Tech Talk - Fast destruction and slow reconstruction

Underlying many of the projections of future energy supply that are now being made there are, as mentioned earlier, a lot of assumptions that are beginning to appear more questionable as time passes. Much of the concern has to focus on the instability in the Middle East and North African nations (MENA) that are now increasingly unsettled by civil conflict. While optimism in many reviews anticipates that the turmoil will decline and nations will return to pre-conflict levels or higher, particularly in the case of Iraq, unfortunately this conflicts with much of what we have learned from recent history. Sadly there is also the history of Gazprom, which now also suggests that rosy visions of the future are only that, and what is coming is likely to be much grimmer.

Considering first Libya, once the infrastructure of an oilfield and its links to the outside world, and the operators that run it have been destroyed, seriously damaged or dissuaded from being there, then, particularly where conflict continues over time, restoration of pre-conflict volumes can take more than a decade. Once combatants become embittered by the realities of civil war, so their willingness to subsume the hatreds and other burdens brought on by loss becomes more difficult to engage, and conflict drags on with its continued losses for society. Libya is a sad example of how rapidly production can collapse.

Figure 1. Libyan oil production pre-current conflict (SEPM strata )

The country has now reached as low a rate of daily production (around 240 kbd) as it has seen in recent years.

Figure 2. Recent Libyan oil production (from OPEC MOMR)

For some time the powers that be have continued to hope and even project that Libyan production can return to levels of around a million bd, but those hopes seem dubious at best.

Just a week ago the National Oil Corporation announced that it was lifting the “Force Majeure” designation for the Oil Harbor at Zuetina. The first tanker was to load on Friday. According to a Bloomberg report the Ottoman Tenacity was to pick up a cargo of 600,000 barrels from Zuetina and carry it to Europe. The ship was reported to be loading on Friday and is currently just off Cagliari in Sardinia.

Figure 3. Location of the Ottoman Tenacity on Wed May 7th (Marine Traffic )

A second ship was supposedly loading up to 850,000 barrels at Haringa destined for France. Yet according to Marine Traffic it is now (Wednesday) off the coast of Tunisia, and does not, in the end, appear to have revisited Haringa.

The situation in Libya is not really stable, despite the hopes. On Sunday the Parliament swore in a new Prime Minister but his support is not strong, and factions continue to challenge his election. Attacks on the military are also on the increase. Meanwhile the blockade of the Sharara oilfield continues. It is hard to see oil production increasing much above the current levels, despite the optimism.

Yet if this effectively has removed a million bd from the global market, where can this be made up? In the short term Saudi Arabia increased production to cover the shortfall, and is still producing around 9.7 mbd. OPEC production overall remains at around 30 mbd, and is projected to remain at this level over the year.

OPEC notes that the Former Soviet Union is expected to increase production by around 200,000 bd this year, of which almost half will come from Russia itself, but OPEC are careful to include a word of caution in their predictions of Russian output.

The risk to Russia’s supply forecast remains high on technical, political and natural decline grounds.

It is the increasing political risks associated with Russian production, and the supply of that fuel to Europe that are perhaps of most concern. An article in Der Speigel points out that the Russian grip on German fuel supplies is only increasing. One of the Russian oligarchs has just bought one of the German oil and gas production companies for $7.1 billion, and now controls a fifth of German natural gas production and a quarter of its oil production. Another fifth of the German natural gas market, provided by Wingas, is also now Russian as Gazprom bought the company, and its distribution network, in a sale to be finalized this summer. And while Europe is seeing more LNG receiving facilities being constructed there is still a global shortage of export facilities to match that demand. As a result current facilities are significantly under-utilized.

Gazprom has, in the past, shown that it can, when necessary, play hard ball to ensure that it owns and controls the market for natural gas (just ask BP or Turkmenistan), and with the demise of the Nabucco pipeline is in increasing control of natural gas supplies into Europe. That condition cannot change in the short term, LNG facilities take years to plan, permit and construct, and thus the control which Russia exerts over Europe through this grip on the various supply pipelines is likely to continue to influence European opinion and, more realistically, actions in the next few years.

What this all means for the future of Ukraine is rather unfortunate – regrettably it is not clear that Russian ambition will end there and one would suspect that, given the limitations in response to the current and earlier (Georgia) Russian activity, that it will not. How this will affect overall oil and natural gas supply is unclear. OPEC concerns over future Russian production levels appear justified, especially since future developments in Russia will require increasing levels of capital, which might instead be directed at supporting Russian foreign policies – reducing overall volumes available, and more particularly the volumes that Europe has come to depend on. It could make for a couple of interesting years, since there are few alternatives that can be developed within that time frame. And certainly there is, at present, little will to make the capital investments that might bring them about.

Sadly history suggests that the outcome will not be a good one, there are few precedents that would show how one might get out of the increasing messes caused by political instability.

OGPSS - Cutting back on supply in the presence of optimism

We have reached, I would suppose, a period of complacency in the perception of the coming of Peak Oil. We are in a period where, as recent posts have shown, the promises of bountiful supply are built on increasingly tenuous propositions. Unfortunately the evolving story of the mess that we are heading into is at a point where the critical aspects of the problem rate minor paragraphs in articles that largely talk about something else. And the potential of the fossil fuels that lie within shale have commentators drooling over the benefits that will come from this abundant resource. Unfortunately within this euphoria there are sufficient concerns that need airing, since, overall, the situation has not changed that much since the Hirsch Report was published, just over eight years ago.

One of the points that was made in that report was that it would take some twenty years for new technologies to mitigate the foreseen shortages of liquid fossil fuels, made when gasoline prices averaged some $2 a gallon. Driven by concerns over climate change, there has been a significant effort to find alternate fuel options that can provide a renewable option. And the hopes for these producers lead to predictions of a different future.

The British Department of Energy and Climate Change (DECC) has just released a report on the future of coal-fired power plants in Germany, Spain and the Netherlands. It notes that, although Germany will open more coal-fired power plants this year than at any time within the past twenty years, the future for coal is not that promising. In rough numbers Germany has a peak demand of 85 GW of electricity with coal and lignite capacity of around 47.6 GW in 2011. From then until 2015 an additional 10.7 GW of coal-fired plant will come on line. The DECC report notes that while an additional 2.7 GW of plant are in development they have not advanced and, it is suggested, they will likely be cancelled. Some 22 coal-fired projects have been cancelled, and four postponed in recent years. New plant does not spring, like corn, fresh out of the ground within months of planting. Rather there are years of effort, and millions of investment, before power starts to flow. The report brings these views to the following:

We conclude that further new projects to build coal-fired generation in Germany, the Netherlands, and Spain are all very unlikely.

The three major oil companies each had different technologies on which they hung their hats to ease any fears of the future – including the widespread development of either methane hydrates of the oil shales of Colorado. (Neither of which can be realistically expected to come to pass in the next twenty years). The British National Grid in their view of the future seems to put is faith more in the widespread use of high-efficiency heat pumps.


Figure 1. Projected growth of heat pumps in the UK, under three future scenarios (National Grid)

The also anticipate considerable growth in future sales of electric vehicles, though admitting that their earlier projections for these numbers were overly optimistic.


Figure 2. Projected growth in electric vehicle usage in the UK (National Grid)

As a result they anticipate significant reduction in the needs for fossil fuels, although the least optimistic of the scenarios (the Slow Progress one) means that:

In the Slow Progression scenario developments in renewable and low carbon energy are comparatively slow, and the renewable energy target for 2020 is not met until some time between 2020 and 2025. The carbon reduction target for 2020 is achieved but not the indicative target for 2030.

The concern with these optimistic projections, is that it also impacts the investment strategies of those who will need to supply those fuels in the future. Just as it takes time and money to build a power station, so it also takes time to permit and build a coal mine, or an oil or gas well, and the infrastructure to support it.

The current situation in the United States has proponents of the natural gas boom urging the development of export terminals to ship LNG to a global market at a very competitive price. By last December there were plans for a dozen such terminals in the works.


Figure 3. Proposed new LNG Export terminals in the United States (Oil and Gas Journal)

This additional supply, and the likely impact of cheaper natural gas into the European market, has already caused Gazprom to rethink its strategy for natural gas development over the next few years.

The major Russian current development is taking place in the Yamal Peninsula, where the Bovanenkovo field, which came on stream last October had been projected to yield 4 Tcf by 2017, increasing 5 Tcf in the out years. Other adjacent fields, Kharasaveyskoye, Kruzensternskoye, Tambey and Nonoportskoye, were scheduled to follow in order to meet anticipated demand.

But those plans are now being scaled back. Russia has already lost some of their Chinese natural gas market to Turkmenistan, and now it can see that the US might take some of the European market. It cost $41 billion to develop Bovanenkovo, which made it “one of the most expensive industrial projects in the world.” Gazprom is cutting production by to around 83% of capacity this year, and expects it may have to go lower. The natural follow-on to this will be a slowing of investment and development in Yamal, which also produces oil.

At present Russia is closing in on a record post-Soviet oil production () reaching a level of 10.49 mbd (the Soviet peak was 11.48 mbd in 1987). Rembrandt recently noted that it is going to take a significant and ongoing investment in order to have any hope of sustaining those numbers.

My concern is that, in the current Western euphoria, those who must invest to build the alternative infrastructure that will provide sufficient fuel, if all the current plans and projections for alternative supplies and conservation fail, will not b motivated to make those investments in a timely manner. If they do not, or have not, then we will still need the 20-years that Robert Hirsch and his committee projected, when we run out of that time. (That clock is ticking). Unfortunately those who, like Cassandra, sing this song are less likely to be heard in this interval.

OGPSS - Russian natural gas production

It has been bitterly cold in parts of Europe over the past few weeks, and this has had an impact on power with Russia seeing the highest demand yet for electricity at 156.96 Gigawatts, while, at the same time, having to reduce the volumes of natural gas that it is supplying to Europe. To put the Russian power level in perspective, while there has been an increase in power generated from natural gas in the United States the capacity to generate more than 1,000 GW. still relies considerably on coal and nuclear power although renewable sources are becoming more prominent.

Sources of Electrical Power in the United States (EIA)

The above plot, however, shows capacity rather than actual contribution, and I am grateful to Gail who took the time to develop a plot of actual use, which shows how the different sources actually contribute. I am putting in both since each addresses a different point in comparison with Russian production.

U.S. Electricity as supplied, by source (Gail Tverberg)

In contrast to the US, in Russia some 56.2% of the electrical energy comes from natural gas, oil produces some 18.3% coal 14.4% nuclear power is 5.3% and hydropower is at 5.6%. This high demand for natural gas, is compounded by the sales which Russia makes to Europe where it provides about 25% of the market supply, down from the 27% levels of a couple of years ago. And Gazprom is marketing its product further to India (through LNG sales) as well as to China, where it will now be in competition with natural gas being piped from Turkmenistan (which used to have Gazprom as its only customer).

Russian natural gas production, consumption and exports (Energy Export Databrowser )

Natural gas is more often supplied on demand, rather than from large storage facilities, and so when local demand in Russia recently rose due to the severe cold spell, there was less available for Europe, and supply fell, for example, by 30% in Italy, though having been that route before, European nations have learned to keep some reserve available for these situations. Gazprom has also seen the need for more storage and now plans on investing some 2-300 million euros to double the volume available in gas reservoirs around Europe. During the peak cold spell Europe was using around 17 bcf per day up 20% from the average demand during 2011.

The problems that Gazprom faces are two-fold, the first is to produce the gas, and then the second is to ensure that the customer has enough available when needed. And at the moment (to address the latter problem first) one of the critical issues is that the gas must pass through Ukraine.

Major routes of gas pipelines feeding Europe from West Siberia (RIANovosti)

Unfortunately Ukraine and Russia have an uncomfortable history in regard to the passage of natural gas through the country, and this year, because of the cold, is no different, with disputes over volumes contracted for and used still continuing. However the Nord Stream pipeline has now completed the first pipeline to Germany, bypassing Ukraine, with the second lacking only one section, which will be installed this year. The twin pipelines will carry the equivalent of 5.3 bcf/day into Lubmin in Northern Germany, with delivery from Portovaya Bay in Russia, already flowing through the first pipeline, starting last November 8th.

Nord Stream pipeline path through the Baltic, showing remaining construction (Nord-Stream )

Landfall operations in Germany (Nord-stream November 2011 newsletter)

On the Russian end of the pipeline, it connects into the Gryazovets-Vyborg pipeline which brings the gas from the producing fields.

The Gryazovets-Vyborg pipeline bringing natural gas from Western Siberia (Gazprom)


The gas that is coming through the pipeline comes from Novy Urengoy in Western Siberia, which is where, at present, some 74% of Russian natural gas is being produced. This is where the Yuzhno-Russkoye gas field is located, with current estimated reserves of 21 Tcf of natural gas. The gas is currently coming from some 142 wells spread over an area of 424 sq miles, with the field producing 2.6 bcf a day. It takes 10 days for the gas to make the trip. The gas field came on line in 2007.

Fields feeding into the supply pipeline to Germany (Gazprom)

It should be noted that the pipelines going up into the Yamal Pensinsula are still being developed and the gas fields of that region are not therefore fully available, though drilling is taking place.

Drilling at 70deg00’01.85” N 70deg00’02.05”E (kim46 at Google Earth)

There are a number of fields in the Peninsula, including Bovanenkovo, that are still to be fully developed, and which will provide some of the reserves that Russia will need as their current main producing fields start to run down. There has been some considerable progress, however, since the last time that I tried to find evidence of activity in the field.

It is one of 11 natural gas and 15 oil and gas condensate fields in the Peninsula, with aggregate reserves, for just the three largest fields (Bovanenkovo, Kharasavey and Novoportovskoye) of 208 Tcf of natural gas, 730 million barrels of condensate, and 1.6 billion barrels of oil. At present the first 1.5 bcf/day production is scheduled to begin operation in the 3rd quarter of this year. A railroad is being connected into the region in order to maintain supplies and provide equipment for further construction.

Current Gas flaring at 71deg03’32.30” N 67deg25’23.41 E (DDS7 at Google Earth)

New construction at Bovanenkovo (Gazprom)

With the growing prospects of additional natural gas from Yamal, and with further facilities being built in Europe to allow storage to get through inclement weather, it does appear that Russia will be able to supply Western Europe with natural gas for at least the next 30-years that they are predicting – although should demand rise, (as it well might with the closure of nuclear and coal-fired power stations) then the reserves will be drawn down considerably faster. At present the current storage has only been run down by about 48% of that available according to Gas Infrastructure Europe.

Natural gas stored in the UK (on 19 Feb 2012) (Gas Infrastructure Europe) (as an example).

This is while Russia is still flaring considerable volumes of natural gas that cannot be otherwise used. And while the trend is going down (by about 15%) it still has a way to go. There just aren’t that many folk in Siberia that appreciate the slightly warmer air that is being generated. And while that part of the news is good, the failure to date of the Polish trials to find commercial reserves of natural gas in domestic shale deposits may mean that Gazprom’s market will continue, since the presence of as much as 187 Tcf of natural gas in the Polish shales does not do anyone any good if it cannot be viably recovered.

Global gas flaring volumes (The World Bank)

Political will amidst climate uncertainty

I don’t expect that there will be many tsunamis in Germany over the next century, nor, apart from the occasional man-made earthquakes that can come from potash mining, do I expect the country to suffer any major damage from an earthquake. Seriously, I rather suspect that the German government has the same view of the future. But that has not stopped them from deciding to close all nuclear power stations within the next eleven years, using the recent events in Japan as one of the justifying reasons.

Germany gets about 25% of its current energy supply from nuclear power, and about 17% comes from the sustainable sources such as solar and wind. But the problem, in part, is that these become unreliable sources in winter, with lower wind speeds and shorter, darker days. Yet, without a balance sheet having been presented that will show where the lost power will come from, the decision has been made, on apparently political grounds, that nuclear must go.

There comes a time in the affairs of Government when a commitment is made to a policy that makes it virtually impossible for those in charge to later reverse the decision. This decision by the German government is one such probably irrevocable decision, and it seems that the step that the British Government recently made in their commitment to a “green” anti-carbon future for the UK, is another.

A limit on the total amount of greenhouse gases to be emitted by the UK between 2023 to 2027 has been proposed to cut Britain’s emissions by 50% from 1990 levels.

The ultimate goal is to get the emissions down 80% by 2050. The evidence that these “green” technologies will support existing levels of power and production is becoming more debatable. Thus the powers-that-be anticipate that there should also be a cut in energy demand from the general populace. In the case of Germany this target is about 10% of their current consumption.

The commitments to turn away from existing technologies with the capacity to supply energy at an acceptable financial price, and instead to rely on wind and solar, technologies that are not as consistent in providing power when needed, comes at a time when there has been enough experience with sustainable power that the advantages and disadvantages are becoming more evident. Though, before discussing that I should explain that, writing as I do about coming shortages of oil, the reality is that the world is going to need whatever energy supplies it can find in the coming years and that includes energy from wind, solar, geothermal and hydro.

But there is a growing question as to the real practicality of some of the “green” solutions being proposed, and also questions on their cost. One such, for example is the book “The False Promise of Green Energy”. This epitomizes a growing body of criticism that takes a hard look at the costs and energy actually produced by the “green revolution” and concludes that they not nearly as beneficial in reality as they have been made out to be. I don’t agree with a lot of the philosophy that drives the Foundation that published the study, leaving the energy future to the marketplace to find answers to me indicates a failure to understand the size of the problem that is developing. Nevertheless the book does raise some legitimate concerns over the drive to commit to the “energy solution of the day.” For a while at the end of the last Administration in the United States, cellulosic ethanol was going to be that White Knight. Mandates were to provide a market to justify the investment in large plants required to have any increment on national supply. Well it turns out that those getting the money were more optimistic than realistic, and those targets have been scaled back.

Today the solution of choice still remains wind power. The cost has come down, and particularly on-shore, the reliability of the plant has gone up. Unfortunately the other partner in the success of the technology is a natural one, and the consistency and strength of the wind to drive the wind turbines has not been as good. The John Muir Trust examined the record,, and reported last January,

The research found over 395 days, the wind farms could have produced 17,586,000 MW hours of energy running at full capacity. In reality, 3,881,900MW hours was generated, equivalent to 22.07 per cent.

And over the past two years, wind generation across the sites fell below 20MW on 123 separate days for a combined duration of 25 days. For a total of nine days, output dipped below 10MW, barely enough power to boil 3,300 household kettles.

More recently the Telegraph has noted

The Coalition has drawn up plans to open more wind farms in an effort to meet Britain’s European Union target of providing 15 per cent of its energy from renewable sources by 2020.More than 3,600 turbines are expected to be installed in offshore wind farms over the next nine years.

But statistics suggest that the winds that sweep across the British Isles may be weakening. Last year, wind speeds over the UK averaged 7.8 knots (8.9mph), a fall of 20 per cent on 2008, and well below the mean for this century, which stands at 9.1 knots (10.5mph).

If the current power systems (often nuclear and coal) are to be done away with, as the current European Governments seem set on achieving, then they should, were they morally responsible, also indicate the sources, costs, power and true likelihood of being able to replace existing power plants with a viable alternative. Those answers are often given in general terms and rely on projections (such as, for example, that wind will produce 30% of nameplate capacity) that are now being shown to be wrong. This seems a more certain way of destroying the future of our children than the threat of carbon dioxide level rise, though one would have to look hard to find many that recognize this reality. Politicians have grasped an approach and now use the threat of climate change to justify policies that cannot be easily undone.

The same is equally true about the opinions of the validity of the models that are used to justify these decisions. Changes in the reliability of the models, as data is acquired and time passes are often largely not to be admitted. For example, one of the more prevalent aspects of the global warming argument is that the accelerating rise in sea level is going to lead to the swamping of land around the globe well within this century. That later prediction has largely been based on models, but a series of buoys was placed around the world to give a more accurate assessment of the rise in sea-level. As this data has become more widely available and over a longer time, so it has been possible to discern the trend.

Sea level change over the past eighteen years (U of Colorado )

If one looks at the second half of the plot (green and orange) it is possible to conclude that, if anything , the rate of sea level rise is slowing down. This despite the increased quantities of carbon dioxide that have been added to the atmosphere.

That view of this data by Dr James Hansen, the “guru” of the AGW world, has now been announced through the Goddard Institute for Space Science (GISS) in the form of a paper “Earth’s Energy Imbalance and Implications” . And while it lays the blame on the slow-down on volcanic activity and a solar minimum, nevertheless it recognizes the phenomenon

Although the accuracy of ocean heat uptake in the pre-Argo era is inherently limited, it is clear that heat uptake in the Argo era is smaller than it was during the 5-10 years preceding full Argo deployment, as discussed by Trenberth (2009, 2010) and Trenberth and Fasullo (2010).

Yet with this evidence of a stability in the ocean temperature, the IEA has just announced a major increase in CO2 emissions, which leads them to predict that the temperatures will rise, around the globe, by 4 deg C by 2010, and that many of us will drown.

It would seem that even as the science becomes less certain, so the politicians who cling to it, become more determined to implement an answer that may no longer be correct.

Incidentally I was down in Florida last week, and one of those I met with was bemoaning that the oranges that used to be grown in Northern Florida (Jacksonville) can now only be grown economically further south in the state due to the colder climates of recent years, ah!

Why we aren't buying a new car (yet)

I have mentioned earlier this year that we are thinking of buying a car. In fact we are planning on replacing an eleven-year old vehicle with a new hybrid. Last year we bought, for my use, a Camry Hybrid, with which I have been quite happy, both in around the town driving and in trips from Missouri to Maine. It introduced me to the joys of Hypermiling. Motivated by a post from Robert Rapier, this time we decided to look into the Ford Fusion for the Actress. It purportedly gets better mileage that the Camry (so that we could get to Maine in 2 tanks of gas, rather than 3), and promised many of the features that we like in the Camry. We aren’t however there yet, and this is perhaps a message to the Administration about what they are doing to the car buying public.

When we started the process we recognized that there is a difference in price between the pure gasoline model (starts at $19,270) and the Hybrid (starts at $27,270). Some, but not all, of that can be made up by the better mileage (from 34 to 47 mpg on the highway). But if we drive the car for 100,000 miles, even if gas gets up to $5 a gallon (on average over that life) we would only save around $4,000 on gas. (I actually believe that, with the likely impact of Peak Oil being felt within a couple of years the $5 price is optimistic, but I might be accused of padding the argument if I went much higher). There is, however an additional incentive. Because this is a new hybrid, there is a tax incentive or credit, if one buys the Fusion. At the moment it is $3,400. Which, given that there are some other benefits, brings the price of the two models to being sensibly the same. So we get on the phone and chat with a local dealer, or two. Ah, but here is the rub; that tax credit expires at the end of March. Yup! That’s right, tomorrow night! After that, the tax credit drops to $1,700, and in October it drops further, to $850.


So we re-call our closest Ford dealer, a very nice lady, and trying to be very helpful – but she hadn’t heard of the tax credit. (A little odd, but never mind). And so we asked about seeing one. She did some checking on the Internet and there is apparently one in Kansas City, and maybe another in Indiana, but those are the closest two, and one is sold. She will get back to us as soon as she has a model that we can test drive, but has no idea when this will be. So there goes $1,700 through the window – and I suspect that there are several folks in the MidWest, who, like us, never even got a look-in at that particular incentive.

But wait, in today’s New York Times, there is a report of President Obama’s ultimatum to the car makers, in which appears the following paragraph

Other salient features of the latest plan to pull Detroit out of its decades-long skid include a tax break, being started by the Internal Revenue Service at once, for auto purchases made between Feb. 16 and the end of 2009; incentives for people to turn in older, less fuel-efficient vehicles and buy more energy-efficient cars, and government-backed warrants to assure customers that they have nothing to fear by buying a car from G.M. or Chrysler.

The concept of encouraging people to buy more fuel-efficient cars, which has been tried with considerable success in Europe, will require the cooperation of Congress. Mr. Obama said he would work with lawmakers to identify portions of the recently enacted multibillion-dollar stimulus package that could be trimmed to finance the purchase-incentive idea — and make it effective at once.

I commented favorably when I first heard of this as a means of improving German car sales, that Chancellor Merkel had introduced. And noted that Russia had also adopted the idea. In Germany, in February, it spurred a 21% sales increase (y-o-y), while U.S. sales fell 41%. So it sounds as though it is a good idea.

The only thing is, as we sit here waiting, is that we don’t know what the new plan is going to be, and when it is going to be implemented. So, in the meanwhile, we won’t be buying that car after all. And I suspect, as word gets out, that we won’t be the only ones. So if the Administration and Congress want a hint, they might decide one way or another what is going to happen with this, since if it is at the level of the European deal (2,500 euros or $3,284) then it will be worth the wait. Particularly if we can also get the hybrid credit. But until they decide, we won’t.
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P48. Pick Points

Half-a-dozen or so stories of interest:

There has been considerable debate about fossil fuel producers being given tax breaks to encourage production. Treasury Secretary Geithner has suggested that those days should be over, since the companies contribute to global warming. It is perhaps an indication of things to come.

"We don't believe it makes sense to significantly subsidize the production and use of sources of energy (like oil and gas) that are dramatically going to add to our climate change (problem). We don't think that's good economic policy and we think changing those incentives is good for the country," Geithner told the Senate Finance Committee at a hearing on the White House's proposed budget for the 2010 spending year.

I suspect the days of being able to separate the debates on peak oil and climate change may be coming to an end. And yet, at the same time he spoke of the need to reduce the national dependence on foreign oil. The proposed budget would also charge $4 per acre for leases in the Gulf that are nonproducing. But the core proposal is to raise money from the cap-and-trade system that could be used to help pay for the middle class tax cut. The apparent rate for carbon dioxide production that is being bruited about is $20 a ton.

German Chancellor Merkel has said that the Nabucco gas pipeline should not be subsidized by public money. She sees the problem as being one of getting enough gas to supply the pipe, rather than raising the cash, since she anticipates enough private investment.. Germany has long been suspicious of the pipeline. Former Chancellor Schroeder, who is on the Board of the Nordstream pipeline to bring Russian gas to Germany, (as well as the TNK-BP Board) was today in Yugra, visiting the Kamennoe field, where TNK-BP get 70% of their production (40 million tons in 2008 or roughly 800,000 bd). The ex-Chancellor noted that it was one of the most modern fields he had seen, despite the economic conditions they hope to hold production at current levels this year. Italy meanwhile is calling for a high-level meeting with Turkey and Azerbaijan to discuss getting gas from the Shah Deniz field. This is some of the gas that might end up in the Nabucco pipeline.

On a slightly worrisome note, there was an interview with Kate Watters of Crude Accountability about Turkmenistan’s oil production. Worrisome since it has been through ecological concerns that Eastern European governments have sought control of Western investments. And there are areas where concerns are now being raised

Unfortunately, we have seen serious problems with IFI-financed projects in the Caspian region to date. The Karachaganak Field in Kazakhstan is one example where a recent audit by the IFC's own compliance mechanism found it to be out of compliance with numerous air monitoring requirements. Numerous complaints have been filed against the EBRD and IFC for their investments in the Baku-Tbilisi-Ceyhan pipeline, and we have grave concerns about the environmental impacts of EBRD financing at the Bautino Port in Aktau, Kazakhstan, which services the Kashagan field. Among other concerns at Kashagan are threats to the habitat of the Caspian seal.

Completion operations are underway on a well to test multiple prospective intervals in theHaynesville shale. The first fracture stimulated a fourteen-foot interval with 78,000 pounds of proppant. This zone is currently testing at approximately 400 thousand cubic feet per day (kcfd). The Company plans to test this first stage for three to four additional weeks before testing additional intervals. (Note these are vertical wells in the Haynesville gas shale).

One of the big targets for the stimulus package is to improve the national electricity grid, and its ability to distribute power. There are some growing concerns that the investment alone might not be enough. One problem is a recent court ruling said that states could over-rule the Federal Energy Regulatory Commission regarding putting these lines in place. Another is that there are not yet enough standards established for the new grid components, although with encouragement these could be developed relatively quickly. Standards are needed, since there are a number of competing products, for example in the smart electricity meters that are used to optimize domestic electricity use, and legislation may end up favoring one over others.

The TVA is spending over $1 million a day in cleaning up the coal ash spill in Tennessee, with the ultimate bill being expected to be in the $500 - $800 million range.

The Department of Energy is already starting to post some of the steps they are taking to spending their portion of the stimulus package. The initial breakdown into ten overarching programs is first defined and then the subdivisions are broken down into the sub-divisions, each with their own web page. These ultimately lead to the Funding Opportunity Announcements, two of which came out today, as an example:

The first FOA offers $35 million for component research, development, and analysis. The funding will support 20 to 30 projects to develop advanced technologies that will address important aspects of creating, managing, and using engineered geothermal reservoirs. The second FOA offers $49 million to support 5-10 domestic EGS demonstration projects. DOE seeks projects in a variety of geologic formations that will quantitatively demonstrate and validate reservoir creation techniques that sustain sufficient fluid flow and heat extraction rates for 5-7 years and produce at least 5 megawatts of electricity.

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

P42. Pick Points

Half-a-dozen or so stories of interest:

Back in March Switzerland signed a deal with Iran for a 25-year supply of natural gas it appears that this will bring a fourth gas corridor though Turkey, that will provide an additional connection to Europe, and it remains under criticism. Iran sees it as the start of a new relationship with Europe, and a possible model for others. The gas will come from Assalouyeh and require a new pipeline that will be built by the Turks. Germany has taken the hint, and Gerhard Schroeder is now in Tehran to see what sort of a deal they can cut. The pipeline will also provide a pathway for Turkmenistan gas to get into Europe without going through Russia. Iran, meanwhile still considers the discussions ongoing with Bahrein, even though the latter cut them off when some Iranians claimed the kingdom belonged to them. Iran is discounting those statements.

Russia, meanwhile has apparently not been sending the agreed amount of natural gas to Poland. So far it has only got 75% of the agreed amount, and now Gazprom wants a new deal. The Council on Foreign Relations has just released a special report on Eurasian Energy Security that calls, among other things for a better network of interconnections and integrating Russia more into the energy picture in Western Europe. It also calls for a common regulatory framework. Rune’s work on whether the UK will get through the winter without problems, suggests it will be close.

Iceland is looking to exploit its Geothermal power in the face of major financial problems. Of the three natural resources the country has, fish, hydro and geothermal, the first two are in some trouble, and with an increasing amount of geothermal due to come on line in the next few years all they need are investors. For those in the US looking at using geothermal, the more likely domestic source will be ground-source heat pumps, and the cap of $2,000 for a tax credit which would otherwise be 30% of the cost, has been removed. In an earlier post at TOD I heard that the going price was in the $20,000 to $30,000 range, and so this is a significant change (but not enough to justify my doing it yet).

The numbers for oil production from Mexico, of which I have written in an earlier post, are growing worse quite quickly. Country production fell 9.2% in January , with Cantarell now down to 772,000 bd. Pemex claim they can keep it to an average of 700,000 bd this year, but this may be doubtful, and will hurt exports. That did not help oil and gas futures (the latter at $4 per million btu). There is a new documentary on the oil situation now out called Blind Spot which has got a favorable review at TOD but since they were out of copies when I tried to order one, it will be a wee while before I can do a review.

Last week China was tying up loans with Russia to ensure long-term delivery, and then with Brazil. This week it is Australia’s turn with Exxon Mobil signing a long term agreement for LNG from the Gorgon project that will send 2 million tons a year of gas north for 20-25 years. Projections for the LNG plants being put into Gladstone in Australia have slipped from 2011 to 2012 for the first LNG plant, which will liquefy coalbed methane, and the customer has not been defined. (Though as I noted last week I wouldn’t be surprised if they had a South Asian accent).

The current low prices for energy, taken with flooding from the fire-fighting last year, means that the historic Barentsburg coal mine in Norway may not reopen.

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