Energy Tomorrow Blog
Posted June 8, 2015
Platts (The Barrel Blog) – When OPEC left production unchanged in November last year many understood it to be US or Canadian tight oil producers who would suffer, but thanks to technological advances — to paraphrase Mark Twain — the reports of the death of the tight boom have been greatly exaggerated.
After OPEC’s announcement of stable production, crude prices fell under $50/b, and the obituaries began to be written.
But lower prices forced companies to become hyper-vigilant on costs, and the result was the opposite of what may have been intended. US and Canadian production continued to grow, and E&P companies became leaner and more efficient — leading to a more competitive industry.
The savings from technological advances and more efficient internal processes, unlike the drop in rig dayrates that could rise again when the market turns, will be a more permanent feature of the North American oil market.
The numbers tell the story. The North American oil rig count dropped from its peak in early October at 1,609 to 646 for the week-ending May 29, yet productions is headed in the opposite direction — US oil output hit 9.586 million b/d, its highest daily rate since the EIA began weekly production reports in 1983. The EIA recently forecast another million b/d of oil production growth until it peaks in 2020 at 10.603 million b/d.
Posted June 3, 2015
The Hill: House Republicans have found reasons to agree with some parts of the Obama administration’s energy infrastructure proposal.
GOP leaders in the House Energy and Commerce Committee told Energy Secretary Ernest Moniz that they are largely in agreement on the need to improve pipelines, electric transmission lines, energy storage and other pieces of infrastructure.
Moniz testified at the hearing to promote the Quadrennial Energy Review, which the administration released in April to call for comprehensive infrastructure improvements worth billions of dollars.
“Many people are even asking — not surprisingly — is there enough common ground between our efforts and the Obama administration to enact meaningful energy legislation,” Rep. Ed Whitfield (R-Ky.), chairman of the energy and power subcommittee, said at the Tuesday hearing.
Posted June 2, 2015
With EPA last week proposing ethanol-use requirements for 2014, 2015 and 2016 under the Renewable Fuel Standard (RFS), the ethanol industry no doubt will keep lobbying to foist increasing amounts of higher-ethanol blend fuels like E15 and E85 on the motoring public. This, despite studies that have shown E15 can harm engines and fuel systems in vehicles that weren’t designed to use it – potentially voiding manufacturers’ warranties – and historically small consumer demand for E85.
A subset of the argument for increased use of higher-ethanol blend fuels is the dismissing of concern that E15 also could damage existing service station infrastructure, including storage tanks, fuel lines and dispensers. Though service station owners and operators indicate otherwise, ethanol supporters say that a new National Renewable Energy Laborary (NREL) report – commissioned by the Renewable Fuels Association (RFA), a big ethanol advocate – found that E15 is compatible with existing equipment. It’s simply not true, and the report has some challenges. Let’s look at a few.
Posted June 1, 2015
Pittsburgh Post-Gazette op-ed (Eberhart): ... Since 2000, global LNG demand has grown an estimated 7.6 percent per year. And that rate is expected to increase: Ernst & Young predicts that by 2030 global demand will reach 500 million metric tons, doubling 2012 levels.
At the same time, because of the surge of natural gas from American shale, the United States is awash in the stuff, with domestic natural gas production increasing 41 percent in the past decade alone.
Ten years ago we were an LNG importer. Today we’re the world’s largest natural gas producer.
And with the amount of technically recoverable natural gas in the United States 100 times greater than our current consumption, we have a boon to the economy that is expected to contribute up to 665,000 net jobs and $115 billion to GDP by 2035. We are expected to have enough gas to meet our own needs while also helping to satisfy staggering demand in places like Japan, Korea, India, China and Taiwan.
Clearly, this is an opportunity we don’t want to miss. But a protracted, redundant and expensive approval process could put it just out of reach.
Posted May 29, 2015
With EPA already embarrassingly late in setting requirements for ethanol in the fuel supply for 2014 (due 18 months ago) and 2015 (due six months ago), the agency finally has proposals for those years and 2016 that would continue to drive ethanol use – though not at levels dictated by the Renewable Fuel Standard (RFS).
Top EPA official Janet McCabe called the proposals “ambitious, but responsible.” We’ll agree on the ambitious part – in that it takes a whole lot of something to thread the needle between marketplace realities and the flawed RFS – difficult for the nimblest of bureaucracies, much less a regulatory colossus like EPA.
Unfortunately, EPA comes up short, particularly for 2016. An RFS program that long ago went awry remains lost in the tall weeds of process over substance.
Posted May 27, 2015
Wall Street Journal commentary (Engler and McGarvey): America’s business and labor leaders agree: President Obama and Congress can do more to modernize the permitting process for infrastructure projects—airports, factories, power plants and pipelines—which at the moment is burdensome, slow and inconsistent.
Gaining approval to build a new bridge or factory typically involves review by multiple federal agencies—such as the Environmental Protection Agency, the U.S. Forest Service, the Interior Department, the U.S. Army Corps of Engineers and the Bureau of Land Management—with overlapping jurisdictions and no real deadlines. Often, no single federal entity is responsible for managing the process. Even after a project is granted permits, lawsuits can hold things up for years—or, worse, halt a half-completed construction project.
Posted May 26, 2015
Reuters: U.S. Republicans have had to watch from the sidelines as the Obama White House has taken political credit for America's unexpected energy boom and tumbling gas prices. Now it has left their presidential candidates scrambling for a way to reclaim leadership on an issue the party once seemed to own.
Their apparent answer: calling time on a 40-year-old federal ban on crude oil exports and using the newfound energy bounty to strategic advantage.
"We've got an abundance of supply," Wisconsin Governor Scott Walker said this week in Oklahoma at a gathering of putative Republican candidates for next year's presidential election. Lifting the ban, he said, would allow exports to "our allies in Europe, where, instead of being dependent on (President) Vladimir Putin and the Russians, they could be dependent on Americans."
Posted May 21, 2015
Fort Worth Star-Telegram (Weinstein): Thanks to what’s sometimes called the “shale revolution,” America has re-emerged as an energy superpower.
Even with prices 40 percent lower than a year ago, we remain the world’s No. 1 producer of crude oil and other liquid hydrocarbons. Imports of oil have dropped from 60 percent of consumption to about 35 percent just in the past five years. We’re also the world’s largest producer of natural gas.
Both our oil and natural gas output would be even higher if not for regulatory and infrastructure constraints.
Posted May 7, 2015
Oil & Gas Journal: North American businesses and governments must work together toward the collective goal of advancing the continent’s energy aspirations. That was the message delivered by producers and government officials during a May 5 panel discussion at the Offshore Technology Conference in Houston.
The US and Canada represent two of the world’s top five oil producers, and Mexico hopes to ramp up its production in the coming years once its energy reforms are fully realized.
Gustavo Hernandez Garcia, general director of Petroleos Mexicanos (Pemex), said a primary challenge faced by his country is rising technical commercial complexity including deepwater, heavy oil, unconventional, and LNG. To attract the players capable of developing these resources, Mexico must offer attractive contractual and fiscal terms; transparent and clear roles for regulators and operators; an agile and competitive national oil company; and minimal political intervention, he said.
Pemex benefits from its geographic proximity to major producers and their unique skillsets in the US. Paula Gant, deputy assistant secretary for oil and natural gas in the Department of Energy’s Office of Fossil Energy, said there’s “a tremendous need” to build on public data, statistics, and mapping in North America; for modern and resilient infrastructure; and for best practices for unconventional oil and gas.
Gant emphasized the necessity of constant and clear communication among government agencies in the three countries, and boasted that the US is “the envy of the world” with its existing natural gas pipeline system. Building out infrastructure and sustaining output growth in the US also relies on public confidence, she noted, adding that the office of oil and gas at DOE “provides scientific base from which politicians can make decisions.”
Posted April 28, 2015
EIA: In its recently released Annual Energy Outlook 2015 (AEO2015), EIA expects the United States to be a net natural gas exporter by 2017. After 2017, natural gas trade is driven largely by the availability of natural gas resources and by world energy prices. Increased availability of domestic gas or higher world energy prices each increase the gap between the cost of U.S. natural gas and world prices that encourages exports of liquefied natural gas (LNG), and, to a lesser extent, greater exports by pipeline to Mexico.
The AEO2015 examines alternate cases with higher and lower world oil price assumptions, which serve as a proxy for broader world energy prices given oil-indexed contracts, as well as with higher assumed U.S. oil and natural gas resources. These assumptions significantly affect projected growth in annual net LNG exports after 2017. Net LNG exports make up most of the natural gas exports in most cases. By 2040, LNG exports range from 0.2 trillion cubic feet (Tcf) in the Low Oil Price case to 10.3 Tcf in the High Oil and Gas Resource case. For comparison, 2040 natural gas net exports by pipeline range from 1.1 Tcf in the High Oil Price case to 2.9 Tcf in the High Oil and Gas Resource case.