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Eamon Keane

 
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  • Molycorp's Project Phoenix Rising Along With Its NPV [View article]
    "Where are these "structural oversupply" forecasts?"

    Figure 16 of the linked document (www.slideshare.net/Eam...) shows the forecasts of Lynas, Byron Capital Markets, IMCOA & Great Western which all predict 10-30 ktpa cerium surplus in 2014. Also Ernst & Young came out last week and predicted a 10 ktpa surplus in 2015, see Figure 2: (www.ey.com/Publication...).

    "Cerium has far more uses than glass polishing"

    I'm aware of that, I made a sankey chart which shows rare earth flows by end product in Figure 9 of (www.slideshare.net/Eam...)
    Apr 26, 2011. 10:17 AM | 4 Likes Like |Link to Comment
  • Molycorp's Project Phoenix Rising Along With Its NPV [View article]
    "The second thing that stood out to us was that we learned one of the uses for lanthanum and cerium is to crack heavy oil into lighter petroleum products. This is not a use for these specific rare earths that we were previously aware of, but it stands out to us as a major growth opportunity in terms of demand drivers."

    Whoa, buddy, gonna have to stop you there! Approximately 55% of lanthanum is used in fluid catalytic cracking (FCC) (19.5 ktpa) while about 3% of cerium (2.2 ktpa) is also used in FCC. (www.slideshare.net/Eam...). I would hardly call oil a growth area, even if the average API is decreasing.

    Also, this period of high prices can and probably will lead to some demand destruction for cerium in particular (www.usgnn.com/newsgana...):

    "The Glass Association of North America's (GANA) Mirror Division tackled the topic of the cerium oxide shortage during its Technical Committee taking place as part of last week's Glass Week event.

    "It's a serious issue in getting this," commented Jim Ventre of Vitro in bringing this topic to the group.

    China controls approximately 95 percent of the supplies of this rare earth element used in, among many other things, polishing glass, and in the last year has further limited supplies, consequently drastically raising prices.

    The other mirror manufacturers in the room agreed that they, too, are experiencing the shortage of this product, which also is used in cleaning the glass before it's silvered, as Ventre explained. "From what I understand we may not be able to get it," he said.

    Dave Evans mentioned Guardian Glass "is looking at other products ... not aware we've put anything on the line yet to try, but we're definitely talking about it."

    Based on spot prices, greater than 50% of MCP's revenue from REOs comes from La and Ce. Almost every forecast shows these elements to be in structural oversupply come 2015 which would tend to be bearish for the pricing of said elements.
    Apr 26, 2011. 05:17 AM | 3 Likes Like |Link to Comment
  • OPEC: No shortage of crude oil in market [View article]
    Ok, I'm thoroughly confused by this.

    Is the major discrepancy (0.6 mb/d) between the IEA's March 2011 Saudi figures and what Saudi says plausible? Any other explanations?
    Apr 19, 2011. 07:45 AM | Likes Like |Link to Comment
  • What You Should Know About Gas Prices [View article]
    While high oil prices are never welcome to a weak economy, this shovel to the back of some drivers' heads may be just what is needed to get them to come to Jesus and buy a more efficient car. To wit, from December 2010 (www.mlive.com/auto/ind...):

    "Leading the growth were sales of midsize sport-utility vehicles, which jumped 41 percent through the first 11 months of the year, led by vehicles such as the Jeep Grand Cherokee and the Honda Pilot, each of which get about 18 miles per gallon.

    Sales of small cars, by contrast, remained flat despite otherwise surging demand for automobiles. Sales of the Toyota Corolla and the Honda Civic declined, and even the fuel-sipping Toyota Prius, the hybrid darling of the eco-conscious, dropped 1.7 percent.

    "You have about 5 percent of the market that is green and committed to fuel efficiency," said Mike Jackson, the chief executive of AutoNation, the largest auto retailer in the country. "But the other 95 percent will give up an extra 5 mpg in fuel economy for a better cup holder."
    Apr 18, 2011. 06:53 PM | 3 Likes Like |Link to Comment
  • Weekly Gasoline Update: Prices Up Again [View article]
    not really, retailers typically operate on very thin margins, a few cents per gallon. For instance in California, distribution, marketing and retailer profits only come to $0.12/gallon of the $4.16, a margin which doesn't generally fluctuate with oil price.

    energyalmanac.ca.gov/g...
    Apr 13, 2011. 02:35 PM | Likes Like |Link to Comment
  • A Reality Check for Wind Power Investors [View article]
    Valerie Woods, a natural gas veteran, wrote this insightful article last year here on SA, i'll paste it below (seekingalpha.com/artic...):

    "Historically, the price of oil and natural gas commodities has moved in tandem because the demand for both commodities will move up or down in conjunction with the economy and weather.

    As a result, over time, analysts have placed a value on what level natural gas prices should be at if crude oil is at a certain price level. This is referred to as the oil-to-gas price ratio and this ratio has become a way of measuring if the value of each of these commodities is too high or too low.

    The historical oil-to-gas price ratio has ranged from 6:1 to 10:1. For example, at a 10:1 ratio, if the price of natural gas is $7 per MMBtu, then the value or price per barrel of crude oil is expected to be around $70 per barrel. This oil-to-gas price ratio will move up and down based on current events, particularly if there is political unrest. But on average, it has ranged from 6:1 to 10:1.

    However, the oil-to-gas price ratio changed dramatically in the middle of 2009. As crude oil climbed to over $80 per barrel, natural gas NYMEX prices fell to $4 per MMBtu, taking the oil-to-gas price ratio to 20:1. There are two ways to look at this ratio relative to history. Some may say that at $4 per MMBtu, natural gas was undervalued and should rise to bring the price ratio back into balance. Others may say that at $80 per barrel, crude oil was overvalued and should decline to bring this ratio back into balance. Basically, in 2009, one of these commodities was expected to move up or down to return the 20:1 ratio to something closer to historical levels of 6:1 to 10:1. But that didn’t happen.

    Because of the wide price ratios last summer, some investment companies urged investors to buy natural gas commodities based solely on this ratio, under the belief that it would ultimately return to a historical level of 6:1 to 10:1, providing investors with a formidable profit. Under the oil-to-gas price ratio argument, investors anxious to earn a quick buck presumed natural gas was just too inexpensive in comparison to oil. To their surprise and dismay, those who took that bet did not profit because the oil-to-gas price ratio did not return to historical levels.

    For all practical purposes, the prices of crude oil and natural gas are not really related and are not easily interchangeable today. Historically, there was more of a link. About fifteen years ago there was a greater number of older power-generation facilities that could switch back and forth between oil and natural gas, and fuel-switching between the commodities could impact the price of each commodity.

    Today, transportation accounts for 70 percent of U.S. oil consumption, while natural gas is primarily used for heating, power generation and industrial processes. Fuel switching by power generators has declined substantially, and the ability to switch fuels in response to short-term price signals no longer exists.

    Overall, crude oil often acts as a proxy for energy demand. Historically, another reason why the two commodities moved in tandem was because investors tended to buy “energy commodities,” which may have included both crude oil and natural gas. Thus, it was often said that natural gas moved in sympathy with crude oil prices.

    However, the chart below shows that relationship has wavered over the past year and is not nearly as consistent as it was in 2007 and 2008.

    Question: Will the crude oil to natural gas price ratio return to historical levels?

    Conclusion: No, although at times the historical ratio will seem to apply, if only by coincidence.


    Support for Conclusion: The concept of a crude oil to natural gas price ratio continued to exist long after fuel switching was really no longer an issue, because speculative investors looked at the historical ratio as a profit-making opportunity. Basically, the natural gas supply situation has changed dramatically over the past two years. With the rapid expansion of shale supplies and worldwide expansion of liquefied natural gas, investors looking to make a profit by relying on the historical crude oil to natural gas price ratio are more likely to get burned. As investors learn this lesson, this historical ratio will become a thing of the past."

    Are you not persuaded by this analysis?
    Apr 7, 2011. 01:45 PM | 6 Likes Like |Link to Comment
  • A Reality Check for Wind Power Investors [View article]
    Javaharv, because there is no causal link between the two. As was said, very little oil is used in power generation, which is where it's easiest to substitute natural gas for oil. It's a lot harder to substitute natural gas for oil in transport. The oil market is a truly global market, whereas the natural gas market is regional.

    The IEA's World Energy Outlook 2010, for example, predicts a Btu of gas in America will remain at 40% the cost of a Btu of oil for the next 25 years (O/G ratio = 14.5). In Europe, because of an assumed oil indexation, a unit of natural gas energy is projected to cost 60% of oil. The canary in the coal mine for price parity based on energy equivalency is that a unit of coal energy has cost about 30% of the cost of an oil Btu for the last ten years.

    Over the last 30 years, aside from once in the '80s and once in the '90s, the annual price of European natural gas has always been below price parity. In the US, price parity was reached in two different years of the '00s but never in the previous 20 years.

    Oil is 33% of global energy demand, natural gas is only 21%. The only way the two prices would have a logical link today is if a huge amount of natural gas was diverted to make oil via GTL or if compressed/liquified natural gas in transport took off majorly. These are discussed and discounted in the IEA's estimation. GTL plants require many years to plan and construct. Concerted sales of NG vehicles for years would be required to relieve pressure on the oil price and increase pressure on the natural gas price.
    Apr 7, 2011. 12:49 PM | 4 Likes Like |Link to Comment
  • A Reality Check for Wind Power Investors [View article]
    A barrel of oil contains 5.8 million BTUs, so if NG and were oil were perfectly substitutable, oil should be at $23/barrel based on today's $4/MM Btu gas price. Instead oil is at $108/bbl and the ratio is 26:1 as opposed to 5.8:1. Aside from in Europe where some gas contracts are indexed to oil, there is no causal link between oil and gas.

    If oil were to stay at current levels, which seems likely, the oil gas ratio would predict that over the long term NG would rise to $19/MM Btu, which has no chance of happening!
    Apr 7, 2011. 09:01 AM | 1 Like Like |Link to Comment
  • A Reality Check for Wind Power Investors [View article]
    Starting a power system from scratch, yes, however most current power systems have capacity and flexibility which can be used to balance wind.
    Apr 7, 2011. 06:51 AM | 4 Likes Like |Link to Comment
  • A Reality Check for Wind Power Investors [View article]
    Ireland is at the coal-face on issues related to high wind powered generation and the research group I'm a part of is heavily involved with the technical aspects of wind integration. We have many links with American wind integration groups and the head of the group has advised the IPCC on wind integration.

    Ireland is a small, synchronously isolated power system with limited inertia, low interconnection, and almost no hydro, so at present there is nowhere to ship any excess wind. While in 2010 wind accounted for 15% of supply, there were times with low demand at night where it reached 50% of supply.

    Wind output was very low on the 21st of December during the record Irish peak demand brought about due to the arctic cold snap, which is typically associated with low wind. The lights remained on because there was conventional backup. Because wind might not be there when you need it, you need pretty much full backup conventional capacity. Which is ok. It turns out that when power plants are turned off they don't burn fuel.

    Power systems with large amounts of wind need to be more flexible. Ramping up and down coal plants in say Germany or China is going to decrease the failure rate, although no-one really knows by how much. The cycling of gas plants is less problematic, which Ireland has plenty of. As Ireland goes towards 40% of wind on average by 2020 and possibly 75% instanteously, this flexibility will be tested to the limit, and there a range of different measures which my research group are looking at: demand side management, inertia from wind turbines, EVs etc.

    The issue of changing wind patterns is something which should be closely looked at. The average capacity factor for last year was 22% in Ireland, vs. historical expectations of mid-thirties, and has remained low for the first 3 months of this year.

    Talking about a 100% wind system is a straw man. If all America's electricity came from wind there would need to be about 2,000 GW. There's currently 40 GW. Criticising wind economically is fair game - it's not economic at present - however ruling it out of bounds at these low levels for technical reasons is jumping the shark.

    By the way, there is over 5 years of readily downloadable wind output data at 15 minute resolution on the Irish system operator's website (www.eirgrid.com/operat.../
    Apr 6, 2011. 08:40 PM | 9 Likes Like |Link to Comment
  • A Realistic Look at Shale Gas [View article]
    yes, I wrote a few articles on that last Feb e.g.
    seekingalpha.com/artic...

    Converting all cars would require approximately 18 tcf/yr, or about an incremental 80% over current demand, so by that logic we're down to 56 years (100/1.8).
    Apr 5, 2011. 06:59 PM | 3 Likes Like |Link to Comment
  • A Realistic Look at Shale Gas [View article]
    Your point is well taken, wind displaces little conventional capacity and increases cycling of conventional plants however it does displace marginal fossil fuel generation which is often gas-fired.
    Apr 5, 2011. 04:45 PM | 1 Like Like |Link to Comment
  • Peak Oil Theory Misses 2010's New Peak [View article]
    No respect is due, I'm just some dude on the internet. Unfortunately your graph is not just for oil, it is for global liquid fuels supply inclusive of biofuels etc., as Table 3 on page 29 of the EIA's International Energy Outlook shows:
    www.eia.doe.gov/oiaf/i...
    Mar 21, 2011. 07:15 PM | 7 Likes Like |Link to Comment
  • Peak Oil Theory Misses 2010's New Peak [View article]
    Slightly strawmanish as was pointed out above. The main takeaway I got was that we can't predict the future, well, earth to Carlos, that's fairly clear, just check out the IEA's WEO 2000:

    "In the high oil-price scenario, the average international oil price is
    assumed to increase from $20 in 1997 to $30 in 2002 and remains there in real terms until 2020. This assumption differs from the WEO 2000 Reference Scenario, where the oil price is assumed to be $21 up to 2010 and then increase gradually to $28 by 2020."

    Secondly, you are comparing apples and oranges. The EIA graph is for all liquids and includes, for 2007, 1.2 mb/d biofuels, 0.6 mb/d extra heavy oil, 0.2 mb/d CTL and 0.1 mb/d GTL, which reconciles the two figures. In the meantime, biofuels increased to 1.6 mb/d last year.

    We have a stock flow problem, with the treadmill of decline in existing fields being met in the main by biofuels, tar sands, CTL and GTL which are very difficult to ramp up. These are no Ghawars.

    Who knows if we're at peak oil. Straight line extrapolation would actually point to a demand of 130 mb/d in 2030 assuming past is prologue for the developing world's rising incomes. This is far beyond what anyone forecasts and while it isn't going to happen, it shows that even a 90-95 mb/d plateau isn't exactly stellar news.

    On the other hand, if China's housing market goes tits up, for example, then demand isn't going to rise much, and if this happens we have a lot more to worry about than peak oil.
    Mar 21, 2011. 06:09 PM | 7 Likes Like |Link to Comment
  • Italian PM Berlusconi believes the West, by threatening prosecution, bungled its opportunity to get his friend Gaddafi to give up power. Backed into a corner, Gadaffi has no other choice but to remain in Libya and retain power by whatever means.
     [View news story]
    Wow, Berlusconi really is and odious little creature.
    Mar 11, 2011. 02:22 PM | 1 Like Like |Link to Comment
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