Gas flaring at Bakken and Eagle Ford

Since the IEA presented its World Energy Outlook report of 2012 the world’s press has spread the news that the USA can become a larger oil producer than Saudi Arabia. They have also reported on increased production of shale gas. During recent years production of shale gas has increased so greatly that the price of natural gas has fallen to levels where it is no longer profitable to drill new wells. I have previously described how drilling rigs are leaving the shale gas fields. Today, the Oil&Gas Journal reported that, “Oil prices rise in mixed market but gas ‘falls off cliff’”.

Production of shale oil occurs primarily in two areas, the Bakken of Montana and North Dakota and the Eagle Ford area in Texas. Historically, some natural gas has always been produced in association with oil and from the beginning this has been burned (“flared off”). Nowadays, oil companies are trying to utilise this gas. This is good for the companies’ economies and is also good for the environment since burning natural gas forms carbon dioxide (although CO2 is a less potent greenhouse gas than natural gas [methane] itself).

IMF and resource scarcity

During the past week the future of the world economy has been discussed in Davos, Switzerland. Below, I think it is appropriate to quote Christine Lagarde, the Managing Director of the International Monetary Fund (IMF). In her speech of 23 January she presented the following viewpoint:

The burning question is this: how we can make sure that all regions grow strongly, converge rapidly, and succeed in meeting the aspirations of their people? To answer this question, we need to reflect upon some of the megatrends shaping the future. Many thought leaders are pondering this issue, including here at the World Economic Forum. I would submit the following four pivot points:
• First, a growing demand for individual empowerment, including for women, and a growing sense of a single global community.
•Second, a reallocation of political and economic power across the world. By 2025, for example, two-thirds of the world’s population will live in Asia. This can lead to greater cooperation or to greater tension and competition.
•Third, a seismic shift in demographics, as the “youth bulge” in various emerging regions rubs up against the “graying” populations elsewhere.

Total to cut US shale gas investment

Associate Editor: Total to cut US shale gas investment (http://www.ogfj.com/articles/2013/01/total-to-cut-in-us-shale-gas-investment.html)

Not long ago, supermajors, both foreign and domestic, entered into multi-million and multi-billion dollar agreements with US independents to get in on the North American shale gas boom. With deflated gas prices, it seems some companies may be looking to decrease their level of investment.

RBC Capital Markets analyst Peter Hutton reported in a note to investors Thursday that Total’s CEO Christophe de Margerie confirmed to French newspaper Le Monde that the company will decrease additional investments in US gas.

In January 2010, Total paid $800M to enter the US shale gas business—earning a 25% interest in Chesapeake Energy Corp.’s gassy Barnett Shale assets by way of a joint venture agreement.

U.S. rig count for oil and gas and future economic growth

Why is it interesting to study drilling rig statistics? The answer is that drilling rig activity indicates the future direction of the oil and gas industry.

In a short article without comments Oil&Gas Journal assert that the number of drilling platforms currently drilling for oil and gas in the USA has decreased by 12 units to 1749. Compared with the number of rigs one year ago, 2008 rigs, that is a decrease of 13%. A somewhat more detailed study shows that 51 rigs are drilling offshore, 429 rigs are drilling for gas and 1316 for oil while the rest could not be categorized. Those who are interested in the detailed statistics can visit the website of Baker Hughes Inc. http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm There one can also read that there are 601 rigs in Canada and 1253 rigs currently drilling in the rest of the world. Thus the total number of rigs currently drilling in the world is 3603 and 65% of these are in North America.

Canada’s oil sands cannot stop Peak Oil

The term “Peak Oil” was used for the first time in January 2001. It was then that Colin Campbell wrote his first newsletter for ASPO, the Association for the Study of Peak Oil and Gas. A month later the “Focus” (Brännpunkt) the Op-Ed column of Svenska Dagbladet, Sweden, published the first debate article on Peak Oil. In the debate that followed, Tommy Nordin, the then head of the Swedish Petroleum Institute (now the Swedish Petroleum and Biofuel Institute) advanced the view that we did not need to worry about Peak Oil since huge oil sand resources exist.

Fig 9.3 prod oilsand 1000

When the Global Energy Systems research group was founded 10 years ago at Uppsala University, research into Canada’s oil sands became one of our first projects. The initial scenario for the analysis was maximal production where economic conditions were not a limiting factor.

Lower output target for Iraq

Figure 3.19 Change in oil production

In the World Energy Outlook 2012 report the IEA presents its view of future crude oil production (see the figure). With decreases of over 2 million barrels per day (Mb/d) by 2035 both Russia and China have passed Peak Oil. In other nations where crude oil production has previously reached Peak Oil, the decline in their production continues. The savior in this time of need is Iraq with a projected increase in production of 5.5 Mb/d. We have previously heard that ExxonMobil wants to leave projects in southern Iraq and now Statoil is leaving West Qurna at the same time as other intended operators are writing down their production volumes by 600,000 barrels per day. Thus it is now doubtful that an increase in crude oil production of 5.5 Mb/d can be reached. The IEA states that world crude oil production - that was 70 Mb/d in 2008 - will decline to 65 Mb/d by 2035.

Norway is squeezing Russia out of European gas market

A Russian newspaper, Kommersant, is published in Russian but also has a daily English version published online. On January 17 it published an interesting article on Norwegian and Russian deliveries of natural gas to the EU, “Norway is squeezing Russia out of European gas market“. The success with shale gas in the USA has meant that gas prices there have decoupled from the price of oil and are much lower than in the EU. One reason for the higher price of gas in the EU is that the Russian delivery contract for gas to the EU is coupled to the oil price. Norway can now offer a lower price and this, together with the economic crisis in the EU has meant that Russian deliveries of gas have decreased. Another factor is that the liquefied natural gas from Snövit, that was originally intended to the shipped to the USA, must now find another buyer and the capacity to receive liquefied natural gas in Europe has increased. An additional factor may be that development of new natural gas fields in Russia is delayed which means that the gas available for export from Russia is declining.

Fracking and BBC Radio 4

A moment ago I was contacted by Simon Tulett, Business Broadcast Journalist, at BBC Radio 4. He wants me to participate in tomorrow's "Today" programme that is broadcast from 7 AM Swedish time (6 am G.T.). The theme will be "has shale gas/fracking ended the peak oil debate?" Someone from Citigroup who asserts that ”Shale oil fracking has killed Peak Oil” will also be participating in the debate. It is interesting that in recent days I have been working on a newspaper debate article on "fracking" and earlier I wrote in my blog that, The “fracking bubble” of oil optimism that is currently being inflated by the oil industry will soon “fracture”.

BBC Radio 4 on line or later

Offshore production and investments

Björn Lindahl has published an article on activities and investment on the world’s seas. (20120108 in Swedish in the edition of Svenska Dagbladet Industry [the business section of one of Sweden’s major broadsheet newspapers].) He states that 59,000 freight ships ply the world’s oceans and that the world’s shipping turns over $183 billion per year. He also asserts that only half of the fish that we eat are caught wild at sea, the rest being cultured in large cages or on land in dams/ponds. We know that Norway is a large producer of fish. Naturally, he also writes about the offshore oil industry and asserts that a third of all oil production, 24 million barrels per day, is produced offshore (NGL is excluded). At a price of $100 per barrel that is oil worth $860 billion, nearly five times as much as all sea traffic. 17,000 fixed or floating oil production platforms have been built and 400 new platforms are built every year if one includes those installations built directly on the sea floor. With this in mind it is amazing that there are not further accidents at sea. It is estimated that investments in offshore oil production increased by $213 billion in the last year, i.e.

Comments on comments to the Brännpunkt [“Focus”] article "The EU must drastically reduce its oil imports"

(To Swedish text)

Comments on the comments made following the “Focus” article (Brännpunkt) in Svenska Dagbladet: The EU must drastically reduce its oil imports”.

”Focus” gave its readers the opportunity to comment on my article published recently there. As one engaged in the peak oil debate I should respond to them. There are those who assert that such commentators not worth bothering about but the fact remains that those who have left comments have probably read the article and that has given them cause to write. Focus limits comments to three per person and that means that I did not have the opportunity to enter a discussion at their website and respond to all the viewpoints that the various readers had contributed. I have now studied the 141 comments that have been made as I write this and they can be crudely divided into four topics: Peak Oil, the climate, atomic energy and conspiracy theories.

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