No love for XOM

Venezuela’s Hugo Chavez has threatened Exxon Mobil for going after its assets in the US. Now it appears that China is also threatening XOM:

HONG KONG, July 20 (Reuters) – China has warned Exxon Mobil Corp to pull out of an exploration deal with Vietnam, describing the project as a breach of Chinese sovereignty, the South China Morning Post reported on Sunday, citing unnamed sources.

The article, which cited “sources close to the U.S. firm”, said Chinese diplomats in Washington had made repeated verbal protests to Exxon Mobil executives in recent months, and warned them its future business interests on the mainland could be at risk.

While Chavez might seem a worst a minor annoyance to XOM, the threat of being shut out of future deals in China must seem more serious. It will be interesting to see how this plays out. Since only “future” business interests are mentioned, I get the feeling this is more bluster than anything.

(Update: I found a decent article that has some more info. Apparently, BP stopped a partnership with Vietnam after similar threats from China.)

Are we there yet?

The giant oilfield Ghawar is the cornerstone of Saudi Arabian oil production, and actually, of the entire world. The massive field may be coming to the end of its “useful” life:

One dramatic part of the data concerns a site called Ghawar, which has been the kingdom’s workhorse field for decades. It shows the field producing 5.4 million barrels a day next year, but the volume then falling off rapidly, to 4.475 million daily barrels in 2013. “That’s why Khurais is so important—to make up for that decrease,” said the oil industry executive who released the data. He was referring to a supergiant field that is to come online later this year and produce an estimated 500,000 barrels a day of crude. In last month’s gathering in Saudi Arabia, officials of the kingdom told journalists that Ghawar had produced just under 5 million barrels a day from 1993 through 2007.

Let’s look at that math. The numbers for global consumption of crude oil from EIA data show the average total global production of crude from 1993 through 2007 is 67.5 million bpd. Thus Ghawar, by itself, has on average accounted for 7% of global production, EVERY DAY, for the past 15 years (and probably a similar percentage for far longer than that).

Some claim that such a decline in Ghawar must imply that Saudi Arabia has peaked. If so, then world production has probably peaked also. Depending on your definition of oil, such as including natural gas liquids or biofuels, this date might shift a few years. However, I don’t think that many knowledgeable parties would argue against the proposal that it is very close now. Unless the world can learn to get by on less, there are stormy days ahead.

The IEA has revised their medium term estimate of worldwide decline rate, and offer a sobering account of how much production will need to be added (3.5 million bpd every year!) just to maintain constant production levels:

Supply growth deriving from a concentration of new project start-ups during 2008-2010, allied to weaker economic growth, sees potential spare capacity rise in excess of 4 mb/d. However, this expansion slows from 2011 onwards when global demand growth recovers, leading to a narrowing of spare capacity to minimal levels by 2013. Since the 2007 MTOMR, significant downward revisions have been made to both non-OPEC supplies and OPEC capacity forecasts. Project delays averaging 12 months, coupled with global average decline of 5.2% – up from 4% last year – are the factors behind these revisions. Over 3.5 mb/d of new production will be needed each year just to hold global production steady. “Our findings highlight again the need for sustained, and indeed, increased investment both upstream and downstream — to assure that the market is adequately supplied,” stated Mr. Tanaka.

This is a very interesting report that should be read in full. Summary here and full pdf version of report here.

I aim to have a future post with quick breakdown of numbers for oil use in transportation and food production in the US shortly.

More drought news

Apparently problems delivering enough drinking water are global. Cyprus is experiencing shortages, and water tanked in from Greece to help is “smelly”:

Drought-stricken Cyprus is unable to distribute a shipment of water from Greece directly to households because it smells bad, authorities said Wednesday.

I am not sure why the normal system of desalinization is incapable of meeting the demand, but reservoir levels were stated to be extremely low – around 7%.

In Australia, a report warned that the lower reaches of the Murray-Darling river system needs more water, now, or it risks irreparable harm to the viability of the ecosystem:

But scientists have warned the federal government that the unique ecology of the lower reaches will be irreversibly damaged if there is not sufficient water flow by October — a deadline unlikely to be met by the plan, by Rudd’s own admission.

This river basin, which is responsible for a large (40ish%) of food production, “faced a 92 percent decline in irrigated agricultural production” by the end of the century. That is a rather bleak assessment.

Smart car crash video and electric car test drives

Ok, I gave the smart car some grief for its lackluster mileage. I am very impressed by how it handled this crash however.

This link has a video test drive of four electric vehicles in London. Included is an electric version of the smart fortwo, and apparently it isn’t for sale – lease only. It came in second on the range/speed ranks (71 mile range/ 60 mph top speed) behind the Micro-Vett Fiat Doblo, and was reviewed favorably. I think the other two in the test would be NEVs here in the states, meaning they couldn’t go on roads with speed limits over 35 mph. I am not sure about that though.

Crude – the incredible journey

Recently I found the link to this video on the OilDrum.  It is quite good, and does a good job of interlinking peak oil and global warming.  The video was very choppy for me, not sure which end of the connection was responsible for that!!

Crude – The Incredible Journey of Oil

http://www.abc.net.au/science/crude/

Mexican Referendum on PEMEX

The Mexico city government will hold a referendum on plans for the state oil company, PEMEX, to partner with foreign oil companies. Likely to fail due to organization by the PRD, this might make passage of the reform bill by the national Congress harder:

The July 27 referendum isn’t endorsed by the federal government, and won’t have any direct impact on the bill being debated in the Senate. Still, a lopsided vote against loosening restrictions on state-owned Petroleos Mexicanos may fuel more protests by opponents of the bill, said Jose Antonio Crespo, an analyst at the Center for Economic Research and Teaching in Mexico City.

I have not seen much in the news about progress on this front. Still, it appears there are some that think the reforms will pass. The two month period of debate that was announced in response to the sit-in that shut down Congress in April is due to end very soon. Not sure how quickly action on the pending bill will proceed thereafter.

Production of crude in Mexico dropped 5.3% from 2006 to 2007.  Net exports dropped a whopping 14.9%, and the amount exported to the US fell 10.1%. Link.  This is not good news in the US about a country that ranked second on our imports list.  Apparently this trend will continue for some time:

29-04-08 Mexico will reduce its crude oil exports to the US by an average of 184,000 bpd throughout 2008, a situation that could continue for 2 years longer.  According to PMI Comercio Internacional, the Petroleos Mexicanos affiliate in charge of marketing, a reduction in US-bound exports for 2008 — and possibly until 2010 — was due to Mexico’s reduced oil output.

That would be a 12% drop from 2007 to 2008.  Sadly it looks like the total year numbers might be lower than that, as May export numbers dropped about 10% over April.  I am not sure of what special events might have contributed to this, perhaps tropical storm Arthur had an impact.  I need to try and find data broken out by field, to see if Cantarell’s decline can be isolated.

In a related note, apparently gas shipments to areas near the US border are being reduced to try and combat US drivers crossing the border to fill up on cheaper Mexican gas and diesel.

However, it appears that US consumption has been drastically reduced throughout this year, so the reduction in imports might be outweighed by reduced demand.