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28 May 2016

Press review 28-05-2016 - Still in contraction

Compared to the last this was a quiet week. The mainstream media is still trying to explain how its "lower for longer" mantra failed so miserably, but to what pure facts is concerned the pace slowed down. Brent continued its rally, but with considerably less volatility. It traded above 50 $/b for a few hours on Thursday, producing some hastened headlines.

Nigeria remains the most visible and worrying story in the petroleum world. The government appears powerless at this moment to stop the rebels hitting the country's petroleum infrastructure. Events seem to be spiralling out of hand with a relevant impact on the international petroleum market.

In Venezuela petroleum extraction is holding above 2 Mb/d, however, the socio-economic situation is so deteriorated that some sort of political disruption seems now inevitable.
'Niger Delta Avengers': Who they are, and what they want
Tom DiChristopher, 20-05-2016

After seven years of relative peace, one of the world's most oil-rich regions is once again under siege by militants. And though Nigeria is well-acquainted with violence on its southern shores, the group behind a new wave of attacks — the Niger Delta Avengers — is shrouded in mystery and sabotaging one of the world's biggest oil producers.

[...] The Niger Delta Avengers are in the business of destroying oil infrastructure — working in teams, carrying small arms and explosives, blowing up pipelines and sabotaging facilities — taking advantage of the Delta's complex, creek-filled terrain to stay one step ahead of the Nigerian soldiers chasing them.

They're driven by economic and environmental grievances, and until those issues are addressed, the Delta will remain in a cycle of sabotage, experts told CNBC. And Nigeria's oil output will remain under pressure.
Petroleum extraction in Nigeria has been reduce in 1 Mb/d since the beginning of the year. This figure alone offsets the hike in exports out of Iran.
Nigerian oil output as low as 1.1 million b/d: NNPC official

Nigeria's crude oil and condensate production has fallen almost 50% from the start of the year to around 1.1 million b/d, an official from state oil firm Nigerian National Petroleum Corp. said Friday, after reports of a fresh attack on an oil and gas pipeline in the Niger Delta late Thursday.

"The waves of attack on virtually [most] oil pipelines and production facilities in the western division of the Niger Delta have crippled operations there," the NNPC official told Platts.

"We estimate total production losses to be around 1 million b/d, so we are currently down to 1.1 million b/d," he added.
Contrary to Iran, petroleum extraction in Iraq recedes. This news highlights in particular the budgetary owes faced by the Baghdad government at this stage.
Financial Times
Iraq struggles to match January’s record oil production
Anjli Raval, 24-05-2016

[...] Iraq is Opec’s second-largest producer after Saudi Arabia and has ambitious plans to increase production capacity to between 5.5m b/d and 6m b/d by 2020.

This target, which has been revised downward in recent months, has been viewed with scepticism as a budget crisis is limiting the federal government’s ability to pay companies that are producing oil in Iraq. These include from BP, Royal Dutch Shell and Russia’s Lukoil.

Although they are developing some of the lowest cost easy-to-access deposits of oil in the world, the fields need more investment to maintain production at current levels and increase future capacity. At the same time, the government in Baghdad is requesting companies reduce spending.

“We’re taking more risk to keep production the same, while not getting paid. We can’t continue to produce for 2-3 years like this, it’s not possible,” said one executive at an oil company operating in Iraq. “Maybe they can achieve 6m b/d by 2030.”
Another step back for the plans engendered by foreign powers to stabilise Libya. Interestingly, one of the reasons invoked by the Cyrenaican forces to march on Tripoli is the alleged complicity of the new government with jihadists, most notably Daesh.
'Rebel' general nears capital, Libyan oil fate up in the air
James Burgess, 26-05-2016

The Libyan National Army (LNA), led by a rogue general coming from the country's east, is reportedly marching towards the capital, Tripoli, with an eye to 'liberating' it from the hands of the emerging Government of National Accord (GNA), according to local media reports.

The LNA, and General Khalifa Haftar were said by late last night to be only 10 kilometers outside of Tripoli, with eastern officials warning that they would make their move soon, the Libya Herald reported.

The warning came from LNA Chief of Staff Abdul Razak al-Nazhuri, General Haftar's top aide.

The warning was apparently first issued in a tweet by al-Nazhuri on Tuesday, saying: "Our forces are 10km away from Tripoli, liberating it is very soon."
Another stark testament to the difficulties faced by the petroleum industry. By the end of this year Shell will have reduced its staff by more than 10%.
Shell’s Job Losses Now Equal Facebook’s Entire Payroll
Charles Kennedy, 25-05-2016

Royal Dutch Shell announced that it would eliminate another 2,200 positions, which means that its total job losses is roughly equivalent to the entire payroll of the tech giant Facebook.

By the end of 2016, Shell will have slashed 12,500 positions, a staggering total for one company. According to Statista, Facebook only employed 12,691 people as of 2015.

Much of Shell’s attrition is due to the collapse of oil prices, which has plunged the Anglo-Dutch oil major into a cash flow crisis. However, other job losses are due to its purchase of BG Group – synergies between the two companies will lead to the loss of around 2,800 positions, the company previously said. The combined Shell-BG company employed 94,600 people at the start of the year.
Isn't it interesting that while some western economies gear up to consume more petroleum, exporting nations actually develop programmes for the life afterwards? Who is tricking who in this story?
Resource Insights
Saudi Arabia is planning for the post-oil era, why not the United States?
Kurt Cobb, 22-05-2016

The world's largest exporter of crude oil, the Kingdom of Saudi Arabia, recently announced a plan for its post-oil future. If a country almost synonymous with the oil economy can see the need for such a plan, how can the rest of the world, particularly the United States, the world's largest consumer of petroleum, not see the necessity of such foresight?

The kingdom's plan includes sale of part of Saudi Aramco, the world largest oil company and currently wholly-owned by the Saudi government. The company controls all oil development in Saudi Arabia. That the Saudis want to sell part of the most valuable company in the world means they have a different view about the future of oil than those who will be buying. Commentators often report that markets rise because investors are optimistic or fall because they are pessimistic. But this is complete nonsense because for every buyer there is always a seller. Each side of a trade believes in a different future for the investment being traded.

[...] As recently as 2007 the U.S. Energy Information Administration (EIA) believed Saudi Arabia would be supplying the world with 16.4 million barrels per day (mbpd) of oil by 2030. (And, that was down from 23.8 mbpd projected for 2025 in a 2003 report.) In 2008 the Saudi king appeared to embrace a policy of 12.5 mbpd and no more.

Since then long-term projections for Saudi production have come down with a range of 10.2 mbpd to 15.5 mbpd for 2040 (in a 2013 EIA report) depending on which of three scenarios you choose. No explicit range has been included in subsequent EIA reports.
Moving on to gas, it seems the long supply destruction cycle in the US is finally coming to an end. What will be of the so called "boom" afterwards? Will the finance industry still be available to blow one more bubble?
The Petroleum Truth Report
Shale Gas Magical Thinking And The Reality of Low Gas Prices
Arthur Berman, 24-05-2016

Enthusiasts believe that shale gas is simultaneously cheap, abundant and profitable thus defying all rules of business and economics. That is magical thinking.

The recently released EIA Annual Energy Outlook 2016 sparkles with pixie dust as it forecasts almost unlimited gas supply at low prices out to 2040 and beyond. Exuberant press reports herald a new era of LNG exports that will change the geopolitical balance of the world and make America great again.

But U.S. shale gas production is declining because of low prices and shale gas companies are in deep financial trouble because in the real world, price and cost matter.

That is not magical.
Here in Europe the gas consumption trend is becoming ever more salient. Coal is still holding stable in the graph below largely due to the subsidies in place for the mining industry. This picture should change visibly from here to 2020. Naturally, gas consumption for heating is heading in a completely different way.
Renewables International
Renewables replace natural gas in Europe
Craig Morris, 09-05-2016

In April, Germany’s Öko-Institut reviewed the situation in Europe’s power sector and found that, as renewable electricity grows, coal power largely remains untouched. Electricity from natural gas is being offset.

Renewable electricity is up by more than a third within the EU from 2010 to 2015, having risen by 244 TWh. In return, the coal power has remained relatively stable since 2010 at 300 TWh (lignite) and 500 TWh (hard coal). But electricity from natural gas is down by 283 TWh in those years.

Essentially, Europe has transitioned from natural gas to renewables.

Finally, news of the first commercial contract to a novel wind power technology. I rather like because it is so counter-intuitive, you look at the apparatus and can not stop thinking it will not work. But apparently it does. If successful, this technology can greatly shed the material inputs to wind energy.
PR Newswire


SheerWind's authorized distribution HUB SheerWindChina broke ground last week for the largest INVELOX(™) system to date. The Chaska-based wind-power innovator, SheerWind, was pleased to get the news and is looking forward to working closely with its China HUB during the construction, scheduled for completion in October 2016. The event took place in collaboration with Hengshui City Agricultural Science and Technology Company.

SheerWindChina will use this system as a demonstration aimed at establishing, optimizing and verify the technical parameters of the wind power generation system. Construction of the world's first 100MW wind farm power industrial park is scheduled to follow in the next year.

The INVELOX technology is a cost-effective, high-performance alternative to conventional wind technology. Employing a funnel system that captures the wind and brings it to ground-level turbines and rotors for safer, easier, and cheaper operation and maintenance. Enclosed turbine benefits include no harm to birds or humans, far less maintenance, and greater electrical production per dollar invested than conventional systems.
This week there was a surge of traffic to this blog in the wake of the article entitled This is Peak Oil. In just five days it became the fourth most read article in the history of AtTheEdgeOfTime. It seems there is still some attention being paid to resource constrains.

Have a good weekend.

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