ODAC Newsletter - 31 July 2009


Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.

Low oil prices and reduced oil demand were blamed for the falling earnings of the oil majors this week. With prices half what they were in the same quarter in 2008 it is hardly surprising that last year’s exorbitant profits were unrepeatable. Tony Hayward of BP warned that the demand recovery was likely to be slow and drawn out, while Shell announced a cut in capital expenditure next year of 10%. Tightening investment budgets are already leading to the cancellation of projects, especially in the high cost oil sands. In a report Shifting Sands released this week, Greenpeace & Oil Change International question the future viability of oil sands production. The report references work by energy business analysts Douglas Westwood which concludes that a price of $80/barrell appears to be the US “recession threshold”, or the point at which demand recedes thus pulling down prices. Given the cost of exploiting the oil sands, this would leave little margin for profitable exploitation of this resource.

The oil sands however have other attractions – their location in Canada is a politically attractive option for oil companies. In addition, from next year the Securities and Exchange Commission will allow companies to report oil sands reserves without distinguishing them from conventional reserves. This will help oil companies shore up their oil replacement ratios, something they have been struggling to do, though these reserves are clearly not the same thing.

For the oil majors, getting access to new oil is getting harder. Access and terms are worsening the world over. In Nigeria this week proposed legislation to tighten terms , including increased royalties and taxes as well as renegotiations of existing contracts, was  greeted with disapproval by all of the incumbent producers.

In the UK this week the National Grid reported an oversupply of generating electricity capacity due to a 6% fall in demand. With prices and energy company profits down, there is a risk that shrinking demand could lead to delays in renewables projects, further jeopardising the government’s 2020 targets. It would be nice to think that the demand reduction was down to greater efficiency and the beginning of a trend. Nice, but unlikely.

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Disclaimers

Oil

Oil Rises as Better-Than-Expected Earnings Boost Confidence

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Oil firms see no quick recovery as profits plunge

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Exxon, the Chase for Reserves, and the Oil Sands

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Oil demand: Is a global peak in sight?

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Are We Headed for Another Oil Shock?

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FACTBOX-Oil production cost estimates by country

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Oil Firms Slam Nigeria's Bid to Overhaul Energy Industry

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Iraq's Cabinet Approves Law Establishing National Oil Co

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U.K.’s FSA Summons Oil Traders, Hedge Funds to Discuss Rules

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Exchange rivalry spills into oil trading debate

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Maersk Hit With Frontline as Fuel Oil Beats Crude

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Coal

Not under our backyard, say Germans, in blow to CO2 plans

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The carbon-capture challenge

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Electricity

Power Glut Forces U.K. Utilities to Idle Plants

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Renewables

Latest protest leaves climate strategy twisting in the wind

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Wind power: the silent majority must speak out, says Miliband

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Desert sun power pulls in the big guns

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Geopolitics

Britain to withdraw Iraq oil force to Kuwait

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Britain targets Turkmenistan gas as North Sea resources deplete

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China gains a foothold in Russia’s backyard

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Disclaimers

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