We lead off this Blowout week with the ongoing oil price collapse (graph credit NASDAQ)
Which is having predictable impacts on some producers:
The UK’s oil industry is in “crisis” as prices drop, a senior industry leader has told the BBC. Robin Allan, chairman of the independent explorers’ association Brindex, told the BBC that the industry was “close to collapse”. Almost no new projects in the North Sea are profitable with oil below $60 a barrel, he claims. “It’s close to collapse. In terms of new investments – there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks. Budgets for 2015 are being cut by everyone.” His remarks echo comments made by the veteran oil man and government adviser Sir Ian Wood, who last week predicted a wave of job losses in the North Sea over the next 18 months.
But not on others:
U.S. energy producers plan to pump more crude in 2015 as declining equipment costs and enhanced drilling techniques more than offset the collapse in oil markets, said Troy Eckard, whose Eckard Global LLC owns stakes in more than 260 North Dakota shale wells. Oil companies, while trimming 2015 budgets to cope with the lowest crude prices in five years, are also shifting their focus to their most-prolific, lowest-cost fields, which means extracting more oil with fewer drilling rigs, said Goldman Sachs. Exxon Mobil Corp will increase oil production next year by the biggest margin since 2010. So far, the Organization of Petroleum Exporting Countries’ month-old bet that American drillers would be crushed by cratering prices has been a bust. “Companies that are already producing oil will continue to operate those wells because the cost of drilling them is already sunk into the ground,” said Timothy Rudderow, who manages $1.5 billion as chief investment officer at Mount Lucas Management Corp.
More related stories below the fold, plus the UK “capacity auction”, US tariffs on Chinese PV panels, India’s advanced heavy water reactor, New York bans fracking, the world’s largest ship, CO2 emissions from the Southern Hemisphere, the Lima climate talks and how hot weekdays are going to cost Americans $20 each.
Western sanctions against Russia were already pressuring the ruble when oil prices plunged, accelerating the currency’s decline. A move last week to help the state-owned oil company Rosneft meet debt obligations sent the ruble down even further, raising concerns about a run on banks as Russians fled to stores to buy expensive goods before prices rose. Oil and gas sales account for nearly 70 percent of Russia’s export revenue. If oil prices stay near $60, the Central Bank said the Russian economy could contract by nearly 5 percent next year. Even at $80 a barrel, the Russian economy could still shrink by 0.8 percent. Venezuela is even more dependent on oil revenues, (which) account for 95 percent of the country’s exports. The price of Venezuelan bonds has plummeted in recent days as investors worry about a default, a move that could trigger political upheaval. On Wednesday Nigeria’s finance minister trimmed the country’s 2015 budget by $3 billion, or 12 percent, because of lower oil prices.
Washington Post: Plunging oil prices are doing Obama’s foreign policy for him
The swift drop in the price of oil is realigning global economic power — and might help President Obama achieve some of his foreign policy goals. The precipitous fall in oil prices, which is hammering countries heavily dependent upon oil exports, could prod Russia into abiding by a ceasefire in Ukraine, make Iran more pliable in talks over its nuclear program, undercut Venezuela’s influence in the Caribbean, and weaken the finances of the Islamic State. At the same time, however, other parts of Obama’s foreign policy agenda could become more difficult, including efforts to open up Mexico’s oil industry to foreign companies, promote oil-fueled development in poor nations in Africa, and reduce global fossil fuel use to limit climate change.
Russian President Vladimir Putin does not rule out the possibility of a price conspiracy between Saudi Arabia and the US on the market of energy resources but says it is not possible to confirm the data.“There’s a lot of talk around” in what concerns the causes for the slide of oil prices, he said at a major annual news conference. “Some people say there is conspiracy between Saudi Arabia and the US in order to punish Iran or to depress the Russian economy or to exert impact on Venezuela. Given the current situation on the market the production of shale oil and gas has practically reached the level of zero operating costs. If this rate is kept up, everything will fall apart (in the production of shale oil — TASS) and the prices will start climbing,” he said. “But we can’t tell this with a hundred percent assuredness.”
Financial Times: Cheap oil burns green energy
Tumbling oil prices have long been seen as kryptonite for clean energy companies — and share prices of some of the world’s best known renewable power groups have slumped in the wake of the latest slide in crude. Shares in Denmark’s Vestas, the world’s largest wind turbine supplier, dived after the oil producers’ cartel Opec decided not to cut production in late November and prices are still down 11 per cent, noticeably below the broader market. The Chinese solar panel giant, Yingli Green Energy, and Tesla Motors, the US electric carmaker, have suffered even sharper share price falls. Crude’s surprise rise of $3 a barrel to $63.40 on Wednesday did little to halt the decline. Even before Opec’s move, lower oil prices appeared to be hitting hybrid cars in the US, where sales were down 11 per cent in November compared with the same month last year. Sales of some models of fuel-hungry sports utility vehicles, meanwhile, were as much as 91 per cent higher last month than a year ago.
Power generation firms are to receive close to £1bn to ensure their plants stay open and prevent blackouts. The payments will add £11 to an average household electricity bill, according to the Department of Energy and Climate Change. The government has described the outcome as good news for consumers, which guaranteed security of supply. But critics of the new plan say that most of the payments will go to plants that would have remained open anyway. The Secretary of State for Energy and Climate Change, Ed Davey, described the result as “fantastic news for bill-payers and businesses”. “We are guaranteeing security at the lowest cost for consumers”, he said. “We’ve done this by ensuring that we get the best out of our existing power stations and unlocking new investment in flexible plant”. Critics of the scheme argue that it will keep older polluting coal plants on the system for longer which could hold back investment in new, cleaner technologies.
Energy consumers look set to pay at least £750m a year extra after a government-run auction finished with some power companies winning subsidies of between £15 and £20 per kilowatt of generating plant. This was significantly lower than the £75-per-kW price level that opened the bidding sessions on Tuesday but could still leave ministers being asked to justify why such “capacity payments” are being made at all. The Department of Energy and Climate Change (Decc) has declined to comment ahead of a formal announcement today, but has previously argued these subsidies would ensure security of supply by providing a payment for reliable sources of capacity to ensure they delivered energy when needed. “This will encourage the investment we need to replace older power stations and provide backup for more intermittent and inflexible low-carbon generation sources,” it has said. But analysts believe it highly unlikely that any companies would have submitted bids to construct new super-efficient gas-fired plants at the price of £15-£20. “This low price is better for consumers but it looks like it is being used just to keep existing coal, nuclear and gas-fired plants running. You have to wonder whether these plants would have remained open anyway and really need these capacity payments,” said one analyst.
The UK government is to subsidise 49.26GW of mostly existing electricity generators that have emerged victorious from the country’s first capacity market auction.The provisional result of the tender set a clearing price of £19.40 per kW per year, which will be paid as a fixed sum to flexible power stations to guarantee their availability on top of any power they produce. Existing coal and gas plants made up the vast majority of winners in the provisional results. Combined cycle gas accounted for 22.3GW or 45% of capacity, while coal came in at 9.2GW or 19%. Nuclear power came in third place with 7.8GW across 16 generators. Existing infrastructure landed the 68% bulk of all capacity auction subsidies, with a further 26% going to refurbished units. Only 5% went to new-build stations, prompting harsh criticism from some observers.
The government’s scheme to keep the lights on offers lower subsidies than expected, saving consumers money but meaning big new power plants are unlikely to be built, experts say. A raft of proposed new gas-fired power plants will be shelved for at least a year after failing to win Government subsidies, experts have predicted. Some old power plants could also be at risk of closure after missing out on the payments, potentially worsening the capacity crunch in coming years, they warned. Peter Atherton, energy analyst at Liberum Capital, said: “99 out of 100 people would tell you we need to start building some additional gas capacity pretty soon. The capacity market was due to deliver that. If the auction comes in at £20 it’s just going to reward existing plant that was going to be there anyway.” If no new gas is built soon then by the early 2020s there would be a “massive black hole” to make up when coal is eventually forced to close, he said.
The United States on Tuesday confirmed steep import duties on solar products from China and Taiwan, in a decision that could inflame trade tensions between the two countries. Anti-dumping duties for Chinese goods were set as high as 165.04% as the U.S. arm of German solar manufacturer SolarWorld AG seeks to close a loophole that let Chinese producers sidestep duties imposed in 2012. Taiwan producers face anti-dumping duties as high as 27.55%, according to the final Commerce decision, which SolarWorld said raised average duties for Chinese producers but cut them for Taiwan. Producers in China face separate anti-subsidy duties. “These remedies come just in time to enable the domestic industry to return to conditions of fair trade,” said SolarWorld Industries America President Mukesh Dulani.
Breakthrough Institute: Natural gas, not renewables, responsible for fall in US emissions
A new Breakthrough analysis looks at regional power generation data and finds that cheap natural gas has overwhelmingly displaced coal generation, not other sources of low-carbon energy, such as renewables, nuclear, or hydro. In fact, in regions where gas generation has grown, nuclear and hydro generation has either remained stable or risen. Growth of non-hydro renewables, by contrast, can account for little of the decline in coal generation, the analysis finds. Ultimately, the growth of natural gas generation, along with reduced electricity demand, is responsible for the vast majority of reduced emissions in the US power sector since 2007.
Mercola: Ethanol destroying US grasslands
Since the US government began requiring its shortsighted, industry-influenced ethanol in fuel in 2007, more than 1.2 million acres of grassland have been lost to corn (and soy) crops. The ethanol fuel program was designed to reduce global warming but, ironically, the loss of grasslands is poised to do just the opposite. Plowing up native grasslands to plant vast expanses of corn and soy releases carbon dioxide into the environment while increasing erosion and the use of toxic fertilizers and other chemicals. It also destroys habitat for native plants and wildlife.
Vancouver Sun: Canada’s energy policy “crazy”
It is no wonder critics call Canada an “axis to environmental evil” when Prime Minister Stephen Harper calls regulating Canada’s oil and gas sector a “crazy economic policy.” Not only has the Conservative government systematically cancelled and gutted laws and policies protecting the environment, but they subsidize the fossil fuel energy sector. A study by the International Monetary Fund posted earlier this year states Canada spent $26 billion on energy subsidies in 2011 alone. That works out to $787 for each Canadian that year. This kind of subsidy distorts resource allocation, artificially promotes capital-intensive industries, reduces incentives for investment in renewable energy, and accelerates the depletion of natural resources.
Bangkok Post: Japan nuclear watchdog greenlights more reactors
Japan’s nuclear watchdog on Wednesday gave the green light to restarting two more atomic reactors, days after pro-nuclear Prime Minister Shinzo Abe swept to election victory. The Nuclear Regulation Authority (NRA) said it believed the two units at Takahama nuclear power plant in central Fukui prefecture met toughened safety standards introduced after the tsunami-sparked disaster at Fukushima in 2011. The actual restarts, however, will be delayed until a month-long public consultation is held and local authorities give their blessing.
Time: New York Bans Fracking
The administration of New York Governor Andrew Cuomo announced Wednesday that the controversial drilling technique known as fracking will be banned in the state, citing concerns over risk of contamination to the state’s air and water. “I cannot support high volume hydraulic fracturing in the great state of New York,” acting Health Commissioner Howard Zucker said. The announcement comes after years of debate over the practice, during which New York has had a defacto fracking ban in place, the New York Times reports.
Economic Times India: Advanced Heavy Water Reactor likely to be functional by 2020
The indigenously-developed Advanced Heavy Water Reactor (AHWR) is likely to be functional by 2020. Minister of State in PMO Jitendra Singh said the nuclear reactor is being developed indigenously. It is expected to be functional by 2020 or one or two years more thereafter. The reactor is being developed by Bhaba Atomic Research Centre. Singh also said the reactor would help in ensuring optimal use of thorium. India has one of the largest sources of thorium resources which is a matter of pride, he said. “Till October, 2014, AMD has established 2,14,158 tonnes in-situ U3O8 (1,81,606 tonnes uranium) resources and 11.93 million tonnes of in-situ resources of monazite resources, which contains about 1.07 million tonnes of Thorium Oxide (ThO2),” he said.
According to preliminary sigma estimates, total economic losses from natural catastrophes and man-made disasters were USD 113 billion in 2014, down from USD 135 billion in 2013. Of the estimated total economic losses of USD 113 billion in 2014, natural catastrophes caused USD 106 billion, down from USD 126 billion in 2013. The outcome is well below the average annual USD 188 billion loss figure of the previous 10 years. The total loss of life of 11 000 from natural catastrophe and man-made disaster events this year is down from the more than 27 000 fatalities in 2013.
Arctic sea ice may be more resilient than many observers recognise. While global warming seems to have set the polar north on a path to floe-free summers, the latest data from Europe’s Cryosat mission suggests it may take a while yet to reach those conditions. The spacecraft observed 7,500 cu km of ice cover in October when the Arctic traditionally starts its post-summer freeze-up. This was only slightly down on 2013 when 8,800 cu km were recorded. Two cool summers in a row have now allowed the pack to increase and then hold on to a good deal of its volume. And while the ice is still much reduced compared with the 20,000 cu km that used to stick around in the Octobers of the early 1980s, there is no evidence to indicate a collapse is imminent.
Reuters: Lima climate talks fall short
Lack of real progress at a climate conference in Lima that ended in the early hours of Sunday morning harms the chances of reaching a global agreement next year that effectively curbs climate change and deals with its impacts, experts said. Lima had a straightforward agenda: agree the scope and schedule for the Paris agreement. But countries split on both big fundamentals and many of the details of a future agreement, and the meeting ended with a far more modest agenda than many had hoped for. Developing countries fear any agreement that will require them to set ambitious targets to cut carbon emissions, arguing that this is unfair because they should be allowed to develop. Rich countries, who have produced most of the world’s climate-changing emissions so far, say it is now time for everyone to help. The final decision in Lima, reached after negotiations overran their two-week schedule by more than 30 hours, watered down an earlier version, deleting any review of country pledges which would have made them more rigorous.
Early data has come in from the first satellite dedicated to monitoring levels of carbon dioxide in the air – with some surprising results. The patch of dense carbon dioxide above China was to be expected, as factories churn out emissions. But the biggest swathes of red – signifying a high concentration of the greenhouse gas – appeared over the southern hemisphere. “Preliminary analysis shows these signals are largely driven by the seasonal burning of savannas and forests,” explained NASA scientist Annmarie Eldering. Farmers in Brazil and southern Africa are known to clear land in springtime. The images suggest this might have a bigger impact on the atmosphere than previously thought.
It is widely hypothesized that incomes in wealthy countries are insulated from environmental conditions because individuals have the resources needed to adapt to their environment. We test this idea in the wealthiest economy in human history. Using within-county variation in weather, we estimate the effect of daily temperature on annual income in United States counties over a 40-year period. We find that this single environmental parameter continues to play a large role in overall economic performance: productivity of individual days declines roughly 1.7% for each 1°C (1.8°F) increase in daily average temperature above 15°C (59°F). A weekday above 30°C (86°F) costs an average county $20 per person. Hot weekends have little effect.
Prelude is a staggering 488m. Four football pitches placed end-to-end would not quite match this vessel’s length – and if you could lay the 301m of the Eiffel Tower alongside it, or the 443m of the Empire State Building, they wouldn’t do so either. In terms of sheer volume, Prelude is mind-boggling too: if you took six of the world’s largest aircraft carriers, and measured the total amount of water they displaced, that would just about be the same as with this one gigantic vessel. Under construction for the energy giant Shell, the dimensions of the platform are striking in their own right – but also as evidence of the sheer determination of the oil and gas industry to open up new sources of fuel.