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):
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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.
Iraq Looks for Partners to Develop its Oil Superfields
Sonangol logo. (image: brandsoftheworld.com)
On December 30, the BBC reported that the Angolan national oil company, Sonangol, inked a deal with the Iraqi government to develop two fields in the country’s south, the Qayara and Najmah oilfields in Nineveh province. The deal is the latest in a series of partnerships Iraq has forged with foreign oil companies to help develop its outdated oil infrastructure. Iraq has the third-largest proven oil reserves in the world, but its crude output has hovered below 4 million barrels a day, and often below 2 million, since the late ‘70s.
Earlier development bids went to international giants such as BP, Royal Dutch Shell and Lukoil; Exxon Mobil was the only American company to make a successful bid, and the geopolitics of the region may have been a factor in that result. Despite its rich reserves, Iraq’s political instability is a high risk for the shareholders of American conglomerates, whereas state companies such as Sonangol, which is used to operating in politically tense areas, are beholden only to themselves. The Qayara and Najmah fields are located in a region that is a hotbed of Al-Qaeda and Sunni Muslim insurgent activity, but the dangers of extracting oil there also earned Sonangol a price per barrel of between $5 and $6 from the Iraqi government, higher than the price paid at other larger, more lucrative and safer fields. Sonangol has said it will invest $2 billion in Qayara and is in talks with several other companies that have shown interest in joining in on their development plans.
Brazil Set to Become Latin America’s Biggest Oil and Gas Producer by 2011
Brazil: known for sun, sand, and now oil wells. (diario portuario via flickr.com)
What country may be Central or South America’s number one oil producer in a few short years? Mexico? Venezuela?
No—Brazil. Mexico and Venezuela may outproduce Brazil now, but that’s poised to change. A combination of increasing Brazilian oil production and declining oil production in Mexico and Venezuela may lead to an inversion in the Latin American hierarchy of fossil fuel production.
As the Wall Street Journal reported on December 17, Brazil has recently made major offshore petroleum and natural gas finds. Much of the new reserves lie deep under the ocean floor, in “subsalt” formations that pose significant technical challenges to drilling. However, improvements in drilling technology and methods, combined with crude prices that make oil production attractive even at great expense, have made deep reserves economically viable. These new reserves—one field alone is estimated to hold between 5 and 8 billion barrels of oil—greatly add to Brazil’s existing proven reserves of 12.6 billion barrels.
Eskimo and Environmentalist Groups Challenge Shell’s Alaskan Offshore Drilling Plan
Native Alaskans preparing to set off for a traditional, subsistence-lifestyle whale hunt. (alaska-in-pictures.com)
Right after Shell finally won Interior Department approval to begin offshore oil exploration in the Arctic, not one, but two separate lawsuits have been filed to block drilling. As reported by the Los Angeles Times Tuesday, Native Alaskan and environmentalist groups have brought legal actions to stop oil exploration.
In the first action, the Alaska Eskimo Whaling Commission joined with a Native Alaskan community to ask a federal court to block drilling while requiring yet another review of oil production’s environmental impact on the Beaufort and Chuckchi seas. Said the spokesman for the Whaling Commission: “[T]he government and the offshore operators need to understand that development has to be done in a way that does not threaten our subsistence livelihood and culture.” In contrast to more general environmental challenges to energy production, the suit focuses heavily on the impact of offshore oil exploration on Native Alaskans and their traditional lifestyle.
Oil Sands Licenses Yield High Sales in Alberta’s Auction
Oil sands are in high demand, as shown by the high prices fetched by drilling leases. (image: nationalpost.com)
In a recent auction, the Canadian province of Alberta sold oil leases for a total of $383.9 million, making it the highest sale of onshore leases since December 2006 and the third highest in history. The most expensive lease sold for a total of $46.8 million, or about $5,700 per hectare, indicating that the bidders (big oil companies) are unafraid of the challenges associated with drilling in oil sands and are willing to spend the time and money necessary to see results.
Perhaps when you think of Alberta, you don’t imagine tremendous underground fields of oil. But according to the Oil Sands Discovery Center, the province’s oil sands are the largest known reserve of oil on earth, between 1.7 and 2.5 trillion barrels of crude, and represent about 44 percent of the country’s oil production. To gain some idea of the immensity of these reserves, consider that Saudi Arabia has only 261.9 billion barrels of proven reserves, and that the combined reserves of OPEC come to only 885 billion barrels.
Spending on Oil and Gas Exploration and Production to Rise in 2010
Oil companies will be spending more money on exploration in 2010. (image: yorku.ca)
A survey of 387 oil and gas producers found that global spending on oil and gas exploration will rise 11 percent to $439 billion in 2010 as energy prices increase, Reuters reported on Thursday. The increase in spending on exploration reverses the 15 percent decrease seen in 2009, when oil prices dropped after 2008’s record highs.
Exploration and development spending is strongly linked to oil and gas prices. If prices are too low, oil companies have no incentive to initiate exploration and drilling projects. Without the development and production of new fields, however, supplies will decrease; that could in turn raise prices, unless demand falls by an equal amount.
The survey projected spending on exploration and development in the US to rise by 12 percent to $79 billion, with drilling for shale gas responsible for much of the increase. Spending in Canada is expected to increase by 23 percent to $23 billion, buoyed in part by the strengthening of the Canadian dollar. Globally, national oil companies in Asia, Africa, the Middle East, and Russia are expected to increase their budgets and raise exploration and development spending outside of North America by 10 percent to reach $337 billion.
The findings of the survey, conducted by Barclay’s Capital, fit with Chevron’s recent decision to focus on exploration and development in favor of refining. The majority of Chevron’s $22 billion in planned spending for 2010—$17.6 billion—will be spent on upstream natural gas and crude oil exploration and production projects.
Chevron Invests in Exploration and Development, Not Refining
Chevron cuts back on oil refineries, like this one in British Columbia, which have become less and less profitable. (image: theandrewness)
Chevron, one of the country’s largest oil companies, is putting its focus on—and its money in—exploration and drilling, instead of refining. This move away from refining, a major element of Chevron’s downstream business, is, as Kirstin Korosec of Bnet reports, a reaction to the difficulty the refining sector has been facing.
Chevron is cutting roughly $900 million from its downstream budget as part of a 2010 spending budget that, at $21.6 billion, is 5 percent lower than last year. The majority of that nearly $22 billion in planned spending, some $17.5 billion, will, as Korosec writes, “fund a slew of upstream crude oil and natural gas exploration and production projects.”
While oil prices have remained high, demand for refined products remains weak, creating a tough market for refineries. While a further hit to the refining market could ultimately send heating oil prices up, it’s hard to say exactly how Chevron’s move away from its downstream business will affect the market. Certainly Chevron is not alone among the big oil players in trimming its overall budget, as other major oil companies are bracing for a tougher 2010 and have similarly announced plans to scale back next year.
Saudi Arabia Plans to Use Carbon Capture to Boost Oil Production
A Saudi Aramco pipeline under construction. (image: arabianoilandgas.com)
The latest country to jump on the carbon capture idea is Saudi Arabia. The oil-producing nation wants to capture carbon dioxide and inject it into the world’s largest oilfield by 2013 to attempt to increase output and reduce the country’s carbon footprint, reports the National.
Ali al Naimi, the Saudi minister of petroleum and mineral resources, made the proposal on Wednesday at a meeting of the Gulf Petrochemicals and Chemicals Association, which is similar to plans for carbon capture in Abu Dhabi. Yesterday’s announcement of the carbon capture project at the giant Ghawar oilfield was a key part of Saudi Arabia’s “initiatives on green.” The announcement came after the Saudi government was criticized by many global leaders for public skepticism that a global agreement could successfully cut emissions through reduced consumption of fossil fuels.
Manifa, Saudi Arabia’s Offshore Oil Project, Scheduled for 2013
The man-made islands of Manifa. (image: dredgetheworld.blogspot.com)
The Saudi national oil company Aramco announced on Wednesday that it has resumed construction of its enormous off-shore drilling complex, called Manifa, estimating that the project is now 60% complete and should be operating by 2015. The company decided to delay the project when oil prices sank last year; but, with a barrel of crude now fetching upwards of $70, Manifa is once again a viable enterprise.
The company has called Manifa “the largest single off-shore crude oil project in Saudi Aramco’s history”—and for a very good reason. When completed, Manifa will comprise 27 man-made islands connected by 41 km of causeway. Moreover, it will produce 900,000 barrels per day (bpd) of Arabian heavy crude, 90 MMscfd of associated gas, and 65,000 bpd of condensate, more than any other Saudi Aramco oil field now operating. Indeed, Manifa’s crude could constitute as much as a tenth of the company’s daily production.
