Energy Wars: The "Shale-Oil Insurgency"

Interesting analysis from Nikos Tsafos writing in The National Interest Shale-Oil Surprise: OPEC Faces an Insurgency, Not a Price War

Between June and November 2014, oil prices have fallen by some 40 percent, courtesy of robust growth in output and a bleaker outlook for oil demand. In late November, The Organization of Petroleum Exporting Countries (OPEC) chose to keep its production quotas intact, triggering several obituaries and talks of a price war between OPEC and the United States, where most of the additional supply originates. Yet war is not quite the right term; insurgency is more like it—decentralized, adaptive and, likely, inconclusive.

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Gone are the days where high oil prices triggered a production response with a seven-to-ten-year lag (to allow for acreage acquisition, exploration, appraisal and then development of an oil field). When a system can grow as quickly as the United States’ can, then clearly, the world has a competing source of “spare capacity,” meaning capacity that could come online quickly to meet market needs.

Good read.

And, really, isn't "energy independence" mostly about being able to quickly fill market needs?

"Decentralized" "Adaptive" -- I like that in the energy context.

Long-Endurance Electric Unmanned Aircraft and the Potential for Other Things

USNRL photo

The engineers and scientists at the Navy Research Laboratory have successfully tested a long-endurance unmanned aircraft using a special tank of liquid hydrogen to feed fuel cells. Read more at "NRL Shatters Endurance Record for Small Electric UAV::

Researchers at the U.S. Naval Research Laboratory (NRL) flew their fuel cell powered Ion Tiger UAV for 48 hours and 1 minute on April 16-18 by using liquid hydrogen fuel in a new, NRL-developed, cryogenic fuel storage tank and delivery system.
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Liquid hydrogen is three times denser than 5000-psi compressed hydrogen. The cryogenic liquid is stored in a lightweight tank, allowing more hydrogen to be carried onboard to increase flight endurance. Success in flight requires developing a high quality, lightweight insulated flight dewar for the cryogenic fuel, plus matching the boil off of the cryogenic hydrogen to the vehicle fuel consumption.
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To address the logistics of in-theater supply of liquid or gaseous hydrogen, NRL proposes in-situ manufacture of LH2 for use as fuel. An electrolyzer-based system would require only water for feedstock, and electricity, possibly from solar or wind, to electrolyze, compress, and refrigerate the fuel.

Much quieter and long-endurance, too. I wonder what its thermal signature looks like?

So, fuel from water to a special tank to power fuel cells to drive electric motors.

Potentially a game changer in the world of powering land vehicles, too,  I would think.

Makes me wonder a little about the future of fossil fuels.

Energy Wars: Fusion Power

Aviation Week got an exclusive look at Lockheed's fusion reactor:

Lockheed estimates that less than 25 kg (55 lb.) of fuel would be required to run an entire year of operations. The fuel itself is also plentiful. Deuterium is produced from sea water and is therefore considered unlimited, while tritium is “bred” from lithium. “We already mine enough lithium to supply a worldwide fleet of reactors, so with tritium you never have too much built up, and that’s what keeps it safe. Tritium would be a health risk if there were enough released, but it is safe enough in small quantities. You don’t need very much to run a reactor because it is a million times more powerful than a chemical reaction,” McGuire notes.

Faster. But be safe.

Five or so years to another breakthrough that eases the stress on fossil fuels and the land and maritime routes needed to get them to market?

Cool.

Energy Wars: Fracking Our Way Ahead

America's not so secret new weapon, discussed again at The American Interest "Shale Boom Has America Sitting Pretty"

By lessening our dependence on foreign sources of oil and gas, the shale boom has given us more options abroad, and in some cases . . . has given America more clout in diplomatic standoffs.

Almost all of this "shale boom" has occurred, by the way, by private companies working their "magic" on private property - in many cases with local or regional opposition to this development.

Interesting look at the U.S. development of its resources from Aljazeera "American power and the fracking boom: What impact will America's oil and gas boom from fracking have on US power and global geopolitics?":

Fracking is giving rise to a new energy abundance in the United States that has major implications for American policy in the Middle East and the debate over climate change. Over the past five years, daily oil production in the US increased 3.7 million barrels, while US net imports of oil dropped 44 percent. A revolutionary technique to tap into oil and gas reserves by drilling horizontally into underground shale formations and using liquids pumped at high pressure to open cracks in the rock, fracking is reshaping the contours of American power.
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For the past 35 years, securing access to Persian Gulf oil and protecting the shipping lanes to keep it flowing has been a central tenet of American military policy. It is known as the Carter doctrine because President Jimmy Carter first enunciated the commitment in his 1980 State of the Union address.

Historian and author Andrew Bacevich hopes that the shale oil and gas boom from fracking will cause a strategic rethinking of the Carter Doctrine in the United States. "What the new energy regime could do would be to make it clear that the United States does have choices and one of those choices will be to lower our profile in the Middle East more broadly and in the Persian Gulf specifically," he says.
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According to Jeppe Kofod, a member of the European Parliament and representative from Denmark to the NATO Parliamentary Assembly, about one-third of US military spending, or about $200bn a year, can be linked to efforts to keep oil flowing.
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. . . President Barack Obama and administration officials emphasise that the US commitment to safeguarding access to Middle Eastern oil will remain strong despite America’s shrinking reliance on imports from the region. In a speech at the United Nations last year, Obama said that the US is prepared to use military force, “to ensure the free flow of energy from the region to the world. Although America is steadily reducing our own dependence on imported oil, the world still depends on the region's energy supply."
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Anti-fracking activists are trying to prevent the construction of terminals and pipelines needed to transport and export natural gas and oil. Robbie Cross, a member of a local group trying to stop fracking in Pennsylvania, is clear about the rationale. "After you frack it has got to go somewhere," he says. "If we don’t have ways of moving it, selling it, distributing it, it’s not going to work."
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Richardson and other proponents of shale exports argue that they can be used as effective instruments of American power to counter the Russians in Europe. The Continent relies on Russia for 30 percent of its gas supplies, and half transits via the Ukraine. Some countries like Hungary, Poland and the Czech Republic get 70 to 100 percent of their gas from Russia. Hungary’s ambassador–at-large for energy security, Anita Orbán, argues that American exports of natural gas to Europe can help diversify supplies and undermine Russia’s energy leverage there even if the flow does not begin for a few years. (emphasis added)

The impact of fracking on China is discussed in the country that uses the greatest percentage of coal in the world, China, in this Atlantic article, America's Fracking Boom Comes to China: Deep inside Beijing's campaign to wean the country off coal .

What the EIA says:

Most of China's proven shale gas resources reside in the Sichuan and Tarim basins in the southern and western regions and in the northern and northeastern basins. EIA estimates from its most recent report on shale oil and gas resources that China's technically recoverable shale gas reserves are 1,115 Tcf, the largest shale gas reserves in the world.
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China's NOCs are in discussion with several IOCs for partnering on potential shale gas projects in order to gain necessary technical skills and investment for developing these geologically challenging resources. CNPC and Shell signed the first PSC for the Fushun-Yonghchuan block of shale gas in the Sichuan Basin in March 2012. Shell also has partnered with Sinopec and CNOOC on two other shale gas plays. After investing $950 million between 2011 and 2013 on shale gas exploration in China, Shell plans to spend another $1 billion each year for the next five years to develop these resources. Sinopec is working with Chevron and ConocoPhillips to explore shale gas resources in the Qiannan and Sichuan basins, respectively. On the reverse side, Chinese NOCs have been actively investing in shale oil and gas plays in North America to gain technical expertise in this arena. (NOC=National Oil Company, IOC= International Oil Company)

It's interesting that people who have previously argued that we should not fight "wars for oil" in our own national interest are willing (1) to commit our national forces and dollars to possibly fighting "wars for oil" for the interests of other countries and (2) that people who who are opposed to U.S. fracking on environmental grounds seem to be totally okay with the status quo of pushing environmental damage off to those second and third world countries who are resource rich but not in the protesters back yards - and condemning others in the world to be dependent on the whims of leaders in Russia and other undemocratic countries.

Given the huge amount of pollution created by the use of coal by China (about 50% of the world's use) - see China's coal emissions responsible for 'quarter of a million premature deaths', it is to the benefit of the entire world that China be given all the assistance it needs to wean itself from coal and to develop its access to those much cleaner burning natural gas reservoirs.

It also behooves Europe and Japan that the U.S., Canada and Mexico develop LNG export facilities to allow the export of natural gas to offset the Russian and Iranian power in using the "oil and gas weapon" against Europe.

The U.S. government should be encouraging U.S. companies to help Poland to explore its shale gas reserves as an offset to the Russians. While the estimated levels of Polish shale gas are fluctuating, there is gas there and it is both Polish and European interests to develop it.

It's not just the U.S. that has the potential to be "sitting pretty" as a result of the the shale boom.

Energy Wars: Marcellus "Miracle" Continues

Was it only a few short years ago that there was concern over "peak oil" and worry over the dwindling supply of U.S. natural gas? Why, yes it was.

Then along came shale oil and gas.

A revolution that changed everything, as noted in this Oil and Gas Journal article, "Marcellus continues to defy expectations, driving US gas production ever higher":

Shale has been the primary driver of US gas supply growth since 2007, and the Marcellus shale has been the largest single contributor to rising production.

Marcellus production topped 14.5 bcfd in March and is expected to account for nearly one fourth of all US gas output by 2015, according to a report by Morningstar Inc.

The Marcellus's eminent position stems, in part, from the ability of wells in the formation to come online at high initial production (IP) rates and to sustain those rates for longer than wells in other shale formations.
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The Marcellus stretches across portions of Pennsylvania, Ohio, West Virginia, and New York. Moody's Investor Service figures the formation holds an estimated 141 tcfe of recoverable reserves.

Marcellus output climbed from virtually nothing in 2007 to 9 bcfd in 2013, equivalent to the combined production growth of the Haynesville (4 bcfd), Eagle Ford (3 bcfd), and Barnett (2 bcfd) shales. According to Morningstar, output from the formation helped boost US production 14 bcfd, or 25%, during the 6-year period, more than offsetting declines from conventional reservoirs and the Gulf of Mexico.

If not for the Marcellus, Morningstar found, US gas production would likely have peaked in late 2011 or early 2012 as producers reduced gas-directed drilling in response to weak domestic gas prices.
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The Marcellus shale has fundamentally altered the outlook for the US natural gas industry. The US is emerging as a low-cost chemicals producer and is poised to become an exporter of natural gas—a feat unthinkable just 5 years ago when it was widely believed that increasing LNG imports would be needed to meet domestic demand.

According to Hanson, "In short, the growth of the Marcellus over the next several years is likely to be nothing short of astounding."

Europe ought to be happy, too, if the U.S. can get its LNG export business in motion. The Russians? - well, not so much.

Energy Wars: Philippines Offshore Oil and Gas Developments

 Let's see, countries with young, ambitious populations, growing energy demands and ready-made disputes over adjoining water space  - what could possibly go wrong?

Very nice RIGZONE report, "The Philippines Pushes Ahead with Offshore Development Efforts":

. . . The Philippine Department of Energy (DOE) said it aims to make the country 60 percent self-sufficient in energy by 2024 in a 2011 public address.

In the same year that the DOE committed to raise the country's energy self-sufficiency, the agency launched its largest ever petroleum block contracting round. The fourth Philippine Energy Contracting Round (PERC 4), which was launched June 30, 2011 saw 15 oil blocks – 12 offshore and three onshore – spanning an area of more than 25.5 million acres (10 million hectares) being offered.

The contract areas cover hydrocarbon prolific areas within the basins of the Northwest Palawan, East Palawan, Sulu Sea, Mindoro-Cuyo, Cagayan, Central Luzon and Cotabato.
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The Philippines produced some 1.64 million barrels of oil in 2012, a remarkable achievement considering that the country produced no oil before 2000, according to the DOE. The Galoc field, sited 37 miles (60 kilometers) northwest of Palawan Island, accounted for 1.5 million barrels. The Nido oil field is the second largest producing field, followed by the Matinloc and North Matinloc oil fields.

"Although [the country's] current production of crude oil is quite modest, the Philippine petroleum industry may have significant potential in the disputed area of the South China Sea Basin, which is adjacent to the Northwest Palawan Basin," according to an August 2012 report published by the International Monetary Fund.

Which of, course, bumps it up against China's claims in the South China Sea or, as the Philippines would have it, the "West Philippine Sea" -

"This afternoon, the Philippines has taken the step of bringing China before an arbitral tribunal under the 1982 United Nations Convention on the Law of the Sea (UNCLOS) in order to achieve a peaceful and durable solution over the West Philippine Sea," the DFA said.

"The Philippines has exhausted almost all political and diplomatic avenues for a peaceful negotiated settlement of its maritime dispute with China. We hope that the arbitral proceedings [will] bring this dispute to a durable solution," the DFA added. (Jan 23)

Now, the Oil and Gas Journal reports a modest effort to expand production from the Galoc field:

A unit of Otto Energy Ltd., Perth, heads a group that is drilling two horizontal wells in a second development phase at Galoc oil field offshore the Philippines.

The company expects the Galoc-5H and 6H wells, being batch-drilled in 311 m of water

Otto Energy Map of Galoc Area

each with a planned 2,000-m lateral, to begin producing in the fourth quarter to the Rubicon Intrepid floating production, storage, and offloading vessel.

Info from Otto Energy on its Galoc development here. A little investment info:

Early this month, Otto Energy announced the entry of Kuwait Foreign Petroleum Exploration Co. (Kufpec) as partner in the Galoc project.

Otto Energy, the main operator of Galoc, holds a 33 percent working interest in the project. Kufpec assumed control of 26.84473 percent working interest in the joint venture project following its acquisition of Risco Energy Pte Ltd., the parent firm of Galoc Production Co.

The Galoc field consortium is eyeing first oil to flow from the drilling of two additional wells by the first half, bringing total daily production to about 12,000 barrels per day.

Some history of Philippines oil and gas exploration from the Philippine DOE:

In 1989, relatively large fields were discovered in the deep waters off Palawan when Occidental Petroleum tested gas in its Camago Structure. Alcorn Philippines, in 1990, discovered the West Linapacan Field and commenced production two years later until 1996. Also in 1990, Shell discovered Malampaya gas field becoming, by far, the largest gas discovery in the country. The field started to produce commercially in 2002, providing clean fuel for power generation to Luzon grid. At present, Malampaya natural gas provides about 40% of Luzon’s power requirement.

Onshore in northern Luzon, the Philippine National Oil Company developed and produced the San Antonio Gas Field in 1994 and supplied natural gas as fuel to the local electric cooperative in the Province of Isabela.

Wrap up this backgrounder with a U.S. Energy Information Administration brief on the South China Sea:

EIA estimates the South China Sea contains approximately 11 billion barrels of oil and 190 trillion cubic feet of natural gas in proved and probable reserves. Conventional hydrocarbons mostly reside in undisputed territory.
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While national oil companies (NOCs) have been successful in extracting hydrocarbons near the shorelines of the South China Sea, the majority of the area presents daunting challenges to development. In addition to the geopolitical disputes, the contested areas of the sea face geological and technological concerns.

EIA estimates the South China Sea to be more viable as a source of natural gas than as a source of oil, so producers would have to construct expensive subsea pipelines to carry the gas to processing facilities. Submarine valleys and strong currents present formidable geologic problems to effective deepwater gas infrastructure. The region is also prone to typhoons and tropical storms, precluding cheaper rigid drilling and production platforms. Industry sources point to innovations in deepwater drilling pioneered throughout the Gulf of Mexico as models for developing the South China Sea, including tension leg tethering of production installations and managed pressure drilling to operate in the high-pressure deepwater environment. NOCs have partnered with international companies to provide technology and equipment for deep sea exploration and drilling operations.

Of course, from a maritime security point of view, there is this:

More than half of the world's annual merchant fleet tonnage passes through the Straits of Malacca, Sunda, and Lombok, with the majority continuing on to the South China Sea. Almost a third of global crude oil and over half of global LNG trade passes through the South China Sea, making it one of the most important trade routes in the world.