Tweet

 

Email

Email to a friend:

To:

Separate multiple addresses with commas.

From:

Name: Please send me a copy Message:

Verification code

Enter the code from aboveRequired

Send

Israel, the oil producer, is about to have the last laugh - This is an extremely interesting article (may require subscription registration) by Ian King for The Times (UK). Here is the opening:

The joke has been told by generations of Jews, most famously Golda Meir, the former Prime Minister of Israel. Why did Moses lead us to the one place in the Middle East without oil?

But an updated version may be required if Harold Vinegar and his colleagues get their way. Dr Vinegar, the former chief scientist of Royal Dutch Shell, is at the centre of an ambitious project to turn Israel into one of the world's leading oil producers.

Israel Energy Initiatives, where Dr Vinegar is chief scientist, is working on projects to extract oil and natural gas from oil shale from a 238 sq km area of the Shfela Basin, to the south and west of Jerusalem.

Oil shale mining is often frowned upon, not least by the environmental lobby, as a dirty process that is both energy and water intensive. IEI believes that its technique will be cleaner than that of other operators because the oil will be separated from the shale rock up to 300 metres beneath the ground. Water will be a byproduct of the process rather than being consumed by it in large volumes.

According to Dr Vinegar, Israel has the second-biggest oil shale deposits in the world, outside the United States: "We estimate that there are the equivalent of 250 billion barrels of oil here. To put that in context, there are proven reserves of 260 billion barrels of oil in Saudi Arabia."

The marginal cost of production, IEI estimates, will be between $35 and $40 per barrel. This, Dr Vinegar points out, is cheaper than the $60 or so per barrel that it costs to extract crude from inhospitable locations such as the Arctic, and compares with $30-$40 per barrel in some of the deepwater oilfields off the coast of Brazil.

"These Israeli deposits have been known about, but have never been listed before. It was previously assumed there was not the technology to deal with it."

My view - Israel already has a high-tech economy and the successful development of its oil shale reserves within a decade would make it an extremely wealthy country.

More importantly, effective oil shale technology, developed within a decade of shale gas technology, is another 'game changer' for the global economy.

Less than ten years ago many of us were seriously worried about 'Peak Oil', due to the finite supply of conventional crude supplies and a remorseless increase in demand for the world's most important commodity. For a global economy run on oil, the prospect of a worldwide shortage and a series of price spikes in energy costs were a recipe for widespread recession and even depression.

There are risks to the upside for oil prices over the next few years, as we have been reminded by recent events in the Middle East. However, 10 to 15 years from now the world will be awash in oil and gas, due to the development of supplies previously locked in shale rock. By 2025 I would not be surprised to see the price of crude oil lower in real terms than it is today.

This item continues in the Subscriber's Area and contains a map of global shale oil reserves.

Japan: whatever happened to the nuclear meltdown? - My thanks to a subscriber for this article by James Delingpole of The Telegraph (UK). Certain to either entertain or irritate, depending on one's views, it is written with the stridency of youth (or narcissistic old men) but also with intelligence. Here is the conclusion, mainly quoting the German astronomer and physicist, Dr Peter Heller:

Let's leave last word to this German astronomer and physicist, Dr Peter Heller, who has written a moving essay on how the scientific truth on nuclear power has been warped by political activism. (Hmm. Reminds me of another area of "science" which has been similarly distorted by scientists, politicians and activists with an agenda. Can anyone jog my memory?) (H/T Roddy Campbell)

So it fills me with sadness and anger on how the work of the above mentioned giants of physics is now being dragged through the mud, how the greatest scientific discoveries of the 20th century are being redefined and criminalized. The current debate in Germany is also a debate on freedom of research. The stigmatization and ostracism of nuclear energy, the demand for an immediate stop of its use, is also the demand for the end of its research and development. No job possibilities also means no students, which means no faculty, which then means the end of the growth of our knowledge. Stopping nuclear energy is nothing less than rejecting the legacy of Einstein, Heisenberg, Bohr and all others. It is tantamount to scrapping it, labelling it as dangerous - all in a fit of ignorance. And just as creationists attempt to ban the theory of evolution from the school books, it almost seems as if every factual and neutral explanation in Germany is now in the process of being deleted.

The media suggests a nuclear catastrophe, a mega-meltdown, and that the apocalypse has already begun. It is almost as if the 10,000 deaths in Japan were actually victims of nuclear energy, and not the earthquake or the tsunami. Here again one has to remind us that Fukushima was first hit by an unimaginable 9.0 earthquake and then by a massive 10-meter wave of water just an hour later. As a result, the facility no longer found itself in a highly technological area, but surrounded by a desert of rubble. All around the power plant the infrastructure, residential areas, traffic routes, energy and communication networks are simply no longer there. They were wiped out. Yet, after an entire week, the apocalypse still has not come to pass. Only relatively small amounts of radioactive materials have leaked out and have had only a local impact. If one considers the pure facts exclusively, i.e. only the things we really know, then it exposes the unfounded interpretations of scientific illiterates in the media. One can only arrive to one conclusion: This sorrowful state will remain so.

My view - Don't miss the section on nuclear fatalities over the last ten years (7), versus wind farm fatalities over the same period (44).

Some of the email comments posted beneath James Delingpole's article are also interesting.

UK's Chief Scientific Officer Professor John Beddington: Situation at Fukushima Nuclear Plant - This is a transcript of a Q&A session held last week at the British Embassy Tokyo. Here are two brief samples:

John Beddington (JB): Let me now talk about what would be a reasonable worst case scenario. If the Japanese fail to keep the reactors cool and fail to keep the pressure in the containment vessels at an appropriate level, you can get this, you know, the dramatic word "meltdown". But what does that actually mean? What a meltdown involves is the basic reactor core melts, and as it melts, nuclear material will fall through to the floor of the container. There it will react with concrete and other materials … that is likely… remember this is the reasonable worst case, we don't think anything worse is going to happen. In this reasonable worst case you get an explosion. You get some radioactive material going up to about 500 metres up into the air. Now, that's really serious, but it's serious again for the local area. It's not serious for elsewhere even if you get a combination of that explosion it would only have nuclear material going in to the air up to about 500 metres. If you then couple that with the worst possible weather situation i.e. prevailing weather taking radioactive material in the direction of Greater Tokyo and you had maybe rainfall which would bring the radioactive material down do we have a problem? The answer is unequivocally no. Absolutely no issue. The problems are within 30 km of the reactor. And to give you a flavour for that, when Chernobyl had a massive fire at the graphite core, material was going up not just 500 metres but to 30,000 feet. It was lasting not for the odd hour or so but lasted months, and that was putting nuclear radioactive material up into the upper atmosphere for a very long period of time. But even in the case of Chernobyl, the exclusion zone that they had was about 30 kilometres. And in that exclusion zone, outside that, there is no evidence whatsoever to indicate people had problems from the radiation. The problems with Chernobyl were people were continuing to drink the water, continuing to eat vegetables and so on and that was where the problems came from. That's not going to be the case here. So what I would really re-emphasise is that this is very problematic for the area and the immediate vicinity and one has to have concerns for the people working there. Beyond that 20 or 30 kilometres, it's really not an issue for health.

And:

[Q] Good morning. Couple of days ago the Japanese authorities predicted a 70% chance of another aftershock exceeding magnitude 7, and potentially another tsunami. If that were to happen and the emergency procedures that are taking place now, how does that affect your worst case scenario?

[JB] I think the worst case scenario would remain. The issue is basically that if they can't, if for example, their attempt to cool fails, and if their attempts to keep the pressure in the containment vessel fails, then you would get an explosion. What I suppose, you know, in a reasonable worst case that that would happen in a single reactor, if you had a massive new influx of tsunami and so on, you move into a sort of relatively low probability event, but you might get more than one, but the point still remains that you would actually have no real concerns even if there were two rather than one explosions, they don't multiply it up, it doesn't mean that it goes up to 1,000 metres or anything like that. It's still up to about 500 metres, it still is a relatively short duration and the key thing here also is wind direction. When does it happen? If the wind is taking material, is going out into the Pacific, it is not going to be a problem. It's the combination, as it were, unhelpful weather, and an explosion that is twice that reasonable worst case scenario. If you had this sort of second tsunami so that people could not work and actually operate on the core then you would have a problem. But that would probably mean that you might get all three reactors go up. But again, I'd emphasise this would not affect the advice we are giving.

My view - Assuming Sir John is correct in his assessments, there is little need for people in Tokyo, let alone China, to panic. However, there is the serious problem of ongoing radiation leakage in the Fukushima region, albeit at what are still described as 'low levels'. Perhaps, but they are having a cumulative effect. This will increase the risks of soil and water table pollution, and make the eventual cleanup process very expensive. Meanwhile, nuclear technicians are still struggling to prevent Sir John Beddington's 'worst case' scenario described above.



Additional commentary by Eoin Treacy

Global iron ore supplies likely to be stretched by Japanese rebuilding effort - Rio Tinto - This article by James Regan and Rebekah Kebede for Reuters may be of interest to subscribers. Here is a section:

Walsh later told reporters Japan's disaster could set back some of Rio Tinto's expansion plans if access to mining equipment, such as heavy machinery and truck tyres, became difficult.

Fortescue, for its part, said its expansion plans were on track as it buys very little mining equipment from Japan. [ID:nS9E7E800E]

Until recently, Japan was the largest buyer of Australian ore, but has been supplanted by China.

Walsh painted a bright future for iron ore producers, saying the outlook warranted spending billions of dollars to expand mines in Australia and build new ones in Africa and India.

The company's Simandou iron ore mine project in Guinea -- touted by Rio Tinto as the single largest iron ore mine -- would be developed ahead of the current end-2015 target date if infrastructure restraints such as rail line construction could be overcome, according to Walsh.

The mine will have capacity to yield about 95 million tonnes of iron ore a year, he said. Countering Walsh's positive outlook, Citibank analyst Daniel Hynes forecast the global iron ore market was headed for oversupply over the next few years and would see a 100-million tonne surplus by 2015.

My view - The aftermath of the Japanese tsunami is still being worked through but some winners and losers are emerging. The one certainty is that Japan will rebuild. Construction companies (see yesterday's Comment of the Day) should benefit from this crisis provided they can source the necessary materials and ensure a reliable supply of electricity. Coal exporters should also benefit through increased demand from coal fired power stations as well as steel production. LNG shippers should also benefit for the former reason.

Iron-ore companies have had a mixed reaction to the crisis. On the one hand they fell due to concerns about the impact on global growth and potential machinery supply problems. On the other hand, they have steadied recently as investors begin to price in increased demand for steel.

This section continues in the Subscriber's Area


Chinese rare earth exports burst through $100,000-per-tonne mark in Feb - This article by Tom Miles for Reuters may be of interest to subscribers. Here is a section:

The apparent price rises have averaged $10,000 per tonne per month but accelerated in February, galloping ahead by $34,000 per tonne, according to Reuters calculations based on data from China's Customs office.

Last month each tonne of exports was valued at $109,036, including the cost of insurance and freight, almost half as much again as the average value in January.

The explosion in export values has coincided with a collapse in volumes coming out of China, the source of almost all the world's rare earth supplies, which has cut export quotas of the 17 rare earth metals and raised tariffs on exports.

China's actions have infuriated its trading partners but lifted the shares of the few mining and prospecting companies outside China that are well-placed to capitalise on the constriction of Chinese supply.

My view - China's export restrictions of rare earth metals has forced countries to realise just how dependent on China they are. National security concerns have been voiced by the USA and Japan and efforts are underway to ensure security of supply. Companies are now racing to bring new supply online in an effort to profit from the tightness in the market. Most rare earth metal miners are comparatively small companies which makes them prone to high volatility as investor sentiment waxes and wanes. This needs to be considered when performing one's due diligence.

This section continues in the Subscriber's Area

Portugal braced for political crisis - This article by Peter Wise for the Financial Times may be of interest to subscribers. The full article is posted in the Subscriber's Area but here is a section:

Portugal faces an imminent political crisis that could force the government to resign, trigger a snap election and make an international financial rescue inevitable, according to government ministers and opposition leaders.

The minority Socialist government is almost certain to be defeated on Wednesday in a parliamentary vote on a new austerity package, leaving José Sócrates, the prime minister, with little alternative but to resign.

Opposition parties have refused to back the austerity measures, which Mr Sócrates planned to take to a key European Union summit meeting at the weekend as proof of Portugal's determination to avoid a bail-out.

My view - Speculation over whether Portugal would have to seek an EU/IMF bailout has raged for much of the last year. The country's 10yr yield remains at an elevated level which probably reflects a lack of belief among investors that the country will avoid a bailout.

The EU periphery's debt problems remain unresolved. Right now it is impossible to know whether the austerity packages foisted on so many countries are going to be sustained for the lengths of time necessary to bring government debt/GDP ratios back into line with the stability and growth pact.

This section continues in the Subscriber's Area

The Chart Seminar 2011: Sydney & Singapore sold out, London in May more than 50% full - The Sydney and Singapore seminars have sold out and we have waiting lists in case of any cancellations. The first of our London seminars, in May, is now more than 50% booked.

Anyone interested in securing a place at any of our events should contact Sarah Barnes at sbarnes@fullermoney.com.

The full rate is £950 + VAT. The early booking rate of £875 for non-subscribers expires on March 17th for the Singapore seminar. Paid-up Fullermoney subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.

The dates and venues for all my seminars in 2011 are:

Singapore - April 28th and 29th at the St. Regis Hotel Singapore

Sydney - May 3rd and 4th at Sheraton on the Park in Sydney

London - May 19th and 20th at The Radisson Edwardian Hampshire

London - November 3rd & 4th at The Radisson Edwardian Hampshire

I will also be speaking to the Technical Analysis Society of Singapore (TASS) and the Australian Technical Analysts Association (ATAA) during The Chart Seminar tour. Both of these talks will be open to the public. In Singapore, attendees will be charged a nominal S$20 fee by TASS. At the ATAA in Sydney, anyone's first meeting is free and a $30 fee is levied for subsequent meetings.

The topic for both talks will be "The Greatest Urbanisation in History: Investment Implications". The dates and venues for these presentations will be:

Singapore - April 27th presentation to TASS (Singapore Management University (SMU, Victorial str.) Function Room 4.1 & 4.2 @ SMU Admin Building Level 4).

Sydney - May 2nd presentation to ATAA (The Auditorium, Level 1, The Bowlers Club of NSW, 95 York Street.