Oil and gas reserves developed
from 140 million years ago. Global depletion of these reserves by
humans between1859 until 2005 has now reached the halfway point. The
shape of the 'top of the curve' depends on the rate of oil and gas use,
which in turn depends on employment and confidence. Recession can
flatten the top of the curve. Wars in the 'high volume' suppliers of
the
Middle East or Russia could also flatten the top of the curve.
Unexpected events such as collapse of mega-oil and gas fields can
steepen the shape of the downslope. The
story from 140
million years ago until the global peak of oil production in 2005 is
available here.
Outlook for 2006
Oil and gas demand continues to rise globally as gas and oil supplies
slowly decline, and population numbers in many areas continues to rise.
Most
demand is fed by burgeoning transport, as global car numbers climb.
With the exception of regions of Africa, tropical Asia and Southeast
Asia and tropical South America, all economies are effectively
oil-based economies. Oil products provide the majority of the motive
power for goods. Many economies also rely heavily on natural gas to
generate electricity. This dependance on gas for electricity supply at
peak times is becoming critical for more and more countries of the
world. Some countries, such as India, Iran, and Iraq, also rely very
heavily on bottled natural gas to be able to cook their grain and
bean-based foods. Demand for natural gas is surging. The UK and USA in
particular, are facing shortfall in domestic supply and an interim
period of 2006 - 2007 when domestic importation infrastructure
(pipelines and terminals) will likely be insufficient to meet peaks of
demand.
All around the world, countries are developing terminals for
increased importation of natural gas for electricity generation. Prices
are likely to remain high as competition for natural gas on the spot
market hots up, especially in winter. New nuclear power plants are a
long way off, and coal, especially 'clean burning' coal is becoming
shorter in supply and thus more expensive.
Crude oil supply and demand
Crude oil supply and demand will likely be very closely matched.
World oil reserve depletion rates are considered to average around 3% a
year. New projects in 2006 are believed to bring in an additional about
3.5% of supply. Growth in demand for oil is expected to be at least 3%,
barring recession. Some shortfall in supply, and thus higher prices,
seem inevitable at some point in the year. Temporary shortages may
happen early in 2006 if the weather in USA is
particularly cold. If not, prices may rise in the USA 'driving season'
later in the year.
More
're-configuring' projects to enable refineries to handle heavy and
'sour' crude are likely to be completed this year, but are unlikely to
be large enough to help convert 'heavy' and 'sour' crude into the
required marginal volumes of gasoline and diesel. Reduction in demand
due to recession is the key to moderate or lower oil prices. Whether or
not oil
prices increase to a higher band (say US$65-$US75), hover between
US$55- US$65, or fall to a lower band (US$45 - US$55) depends on
whether or not the vast USA borrowing boom slows down and
recession-induced unemployment
in USA and China goes up. There is a possibility that China may keep
oil prices up even in recessionary conditions by filling strategic
reserves - but the capacity and
filling schedule for these reserves isn't known, so can't be factored
in as yet. On last years experience, any supply 'pinch' in gasoline
(specifically) in USA should drift light sweet crude up by around
$US20, to around the US$80 - US$85 mark.
As always, Russia and Saudi Arabia are the two countries crucial to
high volume oil and gas supply (and to a lesser extent Norway is also a
significant volume producer). Both produce roughly 9 million barrels
a day of crude each. Russias daily production increases have been
dramatic over the last few years. But Russia may have already produced
more than 80% of its reserves, as far as can be told, but it is new
investment in technology and new management that is holding volumes -
for
the moment. When Russia commences production
decline is uncertain. The
commencement is probably not this year, but is likely within 6 years,
and decline rates may be significant (any
decline rate in a high volume supplier is important - but even a high
decline rate in a low volume supplier has no significant impact on
supply).
Iraqi production will doubtless hold, and
development will not be possible until the future, when it will be
helpful but not 'the answer'. Non-OPEC supply is likely to be fairly
static over 2006.
Saudi Arabia claims it will be able to reduce oil supply by a million
barrels a day in 2006 in order to underpin prices. This seems like a
fantasy, given the razor edge margin that exists in supply and demand
at the moment. Perhaps they know more about their ability to supply in
2006 than they are publicly revealing. In any event, they are at or
just past their likely production peak. So long as pressurisation of
their massive fields holds, Saudis are likely to maintain volume this
year. Straws in the wind around the secretive Saudi camp suggest
pressurisation is becoming insufficient to maintain full volumes. There
is no reliable information, but if true, results will speak for
themselves by the end of the year. All bets are off after this year.
Recession in 2006 staved off?
The USA backs the US dollar directly with both USA and Iraqi oil
(growing more valuable by the day), plus
an agreement with Saudi Arabia to denominate international oil sales in
US dollars only. Russia may accept Euros and other currencies
for oil and gas sales starting 2006. Iran may continue to accept euros
and other countries currency, and open an internet based oil bourse to
allow
other oil producers to do the same. This may weaken the US dollar
relative to other countries currencies - especially as the USA Federal
Reserve must continue to raise interest rates to attract buyers of USA
treasury debt notes. (The USA requires the rest of the world to loan it
$US1 billion per day to pay for oil imports, and the cost of securing
future Iraqi oil prospects is now $US5 billion per month.)
Continuing to price oil exclusively in US dollars will make oil and gas
cheaper for countries
needing to use their own currency to buy USA dollars to in turn then
buy oil.
Whether the market bids up the dollar price of oil and gas to reflect
the weaker
dollar will remain to be seen. A weaker dollar makes
imports of foreign goods more expensive, in turn helping USA domestic
manufacturers to survive and to a degree easing recessionary pressures.
The big question is whether or not the USA Fed interest rate
hikes will make home mortgage repayments difficult, or even impossible.
If
mortgage defaults reach a certain point, consumer spending drops,
businesses lose confidence, and the USA economy (at least) slides into
a recession. A USA recession means less consumer spending. This may
have global effects.
China may then be faced with selling its cheap manufactures in a
declining
USA market, and at the very time that its domestic market is not large
enough to 'take up the slack'. At the same time, the central and local
governments have made massive numbers of loans (nearly 47% of China's
GDP is put into 'investments' of all kinds) to create business
start-ups which are
not likely to find a sufficient market - or are simply uncompetitive
against existing Chinese businesses. China's governing clique believes
it must create 7% annual growth in industry to soak up immmigrants to
the cities and prevent social unrest in its huge population of
impoverished rural workers. Government-subsidised
businesses sell at artificially low prices and create domestic and
export market oversupply, driving down the profits of
already established Chinese manufacturing businesses, and making these
otherwise sound businesses less able to survive. But
market-distorting businesses founded on artificially cheap loans to
unwise enterprises are not the only artificial subsidy propping up some
Chinese (and South East Asian) business.
For decades China has subsidised
its businesses with cut-price oil and gas. It has further subsidised
industry by allowing it to escape the cost of preventing or mitigating
pollution produced by its coal burning power plants, and by its
virtually
unregulated factories. Environmental controls 'on the books' are either
unenforceable or not enforced effectively or regularly.
The true cost
of business includes not doing harm to a nations people and to the
peoples land. But this
cost has not been paid by China's business owners - the cost has been
transferred to
the poorest working people, through poor education, dangerous and
slave-like
working conditions, polluted air, polluted water, and food that can be
polluted with unacceptable levels of metals (for example arsenic and
fluoride from coal) and overuse of pesticides. Estimates are that
identified costs of pollution cost 8-12% of GDP. These conditions are
causing increasing unrest in China, and the judicial system seems
poorly able to
resolve injustices.
It is possible that China will aggressively institute 'world's best
practise' in mitigating and preventing environmental pollution, and
educate its populace to insist on an open, fair and accessible justice
system, a healthy environment and healthy working conditions for its
people. But it is extremely unlikely. As the rest of the
industrialised world found out from the 1960's onward, these problems
can be faced and
systematically overcome. The danger is that as these
problems worsen, China will not invest in overcoming them, will not
stop helping to create economically unviable business start-ups, and
China
will also slip into a recession made worse by unresolved environmental
and social grievances. Recession means loss of markets, business
failures and slowdowns, bankruptcies, and disillusionment in the middle
class.
Protests over illegal land confiscation, punitive taxation of
ordinary people, corruption and pollution continue to increase in
China.
As China (and businesses) is basically run directly or
indirectly by the military, the
more
xenophobic military elements may use the situation to promote a
catastrophic military 'final
solution' to China's reluctance to deal with its social, political
and environmental challenges.
Summary
Aside from 'wild cards' of a sneak Chinese neutron bomb or biological
warfare attack on USA, global bird influenza pandemic, a sudden and
irrational collapse of the USA dollar, steep collapse of the Saudi
Gharwar oil field, insufficient snowfall in the mountains of Eurasia
and North America followed by prolonged drought, or other possible but
improbable event, economic
conditions are possibly likely to be like those of 2005, but perhaps
with a 'harder edge'.
The harder edge is likely to be increasing USA interest rates, slowing
economic activity, lower profits, increase in
business failures, lower tax receipts, cuts in government programmes,
increase in personal bankruptcies, slowing of
speculation in house buying, lowering house values, slipping value of
the USA dollar, derivatives wobbling (if not crashing), holding
of value of gold and of the euro, slipping economic activity in Europe
with a higher euro value and higher interst rates, razor edged margins
of supply of natural gas
in
those countries that are dependant on it, seasonal spikes in natural
gas, petrol and diesel prices, and a move to heightened
caution in business investment and planning.
There is likely to be a creeping popular understanding that things are
not quite right. In the event of a gas supply/demand mismatch in a
severe UK winter, dramatic
events may result in a sudden popular understanding.
But even although the warning flags have been raised in Parliaments and
congresses
around the world, it is a very safe prediction that no government will
publicly, actively, positively, and effectively start to plan and
provide for the fading of the oil economy and the rise of the solar
economy during the course of 2006.
January - Saudi Arabia - Saudi
Aramco's operating plan is to increase the number of development wells
drilled by 61% relative to last year. These wells are required to
"support current production" and to accomodate future increase in
demand. The Saudis plan to double the size of their fleet of offshore
drilling rigs.
January 1 - East Eurasia - China - New energy laws come into effect.
These include subsidies and tax incentives to develop renewable
energy - wind power, solar energy, biomass, and other renewable
sources. Renewable biomass-based power fed into the grid will be based
on a small premium above the regional price of de-sulphurised coal
power. Subsidies decline annually, and stop after 15 years a project
has been running. Wind power will be bought as long as it is at or
below conventional grid power prices. Solar, wave, and geothermal power
will be bought so long as projects are economic and are reasonable in
pricing. China aims to derive 15% of its power supply from renewable
sources by 2020.
January - China now builds one coal-fired electricity generating plant
around every 10 days. Most are relatively inefficient
'electricity-only', and do not re-cycle heat for nearby industrial
users.
January - China now builds one gas-fired electricity
generating plant
around every 3 days. Most are relatively efficient
'electricity-only', and are much less polluting and release
less carbon doxide into the atmosphere.
January 1 - USA - Almost 40% of Gulf of Mexico gas production (an
important component of the US winter heating supply) remains shut down
due to the 2005 hurricanes. Natural gas storage levels are not as high
as normal for winter (1.2% lower than 2005, an unusually warm winter).
Imported compressed natural gas prices are high due to 'tight supply'
in Europe. If january is cold,
prices will almost certainly spike high.
January
1 - West Eurasia - Europe - Russian gas firm Gazprom cuts its gas flow
to Ukraine by 20 million cubic meters a day (Ukraines own gas needs) as
leverage to solve a dispute over how much Ukraine should pay for
Russian gas. (Russia is seeking current market prices from Ukraine, but
Ukraine wants to continue to be paid in a fixed volume of gas,
regardless of current market prices.) Gazprom sends 75% of its gas
through Ukraines gas pipeline to Europe under a transit contract.
Ukraine replies by using 67 million cubic
meters of gas bound for Europe for domestic purposes. Russia claims up
to 100 million cubic meters have been "stolen".
January
2 - West Eurasia - Europe - gas supplies to Hungary are down by 40%,
France, Austria, Romania and Slovakia by about 30%, Italy is down 24%,
and Poland 14%. All due to the cut in gas being transited through
Ukraine from Russia. Gas reserves in these countries vary - Italy has
15 days reserves ( 6 billion cubic metres). Gas is used for about 23%
of west European energy needs. Some European countries - for example
the Netherlands - rely on gas for 50% of their energy needs. Russias
Gazprom supplies about a quarter of Europes total consumption (domestic
plus imported gas), and makes up about a third of the Eurozones
'foreign' imports. While Germany receives 30% of its gas from Russia
via the Ukraine, it is one of the few countries that can source
alternate supplies, mainly from Norway. Belgium does not use Russian
gas.
Netherlands is self sufficient in gas, and most western European
countries use Dutch, Norwegian and UK gas, plus LPG from Algeria, Qatar
and Nigeria for the greatest part of their supply anyway.
Of the gas that is imported to supplement domestic supplies (chiefly UK
and Netherlands) in the EU (west, central and east europe, excludes
Norway, which is not a member) as a whole, around 45% of its gas from
Russia, 27% from Africa, about 24% from Norway, and 1.7% from the
middle East.
January 3 - Oil prices jump sharply to US$62.40
January 3 - West Eurasia - Europe - Russia restores gas flow volume to
Europe/Ukraine.
January - Hungary - badly affected by its dependence
on Russian gas, Hungary signs an agreement with Croatia to build an LNG
terminal on Croatia's Mediterranean coastline to allow imports of
Algerian and other nations gas to Hungary (and Croatia).
January 3 - Africa - Nigeria - Shell ships the first crude oil from the
Bonga deepwater oil and gas field for the first time, following its
november 2005 start-up. Crude oil production is estimated to be 200,000
barrels per day over the course of 2006. As Bonga (like Agbami) is 100
kms off the coast, it is relatively secure from attack by Nigerian
militants.
January 4 - Europe - UK - the continued
high gas prices results in some gas-fired electricity generating
stations switching to gasoil and
kerosene. This sharply increased demand reduces refining capacity
available for
petrol and diesel production. The result is shortages of wholesale oil
for heating, and localised run-downs in petrol stocks, causing delays
in re-supply. Supplies are very tight, but are expected to ease.
January 7 - Europe - Netherlands - Shells Pernis oil refinery in
Rotterdam is in trouble again,
and cuts production of refined product (petrol and diesel) due to a
failure in the steam production unit. Pernis processes 418,000 barrels
a day, and is Europes's biggest refinery. Petroleum on the spot market
will undoubtedly climb, and prices to USA, 'shorted' by hurricanes and
committed to refining winter fuel rather than increased gasoline, and
as a result increasingly dependant on imports of refined gasoline from
the spot market (rather than long-term fixed price contracts), will
surely face higher petrol prices. With refineries running at capacity
around the world, any disruption to a major refinery has ripple effects
due to lack of spare capacity anywhere.
January - Indonesia - Balongan refinery will have to close its 83,000
barrel a day residual cracking unit in february for repairs to the
catalytic cooler. Current problems at the refinery mean Indonesia may
have to import an additional 800,000 barrels of refined products in
January. Indonesia currently imports around 9,000,000 barrels of
refined product (mainly petrol and diesel) a month.
January - India - The government resolves to build a 5 million tonne
(37 million barrel) crude oil reserve. This amount will supply Indias
needs for 5 day, far below the International Eneergy Agencies
requirement that countries hold 90 days of imports. India burns about
2.6 million barrels of oil a day, and 2 million barrels a day of that
is imported. The reserve is expected to take 9 years to complete and
fill.
January 18th -
Russia - Record cold snap, electricity consumption
hits a record consumption of 146,000
megawatts. Gas supply to some mid European countries reduced to
conserve Russian domestic supply.
January 17th - Iran -
cold weather drives up natural gas consumption. Iran cuts gas supply to
Turkey from 26 million cubic metres a day to 5 million cubic metres a
day.
January 21st - Russia - New record 15,760 megawatt of electricity use
in Moscow reached as the intense cold continues. Electricity to
industries in and
around Moscow is cut back to reduce the load. Residential consumers are
urged to minimise electricity use at peak times. One power station runs
low on gas, and resorts to fuel switching, burning, coal, diesel, and
finally peat.
January 20th - China - gas
prices rise as part of government
progressive introduction of 'true market' pricing of fuels. A
15-kilogram bottle of LNG now costs 115 yuan
(US$14), up from 95 yuan (US$12) 3 weeks ago. Many cities in southern
China have a shortage of bottled gas as rising wholesale prices squeeze
retailers profit margins and retailers reduce their stock. Use of clean
burning LNG is being promoted as way of combatting Chinas air
pollution,
largely from burning coal with little in the way of effective
smokestack pollution control.
January - Central Eurasia -
gas pipelines from Russia into Armenia and
Georgia are sabotaged by persons unknown. Some claim the explosions are
the result of the bad state of repair of the pipelines.
January - Propaganda war
over Irans supposed intentions to create a
nuclear weapon intensifies as USA seeks to have Iran referred to the UN
Security Council for "shoot myself in the foot" sanctions, and Iran
baldly states the obvious - it will hurt ultimately USA more than it
will hurt
Iran. USA does not buy Iranian oil, but suddenly removing a significant
part of the 2.5 million barrel a day Iranian oil production from the
market would cause competition for the remaining supply and initially
raise global oil prices 20-40%.
China, an important long-term customer for
Iranian oil and gas (and
supplier to Iran of sophisticated 'silkworm' anti-missile missiles)
plays the
'cool head'. China hopes to draw Iranian oil from a pipeland overland
through Kazakhstan, via China's
new Kazak oil concessions. The pipeline intersects with a Russian
pipeline into/out of Kazakhstan.
US public deployment of 'bunker-busting' weapons may be aimed at
illustrating to Iran that any oil and gas exports it makes cannot be at
the expense of future reduced Iranian supply to the west. It may be
illustrating that a direct or indirect threat to other Middle East oil
and gas supply will not be tolerated. It may be illustrating that a
direct or indirect threat to continued substantial denomination
of oil in dollars will not be tolerated. USA has already
illustrated the effect of targeted missile attacks in neighbouring
Iraq. Infrastructure is expensive, and takes a long time and vast
amounts of money to repair.
January - Nigeria -
insurgents kidnap several
oil workers at Shell's 120,000 barrel a day E.A. offshore oilfield. The
platform, 25 kilometres off the coast, temporarily closes to
safeguard its workers. A few days later, insurgents kill 15 soldiers
with rocket fire, then blow up the Benisede oil pipeline pumping
facility, cutting oil exports by 100,000 barrels a day.
A total of 220,000 barrels of Nigerian crude are
shut out
of global trade, but not as much as in previous
years.
Nigeria is the worlds 8th largest oil exporter,
exporting about 2.6 million barrels of oil a day, and is soon expected
to be number 7 in the world. Nigeria produces 'sweet' light oil,
currently in high demand due to limited global refinery capacity for
heavy and sour oils.
Both Europe and USA have significant reliance on
Nigerian oil.
An insurgent group,
MEND, says it will intensify attacks in february, aimed at reducing
Nigerias oil exports by a third. MEND says its ultimate goal is to stop
Nigerian oil exports entirely.
Nigeria has huge oil revenues, but most of the money is taken by
utterly corrupt officials. Little gets spent on infrastructure,
development, or social needs. The vast bulk of the population are
impoverished.
Corrupt oil workers and corrupt military
collude with local delta gangs
to 'bunker' oil - divert oil into barges, which is then sold off the
coast to tankers. Cosmetic efforts to 'suppress' the delta gangs make
the problem worse, as the corrupt military task force tries to take
over the 'bunker' trade for itself, and is resisted by other elements
of the ministry and by local gangs/political/insurgent/ethnic groups.
January 23rd - oil prices briefly hit $US69 a barrel.
January 23rd - USA - gasoline in USA is about $US2.30 a USA gallon.
January - New Zealand - Diesel prices are NZ$1.06 cents/litre (US
72.5 cents/litre), farmers complain the fuel cost for their tractors is
now 63% higher than two
years ago.
January - USA - Hurricane Katrina and USA's declining natural gas
production caused a
supply shortfall. Fertiliser companies with existing fixed prices for
natural gas took the opportunity to stop producing nitrogenous
fertiliser and simply re-sold the gas to the supplier for a tidy
profit. Shortening of the nitrogenous fertiliser supply causes prices
to
drift upward.
Farmers planning spring maize and soybean sowings currently face an
increased cost of sowing of about 8%, mostly due to the rise in the
cost of nitrogenous fertilisers. These fertilisers are made from
natural gas. For crops with a high nitrogen demand, such as maize, the
cost of fertiliser is about 30% of the direct growing costs. Harvest,
drying,and transport costs are additional. If maize has to be dried
(using natural gas) costs are much higher.
January 24th - Saudi Arabian oil minister says "Fundamentals today are
in excellent shape and inventories are at
reasonable levels, supply plentiful, demand is well-met by
supply...There is no reason why
prices should be rising - other than these tensions"
January 24th - Russia - Gas supplies to European customers are still
curtailed. Countries short of gas cut supplies to industry in favour of
households. Work is under way to restore gas to Armenia and Georgia.
January 23rd - Saudi oil minister Ali
al-Naimi visits China on a sweep of the Asian region that takes in
India, Pakistan, and Malaysia. The Asian region takes 60% of Saudi oil
exports.
January 24th - Saudi
Arabia and China sign
an 'accord' on oil, natural gas, and
minerals between the two countries. Details are few, but seem to
involve Saudi involvement in 'energy cooperation' and 'infrastructure',
with "specific agreements" due to be signed between the two nations
state owned oil companies. Reports suggest China and Saudi Arabia plan
to jointly build a 25-30
million tonne strategic crude oil storage
facility in China's Hainan province, with a contract for an associated
oil refinery and natural gas storage facility.
China and Saudi Arabia have cooperated in large-scale energy projects
for the last 3 years. Saudi Aramco is involved in a joint venture with
Sinopec and Exxon Mobil in building an oil refinery in
China's Fujian province, and is working in a joint venture with China's
Sinopec to build a refinery in Qingdao city. Sinopec is engaged in
a partnership with Saudi Aramco to explore for gas in south of the
giant Ghawar oil field.
January - China
- imports of crude oil from Saudi Arabia now run at
more than 22 million
tonnes per year. This is 28% higher than the same time last year. Saudi
Arabia is the single largest supplier of China's
oil imports of roughly 130 million tonnes a year. Angola is China's
second largest supplier.
January - India - Saudi Arabia is the largest supplier of India's oil
imports. Saudi Arabia invites Hindustan
Petroleum and the Indian Oil Corp to tender for part ownership of a new
Saudi Aramco oil refinery at Yanbu,
on the Red Sea.
January - Japan remains Saudi
Arabias single biggest customer. South
Korea is second, India is third, and China fourth.
January - Kuwait's oil reserves, officially about 99 billion barrels,
are finally acknowledged in an internal document of the Kuwait
Petroleum Corp to be lower, with about 48
billion barrels (proven and non-proven) remaining to be produced.
Burgan, one of the biggest oilfields in the world, is said to have
around 15 billion barrels of oil. True reserves (already produced and
oil in the ground not yet produced) may be somewhere in the region of
85 billion barrels.
January - Spain - Repsol YPF oil and gas group
reveals it will have to remove 25% of its previously reported proven
reserves.
Over half the revisions are in its Bolivian concessions, where 658m
barrels of oil
equivalent (BOE) of gas and oil have been removed from the 'proven'
category of reserves. It nows books its global reserves as 4.93 billion
barrels of oil equivalent (oil, liquids, and gas).
January - China -Shortage of natural gas brings most of China's
gas-fired electricity generation power
plants to the point of closing. A total of 4 Gigawatt of
electricity generation is idle in east China due to lack of gas for the
turbines, in spite of being at the terminus of the countries biggest
gas pipeline. Gas turbine power stations recently completed in south
China remain unused due to lack of gas.
January 25 - China - China
launches its first domestically produced LNG
tanker, with a capacity of 147,200 cubic meters. China wishes to import LNG in volume, and is planning 16
LNG facilities throughout central, northern, and southwestern China. So
far, only 2 have long term gas supply contracts in place, with the
Australian LNG contract being for 3 million tons of LNG a year. The
facilities in Guangdong and Fujian are due to commence operation in
June.
January - LNG is in demand all over Asia for power generation and
cooking fuel. World shipyards have orders for 126 natural gas tankers,
taking the world
fleet to 310 ships.
January 27 - Turkey - gas supplies from Iran have now increased to 10
million cubic metres a day, enough for households. Some industries have
supplies reduced or cut off temporarily. Around 75 million cubic metres
of LPG shipped in from Algeria is expected to restore supply to near
normal.
January 26 - Itay
- gas consumption hits a record 420M cubic metres. Russia, Algeria,
Libya and the
Netherlands provide the maximum possible amount, 230m cubic metres, and
local production provides its maximum of 20m cubic metres. It is
not enough. 170m of stored gas is also used, resulting in the limits of
the gas distribution capacity being reached. Cuts are made to
industrial users gas supply, and to some domestic heating supply. Some
electric power stations are switched from natural gas to fuel oil.
Italy just squeaks through the crisis. Italy is heavily reliant on gas
to generate electricity.
January 25 - price of oil -
crude is now
$US64.20
January 27th - The International Energy
Agency (IEA) announces it is ready to coordinate release of emergency
oil stocks if the Nigerian or Iranian
supply is disrupted.
January - USA - Ford motor company announces it will dismiss 30,000
employees and close 14 car production plants over the next 6 years.
General motors makes a loss of over $US86 million. One quarter of
General Motors cashflow comes from sale of gas-guzzling SUVs and
minivans.
January 26th - USA - President Bush said he will no longer spend
taxpayer money to prop up SUV producing Ford and General Motors
Corporation, but would encourage them to build "a product that's relevant."
Clearly, Bush is conceding the blindingly obvious - the American gas
guzzling cars are irrelevant in an era of declining oil reserves. They
are dinosaurs heading for extinction.
January - USA
- President Bushs state of the nation address spouts
the same
old misleading garbage on 'new' sources of energy releasing USA
from 'dependance'
on the Middle East for oil. The USA imports around
584 million barrels of oil from Canada every year, and about the same
amount from Mexico. USA imports a little less (548 million barrels a
year) from Saudi Arabia, then 475 million barrels from Venezuela and
about 400 million barrels a year from Nigeria. USA's Iraq supplies 256
million barrels a year, and Angola and UK 110 million barrels a year.
Smaller amounts come from Algeria and Kuwait.
So the USA is broadly similarly heavily dependant on Canada, Mexico,
Venuezuela, Nigeria and Saudi Arabia for its imported oil. Hardly
dependant on the Middle
East. Of these countries, Canadian production cannot be increased,
Mexico's giant Canterell field has started to decline, Saudi Arabia is
sound and Venuezuela is sound, and Nigeria may well become so unstable
oil exports are severly cut.
There is no excess
capacity in the world to make up for the
possibility of a sharp drop-off from Mexico, or a 30% cut in exports from
Nigeria. There is no 'spare' gas capacity within pipeline reach of USA.
There is no alternative fuel available to meet the supply/demand
mismatch that is slowly evolving. Alcohol (a relatively low energy
fuel) from crops generally takes more energy to produce than is
harvested. Bush
knows this, and knows there is no realistic plan 'B' involving
'cheap' energy in abundance. But gives the impression there is.
January - quote of the
month:
"Current U.S. energy policy and the
President's Advanced Energy
Initiative are too modest and overly focused on the goal of increasing
domestic production of oil and alternatives to support increasing oil
consumption. This is futile and
self-defeating because U.S. oil
production is in permanent decline and world oil production will follow
- perhaps disastrously soon.
...Technology and alternatives are important. However, unless we also
use less oil, we won't reduce America's oil imports. Delayed
gratification and self-sufficiency are traditional conservative values.
That is why the next conservatism should champion policy changes to use
less, not more oil through conservation and energy efficiency.
Conservatives should recognize that unless
we have a national energy
conservation program with the commitment, breadth and intensity of the
Apollo moon mission and the Manhattan Project to create the atom bomb,
our country is unlikely to achieve the goal of replacing "more than 75
percent of our oil imports from the Middle East by 2025" and
even less
likely to break our oil addiction. "
- Roscoe G. Bartlett, Republican Senator
(emphases added)
January - high natural gas prices for electricity generation results
in the demand for wind turbine power generators intended for commercial
wind power supply to be unmet. The cost of these wind powered
generators goes up.
January - The International Energy
Agency forecasts an increase of 14.5% in the price of natural gas for
2006, relative to 2005.
This gives an average residential price of $US14.57 per
thousand cubic feet.
Second
Quote of the month:
"The proven world gas reserves as of 1 January, 2001 are 164 trillion
cm [cubic metres]. It is believed that these reserves will be enough
for 62 years.
Russia and Iran have 50% of the world's natural gas reserves, while the
territory of Russia, Kazakhstan, Turkmenistan, Uzbekistan and Middle
East has 70% of the world reserves."
- Institute of Analysis and Prognostication Kazakhstan-USA, a
Kazakhstani
strategic studies institute
January - Georgia - the pipelines supplying Georgia with Russian
natural gas are still not yet repaired. Russian gas routed to Georgia
through neighboring Azerbaijan was severely cut back due to a problem
with a compressor (according to Russia). Lack of gas for electricity
generation causes supply failure in all of Eastern Georgia. The
government hands out firewood and sells cheap kerosine. After a few
days some electricity is restored in the east, but electricity is
rationed in the Georgian capital Tblisi. Iran promises to provide
Georgia with 4 million cubic meters a day, also via Azerbaijan. A
Georgian official says once Iranian gas begins flowing, "then Russia
won't see the usefulness of the energy blockade any longer." The
Georgian President hints that Russia is punishing Georgia for its
pro-western stance by taking longer than necessary to repair the gas
pipeline.
The Georgian case illustrates the danger of dependence on
centralised power supply from a few large volume pipelines.
January - USA - Unusually mild winter results in reduced natural gas
demand. High gas prices at the start of winter result in switching to
electricity, and other fuels. US natural gas supply remains favorable,
stored supplies being over 20% higher than the five-year average
for this time of year.
February - USA
- the 727 million barrel capacity strategic petroleum
reserve remains at around 684 million barrels stockpile. Around 20
millions barrels of sweet crude 'loaned' to USA refineries post
hurricane Katrina or sold for undetermined reasons has still not been
replaced. Congress authorised the reserve to be increased to 1 billion
barrels, but so far, it hasn't been implemented.
February - USA - nearly 363,000 barrels a day of crude are still
shut-in from last years hurricane Katrina damage.
February 10 -
USA - average daily net oil imports (crude oil plus refined
petroleum) are 13,396,000 barrel per day.
February - Nigeria - crude production is still down, by about 26%.
February - Iran - crude
production is down by 40,000 barrels a day,
due to high rates of depletion in existing fields and difficulty
selling its existing stocks of heavy Soroush
and Nowrouz crude. These two offshore fields have been shutdown,
and are expected to re-start in may.
February - Mexico - Mexico's oil production for the month averages
3,747,000 barrels per day in total.
February - ASPO - The Association for the study of Peak oil and Gas
estimates world 'regular' (conventional, i.e. cheap) oil production for
2005 at an average of 67 million barrels a day, and 80 million barrels
a day if heavy oils, deep water, polar oil, and natural gas
liquids are added in.
February
16th - UK - an accident at the Bravo gas platform off the coast of
Yorkshire interrupts operation of the Rough gas storage facility, where
the UK stores the vast majority (82%) of its
long term gas supplies. (The Rough facility can also meet about 37% of
the peak demand load.) The Rough facility is not expected to be back
online until early may.
February 18th - USA - record cold weather in Colorado increased peak
demand for electricity and gas heating, causing the load on the power
grid to suddenly increase. The grid was closed for a short time to
prevent collapse. Peak load power is generated in gas fired plants.
Insufficient gas supply to meet the demand for peak load power
generation was at hand partly due to unplanned demand, partly due to
freezing at the wellheads, partly due to breakdowns at local coal-fired
power plants, and possibly partly due to insufficient pressure from the
fading Colorado natural gas wells.
February 2nd - Saudi Arabia - Saudi terrorists attempt to penetrate
the extensive security surrounding the Abqaiq oil export facility. The
facility
process 5-7 million barrels of crude a day, seperating gas from the oil
and removing hydrogen sulphide in readiness for shipping. This latest
terrorist attack on Saudi oil facilities fails at the outer perimeter.
The terrorists blow themselves and some security guards up 1.5
kilometers from the main gate. Oil prices on the New York bourse jumps
to $US62.50 on the news.
February 28th - light sweet
crude is now US$61.41
February 24 - USA - US net daily petroleum imports are down about 8%
relative same period last year, roughly one million barrels a day.
March 9 - Mexico - Presidential candidate in the forthcoming election
announces an intention to stop drilling for oil in
deep water and concentrate soley on land and shallow water
reserves. Critics say this is short sighted, as production from
deep water will take at least 10 years from commencement of exploratory
drilling. Observers say that this is one means of preserving some
oil for Mexico's future domestic needs, and deep water production
in the hurricane-prone Gulf of Mexico ought to wait until oil prices
justify the high cost of extraction in that environment.
March 14 - Mexico - President
claims a deepwater exploratory well
(Noxal) indicates a massive find of gas and oil. Industry observers
dismiss the claim as more related to the upcoming election than reality.
March 15 - Mexico - President Fox announces US$37.5 million will be
invested over the next 20 years to develop the sprawling Chicontepec
on-shore oil field. It contains 18 billion barrels of 'oil equivalent'
- oil, gas, and gas liquids. How much will be recoverable is uncertain,
as it is a difficult field. The field is low permeability, and sprawls
across 3,800 square kilometres. The aim is to produce 1 million barrels
a day from this field, to replace the declining Canterell field. This
would entail drilling 20,000 wells, four times more wells than exist in
the entire of Mexico at the moment. Chicontepec contains 38% of Mexicos
hydrocarbon reserves.
March 12 - Kuwait - discovers around 35 trillion cubic feet
of natural gas, with about 60-70% of the reserves recoverable. The new
"free gas' reserves - not associated with an oil play - were discovered
at four fields, and in very large quantities
at the Sabriya and Um Niga fields.
Initial
production is expected by the end of 2007. Kuwait currently produces
one million cubic feet of natural gas a day, most of which is used in
power generation. Kuwait had
entered into initial talks with a view to importing natural gas from
Iran, Iraq and Qatar. The new gas find is expected to cover Kuwait’s
gas needs
for electrical power generation, and with enough left to use in
petrochemical industries.
March - Kuwait
- The Kuwait Oil Company announces it has found an estimated 10 to 13
billion barrels of light crude oil in
the north, in
the Bahra and Rawdatain fields. 31 reservoirs out of 105 known
reservoirs have been explored. Most of existing production is heavy
oil. The light oil discovery will add
10% to the country’s claimed oil reserves of about 90
billion barrels.
March - India - India hosts Russian Prime Minister Mikhail Fradkov
on a state visit and proposes Russia has an involvement in the gas
pipeline projected to take Iranian
gas to Pakistan and then on to India.
March 23 -
Russia - Russia's president Putin visits Beijing and
discusses building a new gas-pipeline system, to be called the Altai,
to deliver gas from western Siberia to China. This pipeline, plus
another from eastern Siberia (the East Siberia-Pacific Ocean Pipeline,
or 'ESPO' pipeline) could deliver 80 billion cubic meters of
gas a year to China. The route and the gas fields that might be used
have not been determined. The cost for this proposal is estimated at
about $US10 billion. Russia already supplies 25% of West Eurasia gas.
March - Russia
- Gazprom explores possibly extending Russia's
Blue
Stream pipeline that runs from Russia to Turkey. It is suggested
the pipeline be extended to Italy, with supply to other countries such
as Greece en route. Gazprom
hopes to enter the retail gas supply and distribution business along
the Mediterranean as part of the deal. Gazprom suggests the pipeline
could one day take gas as far as Spain. It could also supply Israel.
The pipeline will mean Russia would no longer have to route gas bound
for Europe through
Ukraine.
It also enable Russia to buy Turkmenistani gas to re-supply to the
European market (existing contracts call for gas from Turkmenistan
to Russia to eventually reach 70-80 billion cubic meters a year).
Russia is slowly becoming a Eurasian energy major, albeit new giant
fields are in extreme environments and far distant from major markets.
Significant supply from these fields is many years off as yet.
The Sakhalin and, to a lesser extent, East
Siberian gas fields will
eventually supply east Eurasia (China, Korea, and Japan) and perhaps a
little to North America.
Ultimately, northwest Russian fields on the Barents sea will link with
the planned North-European pipeline from the Yamal field in west
Siberia (still undeveloped) to supply West Eurasia by pipeline (Germany
and adjacent), and
possibly UK.
The Barents Sea fields may also supply Canada and the USA Atlantic
coast by LNG tanker. Canada is negotiating to promote the building of a
gasification plant at Petersburg to ship Barent gas to Quebec.
Norways Statoil is promoting a gasification plant to be built onshore
from the field (at Murmansk) capable of liquefying 25-27 billion
cubic meters for export as LNG. Linking with the proposed
North-European pipeline will come later. No final decisions have been
made.
West Siberian pipelines already supply parts of Europe, and Turkey,
with 80% of the gas currently routed via Ukraine.
Extensions to the existing Blue
Stream pipeline will directly supply
the Mediterranean with Russian gas as far as Spain.
Russia is well placed to buy Turmanistani gas now (rather than the
Turkman waiting for the Chinese to build a gas pipeline to
Turkmenistan),
Gazprom, currently deeply indebted, aims to be a retailer in the
countries it supplies, as well as
a wholesaler, the same as other major energy (oil) companies today. It
is looking for partners with capital and technological know-how to form
joint ventures.
Russia - Domestic gas
consumption continues to increase. Most Russian
electricity in Russia is generated in gas powered electricity
generation plants. Russia's gas-fired electric generators have an
average efficiency of 33%. Europe's gas-fired electric generators have
an average efficiency of 50% - 55 %.
Over 90% of residential and industrial consumers of gas are un-metered.
Russia has abundant coal, but Russia is almost the only country in the
world where gas is cheaper than coal.
Russia - It is
estimated that the declining western gas fields may be
insufficient to supply both Russian domestic users and European
customers by winter 2008.
Russia's major large gas fields in west Siberia are mature and
declining. The deputy head of Gazprom notes that required new capacity
to meet existing needs will not be met until deposits in the north
Yamal Peninsular begin to come on stream about 2012. (The only other
reserves of note are the Urengoi
and Zapolyarny fields gas fields, but these contain 'wet' gas and
heavy hydrocarbons, and are thus very expensive to develop). In
the interim, the last of the largest
deposits (25-30 billion cubic meters of natural gas a year), the
Yuzhno-Russkoye field, in
Nadym-Purtazovsky will come onstream in 2008. But it will not be
enough. In spite of Gazprom's plans to add 45-55 billion cubic meters
of gas from independants such as TNK-BP and LUKoil operating in the
Nadym-Purtazovsky region to the Gazprom pipelines, the necessary
pipeline infrastructure will not be in place until about 2009.
It is likely that the demand for natural gas in Russia and parts of
Europe in the peak winter period will not be able to be met in the
coming few years.
March - Russia - Belarus - Russia triples the price of gas to its close
ally, Belarus. Former Soviet satellite states have enjoyed artificially
low gas prices since gas discovery in the former Soviet Union.
March - Algeria - Russia - President Putin signs an exclusive agreement
to help develop certain Saharan gas prospects in return for access to
Algerian gas liquification technology.
March - UK - A very mild winter has meant demand for gas for
domestic heating has been lower than would be expected in a normal
winter. UK escapes a gas crisis.
March - UK - short term gas
storage may reduce to198 gigawatt hours
at current usage rates. Daily gas use at this time is around 350 to 389
million cubic metres a day. Draw required from short term storage
thereafter could be higher than the actual amount available. Medium
term storage holds about 7 days worth of gas at current consumption
rates. Gas from the long term store is unavailable.
Supplies direct from the North sea fields are insufficient as the
fields are declining.
A 50% chance of a phase one gas emergency by the end of march now
exists. At that point, large industrial users will disconnected. It is
hoped that additional supplies of gas from the continental
interconnecter will be available in time to avert shut downs. Most gas
in the continet is sold on contract, and little is available for the
spot market, even when prices spike high. The quantity 'required' by
the UK may be unavailable at almost any price at this time.
March - UK - gas prices within
UK reach 255 UK pence a therm (a therm is 100,000 Btu's), or the
equivalent of US$33
per million British thermal units. World spot prices are US$7.15
per million Btu's.
March - UK - Power stations used 15% less gas this last winter, due
to price constraints. Gas fired
power stations emit an average of 99 tonnes of carbon for every
Gigawatt hour of
electricity they generate.
Conversely, power stations used 13% more coal. Coal-fired power
stations emit 238 tonnes of carbon for every Gigawatt hour of
electricity they generate. This is because burning coal is essentially
burning 'pure carbon', whereas burning gas burns both carbon and
hydrogen.
The increased use of coal and fuel oil for electricity generation
increased UK carbon emissions rose by 1,687,853 tonnes (nearly 7%)
between the previous winter and this last one.
"In
the deserts of Saudi Arabia, the permafrost vastness of Siberia’s Yamal
Peninsula, in the emerald green islands of the Indonesian archipelago,
in the depths of the ocean off West Africa and the ancient Persian
plateau lies the gas reserves of the planet, the future of the next
world energy order. Governments spend untold billions to control
reserves, built pipelines and regas plants, lease fleets of LNG
tankers. Like crude oil, gas is the currency of power in the new
millennium.
As
the grim reality of Peak Oil dawns on an increasingly gas guzzling
world, the smart money and Big Oil have rearranged the chessboard of
international finance and power
politics to stake their claim
to the
priceless reserves of the only hydrocarbon fuel that complement crude
oil. Power generation, electricity, winter heating and industry are all
derived from gas that, sometime after 2020, could emerge as the
planet's dominant energy source....
Pipeline
technologies have now linked the world gas markets for the first time
in history. The advent of $60 crude oil, intercontinental pipeline
networks, the emergence of LNG and sophisticated derivatives market to
hedge price risk have created a truly gas market. It is no coincidence
that the Russian - Ukraine spat led to nightmares in Western Europe's
most powerful boardrooms and diplomats chancelleries, or that Big Oil's
multi-billion dollar LNG bet in Qatar is defacto underwritten by the
White House, or that bulk methane has made the President of
Turkmenistan
one of the most potentate in Central Asia or that Gazprom, not
Microsoft or GE, will be the most valuable company on earth one day.
The
lessons of Hugo Chavez and the 1974 Arab oil embargo mean the US will
never allow the Ayatullah’s Iran with the world’s second largest gas
reserves to dictate its energy supply ... Gas is the reason the spark
spread will one day become as critical a metric of the world’s
financial heartbeat as the North Sea Brent or West Texas Intermediate
futures price. .. Big Oil wrote the
history of the twentieth century. Big gas will define the secret
history of the new millennium."
- Matein Khalid, Dubai Investment
Banker, writing in the Khaleej Times, April 2006
March - Russia - China - USA - the chairman of the US Senate's
Foreign Relations Committee unveils an 'Energy and Diplomacy Act' to be
introduced in the USA Congress.
This extraordinary move has come about because USA is beginning to
admit its dependance on 'foreign' oil when the rest of the world also
demands a share of what is a limited resource, and USA is an energy
hog.
"Chinese and Indians, with one-third of the world's people between
them, know that their economic future is directly tied to finding
energy resources to sustain their rapid economic growth. They are
willing to negotiate with anyone willing to sell them an energy
lifeline ... The demand for energy from these industrializing giants is
creating unprecedented competition for oil and natural gas." When the
senator says "negotiate with anyone" he means China and India are
willing to negotiate with Iran, Russia and Venezuela.
The proposed legislation would "offer a formal coordination agreement
with China and India as they develop strategic petroleum reserves. This
will help draw them into the international system, providing supply
reassurance, and thereby reducing potential for conflict." Presumably
this is aimed at Chinese and Indian cooperation with Iran
and Saudi Arabia in developing joint venture oil and gas field
operations. The 'coordination' agreement referred to is presumably
the beginning of an attempt to arrange the 'orderly marketing' of the
major oil and gas fields, a sort of consumer bizarro 'reverse OPEC'.
The "International system" referred to is presumably pricing in US
dollars. "Supply reassurance" is presumably a reassurance by the
parties that the USA will continue to be supplied with around 20% or so
of the energy resources of the entire world.
This idea of 'orderly marketing', with allocations no doubt based on
historic use (so that USA can take an unfair share) stands in contrast
to the 'traditional' approach, as outlined by an USA official in 1992,
just after the first Gulf war in 1991. In 1991 Saddam
Hussein was evicted from Kuwait by blockading all ports, systematically
flattening Iraqi infrastructure such as power plants and pipelines, and
carpet bombing his under-equipped army. Hussein was left with no option
but to withdraw back to Iraq. The whole episode screened live on
television.
“What the American people
learned from the Gulf war is that it’s a helluva lot easier and a
helluva lot more fun to kick ass in the Middle East than it is to make
any sacrifices to limit America’s dependency on imported crude.”
- James Schlesinger, former secretary of defence and
director
of the CIA and former energy secretary, in an address to the 15th
World Energy Congress in september 1992
Given the USA investment in land-based 'unsinkable aircraft carriers'
strategically placed across Iraq, it is impossible that USA has decided
to abandon the blockade and infrastructure destruction technique in
favor of multilateral agreement. Use of multilateral agreement is just
another tool in the box for the USA, nice to have if it works, but not
essential if it doesn't.
March - Russia - China - USA - the European Union's
foreign-policy chief, Javier Solana says "We have to find the right
balance between a market-driven and a more strategic approach."
Here "we" refers to USA, China, India and Europe. In a curious echo of
the new American call for what is in effect a 'consumer collective', he
calls for a 'collective energy dialogue' by major consumers with the
producers. "What we need is an orderly combination of markets, law and
consensual negotiations ... The role of politics is to balance
different considerations ... The
time has come to forge a European energy diplomacy, based on common
interests and shared principles."
March - Russia - Germany -
former German Chancellor
Gerhard Schroeder is made chair of the Russian-German consortium to
build a natural gas pipeline, the North
European Gas Pipeline (NEGP), under the Baltic
Sea from Vyborg on the Russian Baltic Coast to Greifswald on the German
Baltic shoreline.
March - Russia - the strategic Baltic
Pipeline System carrying oil to a Russian export terminus in the
Baltic, rather than transiting through NATO aligned countries as
before, is now complete.
March 23 - Saudi Arabia - the Haradh
oilfield project is officially opened 4 months ahead of time. It is
pumping 300,000 barrels per day, and
pumping at full output capacity. Over
500,000 barrels of seawater a day are pumped in to maintain high
pressure.
The Saudi
Oil Minister Ali al-Naimi claims new oil from Haradh has raised Saudi
output capacity to 11.3 million
barrels per day. Saudi Arabia currently pumps 9.5 million
barrels per day.
The minister claims three new oilfield projects will allow the Saudis
to pump
12.5 million
barrels per day by 2009. Khursaniyah oilfield is expected to pump
500,000 bpd in 2007, Shaybah and Nuayyim are expected to add
300,000bpd in 2008 and the Khurais oilfield is expected to produce 1.2 million
barrels per day in 2009.
The 'extra' capacity by 2009 is expected to be 1.5 to 2 million barrels
a day, to be used for contingencies. Production in 2009 is therefore
likely to be 10.5 to 11 million barrels a day.
March - USA - USA
Army report on energy trends and their implication for the army
dated september 2005 is made available for public release and discussed
by Senator Roscoe Bartlett in congress ["...Mr. Speaker, I would
remind you that this is not an article from some environmental journal.
This is from a report, which has kind of been kept under cover now
since last September, just released. I think that it was inadvertently
released, by the way. But now that it is out, you can get a copy of it.
This was done by the Corps of Engineers. This is a U.S. Army
publication...."]. In a career killing move, the authors lay out the
un-embellished, uncomfortable, stark data, the 'real life' constraints
and challenges. Recognising the risk to the functionality of the army,
they ignore the inaction and dissembling of the US
Government and lay out the sort of program for the army that the US
and other governments should be implementing.
There are eerie echos of the US Government action plan that almost
happened in 1977.
Read the report.
Quote from the summary, accents added, layout altered -
"Availability. Future availability of customary energy sources is
problematic.
Domestic production of both oil and natural gas are past their peak and world petroleum production is nearing its peak.
Growing domestic consumption will continue to increase dependence on foreign and
potentially unstable energy sources.
Almost half of the existing U.S. natural gas reserves are considered to
be either remote or stranded, i.e., they are too far from existing
infrastructure, located on restricted Federal lands, or considered too
environmentally detrimental to harvest. Construction of an Alaskan
natural gas pipe-line and the importation of Liquefied Natural Gas
(LNG) are possible solutions to domestic natural gas problems. However,
the necessary production and distribution infrastructure will require years to
construct....
our electrical transmission grid is aging and overtaxed. It was not
designed to accommodate the complex high load traffic it must now
handle due to deregulation.
Its reliability will degrade
until appropriate investments are made.
• Affordability. As demand for natural gas and petroleum exceeds
supply on a national or worldwide basis, prices rise. As the Earth’s population swells and as
standards of living are improved for the developing world, competition for finite resources will
increase.
• Sustainability. Worldwide consumption of fossil fuels...continue to
grow.
The earth’s endowment of natural
resources are depleting at an
alarming rate—exponentially faster than the biosphere’s ability to
replenish them. It took nature 100 million years to create the
energy the world uses in 1 year....
Wastes from nuclear power generation
plants are accumulating
and no viable means exists to safely and effectively dispose of them.
Current energy policies and consumption practices are not
sustainable.
They clearly limit and potentially eliminate options for future
generations.
• Security. In an age of terrorism, combustible and explosive fuels
along with potential weapons-grade nuclear materials create security
risks.
The United States currently has 5
percent of the world’s population, but uses 25 percent of the world’s
annual energy production. This disproportionate
consumption of energy relative to global consumption causes loss of the
world’s good will and provides a
context for potential military conflicts,
at the cost of lives, money, and political capital.
A more equitable distribution of
resources is in our best
interest for a peaceful future.
Energy Trends
...the United States currently imports 26 percent of its
total energy supply and 56 percent of its oil supply...
The domestic supply and demand imbalance would lessen if coal and/or
nuclear energy could be made more environmentally acceptable or if
the renewable share of our
energy portfolio were to vastly increase.
Worldwide energy consumption
is expected to increase by 2.1
percent/yr and domestic energy
consumption [increase]
by 1.4 percent per year.
This
will exacerbate global
energy competition for existing
supplies.
Renewable energy technologies will certainly be a growing part of
the energy mix and will penetrate faster and further than conventional
energy advocates think... the cost of renewable technologies continues
to fall while the cost of conventional energy sources continues to rise.
The electrical system will likely become increasingly problematic
over the next 5 to 10 years. Power capacity should suffice....The grid,
itself, however is the weak point in the Nation’s electrical system.
Investments are not keeping up with power flow demands; consequently,
bottlenecks exist in certain regions, which lowers the reliability of the grid
as a whole...
Energy consumption is indispensable ...current trends
are not sustainable.
The impact of excessive, unsustainable
energy consumption may undermine the very culture and activities it
supports.
The days of inexpensive, convenient, abundant energy sources are
quickly drawing to a close.
Domestic natural gas production peaked in 1973.
The proved domestic reserve
lifetime for natural gas at current
consumption rates is about 8.4 yrs.
The proved world reserve
lifetime for natural gas is about 40 years,
but will follow a traditional rise to a peak and then a rapid decline.
Domestic oil production peaked in 1970 and continues to decline.
Proved domestic reserve lifetime for oil is about 3.4 yrs.
World oil production is at or near its peak and current world demand exceeds the
supply.
Saudi Arabia is considered the bellwether nation for oil production and
has not increased production since April 2003. After peak production,
supply no longer meets demand, prices
and competition increase.
World proved reserve lifetime for oil is about 41 years, most of this
at a declining availability.
Our current throw-away nuclear cycle will consume the world reserve of low-cost
uranium in about 20 years. Unless we dramatically change our
consumption practices, the Earth’s finite resources of petroleum and natural gas will become
depleted in this century.
Coal supplies may last into
the next century depending on technology
and consumption trends as it starts to replace oil and natural gas.
We must act now to develop the
technology and infrastructure necessary to transition to other energy
sources. Policy changes, leap ahead technology breakthroughs, cultural changes, and significant
investment is requisite for this new energy future.Time is essential to
enact these changes.
The process should begin now.
Our best options
for meeting future energy requirements are
energy efficiency and renewable sources.
Energy efficiency is the least expensive, most readily available, and
environmentally friendly way to stretch our current energy supplies...
The potential savings for the Army is about 30 percent of current and
future consumption. ...Renewable
options make use of Earth’s resources
that are not depleted by our energy consumption practices:
namely solar, wind, geothermal, geoexchange, hydrology, tidal
movements, agricultural products, and municipal wastes... These options
are available, sustainable, and secure.
The affordability of renewable technologies is improving steadily and
if the market is pulled by large Army application the cost reductions
could be dramatic....Many of the issues in the energy arena are outside
the control of the Army. Several actions
are in the purview of the national government to foster the
ability of all groups, including the Army, to optimize their natural
resource management.
The Army needs to ...be prepared to proceed regardless of the national
measures that are taken.
The following steps by the national government would help the Army with
its energy challenges:
• Increase supplies.
- Recognize and promote energy efficiency as the cheapest, fastest,
cleanest source of new energy.- Recognize and promote that renewable
energy technologies make sense for America on a very
large scale.
- Promote renewable applications and work to change the image of solar
roofs and off-shore wind farms.
- Appropriate the necessary funding to bring Federal facilities to
state-of - the- art efficiency.
- Pull renewable technology markets to produce more cost effective
solutions with tax incentives and large Federal applications.
- Provide incentives for green power production through continued and
expanded tax credits.
- Open up Federal lands for oil and natural gas harvesting where
environmentally appropriate.
- Encourage the development of LNG terminals and infrastructure by
streamlining approvals and assisting with local approvals.
• Modernize infrastructure.
- Support modernizing and expanding the electricity grid.
- Support the construction of a natural gas pipeline from Alaska and
Canada.
- Enhance the expansion of LNG
terminals and natural gas
infrastructure.
• Diversify sources.
- Invest in research and development (R&D) in clean coal
technologies, renewable technologies, carbon sequestration, breeder reactor nuclear power.
- Invest in R&D in energy
efficiency in the built environment.
• Optimize end-use.
- Significantly increase Corporate
Average Fuel Efficiency (CAFE) standards and expand to all classes of motor
vehicles.
- Expand rebate programs for hybrid vehicles.
- Expand appliance and equipment efficiency standards as many states
are doing.- Continue and enhance the Federal Energy Management Program.
- Continue and enhance the Energy Star Program.
• Minimize Environmental Impact.
• Cooperate in global energy markets.
The national and world energy
situation mandates
strategic planning and action by the Army. The pending
challenges of meeting the Army’s ongoing energy requirements in a reliable,
affordable, sustainable, and
secure fashion demand thoughtful and comprehensive approaches. ... The
informed and disciplined management
of consumption is imperative.
The
Army has already begun this necessary strategic planning and its Army
Energy Strategy for Installations defines the overarching mission and
goals, and outlines broad approaches for reaching the Army’s full
potential....Special attention to the diversification of sources is
appropriate.
This incorporates a massive expansion in
renewable energy purchases, a
vast increase
in renewable
distributed generation including photovoltaic, solar thermal, wind,
microturbines and biomass, and the large-scale networking of on-site
generation....
The Army must continue to improve and optimize its energy ...
management to meet mission requirements."
The US Department of Defense is the single largest buyer of fuel in
the USA. The military burn a breath-taking 97% of the total oil burnt
by the USA state. The USA government burns about 440,000 barrels of
oil a day, around 160 million barrels a year. The Air Force is
responsible for burning 53% of this massive amount, the Navy (including
the Marines) 32%, and the Army 12%.
According to Senator Roscoe Bartlett the USA military is "doing more
than anyone else - in the government
or around the country" to try to mitigate the huge dependance on
increasingly expensive oil and gas. Including working on new energy
efficient battleships, some with masts and sails and clad in
photovoltaic panels.
March - USA - Corrosion
in a transit pipeline at USA's Prudhoe Bay oilfield in Alaska causes a
rupture and spill of 200,000 barrels of crude oil in the western sector
of the field. BP tells the USA Senate Energy Committee that the
corrosion problem is now under good control.
March - Dubai - the Dubai government and the New
York Mercantile Exchange to agree to launch an International Mercantile
Exchange dealing mainly in energy futures and derivatives The first
offering will be in Middle East sour crude, and may be underwritten by
Omani oil. It is hoped the Omani oil will be a benchmark crude for
trading crudes from the Middle East to Asia.
March 20 - Qatar - Qatar
announces it is will create what it hopes will be the Middle Easts
first International Mercantile Exchange dedicated soley to energy
trading in all its forms. The promoters, 'Gulf energy', describing
itself as a 'global
consortium of energy experts', has signed an agreement with the
government-backed Qatar Financial Centre, and expects to 'go live' in a
relatively short time.
Qatari state owned 'Qatar
Petroleum' is being
approached to underwrite the oil supply futures. Qatars energy minister
says he goes for long term contracts, and "...we will never go
for these activities". Other
Qatari government ministers praise it as an excellent fit to Qatars
LNG sales and financial hub services. The exchange will operate in
a tax free zone.
Qatar currently pumps
840,000 barrels of oil a day.
Qatar
has one of the largest gas reserves in the world.
Qatar is strongly
'pro-American' and hosts the command and control base for
USA forces in Iraq and in the Gulf.
Qatar is believed to have
significant financial
connections with USA banking interests, and it is believed that these
interests are behind the superficially 'Arab' bourse.
March 20 - Iran -
Iran's planned electronic oil bourse is delayed for several months to a
year. It is planned to start trading in petrochemicals first, with
crude being the last commodity to be included. It is expected that
crude would commence trading in about three years time, probably for
direct physical product. British
consultant Chris Cook, member of
the consortium (headed by the Tehran Stock Exchange) working on
implementing the project says "... it's
at a much earlier stage than people would think...there will not be a crude oil contract,
Gulf-based, in my opinion, within a year -- and that would be really
pushing it". The exchange will be located on Kish Island, an Iranian
duty and tax free zone.
March
- Japan - Iran - The Nippon oil company cuts 15% of its Iranian
oil imports by cancelling oil brokers contracts sourcing oil from Iran.
Direct imports continue. Japan takes about a quarter of Iranian total
crude exports,
although in total Japan buys more crude from Saudi Arabia and the
United Arab
Emirates. The move by Nippon Oil is seen as insurance against supply
disruption due to the USA moves against Iran's programme to develop
nuclear power, and the possible eventual development (or importation
from North Korea) of a nuclear weapon.
"From a business standpoint,
the
announcement will have no effect on
either Japan and Iran. Iran has many options to sell its oil, but
how they take the message is another thing...Even if Japan reduces
Iranian oil imports, Iran knows China would buy as much oil as it
produces"
- Hidenobu Sato, Middle East Research
Institute of Japan.
March - Pakistan -
the oil import
bill for Pakistan's current financial year (July-June) is expected to
be
$US6 billion. For the same period last year it was $US4.4 billion.
March - China - retail gasoline and diesel prices are increased by 3%
- 5%, the first rise for eight months. Gasoline and diesel are
subsidised by the State by regulating the prices refineries can charge.
Refineries continue to lose about $US1 on every barrel of crude they
refine.
March 30 - Light sweet crude is now $US66.07.
March 31 - Light sweet crude peaks at $US67.15 before sliding back a
few dollars. Brief period of low petroleum reserves in USA may have
caused the surge, along with USA and UK threats against Iran.
April 16th - the latest IEA report shows world
oil supply at 84.5 million barrels a day. This is down by 125,000
barrels a day relative to last month. Reduced production from OPEC
countries, North
America and the North Sea fields due to a variety of outages
(destruction of Iraqi pre-invasion oil commerce and sabotage of the
northern Ceyhan pipeline, Iran production down, Nigerian rebels closing
out significant Nigerian production) outstripped higher production from
elsewhere. If these political constraints didn't exist, production
would have shown an increase.
April 4 - Iran - Iran claims to have 'unstoppable' high speed torpedos
it
could use in the event of being attacked. A clear warning to USA that a
USA attack will result in oil tankers or USA aggressor ships being sunk
in
the narrow Straits of Hormuz. Married to Iran's defensive Russian and
Chinese coastal short range missile batteries (which are also
effectively unstoppable), the stage is set for the USA to precipitate a
massive disruption to world oil supply. Both countries will lose if USA
attacks Iranian defense forces.
It is likely the USA has taken a longer term view, and seizing on the
fortuituous duplicity of the Iranians as they pursue an ultimate
capability of a nuclear weapon (which, paradoxically, they could never
ever use without guaranteeing their own total annihilation). This gives
an excuse to attack Iranian defenses. Iran would have to be rendered
defenseless so that USA/Israeli attack planes can destroy the Iranian
nuclear research facilities. With Iran's extremely dangerous and
effective coastal defense missiles and radar destroyed, the USA would
have total control of the Middle East from its command and control
centre in Qatar (a country with vast gas reserves
and developing a
USA/Qatari oil bourse in competition with Iran's) and its vast new
billion dollar "little
America" bases strategically placed to protect the USA oil reserves
in Iraq. No doubt the bases with be "long term" 'leased' from USA/Iraqi
companies...It is almost certain that USA will not only police and
control the Middle East oil industry - including all bourses competing
with its New York and London-based bourses - but will buy increasingly
high prices hydrocarbons with increasingly high priced carbohydrates
(USA wheat, sorghum, and maize).
The
USA plan continues to unfold.
April - USA - Russia
- Iran - USA office of Secretary of State official visitis Moscow and
publicly asks Russia to cancel the sale of
the Russian Tor-M1 mobile anti-missile missiles to Iran. His request is
bluntly
rejected by the Russian Chief of Staff.
April 4 - UK - Gazprom (Russia) delivers 85 million cubic meters of gas
(140,000 cubic meters of liquid) to UK.
This is the first time Gazprom has delivered gas to the UK. Gazprom
does not have its own LNG facility, and obtained the LNG from Gaz de
France. Gazprom is anxious to diversify into the area of gas
distribution and retail throughout western Eurasia, as well as
wholesale supply. It plans a similar business expansion in USA
and Canada.
Gazprom aims to become one of the worlds major vertically
integrated energy companies.
Gazprom hold roughly 20% of the world's gas reserves.
But 70% of Gazprom's production comes from mature giant fields which
are declining rapidly. Newer fields cannot fully compensate for
decline. Declining supply is likely to dramatically increase prices by
2010.
The cost of exploring, developing, and piping gas from the new
prospects and new fields is conservatively estimated at about $US700
billion over the next 20 years.
April - Russia - Germany - Gazprom signs an agreements with the German
company BASF,
for the BASF subsidiary gas company Wintershall to
jointly develop the Yuzhno Russkoye gas field in west Siberia. The
field contains 500 billion cubic meters of gas - enough to supply all
Germany's gas needs for 5 years.
April - Germany - Russia - Gazprom signs an agreements with the German
company BASF,
for the BASF subsidiary gas company Wintershall to
jointly build the North European gas pipeline, to transport gas from
the Yuzhno Russkoye gas field across the Baltic sea to Germany, and
perhaps other parts of western europe.
April - Russia - Germany - the German BASF chemical company and Gazprom
joint venture company Achimgaz announces drilling in the Russian
Urengoy gas field in west Siberia is due to start this year. The field
is believed to hold 200 million
cubic meters of natural gas, and 40 million metric tons of condensates.
The field life is anticipated to be 40 years.
April - UK - Russia - UK government illegally tries to block the sale
of the UK's
largest gas supplier, Centrica, to Gazprom.
April - UK - Russia - EU - In response to the UK's underhand moves,
Alexei Miller, Gazprom’s chief
executive says, after meeting EU ambassadors:
“It is necessary to
note that attempts to limit Gazprom’s activities in the European market
and politicise questions of gas supply, which in fact are of an
entirely economic nature, will not lead to good results...It should not
be forgotten that we are actively familiarising ourselves
with new markets, such as North America and China. Gas producers in
central Asia are also paying attention to the Chinese market. This is
not by chance: competition for energy resources is growing...”
Gazprom said that while it would fulfill its current contracts - signed on
rather favorable terms to the EU customers when Russia was desperate
for overseas income - "If the European Union wants our gas, it has to
consider our interests as well" , referring to Russias wish to become a
fully integrated wholesale energy supplier and retail distributor, just
like all significant UK, US, and European energy companies.
About a third of Gazprom's gas (by volume) goes to Europe. But sale of
that third of the gas that Gaprom supplies brings in two thirds of
Gazproms revenue - about $US25.7 billion in 2005. The reason the
European market is so profitable is that the two thirds of supply to
Russias domestic market has to be made at government-mandated
artificially low prices.
Russia is as much dependant on Europe as a market for its gas as Europe
is on Russia. These two parts of central and west Eurasia are virtually
co-dependant. In the absence of an alternative market for Russia and
an alternative high volume supplier for Europe, neither party has 'the
upper hand'.
April - Russia - China - Russia signs an 'outline agreement' regarding
the possibility of selling West Siberian gas to China. West Siberian
gas is Europes main gas source. This West Siberian gas will be very
expensive to pipe east to China, and cost overruns in this challenging
frozen environment are almost certain. There will virtually only one
customer for this gas, China. Price negotiations would be interesting.
April - Russia - Armenia - Gazprom signs an agreement to take control
of Armenian pipelines and a power
station in return for supplying gas to Armenia at a 50% discount to
European current market prices. Even so, supplying gas at half the
market rate almost doubles the current artificially low price of gas in
Armenia. The cheap rate for gas ends in
2009. Armenia is almost totally dependent on Russia for gas supply.
April -Russia - USA -
Turkey - Greece - USA Rice wants Greece and
Turkey to exclude Russia's Gazprom from a €600m gas pipeline project of
the Turk and Greek state gas companies designed to supply Russian gas already imported into
Turkey from Gazprom to go to Greece and also Italy. Rice 'wants' Greece
and Turkey to buy Azerbaijani gas from supplies being developed in
Azerbaijan by a consortium led by BP (USA) and Statoil (Norway) and due
to come on stream next year.
USA is said to be negotiating a military
base in Azerbaijan.
April 12 - Light sweet
crude is now $US68.74.
April - Russia - the massive but isolated Kovykta
gas field in East Siberia will now not begin large scale production
until
2015. It had been hoped that significant gas would reach Beijing,
Dalian, and South Korea by about 2008. It currently produces about 35
billion
cubic feet a year.
April - South Korea -
imported LNG now supplies 13% of South
Korea's energy requirements. South Koreas long term contracts with
Qatar, Malaysia, and Indonesia end within the next two years.
April 14 - Mexico - USA - Mexico usually exports 50% of its oil
production to USA. In the first 2 months of the year Pemex sent 10.6
million more barrels of oil to
the USA than it did for the same period last year (up from 99 million
barrels to 109.6 million barrels, close to 10% more). This is
about 1.77 million barrels a day, and now over 50% of Mexico's production.
This time next year, the
declining major Mexican oilfield complex
(Cantarell) will be producing 1.7 million barrels a day. USA will need
the equivalent of all of the Cantarell megafield oil in 2007.
April 14 - Mexico -
Mexico's state oil company Pemex had a record
revenue of US$4.88 billion for January-February 2006. Mexico is the
USA's second largest supplier. (Canada is USA's major supplier by
volume.) Mexico is now desperately looking to joint venture
partnerships with available rigs as its major field declines. As
Mexicos ability to supply starts to diminish, oil revenue will plateau.
A third of Mexico's revenue comes from oil. Mexico's population is
currently about 107 million people. By 2015 it will be nearly 120
million. By 2015, a social time-bomb will be released. The question is
whether Mexico's government will conserve remaining oil for domestic
use in the future to reduce the impact of loss of cheap oil, or sell
oil as fast as it can right up to depletion to buy short term social
harmony - at the price of hugely greater social discord later.
April - Venezuela - President Chavez
promises to blow up the Venezuelan
oilfields if a USA aggressor attacks. US officials deny plans for
attacks, then call the elected President a "threat" to "stability".
Presumably "stability" means USA control of Venezuala's oil resources.
Venezuela supplies around 40 million barrels a month to USA, around 60%
of its production. Much goes to it's USA subsidary distributor, Citgo.
April - Venezuela's
state owned oil company PDVSA (Petroleos de
Venezuela) signs a deal
with India to supply 2 million barrels of oil a month. India is one of
the relatively few countries with refineries able to handle Venezuelas
increasing amounts of heavy sour crude.
April - Canada - USA -
China - While USA depends on Canadian oil and gas, USA
continues to treat Canada with contempt, ignoring judgements in
Canada's favor in disputes bought by Canada against USA under the North
American Free Trade Agreement. Canada as a result is increasing it's
trade relationship with China, with the possibility of shifting up to a
quarter of its oil exports from USA to China instead. Canada and China
have agreed to a joint project to build a pipeline from Alberta to
Canada's west coast to ship oil to China.
April - USA - President Bush
orders the Energy Department to delay buying oil to finish replenishing
the
strategic reserve until USA autumn (september). The given 'reason' was
to 'make more oil available' to motorists in the driving season.
The only possible effect would be to keep one more major buyer off the
market, and to that extent, not fuel oil price rise.
April - USA - daily net oil imports (crude oil plus refined
petroleum) are down by about 13% over previous
weeks to around 11,634,000 barrels per day.
April 17 - Light sweet
crude briefly touches $US70 in overnight trading before settling at
$US69.32. USA petrol stocks prior to the may to september driving
season are down around a million barrels, plus razor edge supply:
demand, and with possible speculators entering 'plays' on future prices
as the USA pre- bombing of Iran propaganda 'talk up' continues
might push prices up for the moment.
April 18 - Anniversary of President
Carters prescient televised address warning the USA people time is running out.
April 21 - Light sweet
crude for june delivery briefly hits $US75.15 on the New York
Mercantile Exchange, a record price.
April 24 - Light sweet
crude is now $US73.15
April 24 - USA -
gasoline price per (USA) gallon tips over $3 in
some areas. Much USA gasoline is imported, some of the borrowed
gasoline post
hurricane Rita remains to be repaid,
and as the USA dollar weakens the cost
of gasoline imports rises, even if crude oil prices remain static. The
USA consumes around 135 billion gallons of gasoline a year (about 370
million gallons a day).
Repayment of 8.6 million barrels of oil borrowed from overseas to
meet the hurricane Katrina
shortfall have now been repaid. There are 1.7 million barrels reamining
to be repaid. As part of his 'Four Part Plan to
Confront High Gasoline Prices', the President directs this 1.7 million
not be repaid, as it is 'sweet' oil, and repaying it would make the USA
gasoline market even 'tighter' (higher prices) than it would otherwise
be. The final 1.7 million barrels will supposedly be
delivered around April 2007.
April 27 - UK - gasoline prices now
hit a record high of 96.13 pence per litre (roughly $US6.55 per US
gallon). Over 60% of the price of petrol in the UK is government
tax (about 61 pence).
April - Middle East - Surging metal (steel, copper, aluminium) and
other commodity prices has tripled the cost of energy projects over the
last two years. Shortage of some minerals is extreme. Copper
stockpiles, in particular, equate to just 2.5 days of daily global
consumption.
Quotes of the month:
"It is not just the Australian
public, then, that seems to be struggling
to come to grips with the fact that the future of oil prices that once
seemed inconceivably high is upon us. Service Station Association chief
executive officer Ron Bowden this week summed it up: "You're living in
a fool's paradise if you think you're just weathering a storm and
everything will go back to normal. Normal is high energy prices ...
$[AU]2
a litre is quite possible."...Some seemingly obvious answers,
such as
converting vast natural gas
reserves into liquid fuel, may not be as cheap or last as long as
expected once the world starts looking at this alternative. The US
(which could use up Australia's gas in three years) and Europe have
depleted much of their natural gas, and China is buying up Australian
gas...Politicians have not led the way in informing the public
...State governments, Victoria's included, are backing huge road
projects
that keep commuters in cars and promote oil use. The car industry is
also built around six-cylinder cars, rather than smaller,
fuel-efficient models that motorists are realising are a smarter
choice...If Australians and their leaders act now, this country can be
ready
when oil supplies become unaffordable or unreliable. Planning for the
transition from an oil-dependent economy is one of the great challenges
of this generation."
Editorial in The Age newspaper, Australia, 23rd April 2006
"Worry now. The problem is enormous. There will be massive shortages
unless we act in time. But mitigation takes a long time. Peak oil is
not a theory; 33 out of 48 of the largest oil producing countries have
hit peak. There is no warning for peak, as production goes up until the
peak. After peak, the drop off is sudden."
Robert Hirsch, Senior Energy Program Advisor at the
consulting firm SAIC speaking at a Pentagon-sponsored presentation,
"Energy: a Conversation about Our National Addiction" on April 24th 2006
April - UK - UK Coal re-negotiates key contracts with
electricity generators. The contract calls for an increase in the price
of coal of 40%. The generators cannot import all their coal as
the UK rail network cannot cope with the volume that will be required
as gas supplies fade. 50% of UK's power generation now comes from coal
fired stations.
April - USA - brief shortages of gasoline appear in some areas as
the formula for USA gasoline is changed to exclude environmnetally
damaging chemicals. The chemicals are replaced with ethanol. Ethanol
absorbs water and can't be shipped in pipelines. It must be trucked to
refineries.
April - USA -
gasoline dependant USA cannot buy up enough
gasoline from Europe (which predominantly runs on deisel, and whose
largest gasoline exporter, Total, has re-jigged refineries to produce
more deisel at the expense of gasoline) and, exacerbated somewhat by
re-formulated gasoline shortages in some areas, the supply/demand
mis-match pushes up the price of transport fuels. The light crude
refineries want for the summer driving season is in short supply - as
it was last
year. There are still insufficient refineries to handle sour and
heavy crudes. Many smaller USA refineries are looking for light sweet
crude to process for the summer driving season, bidding up the price of
this class of crude, and helping bid up the price of the gasoline made
from it.
April - USA - Ethanol is mandated
in some states as an oxygenate
added to gasoline to replace the carcinogenic MTBE. This will
require 700 million gallons of ethanol a year in California alone.
There
is insufficient ethanol supply in the USA to accomplish the government
mandated switch-over in those states. Even if it were possible to
produce the 6 billion or so gallons of ethanol needed in 2006, this
represents only about 4% of the gallons of petroleum the USA uses per
year. But ethanol is not volume for volume equivalent to gasoline in
the energy it supplies. Ethanol
contains only 70% the energy value of an equivalent volume of
gasoline. The theoretical 6 billion gallons of ethanol would substitute
for less than 3% of USA's petroleum usage.
USA ethanol production increased last season as production of maize for
ethanol becomes more competitive with gasoline. There are two main
reasons. First, the taxpayers of USA pay the farmers to produce it
(farm welfare) via subsidies, presumably in small part to achieve
sufficient supply for the ethanol switch-over states, partly for Bush's
flawed dream of an ethanol economy, and partly to'pay-off' midwest
republican pressure groups. Second, new varieties of maize developed
for ethanol production have, in tandem with improved processing
techniques, improved yeild of ethanol per bushel of harvested
maize. In 1980 a US bushel (56 lbs/25
kg of corn/maize) yielded 2.5 US gallons of ethanol. Now the yield per
bushel is about 2.8 US gallons per bushel.
Current USA maize production is very roughly 11 billion
(11,000,000,000) bushels.
Most maize is grown for animal feed (pigs and cattle), and the amount
grown is relatively static from year to year. Nearly 2 billion bushels
are exported, and this amount has also remained fairly static over the
last decade or so. Ironically, this years stored-maize surplus will be
gone by the time next years harvest is in, and as the current drought
has decimated USA planting this spring, next years harvest (2007) will
be short over even USA domestic demand by around a billion bushels.
This means the subsidized USA beef and pig and poultry fatteners will
be
competing with the subsidized ethanol producers for that last billion
bushels of corn...prices will rise. USA beef and pork will be more
expensive. Ethanol will be more expensive.
In 1994 maize production for ethanol was relatively insignificant. But
in 2005 it was getting up towards 2 billion bushels.
Clearly, the USA government is 'pork barreling' (paying large taxpayer
funded welfare checks to corporate farmers) USA ethanol production from
maize. Vast Department of Energy subsidies go to research and
development of 'anything ethanol'. But it is both a waste of public
money and a subsidy to the already rich.
Nitrogen is the primary fertiliser for corn. Nitrogenous fertilisers
are mostly made from
natural gas. Nitrogen fertiliser prices have increased dramatically
with the increased price of natural gas. Anhydrous ammonia, selling for
$US150 a ton a few years ago, reached $US400 a ton in september
2005. Transport costs to isolated farms were an additional $US50 per ton at that
time.
It is uncertain whether maize plantings will remain steady or decrease
in future. Some predictions are for over 1 million less acres of maize
planted this USA sowing season. And drought has already ruined some
sowings.
When all factors of production of ethanol from maize are accounted for
- fuel for planting and harvesting, energy cost of making and
transporting fertilisers and herbicides, energy costs of pumping
irrigation water from ever-depleting underground aquifers, energy cost
of manufacturing and transporting the manufactured ethanol - then
ethanol from maize takes more energy to produce than it returns. At
this time, unsubsidized corn ethanol is estimated to economically break
even at the equivalent $US100 barrel of oil. But when oil eventually
reached $US100 a barrel, the finishing line is shifted further out
because all the costs of producing the ethanol would rise yet again as
oil prices rise.
It is only economic now because of obvious and hidden
farm welfare subsidy payments extracted from taxpayers and handed to
the corporates (710,000 USA farms receive farm subsidies, substantial
numbers of which are controlled or owned by rich giant corporations).
April - Sweden - The only country to acknowledge the reality of the end
of cheap energy, Swedish taxpayers continue to invest huge capital sums
in railway and electric tramline infrastructure and maintainance.
Around 90% of Swedens rail network is electrified. A large part of
Swedens domestic heating comes from its hydro-electric and nuclear
power capacity (Sweden has around 15% of the world uranium reserves,
albeit mostly low grade). Increased demand is expected to be met from
municipality heat schemes using a variety of co-generation and
heat-retrieval sources from industry, burning of waste, some coal, fuel
oil generation for peak demand, and efficient wood pellet burners.
Transport industry is actively pursuing hybrid cars and trucks, and the
use of biofuel, including from the waste produced by the Swedish paper
industry. Sweden actively plans and implements projects for the
impossible - an oil free economy by 2020.
April - China - Aware of
its dependance on imports of foreign oil in a politically unstable
region, China moves its strategy of developing coal-to-liquids
technology up a click. China's state-owned coal producer, the Shenhua
Group, already
has a CTL plant under construction in Mongolia, and is planning joint
venture plants in South Africa with Sasol and Shell. The South African
facilities are being designed to produce the equivalent of 10 million
tons of crude oil by 2010, increasing to 30 million tons of crude oil
equivalent by 2020. Yanzhou Coal Mining Co, also a major coal producer,
plans to complete construction of a CTL plant producing 2 million tons
of oil equivalent by 2008. The estimated production from all the
CTL plants in China either under construction, or with construction due
to start, is about the equivalent of 16 million tons of crude oil.
The economics of these plants is predicated on a high price for oil and
a largely unchanged price for coal. As China gains most of its power
from coal-fired electricity generation plants, China's state-owned
electricity industry will be increasingly competing with its
state-owned coal industry for supply. China says it used 2.19 billion
tons of coal in 2005, a 10% increase over 2004. More coal-fired
electricity plants are under construction to meet China's rapidly
growing demand for electricity. An estimated 300 million people will
move into China's industrialised coastal cities over the next 20 years,
seriously straining electricity supply. Increased demand for coal for
both electricity and to extract oil from would drive up the price of
coal in a market-led economy. China is a state-command and control
polity, and price increases may be frozen (subsidised) - in effect a
new tax on the people of China. Increased coal use will also require a
huge investment in rail
infrastructure. As with all industrialised nations, the question is
whether the investment capital should be applied to gas to liquids or
to energy conservation and development of solar and wind power.
April - USA - Rutgers
chemists refine and improve the efficiency of the
Fischer-Tropsch process that converts coal to oil. The process
produces useful gas and useful medium heavy products for deisel, but
too much middle hydrocarbons, which have made it uneconomic to convert
coal to liquid fuels. The new invention changes the middle weight
products to useful forms, making coal to liquid fuels economic for the
first time. USA has around 286 billion tons of coal of varying
usefulness at varying depths in the ground.
Diesel transports 94% of all USA freight in the U.S. and 95% of
buses.USA uses about
56 billion (US) gallons of diesel a year.
April - USA - 22% of the Gulf of Mexico oil production, and 13% of gas
production has still not been brought back on stream after last years
hurricane season. Many platforms have yet to have underwater damage
fully assessed, due to lack of divers and boats. Most work is on
permanently sealing off small wells that are uneconomic to repair. The
hurricane season starts again in June.
April 17 - USA - Jet fuel in USA is now the equivalent of $US89.55 per
barrel when unrefined crude is selling for around $70 per barrel, a
difference of around $US9 a barrel. After the dispuptions of Hurricane
Katrina, jet fuel in the USA climbed to around $US107 a barrel, when
crude was selling for about $US63 a barrel, a difference of around
$US44 a barrel.
USA
domestic and cargo airlines now consume jet fuel at the
rate of 19.9 billion
gallons a year (a little less than last year, partly due to the
industry achieving fuel
efficiencies of around 16%).
Every one cent increase in the price of a gallon
of jet
fuel adds about $199 million extra to the total annual fuel bill of USA
airlines. Some airlines are on the point of bankruptcy already.
USA refineries produce 1.55 million barrels of jet fuel a day. A nett
of 92,000 additional barrels a day is imported (a tiny amount of USA
production is exported for a variety of reasons).
The USA airline industry cannot afford another hurricane Katrina this
year.
April 22 - USA - Canada - Delivery of 50,000 barrels a day of heavy
crude from west Canadian oil sands through a link into a 858-mile long
pipeline from Illinois to Texas refineries commences. The USA leg of
the pipeline has been predominantly unused for some time.
April 22 - USA - Crude imports from Canada in January and February now average of 1.736 million
barrels a day, nearly 13% higher than the same period last year.
April - Qatar - with
the huge worldwide demand for natural gas products such as urea (Qatar
has the largest gas-based fertiliser plant in the Middle East) and
plastics, Qatari
gas production is now around 11 billion cubic feet a day. At this rate
of production, it will be producing 25 billion cubic feet a day by
2011, a
production level that was not expected until around 2020. Qatar is
re-evaluating reserves in the Northern gas field to see if this rate of
production is sustainable into the future. It cancelled two extraction
programmes last year. Qatar expects to triple LNG production by 2010.
Qatar has the worlds largest gas field, and is of great strategic importance.
April
- Russia - Russia announces stage one of construction of the East
Siberia-Pacific Ocean Pipeline
(ESPO). This huge project, handled by Transneft, Russia's state-owned
pipeline company, will take crude oil from Taishet, near
Lake Baikal in East Siberia, to the port of Nakhodka in Perevoznaya Bay
on Russia’s Pacific
Ocean coastline. The pipeline capacity will be 1.6 million barrels a
day. The estimated cost of the pipeline is at least $US11.5 billion.
Stage one is scheduled for completion in 2008. Initially, oil will be
able to be tankered from Nakhodka to East Asian markets, including
China and Japan.
A further pipeline extension between Russia's
Blagoveshchensk andChina's Daqing will see part of the oil piped
directly to China, and further branch lines could pipe oil directly to
North Korea and South Korea. A later stage sees a refinery built near
the Chinese border to on-sell value-added refined products to China,
Asia, and the Pacific.
April 23 - Russia - West Eurasia - Russia's president of oil pipeline
monopoly Transneft observes that Russia has "overfed Europe with oil"
and "surplus supply lowers prices". Because current pipelines head to
west Eurasia, Russia can't do much to reduce supply to its European
customers without losing revenue. But once the Eastern Siberia-Pacific
Ocean pipeline (ESPO) opens, around 1.5 million barrels a day will
travel
east, not west. This will, in Vainshtok's estimation, reduce supply to
Europe without cutting income, and presumably leverage higher prices.
April 26 - Iran - Oil Minister Kazem Vaziri Hamaneh says "The need of
the world for energy is soaring,
and if Iran is taken out of the equation, prices will shoot up and
there will be big difficulties in the energy markets...We don't want to
cause hardship for
any consumers around the world," he said. "We have a commodity and we
want to sell it, and we are doing our best and we have shown in the
past we are a very reliable source of supply and meeting the demand of
the world". He also noted that Iran's willingness to supply the world
oil market through all recent disruptions should be noted by the
countries of the UN when considering USA's call to aggressively
'punish' Iran for its legitimate nuclear energy program "In my opinion,
there are reasonable people in the U.N., and when they
are looking at this issue and seeing our activity, they will decide
with logic and prudence..."
Iran's virtue in being a reliable supplier is of course dictated by its
absolute reliance on oil revenue. Around 40% of revenue is from oil.
The birth rate is high, incomes are low, and employment is dependant on
a relatively inefficient industrial and agricultural and service sector
that is either state owned or subsidised. Iran needs to spend a lot of
money on keeping its oilfields pressurised (amongst other elements) if
it is to continue to produce the amount of oil it needs to fund the
social needs of a young and growing population.
April 26 - Iran - Iran's oil minister admits that the decline rate of
it's mature fields averages 6% - 7%. Iran's oil production is stagnant,
at about 4 million barrels a day. It
consumes at least 1.5 million barrels a day domestically. It exports
about 2.5 million barrels a day.
April 26 - Iran - Iran
can provide only half it's own
gasoline. It must import gasoline to make up the shortfall. Iran's
gasoline consumption continues to
increase. The annual increase in the amount of gasoline
Iranian's consume has now reached the rate of 10%. Iran now imports
around 160,000 barrels a day of refined gasoline, at a cost of around
US$4 billion a year. A new refinery is
planned to provide sufficient gasoline for domestic needs without
having to import. The refinery, once built, will use about 500,000
barrels of oil a day. This will reduce the amount of crude available
for export, but increase the amount of diesel and fuel oils available
for sale overseas.
April 26 - Iran - Iran plans to spend at least $US25 billion for the
next four years on oil and gas development and production to make up
for
declines. A further $US25
billion will comes from foreign partners.
Intensive development of the oil fields may produce an additional
pumping capacity of 1.3 million barrels a day. But the oil Minister
says that after taking existing declines into account, this represents
only an additional 500,000 barrels a day amortised over the four year
period.
The conclusion from his statements is that existing mature fields, if
left 'untweaked', would have naturally declined by around 800,000
barrels a day over this four year period. The decline rate of big
fields is very important. It suggests that by 2014 decline in Irans big
oil fields will outstrip new production by at least 300,000 barrels a
day, potentially dropping Iran's export production to around 2.2
million barrels by 2014. It also suggests that heavily 'massaged'
fields will enter a phase of steep decline some time after 2014.
April - Iran - Iranian diplomat notes Iran's population has more
than doubled since 1979. It's installed electrical generation capacity
is 30,000 megawatts, but needs an additional 2,000 megawatts capacity
to be brought on line to meet growth in demand. Domestic oil
consumption is increasing 8% a year, and "57 of the 60 Iranian oil
fields need major repairs, upgrading, and re-pressurising which would
require, over a 15-year period, investment of at least US$40
billion...[if current domestic consumption trends continue]...Iran
could become a net oil importer by 2010, a catastrophe for a
country
which relies on oil for 80% of its foreign currency and 45% of its
annual budget".
Currently much of the developed Iranian gas is
used domestically for
elect