RGGI auctions under way

The Regional Greenhouse Gas Initiative (RGGI) is a group of 10 northeastern US states conducting a series of carbon auctions. During 2008, RGGI conducted two auctions. The goal is to provide a model for an eventual national cap and trade program.

Peter Iwanowicz, director of New York's Office of Climate Change, told the Associated Press that RGGI might merge with the Western Climate Initiative being developed by seven western states, including California. Four Canadian provinces also are part of the Western Climate Initiative.

RGGI members are New York, Connecticut, Deleware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Rhode Island, and Vermont. The program covers total carbon dioxide emissions allowed from power plants in the RGGI region.

Participants of these auctions will help to determine a carbon price. So far, auction participants have been power generating companies although the auctions are open to others.

Former BP executive joining alternative energy company

Sapphire Energy recently attracted a former BP PLC executive to its ranks. Cynthia J. Warner plans to become president of Sapphire energy, effective Feb. 1, 2009.

She is leaving her job as BP’s group vice-president of global refining to join Sapphire, a San Diego, Calif., company working on using sunlight, carbon dioxide, and micro organisms, such as algae, to produce renewable fuel products.

“Pioneering a new energy frontier for the next industrial era is the best way I can image to make a positive impact as a leader,” Warner said in a recent Sapphire Energy news release.

It would be interesting to know how many industry veterans have left the ranks of oil companies to join alternative energy companies. I don't have any statistics but I know that Warner is not the first one.

She also is not alone in putting confidence in the future of alternative energy despite the ailing US stock market and worldwide oil price volatility.

“Simply put, when energy is out of favor, alternative energy is almost always even more out of favor,” said Raymond James & Associates Inc. analysts in the Houston office. “To acknowledge the obvious: 2008 was a dreadful period for alternative energy stocks, with the solar space especially hart hit.”

Assuming oil prices recover in 2009, RJA analysts believe alternative energy is well-positioned for a rebound “albeit without the sense of market exuberance that was visible 12-18 months ago.”

Chinese vs. US gasoline consumption

When it comes to anticipated oil demand, Amy Myers Jaffe of Rice University’s James Baker Institute for Public Policy likes to point out what she calls a big myth.

The myth is the notion that China has replaced the US as a driving force in world gasoline consumption, Jaffe says. The US has 250 million vehicles compared with China’s 13 million vehicles on the road, she said, citing statistics from various agencies.

Gasoline use contributes about a third of all emissions stemming from fossil fuel combustion, she said.

“A vast pent-up demand for automobiles and electricity exists in the developing world,” said Jaffe. One of the biggest questions is the potential fuel efficiency of future automobiles. Climate and energy security policy are expected to focus heavily on automobile efficiency.

“Most forecasts indicate that future growth in global oil demand will come almost entirely in the transportation sector,” Jaffe said. “Technology and policy, therefore, will be vital to determining the pace of oil demand growth.”

Emerging policy is apt to get complex. California developed a very detailed Low Carbon Standard aimed at driving innovations in vehicle efficiency and alternative transportation fuel.

Jaffe spent three hours discussing the California Low Carbon Standard with someone who was very familiar with it. Everything could not be covered in that period, she said. California hopes that its standard could serve as a model for US national policy.

Babyboomers apt to delay retirement

Although it's cynical, one possible bright side to the economic downturn might be that babyboomers working in the oil and gas industry now will wait longer to retire because their retirement funds lost money in the past year.

Adam E. Sieminski, chief energy economist for Deutsche Bank, jokingly raised this point during the Deloitte energy conference on Dec. 10 in The Woodlands, north of Houston.

“The crew change problem has been solved,” Sieminski said with a laugh, referring to long-standing industry concerns about how to replace numerous skilled workers who are nearing retirement age.

“My 401k is now a 201k,” Sieminski said. “My hopes of early retirement to go trout fishing have been dashed.”

As I visited with him after his speech, Sieminski told me that he actually is fairly optimistic about long-term energy fundamentals. He believes energy will help lead the way out of the recession. On the bright side, he notes that lower retail gasoline prices help boost consumer spending.

Can nanosensors boost oil production?

Oil companies and service companies are helping finance a research consortium promoting nanotechnology. The consortium hopes that subsurface nanosensors can coax more oil and gas out of conventional reservoirs.

The Advanced Energy Consortium says it “seeks to build a vital and economical hydrocarbon bridge while renewable energy resources are being developed.” AEC seeks to use nanosensors to characterize reservoir rock formations.

The medical industry already uses nanotechnology—engineering on the level of atoms and molecules. Paul Ching, AEC executive director, said most major oil companies are researching nanotechnology.

AEC members include BP America Inc., Baker Hughes Inc., ConocoPhillips, Halliburton Energy Services Inc., Marathon Oil Corp., Occidental Oil & Gas Corp., Schlumberger Ltd., Royal Dutch Shell PLC, and Total SA. The Bureau of Economic Geology at the University of Texas manages AEC. Rice University is a collaborating technical partner.

Separate from AEC, ConocoPhillips announced a 3-year nanotechnology program with the University of Kansas to research and test new technologies for enhanced oil recovery.

Stephen Brand, ConocoPhillips senior vice-president of technology, said the inclusion of nanoparticles might yield more efficient, environmentally sensitive EOR technologies.