Ecobella Blog

• For Darpa, the support for algae is part of a broader mission for the US military to obtain half of its fuel from renewable energy sources by 2016. That time line meant that the Pentagon needed to develop technologies to make its hardware “fuel agnostic”, capable that is of running on any energy source including methane and propane.
• The US Air Force wants its entire fleet of jet fighters and transport aircraft to test-fly a 50-50 blend of petroleum-based fuel and other sources – including algae – by next year.

Defense Advanced Research Projects Agency (Darpa) that helped to develop the internet and satellite navigation systems, has taken industry insiders by surprise. A cheap, low-carbon fuel would not only help the US military, the nation’s single largest consumer of energy, to wean itself off its oil addiction, but would also hold the promise of low-carbon driving and flying for all.

Darpa’s research projects have already extracted oil from algal ponds at a cost of $2 per gallon. It is now on track to begin large-scale refining of that oil into jet fuel, at a cost of less than $3 a gallon, according to Barbara McQuiston, special assistant for energy at Darpa.

“Darpa has achieved the base goal to date,” she said. “Oil from algae is projected at $2 per gallon, headed towards $1 per gallon.”

McQuiston said a larger-scale refining operation, producing 50 million gallons a year, would come on line in 2011 and she was hopeful the costs would drop still further – ensuring that the algae-based fuel would be competitive with fossil fuels. She said the projects, run by private firms SAIC and General Atomics, expected to yield 1,000 gallons of oil per acre from the algal farm.

Unlike corn-based ethanol, algal farms do not threaten food supplies. Some strains are being grown on household waste and in brackish water. Algae draw carbon dioxide from the atmosphere when growing; when the derived fuel is burned, the same CO₂ is released, making the fuel theoretically zero-carbon, although processing and transporting the fuel requires some energy.

Source: The Observer

• EV are a short term tip of the iceberg solution to our energy challenges
• Lithium-ion is a non-renewable natural resource with limited supplies
• The future is Hydrogen fuel cells

Major carmakers as Toyota, Honda, Daimler, General Motors, and Hyundai/Kia are deep into plans for commercial production of cars powered by hydrogen fuel cells starting in 2012.

Like natural gas, hydrogen can be used as a car fuel with engine modifications. But carmakers think fuel cells are the better, more efficient, silent, clean power source for transportation. They function somewhat like a battery, except that their fuel is constantly replenished, reacting electrochemically with the air’s oxygen to make electricity to drive an electric motor.

Today, such vehicles are hand-built and expensive, but costs will come down once series production gets underway: Toyota says that it expects to “shock” the industry with its cost reduction as much as 90%.

As for hydrogen fuel costs are expected to be $2-3 per kilogram by around 2018 (a kilogram of hydrogen has about the same energy content as a gallon of gasoline), but because fuel cells are about twice as efficient as internal combustion engines, the effective cost per unit of distance would be about half that.

It is worth noting that hydrogen’s supporters do not oppose battery-powered cars, and they embrace biofuels as another renewable source of hydrogen. But because of the weight of electric batteries, their limited range, cost, and other considerations, batteries are best suited primarily for short-range city cars.

Source:  Project Syndicate &  Ecobella Blog

February 10, 2010 Release

Highlights

• Crude oil prices continue to fluctuate.  The West Texas Intermediate (WTI) spot price increased from $69.48 per barrel on December 14 to $83.12 on January 6 and then fell to $72.85 on January 29.  EIA expects the crude oil market to strengthen again this spring with WTI rising to an average of about $81 per barrel over the second half of this year and $84 per barrel in 2011.  The crude oil price forecast is unchanged from last month’s Outlook.  EIA’s forecast assumes that U.S. real gross domestic product (GDP) grows by 2.3 percent in 2010 and by 2.5 percent in 2011, while world oil-consumption-weighted real GDP grows by 2.7 percent and 3.6 percent in 2010 and 2011, respectively.
  

• EIA forecasts that the annual average regular-grade retail gasoline price will increase from $2.35 per gallon in 2009 to $2.84 in 2010 and $2.97 in 2011 because of the rising average crude oil price forecast.  Pump prices may exceed $3 per gallon at times during the approaching spring and summer.  Projected annual average retail diesel fuel prices are $2.95 and $3.16 per gallon, respectively, in 2010 and 2011.
  

• EIA expects this year’s annual average natural gas Henry Hub spot price to be $5.37 per million Btu (MMBtu), a $1.42-per-MMBtu increase over the 2009 average of $3.95.  EIA projects continuing price increases in 2011, averaging $5.86 per MMBtu for the year.  EIA expects working gas inventories to end the first quarter at about 1,644 billion cubic feet (Bcf) compared with 1,734 Bcf in the previous Outlook, because of colder-than-normal weather in early January.
  

• The annual average residential electricity price changes only slightly over the forecast period, falling from 11.6 cents per kilowatthour (kWh) in 2009 to 11.5 cents in 2010, and then rising to 11.7 cents per kWh in 2011.  These projections are unchanged from the previous Outlook.
  

• Projected carbon dioxide (CO2) emissions from fossil fuels, which declined by 6.3 percent in 2009, will increase by 1.5 percent and 1.3 percent in 2010 and 2011, respectively, as economic recovery contributes to higher energy consumption.

Crude Oil and Liquid Fuels Overview. The world oil market should gradually tighten in 2010 and 2011, as the global economic recovery continues and world oil demand begins to grow again.  Continuation of the production targets set by the Organization of the Petroleum Exporting Countries (OPEC), as well as lower overall growth in non-OPEC supply over the 2010-2011 forecast period, would also contribute to a firming of crude oil prices to above $80 per barrel this summer.  However, the combination of high commercial inventories among members of the Organization for Economic Cooperation and Development (OECD) and ample OPEC surplus production capacity should help dampen the likelihood of any large upward swings in prices.

Global Crude Oil and Liquid Fuels Consumption. EIA has revised upward slightly its projections for global liquid fuels consumption growth in this Outlook, as the Asian-led recovery continues.  China’s apparent liquid fuels consumption in December increased by 0.9 million barrels per day (bbl/d), or 12 percent, above year-earlier levels, as China’s economic stimulus package continued to help push up both oil usage and economic growth. While Japan is expected to continue its long-term decline in consumption, signs of an economic turnaround in that country lead EIA to be less pessimistic about the Japanese decline in liquid fuels consumption for 2010-2011.  EIA’s revised outlook is for global liquid fuels consumption to grow by 1.2 million bbl/d in 2010 and 1.6 million bbl/d in 2011 after showing annual declines in 2008 and 2009.  Non-OECD countries are expected to account for the majority of this growth in both 2010 and 2011.

Non-OPEC Supply. Non-OPEC supply increased by 560,000 bbl/d in 2009, the largest annual increase since 2004.  However, EIA does not expect this level of supply growth to continue during the forecast period. Non-OPEC supply is projected to increase by 430,000 bbl/d in 2010.  The largest source of growth in 2010 is the United States, followed by Brazil and Azerbaijan.  Offsetting this growth, production is forecast to decline in Mexico, the United Kingdom, and Norway.  Non-OPEC supply is expected to fall by 120,000 bbl/d in 2011, as declining production in mature areas overwhelms any new production growth.

OPEC Supply. OPEC cut its crude oil production by 2.2 million bbl/d in 2009, one reason why WTI crude oil prices stabilized between $70 to $80 per barrel since the middle of last year.  This range is consistent with the “fair price” range for crude oil proposed by King Abdullah of Saudi Arabia at the beginning of 2009.  Oil prices hovered in this range despite sustained high levels of oil inventories and rising spare production capacity, which rose, in part, because of cuts in OPEC production. OPEC surplus crude oil production capacity currently stands at about 5 million bbl/d and could grow to 6 million bbl/d by the end of the forecast period.  However, most of this surplus capacity is concentrated in Saudi Arabia, which is not likely to use it as long as the oil market is stable and its price target range is being met.  In contrast, OPEC surplus crude oil production capacity averaged 2.8 million bbl/d during the 1999-2009 period.

EIA expects annual OPEC crude oil production will increase by an average of 0.4 million bbl/d in 2010 and again in 2011 as global oil demand recovers. In addition, EIA expects OPEC non-crude petroleum liquids, which are not subject to OPEC production targets, to grow by 0.6 to 0.7 million bbl/d each year through 2011, for a total of up to 2.2 million bbd/d of increased OPEC liquids production over the next two years. OPEC is scheduled to meet in Vienna on March 17, 2010, to reassess market conditions.

OECD Petroleum Inventories. EIA estimates OECD commercial oil inventories were 2.69 billion barrels at the end of 2009, equivalent to about 58 days of forward cover, and about 90 million barrels more than the 5-year average for the corresponding time of year.  Projected OECD oil inventories remain at the upper end of the historical range over the forecast period.

Crude Oil Prices. WTI crude oil spot prices averaged $78.33 per barrel in January 2010, almost $4 per barrel higher than the prior month’s average and matching the $78-per-barrel forecast in last month’s Outlook.  The WTI spot price peaked at $83.12 on January 6 and then fell to $72.85 on January 29 as the weather turned warm and concerns about the strength of world economic recovery increased.  EIA forecasts that WTI spot prices will remain near current levels over the next few months, averaging $76 per barrel in February and March, before rising to about $82 per barrel in the late spring and to $85 by late next year.

Expected WTI price volatility was fairly steady over the month.  April 2010  implied volatility (based on options prices)  averaged 35 percent per annum during January, and, over the 5 days ending February 4, 2010, it was slightly over 34 percent.  April 2010 WTI futures averaged $75 per barrel over that same 5-day window, yielding a lower and upper limit for the 95-percent confidence interval of $60 and $94 per barrel, respectively.

One year ago, April-delivered WTI into Cushing, Oklahoma, was priced at $45 per barrel, and implied volatility, at 74 percent, was more than twice the rate now trading in the options markets.  Thus, the 95-percent confidence interval for April 2009 WTI futures had lower and upper limits of $28 and $72 per barrel at that time, respectively.

Source: EIA

Mr. Gabrielli, the CEO of Petrobras, gave a presentation in December 2009 in which he shows world oil capacity, including biofuels, peaking in 2010 due to oil capacity additions from new projects being unable to offset world oil decline rates.

Gabrielli states in his presentation that the world needs oil volumes the equivalent of one Saudi Arabia every two years to offset future world oil decline rates.

This is a stronger statement than the one he gave in January 2009 in an interview with Business Week when he said the following.

According to the company’s projections, production from existing fields will fall from a little over 80 million barrels a day to maybe half of that even if new techniques are used to slow their rate of decline. So just keeping global production flat is going to require lots of new fields and requires the world to replace one Saudi Arabia per three years.

Gabrielli is clearly concerned about declining future world oil production. His statements are now in alignment with those of other oil company executives including Sadad al-Husseini, former Aramco executive, who states that world oil production is on a peak plateau, and Total’s CEO, Christophe de Margerie who doesn’t see global oil production ever exceeding 89 million barrels per day (mbd). World oil production in December 2009 was only slightly lower at 86 mbd.

Source: The Oil Drum

Increased levels of carbon dioxide in the atmosphere are apparently causing forests in the eastern United States to grow faster, a new study says. Trees observed along the Chesapeake Bay in Maryland are growing two to four times faster than during earlier periods, and mixed hardwood forests are packing on an additional two tons of growth per acre, according to a report published in The Proceedings of the National Academy of Sciences. After controlling for other variables, researchers say the likely cause is higher levels of CO2. Because trees absorb and store carbon dioxide, they are an important factor in counteracting global warming. “My guess is that they are already sopping up some of the extra carbon,” said Geoffrey G. Parker, an ecologist at the Smithsonian Environmental Research Center and co-author of the study. The rate of growth is tracked by measuring tree diameter. How long this accelerated growth can be sustained is uncertain, however, since the growth rate depends on other factors, including water availability and soil nutrients. Since 1987, Parker has studied 55 stands of trees that are representative of other forests in the eastern United States.

Source: Yale 360