Is Australia’s energy crisis starting…..?

9 03 2017

This morning on the news, we were woken up to the fact we could be facing gas shortages in Australia. And because more and more electricity is generated with this fuel (Tasmania and South Australia immediately come to mind), the repercussions could be electricity rationing, as well as gas for heating and cooking.

An assessment from the Australian Energy Market Operator (AEMO) is warning that, without a swift response, Australia could face a difficult choice — keeping the power on versus cutting gas supplies to residential and business customers.

“If we do nothing, we’re going to see shortfalls in gas, we’re going to see shortfalls in electricity,” AEMO chief operating officer Mike Cleary said.

The analysis said without new development to support more gas-powered electricity generation, modelling showed supply shortfalls of between 80 gigawatt hours and 363 gigawatt hours could be expected from summer 2018/19 until 2020/21.

It’s not like we weren’t warned……  I wrote about this almost three years ago…. at the time, I quoted Matt Mushalik…: “In July 2006 then Prime Minister Howard declared Australia an energy super power. Two years earlier his energy white paper set the framework for unlimited gas exports while neglecting to set aside gas for domestic use”

Bloomberg agrees…..

Australia, the world’s second-largest exporter of liquefied natural gas, needs to remove road blocks to gas exploration on the east coast that Prime Minister Malcolm Turnbull blames for a looming domestic supply crisis.

“We are facing an energy crisis in Australia because of this restriction of gas,” Turnbull told a business conference in Sydney on Thursday. “Gas reserves or gas resources are not the issue. The biggest problem at the moment is the political opposition from state governments to it being exploited.”

Hang on a minute…… if we are indeed the world’s second biggest gas exporter, why do we need more exploration (code for really dirty coal seam gas)..? And if we are exporting so much gas, why can’t we cut down on the exports, and keep some for ourselves?

I smell a rat…….

According to Bloomberg again……

Origin Energy Ltd, Australia’s largest electricity company, on Tuesday said Queensland gas intended for LNG exports to Asia may be diverted to ease an expected supply shortfall this winter.

So there’s no problem then…?

Royal Dutch Shell Plc, owner of the $20 billion Queensland Curtis LNG development, said in an emailed statement that its QGC Ltd. subsidiary will continue to make gas available “where we have the capacity to do so.”

gas burning.So there’s capacity for export but not for domestic use…. and the hogwash continues at full speed with more statements like “Energy security has come under scrutiny since a state-wide blackout in September hit South Australia, the mainland state most reliant on renewable energy generation. Turnbull’s conservative leaning government called the state “utterly complacent” due to its over reliance on renewable energy following a partial blackout in February, whilst later attacking other left-leaning state governments for similar ambitions.” Oh I get it now…..  it’s the renewables’ fault that we are short on gas. And what on Earth is a left leaning state? You mean like Queensland’s ALP government going full steam ahead to support Adani’s project for the world’s largest coal mine..?

Give me a break Malcolm….  this is all your greedy lot’s fault, you damn well know you can get more money for gas overseas than we are willing (or able) to pay for it locally.

Do the morons in charge really think we are all dills who can’t see through all their propaganda?   “Economics and engineering, they should be the two load stars of our national energy policy,” Turnbull said. “We’ve got to get the ideology and the politics out of it.”  YOU first Malcolm….. you’re not interested in Australia’s energy security, you just want to kow-tow to the right wing nuts in your party, and maximise your mates’ profits…..

Consumer groups are saying it’s too early to advise people whether to switch away from gas, despite the forecast by the Australian Energy Market Operator of a looming shortage on the country’s east coast. Energy Consumers Australia (ECA) said householders should instead research the most competitive offers available from across the range of energy providers. I think consumers should look at alternative technologies myself. While I constantly discredit solar PV on this blog, the most sustainable form of solar power, solar water heating, is struggling to make inroads these days.

Some of the advice is simply ludicrous…. as if LED lights will save you from an energy crisis (let’s call a spade a spade here..) and “The main use of gas is in central heating and hot water, so if you’re building a new house think about reverse cycle air-conditioning or heat pumps” Mr Stock said.  But but…….  Mr Stock, do you realise it’s possible to build houses that actually do NOT need any heating and cooling?

And people wonder why I think we’ll be rooned…….. my wood fired AGA‘s looking pretty good right now.

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The price of fuel…. yep, Australia still bang on target to run out of oil by 2020

18 01 2017

Following on from the article I recently published regarding the sudden rise in the cost of fuel in Australia by a whopping 14% in one day, and the absence of any logical reason despite the mainstream media falsely rabbitting on about the soaring cost of oil, I started thinking about the series of articles I wrote years ago about Australia running out of oil by 2020……. the last time I investigated this was almost three years ago. How time flies when you move interstate and start again…!

Finding current data turned out difficult, as usual. My traditional source from the government has still not updated its spreadsheets beyond September last year, so 2016 totals were not yet available.

This chart is from http://www.tradingeconomics.com/australia/crude-oil-production and means I don’t need to produce my own..!

australia-crude-oil-production

Predictably, we are still bang on target to totally run out of oil by 2020, now just three years away.

I still believe that the oil companies are in serious financial trouble, but the fact that we are continually importing more and more liquid fuel from overseas instead of producing our own cannot be helping the situation. How much you will have to pay for the fuel for your favorite vehicle three hears hence is anyone’s guess…. except it’s unlikely to be less!

You may also remember I commented about the huge shale oil deposit found in South Australia over four years ago. Why has nothing yet happened about this scenario changing event, as we were promised by the ranting media of the time…?

A year ago, the Advertiser, Adelaide’s main newspaper wrote..:

THE company sitting on potentially significant shale oil reserves in the state’s far north has dismissed its previous claims to deliver a US-style economic boom for Australia.

AND…..

“We just don’t have the resources on the ground to facilitate it and it makes it harder for us to attract investment from major traditional oil investment markets such as the US because if you look at it pound for pound, you are investing in a remote area in a remote part of the globe,” he said.

Don’t expect that chart to change any time soon……..





The counterintuitive facts about population growth

30 10 2013

A guest post by Michael Lardelli,

October 2013

This year my 8-year-old daughter’s school class has been studying “sustainability”. Last term she was all over me like a rash about not wasting water. Unfortunately, I had to explain to her that saving every last drop of water was actually a waste of time, ‘The water you save will just let the government bring in more people because it wants to grow the population. It actually makes more sense for you to use as much water as possible because that may slow the government down’. Adelaide’s population has now grown to a size where coping with the growth has outpaced our capacity to pay. SA’s $2 billion desalination plant (costing $130 million per year to run) was built explicitly to cope with population growth and would be unnecessary without it. Then there are the costs of extra hospital beds, congested roads, crowded schools etc. Counterintuitively, these dyseconomies of scale are counted as positives when GDP figures are calculated!As a scientist I am used to reality sometimes appearing counterintuitive. The most famous example is Galileo dropping two metal balls of different weights from the leaning tower of Pisa to demonstrate that they would both hit the ground simultaneously. Demography – the study of the structure of human populations – is another area where the obvious answer is not necessarily the correct one. An interesting example of this was Senator Nick Xenophon’s insistence before the recent election that he wanted to promote faster population growth in South Australia.

Apparently Nick believes that, with SA’s population growing at 1% per year, “We’re sitting on a demographic time bomb. There’ll be fewer taxpayers compared to the rest of the population.” Nick appears envious of WA’s population growth of more than 3.4% even though this will double WA’s population in only two decades! Imagine trying to double a state’s infrastructure – hospitals, roads, sewerage, power etc. – in 20 years when the current estimate is that each additional person requires about $200,000 of infrastructure. From where will that money come?

Unfortunately, Nick has been deceived by the notion that it is possible to significantly “youngify” our population through migration. But even pro-migration demographers reject this idea.

As demographers McDonald and Kippen stated in a report for the Department of Immigration and Multicultural Affairs in 1999, “Levels of annual net migration [into Australia] above 80,000 become increasingly ineffective and inefficient in the retardation of ageing. Those who wish to argue for a higher level of immigration need to base their argument on the benefits of a larger population, not upon the illusory ‘younging power’ of high immigration.” At the moment annual net migration is about three times higher than the 80,000 recommended! A 2008 paper by demographer Katherine Betts shows how Australia’s current sky-high rate of population growth could more than double our population by the end of the century (and our water, food and fuel consumption etc.) but make little difference to our population’s median age. In fact, if we encourage immigration rather than supporting women to have children we could end up with an older population structure than otherwise!With ideas this counterintuitive it is no wonder that our normally intelligent Senator Nick is confused. Australia’s current rate of population growth is truly exceptional – or ‘third world’ – depending on your viewpoint. At the moment we are growing at three times the rate of the rest of the OECD. But despite the yawning infrastructure shortfalls that rate is not fast enough for Labor’s Bill Shorten who wants to see still higher levels of immigration. The next arrival could “be the next Albert Einstein or a good taxpayer”. But it could just as well be the next crime boss or a welfare recipient. And while the current SA Labor government starts to talk about dismantling our current planning approval system (to make it easier to realise its urban expansion and densification dreams) the leader of the alternative Liberal government wants more incentives to boost our population growth. It’s enough to make you bury your head in your hands in despair – or join Stop Population Growth Now.

Michael Lardelli is senior lecturer in genetics at the University of Adelaide, translator of Prof. Kjell Aleklett’s book “Peeking at Peak Oil”, a committee member of Sustainable Population Australia and a member of the management committee of the political party Stop Population Growth Now.





Will fracking postpone Peak Oil?

24 01 2013

Much has been said both here and and elsewhere on the internet about the capacity for the fracking frenzy to defer Peak Oil as a threat.  I’m far from convinced, but these latest news which just arrived today on the ABC have made me make the most of the wet weather to write another post!

Major oil discovery in outback SA

http://www.abc.net.au/news/2013-01-24/major-oil-discovery-in-outback-sa/4481982SAshaleoil

Brisbane company Linc Energy says it has discovered up to 233 billion barrels of shale oil in the Arckaringa Basin in South Australia’s far north.

The company says independent consultants have confirmed the finding after drilling and seismic explorations in shale rock.

Linc Energy holds rights over more than 65,000 square kilometres of land around Coober Pedy.

In a statement to the Stock Exchange, the company said reports from US-based consultants Gustavson, and DeGolyer and MacNaughton indicate underlying rock formations “are rich in oil and gas prone kerogen.”

Shale oil is costlier to extract than conventional crude and involves ‘fracking’ in which water is pumped in to break up the shale.

South Australian Mining Minister Tom Koutsantonis says the value of the finding could be worth $20 trillion and could turn Australia into an oil exporter.

“What they think they’ve found, or they have found but whether it’s economic to recover or not is still the question, is vast reserves of shale oil,” he said.fracking

“It’s basically oil which is trapped in low-permeability, clay-rich rocks so it’s within the rocks and you fracture-stimulate those rocks to release the oil.

“There are processes now where you can unconventionally retrieve these reserves.

“If the reserves and the pressure was right over millions of years and the rocks have done the things they think they’ve done they think they can extract vast reserves of oil out of South Australia which would have a value of about $20 trillion.

“South Australia is blessed with abundant resources but there are a few setbacks and those setbacks are that they’re remote and they’re deep.”

The South Australian Chamber of Mines and Energy says it is much to early to say if the reserve can be profitably tapped.

Chief executive, Jason Kuchel, says major works would have to be carried out in order to access the oil.

“There’s a lot of infrastructure that needs to go particularly if there’s a lot of gas to be had rather than liquid,” he said.

“Up in the Cooper Basin where we have a lot of gas, of course it requires a lot of pipelines to be able to get that product to market whereas at least with oil you can pull that out of the ground, put it into a truck and get it going to market relatively quickly.”

So there you have it…….  we’re saved…!

However, at almost the same time I viewed this news item, I was also made aware of this article http://seekingalpha.com/instablog/121744-mark-anthony/1354531-the-real-bakken-shale-well-decline

I urge you to read it, even if only to check the maths….  The author, some chap called Mark Anthony, writes “In a previous article “The Real Natural Gas Production Decline“, I discussed a simple and effective way of estimating the real declines and realistic EURs (Estimated Ultimate Recovery) of shale wells based on two things that shale gas and oil producers can not lie about: number of wells added during a period of time, and the total daily productions.”

The idea is simple he says…. “All shale wells are in steep decline. Thus as the producers put new wells into production, a considerable portion of the new production merely compensates the decline of existing wells. If we assume producers add just enough wells to exactly compensate for the decline, then the EUR times number of wells added equals the amount of production during the same period.”

He then goes into the maths, the basis for which are indeed fairly simple….

Let the combined daily decline of existing wells be D, and IP being the Initial Production rate per well:

Total Production x D = IP x Well Additions

EUR = Total Production/Well Additions = IP/D

I don’t particularly want to copy/paste the rest of this blog, I’ll let you establish how he achieves the numbers, but the outcome is that Shale oil costs $65 a barrel to produce, that each well costs $11.60M to establish, and that at $65 a barrel, the oil companies barely make $11.65M, just breaking even for the well capital spending….  But, Mark Anthony adds,  “the capital spending is not the only cost. We have not calculated the production and maintenance costs, the General & Administrative costs. Thus, at the current oil price, [they are] not making any real profit in developing Bakken shale wells.”

So then, how do they manage to report positive profits for the quarters?  Creative accounting is how I would describe what Mark Anthony divulges…  Is a business profitable, if it continues to borrow more debts quarter after quarter, and it continue to spend many times more on capital spending than the revenue it takes in? “This is neither profitable, nor sustainable” says Mark.  He can see that when the banks get suspicious and stop lending money, then the shale industry will collapse.

But consider the effect on the economy of continued investing in the “drill, baby, drill” program.  Over-production lowers fuel costs at the pump, it employs people instead of them being on welfare, and it even allows politicians to deny Peak Oil and claim the US will be self-sufficient in oil in the future.

And what does it really cost?  The investment banks probably get their funds at low rates from the major banks, who get their funds at ultra-low rates from the Fed and then leverage it up 8-fold through fractional reserve banking, and the Fed creates the funds out of thin air and books the lot as solid assets.

As long as the supply of money doesn’t run out, it cannot fail – the usual Ponzi scheme.  And Bernanke has said again and again that he will always print money to avoid deflation.

So, maybe, just maybe, this whole sordid system may continue for years yet.  Only net energy will put an end to it…….

Michael Lardelli, a friend of mine from the Yahoo list Running on Empty wrote this very pertinent letter to the editor of Indaily following this article’s publication:

Kevin Naughton is correct in adding a dash of scepticism in his report on shale oil discoveries in SA’s north (Black Gold Fuels Boom-Sayers, InDaily 24 Jan. 2013) . Reserve figures of 100+ billion barrels sound extremely impressive when the entire world “only” uses 30 billion barrels of oil per year (1000 barrels per second). However, the critical issue for Australia’s future will be how rapidly this oil can be produced, not how large the reserves actually prove to be. There is growing scepticism in the USA in the wake of the huge claims that have been made there regarding shale oil. Shale oil wells are expensive to drill and require (and pollute) large amounts of water per well (not so plentiful in SA’s north). But the greatest concern from an economic viewpoint is that, unlike for conventional oilfields, the production volumes from shale oil wells typically are lower and drop off rapidly. This means that, to maintain any significant level of production, a high rate of continuous drilling of new wells is necessary. This is extremely expensive and has huge environmental impacts. The real profitability of much of US shale oil production is in doubt and the current drilling frenzy (which appears to be abating) is driven more by financial shenanigans rather than oil sales. So we should indeed remember the lessons of Olympic Dam when hearing all this good news. And what about SA’s fuel security? Well, we no longer have a refinery so any oil from SA’s north will have to be sent elsewhere ….

Watch this space……….