Tag Archives: Saudi Arabia

Oil Crash Means Biggest Boomers Halt Supply Growth in 2016

Repost from Bloomberg Business

Oil Crash Means Biggest Boomers Halt Supply Growth in 2016

Grant Smith and Julian Lee, November 19, 2015 — 4:00 PM PST Updated on November 20, 2015 — 6:53 AM PST

HIGHLIGHTS
•  U.S., Iraq to both stop adding barrels amid price drop
•  Faltering growth to spur global oil market rebalancing in 2016

To understand what the oil price crash will mean for global crude supplies next year, look no further than the two nations that added more barrels to world markets in 2015 than anyone else.

The U.S. and Iraq, whose extra crude this year equates to about 80 percent of the global surplus, will fail to boost output in 2016, according to the world’s biggest forecasters. While the U.S. curtailment is mainly because prices are too low to spur fresh supply, the Middle East country’s ability to boost output is also being crimped by a need to fund its battle with Islamic State.

Slowing output in the the two fastest-growing producers signals the global glut, which has depressed oil prices to near $40 a barrel, may begin to dissipate next year, according to Barclays Plc. While that would start to fulfill Saudi Arabia’s plan to re-balance world crude markets, Iraq’s struggles show that producers in OPEC are also suffering as that strategy takes effect.

“The U.S. and Iraq have been two of the biggest contributors to the global oil surplus and when we look at 2016, production in both will be challenged,” Torbjoern Kjus, an analyst at DNB ASA in Oslo, said by e-mail. “Accelerating decline rates and reduced investment will lead to falling U.S. output, while Iraq is unlikely to see much growth from further levels.”

The two nations are now pumping the equivalent of 4.88 billion barrels a year, an increase of 1.77 billion barrels, or almost 60 percent, compared with their output rates at the start of 2012. To put that in context, oil inventories in Organization for Economic Co-operation and Development nations expanded by 314 million barrels, or 12 percent, in the corresponding period.

U.S. shale production, which has driven a six-year boom in the nation’s oil output, will decline by 600,000 barrels a day next year, according to the International Energy Agency. Total U.S. oil supply is set to surge by 830,000 barrels a day this year, powered by shale formations in Texas and North Dakota. Oil traded at $40.39 a barrel in New York at 9:49 a.m. New York time.

Iraqi production “is likely to remain broadly flat” next year as the OPEC member “is struggling with the stress of $50-a-barrel oil and a costly battle” with Islamic State militants, the IEA said in a report on Nov. 13. Baghdad is also straining to reimburse international oil companies for investments in southern fields. BP Plc cut this year’s operations budget by 60 percent to $1 billion. As oil prices halved, Iraq has had to pay twice the amount of crude to foreign firms who receive per-barrel fees in the form of cargoes.

In the north, the semi-autonomous Kurdish region is struggling to pay partners amid a budget dispute with Baghdad. DNO ASA, the Norwegian operator of the Tawke field, and Gulf Keystone, which operates Shaikan, have said their plans are on hold until they receive overdue payments for output from the government. The Kurdistan Regional Government began making regular monthly transfers to companies in September, although DNO says it’s only receiving half of what it is owed for monthly exports and nothing towards reducing accumulated arrears.

With output gains in jeopardy, “there are signs that the supply glut is easing,” said Kevin Norrish, managing director for commodities research at Barclays in London.

“U.S. shale oil growth measured over last year’s levels is now coming to an end at last and given the infrastructure constraints in Iraq, plus an end to the upward trend in Saudi output it seems the phase of steadily rising OPEC production may be pausing for now as well,” he said. “The long, slow process of re-balancing the oil market continues.”

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    Falling oil prices: what impact on North American crude by rail?

    In Benicia, some are wondering about implications for and against Valero’s crude-by-rail proposal
    By Roger Straw, November 29, 2014

    The business news pages of mainline media are repeatedly trumpeting the dramatic decline in the price of oil.  Regular folks here are happy to see gas prices at the pump at or below $3/gallon.  Business Insider reports that “The decline in the price of oil has been fast and furious, with oil prices falling more than 30% since June.”  This has been near disastrous for some petroleum producers.  (See links below for details.)

    New Eastern Outlook author William Engdahl offered a broad global political perspective on November 3.  According to Engdahl, “The collapse in US oil prices since September may very soon collapse the US shale oil bubble and tear away the illusion that the United States will surpass Saudi Arabia and Russia as the world’s largest oil producer. That illusion, fostered by faked resource estimates issued by the US Department of Energy, has been a lynchpin of Obama geopolitical strategy.”

    Engdahl continues, “The end of the shale oil bubble would deal a devastating blow to the US oil geopolitics. Today an estimated 55% of US oil production and all the production increase of the past several years comes from fracking for shale oil. With financing cut off because of economic risk amid falling oil prices, shale oil drillers will be forced to halt new drilling that is needed merely to maintain a steady oil output.”

    Will North American crude oil supply dry up sooner than predicted?  Will volatile global and American oil pricing make offloading oil trains a riskier business proposition than previously thought?

    What are planners at Valero saying about this?  More importantly, what are they thinking, and talking about behind closed doors?  Will anyone be hitting a pause button on crude-by-rail, or will they be hitting the accelerator?

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      Reuters Exclusive: California getting more Bakken crude by barge than rail

      Repost from Reuters
      [Editor:  At the 9/11/14 Benicia Planning Commission meeting, John Hill, vice president and general manager of the Valero Benicia Refinery, stated that Bakken crude has been refined at Valero.  Commissioner Steve Young asked Hill to confirm his statement, which he did.  Young then asked the means of transport, and Hill replied “by barge.”  Our communities might well ask when, how much, and with what new volatile emissions output, etc….  – RS]

      Exclusive: California getting more Bakken crude by barge than rail

      By Rory Carroll, SAN FRANCISCO, Oct 23, 2014
      A pumpjack brings oil to the surface  in the Monterey Shale, California, April 29, 2013.  REUTERS/Lucy Nicholson
      A pumpjack brings oil to the surface in the Monterey Shale, California, April 29, 2013. REUTERS/Lucy Nicholson

      (Reuters) – Shipments of Bakken crude oil from North Dakota to California by barge have quietly overtaken those by train for the first time, showing how the state’s isolated refiners are using any means necessary to tap into the nation’s shale oil boom.

      While tough permitting rules and growing resistance by environmentalists have slowed efforts to build new rail terminals within California itself, a little-known barge port in Oregon has been steadily ramping up shipments to the state, a flow expected to accelerate next year.

      From January through June, California received 940,500 barrels of the North Dakota crude oil from barges loaded at terminals in the Pacific Northwest, the highest rate ever, Gordon Schrempf, senior fuels analyst for the California Energy Commission, told Reuters.

      Bakken crude transported to California on railcars, which has gained widespread attention after a series of fiery train derailments in North America, accounted for just 702,135 barrels over the same time period, according to published figures.

      “We’re seeing marine transport of Bakken crude outpace rail for the first time,” Schrempf said. In 2013, rail shipments of 1.35 million barrels exceeded barge shipments of 1.33 million barrels. The year before, almost no crude arrived by barge.

      Bakken shipments by barge and rail may only comprise a tiny portion of the crude California imports, at about 5,200 and 4,000 barrels per day respectively, with Alaska supplying over 20 times as much crude.

      But companies, including refiner Tesoro Corp and logistics company NuStar Energy LP, have plans to significantly expand that volume with new terminals along the Pacific Northwest that would unload trains from North Dakota and pump the oil onto tankers.

      They would help make California a major destination for Bakken oil, a trend that has drawn objections from environmental groups who have been seeking to stem the tide, often by blocking local permits to built oil-train offloading terminals.

      “Bringing it in by barge gets you around cumbersome permitting and the growing citizen opposition to crude-by-rail,” said Lorne Stockman, research director of Oil Change International, a research and advocacy organization working on energy, climate and environmental issues.

      To be sure, their objections may differ. The principle concern over transporting Bakken by rail is the risk that a derailment could cause a deadly explosion similar to the one in Lac Megantic, Quebec, last year that killed 47 people.

      There is no suggestion that waterborne oil transportation poses similar explosive risks, although the environmental impact of a barge spill could be much greater.

      “The barges are designed to carry the grade of oil that the Bakken is,” said Ted Mar, prevention branch chief for the state’s Office of Spill Prevention and Response and a former member of the Coast Guard.

      That is small comfort to environmentalists, who oppose all forms of oil production, in particular shale crudes like Bakken, extracted through hydraulic fracking they fear contributes to global warming and poses a potential risk to water supplies.

      “Our end goal is to leave these more dangerous, unconventional fuels in the ground,” said Jess Dervin-Ackerman, conservation manager for the San Francisco Bay Chapter of the Sierra Club.

      SMALLER BUT CLOSER

      With state production declining since the mid-80s, California’s refiners have increasingly relied on deliveries of crude by oceangoing tankers carrying 500,000 barrels or more from places like Alaska, Saudi Arabia, Ecuador and Iraq, which supplied two-thirds of their needs last year.

      The refiners have been scrambling for several years to get better access to cheaper domestic shale oil by any means necessary, replacing costlier imports. But with the big shale fields to the east of the Rocky Mountains and a lack of major pipelines, it has not been easy.

      The articulated tug barges (ATBs) now arriving are tiny by comparison to the tankers, carrying as little as 50,000 barrels.

      Such shipments cost more than bringing Bakken directly to California by rail, but easily plug into existing port and terminal infrastructure – avoiding the need for new permitting that can take years.

      While many are working to build out their own rail facilities, a handful of major rail-to-barge terminals along the Pacific Northwest coast that would ship over 500,000 bpd of Bakken crude have been in the works for several years. But most are incomplete, and several face delays.

      One of the few exceptions is an idled ethanol terminal and processing plant in Clatskanie, Oregon, run by Global Partners LP. The facility, on a small canal that feeds into the Columbia River, began quietly transshipping oil from trains to barges in 2012 and is now receiving so-called “unit trains”, mile-long trains that only carry crude oil.

      “Unit train volume into our Clatskanie terminal is up, and interest in the facility from prospective customers is at an all-time high,” Global Partners Chief Executive Eric Slifka said in August.

      Global Partners did not respond to a request for comment.

      Later that month, the firm received a new air permit from the Oregon Department of Environmental Quality that will allow it to ship as much as 1.84 billion gallons of volatile liquids, or some 120,000 bpd. It did not specify crude or ethanol.

      Much of those shipments moved north to refineries in Washington, including BP’s Cherry Point in Puget Sound, and Phillips 66’s Ferndale facility. But both those plants are expanding their own facilities to bring more Bakken in by rail, likely curbing some demand for barges.

      Top oil barge operator Kirby Corp, which runs vessels out of Clatskanie, is currently building two larger 185,000-barrel barges to deploy on the coast next autumn.

      Environmentalists say they are monitoring the rise in Bakken-by-barge deliveries.

      “This won’t pull our focus away from crude by rail, but rather expand the lens with which we look at dangers of Bakken entering our communities,” said the Sierra Club’s Dervin-Ackerman.

      (Reporting by Rory Carroll, editing by Jonathan Leff and Marguerita Choy)
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        Grant Cooke: Big Oil’s endgame: While fossil fuel costs keep rising, renewable costs fall

        Repost from The Benicia Herald
        [Editor: Benicia’s own Grant Cooke has written a highly significant three-part series for The Benicia Herald, outlining the impending fall of the fossil fuel industry and concluding with good advice for the City of Benicia and other cities dependent on refineries for a major portion of their local revenue stream.  This is the second of three parts.  Read part one by CLICKING HERE and part three by CLICKING HERE.  – RS]

        Grant Cooke: Big Oil’s endgame: While fossil fuel costs keep rising, renewable costs fall

        October 4, 2014, by Grant Cooke

        Grant Cooke, Benicia, California“The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.” — Sheikh Ahmed-Zaki Yamani

        THREE KEY FACTORS WILL PUT TO REST the fossil fuel industry and make the good Sheikh Yamani’s prediction come true. Two of them are discussed here.

        The first is that the carbon emitters will be held accountable and made to pay for using the atmosphere as a garbage can. While still struggling to price the cost of pollution, most nations, as well as California, have come to realize that the heavy carbon emitters need to pay for the damage they have done. A cap-and-trade process is the first method to hold the emitters accountable. While imperfect and not nearly as effective as a straight carbon tax, this system is growing throughout the world. The European Union’s program, which started several years ago and was described by the fossil fuel interests as failing, is now deemed a success. It has become an established part of European culture and corporate practice. Various nations such as Australia, New Zealand, Canada, Korea and China have developed cap-and-trade programs as well.

        California’s own program continues to grow, and our carbon offsets are tradable in parts of Canada as well. As it gains momentum, other states are watching California’s program and thinking about adopting their own. Impoverished state governments see cap-and-trade programs as a boon to their environment and a way to garner vital tax revenues. Since increases in personal income tax are so unpopular, cap-and-trade is seen as a way to bring new money into state treasuries without risking voter rebellions.

        The pressure to make the major carbon emitters pay for their pollution is coming from the agreements made at the 2012 UN Conference on Climate Change in Doha, Qatar. At this conference world governments consolidated the gains of the last three years of international climate change negotiations and opened a gateway to greater ambition and action. Among the decisions was to concentrate on a universal climate agreement by 2015, which would come into effect in 2020. The 2015 conference will be held in Paris, and world governments are expecting much greater cooperation and agreement on carbon-reduction policies from the U.S. and other major emitters.

        The world is slowly accepting the reality that the mitigation of climate change is a massive problem. A 2012 report by Climate Vulnerable Forum estimated that more than 100 million people will die and the international economy will lose out on more than 3 percent of GDP ($1.2 trillion) by 2030 if the world fails to tackle climate change. But because governments don’t want to use their funds for environmental cleanup and climate change mitigation, it will be the heavy emitters like the oil, coal and utility companies that will pay.

        This cost for carbon cleanup, added to the increasing costs of extracting hard-to-get fossil fuel resources, will hit the oil industry hard. A 2013 Harvard University report showed that the cost externalities from coal were about 18 cents per kilowatt hour. Most U.S. end-users who rely on coal-generated electricity pay about 10 cents per kWh. If the external costs were added, those users would pay closer to 30 cents per kWh — which would severely impact those users’ lifestyles.

        Grid parity

        The second major factor hastening the end of today’s megalithic fossil fuel industries is “grid parity.” Grid parity is a technical term meaning that the cost to a consumer for electricity from a renewable source (without subsidies) is about equal to the cost from a traditional source — be it fossil fuel or nuclear. The Germans used grid parity to price their feed-in-tariff program, or FiT, that launched Energiewende.

        Simply put, with PGE’s 2014 rate increase a Benicia resident or small commercial consumer pays about 20 (19.9) cents per kWh for electricity from traditional sources. If that same kWh came from a renewable source and cost the consumer an equal 20 cents, then the renewable source would be at “parity,” or equal to the cost of the traditional generation source.

        However, the cost of traditional energy is rising, driven by higher extracting costs, increasing maintenance costs for natural gas pipelines and increases in operating cost at nuclear power plants. At the same time the costs for renewable energy — wind, solar photovoltaic and biowaste fuels — are declining.

        The costs for wind generation have been and still are the lowest. However, the costs for solar are declining rapidly as its use spreads. Deutsche Bank reported in January 2014 that there were 19 regions around the world where unsubsidized PV solar power costs were competitive with other forms of generation. In fact, PV competes directly in price with oil, diesel and liquefied natural gas in much of Asia. This equality of costs with fossil fuel and natural gas is creating a worldwide solar boom in 2014-15.

        In the U.S., almost 30 percent of last year’s added electricity capacity came from solar. In Vermont and Massachusetts, almost 100 percent added capacity came from solar. According to the U.S. Solar Energy Industries Association, more solar was installed in the U.S. in the past 18 months than in the last 30 years. Solar PV technology, which has been helped by the U.S. military, is improving so fast that it has achieved a virtuous circle.

        As described by New York’s Sanford and Bernstein investment bank, we have entered an era of “global energy deflation.” This ratcheting down of energy costs may be slow to start, but as they argue, the fossil fuel-dominated energy market will experience a major decline in costs over the next decade. The market is entering a new order that will erode the viability of oil, gas and the fossil fuel continuum.

        The report argues that the adoption of solar in developing markets will translate into less demand for kerosene and diesel oil. The adoption of solar in the Middle East means less oil demand, and the adoption of solar in China and developing Asia means less liquefied natural gas demand. Further, distributed solar in the U.S., Europe and Australia will likely reduce demand for natural gas.

        They reason that while solar has a fractional share of the current market, within a decade solar PV and related battery storage may have such a large market share that it becomes a trigger for energy price deflation, with huge consequences for the massive fossil fuel industry that is dependent on continued growth.

        Even the Saudis are betting on solar, investing more than $100 billion in 41 gigawatts of capacity, enough to cover 30 percent of their power needs by 2030. Most of the other Gulf states have similar plans.

        Grant Cooke is a long-time Benicia resident and CEO of Sustainable Energy Associates. He is co-author, with Nobel Peace Prize winner Woodrow Clark, of “The Green Industrial Revolution: Energy, Engineering and Economics,” to be released in October by Elsevier.

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