Tuesday, July 31, 2012

Obama's War On Coal Leaves US Vulnerable

Energy Fix
The coal-fired electricity projected to be retired over the next five years is more than four times greater than retirements executed during the preceding five-year period, a mere 6.5 GW by comparison. The estimated 9 GW of coal-fired capacity retirements expected in 2012 will likely be the largest one-year amount EVER. And that record likely won’t stand very long because 10 GW are projected to be retired in 2015.

...The risks of brownouts and perhaps even blackouts on weekdays challenged by extreme weather loom as a growing risk that could trigger a backlash against emissions regulations, renewable sources of electricity and competitive power markets. _EnergyFix
As Obama fulfills his campaign promise to green supporters to put coal plants out of business -- and to prevent the building of new coal plants -- he is placing the US power grid and US industry in an increasingly vulnerable position.

Obama mad grand promises about the potential for "green energy" and "green energy jobs", but out of the tens of billions wasted on green energy projects, almost all are either bankrupt or struggling.

Put simply: Green energy cannot replace coal

Reading the entire analysis at the energy collective will help you to understand just how badly the green strategies go wrong. You will get the barest hint of how much this grand green strategy will cost American power consumers.
Based on this analysis of replacing all U.S. coal power with clean energy, total U.S. CO2 emissions would also be reduced by almost 22% from 2005 levels; the ACES base year for target CO2 reductions. Assuming other clean energy alternatives are competitive to replacing coal power with natural gas & wind clean power (i.e. $51.50/MT CO2), the total average-annual cost to achieve the ACES ultimate 80% CO2 reduction target would be about $220 Billion/yr. This is equivalent to about $1,835 direct + indirect increased Household annual power related expenses or almost 4% of total average gross Household income. _Green Energy Cannot Replace Coal

The reality will be much worse than even the above very sober analysis reveals. The reality is always worse than what the government promises, than what emotionally earnest advocates promise.

Obama's approach to energy and to the economy has been misguided and ideologically skewed.

From offshore drilling to Canadian oil sands to coal to nuclear, Obama's approach to energy has resulted in a stunting of energy production and a slowing of economic growth. The only exception is in tight oil & gas fracking -- and Obama's EPA came very close to trying to shut down that enterprise -- virtually the only bright spot in Obama's entire economy.

The third world and the emerging world show us what happens when bad energy policies are superimposed upon government corruption, debt, and demographic decline. If the current US president is re-elected, we should expect to see the US more firmly set upon a parallel declining path.

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Half of India Goes Dark

"Even before we could figure out the reason for yesterday's failure, we had more grid failures today," said R. N. Nayak, chairman of the state-run Power Grid Corporation. _Reuters

India's energy crisis cascaded over half the country Tuesday when three of its regional grids collapsed, leaving 620 million people without government-supplied electricity for several hours in, by far, the world's biggest blackout. Hundreds of trains stalled across the country and traffic lights went out, causing widespread traffic jams in New Delhi. Electric crematoria stopped operating, some with bodies half burnt, power officials said. Emergency workers rushed generators to coal mines to rescue miners trapped underground. _AP

A modern power infrastructure requires constant upkeep, maintenance, and piece by piece replacement, as various parts inevitably break down and go bad. If a nation -- even a nation of over 1 billion persons -- is unable to support its massive critical infrastructure, the lights will tend to go out from time to time.
Stretching from Assam, near China, to the Himalayas and the northwestern deserts of Rajasthan, the outage covered states where half of India's 1.2 billion people live and embarrassed the government, which has failed to build up enough power capacity to meet soaring demand.

"Even before we could figure out the reason for yesterday's failure, we had more grid failures today," said R. N. Nayak, chairman of the state-run Power Grid Corporation. _Reuters
This is par for the course across most of sub Saharan Africa and much of third world Asia. And it is a preview of coming attractions for much of the developed world, which is being slowly transformed -- piece by piece -- into a reasonable facsimile of the third world, itself.

If people are attempting to maintain a high tech infrastructure which they do not understand, failure is guaranteed. Not merely intermittent failure, but ultimate failure.

The only alternative in such cases is to solicit outside help from those who do understand the technology.

Of course in India's case, there are large numbers of persons who could repair and upgrade the byzantine power grid. But the massive levels of corruption at every level of India's government essentially guarantees that the best persons for critical infrastructure jobs, will not be the ones who are paid to do those jobs.

In Africa, the permanent infrastructure problems are due to a lack of skilled and trainable manpower, and the general inability to pay outsiders to make up for the intrinsic lack of competence. In MENA, where average manpower competence is slightly better than in sub Saharan Africa, oil rich states can pay outside service companies to keep the power on for most of the 24 hour day, at least.

But India is a special case, with almost 1.4 billion people, and perhaps the widest population variance in basic competencies of any large modern or emerging nation -- from very high to very low.

Which makes India something of a preview of coming attractions for much of Europe. Europe's demographic picture is changing very rapidly, to resemble that of emerging nations such as India, or perhaps Brazil.

Perhaps it is time to stock up on long-burning candles?

any connection to the grid remains a luxury for many. One-third of India's households do not even have electricity to power a light bulb, according to last year's census. _AP

Power shortages and a creaky road and rail network have weighed heavily on India's efforts to industrialize. Grappling with the slowest economic growth in nine years, the government recently scaled back a target to pump $1 trillion into infrastructure over the next five years.

Major industries have their own power plants or diesel generators and are shielded from outages. But the inconsistent supply hits investment and disrupts small businesses.

High consumption of heavily subsidized diesel by farmers and businesses has fuelled a gaping fiscal deficit that the government has vowed to tackle to restore confidence in the economy. _Reuters

Of the BRICs, not a single one is up to the task of leading the global economy out of the doldrums. The opposite is more likely to be the case.

So, think! What will faltering economies in the BRIC nations do to global commodities pricing, and the global economic picture as a whole?

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Waterless Fracking Improving, Changing the Game


Brian Westenhaus takes a closer look at waterless GASFRAC of Calgary

Brian Wang also takes a look at water-free fracking

New methods of fracturing deep source rock promise to change the face of the tight oil & gas energy revolution. Eliminating the need to use water should minimise concerns about earthquakes and water contamination.

Originally developed for shale oil extraction in geographic areas that were far too cold to use water due to freezing, Non-Hydraulic Extraction has recently emerged to be asserted as a cheaper and more effective extraction method that does not affect groundwater at all.

Chimera Energy Corp has put in place their procedure for engineering this new method for mass production, patenting, licensing and sales. For a description of how Non-Hydraulic Extraction works, high-speed broadband users may visit

All other Internet speed connections may visit www.chimeraenergyusa.com/investors.html. _FP

More from Russ Steele:
A planned shale gas drilling project in New York state has drawn global attention for its aim to make use of a waterless form of hydraulic fracking – a new technique designed to reduce the pollution associated with controversial natural gas drilling processes.

According to an industry report, the project is focused on using a technology that pumps a thick gel made from propane into the ground as opposed to using traditional methods of hydraulic fracking that make use of a mixture of water, sand, and chemicals to extract natural gas reserves from deep shale formations. Unlike traditional technologies, the gel from the new liquefied propane gas (LPG) fracking method reverts to vapor while still underground, and as a result returns to the surface in a recoverable form. _Russ Steele

As technological innovation discovers better ways to discover and recover new energy supplies, we will always be confronted with new problems and new objections.

But the answer to obstacles is not to lie down and whine, as faux environmentalists are wont to do. Rather the answer is to get busy and devise solutions and viable work-arounds.

The above article is cross-posted from the Al Fin blog

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Monday, July 30, 2012

Waste to Energy: Micro-Channel Fischer Tropsch

Sierra Energy plans to build a municipal waste to liquid fuels plant in Northern California, based upon the scalable microchannel Fischer Tropsch technology developed by Velocys / Oxford Catalysts.

The microchannel FT technology can affordably convert any carbonaceous form of matter -- from biomass to coal to natural gas to municipal waste, etc. -- to high quality diesel fuel and other high value chemicals.
The waste-to-liquids process involves two main operations: production of a synthesis gas (syngas) using a gasifier; followed by FT synthesis. The resulting FT product can then be upgraded via hydrocracking and fractionation to produce a range of liquid hydrocarbon fuels. The fuels produced can be directly substituted for conventional fuels, and are generally of higher quality than those derived by conventional means.

In the commercial demonstration, which will be hosted by SacPort Biofuels, the gasification will be carried out using Sierra Energy’s proprietary FastOx waste gasification process. The FT synthesis will be carried out using Velocys’ microchannel FT reactor technology. Sierra Energy intends to use this commercial demonstration as the basis for the design of a turn-key, waste gasification system called the FastOx Pathfinder.

The FastOx gasifier is a simple derivative of the blast furnace, specifically designed to convert waste; waste is fed into the top of the gasifier while oxygen and steam are injected into the bottom. The injection of oxygen and steam is one of Sierra Energy’s patented innovations. The waste passes through four reaction zones as it descends in the gasifier:
Drying occurs when the hot syngas produced at the bottom of the gasifier rises and passes through the waste in the top zone of the unit, drying the waste as it passes.

Devolatization is where the majority of the organic matter is driven off into syngas.

Partial oxidation occurs when carbon-containing materials in the waste react with the injectors. This reaction creates high temperatures in the range of 4,000 °F, allowing for the thorough conversion of remaining carbon into syngas.

Melting of inorganic compounds results from the high temperatures occurring in the partial oxidation zone. These compounds collect at the bottom of the unit and are continuously removed as inert stone (slag) and recycled metals.

While California's government is attempting to promote this nifty technology for waste to liquids, a more economical use at this time would be on offshore oil platforms and at stranded gas wells -- to reduce the level of natural gas flaring and to make economical use of stranded and offshore gas.

This technology would also work well for decentralised biomass to liquids (BTL) production on a local and regional level -- once the infrastructures for collection and densification of biomass are developed.

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Dumbing Down the Energy Debate

Sometimes you can pack an immense amount of useful information into a single graphical image. Other times a graphical image can appear to contain a large amount of information, but in fact it contains virtually zero useful information. An example of the latter is the graphic below, presented by Real Clear Energy:
It is crucial that the Germans get their energy future right -- they are gambling the future of Germany and all of Europe on getting it right. The result of wishful thinking and self deception in this context is likely to be catastrophic. Openness and honesty are vitally important, at a juncture when Germans are shutting down reliable nuclear plants and are exposing their jugulars to expensive, intermittent unreliable forms of energy.

First of all, the data for the graphic apparently comes from Germany's BDEW, but the Real Clear Energy article refers to their source of information as "Germany!"
Germany reported last week that it has been able to generate 26% of its electricity from renewable resources over the first six months of 2012. This is reflective of its effort to ramp up renewable sources in an effort to close all its nuclear reactors by 2020. Renewable sources provided only 20.45% last year and 18.3% the year before. _RCE
To ascribe a statement to "Germany" is absurd. Energy journalists must be specific about the sources of their information -- in this case a specific agency of the German government.

Secondly, the article refers to "percentage of energy generated" without specifying whether the generated "energy" was used, dumped, or exported. Intermittent unreliable forms of energy cannot be treated the same as energy from dispatchable power plants (gas turbines, hydro turbines, backup storage . . .) or baseload power plants (nuclear, many coal plants ...). In fact, Germany's grid came very close to being destabilised by its vulnerability to intermittent unreliables:
The good wind supply situation in December also showed some drawbacks for grid operation. While wind generation in the North of Germany was at a high level, system stability in the South of Germany was jeopardised. On 8 and 9 December 2011, for instance, Germany had to rely for the first time on capacities of Austrian reserve power stations to ensure security of supply. "As a result of strong wind supply in the North, fully utilised networks in the Centre, and generation congestion in the South of Germany, reserve capacities of Austrian gas and oil-fired power stations had to be used to be able to serve demand. This cannot be in the sustained interest of the energy turnaround. _BDEW

The German government is attempting an impossibility, and is betting its future and the future of its people on a sure loser. Intermittent unreliable forms of energy such as big wind and big solar, are qualitatively different from the stolid workhorses of modern utility grids: baseload and dispatchable power.

Not only is it impossible to substitute intermittent unreliable energy sources for dispatchable and baseload power generation, it is actually very dangerous to attempt anything above 20% penetration of the intermittent unreliable energy sources onto the grid.

Germany's grid is due for greater and greater destabilisation as the government attempts to force utilities to depend more and more upon the intermittent unreliables.

Energy media such as RealClearEnergy.org should be able to recognise disinformation, and have the courage to confront information sources with the fact of their disinformation. This is particularly true in the editorial section, where the above graphic was found.

The information in the graphic above is essentially meaningless, because it omits the crucial data specifying the ultimate use of the "generated energy" and the effect which the "generated energy" had upon the power grid and the rest of the installed power generation infrastructure.

Wishful thinking is okay, in private fantasies. But when the entire future of the European continent is being bet on wishful thinking, the grownups need to stand up and speak out.

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Sunday, July 29, 2012

China's Coal to Chemicals: Guest Post by Rembrandt

Note: The article below is reprinted from the peak oil site "The Oil Drum" to illustrate that even peak oil sites occasionally publish informative and factual material. Most of this information has already been published here at Al Fin Energy over the past few years. But it is always good to encourage the publishing of important, positive information by websites which typically focus on the negative.

The following article by Rembrandt was originally posted at The Oil Drum

In this post, I give an overview of developments in China to create a coal to chemicals industry, primarily using methanol as an intermediary feedstock. In doing this research, to my surprise, I found that the Chinese chemical economy is advancing rapidly in its use of coal as a chemical feedstock, as opposed to crude oil in other countries. In many cases, coal already represents 20% or more of chemical feedstocks, and in special cases such as PVC, the country already sources virtually all of its input from coal. Since China produces 20% of the world's PVC, such transitions have a substantial impact on the global energy system.

The primary raw chemical input produced from coal is methanol, which is produced through coal gasification and subsequently, methanol synthesis and refining (see picture below for overview of process steps).

Figure 1 - Block flow diagram of coal to methanol synthesis. Source: Inouye et al. 2008

Today, methanol is used to produce a wide variety of chemicals including formaldehyde, MTBE, acetic acid, DME, esters, olefins, and other products. These are used for fuels, pesticides, medicines, plastics, fibres, resins, etc. China currently produces approximately 25% of the world’s output of methanol.

Figure 2 - Products produced in the coal to chemical's industry of today. Source: Yang and Jackson 2012

The current status of China’s coal to chemical industry.

Since 2000, China has been investing an increasing amount into the production of coal-based petrochemicals, substituting these for traditional crude oil based processes. The plausible reasons are the cheap price of coal and the strategic desire to be self-sufficient in resource inputs. The industrial base originally focused on five areas of petrochemical replacement. More recently, the industry is gearing up to produce other petrochemicals by Chinese R&D, and through establishing technology partnerships with non-Chinese players such as TOTAL Oil Company.

The five base chemical products currently made from coal in China are:

• Light oil (containing benzene, toluene and xylene) as a by-product of coke oven steel industry operations. The COLO (coke oven light oil) is utilized in the production of aromatics. It has been estimated that approximately 27% of benzene production in China is coming from this source. Benzene is a precursor for tens of thousands of chemical products including cosmetics, drugs, pesticides, lubricants, dyes, explosives, detergents, nylon, polymers, and plastics. Source: Jeffrey Plotkin 2012

• Acetylene used for production of vinyl chloride monomer (VCM) and 1,4 Butanedoil (BDO). VCM is used to produce polyvinyl chloride (PVC) plastics. BDO is used for a variety of plastics, elastic fibres, and polyurethanes. It is estimated that approximately 85% of VCM produced in China is through coal based routes. Source: Jeffrey Plotkin 2012

• Urea and Ammonia used mainly for the production of fertilizers. Roughly 70% of nitrogen fertilizers in China are produced from coal feedstocks, and all expansion in the future will likely be coal, given the lack of natural gas supplies in China. Source: China Fertilizer Consultants 2010

• Coal to Olefins (CTO), also referred to more commonly as alkenes. These are used to process into a large number of other building block chemicals including ketones, carboxylic acids, ethylene, and alcohols. The first commercial plant was started in 2010.

• Monoethylene Glycol (MEG) production, utilizing a new process route based on gasification of coal with several further reactions to obtain methyl nitrate into dimethyl oxalate into MEG. The first commercial plant began operating in 2009 at a rate of 200,000 tons per year.

Future ventures

The country's industry is expanding its current operations rapidly, as well as implementing new process routes. For example, the company Celanese is looking at commercializing technologies to produce ethanol from coal. A few of the upcoming developments include:

• Dow Chemicals together with Shenhua will launch a large multi million tonnes coal to many chemicals plant in 2016, called the Yulin Integrated Chemicals project, for the production of methanol, methanol to olefins, monoethylene glycol, ethanolamines/ethylendiamines, polyether polyols, acrylic acids, acrylic esters, chlorinated methanes, ethylene dichloride, vinyl chloride monomers, and PVC’s. Source: Business Wire 2010.

• A substantial number of companies are planning to expand methanol to olefins production at commercial scales. Currently there are three methanol to olefins plants with a capacity of 1.56 million tonnes, using coal based methanol inputs. Another nine such plants have been approved and are under construction, and thirty such plants are in the planning stage with a combined capacity of 20 million tonnes. It is estimated that half of these projects would be sufficient for China to become self-sufficient in ethylene supply (primarily from Coal).Source: Ken Yin 2012

• PetroChina is planning to build two coal to paraxylene facilities, one of the main building blocks of PTA for the production of polyester. The facilities are planned at a capacity of 1.6 million tonnesSource: Ken Yin 2012

While ambitions exist, the Chinese government has announced that it aims to cap methanol production capacity at 50 million tonnes by 2015. Current capacity is around 40 million tonnes, of which only 50% is utilized. I.E. half of the plants stand idle due to over-expansion of the industry. Beyond the obvious too fast expansion, there appears to be other strategic reasons such as potential competition over coal use for electricity, and restrictions on water availability to produce coal. Some other key challenges lie in the distance of the coal seams to major consumer markets, and competition over other fossil fuel feedstocks from the Middle-East.

Original article by Rembrandt at The Oil Drum

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Turning Waste into Wealth, Drought into Abundance

The massive quantities of cellulose which sit unused and wasted in forests and fields, could be turned into high value cellulosic sugars, fuels, chemicals, and other materials. Here's more on turning cellulose into valuable sugars:
Sweetwater Energy uses a novel technology to produce low-cost sugars from non-food plant materials. The company plans to sell its sugar solutions to refineries, which use it to produce biofuels, biochemicals, and bioplastics.

Initially launched in 2006 under the name SweetWater Ethanol, LLC , the company originally was pursuing a decentralized business model to allow farmers to produce ethanol from crops right on their farms. The company refocused on producing sugar—which can be a key precursor for ethanol as well as for many types of other biofuels, biochemicals, and bioplastics—and changed its name to Sweetwater Energy.

In the spring of 2011, Sweetwater Energy’s team of scientists, led by Dr. Sarad Parekh, devised a way to increase significantly the efficiency of the extraction and fermentability of extracted sugars from a variety of biomass types. The technology generates separate and concentrated individual streams of C5 and C6 sugars.

Sweetwater’s initial $1.2 million seed round closed in February, 2010, financed in large part by Chesonis and Jack Baron, Sweetwater’s President and Chief Operating Officer. That funding, along with grants from the New York State Energy Research and Development Authority and early revenues from Department of Defense research sales to produce jet fuel for the US military, allowed Sweetwater to develop its novel decentralized sugar platform technology. That technology and other recent advances in the Sweetwater laboratories are now being engineered into Sweetwater’s first commercial facilities.

Earlier this year, Sweetwater began operation of its pilot-scale cellulosic sugar processing facility in Rochester, NY. Sweetwater’s chemists and engineers are using the pilot system in conjunction with Sweetwater’s laboratory to test new ways to quickly optimize the extraction of useful sugars from a wide variety of plant materials. Sweetwater is currently constructing a demonstration-scale facility at the same location later this year, which will allow final vetting of the Sweetwater technology at commercial scale.

In April, Sweetwater and BioGasol ApS, a Danish biotechnology company, entered into a strategic partnership through which Sweetwater will use BioGasol’s pretreatment technology—Carbofrac—as part of its overall solution to maximize the amount of sugar that can be extracted from plant-based feedstocks. _GCC
These beetle kills and drought kills are by no means unprecedented, nor are they indicative of anything other than natural cyclic activity.

But it makes sense to make productive use of natural cycles -- even destructive ones. Rather than to allow all of the waste cellulose to lie dormant and be converted into CO2, methane, etc., why not harvest it for productive use?

It takes a significant shift in attitude to approach problems as opportunities. And yet that is the most promising approach which we can take to the inevitable problems which will come our way.

Current crops of politicians, academics, and journalists tend to be whiners by nature -- virtual total losses. Isn't it time we turned them into something useful?

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Friday, July 27, 2012

Schlumberger Invests $1 Billion Yearly in R & D

Schlumberger invests roughly $1 billion a year in research and development, a level it maintained even during the slump after the 2008 financial crisis. That is as much as the mighty ExxonMobil spends; as a share of sales, five times more. The big OFS companies now probably file more patent applications than the oil majors, whose technological skills are largely interpretive. _Economist

Innovations in directional drilling, advanced hydraulic fracturing, and increasing ability to drill more deeply into more types of terrain, are advancing the art of oil production worldwide. The companies which are pushing these technologies the most quickly are largely to be thanked for the revolutions in production across North America -- and in the deep ocean.

Oilfield services (OFS) firms such as Schlumberger are the unsung workhorses of the oil industry. They do most of the heavy lifting involved in finding and extracting oil and gas. They are far less well-known than the oil firms that hire them, but immensely lucrative. Schlumberger, with headquarters in Paris and Houston, earned profits of $5 billion on revenues of $40 billion last year. Its market capitalisation has risen fourfold in the past decade, to $91 billion. That is bigger than several international oil companies, including ENI ($82 billion), Statoil ($75 billion) and Conoco-Philips ($71 billion).

With the price of oil so high, firms are scrambling to pump it out of ever more remote and costly crevices. Over the past decade the oil industry’s annual spending on exploration and production has increased fourfold in nominal terms, while oil production is up by only 12%. The big services companies, which invest heavily in technology (see chart), have been growing by around 10% a year. According to McKinsey, a consultancy, OFS companies grossed around $750 billion last year.

The oil business is likely to grow even more dependent on brainy OFS firms. Global production from mature oilfields is falling by between 2% and 6% a year. In the North Sea it has declined by 6% a year on average since 1999. With global demand for oil growing by 1-2% a year, there are persistent fears of a supply shock. Hence the current high oil prices: even after a 20% fall in recent months, Brent Crude is now around $100 a barrel. Oil firms are searching harder in more remote places, such as the Arctic and the deep seas off Brazil. Operating in such places will require yet more snazzy technology.

Schlumberger is planning more of what it is best at: pushing the technological boundaries of extracting the black stuff. It has recently been busy making acquisitions—including of Smith International, an American drill-bit company, for $11.3 billion—which have given it know-how in most segments of exploration and production. It now hopes to re-engineer the entire process.

The prize of increased efficiencies—delivered in barrels of money, not oil—could be vast. A big deepwater drilling rig costs half a million dollars a day to rent, and can take three months to drill a complicated well. Any OFS company that can shave a few days off that time will be in the money. Drilling is thrilling, and getting more so. _Economist

Investment into innovative oil production and recovery technologies is one of the reasons why peak oil has been pushed back many decades past the time that peak oilers began to predict it. While cultists are chanting "EROEI - EROEI . . ." in darkened cloisters, more ambitious men and women are busy at work, solving problems.

It is a difference in philosophy and outlook, between the doomers, and those who have important things to do.

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Wednesday, July 25, 2012

Versatile Home Power Distribution System for Use w/ EV

The DENSO power distribution system provides both quick DC charging of an EV battery AND emergency home power in the case of a power grid outage.
The V2H system can quickly charge an EV with direct current from the HEMS storage battery, and can supply the electricity in the EV back to the household. In addition, the system can efficiently distribute electricity, including power generated by residential photovoltaic systems (solar panels), to the EV and to the home through the coordination of the HEMS. The two main features of the new system are as follows:
Quick recharging function using a HEMS storage battery. Because an EV is battery-powered, the battery needs to be quickly charged for the car to be practical and functional, particularly when the battery level is low. However, a quick charger uses a substantial amount of power, resulting in an increase in the consumer’s electricity contract/bill and it is difficult to install for household use.

DENSO’s new system can quickly supply the electricity that is stored in the HEMS storage battery to the EV when charging at home, which doesn’t require a dedicated charging device. Within just 15 minutes of charge using the DENSO system, the EV can travel up to about 20 km (12.4 miles).

Eco-V2H function. The HEMS can estimate the daily EV travel distance and household power consumption to best manage the charging and discharging of the electricity of EV and HEMS battery unit. Also, to achieve local production of energy for local consumer consumption, the energy surplus produced by the photovoltaic system can be stored in the EV or the HEMS storage battery as opposed to being sold to the local electric power company.

During the electricity peak time, surplus electricity stored in the HEMS storage battery is supplied back to the house to enable electricity peak shift. These functions require technology to combine electricity supplied back to the home from the EV and commercial power. Moreover, in emergencies such as natural disasters, electricity stored in the EV can be used at home in the same way as the PHV.

Electric vehicles are likely to achieve slow but steady penetration into the private vehicular market. This will call for foolproof home systems which allow for quick EV charging. The ability to utilise stored EV and power system energy in the case of a power outage is an added plus.

Expect more intelligence to be built into such systems, so that they will be able to also integrate and control auxiliary generator and fuel cell backup, for more extended power outages.

More on the DENSO Home Energy Management System (HEMS)
Image Source

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Tuesday, July 24, 2012

Food vs. Fuels? No. Food vs. Everything!

The food vs. fuels debate is being framed in an artificially constrained manner, quite remote from the realities of both food and fuels.

First of all, things which are commonly considered food are being used for producing much more than just fuels. "Foods" are being used to make plastics, chemicals, automobile tyres, and much, much more.

But much more damning to those who engage in such artificial debates, is the fact that the concept of what constitutes "food" is undergoing a radical change. Synthetic foods and unconventional foods are likely to grow far more common as humans learn to live in a much wider range of habitats, where conventional foods may be harder to come by.

In other words, we are approaching an era when just about anything can be turned into food, and when food can be turned into just about anything.

Such a state of affairs clearly makes mincemeat out of any simplistic arguments such as "food vs. fuels."

Even today, only 15% of worldwide maize is used for human food. Most maize (almost 70%) is used for animal feed. Of all the other uses, the production of fuels must compete with a growing range of other economical industrial uses. Food vs. fuels indeed.

But in the future, the breakdown of uses for feedstocks which are often considered "food" is likely to grow far more complex and more difficult to pin down, from year to year.

In an era of dumbed-down schools, skankstream media, and idiocratic government, the most prominent arguments occupying the public sphere tend to be less than meaningful. But you do not have to allow your brain to decompose on such mental fodder. Try to look beyond the commonplace... try not to fight yesterday's wars or fight battles which were meaningless years ago, let alone today or tomorrow.

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Advanced Lessons in Profitable Oil Sands Production

Canadian oil sands production is headed upward, thanks in large part to increasing efficiencies of in situ production methods.

...oil companies... are experimenting with technologies that could unlock even more reserves from what is some of the world's heaviest and stickiest petroleum. The new technologies could also drive down the cost of producing oil in Canada.

One consortium aims to get oil flowing to the surface by sending radio waves from huge antennae pushed through wells deep underground—adopting technology first developed for the U.S. government to eavesdrop on underground bunkers.

Another company is working on inserting electrical heating coils into wells to melt the oil, while other firms are tinkering with petroleum-based solvents they hope to pump into wells to get more oil out.

All the experimentation is aimed at improving a standard method of oil-sands extraction: so-called steam-assisted gravity drainage, or SAGD.

...SAGD quintupled the amount of bitumen that may be possible to recover in Canada, and helped lift Canada's overall recoverable oil reserves to No. 3 in the world, behind Saudi Arabia and Venezuela.

But those reserves are only a 10th of the 1.7 trillion barrels of bitumen found in Canada. Alberta's Energy Resources Conservation Board estimates there are also more than 400 billion barrels of bitumen trapped in carbonate rock formations in Alberta, mostly in a large formation called the Grosmont that stretches across the center of the province.

"If we postulated that 25% of that can be recovered, Canada could move to No. 1" in world oil reserves, said Glen Schmidt, chief executive of privately owned Calgary energy-technology company Laricina Energy Ltd.

...Basic SAGD technology uses two horizontal wells drilled parallel to each other, one above the other. Natural gas is used to boil water into steam, which is injected underground into the top well. The steam heats and softens the bitumen, separating it from the sand, causing it to drip down to the bottom well, which sucks it back up.

Laricina is part of a consortium including large Canadian energy companies Suncor Energy Inc. SU -0.96% and Nexen Inc. NXY +51.82% that is testing replacing the steam with an antenna, developed by Melbourne, Fla., telecommunications-equipment manufacturer Harris Corp. HRS -1.24% After being fed down a well, the antenna blasts out heat, warming the bitumen.

..."If we eliminate steam, we eliminate potentially 60% of the cost of a facility, which is huge," he said. The technology could be ready as soon as 2019.

...Harris and other antenna designers try to reduce electromagnetic heat as much as possible to improve the efficiency of a radio antenna for communication. Harris "realized that we can take our antennae and instead of using them for communications, we can use them as a source of electromagnetic energy that generates heat," Mr. Covell said.

Athabasca Oil, another big Canadian oil producer, is testing a similar electric-heating technology to unlock bitumen from carbonate rock. The company inserts electric coils, made of the same material as heating elements on a stovetop, into wells. If tests are successful, Athabasca plans to start a commercial project for its technology by 2018.

Laricina and several other companies are also testing adding light hydrocarbon solvents to steam in SAGD wells to boost output. The solvent dilutes bitumen, making it easier to flow.


The bottom line is that oil sands producers are learning how to reduce the cost of in situ extraction of bitumens, while also increasing the overall yield.

Breakeven prices may approach $50 a barrel for some approaches, and yields may improve by 30%. How quickly all of this happens will depend in part upon global oil demand over the next 10 years.

Using nuclear power and heat to economically produce oil sands (PDF)

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Monday, July 23, 2012

A New Era for Deep Sea Drilling

So far this year, upstream operators have made 22 announcements of oil and natural gas discoveries in water depths of 4,000 feet and greater, compared to 37 such discoveries in all of 2010, Simon Johnson, vice president of marketing and contracts for Noble, said during the company's earnings call July 19. The average water depth of the finds is 6,400 feet, although the deepest this year so far is offshore Mozambique in 7,400 feet of water. _Platts

After the Deepwater Horizon disaster, many analysts seemed to write off the prospects for future deepwater and ultra-deepwater energy drilling. But the 70% of the Earth's surface is covered by water, and it is to be expected that many of the rich oilfields yet to be discovered, lie deep beneath the waves.
The newest ultra-deepwater rigs coming into the market these days are equipped to drill in 10,000 feet of water, and can gear up for waters 12,000 feet deep with some added equipment. The most state-of-the-art rigs can also drill 40,000 feet below the mud line. That is well past current needs; the deepest well ever drilled so far in the US Gulf, for example, lies in about 10,000 feet of water and the deepest total depth has been about 35,000 feet. And so far, 10,000 feet is about the water depth limit of US areas now open to leasing.

But ultra-deepwater--loosely definfed as water depths of 7,000 feet and greater--isn't the only market segment doing well. Deepwater--again, loosely defined as water depths around 4,000 to 7,000 feet--also is doing well. Michael Acuff, senior vice president of contracts and marketing for driller Diamond, said rigs for that class are fetching dayrates in the high $400,000s to low $500,000s.

And even the midwater market for rigs that can drill in no more than 1,000-4,000 feet of water is performing well, and dayrates there also continue to increase, he said. _Platts

It is good to reflect repeatedly upon the fact that if not for the corrupt and incompetent state oil & gas companies of MENA, Russia, Venezuela, Mexico etc., the international oil companies might have been kept quite busy pumping all the oil they could sell, from conventional land-based wells. No other land mass on the planet has been explored for oil so thoroughly -- by a factor of one thousand -- as North America. And yet, prospectors are still finding new locations for rich wells across that "over-explored, over-drilled" continent.

It stands to reason that if the vast land expanses of Asia, Africa, Latin America, and elsewhere were explored to the same extent as North America -- and if those lands were open to production by the most highly skilled and competent oil producers on the planet -- that conventional oil production could easily put deep sea oil, tight oil, and heavy oil / oil sands out of the running.


Tight Oil & Gas in US; Global Tight Gas

The Energy Information Administration annually updates its estimates of the technically recoverable resources (TRR) in the nation’s major oil and gas fields. In recent years this has become a more uncertain process as attention has shifted to shale gas and “tight oil” formations, which have become newly accessible through the technology of hydrofracking. The two graphs [below] represent the latest estimates for the nation’s major formations. _RCE

Shale gas resources (top) are dominated by the huge Marcellus formation, which stretches all the way from Tennessee to upstate New York. The Haynesville-Bossier is on the Texas-Louisiana border and the Eagle Ford and Woodford are also in Texas. The Fayetteville is in Arkansas. The Utica – actually part of the Marcellus formation – is in Ohio and western Pennsylvania. Most of these are now being developed.

With tight oil (below), the largest reserves are actually in the Monterey/Santos formation in Southern California. This area has long been tapped for easy oil but has not yet undergone much advanced extraction. The biggest action has been in the Bakken Shale, which has catapulted North Dakota into second place ahead of Alaska and behind only Texas as the biggest oil producing state, reducing unemployment to 3 percent in the process. As big as the Bakken is, the Niobrara, which spans western Nebraska, western Kansas and eastern Colorado, is actually larger. All this is what is now encouraging prognosticators to say that America may be able to make drastic reductions in its dependence on foreign oil.

Of course there are also vast reserves of shale gas and tight oil in other parts of the world as well, which is why the concerns about Peak Oil may also subject to revision. _RCE

Monterey/Santos Largest US Tight Oil Reserves

Outside the US, the vast tight oil & gas reserves may have to wait between 5 and 10 years for the necessary regulations and infrastructure to be contrived.
Exactly how much unconventional gas lurks outside America is a matter for conjecture, but the list of countries with potentially large reserves grows steadily. Canada and Mexico are known to have lots. Australia already produces coal-bed methane and has plenty of shale and tight gas too. South Africa also has big deposits, though a fracking moratorium was announced last year. Argentina and India could join the shale club, and so could countries that already export conventional gas, such as Algeria and Libya. Even Russia and Saudi Arabia, the largest conventional oil producers, have the stuff. But the biggest shale-gas reserves may be lurking in China.

...As in Europe, there is still a question mark over how easily American technology can be applied to China's shale beds. Like Europeans, the Chinese are tightly packed in some parts of the country, and as they become more resistant to centrally wielded power they may object to drilling on their doorstep. China also lacks gas infrastructure to serve shale fields. Much of what it has was built to connect conventional fields to markets. The country has a record of building infrastructure at lightning speed: the Turkmenistan pipeline, for instance, went up much faster than it would have done in the West. Yet coal-bed methane, although in development in China for ten years, in many places still lacks suitable pipelines linking it to markets. And two of China's big shale fields are in the parched far north-west of the country, far from the water needed for fracking.

Sinopec extracted gas from test wells in Sichuan in March, but it could be years before the gas starts flowing in earnest. Still, if all goes well there may be plenty. The IEA says that total gas production could increase fivefold by 2035, to 475bcm, of which 390bcm would come from unconventionals, over half of that from shale.

India hopes to map its shale resources and have exploration rules in place by December 2013. But it is short of water, and locals are often chary of drillers and miners. Argentina's hopes of getting at its shale probably took a blow when its government recently took control of YPF, a formerly state-owned oil and gas company that had been sold to Spain's Repsol. All in all, it is likely to be a decade or more before shale has much of an effect on global gas markets and pricing systems outside America. _Rigzone quoting Economist
China does not actually have to fully develop its tight gas resource. It can simply hold the possibility of such development over Gazprom's head, in negotiating more reasonable gas rates. Meanwhile it can develop whatever infrastructure is needed to build tight gas production over the next 10 or 15 years.

Over that same time period, expect next generation nuclear power to experience rapid development -- which will help take much of the electrical power load, and will provide cheap, high quality industrial process heat to make unconventional hydrocarbon energy & fuel production more affordable and competitive.

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Median Breakeven for Tight Oil is $52 per Barrel

Many tight oil projects achieve payout of the capital invested very quickly because so much of the economic value comes out in the first year, he said. According to Peters & Co. estimates, a median tight oil project is economic, with a 10% rate of return, at around US$52 a barrel. _Financial Post_via_GWPF

Improved technologies for production of tight oil and oil sands will allow for more and more economical production of these formerly uneconomical forms of crude. By shifting to in situ production, for example, Canadian oil sands producers can reduce breakeven costs from above $80 all the way down to around $60 a barrel.

Now if Americans can either get rid of Obama, or convince Obama to sign off on Keystone XL and other crucial projects, they may revive their economy, while being able to temporarily go back to exporting oil.

And as long as North American tight oil projects provide rich profits as early as the first year, we can expect to see production in North Dakota and Texas continue to ramp up. This boom is likely to last for at least 10 to 20 years, if not longer.

North American tight oil (& gas) alone is not likely to change the world appreciably. But oil prospectors have barely begun to explore the tight source rocks of the world for their riches. Why should they, when there is so much conventional oil still being found in the hinterlands and deep under the seas?

But the resource is there, and likely to be much richer than currently assumed, when and if it is ever needed.

Finally, the US had best move quickly ahead with development of the next few generations of nuclear power technology. That will assure the world of several tens of thousands of years of abundant electrical power and cheap high quality industrial process heat.

Perhaps the Russians, the Saudis, and the Mexicans can get away with oil-based over-complacency, but Americans and Canadians had best stay on their toes.

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Saturday, July 21, 2012

Green Energy: A Bust in the US, Europe, ...

Instead of trying to pick winners and losers, the private sector message to the Government is clear—create a competitive marketplace with fair rules, no subsidies and turn the private sector loose.  The genius of America is our ability to continuously reinvent ourselves to adapt to change.  The failure of government is impeding that disruptive innovative change. _Private Sector -- Not Government -- Creating almost all new energy

The Obama administration has compiled a long list of investment losers. These green companies gone bust, are only the tip of the iceberg of funds misallocated by the Obama administration in pressing its destructive green agenda:
Abound Solar consumed $70 million of its $400 million Energy Department loan guarantee. The company, based in Loveland, Colo., blamed Chinese subsidy payments and European subsidy cuts for falling prices in its thin-film-panel sector. On July 2, Abound Solar filed for Chapter 7 liquidation and prepared to lock shop and fire its 125 employees.

Solar Trust envisioned Earth’s largest solar-power plant. DOE enthusiastically offered it a $2.1 billion loan guarantee in April 2011, provided that it raised private capital. Interior Secretary Ken Salazar attended the company’s groundbreaking in Blythe, Calif., and hailed “a historic moment in America’s new energy frontier.” Solar Trust missed DOE’s benchmarks, however, and filed for Chapter 11 bankruptcy on April 2.

Energy Conversion Devices, a solar-laminate supplier, received a $13.3 million stimulus tax credit in January 2010 to update its factory in Auburn Hills, Mich., and to hire some 600 people. ECD pleaded Chapter 11 bankruptcy on Valentine’s Day.

Ener1 received a $118.5 million DOE stimulus grant in August 2009. Vice President Joe Biden traveled to Greenfield, Ind., to tour Ener1 on January 26, 2011. “Here at Ener1,” Biden said, “we’re going to harness electricity and bring it to the world, like Edison did more than a century ago.” The electric-car-battery company filed for Chapter 11 bankruptcy on January 26, 2012, exactly one year after Biden’s visit.

Aptera Motors aspired to build three-wheel electric cars. DOE offered it a $150 million ATVM loan, conditioned on Aptera’s raising $150 million in non-government capital. Aptera never convinced private investors to finance glorified tricycles. So, on December 2, CEO Paul Wilber announced that “after years of focused effort to bring our products to the market, Aptera Motors is closing its doors, effective today.”

Massachusetts-based Beacon Power Corp. received a $43 million loan guarantee in October 2010 — DOE’s second such subsidy. The energy-storage concern declared Chapter 11 bankruptcy on October 30, 2011.

Solyndra, the most notorious of Obama’s green-energy baubles, filed for bankruptcy on August 31, 2011. Taxpayers are liable for this solar-panel maker’s $535 million in loan guarantees — the first that DOE made under Obama.

In death, Solyndra has proved anything but green. As San Francisco’s KCBS-TV reported in April, Solyndra’s facility in Milpitas, Calif., features metal drums marked “hazardous waste.” Cadmium, lead, unidentified black chemicals, and othertoxins haunt the premises. A company called iStar said it would remove these poisons — as soon as Solyndra pays its bills.

Solyndra also discarded still-valuable solar-panel components, even though selling them could have generated capital to reimburse its creditors, including America’s taxpayers.

In June 2009, SpectraWatt scored a $500,000 grant from the PV Technology Pre-Incubator project of DOE’s National Renewable Energy Laboratory. In June 2010, it received $150,000 from the National Science Foundation. Facing stiff Chinese competition, this solar-cell manufacturer closed its factory in Hopewell Junction, N.Y., and dismissed all of its 117 workers in April 2011. SpectraWatt filed for Chapter 11 bankruptcy protection on August 19, 2011.

Raser Technologies received a $33 million Treasury Department stimulus grant in February 2010. As its dreams of a geothermal plant in Beaver County, Utah, turned to steam, its payroll subsequently evaporated from 42 workers to 27 to 10. Raser declared Chapter 11 bankruptcy in April 2011.

Despite the bankruptcy of Mountain Plaza, Inc., in 2003, the EPA decided to inject$424,000 in stimulus funds for that Tennessee company’s “truck-stop electrification” technology. Nonetheless, Mountain Plaza again went bankrupt, on June 3, 2010. EPA officially awarded those funds twelve days later, despite Mountain Plaza’s insolvency and a related lawsuit. _TheGWPF

The same wasteful cycle of green investment and green collapse has occurred on an even larger scale in Europe -- and is likely to get much worse before it gets better.
Chancellor Angela Merkel’s government said it may have to scrap some of its targets for shifting the source of its electricity supply, a move that would water down a commitment to bolster renewable energy in Europe’s biggest economy. Economy Minister Philipp Roesler told today’s Bild newspaper that Germany may readjust targets linked to the plan to exit nuclear energy-generation by 2022 if jobs are threatened.—Bloomberg, 17 July 2012
 Prices for UN-backed carbon credits sank to a record low in morning trading on Wednesday after doubts emerged about European Commission plans to prop up the bloc’s ailing emissions trading market. Carbon prices have fallen to fresh lows at several points over the past nine months as a glut in the supply of EU credits has been exacerbated by sagging demand due to weak European economic conditions.—Pilita Clark and Jack Farchy,  Financial Times, 18 July 2012[
 The end of the world is not going to happen within our lifetimes. That’s the word from Justin Deering, author of The End of the World Delusion: How Doomsayers Endanger Society. “We’re bombarded with end-of-the-world scares practically everywhere you look,” Deering explains. Deering doesn’t care whether the claims arise from religious beliefs or scientific concerns. “It doesn’t matter to me whether they’re a preacher or a scientist, a shaman mystic or an expert researcher. If they’re saying the end is near, they’re wrong.”—Watts Up With That, 18 July 2012
_Benny Peiser
Obama's "investments" that failed, were actually largely payoffs to cronies who helped Obama get elected. If one looks closely enough, he is likely to find a similar political cronyism involved in all areas where green faux environmentalism overlaps with big money politics and government.

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Thursday, July 19, 2012

New Resources Re-Writing the Books on Energy

Intermittent high oil prices over the past 5 years have triggered the expansion of new technologies in hydrocarbon exploration, discovery, production, and advanced recovery. This revolution of new energy technologies has barely begun. As long as prices continue to be held high by a combination of market and political factors, this bonanza of new discovery and production is likely to continue expanding around the globe.
The assumption that the world was at or near “peak oil” has been a driving force behind predictions that the 21st century would be an era of U.S.-China competition... The assumption that there were few major discoveries left to be made also led many to forecast that the Middle East and especially the Gulf region would continue to be a major fulcrum in global affairs...

...none of that looks true anymore. Advances in extraction technology have changed our understanding of the world’s energy future.... the amount of available energy out there may be even greater than we now think. Because the extraction technology is new, and because it is still developing, much of the world has not been surveyed for these unconventional deposits. Both on land and under the sea, there is a lot of territory still to explore.

...Much of the punditry of the last ten years is looking suddenly obsolete; a number of writers are going to hope that some of the books and articles they’ve recently published will be quickly forgotten. _WRM
The peak oil doomer punditry was lucrative enough, as long as it looked as if the world was running out of oil, gas, and energy in general. But the antidote to ignorance is knowledge, and the mainstream energy press has just begun to stumble upon a mountain of knowledge which more astute analysts have been climbing for years now.
...on the bigger stage of world politics, it’s the United States that benefits most from the energy revolution. To begin with, the core objective of the United States—a reasonably stable, orderly and liberal global system—is a lot easier to achieve in an era of energy abundance than in one of tough resource competition. Oil is a lubricant, and the more the world has, the more smoothly things are likely to run. A world in which jealous, competing states are trying to elbow each other aside to access the last few remaining pools of oil is a much nastier place than one in which the whole oil question is a lot more laid back. Abundant energy will also promote global economic growth, an effect that strengthens and stabilizes the world system. It is easier for countries to cooperate when their economies are doing well. There is less nationalist pressure inside countries driving political leaders to take confrontational stands, and it is easier to negotiate win-win solutions and build functioning international institutions when all parties are relatively optimistic about their prospects. _WRM

Walter Russell Mead may be a bit optimistic -- like many other writers -- concerning the political fallout of the new energy technologies. Politicians are unlikely to suddenly grow wiser and less corrupt, simply because the industrial world now has a few more decades worth of hydrocarbons to utilise while converting to more advanced energies of the future.


Wednesday, July 18, 2012

OPEC, Russia, and Green Dieoff.Orgy Biggest Losers in Coming Age of Energy

For nearly four decades, OPEC -- the cartel formally known as the Organization of Petroleum Exporting Countries -- has been a major economic and geopolitical force in our collective lives, driving nations to war, otherwise self-respecting world leaders to genuflect, and economists to shudder....Russia's Vladimir Putin has strutted the global stage, bolstered by gas and oil profits, and Venezuela's Hugo Chávez has thumbed his nose at los Yanquis. _FP

And green dieoff.orgy fundamentalists have pushed governments to abandon reliable and clean forms of energy such as nuclear, in a gigantic, potentially catastrophic scam to force dependency upon exorbitantly expensive intermittent unreliable forms of energy such as big wind and big solar.

But something happened along the way to the great OPEC / Russia / Green dieoff.orgy celebration: humans discovered that clean and affordable energy was not nearly as scarce as they were being told by their green tainted leaders.

Still, one should never underestimate the ability of bad government to convert a great opportunity into an even greater problem. If greens cannot be removed from power, they are likely to continue to overtax, overregulate, and misallocate resources within their unfortunate jurisdictions.
A growing number of key energy analysts say that technological advances and high oil prices are leading to a revolution in global oil. Rather than petroleum scarcity, we are seeing into a flood of new oil supplies from some pretty surprising places, led by the United States and Canada, these analysts say. Rather than worrying about cantankerous petrocrats, we will need to prepare for an age of scrambled geopolitics in which who was up may be down, and countries previously on no one's A-list may suddenly be central global players.

One primary takeaway: North America seems likely to become self-sufficient in oil. "This will be a huge potential productivity shock to the U.S. economy," says Adam Sieminski, director of the U.S. Energy Information Administration, a federal agency. "It could grow the economy, grow GDP, and strengthen the dollar." _FP
And what is true for North America, could also be true for multiple parts of Europe, South America, East Asia, the Levant, and even Africa.

The big losers are:

Unenlightened petrocrats: Oil prices could be lower and volatile in a world of surplus. So for states relying on a single economy such as oil or gas, "it is not a pretty picture," said Morse. He forecasts much political turmoil, and a struggle to keep market share. That includes Chàvez for sure, but could also jostle Teodoro Obiang Nguema, the allegedly corrupt president of Equatorial Guinea, Turkmenistan President Gurbanguly Berdymukhamedov, and Iranian Supreme Leader Ayatollah Ali Khameini.

Russia: Michael Levi of the Council on Foreign Relations led the panelists, plus many audience members, in singling out Russia as a key loser since Putin shows no sign so far of genuine economic diversification. For his state budget to break even, Putin requires an estimated oil price of $117 a barrel. Right now it is 12 percent below that threshold, or about $103 a barrel. Struggling to make up the difference but with no tools other than oil and gas to do so, Putin seems headed for a tougher political experience than in his previous tenure as president in the 2000s, when he rode a wave of public popularity based on a growing and optimistic middle class. When Russians realize their living standard is static or diminishing, they will not be happy.

The green edifice: ...The bar was already high for green-tech companies to compete against the economics of fossil-fuel energy; with lower oil and gas prices, the bar rises higher....

OPEC: With prices dropping and competing supplies flowing from numerous new producers, OPEC will lose much relative influence, and may simply cease to be a pivotal economic player. "OPEC will descend into chaos as an organization," said John Hofmeister, former president of Shell USA. "They don't know now how much they are hated by the entire world. But they will find out as things unfold." ... _FP

Of course, if Barack Obama is re-elected president of the US, all bets are off. Obama's war against energy was necessarily curtailed by the need to win re-election. In a second term, no such constraints would be present. In such an event, expect an unending flurry of executive orders tailored to constrict the US energy sector and the US private sector in general.

If you think Obama's first term was a stagnant disgrace, wait until he has carte blanche to go off the rails in any direction he chooses.

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Tuesday, July 17, 2012

Russia Reacts Against the Coming Global Gas Boom

This article was previously published on Al Fin blog

Multiple voices out of Russia have been condemning the global shale gas movement -- deriding unconventional gas as "unsafe," "uneconomical," and "irrelevant." In other words, Russia is running scared, hoping that irrational lefty-green influences over western governments will subdue Gazprom's unconventional competition, before Russia loses all of its lucrative, high priced natural gas contracts.
Poland is just one of many countries suffering under extortionate Russian natural gas prices, which would like to develop its own cheap shale gas resource:
If geologists are right, up to 768 billion cubic meters of natural gas sits trapped in shale deposits deep beneath the surface in Poland, enough to meet the country's needs for the next 50 years and more. The estimates have tantalized Poles with visions of ending their reliance on Russian gas, which warms them through harsh winters but puts them at the mercy of their former masters far more than they would like. _LA Times
Other of Russia's customers looking to slip the Gazprom chains from around their necks include the Ukraine, China, and a number of central and western European nations.
The unconventional-gas bonanza has roughly doubled the gas resource base, a measure of the total gas in the ground rather than what might be economically recoverable. In 2009 the IEA estimated the “long-term global recoverable gas resource base” at 850 trillion cubic metres (tcm), against 400tcm only a year earlier. The main reason for the rethink was shale gas and other unconventionals. Not just America but parts of Europe, China, Argentina, Brazil, Mexico, Canada and several African countries, among others, sit atop as yet unknown quantities of gas that could transform their energy outlook.

...Historical factors have led to another anomaly: much of the gas traded across borders is sold at prices linked to those of crude oil. When gas was first brought to market as a commercial fuel in the 1960s, as an alternative to home heating oil, it made sense to price it against a substitute. But there was also a more subtle reason. Oil was used as an independent price arbiter for Dutch gas in the 1960s and then for Algerian and Norwegian gas in the 1970s because neither side could influence the supply and demand for it. The system persisted as Russian gas came to Europe in the late 1970s. But the economics have changed, and valuing one commodity in terms of another now seems bizarre.

...A more competitive market the world over would doubtless make gas cheaper by breaking the link with oil, but that will be difficult to bring about. Gazprom, Russia’s huge state-run gas producer and supplier of 25% of Europe’s gas, is strongly opposed to dropping oil indexation. A tussle is under way between it and the continent’s big buyers. Some pundits say that gas must eventually become a global fungible product like oil, with regional price differences closing as more gas is shifted in the form of LNG, draining gluts and making up shortfalls in regional production in North America, Europe and Asia......

Gas producers are naturally happy with the high prices resulting from oil indexation, arguing that without them the economics of big gas projects would never work. But Rick Smead of Navigant, a consultancy, thinks there are good reasons for all concerned to want competitive gas prices. He points out that they would reduce regional price volatility and provide gas producers with a broad and flexible market instead of having to rely on a single consumer at the end of a pipeline. That should offer an incentive to make the huge investments required.

If the “shale gale” blowing through America can be replicated worldwide, the huge surpluses it would bring could hasten the advent of a global market. Just as the 20th century was the age of oil, the 21st could prove to be the century of gas. _Economist
In early 2009, at the height of winter, Gazprom withheld gas from Ukraine in a dispute over prices and payment, a shutoff lasting for days that also affected delivery to more than a dozen other shivering European nations. On at least one day in February of this year, Poland detected a sudden 7% drop in supply from Gazprom; some suspect Russia was holding back some of its gas for itself to combat a nasty cold spell. _LATimes

Russia not only stands to lose its ability to extort high gas prices from its customers -- it is in danger of losing many of its customers altogether. Since Russia's government depends upon Gazprom profits to finance many of its "unofficial" expenditures, the crony-ocracy at the highest levels of Russia's government is extremely concerned.

Losing China and Eastern Europe would be a significant blow to Gazprom. But the loss of western Europe might be the final straw, leading to revolutionary changes inside Russia.

These are basic, earth shaking trends which should be taught to every school boy and girl. Unfortunately, almost all school boys and girls are too busy being indoctrinated into climate hysteria and politically correct multicultural mind pablum, to have time to understand what makes the world go around.

Unconventional natural gas is just the beginning. Unconventional liquid fuels are closing in on economic production when oil sells for between $100 and $120 a barrel. As technologies continue to improve, that breakeven price is slowly but surely dropping.

If Russia is to benefit from its vast resources of energy wealth, it had best open itself to foreign investment and development as quickly and cleanly as possible -- cleaning out the destructive corruption and cronyism from top to bottom to make way for a better future for Russia's people.

For if Russia continues down its current path, it is certain to lose everything East of the Urals in a matter of decades, and perhaps everything else shortly thereafter.

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Monday, July 16, 2012

China Has the Most Shale Gas: What's the Catch?

China apparently has vast resources of tight natural gas, waiting to be horizontally drilled, fracked, separated, and produced. But will China achieve the same incredible production bonanza which North American countries are experiencing? Perhaps not.
EXACTLY HOW MUCH unconventional gas lurks outside America is a matter for conjecture, but the list of countries with potentially large reserves grows steadily. Canada and Mexico are known to have lots. Australia already produces coal-bed methane and has plenty of shale and tight gas too. South Africa also has big deposits, though a fracking moratorium was announced last year. Argentina and India could join the shale club, and so could countries that already export conventional gas, such as Algeria and Libya. Even Russia and Saudi Arabia, the largest conventional oil producers, have the stuff.

But the biggest shale-gas reserves may be lurking in China. At the end of last year the IEA estimated the country’s total recoverable resources at 50tcm, over 70% of it in shale beds, most of the rest coal-bed methane. China already extracts prodigious quantities of the latter—some 10bcm last year. Only a handful of test wells for shale gas have been sunk, and it looks as though the geology may make it harder to get at than America’s.

But China has ambitious targets for getting its hands on it all the same. It wants to use a lot more gas to generate electricity and to fuel its expanding fleet of cars. Since 2000 its appetite for gas has grown by around 15% a year as the lights have come on in new towns and cities and the country’s breakneck economic expansion continues. At present gas makes up just 4% of the country’s primary-energy consumption. The latest five-year plan envisages an increase in that share to 8% by 2016. Even then, China will still lag far behind most rich countries, where gas generally makes up a quarter or more of the total energy mix.

Because of China’s vast size, what sounds like a small shift could have massive implications for the global gas market. An increase of one percentage point in China’s consumption is reckoned to equate to 25bcm a year, roughly half of what Qatar, the world’s biggest exporter of LNG, puts on the market annually.

To meet this enormous demand, China will need imports. Pipelines from neighbouring countries (including one of 1,100 miles from gas-rich Turkmenistan) and LNG regasification terminals have proliferated. At the same time China is making big efforts to step up domestic production of both conventional and unconventional gas.

The country’s eventual capacity to produce gas is hard to gauge. It has been seriously tapping its domestic conventional reserves for only a decade, and what gas it has is in inland provinces far from the economic powerhouses on the coast. But offshore deepwater exploration could yet produce considerable finds more handily placed in the South China Sea.

China is pushing exploration of shale gas by encouraging domestic producers to form partnerships with foreign oil and gas companies. BP, Chevron and others are involved in exploration joint ventures with Chinese partners. In the past couple of years Chinese state energy firms have struck multi-billion-dollar shale deals in America with Chesapeake Energy, mainly for shale oil, and with Devon Energy Corp for gas. The deals gave them an opportunity to learn about shale technology from American operators. Yet shale gas is unlikely to make a serious difference to the country’s supplies for several years yet. _Economist

So why might China's experience with shale gas be less prolific than North America's? First, let's look at one reason why Europe may be slow to develop its rich shale gas resource:
'Whoever owns the soil, it's theirs up to Heaven and down to Hell." So goes the ancient common-law principle. Today, however, almost no major country recognizes full subsurface private property rights, except for the United States.

We mention this because that blessing of American jurisprudence helps explain one of the few bright patches in the Obama economy—the booming production of shale gas and, increasingly, oil. The U.S. ranked 159th in GDP growth last year. But in natural gas production, it's now No. 1. _WSJ
European countries do not typically grant mineral rights to private property owners. Without the chance of profit from the riches under their property, owners are likely to strongly resist oil & gas drilling. And they are likely to do so as a large and powerful political block.

In the US, private property owners with mineral rights are willing to negotiate with drillers -- small or large -- for leasing rights. The hope of striking it rich is contagious, and many US private property owners have profited significantly from signing a simple contract.

Also in the US, legal obstacles to mineral exploration and production are generally lower than in Europe and many other countries -- at least when working on private property.

China's wealth is concentrated in the hands of a relative few, politically connected families and state-connected groups. Property rights are few, and mineral rights to anyone but the state and the state-connected are virtually non-existent.

China's people are already unhappy over the expropriation of their limited land rights by local and regional governments who are eager to build new industrial and real estate infrastructure. China's environmental record is extremely poor on all fronts, and the prospect of opening a vast new land-hungry industry which may conceivably -- if done badly -- further endanger China's air and water supplies, must make many of China's land rights activists very angry.

In many locations, this issue will not come up. And when the issue of limited land rights and land expropriation does occur, the governments of China can put their foot down. But in the age of twitter and other forms of easy communication, China's follies can be broadcast to the world more easily than ever. China will have to tread softly.

But in the long run, China may be able to cut its strings to Russia's Gazprom, and slowly reduce its dependency upon coal (freeing up coal for CTL). China may even have enough gas to go into the GTL and LNG industries.

Whether quickly or slowly, this development has the potential to upset global energy markets, and should be monitored.

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Kuntsler's Magical Dreams of Apocalypse

James Howard Knustler's new much-publicized critique of humanity, Too Much Magic, predicts peak oil, the death of the automobile and the fall of the global economy as we know it.

Of course, the strangest thing about this post-apocalyptic obsession is that the post-apocalypses we see are almost always beautiful. Knustler predicts the repopulation of quaint old ports like Troy, New York, as the riverboat and rail trade revive. In his post-apocalypse, the beautiful buildings will be saved, while the strip malls and superhighways will fall. And indeed, there is more than a tinge of romanticism in many of these visions; some combination of Burning Man-style, radical self-reliance and the slow show of the old steamboat culture, before iPhones and the 24-hour election cycle.

In many ways, this is reminiscent of the culture that spawned the Whole Earth Catalog: late sixties conviction that society was on the verge of collapse, combined with a liberal, oddly techno-utopian sentiment that this didn't have to be so bad; we could isolate ourselves from the ugly world and build our own farmsteads of geodesic domes. It's an odd kind of wishful thinking, to fantasize the beauty of a slower world while at the same time trusting technology to forestall the true, ugly disasters of the traditional post-apocalypse: disease, lacking sanitation, mass famine. A clean slate is always romantic, after all, and it's lovely to think of a world where electronic isolation and a scenic train trip are more than just decadence. But there's a hypocrisy to Knustler's charge that we're a society more mired in fantasy than reality, when the art that surrounds his post-apocalyptic world plays off precisely our desire to envision ourselves in a world other than the real. _Isaacson
Peak oil doomer and apocalyptic, James Howard Knutsler, has written a book detailing his magical dreams of apocalypse, "Too Much Magic." Kuntsler has long predicted the collapse of civilisation, with blood running through suburban streets. And he is not discouraged that his predictions seem a bit slow in taking form. More from Peakoil.com:
In his new book Too Much Magic, Jim [Kuntsler] attacks the wishful thinking dominant today that with a little more growth, a little more energy, a little more technology — a little more magic — we’ll somehow sail past our current tribulations without having to change our behavior.

Such self-delusion is particularly dangerous because it is preventing us from taking intelligent, constructive action at the national level when the clock is fast ticking out of our favor. In fact, Jim claims we are past the state where solutions are possible – instead, we need a response plan to help us best brace for the impact of the coming consequences. And we need it fast.
[We now live in] this weird, peculiar period in American history when the delusional thinking has risen to astronomical levels — predictably, really — in response to the stress levels that our society feels. And it is expressing itself as sort of “waiting for Santa Claus and the Tooth Fairy” to deliver a set of rescue remedies to us so that we can continue running Wal-Mart, Walt Disney World, Suburbia, the U.S. Army, and the Interstate Highway System by other means. That is the great wish out there. It is kind of understandable because that is the stuff that we have, and people tend to defend the stuff that they have in any given society and the systems and platforms that they run on. But it is probably a form of collective behavior that is not really going to benefit us very much and really amounts to simply wasting our time, and wasting our dwindling resources, and even our spiritual resources when we could be doing things that are a lot more intelligent.

Here is something I have detected as I travel around the country: there is a clamor for “solutions”. Everywhere I go people say “Don’t be a doomer, give us solutions.” And I discovered that the subtext to all that is they really want solutions for allowing them to keep on living exactly the way they are living now. To keep on running Wal-mart, and keep on running suburbia, and keep on running the highway system, and the whole kit of parts. And what that really means is, that they are looking for ways to add on additional complexity to a society that is already suffering from too much complexity.

So I am trying to propose something a little different. Rather than so-called solutions, I am proposing that we use the term “intelligent responses”, which is not so grandiose. It does not come with a whole grab bag of promises that life is actually going to work out exactly the way you wish. A lot of the intelligent responses that we could be making to our predicament would have a lot to do with decomplexifying and with simplifying. But we do not want to do that; we just want to add more complexity, and that is what some of the wishful thinking and vanities about technology are all about.

We are discovering more and more is that the world is comprehensively broke in every sphere, and in every dimension and in every way. The governments in every level are all broke, the households are going broke, the banks are insolvent, the money really is not there. And the pretense that the money is there has been kept going simply with accounting fraud. And accounting fraud really accounts for most of the so-called “innovation” that we chatter incessantly about – this is at the heart of Too Much Magic and the wishful thinking about technology. We are so intoxicated with this idea that we can create new and wonderful things. And we have absolutely no sense that the new and wonderful things that we created in the money system are destroying the money system.

One of the lessons that used to be at the center of a liberal education, and no longer is, is that life is tragic. And by that I do not mean that happy endings are impossible or that bad outcomes are guaranteed. What I mean is that there are consequences to the things that you do and that everything has a beginning and a middle and an end. And we have to get real with those.

It seems to me that the whole capital issue is going to accelerate hugely over the summer. I really do not see how the Europeans can get out of the box they are in – it really does not look like they are going to be able to form a European fiscal union. And it really does not look like the Germans are going to be willing to print money into a hyperinflation. And so I think that the disappearance of money is going to accelerate, and it is going to be all getting sucked into a black hole over the next six months. And that is going to be the beginning of a broad-based social awareness of the nature of this problem.
The excerpt above is only a brief glimpse into Knutsler's thinking, but it is revealing all the same. Increasingly frustrated that his dreams of doom have not yet come to pass, the apocalyptic prophet inserts more and more urgency into his magical dreams of doom. Much like a magical conjuring, Kunstler seeks through repetition to find the most powerful spell of death, which will finally bring the overblown and crumbling edifice to the ground.

There are many other opportunists who have settled into this economic niche, in an attempt to satisfy the appetite for bloody wishful magical thinking scattered through a dumbed down population. For those who are only serving out their time, without a purpose or dream of their own, the doomer-dreams of others may seem quite compelling. Particularly if they are infused with a self-righteous sense of payback and comeuppance against their enemies.

This quasi-religious apocalyptic feeling which pervades every capillary of such doom cults, is a powerful draw. The more powerful the quasi-religious appeal, the more strongly the true believers deny any sense of religiosity or cultish thinking.

How long can these grifters fool others into giving them money and respect? You might think that as peak oil doom grows less and less likely the grifters would be discredited. But just as in the Y2K hysteria, doomers always find another source of imminent catastrophe. Whether climate hysteria, overpopulation hysteria, pollution hysteria, water scarcity hysteria, collapse of capitalism hysteria -- it all amounts to the same idea: Humans have risen too far in their utter hubris, and will certainly be brought low by the pure force of nature, balance, justice, or whatever you wish to call it.

The sentiment underlying all of the doom hysterias is essentially the same, which makes the particular dooms rather interchangeable. This is very convenient for the doom-sayers, and allows them to shift from one doom to another with minimal inconvenience.

You, of course, have a choice. And you probably have something else to do than to hang on the words of opportunistic doom grifters.


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