Outlook for 2008
January 1 - Mexico
-major oil exporting ports are shut-in due to bad weather.
- oil prices - Tapis crude is $US99.60
January - Russia - Transneft's 30-million-tonne capacity pipeline for
crude oil from Russia's East Siberia Vankorskoye field to the Chinese
border is delayed until mid 2009. It was to have been complete by the
end of this year, when the Vankorskoye field starts production.
Vankorskoye crude will have to be shipped west, not east; presumably by
January - Nigeria - Anglo Dutch Shell
Petroleum Development Company (SPDC) operations in the Delta and River
States are cut by about 50% (around 500,000 barrels a day) due to
on-going damage to various wells and installations from
disaffected locals. The only field to be producing at full capacity is
the offshore Bonga field. Shell hopes to "improve relations" with
locals and militants in order to be back to full capacity in the Delta
by mid year.
- oil prices - Tapis crude is $US103.96, a record high.
January 3 - Iran - The
Minister of Economy and Finance announces that the Iranian oil bourse
will commence in early february, during the Ten-Day-Dawn festivities
marking the 29th anniversary of their 'Islamic Revolution'.
January - Nigeria - Russia - Gazprom continues talks with Nigerian
officials to jointly develop Nigerias underperforming gas assets.
Gazprom hope to provide both financing and technical expertise to
Nigeria in return for permission to develop Nigerian gas and build
further liquified natural gas (LNG) plants to export gas. Nigeria
curerntly exports LNG to both Europe and America. Nigeria also burns
(flares) about 24
billion cubic metres (0.84 trillion cubic feet) of
natural gas associated with its oil wells every year.
January 3 - Saudi Arabia - the start up of the
field is delayed again,
with no date given for commencement, other than 'beyond the first half
of this year'.
January - Angola - production is currently 1.7 million barrels a
day. Production is expected to be 1.8 million barrels a day by end of
2008. New production is expected at the end of the year, or beginning
January 4 - Mexico - Oil export ports commence re-opening after
being shut in from about 1st january due to storms pushing waves to 7.3
metres (24 feet).
January 5 - OPEC - OPEC president Chakib Khelil says that oil
demand was being pushed up by "China and India but also by the Middle
whose consumption has risen immensely"...but that the price should be
relation to the real price" which, taking the inflating US dollar into
account is "between $102 and $110 depending on estimates". He said "The
rise [in oil
prices] is likely to continue until the end
of the first quarter 2008 and will stabilise in the second quarter," he
claimed the cause as "political tension in
Pakistan, escalating violence in Nigeria and decline of oil inventories
in the United States". While he may have more information available
then most of us, prices in 2008 are likely to be volatile.
January 5 - OPEC - Mohammad Ali Khatibi, deputy director of
international affairs at the National Iranian Oil Company says "Because
most members are currently producing at full capacity it seems
that even if there is a decision to increase the output ceiling, not
all members would be able to increase their production capacity". He
goes on suggest lack of refinery capacity might be the bottleneck
""First it should be [made] clear whether the market's current problem
shortage of crude oil or not, because in many instances in winter and
summer a shortage of crude products
is the main factor behind the rise
in prices" .
January - Iran - Iranian gasoline rationing continues.
Private motorists rations are now increased to120 liters (31.2 gallons)
a month for the next four months. In the 6 months since rationing was
introduced, daily consumptions has been around 59 million litres (about
15 .5 million US gallons), a fall of 22% over the same period the
previous year. Gasoline is heavily subsidised, costing only about 33
cents a US gallon. Iran plans to convert as much of the fleet as
possible to run on compressed natural gas (CNG). Iran has vast supplies
of natural gas.
January 8 - Iran - bad weather causes domestic demand for natural gas
to spike sharply upwards. Iran stops natura gas supply to Turkey as it
has insufficient reserves to meet demand. Turkey cuts off supplies of
Azari gas to Greece in order to meet its own demands. Turkey uses
natural gas in about half its electricity generating plants. Its main
suppliers are Iran and Russia. Demand in Turkey is up about 17% over
January - UK - Diesel cars now make up 40% of all new car sales in UK
because they are fuel effciient. In 2000, diesel cars made up 10% of
new car sales.
January - Iraq - the USA's Iraq resumes pumping
Kirkuk crude oil via the northern pipekline to Turkey. The pipeline now
carries around 72,000 barrels a day. Iraqi crude oil stocks in the
Turkish port of Ceyhan have accumulated to six million barrels.
January - Iran - production from the
Darkhovin oil field in southwest Iran has now doubled, to 100,000
barrels per day.
Jan 20 - Mexico - all Mexicos main oil
exporting ports (Dos Bocas, Cayo Arcas and
Coatzacoalcos in the Gulf of Mexico and Salina Cruz on the
Pacific side) close once
again due to bad weather. Over 80% of Mexico's exports are shut in.
Jan - Mexico - Oil exports are
now 1.434 million bpd.
January 19 - fuel conservation - The maiden voyage of a kite-assisted
commercial ship commences. The 10,000 tonne 'MS Beluga SkySails' set
sail from Bremen, bound for Venezuela. The inventor of the giant
computer-guided kite, Stephan Wrage, believes the added 'pull' of the
kite might trim the ships daily fuel cost of $US8,000 by 20% ($1,600).
January - fuel conservation - Hapag-Lloyd will reduce the speed of its
ships from 20 knots to 16 knots for voyages across the Atlantic. Every
5 knot reduction in speed results in substantial fuel savings - nearly
50% in the very best cases.
January 25 - Quote of the month where Shell Oil admits the reality of
peak oil and takes an oblique swing at USA intransigence while hat
"...we are experiencing a step-change in the growth rate of energy
demand due to population growth and economic development, and Shell
estimates that after 2015 supplies of easy-to-access oil and gas will
no longer keep up with demand. As a result, society has no
choice but to add other sources of energy -
renewables , yes, but also more nuclear power and unconventional fossil
fuels such as oil sands. Using more energy inevitably means emitting
more CO2 at a time when climate change has become a critical global
In the Scramble scenario, nations rush to secure energy resources
for themselves, fearing that energy security is a zero-sum game, with
clear winners and losers. The use of local coal and homegrown biofuels
Taking the path of least resistance, policymakers pay little
attention to curbing energy consumption - until supplies run short.
Likewise, despite much rhetoric, greenhouse gas emissions are not
seriously addressed until major shocks trigger political reactions.
Since these responses are overdue, they are severe and lead to energy
price spikes and volatility.
The other route to the future is less painful, even if the start is
more disorderly. This Blueprints scenario sees numerous coalitions
emerging to take on the challenges of economic development, energy
security and environmental pollution through cross-border cooperation.
Much innovation occurs at the local level, as major cities develop
links with industry to reduce local emissions. National governments
introduce efficiency standards, taxes and other policy instruments to
improve the environmental performance of buildings, vehicles and
As calls for harmonization increase, policies converge across the
globe. Cap-and-trade mechanisms that put a cost on industrial CO 2
emissions gain international acceptance. Rising CO2 prices accelerate
innovation, spawning breakthroughs. A growing number of cars are
powered by electricity and hydrogen, while industrial facilities are
fitted with technology to capture CO 2 and store it underground.
Against the backdrop of these two equally plausible scenarios, we
will only know in a few years whether December's Bali declaration on
climate change was just rhetoric or the beginning of a global effort to
counter it. Much will depend on how attitudes evolve in Beijing,
Brussels, New Delhi and Washington.
Shell traditionally uses its scenarios to prepare for the future
without expressing a preference for one over another. But, faced with
the need to manage climate risk for our investors and our
grandchildren, we believe the Blueprints outcomes provide the best
balance between economy, energy and environment.
For a second opinion, we appealed to climate change calculations
made at the Massachusetts Institute of Technology. These calculations
indicate that a Blueprints world with CO2 capture and storage results
in the least amount of climate change, provided emissions of other
major manmade greenhouse gases are similarly reduced.
The sobering reality is that the Blueprints scenario will only come
to pass if policymakers agree a global approach to emissions trading
and actively promote energy efficiency and new technology in four
sectors: heat and power generation, industry, mobility and buildings.
It will be hard work and there is little time.
For instance, Blueprints assumes
CO2 is captured at 90% of all coal-
and gas-fired power plants in developed countries in 2050, plus
least 50% of those in non-OECD countries. Today, there are none. Since
CO2 capture and storage adds cost and brings no revenues, government
support is needed to make it happen quickly on a scale large enough to
affect global emissions. At the very least, companies should
carbon credits for the CO2 they capture and store.
Blueprints will not be easy. But it offers the world the best chance
of reaching a sustainable energy future unscathed, so we should explore
this route with the same ingenuity and persistence that put humans on
the moon and created the digital age.
The world faces a long voyage before it reaches a low-carbon energy
system. Companies can suggest possible routes to get there, but
governments are in the driving seat. And governments will determine
whether we should prepare for a bitter competition or a true team
China - January 27 - Coal shortages in northern and Central China close
90 power stations, dropping 20,000 megawatts off the national supply.
The record cold winter (coldest in 50 years) has boosted demand right
across China. The cold weather has also disrupted rail deliveries, and
damaged some parts of the grid. Averaged across the nation, only 3 days
of coal stocks remain. China has an electric power demand shortage of
70 gigawatts (equivalent to about Britain’s total electric power supply
capacity). In response, the government has banned coal
exports for the next two months, seventeen ships of China's
international merchant fleet are diverted to local coal carrying,
and some coal mines previously closed because they are unsafe
have been allowed to re-open.
- Jeroen van der Veer, Chief Executive Shell Oil Company, in an email
to company staff
China - controls on coal prices have been freed up, with the result
coal prices have increased by about 14% over last year. But electricity
prices that can be charges by the (mainly) coal fired power stations
capped by the government.
China - a tonne of coal now sells on the Asian market at over
$US120. It was around $US45 a tonne last year.
World coal - About 40% of
the worlds electricity generation is fuelled by burning coal.
UK - January - wind farms are more profitable due to electricity price
subsidies. A typical onshore 2 megawatt (2MW) turbine (costing around
£2 million to build) is potentially able to
generate power worth £200,000 on the wholesale market. The same
turbine will also attract a taxpayer subsidy of up to £300,000 -
£300,000 of subsidy from taxpayers. According to the British Wind
Energy Association, there are 1,944 turbines currently operating in the
UK, with another 34 being built, and 118 with planning permission but
not yet started.
January - this month marks the
highest ever production of 'liquid fuels', at 87.2 milion barrels a
day. The increase is not coming from conventional crude oil and lease
condensate, but mainly from ethanol and liquids from the increasing
amounts of natural gas now being produced.
South Africa - February - power supply is being cut by 4,000 megawatts
for a month to try to stabilise the power grid.5.4 million tonnes of
coal are needed within the next 3 months to ease the power supply
January - Japan - crude oil imports for the month are now 4.12 million
barrels a day. This is higher than the same period last year, and may
be due to increased fuel oil use for electricity generation since the
shutdown of the earthquake damaged Kashiwazaki-Kariwa nuclear plant in
july last year. This nuclear electricity plant is the worlds biggest.
It was built over a deep fault line previously 'considered' to be
February - Brent crude - production has now dropped to about 5,250
barrels a day. Brent is in terminal decline from its peak of 500,000
barrels a day in the early 1980's.
February 7 - Saudi
Arabia - USA - Saudi Arabia sells crude oil to USA
for a discount of between US60 cents and US1.50 per barrel. USA
will pay $2.60 less for a barrel of Arab extra light. USA demand is
muted at the moment, and Saudi Arabia sells only to refineries. At the
same time, the price of Arab Extra light has been increased to $US2
above the benchmark for its northwest European customers, while Arab
heavy has been discounted. Saudi Arabia appears unable (or unwilling)
to produce more light oil, and lack of specialist refinery capacity to
deal with heavy oil means it must discount them to sell.
February - Venezuela - The trend for countries to nationalise their oil
and gas reserves continues. Exxon Mobil refuses to accept a re-write
of their contract to develop the Cerro Negro project in Venuzuela's
Orinoco heavy oil belt, sues
Venezuela, and has UK, Netherlands, USA, and Netherland Antilles
courts award them damages, recoverable from
Venezuela's UK, Netherlands, USA, and Netherland Antilles oil assets.
Venezuela may have to find another refiner to process that part of
their heavy crude that was sent to USA to be refined by ExxonMobil.
However, a large part of the Venezuelan crude is refined by its own
Citgo refineries in USA, and some may be diverted
Exxon Mobil's Venezuelan operation made a nett profit of $362
million. The ExxonMobil operation was extremely profitable, in fact the
of profits to sales for Venezuela was four times the company's
worldwide operational average. Venezuela was attempting to re-write the
contract to take into account the recent large increase in world oil
prices, currently a windfall profit to ExxonMobil, and to gain a higher
percentage control of the operation.
Most major oil companies now have reducing asset
bases, and 90% of the worlds oil reserves are now
controlled by the countries
in which those reserves are found (with one important
exception). Oil companies argue that future oil production is
threatened because they are being shut out from applying capital and
new technology to nationalised fields. While new technology and
development will hasten production, it cannot replace the shortfall as
global reserves deplete. In fact, it can only increase the rate of
depletion. Ironically, reserves that remain undeveloped due to
nationalisation and slow investment may help to buy
a little time to adjust to a world of high oil costs.
February 1 - ExxonMobil - ExxonMobil, the worlds largest publicly
traded oil company, reports a record profit of $US40.61 billion last
year This is almost $US1,300 a second.
February - Conoco - Conoco,
the United States third-largest oil company announced a profit 25% than
February - Royal Dutch Shell PLC - Shell, Europe's largest oil company,
reports a 60% increase in profits.
Oil company profits are up on high oil prices, but, as mentioned above,
replacement of reserves is problematic. Shell oil is now exploring the
difficult Arctic Barents Sea for oil basins. Oil produced in these
regions is not cheap oil. Costs are high. Shell also wants the American
Security Exchange Commission to allow it to count oil sands as oil
reserves in its books. These 'reserves' have a high cost of production,
as extraction depends on energy inputs of natural gas or nuclear power.
The only 'cheap' to produce large oil fields left may be in America's
recently acquired Iraqi properties.
February - USA - BP's super giant Prudhoe Bay field continues to
deplete at 6% a year. This field is the largest oil producer in USA.
Production has now
fallen to less than 400,000 barrels a day. Of this, 50,000 barrels a
day is slow-producing heavy crude, which flows 100 times as slowly as
BP is now aggressively re-working the wells with modern technology to
maintain field pressure (and thus production rates) and to extract as
much 'tight' and residual oil as possible. BP hopes to ultimately
extract a further 1.5 billion barrels of oil more on the 'long tail'
than it otherwise would have through application of these techniques.
BP is also exploring working some of the the extra heavy crude in the
Ugnu formation. While there are 20 billion barrels in the formation,
only about 8% might 'possibly' be extracted economically.
February 12 - Venezuela - ExxonMobil - Venezuela cuts off supply of
heavy crude to ExxonMobil.
February 14 - oil prices - Tapis crude climbs to $US99.14
February 19 - West Texas Intermediate crude oil futures close above
$US100 for the first time ever, partly due to a fire and temporary
shutdown at a Texas oil refinery (Alon Energy USA's Big Spring
refinery, capacity 70,000 barrels of oil a day).
February 21 - oil prices - Tapis crude briefly climbs to $US102.98
February - Russia - Russia's Gazprom, Frances's Total, and Norway's
sign an agreement forming a company - Shtokman Development AG - to
develop phase one of the Shtokman gas field. Phase one is designed to
eventually produce 23.7 billion cubic metres of
natural gas a year. Shtokman, in the harsh environment of the Arctic
Barents Sea has total gas reserves of around 3.8 trillion cubic metres,
and will likely yeild 37 million tons of gas condensate. The joint
venture shareholdings are Gazprom 51%, Total 25%, and StatoilHydro 24%.
Pipeline delivery is hoped for in 2013, with LNG delivery the next year.
February - Indonesia - Indonesia is forced to import an additional
600,000 barrels of diesel and 370,000
barrels of fuel oil for February to use as fuel to generate power.
Although Indonesia produces
crude, it imports between 200,000 and 300,000 barrels of crude a day.
Bad weather prevented delivery of
coal to Java and Bali for use in the coal fired power plants, and some
coal burning plants have switched to burning fuel oil. Java and Bali
suffer a 1,000MW power deficit in the shortage, and supply has to be
shut down. Arounf 30% of Indonesia power plants burn fuel oil.
Electricity rices have been frozen by the state for several years, in
spite of the rising cost of fuel. Indonesia is the world's largest
exporter of thermal coal, but with electricity demand in Indonesia
growing by 10% a year, increasing amounts will have to be diverted to
Indonesia's state run Pertamina
oil company says crude oil imports will be cut by 50,000 barrels
a day, starting in april, due to the increased cost of crude.
February - China - after 3 months of increased diesel imports (an
average of 140,000 barrels a day between november 2007 and january - a
record for diesel imports), finished diesel imports have been cut
dramatically to about 25,000 barrels a day. The cut is the result of
refineries increasing domestic production of diesel to near record
levels (around 7.6 million barrels a day), coupled with reduced demand
due to the holiday season closing factories and cold weather closing
down some roads and rail lines.
February - China - gasoline exports have fallen as refineries ramp up
diesel production at the expense of gasoline production and stocks of
gasoline are held back for domestic consumption in the lunar New Year
festival period. PetroChina and Sinopec Corp terminate all gasoline
exports, leaving West Pacific Petrochemical Corp (WEPEC) to
export a low
of 850,000 barrels of gasoline for the month.
February - Singapore - lower Chinese petroleum exports increase the
price of finished gasoline at the Singapore regional oil hub,
especially as demand from Indonesia, Vietnam and Australia remains
February - USA - wind power - Texas now generates more than 3% of its
electricity from wind turbines. This is enough electricity for about
one million homes.
February - USA - For the first time ever, USA imports liquified natural
gas (LNG) from Europe. Gas from from Norways Snøhvit field
in the Barents Sea is shipped to StatoilHydro Oil and Gas Companys gas
storage facility at Marylands Cove Point gas terminal. Cove Point has
storage capacity of 7.8 billion cubic feet (220,000,000 m³). The
journey took 12 days. The Snøhvit field, operated by
StatoilHydro, is expected to produce 4 billion cubic metres of gas a
year at peak production.
February - Russia - Gazprom, the Russian gas domestic (supplying
90% of domestic) and export major, invests in Russias largest by volume
coal producer. The idea is to swap some electricity generation plants
from natural gas to coal, supposedly in order to release more natural
gas 'for export'. Gas is used to generate 43% of Russia's electricity.
Coal is used to generate 23% of Russia's electricity (in comparison,
USA generates 49% of its electricity from coal). Gazprom is both an
electricity generating company and a gas company. Most of Russias gas
fired stations are old, lacking combined-cycle efficiencies, resulting
in a relatively poor thermal efficiency of about 30%. Gazprom's
domestic gas resources have peaked, and the new gas supplies are in
cold and remote Siberian and Arctic areas, and require massive
investment and time to develop. Russia is likely to have a domestic gas
shortfall in future. This is likely the real reason Russia is turning
Gazprom is the major buyer of State electricity companies, which are
being sold into private hands. Gazprom will ultimately control almost
all Russias electricity supply.
February - Iran - Russia -
Gazprom and Iran's State Oil Minister agree
that Gazprom will extend its involvement in Iranian gas production to
develop "two or three" blocks of the giant South Pars gas field (the
world's largest). Iran supplies 1% of the world's gas supplies,
exporting only to Turkey and Armenia. Iran aim to supply 10% of the
world's gas by 2028, when phases 17, 18 and 19 of South Pars are
expected to be fully developed. Iran currently produces about 73
billion cubic meters, but is expected to more than double production
over the next few years.
February - Iran - Russia - Gazprom has agreed to help Iran extend its
pipeline system from the south to Tehran in the far north. Currently
Tehran has to import natural gas from Turkmenistan. Gazprom has
invested over $US4 billion in Iran since 2000. It is largely free of
competition, as the USA
refuses to allow European companies to invest in Iranian gas
development. Europe currently depends largely on Russian gas, and in
future will certainly depend on Iranian gas, as Iran has the largest
gas deposits in the world.
February 26 - USA - despite prices, USA now
continues to add 70,000 barrels of oil a day to its strategic
stockpile. The stockpile is expected to reach over 700 million barrels
by the end of march.
February 27 - Iran - The Iranian
oil bourse, while officially commenced, has become largely
inconsequential. Chris Cook, architect of the bourse, says "the trading
'system' is the rudimentary one used by the Tehran Metal Exchange. As
we know it is not even web-enabled. There may be the odd 'spot' trade
in petrochemicals, but
these will probably be existing business - done over the phone - which
would use the system for registration. There is no clearing house, nor
is there likely to be, as the skills do not exist in Iran: therefore
you can forget forwards or futures trading, even were they Islamically
sound, which they are probably not. The long and short of it is that
launched Iranian oil bourse is an illusion. There is no real interest
among the Iranian elite in any further transparency than exists now."
February 29 - oil prices - oil
reaches a new historic high of $US103.05
February 29 - Mexico - Cantarell
oil field will now
produce "between 1.2 million and 1.3 million barrels a day this
year", according to Carlos Morales, director of exploration and
production for Pemex Oil Company. Cantarell produced 1.243 million
barrels a day in january. As its annual decline
rate is at least 15% (and likely more), it is more likely to be
producing around 1.06
million barrels a day by the end of the year. Canatarell now
produces only around 43% of Mexicos oil production.
February - ExxonMobil - in an unusual twist, ExxonMobil may cut its
production of oil by around 3% in some countries with production
sharing agreements in place, because the share to the producer in part
depends on dollar value of the oil as well as production. Higher dollar
value leads ultimately to a reduced volume share for ExxonMobil, so
reducing production to spin out the term of the share makes sense for
February 29 - biofuels - Weyerhaeuser Forestry company and Chevron oil
company sign a joint venture agreement to investigate making ethanol
from cellulosic sources such as wood and straw.
March 01 - oil prices - as the
dollar weakens, oil reaches
a new historic high of $US104.53 for Louisiana sweet. Other sweet
crudes are not too far off. Only heavy blends, for which refinery
capacity is limited, remain around the mid nineties.
March 2 - Saudi Arabia - Ali Al Nuaimi,
Saudi Arabia's oil minister, claims that by the end of 2009 Saudi
Arabia will have production 'capacity' of 12.5 million barrels a day,
and with 'spare' capacity of 1.5 to 2 million barrels a day. Most of
this will have to come from new developments in the Khursaniyah,
fields. Currently Saudi Arabia produces around 8 million barrels of oil
a day and 'claims' additional capacity to produce if it wanted. Ali Al
Nuaimi claims Saudi Arabia "exports" 10 million barrels a day. Up to
the Saudi exports have been a 'state secret'. Presumably he means
'produces', not exports.
The oil minister makes these claims "to reassure the world that
we are not going to run
out of oil in the next five to ten years as peak oil theorists say." In
fact peak oil 'theorists' DON'T say "the world is going to run out of
oil in the next five to ten years."
The reality of peak oil is
that "the importing countries
of the world are going to run out of CHEAP oil in the next five to ten
The reasons are one part declining global (not Saudi) crude
oil production, and one part declining exports from the producing
countries - as producing countries allocate more and more of oil to
their rapidly expanding domestic populations. For example, Saudi Arabia
has a population of around 27 million people, and is expected to add at
least another 7 million people within 10 years.
While exported oil will be expensive in the years to
come, the oil that the oil producers like Saudi Arabia put on their
domestic market is very cheap - and is likely to
remain so until all the domestic oil is substantially depleted.
March - Yemen - diesel is sold at government subsidised ultra-cheap
prices, around US 17 centres per litre. As a result, diesel is used to
pump water from Yemens 21 aquifers so fast that 19 of them do not have
time to recharge. 90% of the water is used to grow the drug quat (Catha edulis) for sale. At this
rate, the aquifers will soon be unable to supply all of Yemens current
water use. The government says it is powerless to enforce water
restrictions on the tribal leaders, military and rich who benefit from
quat growing. The area in quat is growing at over 10% a year. The
Yemeni population of 22.4 million is growing out of control, at over 3%
March 03 - oil prices - light sweet oil reaches
a new historic high of $US105.95 for Tapis light. The spread between
light and heavy grades continues to widen.
March 04 - oil prices - light sweet oil briefly reaches
a new historic high of $US106.59 for Tapis light before falling back to
March 09 - oil prices - light sweet oil reaches
a new historic high of $US109.21 for Tapis light. Heavy oil such as
Dubai and Oman 1M is stuck around the $96-$97 mark.
March 10 - oil prices - light sweet oil reaches
a new historic high of US$109.69 for Louisiana Sweet.
March 11 - oil prices - light sweet oil reaches
a new historic high of $US110.93 for Tapis light.
March 11 - USA - gasoline prices are now $US3.22. averaged nationwide.
This is an historic high.
March - Russia - the value of oil and gas exports is now approaching
$US1 billion per day. About 70% of the value of Russia's exports is
from oil and gas.
March - Saudi Arabia - The Saudi plan to boost 'value added' refinery
capacity to about 3.7 million barrels a day by 2012 is under review as
costs escalate. The projected 400,000 barrel a day Jubail refinery may
cost in the region of $US10 billion to build, rather than previous
industry estimated costs of around $US6 billion. The proposed Jubail
refinery would handle heavy oil, including about 75% of the difficult
heavy crude from the Manifa
offshore field, due about 2011.
March - non-OPEC oil - According to the International Energy Agency,
production from non-OPEC oil fields (when all are averaged) is
declining at an annual rate of about 7.7% a year. Generally, non-OPEC
fields are smaller and have a shorter lifespan than OPEC fields. If
this decline rate doesn't increase even further, non-OPEC oil
production will drop by half within ten years.
Non OPEC oil produces around 56% of the worlds oil.
March 13 - oil prices - light sweet oil reaches
a new historic high of $US111.47 for Tapis light.
March 14 - oil prices - light sweet oil reaches
a new historic high of $US113 for Tapis light.
March 17 - USA - Iraq - Dick Cheney visits Iraq to push for better
access by 'International' oil comanies to 'Iraqi' oil. 'Progress'
in developing Iraqi fields for the Americans remains slow, in spite of
March 17 - India - Tata BP Solar, joint venture between Tata Power
Co and BP Solar announce plans to expand their production of
photovoltaic panels with a total nominal capacity of 60 megawatts (MW)
to 180 MW. The ultimate aim is to produce panels with a nominal
capacity of 300 MW per year.
March 17 - Saudi Arabia - an unamed official claims Saudi Arabia produces
about 9.2 barrels a day, and has produced at this levels for the last
March - 'Oil Sands' - Shell reveals that costs in its Athabasca Oil
Sands Project in Alberta have increased by nearly 50% since 2005.
Production at the bitumen sands
project has been more or less static. Shells 'oil reserves' are now
counting bitumen sand 'reserves' as economically producible oil.
Natural gas is needed to refine these sand/bitumen deposits. The rising
price of natural gas is likely to make the extraction of liquid from
these sands increasingly expensive.
March 20 - China - Sinopec oil refining company continues to make
"extremely heavy losses" as it is obliged by the Chinese government to
sell oil products at far below the world oil price, and at the same
time must import oil for refining. The Chinese government gives Sinopec
$US1.7 billion dollars as a subsidy to cover Sinopecs losses due to
government price controls. Sinopec processes 80% of China'a imported
crude. Sinopec produces 70% of China's refined oil.
March 27 - Iraq - USA - An oil pipeline from the Zubair oil field to
the Al-Faw export storage facility near Basra is blown up by saboteurs.
The pipeline, Zubair-1, is one of two major export pipelines to the
export terminals at al-Umaiya and Basra. These two pipelines carried
1.54 million barrels a day of oil for export in february. Over 500,000
barrels a day is directly for USA. Around 80% of Iraqi oil is from
fields in southern Iraq, exported through Basra. About 500,000 barrels
a day is immediately unavailable for export until the pipeline is
repaired. Military operations in the area mean oil workers cannot get
to their work place. All oil exports may end up being temporarily
suspended if the insurgency continues.
March - USA - While gasoline
and diesel prices are still much lower in
USA than Europe, the higher gasoline and diesel prices have led to
reduced consumption. Americans drove 11 billion fewer miles this march
than last march, according to the US Department of Transport. The last
time petroleum use declined in the month of march in USA was in march
March - UK - petroleum sales in the year to march are down 20% over
last year in volume.
April - Iraq - the oil pipeline from the Zubair oil field is now
April 5 - Saudi Arabia - Aramaco, the Saudi state oil company, once
more drops the
price of crudes for may delivery to refineries in USA. USA refineries
have reduced their throughput to the bare minimum, stockpiles are high,
and refinery margins are low. Oil company owned refineries make profit
both on the oil produced from the wells, and from the refinery margin
from their own refineries. Private refineries must buy crude on the
world market, and the up-front cost of buying and holding crude oil
inventory is squeezing them hard.
The Saudi crude is discounted against the current price of the
benchmark West Texas Intermediate crude.
April - Asia-Pacific regional refineries are now shutting down units
routine maintainance. In all, roughly 1.4 million barrels a day of
capacity will be offline in the second quarter of this year, with the
peak of shutdowns being in may. This is a significantly larger fall in
refinery output capacity than last year.
- Aramco has discounted Arab extra light by an additional US90
existing discounts, bringing the total rebate to $US4.65 a
- Aramco has discounted Arab medium by an additional US$1.60 over
existing discounts, bringing the total rebate to $US9.25 a
- Aramco has discounted Arab heavy crude discount by an additional
US$2.10 over existing discounts, bringing the total rebate to $US13.70
But at the same time demand for the lighter 'middle distillates' -
diesel and kerosene - in Asia is very strong. India's demand
for oil is
increasing by around 10% a year, but produces only 25% of its
consumption domestically. Indian private oil producers are required by
law to sell kerosene and diesel at below cost. As a consequence, much
of the privately produced oil is sold overseas. Both China and
Indonesia are also experiencing domestic production shortfalls, and
demand is rising. The cost of importing crude oil at world prices and
selling it domestically at below cost is an increasingly heavy burden
on China and India. Indonesia also subsidises the price of oil products
on the domestic market. In face of these pressures, China has allowed
its domestic refineries to increase prices. Reductions in state
subsidies have now pushed the price of diesel and kerosene to historic
highs, albeit way below the true market price.In spite of this, demand
is surging in these markets.
April - The benchmark for margins by unsubsidised refinery is the
Complex' margin. The Singapore Complex margin is now at about
$US11.06 per barrel of oil processed.
In the face of the demand for light oils in Asia, Saudi Aramco now
increases the 'price
premium' of Arab Light - the main crude refined in Asia - by US40
cents, to $US1.45 for its Asia-Pacific term-contract regional customers.
Asia-Pacific regional customers will also now have to pay an additional
premium of US80 cents for Arab extra light crude, making the total
premium for this crude $US5.25 a barrel.
Asia-Pacific regional customers will also now have to pay an additional
premium of US70 cents for Arab super light crude, making the total
premium for this crude $US7.05 a barrel. This is $US1.73 higher than
April - Saudi Arabia - Iran - Kuwait - While demand for lighter crudes
that yeild high amounts of diesel and kerosine
surges, demand for heavy grades that require specialised refineries and
yeild less of the desirable 'middle distillates' continues to fall. No
new substantial heavy-oil refinery capacity is on the horizon until
later this year, when India's Reliance heavy-oil refinery is due to
come into operation. The
profit margin on these heavy oils continues to slip. The bulk of the
'spare' oil capacity from Saudi Arabia, Iran and Kuwait is in heavy and
sour crudes. Asian buyers don't want them, as, after higher refining
costs, the profit margins are very low due to higher production of
unwanted heavy fuel oils and other heavy products.
April - Saudi Aramco further deepened its discounts to Asian
refiners for Arab medium and Arab heavy crudes (discounted relative to
Oman and Dubai heavy crudes).
- Asia-Pacific regional customers will pay US90 cents less for Arab
heavy crude. This brings the total discount on this crude to a rebate
of $7 a barrel.
- Asia-Pacific regional customers will pay US40 cents less for Arab
medium crude. This brings the total discount on this crude to a rebate
of $3.15 a barrel.
April - Europe - Saudi Arabia - faced with falling consumption in
Europe, Saudi discounts most of its may-delivery crude oil
shipments to both Europe and the Mediterranean relative to regional
The discount for Arab light has been increased to US70 cents, making
a new total rebate of $US3.95; Arab medium has been discounted by an
US75 cents, making a new total rebate of $US6.95; Arab heavy has been
discounted by US85 cents making a new total rebate of $US9.30.
The existing discount on the very much in-demand Arab extra light has
reduced by US60 cents, to
40 cents a barrel.
April 8 - oil prices - light sweet oil reaches
a new historic high of over $US115 for Tapis light.
April 10 - oil prices - light sweet oil reaches
a new historic high of $US116.20 for Tapis light.
April 10 - oil prices - light sweet oil reaches
a new historic high of $US116.84 for Tapis light.
April 21- oil prices - after a series of historic highs over the last
week, light sweet oil reaches
a new historic high of $US123.78 for Tapis light.
April 22 - oil prices - light sweet oil reaches
a new historic high of $US124.18 for Tapis light.
Late April - Nigeria - Shell shuts 169,000 barrels a day of of Bonny
Light crude oil output due to damage to a pipeline by MEND rebels.
April 25 - UK - BP begins to shut down the 700,000 barrel-a-day
oil pipeline due to a strike planned for this weekend at Grangemouth
oil refinery in Scotland. The shutdown takes about 24 hours. The
pipeline processing terminal at Kinneil uses power and also steam from
operate. If the refinery closes, the pipeline must close down. If the
refinery does close fully, it will take
about a month to bring it back into full production.
pipeline carries about half of Britains production from the
North Sea.(The other half is mostly piped to BP's Sullom Voe oil
terminal in the Shetland Islands. This terminal then ships this crude
refineries worldwide) Some crude piped to the Kinneil oil terminal near
Grangemouth is piped to the Dalmeny oil export terminal at Hounds
Tooth, laded onto tankers and shipped out. Most of the oil, however,
goes to Grangemouth.
Grangemouth is the sole oil refinery in Scotland to produce and
diesel, fuel oil and jet fuel. It supplies product to Scotland,
Ireland and the northern of England. Grangemouth can process 210,000
barrels of crude a day. The rest of the UK has good supplies of of
refined fuel from other sources.
Scotland and the northern UK sees a 'rush' on gasoline, forcing some
stations to limit purchases. Some run out in the face of panic buying.
Once the strike ends, it is estimated it will take about 3 weeks to
bring gasoline supplies back to normal.
April 27 - UK - The Forties pipeline is now shutdown. Grangemouth
oil refinery is now shutdown. As a result, over 60 North Sea oil and
gas fields are now shut in. The North Sea fields currently
supply about 30% of UK's crude oil needs, and it is now all shut in.
Imported refined products are 'supposed' to make up the shortfall.
About 70 million cubic metres a day of natural gas supply - around 25%
of the current British natural gas demand - is now shut in.
Stored gas (roughly 30 days worth) and reducing spring demand will make
up the lost capacity.
April 28 - oil prices - light sweet oil reaches
a new historic high of $US126.94 for Tapis light.
April - Russia - oil production for the month has fallen from the
of production - for the fourth straight month in a row.
April - Indonesia - prdiction was 860,000 barrels a day, whereas at
peak in the 1990's it was well over 1.6 million barrels a day.
Indonesia is now considering dropping out from membership of OPEC.
April - India - India will be short of about 86 million tonnes of
coal for power generation this fiscal year (2008-2009). Over 60% of
India's power is generated in coal-fired power stations. Even if stocks
are found from overseas, rail infrastructure and rolling stock is
likely to be insufficient to keep all power stations adequately
May 6 - Scotland - the Grangemouth refinery is now back in
operation, with about a third of its normal production back on line.
Full production will not be reached until about may 18th.
May 8 - oil prices - light sweet oil reaches
a new historic high of $US128.58 for Tapis light.
May 11 - oil prices - light sweet oil reaches
a new historic high of $US131.43 for Tapis light.
May - Tanzania - the price of herosene, the predominant fuel used in
cooking, has nearly doubled in the last two months. Supplies in some
areas are now unavailable. People turn increasingly to charcoal as a
fuel source. There are 5 million people in Dar es Salaam alone. The
ultimate result will be accelerated deforestation and erosion.
May - UK - wind - The 180 megawatt capacity Lynn and Inner Dowsing wind
farm connects to the national grid. The 54 turbine project, off the
coast of Skegness.
The rising cost of materials and limited number of manufacturers for
the turbines have made the future of the 1,000 megawatt capacity London
wind farm project uncertain. Costs were estimated at £1 billion
in 2003. The estimated cost is now double that, partly due to rising
costs of steel and copper. The profitability is now said to be
'marginal', and Shell, one of the three major partners, has now pulled
out. The windfarm, planned for offshore Kent, would be the world's
May 21 - oil prices - light sweet oil reaches
a new historic high of $US134.12 for Tapis light.
May 24 - oil prices - light sweet oil reaches
a new historic high of $US139.37 for Tapis light.
May 24 - Indonesia - in the face of high oil costs, the government
reduces the subsidy on gasoline, causing the price to increase by 33%.
Indonesia still has some of the cheapest gasoline in the world, as the
state oil firms are required to sell oil at hugely discounted prices.
May - China - crude oil costs have meant private refineries have cut
throughput to avoid losses in China's heavily price-controlled market
(gasoline has risen only 9 cents in the last 18 months). To compensate,
and to build fuel stocks ahead of the Olympics, China doubled its
gasoline imports relative to last month. China sells gasoline to Asia,
and for the first time imported more gasoline (338,572 metric tonnes)
than it exported (160,000 metric tonnes). China has
reserves of $US1,300 billion of which $US27 billion was used to
subsidise pump prices in 2007. China can afford to subsidise cuurent
consumption for the next 50 years - as long as it doesn't have to
import larger amounts on the world market. Which it will. And as long
as the US dollar doesn't slide further in value. Which it will.
May - Norway - Production of all liquids from oil and 'wet' natural gas fields for
this year is forecast by the Norweigan Government to average about 2.4 million
barrels a day (crude oil, condensate, and natural gas liquids).
May 24 - Mexico - Production from
the Cantarell oil field is declining
rapidly, and has now dropped by 416,000 barrels a day (26%) relative to
a year ago. This must
mean it is now
producing in the region of 1 million barrels a day.
May - Mexico - The average oil production for the first 4 months of
this year is now 2.87 million barrels a day, a drop of 9% over last
year. Mexico's supplies to the USA are falling.
May - USA - As Mexico's vitally
important supplies to USA fall (coupled with rising internal
consumption) more oil is now being purchased from the Middle East. USA
against the world for oil. This, plus the flight to oil as a
value-retaining investment commodity (oil is the 'new gold') keeps the
price of oil high.
May 25 - Saudi Arabia -
after a few preliminary trials earlier in the
is still not in production. Saudi Aramco say it could be bought into
production now, but as the gas plant is not yet complete, the gas would
have to be wasted by burning off. The gas plant is expected to be
complete within a few months.
May - USA - Sales of the Toyota Prius hybrid drop - because all stock
is sold out. Ford Motor Companies sales of of SUVs have fallen from 47%
of all new sales 3 months ago to 34% now. General Motors is closing 4
truck plants and adding more shifts to small car assembly lines.
Production of hybrid vehicles by American companies is capped by an
absolute shortage of nickel-metal-hydride batteries.
May - Iraq - oil production is now 2.5 million barrels a day once more.
The Iraqi Prime Minister claims production has returned to
pre-US-invasion levels because of better security.
June - Iraq - the Iraqi government announces it will let tenders for
the development of several prime Iraqi oil fields to foreign companies.
companies ExxonMobil, and Chevron
are expected to be top tenders, with something for the British BP
and perhaps the Dutch Shell oil company.
June 7 - Russia - Russian President,
Dmitri Medvedev says in a speech to international investors at St.
Petersburg "Failure by the biggest financial firms in the world to
adequately take risk into account, coupled with the aggressive
financial policies of the biggest economy in the world, have led not
only to corporate losses, most people on the planet have become
poorer...No matter how big the
American market and no matter how strong
the American financial system, they are incapable of substituting for
global commodity and financial markets." He went on to
announce that Russia planned to become a global finance centre, and to
to establish the ruble as a reserve currency for the region. Making the
ruble a currency in demand for payment for oil and gas would make
imports into Russia cheaper. Medvedev believes there needs to be a
group of reserve currencies, not just the greenback, and better
regulation of money markets.
June - Frances TOTAL
estimates that the cost of discovering and
bringing replacement oil reserves on-line is today at least $US80 per
barrel. That cost will rise further as oil prices themselves rise.
June - USA - Oil inventories become very low, nearing the
minimum required for safe distribution pipeline operation. The USA Gulf
refineries process 50% of USA's oil. In recent weeks, USA Gulf Coast
oil inventories have been falling at the rate of around 750,000 barrels
a day. It is uncertain whether this reflects a need for additional
storage capacity to deal with a 'switch over' from Mexican to Middle
Eastern supplies, or if some other factor is at play.
As oil from
Mexico (and Venezuela) falls off, so the time taken for oil to arrive
in USA Gulf of
Mexico ports takes longer. Where it takes 5 days from Mexico, it takes
30 from the Middle East. The 'ant trail' to the Middle East is much
longer than to Mexico. It requires far more 'ants', where each 'ant' is
June - Saudi Arabia - France - Saudi
Aramco and the French Total S.A. confirm a $US10
billion joint venture
to complete a
400,000-barrel per day heavy crude refinery in Jubail, Saudi Arabia.
Completion is scheduled for end 2012.
June 7 - Saudi Arabia - Faced
with an inability to sell the unprofitable heavy and sour crudes, and
having no ability to supply further light and medium grades, Saudi
Arabia drops its Official Selling Price yet again for its heavy and
sour crudes. The differential between heavy and light grades of crude
$US10, an historical high.
June - Iran -
In spite of steep drops in its Official Selling Price (from $US7 a year
ago to $US13.05 now), Iran cannot find buyers for some of its heavy
crude. The National Iranian Oil Co is forced to store about
25 million barrels of its heavy and sour crude, mainly from its Soroosh and Norooz fields,
in tankers anchored in the Arabian Gulf.
June 8 - oil prices - light sweet oil reaches
a new historic high of $US141.97 for Louisiana sweet. The
American crudes are now expensive, West Texas Intermediate is $138.48,
Alaska North Slope is $138.09. Tapis, from Southeast Asia, the previous
price leader, is a relatively 'cheap' $135.54.
June - USA - natural gas prices now range from $2.88 to $3.33 per therm for marketers
variable pricing contracts.This is the highest ever price for gas, at a
time of year when gas demand is low.
June - Europe - diesel prices have reached the equivalent of $US10 per
US gallon. Around half the new cars in Europe run on diesel. The high
prices of diesel make some independant trucking firms uneconomic. There
are truckers strikes in France, Italy and Spain.
June 15 - USA - the national average price per US gallon
of regular gas is now a record $US4.06.
June 10 - Quote of the month:
“Now, the price is going to reach a
level never-before-seen. The perspective will be $250 per barrel of oil
and the competition for this resource will be strong
Alexei Miller, head of Gazprom
June 11 - BP publishes its annual 'Statistical Review of World Energy'.
But BP continues to base its figures for OPEC country reserves on the
instantaneously inflated figures reserve figures self-reported by OPEC
members in 1983
- when OPEC production quotas were related directly to the size of a
member countries reserves. These reserves have remained unchanged ever
since, no matter how much oil has been pumped out of them since...
While BP continues to print these patently absurd figures, it is
careful to add a disclaimer - in small print - that the information
comes from "official sources and third-party data" and "does
not necessarily represent BP's view of proved reserves by country". The
lead author later admits that the data sources include what he quaintly
describes as "some good apples and some bad apples".
June 11 - BP head Tony Hayward claims its annual summary of proven oil
reserves, production and
consumption is "one of the most reliable sources for energy data
June - Airlines - USA - extra fuel costs for American domestic
(trans-continental) passenger airlines are expected to be an additional
$US30 billion by the end of the year if oil prices remain over $US130.
Fuel costs currently take 40% of revenue - and that percentage is
increasing. Seat costs would have to be increased by 20% 'across the
retrieve the rise in fuel costs since 2007. With current seat
overcapacity in US domestic airlines, this is simply not possible. It
appears many billions will be wiped off global airline income once
June 13 - Airlines - The USA Business Travel Coalition says a study it
commissioned suggests the top 10 U.S.domestic airlines will have losses
of $17.6 billion in
2008 and 2009. The report suggests that if oil remains over $US130 a
barrel for the rest of the year, all
major US 'legacy' domestic passenger airlines (now run as low cost
airlines) will run out of cash and be in default on debt covenants by
early 2009. It suggests some airlines will be forced into liquidation,
and others will have to file for bankruptcy. At this price point for
oil, the report suggests US domestic airlines would remain viable if at
least 15% of seat capacity was permanently removed, and fares increased
by around 20%.
June - Mexico - Cantarell production has
now fallen to 1.017
million barrels a day - 35% lower than june 2007. Production at
the Ku-Maloob-Zaap field has been ramped up by around 30% as
Cantarell's nitrogen injection system is swapped over to Ku-Maloob-Zaap.
June - Mexico - exports to USA, at 1.139 million barrels a day, are
down 19% relative to june 2007. Mexico is the third largest supplier of
crude oil to USA.
June - Japan - Toyota can barely keep up with
demand for its hybrid vehicles because of a bottleneck in battery
production. Additional battery production capacity won't be available
until 2009 when a joint venture with Matsushita Electric Industrial Co.
will begin producing next-generation lithium-ion
batteries. The smaller lithium-ion batteries produce more power than
nickel-metal hydride battery, and are better suited to 'plug-in'
recharging at home. 'Plu-in' charging is a developing trend by Prius
owners, and there are now 'after-market' entrepreneurs converting the
existing Prius models to allow them to be 'plug in' charged from a
domestic supply overnight.
Full-scale production won't be in place until 2010, when it expects to
be selling 1 million hybrids a year. In the meantime, Toyota will work
on building another plant to produce the existing nickel-metal hydride
battery. Toyota will also develop its own battery research unit, in an
effort to further improve battery performance.
June - Japan - Honda announces it expects hybrid production of 500,000
a year after 2010. Honda has 4 hybrid vehicles at the moment, and plans
June - Japan - Nissan Motor Co announces it will produce a hybrid
vehicle by 2010. Nissan plans to start mass-producing lithium-ion
batteries in Japan in 2009 with joint venture partner NEC Corp.
June 22 - Nigeria - recent attacks by MEND rebels (including Shell's
225,000 barrels a day Bonga oil field 120 kilometres offshore ) have now
shut down between 900,000 and 1 million barrels a day of oil
production. Nigeria is now producing between 1.2
million and 1.5 million barrels of oil a day, the lowest level in over
June 24 - oil prices - light sweet oil reaches
a new historic high of $US142.74 for Tapis light.
June 28 - oil prices - light sweet oil reaches
a new historic high of $US147.30 for Tapis light.
June 30 - International Energy Agency, noted for its fantasy-land
projections of world oil supply and demand, publishes its latest
'analysis' of the oil markets and projected supply, while making a few
uncharacteristically realistic comment:
Uncharacteristically, the IEA admits there are no "obvious sign" that
speculators are behind high prices, and the facts are that crude oil
stocks are "normal to low" (sweet oil stocks are low, sour abundant),
and refinery production is "very tight". The IEA notes that oil
producers are "operating close to flat out". It then goes on to note
"high prices reflect strong non-OECD growth and poor non- OPEC supply
performance". That is, we are past the peak of supply, and, looking
forward, there will be a slight reprieve in 2009 (which we agree is
likely the case) as megaprojects come on stream, but as 'non-OPEC'
supplies continue to fall, the supply situation will deteriorate after
that, but in 2013 there will be more oil from More oil beyond 2013 Saudi
Arabia, Khashaghan, and the Brazilian Tupi field. They omit the
fact that decline in other fields, and especially Russian fields, will
wipe out the effect of these other supply sources - and then some.
“Like alchemists looking for a way to turn basic elements
into gold, everyone wants a simplistic explanation for high
prices...Often it is a case of
political expediency to
find a scapegoat for higher prices rather than undertake serious
analysis or perhaps confront difficult decisions.”
July 3 - oil prices - light sweet oil reaches
a new historic high of $US153.98 for Minas light. Tapis is also high,
Both these Asian crudes are light sweet oils. Most Asian refineries
only handle sweet oils, and cannot process sour crudes. Roughly 25% of
the global refining capacity is in Asia. Competition for local 'sweet'
feedstock is now intense. Minas light, from Sumatra in Indonesia, is
35.3 API, and has a sulfur content of 0.09%. Tapis light, from
Malaysia, is 45.2 API and has 0.03% sulfur. As local Asian sweet crudes
cannot meet Asian refinery demands, Asia will have to import greater
amounts of light crudes from elsewhere. Sweet crude production from
declining Asian fields is expected to drop by around 60,000 barrels a
day by years end. And major non-Asian sources
are in very volatile regions. New Asian regional heavy-oil refinery
capacity is not yet on-stream.
July - oil - well over half the world oil
production is heavy sour
crude. The trend in the Asian region is to mandate lower sulfur fuels.
Indonesia, Australia, and Vietnam have all mandated that retail fuels
contain lower amounts of sulfur. This has put increasing
demand-pressure on low sulfur crudes. If Asian 'straight-run'
refineries (that cannot handle sour crude) cannot obtain enough low
sulfur crude, it necessarily creates a bottleneck, as around 25% of
world oil production goes through these refineries, and other
refineries are operating at near full capacity. Under these conditions,
the high price of sweet oil will likely make some refineries
Only refineries that are processing crude from their own oil fields are
likely to remain economically viable.
And as the demand for light sweet oil is so very high, the profitable
refineries can set the wholesale refinery profit margin very high - and
have done so. The price spread between sour heavier crudes and light
sweet crudes in Asia is at historic highs. It is unlikely to come down
until 2009, when around 600,000 barrels a day of new heavy oil refining
capacity in India (Reliance's Jamnagar refinery) and additional
capacity from expansions in China (Zhenhai, Quanzhou, Wuhan, Yanshan,
Jinling, Qingdao, Luoyang, Dushanzi etc ) and from some of China's
offshore refineries (Sudan) comes on-line.
The retailer selling to the public has an unchanged small profit
margin, but pays a huge amount more for supplies. And so has to put the
price at the forecourt up.
July - oil - Currently, fuel oil is in over-supply, and cheaply
available due to lack of suitable refinery facilities for heavier oils.
refineries upgrade to deal with heavy and sour crudes, they produce
less fuel oil. At the same time,
Middle East countries are increasing the use
of fuel oil to generate electricity. While their generators can
switch between fuel oil and natural gas, natural gas supplies have now
become more difficult, with significant new sources now diverted to the
chemical feedstock industry, and greater demand for gas in Europe and
Asia. Paradoxically, in future, refineries could produce more fuel oil
quite easily, but as as upgraded refineries produce less percentage of
fuel oil per barrel of crude processed, the refineries would have to
increase throughput in order to expand fuel oil production. This is
unlikely to be possible.
July - petrodollar investment - About 60% of Gulf oil producing
countries income now
goes to US dollar denominated investments, and about 20% to Euro-based
July 4 - oil prices - light sweet oil
a new historic high of $US154.11 for Minas light.
July 10 - Iran - France's Total oil
company announces it will pull out of joint developement of phase 11 of
the South Pars gas field due to political risks. In an on-going
re-run of its Iraq technique, USA continues its accusations that Iran
of trying to develop nuclear weapons, rather than consider Iran's
statement that it needs to exploit its uranium deposits to generate
electricity. Iran controls
the world's largest natural gas deposit, and if exports eventuate, the
price will not be in dollars, particularly if partnership
with Russia eventuates. USA may have control
of Irans oil and gas distribution, income, and currency on its
agenda - as well as Iraqs.
Shell has already pulled out of the joint venture, and Malaysia
Petronas company is the last foreign company working on the field phase
expansion. Total is said to have the most advanced technology to
capture and process natural gas. Iran hopes to export natural gas as
LNG. Iran says it will continue to develop the field by itself, if it
has to. Analysts believe that Totals pull-out will mean this phase of
the vast Pars field expansion will now not be fully in place for around
8 to 10 years. It is likely that other strategically important regional
partners will be found, as domestic
demand for natural gas from Iran's rapidly expanding population is
likely to match any expansion in available
July - USA - demand for low-sulfur lighter crudes to make (government
mandated) low-sulfur diesel increases. Lighter crudes also yeild more
diesel than heavier crudes (which yeild more petroleum, for which, in
USA, there is currently less demand). USA has to bid against strong demand from Asian refineries for
price-supply. Diesel in the USA now costs $US4.66 per American gallon,
making diesel more expensive than petrol for the time ever. The average
price of petrol (all grades) is now $US4.15 per American gallon.
July 13 - Iran - Russia - Gazprom signs an agreement to help Iran
develop its oil and gas fields. Alexei Miller, CEO of Gazprom,
expressed interest in participating "in big oil and gas projects; in
South and North Pars, Azadegan
and the Caspian Sea fields." Gazprom also suggests Russian expertise
could help in the North Azadegan oil field in southwestern Iran. Iran
commenced production from the very large Azadegan field by itself after
its Japanese partner pulled out.
July 13 - UK - A speech by British Prime Minister Geoffrey Brown is the
closest thing to public admission of peak
oil and the fading of the oil economy that a leader of country
has yet given. It is a remarkable speech (edited and emphases added):
now leave behind the
...oil dependent ways
yesterday and embrace the new cleaner and sustainable energy
years of cheap energy... are behind us. We
need a new strategy. Past total
dependence on oil must give way
clean energy future...
...improving the functioning of the oil market can be only one half of
our strategy. The
other must be to set
ourselves on a new energy path - a path from our
economies that are today over-dependent on oil towards the post-oil energy economies
of the future.
Today in Europe more than a third of our
energy comes from oil, and
a further 40 per cent from other fossil fuels - gas and coal. Only
around 20 per cent of our energy comes from...renewables and nuclear.
Europe is on a
path to increase the proportion of renewable energy in its energy mix
by 2020 from under 10 per cent to 20 per cent....we must also become
much more efficient in the way we use energy.
So let me set out the five main points of
an oil replacement strategy.
First, since 70 per cent of future oil
demand is from transport, we need a
step change in the fuel efficiency of vehicles. ... we will need to see the mass production
of electric vehicles - conventional hybrids, plug-in hybrids,
I want to see the mass production of
hybrid and electric drive
technology in ordinary family models.
Already initiatives are under way in
several countries to accelerate
the commercialisation of electric vehicles by supporting the required
charging infrastructure and automotive technologies.
...we need all countries to commit to
taking rapid action to improve energy efficiency in households and
The G8 nations this week committed to implementing the IEA's 25
recommendations on energy efficiency. If
implemented globally these
could cut oil consumption by
15 per cent
We need agreement on lower levels of [value added tax] for energy saving goods...we will
also introduce new measures to encourage the
installation of household insulation
and energy efficiency appliances...
need a renaissance of nuclear
power. Britain is now moving quickly to replace its ageing fleet
nuclear power stations.... I see renewed
interest in this technology, as countries contemplate the alternative -
[is] continued oil dependence....we need a massive expansion of
renewables. Britain is
fully committed to the EU target that 20
per cent of all energy must
come from renewable sources by 2020.
will become the global centre for offshore
will see major investment in energy
from waste and biomass and in new
We are pushing ahead with the development of
marine and tidal technologies, including an examination of a tidal
scheme on the River Severn, which could supply 5 per cent of all the
time for a major investment in the development of solar power.
The IEA suggests that additional investment of up to 215 million square
meters of solar panels will be needed every year to 2050. And
particularly in the Mediterranean region, concentrated solar power
...[in] those sunnier countries ...could become
a vital source of future global energy by harnessing the power of the
...the EU is committing at this summit
to work with its neighbours - including Egypt, Jordan, Morocco and the
League of Arab States - to explore the development of a new
'Mediterranean Solar Plan' for the development and deployment of this
vital technology from the Sahara northwards.
So I call on the European Investment Bank to use its 3 billion euro
sustainable energy fund to support a clear strategy for the reduction
in global dependence on oil
and traditional fossil fuels and for the
development and deployment of new low carbon energy technologies.
We live in a new era. Today our
globalised, energy-hungry and warming world requires a shift from oil
dependence to sustainable energy.
with political leadership from all of us will we be able to
move towards a new sustainable economy. This is now Britain's goal. It
must be Europe's destiny." - exerts
from a speech made by UK Prime Minister Gordon Brown, on 13th July at
'The Union for the Mediterranean Summit'.
July - a new
historic peak of
supply - So far, this month marks the highest ever
production of conventional crude oil, at 74.83 million barrels a day.
July - a new
historic peak of production of crude oil plus condensate
is reached -
74.94 million barrels a day.
August 5 - Turkey - Azerbaijan
- Caspian Sea Oil - The
1,000 mile long Baku-Tbilisi-Ceyhan oil pipeline closes due to a fire
from a bomb attack by Kurdish seperatists in Turkey. Oil from Caspian
sea fields is also shut in, as it feeds into the BTC pipeline from
subsidiary pipelines. Output is cut from 800,000 barrels a day to
250,000 barrels a day. Around 80% of Azerbaijani
production is shut in, causing significant economic loss.
September 1 - USA - Hurricane
Gustav hits the Gulf of Mexico. The hurricane does only
minimal damage to offshore rigs, but as 100 rigs in its path were
evacuated, oil production from the 21 rigs not evacuated is relatively
small. About 96% of the USA's Gulf of Mexico oil output is shut in,
along with around 82% of Gulf of Mexico natural gas output. Oil
and liquid condensates from gasfields in the Gulf of Mexico make up
roughly a quarter of all the oil produced in the USA. Modelers
estimate that about 40% of Gulf of Mexico oil and about 30% of Gulf of
Mexico natural gas will be unavailable for the next 30 days.
The pipeline was to be a key element in the American-backed 'east-west'
corridor to take Caspian Sea oil to Turkey, and then Europe. The
pipeline transits through Georgia, recently under attack from Russia
after Georgia's attempt to 'blitzkrieg' its (largely Russian ethnicity)
break-away South Ossetia region
into submission. Russia drops bombs adjacent to the pipeline, in a
clear warning to all parties.
The Louisiana Offshore Oil Port is closed, shutting out the1.2 million
barrels a day of crude oil that is imported from overseas through this
In addition, 27% of the USA refining capacity is affected, with 11% of
refineries shut, and 16% operating at reduced rates. The hurricane
closes down power stations in some areas, leaving 1.5 million people in
Louisiana without power. Petroleum shortages result, as gas
stations don't have power for their pumps.
September 3 - USA - The Louisiana Offshore Oil Port commences very
limited offloading of imported crude using stand-by electricity
generators. Return to full capacity is expected once commercial power
restored, a process that might take one or two weeks.
September 8 - oil prices - Tapis light sweet crude is $US113.11 as
prices temporarily spike down. Minas is now
September - India - Coal shortages and distribution problems continue
to hamper the reliability of India's electricity supply. Half of
India's electricity is generated by burning coal. India produces around
380 million tonnes of coal a year, with production increasing annually.
The state-owned coal monopoly, Coal India Ltd, now plans to import coal
for the first time ever. India is arranging to import 4 million metric
tonnes, with imports expected to increase to 60 million tonnes a year
by 2012. Coal India, in conjunction witht the Steel Authority of India,
is working to buy coal mines in Indonesia, Mozambique Zimbabwe and
Australia. It is also attempting to secure thermal coal from Indonesia
and South Africa.
September - Japan - High oil prices and reduced demand for gasoline and
diesel have led to Nippon Oil Corp, Japan's top oil refiner, refining
3% less crude this month, relative to september 2007. Other smaller
refiners are also affected, some down by as much as 10%.
September - Japan - Nippon Oil Corp, faced with excess capacity, signs
a deal to export 3,446 barrels a day of diesel to Mexico. The contract
is for a year, after which Nippon Oil may sell diesel on the spot
market, demanding on the shape of domestic demand.
September - USA - Ford Motor Company releases a 5-seater diesel car
(the 2009 Fiesta ECOnetic ) that does 65 miles to the gallon. But as
diesel in America costs from 40 cents to $US1 a gallon more than
petrol, it won't be released in America. The USA has the 'distinction'
of having the most fuel-inefficient domestic fleet in the world. About
3% of the cars in USA use fuel-efficient diesel, whereas about 50% of
European cars are highly fuel-efficient diesels.
September - Saudi Arabia - SA officials admit that the long-delayed 500,000 barrels a day Khursaniyah field is
actually "operational and producing crude". It is uncertain how much has, or
will, be produced per day. Khursaniyah produces light crude.
September 13 - USA - a larger, but less powerful hurricane hits
the coastal Gulf of Mexico USA refinery belt. 14 Texas
refineries are shut down, mainly due to damaged power supply.
These refineries have a total capacity of about 3.8 million barrels of
crude a day, roughly 20% of the USA's total production. Gasoline prices
in the region soar as supply is disrupted. It reached $US5 in a few
places, and outlaying areas have difficulty receiving fuel from the
reduced flows in some pipelines.
September 21 - oil prices -A combination of the USA credit bubble
popping and weather and political interruptions to supply cause oil
prices to briefly spike from about $US100 a barrel to $US130 a barrel.
This is the largest ever one day movement in oil prices. Crude oil
trading is briefly suspended. Crude prices closed at about $109, up
about $18 a barrel. Volatility in players betting on oil price changes
(a 'watching from the side-line' money market 'game' unrelated to
actual physical delivery of oil) can be expected to remain high from
now on. Supply and demand remain closely matched, but there are now far
higher fluctuations around supply than there are around small
fluctuations in demand.
September 22 - Nigeria - crude oil production has now dropped by
280,000 barrels a day since
Sept. 13, due to attacks by MEND (Movement for the Emancipation of the
Niger Delta) in the Niger Delta region. Several major pipelines have
been blown up in the past week. Shell declares force majeure, freeing it from
its contracts to supply crude oil from Shells Niger Delta
facilities. Oil industry representatives say that if the fighting ends
production could be brought up to a new
high of about 3
million barrels a day.
September 23 - USA - About 870,000
barrels of oil a day remains shut-in
in the Gulf of Mexico due to damage sustained in hurricanes Gustav and
Ike. Around 4.56 billion cubic feet of gas is also still shut in.
September 23 - Mexico -
Production from Cantarell oil field has now
dropped to to 998,000 barrels a day.
Mexico's oil exports have now dropped to 1.43 million barrels a day.
September 29 - Russia - Russia opens an
internet-based oil and gas exchange (bourse). The aim is to remove
intermediaries, make oil and gas sales transparent, and make prices
cheaper at the pump. As this is the world's first oil exchange that is
not denominated in dollars, it helps to strengthen
the Russian ruble. Government majority owned Rosneft oil and gas
company intends to put 50% of its production through the bourse.
Rosneft produces 20% of Russias crude oil, and is the major refiner in
Russia. Prime Minister Putin says this is the first step to
making the Russian ruble an international reserve currency.
September - China - low oil prices allow China to increase its oil
imports - imports surged in september to 4.87
million barrels a day, almost double the volume imported last september.
October 15 - Russia - The Russian government provides $US9 billions to
4 major oil and gas companies to help pay off foreign debt obligations.
Its is uncertain if this is 'creeping nationalisation' of Russia's oil
October 15 - oil prices - Brent crude drops to
$US71.36 a barrel, the
in the last 13 months. The enormous financial sector pyramid
schemes - loosely based on the assumption of endless increases in property,
currency, fuel, and commodity values - finally collapses (precipitated
by the failure of 2 large global betting rings, usually known as 'hedge
funds'). Bank ponzi scheme paper 'assets' become near worthless, banks
become technically bankrupt, credit dries up, governments issue paper
('money') to wipe out the losses caused by these so-called 'assets'
revealing their true nature and being instantly shifted to the red ink
side of the balance sheet as what they always were - liabilities.
The 'smart money' fund managers, bankers, and 'clever' investors
have changed the slope of the existing slide into recession (due to oil
prices) from gentle to precipitous. They are now culpably responsible
for a sudden flood of business failure, and consequent unemployment.
They have stalled productive investment, and severely damaged the
retail sector. Demand for oil will probably drop year on year.
is likely to drop below the drop in combustible liquid production (oil,
ethanol, tar, gas liquids, biofuel etc) that would have been expected
about 2010. Oil is more likely to bounce/spike around the $US80 a
barrel mark from now until about maybe 2010/2011. After that date,
increasing internal consumption within oil exporting countries is
likely 'short the supply' to the export market, pushing up prices once
October 16 - USA - Around 40% of USA Gulf of Mexico crude oil
production remains offline due to
hurricane damage. About 36% of the Gulf's natural gas production is
October 29 2008 UK companies known as the 'Peak Oil Group' launch
a report 'The Oil
Securing the UK’s energy future'. The group warn
cheap oil production is likely to end
by 2013, posing a huge risk to the UK and world economy.
"Plentiful and growing supplies of oil have become essential to almost
every sector of today’s economies. It is easy to see why, when we
consider that the energy locked into one barrel of oil is equivalent to
that expended by five labourers working 12 hour days non stop for a
year. The agricultural sector perhaps makes the case most starkly:
modern food production is oil dependent across the entire value chain
from the field to the delivered package. Within modern cities, for
example, life in the suburbs will become extremely challenging without
plentiful supplies of affordable oil.
Yet in recent years, a growing number of people in and around the
energy industry have been warning that global oil supply will soon fail
to meet demand, even if the global demand drops, because the world is
on or close to its peak of
Peak oil production is the point at which the depletion of existing
reserves can no longer be replaced by additions of new flow capacity.
Conventional wisdom holds that the peak is many years in the future,
allowing a timely transition to alternatives that can replace falling
oil supply. However, the International Energy Agency has warned of an
oil crunch by 2013. Other authoritative voices warn of severe problems
earlier than this.....The immediate conclusion from the analysis is
that the peaking of oil supplies is imminent and will occur in the
window 2011-2013. In planning terms 2011-2013 is effectively tomorrow.
This means the crisis is already upon us and companies and individuals
need to be planning their response now."
November 15 - Mexico - Production from the massive Cantarell oil field
has now dropped by 300,000 barrels a day so far this year. The decline
rate was expected to be 15% a year from now on, but it is collapsing
more rapidly than thought, and the decline rate is now closer to 20%.
It is estimated that Canterell will now
be producing only 700,000 barrels a day by the end of next year.
December - oil prices are now about $US36.73 a barrel for West Texas
Intermediate. This steep fall from record
high price in july reflects sharpening drop in demand due to the
sudden onset of recession, particularly in
the USA, coupled with traders caught in the financial crisis
bailing out of their bets on oil prices (with the strong possibility of
a major European player selling assets frantically to cover oil bets
As the costs of exploration and development are said by
some commentators to be around at least $US50 a barrel,
smaller exploration and development companies cannot continue
developing new small fields. And the new fields in politically
relatively stable countries and non-polar/non-deepwater environments
are predominantly smaller fields.
December - Frances Total oil company CEO announces Total will seek
partners to develop nuclear power and solar power. Total has decided
not to diversify into windpower.
December 25th - oil prices are now about $US30.03 a barrel for West
World - Average global production of all liquids in was 86.59
million barrels a day (IEA.)
World - new wind power installations in 2008 totalled 27,000 megawatts
nominal capacity. This is about 36% more than the capacity installed in
2007. Globally, there is now 120.8 gigawatts of wind energy capacity.
USA - United States installed 8,358 megawatts in 2008 - 50% more than
2007. This capacity is nominally enough energy to power two million USA
homes. However, the October financial debacle
has severely constrained investment in wind power.
China - Wind - China added 6,300 megawatts of new wind energy capacity
in 2008. China's total capacity has now doubled, reaching 12,210
megawatts. China has a goal of hitting 30,000
megawatts by 2030. China aims to double its existing capacity again
China - Coal - China now produces 300,000 megawatts by burning coal.
India - Wind - India added 1,800 megawatts new wind energy
capacity in 2008. Installed capacity is now 9,645 megawatts.
USA - Gasoline consumption
fell 3.5%, the steepest decline
since 1965. Diesel consumption fell 6.8 %, the steepest decline
The information on this
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