America Flips Switch On First New Nuclear Reactor in 7 Years

By Charles Kennedy - Jul 31, 2023

The United States has started operations on its first new nuclear reactor in seven years, in a development hailed as having a positive impact on the climate as it releases no greenhouse gas emissions. 

The Waynesboro, Georgia-based Unit 3 reactor at Plant Vogtle began delivering power to the grid on Monday after having successfully completed tests this spring.

The Westinghouse AP1000 commercial reactor is now generating some 1,110 megawatts of energy to power around half a million homes and businesses, according to its grid operator, Georgia Power, as reported by CNBC. The reactor will be able to operate at this level for as long as eight decades.

The nuclear milestone is the first new reactor to be put into operation since 2016, in Tennessee. 

The debate continues over whether nuclear power is a friend or foe to the climate. 

The anti-nuclear lobby feels that nuclear energy is not a legitimate element of the renewable transition, citing meltdown risks and dangerous storage of nuclear waste fuel. 

Proponents, on the other hand, argue that there have been major advancements in the treatment and storage of nuclear waste fuel, and that the U.S. has a clean track record in terms of dangerous accidents. 

Another hurdle is American dependence on Russia for uranium to power nuclear reactors. The U.S. imported some 14% of its uranium and 28% of all enrichment services from Russia in 2021 and is actively pursuing alternatives for uranium as a nuclear fuel. 

Russia is home to one of the world’s largest uranium resources with an estimated 486,000 tons of uranium, the equivalent of 8% of global supply. It also houses the biggest uranium enrichment complex in the world, accounting for nearly half of the global capacity. 

Japan Considers Subsidy Grants To Revive Nuclear Power

By Tsvetana Paraskova - Jul 26, 2023

Japan’s nuclear energy policy has been transformed by last year’s energy crisis, with the country now looking to boost its nuclear industry.

The country is now considering granting subsidies to help with the necessary safety upgrades at nuclear power plants that are idle.

Nuclear power currently accounts for just 6% of Japan’s power generation mix, but the country is looking to boost that number.

Japan, which has made a U-turn in its nuclear energy policy in the wake of last year’s energy crisis, is considering granting subsidies to help with the necessary upgrades at nuclear power plants that are currently idle.

Nuclear power stations in Japan will be invited to take part in an auction in 2024 to get government subsidies for the necessary safety upgrades, Bloomberg reported on Wednesday, citing documents of the Japanese Ministry of Economy, Trade and Industry. The winning projects would give the nuclear power plants subsidies for 20 years that would help cover the costs for meeting the much stricter safety standards after the Fukushima disaster in 2011.

In the wake of the disaster, Japan closed all its nuclear power plants that underwent rigorous safety checks and inspections.

In recent years, Japan has restarted part of its nuclear power facilities. The first two reactors restarted in August and October 2015, with a further eight having restarted since. A total of 16 reactors were in the process of restart approval as of February 2023, according to the World Nuclear Association.

Nuclear power currently accounts for just 6% of the power generation mix in Japan, down from 30% before Fukushima.

However, the resource-poor country which needs to import about 90% of its energy requirements made a U-turn in its nuclear energy policy at the end of last year, as its energy import bill soared.

Japan is bringing back nuclear power as a key energy source, looking to protect its energy security in the crisis that led to surging fossil fuel prices. The Japanese government confirmed in December 2022 a new policy for nuclear energy, which the country had mostly abandoned since the Fukushima disaster in 2011.

A panel of experts under the Japanese Ministry of Industry decided that Japan would allow the development of new nuclear reactors and allow available reactors to operate after the current limit of 60 years.

By Tsvetana Paraskova for Oilprice.com

New Catalyst Efficiently Cleans Methane From Natural Gas Exhaust

By Brian Westenhaus - Jul 27, 2023

The novel catalyst, created using single or few palladium atoms, has demonstrated the ability to remove methane from natural gas engine exhaust at temperatures less than 350° Celsius while maintaining stability at higher temperatures.

The significance of this catalyst lies in its ability to form highly active two- or three-atom clusters at low temperatures, which efficiently break apart methane molecules and then disperse back into single atoms at high temperatures.

Although the technology is still in its research phase, it promises to greatly improve the efficiency and environmental impact of natural gas engines.

A Washington State University catalyst design using a single or just a few palladium atoms removed 90% of unburned methane from natural gas engine exhaust. The research showed that the single-atom catalyst was able to remove methane from engine exhaust at lower temperatures, less than 350° Celsius (662° Fahrenheit), while maintaining reaction stability at higher temperatures.

The research effort between Washington State University and SLAC National Accelerator Laboratory has been reported in the journal, Nature Catalysis.

Yong Wang, Regents Professor in WSU’s Gene and Linda Voiland School of Chemical Engineering and Bioengineering and a corresponding author on the paper noted, “It’s almost a self-modulating process which miraculously overcomes the challenges that people have been fighting – low temperature inactivity and high temperature instability.”

Natural gas engines are used in about 30 million to 40 million vehicles worldwide and are popular in Europe and Asia. The gas industry also uses them to run compressors that pump natural gas to people’s homes. They are generally considered cleaner than gasoline or diesel engines, creating less carbon and particulate pollution.

However, when these natural gas-powered engines start up, they emit unburnt, heat-trapping methane because their catalytic converters don’t work well at low temperatures. The catalysts for methane removal are either inefficient at lower exhaust temperatures or they severely degrade at higher temperatures.

Co-author Frank Abild-Pedersen, a staff scientist at SLAC National Accelerator Laboratory explained, “There’s a big drive towards using natural gas, but when you use it for combustion engines, there will always be unburnt natural gas from the exhaust, and you have to find a way to remove that. If not, you cause more severe global warming. If you can remove 90% of the methane from the exhaust and keep the reaction stable, that’s tremendous.”

A single-atom catalyst with the active metals singly dispersed on a support also uses every atom of the expensive and precious metals, Wang added. “If you can make them more reactive, that’s the icing on the cake.”

In their work, the researchers were able to show that their catalyst made from single palladium atoms on a cerium oxide support efficiently removed methane from engine exhaust, even when the engine was just starting.

They found that trace amounts of carbon monoxide that are always present in engine exhaust played a key role in dynamically forming active sites for the reaction at room temperature. The carbon monoxide helped the single atoms of palladium migrate to form two- or three-atom clusters that efficiently break apart the methane molecules at low temperatures.

Then, as the exhaust temperatures rose, the sub-nanometer-sized clusters re-dispersed to single atoms again so that the catalyst was thermally stable. This reversible process enables the catalyst to work effectively and uses every palladium atom the entire time the engine was running – including when it started cold.

Christopher Tassone, a staff scientist at SLAC National Accelerator Laboratory and co-author on the paper commented, “We were really able to find a way to keep the supported palladium catalyst stable and highly active and because of the diverse expertise across the team, to understand why this was occurring.”

The researchers are working to further advance the catalyst technology. They would like to better understand why palladium behaves in one way while other precious metals such as platinum act differently.

The research has a way to go before it will be put inside a car, but the researchers are collaborating with industry partners as well as with Pacific Northwest National Laboratory to someday move the work closer to commercialization.

In addition to Wang, Abild-Pedersen, and Tassone, Dong Jiang, senior research associate in the Voiland School, also led the work. The work was funded by the U.S. Department of Energy’s Office of Basic Energy Sciences.

***

It might be a surprise to North Americans that there are so many natural gas fueled vehicles. In North America one will find some propane vehicles although very few are on road machines.


That there is so much concern for methane in the exhaust one might think that fuel management systems could be quite simple or primitive. Just how the machine can be running so rich as to expel unburned fuel is something of a mystery in the 21st century.

Perhaps some effort might be directed to fuel management and efficiency as well. That might get more positive consumer attention than a precious metal catalyst.

By Brian Westenhaus via New Energy and Fuel

Why The World Just Can’t Kick Coal

By Robert Rapier - Jul 27, 2023, 3:00 PM CDT

U.S. coal demand has decreased due to the increased availability of natural gas, growth in renewable energy sources, and stricter environmental regulations.

Despite the decline in the US, global coal consumption, especially in Asia and China, which consumes 55% of the world's coal, continues to rise due to the relative cheapness and abundance of coal, and rapid industrialization.

Coal demand rebounded in the US and EU in 2021 and 2022 due to the European energy crisis and increased coal burning as an emergency measure, raising concerns over the ability to reduce global greenhouse gas emissions.

In the U.S., coal demand has been on a downward trend for about 15 years. There have been three significant drivers behind this decline.

One of the primary reasons for the decline in U.S. coal demand is the increased availability and affordability of natural gas. The advent of hydraulic fracturing (fracking) and advanced drilling techniques led to a significant expansion of natural gas production, resulting in lower natural gas prices. Many power plants have shifted from coal to natural gas as it produces fewer greenhouse gas emissions and can be more economically viable.

At the same time, there has been substantial growth in renewable energy sources like wind and solar. Falling costs and government incentives have made renewable energy more attractive for power generation, reducing the need for coal-based electricity.

Stricter environmental regulations on emissions, especially from coal-fired power plants, helped drive this shift. The regulatory changes were implemented to address air and water pollution, as well as climate change concerns. These regulations have made coal-based electricity generation less competitive compared to cleaner alternatives.

These are positive developments given coal’s role as the fossil fuel source with the highest carbon dioxide emissions. However, it’s very important to note that U.S. demand is small relative to the world. The U.S. uses only 6.6% of the world’s coal, so coal consumption trends outside the U.S. are even more important.

The news on that front isn’t nearly as positive.

Coal consumption is still high and growing in many developing countries, particularly in Asia. This is due to the relative cheapness and abundance of coal, as well as the rapid industrialization of these countries.

China, for example, consumes 55% of the world’s coal, and that consumption continues to rise. As a whole, the Asia Pacific region is responsible for 81% of the world’s coal consumption, as well as the vast majority of the world’s ongoing carbon dioxide emissions.

China’s coal demand has increased for six straight years, setting new record highs in 2021 and 2022. Current heat waves in China have created a soaring demand for electricity, leading to unprecedented amounts of coal consumption at China’s more than 1,000 coal-fired power plants. As a result, China is on track to set a new record high for coal consumption in 2023.

This trend is set to continue. Last year the Chinese government approved a record-breaking 86 gigawatts of new coal-fired power capacity. This raises significant doubts about whether China can meet its emissions goals by 2030.

Although China is the single biggest coal consumer, trends in developed countries have reversed since 2020. Prior to 2020, developed countries, especially in Europe and North America, were significantly reducing their coal consumption.

But demand rebounded in the U.S. in 2021, and in the EU in 2021 and 2022. That trend has continued into 2023. The primarily culprit has been the energy crisis in Europe, with led several European countries to delay coal plant phase-outs and increase coal burning as an emergency measure to compensate for reduced Russian natural gas supplies.

Coal companies in the U.S., which had been battered for years, surged as coal demand bounced back. Peabody Energy, which hit a low of $1.05 per share in November 2020, is now around $22 a share. Arch Resources saw its profits jump 12-fold from Q2 2021 to Q2 2022, and its share price quadrupled in response. Consol Energy saw its share price go from $4 in 202o to nearly $70 today.

Thus, the market is being incentivized to continue producing coal, because despite the need to reduce global greenhouse gas emissions, coal consumption continues to grow.

With China consuming the lion’s share of coal, and with the Chinese government continuing to approve new coal-fired power plants, it is hard to be optimistic about the prospects for significantly reducing greenhouse gas emissions anytime soon. I will discuss the latest trends in greenhouse gas emissions in the next article.

In conclusion, while the challenges of reducing global coal consumption are significant, they may soon be overshadowed by the even greater challenges of curbing global oil consumption. There are viable alternatives for replacing coal, but the task of replacing oil is far more daunting because there are fewer economic alternatives. The decisions we make will ultimately be driven by the signals of change, but those signals are currently predominated by price and availability.

By Robert Rapier

Brazil And Guyana Are Fueling Latin America's Oil Resurgence

By Matthew Smith - Jul 27, 2023

Brazil, with 14.9 billion barrels of proven reserves, is aiming to boost oil output to 5.4 million barrels per day by 2029, potentially becoming the world's fourth-largest oil producer.

Guyana, following a series of discoveries by Exxon since 2015, is becoming an increasingly important player in the global oil sector, currently producing around 400,000 barrels per day.

Latin America's oil sector, led by Brazil and Guyana, is projected to expand significantly over the next decade.

The near collapse of Venezuela’s once colossal oil industry under the weight of endemic corruption‚ and strict U.S. sanctions, along with Mexico’s sputtering mature oil fields, saw Latin America’s economically crucial hydrocarbon sector fall into decline. By 2020, Venezuela’s oil output had crashed to an all-time annual low of 569,000 barrels per day, while Mexico’s sputtering aging oilfields pumped less than 1.7 million barrels daily. Then a series of world-class offshore discoveries in Brazil’s territorial waters captured the attention of energy supermajors and put Latin America back on the world hydrocarbon map. That was followed by Exxon’s world-class offshore discoveries in Guyana, which put the tiny South American on track to become a leading global petroleum producer and exporter. These events see Latin America poised once again to become a global hydrocarbon powerhouse once again.

Brazil’s national oil company Petrobras made the first offshore deepwater pre-salt oil discovery in the Santos Basin in 2006, with the first oil being pumped a mere two years later. Those vast pre-salt reservoirs continue to deliver major world-class discoveries which have endowed Brazil, according to data from the regulator, the National Agency of Petroleum, Natural Gas and Biofuels, with 14.9 billion barrels of proven or 1P reserves. This now sees Brazil holding the second largest oil reserves in Latin America after Venezuela and ranked 16th globally. Those impressive oil reserves, along with ongoing discoveries, are sustaining Brazil’s epic offshore petroleum boom. There are clear indications Brazil’s hydrocarbon reserves and production will continue to expand.

The Ministry of Mines and Energy is targeting significant production growth. The ministry is doing this by implementing strategies to develop existing basins and lift output to 5.4 million barrels per day by 2029. If that ambitious target is achieved, it will make Brazil the world’s fourth-largest oil producer. For May 2023, Brazil pumped an average of 3.2 million barrels per day, which was an impressive 11% greater than the equivalent period a year earlier. Total hydrocarbon output was 4.1 million barrels of oil equivalent per day for May 2023, a notable 9% higher year over year. While Brazil’s hydrocarbon production is growing at a steady clip, there is still a significant way to go before the country is lifting more than 5 million barrels per day with 80% flowing from the pre-salt layer.

It will take a considerable investment in developing Brazil’s offshore hydrocarbon basins to lift production to the targeted volume. Petrobras, as part of its 2023 to 2027 strategic plan, has allocated $64 billion to developing exploration and production assets, with 67% of that amount to be invested in pre-salt operations. By 2027, Petrobras envisages lifting 2.5 million barrels of oil per day and another 600,000 barrels of natural gas, seeing the company pump 3.1 million barrels of oil equivalent per day, with 78% being sourced from pre-salt fields.

Brazil’s booming oil production is an important economic driver for Brazil. By 2012 Petrobras had become a key government policy tool seeing it emerge as the world’s most indebted oil company with the administration of President Dilma Rousseff looting its coffers to fund social programs and other policy initiatives. After a massive corruption scandal involving Petrobras and construction firm Odebrecht rippled through Brazil, eventually claiming Rousseff’s scalp, Petrobras was set on a more independent pro-business footing by her successor Michel Temer with that approach continued by his successor Jair Bolsonaro. There are fears that the return of Luiz Inácio Lula da Silva, known as Lula, to the presidency, will lead to further heavy-handed government intervention.

It isn’t only Brazil which has brought the spotlight back on Latin America’s oil industry. Neighboring Guyana is following in the footsteps of Latin America’s largest oil producer after global energy supermajor Exxon discovered oil in the former British colony’s territorial waters in 2015. Since that discovery in the Stabroek Block, Guyana has emerged as what is being called the world’s hottest offshore frontier oil play. More than 35 discoveries have endowed the impoverished country of around 800,000 people with over 11 billion barrels of oil. The Exxon led consortium’s accelerated development of the Stabroek Block, with it taking four years to go from the first discovery to first oil, sees Guyana pumping around 400,000 barrels per day.

Georgetown plans to auction 14 blocks during 2023, although for the third time, it has been delayed until mid-August 2023 so the government can finalize changes to the regulatory framework. Those reforms include introducing a new Production Sharing Agreement (PSA), which will increase the royalty from 2% to 10%, reduce the cost recovery limit from 75% to 65% and introduce a 10% corporate tax. While those terms are less advantageous than those secured by Exxon for the Stabroek Block, they are still competitive compared to other countries in the region.

Guyana’s first-ever oil auction is intended to reduce the country’s dependence on Exxon. It will do this by attracting other petroleum explorers and producers to the South American country’s territorial waters. Given the considerable petroleum potential believed to exist in Guyana’s shallow water and deepwater blocks, further oil discoveries are only a matter of time. Analysts estimate Guyana will be lifting 1.2 million barrels per day by the end of 2027, making the former British colony become a leading global oil exporter. This is delivering a mega economic boom for Guyana, which will have the fastest growing economy during 2023, with gross domestic product forecast by the IMF to expand by 37.2%.

There are signs that Latin America's hydrocarbon sector will expand substantially over the next decade despite heightened geopolitical risk, the clean energy transition and looming peak oil demand. Venezuela’s oil output is growing because of assistance from Iran while U.S. sanctions are being loosened with supermajor Chevron permitted to lift oil in the crisis-riven country. Argentina is undergoing an onshore unconventional hydrocarbon boom as the Vaca Muerta shale body is developed. While those will boost hydrocarbon production in Latin America and the Caribbean, it is Brazil and Guyana which are driving the massive explosion in oil production expected in the region. Those two countries alone will add up to 3 million barrels per day to Latin America and the Caribbean’s oil output, but that will occur at a time when petroleum prices are under pressure from falling global demand due to the clean energy transition. That makes it a race against time for oil producers in the region to exploit their hydrocarbon wealth.

The Oil Eldorado: Guyana's Stabroek Block Surpasses Analyst Expectations

By Matthew Smith - Jul 26, 2023

Oil estimates for the Guyana Suriname Basin, particularly Guyana's Stabroek Block, are being revised upwards, with Exxon's 35 discoveries believed to contain over 11 billion barrels of oil.

Various oil discoveries in both Guyana and Suriname indicate the presence of up to 32 billion barrels of oil resources in the basin, a number that is likely to grow as exploration and development operations escalate.

The surge in oil resources is attracting foreign energy companies and investment, fueling what is projected to become South America's largest oil boom and promising significant economic benefits for Guyana and Suriname.

Tiny South American country Guyana, which has a population of less than one million, recently emerged as the world’s hottest offshore frontier drilling location. After Exxon’s slew of world-class oil discoveries in the offshore Stabroek Block, the first occurring in 2015, big oil was captivated by the petroleum potential held by the Guyana Suriname Basin. This saw foreign energy companies, including Malaysia’s Petronas, France’s TotalEnergies and U.S.-based Chevron in recent years acquire interests in a range of blocks in offshore Guyana and Suriname. Both impoverished former colonies possess the petroleum potential to become major oil producers and exporters, with Guyana well ahead of Suriname when it comes to developing its considerable oil resources. There are clear signs that the Guyana Suriname Basin contains significantly more petroleum than originally estimated.

It is becoming increasingly evident that the U.S. Geological Survey (USGS) grossly underestimated the volume of oil contained in the Guyana Suriname Basin. In a May 2001 assessment of undiscovered conventional oil and gas resources in South America, the USGS determined the Guyana Suriname Basin contained 2.8 billion to 32.6 billion barrels of oil with mean resources of 15.2 billion barrels. At the time, due to the lack of drilling success in the basin, the assessment appeared accurate. Nonetheless, those conservative numbers are now being challenged by Exxon’s 35 discoveries in the Stabroek Block alone, where the supermajor believes it has discovered more than 11 billion barrels of oil.

There has been a slew of other discoveries in Guyana’s territorial waters. The most recent occurred at CGX Energy’s Wei-1 wildcat well in the northern tip of the Corentyne Block, which is contiguous with the Stabroek Block, where 210 feet of hydrocarbon-bearing sands in the Santonian interval was identified. Analysts believe the success of the Wei-1 exploration well, along with CGX’s earlier discovery at the Kawa-1 exploration well roughly nine miles to the southeast of the Wei well, is particularly important for the oil boom occurring in the Guyana Suriname Basin. This indicates the prolific petroleum fairway contained in the Stabroek Block runs through the north of the Corentyne Block and into neighboring Block 58 in offshore Suriname, where TotalEnergies and partner Apache have made five discoveries.

Frontera Energy, CGX’s 68% partner in the Corentyne Block and majority owner, had an independent resource evaluation for its Guyana Blocks conducted during 2021. This evaluation determined the Corentyne Block contains 1.7 billion to 10.7 billion barrels of oil resources with nearly one billion barrels of mean risk oil resources. In a late 2022 report, industry consultancy S&P Global Commodity Insights determined that more than 15 billion barrels of oil have been discovered in Guyana’s territorial waters since Exxon’s first Liza discovery in 2015. That number alone indicates that the USGS substantially underestimated the volume of petroleum contained in the Guyana Suriname Basin.

This becomes more apparent when it is considered that Block 58 offshore Suriname, where 50% partners TotalEnergies and Apache have made five commercial discoveries, is thought to contain up to 6.5 billion barrels of oil resources. Already flow testing at the Sapakara and Krabdagu discoveries in the block has identified there are over 800 million barrels of oil resources in place, with more to be discovered. Based on the numbers for the Stabroek as well as Corentyne Blocks in Guyana’s territorial waters and Block 58 in offshore Suriname, there are easily up to 32 billion barrels, or even more, of oil resources contained in the Guyana Suriname Basin.

That number will only grow as the tempo of exploration and development operations in the basin gain pace. There have been other discoveries in the Guyana Suriname Basin that have yet to be evaluated and determined whether they are exploitable. These include Exxon, along with partner Malaysia’s national oil company Petronas finding oil with the Slonea-1 exploration well in offshore Suriname Block 52 and Apache’s Baja-1 discovery in Block 53. Since 2015, there have also been a series of non-commercial discoveries in Guyana, which despite being deemed unexploitable for assorted reasons, including being water-bearing, further underscore the considerable oil potential contained in the Guyana Suriname Basin.

While TotalEnergies delayed the multi-billion-dollar final investment decision for Block 58, expected in 2022, because of conflicting drilling results and seismic data as well as a high oil-to-gas ratio, Paramaribo is pushing to attract other energy companies. This saw Surname’s government launch a series of oil auctions for the shallow water underexplored Demerara acreage, the latest of which closed at the end of May 2023 with several companies making qualified bids for three of the six blocks offered. In a series of earlier auctions, supermajor Chevron acquired interests in shallow water Block 5 and 7 as well as deepwater Block 42, where the operator Shell, in 2022, drilled the Zanderij-1 wildcat well where a non-commercial oil discovery was made.

Guyana is also focused on attracting further investment in its burgeoning offshore oil boom. Georgetown announced the first-ever petroleum auction in late-2022, which has since been delayed 3 times, now until mid-August 2023, as the government seeks to implement new contractual terms for the country’s production-sharing agreements. That auction sees a total of 14 blocks on offer, comprised of 11 deepwater and three shallow-water blocks, with a view to reducing dependence on the Exxon-led consortium lifting 400,000 barrels per day in the Stabroek Block. According to Reuters, Shell, Brazil’s national oil company Petrobras and Chevron were weighing whether to make bids earlier this year.

At the start of July 2023, it was announced that Guyana’s Environmental Protection Agency had approved Exxon’s ambitious drilling campaign in the Stabroek Block, where it plans to drill 35 exploration and appraisal wells. With the prolific petroleum trend in the Stabroek Block yet to be fully explored and the large volume of discoveries already made that have yet to be appraised, there are significant odds of further oil discoveries being made as that campaign progresses. Other companies such as CGX, Repsol and Shell are pushing ahead with their own drilling campaigns in offshore Guyana.

As foreign energy companies and capital pour into Guyana and Suriname, advancing further exploration and development activity, there is every indication that further world-class oil discoveries will be made. That will significantly boost the volume of exploitable oil resources in the basin to levels well above those estimated by the USGS, with the government organization claiming the geological body contains 15.2 billion barrels of mean undiscovered oil resources. Indeed, there is an estimated 16 billion barrels of exploitable oil resources discovered to date in the Guyana Suriname Basin, with various estimates indicating that it contains at least 27 billion barrels of oil resources. This considerable petroleum potential will fuel what is South America’s largest oil boom and deliver a tremendous economic windfall for Guyana and Suriname.

By Matthew Smith for Oilprice.com

Offshore Oil Stocks Flying As Investors Bet On A Deep Water Boom

By Alex Kimani - Jul 26, 2023

Offshore drilling companies have seen their share prices jump this year as a result of renewed appetite for offshore drilling and exploration.

One notable trend in the ongoing offshore boom is a large increase in deepwater and ultra-deepwater drilling.

Ultra-deepwater production is set to continue growing at breakneck speed to account for half of all deepwater production by 2030.

Stocks of offshore oil and gas drillers and producers have gone on a tear after recent contracts broke records, reversing their seven-year downturn that reached its nadir during the Covid-19 pandemic. Rising global petroleum demand, coupled with increasing deepwater exploration and drilling, has been keeping offshore contractors really busy.

Leading with impressive gains is deepwater drilling specialist, Transocean Ltd. (NYSE:RIG), whose stock has gained 99.1% in the year-to-date. RIG stock jumped nearly 10% over the past week after the company reported a three-year, $518 million contract to deploy one of its drillships in the Gulf of Mexico, the latest in a series of large transactions announced in recent months. The company has revealed that its aggregate incremental backlog associated with the latest contracts totals ~$1.2, bringing its total backlog to $9.2B. Meanwhile, rig rates have shot up to $480,000 a day, a 50%Y/Y increase and about triple the downturn’s lows.

Deepwater Boom

One notable trend in the ongoing offshore boom is a large increase in deepwater and ultra-deepwater drilling. Recently, the China National Petroleum Corporation (CNPC), the government-owned parent company of PetroChina, and Cnooc (OTCPK: CEOHF), kicked off ultra-deepwater exploratory drilling for oil and gas as the country looks to wean itself of foreign oil. According to Chinese news agency Xinhua Global Service, CNPC will drill a test borehole of up to 11,000 meters (36,089 feet), the country’s deepest ever, which will help it better understand the Earth’s internal structure better, as well as to test underground drilling techniques.Related: Oil Prices Drop As Market Awaits Fed’s Interest Rate Decision

CNPC’s borehole depth is not far from Qatar’s world record of 12,289 meters (40,318 feet) for a petroleum well depth that was drilled in the Al Shaheen Oil Field in 2008 or Russia’s Kola Superdeep well that reached a depth of 12,262 meters (40,230 feet).

In the oil and gas exploration and production (E&P) industry, deepwater is defined as water depth greater than 1,000 feet while ultra-deepwater is defined as depths greater than 5,000 feet.

But China is not the only country willing to drill to ridiculous depths in the pursuit of energy security.

Deepwater oil and gas production is set to increase by 60% by 2030, to contribute 8% of overall upstream production, according to a new report from Wood Mackenzie, as cited by Rig Zone.

Ultra-deepwater production is set to continue growing at breakneck speed to account for half of all deepwater production by 2030.

Deepwater production remains the fastest-growing upstream oil and gas segment with production expected to hit 10.4 million boe/d in 2022 from just 300,000 barrels of oil equivalent per day (boe/d) in 1990. Wood Mackenzie has predicted that by the end of the decade, that figure will pass 17 million boe/d.

Norway's Aker BP (NYSE:BP) (OTCQX:AKRBF) is the latest oil major to make an ultra-deepwater discovery. At a total depth of 8,168 m, Aker BP says the well is the longest exploration well drilled in offshore Norway. The much bigger-than-expected oil discovery was made in the Yggdrasil area of the North Sea.

Preliminary estimates indicate a gross recoverable volume of 40 million-90 million barrels of oil equivalent (boe), much higher than the company’s earlier projection of between 18 million and 45 million boe. The discovery will significantly enhance the company’s resource base for the Yggdrasil development, which previously was estimated at 650M gross boe.The oil discovery is located within production licenses 873 and 442: In license 873, with Equinor ASA (NYSE:EQNR) and PGNiG Upstream Norway as partners. The plan for development and operations (PDO) for this project was submitted to Norwegian authorities in December 2022, with production scheduled to start in 2027.

Two years ago, U.S. oil and gas major Exxon Mobil (NYSE: XOM) made a big deepwater oil and gas find. Exxon announced that it had made two more discoveries at the Sailfin-1 and Yarrow-1 wells in the Stabroek block offshore Guyana, bringing discoveries on the block to more than 30 since 2015. Exxon revealed that the Sailfin-1 well was drilled in 4,616 feet of water and encountered 312 feet of hydrocarbon-bearing sandstone, while the Yarrow-1 well was drilled in 3,560 feet of water and encountered 75 feet of hydrocarbon-bearing sandstone.

Exxon did not disclose how much crude oil or gas it estimates the new discoveries to contain, but hiked a previous output forecast for the third quarter from older discoveries in the region.

The supermajor has boosted development and production offshore Guyana at a pace that "far exceeds the industry average”. Exxon’s two sanctioned offshore Guyana projects, Liza Phase 1 and Liza Phase 2, are now producing above design capacity and have already achieved an average of nearly 360K bbl/day of oil. The supermajor expects total production from Guyana to cross a million barrels per day by the end of this decade.

Exxon said a third project, Payara, is expected to launch by year-end 2023 while a fourth project, Yellowtail, could kick off operations in 2025.

Exxon is the operator of the Stabroek block where it holds a 45% interest while partners Hess Corp. (NYSE: HES) and Cnooc hold a 30% and 25% interest, respectively. Exxon’s oil and gas production are well below record levels, averaging 3.7M boe/day, nearly 9% below 4.1M boe/day set in 2016.

By Alex Kimani for Oilprice.com

Desertification: An Existential Crisis For Iran

By RFE/RL staff - Jul 30, 2023

• Iran is grappling with severe desertification and water scarcity, leading to potentially uninhabitable territories, contributing to internal migration and posing a threat of mass exodus.
• 
  
• Tehran's attempts to mitigate water scarcity have led to dam-building and water-intensive irrigation projects that have contributed to the drying up of rivers and underground water reservoirs, exacerbating the desertification problem.
• 
  
• Iran, one of the most water-stressed nations globally, faces potential conflict due to water scarcity, both internally and with neighboring states such as Afghanistan, adding to its socio-political challenges.r Community

Temperatures in Iran are hitting record highs, rivers and lakes are drying up, and prolonged droughts are becoming the norm, highlighting a water crisis that is turning much of the country’s territory to dust.

The desertification of Iran is occurring at a staggering pace, with officials last month warning that more than 1 million hectares of the country’s territory -- roughly equivalent to the size of Qom Province or Lebanon -- is essentially becoming uninhabitable every year.

The situation has Tehran scrambling to gain control of the situation in a country where up to 90 percent of the land is arid or semi-arid. But the clock is ticking to stave off what even officials have acknowledged could lead to an existential crisis and the mass exodus of civilians.

The warning signs were on full display this month. Temperatures in southwestern Iran hit a staggering 66.7 degrees Celsius (152 degrees Fahrenheit), higher than what is considered tolerable for human life.

Iranian scientists warned that the water levels of Lake Urmia, which is in severe danger of drying up, are the lowest recorded in 60 years. And in what has become routine, advisories were issued about the threat of suffocating dust storms.

As elsewhere in the world where temperatures are soaring, global climate change gets much of the blame. But the thermometer only tells part of the story on an issue Iran has been wrestling with for years.

“Exacerbated by decades of [international] isolation, mismanagement of local resources, rapid population growth, improper spatial distribution, and the consequences of a prolonged drought, Iran’s water crisis has entered a critical phase,” environmental expert Shirin Hakim told RFE/RL in written comments.

Water scarcity, and Tehran’s failed efforts to remedy it, is well documented. The problem has led to grand dam-building and water-intensive irrigation projects that have contributed to the drying up of rivers and underground water reservoirs. Clashes with neighboring states and anti-government protests in hard-hit areas of Iran have erupted over scant water resources. And the degradation of soil has contributed to the increase of dust and sandstorms that have helped make Iran’s air pollution among the worst in the world.

The accompanying loss of arable land has also harmed agricultural production, threatening livelihoods and leading to internal migration from the countryside to urban areas, which in turn could unleash a raft of related problems.

“Over time, the increased pressure on urban areas due to these migration patterns can strain infrastructure, natural resources, and create socioeconomic challenges,” said Hakim, a senior fellow at the Berlin-based Center for Middle East and Global Order (CMEG) and fellow at the Atlantic Council's GeoEconomics Center.

Mass Exodus?

Iran’s population has more than doubled since the 1979 Islamic Revolution, rising from about 35 million to almost 88 million, with about 70 percent of the population residing in cities. Tehran alone, Hakim said, “has seen an average influx of a quarter of a million people per year for the previous two decades.”

But as water scarcity and desertification make more and more territory unlivable, there are fears that a huge segment of the population might eventually have no option but to flee the country entirely in the face of what is arguably Iran’s most pressing policy challenge.

In 2015, Isa Kalantari, a former agriculture minister who at the time was serving as a presidential water and environment adviser, infamously predicted that, unless Iran changed its approach on water use, “Approximately 50 million people, 70 percent of Iranians, will have no choice but to leave the country.”

In July 2018, a month that saw violent protests over water shortages in the southwestern city of Khorramshahr as the country faced its driest summer in 50 years, then-Interior Minister Abdolreza Rahmani Fazli described the water situation as a “huge social crisis.” Fazli said water scarcity could fuel migration and significantly change the face of Iran within five years, eventually leading to “disaster.”

That deadline has passed, but the dire predictions and failed policies continue.

Iran is currently ranked by the World Resources Institute as one of the most water-stressed nations in the world, based on the impact on countries’ agricultural and industrial sectors, and routinely has been listed among the countries where water scarcity could lead to conflict.

That prospect became a reality earlier this year when Iran and Afghanistan engaged in deadly cross-border shelling. The clashes came after Tehran demanded that its neighbor release more upstream water to feed Iran’s endangered southeastern wetlands.

Internally, the threat of renewed anti-government protests over the lack of fresh water like those seen in the southwestern Khuzestan Province in 2021 highlight the ongoing challenge to Iran’s clerical leadership.

The UN Convention to Combat Desertification specifically addresses land degradation in arid, semi-arid, and dry subhumid areas. But those are not the only territories under threat in Iran.

Vahid Jafarian, the director-general of desert affairs for Iran’s Natural Resources Organization estimated that the country was losing 1 million hectares a year to desertification. He warned on July 19 that even Iran’s wetlands are being “turned into a center of fine dust” as underground reservoirs dry up and the country pursues water-intensive industrial development.

Kalantari, who last year said the fate of Iran’s clerical establishment could depend on the restoration of Lake Urmia, said in May that the drying up of what was once the largest lake in the Middle East could force the displacement of up to 4 million people.

The Solution

Iran has launched various initiatives to combat desertification, which Hakim said include dust and sandstorm management with countries in the region, the restoration of degraded soil and reforestation, addressing the overexploitation of water reserves, and the improvement of coordination among its various environmental bodies.

Iran is also a signatory to the UN Convention to Combat Desertification, is involved in efforts by the UN’s Food and Agriculture Organization to minimize the effects of sand and dust storms, and has attempted to address environmental concerns in its five-year development plan.

But Hakim said such measures “have been largely overshadowed by the consequences of chronic environmental mismanagement and corruption.”

Noting the continuation of ill-conceived hydraulic infrastructure projects and the overexploitation of groundwater resources that compound Iran’s water crisis, Hakim added, “these practices will likely contribute to increasing desertification threats” without substantial improvements in how the country manages its water.

By Michael Scollon via RFE/RL

Geothermal Energy: The Hot New Trend In Renewable Power

By Felicity Bradstock - Jul 30, 2023

• Countries worldwide, including the U.K., Japan, Kenya, and Indonesia, are looking to develop their geothermal energy capacities to diversify their renewable energy mix.
• 
  
• Technological improvements and increased funding for research and development are expected to expand geothermally viable regions and boost investor confidence.
• Activities range from assessing deep geothermal potential in the U.K. and commercialising new geothermal technology in Germany, to assisting regional development of geothermal resources in Africa and extending geothermal energy programs in Indonesia.

An increasing number of countries are exploring the potential to develop their geothermal energy capacity as governments look to expand their energy portfolios to include a broader range of renewable sources. As the U.K. assesses its deep geothermal potential, a major Japanese utility is betting big on geothermal energy in Germany, and Kenya is taking a regional approach to developing capacity. Greater investment in the sector is expected to continue supporting technological breakthroughs to draw investor interest and make operations more economically viable. 

Geothermal operations use steam to produce energy. This steam is derived from reservoirs of hot water, typically a few miles below the earth’s surface. The steam is used to turn a turbine, which powers a generator to produce electricity. There are three varieties of geothermal power plants: dry steam, flash steam, and binary cycle. Dry steam power plants use underground steam resources, piping steam from underground wells to a power plant. Flash steam is the most common form, using geothermal reservoirs of water with temperatures above 182°C. The hot water travels through wells in the ground under its own pressure, which lessens the higher it travels to produce steam to power a turbine. Finally, binary steam power plants use the heat from hot water to boil a working fluid, typically an organic compound with a low boiling point, which is then vaporised in a heat exchanger and used to turn a turbine.

British Geological Survey (BGS) and Arup, a British engineering consultancy, recently developed a White Paper entitled ‘The case for deep geothermal energy — unlocking investment at scale in the UK’, funded by the U.K. government. It aimed to assess the opportunities for constructing deep geothermal projects across the country to help diversify Britain’s renewable energy mix. To develop deep geothermal systems, companies must drill deep wells to reach higher-temperature heat sources at depths of more than 500 m. There is significant potential to develop these resources in the U.K., but the complex drilling operations come at a high cost, which has so far deterred developers. 

However, as technologies are improving, thanks to greater funding for research and development in the renewable energy industry, the number of areas where geothermal exploitation is economically viable is expected to increase. Most of the U.K.’s deep geothermal resources can be found in deep sedimentary basins across the country. The White Paper recommends that the government promotes geothermal energy as one of the U.K.’s renewable energy resources to boost investor confidence and promote awareness of the energy source. The establishment of a regulatory body could also support the development of new projects, while a licensing system could help streamline future projects.  

In Japan, one of the country’s biggest utility groups, Chubu Electric Power, announced plans to buy into a geothermal energy project in Germany. Chabu is purchasing a 40 percent stake in the company, which plans to develop first-of-its-kind geothermal power and district heating project in Bavaria. It will use Eavor-Loop technology developed by Canadian start-up Eavor, transforming sub-surface heat from the Earth’s core into renewable energy, without the need to discover underground hot-water reservoirs. Chabu already invested in Eavor itself in 2022 and hopes to promote the commercialisation of the new technology in Germany. 

Meanwhile, in 2022, Kenya – which drilled its first geothermal well in the 1950s and opened its first power plant in 1981, came seventh in the world for geothermal energy production. Kenya produces around 47 percent of its energy from geothermal resources. It is one of only two African countries, alongside Ethiopia, that produces geothermal energy. The East African country hopes to assist neighbouring states with their geothermal ambitions, in a bid to support the regional development of clean energy resources in line with the global green transition. KenGen, the government entity that operates Kenya’s geothermal power plant, is providing technical support to other countries in the region, having already drilled multiple geothermal wells in Ethiopia and Djibouti to assess their potential. 

And this month, the governments of Indonesia and New Zealand confirmed their cooperation in geothermal energy projects. Indonesia-Aotearoa New Zealand Geothermal Energy Program (PINZ) has been extended for 2023-2028, with a funding commitment of $9.9 million from the New Zealand government to develop Indonesia’s geothermal industry. This partnership has existed for over a decade, to support Indonesia’s clean energy transition. 

Several governments around the globe are increasing their investments in research and development into geothermal energy, aiming to diversify the renewable energy mix and reduce reliance on any single energy source. Investment into geothermal energy technology in recent years has already led to advancements that are expected to make new operations more economically viable, with further breakthroughs expected to come as the global geothermal market is established. 

By Felicity Bradstock for Oilprice.com

 

Biden Administration Proposes Hike In Fuel Economy Standards

By Charles Kennedy - Jul 31, 2023

The Biden Administration is proposing raising the fuel economy standards for passenger vehicles and light trucks by 2032 in an effort to reduce fuel consumption and emissions.  

The U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) proposed fuel economy standards for passenger cars and light trucks and fuel efficiency standards for model years 2027-2031 that increase at a rate of 2% per year for passenger cars and 4% per year for light trucks. NHTSA is also proposing new fuel efficiency standards for heavy-duty pickup trucks and vans (HDPUVs) for model years 2030-2035 that increase at a rate of 10% per year.

NHTSA currently projects that the proposed standards would require an industry fleet-wide average for passenger cars and light trucks of roughly 58 miles per gallon (mpg) in model year 2032 and an industry fleet-wide average for HDPUVs of roughly 2.6 gallons per 100 miles in model year 2038.  

The proposal is now open to comments for 60 days.

If finalized as proposed, NHTSA estimates that the combined benefits of the new standards would exceed costs by more than $18 billion. In addition, according to NHTSA, “the updated standards would save Americans hundreds of dollars at the pump, all while making America more energy secure and less reliant on foreign oil.”

Commenting on the new proposed fuel economy standards, U.S. Transportation Secretary Pete Buttigieg said in a statement,

“Better vehicle fuel efficiency means more money in Americans’ pockets and stronger energy security for the entire nation.” 

This proposal is not as stringent as the April proposal from the Environmental Protection Agency (EPA) which proposed the toughest-ever tailpipe emission standards for new cars and trucks, aiming to accelerate the adoption of electric vehicles to the point of EVs becoming a larger portion of new sales than conventional vehicles by 2032.

John Bozzella, president and CEO of Alliance for Automotive Innovation, said, commenting on NHTSA’s fuel economy proposal, “At first glance it appears NHTSA tried to sync up these fuel economy rules with EPA’s 2027-2032 greenhouse gas emissions rules (with which we’ve already raised concerns).”

“The best policy would be a return to a single national standard to reduce carbon in transportation – one vehicle fleet and one national standard,” Bozzella added.  

By Charles Kennedy for Oilprice.com

 

British PM Says North Sea Drilling Bonanza Will Move Forward

By Charles Kennedy - Jul 31, 2023

As a battle over British energy sources intensifies, UK Prime Minister Rishi Sunak on Monday said the expansion of oil and gas drilling in the North Sea would go forward to ensure the country’s energy security. 

At the same time, and with the need to appease mounting opposition to these plans, the prime minister announced plans for the construction of two new CCS (carbon capture and storage) sites in the North Sea, to add to the two existing facilities. The new facilities ar expected to be completed by 2030. Sunak has insisted that plans to drill more in the North Sea would not prevent a net-zero transition by 2050. 

“Even when we’ve reached net zero in 2050, a quarter of our energy needs will come from oil and gas. But there are those who would rather that it come from hostile states than from supplies we have here at home,” Sunak said in a statement. 

In the third-quarter of this year, the UK intends to grant 100 new oil and gas drilling licenses for the North Sea, with potentially hundreds more to follow. 

Sunak’s decision was foreshadowed last week, when UK Energy Minister Grant Shapps announced that the government’s intention was to extract one-hundred percent of British North Sea oil and gas reserves. Shapps also warned that refraining from extracting all the North Sea has to offer would render the UK vulnerable to the weaponization of energy, such as the hold Russia has had over Europe in this respect. The UK imported 13 million metric tons of crude oil from Norway in 2021, along with 1.7 million tons of natural gas liquids, followed by some 11 million tons of oil and natural gas liquids from the United States.

By Charles Kennedy for Oilprice.com