Thursday, April 10, 2014

Romania may have no choice but fracking, says Romanian oil industry think tank

Romania may not have any choice but to allow hydraulic fracturing (fracturare hidraulice), according to a report by the Romania Energy Center.  We've been studying Romania's situation over natural gas, and proposals to frack that country's shale deposits, as a way of learning about the overall story of fracking.

The papers I've read this evening were delivered by the ROEC to various conferences over the last two years.  The ROEC is an english language think tank focusing on oil, natural gas, and "energy" policy in Romania.  As an industry think tank we can expect their work to be biased towards the oil and gas industry.  However, some of what they're reporting does paint a dire picture for Romania's future unless some big change is made in that country's energy resources.

I'd rather see Romania embrace renewable energy resources, but the tried-and-true for over a hundred years of modern economic development has been fossil fuels.

Romania is way past its peak of oil production, and domestic oil and gas production is declining at a 10% per year rate.  It's expected the country will simply run out of oil and gas to produce, via conventional methods, in 10-15 years.

Consider that it takes a LOOOOONG time, many YEARS, to start producing in new oil or gas fields.  That means to avoid the looming problem, if their solution is more oil and gas then they'd better start drilling now.

If Romania doesn't come up with a seriously big solution for new energy resources, they'll become dependent on Russia.  That's the last thing Romania wants is to fall back under the dominance of Russia.  It's not just the Romanians that fear dependency on Russia, most of Europe does.  It's expected that if (when) Russia's natural gas is the primary supply to Europe, that Russia will be able to extract huge economic dividends, and that Russia is salivating over those prospects.

Romania has identified three new sources of domestic oil and gas production.
  • Enhanced recovery techniques in existing fields.
  • Unconventional resources (fracking), which we've been covering a lot in recent posts.  As we see in this slide, the ROEC can't predict the outcome.
  • Off-shore deep-water resources in the Black Sea.
Those slides came from ROEC's presentation in September 2013 at the Balkans Oil and Gas Conference in Athens.

It's also possible for Romania to secure an external source of natural gas and oil other than Russia.  The country has been working hard on this, and pinned a lot of hope on the "Southern Gas Corridor" project.  I'd written a fair amount about the Southern Gas Corridor project in an earlier post.  The gist is that there's plenty of natural gas deposits in Central Asia that aren't under Russia's control - today - because these various countries managed to escape from the U.S.S.R. when that country disintegrated.  The Southern Gas Corridor aims to build a natural gas pipeline from the Caucasus, through Turkey, and into Europe.  This would let Europe switch their dependency on Russian natural gas for Central Asian natural gas.
A strategy decision in the Summer of 2013 concerning the Southern Gas Corridor went in a direction that does not help Europe.  "Nabucco" is the version of that project which would have supplied large quantities of natural gas to Europe.  Instead a different plan was chosen, and because Romania had pinned their hopes on Nabucco the country is left scrambling for a replacement natural gas source.

Another possible resource is this new oil and gas discovery in the Mediterranean.   This is years away from being exploited.

Those slides came from ROEC's November 19, 2013 presentation at the Romania Oil And Gas Conference, 2013.

The picture painted by these two presentations from ROEC is that in a few years Romania is going to face a big economic problem.  Dwindling domestic oil and gas is going to force the country to increase imports, but that will put a drain on Romania's economy, which is already weak.

As for the prospects of shale gas (fracking) as the solution, ROEC had this to say:

NAMR is Romania's bureau of natural resources.
My vantage point is thousands of miles away, but having read dozens of Romanian news reports on this, this assessment seems apt.  However, I don't know that the public is being manipulated with misinformation.  The anti-fracking writings I see in Romania seem to be well informed of the risks.  The people involved are strongly convinced they do not want fracking to take hold in Romania.

Wednesday, April 9, 2014

German automakers complain over non-standardized Tesla Supercharger, but where are the CCS cars?

It would be wonderful if there were one fast charging standard for electric cars.  We've collectively gone through periods with dueling standards, and it was painful.  But, the current environment has several fast charging standards (CHAdeMO, China, Combined Charging System, and Tesla) each of which are vying for dominance.   Recently on, an article quoted several top people in Germany's electric car industry complaining about the Tesla Supercharger system, and how much better it would be for public fast charging infrastructure to be based on standards.

While we agree with the sentiment, the people making those statements have their own agenda - to assure dominance of the Combined Charging System.  Further, the phrasing is similar to what Shad Balch (General Motors) said in May 2012 in a California State Senate public hearing on electric car charging infrastructure.  Both Balch and these Germans rest their argument on CCS being the Standard, so therefore that's the only fast charging system which should be deployed.

At that meeting Balch laid out for State Sen. Corbett a series of priorities GM has in fostering electric vehicle adoption, the last of which had to do with charging standards.  He started by saying the J1772 standard was a big improvement over the previous era of electric cars and non-standardized charging connectors.  But he described the current situation as a "hodgepodge of fast charging standards" and said, "we need to make sure, especially because we're talking about taxpayer money, that ONLY those standards are installed going forward."  He actually got boooo'd at that point, because everyone in the audience knew he was slamming CHAdeMO.

With that in mind, here's what the Germans were quoted saying:
  • Dr. Arndt Neuhaus, CEO of RWE Germany: "When charging infrastructure Tesla uses a proprietary system instead of an open system, in the computer industry, this approach has not been implemented so far. Electric mobility has to rely on open standards to be quickly mass market. I have to use with my plug each charging station in Europe. A separate plug does not help there."  (original: „Bei der Ladeinfrastruktur nutzt Tesla ein proprietäres System statt eines offenen Systems, in der Computerindustrie hat sich dieser Weg bislang nicht durchgesetzt. Die Elektromobilität muss auf offene Standards setzen, um schnell massenmarkttauglich zu werden. Ich muss mit meinem Stecker jede Ladesäule in Europa nutzen können. Ein eigener Stecker hilft da nicht.“)
  • Daimler Chief Development Officer said Thomas Weber: "The future lies in the standardization. As with the petrol filling stations and we need a cross-vendor charging network because not least can thus reduce the cost of infrastructure and comfortable is for the customer." (original: „Die Zukunft liegt in der Standardisierung. Wie auch bei den Kraftstofftankstellen brauchen wir ein herstellerübergreifendes Ladenetz, weil sich damit nicht zuletzt die Infrastrukturkosten reduzieren lassen und es für den Kunden komfortabler wird“)
  • Bosch Boss Volkmar Denner: "There would be economically nonsense, now if any vehicle manufacturers would set up its own infrastructure. Much more useful would be if the variety of charging stations owners for the customer would not be relevant because the software in the background takes care of everything for him. When we are dealing since long with small-minded discussions, then we get into a serious imbalance. The technique for a Europe-wide charging network we have.We need it now but really want to implement." (original: „Es wäre doch volkswirtschaftlich ein Unsinn, wenn jetzt jeder Fahrzeughersteller seine eigene Infrastruktur aufstellen würde.  Viel sinnvoller wäre doch, wenn die Vielfalt an Ladesäulenbesitzern für den Kunden gar nicht relevant wäre, weil die Software im Hintergrund alles für ihn regelt.  Wenn wir uns da noch lange mit kleinkarierten Diskussionen beschäftigen, dann kommen wir in eine bedenkliche Schieflage.   Die Technik für ein europaweites Ladenetz haben wir. Wir müssen es jetzt aber auch wirklich umsetzen wollen.“)
The translations probably aren't that good, but we get the gist of it to be a call for standardized electric car charging systems, rather than the hodge-podge of systems currently in use.

It's possible they're calling on Tesla to submit the Supercharger system to standardization.  But, it's much more likely that they're calling on Tesla to simply adopt one of the open standards rather than going their own way.

To my eyes after having observed this issue since 2010 (see The controversy in fast charging for electric vehicles (PlugIn 2010)) that an allegation many make could well be true.  Namely, that the German and American car makers colluded in the SAE committee to ensure that CHAdeMO did not get standardized in an effort to throw a monkey wrench into Nissan's plans for electric car dominance.

Consider that neither the American nor German car companies have yet to deploy electric cars with Combo Charging System plugs in any respectably sized quantity, while both Nissan and Tesla are going full speed ahead with selling fast-charge-capable electric cars, and both are supporting deployment of fast charging stations.  Can you say "late for the game"?

(CCS cars:  Chevy Spark EV, miniscule quantities.  BMW i3, just started production last month in reasonably large quantities.  That's it.  Ford, VW, nor the other members of the anti-CHAdeMO consortium have announced any CCS cars.  Just today, Ford revealed some info on the 2015 Ford Focus Electric, and it's clear from the images that it does not have a CCS compatible charging port.)

It's a little disingenuous to call for standards, and then not be selling many electric cars that comply with the standard.  CCS will not be a useful standard until there are a large number of vehicles implementing that standard.

Dr. Neuhaus alluded to the computer industry as not being controlled by closed systems.  That's an interesting point, and the rise of the Internet is directly attributable to open standards that any company could implement.  But that doesn't mean the Computer Industry doesn't have closed systems.  Microsoft's Windows is just one example of a closed system, and Apple's iPhone is another example.  It hasn't always been true that open systems always win out over closed systems, either.  What is always true is that numbers win, the system with the largest sales is what wins.

In February, Nissan installed the 1000'th CHAdeMO charger in Europe.

On Monday, Nissan announced a deal to install 100 CHAdeMO charging stations in Germany.

Both Nissan and Tesla are going full steam ahead with fast charger deployments in North America.

In Europe, Tesla Motors has a few Supercharger stations in Norway, Germany and the Netherlands, and by the end of the year plans an extensive system covering most of Western Europe and Scandinavia.

That leaves us wondering how market cohesion will come about, or will the electric car fast charging market continue on divergent paths?  If the latter we know it will be painful.  At best we'll end up with a hodge-podge of adapters such as the one Tesla is now selling that allows Model S owners to recharge at a CHAdeMO station.  It's theoretically possible to develop a CHAdeMO-CCS adapter, but wouldn't be economically viable until there's enough such cars on the market.

One Western Romanian company pledges to not frack or otherwise tap shale gas deposits

During last weekends anti-protests in Romania, one company based in Western Romania went to the protest rally in Arad to reiterate they will not use hydraulic fracturing or any other technology to exploit shale gas.  In a specific location, near Curtici.  Panfora Oil & Gas company said in a press release on Monday they will not perform operations related to shale gas.

The following quotes come from Panfora Oil & Gas, MOL Group company after protests Sunday at Arad: No explore and exploit shale gas not Curtici, and are attributed to Gabor Zele, Managing Director of Panfora Oil & Gas.

Specifically: "Panfora Oil & Gas reafirma ca nu va explora si nu va exploata gaze de sist in perimetrul Ex-6 Curtici si repeta invitatia de a semna angajamente juridice cu toate partile interesate" (which Chrome translated as "Panfora Oil & Gas reaffirms that will explore and exploit shale gas will not perimeter Ex-6 Curtici and repeat the invitation to sign the legal obligations of all stakeholders")

And: "Dorim sa ii reasiguram pe toti locuitorii din zona ca vrem sa construim o relatie pe termen lung, benefica ambelor parti, impreuna cu comunitatile din judetul Arad. Dorim sa ii reasiguram pe toti locuitorii din zona ca vrem sa construim o relatie pe termen lung, benefica ambelor parti, impreuna cu comunitatile din judetul Arad. Suntem disponibili si vom semna angajamente juridice in acest sens cu toate partile interesate, pentru a incredinta pe oricine de bunele noastre intentii" (translation: "We wish to reassure all residents of the area that we want to build a long term relationship, beneficial to both parties, along with the communities of Arad. As we have said since last year, I have planned and will not perform any operations related to shale gas in perimeter EX-6 Curtici and we will not explore nor exploit shale gas in any area of the perimeter, either by Hydraulic fracturing, nor by any other technology. We are available and will sign legal obligations in this respect with all stakeholders to anyone entrust our good intentions,")

And: "Dupa cum sa demonstrat in multe zone din judetul Arad - Pecica, Turnu, Pereg, activitatile de explorare si productie de petrol si gaze conventionale pot co-exista cu cele agricole in cele mai bune conditii. Mai mult decat atat, operatiunile petroliere au sprijinit dezvoltarea zonelor respective. Este important de subliniat ca nu vor fi afectate nici sanatatea oamenilor si nici drepturile de proprietate ale acestora" (translation: "As demonstrated in many areas of Arad - Pecica, Turnu, Pereg, exploration and production of conventional oil and gas can co- farm there with the best conditions. Moreover, petroleum operations supported the development areas. It is important to note that they will not be affected by any human health nor their property rights")

And: "Legislatia din Romania acorda titularului acordului de concesiune drept de servitute asupra terenurilor, iar detinatorii acestora primesc sume de bani in acest sens. Aceste prevederi asigura accesul pe terenuri pe durata masuratorilor, care dureaza cateva zile pentru fiecare proprietar, in functie de marimea terenului." (translation: "legislation in Romania holder of the concession agreement granted easement lands and their owners receive money in this regard. These provisions ensure access to the courts during the measurements, which takes a few days for each owner, depending on the size of the land")

Chevron ready to begin drilling for exploratory fracking in Pungesti, Romania

On Monday we reported on anti-Fracking protests in Romania that saw coordinated rallies in over 60 cities around Romania, as well as several cities outside the country.  Today we have the displeasure to report that Chevron is set to begin shale gas exploration (Fracking, or fracturare hidraulica gaze de sist) in Pungesti later this month.

This is of course what we expected to hear would happen.  Chevron was able to gain protection from protesters through a combination of private security forces, and national police (Gendarmerie), that kept any effective protest from being waged since December.   And, as we've reported before, fracking operations are being set up all around Romania despite the growing protest movement.

According to news reports I've found, Chevron will spend 3 months drilling an exploratory well and take soil samples for analysis.  Those samples will tell them what fracking techniques to use, or whether the shale deposit is worthy of exploitation.

Chevron to start shale gas exploration in Romania’s Pungesti this month, protests continue in the area:  Drilling will start within two-three weeks - at the latest that means April 30.  Drilling will take 90 days, and they'll take soil samples.

On April 8, activists gathered in front of the site for another protest.  They also chanted slogans like “Water, air and nature, not fracking, not cyanide,” or “Romania is our country, Chevron will never poison it.”

Chevron organized an "Open Day" for journalists to visit the site.  Activists pelted the bus carrying the journalists with stones and eggs.

Chevron to start the exploration of shale gas at Pungesti in two weeks time: ditto

Chevron Official: shale gas exploration in Pungesti will start in two to three weeks: This report on is the source for the above reporting.  In addition to the above information, it says that for the last four months (since December), Chevron has been preparing the drilling platform.  That work has been completed.

The incident where protesters pelted the journalists bus with eggs and stones occurred at the entrance to Silestia, a town neighboring Pungesti.  The drilling site is between those two villages.  Police and Gendarmerie watched the incident take place, then removed the protesters from the road.

Chevron has three other agreements for shale gas (fracking) exploration in nearby locations - Puiesti, Hohe Rinne - Bacesti and Popeni - Gagesti.  A "building permit" was recently granted for a drilling platform near Puiesti, in a location 1.4 miles from the nearest town and 300 meters from Tutova creek. 

"Pungesti. Status of necessity" and "ambitious" Eduard Novak, file folder Romania This is a TV show looking closely at the situation in Pungesti, and showing how Chevron and the government are ramrodding this through despite local opposition.

Dosar Romania: PUNGESTI: STARE DE NECESITATE... by medialert

Protests in the capital and several cities against shale gas: Reports on last weekends protest rallies.

Coach journalists attacked with stones and eggs at Pungesti: Discusses the incident with protesters pelting the journalists bus with stones and eggs.  Says the protesters kept protesting around the perimeter throughout the visit.  It also included the image shown here, which demonstrates the visit wasn't exactly calm and peaceful.  Instead the protesters made sure their presence was known to the journalists.

Tesla Motors offering real leases to small and medium businesses

Tesla Motors is launching a new subsidiary, Tesla Finance LLC, to handle leasing Tesla's electric cars to small and medium sized businesses.  The new program is a separate focus from the pseudo-leasing financing that Tesla announced a year ago.  That program, focused on individuals, gave a lease-like purchasing option for the Model S.  The new program is a true leasing product, and is targeted to businesses.

The target for this is probably those companies that arrange luxury cars for their top managers.

At least that's the obvious target.  But, Schiphol Airport in Amsterdam announced today a plan for a taxi operation with 100 Tesla Model S's.  An operation like that might like to lease their Model S's.  That airport was the site of one of the few Better Place deployments outside Israel, for an electric taxi operation.

Here's the information Tesla posted in an FAQ on the Investor Relations portion of their site:
What is Tesla’s strategy in starting Tesla Finance? – We believe that a captive finance company is a natural extension of our strategy to offer great customer experience, including financing products important to customers. Consistent with this, Tesla Finance will offer a financing product that customers have been requesting but that has not available from our bank financing partners: a true leasing product intended for businesses. This will round-out the portfolio of financing options available to Tesla customers. This leasing program will be offered alongside traditional installment loan programs currently offered by our bank partners.

How will this program affect Tesla’s capital structure? – The leasing program is targeted just at small/medium-sized businesses and their owners, so volume is expected to be somewhat limited.

The leases will be funded with a combination of equity and a warehouse financing facility that will be announced shortly. Given Tesla’s solid cash position, strong cash flow from operations and the poor returns available on cash equivalents today, it makes sense for Tesla to use a portion of this cash to support growth by creating Tesla Finance now.

Should the program grow, it would be reasonable that additional layers of warehouse facilities would be added and eventually replaced with private and/or public asset-backed securitization transactions commonly utilized in the industry. Tesla has established the legal structures to support securitization transactions, but that approach is volume driven and not necessary until we begin to deploy Tesla’s capital to support the Gigafactory and Gen III initiatives in earnest.

How will Tesla account for the leased vehicles and how does that compare with other car companies? - Within the automotive industry, automakers typically sell their vehicles through a franchised dealer network in which sales to the independent dealers represent a full sale for GAAP purposes. Later, a portion of these same vehicles may be financed by the automakers’ financing affiliates where they also record the related leasing revenue. Since Tesla sells directly to customers, we cannot recognize full sales revenue for vehicles delivered under our captive leasing program. Therefore, we will not adjust our financials (GAAP or non-GAAP) to show leased vehicles as sold vehicles like we do for the Resale Value Guarantee program in our non-GAAP financials.

What info will Tesla disclose on these transactions? - To facilitate comparability with other automakers, we will include a supplemental quarterly and YTD table that summarizes the aggregate price of vehicles leased by Tesla. This should allow investors to evaluate the velocity of our vehicle business.

How will gross margins be impacted by the program? -  There will be no material impact to our gross margin in either GAAP or non-GAAP financials.

eVgo installs more freedom stations, in Berkeley CA and elsewhere

Berkeley CA has been curiously devoid of electric vehicle charging infrastructure.  The city's residents are famously green, but somehow there have been only two public charging stations in Berkeley for a long time, and those were in a parking garage with limited hours of operation.  That changes now with the latest eVgo Freedom Station going in at the Whole Foods in Berkeley.

The location is on Telegraph at Ashby, and of course includes both fast charging and level 2 charging support. 

The installation is supported by a City of Berkeley pilot program to ease the permitting and installation of EV charging stations. The Non-Residential Plug-In Electric Vehicle Charging Station Pilot Program has staff who personally guide businesses through the process. Applications will be accepted through the end of the year. 

This reminds me that I've been meaning to circle back around to the eVgo deployment.   It's been a year and a half since I last looked deeply into their progress.   The agreement between eVgo and California specified a deployment timeline, and it would be good to check how they're doing.

GM reaffirming 2nd gen Volt, other EV's coming, investing in new electrified vehicle manufacturing

General Motors is reaffirming its investment in electrified vehicles, reaffirming there will be a 2nd Generation Volt (something which wasn't always a given), hinting at future electrified cars from GM.  On Wednesday, the company announced nearly $500 million in investments in new manufacturing equipment and processes to support building the "next generation Chevrolet Volt and two future products."

The investments are "$384 million at Detroit-Hamtramck for new Body Shop tooling, equipment, and additional plant upgrades to build the next generation Chevrolet Volt and two future products" and $65 million investment at the Brownstown Battery Assembly to "support the next generation of lithium-ion battery production and future battery systems."

GM's press release describes the Hamtramck plant as "the world’s only automotive plant that mass-produces extended-range electric vehicles – including the Volt, Cadillac ELR and Opel Ampera – for markets in 33 countries."

The Brownstone facility received ATVM loans from the Dept. of Energy a few years ago.  The new investments apparently do not have any Federal dollars tied to them, otherwise the press release would have mentioned such involvement.  Instead it demonstrates one way that government investments pay off, because GM is now of its own accord finding the dollars to fund more electrified vehicle manufacturing infrastructure.

This is how GM's new investments in vehicle electrification break down.  At the Hamtramck plant, GM has invested over $1 billion over the last five years.

Those investments fit into a larger puzzle of investments GM is making in Michigan overall.

And that in turn fits into the total picture of investments GM is making across the U.S.  They did not show a picture of this, but GM as a global company has manufacturing facilities around the world, and repeated investments are made to each facility each year.

This is what it takes to run a company with the scope of GM.  It gives us an appreciation of what Tesla Motors has in store for them over the next few years in order to truly challenge the ilk of General Motors.

It also demonstrates that changing the automobile industry from gasoline to electric can occur piecemeal, because these companies make manufacturing investments each year.  Each manufacturing investment is an opportunity to switch from gasoline to electric, should the company choose to do so.