Boom boom boom boom

Canada's oil boom has legs, IEA says

Surging demand in the developing world and oil-addicted consumers in the West will ensure at least five more years of tight petroleum markets, maintaining the boomtown momentum of Canada's oil patch, the industrial world's energy watchdog predicts. Unlike in the past, sharply higher oil prices have not dampened global demand, nor brought on sufficient new supplies of crude oil to offset declines in more mature fields, the International Energy Agency said yesterday. “Despite four years of high oil prices, this report sees increasing market tightness beyond 2010,” the IEA concluded in its medium-term forecast, released yesterday. The agency increased its five-year forecast for global oil demand from the one released six months ago, and reduced its expectation for more supply from non-members of the Organization of Petroleum Exporting Countries. As a result, the energy agency is forecasting “substantially higher cash returns to shareholders” of global oil companies, whether those owners are governments or private investors.

The IEA said the Canadian oil sands are among a few notable exceptions to the general trend of declining production outside of OPEC, with others including the former Soviet Union, Brazil and the deep waters in the Gulf of Mexico. Those four regions will account for the bulk of non-OPEC growth in crude supply over the next five years, offsetting steep declines in the North Sea, Mexico and the continental US. Peter Tertzakian, chief energy economist with Calgary-based ARC Financial, said the IEA outlook was extremely bullish for Canadian oil and gas producers, and underscores the ever-increasing appetite for oil sands production, even as costs there soar. “This report confirms what the market is already starting to believe,” Tertzakian said. “There had been a sense of complacency [about abundance of cheap energy], and that complacency should end.” The IEA noted that the demand for petroleum products continues to climb around the world, even though crude prices have tripled in the past four years. While growth in demand has slowed in the developed world, booming economies in Asia and the Middle East have taken up the slack. Indeed, Asia and the Middle East are expected to account for three-quarters of the demand growth between now and 2012. Globally, the IEA forecasts demand for crude oil products will grow 2.2% a year on average to 95.8 million barrels a day in 2012. It expects 1.3% average annual growth in North America, and 0.7% in Europe. But the agency forecasts 3.6% yearly growth in demand in emerging economies and developing world. At the same time, the agency is forecasting only modest growth in crude oil supplies, as producers struggle to offset declines from existing fields. While there will be some spare capacity among OPEC members in the next few years, that cushion will drop to “minimal levels” by 2012, it said. The IEA does not include a specific price forecast in its outlook, but with crude prices hovering above US$70 a barrel, it provides little hope for a significant easing.
(Globe and Mail, National Post 070710)

“There had been a sense of complacency [about abundance of cheap energy], and that complacency should end.”

...and we've built our entire society on this complacency. What is going to happen when our huge energy requirements aren't so cheap and plentiful anymore? Your guess is as good as mine. The effects will most likely differ in different parts of the world. I think North America, with it's huge oil overreach and personal mobility addiction is particularly vulnerable to the implications of expensive energy. In fact, since most Western countries import most of their oil, this is a huge point of concern for most.

I think to get over this hurdle is going to require a massive global efficiency and conservation effort.

Hopefully new supplies offset the rapid declines in such previously productive non-OPEC areas as Cantarell in Mexico, the North Sea, and OPEC areas like Kuwait's Burgan fields and the proposed possible plateau in Saudi Arabia's Ghawar (the mother of all megafields). I think some of the concern lies in the fact that traditionally, tapped out conventional fields decline very rapidly, especially if they have had remedial extraction techniques applied, and no one knows for sure how quickly some of the megafields, from which we get a large chunk of our global supply, will dwindle or how many years they have left in them. Many of the new fields are (currently) expensive or unprofitable to develop right now and are in the most remote regions of the planet. Many of the non-conventional fields require huge energy inputs to get any final-product processed oil out of which lowers their EROEI even further and makes them expensive - financially, environmentally, technologically.

Because Northern Alberta's sands are easier to process than central U.S oil shale or Venezuela's Orinoco Basin sands, it is a prime development target. Especially because of Canada's location and political and economic stability, it is being eyed with hungry eyes by all the U.S. majors. How much you're willing to give up to promote this development is a personal issue, but there's no doubt the boom in Calgary will most likely continue for some time to come. The chances of something happening in the next five years to seriously impact global demand are remote.

As for the alternatives....

Biofuel targets doubted by energy agency

The International Energy Agency questions the ambitious targets set by governments around the world to use ethanol and other biofuels to reduce oil imports and cut greenhouse gas emissions. In a report released yesterday, the agency said it is maintaining a cautious forecast on the production growth of biofuels, at least compared to some of the more aggressive promises of ethanol promoters. The agency, which monitors energy markets for the developed world, expects global biofuels production to double over the next five years, led by the US and Brazil. But most of that increase will come before 2010, and growth will then level off. The report says rising feedstock prices – including corn, sugar, wheat and oilseeds – and inadequate infrastructure for distribution remain serious impediments to their wholesale adoption. “Despite political support and enthusiasm for what is seen by some to be an important but only partial solution to the dependence on imported oil, the depletion of liquid hydrocarbons and growing carbon emissions, the economics of first-generation biofuels are still uncertain and raise doubts about whether the ambitious supply growth scenarios some sketch will be realized,” the report concluded. It forecast the biofuels will account for 13% of the overall growth in transportation fuels over the next five years, and 27% of growth in gasoline consumption. But they will still represent less than 2% of the total market for petroleum products.
(Globe and Mail 070710)