The UK has for many decades become accustomed to the bounty of North Sea oil and gas that has filled government coffers and provided employment. For a number of years exports helped our balance of trade and oil and gas on our doorstep provided energy security. Oil and gas production peaked at 4.72 million barrels oil equivalent (boe) per day in 1999 but has since undergone a relentless decline that has accelerated in recent years (Figure 1). The UK is now a net importer of oil and gas and coal with a net cost to UK balance of trade near £22 billion in 2012 (Figure 2). It was against this backdrop that Secretary of State for Energy and Climate Change, Ed Davey, invited Sir Ian Wood to conduct a review of the North Sea oil industry in order to identify key problems and to make recommendations for maximising the economic recovery – MER UK. Sir Ian’s interim report was published on the 11th of November 2013. This article provides a brief overview of the report’s findings, focussing on some of the key issues.
Figure 1 The history of UK oil and gas production according to the BP statistical review of world energy 2013 (data up to the end of 2012). It is worth noting that in the Wood Review they come up with a figure of 41 billion boe to the end of 2012 and the DECC official estimate is 42 billion boe (email) and summing BP data I get 43.6 billion boe using 1 bcm of gas = 6.6 million barrels of oil (BP conversion ratio). Since statistics are very important, one of the issues the Wood Review may want to address is energy reporting standards. We can only know where we are and where we are headed from a common datum.
The Philosophical Transactions of The Royal Society has published a special edition on “The Future of Oil Supply” edited by Richard Miller and Steve Sorrell. I have not read the papers, but the volume is interesting because it brings together authors who in the past were on opposing sides of the Peak Oil debate.
Were they crying “Wolf”?
Concerns about “peak oil” have recurred repeatedly since the resource was first developed, but they reached an unprecedented height in 2007 just prior to the global economic recession. Since then public concern has diminished, partly as a result of shale oil production in the United States. Yet, despite these developments and globally rising reserves, oil prices have almost doubled since 2010 and have tripled in a decade. The ‘peak oil’ debate has not gone away – oil remains critically important, adequate substitutes have yet to be found and concerns about depletion persist.
A number of sources (DECC, BP, this report) point to UK proved oil and gas reserves to be of the order 4.5 billion barrels of oil equivalent (boe) at the end of 2012. On current trajectory this will be mainly produced by the end of this decade and the North Sea party will be over. That is unless urgent action is taken to stem the decline and to prolong the life of ageing infrastructure. (DECC = UK government Department of Energy and Climate Change).
Figure 1 UK oil production history based on data published by BP statistical review of world energy 2013. See Figure 3 for an explanation of the numbers. THIS IS NOT A FORECAST but a scenario of what may come to pass without urgent and serious intervention.
This week in Blowout:
UK: The argument over high energy prices rumbles on. The government contemplates reducing support for energy efficiency targets – which in my opinion seems to be the exact wrong course to take. Oil companies contemplate delaying or cancelling new North Sea projects. RWE cancels large offshore wind farm.
World: Energy companies making record investments for diminishing returns. IEA turns pessimistic on shale and sees oil prices heading higher. Power play in The Middle East as Saudi Arabia threatens Iran whilst contemplating its own fleet of nuclear reactors. 21 stories below the fold.
Toil for oil means industry sums do not add up
Over the past decade, the oil and gas industry’s upstream investments have registered an astronomical increase, but these ever higher levels of capital expenditure have yielded ever smaller increases in the global oil supply. Even these have only been made possible by record high oil prices. This should be a reality check for those now hyping a new age of global oil abundance…. according to the FT
Every now and then I read a report that makes me angry. This one
made my blood boil:
National Grid has confirmed that a record-breaking amount of clean electricity was generated by wind power in the UK today [29th November] – achieving more than 6 gigawatts (over 6,000 megawatts) for the first time.
Renewable UK’s Director of External Affairs, Jennifer Webber said:
Wind energy is consistently setting new records and providing an ever-increasing amount of clean electricity for British homes and businesses. We’re generating from a home-grown source which gives us a secure supply of power at cost we can control, rather than leaving ourselves exposed to the global fluctuation in fossil fuel prices which have driven bills up. Wind gives us a way to make a smooth transition from old-fashioned fuels to a new low-carbon economy.
What they forgot to say, the day before 29th November, was flat calm across the UK and we were pretty well 100% dependent upon these old-fashioned fuels – nuclear, coal and gas, so derided by the renewables industry. Charts and facts below the fold.
- US shale gas production has grown from around 4 billion cubic feet (bcf) per day in 2007 to around 26 bcf/day in 2012
- US gross natural gas production has grown from a plateau of 2 trillion cubic feet (tcf) per month in the period 1995 to 2002 to 2.5 tcf per month in 2012
- Some believe this is marching the USA towards energy independence while others believe, owing to costs and decline rates, that this may be an energy bubble
- At the end of 2011, shale gas accounted for 32% of total US natural gas production (EIA data)
- Pre 2008 financial crash, there were roughly 400 rigs drilling oil in the USA and 1600 drilling gas. Today it is roughly 1400 drilling oil and 400 drilling gas
- The fall in US prices to <$2 in 2012 has created the illusion that shale gas is cheap while in fact over-production caused a crash in the price in US natural gas to below the level where it was possible for companies to make a profit
- What is the real cost of shale gas? “Some wells are profitable at $2.65 per thousand cubic feet, others need $8.10…the median is $4.85,” attributed to Ken Medlock, Senior Director of Rice University’s Baker Institute Center for Energy Studies
Figure 1 The astonishing evolution of global annual average natural gas prices according to BP. Shale gas development in N America, The Fukushima nuclear disaster and a shortage of LNG explains much of what is going on. The grey bar to the right shows minimum, maximum and median break even prices required for US shale gas according to Ken Medlock of The Baker Institute. These shale gas prices would be really cheap in Japan but are expensive for the USA and still mainly above US spot prices today ($3.85 / mmbtu). Click on all exhibits to get a larger version that will open in a new browser window.
This week in Blowout:
UK: David Cameron wants to get rid of all the Green crap (according to sources), his cabinet colleague Ed Davey says getting climate deal is critical, Alex Salmond accuses Cameron of hastening planetary suicide and Nigel Farage blames MPs for high energy prices.
World: Trouble bubbling in Iraq and Libya. 23 stories below the fold.
No 10 pours cold water on claim David Cameron wants to ‘get rid of green crap’
Downing Street has said it does not recognise reports that David Cameron ordered aides to “get rid of all the green crap” from energy bills in a drive to bring down costs.
With European energy security draining away, any discussion about our energy future should begin with energy security, price and a rounded assessment of the impact that new energy supplies may have upon our environment. European primary energy production peaked at 1136 million tonnes oil equivalent (mmtoe) in 1997 and has since fallen 15% to 970 mmtoe in 2012. It is against this backdrop that many European governments are now embracing The American Dream in promoting shale gas as the cheap, clean, abundant and secure “bridging fuel” to a carbon free energy future. None of this is true.
Shale gas is not cheap, it’s certainly not clean and in geological terms it is a low-grade resource. Any country going down this route is also making a commitment to drill hundreds to thousands of new wells every year to keep the gas flowing. So where does the truth really lie? In part 1 of 2, I describe what shale gas is and consider environmental factors such as intensity of development, potential contamination of ground water and CO2 emissions. Part 2 will consider economics and shale gas potential of the UK.
Figure 1 The Northwest corner of Bradford County in Pennsylvania USA . This is a production sweet spot in the prolific Marcellus Shale. Mixed arable land with forest close to the Appalachian Mountains, not too dissimilar to parts of rural England and Europe. How many shale gas drilling pads and production wells can you see in the image? What impact does this have on a landscape already overprinted by Man’s roads, farms, towns and quarries? Click on all images to get a large version that opens in a new browser window.
- From a standing start in 2009, natural gas production from the Marcellus Shale in Bradford County Pennsylvania (PA) now exceeds 2.2 billion cubic feet (bcf) per day from 728 wells (to end June 2013).
- To put this in perspective, the UK consumes about 8 bcf per day and so 4 Bradford counties (about 3000 wells) could make the UK self- sufficient.
- The catches are that Bradford County is a production sweet spot – you have to find the sweet spots before you can produce them. And to keep production going, over a hundred new wells need to be drilled every year.
- 6 charts below the fold show the production history, average well productivity and decline rates from Bradford County.
Figure 1 This chart shows the production stack for 728 Marcellus shale gas wells, Bradford Co. PA. XL would only let me plot about 150 data series and so the wells are aggregated into production from groups of 5 wells. The black line shows the number of producing wells, right hand scale. Data from the Pennsylvania Department of Environmental Protection (DOEP). Click on all charts to get a larger version that will open in a new browser window.
Every day interesting energy news stories drop into my in box from my network. This is the unedited list from last week and is an experiment to see if there is interest in a weekly news round up. 23 news links below the fold.
In energy news this week: oil and gas companies struggling with high costs and poor field performance; Electricity companies struggling with competition from subsidised renewables and environmental levies; Airline companies struggling with old inefficient planes and high fuel costs; the Arab Spring continues to spread misery in the Arab world.
Asian LNG Prices Rise Sharply
Spot liquefied natural gas prices in Asia have risen sharply as power producers have started stockpiling for the winter much sooner than usual this year.
The price for LNG for delivery to Asia in the second half of December is around $17.90 per million metric British thermal unit compared with less than $14 per mmBtu at this time last year, Singapore-based traders say.
UK offshore oil and gas: Sir Ian Wood’s interim report published
Web page inviting feedback
The interim report (pdf)
On the 11th March 2011 a massive sub-marine earth quake off the east coast of Japan sent a tsunami towards the Fukishima Daiichi reactor complex. The tsunami defences were breached and the pumps that provided cooling water circulation to the reactors and spent fuel ponds were swamped. By the 12th March the reactor cores and spent fuel began to melt releasing hydrogen gas that would eventually explode destroying 3 of 6 reactor buildings. The government went on to close down all of Japan’s 52 nuclear reactors that provided 18% of its electricity supply. The consequence of this decision was for Japan to increase its reliance on imported liquefied natural gas (LNG) and oil placing upwards pressure on the price of both. LNG cargoes that were once destined for Europe went chasing sky high prices in the Far East.
This at least is part of the story but it does not explain all of the extraordinary evolution in global gas prices shown in Figure 1, which is the main focus of this post. Just at the time when the world needed more gas to plug the gap left by Japan’s crippled nuclear industry, LNG supply declined for the first time ever in 2012 sending already high LNG prices in Japan even higher (Figure 1) whilst at the same time US gas prices hit decade lows. What on Earth is going on in the global gas market?
Figure 1 In 2012, the average price of imported LNG to Japan was 6 times greater than the cost of natural gas in the USA! Prices in Europe are mid way between the dirt cheap US and ultra expensive Japanese extremes. Following closure of large coal fired power stations, Europe may find itself in a bidding war with the Far East for scarce LNG cargoes this winter. Data from the 2013 BP statistical review of world energy.
In this post we present evidence that suggests 88% of temperature variance and one-third of net warming observed in the UK since 1956 can be explained by cyclical change in UK cloud cover. The post is co-authored by Clive Best and builds on an earlier post that described the UK Met Office climate station data from 1933 to present (links given below).
A copy of a manuscript submitted to and rejected by Nature can be downloaded here. This post is also based on a seminar given at The University of Aberdeen on 12th November that can be downloaded here (4.1MB).
The objective of this study is to explain an observed cyclical relationship between sunshine hours and temperature from 23 UK Met Office weather stations (Figures 1 and 2) . The relationship (R2=0.8 on 5y means) is observed in data from 1956 to 2012. The pre-1956 data are believed to be affected by air pollution as previously described on Energy Matters and clivebest.com
Figure 1 Tmax and sunshine hours averaged for 23 UK weather stations. The UK Met Office report monthly data. The first stage of data management was to compute annual means. The above chart shows a 5 year running mean through the annual data.
This post shows how UK surface temperatures since 1933 are influenced by changes in net cloud cover and is co-authored with Dr Clive Best, a physicist who has formerly worked at CERN and on the Jet nuclear fusion experiment.
- Terrestrial sunshine records provide an inverse proxy for cloud cover. Sunshine at surface means cloud free line of sight between the point on the surface and the Sun.
- We present concordant sunshine and temperature records for 23 UK Met Office weather stations. Data is available for a handful of stations from 1908 but it is only from 1933 that there are a sufficient number of stations to provide representative cover of the UK.
- Data from 1933 to 1956 is believed to be affected by air pollution from burning coal for home heat and power generation, therefore our main analysis focusses on the time interval 1956 to 2012.
- Both temperature (Tmax) and sunshine hours show cyclic variation, both showing a tendency to rise in the period 1980 to 2000 in keeping with global warming that has been documented in many studies.
- In the UK there is a high degree of covariance between sunshine and Tmax, sunny years tend to be warmer. The correlation coefficient (R2) between sunshine hours and Tmax is 0.8 whilst R2 for CO2 and Tmax is 0.66 (calculated on 5 year means). A significant portion of warming observed in the UK may be attributed to temporal variations in sunshine and cloud cover.
- This post presents a summary of the raw data in 14 charts. Next week we will present a combined net cloud forcing and radiative forcing model with the aim of quantifying the relative contributions of dCloud and dCO2.
Figure 1 Maximum daily temperature (Tmax, red, LH scale) and minimum daily temperature (Tmin, blue, RH scale) from the Leuchars weather station. The red and blue lines are annual averages. The black lines are centred 5y moving averages. Note high degree of co-variation between Tmax and Tmin. Also note how temperatures drifted higher during the 1990s and 2000s but recently are drifting down again, in keeping with the global temperature trend.
The Kyoto Protocol, designed to limit CO2 emissions from industrialised nations was adopted in 1997. The first commitment period began in 2008 and ended in 2012. These landmark dates are marked by arrows on Figure 1. In this period, the rate of global CO2 emissions accelerated (Figure 1). It is difficult to regard the Kyoto process as anything but a total failure.
In the same period, since 1997, Global average temperatures have risen by <0.1˚C (based on Hadcrut4 data) despite cumulative emissions of 460 Gt CO2 being added to the atmosphere (Figure 2). In the period 1997 to 2012 there is absolutely no evidence from the atmospheric temperature record that global warming or climate change are linked to CO2 emissions*.
European Union (EU) and UK energy policies aimed at reducing CO2 emissions have failed to make any impact at the Global level. These same policies have succeeded in pushing up electricity prices, making EU economies less competitive and in spreading energy poverty amongst the poorer people of Europe.
Based only on data from the cherry picked time interval 1997 to 2012 one would conclude that EU energy policy has failed to address a non-existent problem.
* readers are advised to read my cautionary note at the end of this piece.
Figure 1 Global fossil fuel consumption expressed in millions of tonnes of oil equivalent (mmtoe) from the 2013 BP statistical review of world energy. Mmtoe converted to CO2 by assuming CH2 as general formula for oil with molecular weight=14 atomic mass units (amu) and a molecular weight for CO2=44 amu. The arrows show landmark dates in the Kyoto process. During this period, CO2 emissions accelerated. The only process to halt the relentless rise in CO2 emissions is spikes in the oil price causing recessions in 1974, 1979 and again in 2008.
Posted in Climate change, Energy
Tagged co2 emissions, energy cost, energy policy, european union, germany, hadcrut4, kyoto protocol, little ice age, sea ice, UK
This week’s main post will be titled “The failure of Kyoto and the futility of European Energy Policy” and in this context I wanted to have a quick look at German energy consumption since Germany has come to symbolise the “global” effort to transition away from fossil fuels (and uranium) in order to save the planet from the pestilence of atmospheric CO2 and radiation poisoning. As usual I ended up with too many charts, and since the German story is an interesting one I thought I might as well look at the UK, France and Spain too. Energiewende is German for Energy Transition. The key observations:
Germany and the UK
Germany and the UK have a rather similar energy mix spread between coal, oil, natural gas, nuclear and renewables but both heavily dependent upon fossil fuels (FF) (Figures 1 and 5). The absolute primary energy consumption in both these countries peaked in 1979, and following the oil price shock of that year energy consumption has been on a declining trend ever since. Population growth and economic growth have been absorbed by improving energy efficiency…. (15 more charts below the fold, click on charts to open a larger version in a separate browser window).
Figure 1 Germany has a diverse primary energy mix of coal, oil, gas, nuclear and renewables. Energy consumption peaked in 1979. The decline in coal around 1990 likely reflects reunification of E and W. The growth in other renewables (wind, solar, geothermal, biomass and waste) has gone largely to fill the gap left by closure of nuclear power stations.
The map shows physical gas flows in Europe in 2011. It was compiled by the UK Department of Energy and Climate Change (DECC) based on data from the International Energy Agency (IEA). Click on map to get a larger version.
The units are billion cubic meters (BCM). Note that blue numbers are production and red numbers are consumption. If blue is bigger than red the country is a net exporter of gas. Within Europe, only Russia, Norway and The Netherlands are gas exporters. All the rest import gas, including the UK. The green arrows are liquefied natural gas imports most of which comes from Africa and The Middle East. Also note trans Mediterranean pipeline imports from N Africa: Libya, Tunisia Morocco, and Algeria, the latter being the big exporter. These gas flows have huge energy security and geo-political implications.
I am on holiday this week, but want to try and keep Energy Matters ticking along with a couple of very short posts with complicated charts. The above chart is called a Sankey diagram produced by DECC. Sankey diagrams are an ingenious way of portraying how energy of different sorts flows through the economy of a country. Some time and care is needed to work out exactly what is going on. Note the key distinguishes between imports and indigenous supply. The thickness of the lines is proportional to the size of the flow, units are million tonnes oil equivalent. The inputs are to the left, conversions in refineries and power stations in the middle and outputs, i.e. end use, is to the right. Along the bottom are energy losses and exports. Click the chart to get a large readable copy. Have fun!
Figure 1 Stacked area chart showing the contributions to the UK grid from various generating sources for March 2013. Similar charts for January, February and April can be found in an earlier post. With 9000 lines of data, it is not easy to display a time scale on the x-axis. The peaks represent days with the 1st of March to the left of the chart. The “Other” category includes French, Dutch, Irish and EW imports / exports via inter-connectors, pumped storage, conventional hydro, oil, open cycle gas turbines and “other”. Data from BM reports as reported by Gridwatch.
Balancing Mechanism (BM) reports as recorded by Gridwatch provide insight to exactly how the UK grid is coping with and responding to the ever growing amount of intermittent wind energy. The key observations are detailed below, the evidence is below the fold.
- There is no evidence that integrating wind has impaired the efficiency of combined cycle gas turbine (CCGT) or coal fired generation.
- The rate of load change to accommodate wind is no greater than the diurnal load cycle to accommodate demand.
- Wind is variable and is just as likely to be blowing at night when demand is low as during the day when demand is high (Figure 1).
- CCGT (gas) bears the brunt of load balancing in the UK for both diurnal demand and wind variability.
- A consequence of this is that CCGT is losing market share to wind whilst providing an ever larger and more valuable load balancing service.
- Reduction in coal generating capacity meant that coal fired power was running at capacity for periods last winter.
- Nuclear was also running at capacity for periods during the winter months.
- UK gas storage was run down to near zero April 2013 (source Rune Likvern at Fractional Flow), the result of a colder than normal winter and competition for LNG from Japan (Source National Grid).
- Continued growth of wind is going to squeeze CCGT (gas) out of the system – which is a consequence of the 2008 Climate Change Act. At some point CCGT generation may become unprofitable, but since it also provides essential grid balancing service, the industry may have to transfer to state ownership.
- Wind electricity displacing imported gas has a positive impact upon UK trade balance.
- Within a tight European gas market, wind power is making a contribution to keeping the UK grid operational. Without wind, the UK gas and electricity security situation would have been worse last winter
- Had the UK government commissioned 20GW of nuclear power 10 years ago, this situation could have been avoided.
Posted in Energy
Tagged bm reports, ccgt, coal, DECC, efficiency, electricity, gas, gas storage, grid, gridwatch, japan, lng, load factor, nuclear, primary energy, trade balance, wind
For many years BM reports (Balancing Mechanism Reports) have published live generating statistics for UK electricity broken down by generating type. The data have always been fragmentary and difficult to access. Gridwatch have done all energy analysts a great favour and have been saving this data in an easy to access format. The CSV file I downloaded had data for the UK grid at 5 minute intervals from May 2011 to present. Below the fold are detailed charts of generating statistics broken down by nuclear, coal, gas and wind, from Jan to April 2013 – each chart contains about 9000 lines of data!
Posted in Energy
Tagged balancing service, bm reports, ccgt, coal, demand, electricity, gas, gridwatch, load factor, nuclear, supply, UK, wind