Don't Fall for the Hype - China's Renewables Sector is in Disarray

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.
In its latest ‘Five Year Plan’, China committed $290 billion to clean energy investments, with the aim of generating 20% of the country’s energy from renewable sources by 2015.
This is a huge amount of investment to pledge to renewables, in fact so much so, that President Obama used his 2012 State if the Union speech to ask the US to invest more in renewables and prevent the Chinese from growing to dominate the global market for renewable energies. “I will not cede the wind or solar or battery industry to China?…?because we refuse to make the same commitment here.”
Related Articles: China Energy Outlook: China's Energy Strategy for the Future
Due to vast investments over recent years China now boasts 6.2 gigawatts of solar energy capacity and 68.3 gigawatts of wind, beating the US, which only has 5.7 gigawatts of solar capacity and 51.6 gigawatts of wind power.
This rapid expansion has led to many problems, and whilst China’s renewable energy industry may appear to be flourishing, on closer inspection huge cracks are very evident.
The $30 billion solar industry is rotten, it is overbuilt and heavily in debt and can only exist due to heavy government support. The problem is that it is now addicted to that government support, and analysts have suggested that even with billions of dollars of new loans it will still not be able to fully stand on its own.
Related Articles: Chinese Rare Earth Mining Monopoly Threatens US Defense Technology
Then there is the wind industry. Not so much rotten, as wasted. 25% of China’s wind farms are not connected to the power grid, so the energy they produce is not used. This has occurred as a result of poor planning which allowed wind installations to be built without the corresponding transmissions lines necessary to carry the power generated.
China Datang Corporation Renewable Power, a state-run wind energy developer, saw their profits drop 76% over the first half of 2012 due to the fact that regional energy utilities didn’t have the capacity to take all of the energy that it was producing.
By. Joao Peixe of Oilprice.com

View the original article here

EPA Testing Dangerous Pollutants on Human Beings

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

Want to know how dangerous pollutants are to your health? For $12 an hour, you can find out directly.

In the aftermath of US presidential elections and corporate fears of looming environmental regulations that could affect their bottom line, the Environmental Protection Agency (EPA) is under attack for conducting dangerous experiments on human beings.

Over the past decade, the EPA has apparently been paying hundreds of people $12 an hour for the privilege of exposing them to high levels of air pollutants like diesel exhaust and PM2.5 particulate matter in an operation run at the University of North Carolina’s School of Medicine.

A lawsuit has been filed in the federal court, charging the EPA with conducting illegal and potentially lethal experiments of hundreds of financially vulnerable people.  

According to an EPA testimony before Congress in 2011, particulate matter—a key component of diesel exhaust fumes--causes premature death. “It doesn’t make you sick. It’s directly causal to dying sooner than you should.”

In addition: “If we could reduce particulate matter to levels that are healthy we would have an identical impact to finding a cure for cancer.”

Apparently, however, test subjects were not apprised of the exact risk involved. While the EPA has dramatized the dangers of PM2.5 exposure before Congress, with its test subjects, the message has been toned down to warn of the potential of airway irritation, coughing or shortness of breath. The courts will have to determine whether test subjects were sufficiently briefed on the risks.

Related Articles: Top Ten Costs of the BP Oil Spill that won't be Covered by the $4.5 Billion Fine

This is how the EPA gathers the research it needs to support the implementation of strict regulations. Two major new regulations that have actually been rejected by the D.C. District Circuit Appeals court are the Cross-State Air Pollution Rule and the Mercury Air Toxics Standard—both based on the dangers of PM2.5.

The EPA is now reportedly evaluating its research on human subjects, in accordance with a Congressional request. 

In early October, Senator Jim Inhofe (R-Oklahoma), a ranking member of the Environmental Public Works Committee, called for a hearing to investigate the experiments.

The obvious question is: If the EPA has been doing this for a decade, why is it only now becoming an issue? That, of course, can only be answered by politics, which tends to value human life in a selectively opportunistic manner.

The story only reluctantly maneuvered itself into the mainstream media when “alternative” writer Seven Milloy of Junkscience.com dug it up and added a lawsuit to the mix after obtaining details of the experiments through the Freedom of Information Act (FOIA).

Milloy is a dubiously interesting figure. A biostatistician and securities lawyer by trade, he picks his battles—and they aren’t necessarily “human interest”, so to speak. In fact, he spent his earlier days consulting for big tobacco and working to debunk science that shows how dangerous smoking is.  

Related Articles: Battling Climate Change is Far Cheaper than Inaction

Agenda aside (it’s always good to know agendas), Milloy makes an important point. The EPA insists that its experiments are independently evaluated for safety and ethics, those independent evaluations are conducted by the University of North Carolina (UNC), which has been paid over $33 million by the EPA since 2004. The point: independence here is questionable.

Milloy is also a fellow at the American Tradition Institute (ATI), which has filed its own lawsuit against the EPA for illegal and unethical practices, comparing the experiments to Nazi undertaking and the Tuskegee experiments. This latter actually convinced Congress to pass the National Research Act of 1974 aimed at protecting human test subjects in scientific experimentation.

The ATI has filed its lawsuit on behalf of one of the experiment’s test subjects, Landon Huffman, who claims he was led to believe that the experiment would help people suffering from asthma, like him. He claims he was never informed that the experiment would potentially cause asthma attacks, among other things.

Of course, the EPA’s Clean Air Act of 1997 and subsequent moves to tighten air quality standards are quite irksome to the corporate world, which has to fork out billions of dollars to keep pace.

That the EPA is conducting creepy experiments on human beings in order to make its case for stricter regulations is not news—it’s been going on, at least in this case, since 2004 and has never been a secret. It’s being pulled out now as a trump card with the intention of derailing new regulations.

Regardless of the politics, though, no one wants to hear that an environmental “protection” agency is so Machiavellian as to use human beings as guinea pigs to determine exactly how dangerous our pollutants are—especially if they’re not being told what the real potential risk is.

By. Jen Alic of Oilprice.com

View the original article here

Germany's Renewable Energy Problems Serve as a Warning to the UK

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

On the 14th of September 2012 the 3,500 wind turbines that exist around the UK managed to produce just over four gigawatts of power to the national grid; a record. The same day Germany also set its own production record, although its 23,000 turbines and millions of solar panels managed to create 31GW.

It is interesting to note that the two records were received very differently. Maria McCaffery, the CEO of RenewableUK, said that “the record high shows that wind energy is providing a reliable, secure supply of electricity to an ever-growing number of British homes and businesses;” whereas the Germans dismayed at their surge in electricity production.

 Germany has a very advanced renewable energy sector, having invested billions over several years to try and encourage as many renewable energy installations as possible. It is a path that the UK government wants to take, and therefore they must quickly heed the warnings and note the problems that Germany is already experiencing.

Related Articles: Europe Rejects Proposal to Ban Hydraulic Fracking

The problems generally stem from the fact that solar and wind is not a steady source of energy. This means that it is very difficult to maintain a steady supply to the grid, and as a result traditional fossil fuel plants must be kept on standby, ready to produce energy whenever the wind dies too much.

Keeping a fossil fuel plant on standby in such a way is actually very inefficient, and leads to far more emissions than if the plant were just running normally all the time.

The more Germany installs renewable energy sources, the more problems it encounters. The whole plan to generate 32% of renewables by 2020 is turning out to be a disaster, and the UK really should take note so that they can try to avoid making the same mistakes as best they could.

By. Charles Kennedy of Oilprice.com

View the original article here

How Big a Role Will Shale Gas Play in America’s Energy Future?

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

Some people herald it as the start of a new dawn, and others condemn it as a potential environmental disaster.

I am talking of course about shale gas and shale oil, produced by hydraulic fracturing — known by its shorthand as “fracking.” With every new technology there are winners and losers, benefits and costs.

But hydrocarbons from shale deposits are shaping up to cause as big a stir in the energy markets as nuclear power did back in the seventies. Maybe more so, as oil and gas are consumed across a wider range of applications than just the electricity produced by nuclear.

This isn’t the place to delve into the environmental implications — there are dozens of sources that lay out their stall in rightly protecting the environment — but it should be said that the biggest threat to the future of shale resources will be environmental.

If widespread contamination of ground water, for example, began to be linked to fracking, the industry could yet be stopped in its tracks. So far (although there have undoubtedly been instances), cases of contamination have been sufficiently isolated that the industry still has full government approval, fueled by excitement of what the future could hold.

As the NY Times writes, an International Energy Agency (IEA) report this week leads with the headline grabber, “The United States will overtake Saudi Arabia as the world’s leading oil producer by about 2017 and will become a net oil exporter by 2030.”

Even this may be too pessimistic a prediction — the Telegraph newspaper states that total US liquid production is set to hit 11.4 million barrels per day (bpd) next year, close to Saudi Arabia’s current 11.6 million. Saudi production is itself running at a record level to depress world prices in an Iran-sensitive market; if not for that, Saudi production would be barely more than 10 million bpd.

Shale gas may have been eclipsed by shale oil in the affections of the exploration companies, but already US natural gas resources are put at over 1,300 trillion cubic feet — the bulk of which is shale gas — edging ahead of Russia’s near-1,200 trillion cubic feet of gas.

The arrival of US shale oil (and, it must be said, Canadian supplies of unconventional oil), have depressed US oil prices relative to the rest of the world, pushing the West Texas Intermediate benchmark to a discount of a fifth to Brent, the international benchmark. As a result, big chunks of the US are getting oil on the cheap, improving US competitiveness relative to the rest of the world.

Low natural gas and oil prices will be a boost for US industry and the International Energy Agency (IEA) estimates that electricity prices will be about 50 percent cheaper in the United States than in Europe, largely because of a rise in the number of power plants fueled by cheap natural gas.

The IEA estimates the point at which the US will become self-sufficient in oil production to be 2030, when it could become a net oil exporter. However, long before that, exports could become the norm from some parts of the continent, while imports remain in others — the effect there will be to limit the downside to US oil prices relative to the rest of the world.

But what about the wider geopolitical ramifications?

There will be winners and losers all around as shale oil and gas supply increases. As the US becomes less dependent on the Middle East, will it continue to take such a close strategic interest in developments there?

The IEA predicted that global energy demand would grow between 35 and 46 percent from 2010 to 2035. Most of that growth will come from China, India and the Middle East, where the consuming classes are growing rapidly.

Oil cargoes currently flowing to the US will instead go to Asia, making the region’s political developments increasingly crucial to China and the rest. Subject to securing the massive investment needed, Iraq has the ability to become the second-largest exporter of oil after Russia, but will that be Western investment or Asian?

Nor will shale gas be the savior of greenhouse gas emissions, supporters of gas-fired power generation claim. As we have seen, US coal — if not consumed in the US — is exported to India and China and simply consumed there.

Meanwhile, production in some parts of the world, once seemingly secure and solid, are beginning to look less so.

An FT article details how Russia’s Gazprom has just commissioned the massive Bovanenkovo gas field far above the Arctic Circle. The field is said to contain enough gas to supply Europe’s needs for decades to come, yet questions are already being asked about its viability as the spot gas price falls.

Mikhail Korchemkin, an independent commentator on the gas industry, is quoted as saying in this FT article Gazprom needs to export gas at a price of about $14 per 1 million Btu (MMBtu) by 2020 to afford the investments in its pipelines.

But the current average spot price in Europe is already about $10 per MMBtu, while sales in the US are even cheaper at $3.50 per MMBtu.

“They would reach a point of no return,” Korchemkin says. “Gazprom could reach a time when it’s permanently in the red,” potentially leading to a break-up of the firm. Unthinkable a couple of years ago, but now openly discussed as a result of the impact of shale gas.

What about closer to home? Will shale oil and gas result in a bonanza for US manufacturing and free up consumers to spend more on the back of cheap energy prices?

For a time, yes. The infrastructure to export shale gas as liquefied natural gas (LNG) is almost non-existent at the moment, but several projects are in the pipeline, and as exports rise the domestic price will become closer to the world price. In addition, as more gas-fired power stations are built, demand will rise and with it domestic shale gas prices.

Nevertheless US prices are likely to remain at a discount to world prices for many years to come. The US will win in another way; the country operates a current account deficit with the rest of the world in large part because of oil imports.

As oil imports have fallen this year, so has the deficit — imports up to August were the lowest since 1998, in part due to lower oil imports. On the flip side, a stronger current account means a stronger dollar, according to James Mackintosh on the FT’s Short View, which would not help US exporters of manufactured goods.

So on balance, shale oil and gas have much to offer the US.

It will probably usher in a prolonged period of energy supply independence — if not price independence.

It will reduce the demands made on the country’s military to police areas of the world it would probably rather not police.

It will provide, at least for a number of crucial years crawling out of the current crisis, access to cheaper energy relative to the rest of the world, which will benefit manufacturers and consumers.

And it will continue to provide a source of employment — so far estimated at 1.75 million — that is sorely needed in an economy that is not producing anywhere near enough new jobs for its rising population.

By. Stuart Burns

View the original article here

How Will Oil Production Impact the Economy Over the Coming Decade

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

A paper published recently by the IMF gives us some insight into how oil prices and availability might affect the global economy in the next decade. The paper, entitled Oil and the World Economy: Some Possible Futures, starts with the statistic that global oil production grew by 1.8 percent annually from 1981 to 2005, then stagnated with production remaining essentially flat thereafter. In the last seven years what is called global “growth” in “oil” production has come largely from substitutes for crude such as natural gas liquids, tar sands, and biofuels. While these substitutes do have important uses, they do not have the versatility of conventional oil and in the long run, falling supplies of normal crude can and probably are acting as a brake on economic growth.

There are other, non-liquid, substitutes for oil such as coal, natural gas and even nuclear power, but to implement these as a major source of transportation energy would be a long, expensive and in some cases an impossible task. Airplanes won’t run on coal very well without a lot of expensive preprocessing.

Global oil production has been on a plateau, at historically high prices, for so long now that it seems unlikely that it will ever resume sustained growth at the rates we saw in the decades prior to 2005. The only possible outcomes are prolonged stagnation, which some like to call the “bumpy plateau”, or decline of global production. The rate of decline, of course, will be critical to the future of the global economy and is the core of the IMF’s paper.

With the world producing and burning some 31 billion barrels of oil, or some combustible liquid we call “oil,” each year, and at a relatively cheap average price to boot, our stagnant plateau is unlikely to continue much longer. Most people who are willing to hazard informed guesses as to when global oil production will start down are saying that the decline will begin somewhere between 2015 and 2020.

There has been considerable discussion in the mainstream media recently about the growing supply of “shale” oil from North Dakota and Texas, more properly termed “tight oil,” which it is claimed will soon make America the world’s biggest oil producer – free from the tyranny of imported oil. Anyone digging into this issue will find that “tight” oil will turn out to be another bubble. Tight oil wells cost several times more to drill and frack in comparison with conventional land or shallow water wells and have an average annual depletion rate on the order of 40 percent a year in comparison with 4 or 5 percent for conventional wells.

In recent months, however, thanks to an all out drilling effort, the oil coming out of the fracked fields in North Dakota and Texas has been on the order of 950,000 b/d and has been increasing at the rate of about 350,000 barrels a day (b/d) each year. This has pushed up U.S. domestic oil production to the highest level in nearly 30 years – no wonder the press is bursting with optimism for America’s future.

The true story, however, is not as good as it seems. North Dakota currently has some 4,500 producing wells pumping out an average of only 144 barrels a day per well. A good conventional well will produce 3-5,000 b/d and those big deep water platforms are designed to produce 100-200,000 b/d from multiple well holes. To produce the 8 million additional b/d that the U.S. would need to obtain “energy independence” it would take 60,000 wells pumping out 144 b/d. These and the 6,000 or so fracked wells we already have would have to be redrilled every 3 or 4 years to maintain production. This is clearly impossible as the best prospects have already been drilled and from here on we are likely to see less productive tight (fracked) oil wells.

If the price of crude in the mid-west, currently about $85 a barrel, drops another $10 or so a barrel it will be selling for less that the marginal cost of production if it isn’t already in some cases. When the value of the produced oil gets too low, the sinking of new wells will decline rapidly as it has for shale gas drilling. A good estimate would be that the “shale oil bubble,” while adding to America’s current production, only has another year or two before it begins to fizzle.

Global oil demand has been growing at the rate of circa 800,000 to a million barrels a day in recent years all though some foresee this rate of increase declining. This is the underlying reason why would oil prices are staying high.

The IMF’s first scenario has global oil production dropping by only 1 percent a year when the decline comes. Should this occur, the IMF’s model predicts that oil prices will jump by 60 percent. As supplies continue to decline each year at this rate, the real oil price would continue to climb until demand destruction caused by unaffordable oil brings supply and demand back into balance.

Another scenario considers what might happen if the decline in world oil production increases to 3.8 percent which is about the rate that existing oil fields are depleting. In this situation, the impact is roughly four times as bad as with a 1 percent annual decline. Annual growth rates in the industrial countries would decline by one full percentage point. Oil prices would have to rise by 200 percent to bring about the demand destruction required to rebalance the oil markets.

Many of us have always thought of Peak Oil as being the point in time when global oil production began its inexorable decline to lower levels, bringing on all sorts of economic turmoil. The lesson of the last five years, however, seems to be that we can have deep and perhaps insoluble economic problems merely by the inability to grow production at satisfactory rates. The next five years should prove whether this concept is correct.

By. Tom Whipple

Source: Post Carbon

View the original article here

Is Iran Using an Insurance Scam to Cover its Oil Tankers?

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

An interesting article has today been published by Forbes which investigates the possibility that Iran has set up a false insurance company, offering illegal insurance policies, in order to circumvent the EU sanctions and enable the Persian State to continue exporting its crude.

Very Large Crude Carriers are obliged by international maritime authorities to carry mandatory third-party liability insurance of a value up to $1 billion, known as Protection and Indemnity Coverage. This type of coverage is only offered by large insurance groups (P&I clubs), 90% of which are based in Europe. EU sanctions against Iran have prevented European insurers from dealing with Iranian tankers, and this has severely affected Iran’s export, as without cover, its tanker cannot deliver oil. It has lost all of its European customers, and other international customers have drastically reduced their purchases.

Suddenly, out of nowhere, an Iranian P&I club has emerged and started to offer full cover and protection to the entire National Iran Tanker Company’s (NITC) fleet of 44 ships.

The insurance group, Kish P&I, was established in 2011, and does not seem to have the financial means to provide the cover that it offers. According to the website, Kish P&I offers $500,000 coverage for accidents and says that the remaining $999.5 million would be provided by a consortium of Iranian Insurers.

That is where things start to seem a bit dodgy, and it only gets worse.

Related Article: Iran's Nuclear Plant Entering Final Stages?

According to Central Insurance of Iran, Kish P&I only holds 44 policies, exactly the number of tankers that NITC owns, and there is no information that suggests any other ship owners may be covered by one of these policies.

NITC claims to be a privately entity, but its shareholders are clearly state owned pension funds, which led the US to label the company as a government-owned entity. This leads to the possibility that the same pension funds that underwrite Kish’s policies, and will provide the missing $999.5 million, could well be the same funds who own NITC.

Kish could well be a mask of a company to prevent people from noticing that the owners of the tankers are, in fact, the insurers as well; which kind of defeats the object of insurance in the first place.

By. James Burgess of Oilprice.com

View the original article here

New Study Shows that Global Warming Stopped 16 Years Ago

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.
Figures that have recently been released by Hadcrut 4, the collaboration between the Met Office’s Hadley Research Centre and the Climatic Research Unit, describing the changes in global temperature. The results are astounding, and sure to put a spanner in the wold climate debate as reported by The Daily Mail: Global warming stopped around 16 years ago.

How are the Sanctions Against Iran Progressing?

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.
The boycott of Iran has been more successful than I had anticipated, with Iranian oil production and exports down significantly from a year ago.

BP Falls Out with Azerbaijan as Baku Gambles on Future

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

That Azeri President Ilham Aliyev is so ferociously lashing out at British Petroleum (BP) for declining output in Azerbaijan’s largest oilfield has very little to do with BP and everything to do with Baku’s ambitions to raise the stakes as it seeks the top spot on the Caspian oil and gas chain.

Aliyev is simply setting the stage for changes in the regulations governing Azerbaijan’s oil and gas resources. From where I’m sitting, BP can’t afford to play this game and may be pushed out to make room for other oil majors.

Earlier this week, Aliyev took his show on the road personally—which is significant in itself. Speaking on public TV, the Azeri president has attacked the BP-led consortium for failing to meet its projected production targets in the Azeri-Chirag-Guneshli (ACG) field, referring to the situation as “totally unacceptable”.

The simple math is this: In 2010, ACG reached production of 823,000 bpd. Production at ACG declined 12% in the first half of 2012, to 684,000 bpd.  BP, which operates the field and holds a 35.8% stake in the consortium, had promised that ACG would produce more than 1 million bpd after its third phase was completed in 2008.

Related Article: Smash the Rally in Oil

According to Aliyev’s math, this BP failure has cost Baku $8.1 billion in revenues.

When BP initially made its 1 million bpd promise, it was to great fanfare and much uncorking of the champagne in Western diplomatic circles whose eyes glossed over at the prospect of access to so much non-OPEC crude oil.

But no sooner had the fizz gone out of the champagne that everyone realized that these predictions were a bit on the over-optimistic side. Azerbaijan’s reserves are limited, and from the start it was clear that production would experience a sharp increase and then a sharp decline. In fact, for 2012, Azerbaijan’s whole oil sector combined was only projected to produce just under 1 million bpd by the end of this year.  

Aliyev knew this. His very public attack on BP is intended to send a message that requires some reading between the lines.

"It is absolutely unacceptable … investors who cannot stick to their obligations and contract terms must learn lessons. Serious measures must and will be taken," Aliyev said.

Related Article: Yet Another Attack on Turkish Pipelines

The message is that contracts are about to re-negotiated and BP is being used as a guinea pig for a re-mapping of Azerbaijan’s energy players. We are not just talking about oil here, but gas, and BP is also knee-deep in Azeri gas via the Shah Dengiz II field. Baku isn’t convinced that BP is the best choice for reaching the full potential of Shah Dengiz II. So look for a “reorganization” of this as well. 

Can BP pull itself up out of the Azerbaijani mire? Right now, it’s looking very promising. The company is already spending some $2 billion just to maintain its currently unacceptable production levels, and if it has any chances of ramping up production to appease Baku and make good on an impossible promise, it will have to invest billions more. Unfortunately, investment on this level will not pay out, especially since BP only has a contract until 2024.

At the same time, Baku is making it clear that the contract will not be extended beyond 2024. And BP will be lucky if it isn’t pushed out before then.

Certainly, it’s a bad time for BP, which is battling on multiple front lines. Company shares have dropped around 5% this year, even after plunging about 25% over the Macondo disaster of 2010.   

By. Jen Alic of Oilprice.com

View the original article here

Albanian Tycoon Shakes Up the Country's Booming Oil Market

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

It was just 8 years ago that Canada's Bankers Petroleum (BNK-TSX) began developing one of Europe's biggest oil fields – in Albania.

The main reason for that – Albpetrol, Albania's national oil company, lacked the resources necessary to develop the country's huge oil resource.

And in those 8 years, Bankers' stock has enjoyed two big runs.

So what will happen now that Albpetrol has been sold to the highest bidder—an Albanian tycoon with deep ties to the government and the regional energy elite???

The answer is a cocktail of optimism and uncertainty, with a heavy dose of geopolitics. The sale of Albpetrol has three clear winners:

1. The Albanian economy
2. Western gas pipeline ambitions
3. A controversial Albanian tycoon??

But the outcome is less clear for Canadian energy companies that have been the backbone of Albanian oil.  Other Canadian juniors operating in Albania include Stream Oil and Gas (SKO-TSXv) and Petromanas (PMI-TSXv).??

On October 3, Albanian Prime Minister Sali Berisha announced that a private, US-based consortium Vetro Energy had won the tender for Albpetrol.??

The price: €850 million—but the actual assets were only valued at one-third of that price shortly before the tender process opened on 7 September.??

What will Vetro Energy actually get for nearly $1.2 billion? Quite a lot, under the surface.??
While Albpetrol maintains only 5% of the country’s oil field shares and operates only one oilfield, Amonica, the government took steps right before the tender was opened to sweeten the deal.??
Legislation governing Albpetrol was amended, granting the new owner licenses to build a refinery and to transport and distribute natural gas. This addition to the Albpetrol dossier is worth an estimated €20 million in revenues annually.??

In total, Albpetrol’s above-ground assets, including oil and gas fields, are worth about €322 million, and Vetro Energy has won the right to explore and exploit these assets for 25 years.??
Calgary-based Bankers Petroleum was one of the six bidders for Albpetrol, but its €304 million offer was turned down. Stream Oil and Gas did not participate in the tender.??

Was Bankers Petroleum disappointed? Yes, but there is a silver lining. According to Mark Hodgson, Vice-President of Business Development for Bankers, the high price tag placed on Albpetrol raises the estimated value of Bankers’ own assets.??

"If you look at the assets of Albpetrol, a good portion of that value is future royalty payments [from Bankers Petroleum]," Hodgson told OilandGas-Investments.com in an October 9th interview, suggesting that the value attributed to Albpetrol's assets with the nearly $1.2 billion bid immediately raises the estimated value of Bankers' own assets.??

Albpetrol was on a downward spiral during the post-independence transition period of the 1990s and was in dire straits by the time Bankers Petroleum entered the market in 2004, acquiring the lion’s share of Albpetrol’s key oilfield holdings.??

Since then, Bankers Petroleum has been responsible for a massive increase in Albanian oil production—from 600bpd in 2004 to 13,000bpd in 2011. Average third-quarter 2012 production from the Patos-Marinza oilfield was 15,616 bpd.??

The company’s $450 million in investment in the Patos-Marinza field alone between 2007 and 2011 has increased proven and probable reserves, making it one of the biggest onshore fields in Europe. Probable (2P) reserves are now estimated at 227 billion barrels, compared with 100 million in 2006.??
In 2011, Bankers Petroleum acquired Albpetrol’s remaining shares in the Patos-Marinza field. That same year, it began re-development in the Kucova field, with production targets of 2,250 bpd for 2015. Exploration in Block F, next to Patos-Marinza, represents an additional $215 million investment and is scheduled to begin in the first quarter of 2013.??

Acquiring Albpetrol would have been ideal, giving Bankers control over the extraction, processing and distribution of oil and gas. It was, however, up against the formidable force of Albanian oil tycoon Rezart Taci and his US partners.??

The Chicago-based Vetro Energy consortium consists of Singapore-registered YPO Holdings, owned by Taci, and Vetro Silk Road Equity. The deal saw YPO gain a 51% share in Albpetrol, with a 49% share for Silk Road. On October 5, two days after it was announced that Vetro Energy won the bid, the consortium stepped out publicly with Taci, introducing him as the man behind the deal.??
Taci, whose main business empire hinges on the Taci Group and Taci Oil, also owns the country’s only refineries, the largest chain of gas stations and a key TV station which boasts more than 10 million viewers. He is a personal friend of Silvio Berlusconi and a member of Berisha’s inner circle.??
In 2009, Taci managed to acquire Albania’s state-owned refineries (ARMO) for €128.7 million by having a previously unknown Swiss company close the deal. Shortly afterwards, he re-registered ARMO under the Taci Group.??

So where does all of this leave companies like Bankers Petroleum and Stream Oil and Gas, who have developed Albania’s oil production capacity???

Bankers Petroleum is “not overly concerned,” said Hodgson, noting that “as a state-run entity, Albpetrol was often bureaucratic and slow, and its decisions were often politically rather than financially motivated.”??

"We're excited to be working with a new party with similar motivations, to expand Albanian oil production and increase revenues," he said.??

On the subject of Taci, there was more reservation. Hodgson said that Bankers Petroleum had a “long history” with the Albanian tycoon, and that history was not without its problems, particularly concerning the timing of payments for crude deliveries.??

ARMO has had difficulties keeping current on their payments to Bankers, according to Hodgson. “We’ve had payment delays in the past and we’ve worked hard to resolve them with [Taci].”??
Albpetrol’s newfound power, however, should not be underestimated. After all, Taci is part of the prime minister’s inner circle and he has worked to secure his hold on Albania’s energy industry at an even pace.??

The acquisition of ARMO, to complement his chain of gas stations was a logical step. Another logical step would be to win back some of Albpetrol’s lost oilfields, particularly since they have now been successfully developed. While this latter ambition would be legally out of Taci’s reach as Vetro Energy will be bound to honor Albpetrol’s previous agreements, the Albanian tycoon could make things very difficult for his foreign competitors if he chose.??

Essentially, he will have the power of Albpetrol, Berisha and a key link in the future of the Trans-Adriatic pipeline behind him. And when Taci makes an acquisition, no one sees it coming. This is his modus operandi. His involvement is only revealed after the deal is done.??
What if relations with Taci went sour???

One concern for both Bankers Petroleum and Stream Oil and Gas could be how a mounting battle over non-payment of corporate income taxes plays out. Presently, the opposition Socialists are attacking the two Canadian companies for allegedly taking unfair advantage of a 1994 law that exempts them from paying corporate income tax as long as investments outpace profits.??

Bankers insists that it continues to reinvest revenues in development. Certainly that has been the case, most recently in the Kucova fields. Despite Socialist claims, audits are conducted frequently to this end. And Taci is not going to help the Socialists.??

Regardless, it remains an issue of contention that could be easily manipulated through the media.??Bankers is also dogged by recent allegations that its drilling caused a series of earthquakes in June which resulted in structural damage to (illegally built) homes in the rural area of Zharres, followed by protests and an attack on Bankers facilities. This issue could also gain momentum, particularly through the media, in which Taci owns significant stakes.??

For now, these are hypothetical situations and Bankers Petroleum does not view Taci as a threat to their future operations. As Hodgson reminds us, “[Taci’s] business is very much dependent on our own business.”??

And indeed, business is good. Bankers’ third-quarter output has risen 18% and sales agreements have been signed for most of its 2013 production. Shares were up 3% at C$3.18 on October 4 on the Toronto Stock Exchange, boosted, rather than shaken, by reports of the sale of Albpetrol.?

From a geo-political perspective, the acquisition of Albpetrol by Vetro Energy resounds all the way from Albania and Azerbaijan, to Western power corridors, eyeing an opportunity to further the plans of the Trans-Adriatic Pipeline (TAP).??

TAP will carry Azerbaijani gas across Greece and Albania to Italy.  It is a key strategic element of Europe’s plans to reduce its dependence on Russian gas and the stranglehold Gazprom has on Europe’s supplies and distribution network.??

Vetro Energy will guarantee the West additional gas supplies for the TAP along with a convenient place to store those supplies to boost European energy security.??

From the perspective of the TAP, Albpetrol’s value far exceeds the estimated value of its tangible assets. There is another deal sweetener, too: The new owner of Albpetrol will also be granted the use of the country’s vast salt mines for natural gas storage. The largest of these salt domes, at Drumea, can hold up 2 billion cubic meters of natural gas, or 70.6 billion cubic feet (bcf).??

Essentially, the privatization of Albpetrol will render Albania a warehouse for TAP gas supplies, strengthen ties between Albania and the US, and help Albania—and the Balkans—keep a safer distance from Russian dependence.?

Gazprom did bid on Albpetrol, but it has fallen on hard times in the face of the US shale gas boom, and offered up a paltry $52 million.?

Even before the tender results were announced, on September 27 officials from Albania, Azerbaijan, Greece and Italy signed an intergovernmental MOU in New York on the TAP pipeline.?

By Jen Alic for the Oil & Gas Investments Bulletin

View the original article here

What the Future Holds for U.S. Energy Policy

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

Domestic energy policy in the United States played a central theme during the first debate among presidential contenders. Both incumbent President Barack Obama and Republican challenger Mitt Romney said they favored a policy that focused on domestic energy resources. While most of the energy debate featured recycled rhetoric from much of the campaign so far, the candidates offered differing opinions on the shape an energy-independent United States will take.

Romney was able to gain some traction in the U.S. presidential contest in what has been an otherwise lackluster campaign. The former Massachusetts governor seemed to wander comfortably into centrist territory against an incumbent seemingly uncomfortable with sharing the stage. On energy, both leaders said they favored a United States that was more dependent on its own resources than on oil imports from overseas, though they differed on substance.

Obama during the initial salvo highlighted his administration's track-record on domestic oil and gas production. The Energy Department had said drilling offshore during the first six months of the year increased 50 percent when compared to the same period in 2011. Higher domestic crude oil production, meanwhile, meant the United States should rely on foreign suppliers to meet less than 40 percent of its energy needs in 2013 for the first time since 1991.

Romney, however, took issue with Obama's rhetoric on domestic production, saying the president has cut the number of permits for federal land in half. The Republican challenger added that offshore Alaska presented a lucrative opportunity for U.S. energy independence, though he ignored the fact that Shell was already working there and more leases were included in Obama's five-year lease plan.

Obama, meanwhile, referenced his "all-of-the-above" energy policy by saying "we've got to look at the energy source of the future, like wind and solar and biofuels." In his retort, Romney said the "$90 billion" in breaks given to green energy projects in one year represents "about 50 years' worth of what oil and gas receives." Federally-supported energy companies like solar panel company Solyndra have failed in the U.S. market while oil majors continue to make substantial profits despite what Romney says is a lack of federal support.

Regardless of the numbers, candidate Romney suggested some of the federal funds spent on green energy could have been spent more wisely. "I'm all in favor of green energy," he said. But most of those investments, he argued, have funded ventures that have failed, as did Solyndra.

Instead, Romney said he'd "bring that pipeline in from Canada," referencing the much-lauded Keystone XL pipeline. The project, however, has come to represent among environmental activists all that's wrong with a petroleum economy. Keystone XL is designated for so-called tar sands oil from Canada. Rival company Enbridge this week was ordered by the EPA, an agency Gov. Romney opposes, to do more work in Michigan to clean up a tar sands spill that happened more than two years ago. That spill was the costliest onshore incident in U.S. history and still needs a more thorough response. "And by the way," said Romney, "I like coal."

Both candidates touched on the same themes but from different perspectives.

"On energy, Gov. Romney and I, we both agree that we've got to boost American energy production," said Obama.

"Energy is critical, and the president pointed out correctly that production of oil and gas in the U.S. is up," said Romney.

Something left out of the debate, however, was the consequences of their decisions. Does the future of U.S. energy independence lie in a pipeline from Canada that carries a type of crude oil that raises concerns even among Canadians? Or does it lie in a green energy sector that can barely stay afloat even with the support of taxpayer dollars.

The future of U.S. energy policy, for better or worse, lies in the hands of the American voters.

By. Daniel J. Graeber of Oilprice.com

View the original article here

Will a Melting Arctic Help Postpone Peak Oil?

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

Last week brought the news that this summer the Arctic icecap shrank to an all-time low of roughly half the size it was in 1980. While this is the lowest ever seen since satellite monitoring began 33 years ago, some experts are saying that the summer of 2012 was probably the smallest the icecap has been in the last million years. The announcement triggered a spate of newspaper and magazine stories pondering the meaning of this development.

It now appears that the arctic is melting much faster than the models have been predicting: that the ice cap would stay intact during the summer for another 40 years. Some of the stories have been downright scary such as the one in the Guardian in which Professor Wadhams, Cambridge University's arctic expert, predicts the final collapse of the Arctic sea ice during the summer will come within four years. The professor terms this event as a "disaster' for the Arctic as it will result in much faster warming of the Arctic Ocean, the seabed, and the permafrost along the Arctic shoreline.
Most of the hundreds of articles commenting on the event reached the unsurprising conclusion that our global weather was going to get worse – perhaps much worse. At the extreme, some argued the case that so much methane will be released into the atmosphere as the permafrost melts that life on earth will be extinct by the end of the century. Others speak of the tipping points, that once past will set off such an avalanche of disasters that the world will take centuries or millenniums to recover.
Our interest here, however, is about what the end of the Arctic's summer ice cap will mean for oil production – in the Arctic and elsewhere. This question would seem to have two sides. The obvious one is if and how quickly oil companies can move to exploit the 90 billion barrels of oil (about three years of global consumption) and 44 billion of natural gas liquids that the U.S. Geological Survey believes is somewhere under Arctic waters. Indeed, the rush to exploit has already started with Shell receiving a permit to drill off the coast of Alaska. Although drilling did not get started this year due to a series of delays related to safety, preliminary work is being done so that Shell's drilling program should be ready to start up in 2013. ExxonMobil, ENI of Italy and Norway's Statoil are preparing to drill in Russia's Arctic waters. However, Russia's Gazprom recently announced that it was shelving it massive arctic Shtokman natural gas project due to excessive costs.
With a minimal permanent ice cap, much of the Arctic ocean may be open to shipping, and drill rigs may be free to operate during the summer months. Drilling in the Arctic, however, is not in the same league with drilling in the Gulf of Mexico where only the occasional hurricane can cause disruptions. Gulf support bases, helicopters, and numerous support ships are only hours away from the drill rigs. In the Arctic a drillship is largely on its own, for until very expensive support bases are established there is little help offshore.
Even if much of the permanent ice cap melts away in the next 5-10 years, strong winds can still blow large ice blocks around, threatening drilling operations. This August, a large storm settled in the Arctic for many days and was partly responsible for the breaking up much of the permanent ice cap. Storms over water can be far more fierce than over ice caps making the risk of drilling even higher. The CEO of French oil giant, Total, recently stated the belief that it is too dangerous to drill in the Arctic and that the risk of oil spills is not worth the reward.
Then of course we have the issue of just who owns the Arctic's seabed. The U.S., Russia, Canada, Norway and Denmark are all seeking to claim part of the continental shelf. As the US still has not signed the Law of the Sea convention and recently 34 Republican senators indicated that they are opposed, the US's position of exploiting resources beyond the 12 mile limit is in limbo. Russia, however, has moved stake claims deep into the Arctic in regions it says are extensions of its continental shelf.
Even with relatively ice free waters, the big problem may turn out to be the availability of drilling rigs and ships that are robust enough to withstand encounters with Arctic ice. The upshot of all this is that there are so many factors inhibiting the widespread drilling for oil in the deep arctic, it is doubtful that much of this will take place in the next five to ten years. During this time frame, the odds are high that global oil production will begin to start down due to depletion of the best fields, and it seems unlikely that Arctic resources can be brought into production quickly enough to offset most of this decline.
The other side of this issue is just how much climate change will a near term disappearance of the permanent Arctic ice cap cause. Here there are no shortages of informed opinions. All agree that without polar ice to reflect incoming sunlight, the average temperature of the Arctic Ocean and surrounding land masses will rise sharply. In the Arctic, snowfall will likely increase thereby forming a protective blanket on whatever ice forms, preventing it from becoming thicker. There will be more storms in the region that will tear up coastlines.
Again the bottom line is that there will likely be an increase in droughts, storms and floods that will cause great damage across the world. How this will affect economic activity or the demand for increasing amounts of oil is hard to say. For now it looks as if while it may be easier to get at Arctic oil in coming decades, the costs of doing so and the demand for the product may not be worth the price.

By. Tom Whippl