More Supply, Competition and Friction Possible
News of Iran’s potential slow ramp up of oil supply resounded with a downward small ping in prices in late November, later to bounce back based on supply realities and economic growth. Iraqi oil supply keeps increasing, averaging about 3 million barrels per day, a new high in the last 20 years. Iraq plans to keep pumping — growing production 500,000 – 750,000 barrels more per day in 2014. Iraq’s output relative to OPEC production hovers near 10%, from around 7.5% in 2008. Iran’s contribution to OPEC production was around 12% in 2008, dropping in 2013 to 8.6%, according to a recent Wall Street Journal article.
“Al Arab Yantafiq lam yantafique,” said Mr. Charles Kestenbaum, a top Middle East expert and former U.S. Trade Specialist, in a November 25th interview, immediately following the news of Iran’s nuclear deal. This Arabic expression is translated as: ”Arabs can only agree to disagree.” In late November, the Dallas Committee on Foreign Relations hosted Charles Kestenbaum, a veteran of Middle East affairs since the mid-1970s. In his quote, a common expression, lies the challenges ahead in the Middle East.
“Iran sanctions will not be sufficiently relaxed during the next six month period to have a major impact on Iranian production or world markets,” Kestenbaum notes in follow up commentary. ”Word in Washington today [Dec. 4] reinforces that. It will take some time for the Majors to feel safe enough to go back or expand purchases, given how tough the sanctions regime has become and uncertain the relaxation will be.” Kestenbaum believes it will take months to sort things out, at minimum, just from the U.S. legal side. This does not include negotiating with the Iranians for the fields, production agreements, and even simple purchases will not restart right away. The sanctions are not lifted in any real way yet, which will come when the next stage of agreements is reached, suggests Kestenbaum. ( Continue… )
A deal between refiner Phillips 66 and Sapphire Energy to develop green crude was lauded by advocates as the dawn and the emergence of a new renewable form of domestic oil. With a production target of around 65,000 barrels per day by 2025, however, the celebration may be premature.
Phillips 66 and green crude pioneer Sapphire Energy, Inc., agreed to work together to develop crude oil derived from algae to the commercial level. Both sides said they'd work to expand on Sapphire's test program to show green crude can be refined using traditional methods.
Sapphire Chief Executive Officer Cynthia Warner said the decision by Phillips 66 shows there is momentum building behind the development of algae as a petroleum alternative. (Related article: European Car Manufacturers and Oil Companies Join to Create a Biofuel Roadmap)
"We’re looking forward to building a strong relationship with Phillips 66, an established leader in research and development for next generation fuels, who understands the opportunity our green crude oil holds as a feasible and sustainable crude oil choice for refiners," she said in a statement.
RECOMMENDED: US energy in five maps (infographics)
The U.S. Energy Department said algae-based fuels have the potential to displace 17 percent of the oil imported for use in the transportation sector and in August, Sapphire secured a $5 million grant from the federal government to help develop the refining process for algae-based fuels. ( Continue… )
If one was to believe the picture that most Western media outlets are painting, Ukraine has been lost to Russia. Though the country fought valiantly to sign an Association Agreement with the European Union in Vilnius, Lithuania last month, President Viktor Yanukovych suspended negotiations with the EU at the last possible moment, betraying Ukrainians everywhere. Two recent energy deals that Ukraine has reportedly made, one with Russia and the other with Slovakia, however, show that the reality of the situation is slightly more complex.
Claiming that Yanukovych had always wanted negotiations with the EU to fail would arguably be giving him and his advisors too little credit as political strategists. In terms of public opinion, signing the Association Agreement would have all but secured Yanukovych’s re-election in 2015, whereas his step down from the deal has visibly shaken his legitimacy as President to its core. Rather, too little attention is given to the very real economic pressure Russia has placed on Ukraine and the EU’s reluctance or inability to offset Putin’s ‘trade war’. Furthermore, while Yanukovych did not sign the Association Agreement in Vilnius, he did not commit his country to Putin’s rival ‘Eurasian Union’ either. (Related article: Russia Readies to Take Shale Oil Lead)
Prior to the Vilnius Summit in November, the Ukrainian government found itself between a rock and a hard place. On one hand, Russia was imposing exorbitant gas prices and devastating economic sanctions on Ukraine’s already fragile economy. By October 10th, 2013, trade between the two countries had fallen by 25% and prices for Russian gas, on which Ukraine remains dependent, stood at $420/1000 m3, $50 more than the European average. On the other hand, EU leaders refused to hold tripartite negotiations with Russia and Ukraine, instead using all their leverage to insist that jailed former Prime Minister Yulia Tymoshenko, convicted of abuse of office and embezzlement in 2011, be freed. ( Continue… )
Solar PV has been the belle of the ball when it comes to distributed energy resources of late. But from microgrids in Maryland to NRG’s solar pergola, battery storage is increasingly entering the conversation, too. Now, California’s new energy storage mandate, AB 2514, is pushing the issue further.
AB 2514, which passed unanimously in October, instructs California’s investor-owned utilities (Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E)) to expand their electricity storage capacity and procure 1,325 MW of electricity and thermal storage by 2020. Such energy storage is one important strategy of many that can help to manage and balance the inherent variability of renewable electricity generation—for example from cloud cover or at night when solar panels aren’t cranking out kilowatt-hours. But storage’s role goes well beyond that.
California has a very high renewable portfolio standard (RPS), currently set at 33 percent, with active policy discussions about a possible higher future level, perhaps 50 percent. As higher and higher penetrations of renewables are added to the grid, the California Independent System Operator (CAISO) has predicted the potential for disruptions to grid operations as soon as 2015. ( Continue… )
Abundant natural gas, cost declines for renewables, and tight regulations from the Environmental Protection Agency (EPA) are slowly killing coal-fired power plants in the U.S. This dynamic is playing out across the country, but the results will be particularly important in the Midwest, which will be ground zero for the fight over the changing electricity mix in the coming years.
The Midwest depends on coal for 60% of its electricity. But that is rapidly changing. The region obtained 80% of its power from coal in the early 2000’s, but natural gas and renewable energy are capturing an increasing share of the market as coal plants shut down. The story is well-known: shale gas is cheaper than coal, and even clean energy is becoming economically competitive in many areas. (Related article: Chinese Coal Use to Hit 4.8 Billion Metric Tons Annually by 2020)
RECOMMENDED: US energy in five maps (infographics)
Shale gas is transforming the Midwest. Ohio, in particular, is awash in gas, lacking adequate infrastructure to connect all the wells being drilled. According to the Ohio Oil & Gas Association, only about half of the 334 wells drilled in the state are producing, while the rest await pipeline construction. The state of Ohio predicts that despite all the drilling already underway, the industry will continue to grow rapidly, drilling 1,830 wells by 2015. So much gas makes a switch from coal to gas an easy decision for utilities faced with pending regulations. ( Continue… )
President of Russian energy company Rosneft, Igor Sechin, said he was eager to unlock the shale oil potential in the Samara region of western Russia. With forecasts warning the U.S. shale phenomenon won't last, Russia could be moving its pawns into play.
Sechin met Friday with Helge Lund, chief executive officer of Norwegian energy major Statoil, to sign a joint venture agreement for the production of the Domanik shale formation in the Samara region, near Russia's southwest border with Kazakhstan.
Sechin said in a statement the deal with Statoil would help his company, the largest publicly traded oil and gas company in the world, accelerate the development of hard-to-reach oil reserves in the region. (Related article: Oil Majors Pushing Offshore, but Obstacles Remain)
"If successful, we believe this could be a world class shale oil asset," Lund added. ( Continue… )
Nuclear energy: buying local and creating jobs (Sponsor content)
Localized labor is more than just our business model, it is AREVA TN’s philosophy to buy and source locally whenever possible, as seen in projects in the works in Pennsylvania and Ohio. Our onsite jobs bring in several million additional dollars to the local community each year and boost regional economic development for the life of the project. For example, projects this year in just Ohio and Pennsylvania total about $30 million spent.
AREVA TN’s operations at each utility generate an additional 25 to 30 high paying skilled jobs. These workers support the onsite construction of the NUHOMS® Horizontal Storage Modules and the Fuel Loading Operations. Workers are hired from the local area including union workers in accordance with local rules and practices.
A recent Deutsche Bank report projects global newly installed photovoltaic (PV) capacity will reach 50 GW annually in 2014, a roughly 50-percent increase over anticipated new installed capacity during 2013. Germany’s been the longtime undisputed champion of solar deployment, with 35.2 GW of installed capacity as of November 1, though the installation pace lead has shifted in 2013 to Japan. But the U.S. is accelerating—and is expected to install 4.4 GW of solar this year, about the same absolute amount as the Japanese and more than the Germans.
This growth is impressive, but if the U.S. is to transition to the low-carbon, resilient, and sustainable electricity system of the future outlined in RMI’s Reinventing Fire, we need to install four times more solar capacity annually than we’re currently doing, for the next forty-odd years, with most of the installs coming in the distributed market (residential and commercial rooftops). If we’re going to do that, we need to make distributed solar cheaper, and do so quickly.
PV soft costs now dominate the equation
Between 2008 and 2012, the price of sub-10-kilowatt (mainly residential) rooftop systems decreased 37 percent. However, over 80 percent of that cost decline is attributed to decreasing solar PV module costs. With module and other hardware prices expected to level off in the coming years (and in the near term, actually increase), further market growth will be highly dependent on additional reductions in the remaining “Balance of System” costs, otherwise known as “soft costs.” ( Continue… )
Major oil companies continue an aggressive push into deeper water as the memory of the 2010 Deepwater Horizon blowout recedes. Spurred on by consistently high prices for crude oil, the decline of conventional oil fields, and the advent of new drilling technologies, companies like BP plan bigger investments in offshore oil in the coming years.
BP is still not out of the woods in terms of its legal liabilities stemming from the 2010 disaster, but they are pushing into deeper waters. In August 2013 BP began appraising its Tiber field, a “giant” oil field that could hold between 4 to 6 billion barrels of oil. The Bureau of Ocean Energy Management (BOEM) estimates that the Gulf of Mexico holds 48 billion barrels of undiscovered technically recoverable oil reserves.
But at 35,000 feet, the field is more than twice as deep as the Macondo well. The high pressure and temperatures makes drilling in the Lower Tertiary extremely difficult and costly. BP is investing big in its “Project 20K,” named for technologies that need to be developed that can withstand 20,000 pounds of pressure per square inch at 350 degrees Fahrenheit – pressure and temperatures that occur at such drilling depths. (Related article: Louisiana Loses ‘Millions’ in Oil Extraction Tax Glitch) ( Continue… )
If It’s December It Must Be PTC Time, Again
With the end of the year fast approaching, the US wind power industry faces yet another scheduled expiration of federal tax credits for new wind turbines. The wind Production Tax Credit, or PTC, was due to expire at the end of 2012 but was extended for an additional year as part of last December’s “fiscal cliff” deal. There are no signs yet of a similar reprieve this year.
With the PTC and other energy-related “tax expenditures” subject to Congressional negotiations on tax reform, this might truly be its last hurrah in its current form. It is high time for this overly generous subsidy to be “sunsetted”, and if it’s replaced with a smarter policy emphasizing innovation, the outcome could be beneficial for taxpayers, the environment, and even the US wind energy industry.
Too Big To Last
In its 20-year history, minus a few year-long expirations in the past, the PTC has promoted tremendous growth in the US wind industry, from under 2,000 MW of installed wind capacity in 1992 to over 60,000 MW as of today. For most of its tenure, the PTC did exactly what it was intended to do: reward developers for generating increasing amounts of renewable electricity for the grid at a rate tied to inflation. ( Continue… )