US Pumps Up Oil Output, Big Gains Seen for 2013

CNBC | Jan 8, 2013

By Patti Domm

The growing role of the U.S. as a major energy producer is changing the dynamic of the energy market.

U.S. oil production continues to accelerate at a surprising rate, and the government now predicts the U.S. industry could pump 14 percent more oil this year alone. The use of non conventional drilling techniques in places like North Dakota and Texas has created an explosion in U.S. production to the point where the U.S. is expected to surpass Saudi Arabia in crude production by 2020, according to U.S. government statistics.

At the same time, the industry is developing more pipeline capacity to carry landlocked U.S. crude from storage in Cushing, Okla. to the Gulf Coast refining areas. That should continue to drive the trend, create more refined product for the U.S. and export markets, and bring down some oil prices in the next several years, according to the Energy Information Administration.

In the next few days, a significant pipeline expansion is coming on line as the Seaway pipeline adds 250,000 barrels a day in capacity from Cushing to its current 150,000 barrels. In anticipation, the market has compressed the spread between U.S.-produced West Texas Intermediate and the international bench mark Brent crude, to below $18, the narrowest level since September.

“There’s high hopes for what this Seaway pipeline will do for the WTI market, and that spread. There’s a lot of expectations around that right now,” said John Kilduff of Again Capital.

The energy market has been trading these macro trends, and on Wednesday traders will also have their eyes on the 10:30 a.m. ET EIA release of weekly oil and refined product inventory data. The American Petroleum Institute inventory data, released Tuesday afternoon, showed a surprise build in crude of 2.36 million barrels and a very large jump in gasoline stockpiles to 7.93 million barrels.

“It was extremely bearish tonight. If the EIA comes in with a build like that tomorrow, it could break the back of the recent crude rally and we could see gasoline prices flirt with $3 on a national average in coming weeks,” Kilduff said.

The EIA also released its short-term outlook Tuesday, which included raised expectations for 2013 and its first forecast for 2014.

It said U.S. oil production, already at a 15-year high, is now expected to rise to 7.3 million barrels per day in 2013. That’s 300,000 more than its December forecast, and 900,000 barrels per day more than what was produced in 2012. It also expects 2014 production to increase to 7.9 million barrels, the highest since 1988. That is up from a low of 5 million barrels in 2008.

The result could be lower prices. The EIA forecasts Brent could fall to $105 next year, and to $99 in 2014, from its 2012 average of $112. It expects WTI to trade an average $89.54 in 2013, and $91 in 2014. The spread between WTI, trading at about $93 Tuesday, and Brent, trading at $111.82 Tuesday, should continue to narrow to $16 in 2013, and to $8 in 2014.

“We were having trouble getting oil to market because of that bottleneck in Cushing, and that’s one of the things that the pipeline is supposed to help,” said Gene McGillian, analyst with Tradition Energy. McGillian said the oil market also has its eye on Washington, and trading has been more volatile as a result.

“The idea that the spending cuts and the debt ceiling weren’t dealt with keeps the market focused on economic issues,” he said.

Andrew Lipow, president of Lipow Oil Associates, said Seaway is the first of several pipelines that will change the flow of oil. “By the end of the first quarter, we expect pipelines form Magellan LP and Sunoco Logistics to be on line,” said Lipow. “By the end of 2013, we should have the Keystone XL Southern leg in service from Cushing to the Gulf Coast.

The flood of new oil coming to the Gulf Coast could compete with Louisiana Light Crude, used in refining, and priced closer to Brent, said Kilduff.

“The question is whether the impact of all this crude coming into the Gulf Coast, is it going to be enough to top over demand for Brent? Will it be a tipping point?” said Kilduff. “The way these numbers keep going up and up, it seems like it could.” Kilduff said that would depend on how the impact of the Midwest crude filters through to the east coast, since the east coast refineries have run on oil based on Brent prices.

“The question is whether WTI rises to the Brent price, or Brent falls down toward the WTI price,” said Kilduff. “Right now, it appears the WTI is rising toward the Brent. The focus now is on what this pipeline is going to do to drain the bottleneck in Cushing.” Brent has historically traded below WTI, but in the last several years it’s been at a premium because of Middle East tensions, declining production in the North Sea, production disruptions in Africa and mostly the bottleneck in Cushing.

Kilduff added that the Saudis have also increased supplies to their jointly owned Motiva refinery in Texas, and that supply will also hit the Gulf Coast market.

“My expectation is that the Brent spread will get to $10,” said Lipow. “My expectation is that we will export a record amount of petroleum product in 2013 because petroleum product demand in the U.S. is relatively stagnant and we are going to process more crude as refiners in the Gulf Coast have raw material and operating cost advantages.” The U.S. became a net exporter of refined products in 2011 for the first time since 1949.

Lipow said the U.S. refineries are running at historically high levels for this time of year, and he thinks pump prices, could fall to a low this year of $3.10 per gallon. According to AAA, the national average is $3.30 per gallon for unleaded regular gasoline, up slightly from $3.29 a week ago, but down from $3.47 a month ago. His expectation is that the year high will be $3.70.

Strippers earning up to $2,000 a night in North Dakota town thriving amid oil boom

In a North Dakota oil boomtown, there’s one job market that never goes bust: Stripping.

Daily News | Oct 26, 2011

BY Larry Mcshane

A pair of strip clubs in Williston, N.D., are drawing exotic dancers who can earn up to $2,000 a night thanks to the influx of well-paid oil workers in the remote region, CNN Money reported.

“My best girls would rather dance here than in Vegas, because they make more money here,” boasted Melissa Slapnicka, co-owner of the club Whispers.

Slapnicka, who says aspiring strippers from Alaska, Germany and the Czech Republic have applied for work at her club, said the patrons are quick to spread their oil money around.

The co-owner/bartender says her tips – once $50 a night – are now more like $200 each evening.

And it’s even better for the talent. One stripper told CNN that she was making more in a single night than she could earn in a week on the Las Vegas strip.

“We make more than doctors,” she said. “Back in the day, it was hard to make $200 a night. It was like pulling teeth. Now you can pull in $2,000 a night.”

The oil workers are making big bucks, and have few options in spending their cash. Many of the customers at Whispers and nearby Heartbreakers are married men who chased the oil money to North Dakota – and left their families at home.

“They’re just here for a little company, because they’re lonely,” the stripper told CNN Money. “Other places, (men) wait until Friday because it’s payday.

“But here, they don’t wait. It’s payday everyday.”

China Opens Oil Field in Iraq

A China National Petroleum Corporation engineer working at Iraq’s Al Ahdab oil field.

nytimes.com | Jun 28, 2011

By EDWARD WONG

BEIJING — China’s largest oil company has begun operations at Al-Ahdab oil field in Iraq, making the field the first major new area to start production in Iraq in 20 years, according to an official news report on Tuesday.

Operations began June 21, and the field is expected to produce three million tons of crude oil per year, reported China Daily, an official English-language newspaper. The oil field was discovered in 1979 and is believed to contain a billion barrels of crude.

The Chinese company, the China National Petroleum Corporation, a state-owned enterprise, secured rights to the field under a technical services contract signed with the Iraqi government in November 2008. Under the contract, the company has development rights for 23 years, China Daily reported. It is investing $3 billion.

The contract, the renegotiation of a deal first signed in 1996 with the government of Saddam Hussein, was postponed after the United Nations imposed economic sanctions on Iraq and the American military toppled Mr. Hussein in 2003. Analysts say the Ahdab operation is China National Petroleum’s largest in the Middle East.

The contract stipulates that the company receive a fee for every barrel of oil produced, rather than an equity interest in the oil field, as it would have under the original agreement with Mr. Hussein’s government. A Chinese oil executive said in 2009 that the company would make a profit of less than one percent, but that the contract was a way to “get a foot in the door” of the Iraqi oil industry, which has much larger fields than Ahdab.

The deal began drawing intense criticism from residents and officials in Wasit Province, where the field is located, shortly after the contract was signed. Some people demanded that Wasit be granted a royalty of $1 a barrel to improve access to clean water, health services, schools, roads and other public needs in the province, which is among Iraq’s poorest. The Iraqi government rejected the demands.

Local residents complained in 2009 that Chinese development of the field would have no benefits for them, other than providing several hundred people with jobs as laborers and security guards for less than $600 a month. At the time, China National Petroleum said it was in an exploration phase and did not need much labor. Now, with the start of production, it is unclear whether the company has hired more residents. At the time, the 100 Chinese workers at the compound were too scared to leave the area for fear of being kidnapped.

The Ahdab field’s estimated reserves are small by Iraq’s standards. The Rumaila field near the southern city of Basra, for which China National Petroleum and BP signed a development deal in June 2009, is Iraq’s largest oil field, with an estimated 17.8 billion barrels. Iraq as a whole is estimated to have reserves of more than 100 billion barrels.

China’s energy needs have soared, and it has been scouring the world for energy sources. On Tuesday, President Omar Hassan al-Bashir of Sudan, in which China has large oil interests, arrived in Beijing for talks with Chinese leaders. Mr. Bashir faces indictment by the International Criminal Court on war crimes and genocide charges, but China is not obligated to arrest him because it is not a signatory to the Rome Statute that established the court. He is scheduled to meet President Hu Jintao on Wednesday.

In China’s Wild West, A ‘Black Gold’ Rush Takes Shape

Time.com | May 23, 2011

By HAROLD THIBUALT

Oil fields in Karamay, Xinjiang, China. Yang Liu / Corbis

Standing in front of a stopped truck in the desert, two workers in red overalls are pumping water out of an oil slick before installing a new derrick. The landscape is moonlike. Off on the horizon is the city of Karamay, a bona fide boomtown in northwestern China that has multiplied in only a few short years.

“Here everyone works either directly for oil, or in a service connected to it,” one of the workers says. Eight or 10 years ago, Karamay, at the heart of the autonomous region of Xinjiang, was a faceless stop on the road to nowhere. Now, it is difficult to find a bank, hotel, or bus that doesn’t bear the Petrochina logo. The company’s local headquarters lies proudly at the entrance of the city, and is taller than that of the Communist Party. Between 85% and 90% of the city’s economy is directly linked to black gold.

Here and there, dripping oil forms puddles on the ground. The story goes that back in the 1940s, an old Uighur man named Salimuhu discovered the mysterious “black oil” that would give this city its name as well as provide heat and light. He hastened to transport the liquid on the back of a donkey. The country’s first oil well – managed directly by Beijing – was opened 10 years later. (See TIME’s photo-essay “A New Look at Old Shanghai.”)

The growth in Chinese energy consumption has accelerated the movement. On May 12 the economic planning body of the government announced the suspension of Chinese diesel exports and the “strict control” of foreign sales of other refined petroleum products. The National Commission for Development and Reform called on the three large Chinese producers (Petrochina, Sinopec, and China National Oil Offshore Company) to “ensure full operational capacity,” in order to “maintain social stability and support economic growth,” just as the price of a barrel of oil had reached 100 dollars.

In 1993, China became a net importer of oil, but the country continues to export refined petroleum products to Vietnam, Japan, and Singapore, as well as some Western countries.

This appetite is noticed in the “city of black oil,” where oil rigs are pumping as far as the eye can see. In February, Petrochina announced an increase in production for the Karamay oil field, which in just two months has gone from 25,870 tons to 29,000 tons per day. The most important oil field in the west of the country produced nearly 11 million tons of crude oil last year. In 2011, Petrochina began the exploitation of local oil reserves of heavy crude, whose density makes transporting and refining it more expensive.

The reserves found in Xinjiang explain, in part, Beijing’s interest in the region, where ethnic tensions between the migrant Hans and Uighurs are lively and even led to bloody riots in Urumqi (the capital of Xinjiang) in July 2009. In Karamay, the equation is simpler because three-fourths of the population are migrant Hans, recruited by Petrochina. The Uighurs say they can be hired only if they can speak Mandarin Chinese. Nevertheless, the two communities rarely mix.

Professor Gou Haitao, a researcher at the Chinese University of Petroleum, explains that Xinjiang is crucial for the energy strategy of the country. A pipeline connects the region to Kazakhstan before the imported oil from Central Asia and the oil produced in Xinjiang are delivered to the coastal industrial provinces of the East. Closest to these dynamic coastal zones, the oil fields of the northeast are emptying.

“In the East, the reserves of black gold are declining after decades of exploitation. The petroleum from Xinjiang offers a very real margin of development,” says M. Guo. “The high prices of imported oil are a heavy burden, and China has to change its rate of energy consumption, become more efficient, and reach an equilibrium with available oil resources.”

In March, Beijing adopted a new five-year plan that will guide its strategic choices until 2016, anticipating a reduction of its historical dependence on carbon, which [currently] supplies two thirds of its energy needs, by relying more on renewable energy.

It also predicts new investments in oil, notably in inner Mongolia and of course here in Xinjiang.

This post is in partnership with Worldcrunch, a new global news site that translates stories of note in foreign languages into English. The article below was originally published in Le Monde.

Israel discovers 1.5 Billion Barrels of oil

Central Israel Oil Discovery: 1.5 Billion Barrels

Oil samples were found as having high quality.

israelnationalnews.com | Aug 17, 2010

by Tzvi Ben Gedalyahu

Estimates of the amount of oil in the Rosh HaAyin discovery have rises to 1.5 billion barrels, and there is more oil off-shore, but it is not yet known how much of the “black gold” can be extracted for commercial use.

The new estimate, along with the gas and oil finds off the Mediterranean Coast, raise the likelihood that Israel will be self-sufficient for energy for the next three decades and even become an exporter of gas.

The amount of oil at Rosh HaAyin represents a tiny percentage of Israel’s oil consumption, but development is continuing in the area as well as in the Dead Sea.

Economists have noted that the discoveries will have a huge impact on society, creating more jobs and strengthening the shekel against word currencies.

Investors in the project at Rosh HaAyin, located on the edge of Samaria and several miles east of Tel Aviv, have been waiting anxiously for months for news about the amounts oil underground at the Megged 5 oil well. The full engineering report will not be available until mid-September, but the company has decided to adopt the recommendation in the initial report.

Oil samples were found as having high quality with very little sulfur, and the amount of water in the samples was less than 10 percent.

It added, “A reasonable estimate of the amount of oil…is 1.525 billion barrels of oil” but warned that the final estimates may be lower, with a chance that they could even be higher. The report does not include estimate of other sections in the field.

Previous reports estimated that daily production could reach 382 barrels a day. The latest company statement said it is will not be known before next month the new estimated production rate, but it should reach at least 450 barrels a day.

Lloyd’s Warns Of Increasing Fossil Fuel Risks, Urges Green Focus

NU Online News Service | Jun 21, 2010

By CAROLINE MCDONALD

As fossil fuel supplies are stretched thinner, risks similar to the British Petroleum oil spill will increase, according to a new report from Lloyd’s and a U.K. think tank that urges businesses to rethink their approach to energy.

The report, “Sustainable Energy Security: Strategic Risks and Opportunities for Business,” by Lloyd’s 360 Risk Insight and U.K. think tank Chatham House, found that reliance on fossil fuels is pushing the search for reserves into more difficult and risky territories.

Declining production from easily accessed oil reserves combined with rising demand from developing economies can result in events such as the current Deepwater Horizon Oil Platform spill in the Gulf of Mexico, the report said, adding that the BP spill could push the transition to more cost-efficient clean and renewable energy systems.

The study predicts that price spikes and supply disruptions will become more frequent due to rising consumption, insufficient investment, and threats to installations and transport.

These factors, the report notes, combined with political pressure to reduce greenhouse gases and protect our environment, will force businesses to be more efficient consumers of energy and adopt clean and renewable technology.

Richard Ward, Lloyd’s chief executive, said in a statement that business leaders “need to rethink their approach to energy risks or be left behind as energy becomes less reliable and more expensive. The environmental and economic cost of our reliance on fossil fuels is too high. We need a long-term plan to reduce consumption and diversify our energy sources.”

Mr. Ward said the report “should cause all risk managers to pause,” adding that it outlines “that we have entered a period of deep uncertainty in how we will source energy for power, heat and mobility, and how much we will have to pay for it.”

Bernice Lee, research director at Chatham House, noted, “Businesses across the board need to make a serious assessment of their vulnerability to change and volatility on the energy scene. There are huge opportunities as energy systems evolve to include users and increase resilience and efficiency. There is also the potential for heavy or even catastrophic financial and environmental losses.”

The expected level of investment in renewables and clean energy—up to $500 billion per year by 2050—holds tremendous opportunities for businesses, but the lack of global agreement on carbon reduction is inhibiting commitment and investments, the report states. Ultimately, this will make catching up or adapting to energy shortages much more expensive for all, it notes.

The report calls on governments to set clear policies and create certainty in the transition to a low carbon economy.

The study also warns that preparations must be made for a new set of risks as our energy system changes. Many renewable technology systems, for example, use rare materials, and the increasing reliance on electricity and IT could raise vulnerability to cyber attacks, according to the report.

The report advises businesses to reassess global supply chains and increase the resilience of their operations.

Green groups hope Gulf spill photos of dead dolphins horrify Americans enough to downsize and pump less gas

Green groups hope Gulf spill galvanizes movement

Associated Press | May 12, 2010

by Tamara Lush

VENICE, La. – In the weeks after an oil rig exploded and killed 11 men in the Gulf of Mexico, worried environmental groups scoured the water for oil plumes, set up animal triage centers and stretched boom across shorelines.

Activists hope their involvement doesn’t end there; maybe, they contend, this is the catalyst that America’s green movement needs. Will Americans be horrified enough by the news to pump less gasoline, buy hybrids and downsize their consumer lifestyle?

“We all need to take a hard look at how we’re living. And how that is having an impact on our world and the health of the planet,” said Larry Schweiger, president and CEO of the National Wildlife Federation. “How long will it take for folks to wake up to the truth? Clearly, if there is a moment for us to wake up, this is it.”

But asking Americans to pay attention is easier if there are dramatic photos and videos tugging at heartstrings. So far, there have been few such images in this disaster. Though more than 4 million gallons have been spilled in the three weeks since the explosion, slow-moving currents in the Gulf have kept the thickest oil offshore and away from coastal wildlife.

Related

False Flag Operations: The Crisis Route to the New World Order

Gulf oil spill reaches Freemason Island as BP prepares to lower giant funnel

That hasn’t stopped environmental activists from trying to publicize how much the spill will affect the region.

Ten days after the rig explosion, Schweiger and a team of National Wildlife Federation staff had rented a condo in Venice, a small Louisiana fishing village 70 miles south of New Orleans that has become a staging area of sorts. Guys with GREENPEACE T-shirts mixed on docks with charter boat captains and international media. Leilani Munter, an IndyCar racer and environmental activist who blogs under the name “carbonfreegirl,” was there, taking video of the effect on local fishermen.

Last week, Sierra Club Executive Director Michael Brune flew over the Gulf in a seaplane to survey the damage. He saw waves of rust-colored oil undulating through the blue water, toward sensitive bird habitat.

“We saw high concentrations of oil,” he said. “We flew over a very small portion of this. This is a spill that extends for miles and miles and miles and miles. It will be one of the largest manmade disasters ever and the impact will be profound.”

It’s been relatively easy for environmental groups to detail the spill’s human toll. Eleven men on the oil rig were killed. Thousands of fishermen on the coast of Louisiana, Mississippi, Alabama and Florida are no longer making money now that the federal government has shut down commercial fishing in a big chunk of Gulf waters.

It’s been a little more difficult to explain to the American public how the spill is affecting the environment — or why people should change their habits to help the situation. Only a few birds have been brought in to cleaning centers, and while several dozen turtles and a few dolphins have washed up — none with visible oil — scientists aren’t so sure that has anything to do with the spill.

Photos and videos of brown, pudding-like oil in the water near the well far out to sea don’t have the same impact that it would if and when such sludge makes it to beaches in big quantities.

It was images of another oil spill — a massive gusher off the coast of Santa Barbara in California in 1969 — that spearheaded the modern environmental movement and galvanized people to create the first Earth Day in 1970.

That spill coated miles of California coast and killed dolphins and seals. Among the conservation groups formed at the time were the Environmental Defense Center and Get Oil Out!, an anti-drilling group whose founder urged the public to cut down on driving, burn gas credit cards and boycott companies associated with offshore drilling.

Yet after the Exxon Valdez spill in 1989, environmentalists were hoping it would change both public policy, opinion and behavior.

“But it didn’t,” said Rick Steiner, a former University of Alaska marine conservation specialist who has been doing volunteer work in Louisiana for Greenpeace. “Exxon Valdez did make tanker transport safer. I was hoping it would result in a sustainable energy push in the U.S. but it didn’t.”

Steiner thinks this Gulf spill could “become like Chernobyl or Three Mile Island or Bhopal” — a moment where people, and politics transform.

“Maybe this is the straw,” he said. “Maybe this is the incident that will catalyze both the individual consumer’s behavior and the political policy change.”

It could change if more photos and pictures of oiled animals emerge.

“People have a deep connection to the wildlife and the beauty of the wildlife, and when they see those pictures of the birds, the turtles, the things that are harmed, there’s a gut emotional reaction,” said Marylee Orr, executive director of Lower Mississippi Riverkeeper, a Louisiana-based advocacy group.

Advocates acknowledge there is a disconnect between consumer behavior — and the dependence on oil — and what is happening now in the Gulf.

“I would like to see people make a connection to this incident and their everyday behavior,” said David Ringer, a spokesman for the National Audubon Society. “For people to realize that our individual choices every day have a tremendous effect on the planet and all the life we share this planet with.”

ExxonMobil-led consortium nets ‘supergiant’ Iraq oil field

Group wins bid to develop west Qurna as baghdad signs up slew of big contracts

Reuters | Nov 6, 2009

by Ahmed Rasheed and Muhanad Mohammed

BAGHDAD: An ExxonMobil-led consortium has beaten rival Russian, French and Chinese groups to bag initial rights to develop Iraq’s West Qurna field, the Oil Ministry said, adding momentum to Iraq’s bid to unlock its oil riches. With reserves of 8.7 billion barrels, West Qurna is among the prized Iraqi fields eyed by Western oil majors as they face flat or lower output at home and stiff competition from Chinese and Indian oil companies in bidding for oilfields elsewhere.

“The consortium led by ExxonMobil, which includes Shell, won the contract to develop West Qurna Phase One oilfield,” Oil Ministry spokesman Asim Jihad said.

The initial deal was signed in Baghdad on Thursday but needs Cabinet approval before it can be finalized.

The 20-year contract is part of a raft of deals Iraq is close to formalizing in a bid to catapult itself to the world’s third largest oil producer after decades of war and economic decline.

There is no guarantee that Iraq’s next government – to be elected in January ­– will honor the deals, but it injects optimism into prospects for Iraq’s battered oil sector and a second oil bid-round in December, after a lacklustre June auction.

ExxonMobil, partnering Royal Dutch Shell, beat Russia’s LUKOIL – which had teamed up with US oil-major ConocoPhillips – and two other groups led by France’s Total and China’s CNPC.

ExxonMobil’s output target for West Qurna Phase One beat those of its rivals and allowed it to clinch the contract, said an Iraqi oil official, who was part of the negotiating team.

“This is better for us,” the Iraqi oil official said. “We need higher production. This is a supergiant field and it has the capacity to produce even more than the target set by Exxon.”

The group plans to raise the field’s output nearly five-fold to 2.325 million barrels per day (bpd) from less than 500,000 bpd at present, Iraqi Oil Minister Hussain al-Shahristani said.

He also said the consortium planed to spend as much as $50 billion in investment and operating costs for the project over six years, but there was no immediate confirmation of the figure from the companies.

The consortium would get a remuneration fee of $1.9 per barrel, the minister said.

The pact on West Qurna comes after British oil major BP Plc. and China’s CNPC on Tuesday signed an agreement for the Rumaila oil field: Iraq’s first major new oil deal since the 2003 US-led invasion.

A group led by Italian oil major Eni also signed an initial agreement on Monday to develop the Zubair oilfield, and Iraq said it also expected to ink an agreement with Nippon Oil Corp on Nassiriya in the coming days.

Analysts said the timing of the deals ahead of the January 16 poll in Iraq was convenient for both the Iraqi government and oil companies.

Russian researchers: Earth doesn’t need dinosaurs to produce oil

Russian research has shown that the Earth doesn’t need dinosaurs to produce oil

Financial Post | Sep 12, 2009

Endless oil

By Lawrence Solomon

Do dead dinosaurs fuel our cars? The assumption that they do, along with other dead matter thought to have formed what are known as fossil fuels, has been an article of faith for centuries. Our geologists are taught fossil fuel theory in our schools; our energy companies search for fossil fuels by divining where the dinosaurs lay down and died. Sooner or later, we will run out of liquefied dinosaurs and be forced to turn to either nuclear or renewable fuels, virtually everyone believes.

Except in Russia and Ukraine.

What is to us a matter of scientific certainty is by no means accepted there. Many Russians and Ukrainians — no slouches in the hard sciences — have since the 1950s held that oil does not come exclusively, or even partly, from dinosaurs but is formed below the Earth’s 25-mile deep crust. This theory — first espoused in 1877 by Dmitri Mendeleev, who also developed the periodic table — was rejected by geologists of the day because he postulated that the Earth’s crust had deep faults, an idea then considered absurd. Mendeleev wouldn’t be vindicated by his countrymen until after the Second World War when the then-Soviet Union, shut out of the Middle East and with scant petroleum reserves of its own, embarked on a crash program to develop a petroleum industry that would allow it to fend off the military and economic challenges posed by the West.

Today, Russians laugh at our peak oil theories as they explore, and find, the bounty in the bowels of the Earth. Russia’s reserves have been climbing steadily — according to BP’s annual survey, they stood at 45 billion barrels in 2001, 69 billion barrels in 2004, and 80 billion barrels of late, making Russia an oil superpower that this year produced more oil than Saudi Arabia. Some oil auditing firms estimate Russia’s reserves at up to 200 billion barrels. Despite Russia’s success in exploration, most of those in the west who have known about the Russian-Ukrainian theories have dismissed them as beyond the Pale. This week, the Russian Pale can be found awfully close to home.

In a study published in Nature Geoscience, researchers from the Royal Institute of Technology (KTH) in Sweden and the Geophysical Laboratory of the Carnegie Institution of Washington joined colleagues at the Lomonosov Moscow State Academy of Fine Chemical Technology in publishing evidence that hydrocarbons can be produced 40 to 95 miles beneath the surface of the Earth. At these depths — in what’s known as Earth’s Upper Mantle — high temperatures and intense pressures combine to generate hydrocarbons. The hydrocarbons then migrate toward the surface of the Earth through fissures in the Earth’s crust, sometimes feeding existing pools of oil, sometimes creating entirely new ones. According to Sweden’s Royal Institute, “fossils of animals and plants are not necessary to generate raw oil and natural gas. This result is extremely radical as it means that it will be much easier to find these energy sources and that they may be located all over the world.”

The Institute’s lead author, Vladimir Kutcherov, Professor at the KTH Department of Energy Technology, is even more brash at the implications of his findings: “With the help of our research we even know where oil could be found in Sweden!” he delights. Kutcherov’s technique involves dividing the world into a fine-meshed grid that maps cracks (or migration channels) under the Earth’s crust, through which the hydrocarbons can bubble up to the surface. His advice: Drill where the cracks meet. Doing this, he predicts, will dramatically reduce the likelihood of dry wells. Kutcherov expects the success rate of drillers to more than triple, from 20% to 70%, saving billions in exploration costs while opening up vast new areas of the planet — most of which has never been deemed to have promise — to exploration.

The Nature study follows Kutcherov’s previous work, published in the Proceedings of the National Academy of Sciences, that created hydrocarbons out of water, calcium carbonate and iron — products in the Earth’s mantle. By superheating his ingredients in a pressure chamber at 30,000 times atmospheric pressure, simulating the conditions in the Earth’s mantle, Kutcherov’s alchemy converted 1.5% of his concoction into hydrocarbons — gases such as methane as well as components of heavier oils. The implication of this research, which suggests that hydrocarbons are continuously generated through natural processes? Petroleum is a sustainable resource that will last as long as Planet Earth.

Lawrence Solomon is executive director of Energy Probe and Urban Renaissance Institute and author of The Deniers: The world-renowned scientists who stood up against global warming hysteria, political persecution, and fraud.

Giant oil find by BP reopens debate about oil supplies

BP says it has made a giant oil find in the Gulf of Mexico. Photograph: Newscast

Discovery could be as large as Forties field in North Sea and comes hard on heels of 8.8bn barrel find by Iran

guardian.co.uk | Sep 2, 2009

by Terry Macalister

BP has reopened the debate on when the “peak oil” supply will be reached by announcing a big new discovery in the Gulf of Mexico which some believe could be as large as the Forties, the biggest field ever found in the North Sea.

The strike comes days after Iran unveiled an even larger find of 8.8bn barrels of crude oil, and the moves have encouraged sceptics of theories which say that peak production has been reached, or soon will be, to hail a new golden age of exploration and supply.

BP, already the largest producer of hydrocarbons in the US, said its “giant” Tiber discovery in 4,100ft (1,250m) of water was particularly exciting because it promised to open up a whole new area.

Shares in BP were up 4% to 539p in afternoon trading, making it the biggest riser in the FTSE 100 despite the company saying much more drilling appraisal work was needed before Tiber’s commerciality could be guaranteed.

“Tiber represents BP’s second material discovery in the emerging lower tertiary play in the Gulf of Mexico, following our earlier Kaskida discovery,” said Andy Inglis, chief executive of exploration and production. “These material discoveries, together with our industry-leading acreage position, support the continuing growth of our deepwater Gulf of Mexico business into the second half of the next decade.”

Analysts agreed that the find appeared to be very significant. “Any time an oil major uses the word ‘giant’ you have to sit up and take note. Kaskida confirmed the western limits of the lower tertiary play and this extends the limits even further,” said Matt Snyder, a Gulf of Mexico specialist at oil consultancy Wood Mackenzie.

Fadel Gheit, an equity analyst who follows the oil sector for the Oppenheimer brokerage in New York, said the discovery was a “big feather in BP’s cap and reaffirms their leading position in the deep water Gulf of Mexico”.

BP itself believes that Tiber is bigger than the prospect on the nearby Kaskida field found in 2006, which has around 3bn barrels of oil reserves in place, while industry experts said Tiber might be as large as Forties, which has 4bn barrels.

Excitement around Tiber comes amid a welter of new finds both in established oil producing areas such as Iran and in new areas such as Uganda and western Greenland. There has recently been an oil rush in the deep waters off Brazil and talk of large onshore volumes of new gas in Holland, although the UK’s North Sea fields have seen a slump in drilling levels.

“Its an amazing turnaround from the gloom of the last 10 years. All these finds will take a long time to bring on stream, but it shows the industry is capable of finding more oil than it uses and shows we have not come to any peak,” said Peter Odell, professor emeritus of international energy studies at Erasmus University in Rotterdam.

However, exponents of peak oil theories said the BP find would not fundamentally change the longer-term supply-and-demand picture. “The International Energy Agency said in its 2008 report that the world needed to find six new Saudi Arabias to meet the growing demand for oil in the future,” said Jeremy Leggett, chairman of the renewable power company Solarcentury, and a key peak energy specialist.

“This [BP] find is welcome but its not going to take concerns away at a time when existing fields are depleting faster than expected and the new discoveries have a very long lead time.”

Leggett pointed out that it would take many years for BP to bring any Tiber fields onstream, pointing out that the huge Kashagan find in the Caspian Sea, in which BP has sold its stake, was meant to produce its first oil in 2005 but is now targeting 2013 as a start-up date.

The oil company will be helped at Tiber by the light nature and high quality of the oil in a development that will cost billions of pounds.

The two discoveries, which are about 40 miles apart, make it much easier for BP, which owns 62% of the discovery alongside Petrobras of Brazil and ConocoPhillips of America, to justify building a platform and pipeline to shore. The companies will need to tackle very deep water – the well is one of the deepest ever drilled.

The oil has been found in lower tertiary soils which were created more than 30m years ago. Their commercial prospects will depend on what portion of the reserves at Tiber can be recovered: in the case of Forties it has risen to well over 70%, but can be as low as 30% in other parts of the industry.