Alaska is worried
Everyone knows that Alaska depends on North Slope oil for the lion’s share of its tax revenue. Everyone also knows that production from the field is in decline and will soon face volume issues with keeping the pipeline flowing. But to get a sense of just how important this is to Alaska consider this latest proposal.
Alaska’s government proposed investing its own cash in an assessment of oil reserves in the U.S. Arctic National Wildlife Refuge, seeking to prod the federal government to consider drilling in the protected area.
Alaska’s governor plans to seek $50 million of state money to help with funding the assessment. This seems silly given the latest news that the U.S. is “energy independent” and is on the verge of passing Saudi Arabia in oil production. Based on the “SaudiAmerica” story Alaska should keep its money. We don’t need their oil.
Oh but wait they need our money for their oil. Remember Alaska is a petro state just like any Opec member.
There is one further reason Alaska should hold onto its money. They may need it to help deal with all those abandoned wells the U.S. Bureau of Land Management is planning on cleaning up. The draft plan was released earlier in May to deal with 50 identified wells in the Alaska arctic region.
For now though it doesn’t sound like Alaska wants to help with the clean-up cost. The reason is fairly simple; these wells were not drilled by oil companies or the state of Alaska. BLM manages the National Petroleum Reserve-Alaska, where more than 130 wells were drilled under the federal government’s direction as part of an exploratory oil and gas program from the 1940s to the 1980s.
Finally there is the ultimate question of when and who is going decommission the pipeline and that entire oil production infrastructure on the North Slope. Has anyone reserved for that future expense? Then again with the prospect of offshore production in the Arctic maybe it will last forever….????
Railroad intermodal volumes up
The Association of American Railroads reported carload traffic was up 1.9% compared to the same week in 2012. Petroleum continued its amazing growth rate up 38% on the back of increased U.S. crude production.
Intermodal continues to be a star performer with U.S. up 3.5%, Canadian up 4.6% and Mexican up 8.7% as rail continues to expand at the expense of long haul trucks.
The number of rigs drilling for natural gas in the U.S. was unchanged at 354 from last week according to Baker Hughes weekly rig data. The U.S. total drilling for oil was down 6 with North Dakota losing 5 from last week.
Is the conventional wisdom about clean energy decades out of date?
Chris Nelder looked into that very issue by reviewing the REN21 Renewables Global Futures Report. It appears the conventional wisdom on clean alternative energy is stuck in the late disco era. The following excerpt gives some examples of just how far off the marks past forecast concerning the growth of clean energy has been.
…“[t]he history of energy scenarios is full of similar projections for renewable energy that proved too low by a factor of 10, or were achieved a decade earlier than expected.” For example, the International Energy Agency’s 2000 estimate for wind power in 2010 was 34 gigawatts, while the actual level was 200 gigawatts. The World Bank’s 1996 estimate for China was 9 gigawatts of wind and 0.5 gigawatts for solar PV by 2020, but by 2011 the country had already achieved 62 gigawatts of wind and 3 gigawatts of PV.
Whether you are a skeptic on renewables or a proponent Chris’s review is a good starting point. Then hit the full 76 page report which is available here.
Combining wind and tidal currents to generate power
This device to be tested in Japan would generate power from both wind and tidal currents (not waves). The design could at maximum generate enough power for 300 homes. The problems come when cost is considered. This device is very large, expensive to deploy and maintain in the marine environment. It is an interesting concept but will it be economic? The only way to know is to get on with testing it.
The video below if from CBS News. More information here.
The Financial Times video below takes a look at the need for energy efficiency improvements. Note the graphic that illustrates the percentage of GDP consumed by energy and the discussion that concerns that relationship.
Ocean acidification: The other carbon problem.
Natural gas storage
This week’s EIA report on natural gas in storage should have opened a few more eyes. Storage is 30.9% below year ago levels, 6.2% below the trailing five year average and only 3% above the 2007-11 five year average (note this excludes the storage bubble in the 2008-12 five year average). Also of note was the 39.4% year-over-year drop in storage in the east region also reported by the EIA.
Here is the graph illustrating the comparison to the 2007-11 and 2008-12 five year averages. The 43 Bcf build was in line with our estimates and should be getting the industry’s attention for this time of year.
News from BP isn’t going to help.
BP is shutting down a Gulf of Mexico gas-processing plant in Pascagoula, Mississippi for maintenance beginning today for 36 days. The plant handles production from Gulf platforms such as BP operated Thunder Horse which is currently battling its own steep production declines. While the discussion is focused on the oil production the plant closure will also impact natural gas supplies since the plant has the potential to handle 1.5 Bcf/d.
Baker Hughes gas rig count down again
Baker Hughes reported this morning that the U.S. natural gas rig count was down 12 from last week to 354. Year-over-year the gas rig count is down 252. The oil rig count was up 22 to 1403 rigs.
More on the nexus of Energy & Water
Below is a clip of a very interesting interactive map that overlays the areas of shale gas and oil development with areas of water stress. This is a clear example of how the world’s supply of energy and water are bound tightly to each other. Neither will remain abundant if the other becomes scarce. Click the image of the map or here to link to the original map which allows zooming in on specific shale regions.
Note: Clients and advisors at Ravenna Capital Management currently do not hold positions in BP.
The car’s future?
In this week’s Economist there is a special report on Cars. The report takes a broad look at where the automobile is today and what appears to on the horizon. But one overriding assumption is the car will continue to dominate both transportation and society in the decades ahead. Below is a video by the Economist forecasting the shift in fuel use through mid-century.
This one excerpt from the section on driverless cars sounds an awful lot like taking the bus, train or carpool to work. “People who spend hours driving every day will get a chunk of their life back, to work, rest or play while they are on the road. Less congestion means less wasted fuel and fewer emissions.” Do we really need Google’s latest technology to accomplish these goals?
The critical question the report did not address is whether the car and the car based society it supports may in fact need to make even more fundamental changes in the decades ahead. After all they didn’t question whether there would soon be 1 billion automobiles on the globe. For example they closed the opening section with this paragraph.
Why you shouldn’t predict price
Below is a video of a recent CNBC interview with a floor trader in natural gas. [March 28, 2013]
Speaking of price predictions here is one for oil just reported by Upstream from an LNG conference in Houston. Since most LNG contracts are indexed to the price of oil the future price of oil will significantly impact global LNG import prices.
A Brent crude drop to around $80, expected in the next year or two, could decrease prices for countries looking to import LNG, according to Fereidun Fesharaki, chairman of Facts Global Energy, an affiliate of the Washington-based Centre for Strategic and International Studies (CSIS).
At $80 Brent if the current discount of WTI continued it would put WTI in the mid $60/b range. At that price things could get real quite in western North Dakota really fast. Also lower LNG prices could put the brakes on the drive to export U.S. natural gas which would be most likely benchmarked to Henry Hub and priced primarily by U.S. domestic demand.
Interactive map of proposed coal plants around the globe
The map is from the World Resources Institute. The research this map is based on “shows that 1,199 new coal-fired plants with a total installed capacity of 1,401,268 megawatts (MW) are being proposed globally. If all of these projects are built, it would add new coal power capacity that is almost four times the current capacity of all coal-fired plants in the United States.”
By moving your mouse over each country you can see their plant proposal. Also when viewing this keep in mind that carbon emissions are only a portion of the story, mercury and other emissions matter as well.
“Please note that this information is being provided for educational purposes only and the opinions expressed by the author(s) are not necessarily my opinions. By selecting the links provided here you are leaving this email or website. This material is not intended to be a recommendation to purchase or sell any security. Any changes to your current portfolio would only be made after a review and discussion of your specific financial situation. Past performance is not indicative of future returns.”
Solar power in the Middle East
Below is a video of an interview with Vahid Fotuhi, the president of the Emirates Solar Industry Association discussing the outlook for solar power in the region. It is hard to find a region in the world better positioned to take advantage of solar power and at the same time so dependent on fossil fuels today.
North American rig count
Baker Hughes reported today that the U.S. oil rig count climbed 30 rigs while the natural gas focused rig count climbed 2. Currently there are 377 rigs drilling for gas and 1387 drilling for oil. It is worth noting that the 1771 rigs operating in the U.S. is more than 50% of the global total according to Baker Hughes data. The U.S. is gradually becoming a pin cushion of oil and gas wells.
When considering the impact of the rig count don’t forget to take into account the improved efficiency of pad drilling and new techniques being employed in the industry. One operating rig today can do a lot more than one just a few years ago.
Canada looks at more LNG terminals on the BC coast
Many observers of Canadian energy policy are aware of plans for a terminal at Kitimat but how many have heard of Grassy Point?
The four new proponents emerged in response to a provincial call for expressions of interest to situate facilities on Crown land at Grassy Point, north of Prince Rupert and within 40 miles of Highbank’s Swamp Point North, Portland Canal aggregate project.
For a map of the proposed sites click here.
Natural gas in storage falls below five year average
Working gas storage is now 2% below the five year average (2008-2012) as shown in the graph below. One year ago it was 60% above the five year average (2007-2011). Since last year’s storage volumes were so high they are distorting the relationship between the five year average and current storage levels. The red line in the graph below gives a more realistic measure of gas in storage by comparing today’s storage with the 2007 to 2011 five year average eliminating the impact of 2012. There is a dramatic difference between the situation last year when storage was 60% above and this year when it is less than 10% above that average.
Will China surpass the U.S.?
Bloomberg reported on Tuesday that Opec thinks the U.S. may lose its number one oil importer spot by the end of the year to China.
China is on course to overtake the U.S. as the world’s top crude importer by 2014, as the Asian country’s growing refining capacity boosts demand and America’s fracking boom cuts the need for foreign oil, OPEC said today.
Remember this doesn’t mean the U.S. will be giving up oil imports. It just means China will be competing for more of them than the U.S.
Here it is worth reporting that 60 percent import dependency is just about the highest level the U.S. ever reached prior to the 2008 financial crisis. It seems safe to assume that the Chinese leadership will be experiencing the same hand wringing U.S. leaders did at that level. It will be interesting to watch their response.
Follow-up to last week’s video on Northwest hydro power issues.
The Pacific Northwest isn’t the only part of the U.S. that is facing water supply issues. NOAA recently made it clear things may not be getting better this year and could get worse. Remember the standard go to solution during a drought is “energy” to run more pumps and drill deeper water wells. Good thing the U.S. is energy independent now.
In February, 54.2 percent of the contiguous United States experienced drought conditions, compared with 39 percent at the same time last year. Large swaths of South Dakota, Wyoming, Nebraska and Montana — which entered last year’s major agricultural growing season with very moist conditions — are now battling severe and extreme drought as farmers get ready to plant their spring crops.
NOAA’s Climate Prediction Center recently forecast that Texas, Oklahoma and the Pacific Northwest will likely get less rainfall in 2013 than in 2012, and that the entire nation will see a warmer summer than last year.
Russia and shale?
Russia is gearing up for an oil boom on the same scale as the US, as the techniques that sparked the shale revolution are applied to Siberia’s deposits of unconventional oil, according to one of the country’s top oil executives. [Hmmm…We shall see.]
US rig count falls by 39
According to Baker Hughes the U.S. rig count drilling for natural gas fell by 29 last week. As noted last week the trend towards 400 rigs drilling for gas appeared in place. Well it blew thru that to 389 down 269 from year ago levels. Even more startling is the decline from the 2008 peak of 1,606. The number of rigs drilling for natural gas in the U.S. has fallen by 75%. Equally significant is the drop since October of 2011 from 936 rigs to the current 389 which is a 57% decline. History tells us what the result of this will be and it isn’t good.
On the oil rig side things couldn’t be different. Corresponding to the bottom of the recession in June of 2009 the number of rigs drilling for oil hit a low of 179. By last August the number of rigs drilling for oil in the U.S. had grown 700% to 1,432. As the graph shows it has slipped some since that high but it still sits at 1,354. It is important to note the scale of the drilling that corresponds to the increase in U.S. domestic oil production since the middle of the last decade.
Pacific Northwest hydro power conditions
With water flows 20% below the 30 years average hydro power generation in the Pacific Northwest deserves watching. This video discusses some of the issues this spring in the region that will not only impact hydro but wind power generators as well.
The report was updated to correct a bad link. (Mar. 22 7:45 pm PDT)
Just how deep is that oil?
Anadarko announced this week that it had discovered a “potentially giant” oil field in the deep waters of the Gulf of Mexico. The Shenandoah well is in 5,800 feet of water. From there they drill down another 26,500 feet below the seabed to reach the oil.
To give some perspective on just how far that is consider that if you could look down at the bottom of the well it would be like looking out the window of a commercial jet making a transcontinental flight at over 32,000 feet.
2012 ASPO-USA Conference Highlights. Other video presentations from the 2012 conference and past conferences are also available on the ASPO-USA web page.
Russian oil company is now the biggest
According to the Financial Times Russian oil company Rosneft is now the on top passing Exxon. “Rosneft’s acquisition of TNK-BP made it the world’s largest publicly traded oil producer, accounting for around 5 per cent of global production. The enlarged company will pump out between 4.2m and 4.3m barrels a day.”
That means that Rosneft is producing over 60% as much oil as the total production in the United States (7 mb/d) and more than any Opec member except Saudi Arabia (EIA).
It is interesting to note that BP decided to use the proceeds to buy back shares and pay down debt rather than pursue an acquisition.
US rig count falls by 30
According to Baker Hughes the U.S. rig count fell by 30 last week. The decline was 17 in oil directed and 13 in natural gas with all of it in horizontal rigs. Rigs drilling for gas are again falling towards 400.