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Thread: Energy Security

  1. #621
    Council Member Firn's Avatar
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    After the oil rout in the last months it might be useful to return to this topic. The oil market has of course known far more dramatic movement and swings, and I have no idea what the oil price will be in a couple of months or years. Sounds obvious, but it is good to remind others and oneself of it.

    Extraction costs from the Business insider are handy to put the current prices into perspective. Handle as always with care...



    Another table by the (American) EIA.



    The higher oil prices of this year mean that for most countries the budgets should be fine on that side. Things will be of course different if it prices stay so low for a longer period. There are of course the well-know feedback loops with investment which kick in but with so many variables it is impossible to say what impact it will have when.

    What is Fiscal Breakeven for Oil States? is a blog entry which contains many links looking into the problem. I have actually posted quite a few of the same graphics over the months...

    As stated before, ideally not-so-badly performing countries like the USA would use this opportunity to somewhat increase taxes on fossil energy consumption to curb global warming and increase it's longer term energy security. Some semi-flexible indexing might work. Won't happen of course...
    Last edited by Firn; 10-17-2014 at 03:01 PM.
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    Default ND's concentrated oil production

    Thanks for your post, Firn.

    We've seen posts all week heralding a return to cheaper oil, mocking peak oil concerns, etc. But many people seem unaware of the fact that conventional oil has peaked and that the increased production that we've enjoyed for the last 8 years has come almost entirely from two North American sources: US tight oil and Canadian bitumen.
    Both sources are very expensive, as your graph illustrates, and will be scaled back if they face sustained unprofitable prices.

    Yesterday Ron Patterson posted an examination of ND oil production by county. The degree to which ND's production depends on the sweet spots in two counties is quite remarkable: McKenzie and Mountrail produce about 60% (around 666,000 bpd) of ND's oil:
    http://peakoilbarrel.com/bakken-oil-production-county/

    Meanwhile, EIA continues to forecast a peak in US tight oil (and therefore US overall production) within the next few years.

    This thread has been running for over 5 years, during which time we've seen several ups and downs re. oil & gas. Five years from now I expect that the prevailing view will be that concerns over long-term global oil supply (and climate change, the flip side of the energy coin) were well-founded.

  3. #623
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    I broadly agree with you and history shows indeed that oil prices swing indeed a great deal. The low prices of today have often been an important factor in the high prices in the next future.

    I think it is always important to keep the basics firmly in mind. Among them is the simple fact that never before was so much oil consumed:



    From the Climate Insider.



    Puts the economic rise of Asia in an energy perspective. The European decline, yes to a (small) degree through increased efficiency, is almost as stunning. The last graphs are from Energy Trend Insider




    Seemingly ever increasing demand for finite ressources will make sure that at some stage we will run out even if technology and capital allocated due to high-enough prices will push the bounderies of 'finite'.
    Last edited by Firn; 10-20-2014 at 06:40 PM.
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  4. #624
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    As I don't think that technology can keep the costs of crude at the current levels in the long run, putting also in the long run something similar to a floor under it's price, it will continue to get substituted. Arguably the pace should increase with far stronger competition from alternatives, some of which seem able to continue to benefit from technological progress. Of course how it plays out depends on a lot of variables and the specific dynamics of the demand and supply. Those soft restraints and competition should play a bigger role in the near future than the hard limits, at least in my humble opinion.



    The upwards trend of coal is quite interesting after it's consistent fall over more then a decade. Crude is also down, but far less so in percentage terms. NG has been clearly replacing the two other fossil fuels to a good degree. The rise of renewables is indeed very large.
    Last edited by Firn; 10-21-2014 at 04:32 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

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    Default Hughes' report re. US oil & gas supply

    David Hughes is a veteran geoscientist, now retired from the Geological Survey of Canada. He is also a meticulous researcher who carefully sources the data upon which his conclusions are made.

    This morning his latest analysis of US shale/tight oil and shale gas supply was released. "Drlling Deeper" is a massive document (315 pgs, 25 MB). Here is the Abstract (my emphasis in italics):

    Drilling Deeper reviews the twelve shale plays that account for 82% of the tight oil production and 88% of the shale gas production in the U.S. Department of Energy’s Energy Information Administration (EIA) reference case forecasts through 2040. It utilizes all available production data for the plays analyzed, and assesses historical production, well- and field-decline rates, available drilling locations, and well-quality trends for each play, as well as counties within plays. Projections of future production rates are then made based on forecast drilling rates (and, by implication, capital expenditures). Tight oil (shale oil) and shale gas production is found to be unsustainable in the medium- and longer-term at the rates forecast by the EIA, which are extremely optimistic.

    This report finds that tight oil production from major plays will peak before 2020. Barring major new discoveries on the scale of the Bakken or Eagle Ford, production will be far below the EIA’s forecast by 2040. Tight oil production from the two top plays, the Bakken and Eagle Ford, will underperform the EIA’s reference case oil recovery by 28% from 2013 to 2040, and more of this production will be front-loaded than the EIA estimates. By 2040, production rates from the Bakken and Eagle Ford will be less than a tenth of that projected by the EIA. Tight oil production forecast by the EIA from plays other than the Bakken and Eagle Ford is in most cases highly optimistic and unlikely to be realized at the medium- and long-term rates projected.

    Shale gas production from the top seven plays will also likely peak before 2020. Barring major new discoveries on the scale of the Marcellus, production will be far below the EIA’s forecast by 2040. Shale gas production from the top seven plays will underperform the EIA’s reference case forecast by 39% from 2014 to 2040, and more of this production will be front-loaded than the EIA estimates. By 2040, production rates from these plays will be about one-third that of the EIA forecast. Production from shale gas plays other than the top seven will need to be four times that estimated by the EIA in order to meet its reference case forecast.

    Over the short term, U.S. production of both shale gas and tight oil is projected to be robust—but a thorough review of production data from the major plays indicates that this will not be sustainable in the long term.
    These findings have clear implications for medium and long term supply, and hence current domestic and foreign policy discussions, which generally assume decades of U.S. oil and gas abundance.
    Last edited by davidbfpo; 10-27-2014 at 11:22 AM. Reason: Fix quote

  6. #626
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    North Korea dispatched covert commando teams to the United States in the 1990s to attack nuclear power plants and major cities in a conflict, according to a declassified Defense Intelligence Agency report.

    The DIA report, dated Sept. 13, 2004, reveals that five units of covert commandos were trained for the attacks inside the country.

    According to the report, the “Reconnaissance Bureau, North Korea, had agents in place to attack American nuclear power plants.”
    http://freebeacon.com/national-secur...uclear-plants/
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  7. #627
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    Seven Reasons Cheap Oil Can't Stop Renewables Now

    I like graphs so I had to go with that one:



    As we discussed before the often large tax burden does of course reduce the upside for the consumer. As Italian it is especially easy to note that.



    On a worldwide scale the following might be surprise some:

    Fossil-fuel subsidies outpace renewable-energy subsidies by a factor of 6 to 1. Reducing the subsidy gap is one of the cheapest ways to increase fuel efficiency and speed up the switch to cleaner energy. Expect similar moves as the rising toll of climate change pushes governments to take action.
    However it is important to keep in mind the difference in energetic output, with the renewables still being a small slice of the worldwide consumption. Still subsidies for oil are a terribly bad idea for many developing countries or producers. Perhaps the best example of the worst policy (among many others) in that regard is Venezuela.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

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    The good news are that PV is a generator for which global installation doubles in less than four years, from 1% to 32% takes only 5 doubling steps, i.e. 20 years. And there are no real bottlenecks for required materials.

    Installation and O&M are more or less low tech for PV, so no real problem for a wider distribution.

    Wind power is more tricky as installation and O&M is sometimes more on the high tech side, however, with huge potential in developed countries and some of the developing countries I see a real impact in PV and wind power.

  9. #629
    Council Member Firn's Avatar
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    Quote Originally Posted by Ulenspiegel View Post
    The good news are that PV is a generator for which global installation doubles in less than four years, from 1% to 32% takes only 5 doubling steps, i.e. 20 years. And there are no real bottlenecks for required materials.

    Installation and O&M are more or less low tech for PV, so no real problem for a wider distribution.

    Wind power is more tricky as installation and O&M is sometimes more on the high tech side, however, with huge potential in developed countries and some of the developing countries I see a real impact in PV and wind power.
    I fully agree with you and the basic logic is hard to deny. PV is booming for very good reasons, having become ever more cost-efficient per watt surprisingly quickly.




    From Bloomberg's article: California Just Had a Stunning Increase in Solar and good chunk comes from mighty Berkshire. In addition to the utility numbers 'In small-scale solar, capacity for another 2.3 gigawatts has been installed'. Not bad at all...


    Last edited by Firn; 03-26-2015 at 07:17 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

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  10. #630
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    An interesting article about oil storage in the US gets filled up at a rapid pace.

    Traders’ attempts to use every cubic inch of storage underscores how desperate the market has become to stow oil. Supplies at Cushing reached a record 56.3 million barrels as of March 20, Energy Information Administration data show. Nationwide, stockpiles at 466.7 million are the highest since 1930
    Who saw that coming even one year ago?
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  11. #631
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    X-rays Reveal Secret Life of Batteries offers amazing pictures and graphs on some processes inside experimental batteries. It is a public lecture and thus explained in a simplistic but cohesive and clear manner.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

  12. #632
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    China’s Fuel Demand to Peak Sooner Than Oil Giants Expect makes for interesting reading. China dominated demand growth across pretty much all the commodities so a different path will be felt around the world.

    Sinopec has offered a view of the country that should serve as a reality check to any oil bull. For diesel, the fuel that most closely tracks economic growth, the peak in China’s demand is just two years away, in 2017, according to Sinopec Chairman Fu Chengyu, who gave his outlook on a little reported March 23 conference call. The high point in gasoline sales is likely to come in about a decade, he said, and the company is already preparing for the day when selling fuel is what he called a “non-core” activity.
    It seems a little to bullish (or bearish depending on your perspective) but it is well worth to think about it.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

    General Ludwig Beck (1880-1944);
    Speech at the Kriegsakademie, 1935

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    Quote Originally Posted by Firn View Post
    China’s Fuel Demand to Peak Sooner Than Oil Giants Expect makes for interesting reading. China dominated demand growth across pretty much all the commodities so a different path will be felt around the world.



    It seems a little to bullish (or bearish depending on your perspective) but it is well worth to think about it.
    I wonder if this analysis is based on China's slowing economic growth, or the growing efficiency of alternative fuels?

  14. #634
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    Good questions which are usually not in short supply regarding China...

    Sinopec has offered a view of the country that should serve as a reality check to any oil bull. For diesel, the fuel that most closely tracks economic growth, the peak in China’s demand is just two years away, in 2017, according to Sinopec Chairman Fu Chengyu, who gave his outlook on a little reported March 23 conference call. The high point in gasoline sales is likely to come in about a decade, he said, and the company is already preparing for the day when selling fuel is what he called a “non-core” activity.
    Peak diesel demand just two years ago is a very bold prediction. A quick look at the commercial vehicle sales have roughly doubled within 10 years on a 3Y basis. I don't know about the longevity of Chinese trucks and the typical turnover but the overall fleet size should be still increasing greatly even if annual sales are down. Alternatives to diesel play only a minor role so, all things equal, we would have to see a large drop in miles per vehicle (or/and a lot of vehicle exports to Africa ) if demand should peak in 2017



    The current trend of diesel and ex-diesel oil consumption...

    The China Commercial Vehicle Outlook is dated but gives plenty of details on the market (among them the officially proposed vehicle duration)A recent global overview provides some background. There might have been some overinvestment due to a too bullish projection of the economy, some impact by Euro IV, more efficient fleet management. lots of other factors and so forth but personally it seems unlikey that we will see no increase in consumption over 2017 unless there is a might Chinese crash.

    China invests massively in renewables but China is massive and the energy sector has typically a huge momentum. I will have to take a closer look at the non-diesel part later, starting most likey here.



    Yes I love graphs!
    Last edited by Firn; 04-02-2015 at 06:19 PM.
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    A massive power failure that crippled life in Turkey for almost 10 hours on Tuesday highlights the threats facing electricity grids worldwide.

    Turkey’s most extensive power failure in 15 years, which left people stranded in elevators and traffic snarled, wasn’t the result of a lack of electricity. The prime minister said all possible causes -- including a cyber-attack -- were being investigated.

    While the source of the problem is still unknown, recent revelations that a 2008 oil pipeline explosion in Turkey was orchestrated via computer and the high-profile hacking last year on Sony Pictures Entertainment demonstrate the increasing ability to penetrate systems. For power grids, technology being added to make them more reliable and productive is also giving attackers an entry point into vital infrastructure.

    “Every country, including the U.S., will be looking at it to see what the vulnerabilities were and learn some lessons about protection,” said Kit Konolige, a New York-based utility analyst for Bloomberg. “An electric grid is a complex system and it’s hard to ensure that it’s defended everywhere.”

    Several foreign governments have hacked into U.S. energy, water and fuel distribution systems and might damage essential services, the National Security Agency said in November. A report by California-based cybersecurity company SentinelOne predicts that such attacks will disrupt U.S. electricity in 2015.
    http://www.bloomberg.com/news/articl...s-under-threat
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  16. #636
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    The move towards a 'smarter grid with much complex physical and digital interactions should indeed naturally greatly increase the ability to input cyber attacks.

    Water consumption outstripping water supply in the last decades has in California both impacts the energy security both directly and indirectly.

    California's drought caused a state of emergency to be declared in January 2014. Since then, the drought has worsened, and, as of April 7, 2015, 44% of the state is now classified as experiencing exceptional drought, the most intense drought category. The drought has limited the state's ability to generate electricity from its hydropower plants. For instance, the California Department of Water Resources reports that 2013-14 precipitation in the Northern Sierra, where some of California's largest hydropower plants are located, was 37% below the historical average. Precipitation in 2015 continues to be exceptionally low.


    Desalination has become an important source of water in some dry countries and areas of the world, for example Israel*, but it requires large amounts of capital to built as well as energy to operate. The latter obviously increases energy consumption per capita, making 'energy security' harder to achieve.

    A huge amount of energy is required to create enough pressure to shove the water through the membranes. But clever engineering has cut energy use of the plants in half in 20 years, as well as improving their reliability.

    Future desalination plants also have the potential to blend well with the rising percentage of renewable power on the electric grids in California and Texas. Since treated water can be stored, the plants could be dialed up at times when electricity from wind or solar power is plentiful, and later dialed down.
    All in all so far almost everything I gathered seems to support this view:

    “Our position is that seawater desalination should be the option of last resort,” said Sean Bothwell, an attorney with the California Coastkeeper Alliance, an environmental coalition that has battled California’s turn toward the technology. “We need to fully use all the sustainable supplies that we have available to us first.”
    A sensible legal framework and much better markets are among other efforts key to price water properly, especially for farming, which consumes 80% with a high ratio of especially water-thirsty crops while creating only a (very) small poportion of California's economic output.

    *Israel is arguably one of the country for which such plants make most political and economic sense for obvious reasons despite far more conservation efforts then we see in Californian agriculture. It is no surprise that a considerable amount of technological progress seems to have come from there.
    Last edited by Firn; 04-12-2015 at 09:46 AM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

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  17. #637
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    A nice Bloomberg piece about some of the trends I have been writing about in this thread.




    Long term the rapid rise of renewables is of course the far bigger story.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

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    U.A.E. Removes Fuel Subsidy a long, long overdue move as we discussed many pages ago with terrible knock-on effects.

    Gasoline is now subsidized in the U.A.E., the second-biggest Arab economy and home to about 6 percent of the world’s oil reserves. Unleaded gasoline 98 octane in the U.A.E. sells for 1.83 dirhams (50 cents) a liter, according to prices on the ministry’s website. The U.S. price of premium unleaded gasoline is $3.18 a gallon, or 84 cents a liter, according to AAA, the biggest U.S. auto group. That compares with 16 cents in Saudi Arabia, the largest OPEC producer.
    It will be wise the review it in a couple of months..

    A The Context of Fossil-Fuel Subsidies in the GCC Region and Their Impact on Renewable Energy Development offers a great deal of, well, context to the economic folly.

    By now it has been recognized that the low pricing of fossil fuels has led to a number of adverse impacts. While GCC countries have among the highest GDPs per capita in the world, the opportunity cost of selling fuels domestically at prices below international market rates and the volatility in world oil prices have started putting fiscal pressure on GCC governments. Low fuel pricing has resulted in domestic over-consumption of hydrocarbons and the absence of incentives to achieve energy efficiency in the economy. At the same time, renewable energy uptake has been impeded by a lack of competitiveness.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

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    Speech at the Kriegsakademie, 1935

  19. #639
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    i) A neat graphic about the Electric Car market:



    ii) Germany's wholesale electricity prices keep falling . Maybe something for Ulenspiegel :



    iii) Nominal oil prices agains real ones:

    Last edited by Firn; 08-25-2015 at 05:12 PM.
    ... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"

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    @Firn

    as far I understand the situation, the wholesale price of electricity is quite irrelevant for the consumers: a lower wholesale price leads to higher RE tax. Electricity will very likely cost almost the same in the next 15 years, maybe slightly more around 2023 due to more (expensive) offshore wind until 2020. Around 2030 we as consumers can expect a sharp drop of the RE payments as a lot of expensive PV falls out of the FIT.

    For energy intensive industry the situation is quite good as these guys do not pay any RE tax, i.e. the Germany energy intensive industry will improve its relative competitiveness on the global market in the years to come.

    For utilities this means that NO new conventional power plant is able to make money in a energy only market. You have to privide other services or switch to REs.

    As German and Austrian utilities have excess capacity only until 2019, I expect a higher wholesale price then. Or from a different POV: The Austrian Verbund assumes that their mothballed NG power plants are able to make money in 2019 again.

    On the other hand, the German Net Agency and some other people expect an increasing NET export of German electricity even after 2019, therefore, I may miss something. (I would expect lower net exports as more electricty is then generated from expensive NG, which not longer has the advantages coal has today.)
    Last edited by Ulenspiegel; 10-02-2015 at 07:21 AM.

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