Archive for April, 2006

The Oklahoman asks, “Are we ready for the next energy crisis?”

Tuesday, April 18th, 2006

Today’s (Tuesday) business section of the Daily Oklahoman has a long article by Adam Wilmouth asking the question: Are we ready for the next energy crisis. From the answers quoted by various leaders of business, industry, and government, the answer is clearly “NO!”. This answer is also the conclusion of the folks at http://www.sustainlane.com which just releated a ranking of the 50 largest cities in the US based on how well prepared they are for an energy crisis.  Alas for us, we were dead last on the list.

The article is at  http://newsok.com/article/1818923/?template=business/main .  The folks in Oklahoma’s energy industries seem to think we’ll be OK because high energy prices are good for their business. As energy prices rise, more money flows into the state.  Unfortunately, that benefit is uneven.  Those with economic ties to the energy industry will profit, but those without such connections will see less benefit.

Some point to the coming income tax cuts as a way for government to help consumers manage increased energy costs, but here again, the benefits will be uneven. Those who have higher incomes will benefit the most from the proposed tax cuts.  Those with lower incomes will see little if any benefits. Yet, those same lower income people will see steep increases in the price of all the energy they use — for transportation, for home heating and cooling, and the embedded energy in products purchased. They don’t have any discretionary income to cushion these increases.

 The mayor complained that the Sustainlane.com methodology “made it impossible” for Oklahoma City to receive a positive score.  It is certainly easier to kill the messenger, but that doesn’t do anything about the bad news, which is that Oklahoma City is not prepared for a major energy crisis. 

I like Mayor Cornett as a person.  He has an engaging personality and I think he wants the best for Oklahoma City. But his thinking is mired in the 20th century era of cheap energy, and the expensive energy realities of the 21st century are simply not on his radar screen.  He is not alone in this, the entire city council is as much in denial as he is, and if anything the state legislature and the governor are worse. 

As this energy crisis goes from bad to worse (and doesn’t stop there but continues to get worse), Oklahoma will be hit hard.  We will see an exodus of businesses heading for areas with a better understanding of the realities of the 21st century and which have a 21st century infrastructure to manage those realities.  Jobs and money will leave the state.  If workers can’t get to work, and shoppers can’t get to shop because of the high price of gasoline, there will be precious little working and shopping done in Oklahoma City.  Where then does our much vaunted place in the globalized economy go?  Down the toilet, that’s where it goes.  It’ll make the collapse of the Penn Square Bank look like a prosperous bull market.

 The Mayor seems to think that if things get really bad, we will “adapt quickly”.  This is a bit of an understatement, but — someone correct me if I am wrong — I don’t think you can just go out and wave your magic fairy godmother’s wand and create an efficient and effective public transportation overnight. 

When gasoline gets to five bucks a gallon, the line at the federal window for mass transit funds will be very long, and we will be very far back in the line.  Even if we have the money, how long will the line be at the manufacturers of the buses and trains we will need?

If we do need a mass transit system on the fast track, we have the core of it in place right now in the form of Union Station, it’s rail yard, and the existing rail lines which serve all parts of the city except for the NW Expressway corridor.  Alas for us, that rail yard is doomed to demolition by the “Highways Uber Alles” folks at the Oklahoma Department of Transportation. Oklahoma City government has no objection to this destruction of this important heritage transportation infrastructure. But with that system, all we need is some repair, some passenger loading facilities, and some rolling stock and the Oklahoma City Rapid Transit System could be in bidness.  Every day we inch closer to the demolition of the heart of that system via the inexorable progress of the I-40 Crosstown Freeway project, which is a blight upon the landscape and will go down in our history as one of the most stupid public works projects ever attempted in this state.  It is a great project for a century in which “highway congestion” was a big issue.  Alas for us, that was the TWENTIETH century, and we now live in the TWENTY-FIRST century.  Freeway congestion is not going to be a big issue as this century progresses.  In fact, the I-40 Crosstown Freeway will be finished right about the time the interstate trucking industry converts almost completely to piggy-back rail (hauling the trailers between cities on rail cars, using the trucks only for the local delivery.  (We shouldn’t forget that the present route of the I-40 Crosstown Freeway has more to do with the demands of the interstate trucking industry than it has to do with any local considerations.)

 People should get ready for the economic maelstorms that will accompany the steady increase of energy prices in the 21st century.  Can your household budget manage a 100% increase in your present energy costs?  How about 200%?  300%? That’s where we are headed. 

 If the government refuses to lead, we the people must lead.  And we do so by doing the things I talk about all the time.  Spend less, save more, invest in serious energy conservation.  Pay off your debts as quickly as possible and don’t take on new debt unless you are investing it in energy conservation or some other productive activity or a home.  Spend your money as much as possible in the local economy. Buy food directly from farmers.  Get ready to manage your daily commute without an automobile. Plant lots of edible landscaping.

 And we need to keep bringing political pressure to bear on our local and state politicians. People should write letters and make phone calls to your city council people and to the mayor.  The squeaking wheel gets the grease, and we need to squeak a lot louder.  It may be time to start thinking about doing some public demonstrations, “honk and wave” type activities.

If anybody is going to get Oklahoma ready for the energy crisis, it is going to be folks like us, who are already aware of the coming problems. How we face this challenge has an impact on everyone around us. Let’s follow Gandhi’s advice, and be the change we want to see.

 

Bad news from Saudi Arabia

Tuesday, April 11th, 2006

This news from Saudi Arabia is not good news for those who think that “peak oil” is just the latest doomer cult.  According to the story linked below, Saudi Arabian oil fields are presently depleting at a rate of 8%/year.  By deploying various technical measures, they are able to recover a little more oil and thus they have reduced the depletion rate to 2%.  Great.  In 36 years, Saudi Arabian oil production will only be half what it is this year. 

But wait. . . this isn’t the whole story.  The technical measures they are using to decrease their depletion rate don’t create any new oil in the ground, they just recover what is producible at a faster rate.  That’s fine now, but it means that when those measures play out, then their decline rate will be much greater than 8%.  There is no such thing as a free lunch in the oil patch.  If you get more now, you will get less later.

The significance of that is that Saudi Arabia is the place where the US government and various other folks think that the INCREASED production is going to come from in order to meet expected increases in oil demand in the future.  Now we’re being told that the present situation in Saudi Arabia is that their production is declining, not increasing.

Alas for Oklahoma City.  Our political leadership have bet the entire farm that energy will always be cheap and plentiful, but the reality of the 21st century is that energy is going to be expensive and increasingly scarce. 
Shortcut to:
<http://www.platts.com/Oil/News/8377179.xml?sub=Oil&p=Oil/News&?undefined&undefined>

Saudi Aramco boosts drilling efforts to offset
declining fields

Dubai (Platts)–11Apr2006 — Saudi Aramco’s mature
crude oil fields are expected to decline at a
gross average rate of 8%/year without additional
maintenance and drilling, a Saudi
Aramco spokesman said Tuesday.  But Saudi Aramco
has taken a number of
measures to offset a decline in output from the
country’s aging oil fields, the
spokesman added.

     “A variety of remedial activities are always
being taken in oil fields influencing their
effective decline rates,” the spokesman said. “The drilling of additional development wells in the producing  fields is
Saudi Aramco’s standard practice to offset normal declines of
older wells.”
     This is particularly important when oil
fields are progressively depleted under a well
thought out strategy of maximizing
the sweep and displacement efficiencies, leading
to high ultimate oil  recovery, the spokesman
said.

     “This maintain potential drilling in mature
fields combined with a multitude of remedial
actions and the development
of new fields, with long plateau lives, lowers the
composite decline rate  of producing fields to
around 2%,” the spokesman said.

     Underscoring these efforts, Saudi Aramco
signed two contracts with J. Ray McDermott Middle
East and McDermott Arabia Company  Ltd,
subsidiaries of J. Ray McDermott, to detail
design, procure, fabricate, transport and install
offshore facilities for the Maintain Potential and
Khursaniyah Upstream Pipeline programs, Saudi
Aramco said April 6.

     The first contract includes two drilling
support structures in Zuluf field to be installed
in December 2006 and one new
wellhead production platform in the Central
Safaniya oil field to  support onstream start-up
in May 2007, Saudi Aramco said.

     Three additional wellhead platforms will be
installed in the Central Safaniya and Zuluf fields
by December 2007. New
associated flowlines will connect these platforms
to existing offshore  tie-in (manifold) platforms.

     To support increasing production in the
Central Safaniya field, a new tie-in platform
(Safaniya TP-18) will also be
engineered, procured, fabricated and installed by
December 2007, along with a  24-inch trunkline
between it and
a subsea connection on the new 42-inch trunkline
flowing to the onshore Safaniya GOSP-1, installed
under a separate
contract.

     The second contract is associated with the
subsea portion, some 22 km (14miles) long, of the
30-inch gas pipeline from Abu Ali Island to an
onshoresite at Khursaniyah to be installed by May
2007.     This subsea portion is part of the new
66 km
BKTG-1 pipeline that will transport 220 million
cubic feet/day of gas from Abu Ali Plant to
Khursaniyah Gas Plant.

–Glen Carey, glen_carey@platts.com