Checking in on CERAweek first –IHS Director of Political Risk Terry Hallmark is predicting that crude oil will average $43 a barrel in 2009. (IHS purchased CERA in 2004) . The meeting was opened with Representative Edward Markey telling delegates that $147 a barrel oil was a cause of the current global recession. He is the new chairman of the House Energy and Commerce Subcommittee on Energy and Environment, and the legislation on the Administration program will have to go through him.
Legislators are bent on pushing though greenhouse gas legislation, promoting a cap-and-trade system for limiting carbon dioxide emissions, and looking at ways to diversify away from imported oil wherever possible.Turns out he is a T. Boone Pickens fan.
OPEC, recognizing the impact of the fall in oil prices is delaying 35 of the 150 planned oil drilling projects by at least 4 years. Dates for the others may also well slip, as OPEC anticipates a 50% cut in income this year. However with oil now apparently stabilized at around $40 a barrel the likelihood of further cuts is growing less. It did however drop below $40 today. If the price drops further Saudi Arabia may lead the move to lower production. Algeria thinks the price will rebound to $60 this year, though Angola would like the price to rise to $75. In the meanwhile Venezuela has been making cuts of around 210,000 b/d (Bloomberg estimate) or 364,000 bd (Venezuela claim) as part of the OPEC cuts. Cuts have now reached around 4.2 mbd and these collective moves make it unlikely that the OPEC will be able to increase capacity by 5 mbd by 2012. However the current cuts have swelled the unproduced capacity of OPEC to an eight-year high.
The cuts in oil company profits will also impact their charitable giving, even to prestigious places such as the Bolshoi. And just as Germany has subsidized car loans to improve their economy, Russia is now moving to try the same, even though sales in Germany have yet to pick up, though they are expected to do so, with the incentive being to replace cars older than 9 years. The Russian economy is still growing, albeit now at only 1.1%. Russia will get into the LNG business next month when the first cargo leaves Sakhalin Island for Japan. Incidentally there is an extensive review of the Nord Stream pipeline project.
Platts is taking a closer look at wind energy since this energy source is looming larger and larger as the renewable energy source. To meet EU requirements the industry will need another roughly 125 GW installed (or more than double current capacity) by 2020. But there are problems since the larger the industry grows the less economic the necessary base load and backup power generation becomes. Jerome argues that the route forward should include wind, though there may be some problems this year.
One of the problems has been in transmission of power from the wind site to the user and ITC is now addressing this with a planned “Green Power Express” to carry 12,000 MW of power from the Dakotas to the MidWest. Texas remains on schedule with the installation of new transmission lines to feed future sites. But as wind farms grow, there are concerns over their impact on wild life, particularly in the East.
While CERA meets in Houston, in Europe it is Sustainable Energy Week, introduced by the Commissioner. Registration for the meeting is now closed, but there are video recordings and live internet broadcasts, which can be reached through the Website. The opening speech has already been posted. The Danes have provided a wind map for Europe. It is slightly different in format to that of the Department of Energy for the USA.
As more drilling occurs in the Arctic regions, there will be a need for more collaboration with the indigenous peoples, one such agreement just having been signed in Russia. Yet there is likely to be more strain between the countries seeking the energy. Russia is looking into adding a new refinery in the region.
For more stories see The Energy Bulletin or Drumbeat at The Oil Drum