Kate Mackenzie

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

Kate Mackenzie

Today is my last day on Energy Source for a while, as I’m taking maternity leave — admittedly, a rather carbon intensive pursuit.

The past 18 months of blogging here has been a tremendous learning experience, thanks in large part to all who’ve commented, emailed, and contributed guest posts.

I’ll leave you in the capable hands of Anjli Raval for the next couple of weeks, followed by Masa Serdarevic.

Kate Mackenzie

It seems a long time ago now, but back in February there was an awful lot of fuss about an energy company that had supposedly come up with a revolutionary new technology.

Of course, it wasn’t that simple, despite the roster of Silicon Valley stars that lined up to trial the company’s wares. Yet breathless reports of exciting energy technologies continue to pop up periodically, particularly in recent years in connection with the information technology world, as many IT entrepreneurs have decided to focus on ‘clean tech’. Some have no doubt made big inroads, such as electric car maker Tesla.

But the idea that the great leaps made by IT and networking technologies in the past decade can be easily transferred to the looming energy challenge is shallow and misleading.

Kate Mackenzie

One of the enduring lines about peak oil is that authorities keep it a secret because there would be some kind of financial havoc if it were revealed. A recent example is a claim that Steven Chu, US energy secretary:

“… knows all about peak oil, but he can’t talk about it. If the government announced that peak oil was threatening our economy, Wall Street would crash.”

Is it really possible that oil traders, investors and analysts haven’t heard of peak oil?

Or that they have decided to ignore it altogether?

First, peak oil is hardly shunned by the financial world; just Google ‘peak oil funds’ to see how many investment managers are basing their strategy around this. Oil market traders can’t ignore the question of peaking oil production either, because the supply/demand balance is intrinsically bound up with oil prices.

Introducing the Macondo ‘Costometer’ from Citigroup.

Unfortunately you can’t manipulate the data, but it could be used as the basis for a spreadsheet.

Have fun!


Citi reckons the clear water fines are particularly difficult to forecast because the Environmental Protection Agency has a certain amount of discretion and we still don’t know how much oil has been spewing out of the ruptured well in the Gulf of Mexico:

As far as clean water fines are concerned, we are in new territory since the largest fine the EPA has handed out to date was $34m to Colonial Pipelines in 2003. The often-quoted penalty range is $1,100-4,300 per barrel spilled. However, the EPA has a certain amount of discretion around this range and the Colonial Pipelines fine was below $1,000/barrel. In our ‘Costometer’, we have assumed BP is penalised at c$3,500 per barrel spilled.

Kate Mackenzie

We knew that Shell was moving towards gas accounting for half of its upstream production by 2012, but it appears that, on a reserves basis, it’s almost there. And some of the other supermajors aren’t far behind, according to research from Wood Mackenzie:

In fact Shell, with the highest ratio of gas to oil, also has the highest value of remaining reserves.

Kate Mackenzie

Uh-oh. After a 24-hour delay at the request of the US administration, BP finally began to test the leaking well by closing up its new cap. But then…

In preparation for commencement of the well integrity test, the middle ram has been closed and a leak has been detected in the choke line of the 3 ram stack. It has been isolated and will be repaired prior to starting the test.

That’s from BP’s subsea update, though the material at that link will be overwritten as time goes on.

The Washington Post is rather sceptical about BP’s comments that it will simply fix the leak and carry on:

But video streams from the seafloor showed a chaotic plume of oil and gas continuing to surge from one of the outlets on the 75-ton cap installed earlier this week. It was unclear late Wednesday whether the leak would be a momentary hitch in the much-anticipated “integrity test” on the well, or if it would put the operation in grave peril.

Here is that oil plume, from the Skandi ROV 1 video feed:

Investors don’t seem too worried, however, with shares down about 1.5 per cent in early trade.

Kate Mackenzie

- Modest relief on energy costs

- Letting manufacturers opt-in to cap-and-trade could increase emissions

- On the block: Assets BP could sell

- Looking ahead to the GoM snap back

- Walking: not just for cities

Kate Mackenzie

- Leak hampers BP effort to shut off well - NY Times

- BP moves ahead with critical test - FT

- EU ministers toughen stance on emissions - FT

- US moves to block new BP oil leases - FT

- Industry groups target utility-focused climate plan – The Hill

- Cap-and-trade won’t pass, says Rockefeller – Bloomberg

- Wildlife charity set to benefit from oil capture - FT

- Scientists say Gulf oxygen depletion problem is real – WSJ

Kate Mackenzie

So much for BP’s plans to cut off the flow of oil with its newly-installed cap on Tuesday.

It appears that the US administration, in the form of energy secretary Steven Chu and USGS director Marcia McNutt, has stepped in and demanded more analysis before the valves are shut off.

From incident commander Admiral Thad Allen:

“Today I met with Secretary Chu, Marcia McNutt and other scientists and geologists as well as officials from BP and other industry representatives as we continue to prepare and review protocols for the well integrity test – including the seismic mapping run that was made around the well site this morning. As a result of these discussions, we decided that the process may benefit from additional analysis that will be performed tonight and tomorrow.”

So what could Chu and McNutt et al’s concern be?

The plan was to shut the valves off for between six and 48 hours, giving BP time to monitor well pressure. Consistently high pressure, of about 8,000 – 9,000 pounds per square inch, would indicate the well casing was intact. Lower or inconsistent pressure might mean that oil and gas were escaping from other places below the sea bed; the cap risked further rupturing the well in ways that would be very difficult to fix.

In otherwords, the cap is being tested to see if it’s safe to use again in the future.

So perhaps the fear from the administration it is that shutting the valves off completely, even for a test of several hours, would actually threaten the well casing.

Kate Mackenzie

- NOAA ‘hoarding key data’ on oil spill damage

- Is India too late to the Asian oil-guzzling party?

- Lessons from Exxon Valdez have gone unheeded

- Chip industry tactics to be emulated for energy research

- Russia’s oil trap

Energy Source is no longer updated but it remains open as an archive.

Insight into the financial, economic and policy aspects of energy and the environment.

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« AugDecember 2014