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.

P46. Pick Points

Half-a-dozen or so stories of interest:

I watched a little of the demonstration outside the Capitol Power Plant this afternoon, in a line feed from the CapitolClimate Action site . There was not that much snow visible, just a little on the bushes, and everything was relatively peaceful. (About 7 inches fell apparently). There was some sort of march, but the video was live and without a commentator, so much of what I saw was very unscripted. Apparently some of the demonstrators came from a conference that was being held in town.

The first thing shown (at about 1:30 pm when I tuned in) was a group of demonstrators outside the CPP gates chanting, and being encouraged to do so by a man with an electronic bullhorn. The chants were along the lines of “no coal, no gas, no compromise.” You may remember from my note yesterday that the plant is fired with a mix of 65% natural gas, and 35% coal, so they obviously want to shut the plant down. How to provide for the energy needs of the Capitol and surroundings? The next chant was “Coal is over, coal is done, get your power from the sun!” Well for those not paying attention Washington is just coming out of a major snowstorm, so any solar panels would be covered with snow, as the bushes were behind the demonstrators. So sun would not be an option today – how about nuclear – no carbon dioxide – next chant “no coal, no gas, no nukes, no kidding”. I think no kidding is right, where are they going to get the power to supply heat and light to the east coast? Remember that it is very cold in the region at the moment, and there was no visible wind in the afternoon. James Hansen was there and the Congresswoman that represents DC in the House, and one of the Kennedys. I had other things to do, but it all seemed very low key in the time that I watched it. They are playing the highlights again at the website, and are promising to go back to Coal Mountain again.


Plans are moving in Iraq to restart a drilling program that will yield 60 wells a year at 5,000 barrels/day/well.

In 2008 Iraq produced 2 million b/d, which the ministry is eager to boost to 3 million b/d as soon as possible and to 4.4 million b/d within the next 4 years. Iraq wants to achieve 6 million b/d of production by 2013.

"The parties to the joint venture intend to invest a total of $400 million to enable [IOSC] to purchase and operate 12 new drilling rigs and for provision of logistical support and working capital in order to deliver state-of-the-art performance in its operations," MPC said. IOSC also wants to improve local Iraqi expertise and integrated drilling technology.

Iraq has had to redo its budget twice already, due to the falling price of oil, and thus is anxious to reinstate itself as a producer.

The transcript is out for the API telecon I participated in on Friday. The transcript can be downloaded here.

Those taking part included:
The Bear, The Absurd Report

Brian Westenhaus, New Energy and Fuel

Dave Summers, Bit Tooth Energy

Devil’s Advocate, Copious Dissent

Gail Tverberg, The Oil Drum

Geoff Styles, Energy Outlook

James Shott, Observations

Nate Hagens, The Oil Drum

Peter Carlock, OPNTALK
 (which has the transcript posted -
Stephen Rhodes, The Republican Temple who also has some video from the Capitol demonstration today.

Brian Westenhaus had a post on Friday about a new way of getting light into the photobioreactors for algae growth. Several folk had forwarded it to me for review. It is way of distributing the light that we looked at a couple of years ago but doesn’t really address a couple of the problems relating to the drop off in intensity with distance, though it helps get light to the bottom of deeper ponds. He also writes about the Petroalgae operation in Florida. This is getting closer to a target of 5,000 gallon/acre/year yield which is the target set as a break-even point for algae. (There are lots of caveats to that number). Biovenitas has more coverage over this past weekend, The potential for green energy technologies to provide jobs is becoming more of an issue and certainly when we talk of research projects it is something that is brought up in almost every discussion with potential outside partners.

OPEC is still pumping about 780,000 bd of oil above the targets they have earlier set, but are down to 25.62 mbd, which takes them to abot 81% of the targeted cuts. Venezuela would like the target to be enforced, and more cuts made to bring the price up to $70 a barrel. I think it will likely get there this summer anyway, though, as noted last week Secretary Chu is not as concerned with OPEC oil as he is with the longer-term issues of cutting energy demand and dealing with the climate issues of energy production
.
Pakistan approved a wind farm in Sindh. Power will be provided to Karachi and Hyderabad. The 50 MW wind facility may also be joined by a similar sized solar farm. Details of a wind survey around Pakistan are available.

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

P45. Pick Points

Talking with the utility companies the other week, they had noted that, while there was still a planned growth in using natural gas for new power stations, the rising cost was giving some of them second thoughts. Well on Friday Speaker Pelosi noted on her blog that she and Senator Reid had sent a letter to the Acting Architect at the Capitol, asking that the Capitol Power Plant (CPP) switch from burning both coal and natural gas to just natural gas. Turns out it is not that easy – the plant now burns 65% natural gas and 35% coal (down from 49% in 2007). There are cost, technical and political problems in making the changes, but Dr James Hansen is pressing them hard. (isn’t he still a civil servant?). But even the Guardian seems to having the odd second thought

Peter Huber and Mark Mills – in their outstanding 2005 book about energy, The Bottomless Well – made this point clear, declaring: "Economic growth marches hand in hand with increased consumption of electricity – always, everywhere, without significant exception in the annals of modern industrial history." . . . The second problem with Hansen's prospective coal ban: scale. According to the latest data from the BP Statistical Review of World Energy, the countries of the world now consume the coal equivalent of about 63.8 million barrels of oil per day. That's the energy equivalent of about 7.5 times the daily oil production of Saudi Arabia. Where will the world find a replacement for such a vast quantity of energy? And how will it pay for it, particularly now, given the worldwide recession?

Hansen doesn't offer any ideas. And frankly, aside from a huge push for increased nuclear power (a move that I favour) no one else has any reasonable ideas either.

Well there is supposed to be a march of protest tomorrow, so we will see how it goes, but the weather may snow it out. ”It's no accident that he's announced he'll be on hand to get arrested. (Hansen that is).”

Tehran looks as though it may be getting into the LNG business, with talks progressing with Total. At present LNG seems to be moving from shortage to surplus, making it tougher for those in the business to succeed. Remember that Russia has just become a supplier (though mainly to Japan) but there are markets developing in India, for example, who are looking to double deliveries this year, as the Gujarat terminal expands. It will help if the global surplus lowers price for India.

India is a gas deficit country. Power and fertiliser plants consume 70 per cent of the gas available in the country. Inadequate supply of gas forces them to operate at 50-60 per cent of capacity. At present, power plants in the country are getting 34-35 million standard cubic metres per day (mcmd) supply against the requirement of 70 mcmd.

Currently, spot LNG is trading at $8 per million British thermal units (mBtu), whereas naphtha is trading at $13 per mBtu in the spot market. In December, LNG was trading at $10 per mBtu, whereas naphtha was trading at $7.04 per mBtu.

At the same time the disputes over coal supply also seem to be coming to an end, with supplies guaranteed at least at 90% of actual supplies last year.

Meanwhile the Russians are beginning to invest more in floating nuclear power plants. Four more are to be built to bring power to the northern coast region of Siberia. Although delays are reported, the first plant is scheduled to be ready in May 2010. The region for which the plants are destined has large deposits of uranium. Elkon being reported to have about 6% of the worlds reserves. Production is planned to reach 3,000 tons by 2015. But some of that production may be needed for the upgrade of Russian nuclear forces . Don’t forget that the Miss Atom 2009 contest is coming up.

Russians are also investing in coal, with the purchase of the Bluestone Coal Corp, although the domestic industry appears to be in some trouble. Bluestone currently mines coal around Beckley, W. Va and has estimated sales of around $23 million, with 180 employees. The price was $425 million plus shares for a $4 billion deal.


Senator Lisa Murkowski of Alaska has introduced a bill to permit oil production in the Arctic National Wildlife Refuge, from directional wells that are drilled outside the refuge's borders. The state is also considering supporting renewable energy with a new line of credits.

It was only last week that the thought of a pipeline across the Sahara was floated, but it is already getting threats from a major Nigerian militant group .