Daily Archives: November 10, 2009

Kate Mackenzie

Claims that the US has pressured the IEA to put a more optimistic spin on future oil supplies gained a huge amount of attention today. But just how likely a scenario is that?

Ed Crooks

The International Energy Agency (IEA) has said we need a much higher carbon price, called for investment of $500n a year in clean energy, and warned that rising oil demand could threaten the world’s security.

It holds some remarkably radical views for a government-backed multinational organisation, particularly one which has been accused of being in thrall to the US.

Launching its World Energy Outlook – heavily trailed in the FT – on Tuesday, the IEA called for a revolution in the industry to tackle the threat of climate change.

Above all, it stressed the need for a significantly higher price of carbon credits than is currently effective in the European Union, or initially envisaged in the US.

Sheila McNulty

KL Energy says it is the only company in the US with an industrial scale demonstration plant producing cellulosic ethanol. And it is ready to build commercial plants to produce cellulosic ethanol in four continents – north America, south America, Asia and Europe.

Cellulosic ethanol – where liquid fuel is produced from starchy material such as corn husks – is one of the one of the great hopes of biofuels industry, because it means fuel can be made from plant sources without the need to compete with food crops.

But KL first needs funding for its proposed plants. The credit crisis has not only made it difficult for everyone to get credit, but especially those venturing into new, untested areas and looking for project finance. The key is to tie up with a big name company who can get access to finances.

Kate Mackenzie

Fossil fuel use must peak by 2020, warns IEA

Ask Dr Fatih Birol a question about the new IEA report

Don’t cry for Opec – even in a low-carbon future

IEA warns non-Opec oil supply will peak next year

Goldman still bullish on commodities

Tropical storms and UK nuclear in Spot news

How soon will the UK get its new energy policies?

How to solve ‘carbon leakage’ with carbon trading

Further reading:

Spain sets a new wind-powered record: more than 50% (Environmental Capital/WSJ)

A bright nuclear future: True or false? (Guardian)

More on the Spanish green jobs report (Houston Chronicle)

Power for US from Russia’s old nuclear weapons (NY Times)

EPA sends greenhouse gas finding to White House (BNet)

Build your own solar panels (Times Online)

Australia invests in world’s first utility-scale wave power project (Yale 360)

Kate Mackenzie

How much does the world’s oil-producing bloc have to fear from an international agreement (or perhaps initially, a framework) on carbon dioxide emissions?

Opec members have signalled they are concerned about a Copenhagen agreement before – secretary-general Abdalla Salem El Badri said in September that oil producing countries should not be penalised for what they do.

However the IEA’s new report shows that even in its ’450 scenario’ – in which governments make big efforts to limit carbon dioxide concentrations to 450 parts per million – Opec production still increases quite significantly, to 43m barrels per day in 2020 and 48m b/d in 2030.

By Izabella Kaminska

Want another reason to be bullish commodities?

The commodity bulls at Goldman Sachs have put out another ballsy forecast for the market, this time predicting a 17.5 per cent return for the S&P GSCI Enhanced Total Returns Index in the next 12-24 months.

Jeff Currie and his team have specifically singled out oil, copper and corn as chief contributors to the upside outbreak — all of which they say will shift into global deficits in the coming months owing to a “combination of demand and supply drivers”.

Carola Hoyos

The International Energy Agency warned today that the world’s use of fossil fuels will have to peak by 2020 if it is to escape a dangerous spike in global temperatures.

Fatih Birol, the IEA’s chief economist, said at the launch of the agency’s annual flagship World Energy Outlook: “This would be a revolution. This revolution could only take place if there is a financial signal to the energy industry.” He added: “We need a deal in Copenhagen. We need a signal for the energy industry. Without that, nothing will move.”

Better energy efficiency, rapid growth in renewable energy, and increased use of nuclear power will be critical to move the world away from fossil fuels, the IEA believes. A second revolution would have to happen in the automobile industry so that six of every ten cars sold in 2030 are hybrids or electric by 2030.

Kate Mackenzie

The International Energy Agency’s chief economist, Dr Fatih Birol, will answer Energy Source readers’ questions about the IEA’s 2009 World Energy Outlook.

Questions can be submitted up until midday GMT on Thursday.

Answers will be published early on Monday November 16.

You can post a question in the comments below, or email theenergysource@ft.com. Your email address will not be published or forwarded. (Update: We’re getting a lot of emailed questions. If you email us, please specify if you don’t want your name published).

As with previous Q&As, we can’t promise every question will be answered – but keeping your question succinct and original will improve its chances.

Kate Mackenzie

Non-Opec oil production will peak next year, the International Energy Agency says in its World Energy Outlook.

The IEA also says that post-peak gas fields are declining at a rate of 7.5 per cent, but there appears to be enough recoverable gas reserves to satisfy world demand until at least 2030.

The IEA has been criticised for underplaying the risk of an imminent oil supply crunch. A story in The Guardian today quotes two whistleblowers who claim the agency privately believes oil production will never reach 100m barrels per day, despite its forecasts that world oil demand will reach 105m b/d by 2030.

The WEO repeats the 105m b/d forecast this year, but breaks its outlook into two scenarios: a ‘reference scenario’, in which energy use continues along its current path, and a ’450 scenario’, in which governments make a concerted effort to limit atmospheric CO2 concentrations to 450ppm.

Under the no-change reference scenario, the IEA sees global oil rising 1 per cent per year, reaching 105m b/d in 2030. This is 1m b/d less than the agency’s forecast last year. OECD demand, in this scenario, will also fall.

Under the 450 scenario, non-hydro renewables rise from 2.5 per cent of the power mix in 2007 to 8.6 per cent in 2030.

Warnings of the no-change reference scenario

The WEO says that investment in upstream oil and gas production is 19 per cent lower this year than in 2008 – which it says could have “potentially serious consequences for energy security”, depending on how governments respond. It warns of price volatility and says:

These concerns are most acute for oil and electricity supplies. Any such shortfalls could, in turn, undermine the sustainability of the economic recovery.

Without any chance in government policy, the report warns, climate change and energy security pose big risks.

Average oil prices will be $100/barrel in 2020 (in 2008 dollars) compared to $60 this year.

OECD countries, although their oil imports will fall under both scenarios, will spend 2 per cent on average on importing oil and gas between now and 2030. Non-OECD countries will spend even more.

Natgas demand to grow

In both the ‘no change’ and the climate change aversion scenarios outlined by the International Energy Agency, natural gas plays an increasingly important role in future energy supply.

In the 450 scenario, world gas demand would grow by 17 per cent in 2030. But that would be 17 per cent lower than in the reference scenario, and demand would begin to fall in some areas after 2020 as low-carbon policies kick in.

In the shorter term, gas demand will grow by 2.5 per cent a year between 2010 and 2015, assuming an economic recovery begins next year. But in a bearish note for gas prices, the IEA says supply growth will outpace demand.

There is adequate natural gas resources to meet ‘any conceivable’ increase in demand, the agency says. There are 850tcm of commercially recoverable gas reserves and only 66tcm of that has been produced (or flared). But costs of production, in the long-term, will rise and half of the world’s existing capacity will need to be replaced by 2030.

The IEA is less confident than some that the shale gas boom in North America will be replicated in the rest of the world:

The extent to which the boom in unconventional gas production in North America can be replicated in other parts of the world endowed with such resources remains highly uncertain.

Related links:

Peak demand: Going big?

Kate Mackenzie

Energy companies idle 29.6% of oil output for storm
Tropical Storm Ida first to disrupt production this season (Bloomberg)

China-US deal on clean energy projects
CCS and electric cars, but no Copenhagen breakthrough (FT)

Ministers pick 10 nuclear sites
RWE Npower quits competition (FT)

Questions remains on viability and waste
UK nuclear issue swept under the carpet (FT)

Obama will go to Copenhagen to clinch deal
‘If it will make a difference’ (Reuters)

Sinopec, PetroChina gain on China fuel price increase
Government increases diesel and petrol prices for first time in two months (Bloomberg)

China seeks Africa joint ventures
Head of China’s Africa investment fund speaks (FT)

Reliance looks to buy LyondellBasell assets
Deal could be worth $6bn (FT)

Chemical reaction may help Mukesh Ambani focus
Comment: LyondellBasell would put distraction concerns to rest (FT)

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