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.
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.
