Oilfield Daily News

There is one thing on which almost all pundits, industry veterans, forecasting agencies and members of the public seem to agree. Energy, particularly hydrocarbons, is going to get ever scarcer and more expensive. The “age of easy oil” is over.

Former Shell CEO Jeroen van der Veer opined in April 2008 that, “Easy oil and easy gas…is simply depleted” and that December, his unlikely soul-mate, Russian Prime Minister Vladimir Putin, concurred: “The era of cheap energy, including cheap gas, is coming to an end”.
Oil prices remain high by historic levels, and the continuing Macondo disaster in the Gulf of
Mexico seems to confirm the belief that the oil industry is venturing into ever more-challenging frontiers.

Business plans and economic projections are founded on the belief in the end of easy oil. It predicts a rosy future for the Middle East and Russia, drives growth in renewable energy and alternative vehicles, and leads many to worry about “peak oil”, resource wars and a collapse of industrial civilization.
But what if this belief is wrong?

Resources in the ground are clearly abundant. Canadian Association of Petroleum Producers Vice President Greg Stringham, pointing to the 175 billion barrels recoverable from the Canadian oil sands, says, “It won’t be a lack of resources that causes a shift away from oil. There’s lots of oil.” The United States Geological Survey recently updated their estimates for recoverable oil from Venezuela‟s Orinoco Belt to 513 billion bbl. Compare this to BP‟s estimate of some 1200 billion bbl of global conventional oil reserves.
Some shale formations, such as the US‟s Bakken and Eagle Ford, contain substantial amounts of oil and natural
gas liquids too, a form of unconventional oil which has emerged from nowhere in the past few years.

Traditional onshore light crude, though often inaccessible to the international oil companies, remains plentiful too. We might be skeptical of Iraq‟s plans to reach some 12 million barrels per day output by 2015, despite the assistance of Shell, Total, ExxonMobil, CNPC and others. The political, security and logistical challenges are clearly huge. But most industry observers agree that, in the longer term, the technical potential is there. Iraq‟s reserves are likely to increase substantially once the super majors start work, not to mention the almost unbroken string of discoveries in the Kurdistan region.

Next door, despite sanctions and mismanagement, exploration successes in Iran suggest substantial remaining potential: at least 21 billion bbl found since 1998 in four fields near the Iraqi border. Saudi Arabia has substantial spare capacity, while Kuwait and Abu Dhabi recently updated ambitious plans for production gains.

Non-OPEC is not slacking either. Despite high taxation, maturing fields, often outdated technology and a capricious legal environment, Russian production continues to creep up. Kazakhstan‟s long-delayed Kashagan field will finally come onstream around 2013 and yield more than 1 million bbl per day. Brazil‟s enormous pre-salt play continues to deliver new discoveries and is now moving into early production. At the same time, frontier exploration is finally yielding fruit, with major finds in Ghana and Uganda, and promising signs in areas such as Mozambique, the Falklands Islands and Greenland.

And we should not forget the potential of old fields. Global average recovery factors hover around 33%, but 50- 60% is often achieved in the North Sea and onshore USA, indicating a vast, low-risk prize for better reservoir management and more systematic use of enhanced oil recovery. Mature areas such as Colombia, Egypt and Oman are rebounding impressively from some years of decline.

Instead of fears that non-OPEC production had peaked, the IEA now sees output broadly flat to 2015. Admittedly, action following the Macondo blowout may hamper US deepwater production, but elsewhere in the world, higher safety standards are to be welcomed, and probably mean only moderately higher costs.

During the decade to 2009, stimulated by high oil prices, reserves increased in every region and by 23% overall, even excluding the undeveloped portions of the Canadian oil sands. Production growth, running at 1.1% annually during the 1990s, accelerated under the stimulus of Asian demand to 1.4% per year from 2000 up to the onset of the economic crisis.

As for gas, the success of US shales has demonstrated that fears earlier this decade of a shortage were wildly pessimistic. Led by technology, the industry was able to respond to high prices, and demonstrate that

www.oilcouncil.com

In contrast with the former rosy outlook of politicians and economists, a recent survey of 21 predictions (from national governments, oil producers, energy analyst firms and retired oil geologists and oil engineers) shows global decline beginning anytime up to 2020. Of these 21 predictions, the mean statistical date is 2013, just three years from now.

Global production of cheap oil (the easy-to-get conventional oil) peaked in 2005 and has flatlined ever since. Irreversible decline is imminent.

There will still be oil, but it won’t be cheap as producers are increasingly resorting to expensive oil (the hard-to-get unconventional stuff).

Yes, there are alternative energies, but they and their prerequisite infrastructures won’t be ready in time for cheap oil’s decline, preparations needing to have been started 20 years ago.

First, it will be hugely expensive because we’ll have to use unconventional oil to create new energy and energy infrastructures. Secondly, as Canadian energy analyst Vaclav Smil writes, “because of the requisite technical and infrastructural imperatives and because of numerous (and often unforeseen) socio-economic adjustments, energy transitions in large economies on a global scale are inherently protracted affairs.”

As an example, commercial oil took decades after the 1860s to capture 25 per cent of the global energy market. Says Smil again: “Analogical spans for natural gas are almost identical: approximately 50 or 40 years.”

In the early 1980s, some advocates of alternative energy predicted the U.S. would draw 30 to 50 per cent of its energy from solar power, wind power and biofuels by the first decade of the 21st century. The reality, however, is 1.7 per cent.

What will be the impacts of oil’s decline? We’ve already felt the first impacts when oil prices spiked in the spring of 2008. The world sank into recession. (Most recessions in the past 60 years have been related to expensive energy.) Whichever comes next, another spike or a permanent, irreversible yearly decline in production, the result will be a deeper recession and finally a depression on a par with the Great Depression of 1929.

The impacts of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5 per cent caused oil prices to nearly quadruple. The same thing happened in California a few years ago with natural gas. A production drop of less than 5 per cent caused prices to skyrocket by 400 per cent. What, then, can we expect when the annual decline rate, beginning soon, falls into the presently predicted range of 4 to 10 per cent?

Every sector of the economy will be affected, but the initial lack will be felt in terms of food. In this regard, Cuba’s experience has relevance for us.

When the Soviet Union disintegrated in 1989, oil subsidies to Cuba ceased, and Cubans entered a three-year “Special Period.” All of the nation’s cattle and even cats and dogs were killed for food. This happened because crops could no longer be transported from Cuba’s centralized growing areas to its many localities. Gradually, agriculture needed to be relocalized. Get to know a Cuban and see if the memory of those days doesn’t bring tears to his or her eyes.

The Cuban experience will become our own unless we learn from it and prepare.

Because most of our food comes to us from distant places by plane and truck, we are highly vulnerable. Grocery store shelves can empty in as few as two or three days without uninterrupted air and ground transport.

This is why I believe our mayor and council should be preserving each and every acre of Hamilton’s greenfields, even those currently dedicated to some other purpose, but as of yet undeveloped, for the growing of food crops during the inevitable years of energy decline.

Yes, that includes Aerotropolis. After all, that property has already been designated as prime agricultural land, not business and light industrial lands. If employment and economic growth matter, the employment grounds can be relocated to greenfields of a lesser designation and accomplish the same purpose.

If it’s the nearness of air transport that matters, there will probably be as many flights taking off from the lesser lands as the present airport.

Food matters first.

TheSpec

China, the world’s second-biggest fuel user, is seeking overseas partners to help build fourth- generation nuclear reactors to meet rising clean-energy demand.

China National Nuclear Corp. has started an “experimental program for the fast-reactor technology for commercial use,” Liu Jing, the deputy director of nuclear power at the state-run company, said in an interview in Beijing before a conference. China plans to master the technology by 2020, he said today.

The world’s fastest-growing major economy is developing nuclear energy to help cut reliance on more polluting coal and oil and to meet surging electricity demand. Fourth-generation technology reactors produce minimal radioactive waste and are fuel efficient.

Business Week

There is absolutely no reason why prices of crude oil and gasoline should be moving in opposite directions this much for this long. If anything, economic trends should be bringing these two prices closer together.

For one thing, supplies are plentiful. According to The Wall Street Journal, crude inventories have hit a record high at Cushing, Okla., where barrels traded on the Nymex are delivered.

The oil market is apparently counting on a robust recovery both here in the U.S. as well as globally to use up some of the surplus crude and fuel put in storage during the downturn, adds the WSJ. So far its hopes have not been fulfilled, hence the decline in crude.

The demand for oil and gas is clearly failing to live up to expectations.

While the nation’s factories have shown some signs of life lately, demand for oil for industrial purposes remains weak. Naturally, the need for diesel fuel, which is used mainly in trucks, is off as well.

MarketWatch

Sadly, President Obama seems intent on squandering his environmental 9/11 with a Bush-level failure of imagination. So far, the Obama policy is: “Think small and carry a big stick.” He is rightly hammering the oil company executives. But he is offering no big strategy to end our oil addiction. Senators John Kerry and Joe Lieberman have unveiled their new energy bill, which the president has endorsed but only in a very tepid way. Why tepid? Because Kerry-Lieberman embraces vitally important fees on carbon emissions that the White House is afraid will be exploited by Republicans in the midterm elections. The G.O.P., they fear, will scream carbon “tax” at every Democrat who would support this bill, and Obama, having already asked Democrats to make a hard vote on health care, feels he can’t ask them for another.

I don’t buy it. In the wake of this historic oil spill, the right policy — a bill to help end our addiction to oil — is also the right politics. The people are ahead of their politicians. So is the U.S. military. There are many conservatives who would embrace a carbon tax or gasoline tax if it was offset by a cut in payroll taxes or corporate taxes, so we could foster new jobs and clean air at the same time. If Republicans label Democrats “gas taxers” then Democrats should label them “Conservatives for OPEC” or “Friends of BP.” Shill, baby, shill.

NYTimes

So this weekend, BP successfully inserted a catheter into the leak at the Deepwater Horizon, marking the first time there’s been any progress in stemming the disaster.

So how much of a success is this?

Well, according to a BP exec quoted by Platts, the tube is collecting mover then 1,000 b/d, which probably means somewhere in the range of 1001-1002 b/d.

Basically, this is a drop in the bucket.

At the low end of estimates, that’s 20% fo the daily flow (which some have estimated at 5,000 b/d). At the other end, it’s just a tiny fraction of the 70,000 b/d that could be flowing into the gulf.

We’re not sure if this is a baseline and if this could collect more, but for now, this situation is nowhere near solved.

Read more: http://www.businessinsider.com/ok-so-now-we-know-the-new-gulf-oil-fix-isnt-doing-jack-2010-5#ixzz0oKZZ5X94

Cnooc Ltd., the Hong Kong-listed unit of China National Offshore Oil Corp. has partnered with the state-run Turkish Petroleum Corp. (TPAO) to win a contract with Iraq to develop the lucrative Missan oil-field in southern Iraq, marking Cnooc’s first upstream access to Iraqi oil following its two major rivals, CNPC and Sinopec.

The deal is still pending Iraqi government approval.

Marketwatch

Above all else, Pettigrew said technology will play a significant role in the world’s ability to meet expanding food needs. In the past 30 years, agriculture has managed to double food production, and it is important to recognize that it did not just magically happen. Agriculture made it happen, and we have a responsibility to make sure that continues to happen into the future, he said.

By 2050, the world will need twice as much crop production as there is now. This will be the result of the population increase ahead, said Pettigrew, as well improved living standards that will lead to greater protein consumption. Given the future constraints of limited land and water, he said technology — and its continued adoption — is the only solution.

feedstuffs