The Heart Of Peak Oil  

Conferences and seminars on peak oil seem pretty popular in recent times (The Oil Drum has a flurry of reports from the "Peak Oil and the Environment" conference in Washington) - the latest one I've noticed, on a much smaller scale, is "The Heart Of Peak Oil" in Perth, organised by Robyn Williams from Persistence of Vision (via STCWA).

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At the other end of the local peak oil spectrum, the head of ABARE, Brian Fisher, was testyifying at the Senate enquiry and predicts oil prices are due to tumble due to the enormous potential of coal liquefaction. I think assuming SASOL's process will scale up to make up for depletion and continuing demand growth may be "optimistic" in one sense - but it guarantees a greenhouse planet if it does. Of course, he hedges his bets by also, somewhat contradictorily, suggesting we should pursue alternative energy and aim to electrify the transport system - so he got things half right.

The rise of alternative fuels will force a dramatic drop in oil prices over the next 50 years, the head of a government research body says. Anyone predicting an average oil price above $US40 a barrel over the next 50 years has not taken into account the rise of alternative options, Australian Bureau of Agricultural and Research Economics (ABARE) executive director Brian Fisher says.

Oil prices are currently hovering at about $US70 a barrel.

Dr Fisher said Australia should be investing in alternative energy but there was no cause for panic. "If you're looking at the long term, (the) real price of oil over the next 50 years, anybody who calls a price over $US40 does not bring into place the liquefaction of coal," Dr Fisher told a Senate committee into future oil supply. "We have more of this stuff (energy) than you can poke a stick at, vastly more than we can use over the next several thousand years."

Dr Fisher's comments came after Australian Greens leader Bob Brown accused Treasurer Peter Costello of failing to use Tuesday's budget to oil-proof Australia against "the coming oil shock".

The ABARE chief said the liquefaction of coal should be heading the list of alternative fuels. Coal can be turned into a liquid fuel and costs about $US40 a barrel. He also suggested Australia should be aiming for a largely electric car fleet by 2050. "We can generate electricity from a range of fuels and that would give us much more flexibility," Dr Fisher said.

Elsewhere in the realm of cluelessness, reactionary (and ignorant to boot) Cardinal George Pell has disgraced himself once again by joining the ranks of global warming deniers (purely on ideological grounds rather than on any scienific basis - but I guess that shouldn't be surprising). Its a shame the ghost of the Roman Empire won't finally give up and go away. Michael Pascoe at Crikey reports:

Cardinal George damns Koran and global warmingists

There's something of the Barnaby Joyce about Cardinal George Pell – an ability to attract attention by riding a hobby horse off at a tangent.

Personally, I don't mind Barnaby's latest idea of mining our Antarctic territory. And there's not much wrong with checking if there's oil around the Barrier Reef either, but in the general scale of what a politician might be hoping to achieve, I wouldn't recommend anyone pushing either barrow.

Similarly, George Pell is only preaching to a core of the already converted by publicly belittling the Koran as a crook and violent book with a sideswipe at those who take global warming seriously for good measure. Pell has been quietly telling confidants for some years that the Koran isn't nice bedtime reading but he went very public about it in a speech to Catholic business types in Florida in February and this week stuck the speech up on his website.

Inevitably, The SMH has picked it up with Linda Morris reporting under the headline "Pell challenges Islam – o ye, of little tolerant faith". Pell's lengthy speech about Islam and Western Democracies pretty much comes down to the Koran being a violent book (and possibly one big translation mistake), resulting in a basically intolerant religion. You'd be pretty silly to take the Koran or the Bible literally. (I just added the bit about the Bible, George didn't quite say that.)

But George's general warning about the nature of Islam then meandered on to one of his pet themes: falling Western fertility rates. The Cardinal is right up there with Pete Costello in the get-breeding stakes. And too much contraception in the West is somehow linked to pagan global warmingists. Try these two paragraphs:

Faith ensures a future. As an illustration of the literal truth of this, consider Russia and Yemen. Look also at the different birth rates in the red and blue states in the last presidential election in the U.S.A. In 1950 Russia, which suffered one of the most extreme forms of forced secularisation under the Communists, had about 103 million people. Despite the devastation of wars and revolution the population was still young and growing. Yemen, a Muslim country, had only 4.3 million people. By 2000 fertility was in radical decline in Russia, but because of past momentum the population stood at 145 million. Yemen had maintained a fertility rate of 7.6 over the previous 50 years and now had 18.3 million people. Median level United Nations forecasts suggest that even with fertility rates increasing by 50 per cent in Russia over the next fifty years, its population will be about 104 million in 2050—a loss of 40 million people. It will also be an elderly population. The same forecasts suggest that even if Yemen's fertility rate falls 50 per cent to 3.35, by 2050 it will be about the same size as Russia — 102 million — and overwhelmingly young.

The situation of the United States and Australia is not as dire as this, although there is no cause for complacency. It is not just a question of having more children, but of rediscovering reasons to trust in the future. Some of the hysteric and extreme claims about global warming are also a symptom of pagan emptiness, of Western fear when confronted by the immense and basically uncontrollable forces of nature. Belief in a benign God who is master of the universe has a steadying psychological effect, although it is no guarantee of Utopia, no guarantee that the continuing climate and geographic changes will be benign. In the past pagans sacrificed animals and even humans in vain attempts to placate capricious and cruel gods. Today they demand a reduction in carbon dioxide emissions.

But maybe we're not meant to take any of it literally.

While I don't claim to be an expert on the Bible, and I've never read the Koran, I would imagine that each of them (and the Torah as well, while I'm sticking the boot into Abrahamic superstitions) advocates a schizophrenic mix of violence (towards non-believers) and tolerance (towards all people). While some people don't seem to have much trouble making their religion a positive thing by ignoring the less savoury bits of their sacred texts, its a shame some religious leaders feel the need to behave like the baser sort of politician - we've got enough of those already.

And what's with the pagan / human sacrifice nonsense ? If you look at the region with the greatest awareness of global warming - Europe - most of them are atheists, not pagans (who are probably far fewer in number than the remnant European Catholics).

The bit where he feels the need to compare the relative populations of Russia and Yemen seems pretty racist to me I might add - who cares which country has the greater population growth ? Maybe if he took a scientific approach to resource supply constraints (not to mention geopolitics) he might realise that the short term population trends in either country won't continue - if the Yemenis maintain the religious fundamentalist's approach to breeding they'll be meeting a sticky Malthusian end one day, while Russia's enormous resource wealth (along with the large pile of nuclear weapons needed to defend it) and static population (partly courtesy of the Soviet economic collapse) means they likely face a bright future. So Georgie boy can probably stop worrying his purple little head about hordes of brown religious competitors swamping the planet...

Pell's ideological twin, Mahmoud Ahmadinejad, made quite a stir this week with his personal letter to George Bush. While I tend to feel a bit sorry for Iran, as the various world power blocs use a variety of tactics to try and control access to Iran's energy reserves, I find the combination of religion and politics to be completely toxic - its one of the things I most dislike about Bush and the religious right in the US in fact. Steve at Deconsumption points to the letter and various pieces of analysis. Resource Investor's Peak Oil Passnotes examines the Iran situation :

Firstly, it does not seem a good idea to write an 18-page letter to President Bush. He is not known as one of the world’s most patient or well-read men. Secondly, it would be a good idea to write something that did not sound like the babblings of an angry religious student trying to sound reasonable.

He was conciliatory on September 11th. He made reasonable points about Guantanamo Bay. In fact much of his letter could have been written by a left wing Republican congressperson. He did not like poverty. But perhaps the most interesting thing he had to say was this:

“Is not scientific research and development one of the basic rights of nations?” he asked. “You are familiar with history. Aside from the Middle Ages, in what other point in history has scientific and technical progress been a crime? Can the possibility of scientific achievements being utilised for military purposes be reason enough to oppose science and technology altogether? If such a supposition is true, then all scientific disciplines, including physics, chemistry, mathematics, medicine, engineering, etc. must be opposed.”

It is undoubtedly a good point. But in 18 pages it was basically the only original thing he had to say. Otherwise the letter was interesting, mainly to show how religion should be taken in small doses.

Because of course we all know that the war in Iraq and the pressure on Iran right now is all about oil and gas. Yes, let us say 10% is about religious hatred and strategic geography. But the main focus is energy.

So let us do away with the shadow show that infects current political debate. The fact is that the only reason great power, of any sort, is interested in the entire region is because of oil. Or as Paul Wolfowitz put it a region “swimming in a sea of oil.” The idea that ‘the Iraq war was about oil’ simply does not do the subject justice.

It just so happens that right now the only country able to project its great power onto the region is really the United States. Russia and China can try and stick their toes in, and they do, but the U.S. has troops all over the region. And they are not coming home.

From Djibouti to Kazakhstan, to Saudi, to Iraq, to Jordan, to Turkey, to Qatar, to Kuwait, to Oman and more, America dominates the region. None of the above countries are in any way democratic. We all know the score; they are protecting oil and gas. So, if we can take President Ahmadinejad’s letter a bit more at face value, why is energy bound up with violence?

After all this week troops died, Iraqis died, Chadians died, an American oil company manager was killed in Nigeria by a motorbike assassin and Somalia erupted into fresh, serious, violence just as mediations over its oil and gas potential were being prepared. Oil is power and unless we close our eyes to history, power is violent.

With this little round of death came fresh highs for the oil indexes. Futures contracts bumped up to $75.35, the highest they have ever been. The Nymex and Brent prices leapt back up, all this despite the very real possibility of long liquidation – the fall in prices associated with herd mentality at the end of a major bull run. Do not be surprised to see prices fall back under $70 soon.

So this little bit of violence made some people somewhere a good deal of cash. It is not their fault, they will most likely be good at their job; we all need energy, they interpret the facts and they trade on them.

Then do we really blame the soldiers on the ground for the deaths? Or the insurgents for fighting on their own soil? Or even the Somalians who want to storm the capital to control their own power, even if it for their own personal benefit. Hell, even the guy on the motorbike most likely thought he had a just cause.

It might sound bleak, but so many of the basic reasons why oil and gas prices are doing what they do is about politics, violence and belief; belief in one’s own inalienable right to kill for power, for ‘interests.’ Because not only is scientific progress a means of power the results of scientific progress - such as one of its greatest achievements, the internal combustion engine - then become excuses for power to create more violence.

It’s enough to make you turn to religion.

Moving back from religious fervour to the oil business, Woodside have announced they will be resurrecting their expensive search for salvation in the Great Australian Bight.

Woodside is set to return to the Great Australian Bight to hunt for what might be Australia's last new oil province. An exploration well named Springboard is planned for 2007 and follows the drilling of the Gnarlyknot prospect several years ago. That well cost more than $40 million but came up dry.

The bight is considered the last region capable of yielding the 200 million to 300 million-barrel oilfields that Australia needs to find if it is to maintain current levels of oil sufficiency.

The Townsville Trough, 100 kilometres from the Great Barrier Reef, is the only other new frontier for oil but the Federal Government has excluded the industry from the region because of environmental concerns.

Woodside plans to attract a partner to share the cost of drilling the high-risk/high-reward Springboard prospect, which is a different type of structure from that drilled at Gnarlyknot.

Ahead of the return to the bight, Woodside will later this year drill a $US70 million ($91 million) well offshore from East Africa's Kenya, which will be one of the most expensive wells ever drilled by an Australian company. Kenya is also a frontier play. Woodside's director of exploration and new ventures, Agu Kantsler, said preliminary work had identified "some very large structures" and the company was pleasantly surprised by the number of targets. The well is scheduled to be drilled in November or December.

Dr Kantsler also said results from Woodside's first well in Libya should be available next week. The target size in the group's campaign in the country ranges from 20 million to 50 million barrels.

Separately, Santos has exercised its pre-emptive right to acquire Woodside's interest in the Kipper gas project in Bass Strait for an estimated $40 million to $50 million. The acquisition increased Santos's interest from 14 to 35 per cent and follows the recent offer by the Victorian Government of a production licence for the ExxonMobil/BHP Billiton-controlled project. Kipper contains 620 billion cubic feet of recoverable gas and 30 million barrels of light oil and LPG. First production is expected in 2009.

Woodside are also in the press for less positive reasons, with further headaches from their Mauritanian venture.

Woodside Petroleum has strongly rejected any suggestion that it had been involved in corrupt practices in the West African nation of Mauritania, home to its new $900 million Chinguetti oil project.

Australian Federal Police yesterday confirmed that it was "evaluating" the corruption claims, on referral from the Department of Justice and Customs. It would not make further comment on the corruption claims, believed to have been made by the Greens senator from Tasmania, Christine Milne.

BHP's Typhoon platform in the Gulf of Mexico - trashed by hurricane Rita last year - has been declared unsalvageable. US taxpayers will be glad to know that it has been donated to them so it can be turned into an artificial reef.

When Hurricane Rita tore through the Gulf, Typhoon was ripped from its mooring and turned upside down before drifting about 130 kilometres. There was speculation that another rig collided with it but this has not been confirmed.

Typhoon had been producing about 20,000 barrels of oil per day, which was split 50/50 between BHP Billiton and Chevron. The mature field's output had halved since its start-up in 2001, so many analysts questioned whether rebuilding the platform was worth the cost. At that time, the companies expected it to produce oil for five to eight years.

The petroleum industry magazine Upstream said Chevron and BHP explored the possibility of salvaging the hull section of the unit, but a plan to cut it from the deck section and bring it ashore proved too costly and dangerous.

Chevron and BHP would like to resume production from the field if possible. Upstream said Chevron had not ruled out the use of a temporary production facility or connecting the Typhoon field's subsea wells to other nearby infrastructure to restart production.

ROC Oil had a bumper week (much to my dismay, as I'm not holding any at present), following news of a discovery offshore China.

Shares in Roc Oil surged almost 17 per cent yesterday after the emerging producer reported a "potentially significant" oil discovery off the coast of China. Roc Oil said preliminary analysis of the exploration well in the Beibu Gulf showed the majority of the oil-bearing sands surveyed displayed "good reservoir quality".

Shares in the Sydney-based explorer and producer have soared almost 28 per cent since it said on Friday that the prospect could contain a "few to many" tens of millions of barrels of oil.

The explosion of a fuel pipeline in Nigeria is getting plenty of attention this weekend - TOD used the opportunity to point to some good articles on Nigeria from themselves and John Robb.

Up to 200 people were burnt to death in Nigeria when an oil pipeline exploded on the outskirts of Lagos after thieves tapped into it to steal fuel. The huge blast left about 100 blackened, unrecognisable corpses strewn across a beach where young men were siphoning fuel into jerry cans for sale on the black market.

The explosion burnt everything within a 20-metre radius. Only grey skulls and bones, incinerated to near powder, remained of the five people closest to the pipeline, which had been dug out of the sand and bore marks of drilling.

Burned corpses were strewn on the water's edge a few metres away, where the golden sand was still steaming hot in the afternoon. Other bodies, charred and bloated, floated in the water, less than two km from Lagos city centre by boat.

"You can see the corpses. Some are burnt to ash. Others are remnants ... we estimate 150 to 200 people died," Lagos State Police Commissioner Emmanuel Adebayo said at the scene.

Theft of petrol and crude oil from pipelines is common in Nigeria, Africa's top oil producer where the vast majority of people live in poverty. "This is caused by hunger and greed. If you've got no job and you're hungry you take advantage of anything to feed your family. Anyone who takes this kind of risk is desperate," said Olanrewaju Saka-Shenayon, a Lagos State government official.

The pipeline, which belongs to state-run Nigerian National Petroleum Corporation, runs just under the surface of Inagbe Beach, a stretch of sand on one of many islands that dot the Atlantic coast around Lagos. It carries petrol from a large tanker jetty to a distribution depot inland.

The supply of natural gas to the US seems to have recovered rather well if this report is to be believed, in spite of some of the panicky pronouncements in the wake of hurricane Katrina last year. Probably best to see how this years hurricane season turns out before getting too bearish on gas prices though...

Natural gas futures declined to their lowest level in almost a year on Thursday amid soaring inventories of the mostly domestic fuel used to heat homes and produce electricity.

Analysts said the price of natural gas could fall even further in the months ahead, given relatively weak demand and expectations of rising supplies, though they cautioned that production in the Gulf of Mexico remains hindered by damage from last year's powerful hurricanes Katrina and Rita.

"Unless we have a repeat of last summer's hurricane season, we're going to have so much (natural) gas in storage by September that we won't have anywhere to put it," said Daniel Lippe of Petral Worldwide Consulting in Houston.

Meantime, oil prices fell but finished the week roughly $US2 a barrel higher as traders' concerns about geopolitical threats and refinery snags trumped evidence of rising supplies and forecasts calling for weakening global demand.

Crude futures dipped toward $US72 a barrel on Friday after the International Energy Agency reduced its 2006 world oil demand forecast. Earlier in the week, the US Department of Energy said domestic petrol supplies increased for the second straight week.

Still, oil prices are about 48 per cent higher than a year ago, a reflection of the market's fear about real and possible output disruptions at a time when the world's supply cushion is perilously thin.

Only Saudi Arabia has any spare production capacity to speak of, analysts say, but it is less than two per cent of daily global demand of almost 85 million barrels and not the high quality crude that refiners prefer.

In Nigeria, violence has curtailed output for months by roughly a half-million barrels per day. And in the Gulf of Mexico, more than 300,000 barrels per day remains shut as a result of damage from last summer's hurricane season.

But perhaps the biggest supply related worry is, for now, a theoretical one. Iran, OPEC's second largest producer, refuses to give up its uranium enrichment ambitions and the UN Security Council has the power to impose sanctions.

Analysts fear Iran could retaliate by withholding oil from the market, even though the country's oil minister has repeatedly said this would not occur.

If you enjoy a good peak oil graph or two, Khebab's "Graphoilogy" is the place to go. This week he took a look at Norway.







Elsewhere in Scandinavia, Sweden is demonstrating to the rest of the world how sensible adults go about dealing with the peak oil issue (not to mention global warming). If only more countries still had functioning political systems that enabled this sort of positive action to be taken without waiting for some sort of market disruption to toll the bell for action...

Sustainable development is the overall goal of Swedish Government policy. This means that all political decisions must take into consideration long-term economic, social and environmental consequences. I would like to give you a picture of why and how a small country could try to act in this global world.

In the west, we all live in economies that are heavily dependent on oil. We use oil for transport, for heating and for electricity. But oil is not an endless resource. The price of oil has actually tripled since 1996! Furthermore, the use of fossil fuels is contributing to global warming - the most serious environmental hazard of our time and already a fact. To add to that, the World Bank last week reported that as a result of the increase in oil prices over the past few months, poverty in a number of already poor countries has increased by 4-7 per cent. We act as though we are the last generation on earth - and we leave nothing to those who come next.

Our dependence on oil also has implications for security of supply as well as security policy. Many international conflicts today revolve around energy issues. As we know, oil reserves are not distributed equally around the world. Being able to rely on domestic and sustainable energy would also be beneficial in terms of security policy.

In light of all these factors, the Swedish Government has set a new policy target: the creation of the conditions necessary to break Sweden´s dependence on oil by 2020. And there is, indeed, an increased sense of urgency. If we prepare now, the transition to a sustainable energy system can be smooth and cost-efficient. If we wait until we are forced by circumstances, the transition may be costly and disruptive. No country can escape from this transition; to act sooner or act later are the only options.