Oil Artist Uses Crude in Ghostly Works
Piers Secunda's art works are painted in crude drawn from the very pioneering oil wells his work depicts. (image: thenational.ae)
An artist is documenting the history of oil using crude meticulously sourced from individual oil wells all over the planet, thenational.ae reports.
Piers Secunda’s work hangs in a gallery in London. His ghostly images are painted on silkscreen to recreate old photographs of pioneering oil fields that characterize the industry’s early sweat and toil.
But rather than using any old oil for his painstaking, nostalgic drawings, Secunda spent years in some case tracking down samples from the exact wells he was reproducing to give his work a unique sense of authenticity.
“Actually getting hold of the crude oil was quite a challenge. You can go on to a website and buy 100,000 barrels of the stuff, but of course you never actually see it. It’s not delivered to your door. But there are tiny specimen samples and novelty bottles from museums if you look hard enough. I spent a lot of time on eBay. A lot of time. “
Secunda set out to record a hugely important bygone age and remind viewers of oil’s immense importance in today’s society. One image depicts a significant development in the history of the Middle East.
“This one is called Dammam No.7 Blowing In,” he says. “It shows the moment in 1937 when the first oil blew out of this tiny little well head in Saudi Arabia. And this is the point at which global politics, economics and the history of energy shifts in a colossal way. It was the beginning of something completely new in the Middle East.”
To Secunda’s immense credit, he didn’t just search archives, find important photographs and dash off a silkscreen using any oil at hand. He waited two years until he tracked down oil from that exact well, Dammam No.7, before commencing that particular work.
“And then I found a corporate paperweight on eBay with the oil on the inside, marked Dammam No.7. You might think that a bit obsessive, but I really wanted the story of that specific well to be portrayed through its medium.”
Similar attention to detail has gone into all Secunda’s work. Whether the drawing depicts a Texan, Canadian or Californian oilfield, it is painted using oil from the correct well. He also refuses to make any political statements about the provenance of oil, despite it being “an inherently political material.”
“I genuinely don’t think I’m in a position to say oil is bad. The incredible thing about crude oil is that it’s absolutely and totally inseparable from everything we do. It facilitates everything - if you remove it, you’d have mayhem.
“I don’t take a position because I want this to be a record of an amazingly important time. You have the Stone Age, the Iron Age, the Bronze Age, and the petrochemical age will be acknowledged in the same way. I think it can’t not be - it’s too significant.”
His drawings are made in the browny hue of dried crude oil. But HeatingOil.com wonders what would happen if Secunda added heating oil to his work, which features a red dye to distinguish it from diesel.
Just a thought.
EIA: U.S. Now Has 1,000 Active Oil Rigs
A few of the 125 rigs in the Gulf of Mexico, even more than there were before the devastating BP oil spill. (image: nola.com)
The Baker Hughes weekly count of actively drilling oil rigs in the United States hit 1,003 in late June, its highest level since 1987 when the company first separated oil and natural gas rig counts, according to the Energy Information Administration. Since breaching 1,000, the count has continued to increase. The latest update on July 29th put the national oil rig count at 1,025 – the twenty-sixth consecutive month of increases.
Rig counts are important because they can be indicative of price trends for both crude and distillates like heating oil and diesel. For example, oil rig numbers fell shortly after the crash of 2008 when oil hit nearly $135 a barrel. Rig numbers started to rebound in March of 2009 when oil prices bottomed out at $40 a barrel and haven’t stopped climbing since.
The increase demonstrates federal and private operators’ interest in expanding drilling programs and exploring and utilizing the nation’s gas and oil-rich shale formations. And as one would expect, the rise in active rigs has boosted domestic production. From November 2008 to March of this year, U.S. daily oil production went from 5 million barrels to 5.6 million. It’s safe to assume the country’s steep decline in dependence on foreign oil imports in the last few years is no coincidence. In 2008, the U.S. got two-thirds of its oil from foreign producers. Now we only import 50%.
Also unsurprisingly, most of the increased activity is taking place in the country’s known hotspot basins. Monthly rig counts in the Permian Basin region of Texas and New Mexico has increased six-fold since the spring of 2009. Rigs in the Williston Basin have quadrupled, and average rig counts for the Western Gulf Basin went from 11 to 162 in the last two years.
How might this trend affect oil pricing? We know markets have been highly volatile for some time, but maybe this breakdown of the last three years could spread some light on the issue:
(image: Energy Information Administration)
Flurry of Policy Action on Oil Drilling Will Do Nothing to Lower Gasoline and Heating Oil Prices
CAPTION: Senate Minority Leader Mitch McConnell (R-KY) is the latest of many national political figures to attempt lowering fuel prices with expanded US oil drilling, but drilling increases would do nothing to affect gas and heating oil prices. (image: newsmax.com)
With Americans frustrated by rising fuel costs and the start of the summer driving season just a week away, President Obama and both parties in Congress are addressing concerns with policy moves. The last two weeks have seen a whirlwind of proposals at the federal level aimed at increasing domestic oil production. But despite some claims that those proposals will help bring down the cost of gasoline and other retail fuels like heating oil, they would do nothing to bring down short-term prices and offer little to no long-term price relief.
On May 5, the Republican-controlled House of Representatives passed a bill requiring the government to restart sales of oil drilling leases off the coast in the Gulf of Mexico and in Atlantic waters off the coast of Virginia. Those areas had been opened up to drilling by the Obama administration in the spring of 2010, but lease sales were halted by the administration’s drilling moratorium following the April 20 oil rig explosion and subsequent oil leak in the Gulf. House Majority Leader Eric Cantor (R-VA) tied the Republican bill to lower fuel prices in pointedly partisan language, as quoted by the Washington Post:
In response to the Obama administration’s aggressive fight against domestic energy production, House Republicans have taken another important step to encourage economic growth, create jobs and lower gas prices – especially right here at home in the Commonwealth [of Virginia].
Last week, the House passed two more bills aimed at increasing domestic production of crude oil. Passed on May 11 and May 12, the bills would force the Department of the Interior to approve drilling permits within 60 days and open previously off-limits areas to offshore drilling, respectively.
Despite claims by Rep. Cantor and other Republicans, the measures proposed in the three House bills would do nothing to lower fuel prices in the coming months, and offer slim-to-none hopes of bringing prices down in the longer term. This fact was cited by the White House as a key reason for the President’s opposition to the bills. However, in a surprising announcement, the Obama administration offered its own plan to streamline domestic oil production that shared some common ground with the Republican oil drilling bills.
Soaring oil and gasoline prices have sparked heated political debate about whether to open up more US areas to off-shore drilling. (image: greenfudge.org)
In his weekly address to the nation on Saturday, President Obama said he would take steps to increase “safe and responsible oil drilling here at home.” His plan includes extending leases affected by the drilling moratorium enacted last year, offering new leases in Alaska’s petroleum reserve, and speeding up environmental reviews of potential oil reserves off the Atlantic coast. In contrast to congressional Republicans, Obama ceded that increasing domestic drilling would not lower today’s high fuel prices, and emphasized that his proposals would reduce US dependence on foreign oil, help create jobs and stimulate the economy.
In the latest salvo in the war of rhetoric over fuel prices, Senate Minority Leader Mitch McConnell (R-KY) introduced a bill that would have forced government sale of leases off the coasts of Virginia and Louisiana. The bill failed to win enough support in the Democrat-controlled Senate on Thursday to enter into floor debate. In defense of the bill, McConnell repeated the errant belief that increased US drilling would bring down fuel prices. As quoted by UPI, McConnell told Senate leaders, “our plan would actually do something to increase supply, putting downward pressure on price.”
As reported by HeatingOil.com in April, increasing domestic production of crude oil would have absolutely no effect on gasoline and heating oil prices for two reasons. First, the price of crude is set on a global market that is driven by world supplies, so boosting crude supplies in the US would not affect prices paid for oil by American companies. Second, US crude reserves are simply too small to increase world supplies to an extent that would drive down global prices. Even if US production were to increase to 3 million barrels per day (as the third of the House drilling bills mandates by 2027), US crude would only constitute 4 percent of the approximately 74 million barrels per day generated worldwide, not nearly enough of a supply increase to bring about trickle-down reductions in retail fuel prices.
With gasoline and heating oil prices rising steadily once again, the summer driving season just days away, and a presidential election next fall, fuel prices have become the political issue of the hour. But so far, none of the policy proposals put forth by the president or Congress offer any hope of bringing prices down. So as both political parties jockey for a political advantage on the issue, consumers would do well to keep the realities of oil prices and world markets in mind and demand more effective and concrete solutions from their elected leaders.
Timeline of recent oil drilling policy proposals:
Thurs 5/5: House passes bill requiring lease sales in Gulf and VA coast.
Wed 5/11: House passes second bill forcing Dept of Int to approve drilling permits within 60 days, permits automatically approved it deadline not met.
Thurs 5/12: House passes 3rd of 3 bills—open new drilling areas in CA, AK, and Atlantic coasts; require US production to reach 3 mbpd by 2027.
Thurs 5/12: Senate hearing on Oil industry tax breaks
Sat 5/14: Obama extends Gulf and AK leases, increases frequency of rights sales in AK petroleum reserve
Thurs 5/19: Senate rejects McConnell-sponsored bill to reopen lease sales on VA and LA coasts closed after oil spill
Ownership of Potentially Huge Arctic Reserves of Oil and Natural Gas Subject of UN Summit
Cairn Energy's drilling platform off the coast of the Greenland that recently struck oil. Could it be the first step toward an arctic black gold rush? (image: the BBC via bbc.co.uk)
Last year, HeatingOil.com’s Steven Zweig published a comprehensive report on the fossil fuel potential and looming territorial disputes over the frozen waters of the Arctic. This week, the competition for arctic oil and gas is heating up after a groundbreaking oil discovery raised the stakes of a United Nations summit at which countries will jockey for the rights to the Arctic’s natural resources.
The UK’s Guardian reported on Tuesday that the Scottish company Cairn Energy has struck oil with an offshore well off the coast of Greenland. While the company has not yet determined the size of the reserve or its economic viability, the discovery is the first of its kind off of the Greenland coast and could be the first of what the oil industry hopes will be scores of oil and gas production operations in the region.
The daily business program Marketplace Morning Report reported on Wednesday morning that US Geological Survey data shows that the Arctic could hold up to 25 percent of all the world’s undiscovered oil and gas. With this juicy figure in mind, five nations that have laid claim to arctic resources will be meeting at a UN summit this week to haggle over who gets to drill where in the icy north: the US, Canada, Russia, Denmark, and Norway.
In addition to the potentially massive reserves of oil and natural gas under arctic water and ice, global warming is also helping to make the region more attractive to seekers of fossil fuel. As the BBC reported on Tuesday, “Global warming is opening up the region.” As anticipated increases in global temperatures take hold, ocean temperatures will rise as well, causing huge areas of ice to melt and making offshore waters more accessible to drilling ships and platforms.
Environmentalists who are no doubt chafing at the idea of global warming making more greenhouse-gas producing fossil fuels available for burning have strongly expressed their opposition to oil drilling in arctic waters. Their main objection is that any spill would be devastating to surrounding ecosystems, and that spilled oil would take an extremely long time to dissipate—much longer than a spill in the Gulf of Mexico, for example. Shortly after Cairn announced its discovery, activists from Greenpeace occupied the drilling rig before being arrested for trespassing.
With global demand for oil slowly but steadily increasing and uncertainly about future supplies elevating the issue of peak oil production, the quest for arctic oil and gas will figure prominently in future debates over energy resources.
Company Sells Satellite Images to Oil Companies and Market Analysts
Digital Globe satellite image of an oil storage facility. The company takes satellite images of oil production and storage facilities for use by oil companies and oil market analysts. (image: digitalglobe.com)
CNBC reported Tuesday on Digital Globe, a private satellite company that sells birds-eye-view photos to oil companies, oil analysts, and investors.
The company, which operates three satellites at altitudes of between 300 and 600 miles, can take images of basically anything that is visible from the air. US intelligence agencies are top Digital Globe clients, but civilian industries are finding more ways to use the images. Common private-sector applications of the satellite images are urban planning, land use, agricultural analysis, location-based services on cell phones and other handheld devices, and of course evaluating oil production and shipping.
The company’s images can help oil analysts determine how much oil is actually being produced at a certain extraction sites like offshore platforms. While using satellite pictures to count the number of trucks or tankers going to or from an oil well may seem like a haphazard way of gauging oil supplies, it makes a lot of sense when one considers the notorious inaccuracy of official oil supply data released by the American Petroleum Institute (API), the US government’s Energy Information Administration (EIA) and the International Energy Agency (IEA). Just this week, the API report showed a 5.86-million-barrel increase in US crude oil stockpiles during the previous week, while the EIA report showed an 800,000-barrel decrease over the same period.
It’s hard to say how the use of more sophisticated analytical tools like Digital Globe’s images will affect the oil market. But if it brings a bit more certainty to the task of accurately measuring supply and demand, it could help create a more stable market that is truly grounded in fundamental forces.
To watch a video of CNBC’s report from Digital Globe “Mission Control,” visit the CNBC website.
Heating Oil Weekly Roundup: Offshore Oil Drilling, Building-Top Wind Turbines, Trading Oil with Iran
Caption: (image: Mike Lester, Rome News-Tribune via cagle.com)
Opposition to offshore oil drilling has swelled in the aftermath of the BP oil spill in the Gulf of Mexico, but environmental risk may not be the only argument against offshore drilling, points out Glenn Morton at The Oil Drum blog. Morton looks at BP’s Thunder Horse drilling platform (not the Deepwater Horizon platform that collapsed and spilled) and finds that it is not performing nearly as well as expected, which could be another reason to recalibrate the cost-benefit analysis of offshore drilling.
If you own a large building and you want to save $100,000 a year, here’s a tip: don’t run your heating and cooling systems at the same time. That’s the sort of fix that can be found through “building commissioning,” the surprisingly little-used practice of having an outside expert test a building’s climate control and energy systems, reports Richard Conniff at the Yale Environment 360 blog. If applied to all non-residential buildings, commissioning could save $30 billion dollars by 2030.
Building-top turbines seem like a neat way to add some self-sufficiency to a home or building and cut down on energy bills in the process. Now just imagine how cool they would be if they worked. The trouble is, they usually don’t, as the Museum of Science in Boston found out. Martin LaMonica of CNET tells the story of how the museum is taking advantage of its failed urban wind effort to learn more about the challenges of small-scale wind energy.
Buying oil exports from Iran is legal, but it’s a secretive trade nonetheless, says the Wall Street Journal. Sanctions against Iran only apply to selling oil to Iran, but oil majors like Shell and Total still alter ship-tracking data and turn off electronic transponders when doing business with the ostracized country.
Three Forks Oil Formation in North Dakota Could Yield 2 Billion Barrels of Oil
This map of Continental Resources drilling operations in North Dakota centers on the potentially massive Bakken and Three Forks shale formations. (image: contres.com)
New drilling technologies, such as the controversial method of hydraulic fracturing (hydrofracking), have opened up vast resources of oil and natural gas once thought to be irretrievably locked in underground shale formations. The most notable example is the Marcellus Shale, which stretches from Tennessee to New York and could contain as much as 500 trillion cubic feet of natural gas, but in North Dakota the prize is not shale gas but shale oil.
North Dakota’s shale oil resources are found primarily in the Bakken and Three Forks formations. The Bakken could hold up to 169 billion barrels, but when it comes to recoverable oil the Three Forks shale may be just as productive, reported the Bismarck Tribune on Friday. A report from the North Dakota Department of Mineral Resources estimated that 2 billion barrels of oil are recoverable from the Three Forks, the same number estimated to be recoverable from the Bakken. The number of recoverable barrels could increase as technology improves.
A representative from the Energy Information Administration cautioned that the new estimate does not add to the proven reserves held by the US, because the Three Forks potential remains unproven. Yet at least one inside source believes the estimate that the Bakken and Three Forks formations hold 4 billion recoverable barrels is too conservative. Harold Hamm, chairman and CEO of Continental Resources, Inc., which owns nearly half the wells working on the Three Forks formation, believes that North Dakota is sitting on 8 billion barrels of oil.
These preliminary estimates could one day lead to huge oil extraction projects in the Bakken and Three Forks region, but if that day does come, it is decades away. If the 4-billion-barrel estimate is even close to accurate, the reserves could contribute significantly and bring down oil prices. Despite the oil industry’s enthusiastic announcement of the oil finding, government approval, legal challenges and sophisticated construction requirements would likely delay any drilling for at least 10 years.
Controversial Falklands Oil Drilling Comes Up Empty
Desire Petroleum’s oil platform offshore of the Falklands has yet to find a commercially viable oil field. (image: drillingcontractor.org)
When Desire Petroleum made the decision to drill for oil off the shores of the Falkland Islands, some observers thought the British oil company’s push for natural resources could reignite the longstanding conflict between Britain and Argentina over the sovereignty of the islands. Now the first results of Desire’s drilling are in, and are so disappointing that the company could abandon the well altogether, the Times of London reported on Sunday.
According to the Times, Desire’s results were “technically successful” but “non-commercial”—that means they found oil, but not enough to make it worthwhile. Prompted by the Times’ report over the weekend, Desire released a statement on Monday that confirmed the lackluster results and said that more testing would be required before the company decided “whether the well will need to be drilled deeper, suspended for testing or plugged and abandoned.” Desire still has rights in other fields near the Falklands, and could still find a productive oil field elsewhere.
The political conflict between Britain and Argentina could be eased if drilling continues to produce unpromising results. In the meantime, Desire Petroleum is the clear loser—the AP reported Monday morning that on the London Stock Exchange the price of the company’s shares had fallen by 48 percent.
Environmental Coalition Uses Avatar to Criticize Tar Sands Mining
For some environmental groups, the earth-smashing ubobtanium mining in Avatar (top) perfectly parallels the excavation of Canada’s tar sands (bottom) in pursuit of crude oil. (images: gawker.com and whitepinepictures.com)
On Sunday Avatar fell short of winning the coveted “Best Picture” Academy Award, but it continues to rule box offices around the world as the most profitable movie ever made. While the film’s dazzling three-dimensional special effects and fantasy-world setting are likely the main drivers of its massive popularity, there is another element of Avatar that has lot of people talking: its environmental message.
In the film, a corporation intent on extracting an invaluable mineral called “unobtanium” from the lush green planet of Pandora meets resistance from the planet’s inhabitants, who want to prevent the environmental destruction that the excavation of unobtanium brings. For many, the heroic natives’ struggle against the greedy invaders amounts to a powerful environmental allegory that urges humanity to deny greed and respect the pristine harmony of the natural world.
As the CBC reported on March 5, a coalition of environmental groups took the allegory one step further, placing an ad in the film industry publication Variety that cast Canada’s Alberta tar sands as the real world’s unobtanium. The ad, paid for by 50 environmental groups, featured an aerial photograph of a massive oil sands site, where excavation had removed all signs of life, leaving only a huge field of brown sand dotted with man-made hills and pits. Title text labels the photo “Canada’s Avatar Sands.” For the groups who took out the ad, the bitumen (a chemical precursor to crude oil) trapped in the tar sands of northern Alberta is real-life unobtanium, and the environmental destruction it has brought to the plains and forests of Canada parallels the tragic and heartless plundering of Pandora.
Despite the engineering inaccuracies of Avatar’s mining equipment, it is hard to deny that the destructive mechanical behemoths used to mine unobtanium in the film bear a striking resemblance to the massive drilling machines and dump trucks used to excavate Canadian tar sands. But to draw so direct of a comparison between the real world and a fictional one goes a bit further than most green-minded citizens are willing to allow.
In any event, the public “shame on you” directed at oil companies excavating oil sands have successfully attached (at least for now) the issue to a global blockbuster that nearly every citizen of the world has at least heard of, if not seen. But so long as Canadian tar sands keep providing a steady supply of oil to the US and other major consumers, projects will continue to expand. And as global crude demand recovers, other tar sands sites like the massive fields in Venezuela’s Orinoco belt will likely be dug up as well.
So long as the world thirsts for oil and squeezing it from tar sands it is a profitable enterprise, all the environmentally friendly movies in the universe won’t stop the digging.
Watch the trailer for Avatar below (it begins at 0:44):
embedded by Embedded Video
YouTube Direkt
Exxon’s Oil and Gas Production Plans a Sign of Industry’s Future Reliance on Unconventional Sources
For Exxon Mobil and the rest of the oil industry, much of their future production will come from unconventional sources like the oil sands of Alberta, Canada. (image: cdecard.com and The Co-operative campaigns via flickr.com)
In a presentation to the New York Stock Exchange, Exxon Mobil laid out plans for future oil and gas projects that show an increasing reliance on harder-to-reach oil and gas reserves, CNN Money reported on Friday. Exxon, the world’s largest publicly traded oil company, will begin new projects aimed at extracting crude oil and natural gas from deep ocean waters, from a remote area of the Arctic, and from tar sands in Canada. All of those sources, deemed “unconventional,” require substantially larger investments of money and resources to extract than do the “conventional” reserves of crude oil and gas relatively close to the earth’s surface. As reservoirs of easy-to-reach oil, such as those found in abundance in Saudi Arabia, deplete, oil companies big and small will increasingly turn to unconventional sources such as those identified by Exxon.
Exxon CEO Rex Tillerson, doing his job to keep up appearances of a rosy future for his company, noted that the definition of unconventional oil is subjective, and insisted that just 10 percent of its future projects will tap unconventional sources. Unconventional oil and gas that is difficult to access is more expensive to extract and process, meaning higher costs for oil companies that would likely lead to lower profit margins and/or higher consumer prices that could cut into future demand. Even Tillerson acknowledged that increased reliance on unconventional sources is the inescapable future of the industry, and offered his company a pat on the back for preparing for that future: “We anticipate it will grow in the future, and we hope it will grow with the positions we’ve taken,” he said.
There are some bright spots in the future of conventional oil, most notably expectations of prolific conventional oil production in Iraq as the nation becomes more stable. However, the quantity of conventional oil expected to come from these bright spots will not be abundant enough to offset the depletion of other conventional supplies.
Although oil executives like Tillerson would probably deny it, the industry’s shift toward unconventional sources will, sooner or later, bring higher prices for consumer goods like heating oil, gasoline, and natural gas. For economist Jeff Rubin, the shift toward unconventional energy sources is the most important factor in his extreme vision of $225-per-barrel crude oil in two years and a subsequent demise of the global economy.
While an economic downturn, booming economies in the developing world, and a host of other factors have sent oil prices on a wild rollercoaster ride over the last couple years, the future is clear: the prices of oil and natural gas will continue to increase—the only question is how much and how fast. One cannot escape the simple logic that a product that is more expensive to produce is more expensive to buy.
Digging for Oil Could Cause the Planet to Tilt
(image: lpi.usra.edu)
Burning fossil fuels plays a well-known role in causing climate change, but a new scientific paper analyzes how fossil fuel mining—never mind burning the stuff—could also affect the climate by changing the shape of the earth, reports the blog Seeking Alpha.
According to the paper, which will be presented in India at the AGU Chapman Conference on Complexity and Extreme Events in Geosciences, the extraction of fossil fuels may have a noticeable impact on the earth’s total mass. For you math whizzes there’s some talk of “the moment of inertia” and “the angular frequency of the earth,” but the gist is that extracting so much oil from the northern hemisphere may have upset the earth’s balance and tilted it. More tilt could mean more extreme summers as the earth revolves around the sun.
This is only one paper presented at one conference, so it’s not exactly well-established science, but if it’s true we would agree with the paper’s author that it “[makes] the process of climate change such as global warming more complex to understand.” Not that we really understood it in the first place.
“Gusher” Oil Field Discovered In Weld County, CO Is Surprisingly Sweet
Light sweet crude is flowing in Weld County, Colorado. (image: co.weld.co.us and lca-resources.com)
Yesterday, reports of a high quality crude oil well in discovered in northern Colorado contained two remarkable facts.
1. During its initial 24-hour test, the production well yielded 1,770 barrels of oil. According to denverpost.com, the average well in the region produces 100-150 barrels a day.
2. The oil is light sweet crude, the most useful and therefore most valuable crude grade in the world that is increasingly rare.
Exxon, Chevron Report Falling Profits As Refining Sector Continues To Suffer
(image: daylife.com)
As our Kristin Miller wrote January 22nd, refiners are closing facilities, reducing output, and cutting payrolls in response to weak demand for refined petroleum products. This weak demand can be seen in falling profits—and even outright losses—being posted by the refinery operations of major global energy companies, such as Exxon and Chevron.
As MarketWatch reported Friday, Chevron reported a fourth-quarter loss of $613 million in its refining and marketing businesses, contributing to a decline of 37 percent—or $1.82 billion—in profit. For the same period, CNNMoney.com reported that Exxon suffered a $189 million loss in its refining business.
Refiners are caught between a rock and a hard place. Demand for refined or distilled products, including gasoline, diesel, and heating oil, is down, depressed by a persistently global weak economy mired in recession. Less economic activity means fewer goods transported in commerce and less construction (less diesel); high unemployment reduces work-related driving, such as commuting, and also discretionary or vacation travel (less gasoline and jet fuel); and many households feeling the economic pinch are turning the thermostat down (less heating oil). However, at the same time, the raw material that these end products are made from, crude oil, continues to be priced surprisingly high given the weakness or economies around the world. Notwithstanding that supply has outpaced consumption, leading to record-levels of inventory, the average 4th-quarter 2009 crude price was $76/barrel, up more than 30 percent from 4th-quarter 2008’s average price of $59/barrel.
Tar Sands’ Potential Grows as Industry Investment Shrinks
The Orninoco oil belt territory, Venezuela. (image: vheadline.com)
As reported by the New York Times on Monday, a new USGS survey concludes that Venezuela’s Orinoco tar sands have more than twice as much “technically recoverable” oil than previously thought. The survey concludes that the Orinoco belt, thought to contain 235 billion recoverable barrels of oil, actually holds 513 billion barrels. This, “the largest accumulation ever assessed” by the USGS, goes a long way toward validating Venezuela’s claim to have the world’s largest oil reserves, ahead even of Saudi Arabia.
However, the critical caveat is “technically recoverable”—getting oil from tar sands is a labor-, capital-, and energy-intensive process, at least compared to “simply” sinking a well. For example, the Orinoco is believed to have 1.3 trillion barrels of oil locked up in its sands, of which only around 40 percent is now thought to be extractable. The rest is not practically reachable by today’s techniques. However, even for the 40 percent that can be recovered, the question remains: is it worthwhile to recover at today’s prices? Read More »
Study: China’s Oil Demand Weaker than it Seems
An employee of Sinopec, China’s national oil company, at work. (image: daylife.com)
The world may expect China to drive a resurgence in oil demand and a subsequent rise in prices, but according to a new report from IIFL, its oil consumption growth is actually decelerating, said an article published on Monday in India’s Business Standard. IIFL wrote in its report on China’s quest for energy security that, “The importance of China’s oil consumption and growth to global trade, albeit undoubtedly significant, had been grossly overrated.”
The IIFL also mentioned that China imports much less oil than the “developed world.” The IIFL described China as a “price-taker, not yet a price-driver.”
Anatomy of an Offshore Oil Drilling Rig
The Discoverer Clear Leader, currently under contract to Chevron for the bargain price of $500,000 a day. (image: ports.co.za)
A video posted on Monday to the Wall Street Journal website profiled what offshore drilling giant Transocean claims is the world’s most powerful drilling ship. The ship, called Discoverer Clear Leader, is drilling for oil in the Gulf of Mexico, 190 miles south of New Orleans.
The Clear Leader is owned and operated by Transocean, who is using the ship’s technology to drill for oil in places that other oil rigs cannot. “We are drilling in 12,000 feet of water, 40,000 foot holes, because we have the horsepower to do that,” John Redington, offshore installation manager for Transocean, told the Journal. He went on to say that third- and fourth-generation oil rigs get to 20,000 or 25,000 feet, and then “start wheezing.”
Salazar Vows Closer Inspection of Oil and Gas Drilling Leases
Interior Secretary Salazar is unapologetic about tightening regulations on drilling in public land. (image: csbj.com)
Interior Secretary Ken Salazar had some disparaging words for the Bush administration and its coziness with the oil industry this week. As the New York Times reported, Salazar, in an address given on Wednesday, said his department will be taking a harder look at the leasing of oil and gas on public lands; Salazar said he and his colleagues would not be doing business as the last administration had, serving as a “candy store” for big oil.
Salazar, who said Bush administration policies “carved up the landscape and fueled costly conflicts that created uncertainty for investors and industry,” is looking to cut down on what he sees as pricey legal disputes that arose from protests over land use. He pointed to the statistic that nearly 40 percent of rulings on permit drilling rights were challenged in 2008, as compared to 1 percent in 1998.
Economist Rubin, Who Predicted 2008 Spike, Sees $100 Oil in 2010
Rubin predicted the last spike in oil prices—will he be right about the next one? (image: ipsnews.net)
According to BusinessWeek, Jeff Rubin, the economist who correctly predicted 2008’s massive crude oil price spike, believes that petroleum prices are steadily headed toward the $100 mark. Asserting that oil prices will hover around $90 by the end of March, the former CIBC World Markets Inc. chief economist believes that “it’s safe to say that we’ll see triple-digit oil prices by the fourth quarter of this year.”
Rubin attributes rising oil prices to increased consumption by countries with rapidly developing economies such as India and China. This occurrence will in turn force the United States to rely on more expensive non-conventional sources of oil. Increased consumption, Rubin believes, will outweigh other factors that could cause price spikes, such as political disturbances in oil producing nations and production limits set by OPEC. Rubin’s prediction challenges recent forecasts made by Peter Cooper, who believes that oil prices will drop in 2010 and that factors such as rising Chinese demand are not credible because the strength of emerging market economies is questionable.
Lamentably, if Rubin again proves correct, consumers should expect to pay more for heating oil as he predicts crude prices could reach up to $160 a barrel in 2012, a level at which he asserts “the global economy becomes very challenged.”
Pemex Oil Output to Increase After 7-Year Decline
In 2011 Pemex’s oil production will be back on the rise. (image: thefastertimes.com)
On Tuesday, Bloomberg reported that Mexico’s state-owned oil company Petroleos Mexicanos, or Pemex, forecasts a reverse in its seven-year decline in oil production. Pemex expects to 2.55 million barrels a day in 2011, an increase of over 50,000 barrels per day from its forecast for 2010 production. Optimistic that newly found crude deposits will be able to replace and surpass older fields, Pemex hopes to end a long period of declining production, which cost the company approximately $23.4 billion last year alone. That is a staggering amount when one considers that oil profits fund nearly a third of the Mexican government’s budget.
Mexico’s expected increase in production coincides with growing oil production Brazil, Russia, Iraq, Nigeria, and Kazakhstan, sometimes called the BRINK countries, which anticipate bringing new oil fields online and dramatically boosting their oil output. If output does increase in all these countries there will be considerably more oil on the market, and prices could drop as global supplies outpace demand.
China to Increase Pursuit of Oil and Gas Resources
The logo of the China National Petroleum Company could become a more common sight around the world. (image: 1.bp.blogspot.com)
Bloomberg reported Tuesday that China is stepping up its efforts to pursue and secure oil, natural gas, and mineral resources. As domestic demand grows, the world’s second-biggest energy consumer has said it will “actively” participate in global competition for these resources.
Though the intensity has been increased, these efforts by the Chinese are not new. The country walked away from an early December auction with lucrative deals in place to develop Iraq’s oil fields. And even earlier that month, the China National Petroleum Company made a less-favorable deal to work on the Iraqi Rumaila oil field, which holds 17.8 billion barrels.
Investments in Iraqi oil fields are notoriously risky in terms of stability, so the effects of these steps for heating oil prices remains to be seen. If the Chinese are successful in their bid to procure “stable energy supplies for economic growth,” however, it could bode well for heating oil and other energy consumers around the world.
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