A Long-Awaited Decision
Earlier this month, after a debate that spanned nearly the entire duration of his presidency, President Obama finally rejected the proposed Keystone XL pipeline project. He had been heavily criticized on this issue from many angles, including by me, for his long-running failure to make a decision on this issue. For the record, my position on the pipeline wasn’t that it should be built. Nor that it shouldn’t. But rather that it was a distraction that garnered far more attention than it deserved, while more important issues desperately warranted attention.
Today, in the last Keystone XL article that I plan to write, I want to review the controversy, explain why I feel it took on a symbolic meaning far beyond what it deserved, and describe some of the other things that were taking place while an environmental movement mobilized to stop the pipeline. In a nutshell, I am going to strip the symbolism and wishful thinking and address things we actually know to be true. CONTINUE»
It’s Not That Simple
In my previous article Why the Bakken Boomed, I discussed the shale oil boom that has had such a dramatic impact in North Dakota’s Williston Basin over the past decade. But throughout the U.S. shale boom there have been those who doubted that the production gains would prove anything other than fleeting. Those doubts were grounded in the fact that shale oil production is more complex and expensive than conventional oil production, and the fact that cash flow has been consistently negative for virtually all shale oil producers.
While the doubts are based on fact, the story is more complex than it may appear. Isn’t that always the case though? Things are never quite as simple as they seem. Superficially, the narrative for many has been “Shale oil isn’t economical. The wells deplete too quickly. Just look at the negative cash flow.” But it’s just not quite that simple. Let’s dig a little deeper to gain a better understanding of what has happened, what is happening, and what is likely to happen moving forward.
The Boom-Bust Cycle for Dummies
First it’s important to understand that the oil industry is cyclical, and more importantly to understand the reason that it is cyclical. The long history of the oil industry has been one of boom and bust cycles. During the booms we hear about windfall profits, but during the downward part of the cycle, oil companies lose a lot of money and many people lose their jobs. CONTINUE»
A Williston Basin Primer
In my previous article Addressing the World’s Flare Gas Problem, I discussed my current project, which recently took me to the Williston Basin in North Dakota and Montana. Today, I will discuss the region’s shale oil boom in greater detail. In Part 3 of this series, I will conclude by delving into the economics of shale oil production.
The Williston Basin underlies parts of North and South Dakota, Montana, southern Saskatchewan, and southwestern Manitoba. Within the Williston Basin is the Bakken Formation, which first produced oil over 60 years ago. It was on North Dakota farmer Henry Bakken’s farm in 1953 that Amerada Petroleum — later acquired by Hess (NYSE: HES) — discovered oil at a depth of about 10,000 feet. The Bakken Formation is to date the source of most of North Dakota’s rapid oil production growth, but underneath the Bakken Formation is the Three Forks Formation, which has also begun to produce oil:
Source: US Geological Survey CONTINUE»
Answer …not really. More on that later.
Chevy Cruze and Volt
I was hoping to see the Chevy Bolt and Tesla Model X at the Seattle car show but the Nissan Leaf was the only all-electric car I saw on display this year. Nissan hasn’t messed with the Leaf’s look yet but the range on its SV and SL models has been improved about 22% (for a price). CONTINUE»
I don’t generally use this column to discuss the projects that I am working on. In fact, it’s been more than 2 years since I did. But I often get inquiries about where I am and what I am doing, so in today’s column I thought I would update readers who may be interested.
Since I graduated from Texas A&M in 1995 with my master’s degree in chemical engineering, I have worked for 5 companies in 10 different locations — including 3 foreign countries. Most of my work has been on energy projects. I am not going to run through my entire career here, but I will explain what brought me to my current job. If you want a full accounting, please refer to my CV.
From 2009 to 2014, I worked for a company in Hawaii called Merica International. Merica was essentially a holding company for a German entrepreneur who lived in Hawaii and invested in energy companies and technologies. Most of the published biographies for me still list Merica as my employer. In my role as Chief Technology Officer for Merica, I had the responsibility for conducting due diligence and making investment recommendations. When I joined the company, one of the major holdings was the German company Choren, which produced diesel from biomass. I first wrote about Choren back in 2008 before joining Merica. Long story short, as is often the case with new technology, startup issues dragged on and on and we finally made the decision to shut the plant down. I documented the timeline for these events in What Happened at Choren? CONTINUE»
Another Clinton Administration Likely
I know some people cringe at the idea, but Hillary Clinton is the current favorite to win not only her party’s nomination, but the presidential election in 2016. An online Irish bookmaker lists Hillary at 11/8 odds to win the presidency, followed by Jeb Bush and Donald Trump at 9/2 odds, and then Bernie Sanders, Joe Biden, and Marco Rubio at 8/1 odds. (You can even bet on Kim Kardashian at 1,000 to 1 odds of winning the 2016 presidential election).
Some will argue that her unfavorable ratings are too high, but all of the leading candidates have significant negatives of one kind or another. I imagine that Hillary Clinton versus Donald Trump could result in the highest voter turnout in U.S. history — much of it from voters trying to keep the opposing candidate out of office. Others have argued that someone will rise up and knock Hillary out of the lead. That was my exactly feeling 8 years ago during the Democratic primaries when Hillary was in the lead — that Barack Obama would not only win the party’s nomination but would go on to win the presidency. I felt like he could beat McCain, but I didn’t think Hillary could have beaten McCain in 2008. But I don’t see a Barack Obama in the wings this time around. I think it’s Hillary’s election to lose, even though a large fraction of the population loathes her.
Hillary on Energy
Given the circumstances, let’s take a look at Hillary’s energy proposals. As I pointed out during the 2008 election campaign, her energy policy proposals have been rife with pandering and flip-flops. Of course they all do it to some extent. John McCain wasn’t above a bit of both, flip-flopping on ethanol and pandering by proposing a cut in gasoline taxes leading up to the election. CONTINUE»
Photo Credit The Environmental Blog
Volkswagen was just caught cheating on emissions tests for some of its diesel-powered cars. As a result, their stock price has plummeted. I no longer have to deal with emissions tests because we own a 2006 Prius and a 2011 Leaf, neither of which require testing because one has a SULE (Super Ultra Low Emissions) rating and the the other doesn’t have a tail pipe.
You can’t fake acceleration or gas mileage, but apparently you can fake out emissions tests by installing software capable of detecting when an emissions test is being conducted (via the diagnostic plug in your dash board) that will lean out the fuel mixture and alter the timing (among other things) so the car will pass the test, returning it to normal when the test ends.
I was fooled. Following is a comment I made last year on this subject:
These are all valid points but controlling pollution is mostly a matter of innovation and engineering. You are not necessarily limited by thermodynamics. For example, compare the mileage of the very dirty 2006 diesel Jetta to the very clean 2014 diesel Jetta.
The Origins of Peak Oil Awareness
The scientific study of peak oil began in the 1950′s, when Shell geophysicist M. King Hubbert reported on the evolution of production rates in oil and gas fields. In a 1956 paper Hubbert suggested that oil production in a particular region would approximate a bell curve, increasing exponentially during the early stages of production before eventually slowing, reaching a peak when approximately half of a field had been extracted, and then going into terminal production decline.
Hubbert applied his methodology to oil production for the Lower 48 US states and offshore areas. He estimated that the ultimate potential reserve of the Lower 48 US states and offshore areas was 150 billion barrels of oil. Based on that reserve estimate, the 6.6 million barrels per day (bpd) extraction rate in 1955, and the 52.5 billion barrels of oil that had been previously produced in the US, Hubbert’s base case estimate was that oil production in the US would reach maximum production in 1965. He also estimated that global oil production would peak around the year 2000 at a maximum production rate of 34 million bpd. CONTINUE»
Why Make Predictions?
While there are actually other stories unfolding in the world of energy, you would never know that by my inbox. Most of the correspondence I have received in the past week is still related to oil prices, particularly following the recent huge rally in crude futures. A few readers also wanted to make sure that I noticed that one of my 2015 predictions had fallen last week. I will address that in today’s column.
For background, each year in January I make predictions for the upcoming year, and I provide the context for those predictions. (See My 2015 Energy Predictions). I have been doing this for several years, and at the end of each year I grade my predictions. As I have stated on many occasions, context around a prediction can be more important than the prediction itself. When I grade the predictions, I will talk about the context when I made each prediction, and the reasons the predictions turned out to be right or wrong.
But one reader asked why I would even attempt to make predictions given such uncertain conditions. I make predictions to set up a narrative that describes what I see unfolding in the energy sector, incorporating as much data as I can into making each prediction. While this is not an investment column, I am aware that some readers use it for investment advice. So without overtly recommending investments, I generally try to make predictions that are actionable. I will give 2 examples of that today, one of which is the prediction that failed last week. CONTINUE»
The July announcement from Chevy of its upcoming $38K, 200-mile range Bolt electric car may be of similar historical importance to Nissan’s announcement back in 2011 of the Leaf.