A U.S. government-backed Silicon Valley company says it has reached a key milestone that will much-reduce the cost of producing lithium-ion batteries, whose high pricetag has been the primary hurdle making electrified cars prohibitively expensive. Envia Systems, whose shareholders include General Motors, said its improvement allows an electrified vehicle to travel for 300 miles at half the cost for the battery pack. If proven on a commercial scale, the advance could bring the price of electric and plug-in hybrid vehicles much closer to a par with pure gasoline-driven models.
There are almost weekly claims by private and university scientists to have broken through key technical hurdles preventing the commercialization of electric cars, but Envia CEO Atul Kapadia told the New York Times' Jim Motavalli that the improvement is different. "What we have are not demonstrations, not experiments, but actual products. We could be in automotive production in a year and a half," Kapadia said.
The technology is built from a breakthrough made at Argonne National Laboratory, which licensed the advance to Envia in 2008. Envia also received a $4 million grant from ARPA-E, the radical energy research laboratory at the U.S. Energy Department. GM invested an additional $7 million in the Newark, Ca.-based company. (Envia posted some of its lab data here).
The advance is in energy density -- the number of watt-hours per kilogram of kilogram of battery material. Envia says its battery cells deliver 400 watt-hours per kilogram, or more than twice the best performance currently on the market. Kapadia called the 400-watt-hour level "the holy grail of electric cars," writes Sarah Mitroff at VentureBeat. If GM could commercialize the development somewhere on the scale that Envia describes, it could make the $41,000 Volt much more affordable, writes Mitroff.
Envia's lower cost battery will give GM the chance to lower the cost of the Volt, making it more available to the general car buying public. In addition, other car companies could use the technology to create economically viable cars that could compete with gasoline-powered economy models.
Envia's announcement comes against a black eye suffered by the Energy Department for its investment in Solyndra, a solar panel company that has filed bankruptcy. To the degree the technology is proven out, it could be a public-relations boon for Arpa-E.
Oil prices are going through the roof. As usual, we have actors tamping them down, and others pushing them up. All of it links with Iran, meaning there is no visible terminus.
On the tamping-down team, Saudi Arabia has raised exports to 9 million barrels a day -- a 1.5 million-barrel-a-day hike -- to help curb an Iran-driven panic that has kept prices well over $100 a barrel, write Reuters' Jeff Mason and Matthew Robinson. U.S. Treasury Secretary Tim Geithner says the Obama Administration is keeping open the option of providing a jolt of oil to the U.S. market through the Strategic Petroleum Reserve, as it did last year during the Libyan oil crisis. And the U.S. military is putting plans into motion to secure the Strait of Hormuz -- the channel for some 17 percent of the world's daily oil supply -- according to the Wall Street Journal's Adam Entous and Julian Barnes.
Ordinarily, the Saudi move should help. That it hasn't suggests the virulence of the virus it is attacking. Injections of strategic reserves should have little if any impact, since oil prices react to the ability to produce from newly available oil wells -- so-called spare capacity -- and not to sell already-produced oil whose existence is long recognized by the market. As for military preparedness -- that could play a role in the event the Strait is actually closed, but otherwise is no more than grist for barroom discussion.
Meanwhile, the market is putty to the provocateurs, among whose culprits we include the ratcheting up of a Western-led campaign to choke off Iran's oil export earnings, which were $100 billion last year; Iran's own politically minded bellicosity less than a week before hard-fought March 2 parliamentary elections; and general edginess linked to the Arab Spring.
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The news on the axis of oil -- Africa and South America: A key new travel route for oil executives is the south Atlantic shuttle between the west coast of Africa and the east coast of South America. This is because, geologically speaking, they are "anologues" -- millions of years ago, the two continents were united, so that when oil is found on the coast of one, it can also be found on the coast of the other. Take this week for example. Houston-based EnerGulf Resources announced that it is drilling a supergiant 3.1 billion-barrel oilfield off the coast of Namibia, Bloomberg reports. Meanwhile, across the Atlantic in northern Brazil, BP took a 40 percent stake in an offshore area held by Petrobras for an undisclosed sum of money; for BP, that is on top of a $3.2 billion investment in Brazil last year. On the South America side, this area is called the "equatorial margin," which includes northeastern Brazil, French Guiana, Guyana and Suriname, write Bloomberg's Peter Millard and Rodrigo Orihuela. Companies working the equatorial margin have conviction that they can find oil straight across the sea in Africa as well. The Bloomberg writers quote Bob Fryklund of IHS CERA, a Massachusetts-based energy research firm: "It's one of the hottest trends in the business at the moment. People are marching up and down the coasts to figure out where those fan-shaped deposits are."
Yet the African continent can be perilous, as Chinese companies have discovered. South Sudan has expelled the head of the Chinese-Malaysian partnership conducting most of the country's oil production, reports the Associated Press. Liu Yingcai, chief of Petrodar (81 percent owned by the China National Petroleum Company and Malaysia's Petronas), was given 72 hours to leave after being accused of helping Sudan to steal South Sudan's oil. The alleged theft of more than 2 million of barrels underlies a ferocious row between the two neighbors. South Sudan asserts that Petrodar helped Sudan to build a dogleg pipeline that aided the alleged oil theft. It is the second recent drama involving the Chinese -- last month, 29 Chinese workers in South Sudan were abducted and held for 10 days by rebel forces. Yet, for the reasons stated above, the stakes are too high to leave. China relies on Africa as a whole for 24 percent of its oil imports, writes Reuters' David Stanway, and is not likely to pull back.
For Putin, the price of oil goes up: Russian strongman Vladimir Putin is waging a furious contest for a third term as president. His opponent? Enemies abroad (mainly Americans) who, he suggests, covet Russia's oil, corrupt its citizens into traitorous behavior, and all in all wish harm to the country. To buttress his fiery defense of Russia against a potential new invasion such as Napoleon's of 1812 (yes Putin really cited the French dictator), Putin is promising to dispense billions of dollars -- for higher pay for police and doctors, for cheaper health care, and for a stronger military. The spending, and the sharp-edged confidence behind Putin's politics, both flow from the spigot of Russia's prodigious oil exports, writes the Financial Times' Charles Clover. Many of the world's petro-rulers have become bolder with the rise of oil prices, and more profligate with the revenue given the challenges of the Arab Spring. In Putin's case, it is less than two weeks before a March 4 election that has ignited unprecedented criticism of his rule. That he has resorted to populist spending places enormous demands on Russia's oil income. The state budget already required an estimated $90-a-barrel oil to break even. Now the break-even price could be $120 a barrel, Clover writes. He quotes former deputy energy minister Vladimir Milov: "For Putin to have serious room for maneuver, he needs to have oil at $150 or $200 per barrel. What we have now is not enough." Finances are just one indication of a coming post-election Russian hangover. Putin's jingoism does not seem to be mere electoral politics -- with opponents now able to muster tens of thousands of supporters in the street, Putin will continue to need a bogeyman in order to rule effectively. Look for reset -- the thaw between the U.S. and Russia of the last three years -- to stay stubbornly on the back burner.
Go to the Jump for more of the Wrap.
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If Venezuelan President Hugo Chavez is forced to drop his bid for re-election for health reasons, will the primary repercussion for the West be the exit of a voluble thorn in the side? Perhaps, but it will also mean the prospect of yet more newly available oil reserves -- on top of the widely projected U.S. shale oil bonanza. The takeaway: If the shale oil projections are accurate, and Chavez leaves politics under whatever scenario, we have the prospect of a geopolitical shakeup analogous to what has accompanied the rise of shale gas.
Venezuela has the largest proven oil reserves on the planet -- 296 billion barrels, according to OPEC figures. The number is slightly misleading: Saudi Arabia's 264 billion barrels are higher quality and cheaper to produce than the extremely heavy crude of Venezuela's Orinoco Basin; yet Venezuela's reserves are so massive that such details almost don't matter.
The trouble has been that, since Chavez took power 13 years ago, Venezuela's oil production has fallen to 3 million barrels a day, 16 percent less than the 3.5 million barrels a day it produced in the 1990s. This has resulted from Chavez forcing out key members of the skilled labor force and management of the state oil company, known as PDVSA, and his marginalizing of the other source of oil patch expertise -- foreign oil companies such as Chevron and Shell.
Yesterday however, Chavez said his cancer may have recurred, reports the Associated Press -- he must go to Cuba for further treatment and scale back his frenetic pace. That bodes ominous for his attempt to hold back a groundswell of apparent support for Henrique Capriles (pictured above), his 39-year-old opponent in October elections. What distinguishes Venezuela from some other petro-states -- Russia, Kazakhstan, Azerbaijan and Iran among them -- is that power can actually change hands through the ballot box. So even though polls show Chavez with sustained popularity, he still must win. Capriles already was a serious challenger, and now he is more so.
Capriles has already said that, if elected, he will boost oil production. He also has suggested that foreign expertise will be permitted back into the country.
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Is Iran too cheap to haggle? Over the last week, we have observed the following out of Tehran: a halt of oil sales to the U.K. and France; threats against the West and its neighbors; and alleged bombings and bombing attempts in Georgia, India and Thailand. All of this has flowed out of Western-led efforts to choke off revenue from Iran's 2.5 million barrels a day of crude oil exports that last year totaled about $100 billion.
As a result, oil traders bid up oil prices early today to a nine-month high for both the benchmark U.S. and European blends. They are betting on the prospect of fighting, primarily the possibility of an Israeli strike, and a violent and unpredictable chain reaction.
Will Iran offer up serious concessions to nuclear inspectors from the International Atomic Energy Agency, who are currently in Tehran (pictured above, street scene in Tehran on Sunday)? If the record is an indication, Iran will stall. Meanwhile there is the danger of a miscalculation that, because of the U.S. presidential campaign, could force President Barack Obama -- despite his preference to press on sanctions -- to carry out a military attack. That's according to Karim Sadjadpour, an Iran export at the Carnegie Endowment who spoke with National Public Radio from Washington, D.C. Sadjadpour said:
According to the law of averages, if Iran continues to aspire to commit these acts of terror, at some point they're going to be successful. They are going to hit their target, and if they hit either a major American target abroad or they strike on American soil, I think it's going to be difficult for President Obama, in an election year, not to respond.
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The war of tight oil: Are we in an age of oil plenty, or a stubborn era of scarcity? The folks with skin in the game are among those who cannot agree. At Citigroup, Seth Kleinman leads a group of analysts (including the venerable Ed Morse) who issued a note to clients this week declaring "the death of the peak oil hypothesis," a belief that there is a limit to how much oil can be produced. The actor in this murder is shale oil, the sister to shale gas, which is being unleashed from hard underground shale through the application of hydraulic fracturing. "The U.S. appears to be on course, after many weak starts, to achieve energy independence this decade," Kleinman writes. In a shot over the bow of doubters, the Citi team snickers at those who cannot notice the truth before their eyes: "We expect industry expectations to lag behind reality, just as they did with shale gas for many years." They go on to tally up how they see the new oil patch:
U.S. crude and product imports are now about 11 million barrels a day, with about 3 million barrels a day of product exports. This leaves import reliance at 8 million barrels a day. If shale oil grows by 2 million barrels a day, which we think is conservative, and California adds its 1 million barrels a day to the Gulf of Mexico's 2 million barrels a day, we reduce import reliance to 3 million barrels a day. Canadian production is expected to rise by 1.6 million barrels a day by 2020, and much of this will effectively be stranded in North America, and there is the potential to cut demand both through conservation and a shift in transportation demand to natural gas by at least 1 million barrels a day and by some calculations by 2 million barrels a day.
Voila, U.S. energy independence.
Not so fast, say the analysts at Barclays Capital, who issued their own, nearly simultaneous note to clients saying the opposite. The note, by Paul Horsnell and Amrita Sen, suggests that Barclays' clientele guard against "the near-euphoria surrounding the potential of oil shales in the U.S., together with a natural bias in the market to be overly optimistic on oil supplies." The oil market is extremely tight, made the more so by political upheaval, says the Barclays team. They write:
While posing some stirring prospects following almost a decade of dismal performance by non-OPEC supply, oil shales alone are simply not enough to offset the decline in other parts of non-OPEC and meet all the incremental demand growth. The scale of growth in U.S. output really needs to be put into perspective. North Dakota still only produces 0.5 million barrels a day, which in a weak year, incremental Chinese oil demand alone can consume all of and more. Does shale oil help the U.S. reduce its dependence on foreign oil? Yes, it does. But does it remake the U.S. into the next Saudi Arabia? No, at least not yet.
There you have it.
Go to the Jump for more of the Wrap.
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Consider the latest news from the Middle East and North Africa, and one grasps why many U.S. oil and geopolitical analysts are cheering what they see as a prospect that the country will seriously trim its oil imports.
At the Financial Times, Javier Blas describes a drop in Saudi Arabia's pivotal capacity for bailing out the global oil market in a pinch, quoting a new report by the International Energy Agency; the IEA says natural oil field decline has eroded Saudi's spare production capacity. Nearby in Iran, the standoff with the West has resulted in a 15 percent risk premium on top of market oil prices, writes Bloomberg's Ayesha Daya; traders worry of a loss of much oil to the market should the tension escalate.
Meanwhile in Iraq, oil giant ExxonMobil -- hard-pressed like the rest of the industry to find new reserves -- has been barred from a new round of presumably world-class oil leases, reports the Wall Street Journal's Hassan Hafidh; Exxon is subject to this punishment for signing an independent oil deal with the northern Iraqi region of Kurdistan, with which Baghdad is in a long spat over revenue sharing.
And in Northern Africa, Sudan has reportedly seized another 2.4 million barrels of oil from South Sudan, which continued a two-week-old halt to its 350,000-barrels-a-day of oil exports, writes Reuters, and an outbreak of fighting between the neighbors seems possible.
Against this exceptional Middle East turmoil -- events with reverberations around the world -- Lou Pugliaresi of the Washington-based Energy Policy Research Foundation tells me that in just five years, U.S. oil imports by sea are likely to fall to 4 million barrels a day, or less than half today's level (see slide eight). Pugliaresi credits a rise in oil production from far more predictable places -- a 1.5 million-barrel increase in U.S. unconventional oil production (oil shale and tight oil from North Dakota, Texas and elsewhere), plus more oil sands imports from Canada.
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Shale gas fever has overtaken America, but we have seen this sort of mania before.
In 2003 and 2004, a "hydrogen economy" was touted as the Next Big Thing. The United States was poised to run its 240 million cars and trucks on it some day, and wean itself off of oil. California would lead the way, putting half a million hydrogen vehicles on the road and building 200 fueling stations by 2010. Today, after the expenditure of around $2 billion of public funds, the U.S. has just two-dozen fueling stations and 500 hydrogen vehicles, plus only modest progress in fuels cells. There is no longer mainstream discussion of a hydrogen economy.
Then Americans became drunk on ethanol. More than $20 billion in subsidies was spent over a three-decade period ending Dec. 31 that ultimately turned nearly 40 percent of the U.S. corn crop into less than 10 percent of the country's fuel needs by volume, and less than 7 percent by energy content. In 2009, the U.S. taxpayer subsidized 75 percent of the price of each gallon of gasoline replaced with ethanol.
Now the U.S. has gone batty for natural gas. President Barack Obama and key members of Congress have cited a humongous estimate for the natural gas supply supposedly possessed by the United States -- nearly 2,200 trillion cubic feet of the fuel, the equivalent of 379 billion barrels of oil, which if accurate would exceed the crude oil reserves of Saudi Arabia, and satisfy U.S. gas demand at current levels for around a century. Only, that widely published figure represents what are called "possible" reserves, not the more certain categories known as "proved" and "probable" -- gas that is more likely to be producible under current technological and market conditions. When discussing proved reserves, the U.S. Energy Information Administration says the U.S. possesses just one-twelfth of that volume, or 273 trillion cubic feet of gas, the equivalent of 47 billion barrels of oil. That is still a lot but, at the country's 2010 rate of consumption of 24 trillion cubic feet a year, it's just an 11-year supply. Even if we assume a very optimistic 50 percent recovery factor for the estimated 550 trillion cubic feet of probable gas, we would still have just a 31-year supply.
A lack of good data, in addition to an apparent bias toward optimistic data, underlies this perception gap. Consider a new, well-by-well analysis by Houston-based petroleum geologist Arthur Berman. Berman, a long-time doubter of mainstream gas estimates, writes that, contrary to popular belief, gas production is not growing under current conditions; instead, 80 percent of the country's shale gas production (pictured above, shale gas operation in Springville, Pa.) has flattened out or declined over the past year. Total U.S. gas production has been on an "undulating plateau" since the beginning of 2009, Berman says, as new shale gas output struggles to compensate for a 32 percent-per-year decline in conventional gas production. This picture is missing from the EIA's data because the U.S. agency bases its reporting on shale gas data only for 2008 and 2009, and does not do well-by-well sampling.
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Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.