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[Due to the increasing size of the archives, each topic page now contains only the prior 365 days of content. Access to older stories is now solely through the Monthly Archive pages or the site search function.]

Wall Street Losing Millions From Bad Energy Loans

March 24, 2015

by Nick Cunningham of Oilprice.com

Oil companies continue to get burned by low oil prices, but the pain is bleeding over into the financial industry. Major banks are suffering huge losses from both directly backing some struggling oil companies, but also from buying high-yield debt that is now going sour.

The Wall Street Journal reported that tens of millions of dollars have gone up in smoke on loans made to the energy industry by Citigroup, Goldman Sachs, and UBS. Loans issued to oil and gas companies have looked increasingly unappetizing, making it difficult for the banks to sell them on the market.

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BLM issues final rule for fracking on public lands; new rule on deepsea blowout preventers coming

March 22, 2015

The US Department of the Interior Bureau of Land Management (BLM) has released final rule covering hydraulic fracturing on public and American Indian lands. As of 30 June 2014, there were approximately 47,000 active oil and gas leases on public lands, and approximately 95,000 oil and gas wells. Of wells currently being drilled, more than 90% use hydraulic fracturing. This final rule will supplement the existing requirements, which will remain in place. The rule applies only to development on public and tribal lands—which represent about 25% of US unconventional oil and gas—and includes a process so that states and tribes may request variances from provisions for which they have an equal or more protective regulation in place.

The Department will also propose a rule in the coming weeks that raises the bar on blowout preventers for offshore wells and well control measures based on technological progress advanced by industry, said Secretary of the Interior Sally Jewell during her remarks at the Center for Strategic and International Studies (CSIS) several days prior to the release of the fracking rule. Other reforms will also include important measures to target where oil and gas leasing occurs and protect sensitive areas that are too special to drill.

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Texas: From Shale Boom to Water Revolution

March 18, 2015

by James Stafford of Oilprice.com

Texas is famous the world over for two things on a massive scale: oil and droughts. Now the slick but dry state is becoming famous for water: that precious element that both resolves the drought problem and also makes it possible to pump more oil out of the ground.

Not only does Texas have the Permian Basin and the Eagle Ford shale, but it also has the Gulf of Mexico and its massive oil deposits and endless gallons of seawater that are now economically treatable thanks to next generation water processing technology.

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Opinion: Consumers winning with low oil prices, for now

March 13, 2015

by Thomas Miller for Oilprice.com

Lest we be too quick to forget whence we came, America is now 9-months into lower gasoline prices, which started their swoon the week of June 30, 2015 from a lofty national average just under $3.70, tumbling almost every subsequent week before bottoming and bouncing from $2.02 the end of January, according to gasbuddy.com.

It is estimated that for every penny gas goes down, consumers collectively save $1 billion. Therefore, the 2014/2015 drop has accounted for at least $50 billion in your pocket and mine. Well, maybe a little less than that in each of our pockets, but the national average is about $500 bucks per family. The question begs then, has that money shown up in other parts of the economy?

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Opinion: Everyone Is Guessing When It Comes To Oil Prices

March 11, 2015

by Nick Cunningham of Oilprice.com

Predicting and diagnosing the trajectory of oil prices has become something of a cottage industry in the past year. But along with all of the excess crude flowing from the oil patch, there is also an abundance of market indicators that while important, tend to produce a lot of noise that makes any accurate estimate nearly impossible.

First there is the oil price itself. The crash began last summer, and accelerated in November. Since then, predictions for oil prices for 2015 have been all over the map— from Citigroup’s $20 per barrel, to T. Boone Pickens’ prediction of a return to $100 per barrel. OPEC’s Secretary-General even said prices could shoot up to $200 in the coming years as a result of overly drastic cutbacks and a failure to invest in new production. With those estimates at the extremes, most analysts think prices will continue to seesaw within a rough band of $40 to $70 for the rest of the year. Still that is quite a large range, highlighting the fact that everyone is merely guessing.

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Opinion: Here’s what will send oil prices back up again

March 05, 2015

by Martin Tillier of Oilprice.com

Oil’s rapid decline since August of last year has been dramatic. To listen to some commentators you would also think it is unprecedented and irreversible. Those claiming that oil will continue to fall from here and remain low for evermore, however, are flying in the face of both history and common sense. The question we should be asking ourselves is not if oil prices will recover, but when they will.

From June of 2014 until now, the price of a barrel of West Texas Intermediate (WTI) crude oil has fallen approximately 57 percent. As the chart below shows, there have been drops of a similar percentage five times in the last 30 years. The rate of recovery has been different each time, but recovery has come. In addition, since 1999 the chart shows a consistent pattern of higher lows. In other words, oil is a volatile market, but prices are in a long term upward trend.

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Opinion: Why oil prices must go up

February 19, 2015

by Nick Cunningham for Oilprice.com

It may be difficult to look beyond the current pricing environment for oil, but the depletion of low-cost reserves and the increasing inability to find major new discoveries ensures a future of expensive oil.

While analyzing the short-term trajectory of oil prices is certainly important, it obscures the fact that over the long-term, oil exploration companies may struggle to bring new sources of supply online. Ed Crooks over at the FT persuasively summarizes the predicament. Crooks says that 2014 is shaping up to be the worst year in the last six decades in terms of new oil discoveries (based on preliminary data).

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Arctic oil on life support

February 03, 2015

by Nick Cunningham for Oilprice.com

Oil companies have eyed the Arctic for years. With an estimated 90 billion barrels of oil lying north of the Arctic Circle, the circumpolar north is arguably the last corner of the globe that is still almost entirely unexplored.

As drilling technology advances, conventional oil reserves become harder to find, and climate change contributes to melting sea ice, the Arctic has moved up on the list of priorities in oil company board rooms. That had companies moving north: Royal Dutch Shell off the coast of Alaska; Statoil in the Norwegian Arctic; and ExxonMobil in conjunction with Russia’s Rosneft in the Russian far north.

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Chevron, BP and ConocoPhillips partner to explore 24 leases in Paleogene trend in deepwater Gulf of Mexico

January 29, 2015

Chevron Corporation’s subsidiary, Chevron USA will now work with BP Exploration and Production Inc. (BP) and ConocoPhillips Company (COP) to explore and to appraise jointly-held offshore leases in the emerging Paleogene trend in the deepwater Gulf of Mexico.

The transaction encompasses BP’s recent Tiber and Gila discoveries, and the Gibson exploratory prospect. Chevron has acquired an interest in Tiber and Gila from BP. Chevron, BP and ConocoPhillips already held interests in the Gibson prospect. The scope of the collaboration between Chevron, BP and ConocoPhillips includes further exploration and appraisal of these leases as well as evaluating the potential of a centralized production facility, which would provide improved capital efficiency, similar to Chevron’s Jack/St. Malo project.

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Obama Administration recommends designating most of Arctic National Wildlife Refuge as Wilderness

January 26, 2015

On Sunday, the US Fish and Wildlife Service (FWS) released its revised proposed comprehensive conservation plan and final environmental impact statement (EIS) for the 19.64-million acre Arctic National Wildlife Refuge.

The FWS’ preferred alternative recommends an additional 12.28 million acres—including the Coastal Plain—for designation as “Wilderness”. (“Wilderness” (with a capital “W”) refers to designated Wilderness areas, with accompanying restrictions.) The FWS also recommends four rivers—the Atigun, Hulahula, Kongakut, and Marsh Fork Canning—for inclusion into the National Wild and Scenic Rivers System. Currently, more than 7 million acres of the refuge are managed as Wilderness. However, more than 60% of the refuge—including the Coastal Plain—does not carry that designation. Implementation of the preferred alternative would change that.

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Rice, Minnesota scientists use predictive modeling to identify optimized zeolites to aid ethanol, petroleum production

January 23, 2015

Scientists at Rice University and the University of Minnesota have identified, through a large-scale, multi-step computational screening process, promising zeolite structures for two energy-related applications: the purification of ​ethanol from fermentation broths and the hydroisomerization of alkanes with 18–30 carbon atoms encountered in petroleum refining.

The results, presented in a paper published in Nature Communications, demonstrate that predictive modeling of synthetic zeolites—a technique pioneered by Rice bioengineer Michael Deem—and data-driven science can be applied to solve some of the most challenging problems facing industries that require efficient ways to separate or catalyze materials.

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Opinion: Crushing the US energy export dream

January 22, 2015

by Arthur E. Berman for Oilprice.com

Exporting crude oil and natural gas from the United States are among the dumbest energy ideas of all time. Exporting gas is dumb. Exporting oil is dumber.

The US imports almost half of the crude oil that we use. We import 7.5 million barrels per day. The chart below shows the EIA prediction that production will slowly fall and imports will rise (AEO 2014) after 2016. This means that the US will never be self-sufficient in oil. Not even close.

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Oil price collapse hurting some more than others

January 21, 2015

by Nick Cunningham of Oilprice.com

US oil and gas rig counts dropped to their lowest level in over four years, falling by an additional 74 units for the week ending on January 16. The lower count provides fresh evidence that low oil prices are forcing drillers to pare back operations and slash spending.

While that may soon begin to cut into actual production figures, a new Wood Mackenzie report finds a lot of nuance in the oil patch, painting a complex picture of what to expect in 2015. The report identifies several trends beyond the simple narrative that low prices will force a cutback in drilling.

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Oil price tumbles after OPEC releases 2015 forecast

December 11, 2014

by Andy Tully of Oilprice.com

The demand for oil in 2015 will drop to its lowest level since 2002 because of an oversupply of crude and stagnant economies in China and Europe, according to OPEC’s latest forecast. And that’s just one of several sour estimates. OPEC’s monthly report said demand for the cartel’s oil will fall to 28.9 million barrels per day next year, 280,000 barrels lower than its previous forecast and the lowest in 12 years. Add to that a new report from the US government’s Energy Information Administration (EIA), which also cut its 2015 forecast for growth in global oil demand by 240,000 barrels per day, down to 880,000 barrels per day.

For 2014, the EIA expects demand will be about 960,000 barrels per day. And yet on Nov. 27, OPEC refused to lower its production levels below 30 million barrels a day, adding to the oil glut that started with the US boom in high-quality shale oil. As a result, the price of Brent crude has plunged more than 40 percent since June. Futures for US crude also are down dramatically.

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ExxonMobil: global GDP up ~140% by 2040, but energy demand ~35% due to efficiency; LDV energy demand to rise only slightly despite doubling parc

December 10, 2014

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As the world population increases by the estimated 30% from 2010 to 2040, ExxonMobil sees global GDP rising by about 140%, but energy demand by only about 35% due to greater efficiency. Click to enlarge.

Significant growth in the global middle class, expansion of emerging economies and an additional 2 billion people in the world will contribute to a 35% increase in energy demand by 2040, according to ExxonMobil’s latest Outlook for Energy report.

Even as demand increases, the world will continue to become more efficient in its energy use, according to the 2015 Outlook for Energy: A View to 2040. Without efficiency gains across economies worldwide, energy demand from 2010 to 2040 would be headed toward a 140% increase instead of the 35% forecast in the report.

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Commentary: Could falling oil prices spark a financial crisis?

December 05, 2014

by Nick Cunningham of Oilprice.com

The oil and gas boom in the United States was made possible by the extensive credit afforded to drillers. Not only has financing come from company shareholders and traditional banks, but hundreds of billions of dollars have also come from junk-bond investors looking for high returns. Junk-bond debt in energy has reached $210 billion, which is about 16 percent of the $1.3 trillion junk-bond market. That is a dramatic rise from just 4 percent that energy debt represented 10 years ago.

As is the nature of the junk-bond market, lots of money flowed to companies with much riskier drilling prospects than, say, the oil majors. Maybe drillers were venturing into an uncertain shale play; maybe they didn’t have a lot of cash on hand or were a small startup. Whatever the case may be, there is a reason that they couldn’t offer “investment grade” bonds. In order to tap the bond market, these companies had to pay a hefty interest rate.

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As excitement builds in the Montney Shale, companies seek more infrastructure

December 03, 2014

by James Stafford of Oilprice.com

What does it take to build up a new region for oil and gas development? Obviously, the resources have to be in place and economically recoverable. But it is not as easy as just sticking a drill into the ground and pumping out oil and gas.

Even with significant oil and gas reserves trapped in shale, a variety of factors need to come together to turn a given region into a significant producer. To begin with, there needs to be enough companies willing to take risks on major drilling projects. Next, there needs to be enough capital behind those companies to make projects viable. And once explorers find and prove commercial quantities of oil and gas, there needs to be infrastructure in place to move the energy to market.

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Follow the sand to the real fracking boom

November 26, 2014

by James Stafford of Oilprice.com

When it takes up to four million pounds of sand to frack a single well, it’s no wonder that demand is outpacing supply and frack sand producers are becoming the biggest behind-the-scenes beneficiaries of the American oil and gas boom. Demand is exploding for “frac sand”—a durable, high-purity quartz sand used to help produce petroleum fluids and prop up man-made fractures in shale rock formations through which oil and gas flows—turning this segment into the top driver of value in the shale revolution.

“One of the major players in Eagle Ford is saying they’re short 6 million tons of 100 mesh alone in 2014 and they don’t know where to get it. And that’s just one player,” Rasool Mohammad, President and CEO of Select Sands Corporation told Oilprice.com. Frack sand exponentially increases the return on investment for a well, and oil and gas companies are expected to use some 95 billion pounds of frack sand this year, up nearly 30% from 2013 and up 50% from forecasts made just last year.

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Iran negotiations, OPEC meeting loom for oil markets

November 21, 2014

by Nick Cunningham of Oilprice.com

As November draws to a close, there are two major events that could profoundly change the oil markets. With the clock ticking, the 5 permanent members of the UN Security Council plus Germany (P5 plus 1) are negotiating down to the wire with Iran over its nuclear program. The two sides have made substantial progress, but some difficult issues remain unresolved ahead of the November 24 deadline.

“We’re very keen to try to get to a deal, but not a deal at any price,” UK Foreign Secretary Philip Hammond said on November 17. “There will have to be very significant further movement by the Iranians if we’re going to be able to get to a deal.”

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IEA says oil supplies may not keep up with demand

November 15, 2014

by Nick Cunningham of Oilprice.com

Despite what appears to be a saturated oil market in 2014, oil producers around the world will struggle to meet rising demand over the next few decades. In its latest annual World Energy Outlook, the International Energy Agency (IEA) warned that the current period of oil abundance may be fleeting, and in fact, without heroic levels of production increases, oil markets will grow dangerously tight in the coming years.

Global oil demand is expected to increase by 37 percent by 2040, with a dominant proportion of that coming from developing countries—i.e. China and India. In fact, the IEA says that for every barrel of oil the industrialized world expects to eliminate from demand through efficiency or other ways of reducing demand, developing countries will burn through two additional barrels.

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With oil prices low, early signs of a pullback in drilling activity

November 14, 2014

by Nick Cunningham of Oilprice.com

With oil prices low and showing no sign of an immediate rebound, the industry is beginning to pull back on spending.

Oil prices have dropped around 30 percent since summer highs, raising fears among producers across the globe. Yet, many oil majors are relatively diversified, with large holdings downstream. For example, ExxonMobil and Chevron have been insulated in the third quarter because of their large holdings in refining. Steep declines in oil prices may hurt their production sectors, but with lower priced oil as an input, big oil’s refining assets become more profitable.

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Ecofys report concludes current European regulations underestimating GHG reductions

November 13, 2014

Substituting biofuels for marginal fossil-based liquid fuels results in the avoidance of significant GHG emissions that are not currently accounted for in the European Renewable Energy Directive (2009/28/EC), according to a new analysis by the consultancy Ecofys. The study was commissioned by the European Oilseed Alliance (EOA), the European Biodiesel Board (EBB) and the European Vegetable Oil and Proteinmeal Industry (FEDIOL).

The European RED and the Fuel Quality Directive (2009/30/EC) both assess the GHG benefits of biofuels by comparing the lifecycle emissions of biofuels to a “fossil comparator”. However, the Ecofys authors note, the current comparator does not reflect the increasing emissions of fossil fuels that are becoming more difficult to extract. In addition, they argue, biofuels should not just be compared to the average performance of gasoline or diesel but with the fossil fuels they most likely replace—i.e. those that are marginally “not produced”.

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The driving force behind the US oil boom

November 07, 2014

by James Stafford of Oilprice.com

The shale revolution’s sweet spot is oilfield services, the lower-risk backbone of the American oil and gas boom that pays off regardless of a play’s economics. Behind the stardom of the explorers and producers who have put themselves on the revolutionary shale map and absorb most of the risk are the service providers who make up a highly lucrative market segment.

The US land-based rig count rose 3% over the last quarter, reaching a two-year high of 1,870 active rigs. A major factor in this growth has been an uptick in horizontal drilling in the Permian Basin, Texas’ revived giant, where the rig count was up 21% year-on-year. And while oil prices slumped in October, drilling activity continues to rise, according to Baker Hughes, the third-largest oil services company. Baker Hughes’ rig count is up 3.8% in the fourth quarter of this year, compared to the third quarter.

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Opinion: The End Of An Era: Is The US Petrodollar Under Threat?

October 31, 2014

by Andrew Topf of Oilprice.com

Recent trade deals and high-level cooperation between Russia and China have set off alarm bells in the West as policymakers and oil and gas executives watch the balance of power in global energy markets shift to the East.

The reasons for the cozier relationship between the two giant powers are, of course, rooted in the Ukraine crisis and subsequent Western sanctions against Russia, combined with China’s need to secure long-term energy supplies. However, a consequence of closer economic ties between Russia and China could also mean the beginning of the end of dominance for the US dollar, and that could have a profound impact on energy markets.

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Low oil prices hurting some US shale operations; slumping oil prices putting pressure on drillers

October 23, 2014

by Nick Cunningham of Oilprice.com

The number of active rigs drilling for oil and gas fell by their most in two months, according to the latest data from oil services firm Baker Hughes. There were 19 oil rigs that were removed from operation as of Oct. 17, compared to the prior week. There are now 1,590 active oil rigs, the lowest level in six weeks.

“Unless there’s a significant reversal in oil prices, we’re going to see continued declines in the rig count, especially those drilling for oil,” James Williams, president of WTRG Economics, told Fuel Fix in an interview. “We could easily see the oil rig count down 100 by the end of the year, or more.” Baker Hughes CEO Martin Craighead predicted that US drilling companies could begin to seriously start removing rigs from operation if prices drop to around $75 per barrel. Some of the more expensive shale regions will not be profitable at current prices. For example, the pricey Tuscaloosa shale in Louisiana breaks even at about $92 per barrel. But that also reflects the high costs of starting up a nascent shale region.

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Topsøe researchers analyze hydrotreating catalyst at single-atom level; potential for more efficient catalysts for cleaner fuels

September 30, 2014

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Cover courtesy of S. Nygaard, Haldor Topsøe A/S. Click to enlarge.

Researchers from Haldor Topsøe A/S have analyzed an industrial-style MoS2-based hydrotreating catalyst at the single-atom level using electron microscopy. With this method, the sites of single cobalt atoms, which are responsible for promoting sulfur removal from oil distillates, are resolved. The study is published in the journal Angewandte Chemie.

Co-Mo-S is the active part in Haldor Topsøe’s series of TK catalysts; the cobalt serves as a promoter of the functional properties of the transition metal dichalcogenide (TMD) MoS2. The researchers obtained images—achieved following decades of attempts—disclosing detailed knowledge about the structure of the catalyst. The research could mean more efficient catalysts for oil refineries in the near future, promoting a cleaner environment and helping industry to deal with increasingly tight and more stringent environmental legislation.

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EIA projects world liquid fuels use to rise 38% by 2040, driven by growth in Asia and Middle East; transportation 92% of demand

September 10, 2014

Figure_3
Liquid fuels production (OPEC crude and lease condensate, non-OPEC crude and lease condensate, and other) and consumption (by OECD and non-OECD regions) under three price cases in 2040. Dashed red line shows 2010 consumption of 87 MMbbl/d. Source: EIA. Click to enlarge.

World petroleum and other liquid fuels consumption will increase 38% by 2040, spurred by increased demand in the developing Asia and Middle East, according to the Reference Case projections in International Energy Outlook 2014 (IEO2014), released by the US Energy Information Administration (EIA). Those two regions combined will account for 85% of the total increase in liquid fuels used worldwide over that period, said EIA Administrator Adam Sieminski.

IEO2014 projections of future liquids balances include two broad categories: crude and lease condensate and other liquid fuels. Crude and lease condensate includes tight oil, shale oil, extra-heavy crude oil, field condensate, and bitumen (i.e., oil sands, either diluted or upgraded). Other liquids refer to natural gas plant liquids (NGPL), biofuels (including biomass-to-liquids [BTL]), gas-to-liquids (GTL), coal-to-liquids (CTL), kerogen (i.e., oil shale), and refinery gain.

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Soros signals Argentina’s shale is biggest place to be; doubles stake in YPF SA

September 04, 2014

by James Stafford of Oilprice.com

One of the world’s legendary investors is upping his bet on Argentina’s shale oil and gas industry in a show of confidence for shale production in South America’s largest unconventional prize—and a big boost for both supermajors and smaller players making big waves in the heart of new discovery areas.

George Soros has doubled his stake in YPF SA, the state-owned oil company in Argentina, which sits atop some of the world’s largest shale oil and gas resources, and is about to get even larger following a new discovery over the last couple of weeks of a second key shale play.

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DOE to award $9M to promote consensus on future fossil energy technologies

July 20, 2014

The US Department of Energy’s (DOE) Office of Fossil Energy will award $9 million over five years to organizations to assist it in building domestic and international consensus on future fossil energy technologies (DE-FOA-0001111). The Funding Opportunity Announcement (FOA) anticipates two awards being made: the first for $7 million in the area of Carbon Capture and Storage (CCS) and fossil-fuel-based Clean Energy Systems (CES); the second for $2 million in the area of international oil and natural gas.

One of the key missions of the Office of Fossil Energy is to “ensure the nation can continue to rely on traditional resources for clean, secure and affordable energy while enhancing environmental protection.” In pursuit of this, the Office provides outreach and education to many stakeholders, including the general public, in order to allow them to make educated choices about energy.

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DOE releases report on water-energy nexus

June 19, 2014

The US Department of Energy (DOE) released a new report that frames an integrated challenge and opportunity space around the water-energy nexus for DOE and its partners and lays the foundation for future efforts.

Present day water and energy systems are tightly intertwined. Water is used in all phases of energy production and electricity generation. Energy is required to extract, convey, and deliver water of appropriate quality for diverse human uses. Recent developments have focused national attention on these connections.

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EIA: China promoting both fuel efficiency and alternative-fuel vehicles to curb growing oil use

May 13, 2014

Consumption of gasoline in China grew from 0.9 million barrels per day (bbl/d) in 2003 to more than 2 million bbl/d in 2013, according to figures from the US Energy Information Administration (EIA). This continues a trend of significant growth in China’s transportation sector since the 1990s.

Increasing oil demand is requiring increasing imports; since 2009, China has been importing more than half of its petroleum needs. To counter this trend triggered by China’s rapid motorization, the Chinese government is adopting a broad range of policies, including improvements in the fuel economy of new vehicles and the promotion of alternative-fuel vehicles, EIA notes.

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DOE issues request for information for Grand Challenges in Subsurface Engineering

May 11, 2014

The US Department of Energy (DOE) has issued a request for information for Grand Challenges in Subsurface Engineering (DE-FOA-0001135). The purpose of the RFI is to gather information from industry, academia, national laboratories, and other federal agency stakeholders on critical subsurface knowledge and/or technology gaps that, if filled, will enable significant improvements in the understanding of the character and behavior of the subsurface environment and improve the ability to access, predict, manipulate and monitor the subsurface. Responses to this RFI are due no later than 8:00 PM ET on 23 May 2014.

Background. Subsurface reservoirs account for more than 80% of US primary energy, and also offer potential for the storage of energy, CO2, and nuclear waste. Despite decades of development, DOE notes, current technologies do not allow full utilization of subsurface energy resources; for example, only ~10 to 40% of the oil and gas is recovered from shale and conventional reservoirs, respectively.

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DOE to award up to $35M for environmentally-prudent unconventional resource development

May 04, 2014

The US Department of Energy (DOE) has issued a funding opportunity announcement (DE-FOA-0001076) for projects in Fiscal Year 2014 (FY2014) that focus on improving the environmental performance of unconventional oil and natural gas (UOG)—i.e., shale gas, tight oil, and tight gas—resource development. DOE expects approximately $25-35 million to be available for new awards under the FOA.

While in-place, unconventional resources are substantial, recovery efficiencies are commonly low in these reservoirs. Current industry practice includes decreasing well and frac stage spacing to increase overall recovery. The objective of the new FOA is to address critical gaps of knowledge of the characterization, basic subsurface science, and completion/stimulation strategies of tight oil, tight gas, and shale gas resources to enable more efficient resource recovery from fewer and less environmentally impactful wells.

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