Tech Talk - from 1491 to China, coal, smog and CCS

I have written about my curiosity about the condition of Native Americans at the time that Europeans arrived in the Americas in the past, and so, when I came across Charles Mann’s “1491” at the Brookline Booksmith the other day, I bought a copy. It tells a fascinating story of the developments of agriculture and civilization, largely in South and Central America perhaps pre-dating the time around 10,000 years ago that the first cities were developing in Mesopotamia. He tells, with reference to considerable evidence, of the changing understanding of the state of society, and how it developed pre-Columbus. And if you thought the debate over climate change was rough, apparently that over the changing understanding of such civilizations is at least as intense, although confined to a smaller group.

Conventional theories are that Native Americans crossed over the Bering Straits from Siberia while the land was above water some ten to fifteen thousand years ago. However the discovery of remains at Monte Verde in Chile, with a site that dates back over 13,000 years and with other sites that may date to considerably earlier has thrown this all into debate and controversy – which the book explains in some detail. (It was published in a second edition in 2011, since when DNA tests of skull parts from the Botocudo peoples of Brazil have shown some Polynesian markers suggesting a possible sea route for the first Americans.) I am looking forward to reading the chapter that covers Cahokia.

This is a long introduction to explaining why I was drawn to the cover story in the April Wired that the book's author, Charles Mann, has written on the Future of Coal. It is a fairly rational review of ongoing developments in China to find ways of easing their air pollution problems, while continuing to rely on coal to power the ongoing industrial changes in their society. For as he notes,

Nowhere is the preeminence of coal more apparent than in the planet’s fastest-growing, most populous region: Asia, especially China. In the past few decades, China has lifted several hundred million people out of destitution—arguably history’s biggest, fastest rise in human well-being. That advance couldn’t have happened without industrialization, and that industrialization couldn’t have happened without coal. More than three-quarters of China’s electricity comes from coal, including the power for the giant electronic plants where iPhones are assembled. More coal goes to heating millions of homes, to smelting steel (China produces nearly half the world’s steel), and to baking limestone to make cement (China provides almost half the world’s cement). In its frantic quest to develop, China burns almost as much coal as the rest of the world put together—a fact that makes climatologists shudder.

. . . . . . “Coal is too low-cost, too plentiful, and too available from reliable sources to be replaced,” says fuel analyst John Dean, president of the JD Energy consulting firm. “China is putting in solar and wind power at a tremendous pace, but it will have to use more and more coal just to keep up with rising demand.”

The article then goes on to discuss the facility at Tianjin, where GreenGen is developing a Carbon Capture and Sequestration (CCS) plant. The first phase of the plant was inaugurated in December 2012, and the site is now in Phase 3 construction to develop a 400 MW demonstration IGCC power station.

In the WIRED article, however, lies the sentence “Conceptually speaking, CCS is simple: Industries burn just as much coal as before but remove all the pollutants. “ However, later in the piece this is qualified since one of the problems with the technology is that there is a significant (up to 40%) increase in the amount of power that the station must generate to provide that now needed to capture, liquefy and dispose of the carbon dioxide (by underground injection). Thus the plant burns significantly more coal, for the same effective power supply into the grid. This is one of the reasons that the DOE has concluded that the costs of such a plant will increase electricity costs by 70-80%, making it potentially too expensive. Interestingly that considerable increase in cost is, in part, because power generation using coal is currently relatively inexpensive.

Reading the story in WIRED made me realize that I must be quite a bit older than Charles Mann. Being raised in the North of England in the years after the Second World War I can remember when the UK was in much the same state as China is now, with the need for as much coal as possible to rebuild the nation’s industry and power the restoration of the economy. As a result the UK had vicious smogs when the air pollution mixed with a fog to create a condition when I can remember not being able to see the hand at the end of my arm, in the middle of the day in Leeds in 1962. The Great London Smog of 1952 was reported to have killed more than 4,000 people and severely affected the health of many others. The 1962 smog killed over 750 Londoners and the pollution from burning coal had long since turned most of the buildings in the cities of Britain into black edifices, with the original stone crusted with soot. I can remember that in the mining villages of the North the windows and steps were washed and “holystoned” every week to minimize the soot, and curtains and windows were constantly washed to remove the residue.

Two major acts were passed by the British Government, the Clean Air Acts of 1956 and 1968. While the advent of North Sea oil and gas removed the need for homes to burn coal in open fires (which I did until I left the UK in 1968) coal has continued to power the island (31% of power is still generated by coal) but the air pollution that contributed to those smogs is gone. The buildings in the major cities have been cleaned and brought back to the golden sandstone, or white limestone finishes that they had when initially built and the dark clouds that are shown issuing from power stations only occur when the photographer puts the steam emission between his camera and the sun.

The same change has occurred across Europe and in the United States (see photographs of Pittsburgh in 1940) - laws were passed, natural gas played a larger part in domestic energy supply, and the air cleared away.

It is likely that China will be able to achieve the same changes, as they increasingly import natural gas (perhaps from Russia, certainly from Turkmenistan) and provided they impose the same standards for air quality as are found in our power plants, then the air can be cleaned up. In this way the more than a million premature deaths that air pollution is currently causing (according to the article) can be ameliorated, perhaps at a lesser cost than the CCS technology, which is still struggling to provide meaningful demonstrations of its effectiveness. And China has to do something for, as the article continues to emphasize:

More important from China’s perspective, more than one-quarter of its citizens still live on less than $2 a day. These people—more than 350 million men, women, and children, an entire United States of destitution—want schools and sewers, warm homes and paved highways, things that people elsewhere enjoy without reflection. China can’t provide enough energy to make and maintain these things with oil or natural gas: The nation has little of either and not much incentive to import them at great cost. (Asian natural gas prices are roughly five times higher than US prices.) Nor can solar, wind, or nuclear fill China’s needs, even though it is deploying all three faster than any other country. Meanwhile, it has the third-biggest coal reserves in the world.

China, like most of the rest of the world, “pretty much has to use coal,” says Dean, the fuel analyst. “Or, I guess, leave people in the dark.”

And in this view of the future, China is not alone.

Good article (and good book)!

The UK - new Government, new Energy policy?

The new British Government has moved in, and Chris Huhne is the new Secretary of State for Energy and Climate Change, Charles Hendry is the new Minister of State for Energy while Gregory Barker is the new Minister of State for Climate Change. (Interesting set of pre-government employments). This post will look at the new policy statement, relative to the recent Ofgem Discovery Report.

(Saturdays on this site are usually devoted to issues of Climate Change, just to make a little break from the usual focus on energy, although the two are quite closely related. Because of the spill in the Gulf, and some travel before that, I have drifted away from the practice, but hopefully by next weekend things will have quietened down enough that I can return to analyzing the behavior of state temperatures over the last century.)

The challenge (Ofgem)

The policy statement for the new Government in the UK includes the following objectives for the Department:

• We will push for the EU to demonstrate leadership in tackling international climate change, including by supporting an increase in the EU emission reduction target to 30% by 2020.
• We will seek to increase the target for energy from renewable sources, subject to the advice of the Climate Change Committee.
• We will continue public sector investment in carbon capture and storage (CCS) technology for four coal-fired power stations.
• We will establish a smart grid and roll out smart meters.
• We will establish a full system of feed-in tariffs in electricity – as well as the maintenance of banded Renewables Obligation Certificates.
• We will introduce measures to promote a huge increase in energy from waste through anaerobic digestion.
• We will create a green investment bank. • We will retain energy performance certificates while scrapping HIPs.
• We will introduce measures to encourage marine energy.
• We will establish an emissions performance standard that will prevent coal fired power stations being built unless they are equipped with sufficient carbon capture and storage to meet the emissions performance standard.
• We will cancel the third runway at Heathrow.
• We will refuse permission for additional runways at Gatwick and Stansted.
• We will replace Air Passenger Duty with a per-flight duty.
• We will introduce a floor price for carbon, and make efforts to persuade the EU to move towards full auctioning of ETS permits.
• Through our ‘Green Deal’, we will encourage home energy efficiency improvements paid for by savings from energy bills. We will also take measures to improve energy efficiency in businesses and public sector buildings. We will reduce central government carbon emissions by 10% within 12 months.
• We will reform energy markets to deliver security of supply and investment in low carbon energy, and ensure fair competition including a review of the role of Ofgem.
• We will instruct Ofgem to establish a security guarantee of energy supplies.
• We will give an Annual Energy Statement to Parliament to set strategic energy policy and guide investment.
• We will deliver an offshore electricity grid in order to support the development of a new generation of offshore wind power.
• We will encourage community-owned renewable energy schemes where local people benefit from the power produced. We will also allow communities that host renewable energy projects to keep the additional business rates they generate.
• As part of the creation of a green investment bank, we will create green financial products to provide individuals with opportunities to invest in the infrastructure needed to support the new green economy.
• We will work towards an ambitious global climate deal that will limit emissions and explore the creation of new international sources of funding for the purpose of climate change adaptation and mitigation.
• Liberal Democrats have long opposed any new nuclear construction. Conservatives, by contrast, are committed to allowing the replacement of existing nuclear power stations provided that they are subject to the normal planning process for major projects (under a new National Planning Statement), and also provided that they receive no public subsidy.
• We will implement a process allowing the Liberal Democrats to maintain their opposition to nuclear power while permitting the Government to bring forward the National Planning Statement for ratification by Parliament so that new nuclear construction becomes possible. This process will involve:
– the Government completing the drafting of a national planning statement and putting it before Parliament;
– specific agreement that a Liberal Democrat spokesperson will speak against the Planning Statement, but that Liberal Democrat MPs will abstain; and
– clarity that this will not be regarded as an issue of confidence.

The big change, of course, between being in Opposition and being the Government is that the coalition how has to make the system work, as well as meet the objectives that they have now outlined.

There are some tough hurdles in the above that will now have to be reconciled with the actual state of British energy supplies, and the relative costs of providing energy to a nation that is on the downside of the curves for the provision of oil and natural gas from its own resources. The Prime Minister has stated that

So today, taking our lead from 10:10, I commit us to a ten percent reduction in carbon emissions across central government in the next twelve months. You’ll be driving this forward. But I have also made sure all Cabinet ministers are involved, developing plans to show how they will meet their share.

“And the public will be involved too - because we're going to publish the energy use of government headquarters in real-time, so people can hold us to account for our performance.

And lest you miss which is viewed as the more critical aspect of the new Secretary’s job, let there be no doubt, since he stated his goals.

Climate change is the greatest threat to our common future. We have a very short period of time to tackle the problem before it becomes irreversible and out of control.

“A lot of progress has been made, but we must now go further, faster and turn targets into real change.

And

Together we have the opportunity to make this the greenest government in our history. And to put energy security, for too long a second order issue, at the heart of the UK's national security strategy.

In the United Kingdom Ofgem (the Office of Gas and Electricity Markets) regulates the monopoly gas and electricity companies in the UK, and is intended as a consumer watchdog. In March it produced a “Discovery Report”, which notes some of the concerns that had then risen with regard to future energy security. It shows, through this figure, the need for adequate lead time for many of the changes that will come about as domestic supplies fall.

The challenge (Ofgem)

Specifically they note:

• The potential need for additional gas storage and gas ballasting facilities (to address gas quality issues) around the middle of the next decade as our import dependence passes significant milestones (as based on our Dash for Energy scenario);
• The possibility that additional combined cycle gas turbines (CCGTs) will be needed before 2016 to offset plant closures associated with the Large Combustion Plant Directive (LCPD);
• The need for low carbon alternatives, such as new nuclear or plant fitted with carbon capture and storage (CCS), to be deployable at scale to replace closing nuclear plant and large volumes of fossil fuel plant expected to close from 2020 under the terms of the Industrial Emissions Directive (IED); and
• The (at least) doubling of our wind deployment rate by the end of this decade that will be needed if the 2020 renewables targets are to be met.

They note that this is going to require significant investment, which may be a problem given that the UK is currently anticipating making major budget cuts to overcome the deficits left by the previous government.

The report calls for an investment of 200 billion English pounds by 2020, which, in context, is larger than the current UK budget deficit of 163 billion pounds, about 11% of the GDP. That deficit is leading to current plans for cuts of up to 6 billion pounds in the public sector. The first budget to more comprehensively address this will be announced on June 22nd.

In regard to the availability of funding the Ofgem report notes:

our assessment suggests that prices may indeed not rise sufficiently during periods of scarcity and we believe that this presents a material risk to security of supply. As a result, potential investors in new power stations could find it difficult to recover their investment costs and so may not build new plant. Some commentators suggest that this so called 'missing money' problem in electricity markets can only be addressed through separate mechanisms for rewarding capacity as have been implemented in the US and elsewhere. Others argue that capacity mechanisms are not necessary and lead to inefficiently high prices.

One issue that the report highlights that I had not previously considered is that of natural gas quality. There is a significant difference, apparently between that needed in the UK for existing appliances, relative to that obtainable, for example, from Russia.

The difference in gas specification creates a risk that gas cannot flow via the IUK interconnector to the GB market. Up until now, Fluxys, the Belgian SO, has been able to manage this risk to imports via the IUK by swapping higher calorific sources with lower calorific sources or by using linepack to keep gas within the GB specification. However, there is a risk that the high specification of new sources of Russian gas and the increasing specification of Norwegian gas arriving at Zeebrugge may make it more difficult for Fluxys to provide these services. This means that there is an increasing risk that flows could be curtailed on certain days to stop "out of spec" gas from entering GB.

To cut to the bottom line, the report notes that:

They lead us to conclude that, in the context of the risks identified in our scenario work, there are reasonable doubts as to whether the current arrangements will deliver security of supply and environmental objectives at affordable prices. . . . . . . Ofgem does not consider that leaving the current arrangements unaltered is in the interests of consumers.

That seems to be a realistic point at which to sit back, and see how the Government actually will overcome the problems – or at least try.

Secretary Chu in Newsweek

My dependence on good internet service has been underlined by a week where it has not been available. Unfortunately the motel we were staying at in Maine had a problem with its server, and we returned home to find a problem with our own internet connection. Thus a couple of the posts that I was completing will be a little delayed, until I have that indispensable tool, a good connection. This has been prepared largely without, and similarly posted with access just to find a couple of references.

And in that meantime I have been perusing this week’s NEWSWEEK, on my Kindle, and noted that the Secretary of Energy had a new interview. The first thing that he said in it was in response to a request to define President Obama’s energy policy. Here is what he said:

We look at all the factors and we say, how can we get to the lowest possible level of carbon as quickly as possible and not only at the lowest cost but with the greatest possible economic opportunity for the U.S.?

That’s it!

The rest of the interview was not that much more constructive (one of the benefits of the Kindle is that it counts words, in this case the article – including questions – ran to 782 words - the attempted length of this piece). There was no mention of peak oil, or energy security or prices in the article. In response to the criticism that the Stimulus package did not make enough investment in energy, the Secretary said that they would fund projects for up to three years maximum, and encouraged innovators to “swing for the fences.” Whatever that means (in context)! I will admit to having helped put a couple or more proposals into the DOE hopper, though most came back rather quickly and negatively (one was successful). What struck me about the process, and the attitude redolent in the Secretary’s remarks was the focus on short term benefits and application. Most of the work is also oriented to larger group efforts, with a lot less focus on the smaller innovator to stimulate new ideas. If you can’t claim a home run within the remaining life of this Administration, don’t bother applying.

He appears to hope for a start to a Smarter Electric Grid, to double renewable energy contributions by 2012, and to get the nuclear power plant construction industry restarted in this term. But he also recognizes that carbon capture and sequestration is at least 10-years away from deployment. His “blue sky” hopes are for cheap (below $2) per watt photo-voltaic systems, (current costs he quoted as being over $4) and he still looks to the generation of fuels such as gasoline directly from biomass. This is not the ethanol production that the industry and government are still heavily involved in, but rather focuses back on the work he was supporting while at LBNL looking at using natural fauna to do the digestion and fuel generation.

But he returned to the need to put a price on carbon, and for a cap-and-trade bill to make sure that the point on where his focus was, would not be missed.

Sigh! He sounds as though the “scientist in a tower” description still fits him like a glove. There are considerable issues in regard to the changing energy supply of the planet that should be giving him pause in his charge against carbon. Increasing numbers of people are pointing to a coming crisis in oil supply. The British government, at the urging of folk such as the head of Virgin Airways, has decided that perhaps it is about time that it took its head out of the sand, and took a hard look at the situation. Of course it is also taking a look at the reality of climate change predictions, though with the coming of a general election, it is not clear whether either effort will amount to much.

I am increasingly struck by the perception that many of the folk that write about both climate change and energy supply do so with a very complacent attitude toward the continuing situation. The potential impact from a major impact on climate from a severe eruption of the Laki suite of volcanoes in Iceland seems to be being totally ignored. (A quick skim through some of the scientific papers suggests that the major eruption follows within a couple of years of the current eruption of the smaller volcano). The problem is that should there be a problem, running around in a panic for a couple of days is going to do nothing constructive in stopping folk from being killed.

Well we will have to see, in the relatively short term, whether that complacency is warranted. Being a Cassandra is unlikely to get more recognition this time around.

Carbon Sequestration sites and their success

There are a number of questions on the ease with which carbon dioxide can be sequestered underground, and I alluded to some of them in yesterday’s post. That led me to a quick review of the status of the concept, and I thought I would pass on information from some of the papers that I looked at. Some of the different options that can be used for carbon dioxide injection underground are illustrated by a review of the Polish program.

Different options for carbon dioxide disposal underground.

Of these the use for enhancing oil recovery has, perhaps the longest history. Some sense of the work can, perhaps, be seen by looking at CO2 injection at the Cranfield site in Mississippi.


The site is in an oilfield that was discovered in 1943, and abandoned in 1966. Since that time, under the influence of a strong aquifer drive, it has returned to its original reservoir pressure. There is a layer of residual oil, under a gas cap..

Section through the Cranfield site

The site is actually a dome, folding in both directions, so that the residual oil forms a ring. It is a part of the Tuscaloosa Formation, which MIT has calculated should be able to retain some 10,000 million metric tons of CO2. Adjacent continuations in East Texas and the Gulf would add an additional 187,000 million tons of capacity. Validation of the performance of the test site would thus go a long way to answering some of the critics of the technology. Because of the limited volume of oil available, the project is also looking into injecting CO2 into the brine interval during the third phase of the program.

At Cranfield the CO2 has been injected continuously, starting in July 2008, at a rate of 500,000 tons per year. so that, as Professor Economides discussed, the injection pressure remains high. At present the analysis of the samples shows little change in the water chemistry as a result of the injection. Last November it became the fifth site in the world to store more than a million tons of CO2. Monitoring of the pressures as the third stage has begun, does show a pressure increase, although this may be injection rate sensitive.


Monitored pressures for Cranfield 3 (U of Texas)

A second site is being prepared in Alabama at the Citronelle oil field, near Mobile. Both carbon dioxide and water will be injected at that site, with the intent that the CO2 will allow an additional 15 to 20% increase in overall production from the field, before the site is left to sequester the CO2.

In the United States, CO2 injection has already helped recover nearly 1.5 billion barrels of oil from mature oil fields, yet the technology has not been deployed widely. It is estimated that nearly 400 billion barrels of oil still remain trapped in the ground. Funded through the D.O.E.'s Office of Fossil Energy, the primary goal of the Citronelle Plan is to demonstrate that remaining oil can be economically produced using CO2-EOR technology in untested areas of the United States, thereby reducing dependency on oil imports, providing domestic jobs, and preventing the release of CO2 into the atmosphere. . . . . . . When the 5-month injection is completed, incremental oil recovery is anticipated to be 60 percent greater than that of conventional secondary oil recovery by water flood. A recent study by Advanced Resources International of Arlington, Va., estimates that approximately 64 million additional barrels of oil could be recovered from the Citronelle Field by using this tertiary recovery method.

In the last Oil and Gas Journal survey (April 2008) they found 100 miscible ongoing CO2 projects and 5 immiscible ones, with enhanced oil production, at the beginning of 2008, running at 250,000 bd.
Costs for CO2 EOR have been given as $20.86 boe, divided out as follows:
* $3.68/boe for CO2.
* $5.72/boe for power and fuel.
* $3.34/boe for labor and overhead.
* $2.00/boe for equipment rental.
* $1.36/boe for chemicals.
* $3.05/boe for workovers.
* $1.71/boe for miscellaneous.

One of the Centers most active in the monitoring of CO2 plumes as they migrate from the wells out into the formation is at the University of Texas-Austin. Sue Hovorka, for example, monitored a CO2 plume migration after it was injected as part of a test in the Frio Blue sand, although in that test the injection was of the gas.

Several times a day during injection, trucks hauling 20-ton tanks of cold liquified CO2 arrive at the test site, where it is transferred to two 70-ton storage tanks. The CO2, which comes from a natural reservoir near a Mississippi salt dome, is transported most of the way by train.

During injection, the liquid CO2 is pumped through a heat exchanger, which warms it up to 21 degrees C (70 degrees F), converting it to a gas. Then it is pumped through the injection well head and a mile down the well. The CO2 enters the porous sandstone and brine through perforations in the well casing and spreads out in a plume.

She also described, briefly how the process was supposed to work.

Before the first tests, the scientists had predicted that an effect called residual saturation, caused by capillary forces, would cause the brine-filled pores in the stone to trap and hold about 20 percent CO2. The other 80 percent moves on to the next set of pores, and as it moves, it’s continuously diminished. In other words, the plume smears out. Hovorka said the effect is intuitive.

“It’s the same reason you can’t get grease off the stove,” she said. “You can’t wash it loose with water, you have to use soap.”

The 2004 test confirmed this prediction and now initial results from the 2006 test seem to reconfirm it. “It means we got the physics right,” said Hovorka. It also means she and her colleagues can predict the CO2-trapping ability of other sites before injection begins, a powerful and necessary tool for carbon sequestration to become a common practice.

Polish trials have looked at displacing natural gas with CO2 in a program that has been going on for over 12 years Part of the process at the Borzecin site was to inject the gas into the underlying aquifer beneath the natural gas pocket. The CO2 dissolves into the water and so the migration to the gas pocket occurs only very slowly, the gas is at 1,500 psi (just above the critical pressure) when it enters the reservoir). The gas displaces natural gas that had previously been dissolved in the aquifer, yielding about 60% of the injected volume of CO2, as natural gas from the production wells.

One event that this test showed, which perhaps Professor Economides had not considered is that the dissolved CO2 appears to have interacted with the water, over time, to form a carbonic acid, that ate into the carbonate rock, and increased the permeability of the formation, lowering the pressure required for injection, rather than, as he had anticipated, having it rise. The site has now accepted more than 1.4 million scm.

CO2 has also been tested as a means of displacing methane from unmined coal seams. The initial project was completed in 2005

During the project 203 tonnes of CO2 were supplied to the site and stored in tankers. The CO2 is taken from the tankers where it is already stored under pressure and then injected at the injection well (MS-3 well). The injection well was a new well drilled down to a depth of 1120m for the purpose of this pilot project. The target seams were thin coal layers that were bounded (above and below) by highly impermeable shales. The pre-existing coal bed methane (CBM) production well (MS-4) is 150m from the injection well. A tank by the production well stores the saline water which is a by-product. This is emptied and disposed of on a weekly basis. The produced gas (naturally - 97% methane, 2% CO2) is flared. Since December 2004 there has been a gradual rise in CO2 content of the produced gas, the latest figure is 8% which may represent breakthrough of injected CO2 at the production well.

Modeling of the process is not yet fully functional, and in contrast to the more conventional reservoirs for oil and natural gas, the large fracture patterns in coal, known as cleat, play a greater part in the performance of the coal beds and must be included in the analysis.

Nevertheless the tests of the different methods for storage, and use of CO2 injected into the ground have been successful. The most widely recognized, however, is that carried out by Statoil, with Sleipnir the most documented. By 2004 Sleipnir had been injecting CO2, which is produced at an unacceptable 9% in the natural gas extracted at the site, at a level of a million tons a year, since 1996. Because of the length of time that the injection had occurred it has been possible to map the migration of the CO2 over that time. The initial injection is at a depth of 1,000 m below sea level.


Pattern of CO2 injected flows from the injection well at Sleipnir after 3 years

If I read the plots correctly the injection point is aligned with the deepest point in the picture and the flow path is about 2 miles long on its greatest extent.

The site continues to be monitored, as injection continues, with migration being downward under the containment of the cap rock.

Seismic surveys of CO2 migration at Sleipnir

It is expected that the CO2 will slowly dissolve into the brine (over hundreds of years). The scale of the above is exaggerated vertically since the height of the plume is around 600 ft.

The success of the program has led to the Snohvit Project which again takes the CO2 from a natural gas supply (in this case at 5% CO2) and stores it underground.

The success of these projects, and the changes in conditions from the simple models initially assumed to the more complex considerations that have had to be undertaken as the storage has continued to accept high levels of CO2 in some cases, and only high injection rates in others, nevertheless combine to suggest that Professor Economides models may be overly conservative.

The Professors Economides and carbon sequestration

One of the problems in ensuring that there is sufficient energy available at some future date is that the supply, in virtually all cases, requires that a significant infrastructure is in place to deliver it. Thus, for those of us who have become used to having a light come on, when a switch is flicked, there needs to be some form of generator hidden at the other end of the wires to which the switch is connected. Stepping further back beyond the generator there must be some energy source, whether it be the sun’s rays; the wind blowing across the moors; or the fuel that fired the power station from which the electricity flowed.

Putting that infrastructure in place takes time. And the existing plant, over time, and even with good maintenance, will slowly decay and require replacement. At the same time just being able to generate power doesn’t necessarily allow me to flick the switch and see the computer screen as I type this. There has to be system, typically an electric grid of power cables, which carries the power to where it is needed. As Boone Pickens found out, putting wind turbines into West Texas was an exercise in futility, until such time as there is a network that will deliver the power to the folk that need it in East Texas, more than a few miles, and a few years of construction and permitting, away. As “just in time” manufacturing has grown as a cost control practice, so ordering large pieces of equipment carries with it longer delivery times, since the minerals must be mined, processed, produced, transported, made into parts and assembled, before the final product can be brought to a site and installed. The larger the facility, in many cases, the longer that process takes, and the more paperwork is likely going to be involved in the getting the installation into the ground. It is a lengthy process even when the need is generally recognized. If there is political opposition - regardless of merit – then you just added years to the delivery, construction and operational start times.

Power station construction is one of those things where the process is more likely to be beset with delays, than with dramatically earlier than scheduled delivery. And if the fuel comes out of the ground, whether coal, oil, natural gas or uranium, then delays can more critically compound, particularly at politically critical points, such as around election times.

I was thinking of this today, as I came across Chris Booker’s comments on the Conservative leadership views on electricity generation, at a time when the UK must, before long, have a General Election. Given that Britain must replace 14 of its current generating plants, under EU mandate, taking with them 40% of the current generating capacity of the country, he draws attention to the Conservative view that coal-fired power can only be allowed if there is full carbon capture and storage.

What makes it particularly interesting and relevant is that, after some 100 coal-fired power stations in the United States have been cancelled or postponed, we have folk such as the head of one of the largest generating companies in the Midwest virtually echoing the Conservative leader. And it is much the same position with the Department of Energy and the current Administration. Carbon sequestration is the also a current area for lots of research and planned development.

In October 2009, as part of President Obama’s stimulus package, the US invested $1.4 billion in 12 CCS demonstration projects. In December 2009, the US announced a further $979 million is to be invested in 3 further such projects. The same month the EU pledged over $1.4 billion towards building 12 CCS similar projects by 2015. The UK is also proposing to fund and bring online 4 CCS demonstration projects by 2020.

Now there has been the odd small problem with leakage at one of the few places that are actually carrying this out at present. Yet the current site at Sleipnir, has been injecting CO2 for years, though the gas it re-injects was initially a part of the natural gas mix that wells at the site produce.

Using a simple metallic tube measuring 50 centimetres (20 inches) in diameter, the platform operator, Norwegian oil and gas group StatoilHydro, has injected some 10 million tonnes of CO2 into a deep saline aquifer one kilometre (0.6 miles) under the sea.

"We bury every year the same amount of CO2 as emitted by 300,000 to 400,000 cars," said Helge Smaamo, the manager of the Sleipner rig, a structure so large that the 240 employees ride three-wheeled scooters to get around.

But that is not the concern that has been highlighted, nor is it the volumes of gas generated to run the compressors that drive the gas to liquid and up to the pressure at which it is injected. Rather it is the results of the pressure itself.

Last October Michael Economides and his wife presented a paper in Houston, that he has since abbreviated on his web site, and which Chris Booker has made reference to.

Simplistically he examines the relative volume, within an existing rock formation, that carbon dioxide can occupy, if it is injected into that rock and left there in storage. The number that he comes up with is 1% of the pore volume.

The problem that they identify (with computer models) is that as the carbon dioxide (which has been compressed under pressure so that it is delivered and stored as a liquid) is injected at a relatively steady rate, it flows into a formation where there is already some pre-existing fluid. Thus as the new fluid is pushed into the rock, in the reverse of the process that happens when oil flows out of the rock into the well, the driving pressure must increase to move the CO2 away from the well. This injection pressure must continue to build, over time, to keep the fluids moving, but it can only displace some of the existing fluid, and some it has to compress. Achieving the compression by increasing pressure has a couple of serious snags. The first is that fluid at low pressures is virtually incompressible, and the second is that to achieve it the pressures must therefore be increased significantly to, and above, the levels that the rock can easily stand.

What do I mean by that, well if you remember back to one of the tech talks, I mentioned that we can crack a rock by raising the pressure in the well above the strength of the surrounding rock. We do that to create paths that the oil can flow out through, into the well, driven by the pressure differential between the fluid in the rock, and the pressure in the well, that we lower after fracturing the well. We lower the pressures because we don’t want the crack to continue growing. If it did then it could easily grow through the reservoir rock, and then up through the cap rock that is holding the oil (or gas) confined within the reservoir rock. Once we crack through that cap rock, then the reservoir isn’t a reservoir any longer, since it has a leak path, through which the CO2 can escape.

As a result we can only inject CO2 into that reservoir until the pressure in the well starts to approach the fracture pressure of the rock. But we don’t start at zero pressure, we have to start at the existing pressure of the fluid in the rock, and it is only in the difference between these two pressures that we can drive the CO2 into the rock. And that range, the Economides have calculated, will only allow a 1% change in fluid volume before the pressure gets too excessive.

Now I have to add two caveats to this argument – the first is that it does not hold when the liquid is injected into a reservoir where the fluid is still oil, since CO2 will merge into the oil, lowering its viscocity, and this has been used previously to enhance oil recovery (EOR) and get perhaps another 10% production out of formations where it is feasible. And even when the oil can’t be recovered, it can accommodate larger levels of injection that that forecast.

The other point is that there is nothing that stops the site from extracting the contained fluid (generally water, though often brackish) to allow the CO2 to displace it, at a lower pressure (which could be considered as a reverse water flood). It may be a bit more expensive, but at least it would reduce the volume of space that would be needed from the huge areas that the Professors Economides currently anticipate would make carbon injection infeasible.

I suppose someone will realize that, after a bit, but in the meantime while the debate continues, and the example sites fail to yield reassuring results, the power stations are not being built, and the future needs of both the UK and the USA hang further in the balance.

Coal, carbon capture and cheap natural gas

There are a couple of interesting articles that came out today on the future of coal as a power source that indicate some of the shorter and longer term concerns over energy supply. One is a tale of the United States the other the United Kingdom.

Looking at the United States condition first, those that are concerned about the future climate of the planet are particularly concerned about the amount of carbon dioxide that is generated when coal is used to generate electricity. (I am not going to go through the pro’s and con’s of their arguments, I do that on Saturdays, and there are lots of others who provide stronger arguments than I). The world had been anticipating that the upcoming meeting in Copenhagen would lead to a new treaty, and set of international regulations to control carbon dioxide emissions. This would build on the Kyoto accords which are expiring. However it now appears that the chances of an agreement in Denmark is not going to happen, and with the chances of a climate bill passing the US Congress in the near future fading, an alternative path to emission control is perceived, by those concerned, to be needed.

Thus the EPA is taking steps to generate regulations that will enforce carbon capture and sequestration by those using coal-fired power stations to generate electricity. One of the problems with a large scale program to undertake this effort is that it relies on a set of technologies that are not necessarily all worked out yet.

Certainly carbon dioxide can be captured from flue gases, and then liquefied for transport to an site for injection underground. There have been demonstrations of this in the past, though it should be noted that the two sites that are often quoted as examples of the ability to inject carbon dioxide – Sleipner for example is reinjecting carbon dioxide that is a byproduct of the gas being produced at the site back into a saline aquifer some 1,000 m below the sea bed. The other success quoted is that where carbon dioxide is injected into an oil reservoir to increase tertiary oil recovery. And the success most often cited here is at Weyburn field in Canada.

The EOR technique that is attracting the most new market interest is carbon dioxide (CO2)-EOR. First tried in 1972 in Scurry County, Texas, CO2 injection has been used successfully throughout the Permian Basin of West Texas and eastern New Mexico, and is now being pursued to a limited extent in Kansas, Mississippi, Wyoming, Oklahoma, Colorado, Utah, Montana, Alaska, and Pennsylvania.

Until recently, most of the CO2 used for EOR has come from naturally-occurring reservoirs. But new technologies are being developed to produce CO2 from industrial applications such as natural gas processing, fertilizer, ethanol, and hydrogen plants in locations where naturally occurring reservoirs are not available. One demonstration at the Dakota Gasification Company's plant in Beulah, North Dakota is producing CO2 and delivering it by a new 204-mile pipeline to the Weyburn oil field in Saskatchewan, Canada. Encana, the field's operator, is injecting the CO2 to extend the field's productive life, hoping to add another 25 years and as much as 130 million barrels of oil that might otherwise have been abandoned.

The Weyburn site is also not using flue gas carbon dioxide. There have been considerable questions about the cost of actually doing the carbon capture and liquefaction, but for some it provides the only alternative to shutting down the coal-fired sector of electricity generation.

"CCS is the only climate change solution we have for the existing fleet of coal-powered power plants," said Sarah Forbes of the World Resources Institute.

Thus there is the new initiative being carried out by AEP at their Mountaineer power plant to capture the gas and reinject it underground. The trial is planned for a 12 to 18 month operation

This project will test Alstom's chilled ammonia technology for CO2 capture from flue gases particular to natural gas combined cycle (NGCC) power plants.

The test began in September and is a scale-up from an earlier test. However it is going to take some time, even after the project is completed, to collect analyze and evaluate the data that will result. Unfortunately I would suspect that the EPA is not going to wait, and the high energy and fuel costs that will be required for the sequestration and re-injection of the carbon dioxide underground will not be much of a factor in the agencies move to force the industry into that particular box.

This will produce a significant increase in the price of power at the plant, and since such plants need to make at least some money to continue operation, one might logically anticipate that this will drive up the price of electricity. (I have heard predictions that in Missouri – which gets some 85% of its electricity from coal – the basic cost of electric power at home may double). The impact, worldwide is also projected to be very expensive.

Earlier this month the International Energy Agency said the world will need to spend $56 billion by 2020 to build 100 such projects, with an additional $646 billion needed from 2021-30.

And so, as a result, one might anticipate that there would, where possible, be a switch to using natural gas, which produces less carbon dioxide, and which is currently in abundant supply over a much greater swath of the nation. That coverage was enhanced with the transition to full operation of the Rockies Express Pipeline which has just come on line and will deliver natural gas from Wyoming and Colorado, where there is a plentiful sufficiency, to the Ohio and points East which has been a bit short. Given the availability of shale gas and new LNG terminals to import gas from abroad, gas will likely remain cheap in the short term.

And it is that dilemma that is facing the power station operators in the UK. The abundance of natural gas supplies to the UK (a quarter of which comes as LNG) means that it may be cheaper to generate power with gas-fired stations that by using coal. But the EU is seeking to shut down the older, more polluting stations and has mandated that they only run for 20,000 hours before being shut down permanently in 2015. This has been why there has been a move to build new replacement stations such as that at Kingsnorth (recently postponed).

The problems that might then arise, as the gas supply, on which the alternative is currently focused, provides the lynchpin of the energy plans of most of the world, is that increased demand may shorten the effective economic life of that resource. Given that nations need to have some alternative source in their back pocket, the dismantling of coal-fired stations across Europe may mean that these resources won’t be available if needed, and the move to restrict new nuclear plants, may keep that from being an answer in the same way. We shall see!!

The Wicks Report - a gentle cough

Last week a report went to the British Government suggesting that nuclear power is an answer to their coming energy shortfall problems. The report is known as the Wicks report, and discusses Energy Security for the UK. In light of their transition from energy independence to the point where current imports of 25% of natural gas supply will rise to somewhere between 45 and 70% of supply by 2020 the report is timely. (That being now just over ten years away). The report would suggest that there is no need to panic – that renewable energy is on target to provide 15% of all energy by 2020, Increasing the contribution from nuclear power will take a little longer and it is suggested that a program be put in place to get 35 – 40% of UK electricity from nuclear by 2030. However in para 2.27 it states as one of the assumed conditions for the future it predicts that

In contrast North America becomes much less dependent on imports, dropping by almost a half, as production from Canadian oil sands increases.

Given the current level of US imports (recognizing that some come from Canada) the questionable reality of this assumption brings the value of the rest of the report also into question. (The US imported roughly 12 mbd of crude in May, of which roughly 2.2 mbd came from Canada, and unlike the report - see below - I do not see US current production being sustainable that long).

The report recognizes that, for the next decade, the UK will still rely on fossil fuels, demand for which will accordingly increase. And so what is the UK Government to do? The report suggests that the first step is to reduce demand, the second to move to adopt technologies that don’t rely on oil and gas – while reducing carbon emissions, and thirdly it recommends mitigating the energy security risks inherent in the use of fossil fuels. The scope of the problem is illustrated with this figure.


As you may note, UK production is dropping rapidly as a percentage of total use.

Unfortunately the report is better at stating objectives such as these than in providing realistic ways in which they can be accomplished. As an example it talks about the desirability of opening a “Southern Corridor” that will allow natural gas to be brought into Europe from the Caspian and Central Asia. This is, no doubt, a reference to the Nabucco pipeline that is being pushed as a way of bringing, among other things, Turkmen gas into Europe through a pipeline that bypasses Russia. The problem is that while the customers for such a pipeline are all very keen on the idea and sign promising proclamations the folks that would supply the natural gas are being strongly “courted” by Russia and so far have not actually agreed to provide all the gas required to make Nabucco a reality.

Coal is largely written off as a resource with the report noting

In 1954, production peaked at 227 million tonnes from around 900 pits employing some 700,000 miners. By 2008, a deep-mine workforce of 3,660 produced some 8 million tonnes from 18 underground mines.

In regards to oil and natural gas the national supply peaked in 1999 and is now declining at some 5 – 8% a year, so that imports now account for 26.5% of energy used. This is in spite of:

2007 saw the highest number (111) of offshore exploration and appraisal wells drilled since 1996. 2008 saw almost as many (105), with a strong emphasis on exploration. Over the past three years this strong drilling has resulted in more than 400 million boe being discovered each year. And the latest licensing round produced, at 171, the highest number of licences ever offered, to 99 companies.

One of the problems that the UK face (and others have the same issue) relates to the desire to cut carbon emissions. Thus the present energy plans see a cut in the UK use of coal – interestingly enough, however, the report notes “coal projects can be producing within two to five years of an investment decision should high growth in coal demand resume.” So this remains a rabbit that can be pulled from the hat, when circumstance dictates, and internationally the report projects an increase in global coal use going from the current roughly 4 billion to 7 billion tons by 2030, though the growth rate is anticipated to decline over time, as carbon concerns grow.

Coal imports and exports by region through 2030

In terms of oil and natural gas the report has no problem in projecting global oil demand at 106 mbd by 2030. Given that they project both China and India increasing the number of vehicles in each country by a factor of 10 that seems remarkably low. (I was going to say optimistic but I suspect that depends on how you view the number).

To meet that demand the report recognizes that production outside OPEC has probably peaked and thus all the increase will come from just some of the OPEC members. (There is that "small" caveat mentioned at the beginning – the US need from OPEC is seen to decline since the report projects that half the US need will be met from the Canadian oil sands – para 2.27). The following graph comes from the IEA (but last year).

Oil imports and exports by region through 2030.

Given that increase in production, and the growth of the biofuels industry to reach 3.2 mbd in 2030 (the IEA figure) , although there is some question left floating in the report about the reality of both sets of numbers

Natural gas will be one of the big winners. While increases in US domestic production remain uncertain as to size, and Russian production is unlikely to increase much, there are anticipated to enough supplies on the global market through 2030 to meet the international need. This transfer between countries is to be facilitated by a significant growth in the LNG market.

Natural gas exporters through 2030.

It is interesting to note, under the category of risks, that the report says:

For all three fuels, physical supply risk due to geological constraints may be effectively ruled out as a serious concern since there are sufficient proven reserves and even larger remaining resources.

However, the geopolitical and economic risks are such that the large sums of investment needed to exploit these reserves may not be made or may not be timely, meaning some markets are potentially left undersupplied or prone to volatile or high prices. In addition, as resources become more concentrated, supply disruptions in certain regions may have a larger impact on physical availability.

2.59 The consequences of a supply disruption for oil are generally considered less grave than for gas delivered by pipeline since in the event of a disruption of one source, the liquid nature of oil – both literally and figuratively in terms of the global oil market - mean that supplies can be shipped from other regions and purchased from sellers with relative ease on the spot market.

And for those of us concerned about peak oil, it has the following words of wisdom:

Firstly, the peak oil debate tends to focus on conventional oil production and often excludes natural gas liquids (NGLs) and other unconventional sources such as oil sands, and oil shales.

Secondly, the fundamental constraint on production is typically considered to be the geological scarcity of oil, leaving out other important factors such as technological progress, future demand for oil and its link to the oil price, access to and investment in the development of existing resources, and political instability or resource nationalism that limits the amount of recoverable oil.

All I can say is that he doesn’t read the same sites, and follow the same debates on the issues that I, and most of the folk that I talk with about this, read. Most of the subjects that he says that we ignore are covered, from time to time, in these pages. This is the global projection for oil production in 2030.

Oil reserves by country Source: BP Statistical Review 2009 for 2008 production and exports; and IEA World Energy Outlook for 2030 production estimate reference scenario

Now if you want to go down to the second line you will note that it says that Canada will export 943,000 bd in 2030 and produce 1,900,000 bd I am going to presume (given the statement about America getting half its oil from the Alberta sands) that this is conventional oil – though when I see that the US is still supposed to be producing 6.5 mbd I don’t see how it can be.

One of the interesting curves in the report is how the UK is supposed to get to the low carbon emission rates that are being promised. The following figure shows the relative proportions of different fuels that are anticipated to be needed for the different scenarios.



Now if the far left column is the base case, you can see how much other sources are going to have to contribute to bring the overall figures down. And you can see the advantages that adding more nuclear power will bring to those columns and the overall number.

The report is not confident that, in the intermediate term (that covered by the report) the UK will be able to provide all the renewable energy supply that it needs. It may however be able to provide enough biofuel. Bear in mind the recent start of the wood-fired station fed from plantations in the UK.

In terms of the overall picture in both the short and long term the report concludes that the UK cannot become energy independent but must import the oil it needs for transportation. (Electric cars won’t have a significant impact). Talk of independence is “unrealistic.”

And so the final conclusions are – become more efficient and save energy, develop technologies to minimize oil and gas use, and to allow coal use without generating GHG. (One concept that is proposed is underground coal gasification – which I will put on the list for a Sunday Tech discussion).

There are some nice graphs, and some philosophy, but unfortunately I think that some of the projections in the report are considerably over-optimistic, particularly those dealing with oil supply. Given that the rest of the report has a significantly reduced value.

Turns out that I wasn't the only one that is not impressed. The Economist even went so far, in commenting on the bleakness of the picture, to tie the story to "posturing politicians."

The Post and the Secretary - a comment on a discussion

One of the major planned bastions of the Obama Administration is intended to center about a change in the Energy Policy of the country. Given that the folk that are now in charge of a number of issues come from California Congressman Waxman (the 30th District which includes Beverley Hills and Malibu); Senator Boxer from California, and Secretary Chu of the Department of Energy; there is a predilection to call the new policy California-based, rather than the Texas-based orientation of the Bush Administration. And the experiences of the key players will likely color the thinking and planning that will take policy forward. (Recognizing as was noted in the EIA meeting last week, that given the need to get 60 votes out of the Senate, that such a process will dictate adopted policy). So it is interesting, with that filter in mind, to listen to the interview that Secretary Chu gave to the Washington Post today.

The interview begins (the Post listing is not in order, so this was the top bit) with a question on getting folk to use public transport, and conservation as a necessary early step in reducing the national energy demand. The question illustrates the difficulty between setting an overall goal, and the problems in trying to implement those goals in a time of financial exigency. Consider that while, in order to save money in tougher times folk recognize that they are better off taking public transport. The problem is that as that demand goes up, from Washington D.C to Florida, and all across the country, it bumps into the harsh reality that cuts in municipal income are forcing the services to become more restricted. As someone noted “it makes no sense to hire a construction worker, and fire a bus driver.” Unfortunately that part of the question was not fully addressed by the Secretary, though he did note that 60-70% of transportation fuel is used in the private sector, but then focused on the more fundamental theme, that he has expounded upon before, about conservation of energy. In this case he would replace the construction worker with someone that can weatherize your home. (Though still not helping the bus driver). But even here I think he has difficulty. Because to sell this message (that weatherizing your home can pay for itself in a year or eighteen months), requires that he get people to hire folk to work on their homes.


The difficulty with this when times are tougher, is that it is requiring individual members of the public to become involved and actually spend their own money in the process. (We had some small remodeling done over the winter, and according to the folks we hired, there is very little work out there at the moment). In tough times that is going to be a hard sell, high return or not. And while the sale that the Secretary talks about hinges on folk seeing the payback in lower energy bills after the investment, or getting a bank loan to make the improvements, which is a group that also needs to be persuaded.

In regard to the use of solar energy, and particularly photo-voltaics, the Secretary plays around with words. At the moment solar is much more expensive than conventional other fuels. But he notes that if you look instead at the energy supply for peak power then, instead of costing $0.10 per kwh, that currently costs $0.40 per kwh. So that instead of replacing other power sources if one instead makes the comparison with solar (at say $0.23 per kWh) then solar becomes a logical choice. The problem with that argument is that I suspect that solar is only considered as being at $0.23 if the investment can be paid off by continuous supply of power into the grid at the time that the sun is shining, in which case it is displacing existing, lower cost systems. If it is installed and then only run in times of high demand, then ROI would surely drive the costs over $0.23 and it would still not be economical.

Turning to oil dependence he tried to distinguish between folks reducing their driving habits purely because the price went up, over their decision to do so because of the dependence on foreign oil. He recognized that countries are now jockeying for guaranteed access to the increasingly limited supply, and this dependency is a “very scary proposition” particularly if it starts to define our geopolitical stance. He did suggest that people conserve in personal travel by driving more fuel efficient cars and car pooling, but when challenged as to whether folks would, he merely hoped so. And then he spoke up for the use of bio-waste as well as specifically grown crops to generate bio-energy.

In looking at the benchmark of 100-day accomplishments he is proud of getting the loan guarantee program to actually start making loans, whereas when he came in the likely start date had been projected as sometime next year.

For climate change, and carbon reduction he still holds to the target of reducing carbon emissions by 80% by 2050. He still sees energy conservation, in things like buildings, as the lowest hanging fruit. He thinks we can reduce building energy costs by 80%, with today’s technologies and without solar panels. He feels that the Department can design tools that will help people do this., and that the added investments to make them efficient will then pay for themselves in 10-years or less.

But as with cars, and the change to higher mileage vehicles with improved batteries, there is no recognition that this problem needs an immediate solution. Rather the Department is going to continue developing battery technology, with the hope that in time the cost differential for a hybrid will be small enough that it will become more attractive to the public. As it will continue to work on the design tools for buildings, but there is no sense of emergency in the talk, no sense that the time where we will need to have answers is in the relatively immediate future. Interestingly when he was selling the concepts of hybrids he argued that they were only $5,000 more expensive than conventional models, and yet when arguing the need for research on batteries he put the price of current batteries in hydrids as being on the order of $10,000. (Tsk!) But new batteries are at least 5 years away.

I must confess that I do find it a little odd that he would have us concerned over climate change, with a potential for that impact being towards the back end of this century, with much less concern over the more imminent arrival of fossil fuel shortages, which may well occur within the period of the current Administration.

And in that regard he talked of the differences between regulatory and legislative paths towards reducing carbon emissions. He anticipates that the EPA will move on the regulatory process, which may, in turn stimulate more legislative activity. And looking further into coal, the rate of advance of “clean”coal’ is going to depend on the costs and the technologies that show that they can work. These are pilot demonstration plans going forward that will initially be expensive, but will come down with use. And he thinks that as a result clean coal could happen. He thinks that the economic and social consequences of continuing to burn coal are becoming more evident and more pressing. (One wonders what he is thinking of in particular) But again this is quite generalized, and not focusing on the shorter term path forward, and, as I keep listening to the Secretary the more I worry that he does not see the time scale over which changes need to be made.
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P47. Pick Points

Half-a-dozen or so stories of interest:

Up in Canada Suncor expects to produce around 300,000 bd of crude from its operations in Alberta. But all is not well in those operations. The rise and then fall in petroleum prices has had a significant impact on the oil sands industry.

Companies financing oil sands projects out of cash flow have been relatively unscathed, besides suffering substantially lower stock prices and having to delay projects due to lower revenue. Companies financing oil sands projects on credit are up for sale at bargain basement prices. The most likely buyers of those credit-short companies are supermajors and sovereign wealth funds.

The Canadian and Albertan governments have lost substantial tax revenue because of rapidly rising project costs eating into corporate profits. Relatively more upgrader projects being delayed or cancelled compared to mining and in-situ projects contributes to less value-added in Canada and a lower tax base for those governments.

The article goes on to discuss the significant costs of a cap and trade rule for the oil sands, and the potential serious consequences to the industry if it chooses to ignore that coming freight train. The report anticipates a cost of $80 a ton for carbon from operations on the scale of the oil sands.

In order to help the industry the Alberta Government is slashing royalty rates. The Alberta Government has also set aside $2 billion for work on carbon capture and storage for the oil sands and coal. There are however some doubts that the effort will result in any significant benefit. The current article in National Geographic has stimulated debate on the issue. But it has also brought a note that, if America does not want oil sand crude, (or makes it difficult to buy through CCS legislation) then China is ready to move in and take the oil instead. In Australia, meanwhile, a company has suspended its work on underground sequestration due to the plunging prices of permits (the problem that Europe also has).

While wandering around the various websites looking for comment on the demonstration at the Capitol Power Plant yesterday (which was a lot less dramatic that the organizers had intended I suspect, and a lot less well attended, I came on a couple of other folk that had been watching the video feed. One of them was OpenMarket who quoted a couple of interesting reports about some of the downside of moving from coal to other renewable fuels. The Reports were: M. Harvey Brenner, Ph.D., “Health Benefits of Low-Cost Energy: An Econometric Case Study,” AWMA Environmental Manager, November 2005, and Adam Z. Rose, Ph.D., and Dan Wei, “Economic Impacts of Coal Utilization and Displacement in the Continental U.S., 2015” (Penn State University, supported by a grant from CEED, July 2006). These looked at the conditions that would occur with different coal future production levels. The results were along the lines of

An econometric model was applied to a hypothetical regulatory case study, whereby U.S. coal was replaced by alternative higher-cost fuels such as natural gas for the purpose of electricity generation. The model was used to estimate the premature mortality associated with increased unemployment and reduced personal income. The adverse impacts on household income and unemployment due to the substitution of higher-cost energy sources were estimated to result in 195,000 additional premature deaths annually.

Somehow I doubt if we will hear much of those findings.

Pemex is sticking to its target of 756,000 bd from Cantarell this year, even though apparently their own figures are showing production is dropping at 7% pa. They are having some success with the Tsimin-1 exploratory well that came in with 4,400 bd of oil, while the Cali-1 well in the Burgos project is producing at 9 mcf/d.

Russia is signing energy deals with Spain that include renewable energy collaboration. This might bring the Spanish oil company Repsol into working on the Yamal fields. Given that investors have been lukewarm to the latest news of Gazprom profits this agreement, and the promise of some Shtokman gas for Spain supplied as LNG starting in 2014, may be helpful, since it may bring in Spanish investors.

And a quick note on the coal situation in Bangladesh. Apparently the Chinese company that has been working on the Barapukuria coal mine has told the authorities that if the mine does not start this week, they would pull out. The operation is tied up in compensation claims.

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

P43. Pick Points

I mentioned in Monday’s post that I have an interest in algae, and so I will put up a couple of items that caught my attention this weekend. The first deals with the possibility of using wind power to provide some of the energy that algae need to foster growth Some of the European wind farms have been up for a while, and one in Denmark, that was installed in 1990, is looking at using some of the extra power to encourage algae growth. The algae, through the generation of biofuel, would thus act as a form of “battery” for the wind. One problem, however, is to ensure biological security, since the escape of algae species into a favorable place, such as in Hawaii, can have negative results, and require costly capture and remediation. The use of algae for flue gas cleanup has inspired a number of efforts, from Israel to MIT (who use it to make hydrogen), to Missouri . There is also the blog Oilgae, which carries the MIT report on the topic.


Developers of the Shtokman project are talking about using CCS as part of the strategy for development at the site. There is anticipation that the cost of the project will decline with the poor economy. More details of the loan from China to encourage a pipeline and oil supply to that nation are now emerging. The change in investment strategy has the advantage of getting a good price now for the oil, and securing it into the future. Russia is also trying to find a way to improve the efficient use of energy, with planning for a new law on the way, and an example of how it might be done, comes from a dairy. In the United States homeowners can look at the Home Energy Rating System which compares the energy use of a house with a standard. Based on the result that you get different approaches may be needed to lower the number (a 200 means you use twice the standard). Oregon is moving to have the state provide loans to encourage upgrading of homes in a way that would make them more energy efficient. As I noted in Monday’s post, this is something that we are seeing in an increasing number of states.

St Mary Land and Exploration is drilling horizontal wells into the Woodford, and Haynesville shale and while cutting the number of rigs back to 7, from 16 at the peak of last year, one or two of the rigs will shuttle between the Haynesville, the Eagle Ford and the Marcellus shale sites. The lateral section of the well is around 3,300 ft, and with 10 slick-water fracs will use some 3,000,000 lb of resin coated sand proppant. There is some move in Pennsylvania to require that drilling records for the Marcellus be made public (including production data) every six months. Other states such as Louisiana and Wyoming post such production on Web sites. Chesapeake, who is drilling both Marcellus and Hanesville is currently getting a favorable press. With natural gas prices projected as perhaps falling as low as $2 per MMBtu due to lack of demand and overproduction, this years prospects don’t look good for the industry.

Scotland is looking for new ways to develop marine energy, the target being some 60,000 MW. The current projects are based in Orkney, and the European Marine Energy Centre. The current targets are sites around Britain and Ireland that are capable of producing more than 1,000 MW each, largely from wave and tidal energy.

The State Governors are asking Presidential help in promoting biofuels hoping to see approval, for example, of ethanol blends above 10% and as high as 30%. (This was something Dr Chu was asked about last week).

Because of the global financial problems Russia and Kazakhstan are considering slowing the development of the Karachanganak project (which is reputed to have 47 trilion cubic ft of gas).

Expanding Dr. Chu's Comments

After posting the P41 Pick Points, it was not until this morning, over a quiet cup of tea, that I could sit down and actually listen to what Dr Chu had said during his visit to Platts on Thursday. There were sufficient additional pieces of information (and the comment on OPEC was right at the end and of less significance than has been made) that I thought I would expand a little on what you can hear on the podcast. The prepared remarks, as I mentioned earlier, deal with the loan guarantee program, but the answers to questions were the more informative.

On being asked how the nation could double renewable output in 2 years, he said that wind is most mature technology and thus the most likely, solar thermal would be the next to see growth while photo-voltaics (PV) may also contribute. Numerous wind projects can be expected to go forward . He cited Bonneville Power as one who is capable of putting in lines to connect to turbines, with the system being installed within 2 years. There is Wind available in the Dakotas; and there are power plants capable of using solar thermal in the range of 100’s of Megawatts but those are the areas that he expects to get immediate funding and to meet the targets.


He does not claim that the government has all the answers, but anticipates going out into the market to find what the industry wants to bring forward, transmission isn’t there yet (maybe not until 2014).

He hasn’t reviewed the existing CCS projects yet, nor made any decisions; yes, there is FutureGen, but it needs a technical review before a decision can be made to see if it can progress. He feels that there are gains to be made in pre-combustion separation as well as post combustion separation of pollution. Oxyburn is also to be looked at. It is not a slam dunk which technology is going to prove to be the best, so he wants to carry out a suite of tests on potential solutions. 6 geological sites are going to be tested for CCS, and he wants also to look at EOR but all this has to be tested. The big money will be in capture and in sequestration, though it will be so expensive that the current investment will not go that far.

He sees power transmission as a national issue, combining renewable energy and being able to port it around the country. We have gone from local generation and use to a need to look nationally. Solar, for example, is concentrated in the Southwest. And wind also is focused. We need a national transmission system overlay. We need a discussion over the realization that this is a national issue. Yet while this is a national imperative that we go forward, we need to study this as these are complicated issues.

In regard to feeding the Strategic Petroleum Reserve (SPR) he said that the last thing we want to do is to is to have the 13 million barrels of the current commitment going into the SPR, when there is a tightening of supplies and OPEC cuts, but he is not sure if this is not already a done deal, and since there are complications to the issue – he will have to look into this. Having been dumped deep into the pool, and while he knows the technical issues, he will need to look at other aspects while he gets up to speed, and he was told this was a done deal.

What is the likelihood that the world will get the tipping point when tundra starts emitting carbon dioxide? He said that we don’t know when the tipping point when the tundra thaws, don’t know at what temperature and carbon dioxide concentration this will occur. It would, however, be prudent to stay away from that happening.

His goal is to focus DOE research and make it more results driven. It is the biggest supporter of physical sciences in the US. Many Nobel laureates have been supported by DOE. It is a primary contributor to our current prosperity, and so we cannot not do that, but must fund basic research. But at the same time there is a lot of government research that should be used and passed to the private sector. DOE is not as good at taking great research and transfer into things industry picks up. So he will be spending time trying to find out how to port discoveries over. Wealth creation was effective when Bell Lab results were transferred into industrial products, and our economic future was driven by electronics companies that believed and invested in research. Don’t have this philosophy yet in Energy, and so DOE has to fill the vacuum, National Laboratories and Research Universities will be the key. First priority is the economic recovery and the second is a green industry where US can lead.

If anyone thinks they can predict oil prices, they should be rich. For a long time he was a member of the America’s Energy Future study by the National Academy (the report should be out soon). He can’t predict oil prices, but sees higher demand and hopes they can decrease the rate of demand increase, though it will still go up, the peak of major oil companies, conventional oil production (not tar sands or deep water) is going to be soon. They will have to move to more expensive oil recovery this drives price up, cheap oil production will not increase. Price will go up in the long term, and so we must decrease consumption and use other means. Conventional oil has been increasing but it is now flat, and will have to go to more expensive sources. If we get smarter ways to get oil out it will extend oilfield life. But at some point you reach a limit.
The price of wind energy has gone down by a factor of ten and will go down further, PV is on the learning curve, and hopefully can get down a factor of 5 further, to make it practical. New technologies will come down in price = faster than more mature technologies. It is different because oil has only a finite supply. But with EOR oil may be not last 15-20 years but 50 years.

Asked about an increase in the blending cap for ethanol – he answered that the only issue is the auto industry opinion on harming engine at higher mix. You need to accept that you can’t deteriorate the engines of the present fleet, but we need to increase fraction of E85 vehicles, which means changing the fuel lines, seals etc. We can’t get to target on cellulosic – but this is a challenge, some smart work now being done, looking at bio-producing heavier fuels than ethanol. 3 bioenergy institutes have been started started, and in first 6 months altered yeast and bacteria have been sued to feed and sugars and make gasoline and diesel like fuels. These self-separate from water. These are better than ethanol therefore. Given the caliber of the scientists working on this – some of the best – suddenly the level of activity causes technology to lurch forward. He expects the work to be populated by really top people and students who no longer aspire to a life in finance but want to do science. Don’t need an ethanol pipeline.

On India he was asked how to do tech transfer of nuclear technology to India; reply - there is an understanding and that will go forward.

On how the US and China can they work together in climate change issues, he said that the key was that they do work together and mitigate carbon dioxide, increase the efficiency of their growth and the best choice of new sources of power. There are many opportunities. Building technologies, for example, provide a lot to be gained, since buildings can use 70-80% less energy thann conventional construction affords. We can now build 60% more efficient buildings and we think we can build 70-80% efficiency in ten years. China will build many new buildings so a lot of things can be done, and there are lots of chances for collaboration.

OPEC and his role and his message to them. Stable prices are very important to every country and he will do what he can to encourage stability. Major mission of DOE is to look to ourselves and what we have control over. We are the science house and he is aimed at promoting efficiency, and decreasing our use of oil. If oil is used more efficiently, particularly in personal use by a factor of two, this can have a great effect. He would argue for price stability – do we want OPEC to cut production. He needs to look into it more. No specific plan for doubling renewable power in 3 years, but there are mature renewable technologies, and he cannot divide how to get to the target but has to look at the technologies and how they can be best encouraged to develop the answer. He, personally, is big on energy efficiency in the home , and had a house in California where he paid very little for heating and nothing for air conditioning – through the efficient use of blinds.