Russia formally staked a claim to a vast area of the Arctic Ocean, including the North Pole. If the United Nations committee that arbitrates sea boundaries accepts Russia’s claim, the waters will be subject to Russian oversight on economic matters, including fishing and oil and gas drilling.

World crude oil prices tumbled to around $42 a barrel this week following China’s decision to devalue its currency.  Prices are down 11% in the space of two weeks. Many oil producers and governments that had become accustomed to $100+ oil are hurting badly. In the US many, if not most, of the smaller shale oil producers are in serious trouble. Bankers will not loan them money; equity financing has dried up since June; and for some the only solution is to sell off assets (such as oil and gas fields) at fire-sale prices. The US oil industry needs to cut production by at least 500,000 barrels per day in order to stop the over supply and send oil prices higher.

Over the next three years, lower world oil prices could result in some $4.4 trillion in lower revenues for the world’s oil producers. Much of this revenue will be lost by the larger oil companies that are only maintaining production these days with very expensive deep-water oil fields. There is not as much room for efficiencies for large companies as there is for the smaller producers, so deep reductions in capital expenditures by the major oil companies are taking place. Revenues for the service companies that support offshore drilling are already down by about one-third and additional cuts are coming.

Industry observers think that over the next three to five years a lot less new oil production will be coming on line. This in turn implies that at some point before the decade is out, oil prices will rise again allowing expensive producers such as Canada’s tar sands and deep water oil producers to again increase production.

Magnus Nysveen, head of analysis at Rystad, said global oil companies are likely to cut investment another 5% to 15% next year, after a 21% cut this year.

US imports of Canadian oil and gas is down 7% over the past year. Canada relies heavily on export revenue from oil and natural gas with most of its crude oil exported to the US.

Shell Oil’s geologists believe that some 26 billion barrels of crude oil lay buried underneath the Arctic Ocean off of Alaska.

Companies that transport and store crude oil and refined products, as well as manage shipping terminals reported soaring profits this week. The glut of crude oil brought to market generally means more business for operators of pipelines, tanker trucks, storage tanks and marine terminals.

Together Russia and Iran have roughly over 40% of world natural gas reserves. It is anticipated Iran and Russia will cooperate within an OPEC-like formula to influence world prices.

Industry observers believe it will take a decade for Iran to be ready to provide sizeable shipments of natural gas to Europe. Iran’s domestic needs will be dramatically increasing and will absorb a substantial portion of the country’s gas output for some time to come.

US natural gas exports to Mexico are expected to soar in the coming years now that Mexico has opened its electricity market to private investment. Contracts have been let to build power plants, electrical distribution facilities and natural gas pipelines. As a result, US pipeline companies and gas producers expect to capture a vast share of that market.

New Zealand announced it will cease production of coal-fired electricity generation in 2018.

The government of India announced it is on track to installing 175 gigawatts (GW) of renewable energy by 2022. India is currently expected to increase electricity demand by 60% per year until 2021, and predicts 75 GW of installed solar power could deliver 22% of the required energy generation increase. India has become an increasingly popular destination for solar development, due to a favourable climate and abundant solar resources. An official for the Institute for Energy Economics and Financial Analysis said:

“India is replicating Germany’s and China’s systematic electricity sector transformation, with the added advantage that the cost effectiveness is accentuated by the fact that the price of solar electricity has dropped by 80% in 5 years.”

The Canadian province of Nova Scotia has ended a program that subsidized the production of small-scale renewable energy projects. In withdrawing the feed-in tariff for small-scale wind and solar, the government said that the program had already achieved its purpose. Nova Scotia joins several European countries that had ended or sharply cut back on subsidies for the production of renewable energy.

 

with h/t Tom Whipple

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