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Vinod Dar
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I am the managing director of Dar&Company in Bethesda, MD. We provide business advice and corporate governance coaching to presidents, CEOs, and chairmen of energy and utility companies. Our clients have ranged from the largest utility holding, energy finance and energy technology companies... More
  • Abiotic Oil and Gas: A Theory That Refuses To Vanish

    In the West it is almost universally held that all oil and gas is derived from fossils. This is not the case elsewhere, particularly among Russian and Ukrainian scientists who have, over several generations, tenaciously propounded the notion that oil and gas are abiotic, can be found deep below the surface of the earth in most parts of the world and in very large amounts.


    Western geologists and scientists find the theory either annoying or amusing and refuse to consider it seriously although there are exceptions. The theory continues to be held in much higher regard by Russian scientists and geologists (including some working in the West) for historical and perhaps ideological reasons.


    Many Russian geologists and petroleum researchers credit the rise of Russia over the past 50 years as the largest producer of oil and second largest producer of natural gas in the world to the successful application of the abiogenic theory of oil and gas formation. The Russians claim to have successfully drilled over 300 ultra deep (around 40,000feet) oil and gas wells through granite and basalt based on this theory. These claims have been questioned by Western geologists and petroleum engineers.


    The most recent attempt at gaining credence for the abiogenic idea was only a few months ago. A research team at the Royal Institute of Technology, Stockholm, Sweden, led by Vladimir Kutherov, demonstrated that animal and plant fossils are not necessary for producing oil and natural gas. The team simulated the thermal and pressure processes that occur in the inner layers of the earth to generate hydrocarbons, the chief component of oil and natural gas. The team also noted that oil and gas has been found 7 miles below ground in Texas and fossil oil and gas could not, via, gravity have seeped down to such depths.


    According to the Prof. Kutherov all types of bedrock can serve as reservoirs of hydrocarbon energy and their method of discovery can enhance exploration success rates from 20 % to 70 %. The research team has developed a new technique for locating oil and gas resources. It consists of dividing the globe into a fine grid, which corresponds to underground fissures or migration channels. Hydrocarbon resources will be found wherever migration channels intersect, predicts the team.


    An  abiogenic theory of petroleum is not new, dating from the 16th century .In the 19th century two very accomplished scientists, Alexander von Humboldt and Dimitri Mendeleev( of the Periodic Table fame) advanced the concept. In the 20th century the Russian- Ukrainian School of geology emerged in the Soviet Union to vigorously formulate the modern theory of abiogenic oil and gas. In the West, the most eloquent and determined proponent was the famous astronomer Thomas Gold. After his death, Jack Kenney of Gas Resources Corporation has become the leading Western exponent.


    The prevailing abiotic theory is that the full complement of hydrocarbons found in oil and gas are generated in the mantle (40 to 90 miles below the surface of the earth) by non-biological processes. These hydrocarbons then migrate out of the mantle into the crust where they escape or are trapped by impermeable strata that lead to reservoir formation.


    Specific examples to support the abiotic theory have been cited over the years. Each example has been dismissed by the Western establishment as specious while it has been hailed by proponents as convincing. This is always so when a deeply entrenched belief and massive money flows encounter a subversive idea that profoundly threatens the prevailing order. The debate is becoming increasingly shrill as the two diametrically opposed views of Peak Oil and Abiogenic(Superabundant) Oil collide in a clash not only of science but, far more importantly, of money and ideology.


    Specific examples cited are the impressive recharging from below, not the sides, of the Eugene Island field (wells in deep decline exhibiting sharply increased production; recovery far in excess of  estimated remaining reserves) off new Orleans; the White Tiger oil field in Vietnam( discovered by a Russian company, Vietsovpetro) in fractured basement granite; the Panhandle-Hugoton field (high helium content) in Teaxs-Oklahoma, the Shengli Field and Songliao Basin in Northeastern China( supposedly mantle derived natural gas), and the well known Chimaera natural gas seep in Turkey. This seep has been known to be continuously active for thousands of years and represents the largest cataloged emission of abiogenic methane on land. The vast amounts of methane released by the biggest mud volcano eruptions are allegedly greater than found in the most abundant natural gas fields in commercial production. The presence of considerable amounts of hydrocarbons not associated with tectonic structures is also presented as evidence and, of course, the enormous methane hydrate deposits found all over the world are asserted to be of abiogenic origin. Finally, theory advocates aver that the impressive record of recent ultra deep drilling in the Gulf of Mexico supports their idea.


    The matrix of scientific, political and business interests in the West, Saudi Arabia, Iran, Brazil (an emerging oil exporter of consequence) and Venezuela that refuses to countenance abiogenic theories is big and potent. These interests want oil and gas to be scarce and expensive for a variety of reasons. It is natural and understandable that no credible test of the theory will be attempted within the ambit of these interests.

    The Russian authorities and oil and gas companies seem to be deeply conflicted between intellectual pride (it is their theory, after all) and the desire to keep oil and gas prices high via the idea of scarcity when talking to the rest of the world about their abiogenic oil and gas reserves.


    It seems to the author, however, that China and India have compelling economic and national security interests in proving or disproving the theory, convincingly. If the theory is false then they are no worse off than today. If it is correct then they, of the major nations in the world, have the most to gain in subverting the prevailing oil and gas order of the world. So, of course, do scores of millions of ordinary Americans who care nothing about theories but want cheap, abundant, reliable oil and gas.



    Disclosure: No Positions
    Tags: Natural Gas, Oil
    Feb 03 11:50 AM | Link | 13 Comments
  • Floating Energy Systems: A Nascent Sub-Industry

    The global energy supply industry continues to innovate. Given the scale, multiplicity, complexity and variability of the world’s energy supply system, innovation (both adaptive and transforming) is an essential characteristic of the industry. Floating energy systems, in commercial application and size, represent a nascent sub industry that has the potential to expand rapidly in several parts of the world.


    These developments are occurring in the natural gas and nuclear industries. World resources and reserves of natural gas are quite often remote from major markets. This remoteness means that unless the fields are very large they cannot be commercially useful. Such reserves are referred to as stranded. There are also some import markets that are difficult to serve because of onerous siting issues on land within the importing country. These are stranded or underserved markets. Monetizing stranded reserves and underserved markets provides the incentive to innovate.


    Industry estimates are that there are almost 2,500 small to fairly large gas fields that are currently stranded with reserves ranging from as little as 0.1trillion cubic feet (Tcf) to as much as 5 Tcf. Floating LNG (FLNG)plants are conceived to monetize these stranded markets and fields. These are several fields in the Asia Pacific region, Brazil and West Africa that can justify large FLNG plants. These plants should not be confused with floating LNG ports, which are offshore import and regassification terminals. The first floating LNG port has already been constructed. It is anchored offshore Italy.


    Floating, small scale, nuclear power plants are conceived to monetize electricity intensive, high economic value added opportunities that are either at the far periphery of the grid or remote from the grid. These opportunities may be rather transient or long lived. Maneuverability and the ability to site offshore, away from population centers, are attractive features of floating nuclear power plants.


    It is generally held within the industry that Royal Dutch Shell is the leader in floating LNG technology. The company will, supposedly, order 3 FLNG plants at $5billion each to monetize stranded reserves. Technip and Samsung Heavy Industries are the designated builders. Flex LNG Ltd of Norway has already commissioned 4 smaller FLNG plants from Samsung. First deployment by Flex Energy may be in the Timor Sea by end 2013. The field under development has reserves of 1.2 Tcf, far too small for a conventional LNG facility but quite adequate for an FLNG vessel. Another Norwegian company, Hoegh LNG is also considering an FLNG vessel, with Daewoo Shipbuilding undertaking the design. Santos Ltd and GDF Suez are reportedly studying FLNG for a small project in Australia’s Bonaparte basin. Brazil’s Petrobras may use FLNG vessels for a project in the Tupi field. The pre-salt natural gas resources of the Tupi field may support about a dozen FLNG vessels.


    Shell is using a design that can process 3.5 million metric tons (mmt) of LNG per year. Industry speculation is that Shell may deploy as many as 10 of these large FLNG vessels. The Norwegian companies are planning smaller vessels that can process up to 2 mmt at a cost of $2billion each. Shell is likely to deploy its vessels first in Australia and then expand its geographic horizon. The vessels, of course, can be moved from field to field, basin to basin and continent to continent.


    If Shell succeeds, FLNG will attract other majors as well as mini majors and independents to this emerging sub-industry. The industry will be driven by the propositions that there are no fixed assets that can be held hostage by governments, the vessels are easy to locate, there are significant cost benefits since all the vessels can be built in Asian shipyards, flaring is dramatically reduced, siting is much easier and FLNG projects can be deployed far more quickly than onshore, traditional, LNG projects.


    The world’s first floating nuclear plant (called the Akademik Lomonosov) is scheduled to become operational by the end of 2012, off Russia’s eastern coast. It will be used to power the city of Viluchinsk on the Kamchatka peninsula. The city is a base for Russia’s nuclear submarines. The floating plant is being built for Concern Energatom at the Baltiysky Zavod shipyard in St. Petersburg by United Industrial Corporation. The construction contract is estimated at $315million. The plant is scheduled for completion at the shipyard in 2011 and be ready for transportation by mid 2012 with delivery to Energatom planned for late 2012.


    The plant looks like a ship. It is expected to be 472 feet long and 98 feet long. It will house two 35 MW KLT-40S reactors, similar to those used by Russia’s nuclear powered icebreakers, and two generators. The construction of a second plant may start in late 2010 to be deployed in the city of Pevek in Siberia. Several other cities in Siberia seem to have the potential to house such plants.


    Gazprom is reportedly considering buying and deploying half a dozen of these floating nuclear plants to develop oil and gas fields near the Kola and Yamal peninsulas. Russia has offered Indonesia a 40 MW  floating  nuclear power plant for deployment in 5 to 7 years that can be moved from island to island to address acute electricity shortages. The Russians believe that there is a market for dozens of such plants worldwide, with  oil and gas E&P  and mining companies, interested in developing remote resources, providing a prime opportunity.


    The rapid growth of the global gas and nuclear industries will be  major energy investment themes in the first half of this century, with anticipated growth rates substantially higher than global coal and much higher than global oil. As the demand for fossil energy and electricity increases swiftly in the Global South, natural gas and nuclear power will be the favored sources of energy even as coal consumption in the steel, cement and power generation industries expands notably. Floating natural gas and nuclear systems may well prove attractive and competitive in several applications in scores of locations and floating energy systems could make the transition from novel proposal to respectable niche to important sub industry rather quickly.


    There is another, much longer term, strategic significance to the successful commercial deployment of floating energy systems. This, of course, is the very large scale, global, development of ocean energy resources (beyond oil and gas, including the staggeringly vast amounts of energy trapped in methane hydrates). The movement of water, the flow of air above the surface of the oceans and the thermal gradients (temperature differences) among the various levels of the ocean moving from the warm  surface to the cold lower levels are tremendous, inexhaustible and highly reliable sources of energy for humanity. The technologies, legal structures and business models to develop these three ocean energy resources are nascent, at best. It will be another 20 to 25 years before large, commercial, ocean energy projects become profitable realities and another 30 to 40 years before the global ocean energy industry (assuming it comes into existence) attains a rapid growth trajectory. The floating energy systems being planned and imagined today, however, will be important bridges to this possible new energy industry. The natural gas and nuclear industries may well deploy scores of such systems. The ocean energy industry will need thousands.   



     Disclosure: No positions in the companies named









    Disclosure: No positions in companies mentioned

    Disclosure: NO positions in the stocks mentioned
    Jan 29 12:29 PM | Link | Comment!
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