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Monday October 03, 2011

Shell may shut its largest refinery at Pulau Bukom, Singapore at least a month following fire

Shell's fire-hit Pulau Bukom oil refinery may remain shut for at least a month. Shell is tight-lipped about how much money is going up in smoke due to the incident at its biggest refinery. But some analysts said disrupted production would affect regional supplies of Shell's products in the short term. Shell's declaration on Sun 2 Oct 2011 of force majeure on the supply of oil products to some customers following a fire at its 500,000-barrel-a-day Singapore refinery has done little to provide answers on how long refining operations will remain disrupted.

While petroleum markets have already priced in a short-term supply disruption, with gasoline, middle distillates and fuel oil all up $2-3 per barrel against crude oil prices since the fire, the declaration has exacerbated supply worries. Shell has not provided a forecast on when repairs to the refinery - the company's largest - will be complete, although it has said refining units at the Pulau Bukom complex were not damaged by the blaze which started in a pumping station near storage tanks and burned from Wednesday to Friday. The fire may have already dented demand for Middle East crude oil. A Singapore trader said Shell may have cancelled 4 million barrels of Oct 2011 crude from Saudi Arabia. It remains difficult to assess the full impact of Shell's supply disruption. Shell said it has started an investigation over the cause of the fire, and won't restart the refinery until safety is ensured, despite damage being limited to a small area.

- Though this has been one of the biggest stories out of Singapore for the past week or so, there are still many questions that are as yet unanswered, the exact cause of the fire only being one of them. The other issues include the possibility of tightness downstream through the supply chain, in particular gasoline (or petrol as we call it here in Singapore), as well as diesel. Another quite valid question is of course something that people might ask me, such as "should I go and top off my fuel tank right away, reduce my driving and in general prepare for an all-out calamity?"

Let's try to estimate this using best guesses. The Shell Bukom refinery operates at 500,000 barrels per day, which is 500kbpd, or 0.5mbpd as the industry as well as we peakoilers usually refer to it. Reportedly, 90% of that is exported, which means that 10% or 50kbpd is for local consumption. Assuming that half of it is utilized for gasoline and diesel production, that works out to 25 kbpd worth, or close to 4 million liters per day. Assuming that each vehicle has a fuel tank of 50 liters, we come to an impact estimate on 79,500 vehicles per day. The total vehicle population in Singapore is 952,221 vehicles (as at Jul 2011 according to the Singapore Department of Statistics), hence the impact will be felt on about 8.3% of the Singapore vehicle population, which roughly speaking, would be 1 out of every 12 vehicles.

As you can see, this is not an insignificant impact though it shouldn't be calamitous. Given the storage buffers throughout the supply chain, we might not expect to see an immediate impact right away. From past observations of petrol price movements, we might expect changes if any to hit within 1 to 2 weeks' time. This isn't much of a forecast, but we might expect petrol and diesel prices to move upward in this timeframe. As they say, pricing happens at the margins, and this is quite a margin.

Of course, many things might happen in a dynamic market. For all we know, it might all come down to who's bidding and who's winning. Singapore may export less distillates as a whole, with price increases passed on to local motorists, and the rest of the impact spread out among the wider Asian region. The extreme opposite could also be true, if the locals balk at increased prices, and so on. At the point of writing, nobody knows for sure. We should have a much clearer picture soon, within 2 weeks at most.

(2011-10-03 21:31:47 SGT) [Energy] Permalink

Sunday July 10, 2011

Saudi Arabia has reached peak oil output, commodities to rise : Goldman Sachs

theoilage.com -> energyandcapital.com :

It's all speculation over the future of the commodities market. But Goldman Sachs is predicting a significant upturn. And they're particularly bullish when it comes to crude oil. According to Goldman Sachs, Brent crude oil prices could be as high as $120 at the end of 2011 and $140 at the end of 2012. The global economy, they believe, is on the rise, despite the Japanese earthquake and the high oil prices. A rise in demand will push up commodity prices. And Goldman Sachs believes this will be fueled by the fact that Saudi Arabia won't be able to meet oil demand.

Despite claims by analysts and even OPEC that Saudi Arabia will be able to increase output to meet growing market demand, Goldman believes that the Saudis have reached their peak oil output. This stems from 2008 when oil surpassed $100 a barrel. This was plenty of reason to boost market supply, but Saudi Arabia hit its peak at 9.5 million barrels a day. Now, despite claims that Saudi Arabia has the potential for a 12 million barrel-a-day capacity, Goldman estimates a supply shortage. US natural gas, gold futures and copper prices (due to China demand) could also see a significant increase. The solution? Go long on commodities - crude oil, copper, zinc, gold - or even soybeans.

- Over time, it is increasingly getting obvious that Saudi Arabia is going through the process of peak oil production and eventual decline. And as peak oil author Matt Simmons had said, "as Saudia Arabia goes, so goes the world". The first alarm bells started ringing as early as 2005 when it was first discovered that apparently the Saudi's could be having problems keeping up production of light sweet crude oil which is the more desired grade of oil. In the years after that, the peakoiler community watched as Saudi's answer to keeping up their oil production was done instead with heavy, sour crude oil. We knew that was it, back then, and waited for the time when even the heavy, sour stuff would start to peter out, and then it would actually be Global Peak Oil, for all intents and purposes.

As a number of peak oil watchers have stated, May 2005 was the date of peak oil for light sweet crude worldwide. Now all we are awaiting is confirmation of the peak date for all liquids - that would include both light and heavy crude, oil from tar sands, from NGL (natural gas liquids), deep-sea drilling, plus all the more exotic and smaller-scale forms like CTL (coal-to-liquid), GTL (gas-to-liquid) and so on. We are getting close but the actual date is hard to pin down as the only way to tell for sure is to look into the proverbial rear-view mirror. Best estimates, as far as we can tell, are currently at 2013 +/- 3 years. So yes, it could actually be in the past and indeed some are talking about the Global Peak Oil date, All Liquids, as being some time last year, back in 2010. And now with no less than Goldman Sachs coming out and saying it, and with the economy nowadays hardly able to gain any real traction, we're getting a sinking feeling that the "early peakers" could be right after all.

(2011-07-10 23:17:49 SGT) [Energy] Permalink

Tuesday June 28, 2011

Singapore electric cars testing starts with 9 electric vehicles

channelnewsasia.com :

Singapore is testing out several electric vehicle (EV) prototypes and technologies. The Electric Vehicle Taskforce led by EMA and LTA announced the launch of the electric vehicle test-bed on Sat [25 Jun 2011]. The aim of the test-bed is to test different EV prototypes and charging technologies in Singapore's urbanised environment. The test-bed will be at 3 outdoor and 2 indoor charging stations and involve 5 Mitsubishi i-MiEVs and 4 Smart Daimler electric cars. From 9, the number of electric cars taking part in this test-bed is expected to grow to 95 before the trial ends in 2013. By then, there will also be 63 charging stations. The 5 stations will collect data on charging patterns as part of the test-bed. The data will also help determine the optimal ratio of charging stations to vehicles.

The charging stations will be installed near the homes or offices of test-bed participants and it will cost a flat rate of S$180 per month for unlimited charging of their electric vehicles. After a full charge of over 8 hours, the electric cars can run for about 90km to 160km. Companies interested in the test can apply for the TIDES-PLUS scheme which waives all vehicle taxes such as ARF, COE, road tax and excise duty for 6 years. The LTA said the cost of buying a Mitsubishi i-MiEV, for example, is about S$90,000 after waiving vehicle taxes under the scheme.

- Finally, the official testing of Singapore's first batch of fully electric cars seems to be taking off, after a roughly 1-year delay during which the rest of the world has been moving further ahead. The electric cars such as the Mitsubishi i-Miev are no longer prototypes as the article claims, but are now full-fledged production vehicles wth retail sales started since Apr 2010.

Yes, there are people keeping track of such things and I happen to be one of them. Back in 2009, the article that ran said that the test-bed was "expected to run for three years (2010-2012)". It is now 2011 and the trial is supposed to end in 2013. Looks like everything has shifted 1 year. In addition (or rather, subtraction), V2G (Vehicle-to-Grid) is no longer mentioned. The scale of the test also seems to have been reduced. At the end of 2009, it was reported that 50 Mitsubishi i-MiEV electric cars will make their way here from Sep 2010. The trial seems to have started with only 5 i-Miev's (down from 50) and another 4 Smart electric cars. In 2010, it was initially said that there would be 26 charging stations which can do 8-hour charges, with one of them being a "quick charge station [that] can do so in 45 minutes". We are down to 5 charging stations and no mention of a 45-minute quick charge station.

Like I've said before, yes, it is good that the Singapore government is looking at adopting electric vehicle technology. But now I have to say that we have got to move quite a bit faster if Singapore is to have any kind of leadership position in technology adoption or transition to the post-Peak Oil era. Not only do we need to move faster in adopting alternative transportation technologies, but also in adopting alternative energy technologies. But that, is a story for another day.

(2011-06-28 23:39:50 SGT) [Energy] Permalink

Saturday June 25, 2011

Book review : Shut Down by William Flynn

Shut Down by new author William Flynn is quite possibly the first actual "Peak Oil novel" written by a long-time member of the peakoiler community. For those unfamiliar with the concept of Peak Oil, as defined by geophysicist King Hubbert, it is the point at which maximum crude oil production is reached, after which the rate of oil production enters terminal decline. If that does not sound like too big of a problem, read the book and let Flynn take you on a whirlwind tour of what the peak oil community has been discussing and pondering about over the past years - about the inter-connectedness of everything in today's modern society, finance, politics, agriculture, logistics, and it all starts where we get most of our energy from - crude oil.

The book starts, innocently enough, with the main protaganist, Kelly Lee, turning up as usual at her workplace, a Starbucks coffee shop, on an ordinary Monday morning. What happens next is what the community calls a "fast crash", as events reminiscent of a souped-up version of the near-economic collapse of 2008 quickly unfold, only this time, unlike 2008, the economic collapse turns out to be a real and permanent one, with a major trigger event setting the stage as the author takes us on a Tom Clancy-style incursion by fighter jets which ends in a retaliation that takes out the most important of Saudi Arabia's oil facilities. This, combined with another massive bank implosion, devolves society quickly into chaos, as Kelly has to embark on a journey amidst the deteriorating sitation to first find her family, and next to seek safety and shelter together with her friends Joe and Bill.

It was a good read. Frankly, I have not touched an honest-to-goodness paperback book in the past couple of years due to work commitments and so on, but I found that I literally could not put this one down, finishing it in what must have been something like near-record time. It is that good. The author evidently knows his stuff - and this, from a fellow peakoiler who knows the scenarios and material depicted therein intimately. It was like, wow, this is what we had been talking about all these years, condensed into one book, summarized into a single, action-packed, terrifying narrative. For those who do not know what we mean by "fast crash", get the book, read it, and be prepared to be blown away. Get the book now.

(2011-06-25 15:17:37 SGT) [Energy] Permalink

Thursday June 23, 2011

Crude oil prices plunge as 28 countries release supply from strategic reserves

usatoday.com, beta.news.yahoo.com :

Crude oil prices tumbled Thursday [23 Jun 2011] on fresh news of US economic weakness and a pledge by 28 countries to release 60 million barrels of oil from strategic reserves. NYMEX crude oil prices for Aug 2011 delivery fell almost $5 a barrel to around $90.51 a barrel. Wary of a new surge in gas prices, the Obama administration decided to release 30 million barrels of oil from the country's emergency reserve as part of a broader international response to lost oil supplies caused by turmoil in the Middle East and North Africa, particularly Libya. Oil's most recent high was $113.93 a barrel in Apr 2011. Stocks fell sharply on news of a rise in initial unemployment claims with the Dow Jones industrials off 200. Oil companies from BP in Britain to Total in France and ExxonMobil in the US were all marked down heavily in the wake of the oil news, adding to the already depressed mood in stock markets.

- Apparently these people are trying to prevent another 2008-style meltdown by moving quickly to douse the fumes on simmering inflation before it becomes a roaring inferno and leads to another price run and subsequent crash. The other indicators included the raising of margin requirements in the futures markets just a few weeks back. But strategic petroleum reserves are only meant to be a short-term solution. This whole thing smacks of an attempt to manage the markets by government control. It might work for a while in the short term. Me, I would just like to thank the 28 countries for another buying opportunity to go long crude oil.

(2011-06-23 23:36:32 SGT) [Energy] Permalink

Friday April 08, 2011

Brent crude oil prices climb above $123 while Nymex crude above $110

channelnewsasia.com :

World oil prices stayed above multi-year highs Fri 8 Apr 2011, supported by the continued tensions in the Arab world and the postponement of elections in Nigeria, Africa's biggest oil producer. NYMEX crude oil prices for May 2011 delivery rose 55 cents to $110.85 per barrel after touching the highest level in two-and-a-half years in US trade. Brent crude oil prices for May 2011 gained 38 cents to $123.05.

The market has been under pressure by tensions in the Middle East and North Africa region, where long-time rulers are under threat by uprisings similar to those that deposed the leaders of Tunisia and Egypt. Libyan leader Muammar al-Gaddafi is battling to remain in power, with rebels controlling large parts of the country. Gulf states have also piled pressure on Yemen's embattled President Ali Abdullah Saleh, saying they expect him to quit following more than two months of bloody protests. The IMF warned that crude demand is outpacing the growth of global supplies, a situation that would lead to sustained higher prices over the long term.

With the price action going on for the past couple of months, $100 is now acting like a floor for NYMEX oil prices. In the recent past there has been talk that prices above $100 would bring about another 2008-like economic catastrophe but this time round the conditions are slightly different. The arguments regarding "speculators" are strangely muted in the mainstream nowadays - what we hear is plentry of concern about geopolitics.

Heading above $107, NYMEX oil prices are definitely in "breakout" territory, and Brent oil prices above $120 are simply perpetuating the continuing spread between the two. Expectations are high for NYMEX to break above $120 but from there on, opinions vary. There are those who say that it will easily break the current standing record of $147.27 per barrel, while others are on record as saying that $120 is the barrier beyond which the world economy will go into another downturn again.

My take is that with the ongoing dollar weakness and geopolitical situation, amongst other factors, the price could well be driven by the momentum crowd, followed by a short pullback and stabilization, base-building for what could be yet another record-breaking run. Not very much of a specific prediction but that is the current "feel" of the situation as could be glimpsed from trawling through all the chatter going on out there. Of course as usual, we shall see.

(2011-04-08 22:18:56 SGT) [Energy] Permalink

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