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Thu, Apr 17, 2008

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Russia’s Oil Future Uncertain
S. Africa: Cheap Power Deterring Investors

Russia’s Oil Future Uncertain
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Recent figures show Russian output fell 1 percent in the first quarter of 2008.
The future supply of Russian oil is threatened by a likely decline in production levels, one of the country’s top oil executives has warned.
Lukoil’s Leonid Fedun said $1 trillion would have to be spent on developing new reserves if current output levels were to be maintained, BBC said.
Recent figures show Russian output fell 1 percent in the first quarter of 2008.
The possibility of less oil from one of the world’s key suppliers will add more pressure to prices now at record highs.
The surprise fall in Russian oil output in the first part of the year has raised fears about the ability of global supply to keep pace with demand over the next decade.
Russian production averaged 10 million barrels a day in the first three months of 2008, according to the International Energy Agency, down 1 percent on the same period last year.
Blamed on supply problems in western Siberia and weather conditions making it harder to move drilling equipment, the fall contrasts with substantial output rises in recent years.
In an interview with the Wall Street Journal, Lukoil vice president Leonid Fedun cast doubt on whether output could continue to increase.
Once highly-productive fields in Siberia are slowly being exhausted and the huge cost of searching for oil in the untapped but remote region of eastern Siberia has deterred firms.
“When the well’s productivity falls, you have to keep drilling more and more,“ Fedun said, referring to the steady depletion of older fields.
“You have seen it in Alaska and the Gulf of Mexico and now you are seeing it in Siberia.“
Analysts at Citigroup recently said annual increases in Russian output could “no longer be taken for granted“ but argued that production was expected to rise until 2012.
One energy expert said the Russian industry was now acknowledging a crisis which had been evident to independent observers for several years.
“We now see production peaked last year,“ Mikhail Kroutikhin, editor in chief of the Russian Petroleum Investor told the BBC.
“I believe the decline will continue for quite a number of years.“
The problems have been caused by high tax levels and a shortage of financial incentives to invest in exploration, he added.
Russian worries underline longstanding concerns about whether there is enough oil to meet the needs of the global economy, particularly fast-growing China and India.
They are also a particular cause of concern for several of Europe’s largest economies, such as Germany, which buy a large share of their oil from Russia.
“Russia is not going to be a very reliable supplier of energy in a few years,“ Kroutikhin warned.

S. Africa: Cheap Power Deterring Investors
South Africa’s government, facing its worst ever power crisis, bolstered a request by state-run utility Eskom Holdings Ltd. for higher tariffs, saying cheap electricity has deterred investment in generating capacity.
According to Bloomberg, higher utility bills would help buoy the competitiveness of private projects, Energy Minister Buyelwa Sonjica said on April 15 in a speech in Johannesburg. AES Corp. quit talks to build plants because the venture wasn’t “lucrative enough,’’ Sonjica said.
“The low cost of electricity, the cheapness of our electricity, it’s a deterrent for participation of the private sector,’’ she said. “We are alive to that. We are concerned.’’
Eskom is rationing power to industrial customers after shortages forced it to cut power to most of the country’s mines for five days in January. South Africa faces outages until at least 2012 after earlier government delays in approving expansion at the utility.
The company, which generates 95 percent of the nation’s power, has asked for a 60 percent tariff increase this year, up from the 14.2 percent it has already won from the regulator. South Africa has the cheapest electricity in the world at an average of 4 cents a kilowatt hour, according to NUS Consulting Group, cited in Eskom’s 2007 annual report.
“We’ve tried to introduce two independent power producers and that process has failed,’’ Mbulelo Ncetezo, who manages power regulation at the National Energy Regulator of South Africa, said in a separate speech. “We’ve learnt a lot and we believe going forward things will be much different.’’ The government said April 3 it planned to reissue a tender to build two power plants, generating a combined 1,000 megawatts for about 7 billion rand ($887 million) after the talks with AES failed. Arlington-based AES, shortlisted along with Suez SA in August, was the preferred bidder for the contract.
AES said on April 3 that it quit negotiations as “changes to the project parameters and risk profile of the deal made pursuing these projects unattractive.’’ Companies have also failed to build plants in South Africa because their costs were “too high’’ and they couldn’t prove reserves of fuel available for the plants, Sonjica said. The government wants to boost private power production to 30 percent of total electricity generation, from 5 percent now.
South Africa is also examining rules that oblige businesses building so-called cogeneration plants to sell the electricity to Eskom, which has received more than 100 such proposals. The plants produce power from wasted resources such as heat and gas.

Gas Project
Uzbek energy firm Uzbekneftgas has formed a joint venture with China’s CNPC to build a pipeline that would bring gas from
Turkmenistan to China.

EnergyCol2
New Ways to Store Solar Energy
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Solar power, the holy grail of renewable energy, has always faced the problem of how to store the energy captured from the sun’s rays so that demand for electricity can be met at night or whenever the sun is not shining.
The difficulty is that electricity is hard to store. Batteries are not up to efficiently storing energy on a large scale. A different approach being tried by the solar power industry could eliminate the problem.
The idea is to capture the sun’s heat, NYtimes reported.
Heat, unlike electric current, is something that industry knows how to store cost-effectively. For example, a coffee thermos and a laptop computer’s battery store about the same amount of energy, said John S. O’Donnell, executive vice president of a company in the solar thermal business, Ausra.
The thermos costs about $5 and the laptop battery $150, he said, and “that’s why solar thermal is going to be the dominant form.“
Solar thermal systems are built to gather heat from the sun, boil water into steam, spin a turbine and make power, as existing solar thermal power plants do--but not immediately. The heat would be stored for hours or even days, like water behind a dam.
A plant that could store its output could pick the time to sell the production based on expected price, as wheat farmers and cattle ranchers do. Ausra, of Palo Alto, Calif., is making components for plants to which thermal storage could be added, if the cost were justified by higher prices after sunset or for production that could be realistically promised even if the weather forecast was iffy.
Ausra uses Fresnel lenses, which have a short focal length but focus light intensely, to heat miles of black-painted pipe with a fluid inside.
A competitor a step behind in signing contracts, but with major corporate backing, plans a slightly different technique in which adding storage seems almost trivial. It is a “power tower,“ a little bit like a water tank on stilts surrounded by hundreds of mirrors that tilt on two axes, one to follow the sun across the sky in the course of the day and the other in the course of the year.
In the tower and in a tank below are tens of thousands of gallons of molten salt that can be heated to very high temperatures and not reach high pressure.
“You take the energy the sun is putting into the earth that day, store it and capture it, put it into the reservoir, and use it on demand,“ said Terry Murphy, president and chief executive of SolarReserve, a company backed in part by United Technologies, the Hartford conglomerate.
Power plants are typically designed with a heat production system matched to their electric generators. Murphy sees no reason why his should. His design is for a power tower that can supply 540 megawatts of heat. At the high temperatures it could achieve, that would produce 250 megawatts of electricity, enough to run a fair-size city.
It might make more sense to produce a smaller quantity and run well into the evening or around the clock or for several days when it is cloudy, he said.
At Black & Veatch, a builder of power plants, Larry Stoddard, the manager of renewable energy consulting, said that with a molten salt design, “your turbine is totally buffered from the vagaries of the sun.“ By contrast, “if I’ve got a 50 megawatt photovoltaic plant, covering 300 acres or so, and a large cloud comes over, I lose 50 megawatts in something like 100 to 120 seconds,“ he said, adding, “That strikes fear into the hearts of utility dispatchers.“
Thermal storage using molten salt can work in a system like Ausra’s, with miles of piping, but if the salt is spread out through a serpentine pipe, rather than held in a heavily insulated tank, it has to be kept warm at night so it does not solidify, among other complications.
A tower design could also allow for operation at higher latitudes or places with less sun. Designers could simply put in bigger fields of mirrors, proponents say. A small start-up, Solar, is pursuing that design, backed by Google, which has announced a program to try to make renewable electricity for less than the price of coal-fired power.
Murphy helped build a power tower at a plant in Barstow, Calif., sponsored by the Energy Department in the late 90s. It ran well, he said, but natural gas, a competing fuel, collapsed in price, and the state had few requirements for renewable power.