Friday, August 31, 2012

Why China Needs North American Expertise to Develop Its Vast Shale Gas Resource

China possesses one of the larges shale gas reserves in the world. But China lacks the native expertise to develop its tight gas resource. China needs outside help.

But China is more in the habit of stealing technology than of working cooperatively with outsiders. Will China's desperate need to develop its natural gas resource force it to learn to work well with others?

Getting shale out of the ground has proved challenging as China’s shale deposits also have more clay than the brittle marine shale of the US, making fracking more time consuming and less productive. This is compounded by lack of infrastructure that makes the shale revolution possible in the US, including an extensive gas pipeline network and oil workers trained in fracking techniques. Issues that might limit this potential include a lack of water resources around China’s western shale reserves and the deep nature of some basins, coupled with hilly terrain. These factors combined with Chinese companies’ relative inexperience are likely to make such projects more costly than their US counterparts... China's main motive for exploiting shale-gas reserves would be for power generation, and perhaps even for gassifying its transportation system. But the resulting natural-gas liquids could also feed big new petrochemical capacities.

China’s recently announced development plans for shale gas production may be overly optimistic, considering the geological complexities of China’s shale formations, according to natural resources expert GlobalData. The report suggests that the geology of China’s shale gas reserves, as well as the country’s water shortages, insufficient pipeline infrastructure, government control over natural gas prices, and environmental issues will all challenge China’s ambitions, despite the country’s extensive plans to support and encourage industry growth. China’s five-year shale gas development plan for 2011-2015, released on March 16, 2012, boasts the target of 6.5 billion cubic meters (bcm) of annual shale gas production by 2015. The plan states that a two-year appraisal of China’s shale gas reserves, an increase in China’s expertise on shale gas technologies, and the development of a regulatory framework will also be accomplished. However, the industry remains cynical of the ambitious production targets.

The Chinese government promises to support the research and development (R&D) of shale gas technology, and will also accelerate the process permitting investors to develop shale gas reserves. A contract management system will also be put into place to control and monitor industry activity. China will also consider the introduction of subsidies for shale gas projects, which will assist companies with obtaining a waiver or reduction of their license fees, priority for land use permits, and exemption of custom duties for the import of shale gas equipment and related technologies which is unavailable in China. Essentially, the government aims to provide an adequate policy environment for huge shale gas development. The construction of natural gas pipelines will be encouraged at shale gas reserves that are close to existing gas pipeline networks, and the construction of small-scale Liquefied Natural Gas (LNG) or Compressed Natural Gas (CNG) facilities will be encouraged at shale gas reserves remote from existing pipelines. However, the development of the domestic pipeline network will take time and money, and this is expected to slow the pace of shale gas development. China aims to achieve a commercial level of shale gas production which has so far only been achieved in North America.

However, Chinese shale gas companies cannot currently use the high performing drilling technologies used to extract shale gas in the US, as further research is needed to adapt the US’s drilling methods to China’s very different geology.... Lastly, the Chinese government is expected to encourage international exchanges and co-operation, yet state control over natural gas prices will keep natural gas prices artificially low, not reflecting the realities of the natural gas market. Shale gas development companies will therefore have little incentive for development, as profitability will be minimal. With the development of shale gas requiring huge capital investment, the industry remains uninspired as government policies, especially on pricing, threaten to remove any financial attraction from the industry.

If China’s plans are successfully implemented, shale gas will change the pattern [of] China’s energy consumption. _China's Race to Develop Its Shale Resource

In fact, China's main motive for developing its vast shale gas resource will be to negotiate better gas prices with suppliers, including Russia's Gazprom. At least in the beginning. Later, China will want to use methane and natural gas liquids as fuels and as feedstocks for chemical processes -- to substitute for oil based products.

China needs to reduce its dependency on oil in any way it can. This will mean eventually using nuclear process heat to convert natural gas -- and coal -- to liquid fuels, chemicals, fertilisers, polymers, and other essential products.

But China desperately needs outside help to overcome the many obstacles it is facing. For this, China will need to discover a new way of honestly working with international commercial entities. Achieving such honest cooperation may be the most difficult obstacle of all for China to overcome.

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Wednesday, August 29, 2012

Neste Turns to Microbial Oil for Diesel & Aviation Fuel

Engineered microbes are capable of rapid exponential reproduction, and subsequent industrial-scale production of chemicals, fuels, pharmaceuticals, and more. The energy and feedstock needs of such microbes can be supplied by biomass-derived sugars, which are becoming more economical every year due to scientific progress in microbial engineering.
Neste Oil has completed the first phase of its project to build a pilot plant for producing microbial oil for use as a feedstock for NExBTL renewable diesel. Construction of the plant is on-schedule and on-budget. (Earlier post.) The first phase will enable the growth of oil-producing micro-organisms, and the following phases will concentrate on raw material pretreatment and oil recovery.

The technology is designed to produce feedstock for NExBTL renewable diesel by using yeast and fungi to convert sugars from waste and residues into oil highly efficiently. It utilizes bioreactors similar to those used in the biotech and brewing industries. Commercial-scale production is expected by 2015 at the earliest.

A wide range of different waste and residue materials can be used, such as straw and sidestreams from the pulp and paper industry, which makes feedstock optimization possible.

....Microbial oil technology represents an attractive option, both because of its efficiency and its sustainability. A number of partners have been involved in this work, including Aalto University. Neste Oil has been working on R&D in this area with Aalto University since 2007, and applied for various patents for technology that can produce microbial oil from waste using fungi in 2010. _GCC
More at the link.

Neste Oil has been one of the leaders in advanced biofuel and renewable diesel production. Up until now the profitability in this area has not been particularly high, but the numbers are improving with every new bioscientific breakthrough.

But in mainstream energy economics, the deluge of energy from tight oil & gas has altered the timetable for many advanced biofuels projects. It is likely that many of of the scheduled projects of Neste Oil and other companies, will be delayed -- in terms of actually coming to market.

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Russa, Gazprom Finally Admit they Lied about Shale Gas

Cross-posted from Al Fin Blog

Gazprom's top managers have for years said that shale gas production would never threaten demand for Russian gas. Gazprom has recently started to change its view...

Russia's economy ministry sees "serious" risks posed by shale gas to the revenue of Gazprom (GAZP.RS) beginning in 2014, as higher supply from the nontraditional hydrocarbons may hurt prices and demand for Russia's pipeline gas.

"Gazprom had undervalued the importance of shale gas, but is starting to look at it seriously," Deputy Economy Minister Andrei Klepach said Tuesday as he presented a weaker outlook for the country in 2012 and beyond.

Russia satisfies about a quarter of Europe's demand for gas, which generates revenue for the budget.

Mr. Klepach added that the ministry also saw a lower outlook for gas prices in Europe, driven by both the euro-zone economic crisis and a higher supply of shale oil and gas from other sources. _WorldOil
After years of denial by Putin and Gazprom's top executives, Russia is finally acknowledging what Al Fin energy analysts have been saying all along. But political deception is nothing new for Russia or Putin. It is only those who still give the Russian government credibility who were fooled.

Meanwhile, Russia is jumping into shale fracking for oil & gas big-time, despite all that Putin has said about the evils of shale fracking. I suppose the shale oil & gas bonanza would look evil to a corrupt pol such as Putin, when it threatened his corrupt system.
Present recovery rates at various tight oil projects across Russia are between 2 to 8 percent. However, tight oil reserves could account for as high as 62 percent of Russia’s total reserves.

In the face of all this, Russia looks eagerly to the success experienced by North America in its shale revolution. The geology of the Bazhenov is quite similar to that of the Bakken shale here in the U.S., meaning fracking could be the solution to Russia’s oil situation.

The Russian oil producer Rosneft has already paired up with ExxonMobil (NYSE: XOM) to jointly work the Bazhenov formation. They will begin drilling in the Bazhenov and Achimov formations in 2013, following completion of an ongoing geological study. Rosneft has also reached an arrangement with Norwegian firm Statoil (NYSE: STO) to develop Russian oil assets in Southern Russia and West Siberia.

Other major oil companies like Lukoil (PINK: LUKOY) and Gazprom (MCX: GAZP) are also exploring ways of developing tight oil reserves.

The Russian unconventional oil and gas market could be heading for a time of profit and success. _Energy & Capital
This development points out some interesting things about Russia's economic future:
  1. Russia's "prosperity" depends primarily on its energy production
  2. For Russia to maintain its production, it must attract the expertise of foreign companies
  3. Everything that Russia has said about the dangers and the inconsequential nature of shale oil & gas, was nothing but a politically expedient smoke screen
  4. Russia needs to exploit its own vast shale oil & gas reserves
There are other interesting tidbits that can be read from between the lines, but that is enough for now.

Meanwhile, Europe's emerging recession is already having an effect on Russian gas profits:
Russia’s Economy Ministry is reportedly cutting its gas export forecast for this year due to sluggish demand from recession-mired Europe.

The forecast is said to be reduced to 193 billion cubic metres (bcm) from an earlier 212 bcm.

A government source has told Reuters that it will also reduce its average export price estimate.

State-controlled Gazprom has a monopoly on Russian gas exports.

Earlier this week the Deputy Economy Minister Andrei Klepach had said the gas export forecast would be reviewed, in the face of competition from US shale gas and liquefied natural gas. _Euronews
This tells us that Russia is reluctant to admit its earlier lies, when it claimed that US shale gas was no threat to future Gazprom profits.

It is important to understand that Russia's budget (official and unofficial) not only depends upon oil profits, but also depends upon gas profits. If Gazprom profits begin to fall because its customers in Europe and Asia begin to develop their own tight oil & gas resources, Russia's government will come under serious financial pressure.

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Germany Begins to Face Its Green Folly

When Germany rejected nuclear in favour of big wind and big solar, few German leaders were considering the consequences of their actions.
"In the next 10 years some investments totaling 150 billion euros ($187.8 billion) will be necessary," Vattenfall Europe chief Tuomo Hatakka told the Sueddeutsche Zeitung. "I assume that the bill for private customers will rise by up to 30 percent to 2020."

He also said the planned shift away from nuclear and fossil fuels towards green energy derived from wind and solar would take longer than expected, citing delays to important projects such as connections to offshore wind parks. _Reuters

Germany is already the second most expensive electricity market in Europe. But it is clearly aiming to be the top most expensive market. This is already playing havoc with industrial customers, but things are going to get worse. Much worse.
Due to the inherent intermittent nature of wind, their wind power system was designed for an assumed 30% load factor in the first place. That means that they hoped to get a mere 30% of the installed capacity – versus some 85-90% for coal, natural gas, nuclear and hydroelectric facilities. That means that, when they build 3,000MW of wind power, they expect to actually get merely 900MW, because the wind does not always blow at the required speeds. But in reality, after ten years, they have discovered that they are actually getting only half of what they had optimistically, and irrationally, hoped for: a measly 16.3 percent. _WUWT
Actually, Al Fin calculated a capacity factor for Germany's wind during 2009, of close to 16.9%, using the figures provided in this article. So a figure over 10 years of close to 16% is quite credible, if perhaps a bit high allowing for official mis-reporting of data -- a type of deception not unknown among activists employed by governments.

Germany's rejection of nuclear and adoption of big wind and big solar, is forcing the country to revert to coal energy -- just to survive. But this "backdoor survival strategy" is not likely to receive much attention in the green-dominated skankstream. Which will be yet one more media crime to place against the growing tally.

Big wind and big solar are so clearly incompatible with modern power grids, that one has to ask why they are being forced down the throats of unwilling utilities, industries, and citizenries?

The answer, of course, rests in the bizarre modern phenomenon of faux environment groupthink. When viewed in its entirety, faux environmental groupthink is building to a $trillion dollar global "enterprise" -- the granddaddy of organised crime scams.

At a time when Europe is sliding into recession, Obama's US economy is mired in stasis, and China's formerly blockbuster economy is slowing rapidly, one would not think that wise governments would want to adopt energy starvation of the green variety as a national, regional, and international policy platform.

But one should never underestimate the stupidity of Idiocratic groupthink.

More: Germany Rethinks Path to Green Future

...the costs are rising at a faster-than-expected rate. The average household in Germany currently pays €144 ($181) a year for these subsidies, and that figure looks set to rise to more than €200 in 2013. In all, it has been estimated that the operators of green power plants have been promised more than €200 million.

Such numbers are big enough to exacerbate social inequalities in Germany. Recipients of "Hartz IV" welfare benefits for the long-term unemployed, for example, receive a fixed sum for electricity and can't afford energy-saving fridges or washing machines. At the other end of the scale, the owners of well-located houses install solar panels on their roofs and are paid for the privilege. _Spiegel


Tuesday, August 28, 2012

Growth In Nuclear Power Will Free Up Hydrocarbons for Fuels and Chemicals

Saudi Arabia's power generation Forty-nine percent depends on natural gas and remaining from liquid fuels with renewable power resources accounting for a negligible share, reported the Kuwait Financial Center (Markaz).

_Power Engineering

By 2020, the Saudi Government is planning to create an additional 30,000 MW of generation capacity. This is as part of its plan to ramp up power generation capacity by two fold by 2030. Many projects are implemented through private participation as well. _Arab Times
As nuclear power assumes a larger share of Saudi Arabia's power production, more valuable liquid fuels will be freed up for export, further enriching the KSA's treasuries.
The Kingdom is planning to build a series of nuclear power plants, which would be capable of generating 20% of requirements by the end of 2030. _CW

In reality, nuclear power is set for rapid growth across most of the world, except for nations such as Germany, the US, Switzerland, and others where the green dysfunction has affected government policy.
Except for Germany, Switzerland and the United States, the race to build armies of nuclear power plants is unfolding.

China's got 136 under development right now. Russia's working on another 53, India's got 46 on the board and even Saudi Arabia's shelling out $100 billion to put 16 in their backyard. And that's about 1/3 of what it'll cost when all is said and done!

Between power plant construction, uranium production and nuclear infrastructure development, there's an absurd amount of money being thrown at about a dozen or so companies right now. How much to be exact?

Well, the big dogs never show their hands. But the most recent nuclear power plant deal shows Korea Electric Power Corporation (KEPCO) sinking its meat hooks into a $20 billion contract in the United Arab Emirates. And that's on a power plant that has a $30 billion build cost.

KEPCO (NYSE:KEP) seems to have made nice with the Saudis too, and it's looking like the company's got most of the Middle East on lockdown for future nuclear deals. Not a bad situation considering some estimates show as many as 43 nuclear power plants now being considered across the region.

Just on Middle East growth alone, KEPCO's looking at a potential $860 billion in the desert. And KEPCO is also rumored to have deals under development in India, Kazakhstan, South Africa, Turkey and Vietnam.

It total, KEPCO's flexing more than $2 trillion worth of nuclear power plant muscle. And we're talking deals that could easily be done in less than 3 years. Now guess how this is going to effect the company's share price? _Energy and Capital
An interesting thought.

Besides freeing up a great deal of oil & gas for international energy markets, new nuclear power plants will generate jobs -- lots of jobs. The worldwide market for trained nuclear workers is set to expand rapidly.

And of course, as scalable nuclear power reactors grow cheaper, safer, more reliable, and more portable, we will see nuclear process being used in the field, to enhance production of liquid fuels from unconventional hydrocarbons -- which represent 10s of trillions of boe.

And the 119th Carnival of Nuclear Bloggers is being hosted at Yes, Vermont Yankee. Many more nuclear stories can be found at the carnival!


Monday, August 27, 2012

Natural Gas to Chemicals:Brasil Steps Up

The abundant naturalgas available globally can be better utilized by increasing its use as a source of chemicals in place of its predominant use as fuel today... The need to further develop these processes as well as other processes for the conversion of naturalgas to useful chemicals remains strong. _Natural Gas Conversion to Chemicals
Image Source

Due to increasing gas production as a side effect of its oil boom, Brasil has been near the forefront of implementation for advanced and scalable methods of gas to liquids and gas to chemicals. Its new gas to chemicals complex in southeast Brasil aims to accelerate the rate of this important and economical substitution of cheap gas in place of more expensive crude oil.
Foster Wheeler AG has been awarded a contract by Petróleo Brasileiro S.A. (Petrobras) for a world-scale grassroots gas-to-chemicals complex in Linhares, Espirito Santo State, southeast Brazil, called Complexo Gás-Químico UFN-IV. Foster Wheeler will provide basic engineering design (BED), front-end engineering design (FEED), and technical assistance and training during the engineering, procurement, construction (EPC) phase through to successful completion of the plant performances tests.

Foster Wheeler will act as integrator for the entire complex, managing the overall BED and FEED, including managing the process licensors and Brazilian subcontractors. The BED/FEED phase is scheduled for completion at the end of 2013.

The complex is expected to produce in excess of one million tonnes per annum (TPA) of ammonia and urea fertilizers, methanol, acetic acid, plus formic acid and melamine, helping to reduce Brazil’s imports of these products. _GCC
As can be seen in the chart above, other regions -- such as MENA, Russia, and North America could also benefit from an accelerated development of cheap natural gas to high value chemicals and fuels.

The most economical means of converting cheap unconventional hydrocarbons into higher value fuels and chemicals, would be to use inexpensive high quality process heat from scalable, factory-produced, gas cooled high temperature nuclear reactors. But we cannot expect to see such reactors coming off the assembly line for another 10 years, unless more enlightened political leadership takes the stage in the US and Europe.

In the meantime, natural gas will be used to fuel its own conversion to higher value fuels and chemicals, which reduces the efficiency and profitability of the overall process. Even so -- as Shell's Pearl plant in Qatar demonstrates -- GTL and gas to chemicals can be a very profitable enterprise.

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Saturday, August 25, 2012

What Green Cronies Don't Want You to Know About Wind

...wind is an inherently unreliable power source. The strength and direction of wind fluctuates in different areas and at different times of the day. Because of this problem, wind-powered energy grids require additional fossil fuel-based energy to balance and stabilize them. The combination of wind-based and fossil fuel-based energy grids drives up the cost of using wind energy, which is then passed onto struggling businesses and worried consumers. At the same time, because of its reliance on stable fossil fuel-based energy, wind energy isn’t decreasing as many emissions as we had hoped.

Wind energy has also proved itself to be economically disastrous. The PTC has cost billions of dollars over the past two decades. After 20 years of burdensome subsidies, the industry generates less than 2 percent of all energy consumed in the United States while costing taxpayers more than $1 billion annually. As a stark indicator of the wind industry health, it shed 10,000 jobs since 2009.

Though unreliable and financially unviable, wind energy is assumed to be at least environmentally friendly. But this is false. Wind energy isn’t as environmentally friendly as special interests and politicians would have us believe. The unspeakable environmental impact on migrating bat and bird populations is just one harmful aspect of the wind industry. An estimated 33,000 to 111,000 bats are predicted to be killed by wind turbines in the mid-Atlantic Highlands alone by 2020. The American Bird Conservancy estimates that U.S. wind turbines kill between 75,000 and 275,000 birds per year, including hundreds of bald eagles. Bat and bird populations are desperately needed to sustain healthy local ecosystems but the wind industry has a proven record of distributing this fragile balance.

...Why haven’t the politicians in Washington come to terms with the realities of wind energy? Recently, the Senate Finance Committee voted to extend the PTC for another year, costing an additional $3.3 billion. Two Republicans on the committee—Sens. Charles E. Grassley of Iowa and John Thune of South Dakota—threw their votes behind an extension of the credit. The wind industry happens to be rather expansive in both of these states and relies on government subsidies for survival.

An American energy policy that caters to misguided environmental interest groups, wind industry lobbyists, and special interest politicians is flat out wrong. Americans deserve an energy policy that embraces reliable, economically viable, and environmental friendly resources. Wind energy is sadly none of these things. An extension of the PTC will simply continue the use of unreliable, costly, and environmental dangerous resources while benefiting special interest groups rather than the nation as a whole. _Dr. Wayne T Brough

Dr. Brough is actually understating the problems with big wind energy in his article above. The cost of forcing unreliable and unpredictable wind energy onto a delicately balanced power grid is incalculable over the long run, due to the many central and peripheral repercussions which are rarely placed on the balance sheet under the proper category.

Europe has already chosen energy suicide by the intermittent unreliables, wind and solar. But it is still not too late for other advanced economic communities to make wiser choices.


Friday, August 24, 2012

Energy Briefs

One-step closer: Biofuel from Biomass
New research from scientists at the University of Georgia who are members of Department of Energy's BioEnergy Science Center (BESC) provides a genetic method for manipulating a group of organisms, called Caldicellulosiruptor, that have the ability to use biomass directly at temperatures over 160 Fahrenheit. The ability to modify the microbes to make the needed fuel products is a required first step for modern industrial fermentations. This allows researchers to combine the natural ability to consume renewable plant materials with an altered improved ability to make what is needed. _PO
Tough industrial-strength microbes that can be programmed to produce the fuels or chemicals desired, should take biofuels and bio-chemicals production to a higher level.

Unlimited high-value chemicals from engineered microbes: Freeing up petroleum can provide a 25% boost to global petro-production!
Although the major products of crude oil refineries are fuels such as gasoline and jet fuel, approximately 20 percent of crude oil is refined, in several complicated, energy-intensive steps, into petrochemicals. These chemicals permeate our daily lives in products ranging from candles and perfume to disposable diapers, toys, tires and plastic packaging, among many others.

As an alternative to crude oil, researchers around the world are studying ways to produce fuels and chemicals from renewable sources, including plant biomass and algae. Current production processes are energy-intensive and generate sugars or oils, which are "intermediate" products. "Then you would take those intermediates and do traditional processing, whether it's biological or chemical," says Pfleger. _PO
So, if we take that 20% of crude oil production that is used for chemicals, and put it back into global oil markets, we achieve what is in essence a 20% boost 25% boost in oil production, in terms of fuels etc...

Sure, it is more complicated than that, since some fractions of petroleum are more suitable for one use than for others, but you can get a vague idea as to why substitution of unlimited renewable chemicals and feedstocks can have a powerful effect on global oil markets.

Why Iowa finds itself at the center of the ongoing revolution in next generation biofuels

New nano-composite material for fuel cells achieves a 5X increase in electric current per milligram of platinum
IBN's new nanocomposite material can produce at least 0.571 amperes of electric current per milligram of platinum, compared to 0.109 amperes per milligram of platinum for commercial platinum catalysts. This is also the first time that a catalyst has been shown to enhance both the stability and activity for the fuel cell reaction with a significantly reduced platinum content. _PO
This is a low level, nuts and bolts type advance in fuel cell mechanics and economics. But with the coming global bonanza of tight gas, we are likely to see increasing use of methane fuel cells for both primary production in residences and small business, and as critical power backup for commercial, municipal, and industrial enterprises.

None of these stories are particularly earth-shaking in themselves, but over time such innovations tend to accumulate, combine, rearrange, and evolve into significant advances.

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The Great Chicago Plutonium Heist

Warning: Plagiaristic satire alert

According to CBS News, thieves are stealing plutonium from an unsecured location near Chicago.
Someone in Palatine, Ill. is sawing the catalytic converters off the bottom of trucks and SUV's, and converting them into cash, CBS Chicago reports.

"High-profile vehicles" that thieves can slide underneath are being targeted in a parking garage near the commuter railroad station, for precious metals such as plutonium and rhodium that are used in the pollution control devices.

CBS Chicago says the thief or thieves are sawing the catalytic converters from beneath the chassis, and peddling the units to scrap metal dealers probably for less than $200 a pop. _CBS News
Okay, you must know that plutonium is not contained in catalytic converters for automobiles. But it is scary to think that CBS News does not know that. This simply confirms what we have known about the skankstream media all along -- it is full of radioactive shite.

By the time you follow the link, CBS may have caught on to its stupid error, and changed the text of the story. Whether they will acknowledge their mistake is to be determined. The modern skankstream -- like President Obama -- is extremely reluctant to admit any weaknesses.

In the meantime, beware the plutonium catalytic converters in you automobiles. Insist on having them changed out for platinum converters as soon as possible.

Screen Capture from This Page 24 August 2012


Thursday, August 23, 2012

Guest Article: The Unlevel Playing Field for Energy

The following article is re-published from Geoffrey Style's Energy Outlook blog. It shines a penetrating light behind the facade that green energy activists have built to try to influence public and political opinion about the intermittent unreliable forms of green energy. Well worth reading.

An editorial in last weekend's Wall St. Journal led me to a recent analysis by the US Energy Information Agency (EIA) summarizing the costs of the federal government's various "subsidies" for energy from different sources.  This is both useful and timely, since discussions of specific subsidies such as the expiring wind production tax credit inevitably lead to questions about how incentives for renewable energy compare to those for oil, gas, nuclear, and other more traditional sources.  As the Journal noted, the EIA stopped short of comparing these incentives on the basis of the relative productivity of different energy sources, but even without that it's still apparent that the category of new renewable electricity--excluding hydropower--received 21% of the federal energy benefits for 2010, while accounting for less than 3% of domestic energy production that year, when oil and gas, which provided 49% of US energy production, received less than 8% of these benefits.  Whether on an absolute or relative basis, renewables receive much more generous federal support than oil and gas.

Before digging further into the EIA's analysis, I should point out an important distinction between the federal expenses and incentives covered in the report and the externalities that are frequently conflated with them.  It is certainly true that many of these energy technologies involve significant impacts that aren't reflected in their market prices, and that the production and especially the consumption of fossil fuels create serious environmental and security externalities. However, to whatever extent federal subsidies address externalities they do so indirectly, at best, and in many cases inefficiently.  The focus of this posting, just like the EIA report's, is on the federal government's cash outlays and "tax expenditures"--deductions, credits, etc.--that have a direct bearing on the federal deficit and debt burden that are the subject of intense debate in this election cycle.

The tables in the report's executive summary reveal several key facts.  Between 2007 and 2010 federal energy subsidies in constant dollars more than doubled to $37.2 B, with most of the increase going to renewables and energy efficiency, except for a sizable bump in low-income energy assistance payments.   $14.8 B of the increase originated with the 2009 stimulus bill, none of which was directed at oil and gas, but which appropriated nearly $8 B to conservation and efficiency.  Overall, renewables received $14.7 B, split 55/45 between electricity and biofuels, while nuclear received $2.5 B and oil and gas $2.8 B.  The latter figure is lower than you'll see elsewhere, because among other incentives that the EIA chose to exclude from its analysis was the Section 199 deduction for manufacturers, which is budgeted at around $1 B/yr for oil and gas firms.  The logic behind that exclusion seems sound, because US manufacturers of biofuels, wind turbines, solar panels and other renewable energy equipment qualify for the same tax credit, and at a higher rate than oil companies.

I was also struck by the fact that oil and gas received just $70 million out of the more than $4 B spent on R&D. If there's one category in which federal expenditures on renewables should be expected to dwarf those for conventional energy, this is it, and they did so by a factor of more than 20 times.  (Coal R&D received more than $0.6 B, presumably for clean coal technologies.)

It's also the case that while the growth of renewable energy output from 2000-10 was dramatic, the relatively smaller net changes in oil and gas output in that period masked the substantial replacement of depleting resources that would have otherwise resulted in a large drop in output, especially for natural gas.  This is precisely the aspect of the mature oil and gas industry at which these federal incentives are aimed, to enable US projects to compete with the international opportunities to which many of these companies have access.

The authors of the report suggested caution in comparing the allocations of incentives to the energy produced by each technology, because some of these incentives were paid for projects still under construction and in some cases represented the front-loading of what would otherwise have been a 10-year stream of tax credits.  Fair enough.  Yet even with the conservative assumption that the entire $4.9 B of non-R&D subsidies for wind power in 2010 came in the form of cash grants in lieu of the 30% investment tax credit for new wind turbines that would produce for 20 years at a 30% capacity factor, that still equates to a subsidy of more than 16% of the average present wholesale value of all the electricity those turbines will produce, using prevailing industrial sector electricity prices as a proxy for wholesale prices.  By comparison, the $2.7 B of oil and gas tax incentives for 2010 represented just 1% of the wholesale value of US production of these fuels, before refining.

A serious debate about the appropriate level of US energy subsidies should begin with the facts, rather than with misperceptions. It should also focus first on the goals of such incentives, before jumping to the details of this tax credit vs. that one.  What do we want these measures to achieve?  If it's simply the promotion of energy production, then the current incentive system looks too heavily skewed in favor of renewables.  If it's jobs, then we should be realistic about how many can be added by such a capital-intensive sector.  If it's the promotion of both energy security and innovation, then at least parts of the current system look directionally right, though I'd argue that we'd benefit from spending more on renewable energy R&D and less on the deployment of mature-but-expensive technologies like wind.  However, if emissions and climate change are our primary concerns, then these incentives are not a terribly effective way to address them.  My own expectation is that regardless of whether the wind tax credit is extended for another year, most of the tax incentives that the EIA assessed here will eventually be swept away by tax reform focused on reducing corporate tax rates to improve US competitiveness, while eliminating loopholes to make the changes revenue-neutral.
_Geoffrey Styles in Energy Outlook
Geoffrey Styles is one of the better energy analysts, willing to look at the larger picture from multiple perspectives. His article above clearly illustrates the falseness of the claims about subsidies to the fossil fuels and nuclear industries so often made by green activists and special interests.

Out of curiosity, I visited some peak oil and green sites to gauge their reaction to Geoffrey Style's piece. Predictably, the groupthink circular jerkulars were outraged to think that anyone might be willing or able to think beyond the constrained limits of their own indoctrination.

But such places are populated by people with nothing important to do. As for the rest of us, we all have problems to solve, so we may as well get to it.

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Wednesday, August 22, 2012

Big Wind is a Disaster

Britain is a world leader in wind with a subsidized program to take advantage of the windiest conditions in Europe. But its program continues to fail. Figures released in early January showed that as temperatures plunged to well below freezing and electric power demand soared, electricity production at Britain’s 3,100 wind turbines fell from an average of 8.6 percent of Britain’s electricity mix to just 1.8 percent. On the evening of Dec. 20, Britain’s average temperature fell to minus 5.6 Celsius. At 6:30 that evening, Britain’s wind farms, which have a generating capacity of 5,200 MW of electricity, were actually generating 40 MW. _Source
Hmmm. 40 MW divided by 5200 MW gives you a capacity factor of . . . . roughly 0.008, or 8 tenths of 1 per cent! Is this the future of energy that US President Obama is boasting about? Sad indeed.
The wind industry is imploding, and the American Wind Energy Association (AWEA) is providing the details. Suffice it to say that there will be no Jay Leno at the next AWEA confab.

With accumulating layoffs, extending the Production Tax Credit (PTC) is increasingly becoming too late. AWEA has been warming about 10,000 job losses by September 1, and now the number is 37,000 in the next seven or so months.

Wind companies are wising up to the fact that consumers don’t like their product. _Master Resource
More details on massive wind industry layoffs at link above.

When politicians from Germany to the UK to the US to Japan continue to double down on stupid, there is likely to be a connecting thread of stupidity behind their stupid decisions. The connecting thread in this case is the global faux environmental movement, along with pseudo-scientific carbon hysteria and climate alarmism.

Politicians have hysterically pursued big wind and big solar -- despite the ruinous economic implications -- out of a crusader's zeal for "green" energy and "green" jobs. Unfortunately, what we are seeing is green ruin across the board.

And as penetration of big wind into the power grid generation ensenble continues to increase -- displacing more reliable and less expensive forms of energy -- we are beginning to see the destabilising effects of big wind on critical power grids.

Most politicians probably never worked an honest day in their lives. Corrupt to the core, depleting the public purse and oppressing the private sector, these top level parasites are lining their own nests and those of their families and supporters. And to hell with everyone else.


Tuesday, August 21, 2012

Gasoline from Biomass at $2.00 per Gallon?

We have looked at GTI / CRI IH2 process of biomass to gasoline conversion several times. Brian Westenhaus reports on some recent advances in the process which increase the feasibility of near to intermediate term biomass-to-gasoline at affordable costs.
GTI anticipates full-scale commercial plants converting 2,000 tons a day will be operating by 2014. Such a plant could produce more than 300,000 gallons of fuel a day, if the larger scale plants operate at the same efficiency as the pilot plants.

The prime driver for the amazingly fast commercial launch is assessments by the U.S. Department of Energy’s National Renewable Energy Laboratory in Golden, Colo., the technology has the capability to produce gasoline at a cost of less than $2.00 per gallon. _Brian Westenhaus
The report by GTI was given at the 244th meeting of the American Chemical Society, and detailed progress made at a 50 kg/day pilot plant.

Article abstract (ACS)

ACS Press Release

The Al Fin Institute for Advanced Bio-Energy has focused upon the use of IH2 for converting algal biomass to fuels, chemicals, polymers, and more. Algae -- both micro-algae and macro-algae -- are some of the most prolific producers of biomass on the planet -- land or ocean. Combining the biomass production of algae with the high quality biomass-to-chemicals conversion of IH2, would seem to be an advantageous approach to advanced biofuels at this time.

Progress toward another advanced approach to biofuels -- fermentation of branched chain alcohols

More progress in bio-butanol research

Advanced biofuels is not about ethanol from corn (maize). The old "food vs. fuels" debate was malformed from its outset, but it is becoming increasingly irrelevant as science and technology leave it behind.

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Monday, August 20, 2012

Real Clear Energy Editors: Dumbing Down the Energy Debate?

The website Real Clear Energy provides a useful service to followers of the energy field. It provides timely links to a wide range of energy stories, as well as informative graphics and editorial commentary.

Editors of such a site should be more knowledgeable and informed on energy issues than the average internet user, and should attempt at all costs to provide an honest view of the energy field.

Here are two graphic images currently being presented on the Real Clear Energy main page, which seem to illustrate either a "dumbing down" of the energy debate, or a subtle type of deliberate obtuseness -- otherwise known as dishonesty.

Take a look, and think it over, considering all the things you should have learned by now about intermittent unreliable sources of energy such as big wind and big solar.

In the above graphic, Real Clear Energy "Editors" make the claim that wind energy added 32% of electrical generating capacity in 2011. But that is a false claim, and the editors should know enough about energy to understand this.

The "capacity factor" of wind is 30% or less of its "nameplate capacity," so one should never treat the nominal capacity of wind as the genuine capacity being provided. Even worse, wind is an intermittent -- innately unreliable -- source of energy. One cannot count on wind for either baseload power or dispatchable power. This means that "capacity" of installed wind energy is essentially meaningless in terms of percentage of overall capacity -- since no one can predict when the wind will blow, or how hard. This makes it impossible for grid managers to plan utilisation of wind energy in any meaningful or useful way.

This graphic purports to show a "dispatch curve" for the summer of 2011. For the sake of the graphic, the editors "pretend" that wind is a dispatchable source of energy, although they later admit that it is not:
The only problem with renewables is that they are unpredictable and not always available. Ordinarily systems operators would charge a premium for this since other units must be run simultaneously to back them up. But because of the great desire to get renewables on the grid, systems operators in some regions have been instructed not to add reliability premiums. This has caused some resentment since other suppliers are not rewarded for their reliability and it adds costs to the system. In the Bonneville Power Authority, dispatchers have now been instructed to give preference to wind even if it means that hydroelectric dams must be operated in a way that endangers fish runs. _RCE
The excerpted paragraph above is the most honest part of the entire editorial. The rest of the piece is smattered by crucial omissions and fudge phrases.

The "editors" claim that renewables are "dispatched" earliest in the dispatch curve because "they are the cheapest." That claim is only true for hydro-power, and by lumping wind and solar together with hydropower, the editors commit a bait and switch. Wind and solar -- not being dispatchable, or predictable -- are far from cheap. The above graphic portrays "load curves" for both a summer day and a winter day. Grid managers utilise dependable and cheap sources of power -- such as nuclear, coal, hydro, and increasingly combined cycle natural gas -- to supply the baseload component. The intermediate and peak loads are supplied by power sources which may be more expensive -- but are more "dispatchable," meaning they can be reliably put onto the grid as needed. Natural gas and hydro -- as well as backup storage -- are often used to supply these loads.

The reliability of the power grid and the power industry determine issues of life or death, 24 hours a day, 7 days a week. For the "editors" of an otherwise useful website to attempt to mislead readers with deceptive quasi-partisan phrasing, and dumbed down or misleading graphics, is something we should be moving beyond -- in a true information society.


Sunday, August 19, 2012

Nuclear Power Blogs Carnival 118

The 118th Carnival of Nuclear Energy Bloggers is hosted at ANS Nuclear Cafe.

Two articles of note:

Brian Wang compares the amount of steel and concrete required to build a nuclear power plant vs. an onshore wind facility vs. an offshore wind facility. Brian finds that nuclear plants are far more efficient in the use of materials -- primarily steel and concrete -- than both onshore wind installations and offshore installations. Interestingly, he also finds that onshore wind installations are much more material-efficient than offshore wind installations.

Thorium MSR blog looks at a recent Washington DC conference on commercialising small modular reactors (SMRs), and makes recommendations to Canada about future investment in new nuclear reactors for process heat in the oil sands.

Environmentalists are a vested interest group, and should always be viewed as such.

Global development of nuclear power is ongoing despite the Fukushima overreaction by politicians and the media

A brief overview of nuclear energy for the general public (h/t Earth's Energy)

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Friday, August 17, 2012

Ample North American Supplies of Oil & Gas Offer Choice

"It is not a question of do we want more oil and gas? It's where do we want to get it?," he [the API's Martin Durbin] said. _Platts

US oil & gas reserves continue to grow at a rapid rate, even while US oil & gas production has skyrocketed. New technologies of exploration, discovery, and production, have revolutionised North American production of oil & gas. It has become a question of which assets concentrate on first.

Despite the relatively rapid depletion rate of tight oil & gas, for example, the massive supplies of this resource should keep production rates growing for decades. And the huge undersea deposits of oil & gas in the Gulf of Mexico and off North America's East, West, and North coasts, have barely been explored -- much less tapped.

And silently, in the background, the massive potential for conversion of unconventional hydrocarbons into high quality liquid fuels and chemicals, is being perfected and slowly becoming more economical.

The final coup de grace to peak oil doom will be the development of scalable, factory-produced high temperature gas cooled nuclear reactors -- which will expedite the cheap production of liquid fuels, high value chemicals, fertilisers, polymers, and much more, from a wide range cheap and abundant feedstocks.
When asked if such increased access to oil and gas resources could lead to more American jobs, 90% of those polled agreed or somewhat agreed, and by affiliation that was 95% of Republicans agreeing, 91% of independents and 85% of Democrats. The telephone poll of 1,016 registered voters in the U.S. was taken August 9-12 by pollster Harris Interactive. (The poll results details are here.

....proved reserves in the US of crude oil and lease condensate were 25.2 billion barrels at the end of 2010, up 13%, or the largest annual increase since 1977, and reaching the highest total level since 1991, according to Energy Information Administration data. Wet natural gas proved reserves rose 11.9% year-on-year to 317.6 Tcf at the end of 2010. On August 14, the US Geological Survey released new estimates for potential additions to domestic oil and gas reserves from reserve growth in discovered, conventional accumulations, with a total of 32 billion barrels for crude, 291 Tcf for gas, and 10 billion barrels of natural gas liquids.

... there will be more production.... Take the total US production of crude oil and natural gas liquids. For 2010, it was 7.5 million b/d, and for 2020, it could be 9.6 million b/d (reference), 8.8 million b/d (low EUR), 10.3 million b/d (high EUR) or 11.6 million (high TRR). _Platts
Even the high predictions will likely prove too low, should Obama be defeated in November. The US private sector -- including the US energy industry -- has been held stagnant by a malignant uncertainty generated by the anti-business attitudes of Obama and virtually everyone in his administration.

In an atmosphere of greater clarity, with more straightforward and less corrupt rules of doing business, US business and energy are likely to revive in dramatic fashion.


Thursday, August 16, 2012

Where the US Jobs Are

This article was previously published on Al Fin blog

In towns and counties across the North American oil patch, there are so many jobs that employers cannot find enough people to fill them. The shortage of employees applies not only to service jobs, but also to government jobs that offer good pay, benefits, and a lifelong pension after 20 years.

In Montana and North Dakota:
Rapid oil and gas development in the “oil patch” of western North Dakota and northeastern Montana has created huge demand for workers—not just in the oilfields, but also in a range of non-oil industries. But so far, the supply of labor—from within and outside the region—has responded slowly to demand. In recent years, job openings have soared and unemployment has dropped to very low levels—below 3 percent in a number of counties. _Desperately Seeking Workers

In Texas:
A freshly graduated petroleum engineer can make $80,000 a year, sometimes with a $10,000 to $20,000 signing bonus tacked on. Roughnecks and truck drivers willing to work killer hours can gross over $100,000 a year. _Chron

In Oklahoma:
Many businesses and government agencies now struggle to find enough workers. Most able-bodied people can double or triple their income in the oil patch.

“If you can walk and breathe out here, you can get a good job,” said LaVern Phillips, president of the Industrial Foundation in Woodward. The county’s unemployment rate hovered around 3 percent in June, 5 percentage points lower than the national average. In some nearby counties, the rate has dipped below 2 percent.

In towns like Woodward, which is home to dozens of oil and gas companies, housing is scarce, hotels are booked solid and vacant jobs are everywhere. _Many Jobs Go Unfilled

Don't get me wrong. There are plenty of Obama administration officials who would like to shut down the oil & gas boom. Many of these spoiled sports work at the US EPA, but some of them work in the White House itself.

But Obama and his anti-private sector activists and energy starvationists have been warned by his re-election strategists that Obama cannot afford to destroy any more private sector jobs -- at least, not until after the election. After the election, they are willing to allow Obama to do his worst.

Just in case Obama is defeated in November, real estate developers across the oil patch are making plans to build thousands of units of rental properties, to take advantage of the swollen populations of oil workers -- and consequent housing shortages -- across the oil boom towns and counties.

The US oil & gas boom has the potential to add almost 4 million new jobs to the US economy, both directly and via add-on stimulatory effects to local economies.

Imagine the state of the US economy, had Obama not gone all-out to shut down offshore oil drilling, coal mining and coal power plants, nuclear power plants, energy production on public lands, and a number of other industries which would have been key to re-building a healthy economy? Instead, Obama drove the US deeper into debt by the $trillions, to pay off crony supporters across the board from unions to trial lawyers to green ripoff lobbies and corporations.

Most people who will vote for Obama, are doing so due to dependency on government payoffs of one type or another. Certainly far more are dependent on government checks now, than when Obama first campaigned for the presidency. Imagine how many people would be dependent on the government after a second Obama term?

It is almost as if Obama is creating a nation of crack ho's, dependent upon a steady supply of government crack.

Without Obama, in 2013 the US economy would have a chance to rapidly re-build, on a more solid basis than an addiction to government handouts and corruption.

Of course, after Obama, the US government debt is so high that even very slight rises in interest rates could put catastrophic stresses on the US federal budget. And once interest rates do inevitably go up, the rate of growth of the federal debt will make it difficult for even a booming economy to pay it down.

But then, with more of Obama, the end result will necessarily be default. And you don't want to know what that would do to the world economy.

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Wednesday, August 15, 2012

A Peak In World Oil Production Just Isn't Going to Happen Soon

A peak in world oil production -- due to supply limits -- just isn’t going to happen anytime soon, perhaps not even in our lives or the lives of our children. _Alex Wilson
Despite multiple failed predictions by peak oilers such as M. King Hubbert, Colin Campbell, Jean Laherrere, Matt Simmons, and the rest of the usual suspects -- living and dead -- peak oilers continue to adhere to their one true faith.
Why are peak oil-ers like Jehovah’s Witnesses? Answer: When the definitive JW prediction of the ‘Day of Wrath’ failed in 1914, they did what false prophets have done in every generation: shifted the goalposts (to 1975 in the case of JW’s—and wrong again). It’s what false prophets do to save face, enabling them to keep fleecing the inherently gullible. Peak-oilers do likewise. _Peter C. Glover

Peak Oil is a religious cult, and like all religious cults it is resistant to objective reality and the changing facts on the ground.
A USGS report of 171 global regions in 2012 further estimates that the world’s undiscovered conventional and technically recoverable oil resources, much of it in deepwater, stands at 565 billion barrels of oil (BBO). That’s a figure that only represents known conventional resources. But it pales in significance when unconventional resources, such as heavy oil, oil sands and shale oil, are taken into consideration. As the USGS reports, the mean estimate for recoverable heavy oil from the Orinoco Oil Belt in Venezuela alone stands at a mammoth 513 BBO. The shale oil potential of Russia’s Bazhenov Formation in Western Siberia may well prove to be 80 times larger than America’s Bakken Formation. At present six of the world’s largest oil fields in Ghana, Mexico, Kazakhstan, Iraq, Brazil and Venezuela (the Orinoco Field) all still await development—the last directly due directly to President Chavez’s anti-West politics. _Peter Glover
As technology of unconventional hydrocarbon production and refinement improves, the distinction between conventional and unconventional oil will continue to diminish on all levels -- technical, economic, and practical.
....the once all-important distinction between "conventional" and "unconventional" oil will break down over time. As technologies improve for very deep drilling (measured in miles rather than feet), such wells will become more common. Fraking will become more common as a strategy for rejuvenating oil fields that had been considered depleted. _Alex Wilson
More and more people who formerly belonged to the peak oil cult, are getting tired of being slammed over the heat time after time with contrary evidence from the real world. Much "backsliding" and slipping away from the one true faith is to be expected in such an environment of cognitive dissonance.

There are conditions under which peaks in world oil production could happen, however. Most of them would be due to political decisions and events, such as war or top down policy change.

But the most hopeful likely cause of a long-term or permanent peak in world oil production would be if humans developed advanced, new generations of nuclear power that allowed them to abandon hydrocarbons for everything except chemicals, plastics, other materials, lubricants, etc.

A large scale move to an electrical infrastructure based upon safe, clean, cheap, scalable, and quickly implemented new generation nuclear power reactors, is the most logical choice that humans could make, if they wish to provide an abundant future for everyone on the planet -- and not just a few.

The current course being plotted by Obama, Putin, the EU, and China's CCP leads to a great deal of suffering, violence, and death.


Tuesday, August 14, 2012

Is $115 / b Oil an Overcooked Price?

Oil prices hit a staggering $115/b yesterday, an amazing number given Chinese growth fears, abject German failures in the euro zone, and flat-lining growth in the US. The core reason prices hit a three month high, is not because of fundamentals, but because oil traders erroneously believe that Israel will go to war with Iran in October to choreograph its ‘nuclear putsch’ in time for US presidential elections. _Forbes

It looks as if big international traders are once again grasping at straws in order to move oil markets. Economic news is almost universally bad -- signalling reduced demand on virtually all fronts. Sometimes big traders have to make things happen, even if nothing wants to happen on its own.
$115/b oil is a one way bet on Israeli strikes on Iran. It plainly has nothing to do with US oil consumption down by 1.1%, unemployment rates above 8%, and more importantly, six consecutive quarters of dampened Chinese growth. The upshot; when the fuse doesn’t light in’s only going to be a matter of time before fundamentals kick back in and prices correct. That raises the thorny question for producer states of how far prices could plummet.

...The lower prices go, the more likely political unrest creates serious supply disruptions affecting physical supplies as producers go offline. That would obviously put a radically new spin on what ‘cyclical’ means as far as price and political instability is concerned, but when we look across producer states, it’s hard to find any major players not sitting on a powder keg of political risk these days. That applies to some of the core producers in the Middle East, Eurasia and Latin America, as well as some of the smaller players that are likely to get caught in the cross-fire first.

...traders willing to fly much above $115/b will get burnt at the top of the market right now... _Matthew Hulbert in Forbes
An artificial inflation of oil prices does nothing to help demand for oil, which is what will drive oil production in the long term.

Like most mainstream media analysts, Hulbert says nothing in this analysis about the active political suppression of energy production in the US, Australia, and several nations of Europe. He says nothing about the incompetent negligence of oil fields in Russia, Mexico, Venezuela, and several other nations where oil production is nationalised. He says nothing about the disruptive conditions in Africa and parts of the Middle East which artificially suppress oil production far below potential levels.

All of those things -- and much more -- should figure into any elementary analysis of current oil prices.

Such basic omissions and oversights provide a vague hint as to why more an dmore people are beginning to think of the "mainstream media" as the "skankstream media." I am not pointing a finger at Hulbert, so much as at the general milieu in which mainstream analysis is floating.

The technology which would make most of this discussion moot -- advanced generation high temperature gas reactors -- is being stalled in all phases of research, development, and potential production.

This technology has the capacity to speed the transition to "the electrical age" by providing the essential energy bridge which will allow such a large-scale transition to occur with minimal economic disruption.

With high temperature gas cooled reactors, several trillion boe from unconventionals become available in an affordable fashion -- competitive with conventional oil. This is important, if a society is in the middle of an important infrastructure transformation such as a large-scale conversion from a hydrocarbon economy to an electrical economy.

Big wind and big solar -- the intermittent unreliables -- cannot survive without massive government supports. They are destructive of any society which chooses to depend upon them, as Germany is soon to discover.

Only advanced nuclear is able to support advanced societies over the long run. But a transition to newer generations of safer, cleaner, cheaper nuclear power will take decades. The key to the transition is to use high temperature gas cooled reactors as an intermediary between the hydrocarbon age and the electrical age.

As soon as Matthew Hulbert and his colleagues in the mainstream begin to catch on to these deeper currents of transition, the sooner their readers will understand what is at stake.

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Monday, August 13, 2012

China's Grand Green Charade and the Idiots Who Believe It

This article is cross-posted from Al Fin blog

China is losing a lot of money on solar -- even more than Obama lost betting on the intermittent unreliable form of energy!
China’s top ten photovoltaic makers have accumulated a combined debt of 17.5 billion U.S. dollars so far, leading the whole industry to the brink of bankruptcy, data from U.S. investment agency Maxim Group showed.
Goodness. That’s 35 Solyndras!

LDK Solar, the world’s second-largest maker of solar wafers, and Suntech Power, the world’s largest solar panels producer, are the mostly likely to be headed for bankruptcy, Maxim noted. LDK reported a net profit loss of 1.08 billion yuan in the first half of this year, with a total liability of 26.7 billion yuan, about 88 percent of its total assets. 2.42 billion yuan of debts will come due in 2013, compared with a cash pile of only 830 million yuan. With its debt-to-equity ratio at 7.4, the Jiangxi-based LDK has already been in insolvency based on corporate accounting standards in the Europe and the United States, according to Maxim. A bankruptcy filing or restructuring could be needed for LDK, it added. _Reason

Unfortunately for the Chinese people, solar companies in China are devastating the landscape with toxic waste on a monumental scale.

And more than half of China's installed wind power lies fallow -- disconnected from the power grid! Imagine all the wasted resources, just to be able to claim a large installed wind power base.

Land Area Required for Various Forms of Generation
But knowledge of the grand green charade of China's wind and solar industries has not reduced the fervour of US green political activists such as Barack Obama or Senator Harry Reid of Nevada. In fact, Senator Reid is indulging in a grand corrupt and nepotistic scheme in his home state of Nevada, involving a public lands give-away to a Chinese solar company and an associated US company involving his own son!

Of course this type of insider political deal is not unusual for either Nevada - style or Chicago - style political operators.

China's grand scheme of infrastructure buildup -- including green infrastructure -- is proving to be something of a big bomb. China has been spending money hand over fist, stalling for time in hope that its big export customers -- Europe and North America -- would pull out of their economic doldrums, and start to buy Chinese products on a grand scale, once again.

China is getting a bit desperate, and cannot help but be relieved every time a foreign sucker -- in Germany, the US, Australia ect. -- gets sucked into another green energy scam.

Yes, China is poisoning itself to build and sell intermittent unreliable products such as big wind and big solar energy generation equipment. But if foreign devils like Harry Reid, Barack Obama, Angela Merkel, etc. are stupid enough to buy this junk at high prices, why not? It's not as if China's people can do anything about it.

More: Is Obama facilitating technology transfer and theft to the Chinese?

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Saturday, August 11, 2012

Oil Prices 2020: Where To, and Why?

Citi is projecting that (PDF) oil costs will stabilise at $80 to $90 a barrel by the year 2020. And a recent report from Harvard's Belfer Center warns that oil prices may fall precipitously over the next several years, due to a coming global oversupply of oil & gas.

How can these analysts be certain that their predictions will be accurate?

Several factors go into setting the price of oil. Supply and demand are both crucial.

In terms of supply, costs of finding and producing a barrel of oil help determine whether it is worth producing that particular oil reservoir:

Production or lifting costs are the expenses associated with bringing oil and gas from the reservoir to the surface, separating the oil from any associated gas, and treating the produced oil and gas to remove impurities such as water and hydrogen sulfide.Worldwide lifting costs have been increasing since 2001 and U.S. costs have been higher than foreign cost since 2004. In 2007, U.S. production costs were $11.25/barrel of oil equivalent (BOE) and foreign costs averaged $8.88/BOE.  These figures include production taxes of $2.90/BOE in the United States and $2.41/BOE internationally.__Petrostrategies 

Costs for Producing Crude Oil and Natural Gas, 20072009
2009 Dollars per Barrel of Oil Equivalent1
Lifting CostsFinding CostsTotal Upstream Costs
United States  Average$12.18$21.58$33.76
All Other Countries Average$9.95$15.13$25.08
    Middle East$9.89$6.99$16.88
    Central & South America$6.21$20.43$26.64
Oil production costs

Although costs for finding and producing oil increased in the first part of the decade beginning in 2000, such costs decreased in the latter years of that decade:
Finding and lifting costs both declined.

Average worldwide finding costs for the FRS companies decreased to $18.31 per barrel of oil equivalent (boe) of reserves added in the 2007-2009 period compared with the 2006-2008 period, a decline of $5.79 per boe from 2008. Finding costs declined in all FRS regions except the Former Soviet Union, Africa, and the Middle East. The U.S. Offshore, which had the highest finding costs among the FRS regions in 2006-2008, had the largest fall in 2007-2009. Europe's costs also fell substantially in 2007-2009. Europe had the highest finding costs among the foreign regions in 2006-2008. Canada displayed a large decline in part likely because of the inclusion of oil sands in 2009.

Reversing an almost decade-long trend, worldwide total lifting costs for the FRS companies fell $2.66 per boe, to $10.04 per boe, in 2009. Total lifting costs also fell in each of the FRS regions except Canada, where they rose $2.49, probably reflecting the inclusion of oil sands in 2009. _USEIA
The fall in lifting costs in the latter part of the 2000s reflects the drop in cost of oil and subsequent reduction in taxation, which is generally tied to market prices.

Another important factor on the production side, is the "fiscal breakeven price" of oil for national oil companies. Many oil exporting nations depend directly upon revenues from national oil companies to finance government budgets. If oil prices are not high enough to balance the government budget, the government is driven into deficit spending. This might be okay in the short term, but in the long term deficit spending to support routine government expenditures, can be suicidal.

Endowed with about 70% of the world's proven oil reserves and 50% of proven gas reserves, MENA oil-exporters play a critical role in the world energy market. Earnings from oil and gas account for about 70% of total exports, and 75% of budget revenues. The global financial crisis and recession affected mainly the oil exporters (as oil prices peaked and then dropped sharply) and the more globalized jurisdictions such as Dubai where the financial sector and the property market suffered severe setbacks. Massive step-up in government spending along with central bank liquidity support and capital injections into the banking sector helped mitigate the impact of the crisis on economic activity. Many governments in the region remain on a path of strong fiscal expansion, especially in the GCC, where real GDP growth in 2010-11 is projected to average 4.2% annually, still below the annual average growth of 8.0% in 2002-2008. _Source
Russia, Venezuela, and several other oil exporting nations are similarly dependent upon high oil prices in order to meet exceedingly ambitious government expenditures.

WTI prices in the $80 to $90 range and Brent prices in the $90 to $100 range, provide oil producers with profitable returns -- in terms of costs of production -- although governments which depend upon higher oil prices than that to balance their budgets (fiscal breakeven) may be forced to pay a price on global financial markets in order to finance budget deficits.

Political decisions made by oil exporting countries in particular, can affect oil supply. Many oil exporting nations have neglected their oil infrastructure, and allowed their production technology to grow decrepit and obsolete. Mexico and Venezuela are textbook examples of this phenomenon, and Russia is not far behind them. All of these countries have deplorable histories of expropriating oil production assets from private oil companies, which will make it more expensive for them to attract the state of the art outside expertise which they will need to maintain production, to support government budgets. Political decisions to go to war or to threaten war -- such as Iraq's Saddam or the mad mullahs of Iran -- can affect oil supplies. Sabotage of pipelines, guerrilla action in oil producing areas, or theft of oil, can reduce supplies as well.

Weather -- such as Gulf of Mexico hurricanes or North Sea storms -- can also affect oil supplies, temporarily.

In the near future, both discovery of new oil and discovery of new technologies for producing crude oil equivalent and crude oil substitutes from unconventional energy sources -- such as natural gas, coal, biomass, oil shale kerogens, heavy oil bitumens, gas hydrates, etc. -- will also affect overall liquid fuels supplies.

In terms of demand, overall global economic growth, stability, and level of prosperity play a big role. Population growth or contraction will likewise contribute to demand from country to country, along with the dynamics of economies. Consumption subsidies and taxes will likewise influence demand for oil. And if the oil price goes high enough -- as it did in 2008 -- demand destruction can be severe, illustrating the influence of oil prices on demand for oil.

Wars and military actions -- along with other governmental actions -- can also produce spikes in oil demand, which can be reflected on oil markets. China's recent economic stimulus and reserve buildup is one example of this.

On a different level, the United Nations -- via its IPCC -- is seeking to institute international policies which would have the effect of radically suppressing carbon use in more developed countries. Such policies of carbon suppression -- if widely instituted -- might artificially reduce demand for oil in OECD countries.

Robert Rapier looks at global oil demand

Beyond supply and demand, market factors as well as political factors often create temporary swings in oil prices. Highly placed and well-connected oil traders may be able to collude with government officials to take advantage of "tripwire" issues that tend to sway global markets, based on specific fears and rumours. Such actions tend to create temporary disruptions for the sake of quick -- though often sizable -- profits.

The oil price crash / demand destruction of late 2008 - early 2009, combined with a recent improvements in technologies for oil production and discovery, may have given both Citigroup and Harvard's Belfer Center the courage to predict oil prices in the $80 to $90 range by the year 2020.

Such predictions should specify future oil prices in constant dollars, for example "2010 dollars," etc. The value of US dollars has been diluted by insane US government fiscal and monetary policy.

Al Fin energy analysts emphasise that the issue of future energy prices hinges upon political decisions made in the US and Europe. If most of the developed world adopts an energy policy similar to Germany's abominable "Energiewende," or Obama's misguided agenda of "energy starvation," all bets are off, and prices would likely skyrocket.

But if the governments of the developed world experience a sudden energy enlightenment and encourage the rapid development of cleaner, safer, cheaper, more reliable, scalable, and rapidly deployable generations of nuclear power, prices could easily go the other direction, spurred by cheap and abundant electrical power and high quality industrial process heat.

These are essentially political decisions. Voters in OECD countries could play a powerful role in their own energy futures, if they were freed from ideological indoctrination by lefty-Luddite green dieoff.orgiasts in government, the academy, and the media.


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