UnRisk 8

Russia Launches Crude Oil Benchmark to End Dependence on Dollar, Brent


In November, Russia is set to launch test trading of its new domestic-produced benchmark oil. It is expected to drive up the price for Russian oil and end its dependence on Brent pricing. That may result in trading Russian oil in rubles.

Please read more here.

Bill Gates: “Bring Math Skills To The Energy Problem”

by Mark P. Mills


Bill Gates is right.   In a feature interview, mainly about energy, in the November issue of The Atlantic, Bill Gates begins with a pointed challenge that we have to bring “math skills to the problem” when talking about changing global energy use.  May I second that notion.

The central reality today is that hydrocarbons—oil, natural gas, and coal—supply 90% of global energy.  And in the future, the world will need a lot more energy, not less.  If policymakers want to change that equation in order to avoid the use of the carbon in the hydrocarbons, there are no easy solutions.  In fact, any technological solution will require, in Bill Gates words, “a miracle.”


And now for some of the math that Gates is clearly aware of, that illustrates the magnitude of the challenges in changing the world’s energy system.  (Gates’ statements here are in no particular order, but taken as they occur in the interview.)

1. “[F]or energy as a whole, the incentive to invest is quite limited, because unlike digital products … almost everything that’s been invented in energy was invented more than 20 years before it got scaled usage.”

  • 1905 and 1939 were the last times the world saw foundational inventions in energy sources.  In 1905 Einstein received the Nobel Prize for the photoelectric effect leading to solar cells, and 1939 at the University of Chicago with the proof of nuclear fission.  Now, about a century later, those two energy sources combined supply less than 4% of world energy (and nearly all of that from nuclear).
  • Shale technology—arguably a new source of energy wherein hydrocarbons are manufactured from rocks—was pioneered in 1991 by George Mitchell.  Some 25 years later, and with hundreds of billions of dollars of private investment in U.S. shale infrastructure, shale oil and gas have roiled markets but still collectively supply only 3% of world energy.

2. “But what we’re asking ourselves to do here is change energy—and that includes all of transport, all of electricity, all of household usage, and all of industrial usage.”

  • We can add to the list not just all of “industrial usage” but also all data usage.  The global information ecosystem now uses more energy than does global aviation.
  • Everything people use and do, everywhere and always, requires energy, including and especially energy-intensive information-communications technologies:
  • Watching a baseball game on a smartphone uses as much energy as driving a Prius 30 miles. Consuming 100 GB on a smartphone uses the same amount of energy as that required to produce beef for 15 hamburgers
  • Even the digital monetary system uses energy: globally, computers used to create virtual currency, i.e. to ‘mine’ Bitcoins, consume as much energy as do the machines that dig for physical gold.
  • When the world’s 4 billion poor people increase energy use to just 15% of the per capita level of developed economies, global energy use will rise by the equivalent of adding 15 more supertankers (an America’s worth) per day.

3. “[T]he biggest problem for the two lead candidates [wind and solar] is that storage looks to be so difficult.  … We’re more than a factor of 10 away from the economics to get that [grid-scale economic storage].”

  • Electricity is hard to store; economics are only half the problem.
  • All of the annual output from what will become the world’s biggest battery factory—the $5 billion Tesla gigafactory under construction in Nevada—can store just five minutes worth of annual U.S. electric demand.
  • It would require 40 years worth of production from 100 gigafactories in order to build a battery ‘tank’ farm capable of storing enough electricity to match the energy held in the oil tank farm at Cushing, OK, (one of many oil depots in the U.S).

4. “They [clean-energy enthusiasts] have this statement that the cost of solar photovoltaic is the same as hydrocarbon’s. And that’s one of those misleadingly meaningless statements.”

  • To have “parity,” electricity sources have to match both price andavailability precisely because electricity is so difficult to store.  Essentially all kilowatt-hours are produced the same instant they are consumed. Today, 95 percent of America’s power comes from sources that can supply electricity any time it’s needed.
  • Even spontaneous “grid parity” is “meaningless” (i.e., producing a kilowatt-hour for the same price as the grid when the sun is shining) because to match grid-scale availability, photovoltaics would still be about 400% more expensive than conventional grid power because of the extra production equipment and storage needed to ensure availability at any time.

5. “[W]e need innovation that gives us energy that’s cheaper than today’s hydrocarbon energy, that has zero CO2 emissions, and that’s as reliable as today’s overall energy system. And when you put all those requirements together, we need an energy miracle.”

  • Solarwind and battery technologies have improved 150 to 250% in the past half-decade, in terms of energy produced per dollar of capital.  Shale technology, measured the same way over the same time, has improved over 400%.
  • Shale technology has added 100 times more energy supply to America in the past decade than has solar.

6. “I would love to see a tripling, to $18 billion a year from the U.S. government to fund basic [energy] research alone. …  That may make it seem too daunting to people, but in science, miracles are happening all the time.”

  • Federal basic research funding has been in decline, and accounts for less than half of total government R&D spending.
  • Less than 40% all DOE R&D is devoted to basic research, and for other agencies that fund R&D in areas relating to energy, less than 30% is directed at basic science.  The majority of federal R&D funding is directed at “development” and projects, not basic science, thereby turning government R&D policy into de facto industrial policy.
  • About 95% of private-sector R&D spending is directed at “development” and not basic research.

Please read more here.

Is Iran Opening A “Secret Passage” To Asia For Russian Crude Oil?

Russia is looking to expand its influence through oil trade. And a little-reported deal this week may give it access to an entirely new part of the planet when it comes to crude exports.

That's the Persian Gulf. Where reports suggest Russia is close to negotiating a "secret passage" for its oil shipments.

The move is coming through a deal with Iran, which that government says could open the door for crude oil swaps between the two countries -- facilitating exports of "Russian" oil out into Asia and beyond.

Please read more here.

Financial Times: Oil explorers predict 10,000 more job losses in North Sea sector


Producers in the North Sea, ranging from giants such as Royal Dutch Shell and Total to smaller players such as EnQuest and Ithaca Energy are contending with the most difficult conditions in living memory. This is because the North Sea, western Europe’s most prolific oil and gas basin, is one of the most expensive places to pump crude in the world. The price rout has resulted in many fields becoming unprofitable.

Energy companies are seeking to slash costs but there is a risk some small producers with large debt loads could collapse. As profits turn to losses after the price of Brent crude fell from $115 in June last year to about $50 now, banks may no longer be as willing to provide producers with the credit they need to get through the downturn.


Please read more here and here.

Houston Energy Insiders of the Month

Oil & Gas News in Houston, TX

Houston's #1 source for all things energy

Insiders of the Month- October

Underwriter at Republic Business Credit

LaCour Miller

Oil and Gas Project Engineer - Pipeline Specialty

West Davis

Jaime Saldarriaga, Ph.D.

Jaime Saldarriaga, Ph.D.

Iris Mack, PhD, EMBA

Iris Mack, PhD, EMBA

Joel Brown

Joel Brown

Isaac Esparza

Isaac Esparza

Former NATO Commander Wesley Clark: Oil Wars

Wesley Kanne Clark, Sr. (born December 23, 1944) is a retired General of the United States Army. He graduated as valedictorian of the class of 1966 at West Point and was awarded a Rhodes Scholarship to the University of Oxford, where he obtained a degree in Philosophy, Politics and Economics. He later graduated from the Command and General Staff College with a master's degree in military science. He spent 34 years in the Army, receiving many military decorations, several honorary knighthoods, and the Presidential Medal of Freedom.

Clark commanded Operation Allied Force in the Kosovo War during his term as the Supreme Allied Commander Europe of NATO from 1997 to 2000.

More information about General Clark may be found here.

Bloodbath at Halliburton: Internal Memo & Sources Warn Up To 20,000 More Layoffs Coming


According to an employee memo, additional layoffs are underway at Halliburton, with the majority of the reductions taking place in North America.  Halliburton has already cut 14,000 jobs since its peak last year.  This new round of layoffs could number into the 20,000 range.

Please learn more here.

Former Fed Chairman Alan Greenspan: Oil Wars


Global Layoffs from the Oil and Gas industry are nearing 200,000

Please read more here and here.

China Intends to Oust Dollar from Oil Trade

Please read more here.

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