ENERGY IS CARBON
First mankind had horsepower and sometimes slavery. Than mankind start to harvest windenergy in mills. Than they found began to explore the energy within coal and fuelled stream engines with it to power machinery directly, the process of 'implanting extra energy' in our economic system started. A while later Tesla can along and invented and further developed AC and the AC power grid and online power became the main indirect (remote) fuel for devices. Two decades later the combustion engine finds it way into earth based transport and mobility and after WW II the jet engine for air based transport find its way. Both are on location powered by oil. an energy source with a very high energy level can cheap and abundant available. Oil that first only was used for lightning (Kunstler: the oil lamp was the IPod of the Civil War), but by the invention and cheap production of both the combustion engine and gasoline/diesel got its boost into the global economy/society and the invention of the jet engine initiated real globalization. The development we called PeakOil is more about Peak than about Oil. PeakOil will be replaced by the Heinberg mentioned/designed word PeakX or PeakEverything. We're living on a limited planet and all finite resources (like oil) are as real finite as the word finite says. Oil became is the most popular kid in the carbon energy class due its easy logistical characteristics (non pressured, liquid, no physical left rest material). In the beginning of the oil age, the exploration energy balance was 1 to 100. Only 1 barrel oil was used to produce 100 barrels of oil. Now these days the energy efficiency of oil exploration is severe lowered to 1 to 5: 1 barrel oil used in exploration only gives yet 5 barrels of oil production. And this will change even more as 'easy oil is over' (quote of Jeroen VanderVeer, CEO Shell Corporation), so the current 1 to 5 ratio is not sustainable for the next 10 years. Energy ratio's will lowered once again severely. Oil exploration will become earlier economic to expensive than it become from energy perspective to expensive. It is no longer attractive by 1 to 3 ratio's (1 barrel oil used to explore 3 barrels), as investments and operational costs also take their piece of the price. Oil will still be available. But against much more higher prices and also more irregular. The current installbase of oil fuelled/powered devices (cars, trains, airplanes, tractors, machinery) will still be used, but will become more and more less economic in use due to the continuing rising fuel costs. The Hirsch report of the US Department of Energy on the installbase issue, sees this a huge economic problem (the economic waste/decline of a complete installbase generation). In reality all transport/mobility devices will just become to expensive to use. It's not an oil price/availability problem, it's an energy price/availability problem. Transport/mobility will become expensive and thereby less used. The history of oil is widen distances (by its cheap and abundant availability), the future of oil is shorten distances (by its expensive and irregular availability). Cheap oil has given us car based commuting, industrial concentration and production/travel globalization. Expensive oil will give us vibrant local prosperity. The oil of the future will come from stated controlled companies of nations that not want to sell it all now in a hurry and nor sell it now for a bargain price. The price of oil double each year. The price of the dollar drops 20% a year. Producing this year, what also could produced next year is 'own initiated robbery' and no state controlled company will do so. Oil nations will produce a little above current year budget and no longer for stockpiling dollars. Oil nations will reduce production more and more, giving them even more income in doing so. As oil will reach its maximum market price, the granting based distribution model will be placed on top of the price based distribution model. Nobody knows where that price will be, but it's proven that $ 150 per barrel oil was high enough to kill demand (car miles, airtravel and airtransport) severely, both active as in terms of repressing global economy. High oil prices burden our old economic model that was based/build on cheap oil/energy. We need a new economic model that produce high prosperity by low energy demand. Energy that has brought us where we are, now can break was is build, if we stay using the amount we used when is was cheap and abundant available. When the granting based distribution model will come of top of the price model, nations with no real friends will become serious in trouble as their supply will shrink to very low levels. Oil prices will go up, due to the market mechanism (more global demand and less global supply), due to exploration facets (higher exploration costs, lower exploration efficiency ratio's), due to distance facets (more crude oil miles, not enough ship capacity), due to extended refinery facets (new refineries needed for heavy crude types and sulphur polluted crude), due geopolitical facets (strategic less production and the fact that a tight market is more vulnerable for regional/global tensions. Very heavy crude will be gasified, instead of being refined. New refineries will be build. Export of crude will be stopped, crude will be refined in the crude origin nations. The oil of the future is very difficult (expensive) to explore and to refine. Shipment capacity will become a real problem as oil supply in Canada, Mexico, USA and Europe declines a high speed. Conclusion: the globalized cheap oil based economic model will be replace by the local prosperity expensive oil based model, as transport and mobility will become to expensive. Oil fields never can be explored completely, the production of each oil field peaks at a certain moment and then declines gradually. Peak oil field production can be extended by oil field injection methods (nitrogen or water), but the decline rated of injected fields is after the injections more progressive. The Mexican Cantarell field output, which peak is extended by nitrogen injection, declines now at a 15% rate a year. If Ghawar (Saudi Arabia) should start to decline, global oil production will decline with it from it's current extended peak. Ghawar is 'reconditioned' during exploration by massive water injections. Water injections that must be done wisely/slowly otherwise the output will become to much water polluted and the field than needs some rest time to let gravity split oil and water during time. The viscosity of oil is the reason this process takes a lot of time. It's one force (gravity driven by the higher density of water) against the other (higher viscosity of oil). Oil nationalism has pushed western oil internationals out of the center of the market. The future of western oil internationals is serving oil nationalism and getting squeezed by it, when the bucks start rolling. The business model of western oil internationals is outdated. They were the rulers, the hunters, now they're in the wind silence of the oil nationalistic storm. They will become the losers and the hunted. Their history works now against them. They have in the past no real friendships that achieved mutual interests, this is now working severely against them. Only oil internationals with a complete different attitude (as in: complete change of management and policy, by open communication on their history) will get new mutual deals in an oil nationalism dominated global market. Otherwise every lost will be accounted to them and every profit will be taken from them. Oil nationals versus oil internationals will be won by oil nationals. The oil internationals will be used this they are brook. Current strategy of oil internationals is paying dividend and purchasing own stock (to maintain high stock prices). Shell has recalculated/reshuffled their owned reserves figures, others will certainly follow. If BP will loose their rights in the TNK joint venture in Russia, almost 1/3 of their proven reserves will be vaporized overnight. Oil internationals will be split due to shareholders pressure, giving the shareholders double stock value and double dividends, as oil internationals has become to big and to divers to manage centrally. The split-up of Standard Oil (which make Rockefeller from borrower to banker by the by the split-up generated value) has proven both the value and the performance improvements of a split-up. Oil internationals that follow the US in the occupation of Iraq will be thrown out Iraq when the US leave Iraq. The nationalization of oil is a non reversible process. Oil in the 21st century is nationalized. Period. Making old times alive by invasion (or profiting of it) is just a way to ask to kicked out / shut off for ever. Alan Greenspan in his book "The Age of Turbulence: Adventures in a New World.": "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil." or an other quote of this former man of huge economic influence "The Republicans in Congress lost their way, they swapped principle for power. They ended up with neither." Some say these remarkable quotes of him are primarily done to swift attention away from the failures grown/matured during his economic credit/currency leadership. One other remarkable statement. This is from Fatih Birol which is Chief Economist and Head of the Economic Analysis Division of the Paris based IEA/IAE (International Energy Agency) of the OECD: "I think we should leave oil before it leaves us. That should be our motto." The actual coal reserves situation is much more worse than everybody thinks. In all coal reserves calculations are polluted by large quantities of total not economic exploration coal 'reserves'. This while demand is exploding. China opens a huge coal fired power plant each 14 days. Coal will become the most expensive power fuel. Going short on coal based power companies can become very profitable. Gas: Gas used to be a unwanted side product of both exploring and refining. This has changed. Gas is becoming to expensive to flame it of. It is harvested and piped away to nearby users (and as gas pipelines were initiated to also long distance users) or cooled down and/or pipeless shipped as LNG to foreign markets. In many nations there is a high density peripheral natural gas infrastructure installed in all the cities/villages. The US has plenty or natural gas for domestic use for decades to come. Europe has Norway/UK/Holland and will become more and more dependent on Gazprom of Russia. Norway has cancelled new gas production projects as they as they have calculated probably will reduce oil pressure in the same Troll field. New investments in gas production of the Troll field that reduce oil output where investments already were done, was wisely considered not economic. Gas is a very attractive energy source. Its logistics is invisible and relatively cheap, its use can be turned on/off in a second both by the enduser. In power generation it's a fuel that no needed a new infrastructure, burns clean, is suitable for decentral power production (and thereby rest warmth use in domestic heating projects) and gas-to-power plants can be turned on/off in very short time (making it a very attractive peak load targeted fuel). In the US T. Boone Pickens (a 81 year old oil baron of BP Capital Inc.) want to replace the gas that is used for 20% of the power baseload generation by windenergy. His plan can be found on www.pickensplan.com and gets attention of both presidential candidates (Obama and McCain). Australia is becoming the LNG export country of the world. The Middle East uses their gas for power generation. Russia and Iran have a huge gas surplus. Gas is geopolitics as it is an economic lifeline. Bombing out a gasline is putting a continent in the dark for several days. In the winter this will have even more impact. Nations seek both pipe redundancy and supplier redundancy. Russia and the USA understand energy politics. The rest of the world are the dummies. Georgia was a power interference between Russia and the US. Both Georgia/US (invasion independent region South Ossetia that wants to be reunited with North Ossetia) as Russia (nuking every military installation in Georgia to the ground as 'don't mess with Russia' signal) can be blamed for this conflict. The US want to supply Europe by a pipeline trough Georgia with Iraqi and maybe Iranian oil/gas. An invasion of Iran by the USA is no option any more as India, China, Russia and Venezuela support Iranian independence for their own interest) gas. Europe must find its own (constructive) way with Russia and leave the USA out of this discussion. Russia likes to gain friends. Real friends serving mutual interests. Medvedev is the bridge of Putin to Europe. Europe must offer Russia real mutual/friendship based deals. The business facet must become mutual. Russia is a water, food and energy surplus nation. Not the USA, not China, but Russia and Brazil will become the economic heavy weights of the 21st century. Russia has an authoritarian type of capitalism, that could easy to a healthy open free democratic capitalistic type of democracy. While Russia is turning down the KGB, the USA is building DHS. The USA was the home nation of freedom. Freedom was in the US genes, due the history if both the nation and its immigrants. While Russia is building capitalism, the USA will socializing the financial, car and airline industry. Global production of fertilizer is moved to gas rich nations like Russia and Iran (due to the huge gas demand of the Haber-Bosch process), making by the current fertilizer technology Russia and Iran the bottleneck of our cheap food system. Fertilizer production by coal is possible, but requires much more energy (and is thereby more expensive). Algae and/or bacteria based fertilizing technologies are important for food independence of all nations of the world. Gas can be processed to liquid fuel. Due the process costs energy it is less energy efficiency, but still it's possible. Gas con compressed used as mobility fuel. In several cities in Holland the public mobility busses are fuelled by compressed natural gas. Tarsands: Tarsands are sands that contains hydrocarbons. It can be explored by mining (surface and underground) or by in-situ methods (mining and processing underground by underground drilling/heat technologies). Water is used a lot (as in: in huge quantities) in tarsand based oil production. The first reason for this is due the physical characteristic of water that it can transfer a lot of heath: water can absorb and provide back 0,5 MJ in a rise from 0 degrees Celsius to 100 degrees and back to 0 degrees. The second reason is that it can control a production process not to rise above 100 degrees Celsius, which is useful by tarsand production as higher process temperatures would cause a lot of oil lost due to these higher heats. But water is getting more and more expensive for the tarsand industry. The same way regional/national governments tries to strip the oil internationals as much as possible after they've done their investments (which is the future of the oil internationals in one line), the Canadian Administration for example has installed a Water Tax, that just tax additional (above all other taxes and fees) $ 15 tot $ 20 of each produced barrel of tarsand originated oil. The tarsand based hydrocarbon industry will abandon the water based production model (not for the taxes: it still is very attractive), but due the fact that the tarsand industry uses so many water that the water must be transported to the production sites over more and more long distances and will become to expensive. Water scarcity is the huge (and stupid) forgotten production facet in the current tarsand development/technology. Tarsands will be waterless burned (power) or gassed (gas). The waterless production processes will also more energy efficient (less cost and more sales). The underground based new high tech in-situ production model will gain enormous popularity: based on direct harvesting/using the energetic value of the vaporized gasses, or indirect by warmth pump technologies. The current tarsand model is just a beta version of the future tarsand model. A huge development in tarsand energy efficiency improvement will be if tarsand-to-power plants. They will become the most used model. This model requires an on-location power infrastructure. When hydrogen production energy efficiency could rise, that would also be an off grid location than. Oilshales: Oilshales are large solid stone/rock formations that contains hydro carbons. It holds of course less hydrocarbons than crude oil. In order to release these hydrocarbons from the shale stones, it needs to be heated, than they hydrocarbons vaporize and these temperately gas can be condensed to a liquid and than distillated in to oil products. The process use the vaporized gas also to fuel it's own heating process. Oilshales can be explored in surface mining, underground mining and in in-situ projects. The in-situ process extracts the oil of the oilshale without moving them, by creating of underground fire technologies and underground vaporized hydrocarbon harvesting. Water (as heat transporter and process temperature protector) is the missing/expensive part in old technologies based oilshale production models, new models will be waterless technologies. Gasifying will gain enormous popularity. Oilshales can be harvested with 25% to 33% energy lost: using 1 barrel equivalent to explore 4 or 3 barrels oil. A huge development in oilshales energy efficiency improvement will be if oilshales-to-power plants will become the most used model. Independent if the mining is surface/underground or in-situ. Based on direct harvesting the energetic value (air expansion in both production and burning) of the vaporized gasses, or indirect by warmth pump technologies. This requires an on-location power infrastructure/grid connection. When hydrogen production energy efficiency could rise, that would also be an off grid location than. Coal: The global coal reserves are severely over estimated, not in one country: in all countries of the world. They are calculated just on actual presence, regardless the technological chance/possibility and/or economic cost of exploration. Oversizing them with 50 till 75%. The global coal demand on the other will explode the next years. There is low-grade thermal coal (used for power production) and high-grade cooking coal (used for iron/steel production). Concerning the low-grade thermal coal: There were not so many coal fired power plants in construction as there are today. They were never bigger than the ones that are in construction right now: demanding all a complete coal train as fuel per day when they are in production. Even right now very bad quality (in terms of energy and chemical ballast) thermal coal finds it way to China and India these days. Coal and the climate discussion are contrary, but coal will win the dispute. Talking about CO2 reduction is easy, using less hydrocarbons is more difficult. Coal is a hydrocarbon fuel with a lower energy to power ratio and thereby not the favorite flavor of the Climate Change focused community of the world. But prosperity is something each and everyone wants, and prosperity is about affordable energy, so coal will win this dispute. The world should implement more coal technology. Not burning it, but gasification it. Cleaner (in terms of acid rain facets), more energy efficient (and thereby less CO2 emission) and by its higher energy efficiency cheaper. All the current in construction coal to power plants face the possibility of never or only sometimes been used, not due to environmentalists, but due 1) physical shortage of thermal coal (just no 'fuel' available), 2) economic outdated due the more efficient gasification based process (as coal prices rise, efficiency becomes more important facet), 3) relocating of power production to coal mining locations (transporting electrons, instead of coal). Concerning the high-grade cooking coal. As China in June 2008 offers the iron ore miners a 100% price rise for iron ore in exchange for delivering guarantees, the future prices of cooking coal will be at least very soon double of the current price. Taking in calculation that 1) energy is more scarce than iron-ore and 2) cooking coal is a high-grade/scare/premium coal type, the chances that high-grade cooking coal will be tripled in price the next year would not be strange. The fact that coal reserve figures will be lowered next years to realistic levels, coal reserves more and more will been nationalized and energy demand will grow severe, the price of coal (and thereby the price of power and iron/steel) will be doubled each year the next years till it reaches it economic maximal point and than also for coal the granting distribution system will be put on top op de supply/demand exploration model, that already is on top of the exploration costs model. Coal will be as much geopolitics as oil/gas/uranium is these days. In-situ technologies (harvesting the coal energy underground) will rise. Coal to gasoline technologies will rise in oil deficit countries. Everybody with a sense for cost of investments and energy process efficiency knows without any calculation that the gasoline produced this way will not be very cheap, but the cheap oil/gasoline believers still got very much media attention. Common sense we've lost due to cheap oil addiction. Investors in coal-to-power plants are (like investors in each carbon based power generation plant) gamblers. Building a very capital intensive facility with no outlook at all for nor the availability of fuel and the price of the fuel, in a market perspective where both (availability and price) are problematic. Power generation is now a general activity. This will change. Coal-to-power will be done by total other type players than gas-to-power. The size is different, the geographical density is different, the fuel logistics is different and the fuel purchase is different. This availability and price uncertainty is a very uncomfortable situation by such mega investments. This will lead to this uncertainty solving strategic choices/alliances like that coal-to-power plants will or taken over by coal miners or will taken over miners. But more likely is that coal-to-power will be done on the coal locations, why carry around with such material as electrons are more easy and more cheap to transport by HVDC/HTS/LTS or maybe as hydrogen. Coal exploration can be done or in mining (surface or underground) or by in-situ (underground technology). The uncertainness of coal availability and coal prices will make for example solar based energy investments much more attractive: The availability of sunlight is in daytime 100%, each day, the sun doesn't strike or have logistical/political problems. The fuel price of sunlight is $/E 0, the sun doesn't invoice daily fuel costs. These two major advantages of renewable energy harvesting will hit both coal-to-power operations and investments. Coal-to-power investments will in the future only be done by economic gamblers with lots of equity (as banks will turn away from coal-to-power due the supply uncertainness and price uncertainness). An other issue is the low efficiency of old coal technology: this is the main reason why coal has such a bad name (old pollution technology that causes acid rain and old low efficient technology that has thereby more CO2 emission than more effective sources/technologies. The whole CO2 issue will be pushed to the background as energy scarcity grows. Market prices will change behaviour more than any preacher ever could. Clean coal technology (gasification) will gain enormous popularity. International power infrastructures will replace coal shipments. Miners will stop shipping coal and start producing power. Miners will co invest in HVDC/HTS/LTS powerlines (in combination with CSP -Concentrated Solar Poweroperators and producers). Miners will invest in hydrogen research as transport or energy multiplying technology. Miners will buy enduser contracts for creating a closed circuit. Miners will have joint venture with powerlines and with customer/enduser brands/contracts operators. Miners are the Gazproms of the future. Large cities and large factories will always be energy deficit. The big question is if there is market for large cities and large factories in times of expensive energy. Delivery contacts will become more and more important. Contact prices will become more and more flexible determined by global exchange prices based on supply/demand. Coal will profit from the price rises of other energy sources and the other energy sources will benefit from the price rise of coal. Iron will become very expensive due to iron ore and coal prices due to less supply and high demand. Iron will be replaced a lot by glass/silicon material technology. Aluminium also as coal prices will rise and make the in production lots an energy demanding) aluminium very expensive. Miners will become powerful energy players. Miners will be nationalized, making coal also part of geopolitics. Coal has also become a commodity that is confronted with state driven revenue sharing. Miners will be confronted with a kinds of new taxes/duties where an export duty on coal often is the first one (in China 40%) later-on there will be additional other special designed duties put in place. The purpose of these duties are: 1) Stopping export in countries with state ruled energy prices for the internal/domestic market. For example China needs the coal, but as the price of coal is state regulated low (as the state subsidize energy and therefore don't like much space between guaranteed enduser price and market supplier price) and the world market price is high Chinese miners prefer to sell abroad. 2) Sharing revenues by customized taxation between miners and the governments, additional to the in the mining contract mentioned state fee per 1000 kg, as the market prices are much higher than when the contract was signed between miners and government. Steel companies and miners also will make joint ventures, and/or steel companies will go into coal/iron-ore mining, and/or mining companies will go into coal and iron-ore, and/or mining companies will buy steel companies, and/or steel companies will buy mining companies. All just to ensure long term supply and/or enforce each other earnings. Commodities are the scarcities of the 21st century. Coal can be processed to liquid fuel. The Nazi airforce was completely fuelled by coal originated kerosene. Energy is Carbon was an almost 100% accurate statement, but regarding the future it is a very doubtful statement.
Author: Gijs Graafland
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