be reconnected with the land via localized communities, drastically reducing dependence on the global markets. This will not discharge the financial debts, but it will allow people to survive as opposed to rotting in tent cities and beneath bridges.

If a family has children on the market, it probably cannot be considered bankrupt... lol

Why sell children when you have step-children though

The US is not bankrupt for the simple reason that it is the country that decides who is bankrupt and who is not. They can force any country into very difficult situations and could easily pressure its economically conquered nations (step children) into giving it anything it needs.

totally agree
my comment wasn't qualitative or normative (what should be), just definitional. We do have lots of resources so aren't bankrupt (e.g. we still produce 80%+ of our own energy). If we continue on current path we will most suredly become bankrupt.

Second, the not so obvious:
Prospect A = 100,000 net bbls of oil. Prospect B = 120,000 net bbls of oil. Both prospects will cost exactly the same to develop. Which oil gets produced by an operator driven only by the profit incentive? Prospect A does and Prospect B doesn't. The daily flow rate from A is many times greater than B.

Something is wrong with the numbers here.

How so Han? Real prospect with real economic analysis. Did I misstate something?

If it's the flow rate differential that's just the reality of reservoir engineering. One zone can flow a max rate of 30 bopd and a different zone can flow 300 bopd. Mother Nature determines the max sustainable rate...not man.

oh i dunno 'bout all that, a company who wants to be in business in 5 yrs would probably choose door number b so you assumption that prodspect a would get drilled first is on shakey ground, imo.

elwood -- I didn't say B would get drilled second...I said few operators I've ever dealt with would ever drill Prospect B. I do know plenty of promoters who would suck some gullible investors in and drill B. Any well where your share is being paid for by a third party is always a good deal. Maybe not for them..but for you it might well be.

Its a simple consequence of the Net Present Value, which exponentially discounts the value of future production. As Rock said, why drill if you can obtain a higher stream of income by buying T-bills? Of course the choice of the discount rate is crucial. Choosing a high discount rate, i.e. one that is several percent higher than say bond yields, means that the discounting of the future is way too severe.

EOS -- Valid points for sure. But the reason companies use higher discount rates (10 to 15%) is as much to offset the drilling risks as anything else. Consider that a company drills a well that delivers a 25% ROR. Great. But that doesn't take into account the millions lost on dry holes. No one looks at our discount rates with respect to bond yields or any other parameter. Over the years companies just settled on these discount rates based on past experiences.

Despite the fact that oil patch economics are run out to two decimal places doesn't mean we function anywhere close to that level of accuracy. At the end of the day the odds of making money by drilling a well is 50/50: either you do or you don't (simple geologist economics). Pick any DR you want or any price deck you want: it doesn't matter if you drill a dry hole (like I think we just did...catching the log run late tonight to find out). After you drill you can knock the numbers out. Before you're just taking a gamble.

Rock, I know jacking up the discount rate to "correct" for various risks is standard practice. My co-worker is studying for his MBA, and we discuss these sorts of issues. But that it actually a very poor lazy way to correct for uncertainty. It would be much better mathematically to create a suite of oucomes, varying things like drilling success and oil production, as well as using different models for the oil price trajectory. Then the part that needs to real expert judgement, choosing the appropriate weighting for the different possible outcomes. Then a weighted sum of the NPV of each possible outcome determines the probablistic value. You use a competitive discount rate, i.e. one that reflects the opportunity cost of the investment, the different models account for the risk.

For instance, as a simple case, you spend $1M to complete a well that may produce
$Xm of oil in five years time. You assume a simple binary risk model, 50% chance it works as planned, and a 50% chance of a dry hole, and the opportunity cost of money is say 10%. Currently you bump up the discount rate, say to 20%, and your NPV is
X * .8**5. This means X must be >= 3.05 for the investment to pay off. With my porbablistic model I would get an NPV of .5*X*.9**5, which means X must be greater than 3.39. Now these numbers are pretty comparable, but suppose the time lag was ten years instead of five, we then get:
X*.8**10 for the NPV with the standard method. This implies X must be at least 9.3 to proceed. The probabilistic method gives NPV=.5*.9**10, which needs X> 5.74. So for
long lengths of time the simple trick of bumping up the discount rate can cause poor investment decisions to be made.

I follow your math EOS. But I have to be honest, after 34 years I've learned that the numbers are almost meaningless at least on the exploration side of the game. Not that we don't crank them out in our shop to keep the owner happy. But when I look at a drilling deal where I can't be certain there's any commercial oil/NG to produce, I don't get hung up on what discount factor or risk to reward ratio someone might throw out...even me. I look at the logic behind the play: is the reserve target reasonable, are there viable alternative interpretations to explain why there might be no oil/NG there, is the prospect generator throwing around a lot of smoke and mirrors on the hopes that I'm not good at my job (this is a real deal killer for me). It's a long and rather subjective list of parameters I look at. But for at least the last 20 years this is how I've analyzed deals. Not that I haven't drilled dry holes (Mother readily punishes arrogance) but I've made a lot of commercial wells too. And yes...if I like the deal I make the numbers work. And if I don't like it I can make the numbers go the other way too. That's the nice thing about dealing with rather loose science.

Shhhh...don't tell my owner.

A company that wants to stay in business in 5 yrs will pay careful attention to NPV, IRR and the inputs as described by ROCKMAN.

I worked on a major development project for an oilsands company that did not get developed because the IRR could not be brought to a satisfactory number. It was a 5 billion dollar project that the board really wanted to be a 4 billion dollar project. That was in 2007 (summer) so in a high oil price market. Also a high cost (fort Mcmurray) location.

The NPV stuff in this chain demonstrates why;

Many platforms in the north sea will not be decommissioned unless legislated. (owners will flip platforms until the last owner defaults on obligations and abandons) My prediction is the GOV will get stuck with rusty sea lumps.

Carbon taxes improve the NPV of alternatives to fossil fuels and destroy demand. Also (EROEI Aside) is the reason that clean coal will only have a chance iff carbon taxes are employed to the benefit of what is sequestered and to improve the NPV calculation. i.e. 100% carbon sequestered - 0% carbon tax. Tax equal to cost and NPV is even.

Carbon taxes are also a nice way for demand destruction. BUT they significantly harm NPV for any oil play that has no means to capture carbon. The oil industry will fight this to the death. Literally.


setting -- Those Brits need rules like our MMS. Exxon might build a platform that gets sold to someone else a dozen times. But if the last owner goes belly up Exxon is still on the hook via it's required bonds in order to operate in Federal waters. That's one reason companies are selective about who they sell offshore facilities to. Not that difficult to protect the environment if you write the rules right...and then enforce them.

That is interesting - I probably should not have added that bit about the platforms. We were developing some decommissioning equipment not too long ago and at the time I was thinking it would never get used. The client (UK based) was having trouble getting his project past gate 2. It is a zero cash-flow project and will require special rules and considerations. Perhaps as you mention. 18 months on - still not used.

Mining developments in Canada have a bond system to ensure infrastructure is removed at "ore's - end". So to speak.

ROCKMAN, you stated in that example that the flow rate of A is many times greater than of B, as if that logically follows from 100,000 and 120,000.

I think I understand your point Han. On TOD we chat about fields making 300,000 bopd and the such. In the US we've had a few similar fields. But the vast majority are far smaller. I can point to many wells in Texas that flowed 20 or 30 bopd but ultimately produced much more than 120,000 bo. I can also point out wells that produced several hundred bopd but had ultimate recovery of less than 30,000 bo. I recall one specific well from long ago that came on at over 200 bopd and was depleted in less then a month. A well's flow rate seldom indicates its ultimate recover. Mother Nature makes these rules...all we can do is deal with them. If I understand you correctly that's what seems odd to you. What I offered were real world examples...not hypotheticals.

If I understand you correctly that's what seems odd to you. What I offered were real world examples...not hypotheticals.

Yes indeed, ROCKMAN. Because in general the higher flow rates come from the bigger fields. Also in general the (super)giants are developed first. Your examples are interesting in their extremes, but obviously do exist in real world.

Han -- I suppose what one considers exteme depends on what one has been exposed to. There is a series of fields along the Texas coast that have produced well over 2 billion bbls of oil. But not very quickly due the the unstable nature of the reservoir rock. One field (West Ranch) in particular has produced over 350 million bo. Initial flow rates were around 200 to 300 bopd. But the unstable nature caused rates to be reduced to around 50 bopd with in months of a well being turned on. It took over 40 years to recover those reserves.

Typically public companies like to issue those press releases touting large initial flow rates of new discoveries. While they might impress the general public they generate little excitement within the oil patch. As I've said, I've seen wels with hgih initial flow rates never recover their capex. And very modest flow rates recover many time the capex.

Typically public companies like to issue those press releases touting large initial flow rates of new discoveries. While they might impress the general public they generate little excitement within the oil patch.

ROCKMAN, that means adding all the flowrates from the future megaprojects (on Wikipedia) might give a much too optimistic view. Moreover, because a lot of new projects started up the past several years showed (much) lower flow rates than predicted ( if what I have read is true).

I agree HAN. I can't look at the flow rate(actual or projected) of any field and make an inference of recovery volumes without detailed mapping. I could pull up hundreds of real examples where two wells in a field came on at the same rate. But due to th actual location in the reservoir one well ultimately recovers 10X or more then the other. For instance, in a water drive reservoir a well high on the structure (producng 200 bopd initially) might ultimately recover 300,000 bo. But a well on the edge of the reservoir (producing 200 bopd initially) might recover only 10,000 bo before it waters out.

I think you get the idea now. With the secrecy (and sometimes just the lack of basic data) folks get desparite to take what little data is offered and try to project it to a bigger picture. Unfortunately it often just can't be done with any accuracy.

Something is wrong with the numbers here.

Whatever you think is wrong is what Rockman is pointing out. He's providing examples of how less oil will often be produced because of economic factors.

You've been in this business a lot longer than me, but in my experience, good companies do not intentionally drill 2% ROR wells to pump stock price. We won't touch anything with less than a 15% expected ROR... and that's with a very conservative price deck. Not saying it doesn't happen... there is no shortage of fools out there, but I don't think this represents the majority of the oil patch. Other than that, as usual you've nailed it. I am the "moneyman" for an exploration team of geologists and engineers, and by far, the two most critical variables are capital cost and initial production rates. Our models often go out 30+ years, but I can tell you if a well will be drilled just by looking at the first 12 months of cash flow... it's not exactly rocket science.

Who said anything about "good companies" Moneyman? LOL.

Real example: back in 1991 a new small public company was producting 10 million cf of NG per day. I drilled 4 horizontal wells in reservoirs that were already producing but slowly. The new wells bumped company wide production up to 50 million cf/d. Stock went from $.50 to $3.00 per share. But we didn't add one cf of reserves...it was NG that was going to be produced anyway but just take a lot longer. The NPV gain from the new wells was $16 million. But the 4 wells cost $20 million. So not only did we not add reserves but we lost money on a NPV basis.

Yes...not a good company. But the officers made a ton of money on their options. As did the market maker...it was a very small company. All quit legal in the eyes of the SEC. It's the system. Folks can curse it all they want. Watching the business from the inside for the last 34 years gives me a pretty good base from which to offer insights. And it often isn't a pretty picture.

Folks can curse it all they want. Watching the business from the inside for the last 34 years gives me a pretty good base from which to offer insights. And it often isn't a pretty picture.

This is not surprising, you can say the same thing about a lot of businesses. We have seen some pretty dumb things regularly done in our field of work too.

I'm sure Jim. Greed and stupidity are rather universal.

After my last public company experience, which ended in a successful hostile take over by one of those greedy idiots (who eventually lost his butt), I got fed up with the corporate game and became a full time well site consultant. Then it didn't to me matter what dumb policies were in place. I did my job, mailed my invoice and went down the road to the next gig.

I gave that up for my present employee status because I knew the players and the rules of the game were simple: drill profitable oil/NG wells with our own capital.

I appreciate the perspective Rockman, it's amazing to me though I suppose it shouldn't be surprising. In your opinion are the majors are getting away with these same sort of practices or is it restricted to smaller companies? It would seem like investor scrutiny would be tougher to get around for larger outfits, but perhaps I'm overestimating "due diligence".

Also, tangentially, I just began wondering how the same practices might manifest themselves in our green energy saviors.


Innus -- What practices in particular are you referring? As far as the majors go they are about as transparent as it gets. Also, because of their huge size there's really not much they can do to shine themselves up to any significanct degree.

The problem with companies offering very biased but legally valid views of themselves is that the public is required to understand the business in much greater detail then could possibly ever absorb IMHO. And, to be very cold hearted for the moment, that's the public's problem...not the companies. How many folks have you ever known (excluding insiders) who really understood any company's business well enough to evaluate their viability? I've been in the biz for 34 years and it's not a simple matter for me to evaluate a public oil company. Folks buy stocks because someone said it was a good idea: a broker, a neighbor, the Wall Street Journal. Walking through a mine field is dangerous enough. A lot more dangerous if you don't even know there's a mine field there.

Let the buyer beware. Everyone knows that rule. But greed will often make them forget it IMHO.


Given that a geologist adds two plus two and gets "somewhere between three and five" ,which makes excellent sense in the context from which I lifted it,you and Rockman seem to be saying pretty much the same thing.

It seems to me that putting money into drilling can be compared to loaning money.

If I can loan money at fifteen percent and get my principal and some profit back within a fairly short period,I would, knowing that there will be a certain number of defaults.Some of my debtors will of course default.

Loaning that same money out at say eight percent and not getting my principal back for say twice as long would be a very dumb move IF the expected default rate over either the number of loans or over time is similar -and in this thought experiment both debtors would have a comparable default rate-meaning of course a dry well or one that produces significantly less than expected, or played out sooner than expected.

I don't know beans about the oil business but I have been observing the behavior of paper shufflers in general with great interest for a good while and it seems to me that Rockman's argument about some marginal drilling being done to make the paperwork look good is reasonable.I expect we could find lots of experts to come down on both sides of the question easily.My guess is that the hands on the checkbook guys with smaller operators will come down or your side and the corporate types interested in stock prices rather than actual profits will come down on Rock's side.Your guys want to find and sell a lot of oil.Rock's guys want to collect bonuses and sell out.

In plain language what he is saying, as I interpret it, is that what marginal drilling accomplishes is no more or no less than pumping the stock.Legally.

The bean counter types are like young boys and girls-eager, energetic , and incredibly persistent in searching out opportunities in thier chosen field of operations-regulation and taxes.The regulatory and tax people are like parents -busy with a lot to do and tasked with preventing a thing from happening that IS GOING to happen no matter what.

So a long time ago when the bean counter types couldn't get the corporate dividend tax rate lowered they figured out that most of the owners of stocks dodn't really NEED the dividends immediately, and that retaining dividends and pushing growth and therefore the stock price keeps the company and the stockholders money out of the hands of the tax collector , compunding annually if things go ok, until such time as stockholders want to sell-and that if you are making money as a lawyer or doctor or real estate agent or other typical owner of stocks, the capital gains rate is usually lower than the regular rate.

So the whole management paradigm shifted from good steady management of real day to day business making or producing a real product or supplying a real service to anything that looks like it can grow like a mushroom later on.The dumb money will rush in and bid the stock prices up like idiots buying lottery tickets or (recently) houses or dot com stocks and the smart money cashes out enough early to keep thier grubstakes safe at the very least.

My interpretation is just a very rough short layman's sketch of a complicated subject.But it seems consistent with both your position and with Rock's position; and it is in not in conflict with Theramus 's ideas posted today.Of course there s nothing original in it.

You've got an excellent handle on the realities Mac IMHO. The loan analogy is perfect. Whether justified or not that's the excuse the credit card companies have used for their high interest rates.

You call it dumb money...I call it stupid money. But the same folks. Madoff was a crook of world class proportions. But folks who thought his returns were real share some of the blame IMO. I still recall efforts in my professional youth to stop friends from mailing investment money to some promoter advertising in the back of the Oil & Gas Journal. Even as a baby geologist I couldn't understand how some folks allowed greed to turn themselve into such idiots.

Example B looks wrong.
ROR = Benefit/Cost=($out-$invest)/$invest because you save $invest is the same but RORs are different.

Let's say for both the investment is $2 million dollars so you get
well output A WOA-$2/$2=.25 means that WOA=$2.5 million or $25 a barrel.
For B you get WOB=$2.04 million and you say that WOB has 20000 barrels more of oil than WOa or $17 a barrel.
The only way this can be true is if oil from A has a much lower market price than oil of B. If you turn B oil into syncrude then the investment of B must increase from $2 million to $2.4 million. $25 x 120000 - $2.4m/$2.4m = 25% ROR.

As far as making a profit and running away, that might work for wildcatters but real oil companies know they must invest for the long haul as the oil business is very expensive. The get-rich-quick mentality is out of date and targetted toward unsophisticated investors(suckers).

The real peak in that case would be the supply of chumps which I would say has crashed in the past year.

Sorry maj but having trouble following your math. My numbers have nothing to do with get-rich-quick. All oil patch economic analysis is subject to the time value of money. Companies, with few exceptions, look at the short term cash flow vs. capex. If the cash flow isn't suffcient it won't generate the required return on investment. The only companies that will forgo short term profit are the public companies that are trying to gin up their stock prices by booking reserves.

Understand I'm not offering some model on how I think companies should evaluate drilling deals. And, I don't want to seem rude, but I'm not soliciting alternative approaches. What I presented is how it's done today and has been done since I started 34 years ago. I'm not offering theory. This is the energy business today in the US. It doesn't matter how anyone judges the approach. What matters, IMHO, is that folks understand how the business works and how that directly relates to PO. That's my sole goal.

The time value of money isn't that important here. You say that Project A lasts for 18 months and Project B lasts 5 years. The Uniform Present Value Rate at 5% for those two projects is,

100,000/1.5 years =66,666 bpy x $25/b x 1.6 = a present value of $2,666,000
120,000/5 =24,000 bpy x $25 x 4.3 = a present value of $2,580,000

If you choose a very high discount factor like 10% you get a greater difference but the growth of the stock market minus inflation is around 5%, not 10%.

(Not trying to be TOO annoying but just asking obvious questions.)

maj -- The time value of money might not be "important here". But it is the key metric in every oil/NG economic analysis I've ever reviewed. Again, I'm not saying your approach to such analysis is flawed. I'm just saying the industry doesn't do it that way. Trust me, when they crown me KING OF THE OIL PATCH I will completely revamp the process. I'm serious: I do know how to maximize the efficient recovery of our remaining hydrocarbon base. Many of us on the inside know how to do it. Wouldn't stop PO but it could lessen the trauma. But "we" don't make the rules anymore then TOD does, unfortunately.

And you never annoy me maj...I always appreciate your scrutiny. Seriously.

When I next chat with President Obama, I'll recommend you for OIL CZAR
(the Republicans would be recommending their energy expert, Sarah Palin) because of your commitment to properly conserving hydrocarbon resources.
To do so will probably mean nationalizing what's left under America.


Thanks maj. I actually wouldn't mind sharing a "post" with Sarah.

Sorry...even at my advanced age there's still a strong grain of oil field trash in me.

this is one of the most intelligent posts I have read on TOD

God save us from academics and outside observers who create castles in the air, with no experience of the realities of the industry


+1 from me too.

Although I already realised what you are saying from experience in other ares of business, as I'm not from an oil business background I couldn't be sure.

Like all other business' the product can only be produced if it is profitable in the long term - this applies to alternative energy sources like ethanol too, they can't be subsidised forever.

And this, IMHO, is the basis for PO. And there is no escaping this reality as I see it.

Absolutely, Rockman! PO is a simple idea. The easy oil is drilled first; when that is gone, the next easiest. Profit motive and all that! PO also says that because the easy oil is gone, it will take longer to extract what is left. Demand being high, supply being restrained, price must go up. That will fund the next round, but it will detract from the economy overall.

As difficulty and costs rise, extraction will diminish and economy will drop as a greater and greater proportion of wealth goes to energy extraction [I would not say, "production," because the energy we are speaking of was produced in the sun and stored in fossil fuels].

Now we see and hear the BAU crowd telling us all about "clean coal." Since energy is the bottom line, the cheapest energy figures to be used first. If that is coal, the BAU folks will spin coal as acceptable. After all, they need to keep the economy growing.

So, good job in explaining how decisions are made by extraction folks. Spot on!

Prospect A pays out in 18 months and delivers a 25% ROR. Prospect B takes 5 years to pay out and delivers a 2% ROR.

I worked in a different industry, but even if ROR and NPV were the same, break-even or at least cash-flow-positive in 18 months versus break-even or cash-flow-positive in five years carried a lot of weight. Too much that's impossible to predict can happen over five years, and it makes the big bosses uncomfortable.

A good example, IMO, is to look at what happened in the unregulated electricity generation business. Prior to federal incentives and state-level mandates, pretty much everyone who got into that game made the same choice -- natural-gas fired turbines. Fuel prices were much more volatile than some other choices, but you could build it fast and break-even came early. Regulated utilities can make commitments to large long-term investments in order to have fuel diversity and such; private companies in a supposedly competitive environment, not so much.

I'm not an oil guy, but I did work as a computer jock in the HQs of a very, very large oil co in the 80s. I can affirm that RM's description of the method of deciding on investments is correct.

It got to be ludicrous sometimes -- the method was applied even to small projects, even buying relatively small things, unrelated to oil. It was like using a jackhammer on a tackboard. Everyone knew this was the way things had to be presented and justified.

Beyond that, the explanation of the predicament of the gas drillers is extremely interesting, and explains a lot for me. There's a general point there: it's easy to confuse the purely physical with the financial. But the cos involved don't do that -- they are intently focused on the bottom line, or more precisely, the IRR over a relatively short period of time.

RE Rockman's description of the counter-intuitive nature of which oil prospect gets drilled:

I find analogous behavior in the real estate market. Supposedly the agent has an incentive to get the highest price possible on a piece of property. My experience has been that quick turnover is a much greater incentive. Get a quick return and get out. Dealing with an expensive piece of property over the course of a year or so is just too much trouble.

Lukoil Cuts Oil Production Budget To Focus On Refining - WSJ.com

MOSCOW (Dow Jones)--OAO Lukoil Holdings (LKOH.RS) will slash its exploration and production budget by 20% and focus on refining and cash flow generation as Russia's oil output plateaus.

Lukoil, Russia's second-biggest oil producer, will also postpone gas projects in the Caspian Sea and Yamal Peninsula amid uncertain demand in Russia and Europe, Chief Executive Leonid Fedun told journalists Tuesday.

Better step up to the plate, Brazil.

KLR -- If Petrobras can come up with a healthy budget they might be trying to do just that next year. Just read a story that the DW drilling rig contractors are looking at a potential glut of their rigs next year as more new ones are about to be launched. Lower rig rates will make those Brazil bucks go that much farther.

I drilled 4 horizontal wells in reservoirs that were already producing but slowly. The new wells bumped company wide production up to 50 million cf/d. Stock went from $.50 to $3.00 per share. But we didn't add one cf of reserves...it was NG that was going to be produced anyway but just take a lot longer

Thanks for the info Rockman...really great.

I have heard many times that one reason we have been able to increase oil production(worldwide) is because the technology has gotten better at getting the oil out of the ground faster even though we haven't grown reserves. It seems like the more profitable production that's occuring now is pulling future production to the frontside of the PO bell curve. This is one reason I think the decline curves could be much worse than anyone anticipates.


Rockman wrote:

I drilled 4 horizontal wells in reservoirs that were already producing but slowly. The new wells bumped company wide production up to 50 million cf/d. Stock went from $.50 to $3.00 per share. But we didn't add one cf of reserves...it was NG that was going to be produced anyway but just take a lot longer.

I think this is what's happening in oil patches around the world. I know it is happening in Russia for they have admitted as much:

Russian organic decline in production is close to 19%. To compensate for that organic decline, Russia drills somewhere between 5,000 and 6,000 wells every year.
Alex Burgansky: Russian Oil and Gas Industry Surprises Analysts

And in Saudi Arabia:

Without “maintain potential” drilling to make up for production, Saudi oil fields would have a natural decline rate of a hypothetical 8%. As Saudi Aramco has an extensive drilling program with a budget running in the billions of dollars, this decline is mitigated to a number close to 2%. Saudi Arabia’s Strategic Energy Initiative: Safeguarding Against Supply Disruptions

So all they are doing is pulling the oil out a lot faster. They are using Superstraws To keep the decline rate down but they are dramatically increasing their depletion rate. What this means is that when they do hit that inevitable decline cliff all hell is going to break loose.

Ron P.

Thanks, Ron.

re: "What this means is that when they do hit that inevitable decline cliff all hell is going to break loose."

This warrants it's own article (IMVVHO). If it hasn't already been done.

So all they are doing is pulling the oil out a lot faster. They are using Superstraws To keep the decline rate down but they are dramatically increasing their depletion rate. What this means is that when they do hit that inevitable decline cliff all hell is going to break loose.

Wouldn't one expect then that most 'past peak' countries are showing a decline cliff ?

As I understand it, one does not want to drill from Off shore platforms while they are producing.

The economics are not there to build a second platform, and off shore fields are developed for quick depletion, not maximum oil production anyway.

So this in-field drilling appears to be more an on-shore thing.

Best Hopes for getting my facts straight,


Alan -- We can drill from a platform while still producing. It depends on the platform design and the type of rig used. There are cantilever jackups that can set up next to a platform and slide the drilling derrick over the platform drilling slots. But you're correct in that many operators take the safer route and shut the platform in while drilling. But this can lead to other problems. Older producing wells often don't return to their former prducing rate after they've been shut in for an extended period. Can turn into something of "damned if you...damned if you don't" situation.

Han -- I think it's difficult to make such a general statement. Superstraws can have a dramatic impact in a field but in the fast majority of past peak countries there are limited opportunities. The US, for example, is the third largest oil producers in the world. And we've used Superstraws in a number of fields/plays. But the bulk of US production still comes from wells making less then 20 bopd. Thus on an individual field rate we might see a true cliff but on total US production rate it could be invisible.

But I also don't think the balance of the global decline rate will have as low a slope as the US history. Our small independents keep these low rate oil wells going. That's not the case in most of the world. Superstraws may produce a steeper decline in certain big fields globally but it may be difficult to see due to a slower decline rate of heritage production. Very difficult to come up with numbers that can allow us to guage the impact

I think it's difficult to make such a general statement. Superstraws can have a dramatic impact in a field but in the fast majority of past peak countries there are limited opportunities.

ROCKMAN, I understand. Though IIRC it was Darwinian who wrote a few weeks ago that the 'modern' techniques are used in a lot of countries for many decades allready. Probably those countries have (had) still a lot of relatively small fields to put on stream, so that a rapid decline could (can) be prevented.

But I also don't think the balance of the global decline rate will have as low a slope as the US history.

Because of the following fact (which doesn't exist in most other countries):

The bulk of US production still comes from wells making less then 20 bopd. Thus on an individual field rate we might see a true cliff but on total US production rate it could be invisible.

A "Golden Oldie" from 2004:


The Royal Dutch/Shell Group's oil production in Oman has been declining for years, belying the company's optimistic reports and raising doubts about a vital question in the Middle East: whether new technology can extend the life of huge but mature oil fields.

Internal company documents and technical papers show that the Yibal field, Oman's largest, began to decline rapidly in 1997. Yet Sir Philip Watts, Shell's former chairman, said in an upbeat public report in 2000 that ''major advances in drilling'' were enabling the company ''to extract more from such mature fields.'' The internal Shell documents suggest that the figure for proven oil reserves in Oman was mistakenly increased in 2000, resulting in a 40 percent overstatement.

Some might recall memmel talking about declines with a "shark-fin" type profile; I recently happened to come across his original utilization of this term from a couple of years ago, in an article of Staniford's, one that I recall well, where he speculated on an acceleration in "base decline."

This article has a graph of the White Rose field's output, with a gradual buildup, plateau, steep decline. Extrapolating that to the world decline rate post-peak may be jumping the gun, but we certainly have firm evidence of this with offshore, and who's to say what's going on onshore in OPEC nations; IEA assures us the declines are quite gentle, but they're just middlemen with no means of auditing this information.

You're welcome Don. And such operations were standard long before horizontal wells came into the game. They are generally called "acceleration wells" and are drilled for a variety of reasons. You might be getting drained by an offset operator so you drill to get your share. You might recover the same reserves over time but by drilling additional wells you improve you NPV. The key is what it costs to do so. There was a time in Texas when an operator competing with another company might produce their wells as fast as possible. But this often led to decreased ult recovery. So rules ("allowables")were established to prevent this. Thus the only option a company might have is to drill additional wells to increase total production.

To a degree the upswing in shale gas drilling was based upon the same acceleration principle. There are wells in the eastern US that have been producing for over 50 years. They might net only $50/day but they do that every day seemingly forever. In addition to reaching areas in a SG reservoir that might not be drained by a vert well, the horizontal wells also add value via the acceleration effect. But at a cost that wasn't sustainable when NG prices fell last year.

You might be getting drained by an offset operator so you drill to get your share.

Drainage! Drainage, Eli, you boy. Drained dry. I'm so sorry. Here, if you have a milkshake, and I have a milkshake, and I have a straw. There it is, that's a straw, you see? You watching? And my straw reaches acroooooooss the room, and starts to drink your milkshake...


[sucking sound]


- Daniel Plainview (as played by Daniel Day-Lewis) in "There Will Be Blood"

LOL Jerry. I have the dvd sitting on my desk as I type. A rather odd movie IMO but intertaining. And I did long ago watch from afar as they removed the bodies of two hands from a celler. NG got them...not a piece of equipment.

You said that the NPV discount rate for gas wells is 10-15% because of the chance of drilling dry wells. But with shale gas my understanding from comments from the gas companies and comments on TOD is that the chance of drilling a dry shale gas well is incredibly small. Wouldn't that mean that shale gas wells would have a dramatically smaller discount rate?

That's a good point Dax. While the profitability of various SG wells can vary greatly in a trend you don't often drill a well that doesn't make some money. Not a hard rule but most companies stick with the same DR regardless of the project. But I suspect as NG prices dropped some companies started lowering their DR to make the projects look better on paper. But I've also seen one company not change the evaluation parameters but still drill wells that didn't look too viable.

At the risk of being crude (pun intended), the process sometimes can appear similar to a drunk guy in a bar at closing: every women still in the bar looks beautiful.

Starving polar bears turn to cannibalism

New pictures show that polar bears are beginning to cannibalise each other as global warming destroys their hunting grounds.

The images, taken in Hudson Bay, Canada, around 200 miles north of the town of Churchill, Manitoba, show a male polar bear carrying the bloodied head of a polar bear cub it has killed for food.

Polar bears usually subsist on seals, which they hunt from a platform of sea ice. But the melting of sea ice as a result of rising global temperatures has made it more difficult for polar bears to hunt seals at sea, confining the bears to land.

Barrett -- I was lucky enought to ride out onto the tundra at Churchill and observe the PB's directly. Really great experience. Most folks don't realize that the PB's are on a starvation diet during the summer. They need to hunt seals on the ice in the winter time to survive. That's why the PB's migrate thru Churchill...it's the first spot to ice over. Lose the ice and you'll lose a lot of PB's.

OTOH, the male PB's will kill cubs at any opportunity. By killing the cubs in brings the females back into heat. With lose of winter habitat they just have another incentive.

Lose the ice and you'll lose a lot of PB's.

Couldn't agree more, Rockman. Thanks for the first-hand account.

You're welcome Barrett. Been thinking more about the folks in Churchill. Some PB's wander right thru town. That's why there's an "open door" policy there: if you confront a PB in town you're allowed to run into anyone's house. The repeat offending PB are darted and put into PB jail. Got to see them chopper out a mom and her cub to a distant location.

But I wonder if the starvation factor will run the risk up significantly for the town folk. The town is very dependent upon the PB for economic survival. When the grain export biz died there it almost took the town with it. PB tourism is the only biz for Churchill. That's the main reason they stopped shooting the PB's that wandered into town. Life doesn't need to getting anymore difficult for the PB.

The bears have absolutely no fear of man. I got to stare down into the little black eyes of one from about 5' way. And you can easily tell that they see you as nothing more then an easy meal...if they can reach you. A starving PB has to be the most dangerous animal in N. America. Except for man, of course.

I got to stare down into the little black eyes of one from about 5' way.

Wow, what an experience! Glad you were safely separated.

I too have been to Churchill and all you say is true. My daughter was there last spring to show a school play she was in at the local school. Unfortunately the train is so un-reliable that they did not get there until well after the play was scheduled to start. They went to the museum and then went home.

Polar bears (males) have always eaten their young but I think the issue this year has been the late freeze-up. This has led to males and females with cubs being in close proximity for longer than other years.

The town of Churchill still burns diesel fuel for electric generation.

sorry. the town of churchill is connected to a 138kv line run up from Gillam which is where a significant part of our hydraulic generation is located. i have patrolled that line. the diesel generator is only a backup. and they pay the same rates as anyone else in manitoba.

$0.06 per kwh. really cheap!

When did that go in? Not very long ago. I did a cursory look on the trusty in-ter-net as a check but found nothing.

I has been years since I was up there myself. It is about time they put a line in.

it was energized april 1987. 270 km long and 3 winters to complete. i had no part in the construction thank my lucky stars. it would have been "interesting".

You know what - I remember now. It had something to do with the development of a commercial satellite launching facility that "never got off the ground". Actuate Aerospace rings a bell. I met a lady named Mullen up there who had something to do with it.


Several hundred km to the nearest hydroelectric dam (several large ones on the Nelson River). Not enough people to warrant the expense apparently.



Male polar bears, like males of other ursids, will kill and eat dependent cubs (Hansson and Thomassen 1983; Larsen 1985; Taylor et al. 1985; Derocher and Wiig 1999). Although this activity does not account for a large percentage of the mortality, it is a curious cause of death in young bears.

Great link, ceiii2000, thanks!

Cannibalism in Hudson Bay Bears

December 7, 2009 - Freeze-up ran weeks late this year on Hudson Bay, and the polar bears that gather near Churchill to wait for the ice to form showed signs of stress.

"Research shows that the average body condition of the Western Hudson Bay polar bears has been declining for almost 30 years," says Dr. Andrew Derocher, a leading polar bear scientist who serves on PBI's Advisory Council. "If they're forced to wait until December to return to the sea ice this continues to take a toll on the bears as they burn one kilowatt of stored body fat every day they're not hunting."

Scientists believe that the decline in body condition and this year's late freeze-up may have contributed to this year's higher-than-normal observations of cannibalism of cubs by adult males in the Western Hudson Bay population. Manitoba Conservation has confirmed four cases of cannibalism this year and are investigating four others. In a typical year, there are one or no cub deaths by male bears.

“The weight of evidence is that cannibalism and infanticide has been uncommon in Churchill,” says Derocher. “It certainly wasn't this year. It's an unusual event that should be reported.”

I expect to see Arizonans doing the same thing in a few years, maybe less time. That's why I got the hell back to California. Sure we may see that in some areas in CA, but we can sustain 10% of our population after the big dieoff/killoff. AZ can support maybe 1%.

Burning biomass to produce electricity

Here is a program from Interlochen Public Radio that includes a discussion about burning biomass to produce electricity. It includes interviews with Jeff Gibbs (one of Michael Moore's film production crew) and Randy Udall who are on opposite sides of this issue.


The biomass burning debate has come up in several forms in Australia. The latest is the fact that bagasse burning power stations in sugar cane growing areas can't sell the credits they need to be financially viable

Another whacky idea is to increase burning of Northern Territory savannah which supposedly improves soil carbon uptake. Yet another is to co-fire biomass with coal to get carbon credits. I suggest the bureaucrats attending the Copenhagen love-in as we speak are simply not hard headed enough to run carbon reduction schemes.

Link up top: Mexico hedges 230 mln bls oil exports for 2010

The volume hedged represents nearly all of Mexico's anticipated net oil exports, according to Reuters calculations.

Mexico, through October 2009, has averaged 1.22 million barrels per day exports of crude oil. 230 million barrels for the year is .63 million barrels per day, or just a tad over half this year's average exports. If they expect to export only half of what they did this year then they are either expecting a huge drop in production or a huge increase in domestic consumption. Or perhaps a combination of both.

Ron P.

Ron -- Did they give any details on the hedge price? Just a WAG but I wonder if the bankers force them into a big hedged position. I had a banker do the same to me once. Cost us some profit but the banker wanted to make sure his payments were guarenteed. And if the banker wasn't happy we weren't happy. Just had to grin and bare it.

Carstens said part of the hedge was locked in at $57 a barrel. A statement released by the government said the hedge used a put option strategy, which guarantees Mexico a base price but does not lock it into selling its oil at the hedged price level.

That doesn't tell me much but it seems like a dumb strategy.

Ron P.

Thanks Ron. Not sure but doesn't sound smart to me either. Again, it might have been forced upon them by the IMF or some other banker.


From my perspective if Mexico was forced to take this position then its perhaps not what it seems.

By forcing a producer to take this position that also effectively only able to sell to on Market its the consumer who wins big as if oil prices go a lot higher they have a locked in supply at pretty cheap price. This should at least in principle depress the price of crude. Of course one has to wonder or not who is on the other side of this trade.

Of course my claims that the US is trying right now to use the strategy of price controls has been roundly discredited so no way can this interesting tidbit be used to support such a claim :)

And of course they did it before right at the peak price and actually came out ok.

For a whole host of reason this time around I suspect the game is different.

Looking forward given the rate of decline of Mexican net export one has to wonder if they can even ship enough physical oil to be a market maker. I'm not sure but its certainly not clear. Next of course if there eventually is not enough oil then there is simply not enough oil no financial game can change the facts.
Certainly some of the players can make a lot of money and some can lose a lot but you still don't have any oil.

Commodity markets are not stock markets or other speculative markets in the end regardless of who the winners and losers are someone is paying for a real barrel of oil at a certain price in competition for other buyers for that same barrel.

Personally I think that the oft quoted number of 75 dollars a barrel being the new fair price for oil is a big mistake and attempt to defend this price point now will eventually result in a lot more pain down the road and in my opinion not all that far down.

All I can say is its a bit sad that moves which are easily construed as and obvious attempt to get a certain price point are probably not allowed as evidence by the pundits. Ohh well. On a different issue the Brent Crude market is very very interesting and seldom talked about despite its importance. I've found the WTI/Brent USD/Euro crosses and couplings fascinating.

Your posts are my favorite on the oil drum these days because of your terrific insights into the oil biz and your lucid prose.


"Grin and bare it" is what strippers do. ;>)

The block quote says "net exports" and your data says "exports," so maybe we're not looking at a dramatic dropoff. What is Mexico's current net exports per day?

I estimate Mexico's 2009 annual net exports at about 0.84 mbpd (assuming no change in consumption), versus 1.06 mbpd for 2008 and 1.85 mbpd for 2004 (EIA).

2010 ????

See my post above I think its dropping to the point that moves by Mexico simply won't have the market impact they used to have.

As westexas has pointed out innumerable times, once you start down the slippery path of net export decline you don't have much time left as an exporter. The pincer action of declining production and increased consumption has historically proven to be unrelenting:

From the Energy Export Databrowser:

Mexico's exports decreased by 22% from 2007 to 2008. And we know Cantarell is rapidly depleting.

Just eyeballing this chart one would expect almost a 50% decline in exports for 2009 relative to 2008.

For similar situations in the developing world check out the graphs for Indonesia, Malaysia or Egypt.

Energy use in the developing world is not responsive to declines in domestic production.

-- Jon

David Shields expects the overall production decline rate to moderate somewhat. I based the 0.84 mbpd net export number on the Pemex total liquids production through October, 2009, and it does look like the 2009 production decline rate will be somewhat less than the 2008 decline rate.

and it does look like the 2009 production decline rate will be somewhat less than the 2008 decline rate.

and it does look like the reported 2009 production decline rate will be somewhat less than the 2008 decline rate.

There fixed it for ya :)

David Shields says Mexico should forget about building new refineries - because, well, there just won't be any domestic oil for them.

December 4, 2009

Mexico: Energy Industry Analyst Comments on Need for 'Real Oil Reform'
Commentary by energy industry analyst David Shields : Calderon and Pemex

Mexico's most serious problem in public finances is that it is running out of petroleum, President Felipe Calderon says time and time again. And it is running out because energy reform was not done in time, when it should have been done 10 or 20 years.

Many people ask: Are we really running out of crude oil?Because, according to Nobel Prize winner Mario Molina, the air will run outbefore oil does. But it's true - and this is what Calderon is referring to -that we are running out of easily and cheaply exploitable oil in known oilfields, not only in Mexico but around the world. Nevertheless, there must beother oil fields, on land and at sea, in unexplored areas and at greaterdepths.

Calderon asserts that the oil production volume will bestabilized in 2010. But that looks impossible. In Mexico, 75% of crude oilproduction is obtained from oil fields in their decline phase. There are no other fields to replace them. Cantarell continues to decline, Chicontepec is not productive enough, and Ku-Maloob-Zaap will begin to decline in two or threeyears.

Calderon says that he will present a second generation of Pemex reforms, but he has not yet said what those reforms are. The official discourse implies that the president may reintroduce elements of last year's initiative that the Congress did not include, particularly opening up construction and the operation of refineries and pipelines to the privatesector.

Just like his archrival AMLO [Andres Manuel Lopez Obrador],Calderon has said that Mexico needs three (or several) new refineries. But while AMLO prefers to ignore Pemex's lack of execution capacity to build them,Calderon does not want to acknowledge international companies' lack of interest in investing in refining in a country where they cannot produce oil. Perhaps we do need them, but we would not have enough crude oil for those new refineries. So, if the "second generation" of reforms just reintroduces theproposal to allow private investment in refining, but not in exploration and production, it would be better for Calderon not to propose anything and to devote himself to other issues.


More details in this article:

Mexico Has Hedged Oil for 2010 at $57 a Barrel

Bloomberg) -- Mexico spent $1.172 billion to buy oil hedges for 2010, covering a possible revenue shortfall if production falls for the sixth straight year and prices don’t recover from about a five-year low.

Mexico purchased put options that give it the option, not the obligation, to sell its oil for $57 a barrel next year, the Finance Ministry said in an e-mail statement today.

“We want this as an insurance policy,” Finance Minister Agustin Carstens said in New York today. “If we don’t collect any resources from this transaction it’s OK because that means oil would have been above $57 a barrel.”

San Francisco's thoughts about converting Lincoln golf course into a community food garden could be copied throughout the nation with benefit. Considering the prodigious waste of water by golf courses, a properly managed garden might even reduce water demand

I'm tempted to do my best totoneila impersonation here...

Recall my earlier postings on Tiger Woods' new line of titanium farm tools...
Have you hugged your bag of NPKS today?...

No, it's not the same.

Where is Toto, by the way. He used to be here daily,but I haven't seen his posts for a month or so. Hope he is OK.

Antoinetta III

A lot of us are worried about him, Gilroy CA is a pretty chill town to be homeless in, apparently. There's cold-weather shelter at the Armory, I know of several squattable houses around here, a couple of soup kitchens that are pretty good, you may not eat at 'em every day but you stuff yourself when you do eat most of the week and you'll do OK. Panhandling with a sign at road intersections is done up by the Wal-Mart and the Goodwill, and with some success, but some cop troubles, at I-101 and 152 East. "Walking" type panhandling is hard to measure, hard to detect, which is why I did it, no reason to think it'd not bring in essentials in this town. There are also some regular panhandlers by the Nob Hill and Safeway, they're territorial but no real threat, even I could beat 'em up so he could become a regular there with no problems. We had a guitar player who was a good blues singer, a black guy, and the damn regulars ran him off, I'm still pissed off at 'em for that. If Toto can sing/play he could do that, and I'll help him against the regulars. If toto's large and strong, good with his fists, he can try day-labor by the Home Depot too he'll just have to beat up Jose Immigrant to be allowed to stay and wait, sad to say. My understanding is he's living in a van, I can offer a place to park it behind an antique store owned by some friends, and if I meet Toto and verify he's not dangerous, I should be able to offer him some time to rest and recoup here at the doomstead.

It's a rat-race being homeless up on the Peninsula and in SF because there are so many others. Homeless down here tell me this town's an unrecognized treasure for the homeless.

I did a bit of searching for info on Bob, Google searching for Bob Shaw Phoenix totoneila. On some Yahoo! group called "Alas Babylon" he gave his full name as Robert N. Shaw. Have checked AZ obits to see if his name came up but nothing. Hope he's just off running IQ tests on yeast!

I'm in San Francisco, and am closely tied to the low-incoming housing scene, both local government funded as well as private. I'm also closely connected to the people in city government/non-profit departments and agencies that help people get some basic income, housing and health care. I don't know if Toto has any (non-panhandling) income at all, but if he doesn't, or it is minimal or under the table, and he is willing to come to SF, I could likely get him set up for Social Security and some basic housing.

Does anyone here have any communication with him? If he's interested I can be contacted at 1415-552-4803. Since I have three highly energetic cats, when I leave for more than an hour or so, I yank the main power line (so the cats don't start a fire by knocking over a light) so if there is no answer and no tape-message, it just means I am not in, not that the phone number isn't working; you'll just have to try calling again later.

Antoinetta III

I think he lives in Phoenix.

Likely the place they filmed 'The Road'? Just kidding. They filmed it in Gilroy.
Land of Garlic. I went there once. All I saw was garlic. I was participating in a tech conferernce at IBM's Almaden Research Facility and needed a break.


This is the land of milk and honey.

Walnuts litter the road, mainly Black but a fair amount of English too. Crops such as corn, onions, yes garlic, peppers, various table greens, etc are all over. Acorns for the harvesting, of all varieties, again they litter the ground right now. Chanterelles, other mushrooms. Crawdads in the ponds and bass galore in the ponds further into the mountains. Pigeons and doves on the wing. Grasses and amaranth.

We have sheep and chickens, about to get 20 geese, if things get tough there are dogs, cats, jays, finches, possums (yuk!) and coons.

I am here because things grow. In the great dieoff/killoff, I hope to be one of the last ones standing and will be able to garden/farm and have a good life.

I've not seen the movie The Road but have read the book, the scenes in the book remind me of maybe the "Inland Empire" in summer in SoCal, and the characters moving out to to coast. Very barren. This area is not that at all.

The key thing is, a person can live and survive here and has a better chance in the coming battles than in most places.

Toto would be welcome to rest and recharge here, I'd want to meet him at a neutral location first just to make sure he's not a meth-head, loony, etc. We have a rule: NO DRAMA. But I have a feeling he'd pass the screening and he could get some meat on his bones and recovered from his ordeals. Ideally he could end up with the same situation as I have, I'm a healthy responsible body who looks out for the Doomstead for its warlord, to whom I have pledged fealty in exchange for the 4 essentials, I stay Safe, Warm, Dry, and Fed. There are landowners (nascent warlords) in this area who likewise, would like a responsible person to help hold down the fort. It's not generally hard work, it just takes doing the odd little things that need doing, being responsible, etc.

If Toto is old enough he may already have SS. I also dunno if he's still got a van to live in. If some form of communication can be rigged up to contact him, and if he's in dire straits, I'll sponsor him. I'll ask for a bus ticket out here for him for my Christmas present. Or, maybe we can get up a fund to get him out here. I'll make up a sign and do the freeway median thing to contribute. It's worth it to save a life.

Since when has Toto been homeless?

He wasn't, last I heard. He was renting a room in someone's house, I believe. Not sure if people are assuming he's homeless because he hasn't posted here in a month, or if they have news from other sources.

I briefly meet Robert Newell Shaw in Phoenix while visiting family there. I have some old contact information that I will pursue.

Fleam, he will not be a problem, except maybe for talking too much :-)

Best Hopes,


OK it looks like I will NOT be able to invite him here, nor can I let him know about this location at all, but if he can make it to Gilroy, CA, I can help him on the sly. I can ask my antique-store friends if he can park his van (if he has a van) behind their store, help him find the soup kitchens and times they are serving, etc. Any cash I am able to help him with, well, I'll need to make a sign and stand out by the freeway median but I'll do what I can.

Basically the mission here is:

(1) Find out where he is
(2) Find out how close to death from starvation and exposure he is
(3) IF he is close to death, figure out where he can go for refuge.
(4) Get him to that site of refuge.

I think Gilroy, CA is better than Cascadia due to being less rainy and cold, our winters are cruel but less cruel. We seem to have a relatively low homeless to services ratio, there are squattable places, good panhandling locations, enough soup kitchens to keep a guy from starving, a cold-weather shelter, etc. His chances of survival may be better here than fighting 100 meth-addled homeless for a bowl of soup in Phoenix, or standing in a line 2,000 men strong for a crust of bread in Portland.

I can NOT, it turns out, offer him shelter here or reveal the location of this Doomstead. But I am sure as hell willing to help him find a place to hide in, and learn the layout of, this town. I won't let a soul around here know I'm helping him, I'll help him just find a place to stay out of the weather, dandy abandoned buildings downtown and houses, as mentioned an active Salvation Army and Catholic Church running homeless programs, a medical bus I may use myself (I really need to have a tetanus booster) and so on.

But first firsty-first, we need to find out WHERE he is and HOW he is.

Does he need to "hide" from officialdom for some reason? If he has to and as well he has no income, there's probably not a whole lot I can do. If he has to hide, but can manage $550 in rent, I can get him quietly housed in a privately run SRO Hotel, like I live in myself, indeed, I could get him set up in my own building. If he doesn't have to hide, and has no income, I can probably get him at least a minimal income stream and a place in one of the city's affordable housing programmes.

Of course, that means he would have to be willing to live in San Francisco.

Antoinetta III

$550 a month can be done panhandling, I've done it. And that was to just rent a COUCH.

In my own case I'm hoping to, along with becoming an EMT, come up with some sort of street act or hustle that's NOT panhandling, that I can go anywhere with and not starve.

In my blog I'm about to do a run-down on what I've tried so far. I've had some success with some things. Right now, well, my income has hit bottom with a thud. I'll likely get along on very little until mid-March when it warms up again.

In general %500 a month will get a person a room. Once you have that, you can scrounge/beg/etc a bit more, visit the soup kitchens and keep fed, visit clothes banks etc. You can live.

Hi Alan,

Thanks. I'm glad you'll take on the job of checking up on Bob.

My impression was that he's a caretaker for his Mom. So, perhaps something is going on with her that is taking up more time.

In any case, it seems many here are willing to offer help(s) of various sorts. So, look forward to your "report back."

Someone said his mother had passed away last year, but I haven't seen any confirmation of that, and don't recall him saying so here.

He has disappeared for weeks at a time before. When he broke up with his girlfriend, IIRC.

I've been trying to quantify smoking risks versus Vitamin D deficiency risks, and I found some numbers.

Based on the two following studies:

(1)   A male smoker aged 40, is 71% more likely to die than a non-smoker, at that age. 

(2)  People who have low levels of Vitamin D (less than 15 ng/mL) are 77% more likely to die than those who have greater than the recommended minimum level of Vitamin D (30 ng/mL), using the 25(OH)D test.   

My doc has found that 90% of her patients, here in Texas, are Vitamin D deficient, and note that over the age of 40 we lose the majority of our ability to synthesize Vitamin D from sunlight. 

More Vitamin D stuff at www.vitamindcouncil.org

Study #1: Smokers loose six years to cigarettes


The study found that male smokers aged 60 have about a 106 in 10,000 chance of dying that year, while the chance of a non-smoking man of the same age is 48 in 10,000.

A 60-year-old female smoker has an estimated 85 in 10,000 chance of death at that age, while the figure drops to 35 for non-smokers.

For younger people, the differences are less pronounced. A male smoker aged 40 has an estimated 12 in 10,000 chance of dying that year, in comparison to a 7 in 10,000 likelihood for a non-smoker.

Figures for 40-year-old females reveal there is an 8 in 10,000 chance of death that year for smokers, or a 5 in 10,000 for non-smokers.

Study #2: More Vitamin D Studies of Interest


Dr. Tami Bair and Dr. Heidi May, of the Intermountain Medical Center in Utah, report yet another study showing that your risk of heart attack, stroke, congestive heart failure, and death are dramatically increased by Vitamin D deficiency. In a presentation at the American heart Association meeting, they found that people with low levels (<15 ng/mL) had a 45% increased risk for cardiovascular disease, 78% greater risk of stroke, and double the risk for congestive heart failure — not to mention a 77% increased risk of death — compared to people with Vitamin D levels >30 ng/mL. All that disease and death occurred in only 13 months of follow up for the 27,000 people in the study.

So how many Americans died this last year from Vitamin D deficiency? Ten thousand? A hundred thousand? More? How many will die next year? Someone is responsible. Medical scientists who want more money before recommending that Vitamin D deficiency be treated have to assume responsibility. I am all for more studies but we have to act now, like we did with cigarettes. Remember, no human randomized controlled trials exist showing cigarettes are dangerous, so we have much more — and better — science than we did when we warned about smoking. If we fail to act on the dangers of Vitamin D deficiency, someone will end up with blood on their hands.

WT -- "(2) People who have low levels of Vitamin D (less than 15 ng/mL) are 77% more likely to die than those who have greater than the recommended minimum level of Vitamin D (30 ng/mL), using the 25(OH)D test."

Are you sure about that? I think the probability of death in both groups is the same: 100%.

(Sorry TOD...I hate to miss a chance to tease WT)

Off thread.

Nate -- When I opened your message at my aol addy it just evaporated...don't know how else to describe what happened. Please resend.

I guess we are all like the Turkey who expected Thanksgiving to be like all previous days.

I started to add, "In a given year," to the Vitamin D stat, but the quoted article wasn't clear about the time frame, where as the smoking article was, but in any case I suspect that what they meant was "In a given year," although I suspect that the numbers varied by age group, like the smoking study. There is one school of thought that our failing ability, as we age, to synthesize Vitamin D is one of Mother Nature's primary ways of getting rid of us once we are past peak reproductive years.

WT -- I needed to tease you for a little cheer...think I'm heading out to log a duster in the primary tonight...mud log doesn't look good. maybe a little oil salvage uphole in the secondary. Fingers and toes crossed.

And thanks to all the good folks at TOD I started my Vit D program a couple of weeks ago. About the only sun I get these days is moving from the car to the house. Sun isn't even up when I get to work.

Just wondering, what on Earth does Vitamin D have to do with our energy/oil predicament. Seems like this stuff should be on some diet blog.

Antoinetta III

Nothing, other than people who like to think critically and are used to seeing the world from a different angle often have varied interests. Enjoy the opportunity to follow some interesting tangents - it won't last forever.

Energy, economy and environment including health and food choices .... and even getting enough Vitamin D are all, IMHO, interrelated.

This SCIAM article on the Greenhouse Hamburger is a case in point. http://www.vegetarisme.be/download/interndocs/milieu/klimaat/scientific%...

Long term posters that have made significant contributions (such as Westexas) are allowed more latitude. Quite frankly many of us here "know" each other (and respect each other).

So some digressions are allowed on Drumbeat that might not be allowed to someone that registered last week.

Best Hopes for Diverse Knowledge :-)


I consider food, nutrition, and health to be on-topic. If it gets tedious, I'll drop the hammer down, but I don't think the vitamin D discussion has gotten there yet.

WT, it's not the vitamin D I worry about, it's the fluoride contaminating my PRECIOUS BODILY FLUIDS!!!!!!

That's why I only drink rainwater and grain alcohol.

I rarely drink 'pure' water.

I am always find it likely suspect so I render it potable with good Kentucky Sour Mash Bourbon. Or failing that some cheap Edradour scotch.

Works for me.
Sometimes I throw a root of ginseng in the bottle to render it medicinal.

Airdale-I know this is BS but I do have a nice bottle of Edradour right above my PC. As well as four bottle of Evan Williams and Four Roses. I once lived one mile from the distillery that made Four Roses. (the Old Joe distillery in Lawrenceburg,Ky.)

Re: The Myth of Clean Coal: Analysis, up top.

For those who may have missed it, Mark Fiore has one out on clean coal.


Click on the clean coal video to the right.

Clean coal technology is being perfected by the Oxymoron Energy Corporation as we speak.

The "elephant" article is quite excellent. I'll have to get the Speth book referenced in the article. One of my favorite passages:

"The gains from technology may make us more efficient, for sure. But to resolve the problem, they actually need to detach economic growth from energy growth. This is the distinction between what the experts call "relative" decoupling (greater efficiency) from "absolute" decoupling (energy-free economic growth).

This is a critical distinction, because if we can only achieve relative, but not absolute, decoupling, then as the economy grows, it will eventually catch up and surpass the gains made by efficiency. As the years go by, it will become more and more difficult (and costly) to squeeze still more efficiency gains out of a limited supply.

Take cars, for example. We can increase fuel economy, and we can shift to hybrid electrics. And we can use our oil more wisely, stick up a million windmills, and dam another 100,000 rivers. And we can grow, slowly steadily, year by year. And then we will have more and more cars everywhere, and the oil is still going to run out, and there will be no more rivers left to dam, and no new places to take advantage of the wind. Then what?

Like Obama in Afghanistan, we should ask, "Where is the 'exit strategy'? And when?" And what will the world look like when we face up to that inevitable exit?

People rightly decry the Tar Sands proposals, for it is an egregious example. But is not Copenhagen premised on a Tar Sands strategy writ large? Growth needs energy, and energy has costs.

Copenhagen's most basic contradiction

Let me give you another example. The Mekong River system in SE Asia is one of the world's last great wild rivers. It is hugely biodiverse, and its abundant fisheries support millions of communal inhabitants. But to provide power for Bangkok, fuel industrial development and generate cash for the region's "emerging" economies, the Mekong is slated for 55 dams. This modernization is partly funded by, you guessed it, the Kyoto Clean Development Mechanism! Driven by organizations like the World Bank and the IMF, no critical discussion is allowed in the region. It's just full steam ahead.

This is Copenhagen's most basic contradiction. Growth may keep the economic world stable, but in the now "full" world that we occupy (for the first time in human history), growth causes more problems than it solves. Growth has become self-defeating. As a recent British government report put it:

"[S]implistic assumptions that capitalism's propensity for efficiency will allow us to stabilize the climate and protect against resource scarcity are nothing short of delusional. Those who promote decoupling as an escape route for the dilemma of growth need to take a closer look at the historical evidence -- and at the basic arithmetic of growth.""

Very interesting dohboi...thanks. I can immediately see the distinction between relative and absolute with respect to the oil/NG business. We've gotten so much better at finding what oil/NG is left that we're running out of places to look. Had we been using 1975 technology to find the oil/NG we did last year it would have taken several times as many wells and much more then a year. International is not my area but I think we've just about gotten all the technolgy to explore all the remainign areas on the globe. The Arctic is probably the last major froniter to be conquered. Eventually new technologies will be of minimal value IMHO. Doesn't matter how good you are at exploring if there's few places left to explore.

dam another 100,000 rivers ... and there will be no more rivers left to dam

Indeed, damming hasn't worked out too well for SE Australia:

Indeed,Barrett808.Damming has all but destroyed many Australian streams,particularly the ones that drain into the predominantly flat inland of the continent.The flood plains are a vital part of these river systems and they are destroyed,in the main, by dammming.It can take quite a few years but prolonged drought can acelerate the process.

Excellent post and very good points. I am reminded of Ray Anderson and Interface Carpet who says that in order for a system to be truly sustainable it's footprint on the earth needs to be zero. The damming of the Mekong would be a great tragedy. When I was in Engineering school (Mechanical) we were forced kicking and screaming and under threat of not graduating to take a course in the humanities faculty on "Ecology". We made fun or the professor and his long cigarillos, mocked the subject matter, pretended to take notes, bulled our way through the quizzes and at the end chose a final project we thought would be easy. I am from northern Manitoba as my posts above might indicate and chose for a topic the development of the Nelson River expecting to show this fella the error of his ways. There are plusses and minuses to any project and cheap endless power would out weigh the minus - I was sure I could demonstrate that. (this was in early 1990s)

I wish I still had that report because I poured through transcripts and read opinions from the 1970s on the topic and could find very little in support of the project. The Churchill river was dammed to raise the level of south Indian lake. The Ratt river made to flow in the reverse direction, and the excess flow diverted to the Nelson via the Burntwood. Several large canals were dug at the top of Lake Winnipeg.

The descriptions of the land lost by the people who lived there were heart wrenching - first hand transcripts of people now dead - technical arguments against, fisheries destroyed, vast acres of rotting trees. People in Winnipeg still all think it's great and - hey, only a few people live there who cares right? The research led me to destroyed fisheries, Tom Lamb's mink ranch (On a different flood plain but still Manitoba Hydro) that had over 5000 mink and employed many aboriginal people. Flooded. Gone. Tom is dead now. South Indian Lake must have been an amazing place but the fish are mercury laden even today. One year after flooding thier fisher was closed and the entire community was on Welfare. Go to Leaf Rapids and work in the mine.

I have to say it all really made me think. Certainly changed my outlook. Even if it is taking a while to sink in. It is still sinking in.

We go after these mega projects for wealth but there is no long term wealth. The complex society of community and people is wrecked along with the possibility of long term wealth. I'm talking "laws of thermodynamic wealth" - things that need to be fed, repaired, prevented from rusting, bought and sold. Not the mathematic wealth that seems to have screwed us completely.....

But then again - where else would the electricity come from?

We could be in very big trouble.


Big Oil Worries About The Next Boom

This is interesting for several reasons. First, that oil companies expect a surge in demand when the global economy recovers. Second, that they're not worried about Peak Oil--the pessimist dogma that oil fields have been run down so much that supply growth will soon be impossible. (Says Rostand, "There's enough resources to provide the oil that the world will need for many years to come.") Rather the worry is that oil and gas companies, Schlumberger included, that cut hundreds of staff when prices plunged, won't have enough hands on deck to develop new resources fast enough when demand growth returns.

The gist of this story is that they are not one bit worried about peak oil, they are worried that they will not have enough trained people to help extract and refine all that oil.

They talk as if there will be a glut of oil but a scarcity of people.

Ron P.

Or they know they will have to drill and drill and drill to get the same output ---> need a bunch of people.

RE: Iran threatens protesters after detaining 200

And Karl Denninger issues a panicky red alert to the U.S. government:
Oh No..... (To The US Government - This Is No Joke)

Imadinnerjacket has just threatened to nuke The United States, and he is clearly acquiring the material necessary to do so.

I pray I'm wrong but I fear I'm not.


No mention of how Ahmadinejad is a nutter with virtually no real decision-making power, or how his statements have been mistranslated in the past.

But you gotta give Karl credit, as he seems to have an intuitive understanding about how to get his followers all riled up.

It is so easy to rile up the masses and get them to believe the most absurd things, and the more scared, angry and desperate they are the easier it is. The last decade is nothing if not a perfect illustration of that, but I think it will pale in comparison to what we see in the coming decade.

The strange thing is that, assuming the all the quotes in the original article are accurate, all that is explicitly said is that they will "prepare the ground for his coming". Given that (from memory) the Iranian religious orthodoxy already do various "preparations" like reserving an empty space at certain events, etc, in case he suddenly returns, I think this is a case of the author reading much more into the text than is there to say the quote means "we will to nuke the states" rather than something else. (This isn't to say Iran may not have malign intent, just that this quote isn't remotely a "red alert".)

Unfortunately, this seems common with Denninger's posts: I know what my viewpoint is, so I'll interpret everything in those terms, even if it requires vigorous hammering some squares blocks into round holes.

Okay... this is a rant. So, Leanan or someone, if it is too much, take it down...

Politics as usual, elephants of doom...

Because climate change is not like any other issue we’ve ever dealt with. Because the adversary here is not Republicans, or socialists, or deficits, or taxes, or misogyny, or racism, or any of the problems we normally face -- adversaries that can change over time, or be worn down, or disproved, or cast off. The adversary here is physics.

It is quite obvious that idiots like conservationist, and other paid dupes of the energy industry, and promoters of BAU are going to have their way. They have lobbied, and they have cajoled, and they have flooded the internet and MSM with their junk science, their distorted views and their incompetent idiocy until mere politicians, like Barack Obama and John Kerry in particular, buy into the idea that this is just another windmill to tilt.

After Copenhagen, there will be 'agreements' between governmental hacks who cannot understand that for once we need to think about more than our immediate self interest. But, no. We had Reagan the Unwise, who inculcated us with neo-Con economics from Milt Friedman and friends at the U. of Chicago, telling us that greed is really good, and we don't need to care about the future.

"Live for today, Don't worry about tomorrow."

Tomorrow is here. Our ecology is toast. "Conservationist" posts unrestricted garbage on TOD, as if he has anything whatever to do with conservation. We are nice... we let her and her ilk spread their foolishness, and we banter with her. We actually give her some sort of ligitimacy by being so nice to her.

Sorry for the rant... it is just that, with the reality of PO being constantly ignored, and AGW being denied by the moronic mavens of monopolistic industry, I just hadda do it!

Now I can read the rest of TOD.

Good rant.

I think rants are in danger of extinction on TOD.

If your post gets deleted then those that replied to it also get deleted. Like this one.

Funny that some words are too harsh for our youngsters , who might be checking in via the net to read TOD instead of engaging in unsavory conduct on Teenie Booper Chat Rooms, doing Cell Phone Sexting, and engaging in teen sex at the age of about 12. Who read books and go to movies that would scald the eyes out of most right wing, extreme evangelical, Bush voting, gun toting ,tobacco smoking, maniacs. I mean check out the New Moon and other teen age movie trash. "Please quit biting me!"

But they can always go home and upstairs after defeating Net Nanny and watch to their hearts content hookers on YouTube strutting their stuff,very banal stuff.

Am I over the top? Likely. But if mine gets deleted yours will likely remain in that case.


You watched New Moon? I didn't like vampire flicks well before the current fad hit...



Ever seen Escape from NY?


moronic mavens of monopolistic industry

That's extremely good Zaph. Can I steal it?
Also nicely to the left side of the traditional 'nattering nabobs of negativism'.

Thanks a bunch,


It's yours - for the asking. Glad to share.

"The Elephants of Doom in Copenhagen" is wrong about, "the adversary here is physics." The adversary is ourselves.

We have met the enemy, and it is us, eh?

Well, I suppose physics, while implacable, inescapable and inevitible, is not really adversarial at that. It is we who put ourselves in opposition to physics, and are suddenly surprised to find that, horrors, we cannot change it.

Then, inexplicably, we do the same things, over and over and over... expecting, what? Physics to change?

Odd species, homo sapiens, and strangely named. Wonder if we will be missed.

NEW YORK (CNNMoney.com) -- President Obama proposed a new program Tuesday that would reimburse homeowners for energy-efficient appliances and insulation, part of a broader plan to stimulate the economy.

OK, I know waxing political is considered bad form so I'll try to stick to the practical side of this one. As someone who built his own superinsulated, PV powered house with an eye on sustainability and minimized environmental impact, took ten years to do it, and asked nothing from the Govt in the process, I can understand why it is so hard to get the fence-sitters on board concerning climate change and peak oil. It's just another case of way too little, way too late. Like Cash for Clunkers, the only thing I can see coming from this is more money from those who have made responsible long term choices.
Can you feel my anger and frustration? Maybe I'll run an add in the paper: "Caulking done cheap", do my part for humanity.

Interesting Philippines link its high on my list of countries that will collapse first. Also it along with South Africa are some of my early warning indicators that oil supplies are again becoming strained at a global level.

Perhaps the coming World Cup event is already having some interesting side effects.

Found this one Kazakhstan a new one for my list.

Time to start googling for gasoline shortage again looks like.

Yeah. Soon, the Philipinos may be wishing they hadn't kicked us out. It's not like we'll be in any position to help.

I attended a talk by an investment banker about the Caspian oil and gas yesterday, at the UK houses of parliament.

He had a lot to say about Kazakhstan. Two items were that their reserves are a lot more than reported by the IEA (but then he was selling his pitch)
and the other was if we don't get Afghanistan under control then the 'stans could fall like dominoes.

Where have I heard that before ?

BTW he said in private CERA know that peak is now or abouts.
The video should be up soon.

"consuming less"....can any oil conundrummers live off 600 watts at 5 amps? source being a 64 amp hour battery? and taking 12 hours to recharge it with a 40 watt solar panel? is that what pundits mean by reducing consumption? isnt that way better than say, um, a palestinian uses?... (being contrite)... i notice some posts about homeless people. wasnt there a time when they were called nomads?...(1000 years ago)... in the future homeless people will be called refugees. i just bought a 1995 saturn wagon for $1000. my state, nj, has a massive highway and road upgrade program. how will we know we are in post oil? when money cant purchase it. only then will the paradigm change. news reports say 2009 is the 5th warmest ever recorded. not where i live. cooler and wetter than many previous years. i was unemployed for 9 months and recorded the daily temps and times in my grid tied PV system log book. what i have noticed was a cooler summer and a milder fall so far. i dont think there is any police state that will contain the social breakdown when food stores are empty. uhmerikans have a long way to fall. it wont be pretty. i just want to be able to step out of the way when gold man sacks goes splat! and say, "lookie that there!".


My Sweetie and I live on one(1) kwh per day. The source is 800 watts of solar and a 1kw windmill. In my regime (Ontario) thats nets out to about 1.3 kwh per day on average. The battery bank is about 1000 AH at 24 V, of which about 30% is useful for good battery life, so about 0.3 * 24 = 7.2 kwh. Which in theory means about a week of no wind no sun. In reality I have to run the gen about 25 - 30 hours/year, or whenever I have the urge to electrically weld some bit of farm machinery I broke.


ps. I have no real idea of what 600 watts at 5 amps actually means as a unit, so this is my reality.

800 rated watts of photovoltaic panels should produce considerably more than 1 kW·hr / day unless Ontario is very cloudy. With a 1 kW windmill adding something extra on windy days, you ought to have even more.

Nearly 20 years ago I began with 400 rated watts of PV panels delivering an annual average of ~1.4 kW·hr/day to my house in Arizona. I used a generator to charge my batteries less than 10 times during the first decade. Currently I have 660 rated watts of PV panels producing an annual average of ~2.2 kW·hr / day and have not used the generator to charge my batteries for the last decade. I have fewer batteries than you and seldom discharge them more than 10%.

How do you equalize your batteries? Even with a good PV array and lots of sun it is always a good idea to use the genny a few times a year to cook the batteries good (assuming lead-acid).


All experts agree that this will extend your battery life dramatically and keep them at full capacity much longer. (Make sure to check their water prior to equalizing!)

A generator is not needed to equalize the cell voltages unless you have a large battery bank and a small PV array. I seldom equalize my batteries and achieved a lifetime of 14 years from my first battery bank.

My regulator is relay switched and has a switch to disable the upper cutoff voltage to allow the PV panels to overcharge (the result of improperly equalizing) the batteries.

The lead contacts between the cells of my batteries are exposed allowing me to attach a variable power supply (120 VAC to variable DC voltage) directly to an individual cell whose float voltage is less than the average. I can and have charged cells individually, but I have found this to be unnecessary unless one of the cells is going bad.

My battery bank is 12 V. I have wires connected in parallel between the batteries at the 6 V level to ensure that their cell voltages are equal in groups of three.

The keys to long lead-acid battery life are:

1. do not deep cycle your deep cycle batteries.

2. keep the batteries charged up. Each day the PV panels should provide enough power to fully charge the batteries. Restrain your power usage at night and reduce your power consumption on cloudy days to make this work. Save the power consumption for sunny days. This practice explains why my batteries seldom need equalization.

3. add distilled water to the cells before the level of the electrolyte drops down to the lead plates.

A lead-acid battery is damaged by overcharging reducing its lifetime. Never allow the cell voltage to exceed 2.40 V which, assuming the voltage is distributed equally across the cells, is 14.4 V across a 12 V battery. Most sources indicate that equalization should occur at 2.50 V / cell or 15.0 V across a 12 V battery. I disregard this advice.

Well, for example two years ago we had 31 days in a row with no sun. November - December. Most of it was a stationary low pressure area, so also no wind.

Sure on nice sunny or windy days, I get lots more, but this is a long cloudy way from Ariz.


Ah, that explains it. You were referring to the power you get on cloudy days. On those days I get about 700 W·hr and deal with it by reducing my power consumption. In the mountains I get more clouds than the desert, but the worst here so far has been a January with 3 sunny days, a few party cloudy ones and the rest overcast.

1000 dollar car
great song

(Did a search, didn't find this headline.)

The domestic drilling backlash (CNN/Money)

More than a year after Republicans rallied around the now-famous call, a growing number of Americans are saying not-in-my-backyard when it comes to more oil and natural gas drilling.


-Growing fear about contaminated water-

New horizontal drilling technologies have made the gas in the Marcellus shale and other shales across the country more accessible. But extracting it requires breaking the shale rock with a mixture of chemicals, water and sand, blasted down the well hole. While the process, known as hydraulic fracturing, has been around for decades, it's never been done on this scale, and so close to major population centers.


The federal Environmental Protection Agency has just begun looking into the issue. EPA had been largely sidelined from regulating this practice thanks to a 2005 law exempting the drilling from the Clean Water Act and declaring the chemicals trade secrets not subject to disclosure.


And then a jump to an article in the sidebar.

8 weird ways to save the Earth
(sea ships 'blowing' ocean into the atmosphere, space deflectors, etc.)

- Enzwell

It was posted on Dec. 2. :-)

Ah, sorry. Thought it was from today.
Next time I'll use the site search instead of the browser.

Anyone have a link to aangel's site or to his peak oil video?

Click on his name, and you'll see his profile.

Thanks ... got it.


Thanks for all the attention given to oil/NG economic analysis. My original post was to just briefly explain my comments in Kurt 's article but was surprised how long the thread ran. A short time ago Nate invited me to post a more formal explanation of the economic analysis of oil/NG drilling projects. I'll will do so in late January.

The goal of that post, as well as the current thread, isn't to just explain the techniques companies use to make drilling decisions. The process isn't much different then used in many investment strategies. The objective is to impart an appreciation of how such evaluations will have a direct impact on how future energy supplies will, and will not, be developed. The future volume of oil/NG left to be discovered and developed is often discussed on TOD. The current thread offers some insight into my opinion that those discussions must include a clear understanding of the process that determines what reserves will be developed. It is this process that will determine the magnitude and timing of future development of oil/NG and not the actual amount of oil/NG left in the ground IMHO.