Few people think of Brazil as an emerging global energy player. Even the most widely cited future of energy scenarios do not put Brazil into the elite group of energy resource-rich nations.
While it is best known for its domestically produced sugarcane ethanol, Brazil’s real source of energy wealth and future geopolitical power is likely to come from exports of oil and natural gas extracted from its deepwater reserves.
Energy pundits are now tracking early indicators hinting that Brazil is awakening to its full potential as a uniquely diversified energy economy growing around traditional hydrocarbon resources while simultaneously expanding its own renewables and bio energy solutions. Brazil’s rise as a global energy powerhouse will take decades to unfold, but it might turn out to be one of the more interesting geopolitical energy stories of the next century.
Who might follow in Anadarko’s footsteps
On Thursday, Houston, Texas-based Andarkoannounced a successful deepwater field discovery offshore of Brazil in its Campos Basin region. This could be the beginning of a string of announcements to come from energy majors tapping the deepwater oil fields of Brazil.
Announcements are likely to come from companies based around the world. Everyone is looking to partner with Brazil in advancing deepwater drilling and securing access to their growing reserves. While the general public might see the oil industry organized neatly into brand names like BP, Shell, Exxon and Chevron, the reality is that these companies are all betting on each other. Most projects have a lead company, but the financial risk is spread with smaller stakes held by competitors and specialized development firms.
Brazil’s emergence as an energy giant might be quiet, but they are not going to do it alone. Now that it has overcome the technical challenges of deepwater drilling, it must navigate the complex geopolitical landscape of energy politics.
Brazil: Deepwater brings new opportunities & challenges
The economy is a funny thing. As oil prices, and commodity
prices in general, have gone wild in the past year or so, there are
many interesting ripple effects. Some are obvious and quantifiable,
such as the increase in venture capital investment into
green/alternative energy sources and plummeting SUV sales. But here is a micro-trend that could gain
some traction if oil prices continue to rise. A farmer in Indiana
installed a drill on his property that produces about 3 barrels of
oil a day – worth almost $400 dollars at today’s price of about
Of course you have to have oil in your backyard to actually make
this work – but if oil ever gets to be the same price as gold –
then we’ll really see a trend in backyard prospecting.
With crude oil hovering at an all-time high of $130/gallon
people all over the globe are feeling the pain and starting to
react in different ways.
Some are finally choosing to drive less frequently.
that “compared with March a year earlier, Americans drove an
estimated 4.3 percent less—that’s 11 billion fewer miles, the
DOT’s Federal Highway Administration said
Monday, calling it ‘the sharpest yearly drop for any month in
In Europe, where environmental taxes roughly double the cost of
gas, groups of French and British workers are demanding public
staging protests .
A few particularly pinched and pro-active folks in rural regions
are shifting around their work week and travel schedule. According
Wall Street Journal “a handful of small towns and community
colleges are switching to four-day workweeks in an effort to help
employees cope with the rising gasoline prices, and could soon be
joined by some larger local governments.”
Because they are investing in the future design of catalysts!
And their strategy is to innovate at the nanoscale.
The Beginning of Nano
Physicist Richard Feynman is often credited with launching the
‘nanoscale’ era of engineering with his famous lecture ‘Plenty of
Room at the Bottom’ at Caltech in 1959. Feynman
described our future ability to manipulate individual atoms and
eventually create complex mechanical structures made of the
Fifty years after Feynman’s lecture, researchers and startups
are making significant progress in designing nanoscale structured
materials that will have an enormous impact on all aspects of the
energy industry from production, to storage to end use
What is disruptive about catalysts?
Simply put, catalysts help us get more output with less energy
input. Catalysts speed up the reaction of photo-, chemical and
electrochemical changes in everything from batteries, fuel cells,
and solar cells, to the refining of coal, gasoline, diesel, and
natural gas, and the production of hydrogen and biofuels. Catalysts
also help to reduce the energy required to create plastics,
biomaterials, pharmaceuticals, and fertilizer.
The rules of the energy industry game are being re-written by
companies designing synthetic metal and carbon-based catalysts that
change our notions of what is possible in the years ahead. Other
companies are attempting to harness, or mimic, naturally occurring
bio-catalysts that gracefully manipulate energy in all living
things from algae/bacteria to plants to human beings.
Catalysts are the silent work horses of our modern world but you
seldom, if ever, hear or see the word mentioned in mainstream
conversations about energy. Yet they hold the key to unlocking
human potential without draining the planet’s resources. Catalysts
can help realize the vision of a world powered by cheap, abundant,
clean energy. (Continued)
[Note: Sadly, this is a Production chart focused on alternative 'decline rates', and does not include Global Demand forecasts. Only know that there is a gap in any scenario!]
The upside of 'Peak Oil Production' is that it might be a more effective message than Climate Change in spurring dramatic changes to our transportation sector. The worst case 'peak production' scenario is that it might remain marginalized among mainstream audiences and political leaders just long enough to really matter. What if confusion reigns?
People might confuse the idea of 'running out of oil' (not true) with the reality that global production is not keeping up with increasing demand. People might place misguided hope into potential 'solutions' like solar or nuclear that have nothing to do with liquid fuel markets. You cannot put electricity into a gas tank!
Why Data Has Replaced 'Assumptions' & Why 'Peak and Plateau' Matters
Most of us have read about peak oil production in which the ability to extract oil reaches a growth plateau and fails to keep pace with accelerating demand. The result could be managing a ‘peak and plateau’ scenario as we gradually shift away from oil, or a ‘peak and collapse’ scenario as the world economy stumbles and cannot adjust to a more rapid decline in production.
But what about the implications of ‘peak oil demand’ from energy consumers? And how might it change the future of the transportation industry?
This notion of ‘peak demand’ is supported by a new report from leading energy-sector forecast firm CERA titled ‘Dawn of a New Age: Global Energy Scenarios for Strategic Decision Making- The Energy Future to 2030’.
CERA suggests that because of high energy costs the US could reach ‘peak gasoline demand’ in the next ten to fifteen years, and possibly plateau as early as 2010. As our vehicles become more efficient and we change behavior, our demand for gasoline will plateau.
CERA’s forecast of ‘peak demand’ is a game changing concept because it shows the transportation industry the ceiling of its growth opportunities in the world’s largest economy. It also forces drastic changes to enable more growth around a new platform as we electrify the world’s transportation sector.
If peak production is our biggest challenge, ‘peak demand’ might be our best incentive for innovation! (Continued)
After airing a special on the future of electric cars CBS 60 Minutes had energy pundits glued to the screen again with Charlie Rose leading an interview with Billionaire Texan T Boone Pickens. Pickens has generated international media attention with his ‘Pickens Plan’ to rearrange the US energy mix emphasizing natural gas and wind in a complicated scheme to wean the US off ‘foreign oil’. What is not entirely clear is how the utilities will respond to the challenges of wind power (without effective storage to manage intermittent power generation), and how Pickens expects free market driven companies to avoid buying ‘foreign’ natural gas if prices are lower than US domestic supplies.
Gas prices have dropped to under $2/gal at some gas stations around the country. “It feels like the 1970’s, with people waiting in line for gas,” one observer says as she waited to fill up at almost half the price of what she was paying earlier in the year. But unlike the ‘70’s (or two months ago) there now seems to be plenty of supply.
As Amory Lovins points out, we can lower our demand faster than Saudi Arabia can lower their production, although his idea is to lower demand with more efficient vehicles, not via a global economic slowdown.
What Happened? Continental Airlines and Boeing are preparing for the first flight of a plane run partially on next generationbiofuels, which will leave on January 7 from Houston, Texas. Continental and Boeing's joint venture will be the first American plane to use jatropha as a biofuel. This biofuels milestonefollows Virgin Atlantic's earlier test run, using coconut oil and babassu oil.
Why is this important? Biofuels would not only help reduce the airline industry's carbon emissions but it could also be a more stable source of fuel.
The January 7th flight is going to be fueled by a 50/50 blend of traditional jet fuel and biofuelsderived fromalgaeand jatropha fuel. Jatrophais ashrub (non-food crop) grown on marginal lands. Its oil-rich seeds can be used to make biofuels. The first commercial scale Jatropha operations are now being tested in India, China, Indonesia, Malaysia and West Africa.
What's Next? Provided the test run goes well next month, this could open doors for the airline business and biofuel producers looking to capture a part of the aviation biofuel market.
Oil Supply Crunch ahead The world's leading authority on oil markets is warning that these days of cheap ($40 barrel) oil are just a mirage and that the world is likely to experience 'an oil supply crunch' next year (2010) as markets begin to recover.
Reuters reports on IEA Executive Director Nobuo Tanaka describing a potential short-term reality: "Currently the demand is very low due to the very bad economic situation, but when the economy starts growing, recovery comes again in 2010 and then onward, we may have another serious supply crunch if capital investment is not coming."
The Real Problem with Oil - No Alternative Oil's biggest problem is 'lack of substiitutability'. There is no other 'reserve' of liquid fuel that can compare to the energy locked up inside the hydrogen-carbon bonds of oil.
If we talk about using oil as gasoline for the transportation sector there is no commercially viable alternative that offers the same volume and performance. Even 'Next Generation' biofuels from algae and cellulose-eating bacteria cannot provide the scale to fill even a tiny gap in global oil production vs demand.
People who push 'solar', 'wind' or 'nuclear' (which produce electricity) as an 'alternative to oil' simply do not understand the combustion engine. You cannot put electricity inside your gas tank. We must either produce massive amounts of liquid fuel substitutes, or take a bolder step to kill the combustion engine.
Is the world ready to confront the real problem? The Combustion Engine
The Financial Times has obtained a draft copy of the International Energy Agency annual World Energy Outlook. The Paris-based IEA is a highly regarded information agency on the global energy sector. The report, which will be officially released next month, states that the world’s largest oil fields have a natural annual rate of output decline is 9.1 per cent. This suggests that the world will struggle to add capacity against such a steep decline. [We will not know IEA’s official figures until November 12th, but the issue of new capacity growth should not be dismissed.]
Peak Production, not Supply
Peak oil relates to extraction, production and new capacity, not total supplies. Even though oil is a finite resource, we are not ‘running out of oil’ – especially around non-conventional hydrocarbon resources. The real concern relates to our ability to increase production to meet growing global demand. The real question is how much can we ‘add’ in new capacity, at what cost and how quickly.
The central element of this story from the IEA, and a key concept to peak oil production, is the ‘rate of decline’ of existing oil field output. The Financial Time reports from the IEA draft “…as they (oil fields) mature it is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand”.
Who is going to add new capacity?
The big question is – where will the oil come from? Forget about claims of ‘known or proven reserves’, there is plenty of oil in the ground. We must ask ourselves which countries and companies can bring massive amounts of oil online at a reasonable cost. This is where things look more uncertain.
Richard Heinberg writes with the Energy Bulletin: “This (9% decline) is a stunning figure. Considering regular crude oil only, this means that 6.825 million barrels a day of new production capacity must come on line each year just to keep up with the aggregate natural decline rate in existing oilfields. That’s a new Saudi Arabia every 18 months.”
The International Energy Agency has released a report describing a challenging future ahead for the energy industry and planet. The IEA’s annual World Energy Outlook highlights an uncertain future shaped by tightening oil supply, higher energy prices, and rising emissions of greenhouse gases.