Friday 26 April 2013

Peak Oil

If ever you had any doubts about Peak Oil....

Saudi Arabia’s Shale Gas Hopes Dashed Due to Lack of Water

23 April, 2013

Much of Saudi Arabia’s conventional natural gas is produced as a by-product of the crude oil extraction. Nearly all is then re-injected back into the well in order to maintain the reservoir pressure. What little may remain is allocated to industrial projects such as petrochemical expansion. The result of all of this is that there is very little natural gas to be used in power plants for electricity generation, so Saudi Arabia has had to use large amounts of oil to burn in the power plants, and this volume has been increasing as the energy demands of the growing economy have increased.

The shale boom in the US has opened up the possibility of a new source of potentially cheap and abundant natural gas for Saudi Arabia, which could be used as a source of power generation, freeing up more oil for export.

Recent comments made by the Saudi Arabian oil minister, Ali Al-Naimi, has suggested that Saudi Aramco will soon begin to explore the country’s shale gas resources; resources that are estimated to be in the region of 600 trillion cubic feet.

One major problem stands in the way of a Saudi shale boom that was not as much of an issue in the US, the fact that huge amounts of water are needed for the fracking process, a resource that is in very short supply in the Middle East.

Already the water demand from cities and industry in Saudi Arabia exceeds the available supply from aquifers, leading to the requirement of 27 desalination facilities which deliver nearly 300 billion gallons of water each year. Each hydraulically fractured shale well requires several million gallons of water, raising a small question about the logic of pursuing such a technology in such a dry country.

There are a few methods that can reduce the amount of water needed for fracking. The US frackers, especially around the Marcellus shale play in Pennsylvania, recycle between 10% and 30% of all water injected into the wells; using nitrogen foam mixed in with the fracking fluid can also reduce the amount of water needed; and finally tests have been made in Canada on the possibility of using gelled propane as a form of waterless fracking.

Here, from Bloomberg, is an article showing why peak oil is real. It's exactly as I have pointed out repeatedly: prices must rise to help drillers cover their increasing costs, but at the same time high energy prices are strangling the global economy. Additionally, because of declining net energy, even if more barrels of oil are produced, they don't necessarily translate into more energy for society to use. Savvy people can see where this is leading, and it ain't to a Glorious Technological Greenie Future.
-- Rice Farmer

Oil’s Big Five Squeezed by Crude Drop as Spending Soars: Energy

25 April, 2013

The biggest oil companies are failing to increase earnings as crude trades near a nine-month low, production wanes and costs rise.

For only the second time since 2009, Royal Dutch Shell Plc, Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), BP Plc (BP/) and Total SA (FP) will all report lower quarterly profit when they announce earnings in the coming week, analysts’ estimates show. The group, which is investing a record $155 billion this year to bolster output, is disappointing investors: the companies’ shares have gained an average 2 percent this year as the Standard & Poor’s 500 Index jumped 11 percent.

It’s going to be a very rough ride for the majors,” said Fadel Gheit, an analyst at Oppenheimer & Co. in New York who rates Exxon the equivalent of a hold. “If oil prices go down from here, no major integrated oil company will beat the S&P. We cannot hope they’ll be able to squeeze costs faster than falling oil prices.”

Benchmark Brent crude, used to price two-thirds of global sales, has dropped 9 percent this year to $101 a barrel as fracking technology opens wells in the U.S., prompting BP to predict the nation may top Saudi Arabia as the biggest producer of oil and liquid fuels. Goldman Sachs Group Inc. this week cut its forecast for average Brent prices in 2013 to $100 from $110 as supply grows.

At the same time, producing oil and natural gas is becoming harder for the world’s largest energy companies. Output at the five so-called supermajors reached its zenith in 2004 at 16.9 million barrels a day of oil equivalent. Production has slipped 7 percent since then to 15.7 million barrels last year, data compiled by Bloomberg show.

Capital Intensity

The recent fall in oil prices is hardly likely to change sentiment toward this group of companies, whilst capital intensity has continued to rise as industry inflation continues,” Iain Reid, an analyst at Jefferies Group LLC in London, said in an e-mailed note to investors. “The global majors have as a group been a poor investment for some time.”

The U.S. will surpass Russia and Saudi Arabia this year to become the largest liquid fuel producer, BP said Jan 16. Liquids output, which includes oil, natural gas liquids and biofuels, will be boosted in the U.S. by tight oil extracted by the same technology that sparked a boom in shale gas.

The quest for new deposits to replace shrinking established fields is costing a record amount this year and all five companies have pledged to maintain or increase capital expenditure to bolster output. BP Chief Executive Officer Bob Dudley said in February that the inflation rate for oilfield services and supplies is running at about 10 percent a year.

Exxon Today

Exxon reports first-quarter earnings today. The Irving, Texas-based company will post net income of $9.25 billion, compared with $9.45 billion a year earlier, according to the average of four estimates compiled by Bloomberg. Chevron will say net income fell to $5.83 billion after $6.47 billion a year earlier, according to Bloomberg data.

In Europe, analysts estimate that Total’s adjusted profit fell 5.7 percent to $2.99 billion. BP will say next week that profit in the first quarter slipped to $3.47 billion from $4.8 billion a year earlier, and Royal Dutch Shell Plc (RDSA) will say on May 2 that profit slid to $6.6 billion from $7.28 billion, Bloomberg data show.

Lower prices are also squeezing margins. Brent crude declined 4.9 percent from a year earlier to average $112.64 a barrel in the first quarter. New York-traded West Texas Intermediate, the U.S. benchmark, fell 8.4 percent to $94.36. U.S. gas prices gained 39 percent from a decade low to average $3.48 per million British thermal units.

Occidental Petroleum

Occidental Petroleum Corp. (OXY), the largest oil producer in the continental U.S., announced in February it was seeking a successor for CEO Stephen Chazen after less than two years on the job as the company lost a fifth of its market value last year on rising costs and lower-than-expected production growth.

BP and Total have focused on selling off less profitable operations and emphasized frontier exploration, where the payoffs from new discoveries are biggest.

It’s now apparent to the majors that you need a high- quality portfolio to maintain earnings,” said Jason Kenney, an analyst at Banco Santander SA (SAN) in Edinburgh. “We’re in a period of inflation in the sector, and there’s value leakage in every spot along the chain.”

While profits from selling crude oil are falling, the business of turning crude into gasoline and other products has improved. Global refining margins were $17.80 a barrel in the first quarter compared with $14.75 a year earlier, according to BP’s refining marker margin.

Marathon Oil Corp. (MRO) and ConocoPhillips (COP) have spun off their refining business to add to their share prices. The biggest oil producers may now also have to try something radical to reward their shareholders, Oppenheimer’s Gheit said.

Companies will have to look outside of the box to create value,” said Gheit. “It won’t be as simple as it has been for the past two years. Rising oil prices can be the tide that lifts all boats, but it will also bring them back down again.”


BP predicts growth in global demand for energy resources by a third

24 April, 2013

World energy demand will grow by 36 percent by 2030, senior economist at the British company BP Lev Freinkman told journalists in Baku on Wednesday.

He said the increase in demand for energy resources is mainly due to increased consumption in the electricity sector.

This, in turn, is due to the development of industry and the increase in demand for electricity. Mainly, growth in the demand for energy resources will be because of developing countries.

Also, according to Freinkman, significant growth in oil and gas is not expected in a 20-year prospect, which is due to the development of fields of shale hydrocarbons.

With the development of this trend, countries producing conventional oil and gas, and in particular the OPEC countries, will have to lower production volumes in order to maintain balance in the market.

Despite the development of alternative and renewable energy sources, by 2030, the share of these types of energy in the total share of energy consumption will be only 6 percent.

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