P60. Pick Points

There seems to be a fair bit of chat in the blogs at the moment about the fate of the “cap and trade” legislation that has appeared in the House. It has drawn an editorial comment from the Houston Chronicle, and a column at U.S. News It is beginning to be viewed as only a first step, without likely passage this year. Kevin Drum feels that it is too weak to start with, open to abuse, and unlikely to get any stronger as it progresses through the process. On the other hand Grist is disappointed that it doesn’t deal with agricultural waste, the literal BS, which is specifically exempted. The intent is to have something to take to the Climate Change Meeting in Copenhagen in December, and the Huffington Post thinks it is better as a job creator than in dealing with climate change. At Climate Progress the feeling is that there aren’t enough votes to get it through the Senate. And Democrats from coal states are leary.

Despite the warm words for renewable energy, and the comforting thoughts of the legislature, in the real world companies out there trying to build market share are finding it tough going. Biofuel Energy is one of the latest that has to face this reality after losing $84 million in 2008, and without the needed margins between the prices of corn and ethanol, it is facing bankruptcy. The company produces some 230 million gal/year of ethanol. (15,000 bd). Renew Energy, another ethanol producer, went bankrupt in February. A calculation on relative profit has recently suggested that planting corn would yield $89 per acre, while soybeans would yield $108 per acre. Demand for corn is anticipated to exceed that which can be grown on 80 million acres this year, but the relative costs argue against planting corn after corn (as opposed to soybeans) and thus it is anticipated that less than 80 million acres will be planted. (Which will turn some of the economics around, but not favorably if you are trying to make ethanol).

Oops! The smooth relationship between Turkmenistan and Russia (er, Gazprom) seems to have just sprung a bump.

Ashgabat has expressed interest in participating in the US-supported trans-Caspian pipeline (TCP) project, which would become part of an export route to Europe that evades Russian control. But so far, Turkmen officials have made no firm commitments to the TCP route. The East-West spur is estimated to cost about $1.5 billion to build. The April 3 statement took repeated swipes at Russia, but gave no indication that Turkmen leaders were ready to embrace the US-backed TCP route. In not so subtle terms, the statement accused Russia of trying to bully Turkmenistan on energy-related issues.

It is not Gazprom’s week, since Moody has just lowered their debt rating, and with the slump in demand for natural gas, the company is talking about reducing its investment program. On the other hand it sold $350 million worth of bonds on Friday, and is now selling gas directly to Ukrainian industrial customers. However it is still expected that Turkmenistan will ultimately sign that contract with Russia.

After several months of falling numbers, the number of rigs exploring for oil and natural gas went up by 4 (to 1,043) this week, though it still fell a couple for natural gas (808 for natural gas, 224 for oil). Four wells, including three horizontals have just been completed in Illinois in what is claimed to be an innovative new layout (among other things the horizontals intersect the vertical) but the main plays continue to be in the gas shales. Even though activity in the Barnett shale, for example, has been cut 40% over last year, it still affects some 70,000 jobs, according to a recent report. Development is still going forward with the Marcellus Shale. Normally there would be some increase in demand over the summer, since about 25% of electricity is now fueled by natural gas, but with stocks high and lots of gas currently available, this may not help stop the falling gas price.

With the glut in natural gas, this may not be the best of times to note that Sakhalin finally shipped the first LNG cargo, bound for Tokyo on April 1, and (marking the change from Shell management) they toasted in vodka, not wine. The LNG market is revising some opinions about Shtokman and Norway would like to be considered as a place to build the tankers.

P54. Pick Points

So here it is the weekend, and I would usually be putting up Saturday Pick Points, and the Saturday post, with Sunday’s Tech Talk in the wings. However, since I am still wandering around Europe (tonight I am in London, but leave early in the morning for Dumfries and Burns Country) I am, instead going to take a quick peak around and do sort of an abbreviated Pick Points, looking at some half-a-dozen or so stories that are worth a quick look.

Getting around as I do involves a fair bit of travel by plane, and I’ve noticed that the planes seem to be getting smaller, and thus fuller, as the economy spins away. Of course the increased traffic might be because some travelers, can’t have a new jet of their own, though I doubt it. China is now providing its suppliers with increasing quantities of jet fuel, perhaps suggesting that while the rest of the world is cutting back , they continue to grow. Cutting back is almost the universal cry, and certainly the restaurant business has to be hurting. And I have eaten in a number of places recently where I was one of only few customers. Of course sometimes it is because, when I go to places like the Fem Sma Hus in Stockholm I show up at American dinner times not European (most of my meal I was alone in the cellar, but just before I left it became crowded). This lack of demand hurts chef employment, in NYC the restaurant trade lost more than 10,000 employees in the three months over the end of the year, nationally the drop has been more than 100,000. And with reduced waitstaff, in more popular places this can catch management out when there is an evening surge in demand. Which may “earn” you a free glass of wine as it did for me tonight in London. Sadly, however, sales of alcohol often pick up in troubled times, as they are now in Russia, while the harsher economic environment means that the smaller firms are pushed out of the trade.

Robert Rapier has noted that this is a good time to pick up alcohol – though he is talking of the ethanol variety in his most recent column at R-Squared Energy Blog: Valero Now in the Ethanol Business. As he notes VeraSun, the nations second largest ethanol manufacturer, filed for Chapter 11 at the end of October. The corporate assets are now on the block, and Valero Energy stand to pick up the seven ethanol refineries, at a quarter of the construction costs. Other ethanol companies have already filed for bankruptcy protection, and it appears Aventine may soon be in similar straits. Yet even as these sales start, the scale of the volume that ethanol will contribute, relative to the coming need is small, and while it provides, as Robert notes, an easy way to pick up a fuel that is being mandated as part of future supply, for small change to the oil companies, it is not going to be more than a contributory part to the answer. Yet, at the moment, despite that mandate, farmers are planting a greater fraction of the crop in soy beans this year, anticipating a bust in corn prices (which prophecy might be self-defeating). On the other hand if the import tariffs are reduced, as some in the Senate suggest, we may be able to import all we need. (But wasn’t there this slogan about freeing ourselves from imported fuel dependency?) Even the Wall Street Journal has weighed in against ethanol, though that also gives me the chance to make a small technical note. Unless I am doing something stupidly wrong (not unlikely) American Kindles can’t yet pick up magazines and papers in Europe (neither Sweden nor the UK). So much for my plan to save weight in my carry-on baggage by just loading the papers to it – Rabbits! Though I guess they may have other bigger troubles.

Solar panel advocates can no doubt breathe a sigh (though they said it was rather a shout) as the final Space Station panels were successfully installed. The station now has enough power to allow double the crew. Down on Earth the Administration is making its first Federal loan guarantee for alternative energy. The guarantee is for $535 million and will help construct a PV facility that can generate panels to produce up to 500 MW per year. The panels are designed for use on rooftops. The world’s solar PV installations are stated to have reached a combined total of almost 6 GW by the end of last year with Europe getting 82% of the business to date. (The ranking by country is Spain, Germany, USA, Korea, Italy and Japan). Sales are thus on a positive upward trend, with DuPont estimating a trebling of sales by 2012. First Solar have also just announced that they have now produced 1 GW of their solar modules, so with manufacture gearing up, all we need now is the market growth.

The other major renewable, wind power, is also gaining market, with a new effort to put turbines into South Africa. The country, as you may remember, has had problems with suppling power, not only for its own needs, but that of its neighbors. The first 30 MW farm is not scheduled until 2011, which won’t help the intervening shortages. It will, however, quadruple capacity. Eskom – the main SA power provider needs a rate increase, but is having trouble getting its act together, and having a power failure at a rally to improve their public posture sure doesn’t help. It is frustrating enough to Botswana, who got most of their power from SA, that they have started seeing pink elephants. (Would I lie to you ?). Of course it’s not just the South Africans that can run into infighting over turf relative to wind power, though the new Interior Secretary promises to get it stopped.

And finally (as the clock kicks over here in London) it is 4 years ago that Kyle Saunders and I first posted our collaborative effort that was, and is, The Oil Drum. I have posted a short history of the site, over there, and repeat the very best wishes that I have for the site. It has filled a valuable need, and that will not diminish in the months and years ahead, and so my wish that the site “Live long, and Prosper.”

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