Briefs week of February 16, 2009 - The Energy Bulletin

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Russian crude output will drop by nearly 8 percent from last year’s level through 2013 if the government doesn’t provide further aid to producers, Energy Minister Shmatko said at a meeting that Prime Minister Putin convened to talk to oil executives. (2/13, #18)
Most Russian oil companies still hope the oil price will magically go back up. Drilling in Russia will probably decline by 20 to 25 percent this year, according to Chirvani Abdoullaev an analyst at Alfa Bank. (2/14, #4)
With oil around $40, OPEC countries can still turn a profit, especially as output costs have dropped. Funding national budgets is another question which in many countries assumes $50+ per barrel oil. In terms of the narrow economics of getting their oil out of the ground, it costs less than $10 a barrel to pump in the Middle East. (2/14, #4)
OPEC nations have collectively postponed 35 oil drilling projects that had been in various stages of development, Secretary General el-Badri said Monday. The delayed projects, shelved for an indefinite period, are a sign that members of OPEC are starting to feel the pain of low crude prices. Oil’s record plunge reduces their revenues and the financial crisis erodes demand. (2/10, #3, #5)
Saudi Arabia will import a third more diesel this year, due to robust power and transport demand. (2/14, #7)
Saudi Arabia, the world’s largest oil exporter, will more than double its spare capacity by the middle of the year to 4.5 million barrels a day as it brings the massive Khurais project on stream while cutting production with OPEC. (2/11, #9)
Crude oil prices at current levels around $40 a barrel are too low, about half the level required to attract enough investment in new supplies, the United Arab Emirate’s oil minister said Monday. He added, “we do not yet see light at the end of the tunnel.” (2/9, #5)
The Research firm of John S. Herold expects capital spending on the part of the world’s oil companies to fall 13 percent this year from last year’s $300 billion. Many of the higher-cost fields that attracted capital in recent years may not be profitable at today’s prices. (2/14, #5)
The stage is being set for a fuel supply crunch in the US once the economy rebounds now that refiners have pushed back more than $10 billion worth of upgrades they had on the drawing board. Gasoline price increases associated with this delay in refinery expansions and upgrades are probably two or three years away. (2/14, #14)
Brazil’s Petrobras published its revised investment plan for the next five years. Its proposed capital spending of $174 billion over this period is bigger than the entire economy of Chile. By 2020, if all goes to plan, Petrobras and its foreign partners will be producing 5.7m barrels of oil and gas per day, more than half the output of Saudi Arabia. (2/13, #9) [Editors’ note: 5.7 mb/day in a decade? Consider us skeptical.]
The collapse of oil prices has slowed efforts to tap crude oil and natural gas supplies that lie under the Arctic Ocean, but countries like Russia, Canada and Norway are still vying for the energy trapped there. (2/13, #17)
To cut costs, BP is using fiber-optic lines and wireless connections to transmit data in real time from unmanned, offshore wells. By measuring the pressure, temperature, and oil flows remotely, the company tweaks the levels of chemicals, water, and gases used to flush out the hydrocarbons. BP has cut its chemical costs by 15 percent, its labor costs by 25 percent, and boosted production from old fields by 2 percent. (2/14, #5)
Columbia cut its taxes sharply in the past three years and allowed foreign oil companies to invest without having to partner with national oil company Ecopetrol. Chevron alone has invested $500 million in Colombia. The result of such efforts is a 30 percent increase in oil production over the past two years. (2/14, #5)
Output at Nigeria‘s Bonny Terminal, operated by Shell, has fallen to around 90,000 barrels per day because of security concerns. The Bonny terminal was producing more than 500,000 bpd before the attacks started in early 2006. (2/14, #9)
The Movement for the Emancipation of the Niger Delta (MEND), the most active militant group in Nigeria’s oil-producing Niger Delta region, has threatened to attack targets operated by Italian companies in Nigeria. (2/14, #10)
The Ukraine-Russia gas feud is a first taste of the transnational energy disputes to come. Matthew Simmons believes Moscow’s saber rattling is political cover for a more serious problem: a shortage of gas in Gazprom’s pipeline system. (2/14, #17)
PDVSA, Venezuela’s state oil company, will combine almost two dozen joint ventures with foreign partners into as many as six large companies, hoping to reduce costs amid financial troubles. (2/13, #11)
Europe‘s economy declined by 1.5 percent during the fourth quarter. That is even worse than the 1 percent decline in the US economy. (2/14, #15)
Natural gas production from shale is largely responsible for an “oversupply” in the gas market. Nearly 60% of rigs that are currently drilling need to suspend operations in order for supply to decline enough to catch up with weakened demand by the end of 2009. (2/13, #16)
KBR pleaded guilty Wednesday to federal criminal charges alleging it paid millions of dollars in bribes to Nigerian officials to win contracts to build a natural gas project in the country. (2/12, #6)
Eni, Italy’s largest oil company, reported its first quarterly loss in seven years and will cut spending after the global recession caused a record plunge in crude prices. (2/13, #19)
China‘s net crude-oil imports declined to the lowest level in more than a year as a slowdown in the world’s third-largest economy cut demand. (2/12, #7)
China‘s exports plummeted 17.5 percent in January, the latest sign of the sharp downturn in demand that has hit Asian economies hard. (2/11, #13)
The China Association of Automobile Manufacturers said Tuesday that 735,000 vehicles were sold in China in January. That surpasses the 656,976 vehicles sold in the U.S. the same month-a record-low figure caused by the plunging US economy. (2/10, #10)
Confronted with a sharp change of priorities in Washington, international oil executives are expressing an eagerness to work with President Barack Obama to fashion new policies to tackle global warming. (2/12, #10)
The world automobile fleet is growing by 23 million cars per year, and is claiming ever more cropland for roads, highways, and parking lots. At least 0.4 hectares of land has to be paved for every 20 vehicles added to the fleet. (2/12, #13)
French oil major Total has agreed to halve its 75 percent stake in two Libyan oil blocks as part of a contract renewal with the north African country’s national oil company. (2/11, #10)
An Iraqi oil industry official told Dow Jones last week that the country’s crude oil production from its southern oil fields had slipped by 100,000-150,000 barrels a day over the last six months as maintenance problems and a lack of investment undermine the country’s output capacity. (2/11, #11)
The Obama administration will set aside an “oil and gas or nothing” approach to energy exploration on the outer continental shelf and consider proposals for offshore wind farms alongside plans for new drilling, Interior Secretary Ken Salazar said yesterday. (2/11, #16)
President Barack Obama’s energy plan calls for putting one million electric plug-in hybrid cars on the road by 2015. This ambitious goal could be accomplished more quickly if we invested in converting the largest civilian fleet in the United States — the 219,000 vehicles owned by the United States Postal Service — to electricity. (2/15, #20)
A biofuels analysis project conducted over nine months by Sandia National Laboratories and GM’s R&D Center concluded that large-scale production of advanced biofuels produced from plant and forestry waste and dedicated energy crops is achievable and sustainable by 2030. Roughly 90 billion gallons of ethanol can be produced per year in the US: 15 billion gallons per year from corn ethanol, with the balance from cellulosic ethanol. (2/11, #19)
Chevron, BP and other oil producers are locked into drilling offshore wells that cost as much as $200 million each because of rig contracts that were signed when crude was soaring above $140 a barrel. Demand for rigs that can fetch more than $600,000 a day to rent hasn’t diminished amid the $105-a-barrel tumble in crude from a July record. Energy companies are betting that in the five to 10 years it takes to turn a deep-water discovery into a producing field, crude prices will rebound and their finds will turn a profit. (2/10, #2)
Australian oil and gas companies face a drop in creditworthiness this year because of “significant” spending plans to develop liquefied natural gas projects and the drop in energy prices. (2/9, #14)
Alberta‘s plan to give incentives to hard-hit small and mid-size oil companies may not stem this year’s sharp drop in drilling in Canada’s biggest energy-producing province. (2/9, #18)
A grim report from FBR Research forecasts limited growth in the production of oil from Canadian oil sands and slashed capital spending. While previous estimates thought that there would be 4 million barrels of oil being pulled from the sands by 2015, FBR only sees 2 million a day. (2/15, #15)
US Gulf of Mexico production peaked in June 2002 at 1.73 million barrels a day and is forecast to continue declining. The 250,000 b/d Thunder Horse project started oil production in mid 2008 and BP claims that it is producing 200 kbd now, but it has not stopped the overall decline in GoM production. Blind Faith and Neptune also started in 2008, adding almost 100 kbd capacity. However, long term GoM production will probably continue its decline from the 2002 peak because sanctioned capacity additions beyond 2010 are less than 100 kbd per