The Oil Drum

Extended from the European Tribune version, which was itself inspired by earlier coverage here on TOD. More relevant background can be found in these two articles from a few months ago: UK Energy security and The European Gas Market, both by Euan Mearns.

Now that the news that the Forties pipeline has to close down is known, the blame game has started:

UK resists fuel curbs despite strike The UK is “nowhere near” having to impose emergency powers to restrict fuel supplies to essential users, the government insisted on Sunday, despite a strike forcing the closure of a pipeline that carries nearly half of Britain’s North Sea oil. (...) But the Conservatives sought to make political capital from the unrest. On Sunday, they argued that the strike was a byproduct of his weakness. “Whether it is teachers or whether it is oil workers or whoever else, they’re actually saying we can push this guy around,” David Cameron told the BBC. The Tory leader argued that Mr Brown was indirectly to blame for the dispute because of his changes as chancellor to employer pension schemes. “Who is the man who wrecked the British pension system? He is the prime minister,” Mr Cameron said. The Grangemouth workers are protesting over the company’s intention to close their final-salary pension scheme to new employees from August 1. Ineos has offered to suspend plans to make existing employees start making contributions, pending further talks.

I'd like to flag just a few points that seem to be typical of our times, and maybe warrant making this a symptom of the Anglo Disease, ie the wholesale domination of our economies by reckless financial capitalism:

This is a guest post by Glenn Morton, a geophysicist in the oil industry. For Kerr-McGee Oil and Gas Corp., Glenn served as Geophysical Mgr Gulf of Mexico, Geophysical Mgr for the North Sea, Dir. of Technology and as Exploration Director of China. Currently he is an independent consulting geophysicist, and you might know him as seismobob.

I have intentionally paraphrased this wonderful Christmas song because it has much to say about the future after peak oil which I am now ready to say has already happened. As energy declines, we will indeed go to our grandmother's house--one without electricity and running water, sewer or septic and deep, mechanically pumped water wells. At least that was MY grandmother's house. She lived on the Kansas prairies of the 1890s. In the 1960s I asked my grandmother what the greatest invention of her life had been. She said electricity because before they had lights, everyone went to bed shortly after sun down because it was simply too dark to do to much. There was no air conditioning, so the summers were very hot. In the winter, trips to the outhouse were cold (and brutally awakening if during the middle of the night). While she had wood where she lived, about 100 miles west of her home, people had to burn dung as is done in Tibet today. See the picture below of the dung plastered against the house. When one wants to cook, one retrieves a patty.

Without cheap energy, we go back to my grandmother's house or one quite like it...

Hmm! Maybe the next book review I’ll do will be “The Boy’s King Arthur.” Well actually, given the controversy about him (he was a Celt and they ultimately lost – after he died - so he has been relegated to mythical status. The winners write the history books), perhaps that might not be such a good idea. I recently looked at an NRC survey showing the classes of disciplines at a University and while history had more than 8 subdivisions as I remember, there was no mention of energy per se, or most of the energy production disciplines – so just imagine the columns of controversy I might generate. But it also speaks, by itself, to how important certain issues are ranked in the corridors of the mighty.

So let’s get back to the status of the world of oil. And while, as one of the recent conferees noted, the public thinks that, since prices having dropped back “we survived the energy crisis,” sadly the world picture is really getting worse. Sometimes, when I have looked at what we have projected, I have consoled myself with the thought to myself along the lines of “well these are the lower estimates, it really isn’t going to be that bad.” Unfortunately the numbers that are now starting to pop up hold no such comfort, and are beginning to confirm what our contributors have been predicting for a while.

Central to the Peak Oil debate, is the ability of individuals to forecast the future, based upon information that is available to them today. Different people and organisations come up with different forecasts based on the same data. So how does anyone know who to believe?

Cambridge Energy Research Associates (CERA) in March 2006 presented a model for UK oil production capacity showing around 2,350,000 bpd for the UK in 2006. That's around 700,000 bpd higher than the actual production figure.

Where does the truth lie? A full review of CERA's and other UK oil production forecasts are dicussed under the fold.

More data from the DTI. On 26th Oct '06 the DTI updated their monthly oil statistics. The Excel spreadsheet is available here: Excel link. Hat tip Nick Rouse for bringing this to my attention.

The key quote is:

Oil production in the period June 2006 to August 2006 was 12.1 per cent lower than a year ago.

This isn't good news and perhaps we are becoming weary of such announcements however there is a little more we can say about these recent numbers...

This week we have received two announcements of retail gas price increases. The first was from EDF who own London Energy, Seeboard and SWEB and the second came from British Gas (also Scottish Gas).

EDF are to increase their gas prices by 19% and British Gas theirs by 12.4%. These price rises need to be taken together with the quarter one increases from these companies of 14.7% and 22% respectively - together this means both companies (coincidentally?) have increased the retail price of gas by 37% this year.

According to media reports the average household gas bill has approximately doubled from £350 a year in 2003 to £700 in 2006.

In other news, in a bid not to be out done by New York, London today saw power cuts to thousands of people in the posh West End district of the city. (BBC Link).

The Scotsman today reports on a new study by Professor Alex Kemp and Linda Stephen of Aberdeen University on the prospects for the UK Continental Shelf (UKCS) until 2035.

Professor Kemp, a leading oil expert with the university's Department of Economics, said that a "striking feature" of the prospects for undeveloped fields was their relatively small size, with the average size of the probable and possible fields estimated at under 15 million barrels of oil equivalent. He said: "The long-term future of the UKCS depends on the successful development of large numbers of small fields and enhanced oil and gas recovery schemes. The remaining reserves are large but they are mostly located in relatively small accumulations."

This is a guest article from TOD member: Roberto

Roberto makes some very interesting observations about UK North Sea oil extraction, article below.

Yesterday (Tuesday 14th March 06) John Hemming MP was granted permission to ask an 'Urgent Question' in the house.  His question sparked an interesting and long overdue debate on the current gas situation.  

John Hemming (Birmingham, Yardley, LDem)

The country is on a knife edge. What will the Secretary of State say to the 7,000 people who may lose their jobs in the plastics industry? What will he say to domestic consumers, who have seen price increases and are likely to see more? What have the Government done since long-term storage went out on 16 February?

If there is too little storage, as I think we all accept, why do we not import more on mild days? Why is the trigger for a gas balancing alert so high? On Sunday 319 GWh was taken from short-term storage, but there was no gas balancing alert. Had the same rate been taken on Monday and today, we would be in a gas emergency now. How can the Government expect UK industry to cope with energy prices in this country that are 50 per cent. greater than those in the United States of America?

Why do the Government do so little about energy security and reducing demand? The Prime Minister says, "Not me, guv--nothing we can do." Cold weather is now predicted. Short-range storage has approximately 50 million cu m and the Hornsea facility has 48 million cu m. Why do the Govt not do something about demand and supply?

The full transcript of the subsequent debate can be read here: They Work For You

There were a couple of comments in the last post that need a little more visibility.  Firstly Essex Landrover Man noted that Norwegian production from the North Sea has dropped about 300,000 bd comparing October 2004 with Oct 2005; and then Nick Rouse commented that for July 2005 the UK production drop over 2004 was 387,000 bd or 21% reduction.  

This is an accelerating trend and considerably worse than the numbers earlier in the year.  It is, unfortunately much more than the 6% historical average that is used in much of the modelling of overall long term production (especially by Saudi Aramco, as I mentioned in my comments on the IEA Outlook earlier.)