Tech Talk - more on volcanoes, peak oil and slow transitions

Many news agencies are following the slow inundation of the Hawaiian town of Pahoa, as lava from Kilauea inches into the small town at the rate of around 15 ft an hour. It is a slow death to parts of the community since the lava started moving in June and the flow has travelled over 24 miles on its way to the sea. Not quite as prominent in the news is the continued outflowing of lava in Iceland where the flow from Bárðarbunga has now covered just over 25 square miles, and the threat from the outpouring of sulfur dioxide continues to move around the island as the wind patterns change. As the energy of the eruption falls, there is concern that less of this is getting into the upper atmosphere, causing higher concentrations in the lower layers of the cloud. The volcano is putting out about 35,000 tonnes a day more than all the industries in Europe. Safe concentrations are considered to be around 500micrograms/cu. m. while levels as high as 21,000 micrograms have been measured.

Figure 1. Gas cloud threat from Bárðarbunga on October 31 (Icelandic Met Office)

It is only the high winds of the Icelandic winter that dilute the gas below the threat to individuals. And yet the earthquakes in the caldera persist with events above level 5 still occurring almost daily. There were 200 yesterday, with ten being larger than magnitude 4.

Figure 2. Earthquakes in the Bárðarbunga region of Iceland in the last 48 hours. (Icelandic Met Office)

The water in the caldera is melting at an estimated rate of 2 cu. m/second with hot magma residing under the originally half-mile thick glacial cap.

While these events are generating hundreds of megawatts it is not in the form of useful energy at this point, but despite the disappearance from the headlines of the Icelandic event, it still has the potential for much greater societal impact than does that in Hawaii. But it will happen more slowly (at least until the potential eruption when the icecap is penetrated.) And sadly it is this demonstration of the short-term focus of the news media and the need for dramatic pictures that again bring me to the analogy of these events to what is happening with Peak Oil.

As noted in an earlier post, the EIA have pointed out that the current glut in oil availability and thus the fall in gas prices correlates inversely with the increase in production from Libya. Their OPEC governor has pointed out that the current global oversupply is at around 1 million barrels a day. Libya has recently produced about 800 kbd of this, and while OPEC as a whole is not worried out the imbalance (since they are projecting that global demand will rise this much over the next year), he would like to see current production curtailed by 500 kbd to get the price back over $100 a barrel.

It is this marginal supply of around half-a-million barrels a day which is now the level of volume that can transform us from having too much to not enough. Which goes back to the remarks that Charles Dickens put in the mouth of Mr. McCawber:

'My other piece of advice, Copperfield,' said Mr. Micawber, 'you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and - and in short you are for ever floored. As I am!'.

Our sixpence, it would appear, is now at around that 500 kbd. OPEC will not increase production much above current levels, in fact it is hard to see where they could anticipate being able to do so. Libya remains threatened by worsening violence, which has been approaching the El Sharara oilfield and it remains questionable as to whether they can continue to sustain production.

The other big question mark remains Iraq. How far the Kurds can increase production up through the pipeline to Turkey remains a question. They have recently announced that the new pipeline is carrying 240 kbd and if the logistics can be put in place the volume could well increase. Problems however with contractors, making the necessary field connections and the nearby conflict will likely combine to slow that progress.

If both sources of supply continue to produce, and even increase a little more than at current levels then the global surplus will still be eaten up by increased demand over the next year. The short-term drop in prices (which may well extend over the winter) will gradually disappear as the surplus reduces. And in so far as the current drop in prices discourages new investment in costly alternate places, even if only in the short term, that cannot but help OPEC as supplies tighten in the future, and that competitive oil is not in place in the market to reduce the consequent price increase.

The short-term loss therefore may well, before long, be returned in higher prices in the summer and towards the end of next year. Such a projection assumes that the recent increases in US production will slow down, and that seems to be a reasonable assumption, given the changing price structure and the lower returns on wells drilled outside the “sweet counties.” One can only drill so many wells where production is rewarding, before the land gets full.

In the short term the drop in prices will also encourage demand, helping to build back what had been a falling away from earlier OPEC projections of demand growth. It will be an interesting year, and perhaps one that will change faster than the slow but steady changes that the volcanoes are having on their local communities. But if so it may still be too slow for the media to closely follow, since many of the controlling events take place away from media attention and occur without, often, immediate visible impact.

P39. Pick Points

Half-a-dozen or so stories of interest:

China is going to need a lot of oil, and to ensure it gets it, it has just loaned the Russian oil companies Rosneft and Transneft (who runs the pipelines) $25 billion, and for this they get an annual delivery of 15 million tons of oil (300,000 bd) for 20 years. Of the sum Rosneft will get $15 billion. The first pipeline heading that way will carry up to 0.6 mbd, but needs a spur to carry the oil to China. The oil will likely come from the Vankor field in the Tyumen region of Siberia, with the pipeline running from Taishet in Siberia to Skovorodino, a town of about 10,000 people, on the border, and in Amur province. Overflying part of the route on Google Earth, it doesn’t look quite as uncivilized as the articles make out. There is a Youtube video of the town of Tynda, for example.

Despite the problems that they are having with the California budget, customers of the Southern California Gas Company are getting a 20% drop in their heating bill. The average winter bill of 75 therms per month is expected to be in the $70-80 range. However there is a drive to change the gas hot water heaters to solar heating, given that about 38% of the home power goes to heating water. Unfortunately I suspect that the $250 million price tag will be too much for the state right now, even though it would be through rebates. Oddly Government support for such a move in Australia is meeting some opposition from Greenpeace, on the odd argument that they don’t generate electricity. It was only last week that tentative agreements were signed for solar-thermal power for Southern California Edison, with Brightsource Energy building 7 plants for a total of 1,300 megawatts over the next seven years. though the first 100 MW unit, in the Mojave Desert won’t be ready until 2013. SCE states that it now gets 16% of its energy from renewables. (Though by next year the state target is 20%).

BrightSource CEO John Woolard said the 400-MW Ivanpah project will create about 1,700 full-time jobs in construction and another 3,500 jobs to last the 40-year life of the plants.

The technology uses the tower approach rather than the trough shaped collector idea used by Acciona in Nevada. Israel contrarily has just approved the connection of a photo-voltaic power station to their national grid, though it will take 4 years to install the connection.

Perhaps the money put into the stimulus package for high-speed rail might head toward maglev. China is looking to start a new project next month although there is already one system in operation in Shanghai, that uses German technology. Plans for high speed rail systems in California are being debated even though no-one knows where the stimulus money is going yet.

While recent talk has focused on a gas pipeline from Iran to Pakistan and on to India, and recent reports have been either favorable or discouraging, Bangladesh remains strapped for energy, and so there is now talk of a pipeline from Myanmar, through Bangladesh to India.. However economic reality, and the fact that coal is indigenous to many in the region is causing the countries of South Asia to seriously consider switching to coal. India, for example, is now seeing a gap of some 5.7% between available supply and demand and needed the pipelines that had been planned, since even now gas can only meet 60% of industrial demand.

There have been concerns in the past over the ability of wind turbines to operate in cold climates, but with turbines now working successfully in Alaska those days may be over. It may still take about 17 years to pay for the installation, however, on an expected life of 20-25 years. Yet with that promise there is still uncertainty over the future of wind in Canada. In the UK permission was given to install ten new wind farms around Scotland. Britain currently generates some 3 GW from wind, and these farms may add double that amount.

And the EU has just released the Market Observatory for Energy report looking at energy generation in the EU. However since the range of oil prices assumed go from $61 to $100 per barrel for oil in 2020 it may still be a little unrealistic – but I will take a look!

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

P26. Pick Points

Half-a-dozen or so stories of interest:

Former Vice-President Gore has given his support to the Administration’s Stimulus package. He supported the cap and trade process for dealing with CO2 emissions, and the need to enter the Copenhagen treaty talks, something the Europeans are also suggesting. Not everybody, however agrees. And despite the comments around the blogsphere the news that Dr Hansen’s supervisor is now skeptical of the whole Global Warming argument, is not making any waves, or even riding above them, in the MSM. Of course the darkness could also be because of power outages from the storm that has a million folk without power.

In Davos, at the World Economic Forum, the theme is also that investing in “green” energy projects will fix the economies of the world and bring us back to good times, although the need for investments in current fuel sources, such as oil, should not be forgotten as the IEA executive director pointed out. They will be needed for the new off-shore oil tracts that the Interior Department is now looking into opening up. And the story of Prime Minister Putin’s painting won’t go away. He can’t be excited by the news that after the Ukraine debacle Germany is now considering importing LNG. They are also forming an International Renewable Energy Agency to match the IEA.

Chinese energy imports were down to a growth rate of only 3.7% last year and while coal was down, oil was up. However the amount that they expected from Venezuela did not all arrive . Some of the oil sent from Venezuela is to pay off on a Chinese loan, but Venezuela is hoping that the world price will get back up to around $80 a barrel, and is trimming production.

Colorado is tightening the rules on natural gas, while Utah is committing to more investment in renewable energy. The sort of energy savings that the new Administration may have in mind by adopting energy efficiency standards may be epitomized by Glenborough LLC who saved 1.5 billion kilowatt hours. Cisco is coming out with business software to monitor and manage energy use.

Five utility companies are joining EPRI to study ways of conducting CCS as a retrofit to existing power plants. Trying to stimulate plankton to absorb CO2 doesn’t appear to work as well as hoped so there goes the idea of dumping iron particles into the sea. Which is good given the questions about its legality.

Further to the note the other day about Bangladesh moving to install surface coal mines, the government is now going to prepare a law governing compensation for those that will be displaced.

The Russian city of Arkhangelsk is thinking of changing its power station from oil to gas, as a way of saving money, but given that Gazprom is talking to Norway about possibly using some of its pipelines to supply Britain, though that may be a problem, since, according to a detailed article in Der Speigel on the Nord Stream pipeline, Russia only has 20-years of natural gas left.

For more stories go to The Energy Bulletin, or Drumbeat at The Oil Drum