Daily Archives: February 20, 2009

Mexico’s Cantarell, until recently the world’s third largest oil field, waved an ‘adiós’ in January as the field lost its position as the country’s largest in favour of the Ku-Maloob-Zaap oil field. This adds weight to the view that fast maturing oil fields will tighten the global oil market when demand recovers.

The decline in Cantarell is one of the starkest signs of mature oil fields falling production, and signals the growing difficulties to increase global oil output. The International Energy Agency, the western countries’ oil watchdog, last year warned that oil companies will struggle to pump enough new oil to offset the steep production declines of the world’s older fields.

Pemex

Source: Pemex

Pemex, Mexico’s state oil company, said on Friday the Ku-Maloob-Zaap pumped an average of 787,000 barrels a day, above the 772,000 b/d of Cantarell. In early 2006 the Cantarell field was pumping more than 2m b/d.

Kate Mackenzie

Our interest was piqued earlier today by a story in Reuters earlier today that management consultancy Arthur D. Little had put out a report on peaking oil demand (free registration required for the full text).

The 7-page report argues the consensus that fossil fuel demand will recover could be misplaced, because of three policy drivers which, it argues, could converge to see oil’s dominance of the energy landscape fade much quicker than first thought. They are:

- price volatility
- security of supply
- climate change

Kate Mackenzie

The Oil Drum looks at reports into available uranium and ponders whether shortages are in the not-too-distant future.

First: an Energy Watch Group report showing that reasonably assured resources of sub-$40/kg uranium are likely to peak in the next decade. The next jump after that is >$130/kg. However current prices are around $110/kg.

Then an IAIE report from 2001 also a shows peak; this one in 2024.

The World Nuclear Association – via the EIA – predicts a peak in 2015.

The Oil Drum also points out estimates of reserves have been overly positive:

In several countries, production has stopped or nearly stopped after available resources have been exhausted. If one compares the reserve figures prior to exhaustion to the amount actually produced, one finds that the stated uranium reserves were significantly higher than the production actually achieved.

There is much, much more – including some strident criticism from commenters.

The nuclear power industry might have another problem: skilled staff shortages.

Kate Mackenzie

From Energy Source:

A primer on the disadvantage of low oil prices

Sibir: A noddie award added to its woes

China gets busy

Barclays cuts oil forecasts, but keep a glimmer of hope
Notable links from elsewhere:

Peak oil: Management consultants Arthur D. Little get in on the act

Oil sands I: They are more important than you might think

Venezuela: and Opec’s dilemma

Oil sands II: Grabbing a bargain while it’s cheap

Oil sands III: Carbon capture?

Russia: Economic downturn hasn’t hit Putin’s popularity

Exxon: Why it will keep profiting

Rockets Test suggests a promising future for biodiesel

Kate Mackenzie

If you’re a keen watcher of oil and energy generally the news is old, old, old. But for many people the downsides of cheap oil that might be familiar to us – mainly decreased investment storing up future demand crunches/price spikes; and lowered incentive to invest in alternative energy – are news.This Washington Post is today running a lengthy and popular story canvassing all these issues.

One writer at SeekingAlpha makes the case that alternative energy investment is dead, as figures from the API yesterday shows gasoline demand is starting to rise.

Meanwhile punters are certainly wondering why gasoline is not becoming ever cheaper as oil prices (particularly the widely quoted WTI contracts, which have come under significant fire) continue to fall. The API has been defending big oil, but its case does not come across very convincingly in this story:

“We’ve heard people say, ‘Oh, the refiners are trying to manipulate the prices,’ but it just isn’t true,” API Chief Economist John Felmy told reporters on a conference call.

And then…?

API figures show that U.S. refiners made a record amount of gasoline in January, and U.S. gasoline imports also rose in the month, even after government data showed demand for gasoline fell in 2008 for the first time since 1991.

Average U.S. retail gasoline prices have risen to $1.95 a gallon, up from $1.84 a month ago, according to automobile and travel group AAA, as refining companies like Valero Energy Corp (VLO.N) and ConocoPhillips (COP.N) announced production cuts to fend off weak profit margins.

“With refiners cutting back as much as possible to avoid losses, pressure is on inventories to supply the additional barrel of gasoline,” Boston-based Energy Security Analysis Inc said in a research note Thursday. “As these supplies diminish, the wholesale price of gasoline will spike, leading to higher prices at the pump.”

Kate Mackenzie

Sibir Energy, an AIM-listed oil company with assets in Russia, was suspended when it revealed it had made a larger loan to a key shareholder than previous disclosed.

In a statement, Sibir admitted that Chalva Tchigirinski, a Russian tycoon who owns about 23 per cent of the shares, owed the company $210m more than the $115m that it had previously acknowledged.

Sibir is listed on Aim, the exchange for smaller companies that is more lightly regulated than London’s main market. At the latest share price of 174¾p, down 69 per cent in the past six months, its market capitalisation was £676m.

More here.

FT Alphaville has given Sibir the honour of being #1 on its list of ‘The Noddies’ – its Guide to Non-executive Directors Who Appear to have Nodded Off.

Kate Mackenzie

While much of the west struggles with ailing financial sectors and ballooning fiscal deficits, China is getting busy on resources. Last week it was a $19.5bn injection for cash-strapped Anglo-Australian miner Rio Tinto, then an all-cash offer for Oz Minerals, then a $20bn loan to Russia for 20 years of oil, now a $10bn loan to Brazil’s Petrobras in exchange for some of its enormous oil and gas reserves recently discovered offshore.

Reaction to the Brazilian deal, announced late last night, is still filtering through and many pundits are still digesting the Rosneft agreement.

Philip Zelikow, a historian and former deputy to Condoleezza Rice, ventures that “this sounds like a deal worth something in the neighborhood of $20 a barrel” – and would lock in at least about 5 per cent of Russian oil exports for China.

James Fontanella-Khan

Energy news headlines from elsewhere

- Petrobras Gets $10 Billion China Loan (Bloomberg)

- Ukraine faces new Gazprom crisis (The Times)

- Oil falls on concern Opec cuts won’t outweigh demand declines (Bloomberg)

- Nippon Oil to delay setup of venture with CNPC (Reuters)

- Chavez plans 12% more oil as credit freezes (Bloomberg)

- Slumping oil prices provide an opening on Iran (WSJ)

James Fontanella-Khan

Energy news from the FT:

- Brazil to supply oil to China for loans
Landmark agreement will ensure long-term supplies

- Australian investors join Rio revolt
Discontent among shareholders spreads

- China steel group talks to Fortescue
Interest in Australian mining groups grows

- Sibir shares suspended after revelation
Oil group lent $325m to one of its shareholders

- Enel near E11bn deal for Endesa control
Italian group seeks to end three-and-a-half-year battle

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