ODAC News
Wednesday 16 May
The Oil Depletion Analysis Centre
1/ Coal’s Future in Doubt (Global
Public Media [MuseLetter], Wed 09 May)
2/ Congress Told FAA Lacks Road Map For NextGen (AVWeb, Wed 09
May)
3/ China's Bohai Bay may hold 146 bil
barrels oil reserves: report (Platts,
Thu 10 May)
4a/ Saudi to boost gas reserves by 40% (Arabian Business, Wed 09 May)
4b/ Saudis to step up natural gas output (The Financial Times, Thu 10 May)
5/ Easy profits herald global oil crunch (The Financial Times, Thu 10 May)
6/ Companies eye Iran’s gas fields (The
Financial Times, Thu 10 May)
7a/ Kuwait’s Oil Minister
should “Mind His Ps & Qs” (Proven, Probable & Possible – Quantity &
Quality) (ODAC, Tue 15 May)
7b/ The Search For Solid Ground On Oil Reserves (Petroleum Intelligence Weekly, Mon 14
May)
8/ The AAPG Oil Reserves
Conference, Nov 2006 - How Much Is Left? (ODAC,
Fri 11 May)
9a/ Banks are heading for disaster, says Bolton (The Times, Wed 16 May)
9b/ Housing costs taking their toll of society (The Times, Fri 11 May)
10/ What Stern Got Wrong (Prospect,
May 2007)
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1/ Coal’s Future in Doubt (Global Public Media [MuseLetter], Wed 09
May)
http://globalpublicmedia.com/heinberg_coals_future_in_doubt
Comment: Richard Heinberg discusses
the second of two recent reports that suggest all is not well with the world’s
endowment of coal supplies. Rather than focus on when a peak in global coal
production might occur, Coal’s Future in
Doubt, according to Heinberg – the report is not published yet, focuses
more on unreliability of supplies and the price of coal.
Article: … The EWG (Energy Watch Group
) report has enormous implications for climate change, global energy, and
particularly for future electricity supply and steel production in the
... Therefore any new analysis of global coal
supplies, following on the heels of the EWG report, warrants considerable
interest.
We have not had to wait long. “The Future of Coal,” a
study by B. Kavalov and S. D. Peteves
of the Institute for Energy (IFE), prepared for European Commission Joint Research
Centre, is ready in final draft and will be published within days.
Unlike the EWG panel, Kavalov
and Peteves did not attempt to forecast a peak in
global production. Future supply is discussed in terms of the familiar but
often misleading reserves-to-production (R/P) ratio. Nevertheless, the IFG’s conclusions are broadly supportive of the EWG report.
The three primary take-away conclusions from the new
coal study are as follows:
• “World proven reserves (i.e. the reserves that are
economically recoverable at current economic and operating conditions) of coal
are decreasing fast….
• “The bulk of coal production and exports is getting
concentrated within a few countries and market players, which creates the risk
of market imperfections.
• “Coal production costs are steadily rising all over
the world, due to the need to develop new fields, increasingly difficult
geological conditions and additional infrastructure costs associated with the
exploitation of new fields.”
Early in their paper the authors ask, “Will coal be a
fuel of the future?” Their disturbing conclusion, many pages later, is that
“The analysis in the preceding chapters indicates that coal might not be so
abundant, widely available and reliable as an energy source in the future.”
Along the way, they state “the world could run out of economically recoverable
(at current economic and operating conditions) reserves of coal much earlier
than widely anticipated.”
... In other words, the authors are not attempting the
same task as the EWG team: there is no quantitative analysis of reserves for
individual nations here. Instead, the focus is on foreseeable challenges to
coal supply, and how these will likely affect cost—and hence the attractiveness
of coal vis-à-vis other energy sources.
In the course of their discussion, the authors
highlight some of the same problems noted in the EWG study having to do with
differing grades of coal and the likelihood of supply problems arising first
with the highest-grade ores:
... Taken together, the EWG and
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2/ Congress Told FAA Lacks Road
Map For NextGen (AVWeb, Wed 09 May)
http://www.avweb.com/avwebflash/news/FAA_Lacks_Clear_Road_Map_For_NextGen_195171-1.html
Comment: From an ODAC News reader:
“They don’t get it do they, spending money on
infrastructure that probably won’t be needed. Note the bit by Dr Gerald
Dillingham from the GAO talking about ‘high risk’; what did the GAO have to say about Peak Oil
recently (www.energybulletin.net/28618.html), obviously
departments aren’t talking to each other. “
You need to log in to get the whole article, free
registration.
Article: The FAA says that the current
national airspace system won't be able to handle the expected tripling of air
traffic by 2025, and there's generally no disagreement among stakeholders about
the need for ATC modernization. But it is how we get there that is the big
problem. In opening statements before a hearing Wednesday morning on ATC modernization,
House Subcommittee on Aviation Chairman Jerry Costello, D-Ill., brought up the FAA's poor track record of previous ATC modernization
projects and promptly added that "vigorous congressional oversight"
will be needed for NextGen. DOT Inspector General
Calvin Scovel testified that NextGen is a
"high-risk effort" that will "involve billion-dollar investments
by both the government and airspace users." During questioning, he
submitted that the FAA and Joint Planning Development Office (JPDO) need to
have a detailed R&D plan developed before Congress can properly appropriate
funding for ATC modernization.
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3/
http://www.platts.com/Oil/News/9190129.xml?p=Oil/News&sub=Oil?src=energybulletin
Article: The
The
The CAE professor, however, also noted that these
undiscovered structures would be more difficult to find.
CNPC's
publicly-listed business arm PetroChina last Friday
said its discovery of the Jidong Nanpu
oil field in the shallow waters of the
billion cubic meters (4.95 Tcf)
of gas.
PetroChina
intends to start developing the Jidong Nanpu oilfield as soon as possible. The first-phase of the
project, to be finished by 2012, will produce 10 million mt/year
(200,274 b/d).
Output is expected to rise progressively to 25 million
mt/year, making the oilfield
Han Xuegong, professor with
the CNPC Managers Training Institute in
Han said he believed this was a signal that PetroChina might have also come across other large
hydrocarbon structures which the Chinese oil giant has yet to announce, the Xinhua news agency reported.
Han added that based on a primary recovery rate of 40%
for oil fields in general, Jidong Nanpu's
overall output would be about 408 million mt of oil
equivalent if no further discoveries are made in the acreage.
Using PetroChina's peak 25
million mt/year production goal for Jidong Nanpu as a reference, the
field would have a lifespan of about 20 years.
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4a/ Saudi to boost gas reserves
by 40% (Arabian
Business, Wed 09 May)
Comment: From what the article says,
it is not so much that
“
Article:
"We are planning to add in the next 10 years 100
trillion cubic feet to our current reserves of gas," Naimi
told a conference on economic development in
The kingdom holds the world's fourth largest natural
gas reserves at 252 trillion cubic feet, Naimi said.
Domestic gas sales were expected to rise by 40%
through 2012 from the current level of around 7 billion cubic feet per day, Naimi said.
The kingdom plans to drill 186 exploration wells for
gas and 332 development wells by 2012, Naimi said.
That was higher than a figure of around 70 gas exploration wells given by an
Aramco executive last November.
Gas output from the offshore Karan
gas field will start in 2012, Naimi said, a year
later than previously planned. He gave no reason for the delay.
Karan is a $3
billion development that will yield domestic gas sales of 770 million cubic
feet per day, Naimi said.
The kingdom has opened its gas fields to international
firms to help meet demand growth. The upstream oil sector of the world's
largest crude exporter is off limits to foreign investors.
Four consortia of European, Russian and Chinese firms
were awarded gas exploration blocs in the
4b/ Saudis to step up natural gas output (The Financial Times, Thu 10 May)
Comment: The title in the print
version reflects more accurately what the article is about: “Saudis to spur
manufacturing with natural gas production”
Article: Ali Naimi,
Mr Naimi said the kingdom
would use growing supplies of natural gas and feedstock from related
petrochemicals facilities to form clusters of industries, such as car
manufacturing, building materials, household appliances and metals.
“This programme will allow the kingdom to enter into a
new phase of industrial investment,” Mr Naimi told a
conference in
The programme is accompanied by growing investment in
infrastructure through four multibillion dollar “economic cities” across the
country.
State energy giant Saudi Aramco is moving away from
its traditional role as an oil and gas producer to develop its role in the
downstream processing of the kingdom’s hydrocarbons reserves.
Aramco is building petrochemicals and refining
complexes with
… The main aim of the programme is to create some of
the estimated 100,000 new jobs needed every year to stop unemployment levels
creeping up from the official level of 9 per cent among Saudi males.
But labour is also the issue of most concern to
foreign investors, say economists. The labour ministry’s programme of putting
quotas on the number of Saudis employed by companies can prove a big hurdle as
many Saudis lack the skills and refuse menial work.
Mr Zamil said the ministry
was “responsive on this issue”, with plans to reduce the Saudi quota in the
industrial sector to 15 per cent from the current 30 per cent.
Mr Naimi said the programme
would be fuelled by rising gas output from the kingdom, with reserves expected
to rise by 100,000bn cubic feet, or about 40 per cent, over the next 10 years.
Domestic gas sales are expected to rise by 40 per cent from 7bn cubic feet a
day by 2012, he said.
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5/ Easy profits herald global
oil crunch (The
Financial Times, Thu 10 May)
http://www.ft.com/cms/s/9ed783da-fe6d -11db-bdc7-000b5df10621.html
Comment: An interesting article from
the FT that summarizes well why Peak may be near for non-geological reasons.
Suggests that
Article: … Companies are able to get
more out of oil fields than they expected even a decade ago. Yet if they cannot
access those fields, the oil within is not going to come to market.
A study by PFC Energy, the respected consultancy,
shows world oil supplies might well fall behind growing demand in the long term
as political factors limit production capacity increases in key producing
nations.
“The full impact of the nationalisations that took
place in the 1960s and 1970s are taking effect now,” says Robin West, chairman
of PFC Energy.
… The report singled out
…
In
PFC lists the stagnant producers as
The impact of continued depletion and stagnation of
oil production capacity will not be felt for some time, given that other producers
are expanding production, many of them in partnership with international oil
companies.
In
“The scale of these additions, however, is limited and
will peak in relatively short order,” PFC says.
Whether the declining and stagnant producers will step
in at that point remains to be seen…
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6/ Companies eye
Comment: As much as they have a lot
natural gas reserves, few
Article: This year alone three of
Europe’s biggest energy groups have announced they are considering investing
billions of dollars in
But a non-binding memorandum of understanding signed
late last month by OMV, the Austrian energy group, and similar recent accords
with Anglo-Dutch Royal Dutch Shell and Repsol, of Spain, do not necessarily
mean those companies are about to sink large sums into Iran and incur the wrath
of Washington, which is trying to isolate Tehran over its nuclear ambitions.
Instead, these are ways companies are trying to keep their options open until
the international diplomatic situation improves or
Frank Harris, analyst at Wood Mackenzie, the
consulting group, said: “Access to gas around the world is getting tougher and
the big players cannot afford to ignore
No European company has made a large new investment in
… Even Lukoil,
… But companies may not be able to drag their feet for
ever.
Not only Inpex is feeling
the heat from the White House. In March, Nicholas Burns, a senior state
department official, told a congressional hearing the
Passed in 1996 as the Iran Libya Sanctions Act, the
law requires
How long Total, Shell and others are able to postpone
deadlines will depend in part on whether
China National Offshore Oil is negotiating a $16bn
dollar deal to develop
However, there is a catch: these new Asian investors
are relatively untested and it is far from certain they have the ability to
develop vast, complex oil and gas projects, especially without being able to
rely on US technology or contractors, which are banned.
But Mr Harris points out: “There is always the
possibility the Iranians may attempt to do the first LNG project without IOC
help (probably with the Chinese), accepting it may take longer and be less
efficient but that it gets them into the game.”
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7a/
http://www.odac-info.org//bulletin/documents/BGC_Kuwait_Oil.htm
Comment: Barry G. Claverhouse, based
in the
Article: ... In actual fact, the PIW
[Petroleum Intelligence Weekly] report states that the figure of 48 billion
barrels was “Probable” while “Proven” was 24 billion barrels. Trouble with
those “P’s” again! So it now appears that
7b/ The Search For Solid Ground
On Oil Reserves (Petroleum
Intelligence Weekly, Mon 14 May)
http://www.energyintel.com/DocumentDetail.asp?document_id=202116
Subscribers only. I read a copy at the London-based
Energy Institute’s library.
Comment: This was an article written
by Sadad al-Husseini, retired executive vice president
of Saudi Aramco. It was in response to a PIW survey of global oil reserves
published last month (see here for a brief
summary of the PIW Global Oil Reserves Survey). Sadad
was highly critical of the survey, despite the fact that it concluded “trend in
worldwide liquids reserves is actually one of stagnation and modest decline”.
In fact, his article read very much like that of a Peak Oiler.
He was critical that the survey included Canadian tar sands, and suggested that
as these were solids that can only be produced very slowly, they should not
have been included in the survey as ‘oil’ reserves. Sadad
was also very critical of the USGS survey, saying that they were mixing
reserves and resources, and that the IEA were issuing similarly suspect
numbers. Towards the end of the article, he stated that globally we have
produced 1 Trillion barrels of oil, that we are half way thro the reserves, and
that we have produced the easy and most economical half. He made many other
interesting points, these were the main ones.
The content of the article is not new to members of
the Peak Oil community, it is who wrote it that is of interest.
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8/ The AAPG Oil Reserves
Conference, Nov 2006 - How Much Is Left? (ODAC, Fri 11 May)
http://www.odac-info.org//bulletin/documents/AAPG_Nov2006.htm
Comment: Towards the end of last year,
2006, an important meeting took place that should have been reported by the
mainstream media, but passed by unnoticed. The meeting was invitation-only,
free of media and consultants, with the intention of bringing together leading
experts to discuss and establish as best as possible the world’s remaining oil
reserves. That ODAC is aware of, only the Oil
and Gas Journal reported on the conference. ODAC discusses some of the
highlights as reported in the Oil and Gas
Journal, then reviews some of the conclusions reached at the conference,
from an ODAC source who attended the conference.
Article: … The OGJ article states that
“Undiscovered resources are the best understood source of future additions.
Worldwide estimates of undiscovered oil resources presented at the AAPG
Convention, drawn from an augmented version of the USGS Worldwide Assessment,
range from 480 to 1,550 billion bbl.” Note that this is summarising the USGS data,
which was generally found to be five times too high compared to the other
conference participants with original data. A more realistic value is the
figure of 200 to 300 B for yet-to-find conventional oil.
The main source of growth in oil reserves will be from
existing oil fields, anywhere between 200 billion to 1 trillion barrels, the
uncertainty is massive. This compares with only 200-300 B barrels yet-to-find.
While there are truly massive amounts of
unconventional oil, the conference noted up to 10 trillion barrels mainly
consisting of Canadian tar sands, Venezuelan heavy oil and
The OGJ article states: “World oil production reaches
the peak by 2020-40, the rate will be 90-100 million b/d, only 10-20% higher
than it was in 2005”. This allows for a lot of uncertainty, or is it political
acceptability? Peaking by 2020 is at the upper range of most current forecasts
(Peaking of world oil production:
Recent forecasts, R. Hirsch, April 2007), but it would still entail
a lot of pain if the global community is not prepared. But it also means that
the current rate of 85 Mb/d is not far off the maximum of 90-100 Mb/d. A peak
rate of 90 Mb/d would suggest a peak date much sooner than 2020, indeed closer
to 2010 than 2020.
Interpreted as it should be, the results of this
conference should have alarm bells ringing. 200 to 300 billion barrels of
conventional oil yet-to-find is not very much, indeed it is less than the
amount which “is either being developed or planned for future development” (OGJ
item 4). And the forecast production from Canadian tar sands and
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9a/ Banks are heading for
disaster, says
Article: Anthony Bolton, the influential
Fidelity stockpicker, has given warning that banks
are heading for disaster by recklessly lending huge sums to private equity
firms.
Mr Bolton, who yesterday began the handover of his
Special Situations fund to his successor, Sanjeev
Shah, said that it was increasingly difficult to find value in large companies
because of the liquidity boom.
The 55-year-old fund manager said private equity firms
were themselves surprised by the cheap borrowing available to them. “I think
the phrase is ‘covenant-lite’, but in many cases it
appears to mean no covenant at all,” Mr Bolton said.
Under the terms of covenant-lite
loans, borrowers can skip the usual quarterly tests that compare a company’s
cash-flow with its level of outstanding debt. Apax
was the first British private equity firm to use the loans, in its acquisition
of Trader Media from the Guardian Media Group in March…
9b/ Housing costs taking their
toll of society (The
Times, Fri 11 May)
http://business.timesonline.co.uk/tol/business/columnists/article1774685.ece
Comment: Various commentators have
been warning of a potential housing crash in the
Various Peak Oil analysts have suggested higher
unemployment is virtually guaranteed as a result of not being prepared for Peak
Oil.
Article: One of the unplanned but most
intractable legacies of the Blair decade is the distortion of any normal or
sustainable relation between house prices and people’s incomes. If that link is
not already broken it is certainly stretched to the limit.
The rate of price inflation may be slowing, just, but
remains obstinately high.
The question that always accompanies fresh data
showing a fast-growing housing market is: are we headed for a crash? The short
answer, at present, is no.
Yesterday’s quarter-point rise in rates will not make
much difference and was not intended to. Few of the most vulnerable borrowers
pay higher mortgage interest immediately just because the Bank’s rate has gone
up.
A run of four rate rises must, however, put more
pressure on new buyers. Allowing for high prices and higher interest rates,
they are likely to have to pay a fifth more interest each month than a year
ago.
But in
The squeeze on incomes must eventually tell. Next
month’s new selling regulations may cool the market a little more. But there
will not be a price crash unless there is a much sharper rise in unemployment
than currently looks likely...
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10/ What Stern Got Wrong (Prospect, May 2007)
http://www.prospect-magazine.co.uk/article_details.php?search_term=strahan&id=8954
Comment: The Stern Report published Oct 2006 was seen as a
major breakthrough for those wishing governments to take global warming more
seriously. Stern suggested that tackling global warming now might be a lot
cheaper than waiting until later. However, as discussed by David Strahan
writing in Prospect, the Stern Report
avoided any discussion of Peak Oil, and thus missed the opportunity to tackle
the two problems together, while raising the profile and urgency of Peak Oil.
Article: Stern asks rhetorically whether there
are sufficient fossil fuels to fulfil economic growth
forecasts, or whether fossil fuel shortage would provide a laissez-faire
solution to climate change by forcing up the price and depressing demand. He
concluded that, “There appears to be no good reason… to expect large increases
in real fossil fuel prices to be necessary to bring forth supply.” In the case
of oil, this conclusion was based largely on a resource assessment by the
International Energy Agency (see graph, below). And with that, Stern
regurgitated the facile assumption that because the available resource is
large, there will be no problem with supply in the foreseeable future.
... Everything else is considered "non-conventional," in which
the significant resources are bitumen and so-called oil shales, usually found
in solid, non-pressurised deposits near the surface,
which have so far produced very little. Stern’s assumption is that because all
these forms of oil are allegedly economic at less than today’s crude price,
there can be no shortage in the foreseeable future. This is a dangerous
delusion.
... What makes Stern’s omission the more surprising is that two of Tony
Blair’s closest advisers believe global oil production will peak by around
2015. David Manning—Blair’s chief foreign policy adviser in the run-up to
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