Briefs - The Energy Bulletin

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Over the next 11 years, Canada‘s oil industry is likely to produce 500,000 b/d less than was forecast a year ago, according to the Canadian Association of Petroleum Producers. The forecast for the oil sands has dropped even further, the industry group said in an annual report. Oil sands production is expected to reach only 2.9 million b/d by 2020 – down from 3.5 million b/d in the 2008 forecast. (6/6, #16)
New projects in Canada’s oil sands could be viable with crude prices of just $60 a barrel, as much as 40 percent below estimates made before oil prices slumped late last year. Labor and material prices in the oil sands region of northern Alberta have fallen far enough that producers may look to revisit projects that were mothballed by the recession. (6/2, #15)
A Kuwaiti lawmaker demanded the oil minister provide the exact size of the OPEC member’s crude reserves following doubts over the official figure of 100 billion barrels. Kuwait, whose officially stated oil reserves constitute about 10% of global crude reserves, is pumping around 2.2 million barrels a day and oil income contributes more than 95% of public revenues. (6/2, #8)
Declining investment will naturally lead to production declines, making a Saudi prediction of oil at $150 barrel “realistic” within three years, Russian Deputy Prime Minister Igor Sechin said at the St. Petersburg International Economic Forum. Should companies fail to invest, a demand crunch could drive up the price to $160 or even $200 a barrel, BP CEO Tony Hayward said, answering a question about surpassing last year’s price. (6/6, #17)
Seven of the 33 supertankers being used to store oil are scheduled to deliver their cargoes. The amount of oil stored at sea climbed to the highest in at least two decades last month (53 tankers) because traders could buy the commodity, sit on it and take advantage of higher prices in the future. A supertanker is capable of storing about 2 million barrels of crude. (6/6, #4, #5)
The number of drilling rigs operating globally fell 3.5 percent in May compared with April, according to Baker Hughes Inc. The U.S. rig count for May was 918, down 54% from the high point at the end of last summer. (6/6, #7)
Venezuela says it is seizing 14 natural gas compression plants as it moves forward with the takeover of private companies in Venezuela’s oil industry… PDVSA will hire all 8000 workers from the more than 70 oil service contractors that the government nationalized last month… The company’s refusal to pay its bills has led several of the private companies to stop work in Venezuela. (6/6, #8, #9)
Venezuela‘s congress has approved an energy cooperation deal with Russia that includes the creation of a joint venture company to develop the Carabobo 1 north and Carabobo 1 center oil fields, two of the seven areas that were offered to foreign oil companies. (6/4, #12)
BG Group said it discovered oil at another well in the pre-salt Santos Basin off Brazil’s coast. The Iracema well is under 2,210 meters (6,850 feet) of water and located 33 kilometers northwest of the Tupi well. A test confirmed the presence of light oil located at depths of around 5,000 meters, reinforcing expectations for the Tupi discovery. BG plans to invest as much as $5 billion through 2012, and expects its share of output from three fields will reach 400,000 barrels of oil equivalent a day by 2020. (6/6, #10)
Energy analyst Daniel Yergin said current oil prices are not justified in the face of weak global demand and a glut of spare supply, but oil supplies could tighten in the next three to five years. Global oil demand is down nearly 3 million barrels a day, erasing four year’s worth of demand growth, and the market is struggling to digest the biggest spare capacity overhangs in 21 years at 6.5 million barrels per day. (6/2, #7)
Ukraine will settle its Russian gas bills and expects an apology from Moscow for comments that cast doubt over its ability to pay. (6/6, #18)
A $5 billion deal on the development of South Pars gas field phase II was signed by Iran and China last week. (6/4, #6)
One spot LNG buyer said the startup of a second LNG train at the Sakhalin 2 project in Russia’s Far East would only add to the excess available in the market. He said there were lots of cargoes being offered to buyers already, so further production could flood the market. (6/6, #19)
Arjun Murti, the Goldman Sachs analyst who predicted a surge in crude oil prices, raised his fourth-quarter estimate to $70 a barrel from $60 as output from non-OPEC members declines. (6/5, #6)
The American Petroleum Institute says increased federal regulation of a method to crack underground shale rock to release natural gas could increase costs and chill production. (6/5, #15)
Independent oil and gas producers that rely heavily on cash flow face bigger financing challenges than major or national oil companies as the global recession depresses oil and gas demand and prices drop. The possible consequences range from a new wave of acquisitions to slower development of natural gas from domestic shale formations. (6/5, #16)
Chevron will spend more than $20 billion on exploration and production activities this year despite the economic downturn. Chevron has maintained annual capital spending in excess of $20 billion this year, the same level as it was in 2008. (6/3, #13)
As California teeters on the verge of insolvency, the governor has proposed expanding offshore oil drilling under a plan approved by environmental groups as a way to tap new revenue. If approved, the state would collect $100 million from the project on July 1 and as much as $2.3 billion in royalties over the next13 years. (6/6, #13)
In northern Nigeria, the town of Kano was once a hub of commercial activity. Today, it’s a different story: over 70% of its factories are shut. Those that are open are working at 40% capacity or less. The reason: sporadic electricity supply. (6/2, #11)
Japan may be forced to shut more than a fifth of its refining capacity, at least 1 million b/d, in the next five years as oil demand falls faster than expected. Total oil sales in the year ended March 31 slumped 8 percent, the sixth straight year of decline, as the global economic crisis has slowed industrial activity, adding to already waning demand caused by an aging population, a shift toward smaller, fuel-efficient cars and a drive to embrace greener energy sources. (6/4, #14)
Russia‘s swing from 8 percent growth in 2008 to a 6.5 percent contraction this year is the most extreme of any major economy in the global slowdown. (6/4, #18)
The Amsterdam Court of Appeals has ordered Shell to pay $450 million to a foundation representing institutional investors after it suffered securities fraud related to the company’s proven oil and gas reserves, which were found to be inflated from 1997-2003. (6/2, #17)
U.S. car sales fell 34% in May to 925,824 vehicles, but showed some signs of firming up as General Motors, Ford and Toyota all reported their highest monthly totals so far this year. For May, the annualized selling rate for the entire market, a closely-watched indicator of the industry’s health, was 9.91 million vehicles. That’s up significantly from April’s annualized pace of 9.32 million vehicles, and is the highest rate so far this year. But it still is well below the year-ago level of 14.26 million. (6/3, #11)
US climate legislation approved by a House committee would raise more revenue than it would cost in federal spending through 2019, the Congressional Budget Office said in a report today. (6/6, #12)
As much as 100 billion euros ($143 billion) in planned investments in German offshore wind farms are at risk as developers struggle to get funding. A large municipal utility expects its first wind park to be delayed by up to two years (6/3, #14)
Using nonfood crops to make cellulosic ethanol to fuel vehicles has been the most common path laid out by Congress, but it may be more efficient to use those crops to make electricity. An acre of crops can generate enough electricity for a battery-powered SUV to travel 15,000 miles, nearly twice the distance that would be covered if the crops were turned into cellulosic ethanol. (6/3, #17) [Editor’s note: why analyze an SUV?]
Massive investment in renewable energy could ultimately create 4 million manufacturing jobs. But for the workers in the bottom rung of this movement, the shift to green jobs could very well mean a pay cut of nearly 60 percent, a trend spreading across the entire manufacturing sector. (6/5, #18)
Currently, wind generated electricity, in the absence of subsidies, is much more expensive than the fossil fuels it is replacing. (6/1, #14)