Peak Oil? What Peak Oil?

This is a most interesting blog-op, via The Oil Drum.

The abiotic oil crowd will be particularly interested.

Conspiracy theorists will enjoy it also.

So now there are two countries where oil resources may suddenly exceed that of Saudi Arabia! In fact, it never made sense that the Middle East was the repository of the world's oil. It was just too ... coincidental. The Saudis had all the world's oil and they were willing to cooperate with the US to sell for dollars and nothing else. 

The second country, of course, is Australia.

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Added later, see comments below. From the Platts link, building on the above:

Offshore exploration in the oil industry is percolating furiously like a pot of Maxwell House, and brewing up a handsome lot of discoveries to whistle at.

To that end, here’s a tidbit extracted from the fourth-quarter earnings conference call of contract driller Noble Corporation on January 24.

During the call, Roger Hunt, Noble’s senior vice president of marketing and contracts, said that in 2012, global customers announced 52 deep- and ultra-deepwater discoveries in waters 4,000 feet of water and deeper. This eclipsed by 40% the previous record in 2010 of 37 discoveries.

Of last year’s 52 discoveries, 18 were in ultra-deep waters of 7,000 feet and deeper, including nine in more than 8,000 feet of water.  The 52 discoveries were made in 14 countries, Hunt said.

And industry continues to spread its wings across more and different regions of deepwater drilling, he said. In 2008, the so-called “Golden Triangle” of the US Gulf of Mexico, Brazil and West Africa accounted for 80% of all deepwater discoveries.  But last year, that area only accounted for 47% of total discoveries; the rest were in a diversity of areas throughout the world, said Hunt.

“Only five short years ago, we heard the first mention of deepwater successes in Israel, Australia, Ghana, Sierra Leone and Mexico,” he said. “Now these countries are present in the backlog of discoveries each year … and new areas are surfacing” such as Tanzania, Mozambique, India and the Ivory Coast.

Idle Rambling on a Saturday Night -- Energy, Fracking, But Not the Bakken

Updates

January 27, 2013: electricity is getting so expensive in Germany (subsidizing renewable energy), companies there are moving to Turkey. Sent in by "anon 1." Thank you. Wow, read this:

A 47 percent increase on Jan. 1 in the fees grid operators set to fund wind and solar investments is driving the maker of paint ingredients to Turkey, where next month it will start making a new type of hardening agent at a factory near Istanbul.

Istanbul, Not Constantinople, The Four Lads   Later, 1:16 am: just after posting the article below, Don sent me a great Barron's article that validates the manufacturing boom the US will experience due to cheap energy due to fracking due to lessons learned in the Bakken.

The Rust Belt owes its new shine to many factors, including rising wages and industrial-land costs in Asia. But none is bigger than the U.S. energy boom. Thanks to a head start in extracting oil and gas from shales, North America now produces far more natural gas than any other continent.

Unlike oil, gas isn't easily transported across oceans, and a result is some of the world's cheapest energy within our reach: Natural gas here costs $3.55 per million British thermal units, versus roughly $12 in Europe and $16 in Japan.

Cheap energy not only reduces our trade deficit and our addiction to Middle East oil, it also makes our factories more competitive globally -- a boon for a country that had gone from exporting American goods to exporting American jobs.

The biggest beneficiaries are energy-guzzling companies like chemical producers and steelmakers, and Barron's has identified eight stocks that should prosper in our gas-fueled manufacturing upswing. They are Southwestern Energy, LyondellBasell Industries, Nucor, Dover, Calpine, CF Industries, Williams, and Union Pacific. But any glow will also rub off on regional lenders, home builders, and local small businesses.

"The U.S. is the Saudi Arabia of natural gas," declares Nancy Lazar, co-head of the New York research firm International Strategy & Investment. "And Middle America is my favorite emerging market."

This is not an investment site, but regular readers should be seeing some investment opportunities. However, do not make any investment decisions based on what you read here. 

Original Post

This is a most fascinating article, sort of a fact-filled op-ed.

First the data points:

• the US will become almost self-sufficient in oil and gas by 2035
• the US will overtake Russia in natural gas production in less than two years (by 2015)
• the US will overtake Saudi Arabia in oil production by 2017

Of course, several assumptions are being made .....

But assuming the current administration does not screw this up ....

I wonder about one data point above: "the US." I've argued earlier that looking at "US-only" statistics is inappropriate. For all practical purposes one must also include Canada, and perhaps Mexico. With the exception of the Keystone XL, the commodity border seems to be entirely open between the US and Canada. Canada is a net exporter of fossil fuel as it stands now; I would assume that if the US "will become almost self-sufficient in oil and gas by 2035," North America should be self-sufficient long before then.

One data point not mentioned in the article: Saudi Arabia is now its own biggest consumer of its oil production.

So, now back to the op-ed portion of the linked article at the top.

A US industrial boost following its ability to tap abundant shale gas reserves is provoking fears that imperilled energy-intensive European businesses will find it harder than ever to compete.

But calls for the EU to deliver a ‘silver bullet’ and emulate the US by tapping shale gas through ‘fracking’ remain controversial because of environmental and logistical concerns.

Industrial manufacturers have announced investments of more than $90 billion in the United States to take advantage of its cheap natural gas, according to calculations that underline the revolutionary impact of shale gas on US industrial growth.

Petrochemicals, fuel, fertiliser and steel companies, attracted by cheap energy are amongst those committed to multi-billion dollar investments, according to Dow Chemical, which has announced a $4 billion investment in Texas and Louisiana and calculated the total value of US industrial investments at $90 billion or more, the Financial Times reported in December.

The development has spurred fear amongst concerned European manufacturers that they will be unable to compete in energy intensive sectors. It is clear that industry such as steelmaking, currently slumping in the EU, is shifting towards the United States after decades of decline.

The EU should be concerned. As reported earlier, it is less expensive for Germany to ship iron to the US to turn it into steel, and then shipping the steel back to Germany for specialty-steel manufacturing. That's how cheap our energy is.

Cellulose-To-Diesel Fuel Industry May Be Gaining Momentum -- NY Times; Meanwhile US Court Overturns EPA Rule on Renewable Fuels

Court overturns EPA's rule on renewable fuels:

A federal appeals court threw out a federal rule on renewable fuels on Friday, saying that a quota set by the Environmental Protection Agency for incorporating liquids made from woody crops and wastes into car and truck fuels was based on wishful thinking rather than realistic estimates of what could be achieved.

The court agreed with the American Petroleum Institute; ruled against the EPA. 

But the NY Times said things might be turning around in the "cellulosic" sector:

There are signs that the cellulosic sector could soon gain some momentum. Several companies have invested tens of millions of dollars in building commercial-scale projects. Last year, two companies said they were near production.

KiOR, one of the two companies, said on Friday that it had sold 1,024 gallons of diesel fuel in December that was produced at its plant in Columbus, MS.

If I read that previous paragraph correctly, the cellulose-to-diesel fuel company said it sold about a thousand gallons in the entire month of December, which begs the question: what is the diesel fuel capacity of an 18-wheeler?

About 300 gallons. So, one of two cellulose-to-deisel fuel companies sold 1,000 gallons (and the other did not provide any data) ... well, the industry is on its way.... I can't make this stuff up.

Saturday Morning

The "top stories" for the past week have been linked; see tab at the top: "Top Stories."

Bully oil field was profiled and posted last night. 

WSJ Links

Section D (Off Duty):

Wow, this almost deserves a stand-alone post of its own. Regular readers know of my enthusiasm for the new Vizio smart-TV we just bought. Today, page D11 in the WSJ, a nearly-full-page review of television technology. Below, the five technologies, and top model and price.

The game changer: OLED - LG EM9700, $12,000

The cutting edge: ultra HD -- Sony XBR-84X900, $25,000

The work-in-progress: Smart TV -- LG 47G2, $1,700

The reigning champ: LED -- Sony KDL-46HX850 LED, $1,600

The lost cause: 3-D TV -- too many to list

I guess televisions are like wine: it's easy to fine a great television; the challenge is finding a great television for a great price. We are thrilled with the Vizio Smart TV, a 32-inch that was on sale at Target during the Christmas season for $279.00. I can't imagine paying $25,000 for a television, but then again, I don't own any mineral rights in the Bakken.

Section C (Review):

Wow, this is incredible. I am fortunate enough to have been invited to Amazon.com's Vine program (along with two million others, I suppose).  Two weeks ago, I made an error in not selecting American Isis: Sylvia Plath, by Carl Rollyson. Yesterday, the Vine list arrived again; I did not repeat the mistake. I ordered American Isis; can't wait to read it. And then today, of all things, the book is reviewed (p. C7) in the WSJ, and takes up nearly a full page. This is the most space the WSJ generally gives any subject; this is huge (at least in someone's mind). There is also a wonderful photograph of her gravesite at Heptonstall Parish Church in Yorkshire, England. I did not get to my "Sylvia Plath" stage until I had left Yorkshire; what a pity. I could have driven to Heptsonstall from Pateley Bridge: 40 miles, an hour-and-a-quarter drive; west of Bradford. Interestingly enough, this is in/near Brontë country. Funny how things work out.

Wow, I'm beginning to think today's WSJ is worth the entire year's subscription (I can't wait to note the lead story on the front page, but you will have to wait). Here on page C9, "Does a Novel Need a Publisher?" by Sam Sacks. The highlighted blurb: self-publishing gave Virginia Woolf the freedom to pursue a new, daringly innovative style. I owe a lot to Virginia Woolf; she taught me to read the modern novel. But she made me type Mrs Dalloway -- the entire novel -- in free verse.

Section B (Business & Finance):

Several articles on Apple.

Natural gas suffocates nuclear power.

UBS analyst Julien Dumoulin-Smith estimates fixed costs per kilowatt of capacity at a nuclear plant are perhaps five times those for a comparably sized coal plant. As capital improvements will mostly flow through cash flow with only a smaller portion hitting profits, it can mean a nuclear plant that turns a nominal profit can actually generate negative free cash flow.

Smaller nuclear plants, with less output over which to spread fixed costs, suffer most. Dominion Resources already has announced it will close its 556-megawatt Kewaunee unit in Wisconsin. The average U.S. nuclear plant capacity is 971 megawatts. There are 20 out of 104 stations with capacity of less than 800 megawatts, according to Department of Energy data.

The silver lining for larger nuclear plants is that if smaller competitors close, alongside coal plants, this should tighten the electricity market and support prices. Ultimately, though, being able to afford the price of allaying public safety fears depends on that ever-elusive gas-price rally.

Section A:

Ah, here it is -- the headline story for today's WSJ: court throws out recess picks; long tradition of presidential appointments during Senate breaks faces constitutional challenge. Let's hope Chief Justice Roberts doesn't blow it (again). A google search of the article will lead you to a PDF file also, something I don't often see. Also, the op-ed: Obama's abuse of power.

Another hidden government bank account? California agency burned by discovery of bank account.

Janet Upton, deputy director of the Department of Forestry and Fire Protection, confirmed on Thursday the existence of the Wildland Fire Investigation Training and Equipment Fund, known as WiFiter. She said the account was set up in 2005 under the agency's previous leadership to pay for training and equipment.

Ms. Upton said her agency—commonly known as Cal Fire—alerted the Finance Department last week about WiFiter and is working to deposit its balance into the state's general fund.

The account came to light as a result of lawsuits filed by Cal Fire and the federal government against Sierra Pacific Industries Inc., a Redding, Calif., lumber company. The suits claimed the massive 2007 "Moonlight Fire" was started by a bulldozer driver at a company hired by Sierra Pacific, which denies any involvement with the blaze.

Wow.

Page 3, and we've talked about page 3 often. Today, two articles: planting seeds for a better oyster harvest; and, Seattle teachers protest exams. I'm interested in the former story because a) I love oysters on the half shell (never fried); and, b) I'm learning a lot about oyster farming in my travels. I'm interested in the latter story -- well, just because I am.

On climate change, some arguments shift: seniors cooler to global warming. The demographic group with the highest support for this scam is the "immigration nation" -- the large Latino populations -- almost 80% of folks in "immigration nation" believe in global warming and nearly 70% believe it is caused by human activity. For those who have forgotten, the earth is cooling -- Forbes, May 31, 2012.

Op-ed: with an iPhone or Android app, customers can summon the closest available car on the Uber map; bringing limo service to the urban masses; and how the founder learned to beat the taxi cartel and city hall. 

Op-ed: Rahm's ObamaCare brainstorm: dump Chicago's retiree health care costs on federal taxpayers. Anyone could see this coming; this is not rocket science. So all the Bakken millionaires can foot the bill for Chicago's pension system. Of course, Lefty in southern California will have to pay, as well as Rush in NYC or Tampa, wherever he calls home these days. [Comment: this is exactly what I predicted cities and states would do under ObamaCare. It only makes sense. I would do the same. Simply move the retiree health care bill to the federal government. Rahm masterminded the scam while in the White House; he is probably the most knowledgeable on how to frame the city's plan. From then, that plan becomes the boilerplate for the rest of the nation's cities and states to follow. Cue up Connie Francis.]

I haven't read Peggy Noonan in quite some time, and won't do so today, either.

Op-ed: the motor city roars out of Washington's shadow -- the auto industry is thriving, except for subsidized alternative fuel vehicles.

Predicting a breakthrough in switchgrass-based ethanol technology in 2007, the Bush administration mandated that cellulosic, or plant-cell based, ethanol production for American autos increase to 500 million gallons by 2012 and a staggering 16 billion by 2022. Washington then subsidized its fledgling industry with $1.5 billion in federal grants and tax credits. Prodded by Washington, General Motors used the 2008 auto show to announce investments in cellulosic ethanol companies and flex-fuel vehicles, and a national campaign to add E85 (a blend of 85% ethanol and 15% gasoline) pumps at gas stations.

Five years later and the ethanol market is a bust. Fewer than eight million gallons of cellulosic ethanol were produced in 2012, E85 pumps are rare (most blends are 10% or 15%), and ethanol is rarely mentioned at the auto show.

The electric revolution is muted too. Spending an estimated $10 billion of the 2009 federal stimulus bill on battery power, Team Obama predicted a million electric cars on the road by 2015. Today there are barely 30,000, and federally subsidized auto-battery suppliers like Ener1, A123 Systems and LGChem are either struggling or bankrupt.

The reason is simple: Battery-power is proving to be a small niche player. The electric Nissan Leaf—which received a $1.4 billion Washington loan in 2010—saw a 22% increase in sales over 2011, half what was expected. "It was a disappointment for us," Nissan CEO Carlos Ghosn said here last week.

Poor sales have dogged the electric Ford Focus, Chevy Volt and Fisker Karma as well. A $7,500 federal tax subsidy to electric-car buyers has done little to boost the market, even as it subsidizes One Percenters like Leo DiCaprio and Justin Bieber, who both own $100,000 electric Karmas; and Michigan Sen. Carl Levin, owner of a $40,000 Chevy Volt.

And then this:

In an ironic twist, one of the showstoppers is the VL Destino, which strips the Karma of its electric drive-train and inserts a fire-breathing, 638-horsepower Corvette ZR-1 gas engine in its place. The result? A lighter, more competitive, four-door sports sedan. Its designer? Bob Lutz, the former GM vice chairman and old-school "car guy" who brought the struggling Volt to market.

Wow, today's issue is worth the annual subscription, at less than 75 cents/day. Enjoy. Isn't a cup of coffee at McDonad's about a buck?

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A Video For the Granddaughters

Concert Tour Japan, Brian Setzer Orchestra

Week 4: January 20, 2013 -- January 26, 2013

Bakken Operations
Top ND oil producers going back to 1951
NDIC approves permit for Killdeer Mountains; near historical site
Banks oil field: 14 wells sited in one section; production exceeding 100K bbls/well in first year (these are the 14  wells on one 1280-acre unit; and 14 wells on one 2560-acre unit (CLR)
ND rigs back up to 190

Pricing
WTI/Bakken near parity

Pipeline / Rail
North Dakota takeaway to hit 1.5 million bopd this year

Operators
Hess commits to $2.2 billion in the Bakken for 2013
CLR: Bakken-proved reserves almost double; exceeds a half-billion boe 
WPX with a gusher
EOG: innovator in the Bakken

Refinery
Delta bets on Bakken to boost refinery results

Economic development
Five-lane highway, Watford City to Williston (think Odessa/Midland)

Non-Bakken
Keystone XL: new route approved by governor; State Dept: yawn; tea leaves: DOA
Wyoming considering a 4,250 natural gas well project on 265,000 acres