Wind, Water and Oil  

Posted by Big Gav

The Baltimore Sun has a good op-ed piece on the effects of Hurricane Katrina, an oil supply chain that is "stretched to capacity" and the link between global warming and increased hurricane strength.

AS LOUISIANA, Mississippi and Alabama today cope with the terrible material and human devastation left in the wake of Hurricane Katrina, the entire nation -- while thankful that the hurricane was not as lethal as feared -- braces for a fierce oil-price storm in its aftermath. As Katrina blew in, the prices of crude oil, gasoline, natural gas and heating oil hit all-time highs. The Category 5 storm forced the evacuation of oil and natural gas rigs in the Gulf of Mexico that account for as much as 30 percent of U.S. production, the closing of the Louisiana port that handles 11 percent of U.S. crude imports, and the shuttering of gulf coast oil refineries that are the major source for East Coast markets.

The worldwide supply chains for oil and natural gas -- already stretched to capacity and vulnerable to the slightest political tremors -- are no less fragile in the face of savage formations of wind and water. It turns out that if below-sea-level New Orleans has been a national disaster just waiting to happen, so also is the dense concentration of energy production, importing and refining along the gulf coast -- one with concrete national security implications.

For the last week, water temperatures in much of the gulf have been higher than average, as warm as 90 degrees. Such warmer waters fuel the formation and ferocity of hurricanes. Warmer oceans are an inseparable by-product of global warming, and it's foolish to ignore the link to the burning of fossil fuels.

In coming days and weeks, if Hurricane Katrina drives further home this nation's Faustian overdependence on oil, it also should highlight the environmental damage that results from that dependence. From oil to oil, this storm -- the fiercest to strike the gulf coast in decades - should put the spotlight on a vicious cycle in which America has rapped itself.

Sometimes a picture says a thousand words - some before and after shots of the Mars platform.
Royal Dutch Shell said an aerial inspection of its Mars platform, which produces 147,000 barrels of oil and 157 million cubic feet of gas per day, showed some damage to its upper deck.





New Orleans seems to be a complete mess now, with the death toll and damage assessment still uncertain, and martial law has now been declared.

Moving on to a more general news roundup, BHP CEO Chip Goodyear has predicted the oil price will fall over $20 per barrel next year. While I imagine Chip has access to better data than Steve Forbes, I still don't see how anyone could predict this unless there is a large amount of demand destruction somewhere. There are no reports about damage to the company's Mad Dog or Atlantis fields as yet.
BHP Billiton Ltd chief executive Chip Goodyear has said the price of crude oil could fall up to $US20 per barrel in the next 12 months. When asked to estimate the price of oil per barrel in 12 months time, Mr Goodyear said: "I think you are looking at a range of probably $US40-$US50 (per barrel)". Mr Goodyear was speaking at the Forbes Global CEO Conference in Sydney.

There seems to be a few demonstrations going on around the city today against the conference, though I haven't seen anything around my neck of the woods other than a few helicopters circling and the occasional police car heading north.

Treasurer Peter Costello was on TV tonight showing that he is just as out of touch with the global oil market is he is with a lot of issues within the country, saying that the solution to high oil prices was international pressure on OPEC to pump more oil. Perhaps they should have asked Malcolm Turnbull for a more informed view.
Mr Costello told Southern Cross Radio that higher output from oil producers is the best way to bring petrol prices down. "I think we've got to raise our voice about OPEC and the production of oil," he said.

"If the world could get the production of oil increased, that would be the most concrete thing that could lead to a lowering of the petrol price," he said.

The Christian Science Monitor has an interesting article on the proposed Iranian oil bourse - "Iran's oil gambit - and potential affront to the US", the creation of which is probably the worst sin the mullahs could commit in the eyes of the US government. As Malcolm Fraser would say - achieving global hegemony wasn't meant to be easy.
The Iranian government's plans to create an oil exchange fit into a strategy of weakening US economic hegemony.

Is the biggest threat Iran poses to the United States really its nuclear ambitions - or is it petropolitics?

James Howard Kunstler has a guest column today from Dmitry Podborits who takes a dim view of the Freakonomics take on peak oil.
The scariest thing for me here is not the flimsiness and the stupidity of the rebuttal, but the CONFIDENCE and the LACK OF INTEREST IN THE REALITIES OF THE WORLD that they are pronounced with. Even scarier, however, is that these commentators are smart people with high IQ, regarded throughout the world as authorities in economics. When these two talk, many listen.

Of course people respond to incentives! Of course markets will attempt (as they have been attempting for a long time, without success) to find substitutes within the same basic economic structure.

However, is there a physical law stating that an adequate substitute, fitting into any existing infrastructure and cost structure, and satisfying the needs of any living arrangement, has to exist? I wish the freakonomists were there with me during my various travels -- from Mexico to Greece to Alaska -- where I saw communities of various scales abandoned and in ruins because the populace couldn't find at sufficient cost and quantities the resources they have come to depend upon, from water to arable soil to fish in the sea to mineable minerals. What if the vast literature dedicated to discussing the inadequacy of all currently known putative replacements for cheap oil has a point?

One of my pet gripes with the seemingly commonly held view amongst Libertarians and economists that peak oil isn't a problem as "the market will take care of it" is my belief that the market doesn't guarantee anything other than "efficent" allocation of resources and balancing supply and demand via prices - nothing more. If you can't find a better replacement for a particular good or service you have to make do with an inferior one - the market won't conjure a better, cheaper and less environmentally harmful one out of thin air, no matter how hard you believe it will happen.

Andrew McNamara said much the same thing in his recent interview:
I guess there is a broad issue here that, in terms of advice governments get, we rely on economists, and I don't want to nag economists as a class, there nice people, some of my best friends are economists, but there's this belief that the price mechanism will sort out all problems, that supply and demand will come into equilibrium eventually and that the rising price of any good will make alternatives more attractive and make exploration and development of that particular product more attractive and therefore more will be found. The underpinnings of that analysis are that there is always more to be found, that there is no natural limit, and I guess there's a clash between the man-made laws of economics and the universal fundamentals of the laws of physics, and I think the laws of physics are always going to win. So, as we find oil, for example, becoming more and more expensive to find, it doesn't mean that, with the price of oil going up it'll always be worthwhile doing it. If it costs you more than a barrel of oil to get a barrel of oil out of the ground, then it doesn't matter whether the barrel of oil's worth a hundred dollars or a million dollars, it's not worth doing.

Rigzone reports that "Resources Under Somalia May Once Again Become Accessible", with "Chevron and ConocoPhillips crossing their fingers that their former concessions in northern Somalia will be honored now that the country is coming out of nearly a decade and a half of chaos." Given that the transitional government hasn't dared base itself inside the country yet I'd say this could be a slow process.
While many Western countries were looking at Somalia's resources before the country's descent into civil war, those countries may find getting their concessions back not as easy as getting them in the old days. Some concessions formerly held are now hard to trace because they existed in parts of the country that are no longer parts of the current country. New concessions may be hard to get as the government attempts to legislate the management of its natural resources before it gives its okay to explore and pull any of those resources out of the ground.

Treehugger has a number of interesting posts today, inlcuding one on rising oil prices boosting the value of recycled plastic, one on US tax credits for installing solar energy systems and finally an example of energy waste par excellence - skiing in Dubai.

Finally, in an example of how long it takes to arrest environmental changes, the BBC reports on major ozone loss over Antarctic.
New readings from the European satellite Envisat suggest that this year's southern hemisphere ozone hole may be one of the largest on record. The hole covers an area of 10 million sq km (four million sq miles) - approximately the same size as Europe. It is expected to continue expanding for two to three weeks.

There have been signs over the last two years that damage to the ozone layer has reduced, but a full recovery is not expected until around 2050.

Efficiency Works Forever  

Posted by Big Gav

TreeHugger has a good post up today on the enduring value of energy efficiency efforts. Dealing with oil depletion will be much easier if people focus on reducing consumption and consuming energy more efficiently than endlessly chasing other energy sources while wasting as much energy as they can afford to buy.

This is a small editorial about something that might seem obvious to some, but that is too often left out from public debate. To go straight to the point: Efficiency and conservation should be at the top of the list of solutions to our energy problems.

Why? Because before we build new production capacity, we should use what we already have. It's common sense. There is so much wasted energy that we already pay to produce that it would be foolish to pay again to produce more before addressing that problem. That energy is already there, just waiting to be used for something. Here are the arguments I can think up in favor of efficiency and conservation:

1) After the initial investment, there are no additional costs for fuel or maintenance...

I also noticed a good article in the Seattle Times (while reading an updated post on WorldChanging about "Green China") called "Asleep at the energy switch", which looks at the wasted opportunity the latest US energy bill represents and 3 measures which would really make a difference to both oil depletion and global warming: energy-efficiency, green roofs and local cogeneration of electricity.
The lawmakers have been attacked for their $8.5 billion worth of tax breaks for oil, coal, gas and electric companies. Critics say they knuckled under to Detroit by failing to enact new fuel-efficiency standards (including any meaningful coverage for gas-lapping SUVs). They're hit for being as indifferent about global warming as President Bush, refusing any tough new action to tax or cap utilities' emissions of carbon dioxide. And there's no question: Despite Mideast turbulence and India and China roaring onto the global energy market, the bill does nothing to reduce U.S. reliance on foreign oil (now 58 percent of our consumption, headed to 68 percent by 2025).

In fairness, the new energy bill does allocate about $1.3 billion to efficiency and conservation programs, plus $3 billion for renewable sources, mostly tax breaks for wind turbines. But Congress couldn't muster the votes to set a requirement of 10-percent renewables (wind, solar, biomass) in our electric-generation stream within the next 15 years. The European Union, by contrast, is struggling — but still aiming — to achieve 22.1 percent from renewable sources in 2010.

And check out our new super-competitor — China. Growing pell-mell, it is already one of the world's leading polluters and faces immense environmental challenges. But the Chinese will start their first offshore wind-power complex next year; they're building the world's largest tidal-energy project; they're implementing auto-fuel standards more stringent than the United States. On top of all that, they've undertaken a massive solar-energy program, according to the Web site worldchanging.com. By the end of 2010, Beijing expects all Chinese cities to reduce their buildings' energy use by 50 percent, and by 2020, 65 percent.

With official Washington asleep at the switch, what should our states and communities do?

Three interesting candidates spring to mind: energy-efficiency measures, green roofs and local cogeneration of electricity...

Random Notes  

Posted by Big Gav

Hurricane Katrina is weakening now, with large areas of New Orleans under water and likely to remain so for some time.

"It looks to me like the whole damn city is under water," one rescue worker told the Guardian, standing by a flooded freeway close to the city limits. "That should be flowing the other way," said another, pointing to the 17th Street canal. New Orleans mayor Ray Nagin said there had been reports of more than 20 buildings collapsing in the city, while offshore at least two oil rigs were adrift in the Gulf of Mexico. The weather knocked out power to about 1.3 million people in Louisiana, Mississippi, Alabama and Florida, and analysts estimated the damage could top $26bn.

Damage has been reported to the Louisiana Offshore Oil Port LOOP and Port Fourchon but a complete picture of the damage doesn't seem to be available yet.
Ted Falgout, port director, Port Fourchon, Louisiana -- a key oil and gas hub 60 miles south of New Orleans on the Gulf of Mexico -- reported on CNN that the port had taken a direct hit from the hurricane. According to Falgout, this port makes up 16 to 18 percent of the US oil supply and Hurricane Katrina "will impact oil and gas infrastructure, not just short term but long term as well. The impact of the storm -- the Gulf is shut down; all of the area of the storm is shut down; a half billion dollars a day of oil and gas is unavailable."

Two rigs appear to be drifting and another rig that was in a dock in Alabama broke free of its restraints and collided with a bridge downriver (of the more than half of the 231 offshore rigs currently working in the Gulf were in Katrina's path) but according to TOD there are at least 6 rigs on the loose. Rigzone has a special report on the damage.

The largest refinery in Louisiana (ExxonMobil's in Baton Rouge) has now resumed normal operation, however NYMEX futures contracts for August gas have had "force majeure" declared.

For those who like to draw parallels to the plot of the movie "Oil Storm" (and the "Oil Shockwave" exercises), there are reports from Saudi Arabia about a gunbattle being fought in the city of Jubail with "Iraqis" (following the arrest of 41 militants a few days ago).

The Pat Robertson saga is also lumbering onwards with decreasing intensity, with Hugo Chavez requesting that Robertson be tried on terrorism charges (I guess everyone should play by the same rules - maybe Pat should be praying he doesn't suffer "rendition" to some unknown prison in the third world which shares US Attorney General Gonzales' views on the "quaintness" of protocols banning torture).
"I announce that my government is going to take legal action in the United States... to call for the assassination of a head of state is an act of terrorism," Mr Chavez said in a televised speech. "If the US government does not take action that it must take, we will go to the United Nations and the Organization of American States to denounce the US government," Mr Chavez said.

Mr Chavez, who has frequently charged that the US are plotting to kill him, said Mr Robertson was "crazy" and "a public menace".

Hugo also seems to be serious about his plans to sell cut-price fuel to the poor in the US, in the form of heating oil, according to a report after his meeting with Jesse Jackson.

On a predictable and likely to be repeated note for many airlines, Air New Zealand is forecasting a 40% slump in profits next year due to rising fuel costs.

Europe is still showing the way on the move to renewables, with Spain is aiming to double renewable energy generation by 2010.

Rigzone had a report today on a new Kuwaiti oil find in the north near the Iraqi border. Given my apopheniac penchant for muttering about large untapped Iraqi oil reserves I feel compelled to wonder how far north this newly explored geological structure extends.
State-owned Kuwait Oil Company (KOC) has hit upon commercially-viable light crude oil in one of its northern fields, senior company executives said Wednesday. The find is located just north of the Sabriya field at the Um Niqa structure, they said, noting that the most recent tests conducted in mid-August showed the well produces high-quality crude oil measuring 45 degrees on the API (American Petroleum Institute) scale.

The find is significant, said KOC executives, because it is the first hydrocarbon ever produced in Kuwait from an oil layer known as the Upper Marrat reserve, within the northern Jurassic formation. KOC tested the well at three intervals ranging between 14,580 and 14,884 feet in depth and found it capable of producing an initial 1,879 barrels per day (b/d) of light crude along with large amounts of associated gases. Heavier flow could be expected after the so-called acidization tests, they said. Early July KOC discovered the well of 45-degree crude at 15,000 feet within the Um Niqa structure.

The executives said then the discovery had "enormous significance" since engineers had suspected highly promising levels of crude lay within the Marrat and neighbouring structures.

Local parahistory buffs will be alarmed to learn that Rudy Guiliani is in town for Steve Forbes' conference for global business leaders, which has annoyingly taken over the environs around the Opera House. There have been some protests this evening but I'm not expecting to see any "Battle of Sydney" headlines tomorrow morning. Mr Forbes is blaming the current oil price "bubble" on "speculators", and says that oil will be back down to $35 a barrel next year. Obviously he has a different oil depletion model in mind to that of the ASPO or is anticipating a recession.
Forbes, in Sydney for a conference of global business leaders sponsored by his organisation, said US inflation was helping fuel the rise "and the rest of it is a sheer bubble of speculation". "I think in 12 months we are going to see oil down to $US35, $US40 a barrel," he said.

As Hurricane Katrina lashed the US Gulf Coast yesterday, oil hit $US70.80 a barrel before retreating. "It is a huge bubble, I don't know what's going to pop, but eventually it will pop," Mr Forbes said of the oil price.

Queensland State MP Andrew McNamara has done a good interview with Global Public Media on learning about peak oil and his Oil Vulnerability Task Force.
DR: How did you become aware of Peak Oil?

AM: Last Christmas a friend of mine gave me a book to read, it was Richard Heinberg's book on Peak Oil, and I found it quite startling. Like most members of Parliament I read a lot of stuff, and some of it's good and bad, but this one really made me sit up. And I thought because it's well written doesn't mean it's right, but if it is right it's got amazing implications, so I started talking to different people. A physicist I know in my part of the world, in Hervey Bay, Ian Richards is someone I respect and I said 'What do you know about this?' And he said 'Yeah, it's absolutely true.'

And so I started doing some research on it and talking to engineers and other people I'd met at various times and I was amazed that the scientific people that I got in touch with all were kind of blase about it, they weren't really startled. They said, well, it's quite obvious that oil is a finite resource and it's going to run out some time. This debate's been running for a long time, it's only a matter of when does it start to run down. And so I became convinced that this is completely correct and that the peak of world production was relatively near, and that the problems would begin not when we peaked but when demand outstripped the capacity of supply to keep up with it. And so I walked back into the Parliament after the Christmas break and the first sitting day of Parliament this year, the 22nd of February, made a speech and set out what I thought to be the basic premise, and that's had quite an extraordinary reaction with literally thousands of emails and an amazing response, particularly from the geology and broader scientific community who have really been quite unanimous in saying 'Yes, this is the case.'

...

DR: You mentioned the economic rationalist exercise of the 90's, is this the globalization trend that was going on throughout the world?

AM: Well, that's part of it. We, in Australia in the 90's, signed up to National Competition Policy, which was a proposition that all government services should be offered on a competitive basis rather than a monopoly basis, and that inefficient government services should be privatized or corporatized, and that where there was private sector capacity to offer a service that the government should vacate the field. So it was a bundle of Neo-Classical economic prescriptions that, as part of a globalization swept the world, going back to the Reagan and Thatcher days. So in the early 1990's, one of the things that the then Queensland government did was it looked at country rail lines and said, Are these rail lines efficient? Are they profitable insofar as the number of people completely covers the cost of operating this service? And where that didn't stack up we shut the rail lines. But it was a belligerent exercise. We didn't merely stop operating the trains, we tore up the tracks and sold the corridors. So I think of it as a belligerent economic rationalism where we said 'Not only are we not going to do this but we're going to make it really hard to ever go back.' And so we burned our bridges, literally. That's, I think, going to be looked on as one of the major policy failings of the last quarter of a century in Queensland because the idea that rail had to be profitable for government to offer it, a rail service had to be profitable, is missing the point about building public infrastructure and public capacity, and indeed service to the public. But it's also made life very hard for many, many rural and regional cities that no longer have these rail links and are now entirely dependant on road transport, and to reestablish these rail links we now have to go and buy back corridors and re-lay track which was already there. There's some substantial policy difficulties in that regard, but it was one of the trends that I think is going to prove to be of very poor fashion.

Continuing lobbying for a local nuclear power industry is propelling the shares of local uranium mining companies ever higher.
Uranium miners ERA tacked on an extra 3% and Paladin and extra 2% after the Australian Chamber of Commerce and Industry yesterday urged the federal government to undertake a feasibility study into establishing nuclear power facilities and reopen an energy study to canvas the possibility of a domestic nuclear power industry.

A Liberal Party MP has called for a two year moratorium on wind farms in Victoria. This couldn't have anything to do with them getting so much financial support from the coal industry of course.

Apparently criticising Halliburton is a career limiting move if you are part of the US armed forces. Who says the customer is always right ? And who cares if American taxpayers get ripped off anyway - if they did care they'd be complaining, right ?



Heading Out from The Oil Drum has been interviewed on BBC Radio 5.

Bubba has taken a look at deep water exploration and concluded that there isn't a huge amount left to find.

And to close, here's a weird one on Afghan War Rugs from the Evil Pundit.
One of the cultural side-effects of the Soviet invasion of Afghanistan in 1979 was the creation of a new sub-genre in the traditional world of rug-weaving. These war rugs featured traditional patterns enhanced with images of the tanks, helicopters and missiles that had begun to clutter the landscape.

Air Power  

Posted by Big Gav



(via Energy Bulletin)

Welcome To A Warming Planet  

Posted by Big Gav

Well - everyone is freaking out today about Hurricane Katrina today, and with good reason it would seem, as it may be the strongest hurricane to hit the Gulf region ever.

The Oil Drum has a great round up of all the news, with Prof Goose and the team putting in a great effort providing continuous updates on the news and all the oil and gas related infrastructure in the path of the storm. Most of New Orleans has apparently been evacuated and hopefully those who remain behind come through unscathed.

It seems everyone else has commented on this already - Mobjectivist, MonkeyGrinder, WorldChanging, MEJ, Jeff Vail (who also notes the similarity to the "Oil Storm" scenario), Stirling Newberry and even the parahistorians at RI who came up with the freaky picture to the side of Hurricane Isabel - and no, I don't know if its doctored. Jeff W's comment is interesting in light of the prevailing theory that global warming is making tropical storms more intense, but not more frequent. Maybe that is true globally but perhaps the idea that the failure of the Gulf Stream will mean more GOM hurricanes is worth watching.

Still, here we are, in another moment, where dystopic hallucinations have become wire stories with headlines such as "Experts Expect Katrina to Turn New Orleans Into Atlantis." I'm expecting the storm to weaken enough that the worst-case will not be realized. I'm hoping so for the poorest of New Orleans, who "chose" not to leave because they couldn't, and have been sitting up all night in the Superdome. But Katrina is already the 11th hurricane this season; that's eight more than have been recorded before at this time of the year. The storms are increasing in frequency and ferocity, and will continue to do so as the Gulf Stream fails. All that heat has to go somewhere.

Oil prices have hit an all time record (in both real and inflation adjusted terms).
Crude oil soared to a record above $70 a barrel in New York after Hurricane Katrina forced companies including Exxon Mobil Corp. and Chevron Corp. to shut operations in the Gulf of Mexico, where 30 percent of U.S. oil is produced.

Oil had its biggest gain in 29 months as Katrina may become the strongest storm to hit the Gulf coast since 1969. Hurricane Ivan last September cut oil output by as much about a third. Natural gas, heating oil and gasoline all rose to records today. ``It's as bad as it can get,'' said Marshall Steeves, an oil analyst at Refco Inc. ``Hurricane Ivan came through almost a very similar tract and did a tremendous amount of damage.''

Katrina is a Category-5 storm, the most severe on the Saffir-Simpson scale of hurricane strength. It would be only the fourth storm of that magnitude to hit the U.S. since the government began keeping storm records. Category 5 hurricanes, with winds greater than 155 mph (249 kph) can tear roofs off homes, blow down all trees and shrubs, and cause flooding.

States of emergency have been declared in Louisiana and Mississippi. New Orleans, a city of 500,000 within a metropolitan area of 1.3 million, is being evacuated of all but essential personnel. Much of the city, 100 miles upriver from the Gulf, lies below sea level.

``The storm is more severe than we've thought; it's turned into a monster,'' said Paul Sankey, senior oil analyst with Deutsche Bank Securities in New York. ``The amount of lost production is equal to almost all the spare capacity in the world.''

Oil prices jumped 22 percent in the month after Hurricane Ivan, the third most costly hurricane in U.S. records, tore through the Gulf last September, toppling platforms and damaging underwater pipelines.

Rigzone reported on the likely impact the state of Florida, which istotally dependent on the Louisiana refineries for its supplies.
The impact was immediate Sunday night on the New York Mercantile Exchange, as crude oil futures spiked $4.50 per barrel, putting the cost above $70 for the first time since oil began trading there in 1983. Every additional $1 per barrel translates into more than 2 cents in the price of a gallon of gasoline. Gas prices already are up an average 83 cents a gallon this year.

``Monday morning, take every penny in your wallet and invest in oil, because the hurricane is projected to come in in the heart of the gas and oil port,'' said Ted Falgout, director of Port of Fourchon, a key oil and gas hub that sits 60 miles south of New Orleans on the Gulf of Mexico. ``Prices are going to go up.''

Florida in particular would feel the impact: As much as 90 percent of the state's gasoline arrives by ship from oil refineries along the Mississippi River. Gov. Jeb Bush warned the fuel supplies at Florida ports, which seemed ample on Friday, now will not be enough in view of an expected shutdown of the refineries off the Louisiana coast.

Bush and Cheney's obsession with the War on Terror / War for Oil (and its resulting funnelling of vast streams of cash into the coffers of their associated companies like Halliburton and the Carlyle Group) may come back to bite them if the disaster relief effort runs into problems and US taxpayers start to wonder why disaster relief programs have been gutted, as this New Orleans area article described.
Disaster in the Making

The Federal Emergency Management Agency's diminished capacity to handle natural disasters is especially worrisome to Louisiana.

Last month, an Associated Press poll showed that Americans were as concerned about being attacked by terrorists as they were about getting burglarized or losing their jobs. With such fears running high, it's natural that the Bush Administration, particularly in an election year, would want to put anti-terrorism efforts at the forefront. But few people, especially in a hurricane-prone state like Louisiana, should agree that anti-terrorism programs must compete for
federal money with natural-disaster recovery and prevention efforts. Make no mistake: Natural disasters will occur. Just ask our neighbors in Florida.

Last week's cover story "A Disaster Waiting to Happen" focused on changes that have occurred under the Federal Emergency Management Agency (FEMA) after it was absorbed into the Department of Homeland Security in 2002. FEMA insiders and emergency-management officials nationwide say the move spelled disaster for FEMA and for victims of catastrophic events. From 1993 until 2002, FEMA built a reputation as an effective, independent federal agency that responded to emergencies efficiently and made disaster mitigation a priority. But some FEMA employees and many who work closely with the agency say that when it became a subdivision of the Department of Homeland Security, FEMA's ability to handle natural disasters fell off significantly. Now, it must compete against anti-terrorism efforts for funding.

Commenter JLA at TOD also noted "we should also be hearing a lot about how stupid, reckless, and irresponsible it has been to allow Louisiana's natural defense against hurricanes - its ecologically rich and diverse bayou - to dissappear as the natural process of flooding and silt deposition has been halted by levee construction. There was some talk about finally addressing this issue after Ivan gave everyone a scare last year, but it is obviously too late now."

At the risk of sounding repetitive, how long until the oil industry realises it is going to suffer along with the rest of us as a result of global warming ? OK - oil prices go up when supply is interrupted so there is a silver lining to these storm clouds for them, but hopefully if you have a huge (and increasing) investment in offshore production that is constantly getting shut down or damaged then oil company executives (along with malevolent morons like John Bolton) may eventually start to think that mitigating global warming could be a good thing rather than something to be constantly sabotaged.

Moving onto other matters related to global warming, the BBC has an article up on the Permian extinction and the increasingly prevalent view that it was due to a previous episode of global warming, probably caused by a wave of volcanic eruptions or the release of methane hydrates from the ocean (or a combination of the two).
A computer simulation of the Earth's climate 250 million years ago suggests that global warming triggered the so-called "great dying". A dramatic rise in carbon dioxide caused temperatures to soar to 10 to 30 degrees Celsius higher than today, say US researchers.

The warming had a profound impact on the oceans, cutting off oxygen to the lower depths and extinguishing most lifeforms, they write in the latest issue of Geology. The research adds to the growing body of evidence that higher temperatures, rather than a giant space rock hitting the planet, led to the greatest mass extinction in history.

Finally, on the topic of extinction, one of WorldChanging's posts during "retro" week is on the Sixth Great Extinction.

Underground Coal-Gasification, Coal-to-Liquids Fuel Project in Australia  

Posted by Big Gav

Green Car Congress has an article out on a Coal-To-Liquids project in Queensland that uses a new underground gasification process (via Energy Bulletin).

Syntroleum Corporation and Australian-based Linc Energy are planning to develop a coal-to-liquids (CTL) project in Australia that integrates Syntroleum’s air-based Fischer-Tropsch technology (earlier post) with Linc Energy’s underground coal gasification (UCG) technology. This will be the first such project to combine the two technologies for the production of synthetic diesel from coal. The CTL work will be part of Linc Energy’s ongoing Chinchilla Project (350 km west of Brisbane) which also includes early development of an integrated power plant.

Underground Coal Gasification (UCG) is a process through which coal is converted in-situ to a syngas that can be used as a fuel for power generation or as a chemical feedstock — e.g., to feed into a Fischer-Tropsch process for the generation of synthetic diesel. UCG has been used in the Former Soviet Union for some 40 years.

In general terms, UCG uses adjacent boreholes drilled into a coal seam (typically > 100m depth). The injection wells are used to feed a pressurized oxidant such as air or oxygen/steam into the coal seam and to trigger the and subsequent down-hole ignition. The production wells recover the product gases.

The UCG syngas, which undergoes sulfur removal and additional conditioning at the surface, is similar to syngas obtained from conventional surface coal gasification systems, but production is achieved at a much lower cost.

According to Ergo Exergy, the providers of the UCG technology used by Linc, typical gas recovered using air injection may have calorific values in the range 3.5 to 5.0 MJ/m3, depending on specific site conditions, with approximately twice these values being achieved with oxygen injection.

UCG differs from conventional above-ground gasification in a number of ways:

* Coal is not mined and chemical processes are arranged to occur in the virgin coal seam in situ.
* The process wells (the collective terms for the injection and production wells in a UCG project) must be connected within the coal seam by the links of low hydraulic resistance to allow production of commercial quantities of gas.
* Process water for gasification usually comes from the coal itself and surrounding rocks, and its influx must be carefully regulated.
* No ash or slag removal and handling are necessary since they predominantly stay behind in the underground cavities.
* The process must be confined within a hydraulic system created in the coal seam so that no leakage of the product is possible and no contamination of the underground environment can occur. Such a hydraulic system is called an underground gasifier, and its design is the most crucial part of a UCG operation.

The Energy Blog also has a post up on this topic.

The Oil Drum also has a post on the prospects for Fischer-Tropsch plant in Montana (which I think is the same as the one I noted a few weeks back).

I'm still not entirely sure about the viability of large scale oil production from coal, though SASOL in South Africa (where there process was widely used during the apartheid era) claims to have produced 1.5 billion barrels of oil using this process over the past 50 years.
Sasol has produced almost 1,5 billion barrels of synthetic fuel from about 800 million tonnes of coal since the first sample of synthetic oil from coal was produced fifty years ago at its Sasolburg plant near Johannesburg in South Africa on 23 August 1955.

Regarded as a world technology leader in the production of coal-to-liquids (CTL), Sasol operates the world's only commercial scale synthetic plant at Secunda, where it produces 150 000 barrels of liquid fuel per day.

Sasol currently supplies about 28% of South Africa’s fuel needs from coal, saving the country more than R29 billion (US5,1 billion) a year in foreign exchange.

“Sasol has pioneered the commercial application of Fischer-Tropsch technology since the early 1950s when we built our first petrochemical plant at Sasolburg and began producing fuel based synfuels and chemicals. This pioneering spirit has resulted in Sasol being recognised as a global technology and innovation leader, and we are now poised to deliver the world's cleanest diesel early in 2006, when our first international commercial scale gas-to-liquids (GTL) plant at Doha in Qatar commences production,” says Sasol chief executive, Pat Davies.

If coal to oil does turn out to be the future and can make up for depletion of "real" oil, then I guess we'll all have to go back to worrying about how soon runaway global warming is going to set in (or set about creating Hubbert curves for "peak coal")...

Random Notes  

Posted by Big Gav

Energy Bulletin has an interesting collection of pieces up today by Byron King on "The Saga of Oil", including the one with the catchy title of "Peak Oil: Geology is Destiny".

As for Peak Oil, I have read most of what professor Kenneth Deffeyes of Princeton (not a bad school...) and Colin Campbell and Matt Simmons et al. have written on the subject. Plus, I have read a lot of the better summaries and insightful commentaries by more general science writers (Amory Lovins and Richard Heinberg come to mind). Basically, I am on board with what they are saying. Global oil production is in the process of "peaking," and soon it will level off, and then commence to decline.

Geology predicts it, and who am I to argue with geology?

Peak Oil is a real phenomenon, based on hard science. Ignore it at your peril. At root, the Peak Oil guys are right. How can I emphasize it properly? OK, they are "right, right, right." Everybody else is "wrong, wrong, wrong." These latter folks -- who are wrong, by the way -- are the equivalent of the violin section that played at the burning of Rome. Party on, dudes, but if everybody else stays wrong long enough, then, politically and economically, we will all be done for.

Despite the theories of so-called abiotic oil that are floating around (sort of the petroleum equivalent of the story of the pot of gold at the end of the rainbow), my belief is that oil comes from the unoxidized remains of ancient life forms. The remains of ancient life forms have been, essentially, cooked and refined to a higher energy state of matter by the Earth's tectonic energy (shhh...it's that "thermodynamics" stuff again). Now they are trapped inside bodies of sedimentary rocks by structure and/or stratigraphy.

Glad to see someone is holding out against the spring tide of abiotic oil theorists.

Technology review has a couple of energy related articles out - one on Fusion research in the US, and one on the revival of nuclear (fission) power, asking if the money required to subsidise this would be better spent on advanced wind turbines or hybrid car development.

Hurricane Katrina is looking ominous and may make a direct hit on key oil and gas producting areas of the Gulf of Mexico. I wonder when the oil industry will start lobbying the US government to do something meaningful to combat global warming ?
A strengthening Hurricane Katrina is taking aim at southeastern Louisiana and New Orleans - a path that will also take the storm through key U.S. oil and natural gas producing areas in the Gulf of Mexico - the U.S. National Hurricane Center said Saturday.

The NHC, increasingly confident in its forecast, said a hurricane watch is in effect for the southeastern coast of Louisiana and New Orleans. Katrina has maximum sustained winds of 115 miles per hour and could grow into a Category 4 or even an extremely dangerous Category 5 storm, the NHC said. "It is not out of the question that Katrina could reach Category 5 status at some point before landfall," NHC forecaster Jack Beven said in a discussion note at 11:00 a.m. EDT.

The storm, which just Friday appeared likely to plow into the Florida panhandle and spare offshore oil and gas production, has grown overnight into a storm that poses a significant threat to facilities in the Gulf of Mexico. In an almost worst-case scenario, the NHC forecast track shows the storm plowing through Gulf producing areas off the coast of eastern Louisiana then making nearly a direct hit on the key oil services and pipeline hub of Port Fourchon on Monday.

Even as late as Friday afternoon, the storm had been seen hewing to the eastern side of the Gulf, sparing the producing areas. Oil futures sold off sharply in New York in part because of that forecast. The Gulf of Mexico is home to about a fifth of U.S. gas production and more than a quarter of the country's oil output. Concerns oil and gas production could be disrupted in a market that already is stretched tight drove up the price of energy futures this week in New York, despite late Friday's selldown.

Billmon has a great review of Pat Robertson's homicidal outburst last week.
Bottom line: Thanks to soaring oil prices, Chavez has managed to escape the trap that usually awaits leftist Third World leaders who won't dance to the IMF's tune or kowtow to the global superpower, but who also don't want to make the great leap forward into Stalinist repression and communal poverty. For the moment at least, he doesn't have to worry about capital flight, or economic strangulation or "structural adjustments." Not as long as he's got his hands on the spigot that keeps the go juice flowing.

What's more, thanks to the failure of the 2002 coup, Chavez has been able to purge the armed forces of his opponents. Now he's re-equpping his Air Force with Russian-made jets and helicopters, and his Navy with Spanish-made ships and submarines, dispensing with the need for U.S. spare parts, technicians and military advisors. He's also severed ties with the DEA (he says he'll fight the drug lords on his own) and booted the U.S. narcs out of the country. Whatever else happens to him, Chavez isn't going to go out like Allende.

With the U.S. Army bogged down in Iraq, the invasion option is probably off the table -- although with the Cheneyites you never know for sure. The Bay of Pigs gambit (this time in the form of a gang of Columbian paramilitaries) has already been tried, and failed. Last year's recall referendum failed. (Under Chavez Venezuela has become such a communist police state that his opponents were only able to collect 1.9 million signatures on their recall petitions.) Prospects for beating Chavez in Venezuela's next presidential election also look dim -- his popular approval rating is currently north of 70%.

You can see why the right wingers are getting a little hysterical about the guy. He's holding all the high cards, and they know it. Assassination is the only trick that hasn't been played. Thus do our warriors for democracy in the Middle East reveal their true colors in Latin America -- by embracing the functional equivalent of the Brezhnev Doctrine.

Billmon also spends a lot of time talking about Iraq, and though I've never seen him mention peak oil, he does consider the oil part of the equation occasionally (though, as with almost all Iraq commentators, he can't seem to bring himself to state the obvious - the war is, and was, about oil and everything else is a sideshow or a smokecreen).
... the differences between Iraq and Vietnam shouldn't be ignored. However important Vietnam may have seemed strategically to the Cold War hawks of the Kennedy and Johnson administrations (the ur neocons) it was never critical to U.S. economic interests, certainly not in the way the Persian Gulf oil fields are now. At some level, access to oil also becomes an overrriding strategic issue. Just ask the war planners of Imperial Japan.

I'm not advocating a war for oil -- just the opposite, in fact. But I am pointing out that if U.S. failure in Iraq does spill over into Saudi Arabia or the gulf emirates, the impact here at home (and on the global economy as a whole) is going to be direct, immediate and extremely painful. If Thailand or Malaysia had fallen to communism after the U.S. defeat in Indochina (never a likely scenario, but I'm just saying) the direct impact on U.S. security or the U.S. economy would have been fairly trivial. The Asian Tigers of the '70s and '80s would have been short a couple of players -- but probably would have picked up a few somewhere else. But, if the House of Saud falls, and/or Saudi Arabia slips into the kind of madness we've seen unleashed in Iraq, I can guarantee you it won't be buried on page A-23 of the New Pravda.

In the long run, that wouldn't necessarily be an entirely bad thing (for the United States, at least) if it finally forced the American people to confront the reality of our national oil addiction and the bad case of the imperial overstretch it has created in the Middle East. If also it caused more people to question the relentless militarization of U.S. foreign policy -- or to understand that converting the battle against terrorism into a grand campaign to reshape the Islamic world has pulled America into a war that can't be won -- so much the better.

In the short run, though, the effects of destabilizing the entire Persian Gulf would almost certainly be all bad. Among other things, it would create a ripe climate for the right to blame the left for its own spectacular incompetence.

Of course, it might not come to that. As I argued several months ago, there is a plausible strategic case to be made for a rapid withdrawal from Iraq. It might help contain the damage, rather than making it worse. But there's absolutely no guarantee that would be the case. To quote (again) Juan Cole's now-famous line: Sometimes you're just screwed.

Wayne Madsen has another update on Mauritania (and I still have no idea if he is a reliable source or not), which I imagine only those with investments in companies (ie. Woodside, Hardman, ROC) that have projects in the country care about (see my previous notes on the topic).
August 24, 2005 -- Bush administration officially warms up to Mauritanian "Islamist" junta. After denouncing the recent Mauritanian military coup against President Maaouiya Sid'Ould Taya, the Bush administration has established links with the pro-"Islamist" junta led by Col. Ely Ould Mohamed Vall, a recipient of past U.S. military training. Taya is exiled in nearby Gambia but he has been offered permanent asylum by the government of Qatar, a close U.S. military ally. The Bush administration has been using the presence of the Salafist Group for Preaching and Combat (GSPC) throughout the Saharan region to justify an increase in military presence. Intelligence out of Algeria and other countries in the Sahel indicates that GSPC, said to be an ally of "Al Qaeda," is the creation of the Pentagon's parallel neocon intelligence network in cooperation with Algerian intelligence and private military contractors linked to Halliburton, which are active in the Sahel from Mauritania and Morocco to Chad and Libya.

Rigzone also has a report on Mauritania today, with the Chinese about to start exploration in partnership with Australian "oil giant" Baraka (actually a minnow even by our standards, who I'd never heard of before today - do reporters just reprint news releases from PR departments with delusions of grandeur ? Or was that a subtle form of sarcasm that I failed to get ?)
PetroChina, the nation's largest oil producer, is to explore oil in Mauritania in partnership with Australia-based oil giant Baraka. The two oil Titans have gained approval from Mauritania government, which welcomes foreign investments, with respect to an agreement between them. The two parties are to work in block 20 in Mauritania which belongs to the country's coastal basin and is rich in oil resources. The block is 180 kilometers far away from Chinguetti, the country's first commercial oil exploration project developed by Australian company Woodside.

Strangely enough, Mr Madsen has popped up in the parahistory world today, with RI looking at a rumour that he has been targeted for assassination by a US intelligence agency. I quite like the closing section, which repeats an idea they've looked at previously, that by closely observing the anticipated actions of conspirators they can prevent them. Kind of an "Observer Effect" for conspiracy theorists. I wonder what Heisenberg would make of the idea.

I came across a new Israeli peak oil blog today (possibly the same "OilsNotWell" that started the PeakOil.com thread about Iraqi oil reserves after my original "Control of Oil" post), with one post that caught my eye comparing the Bearded Lord of Evil to Asimov's Hari Seldon. Bit of a novel idea but I must admit it does make me want to go and find a copy of "Foundation" and read it again (all memories of reading it as a teenager having long since been washed away) just to see if I can spot the similarities.

On those notes, I think I'll close, and for those wondering if I've started seeing black helicopters I have to admit I did see one fly past this morning as I went for a morning walk along the harbour (and yes - I'm only mentioning this for the humour value).

Random Notes  

Posted by Big Gav

The Herald is reporting that airlines at Sydney airport may be forced to cut flights because of "unusable" jet fuel.

Airline passengers could face delays for some days after a significant portion of Sydney's jet fuel supply was found to be unusable. BP, Caltex, Mobil and Shell were alerted to the problem when standard testing yesterday showed fuel was "off specification"

Oil related matters are all over the local press this weekend, with the front page of the Herald declaring "Petrol: time to leave the car at home" and reporting layoffs at GM's local subsidiary Holden, blaming falling sales of larger cars (as well as moving some production to China). Sharing the front page is an article decrying inaction on global warming and the teaching of "intelligent design".
Soaring petrol prices are starting to bite into the economy, with motorists tipped to curb their driving soon and car firms feeling the pinch as buyers abandon fuel-guzzling vehicles. With the average household now spending $168 a month on petrol and prices expected to hit $1.30 a litre next week, the managing director of oil refiner Caltex, Dave Reeves, has warned: "If these prices remain or even go higher, I can expect some response from our customers."

His comments came as Holden announced it would lay off 1400 workers at its Adelaide plant, partly due to the growing popularity of fuel-efficient cars. Bureau of Statistics figures released this week showed demand for four-wheel-drives has plunged this year. Sales were down 3 per cent in the year to July, the biggest fall in five years. Mr Reeves said he had "seen fewer cars on the road" on the trip to the office each morning.

They quote a representative of a fuel price monitoring group as saying he didn't expect prices to drop "until February" - why he thought prices might drop then wasn't reported.

The Financial Review (no links because of their stupid pay wall and limited web publication policies) has an article on the prospect of Chile buying LNG from Australia with Woodside and Chevron tipped as possible suppliers of gas from WA. They note that Chile is suffering from a "national energy shortage" - I initially wondered why they aren't piping the stuff in from Bolivia instead (where it is plentiful) but it seems this was the plan but has been scrapped, apparently due to the political situation in Bolivia.

The same article notes that Federal Resources Minister Ian McFarlane (fresh from annexing the NT's uranium supplies) is in San Francisco lobbying on behalf of BHP's planned Californian LNG terminal. Elsewhere in the paper BHP and CEO Chip Goodyear get quite a lot of coverage, with Goodyear predicting that oil prices will "moderate" in future but adding that we'll never see US$20 oil again. Santos also get some coverage, with Trevor Sykes noting that they have 5 gas projects coming online over the next 18 months, plus giving the so-far disappointing Jeruk field some publicity by predicting more appraisal drilling could make it "much bigger".

The AFR also has a piece "Indonesia Acts To Prop Up The Rupiah" which looks at the enormous problem rising oil prices have had on the Indonesian budget deficit and currency. Fuel subsidies are expected to consume over 30% of total government expenditure this year, and the Indonesian is planning to cut these again, thoiugh the date for this happening isn't certain.

While peak oil hasn't got a run in any of the Australian press this week, WHT's home town paper has followed the lead of the New York Times and published an editorial on the subject.
Until recently, opinion on the future of world oil supplies was dominated by two views. One group of experts held that production would decline fairly soon, within a couple of decades at most. Another group argued that the crude would keep flowing for generations, thanks to ever-advancing detection and drilling technologies.

Either way, the scenario was for a gradual and orderly transition to fuels of the future. Now a third perspective is gaining both popular attention and professional respect -- the notion that oil's decline will be sharp and uncontrolled, following a peak that may be more or less at hand.

This "peak oil" theory is neither new -- some geologists think the world has already passed the high point of recoverable reserves -- nor universally accepted. But it is gaining ground as world demand surges, especially in China and India, and as the most important supplier shows signs of strain.

The Oil Drum is closely following the progress of Hurricane Katrina in the Gulf of Mexico and has a good round up of the news.

Africa is starting to get hit hard by rising oil prices, which is a sign of things to come for poorer countries (and poorer individuals in rich countries).

Thailand's Prime Minister has come up with a novel (albeit bizarre) mechanism for ignoring questions from journalists, though apparently questions relating to rising oil prices are OK still.

Morgan Stanley's Stephen Roach is still fretting about the impact of rising oil prices on the the US and world economies.
This is the first oil shock in the modern era of globalization. That means its impacts are likely to be compounded by the cross-border linkages that shape the global trade cycle. In today’s US-centric world, that spells unusual vulnerability. If higher oil prices take a toll on the over-extended American consumer, repercussions in the rest of an externally-dependent world will be all the more acute. That puts Asia, the world’s most rapidly growing region, right in the cross-hairs of the energy shock of 2005.

Globalization complicates the transmission of shocks around the world. That’s especially the case with respect to the current energy shock. Countries will be hit both by the direct effects of rising energy costs, as well as by the indirect impacts of energy-related pressures on their major trading partners. To the extent that the American consumer remains the principal engine of growth on the demand side of the global economy, those nations that rely on exports to the US as major sources of growth will be hyper-sensitive to any energy-related cutbacks in US consumption.

Both Mobjectivist (twice) and MonkeyGrinder have noted the attack of the Swift Boat "Veterans" on peak oil, with professional propagandist Jerome Corsi (wingnut America's Baghdad Bob) - pleased with the success of his reality-altering campaigns to revise John Kerry's military record and the nuclear warfare capabilities of Iran - turning his foaming muzzle onto the subject of peak oil and declaring we have nothing to worry about - oil is abiotic, joining other respected observers like Joe Vialls (http://joevialls.altermedia.info/wecontrolamerica/peakoil.html) in this camp.

The brownshirts are on the march in Hawaii as well, with the American Legion declaring that all dissent is treasonous - the war in Iraq may be both illegal and ultimately futile, but you still have to support it if you want to remain a good citizen of the homeland it seems. At least they aren't plotting a coup again.
The American Legion, which has 2.7 million members, has declared war on antiwar protestors, and the media could be next. Speaking at its national convention in Honolulu, the group's national commander called for an end to all “public protests” and “media events” against the war.

"The American Legion will stand against anyone and any group that would demoralize our troops, or worse, endanger their lives by encouraging terrorists to continue their cowardly attacks against freedom-loving peoples," Thomas Cadmus, national commander, told delegates at the group's national convention in Honolulu.

The delegates voted to use whatever means necessary to "ensure the united backing of the American people to support our troops and the global war on terrorism."

In his speech, Cadmus declared: "It would be tragic if the freedoms our veterans fought so valiantly to protect would be used against their successors today as they battle terrorists bent on our destruction.”

Past Peak has some good quotes on the Bush administration's admiration for fascism.

Lastly, the idea that we've slowly slipped into a totalitarian state has prompted the Ministry of Reshelving to commence a program of moving George Orwell's "1984" into the non-fiction section of book stores.

The Oiloholics  

Posted by Big Gav

Energy Bulletin notes that this week's Economist has a number of articles on oil, and declares that it is time for America and China to wean themselves off "oiloholism" (without acknowledging peak oil of course).

I subscribed to the Economist for a decade and always found it worth reading. They've been pushing the same line for over a century and have seen two waves of globalisation pass now, so you'll rarely be surprised by their take on a particular issue (hint: "free trade is good"), but they are generally pretty even handed and often take what I'd consider the correct stand on a lot of issues where many right wingers these days would choose some other rather less sane (or less moral) option.

For example, last year they decried the calcification of US social structures (noting that an american today has less chance of moving from the poorest 10% of the population to the richest 10% than someone in France or Germany does, neither of those being countries that the Economist is given to praising) and also strongly recommended their readers vote against George Bush in last years presidential election (the first time they've ever not backed the Republican candidate).

Bart comments that "Although its slant is cheeky pro-market, The Economist is worthwhile reading for anyone interested in business and economics -- whatever one's political stripes. In the 19th Century, for example, The Economist counted Karl Marx among its readers.".

According to the IMF's model, an increase of $10 a barrel in oil prices should knock three-fifths of a percentage point off the world's output in the following year. Thus the increase of $30 over the past year or so should have reduced global growth by almost two percentage points. However, all such ready-reckoners are based on previous oil shocks, when the main cause of higher prices was a disruption to oil supplies: the OPEC oil embargo in 1973-74; the Iranian revolution in 1979; and Iraq's invasion of Kuwait in 1990.

The current episode, however, has its origin in increasing demand, notably in China, the rest of Asia and the United States. Last year's increase in global oil consumption was the biggest for almost 30 years. The old rules of thumb based on supply shocks do not work for price increases driven by rising demand. If oil prices rise because of a shortfall in supply, they will unambiguously cause GDP growth to fall. However, if higher oil prices instead reflect strong demand, then they are the product of healthy global growth. They will therefore be less damaging.

The downside is that, if prices are high because of strong demand rather than a supply shock, they are likely to stay high for longer. In past oil shocks, a rise in price as a result of a temporary supply disruption caused oil consumption to decline, so that when supply returned to normal prices promptly fell. But if oil prices are being pushed higher largely by rising demand in China and other emerging economies, a sudden collapse is less likely.

This is not to deny the role of speculators, whose bets that prices have further to climb have given the market an extra momentum—perhaps leaving it vulnerable to a future drop. Even so, with demand growing strongly and supply unusually tight as a result of years of inadequate spending on exploration, development and refining capacity, any serious supply disruption would push prices yet higher. The basic fact is that the equilibrium price of oil has risen: analysts at Goldman Sachs expect oil to fetch an average of $68 a barrel next year and $60 for the next five years. In the long run, such high prices will encourage exploration and bring forth increased supply that will eventually dampen prices, but this will take time.

Once an economist always an economist I guess...

A Question Of Shale  

Posted by Big Gav

2007 Update - more on shale oil in Queensland's Shale Oil Billions In The Balance ?.

Shale Oil is one of those great white unconventional oil hopes that economists pull out of the bag of tricks when they want to tell us how vast the remaining hydrocarbon reserves are.

With Bubba pouring a bucket on the whole "shale will save us" - or help us to fry ourselves, depending on your point of view - idea (via Mobjectivist's "Belly of the Beast" post), I think the time has come to investigate the whole shale oil idea.

I worked with a major oil company for 2 years trying to develop a way to commercialize oil shale. Trust me on this, it ain’t going to happen. Most oil companies know this. The few (one??) that don’t are totally deluded.
Oil shale is not oil. Oil shale is rock that has a relatively high concentration of organic carbon compounds in it. Geologists call this a source rock. If you heat this shale to 700 degrees F you will turn this organic carbon (kerogen) into the nastiest, stinkiest, gooiest, pile of oil-like crap that you can imagine. Then if you send it through the gnarliest oil refinery on the planet you can make this shit into transportation fuel. In the mean time you have created all kinds of nasty by products, have polluted the air and groundwater of where ever you have extracted it. You have also created an enormous pile of superheated rock that will take hundreds to thousands of years to cool off.

Rigzone finished off their set of posts on tar sands this week with a look at shale oil as well, which takes a look at the latest in extraction processes (apparently electric heaters are better than fire - good to see the process making it into the 20th century anyway) but notes that myriad environmental problems remain.
U.S. officials, the petroleum industry and environmentalists are studying Alberta's tar sands development for ideas on how to exploit oil sands and oil shale resources that some say could turn Utah, Wyoming and Colorado into the nation's oil production center.

Oil shale deposits found in a 16,000 square-mile region bounded by Utah's Uinta Basin, Wyoming's Green River Basin and Colorado's Piceance Basin could hold 1 trillion to 2 trillion barrels of oil, depending on the grade of shale being produced, said James Bunger, acting energy director for the Utah governor's economic development office.

Oil shale, which would also either be mined or drilled in situ, would require processes to fracture and heat the fine-grained rock to release gases and oils out of the keragen. Keragen is the shale equivalent of bitumen in the tar sands.

Shell Exploration and Production Co. has been experimenting with electricity to heat the rock up to 700 degrees at a site west of Denver. A heating element is lowered into the well to slowly convert the keragen into oils and gases, which are pumped to the surface. The company says it intends to make a decision about commercial development efforts by about 2010 ( E&E Daily, June 24).

Enviros see trouble ahead Environmentalists are already raising red flags about oil shales. Steve Smith, assistant regional director for The Wilderness Society's Four Corners States office, told the Senate Energy and Natural Resources Committee that Alberta's experience should be a cautionary tale for the United States. For one thing, tar sands development in Alberta consumes so much natural gas that it might deprive the United States of supplies it needs, he said.

"Tar sands development in Canada could not occur without the use of large quantities of natural gas -- potentially much of the entire production to be carried by the new pipeline from the MacKenzie Delta," Smith said at an April 12 hearing. "Tar sands development in Canada is one of the principal reasons natural gas exports to the United States will not increase and may even decline over the next 10 years."

Smith also raised air quality, water use and quality, and economic considerations for oil shale development in a region. Tar sand development consumes large amounts of water, he said. Large consumption of water by the industry would post major problems in the West, where booming cities depend on the Colorado River for drinking water as well as tourism and recreation destination.

"I raise just a few of the many questions that must be asked," Smith said. "Is any water available for a new energy industry in drought years? If so, would the withdrawals for oil shale result in a reduction of flows -- or even a loss of flows -- in the critical reach just upstream of Grand Junction? If so in turn, what endangered species issues are implicated? If any water is available in drought years, how would oil shale development affect the total amount of water remaining for Colorado's use under the Law of the River?"

If we ignore all these externalities (as economists and corporate executives are prone to do), there is still the problem of the low EROEI for shale oil - estimates vary from 0.7 to 13.3 (and I'm not sure where the higher number comes from) which I suspect means that the exploitable shale reserves are likely to be far smaller than some of the grandiose estimates proferred.

In a similar vein to the Rigzone article, Grist notes that "Energy execs are begging Congress to let them dig up the West for oil shale" in "My Own Private Saudi Arabia".
Energy execs beg Congress to let them dig up the West for oil shale

"We can safely say of our future with regard to oil and gas, it has yet to see its brightest days," said Rep. James Gibbons (R-Nev.) in a House subcommittee meeting yesterday. We know what you're thinking: What the ... ? Well, apparently Colorado, Utah, and Wyoming are sitting on top of lots and lots of oil shale, a porous rock soaked through with petroleum. In fact, the Green River Basin is estimated to contain over a trillion barrels of oil, enough to eliminate trans-Atlantic oil imports by 2025.

Energy execs are chomping at the bit to start digging, but farmers and conservationists in the West aren't quite so gung-ho. The last big oil-shale boom, in the 1970s, went bust. Past oil-shale extraction methods have included underground nukes (!) and heavy mining, and though energy companies promise this time around they'll be environmentally sensitive, similar promises about coalbed methane extraction yielded contaminated land and water. Tread lightly, warned Russ George of the Colorado Department of Natural Resources, "but do tread."

The Energy Blog has also taken a balanced look at oil shale and while some companies are claiming improved extraction processes, they don't sound convincing at all when you look at them and Jim doesn't sound very positive.
Shell Exploration and Production is experimenting with a new technology that the company estimates could produce oil for $25 to $30 per barrel. The Shell process involves drilling a well 2,000 feet deep and then heating the surrounding rock to between 600 and 700 degrees for two years. The heat allows the oil and gas to flow to the surface. A thick ring of ice is formed around the well which keeps contaminants from polluting groundwater. The heating and freezing is energy-intensive, but Shell says they still produce three times as much energy as they use in the process. It will take another five years of research and testing before Shell decides whether the technology can be applied commercially.

Of course Saudi's proven reserves are money in the bank and our shale oil reserves are still pie in the sky. At least there is some optimism that we are making some progress in developing this huge reserve. The Oil Tech process has many potential environmental problems associated with the mining of the shale rock. I presume their cost of $10 a barrel does not include any of the mining costs. Shell's estimated costs are still in the acceptable range when competing with $50 crude, and I assume their cost includes all expenses.

Energy Bulletin only has a small set of shale related articles which I think indicates just how little progress has been made in this area over the past 30 years.

The only shale pilot project in Australia (the Stuart Shale oil Project) has been closed, with tar sands giant Suncor admitting the process they were using was not commercially viable. World Oil magazine had a rather bullish article on shale late last year which claimed that stage 2 of this project may yet go ahead - but I can't find any evidence of this on Google, and the owner discontinued their application to begin stage 2 in November 2004.

By far the most positive source I've been able to find on the topic of shale oil is my ragged copy of "The Control of Oil", which was extremely enthusiastic about the potential for oil shale and inferred that the oil companies had been very much against the development of these reserves and that commercially viable extraction processes had been in existance for several decades (before the 1970's). It didn't have an answer to the environmental issues though, and unless the oil companies were very adept at manufacturing the shale oil bust of the 1980's it would seem that shale isn't as commercially viable as Professor Blair believed.

I think the final word should belong to the prophet of peak oil, King Hubbert, who noted (from Mobjectivist's great "Our Petroleum Predicament" post) :
You read about "oil from shale", right? You heard about 1,000 billion barrels of oil out west? Don't get excited, it's going to stay there. Dr. Hubbert told the Senate Committee on Interior and Insular Affairs it wouldn't work, three years ago this month.

It really sounds simple. You "simply" dig up such enormous quantities of shale (1.88 million tons a day,) that it's equal to digging a Panama Canal every week. You crush it fine and heat to 1,100 degrees in a retort to boil off the oil locked in the rock. Then you get rid of the rock. Only now it's turned caustic and has increased in bulk by 20% to 33%. So you back-fill the leftovers, called tailings, into the hole you dug it out of. Since you still have a lot left over, you dump it into the empty scenic canyons of the west. To do this you need to grab off 89% of the undeveloped water of Colorado and Utah and half of Wyoming's. Oh yes, and you turn the Colorado River system into alkaline salts which means you wreck the agriculture in Colorado, Arizona and southern California. What will this get you? 1-1/2 million barrels of oil a day out of the 17 million per day that the U.S. is using!

A news item in the Milwaukee Journal of August 29, 1976,25 says that the last of the oil shale development companies, Standard Oil, Gulf, Shell and Ashland, have walked away from the projects in Colorado and Utah, asking the Department of the Interior to release them from paying any more on their leases. Standard and Gulf have already paid $126 million of the $210 million they bid, and Shell and Ashland have paid about $70 million of the $117.8 million they bid. You have to admit they tried, really tried and they spent a big buck to make it work, but it won't.

Hybrids, Carpooling, Environment, Privacy  

Posted by Big Gav

Dan Gillmor has an interesting tale about an unwholesome combination of the good (hybrid cars, car pool lanes and fast toll processing) the bad (the growing surveillence state) and the ugly (abusing the car pool lane idea).

The Mercury News reports that owners of certain kinds of hybrid cars can now apply for new $8 stickers allowing the use of carpool lanes. This is a result of a law passed last year by California's legislature, and ratified in the giant pork-barrel transportation bill just enacted in Washington.

It turns out, however, that there's a sneaky element to the state legislation. To get the carpool-lane sticker, car owners have to also fork over another $40 for a Fast-Trak transponder -- a little radio that tells bridge tollbooths that you're passing by (you don't have to stop and pay a toll-taker) and which is monitored by others unless you keep it in a protective bag hiding the signal.

... this deal happened because the regional bridge authority asked the DMV to get the wording. The more people using these transponders, the fewer human tolltakers the state needs, for one thing, and the fee for the transponders is not trivial. No doubt this makes law enforcment happy, too, as it provides yet another surveillance tool on more people.

As an owner of a hybrid, I'm in a bit of a dilemma. I was opposed to this law in the first place. It looked like an unnecessary diversion away from the point of carpool lanes, which are designed primarily to get more than one driver into each car during commuting hours and therefore get cars off the highways. (This is one reason why I also think it's outrageous that parents can use the carpool lanes to drive their kids around.)

We have much the same problem here (though no one is handing out express lane rights to those with transponders, as that is a fairly large portion of the population - even I have one and I only get the car out of the garage twice a week).
Many Sydneysiders may cheer when the Cross City Tunnel opens for business this Sunday. But as you whiz through the tunnel, remember to wave goodbye not only to those 18 sets of traffic lights, but also something less tangible - your anonymity. As the first cashless toll-road - with others to follow - drivers and riders will have no choice but to identify themselves every time they drive across town. It all adds up to a profile on each person's daily movements.

Sure, we've had electronic tags for a while, but we've each been able to choose whether or not to trade a little of our privacy for the convenience of a faster trip. Not any more.

The next step towards 1984 is issuing national id cards with RFID chips in them to everyone and making the carrying of these mandatory. The race is one to see which part of the Anglosphere / Oceania gets there first.

As Dan Gillmor notes on the topic of RFID, "One of the tech crowd's least attractive attributes has been its zeal to become the tool supplier for the surveillance state. This is another example of an industry putting money over liberty."

Jeff Vail might say that this is bringing the "Closing of the map" down to a personal level.

Random Notes  

Posted by Big Gav

Tropical storm Katrina has people concerned about more supply disruptions in the Gulf of Mexico.

Oil production interruptions seem to be a common occurrence lately - some fields beginning to come back online this week include those in Southern Iraq, Nigeria and Ecuador.

Pat Robertson may be gagging to get Hugo Chavez and his "deep pools of oil" into his gunsights (be sure to check out Monkeygrinder's discussion with Robertson's alter-ego, the Bearded Lord of Evil, along with Jeff Vail's speculation that this may be Act I of a manufacturing consent process for Chavez's downfall) but Hugo is no doubt winning a few friends in Ecuador, after Venezuela responded positively to a request by the Ecuadorian authorities to provide oil to enable it to honour its export contracts. Especially with Chavez saying that the oil will be lent to Ecuador for free. I guess this is one example of how oil exporting countries will be gaining power and influence as supply shortages grow.

Chavez's response to the whole brouhaha was both funny and quite clever, saying he'd never heard of Robertson and expressing a "deep concern" about "increasing poverty rates" in the US and a desire to sell cut rate fuel direct to the poor there. Will this be the trigger that turns cashflow poor red-state SUV drivers into fervent communists, thereby bringing a new meaning to the term "red state" ?

Over in the parahistory world, Jeff Wells also takes a look at Robertson's checkered history.

I remember watching Pat Robertson, in the mid-1980s, solicit funds and prayers for his "Brother," Rios Montt, the fundamentalist monster of Guatemala. I don't recall hearing one word of censure towards his partner in gold profiteering, the former despot of Liberia, Charles Taylor.

America, in case you haven't noticed, has become a place of strange perversity. A place in which Robertson can fantasize aloud, before an impressionable audience of millions, about smuggling a nuclear device into the US Department of State, without fear of disappearing into the gulag from which Jose Padilla may never emerge. (And what was it he did, again?)

Back to more oil focused news, the Ecuadorian protesters who caused the production disruption there are now threatening to go on a hunger strike unless they are granted immunity from prosecution.

Another report from Nigeria notes that production interruptions aren't the only problem there, with around 20 million barrels of crude oil out of 3.6 billion barrels that was produced in 2004 stolen by oil thieves in the Niger Delta region.

Nigeria's oil minister has noted that OPEC quotas are just academic nowadays.
Meanwhile, some of the recent unscheduled stoppages, including those in Ecuador, were starting to clear, but not without leaving their mark on prices last week. Mr Norrish said: “The major lesson of the Ecuadorian situation is that even a relatively small stoppage – one that would normally be well below the radar of market consciousness – can be a price driver in a system exhibiting no slack.”

This sentiment was echoed by Nigeria’s oil minister who said Opec quotas were “academic”, when asked about the possibility of the cartel raising official production quotas at its meeting in September. He added: “I think for now, Opec will be happy for any member who has the capacity to produce [at current quotas].”

The surging oil price has helped BHP along to their (and the Australian market's) largest profit ever. As this windfall is also due to the high prices for the mineral commodities driven by the boom in China, observers are warning the good times won't last forever. This view isn't shared by everyone, with other analysts claiming that supply/demand imbalances in oil as well as some minerals could result in prices continuing to rise. Personally I tend to think oil prices will keep rising for quite a while and they'll kill off industrial growth and hence mineral commodity prices - which makes BHP a bit of a pain from an investment point of view - if they'd split off the energy (uranium, oil, gas and coal) divisions into a separate company that part would be a much less risky investment proposition (and it would be even better if it included a renewable energy division, though that doesn't seem to figure in their thinking, even though they would seem to have enough excess cash to put together a pretty decent one if it crossed their minds).

Elsewhere in the Herald, Paul McGeogh (who seems to be persona non grata in Iraq after his reports on former US favourite Iyad Allawi shooting prisoners) is now in Kabul and has a look at Afghanistan and the continuing game being played over pipelines through the country. This might explain why I saw a British army officer in Afghanistan on TV earlier this week saying that it would take 30 years to win the new "war on drugs" they are waging against opium growers there (though I seem to recall the Taliban wiping out the opium/heroin trade, along with those wondrous giant Buddha statues at Bamiyan and women's civil rights, in just a few short years when they were in charge). McGeogh also notes how unfortunate it would have been if Unocal had built this pipeline under Chinese ownership.
Afghanistan is at the centre of a high-stakes struggle for vital pipeline routes to tap vast oil wealth.

"We are talking about a very simple pipeline," is how a senior adviser to the Kabul Government describes the on-again, off-again $US3.8 billion ($5 billion) plan to pipe natural gas from Turkmenistan to Pakistan and India. But nothing is quite as simple as that. Like tangled spaghetti, the real and imagined pipeline routes of Central Asia see Washington, Moscow and Beijing pitted against each other in a much higher stakes, 21st-century version of the old Great Game.

In the 1800s tsarist Russia and the British Empire slugged it out for wealth until the distance between their borders - and for the empire that meant India - shrank from about 3000 kilometres to about 30 kilometres. As the old Soviet republics opened up after the Cold War, the trophy became the vast oil and gas wealth of the Caspian Sea basin and the contest was renamed the New Great Game. Now, in the era of the war on terrorism, the liberation of Afghanistan and great unease in the Middle East, it's been dubbed the New New Great Game.

The Afghan project is instructive - because nothing is quite as it seems as the majors and their proxies tug at spaghetti-ends, hoping to wrong-foot others or to lock in a deal for themselves. It was only al-Qaeda's bombing of the US embassies in Nairobi and Dar es Salaam in 1998 that ended Washington's courtship of the Taliban in what was seen as a bid to get a project go-ahead for the US oil firm Unocal.

In the 1990s Washington's interest in Afghanistan was widely seen as a leg-up for Unocal and the rise of three of the company's former Afghan fixers in the new Kabul administration keeps conspiracy theorists in overdrive. Apart from the Mines and Industries Minister, Mir Mohammad Sediq, the President, Hamid Karzai, who has made the pipeline his No. 1 priority, was a Unocal agent in the '90s; so too was Zalmay Khalilzad, Washington and Kabul strongman and recently departed US ambassador to Afghanistan.

As the Taliban locked Kabul in its ancient, fundamentalist vice in 1996, Khalilzad gave the fundamentalists an astonishing wrap in a passionate opinion piece in The Washington Post: "The Taliban does not practise the anti-US style of fundamentalism practised by Iran - it is closer to the Saudi model - [oil and gas] projects will only go forward if Afghanistan has a single authoritative government."

While the Chinese missed out on Unocal and its prospective pipeline from the Caspian, they appear to have had more success acquiring PetroKhazakhstan. In other Chinese news, Canada's "Globe and Mail" reports that China may have move quickly to replace coal fired power with natural gas due to a looming environmental disaster (hence their massive gas deals with Iran).
China's voracious energy appetite has already helped drive crude oil to record levels and now the country threatens to do the same to natural gas as it strives to replace dirty coal with the cleaner-burning fuel.

A senior Chinese energy researcher said this week that his country will accelerate its move away from coal because of rising prices and environmental concerns. The report from Zhou Dadi, director of the Energy Research Institute, did not set a specific target for reducing China's overwhelming dependence on coal for generating energy, with the comparatively dirty commodity accounting for nearly 70 per cent of overall production.

But with natural gas accounting for just 3 per cent of energy production, there is tremendous scope for growth in Chinese consumption, National Bank Financial says.

Environmental worries will push China toward natural gas, the bank said in a note, adding that sulphur dioxide emissions have soared so much that rain falling in parts of the country is nearly as acidic as vinegar. "The switch will need to come," assistant chief economist Stéfane Marion said in an interview.

Finally, signs that freight transport by rail is beginning its comeback are appearing in the UK. Time to sell those trucking company (and toll road) shares if you have any...
Rail freight services have returned to Ridham Dock in north Kent for the first time in more than three years. The rail freight line closed in 2002 but has been upgraded by operator EWS. EWS said the move would take 1,200 lorries off the roads in the next six months and there was enormous potential for more services to and from the dock.

The contract behind the move will see five services a week bringing building materials from Germany previously transported by road. EWS managers say the company is committed to increasing the amount of freight hauled on the rail network. The company has said the dock is part of an overall plan to bring 33m tons of freight to the British rail network.

Spokesman Graham Meiklejohn claimed their customer was making more use of rail transportation because of rising fuel costs. "All over Britain, hauliers and managers are trying to manage the effect of rising fuel prices by using a rail solution," he said.

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