Tag Archives: Economics

Why China Is Being Flooded With Oil: Billions In Underwater OPEC Loans Repayable In Crude, by Tyler Durden

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“When the price of oil was above $100, many of the less developed oil exporting OPEC members decided to capitalize on the high price and cash out by taking loans using the precious liquid as collateral … However, few oil exporters anticipated such an acute oil plunge in such as short time span, which resulted in the value of the collateral tumbling by 70%, and now find themselves have to repay the original loan by remitting as much as three times more oil!”

STRAIGHT LINE LOGIC

Here’s one of the dumber borrower schemes out there, and a bunch of clueless governments in oil producing countries are at the heart of it: borrow money and agree to pay back the equivalent amount in barrels of oil, not using the market value of oil at the time the deals are struck, but at the time the loans must be repaid. So loans incurred when oil was above $100 a barrel now must be repaid with oil that is only valued at $40-$50 a barrel, meaning debtors must repay 2 to 3 times the amount of oil they would have had oil prices stayed high. The Chinese, the creditor on the other side of these transactions, receive a lot more oil, but they’re running out of storage and refinery capacity. From Tyler Durden at zerohedge.com:

When the price of oil was above $100, many of the less developed oil…

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Economist reports proposed Site C Dam ‘dramatically’ more costly than BC gov’t claims

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Peace Valley Landowners Association commissioned leading U.S. energy economist, Robert McCullough, to look at the business case for what will be province’s most expensive public infrastructure project

Image source:  http://unistotencamp.com/?p=601

Source: www.theglobeandmail.com

>”Just weeks before BC Hydro plans to begin construction of the $8.8-billion Site C project, a new report says the Crown corporation has dramatically understated the cost of producing power from the hydroelectric dam.

…Mr. McCullough, in his report, said it appears the Crown corporation BC Hydro had its thumbs on the scale to make its mega project look better than the private-sector alternatives.

“Using industry standard assumptions, Site C is more than three times as costly as the least expensive option,” Mr. McCullough concluded. “While the cost and choice of options deserve further analysis, the simple conclusion is that Site C is more expensive – dramatically so – than the renewable [and] natural gas portfolios elsewhere in the U.S. and Canada.”

The report challenges a number of assumptions that led the government to conclude that Site C is the cheapest option. Mr. McCullough noted that the province adopted accounting changes last fall that reduced the cost of power generated by Site C. He said those changes are illusory and the costs will eventually have to be paid either by Hydro ratepayers, or provincial taxpayers.

Mr. McCullough, a leading expert on power utilities in the Pacific Northwest, also disputes the rate that BC Hydro used to compare the long-term borrowing cost of capital for Site C against other projects, noting that other major utilities in North America use higher rates for such projects because they are considered risky investments. The so-called discount rate is critical to the overall cost projections, and he said the paper trail on how the Crown arrived at its figure “can only be described as sketchy and inadequate.”

The report, obtained by The Globe and Mail, will be released on Tuesday by the PVLA.

The group will call on Premier Christy Clark to delay construction to allow time for a review by Auditor-General Carol Bellringer.

Ken Boon, president of the association, said the government needs to put the project on hold because it has approved the project based on poor advice. […]”<

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California Resort Hotel First to Upgrade to Energy Storage + EV Charging

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Shore Hotel in Santa Monica, California, is a luxury establishment with an energy storage system and fast DC electric vehicle (EV) charging — reportedly, the first one in the US to have this setup. It is expected that the lithium-ion energy storage system will help it reduce electricity demand charges by 50%. Over time, that savings

Source: cleantechnica.com

>” […]  So what is the connection between energy storage and EV charging? When an EV is plugged into a charger, electricity demand increases, so the hotel could be on the hook for a high rate for the electricity, depending on the time of day. Demand charges are based on the highest rate for 15 minutes in a billing cycle. So, obviously, a business would want to avoid spikes in electricity usage so it would not have to pay that rate.

That’s where the energy storage comes in. When there is a spike, electricity can be used from the energy storage system, instead of from a utility’s electricity. Avoiding demand charges in this way, as noted above, can thus help businesses save money. […]”<

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Focus on financing energy efficiency

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“EEFIG’s report states that energy efficiency investment is the most cost effective manner to reduce the EU’s reliance, and expenditure, on energy imports costing over €400 billion a year. Today, this makes energy efficiency investments strategically important due to high levels of energy imports, energy price instability and the need for Europe to transition to a competitive low carbon and resilient economy. EEFIG’s members see energy efficiency investing as having a fundamental and beneficial role to play in the transition towards a more competitive, secure and sustainable energy system with an internal energy market at its core.

EEFIG participants believe that the European Fund for Strategic Investments (EFSI) should put energy efficiency first and that it is essential in the context of the Energy Union to reframe the role that energy efficiency plays in how Europe plans for, finances, and constructs its energy system.”

Renewable Geothermal Power with Oil and Gas Coproduction Technology may be Feasible

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The U.S. has been harnessing geothermal energy since 1960 and if recently announced research projects and startups are successful, even more geothermal power might soon be available.

Source: www.renewableenergyworld.com

>” […]  in the past, wastewater from oilfield production processes was viewed as a nuisance byproduct that needed to be disposed of. But new research has shown that much of the 25 billion barrels of this geothermally heated “wastewater” produced at oil wells each year in the U.S. is hot enough to produce electricity. It is estimated that many of the wells might have clean energy capacities of up to 1 MW.

Oil and Gas Coproduction in the US

In 2008, the DOE developed the first low-temperature geothermal unit in an oil field at the Rocky Mountain Oilfield Testing Center (RMOTC) in Wyoming. The well is producing energy and has a capacity of approximately 217 kW. RMOTC continues to test power units produced by Ormat Technologies and UTC/Pratt and Whitney Power Systems at the center and more than 30 oil firms have visited the center to learn about coproduction technology. The technology is also being implemented in Nevada, Mississippi, Louisiana, North Dakota and Texas.

In Nevada, Florida Canyon Mining Inc. is using the 220°F groundwater in a coproduction project that uses ElectraTherm’s 50-kW waste heat generators, aka “Green Machines” to generate electricity.

Energy can be harnessed at working oilfields and used to power them without interrupting their operation. A Gulf Coast Green Energy (GCGE) coproduction project at the Denbury oilfields in Laurel, Mississippi, is using this technique again with ElectraTherm Green Machines.  It replaced Denbury’s electric submersible pump and cut electricity costs by a third. GCGE has a second 50-kW geothermal natural gas coproduction project in Louisiana.

University of North Dakota was awarded $1.7 million through the DOE’s Geothermal Technologies Program to install a geothermal Organic Rankine Cycle (ORC) system at another oilfield operated byDenbury. For two years the plant will be used to develop engineering and economic models for geothermal ORC energy production. The technology could be used throughout the Williston Basin.

Liberty County Pilot Project

Texas is oil country, and the 4000+ dormant oil and gas wells speckled across the landscape provide a new, or perhaps recycled, frontier in geothermal energy production.  To tap some of that energy,Universal GeoPower CEO and petroleum geologist George Alcorn Jr. and his partner, Chris Luchini, a PhD physicist will use the $1.5 million in federal stimulus funds that they were awarded to bring geothermal energy to Liberty County, Texas. The company said that to prepare its DOE application, it worked with Southern Methodist University. The university has performed extensive research on coproduction and has found that it is applicable to an estimated 37,500 oil and gas wells in the Gulf Coast region.

Universal GeoPower’s pilot project is expected to be one of many that will recomplete the wells to produce low temperature, geopressured brine water. The brine will run through a commercial off-the-shelf turbo expander and an ORC binary generator.

Alcorn spoke recently at GEA’s global geothermal meeting in Washington, DC, offering a snapshot of the economic benefits of the process. “The lead-time to revenue generation is about 6 months, whereas traditional geothermal can take up to five years,” he said. “The wells already have known geothermal potential, and capital costs are dramatically reduced.”

Additionally, Alcorn noted, units are installed at existing oil wells, eliminating the need for investment in drilling, new roads or transmission lines. […]”<

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New Alberta Oilsands Projects to Start Up Despite Falling Oil Prices

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Oil producers are set to be squeezed as a total of 14 new oilsands projects are scheduled to start next year while crude prices continue to fall

Source: business.financialpost.com

” […] “There is a lot of crude coming on next year,” Juan Osuna, IHS Energy Inc.’s senior director for North American oil said in a phone interview Dec. 12. Producers “aren’t going to be happy, they will make a greater effort to cut costs, but they have been prepared for this.”

Western Canadian Select fell to US$39.38 a barrel Monday, the lowest since April 2009, according to data compiled by Bloomberg. The grade, which has higher sulfur content than U.S. benchmark West Texas Intermediate, sold at an average US$18.78 a- barrel discount in the past year, according to data compiled by Bloomberg.

Oilsands projects slated to start next year include ConocoPhillips and Total SA’s joint 118,000 barrel a day Surmont project and the 40,000-barrel-a-day expansion of Cenovus Energy Inc.’s Foster Creek project […]

Sunrise Project

Husky Energy Inc. said last week it began steam operations on its Sunrise crude project with the first phase set to begin pumping oil by early next year.

While oilsands producers may curtail future development, most existing operations won’t be shut and ones under construction will go ahead because of the investments involved and potential harm to future output, Osuna said.

Cenovus said Dec. 11 production would rise 9 per cent to 129,000 barrels a day from its Foster Creek and Christina Lake projects next year even as it lowered its spending plan by about 15 per cent.

Canada’s oilsands output is projected to rise to 3.7 million barrels a day by 2020 from 1.98 million last year, according to a report last month by the Canadian Energy Research Institute.

Brent oil traded near US$61 a barrel Monday as the United Arab Emirates said the Organization of Petroleum Exporting Countries will resist output cuts even if prices slump as low as US$40. […]”<

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Oil Price Slump Good News for Solar Power?

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As global oil prices hit a five-year low, the fossil fuel industry is facing a gathering storm that could spell great news for the solar power industry.

Source: www.pv-magazine.com

” […]

Some analysts had suggested that cheaper oil could initially cause problems for the solar industry. With utilities able – but not guaranteed – to pass on gains to the consumer, the thirst for renewable energy could wane, analysts warned. “Such a scenario could destroy value on existing renewable energy projects and make it difficult to raise financing for future projects,” Peter Atherton, utility analyst at Liberum Capital, told the Guardian.

However, Deutsche Bank energy analyst Vishal Shah yesterday released a report that suggested there would be “limited/no impact from recent oil price weakness” on the solar industry, with PPA prices in the U.S. immune from oil fluctuations. In China, Shah added, government appetite to tackle air pollution also protects the solar industry from external volatility, while the U.S. residential solar market is even more insulated from external forces, which spells good news for companies like Solar City.

In Japan, energy advisor to the government and senior fellow at Mitsui Global Strategic Studies Institute Takashi Hongo told Bloomberg that “renewables are supported by policies, and that is not something that will be amended quickly just because oil prices fall,” suggesting there will be hardly any negative impact to the solar industry.

A warning shot was fired from Lin Boqiang, director of the Energy Economics Research Center at China’s Xiamen University, however. “If oil stays at current prices or weakens through the first half of next year, the impact on new energy would be massive,” Boqiang told Bloomberg. “Weakening oil prices would hamper the competitiveness of new energy.”

[…]

“The fact that oil is so unpredictable is one of the reasons why we must move to renewable energy, which has a completely predictable cost of zero for fuel,” urged Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change at the opening of the COP20 climate conference in Peru.

A changing tide
Following oil’s dramatic price fall last week, this week began with two seismic announcements that could hammer a further nail into the fossil fuel coffin. First, German utility E.ON announced that it is to pivot away from fossil fuels by 2016, pouring the majority of its resources into the development of renewable energy sources.

Then, a day later, the Bank of England (BOE) wrote a letter to the U.K. government’s Environment Audit Committee announcing that it is to formally begin examining the risks fossil fuel companies pose to financial stability.

BOE governor Mark Carney expressed his concern that much of the world’s proven coal, oil and gas reserves may be “unburnable” if the world is to keep global warming within safe limits.

“In light of discussions with officials, we will be deepening and widening our inquiry into the topic,” wrote Carney. “I expect the Financial Policy Committee to also consider this issue as part of its regular horizon-scanning work on financial stability risks.” […]”

Read more: http://www.pv-magazine.com/news/details/beitrag/is-the-oil-price-slump-a-boon-for-solar_100017395/#ixzz3LrUAGr88

 

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Electricity storage becomes priority as solar and wind energy cost keeps dropping

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“And the cost of solar power is declining amazingly. Austin Energy signed a deal recently that a solar farm is selling at 5 cents a kilowatt-hour. A recent study by Lazard gave a cost of 5.6 cents for solar and 1.4 cents for wind power (with current subsidies) or 7.2 cents for solar and 3.7 cents for wind without subsidies. Natural gas came in at 6.1 cents and coal at 6.6 cents. The Solar Energy Industries Association claims that in the Southwest electricity contracts for solar energy have dropped 70 percent since 2008.”

chemengineeringposts

imgres The rapid advances in the use of solar and wind energy – more in Europe, but now also gaining momentum in the U.S.- has put electricity “storage” front and center. That is because there is no solar production at night and little on cloudy days, while strong winds are unpredictable in most locations. So, the best “model” for these renewable energy sources is to generate as much as possible at favorable times and to “store” excess production for periods when solar and wind energy supply are low.

And the cost of solar power is declining amazingly. Austin Energy signed a deal recently that a solar farm is selling at 5 cents a kilowatt-hour. A recent study by Lazard gave a cost of 5.6 cents for solar and 1.4 cents for wind power (with current subsidies) or 7.2 cents for solar and 3.7 cents for wind without subsidies. Natural gas came in at…

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Oil’s Price Drop Forces Lower Prices for Brazilian Biofuel (Ethanol) Makers

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The plunge in oil prices to multi-year lows could have a sour aftertaste for Brazilian sugar processors.

Source: blogs.wsj.com

“> […] The drop in crude prices may spell even more trouble for one of the mills’ two chief products: ethanol. Processors have ramped up production of the biofuel as a way to generate revenue as sugar prices plunged. But now that alternative may lose its luster if cheap gasoline gets in the way. Ultimately, it may push more sugar on the market.

Raw sugar futures on ICE Futures U.S. recently fell 1.6% to a more than six-week low of 15.68 cents a pound. […]

Brazil is the world’s top producer of cane-based ethanol and cane processors have been dedicating more of their cane to produce the biofuel as an alternative to producing sugar, which has slumped in price.

Since Brazil’s cane harvest began in April, mills in the center-south – Brazil’s main cane-growing region – have dedicated 56.1% of their cane to make ethanol, and the rest to make sugar, compared with a 54.7%-45.2% split at the same point last year, according to sugar-industry group Unica.

“If gasoline gets cheaper, it affects ethanol’s competiveness in the blend,” said Jack Scoville, a vice president at Chicago brokerage Price Futures Group. […]”<

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