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The former U.S. National Petroleum Reserve

Alaska's Protected Oil Reserves The US National Petroleum Reserve is being split, with half destined for conservation and half destined for drilling. In a below-the-fold headline last week,  Interior Secretary Ken Salazar announced the new management plan which preserves sustenance resources and wildlife areas while capturing 72% of recoverable oil. The plan also allows pipeline development connecting the reserve with the Trans-Alaska Pipeline in Prudhoe Bay, AK. The National Petroleum Reserve in Alaska (NRP-A) was established in 1923 to ensure the military had ample petroleum if ever a global oil crisis arose.

While this is a highly intelligent development plan, it comes at an inconspicuous time. There is no global oil crisis: the hydrocarbon market is highly diversified and  well buffered at the moment.  There is no political uproar clamoring for this development, and while gas prices are high they’re not record-setting high. It does follow Obama’s campaign promises for lowering our dependence on foreign oil, but he’s traded considerable leverage for apparently no political gain. Every president since Nixon has touted the need to reduce U.S. dependency on foreign oil, but Obama is the first to do it. Furthermore, this increase in domestic production is unlikely to lower domestic gas prices. The only thing accomplished is the continued short selling of the environment. It’s probably inevitable that NRP-A will be drilled, but of all times to do so, why now?

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Categories: Energy, Politics Tags: , , ,

Distilling Differences between Hydrocarbons

29 January 2013 1 comment

Coal, Oil, and Natural Gas are all resources of high energy density and have fueled various revolutions in disparate industries. While they’re often lumped together as hydrocarbons, they have widely different characteristics. Here is a brief overview of  some of those differences:

Formation: All hydrocarbons require vast periods of time for their creation. They begin by dead organic matter being buried and heated until they crack and form a particular hydrocarbon. While they are all chains of Carbon and Hydrogen (hence hydrocarbon) of various lengths, they are not simply the 3 phases of the same substance.  Coal is generated from the slow burial of ancient  forests, wetlands, swamps, and bogs. Oil and Gas are generated in lake or marine environments where plankton and other organisms are buried under water. Over the millions of years or heat and pressure transform this organic material into energy rich hydrocarbons that we extract and burn for energy.

Use: The 3 general physical states each type resides in naturally predisposes them to specific uses. Coal is a heavy, solid combustible rock; a good energy source, but not easily moved. This was the dominate fuel source of the Industrial Revolution As a result, industries developed near coal sources to minimize the transport costs associated with using the fuel. England and Eastern US, both rich in coal, prospered as industry roared to life powered by coal. Coal-fueled, steam-powered trains were the revolutionary mode of transport during the 1800s.  Coal is still the dominant source for electricity generation around the world. Later, oil became the dominant fuel type providing a wider range of transport options as well as many alternative uses such as plastic production, fertilizers, and lubricants. Natural gas is generally used for electricity and heat production.

Distribution: Due to the specific environmental conditions necessary for hydrocarbon formation, their distribution is not even across the Earth. Coal is a entirely viewed as a terrestrial resource as marine mining is excessively difficult and given the abundance of coal, there is no need to exploit marginal reserves. Also, being a terrestrial resource, the countries with large land holdings having the largest reserves (Top 3: US, Russia, China).  Oil and Gas are less abundant and distributed much more unevenly across the globe. While great reserves reside in the Middle East, Venezuela, Russia, and Canada are also among the 10 oil laden countries in the world. Also, given their liquid nature, off shore reserves are capture-able, making distribution even more complex.

Grades: Given the range of environments for formation, the quality of hydrocarbons varies widely between sources. Purest coal, anthracite, contains more energy and burns more cleanly that other, less pure types (bituminous, sub-bituminous, peat). Higher grade coals are mined preferentially over others so as coal use continues, the average coal being burned will become dirtier. Oil can form in various lengths of hydrocarbons  and has a more complex range of types because its liquid nature allows for the incorporation of other impurities. The highest caliber of oil is generally considered light, sweet crude or Brent Crude.  As the level of impurities increase, the value decreases, as is the case with Venezuela’s oil which has considerable sulfur content (referred to as Sour Crude). Additionally, longer chained oils are more difficult to mine and refine, as is the case with the Oil Sands of Alberta Canada. Gas, being light in weight is easily refined into pure forms of methane, ethane, and propane.

Transport: Given its heavy, solid nature, coal is usually transported by rail or ship and is traded on local markets due to the high cost of transport. Natural Gas, on the other end of the spectrum, is light and difficult to contain. It is usually moved via pipelines, though it can be converted to a more transportable state called Liquefied Natural Gas (LNG). Oil is the most useful and transportable hydrocarbon and  is generally moved via ship or pipeline.

Geopolitics: The varying characteristics and uses of hydrocarbons create dynamic geopolitical implications. The concentration of oil in unstable regions of the world has been of concern for decades. Every US president since L.B. Johnson has called for lessening our dependence on foreign oil. This has resulted in increased US production and deeper exploration into marginally located reserves such as in the Arctic. It has also brought alternative sources into production such as the Tar Sands. This brings to light infrastructure needs, and refining capacity. Very few refineries in the world are capable of handling “dirty oil”. The much-debated Keystone XL pipeline would connect the dirty oil of Alberta, CA directly to Houston and one of those few refineries that can handle it. Now with the delays from environmental concerns, China is making investments to increase its refining capacity for dirty oil in hopes to tap into Canadian sources. Similarly, Venezuela’s sour oil has limited markets due to refinery requirements. The US is the primary market due to demand but also current refining capabilities. China is not only increasing its refining capabilities, but also infrastructure investments in Africa in hopes of earning goodwill from oil rich nations. The easy transport of oil makes it a truly global commodity and unilateral maneuvering is unlikely to have great impacts on either supply or demand.

Coal will continue to be the dominant electricity source for decades still. China is increasing its coal consumption daily to meet the growing demands of its population. It’s also looking to neighboring countries for additional reserves to meet its demand. Even environmentally conscience nations are having trouble escaping the need for coal generated electricity with its dirty emissions.

Natural gas differs here too. Due to its reliance on pipelines and long term infrastructure costs, gas is sold in contract blocks between countries over decade long agreements.  The Russia-Europe connection highlights this fact and is exacerbated by soviet-era tensions of sovereignty mixed with needs for energy. LNG trading seems to be following the Contract-Block model thus keeping it from achieving global commodity status equal to that of oil. Japan is likely to become increasingly dependent on foreign natural gas, most likely Russian LNG, as it aims to reduce its reliance on nuclear power with few domestic power options to replace it. Additionally, natural gas booms in North America have depressed the price of natural gas over the last 5 years further altering energy calculations.

The diverse characteristics of hydrocarbons and variations therein create a complex environment for energy policy and decision making.  Understanding the nuance of different energy types will facilitate better utilization of hydrocarbon resources as well as more comprehensive solutions for moving beyond hydrocarbons.

Energy Consumption by Type

Categories: Energy Tags: , , ,

Struggles in Arctic: Risk is the Price

28 January 2013 1 comment

Development plans for the Shtokman natural gas field were put on hold this last summer as agreements expired between Gazprom, Statoil, and Total. The Shtokman Development AG, the corporation formed by these 3 players to explore the field, had a 5 year charter that expired in July with no further plans for cooperation.  During the most open Arctic sea ice season in history, the challenges posed by Arctic ocean drilling remain daunting and are still prohibitory.  The Development AG was created to share the risk of Arctic operations among the 3 participants. Not only are the costs of operations, risks, and precautions extraordinary in the Arctic, but the unimaginable cost of cleanup of an accident in this harsh, remote, offshore environment remains staggering and damning.

The Shtokman natural gas field has been a viewed as one of the most feasible gems in Arctic Hydrocarbon exploration. Several factors make this play so enticing, including it’s promising reserves, but more importantly its location.  Located in the Barents Sea approximately 600km north of Murmansk, RU, the Shtokman Field is relatively close to the largest city in the Arctic. This means it has (relatively) easy access to the drilling infrastructure and equipment. It also means that in the case of an emergency, rescue and spill response teams  will be better able to assist in support and clean up. Location is also a crucial factor in that it is located near some of the warmest (again relatively) waters within the Arctic Ocean.  This corner of the Arctic is home to the 10 biggest cities in the Arctic because of the warm waters brought to this area at the tail end of Gulf Stream which keeps waters warm and ice-free.

While exploration of this play will certainly continue, this breakdown in cooperation shows hesitation in response to the great uncertainty present in this last frontier.  Risk is inherent in Arctic operations. A unquantifiable risk poses a difficult question of when to proceed in increasingly difficult plays, especially in the recent volatile global natural gas market.

Categories: Energy Tags: ,

Polar Bear Protest Ends in Arrest

8 September 2012 Leave a comment

In a symbolic protest Greenpeace activists  dressed as polar bears were arrested by Russian police. The protesters were blocking access to the Gazprom headquarters in Moscow with blocks of melting ice. 10 people were arrested, 4 of whom were dressed as polar bears. The protest was staged in objection to drilling projects in the Barents Sea, and comes just days after the European Commission launched an anti-trust investigation into a 2009 event when the Russian state-owned Gazprom cut supply to Ukraine over pricing disputes.

This appears to be an opportunistic protest with Greenpeace seizing a moment when Gazprom is already in the spotlight for dubious monopolistic/politically-motivated actions, unrelated to environmental concerns. Greenpeace is calling for an Arctic nature preserve that would prohibit natural resource exploitation and industrial fishing, and is largely absent from economic debates.

Russia, a dominant player in global hydrocarbons, is especially dominant in the European natural gas market. The investigation is focused on Gazprom’s operations in Eastern Europe. The proximity of these countries to Russia and the nature of the commodity itself  presents Gazprom with a natural monopoly. The actions of concern are whether or not Gazprom used this advantage to unjustly control prices, and/or to control supply for political advantage. Russia already has pipeline infrastructure supplying natural gas to Europe, and much of Europe is already dependent upon Russian natural gas, so it is in the interest of both parties to find an amicable solution. The economic issues in discussion are Gazprom’s real issues this week, but Arrested Polar Bears make for a much better picture than Economic Discussions.

Categories: Economics, Energy Tags: , ,

Carbon Calculation: Natural Gas vs Coal

7 February 2012 Leave a comment

If you follow the media, especially in PA, you’d be led to assume Natual Gas is the energy source of the future. That may very well be so, at least the near future. Many have proffered that we are in the “Natural Gas Century”, though how long this “Century” lasts may be up for some debate. Natural gas does indeed provide cleaner combustion than coal (38%) and oil (32%), but how much difference do these improvements make in the long run? Or asked another way, how long will using alternative fossil fuels delay crossing certain thresholds?

Mauna Loa CO2 Measured data (red), extrapolated to 2050

The atmospheric CO2 dataset collected from atop Mauna Loa Observatory suggests that we will cross the 450ppm threshold in early 2037, if we maintain our current energy portfolio. This little experiment calculates the change in atmospheric CO2 if we were to alter the energy portfolio by replacing coal with natural gas. To do this, I create 3 scenarios increasing natural gas use by 50%, 100%, and 200%.  There are a few basic assumptions in this calculation. 1) Natural Gas will only be used to  replace the dirtiest fuels: coal first, then oil. 2) The current energy portfolio is the same energy portfolio that’s been used for the last 50 years, and is responsible for the measured increase in CO2. 3) The change from our energy portfolio will happen instantaneously at 2025. There may be additional benefits achieved from ramping up to these goals, but substantial change takes time, here approximated as a 13 year implementation plan. 4) 450 ppm atmospheric CO2 is a threshold that is desirable to avoid. Many have suggested that 450 ppm will equate to ~2C degree warming.  450 will serve as the threshold for evaluating the different scenarios.

https://thevandegraph.files.wordpress.com/2012/01/energy-panel.jpg?w=1024

Scenario 1 increases our current natural gas use by 50%, moving from the current 25% to 37%. If implemented in the year 2025, this will delay us crossing the 450ppm threshold by 15 months.  Scenario 2 increases natural gas use by 100%, making it responsible for 50% of all energy. This would reduce our CO2 emissions enough to offset the threshold by 2 1/2 years.  In the maximum 200% increase scenario, the threshold is delayed by 5 years.

While at first this delay of only a few years seems insignificant, it would represent a substantial change in energy tastes and/or policy, which we have only seen in a limited expanses. Additionally, even the minimum scenario 1 calculation shows that the threshold is delayed by more than a year, after only 12 years of implementation.  That equates to an 8% delay. These carbon savings would continue to accumulate and have larger impacts over longer time horizons.

There are a few caveats, however. 1) This calculation assumes that natural gas will directly compete with only the dirtiest coal and oil, when in fact it will compete with all energy sources.  2) Natural gas is still a fossil fuel and does not get around the fundamental limitation of fossil fuels, which is that they are finite. 3) Natural gas production has the potential for direct release of methane, which is a 12x more efficient greenhouse gas than CO2, though it has a much shorter residence time (~10-12 years). While natural gas will not be the end-all energy savior, the interest in it does represent a first step away from coal and oil and does have the potential to buy us more time while we work toward a more comprehensive solution to our energy concerns. While increased natural gas use  provides a rather minimal change,  it is a change nonetheless, and showing that we can change our energy use will help ease the fears associated with the massive energy overhaul that will be required to fuel our future.

Categories: Climate, Energy Tags: , , ,

Green Energy: Where are we?

2 February 2012 Leave a comment

With all the hub-hub about green energy, I decided to take a look and see how far we’ve actually come towards becoming a “Green” Economy. Global energy consumption is increasing rapidly, increasing nearly 80% over the last 2 decades. This is driven by the booming electronics industry, especially consumption in the developing world. This pattern is not likely to cease as countries like China and India, which maintain 1/3 of the world’s population, continue to modernize at a breakneck speed.  By some estimates China will have 600 million middle class citizens by 2015. They are going to have a lot of demands for products and energy alike. How we meet those demands has great implications for future CO2 scenarios.

To meet these goals we will need a diverse energy portfolio, requiring fossil, nuclear, and renewable, all mixed together with a heave dose of innovation.  Our current energy portfolio is diverse, in that it uses a variety of fossil fuels.  There have been steady gains made in renewable energy production, but those gains are still being swamped by increases in traditional fuel sources.

“Green” has become the adjective of choice when describing the future of energy.  Green has been the word for decades now, ever since Carter put solar panels on the White House.  Every president since Nixon has decried our dependence on foreign oil, yet no one seems to be moving us in that direction.  With the death of the Waxman-Markey Bill in 2009, the likelihood of this president making a substantial change is becoming less and less.  The Obama administration has placed a great emphasis on energy innovation during the past 3 years, but without much to show for it, it ends up being more political ‘greenwash’.  One thing is for sure, if we want to fuel a future based on high energy consumption, our energy portfolio cannot continue to look like this:

Oil & Infrastructure

It seems that nowhere is safe from oil spills. An Exxon-Mobil pipeline ruptured Friday night, leaking approximately 1000 barrels of crude into the Yellowstone River. Luckily, this name-sake of the National Park flows away from the park at this point and towards its confluence with the Missouri River in North Dakota.  The pipeline gushed for about 30 minutes before being shut down. The plume stretches for 25 miles along the river and is expanding rapidly. This spill took place within the longest stretch of undammed river in the US. This lack of dams makes stopping the spread difficult, so its likely the oil will reach the Missouri by the end of the week.

This spill comes at a terrible time as both the Yellowstone and Missouri rivers are in floodstage. This means the damage is spread farther overbank, and will travel downstream much more rapidly. This spill is similar to the Enbridge Spill that occured in Michigan last July where an estimated 1,000,000 gallons of crude was released into the Kalamazoo river while in floodstage. 1 year later, the Kalamazoo river is still closed.

What do both these oil spills have in common? Outdated Infrastructure.

The Enbridge pipeline was built in 1969, the Yellowstone pipeline was built in 1954, and both these pieces of infrastructure were well past the end their design life. Yet, the oil companies kept the pipelines in play, only developing replacement plans after disaster struck. While dilapidated infrastructure is not unique to oil pipelines, these cases do highlight the issue in very real, very devastating terms. If we continue to allow infrastructure to be pushed the literal breaking point, the costs will be much greater than just replacement. Both these companies will bear the majority of clean up costs, but clean ups are always far from sufficient, leaving the real costs uncounted and real payer the environment.