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Goldman Sachs - "360 projects to change the world"


The fact that they have now begun to produce oil from Kashagan and that we know the project costs are $48 billion gives me reason to look at a report that Goldman Sachs presented in March 2012, ”360 projects to change the world”. They have studied how much oil and gas the various projects are planned to deliver and the very interesting information on what oil price is needed for the projects to be profitable. The fact that all new projects need financiers means that new projects are well documented. This also makes it possible to do this analysis. The analysis can be seen as one of optimal possible new future oil production.

Perspective on future oil use

(The image shows Eirik Wærness and Staffan Riben.)

Network Oil & Gas (NOG) was formed in Sweden 12 years ago. It is a forum for training, exchange of experience and debate on issues that affect the use and significance of fossil fuels. During a year, NOG aims to organise approximately six symposia. Last Monday’s symposium was titled, “Perspective on future oil use” and was the 69th to be held. I was most recently invited to deliver a lecture for NOG in 2004 but as early as 2001 I was invited to present at one of their symposia that they had organised to examine the extent of public interest in issues regarding oil and gas. Last spring it was discussed that I would be invited to present a lecture on my book “Peeking at Peak Oil”. During the summer, Staffan Riben, the chairperson for the program committee and the moderator of the symposium read my book.

The black blood in the economic veins

Nobody denies that there is a connection between economic growth and oil consumption. The clearest signal came in 2008-9 when the world economy crashed at the same time as oil production sank dramatically. If one is to describe this in a little more detail then it is not oil production itself that is decisive rather than that part of oil production that passes through the world’s refineries and then becomes transport fuel. Transportation of raw materials and components for manufacturing of goods, transportation of products to retail outlets and, finally, transport of customers to those outlets is the chain that gives economic growth. Therefore, it can be interesting to study what passes through refineries, where it is, and what refinery products are produced.

Each month, Global Data i London gives out a report, ”Refined Products Forecast”.

Barnett shale gas production – on its way downhill?

Map of active permits and wells currently carried on the oil proration schedule and gas proration schedule database.

The American shale gas revolution began in the area that goes under the name of the Barnett Shale. On the map above you can see active permits and wells. The Railroad Commission of Texas (RRA) is the organization that holds responsibility for the official oil- and gas-statistics in Texas. On 22 August 2013 the RRA published the latest statistics on the Barnett Shale (see report). The official name of the area that lies from southwest to northwest of Dallas is not the Barnett Shale but, rather, “The Newark, East Field”. According to the RAA the area is 13,000 square kilometres in size and in Sweden the area of Uppland is a comparable size, 12,676 square kilometres.

Comments on Wood Mackenzie’s report “China on Track to spend US$500bn on Crude Oil Imports by 2020, Surpassing US Import Require

On 20 August Wood Mackenzie (WoodMac) released a report on China and the USA’s future imports of oil. WoodMac regards itself as one of the world’s leading companies producing energy analyses. The title of the report is “Heading in Opposite Directions: China and US Reliance on Oil”, but I chose to use the report’s subtitle as part of this blog, “China on Track to spend US$500bn on Crude Oil Imports by 2020, Surpassing US Import Requirements”.

In recent days WoodMac’s report has been cited by a large number of news outlets around the world and in Sweden. As an example I can cite Reuters’ article “China oil imports to overtake U.S. by 2017”. According to WoodMac, China will surpass the USA as the world’s largest importer of oil in 2017 and by 2020 it is estimated to be importing 9.2 Mb/d per day. Per year this would amount to 3.36 billion barrels of oil.

Texas, Water and Fracking

Last Sunday The Guardian newspaper published an article illustrating one of the negatives of fracking, "Fracking boom sucks away precious water from beneath the ground, leaving cattle dead, farms bone-dry and people thirsty". The title of the article was “A Texan tragedy: ample oil, no water”. It is good that they are beginning to realise that fracking has its problems.

As an introduction to the article online, they show a video with the following explanatory text, "In Mertzon and Barnhart in western Texas, the worst drought in two generations is choking the water supply. Water shortages are raising tensions between locals and the fracking industry. Drilling for shale gas uses up to 8m gallons of water each time a well is fracked" (8 million gallons is the same as 30 million litres, or 30 thousand cubic metres).

Future growth in U.S. crude oil reserves

The title, “New data show record growth in U.S. crude oil reserves” might lead most readers to believe that fantastic developments are afoot in the USA. However, if we study the report in detail we can see that large question marks exist over future oil production. The US Energy Information Agency, EIA, has now reported changes in proven reserves during 2011. Recently I discussed how different types of oil reserves are reported and I can suggest that readers might like to look at that blog again. For proven reserves the EIA states the following criteria: “Proved reserves are those volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions”.

The Economist: ”Oil is yesterday’s fuel"

The next issue of The Economist has a front cover that says, “The future of oil – Yesterday’s fuel".

14 years ago, on 4 March 1999, the front cover had a completely different message. Then, the editors of the Economist published an article titled, “Drowning in Oil”. They wrote that “The world is awash with the stuff, and it is likely to remain so”. They thought that cheap oil from the Middle East would reduce the then price of $10 down to $5 per barrel.

One year earlier Colin Campbell and Jean Laherrere wrote in an article in Scientific American that cheap oil would reach peak production in around 2004 (read the article). It was the flow of this cheap oil that, according to The Economist, would force the price down to $5 per barrel.

How to report resources and reserves

The discussion of Israel’s oil reserves gives me reason to discuss the rules that exist for reporting of resources and reserves of conventional oil. It is this oil that still dominates world production and it is production of this oil that has now reached peak oil and has slowly begun to decline. A bright future for increased production requires that we address production of unconventional oils and for those there are not yet any firm rules about how resources and reserves should be reported. As an example I can point to how the kerogen oil in Israel was compared with Saudi Arabia’s conventional oil without mentioning that the “tap” (flow) of kerogen oil could only be opened to a far lesser extent.

Oil & Gas Journal is an industry news journal on oil that I keep an eye on and on 18 July they published an article with the title, “Resource estimate hiked for Israel nearshore license”.

”Global Energy Systems 2013” and ASPO

The conference, “Global Energy Systems 2013” in Edinburgh, UK, has now concluded with great success. The initiative to hold a conference in Scotland was taken when ASPO International met in Vienna in 2012 after the successful conference there. According to our regulations a meeting of ASPO International members should occur when an ASPO conference is held and in 2012 we decided to try to organise a conference in the UK. Euan Mearns from Aberdeen, the prolific writer for The Oil Drum website, took upon himself the task of assembling a group to organise a UK conference and report back to the ASPO International. We decided that Uppsala would be the backup destination for the next ASPO conference if the UK idea failed.

ASPO International is an entirely non-profit organisation without a budget and so the financing of a conference by a national ASPO organisation can be a difficult issue. During the organisational work it became evident that a conference on Global Energy Systems would find sponsors while a traditional Peak Oil conference would have difficulties.

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