tag:blogger.com,1999:blog-60240071493386359032023-11-15T10:22:43.984-08:00Energy SourceAnalyses and commentary on global and domestic energy markets and public policyEnergy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.comBlogger54125tag:blogger.com,1999:blog-6024007149338635903.post-82235196214450371712016-04-04T15:51:00.001-07:002016-04-04T15:51:15.899-07:00Unintended Consequences of the U.S. Shale Oil Boom<div style="text-align: justify;">
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<span style="font-family: "Times New Roman","serif"; font-size: 12pt;">The
global turmoil in energy prices is not the only problem brought about by shale
oil and gas revolution in the U.S. While this revolution bolstered U.S. energy
independence, the latest developments in the U.S. oil demand, refining, and
storage have been far less predictable, and even seem downright illogical.
Currently, the U.S. oil imports are growing, oil storage is record high and
still on the rise, and American refineries are losing money from processing
domestic light crude oil (with low viscosity and density) compared to imported
heavy oil. This situation arose from domestic oil boom being at the right place
at the wrong time. </span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Following
the peak of domestic oil output and increasing imports over the past few
decades until the shale oil industry shot up oil production in late 2000,
American refineries had installed expensive coking units to process leftover
heavy oil into higher value products such as naphtha, light oils, petroleum
coke, and intermediate oils. In other words, margins for American refineries increased
with processing imported heavy crude oil. Enter light oil crudes from domestic shale
formations into the market. Running light crudes is not so profitable for U.S.
refineries given that the latter are configured with expensive coking units
designed to process mostly heavy crude oil. Given the uncertainty of long-term stability
of light crude oil production in the U.S., refineries with coking units may
stand idle or process light crudes at a loss. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12pt;">Furthermore,
because American refineries profit more from gasoline production than distillates
(because U.S. motorists mostly consume gasoline than diesel) with the rising
demand for gasoline, there are too much distillate products and not enough
gasoline for domestic consumption. Given that domestic and global demand for
diesel is not so strong at this point, the U.S. refineries have been storing
the unwanted stocks of distillates. Meanwhile, gasoline demand is also growing
in China and India and refineries in both countries are trying to get rid of <a href="http://www.reuters.com/article/us-usa-gasoline-kemp-idUSKCN0WX1XT"><span style="color: blue;">surplus
distillates by exporting them</span></a>. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12pt;">While
American refiners are still enjoying strong margins, continued production of
domestic light crude oil will mean more storage of unwanted distillates. </span><span style="font-family: "Times New Roman","serif"; font-size: 12pt; mso-fareast-font-family: "Times New Roman";">The U.S. currently has more than <a href="http://www.cnbc.com/2016/01/27/this-is-why-oil-glut-not-going-away-soon.html"><span style="color: blue;">1.2
billion barrels in storage</span></a>, most of which is light oil.</span><span style="font-family: "Times New Roman","serif"; font-size: 12pt;"> Under the
current market conditions, the cost of storage will remain important. If interest
rates go up, which will increase the cost of building oil storage units, it will
become more expensive to store oil. Therefore, the only way to absorb the storage
glut will be to curtail the production of domestic crude oil. In turn, for
American refineries to reap economic benefits from refining, overproduction of
light crude oil needs to decrease and heavy oil runs should increase. Given the
growing demand for gasoline and refineries built to process heavy oil, <a href="http://www.bloomberg.com/news/articles/2016-03-31/the-u-s-is-a-big-oil-importer-again"><span style="color: blue;">U.S.
oil imports are already rising</span></a>. Although the repeal of the four-decade-old
export ban</span><span style="font-family: Calibri;"> last year has not led to the decrease in oil storage or a
significant jump in exports due to the global oil glut, the only way that the
U.S. shale oil boom will be sustained is if it increases exports and global
demand for crude oil and middle distillates will pick up pace. However, the
status quo might last through 2016. <o:p></o:p></span></div>
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Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com1tag:blogger.com,1999:blog-6024007149338635903.post-67609147895672508152014-05-30T20:34:00.001-07:002015-03-20T15:49:18.648-07:00Looking with Caution at the Rising Power of Master Limited Parntership in the U.S. Energy Sector<div style="text-align: justify;">
<span style="mso-bidi-font-weight: bold;">On
the face of it, Master Limited Partnerships in the US are a dream
investment.<span style="mso-spacerun: yes;"> </span></span><span style="mso-bidi-font-weight: bold;">To increase capital to finance upstream and midstream energy sectors the
United States Congress enacted the Master Limited Partnership (MLP)
legislation in the 1980s. Structured much like a
corporation, MLP’s offer excellent tax breaks as long as profits are not
retained at the end of the year but instead distributed to investors.<span style="mso-spacerun: yes;"> </span>MLP’s have been popular investment vehicles
in the oil and gas industry, with a number of midstream players, in particular,
structured this way. However, MLP’s have their risks. The MLP structure does
not encourage infrastructure spending, which can lead to safety issues (poorly
maintained pipelines, for example).<span style="mso-spacerun: yes;"> </span>MLP’s are not subject to GAAP rules, either, so there is little to
prevent these entities from exaggerating earnings and engaging in other morally
questionable accounting practices.<span style="mso-spacerun: yes;"> In my May 2, 2014 article in the European Energy Review, I closely examine the advantages and potential pitfalls of the rising profile of MLPs in the U.S. energy sector. <a href="http://europeanenergyreview.eu/site/pagina.php?id=4277" target="_blank">Here </a>is a link to the article. </span></span></div>
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<![endif]--><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">The era
of easy oil and gas is over. The 21<sup>st</sup> century frontier of the oil
and gas sector is increasingly in remote, hostile, and geologically challenging
areas of the world. The promising hydrocarbon areas of the world, for example,
the ultra-deep offshore oil plays in the Arctic, West Africa, the Gulf of
Mexico, or Brazil; shale gas and oil in the U.S., China or Australia; or oil
sands in Canada, demand continuous and reliable communications technologies to
withstand extreme heat, ice, snow, humidity, rain, wind, and fog.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">Given
the extreme environments that energy companies cope with, high capacity and
reliable wireless communication are indispensable for continuity and safe
operations. <a href="http://www.tropos.com/solutions/oil-and-gas-communications.html">Wireless</a>
connection helps build a foundation for many networks of broadband speed and to
sustain multiple applications, such as SCADA (<i><span style="font-style: normal; mso-bidi-font-style: italic;">Supervisory Control and Data Acquisition)</span></i><i style="mso-bidi-font-style: normal;"> </i>systems, real-time video monitoring of
wells and other facilities, communications and monitoring of drill rigs,
surveying location of oil and gas assets, among other functions. Technology
firms <a href="http://www.businesswire.com/news/home/20131213005565/en/Research-Markets-Global-Satellite-Communication-Market-Oil">point
out the rise in use of satellite communication</a> in the oil and gas industry,
attributing it to the challenging locations of fossil fuel drilling. Satellite
companies see great opportunities in the oil and gas sector as the latter
increasingly integrates video monitoring of wellheads and drilling. Fiber optic
technology is also gaining a market share in the energy sector as the
distributed fiber-optic sensor sector is expected to grow to $1.1 billion in
2016, 70% of which would be linked to the oil and gas market.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">As
the use of satellite, radio and fiber optic technologies are becoming integral
parts of modern communications for all aspects of oil and gas operations, their
application for some of the challenging and hostile areas of the world is still
sparse, particularly in emerging markets. For example, the deepwater oil
drilling in West Africa constitutes a majority of total oil and gas output for
the region, but some of the <a href="http://www.offshore-mag.com/articles/print/volume-73/issue-12/west-africa/west-africa-oil-and-gas-operations-require-more-reliable-communications.htm">most
reliable communications protocols used globally are still absent in this part
of Africa</a>. The existing conventional and wireless communication in West
Africa has been subject to breakdowns and stoppages, jeopardizing the safety of
rigs and personnel. Remote communications are still difficult in many regions
of Africa. In general, oil and gas fields that cover many miles of remote and
harsh parts of the world are often short of cellular connection. If energy
companies are to profit from operating in extreme environments, the 21<sup>st</sup>
century oil and gas development is likely to set the level playing field for
investment in state-of-the-art communications technology, whether the drilling
is in Africa or the Arctic.</span></div>
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</xml><![endif]-->Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com1tag:blogger.com,1999:blog-6024007149338635903.post-37831026489537423002013-12-02T10:50:00.000-08:002013-12-26T16:30:38.874-08:00Critical Point for U.S. Gas Flaring<!--[if gte mso 9]><xml>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">A sign of
unconventional oil boom in the U.S. can now be seen from satellite photographs of
<a href="http://www.flareandgasmanagement.com/redForms.aspx?id=389080&frmType=Brochure&mLoc=F&sform_id=316492&isbrochure=true&m=1066&eventid=8521&utm_campaign=blogger&utm_medium=website&utm_source=energysource.com&utm_content=home&utm_term=text&MAC=FLR_BLOG">flared
gas</a> from oil wells. NASA’s pictures from the space show brightly lit areas
of sparsely populated Northwest North Dakota amidst the darkness of the Great
Plains. Flaring of associated gas from oil wells in North Dakota <a href="http://www.dallasnews.com/business/energy/20131112-flaring-of-gas-in-north-dakota-oil-fields-draws-litigation-scrutiny.ece">jumped
up to over 50 percent since 2011</a>, according to a non-profit organization
Ceres dedicated to improved corporate sustainability. Associated gas is a form
of natural gas that is found during petroleum extraction and it can be captured
and processed for electricity generation or reinjected to oilfields for
enhanced oil production. Hesitance of the oil industry to invest in expensive
infrastructure to capture the associated gas, in view of record low natural gas
prices, has catapulted the U.S. to <a href="http://www.flareandgasmanagement.com/">the ranks of 5<sup>th</sup>
worldwide for the highest volume of gas flared</a>, nearing the levels of Russia
and Nigeria. </span></div>
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Although <a href="http://www.flareandgasmanagement.com/redForms.aspx?id=389080&frmType=Brochure&mLoc=F&sform_id=316492&isbrochure=true&m=1066&eventid=8521&utm_campaign=blogger&utm_medium=website&utm_source=energysource.com&utm_content=home&utm_term=text&MAC=FLR_BLOG">flaring</a>
is less environmentally damaging than venting natural gas into the atmosphere,
it is a pollutant that emits large amounts of carbon dioxide. The Bakken oil
formation in North Dakota has turned this Upper Midwestern state into #2
producer of oil in the U.S. after Texas. North Dakota is also the largest
contributor of flared gas. <a href="http://www.nytimes.com/2013/10/18/business/energy-environment/oil-companies-are-sued-over-natural-gas-flaring-in-north-dakota.html?_r=1&">According
to some estimates</a>, the value of burnt off gas in North Dakota is close to
$100 million a month. With tripling of flared gas over the last two years,
companies operating in North Dakota are under pressure to reduce flaring or pay
royalties and taxes in compliance with the state regulations. <a href="https://www.dmr.nd.gov/oilgas/rules/rulebook.pdf">The state’s regulations
allow oil producers gas flaring for one year</a> without paying taxes or
royalties on it, with a possibility of extending this provision on the grounds
of economic difficulties of linking wells to a natural gas pipeline. After this
period, “<a href="http://www.eia.gov/todayinenergy/detail.cfm?id=4030">producers
can continue flaring but are responsible</a> for the same taxes and royalties
they would have paid if the natural gas went to market.” </div>
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<br /></div>
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<![endif]--><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;"><a href="http://www.flareandgasmanagement.com/redForms.aspx?id=389080&frmType=Brochure&mLoc=F&sform_id=316492&isbrochure=true&m=1066&eventid=8521&utm_campaign=blogger&utm_medium=website&utm_source=energysource.com&utm_content=brochure&utm_term=text&MAC=FLR_BLOG">Gas
flaring</a> is now a political issue in North Dakota. In an unprecedented move,
mineral rights owners in this state have <a href="http://www.nytimes.com/2013/10/18/business/energy-environment/oil-companies-are-sued-over-natural-gas-flaring-in-north-dakota.html?_r=1&">filed
10 class-action lawsuits against oil producers</a> this October, demanding
millions in dollars in lost royalties from flared gas in fracked oilfields and
hoping that such pressure would expedite flare reduction. More landowners <a href="http://www.dallasnews.com/business/energy/20131112-flaring-of-gas-in-north-dakota-oil-fields-draws-litigation-scrutiny.ece">expressed
interest in joining</a> the litigation against oil companies in North Dakota. While
the process is in the early stages, it is widely believed that a successful
outcome of these lawsuits may increase the cost of oil drilling and slow down this
state’s booming economy. However, <a href="http://www.flareandgasmanagement.com/redForms.aspx?id=389080&frmType=Brochure&mLoc=F&sform_id=316492&isbrochure=true&m=1066&eventid=8521&utm_campaign=blogger&utm_medium=website&utm_source=energysource.com&utm_content=brochure&utm_term=text&MAC=FLR_BLOG">reduction
of gas flaring</a> does not have to end in a zero-sum game. <a href="http://www.slideshare.net/EPetrilli/pres-sn-carbon-limit-workshop-31208-presentation">Norway’s
oil production</a> did not stop because of strict regulations imposed on
management of associated gas. Oil drilling in Norway is allowed only after
solutions on handling associated gas are presented to the authorities. The U.S.
oil industry has reached the point that it cannot ignore the scale of economic
and environmental cost of flared gas. Given the latest legal pushback from
landowners in North Dakota, the U.S. has a chance to learn from the best
practices in harnessing the associated gas</span></div>
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</xml><![endif]-->Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com1tag:blogger.com,1999:blog-6024007149338635903.post-52372497506093160902013-11-26T13:04:00.000-08:002013-11-26T13:04:16.733-08:00Water: The Achilles’ Heel of the U.S. Unconventional Energy Sector<!--[if gte mso 9]><xml>
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<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">Growing global
scarcity of freshwater has made this resource more valued than oil due to an
increasing world population and demand for water, pollution, and climate change.
Water shortage is a colossal economic and social cost to all consumers,
including the oil and gas industry, which is critically dependent on this
commodity for its operations. With an expected <a href="http://www.fas.org/sgp/crs/misc/R43199.pdf">rise in water consumption in
the U.S. by an estimated 7 percent by 2030 </a>from 2005 levels, 85 percent of
which will be used by the energy sector, fuel production is likely to both
increase its impact on water availability and quality and become vulnerable to
potential water supply disruptions.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">With
the 36.5-percent <a href="http://www.aei-ideas.org/2013/09/new-ihs-study-provides-details-on-the-significant-economic-impacts-of-americas-amazing-shale-revolution/">increase</a>
in U.S. unconventional fuel extraction between 2005 and 2012, this energy
sector faces challenges in balancing its water needs. While some reports claim
that water demand amounts to nearly 5 million gallons of freshwater per <a href="http://fracfocus.org/water-protection/hydraulic-fracturing-usage">shale
gas </a>and <a href="http://csis.org/files/attachments/111207_EnergySorensenPPT.pdf">tight oil
</a>well drilling, there is conflicting information and uncertainty about the
amount of water the unconventional energy sector consumes, which complicates
water management in and between the states. Safe disposal and treatment of
produced water from hydraulic fracturing, or fracking, are some of the pressing
concerns for the industry and nearby communities. As competition for freshwater
rises in areas of the U.S. where water demand for unconventional fuel
production is highest, for example, in North Dakota, Texas, and Colorado, <a href="http://azstarnet.com/news/science/environment/fracking-sucking-up-water-in-drought-areas/article_a87235cd-0ad8-5f44-ad44-c3bdf899b6ec.html">recurring
severe droughts pose a risk</a> to the long-term sustainability of water
resources in energy producing states. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">This
complex energy-water predicament necessitates a comprehensive water management
strategy and collaborative government-industry led solutions. The lack of
comprehensive data and research on water supplies, the energy sector's use of this
commodity, consumption levels, and wastewater from fuel extraction stands out
as a main barrier to framing energy and water-related problems and developing
measurable solutions. Collection of such information could help determine the
future sources of water for the energy sector, the impact of the energy
industry’s water use on the society, and decision-making on allocation of
water. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">An
important step to improving data collection could be establishment of minimum
standards for information-sharing on the oil and gas sector's water
consumption, set by the federal government. The federal government should
establish an online platform dedicated to disclosing information on the amount
of water used in oil and gas production, the volume of wastewater derived from
petroleum operations, and wastewater treatment, recycling, and disposal
practices. Penalties should apply for failure to report. Reliance on voluntary
disclosures could be ineffective due to insufficient and irregular reporting,
as evidenced by the <a href="http://www.bloomberg.com/news/2013-04-23/fracfocus-fails-as-fracking-disclosure-tool-study-finds.html">experience
of FracFocus</a>, an online registry designed for disclosure of chemicals used
in fracking. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">Further,
due to the heavy role of state governments in regulating operations of energy
companies in their jurisdictions, states could step up efforts to manage
produced water from shale gas and oil drilling. <a href="http://online.wsj.com/news/articles/SB10001424052970204528204577009930222847246">Pennsylvania's
requirements to recycle </a>flowback water from shale gas production and
limitations on surface wastewater disposal have increased water recycling in
shale gas operations. <a href="http://www.gomcmag.com/online_exclusives/2013/06/texas_encourages_frac_water_recycling">Texas
enacted new rules </a>that encourage water reuse by eliminating recycling permits
for drilling operators if they recycle fluids on their leases or transfer the
water to another operator's lease for recycling. Such efforts could incentivize
the industry to look for innovative solutions to treating and reducing produced
water. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">Extending
the efforts to improve water management, state governments and the industry
should also consider adopting best practices in seawater desalination in states
near the sea, for example, Texas and Louisiana, to shift from freshwater use
for drilling. This is particularly relevant given that the industry prefers
freshwater for fracking because it is less corrosive. As part of the measures
to prevent freshwater contamination, it is also imperative for the
unconventional energy sector to improve well construction, casing, and leakage
containment, especially in light of heightened public concern about the impact
of fracking on groundwater. The U.S. Environmental Protection Agency's
anticipated 2014 report on the impact of fracking on drinking water is likely to
help chart the course of further policymaking toward this industry. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">Lastly,
the U.S. should consider expanding trading water access rights in some of the
arid southwestern states, as competition for water resources is set to increase
between energy, agricultural, and municipal usage. State governments should
study successful water trading schemes in western U.S. and globally and adopt
the best practices. An effective water trading mechanism will hinge on
distinctly and uniformly established water rights, which is not the case in
some of the most energy- and water-intensive states, such as Texas. </span></div>
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<![endif]--><span style="color: #1a1a1a; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">A few years ago, remote-controlled oilfields may have sounded like a
scene from a sci-fi movie. Today, <a href="http://www.digitaloilfieldsusa.com/redForms.aspx?id=389080&frmType=Brochure&mLoc=F&sform_id=316492&isbrochure=true&m=962&eventid=8411&utm_campaign=Saltanatblog&utm_medium=website&utm_source=http://theenergysource.blogspot.com/&utm_content=brochure&utm_term=text&MAC=DOF_BLOG">digital
oilfields</a> make old-fashioned methods of taking a chance to strike oil and
gas a thing of the past. As such, <a href="http://www.digitaloilfieldsusa.com/redForms.aspx?id=389080&frmType=Brochure&mLoc=F&sform_id=316492&isbrochure=true&m=962&eventid=8411&utm_campaign=Saltanatblog&utm_medium=website&utm_source=http://theenergysource.blogspot.com/&utm_content=brochure&utm_term=text&MAC=DOF_BLOG">digital
oilfields</a> rely on IT, automation and communication to improve all aspects
of operations of the upstream oil and gas sector, <a href="http://www.prnewswire.com/news-releases/bp-and-kuwait-oil-company-on-the-future-of-digital-oilfields-229670371.html" target="_blank">from production and drilling to completion and safety</a>. For
example, oil services firms, such as Schlumberger, are able to <a href="http://www.wired.com/wired/archive/13.12/digitaloil.html">seamlessly link
remote drilling operations to command centers</a> of its customers. Real-time
monitoring of onshore and offshore drilling is available to geologists and
engineers in the company’s multiple operation locations in different countries.
According to <a href="http://www.oilgasmonitor.com/expertswriting-ogm/john-d-brantley-ibm-global-chemicals-petroleum-industry/">John
Brantley</a> of IBM, <a href="http://www.digitaloilfieldsusa.com/media/8411/11135.pdf">incorporation of
intelligence and automation into energy operations</a> allows the companies to
detect and preempt equipment malfunctions, automatically make changes, and
reduce the risk of equipment failure. The petroleum industry can <a href="http://www.oilandgasinvestor.com/pdf/DOF0404.pdf">cut the costs of both
onshore and offshore operations by 10% to 20%</a> and increase the production
of oil by <a href="http://www.oilandgasiq.com/gas-oil-production-and-operations/articles/seven-things-to-be-aware-of-before-buying-new-cont/" target="_blank">an additional 125 billion barrels of oil</a>, if the potential
of digital oilfields is realized.</span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;"> <span style="color: #1a1a1a;"> </span></span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;"><span style="color: #1a1a1a;">Although the oil and gas industry still
resists a shift to digitization, the market share of the digital oilfield
technology is growing, particularly with the increased complexity of petroleum
operations in geologically challenging environments and remote locations. While
digital oilfields are currently most active in Western Europe and North
America, the Middle East <a href="http://www.offshore-technology.com/features/featuremaking-the-most-of-the-digital-oil-field/">anticipates
rapid growth</a> in integrating remote monitoring and control of upstream oil
and gas operations in the next ten years. According the oil and gas division of
the New York-based <a href="http://www.digitaloilfieldsusa.com/?utm_campaign=Saltanatblog&utm_medium=website&utm_source=http://theenergysource.blogspot.com/&utm_content=home&utm_term=text&MAC=DOF_BLOG" target="_blank">International Quality and Productivity Center</a> (IQPC), a
web-based oil and gas information portal, “by 2015 the <a href="http://www.digitaloilfieldsusa.com/?utm_campaign=Saltanatblog&utm_medium=website&utm_source=http://theenergysource.blogspot.com/&utm_content=home&utm_term=text&MAC=DOF_BLOG">value
of digital oilfield services is projected to exceed $200 billion</a>, an
increase of more than 405 from the 2012 market size.” At this juncture, there
is no point of return to old, uneconomical and precarious methods of petroleum
exploration and production.</span> <span style="color: #1a1a1a;"> </span></span></div>
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<br /></div>
<div style="text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;"><span style="color: #1a1a1a;">Current
capabilities and best practices in digital oilfields, information and knowledge
sharing, challenges of implementing IT platforms and solutions will be the
fulcrum of <a href="http://www.digitaloilfieldsusa.com/?utm_campaign=Saltanatblog&utm_medium=website&utm_source=http://theenergysource.blogspot.com/&utm_content=home&utm_term=text&MAC=DOF_BLOG">IQPC's</a>
upcoming <i><a href="http://www.digitaloilfieldsusa.com/redForms.aspx?id=389080&frmType=Brochure&mLoc=F&sform_id=316492&isbrochure=true&m=962&eventid=8411&utm_campaign=Saltanatblog&utm_medium=website&utm_source=http://theenergysource.blogspot.com/&utm_content=brochure&utm_term=text&MAC=DOF_BLOG">Digital
Oilfields USA Summit</a> </i>in Houston, Texas, on December 10-11, 2013. It is
a unique opportunity to learn from industry practitioners on how to capitalize
on digital oilfield investments, how to leverage IT, and how reduce operating
costs and maximize oil and gas production. Common challenges in implementing IT
platforms and protecting information and operations from cyber threats will be
also covered in the summit. Speakers at the summit represent market leaders in
IT and the oil and gas sector.</span></span></div>
Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-87793376625037508982013-09-01T11:22:00.001-07:002013-09-01T11:22:43.497-07:00Iraqi Oil Production and Exports to Continue Declining Without Infrastructure Overhaul <!--[if gte mso 9]><xml>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The escalating conflict in Syria
and OPEC crude oil supply disruptions appear to have sent a mild panic to the
oil markets. While Syria may not be a defining factor of price jumps, oil
production <a href="http://www.marketwatch.com/story/iea-warns-of-declining-libya-iraq-oil-supplies-2013-08-09">cuts</a>
from Iraq and Libya by 170,000 barrels per day (bpd), in spite of increased
output in Saudi Arabia, play a larger role. Worker protests in Libya <a href="http://www.marketwatch.com/story/iea-warns-of-declining-libya-iraq-oil-supplies-2013-08-09">brought</a>
the production down to 400,000 bpd in early August. Meantime, the second
largest oil producer in OPEC with </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">oil output exceeding 3 million bpd
(mbpd) in 2012 and 2.4 mbpd going to exports</span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">, Iraq’s oil sales in 2013 have <a href="http://www.reuters.com/article/2013/07/29/iraq-oil-idUSL6N0FZ29U20130729">fallen</a>
below last year’s average, with July 2013 exports hovering at 2.25 million bpd.
With Iraq’s increasingly important role as an oil exporter in the years to come,
it is worth examining why its oil exports are on the decline and are unlikely
to make a big jump without fixing the security and infrastructure problems. </span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">This year’s decline in Iraq’s oil exports<b>
</b>was<b> </b>largely due to the repeated insurgent <a href="http://english.alarabiya.net/en/business/energy/2013/08/08/Iraq-oil-exports-hit-16-month-low.html">attacks</a>
on the Kirkuk-Ceyhan (Iraq-Turkey) oil pipeline as well as other infrastructure
failures. According to Iraqi officials, production disruptions due to repairs
of de-gassing stations at the country’s oldest and largest Rumaila oilfield
contributed to the recent cutbacks. </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">Iraq <a href="http://online.wsj.com/article/SB10001424127887323585604579010363846321946.html?mod=googlenews_wsj">plans</a>
to increase production by 360,000 bpd by the end of 2013 or early next year
from new oil fields Majnoon, West Qurna-2 and Garraf and install three new
single point mooring platforms in the Persian Gulf for additional export
capacity. </span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: 1.45pt; margin-left: 0in; margin-right: 0in; margin-top: 1.45pt; text-align: justify;">
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">But i</span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">t is unlikely that the exports
will increase further with a planned m</span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">aintenance of Iraq’s major export terminal
in the south – al-Basra Oil Terminal and Khor al-Amaya Oil terminal – which
could cut output by <a href="http://www.worldtribune.com/2013/08/19/iraq-vows-no-disruption-in-oil-flow-after-al-qaida-attack-in-basra/">500,000</a>
bpd for four to six months from September, despite assurances of Iraqi oil
officials that disruptions would be minimal. Besides, the increase in export
capacity is subject to tanker traffic in the Gulf, weather challenges, and the
current export infrastructure taking turns between a shut-down and slow
re-starts. At the end of the day, Iraq’s antiquated and neglected energy
infrastructure is a critical obstacle to oil production and exports. This
August, Iraqi officials <a href="http://in.reuters.com/article/2013/08/27/-iraq-oil-investment-idINL6N0GS1YE20130827">chided</a>
Royal Dutch Shell for delayed start-up and for the inability to meet production
goals of </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">175,000 bpd </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">from the giant
Majoon oilfield in the south. </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman";">The row points to the infrastructure challenges confronting international
oil firms operating in Iraq. Shell attributed delays to health and safety
concerns, stressing that additional work was required to safeguard existing
facilities. Similar problems exist in every part of the country’s energy value
chain. Thus, Iraq’s new <a href="http://english.alarabiya.net/en/business/economy/2013/06/12/Iraq-targets-4-5-million-barrels-a-day-in-2014-.html">ambitious</a>
production figures of 9 mbpd by 2020 and exports of 4.5 mbpd in 2014 will be further
curtailed with recurring infrastructure failures that beg for a complete renewal
of the infrastructure, and inevitably cause disruptions while renovations take
place. Constant terrorist attacks on the Kirkuk-Ceyhan export pipeline will not
help the increase of exports either. </span></div>
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</xml><![endif]-->Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-31609217150027608832013-05-31T11:32:00.000-07:002015-03-20T15:38:48.919-07:00New Verse to a Refrain on U.S. Energy Independence <!--[if gte mso 9]><xml>
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There is a lot of euphoria that America maybe
moving towards energy independence with the boost of shale oil production.
Latest news headlines say that the U.S. oil boom will render OPEC irrelevant
and OPEC loses power as U.S. shale boom keeps prices down. Some <a href="http://www.nytimes.com/2013/05/23/opinion/global/when-america-stops-importing-energy.html?_r=0#h[TogQIA,6,Tctfas,6,7]"><span style="color: navy;">observers</span></a> argue that the U.S. could stop
importing energy, particularly from politically unstable countries of the
Middle East and Africa, thereby reducing its involvement in these regions. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Taking a longer view, it is not a fact yet that
shale oil boom will not meet hurdles along the way. It is a fact that both
shale gas and oil wells decline much faster than their conventional
counterparts. Drilling new wells will be the only way to keep the anticipated
high level of shale oil production. Further, even with the rising domestic oil
production and a drop in overall U.S. crude imports, oil supplies from Canada,
Saudi Arabia and Iraq <a href="http://www.ft.com/intl/cms/s/0/8fcdc740-a912-11e2-bcfb-00144feabdc0.html#axzz2Ut9ZJ5I0"><span style="color: navy;">increased</span></a> to a 15-year peak in 2012. These three
countries plus Venezuela remain top exporters of oil to the U.S. </div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Greater energy self-sufficiency is a possibility
for the U.S., but the real questions are whether absolute energy independence
is ever possible for America given rapid peaks and declines in unconventional
oil wells and the nearly bygone era of its conventional oil production; the relatively expensive development of unconventional sources of energy compared to conventional oil and gas; whether
the country's transportation sector, which <a href="http://www.instituteforenergyresearch.org/energy-overview/petroleum-oil/"><span style="color: navy;">accounts for</span></a> close to 93% of all petroleum
consumption, is able to reduce its addiction to oil; and whether it is ever
possible to be immune to fluctuations of global energy prices given the
increased financial and physical interconnectedness of major global energy
markets. </div>
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<![endif]--><span style="font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><span style="font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></span><br />
<span style="font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">
</span>Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-921324474468402912013-05-27T19:16:00.000-07:002015-03-20T15:41:31.531-07:00Key Issues to Understanding the Flawed Oil Pricing System <!--[if gte mso 9]><xml>
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<span style="color: black;">Following the news
earlier this month that some of the world's major oil companies may have
manipulated the Brent oil prices, some energy observers noted that it was a
bomb that was waiting to explode. On May 14, 2013, the European Commission
launched an investigation on BP, Statoil and Shell on suspicion of their
involvement in manipulating oil prices since 2002. A U.S. commodity trading
house, Prime International, filed a class-action lawsuit in New York against
these companies on May 24, 2013. The scandal also involves one of the major
independent oil price reporting agencies (PRAs), Platts, which collects and
reports key international benchmarks on a regular basis. The prices that Platts
reports provide grounds for long-term contracts, futures contracts, and derivatives
and spot market transactions. Information that Platts provides to its
subscribers, which range from oil companies to traders to banks to futures
exchanges and governments, is used to help set prices for derivatives contracts
and physical delivery of oil worth billions of dollars. </span><a href="http://www.bloomberg.com/news/2013-05-20/enron-no-lesson-to-traders-as-eu-probes-oil-price-manipulation.html">According
to</a><span style="color: black;"> the French oil company Total, “as much as 80
percent of all crude and oil-product deals are linked to reference prices
including those published by Platts.” Even a minor mistake in price reporting
carries significant implications on the energy markets. Several issues should
be pointed out about PRAs and the energy market that may help understand the
current mess.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="color: black;">First, some reporters
immediately drew parallels between PRA oil pricing and the Libor-rigging
scandal of last year. Libor, which stands for London Interbank Offered Rate, is
a collection<b> </b>of rates designed to gauge the cost of borrowing between
banks. Libor rates are used as benchmarks for nearly $10 trillion in loans and
close to $350 trillion in derivatives. But comparing Libor-rigging to the oil
price scandal is wrong. PRAs compete with each other for accuracy of price
reporting, which is their bread and butter. Loss of credibility and
reputational damage to their reporting would put them out of business. Unlike
banks, they are not tied to energy trading apart from reporting about it. The
key point on PRAs is they receive pricing information, everything from offers,
bid and transactions, from energy market participants (i.e. buyers and sellers)
purely on a voluntary basis. In other words, market participants are not
required to share their trading data, but if and when they do so via PRAs, the
latter must verify the accuracy and correctness of the data they receive.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="color: black;">Second, a lingering
criticism of Platts has been its use of a market-on-close (MOC) methodology.
Under the MOC mechanism, Platts establishes a time window and only trades
transacted within this window are utilized to assessing the price of oil.
According to Bassam Fattouh's seminal </span><a href="http://www.oxfordenergy.org/wpcms/wp-content/uploads/2011/03/WPM40-AnAnatomyoftheCrudeOilPricingSystem-BassamFattouh-2011.pdf">study</a><span style="color: black;"> of the oil pricing system, “the main criticism of the MOC
methodology is that the Platts window often lacks sufficient liquidity and may
be dominated by few players which may hamper the price discovery process.” Critics also point out the paucity of volumes traded within the Platts window,
which is arguably not representative of the larger volume of trade taking place
outside the window. As Fattouh argues, Platts favored the MOC methodology over
what it previously used – the volume-weighted average of oil prices– believing
that MOC most accurately reflected time sensitivity of assessed prices.
However, there is no regulatory authority to oversee the behavior of PRAs or to
address any dispute over PRA price assessments.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="color: black;">Third, given the
varying levels of transparency between and within various layers of oil
benchmarks, whether it is Brent, WTI or others, the current system of oil price
discovery is quite imperfect. It will be interesting to see whether allegations
of collusion among suspected oil companies to manipulate the Brent oil prices
will bear evidence. A proof of such allegations is likely to result in
evaluations of potential regulatory measures against market manipulation and a
review of current methodologies used by PRAs to discover prices as well as
transparency and accuracy of their assessment of energy prices.</span></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<span style="color: black;">Lastly, the current
market-based system of oil pricing has existed since the 1980s, with oil prices
set by the “market” and PRA reporting on prices based on their assessment of
physical and financial transactions. Despite the known imperfections of the
existing system, market participants (oil producers, oil companies, traders,
refiners, financial actors, etc.) and governments have been hesitant to change
it. It is highly unlikely that this system will be replaced with something
else. But changes to PRA reporting methodology and transparency, which have
come under increased scrutiny in recent years, might occur over the long term.</span></div>
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<![endif]-->Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-1513705547131847752013-03-28T21:50:00.003-07:002013-03-28T21:51:44.454-07:00Gas-to-Liquids Potential of the U.S. Uncertain<div style="text-align: justify;">
The U.S. is exploring the potential of monetizing its copious shale gas supplies by converting them to petroleum distillates through the gas-to-liquids (GTL) process. My recent article published with <em>Oilprice</em> examines the promise and challenges of GTL's commercial application in the U.S. in light of an interest from South African energy company Sasol to build the second-largest GTL plant in Louisiana. The article argues that the high cost of the GTL technology, volatile oil and gas prices as well as carbon emissions from GTL plants will meet stronger resistance in the U.S. than compared to Qatar, which is now a leading GTL produer in the world. <a href="http://oilprice.com/Energy/Natural-Gas/Can-Qatars-Success-with-Gas-to-Liquids-Fuels-Be-Repeated-in-the-U.S.html">Here</a> is a link to the full article.</div>
Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-84316784674100485702013-01-29T20:43:00.002-08:002015-03-20T15:48:26.000-07:00Challenges Facing International Energy Companies<!--[if gte mso 9]><xml>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">In
light of the terrorist attack against the In Amenas gas field in Algeria two
weeks ago, which ended in deaths of nearly 80 people, there is a renewed sense
of vulnerability among international oil companies (IOCs) to security
challenges in politically unstable countries. <a href="http://blogs.wsj.com/marketbeat/2013/01/29/energy-journal-energy-firms-reconsider-restive-mena-region/?mod=MarketsMain"><span style="color: blue;">Wall Street Journal</span></a> blogged this week that
“energy firms are re-evaluating their presence in the [Middle East and North
African] region” after the attack in In Amenas. While the attack was
unprecedented, it is unlikely to that IOCs will pull out altogether from one of
the most the prolific and profitable regions in the world. In fact, the security
situation is just one of many pressing challenges that IOCs confront at this
point. While the challenges are many, it is worth looking into five of the most
prominent ones.</span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Number
one challenge for IOCs is something that was mentioned in the last post on this
blog – resource nationalism and the rise of national oil companies (NOCs). High
oil prices and the rise of NOCs since the 1990s have significantly reduced the
bargaining power of IOCs and weakened any leverage they formerly had on
energy-rich countries. As a result, IOCs have learnt adapt to less favorable
contract and investment terms and take greater risks to operate in more
unstable geopolitical environments. </span></div>
<div class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A
related, second, challenge is political instability (e.g. Arab spring),
weakening of energy-rich nation-states and terrorism (e.g. Nigeria, Algeria).
Many energy-rich countries in the Middle East, North Africa and Sub-Saharan
Africa, for example, Nigeria, Sudan, Iraq, and Libya, face grave security
problems, which are not only due to the lack of the rule of law and security,
but a more fundamental issue of weak nation states with weak governments that
wield little influence and legitimacy in their respective countries. Some energy
analysts point out that there have been a growing number of attacks against
Western interests since 2000. Because of that, companies are likely to continue
to invest in extensive security needs in physical workplace, including Algeria.</span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The
next challenge facing IOCs is tight supplies of economically extractable oil
and gas and competition to produce energy sources in geologically difficult,
remote, harsh and economically costly areas (e.g. unconventional sources such
as shale and tight gas and oil, oil sands, exploration of the Arctic)
ultra-deep waters, or tar sands. Developing unconventional energy sources in
such challenging environments require significant investments in
technology. But even heavy investment in technology cannot guarantee
successful finding of oil or gas, as was the case with the deep-water drilling
in Gulf of Mexico’s Alaminos Canyon or the recent outcome of shale gas drilling
in Poland that turned up dry wells. </span></div>
<div class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Fourth
challenge is cyber security threats and cyber espionage (hacking on energy
companies to obtain vital information on energy activities). Energy companies
are increasingly targeted by hackers aiming to obtain valuable information on
new oil findings or other valuable corporate data. For example, coordinated <a href="http://www.wired.com/threatlevel/2010/01/hack-for-oil/"><span style="color: blue;">hacking</span></a> in 2010 via malicious e-mails sent to
employees of ExxonMobil, ConocoPhillips and Marathon Oil evidenced that hackers
aggressively seek proprietary information. There is also politically or
ideologically driven hacking to disrupt petroleum operations not only against
IOCs, but also NOCs. For instance, perpetrators of a massive cyber <a href="http://www.nytimes.com/2012/12/10/business/global/saudi-aramco-says-hackers-took-aim-at-its-production.html?_r=0"><span style="color: blue;">attack</span></a> on Saudi Aramco in August 2012, which
damaged 30,000 computers and aimed to stop production of oil and gas,
reportedly blamed Saudi Arabia for “crimes and atrocities” in Syria and
Bahrain. Highlighting ideological motivations of cyber attacks, it was reported
in August 2012 that an Anonymous <a href="http://www.bloomberg.com/news/2012-08-27/canada-says-anonymous-may-attack-energy-firm-computers.html"><span style="color: blue;">hacker</span></a> group planned an attack on computers of
energy companies developing Canada’s Alberta oil sands. This group invoked
environmental harm from oil sands operations as its motivation to attack.
Hacking is more sophisticated now than a few years ago and protection of data
of energy companies and critical infrastructure from cyber attacks appears is
becoming a serious concern for corporate and government interests. </span></div>
<div class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Fifth
challenge is addressing climate change and pressures from environmental groups
to regulate the energy industry. While political debate over global warming goes
on, executives of major IOCs appear to have come to accept the scientific
consensus on climate change and to expect that regulations to cut greenhouse
emissions would be inevitable. The current challenge for energy majors is to
have a strong voice in the climate-change policymaking and work out the levels
of regulations through a coordinated national approach to cut greenhouse gases
as opposed to a multitude of regulations devised by various local governments,
at least in the U.S. Another layer of challenge here is an increase in
shareholder resolution filings in the U.S. to pressure energy companies on
sustainability and climate change issues, sometimes even tying executive
compensation directly to a company’s sustainability metrics. With many other challenges
facing IOCs, as well as NOCs, this list is hardly exhaustive. But could this be
a first-tier list? </span></div>
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</xml><![endif]-->Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com1tag:blogger.com,1999:blog-6024007149338635903.post-75277909153514910222013-01-22T11:51:00.001-08:002013-01-22T11:51:06.545-08:00Algeria’s New Security Risk Profile Unlikely to Be a Dealbreaker for IOCs
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">The terrorist attack
on the In Amenas gas field in Algeria on January 16, 2013, has caught the
country and foreign companies operating the field completely off the guard and
left them shocked at the ability of militants to bring down layers of security
to take hostages. Algerian authorities </span><a href="http://www.reuters.com/article/2013/01/21/us-sahara-crisis-raid-idUSBRE90H1DE20130121"><span style="color: blue; font-family: Calibri;">invoked</span></a><span style="font-family: Calibri;">
cooperation between militants and an insider(s) at the gas field to plan the assault.
Some say the attack has either been a response to the French military operation
against Islamists in Mali earlier this month, while others believe that it may
have taken place regardless and the French intervention in Mali was a trigger. The
fact that In Amenas was targeted by an assortment of jihadists from Mauritania,
Mali, Algeria, Egypt, Tunisia and Egypt, who crossed Algeria from its loose
border with unstable Libya, is unsettling at best. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">The move by Algeria’s
parliament last week to endorse an oil and gas law, which cancels windfall tax
on profits of foreign firms that sometimes reached up to 50 percent on some
contracts, was seen by some Western companies as a tad bit late in the wake of 80
deaths in In Amenas and foreign firms anticipated high costs of operating in such
an unstable environment. No date has been set to </span><a href="http://www.reuters.com/article/2013/01/21/us-sahara-crisis-gas-idUSBRE90K0GT20130121"><span style="color: blue; font-family: Calibri;">restart</span></a><span style="font-family: Calibri;">
the In Amenas gas complex. As much as the terrorist attack has been
unprecedented and extremely bloody, it is hard to bet that foreign energy companies
will pull out from oil and gas operations in Algeria.<span style="mso-spacerun: yes;"> </span>As the </span><a href="http://www.eia.gov/cabs/Algeria/Full.html"><span style="color: blue; font-family: Calibri;">world’s</span></a><span style="font-family: Calibri;"> “eighth largest
natural gas producer in 2010 and the third largest gas supplier to Europe,”
primarily to Italy and Spain, Algeria is an important energy player in OPEC and
outside it. Because dependence between Algeria and its energy importers is
mutual, with hydrocarbons constituting nearly 98 percent of this North African
country’s export revenues, all is not lost and a lot still can be gained. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">This is important in the context of the rise of resource nationalism and national
oil companies (NOC) since the 1990s, along with the steady increase in oil
prices. Unlike a few decades ago, NOCs, such as Sonatrach of Algeria, <span style="mso-bidi-font-weight: bold;">Petróleos de Venezuela, S.A.</span> (<span style="mso-bidi-font-weight: bold;">PDVSA</span>), Gazprom and Rosneft of Russia,
Pemex of Mexico and Saudi Aramco in Saudi Arabia, are better consolidated,
maintain stronger control over resources in their home countries and they are
in a position to change rules and regulations, limit foreign ownership in joint
ventures, alter contract terms and increase taxes and royalties for IOCs.<span style="mso-spacerun: yes;"> </span>So, the ability of IOCs to compete
with NOCs on the latter’s home turf has been vastly curtailed. Consequently, IOCs deal with
greater uncertainty, more unfavorable investment conditions, have lesser access
to new oil reserves, and seek profits in politically riskier and geologically challenging
environments. For these reasons IOCs have not left notoriously unstable places like Nigeria, rather the opposite, they boosted their presence there. In fact, despite high political and operating risks, Africa is the
next big hot market for IOCs. Quarter of ExxonMobil's production came from West Africa since 2000. Maintaining technological edge and eyeing relatively
better contract terms, IOCs will beef up physical security and continue
operating in unstable parts of Africa, including Algeria.<o:p></o:p></span></span></div>
Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-56915587093497771572012-12-27T20:21:00.003-08:002012-12-27T20:21:57.131-08:00U.S. Industrial Renaissance Grapples with Looming Exports of Cheap Natural Gas
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">Natural gas is a new
king of the hill, according to a newly released </span><a href="http://www.ogj.com/articles/2012/12/exxonmobil-sees-gas-displacing-coal-as-worlds-no-2-energy-source.html"><span style="color: blue; font-family: Calibri;">ExxonMobil’s</span></a><span style="font-family: Calibri;">
2013 Energy Outlook. Natural gas would displace coal as the world’s second
biggest energy source after crude oil, claims the report. One of the key
conclusions of the ExxonMobil report is that “</span></span><span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><span style="font-family: Calibri;">North America will change to a
net energy exporter from an importer by 2025.” It predicts that over “half of
the growth in unconventional gas supplies will take place in North America,
providing a foundation for strong U.S. economic growth with solid contributions
from the energy, chemical, steel, and manufacturing industries.”<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><span style="font-family: Calibri;">The latter points, however, appear to be a matter of debate.
To a degree, industrial growth is in a collision course with America’s ambitious
natural gas export plans. Gas prices hovering at around $3 per million metric
British thermal units in the U.S. for many months and energy companies
switching to more profitable crude oil production from shale formations,
exporting natural gas seems like a sensible policy, pushed forth by the energy
industry and some government officials. While it will take years before gas
exports will become a reality, given the time required to secure licenses and high
costs of liquefied natural gas (LNG) infrastructure, there is also a concern
that exports could be a setback for the U.S. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><span style="font-family: Calibri;">Namely, the manufacturing and industrial sectors see greater
difficulty to grow in the U.S. if natural gas exports materialize and push
domestic prices up. The revolution of the shale gas industry has revitalized domestic
industrial sector and brought back manufacturing from abroad to the U.S. Manufacturing
costs are much cheaper in the U.S. due to low-cost natural gas compared to even
places such as China, the world’s leading manufacturing workshop. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><span style="font-family: Calibri;">Major industrial firms began taking advantage of low energy
costs in the U.S. and creating jobs. For </span><a href="http://www.elp.com/articles/2012/12/us-luring-manufacturers-away-from-china.html"><span style="color: blue; font-family: Calibri;">example</span></a><span style="font-family: Calibri;">,
“steelmaker Severstal recently expanded its Mississippi and Michigan plants,
and Airbus unveiled plans for a giant, new factory in Alabama.” </span><a href="https://mninews.marketnews.com/index.php/reality-check-us-manufactng-output-rising-natural-gas-boom?q=content/reality-check-us-manufactng-output-rising-natural-gas-boom"><span style="color: blue; font-family: Calibri;">Dow
Chemical</span></a><span style="font-family: Calibri;">, among other major chemical companies, “</span></span><span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><span style="font-family: Calibri;">which is investing $4 billion to build three new chemical
plants in Texas and restart a fourth in Louisiana, compiled a list of 102
projects across a range of industries worth a total of some $80 billion that
are being started in response to the availability and low price of domestically
produced natural gas.” Investment in manufacturing is attractive to even some </span><a href="https://mninews.marketnews.com/index.php/reality-check-us-manufactng-output-rising-natural-gas-boom?q=content/reality-check-us-manufactng-output-rising-natural-gas-boom"><span style="color: blue; font-family: Calibri;">energy</span></a><span style="font-family: Calibri;">
companies, such as Shell Oil, which is mulling over construction of a large
petrochemical complex in shale gas-rich Pennsylvania to produce ethylene, a feedstock
for plastics, from ethane. </span></span><span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><span style="font-family: Calibri;">These and other companies
are now concerned that exports of natural gas will increase the prices, which have
enabled the U.S. industrial renaissance, and threaten billions of dollars worth
investments in capital. </span><a href="http://www.star-telegram.com/2012/12/08/4469451/industry-leaders-sound-alarm-over.html"><span style="color: blue; font-family: Calibri;">According
to</span></a><span style="font-family: Calibri;"> Dow Chemical’s vice president of climate change and energy, George
Biltz, “<span style="color: #111111;">if a single cubic foot of natural gas is
exported, it gives the United States a one-time jolt. But if you take that same
cubic foot and you roll it through manufacturing, whether it's steel or
chemicals or pulp and paper or rubber, this has as much as a 20x impact when
you roll it through the whole GDP of the country.” </span>A recent </span><a href="http://www.nytimes.com/2012/12/06/business/energy-environment/government-report-bolsters-the-case-for-large-us-natural-gas-exports.html?_r=0"><span style="color: blue; font-family: Calibri;">study</span></a><span style="font-family: Calibri;">
by NERA Economic Consulting for Department of Energy argues that exports will
not bring sharp increases in gas prices; on the contrary, “</span></span><span style="font-family: Calibri;"><span lang="EN" style="font-size: 12pt; mso-ansi-language: EN;">export revenue would
generally help most Americans.</span><span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">”</span><span style="font-size: 12pt; mso-ansi-language: EN;"> <span lang="EN">The NERA <a href="http://www.nytimes.com/2012/12/06/business/energy-environment/government-report-bolsters-the-case-for-large-us-natural-gas-exports.html?_r=0"><span style="color: blue;">report</span></a>
admits that “<span style="color: black;">natural gas prices could jump by over a
dollar per thousand cubic feet, or more than 25 percent, over five years if
there are significantly more exports,” which would still be much lower than
just four years ago. </span></span></span><span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">It
is to be seen whether the U.S. Department<span style="color: #111111;"> of Energy
will manage to ensure that continued issuance of export licenses would not to drive
up gas prices high enough to carry negative consequences on manufacturing and
industrial production. </span></span><span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><o:p></o:p></span></span></div>
Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-30719894281278258942012-11-30T10:52:00.000-08:002012-11-30T10:52:58.878-08:00Some Caveats on IEA’s Ambitious Forecasts<span style="font-size: 12pt;"><span style="font-family: Calibri;"><o:p><span style="font-family: Times New Roman;">
</span></o:p></span></span><br />
<span style="font-size: 12pt;"><span style="font-family: Calibri;"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;">The International
Energy Agency (IEA) issued its flagship World Energy Outlook (WEO) report this
month, which emphasized three main game-changers of the world energy landscape
to date: explosive development of unconventional oil and gas in North America, increased
Iraqi oil production, and energy efficiency. Presenting the report at the
Carnegie Endowment for International Peace on November 27, 2012, IEA’s chief
economist, Fatih Birol, stressed that the “foundations of the global energy
system are shifting, with implications on everyone.” Rapid developments of
unconventional oil and gas in the U.S. and Iraq’s oil production have played an
important role in this shift. In fact, the most interesting point of the report
is the ambitious projection for the U.S. and Iraq. Fatih Birol said that the
U.S. will overtake Russia and Saudi Arabia in oil production by 2017, noting
that while the U.S. may become the largest oil producer, Saudi Arabia will continue
to remain the largest exporter of oil. Meanwhile, Iraq would account for 45% of
the growth in oil production by 2035, according to IEA. <o:p></o:p></span></div>
<span style="font-family: Times New Roman;">
</span><br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;">But these
projections may be too modest, at least according to Leonardo Maugeri, a former
Eni SPA executive who is currently a fellow at the Harvard Kennedy School’s
Belfer Center for Science and International Affairs. Maugeri <a href="http://www.ogj.com/articles/2012/11/maugeri-ieas-outlook-for-us-oil-output-late-maybe-low.html"><span style="color: blue;">argues</span></a>
that oil production levels in the U.S., Iraq and Saudi Arabia could be much
higher than what IEA predicts in its WEO report. Basing his statements on
studies he is currently conducting, Maugeri believes that Saudi Arabia’s “production
capacity would still be higher than that of the U.S., but probably the Saudis
will not exploit it fully, in order to support oil prices.” Similarly, he
believes that IEA’s projected oil output of 6 million barrels per day by 2020
was low and the Agency “seems too cautious about effects of investments and new
production technologies.” In short, the world has not run out of oil; rather the
opposite, it may be entering the era of oil abundance.<o:p></o:p></span></div>
<span style="font-family: Times New Roman;">
</span><br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;">Clearly, energy
abundance is good news. But there are a few important caveats. The long-term
future and implications of the revolution in technology, namely, hydraulic
fracturing and horizontal drilling, that changed the U.S. energy landscape
overnight, are likely to be less concrete than they seem at the moment. We do
not know what kinds of regulations await the development of unconventional
energy sources down the road if there is a serious accident or if the industry
fails to win the tenuous public trust due to poor environmental practices.
There is ongoing tension between the energy industry and communities in the
U.S. that resist drilling of shale gas and oil on their territories. <o:p></o:p></span></div>
<span style="font-family: Times New Roman;">
</span><br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;">The future of Iraqi
oil is also uncertain given the many challenges it faces, ranging from domestic
divisions and grave security problems to geopolitical threats (influence of
Iran, competition in energy markets with Saudi Arabia, split of the northern
Kurdish region, dependence on water supply from upstream neighbors to support
oil production). Iraq still sorely lacks the hydrocarbon law, which is crucial
to the development of its energy sources. So perhaps, it is wise to be less
ambitious in making projections on production levels of energy in the U.S. and
Iraq, which are in abundance, but are as much subject to sound policies as they
are to wildcards. Most importantly, we should not be blindsided by the
abundance, but put emphasis on energy efficiency. A sound energy policy in any
country cannot be without energy efficiency given the ever growing energy
demand, rising world population as well as concerns over climate change, something
that Fatih Birol strongly emphasized in his presentation this week. <o:p></o:p></span></div>
<span style="font-family: Times New Roman;">
</span></span><br /></span><br />Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-52803675698071685902012-11-17T10:48:00.001-08:002012-11-29T20:32:50.620-08:00Growing Crisis of the U.S. Electrical System<div style="text-align: justify;">
<span style="font-family: Calibri;"><span style="font-family: Times New Roman;">
</span></span><span style="font-family: Calibri;"><span style="font-family: Times New Roman;">
</span></span></div>
<span style="font-family: Calibri;"></span><br />
<span style="font-family: Calibri;"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;">Hurricane Sandy was just
the latest test to the resilience of the U.S. electrical infrastructure, which has
proven again to be woefully weak and outdated. According to <a href="http://www.washingtonpost.com/business/sandys-blackouts-pressure-utilities-to-bury-power-lines-energy/2012/11/06/86512d00-27ef-11e2-aaa5-ac786110c486_story.html"><span style="color: blue;">Bloomberg</span></a>,
Sandy left “more than 8.5 million homes and businesses across 21 states” in
dark on October 29, with 1.4 million still remaining without electricity last
week. Sandy is one of the latest storms that brought a mass blackout to the
East Coast, following the June 2012 derecho, Hurricane Irene in August 2011, and
a snowstorm in October 2011. Some analysts predict that storms will become
increasingly harsh with climate change. <o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: Times New Roman;">
</span> </div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;">But aside from putting the blame on severe
storms, aging electricity infrastructure of the country has been begging
attention for a while. While some parts of the electrical system are modernized,
certain grids in the U.S. date back to a century ago. CNN <a href="http://www.cnn.com/2010/TECH/innovation/08/09/smart.grid/index.html"><span style="color: blue;">reported</span></a>
in 2010 that “non-disaster U.S. power outages [were] up 124 percent since early
1990s [and] U.S. electricity reliability [is] low compared to some nations.” By
2010, nearly 50,000 consumers were affected by non-disaster electricity
outages. </span></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;">Sandy’s aftermath has generated a heated discussion among energy
experts about upgrading the electrical infrastructure, integrating smart grid
technology to effectively control and respond to a potential crisis, and
burying power lines. While they come with a massive cost, it appears that the
U.S. is bound to bear heavier economic losses by prolonging the inevitable dealing
with the problem. The alternative is learning to live in darkness. <o:p></o:p></span></div>
</span><span style="font-family: Times New Roman;">
</span><br />Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-20196154309099673982012-10-30T21:20:00.002-07:002012-10-30T21:25:54.633-07:00U.S. One of the Top Gas Flaring Countries in the World
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: Arial;"><span style="font-family: Calibri;">Women’s Council on Energy and Environment published my </span><a href="http://www.wcee.org/?page=IncreasingGasFlaring"><span style="color: #0000cc; font-family: Calibri;">article</span></a><span style="font-family: Calibri;"> on flaring of
associated gas in the U.S. last week. Gas flaring is becoming a major issue for
the U.S. with the rise of North Dakota’s oil production from its Bakken Shale
formation, which </span><a href="http://www.eia.gov/todayinenergy/detail.cfm?id=7550"><span style="color: #0000cc; font-family: Calibri;">reached</span></a><span style="font-family: Calibri;">
660 thousand barrels per day (bbl/d) in June 2012. Oil extraction from the
Bakken Shale accounts for a substantial amount of associated gas, which is a
raw natural gas released as a result of petroleum production. Natural gas is
often found in oil wells, where it is either dissolved in crude oil or exists
separately in a form of a cap above oil. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: Arial;"><span style="font-family: Calibri;">With a back-to-back 5 percent rise in oil output every month, North
Dakota does not expect the pace of production to slow down. Rapidly growing oil
production and infrastructure problems are starting to pose serious
environmental challenges. The United States now ranks as one of the world’s </span><a href="http://www.worldbank.org/en/news/2012/07/03/world-bank-sees-warning-sign-gas-flaring-increase"><span style="color: windowtext;"><span style="font-family: Calibri;">top</span></span></a><span style="font-family: Calibri;"> five flaring countries, according to
the World Bank’s recent report. That is largely due to the rise in oil drilling
in North Dakota. In 2011, the United States </span><a href="http://articles.economictimes.indiatimes.com/2012-07-31/news/32961709_1_natural-gas-shale-pipelines"><span style="color: windowtext;"><span style="font-family: Calibri;">represented</span></span></a><span style="font-family: Calibri;"> 5 percent of all gas flaring.
Presently, most companies burn off associated gas rather than invest in
pipelines and processing plants to capture and sell the gas because of added
costs. <o:p></o:p></span></span></div>
<span style="font-size: 12pt; mso-bidi-font-family: Arial;"><o:p><span style="font-family: Calibri;"> </span></o:p></span><br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: Arial;"><span style="font-family: Calibri;">With no regulation on gas flaring at the national level, largely due to
a limited flaring problem since the 1970's, it is also becoming an issue in the
Eagle Ford shale field in Texas, as well as potentially in other states endowed
with unconventional oil sources, such as Ohio, Oklahoma and Arkansas. Given the
size of the Bakken Shale play and expansion of shale drilling in other states,
the era of the U.S. unconventional oil and gas seems to portend not only
massive infrastructure changes to streamline transportation of domestic crude
oil and gas, but also a more careful regulation of this relatively novel
industry to prevent an environmental backlash.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;"><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-57752874354144153892012-10-24T05:28:00.000-07:002012-10-24T05:28:00.415-07:00Iraq’s Oil Boom: Pie in the Sky or a Cautionary Tale <span style="font-size: 12pt;"><o:p><span style="font-family: Calibri;"><span style="font-family: Times New Roman;"> </span></span></o:p></span><br />
<span style="font-size: 12pt;"><span style="font-family: Calibri;"><span style="font-family: Times New Roman;"><div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">Iraq can become
Saudi Arabia of today in terms of size the economy and wealth in the next
couple of decades, if it develops its hydrocarbon potential. Those were the
words of Fatih Birol, chief economist with the International Energy Agency (IEA),
who presented the agency’s new “Iraq Energy Outlook” report at the Center for
Strategic and International Studies on October 22, 2012. Iraq has been steadily
increasing its oil production, now ranking as the second-biggest producer after
Saudi Arabia. According to an Iraqi oil </span><a href="http://www.reuters.com/article/2012/10/09/us-iea-iraq-idUSBRE8980EV20121009"><span style="color: blue; font-family: Calibri;">official</span></a><span style="font-family: Calibri;">,
“oil exports were expected to rise above 2.8 million barrels per day (mbpd)
this month [October 2012] with shipments on the rise from both the north and
south of the country. Exports of 2.6 mbpd in September were already the highest
in more than 30 years.” IEA’s central scenario predicts that oil output in Iraq
would increase to over 6 mbpd in 2020 and reach 8.3 mbpd by 2035, largely driven
by developments of super giant fields in the south.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">Although cautiously
optimistic about Iraq’s ability to fulfill its oil potential, given its currently dire
political, security and economic challenges, Fatih Birol predicts that this
Middle Eastern country will account for nearly 45 percent of the growth in
global oil production between 2011 and 2035, if it does it right. The rest of the members of the
Organization of Petroleum Exporting Countries (OPEC) will provide 42 percent,
with non-OPEC nations filling about 12 percent of global oil production. According
to Birol, Iraq is set to play a crucial role in global oil markets, even with
conservative estimates about its oil production.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">Meanwhile, Iraq’s
Kurdish autonomous began </span><a href="http://www.ft.com/intl/cms/s/0/722479f4-1c64-11e2-a63b-00144feabdc0.html#axzz2A5ZwVrnV"><span style="color: blue; font-family: Calibri;">selling</span></a><span style="font-family: Calibri;">
its oil to global markets this month through independent export deals with two
of the world’s major trading houses, Trafigura and Vitol. This move presents a
further challenge to the central government’s attempt to exert its full authority on
trading oil and gas in the country. With little leverage on the trading houses because of its
own dependence on them to import refined oil products, Baghdad is basically
powerless to rein in on them or on Kurdish trading. Kurdistan’s latest move
drives a wedge to the already tense relations with Baghdad, after they recently survived
a major dispute over payments for oil exports. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">In Fatih Birol’s
view, political consensus on oil governance and legal framework, such as the
long-awaited hydrocarbon law, speed and coordination of investment along the
supply chain, Iraq’s long-term oil and natural gas strategy as well as international
market conditions would be determinants of the country’s pace of oil and gas development.
It appears that without addressing the Kurdish question in the short to medium
term, production of oil and gas in Iraq will be uneven and chaotic. What is worse,
Baghdad could find itself in a potential real clash with the north if it keeps
ignoring <i style="mso-bidi-font-style: normal;">de facto</i>
energy deals of the Kurds with foreign companies and does not work out a mutually beneficial
deal with the autonomous region.<o:p></o:p></span></span></div>
</span></span></span><br />Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-54621240294565572312012-10-11T06:14:00.000-07:002012-11-29T20:47:43.780-08:00Book Review: “America Needs America's Energy: Creating Together the People's Energy Plan”<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><span style="font-family: Calibri;">This summer I attended a discussion of a </span><a href="http://www.amazon.com/America-Needs-Americas-Energy-Creating/dp/1612540716/ref=sr_1_1?ie=UTF8&qid=1349929611&sr=8-1&keywords=america+needs+america%27s+energy"><span style="color: blue; font-family: Calibri;">book</span></a><span style="font-family: Calibri;">
by Mark Stansberry entitled <em><span style="font-family: "Calibri","sans-serif"; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">America
Needs America's Energy: Creating Together the People's Energy Plan </span></em><em><span style="font-family: "Calibri","sans-serif"; font-style: normal; mso-ascii-theme-font: minor-latin; mso-bidi-font-style: italic; mso-hansi-theme-font: minor-latin;">at
The Fund for American Studies in Washington DC. Given that DC is a regular stomping
ground for many events on energy, I was not sure how this one would be
different. Having read the book, I think it is quite timely and relevant. What
is interesting about </span></em><span class="il">Stansberry’s book is that it is
not just an overview of energy issues facing the U.S., replete with policy
recommendations to high level officials, but he calls for Americans to take individual
responsibility for their use of energy, to be better educated about the
industry, and </span>to get involved in crafting an energy plan for the
country. </span></span></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><span style="font-family: Calibri;"><o:p></o:p></span></span> </div>
<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><span style="font-family: Calibri;">In Stansberry’s view, the ability for the U.S. to maintain
its economic growth and standard of living (true for just about any other
country in the world), it needs security of energy supplies, which cannot be
achieved without a strategic energy plan that has been missing for decades. According
to Stansberry, a national energy plan is long overdue to meet the demand, to
secure supply, to more effectively and efficiently build energy infrastructure,
to harness new technologies as well as to bridge the knowledge gap between
energy users, policymakers and the industry. He provides a general overview of
major energy sources used in the U.S. with their pros and cons and changes in
supply and demand over the past few years. For those who work in the energy
industry, most of the factual information in the book may not be too in-depth,
but valuable nonetheless. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
</div>
<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><span style="font-family: Calibri;">The most interesting part of the book for me was the chapter
on “Energy Education,” where Stansberry’s take on the importance of a public-private
partnership to educate ordinary people about their energy use and to change their
perception of the industry resonated strongly with what I have been thinking a
lot lately. Without advocating the fossil fuel industry, it is worth remembering
that it is unarguably an important part of our lives along with, hopefully, the
growing share of renewable sources of energy. As Stansberry notes, “nothing
moves without energy […] our quality of life is dependent upon the development
of all forms of energy, as well as the conservation of our natural resources.” Without
knowing, or more importantly appreciating, what aspects of our lives are
touched, changed and improved by use of energy, nobody can truly value where
and how it is obtained. In my view, Stansberry’s emphasis on starting “Your
Personal Energy Journal 2012-2016” is a brilliant way to begin to understand your
personal energy consumption and to create your personal energy plan in hopes to
ultimately integrating the well-informed citizenry to discussion on creating a
comprehensive, regional, state, and national energy plan. I know I will start
using the charts on individual energy use provided in Stansberry’s book, and
hopefully others will start, too. <o:p></o:p></span></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";"><o:p><span style="font-family: Calibri;"> </span></o:p></span></div>
<div style="text-align: justify;">
</div>
Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-61391728888808906812012-09-24T06:54:00.002-07:002012-11-29T20:48:51.759-08:00Who is Holding the Cards?<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">The booming U.S.
shale oil and gas production is not necessarily a recipe for the country’s energy
independence because China will prevent the U.S. from reaching it. So goes the
argument of an </span></span><a href="http://www.forbes.com/sites/matthewhulbert/2012/08/23/why-china-will-stop-u-s-energy-independence/"><span style="font-size: 12pt;"><span style="color: blue; font-family: Calibri;">article</span></span></a><span style="font-size: 12pt;"><span style="font-family: Calibri;"> by
Matthew Hulbert featured in Forbes on August 23, 2012. In Hulbert’s view, China’s
relentless acquisition of physical assets and sucking out of the North American
energy will basically render the notion of energy independence an illusion. <o:p></o:p></span></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><o:p><span style="font-family: Calibri;"> </span></o:p></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">While Hulbert makes
a good point about China’s active role in gaining a foothold on North American energy
market both in terms of investment and imports of oil and natural gas, it
appears his argument on China stopping the U.S. from reaching energy
independence is as uncertain as China’s ability to single-handedly rebalance
WTI and Brent crude oil benchmarks. The starting point for energy-hungry
China is to increase supplies at home and from abroad and the U.S. is
potentially an important supplier. The frenzy to gain access to the North
American energy market is driven by China’s goal to obtain technological
know-how to develop its own copious reserves of shale gas as well as to secure
oil and gas supplies. China’s access to North American physical assets would
help China achieve these goals. But China would not be the one calling the
shots in the U.S., which is dominated by domestic energy majors as well as
foreign investors other than China. <o:p></o:p></span></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><o:p><span style="font-family: Calibri;"> </span></o:p></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">For better or worse,
America acts in its self-interest in terms of its energy supply security. It is
a country that instituted a law banning crude oil exports under the Mineral Leasing Act of 1920 and Outer Continental Shelf Leasing Act. The ban has eased
somewhat in recent years due to booming domestic shale oil supplies. But as recently as March 2012, Congressional Democrats <a href="http://www.bloomberg.com/news/2012-03-27/export-ban-on-u-s-oil-pushed-by-democrats-as-prices-soar-1-.html">sought</a> a bill that would ban any export of American oil to keep energy costs down. It make
sense to sell them abroad because most local refineries are better fit for
processing heavier crudes. It is possible that U.S. may export its excess cheap
natural gas to China, but it will be sensitive to changes in domestic market
fundamentals and prices, which will determine the level of exports. At the moment,
U.S. would benefit from clearing the natural gas glut, but it is
uncertain that low domestic natural gas prices and exports will be a long-term
development. A change in domestic gas demand and price will affect how much of
it will continue to be exported. <o:p></o:p></span></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><o:p><span style="font-family: Calibri;"> </span></o:p></span></div>
<div style="text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">One thing that
Hulbert is on point is America’s inability to insulate itself from fluctuations
of international oil prices because of their interdependence. U.S. cannot
control that, so full energy independence as such may never be achieved. <o:p></o:p></span></span></div>
<div style="text-align: justify;">
</div>
Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-3750120010537720752012-08-21T07:13:00.002-07:002012-08-21T07:13:39.724-07:00US: Higher Gas Prices with Plenty of Energy Supplies<div style="text-align: justify;">
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">Oil prices are on
the upswing in the U.S. again. National average for a gallon of gas has </span><a href="http://online.wsj.com/article/APdc102d740a9e4f6c9abfeb788d2b38c4.html"><span style="color: blue; font-family: Calibri;">increased</span></a><span style="font-family: Calibri;">
by 34 cents since July 1. Factors that </span><a href="http://www.cattlenetwork.com/cattle-news/Drivers-of-the-recent-rise-in-US-gasoline-prices-166302076.html?ref=076"><span style="color: blue; font-family: Calibri;">attributed</span></a><span style="font-family: Calibri;">
to the spike include anticipation of more stimulus aid to Western and Chinese
economies, uncertainty over the status of the Strait of Hormuz as a result of
tightening sanctions against Iran and its threat to close the globally
important waterway, high driving season that summer tends to be, production </span><a href="http://online.wsj.com/article/APdc102d740a9e4f6c9abfeb788d2b38c4.html"><span style="color: blue; font-family: Calibri;">disruptions</span></a><span style="font-family: Calibri;">
in South Sudan and North Sea as well as a few refinery outages in the U.S. Some
observers </span><a href="http://www.usatoday.com/news/nation/story/2012-08-08/refinery-gas-prices/56875468/1"><span style="color: blue; font-family: Calibri;">predict</span></a><span style="font-family: Calibri;">
the price of gasoline would ease after Labor Day, which might just happen
without releasing oil from the U.S. Strategic Petroleum Reserve. </span></span></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">In fact, there
is no shortage of oil in the U.S. right now and, if anything, oil
production and refining have been on aggressive rise. What seems to matter to understanding
the vagaries of oil prices is not necessarily the scarcity of domestic oil
supplies, but global market reactions to geopolitical events and sudden changes
in physical factors, such as refinery shutdowns. In fact, recent developments in the U.S.
refining sector should give signs optimism about supplies of refined oil products
available in the country. U.S. could benefit more from it once prices of
various domestic crude benchmarks narrow (e.g. Louisiana Light Sweet, West
Texas Intermediate, and Bakken); if its capability to refine both heavy sour (Canadian
imports) and sweet crudes (from domestic shale formations) improve; and if more
supplies become available to the East Coast. <span style="mso-spacerun: yes;"> </span>All three factors appear to have positive indications.
It is worth noting that the Atlantic region has faced a price spike at various times
due to limited refining capability on the East Coast and relying more on imports
of sweet crudes from abroad. </span></span></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">In recent years, availability of copious supplies
of oil and gas in the U.S. boosted its refining industry, which has been increasingly
</span><a href="http://www.bloomberg.com/news/2012-08-08/refiners-awash-in-shale-oil-offer-10-times-exxon-returns.html"><span style="color: blue; font-family: Calibri;">willing</span></a><span style="font-family: Calibri;">
to “improve value through share buybacks and dividends” and investments in
upgrading a lot of its coking capacity to profit from processing heavier
crudes. It is likely that easing of prices for refined oil products, including
gasoline, may maintain for a few years in the U.S., aided by a recent reversal
of the Seaway pipeline from Cushing, Oklahoma, to Texas and with weakening of
Louisiana Light Sweet and Brent crude benchmarks, which have traditionally been
linked to refined oil products. In the end, the level of domestic oil supply alone cannot be the answer to price fluctuations, but it can be found more
in exogenous factors such as weather, a geopolitical crisis or war, shifts in global oil demand and supply, natural disaster, or unexpected production
or refinery shutdowns here or abroad as a result of these.<o:p></o:p></span></span></div>
</div>
Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com1tag:blogger.com,1999:blog-6024007149338635903.post-9188934887772303512012-08-08T08:33:00.000-07:002012-08-08T08:33:34.305-07:00Love It or Hate It, You Need the Keystone Pipeline<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">The controversial
Keystone pipeline is in the news again after the Canadian pipeline company, TransCanada,
</span><a href="http://www.upi.com/Business_News/Energy-Resources/2012/07/27/US-leg-of-Keystone-XL-gets-final-nod/UPI-77551343396176/"><span style="color: blue; font-family: Calibri;">secured</span></a><span style="font-family: Calibri;">
last three permits from the U.S. Army Corps of Engineers to extend the southern
leg of the pipeline to the Gulf Coast. This move upends the January 2012 rejection
of the Keystone XL pipeline by the U.S. Department of State, which was reportedly
based on insufficient time to evaluate the pipeline’s environmental impact. Unpopular
among environmental groups in America, the Keystone pipeline’s new extension is
likely to generate another wave of disagreements and protests over a
potentially damaging impact of the heavy and low-quality Canadian oil on ecosystem
of the U.S. Some of my friends have been eager to express their disappointment and
frustration in various social media outlets on the approval of the Canadian
pipeline at what they see the time of hastening rate of climate change. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">But Keystone is, in
many ways, inevitable for the U.S. The country is still over 90 percent reliant
on gasoline for transportation and it seems like people here tend to forget (or
to not know) how the recent history of U.S. oil production, trade and refining
have permanently changed the types of oil used in the U.S. <span style="mso-spacerun: yes;"> </span>Steady decline of U.S. sweet crude oil output
from the early 1990s through the middle of 2000s have </span><a href="http://www.cmegroup.com/trading/energy/files/PurvinGertz_WTI_Benchmark_Study.pdf"><span style="color: blue; font-family: Calibri;">led
to</span></a><span style="font-family: Calibri;"> a change in the relationship of the West Texas Intermediate (WTI) benchmark
towards other regional benchmarks, shutdown of many refineries in the Gulf
Coast and reversal of directions of some, as well as to an increased demand for
more offshore imports of sweet crude to meet local refinery needs, including
rapidly rising Canadian supplies. </span></span></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: "Calibri","sans-serif"; font-size: 12pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">As
imports of Canadian synthetic crude oil to the U.S. began to increase, Gulf
Coast refineries were adjusted to handle heavier crudes from the northern
neighbor. In fact, the recent surge in shale oil development in places such as
North Dakota, which ramped up domestic sweet crude production again, is likely
to find a good market abroad since “the Gulf Coast refining hub is more suited
to process heavier crudes,” in the <a href="http://articles.chicagotribune.com/2012-06-27/classified/sns-rt-us-usa-oil-exportsbre85q1ke-20120627_1_crude-oil-exports-gas-exports"><span style="color: blue;">words</span></a><span style="color: black; mso-themecolor: text1;"> </span>of the recently appointed head
of the Energy Information Administration (EIA), Adam Sieminski. Canadian oil,
which stood at number<span style="color: black; mso-themecolor: text1;"> </span><a href="http://www.eia.gov/energy_in_brief/foreign_oil_dependence.cfm"><span style="color: blue;">one</span></a><span style="color: black; mso-themecolor: text1;"> </span>in U.S. net crude imports (29
percent) in 2011, is bound to increase its market share in the U.S. via the
existing Keystone pipeline and its planned southern leg. So, what to do with
the dirty Canadian oil? The answer lies in oil (gasoline) consumption of every
American, who cannot, and should not, separate the influx of dirty oil from
Canada from his/her own contribution to its rising supply to the U.S.</span></span></div>Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-29740740503122226012012-07-12T13:24:00.002-07:002012-07-12T13:24:56.012-07:00China in the Driver’s Seat on Direct Coal-to-Liquids Production<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">Coal is here to
stay. More in some countries than others. In places like China, while coal is still
king, its role appears to be slowly morphing to liquid fuels such as
gasoline and diesel. With the world’s third largest reserves of coal after
Russia and the U.S., China </span><a href="http://www.reuters.com/article/2011/09/08/shenhua-oil-coal-idUSL3E7K732020110908"><span style="color: blue; font-family: Calibri;">sees</span></a><span style="font-family: Calibri;">
the future in coal-to-liquids (CTL) fuels in order to reduce dependence on foreign
oil and to maintain robust domestic CTL production as an alternative to
petroleum. Despite environmental and economic costs of producing liquid fuels
from coal, China’s state-run Shenhua Group began profiting from its first direct
coal-to-liquids (CTL) facility in Inner Mongolia Autonomous Region, China, and </span><a href="http://www.chinadaily.com.cn/bizchina/2011-05/16/content_12515142.htm"><span style="color: blue; font-family: Calibri;">producing</span></a><span style="font-family: Calibri;">
216,000 tons of refined oil products in the first quarter of 2011. Although China
wavered to use the CTL technology in 2008 due to high production costs and
concerns with water use, its </span><a href="http://www.chinadaily.com.cn/bizchina/2011-05/16/content_12515142.htm"><span style="color: blue; font-family: Calibri;">push</span></a><span style="font-family: Calibri;">
forward resulted in stable production for the past nine months, bringing in 100
million yuan ($15.38 million) in earnings in the first quarter of 2011 to Shenhua. <o:p></o:p></span></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Calibri;">Direct-liquefaction
CTL, which converts coal to liquid fuels </span><a href="http://www.rand.org/content/dam/rand/pubs/monographs/2008/RAND_MG754.pdf"><span style="color: blue; font-family: Calibri;">by
way of</span></a><span style="font-family: Calibri;"> heating finely ground coal above 400 degrees Celsius with hydrogen
and a suitable catalyst and further processing to obtain naphtha and middle
distillates, has not been widely used in the world yet. The </span><a href="http://www.rand.org/content/dam/rand/pubs/monographs/2008/RAND_MG754.pdf"><span style="color: blue; font-family: Calibri;">reasons</span></a><span style="font-family: Calibri;">
include high production costs, technical challenges, comparatively cheap global
oil prices that make it difficult to invest in expensive CTL technology, as
well as its carbon footprint, which would not be insignificant due to emissions
from hydrogen production and thermal loss. There have been long-standing
concerns with toxicity and carcinogenicity of liquids produced from direct CTL fuel
production, which still warrant detailed studying. For these reasons, the CTL
industry has not developed in the U.S., another country with vast coal
supplies. <o:p></o:p></span></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Calibri;">It is unlikely that
CTL will gain much traction in the U.S. in the near term, particularly given
its massive shale oil and gas production that have further displaced coal in
its energy mix. But China’s continued experimentation with direct CTL
production to make it economically viable and less taxing on the environment,
or failure to do so, would be worth monitoring and taking a note. The true cost-benefit
analysis of the direct CTL technology and any serious attempt to develop or
invest in it in the U.S. might occur when domestic natural gas prices begin to
rise from their current historic lows as well as sustained high crude oil
prices.</span></span></div>Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com2tag:blogger.com,1999:blog-6024007149338635903.post-90376016864145960702012-07-05T07:22:00.000-07:002012-07-05T14:47:43.281-07:00The Elephant in the Room: Fuel Exports<div style="text-align: justify;">
<span style="font-family: Calibri;"></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Calibri;">Much
has changed in the U.S. energy landscape that some of the unthinkable scenarios
of the yesteryear might just be realistic these days. For example, the U.S. is beginning
to flirt with the idea of potentially exporting natural gas, coal and maybe
even crude oil.<span style="mso-spacerun: yes;"> </span>At least in the words of
the newly appointed head of the Energy Information Administration (EIA), Adam
Sieminski, the U.S. should be </span><a href="http://articles.chicagotribune.com/2012-06-27/classified/sns-rt-us-usa-oil-exportsbre85q1ke-20120627_1_crude-oil-exports-gas-exports"><span style="color: blue; font-family: Calibri;">open</span></a><span style="font-family: Calibri;">
to crude oil exports to benefit its economy, particularly because the “selling
the U.S. oil abroad could help provide a market for light sweet crude produced from
shale formations in places like North Dakota, since the Gulf coast refining hub
is more suited to process heavier crudes.” While Sieminski’s proposition on oil
exports will need to overcome the U.S ban on selling most unrefined crude oil
under the Mineral Leasing Act of 1920 and the Outer Continental Shelf Lands
Act, which make oil exports nearly impossible, the possibility of exporting natural
gas and, especially, coal appears to be less far-fetched, partly because they have
created a huge glut in the country. </span></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Calibri;">Proponents of the idea of exporting natural
gas from shale formations, production of which increased from nearly nothing to
23 percent of all U.S. </span><a href="http://www.truebluenaturalgas.org/eia-natural-gas-production-helps-reduce-emissions-increase-energy-security/"><span style="color: blue; font-family: Calibri;">gas</span></a><span style="font-family: Calibri;">
production in 2010 with prices hovering around $2.8 per million British thermal
units, point out that prices and profits are likely to stay </span><a href="http://in.reuters.com/article/2012/06/27/usa-lng-exports-idINL2E8HQKG720120627"><span style="color: blue; font-family: Calibri;">depressed</span></a><span style="font-family: Calibri;">
for decades without alleviating the glut of natural gas. They have a point. Given that the surge
in shale gas production began inevitably eating into the coal market in the
U.S. with its record low prices and coal-to-gas switching, King Coal maybe looking
at markets abroad as well, particularly since demand for coal is rising in
Europe. Reportedly, U.S. </span><a href="http://seekingalpha.com/article/700511-buy-coal-stocks-now-coal-exports-to-europe-surge"><span style="color: blue; font-family: Calibri;">coal</span></a><span style="font-family: Calibri;">
companies “are spending at least $530 million to increase their coal-export
capacity in order to meet high overseas demand.” </span></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Calibri;">Exporting U.S. energy sources may
not be swift, but it will be unavoidable provided that the gas glut and unused
coal stay idle in the U.S. market. And too bad that it is not receiving as much attention in the government as it should. Even if opponents of natural gas exports
argue that keeping gas prices low would be key to many industries, including
domestic manufacturing and transportation sectors, few politicians on both
sides of the aisle appear to be opposed to gas exports. But even fewer
politicians openly state their support to exports lest should they be accused
of causing domestic price hikes. <span style="mso-spacerun: yes;"> And e</span>ven if
there is an eventual agreement to export natural gas, it looks like there will
be cap on the amount. As Cheniere Energy </span><a href="http://www.wallstreetdaily.com/2012/06/13/the-coming-natural-gas-export-boom/"><span style="color: blue; font-family: Calibri;">won</span></a><span style="font-family: Calibri;">
the bid to build an LNG export terminal in Louisiana to begin operation in
2015, political will to agree on exporting fossil fuels in the U.S. may emerge by that
time. Perhaps, it will be ushered in further with influential figures such as
Sieminski. When that day comes, the ultimate question will be how much energy should be exported.</span></span></div>Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-52967071266242092022012-06-28T06:10:00.000-07:002012-06-28T06:10:09.329-07:00Challenges of China’s Fuel of Choice<div style="text-align: justify;">
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<span style="font-family: Calibri;"><span lang="EN" style="color: black; font-size: 12pt; mso-ansi-language: EN; mso-bidi-font-family: Arial; mso-themecolor: text1;">The Chinese
economy has grown by an average of 10 percent a year over the past two decades,
crossing the milestone to become the second-largest economy and energy user in
2010 after the U.S., as well as the world's largest emitter of greenhouse
gases. Stable energy supplies being at the core of China’s rise, they remain
pivotal to its continued economic growth, especially coal, oil and gas. While
coal still constitutes around 68 percent of China’s energy use, Chinese
policymakers and energy executives lean more and more towards cleaner fuel
sources, particularly natural gas. According to International Energy Agency’s
June 2012 report, the share of natural gas is set to rise in China’s energy
mix, which is expected to have strong implications on the country’s energy usage
in the years to come.</span><span lang="EN" style="color: black; font-size: 12pt; mso-themecolor: text1;"> </span><span style="color: black; font-size: 12pt; mso-themecolor: text1;"><o:p></o:p></span></span></div>
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<span style="color: black; font-size: 12pt; mso-themecolor: text1;"><span style="font-family: Calibri;">Analyzing the new role of natural gas in China, my new
article published in Oilprice</span><span style="font-family: Calibri;">
looked into China’s natural gas policy, main players in its gas market and
problems it faces with the rise of Central Asian gas imports (full article can be accessed <a href="http://oilprice.com/Energy/Natural-Gas/China-Turn-to-Natural-Gas-to-Fuel-their-Economic-Growth.html"><span style="color: blue;">here</span></a><span style="font-family: Times New Roman;">). I </span>concluded that </span></span><span style="font-family: Calibri;"><span lang="EN" style="color: black; font-size: 12pt; mso-ansi-language: EN; mso-bidi-font-family: Arial; mso-themecolor: text1;">mounting natural gas demand,
combined with the official endorsement of clean energy sources, is bound to
solidify the position of natural gas in China’s energy mix in the years to
come. But liberalization of domestic natural gas prices will be absolutely key
to attracting private investment to successfully
develop domestic gas and to continue importing this energy source without hurting Chinese
energy companies.</span><span style="color: black; font-size: 12pt; mso-themecolor: text1;"><o:p></o:p></span></span></div>
<div style="text-align: justify;">
</div>Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0tag:blogger.com,1999:blog-6024007149338635903.post-53695068165577115772012-06-20T10:13:00.000-07:002012-06-20T10:13:40.618-07:00Why U.S. Shale Gas Will not Be a Cookie Cutter Model<div class="MsoNormal" style="line-height: normal; margin: 0in 0in 0pt; text-align: justify;">
<span style="font-size: 12pt;"><span style="font-family: Calibri;">A new </span><a href="http://online.wsj.com/article/SB10001424052702303807404577434181432949006.html?mod=googlenews_wsj"><span style="color: blue; font-family: Calibri;">report</span></a><span style="font-family: Calibri;">
of the International Energy Agency (IEA) on unconventional natural gas earlier
this month predicted that </span></span><span style="font-family: Calibri;"><span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";">“global exploitation of shale gas reserves could transform
the world's energy supply by lowering prices, improving security and curbing
carbon dioxide emissions.”<span style="mso-spacerun: yes;"> </span>But unconventional
gas revolution may fall short of its promise if social and environmental issues
are not adequately addressed. The</span><span style="font-size: 12pt;"> IEA <a href="http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf"><span style="color: blue;">report</span></a>
points out many common concerns about shale gas extraction in the U.S. and
other countries.<span style="mso-spacerun: yes;"> </span>Chiefly among them are groundwater
and air pollution, dangers of structural faults in well drilling, </span><span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";">disposal of flowback
water, </span><span style="font-size: 12pt;">and </span><span style="font-size: 12pt; mso-bidi-font-family: "Times New Roman";">emissions of polluting gases
from wells, which are some of the factors of</span><span style="font-size: 12pt;">
public skepticism about the industry’s safety.<o:p></o:p></span></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Calibri;">As more countries
begin to tap shale gas, the learning curve promises to be steep.<span style="mso-spacerun: yes;"> </span>Countries with major shale gas reserves, such
as China, Australia, Poland, and Canada, are aware of the long lead times, high
capital and operational costs, necessary price environments to attract
investment, and the importance of overcoming regulatory and environmental
constraints before this resource becomes a reality.<span style="mso-spacerun: yes;"> </span>Just this week, Europe’s biggest shale potential
in Poland came under question and confusion after ExxonMobil pulled out of
shale exploration in this Eastern European </span><a href="http://www.winnipegfreepress.com/arts-and-life/life/greenpage/exxonmobil-ends-exploration-for-shale-gas-in-poland-due-to-unsatisfying-findings-159406615.html"><span style="color: blue; font-family: Calibri;">country</span></a><span style="font-family: Calibri;">
due to unsatisfying findings, legislative foot dragging and complex </span><a href="http://in.reuters.com/article/2012/06/18/poland-shale-idINL5E8HII5420120618"><span style="color: blue; font-family: Calibri;">geology</span></a><span style="font-family: Calibri;">.<o:p></o:p></span></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Calibri;">Conditions that
existed in the U.S. to revolutionize this industry may not exist in other
countries to easily replicate its success, which include geological
differences, inadequate or lack of access to equipment, water, manpower, and infrastructure
as well as complex land ownership issues. Because maturity of the shale gas industry
outside the U.S. will take anywhere from five to ten years before it reaches
commercial production levels, developments in this unconventional gas sector in
America are likely to set the tone to other countries.<span style="mso-spacerun: yes;"> </span>In other words, what happens in the U.S. shale
gas is bound to have ramifications on the trajectory of the industry elsewhere
because the U.S. is far ahead of the rest of the world in exploiting this
energy source.<span style="mso-spacerun: yes;"> </span></span></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Calibri;"><span style="mso-spacerun: yes;"></span>As much as there is
enthusiasm and effort to follow the footsteps of the American unconventional
gas evolution, a possible serious incident in the U.S. shale gas may set the
newly emerging industry back in the rest of the world.<span style="mso-spacerun: yes;"> </span>Given an already complex set of costs and public
concerns over hazards of shale gas in many countries, an incident in one
country is likely to cause more stringent regulations, and even more moratoria,
in others.<span style="mso-spacerun: yes;"> </span>In such a scenario, costs of
drilling and operations are likely to be even higher for investors and
operators with an added challenge of winning hearts and minds of the distrustful
public.<span style="mso-spacerun: yes;"> </span>The U.S. may have brought down
the costs of taking natural gas out shale rocks, but its global success and
acceptance will hinge on minimal mistakes and no major disasters.<o:p></o:p></span></span></div>Energy Sourcehttp://www.blogger.com/profile/15655255809137209811noreply@blogger.com0