Tag Archives: Shale

What’s Happening Offshore & What We Can Do Here

We have to be aware of what’s going on offshore and how it affects us. Check out Energy specialist Art Berman’s presentation The Shale Revolution & The Current Oil Price Collapse.

Because energy and agriculture – fuel and food – are inextricably tied together, we need solutions that utilize everybody’s contributions.

The rising cost of producing petroleum energy products impacts everything we do. It takes energy to do work and especially to get food onto our plates. Sure technology extends energy, but technology is not energy in itself.

As for food production, we need help in every way we can get it, and certainly not hindrances. As an example, banning GMOs and Roundup raises the cost of food production without alleviating any proven danger. This impacts the people who can least afford the resulting increase in food prices.

In every single thing we do, the pluses have to exceed the minuses. How can we achieve this? We can form a business model that helps us maximize value to our people. Our Hawaii Island Energy Cooperative model, with its local control, helps us adapt the quickest to future situations that we cannot anticipate now. The co-op model can also help us become more competitive with the rest of the world without leaving anyone behind.

We have a lot of positives here on the Big Island. We’ll be over the geothermal “hot spot” for 500,000 to a million years. We have great wind resources and, like everybody else, we have sunlight. Thanks to our gentle climate, we don’t need artificial heating and cooling. The Big Island is especially blessed.

The sooner we can focus on taking care of all of us, and not just a few of us, the sooner we can start preparing for the future.

We CAN do this. We must.

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Shale Gas: Should We Take Their Word For It?

Do we really want to bet the Big Island’s future on the Energy Information Agency’s projections? It’s much more prudent to hedge our bets. Have a look at what people are saying about recent projections.

From the Post Carbon Institute:

Shale Gas Reality Check

The Energy Information Administration (EIA) recently released its Annual Energy Outlook 2015. How have their projections and assumptions changed over the last year, and how does it hold up to scrutiny against up-to-date production data from key shale gas and tight oil plays?

In 2014, Post Carbon Institute and David Hughes published the most thorough independent analysis of U.S. shale gas and tight oil production ever conducted, and now that analysis has been updated to assess the most current thinking from the EIA. 

The update shows that the EIA’s Annual Energy Outlook 2015 reference case suffers from even greater optimism than the previous year—raising what were already highly questionable projections for cumulative shale gas production through 2040 by nine percent…. Read the rest

This recent Los Angeles Times article is one example of some of the reality:

U.S. officials cut estimate of recoverable Monterey Shale oil by 96%

By Louis Sahagun

Federal energy authorities have slashed by 96% the estimated amount of recoverable oil buried in California’s vast Monterey Shale deposits, deflating its potential as a national “black gold mine” of petroleum.

Just 600 million barrels of oil can be extracted with existing technology, far below the 13.7 billion barrels once thought recoverable from the jumbled layers of subterranean rock spread across much of Central California, the U.S. Energy Information Administration said…. Read the rest

Steve Horn, Research Fellow with DeSmogBlog, also wrote about the EIA’s projects. This article, Drilling Deeper: New Report Casts Doubt on Fracking Production Numbers, appeared in the Huffington Post:

The report’s findings differ vastly from the forward-looking projections published by the U.S. Energy Information Agency (EIA), a statistical sub-unit of the U.S. Department of Energy (DOE).

…”The Department of Energy’s forecasts–the ones everyone is relying on to guide our energy policy and planning–are overly optimistic based on what the actual well data are telling us,” Hughes — a geoscientist who formerly analyzed energy resources for over three decades for the Geological Survey of Canada — said in a press release about the reporting’s findings. 

“By asking the right questions you soon realize that if the future of U.S. oil and natural gas production depends on resources in the country’s deep shale deposits…we are in for a big disappointment in the longer term….” Read the rest

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Hawaii, Shale & Geothermal

Richard Ha writes:

Because Hawai‘i relies so much on oil for its energy, the state will be a major beneficiary of the shale oil phenomenon. Conventional oil development takes a long time – five to ten years – whereas activating a shale oil well takes less than a year.

The result is that whenever the Saudis try to raise the price of oil, our U.S. shale oil drillers will react wherever they can make money.

From The Barrel Blog, the essential perspective on global energy:

Energy Economist: Shale oil’s response to prices may call for industry re-evaluation

Shale oil’s investment cycle is shorter and its decline profile sharper than conventional oil production. Current indicators suggest legacy declines from shale will catch up fast with the industry. This points to a sharp deceleration in US shale oil output. But, while conventional oil takes time to slow down, it also takes time to speed up. It will be shale that is best placed to benefit from any oil price recovery, as Ross McCracken, managing editor of Platts Energy Economists, explains in this month’s selection from the publication. Read the rest

At $70 a barrel, a lot of people make money and at $40, a lot of people lose money. This safety valve is very good for us in Hawai‘i.

This will give us time to make rational energy decisions. Oil and gas are still finite resources. Because two-thirds of our economy is based on consumer spending, we need to find solutions that take care of the rubbah slippah folks. Low prices for them strengthens the economy for all.

Each island has its own basket of energy resources. The Big Island, because of its abundant geothermal resource, has the biggest basket of lowest cost alternatives. O‘ahu has the smallest basket of resources and so it needs help from the other islands—hence, the talk about cabling resources.

The elephant in the room is cabling geothermal resources from the Big Island. That will never happen, though, unless the Big Island residents themselves receive a demonstrated benefit from geothermal.

So now we need to work on getting Big Islanders definite low cost and other benefits from geothermal—like making hydrogen for transportation and even nitrogen fertilizer.

Then we can have a group of Big Islanders, representing the people, sit across the table and negotiate the conditions under which the people would approve exporting energy off island.

I would think education for our keiki might be a good starting point.

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Aren’t the Falling Oil Prices Great?

Richard Ha writes:

Isn’t it great that the price of oil has dropped so low all of the sudden?!

Wait – is it??

In the short term, for maybe five years, we’re going to be pretty happy here in Hawai‘i. More tourists will travel here, food and electricity costs will drop, and we will have more consumer confidence. We’ll feel like everything’s fine.

But everything is interconnected in our big world now, and could there be any problems with such a sudden and steep drop in oil prices?

Gail Tverberg, the former insurance actuary I sometimes refer to here who is very knowledgeable about such things on a macro level – and who writes the blog Our Finite World – just wrote about this.

In her post Ten Reasons Why a Severe Drop in Oil Prices is a Problem, she writes about the big picture.

From Our Finite World:

Let me explain some of the issues:

Issue 1. If the price of oil is too low, it will simply be left in the ground.

The world badly needs oil for many purposes: to power its cars, to plant it[s] fields, to operate its oil-powered irrigation pumps, and to act as a raw material for making many kinds of products, including medicines and fabrics….

Issue 2. The drop in oil prices is already having an impact on shale extraction and offshore drilling.

While many claims have been made that US shale drilling can be profitable at low prices, actions speak louder than words. (The problem may be a cash flow problem rather than profitability, but either problem cuts off drilling.) Reuters indicates that new oil and gas well permits tumbled by 40% in November… 

Issue 4. Low oil prices tend to cause debt defaults that have wide ranging consequences. If defaults become widespread, they could affect bank deposits and international trade. 

With low oil prices, it becomes much more difficult for shale drillers to pay back the loans they have taken out. Cash flow is much lower, and interest rates on new loans are likely much higher. The huge amount of debt that shale drillers have taken on suddenly becomes at-risk. Energy debt currently accounts for 16% of the US junk bond market, so the amount at risk is substantial.

Dropping oil prices affect international debt as well. The value of Venezuelan bonds recently fell to 51 cents on the dollar, because of the high default risk with low oil prices.  Russia’s Rosneft is also reported to be having difficulty with its loans….

Tverberg writes about some pretty extreme consequences of nearing the limits of our finite resources. I’ve said many times that I cannot disagree with her. My approach, though, is to look for workarounds for us here in Hawai‘i.

I’ve also said plenty of times that we are so lucky to have geothermal. It’s not quite “infinite,” but the Big Island will be over the geothermal “hot spot” for 500,000 to a million years, and that’s close enough.

We’ll see where all this takes us. It’s uncharted waters. On the state level, it will be good for us in the short term, but on a higher level – where Gail Tverberg operates and what she writes about – we need to pay serious attention to what’s going on. Have a look at her post. It’s important and enlightening. 

It’s been a very interesting week in terms of energy and other issues affecting the Big Island and all the rest of it. Stay tuned. I have more to say! 

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