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A scary strategic problem - no oil

Looking at the article, the big issue for everyone is the gradual decline of oil prices due to the production boom. For the US economy, this is great news, inexpensive energy will be one of the factors that propels real economic growth, and reducing the outflow of American money to overseas producers will have a positive effect on American balance of payments and the current payments account.

The downside is this will depress prices for producing nations (like us). For Canada, it is a setback, but not a disaster, our economy is diversified. Provinces like Alberta and Ottawaq will have to scale back plans that were contingent on oil revenues to power economic growth or pay for things. For nations like Russia and the OPEC nations, this will be a big hit on their export earnings. This will affect Russia's plans to rearm and re emerge as a "first tier" nation. This will reduce the ability of nations like Iran and Saudi Arabia to fund trouble makers, and also make it more difficult to paper over internal difficulties by using oil revenues to subsidize food and fuel (for example).

http://nextbigfuture.com/2013/07/harvard-has-new-us-shale-oil-study.html#more

Harvard has a new US Shale Oil Study forecasts US as world number one oil producer with 16 million barrels per day of all liquid oil in 2017
In a paper titled “The Shale Oil Boom: A U.S. Phenomenon,” [64 pages] Maugeri wrote that the unique characteristics of shale oil production are ideal for the United States -- and unlikely to be mirrored elsewhere in the world. These factors include the availability of drilling rigs, and the entrepreneurial nature of the American exploration and production industry, both critical for the thousands of wells required for shale oil exploitation.

Maugeri, author of a 2012 report forecasting rapid growth of global oil production and belying the notion that oil output has “peaked,” argues in his new paper that the boom in U.S. shale oil production is central to the overall U.S. oil surge. If oil prices remain close to today’s levels, total U.S. production of all forms of oil [all liquids includes natural gas liquids and ethanol] could grow from 11.3 million barrels per day to 16 million barrels per day by 2017.

The dramatic surge in U.S. shale oil production could more than triple the current American output of shale oil to five million barrels a day by 2017, which would likely make the United States the No. 1 oil producer in the world, according to the new study by researcher Maugeri at Harvard Kennedy School.

NOTE - The United States is already the world's number one oil producer in terms of all liquid oil production.

The shale oil counts as crude oil so 10.4 million bpd would put the US as the number one crude oil producer in the world in 2017 unless there is increased production from Russia and/or Saudi Arabia. Updated EIA oil production comparison between USA, Russia and Saudi Arabia is here.

He used a possible best-case scenario encompassing a West Texas Intermediate (WTI) price of $85 per barrel in 2013, $80 per barrel in 2014, $75 in 2016, and $65 long term, along with an 8 percent per-well cost reduction per year through 2017 (that is consistent with what is already happening across the shale industry), and the progressive easing of the transportation problems that now imply significant price discounts for most of U.S. shale crude oils. My projection of the total U.S. oil potential also assumes that, from 2013 to 2017, more than 6,000 new oil producing wells are brought online annually in the shale/tight oil arena alone

Maugeri said the number of American shale oil wells in North Dakota and Texas could soar from the current 10,000 to more than 100,000 working wells by 2030. He said steady improvements in technology and cost would continue to drive industry growth in the shale oil fields in the Dakotas and Texas.

The United States holds more than 60 percent of global drilling rigs, and 95 percent of American rigs can perform horizontal drilling, which along with hydraulic fracturing (“fracking”), is necessary to exploit shale oil.

Some Details

He estimates of recoverable oil reserves from Bakken-Three Forks is about 45 billion barrels.

Given the oil price scenario he used for this study, he assumed that if the number of Bakken’s new producing wells increases progressively by 12–20 percent a year from 2013 on, the play may reach a crude oil production of 1.8 mbd by 2017.

Given the oil price scenario he used for this study, he assumed that if the number of Eagle Ford’s new producing wells increases progressively by 15–25 percent a year from 2013 on, this shale formation could reach a crude oil production of 1.5 mbd by 2017.

He assumed that, from 2014 on, the number of new producing wells would increase by 25 percent a year, allowing the Permian Basin shale crude oil production to exceed 1.3 mbd by 2017.

Considering the scarce data available for all U.S. shale oil plays other than the Big Three, he could not model the evolution of their future liquids production.

However, according to a probabilistic method (with a ±50 percent probability ratio of production, based on yet-to-find discoveries) assuming a number of new producing wells per year growing from 200 to 1,000 in 2017, with an average production of 30,000 b/d of crude oil during the first 12 months, he projected a cumulative crude oil production from all other U.S. shale oil plays of 400,000 crude oil b/d by 2017. This could be a highly conservative estimate, but in the absence of more reliable data, it is not possible to go beyond that hypothetical assumption.

Winners and Losers

The US will have less oil imports if this happens.
Coal usage will be a loser, but more coal will be exported.
Ethanol and biofuel liquid growth will be flat or negative.
 
The ethanol boondoggle continues, but it may end sooner than later as the costs are unsustainable. However, there is a huge downside to the collapse of the Ethanol mandate as well:

http://blogs.the-american-interest.com/wrm/2013/07/17/ethanol-still-a-boondoggle/

Ethanol Still a Boondoggle

The US has a law on the books, the Renewable Fuel Standard, that mandates an ever-increasing amount of ethanol to be blended into gasoline. Under the 2007 law, oil companies must blend the required amount of ethanol or, in lieu of that, buy credits, known as renewable identification numbers (RINs). The price of those credits has skyrocketed this year more than 2,300 percent, hitting an all-time high yesterday.

The ethanol targets set by the Renewable Fuel Standard are out of sync with both the demand for ethanol and its potential supply. Gasoline consumption is projected to be relatively flat this year, a change that the Renewable Fuel Standard lacks a mechanism to account for. This shortfall in demand could potentially be fixed if producers up the percentage of ethanol they mix in with their gasoline past the current industry standard of 10 percent, but few oil companies are willing to move past this so-called “blend wall,” citing studies that link higher ethanol content with engine damage. Even if refiners started blending in more ethanol, the supply problem remains: this year’s supply is projected to be less than the mandate.

All of this explains why oil companies are snatching up increasingly-rare RINs at ever-higher prices. Oh, the RIN-sanity!

This is a mess even before you consider the foibles of the source of the lion’s share of this ethanol: corn. Before the Renewable Fuel Standard set these arbitrarily high targets, the US used just 23 percent of its corn to produce ethanol. Last year 43 percent of our corn crops went towards producing the biofuel. That shift has driven up global prices for corn, starving the world’s poor and potentially fueling food riots. And to what end? Corn ethanol is categorized as a biofuel, but it doesn’t reduce emissions. Advanced biofuels produced from such sources as sugarcane and algae pass the green test, but they haven’t yet proven their commercial viability.

Two bills—one to repeal the Renewable Fuel Standard, the other to reform its targets to more reasonable levels—are making their way through Congress as we speak. The oil lobby is heating up its rhetoric to turn the tide against these mandates, and even the ethanol lobby acknowledges that these biofuels targets have been set too high.

The EU is planning on nearly halving its biofuels targets in the face of studies disproving the energy source’s green credentials. For once, the US should follow Europe’s lead on green energy policy.

and from Instapundit:

UPDATE: Reader J. Johnson writes:

Something that very seldom is mentioned in re the ethanol boondoogle is the profound effect the ethanol mandate has had on land prices in the midwest USA. The impact of ethanol on corn prices has been monumental, with average prices per bushel nearly double (and sometimes much more than that) what they were prior to the ethanol mandate. In turn, this has driven the prices of ‘corn ground’ profoundly higher, such that there are now hundreds of thousands of acres in the midwestern corn belt and elsewhere with prices (as much as $12,000/acre) which are completely unsustainable if the mandate was eliminated or substantially rolled back. It would result in a farm-belt crisis akin to what happened in the early 1980′s when tens of thousands of farmers went bankrupt when land prices collapsed.

A ‘partner in crime’ in this fiasco is Bernanke, whose zero interest rate policy has allowed farmers, bankers and speculators to pay exhorbitant prices for farm ground that is used strictly for producing corn for ethanol and servicing of the enormous debt associated with much of this acreage depends totally on continuation of the ethanol mandate. This mostly hidden debt bomb probably explains why the mandate not only continues, but is possibly going to get even more onerous. There are just too many money men who have too much to lose if anything changes.

Seems like it’s market-distorting cronyism all the way down, these days.


 
I'm hard pressed in seeing oil cost going down due to rising USA production.  There is a lot more factors into oil cost than just production levels.  Shale oil is more expensive to drill.  I suspect American labour wages are higher than the sources is presently purchased from.  Again I suspect tighter control and environmental standards in the USA than from where oil is purchased from.

while in general theory yes, high production levels usually equal lower prices as a whole for everything.  These gains in production are not from efficiency, they are from a supply glut, the production costs per barrel unless things have changed is not lower than the easy to drill crude from Saudi Arabia.  Ergo why I fail to see how a upswing in USA oil output will have a positive affect.  I'm sure it will have a affect of somekind due to being a significant change.  All we are doing is purchasing our oil supply from at home instead of abroad but at a higher production cost.  Where is the offset to actually lower price?  Sadly I just don't see it.
 
Just remember Kevin that oil is a fungable commodity. What goes in your tank (or the plastic gizmo in your hand) can come from anywhere. It is a little known fact that the United States imports virtually no oil at all from the Middle East, so the various aguments about "blood for oil" are idiotic at best.

The real reason the United States spends blood and treasure in the ME is to secure oil and a certain amount of price stability for its allies in Europe and Japan, as well as its major trading partner: China. Americans consume oil from Canada, Mexico, Venezuela and some other South American producers because it is cheaper to ship to the US market from there.

American oil prices are fallig slowly (the main sticking point right now is the Administration, which is infatuated with "green" energy and big payouts to green crony capitalists), and I suspect they could fall rapidly after the mid terms if the GOP manages to win the House and Senate, or 2016 when the Administration leaves. Supply and demand is pretty much the one clearly demonstrated and proven law of economics, and absent of market distortions, works 100% of the time.
 
I won't argue why they are in the middle East, but saying they import very little doesn't line up with official data. 

http://www.eia.gov/countries/index.cfm?view=production (10.14 M bbl/day)
http://www.eia.gov/countries/index.cfm?view=consumption (18.95 M bbl/day)
http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbblpd_m.htm [(10.76 M bbl/day) imported from OPEC]
plus additional [(6.296 M bbl/day) from non-opec]

Yes the blood oil argument is stupid.  Makes sense if you are from the middle east and hate the USA to say that.  My present understanding is it will be another 5 to 10 years before America is independent in terms of purchasing oil.  5 years before they become the worlds largest producer.
 
This could not happen to a nicer bunch of people </sarc>. It also has some interesting possibilities for United States itself: California is sitting on a treasure trove of oil shale and could easily dig itself out of the crippling financial situation it is in by opening up the shale oil basins to exploitation, while powering a massive resurgence in US economic activity predicated on access to inexpensive energy reserves. Chinese access to shale oil technology will also decrease the Chinese need to import energy, and the overall drop in demand will serve to stabilize global prices and allow many poorer nations to grow their economies as well (India, for example, does not, to my knowledge have much local oil or shale oil reserves, but must import a lot of its energy from the Persian Gulf and shipping coal from Africa).

Stabilized prices and lowering overall demand will release the United States Navy from one of its primary roles, which is to protect the flow of ME oil to its allies and trade partners in India, Japan and China, although for other reasons the USN will still need to patrol the Indian Ocean and oversee the freedom of trade that buttresses the overall global economy and US economic power.

http://blogs.the-american-interest.com/wrm/2013/07/29/saudi-prince-us-shale-threatening-our-economy/

Saudi Prince: US Shale Threatening Our Economy

Saudi royal and billionaire Prince Alwaleed bin Talal thinks the US shale boom is endangering his country’s economy. The WSJ reports that the prince published a letter yesterday that he wrote in May to the Saudi Oil Minister and several others, warning of the dangers to Saudi Arabia of American gas production:

Saudi Arabia, the world’s biggest oil exporter, is now pumping at less than its production capacity because consumers are limiting their oil imports, Prince Alwaleed said. This means the kingdom is, “facing a threat with the continuation of its near-complete reliance on oil, especially as 92% of the budget for this year depends on oil,” said the prince.…

In a report last month, OPEC’s own analysts predicted that demand for the group’s crude would fall next year to 29.6 million barrels a day, more than 600,000 barrels a day below its level last year. The International Energy Agency expects demand for OPEC crude to decline again in 2015 to 29.2 million barrels a day, before starting to rise gradually in the following years.

Still, the importance of Saudi oil to the US and to the world market is not diminishing. The Kingdom’s spare capacity and ability to increase exports in times of need (during periods of decreased supply from Iran and Libya, for example) helps keep the global oil market stable. Saudi oil has been consumers’ best shield against price shocks for a while now, and as long as we consume oil, no amount of cheap American gas can make that otherwise.

But if you’re in the House of Saud, that’s not much comfort. There’s no denying that the Kingdom’s economy will suffer under decreased demand for petrochemical exports from its biggest customer—the US. American domestic production means a steep drop-off in demand for the $100 billion Gulf petrochemical industry, and if China masters the exploitation of its own shale reserves, the cracks in the Saudi economic model will grow wider still.
Unless the Saudis do some economic rebalancing to cope with this sea change, they’re in for a rude awakening.
[Image of desert oil tower courtesy of Shutterstock]
 
The world will not wait for Canada’s oil
SHERRY COOPER The Globe and Mail Tuesday, Aug. 06 2013
http://www.theglobeandmail.com/commentary/the-world-will-not-wait-for-canadas-oil/article13608302/?cmpid=rss1

Building oil pipelines to bring Canadian product to market is in many ways a no-brainer.

Take for example the proposed Northern Gateway from Alberta to the West Coast and the Energy East proposal from Alberta to the East Coast.

The construction of these projects is a no-brainer because today, more than ever before, we need Canadian oil sands product to reach tidewater and international markets.

According to a recent bank report, Canadians lost $25-billion in oil revenue in 2012 due to a lack of pipeline infrastructure and continuing bottlenecks that prevent our oil from getting to the highest-paying markets.

We’ll lose another $20-billion this year and $15-billion every year going forward without new pipeline construction.

This is money that would benefit Canadians from coast to coast, helping to fund our health, education and social programs.

The time when we could depend on the United States as our sole oil and gas customer is long gone. In 2011, for the first time in more than 60 years, the US exported more gasoline, diesel and other fuels than it imported.

Thanks to the shale revolution, the United States is set to become the world’s largest oil producer – overtaking Saudi Arabia and Russia – just four years from now according to the International Energy Agency.

Given the U.S. is awash in oil and gas and given the country remains Canada’s only customer, Western Canadian oil sold earlier this year for a discount of as much as $43 a barrel compared to the oil known as West Texas Intermediate. And Canadian oil was discounted even further compared to the North Sea oil known as Brent. While those differentials have since narrowed, Canadian oil still trades at a significant discount.

Even more worrisome is the prediction by experts that in the foreseeable future the US won’t need Canadian oil at all. Currently, the U.S. has been able to reduce its reliance on oil from unfriendly countries such as Venezuela by replacing it with increased imports from Canada. But as U.S. oil production continues to grow rapidly, its imports of Canadian oil will inevitably decline.
more on link
 
Another technological refinement that makes oil recovery more efficient, particularly heavy oils like we find in Western Canada:

http://nextbigfuture.com/2013/08/new-heavy-oil-recovery-process-can-get.html

New Heavy oil recovery process can get over 80% of oil in place and is 11% better than previous method

A new enhanced heavy oil recovery (EHOR) process called Cyclic Production with Continuous Solvent Injection (CPCSI) has been developed at the University of Regina in Canada.

In this process, a vapourized solvent near its dew point is continuously injected into the reservoir to maintain reservoir pressure and also supply extra gas drive to flush the diluted oil out through an injector that is located on the top of the reservoir; while a producer, which is located at the bottom of the reservoir, is operated in a shut-in/open cyclic way. A series of experiments have been conducted to evaluate the CPCSI performance. The recovery factors (RFs) are up to 85% of original oil in place (OOIP) in 1-D tests, and the RF is improved by 11% by using the 2-D lateral CPCSI, compared with the traditional 2-D lateral VAPEX. Well configurations and the producer shut-in/open scenarios are key optimization factors that affect the CPCSI performance. Experimental results show that the foamy oil flow and solvent trap are the two major EHOR mechanisms for enhancing the oil production rate during the production period. In comparison with continuous injection process, such as vapour extraction (VAPEX), and cyclic injection process, such as cyclic solvent injection (CSI), CPCSI offers free gas driving, and the reservoir pressure is maintained during the producer opening period so that the diluted oil viscosity is kept low. This work shows that CPCSI could be an alternative optimization production scenario for applying solvent based in situ EHOR techniques for heavy oil reservoirs in Western Canada.

Highlights
• We tested a new enhanced heavy oil recovery technique, named cyclic production with continuous solvent injection (CPCSI).
• 1-D and 2-D experimental tests were conducted to test the performance of this process.
• The oil recovery factor for this process can reach 80%.
• Compared with the classical VAPEX process, the oil recovery factor is increased by 11%.

This solvent based approach would work far better than SAGD for thin heavy oil formations.
 
While I think the headline is over the top (nuclear energy can wean the world off coal and natual gas driven thermal generators, but liquid hydrocarbons have vast advantages in energy density and material handling properties making them ideal fot the transportation industry), the idea of a fleet of mini nuclear reactors spread around in a distributed array will have many advantages in ensuring the grid is robust and responsive.

Note, this is a different idea than thorium powered molten salt reactors, although molten salt reactors can also be scaled to this size as well.

http://www.popsci.com/technology/article/2010-08/thorium-reactors-could-wean-world-oil-just-five-years

Development of Tiny Thorium Reactors Could Wean the World Off Oil In Just Five Years
By Rebecca BoylePosted 08.30.2010 at 1:18 pm75 Comments

Thorium One ton of thorium can produce as much energy as 200 tons of uranium and 3.5 million tons of coal, according to the former director of CERN. via Telegraph

An abundant metal with vast energy potential could quickly wean the world off oil, if only Western political leaders would muster the will to do it, a UK newspaper says today. The Telegraph makes the case for thorium reactors as the key to a fossil-fuel-free world within five years, and puts the ball firmly in President Barack Obama's court.

Thorium, named for the Norse god of thunder, is much more abundant than uranium and has 200 times that metal's energy potential. Thorium is also a more efficient fuel source -- unlike natural uranium, which must be highly refined before it can be used in nuclear reactors, all thorium is potentially usable as fuel.

The Telegraph says thorium could be used as an energy amplifier in next-generation nuclear power plants, an idea conceived by Nobel laureate Carlo Rubbia, former director of CERN.

Known as an accelerator-driven system, it would use a particle accelerator to produce a proton beam and aim it at lump of heavy metal, producing excess neutrons. Thorium is a good choice because it has a high neutron yield per neutron absorbed.

Thorium nuclei would absorb the excess neutrons, resulting in uranium-233, a fissile isotope that is not found in nature. Moderated neutrons would produce fissioned U-233, which releases enough energy to power the particle accelerator, plus an excess that can drive a power plant. Rubbia says a fistful of thorium could light up London for a week.

The idea needs refining, but is so promising that at least one private firm is getting involved. The Norwegian firm Aker Solutions bought Rubbia's patent for this thorium fuel cycle, and is working on his design for a proton accelerator.
The Telegraph says this $1.8 billion (£1.2 billion) project could lead to a network of tiny underground nuclear reactors, producing about 600 MW each. Their wee size would negate the enormous security apparatus required of full-size nuclear power plants.

After a three-decade lull, nuclear power is enjoying a slow renaissance in the U.S. The 2005 energy bill included $2 billion for six new nuclear power plants, and this past February, Obama announced $8.3 billion in loan guarantees for new nuclear plants.

But nuclear plants need fuel, which means building controversial uranium mines. Thorium, on the other hand, is so abundant that it's almost an annoyance. It's considered a waste product when mining for rare-earth metals.

Thorium also solves the non-proliferation problem. Nuclear non-proliferation treaties (NPT) prohibit processes that can yield atomic bomb ingredients, making it difficult to refine highly radioactive isotopes. But thorium-based accelerator-driven plants only produce a small amount of plutonium, which could allow the U.S. and other nations to skirt NPT.

The Telegraph says Obama needs a Roosevelt moment, recalling the famous breakfast meeting when Albert Einstein convinced the president to start the Manhattan Project. A thorium stimulus could be just what the lagging economy needs.
 
Iceland embarking on becoming an oil power? No oil indeed....

http://blogs.the-american-interest.com/wrm/2013/10/05/iceland-on-cusp-of-oil-boom/

Iceland On Cusp of Oil Boom?

Iceland is sitting pretty for what will likely be the world’s next oil boom. The USGS estimates that the Arctic circle holds roughly 13 percent of the world’s undiscovered oil, and as the world warms, that ice is melting, uncovering billions of barrels of black gold. Countries are licking their lips at the possibility of tapping these reserves, and tiny Iceland is well-positioned to take advantage. The North Atlantic Current keeps the country’s harbors ice-free, making it an ideal jumping-off point for countries like China who are eager to invest in new oil plays. And, as the New York Times reports, Iceland is working towards developing some of this Arctic oil for itself:

It issued two licenses for oil exploration in January and is finalizing a third, hoping to pave the way for rigs to drill beneath its seas for the first time. Still, any drilling is probably years off, and will happen only if fresh studies confirm the signs that significant amounts of oil may be present under the sea floor. [...]

“There’s definitely something interesting there,” [Andy Brogan, oil and gas transactions leader at Ernst & Young] said. If the undersea rocks prove to be as rich in oil as those in Norway, “then there could be some quite big prospects there.”
“It’s one of those high risk, high return options,” he added.

Admittedly we’re still too early on in the process to know how this will pan out. Analysts predict that Iceland is still three years away from drilling the exploratory wells that will make or break these projects, and at least a decade away from commercial production. But for a country still clawing its way out of the 2008 financial crisis, there’s real reason to be optimistic about the future.

And even if the specific plays Iceland has a claim on don’t work out, Iceland can support what will surely be a thriving service industry to other Arctic drillers. As the NYT points out, China is particularly interested in cultivating a friendly relationship with the Nordic country for just this reason.
The energy landscape is already radically different from what is was even 10 years ago thanks to the shale boom and the rise of LNG. We’re far from the first to say it, but it bears repeating: Arctic hydrocarbons promise to be the next big shakeup. At the macro level, the world’s energy outlook is changing faster than it ever has, largely due to the rapid acceleration of technological innovation. Fortunately, the majority of these changes are for the better, confounding Malthusians and buying scientists more time to further develop renewable technologies.
 
While more and more oil producing plays are being found, the other end of the equation (more energy efficiency) is also showing increasing gains. The only issue I have right now with LED lightbulb replacements is they are so freaking expensive ($30 for a 100 watt replacement bulb).

http://nextbigfuture.com/2013/11/ucsb-breakthrough-puts-leds-on-track.html#more

UCSB breakthrough puts LEDs on track for 300 lumens per watt or 90% efficiency vs 5% efficiency for incandescent ligth bulbs

  By determining simple guidelines, researchers at UC Santa Barbara's Solid State Lighting and Energy Center (SSLEC) have made it possible to optimize phosphors –– a key component in white LED lighting –– allowing for brighter, more efficient lights.

"These guidelines should permit the discovery of new and improved phosphors in a rational rather than trial-and-error manner," said Ram Seshadri, a professor in the university's Department of Materials as well as in its Department of Chemistry and Biochemistry, of the breakthrough contribution to solid-state lighting research.

This breakthrough puts efforts for high-efficiency, high-brightness, solid-state lighting on a fast track. Lower-efficiency incandescent and fluorescent bulbs –– which use relatively more energy to produce light –– could become antiquated fixtures of the past.

"Our target is to get to 90 percent efficiency, or 300 lumens per watt," said DenBaars, who also is a professor of electrical and computer engineering and co-director of the SSLEC. Current incandescent light bulbs, by comparison, are at roughly 5 percent efficiency, and fluorescent lamps are a little more efficient at about 20 percent.

"We have already demonstrated up to 60 percent efficiency in lab demos," DenBaars said.

ED (light-emitting diode) lighting has been a major topic of research due to the many benefits it offers over traditional incandescent or fluorescent lighting. LEDs use less energy, emit less heat, last longer and are less hazardous to the environment than traditional lighting. Already utilized in devices such as street lighting and televisions, LED technology is becoming more popular as it becomes more versatile and brighter.

According to Seshadri, all of the recent advances in solid-state lighting have come from devices based on gallium nitride LEDs, a technology that is largely credited to UCSB materials professor Shuji Nakamura, who invented the first high-brightness blue LED. In solid-state white lighting technology, phosphors are applied to the LED chip in such a way that the photons from the blue gallium nitride LED pass through the phosphor, which converts and mixes the blue light into the green-yellow-orange range of light. When combined evenly with the blue, the green-yellow-orange light yields white light.

And for the Twofer; progress on Solid Oxide Fuel Cells. Because they can extract electrical energy directly from the chemical energy of hydrocarbon fuels, units like this could be used to power vehicles and ships with electric motors in place of diesel generators. Even aircraft might benefit from using something like this as an APU, rather than a turbine:

http://www.technologyreview.com/demo/520451/avoiding-the-power-grid/

Avoiding the Power Grid
A cheaper fuel cell could provide affordable power for microgrids.

By David Talbot on October 22, 2013

Eric Wachsman
Also featured in:
MIT Technology Review Magazine
November/December 2013
More in this issue »

WHY IT MATTERS

The electricity grid is increasingly stressed, and existing backup power sources are either expensive or inefficient.

A one-meter-square gray box studded 
with green lights sits in a hallway near the laboratory of materials scientist Eric ­Wachsman, director of the Energy Research Center at the University of Maryland. It is a mockup of a fuel-cell device that runs on natural gas, producing electricity at the same cost as a large gas plant.

The box is designed to house stacks of solid-oxide fuel cells that differ from their conventional counterparts in a dramatic way: they’re projected to produce electricity for $1 per watt, down from $8 in today’s commercial versions, thanks to improvements that ­Wachsman has made in the ceramic materials at their heart.

The technology could eventually become a practical and affordable way to ease strain on the increasingly stressed electricity grid; anywhere there’s cheap natural gas, we could also have constant and cheap electricity.

That would make it possible to do away with the diesel generators that are now widely used for backup power and as a key component of microgrids in places like Malaysia and cellular base stations in rural areas around the world. Solid-oxide fuel cells—which can run on diesel fuel or gasoline, not just natural gas—use much less fuel per watt than diesel generators of similar size.

Conventional solid-oxide fuel cells run at high temperatures, making them more expensive and prone to performance losses. A key advance in the Maryland fuel cell is that it is based on cerium oxide and bismuth oxide, which are far more electrically conductive than materials used in commercial versions and produce much more electricity per square centimeter. The cell can operate at 650 °C, down from 900 °C in existing products, reducing thermal stresses and insulation needs. And the final product is made of 32 stacks, each of which can be replaced if it fails.

The gray box mocks up a 25-kilowatt version of the technology, which is now under development by a startup called Redox Power Systems. Redox is building a factory in Melbourne, Florida, and hopes to launch the product in 2014. A 25-kilowatt fuel cell is enough to power a small strip mall; units that are smaller still could serve a single house. In the long term, the technology could even be put into hybrid vehicles to charge their batteries, since it is both lighter than an internal-­combustion engine and more efficient at producing electricity.

But the stand-alone generators, if successful, would be impressive enough. They’d mean “we’re on par with conventional power generation,” Wachsman says. “It’s not just backup power—it’s energy security.”
 
Mexico as a rival to Canada's oil sands?

Financial Post/National Post link

Mexico emerging as new rival to Canada’s oil sands

The Canadian oil sands sector is set to revive its rivalry with resurgent Mexican heavy crude production in the next few years as the southern country pushes through reforms and starts attracting billions of dollars in foreign investment in its energy sector.


“There is a potential for headwinds for Canadian heavy oil in the Gulf Coast, if Mexico gets its groove back, and is able to stabilize and then increase exports of Mayan crude,” said Judith Dwarkin, director, energy research at ITG Investments.

Mexico’s state-owned Petróleos Mexicanos (PEMEX) already exports its benchmark heavy oil crude to Gulf Coast refineries but its influence has waned as domestic production declined over the past few years. During this time, Canadian heavy oil has increased its market share on the Gulf Coast.

President Enrique Pena Nieto, who swept to power last December partly on a pledge to dismantle PEMEX’s 75-year monopoly, has cut through decades of resistance towards foreign participation in the country’s energy sector. Mexico’s Congress passed a bill on Dec. 12 that ended PEMEX’s grip on petroleum resources and opens the sector to foreign investment. The bill must be ratified by state assemblies before becoming law, but analysts widely expect the process to be smooth.

“This serves to connect the last missing piece of the North American energy landscape,” wrote Michael Cohen, an analyst at Barclays Bank Plc, in a report to clients. “Adding Mexico’s oil and gas resources to world markets, given the U.S.’s tight oil and gas and Canadian oil sands, could have dramatic implications in the medium and long term.”

The new law offers production-sharing contracts and licenses for companies, and gives Pemex the freedom to pursue joint ventures with Canadian and other foreign companies. Mexican crude production may increase slightly from 2.5 million bpd, but reaching the government’s target of 3 million bpd by 2018 and 3.5 million bpd by 2025 is ambitious.


Mexico’s oil renaissance comes at a time when Canadian oil production is expected to reach 4.9 million barrels per day by 2020, according to industry estimates.

Adding to North America’ energy prowess is the United States’ raising production to 9.5 million barrels per day, according to the U.S. Energy Information Administration in its latest Annual Energy Outlook published Monday. The shale-driven surge would dramatically shrink U.S. imports to about 25% by 2016, from about 40% last year, before edging back up in the latter half of the decade.

The North American abundance has the potential to weaken the value proposition of Canadian energy, especially as finding and development costs in Mexico stand around $10.97 per barrel, according to Barclays, much lower than its peers.


But analysts say it will be some time before Mexico can start threatening Canadian heavy oil, which is the U.S.’s biggest crude supplier.

“Mexico’s production has been in a tailspin,” said Ms. Dwarkin. “First they will notionally arrest potential decline and then start providing more to the export market, as well as potentially refining more at home.”

This serves to connect the last missing piece of the North American energy landscape


(...)

MORE AT LINK

 
No oil indeed. Using natural gas (methane) as a low cost feedstock to create synthetic fuels has another benefit not mentioned in the article: it is sulphur free, reducing a huge source of emissions and also extending the life of catalytic converters:

http://www.technologyreview.com/news/523146/chasing-the-dream-of-half-price-gasoline-from-natural-gas/?utm_campaign=newsletters&utm_source=newsletter-daily-all&utm_medium=email&utm_content=20140115

Chasing the Dream of Half-Price Gasoline from Natural Gas
A startup called Siluria thinks it’s solved a mystery that has stymied huge oil companies for decades.

By Kevin Bullis on January 15, 2014 .Why It MattersThe world depends almost exclusively on oil for chemicals and liquid fuels.
Quick screen: A technician at Siluria operates some of the company’s equipment for quickly making and testing new catalysts.
At a pilot plant in Menlo Park, California, a technician pours white pellets into a steel tube and then taps it with a wrench to make sure they settle together. He closes the tube, and oxygen and methane—the main ingredient of natural gas—flow in. Seconds later, water and ethylene, the world’s largest commodity chemical, flow out. Another simple step converts the ethylene into gasoline.

The white pellets are a catalyst developed by the Silicon Valley startup Siluria, which has raised $63.5 million in venture capital. If the catalysts work as well in a large, commercial scale plant as they do in tests, Siluria says, the company could produce gasoline from natural gas at about half the cost of making it from crude oil—at least at today’s cheap natural-gas prices.

If Siluria really can make cheap gasoline from natural gas it will have achieved something that has eluded the world’s top chemists and oil and gas companies for decades. Indeed, finding an inexpensive and direct way to upgrade natural gas into more valuable and useful chemicals and fuels could finally mean a cheap replacement for petroleum. 

Natural gas burns much more cleanly than oil—power plants that burn oil emit 50 percent more carbon dioxide than natural gas ones. It also is between two and six times more abundant than oil, and its price has fallen dramatically now that technologies like fracking and horizontal drilling have led to a surge of production from unconventional sources like the Marcellus Shale. While oil costs around $100 a barrel, natural gas sells in the U.S. for the equivalent of $20 a barrel.

But until now oil has maintained a crucial advantage: natural gas is much more difficult to convert into chemicals such as those used to make plastics. And it is relatively expensive to convert natural gas into liquid fuels such as gasoline. It cost Shell $19 billion to build a massive gas-to-liquids plant in Qatar, where natural gas is almost free. The South African energy and chemicals company Sasol is considering a gas-to-liquids plant in Louisiana that it says will cost between $11 billion and $14 billion. Altogether, such plants produce only about 400,000 barrels of liquid fuels and chemicals a day, which is less than half of 1 percent of the 90 million barrels of oil produced daily around the world.

The costs are so high largely because the process is complex and consumes a lot of energy. First high temperatures are required to break methane down into carbon monoxide and hydrogen, creating what is called syngas. The syngas is then subjected to catalytic reactions that turn it into a mixture of hydrocarbons that is costly to refine and separate into products.

For years, chemists have been searching for catalysts that would simplify the process, skipping the syngas step and instead converting methane directly into a specific, desired chemical. Such a process wouldn’t require costly refining and separation steps, and it might consume less energy. But the chemistry is difficult—so much so that some of the world’s top petroleum companies gave up on the idea in the 1980s.

Siluria thinks it can succeed where others have failed not because it understands the chemistry better, but because it has developed new tools for making and screening potential catalysts. Traditionally, chemists have developed catalysts by analyzing how they work and calculating what combination of elements might improve them. Siluria’s basic philosophy is to try out a huge number of catalysts in the hope of getting lucky. The company built an automated system—it looks like a mess of steel and plastic tubes, mass spectrometers, small stainless steel furnaces, and data cables—that can quickly synthesize hundreds of different catalysts at a time and then test how well they convert methane into ethylene.

The system works by varying both what catalysts are made of—the combinations and ratios of various elements—and their microscopic structure. Siluria was founded based on the work of Angela Belcher, a professor of biological engineering at MIT who developed viruses that can assemble atoms of inorganic materials into precise shapes. Siluria uses this and other methods to form nanowires from the materials that make up its catalysts. Sometimes the shape of a nanowire changes the way the catalyst interacts with gases such as methane—and this can transform a useless combination of elements into an effective one. “How you build up the structure of the catalyst matters as much as its composition,” says Erik Scher, Siluria’s vice president of research and development.

The process of making and testing catalysts isn’t completely random—Siluria has the work of earlier chemists to guide it, and it has developed software that sorts out the most efficient way to screen a wide variety of possibilities. The result is that what used to take chemists a year Siluria can now do in a couple of days, Scher says. “We’ve made and screened over 50,000 catalysts at last count,” he says. “And I haven’t been counting in a while.”

Nonetheless, some seasoned chemists are skeptical that Siluria can succeed. Siluria’s process is a version of one that chemists pursued in the 1970s and 1980s known as oxidative coupling, which involves reacting methane with oxygen. The problem with this approach is that it’s hard to get the reaction to stop at ethylene and not keep going to make carbon dioxide and water. “The reaction conditions you need to convert methane to ethylene do at least as good a job, if not better, of converting ethylene into carbon dioxide, which is useless,” says Jay Labinger, a chemist at the Beckman Institute at Caltech.

In the late 1980s, Labinger wrote a paper that warned researchers not to waste their time working on the process. And history seems to have borne him out. The process “hasn’t been, and doesn’t appear at all likely to be” an economically viable one, he says.

Yet in spite of the challenging chemistry, Siluria says the performance of its catalysts at its pilot plant have justified building two larger demonstration plants—one across San Francisco Bay in Hayward, California, that will make gasoline, and one in Houston that will only make ethylene. The plants are designed to prove to investors that the technology can work at a commercial scale, and that the process can be plugged into existing refineries and chemical plants, keeping down capital costs. The company hopes to open its first commercial plants within four years.

Siluria can’t tell you exactly how it’s solved the problem that stymied chemists for decades—if indeed it has. Because of the nature of its throw-everything-at-the-wall approach, it doesn’t know precisely how its new catalyst works. All it knows is that the process appears to work.

The hope for finding more valuable uses for natural gas—and making natural gas a large-scale alternative to oil—doesn’t rest on Siluria alone. The abundance of cheap natural gas has fueled a number of startups with other approaches. Given the challenges that such efforts have faced, there’s good reason to be skeptical that they will succeed, says David Victor, director of the Laboratory on International Law and Regulation at the University of California at San Diego. But should some of them break through, he says, “that would be seismic.”
 
And reducing the demand side for oil. Ford is working on producing a new F-150 pickup truck which is 12% lighter than the previous model. Weight is one of the biggest factors in fuel economy (although the brick like proportions of pickups and SUV's doesn't help at highway speeds), and 12 % is actually a very big deal:

http://www.latimes.com/business/autos/la-fi-hy-detroit-auto-show-ford-truck-20140113,0,1356693.story#axzz2qj1gjsfS

Detroit Auto Show: Ford bets big on aluminum with F-150 truck

Ford's all-new 2015 F-150 now features an aluminum body that shaves as much as 700 pounds off the truck's weight. Ford also announced a second available EcoBoost turbocharged engine on the new model. (Kirk McKoy / Los Angeles Times /January 13, 2014)«2»1/20By Jerry Hirsch

This post has been updated as indicated below.

January 13, 2014, 5:00 a.m.
While designing the next-generation F-150 truck, Ford Motor Co. secretly substituted the steel body on some of its current pickups with an aluminum shell and delivered them to business customers.

The automaker was looking to test how lightweight aluminum alloys would hold up on the job, at a gold mine, an energy utility and a construction firm. So it lent out the trucks in a test program — without telling the companies what was being tested. What Ford learned from 300,000 total miles convinced the world’s biggest seller of full-size pickups to make wholesale changes to the F-Series.

[Updated 9:49 a.m. Jan. 13: The 2015 model truck debuted Monday at the Detroit Auto Show, weighing 700 pounds less than the old one. After its introduction on the floor of the Joe Louis Arena, Ford Chief Operating Officer Mark Fields acknowledged that working with aluminum was more expensive than steel.

“But given the volume we are working with," Fields said, "we will find some efficiencies.”

He said the new truck builds on the experience Ford has had working with aluminum in smaller amounts in other models “for a number of years.”

“We are taking it up a step into the mass production of our most important vehicle,” Fields said.]

Aluminum alloys will make up the engine compartment and almost every visible metal part of the new truck — the doors, the hood, the side panels, the truck bed, the tail gate.

Being the first major truck to embrace lightweight materials represents a big gamble for Ford, said Brian Johnson, an analyst with Barclays Capital, who estimates Ford earns about $11,000 on a pickup truck sale compared with $5,000 for a car. The F-Series trucks account for nearly half of Ford’s North American profits, he said, and the company can’t afford a misfire.

“It is the single most important product from Ford,” said Johnson.

With its secret test, Ford kept customers in the dark about the aluminum so they would use the trucks just as they would any steel-bodied pickup, said Pete Reyes, the chief engineer for the F-150.

Ford eventually took some of the trucks back and tore them apart, looking to see how they withstood the rigors of the rugged worksites. It then made some changes, such as making the inner surface of the tailgate thicker for extra protection. The companies will now learn that they were aluminum, Reyes said.

Ford introduced the first F-Series truck, the F-1, in 1948. It was one of the first commercial vehicles produced following World War II. Chevrolet was the biggest seller of pickups at the time. But Ford believed a vehicle with a bigger, more comfortable cab could be used for small businesses and farm work, but also double as an every day driver.

The formula worked. The F-Series became the nation’s best-selling truck in 1977. It became the best selling vehicle of any type in 1982 and has retained the title since. Ford has sold 33 million F-Series trucks since 1948, and at least 11 million are still on the road, the company said.

Last year, the automaker sold 763,000 trucks in the U.S. That’s more sales than many major brands generate from their entire vehicle line-ups, including Dodge, Hyundai, GMC, Jeep and Kia.

The goal for the next truck, said Doug Scott, Ford’s truck marketing manager, was to create a truck as strong as the previous version, but with greater fuel economy and towing and cargo capacity. The new pickups go on sale near year-end.

“Our big challenge was, how do you advance the best selling truck ever?” Scott said. “We have to do it with no compromises.”

The switch to aluminum has its complications. Already there are reports of manufacturing delays. The material is more complicated to stamp and weld than steel, requiring higher heat and more electricity. That could be contributing to Ford’s weak 2014 profit outlook and has spooked the stock market, said Adam Jonas, a Morgan Stanley analyst.

GM and Chrysler, Ford’s closest truck competitors, are still singing the praises of steel.

“We use aluminum on the hoods and certain engine blocks and in all the appropriate places,” said Roger McCormack, director of Buick/GMC marketing as General Motors. “There are a lot of advantages of high strength steel — great structural integrity.”

It’s customers such as Jamie Sailor of Chatsworth, that Ford needs to convince.

A professional horse trainer whose parents also are Ford truck loyalists, the 22-year-old needs a rugged vehicle to transport animals during the week and haul her dirt bike to the desert on weekends. Having once blown an engine on a Ford truck hauling a too-heavy load up a hill, Sailor pays close attention to durability and toughness.

“Aluminum is a strong metal, but not as strong as steel,” said Sailor, who owns a 2012 F-250.

Consumers such as Sailor present a marketing challenge for the automaker, said Stephanie Brinley, an analyst at IHS Automotive.

“Ford will have to do a good job of telling its story, all the way down to training the sales people at the dealerships,” Brinley said,

That story will start with the term “military grade aluminum” in Ford advertising. It has no specific technical meaning; it’s just a way for Ford to tie the truck to war machines made with the same stuff.

“We are using the same alloys that are used in the Hummer and the Bradley fighting vehicle,” Scott said. “We have the same objective of strength and durability.”

He doesn’t think the extensive use of aluminum will spook most Ford truck owners, many who have become familiar with the strength of the metal through its use in ladders, tool boxes and other equipment.

Thilo Koslowski, an analyst at Gartner Inc., agreed.

“Consumers don’t really care about what metal is being used to make a vehicle,” Koslowski said. “What they care about is if it will leave them with more money in their pocket, especially if they are using it for a business.”

Aluminum isn’t exactly a foreign material to the automobile industry. Mercedes-Benz will make the body panels of its new C-Class sports sedan from the metal. Tesla Motors makes extensive use of aluminum in its Model S, as does Land Rover in its big Range Rover SUV.

As the auto industry faces more stringent fuel economy standards, Koslowski said, Ford had to make a transformational move with its new truck rather than sitting back and implementing incremental changes, as seen in the recent redesigns of the Ram and Chevrolet pickups.

“I don’t think they really have a choice but to do something like this,” he said.

Still, the new truck just isn’t about aluminum. Ford increased the amount of increased high-strength steel in the frame, from 23% to 77%, to give the vehicle rigidity and improve its handling.

There are other changes, too.

The beltline of the new truck is lower than the current version, a move that improves visibility for the driver — a constant truck owner complaint — and makes it easier to lift items in and out the side of the bed.

Other improvements include all-LED lighting on the outside of the truck; dampening on the tailgate hinges that slow its descent; and spotlights on the mirrors that can be targeted to light the truck’s surroundings. New safety features include a 360-degree viewpoint that can be displayed on the dashboard monitor, a forward collision alert and a blind spot monitor to make lane changes easier.

The truck offers easier access to the second row of seats on the SuperCab model via a rear door that opens 170 degrees toward the back of the truck. There’s no central pillar separating the front and back doors.

Ford also has added a second turbocharged engine to the F-150 lineup. This new 2.7-liter V-6 engine is from the same “EcoBoost” family as the turbocharged four-cylinder that Ford recently dropped in its all-new Mustang and Lincoln’s MKC crossover. The engine will also likely see use in other large Ford and Lincoln vehicles in the future. Ford has yet to release power figures, or mileage ratings, for this, or any of the engines in the new F-150.

Meanwhile, the 3.5-liter EcoBoost remains the top-dog in the F-150 lineup. Power will be similar to the outgoing model, which now has 365 horsepower and 420 pound-feet of torque. Also available will be a base 3.5-liter V-6 engine, and a workhorse 5.0-liter V-8.

Ford also is including high wattage power outlets in the cabin so that workers can plug in power tools and recharge batteries.

Combined with the new aluminum architecture, Ford believes it has designed a modern truck that will have the power, durability and amenties its millions of customers demand, but be a step ahead of its rivals in technology and fuel effeciency.

It all adds up to a big leap in truck design, said Golam Newaz, an automotive engineering professor at Wayne State University in Detroit.

“There has been a lot of testing by Ford, but let’s say that we find that these aluminum vehicles are more difficult to repair, or that the joints aren’t as durable,” he said. “Or what if consumers just don’t like it for some reason? We really won’t know until the vehicle has been in the market for some years.”

Times staff writer David Undercoffler contributed to this report.
 
“Consumers don’t really care about what metal is being used to make a vehicle,”

They will after they have an accident and have to get the repairs done at a shop that has the capability of working with aluminum or have to pay for those specialized parts.
 
Add to that, road salt corrosion will be much worse with an aluminium frame.

Might be ok in a southern climate, but galvanic corrosion will eat out solid aluminium at a mind boggling rate.
 
“Consumers don’t really care about what metal is being used to make a vehicle"

In addition, wait until the insurance companies up the rates skyhigh because of the cost of body shop work, most of which are not equipped to work with aluminum on a large basis....
 
Although not covered in the article, Ford must have thought about these issues and their solutions, otherwise there would be no point in moving forward with production. Given the changing in Government fuel economy mandates and consumer preferences, some radical steps do need to be taken (like eliminating 12% of the dry wight of the vehicle) in order to survive.
 
Thucydides said:
Although not covered in the article, Ford must have thought about these issues and their solutions, otherwise there would be no point in moving forward with production.

I think you're affording them too much credit. I'm sure they thought about it. I'm sure they even looked at some solutions. I doubt whether they notified any body shops or insurance companies what those solutions are. What they likely did, as they are wont to do, is to leave it to the market and the owners to sort out their problems. Most body shops will just resort to replacing panels instead of repairing them. This will drive up insurance costs and provide more, inflated, part sales for Ford (which is likely the solution they settled on).

They will be providing no financial help to body shops to upgrade equipment or technical staff and insurance companies will increase rates accordingly to insure they still make a profit.
 
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