Daily Archives: October 19, 2009

Kate Mackenzie

The latest issue of Foreign Policy magazine has run a couple of letters responding to its cover story last month on oil by Daniel Yergin of CERA. In case you missed it, Yergin argued, on the eve of the 150th anniversary of oil first being drilled, that despite a rapidly shifting outlook there was adequate oil supply for decades to come.

Matt Simmons, who is just as prominent an advocate for peak oil, actually wrote his own response a week later, but FP has continued the debate on its letters page. Simmons writes:

Data from the International Energy Agency (IEA) and the U.S. Energy Department show that the global flow of crude oil peaked in 2005 and is now sliding steadily. The world will never run out of oil altogether, but oil’s flow is in decline. There might still be ample reserves left in the ground when production falls to half of today’s use. But these remaining reserves are either very low-quality heavy oil, which is difficult to process, or tainted with toxic elements that make them hard to refine into usable petroleum products.

Meanwhile Kjell Aleklett, an academic and also a very prominent peak oilist, also gets an appearance on the letters page and points out the IEA data, among others.

Yergin, in turn, says he also relied heavily on last year’s World Energy Outlook, the weighty annual tome published by the International Energy Agency, relied heavily on data from about 800 oil fields compiled by Yergin’s IHS CERA.

There’s a little bit of irony in this, surely. Last year’s World Energy Outlook marked for many observers the point at which the IEA adopted a tone far more favourable of peak oil theory. The inclusion of data from that very set of 800-odd fields saw the IEA revise its decline rate for post-peak fields from 3.7 per cent to 6.7 per cent. Enough to set off headlines all around the world about the decline of oil.

The data, to be fair, can be interpreted in a multitude of different ways. The much-quoted 6.7 per cent decline rate only applies to post-peak fields, which made up about 580 of those 800 fields.

Related links:

Simmons vs Yergin, Lynch et al on peak oil (FT Energy Source, 09/07/09)
IEA warns of new supply crunch (FT, 12/11/08)

Kate Mackenzie

On FT Energy Source:

Piling into Australia’s natural gas

Russia spoiling EU’s Nigerian gas hopes

Who’s responsible for cutting CO2 emissions? Not us!

Who’s really winning in Iraq oil negotiations

Further reading:

Environment minister’s letter signals major shift for Indian climate policy (Times of India)

Was Calderon’s decision to dissolve state-run utility purely political? (LA Times)

British kids worst in Europe at saving energy (Telegraph)

US funding for hydrogen-powered vehicles is returned (BNet)

Last week’s debate on Kerry-Boxer bill (National Journal)

Connecting Siemens’ solar thermal acquisition with the Desertec project (Environmental Capital/WSJ)

Carola Hoyos

When Eni last week clinched the deal to develop the Zubair field in Iraq two clear camps emerged: One that believed the oil company and its partners had finally caved to Iraq’s financial terms and another that believed Iraq had sweetened its terms enough so that Eni, which had refused to accept a deal at the June auction, was willing to come on board.

The critical headline figure of $2 a barrel – the sum Iraq is willing to pay for every extra barrel Eni is able to pump once Zubair reaches the production plateau of a little more than 1bn barrels a day compared to today’s 200,000 barrels a day – remains. That has given Hussein Sharistani the ability to argue he won the battle of wills. Publicly, the oil companies are not entirely unhappy about giving him the victory lap. That is because they feel far safer – physically and financially – starting work in Iraq with a politically strong Sharistani and a country that largely welcomes them. Entering a country that doesn’t want you there increases the risks of kidnappings, sabotage and unpleasant changes to the tax rate.

Privately, oil executives say Iraq sweetened other fiscal terms that brought the entire project’s economics to about half way between the minimum Eni was willing to bid and the maximum $2 Baghdad was willing to pay during the June auction, in which every western oil company except BP walked away complaining about Iraq’s unrealistic terms.

Kate Mackenzie

Here’s something for the world leaders attending the Major Economies Forum today in London to think about. US and UK voters, to be specific, don’t care much about responsibility for historical emissions, according to a survey by Harris Interactive commissioned by the FT.

Only a minority of respondents in those countries believe that developed countries should help developing countries meet the cost of reducing their greenhouse gas emissions. And there is strong support across all the countries surveyed for the view that China should make the most emissions cuts, thanks to its recently-attained status as the biggest emitter:

Check the wording of that first question, though – it’s rather stark and makes no mentioned of historical emissions. But as the second table above shows, making that point in the question only seems to hold sway with mainland Europeans, who are a lot more supportive of rich countries contributing to the cost of poorer countries than Britons or Americans.

There’s also a large number of apparently undecided respondents on these questions, which was evident in  many of the answers to other questions in the survey (more on those below).

Reaching agreement at Copenhagen requires participation from developing countries, who after all are going to contribute most of the growth in greenhouse gas emissions for decades to come. Those developing countries don’t see why they should have to pay for a low-carbon development when the developed world grew rich while consuming cheap fossil fuel with abandon. This, as Fiona Harvey alludes in the FT, is why some developed world leaders have been keen to praise China’s efforts to reduce emissions in recent months.

Kate Mackenzie

How worried will Europe be by the alliance between Gazprom and Nigeria’s Oando?

Russia’s gas monopoly has been courting Nigeria for some time now, making offers to invest in the African country’s sizable gas reserves – which are not only under-exploited as an energy source, but often wasted through flaring around oil production facilities.

In September last year the European Union, increasingly nervous about its members’ reliance on Russian gas, offered Nigeria financial backing to develop a trans-Saharan pipeline to export gas directly to Europe. At the time, energy commissioner Andris Piebalgs admitted last year that the EU had been slow to offer support for the project, but last year’s Georgian conflict had brought the issue to the fore. Some significant European private sector backing for the project was offered by France’s Total in February.

But in June this year Gazprom and Nigeria’s state oil company, NNPC, formed a joint venture (with the unfortunate name Nigaz) that included plans to build a section of that very pipeline.

The new Oando-Gazprom alliance is pretty vague – no numbers were given – but it won’t reassure Brussels much.

Related links:

Gazprom tie-up with Nigerian company (FT, 18/10/09)
Gazprom’s $2.5bn gas deal with Nigeria raises European concerns (FT, 26/06/09)

Kate Mackenzie

Chevron has found more gas off the coast of Western Australia, which it says could be the starting point for an expansion of the planned $40bn Gorgon LNG project.

FT’s Elizabeth Fry writes:

Chevron said the Achilles-1 exploration well was drilled to a total depth of 4,500 meters and encountered about 325 feet of net gas pay. The new discovery in the hydrocarbon- rich Carnarvon basin will build on the supply that underpins the projected 40-year life of the Gorgon project.

The US group suggested that the latest discovery could mean adding two more processing trains to Gorgon, the country’s largest-ever resources development.

If that is the case, oil and gas analysts estimate the company could be looking at 8 or 9 trillion cubit feet of gas.

Gorgon is due to begin producing in 2014 and some $145bn worth of gas supply contracts have already been agreed between Chevron, minority stakeholders ExxonMobil and Shell, and several Asian countries.

However in the rush to sell all this gas, competition for the resources to actually begin producing is getting tight. Woodside Petroleum’s nearby (in Australian terms) Pluto LNG project  is also set to begin producing in 2014 and the company’s chief executive boasted a couple of months back that it could be even bigger than Gorgon.

But Bloomberg writes that JP Morgan Chase analyst Mark Greenwood is sceptical that all these projects will meet their timetables:

Chevron’s discovery could be “good for the expansion of Gorgon, and it adds competition to what’s already a competitive environment,” Sydney-based Greenwood said in a telephone interview today. “We don’t think all the projects that are aiming to get up by 2015 or earlier will meet that target.”

Related links:

Gorgon gives mythical name to modern reality (FT, 10/09/09)
Another gas glut? Big LNG projects gather pace in Asia (FT Energy Source, 22/06/09)

James Fontanella-Khan

Gazprom in tie-up with Nigerian company
Move advances Russians interests in energy-rich West Africa (FT)

Industry urged to embrace action on climate
Peter Huntsman tells the FT that controls are needed (FT)

US enlists oil to sway China’s stance on Tehran
Obama encouraging Arab states to boost oil exports to Beijing (WSJ)

Public backing for deep China emission cuts
FT poll says westerners want China to cut emissions (FT)

Energy firms deeply split on bill to battle climate change
Energy producers are battling each other over policy decisions (NYT)

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