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Obama’s Climate Plan Is Leaking Methane

The Environmental Protection Agency’s new regulations aimed at reducing carbon emissions by 30 percent will no doubt lead to a cleaner economy. But the road there will be paved with methane. 

By requiring reductions in the energy intensity per megawatt-hour of electricity generation, utilities will have the ability to choose from an array of options for how to meet the targets. 

Energy efficiency will likely be the first choice. Renewable energy will certainly play a big part, as well. 

But one of the major ways utilities will comply with EPA rules is by fuel switching from coal to natural gas. By the EPA’s own estimate, coal generation will decline by 20 percent to 22 percent by 2020. That will create an opening for natural gas, which could rise by up to 45 percent, jumping from 22 billion cubic feet per day to 32 bcf/d. 

The Obama administration has bet its climate legacy on this trend, which was already underway before the EPA regulations. This is why the administration chose 2005 as a baseline, when emissions were near a peak. 2005 predated the shale gas revolution, which led to significant reductions in carbon dioxide emissions as cheap natural gas displaced coal. By 2013, the U.S. had already achieved about a 10 percent reduction in emissions since 2005 – meaning we are already well on our way to the 2030 goal. 

methane 

Since natural gas burns much cleaner than coal, producing about half as much carbon dioxide, making the switch from coal to gas can go a long way to achieving the rest of the remaining reductions, the administration seems to be thinking. 

The big problem is that we don’t know what’s happening with methane emissions. Natural gas, which is essentially methane (CH4), may burn cleaner than coal, but what happens when it isn’t burned? As a greenhouse gas, methane emitted into the atmosphere is more than 20 times as potent as carbon dioxide over a 100-year period. 

Natural gas production leaks methane along its entire supply chain – from drilling to storing, processing to distributing. The EPA estimates that methane emissions have actually declined over the past 20 years as technology has improved. And this needs to be true for the EPA’s assumptions to work out with its climate plan. 

The problem is that many scientists dispute those claims. Robert Howarth of Cornell University believes that methane leakage could be much higher than the government says, which would mean pushing utilities to switch from coal to natural gas may not be constructive. He has conducted studies that conclude methane leakage far exceeds EPA estimates. “Converting to natural gas plants, which is what this latest rule is likely to do, will actually aggravate climate change, not make things better,” Howarth told Bloomberg News. “It’s well enough established to suggest the EPA is on the wrong side of the science.” 

The natural gas industry has aggressively pushed back against Howarth’s findings, pointing to other studies that show lower methane leakage. But the problem is that the science just isn’t all there yet – we don’t know exactly how much methane is leaking. Nevertheless, the Obama administration is ploughing forward. 

In its regulatory analysis for the new carbon rule, the EPA recognized the methane problem, but has punted on the issue for now. “The EPA is aware that other GHGs such as nitrous oxide (N2O) (and to a lesser extent, methane [CH4]) may be emitted from fossil-fuel-fired EGUs…The EPA is not proposing separate N2O or CH4 guidelines or an equivalent CO2 emission limit because of a lack of available data for these affected sources,” the report said. 

Natural gas may still have a climate benefit over coal. And even if it doesn’t right now, methane leakage could turn out to be a very fixable problem, as engineers figure out how to plug the leaks in the supply chain. But for now, President Barack Obama’s climate plan hinges on this uncertainty. 

Source: https://oilprice.com/Energy/Energy-General/Obamas-Climate-Plan-Is-Leaking-Methane.html 

By Nicholas Cunningham of Oilprice.com

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New Spy Technology to Spawn Oil Revolution

oil-spy-technology

The future of oil exploration lies in new technology–from massive data-processing supercomputers to 4D seismic to early-phase airborne spy technology that can pinpoint prospective reservoirs.

Oil and gas is getting bigger, deeper, faster and more efficient, with new technology chipping away at “peak oil” concerns. Hydraulic fracturing has caught mainstream attention, other high-tech developments in exploration and discovery have kept this ball rolling.

Oil majors are second only to the US Defense Department in terms of the use of supercomputing systems, which find sweet spots for drilling based on analog geology. These supercomputing systems analyze vast amounts of seismic imaging data collected by geologists using sound waves.

What’s changed most recently is the dimension: When the oil and gas industry first caught on to seismic data collection for exploration efforts, the capabilities were limited to 2-dimensional imaging. The next step was 3D, which gives a much more accurate picture of what’s down there.

The latest is the 4th dimension: Time, which allows explorers not only to determine the geological characteristics of a potential play, but also tells them how a reservoir is changing in real time. But all this is very expensive. And oilmen are zealous cost-cutters.

The next step in technology takes us off the ground and airborne—at a much cheaper cost—according to Jen Alic, a global intelligence and energy expert for OP Tactical.

The newest advancement in oil exploration is an early-phase aerial technology that can see what no other technology—including the latest 3D seismic imagery—can see, allowing explorers to pinpoint untapped reservoirs and unlock new profits, cheaper and faster.

“We’ve watched supercomputing and seismic improve for years. Our research into new airborne reservoir-pinpointing technology tells us that this is the next step in improving the bottom line in terms of exploration,” Alic said.

“In particular, we see how explorers could reduce expensive 3D seismic spending because they would have a much smaller area pinpointed for potential. Companies could save tens of millions of dollars.”

The new technology, developed by Calgary’s NXT Energy Solutions, has the ability to pinpoint prospective oil and gas reservoirs and to determine exactly what’s still there from a plane moving at 500 kilometers an hour at an altitude of 3,000 meters.

The Stress Field Detection (SFD) technology uses gravity to gather its oil and gas intelligence—it can tell different frequencies in the gravitational field deep underground.

Just like a stream is deflected by a big rock, SFD detects gravity disturbances due to subsurface stress and density variations. Porous rock filled with fluids has a very different density than surrounding solid rocks. Remember, gravity measurement is based on the density of materials. SFD detects subtle changes in earth’s gravitational field.

According to its developers, the SFD could save oil and gas companies up to 90% of their exploration cost by reducing the time spent searching for a reservoir and drilling into to it to determine whether there’s actually any oil and gas still there.

“Because it’s all done from the air, SFD doesn’t need on-the-ground permitting, and it covers vast acreage very quickly. It tells explorers exactly where to do their very expensive 3D seismic, greatly reducing the time and cost of getting accurate drilling information,” NXT Energy Solutions President and CEO George Liszicasz, told Oilprice.com in a recent interview.

Mexico’s state-owned oil company Pemex has already put the new technology to the test both onshore and offshore in the Gulf of Mexico, and was a repeat customer in 2012. They co-authored with NXT a white paper on their initial blind-test used of the survey technology.

At first, management targeted the technology to frontier areas where little seismic or well data existed. As an example, Pacific Rubiales Energy is using SFD technology in Colombia, where the terrain, and environmental concerns, make it difficult to obtain permits and determine where best to drill.

The technology was recently contracted in the United States for unconventional plays as well.

Source: https://oilprice.com/Energy/Energy-General/New-Spy-Technology-to-Spawn-Oil-Revolution.html

By. James Burgess of Oilprice.com

Egypt for Sale

egypt-pyramid

Three years has seen the overturn of two government, the deaths of thousands of people and the destruction of much of the Egyptian economy. In the end, the mobs have changed nothing, except to make their own lives more miserable.

It was a year ago in August of 2012 that the Morsi government approached the International Monetary Fund for a 4.8 billion dollar loan. That was an increase from the 3.2 billion dollars that the interim military government had sought and that the Muslim Brotherhood members of the parliament had opposed.

Getting the loan was critical. If Egypt could raise the funds, it would be in a better position to borrow from other sources. The IMF calculated that Egypt needed at least ten to twelve billion dollars to survive for another year.

First, though, Egypt would have to meet certain standards before a loan could be granted. The deficit had risen to 8.7 percent of the budget and that would have to be reduced. Income tax on higher income earners and a higher consumption tax on a variety of goods would have to be imposed. Bread and energy subsidies that consume a third of the budget needed to be cut sharply.

Mubarak had understood in 1977 that the subsidies were a drain on the national budget and tried to raise prices. He learned when the mobs when into the streets the lesson that is as true today as it was thirty-six years ago. A large portion of the Egyptian population views the subsidized items as a right. 40 percent of the population lives below the poverty level and would find their hardship turned into desperation by an increase in prices. A quarter of the population of 84 million faces some degree of malnutrition and can be brought into the streets without much encouragement.

In December, the mobs were already in the streets to protest Morsi’s usurpation of power as he pushed through his constitutional obsession that was the focus of his government when the taxes and prices were raised. Instead of abandoning the constitutional conflict in order to resolve an economic crisis, his administration chose to concentrate upon fighting a political war by abandoning the loan. It was easier for him to defuse one angry mob by canceling the tax increases and the subsidy decreases than it was to appease the mobs opposing his dictatorial rule.

He had acquired an economy with structural flaws that would take decades to correct. Egypt was and remains a rent funded economy that puts the source of wealth beyond the control of the state. Revenue from the Suez Canal and the Sumed Pipeline, tourist spending, remittances from Egyptians working abroad, and foreign aid support the state. Before the revolution resulted in the closure of forty-five hundred enterprises and the flight of capital offshore, only 13 percent of foreign earnings came from the export of manufactured goods.

Short of raising fees for use of the Canal or pipeline, that source of income is relatively inflexible. Tourism was discouraged by news reports of twenty-five riots or demonstrations per day somewhere across the country and a three hundred percent increase in the murder rate. The civil war in Libya sent most of one and a half million Egyptian workers home to congested cities, inflated the unemployment rate, and cost the countries desperately needed remittance payments.

The one hope came from foreign aid. Qatar funneled 8 billion dollars to Egypt. Turkey provided another two billion and Libya added 2 billion more. Each contribution made is easier to delay settling the loan with the IMF. It avoided the humiliation of submitting to foreign dictates that threatened to ignite a civil war.

The government was engaged throughout the period in a struggle between the availability of quality bread at an affordable price and the survival of the currency. Egypt must import fifty percent of its wheat. Between 2006 and 2011 the price of wheat and fuel rose by 300 percent. Under usual circumstances, Egypt runs a fifty percent trade deficit that must be offset by the rent sources of income. Once the disorders began inside and outside of Egypt, the collapsing economy meant that the usual circumstances no longer applied.

Since the start of the Revolution, the Central Bank of Egypt has been engaged in a futile effort to curb the inflation by supporting the exchange rate of the currency. The Strategy has been to allow for a gradual 3 percent depreciation of the Pound by maintaining a managed float. That has drained the reserves from 36 billion to 14 billion of which only half was available for international payments.

A million jobs had been lost since the outbreak of the Revolution in January 2011. Inflation had risen above 10 percent, and foreign reserves had dwindled to a mere two months in funds to finance imports.

These were numbers that the government could not easily conceal from the public. What the Morsi administration was more interested in hiding was that wheat reserves were down to two months and that the people were on the edge of a famine as well as a currency collapse.

The bulk of the imported wheat comes from Russia that produces a high gluten grain preferred for the making of unleavened pita bread that is a staple of the Egyptian diet. The Morsi regime found itself at odds with its main food supplier that was concerned about the spread of radical Islamic movements inside of Russia.

The Russian anxiety was made worse by Morsi’s support of the rebel movement in Syria where Moscow was supporting the Al-Assad regime. In spite of the looming crisis that Egypt was facing, Morsi called on June 15th for a jihad in Syria that assured Russian unwillingness to provide the desperately needed grain.

It was not until shortly after the coup that the United Nations Food & Agricultural Organization announced the social disorders and the abrupt increase in the birth rate threatened a food shortage. The emergency loans and grants of 12 billion dollars from Saudi Arabia, Kuwait, and the UAE has given Egypt the means to purchase the wheat on the open market, and the Russians have indicated their willingness to sell what wheat is available. Just in time, the new government has discovered abundant supplies of diesel fuel and butane that will enable the farmers to complete their harvest and to transport the grain to the mills. The rapidity with which the new administration located the previously scarce fuel reveals that the mismanagement by the Brotherhood of the economy and the negative natural economic forces were made worse by the manipulation by government agencies.

The 6.8 million government employees had a vested interest in bringing down the Brotherhood backed government. The Brotherhood was advocating the privatization of the state owned industries. That was threatening the economic interests of the military that controls a third of the economy and the jobs of the government workers. Morsi was following the same policy that contributed to the mob led coup that enabled the military to remove Mubarak.

Between 1991 and 2009, 382 state companies were sold by the Mubarak administration to private investors for a total of 9.4 billion dollars. Economic reforms to encourage foreign and domestic investment introduced in 2004 attracted foreign investment that grew the economy in 2008 at an annual rate of 7.2 percent from 4.1 percent. In spite of the impressive improvement, the overall unemployment rate remained above 9 percent and 25 percent for the youth that comprise a majority of the Egyptian population. University graduates found that their inferior education did not qualify them for employment and were forced to join the ranks of the unemployed. Neglect of the agricultural sector sent an influx of rural migrants into the crowded slums of the cities. The combined hopeless masses formed the powder in the time bomb that exploded in January of 2011.

Removing Hosni Mubarak was the easy part of the coup that the public imagined was a revolution. Finding a replacement was the harder part especially when the only choice was the Muslim Brotherhood that had been an enemy for sixty years. It was for the military the possibility of preserving its privileges of a separate state within a state. Since Morsi was deposed, the military has separated itself still further from the political system by amending its oath of loyalty to exclude any reference to the president.

The Brotherhood gained from the arrangement access to political power for the first time in its eighty-five year history, but assuring that they would be able to keep that power was not a part of the deal. That was made clear in January 2013. General Abdul Fattah el-Sisi, the defense minister, said in an address to military cadets, “Political, economic, social and security challenges” require united action “by all parties” to avoid “dire consequences that affect the steadiness and stability of the homeland.”

The warning was ignored. Morsi’s call on June 15th for a jihad in Syria provoked General El-Sisi to declare that the military’s duty is to defend the borders of Egypt.

The next step in dooming the Morsi Administration came on June 17th when seventeen new governors were appointed. These included eight Islamists, seven of whom belong to the president’s Muslim Brotherhood party. Of all of the appointments, it was the granting of the office to Adel al-Khayat as governor of Luxor that provoked the strongest reaction.

Al-Khayat is a member of the Building and Development party, the political arm of Gamaa Islamiya. The terrorist organization was responsible for a 1997 attack at Luxor’s Hatshepsut Temple, where 58 foreign tourists and four Egyptians were murdered by six members of the group.

While the people of Luxor protested the appointment of a terrorist to the govern ship, the military was lamenting the loss of the destination for retiring military officers. The office of governor was one of the privileges reserved for their members.

The environment that allowed for another coup that the mobs could label the reclaiming of its revolution was set with the petition circulated by the Tamarod Movement that called for nationwide demonstrations on the anniversary of the Morsi presidency. The mob bolstered by the support of the army has become addicted to the taste of political blood with the defeat of the Hosni Mubarak regime and the real possibility that Morsi too was fall. The mob became its own Roman Circus. Screaming for the destruction of the Brotherhood had nothing to do with solving the real problems that require massive reforming of the economic and political structures. What the mobs failed to grasp while they were urging the armed forces to oust Morsi was that the military is a major source of the poverty and tyranny. The generals cannot make those changes without surrendering the deeply entrenched privileges that is a key part of their elite standing.

The privileges of the military take many forms. Only 8 percent of land is registered. The remaining 92 percent cannot be counted as part of the national wealth and is not available to the average citizen. The lack of confirmed ownership means simply that investing in the property is not possible and that holds down the opportunity for people to accumulate wealth. It does not prevent state businesses or friends of the authorities from using the land that will not appear on any official records.

Government regulations block those without the connections from acquiring within a reasonable period of time and at a reasonable cost something as simple as a telephone. It is why 9.6 million people are employed in the underground economy where they can escape the burdensome regulations and costs while only 5.9 million are employed by the private sector that is public. The businesses in the underground economy do not have access to regular sources of financing and are not available to provide tax revenue.

None of this will change so long as the leadership has access to foreign loans and grants. How long the money will keep flowing remains to be seen. In Cairo, there is the general view among the leadership that Egypt is simply too important to be allowed to fail. It was one reason that Morsi thought that he had the advantage bargaining with the IMF and with Washington. The generals also hold the view that Egypt is entitled to the aid and will in one way or another get it from someone. Who that someone is really doesn’t matter.

The only real concern is how they will pay for the contributions. The United States demands little more than the assurance that Israel would not be attacked, but then, the American aid of 1.5 billion dollars is a minor sum that gives little demanding rights. The Saudis are offering 8 billion with additional funds of 4 billion from close allies; and that gives the Saudis considerably greater demanding rights. What they will demand is likely to take the Middle East into a new era.

Source: https://oilprice.com/Geopolitics/Africa/Egypt-for-Sale.html

By. Felix Inmonti for Oilprice.com

6 Key Oil & Gas Discoveries of 2013

oil-and-gas-discovery

The pace of oil and gas exploration is frightening, and discoveries are weekly, if not daily, with volumes investors would only have dreamt of a decade ago. With each new discovery, it becomes difficult to keep track of the playing field, and even more difficult to rank the potential. There are also a lot of juniors popping up on the scene now, exploring, finding and developing with the intent to lure the bigger players to buy them out. So we’ll make it easy for you here, with our list of 6 key oil and gas discoveries so far this year, followed by a short list of the companies we think have the best potential—and they’re not necessarily the ones who have made the biggest discoveries.

Last year, it was all about East and West Africa, with game-changing finds in Kenya, Mozambique, Angola, Ghana and Ivory Coast that have sent explorers on a feeding frenzy looking for analog plays in the region and finding plenty. This year, so far, we like the discovery revival in the Gulf of Mexico and handful of new sub-salt and pre-salt plays.

6 Key Discoveries of 2013

Shenandoah-2/Gulf of Mexico

In mid-June, Anadarko Petroleum (APC) announced a major new discovery in this deep-water play: more than 500 million barrels of crude oil in the Shenandoah-2 well. This find is important: the implications are massive and this means we could be looking at a major oil rush in the Lower Tertiary trend. (Anadarko shareholders should be thrilled). And it wasn’t easy (or cheap): Anadarko drilled through some six miles of rock in water at a depth of 5,800 feet.

The Lower Tertiary trend and its sub-regions could hold up to 15 billion barrels of oil. What this discovery means is that the US oil boom is far from over, and the Gulf of Mexico Lower Tertiary trend is still surprising us. Anadarko’s find solidifies a trend that began with ExxonMobil’s 2010 discovery of the Hadrian field (700 million barrels); Royal Dutch Shell’s discovery of the Appomattox field (500 million barrels); Chevron’s discovery of the Moccasin field (200 million barrels); and BP discovery of the Mad Dog field (est. 4 billion BOE).

Coronado Prospect/Gulf of Mexico

In May, Chevron Corp (CVX) announced a new discovery at its Coronado prospect in the Gulf of Mexico, at the Walker Ridge Block 98-1 well. The well is some 190 miles off the coast of Louisiana in the Lower Tertiary sub-salt trend, in water of around 6,127 feet, but it’s been drilled to a depth of 31,866 feet! (One of the deepest wells ever drilled and probably cost at least $250 million, though we don’t know for sure). The scale of the reserves is still under appraisal for commercial viability, and Chevron currently holds a 40 percent working interest in the prospect. Other owners of the Coronado prospect are ConocoPhillips ( COP ) with a 35 percent stake, a subsidiary of Anadarko Petroleum Corp. ( APC ) with a 15 percent stake, and Venari Offshore LLC with a 10 percent stake.

Harpoon Discovery/Newfoundland

In mid-June, Norway’s Statoil announced it was evaluating a new discovery of high-quality oil off the coast of Newfoundland, about 500 kilometers northeast of St. John’s. The Harpoon discovery is under some 1,100 meters of water. While we don’t know the extent of the Harpoon discovery just yet, what we like is that it is only 10 kilometers from the earlier Mizzen discovery, which is estimated to hold between 100 million and 200 million barrels of oil. Statoil owns a 65% stake in Harpoon (the rest is owned by Husky).

Offshore Cote d’Ivoire

In late April, France’s Total SA announced a major discovery in the deep waters off the western coast of Cote d’Ivoire, encountering 91 feet of net oil pay while drilling in Block CI-100 in about 7,400 feet of water. It was the first block Total drilled. What is significant about this discovery is not the net feet of pay, but the fact that it confirms an extension of reserves in the Tano basin, home to the giant Jubilee field in neighboring Ghana. The Jubilee field is one of the richest oil fields in Africa with potential reserves eclipsing 1.8 billion barrels. This is the second major find in Cote d’Ivoire recently; last year Tullow Oil—which is also exploring in Ghana, made an offshore discovery here as well.

Gullfaks, North Sea

In April, Statoil said it could be sitting on 40-150 million recoverable BOE in the North Sea in its Gullfaks license, where it is still working to confirm its findings. Gullfaks is in the North Sea’s Shetland Group/Lista Formation. The Gullfaks finds are younger, shallower deposits than its primary areas. Gullfaks has three permanent installations that have so far produced over 2.4 billion barrels of oil and over 56 billion cubic meters of gas. Statoil is the operator of the license, with a 70% interest, along with Petoro (30%). The Gullfaks discovery follows two other recent massive discoveries in the North Sea: Johan Sverdrup and King Lear.

Santos Basin/Libra, Brazil

In May, Petrobras doubled the estimate for its Libra field to 12-15 billion barrels. This makes it Brazil’s largest ever discovery. Brazilian officials say it could easily produce a million barrels of oil per day once it is fully developed—that’s TWICE the output of OPEC-member Ecuador. Production could begin in five years, with plans for up to 12-18 production vessels permanently anchored on the field, each of them pumping up to 30,000 barrels per day. For state-run Petrobras, which owns the field, it means more expenditures and more debt (and it’s already drowning). The answer: Petrobras is taking the show on the road, preparing to offer foreign investors up to a 30% stake in this amazing prospect. (The Libra auction will take place in October, and 70% of the field will be up for grabs).

WHAT’S WORTH OWNING

Genel Energy (LON:GENL)

 

We can’t get enough of Anglo-Turkish Genel, which is advancing like a hurricane in Kurdistan (discovery after discovery and amazing drilling success), and also faring nicely in Africa. Shares in the company have advanced almost 50% over the past year on success in Kurdistan, and now it’s about to hit the roof as its crude oil pipeline nears completion and is slated to start pumping crude to Turkey by the end of September. There is a short window of opportunity here to get in while this is still a bit undervalued. (And there are a number of undervalued stocks operating out of Kurdistan).

Genel is the largest producer in Iraqi Kurdistan, and its holdings are impressive. We’re talking about 7 production-sharing contracts with some nice geological diversity. Its largest producing fields in Kurdistan are Taq Taq and Tawke, which have an estimated gross proven and probable reserves of 1.4 billion barrels of oil and gross proven, and probable reserves of 1.9 billion barrels. By 2014, Genel is aiming for a production capacity of 140,000 net bopd.

Anadarko Petroleum (APC)

 

Anadarko has great onshore assets in the US Gulf of Mexico and diverse offshore, deep-water assets off the coasts of Algeria, Ghana, Mozambique, Brazil, China, Indonesia and New Zealand, with proven oil and gas reserves at about 2,560 million BOE as of end 2012. We’re looking at liquids-natural gas ratio of 46%-54%. For 2012, Anadarko saw a 10% increase in overall production. This year, Anadarko plans to spend some $5.5 billion developing its onshore US assets alone, and about $1 billion on its overseas plays. So we expect another nice increase in production for 2013. The company will shift its key activities a bit to account for low natural gas prices, so we’ll see more focus and money spent on the Gulf of Mexico and less at the Marcellus shale, for instance. Anadarko is trading at $86.10 per share with a total market cap of more than $43.1 billion.

In the second week of June, shares of Anadarko rose 3.7% on the news of a major new discovery in the deep waters of the Gulf of Mexico (Shenandoah-2, mentioned above).

Noble Energy Inc (NYSE:NBL)

When you think about the Levant Basin these days, you think about Houston-based Noble Energy. In late May, Noble announced a new discovery in the Mediterranean Sea, just 20 miles northeast of its Tamar field in its Karish well after drilling to a total depth of 15,783 feet. The well encountered 184 feet of net natural gas pay, and Noble thinks it potentially holds up to 2 trillion cubic feet of natural gas. This brings its estimated combined resources in the Levant Basin—including the Tamar and Leviathan fields—up to 38 trillion cubic feet of natural gas. Noble is definitely on a roll in the Levant Basin, and this latest discovery is its 7th so far in the eastern Mediterranean.

Back in the US, it’s more good news for Noble. In mid-June, Noble confirmed that its second Gunflint appraisal well in the deep waters of the Gulf of Mexico had an estimated gross resource of 65-90 million bbl of oil equivalent. This means Noble’s plans for a subsea tieback development at Gunflint are a green light for this year. Production is targeted for the end of 2015 at both Noble’s Gunflint and Big Bend deep-water discoveries in the Gulf of Mexico.

Oryx (OXC)

Sorry, but it’s got to be Kurdistan—again, but this time Oryx, a company we’ve written about before but you may not have heard of. If you haven’t you’re missing out. About a month ago, Oryx—the upstream division of AOG–offered up 17% of its shares (16,700,000 common shares) on the Toronto Stock Exchange for C$15 per share) with gross proceeds of $250 million. The proceeds will allow Oryx to complete its exploration and appraisal plans through mid-next year, and they expect some serious results over the next 12 months.

Oryx is the brainchild of Swiss billionaire Jean Claude Gandur, who made his grand entrance onto the oil and gas scene in 2008 with the sale of Addax Petroleum to China’s Sinopec for $7.2 billion. Since then, he’s been out of the fossil fuels game—so Oryx is his re-entry ticket. Gandur owns 77% of Oryx through AOG.

Oryx is exploring in west Africa and Iraqi Kurdistan, but it’s the Kurdistan assets we really like. Gandur is an excellent diplomat who can navigate power brokers, which will make or break a junior company in this territory. Oryx isn’t making any money yet, but it will, and that’s why we think now is the time to get in on this. It could very easily go the way of Addax, which was making about $300 million annually in net income when it was sold to Sinopec. Gandur has dumped $700 million into Oryx, which has been busy buying up licenses and drilling wells. It’s sitting quite nicely in Kurdistan right now with a 100% focus on oil and 143 billion bbls of proven oil reserves.

By. OilPrice.com Premium Analysts

This report is part of Oilprice.com’s premium publication Oil & Energy Insider . Oil & Energy Insider gives subscribers an information advantage when investing, trading or doing business in the energy sectors. Successful investors, hedge funds and senior executives, have access to high level intelligence and power in ways that you, as an individual investor, are locked out of (the game is and never has been fair.) Let us help you level the playing field by using our network of traders, intelligence assets and high level partnerships to ensure you are making the right investment decisions.

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In Focus: India’s Energy Ties with Iran

india-energy

India’s relentless search for hydrocarbons to fuel its booming economy has managed the rather neat diplomatic trick of annoying Washington, delighting Tehran and intriguing Baghdad, all the while leaving the Indian Treasury fretting about how to pay for its oil imports, given tightening sanctions on fiscal dealings with Iran.

On 7 June the US State Department reluctantly announced that it was renewing India’s six-month waivers for implementing sanctions against Iran, along with seven other countries eligible for waivers from the sanctions owing to good faith efforts to substantially reduce their Iranian oil imports. In New Delhi’s case, it is the U.S. and EU-led sanctions rather than any willingness on India’s part that has seen a fall in its Iranian oil imports. India is the second largest buyer of Iranian oil, a nation with whom it has traditionally had close ties. U.S. Secretary of State John Kerry said that India, China, Malaysia, South Korea, Singapore, South Africa, Sri Lanka, Turkey, and Taiwan had all qualified for an exception to sanctions under America’s Iran Sanctions Act, based on additional significant reductions in the volume of their crude oil purchases from Iran. Kerry told reporters, “Today’s determination is another example of the international community’s strong and steady commitment to convince Iran to meet its international obligations. This determination takes place against the backdrop of other recent actions the administration has taken to increase pressure on Iran, including the issuance of a new executive order on June 3. The message to the Iranian regime from the international community is clear: take concrete actions to satisfy the concerns of the international community, or face increasing isolation and pressure.”

But even with Washington’s beneficence, New Delhi is struggling to find ways to pay for its Iranian oil imports.

The U.S. and European sanctions have deeply affected Iran’s international oil trade, reducing its exports by more than 50 percent and costing Iran billions of dollars in revenue since the beginning on last year. Tightening the screws, the Obama administration is now attempting to reduce Iran’s oil exports even further, to less than 500,000 barrels per day through tighter sanctions. Nevertheless, despite plummeting sales overseas, Iran, OPEC’s second largest oil exporter, remains one of the world’s largest oil producers, with sales bringing in tens of billions of dollars in revenue annually.

And Iran is anxious to keep India as a favored customer. Last month Iran offered India lucrative terms for developing its oilfields, routing a proposed natural gas pipeline through the sea to avoid Pakistan as well as insurance to Indian refiners provided New Delhi raised oil imports. Making its case, Iran sent a high-level delegation led by Oil Minister Rostam Ghasemi to India to urge New Delhi to raise its oil purchases, which slid to 13.3 million tons in 2012-13 from 18 million tons in 2011-12. Heightening Iran’s concerns, later this year Indian imports are slated to fall further to around 11 million tons.

After meeting Ghasemi Indian Oil Minister M. Veerappa Moily issued a statement noting, “The Iranian side encouraged the Indian side to increase its crude purchase. “The Indian side explained that it would encourage companies to maintain their engagement in terms of crude oil purchase, taking into account their requirements, based on commercial and international considerations.”

While Iranian-Indian trade ties continue to deepen, with Indian-based Consul General of Iran Hassan Nourian predicting that bilateral trade between India and Iran will be worth $25 billion by 2017, India is hedging its bets about energy imports, and where to make up the shortfall from the increased sanctions regime.

…and what better place to look than the Middle East’s rising petro-state, Iraq?

India’s External Affairs Minister Salman Khurshid is heading for Baghdad for a two-day visit beginning 19 June.

Top of the agenda?

Oil – Iraq is now India’s second largest supplier of oil after Saudi Arabia, having replaced Iran and become a “critical partner” of India.

It is a potential marriage made in heaven. Iraq needs an assured market for its increasing crude production, having set itself a production target of 7 million bpd from its current 3 million bpd, while India is in search of a long-term partnership with a major oil producer.

While such deepening ties will thrill Washington as much as they distress Iran, there is still a wild card in the Iraqi mix – China, now Iraq’s biggest customer, already purchasing nearly half the oil that Iraq produces, almost 1.5 million barrels a day. Worse still for Indian aspirations, China is now trying for an even bigger share, bidding for a stake currently owned by Exxon Mobil in one of Iraq’s largest oil fields, West Qurna.

New Delhi’s choices are stark – make Washington happy, alienate long-time partner Iran, and keep fingers crossed that Beijing doesn’t stitch up any further Iraqi concessions.

Tough call.

Source: https://oilprice.com/Geopolitics/International/Indias-Energy-Ties-with-Iran-Unsettle-Washington.html

By. John C.K. Daly of Oilprice.com

Dave Summers: Peak Oil Is Almost Here

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This where we stand, and it’s a fairly bleak view: Peak oil is almost here, and nothing new (with the possible but unlikely exception of Iraq) is coming online anytime soon and while the clock is ticking – forward movement on developing renewable energy resources has been sadly inadequate. In the meantime, the idea that shale reservoirs will lead the US to energy independence will soon enough be recognized as unrealistic hype. There are no easy solutions, no viable quick fixes, and no magic fluids. Yet the future isn’t all doom and gloom – certain energy technologies do show promise. We had a chance to speak with well known energy expert Dave Summers where we cut through the media noise and take a realistic look at what our energy future holds.

Dr. Dave Summers – scientist, prolific writer and author of Waterjetting Technology, is the co-founder of The Oil Drum and currently writes at the popular energy blog Bit Tooth Energy. From a family of nine generations of coal miners, Summers’ patented waterjetting technology enables the high-speed drilling of small holes through the earth among other applications. In an exclusive interview with Oilprice.com, Dr. Summers discusses:

  • Why new drilling techniques aren’t enough to put peak oil off
  • Why the shale revolution will not lead to energy independence
  • Why the potential of nuclear energy isn’t being realized
  • Why ‘plan B’ for Keystone isn’t beneficial to the US
  • Why we should be worried about the South China Sea and the Middle East
  • How low natural gas prices cannot be sustained
  • Why Europe’s shale future is still indeterminate
  • Why the coal industry’s days aren’t necessarily numbered
  • Why geothermal energy has the greatest potential
  • How media manipulation figures in to the climate debate
  • Why nuclear fusion remains a fantasy in our lifetimes and beyond

 

Interview by. James Stafford of Oilprice.com

 

James Stafford: What do you foresee in our energy future? Will new extraction techniques and advances in drilling technology help put peak oil off?

Dave Summers: Most of the “innovation” in energy extraction from underground has been known for some time. It’s just taken time to work its way through to large-scale market use. There are techniques such as in-situ combustion, whether of coal or oil sand, that are now being developed that show some promise. But each increment of gain is at higher cost, and is chasing after a smaller target volume. Even if better methods of drilling were developed (and we have looked at several) in the cost of overall production this would not, in itself, provide that much benefit.

If ways could be found to economically release more hydrocarbon from existing and drilled reservoirs then this might have a significant impact, but though this has been sought after with lots of effort, there has been no magic fluid or way of doing that yet.

Peak oil is about here, though we can argue about fractions of a million barrels of day, it is hard to find any large volumes that can be expected to come onto the market in the next decade (with the possible, though unlikely, exception of Iraq). The clock on this has been ticking for some time, and some of the moves toward increasing renewable energy sources (though motivated by a different driver) have helped mitigate some of the problem, but sadly not enough.

James Stafford: Can the shale boom be replicated in Europe?

Dave Summers: The technology for developing the hydrocarbon volumes in tight shales and sands is now becoming well defined, and can thus be transferred to Europe. It will likely make that transition fairly quickly. That’s why some countries have American partners in their development. However, the environmental movement that is strongly against the technology is more entrenched, and has more political clout in Europe, so this may slow the transfer.

At the same time, though there are significant volumes of shale, it is only after wells have been drilled and fracked that one can get an estimate as to whether or not the resource can be turned into a reserve. This information is still a bit sparse, and it makes it difficult to be definitive at this time.

James Stafford: Is the Keystone XL pipeline vital to the US quest for energy independence?

Dave Summers: The pipeline is something that is a convenience in getting more oil from Canada into U.S. refineries. There are other steps (pipelines now flowing backwards for example) that are being taken to deal with the situation. As long as the sole export market for the oil is into the United States, Canada has to take the price that it is offered for the oil, or not sell it. Should a second sales path (such as a pipeline to the coast) allow significant sales to other customers (say China) then the price will likely go up, and supplies to the US will get more expensive, and potentially smaller.

James Stafford: What happens if Keystone isn’t approved – is there a plan B?

Dave Summers: On whose part? The Canadians will run a pipeline to the coast and make more money over time. In the short term, the US will be able to balance any shortfalls with domestic production, but in about three years as that starts to fall off then life might get more difficult. It takes a long time to develop a new resource.

James Stafford: How much of a role will fracking play in US efforts to reduce carbon emissions?

Dave Summers: Grin, well that is a little bit of a loaded question. Any drop in carbon dioxide levels that will come from changing from coal-fired power stations to gas-fired are not really going to be significant on a global level, and the changes are more likely be market driven, than for political reasons.

It is hard to see, basic operational costs being what they are, that the low price for natural gas can be sustained that much longer. Any slippage in the supply, however, will drive the price up and that will cause a re-equilibration of the market. How that plays out against the political considerations in the Eastern states is, as yet, anybody’s guess.

James Stafford: If energy independence for the US comes at the cost of reducing carbon emissions, and vice versa, which target do you think they should aim for?

Dave Summers: The hope that hydrocarbon production from the shale reservoirs of the United States will lead to energy independence has about a couple of years of life yet before it is shown to be the unrealistic hype that it is.

The continuing rise in energy costs, both here and in Europe, is likely to continue to sap any strong drive toward growth and a rapid recovery from the events of 2008. This cost factor is not getting the recognition that it should, and this unrelenting drain on the global economies does not have an easy resolution. The quick fixes anticipated from investment in renewable energy has not been found to really help that much, and while every little bit helps, there are no magic solutions on the horizon that will help in the intermediate term and sooner.

And after a certain number of cold winters it becomes harder to convince the general populace that global warming remains a critical problem.

James Stafford: Do you think the coal industry’s days are numbered?

Dave Summers: Ultimately no, but in the short term there will be a reduction in demand for coal in Europe and the United States. But in the longer term there is still no viable replacement fuel that will meet the needs of the growing power markets in places such as China, India and most of Asia and Africa.

As the costs for imported fuels rise, the need to develop indigenous resources will become more vital, while the selection of the cheapest available import to sustain the competitiveness of domestic industries will likely surmount the pressures for change.

James Stafford: Many claim that oil consumption in the US will continue to soar to record levels, yet due to the fast rate of decline in production from fracking wells compared to traditional wells this seems unlikely. What do you predict will be the maximum oil production that the US could achieve?

Dave Summers: It is difficult to foresee where all the additional oil that will be needed to meet the projection of sustained growth in supply is likely to come from. Increasing production depends on finding enough people with enough money to fund the drilling costs, and without sustained successful investment, after a while the pool of likely investors shrinks.

Again I don’t see the current trends being sustained for more than a couple of years, for that reason. It also requires good potential sites for drilling, and those are becoming smaller and harder to identify.

James Stafford: Which renewable energy technologies do you think hold the greatest potential to make a meaningful addition to global energy production?

Dave Summers: I have always thought that we did not take enough advantage of the underground. There is a small but growing use of geothermal energy (and ground source heat pumps) but there are other advantages to putting buildings and other construction underground that will likely eventually dawn on enough people that it will become a more sustainable industry.

But I have been waiting for that to happen for 40 years, and it may well take as long again before it comes to pass.

James Stafford: Who or what is the biggest obstacle to renewable energy?

Dave Summers: Depends on where you are. In Botswana it was finding folk to do the maintenance in the villages. I look out of my window at a snow-covered back yard, in a state where neither wind nor solar has much viability, hence the local university is installing a geothermal system. Where do I get the heat? From the surrounding forest, I purchase wood almost every year for use in a tile stove, and the firebox is wrapped in copper tubing. But, as the British experience showed centuries ago, burning wood is a luxury, and coal was cheaper, as the forests disappeared.

Sadly the folks that discuss future energy alternatives tend to come to the discussion with their own agendas, so that it is difficult to have an open discussion that does not end up in emotional argument.

The world desperately needs new forms of energy to replace those that are starting to run out. The time available before those needs become critical is getting shorter, and thus an open debate is vital. But because of the politics there have been a number of decisions to move technology forward before it was really ready, and that has hurt new development, and is likely to continue to do so.

Keeping solar panels clean without scratching and power degradation has been something I first discussed in an ASTM panel over 30 years ago. Maintenance is likely the biggest hidden problem at the moment.

James Stafford: Which geopolitical hotspots should we be keeping our eyes on over the coming year for potential problems?

Dave Summers: The situation in the China Sea is starting to become a greater concern, and it is a reflection more, I believe, of the potential energy sources under the sea, than it is for any particular right to own tiny islands in the middle of nowhere.

The Middle East is always a worry. Once the can of democracy was kicked open the ways in which this will change things in the region can only be guessed at. Regime changes are rough and rarely run smoothly. Policy changes mean changes for investors, and there are many groups in the region that have little love for the United States or for many of the countries of Europe.


James Stafford: 
If energy demand around the world continues to grow at current rates, how do you imagine the future? Will it lead to war? Large differences between the top and bottom echelons of society? Wide spread starvation? Etc.

Dave Summers: Sadly wars have been fought over resources since the beginning of time, and in the last few decades human nature has not changed that much. The impact of mass communication, and its global reach may make it easier to tell the people on both sides the “truth”, which is always adjusted as a function of who is telling it, and the possible impact of fabricators over conventional manufacturing might, however, make more of an impact faster than currently anticipated.

The mass elevation of people into the middle class in Asia cannot be reversed, and the pressures that this will bring can provide unyielding momentum that leads to conflict, particularly where there is some control over communication.

There have been enough breakthroughs in agriculture that the risks of mass starvation are fading, though the availability of water is a constant concern in a number of countries. Spreading information, and providing assistance at the lowest levels of production will come about with the spread of electronic communication and this will have a beneficial impact.

James Stafford: How has media manipulation figured in the climate change debate?

Dave Summers: As long as journalists are advocates rather than reporters the true story will not emerge. The lack of journalistic challenge in the mainstream media to the deliberate deception employed in hiding the decline in temperature prediction accuracy with the tree rings which dropped just as temperatures were rising, thus invalidating the “hockey stick”, was an early indication that media manipulation was going to be a critical factor in this debate.

How long must global temperatures remain relatively stable before someone brings this up as a front page story? The amount of money involved with those who espouse anthropogenic causes of climate change dwarfs the funding that has gone to those who raise questions when so many papers so this “may” happen, and that “might” occur. And those who pay the bills . . . . .

James Stafford: Lockheed recently came out with a statement predicting that they will have a working nuclear fusion reactor within the next 10 years. If this prediction does come true – do you see this having any meaningful impact on the energy sector?

Dave Summers: Um! Nuclear fusion has been the next great thing in energy production for the full extent of my professional life. It is likely to continue to be so through the professional lives of my children, and likely grandchildren.

James Stafford: What are your thoughts on nuclear power? Is it essential to meet our growing energy demand?

Dave Summers: Nuclear power has a considerable potential to help solve some of the shortfalls in energy that are now appearing on the horizon. Unfortunately the long delays in construction, some of which are due to permitting issues that have become political footballs, make it a hard investment to justify.

The move to construction of smaller reactors may well have considerable benefit, and the development of thorium has also got its place. But to make progress requires political will, and that is sadly lacking, and will remain so until energy demand rubs the noses of the body politic in the reality that there is no ideal, only the viable.

James Stafford: Dave thank you for taking the time to speak with us. Hopefully we will have a chance to catch up later in the year.

Source: https://oilprice.com/Interviews/Peak-Oil-The-Shale-Boom-and-our-Energy-Future-Interview-with-Dave-Summers.html

By. James Stafford of Oilprice.com

2012’s Top 5 Oil & Gas Plays

2012 has been a stellar year for oil and gas. From East Africa to North America, new technology, major new discoveries, an unparalleled appetite for exploration and a metamorphosing perception of risk have changed the playing field.

We’re looking at potential rather than existing production, and here are our Top 5 picks for this year:

Turkana County, Kenya

We have to start with Kenya, the biggest success story of the year.

In March, the UK’s Tullow Oil and Canada’s Africa Oil Corp. discovered 100 meters of oil in the Ngamia-1 well. The euphoria was in part because this discovery was made on the very first try in the very first well. Stocks shot up to record highs as a result.

The euphoria has not abated. In late November, the same duo made another find of 30 meters of oil in the nearby Twiga-1 well.

September also saw Kenya strike 53 meters of natural gas in its first-ever offshore find in the Mbawa-1 well, off the coast of Malindi. US-based Apache Corp. owns 50% the well in a consortium with a handful of other companies. They’re still digging, hoping that going deeper will reveal the oil.

The bigger picture, however, is that only the surface has been scratched in terms of exploration. The East Africa Rift is believed to hold over 70 billion barrels of untapped crude oil, while offshore Kenya, Tanzania and Mozambique have a joint estimated 250 trillion cubic feet of natural gas. There may be offshore oil, too. The oil discoveries in Kenya so far have been confined to one massive basin, and there are six more.

In addition to the size of the prize here, Kenya is favorable for other reasons as well: It offers relative political stability in the midst of a rather restless Africa; it offers attractive fiscal terms; it offers easy access to export markets; and it has an appetite for infrastructure that is hard to beat.

While 2013 may see some changes in the regulatory environment that could be less favorable, as for 2012, Kenya remains THE number one East African play in terms of potential. Next year will give us a better idea of commercial viability.

Bakken, North Dakota

The Bakken shale play has placed North Dakota ahead of Alaska, making it the number two oil producer in the US for 2012, after Texas. Because of Bakken, the US has increased oil production this year to a level it hasn’t seen in almost a decade and a half. In one month alone this year, North Dakota issued 370 drilling permits.

Stretching from Eastern Montana to Western North Dakota and across parts of Saskatchewa and Manitoba in the Williston Basin, the Bakken Shale Play could yield some 4.3 billion barrels of oil, according to the US Geological Survey. That’s the modest estimate. Continental Resources—one of the major Bakken players—estimates as much as 40 billion barrels.

The clincher is that much of the vast Bakken Petroleum System has not even been tapped. So far, drilling has primarily targeted the Middle Bakken and the upper Three Forks Zones. The Three Forks Zones have not been fully tapped, and the Upper Bakken Shale hasn’t really been tapped at all.

Eagle Ford, South Texas

Eagle Ford is potentially the next Bakken. It’s one of the most ACTIVE plays in the US right now. And what the majors and juniors are playing with is 7,500 in total acreage, five producing wells, two more wells being drilled, and the potential for 100 wells. This year, oil production has increased to some 300,000 bpd (as of August).

Natural gas is also a major Eagle Ford offering. Last year, it produced 914 million cubic feet of natural gas, though that has dropped slightly for this year.

So far, drilling seems to have had even better results than in Bakken. And there is a great deal of confidence and optimism. Enough so that Marathon Oil is planning to shift its primary focus from Bakken to Eagle Ford and spend one-third of its operating budget there. Right now Marathon is producing around 40,000 net barrels of oil equivalent (boe) per day and plans to more than double this next year. It’s already doubled production this year (and, incidentally, seen its profits jump 11% in the first quarter).

The biggest producer is EOG Resources (NYSE:EOG), putting out about 110,000 boe/day and holding reserves of around 1.6 billion boe.

Analysts think Eagle Ford could end up out-producing the Permian Basin in west Texas—and soon.

Mediterranean Plays

The Levant Basin in the Mediterranean has an estimated 122 trillion cubic feet of recoverable natural gas, and around 1.7 billion barrels of recoverable oil. And the area has seen a flurry of activity recently.

Between 25 and 33 billion cubic feet of this gas is in Israeli waters. The rest is carved up between Greek-held Northern Cyprus (which is a bit problematic), Syria and Lebanon.

Of course, along with this potential comes some uncomfortable geopolitics; on one hand among Israel, Lebanon and Syria; on the other hand between Israel, Turkey and the Greek Cypriots.

The first new natural gas field in the region is expected to begin full-scale production this year, with two additional fields coming on-line over the next six years.

Specifically, we’re talking about:

• The discovery to two offshore natural gas fields in northern Israel (Leviathan and Tamar) with an estimated 25 trillion cubic feet (about 100 years year of gas for Israeli domestic use)

• Estimates that Israel has a potential 1.9 billion barrels of untapped oil

• About 5-6 tcf of natural gas in the Aphrodite field claimed by Greek-held Northern Cyprus (just west of Israel’s Leviathan field)

Exploitation will be a bit expensive, though. Israel’s offshore fields are located 100 kilometers from the coast and in 6,000 feet of water. The natural gas is some 5,000 feet under the sea bed.

Offshore Tanzania & Mozambique

Tanzania has become a gas sensation in a very short time, with recent offshore discoveries of some 33 trillion cubic feet.

Sweetening the deal, we have political stability and low security risk, relatively speaking, as well as an existing 70-million-cubic-feet/day capacity for natural gas processing. More gas infrastructure is in the works.

Next door, Mozambique’s 130 trillion cubic feet of gas in its offshore Rovuma Basin is eye candy for foreign investors, and officials believe there is double this amount still waiting to be discovered. It’s not as attractive as Tanzania for one reason: There is no infrastructure.

Source: https://oilprice.com/Energy/Energy-General/The-Top-5-Oil-Gas-Plays-for-2012.html

The U.S Power Grid: Vulnerable to Everything?

As Washington hunts ill-defined al-Qaeda groups in the Middle East and Africa, and concerns itself with Iran’s eventual nuclear potential, it has a much more pressing problem at home: Its energy grid is vulnerable to anyone with basic weapons and know-how.

Forget about cyber warfare and highly organized terrorist attacks, a lack of basic physical security on the US power grid means that anyone with a gun—like disgruntled Michigan Militia types, for instance–could do serious damage.

For the past two months, the US Federal Energy Regulatory Commission (FERC) has been tasked with creating a security strategy for the electric grid and hydrocarbon facilities through its newly created Office of Energy Infrastructure Security. So far, it’s not good news.

“There are ways that a very few number of actors with very rudimentary equipment could take down large portions of our grid,” warns FERC Chairman Jon Wellinghoff. This, he says, “is an equal if not greater issue” than cyber security.

FERC’s gloom-and-doom risk assessment comes on the heels of the recent declassification of a 2007 report by the National Academy of Sciences.

The National Academy of Sciences on 14 November warned that a terrorist attack on the US power grid could wreak more damage than Hurricane Sandy. It could cause massive blackouts for weeks or months at a time. But this would only be the beginning, the Academy warns, spelling out an “end of days” scenario in which blackouts lead to widespread fear, panic and instability.

What they are hinting at is revolution—and it wouldn’t take much.

So what is being done to mitigate risk? According to FERC, utility companies aren’t doing enough. Unfortunately, FERC does not have the power to order utilities to act in the name of protecting the country’s energy infrastructure. Security is expensive, and more than 90% of the country’s grid is privately owned and regulated by state governments. Private utilities are not likely to feel responsible for footing the bill for security, and states may not be able to afford it.

One key problem is theoretically a simple one to resolve: a lack of spare parts. According to the National Academy of Sciences, the grid is particularly vulnerable because it is spread out across hundreds of miles with key equipment not sufficiently guarded or antiquated and unable to prevent outages from cascading.

We are talking about some 170,000 miles of voltage transmission line miles fed by 2,100 high-voltage transformers delivering power to 125 million households.

“We could easily be without power across a multistate region for many weeks or months, because we don’t have many spare transformers,” according to the Academy.

High-voltage transformers are vulnerable both from within and from outside the substations in which they are housed. Complicating matters, these transformers are huge and difficult to remove. They are also difficult to replace, as they are custom built primarily outside the US. So what is the solution? Perhaps, says the Academy, to design smaller portable transformers that could be used temporarily in an emergency situation.

Why was the Academy’s 2007 report only just declassified? Well, its authors were worried that it would be tantamount to providing terrorists with a detailed recipe for attacking and destabilizing America, or perhaps for starting a revolution.

The military at least is preparing to protect its own power supplies. Recently, the US Army Corps of Engineers awarded a $7 million contract for research that demonstrates the integration of electric vehicles, generators and solar arrays to supply emergency power for Fort Carson, Colorado. This is the SPIDERS (Smart Power Infrastructure Demonstration for Energy Reliability and Security), and the Army hopes it will be the answer to more efficient and secure energy.

Back in the civilian world, however, things are moving rather slowly, and the focus remains on the sexier idea of an energy-crippling cyberattack.

Last week, Senator Ed Markey (D-Mass.) urged House Energy and Commerce Committee chairman Rep. Fred Upton (R-Mich.) to pass a bill—the GRID Act–which would secure the grid against cyberattacks.

“As the widespread and, in some cases, still ongoing power outages from Superstorm Sandy have shown us, our electric grid is too fragile and its disruption is too devastating for us to fail to act,” Markey wrote. “Given this urgency, it is critical that the House act immediately in a bipartisan manner to ensure our electrical infrastructure is secure.”

This bill was passed by the House, but has failed to gain any traction in the Senate.

FERC, of course, is all for the bill, which would give it the authority to issue orders and regulations to boost the security of the electric grid’s computer systems from a cyberattack.

But it’s only a small piece of the security puzzle, and FERC remains concerned that authorities are overlooking the myriad simpler threats to the electricity grid. These don’t make for the easy headlines, especially since they are not necessarily foreign in nature.

Source: https://oilprice.com/Energy/Energy-General/US-Power-Grid-Vulnerable-to-Just-About-Everything.html

By. Jen Alic of Oilprice.com

Shale Gas: The Next Bubble to Burst?

The “shale revolution” has been grabbing a great deal of headlines for some time now. A favourite topic of investors, sector commentators and analysts – many of whom claim we are about to enter a new energy era with cheap and abundant shale gas leading the charge. But on closer examination the incredible claims and figures behind many of the plays just don’t add up. To help us to look past the hype and take a critical look at whether shale really is the golden goose many believe it to be or just another over-hyped bubble that is about to pop, we were fortunate to speak with energy expert Arthur Berman.

Arthur is a geological consultant with thirty-four years of experience in petroleum exploration and production. He is currently consulting for several E&P companies and capital groups in the energy sector. He frequently gives keynote addresses for investment conferences and is interviewed about energy topics on television, radio, and national print and web publications including CNBC, CNN, Platt’s Energy Week, BNN, Bloomberg, Platt’s, Financial Times, and New York Times. You can find out more about Arthur by visiting his website: https://petroleumtruthreport.blogspot.com/

In the interview Arthur talks about:

· Why shale gas will be the next bubble to pop

· Why Japan can’t afford to abandon nuclear power

· Why the United States shouldn’t turn its back on Canada’s tar sands

· Why renewables won’t make a meaningful impact for many years

· Why the shale boom will not have a big impact on foreign policy

· Why Romney and Obama know next to nothing about fossil fuel energy

Interview conducted by James Stafford of Oilprice.com

James Stafford: How do you see the shale boom impacting U.S. foreign policy?

Arthur Berman: Well, not very much is my simple answer.

A lot of investors from other parts of the world, particularly the oil-rich parts have been making somewhat high-risk investments in the United States for many years and, for a long time, those investments were in real estate.

Now these people have shifted their focus and are putting cash into shale. There are two important things going on here, one is that the capital isn’t going to last forever, especially since shale gas is a commercial failure. Shale gas has lost hundreds of billions of dollars and investors will not keep on pumping money into something that doesn’t generate a return.

The second thing that nobody thinks very much about is the decline rates shale reservoirs experience. Well, I’ve looked at this. The decline rates are incredibly high. In the Eagleford shale, which is supposed to be the mother of all shale oil plays, the annual decline rate is higher than 42%.

They’re going to have to drill hundreds, almost 1000 wells in the Eagleford shale, every year, to keep production flat. Just for one play, we’re talking about $10 or $12 billion a year just to replace supply. I add all these things up and it starts to approach the amount of money needed to bail out the banking industry. Where is that money going to come from? Do you see what I’m saying?

James Stafford: You’ve been noted suggesting that shale gas will be the next bubble to collapse. How do you think this will occur and what will the effects be?

Arthur Berman: Well, it depends, as with all collapses, on how quickly the collapse occurs. I guess the worst-case scenario would be that several large companies find themselves in financial distress.

Chesapeake Energy recently had a very close call. They had to sell, I don’t know how many, billions of dollars worth of assets just to maintain paying their obligations, and that’s the kind of scenario I’m talking about. You may have a couple of big bankruptcies or takeovers and everybody pulls back, all the money evaporates, all the capital goes away. That’s the worst-case scenario.

James Stafford: Energy became a big part of the election race, but what did you make of the energy policies and promises that were being made by both candidates?

Arthur Berman: Mitt Romney, particularly, talked about how the United States would be able to achieve energy independence in five years. Well, that’s garbage.

Anybody who knows anything about oil, gas and coal, knows that that’s absurd. We were producing a little over 6 million barrels a day thanks to an all-out effort in the shale oil play. We consume 15 million barrels of oil a day and that leaves the gap of 9 million barrels per day. At the peak of U.S. production, in 1970, the U.S. produced 10.6 million barrels per day. Like I said, either the guy doesn’t know what he’s talking about, or is making a big joke of it.

Obama didn’t talk so much . . . He’s a hugely green agenda kind of president and I’m not opposed to that, but he’s certainly not for the oil and gas business. It wasn’t until he got serious about thinking about his re-election that he decided to take credit for what really happened.

James Stafford: Japan recently announced that they are going to be phasing out nuclear power. What are your views on nuclear? Are we in a position to abandon this energy source?

Arthur Berman: No. Japan is a special case. The disaster at Fukushima, the nuclear reactor, was right on top of a major fault. So, that was a dumb place to put it.

To wholesale abandon nuclear power because one reactor was incredibly stupidly planned, to me seems like a bit of a . . . well, I can’t tell people how they should react, but if I were a Japanese citizen, and the truth was that we have no oil, we have no coal, we have no natural gas, the next question is, “Well, if we get rid of nuclear, what are we going to do?”

It’s a really good question to ask. If you don’t have anything of your own, how are you going to get what you need? The answer is that they have to import LNG and that’s very expensive.

Right now, natural gas is selling in Japan for $17 per million BTUs. You can buy the same BTUs in Europe for $9 today, or in the US for $3.25

James Stafford: What about Germany’s decision to also phase out nuclear power?

Arthur Berman: For Germany to abandon nuclear… that decision is truly delusional because they haven’t had any problems over there. Nor is Germany particularly earthquake prone or tsunami prone. They have forced themselves into a love relationship with Russia.

James Stafford: What are your views on Canada’s tar sands? Are they a rich source of oil that the U.S. needs to exploit? Or do you think they’re a carbon bomb, which could do irreparable damage to the climate?

Arthur Berman: Well, that’s a very good question. I suppose they’re both, as are virtually all things that burn. Right? They’re a very rich source of oil. And they’re dirty. It requires a lot of natural gas heating to convert them into some usable form, a lot of processing, but here’s the thing, if the United States doesn’t buy that oil from Canada, do you think Canada’s just going to say, “Oh. Okay. Nevermind. We’ll forget about all this.”

No. They’re going to sell it somewhere else. They’ll probably sell it to Asia. So, the issue of the carbon bomb doesn’t get resolved by the United States not taking the oil.

So, to me, that’s off the table. Yes. I think it’s an incredibly sensible play to get your oil from a neighbour, and a neighbour who you trust, and it doesn’t require overseas transport and probably getting involved in periodic revolutions and civil uprisings.

James Stafford: Is there any technology, any development you see coming in the future that can help us get where we need to be? Is conservation really the only answer or do you have any hopes for some of the alternative energy technologies, such as solar or, even, some of these more advanced technologies such as Andrea Rossi’s E-cat machine?

Arthur Berman: Oh. I have all the enthusiasm for technology that you could ask for. I’m a scientist and I love technology but I heard a very good presentation several years ago on your exact question and the man who gave a talk said, “I’m going to give you a rule to live by. If it’s not on the shelf today, then a solution is no sooner than ten years in the future.” So, when you talk about E-cat and you talk about algae and all this kind of stuff, it’s not on the shelf today. So, that means it’s in some sort of pilot stage of testing.

Work harder guys. Work harder and faster because you’ve got a lot of work to do. So, yes, I’m enthusiastic. I think there are some great ideas out there but I don’t see any of them helping us in the coming five to ten-year period.

James Stafford: Environmentalists talk about the evil of fossil fuels, but have they really done their research to see how vital it is to pretty much everything that we base our modern lives upon?

Arthur Berman: Well, that’s exactly right. My oldest son and his family until recently lived in California, and in California people think electricity comes from the wall. They don’t have any idea that most of their electricity comes from horrible coal-fired power plants in New Mexico and Arizona. As long as they don’t have to see it, they don’t have a problem.

But, in this world, and in this life, we’re all connected and if you see something you don’t like, there’s a good possibility that whatever they’re doing there has something to do with something you’re using. So, this is an issue.

Source: https://oilprice.com/Interviews/Shale-Gas-Will-be-the-Next-Bubble-to-Pop-An-Interview-with-Arthur-Berman.html

By. James Stafford of Oilprice.com

Andrew McCarthy Discusses High Risk Energy Investing

Risk perception isn’t what it used to be. Ask the swelling ranks of Canadian junior oil and gas companies braving high-risk venues like Sudan, Iraq and even Yemen.

Technological advances and the shale revolution are making risk easier to digest. And political risk is no longer limited to developing countries. Plus, risk is increasingly relative: Ask anyone who’s been caught up in the politics of the Keystone pipeline.

Sudan is a case in point. While instability and a very fragile peace with South Sudan remains a threat, there is also growing optimism. The philosophy is this: Sudan and South Sudan will come to terms for the sake of economic growth, and oil will get them there. The prize: An estimated 5 billion barrels of oil.

In an exclusive interview with Oilprice.com publisher James Stafford, Emperor Oil CEO Andrew McCarthy reveals:

• Why investors are hitting up high-risk regions
• Why Africa is more opportunity than risk
• How political risk is no longer limited to developing countries
• Why Shale WILL live up to the hype
• Why conventional oil is still a great investment
• And why human ingenuity will prevail

Emperor Oil (TSXV: EM.V) is an international oil and gas company with a focus on the Middle East and North Africa. Most recently, the company has renegotiated the terms of a joint venture gas deal in Turkey and introduced a significant conventional oil project in Sudan.

James Stafford: Oil and gas juniors are now setting up shop in high-risk countries like Sudan, Iraq and even Yemen. What’s behind this new era of risk, and are we likely to see more of this?

Andrew McCarthy: This question creates an opportunity for risk comparison – is it less risky to drill a mile below the ocean surface and create the kind of disaster we saw BP (NYSE: BP) deal with in the Gulf, or do we continue to look for work in regions that have accessible resources and are anxious to advance their economic position along with the health and welfare of their community?

James Stafford: So you are saying that on a comparative level even North America has become a political risk? And that in this balancing act, volatile places like Sudan do not necessarily pose any greater political risk?

Andrew McCarthy: Yes, there are always risks associated with any investment. The US halted all exploration in the Gulf of Mexico for extended periods following the BP disaster. This is a risk that few would have foreseen when exploration and development began in a country whose level of political risk is considered to be negligible.

James Stafford: Furthering your point, there have been a number of other unforeseen political risks, both in the US and Europe…

Andrew McCarthy: Certainly. The US banned all exploration and production in the Marcellus Shales in the State of New York. The US has also stalled the construction of Keystone XL pipeline that would link the US to Canada’s oil sands. In Canada, we have seen the province of British Columbia place a moratorium on offshore drilling. Across the Atlantic, we have also seen Europe place a moratorium on all shale exploration and development.

James Stafford: What is your message to investors who still view Africa and the Middle East as too risky?

Andrew McCarthy: Based on all of these North American and European developments, is it any less risky than operating in developing countries?

James Stafford: Which brings us to Emperor’s operations in Sudan. When South Sudan declared independence in July 2011 it took with it some 75% of the known oil resources. Since then, the situation between Juba (the capital of South Sudan) and Khartoum (the capital of Sudan) has been tense and even bloody. How will this affect exploration and extraction?

Andrew McCarthy: Well, now we have healthy competition due to the secession of the south and the need for both countries to maximize their economic opportunity. The skirmishes fought in the spring were quickly squelched when both countries realized the impact it was having on their economy and their people. Rather than fight over existing production they have chosen to expand their resource development so that there is a larger pie to share.

There have certainly been many difficulties over the years but the country recently emerged from a democratic process that the South secede in a diplomatic fashion. Both countries are now keen to advance, and the competition to succeed is healthy and beneficial. Of course, one also has to remember how truly enormous this country is and how remote some of the areas are in which much of the oil reserves are located.

James Stafford: There is also the question of infrastructure. South Sudan is seeking alternatives to transiting oil through Sudan, and Juba is extremely optimistic about the prospects of a new pipeline from South Sudan to Kenya. This is all part of Kenya’s massive regional infrastructure plan—the $24.7 billion Lamu Port-South-Sudan-Ethiopia Transit corridor (LAPSSET). How feasible is this pipeline? What are the implications for Khartoum?
How much would Khartoum stand to lose in transport revenues if this pipeline is realized?

Andrew McCarthy: I think this is an unnecessary undertaking that will be difficult to finance for many different reasons. Pipelines are exorbitantly expensive to build and would seem especially unnecessary given the fact that they could face similar problems to those which they have just overcome in Sudan [in terms of prohibitively high transit fees].

It is doubtful that a new pipeline would have any negative effects in Sudan. If anything it would likely cause the country to push for further exploration and production so as to maximize the infrastructure already in place.

James Stafford: The International Energy Agency (IEA) forecasts a drop in Sudan’s oil production through 2017. This contradicts Sudan’s own projections that it could double production in the next two years. How realistic is this?

Andrew McCarthy: I think that they are more than realistic. The main pipeline and port in Sudan is more than capable of handling the capacity. The resources are proven and available.

James Stafford: Despite the problems between Juba and Khartoum, Emperor seems confident that development and production will proceed without interruption. Can you tell us more about your recent progress in Sudan that boosts this optimism?

Andrew McCarthy: Emperor has signed an MOU to acquire a 42.5% interest in concession Block 7 in Sudan. The other 57.5% is owned by the country’s energy company, Sudapet. Block 7 is 10,000 sq km in size and tens of millions have been spent on the property. The property has 3 discovery wells which have been drilled, capped and are waiting for production. Initial production will be shipped by truck using existing roads which connect the property to the country’s main pipeline, located approximately 60kms away. A tie-in pipeline will be constructed during the second phase of development.

James Stafford: Beyond Sudan, another key area of focus for Emperor has been Turkey, a key strategic player in Middle East oil and gas, where oil majors like Chevron Corporation (NYSE: CVX) and ExxonMobil (NYSE: XOM) have significant interests. What can you tell us about Emperor’s recent activities here?

Andrew McCarthy: Emperor has a JV agreement with a partner in the Catalca Block in Turkey’s Thrace Basin. A major gas discovery was made on the property, which is located 30 kilometers west of Istanbul and only 5 kilometers from the natural gas pipeline supplying the country. The short-term plan is to complete the discovery well and connect it with the pipeline tie-in located only 5kms away. The long-term plan is to drill 5-10 more wells and expand the resource significantly.

James Stafford: In high-risk countries, what should investors look for risk mitigation?

Andrew McCarthy: Management with experience and diplomatic skills; a country with a history and commendable track record in negotiation and resolution; resource potential; development costs; production curves.

James Stafford: Certainly, the reverse would be true as well?

Andrew McCarthy: Yes. In Sudan, for instance, Canadians have an excellent reputation for quality work. They embrace the community and are willing to share their technologies and knowledge with the local people. Canadians are seen as net contributors and effective partners whose relationships are valued.

James Stafford: How are technological advances contributing to the juniors’ readiness to operate in risky territory?

Andrew McCarthy: With ever improving technical advantages in extraction methods I believe we will see more opportunities for resources which have a lower cost structure. Shale oil and gas developments will continue to evolve and conventional oil will have to compete on a cost level. Traditional extraction methods won’t have the same exploration budgets nor will they be able to compete unless the extraction is simple and inexpensive. I believe this is why we are starting to see a renewed interest in Africa and South America.
Energy reserves are abundant, they are often defined by past work and are inexpensive, efficient and safe to extract. This creates a significant advantage that can in many cases offset the political and geopolitical risk that was once associated with these parts of the world.

I also see the world becoming a safer place. Modern communication has improved access to information and changed people’s basic needs to wants and desires. Resource development creates employment and wealth – the cornerstone from which luxury and comfort is attained. Energy development is fundamental to advancing social, economic, health and safety standards for the world.

James Stafford: On a broader level, does natural gas have much further to fall, or have we seen the bottom?

Andrew McCarthy: I think we have seen a bottom in North America but Europe’s moratorium on shale exploration and China’s environmental concerns and air quality issues create a huge demand for natural gas, which in turn creates a long-term, sustainable model for natural gas exploration, development and export.

James Stafford: Will the shale revolution live up to the hype?

Andrew McCarthy: I really don’t believe the hype has even started yet. Unfortunately, the uninitiated are still focusing on the concept of ‘fracking’, while this is in fact one of the oldest technologies. We’ve been ‘fracking’ oil and gas wells since the 1930s. What has changed and continues to change is the technology applied – do you know they actually use CAT scan equipment to check shale porosity? It’s truly a fascinating region of science. The shale oil developers refer to 2010 like its ancient history and there is no reason to expect this rapid pace of development and advancement to slow.

James Stafford: While shale is currently the hot item, which sector will be the next big thing for energy investors?

Andrew McCarthy: Conventional oil is an excellent place to invest if you can find opportunities in areas that have excellent resources and are overcoming or mitigating their political risk. I think that technology stocks which are focused on the energy sector create wonderful investment opportunities. We are in a technological revolution in this industry. When people speak of peak oil they should first realize that the issue is energy – not oil. And in order to talk about a peak we have to eliminate the human factor – man’s creativity, ingenuity, invention and design always has and always will prevail.

Source: https://oilprice.com/Interviews/High-Risk-Investing-The-New-Trend-in-Energy-Interview-with-Andrew-McCarthy.html

By. James Stafford of Oilprice.com

Ed Dolan Discusses Affordable Energy

We were fortunate enough to speak with the well known economist Ed Dolan on various energy and economic issues.

In the interview Ed talks about the following:

• Why cheap energy is not vital to economic growth 
• Why high oil prices aren’t necessarily a bad thing 
• Why the U.S. Oil and gas boom is hurting Russia’s global influence 
• Why Obama’s desire to cut oil industry tax breaks could be a great idea 
• Why energy policy needs to be completely reformed 
• Why Russia’s Arctic Exploration could cause the worst environmental disaster to date 
• Why renewable energy investors should be very worried about the Natural gas boom 
• Why the EU was flawed from the start 
• Why subsidies for renewables are just plain wrong. 
• Why we should give QE3 a chance 
• Why abundant natural resources can bring a curse of riches

Ed writes the popular economics blog Ed Dolan’s Econ Blog and has just recently released a book:TANSTAAFL (There Ain’t No Such Thing As A Free Lunch) – A Libertarian Perspective on Environmental Policy, which you can find out more about here

Interview by. James Stafford of Oilprice.com

James Stafford: Access to cheap energy is vital to economic growth. What do you see happening with the economy over the coming years as the time of cheap oil comes to an end?

Ed Dolan: In my view it is a myth that cheap energy – “affordable energy” as many people like to say is vital to growth. The idea that there is a lockstep relationship between growth of GDP and use of energy is widespread, but the data simply does not bear it out. Instead, what they show is that the world’s best-performing economies have become dramatically more energy efficient over time.

The World Bank uses constant-dollar GDP per kg of oil equivalent as an energy efficiency metric. From 1980 to 2010, the high-income countries in the OECD have increased their average energy efficiency by 55 percent. The United States has done a little better than that, increasing its energy efficiency by 81 percent over that period. That’s pretty remarkable, considering that we haven’t really had a policy environment that is supportive of efficiency.

Think what we could do if we did.

Even after the efficiency gains in efficiency we have made, we still have a long way to go. The US economy is still 15 percent less energy efficient than the average for high-income OECD countries, giving it plenty of room to improve. Switzerland is almost twice as energy-efficient as the US, and the UK is 68 percent more efficient.

Some people say that the only reason the United States has been able to grow while using less energy is the deindustrialization of its economy, outsourcing heavy industry to China. However, compare the US with Germany. Germany is an export powerhouse and Europe’s best-performing economy, yet its energy efficiency has increased at almost the same rate over the last 30 years as the United States, an 80 percent gain in efficiency compared to 81 percent. Furthermore, despite being proportionately more industrialized than the US and a major exporter, Germany squeezes out 41 percent more GDP from each kg of oil equivalent.

In short, we don’t have to hypothesize about the possibility of someday breaking the lockstep relationship of growth and energy use—we and most of the rest of the advanced world are already doing it.

James Stafford: What effect can you see America’s Oil & Gas boom having on foreign policy?

Ed Dolan: On the whole, I see it as beneficial. Energy dependence has led us to buy a lot of oil from countries that are unstable and/or unfriendly to us. Anything we can do to reduce that dependence gives our foreign policy more room to maneuver. The beneficial effects reach beyond our actual imports and exports. The US gas revolution is having repercussions all the way to Russia, where Gazprom is seeing its market power undermined, and Russia, as a result, is losing some of the geopolitical leverage its pipeline network has given it.

James Stafford: From Siberia and Poland to China and Qatar – the shale revolution has politicians salivating at the thought of a cheap and abundant source of energy. But can the results seen in the U.S. be easily replicated in other parts of the world?

Ed Dolan: I think you’re going to have to ask someone with more engineering background for the technical details, but from what I read, the answer is that it won’t always be easy. It is my understanding that some countries where shale seemed just recently to have great promise have already encountered disappointments in practical exploratory work. Poland I think is an example. Furthermore, the environmentalist opposition to fracking seems even stronger in many European countries than in the United States.

Still, I am hoping that the shale revolution will pan out in at least some countries. Think how much difference it would make, say, to Ukraine’s foreign policy if they were able to break their dependence on Russian gas.

James Stafford: Gail Tverberg has written a recent article suggesting the world is suffering from high-priced fuel syndrome, which has the following symptoms:

• Slow economic growth, or contraction 
• People in discretionary industries laid off from work 
• High unemployment rates 
• Debt defaults (or huge government intervention to prevent debt defaults) 
• Governments in increasingly poor financial condition 
• Declining home and business property values 
• Rising food prices 
• Lower tolerance for immigrants 
• Huge difficulty in funding retirement programs, programs for disabled, and regular pension plans 
• Rising international tensions related to energy supply

Do you think this is too convenient and an oversimplification of the problems facing world economies at the moment? What would you blame for the plethora of economic woes being experienced at the moment?

James Stafford: I don’t buy the argument at all. Yes, when countries are hit by unexpected upward shocks in fuel prices, we do see short-run results like slower growth and layoffs, but those are short-term problems. When the proper structural adjustments are made, countries with high fuel prices manage to achieve strong growth and full employment.

Where are fuel prices lowest? If you look up the data and rank countries by retail fuel prices, you find the low-price end of the rankings crowded with countries like Egypt, Cambodia, Iran, Pakistan—not exactly economies we would like to emulate.

We’ve got big economic problems, but a lot of them don’t have much to do with energy.

What about a healthcare system that delivers mediocre results at the world’s highest cost?

Health care isn’t all that much energy driven. What about our steady move down the international rankings in education—are you going to blame that on the high cost of heating classrooms? Hardly.

James Stafford: Oil prices have been near to the $100 a barrel mark for some time now, and don’t look likely to drop back to previous low levels. What effect could this increased price have on oil importing economies compared to oil exporting economies?

Ed Dolan: Clearly, any oil price increase has the short-term effect of transferring wealth from using countries to producing countries. However, the long-run effects are what matter.

In the long run, high prices just accelerate the trend for using countries to become more efficient and less dependent. Meanwhile, the producing countries often don’t manage their oil riches well. They fall victim to the “curse of riches.” The curse takes the form partly of a loss of competitiveness in their non-energy sectors (the so-called “Dutch disease”). Partly it takes the form of corruption of their political systems. Russia is a poster child for both aspects of the curse of riches.

James Stafford: Renewable energy is more expensive than fossil fuels, so how can people be persuaded to choose the less economical option of renewables over the likes of coal and natural gas?

Ed Dolan: There is only one right way to promote renewables, and that is to introduce full-cost pricing of all forms of energy. Full-cost pricing is a two-part program.

First, it means pricing that covers the full production costs for every form of fuel. No subsidies for anyone—not for oil, not for ethanol, not for wind or solar.

The second half of full-cost pricing is to include all of the nonmarket costs, what economists call the “external costs” or “externalities.” The most publicized of these are pollution costs, whether those take the form of local smog, oil spills, climate change, or bird kills. Some people, I am one of them, would like to count in something for the national security costs of dependence on unfriendly and unstable foreign sources of energy supply.

Full-cost pricing accomplishes two things. First, it levels the playing field so that each form of energy competes on its economic merits, not whether corn-growing states have early primaries or oil companies have big SuperPacs. Second, by raising prices to consumers to a realistic level, it accelerates the trend toward energy efficiency that is already underway.

Subsidies for renewables are just plain wrong, even if you look at them from a hard-core environmentalist point of view. With a subsidy, on the one hand, you say, “produce more green energy” and other the other hand, you turn around and tell the consumer, “waste more green energy.” We don’t want to waste energy from wind or solar any more than we want to waste oil and gas. We shouldn’t forget that even the greenest renewables can have significant environmental impacts.

The whole “affordable energy” idea is based on the myth that if we don’t include those external costs in the price—the pollution costs, the national security costs—they just go away. They don’t. Keeping prices artificially low just transfers those costs to someone else, someone unlucky enough to live downwind, someone who owns beachfront property that gets eroded away as the sea level rises, someone who has to go off to fight a war to keep the shipping routes open. There are two things wrong that. First, it’s immoral. If we believe in the market economy, the rule of law, and all that, we have to respect people’s property rights and their human rights. Second, it’s inefficient. It doesn’t strengthen our economy, it weakens it. If there’s one thing we can’t afford, it’s “affordable energy.”

James Stafford: Obama has made clear his desires to cut the $4 billion a year tax breaks given to oil companies. What affect do you believe this would this have on the US economy and the US oil industry?

Ed Dolan: If it is done as part of a comprehensive move toward full-cost pricing, it could only strengthen the US economy. The oil industry would whine, but if we cut subsidies and tax breaks for competing energy sources at the same time, oil will remain a competitive part of the energy mix for many years to come.

James Stafford: The oil industry has enjoyed decades of subsidies and grants, so do you think it is unreasonable to already start cutting the subsidies to renewable energies and expect them to survive on their own?

Ed Dolan: As I explained above, the answer is yes, provided it is done as part of a package that reforms our energy policy as a whole in the direction of full-cost pricing.

James Stafford: Economic growth is generally dependent on the access to energy. As the supply of energy grows, so too does the economy (more or less). Global oil supplies are pretty much stagnant, so do you predict that only nations that successfully convert to a renewable energy mix with an abundant supply of cheap energy will be able to experience continued economic growth at a similar level experienced by the developed countries of recent years?

Ed Dolan: Again, I just don’t buy the doctrine that growth is dependent on ever-increasing energy use. For sure, those countries that pursue sound policies, like full-cost pricing to rationalize their energy mix and promote efficiency, are the ones that are going to keep growing.

James Stafford: As the arctic ice melts at a rapid pace the world’s superpowers are jockeying for position to exploit the region’s vast oil & gas & mineral deposits. Environmental groups are rightly concerned, but is this a resource that we cannot afford to ignore?

Ed Dolan: Arctic oil, like any other source of energy, should pay full freight for any environmental impacts it has. If it can bear those costs and still be competitive, I think it should be in the mix. I am worried about Russia, though. It has a dangerous combination of an environment-be-damned attitude and low technical competence that could lead to headline-grabbing disaster worse than the Gulf blowout or Exxon Valdez.

James Stafford: What effect do you see the shale revolution having on investments in renewable energy?

Ed Dolan: If I were trying to make money by generating electricity with wind or solar, I’d be worried about gas. I don’t have all the relevant numbers at my disposal, but my gut feeling is that even if you price in full environmental costs for wind, solar, and gas—including environmental costs associated with fracking—gas is still going to be pretty competitive.

James Stafford: What are your views on Ben Bernanke’s QE3?

Ed Dolan: I’ve written repeatedly about QE over at Economonitor, so I am on record as saying we should try it. The trouble is, QE is not a magic bullet. Properly executed and properly communicated, it can help support the recovery, but it can’t do it alone.

That is one point where I agree 110 percent with Ben Bernanke Here is what he said in a speech at the Fed’s Jackson Hole conference at the end of the summer:

“It is critical that fiscal policymakers put in place a credible plan that sets the federal budget on a sustainable trajectory in the medium and longer runs. . . Monetary policy cannot achieve by itself what a broader and more balanced set of economic policies might achieve.” https://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm

James Stafford: How do you see the EU solving its debt crisis?

Ed Dolan: I’m afraid I’m a euro pessimist. The US debt situation is hard enough to resolve, but Europe’s is worse. At the same time, whatever you say about gridlock in Washington, our political decision making is a model of streamlined efficiency compared with the EU.

James Stafford: Do you think the EU was doomed to fail from the start with the format that it has? Could more success be seen in a split EU, with the northern/richer nations using one currency, and the southern/poorer nations using a different currency?

Ed Dolan: Doomed, I don’t know, but flawed, certainly. Just recently, I was looking back at what economists were writing about the prospects for the euro back in the early 1990s, when it was still just a project. They were telling us, for one thing, that Europe is too diverse to be ideal for a currency union—and that was when there were only 15 EU countries. Second, they said that you can’t run a monetary union without a central government, a fiscal union, and a banking union. You still don’t have any of those.

I am not sold on the idea of a northern euro and a southern euro. If the currency union doesn’t work, it doesn’t work. Break it up. Sure, some countries will find it works for their special circumstances to tie their currencies to a large, stable neighbour. I could see the Danes or the Latvians keeping a link to the German currency, for example, and I’m sure the Vatican will continue to use whatever currency Italy uses. But a formal, north-south divide doesn’t make much sense to me.

James Stafford: In terms of tackling the current economic situation in the US, of the two main presidential candidates, who do you suggest is the best man, and why?

Ed Dolan: I do not think we can tackle the current economic situation without a thorough-going fiscal policy reform that includes three key elements: Spending cuts, revenue increases, and a rewrite of the whole tax system to eliminate loopholes and cut marginal rates. Furthermore, the package can’t be heavily front-loaded like George Osborne’s austerity program in the UK, which has sent their economy back into recession. Ours should be back-loaded, with an element of stimulus now and an ironclad commitment to move the budget toward surplus as the economy improves. It’s a lot to ask for.

We are not going to get good budget policy out of the GOP unless members of that party make a clean break with mantra that they will not accept a dime of new revenue, not even if it comes from eliminating the most loathsome tax loopholes. Personally, I am never going to vote for a candidate for President, the Senate, the House, or any office who has signed that nonsensical Grover Norquist tax pledge.

At the same time, I have been very disappointed at the lukewarm support Obama has given to the kind of program I would like to see. During the first debate, Romney said that when Obama didn’t “grab” Simpson-Bowles—that was his word, and a good one—it was a failure of leadership. That was one point where I agreed with Mitt.

Then, you also have to take into account the vote for Congress. I’m afraid there is going to be continued gridlock as long as the GOP controls the House. In the Senate, there are at least a few people in both parties who are willing to meet behind the scenes and talk compromise, but not in the House, not right now, anyway. Maybe what we need in the White House is someone who is a real politician, a negotiator and dealmaker in the mould of a Clinton or an LBJ. Instead, we have the choice between a manager and a law professor. I’m not optimistic that either of them will be able to do what needs to be done.

Source: https://oilprice.com/Interviews/The-Myth-of-Affordable-Energy-Interview-with-Ed-Dolan.html

By. James Stafford of Oilprice.com

The Future of Green Banks

As America’s clean energy industry takes up position in a no-man’s land between subsidies and sustainability, the idea of “Green Banks” is being touted as a life-line that will push the industry into maturity, but it’s an idea that will only work on a state level and by empowering states to make their own clean energy decisions.

Green Banks are essentially clean energy finance banks formed at the federal or state level that operate as public-private financing institutions with the power to raise capital to support clean energy projects through loans and loan guarantees. These banks can issue bonds and sell equity and they can often offer cheap loans.

In the US, it is the state level that would likely take the lead in forming Green Banks, and the state of Connecticut has already taken the plunge with the establishment of the Clean Energy Finance and Investment Authority (CEFIA). Launched last year, CEFIA merges several clean energy funds whose revenues come from a utility system benefit fund and the Regional Greenhouse Gas Initiative, among others, with a financing authority repurposed as a clean energy investment bank. Presently, CEFIA is talking with solar photovoltaic stakeholders to boost the bundle, and according to the Brookings Institute, is close to making its first loans.

In Germany and the United Kingdom, the idea of the Green Bank has also taken hold, with a clean energy development bank already boasting success in Germany, while the UK’s is only just getting off the ground. The UK’s version, however, is experiencing some setbacks in and a recession and deficit that is not falling as planned, the UK Green Investment Bank is behind on gaining borrowing powers.

The idea is being put forward by the Brookings Institute, which issued an in-depth report on Green Banks last week as part of the Brookings-Rockefeller Project on State and Metropolitan Innovation.

But the idea is not entirely new. In fact, the Export-Import Bank of the United States (Ex-Im Bank) and the Overseas Private Investment Corporation are similar endeavors that have successfully raised capital for energy and infrastructure in the past. The difference this time around is that Green Banks would be the purview of state governments rather than the federal government.

But the idea is not entirely new. In fact, the Export-Import Bank of the United States (Ex-Im Bank) and the Overseas Private Investment Corporation are similar endeavors that have successfully raised capital for energy and infrastructure in the past. The difference this time around is that Green Banks would be the purview of state governments rather than the federal government.

State budgets are challenged financially, so Green State Banks would be a sound solution that would allow states to leverage public money with private sector funds and, importantly, private sector experience. The overall effect will be to cut clean energy’s dependence on federal subsidies and tax credits, which in turn will make them more competitive and hopefully push development into full maturity, all the while allowing states to make their own decisions. It is also much easier for states to forge public-private relations than it is for the federal government.

There is no single model that could work across states, however, so it is up to each state to design their own form of green banking. There are at least three models of banks that states could choose from depending on their specific circumstances and needs. The Connecticut model is a semi-public corporation that merges funds the state already has for clean energy with private investment in the bank. They could also take an existing infrastructure bank and add on a Green Bank to its services, or transform a grant authority into a lending authority in partnership with the private sector.

More to the point: How will this affect the consumer? According to Bill Ritter, Director of the Center for the New Energy Economy (CNEE) at Colorado State University, consumer purchased energy resources “have never fit well without our existing utility model” because “utilities charge consumers for energy on a monthly basis, having financed their investments over time. Yet, when a consumer purchases efficiency or generation resources, traditionally they need to make a one-time, large up-front expenditure and then see their savings accrue over time through a reduction in their utility bill.”

Green Banks, he argues, would give consumers more and better options. Specifically, they would allow consumers to replace a portion of their monthly utility payment with a payment for energy efficiency or solar power and thus “protect themselves against rising utility bills and increase the value of their home or business while lowering their utility costs at the same time.”

The bottom line is that green banking is a good idea, as long as it remains the purview of state governments rather than the federal government. At a time when clean energy is under attack and only on the cusp of maturity, state green banks could be the first feasible plan out there, and it’s likely to be attractive to a host of governors. The idea will gain even more traction if Congress fails to extend the production tax credit (PTC) this year. Without green banking, the PTC is the only way the clean energy industry will survive. Green banking is a more viable alternative that extending the PTC.

Source: https://oilprice.com/Alternative-Energy/Renewable-Energy/Money-A-New-Decentralized-Shade-of-Green.html

By. Jen Alic of Oilprice.com

SHOCKER: Big Oil Funding U.S. Politics

U.S. Rep. John Boehner, speaker of the House of Representatives, received nearly twice as much financial support from donors tied to the energy sector than did the next-closest recipient, a report from the National Wildlife Federation finds. The 20-page report highlights the role it says oil companies play in U.S. politics, stating energy companies are working behind the scenes on Capitol Hill to influence legislation in favour of oil, natural gas and coal policies. The NWF report finds that the current 112th U.S. Congress has voted one out of every five times against legislation drafted in favour of environmental issues.

Boehner, R-Ohio, in a press conference this week, spoke out against a stagnant unemployment climate in the United States. The U.S. Labour Department, in an early September report, showed the unemployment rate dropped slightly in August to 8.1 percent, down 0.2 percent from its July level. That’s the 43rd consecutive month, however, that the unemployment rate was above 8 percent, the longest period since World War II. The House speaker said this was a sign of President Barack Obama’s failure to lead.

On Friday, Boehner led the House of Representatives in passing the so-called Stop the War on Coal Act, a measure that would block the Environmental Protection Agency from regulating greenhouse gases. It’s unlikely to pass through the Senate.

“We’re the Saudi Arabia of coal and the president wants to shut down coal production and the use of coal in the United States so that we can export it to our economic competitors around the world,” saidBoehner in a statement. It’s a jobs issue, he said.

The report from the NWF, released on the eve of the House vote, finds that Oxbow Corp., a private company focused on mining and marketing of coal, natural gas and petroleum, donated more than $80,000 to Boehner’s campaign since 2010. The NWF explains that Oxbow was founded by William Koch, whose twin billionaire brothers are among the largest corporate financiers of the U.S. Congress. According to information NWF gathered from The Center for Responsive Politics, energy companies like Oxbow gave more than $814,000 to Boehner’s campaign during the current Congress.

The NWF’s report, however, is non-partisan in its effort to showcase the energy sector’s monetary influence over U.S. politics. Sen. Joe Manchin, D-W.Va., who serves on the Senate Energy and Natural Resources Committee, ranked No. 2 on the NWF’s list. Manchin, ahead of Friday’s vote in the House,said it was clear that “the EPA has overstepped its bounds” in terms of action that could target the coal industry. Of the top 10 lawmakers listed in the NWF report, however, Manchin is the only Democrat and received $480,050 compared to Boehner’s $814,060.

The NWF states that the House of Representatives, led by Boenher and his fellow Republicans, voted 109 times since the start of 2011 to weaken environmental laws or some of the safety regulations in the oil industry.

Larry Schweiger, president and CEO of the NWF, said the report provides a “behind the curtains” look into U.S. politics.

“America has been losing ground in the climate fight, and much of this is due to gridlock within our political system,” he writes. “The resulting inertia is sustained by oil, gas, and coal companies that have spent more than a billion dollars on campaign contributions, public advertising, and lobbying in the past two years alone.”

Source: https://oilprice.com/Energy/Crude-Oil/Big-Oil-Funding-U.S.-Politics.html

By. Daniel J. Graeber of Oilprice.com

2011 Renewable Energy Investment in Africa Reaches $3.6B

First, the bad news.

Although Africa has vast fossil and renewable energy sources, only twenty percent of its population has direct access to electricity and in some rural areas, four out of five people are completely without power. According to the UN, over 600 million Africans currently do not have access to electric power. A depressing 70 percent of Sub-Saharan Africa’s population is living without access to clean and safe energy for their basic needs such as cooking, lighting and heating, making energy poverty among the most urgent issues facing Africa. Worldwide, more than 1.4 billion people worldwide have no access to electricity, and 1 billion more only have intermittent access.

Over 2.5 billion people, almost half of humanity, rely on traditional biomass – wood, coal, charcoal, or animal waste to cook their meals and heat their homes, exposing themselves and their families to smoke and fumes that damage their health and kill nearly two million people a year. More than 95 percent of these people are either in sub-Saharan Africa or developing Asia.

The good news?

According to the Managing Director of Nigeria’s Bank of Industry (BOI), Evelyn Oputu, total investments in renewable energy in Africa rose from $750 million in 2004 to $3.6 billion in 2011. To put this in a global context, worldwide investment in renewable energy has risen from $33 billion in 2004 to $211 billion in 2011.

And the future?

According to a report issued in August 2011 by Frost & Sullivan entitled “Mega Trends in Africa: A bright vision for the growing continent,” investment in renewable power in Africa is set to grow from the 2011 total of $3.6-billion in 2010 to $57-billion by 2020, a staggering 1,583 percent increase in nine short years. According to the document, “The key growth sectors will be wind power, solar power, geothermal power and foreign direct investment (FDI) into energy and power infrastructure.”

The reason for the spectacular projections? Africa’s combination of a massive unmet demand, including remote communities, allied to an abundance of renewable power potential in the form of solar, wind and geothermal potential. To give but one example, Only seven percent of Africa’s hydropower capacity has been developed up to now.

Africa is not yet locked into the inefficient, oft-polluting infrastructure of many Western countries. Accordingly, Africa with modern efficient technologies could build a renewable energy infrastructure that could bypass the inefficient, fossil fuel-centered energy infrastructure systems of the developed world.

Modest starts in renewable energy have already begun across the continent. Wind power projects in Africa are planned or under way in Egypt, Ethiopia, Kenya, Morocco, Nigeria, Tunisia, and Tanzania – including Kenya’s 0.3 gigawatt Lake Turkana project and 0.7 gigawatt of capacity under construction in Morocco, while Cameroon, Kenya, Tanzania, and Uganda all have existing biomass power capacity or plans for future development.

Solar? South Africa has its planned solar park in Upington, intended to contribute 5,000 megawatts to the national electrical grid, while North Africa’s Desertec is the largest solar power project ever conceived, designed at a potential cost of $500 billion to provide a significant portion of the electricity needs of participating countries in the Middle East and North Africa (MENA) region and up to 15 per cent of Europe’s electricity needs by 2050.

Africa’s ambitions have the support of the United Nations, where in 2010 the General Assembly unanimously endorsed a resolution designating 2012 as “The International Year of Sustainable Energy for All.” UN Secretary-General Ban Ki-moon has set three inter-linked objectives to support the goal of achieving “Sustainable Energy for All” by 2030, which are ensuring universal access to modern energy services, doubling the rate of improvement in energy efficiency and doubling the share of renewable energy in the global energy mix.

The UN Sustainable Energy for All incorporates a number of initiatives focusing on Africa, including World Bank Group’s Lighting Africa, the Paris-Nairobi Climate Initiative, the Africa-European Union Energy Partnership, and the Global Alliance for Clean Cookstoves, as well as the EU’s decision to make access to sustainable energy a development priority through its “Agenda for Change.” A number of countries, including South Africa, are also leading the way with national initiatives.

But these initiatives are relatively recent and need financial support to prosper. It was only in September 2010 that African and European leaders launched the Africa-EU Renewable Energy Cooperation Program (RECP) at the First High-Level Meeting of the Africa-EU Energy Partnership (AEEP) in Vienna.

AEEP’s agenda is nothing if not ambitious, as its targets on renewable energy to be reached by 2020 include 10,000 megawatts of hydropower facilities, 5,000 megawatts of wind power capacity, 500 megawatts of solar energy capacity and tripling the capacity of other renewables, such as geothermal, and modern biomass.

The downside to this picture? Three things – the need for massive amounts of investment capital, a problem attendant to massive amounts of cash – corruption, and the continent’s changing political landscape, which is already impacting the Desertec North African solar initiative as the Arab Spring roils the south coast of the Mediterranean.

But both the need and potential are there – all that are currently lacking to make the future predictions a reality are cash and political will.

Source: https://oilprice.com/Alternative-Energy/Renewable-Energy/Investment-in-African-Renewable-Energy-Reaches-$3.6-Billion-in-2011.html

By. John C.K. Daly of Oilprice.com