February 2009 Archives

Presidents and Prime Ministers are normally big picture people, so it's not surprising that when US President Barack Obama and Canadian Prime Minister Stephen Harper met last week in Ottawa, the Canadian Embassy confirmed that they did not talk about Section 526.

For those who are blissfully unaware of obscure legislative references, Section 526 is a provision in the US Energy Independence Act of 2007. It prohibits Federal agencies from buying an alternative or synthetic transportation fuel produced from non-conventional petroleum sources if the lifecycle greenhouse gas emissions associated with that fuel (from production to refining to consumption) are greater than such emissions from fuel produced from conventional petroleum sources.

Living in the northeast US, I often have been asked by neighbors what is the better option for heating a house: natural gas or heating oil. I have oil, but don't have the option for gas, since the local utility hasn't run a pipeline down my relatively small street.

In the past I would always reply that I favored oil. Natural gas supply in the US is limited and can't be bolstered by significant imports from abroad, I would tell them. By contrast, a surge of heating oil imports from a wide range of places, with minimal sulfur restrictions that might slow the supply, would always be available to put an end to a price surge created by a prolonged drop in the temperature.

The notion of freeing ourselves in the US from foreign oil is a bumper-sticker type slogan that may as well be as old as the original automobiles. Another popular and populist refrain of late is that we can do so by boosting domestic renewable energy and making transmission systems improvements. But US power statistics put the lie to that idea, at least in the near term.

Unlike many Third World countries, oil use in US power plants is negligible. The share of power generated from petroleum liquids of the country's net generation capacity was 1.1% for 2008 through November, according to an Energy Information Administration monthly report issued earlier this month. Therefore adding renewable energy in the power sector has little to directly do with cutting oil demand.

With credit drying up and pinching much of the oil industry in the drill bit, it is perhaps not surprising that the mammoth rig-building boom of the last few years has virtually ground to a halt.

When asked about oil policy and OPEC's March meeting at a Platts Podium yesterday, a clearly uncomfortable and ill prepared Energy Secretary Steven Chu told reporters that he felt like he's been thrown "into the deep end of the pool."

It could have been poor staff work. Surely, if not Chu himself, someone at DOE should have anticipated an OPEC question or two.

In an interview with the Canadian Broadcasting Corporation prior to his February 19 with Canadian Prime Minister Stephen Harper, President Obama didn't respond when asked if he considers oil sands "dirty oil." During the presidential campaign Obama pledged to break the US addiction to "dirty, dwindling and expensive oil."

Obama did acknowledge that oil sands "creates a big carbon footprint." The dilemma, he said, is "how do we obtain the energy we need to grow our economies in a way that is not rapidly accelerating climate change." Canada and the US "can collaborate on ways that we can sequester carbon, capture greenhouse gases before they are emitted into the atmosphere," he said.

US President Barack Obama's 6-hour trip to Ottawa on Thursday, while brief and lacking in the pomp and circumstance normally associated with presidential trips abroad, will arguably be one of the most important of the early period of his presidency.

Canada is the largest trading partner of the US, particularly in the energy and transportation industries. So how the two countries work out some particularly difficult issues running the gamut from the so-called "smart grid" technology in the power sector to carbon sequestration and cap-and-trade will have dramatic impacts in both countries for years to come.

From CERA in Houston to IP Week in London, here are a few tidbits I've picked up:

The oil and gas industry is viewing with extreme alarm Interior Secretary Ken Salazar's decision to extend by six months the comment period for the Bush administration's draft offshore leasing program.

Secretary Salazar's announcement "means that development of our offshore resources could be stalled indefinitely," said Jack Gerard, president of the American Petroleum Institute. "That would delay Americans' access to nearly 160,000 new, well-paying jobs, $1.7 trillion in revenues to federal, state and local governments and greater energy security." In these tough economic times, "Salazar's delay does a disservice to all Americans," Gerard said.

One of the sources of conflict in the long-running war of words between the Peak Oil school and Cambridge Energy Research Associates was explained at the CERA annual meeting today...sort of.

That wasn't the message at a breakfast session at CERA's annual meeting here in Houston, but the skepticism was palpable.

James Placke, a CERA senior associate, described the terms in the upcoming Iraq bid round as "very, very onerous." "The Iraqis set the targets, they control the operations and the companies pay the bills," Placke told a breakfast meeting.

They say bad things come in three, so here's the third installment of a triumvirate of discouraging news items.

Alberta's oil sands industry has taken considerable heat for its environmental sins, and now an ecclesiastical voice is added to the secular critics.

"I am forced to conclude that the integrity of creation in the Athabasca Oil Sands is clearly being sacrificed for economic gain," Luc Bouchard, the Roman Catholic Bishop of St. Paul in Alberta, wrote in a pastoral letter last week. "The proposed future development of oil sands constitutes a serious moral problem."

Merrill Lynch's latest report on commodity prices is yet another in a series of discouraging reports about supply forecasts for the next few years. It's nothing new, but it is fairly succinct and to the point.

It's official--the Golden Age of Refining is kaput.