Category Archives: Current Affairs

Living to tell the tale

Indulge the elegiac tone here. It will soon be obvious why.

I have been so blessed in so many ways. Life is too short to be wasted on regret, but as Francis Albert Sinatra sang, I’ve had a few of those, and as I start thinking about my legacy, I’ll inevitably address the negative side of that over the next few weeks.  I intend to do that filtered via a collaborator who hopefully will curb my worst impulses. Continue reading Living to tell the tale

The future will be transformative, not terrifying

Looking back at December 2008, we barely mentioned shale gas, which for various reasons, but mostly to do with its disruptive potential, has been an obsession here lately. 

But we started out with the basic rule that saving energy is saving money and both are far easier than most experts would have business buyers believe.  Why?  The simple answer is that making a problem appear complex is the first and hardest part of the sale.  Convince someone energy is a problem and getting them to sign up to an expensive solution is the easy part.

From day one we've been techno optimists, in that we think there are solutions of various horizon lengths that can transform energy use and costs.  A long term would be something like solar, which is predicted as being able to generate electricity at grid parity even at higher latitudes sooner than many think.

On a shorter horizon but still techno optmists, we've always been fans of OLED lighting.  So when one of the top three lighting manufacturers Osram says the future has already started, we have to look.  But Osram are only one.  GE was built on incandescent lighting, and has embraced LED and OLED as the new world order.  Phillips the other world lighting  powerhouse agrees, and coming up quick are Samsung and LG.

Printable OLEDs promise to tick all the boxes:  Cheap, low power and low carbon. But they also add another not usually of importance to business users, but vital to consumers: They promise to be transformative works of art.

What attracted us was the idea that illumination is up to one third of business energy use. Street lighting is a staggering one quarter of all electric use in urban areas and domestic lighting is somewhere in between.  And we haven't even considered the savings that OLED will offer for display:  advertising and screen displays of what are now called TVs, computers and mobile phones.

To us, OLEDs promise a dual revolution in that electricity displaced from illumination means electricity generation itself will be revolutionised.  At first this seemed that it was a case where simply we could lose 15 to 20% of generation capacity:  No  need to worry about lights out Britain when we will use so much less. No need to worry about peak supply when demand disappears.

But the amount of power that OLEDs need promises to be so small that this opens up the possibility of self generated illumination via solar or paper thin batteries

Combine solar advances with OLED.  Throw in heat pumps and smart meter based efficiency.  Generate the remaining electricity via abundant natural gas.  The next decade promises to be transformative, not terrifying.  Don't buy catastrophe stories.  And don't let people sell them to you.

Total and Shale

Total have made few noises about shale, and have even made diversionary noises about European gas security as little as in October.  We revealed in October 9 that far from being behind the pack, they produce the first shale gas outside of North America from Patagonia.

Argentina in general is very, very hot in shale, but so far away that most people can go about their business in secret until something big happens.  But Total are also looking at the US

Total is also considering investment to extract natural gas trapped in shale rock in the U.S. and elsewhere, de Margerie told Bloomberg at a conference in Beijing yesterday.

“We’re looking at it,” de Margerie said. “There are strong chances that the U.S. is a good place” for shale developments. The Paris-based company has made shale-gas deposits a priority to fill a development gap, de Margerie has said. Total is looking to counter falling output as OPEC limits oil production to support prices.

But we'll try and find out about this one:  Total in China.  Shale or not, this one could be big:

Total SA, Europe’s third-largest oil producer, is planning to expand cooperation with China National Petroleum Corp. by pursuing a multibillion-dollar project to extract natural gas in the northern Chinese Ordos Basin


The Telegraph discovers shale, again.

October 28:

Britain faces gas shortage in six years due to Russia

December 20

Everybody knows that this is a game changer," says Aubrey McClendon, chief executive of the $16bn (£10bn) Chesapeake Energy Corporation, the largest independent producer of shale gas in the US.

Suddenly everyone is going to be a shale fan.  Remember where you heard it first.

I guess we should be thankful. But how many UK end users signed up two or three year fixed price contracts based on fear?  How many column inches have been given over to expert,and expensive opinion that has pushed the gas shortage story way past it's sell by date.  This from CapGemini is only six weeks old!

Key Findings of the 11th European Energy Markets Observatory:

Security of supply has improved in electricity, little progress was observed in gas

Europe’s declining reserves and high dependency on Russian gas supplies are an issue.

XOM XTO: The view from Texas

The Exxon/XTO story is one of the year's top stories in shale gas.  If shale gas changes everything, this deal changes everything too.

Once we get past Copenhagen, Christmas and cold snap we're seeing in Europe and the US,  we may see more on the influence of the deal on actual prices.  My theory is that they will simmer down in January  as they usually do.  Industrial demand for December essentially ends today in the UK, and the domestic market alone won't support prices no matter how cold it gets.

Meanwhile,  Exxon Mobil's local paper The Houston Chronicle  put the deal into perspective:

The XTO purchase shows Exxon Mobil believes the near future will be powered by natural gas. In what may be the most significant deal in the Oil Patch since, well, Exxon bought Mobil, energy's 8,000-pound gorilla has revealed its main strategy for dealing with both climate change legislation and the declining primacy of oil.
Exxon Mobil and other major oil companies have been struggling for years to find large new deposits of crude. The rise of government-controlled reserves worldwide and political instability in places such as Iraq and Nigeria have left them with few options.
Despite this week's bickering in Copenhagen, Exxon Mobil and its Big Oil buddies know that climate change legislation is inevitable. It doesn't matter whether they, or any one else, agrees with the science. Most of the world's policymakers are moving toward legislation to combat carbon emissions.

And if you don't get the point of this all, we'll just have to emphasise it:

Burning natural gas still emits carbon, but far less than oil or coal. That, combined with its abundance, makes it the logical transition fuel.

We can think of a certain energy adviser here in the UK who is a physicist. Is it logical to him yet?  We're asking the question today.  We won't hold our breath, but we will get an answer.

And for the rest of the US Energy industry, formerly called Big Oil?

"There's just going to be a natural migration to these unconventional plays by the majors,…. The majors are going to be sucking them in like a giant black hole."Make no mistake, Exxon Mobil's move is the beginning of a decades-long restructuring of the domestic energy industry. It's the start of a migration from oil toward other fuels. That's been talked about for years, but it's been mired in speculation over renewable fuels that aren't economical without government subsidies.

Now, that's changed. After this week, the smart money is now on gas.

Pardon us while we crow.  At least we won't have to eat it. 

But come January, one can be sure that once the Copenhagen story subsides,  the shale bandwagon will suddenly get real crowded.

Copenhagen follow up

The Q+A following the Clean Skies/UN Foundation/Worldwatch Institute    conference of last Sunday gives some more background on shale as a carbon solution.  This was where Tim Wirth pointed out at this introduction that shale was "total mystery" to European regulators who "had no idea of what we were talking about".  The follow up Q+A   is well worth watching.  If only we had regulators like the US's Holmes Hummel here in Europe!

Check out the first question which came from the UK Daily Telegraph.  The question, and Aubrey McLendon's answer shows that some people still just don't want to know.   But where were the FT,  or Guardian or Independent?  FT Energy Source linked to the conference ( maybe because we told them) but there has been no other mention in the UK , or indeed any other press.  Speaking to the converted isn't going to change things.

The next day,  Exxon Mobil's takeover of XTO changed everything. Was the timing planned?  Let's hope it was.

Copenhagen is a bit of a bore,  at least until we saw Clean Skies pointing out the solution.  Latest news seem to be pointing out to a major defeat of Coal CCS.

The Telegraph is very confused on natural gas.  Damian Reece and Ambrose Evans-Pritchard speak sense, but others aren't reporters:  They are more like Alistair Buchanan's stenographer.

But something interesting in it today:  We think it's great news, although The Telegraph paints it as a defeat.

The clean-coal industry has been shut out of the global emissions trading scheme at the Copenhagen climate change talks, dealing a blow to the UK, US and Australia…

Ed Miliband, Energy and Climate Change Secretary, is a strong supporter of the fledgling technology, which attempts to siphon off carbon dioxide when coal is burnt and pump it into geological formations such as disused gas fields.
The UK Government has committed to funding four £1bn trial carbon-capture and storage plants, with the first due to be completed either by Scottish Power in 2014 or by E.ON in 2016.
It is understood that Brazil was largely responsible for blocking the inclusion of carbon capture and storage on the list of approved clean energy over concerns about “the long-term liability for the storage site, including liability for any seepage”.

Go Brazil!  At least someone is waking up to the Completely Crackpot Shambles that is Coal Carbon Capture and Storage.

Shale and green thinking

Policy discussions on what were traditionally two antagonistic sides of the energy/carbon debate,  the green and energy producer sides is starting to move so that new facts are reflected in new thinking.

Shale gas is revolutionary, game-changing and paradigm shifting enough.  But those games are changing on the green side too, where equally as suddenly as shale's rapid emergence,  traditional enemies  are finding themselves on the same side:

XOM and XTO follow up

The morning after on what we now learn is the largest Exxon Mobil acquisition since Mobil.

But this isn’t just about them: This is about shale gas. As Bloomberg says via Business Week

Exxon Deal May Be Green Light for Shale
Others may have to follow its $30 billion purchase of XTO, a company that specializes in fracturing rock with water and sand to make natural gas flow

If you didn’t know about shale already, you do now.  Those who have doubts may find themselves even more isolated than before.  Exxon’s takeover of XTO is a sign that shale gas has arrived.

Similarly,  newspapers around the world suddenly find themselves having to do some research to explain to their readers what shale gas is, one reason why the NHA webstats went crazy yesterday.

But even the pros at somewhere like Petroleum Economist didn’t see this one coming:

ExxonMobil tends to act slowly, but decisively, and this week’s purchase of XTO Energy will send tremors through the oil and gas world. The move could trigger further consolidation among the leading shale-gas players in the US, or draw in other majors

Who gets bought next is only a short term issue for some gas companies.  What’s important here is that December 14 was the day shale gas came of age.

 

Exxon and XTO and shale

Exxon announced a buyout of XTO today, and Exxon's wish to access more shale technology was a big part of that.

In one of the largest deals of the year, Exxon Mobil is acquiring XTO Energy Inc., a large supplier of natural gas, for $31 billion of stock. The deal represents Exxon’s strategy to diversify way from oil and into natural gas, which is considered a cleaner fuel. The deal could presage other acquisitions by big energy companies of U.S. natural gas suppliers.

“XTO is a leading U.S. unconventional natural gas producer, with an
outstanding resource base, strong technical expertise and highly skilled
employees. XTO’s strengths, together with ExxonMobil’s advanced R&D and
operational capabilities, global scale and financial capacity, should enable
development of additional supplies of unconventional oil and gas resources,
benefiting consumers both here in the United States and around the world.

We've been waiting a while for the oil majors to take advantage of low gas prices to buy into the shale secret sauce that they missed the boat on first time around, although judging by Exxon, Chevron and ConocoPhllips interest in European shale in Germany and Poland, they aren't repeating the mistake.  Will this mean another round of M+A activity?  Probably