In my opinion, too much emphasis has been placed on the alleged strength of public opposition to shale as rationale for not investing. The entrance of Centrica is ironic, given their past statements on shale, but the fact they changed their mind is the key point today. With an eventual commitment of £160 million, the value of the entire company is over $1 billion.
Some, I’m among them, may say Centrica are getting a great bargain, but $1BN is nevertheless a great price for what is still a prospective play. Centrica have essentially anted up, and put a value on European shale assets. Because the M+A between the minnows of European shale gas has been so limited, assessing value has been problematic. Someone serious, putting serious money on the table, is going to bring other players into the game. Centrica’s investment puts down a marker, or benchmark, as to what other assets might be worth.
If you've ever looked at the elements that create the images in a kaleidoscope, they are unremarkable: pebbles, beads and bits of colored glass, all mixed together. But when seen through the viewing end of the device, this mixture creates the illusion of pleasing, colorful and multiple identical designs where, in fact, there are none. It's done with mirrors; and the illusion is convincing to the eye as it looks through the narrow tube that connects it with the mirrors and the colored items on the other end.
Like children looking through a kaleidoscope who are unaware of its actual workings, the media and the public have been misled into believing that early production results in the shale natural gas and tight oil formations in the United States will be repeated again and again across the United States and the world. This has led to exuberant forecasts of energy independence for the United States, an end to the dominance of OPEC in world oil supplies, and fossil fuel abundance for decades to come.
Two important trends cast doubt on this naive view. First, in the United States, home of the hydraulic fracturing "miracle," domestic natural gas production has been flat since January 2012. The shale gas revolution may well be over in the United States as the current production level becomes increasingly difficult to maintain in the face of ferocious decline rates for shale gas wells--rates that range between 79 to 95 percent after just three years according to a comprehensive survey of 65,000 oil and gas wells in 31 U.S. shale plays. This means that at least 79 percent of all shale gas production must be replaced every three years just to keep shale gas production flat! With shale gas making up more than 34 percent of all U.S. production in 2011, merely keeping overall domestic production stable will be a formidable task and, given these decline rates, one with no historical precedent.
Further undermining the abundance narrative, U.S. crude oil production has gone almost flat since October 2012. This is not a long enough period to indicate anything definitive about the trajectory of domestic crude production. But, it comes at a time when reports from newer tight oil plays in Ohio and Colorado have proved hugely disappointing. Ohio pumped just 700,000 barrels of oil from its tight oil fields for all of 2012, an amount being pumped daily from the same kind of fields in North Dakota. In Colorado several years of development of tight oil have only been able to raise production statewide by about 100,000 barrels per day. ( Continue… )
Finally, there's a reason to feel good about sitting in coach.
Packed elbow to elbow with fellow passengers, knees pressed against the seat in front of you, you occupy less space. That translates to more passengers per plane and thus fewer carbon emissions per passenger, according to a study published last month by the World Bank. The economy in "economy class" is as environmental as it is financial.
First-class fliers, by contrast, have a carbon footprint that's as much as seven times larger than the average passenger's, according to the World Bank's study. Not only do first-class passengers take up more space, those first-class seats are also more likely to remain unfilled than economy seats.
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The study comes as airliners push the envelop of luxurious accommodations, while simultaneously aiming to 'green' their operations. Those goals appear paradoxical. Can travelers enjoy the comforts of modern air travel without the guilt of the contrails they leave behind? ( Continue… )
Oil and gas companies have begun to struggle to grow due to their inability to find skilled workers; and tactics such as offering large bonuses and building high-tech training facilities, have not helped.
Maersk Group, the giant energy and shipping company, is trying a new technique to train and encourage new work staff; it is offering a video game called “Quest for Oil: A Sub Surface Gaming Experience.”
In the game the player must make similar decisions to an oil executive in the real world. He must locate and drill into deep oil reserves situated in extreme environments, which vary from the cold, dangerous North Sea, to the blazing heat of the Qatari dessert. Gamers must explore the rocks, use 3D seismic maps, secure licenses, use realistic advice from a team of advisors, and reach production targets faster than their opponents. (Related article: NRG Lures Shareholders with Renewable IPO)
The true aim of the game? The players who earn the highest scores could land a job at Maersk! ( Continue… )
Over the past year, oil refiners have been one of the biggest stories in the energy business. After a few years of lackluster performance, the share price for refiners surged -- in some cases by triple digits -- over the past 12-15 months.
It is important to understand why this happened, so readers can be in a position to profit if these conditions persist.
The slide above was presented by Valero (NYSE: VLO) at the UBS Global Oil and Gas Conference last month, and it highlights some very important points. First it gives transportation costs for oil via pipeline and rail from the oilfields in West Texas, the Bakken, and Alberta into various regions of the country. In 2012 the Bakken-Brent differential spent much of the year bouncing around $20/bbl. Because finished products tend to trade at prices influenced by the price of Brent crude, it should come as no surprise that refiners were chalking up record profits. However, someone had to transport that crude. So the railroads and pipeline companies also fared extremely well over the past year. Warren Buffett owns a railroad that services the Bakken, and a piece of Phillips 66 (NYSE: PSX) which has several refineries in the West and Midwest that have benefited from low-priced Bakken crude.
With a $20 differential, one would expect from the graphic that refiners based along the rail route from the Bakken to the Washington coast or into Northern Oklahoma would fare very well. The railroads serving those routes should also do very well. And in fact many of the refiners whose shares soared into triple digits do have refineries along those routes. ( Continue… )
Gulf countries, whilst rich in oil and natural gas, also have an abundant supply of sun, which makes them an ideal location for solar power technologies, yet despite this fact they lag far behind the rest of the world in terms of capacity installed.
Saudi officials have talked about solar power for years, and even made plans to install 41,000MW over the next 20 years, but whilst China installed 5,000MW in 2012 alone, Saudi Arabia still has virtually no solar generation capacity.
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As solar prices have fallen, and oil prices have risen, Saudi Arabia now has a strong economic incentive to push ahead with its long awaited solar plans. Arabian Business has said that solar power would allow the Saudi’s to save more oil to be exported at over $100 a barrel, whilst at the same time producing electricity for less than half the cost of its current oil-fired power plants. (Related article: A U.S.-China War over Solar Power) ( Continue… )
Last week the 7th Circuit Court of Appeals upheld a FERC plan to apportion costs of new transmission, designed primarily to carry wind from the sparsely populated parts of Minnesota, Iowa and the Dakotas into more populated parts of the MISO region, by spreading the cost of the transmission across ratepayers in the populated regions where the power would be delivered. The decision has been hailed as a victory for renewable energy. FERC's ability to structure recovery from a broad pool of ratepayers to support new transmission capacity for prime renewable development sites that have been undeveloped because they were too remote from existing transmission capacity will create opportunities for many new large scale wind, solar and geothermal developments.
The ruling was challenged by utilities and regulators in Illinois and Michigan on the basis that each state had its own renewable energy mandate and within that mandate there was a preference to meet goals with in-state renewable generation. The argument followed that by forcing its ratepayers to carry these transmission costs FERC was effectively forcing the use of out of state renewable power. The key to the Court's decision was that it viewed the in-state limits as violating the Commerce Clause. In its simplest form the Commerce Clause ensures fairness in interstate commerce and in this case the in-state preference was viewed as creating an unfair advantage for in-state produced power over out-of-state produced power.
The potential ramifications of this decision on renewable portfolio standards (RPS) are significant. Most state RPS programs are structured with a bias for in-state renewable power production, and many (if not all) of these out-of-state restrictions may now be unenforceable. ( Continue… )
Half of California’s Nuclear Generating Capacity Shut Down
I’m still digesting last week’s announcement by Southern California Edison that the utility’s San Onofre Nuclear Generating Station (SONGS) in Southern California will close permanently, nine years prior to the expiration of the facility’s operating license. The plant’s two nuclear reactors were shut down for repairs in early 2012, and the Nuclear Regulatory Commission (NRC) still hadn’t approved the company’s plan to restart them, despite a protracted review. Although this event is quite different from the 2011 Fukushima accident in Japan, its ripples are likely to extend beyond California, where both the state’s electricity market and its greenhouse gas emissions will be adversely affected.
California’s Emissions Could Increase by 6 Million Tons per Year
Before considering how the San Onofre closures will affect the nation’s nuclear industry and generating mix, let’s focus on California. While accounting for only 3% of the state’s 2011 generating capacity from all sources, the SONGS reactors typically contributed around 8% of the state’s annual electricity generation, due to their high utilization rates. That’s a large slice of low-emission power to remove from the energy mix in a state that iscommitted to reduce its emissions below 1990 levels. ( Continue… )
General Motors has decided to offer potential buyers of the Chevrolet Volt as much as $5,000 to incentivise them into making a purchase. Demand for electric vehicles is low, and falling lower, and manufacturers such as GM and Nissan are desperate to try anything to try and increase sales.
GM has already reduced the price of the Volt so some doubt that performing the same trick again will help to boost sales, although Nissan experienced some success when it cut the price of the Leaf battery electric vehicle earlier in the year.
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When first released onto the market nearly three years ago, expectations were high for the Volt and Leaf, but they have consistently failed to meet their sales targets, in fact only a few battery electric vehicles have actually come close to achieving their targets, the Tesla Model S being the obvious example. (Related article: Mercedes SLS Electric Drive Laps Nürburgring in Under 8 Minutes) ( Continue… )
The Westminster explosion that rattled a suburban Denver neighborhood Thursday is being blamed on a natural gas leak.
The blast leveled one house, shattered nearby windows, and scattered shingles, insulation, and other debris across front lawns. Several nearby homes were damaged in the Westminster explosion, but no major injuries were reported.
In the wake of the late-morning blast, authorities were unable to locate three people living in the destroyed home, but by Thursday afternoon, the three residents were safe and accounted for.