Tuesday, February 27, 2018

GWPF Newsletter: The Next Shale Revolution

Mammoth Cubes Herald Supersized Future of Fracking

In this newsletter:

1) Cheap Energy Forever: Mammoth Cubes Herald Supersized Future For Shale
Bloomberg, 23 February 2018
2) Global Renewable Energy Sector Faces Enron-Style Collapses, Iberdrola Chief Warns
Financial Times, 23 February 2018

3) Type Failure or Wear And Tear In European Offshore Wind Farms?
GWPF Energy, 25 February 2018
4) The Ross Ice Shelf Is Freezing, Not Melting. Scientists Surprised (Again)
Popular Mechanics, 23 February 2018
5) GWPF To Launch State of the Polar Bear Report 2017
Global Warming Policy Foundation

Full details:

1) Cheap Energy Forever: Mammoth Cubes Herald Supersized Future For Shale
Bloomberg, 23 February 2018

‘Cube development,’ which taps multiple layers of shale all at once, could accelerate the U.S. shale boom and make the world swim in cheap and abundant energy for much of the next 250 years

In the scrublands of West Texas there’s an oil-drilling operation like few that have come before.

Encana Corp.’s RAB Davidson well pad is so mammoth, the explorer speaks of it in military terms, describing its efforts here as an occupation. More than 1 million pounds of drilling rigs, bulldozers, tanker trucks and other equipment spread out over a dusty 16-acre expanse. As of November, the 19 wells here collectively pumped almost 20,000 barrels of crude per day, according to company reports.

Encana calls this “cube development,” and it may be the supersized future of U.S. fracking, says Gabriel Daoud, a JPMorgan Chase & Co. analyst who visited Davidson last year. The technique is designed to tap the multiple layers of petroleum-soaked rock here in Texas’s Permian shale basin all at once, rather than the one-or-two-well, one-layer-at-a-time approach of the past.

After a years-long land grab by explorers, “the Permian is graduating,” according to Daoud. “Now it’s all about entering manufacturing mode.”

With the new technique, Encana and other companies are pushing beyond the drilling patterns that dominated during the early, exploratory phases of the shale revolution. Now, operators are assembling projects with a dozen or more well bores that touch multiple underground layers of the Permian and other shale plays simultaneously, tapping the entire 3-D “cube” beneath a producer’s acreage.

The shift has been controversial, with some of the biggest names in oil shying away from the approach as too aggressive and expensive. But if proponents are right, the cube could accelerate a drilling boom that’s already helped push U.S. production past an historic 10 million barrels a day, rewriting the rules of global energy markets along the way.

Along with the Davidson pad, Calgary-based Encana has 12- and 14-well operations in Texas as well as a 28-well behemoth in the Montney shale play in Alberta and British Columbia.

Devon Energy Corp. said on Wednesday that it has more than 10 multi-zone projects scheduled for 2018, including the 11-well Boomslang pad in the Permian and the 24-well Showboat project in Oklahoma. Concho Resources Inc., another early champion, debuted its Brass Monkey operation in the Permian last year, with 10 wells that dive underground and then burrow about two miles horizontally.

“We have just started to get into the manufacturing and harvest mode of the shale revolution,” Concho Chief Executive Officer Tim Leach said on a conference call.

Full story

2) Global Renewable Energy Sector Faces Enron-Style Collapses, Iberdrola Chief Warns
Financial Times, 23 February 2018

The end of the era of cheap money is set to lead to Enron-style collapses of companies in the much-hyped global renewable energy sector, according to the chief executive of one of the world’s largest wind power producers.

Ignacio Galán, the chief executive of Spanish utility Iberdrola, said that new non-industrial entrants with little experience were making overly aggressive bids on contracts to build renewable energy, thinking its was a financial “el Dorado”.

“Because money is so cheap, many people who have no talent in the sector have been coming with an extremely high level of leverage,” he told the Financial Times. “With the change of the rates, there will be a clean up of the sector.”

As the company on Wednesday reported a 3.6 per cent rise in full-year net profit to €2.8bn and €32bn in investment over the next five years, he added: “I think that what happened with Enron [could happen again]. Enron was highly leveraged . . . and they had no talent as a utility or as traders. And what happened — it disappeared.”

Mr Galán was not accusing any new entrants in the renewable sector — some of whom are private equity or infrastructure funds — of the kind of false accounting that led to US energy trader Enron’s collapse in 2001. He was instead highlighting how cheap money was pushing some into a business they did not understand.

The warning speaks to a wider fear about the potential disruption to global businesses as central bankers start to unwind a multitrillion-dollar experiment in ultra-loose monetary policy. The concern is that some leveraged investors and companies could be caught out by the rate rise.

Full story (subscription required)

3) Type Failure or Wear And Tear In European Offshore Wind Farms?
GWPF Energy, 25 February 2018
Dr John Constable, GWPF Energy Editor

Recent reports indicate that major repairs are required on 500 offshore wind turbines in United Kingdom waters, and nearly two hundred more at sites off the Danish and German coasts. Whether this is type failure or just normal wear and tear is as yet unclear, and is, according to Danish news reports, in dispute.

One of the principal disadvantages of rapid and inorganic technological deployment, such as that required by the European Union’s renewable energy targets, is that problems are very widespread by the time they are discovered. The prudent approach is to stay behind the learning curve, so that the consequences of type failure affect only a small number of installations. Dashing ahead of the learning curve is asking for big trouble.

Recent weeks have seen several reports that Ørsted, as DONG Energy is now called, is faced with the distressed repair of over six hundred offshore wind turbines supplied by Siemens. Five hundred of these are in British waters, and somewhat over one hundred are offshore Denmark, with a further 80 in German waters.

West of Duddon Sands, a joint venture between Ørsted and ScottishPower, is an offshore wind farm of 108 Siemens 3.6 MW turbines (SWT 3.6 MW) with a total capacity of 388.8 MW. It was officially opened by the then Secretary of State for Energy and Climate Change, Ed Davy, and began generating in February 2014.

It now appears that all 108 wind turbines have erosion problems on the leading edges of their blades, requiring removal and reconditioning. Renewable Energy News (renews, issue 377, available only to subscribers), is reporting that this will entail the application of a rubber covering, a process that will take three to ten days per turbine. Work is expected to start later this year and will stretch into 2019.

Renewable Energy News added that this problem was also present at Ørsted’s Walney 2 offshore windfarm, a site comprising 51 Siemens 3.6 MW turbines with a capacity of 183.6 MW.

In total, Renewable Energy News stated that the problem was found in 500 UK offshore wind turbines, and was probably also found in at least one, unnamed, German offshore wind farm, affecting some 80 turbines.

The Danish newspaper Jyllands Posten (Danish report here and translated here) and RE News online  are now both reporting that the problem also affects the Danish Anholt offshore wind farm, a site comprising 111 Siemens 3.6 MW turbines,with a total capacity of 400 MW. Some 27 of the wind turbines were repaired last year, 2017, and the remaining 84 are scheduled for repair in the coming year.

The Siemens 3.6 MW turbine which appears in all these instances entered the market in 2010, and there are, according to RE News, some 950 in European waters.
The cost of the repairs will almost certainly be very large. Assuming a repair vessel charter rate of about £150,000 per day, and, say, five days per turbine, this amounts £750,000 per turbine, plus additional labour and equipment costs. In total the cost seems unlikely to be less than £1m per turbine, which equivalent to between 5% and 10% of the total project cost.

Even if it is only half that sum, this is a very expensive repair very soon after commissioning, to say nothing of the lost generation and income during the repairs.

It is not yet clear who is to pay for this work. The Jyllands Posten noted that Siemens was thought to have granted five year warranties, with the implication that many of the affected machines would still be covered, and they observed that the Danish subsidiary of Siemens Gamesa “has just provided 4.5 billion Danish Krone ($750 million) or 16% of its revenue to guarantee its commitments.” However,  they added, there was “disagreement between Ørsted and Siemens Gamesa as to whether the problems are covered by the guarantee or are a case of ordinary wear and tear.”

There is a lot more at stake here than the allocation of a painful repair bill. If this is a type failure affecting the SWT 3.6 MW device only, then it is a very expensively learned lesson, bad news for Siemens, perhaps hitherto regarded as the premier manufacturer of wind turbines, and unlikely to be forgiven by investors, but of only indirect significance for the wider industry.

But if the need for these repairs is, as Siemens is apparently contending, just every day wear and tear, then this sort of problem is unlikely to be confined to the SWT 3.6 MW device, and will be strong evidence confirming long-held suspicions that developers and owners have greatly underestimated the normal cost of wind farm Operation and Maintenance (O&M).

4) The Ross Ice Shelf Is Freezing, Not Melting. Scientists Surprised (Again)
Popular Mechanics, 23 February 2018

Scientists were surprised by the results of their study. “It blew our minds,” Christina Hulbe, the glaciologist from the University of Otago in New Zealand, who co-led the project, told National Geographic.

In November, scientists from New Zealand used a hot water drill to go deep into Antarctica’s Ross Ice Shelf. The shelf, which can be up to 10,000 feet thick, is the largest of several that hold back West Antarctica’s massive amounts of ice. If these were to collapse, global sea level would rise by ten feet.

Drilling a hole and lowering a camera and thermometer inside is a way for researchers to understand the history of the shelf, and what is happening to it now. In measuring the temperature and currents below the shelf, they expected to find that the ice was melting.

Instead, the water appeared to be crystalizing and freezing. In the video from National Geographic below, you can see the white dots of ice crystals as the camera is lowered towards the dark sea below. If the shelf was melting, the hole at that level would have smooth sides.

“It blew our minds,” Christina Hulbe, the glaciologist from the University of Otago in New Zealand, who co-led the project, told National Geographic.

Scientists have left instruments deep in the hole to measure currents and temperatures below the shelf for the next few years. Though the freezing seems to be a promising sign for the shelf’s stability, it doesn’t tell the whole picture. Scientists also hope to learn whether the ice shelf has melted in the past due to other climate shifts.

Full story

5) GWPF To Launch State of the Polar Bear Report 2017
Global Warming Policy Foundation

The Global Warming Policy Foundation will launch its State of the Polar Bear Report 2017 tomorrow morning in Toronto.

Coinciding with International Polar Bear Day (27 February), the GWPF’s State of the Polar Bear Report summarises clear, reliable and concise information on the current state of polar bears in the Arctic since 2014, relative to historical records. It highlights up-to-date data and research findings in a balanced and factual format that avoids hype and exaggeration. It is intended for a wide audience, including scientists, teachers, students, decision-makers and the general public interested in polar bears and Arctic ecology.

The launch will be held on Tuesday 27 February at 11:00am at the Toronto Public Library, Founders’ Room, 789 Yonge St, Toronto, ON M4W 2G8.


* Welcome (Dr Benny Peiser, Director of the GWPF)
* Introduction: Prof Chris Essex (Chairman of the GWPF’s Academic Advisory Council)
* Short video screening
* Presentation: Dr Susan Crockford (author of the report)

For further information, please contact Harry Wilkinson (harry.wilkinson@thegwpf.org)

The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.

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