Sunday, October 31, 2010

Changing times and mining shovels

I have been discussing the technologies for oil well drilling and coal mining for quite some time, and am thinking that with that review available and just about complete, it might be time to switch the focus of these Sunday information topics. While I could give a more detailed discussion of the different topics that I have covered in the past, I suspect that this would be of decreasing interest to most and so I thought to change the subject matter. What I am planning on doing is to shift focus, and start to write about the different countries that have oil reserves (or had) and what we know about them. The idea, in much the same way as with the technical talks, will be to provide an informative set of background notes, so that, for example, if the topic of the Yamal gas fields comes up, you would know a little about where they are (a peninsula in Russia), and how much gas (maybe 30 trillion cubic meters) is there, as well as how soon they will be developed (not this year).

That is the plan for the future, but before moving there, I would like to revisit coal mining to wrap up the discussion with a small number of posts about surface mining. The first use of coal came from finding outcrops where the coal could easily be picked out of the seam, or where, in the North of England, the sea would do the mining and wash the coal up on the beach, where it could be collected.

Even today there are still areas around the world where there is coal very close to the surface, which can easily be uncovered and removed. Some years ago a farmer came to my office to discuss what he needed to do to mine a layer of coal he had found in his farm (in central Missouri) just below the surface. All that was needed, he thought, was a blade for his tractor to push the soil away, and then a loader to scoop up the coal and take it to market. I had to explain that those simple times had passed, and that there was a considerable body of regulation that he had to comply with before he could do that. And also he had to restore the land to the way it was, after he was done. The profit he had anticipated, faded as he went through some of the costs that he would have to face.

However, and this was part of my first talk at the ASPO-USA meeting in Washington earlier in the month) the technology for mining that coal on the surface remains at about the level of simplicity that he anticipated. Coal supplies, whether in Africa, Asia, Europe (though to a more limited extent) and America are still available that can be extracted with nothing more than a shovel. Now, having said that, the size of the shovel has undergone a significant change since the time that I manually wielded one, to move 15 yards of coal from the face to the conveyor (as I recounted in the video). And as an aside, the shape of mining shovels differs a bit from those usually seen at the surface.

Mining shovels and a pick (with the Engineer at an early age) at the Beamish Museum in the UK

The heart-shape allowed you to get under the coal and pry in a way that the square and molded shovels more common on the surface did not, though most of them came without the cross piece at the top end. Today’s shovels are electrically powered and have bucket sizes that can pick up between 7 and 36 cubic yards of material in a single scoop. They routinely fill 400-ton haul trucks in two to three scoops in operations at the tar sands, and in mines around the world.

Modern shovel loading a haul truck (P&H )

Shovel schematic to give an idea of size – the bucket can hold 170 tons, some 60 cu yds. of material.

With that relatively large-volume, simple approach it is difficult to envisage something that can be simpler or more economic, in the mining of minerals. And as long as this technology can be applied, the need for more advanced mining means does not exist. (And this was part of the talk that I gave at the ASPO meeting).

Mining shovels such as that shown above, which are generally powered by electricity – you can see the cable if you look closely – are used for the more precise removal of material that is needed when mining the valuable material, whether tar sand, coal or a metal ore. To remove the rock and dirt that lie on top of this valuable material, where there is not quite the same need for precision, it is quite common to use a machine known as a dragline. (There is a video of one working here ) Here the bucket is not rigidly connected to the boom as with the shovel shown above, but is instead connected through ropes. This, historically, made the bucket more difficult to control. However the arrival of the computer to both monitor and control rope position, now makes it much easier to "spot" and unload the bucket than in the past.

Working dimensions for a dragline (P&H )

A bucket might move 150 cu. yds at one time with an operating radius of some 350 ft, digging down to a depth of 180 ft and dropping the spoil in a height of up to 160 ft. That doesn't mean that they don't get stuck, or collapse on occasion.

The size of the shovels thus make it possible to mine very large quantities of material at one time, and make the economics of large-scale mining practical. The critical dimension is typically the relative depth of the soil and rock over the coal seam, in relation to the thickness of the coal. It is known as the stripping ratio, so that a coal seam that is 5 ft thick, for example, at a depth of 100 ft, would have a stripping ratio of 20. Depending on the costs of mining, and the quality of the coal, that may or may not be worth going after at this time.

There are other machines that are used in different parts of the world, the largest being the bucketwheel excavator, which usually only get into the news when they are on the move.

These machines work extremely well in a controlled environment, but are extremely expensive, and when they are down, so is production. (One of the main reasons that they are no longer used in mining tar sand in Canada). Mind it is not wise to get one irritated, since they have been know to eat uppity other equipment.

That aside, the nature of the rock and other material overlying the seam will also influence how that material (which is called overburden) is removed, and I’ll discuss that process in more detail next time.

Read more!

Saturday, October 30, 2010

New York State temperature data, homogenized and TOBS

It has been almost a month since I last visited the temperature plots, last looking at Pennsylvania and I have been debating a little as to which state to look at next. The reason for this is that one of the more logical choices, New York State, is one of those states whose stations do not appear on the truncated station list that Chiefio has found that GISS is now using. Which, given that one of the original questions was to look at the difference between the GISS data and that of the USHCN, makes that task, this week, unachievable. However it is still possible to look at the influences of temperature across the state, and to compare the raw data with that after it has been adjusted, and so with I am going to proceed with that effort. As usual I am writing this as I carry out the exercise, and thus initially discover that there are 57 stations in the state with USHCN data.

There will be a pause while I download this, and the related station data. . . . . Well that took a little longer than expected, though it dawned on me half-way through that I could download both the USHCN homogenized average and the Time of Observation corrected (TOBS) otherwise Raw data at the same time. Putting these numbers together showed an apparent pattern of adjustment, that I will exemplify and discuss at the end of this post.

Getting the population of the different communities required a little bit more detective work, given that there were three communities that I ended up attaching to nearby towns. One being, for example, Glenham, which I attached to Beacon. Another was Lawrenceville which was very close to North Lawrence. The third was Mohonk Lake, which sits in a larger community of 17,435 though it could be considered smaller, depending on the net you cast.

Putting all those together and plotting both the homogenized data and the TOBS values gave a somewhat different view of actual changes. For example, while the TOBS data showed a temperature rise, on average, of some 0.5 deg over the 115 year period, the homogenized data showed a rise of 3 times that rate. (I will generally only show the TOBS values plotted – though have the others for those interested).

Average temperature across New York State as a function of time (TOBS data)

Looking at the geographic dependence, the relationship with latitude remains strong, if not quite as good as in other states. (New York has a much greater range of elevation than some of the mid-Western states).

Average temperature as a function of latitude for New York state (TOBS data)

In this case the homogenized data gave a worse fit (R^2 = 0.4515) than the TOBS values. However, the correction that is being applied seems to bring in the longitude values for the sites. (Which, if you go back has been shown consistently over the states evaluated not to be that significant). Here I am going to show both plots. The first is the TOBS data:

Average temperature data for New York stations as a function of longitude (TOBS)

And the second is the plot using the homogenized data values.

Average temperature data for New York stations as a function of longitude (homogenized data)

The state stations range in elevation from virtually at sea level to over 500 m and though there is more scatter than seen in other places, part of this may also be the influence of the nearby water.

Average New York state temperature with elevation (TOBS data)

Looking at population, the logarithmic relationship that seems to come and go in the different states, is much stronger here than in some other places. (And much better with the TOBS than the homogenized – R^2 being 0.129 in the latter case).

Average New York state temperature as a function of station population (TOBS data)

There is some significant difference between the correlations using the slightly modified raw data (merely adjusted for time of observation) and that homogenized to give the accepted mean temperatures for the stations. The change is beginning to show a consistent pattern across the states. For New York, when the average temperatures as homogenized have the TOBS value subtracted, then a reducing negative adjustment with time to the average temperatures is seen to have been applied to the data.

Difference between the homogenized data and the TOBS data for average temperatures in New York.

The adjustments can be epitomized by that applied to the readings for Central Park in New York, as a single example:

Modification to the original data to obtain the mean temperature reported for Central Park in New York.

It is becoming a little strain on credulity to believe that all the temperatures around the United States that were measured back about a hundred years ago were consistently too high, and this measurement error has slowly and consistently diminished over the years. However I have only plotted the data for the last three states (though have it for the others discussed, I just haven’t made the plots yet). So at some stage I will make those plots, as we continue looking at the individual state data. Whither next?

Read more!

Thursday, October 28, 2010

This Week in Petroleum and Ethanol, and VMT for August

Having a quick glance at This Week in Petroleum it seems as though we are in that phase of the year where there is not a whole lot that is new. Demand for gasoline is up a little on last year, with the recent steep decline in demand having been met by a reduction in imports.

Gasoline Demand (Source EIA

Crude Oil Imports (Source EIA )

Ethanol production continues to build,

US Ethanol Production (EIA )

The report for the vehicle miles travelled in August is now out and overall driving was up 1.6% y-o-y. For a change it was the North Central and Northeastern regions that led off the increase. Thus the slight uptick in mileage has continued in the rolling 12-month total plot, though at a reduced slope relative to the period before the decline.

12-month rolling total of vehicle miles travelled for the United States (FHWA

For the last two years there has been a strong decline in rural driving from August to December, and it will be indicative of recovery if the dip this year turns out to be less severe.

12-month rolling total of rural mines driven in the USA (FHWA )

Looking at where the most ethanol is consumed, back in 2001 that was Illinois, at almost 8 million barrels:
Ethanol consumption (barrels) by state (Statemaster )

Looking at the figures for 2008 the leader is now California, at almost 24 million barrels; followed by Texas at 18 mb; Florida at 13 mb; before Illinois shows up at fourth with 12 mb.

With the approval of the EPA for fuel to contain up to 15% ethanol starting in the new year although limited to cars that were made in and since 2007, there may be some further increase in these numbers.

Read more!

Monday, October 25, 2010

Electrifying the Railroads - Alan Drake's manual

While I was away Alan Drake sent me his “An American Citizen’s Guide to an Oil-Free Economy -A How-To Manual for Ending Oil Dependency.” It is only now that I am able to review it. His objective is sound
We can transfer our economy, bit by bit, to the new, more efficient and oil-free replacement as our present system becomes increasingly more fragile and eventually unsustainable. These plans all rely on mature, proven and economically viable technologies and not the current “Hunt for Miracles” that Secretary of Energy Chu has so aptly described his department’s Advanced Projects Research.

As new technologies develop, as they will, and are debugged and scaled up, our plans can be adjusted to incorporate these new solutions. Yet we can make a viable, workable plan with what we have “on the shelf”, ready to go today. We need not gamble our future on “Just-in-Time Technology” appearing at just the right time and with just the right technology. No miracles are required, simply foresight, persistence and hard work.
Alan is a great believer in the energy savings that can be achieved with a transfer to electrically powered railways. I largely agree with that underlying premise, and in Europe particularly, generally travel by train, where I have a choice. In his manual Alan points out some of the considerable savings that can be achieved if the country were to switch to an enhanced electrically-powered railroad system, relative to the oil-based transportation that we currently enjoy.

There are two factors that are required to achieve, in the long run, considerable energy savings, as well as a move toward energy independence, rather than our continued, and growing dependence on importing oil. The first is the transition itself, from diesel locomotives to electrically powered engines. It is a change that has already occurred in many parts of the world. He points out that the current system, which relies heavily on diesel-powered truck transport, could reduce energy costs comparatively, from 20 Btu’s of diesel power, to 1 Btu of electrical power, if long-distance haulage was carried out using Double Stacked Trains. In Europe, without the stacking, the trade-off is still 2.5 to 3.0 Btus of refined diesel converted to 1 Btu of electricity, with a slight reduction (circa 10%) in transit times. He cites Switzerland, China and France among those making the change. Roughly 30% of the 10,000 miles of track in the UK is electrified and the system is one of the busiest in Europe. (And on a personal note I have seen the density of passengers increase over the years as I ride the trains from London to Carlisle and beyond. And, in Austria, an off-peak trip from Vienna to Graz last week was made in a train that was close to full.)

Double Stack Train (Source )

He notes the lower maintenance costs of train over road transport, and given the delays that have been encountered around the country this summer as more highways were repaired under the Stimulus program, that is not a small consideration. I am reminded of a British Rail ad from some years ago, showing a commuter looking at his watch aboard a train running past a highway blocked and stalled with cars, and complaining that the train was running 5 minutes late again. (On the road into St Louis this summer delays of more than half-an-hour have not been uncommon as the highway has been widened near Pacific). Rail is also a safer method of transport (he conjectures the savings in life would be from 4,000 to 5,000 individuals a year).

However the second step that must be made is to increase the capacity of the existing rail system. Even as far back as 1998 Brennan was writing for the USDA of concerns that the existing system was reaching capacity.
Employment in the industry fell from 532,000 in 1980 to 256,000 in 1996. Similarly, rail mileage fell from 179,000 miles of road in 1980 to 147,210 in 1996. Over the same time period, the number of freight cars fell from 1.7 million to 1.2 million and the number of locomotives dropped from 28,094 to 19,269 units.

Even though their miles of track and number of employees, cars, and locomotives decreased after deregulation, railroad output has increased. Measured by carloads originated, output increased from 22.2 million carloads in 1980 to 24.2 million in 1996. In addition, shipments of intermodal containers and trailers increased from 3.1 million to 8.2 million over the same time period. Measured in terms of revenue ton-miles, the growth has been even more impressive. In 1980, railroads handled 919 billion ton-miles of traffic. By 1996, that number had increased to 1,356 billion ton-miles of traffic. U.S. railroads have been able to move this increased volume of freight by handling larger shipments over a longer distance at a much greater velocity. . . . . . However, the recent rail congestion problems suggest that U.S. railroads may have reached the practical limit of their possible productivity increases without major expansion in the capacity of their basic infrastructure. Increasing the volume of freight movements on a fixed network by handling larger shipments over a longer distance at greater velocities cannot be continued indefinitely. Indeed, one of the lessons of the western railroad crisis is the sensitivity of current railroad operations and the productivity of major sections of the U.S. rail system to even a slight downturn in the velocity of the system.
To overcome this more of the track will have to be converted from single to double tracking. However, as Alan points out, most of the infrastructure is already in place, and the right-of-way established, so that it will not incur the high costs of a totally new development.
Good cost estimation is difficult given the variety of issues with the existing infrastructure. However, rail investments can provide superb value for money. An excellent investment example is BNSF double tracked and improved 2,217 miles (Los Angeles to Chicago) for slightly over $2 billion recently. BNSF more than doubled track capacity and now offers 70 mph express container freight service.

A $2 billion investment made BNSF’s Transcon line the world’s busiest container rail line (the Trans-Siberian is #2). By comparison, $2 billion spent on highway expansion projects would have no national and limited local impact. For example, $2.3 billion is proposed to just rebuild the Milwaukee Zoo interchange and $1.2 billion to add two lanes to the Huey Long Bridge outside New Orleans..
The arguments that he makes are strong and should be persuasive, after all – as he points out -
Warren Buffett (BNSF Railroad is his largest single investment) and Bill Gates (30% of his non-Microsoft stock portfolio is in CN Railroad) are hardly charity cases.
Smart though they may be in foreseeing the benefits of investment, the money is not yet being fully invested to make the transitions that Alan feels are needed.
The following are reasonable cost estimates for what is being proposed, given the available information, in 2010 dollars.

• Electrify 36,000 miles of double track railroads - $100 billion.

• Double track 15,000 miles of single track, new rail over rail bridges, better signals, improved curves and grades – $75 to $150 billion.

• Grade Separation (a cost that should be borne by highway budgets) could easily absorb $50 to $100 billion.

• Semi-High Speed “3rd track” on existing ROW - 7,000 to 14,000 miles - $140 to $280 billion.

• Strategic Railcar Reserve – perhaps a couple of billion dollars for mothballed used equipment. New equipment, when used is not available, should be an order of magnitude more expensive.

• Improved Intermodal Centers – a very rough estimate to supplant 85% of existing truck traffic would be $50 billion or so.
Given the investors, it will be interesting to see how this catches on.

Read more!

Sunday, October 24, 2010

A little more on Jetting - surgery, art and diesel replacement

Being somewhat jet lagged today, after returning from Austria last night, I won't attempt anything that requires any great mental dexterity today, but rather continue on the theme about developments that are going on in my field that are likely not to be known to the more general public. One of the things that has been fascinating has been the way in which waterjets are being developed for use in the medical field. There was another illustration of this in a paper by Biskup et al, at Leibniz University in Hannover. When surgeons repair torn ligaments in the knee (an Anterior Cruciate Ligament Reconstruction) they use screws to hold the transplanted piece in place. Use of different materials for these screws has shown to have some long-term problems when they are made of metal. Recent work has shown that if these screws are themselves, however, made of bone, then, over time, the screw is integrated into the surrounding structure and becomes more stable. However it is hard to machine bone conventionally because if it gets heated, then the bone dies. If, however, it is shaped using an abrasive waterjet, to cut the thread, and the internal channel, which is also used to turn the screw, then temperatures can be controlled so that the bone is still viable. (Though it needs some chemical treatment to remove prions).

Back in 2006 the conference was held in Gdansk, and one of the interesting papers was on some work being done by Przemyslaw Borkowski at Koszalin University of Technology, in transferring photographs into inscribed pictures cut into metal. We took that idea and have moved it into a surface textural change that creates the picture as a 3-tone image in metal and rock (hence the "art") but there has been another development that has moved this into commercial availability. Nathan Webers and Carl Olsen of Omax Corporation, has modified the software on their cutting tables so that a controlled depth image can be inserted into a surface from an image. This, for example, is a lizard etched into aluminum.

The image was about 6 inches across and maybe half-an-inch deep.

It may make life a lot easier for those who have to carve images into stone, though removing a little of the artistic license with which sculptors apply their craft.

Incidentally Przemyslaw gave a talk at this conference on the use of waterjets in crushing coal. If you can take coal down to about 5 microns and mix it with water at 50% (roughly) GE have shown - by running a locomotive for more than 700 hours on the track - that it can replace diesel fuel. Looking at different available coals, it appears that brown coal is a little easier to break to the required size range than bituminous, which were the two varieties that he looked at. Using waterjets to do the crushing can make the process technically simpler and less energy intensive than other methods of getting the coal down to the required size.

Read more!

Friday, October 22, 2010

The Waterjet Meeting in Graz

I was not planning on writing about the Conference that I have been at this week. It deals with the uses of high-pressure (typically about 55,000 psi) water jets. However there were a couple or three papers that had some relevance to the topic of energy, so I thought I would craft these into a small post.

The first one was a paper by Professor Soyama of Tohoko University in Japan, who has been looking at the events that occur during a cavitation cloud collapse. For those not familiar with what this is, when you adjust the flow pattern of a fluid so that forces try to stretch the fluid, the fluid ruptures into small bubbles. Instantaneously the bubbles have nothing in them, but they fill with vapor from the walls, over time. However there is rarely much time since, as the bubbles move into an area where there is a positive pressure in the water they collapse. But when they collapse it is not totally symmetrical. As a result tiny micro-jets (known in some circles as Munroe Jets) are formed, and these can generate impact pressures of up to a million psi (we proved this theoretical estimation, made originally by Al Ellis at UCSD). At the same time, as Professor Soyama notes, the temperatures that are locally generated can be very high, to the point where light can be generated in the 300 to 700 nm wavelength range. The combination of the two creates an condition where carbon dioxide, injected into the flow, can be (and in his laboratory was) converted into methane. This is a relatively new discovery, and at a scale that may likely be impractical to put to large-scale commercial development, but on the other hand . . . . . . .

The second paper was by Franz Trieb of BHDT GmbH who talked about the use of high pressure jets in helping the construction of prefabricated brick walls. At the rate of 400 sq. m. per day, for 3 workers. It uses the Redbloc system which glues well-formed brick courses together and gives the high quality wall. The water jets cut and trim shapes (such as door entries or windows) in the wall, which is then delivered to the construction site as a finished assembly, and can be rapidly assembled. The resulting house has a number of other benefits including lower cost.

The third item of interest was the description by attendees from KMT high-pressure systems who talked about the transition to gher pressures (up to 90,000 psi) where individual pieces can be cut about 50% faster rates than with conventional pressure. The overall result is a reduction in cutting costs, and lowering of the energy required to cut a part, and the water needed for the process.

Overall it has been a very interesting meeting, though likely my last. There was a mild incredulity when I brought up the subject of peak oil.

Read more!

Tuesday, October 19, 2010

Saudi Oil Production - read Minister Al-Naimi's small print

Yesterday the Saudi Arabian oil Minister, Ali Al-Naimi, commented that the days of easy oil are not over, and that there remain at least 88 billion barrels in the Saudi oilfield of Ghawar, let alone the rest of the fields in that country. Well before that sends you out to buy a fleet of Hummers, you might want to take a wee bit closer look at some of the other things that he said, or did not say. For the future is not quite as rosy as his remarks might, at first, make you think.

Let’s start with the “days of easy oil are not over.” That is a somewhat egregious remark. It is relatively easy for the Kingdom of Saudi Arabia (KSA) to brag that it is still not that expensive to produce oil. Given the size and extensive development of their fields that is, at present, still to a large extend true for them. But Aramco have carried out extensive research into modeling their fields and developing technologies such as maximum reservoir contact (MRC) on order to get the maximum amount of oil out of their fields. (And I’ll get around to that in a minute). But the KSA only produce a fraction of the increasing amount of oil that the world needs every day. And it is the cost of the oil at the margin (that which balances oil supply with need) that to a much greater degree controls the price.

At the moment the countries that make up OPEC can increase production at need, beyond the current levels of demand. As long as they can do this they can impose controls on the price. This is because the rest of the world is producing just about as fast as it can and there is some doubt, despite some rosy predictions, that they will be able to raise levels above those currently produced. If the price falls too much, then some of the more marginal oil, that is more expensive to produce, might drop off the market. At that point, if OPEC cannot make up the difference, and I would argue that beyond a certain relatively low volume (4 mbd) it no longer can, then prices will rise again. There is an effective lower bound on price now, significantly higher than OPEC costs.

Last week at the ASPO-USA Conference Michael Klare commented on the amount of money that this will bring to the nations that produce oil much cheaper than the global price (which KSA is happy to keep at around $80 bbl) but to keep that price it relies on the make-up oil that is not “easy” at all. This includes oil sand and deepwater production.

Now let me turn to some of the more worrisome part of what he said. Until recently it has been assumed that KSA was going to raise production to levels of 12.5 mbd as part of the balancing act to match declines in other fields and meet supply. (And some time before that there was talk of Saudi production levels of up to 15 mbd). However the KSA has a problem. To get the maximum recovery from their fields they have to control the interface between the waterflood and the oil., and move it relatively slowly and evenly through the reservoir. They are quite good at this, and likely getting better. But it means that they produce the oil at, for them, relatively slow rates. And they are slowing these down a bit. As a result the maximum that they are now talking about is 12 mbd. Which means if you are looking at the global balance over the next few years you have just had to take an eraser and remove 500,000 bd from the available supply. Note that this is not quite 50% more than current production.

Why is this? Well that comes to another part of the remarks that the Oil Minister made. The next major plan for production of oil is the development of the Manifa oilfield. It was, at one time, scheduled to produce a million bd, but this is now dropped to 900,000 bd. But there is a greater concern.

Manifa is a heavy, sour (i.e. high sulfur), vanadium contaminated deposit. It requires a special refinery to process the oil, and these don’t exist. The KSA has had plans in the works for some time to build two refineries in the Kingdom that will refine this oil. There have, however, been delays in construction. It appears that these are getting worse, or, for other reasons, have been further postponed. Without the refineries the ability to produce the oil is meaningless. The original date at which these facilities were supposed to be on line was within the next two. It is now, apparently, been moved to 2024. Presuming that this is not a misprint (since the last target was 2013) it means that KSA has changed its strategy and is not looking to ever produce above the 12 mbd current target as we move into the future.
Naimi said the kingdom has sufficient production capacity at 12 million barrels per day (bpd) and has a strategy of preserving its resources and developing new sources of energy.

"We have the production capacity and we don't have to deplete our reservoirs as fast as someone who's just there for we don't really have to pull our reservoirs as hard as we should," Naimi said.
With their internal consumption continuing to rise, and with increasing sales to China, the amount of that oil which is going to be available to the West is going to go down.

Whether and when they will get to 12 mbd now becomes more of a question. Given current levels, and the income that they are getting from them, it is hard for me to see production rising to even 11 mbd. (subtracting the volume from Manifa). And if world consumption is rising at around 1.5 mbd per year, for the sake of discussion, then we are going to see an imbalance between production and supply needs, in just about 2 years.

Given that this was the message from the ASPO_USA conference, it is interesting to see the Saudi Oil Minister so rapidly confirm it.

So I’m afraid the difference between the headline of his remarks and the small print of his text are enough apart to be disturbing.

And I must apologize in that this was written on the train from Vienna to Graz and I don't have access to all my usual references, which I would insert.

Read more!

Sunday, October 17, 2010

The ASPO Conference - final thoughts

The remark that sticks most in my mind, as I look back on this year’s ASPO-USA Conference was one that I believe totally missed the underlying Conference message. It was Ralph Nader, the speaker at the final luncheon, who trying to encourage action, noted the likelihood of our still debating the same topic at the meeting ten or fifteen years from now. The chances of the happening are slim to none. If by that time there has not been an oil peak, with all its subsequent impacts, the Association will have lost any claim to be able to predict reality, and likely will no longer be having meetings. On the other hand, and the evidence was increasingly evident and worrisome, if the peak comes, then the group that met in Washington will have moved on to the equally worrisome topic of trying to predict how fast the decline in liquid fuels will be, and the impact. So we won’t be still talking about the same stuff.

And yet the tenor of the meeting felt different this year. I remember the excitement of going to Denver five years ago to meet the first group of folk that had the same concerns about future fuel supply that I did. I remember the video cameras, the emotional reaction when I realized that there were a significant number of folk, more knowledgeable than I, who had facts to substantiate an early rather than late date for Peak Oil to occur. Five years have passed. The intervening time has seen global oil use reach a rough plateau along which it has bounced. But the end to that plateau is now coming in the near future. This will make that future much darker than the present, and likely a lot of people are going to be hurt. Yet the mood at the meeting seemed more complacent, even as the message is becoming more urgent. Perhaps we have been talking to ourselves too long, for as the message becomes clearer, the reaction seems to lessen.

The Liquid Fuels problem (though there are concerns also over the effective supplies of energy as a whole) is not an immediately visible crisis. Yes the price of crude oil has gone up, but it is now held (largely through an adjust of the exports from a very few Middle Eastern countries) at a relatively steady price. As long as that reserve exists and is used, as it is now, the world can adjust to the current price and continue about its ways.

But the day when the carousel stops is almost at hand. The predictions at the meeting seem to increasingly focus on the 2012-2014 time frame. That begins to impact the next national elections. The price of crude will continue a slow ratchet up, that quickens towards the end of next year (there was at least one prediction that it will be back in treble digits by then). The slow growth of the crisis, partially because of the continued ill-health of the economies of the world, means that there are other more pressing topics of seeming more important concern. And so the meeting drew less attention than it should.

ASPO-USA is moving to Washington to seek more influence, but I suspect that the dawning awareness of the problem over the next eighteen months will do more to bring the group to national attention. What is needed is an underpinning of facts that explain some of the root causes of the problem, why it isn’t going to go away, and some of the resulting problems that are going to arise in the future. Plus of course the need to continue to work the numbers to better be able to estimate how bad it is going to get.

Robert Hirsch talked about what he has done to prepare – he knows it is coming and is getting ready – but I wonder how many other folks are? It has, to some, become almost an abstract topic, somewhat displaced from day-to-day reality in the way that some meetings change. We talk about the evidence, yes its getting stronger, and the dates are getting closer (even faster than that just due to time having passed) and yes the impacts could be severe, but . . . .

I remember coming away from my last ASPO Conference thinking I should talk to the mayor and council where I live. But it was still a few years from a crisis, and as someone said “if it won’t happen in this term, why should I worry, I might not be elected when it happens and so I won’t have to he concerned.” Well that isn’t true any longer. Those now being elected will begin to see the problem in their next term. The excuses for inaction are running out.

(Oh, and my wife, my eldest son and I drive hybrid cars. I spent the weekend before the Conference stacking wood for our tile stove. I have solar roll on the roof, and the house has been re-insulated. Living rurally I am loath to move nearer shops and we effectively have little public transport).

The evidence is stronger, more folk are becoming aware of it, the likelihood of significant mitigating measures being implemented are growing less, but, for a short while longer, we are off the public screens. But that will likely soon change – as earlier periods of awareness show, people do want web sites that can keep them informed, conferences that bring together folk that can build the encompassing picture of what is happening.

Unfortunately, as the Gulf oil spill showed, the current Administration thinks it can exist without much of that expertise. (The decisions were made by an overseeing panel assembled by the Secretary of Energy that did not contain a whole lot of Petroleum Engineering expertise, by number of members). It, sadly, takes time for those who don’t know the facts, or have the background knowledge, to be brought up to speed. So our role hasn’t gone away. It has actually become more important, and so we must continue to do what we do, until recognition comes. That it likely won’t be long coming is not necessarily good news.

Read more!

Saturday, October 16, 2010

Transient Travel Break

I have been traveling over the last two days and will be spending the next week at a Conference. However, since the Conference is dealing with the uses of high pressure water and I will be taking about such OT things as the wear of diamond nozzles, and how to make art using this tool, the chances for much posting are diminished. I’m afraid that won’t be putting up new temperature and tech talks for a couple of weeks until I get back. However there may be the occasional other post and I hope to be able to post a summary of the ASPO Conference in the form of a short note on what I found different this time around.

For those interested, I did go to the Spanish Riding School today, and took a number of photos of horse-drawn carriages, but I suspect that this won't encourage Vienna to switch to horse-drawn garbage collection. The carriages slow traffic considerably around the Palace it seemed.

Michaeler Platz, Vienna.

I did note the number of folk still sitting out drinking coffee, even as the weather demanded they wrap up in overcoats to do so. Oh, and by the afternoon they had to hoods up on the carriages. More excuses to drink hot chocolate, or something stronger!

Read more!

Wednesday, October 13, 2010

ASPO Conference- last day

One of the helpful aspects of the ASPO-USA organization is that they post the videos and presentations that were given at their conferences. Obviously these need to be tweaked after being recorded, and so do not go up immediately but, for example, they have just posted the video of the Jeff Rubin talk on their site. I am going to conclude my summary of the conference itself with this report. I was not able to stay for the final afternoon, and so Gail has kindly furnished a summary that I will add to cover that section of the Conference. As usual I will then give a short summary of what I felt were the highlights, but which is more opinion that content – the goal of these initial posts.

Turning therefore to the Saturday morning meetings, these began with a slight change, since Terry Backer the scheduled speaker was, unfortunately, ill. Paul, one of his advisors, spoke on his behalf, noting that Connecticut – where they are from – has no indigenous coal, oil or natural gas. They had a plan for moving forward that had received support for a significant effort to insulate houses, but unfortunately even though it would have provided a number of jobs, it fell victim to the recession. They are now looking to see the potential for micro-hydro in the state.

The first session was chaired by Ted Patzek and was focused on the Gulf oil spill and the likely consequences.
I led off with a chronological review of the events that occurred through the course of the spill until the time that the well was declared dead. This covered the initial completion of the well, the kick and explosion on the rig, and the sinking of the well. I then went through the stages of the capture of oil, and the capping of the well. This also covered the assumptions that led to the location of the relief well and what was found when it hit the well. Very largely it was a summary of the posts that were written at the time, with the aid of some photos that others had posted.

After my talk, Art Berman spoke of some of the errors that culminated in the failure of the well and the consequent disaster. He began by pointing out that the energy resource of the Gulf is much larger than that of shale gas, and in the deep water is likely the last great hope of American production. From that point of view the shut down (which has nominally now been lifted. He described the number of wells in the gulf and pointed out that the Macondo well was not an exception.

In reviewing the causes of the disaster he started with the problems that arose when the initial float collar, used in the injection of the cement to hold the production casing in place, did not properly function. To get to work the crew used a pulse of high pressure down the well, and then only cemented part of the lowest section, rather than injecting sufficient cement to fill the annulus up to the level of the previous casing. Because there was a considerable washout of the reservoir, the crew then chose to use a foam cement. Tests have shown that this takes some 24 – 48 hours for this cement to set, and yet they began displacing the mud holding the oil and gas within the reservoir after only 16 hours.

Because the well was drilled with an oil-based mud (rather than the more conventional water-based) natural gas will not come out of suspension at the same depth, but rather remained in suspension in the oil until very close to the surface. At that point it would expand, so that one cu ft of gas at depth would occupy some 800 cu ft and so the onset of disaster came very suddenly.

A problem that continues to face drilling and production companies has to do with experience. There is not a large cadre of well-qualified managers, since the highly cyclic nature of the industry means that many of those who would occupy such ranks were let go in the bad years, and are now otherwise employed. Thus the onus of management is falling to people that do not have the necessary experience and knowledge.

Rick Munroe brought the debate into the larger picture of the Peak fuel debate. Ho pointed out the considerable difference between the military view of the coming crisis, in contrast with the more complacent civilian government point of view. The Energy Bulletin lists over 40 papers from military groups that have highlighted the coming problems of fuel availability. In contrast it was only in 2008 that the IEA began to express similar concerns. Yet, as a paper in 2009 from the war college noted, while these strategic shocks are predictable, they are either not prepared for, or inadequately addressed. The plans that do exist are over 30 years old, dating from the last time we had such a event.

On July 25th the Energy Bulletin carried a review of the Peak Oil situation by the German military. The response to the crisis, because of this lack of preparation, will not be stable, but chaotic. This instability will increase with time as economies shrink. The result will be unprecedented in its severity.

He pointed out that, by and large, these reviews are not individual opinions, but rather the consensus of qualified analysts and it defines a comprehensive domestic external threat to the point that peak oil can be seen as a weapon of mass destruction. In earlier exercises it was projected that if 4% of the world supply was removed from the market then prices would triple.

Yet with all this information available he was unable to find any significant interest in the topic either in Canada or the United States. There is no planning for the impact of oil shortage on the agricultural production of either country, and the GAO noted that planning on the topic ceased about 20 years ago. It is only, apparently, in the UK that plans for a Liquid Fuel Emergency exist. And yet a fuel crisis will, in very short time, transform into also being a food crisis. The problem is, in part, that while the response of many in government is to ration by price, but to give farmers priority, most operate on the margin and a trebling of fuel prices would put them out of business. It is a complex problem, and thus no-one wishes to address it.

In introducing the second session of the morning Ron Swenson said that one of the goals of ASPO-USA was to bring people together in such a way as to leave a world worth inheriting. The session was on the Laws of Energy, Technology and Scale.

Tad Paczek talked of scale, and that the critical metric is the rate of production. He sees peak oil in 2 – 3 years; peak coal soon and peak NG in 20 – 30 years. But while there is still lots of fuel underground it is the rate of production, and the scale of production that are constrained and that drive us into these peaks. If, for example, oil lies in a piggy bank, and we can’t break down the walls, then the rate at which we get money back out depends on the size of the slot in the top. But we should also remember that, on average, we leave 2/3 of the oil in the ground and only recover 1/3.

We use 100 times the amount of energy we have to eat to survive. The world eats roughly 1 Exajoule (EXJ) and we turn fuels into 39 ExJ of energy. One of the more promising techniques for enhanced oil recovery (EOR) is to inject CO2 into the field. This is already in use in the United States and might be able to increase production by 10%, but this comes at the end of field life. In total it might be possible to get up to 2.5 mbd of EOR oil (remember that Ghawar is producing in the 4-5 mbd range), but to get to that level will require lots of money and engineering expertise – and he is not sure we have enough of the latter. He anticipates that Canada may be able to grow tar sand production to 3 mbd by 2020.

In discussing future energy projections he said that many companies will list the prospects that they are considering drilling into – but for budget and other reasons will only actually work a fraction of those lists. Thus those who rely on the projections paint an unrealistic view of what the future will bring. We are, therefore, not in as good shape as most predict.

Ken Zweibel spoke about the Solar Grand Plan. Current development of solar has not developed under any of the pressures that will come when supply as seen as an “emergency need.” Yet overall production gas reached 10 GW and so he is optimistic of the future. Because the liquid fuels supply problem is so tied to transportation the we need to see how the use of solar energy can feed that market. This will require evolution of the Smart Grid, and means for solar forecasting and balancing of power. Unfortunately solar distribution varies – the Southwest gets 30% more photons that the DC area, for example. But, on the other hand, wind is like the measles.

We have gone from $30 a watt to $1.50 a watt, but this only covers the module cost. That is no all the costs since installation and maintenance must also be included and these will likely double the module costs. However while one can pay back the cost of the module in 1.5 years, it might take 15 years in energy savings to cover the whole cost of the installation.

He covered the current costs of some of the major systems that we will likely see grow to dominate the market. The costs have dropped 40% of the last four years, but to go lower they need (and deserve) the lowest interest rate for loans. And he moved on from there to discuss payback on the different systems., though he noted that many costs are based on out-dated methodologies. Cadmium telluride is a promising new candidate, and is not that polluting. And he noted that, in contrast to most conventional systems solar does not use significant water. (A little for cleaning). He pointed out that of the 17 Quads used in transportation only 3.4 Quads (quadrillion Btu’s) do the effective work of moving the object. Electric powered vehicles are thus a more viable alternative.

He said that only 15% of the Canadian tar sands could be recovered by surface mining, and hat the energy costs are 15 – 50% of the recovered and useful energy. For the remainder it might be possible to get 80% of it out, but at a 40% energy cost.

On the other hand vehicles will not, in significant numbers, switch from liquid fuel to solar powered in the near future. There is also not enough lithium for batteries, so realistically the answer hans to be in electrified trains. He seen the end of fossil fuels marking the beginning of a slow-down in economic growth. So the meeting slowed down for lunch.

Lunch began with a tribute to Matt Simmons. Chairman of the ASPO-USA Advisory Board and featured speaker at many of he events. A check to support the Ocean Energy Institute was presented to his daughter Abbie, on behalf of ASPO.

The noon speaker was Ralph Nader who took his quota of time, and more, to discuss Energy and Policy. He proclaimed (just having written a novel on the subject) that “only the super-rich can save us.” The main form of censorship is self-censorship. Why do we do it? It encourages a stagnant society. It builds the blocking of technological advance through the creation of mind sets. Secretary Chu advocates nuclear power and refuses to meet with opposition groups on the topic.

Mr Nader does not see a correlation between energy and economic growth. We have passed the diagnostic phase of energy future analysis, but there has been little prescription for future action and the path forward is obscure. We must mandate changes to buildings, vehicles and connect them to jobs programs. And we must make the jobs local so that they cannot be exported to China. He sees innovation as dramatically higher than it was 10 years ago. , and expects that stimulus funds will lead to innovation. But he gave the example of Evergreen Solar which had intended to stay in the US, having 800 employees here, but found that all its competition is moving to China, so they are too. Then he quoted the example of the “largest tile carpet manufacturer” in the US who has chosen to stay, and through innovation keep costs down low enough that he can remain in business.

Unfortunately as this talk drew to a close I had to leave. Gail Tverberg remained and was kind enough to supply me with her notes, which follow.

Anthony Perl, author of "Transport Revolutions: Moving People and Freight without Oil" and fellow of the Post Carbon Institute talked about ways to reduce oil used in transport. In his view, we have lots of technology, but not much time. Emphasis needs to be on proven, robust technologies.

One thing he talked about was electric motors to replace internal combustion engines, particularly for trains. Also expansion of the use of trains. One issue, though, is the fact that most rail track is privately owned. Perhaps some approach can be used that would allow double tracking with government somehow paying for/receiving ownership of the additional track.

Another possibility is "sky sails", which can reduce fuel use by ships by 50% to 80%. Water transport is already the most efficient mode of transport, and sails would improve it further.

He believes it will cost $1 trillion for passenger rail and $1 trillion for freights train needed changes / improvements. He also pointed out that GM used to build trains and busses, and asked why they couldn't again.

Dr. Charles Schlumberger, Principal Air Transport Specialist, Transport Division of the World Bank, pointed out that from the airline's point of view, it was the recession, and not the price of oil that was the problem. He felt this way, because he felt the airlines had pretty well hedged the price of oil. Its problem was a lack of passengers and cargo, because of the recession.

He pointed out that air transport is the catalyst for modern globalization. For example, he pointed out that without access by air, there is little chance of foreign direct investment in a country.

He also pointed out that at $80 a barrel, fuel cost exceeds personnel costs. He believes that above $80 a barrel, airlines cannot be profitable.

Regarding fuel efficiency, there have been improvements, but these are becoming smaller as the low-hanging fruit have already been found. Some additional changes may be difficult. For example, if changes are made that cause the size of engines to be bigger, these might necessitate completely redesigning the aircraft. One possibility is to use "Air Ships" or dirigibles for moving freight long distances.

Biofuels are being investigated, but progress is slow--perhaps 1% replacement of fuel by 2015. One issue is the huge land area that would be required. According to his calculations, algae would require the least land area, but even so algae would require an area the size of Ireland to replace existing airline fuel.

At this point, it looks like there is a possibility that airline use will need to be significantly scaled back, but if this happens, there will likely be big social and political impacts.

Next, Sharon Astyk, ASPO-USA board member and writer, talked about the world food situation. In 2008, there were 1 billion people who were seriously malnourished. The number is perhaps a bit lower in 2009, but not a lot. While oil prices have backed off a lot from their highs, some food prices are still not too far from their 2008 highs. She pointed out that high prices are a real issue for many, since almost half of the world's population spends 50% or more of its income on food.

Now China is buying land around the world, so as to be able to feed its people. This is likely to present problems for people who live in the area, and need the farmland themselves. Sharon also talked about there likely being an "Export Land" land for food, with countries cutting back on food exports, either as their own population grows, or if crops fail.

She talked about food insecurity being a problem even in the US. One in seven people is on food stamps; one in four children receives food stamps. Children who are hungry are likely not to do well in school.

There is a close tie between food and energy, so reduced food supply in the future is a concern. There are other related issues, like phosphorous supplies, which are already getting short. Lesser energy availability is likely to make the situation worse. There is also the issue of biofuels competition with food for land and water.

The last speaker was Brian Czeck, President of the Center for the Advancement of the Steady State Economy. He talked about the need for governments to scale back their expectations from everlasting growth to a steady state economy.

Read more!

The Chilean mine rescue continues with 4 men out.

I am sitting watching the rescue of the miners from the copper/gold mine in Chile. Four of the miners have been brought to the surface so far. These were some of the fittest of the men trapped, to make sure that if, in the early stages of the use of the travelling cage, that they could handle any mishaps. And after three rescue personnel rode the cage into the mine, it is now being lowered empty.

The event is being handled with some skill by the Chilean government, they had a camera feed from the bottom of the mine. Thus we saw the rescue cage arrive at the bottom of the mine, and the first of the rescue team get out to help with getting the men out. The trip down takes just over ten minutes, then the harness which the man in the cage wears (which carries an oxygen feed, and also can provide a support since it is hooked to the top of the cage) is removed and passed to the next man to be rescued. He is already wearing a coverall that was made to his measurements, and a jacket (given the move from the heat of the mine to the cold of the desert night at the surface). After donning the harness he is fitted into the cage, the door is closed, and the cage slowly lifted back into the shaft. (It is long enough that it does not come completely out at the bottom and at the top and bottom has spring-loaded wheels that roll on the walls as it moves up and down). It takes fifteen minutes to get to the top, and the rider has a headset so that he can talk to the surface crew while ascending.

So far there has been no glitches in the process, the President of Chile is on hand to greet the miners, and the second one out presented him with a rock from a bagful that he had brought out for the top folk present. And after greeting the dignitaries and a couple, at most, family members the rescued men lie on a gurney and are taken for medical examination. (The fourth man to ride to the surface had only been working in the mine for 5 days and was from Bolivia).

In the chat that the program hosts carry on to fill in the time that the cage is travelling, they talked about the debt that the world owes to miners. These men went on shift on August 5th, working in an old (over a hundred years old) and over-mined deposit and were trapped for 69 days. They are talking about changes that will come about as a result of this, but so often a month after the rescue, it fades into history without much change. Over a hundred years ago in Northern England virtually the entire male population of the mining village of Hartley were killed when the only shaft into the mine was blocked. Yet here this mine had only one effective exit. The second nominal exit, up a ventilation shaft, had no ladder all the way up, and so was not available, though the miners did try it to see if they could get out.

In this case the rescue was helped by the mining and drilling community from around the world. Three different machines were used to drill the holes for the rescue shaft. The speed with which it was done hides the complexity of the job that was achieved. Bear in mind that when the rescue began it was expected to take until Christmas.

There were only two T-130’s in Chile, (the machine that drilled the successful shaft) and there were only certain sized pipe sections available, and so it was a case of working out how to get it done with equipment that had never been used for this before. There were a couple of times when it seemed they might not be able to do it, there was a pause of some four days because of problems with the bit in trying to drill the hard rock, but they worked through it. And they were successful., even though they had to drill around the winding drilled hole that had been drilled first to intersect the rescue area. It required that they bring in the best crew that they could find, and that included flying one driller in from Afghanistan where he had been working drilling water wells. It is likely the most difficult job that they have faced, and this has largely gone unremarked in the media.

Given that the technology was successful there is some talk of developing a permanent set of equipment that can be moved to the site of any future mining disaster, and building on the lessons learned with this event, be better prepared to create access to anyone trapped. This sort of effort will continue to be necessary. Miners work at a considerable distance, normally, from the access shaft through which they enter and leave the mine. In most operations the area around the shaft is left un-mined so that it supports the shaft walls and holds their integrity. This was another safety precaution apparently abandoned in this instance. But it means that miners have to travel some distance to get to the working area, and when disaster strikes they may be a long way from that safe passage out.

Mining will thus remain a dangerous occupation, perhaps even more so in the future. For just as we are now seeing, as the ASPO conference last week noted, the approach of peak oil, so we are also approaching peak minerals. As with oil, the need for future supplies means that smaller and more difficult and dangerous deposits will be worked. In order to save on cost risks will be taken, and men will be trapped and die. It is, sadly, a price that the bulk of society seems quite willing to pay. Fortunately in this case that price does not have to be paid, but unfortunately in too many parts of the world it is still being paid on far too often a basis. And as the need for miners and the minerals and fuels that they produce continues to grow it is hard to see that situation changing much. The 1,500 journalists who are in the desert, without decent accommodation and amenities will soon leave, I would not be surprised, after a while, to hear that miners were back, working in much the same conditions as before. The world need and the money that it will be willing to pay will be incentive enough.

Read more!

Monday, October 11, 2010

The Chilean Miners - nearing a rescue

The rate of progress in rescuing the miners from the copper mine in Chile continues to be better than expected. After the completion of the rescue shaft on Saturday, it was inspected, and the top 300 ft was considered to be possibly unstable and so has had to be lined with a metal casing. This is somewhat similar to that used in oilwells, except that it does not have to be water-tight and can be hung from the top, through a lip that extends outwards, again without need for a seal. This liner was inserted in 20 segments, and is only needed for the first 300-ft since a survey of the rest of the 2,300 ft long shaft has shown that the rock around it is solid, and does not need support.

Preparing the casing for the shaft

Schramm T-130

There were three different drills used to try and create the rescue shaft. The first of these, a Strata 950 was brought to the site on August 22nd, and drilled its own access bore, which would then be subsequently reamed to the necessary diameter for the rescue capsules. As a back-up a second drill, a Schramm T-130 was brought to the site at the beginning of September (the fourth) . In contrast with the first drill, which was drilling its own access borehole, this unit was set up to ream one of the existing boreholes (of which there were 3). By doing this, and reaming the hole in two stages, rather than just one, progress could be considerably faster . The initial diameter of the hole was 6 inches, this was first reamed out to 12-inches, and then to the final 26-inches. After set-up the benefit of the two-stage operation became evident early on, with the T-130 being able to ream the initial bore out to 12-inches by the 17th of September. Fifty days after the collapse of the mine tunnel, progress for what was now three different operations, was shown in this graphic.

Plan C, a drilling rig which is drilling a hole at full diameter from the beginning was set-up later, but has been making very good progress, and is being continued to provide a possible back-up in case something goes wrong with the initial shaft.

One of the concerns with the existing shaft is that, as a result of the way that the hole was drilled, it is not straight but has a number of curves in it. These are not severe, but could possibly cause a problem with the cage. By this morning the lining had been completed, and the infrastructure is being assembled over the shaft to be able to wind the cage in and out of the mine.

Moving the liner into place

It is now expected that the cage will be tested today to ensure that it can easily move up and down the shaft, and that the miners will be able to start being lifted out of the mine starting at 3 am Wednesday morning. And in a more recent story the cage has been reported as having been able to move down the shaft without any problems .

Read more!

Sunday, October 10, 2010

ASPO Conference - second day after lunch

This is a continuation of a series of reports on the ASPO Conference on Peak Oil that was held in Washington DC this week. I had covered the first 24 hours in two earlier posts, and return to the meeting at the luncheon on the second day of the meeting.

At the beginning of the lunch the Association presented the King Hubbard Awards for excellence in energy education. These, deservedly, went to Colin Campbell, Tom Whipple and Art Berman. They were followed by the Tom Whipple Volunteer Awards, which went to Lt. Col. Davis and Greg Geyer.

The first speaker at the lunch was Jeff Rubin who pointed out that although the deepest recession since the second world war has been blamed on the housing bubble and the financial problems of the American banking system, the problem was really global in nature, and it is not difficult to show the correlation with energy prices.

Historically economists have always said that when prices go up, then more oil will be released to the market, meeting demand, and the price will fall. This time they were wrong. There was no Alaska or North Sea to provide that additional source, only tar sands. With prices escalating oil demand declined in only the USA, Canada and Europe, which group has historically bought most of the international trade, but which now only consume half of it. That group has not dropped demand, it is just that others are now gaining in consumption (China is now at 9 mbd). OPEC now consumes some 14 mbd, and this is largely because fuel is so cheap in those countries (at around $0.20 a gallon). The OPEC internal consumption (as the Export Land Model predicts) is used at the cost of supplies to the export market.

Oil prices and demand fell during the recession, but are now growing again, as we return to $80 a barrel. As a result he is anticipating triple-digit oil prices again next year. For as demand rises the world is no more capable of balancing supply and demand than it was two years ago. He mentioned the conundrum that price controls growth, the Government cannot bring back cheap oil, and the balance between affordable general yet sufficient supply and the price of that supply is becoming a more difficult balance to sustain.

The rise in fuel costs will change the paradigm for manufacturing. For while it is cheaper to makes steel in China and ship it when transport costs are low, as those prices rise the cost of shipping will become too high. The benefits of local manufacture will become more evident. These economics will kill the suburbs. That will not be controlled by Government fiat, but rather the principles defined in Econ 101.

As the high-prices bring our entry into the Apocalypse it will not, at least initially , be that grim. The price changes will force change and this may help local manufacturing. So we may be moving to a better world, at least transiently.

The second speaker was Bianca Jagger who might, at first, appear to be a strange choice for the conference. However, as she explained, she has been following the topic for many years and initially had just planned on attending the conference, until asked to speak. She spoke of the need for a new Copernican Revolution in the use of renewable technologies. With no treaty in Copenhagen there is less than a decade before we will see dramatic changes in climate, due to greenhouse gas effects. Further the dependence on oil, and our need to get it from deeper waters and arctic regions threatens even more devastation for future generations.

The interactions of 9 billion people with the environment by 2050 will also impose increasing demands on the energy infrastructure, and have their impacts, some of which we have seen this year already in countries such as Pakistan and Russia. We must hold companies responsible for their damage, and she expressed concerns over the tar sand mining in Alberta.

She noted how the subject of Peak Oil had been considered a myth, but that the JOE Report showed that it was not, and she cited other reports that concurred. With the peak arrival we need the President to waken us from our current sleepwalking into disaster. We must democratize and decentralize energy production and if the Federal Government does not do this, then states and local government must act. We cannot compartmentalize the effort as the effects will impact us all, and we must make the investments to replace fossil fuels.

In the following question period the speakers pointed out that we should not expect the Administration to move until the point is reached where we really won’t have many choices left. But we have a greater capacity for change than the government gives us credit for. The problem is that with only 4 mbd of spare capacity, which may come at an increasing price, the balance between stability and recession will be small. We are, perhaps, at the bounds of affordable oil.

The worse the price rise, then the worse off the poorer segments of the community become, but it will become a zero sum game as oil production is bounded. It can be resolved by price – more bicycles are used in Copenhagen, for example, because cars have a 180% surcharge, and power is used economically because it costs $0.30 a kWh.

I chaired the coal session immediately after lunch, and briefly referred to my experience in hand-mining coal in a seam about 20 inches high, and the difficulties King Edward I had in banning the burning of coal. I then introduced Kjell Aleklett who paid tribute to Matt Simmons, and talked of the formation of ASPO – in which Matt played a part, before turning to the topic of coal supply prediction. In the IPCC reports there is an anticipation of coal use rising by 500% by 2100. But his group have been studying the likelihood of this happening and have written several peer-reviewed papers on the topic. (For example Dr Michael Hook nailed his dissertation on the topic to the wall last month, an Uppsala tradition.) He noted that there is a difference in the relative ranking of the worlds largest coal reserve holders and those that mine and export the most coal. China, for example, has 14% of the world’s reserves and yet mines 45% of the world’s coal. (These may be a little off due to my slow transcription of his table). There are only 10 nations that can be considered, as exporters, the “drug dealers” of the planet.

Global production is dominated by the big 6 (USA, China, FSU, Australia, India, and S. Africa) but the world is changing and increasing competition and regulation is changing the use and availability of coal. It is a fuel where there is no correlation between price and reserves, but we are now seeing a decline in coal quality to the point that we are at a peak in the energy level that can be produced from American coal. There are small changes that can occur (it is possible for Pennsylvanian Anthracite, which has peaked, to recover) depending on price but in general this is true. American hopes lie in the reserves of states like Montana, but local opposition, due to the sodium content of the water, makes this mining unlikely.

He then looked at production from the other large producers, and stated conclusions on their future performance, leading to the overall conclusion that coal will peak globally in 2030. He was not favorably impressed by the chances for coal-to-liquid (CTL) plants, and they may only possibly play a part in the future. None of the IPCC models consider peak oil, gas or coal, yet we cannot assume a business as usual (BAU) future, as fossil fuels run out. Concerns at the moment in Sweden are more related to politics than geology. And while coal will remain important, it will not be an answer to the energy challenge.

In questions one of the audience from Montana challenged the assumption that coal is unpopular in the state, and noted that it is likely that there will be considerable coal production in the future. Dr. Aleklett also noted that coal production is limited logistically and by infrastructure, rather than resource. And coal does not contribute to solving the liquid fuels problem.

David Rutledge discussed coal production in terms of the IPCC report, noting that the 2007 report showed oil production rising to 2100 in all 19 models that they ran in predicting future trends. His goal became one of reducing uncertainty in the predictions, and he began by explaining some of the statistical methods he used. He exemplified this by showing that UK coal production peaked in 1913, and is now down to what it was in Napoleonic times. Using statistical methods he was able to predict the likely total UK coal production over time, at around 27 billion tons. Future reserve estimates collapsed in the 1960-70 period as evaluators realized that reserves could only be coal that could be economically mined.

He looked at four regions, UK coal, Pennsylvania anthracite, France and Belgium, and Japan and South Korea. In all cases he found that mining will only extract about 25% of what was once considered a reserve. He tried to look at Chinese coal but had problems getting reliable statistics. While he was able to get good agreements between his plots and predictions and historic numbers his results were incompatible with IPCC coal presumptions.

Coal does not have the global fungibility that oil has and is more of a regional market commodity. He used Tom Wigley’s MAGICC computer model, but in trying to evaluate future temperatures he noted that, as a result of the Climategate incident, that the British Met Office are redoing their temperature records. He discussed some of the problems in assuring accurate temperature records. But overall he was confident of the IPCC predictions and those on the future rise in sea level, quoting Stefan Ramstorf.

Following a break Dr Robert Hirsch chaired a session on the link between Energy and the Economy, and it was possibly the bleakest of the meeting. Chris Martenson talked about looking at the economy as a straight highway, and then hitting a bend. While models often see progress in linear terms life does not turn out that way. Money is loaned into existence and credit (and thus debt) has increased over time. Since 1970 it has doubled five times. Money and energy have been tied, but while money must continue to grow, energy cannot. Credit market growth (with an R^2 of 0.98) has an exponential relationship with time. He sees the problem not with the individual smaller bubble causes of housing, etc but rather the overall credit size itself.

He sees the problems coming in the 2014-2015 time frame when Peak Oil will be recognized and while growth may continue, prosperity may not.

He was followed by Nicole Foss- who many of us have read under the pen name Stoneleigh . She sees fossil fuels as generating the largest bubble in history. The economy has been driven up by energy, but as that declines what will take its place? In the sense that bubbles are Ponzi schemes where only early investors make a return on their investment, as this one comes to an end as the largest suckers get fleeced, so they collapse to general hurt.

Markets are driven by perception rather than reality. But by the time the general public hears of “a good thing” it is generally over. Hearing the “it’s a new paradigm” should warn you to sell the stock. But the world is driven on emotion. And when there is a collapse it is often sudden, bringing the value down below what it was before the bubble began. (And oil prices are following this model). From this she could see nothing ahead but progress into a deflation and depression. We are already in a large debt and liquidity trap and as credit disappears the depression will develop and be sustained. The huge derivatives market may be the first to go, given its insignificant intrinsic value.

The problem is in part that it will be based on reducing volumes of oil, and with that reduction there is no possibility of a rebound, since the resource is not there to develop it. Oil has thus hegemonic power. The depression will, however, sustain its dominance since reduced demand will allow it to remain dominant.

The final speaker of the evening was Robert Hirsch, who has also recently co-authored a book – The Impending World Energy Mess which was available in signed copy at the meeting. In large measure his talk followed the book (from which you may gather that I did buy, and have half-read, a copy – and it is worth doing so, I may do a review later). He noted that the economy depends on energy, not the other way around. Further we should expect that the general public will still be surprised when oil supplies start to decline in the next 2 – 5 years. From then they will continue to decline for at least a decade, until alternate sources of fuel become sufficiently available. He covered the oil problem their forecast of how it will develop, and what an individual could do about it.

The story is a familiar one to the peak oil community, we are over reliant on a few giant oil fields that are depleting and not being replaced. We have been sensibly in a production plateau since 2005, something not predicted by earlier models, but there are an increasing number of reputable sources that see an end to the plateau, and the consequent decline, coming relatively soon. This will impact GDP and hurt national economies. The recent recession and drop in oil demand may have only shifted the onset of the decline by a few weeks.

It is unrealistic to expect a rapid answer to the decline from politicians. Looking at the likely rate of decline, a 2% fall could be easily handled, a 4% fall could be handled with difficulty, but at 6% it is going to be bad. They have had to guess, and think, at the moment that it will likely be at around 4%.

China, having foreseen this problem, are doing smart things to prepare for it. We in the West are not. It will lead to increased tensions – though they did not look at the potential for resource wars, or the likelihood that producers would withhold production for political or economic reasons.

Looking at individual response, we should all expect to be impacted, and because of the lack of political ability to resolve the issue (or even to address it yet) we should expect that the result will be very similar to the oil shortages of the 70s. There was a degree of panic – this will happen again. This time, however, there will be no North Sea or North Slope to come to the rescue. Nor can the oil taps be opened wider to remediate the problems. As a result he has got out of the market – since good stocks and bonds will be hurt as well as bad. He has added annuities to his portfolio, bought some gold, and moved closer to mass transit and the shops.

He reminded us that this is a liquid fuels problem, while most renewables (wind and solar and hydro) deal with the electricity supply, which is not helpful to the crisis. We also have enough food. The issue is in transportation where we need a substitute for oil.

In questions he was asked about rationing. He fully anticipates it happening, but it will be very complicated to develop and impose. Countries will respond in different ways and become more independent. The United States will have to reindustrialize, since it will not be able to rely on foreign manufacture. We increased productivity by having oil help labor. Now this must reverse.

He did not see the problem being deflation, but rather in the control of inflation. But then it is easier to write a history book than a forecast. He could only see that many people will get hurt in the coming years.

On which cheery note I went to find a drink, have dinner and retire for the evening. More later.

Read more!