Daily Archives: April 15, 2009

Sheila McNulty

New data from the American Petroleum Institute shows what those in the field have suspected for several weeks: US oil and natural gas drilling has dropped to levels not seen since 2004, ending six consecutive years of first quarter growth.

Drilling rates have worsened since the combination of economic downturn, plunging commodity prices and the credit crisis make it difficult for the small drillers who account for much of US oil and gas production to continue producing.

Kate Mackenzie

Too late to stop devastating climate change, that is. At least that’s what the University Corporation for Atmospheric Research are saying.


Source: UCAR (click through for full image)

Yesterday we wrote about several signs pointing to a little gloom settling in over the prospects of meeting carbon reduction targets that scientists say are necessary to avoid climate rises above the critical 2°C threshold. But later that day the National Center for Atmosphere Research in the US came out with a reassuring statement. While the climate is likely to change by about 2.2°c (on top of the 1°c already seen since the pre-industrial era) if emissions increase at the projected rate, they estimate that capping the carbon concentration in the atmosphere at 450 parts per million will only result in a further 0.6°c increase – a much more manageable amount.

This is not dramatically different from the carbon curtailment that many scientists have been recommended for some time. They’re right of course: there is still time for the guidelines to be met.

But the main cause of pessimism is not so much the technical reality as the political reality. Who restricts their emissions, and in particular who bears the cost of that reduction, is far from being agreed upon by all the world’s carbon emitters.

But optimism, presumably, is more likely than despair to result in actual measures being taken.

Related links:

Climate change: the despair edition (FT Energy Source)
Bonn update
(FT Energy Source)

As the FT reported earlier this week, North Sea production is being hit critically by the economic crisis. The story quotes findings from a Deloitte report which says the number of exploration wells being drilled in the North Sea has collapsed by 78 per cent in the first quarter of 2009 versus the same period last year.

This is vitally important. As the FT highlights:

The worsening exploration climate could knock 10-15 years off the North Sea’s expected lifespan of 20-30 years, meaning almost half of all its infrastructure could be decommissioned within the next 11 years, UK Oil and Gas estimates.

In short, declining production from mature fields is not being compensated for because exploration and development of new smaller wells is not cost effective in the current price environment. All of which is accelerating non-Opec decline rates, which according to Goldman Sachs are needed before any renewed and sustained rally resumes in the crude market.

Kate Mackenzie

On Energy Source today:

Is better place getting more love?

Opec further reduces 2009 demand forecast

The Reliance conundrum


Politics: The making of a conventional wisdom - is understanding or ideology driving the shift to market-based policy instruments such as cap and trade? (Robert Stavins/Harvard)

Efficiency: Deciphering California’s energy success Higher prices, more people per household and ‘conservation chic’ are possible factors (Green Inc/NY Times)

LNG politics: From Russia, Without Love US concern at Russian LNG imports (Power Line/Platts)

Climate change: Effects of global warming can be avoided (AP)

Power: Spam ‘uses are much energy as 2.1m homes’ – and that’s US homes (Guardian)

Oil: The EIA conference day 2: What peak oil really means; good energy books; and ‘false balance’ in reporting (Bit Tooth Energy)

Geologists: You might be a geologist if… you can answer ‘yes’ to some pretty weird questions (The Chronicle)

Nuclear: Lehman’s (literally) radioactive assets An ill-timed foray into uranium trading results in… (Dealbook/NY Times)

Kate Mackenzie

Bernstein Research are pouring cold water on suggestions that Indian gasoline exports are heading for US markets, for now at least. There is a lot of interest in Reliance Industries’ second Jamnagar refinery, particularly with regard to it exporting to the US and Europe. The large refinery can make products to US and European specifications, is well positioned for these and Asian markets, and Reliance’s buying of storage capacity in the US prompted speculation that it could become an important new player there, as some US refineries are threatened by falling demand.

There have been reports of gasoline shipments destined for the West coast and even shipments, probably of heating oil, arriving in the East coast.

But Neil McMahon and Alexander Inkster at Bernstein Research say Reliance does not appear to be shipping gasoline to the US right now. Tracking shipments is a difficult art, but they provide a strong argument: over the past year and particularly in the past few months, it has become a less attractive destination for gasoline than Singapore.

Kate Mackenzie

The Opec monthly report is out, with another downward revision to their 2009 world oil demand forecast. They now say it demand be 1.37m barrels per day lower than 2008, compared to the previous forecast of 1.01m reduction last month.

World oil demand is already out of its high demand seasonality achieving nothing but devastating contraction. Oil demand is suffering more and more from the world economic recession. Recent data regarding the world economy indicates a delay in the recovery until 2010, leading to another downward revision in world oil demand of 0.4 mb/d. The worst hit was the OECD (North America and the Pacific) and China. Unlike last year, non-OECD oil demand growth has lost 90% of its strength this year. Asia’s oil demand has been forcefully hammered
by the world recession leading to an extra loss of 0.13 mb/d; hence, the 2009 world oil demand change is forecast at a minus 1.4 mb/d y-o-y to average 84.2 mb/d.

2008 demand was also revised down slightly, to a fall of 0.3m barrels per day on average.

Just a few days ago the IEA revised its forecast downwards to minus 2.4m b/d.

Kate Mackenzie

Updated (see below): Shai Agassi, a former CEO-in-waiting at enterprise software giant SAP who now heads up electric vehicle company Better Place, tends to get a good wrap online. He is articulate, charistmatic and promotes a radical business model that some believe could make electric cars economically feasible. In short, it is based around charging stations where batteries are swapped rather than recharged, eliminating a lengthy wait to ‘refuel’ an electric car; drivers would pay a monthly fee rather than ‘owning’ the battery.

A 20 minute video of his speech at the TED conference in February was just published online in the past few days and has attracted a lot of attention. Late yesterday Wired wrote about a report by three Deutsche Bank analysts that was extremely enthusiastic about the company’s potential.

The analysts, says Wired, concluded that “a pure EV [Electric Vehicle] should not be more expensive than a gasoline/diesel machine”. Their estimates of both the cost of a Better Place contract ($550/month) and the cost per mile of fuel (7c) reportedly compare well with combustion vehicles.

Energy news from elsewhere:

- Total and China in talks on Venezuela refining (WSJ)

- White House clears EPA finding on threat posed by carbon emissions (Platts)

- China may raise gasoline and diesel prices this month, CBI says (Bloomberg)

Energy news from the FT:

- Royal Dutch Shell eyes Chinese links in Iraq
May seek to partner with Chinese companies for oil licences

- Report casts doubt on biofuel benefits
Says biofuels may have produced more greenhouse gases

- Gazprom faces fines threat over gas blast
Dispute escalates between Russia and Turkmenistan

- Total raises hostile bid for UTS Energy
Revised offer reflects Total’s belief oil to rise again

- India demands cash before curbing emissions
Throws down gauntlet to developed nations

- US-French push to produce electric car batteries
Part of effort to close gap with Asian rivals

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