$60 / Barrel by year end

[a_majoor]

Meanwhile OPEC is having trouble deciding how to carry out its planed reduction in output:

http://www.zerohedge.com/news/2016-10-12/even-more-opec-confusion-unclear-who-cuts-first-if-anyone-production-hits-new-record

Even More OPEC Confusion: Unclear Who Cuts First, If Anyone, As Production Hits New Record High
by Tyler Durden
Oct 12, 2016 9:37 AM

Following yesterday's latest IEA report which showed that OPEC production had hit an all time high, this morning OPEC released its own estimate of production by OPEC member nations for September and, not surprisingly, the latest report showed that in the month OPEC was supposed to be set on "cutting" production, the 14-nation group produced a whopping 33.39 million b/d crude in Sept., up 220k b/d from August.

While Saudi Arabia showed the largest decline of 88K to 19.49mmbpd, other members promptly ate up the Saudi market share which as recently as last month hit a record. To wit

Iraq +105k, 4.46m
Nigeria +95k, 1.52m
Libya +93k, 363k (an increase of 34%)

Even more notable is what we touched upon last month after the Algiers deal was announced, namely that Venezuela and Iraq oil output may be underestimated by as much as 565k b/d for Sept., according to secondary sources cited in OPEC’s monthly oil market report.

Venezuela reported crude output of 2.33m b/d in Sept. to OPEC, 245k more than secondary source estimates
Iraq reports 4.78m b/d in Sept., 320k above secondary source estimates

Secondary source estimates also lower for 5 other OPEC members; higher for members Angola, Nigeria, Qatar.

Recall that OPEC "agreed" to cut total output to 32.5m-33m b/d as part of agreement to steady oil markets, however both Iraq, Venezuela have disputed secondary sources. This means that if OPEC agrees with the country's own source data, the cartel will need to cut as much as 565k more, an output cut which would have to come out of Saudi production.

This is how Bloomberg put it:

The scale of the internal differences OPEC must resolve before securing a deal to cut supply was revealed Wednesday as the group’s latest output estimates showed a half-million-barrel difference of opinion over how much two key members are pumping.

Venezuela and Iraq’s own figures on how much crude they produced in September were 565,000 barrels a day higher than estimates compiled by the Organization of Petroleum Exporting Countries from so-called secondary sources. The two nations are disputing the data, which could determine the production target for each country when caps on members’ output are decided next month.

Venezuela told OPEC it pumped 2.33 million barrels of crude a day in September, 245,000 more than estimated by secondary sources, which include news organizations such as Platts and Argus Media as well as the International Energy Agency. Iraq said it pumped 4.78 million barrels a day, 320,000 more than the secondary-source view. The total discrepancy for both countries equals the daily production of Ecuador.

Of OPEC’s 14 member countries, Iraq and Venezuela are the only two that have publicly criticized the sources’ figures. Yet there are five others whose own estimates are higher than those provided by secondary sources. Three nations -- Angola, Nigeria and Qatar -- provided estimates that are lower.

But what was most amusing in light of the above, is that according to the OPEC secretary general Mohammed Barkindo tells reporters in Istanbul. "OPEC has still hasn't decided yet whether OPEC and non-OPEC would make cuts at the same time, or OPEC would move first."

So the OPEC production cut will take place... but non-OPEC - i.e., Russia and US shale - cuts first?

And just to top the soaring confusion, Putin said that Russia would only join OPEC if the organization agreed on a freeze, something which considering the scramble by all non-Saudi nations to pick up Saudi market share, is very unlikely to happen. Oh, and Russia refuses to cut production.

Finally, as a reminder, this is what will happen in November according to Goldman if there is no deal:

The post-Algiers rally in oil prices has continued, fueled by comments by Russia and Saudi Arabia today (October 10) that point to a greater probability of reaching a deal to cut production. Saudi Arabia likely holds the reigns to such an agreement, with signs of elevated funding stress potentially driving Saudi to commit on November 30. As usual, risks of a disagreement are not negligible with Iraq currently the most vocal opponent, aiming to grow production next year and disputing usual measures of its production as too low. Failure to reach such a deal would push prices sharply lower to $43/bbl in our view as we forecast that the global oil market is in surplus in 4Q16.

Good luck OPEC.

 

[Kirkhill]

You know the neat thing about watching the world these days?

"That could never happen".

It is no longer used with any sense of certainty, or even irony.

Interesting place to be when planning for tomorrow.

 

[Colin Parkinson]

Not to forget the "tapped reserve" Wells drilled and capped in anticipation of fracking later. OPEC is a dying artifact of another era. They just don't realize yet.

 

[Colin Parkinson]

However another side effect of the current situation http://www.alaskahighwaynews.ca/regional-news/overdue-tax-notices-on-bankrupt-oil-wells-confuse-landowners-1.2359181

 

[Kirkhill]

Not to forget the "tapped reserve" Wells drilled and capped in anticipation of fracking later. OPEC is a dying artifact of another era. They just don't realize yet.

Agreed. 

It is hard to forget where you left stuff like oil, gas and coal.  And it is harder to forget how to get it into service cheaply once you have been squeezed by the market to really efficient production systems.

 

[a_majoor]

And for all the hand wringers who believe oil is the end of the world, a new technology can convert CO2 dissolved in water into ethanol. While it is overrated as fuel when derived from corn and other agricultural plants (it takes far more energy to grow the stuff and distill it than you get from burning it in an engine), this might make it cheap enough to consider as a fuel or fuel additive.

Of course, you could also place it in oak barrels and store it for a period of 8-12 years prior to using it......

http://www.nextbigfuture.com/2016/10/carbon-nanospikes-can-convert-co2-into.html

Carbon nanospikes can convert CO2 into Ethaol with a 63% yield and a room temperature reaction

Scientists at the Department of Energy’s Oak Ridge National Laboratory have developed an electrochemical process that uses tiny spikes of carbon and copper to turn carbon dioxide, a greenhouse gas, into ethanol. Their finding, which involves nanofabrication and catalysis science, was serendipitous.

“We discovered somewhat by accident that this material worked,” said ORNL’s Adam Rondinone, lead author of the team’s study published in ChemistrySelect. “We were trying to study the first step of a proposed reaction when we realized that the catalyst was doing the entire reaction on its own.”

The team used a catalyst made of carbon, copper and nitrogen and applied voltage to trigger a complicated chemical reaction that essentially reverses the combustion process. With the help of the nanotechnology-based catalyst which contains multiple reaction sites, the solution of carbon dioxide dissolved in water turned into ethanol with a yield of 63 percent. Typically, this type of electrochemical reaction results in a mix of several different products in small amounts.

“We’re taking carbon dioxide, a waste product of combustion, and we’re pushing that combustion reaction backwards with very high selectivity to a useful fuel,” Rondinone said. “Ethanol was a surprise -- it’s extremely difficult to go straight from carbon dioxide to ethanol with a single catalyst.”

The catalyst’s novelty lies in its nanoscale structure, consisting of copper nanoparticles embedded in carbon spikes. This nano-texturing approach avoids the use of expensive or rare metals such as platinum that limit the economic viability of many catalysts.

ORNL researchers developed a catalyst made of copper nanoparticles (seen as spheres) embedded in carbon nanospikes that can convert carbon dioxide into ethanol.

Chemistry Select- High-Selectivity Electrochemical Conversion of CO2 to Ethanol using a Copper Nanoparticle/N-Doped Graphene Electrode

“By using common materials, but arranging them with nanotechnology, we figured out how to limit the side reactions and end up with the one thing that we want,” Rondinone said.

The researchers’ initial analysis suggests that the spiky textured surface of the catalysts provides ample reactive sites to facilitate the carbon dioxide-to-ethanol conversion.

“They are like 50-nanometer lightning rods that concentrate electrochemical reactivity at the tip of the spike,” Rondinone said.

Given the technique’s reliance on low-cost materials and an ability to operate at room temperature in water, the researchers believe the approach could be scaled up for industrially relevant applications. For instance, the process could be used to store excess electricity generated from variable power sources such as wind and solar.

“A process like this would allow you to consume extra electricity when it’s available to make and store as ethanol,” Rondinone said. “This could help to balance a grid supplied by intermittent renewable sources.”

The researchers plan to refine their approach to improve the overall production rate and further study the catalyst’s properties and behavior.

They report an electrocatalyst which operates at room temperature and in water for the electroreduction of dissolved CO2 with high selectivity for ethanol. The overpotential (which might be lowered with the proper electrolyte, and by separating the hydrogen production to another catalyst) probably precludes economic viability for this catalyst, but the high selectivity for a 12-electron reaction suggests that nanostructured surfaces with multiple reactive sites in close proximity can yield novel reaction mechanisms. This suggests that the synergistic effect from interactions between Cu and CNS presents a novel strategy for designing highly selective electrocatalysts. While the entire reaction mechanism has not yet been elucidated, further details would be revealed from conversion of potential intermediates (e. g. CO, formic acid and acetaldehyde) in future work.

Abstract

Though carbon dioxide is a waste product of combustion, it can also be a potential feedstock for the production of fine and commodity organic chemicals provided that an efficient means to convert it to useful organic synthons can be developed. Herein we report a common element, nanostructured catalyst for the direct electrochemical conversion of CO2 to ethanol with high Faradaic efficiency (63 % at −1.2 V vs RHE) and high selectivity (84 %) that operates in water and at ambient temperature and pressure. Lacking noble metals or other rare or expensive materials, the catalyst is comprised of Cu nanoparticles on a highly textured, N-doped carbon nanospike film. Electrochemical analysis and density functional theory (DFT) calculations suggest a preliminary mechanism in which active sites on the Cu nanoparticles and the carbon nanospikes work in tandem to control the electrochemical reduction of carbon monoxide dimer to alcohol.

Variations of this technique could also be used to do variations of the F-T process and convert hydrocarbon precursors into a liquid hydrocarbon fuel.

 

[a_majoor]

I'm not sure if the timeline is realistic, but these upcoming technologies could be black swan events which upend the oil industry and kick the pillar out from under 8% of our GDP. The nature of many of these new technologies is far more decentralized (no more blocking pipelines or electrical power line corridors), but will also upend many political and economic factors and change the power relationships between producers and consumers as well, with unpredictable consequences for the national and global economies:

https://www.bloomberg.com/news/articles/2016-12-21/oil-seen-at-100-by-end-2018-in-lottery-ticket-options-trade

Big Utility Sees Pathway to $10 Oil
by Francois De Beaupuy
December 20, 2016 at 06:35:23 EST

Lower cost for solar, hydrogen and batteries to weigh on crude
Innovation chief Lepercq sees ‘quasi-infinite and free energy’

The oil industry must brace for five energy “tsunamis” that threaten to drag prices as low as $10 a barrel in less than a decade, according to Engie SA’s innovation chief.

The falling cost of solar power and battery storage, rising sales of electric vehicles, increasingly “smart” buildings and cheap hydrogen will all weigh on crude, Thierry Lepercq, head of research, technology and innovation at the French energy company, said in an interview.

“Even if oil demand continues to climb until 2025, its price could drop to $10 if markets anticipate a significant fall in demand,” Lepercq said at his office near Paris. Crude last slumped to that level in 1998.

“Solar, battery storage, electrical and hydrogen vehicles, and connected devices are in a ‘J’ curve,” he said. “Hydrogen is the missing link in a 100 percent renewable-energy system, but technological bricks already exist.”

The former French gas monopoly, which is now the world’s largest non-state power producer following a decade of acquisitions, is investing in renewables while selling coal-fired plants and exploration assets to shield itself from commodity-price swings. It plans to spend 1.5 billion euros ($1.57 billion) by 2018 on technologies including grid-scale battery storage, hydrogen output, “mini-grids” that serve small clusters of homes, and smart buildings that link up heating, lighting and IT systems to save energy and cut costs.

‘Massive Value’

“In the months to come, we expect to announce the first major steps of projects, investments, partnerships and potential acquisitions” in these areas, said Lepercq, a former banker and entrepreneur who in 2006 co-founded Solairedirect, a solar developer that was bought by Engie for about 200 million euros in 2015. “We’re talking about technology platforms in which massive value can be created from comparatively small investment.”

The cost of solar power will probably drop below $10 a megawatt-hour before 2025 in the world’s sunniest places, according to Lepercq. In September, Engie bought a stake in Heliatek, a German startup developing photovoltaic films that slot on to building facades. It also acquired an interest in Symbio FCell, a French manufacturer of fuel cells that convert hydrogen into electricity to run vehicles.
“As carmakers offer more electrical vehicles with a range exceeding 500 kilometers, charging stations being progressively deployed and more cities banning gasoline and diesel cars, a shift will progressively take place,” Lepercq said.

The number of battery and plug-in vehicles around the world has surged in recent years to top 1 million, according to the International Energy Agency.

Hydrogen may be as cheap as liquefied natural gas in less than 10 years, according to Lepercq, who highlighted its ability to turn solar power into transportable fuel.

“We’ll have the possibility to transport energy that’s produced very cheaply in remote places,” Lepercq said. He said he’s encouraged by the development of the first liquefied hydrogen carrier by Kawasaki Heavy Industries Ltd. as part of a Japanese plan to import hydrogen from Australia, and believes “hundreds” more will be launched in the coming decade.

In France, Engie recently conducted a “very deep modeling” of the Provence-Alpes-Cote d’Azur region of 5 million inhabitants, showing it could run entirely on renewables by 2030 for as much as 20 percent less cost than the current energy system, Lepercq said. Solar, wind, biogas, large-scale battery storage and hydrogen would be key elements. “The promise of quasi-infinite and free energy is here,” he said.

 

[Colin Parkinson]

Hmm to much hype and not enough action in the battery world. Not to mention it has it's own share of resource bottlenecks. Batteries are the tech holding back much of the alternative energy. Currently the only 3 ways to store massive amounts of energy awaiting conversion is Hydro, Oil and Gas (including coal) and Nuclear.

 

[a_majoor]

For electrical energy storage I'd probably put chips down on super capacitors myself. But you are correct, storage of energy is the real issue rather than the low cost production. Without viable storage, solar electric and wind are going to remain niche providers.

Like I said, the article makes some very optimistic timeline predictions, but there is a lot of disruptive technology coming down the road, so people should start thinking about how this is going to affect them.

 

[Good2Golf]

For electrical energy storage I'd probably put chips down on super capacitors myself. But you are correct, storage of energy is the real issue rather than the low cost production. Without viable storage, solar electric and wind are going to remain niche providers.

^ this.

Yes, you take a bit of a hit on internal losses, but not as much as years past.  Also, the re-fill cost from a zero-charge state will, IMO, more than be made up by the much higher power storage density ration of capacitors compared to chemical storage (batteries), even advanced lithium-film batteries.

:2c:

G2G

 

[Kirkhill]

Hmm to much hype and not enough action in the battery world. Not to mention it has it's own share of resource bottlenecks. Batteries are the tech holding back much of the alternative energy. Currently the only 3 ways to store massive amounts of energy awaiting conversion is Hydro, Oil and Gas (including coal) and Nuclear.

I'll throw one more into the mix - thermal energy.

Either hot water / steam, molten salts (sodium or potassium) or just plain geothermal (hot rocks or hot wells).  All of those are well understood, near term technologies with minimal environmental impacts.

 

[Colin Parkinson]

My bad, BC Hydro explored geo-thermal up near Pemberton in the 80's but it went no where. Iceland can afford to go to Hydrogen fueled vehicles because of their abundant geo-thermal energy.

 

[Kirkhill]

I was thinking of using old wells as heat sinks - if we are going to use intermittent energy, like wind or solar, or even run of river hydro, as well as low grade heat, then "pump" that energy into a hole a few thousand feet down under pressure so that you have long-term storage of high grade heat.  You can then recover the heat using geothermal principles.

 

[Colin Parkinson]

I did a whole bunch of approvals on geothermal loops in lakes and got to talk to the people about their design choices. The big issue about this type of geothermal is the upfront costs vs savings. For a single household, it rarely makes sense. But it is a good idea when scaled up to office building and where electricity costs are high. So in the North where much of the electricity is produced by generators, then it really makes sense to reduce demand side by using these methods. Further south where you have abundant hydro, it really is not that economical.

 

[Kirkhill]

http://www.chenahotsprings.com/geothermal-power/

https://askjaenergy.com/category/geothermal-power/page/3/

I was thinking more along the lines of central utility than individual household

And as for affordable: what has that got to do with anything? We are out to save the planet and protect phoney baloney jobs........

But if I am going to be stuck with whirlygigs chopping up little birdies and hiring thousands of squeegee kids to keep solar panels clean then I might as well try to make them as efficient as possible.

 

[Edward Campbell]

West Texas Intermediate Crude is at $54.92 as 2017 opens; that's up from <$30.00 in the spring of 2016.

 

[Scott]

And the postings asking for entry level positions in the drilling and service industry are going gangbusters. Certainly some good news.

 

[Kirkhill]

West Texas Intermediate Crude is at $54.92 as 2017 opens; that's up from <$30.00 in the spring of 2016.

92%. 

84% if you are talking about the difference between what was and what might have been.

Not bad for a poor scholar.  [

And as Scott says, heading in the right direction.

 

[a_majoor]

OPEC's attempts to raise prices has backfired as many predicted: American shale oil frackers are back in the game:

http://www.the-american-interest.com/2017/03/10/oil-prices-stumble-as-american-shale-rebounds/

Oil Prices Stumble as American Shale Rebounds

Oil took a major dip this week as fears of a global oversupply resurfaced, despite petrostate production cuts. The FT reports:

The falls came after oil prices fell the most in more than a year over the previous session when US crude inventories climbed for a ninth straight week to a record high. […]

Wednesday’s decline came after the Energy Information Administration said inventories of US crude stocks had climbed by 8.2m barrels, far more than analysts expected, as refinery purchases declined…“If things stay unchanged, then this week will be the worst week for oil prices since the Opec deal,” said Olivier Jakob of Petromatrix, a Swiss-based consultancy.

OPEC and the 11 other petrostates the cartel managed to lasso in to its output cut will be looking at the oil market with dismay this week. Those cuts were meant to help eat away at the crude glut that led to the price collapse nearly three years ago, but they’ve only lifted those prices by about $10 per barrel. This week, much of that work has been undone by skittish traders, nervous about swelling American crude inventories.

There’s good reason for concern. Since October, the United States has added more than 500,000 barrels per day (bpd) to our overall production, and we’re once again producing more than 9 million bpd for the first time in nearly a year. American shale producers are taking advantage of the small bump in prices, and they’re also capitalizing on efficiency gains and falling industry costs, all in service of increasing crude output.

Fracking firms aren’t just returning to wells they abandoned during the bearish market, though. Some are seeking new areas of exploration, including a geologist intent on bringing fracking to Alaska. Bloomberg reports:

Paul Basinski, the geologist who helped discover the Eagle Ford basin in Texas, is part of a fledgling effort on Alaska’s North Slope to emulate the shale boom that reinvigorated production in the rest of the U.S. His venture, Project Icewine, has gained rights to 700,000 acres inside the Arctic Circle and says they could hold 3.6 billion barrels of oil, rivaling the legendary Eagle Ford. […]

“The oil is there,” said Basinski, founder and chief executive officer at Houston-based Burgundy Xploration LLC, in an interview. “Now it’s a question of how quickly we can get it to flow and whether we can get the economics to work.” One exploratory well has been drilled, he said, and a second is planned by mid year.

We’re so far past “peak oil” that you’d have to squint to see it in the rear view mirror. New technologies and techniques are unlocking reserves of oil that were previously thought to be impossible to access while turning a profit. That spirit of innovation is what OPEC and its ilk are up against with their production cuts, and for the moment it looks like these new American pioneers are winning.

 

[Cdn Blackshirt]

The Saudis will drive down their production to keep oil prices inflated at least until Aramco goes public....


Matthew.