ODAC News
Monday 01 Oct
The Oil Depletion Analysis Centre
The Hedberg Conference
1/ Private industry conference finds much less oil [interview with Ray
Leonard on the Hedberg conference] (Lastoilshock.com, Fri 28
Sep)
Norwegian Oil Production – the Snoehvit field
and IEA Projections
2/ No oil development at
Snoehvit (The Norway
Post, Thu 27 Sep)
3/ Gas supplies rise but lower
bills unlikely (Financial Times,
Thu 27 Sep)
Russian Gas Imports -
4/ Turkmenistan
plans 50% hike in gas price for Gazprom: report (Platts, Thu 27 Sep)
Economics -
5/ Poorest could see
mortgage payments shoot up 60% (The Guardian, Fri 28 Sep)
6/ Russia’s
Auto Market Ranks 8th in the World (FC Novosti, Fri 28 Sep)
Natural Gas supplies - Italy
7/ Italy Warns of
Possible Winter Blackouts (Energy
Intelligence [International Oil Daily], Fri 28 Sep)
Food - Wheat
8a/ Australia
Beef Crisis Hits as Drought Decimates Wheat
(
8b/ Record
[prices] for wheat as crop forecasts shrivel
(Financial Times, Thu 27 Sep)
Petrol Prices -
9/ Report warns of petrol
chaos (Courier Mail [
Natural Gas Exports -
10/ Iran
to produce 11m tons LNG in 2010
(Press TV, Fri 28 Sep)
Coal Prices
11/ Coal
prices soar to record over $100 (Reuters, Thu 27 Sep)
**********************************************************************************************************
1/ Private industry conference finds much less oil [podcast from Ray
Leonard on the Hedberg conference] (Lastoilshock.com, Fri 28
Sep)
http://www.davidstrahan.com/blog/?p=57#more-57
(for podcast, 17 minutes long, see “Listen to the interview with Ray Leonard”
near the bottom of the page)
Comment: In November 2006, the American
Association of Petroleum Geologists held the ‘Hedberg’ conference. The
conference chairman was Richard Nehring. It was, until ASPO-6 two weeks ago, a
very unreported event. Prior to ASPO-6, the only information (that ODAC is
aware of) in the public domain about Hedberg was a short Oil and Gas Journal
article (World oil production to peak in 15-25 years, AAPG told).
The details of the conference are below. In his talk at ASPO-6 and in the above
podcast, Ray Leonard makes it clear that there were two camps at the
conference, in one the US Geological Survey, and in the other pretty much everyone
else. When it came to discussing oil reserves, in each of the regions discussed
the USGS figures were inflated by up to five times compared to what the
industry raw data suggested.
For reasons explained in the podcast, we will never
know exactly what was said at the conference, and therefore the conclusions of
the Hedberg conference will be open to different interpretation by different
people. For example, in the O&G Journal article referred to above, it states
“When world oil production reaches the peak by 2020-40…”, and yet Ray Leonard’s interpretation from the conference discussions is
that global oil production will plateau “before 2020”. Ray Leonard is clearly
concerned that a global plateau in global oil production is approaching and we
are not prepared.
Interestingly, it looks like Richard Nehring will be
giving a talk on the same theme as Ray’s at the
ASPO-USA conference later this month (Oct 17-20),
“Estimating Technologically and Commercially Possible Levels
of Future World Oil Production”. Here are a couple of quotes from a recent
Richard Nehring PowerPoint presentation: “With medium or high levels of
ultimate resources, production could continue increasing to 2030-2040 with the plateau
extending to 2060-2070”, and “The 21st Century - not the 20th Century - will be
the Age of Oil”. (To be as fair as possible, these are quoted out of the
context of the rest of the presentation.) In other words, as much Ray Leonard
left the Hedberg conference convinced the presentations indicated a plateau of
production before 2020, there remains, and always will remain, sufficient
secrecy about the conference that the oil and gas industry can get away with
saying this was a minority point of view, and their official position is
something like “production could continue increasing to 2030-2040 with the plateau
extending to 2060-2070”. In the meantime, the IEA now forecasts an oil crunch
by 2012, not a peak or plateau, but demand outstripping supply. You wouldn’t know from the amount of media attention.
See also ODAC Press Release: ASPO Conference Confirms A Peak In
Global Oil Production By 2012
Article: (Podcast) A secretive
gathering some of the world’s biggest oil companies
has concluded the industry will discover far less oil than officially forecast,
meaning global oil production may peak much sooner than many expect.
The Hedberg Research Conference on Understanding World
Oil Resources was held by the American Association of Petroleum Geologists in
The
Journalists were barred from the conference to allow
open discussion of confidential information, although the Oil & Gas Journal
later reported that the meeting had concluded oil production would peak between
2020 and 2040 at 90-100 million barrels per day. But Mr Leonard said that based
on the range of numbers accepted by the majority of delegates at the conference,
he expects output to plateau in five years’ time. “If there’s
a world recession it could be a little longer, if
The USGS oil resource estimates have long been
regarded as wildly optimistic by many peak oil forecasters. Its World Petroleum
Assessment published in 2000 implied that the oil industry could discover some
22 billion barrels per year between 1995 and 2025, but in the first quarter of
the forecast period discovery has averaged just 9 bn bbls annually. Last month the USGS revised down one of its
most controversial regional assessments, when it slashed its estimate of
**********************************************************************************************************
2/ No oil development at Snoehvit (The Norway
Post, Thu 27 Sep)
http://www.norwaypost.no/cgi-bin/norwaypost/imaker?id=103782
Comment:
Here is the IEA’s forecast
for Norwegian oil production, 2006-2008, taken from the September Oil Market
Report:
Article: Statoil will cease all work
relating to the development of the oil zone at the Snoehvit oil and gas field
in the
Evaluations undertaken show that such a development
would not be economically viable, Statoil states.
An appraisal well was drilled in the Snøhvit structure earlier in the summer. Its purposes
included to confirm the presence of oil and the thickness of the oil zone in
its western part.
According to Statoil, the well confirmed the presence
of oil with well data being analysed and evaluated together with other
geological information.
"These analyses show the presence of oil to be
significantly less than we expected to find in this structure," says Geir Pettersen, senior vice
president for the Tromsø Patch business cluster.
"When this is now evaluated alongside possible
development solutions and current costs, it becomes clear that it isn't
economically viable to develop and produce oil from the area," Pettersen says.
"This decision is final, since the start-up of
gas production from Snøhvit shortly will prevent the
oil zone being developed at a later stage."
The Norwegian government has been informed of the
decision.
Licensees in the Snøhvit
field are Statoil with a 33.53% interest, Petoro
(30.00%), Total E&P Norge (18.40%), Gaz de France (12.00%), Hess Norge
(3.26%) and RWE Dea with 2.81%.
**********************************************************************************************************
3/ Gas supplies rise but lower bills unlikely
(Financial Times, Thu 27 Sep)
http://www.ft.com/cms/s/0/5389d6e8-6c82-11dc-a0cf-0000779fd2ac.html
Comment: Appropriate quote from the
article that hits the
Article: Customers are unlikely to see
lower energy bills this winter in spite of the
A forecast by National Grid, published on Wednesday by
Ofgem, the energy regulator, says
The extra gas will be coming from
These extra supplies will more than make up for a
decline in gas production from the UK’s own fields, and
mean that the country should be in a much better position than in the winter of
2005-06, when wholesale gas prices hit record highs over fears of gas
shortages.
However, National Grid warned that uncertainties
remained in the
Alistair Buchanan, chief executive of Ofgem, said: “More investment means we have the potential
to import and store more gas this winter than last. While this is welcome news,
we must not forget that we are vulnerable to fluctuations in global energy
prices.”
Some energy analysts have said that the gas supply
situation over the next three years will be as good as it gets, with supplies
falling again after 2010 as the
Centrica, the owner of British Gas, said last month it
would only cut household bills again this year if wholesale gas prices for the
winter came down. At the time the forward price was just over 40p a therm, but in the past six weeks prices have risen to more
than 45p a therm.
The company said on Wednesday that although the gas
supply situation had improved, which should have brought down wholesale prices,
the market remained on edge because of the
Adam Scorer, director of campaigns at consumer group Energywatch, said: “You’d hope
that this positive outlook might provide the assurance for some suppliers to
compete again on price. But there is a much greater chance that suppliers will
sit tight on their high consumer prices whatever the market conditions, whatever
the improved supply outlook, indeed whatever the weather.”
**********************************************************************************************************
4/
Comment: It should be noted with some
irony that as Europe is now severely dependent on Russia for natural gas
imports, Russia is now severely dependent on gas imports from Turkmenistan, 50
Bcm/year 2007-2009 (at its maximum, when it was the fourth largest gas producer
in the world, the UK produced just over 100 Bcm, so 50 Bcm is a lot). For
several years,
Article:
From January 1, the country plans to charge Russia's
gas monopoly Gazprom $150/1,000 cu m against the current price of $100/1,000 cu
m, Roman Matsuev, owner of Energogaz,
told Kommersant, quoting Turkmenistan's deputy prime
minister and oil and gas minister Tachberdy Tagiyev.
However, Gazprom didn't comment on the report or on
any gas price talks.
Under an agreement with
**********************************************************************************************************
5/ Poorest could see mortgage payments shoot up 60%
(The Guardian, Fri 28 Sep)
http://business.guardian.co.uk/houseprices/story/0,,2179559,00.html
Comment: A good summary of why any
forecast suggesting the worst is over for the
Article: Some of
The respected credit ratings agency Standard &
Poor's today warned British mortgage holders who are soon to come off fixed
rate mortgages to expect a "payment shock" - particularly if they
have a poor credit history, and fall into the so-called sub-prime group.
"Borrowers who took out two-year fixed rate
mortgages from late 2005 are facing one of the largest payment shocks witnessed
since the 1990s, even if they are able to refinance," it said.
The problems are expected to hit sub-prime borrowers
hardest because the mortgage companies that provide those loans have always
been much more reliant on the money markets. As they are forced to pay more,
their borrower may find that loans offered two years ago are no longer
available, or are prohibitively expensive. Those with perfect credit histories
will be less affected, but may still see rates rise, if the market turmoil
persists.
The Council of Mortgage Lenders (CML) has calculated that
around 2m fixed rate mortgages – around 17% of the total UK market – will be ending
before the end of 2008.
... The report suggests that if the credit crunch
continues, sub-prime borrowers could easily see their mortgage costs rise by
26% - which would add an average of £167 to month payments on a £85,000 loan.
In the worst case scenario - if the market worsened even
further – the report concluded that borrowers with the worst credit histories,
who took out cheaper, interest only mortgages could see their mortgage payments
rise by as much as 60% - a rate that would undoubtedly force many into
substantial arrears.
A spokeswoman for CML insisted the payment shock
impact will be "manageable" for most borrowers, although she conceded
its effects could be considerable for the 5% of mortgage applicants who are
considered sub-prime.
"Some lenders are putting in place arrangements
to ensure that borrowers are alerted early to the likelihood of the increase in
payments, as well as ways of helping those in difficulty, such as arrears
counselling," she said.
**********************************************************************************************************
6/ Russia’s Auto Market Ranks 8th in the
World
(FC Novosti, Fri 28 Sep)
http://www.fcinfo.ru/themes/basic/materials-rfcm-index.asp?folder=3352
Comment: If car numbers increased by 330,000,
then the previous total car sales = 1.8m – 330,000 = 1.47m. Brand new car sales
are growing at about 10%/year, about 150,000, implying most growth in Russian
car sales last year were imported second hand cars. 330,000 is about 18.5% of
1.47m. No wonder the streets of
Article:
**********************************************************************************************************
7/
No link, newsletter.
Article: With
**********************************************************************************************************
8a/
http://www.planetark.com/dailynewsstory.cfm/newsid/44567/story.htm
Article: Record high grain prices have
thrown Australia's A$4 billion (US$3.5 billion) beef cattle industry into
disarray, emptying feedlots, cutting cattle saleyard
prices and triggering price rises for domestic and exported beef.
The world's biggest beef exporter by value and the
second-biggest exporter by volume, parts of
"Supplies of quality beef onto the domestic
market and to export markets are going to start reducing quite
substantially," said Malcolm Foster, president of the Australian Lotfeeders Association.
"It's very bad. There wouldn't be a feedlot
making money now," he said.
Cattle on feed had already begun to drop off and the
industry, now urgently counting numbers around the country, was already in
crisis, Foster said.
"You will certainly see shortages of quality beef
... And because pasture conditions are impacted by drought, the cattle aren't
going to be anything very flash," he said.
Beef prices would shoot up until consumers were no
longer willing to pay, Foster said. "It's already started," he said.
Peter Weeks, chief market analyst at industry
representative body Meat & Livestock Australia, sees price rises looming
for
... Feedlots fatten steers before export to lucrative
markets overseas, mainly using wheat, barley and sorghum. Prices of all grains
have soared as drought decimated crops.
...Weeks sees beef supplies falling into the peak
export season, between November and January, to pressure supplies to the key
north Asian markets of
... Looming imports of grain -- only the second time
Australian quarantine regulations prohibit the
transport of unprocessed imported grain beyond metropolitan areas, and a A$40 a
tonne processing cost is prohibitively expensive for the cattle industry,
Foster said.
The last time imports occurred, in 2003, none went
upcountry.
As crops shrink fast, much of
8b/ Record [prices] for wheat as crop forecasts shrivel
(Financial Times, Thu 27 Sep)
http://www.ft.com/cms/s/0/8292bbc0-6ce7-11dc-ab19-0000779fd2ac.html
Article: Wheat prices hit record
levels Thursday while oil prices rose above $81 a barrel amid concerns about
possible storm disruptions to production in the
In
The International Grains Council [referred to as ICG
in rest of article] reduced its forecasts for global and Australian wheat
production substantially on Thursday. The ICG cut its global wheat production
forecast from 607m tonnes to just 601m tonnes and slashed its estimate for
Australian output to 13.5m tons. This is 2m tonnes below the most recent
forecast from the Australian government and 9m tonnes lower than last month’s estimate by the ICG.
Wheat stocks for the five largest global exporters are
forecast to fall to a 34-year low of 25m tonnes.
... This year’s
Soyabeans
soared through the $10 a bushel level with the CBOT November contract up 25
cents to $10.15¾ a bushel after strong weekly
**********************************************************************************************************
9/ Report warns of petrol chaos
(Courier Mail [
http://www.news.com.au/couriermail/story/0,23739,22419825-952,00.html
Comment: As mentioned before, the two
English-speaking countries that seem to get much more reports on Peak Oil / oil
depletion in the media than elsewhere are
The Queensland Government's Oil Vulnerability Task
Force report has been leaked to the
The Task Force chair, ASPO-Australia patron Andrew MacNamara MP, has just been appointed Queensland Minister
for Climate Change and Sustainability.
The front-page headline is "Crude Shock".
Article:
As crude oil prices hit a record high yesterday, an
as-yet unreleased Queensland Government report warns of massive social
dislocation, rising food prices and infrastructure headaches because of rising
oil costs.
The report on the looming "peak oil" crisis
concludes that we will have to re-think the way we live and travel in the next
few years as relatively cheap liquid fuels become a thing of the past.
"Peak oil" refers to when global output
fails to meet demand, a situation the report estimates will occur in the next
few years, although some economists believe we are now on the cusp.
The report,
The effect already is being felt at the bowser, with petrol in
The report was prepared by a taskforce of scientists
and industry experts, including
Of the three scenarios mapped out for world oil prices
by the report, Mr McNamara said we were already in the worst case "high
oil price" scenario.
**********************************************************************************************************
10/
http://www.presstv.ir/detail.aspx?id=24980§ionid=351020103
Comment: According to the IEA’s Natural Gas Market Review 2007, Iran has 13 gas
pipeline export projects, four of which are or soon will be operational (three
of which are small volumes, Turkey nominally 10 bcm but this has not been
attained due to lack of Iranian gas), all the other projects coming onstream
2012 at the earliest, or not known. There is no shortage of gas reserves in
Article: Director General of Iran LNG
Company Ali Kheirandish has predicted an output rise
of 11m tons in 2010 and of 88m tons in 2020.
Speaking at the signing ceremony of the 'power plant'
and 'electro-compressor' contracts with Mepna
Company, he said the output of Iran LNG Co. could be doubled every 4 years
without any further investment.
"We have pledged to implement the LNG project in
December 2010 and to load its first cargo," he said, adding that an output
rise of 22m tons in 2014, of 44m tons in 2117 and of 88m tons is expected in
2020.
Kheirandish
said that if $600-700m is invested annually in the LNG project, its turnover
would double in four years, adding that the entire assets invested in the
project would be replaced in 30 years.
He noted that the project mainly aims to provide a
strong substitute for oil exports and that the LNG production capacity depends
on the policies of Iran's Oil Ministry.
**********************************************************************************************************
11/ Coal prices soar to record over $100
(Reuters, Thu 27 Sep)
http://africa.reuters.com/business/news/usnBAN758607.html
Article: Physical coal prices for
delivery into
Coal prices have been rising all year as availability
has progressively tightened. Unfortunately for consumers, freight rates have
also repeatedly hit record levels, forcing up the delivered cost of coal.
Three Q4 delivery coal cargoes traded on Thursday, one
at $102.00 a tonne DES ARA and one at $101.00 DES ARA on the globalCOAL trading platform. A further parcel was sold at
$101.00 through brokers, traders said.
These were the first visible, on-screen coal trades
ever at over $100.00 a tonne. In January, CIF/DES ARA coal prices were around $65.00
a tonne…
**********************************************************************************************************