Export Land Model in Action

[MD]

Over a week ago I mentioned this, but the thread sank.

Now I have time to elaborate. Here is what I was referring to.

...

By the way, in that same release above, seems Qatar wants an aluminium smelter, although it's going for the full NG-fired CCGT setup. In practicality, that's an improvement on Dubai's ambitions, but that's still gas not arriving at a port near you.

...

This sort of thing replicated across the ME Gulf is going to wipe out any increase OPEC could credibly pull off.

EDIT: Again, I would like to know, can someone make an educated estimate for the rate at which this specific OCGT gear is going to burn liquids, and maybe a boe/d or something so we have an idea of how this compares to crude volumes? I know the refinery balance in the ME Gulf produces kerosene / jet fuel for export, so I am assuming that gigawatts'-worth of guaranteed new demand showing up in 13 months is not going to be negligible.

I'd just like to see booked and pending orders from all the major powerplant builders world-wide.

Going back ten years and forward as far as they know.

what a tale that would tell, I'm sure.

[Twilight]

We already know that demand will grow strongly, and it doesn't mean anything if this growth happens in an oil exporting country which then effectively stops exporting, or if the same growth happens in an already importing country. As oil is a fungible product, the effect will be exactly the same.

But what effect will be exactly the same? World or country?

World oil production, yes, it will be declining at some rate. World oil supply/demand shortfall consequently will be increasing at some rate. That high level of detail is of limited practical use however, beyond saying that the world on aggregate has a problem.

Regional trade, no.

The problem is, averaged world statistics while interesting from an academic point of view, are not going to be what gets people excited. When a nation is demonstrably losing out at a multiple of the world average, that is what will make headlines - not the world picture, not for many years yet. Export Land tells you what shortage of foreign exchange or imported resources a specific country may suffer, and that gets political fast. It is detail that the general peak oil theory by itself does not provide. Peak oil is directly relevant of course, but because of its accumulated baggage and dry science, it will probably be a background reference once resource nationalism kicks off in earnest.

I think around 2010, the first Export Land effects from Mexico and Russia will be on the front page of the Guardian, and the global picture will still be absent except as a footnote or Comment. As with the global warming debate, people take an interest in their country's share first, the world picture second. That may be a sad comment on humanity and a poor survival strategy, but politics being what they are, I can say with confidence that is what we will see. This is why Export Land is important - it is the framework for those first self-interested discussions. In the news stakes, Mexico or Venezuela ending exports to the US, or Russia reducing exports to the EU, will beat a 3% world decline that year.

I don't see the use of breaking out individual countries exports from total exports, or indeed from the total supply.

Talking about imports and exports instead of global supply and demand just clouds the issue, in my opinion.

And so where geopolitical self-interest enters the picture, this in fact becomes the key question. Production, consumption and shortage can be summed, but their distribution will be politically and economically important.

I take it you to mean that some capital expenditure (on the polymer plant?) should tell us that some amount of petroleum will heretofore be diverted as a particular industrial feedstock (polymer) rather than remain an internationally traded commodity. Consequence is it is essentially lost to the markets? Is that the connection?

Yes, you could put it that way. Once a raw material exporter decides to go into a value-added product business domestically, it means someone else's value-added product business is deprived of the formerly exported raw material, and that other party no longer benefits from said addition of value. If on top of that the product is consumed domestically as well, it is lost to former consumers who no longer enjoy access, and it doesn't figure on shipping manifests any more. By way of example, this sheds light on one reason why there is no point building new refinery capacity in the US. Oil exporters would be doing themselves a favour, maximising revenue and creating high-value jobs, by refining at source and shipping the product.

It tells us what petroleum essentially disappears. from the system and is not measured by ship-counters and market weenies

Yes, it becomes oil the importers never see, and frankly the effect would play out even if world oil production did not immediately decline.

I'd just like to see booked and pending orders from all the major powerplant builders world-wide.

what a tale that would tell, I'm sure.

I agree, and that kind of data will have been assembled somewhere. No doubt those with a professional interest in the shaping of the future already study it.

[Twilight]

I should have dug deeper. There was more. An additional 800 MW of gas turbines at Az Zour, I would guess with similar fuel consumption figures, so another 37 kb/d, running full blast through Q3 and at some level beyond. Different site, part of the same emergency initiative, announced at the same time.

The release does not actually specify liquid fuel, but given Kuwait's impressive backlog of gas-fired plants deliberately held up to make way for this, and its feature on dieselprogress.com (Google cache only), I have a hunch it will be using oil-derived fuel.

For comparison, the EIA's Kuwait page says only 100 kb/d is currently used for power generation, natural gas import projects are still at the planning stage, but domestic gas infrastructure is being expanded. Reading around the internet, it does seem that Kuwait favours gas-fired CCGTs. However, the government underestimated demand growth. Moving too slowly and displaying reluctance to curb its citizens' extravagant power consumption, it ran into a wall and needed an emergency bridge for other energy infrastructure to catch up. Hence these projects.

We can conclude that until some time in 2010, up to 152 kb/d of Kuwait's 2,150 kb/d (2006) exports (7%) will be withdrawn from market. That word "baseload" suggests much of this will not be seasonal. It will be interesting to see what EIA IPM statistics will show.

[cube]

Under the first of the new contracts announced today, GE will supply 20 Frame 9E gas turbines to Kharafi National of Kuwait for the Sabiya Power Station, which will add more than 2.5 gigawatts of power capacity for the State of Kuwait. The new power plant will be owned and operated by Kuwait’s Ministry of Electricity & Water.

That's a 25% capacity expansion in just one year, ....

What do these people do with all that energy....turn up the air conditioning? To put this in perspective if the French were to "hypothetically" consume electricity at that rate they'd need to literally double the number of nuclear reactors. --> build an extra 59 reactors.

Kuwait
3.1 M people
9.4 + 2.5 gigawatts

France
64 M people
112.2 gigawatts

[Twilight]

Similar trend in Saudi Arabia.

In the first agreement, GE Energy has received a contract to supply gas turbine-generators for the 960-megawatt expansion of the Rabigh Power Plant in Rabigh City, on the west coast of Saudi Arabia. The project is part of SEC’s initiative to provide additional power to support the region’s economic and population growth.

Also...

• Frame 7EA gas turbines to the Al-Toukhi Company for Industry and Trading of Riyadh, the EPC contractor, for a 260-megawatt power plant in Jizan City, southern Saudi Arabia.

• 7EA gas turbines, also to Al-Toukhi, for a 120-megawatt power plant in Qunfutha City, western Saudi Arabia.

• 7EA gas turbines to the National Contracting Company Limited of Al-Khobar, Saudi Arabia, for a 111-megawatt facility in Aljouf City, northern Saudi Arabia.

• 7EA units, also to National Contracting, for a 183-megawatt power project in Tabouk City, northwestern Saudi Arabia.

This batch is only half the size of Kuwait's order and has a much slower schedule; it looks like planned work rather than a last-minute panic. Fuel will be mostly heavy fuel oil (Rabigh and Jizan at least, if my searches threw up correct information), though with these units the mix can be adjusted.

Here are SEC's expectations of the future - see page 4.

Somewhere in my reading I saw that half of Saudi power generating capacity is liquid fuelled. Whether or not natural gas becomes the more popular choice, it is clear that in coming years more of Saudi oil production will be refined and consumed internally, even if it is the kind of gunk that nobody wants at present, as seems to be the case here.

This is their right of course, and it is difficult to express reproach without hypocrisy. What would be more helpful would be some kind of sign that these trends are being recognised and included in our own energy policy planning. This is something that requires timely adaptation on our part.

[BigTex]

It is interesting, too, that there is no mention of using some kind of vast solar power collection scheme to generate this electricity.

Presumably, someone modeled the different approaches and concluded that even an inefficient energy hog fossil fuel powered setup was preferable to solar power, even in the middle of the desert, and even in the face of higher and higher fossil fuel costs.

Another thing I hadn't thought about much was that the spread of prosperity in some areas is probably a lot more energy intensive than others. For example, if a tropical paradise went from being primitive to civilized, there might not be a HUGE change in energy consumption. However, when people in the middle of the desert decide they're tired of sweating all the time and want 24 hour a day climate control, the change in energy consumption could be enormous.

The fact that some of these ME populations are growing in both numbers and levels of prosperity is not good at all from an energy export perspective.

To the question about what the Kuwaitis are doing with all of that electricity, I suspect they're just running the A/C.

I wonder what kind of building codes they have in Kuwait and how much focus there is on energy efficiency.

[yesplease]

Now imagine ConEd or PG&E making the same demands. I'm talking mass texting an order with exclamation marks. Hmm? Not likely, is it?

Nope, because they don't operate in areas where outages are likely, at least compared to SCE. Otoh, SCE has many rebates available for more energy efficient appliances as well as a programwhere customers have cut-offs on their AC unit installed that can be activated according to SCE's discretion in exchange for lowering their bill.

[yesplease]

It is interesting, too, that there is no mention of using some kind of vast solar power collection scheme to generate this electricity.

Presumably, someone modeled the different approaches and concluded that even an inefficient energy hog fossil fuel powered setup was preferable to solar power, even in the middle of the desert, and even in the face of higher and higher fossil fuel costs.

Um... They own the FF's, so the higher and higher costs aren't a really big issue, and I doubt they could get a solar thermal installation up in a year, not to mention solar thermal isn't exactly the best candidate for a peaker plant.

[yesplease]

I guess starvid the important point your missing is the rate of price rise will hugely increase because of the exporting nations no longer exporting.

The increase in price depends on how much oil is taken off the world market, in this case we're looking at, according to aflatoxin, ~50kbpd if run at WOT for ten hours a day. Since these are peakers, they probably won't even need an average of 50kbpd in summer, maybe closer to half that, and throughout the year probably less than that on average.

But, for the sake of a wide margin of error, lets assume they run these things flat out for 10 hours/day every day, even though they probably don't. Compared to production of 9,000kbpd, that's about .5% of Saudi production and .05% of world production. Not exactly the kind of declines detailed in the land export model assuming they run it WOT, and probably a fraction of that given it's likely role as a peaker plant.

[BigTex]

It is interesting, too, that there is no mention of using some kind of vast solar power collection scheme to generate this electricity.

Presumably, someone modeled the different approaches and concluded that even an inefficient energy hog fossil fuel powered setup was preferable to solar power, even in the middle of the desert, and even in the face of higher and higher fossil fuel costs.

Um... They own the FF's, so the higher and higher costs aren't a really big issue, and I doubt they could get a solar thermal installation up in a year, not to mention solar thermal isn't exactly the best candidate for a peaker plant.

It's a little different if you own it, but not a lot. There is still the lost profit you could have earned by selling it at $130 and up per barrel. They have to believe that the price of oil is going to continue to rise, so the present value of that lost stream of revenue from the foregone exports is probably enormous.

[yesplease]

I think that ultimately they feel adding a bit of generation capacity for peak load is worth the likely small drop in revenue from the correspondingly small amount of oil used for it's operation during the hottest times on the hottest days. Besides, better to do it now while oil's under $200/bbl and get it switched over to NG, something there isn't as much of an export market for AFAIK in a year or so, than deal w/ power outages from now until it's put in later w/ oil at $200+/bbl.

Also, just like someone who makes tens of millions per year driving a $500,000 sports car when they could drive a $10,000 compact, at ~$1.2 billion/day from oil, they can afford to splurge a bit. Speaking of which, didn't the Bush family have ties to the Saudi Royal family? It would certainly help having someone in a high up place insuring as much consumption as reasonably possible from their number one best customer.

[Twilight]

Another thing I hadn't thought about much was that the spread of prosperity in some areas is probably a lot more energy intensive than others.

Exactly. Not all parts of the world start from the same level of viability, so it makes perfect sense that reaching a given standard of inhabitability requires different energy inputs to overcome local obstacles.

Take water. A lot of power stations in the ME Gulf are correctly described as power and desalination plants. From the beginning, they are designed to fulfill both functions. Not just power, but desalination! If I recall correctly, somewhere in Saudi Arabia there is a water pipeline hundreds of kilometres long, rising far above sea level, which may hold some sort of record.

Whereas somewhere like the UK, water capture consists of surface reservoirs provided by natural lakes or concrete dams refilled by precipitation. The water still has to be treated at the end of its journey and at some stage pumped against gravity, but there is no corresponding ongoing production stage energy input - it is absent. Or more accurately, we get to freeload off nature to some extent.

yesplease is correct in that their existing ownership of this resource makes choosing PV and the like unnecessary. That is why in spite of recent investments in renewables research in those parts, the real cash is going into stuff like this. It is an easy choice to make, they do not lose much. And in this case, unlike in the case of Kuwait, this is a very small portion of Saudi oil production. But this type of thing does add up, and long term their actual output is not getting any higher, in spite of fanciful claims about capacity.

One small point though, it is by no means a valid assumption that these are peaker plants. In the case of Jizan at least, power and desalination, so by definition baseload. Others could be peakers, but this type of thing is commonly run as baseload over there. In the UK too, the proportion of gas turbines in the generation mix and increasing unreliability of nuclear is such that gas turbines are run without much variation. So we cannot really know one way or another without further information. But in the grand scheme of things I suppose it does not matter.

[yesplease]

One small point though, it is by no means a valid assumption that these are peaker plants. In the case of Jizan at least, power and desalination, so by definition baseload.

It's a likely assumption IMO, especially when considering that the expansion of desalination capabilities does not appear to be strictly linked to waste heat from the new gas turbine plant/s for handling the higher demand during summer.

JIZAN, 11 March 2004 — Minister of Water and Electricity Dr Ghazi Al-Qusaibi signed a SR334 million contract with a national company to expand Jizan electriccity station. The project includes building three gas turbines with a capacity of almost 200 megawatts.

The first unit is expected to start operating by summer 2005, just in time to help handle the higher demand for electricity. The second unit will be finished six months later and the third six months after that.

Al-Qusaibi said that the ministry wanted to have every house in Jizan connected to the network by the time its plan is completed. The ministry is also planning to expand Al-Shuqaiq desalinization plant to cover Jizan’s local need for water.

It doesn't seem like they're using the additional generating capacity to allow expansion of the desalination plant, but if you have information that shows otherwise, please bring it to the table!

[Twilight]

It doesn't seem like they're using the additional generating capacity to allow expansion of the desalination plant, but if you have information that shows otherwise, please bring it to the table!

I do not know. The text is open to interpretation. The two projects might be connected, or they might not. In either case energy consumption is rapidly increasing.

In the interests of completeness, I will copy a directly related exchange from another thread here:

At least you aren't clinging to the idea that a few peaker power plants in Saudi Arabia is honest proof of the land-export model...

It is proof of the demand side of Export Land. Proving the supply side is more difficult. Do that, and you have the argument nailed down. But I never even tried to prove the supply side. There are others who can make a better attempt than I can. I only seek to make a contribution to the debate, not win it single-handed.

The trends do seem to favour the Export Land Effect coming into play. Demand side is a done deal. You can't ask for a more solid set of trends than that, looking exponential too. Supply side is another story. Politics all too apparent there. In spite of the convincing arguments over at TOD, I suspect it is too early to say. It will be a while before I commit myself.

I only make claims I am reasonably confident have already been supported. Don't build me up into a prophet now.

[yesplease]

It's proof of the demand side of Export Land, until of course they switch over to NG. Since, like most trends, we can't say anything concrete about it until it's established itself as a trend, and clearly this specific example as a trend probably won't continue for much longer, by virtue of it's stated operation, it's viability as an example of this trend is suspect to say the least.

Like you linked, initial trends regarding gains in consumption may be indicative, but picking out a specific project that will only operate on oil for a couple years is definitely reaching. Why not state that people's cars breaking down is Demand Destruction In Action?

Micro instances do not macro behavior make! Unless of course we're appealing to d00m here on PO dot com... If SA's behavior regarding exports/consumption continue for a while based on the difference between 06/07 data, that's EL at work. But the vanishingly small use of some peaker stations that are slated to switch over to NG in a couple years? I don't thinks so...

P.S. Anything can look "exponential", especially if expressed as a collection of piecewise exponential functions, so don't fall into the herd mentality w/o looking at what you're saying first. It's unbecoming IMO.

[Twilight]

This is a single example, one of many that make up a trend already observed in EIA data. A single example does not of course make a trend, but many similar examples create one. This is one concrete example of such a component, which will make a contribution for a time even if not in perpetuity. And this is my only goal in this thread, not to preach doom, but to say in supplement of all of the people talking about Export Land in general terms - here is a name. It is a contribution, not a slam dunk. It is a supplement to the debate in something other than general terms. Anything else is what people want my position to be, not what it is, and I have no further wish to argue semantics.

[yesplease]

I think all the similar examples would have to be included in the trend, to make it the trend, as per EIA data. But, like I said before, it isn't proof of the demand side of Export Land, that would be trends as per the EIA data over a sufficient time period.

It is proof of the demand side of Export Land.

That being said, wth is up with posting in another thread about this, but not wanting to continue to debate it? Finicky much? Were you a cat in another life?

[Twilight]

Reuters: UPDATE 1-Iran halts fuel oil exports, stockpiles for winter

Relevant for the following details:

SINGAPORE, July 31 (Reuters) - Iran, a regular exporter of fuel oil to Asia, will halt shipments of the heavy fuel from August as it builds domestic stocks ahead of winter, and due to a heavy fourth-quarter maintenance season, industry sources said on Thursday.

Iran has been shipping out about 1.2 million tonnes of the residual fuel monthly since April. Rising domestic consumption and a lack of gas alternatives had also forced it to reduce exports over the past two winters.

"This is true, we will be concentrating on building up stocks for use at our power stations," a source familiar with the fuel oil export programme said.

Iran's decision came on the heels of Saudi Arabia's move to not resume spot fuel oil exports after its peak summer demand season, due to persistently strong requirements from domestic power plants and new secondary refining units.

Robust economic growth in Middle East oil-producing nations has spurred industrial demand for utility fuels, as power usage across the Gulf Cooperation Council (GCC) grows at an annual rate of around 8 percent.

Gas projects have also failed to keep pace with demand for power generation. Apart from Qatar, all Gulf states are short of gas.

EDIT: This presentation may be of interest. Pages 13 and 14 have particular bearing.