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By Robert Rapier on Dec 2, 2011 with 30 responses

Rank the Top 10 Oil Stories of 2011

Tags: Platts

Platts’ annual survey of the Top 10 Energy Stories of 2011 is now open:

The top 10 oil stories of 2011: cast your vote now

They listed about 40 stories; below are the ones that I voted into the Top 10 from the list they had put together:

  • Keystone XL decision delayed until ’13 after enormous opposition
  • Brent and WTI prices reach highest levels since 2008 surge
  • Australia approves carbon tax, first among major western nations
  • Brent/WTI spread blows out to as much as $28
  • US import dependence plummets on surge in US product exports
  • ConocoPhillips, Marathon to abandon integrated model, will both split in two
  • EA orders release of oil from inventories to counter tight market brought on by Libya
  • Bohai Bay suffers oil spill; ConocoPhillips is the operator
  • 15% ethanol blend approved for use in the US, but has little impact
  • Japanese consumption of LNG and products soars after quake to replace nukes

You are also free to suggest your own stories.

As I do each year, I will put up my own list in late December. The Platts survey is specific to oil, but my Top 10 will be across all energy sectors. Feel free to nominate top energy stories in the comments. I don’t want to give away too much, but I think the top story overall in energy this year took place in Asia.

Link to Original Article: Rank the Top 10 Oil Stories of 2011

By Robert Rapier

  1. By carbonbridge on December 2, 2011 at 3:21 pm

    Robert Rapier said:

    They listed about 40 stories; below are the ones that I voted into the Top 10 from the list they had put together:


     

    RR:  Here’s another energy topic to consider putting on the list.  “The other shoe is apparently dropping now.”

    The FINAL REPORT herein as mentioned in the first article below is said to be PRIVATE.  As public taxpayer money was involved via both the DOE as grant funds and the USDA as a loan guarantee, – I think this ‘final report’ on Range’s “Cellulosic Ethanol” debacle should also be available to interested taxpayers.

     

    Range Fuels biorefinery in foreclosure

    Macon Telegraph

    By S. HEATHER DUNCAN   12-2-11   

    AgSouth Farm Credit, the bank that loaned Range Fuels $80 million to launch its Soperton ethanol plant….

    http://www.macon.com/2011/12/0…..z1fO6Ggmtx

     

    BLOOMBERG

    Georgia Ethanol Plant Given Guarantee Under Bush Fails as U.S. Pulls Plug

    By Mario Parker – Dec 2, 2011 5:20 PM MT

    http://www.bloomberg.com/news/…..-plug.html

     

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  2. By moiety on December 2, 2011 at 8:12 pm

    I would put in something along the lines of Germany closing nuclear plants promotes fossil fuel use. Frack gas could go in the as well (for the public opinion).

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  3. By Benny BND Cole on December 3, 2011 at 3:30 pm

    Fracking and huge global supplies of natural gas. Also, North Dakota, and the possibility that could go global too.

    Really, 2011 was the year the Peak Oil Hysterics began to calm down. At more than $80 a barrel, demand withers and supplies and alternatives grow.

    And still you can make methanol from natural gas for $1.38 a gallon–that is what Methanex is selling methanol for today. No subsidies, no theories, no if and or buts.

    Strikes me that Peak Oil is be ushered out with a whimper.

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  4. By Walt on December 3, 2011 at 8:52 pm

    Benny BND Cole said:

    And still you can make methanol from natural gas for $1.38 a gallon–that is what Methanex is selling methanol for today. No subsidies, no theories, no if and or buts.

    Strikes me that Peak Oil is be ushered out with a whimper.


     

    Interesting point…you are in a very tiny class that sees that value.  As one of my employees wrote recently:

     

    —————

    In transitioning from a petroleum to an (n/syn)gas/renewable base,
    industry is going to have to reevaluate some deeply held assumptions.  Few seem to realize that we are entering a new energy regime where
    simplicity will prevail. FT is illogical when you create a similarly
    liquid one carbon fuel in a profoundly simpler process. Less energy
    dense fuel offset by improved efficiency. Simplicity.

    UOP, the
    world leaders in refining and MTO technology, are probably realizing
    that the days of calling domestic refining capacity “petroleum” in lieu
    of “alcohol” are limited and I’m optimistically guessing this is a major
    reason for the partnership in the first place. Atleast that’s how Gevo would like us to see it. Regardless, I really like the idea of
    retrofitting refining processes for our purposes, as you suggested. With
    olefin hydration, we could produce an alcohol blend like none other.

    I used to admire Amyris, based out of Emeryville, CA, in my neck of the
    woods. They have exploited the isoprene like pathway to produce
    their farnescene, and good for them. We take abiological methane and
    turn into atleast an equally useful fuel or better yet a building block
    for every organic compound known by science. 

    Looks just like
    every other stereotypical industrial biotech start up, like LS9,
    promising everything yet having no ability to fly on their own power.
    These companies should stick to cosmetics.

    —————

     

    When about every blogger is anti-methanol in the “clean fuels” sector and especially in the “biofuels digest” sector, don’t think it will make the top 10 stories in the next several years.  It is going to take a few pioneers brave enough to push methanol who don’t mind the heat in the ethanol kitchen.  Until then, focus on the financial mess as that will drive the next wave of money globally and who will be the winners.  I hope methanol is in the mix as it can make a positive impact worldwide.

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  5. By OD on December 4, 2011 at 12:54 am

    I can’t agree Benny. The real story is, oil prices are still in the $100 range, despite Europe staring into the abyss and the US to follow suit. This worries me, a lot.

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  6. By paul-n on December 4, 2011 at 4:50 am

    Benny, as an economist, I expect better of you than to say with “$80 oil” that “demand is withering”.

    Firstly, the $80 price refers to WTI, which is what is sold in some place in Oklahoma – it represents about 2% of world trade and is certainly not the “world price”.  That would be Brent, or any of the other benchmarks (Saudi, Tapis, Urals, etc) all of which are within a dollar or two of Brent and about $20 above WTI.  In fact, the Brent price for 2011 is averaging close to $110.

    As for demand withering, that may be the case in the US, but is certainly not in China, Brazil, India etc.  In fact world all liquids production (and thus consumption) has hit a new high in 2011, so I don;t see how you can call that a “withering of demand”.

    What we can say is that the US driver is gradually being outbid for fuel, as Jeffrey Rubin predicted in his book.  A gallon of oil being used to run a mill in India produces far more real value than the same gallon being used to drive an  SUV to work in freeway traffic. 

    Now, the fact that “all liquids” – which includes NGL’s and ethanol – is up, while “crude +condensate” (real “oil”) is still below where it was in 05.  So demand for “fuel” is still going up, but production of real “oil” is stalled – I wouldn’t write off peak oil just yet.

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  7. By rrapier on December 4, 2011 at 12:58 pm

    Paul N said:

    Firstly, the $80 price refers to WTI, which is what is sold in some place in Oklahoma – it represents about 2% of world trade and is certainly not the “world price”. 


     

    The other thing to note is that WTI isn’t trading at $80. It closed last Friday at over $100. So count me among those who disagree with Benny on this point. Oil prices have had staying power at this level in a terrible economy. That does not bode well for the future.

    RR

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  8. By Herm on December 4, 2011 at 2:23 pm

    The energy story of 2011 has to be Fukushima

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  9. By Wendell Mercantile on December 4, 2011 at 2:41 pm

    The energy story of 2011 has to be Fukushima…

    Negative. That’s not an energy story, that’s a natural disaster story ~ one that overwhelmed even good planning and engineering.

    When the next large comet whacks into the earth, will you call that the “energy story of the year?”

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  10. By rrapier on December 4, 2011 at 2:46 pm

    Wendell Mercantile said:

    The energy story of 2011 has to be Fukushima…

    Negative. That’s not an energy story, that’s a natural disaster story ~ one that overwhelmed even good planning and engineering.


     

    Ah, but it is an energy story, because it had a major impact on the nuclear energy plans of several countries.

    RR

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  11. By carbonbridge on December 4, 2011 at 2:55 pm

    Herm said:

    The energy [BLOWUP and three core meltdowns] story of 2011 has to be Fukushima


     

    I agree. 

    Fukushima should be #1 on this year’s energy tally listings…

    -Mark

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  12. By paul-n on December 4, 2011 at 2:57 pm

    Oil prices have had staying power at this level in a terrible economy. That does not bode well for the future.

    Yes, the economies of other countries (e.g. BRIC) are not nearly as terrible as the US, so they can carry on at these higher prices.  Europe has already done most of the easy oil savings, so they too just have to carry on, and pay the price.

    The US economy will have to sort itself out.

    But I think it is clearly no longer accurate to make the link that a weak US economy, leading to weak US demand for oil, will somehow lead to lower (medium term) world prices for oil. 

    The evidence is that other oil consuming countries will happily take the oil that the US can no longer afford, whatever the price.

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  13. By paul-n on December 4, 2011 at 3:00 pm

    I would also agree that the follow on from Fukushima – like Germany’s move to end nuclear power – make this one of the major energy stories of the year.

     

    If there was a category for “non-stories”, I would put the Chevy Volt in that category.

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  14. By Rufus on December 4, 2011 at 4:42 pm

    When it comes to “lasting influence,” I’d have to go with Fukushima.

    Overlooked, but important, was the continuing plunge in the cost of manufacturing Solar Panels.

    First Solar announced their manufacturing cost was down to $0.74/Watt, and said they’re looking at $0.52/Watt by, I think it was, the end of 2012.

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  15. By takchess on December 4, 2011 at 6:35 pm

    http://gulfnews.com/business/o…..s-1.943590

    Not quite a story at this point

    Takchess

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  16. By Wendell Mercantile on December 4, 2011 at 10:56 pm

    Ah, but it is an energy story, because it had a major impact on the nuclear energy plans of several countries.

    I cheerfully concur. The energy story is a derivative of the reaction to the natural disaster.

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  17. By Wendell Mercantile on December 4, 2011 at 11:01 pm

    I would put the Chevy Volt in that category.

    Why, sales have been weak — and so far three batter-packs have caught fire?

    I concur, the potential of EV’s is huge and will be a game changer, but the Volt has yet to prove GM is the car-maker to be the catalyst.

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  18. By sameer-kulkarni on December 5, 2011 at 12:01 pm
    • Australia approves carbon tax, first among major western nations

     

    Good! Now that there is a ray of hope for all the Algae tech providers, they shall be eagerly looking forward to scoff all that easy money (@ AUSD 23 / ton CO2).

     

    From Reuters

    Australia’s carbon market is forecast to be worth as much as A$15 billion ($15.5 billion) by 2015, with sale of permits to raise A$25 billion in the first four years. Passage of the carbon price laws is expected to ensure the global market continues to expand over the next few years.

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  19. By Wendell Mercantile on December 5, 2011 at 12:21 pm

    In my opinion, top energy stories of 2011:

    NG fracking and what’s happening in North Dakota. The political reaction to fracking will be particularly important over the next 10 years.

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  20. By paul-n on December 5, 2011 at 2:55 pm

    but the Volt has yet to prove GM is the car-maker to be the catalyst.

    Agreed.  All it has proved is that if you make a 1.7 ton car, and try to make it use electricity, it will be so expensive that hardly anyone buys it!

    Funny thing is, that GM was closer to the mark, in my opinion,  with the original EV1 in 1999.  Small, light, aerodynamic, and got 1.5 x the range of the Leaf on a similar sized battery pack.

    Interstingly, the X-prize winning Edison team have produced an electric version of their car, and it gets more than 2.5 x the miles/kWh of the Leaf.  Their design mantra is light, and aerodynamic – Gm’s almost seems to be the the opposite;

     

    http://www.edison2.com/blog/

     

     

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  21. By Wendell Mercantile on December 5, 2011 at 8:33 pm

    A refinement to my candidate for top energy story of 2011:

    Large swaths of the North American Continent are saturated with billions of cubic feet of recoverable natural gas ~ and although playing it close to their chests, the smiles of investors, those in the gas industry, and American politicians are getting wider and wider as they realize just how much there is.

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  22. By paul-n on December 5, 2011 at 9:18 pm

    the smiles of investors, those in the gas industry, and American politicians are getting wider and wider as they realize just how much there is.

    But there’s a catch.  None of this shale gas is economical at close to current prices. Given that many conventional gas plays are uneconomic to develop at less than $4, how many of the shale plays, where you need directional drilling, fracking, fluid disposal and have faster declines rates, are economical?

    The companies are drilling flat out, and making a loss on production, to “increase their reserves”, which is the main determinant of their stock price.  This party will come to an end when the investors want to see “sales revenues” not just reserves.  At that point, we will see a correction in both price and activity, as many of the uneconomic plays remain undrilled.

     

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  23. By Wendell Mercantile on December 7, 2011 at 5:43 pm

    But there’s a catch.

    Paul~

    There’s always a catch. :-)

    But people are starting to realize much of the earth’s lithosphere is saturated and squishy with methane — and then are all those frozen methane clathrates under the oceans.

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  24. By paul-n on December 8, 2011 at 2:50 am

    Hmm, but will we be able to harness that methane, or will it all go up as fugitive emissions, as seems to be happening in Arctic areas?

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  25. By Walt on December 8, 2011 at 6:34 am

    Paul N said:

    the smiles of investors, those in the gas industry, and American politicians are getting wider and wider as they realize just how much there is.

    But there’s a catch.  None of this shale gas is economical at close to current prices. Given that many conventional gas plays are uneconomic to develop at less than $4, how many of the shale plays, where you need directional drilling, fracking, fluid disposal and have faster declines rates, are economical?

    The companies are drilling flat out, and making a loss on production, to “increase their reserves”, which is the main determinant of their stock price.  This party will come to an end when the investors want to see “sales revenues” not just reserves.  At that point, we will see a correction in both price and activity, as many of the uneconomic plays remain undrilled.

     


     

    Paul,

    Several operators I know are stepping out of the traditional plays and locating new fields.  They are drilling and completing wells, but not building the distribution pipelines yet.  The focus is on drilling before leases expire, and proving up reserves.  There is an incentive to drill, complete and shut-in right now rather than spend lots of money on pipelines to get gas to market without higher prices.

     

    I agree they are drilling flat out in some areas, and looking at new areas (especially formations with NGLs), but I don’t think they are selling at losses yet.  Most of the future contracts will expire this year, and many of those contracts were locked in at $6+.  Some operators have sold forward at over $4.75 in some announcements this year, but I think those are on reserves that have already been in production for some time.

     

    What I find interesting is what Chesapeake is starting in Ohio…as I think the new rig count will be announced soon.  It is a mind blower how much money and rigs that are moving there…it could become like another Bakken or Eagle Ford play.

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  26. By carbonbridge on December 8, 2011 at 12:45 pm

    Paul N said:

    Better still would be to turn the standed gas into methanol, but you already know that…


     

    Right on Paul!!!  The recent methanol article at the URL below was forwarded to me a couple of

    days ago.  I think it speaks volumes about the ‘methanol as liquid fuel’ issue.

    -Mark

    http://www.nationalreview.com/…..int/284560

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  27. By paul-n on December 8, 2011 at 11:59 am

    Hi Walt,

     

    If they are lucky enough to have forward sols at $6 etc, then they probably are making money.

     

    According to an oil industry veteran on TOD, who is still in the NG business, most of the shale gas developers in his area (texas) are going backwards.  Fracking adds a huge cost to the process, and the decline rate is faster with these wells.  Maybe the Bakken area is easier

     

    If they are drilling, proving and then capping, then they are definitely not making money, but if they can stand the negative cash flow, then I think this is a good strategy.

     

    Better still would be to turn the standed gas into methanol, but you already know that…

     

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  28. By Walt on December 8, 2011 at 12:56 pm

    Paul N said:

    Hi Walt,

     

    If they are lucky enough to have forward sols at $6 etc, then they probably are making money.

     

    According to an oil industry veteran on TOD, who is still in the NG business, most of the shale gas developers in his area (texas) are going backwards.  Fracking adds a huge cost to the process, and the decline rate is faster with these wells.  Maybe the Bakken area is easier

     

    If they are drilling, proving and then capping, then they are definitely not making money, but if they can stand the negative cash flow, then I think this is a good strategy.

     

    Better still would be to turn the standed gas into methanol, but you already know that…

     


     

    Paul,

     

    Last month when we were pricing out city gate prices for delivery in Michigan, a colleague/trader sent me the following:

    ————

    The
    NYMEX strip prices as of Friday are $4.20 for 2012 and $4.72 for 2013. In
    addition to the NYMEX price, the Michigan production has a basis adjustment. Last I knew, it was running
    positive (2012 current Basis +$.13).
    ————

    At the end of 2011 the future contracts will expire and nobody will see $6.00 anytime soon as what I’m told by traders.  At some point companies will look at downstream fuels like methanol for low priced natural gas, but all our interest is coming from overseas.  Methanol is still the forbidden chemical/fuel in the states.

     

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  29. By Walt on December 9, 2011 at 3:05 am


     

    Paul,

    Others can speak to the issue of methanol contaminating ground water, but facts don’t seem to matter in politics today.  The “game changer” as the article says may have just been revealed by EPA with this statement:

    —————

    The U.S. Environmental Protection
    Agency
    said for the first time it found chemicals used in
    extracting natural gas through hydraulic fracturing in a
    drinking-water aquifer in west-central Wyoming.

    Samples taken from two deep water-monitoring wells near a
    gas field in Pavillion, Wyoming, showed synthetic chemicals such
    as glycols and alcohols “consistent with gas production and
    hydraulic-fracturing fluids,” the agency said today in an e-
    mailed statement.

     

    The findings give ammunition to
    environmental groups, such as the Natural Resources Defense
    Council
    , that have said the drilling risks tainting drinking
    water and needs stronger regulation.
    “This is just evidence of why we need better rules,” Amy
    Mall, senior policy analyst for the group in Washington, said in
    an interview. “It’s a game-changer. EPA experts and scientists
    have recognized that there is real contamination, that there is
    a real scientific basis for linking it to fracking.”

    http://www.bloomberg.com/news/…..-says.html

    ————–

     

    Let’s see where they take this publicly…as the ethanol lobby and ADM was the driving force behind targeting MTBE drinking water contamination from leaky gas stations in California that ultimately banned its use…and replacing it with ethanol.  Methanol was in the cross hairs of the controversy as we know from the Methanex/ADM/State Department litigation.  Now, EPA miight be coming back to finish methanol’s reputation which is why I’m happy to be working overseas. There is only one alcohol I know used in frac fluid…so let’s see what happens.

    Once the media scares the public on methanol groundwater contamination…it will be the nail in the coffin…as it is already my biggest obstacle to explain to people what happens when methanol is leaked into the soil…but they still don’t believe if the EPA and media says the opposite.

    I don’t want to be overly negative, but methanol has only one major advocate in media (Dr. Robert Zubrin) and so it is an uphill battle.

    ————–

    Findings in the Two Deep Water Monitoring Wells:

    EPA’s analysis of samples taken from the Agency’s
    deep monitoring wells in the aquifer indicates detection of synthetic
    chemicals, like glycols and alcohols consistent with gas production and
    hydraulic fracturing fluids, benzene concentrations well above Safe
    Drinking Water Act standards and high methane levels. Given the area’s
    complex geology and the proximity of drinking water wells to ground
    water contamination, EPA is concerned about the movement of contaminants
    within the aquifer and the safety of drinking water wells over time.

    http://yosemite.epa.gov/opa/ad…..600065c94e!OpenDocument

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  30. By sameer-kulkarni on December 13, 2011 at 1:22 pm

    An another important event that took place in 2011, is the commissioning or Shell’s Pearl (World’s largest) GTL Plant. http://www.shell.com/home/cont…..62011.html and http://www.shell.com/home/cont…..12011.html

    At a full production capacity totalling to 260,000 boepd of GTL products it certainly dwarfs an average Oil Refinery.

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