37. Pick Points

Half-a dozen or so stories of interest:

Since reconvening in Juneau last month, Alaskan lawmakers have been looking to the natural gas fields in the Brooks Range foothills to deliver gas to Alaskans by 2014. There has not been a lot of exploration for gas in the region to date, more for oil. The sort of country they are talking about is dramatically photographed. There are also plans for more wells north of Prudhoe Bay. Getting Alaska’s natural gas down south is something that will come up when President Obama goes to Canada this week. However there is some concern that the current glut of natural gas, from the shales around the lower 48, might make the project unwanted for a decade or more. Pipeline companies are therefore looking at a gas pipeline from the Rockies to Chicago, for example and there are plans for a new pipeline up into the region where the gas from the Marcellus shale is coming on line. Now as long as we can keep them running . . . .

The Nevada Governor is seeking to have bonds for power-line construction become tax-exempt. This is needed since new lines to areas where sun and wind are available are often not where folk are. At the end of last month the Public Utility Commission in Texas, without that incentive, gave 7 utilities pieces of a $5 billion package to bring Wind Energy from West Texas to Houston and North Texas. And as I noted last week, the “Green Power Express” is planned to bring wind power from the Dakotas to Chicago. With the right incentives it is claimed that the lines can be in within two years. Last Monday NV Power postponed plans to build a new 1,500 MW coal-fired power plant in Nevada, but still plans on putting in the transmission lines, though now for wind. At present a renewable energy line would be less expensive. However Gristmill would rather reduce costs by putting smaller power generators nearer users – the only snag being that you have to build the generator where the wind blows. And an environmental group in California has suggested that the power plant may not be needed, if there is sufficient improvement in energy efficiency, more renewable resources used, and more natural gas plants. The postponed coal plant may, in the interim, be replaced with a smaller gas-fired plant. It is a locally popular decision.

Cellulosic ethanol has a pilot plant running that is producing 20,000 gallons a year of ethanol from corn cobs. In defining this step forward it is noted that

With a few key technology improvements, the United States could do even better, creating up to 90 billion gallons of ethanol by 2030, enough to meet one-third of the nation’s transportation fuel needs,

GM is already on board with plans to boost production of cars that can use E85. There is some concern, however, that too much emphasis on biofuel crops could come at the expense of the rainforest. And the cellulosic plant that had been planned for Grand Junction, CO has been put on hold, due to the economy. (One of the partners is Suncor). I made a list of plants that were in planning or process earlier, but this one, which was announced in October, was not on that list. At present the economic floor price for ethanol, at the pump, is considered to be $1.50 a gallon, without taxes, and if gas is selling for less than $2.65 a gallon with tax, it will undercut the sales of ethanol. Last week the average price of gas was $1.93, while that for ethanol was $1.65. However, while some are working on making the fuel production more economical, there is also work going on to make ethanol engines better.

Hopes for increased oil production from Iraq have been the base for a number of studies that decry worries of oil decline. Yet all is not well in that region of the world. There are concerns in Parliament about the current state of the oil contracts. Yet the Government is proposing to further sweeten the deals with outside companies in order to boost output further. Certainly production is increasing and hopes to meet domestic demand this year, while exports rose to 1.81 mbd in December, the highest in 5 months, their target this year is 2 mbd of exports. Iraq has signed a deal with Iran whereby it will send crude to Abadan and receive refined products back. They will also jointly exploit some common fields.

OPEC, in general, now believe that they have roughly stabilized global oil prices with their latest cuts, although there will still be some instability because of the way in which stockpiles are being manipulated. There are currently 70 – 80 million barrels (one day’s global need) on tankers held offshore. With tanker numbers rising, as demand falls, there may be more floating storage coming on line, just when it is not needed. However, if oil prices don’t pick up soon, then OPEC may decide to cut more production at their March meeting. At 26.33 mbd in January, their current output is still 1.5 mbd above the target. (This excludes Iraq), although the OPEC Sec-General says that only a 600,000 bd cut is needed for balance. And this is the season where some refineries go into maintenance mode., which may last a little longer this year.

Gazprom announced Friday that its oil production last year was down 5.8%, that will likely be hidden this week, as the company will celebrate the opening of the LNG plant at Sakhalin Island. While the first shipment is publically expected in March (it was supposed to be tomorrow), local news suggests that it won’t be until April. Gazprom is also increasing their investment in refining, and hope to attract almost as much investment this year as last.

More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.