A city cleaner walks past a mural that spells the last name of Venezuela's late President Hugo Chávez in Panama City, Wednesday. Mismanagement plagued Venezuela's state-owned oil company under Chávez's reign, stifling production and scaring off investors. (Arnulfo Franco/AP)
After Hugo Chávez, what's next for Venezuelan oil?
Hugo Chávez's passing offers new promise for developing the world's largest oil reserves, but most analysts expect that change will come slowly, if at all.
Production at the state-owned oil company Petróleos de Venezuela SA (PDVSA) dropped by a quarter under Mr. Chávez, and some speculate the Venezuelan leader's passing will usher in an era of stability for the country's national oil company.
"The oil industry has been waiting patiently for Chavez to die with the hope that whoever came next would be more interested in building value rather than destroying it," notes Forbes.
The potential value is enormous. Venezuela's Orinoco Belt holds the world's second largest reserve of tar sands (also known as oil sands) after Canada. Adding in its conventional oil, Venezuela has 296.5 billion barrels of oil reserves, the largest in the world, according to BP's 2012 Statistical Review of World Energy. No. 2 Saudi Arabia has 265.4 billion barrels in reserve. ( Continue… )
The American flag flies over the Rayburn House Office Building at the US Capitol in Washington, Sunday. (J. Scott Applewhite/AP/File)
The role of a diverse electricity generation portfolio (Sponsor content)
The Subcommittee on Energy and Power held a hearing yesterday in the Rayburn House Office Building. The hearing was entitled, “American Energy Security and Innovation: The Role of a Diverse Electricity Generation Portfolio” and below are a few of the statements regarding the role of coal-based electricity presented during yesterday’s testimony:
Mark McCullough, Executive Vice President of Generation, AEP
“For over a century, AEP has been a pioneer in the development of advanced coal-fueled generation technologies, which include many first-in-the-world accomplishments that have set the standard for combustion efficiencies, emissions control, and system performance.”
John McClure, Vice President for Government Affairs and General Counsel, Nebraska Public Power District
“What many do not realize is coal remains a more competitively priced fuel for certain regions of the country due to the proximity of supply, especially in the central and western U.S. Natural gas may be a great option if your power plant is located near a robust network of gas pipelines, but unfortunately many of the existing coal plants do not have access to pipeline capacity to convert from coal to natural gas.
Coal has been a mainstay of our Nation’s generating mix, and the Energy Information Administration continues to show coal as an important part of a diverse fuel mix for the coming decades.”
Rep. Ed Whitfield (KY-1)
“The EPA, without question, has established an unfortunate trend line, methodically establishing a regulatory framework to eliminate coal, and taking away diversity choicesfrom utilities throughout the country.”
Rep. Steve Scalise (LA-1)
“The government is picking winners and losers and those that lose are the families that will pay higher electricity costs.”
A demonstrator holds up a sign during a march past the White House to protest against the Keystone XL pipeline in Washington. Protestors won’t make any meaningful impact on climate change even if they manage to stop Keystone XL, Rapier writes, and they could be channeling their energy into things that could potentially make a difference. (Richard Clement/Reuters/File)
Are environmentalists wrong about the Keystone XL pipeline?
If not for the US government’s latest demonstration of incompetence that played out at the end of last week (a.k.a. sequestration), the top news story might have been a report issued by the US State Department late Friday.
The report was the Draft Supplementary Environmental Impact Statement (SEIS) for the Keystone XL Pipeline project, and it was unwelcome news for environmentalists who have been protesting the crude pipeline extension that would link Canada’s oil sands to Gulf Coast refineries.
It may seem arbitrary, given the large number of oil and gas pipelines that already criss-cross the US, that this particular one has generated such a high profile debate around energy security and the environment. But this debate isn’t really about a pipeline. This pipeline isn’t going to make or break the development of Canada’s oil sands, nor — as I will show here — is it going to make a measurable difference with respect to climate change. (Related: How Much Oil Does the World Produce?)
The truth is that the Keystone XL pipeline is symbolic. The environmental movement sees the pipeline as a continuation of a fossil-fuel dependent lifestyle that is leading to a climate catastrophe. Pipeline supporters argue that the pipeline will create jobs and strengthen our relationship with Canada, our most important source of oil imports. The truth is that it isn’t that big of a deal either way. ( Continue… )
Iranian President Mahmoud Ahmadinejad, right, and his Pakistani counterpart, Asif Ali Zardari, shake hands for photographers at the start of their meeting in Tehran, Iran, to discuss a gas pipeline deal. The US State Department has warned of sanctions, Alic writes, but is keeping a low profile on direct threats until the pipeline deal is sealed. (Vahid Salemi/AP/File)
Will the US block an Iran-Pakistan gas pipeline?
Next week Iran and Pakistan will begin work on a $7.5 billion gas pipeline that the US has been fighting tooth and nail to stop in all manner of proxy methods.
On 11 March, Pakistani officials braved the “international community” by announcing that “groundbreaking” work on the 780-kilometer pipeline would begin on the Pakistani side of the border, marking the start of construction by an Iranian-Pakistani consortium.
Just prior to the announcement, Pakistani President Asif Ali Zardari met with Iranian President Mahmoud Ahmadinejad and Supreme Leader Ayatollah Ali Khamenei in Tehran.
The Pakistani portion of the pipeline will cost around $1.5 billion. This is the key here because the 900-kilometer Iranian portion of the pipeline is already nearing completion. ( Continue… )
Gina McCarthy, President Obama's nominee for EPA chief, speaks at a climate workshop sponsored by The Climate Center at Georgetown University. If confirmed, Ms. McCarthy will replace Lisa Jackson, whose push for regulations made her a target of the fossil fuel industry. (Alex Brandon/AP/File)
Will Republicans block EPA chief nominee Gina McCarthy?
President Obama's pick to lead the Environmental Protection Agency has some believing the administration is redoubling its efforts to slow climate change. That may complicate the confirmation process for Gina McCarthy, as Republicans and coal-state Democrats size up the longtime state and federal environmental policymaker.
Already, some on the right are expressing their displeasure.
“This nomination represents a missed opportunity for the President to chart a new course that balances environmental regulations with the need for jobs in our local communities," said US Rep. Shelley Moore Capito (R) of West Virginia in a statement Monday.
It's a significant choice because next on the EPA's agenda is what to do about existing coal power plants. The EPA has already introduced standards on all new coal-fired plants that require them to emit less than 1,000 pounds of carbon dioxide per megawatt-hour. The question is whether the agency will now expand that kind of requirement to older coal plants. ( Continue… )
An oil pump works at sunset in the desert oil fields of Sakhir, Bahrain. While there seems to be a large supply of oil available, it is at ever-higher cost of extraction, because of diminishing returns, Tverberg writes. (Hasan Jamali/AP/File )
Are high oil prices pushing us towards debt limits?
If an economy is growing, it is easy to add debt. The additional growth in future years provides money both to pay back the debt and to cover the additional interest. Promotions are common and layoffs are few, so a debt such as a mortgage can easily be repaid.
The situation is fairly different if the economy is contracting. It is hard to find sufficient money for repaying the debt itself, not to mention the additional interest. Layoffs and business closings make repaying loans much more difficult.
If an economy is in a steady state, with no growth, debt still causes a problem. While there is theoretically enough money to repay the debt, interest costs are a drag on the economy. Interest payments tend to move money from debtors (who tend to be less wealthy) to creditors (who tend to be more wealthy). If the economy is growing, growth provides at least some additional funds offset to this loss of funds to debtors. Without growth, interest payments (or fees instead of interest) are a drain on debtors. Changing from interest payments to fees does not materially affect the outcome.
Recently, the growth of most types of US debt has stalled (Figure 3). The major exception is governmental debt, which is still growing rapidly. The purpose of sequestration is to slightly slow this growth in US debt. ( Continue… )
Craig Paradis (L) of Advance Drilling, operates the brake handle on a drilling rig for Crescent Point Energy as two roughnecks add a pipe extension to drill deeper into the Bakken formation near Oungre, Saskatchewan. The increase in North American energy production is so fast that US energy independence is within sight. (Rod Nickel/Reuters/File)
Invest in oil? Or invest in gas?
In a domestic energy market developing faster than just about anyone can remember, the key for investors is in finding an edge.
That's not easy in a natural gas market bloated with inventory. But oil is a different story. Those domestic oil companies innovating new schemes to get their product to market or pulling more oil from the ground are at the leading edge of America's energy renaissance.
"Oil is growing faster in the U.S. than it has in 20 years," says Dahlman Rose & Co. analyst Nicholas Pope. "The pipelines can't keep up."
RECOMMENDED: Valuable ‘Barn Finds’ (CNBC)
"You'd be hard pressed to find a time when more pipeline was laid in the U.S. than in the last four years," he said. ( Continue… )
MIT physics professor Ernest Moniz smiles as he stands on stage in the East Room of the White House in Washington, Monday, where President Obama announced he would nominate Mr. Moniz for Energy secretary. (Carolyn Kaster/AP/File)
Physicist nominated as Energy secretary. Are there enough scientists in Washington?
By naming Ernest Moniz as his next Energy secretary, President Obama is demonstrating his desire for scientific experience in a post typically occupied by business leaders or former politicians.
Is he right? Does Washington need more scientists?
Mr. Moniz's résumé – he's a nuclear physicist at the Massachusetts Institute of Technology (MIT) – is rare in a town dominated by lawyers and businesspeople. The 112th Congress, for example, counts among its ranks one physicist, one chemist, six engineers, and one microbiologist, all of whom are in the House of Representatives. That's less than 2 percent of the legislative body, which grapples with difficult energy issues (not to mention other areas of science) and is tasked with funding some of the most advanced research in the world. Some argue that more scientists are needed in the nation's capital, particularly as the nation grapples with complex policy questions surrounding climate change.
"Don't leave out public policy," former Energy secretary Bill Richardson urged engineers, chemists and physicists attending an energy conference Saturday at Moniz's employer, MIT. "Don't leave out running for office." ( Continue… )
The Sunrise Power Project (shown here in 2001) was owned and operated jointly by Edison Mission Energy and Texaco Power and Gassification. Edison Mission Energy has filed for bankruptcy as the fracking revolution changes the energy landscape. (Robert Harbison/The Christian Science Monitor/File)
Wholesale power: bankruptcies and lessons
Energy Future Holdings (EFH), the massive Texas electric holding company, formally warned last week that it might need to seek bankruptcy protection. A little more than five years ago EFH was created as the vehicle for the most expensive leveraged buy-out in history when a private equity group led by KKR, TPG and Goldman Sachs bought the Texas energy company at a price of $43.2 billion.
Questions of the company's survival have circulated for years as doubts have grown over EFH's ability to meet obligations on more than $38 billion in debt.
Is this just another narrative about how the fracking revolution, and the associated collapse in natural gas prices, is reshaping America's energy landscape?
The answer is that and more. While the foundation for this story is the huge miss by the buyers on a bet about future natural gas prices, the whole story is complex and evolving, with fascinating historical context - the implications will be far reaching. ( Continue… )
US oil production is headed back up after a long decline, but it's not enough to push the US back to its peak level in 1970. (Energy Information Administration)
US oil production: Don't believe the hype
The way the oil industry is touting gains in U.S. crude oil production, you would think that production was soaring to new all-time highs. But the facts say otherwise. Above is a monthly production history through December 2012.
Production remains well below the peak achieved in 1970 and below a secondary peak—a lower high, if you will—which resulted from the ramp up of production in Alaska. But, as the graph shows, after that it was relentlessly downhill until just recently.
It is true that a new form of hydraulic fracturing—high-volume slick-water hydraulic fracturing—has made available sources of oil not previously accessible. But is it also true that the industry’s hyperbole doesn’t square with the evidence. The U.S. Energy Information Administration’s (EIA) latest estimate of technically recoverable oil from so-called tight oil deposits—the ones suitable for hydraulic fracturing—is 33 billion barrels (see below). It sounds like a lot. But, in fact, it would only supply the United States for about 6½ years. Not bad; but not a world-changing number, especially when you consider that all oil goes onto the worldwide market where that amount would last a little over a year.
But there is another column in the EIA chart above that is worth focusing on, the one labeled “% of Area Untested.” (Click on graphic above left.) We actually know every little about the potential for the country’s tight oil (often mistakenly referred to as shale oil). Many areas haven’t been drilled at all and in others drilling has only just begun. There is reason to believe that all may not go as planned since in areas already drilled, drillers have focused on a few sweet spots that have proven profitable. That just makes sense. But, it suggests that they must now venture beyond those sweet spots to find additional supplies from deposits that will be more stubborn and thus more expensive and difficult to exploit. No one is certain how drillers will fare. But logic suggests that production growth will slow and then stop at some point—and a decline will begin in earnest. ( Continue… )
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