Showing posts with label natural gas. Show all posts
Showing posts with label natural gas. Show all posts

Sunday, July 14, 2019

A rare glimpse of what the members of the elite think: What are they going to do when things get really tough?




"A lot of these laws and regulations were designed back when the US had a finite amount of energy. Before the new technology was put into place."  Gordon Sondland, US ambassador to the European Union, at the meeting titled "The Fight for EU Energy Security" held on April 11, 2019, in Brussels. Mr Sondland is evidently convinced that the US oil resources are "infinite," or nearly so. Full video of the event.



Scott Fitzgerald said once that "The rich are different from you and me” and Ernst Hemingway is reported to have answered, “Yes, they have more money." Maybe this exchange never took place, but I believe that Hemingway was right: the rich are not really different from ordinary people, apart from having more money. That is, they are not smarter than us. Their riches are the result of luck and of a certain capability of being in the right place at the right moment, including being born from a rich father.

I think that the same conclusion is valid for the category we call the elite. They are not different from you and me: they are not smarter, they just have more power. The concept of elite, of course, is a little vague. Let's say that they are people who have a certain capability of putting into practice their beliefs and so have an impact on the world. The commoners (you and me) cannot do that: at best we can vent our frustrations on the Web: it is what I am doing here!

So, if something important happens in the world, it is because the elites want it to happen. The president of the United States can decide to bomb a foreign country and it will be bombed. Senators and MPs can create laws that will be valid for everyone in the country and it will be applied. The military may lobby to siphon ever-increasing sums of money out of the taxes paid by everyone to build more and more expensive weaponry, and they will normally get it. Rich people may move huge amounts of money to support the extraction of fossil fuels, and that's done, no matter whether it is a good or a bad deal.

As we go down in the hierarchy, these capabilities fade gradually and disappear at the fuzzy boundary that separates the elites from the commoners. The elites and the commoners behave in similar ways, although it may be possible that the members of the elite are more aggressive. But the point remains: some people, up in the hierarchy, can do things we can't do.

I am not inventing all this: it is the "Elite Theory" that says that the world moves the way the rich and the powerful want it to move. It has been well-known for more than a century and probably it was well understood also in ancient times. A recent study that shows how commoners have little or no decisional power in a democracy was published by Gilens and Page in 2014 and their conclusion is that "economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence."

Not surprising, I'd say. But note that there is no such thing as a secret "government of the elite" of people dressing in capes convening in a dark hall in the basement of the White House, in Washington. It is just that the pushes generated by powerful people average to a certain direction according to their prevailing beliefs. And the world moves in that direction.

So, what do the elite think? Maybe we can get a glimpse of that from what Mr. Gordon Sondland said when speaking at a meeting about the EU energy security in April 2019. Among his many dubious statements, one stands above the others: "the US had a finite amount of energy before the new technology was put into place." That's the same as saying that the fossil energy available in the US is now infinite.


Now, Mr. Sondland is surely a member of the US elite. He is a rich man, reported to have donated $ 1 million to support Donald Trump's electoral campaign. No wonder that he was given the prestigious post of US ambassador to the EU. But that was not just a reward for previous credits: Mr. Sondland is perfectly suited for the job of peddling US natural gas to the Europeans. If you have time, listen to him speaking at that meeting. Smooth, self-assured, convincing, the kind of person who could sell whiskers to cats.

The interesting point is that I think Mr. Sondland really believes that the US energy is infinite because of technological progress (*). Of course, I can't get inside his head but it was said in such a matter-of-factly tone that I'd bet he does. It is a belief that fits well with the current debate in the media. Of course, just a fringe believe that hydrocarbons are physically infinite, but most people are now in a phase of complete remotion of the concept that such a thing as "depletion" even exists, to say nothing about being a problem for the foreseeable future. The same is true for climate change.

If we can take Mr. Sondland's sentence as representative of the way the elite think, I guess it proves that they are influenced by their own propaganda. As I said, they are not different from you and me: they watch CNN and Fox News, too. And, like most people, they are unable to reason in quantitative terms, they cannot understand complex systems, they have no knowledge of physics, and they use only extremely crude, intuition-based models.

That, I think, explains a lot of things about what's happening in the world today. The elites think that technology can provide "infinite resources" and that's why their financial branch is pouring enormous amounts of money into a money-losing enterprise such as shale oil. And it also explains why their military branch is so fixated with petty little wars while the ecosystem is going to Hell. They are just acting according to their beliefs.

Of course, that's what's happening now. What if something really big changes the elite's cherished beliefs? How about a new oil crisis? What about a truly gigantic climate-related disaster? That may open up some interesting scenarios. Overall, people's behavior is well described by something that James Schlesinger said, "People have only two modes of operation: complacency and panic." There is no doubt that the elites are in full complacency mode, right now but, if things get really tough, will the elite go into panic mode? And, if so, what happens?

Likely, the panicked elite will not react in a rational way: that's not one of the operating modes of human beings. Most likely, they will keep their trust in technology: if Mr. Sondland believes that it could make fossil fuels infinite, then more technology can solve other problems. If fracking ceases to work we can apply more technology and get liquid fuels out of coal, why not? Or maybe restart an all-out effort with nuclear energy, and damn the radioactive torpedoes. And climate change? Well, the scientists can think of some way of dealing with it: spray something in the atmosphere, put mirrors in orbit, whatever.

It could be much worse: the elite may decide that the problem is just that there are too many people consuming and polluting. Then, they could think of ways to solve it - you guess how. Or they may simply decide that, after all, what do they care about the commoners? They'll just work at saving themselves and the commoners will be left to reach the bottom of the Seneca Cliff, underwater. It is just what the Roman Elite did at the time of the fall of the Roman Empire. And we will see the usual combination of lies, damned lies, and propaganda. Interesting times ahead.



(*) What if Mr. Sondland was lying and he knows perfectly well that the US fossil reserves are not infinite? That changes little in the situation, except that it would indicate that a larger fraction of the elite (including Mr. Sondland) is already in panic mode.



Tuesday, March 5, 2019

The real Energy Return of Crude Oil: smaller than you would have imagined

 


A simple but important study by Luciano Celi shows what is the real energy return that oil companies manage to attain. Much smaller than you would have believed, in several cases it is today well below 10. Which means that renewable energies already produce a larger EROI than oil and gas. No more excuses for not switching to renewables as fast as possible!And we have to do it fast because, as Celi shows, we are on the edge of the Net Energy Cliff of fossil fuels.



By Luciano Celi

Researchers involved in the energy sector know very well what the EROI (acronym of Energy Return on Investment) is and how frequently is cited in scientific publications, in spite of differences of definition among researchers.
Well aware of the fact that I arrived last in the middle of a dispute that has engaged researchers for decades, I accepted the challenge and tried to understand, with Claudio Della Volpe, Luca Pardi, and Stefano Siboni, if there was a way to know something that is difficult know: the EROI of oil companies.

The method we have implemented is quite simple, even if with some useful simplification that we have discussed in details in our paper.

The denominator in the EROI value is the Energy Invested, while the numerator is the Energy Return (how much energy is gained with respect to the investment). Knowing the numerator it is quite simple (we are talking of oil companies) because this value corresponds to the production of a day (or of a year). The issue in different cases was knowing the value of energy cost of that production. It is difficult to know how much energy they use to produce what they produce in a year (or in a day), sitting at a desk without wandering the world knocking on the doors of companies. However... we have found an indirect way to have these data.

The oil companies are requested to compile a Sustainability Report (SR) yearly. Even if not mandatory many companies have accepted to prepare them probably under the pressure of the public opinion or/and the business branch named CSR (Corporate Social Responsibility), especially after the alarms launched at the last world conferences on climate.

In these reports, it is possible to find the emissions of their up- and downstream activities expressed in CO2 equivalent. This is good news because we can try to do a mental experiment: to burn all oil that a company produces and convert it in CO2 equivalent, with a simple stoichiometric ratio. In this way, we have the equivalent value in CO2 of production (numerator) and the equivalent value in CO2 of emissions (denominator).
As already mentioned this is an approximation - first we have many kinds of oil, moreover the petroleum production almost always includes a quota of natural gas that has a different composition (mostly methane) and a different HHV (Higher Heating Value) compared to oil - but we have corrected our estimation taking into account these variables. The interesting side of the issue is that the data are above criticism because they come directly from the oil companies reports (Sustainability, Annual, Commercial, and so on).

The choice of companies


I focused my research activity on SR 2015 and looked at the companies with the highest revenues in the world. I have found this list (on worldatlas.com or Wikipedia: both these sources - the second one takes the data from the previous one - are updated to 2017) and I have chosen to make a cut off for a market share above 1%. According to this criterium the companies selected are 30:

#
Company
Billions $
Market share %

1.
Saudi Aramco
478,00
8,31
34,77
2.
Sinopec
455,50
7,92

3.
China National Petroleum Co.
428,62
7,45

4.
PetroChina
367,98
6,40

5.
Exxon Mobil
268,90
4,68

6.
Royal Dutch Shell
265,00
4,61

7.
Kuwait Petroleum Corporation
251,94
4,38

8.
BP
222,80
3,88

9.
Total SA
212,00
3,69

10.
Lukoil
144,17
2,51

11.
Eni
131,82
2,29

12.
Valero Energy
130,84
2,28

13.
Petrobras
130,00
2,26

14.
Chevron Corporation
129,90
2,26

15.
PDVSA
128,44
2,23

16.
Pemex
117,50
2,04

17.
National Iranian Oil
110,00
1,91

18.
Gazprom
106,30
1,85

19.
Petronas
100,74
1,75

20.
China National Offshore Oil
98,53
1,71

21.
Marathon Petroleum
97,81
1,70

22.
PTT
93,55
1,63

23.
Rosneft
91,72
1,60

24.
JX Holdings
90,67
1,58

25.
Engie
89,64
1,56

26.
Statoil
82,48
1,43

27.
Indian Oil Corporation
81,55
1,42

28.
Sonatrach
76,10
1,32

29.
Reliance Industries
73,10
1,27

30.
Pertamina
70,65
1,23
< 1%

Others
623,27
10,84

Total amount >>>>
5.749,52
100,00


Highlighted in green is found the total amount of the market share for the first five companies: this value is quite high considering that the first thirty companies represent almost the 90% of the market share, and only the 16,6% of them hold the 34,7% of the market share.

The EROI values

Applying the method briefly described above, the estimated values of EROI are represented in the graph below:


If we consider that the total contribution of oil and gas to the world primary energy demand in 2016 was 57.41% of the total (as shown in the graph below), the weighted mean of the EROI is rather low. Why does it seem that nothing happens?
 
The explanation is found in the relation between EROI and Net Energy.


The net energy and the Seneca Cliff



Net energy is defined as:



Net Energy (NE) = Energy Return - Energy Investment.



If we divide all terms for a single quantity ER, the result is:



NE/ER = 1-(1/EROI)

and, under the hypothesis of the ER always equal 100, the NE value can be expressed in percentage. 

So, the equation is:
NE(%)= [1-(1/EROI)]*100.

If we graph NE vs. EROEI the result is the following:


The industrial society experiences Net Energy, not EROI, decline. As shown in the graph above, there is a strong non-linear relation between Net Energy and EROI. For a long range of EROI values, say from 100 to 10, the Net Energy is declining very slowly. Presently although the EROI decline is quite clear the Net Energy is still well above 90%. The society feels pretty safe. The problem is that we are walking along a cliff and it is increasingly urgent to make an energy transition, before finally ending up in the abyss.


Who

Ugo Bardi is a member of the Club of Rome, faculty member of the University of Florence, and the author of "Extracted" (Chelsea Green 2014), "The Seneca Effect" (Springer 2017), and Before the Collapse (Springer 2019)