Sunday, October 5, 2014

World on the brink of oil war as Opec bickers over price

Oil prices ended last week in freefall as the world’s largest group of producers from petro-states in the Middle East dithered over whether to cut output.

A secretive group of the world’s most powerful oil ministers will soon gather in Vienna to take arguably one of the most important decisions that could affect the still fragile world economy: whether to cut production of crude to defend prices at $100 per barrel, or keep open the spigots as winter looms among the biggest energy-consuming nations?

A sudden slump in the price of crude has exposed deep divisions within the Organisation of Petroleum Exporting Countries (Opec) ahead of its final scheduled meeting of the year next month to decide on how much oil to pump.

Some members, led by Iran, have called for immediate action to stem the drop in oil prices, while the Arab sheikhdoms of the Gulf have so far argued that it could be another three months before it becomes clear whether the group should cut production for the first time since December 2008.

Whatever they decide, oil remains the lifeblood of the global economic system due to its direct impact on inflation and input prices. Brent crude – a global benchmark of oil drawn from 15 fields in the North Sea, dipped last week to multi-year lows below $92 per barrel as a perfect storm of a strong US dollar, oversupply in the system and declining demand shattered confidence in the market. Brent has tumbled 20pc in the last three months after touching $115 per barrel in June.

In the US – the world’s biggest consumer – crude for November delivery at one point last week dropped below the psychologically important $90 pricing level, raising fears that a prolonged slump could put many of America’s shale drillers out of business. Shale oil, which can cost up to $80 per barrel to produce, has spurred an energy revolution in the US, which has started to threaten the dominance of producers in the Middle East.

However, at current price levels many of these new so called “tight oil” wells are approaching the point when they will soon become unprofitable.

Like the situation in the US, falling oil prices are also a double-edged sword for Britain’s economy and investors. Although George Osborne, the Chancellor, is less reliant on tax revenues from the North Sea than some of his predecessors, prices are approaching the point when many of the developments planned offshore west of Shetland by international oil companies could be placed on ice.

A sharp drop-off in domestic oil production and associated tax receipts from the North Sea would give Mr Osborne an unwelcome hole to fill in the government’s public finances heading into next year’s general election. However, falling oil prices will help to keep inflation low.

For Britain’s motorists the current declines have been good news that has trickled through to the price of petrol on forecourts. A litre of unleaded petrol in the UK has fallen a few pence over the past month to an average of around 127.21p on average, a figure last seen in 2011, just before Mr Osborne raised the value added tax on fuel to 20pc, from 17.5pc.

All eyes are now firmly focused on the next move by Opec, which controls 60pc of the world’s oil reserves and about a third of daily physical supply. The group has been branded an unaccountable “cartel” by free-market critics in North America who claim its system of limiting production by setting an output ceiling and quotas is tantamount to price rigging.

Although this is an accusation that the group’s secretariat which is based in Vienna strongly denies, its mostly unelected group of policymaking oil ministers undeniably pull the strings of the global energy industry in the same way that central bankers can control currencies.

Opec states have largely managed to maintain cohesion over the last decade as prices over $100 per barrel have enriched their economies and encouraged adherence to quotas. This consensus is now starting to break down, creating more uncertainty in the market and a potentially destabilising situation for the global economy.

Next month’s meeting promises to be the most tense held since the onset of the Arab Spring in 2010, with the Shi’ite Muslim faction of Iran and Iraq already appearing to line up against Saudi Arabia and the United Arab Emirates (UAE).

Iran’s Oil Minister Bijan Zanganeh has placed his cards on the table early by calling for Opec to urgently cut output to stem the sharp recent decline in prices, which threatens the Islamic Republic’s fragile economy after years of restrictive sanctions.

According to research from Deutsche Bank, Iran has the highest fiscal break-even price for its budget at over $130 per barrel of Brent, compared with the UAE at around $70 per barrel and Saudi Arabia at about $90. More

 

 

Monday, September 29, 2014

Solar power could be world's top electricity source by 2050

Solar energy could be the top source of electricity by 2050, aided by plummeting costs of the equipment to generate it, a report from the International Energy Agency (IEA), the West’s energy watchdog, said on Monday.

IEA Reports said solar photovoltaic (PV) systems could generate up to 16% of the world’s electricity by 2050, while solar thermal electricity (STE) - from “concentrating” solar power plants - could provide a further 11%.

“The rapid cost decrease of photovoltaic modules and systems in the last few years has opened new perspectives for using solar energy as a major source of electricity in the coming years and decades,” said IEA Executive Director Maria van der Hoeven.

Solar photovoltaic (PV) panels constitute the fastest-growing renewable energy technology in the world since 2000, although solar is still less than 1% of energy capacity worldwide.

The IEA said PV expansion would be led by China, followed by the United States, while STE could also grow in the United States along with Africa, India and the Middle East. More


 

Friday, September 19, 2014

The Peak Oil Crisis: It‘s All Around Us

Ten years ago peak oil was assumed to be a rather straight forward, transparent process. What was then thought of as "oil" production was going to stop growing around the middle of the last decade.


Shortages were going to occur; prices were going to rise; demand was going to drop; economies would falter; and eventually a major economic depression was going to occur. Fortunately or not, depending on your point of view, the last ten years have turned out to a lot more complicated than expected. Production of what is now known as "conventional" oil did indeed peak back around 2005, and many of the phenomena that were expected to result did occur and continue to this day.

Oil prices have climbed several-fold from where they were in the early years of the last decade – surging upwards from $20 a barrel to circa $100. This rapid jump in energy costs did slow many nations’ economies, cut oil consumption, and with some other factors set off a "great" recession. Real economic hardships have not yet occurred

What is so interesting about all this is that a temporary surge in what was heretofore a little known source of oil in the U.S. is masking the larger story of what is taking place in the global oil situation

Much of this is due to the reaction that set in from high oil prices and increased government intervention into the economy. In the case of the U.S., Washington turned on the modern day equivalent of the printing presses and began handing out money that was used to develop expensive sources of oil and gas. The high selling price per barrel, coupled with cheap money led to a boom in U.S. oil production where fortuitous geological conditions in North Dakota and South Texas allowed the production of shale oil at money-making prices provided oil prices stay high.

U.S. unconventional oil production soared by some 3.3 million barrels a day (b/d) in the last four years, and, if the US Energy Information Administration is correct, is due to climb by another million b/d or so in 2015. While this jump in production was unexpected by most, it was just another phenomenon resulting from unprecedentedly high oil prices, which in turn resulted from the lack of adequate "conventional" oil production. As is well known, economic development can have major reactions and feedbacks

What is so interesting about all this is that a temporary surge in what was heretofore a little known source of oil in the U.S. is masking the larger story of what is taking place in the global oil situation. The simple answer is that except for the U.S. shale oil surge almost no increase in oil production is taking place around the world. No other country as yet has gotten significant amounts of shale oil or gas into production. Russia’s conventional oil production seems to be peaking at present, and its Arctic oil production is still many years, or perhaps even decades, away. Brazilian production is going nowhere at the minute, deepwater production in the Gulf of Mexico is stagnating and the Middle East is busy killing itself. On top of all this, global demand for oil continues to increase by some million b/d each year – most of which is going to Asia.

If we step back and acknowledge that the shale oil phenomenon will be over in a couple of years and that oil production is dropping in the rest of the world, then we have to expect that the remainder of the peak oil story will play out shortly. The impact of shrinking global oil production, which is been on hold for nearly a decade, will appear. Prices will go much higher, this time with lowered expectations that more oil will be produced as prices go higher. The great recession, which has never really gone away for most, will return with renewed vigor and all that it implies.

An additional factor which has grown considerably worse in the last ten years is climate change, largely brought about by the combustion of fossil fuels. We are already seeing global weather anomalies with record high and low temperatures and record floods as well as droughts. This too will take its toll on economic development as mitigating this change will soon become enormously expensive. We are already seeing migrations of restive peoples. Thousands are dying in efforts to get from the Middle East and Africa into the EU. Millions are already homeless across the Middle East and recent developments foretell hundreds of thousands if not millions more being added to ranks of refugees as decades and even centuries-old political arrangements collapse.

All this is telling us that the peak oil crisis we have been watching for the last ten years has not gone away, but is turning out to be a more prolonged event than previous believed. Many do not believe that peak oil is really happening as they read daily of surging oil production and falling oil prices. Rarely do they hear that another shoe has yet to drop and that much worse in terms of oil shortages, higher prices and interrupted economic growth is just ahead.

We are sitting in the eye of the peak oil crisis and few recognize it. Five years from now, it should be apparent to all. More

 

Sunday, September 14, 2014

Why Peak Oil Refuses To Die

Perhaps you’ve seen one of the recent barrage of articles claiming that fears of an imminent peak and decline in world oil production have either been dispelled (because we actually have plenty of oil) or are misplaced (because climate change is the only environmental problem we should be concerned with). I’m not buying either argument.

Richard Heinberg

Why? Let’s start with the common assertion that oil supplies are sufficiently abundant so that a peak in production is many years or decades away. Everyone agrees that planet Earth still holds plenty of petroleum or petroleum-like resources: that’s the kernel of truth at the heart of most attempted peak-oil debunkery. However, extracting and delivering those resources at an affordable price is becoming a bigger challenge year by year. For the oil industry, costs of production have rocketed; they’re currently soaring at a rate of about 10 percent annually. Producers need very high oil prices to justify going after the resources that remain—tight oil from source rocks, Arctic oil, ultra-deepwater oil, and bitumen. But oil prices have already risen to the point where many users of petroleum just can’t afford to pay more. The US economyhas a habit of responding to oil price hikes by swooning into recession, and during the shift from $20 per barrel oil to $100 per barrel oil (which occurred between 2002 and 2011), the economies of most industrialized countries began to shudder and stall. What would be their response to a sustained oil price of $150 or $200? We may never know: it remains to be seen whether the world can afford to pay what will be required for oil producers to continue wresting liquid hydrocarbons from the ground at current rates. While industry apologists who choose to focus only on the abundance of remaining petroleum resources claim that peak oil is rubbish, the market is telling Houston we have a problem.

Meanwhile some environmentalists have abandoned the subject of peak oil because they believe it’s just not relevant. For them, climate change is the only thing that matters. Society must deal with its collective carbon habit by going cold turkey on all fossil fuels. We can make the needed energy transition through the strategies of substitution and efficiency. Develop low-carbon energy sources (solar and wind, possibly nuclear), and use energy smarter! Electrify transport with battery-powered cars! Get with the program and stop wasting time on side issues!

Like the abundant-resource argument, this line of thinking proceeds from an unassailable premise. Anthropogenic climate change is indeed the nastiest, gnarliest environmental issue humanity has ever faced. The potential consequences stretch centuries or millennia into the future and imperil not just humanity, but thousands or millions of other species. But peak oil won’t go away just because it’s an inconvenient distraction from addressing that gargantuan issue. In fact, the two problems are closely linked and society will need to address both by way of a realistic, comprehensive strategy. I’ll get back to that point toward the end of this essay.

Is the necessary transition to renewable energy a simple matter of politics and regulation, as many climate campaigners seem to suggest? Hardly. Transitioning the electricity sector is a huge task in itself (the variability of wind and solar power implies soaring costs for energy storage, capacity redundancy, and grid upgrades once these sources start to provide a substantial portion of total electrical energy consumed). But liquid fuels pose an even bigger hurdle. Even the most advanced batteries do a poor job of storing energy when compared to oil; that’s why we’re unlikely ever to see electric airplanes, tractors, ships, 18-wheel trucks, or bulldozers. Some energy pundits tout compressed natural gas as a viable bridge fuel for transport, but that assumes sufficient availability and continued affordability of fracked shale gas—a prospect that seems highly unlikely in view of the results of Post Carbon Institute’s ongoing research into possible shale gas drilling locations and per-well production profiles. Hydrogen could be a niche fuel in some instances, but conversion from other energy sources (electricity or natural gas) to hydrogen implies energy losses, as does hydrogen storage. Further, if we were to make lots of H2 from water, using electricity, in order to fuel much of the transport sector, this would place an enormous extra burden on solar and wind, which already face a daunting job replacing coal and natural gas in the power generation sector.

How about energy efficiency? Good idea! We need to cut energy waste, and the folks at Rocky Mountain Institute have proposed many good ways of doing that. But, at the end of the day, efficiency is subject to the law of diminishing returns; so, while the tie between energy consumption and economic output is somewhat elastic, it cannot be severed. Specifically regarding oil: yes, many nations have reduced petroleum consumption in the last few years as a way of adapting to higher prices. But the fact that their economies have weakened suggests that efficiency gains have tended to lag behind oil price increases. Average vehicle fuel economy has improved, but not fast enough—so our main “efficiency” strategy has in reality simply been to travel less, and then deal with the withdrawal of economic benefits that cheap transport formerly provided.

None of this is trivial: oil is essential to the functioning of the modern industrial world. We use it for just about all transportation, which is key to trade. It’s also the fuel for construction, resource extraction (mining, fishing, forestry), and agriculture. Together, these sectors form the backbone of the real, physical economy of industrialized nations.

Again: the costs of oil production are rising and oil is stubbornly hard to substitute. As I argued in a recent book, this effectively spells the end of the historic period of rapid economic growth that began shortly after World War II. There is no way out; inevitably, society will become less mobile and—this should be cause for much greater concern—it will either produce less food or produce it in more labor-intensive ways.

Of course, peak oil and climate change aren’t the only looming challenges we should be concerned about. Economists rightly worry that the world is mired in far too much debt. Ecologists warn us about biodiversity loss, pervasive chemical pollution, and human overpopulation. Food system analysts try (usually in vain) to direct public attention toward the predicaments of topsoil degradation and depletion of aquifers from over-irrigation. Public health professionals caution us about the specter of pandemics as antibiotics lose effectiveness due to rapid microbial evolution. For city managers, the crumbling of water, sewerage, bridge, gas, and electricity grid infrastructure implies countless disasters just waiting to happen. I could go on. It’s all so overwhelming! Perhaps the only way to avoid crisis fatigue these days is simply to stop paying attention. But amid all these priorities and problems, peak oil refuses to die.

Those of us who insist on paying attention sooner or later get around to doing a form of mental triage. What are the worst crises that humanity faces over the long run? Which are the worst in the short term? What are the deeper issues, of which many problems are mere symptoms? This sorting process has led many systems thinkers to the conclusion that our species, in essence, faces an ecological dilemma of overpopulation, resource depletion, and environmental degradation resulting from a relatively brief period of rapid expansion enabled by a huge but temporary energy subsidy in the form of fossil fuels. We discovered buried treasure and went on a spending binge, adopting a way of life that cannot be supported long-term. Peak oil, climate change, mineral depletion, soil degradation, species loss, and the rest are justwords that blind men use to describe an elephant.

What we must do now is treat symptoms while keeping in mind the root disease, seeing why and how various crises are related. I have a couple of suggestions in this regard. One is that we begin to speak of peak oil and climate change as two sides of the same coin. The coin itself represents our reliance on fossil fuels and their unique energetic benefits. Both side-problems (the declining economic value of fossil fuels as they deplete, on one side, and the increasing environmental cost of burning them, on the other) demand that we reduce our fossil fuel dependency as rapidly as possible, even though that means sacrificing benefits we have come to depend on. If we maintain this holistic view of the situation, we’re more likely to understand that there is no way to keep eating our cake while having it too, either by continuing to burn fossil fuels of declining quality or by relying on new technology to fix what is actually an ecological problem. We can’t frack our way back to economic prosperity; nor can we unplug a coal plant, plug in a solar panel, and go on expanding population and consumption. We will have to adapt to the quantities and qualities of energy that are actually available from renewable sources alone, and that will mean changing the way we do just about everything.

Which brings me to the second, related suggestion. The constellation of challenges before us ensures that economic growth, as we have known it, is over, finished, kaput. That’s a terrible thing, in that the end of growth will almost certainly entail financial and political turbulence with real human casualties. But from the standpoint of diagnosis and treatment, it simplifies everything marvelously. If our impending crises stem from fossil-fueled expansion of population and consumption, their resolution surely starts with a coordinated, planned, and managed program of decarbonization and degrowth. We must reduce population and energy consumption from fossil fuels, while minimizing the human and environmental impacts of both past growth and the process of contraction. Easily said, not so easily done. But if civilization is to maintain itself in any recognizable form, this is what’s necessary. It would really help if those of us working at treating the various symptoms of the global meta-crisistogether acknowledged that growth is a core part of the underlying problem, not a solution, and that it is effectively over in any case.

Ignore peak oil (this could equally be said of climate change), and our view of the global problem-set immediately becomes distorted. We grasp at apparent solutions that turn out to be a useless waste of effort, or worse. Peak oil helps us understand what we’re faced with, and what we must do. It’s a gift wrapped in a curse. And it refuses to go away no matter how often it is pronounced dead.

By. Richard Heinberg

 

Wednesday, August 27, 2014

Geothermal Power Approaches 12,000 Megawatts Worldwide

In 2013, world geothermal electricity-generating capacity grew 3 percent to top 11,700 megawatts across 24 countries. Although some other renewable energy technologies are seeing much faster growth—wind power has expanded 21 percent per year since 2008, for example, while solar power has grown at a blistering 53 percent annual rate—this was geothermal’s best year since the 2007-08 financial crisis.

Geothermal power’s relatively slower growth is not due to a paucity of energy to tap. On the contrary, the upper six miles of the earth’s crust holds 50,000 times the energy embodied in the world’s oil and gas reserves. But unlike the relative ease of measuring wind speed and solar radiation, test-drilling to assess deep heat resources prior to building a geothermal power plant is uncertain and costly. The developer may spend 15 percent of the project's capital cost during test-drilling, with no guarantee of finding a viable site.

Once built, however, a geothermal power plant can generate electricity 24 hours a day with low operation and maintenance costs—importantly because there is zero fuel cost. Over the life of the generator, geothermal plants are often cost-competitive with all other power sources, including fossil fuel and nuclear plants. This is true even without considering the many indirect costs of fossil- and nuclear-generated electricity that are not reflected in customers’ monthly bills.

The top three countries in installed geothermal power capacity—the United States, the Philippines, and Indonesia—account for more than half the world total. California hosts nearly 80 percent of the 3,440 megawatts of U.S. geothermal capacity; another 16 percent is found in Nevada.

Despite having installed more geothermal power capacity than any other country, the United States currently generates less than 1 percent of its electricity from the earth’s heat. Iceland holds the top spot in that category, using geothermal power for 29 percent of its electricity. Close behind is El Salvador, where one quarter of electricity comes from geothermal plants. Kenya follows at 19 percent. Next are the Philippines and Costa Rica, both at 15 percent, and New Zealand, at 14 percent.

Indonesia has the most ambitious geothermal capacity target. It is looking to develop 10,000 megawatts by 2025. Having only gained 150 megawatts in the last four years, this will be a steep climb. But a new law passed by the government in late August 2014 should help move industry activity in that direction: it increases the per-kilowatt-hour purchase price guaranteed to geothermal producers and ends geothermal power’s classification as mining activity. (Much of Indonesia’s untapped geothermal resource lies in forested areas where mining is illegal.) Even before the new law took effect, geothermal company Ormat began construction on the world’s largest single geothermal power plant, a 330-megawatt project in North Sumatra, in June 2014. The plant should generate its first electricity in 2018.

Indonesia is just one of about 40 countries that could get all their electricity from indigenous geothermal power—a list that includes Ecuador, Ethiopia, Iceland, Kenya, Papua New Guinea, Peru, the Philippines, and Tanzania. Nearly all of them are developing countries, where the high up-front costs of geothermal development are often prohibitive.

To help address this mismatch of geothermal resources and funds, the World Bank launched its Global Geothermal Development Plan in March 2013. By December, donors had come up with $115 million of the initial $500 million target to identify and fund test-drilling for promising geothermal projects in the developing world. The Bank hopes that the experience gained from these projects will lead to lower costs for the geothermal industry overall. This would be good news on many fronts—simultaneously reducing energy poverty, air pollution, carbon emissions, and costly fossil fuel imports. More

 

Sunday, August 10, 2014

Natural Gas in the Palestinian Authority: The Potential of the Gaza Marine Offshore Field

Summary: Although in strict legal terms its status is ambig-uous, a 25-year exploration license for the marine area off the Gaza Strip was awarded by the Palestinian Authority in 1999.

The Gaza Marine field was discovered the following the year though its natural gas has yet to be exploited. Politics as well as failure to agree on commercial terms have been the principal reasons for the delay.

Exploitation of the field would provide the Palestinian Authority with an important revenue stream. Using Gaza Marine gas may also reduce the need of Israel to consume its own natural gas to generate electricity for the Palestinians. Ultimately the decision will be political, but, in economic terms, the case for the exploita-tion of Gaza Marine is strong. Download PDF

 

Peak Energy: Solar Power Installations Jump to a New Annual Record

Peak Energy: Solar Power Installations Jump to a New Annual Record



WorldWatch has a report on the global solar power market - Solar Power Installations Jump to a New Annual Record.
The year 2013 saw record-breaking growth for solar electricity generation as the photovoltaic (PV) and concentrated solar thermal power (CSP) markets continued to grow. With over 39 gigawatts installed worldwide, the PV solar market represented one third of all newly-added renewable energy capacity, write Worldwatch’s Max Lander and Climate and Energy Intern Xiangyu Wu in the Worldwatch Institute’s latest Vital Signs Online trend (www.worldwatch.org).
Solar PV installations nearly matched those of hydropower and, for the first time, outpaced wind additions. Even though photovoltaics continue to dwarf CSP capacity, the CSP market also had another year of impressive growth. By the end of 2013, a total of 19 countries had CSP plants installed or under construction.
Consumption of power from PV and CSP plants increased by 30 percent globally in 2013 to reach 124.8 terawatt-hours. Europe accounted for the majority of global solar power consumption (67 percent), followed by Asia (23.9 percent) and North America (8.1 percent). Worldwide, solar consumption equaled 0.5 percent of electricity generation from all sources. ... In July 2014, global PV module spot prices reached an all-time low of $0.63 per watt. For the first time, Asia overtook Europe as the largest regional market.
While global PV module production increased by only 3 percent over 2012, module shipments jumped by 24 percent, signaling an easing of oversupply problems.
Prospects are bright for solar development as prices continue to fall and approach grid parity in an increasing number of contexts. Rooftop solar is already less expensive per megawatt-hour than retail electricity in Australia, Brazil, Denmark, Italy, and Germany. Estimates now also show that PV has become price-competitive without subsidies in 15 countries. For2014, solar installations are estimated to reach 40–51 gigawatts.