Potential Social Impacts of Biofuel Developments in Indonesia and the Philippines and the Need for Social Standards

Jatropha Biodiesel Roadmap Philippines

Oil's Piracy Premium

Source: Frank Holmes, U.S. Global Investors

Hollywood pirates such as Jack Sparrow and Blackbeard are glorified characters among uncivilized peers, stealing from the rich and acquiring bounties of gold. While the adventures of these 19th century caricatures are entertaining, their 21st century descendants are a growing threat to a shipping industry responsible for nearly 80% of the world's trade.

Pirate attacks are on pace to set a nine-year record in 2011, according to data from the International Chamber of Commerce, which tracks global pirate attacks.

Over the past five years, the number of attempted pirate attacks around the world has nearly doubled to 445 in 2010. Pirates successfully boarded the attacked vessels in 50% of these attempts. It's estimated that only 30%–40% of attacks are reported to international agencies so these are pretty conservative figures. Currently, 750 seafarers on over 30 vessels are held hostage by pirates demanding enormous ransoms.

During that same time period, the average ransom paid to release hostages and vessels has increased dramatically. In 2010, the average ransom for hijacked ships was $5.4 million, including a record $9.5 million paid in November for a South Korean oil tanker. This is up substantially from 2005 when the average ransom paid was about $150,000, according to oil industry analyst PIRA Energy Group.

The largest problem area has been off the coast of Somalia. The country's history of piracy extends over 20 years since the fall of its government. In an attempt to protect their waters from being overfished, Somali vigilantes began forcing fisherman in the area to pay a tax.

The area Somali pirates controlled was once only along the coast of Somalia to the Gulf of Aden. Now, following a concentrated effort by naval vessels to eradicate piracy in the area, these pirates are extending their destructive efforts to one of the most important shipping areas in the world: The Arabian Sea, Red Sea and Indian Ocean.

Their tactics have become more sophisticated. The revised scheme is to use previously hijacked vessels, called "mother ships," to transport people and supplies as far as 1,500 nautical miles from land, making it much more difficult for naval warships to patrol.

With Somali pirates covering a larger area, there's an increased risk to energy tankers entering the Indian Ocean headed for key ports in Indonesia, India and China. In 2010, one-third of all pirate attacks were targeting ships carrying chemicals, crude oil and natural gas. This has increased from just 20% five years ago.

One country bearing the brunt of Somali piracy is neighboring Kenya. The Kenyan Shippers Council (KSC) estimates that piracy increases the cost of imports by $23.8 million per month, and exports by $9.8 million per month, according to One Earth Future, a global think tank on trade.

Across the continent, Nigeria's oil industry has been a direct target of pirates. One Earth Future calculated that Nigeria's oil production has dropped by 20% since 2006 as a result of piracy and other attacks. Royal Dutch Shell estimates that approximately 100,000 barrels a day (roughly 10%) of Nigeria's oil production is stolen every day.

To avoid the high-risk areas and protect the workers on the ships and supplies from a pirate attack, these tankers have changed their routes. They now travel farther east toward the coast of India before heading south, adding six days of travel time for a Western destination and increasing travel expenses for the shipper. Energy tankers are also employing armed security guards, paying increased insurance rates and retrofitting their vessels to lessen the chance of a pirate attack.

One Earth Future estimates the global cost of piracy on the economy has grown to approximately $7 to $12 billion a year.

Oil transport is specifically susceptible to piracy because about one-half of total production is moved by tankers on fixed maritime routes, according to the U.S. Energy Information Administration (EIA). This oil flows through chokepoints such as the Strait of Hormuz between Oman and Iran and the Strait of Malacca between Indonesia, Malaysia and Singapore.

PIRA calculated the increased costs related to oil tankers in the table. Considering all factors—vessel diversion costs, additional bunkers, armed guards, hull insurance—the total cost is approximately $0.40 per barrel when transporting oil in and around this area.

When you consider a supertanker can transport up to 2 million barrels a day, it adds up. Under PIRA's calculations, the piracy surcharge tacks on another $800,000 to the total shipping cost.

Over the past 30 years, the International Maritime Organization (IMO) has successfully lowered the risk of pirate attacks in other regions around the world. With the recent escalation of piracy around Somalia, governments and worldwide organizations, including the United Nations, are now working in concert with the IMO to curb these attacks. Their theme for 2011, "Piracy: Orchestrating the Response," represents an increased awareness of the worldwide political changes required to reverse this trend.

Oil Sands: Fueling the Future

For many years, trying to tap an oil sands deposit accomplished about as much as sipping molasses through a straw, but that is changing. So do oil sands companies make a good investment now?

Humans and bacteria share a surprising number of features, not least in what they consider good food. In general, the smaller and simpler the molecule, the easier it is to digest. So, about 50 million years ago, when and where bacteria had a chance to chow down on some of the rich hydrocarbons we call oil, one might expect them to start on the smaller, tidier mouthfuls, and indeed they did.

What's left today of these bacterial banquets are deposits of oil molecules so big and cumbersome that they flow like molasses in winter, if at all. At the extreme end is bitumen, which looks rather like sticky asphalt:



The oil sands that contain this heavy oil and bitumen have long posed an intriguing "what-if" for the industry. heir potential is staggering. One of the world's largest deposits, in the Canadian province of Alberta, spreads over the size of Wisconsin and may hold two trillion barrels of oil—eight times the reserves of Saudi Arabia.

For just about as long, however, oil sands have been minor players at best in the world's energy picture. The very qualities that native peoples have exploited to seal their boats make these heavy oils and bitumen tough to suck out of the ground and shove down a pipeline. And that's before they even get to a refinery.

Two developments in recent years have brought oil sands in from the cold: rising oil prices and new technology to pry bitumen out of deposits and make it run, not walk, to the nearest processing facility.

So let's take a look at how oil sands came about and what we can do with them.

The Tale of Two Oil Deposits

We're back to millions of years ago, this time to the hundreds of millions, when algae and the simple organisms that fed on them died, drifted down to the seafloor and were gradually buried under sediments and subsequent generations of ancient life.

As the ages passed, the pressure of layers above and heat from inside the earth broke down and reassembled these simple plants and animals into chains of carbon atoms bristling with hydrogen. Under pressure, these hydrocarbons squeezed through grainy, porous sedimentary rock until blocked by nonporous rock, known as capstone. There accumulated the first of our tale, a deposit of what we now call conventional oil.

The other deposit was in for a second ride. Geological forces lifted these oil-bearing rocks up toward the surface of the earth, within reach of water and bacteria. You know what happened next.

Because of this additional history, oil sands differ in structure as well as content from conventional oil deposits. The bitumen coats the grains of sand like a film and is in turn surrounded by water. Scraping the bitumen off the grains is the first step in extraction.

The uplifting also means that oil sands deposits are relatively shallow: some can even be surface-mined like coal.

This geological process happened in places like Venezuela and the United States, and particularly in Canada. In the province of Alberta are three major oil sands areas: the Athabasca (the largest), Peace River and Cold Lake. Current estimates put the combined bitumen in these deposits at 1.7 trillion barrels, and some geologists believe more field work will jack that number up a fair bit further.

The catch is that, at present, only 10% or 170 billion barrels of that bitumen is considered economically recoverable, that is, worth a producer's considerable effort to bring it to market. Even so, 170 billion barrels places Alberta second only to Saudi Arabia in terms of proven oil reserves, and ever-developing technology is likely to bring more in reach.

We're going to focus on Alberta because it's home to the largest and most developed oil sands deposits in the world.

To Market, to Market: Step 1

Surface-mining operations dig up and crush the oil-soaked rock, then mix it with water heated to 50-80°C. In such conditions, the bitumen floats off. All told, bitumen recovery from strip mines approaches 90%, and the mining and processing costs come in at about US$8.00 per barrel.

However, only about 20% of Alberta's bitumen is shallow enough for surface mining. The remaining 80% requires drilling and in-situ methods that extract the oil from the rocks in place. There are several methods to do this, and more in development. What they generally have in common is pumping down steam to heat the trapped oil, making it less viscous. Then a producer can actually pump the bitumen to the surface.



Many oil sands companies use this in-situ method, called steam-assisted gravity drainage (SAGD).

Another factor in-situ methods have in common is the large amounts of energy required to generate the steam. At present that energy usually comes from natural gas, which comprises 65-80% of total operating costs.

According to government statistics, Alberta is host to 91 producing oil sands projects as of 2009. Of these, only four are mining projects, while the remaining 87 use various in-situ recovery methods. In 2009 those projects produced an average of 1.49 million barrels of bitumen per day (bbpd), which represents more than 40% of Canada's total oil production. That 1.49-million figure is projected to reach 3 million bbpd by 2018.

To Market, to Market: Step 2

However it's recovered, this stiff black glop needs further work in order to sell it. An oil sands producer has two choices: to upgrade it and make synthetic oil, or to dilute it with lighter hydrocarbons so it can run down a pipeline to a refinery.

Upgrading usually requires two steps. First the bulky hydrocarbon chains are broken into smaller ones in a process called hydrocracking; upgraders may also remove carbon to produce the smaller chains along with coke. The second step adds hydrogen to "fill out" the new carbon chains and to remove impurities like sulfur. Currently five upgraders in Alberta churn out a bit over 1 million barrels of synthetic crude oil each day, and there are plans for more.

Bitumen that's not upgraded is blended with diluents that make it runny enough to pipe to refineries throughout North America. The diluents are usually a mixture of light hydrocarbons, such as light crude oil and naphtha. Companies can recycle diluents that stay within Alberta, a significant consideration in project planning.

The investment to get the industry to this stage has been massive. Between 1999 and 2009, an estimated $91 billion was pumped into developing Alberta's oil sands. In 2009 industry invested another $10 billion, and almost $170 billion worth of oil sands projects are currently underway or proposed in the province.

Environmental Issues

Environmental groups have labeled bitumen "dirty oil" and are calling for an end to oil sands operations. They have three main complaints: that ugly mines and tailings ponds destroy habitat, that projects gulp energy and emit significant emissions for every barrel of oil, and that the whole process uses a significant amount of water.

The groups are certainly right on some fronts. In-situ operations cause minimal disturbance, but surface mining—even though it represents only 20% of oil sands operations—does make an unsightly mess of boreal forests and marshlands. And in-situ projects have their own issues. The roughly 30 cubic meters of natural gas and three barrels of water consumed to produce one barrel of bitumen are indeed high.

Well, oil sands aren't going away. Their potential is too vast, global demands for energy too high, and for governments like Alberta, they contribute too much to the coffers.

But more encouraging yet, industry is developing less-intensive techniques. Quick-drying tailings ponds can be returned to nature faster, for example. And companies have a double incentive to develop in-situ methods that require less energy and water: they would lower operating costs as well as mitigate complaints.

One of the current picks of the Casey Energy team is a company that's proving up an extraction method that's both more efficient and easier on the environment. . .a future winner if we've ever seen one. Sign up now to receive Casey's Energy Opportunities for only $39 per year—and find out all about this low-risk value play in oil sands.

Source: www.theenergyreport.com

World Bank Group Progress Report on Renewable Energy and Energy Efficiency in Fiscal Year 2005 -2008

Energizing Climate-Friendly Development: World Bank Group Progress Report on Renewable Energy and Energy Efficiency in Fiscal Year 2008 (2009)
This annual report summarizes the World Bank Group’s work in renewable energy and energy efficiency improvement during fiscal 2008. In addition to a portfolio review, it presents nine case studies. View PDF (81 pages, 5842kb)

Progress Report for 2007 (74 pages, 5733kb)
Progress Report for 2006 (64 pages, 3566kb)
Progress Report for 2005 (74 pages, 883kb)

Renewables: Global Status Report. 2009 Update (2009)
This fourth report in a series launched in 2005 provides an integrated picture of the global renewable energy situation, coming in the midst of a historic and global economic crisis. All the four reports are available here.

Directions in Hydropower (2009)
“Directions in Hydropower” summarizes key issues in scaling up hydropower for poverty alleviation and sustainable development. Beyond its traditional role in providing electricity access, which remains critical, hydropower has a powerful contribution to make to regional cooperation and development and to the allocation of increasingly scarce water resources. The document outlines the rationale and context for sector expansion as well as the risks, describes the World Bank Group’s role in scaling up and sets priorities for supporting sustainable hydropower in a two-track approach comprising lending and nonlending activities. View PDF (16 pages, 482kb)

RE Toolkit: A Resource for Renewable Energy Development (2008)
This toolkit provides a broad set of tools to improve the design and implementation of renewable energy (RE) projects, incorporates best practices and lessons learned from RE projects supported by the World Bank Group and others, and is operationally oriented to address practical implementation needs at each stage in the project cycle. View PDF (174 pages, 5454kb)

New Renewable Energy: A Review of the World Bank’s Assistance (2006)
This assessment by the Independent Evaluation Group (IEG) evaluates the performance of the Bank's renewable energy portfolio and examines the extent to which strategic objectives were achieved. The assessment is restricted to geothermal; solar; wind; biomass; and small, mini and micro hydro energy sources. View PDF (114 pages, 839kb)

Liquid Biofuels

The State of Food and Agriculture 2008. Biofuels: Prospects, Risks and Opportunities (2008)
This report by the Food and Agriculture Organization of the United Nations reviews the potential of liquid biofuels to contribute to energy security, climate change mitigation, and agricultural development. View Site

Considering Trade Policies for Liquid Biofuels (2007)
Focusing on first-generation ethanol and biodiesel, this report outlines the link between agriculture and biofuels, reviews past and present government policies, and considers how these policies might affect the world biofuels market. View PDF (128 pages, 1074kb)

Potential for Biofuels for Transport in Developing Countries (2006)
This four-page brief draws on the successful Brazilian experience and illustrates socioeconomic considerations for establishing biofuel programs in developing countries. View PDF (4 pages, 181kb)

Source: web.worldbank.org