Monday, February 28, 2011

Oman’s unrest may be a domino, not just to suppliers, but also to customers

There are reports that the unrest in the Middle East has spread to the Sultanate of Oman. While at the moment there has only been one, or perhaps two deaths, small in number relative to the much larger number of fatalities in countries such as Libya, nevertheless such a milepost is sadly likely to indicate that the situation will get much worse. Oman lies East of the United Arab Emirates (UAE) South of Saudi Arabia, and North of Yemen. It is therefore within the region that is now in turmoil. And as the consequences of the unrest begin to compound, the consequences grow beyond the point where simple answers will be sufficient.

Location of Oman (CIA)

Oman is not a member of OPEC, but contains the largest oil reserves of any country outside that group in the Middle East.
Oman produced 863,000 barrels per day (bbl/d) of total petroleum liquids in 2010, 860,000 bbl/d of which was crude oil. Average oil production in Oman has increased by over 20 percent for the past three years, from a low of 714,000 bbl/d in 2007.

Oman oil statistics (EIA )

At the moment production is growing a little faster (865 kbd) than consumption (115 kbd) so that exports have increased a little. The EIA seems cautiously optimistic that this growth can be sustained in the short term, with the potential for Enhanced Oil Recovery technologies (miscible gas injection, steam and polymer flooding are the ones listed) to give a greater boost to these numbers. The main market for the oil is in Asia, with China and Japan as primary customers.

The EIA estimates that Oman has 30 Tcf of natural gas reserves, ahead of both Iran and the UAE. It consumes a fair portion of this so that when one compares production (2.4 bcf/day) with consumption (1.42 bcf/day) there is a smaller percentage available for export.

3 Natural gas statistics for Oman (EIA )

South Korea and Japan are the main customers.

As the turmoil continues to spread it is difficult to assess what effects it will have on the different exporting countries. (And thus in turn on the world market). Saudi Arabia has said that it can cover the possible lapses in delivery from Libya, and is willing to increase output to balance any losses. The full scale of that need is not yet, however, likely apparent. If I look at the numbers for February:
Total OPEC production slipped 285,000 barrels, or 1 percent, to an average 29.11 million barrels a day, according to the survey of oil companies, producers and analysts. Daily output by members with quotas, all except Iraq, decreased 335,000 barrels to 26.515 million, 1.67 million above their target.

Libyan output fell 200,000 barrels a day to 1.385 million this month, the lowest level since January 2003
Unfortunately it may well be that Libyan production is cut in half, which would bring the loss closer to 800 kbd. Since the Saudi’s have been talking of just raising production to 9 mbd this may not be sufficient to make up for the loss. (They were running at around 8.6 mbd in January). If one adds to the drop in Libya any additional losses that might come from the falling dominoes around them, such as Oman, then it may become too much of a strain to rely on KSA by itself. Current additional flow is apparently coming from Abqaiq as well as Khurais.

One of the worries in the present situation has been the increase in violence in Iraq. At the end of last year OPEC had reached a two-year high of production at 29.85 mbd and the increase was largely due to an increase in Iraqi production. And while the refinery that was attacked on Saturday is now back in partial production it will be at least 6 weeks before the plant can be fully restored, and in the interim the company is searching for supplies from neighbors that could be used to meet the national demand. (Iraq's refined product stays in country to meet domestic demand).

Of course there are other available sources short term. Gazprom has increased gas supplies to Italy to help cover shortfalls that have arisen due to the supply pipe from Libya being closed. The replacement is a flow of some 1.7 bcf/day, up from the pre-crisis Gazprom supply of 1 bcf/day. And certainly Russia which is producing at equivalent levels to KSA must be considered as a possible additional source. But there is not a lot of spare capacity in their oil production numbers, there has been talk that they might even decline slightly this year – so that while gas supplies might increase, it is hard to see much of a rescue coming from them at this time to meet any oil production shortfalls.

Individually all these individual areas of concern could be relieved by some compensatory change in supply – as the KSA and Gazprom responses to the Libyan declines illustrate. Unfortunately this is not the greatest concern. The spreading popular uprisings are continuing to develop in additional countries and the changes in government that will result (and the conflicts presaging them) will impact fossil fuel production and export over a much longer interval. Particularly if, as might be the case in Iraq, foreign instigators (perhaps Iranian) foment attacks on the distribution networks, then it will not take many incidents before the short-term stability between supply and demand is threatened. The irony there is that Iran itself is not invulnerable to a similar threat, both to the regime, and to their production of fossil fuels. And unfortunately the victim of any fall in production would again be Asia, with over half the Iranian 2.6 mbd of exports going to China, Japan and India.

"Not our problem" you might say – as those countries seem to be the customers to a number of the nations at risk – well it might be wise to note that this problem has not gone un-noticed, and both China and India have been purchasing more from Mexico, which given its falling production status, means that the traditional markets for that oil might not be getting as much in the near future. Wonder who that might be??

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Saturday, February 26, 2011

A short pause

Snow in New England is not unusual at this time of year, and they clear it well. However moving house at such a time becomes a somewhat more lengthy business, and though the house move is not mine (the Advocate and the Bishop) nevertheless I won't have time for this weekend's climate and tech talks - though I will try to write at least the tech talk sometime early next week.

Again my apologies.

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Friday, February 25, 2011

Michael Lynch appears to be waiting for Harry Potter

It sometimes seems that predicting future supplies is a battle, where on the one side we have the Cornucopians, such as Michael Lynch, and on the other those whom I will call the Realists, both looking at the same situation and calling the future in entirely opposing ways. We are now in a situation where Spain has had to start implementing conservation measures in light of the problems with the loss of their fuel supplies from Libya. Spain gets 13% of its oil and 2% of its natural gas from Libya, and is starting to take precautions (H/t Luis).
On a temporary basis, the government agreed to lower the maximum speed limit on Spanish highways to 110 kilometers per hour from 120 kilometer per hour to reduce gasoline consumption. It will also lower ticket prices on the state-owned railway system to encourage the use of public transportation. In coming days, Industry Minister Miguel Sebastian will meet with regional authorities to study additional energy-savings measures.

Michael Lynch, on the other hand, is quite happy telling folk that there isn’t a problem, and that the Kingdom of Saudi Arabia (KSA) has lots of additional oil fields that it can tap, whenever they are needed.
There are several other reasons to remain calm about Saudi reserves. Officials there have discovered approximately 70 major oil fields that they have left untapped over concerns that increased Saudi production would cause global oil prices to collapse.

And while Aramco is hardly likely to find anything on the scale of the Ghawar oil field, the world’s largest, they haven’t been looking very hard. The Saudis drilled about 500 wells last year; some 11,000 are drilled every year in the United States alone.

The situation is, of course, that any analysis of any worth about the rising demand for liquid fuels comes to the conclusion, relatively quickly, that we are going to need several multiples of the production of the KSA it the world is going to continue to be supplied with an adequate resource to meet the demands of the almost immediate future. But that is not the real point.

What the current situation is likely about to teach us, however, is a somewhat different lesson, though one that some of us have been preaching for the last half-decade. It is that, regardless of resource, it is the rate at which you can bring this to market, to meet immediate demand, which is the critical value. It matters not if there are a billion barrels in the ground, if the wells taping into that deposit are few, and their individual productivity small. There are, for example billions of barrels of oil in the oil sands of Athabasca, as there are in Venezuela. Do we see that pouring into the market to meet the challenge that we face as the countries of the MENA falter in the face of political challenges more important to them than maintaining their fossil fuel production rates? No we do not, because there are a whole lot of steps between having the oil in the ground and being able to put the produced and refined gasoline into your car, and these all have to be in place before a resource can be brought into production at sufficient volume to be significant.

There is also the non-trivial point that the world is not discovering the multiples of the oil in Saudi Arabia each year that would stabilize supply, and in fact we are far beyond that point. Yes discoveries continue to be made, and likely will for decades, but they will no longer be enough in terms of volume of availability to meet the burgeoning needs of society, at the cost it is willing to pay.

Now having said that I don’t necessarily disagree with Mr Lynch’s point about the investment priorities of the current Administration. They (and also the previous Administration) were beguiled into spending more on trying to get cellulosic ethanol into significant production before fundamental commercialism of the technology was established. Robert Rapier has explained in detail what the problems have been, so there is no point in renewing that discussion here, and so I would agree that this was overdone. But to suggest that there should be no investment in future technologies is folly.

To suggest, almost in the same sentence that we should aim to stop importing Saudi oil, and at the same time not invest in “technologies of the future,” leads me to wondering as to whether Michael Lynch has been watching too many Harry Potter movies. You cannot, short of waving a magic wand in a fictitious universe, replace something with nothing. If the nation is to stop importing Saudi oil it has to replace it with something else.

Reducing demand by improving energy efficiency is a method that has been demonstrated to work in California. I get 50% better mileage with my Camry hybrid than I got with the Buick that preceded it. So technology has already a track record of providing a way of reducing energy demand. In the right places wind has been able to generate significant amounts of power – I don’t think that it is going to be enough, or grow fast enough to play a significant part in the coming energy shortage, and since it largely is aimed at replacing coal rather than oil it is a bit of a red herring to the problems of the coming oil shortage.

In the immediate short term KSA has said that they can produce enough crude to meet any potential shortages. Whether they can match the quality of the crudes that are needed is yet to be determined, as will be the time that such an increase in production must extend. The IEA has also mentioned drawing down the reserve stocks held by member nations.
IEA also said it can make up for any lost shipments from Libya by tapping into large surpluses held by member countries, which include the U.S., the United Kingdom, France and Germany. Altogether, member nations hold 1.6 billion barrels of emergency oil supplies, or enough crude to supply the group for 145 days.
Unfortunately the political crises may play out over a longer time frame than will allow this to be a viable solution. Short term fluctuations in the price of oil, as the reality of the situation starts to play out over the next few months are similarly no useful guide to the ultimate development of this situation. It is too early to know whether, for example, changes in government will change the supply of fuel to Israel, which is already looking for alternate sources of supply. (Their indigenous new gas will likely not show up in a pipeline for a couple of years yet). And that is but one precursor of other changes that might come about.

Being more cautious than Mr Lynch I do not plan on predicting how this might play out, but that does not stop me suspecting that, as he has been frequently in the past, he will be proven wrong this time also.

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Thursday, February 24, 2011

Libya, oil production, OPEC responses, Saudi Arabian capabilities and the SPR.

The impacts of the disruptions in the Middle East are now starting to become evident as supplies no longer flow into the delivery pipelines that carry fuel from countries such as Libya to their European Customers. It is now considered likely that the 1.6 mbd that Libya delivers to the world market will not be available for some time. Ireland, for example, which has had other problems with the banks in the recent past, is now faced with the loss of perhaps 23% of its fuel supply, which while only 14 kbd is, for that country, likely to be very significant. For while the Libyan shortage at present may be just due to Gadhafi orderig the ports closed, if he is also ordering the destruction of facilities, as is rumored, then the consequences may be more long term. ENI has reported that the Libyan shortfall is currently 1.2 mbd.

It is in this context that the world turns to OPEC, which has stated that it has enough oil in reserve to stabilize deliveries, and looks to see a compensating production increase from those nations with that potential. And here is the rub, for some OPEC countries are themselves in a little political difficulty which might negatively impact their own production, while those that can, in the short term, increase flow volumes to match the shortfall are likely all called Saudi Arabia.

So the next questions become – first can Saudi Aramco now bring that oil to market, and then second, will they? It is actually not that simple because the oil that will be marketed is likely to be the heavier crudes that Saudi has more difficulty in selling in normal times – since the higher quality Arabian Light has an established market. As I mentioned in a post earlier all oils are not created equal, and not all refineries are set up to easily switch from light to heavy. KSA has said that they can immediately increase the output from Khurais from 1 mbd to 1.4 mbd but that, in itself, will not be enough. Bear in mind that the oil has to be not only produced, but also shipped, and so there will be an additional delay as tankers are chartered and a new delivery line is established. It might also be remembered that there is often confusion about which volumes that KSA are talking about when they mention increasing flow. If we assume total liquids, then KSA has been producing at around 10.2 mbd. They have stated that they can produce up to 12 mbd, if they are still counting oranges – this gives a cushion of around 1.8 mbd (and if some of that is really counting Manifa it is not really there). We will have to see what they have in mind.

This is the time of year when demand is normally low, as heating needs become less critical, yet it is too early for the summer driving increase. But that fall has not been as evident this year. OPEC produced at a two-year high of 29.85 mbd in January. Because of the increase in demand from China and India overall demand has been increasing, and prior to the current situation, had been anticipated to rise an additional 1.5 mbd this year.

Which brings up another concern, since much of the current debate seems to assume that the current events will have a transitory impact, but I cannot see the justification for that assumption. Were the countries involved in the position where there was a clear opposition with a history of government, then a transition might have limited impact. The problem is that in most of the countries that are now in turmoil the outgoing Administrations in general were able to keep power for the decades that they did by ensuring that there was no effective opposition, or alternate ruler that could replace whoever the “Leader” was. The example of places such as Iraq shows the difficulty in establishing a functional new government and getting oil and natural gas supplies flowing at historic levels (they are almost but not yet there).

Changes in philosophy, and the need to switch to providing more to the general populace is likely to reduce funds available for continued development of oil and natural gas. This will affect much more than just the immediate oil flow from Libya. OPEC themselves currently purport not to see a problem since, by their numbers, there is more supply available (by about 700 kbd) than demand. However as the Libyan change has shown, supply to greater levels than this can go off-line relatively quickly, and probably take a lot longer to get back into production after the turmoil is over. Which is a finite period in its own right.

For the very short term the governments of Europe have pointed to their stored volumes to explain why they don’t need to worry, and certainly the US has the ability to release some of the Strategic Petroleum Reserve which is currently as full as it has ever been. At what point that might become an issue is yet too early to tell, but with a growing concern that ever rising oil prices might drive the world back into a similar recession to that which followed the last visit to $147 a barrel oil, that option is likely to be increasingly considered.

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Monday, February 21, 2011

Revolution - the threat to American imports

The countries of the Middle East and North Africa (MENA) are currently in the middle of a series of popular uprisings. While it is not possible to see the outcome in any of these countries at the moment, it is certain that some are likely going to end with a set of different governments and philosophies. This is not just of academic interest, since the countries involved produce collectively a significant amount of oil and natural gas, a lot of which is exported to North America and Western Europe. Looking just to the oil imports to the United States, and the natural gas imports (LNG) and averaging the volumes for October and November 2010, since there can be some wide variation month-to-month I came up with the following table, using the EIA information.

Average imports into the United States from MENA countries, averaged from October and November 2010 (EIA).

The largest concern at the moment is likely with Libya, since they supply Europe with needed oil.
Libya, a member of the Organization of Petroleum Exporting Countries, produced around 1.6 million b/d of crude oil during 2010, of which approximately 1.5 million b/d were exported, mostly to Europe. Therefore, unlike Egypt the situation in Libya has the potential to have a big impact on global oil supply. Latest news that has emerged is that oil output has stopped at Libya’s Nafoora field as workers have gone on strike.”

Algeria, as I noted in my last Tech Talk, plays a similar role in the supply of natural gas
The part of the Algerian gas in the gas balances in some European countries is significant. 86% for Portugal, 61% for Spain, 49% for Italy, 26% for Belgium, 25% for France and 21% for Turkey. Today about 97% of Algerian gas exports supply the European market next to Russia, and Norway, one of the main suppliers of the Europe. Algeria accounts for 29 percent of European Union gas imports and 15% of gas consumption

While it is too early at this stage to determine what the outcomes of the different struggles will be, it is realistic to expect some disruption of the current production in at least some countries, and the possibility of a reduced investment in future production, as the economies of the nations are restructured. And the consequence of that will be an increase in the price - Did somebody mention $147 a barrel?

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Sunday, February 20, 2011

OGPSS - Lower second tier oil producers - Norway, Brazil, Iraq and Algeria

This current series of posts is aimed at an overview of the top oil producing nations, seeking to establish how the ranking of the countries is changing from the original table that EIA put out in 2008, After looking at the conditions governing the top six, this was followed last week when I looked at the condition of the following three (Mexico, UAE and Kuwait) in a little detail, but, having spent four posts on Veneuela in the recent past forebore going back there again.

Source EIA

It is worth recapping, however, that the initial order has changed, and that, currently Russia is at the head of the League, slightly ahead of Saudi Arabia., and both producing somewhere around 10.2 mbd. I’ll go more into that detail as the posts focus in on the individual countries later. The United States production, if one includes ethanol, is around 8.2 mbd, and this is in third place,. China has moved into fourth place, slightly ahead of Iran which is followed by Canada. At present these six appear to be the only countries producing over 3 mbd.

In the next tier down I have already mentioned the United Arab Emirates, which have moved into 7th place, with a production of around 2.81 mbd, how ahead of Mexico, albeit perhaps barely (based on the addition of NGLs etc). As with the UAE Kuwait has been limiting production in line with OPEC requests, but while only producting at around 2.35 mbd at the moment, is looking to increase this to up to 3.5 mdb by 2015, which would move it into the top tier. Venezuela, although it too has some grandiose plans, based on the potential increases in production from their tar sands, is currently producing at down around 2.26 mbd. As I have mentioned Venezuela does have plans to raise production to 4 mbd by 2015. However recent commitments to China of up to 1 mbd and problems that Venezuela continues to have in meeting current obligations leaves a large question mark on those predictions.

And so we come to the lower half of the second tier.

In order to create the current ranking we have to first work out what the current levels of production are, and the future potential. So let’s start with Norway, since that country did rank 11th in 2008. Statoil has noted that their equity liquids production fell to 1.945 mbdoe in the fourth quarter of 2010. Statoil anticipate that there will be little change in production this year, but that there may be a slight rise thereafter. Statoil is not, however, Norway, being responsible for about 80% of the countries production (with properties abroad as well) but I mention it as indicative of the trends. One hopeful sign of which been the agreement with Russia that defines who owns what in the Barents Sea. However when we look at the long-term Norwegian trend is is recognizably downwards, with the Norwegian Petroleum Directorate predicting a 1.7 mbd average production in 2011. The Directorate is predicting that oil production will fall to 1.54 mbd by 2015. This does not consider other liquids and if these are included, while the overall total still lies below 2 mbd, it is currently a lot closer to that, though that is not expected to last.

Norwegian oil production in 2011 (Norwegian Petroleum Directorate)

In January this total, was made up of 1.836 mbd of crude oil, 256 kbd of NGLs and 69 kbd of condensate. Most of Norwegian production is exported, and the percentage can be seen from the EIA Country Analysis. The relatively flat domestic production is (as we have discussed with the Export Land Model) not typical.

Declining production, and thus exports of petroleum from Norway (EIA )

Natural gas production, on the other hand, is continuing to rise, though it depends on finding and developing new fields, and 95% of this is exported.

Norway produced 3.65 Tcf in 2009, with the majority of production coming from the Troll, Oman Lange and Asgard fields.

The next country down the 2008 list was Brazil, and here there is a change in order since Brazil is now rising past 2.12 mbd of crude production in December, moving ahead of Norway. Offshore production in the Tupi field, which may hold 6.5 billion barrels of oil, will be followed by that from the Jupiter field, possibly of similar size. The fields fall deep offshore in the Santos and Campos Basins, which will deserve a couple of posts on their own, down the road.

Location of the Santos and Campos Basins off Brazil

Development has now started.
The Tupi field is being developed as a pilot project in two phases. In the first phase tests will be conducted to gather information about the future production systems. This phase is expected to end in 2012.

The second phase is expected to start from 2012 and will include two parts. In the first part (2012-17) ten production units will be installed at the field with 20 producing wells and injectors expected to be drilled during this time.

In the second part of phase two (after 2017), new technologies such as dry completion units will be employed to recover oil and natural gas from the field.

Brazil plans to double crude production from the current 2 mbd to 4 mbd by 2020, reaching 3 mbd by around 2014. However overall liquids production is already at 2.7 mbd and the EIA anticipates that this will rise over 3 mbd by next year. With the cumulative liquid totals Brazil has also passed Venezuelan production and may soon be competing with Kuwait as they both move into the top tier.

Brazil also produces ethanol, mainly from sugar cane, with production at around 450 kbd However, with a growing economy, the country does not, as yet, have much of its production available for export. (The BP figures are a little more pessimistic than those of the EIA).

Brazilian oil information (Energy Export Databrowser)

Brazil continues to find oil onshore, most recently in the Amazon Basin and this bodes well for the targets that it now envisages.

Brazil gets most of its electric power from hydro-electric power plants, but is able to use the natural gas that is recovered during oil production to meet about half of the national need for gas, the rest being imported.

The next country on the original list was Iraq. And this poses a problem of prediction since we have to decide who to believe in the tales of competing numbers that have been used, among other places by BP in predicting the sources of future oil supply. The problems in this case are as much geo-political and locally ethnic and religious as they have to do with the capabilities of producing oil. At the moment Iraq has finally got back up to a production level of 2.6 mbd not that this will necessarily help Western imports that much:
The rising output will boost Iraq’s oil exports by 5 percent to 2 million barrels a day next month, Falah al-Amri, head of the country’s State Oil Marketing Organization, said today in an interview in Baghdad. The nation sells about 60 percent of supplies to India, China and other Asian countries where demand is increasing, he said

In January, OPEC reports, Iraq produced a total of 2.7 mbd, which was 300 kbd up on production in the last quarter of 2010. To put this in context in February 2003, just before the conflict began, Iraq was producing 2.8 mbd. At the moment production is centered on the North and South Ramalla fields and that of Kirkuk in the North. The problems of Iraq are not so much, in the short term those of most of the rest of the world, i.e. in finding more oil. In the immediate short term the information on fields that have been known for some time (and in some cases were previously producing) already exists. What is needed is some way of ensuring that the infrastructure is repaired and, if necessary, new pipelines laid. Those plans are now advancing although it is now going to be more difficult to foresee their short-term success, given the developing turmoil in the region. The EIA has posted a table showing the potential from the different regions.

Estimate of oil availability in Iraq

Consumption in Iraq has been fairly stable until about 2007 where it started to climb, and, given a little more stability in the country, it is reasonable to expect that it will surge as it has in much of the Middle East. On the other hand it is a little difficult for me to see production rising to the 12 mbd figures that are now discussed as being possible for Iraq by 2017.

Until recently Iraq was flaring more than 60% of the natural gas that it was producing (perhaps as much as 1 bcf/day) One option that is open is to pipeline some of the gas up to Turkey and then feed it into the Nabucco pipeline. There is a hope that this can lead to exports of up to 2.5 bcf/day but new legal hurdles are continuing to delay progress. Apart from resurrecting the pipelines there is also the possibility of installing an LNG train or two.

And when one is considering the growing instability of the region, the next country down the list is Algeria, and that has now started to be mentioned among the countries feeling the fallout from the initial protests in Tunisia. The Algerian Foreign Minister is denying the risk of a “domino” effect. Possibly this could be because, as it is reported the income from oil and gas sales can, in this case help.
Unrest in Algeria could have implications on the world economy since it is a major oil and gas exporter, but analysts say an Egypt-style revolt is unlikely because the government can use its energy wealth to placate most grievances.
There are, however, other opinions.

Algeria is a member of OPEC, which reports the January 2011 production of oil at 1.28 mbd, which has been relatively stable for some time. The EIA consider that the crude is some of the finest in the world . Production is supplemented by condensate (450 kbd in 2008) and NGL (357 kbd) for a total liquid fuels production of over 2 mbd. It is the largest oil-liquids producer in the African continent.

Algeria, which operates the oil and gas through the company Sonatrach exports most of its natural gas, through pipelines to Europe and through LNG terminals, with a new one that is to be completed in 2012. Total exports are around 2 TCF making it the fourth largest exporter. (CIA 2011 World Factbook). Gazprom has recently become involved in field development. It also provides a useful fuel for the processing of fertilizer in Morocco, as Jeff Vail noted, back in 2008. As one of the world’s largest exporters of natural gas, Algeria supplies Southern Europe.
The part of the Algerian gas in the gas balances in some European countries is significant. 86% for Portugal, 61% for Spain, 49% for Italy, 26% for Belgium, 25% for France and 21% for Turkey. Today about 97% of Algerian gas exports supply the European market next to Russia, and Norway, one of the main suppliers of the Europe. Algeria accounts for 29 percent of European Union gas imports and 15% of gas consumption

Algerian natural gas delivery network

The Algerian reserves are found in the Sahara
• 67% of oil and gas reserves contained in the Oued Mya and HassiMessaoud areas, where the two giant fields Of Hassi Rmel (Gas) and Hassi Messaoud (Oil) are located. 

• The Illizi basin comes third with 14% of initial reserves;

Then come the basins of Rhourd Nouss (9%), Ahnet Timimoun (4%), and the Berkine basin.
Algeria is hoping to increase exports by 50% by 2015, using a new pipeline into Spain to help develop the European market.

But the current turmoil may make some of these plans moot.

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Saturday, February 19, 2011

Kansas combined temperatures (revisited)

As I move around the states looking at the differences between the GISS station temperatures, the USHCN homogenized temperatures and the original raw temperature data (albeit modified by a correction for the Time of Observation (TOBS), we have returned to Kansas, which I had originally written about before the TOBS data became available, and then written again looking at that data.

Since then the style of the presentations has changed a little bit, so I am going to redo the Kansas post, and just put the combined temperature reference into the list down the right side of the site, so as to bring it (and later some of the other states) into the same format as I have now evolved. So to begin , Kansas has 31 USHCN stations, that are reasonably evenly distributed around the state:

USHCN station locations in Kansas (USHCN)

Back when I did the initial TOBS data analysis I was still sufficiently na├»ve that I did not realize how, by manipulation of the station picks, GISS could manipulate the temperatures that it reports. Chiefio has explained both how the current selection raises the overall U..S.A. station record by 0.6 deg C, over the USHCN average, by selective deletion of stations, for 2008, for example. There is also a new set of 59 GISS stations that have been added, but these do not have the historic data that I have been comparing to, so I am going to ignore those additions for the rest of this series. However there is one additional point that this study has brought out about how NASA shall we say “fudges” their data.

I first mentioned, when looking at Idaho’s temperatures, the GISS habit of marrying a short-term station with a long-term one. E.M. Smith (Chiefio) has done a detailed post explaining how, by using this type of combination it is possible to generate a trend that does not exist in the initial data. What has since been interesting, as I have continued with this series, is finding just how many state temperature situations that applies to. And the first one that I noticed, but not then realizing the reason, was Kansas, the second state that I had looked at There are 5 GISS stations on the list, including Witchita , Topeka, Concordia,, Dodge City and Goodland. It is Goodland that only has data since 1948.

Goodland KS GISS station data

Because of the small number of stations, the impact of the partial temperature record is significant on the relative difference between the GISS and USHCN average values (using the homogenized USHCN data for this)

Difference between the average GISS station temperature and that of the homogenized USHCN stations

Turning to the TOBS data, and looking at the average temperature change in the state, over time, the temperature rise is 0.85 degrees per century (the homogenized data would suggest a rise of 1.2 degrees.)

Average TOBS temperatures for Kansas (USHCN)

The geography of Kansas is that it is 400 miles long and 210 miles wide, running from roughly 94.5 deg W to 102 deg W, and 37 deg N to 40 deg N. The highest point is at 1,231 m, and the average elevation is at 609.6 m. (The average USHCN station is at 511 m and the average GISS station at 586 m).

Looking therefore at the variation in temperature with the geographical parameters of the state:

Effect of station latitude on recorded temperatures in Kansas

This is a state where the effect of latitude is clearly defined. Given that the state elevation is steadily rising to the West, as we move towards the Rockies it is not surprising that we see:

The stronger and real correlation is with the changing elevation

There was not, in the original search for data, much problem in finding population numbers

The effect of current population size on average station temperature for Kansas

Note that for the curve above, because it is the only source of information for the larger cities in the state, I have included the GISS station data.

And finally there is the difference that shows the effect of USHCN homogenization of the data relative to that recorded and adjusted only for time of observation.

I am replacing the original two posts of Kansas on the comprehensive list with this post so as to give a greater consistency to the formatting.

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Tuesday, February 15, 2011

The Shell future - a look at their new projections

I have recently reviewed the predictions made by BP and ExxonMobil as they relate to energy supply and demand in the years to 2030. Shell has just updated their predictions, which extend further out to 2050. In the opening discussion they make the point that new technologies will require, in their words significant time to develop.
New energy technologies must be demonstrated at commercial scale and require thirty years of sustained double-digit growth to build industrial capacity and grow sufficiently to feature at even 1-2% of the energy system.
Thus much of the focus of the report deals with existing fossil fuel capabilities. Specific new factors that have led to the modification of earlier predictions include the greater instability of the global economy; the growth of uncertainty over regulatory steps that will be taken both to address the concerns over climate change, and in light of the Macondo well disaster; the improved supply potential for natural gas both from shales and coal bed methane supplies; and the emergence of a re-invigorated Iraqi energy industry with a potential to develop significant new resources.

Shell has, in the past, developed two different energy scenarios – the first of which it calls Scramble, where the world moves along a Business As Usual (BUA) scenario, only making changes as these become forced upon governments and companies by the impact of changing circumstance. The second is called Blueprint, a scenario that Shell is now announcing it will advocate, where instead of the reactive approach of Scramble, a set of plans is developed to pro-actively address the issues of carbon dioxide generation, and to ensure the world has adequate energy.

The difference between the two approaches was illustrated in the initial document by the predicted sources of energy through the years to 2050. By putting these one after the other, it is possible to compare how supply changes in their two scenarios.

1. Energy supply scenarios for the future – Shell Scramble scenario

2. Energy supply scenarios for the future – Shell Blueprint scenario

One significant change between the two, apart from the lowever absolute level in the lower case, is the smaller role that biofuels play in the more distant out years. For example in the Scramble scenario they are given a much greater role in that future.

Change in biofuel energy production in the Shell Scramble scenario.

In their new set of projections Shell has more forcefully adopted the Blueprint route, and has produced an amended projection of future energy sources through 2030 that makes it easier to compare with the ExxonMobil and BP plots that I have posted in the past.

Comparison of BP and EM energy futures, (The vertical scale is in billions of tons of oil equivalent. )

However, each company having their own set of units, the conversion needed to compare with the earlier plots is that an ExaJoule (EJ) is about equivalent to a Quadrillion Btu (Quad), and a billion tons of oil is the equivalent of 41.9 EJ.

Shell energy sources for the future. Dividing the vertical scale by that 41.9 gives an equivalent full scale value of 19 billion tons of oil equivalent, not that much different from the two other plots above it.

Two things are evident from this plot, one being the increased role that Shell see natural gas playing over the next 20 years, and the other the decrease in the likelihood of biofuels being more of a significant player in that time frame.

The sources for these levels of production are left quite vague in the Shell document. Only the promise of increased production from Iraq – seeming to accept the more optimistic projections of the Iraqi government – is given as a justification for seeing sensibly no decline in overall oil production levels to 2030. However since Shell is a part of some of the new deals which that Government has struck perhaps there are reasons for this optimism. For those who forget:
Officials say the deals will boost Iraq's oil-producing capacity to around 12 million barrels a day by 2017, putting it on a par with Saudi Arabia. That, said Mr. Birol, "may be a challenge to the other oil producers."
Um! Yes!

Shell devote much more of their projection document to the impact of climate change regulation and response than do the other projections. One item that caught my attention was their comment on water needs.
Energy producers are amongst the largest industrial consumers of freshwater. The link between energy production and water will intensify as portfolio choices move increasingly towards more water-intensive production methods such as biofuels and enhanced hydrocarbon recovery methods (EOR). In the US alone, where energy currently accounts for 40% of all freshwater consumption, projected growth in energy production will require an increase of 165% in freshwater withdrawal by 2025.
Shell also tabulated, against their projections, past growth rates for different sectors of the energy supply scenario.

To sustain growth, and to change, for example, current coal burning practice to a total carbon capture and storage (CCS) system for coal use globally by 2050 will require considerable investment and continued research and development, and similar levels of continued development will be required to develop all the sources needed to meet demand needs over the next forty years. It will also require a smarter power distribution system.
Sometime between 2020 and 2030, we can expect the constraining factor for renewables deployment to move from industrial capacity building to accommodation within the energy system. This would impact land-use and require new infrastructure, such as major upgrades to grids 8, 9. These are essential for renewables to maximise their share of the energy mix.
The new report closes by citing some of the factors that might indicate that the world is following a Scramble path, and others that it might be moving toward to Blueprint option.

It will be interesting to see which one turns out, in the end, to be closer to reality. But there are plots in this document that show peak oil occurs around 2020.

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Monday, February 14, 2011

Gold Rush Alaska - a gentle cough about shaker tables

I do not normally yell at my TV, nor usually want to throw things at it. However I almost reached that point of reaction on Sunday. I had been told about the show “Gold Rush – Alaska” by a couple of folks in my old Department, including a graduate advisee, but had not thought to go and look for it. But setting up to exercise I ran through the channels and an episode had just started. So I watched it as I worked out. (And it did get me more exercised than usual). In this particular episode they were having problems with their Wave table. (Which looks as though it works in a similar way to a table of similar appearance called a Wilfey table, and which I have recently used, as I will show in a photo added to the bottom of this post).

It became very clear, early in the episode, that the folks running it had no clue as to what it was supposed to do, and after a demonstration (which I am not sure wasn’t faked for the camera) where it failed to separate gold from the material run through it, the table was shut down. So I want to explain in very simple detail how the table is supposed to work, and show a photo, albeit with lead rather than gold ore – but that was what we were looking at when I last ran it). This is not rocket science.

The table starts out as a flat surface, onto which a number of thin strips of wood are attached. (Modern ones are of molded plastic ) The strips taper a little as they move along the table. The table is mounted so that it can be tilted in two dimensions, what I will call down the table, and along the table. And for the explanation I am going to use sketches initially.

Schematic of the basic components of a Wifley table.

The crushed ore feeds onto the table in a slurry and water sprays along the top edge of the table are set to give enough fluid to allow the vibration of the table (caused by some sort of eccentric cam resting on the underside) to provide a partial buoyancy to the particles, as well as helping with separation. The combined action of the water flow and the vibration help to move the crushed material both down and along the table, until it hits the top bar (or riffle).

The vibrating action helps to lift the lighter and smaller particles so that they float over this riffle, but the denser valuable particles are not lifted enough. (Remember Archimedes) Instead these then move along the feed edge surface of the riffle and table. If the riffles are of reducing height along the table this means that at some point intermediate weight ores can be separated from the lightest, (which run almost straight down the table) since although initially confined they can lift over a lower barrier. They are also separated from the heaviest ore (gold or lead), which remains confined by the riffles and thus runs down the far end of the table. Smaller particles of the heavier material that get over the top riffle do not have as much water on the lower riffles, and thus become trapped and fed over to the collection stream at the end of the riffles, but lower down the table.

The adjustments to the table are made so that the slope is enough, and the water flow enough, so that the mineral to be collected does not have enough buoyancy from the water and table action to get over all the riffles. It therefore collects at the far end, while the waste material is carried over the riffles then down and off the table. If the table is tilted too steeply, or the flow of water is too high, then even the heaviest particles will be swept over the riffles. (Which was one of the things they wre doing wrong). On the other hand, as is noted below, gold is not a rich ore and so there will be a lot of material swept over the table for very few ounces of recovery.

That is the basic principle, and by more careful adjustment it is possible to separate a mixture of different minerals into separate streams, as I just mentioned, as the particle move across and down the table, and these can be collected at different points along the bottom of the table (ours has holes in the table that feed to collection buckets).

There are different forms of table, based on this initial concept. An initial Google search showed this one at an on-line tutoring site

There is a video of a table working here, and one that, as with the second illustration uses groves that the heavier ore can’t escape from, here using a gold sample.

At the end of writing this rant I did find the Web site where the table makers respond to the Gold Rush Alaska video. They comment (in part)
Mike happened to be up there at John Schnabel’s . . . . so the two of them went over to the Hoffman’s site. Mike adjusted the table, ran a sample that Dorsey had, and got a gold line. It was filmed and will hopefully be shown on the next episode.

here’s our answers to what they did wrong…..

They destabilized the table by taking the slab out of the ground and loading it onto a floor jack.

All the raising and lowering of the table was wrong. Once the material is screened properly, you find the correct height adjustment and leave it there. Dorsey almost had it running, and then it was sabotaged. (Ed note that was the first thing I noticed).

No classification – large flakes should have never even been on the table (according to Dorsey’s blog, it probably was not even on the table).

The wave table does not make gold, it recovers gold. . . . .From the onset, their desperation (and script acting) caused mistake after mistake. No professional miner would work this way. There’s definitely gold on this property, but 30 buckets of concentrate and only 2½ oz of gold total! Wrong area to work……
Sadly it is often shows such as this that lead folk to believe that technology is some form of black art, whereas with just a little more accuracy and demonstration it could have been shown to be a very valuable tool.

The ore that we were processing the other month was a lead ore, and the table was set up just to show that we had liberated the galena, so that it was not tuned to give the separation right on the edge of the riffles (I had too much dip along the table) but you can clearly see, in the photo below how the heaviests parts of the ore had been carried to the edge of the riffles, and the galena (the silver stream) is clearly separated from the rest of the minerals.

It has sadly been my experience that folk often spend large amounts of money on equipment (in my field usually pumps etc) but fail to focus their investment and knowledge on the critical aspect of the entire operation that determines whether or not it works. In my case this is the small nozzle at the end of the delivery line that controls the jet that comes from the pump, (which because it wears out is usually of a poor quality, because they are cheap) - in this case the entire operation was centered around the use of the table to achieve the final separation of the gold. But without that running properly the entire investment was threatened. (But then, as a thought, if it all worked properly maybe there wouldn't have been enough drama to justify the series - tsk, tsk, what a cynic!)

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Sunday, February 13, 2011

OGPSS - Second tier oil producers

The current series of Tech Talks is aimed at discussing, in gradually increasing detail, where we are, and will be getting our oil and natural gas from over the next two decades. It is relatively easy to do a little hand-waving and say, as for example the BP review did, that Russia and Saudi Arabia are expected to continue to provide 12% each of the world’s oil supply through 2030 . It becomes a little more difficult to see that future if one accepts the rest of the BP argument that global supply will rise to over 102 mbd, requiring both Russia and Saudi Arabia to produce at about 12 mbd each through that time frame. It is a little easier to check the validity of the projections if the totals are broken down into smaller pieces, and then examined by looking at both current and projected production from the different countries that supply significant amounts of oil and natural gas, not forgetting the increasing amount that each country is setting aside for its own consumption. We can also check on how that demand is growing. For example gains in the global economy has caused OPEC, in their February 2011 Monthly Oil Market Report (MOMR), to increase their projection of oil demand in 2011, anticipating a rise of 1.4 mbd to average 87.7 mbd.

OPEC anticipated growth in oil demand (OPEC February MOMR)

While the key questions are often focused on countries such as Russia and Saudi Arabia, however, it is in the second tier that more evident changes may be seen. And as a reminder, we are reviewing the countries that were listed by the EIA as the top world oil producers, initially in 2008.

Source EIA
And so we will begin today with a look at the case of Mexico, which ranked 7th in overall oil production, at 3.186 mbd, in 2008, is illustrative of the need to examine future projections with a little caution.

Change in Mexican production from 2004 to 2009, (EIA )

Between those two dates Mexico’s overall production peaked, and started into decline. In December 2010 it produced an average 2.57 mbd of crude. The giant Cantarell field, which at peak production reached 2.12 mbd, fell below 500 kbd last May. Mexico, remains one of the two largest importers of crude to the United States (the other being Canada) , but may well become an importer of crude by 2015. Which leaves one wondering where the US might make up that 1 .3 mbd ?

Leading importers of petroleum products to the United States (EIA )

Mexico consumed internally an average of 2.08 mbd in 2009. One reason to start with Mexico, which has now fallen to 8th, and to use it as an example is that if we go back to 2007, Sam Foucher at TOD was pointing to the predictions of both the EIA and IEA which foresaw Mexico maintaining production of around 4 mbd in 2010. His projection, that Mexican production would drop by 30% from the 2004 figure by 2012, i.e. to 2.59 mbd turns out to be much closer to reality. (Though as with some of these numbers one needs to be sure that apples are being compared with apples, since there are different values depending on whether NGLs are included in the totals. OPEC, for example, is still reporting that Mexico is producing at 2.9 mbd ). Mexico produces some 7 bcf of natural gas, but uses this internally, and more, so that it is an importer of natural gas, and likely to increasingly be so.

Mexican natural gas production, use and imports (Energy Export Databrowser)

Moving from the troubled conditions in Mexico, the next country down the 2008 list was the United Arab Emirates, which in 2008 had averaged a production of 3.046 mbd. Remembering the decline in demand in 2009, it is not surprising that their output (as part of OPEC) fell in 2009 to average 2.795 mbd, OPEC reports that they produced some 2.35 mbd of crude in December 2010. There was an additional production of NGLs and condensate to give a total liquids production averaging 2.81 mbd in 2010. Consumption within the country has been steadily rising (435 kbd in 2009), and as a result, net exports have been declining.

United Arab Emirates oil production and consumption (EIA )

The UAE are one of the OPEC partners who can and do adjust oil flow to balance the market, and can thus potentially help with coming shortages elsewhere. However the UAE anticipates being able to increase oil production to 3.5 mbd,, though not before 2018. One way of achieving this is through extended reach drilling, and the hope of thus being able to increase the ORR to 70%. Current production capability is estimated at 2.7 mbd.

The UAE at present largely exports to Japan, South Korea and Thailand.

The UAE has the seventh largest reserves of natural gas (at 214 Tcf ) However in 2007 domestic demand surpassed production. Part of the reason for this is that the UAE injects the natural gas into oil bearing formations to improve oil recovery. The demand is partly seasonal, with the use of air conditioning driving summer use to over 7 bcf. Up to 3 bcf of this is imported in the summer from Qatar, with only 4.5 bcf being produced by the UAE. While production is to be increased there is also the likelihood that greater supply will substantially further increase domestic consumption, so that the UAE are unlikely to be exporting in the near future.

In much the same way as with UAE, Kuwait, as a member of OPEC has been controlling its production levels to ensure that prices stay “stable.” Back in 2008 Kuwait was producing 2.74 mbd and was 9th in the production stakes. It also has the second largest oilfield in the world, the Greater Burgan, after Ghawar in Saudi Arabia.. The EIA consider that it has the fifth largest oil reserves.

EIA ranking of proven oil reserves (EIA)

In January 2011 OPEC reported that Kuwait was producing 2.35 mbd, virtually all of which was exported. This in the month when OPEC production returned to the levels of December 2008. Last March Abdulaziz Alattar gave a talk on Kuwaiti oil strategies. The Kuwaiti goal is to reach a production capacity of 3.5 mbd by 2015, and to raise this to 4 mbd by 2020 and maintain it at that level. Concurrently they wish to raise the production of natural gas to 1.2 bcf/day by 2015, which will reduce the amount of natural gas that they currently flare off. In order to achieve this goal they will need to improve EOR capabilities and make the required investment in them. It should be noted that they recognize a difference between capability and actual production. And further they recognize that an increasing percentage of their production will be consumed internally.

Anticipated Kuwaiti internal hydrocarbon consumption (Abdulaziz Alattar)

It was interesting to see this table of relative exploration and production costs, which was being used to encourage investment help in meeting Kuwaiti goals.

Relative E& P costs per barrel (RSA is a Risk Sharing Agreement, PSA is a Production Sharing Agreement) (Abdulaziz Alattar)

Natural gas increases are needed as much to provide for the domestic market as any other reason, as the plot above shows. For, at the moment Kuwait imports half the natural gas that it consumes. Additional supplies are needed to meet water and electricity needs, and so, instead of largely relying on the gas recovered from oil operations there is a new emphasis on producing natural gas directly.

The next country down the list is Venezuela, but having posted on that country at some length recently, I think I will call a halt on the discussion for the evening.

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Nebraska combined temperatures

Heading south from South Dakota one comes to Nebraska, as I wander around the states comparing the GISS temperatures, the USHCN homogenized temperatures and the TOBS (Time of Observation corrected) raw data for the stations of the state.

Nebraska has 46 USHCN stations but as with some earlier states the stations seem, in general to be close to the interstates, and as with SD concentrated more in the south-east.

USHCN stations in Nebraska

There are three GISS stations in Nebraska on Chiefio’s list, and these are in Grand Island, Norfolk and North Platte. And, out of the gate, Grand Island has only got temperature records since 1944.

Temperature record for the GISS station at Grand Island NE

The information for Norfolk is also only for the past 56 years

GISS temperature record for Norfolk NE

And that leaves North Platte, which has a full record (I was beginning to get a little worried). It shows a steady rise in temperature, pre-1940, which the other stations obviously cannot.

North Platte NE GISS station temperature record

Inputting the temperature data was otherwise straightforward, and although many of the stations are in small communities it was not until I got to Purdum that I had to use zip-area-code, rather than citi-data for the population (97). And that is the only one. As I have come to expect the GISS stations are in the larger communities (average 31,423) relative to the average USHCN station (2,912). The effect of the truncated data from two of the GISS stations can be seen in comparing their average to that of the USHCN stations, the overall average difference is, for this state, only 0.07 degrees.

Difference between the average GISS station and the average of the homogenized temperature values for the USHCN stations in Nebraska

Overall, turning to the TOBS data, the state is warming at the rate of 0.7 degrees F every century. The homogenized data would suggest that the rate is 1.2 degrees F per century.

Average TOBS annual mean temperature for Nebraska (USHCN)

As far as the geography of Nebraska goes, it is 430 miles long and 210 miles wide, stretching from roughly 95.5 deg W to 104 deg W, and from 40 deg N to 43 deg N. The average elevation of the state is at 792.5 m (ranging from 256 m to 1,653 m). The average USHCN elevation is 650 m and the average GISS station is at 628 m.

Looking at the effects of geography on temperature. There is the expected fall with higher latitudes

And the apparent fall in temperature as one moves West.

However, as I have noted before, this is likely due to the rising elevation as the land moves West, and there is a stronger correlation with elevation:

Turning to population, again the largest populations are with the GISS stations, which I have included in this plot.

And finally there is the difference between the homogenized data that USHCN produces, and the raw data that has been corrected for time of observation.

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