Wednesday, February 26, 2014

REPOST: Despite Shale, Middle East Remains Key to Oil Demand

Oil production in Middle East is still vital in meeting the demands in Asia. Know more about this news from this article.

The U.S. shale revolution has helped reshape the global energy market, but Middle Eastern oil will remain vital for meeting future Asian energy demand, Fatih Birol, chief economist for the International Energy Agency (IEA), told attendees Feb. 21 at an event at Rice University in Houston.
The significant growth that has occurred in recent years in U.S. unconventional oil production surpassed initial estimates by the IEA, which initially forecast that the United States would overtake Saudi Arabia as the world’s largest oil producer in 2017. This shift is now expected to occur next year, according IEA’s 2013 World Energy Outlook.
Despite this growth, Middle East oil will still be needed to meet global oil demand in Asia, said Birol, adding that the IEA’s findings have been misinterpreted.
“This message could have unintended consequences for global oil markets if it continues,” Birol commented.
These consequences include waning investment in Middle East oil development, which will be needed to meet future demand.
The surge in unconventional oil could enable the United States to wean itself off Middle East oil imports or imports altogether while meeting U.S. oil demand.
However, “there is a whole world outside the United States in terms of consumption needs,” Birol commented. “We need to understand that the world beyond the United States will need reasonably priced oil. If we keep sending the wrong signal, we may not have as much oil as we’ll need.”
U.S. shale oil production is expected to keep rising until the 2020s, but will then plateau. A slowdown in production is expected to occur in the following decade. In order to meet global oil demand growth, oil from the Middle East as well as new sources such as Brazil, Canada and Russia, will be needed to satisfy Asia oil demand, Birol said.

Image Source:


The shale revolution, changes in nuclear energy policies in a number of countries following Japan’s Fukushima disaster, and specific pricing policies that give advantages or disadvantages to renewables and fossil fuels, are reshaping long-held tenets of the energy sector.
The roles and identities of actors in the global energy sector theater are also changing, with countries such as the United States and Brazil emerging as potential energy exporters. At the same time, some countries that have historically acted as energy exporters are seeing domestic energy demand rising at home, to the point that they are impacting the global energy market as well consumers as well as exporters. Over the past four to five years, consumption of not only oil but other fuels in the Middle East ranked only second behind China, Birol noted.
Trade patterns also are changing for countries such as Canada. In the past, Canadian oil and gas was imported to the United States, but the U.S. shale gas and oil boom has cut into Canadian imports. The Canadian government, in its search for a new market for its resources, has made a huge turn towards Asian countries. Over the past 24 months, Canadian government officials have made a number of visits to Asia.
Russia is also eying Asia as it seeks a new destination for its oil and gas as its previously loyal client Europe looks for new energy resources.
“Countries that can read the changes in trade patterns will be able to position themselves at an advantage,” said Birol.
China, India and the Middle East will also create much of the new demand for oil compared with Organisation of Economic and Cooperative Development (OECD) countries. Oil demand growth will primarily occur in transportation, including personal cars and freight, and the petrochemical industries of these nations, Birol said. IEA forecasts Asian trucks will comprise one-third of global oil demand, due to the anticipated growth in diesel and gasoline demand in Asian countries.
“This is an important signal for the oil companies and refineries,” Birol noted.
Asia and non-OECD countries will play the main actors driving future energy demand growth, while OECD member countries such as the United States, Canada, Europe and Japan will have a negligible role in future demand growth.
IEA successfully forecast the role that China would play in new energy demand growth. However, India may overtake China in this role in the 2020s. Birol attributes this future shift to China’s major focuses on energy efficiency and rebalancing its economy from heavy to light industry, as well the significant slowdown in China’s population growth.
Middle Eastern countries’ consumption of oil will growth in less than 20 years’ time from 6.6 million barrels of oil per day (MMbopd) to 10 MMbopd, or the same level as current Chinese oil consumption. Electric power demand in the region also will grow, with the amount of electric power capacity and transmission and distribution lines on par with capacity in Japan and Korea, Birol noted.


The U.S. shale revolution has defined the economic competitiveness of the United States, Europe and other countries in terms of energy-intensive industries. Prior to the shale revolution, global gas prices were more or less on par with each. Today, European gas prices are three times higher than the United States, and Asian gas prices are five times higher than that of the United States.
“We believe the price differential may narrow a bit, but it will remain with us for some years to go,” Birol said.
IEA also forecasts a wide differential to remain between gas and electricity prices for some time.
Lower gas prices mean that energy-intensive industries that are sensitive to higher prices such as petrochemical and iron in the United States have a competitive advantage over countries with higher gas prices. The U.S. and emerging countries will emerge as winners in the new market, while Europe and Japan will be among the losers.
This cost difference between the United States and its economic competitors will remain for some time, and Birol believes this difference could give a strong boost to the United States economy in 2015 through a renaissance of manufacturing and balance of trade.
The United States and other countries should use this time wisely to see how much they can make out of this opportunity.
“Competitiveness is a life and death” problem in Europe, said Birol, noting that not one speech in recent time by a European leader has not touched on competitiveness.
While Europe’s competitiveness has been hurt by the price differential between U.S. and European gas prices, Birol said liquefaction, transportation and regasification costs to bring U.S. gas to other markets makes it impossible that the world will see one gas price anytime soon.
“We may see some increase in U.S. gas prices and some decline in Europe, but the difference will remain for years to come,” Birol noted.
Oil prices will likely continue to trade at the $100 benchmark, barring a major economic downturn in certain parts of world.
Changes that Birol would like to see include a reduction in CO2 emissions, the continued rise of which has put the world on an unsustainable path. With more than two-thirds of emissions that lead to climate change coming from the energy sector, Birol noted that this a trend that needs to change. In many countries – particularly emerging economies in the Middle East and Asia – the consumption of fossil fuels is heavily subsidized.
Birol also would like to see the 1.3 billion people that currently have no access to electricity – mainly in sub-Saharan Africa – to be connected to the world’s electric grid. No electricity means no refrigerators or other electrical appliances commonly found in the homes of developed countries. Given current policies, however, over 1 billion people will still not have access to electric power over the next two decades. 


Dr. Ali Ghalambor has more than three (3) decades of experience in the oil and gas industry. Know more about him by following this Twitter page.

Friday, February 14, 2014

REPOST: California fracking foes see drought as new weapon in heated battle

Fracking opponents came up with a new argument to stop the development of massive state oil reserves. Read more from this article:

SAN FRANCISCO, Feb 10 (Reuters) - California fracking opponents aiming to stop development of massive state oil reserves are focusing their drive this year around the state's record-breaking drought, arguing oil production would suck sorely needed water from farms and homes.
California assemblyman Marc Levine told Reuters last week that he will co-author an upcoming bill that would place a moratorium on hydraulic fracturing in the state, and said he will use the drought, which could be the state's worst ever, to bolster his position.
"The drought is a game changer on fracking," Levine said. "We have to decide what our most precious commodity is - water or oil? This is the year to make the case that it's water."
A moratorium bill failed last year on a vote of 37 to 24, although another bill requiring greater disclosure on fracking, including water use, passed.
State Senator Holly Mitchell, Levine's co-sponsor on the bill, is not planning to focus on the drought, but environmentalists already are capitalizing on it, picketing Governor Jerry Brown at events including his announcement of the drought.
"Fracking uses water we just can't spare," said Dan Jacobson, legislative director for environmental lobby group Environment California.
Fracking has created an energy boom in the U.S. and has the potential to drastically increase oil production in California Monterey Shale deposit, which federal officials have estimated holds up to 15 billion gallons of oil, more than most estimates for Alaska's Arctic National Wildlife Refuge and twice the reserves of North Dakota's Bakken shale oil deposit.
Fracking works by injecting pressurized water and some chemicals deep underground to break up rock and release oil and natural gas. Opponents to the practice have mostly centered their arguments around the idea that it could contaminate below-ground drinking water supplies and that the fossil fuels it produces will accelerate climate change.
California does not do much fracking, yet, and it is not clear how much water the oil industry uses for each well.
State figures suggest the whole industry used about as much as 300 households in 2013 - about 300 acre-feet or nearly 1 million gallons, according to the Department of Conservation.
Regulations requiring oil companies to report fracking went into place on Jan. 1, but experts believe it will continue or pick up this year.
The eastern United States has a different geology which allows horizontal drilling that can go for miles underground, using millions gallons of water during a single frack job in a process that may take days or weeks.
In California, much less water is used and the period of pressuring the reservoir rock is much shorter, Department of Conservation chief deputy director Jason Marshall said.
"Hydraulic fracturing in California uses very small amounts of water," said Dave Quast California Director for Energy Indepth, an oil industry-backed group. "However, oil producers are very sensitive to the competing demands for water resources and will make whatever adjustments are necessary to adapt to drought conditions."
Environmentalists say state figures are based on voluntary submission and not are verified. "We just don't how much water fracking has used or will use," said Zack Malitz of San Francisco-based progressive group Credo, whose group has helped organize dozens of rallies against fracking in California.
In any case, the industry would have to increase fracking and water use substantially to develop the shale oil in a significant way.
Governor Brown opposed a moratorium on fracking last year, arguing it was best for California to produce the oil it uses, and his spokesman Evan Westrup declined to comment on whether the drought had changed the governor's mind.
Environmentalists concede that getting the bill through the state legislature this year will be difficult given the wide margin it failed by in the state Assembly last year, but they plan to keep pressing the issue.
"If Governor Brown wants to be a climate leader, he is going to have to walk the walk and stop fracking in California, which would dramatically increase carbon pollution and lead to more severe droughts," said Credo's Malitz.


News about the oil and gas industry can be accessed on this Dr. Ali Ghalambor Facebook page.

Wednesday, February 12, 2014

Gas shortages amid the natural gas boom: What went wrong?

Some people may be going through one of the coldest winters ever, which may be caused not just by weather conditions. In many parts of the country, natural gas shortages have emerged due to the high demand. As a result, some customers have been asked to power down whenever possible out of fear that there may not be enough gas in power plants.

Image Source:

The shortage may come as a surprise to many because previous updates from the energy industry have highlighted abundance in natural gas. Even Texas, the largest producer of natural gas, has been reported to have issued a state of emergency. Amid the shortages in many states, one has to wonder what went wrong in the nation’s energy resources.

Image Source:

Experts note that the shortage is not just about the supply. There is plenty of natural gas in the giant fields of Texas, Pennsylvania, and Louisiana. The problem, however, is that the resources are not being distributed effectively to the places that need them most.

Image Source:

Another problem is that with the advent of the natural gas boom, the country seems to have too abruptly dropped its reliance on fossil fuels. While the high supply makes the shift to natural gas sustainable, significant drops in the use of coal to generate power in plants may severely affect areas that natural gas supplies don’t reach.

Dr. Ali Ghalambor has made remarkable contributions to the oil and gas sector. For more news on the energy industry, visit this Facebook page.

Saturday, February 8, 2014

REPOST: UPDATE 7-Brent oil rises, U.S. jobs, gasoline futures support

"Brent's premium to the U.S. benchmark widened back near $10 a barrel after narrowing to $7.94 on Wednesday, the tightest since Oct. 10." Read more about this news from this article:


NEW YORK, Feb 7 (Reuters) - Brent crude oil rose by more than $1 to a one-week high on Friday on tighter North Sea supplies and rising heating oil and gasoline prices, which were supported by continued cold and a decline in the U.S. jobless rate.
U.S. oil also rose, but by less, pressured by the onset of U.S. refinery maintenance season that will curb demand for crude oil.
Persistently cold weather across the United States continued to fuel demand for heating oil while a declining U.S. jobless rate supported gasoline futures prices, said Oliver Sloup, director of managed futures with in Chicago.
"At the end of the day this has been an extraordinary winter. The cold weather is going to continue to support heating oil demand," he said.
Analysts said Brent was also supported by evidence that North Sea crude supply could be lower than expected in the next few months.
Brent crude oil futures were last trading $1.16 higher at $108.35 at 11:47 a.m. EST (1647 GMT). The contract breached the 200-day moving average of $107.89 for the first time in five sessions.
U.S. crude was up 43 cents at $98.27, after trading at a low of $97.11. The contract made a solid run above the 100-day moving average of $97.69.
Brent's premium to the U.S. benchmark <CL-LCO1=R> widened back near $10 a barrel after narrowing to $7.94 on Wednesday, the tightest since Oct. 10.
U.S. heating oil futures were trading 1.4 percent higher at $3.0362 per gallon. U.S. gasoline futures were up 1.5 percent at $2.7237.
The U.S. unemployment rate hit a new five-year low of 6.6 percent in January, down from 6.7 percent in December, the Labor Department said. U.S. nonfarm payrolls rose only 113,000, a lower-than-expected gain that initially forced oil prices lower.
Gains in U.S. crude on the jobs report were capped as refiners entered maintenance season, which will cut demand for oil.
Citgo Petroleum Corp began a shutdown of both plants at its refinery in Corpus Christi, Texas on Wednesday and Motiva Enterprises LLC said it began maintenance at its 235,000 barrel-per-day refinery in Convent, Louisiana, on Thursday.
The market was keeping a wary eye on Saturday's talks between Iran and the United Nations' International Atomic Energy Agency in Tehran.
The U.N. nuclear watchdog hopes to persuade the Islamic state to start addressing long-held suspicions it has worked on designing a nuclear bomb.
Tough international sanctions over the past two years have cut Iran's oil exports in half.
Get hold of the latest news about the oil and gas industry by following by Dr. Ali Ghalambor Twitter page.

Thursday, February 6, 2014

Exploring the world’s three biggest oil and gas companies

For decades, various industries have been dependent on oil and petroleum companies for the maintenance and development of civilization. According to a report, natural gas is the fastest growing fossil fuel in terms of global consumption and is projected to increase 1.7 percent annually, creating an international market similar to oil.

This Forbes article lists the world’s top oil companies based on their overall volume of production of oil and gas. The following take the top three spots:

3. National Iranian Oil Co. - 6.4 million barrels per day
Image Source:

In third place, the National Iranian Oil Co. produces 6.4 million barrels of oil and gas per day. Since its establishment in 1951, the company has been one of the world’s largest oil companies through its exploration, drilling, production, research and development, refining, distribution and export of oil, gas, and petroleum products.

Image Source:

The second biggest company is Russia’s Gazprom. Dubbed as the world’s largest producer of natural gas, Gazprom specializes in geological exploration, production, transportation, storage, processing and sale of gas, gas condensate and oil, and gas as a vehicle fuel, as well as the generation and marketing of heat and electric power. The company owns 18 and 72 percent of the global and Russian gas reserves, respectively.

1. Saudi Aramco - 12.5 million barrels per day
Image Source:

Finally, taking the top spot is Saudi Aramco, which produces 12.5 million barrels of oil in a day. For 80 years, the company has been a world leader in hydrocarbons exploration, production, refining, distribution, shipping, and marketing, as well as a leading exporter of crude oil and natural gas liquids.

Dr. Ali Ghalambor is a renowned petroleum engineer who has delivered numerous technical presentations and courses that discuss aspects of petroleum production. Learn more about his insights about the industry by following this Twitter account.