Triple Crunch Log Jeremy Leggett

Entering 2005: the great global energy crisis takes shape

The year 2005 began with Saudi Aramco deciding to drop the veil a little on its half-century of secrecy in an effort to calm the growing fears. Being a state-owned creature of the biggest oil producer, it is the biggest oil company in the world by far: some twenty times bigger than the biggest private-sector company, ExxonMobil. To counter the growing view that it has only 1 million barrels per day of spare capacity on top of its 9 million barrels a day of current production, the company promised spare capacity could be maintained at 1.5 to 2, and even professed that Aramco’s technical experts would be prepared to discuss details of how they will be able to hike production to 15 million barrels a day, and keep it at and above those levels for fifty years to come. But they refused to countenance letting independent auditors in. And still some 90 percent of their oil comes from just seven fields that are an average of 45-50 years old, including 5 million barrels a day from just one, Ghawar.⁴⁴ Energy investment banker Matthew Simmons duly told the Arab news agency al-Jazeera that he thinks Saudi oil may already have peaked because they have harmed the structure of the reservoirs in earlier phases of rapid pumping while trying to bring oil prices down.⁴⁵

Entering March, the New York Mercantile Exchange reported its first trade of an oil option with a strike price of $100.⁴⁶ Oil prices predictably surged again, this time to a new record of $57, with analysts attributing the new peak to speculators such as hedge funds.⁴⁷

At this stage the International Energy Agency, hitherto a standard bearer in the “no need to worry” brigade, called for an emergency oil-conservation plan. A leaked report concluded that restraint in importing countries “may be attractive in periods of high oil prices to relieve demand pressure”. These words went straight on the front page of the Financial Times.⁴⁸

In March, ChevronTexaco made a bid for middle-ranking oil company Unocal. Why would they do that if there was a fair chance oil prices might come down again? The buyer would be left looking rather silly, and much out of pocket, if that happened. One commentator in the San Francisco Chronicle ventured an opinion. “Reading between the lines, that means only one thing. Peak oil. We’re basically there.”⁴⁹

April saw another landmark in the unfolding story: the first mainstream bank to say that Saudi Arabian oil has peaked. A Bank of Montreal report concluded “Hubbert’s peak has arrived in Saudi Arabia”.⁵⁰

7.1.05. European emissions trading scheme comes into force: climate change en route to $multi-billion business. UK tried to lift National Emission Plan from 730 to 750 mt CO2 after heavy lobbying by power industry. Commission refused. Companies face fines of up to E40 per tonne if over quotas, or can trade surplus if under. Probably only c 10% will be traded. First phase until 2008: 2.2 billion carbon allowances issued to 14,000 plants across Europe. Carbon price currently E9 per tonne, meaning a market worth E 20m (£14m).

8.1.05. Saudi Aramco reveals some of its secrets – but not enough to please those requesting transparency.

22.1.05. Global warming could reach point of no return in 10 yrs: International Climate Change Taskforce.

30.1.05. Shell Chairman Ron Oxburgh says he wants to join the green lobby when he retires. Climate Change Capital turns out to be his choice.

1.2.05. US DOE report on peak oil predicts problems “unlike any yet faced by modern industrial society:” urgent action not an option. It is not published (but leaked). Reported 27.9.05. Consultants led by energy analyst Robert Hirsch. He likens oil optimists today to gas optimists of the late 1990s who anticipated growing US and Canadian supplies and reasonable prices for the foreseeable future.

12.2.05. Feedbacks are kicking in amplifying global warming, pre G8 scientific gathering tells governments. & 16.2.05.

16.2.05. Kyoto Protocol comes into force. Russia has finally come aboard.

19.2.05. 7 million oceanic temperature measurements down to 2,000 feet plus show irrefutable warming.

20.2.05. Simmons tells al-Jazeera that Saudi oil may already have peaked.

28.2.05. Taking the stand in his trial, Bernie Ebbers denies any role in the $11bn accounting fraud at Worldcom. The trial began 25 January.

x.3.05. Fatal blast at BP’s Texas City refinery.

4.3.05. Wall Street Journal warns of $80 oil.

10. 3.05. Evangelical leaders in USA commit to fight global warming.

12.3.05. $100 oil option trades for the first time on NYMEX.

15.3.05. Former Worldcom CEO Bernie Ebbers found guilty of fraud, conspiracy and filing false documents with regulators. (He is sentenced to 23.5 years on 13 July).

17.3.05. Oil hits new high of $57, pushed to this new peak by speculators.

18.3.05. Arctic National Wildlife Refuge drilling soon to begin – all for maybe 6 months supply in ten years time.

30.3.05. 31 US national security leaders advise Bush to reduce US oil consumption.

2.4.05. IEA soon to call for an emergency oil plan (report leaked to FT, on front page).

Morgan Stanley talk of a “super spike” pushes falling oil price back to $56.

Multi-agency Millennium Ecosystem Assessment shows ecosystems are being destroyed at increasing rates.

8.4.05. San Francisco Chronicle speculates that ChevronTexaco takeover of Unocal is related to peak oil.

12.4.05. BP’s Russian venture with TNK is hit with a $1 billion tax bill ….for 2001.

Bank of Montreal becomes first major financial institution to say Ghawar is over peak.

18.4.05. Exxon, sitting on a cash mountain of $25 b, comes under pressure to pay dividends or make acquisitions.

21.4.05. French investment bank Ixis-CIB warns that oil prices could touch $380 in 2015.

21.4.05. First peak oil fund launched: German investors target companies who will do well after the peak.

25 April 2005, Edinburgh

I sit on a stage facing a packed auditorium with Colin Campbell, Chris Skrebowski and Matthew Simmons. This is the first conference on oil depletion in the oil-rich nation of Scotland. The audience is firing questions at us. A Scottish celebrity broadcaster is chairing. It is late afternoon, and we have all given long talks earlier in the day. The event has been organized by a group of concerned private citizens who usually meet in a pub, yet the attendees include national and international media, politicians, civil servants, oil-industry executives, business people from many other industries and academics.

There is another category of attendee, one that is much on my mind as I think about the coming great global energy crisis. The leaders of the British National Party, otherwise known as the Fascists, have shown up. Five of the people in this sea of faces in front of me lead the nation’s card-carrying Nazis. I scan the audience, trying to guess which ones they are. I can well imagine why they are here. Type “Great Depression” and “Rise of Nazis” into Google and the answer would doubtless leap out. If there is mileage in this business of the oil peak, their thinking must go, the markets will topple, recession will turn into depression, the unemployment queues will explode. There will be armies of seriously disaffected people. The fertile breeding grounds of Nazism, last seen in the 1930s, will once again be with us: playgrounds for any sick thug with a working knowledge of the politics of power.

But they are not wearing their brown shirts and swastikas today. They are just sitting there, listening, learning and scheming in the privacy of their heads. I feel - how shall I put it - very ambivalent about this.

Today is the first time I have met Matthew Simmons. He flew in this morning from Houston in his Leer jet. He is everything I imagined him to be: sharp, clear, passionate about the problem, and bewildered that more people can’t see the crisis. I wonder what his peers and employees think of him, interrupting his profitable investment banking to fly half-way around the world to speak at the invitation of a bunch of British pub activists. He talked this morning of the urgent need for an early warning system and greater transparency. Some 95 percent of the world’s supposedly proven oil reserves are unaudited, he said, with an affronted air. Water and gas injection into oilfields can artificially prop up high pressures, but when pressures finally ebb there is no secondary game to play. We need to know for sure what is going on, given the stakes. Ten good analysts could find out in under a month where the global peak of production lies with data from the hundred biggest fields, he figures. But most of the data is kept secret by the companies. So we have to guess. And his best guess? The peak is close or even past. But let’s find out! Let’s deal with it! Why are we asleep at the wheel?

Not unnaturally, many of the questions are now being addressed to him. “When should I sell my BP shares?” asks one man. Simmons shrugs. “The big companies can’t drill their way to growth,” he replies.

“How likely is it that Saudi oil has already peaked?” asks another. “There is a chance it peaked as long ago as 1981,” Simmons responds.

“Was the war in Iraq an oil grab?” asks a third. “No way,” he insists.

Lest we forget, Matthew Simmons has been an energy adviser to George Bush, which is one of the many reasons why his story should be being taken far more seriously than it is. The celebrity chairman throws that one back to the audience and asks for a show of hands as to who thinks it was a war for oil. A forest of arms go up – the vast majority. I glance at Simmons, who is sitting next to me. “I’m really shocked,” he says. And he looks it.

He proves to be more of an optimist than I had imagined. The world can cope with post-peak oil, he asserts. The aftermath can be managed, if it is truly understood, by using the ultra-high revenue flows from the second half of the oil era in crash programmes to modernize energy infrastructure, maximise energy efficiency, create less energy-intensive transportation, and by directing oil to high-value uses. There will need to be consumption quotas. The industrialized world will need to go on an energy diet, while the likes of China and India get a bigger slice of the cake. Finally, there will need to be R&D Manhattan Projects to invent a new energy plan for the world.

But have we waited too long? Simmons doesn’t know. “I hope we have time,” he says. “This is, er, a major issue.”

And I scan the faces again, Fascist-spotting, wondering if these men I am with on stage and I are right, and actually hoping we are not. I have a recurrent argument with one of my friends. He is 100 percent certain the oil production topping point will happen this decade, and create what he calls the peak panic point with it. I tell him I am 98 percent certain. I am a scientist, I say. You can be 100 percent certain of very little in this world, with my kind of training. There is most certainly some potential for events to turn in a way that I and others have not thought of.

I spot a candidate in the audience. Yes, with a little imagination it is easy to see him wielding a baseball bat somewhere other than a playing field. I think of my one-year-old grandson and the decades ahead of him.

Yes, please let me be wrong.

x.05.05. GE launches “Ecoimagination” green technology initiative, saying “emissions reductions equal profitability.”

x.05.05. Banks are vetting investments on ecological and social as well as economic impact, Time Magazine reports.

x.05.05. UK insurer CIS opposes re-election of ExxonMobil CEO on “ethical grounds” at Exxon AGM: climate is the issue.

x.6.05. Cities from 5 continents meet in San Francisco to pledge Kyoto commitments: 140 US cities have signed up.

x.6.05. UK oil production suffered steepest fall of any country in 2004, annual statistics show.

x.6.05. Saudi reserves are in danger of collapse says Houston investment banker Matt Simmons in a book: “Twilight in the desert.”

x.6.05. Guardian ICM poll shows massive public concern on global warming.

x.6.05. Chinese oil company CNOOC, desperate for supply, trys to take over American oil company Unocal.

6.6.05. ExxonMobil takes out obscure advertisements saying the world faces “enormous challenges.” & July ASPO

x.6.05. NOAA: warming earth is definitely making hurricanes wetter, more powerful, and more dangerous.

30.6.05. BP announces a $600m UK sequestration project with SSE: natural gas to hydrogen for power, and CO2 piped back to North Sea for enhanced oil recovery. A world first combination. 350 MW power plant at Peterhead, enough for 250,000 homes. Will capture and store 1.3m tonnes CO2 pa. Q: does this include the whole lifecycle? What if the gas wasn’t produced in the first place? EOR: up to 40 mbd more in the Miller field, a field that peaked at 150,000 b and 220 mcf of gas a day. Note it is only feasibility stage. Design and economic feasibility not complete until 2006, not expected to begin operation until 2009.

x.7.05. Exxon CEO calls solar and wind energy “inconsequential” and says it will never meet needs.

3.7.05. Oil hits $60 as tropical storms cause shutdowns in the Gulf of Mexico.

6.7.05. Saudi Arabia won’t be able to meet expected demand in 2020, Saudi officials tell counterparts.

9.7.05. First report on ocean acidification says impact on sea life is catastrophic.

11.7.05. France brings in water rationing after worst drought for 40 years.

13.7.05. US Justice Department decides not to take criminal action against Shell over reserves scandal.

x.7.05. In global advertisements, Chevron talks of a coming global energy crisis: starts “willyoujoinus” website. Double page ads saying “It took us 125 years to use the first trillion barrels of oil. We’ll use the next trillion in 30.” “….one thing is clear: the era of easy oil is over. ….We call upon scientists, politicians and policymakers, environmentalists, leaders of industry and each one of you to be part of shaping the next era of energy.”

15.7.05. Shell’s costs double to $20 bn at the 3 bn barrel-equivalent Sakhalin oil and gas project. 9.1.05. 45 bb OE at Sakhalin 1 and 2. Shell owns 55% of Sakhalin 2. Budget first approved through 2014 was $10bn. now 20. Spending $100 per second. van der Veer has said “elephants” like this are vital to Shell’s future. 3 now underway, and he wants 10 at a time.

16.7.05. G8 Summit sets no targets on climate change as Bush Administration maintains isolated course.

19.7.05. Drought alert in UK after driest winter and spring for 30 years. With forests ablaze, crops failing, locust invasions and reservoirs empty, Europe is in the grip of the worst drought recorded. and see 6.8.

29.7.05. US launches 6-nation no-target clean-energy pact as vehicle to derail Kyoto.

11.8.05. “Warming hits ‘tipping point’” (front page): 1 m sq km of Siberia’s bogs are melting.

13.8.05. Oil hits $65 amid new concerns about Middle Eastern supply & strains on US refineries.

18.8.05. Long petrol queues in China cause Government to ban price rises by oil companies.

. BP castigated for “systemic lapses” of H&S at US refinery where fire broke out in March.

20.8.05. Climate sceptics oft-used data from satellites discredited by new studies.

x.8.05. Aramco’s former head of exploration & production says Saudi will never pump 20mbd, and struggle beyond 12. Interview with Aramco’s former head of exploration & production, Sadad al-Husseini. He had only recently retired. Nobody would know more than he about the true situation than he. He dismissed fears of imminent collapse, but professed himself worried that Saudi Arabia will never pump 20 million barrels per day, and will struggle beyond 12. We need 2-3 million barrels per day more each year at the current global growth rate in oil demand of around 1.8%, he said. We are depleting at 4-5 mbd each year. So in total we need to find 6-8 mbd of new oil each year (2.1 – 2.9 billion barrels per year)

. That amounts to one Saudi Arabia every year and a bit. How much did we bring on in 2005? 2.5 mbd (0.9 billion barrels in the year). al-Husseini’s conclusion, on the record, was stark. “It can’t be done indefinitely. It’s not sustainable.”

25.8.06. Nine US states: we will set independent target of 10% CO2 cuts by 2020 from big power plants. NJ to Maine, involving the same amount of emissions as Germany, but less ambitious than Kyoto. 600 power plants would be affected. In the west, Ca, Or, NM and Ar are considering the same. Check: how is this going? 130 US cities have already agreed to hit Kyototargets whatever the White House does.

31.8.05. Hurricane Katrina hits New Orleans: the oil price tops $70. Analyst: The most vulnerable part of the network is the undersea pipelines. 80% of NO underwater, in places 20 feet, 6 metres. 2.1m without power in Lo, Mi, Al and Fl. Bush considering opening the 700 mb strategic petroleum reserve. Riyadh says it will raise output by 1.5 mbd and pump at 11 mbd if necessary to help shortages.

1.9.05. French PM: “We have entered the post-oil era.” Pledges 75 euros to millions of families to pay fuel bills. “I want to draw all the consequences of this and give a real impulse to energy savings and the use of renewable energies.”

2.9.05. Rand Corporation says high oil prices could make shale oil viable: in 20-30 years if technological & environmental issues solved. Oil price would need to be $70-95. Processes: retorting (heating the rock), or in-situ heating. Recommends no federal money until industry invests. Water-use problems and environmental issues because of geog. concentration: risk of overstressing the area “then we will never see more than a few hunred thousand barrels per day of production.”

8.9.05. Scientists show England’s drying soils emit carbon to the atmosphere faster than emissions cuts.

16.9.05 “Meltdown: Massive loss of Arctic ice means global warming is now past point of no return:” front page headline. Satellites show record loss of August ice. The scientists reporting this don’t think it can stop. and see 29.09.05. A ship made it to the North Pole for the first time without the aid of an ice breaker in August. Oil, gas, fish and diamond “Klondikers” are gathering in Hammerfest, northern Norway, to exploit the melting ice (29.11.05).

16.9.05. Scientists show 2003 drought cut European plant growth by 30%: i.e. massive release of greenhouse gas.

22.9.05. High oil prices a risk to the global economy, says IMF. 18.9.05 summary in 30.9.05. Ernst and Young warn of dire consequences if the price hits $100.

23.9.05 IEA World Energy Outlook says non-OPEC peak will be “right after 2010”: says BAU “not sustainable.” in 30.9.05 on WEO 2005 to be published 7 Nov. Non-OPEC production is now at 60% of global total. 7.11.05. Forecast oil production is 115 mbd by 2030. IEA ED Claude Mandil says the projected trends “lead to a future that is not sustainable.” 15.11.05. Birol powerpoint for Reference Scenario (depicted as most probable) shows 29 mbd of the total 82 mbd 2004 production in MENA, and 50.5 mbd of 115 mbd 2030 production in MENA. What did WEO 2004 say? 12.05 ASPO. Analysis points to schizophrenia in the report. They infer the needed OPEC production is feasible, but will depend on doubled investment, for which the rationale ought to be clear to the Saudis. Questions: Even if they double investment, is the extra oil there? Steeper production means steeper decline: do they really have an interest in that?

23.9.05 UK Chancellor blames oil price as he trims UK growth forecasts. in 30.9.05. Brown also said he had contacted seven major oil companies and been assured they would spend 10% more on investment in the future drawing on windfall profits.

24.9.05. Iran threatens to switch oil & gas exports to China if nuclear row escalates. in 30.9.05. UK, France and Germany at risk if they maintain their efforts to curb Iran’s programme, top official says. Note: Iran is number two oil exporter, number two in gas reserves.

30.9.05. Venezuela threatens the same, for different reasons. Chavez does not want to be dependent on US. Bush gave tacit support to a 2002 coup that briefly saw him ousted. Venezuela is fourth largest supplier to US, exporting 1.4 mbd or 2/3 its total exports.

25.9.05. Blair says he is “changing his thinking” about the Kyoto treaty, falling into line with Bush. “The truth is no country is going to cut its growth or consumption substantially in the light of a long-term environmental problem. To be honest, I don’t think people are going, at least in the short term, to start negotiating another treaty like Kyoto.” Places his faith in science, technology and the free market ….just like Bush.

x.9.05. Hurricane Rita, heading for Houston with the same force as Katrina, misses.

27.9.05. CBI says high energy prices are threatening UK business of all sizes: gas supplies are too low. ASPO Feb. 06: W Europe gas production in 2005: 10Tcf. Consumption 15Tcf. Imports therefore 5 Tcf, 3 from Russia.

27.9.05. Saudi Arabia and Exxon team up to try and ease worries about oil supplies and prices. Minister Ali al-Naimi says Saudi Arabia will soon double its reserves base, adding 200 bb to the current 264. Exxon’s Tillerson says the world may still have more than 3 trillion barrels, including unconventional oil.

30.9.05. Much of OPEC’s 2 mbd margin is heavy, sour, oil unsuitable for most current refineries. Around two-thirds of Saudi reserves are light, with the rest either medium or heavy, according to the EIA.

1.10.05. Amazon suffers worst ever drought: Brazilian scientists blame the warmer than normal North Atlantic.Normal tropical weather system has shifted north as a consequence. Towns cut off as river falls.

x.10.05. Two Antarctic glaciers are discharging 3 times faster than a decade ago: just these could raise sea levels 1m.

x.10.05. UK Energy minister admits gas shortage may force companies to close this winter: this having earlier rejected CBI concerns about energy squeeze.

25.10.05 WalMart CEO announces zero carbon target for world’s largest corporation. Also $500m pa for tech to do it with, and a host of other targets on carbon (incl. 20% GHG cuts from existing stores by 2012) and toxics. Fleet efficiency to be increased 25% in 3 years. New store to be designed at 30% less GHG within 4 years. Notes: 2004 turnover $285 b (£160 b). 138 m shoppers a week. 1.6m workers. 3,779 stores in US, 1,641 overseas.

27.10.05. Former Aramco Exploration Manager casts doubt on prospects for substantial new oil discoveries. NYT report in 12.05 ASPO. Edward Price tells NYT the experience from when international companies ran the show doesn’t fit. Also says Saudis have told him optimistic figures are based on USGS 2000, not their own work.

28.10.05. Former US Secretary of Defense likens peak oil denial to Pompeii’s citizens ignoring Vesuvius. & see JL Guardian article. James Schlesinger clashes with arch oil optimist Daniel Yergin of CERA at oil conference in Rimini. 09.05 CERA estimates 101 mbd by 2010 and peak not before 2020. Simmons: they identify 30 new fields yielding 40% of the 16.4 mbd increase they forecast (from 85 today). They don’t account for decline of existing base, which may be around 5% pa.

5.11.05. BP’s CEO Lord Brown says oil price will fall back to $40 or below: part of campaign to avert windfall tax. reported in 12.05 ASPO.

IEA World Energy Outlook says non-OPEC peak will be “right after 2010”: see Sept.

8.11.05. China says it will double renewable use by 2020: 15% up from 7% today, including wind, solar, hydro. 70% of energy currently comes from coal. Smoggy cities cause c. 400,000 premature deaths per year. Thousands of coal miners are killed each year.

10.11.05. Republicans turn on US oil companies as prices soar: Exxon fights calls for a windfall tax. “The oil companies owe the country an explanation,” says Republican Chair of the Senate energy committee. ExxonMobil earned almost $10bn (£5.7b) in the third quarter. The Republicans pushed through a $14 b boost in tax breaks for this same industry. Raymond says a windfall tax will harm investment. Note: Americans spent in 2005 >$1 trillion to fuel their vehicles, heat and cool homes, and power offices and factories. That’s 8.7% of the nation’s GDP. (23.9.05 in 30.9.05).

FSA drops case against former Shell CEO over reserves scandal. Case against former head of exploration also dropped. “Lies,” as the latter told the former, go unpunished.

12.11.05. Kuwait Oil Co says Burgan field, world’s second largest, has peaked: and at 1.7mbd, not 2 as forecast. Burgan accounts for 60% of Kuwait’s reserves. IEA’s latest forecast has it pumping 1.64 mbd in 2020. Likelihood? 12.05 ASPO reporting 9.11 Bloomberg. Burgan found in 1938, started production 1948 supposedly 60 Gb, supposedly still has 55 bb. Next largest, Raudhatain, is 9bb. 10 yr Project Kuwait involves $8.5b investments by ExxonMobil, Shell, BP et al, invited in for the first time since 1970s.

13.11.05. Unprecedented fish and seabird mortality along US west coast ascribed to unusually warm water. Waters 7C above normal during the summer resulted in less wind, less upwelling of nutrients, and collapse of phytoplankton stocks.

23.11.05. CBI warns of industry shutdown as UK gas prices rise: DTI blames Europe for high prices. UK became a net gas importer earlier this year. Dependent on supply from France and Germany where large companies control price in an uncompetitive market. 1.06. PR: Rough storage facility has a capacity of 3 bcm, c. 3% UK gas supply. There is a “storage paradox”: when prices are low nobody wants to store, when high can’t afford. to build storage.

24.11.05. UK ministers draw up a plan for emergency gas supply: document leaked to FT, a DTI memo. Records a meeting at Downing Street with business leaders. The DTI memo talks of “urgently commissioning external consultancy” to work on demand. Gas prices as high as £1.70 per therm this week. Spot electricity prices as high as £110 per MWh. Met Office forecast of a one-in-ten-year winter is based on the North Atlantic Oscillation.

25.11.05. Sea level rise has doubled in the last 150 years: new core studies published on eve of Montreal summit. Cores from eastern US seaboard show 1cm rise over 5,000 years due to glacial rebound, then 2 cm for the last 150, ascribed to global warming. 40cm by 2100 projected on this basis.

28.11.05. Annual corporate responsibility survey shows unprecedented demand for transparency and action. MORI’s annual poll shows 94% of the public think that companies should report on their impacts on society and the environment. 91% think companies have a responsibility to check their suppliers are behaving properly. 71% think they do not pay enough attention to social responsibilities.

29.11.05. BP announces an $8 billion spend on renewables and other alternatives over the next decade. Wind, solar, hydrogen and gas generation to benefit to the tune of $800m, a year. Note: BP’s pro-rata share of the $240 billion a year that Goldman Sachs says the oil industry would need to invest per year in new oil is more than $11 billion. 13.2.06. $1.8 b over 3 years. Roughly equal spend on solar, wind, hydrogen and gas. By 2008, 450 MW of wind, 2 hydrogen plants, 700 MW gas. PV capacity 110 MW 2005, over 200 by end 2006.

30.11.05. Ukraine and Gazprom argument over gas price threaten supply via Russian gas pipelines. Russia wants to triple price charged to former satellite states from 1^st January. 80% of Russian gas exports to Western Europe cross Ukraine. Russia, the world’s largest gas producer, supplies around a quarter of EU’s gas (40% of Germany’s). UK set to double purchases by 2010. Russia about to begin a Baltic pipeline to Germany.

x.12.05. Ford president for the Americas lists peaking oil as a serious challenge facing the auto industry. ASPO. Mark Fields, keynote address to the Society of Automotive Engineers. Lists seven challenges. Report by Jen Laherrere not dated. Note: Also fears of science and engineering entrants falling. China is graduating 5x more engineers than the US this year. Ford and GM finances: downgraded to sub-investment grade.

1.12.05. Gulf stream weakening: scientists announce a 30% slowing of currents since 1992. Report in Nature says UK could cool 1 C in next 20 years as a result. Complete shutdown might mean 4-6 C drop (meaning winters = to Newfoundland), but could be swamped by overall global warming. Data from 22 moorings, in 2004, compared to previous measurements in 1992 (though slowing also detected in 1998). Fact: UK c 10 C above the average for latitude because of Gulf Stream.

7.12.05. Peak oil comes to Capitol Hill: Democrat and Republican Representatives testify that the US has a problem. Roscoe Bartlett (R-Md) and Tom Udall (D-NM), to Energy and Commerce Subcommittee.

9.12.05. Thousands protest against a new Chinese coal plant: militia fire on them, killing at least one. Civil protests are becoming common in China: 3.6m people took part in 74,000 “mass incidents” last year, many of them pollution related.

11.12.05. US forced to retreat on Kyoto: at the Montreal climate summit, outrage greets effort to stop future talks. EU now wants 30% cuts beyond the commitment period of 2008-2012. The US at least has agreed to keep talking.

13.12.05. Kuwait tells OPEC summit 4mbd by 2020 is impossible: invites western oil companies in to help with fields nationalised 30 years ago. The Kuwaiti parliament needs to agree. If they do, Saudi would be the only OPEC country not to have invited in foreign companies. $7b investment needed for Project Kuwait.

13.12.05. EIA downgrades 2025 forecast for OPEC production by 11 mbd: & non-OPEC projected to rise to 67mbd. Global production now 111 mbd by 2025, instead of 121 mbd in 2004 forecast. Means 1.4% demand growth, not 1.9%. Forecasts non-OPEC production rising from 52 mbd in 2004 to 67 in 2025, despite what IEA said about peak soon. OPEC production forecast at 55 mbd by 2025, up from 31 mbd in 2004.

1.1.06. Russia turns off Ukraine’s gas supply in squabble over price, threatening supplies to Europe. Gazprom, the state-owned Russian gas giant, accuses Ukraine of siphoning from the main pipeline to western Europe, and turns off the gas. Ukraine’s Prime Minister denies this, but also says Ukraine has the right to take 15% of the gas as a payment for transit. This crisis has erupted because Gazprom wants to increase the price of gas from $50 to $230 per thousand cubic metres, to bring charges to the former Soviet state in line with exports to the west. Hungary and Poland are the first countries affected.

2.1.06. Russia restores gas supplies to Europe in the face of a blizzard of international protest. Gazprom accuses Ukraine of stealing about $25m worth of gas. Supplies have dropped 40% in Hungary, with sharp drops in Germany, Austria, Poland and Slovakia too. EU buys a quarter of its gas from Gazprom.

13.1.06. US scientists slam Michael Crichton’s global warming novel. Key arguments made in “State of Fear” are demolished one by one.⁵¹ (L)

17.1.06. Gazprom deputy Chairman, visiting UK, promises not to turn off European gas. Gazprom plans to provide 20% of UK gas by 2015. Maybe he will try to buy Scottish Power, he says. Gazprom invests $10bn a year.

18.1.06. Six former Administrators of the US EPA call on Bush to impose mandatory greenhouse controls. 5 of them are Republicans.

19.1.06. Kuwait’s reserves are only half those officially stated, Petroleum Intelligence Week reports. Their reporter sees records saying there are only 48 billion barrels of proven and non-proven oil. Official statistics say 99 billion, c. 10% of the global total. Kuwait is the 12^th largest producer in the world. Only 24 billion are fully proven (15 in Burgan). PIW says the official figures do not distinguish between proven, probable and possible. 24.1.06: Burgan has produced 28bn barrels in 60 years with only minimal investment in technology. Parliament needs to agree a $8.5 bn investment, called Project Kuwait, in order to double production of the northern fields of Kuwait.

Russia suffers a big freeze and keeps some European gas exports for itself. It is 30C below in Moscow, 20 under the seasonal norm. Hungary’s supplies are 20% down. Electricity to Finland is under threat. Russian business daily headline: “The Country does not have enough gas.” 16.3.06: Gazprom’s output is flat: it’s three biggest fields, Urengoy, Yamburg and Komsomolskoye, are in decline while its export obligations are growing each year. Gazprom, which owns dozens of TV channels, radio stations and newspapers, including Izvestia, is effectively an agent of the state.

29.1.06. Exxon posts biggest corporate profit in history, $31 (£18) billion for 2005. But it only replaced 83% of its reserves in 2004.

30.1.06. Front page headline contrasts energy company profits vs 2.3 m Britons unable to afford gas to heat homes. Meanwhile, the 5 biggest listed energy groups will give as much as $250bn back to shareholders in share buy-backs and dividends in the next three years, according to UBS. BP says it will give back $65 b over 3 years.

30.1.06. Trial of Ken Lay and Jeff Skilling begins.
31.1.06. Iran threatens to use the “oil-supply weapon” if Europe & US continue to pressure their nuclear programme with the threat of sanctions or worse.

Investors with $30 trillion assets ask world’s largest companies to disclose climate-change stance, and report their own emissions. The Carbon Disclosure Project letter now comes from 1,933 companies, up from 500 last year, collectively with $30 trillion under management, up from $20 trillion in 2005, $10 trillion in 2004. Questions to companies include emissions, emissions reduction strategy, risk from weather etc. Even Exxon will have to answer this year’s letter.

1.2.06. President Bush speaks of America’s “oil addiction” in his State of the Union address, and says the habit must be kicked. His goal is to replace 75% of US ME imports by 2025. But his Energy Act involves tens of billions in subsidies, nothing to promote carbon trading, no mention of carbon taxes, and no vehicle fuel economy measures.

OPEC says that the President’s proposal could impact their plans to invest in new production, and so harm the world economy. OPEC ministers and oil lobbyists say they fear a return to ‘70s and ‘80s when billions were invested and the oil price then fell.

2.2.06. Shell posts a UK record corporate profit of $23 billion (£13bn) on $379bn revenues for 2005. Reserves replacement has been 70-80% lately, but will be 100% in 2008, the company says (*It falls short). CEO Jeroen van der Veer says: “The theory of peak oil is correct if you look at easy oil close to markets like west Texas and the North Sea. But think about deep-water drilling, think about the Arctic.”

Venezuela demands oil companies cut reserves reported to the SEC. BP, Chevron and others have been reporting reserves that are ours, they say. Repsol had to cut one quarter of proved reserves (1.25 b barrels) because of threatened law changes in Venezuela, Bolivia and Argentina, plus technical reasons.

5.2.06. NASA climate modeller Jim Hansen says Greenland ice cap could collapse explosively fast. He claims NASA is trying to gag him from making such predictions. Water is pouring down crevasses. The sheet is 3 km thick, and could fail gravitationally as a result of lubrication at the base, Hansen warns. Global sea level could rise 2 m this century and several more next century if it did. Previously scientists had thought the the sheet would melt very slowly, over the next thousand years or so.

7.2.06. BP posts record £11bn profit for 2005. The City is disappointed nonetheless: they expected 19.3bn. BP have replaced their reserves for the 13^th successive year.

Sweden announces plans to be world’s first oil-free economy by 2020. The minister of sustainable development announces the government’s plans after work by a committee of industrialists, car makers Saab and Volvo, plus academics, farmers, and civil servants. Renewable energy is now 26% of the energy mix in Sweden. Oil is 32%, down from 77% in 1970. Ethanol will be produced from forestry residues. (Note that Brazil intends 80% transport from ethanol within 5 years).

A majority of American evangelicals lobby Bush for federal legislation on GHG reductions. 86 leaders sign a letter saying “many of us have required considerable convincing before becoming persuaded that climate change is a real problem and that it ought to matter to us as Christians. But now we have seen and heard enough.” Many did not sign. 22 earlier signed a letter saying “global warming is not a consensus issue.” The National Association of Evangelicals has 30 million members.

Mexico’s biggest oilfield, Cantarell - providing 60% of the 3.4 mbd Mexico produces – has peaked. Pemex says this year’s production will fall 6%, but experts fear a collapse within 3 years to a quarter of today’s production. Mexico expropriated foreign companies’ operations in 1938, since when Pemex has been banned from contracting with private operators. Pemex lacks the experience to produce in deep water, and so has little chance of replacing Cantarell with new discoveries.

11.2.06. Two of the largest glaciers in eastern Greenland have doubled their speed over the last decade. Now moving at around 14 km per annum, they drain 10% of Greenland. A glacier in western Greenland was found to be speeding up in this way in 1998.

Greenhouse gases are already past concentration that will trigger disaster, UK scientist calculates. At an expert conference in Exeter, Feb. 2005, the consensus conclusion was that 2C (the level beyond which lies unacceptable danger) would be inevitable at 400 ppm CO2. This puts the “point of return” 10 years away. The CO2 increase pa has been 1.84 ppm, except in the last two years a worrying 3ppm. The 400 ppm in the Exeter conclusions referred to CO2 equivalent (based on a paper presented at Exeter by Malte Meinhausen). We are now at 425 ppm CO2-equivalent, Keith Shine calculates: CO2 at 379 ppm, methane at 40 ppm equivalent and nitrous oxide at 6 ppm equivalent. The Met Office latest best estimate for the temperature change at CO2 doubling (520ppm) is 3.5C (range 2.4 C to 5.4C).

11.2.06. Treasury model for calculating social costs of carbon leaves BP’s £11bn profits as £18bn loss. The New Economics Foundation applies the Treasury model to calculate a £29bn bill for environmental damages. NEF calls for a windfall tax on oil companies earmarked for renewable and decentralized energy investments.

12.2.06. Credit Suisse predicts oil will go above $100 in the next few years, triggering a “frantic” investment in alternatives. Hydro, nuclear, solar and coal will all benefit.

14.2.06. North Sea exploration is hampered by shortage of drilling rigs: all 80 are under contract. Rental prices are going through the roof, and long contracts are being negotiated, penalizing small explorers who have raised money on assumptions of drilling now rendered false.

16.2.06. Fire at UK gas storage facility creates 40% UK gas price surge. Centrica says its Rough facility will stay closed until further notice. 10% of UK supply is stored there.

25.2.06. Terrorists launch an abortive attack on the Abqaiq oil facility. Abqaiq processes about 75% of Saudi oil and most Saudi oil is exported through it. It is the world’s most protected oil installation. 25,000 troops protect the infrastructure not counting air patrols.

1.3.06. Exxon takes out an ad in the New York Times saying “peak production is nowhere in sight.” (Or could have been 2^nd). “Theory does not match reality.” See JL Guardian blog 1, 15.3.06.

Antarctica losing c.152 cubic km ice p.a., satellite measurements of gravity changes 2002-5 show. This is equal to 0.4mm p.a. sea-level rise. The range of uncertainty is 72 cubic km on the low side or as high as 232. Thermal sea level expansion is 1.8 mm p.a.

3.3.06 Poll shows huge majorities of both Republicans and Democrats favour renewables spending. 58% of Americans rate “dealing with the nation’s energy problem” a top priority, up from 40% in 2003. “Protecting the environment” as top priority: 57%, up from 39% 2003. 82% favour increased federal spending for research on wind, solar and hydrogen (82% Republican, 77% Democrat, 87% Independent). A majority opposes nuclear: 49% against, 44% for. (Based on Pew Research).

7.3.06. China’s biggest coal company will open the country’s first coal-to-liquids (CTL) plant next year. Shenua Group will produce 1 million tonnes a year in N China. Building began in 2004. Shenua has spent $37m on research. Coal is turned direct into oil, with no crude intermediary. Last week Shenua signed an MoU with Shell to build another CTL plant, in NW China’s Ningxia Autonomous Region.

Brussels proposes big reforms in EU energy policy to safeguard gas supplies, including creation of bloc-wide energy giants. The EC wants more storage, greater liberalisation, a cross border regulator. Questions are being asked of France and Spain as to why they are blocking the creation of the kind of bloc-wide companies that would have enough clout to build interconnectors and compete across the bloc of 25 and target all 450 m customers. (Spain is opposing Eon’s bid for Endesa). But why even talk about a “European gas market” when 23 out of 25 EU countries rely on imports?

9.3.06. Many oil rigs damaged by hurricanes Katrina and Rita are being written off: 17% of total Gulf oil production. 3 refineries are still shut with the driving season looming. 17% is equivalent to 255,000 bd. 4% of gas is also offline, some 400 mcf in all.

13.3.06. The rate of atmospheric carbon dioxide buildup accelerated last year: double the annual rate of increase of 30 yrs ago. CO2 ppm rose 2.6 to 381. This continues a worrying trend in recent years.

Arctic ice cap melts to an all time low, failing to re-form for the second year running. Satellite evidence shows that for the second consecutive winter, the Arctic ice cap has failed to grow back as far as it melted in the summer. The long-term melting trend is now clear, and it will feed on itself. The less bright ice to reflect light, the more dark water to soak the light up, and hence to warm up. This melting, and the amplifying feedback it produces, may be beyond the point of no return, some scientists say.

In freezing conditions recently the UK has been burning so much gas it is in danger of running out. The UK cold snap has boosted gas use just at the time a fire has shut the Rough storage facility, a disused gas field that provides 75% of Britain’s gas storage. The National Grid issued its first-ever “gas balancing warning,” saying that businesses may have to shut down to conserve supplies so that the millions of all-important voters who live in homes aren’t affected. This move quadrupled prices. Our problems of gas supply are all to do with infrastructure and geopolitics. Rough provides only enough storage for 13 days supply. Germany, in contrast, has storage for 75 days and France 66. Geopolitics kicks in whenever someone holds gas that somebody else wants at the end of a pipeline. Netherlands, for example, has plenty of gas, and it sells for a third the price of UK gas. Somehow, in Europe’s liberalised energy markets, not enough gas gets traded down the pipeline under the English Channel to poor old Britain. See JL Guardian blog 2, 17.3.06.

15.3.06. Denmark opens world’s largest carbon-capture-and storage (CCS) power plant. The CASTOR pilot project at Elsam will be zero emissions, storing emissions underground. It is funded by the European Commission.

16.3.06. US Army Corps of Engineers report concludes that approaching oil peak threatens the military. Conclusion: “world oil production is at or near its peak” and major steps are needed in energy efficiency and “massive expansion” of renewables, with a move towards distributed generation, including solar PV, solar thermal, microturbines and biomass.

21.3.06. ING analyst says oil industry profitability may have peaked: frontier exploration and cost of heavy oil infrastructure is too much of a drain. Rates for some drill rigs jumped 250% last year, but the industry tends to plan for inflation on costs at 10% pa.

22.3.06. US study forecasts 1m sea level rise this century. If so, the Thames barrier would be raised 300 days a year. A Univ. Arizona / NCAR study published in Science looks at a time of higher (4-6 m) sea levels 129,000 years ago. Temperatures then were 3-5C warmer. The study concludes half of Greenland and vast areas of Antarctica will melt. A 1m rise this century should be viewed in the context of risk of a tipping point beyond which lies unstoppability. “An Arctic warming of 3 to 5 C is enough to cause 4-6 m of sea level rise” (Prof Jonathan Overpeck of University of Arizona).

26.3.06. Global warming headline on the front page of Time magazine: “Be worried, be very worried.” “Global climate systems are booby trapped with tipping points and feedback loops.” See JL Guardian blogs 3 & 4, 23.3.06 & 4.4.06.