2013 February 22

The Master Resource Report  2013-02-22

Japan is an energy desert

Bloomberg reported that Japan will be appealing to the U.S. this week to open up to LNG exports.

Japanese Prime Minister Shinzo Abe will ask U.S. President Barack Obama to allow shale gas exports as the world’s third-largest economy grapples with soaring energy costs after 2011’s nuclear disaster closed reactors.

The request will be made at a meeting tomorrow between Abe and Obama in Washington, said three Japanese officials, who declined to be identified because the information isn’t public. The bill for importing liquefied natural gas, combined with a weaker yen, prompted Japan to post a record trade deficit in January of 1.63 trillion yen ($17.4 billion), the Finance Ministry said yesterday.

The problem as this report has indicated before is that once natural gas prices in the U.S. stabilize above production cost they will lose their currently illusionary price advantage on the global LNG market. It is also questionable if the U.S. will be able to generate the volumes of export LNG that the proponents envision and Japan’s leader think they can acquire.

After reading the Post Carbon Institute report and Nature Commentary covered in this week’s report the logic behind Japan’s LNG request becomes questionable. But when you live on an energy starved island what are your options? Japan may have moved into permanent trade deficits with a weakening currency and escalating energy import costs.

Jeff Brown on net exports

Jeff Brown (aka westexas on The Oil Drum) is the developer of the Export Land Model (ELM) that emphasizes the importance of available global net exports over global production as an indicator of where the world is headed. This week he posted an extensive commentary on the ASPO-USA web site covering not only general net exports but a new concept he calls “The Export Capacity Index (ECI).

Jeff starts right out by asking a simple question. Where was the supply response to the second doubling of the price of oil from 2005 to 2011 when Brent crude went from $55/b to over $111? He points out that when the price doubled between 2002 ($25/b) and 2005 ($55/b) global crude and condensate production climbed from 76.2 million barrels per day to 73.8. During the second doubling to 2011 production only moved up from 73.8 million barrels per day to 74.1 despite covering 6 years versus the first doubling taking only 3 years.

From that starting point Jeff delves into his Export Land Model and his new conceptual idea of Export Capacity Index. This is interesting stuff from geoscientist in Texas whose day job is finding and producing oil and whose passion is pondering what is ahead for all us.

Don’t bet on a China shale gas boom

Bloomberg reported that China’s highly anticipated boom in shale gas production will most likely fall far short of the country’s 80 billion cubic meters by 2020. Analysts surveyed by Bloomberg put the likely level at 18 billion cubic meters.

The lack of shale enthusiasm was evident in December at the government’s latest and biggest auction of blocks of land containing natural gas trapped in shale rock strata. Coal miners and provincial government investment firms with no experience of shale drilling were among winning bidders. The bids by the big two gas producers and China National Offshore Oil Corp., the largest offshore oil producer, failed.

VW and Audi push for mileage

The Green Car Congress web page this week reported on new cars from Volkswagen its Audi subsidiary.

Volkswagen has confirmed that its XL1 Super Efficient Vehicle, featuring fuel consumption of 0.9 l/100 km (approx. 261 mpg US), will go into limited production at the company’s Osnabrück factory in Germany. The plug-in diesel-electric hybrid, which Volkswagen will showcase at the Geneva show, can cover a distance of up to 50 km (31 miles) in all-electric mode. [Good article with photos and specs.]

While the VW pushes the limits the Audi A3 in true performance car style provides more punch for the driver.

Audi will showcase the A3 e-tron plug-in hybrid at the 2013 Geneva Motor Show. The Audi A3 e-tron delivers 150 kW (204 hp) of system power and 350 nm (258 lb-ft) of system torque; projected fuel consumption is 1.5 liters per 100 km (157 mpg US), according to the ECE standard for plug-in hybrid automobiles. This corresponds to CO2 emissions of 35 grams per km (56 g/mile).

The A3 e-tron accelerates from 0 to 100 km/h (62 mph) in 7.6 seconds, and has a top speed of 222 km/h (138 mph). In electric mode, the Audi A3 e-tron reaches a top speed of 130 km/h (81 mph) and has a maximum range of 50 km (31 miles).

These two cars hit at the sweet spot of around 30-40 miles all electric range that covers nearly 90% of the driving done by U.S. households. Yet unlike the pure electric vehicle they have the ability to go further on the internal combustion if needed and protect against one of the EV’s biggest hurdle, “range anxiety”.

Both of these vehicles exemplify the very stiff competition that pure electric vehicles face in the near term from hybrid conventional internal combustion engine cars.

It is vehicles like this that have the ability to bring U.S. liquid fuel consumption down by 3 million barrels per day over the next decade if consumers adopt them along with similar vehicles from other manufacturers in large volumes.

However as recent history has shown declining U.S. fuel consumption since the peak in the middle of the previous decade has not resulted in lower fuel prices. It is very possible that household spending on fuel could remain flat or rise even as consumption in absolute gallons declines.

That is clearly not an end of the world scenario like the one envisioned by many with the onset of a global peaking of liquid fossil fuels. However it will be different. But remember different is not always worse. It may help the U.S. to bring back some of the quality of life it sacrificed in its rush to the auto centric life since World War II.