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Things are only going to get tougher for gas and coal compared to renewables.

Solar power prices are dropping at record rates. CREDIT: Acera. — SOLAR POWER PRICES ARE DROPPING AT RECORD RATES. CREDIT: ACERA.

Prices for solar, wind, and battery storage are dropping so rapidly that renewables are increasingly squeezing out all forms of fossil fuel power, including natural gas.

The cost of new solar plants dropped 20 percent over the past 12 months, while onshore wind prices dropped 12 percent, according to the latest Bloomberg New Energy Finance (BNEF) report. Since 2010, the prices for lithium-ion batteries — crucial to energy storage — have plummeted a stunning 79 percent (see chart).

Lithium-ion battery prices have plummeted since 2010 and are projected to keep dropping. — LITHIUM-ION BATTERY PRICES HAVE PLUMMETED SINCE 2010 AND ARE PROJECTED TO KEEP DROPPING.

“The economic case for building new coal and gas capacity is crumbling,” as BNEF’s chief of energy economics, Elena Giannakopoulou, told Bloomberg.

At the same time, solar and wind plants — which are increasingly being built with battery storage — are eating into the utilization of existing coal and gas plants, making them far less profitable. For instance, the super-efficient combined-cycle gas turbine (CCGT) plants that have been popular in recent decades, were designed to be used at full power between 60 percent and 90 percent of the time.

But their actual utilization rate (also called the “capacity factor”) has been plummeting in recent years, and is now close to a mere 20 percent in countries as diverse as China, Germany, and India (see chart).

Solar and wind are squeezing out coal and gas worldwide. — SOLAR AND WIND ARE SQUEEZING OUT COAL AND GAS WORLDWIDE.

Arizona regulators “recently refused to endorse plans by three power companies that included more natural-gas facilities,” the New York Times reportedWednesday. “Commissioners directed them to make greater use of energy storage and plants that produce zero emissions.”

…click on the above link to read the rest of the article…

Europe’s Biggest Gas Field To Close Over Quake Risk

April 2, 2018

Europe’s Biggest Gas Field To Close Over Quake Risk

Europe’s biggest gas field–Groningen in the north of the Netherlands–has been pumping gas for more than half a century and supplies gas to 98 percent of the Dutch population. But the field has been causing earthquakes that have become a growing concern for residents and authorities.

After years of debates and measures to curb production at the field, the Dutch government decided this week that output at Groningen will be terminated by 2030, with a reduction by two-thirds until 2021-2022 and another cut after that. The authorities have already limited production from the field because of the earthquakes, but now they have decided that the risks and costs are no longer acceptable.

“Safety perception as well as actual safety can only be guaranteed for the near future in Groningen by fully eliminating the source of the earthquake risk. The Dutch Cabinet, therefore, is taking measures for natural gas extraction from this gas field to be reduced to zero, as soon as possible,” the government said, noting that the consequences of natural gas extraction “are no longer socially acceptable.”

“According to Cabinet, ongoing natural gas extraction, combined with massive financial compensation and restoration and reinforcement operations, form an untenable situation,” the Dutch ministers say.

To cope with the new reality of natural gas supply and demand in the country with reduced Groningen gas production and ultimately without Groningen gas at all, the Netherlands is building a nitrogen plant near Zuidbroek that will convert natural gas of a high caloric value into low-calorie natural gas and that will cost US$615 million (500 million euro).

…click on the above link to read the rest of the article…

Russia-Ukraine Gas Spat Highlights Geopolitical Divide

March 26, 2018

Russia-Ukraine Gas Spat Highlights Geopolitical Divide

The latest gas dispute between Russia and Ukraine flared up just as most of Europe was gripped by Arctic cold and just before the spy poisoning scandal in which the UK accused Moscow of poisoning a former double agent in England by a military-grade nerve agent of a type developed by Russia.

Russia’s gas giant Gazprom, which delivers around one-third of Europe’s gas, uses the Ukrainian gas system as a key route for its gas supplies. While European Union institutions want to reduce European dependence on Russian gas, Russia wants to cut its dependence on the Ukrainian transit route for its supplies to the EU by building pipelines to bypass Ukraine.

Yet, according to Ukraine, Russia will need the Ukrainian route to ship gas to Europe even after 2019, when the current transit agreement expires, the chief executive of Ukraine’s national company Naftogaz, Andriy Kobolyev, told Bloomberg in an interview this week.

“Gazprom will not be able to cope without the Ukrainian gas transportation system after 2019, so they will need to sign a new contract with us,” Kobolyev told Bloomberg, noting that Russia uses gas supplies to advance its political goals.

“Russia is totally unwilling to separate gas and politics — from their perspective it’s the same and gas plays a very important instrument in achieving a wider geopolitical agenda,” Kobolyev said.

The gas companies of Russia and Ukraine have been locked in bitter disputes for more than a decade, and the relations were further strained by the 2014 Russian annexation of Crimea.

…click on the above link to read the rest of the article…

Dr. Charles Hall: The Laws Of Nature Trump Economics

March 6, 2018

Dr. Charles Hall: The Laws Of Nature Trump Economics

It’s all about Energy Retun On Energy Invested (EROEI)

Dr. Charles Hall may not be a name you instantly recognize, but it should be.

Now a Professor Emeritus of the College of Environmental Science and Forestry, Dr. Hall is a rigorous researcher of energy, oil, biophysical economics — and was a critical early pioneer in developing the key resource metric of Energy Returned On Energy Invested (EROEI).

Here’s how Hall describes EROEI in layman’s terms:

These energy investment ideas are everywhere in nature.

Certainly business people know about investments, but you’ve got to realize that anytime that you’re investing, you investing not only money, you’re investing energy. And, in fact, we consider money to be a lien on energy, a promissory note on energy.

So, if, for example, you buy in New York City a bagel for $1, that bagel cannot possibly get there without the use of a considerable amount of energy. And that energy is, for example, energy used in Louisiana to take natural gas and turn it into nitrogen fertilizer. And then it’s put in a barge and barged up the Mississippi River to Nebraska. And then a tractor spreads in on a field. And then it plows up the field and plants wheat seeds. And then later comes along and tills the soil and maybe takes care of the weeds or whatever and certainly harvests it. And then more energy is used to take the harvested wheat and grind it up and turn it into flour. And then they put it in a sack and put it on a railroad train and ship it to New York City. And there somebody boils a pot of water to cook the bagel. Oh, and they use electricity to mix the batter. And then you have a bagel.

…click on the above link to read the rest of the article…

Gail Tverberg: The Coming Energy Depression

January 8, 2018

Gail Tverberg: The Coming Energy Depression

The math is straightforward, but cruel

As most PeakProsperity.com readers know, we fully agree with the statement: Energy is THE master resource.

Without it, nothing can get done.

Energy analyst and professional actuary Gail Tverberg returns to the podcast this week to revisit the global energy outlook. And fair warning, Gail warns it’s quite grim.

To her, it’s a simple math problem. We have too many people placing too much demand on the world’s depleting energy resources. The cost of energy is rising, which we are compensating for in the short term by using financial gimmicks to make “affordable” — when all we’re really doing is creating future promises that cannot possibly be repaid.

The increasing cost of energy is manifesting in higher prices (for everything, not just fuels) and lower real wages, a divergence she sees only worsening from here. This path leads to another Great Depression-style crisis from which she does not see a clear path out of:

What we really live on is what we pull out of the ground each year, in terms of oil or coal or natural gas or whatever. So what we have is just what we pull out.

Now, you accurately point out that we’re making too many claims on the future using debt. We’re actually doing this via a couple of different ways, which are pretty much equivalent. One of them is by issuing equity. This has the equivalent effect as using debt because what you’re saying is I’ll pay you dividends, and you’re going to get a higher price in the future. This is simply different kind of claim on the future. Another way to borrow from the future is through government promises.

…click on the above link to read the rest of the article…

No Gas in Florida: Give Truth a Chance

September 14, 2017

No Gas in Florida: Give Truth a Chance

Photo by el-toro | CC BY 2.0

As I heard Florida’s governor demanding gas, I wondered why they don’t learn from Cuba, and send buses. Cuba was there in the CBC newscasts about Florida. It was the country under the satellite image, under the “lingering” eye of category five Irma. For hours, that awful image was in the background as the CBC anchor kept returning to Florida’s need for gas.

They won’t learn from Cuba. And it is not because Cuba is part of the world’s “left-overs”, who don’t count and whose ideas don’t count either. It’s not even because of Cold War mentality. The problem is deeper. It’s about culture and truth. In short, it’s about a culture that denies truth.

The popular cultural anthropologist, Wade Davis, says cultures teach us about humanness.[i] He claims to catalogue cultural wealth to know what it means to be human. He gives a platform to cultural representatives expressing “the better angels of our nature”.

He doesn’t catalogue the culture of imperialism. And he gives no platform to the cultures of resistance long opposing it. He writes, “Within this diversity of knowledge and practise [of cultures] … we will all rediscover the enchantment of being what we are, a conscious species”.

Well, not all.

Cuban scholar, Juan Marinello, writes that one of the great puzzles about Cuba, for its enemies, is how ideas have survived. Somehow, in the late nineteenth century, with the US in economic glory, Jose Martí, independence leader, knew Latin Americans could be modern and free without following the US.

And he grasped something not then expressed, which 60 years later would galvanize the poor on three continents: anti-imperialism. Many who study Cuba fail to understand, or even to ask, how such ideas remained motivating through six dark decades of US cultural imposition after Martí’s death.

…click on the above link to read the rest of the article…

Refiners Boost Output, But Irma Could Dent Demand

September 10, 2017

Refiners Boost Output, But Irma Could Dent Demand

Texas continues to recover from Hurricane Harvey, and many of the disrupted refineries are ramping up production once again. But the ripple effects from the outages are still being felt, and some Midwestern refineries are benefitting from surging margins stemming from the havoc.

Bakken Midwest refining margins more than doubled between August 23 and September 1, according to S&P Global Platts, jumping from $9 per barrel to temporarily over $20 per barrel, although they have since fallen back a bit.

The margins are inflated because of gasoline shortages in certain parts of the country, the unfortunate consequence of the massive refinery outages along the Gulf Coast after Hurricane Harvey. Refining margins were also helped along by the initial downward pressure that WTI exhibited as crude oil backed up without any place to go.

That means that refineries outside of the Gulf Coast could temporarily enjoy super profits. September is typically a time of the year when refineries undergo some maintenance and retool to prepare for winter fuel blends, but few are likely to take their plants offline in this market. “Nearly every refinery outside Louisiana and Texas is operating near full capacity,” Thomas Pugh, commodities economist at Capital Economics, told the Wall Street Journal.

“Refineries outside the affected area may delay maintenance to benefit from high processing margins,” Commerzbank oil analyst Carsten Fritsch said in late August. “Hence, the negative impact on crude oil demand and oil product supply might be less severe than feared.”

Indeed, refineries unaffected by Hurricane Harvey have been called into action, but the ramp up has its own consequences. As Midwestern refineries scramble to produce at max capacity, the demand for crude is pushing up benchmark prices in the region. Bakken crude started trading at a large premium relative to WTI as supplies tightened. From S&P Global Platts:

…click on the above link to read the rest of the article…

Gas Games in the Eastern Mediterranean are Threatening Europe

August 28, 2017

Gas Games in the Eastern Mediterranean are Threatening Europe

The European Commission is offering European consumers the so-called Southern Gas Corridor, which provides for the supply, in particular, of Azerbaijani and Central Asian gas along the Turkey–Greece–Italy route. The project’s potential participants have their own interests, however, and are divided by long-standing antagonisms that are turning the corridor into a military and political delayed-action mine.

Turkey, which is traditionally reluctant to play by the European Union’s rules, is playing a particular role here. Ankara’s plans to build an Israel–Turkey pipeline are being superimposed on the desire of the Turkish elite to occupy key positions in the development of offshore natural gas fields in the Eastern Mediterranean Sea, primarily around Cyprus. These plans are unleashing a whole host of problems between Cyprus, Greece and Turkey, while, at the same time, affecting the interests of Israel, as well as Egypt and Libya, which are claiming their rights to the continental shelf. The world’s leading oil and gas companies are also pursuing their own economic objectives in the region, the most active of which are the French company Total and the Italian company ENI.

The current focus of contention is the offshore «Block 11», situated in the territorial waters of Cyprus. Turkey, which is also speaking on behalf of the Turkish Republic of Northern Cyprus, has already sent a frigate, TCG Gökçeada, to the region. The frigate’s commander has been ordered to use whatever measures necessary to counteract ‘undesirable’ activity around the continental shelf. But any actions by Nicosia and Athens in support could be deemed ‘undesirable’, since Turkey’s official position is that all the gas resources on Cyprus’ continental shelf belong not only to the Greek Cypriots, but also to the Turkish Cypriots. And by the latter is meant the Turkish Republic of Northern Cyprus.

…click on the above link to read the rest of the article…

Why The Shale Oil “Miracle” Is Becoming A “Debacle”

August 27, 2017

klublu/Shutterstock

Why The Shale Oil “Miracle” Is Becoming A “Debacle”

Dispelling the magical thinking behind the hype

Energy is everything.

This is an amazingly important concept. Yet it’s almost universally overlooked.

Sometimes it’s hard to appreciate the magical role energy plays in our daily lives because most of what we experience is a derivative of it. The connection is hidden from direct view. Because of this, most people utterly fail to detect or appreciate the priceless and irreplaceable role of high net-energy fuel sources (such as oil and gas) to our modern lifestyle.

With high net-energy, society enjoys increasing complexity and technological advances. It’s what enables us to pursue massive goals like desalinating billions of gallons of seawater, or going to Mars. But without high net-energy fuel sources, our capabilities quickly regress to those of decades — or even centuries — past.

Which is why understanding where we truly are in the ‘net-energy story’ is so incredibly important. Is the US on the cusp of being “energy independent” from here on out? Is the “shale miracle” ushering in a glorious new ‘boom’ era that will vault America to unprecedented prosperity?

No. The central point of this report is that the US is deluding itself when it comes to energy abundance (generally) and oil (specifically).

Yet that’s not what we hear from the cheerleaders in the industry or in our media. From them, we hear a silver-tongued narrative of coming riches — a narrative that contains some truth, some myth, and a lot of fantasy.

It’s those last two parts — the myths and fantasies — that are going to seriously hurt many investors, as well cause a lot of extremely poor policy and investment decisions.

The bottom line is this: The US shale industry resembles a fraudulent Ponzi scheme much more so than it does any kind of “miracle”.

…click on the above link to read the rest of the article…

The Dynamics of Depletion

June 27, 2017

The Dynamics of Depletion

Paul Klee Ghost of a Genius 1922The Automatic Earth has written many articles on the topic of EROEI (Energy Return on Energy Invested) through the years, there’s a whole chapter on it in the Automatic Earth Primer Guide 2017 that Nicole assembled recently, which contains 17 different articles.

Still, since EROEI is the most important energy issue there is at present, and not the price of oil or some new gas find or a set of windmills or solar panels or thorium, it can’t hurt to repeat it once again, in someone else’s words and from someone else’s angle. This one comes from Brian Davey on his site CredoEconomics, part of his book “Credo”.

It can’t hurt to repeat it because not nearly enough people understand that in the end everything, the survival of our world, our way of life, is all about the ‘quality’ of energy, about what we get in return when we drill and pump and build infrastructure, what remains when we subtract all the energy used to ‘generate’ energy, from (or at) the bottom line.

Anno 2017, our overall ‘net energy’ is nowhere near where it was for the first 100 years or so after we started using oil. And there’s no energy source that comes close to -conventional- oil (and gas) when it comes to what we are left with once our efforts are discounted, in calories or Joules.

The upshot of this is that even if we can ‘gain’ 10 times more than we put in, in energy terms, that won’t save our complex societies. To achieve that, we would need at least a 15:1 ratio, a number straight from our friend Charlie Hall, which is probably still quite optimistic. And we simply don’t have it. Not anymore.

…click on the above link to read the rest of the article…

Largest East Coast Pipeline Reveals Demand For Gasoline Is Crashing

June 23, 2017

Largest East Coast Pipeline Reveals Demand For Gasoline Is Crashing

There’s a reason this week’s EIA survey showing gasoline and oil supplies declining has failed to stop RBOB prices from collapsing to 7-month lows: The start of the summer has done nothing to revive sluggish demand. That’s because despite what the EIA survey said, little has been done to reduce record fuel inventories.

The squeeze has gotten so bad, Northeast Colonial Pipeline Co., the operator of the biggest US fuel pipeline system, said that demand to transport gasoline to the country’s populous northeast is the weakest in six years, the latest symptom of a global oil market grappling with oversupply. It’s notable that this peak has arrived despite the advent of the summer driving season, which has seen gasoline demand pull back from last year’s record highs, according to Reuters.

Because of the oversupply in the northeast, “line space”… the cost of renting “space” on the pipeline to assure one’s ability to get supplies of gasoline when necessary… has gone negative, according to Reuters. What can be more exemplary of excess inventories and of reduced demand for gasoline than this?

Refiners are in part to blame for the problem – they have continued to pump motor fuel at record levels for the second year in a row, worsening the oversupply problem, for fear of losing access to pipeline capacity.

More broadly, attempts by large producers to reduce global supplies have failed to meaningfully raise the price of oil. And with good reason: Traders have been skeptical of an agreement between OPEC and non-OPEC producers, including Russia, to extend last year’s supply cut, and already they’re concerns are being validated: Iraq has said it plans to increase production later this year despite the agreement.

…click on the above link to read the rest of the article…

“Recessionary” Demand Forces New York Harbor To Divert Gasoline Shipments

February 18, 2017

“Recessionary” Demand Forces New York Harbor To Divert Gasoline Shipments

Two weeks ago, Goldman analysts were stunned when they noted that in recent weeks gasoline demand in the US has collapsed to levels that suggest not all is well with the economy. In fact, as the bank’s oil expert Damien Courvalin said “to achieve the 5.9% decline suggested by the weekly data, our model requires PCE to contract 6%, in other words, a recession.”

Goldman then quickly changed the unpleasant narrative – one which would suggest that the US economy is in far worse shape than official data represent – and provided several alternative explanations why such a “sudden collapse is unlikely” and said that “we view the larger than seasonal ytd builds in US gasoline stocks as driven by transient supply factors rather than persistent demand issues.”

Perhaps, but so far those “transient” supply factors are only getting more chronic, and as supply continues to grow in anticipation of a demand bounce that refuses to materialize, leading to ever louder speculation that there is something very wrong with the US consumer…

… gasoline inventories have hit record levels, and nowhere is this more obvious than on the East Coast, where as Bloomberg writes overnight, “the biggest gasoline market in the U.S. is bursting at the seams.”

As a result, just like during last year’s unprecedented gasoline glut which, too, was supposed to be “transient”, but has only gotten worse, traders are now lining up to export gasoline and diesel from New York Harbor, an area that normally relies on fuel imports from Europe and eastern Canada.

While at least 6 cargoes that were headed to New York from Europe in January and early February were diverted to the Caribbean or the U.S. Gulf Coast, that wasn’t enough to stem the oversupply building up in terminals along the Eastern Seaboard. Record-high inventories in the region are now pushing prices low enough to turn the typical trade flow on its head.

…click on the above link to read the rest of the article…

Huge Decline In U.S. Proved Oil And Gas Reserves

December 19, 2016

Huge Decline In U.S. Proved Oil And Gas Reserves

Proved oil and gas reserves down 11.8 percent and 16.6 percent, respectively, from year-end 2014

EIA has downgraded its estimates of proved oil and gas reserves in the U.S., according to its Crude Oil and Natural Gas Proved Reserves, Year-end 2015 report, released today.

Proved reserves of crude oil in the U.S. declined by 4.7 billion barrels or 11.8 percent from their year-end 2014 level to 35.2 BBbls at year-end 2015. Natural gas proved reserves decreased 64.5 Tcf to 324.3 Tcf, a 16.6 percent decline.

Average oil and gas prices in 2015 dropped 47 percent and 42 percent, respectively, from 2014, resulting in more challenging economic and operating conditions. This caused operators to postpone or cancel development plans and revise their proved reserves downward.

Discoveries and revisions

Proved reserves are volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

The charts below break down the different additions and revisions contributed to the changes.

(Click to enlarge)

Total discoveries of crude oil kept pace with reserve decreases from production, with 150 million more barrels of crude and lease condensate produced than were found.

Discoveries are defined as new fields or reservoirs in previously discovered fields. Extensions are additions to reserves that resulted from additional drilling and exploration in previously discovered reservoirs. In a given year, extensions are typically the largest percentage of total additions while discoveries are usually a small percentage of annual reserve additions.

Revisions primarily occur when operators change their estimates of what they will be able to produce from the properties they operate in response to changing prices or improvements in technology.

…click on the above link to read the rest of the article…

Can the world go all-electric?

June 18, 2016

Can the world go all-electric?

Recently, word leaked out that Norway may ban the sale of diesel- and gasoline-powered vehicles by 2025. The move toward electric vehicles is part of a dream shared by those concerned about climate change and about fossil fuel depletion (especially oil depletion), namely, to turn the world into one big all-electric paradise by running everything we can on electricity.

Theoretically, this is possible, but getting there won’t be easy. First, such a transition will take time. In the Norwegian example cited above, the transition to an all-electric private car fleet would take about 15 years based on Norwegian new private car registrations in 2015 and the current total number of registered private cars.

But the ban wouldn’t take effect until 2025. While Norwegian electric car registrations are rising, so are total car registrations. Even if we generously assume that the rise in electric car registrations between now and 2025 will shave five years off the transition, that still means Norway won’t achieve an all-electric private automobile fleet until 2035. And, Norway is already a leader in the move toward all-electric transportation. Other countries lag far behind.

The Norwegian example points out a second difficulty in the transition to an all-electric world. Norway gets 95.9 percent of its electricity from hydroelectric dams. It gets another 1.6 percent from wind turbines. Only 2.5 percent of its electricity comes from thermal power plants, the kind that burn fossil fuels such as coal and natural gas and that provide 66 percent of the world’s electricity.

Transitioning to electric transportation in places that primarily burn coal, natural gas and/or diesel fuel to produce electricity would undermine the goal of lowering greenhouse gas emissions. In thermal power plants, the ones that burn fossil fuels, two-thirds of the energy produced is lost in the form of heat. Only one-third is turned into electricity.

…click on the above link to read the rest of the article…

California Lawmakers Move to Prevent Another Disastrous Gas Blowout at Aliso Canyon

May 14, 2016

California Lawmakers Move to Prevent Another Disastrous Gas Blowout at Aliso Canyon

Aliso Canyon is the largest natural gas storage facility in the western U.S. and the site of the October, 2015 blowout that spewed nearly 100,000 tons of methane into the skies above the San Fernando Valley in Los Angeles for nearly four months.

The bill was co-authored by Senator Fran Pavley (D-Agoura Hills), and Assemblyman Scott Wilk presented SB 380 on the floor of the Assembly on April 28 and it passed both chambers with overwhelming bipartisan support.

The new law requires that all 114 wells at Aliso Canyon undergo additional tests to detect any possible leaks.

Wells can go back into use only after passing four additional structural integrity tests, and wells that have not been fully tested and certified must be temporarily plugged and isolated from the facility.

New injections could only resume if well integrity is proven “to prevent damage to life, health, property, and natural resources and other requirements.”

Senator Pavley said in a prepared statement that the law “puts public safety first.”

“Now that the news cameras have left Aliso Canyon and moved on, the governor and the Legislature have shown that their memories are vivid and that a hard lesson has been learned. We must do all we can to prevent another disaster.”

The bill also sets a deadline of July 1, 2017 for the California Public Utilities Commission (CPUC) to open a proceeding to evaluate the feasibility of scaling back or shutting down the facility.

…click on the above link to read the rest of the article…

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