Entering the Tough Oil Era  

Michael Klare is back with an update on the world of energy (in)security and peak oil at TomDispatch - "The New Energy Pessimism".

When "peak oil" theory was first widely publicized in such path breaking books as Kenneth Deffeyes' Hubbert's Peak (2001), Richard Heinberg's The Party's Over (2002), David Goodstein's Out of Gas (2004), and Paul Robert's The End of Oil (2004), energy industry officials and their government associates largely ridiculed the notion. An imminent peak -- and subsequent decline -- in global petroleum output was derided as crackpot science with little geological foundation. "Based on [our] analysis," the U.S. Department of Energy confidently asserted in 2004, "[we] would expect conventional oil to peak closer to the middle than to the beginning of the 21st century."

Recently, however, a spate of high-level government and industry reports have begun to suggest that the original peak-oil theorists were far closer to the grim reality of global-oil availability than industry analysts were willing to admit. Industry optimism regarding long-term energy-supply prospects, these official reports indicate, has now given way to a deep-seated pessimism, even in the biggest of Big Oil corporate headquarters.

The change in outlook is perhaps best suggested by a July 27 article in the Wall Street Journal headlined, "Oil Profits Show Sign of Aging." Although reporting staggering second-quarter profits for oil giants Exxon Mobil and Royal Dutch Shell -- $10.3 billion for the former, $8.7 billion for the latter -- the Journal sadly noted that investors are bracing for disappointing results in future quarters as the cost of new production rises and output at older fields declines. "All the oil companies are struggling to grow production," explained Peter Hitchens, an analyst at the Teather and Greenwood brokerage house. "[Yet] it's becoming more and more difficult to bring projects in on time and on budget."

To appreciate the nature of Big Oil's dilemma, peak-oil theory must be briefly revisited. As originally formulated by petroleum geologist M. King Hubbert in the 1950s, the concept holds that worldwide oil production will rise until approximately half of the world's original petroleum inheritance has been exhausted; once this point is reached, daily output will hit a peak and begin an irreversible decline. Hubbert's successors, including professor emeritus Kenneth Deffeyes of Princeton, contend that we have now consumed just about half the original supply and so are at, or very near, the peak-production moment predicted by Hubbert.

Since the concept burst into public consciousness several years ago, its proponents and critics have largely argued over whether or not we have reached maximum worldwide petroleum output. In a way, this is a moot argument, because the numbers involved in conventional oil output have increasingly been obscured by oil derived from "unconventional" sources -- deep-offshore fields, tar sands, and natural-gas liquids, for example -- that are being blended into petroleum feedstocks used to make gasoline and other fuels. In recent years, this has made the calculation of petroleum supplies ever more complicated. As a result, it may be years more before we can be certain of the exact timing of the global peak-oil moment.

On Tap: The Tough-Oil Era

There is, however, a second aspect to peak-oil theory, which is no less relevant when it comes to the global-supply picture -- one that is far easier to detect and assess today. Peak-oil theorists have long contended that the first half of the world's oil to be extracted and consumed will be the easy half. They are referring, of course, to the oil that's found on shore or near to shore; oil close to the surface and concentrated in large reservoirs; oil produced in friendly, safe, and welcoming places.

The other half -- what (if they are right) is left of the world's petroleum supply -- is the tough oil. They mean oil that's buried far offshore or deep underground; oil scattered in small, hard-to-find reservoirs; oil that must be obtained from unfriendly, politically dangerous, or hazardous places. An oil investor's eye-view of our energy planet today quickly reveals that we already seem to be entering the tough-oil era. This explains the growing pessimism among industry analysts as well as certain changes in behavior in the energy marketplace.

In but one sign of the new reality, the price of benchmark U.S. light, sweet crude oil for next-month delivery soared to new highs on July 31, topping the previous record for intraday trading of $77.03 per barrel set in July 2006. Some observers are predicting that a price of $80 per barrel is just around the corner; while John Kildruff, a perfectly sober analyst at futures broker Man Financial, told Bloomberg.com, "We're only a headline of significance away from $100 oil." New disruptions in Nigerian or Iraqi supplies, or a U.S. military strike against Iran, he explained, could trigger such a price increase in the energy equivalent of a nano-second.

A signal of another sort was provided by the government of Kazakhstan in oil-rich Central Asia on August 7. It warned the private operators of the giant offshore Kashagan oil project -- in the Kazakh sector of the Caspian Sea -- to cut costs and speed the onset of production or face a possible government takeover. In an interview, Prime Minister Karim Masimov said threateningly: "We are very disappointed with the execution of this project. If the operator can't resolve these problems, then we don't exclude their possible replacement."

Kashagan, it must be borne in mind, is not just any oil project: it is the largest field to be developed anywhere in the world since the discovery of Alaska's Prudhoe Bay some 40 years ago. With estimated oil reserves of 9-13 billion barrels, it is crucial to the hopes of its principal developers -- Exxon, ConocoPhillips, Shell, Total (of France), and Eni (of Italy) -- to increase their output in the years ahead. Consistent with the "tough oil" aspect of peak-oil theory, Kashagan is, however, proving dauntingly difficult to turn into a successful font of petroleum. The oil reservoir itself is buried beneath high-pressure strata of gas, making its extraction exceedingly tricky, and it contains abnormally high levels of deadly hydrogen sulfide; moreover, the entire field is located in a shallow area of the Caspian Sea that freezes over for five months of the year and is the breeding ground for rare seals and beluga sturgeon. ...

Andrew Leonard at Salon has a post on the entirely foreseeable problems facing the tar sands industry in Canada - "Blaming labor for peak oil problems".

A labor shortage is "wracking" the province of Alberta, Macleans tell us, brought on by the mad rush to exploit the vast reserves of petroleum locked in the fabled oil sands of Canada's Wild West. The jobless rate in Alberta is a "historically low" 3.4 percent even with net inward migration in 2006 hitting 62,000.

Labor shortages mean workers have leverage, a fact that appears to be inspiring some dismay among the oil companies operating in Alberta. In July, five trade unions authorized a strike mandate, setting the stage for a showdown in which oil sands workers demand a larger piece of oil sands profits.

As Macleans describes it, labor's demands are just one more factor making life hard for oil companies. The price of steel, driven by Chinese demand, is also surging, and government officials are making noises about reducing some of the incentives that originally aimed to encourage investment in the region. Just three years ago, it cost $35 dollars to extract a barrel of oil from the tar pits. Now the price is $50.

Higher material costs, inflation, labor crunches, uncertain government policy -- while none alone breaks the bank -- are in aggregate damaging, narrowing profit margins to the point where companies will pass on future endeavors. "Expected rates of return on these projects for the most part are probably sub-teen now," says Friesen. "When you consider cost and risk of executing a project -- that begins to become marginal." If no new projects are breaking ground in five years, the impact on Alberta's economy (and on Canada's) will devastate.

What's missing from this picture?

Could it be the lack of any mention of how extraordinarily energy intensive the process of extracting oil from the bitumen deposits of Alberta is? So much so that there's been talk of building nuclear power plants just to provide energy for the oil sands industrial complex. Or what about the problem that as the low hanging fruit -- the deposits that are reasonably close to the surface and accessible -- gets picked, the cost of going after the harder-to-reach stuff explodes?

And not one word about the immense environmental costs of oil sands extraction, which usually involve the wholesale destruction of vast tracts of land, along with the diversion of huge quantities of water. (And we won't even bother to complain about the failure to internalize the long term costs of the greenhouse gas emissions produced by Alberta's heavy industrial activity. That would just be silly.) ...

The BBC has a look at the latest SCO meeting in China and their talk about the Asian energy grid. If the western world wasn't run by a bunch of militarist half-wits (otherwise known as Bush, Blair and Howard) we'd be well on our way to avoiding oil dependency instead of finding ourselves lodged in a slowly closing vise. Clowns.

Greater co-operation over energy and security have dominated talks between the presidents of China and Russia and their Central Asian counterparts. Kazakh President Nursultan Nazarbayev told the Shanghai Co-operation Organisation (SCO) meeting in Bishkek that it should form an energy club. Guest of honour, Iranian President Mahmoud Ahmadinejad, used the occasion to hit out at US missile defence plans.

The SCO is increasingly seen by some as a way to stem Western influence. Spanning a strategically important region rich in oil and gas reserves, it is gradually gaining clout and influence, correspondents say.

Mr Nazarbayev said the region's Soviet-era network of gas and oil pipelines could form the basis for an Asian energy market - adding that Kazakhstan had already drawn up a draft strategy for an SCO energy club. "We think that a mechanism of meetings of energy ministers from the SCO member and observer states should function in the context of the idea of an energy club," he told the summit. "This, in our view, might become one of the main elements of an Asian energy strategy."

He also spoke of the importance of increased co-operation between the SCO and the European Union, particularly over a trans-continental transport corridor "which could be a new manifestation of the traditions of the Great Silk Road".

Meanwhile the Australian government is trying hard to sell uranium to India (a non-signer of the NPT) - although the left wing parties in the Indian government are resisting strongly - and also to Russia (don't the Russians have lots of their own uranium ? or did Kazahkstan end up most of it ?)

THE Howard Government has set the scene for a massive expansion of Australia's uranium industry, with the sealing last night of a controversial deal for exports to India and talks nearing completion for a new pact with Russia.

Increasing the focus on the nuclear issue before the federal election, Prime Minister John Howard announced the sale of uranium to India under "strict conditions", which he discussed in a phone conversation last night with his Indian counterpart, Manmohan Singh.

At the same time, Government officials confirmed that a new agreement to sell uranium to Russia could be signed next month during the visit of President Vladimir Putin to Australia. The deal will pave the way for Australian uranium to fuel Russian reactors for the first time. ...

But the deal with India has drawn a strong rebuke from the leading nuclear non-proliferation research and advocacy group, the Arms Control Association, which has accused Australia of "flagrantly contradicting" its international stand on nuclear non-proliferation.

Labor also stepped up political pressure on the Government over the India deal and its ambitions to introduce nuclear power in Australia, asking why it was supporting plebiscites on Queensland council amalgamations but not on the location of future reactors. Mr Howard said the location of reactors would be determined by commercial decisions in the future.

"The Prime Minister has now put Australians on notice that their wishes will be ignored," Labor environment spokesman Peter Garrett said.

The planned deal with Russia follows negotiations in Moscow in May. Under a 1990 agreement, Russia has processed Australian uranium for other countries but not for its own use.

Bruce Sterling at Beyond The Beyond has a look at The Chinese Climate Crisis

(((Job One: burn less Chinese coal. Oh well, that's a look-out for some other bureau.)))


Link: China sets plan to cope with disasters caused by global warming.


BEIJING, Aug. 14 (Xinhua) -- Victims of China's increasingly frequent natural disasters will be guaranteed medical aid and relief supplies within 24 hours under a new government plan released on Tuesday.

The 11th five-year plan (2006-2010) for disaster relief outlines a range of measures to improve the natural disaster response system to cope with the "more frequent" calamities caused by global warming.

"It must be guaranteed that all people who are affected by disasters have access to enough food, drinking water, clothes, shelter and medical aid within 24 hours," it says. (((Eat your heart out, FEMA.)))

"A variety of natural disasters have affected 300 million people, destroyed three million homes, and caused 20 million yuan of direct economic losses every year to China over the past 15 years."

"With the accelerating trend of global warming, the frequency and intensity of natural disasters will both increase," said a senior official with the National Disaster Reduction Commission.

"Natural disasters have become an important factor restraining China's economic and social development," he said.

Under the plan, the government will establish a coordination platform to share information on natural disasters, and national surveillance, early-warning, emergency response systems will be established and improved.

The plan also sets a target for economic loss control: "Direct economic losses caused by natural disasters should be contained at less than 1.5 percent of the country's annual GDP." (((One wonders how exactly the Chinese plan to ration the natural disasters.)))

The document said that global warming could cause more frequent typhoons, floods, rock-mud flows, droughts, and heat waves. Desertification, forest fires, plant diseases and algae blooms would be more common. (((Not to mention the sky turning black over the nation's capital city.)))

More than 70 of China's cities and more than half the population were in areas susceptible to natural disasters....

The Energy Blog has a post on the rapidly growing thin film solar market.

According to a new report from NanoMarkets LC the global market for thin-film photovoltaics (TFPV) is forecast to reach $7.2 billion by 2015, compared to just over $1.0 billion today. The report states that the market is being driven by the inherent advantages of TFPV. . . . most manufacturers are ramping up production capacity and several -- including First Solar, Fuji Electric, Nanosolar, Sanyo, Uni-Solar and G24i -- are building plants with more than 100 MW in capacity.

Some of the findings of the report include:

* PV could eventually account for as much as 20 percent of the U.S. market's energy needs.
* TFPV was only five percent of the entire PV market recently , but it is expected to account for 35 percent of the photovoltaics market by 2015.
* TFPV can be manufactured using simple printing or other R2R machines. Printing TFPV has the potential for lowering capital costs by as much as 75 percent, reducing waste and increasing throughput.

ZDNet has a report noting that large amount of energy consumed by computer equipment and efforts to label greener machinery - "Energy Star rating system proposed for ICT".

Australia's ICT sector generates as much carbon dioxide as the civil aviation or steel industries, according to an ICT carbon emissions audit commissioned by the Australian Computer Society (ACS).

ICT usage by Australian businesses, the audit found, equated to 7.94 million tonnes of carbon dioxide in 2005, or 1.52 percent of total national emissions. The industry produces emits slightly less than steel production (2.3 percent of total emissions) and slightly more the civil aviation industry (0.97 percent), the audit found.

In response, the ACS advocates extending the Energy Star rating system that applies to whitegoods to ICT equipment. "When upgrading or introducing new technology, organisations should discuss energy efficiency with vendors -- many vendors have released great technology products," the report stated.

The society also recommends that IT departments rationalise servers using virtualisation technology, opt for "sleep mode" rather than the use of screen savers on inactive workstations, and use energy saving soft-phones and thin-client desktops wherever appropriate.

Alex Steffen at WorldChanging has a post on "Offshoring Emissions, Historical Carbon and Climate Imperialism".

If we want to build a bright green future, we need to know the actual nature of the problems we face. In terms of climate change, this may be less simple than some might have us believe. In the past few weeks, I've come across three concepts that illuminate unexpected angles of the climate crisis (and thus perhaps open the way to unexpected thinking about solutions).

The first is the idea that the emissions for which we're responsible -- our personal carbon footprint, say, or our city's progress towards climate neutrality -- may not tell the whole story. That's because globalization has tended to move heavy polluting industries offshore, away from Europe and North America, and to places like China and Brazil. We still consume the lion's share of the goods these nations manufacture, but the carbon is emitted there, not here, while our exports are largely things -- like blockbuster films and financial services -- whose carbon footprints are comparatively small.

...Historic carbon demands attention. Historic carbon -- the carbon already emitted, often long ago, not the carbon being produced today -- has filled our atmosphere with the current concentration of roughly 383 ppm of CO2. Over the last century, the United States produced over 30% of all the CO2 emitted worldwide (because of our meat-focused diets, our share of all emissions would actually be higher). Our wealth, then, is a form of historically embedded carbon.

The implications here can get a little staggering. For one thing, it means that even if we've greened our lifestyles -- eating our veggies, driving our hybrids, lighting our rooms with CFLs -- these lifestyles are still made possible by using vast stores of embedded carbon. Everything around us is like a landscape of frozen emissions.

Peter at Karavans has a (rare) post on the "courthouse in a gym bag" emergency kit. These sorts of things seem to be quite popular these days (I'll forbear from my usual comments about fear mongering governments) so its not a bad niche to market to.

US Courts are starting to utilize solar power as a backup energy source in the event of an emergency. When an emergency happens, preparedness can save the day. That’s been the AO Office of Emergency Preparedness mantra to courts ever since September 11, 2001. Providing key decision makers with “go bags” is one way to ready them to dash out in an emergency, well prepared with the grab of one bag. Many courts have chosen to prepare with this “go bag” approach.

At the U.S. District Court, they call their readiness kit the “courthouse in a gym bag”. In it are:

- A laptop set up for instant access to the Internet, to the judiciary’s virtual private network (VPN), and data voice-over IP;
- A secure thumb drive with all key data needed in an emergency, accessible only with the fingerprint of the authorized users—usually the thumb drive user, the court’s COOP manager, and an IT manager;
- A long-lasting solar-charged battery pack;
- A car charger device;
- An adapter that allows anything with a plug to run off the power pack or car as power supply;
- A digital recorder for judges to record key information during emergencies.

“How could you provide people with these resources as an emergency or disaster strikes?” asks Melissa Muir of Washington-Western. “The answer is, you couldn’t, not unless you’re always at the ready.

Links:

* ABC - Farmers, green groups unite to fight climate change
* The Sietch - New Survey Shows Massive Support For Cape Wind, Solar Power, And Efficiency Standards
* Technology Review - Silicon Nanocrystals for Superefficient Solar Cells
* Technology Review - 2007 Innovator Of The Year
* Technology Review - TR 35: Kristala Jones Prather
* Wall Street Journal - Protecting Iraq's Oil
* Short News - New Oil Law Will Strip Iraq of Its Most Vital Resource
* Robert Rapier - Big Oil And Iraq
* SMH - If asked about troubled waters, anything but oil. Nelson has his training wheels back on after his recent brush with honesty.
* KOMOTV - Imperium Renewables Biodiesel plant opening in Grays Harbor County
* Robert Rapier - Biodiesel's Green Diesel Nightmare
* Bruno Giussani - Ed Burtynsky's beautifully monstrous "Manufactured landscapes"
* Bloomberg - Hedge-Fund Guy Atones for His Subprime Bond Sins
* Cryptogon - Wall Street Pulls Off Stunning, Late Comeback
* Energy Bulletin - Deep Thinking
* The Nation - Kucinich Sounds the Alarm
* The New Yorker - Philip K Dick: Blows Against The Empire
* The Onion - War Czar Considering Draft
* Wonkette - Rudy Wants You To Forget That His Kids Hate Him & Are Voting For Obama
* Cryptogon - U.S. to Expand Domestic Use of Spy Satellites
* Rigorous Intuition - No Need To Be Nervous