Arithmetic, Population, and Energy

Following is lecture by Dr. Albert A. Bartlett's on the topic of population growth and energy demands to sustain the current economic growth.
















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Canadian Operators Revive Oil Sands Projects

Companies are reviving projects in Canada's oil-sands region, a sign that life is returning to an industry hit hard by the economic downturn.

Two major oil-sands projects received funding this week. The Canadian arms of ConocoPhillips and Total SA said they are funding an expansion of their Surmont joint venture, and Calgary-based Husky Energy Inc. said Thursday it will spend C$2.5 billion (US $2.4 billion) on the first phase of its Sunrise project.

Both projects are moving ahead because costs have fallen and returns are higher than a year ago. When oil prices neared $150 a barrel in the summer of 2008, labor and engineering costs skyrocketed as companies raced to lock-in oil-sands projects. But those projects turned sour as crude prices plummeted below $50 a barrel last year as the global economic and financial crisis took a toll.

The downtown has lowered the cost of materials and made labor more productive, as fewer projects require fewer workers and companies can chose from among the best available. And projects are profitable with oil near $80 a barrel.

Husky estimates that it will save over C$1 billion on the first phase of its Sunrise project, which was initially expected to cost between C$3.8 billion and C$4 billion.

"With the downturn and with lower global oil demand and lower prices, the companies took the opportunity to review their projects and come out with greater cost savings and efficiencies before going forward," BMO Capital Markets oil industry analyst Randy Ollenberger said.

While Husky managed to save nearly 40% on Sunrise, Ollenberger estimated that companies can expect to save roughly 20% from estimates made during peak activity levels.

Another factor bringing down the cost of oil-sands projects is a narrowing in the difference in the price between heavy and light crude oils over the last year. Heavy oil usually trades at a discount to lighter oils as it is more expensive to refine, but that discount tends to narrow as production rates fall in response to lower prices, as producers cut back on heavy oil production first.

That has made it more profitable for oil-sands producers to ship heavy oil sands crude without further upgrading, and delay the construction of expensive upgrading facilities that transform heavy crude into lighter products.

The first phase of Husky's Sunrise project is expected to begin construction this year, produce 60,000 barrels of oil a day by 2015 and 200,000 barrels a day of production by 2020.

ConocoPhillips and Total's Surmont project is currently producing about 20,000 barrels of oil a day and is expected to produce 110,000 barrels of oil when construction of the second phase is complete in 2015.

Husky shares declined 0.9% to C$28.44 in recent trading in Toronto; ConocoPhillips shares declined 0.6% to $52.77 in recent trading in New York.

Copyright (c) 2010 Dow Jones & Company, Inc.
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Gulf states pumping out of recession

Arab Gulf states may get a boost from higher oil prices in 2010 but the region's real-estate and banking sectors still face head winds.

"We are going to see an improvement in macro-economic conditions, mainly due to higher oil prices, which will trickle down to corporate activity," said Faisal Hassan, head of research at Global Investment House.

The United Arab Emirates, Saudi Arabia and four other Arab Gulf states depend heavily on revenue from oil exports, which still provide about 60% of the regions foreign currency earnings.

Oil prices have more than doubled from lows of about $35 a barrel at the beginning of 2009 as fear of global economic Armageddon has given way to optimism about a recovery led from Asia. New York Mercantile Exchange crude futures averaged just above $62 a barrel in 2009, according to Zawya Dow Jones calculations.

Saudi Arabia, the Middle East's economic powerhouse and its biggest oil producer, is expected to see real gross domestic product grow by 3% in 2010, after successfully averting contraction this year, according to Kuwait's Global. The kingdom is expected to record marginal real GDP growth of 0.15% in 2009.

STOCKS

The primary benefactors of higher oil prices could be the region's stock markets, which lagged behind global benchmarks in 2009.

"I see the stock markets here outperforming next year," said Benedict Floyd, executive director of DPTG, the region's first trading arcade. "Dubai in particular will pull itself back from this recession far quicker than what many think."

The benchmark Dubai Financial Market index clawed back heavy losses following the sheikdom's shock announcement in November that Dubai World was seeking a standstill on about $26 billion of debt. The stock measure finished the year about 10% up.

Of the Gulf's main markets, Bahrain and Kuwait suffered most from the global financial crisis, both ending the year deep in the red. Still, skeptics point to bad debts amongst the region's banks and exposure to real estate weighing on stocks.

"I expect to see significantly higher provisions on non-performing loans and accounts receivables taken by banks, developers and contractors, which could also pressure stock prices," said Saud Masud, head of research at UBS AG in Dubai.

PROPERTY WOE

The real-estate industry, a major catalyst for the boom in cities like Dubai, may continue to face hard times deep into 2010 as excess capacity, a shortage of finance and economic uncertainty continue to undermine investor confidence.

Emaar Properties PJSC (EMAAR.DFM) will greet the year with the opening of Burj Dubai, the world's tallest skyscraper, that now looms over the city's main highway. But leading analysts remain concerned that Dubai real estate has further to fall after a year that saw 50% wiped of the average value of a home in the emirate.

"I estimate property prices in Dubai to decline another 30% from current levels. I think there needs to be more realistic expectations that we are in an economic down-cycle so a V-shaped turnaround is unlikely and house prices will likely continue to slide," said Masud of UBS.

The unabated increase in Dubai real-estate inventory, coupled with continued pressure on its transient expatriate population as international companies retrench will hit the sector in 2010.

"Many U.A.E. banks have weak balance sheets with substantial exposure to local real estate and to Dubai Inc. companies that will limit their capacity to resume aggressive lending." said Masud.

DEBT RESTRUCTURING

Repairing the damage from 2009 in the Gulf will occupy bankers over the coming year, with much of their attention focused on Dubai's astronomical debt pile. The first test of their readiness to deal again with Gulf borrowers could come in January when creditors are expected to hold a second round of meetings with Dubai World to restructure the company's debt.

How Dubai government manages its estimated $80 billion of sovereign and corporate debt could set a precedent for restructuring across the Gulf. Equally troubling for international banks will be the uncertain outcome of a feud between Saudi conglomerates Ahmad Hamad Al Gosaibi Bros. & Co., or AHAB, and Saad Group, who both may default on their debts after heavy losses at their Bahraini banking units.

Estimates on the exposure global lenders have to the two groups range from $16 billion to about $20 billion.

"Global banks burned with Dubai exposure and the Saad and Gosaibi default will be reluctant to return quickly to regional lending and governments will assume a larger burden of credit extension to large infrastructure projects," said Ali Al Shihabi, founder and executive chairman of Rasmala Investment Bank Ltd.

(Mirna Sleiman, Alex Delmar-Morgan, Nikhil Lohade and Summer Said in Dubai also contributed to this story.)

Copyright (c) 2009 Dow Jones & Co.
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NYC Half Marathon, register now!

On March 21st, the Fresh Air Fund-Racers will take to the streets at the NYC Half-Marathon! Thank you to the Fresh Air Fund-Racers and their supporters for participating in this world class event. You are making a huge difference in the lives of thousands of Fresh Air children!

We have limited availability for this amazing race. If you would like to run, please register here right away.


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Fresh Air and One sight partenrship

Its been a while since my last post. I have been promoting Fresh Air on this blog and they have some great news!

One out of four school children in the U.S. has vision problems, and 86% do not get their vision checked before age 12. Many Fresh Air children do not have access to affordable vision care. Glasses break, are too expensive to replace, or are never prescribed in the first place. And often as a result, children's performance in academics, sports and activities suffers.

For the fifth summer in a row, OneSight offered to bring their traveling optical clinic to all five Fresh Air Fund camp.

Together with OneSight's Vision Vans – and a team of local doctors and volunteers, OneSight provides free eye exams and eyewear to thousands of children in need each year.

This summer at Fresh Air camp, OneSight's staff screened 3,295 children and counselors, gave 1,757 eye exams, and made 1,629 pairs of glasses, with 1,458 of them on-site and 171 specially driven in. The team stayed at Camp Hayden-Marks for two camp sessions, to make sure every child who needed the gift of sight was screened.

Although you might think some children would be reluctant to be prescribed glasses, most of them are delighted. They've been missing out on the world around them for too long. (Being able to pick out their own frames helps, too.)

Our friends at OneSight told us about a boy at Camp Mariah who ran to the Vision Van before the team had even begun setting up in the morning.

“You guys have the van, right,” he said, clapping and jumping up and down. “The one that I can get glasses from?”

We thank OneSight and you, for helping inner-city children receive the services they need.



2009 Summer Facts

• 2009 Fresh Air camp attendees: 3,000
• 2009 Friendly Town participants: nearly 5,000
• Children who participate in our year-round programming: 2,000
• Percent of children who are invited back to their Friendly Town families: 65%
• Friendly Town state volunteer coordinators: 500
• Percent of Fresh Air parents who say The Fresh Air Fund meets or exceeds their expectations: 90%
  

You can give a child the experience of a lifetime with your gift to The Fresh Air Fund!

Every year, The Fresh Air Fund gives thousands of inner-city children the priceless gift of fun - and opens the door to a lifetime of opportunities.

Whether it's a two-week trip to visit a volunteer host family, or a fun-filled and educational stay at one of our camps, our programs make for unforgettable memories - and open a world of new friendships and fresh possibilities.

We are a not-for-profit agency and depend on tax-deductible donations from people like you to keep our vital programs flourishing.

Donate online now!
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Why $200 Oil Is Just Around the Corner

Jeff Rubin believes that oil prices are going to escalate much higher. In his book Why Your World is About to Get a Whole Lot Smaller, Rubin foretells $200 oil and a vastly transformed global economic picture coming into focus very soon.

The premise of Rubin's book is that oil is a finite resource and so-called "easy" oil is waning. Inevitably production will be unable to keep up with the growing demand worldwide, and the price of oil will skyrocket.

The chief economist at CIBC World Markets in Canada for 20 years, Rubin correctly predicted the price of oil reaching $50 in 2005 and $100 in 2007. No one believed him then, either.

"There continues to be widespread skepticism regarding my oil price forecast," Rubin told Rigzone. "As I noted in the book, few people have ever changed their minds during the entire history of the peak oil debate, at least insofar as 'experts' are concerned."
Peak Oil Pushes New Frontiers

Pointing out that 1966 was the peak in the discovery of new oil fields, Rubin also states that production declines every year by about 4 million barrels per day because of depletion. In order to replace what is currently being pumped, the industry must in the next five years discover reserves that will top 20 million barrels of oil a day.

In an effort to replace production, exploration and development have been pushed to much harder to produce ultra-deepwaters and equally difficult to refine oil sands. While new developments have been made to enable production from the ulta-deepwaters of the Gulf of Mexico and the oil sands of Canada and Venezuela, these resources come at a price.

In addition to the industry striving to generate emerging (and costly) technologies to overcome the rigors of working in waters that are more than a mile deep, Hurricanes Katrina, Rita, Ike and more have proven the Gulf of Mexico a volatile investment, with mega-projects, miles and miles of pipelines, and refineries delayed and even destroyed due to these storms.

Additionally, while Rubin expects Canadian oil sand production to increase to 4 million barrels a day, the heavy oil "must be processed extensively to become a usable motor fuel … done through an extensive cracking process that is much more costly and energy intensive than cracking light sweet crude."

According to Rubin, the cost of developing and producing a new oil sands project in Canada can reach up to $90 a barrel. While interest in heavy oils was peaked with the 2008 peak in oil prices, the subsequent plummet of oil prices reduced investments in the product.

"When prices plunged during the recession, over $50 billion of scheduled investment in the oil sands were suddenly cancelled," Rubin told Rigzone.

Nonetheless, as the prices rise again, interest in oil sands has been increasing as of late. Althabasca Oil Sands Corp. announced this week that PetroChina paid $1.9 billion to acquire a 60% stake in its MacKay River and Dover Canadian oil sands projects. Furthermore, the US State Department approved a multi-billion-dollar oil pipeline from Canadian oil sands to US refineries earlier in August.

"Synthetic oil from bitumen is likely to be the single largest source of new supply over the next two decades, principally from Alberta and the Orinoco in Venezuela," Rubin said. "But we need to see a world of triple-digit oil prices to raise that kind of production from tar sands."

Additionally, interest in arctic drilling and production has increased worldwide, from the Chukchi Sea in Alaska to the waters offshore Greenland. Rubin argues that these new sources of oil are not necessarily new, but their commerciality just becomes viable with an increase in the price of oil.
Increasing Demand

While Rubin contends that the global economic recession was caused by the peak in oil prices, he also believes that the price of oil is destined to rise again. Increasing demand for a depleting supply is certain to push the price of oil higher.

While the US and European Union were crippled by the high price of gasoline in 2008, many oil-rich countries subsidized the price of gasoline for their citizens, states Rubin. While most economists look for demand to wane when prices soar, this price fix helps to push demand for oil despite high prices.

"So great is the popular demand for fuel subsidies that in many OPEC countries higher world oil prices actually raise oil consumption, in total defiance of conventional economic logic," states Rubin's book.

Rubin points to Ski Dubai in the middle of the Middle East as an example of this crude use of oil. Here, Ski Dubai offers indoor snow skiing, attracting some 3,000 visitors every day. It takes an equivalent of 3,500 barrels of oil per day to run Ski Dubai and the massive indoor mall in which is it located.

Moreover, many countries like Saudi Arabia and Kuwait are running out of water. While they may have enough oil to fuel their cars, these countries' water supplies are dire. The most likely solution to the problem is the desalination, reports Rubin. Requiring massive amounts of energy, desalination will effectively turn oil into water.
Oil Prices Destined to Rise

These two factors -- limited supply and climbing demand -- will work together to push the price of oil higher. In his book, Rubin argues that oil price peaks have caused four of the last five global recessions.

"The over 500% explosion in oil prices from 2002 to the summer of 2008 is almost double the increase that occurred during either OPEC oil shock... No wonder the US economy and the rest of the OECD are in recession."

While he states that high oil prices do cause the demise of demand, he sees the subsequent recession as a temporary setback for oil's race to higher prices. In fact, Rubin predicts that the price of oil will surpass the $100 mark and head to $200 per barrel within the next few years.

"We will see triple digit oil prices very early into an economic recovery," Rubin told Rigzone. "I expect we will be there within 12 months."

While he does contend that the escalating price of oil will cause another recession, Rubin believes that recovery will spell higher prices once again. The economist predicts $200 oil just around the corner.

"By 2012, we will either be in a world of $200 per barrel oil or we will be back in another oil-induced recession," he added.

While the price of oil on the NYMEX has been buoyed beyond supply and demand fundamentals, investors' belief that the economy will rebound and energy demand will increase has helped to nearly double the price of oil through 2009.

"The biggest signpost of change is today's oil prices," Rubin told Rigzone. "West Texas Intermediate (the North American benchmark crude) is trading over $70 per barrel in the shadow of the American economy's deepest post-war recession when there is little evidence yet of a concrete economic recovery; yet only two and a half years ago, today's post-recession oil price was an all-time record high."

Ultimately, Rubin contends that the world economy will be forced to change because transportation and shipping will be thwarted because of the high cost of fuel. Rubin's world foresees a continued demand for oil, but a demand that has changed and a world that has de-globalized.

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BP's Tiber one of industry's deepest wells

BP PLC has reported a giant Gulf of Mexico Lower Tertiary deepwater discovery that is also one of the world’s deepest wells.
Named Tiber, the well went to a total depth of 35,055 ft on Keathley Canyon Block 102 and found oil in multiple Lower Tertiary (Paleogene) reservoirs, BP said.

The company said Tiber, after appraisal to determine its size, should be larger than the 3 billion boe that BP expects to recover from its 2006 Kaskida discovery 45 miles to the southeast.

Kaskida, with more than 800 ft of net pay on Keathley Canyon 292, is under appraisal through 2010. The Kaskida discovery well went to 32,500 ft in 5,860 ft of water. Kaskida interests are BP 55%, Anadarko Petroleum Corp. 25%, and Devon Energy Corp. 20%.

Andy Inglis, chief executive, BP Exploration & Production, said, “These material discoveries together with our industry leading acreage position support the continuing growth of our deepwater Gulf of Mexico business into the second half of the next decade.”

BP is the gulf’s largest oil and gas producer with net production of more than 400,000 boe/d. It is working on nine Gulf of Mexico projects: Atlantis Phase 2, Tubular Bells, Kodiak, Freedom, Kaskida, Isabela, Santa Cruz, Mad Dog tiebacks, and Great White.

Tiber is nearly 300 miles east-southeast of Corpus Christi, Tex., in 4,132 ft of water. It is also 35 miles southeast of the Gunnison field complex in the Garden Banks area.

BP operates Tiber with 62% interest. Brazil’s Petroleo Brasileiro SA has 20%, and ConocoPhillips has 18%.

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Hydraulic Jet System

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