Drumbeat: April 3, 2009

Mexico making progress on new oil contracts – cos

MEXICO CITY/LONDON (Reuters) – Mexico’s state oil company Pemex is making good progress drafting contracts that could bring major international oil companies into the country as service providers, oil company officials said.

Legislation enacted last year allows Pemex to offer incentive-based contracts that Mexican officials say should be sufficient to bring in foreign expertise to help reverse Mexico’s sliding oil production.

…Oil executives and analysts say that, based on their contacts with Pemex executives, they expect the new contracts to stretch the law to its limits to create a workable framework that will allow Pemex to partner with the oil majors in costly, yet potentially lucrative, deepwater oil developments.

Massive Antarctic ice shelf set to break loose

ScienceDaily — The Wilkins Ice Shelf is at risk of partly breaking away from the Antarctic Peninsula as the ice bridge that connects it to Charcot and Latady Islands looks set to collapse. The beginning of what appears to be the demise of the ice bridge began this week when new rifts forming along its centre axis resulted in a large block of ice breaking away.

EU-Ukraine gas deal ‘unfeasible’: Gazprom

(MOSCOW) – An EU-Ukraine plan to modernise gas pipelines in the ex-Soviet republic was crafted with no input from chief supplier Russia and is “unfeasible,” Gazprom head Alexei Miller said Friday, Interfax reported.

Speaking at a meeting with Prime Minister Vladimir Putin, Miller said he had talks with counterparts from E.ON Ruhrgaz AG of Germany, ENI of Italy and Gaz de France and said they too took a dim view of the EU-Ukraine deal.

Netherlands to introduce car trade-in bonus

THE HAGUE (AFP) – The Netherlands will introduce a car trade-in bonus of possibly up to 1,750 euros by mid-2009 to help boost sales of new cars and the economy, as well as to cut pollution, the environment ministry said Friday.

“This decision was mainly taken to help the environment but also to stimulate the auto market,” ministry spokesman Jaap Eikelboom told AFP, adding that agreement had been reached with the industry earlier in the day.

Saudi offers more fuel oil on refinery issues

SINGAPORE – Saudi Aramco has offered unusually high volumes of straight-run and cracked fuel oil in the past two months, due to an extended outage at its Ras Tanura refinery and upgrading tests at Rabigh, industry sources said on Friday.

The state oil firm has offered an unprecedented eighth cargo of straight-run A960 fuel oil in the past month from Ras Tanura, as its hydrocracker, which has been down since early March, is not due to restart till at least mid-May, traders said.

Natural mechanism for medieval warming discovered

Europe basked in unusually warm weather in medieval times, but why has been open to debate. Now the natural climate mechanism that caused the mild spell seems to have been pinpointed.

The finding is significant today because, according to Valerie Trouet at the Swiss Federal Institute for Forest, Snow, and Landscape Research in Birmensdorf, the mechanism that caused the warm spell in Europe – and meant wine could be produced in England as it is now – cannot explain current warming. It means the medieval warm period was mainly a regional phenomenon caused by altered heat distribution rather than a global phenomenon.

The finding scuppers one of the favourite arguments of climate-change deniers.

Baker Hughes Rig Count Rises for First Time in 19 Weeks

(Bloomberg) — The number of oil and natural gas rigs operating in the U.S. rose for the first time in 19 weeks, gaining 4 to 1,043 from last week, according to data published by Baker Hughes Inc.

Grim new reality confronts engineers

As he surveys the crowd before him, Nader Zarabi lets out a laugh. “Hundreds of engineers, as far as the eye can see,” he says of the group dominated by mostly middle-aged men toting black briefcases, forming a line that wraps twice around the interior of the convention centre’s main floor.

…Welcome to the sign of the times, Calgary style. Zarabi, along with what would become, over the course of the day, thousands of other recently laid-off white-collar professionals, found himself among the masses of the city’s brain trust, dropping off his resume to a group of recruiters from Snamprogetti Canada, an engineering division of Milan-based SpA, one of the world’s largest oil and gas contractors.

Nexen, Opti Canada may be targeted in oil sands deals

Nexen Inc. and Opti Canada Inc. may be among Canadian oil companies targeted for takeovers as a price collapse triggers a rush by larger producers to amass holdings in the biggest crude deposits outside Saudi Arabia.

Peak oil: discussion of its obtuse impact on our economy

To follow up on my article about the Pickens Plan, I went in search of more information about peak oil and found that the legislature in Colorado received a briefing by David Bowden on the obtuse impact peak oil will have on our economy. His briefing coincides with the points discussed in the Pickens Plan, so I wanted to provide this synopsis on peak oil discussed in Denver, Colorado on February 15, 2009.

David Bowden is the Executive Director of the Association for the Study of Peak Oil & Gas – USA. He gave a presentation at the Alliance for Sustainable Colorado’s 5th Annual Sustainable Business Legislative Briefing. He is a renewable energy advocate and discussed our 100% penetration of our need on oil and gas. The two words he stressed are the words “peak” and “oil”. At the briefing he shared the following statistics:

A chance for a cleaner world goes begging

Climate change and peak oil, she says, are far more dangerous than the global financial crisis, but did not generate anything like the emergency summit. Come the GFC, says Milne, and “world leaders drop everything and rush to meetings”.

Rather than fiddling around the edges we need “transformational policies” that “open up huge opportunities to create hundreds of thousands of new green jobs in areas like public transport and energy efficiency”.

Richard Heinberg: Timing

The general picture is clear enough. A combination of peak oil, climate change, and the bursting of the mother of all economic bubbles will result in a collapse of the global economy, perhaps of civilization itself. If we are still to avert the worst of a crisis that could eventuate in untold death, destruction, and tragedy, we need to restructure the world’s energy systems and money systems immediately.

This message (in one form or another) is issuing from scores of independent writers, environmental organizations, and economic analysts. Indeed, even before anyone had ever heard of a Credit Default Swap, going all the way back to the early 1970s if not earlier, similar warnings were periodically heard.

But forecasting global catastrophe can be a tricky business, because everyone wants to know just when it will happen. And there’s the rub. As a card-carrying member of the Cassandra Club, I’ve found this a perennial briarpatch. There have been so many variables at play that about all one could say with absolute confidence is that industrial civilization will run out of rope “sometime in the first two or three decades of the 21st century.” But most people consider that too vague, and institutional leaders have shown repeatedly that they are likely to respond only to definite warnings about fairly imminent catastrophe.

This puts an unfair onus on those in the business of waking the world up to the impending crunch. Jump the gun and you wind up sounding silly; make a conservative forecast for some bland-sounding disruption sometime in the distant future and you fail to motivate anyone to change course.

OPEC export forecast down nearly 1B bpd

LONDON (UPI) — Crude exports from the OPEC cartel, save Angola and Ecuador, are expected to decline by nearly 1 million barrels per day in April compared with the month prior.

Information from the British Oil Movement tanker tracking company shows exports from the Organization of Petroleum Exporting Countries could fall to 22.15 million barrels per day in the four-week period ending April 18. That is a decline of 960,000 bpd compared with the previous four-week period, the Platts news service reports.

Too many cars, and they’re not on the road

WASHINGTON – The sea of new cars, 57,000 of them, stretches for acres along the Port of Baltimore. They are imports just in from foreign shores and exports waiting to ship out — Chryslers and Subarus, Fords and Hyundais, Mercedeses and Kias. But the customers who once bought them by the millions have largely vanished, and so the cars continue to pile up, so many that some are now stored at nearby Baltimore-Washington International Marshall Airport.

The backlog exists because many of the factors that contributed to the collapse of the housing bubble — cheap credit, easy financing, excessive production, consumers buying more than they could afford — undermined another large and vital American industry.

One in 10 Americans on food stamps

WASHINGTON (Reuters) — A record 32.2 million people — one in every 10 Americans — received food stamps at the latest count, the government said Thursday, a reflection of the recession now in its 16th month.

Ukraine can meet March gas payments

KIEV, Ukraine (UPI) — Ukrainian energy company Naftogaz will meet its debt obligation to Russian gas giant Gazprom for March deliveries of natural gas, the Ukrainian premier said.

Ukrainian Prime Minister Yulia Tymoshenko told reporters Naftogaz is a reliable partner in the energy sector following earlier concerns over the debt-ridden energy company, Interfax-Ukraine reports.

“Gas payments have been made on time and in full since Jan. 1 … as will the payments for March,” she said.

Putin: Russia should continue dialogue with Ukraine on gas

MOSCOW (Xinhua) — Russia’s Prime Minister Vladimir Putin said on Friday that Russia should continue dialogue with Ukraine on gas issue, calling the neighbor as its important partner.

“The dialogue must be supported,” the Interfax news agency quoted Putin as saying at a meeting with Alexei Miller, CEO of Russia’s state-run gas giant Gazprom.

Iran urges haste on Syrian gas deal

DAMASCUS, Syria (UPI) — Deals to export Iranian gas to export markets in Syria for the next 25 years should move forward as quickly as possible, the Iranian oil minister said.

Iranian Oil Minister Gholamhossein Nozari moved on an energy deal with his Syrian counterpart, Sufian Allaw, during a Damascus visit earlier this week.

“Iran will transfer gas to Greece and Italy through Iraq, Syria and the Mediterranean Sea,” Nozari said.

Turkey wants extra Russian gas supplies from 2015 – Gazprom

NOVO-OGARYOVO (RIA Novosti) – Turkey has asked for additional natural gas supplies from Russia from 2015, including via the Blue Stream-2 pipeline, the CEO of Russia’s state-controlled energy giant Gazprom said on Friday.

The planned Blue Stream-2 pipeline, part of the existing Blue Stream system linking Russia to Turkey via the Black Sea, would extend the system to Israel. The throughput capacity of the project, being carried out by Gazprom and Italy’s ENI, is planned at 8 billion cubic meters.

Mongolia emerges as energy powerhouse

WASHINGTON (UPI) — Mention Mongolia to most people, and their minds conjure up hordes of bloodthirsty horsemen under Genghis Khan sweeping across Eurasia’s vast grasslands, cutting a swathe of terror and destruction. In a world increasingly concerned with reliable sources of energy, however, Mongolia is rapidly becoming a major player, and an international race is on to secure access to one of its most valuable mineralogical deposits, uranium.

Nation’s worst oil spill hits 20-year mark

ANCHORAGE, Alaska — For Steve Smith, the 20-year anniversary of the nation’s worst oil spill is like a reminder that he lost a loved one.

“It’s like a death in the family,” the 70-year-old fisherman said of the Exxon Valdez disaster. “With time it gets a little better, but the pain never really goes away. Until this generation passes on, I don’t think it will ever really be over.”

Three Mile Island — Thirty Years Later

What can we say today about Three Mile Island and its aftermath? I would say three things:

1)The accident, if nothing else, proved that the consequences of a nuclear accident were not as serious as imagined.

2)The culture surrounding nuclear power, rather than the technology, led to the events.

3)The industry has learned its lesson and improved operating and safety procedures almost beyond recognition. Such an accident is not likely to happen again.

Firestorm over U.A.E.-U.S. nuclear deal?

ABU DHABI, United Arab Emirates (UPI) — In a move sure to stoke a diplomatic frenzy, the United Arab Emirates, with U.S. interests, may be the first Arab state with a civilian nuclear-energy program.

U.S. President George W. Bush signed a treaty with the United Arab Emirates during his last week in office to give American companies the opportunity to enter into nuclear trade relations in the Emirates, The Wall Street Journal reports.

Mexico sees oil output slide continuing in 2010

MEXICO CITY (Reuters) – Mexico’s finance ministry expects the country’s crude oil exports to decline by 18 percent in 2010, implying that crude oil production will fall below 2.5 million bpd next year, according to a report delivered to Congress on Wednesday night.

The finance ministry estimated oil exports would drop to 1.125 million bpd in 2010 from 1.370 million bpd forecast for this year.

With no major additions to domestic refining capacity forecast for 2010, the projection implies that crude oil production will fall by approximately 245,000 bpd in 2010 to levels not seen since the late 1980′s.

Mexican oil exports are already under the 1.370 million bpd target forecast for 2009 by the finance ministry. Crude exports over the first two months of 2009 averaged 1.315 million bpd, according to state oil company Pemex.

The American cars Obama wants

NEW YORK (CNNMoney.com) — The Obama administration has made it clear: In order to get the billions of dollars of federal money that Chrysler and General Motors need to survive, they’ll need to build and sell more fuel efficient vehicles.

But even with many changes already underway due to stricter fuel economy regulations and public pressure, drivers won’t see new line-ups overnight, even if these companies get the funds they need.

OPEC Finally Accepts Low Prices, May Not Cut Production

OPEC officials Thursday finally accepted worsening economic conditions would keep oil prices low for now, toning down a previous call for higher prices and suggesting the organization may not cut production further as long as prices stayed steady. The statements, which show a conciliatory tone toward oil-consuming nations, came as forecasts for the global economy released this week were gloomier than expected.

Korean SK yet to cancel oil deal with Iraq’s Kurds

ARBIL, Iraq (Reuters) – South Korea’s SK Energy has not revoked its contract with Iraq’s Kurdish region, which the Baghdad government says the firm must doif it is to be considered for oil exploration tenders.

An oil official of Iraq’s semi-autonomous Kurdish region on Friday told Reuters SK had not cancelled a deal it had made with the Kurdish government. Baghdad says such deals are illegal and must be approved by the central government.

“There’s no change or any development in this issue. The contract stands as it is,” the Kurdish oil official, who declined to be named, said.

The grass is always greener: Saving the planet and creating jobs may be incompatible

In 2006, in a study prepared for a pro-coal lobbying group, Adam Rose and Dan Wei of Pennsylvania State University looked at how increasing the share of renewables in electricity generation at the expense of coal might affect employment. Displacing a third of generation from coal by 2015 would put 1.2m people out of work, they concluded, and displacing two-thirds would raise the figure to 2.7m. The job losses came chiefly as a result of higher energy prices.

Fusion Power Could Be the Answer

Sometimes, it felt like the Bush administration believed blood-letting could purge a man of all evil humors and the universe revolved around the sun. At least government policies supporting scientific research seemed to reflect as much — that we were still stuck in an era where dogma rather than science drove progress.

So what a breath of fresh air it was to hear that the Obama administration was renewing funding for research on all stem cell lines, and that combating climate change would be a top priority. Obama even tapped Steven Chu, a Nobel Prize-winning physicist, as his Secretary of Energy.

This is more than enough to convince me that the President understands that long-term solutions are required to ensure the United States has a safe, clean, and independent energy infrastructure. But if the Obama administration is truly committed to exploring a comprehensive set of options for ensuring that kind of energy future, fusion energy must be on that list.

Oil to be moved from huge tanks near volcano

(CNN) — Officials will remove oil from two massive storage tanks near the base of erupting Mount Redoubt in Alaska, a spokesman said Friday.

As the volcano continues to spew ash across Alaska’s Cook Inlet, U.S. Coast Guard officials said they will begin to transfer oil from the Drift River facility to get to a “safe” level.

America’s oil bust: Falling oil prices and frozen credit are slowing production and piling up equipment. Now some worry we’re setting ourselves up for another price spike.

The collapse in oil prices from over $147 a barrel has caused many oil producers to pack up their rigs and stow their jacks. Some fear the drop in production activity will lead energy prices to spike once the economy recovers.

“We’re not drilling right now,” said Willard Cline, who has run the small Cline Oil Company since 1946. “The low price of oil is slowing it up.”

…”Once oil dropped below $75 a barrel, the economics just don’t make sense for the wells we have around here,” said Shawn Keane, who now runs the company along with his brother. “Just about everyone we’ve talked to is in the same situation we are.”

Oil rises above $53, extending rally

Oil prices rose above $53 a barrel Friday, extending a rally fueled by market optimism that crude demand may rebound if the U.S. economic downturn bottoms out soon. Investors remained cautious, however, ahead of a crucial U.S. jobs report later in the day.

Scumbags: If you can’t beat ‘em, join ‘em

Again the Forbes piece is a must read. I take a couple of lessons away from it. One, regardless of the sound theory behind peak oil and the rapid global growth that we were experiencing oil should have never come even close to rising as fast as it did last summer. When oil was in its parabolic rise, many people believed that as the immortal Fred Sanford would say “Dis is da Big One” and that the world would never be the same. That oil would be so expensive that we all would have to grow our own food and walk to work. Ahhhhh not so fast. That might happen some day a hundred years from now, but not now.

Iraq presidency approves slashed budget

BAGHDAD (AFP) – Iraq’s presidency has rubber-stamped a 58.9 billion-dollar budget for 2009, after billions were wiped off spending plans because of a sharp fall in oil prices, a government spokesman said on Friday.

China oil majors’ gasoline stock fall 3 pct in Feb

BEIJING, April 3 (Reuters) – Gasoline inventories in China’s two oil majors CNPC and Sinopec fell 2.7 percent at the end of February to 31.9 million barrels from a month earlier, a Xinhua newsletter reported on Friday.

The two oil giants’ diesel stocks dipped 0.2 percent in February to 53.7 billion barrels, the bi-weekly China Oil, Gas & Petrochemicals reported, citing data from CNPC.

It also said that China’s crude inventories stood at 36.6 million tonnes at the end of February compared with 37.2 million tonnes at the end of January.

Petraeus Says Iran No Threat Now to Oil Traffic in Persian Gulf

(Bloomberg) — Iran’s naval forces pose no current threat to oil shipments through the Persian Gulf, the top U.S. commander in the Middle East said today.

“I don’t think we have any concerns about disruption to the navigation” in the Gulf, Army General David Petraeus said in an interview. “Certainly nothing from Iran.”

Saudi heavy crude seen down after 4 months

SINGAPORE – Saudi Arabia will likely put an end to four months of rising differentials for its heavy crudes and cut their official selling prices for May after the fuel oil crack weakened, traders said on Friday.

Nine customers of Saudi crude and one trader had varied expectations of the size of the cuts, but all those polled by Reuters expected a fall in differentials for both Arab Medium and Arab Heavy crude, Saudi Arabia’s two heaviest grades.

“Since the fuel oil crack has not performed as well in March than in February, I guess Arab Medium could fall to Oman/Dubai minus $2.00 or below, and Arab Medium to flat or minus 20 cents,” a term buyer said.

Moody’s downgrades Gazprom to Baa1, stable outlook

MOSCOW (RIA Novosti) – International rating agency Moody’s on Friday downgraded the senior unsecured issuer and debt ratings of Russia’s energy giant Gazprom from A3 to Baa1, with a stable outlook.

Moody’s said the rating reflects the agency’s view that the economic drivers of the financial profiles of Gazprom and the Russian state are strongly correlated, meaning the state-controlled energy company could not have a higher rating than the state itself.

Gazprom Balks at $8 Billion Price for Russneft, Vedomosti Says

(Bloomberg) — OAO Gazprom Neft suspended talks on buying OAO Russneft after billionaire Oleg Deripaska sought as much as $8 billion for the crude producer, Vedomosti said, citing two people familiar with the negotiations.

The oil arm of Moscow-based OAO Gazprom doesn’t want to pay cash in addition to assuming Russneft’s debts of $5.6 billion, Vedomosti said. OAO Sberbank, Russneft’s biggest creditor, initiated the sales talks, the newspaper said.

Sinopec Yanshan Refinery Made Profit in First Quarter

(Bloomberg) — China Petroleum & Chemical Corp.’s refinery in Yanshan in the capital city of Beijing posted a profit of 1.13 billion yuan ($165 million) in the first quarter of this year on falling crude costs.

Gasoline production rose 9 percent to 561,000 metric tons, or 4 million barrels, and jet fuel output surged 43 percent to 225,000 tons during the period, parent China Petrochemical Corp. said in its company newsletter Sinopecnews. Ethylene output increased by 4,500 tons to 208,000 tons.

Technip Would Consider Nuclear, Wind Projects Amid Oil Slump

(Bloomberg) — Technip SA, Europe’s second-largest oilfield-services provider, would consider taking on nuclear or renewable energy projects along with customers like Total SA and StatoilHydro ASA as oil companies broaden their investments.

“We want to be in the energy space. Nuclear is going to be important,” Chief Executive Officer Thierry Pilenko said in an interview yesterday at a Paris oil conference.

Norway eyes oil fund revamp after woeful 2008

OSLO (Reuters) – Norway’s Finance Ministry said on Friday it would review the active management of part of its $300 billion (203.16 billion pounds) wealth fund after Europe’s largest equity investor lost 633 billion crowns (68.85 billion pounds) on its investments in 2008.

Norway oil fund to step up green investing – paper

OSLO (Reuters) – Norway aims to set aside billions of dollars on oil cash to invest in environmental technology or sustainable development projects in emerging markets, a daily newspaper reported.

The finance ministry is scheduled to hold a news conference at 1000 GMT on management of the $300 billion Government Pension Fund — Global, commonly known as the “oil fund”, which invests Norway’s oil wealth in foreign stocks and bonds.

Toyota, Honda, Nissan battle recession just like Detroit does

TORRANCE, Calif. — Though he’s 5,400 miles from Tokyo, the chef at the Depot restaurant follows automotive economics in Asia as closely as he monitors the crispness of the Thai shrimp.

That’s because his lunch hangout is down the street from the U.S. headquarters of both Honda (HMC) and Toyota (TM) in this Los Angeles suburb. That puts the restaurant directly in the path of the tsunami-like effect of the recession on Asian automakers.

The eatery still attracts a respectable lunch crowd, but the heady days of parties are over for now.

Honda’s new Insight hybrid taken for test drive

Watch out, Toyota Prius. Honda’s new gasoline-electric hybrid car has aerodynamic styling like yours but carries a lower price, offers video game-like “scoring” for fuel-thrifty driving and is arguably a more fun ride.

AC Transit riders’ claim of funding bias tossed

A federal magistrate has dismissed a suit by AC Transit riders who accused the Bay Area’s transportation funding agency of racial discrimination by steering state and federal money to trains with a relatively higher proportion of affluent white riders and away from buses that carry more poor and nonwhite passengers.

MTA talks delayed by debate over payroll taxes, bridge tolls

ALBANY _ State lawmakers and Gov. David Paterson were far apart Wednesday on reaching an agreement to bail out the Metropolitan Transportation Authority and avoid massive fare increases and service cuts in the New York City area.

Slum cooker protects environment, helps poor

NAIROBI (Reuters) – Kenya’s huge and squalid slums don’t have much of anything, except mountains of trash that fill rivers and muddy streets, breeding disease.

Now Kenyan designers have built a cooker that uses the trash as fuel to feed the poor, provide hot water and destroy toxic waste, as well as curbing the destruction of woodlands.

Big China hydro plant can sell carbon credits-Xinhua

BEIJING (Reuters) – A hydropower plant on the upper reaches of China’s Yellow River was this week approved by the United Nations to sell carbon credits, making it the biggest hydro project to do so, Xinhua reported on Friday.

US Congress passes 3.5-trillion-dollar budget plan

WASHINGTON (AFP) – The US Senate and House of Representatives passed separate versions of a massive budget Thursday signaling broad support for President Barack Obama’s climate change and healthcare overhaul ambitions.

Dem Climate Change Legislation Could Trigger Global Trade War

Major cap and trade climate legislation unveiled this week might be better described as a cap on trade.

The House measure includes potentially far-reaching measures to subsidize domestic industry and impose tariffs on foreign goods.

Climate-Change Policies Risk Protectionism, China, India Say

(Bloomberg) — Global-warming policies being considered by the U.S. and Japan risk provoking trade barriers, Chinese and Indian officials said in interviews.

Protectionism, rejected yesterday by world leaders meeting in London, has been discussed in the U.S. Congress and in France as a response to the competitive advantage of developing nations like China that refuse to regulate greenhouse gases. Potential import fees could prompt trade retaliation, said Su Wei, China’s lead negotiator for a new global climate-protection treaty.

Small islands fear rising seas

Bonn, Germany – Small island states have sharpened their calls for the rich to make deep cuts in greenhouse gas emissions, saying low-lying atolls risk being washed off the map by rising ocean levels.

Arctic may be ice-free in 30 years: study

WASHINGTON (AFP) – Some 80 percent of Arctic ice may disappear in 30 years, not 90 as scientists had previously estimated, according to a new study on the impact of global warming.