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20 June 2015

Press review 20-06-2015 - stealing the Sun

A man from the past. Photo by Zimbio.
"Eventually, we'll all go 100% renewable." A friend employs this sentence often, and even though we disagree in most things energy related, we perfectly agree on this point. The Energy Transition is not an option, it simply imposes itself. As a society, our options are pretty much restricted to the shape and structure of that eventual fully sustainable economy.

Naturally not everyone agrees. Some go even further and try to impose the fossil fuel based infinite growth economic model by decree; along the way concentrating economic power in oligopolies. Such is the case with the present Spanish government, lead by Mariano Rajoy. This week one more cog in the energy Manorism system it is trying to impose on its citizens was announced, with a new round of taxes on renewable energy technology.

Spanish folk are not dumb and will certainly have the opportunity to evaluate Mr Rajoy's actions in the general election next November. Less than 5% of the electricity consumed today in Spain is generated by solar technologies; a future oriented government can easily triple that figure with a relevant reduction in cost to consumers.

El Pais
Government to tax consumers who store their own renewable energy


The Spanish government is planning to tax homes that produce their own energy through solar power and store some of it using batteries.

A draft decree prepared by the Industry, Energy and Tourism Ministry establishes a new fee to discourage the use of batteries or other storage systems by people who produce electricity, with solar or photovoltaic panels for instance, and who are connected to the national power grid.

Under the new rules, these self-reliant consumers will not be able to use products such as the Powerwall battery recently launched by American automotive and energy-storage company Tesla, and will additionally be penalized for the storage systems that come included with the latest generation of solar panels.
The Spanish Conservative intelligentsia is creating a good deal of noise to mask the reasons behind this policy, such as blaming the long lasting tariff deficit. Numbers do not lie, however; with PV electricity costs under 0.06 €/kWh, traditional electricity suppliers simply can no longer compete.
Wolf Street
The Men Who’re Stealing The Sun
Don Quijones, 14-06-2015

If there’s one thing we should have learnt from this extended period of post-crisis drudgery, it is that there is no limit to how far our elected governments will go to protect the interests and privileges of oligarchs and oligopolies. In Spain, the government will even steal the sun’s rays to protect the country’s energy plutocracy.

Now the Spanish government is planning to tax homes that produce their own energy through solar power and store some of it using batteries. El País reports:
A draft decree prepared by the Industry, Energy and Tourism Ministry establishes a new fee to discourage the use of batteries or other storage systems by people who produce electricity, with solar or photovoltaic panels for instance, and who are connected to the national power grid.
It is good to put Mr. Rajoy's government policies in a wider scope. A third of the electricity generated in the EU is now coming from renewable sources. Much of this expansion has been lead by citizen action, through energy cooperatives. The will for an early and ordered energy transition is strong in Europe, it won't be a retrograde government stopping it.
EnergyPost
Europe’s energy revolution marches on: one-third of power supply now renewable
Karel Beckman, 17-06-2015

ENTSO-E’s annual overview of the European electricity market, Electricity in Europe 2014, which has recently been released, testifies to the steady expansion of renewables generation taking place in the EU electricity sector:

Evolution of ENTSO-E net generation (Source: ENTSO-E)

33% of electricity produced in the EU now comes from renewables, of which 18.5% is hydropower and 14.4% “other renewables” (mostly wind and solar power). In 2011 hydropower supplied 15.3% and other renewables just 9.3%. The share of fossil fuels has gone down from 48.6% in 2011 to 40.5% in 2014. Nuclear power has remained stable despite the German nuclear phase-out.
The increase in renewable electricity generation is too contributing to the secular CO2 emission reduction trend setting in. Bad news for infinite growth cornucopians but a more than expectable outcome.
The Local Power Chanel
The EU’s CO2 Emissions Decreased 5% In 2014
Roy L Hales, 15-06-2015

According to the Carbon Brief, the EU’s energy usage is at 1990 levels despite ” a 6% increase in population and a 45% expansion of economic output.” This has been possible because of better building insulation, “improvements in product energy efficiency, uptake of renewables, vehicle fuel efficiency standards and changes in the structure of the economy.” The EU’s reached 17% below the 1990 benchmark, set by the Kyoto Accord, in 2013. Last year there was also a mild winter.

[...] The leaders in today’s announcement were Slovakia (-14.1%), Denmark (-10.7%), Slovenia (-9.1%), the United Kingdom (-8.7%) and France (-8.2%).

[...] The Carbon Brief reported that the United Kingdom’s coal usage has been cut back to levels not seen since the 1850’s. Renewables provided 15% of the electricity in 2014.

Europe’s powerhouse, Germany, lagged slightly behind the pack, reducing its emissions only 4%. This is 27% below 1990 levels.

Natural gas emissions decreased 13%, hard coal 8% and renewable energy usage increased 3%. Germany obtained 28% of its’ electricity from renewables last year.

“Much of the reduction was in 2014 due to the mild winter. But we owe part of the decline to real progress on climate protection,” said Environment Minister Barbara Hendricks.
A large part of the mainstream media echoed a set of misinformation circled around by BP at the publishing of its yearly Statistical Review. This once famous database is today plagued with inconsistencies and chasms that render it largely useless.
Resource Insights
No, BP, the U. S. did NOT surpass Saudi Arabia in oil production
Kurt Cobb, 14-06-2015

Even the paper of record for the oil industry, Oil & Gas Journal, got it wrong. With the release of the latest BP Statistical Review of World Energy, media outlets appeared to be taking dictation rather than asking questions about which countries produced the most oil in 2014.

If they had asked questions, they would have ended up with a ho-hum headline announcing that last year Russia at 10.1 million barrels per day (mbpd) and Saudi Arabia at 9.7 mbpd were once again the number one and number two producers of crude oil including lease condensate (which is the definition of oil). The United States at 8.7 mbpd remained in third place.
In the petroleum market the Brent index weakened somewhat closing the week under 63 $/b. For the North Sea, once the largest source of energy in Europe, this prolonged low price is looking like the final blow. Extraction keeps falling and investment is drying up.
The Barrel
When oil production appears to be going south in the North Sea: Petrodollars
Nick Coleman, 15-06-2015

The North Sea, home of the Brent benchmark, has been on a downward production path for well over a decade, with oil output hitting 847,000 b/d last year. The oil price slump has added to alarm about the basin’s future and that of the independent companies that have sprung up to handle small or mature fields. It has exposed increasingly unviable costs, with operating costs averaging nearly $30/b in 2014 and total spending on decommissioning aging facilities running at over GBP1 billion ($1.6 billion) per year.

Recent months have seen a flurry of financial deals and announcements aimed at jump-starting the North Sea industry, but recovery remains elusive.

[...] But there is still plenty of pessimism. A survey by the Aberdeen and Grampian Chamber of Commerce published this week found two thirds of North Sea operators had been forced to cancel projects because of the oil price drop.

Half of all contractors said lack of access to capital was limiting their activity. Trap Oil, a well-regarded explorer, says it faces impending shutdown having been hit by a reliance on a single producing field, Athena. The field only came on stream in 2012, but has under-performed and Trap said in February it was making a GBP380,000/month loss from its 15% stake.
In the UK a revival of the North Sea has been a common denominator to most political forces. But the maturity of this petroleum region is more than evident. Yet again, the energy transition will be own by those looking ahead, not backwards.
Quartz
Sentiment in the UK oil industry has totally collapsed
Cassie Werber, 17-06-2015

For years, things have been tricky in the UK oil industry. The North Sea once provided a flow of relatively easy wealth to the mainland. The region’s oil powered much of the UK’s infrastructure and was plentiful enough to be exported all over the world.

But with much of the most accessible oil used up, explorers are having to pump more money in to get every drop out, making for a more technologically intensive, and less rewarding, business.

The problem was exacerbated by oil prices falling suddenly last year, from over $100 a barrel in July to around $65 a barrel today, as the recession lowered demand and US production increased supply.
Under-priced petroleum is causing hurt in different places. Azerbaijan is a good example, a country that entered the decline phase a few years ago and to whom this price rout comes at the wrong moment.
BuzzFeedNews
Azerbaijan’s Oil Boom Is Ending — Now Comes The Bust
Max Seddon, 16-06-2015

[...] Azeri officials admit they will have to diversify beyond oil and gas, but five years after domestic oil production hit its peak, the country still relies on energy for 70% of its income and 95% of its exports. “Azerbaijan is not the richest country in the world,” said Ali Hasanov, a senior aide to Aliyev. “Its resources aren’t always going to bring in the expected revenue.”

[...] Aliyev has staked the country’s future prosperity on the massive Shah Deniz II gas field in the Caspian. A consortium led by BP is exploiting the field, which is to provide gas to Europe through two pipelines that together cost about $45 billion. The project will not come online for several years, however, and is unlikely to produce enough to dent Russia’s stranglehold on the European gas market.

“At best, we’ll be producing 10 billion cubic meters in 2020. Hungary alone consumed 13 billion a year,” said Natiq Jafarli, an economist and founder of the REAL movement, an opposition group whose founder is one of the 80 alleged political prisoners.
In North America the focus remains on the so called "shale oil". Extraction declines are starting to show in the statistics and everyone wonders on the consequences to financial markets.
Reuters
North Dakota's oil production has peaked: Kemp
John Kemp, 16-06-2015

North Dakota's crude oil output has peaked, according to the latest production data published by the state government, as the slump in prices takes its toll.

The state produced 1.17 million barrels per day (bpd) in April, down from a peak of 1.23 million in December, the Department of Mineral Resources (DMR) reported on Friday.

The former rapid growth in production has stalled and current output is no higher than it was in September 2014.

So far the American petroleum industry has managed to keep afloat, raising ever more debt at ever increasing rates. Such strategy can only go on for so long.
CNBC
Oil and gas drillers may face wave of bankruptcies this year
Tom DiChristopher, 18-06-2015

Heading into the end of the year, experts say stubbornly high crude production, coupled with eroding revenue, could start to force exploration and production companies to enter bankruptcy, sell assets or embark on mergers—especially if oil prices don't move higher.

A potential catalyst arrives in September, when banks will make one of their periodic reassessments of drillers' reserves. If the companies' assets are found to be less valuable than their outstanding debt, drillers will be forced to come up with a way to cover the gap between their reserve value and debt load. That could mean asset sales, restructurings and the like—or bankruptcies.
The following article zooms into the demise of a particular "shale oil" company. It is very important to note that this company started loosing money well ahead the price rout. The "shale oil" bust was already visible in the first half of 2014, the price rout only precipitated things.
Reuters
Small U.S. frackers face extinction amid drilling drought
Edward McAllister, 18-06-2015

[...] The first sign of trouble came around early summer of 2014 with a rare monthly loss, according to two former employees who saw company statements. At almost the same time, in June, oil prices hit a peak of $107 before falling for seven straight months.

By Thanksgiving Day, as Saudi Arabia and its OPEC allies shocked the oil market by announcing that they would maintain production despite a growing glut, GoFrac was sending crews across the country to carry out what work it could. Time in the field increased as workers went further afield for jobs.

As prices nosedived, GoFrac found itself undercut by larger companies offering up to 20 percent lower costs for their services.
Canada was the epicentre of the price rout, inundating the market last September with low quality, low yield petroleum. It is therefore unsurprisingly one of the hardest hit economies.
UPI
Energy job losses mount for Canada
Daniel J. Graeber, 16-06-2015

More than 25,000 total jobs are expected to be lost in the Canadian exploration and production sector, a well drilling association said.

The Canadian Association of Oilwell Drilling Contractors said it was revising downward its drilling forecast because of lower crude oil prices and changing market conditions in the resource-rich province of Alberta.

"Since its last revision in January 2015, the number of operating days is expected to decline by an additional 10,320 days or 13 percent," the association said in its latest forecast. "A sharp drop in the number of overall operating days means an estimated reduction of 25,110 total jobs in 2015, down almost 50 percent from the 2014 total of 49,950."
This week the Greek debt melodrama seems set to an end, for better or for worse. The European Council will held an extraordinary make-or-break meeting on Tuesday. If no agreement is reached the Greek government will be forced to impose capital controls the following morning. What happens next is anyone's guess.

Enjoy the rain, I mean, the weekend.