After 4 years the first phase of construction of the world’s first experimental nuclear fusion reactor (ITER), involving the creation of the ground support structure for the Tokamak Complex, is finished and the second phase has begun. The reactor is located in Cadarache in the south of France and is expected to be in operation in the mid 2020s.

About 63% (56.5 million barrels per day) of the world’s crude oil production in 2013 moved on tankers. World choke points for maritime transit of oil, such as the Strait of Hormuz and the Strait of Malacca (32 million b/day combined), are a critical part of global energy security because of the high volume of petroleum and other liquids transported by these routes.

As world crude oil prices continue to fall, pressure is being put on shale oil drillers in the US. Drillers in the states of North Dakota, Colorado and Wyoming are seeing wellhead oil prices around $50 per barrel because of the costs of moving this oil to refineries, which are mostly located along the coasts. Many believe the costs for many of these companies is in the $70 to $80 range.

The US Energy Information Administration announced that proven US natural gas reserves rose 9.7% in 2013 to 354 trillion cubic feet, the largest figure ever. The EIA says the US will have plenty of natural gas at least until 2040.

The Eagle Ford shale area in the US state of Texas produced its one-billionth barrel of shale oil and condensate last month and 70% of that total has come over the last two years. Today, the Eagle Ford accounts for approximately 16% of total US daily oil production. In 2015, 2.8 million barrels of oil equivalent per day of production is expected from the Eagle Ford.

The US EIA prognostication is being challenged by a new study from the University of Texas. The study by the Department of Petroleum and Geosystems Engineering claims the US government estimates of the amount of natural gas that can be extracted by fracking may be far too optimistic, It say shale gas production may peak in the 2020s, followed by a rapid decline in output, with output cut in half by 2030. Based on this study, some are wondering if the billions of dollars to be spent on US liquified natural gas (LNG)  export facilities may not be money well-spent if there is little natural gas to export five years from now. The researchers looked at  natural gas production at the four leading US shale gas formations: the Barnett in Texas; the Fayetteville in Arkansas, the Haynesville in Louisiana, Arkansas and Texas; and the Marcellus in and around the Appalachian Basin. These four formations provide two-thirds of US shale gas production.

Faced with much lower crude oil prices, the Russian government conceded that the country faces a recession next year which independent economists say will be at least a 2-3% drop in GDP provided world oil prices do not fall further. Russia depends on energy sales for 70% of government revenues.

Russian President Putin said he will abandon Russia’s South Stream natural gas pipeline, an enormous project that was once intended to establish the country’s energy dominance in southeastern Europe but fell victim to Russia’s increasingly hostile relationship with the West. It was a rare diplomatic defeat for Mr. Putin, who said Russia would redirect the pipeline to Turkey. He painted the failure to build the pipeline as a loss for Europe and blamed the European Union for its intransigence.

Eastern European nations reacted with shock and anger to Russia’s decision to abandon the $50 billion South Stream pipeline that was to carry natural gas from Central Asia across the Black Sea into Europe. Immediately shares prices in some of the companies involved in the project dived. Bulgaria, Serbia and Hungary said they had received no advance warning that Russia was scrapping South Stream. These countries have substantial financial and political capital invested in the pipeline.

It appears that Norway, one of the world’s wealthiest petro-economies, is in for a significant slowdown. A survey found oil companies expect to reduce investment spending by 14% next year, which could drag the country’s economic growth down to 1% from an estimated 2.6% this year.

The plunge in global crude oil prices is prompting the Mexican government to consider scaling back its plans to reopen its oil and gas industry to private companies. The government is now likely to delay or scale-down tenders for some of the oil fields and areas that it planned to offer in the coming months, especially in areas with shale oil where recovery costs are higher than in traditional oil fields.

Schlumberger, the world’s largest oil services group, is cutting back its fleet for offshore geological surveys in the first significant cutback in the oil industry following the recent fall in crude prices. The company also said it was cutting jobs in response to lower oil prices and expected slower growth in oil exploration and production company spending.

Australia had been expected to become the world’s largest supplier of liquefied natural gas (LNG) by the end of the decade, but significant cost overruns and delays in building new LNG projects are threatening its future competitiveness as companies move forward with major projects in the US and Canada. The solution for Australia may be floating LNG plants, because they can be built overseas, where the costs of labor and materials are generally lower.

In Venezuela there is a growing exodus of skilled oilfield workers, since real wages for engineers have fallen to the equivalent of less than $400 a month, about 9% of the global average. With the world’s worst inflation, swelling crime rates and a plunging currency many are leaving the South American oil country, dragging down crude oil production at a time when slumping crude prices threaten the country’s export revenue. The country’s oil exports to 13 countries in Central America and the Caribbean fell about 20% through October.

Renewable energy will receive almost 60% of the $5 trillion expected to be invested in new electric power plants over the next decade, according to the US Energy Information Administration. This is due to the US, China, Japan and the European Union pushing for global limits on greenhouse gas emissions and promoting alternatives to fossil fuels.

 

with h/t Tom Whipple

 

 

 

 

 

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