A "Flood" of new oil..........

[GRG55]

Re: China vs commodities

I've written about this before. As utilities try to offset the cost of solar customers producing their own power these same customers will be installing lithium battery backup systems to time shift their solar production and reduce their peak requirements for grid fed electricity. Utilities that think they are in the energy business and not in the energy distribution business will all go out of business over the next 20 years.

The problem is not the utilities I expect. The problem is utility customers that still think utilities are in the energy business. And that includes those who want 100% reliable back up for their home solar or wind turbine systems.

In many jurisdictions the regulators split the electrical and gas distribution systems from the energy supply, on the premise that such de-regulation would lower consumer prices. That didn't happen. Instead, the controllable portion of the monthly bill - the energy charge (insulation, energy efficient bulbs and other conservation measures) - has declined. But the cost of the distribution system connection has been rising at multiples of the official inflation rate. In my case the annual cost I pay for the utility distribution "connections" to the bunker exceeds the cost of both electric and gas energy it uses. The case for getting off the grid completely is improving.

[santafe2]

Re: China vs commodities

In my case the annual cost I pay for the utility distribution "connections" to the bunker exceeds the cost of both electric and gas energy it uses. The case for getting off the grid completely is improving.

This is a direction I've thought about as well GRG. In the utility industry it's referred to as grid defection. Because I was an early solar PV adopter I still won't have to make that decision until at least 2020 when my utility based incentives run out. My utility let's me consume all of the energy my panels produce each month plus they pay 13 cents per kWh, (through 2020). Also, the state utility, PNM, has not yet moved to a model where distribution is priced separately from energy usage. Until they do that, my electrical energy will be almost free as long as my solar panels are operational.

As you noted, your utility is charging more for the connection than the energy. I don't know specific facts about your utility but I do know that many utilities have aging assets they are still charging back to their customers. It's a broken model and these are the utilities that won't survive as they overly burden their customers and customers defect or more progressive utilities take them over. I had linked this important article almost three years ago from the US utility industries lobbying group Edison Institute. It's beginning to show its age but still very much worth reading.
http://www.eei.org/ourissues/finance...challenges.pdf

The other possibility in electric utility direction is the build-out of a much smarter grid where distributed energy, (roof top, community based), centralized energy and energy storage strategies all work in tandem to shave problems with peak energy usage, time shift energy usage and lower the cost of electrical energy. Going off-grid is possible today and will be economically viable in the next 10 years but in the same time period I think examples of much smarter electrical utilities learning to incentivize energy sources they need installed and slow the growth of energy cost, (see PG&E as an example).

I've attached an interesting chart from the Rocky Mountain Institute that describes these two possible paths:

[jk]

Re: China vs commodities

although path 1 looks a lot more sensible in terms of the efficient use of capital, as well as systemic flexibility, it seems to me that for it to be followed on a national level, it requires a level of government leadership and regulation of which we don't seem capable, at least at this time in history. do you see a way for path 1 to happen under current political and economic conditions? can the utilities themselves make it happen? i know you mention pg&e but california is not typical politically, plus california had the clarifying experience of being raped by energy traders some time ago, focusing attention on the issue.

[santafe2]

Re: China vs commodities

although path 1 looks a lot more sensible in terms of the efficient use of capital, as well as systemic flexibility, it seems to me that for it to be followed on a national level, it requires a level of government leadership and regulation of which we don't seem capable, at least at this time in history. do you see a way for path 1 to happen under current political and economic conditions? can the utilities themselves make it happen? i know you mention pg&e but california is not typical politically, plus california had the clarifying experience of being raped by energy traders some time ago, focusing attention on the issue.

It's a double edged sword jk. As distributed energy strategies proliferate and the majority of US states implement mandatory energy portfolio standards, utilities who had built out for continued growth in consumption are not seeing it. The linked paper has too much of a renewable energy slant but overall it will give you an idea which utilities are working with their local, state and federal agencies to change energy delivery strategies. The way the paper has judged utilities is not always accurate as companies like FPL which get no local support are actually building out projects in other areas with RPS standards. Also, HECO is not mentioned and they are on the forefront in the US of having to time shift renewable energy production.

You'll notice that this paper cites the EEI paper I linked in the last post. If you haven't read that one, it's worth your time. You'll also notice from this paper that Berkshire Hathaway is now an important player.

http://www.ceres.org/resources/repor...eployment-2014

[Polish_Silver]

Re: China vs commodities

how much does a 3kwh battery back up system cost? 3kwh does not mean you are off grid, but it means you might avoid the grid during peak price hours.

We have a gas hookup, but both the stove and water heater are electric.

[santafe2]

Re: China vs commodities

how much does a 3kwh battery back up system cost? 3kwh does not mean you are off grid, but it means you might avoid the grid during peak price hours.

We have a gas hookup, but both the stove and water heater are electric.

Possible but the cost differential would have to be very high for it to make economic sense. Also, you need solar panels installed first. And you really need some type of local / state incentive program and the last time I checked SC didn't have one. If I remember correctly, South Carolina is a more difficult state in which to offer incentives because there are so many small electrical cooperatives. Progress used to have good incentives but as Duke has taken over some of their service areas those have gone away. It's not so much that Duke is anti-solar, they're anti-solar they don't own. Like FPL, Duke is another large provider that doesn't always deliver power in states with Renewable Portfolio Standards so they own solar installations in other states like NC and AZ.

[LorenS]

Re: China vs commodities

how much does a 3kwh battery back up system cost? 3kwh does not mean you are off grid, but it means you might avoid the grid during peak price hours.

We have a gas hookup, but both the stove and water heater are electric.

Batteries alone: $500

http://www.amazon.com/Vmaxtanks-Vmax...lus+Gold+NG-31

You'd need an inverter and a mains disconnect as well. I'd say total system cost would be $1000 with installation labor extra.

[GRG55]

Re: A "Flood" of new oil..........

SU will be a good buy if there is a really emotional flush out..but it is at present a more risky bet than some others imo due to its high exposure to oil sands. In a PCO world it will be a core holding with its long reserve life. But timing is everything, and the time to buy will be when there is blood in the streets...and we seem to have all the right precursors for the probability of that outcome to be elevated now.

The post above is from December 1, 2014. Your patience has been rewarded.

There is now plenty of blood in the streets. I don't normally give "stock tips" but I am going to make one of my few exceptions.

SU is now close enough to my CAN $28 price where it becomes a good buy (there are some other posts on this forum where that target number has been discussed in the past). Given the current state of the CAN$ exchange rate, and the fact SU's production is sold in US$, it is perhaps an even better buy this time at CAN $28 that it was the last couple of times it visited this level.

If you are underweight upstream oil and gas, and have a 3 to 5 year investment time horizon, SU is probably worth at least a look.

[Buy at your own risk, past performance is no guarantee of future performance, see your financial advisor, blah, blah]

[GRG55]

Re: A "Flood" of new oil..........

Yes, I am quite familiar with this project and its troubled history. Quite a few hurdles to overcome. In the technical category the field is overpressured carbonate and overlain by a shale and salt layer cap, which makes the drilling extremely tricky. The completions are even trickier...the field is predominantly tight limestone, instead of the preferred dolomite with its higher permeability.

The field is in shallow water so the construction of artificial islands made the most sense, especially since the field has two main, but pressure connected pods (east and west). With directional drilling methods most of the reservoir can be reached from only a few man-made "platforms". Saudi used the same method to develop the offshore portion of the giant Manifa field. Land rigs can be used at much lower cost than offshore jack-ups, and future access for production operations and well servicing is easier.

Much is being made of the high H2S concentration in the oil, but that is not a big deal...we have numerous fields in Canada with concentrations well over that. One possibility about the associated (solution) gas pipeline failures is the metallurgy of the pipe is wrong...and it could be that they awarded the bid to a Chinese pipe manufacturer that faked the mill certs.

Kazakhstan is an extremely difficult place to do business, with very prescriptive regulations and rampant corruption that is insurmountable even by the cash rich, lawyer heavy IOCs. Part of the problem the consortium(s) faced is the changing ownership and widely differing agendas between the IOCs, the Kazakh and Chinese NOCs and the Kazakh Ministry officials (some no doubt looking for their personal share of the take).

And the saga continues (is it any wonder that ConocoPhillips sold its share and brought the money home to invest in Fortress America's shale plays):

Fri Mar 7, 2014 12:17pm EST

ASTANA, March 7 (Reuters) - Kazakhstan is suing foreign oil majors developing its huge Kashagan oilfield in the Caspian Sea, a tactic similar to those that secured the government large stakes in two of the three multinational energy projects on its territory.

Repeated delays at the 13-year-old project, targeted to produce as much oil as OPEC member Angola from a reserve almost as big as Brazil's, have infuriated the Kazakh government.

The consortium, led by Exxon, Royal Dutch Shell , Total and Eni as well as Kazakh state oil firm KazMunaiGas, may face Kazakhstan seizing a bigger stake in Kashagan or refusing to reimburse a big chunk of the $50 billion spent on bringing it onstream.

Kashagan finally in operation. But some simple "napkin math" is all that is needed to show this project will never, ever return the cost of capital to its investors.

Oil From $50 Billion Kashagan Field Starts Flowing to Export

October 14, 2016 — 6:39 AM MDT

Kashagan, a vast oil field in the Caspian Sea, sent its first crude for export after about 16 years in development and more than $50 billion of investments.

The venture loaded 26,500 metric tons of crude for export into the country’s pipelines, Kazakhstan’s Energy Ministry said in an e-mailed statement Friday. Of that, 7,700 tons was sent to the Caspian Pipeline Consortium. Reaching stable production will take “some time” as commissioning work continues both offshore and onshore, the ministry said.

The project has been plagued by multiple delays and cost overruns. A 2008 budget estimate of $38 billion jumped to $53 billion by the end of last year as the partners replaced undersea links after sulfurous gas corroded and cracked the pipes after a brief startup in 2013. The crude from Kashagan is reaching an already saturated market, with prices at less than half the level of three years ago. Expectations for the field’s exports even prompted OPEC to flip supply predictions for next year.

“Restarting production even in this low oil price environment is good because it means beginning to see some returns on that massive investment,” Andrew Neff, Paris-based principal analyst at IHS Energy, said by e-mail. “The real payoff will be phase two,” which has the potential to increase output to 1 million barrels a day, he said.

North Caspian Operating Co., which took over running of the field from Eni SpA in 2009, said it’s working to gradually increase production capacity to a target level of 370,000 barrels a day by the end of 2017. U.K. consulting firm Wood Mackenzie Ltd. forecasts only about 154,000 barrels a day from the field on average next year...

[shiny!]

Re: A "Flood" of new oil..........

Thanks, GRG55.

[shiny!]

Re: A "Flood" of new oil..........

I'm invested in some mid-level natural gas pipeline MLPs because I think that natural gas has a good future, but I'm deeply troubled by the environmental damage caused by fracking and oil sands extraction. I figured that eventually someone would invent a way to make these processes more environmentally-friendly. If ever a company discovers a way to do this, I'd want to invest in them IF they have a good business model.

The other day I came across a press release from MCW Energy Group. They say they've invented a low-cost "closed-loop solvent based extraction system that recovers bitumen from surface mining" while using no water or toxic solvents. They say their extraction process allows greater profit during periods of very low oil prices. Even when oil demand eventually falls, their process can be used to do soil remediation on existing tailing ponds, leaving the residue completely clean. They are currently operating in the Utah oil sands and expanding into the Permian basin.

Not being an oil and gas expert, I have no idea if their process is scalable or what the downsides, if any, might be. Patent infringement, maybe? Could this company be viable long-term? They only got listed on an American stock exchange very recently as a micro-cap penny stock (a red flag right there). Looking at Morningstar's data, I've never seen so many negative numbers!

This is from one page of their website; there's a lot of information there.

MCW’S PATENTED OIL SANDS EXTRACTION TECHNOLOGY IS A BREAKTHROUGH FOR THE OIL SANDS INDUSTRY.

MCW Energy Group has developed a unique, environmentally-safe, continuous flow, closed loop technology…a first in North America…and probably in the world. The Company’s philosophy is that the environment and the oil sands industry can work together harmoniously ….without any of the resulting destruction seen in so many of the world’s major oil sands projects. This extraction technology is the result of almost five years of research by MCW’s research and engineering teams, headed up by the Company’s Chief Technology Officer, Dr. Vladimir Podlipskiy, well known for his work with benign solvents. Over this period of time, MCW gradually enhanced and improved the efficiencies of its technology at each stage of fabrication with better dryer/mixer components and a higher consistency of oil sands flow. This extraction technology is versatile….it can be effectively applied to both "water-wet" deposits (such as the oil sands projects in Alberta, Canada) or the "oil-wet" deposits such as the resources typically found in Utah.

MCW’s extraction technology utilizes no water in the extraction process, produces no greenhouse gases and requires no high temperatures/pressures. It extracts up to 99% of all hydrocarbon contents and recycles up to 99% of the benign solvents. The proprietary solvent composition consists of hydrophobic, hydrophilic and polycyclic hydrocarbons. In testing periods, these solvents separated up to 99% of heavy bitumen/asphalt and other lighter hydrocarbons from the oil sands, while preventing their precipitation during the extraction process. Solvents used in this composition form an azeotropic mixture which has a low boiling point of 70 – 75 C degrees. MCW expects to recycle over 99% of the solvents used. These features make it possible for hydrocarbon extraction from oil sands feedstock at mild temperatures of 50 – 60 C degrees….with no vacuum or pressure applied. There’s no need for tailings ponds because the only elements that leave the closed-loop system is the extracted crude oil and the cleaned sands, which can be placed back in the earth or sold as clean sand for construction or fracking purposes.

Another unique component of the MCW extraction process is the application of its own extractor, based on a proprietary, patent-pending liquid fluidized bed. Similar-style fluid bed systems have been successfully utilized on a commercial scale in the coal-burning industry, the chemical industry and a wide variety of different industries for decades. This liquid fluidized bed-style reactor is expected to provide continuous mixing of the solvents and the solid ore particles. This action provides a continuous flow process with optimal material/mass/energy balances.

MCW's Tech Snapshot:

• First environmentally-friendly Oil Sands Project in America.
• Effective on all types of oil sands deposits.
• Over 99% hydrocarbon extraction.
• Over 99% solvent recovery.
• No water required.
• Continuous flow, closed-loop system.
• No greenhouse gases.
• No high pressures/temperatures.
• Small footprint.
• Scalable: 250 - 5000 bbl/day units.
• Benign solvents.
• Energy Efficient: EROEI: 20:1 (Alberta: 4:1)
• No expensive infrastructure
• Low Production Costs:
• $35.00 bbl avg. @ Oil Price $80.00
• $28.00 bbl avg. @ Oil Price $50.00
• $24.00 bbl avg. @ oil price $35.00
• Good Netbacks:
• $49.00 bbl @ Oil Price $80.00
• $22.00 bbl @ Oil Price $50.00
• Easily set up. Mobile.
• Lower start-up costs, faster paybacks.
• 13 API rating can be boosted to 42.
• API for higher market prices.
• Nearby compatible refineries.
• Easy access to roads & power.
• Positive, pro-development environment in Utah.
• Opportunity for America to increase domestic production.

[astonas]

Re: A "Flood" of new oil..........

I'm invested in some mid-level natural gas pipeline MLPs because I think that natural gas has a good future, but I'm deeply troubled by the environmental damage caused by fracking and oil sands extraction. I figured that eventually someone would invent a way to make these processes more environmentally-friendly. If ever a company discovers a way to do this, I'd want to invest in them IF they have a good business model.

The other day I came across a press release from MCW Energy Group. They say they've invented a low-cost "closed-loop solvent based extraction system that recovers bitumen from surface mining" while using no water or toxic solvents. They say their extraction process allows greater profit during periods of very low oil prices. Even when oil demand eventually falls, their process can be used to do soil remediation on existing tailing ponds, leaving the residue completely clean. They are currently operating in the Utah oil sands and expanding into the Permian basin.

Not being an oil and gas expert, I have no idea if their process is scalable or what the downsides, if any, might be. Patent infringement, maybe? Could this company be viable long-term? They only got listed on an American stock exchange very recently as a micro-cap penny stock (a red flag right there). Looking at Morningstar's data, I've never seen so many negative numbers!

This is from one page of their website; there's a lot of information there.

Hey Shiny, good question!

I wouldn't make any particularly large bets solely on this information just yet. However, this one may be one to watch for just a bit later, depending on how things work out going forward.

Looking briefly over their website, and the diagrams provided, there doesn't seem to be much difference between their "new" approach and what is already very well established chemical separation technology. As far as I can tell, all they're really claiming is that they can do pretty standard closed-cycle separations, but using "benign" solvents in azeotropic mixtures. The problem is that "benign" has a rather arbitrary definition. They're not exactly providing chemical lists, or even LD-50s. Instead, they make a point of categorizing the solvents employed as a "proprietary" mixture.

True, some solvents are more or less carcinogenic in addition to being acutely cytotoxic and/or volatile, while others are not. But for any organic solvent, a major property that makes them acutely toxic is what they dissolve / attack (i.e. do they break down cell membranes? or other biological structures?) and thus this acute toxicity is a property that generally can't be reduced while still filling the same industrial role in separations. (The reason a solvent is used in the first place is because of what it selectively dissolves, and hence, can separate.) If they have found a way to use less aromatic hydrocarbons, less halogenated solvents, and so on, that's still a good thing, but what they're claiming so far looks more like an incremental (i.e. not revolutionary) advance in technology. For example, they do mention that they're using "polycyclic" hydrocarbons, which are usually aromatic and therefore carcinogenic, so we're at best taking baby-steps in terms of toxicity of compounds employed.

Now, since they're using an azeotropic mixture, it's certainly easily believable that they have found a solution that permits slightly lower-temperature extraction, and gives other incremental benefits to process conditions. But that's a very different thing than the claim that this permits vastly higher recapture efficiencies, so that sands can be disposed of with less contamination. While it's certainly possible, the technology is probably still at a stage where the additional energy (and hence financial) cost of achieving the claimed environmental panacea is undetermined. Of particular interest is how long a given batch of sand has to run through their cycle before it meets the standards promised. They cite a report (Chapman report) that gives an expected range of $30-$40 STB, but to me that has few enough significant figures that it is most likely an on-paper projection, rather than a direct measurement over scale, and presumably one made with idealized assumptions of scaling from controlled laboratory-scale tests, perhaps even with a less-than-perfect model system to represent the input materials. That sort of error is not uncommon.

For this reason, I'd wait to see if the Utah pilot plant they're building lives up to the calculations. It's still quite possible that the purity numbers work out to be entirely valid and correct, for example, but only if you slow throughput down to the point where you could never recapture initial capital costs, or in an extreme case, even energy input. That's the sort of thing that you might not learn until you've run it at scale, on actual input materials. In that case, any investment in the company would be foolish. But if the Utah pilot plant results in great field measurements, at commercially-viable throughput rates, and if there's a reason to expect a flood of orders from a macroeconomic-cycle analysis, that could be a moment you'd want to be standing by with investable cash in hand.

In summary -- wait to see detailed numbers on how it actually performs at scale.

Hope this helps!

[shiny!]

Re: A "Flood" of new oil..........

Astonas- Thank you for taking the time to write such a detailed reply. Most of what you said goes above my head but I get the gist of it.

I read somewhere that they're using citrus-based solvents. Can't remember if it was on their site or somewhere else.

[Milton Kuo]

Re: A "Flood" of new oil..........

Astonas- Thank you for taking the time to write such a detailed reply. Most of what you said goes above my head but I get the gist of it.

I read somewhere that they're using citrus-based solvents. Can't remember if it was on their site or somewhere else.

The true test of non-toxicity is if the CEO of the company will drink a glass of his company's solvent.