Articles in Category: Environment

The investigation being launched by Eduardo Santos de Oliveira, federal prosecutor for Campos, a Brazilian city to the northeast of Rio de Janeiro, into last November’s oil leaks from Chevron’s Frade field in the Campos basin, is — on the face of it — a worthy and prudent review of the safety procedures operated by country’s rapidly expanding offshore oil industry.


If BP’s 4.9-million-barrel spill in the Gulf of Mexico can have had any silver lining, it must be that safety procedures should have been tightened as a result — procedures that should be there to protect both workers’ lives and the environment. But clearly, national bodies responsible for enforcing good practice cannot take it on trust that companies always employ the best techniques, or are motivated by the safest or most environmentally sound of operational intents.

In the case of the Campos basin spill, some 3,000 barrels of oil are said to have leaked and Chevron, along with its driller Transocean, acted promptly to close the well while the cause was located and rectified.

Nevertheless, in spite of Mr. Santos de Oliveira’s fine words — “Now that the working environment has been created (by the Chevron spill), let’s promote this debate and use the official investigation tools to try to understand this situation, including for preventative reasons” — the original $10.9 billion lawsuit, followed up now with a further $10.9 billion second action, raises questions about Brazil’s motives.

Geologists agree the spill was almost certainly naturally occurring, not the fault of the operator or their driller. “The Campos Basin is prone to natural seeps that can stain the ocean,” Cleveland Jones, a geologist at the National Oil Institute at the State University of Rio de Janeiro, is quoted as saying to Reuters. “That, in fact, is one of the reasons that geologists knew that there was a good chance of finding oil there in the first place,” he said.

Chevron said oil seeped from a crack in the bore of an exploratory well and worked its way through the rock to the seabed and then ocean surface. This happens all the time in the Campos basin, as it does in the similarly porous seabed of the Gulf of Mexico, and the firm acted promptly to limit the leak.

Continued in Part Two


So how will Britain go about ending the North Sea oil industry, as we got into in Part One yesterday?

Suggestions that the life of production platforms could be extended by the widespread conversion to alternative uses, such as bases for wind turbine generators, are probably not economically viable.

Platforms cost a fortune to service and maintain while the revenue from turbines is relatively small. A few platforms in shallower waters could provide electrical connection bases for offshore wind farms; the platform would carry the electrical collection and transmission equipment gathering power from individual turbines and managing the transmission to land through existing power cable connections.

Although the technology is far from proved, that has not stopped some from suggesting wave power devices could be anchored to defunct oil or gas production platforms. Where environmental conditions are more favorable, specifically in warmer climes, a number of alternative options may exist for the millions of tons of steel anchored above or standing on our sea beds.

report last year stated the Gulf of Mexico continental shelf will lose a third of its offshore platforms in the next five years and most of the remaining platforms will be removed in the next 15 to 20 years, depriving the area of an entirely unintended (but nevertheless rich) coral ecosystem. Perversely, it seems rigs are removed because recognizing their environmental role as providing habitat would incur oil companies significant costs in compliance to Federal laws, yet the loss of rig structures in the next five years is estimated to potentially destroy 1,875 acres of coral reef habitat and 7 billion invertebrates.

It is estimated that 49 species of federally managed fish and 25 species of protected invertebrates utilize, to varying degrees, the platform substrate for feeding, spawning, mating, and growing to maturity.

In locations such as the Gulf, clearly many more options exist for alternative uses for some if not all of the existing platforms, but in the harsher conditions of the North Sea, most platforms will ultimately be destined for the scrap heap.

It may be small by global standards, but Britain’s oil and gas industry has far greater significance than its size suggests.

Apart from providing a global oil price benchmark — Brent Crude — derived from a blend of sweet North Sea crude types, exploration techniques and production technologies pioneered in the North Sea are used around the world to extract oil from hostile environments. Whatever is done in offshore oil and gas fields around the world, the chances are it was probably done first in the North Sea.

The oil and gas industry is also vital for Britain’s finances. The country still relies on offshore reserves for 55 percent of its energy (Britain became a net oil importer in about 2006), while oil and gas firms paid a fifth of all corporation taxes in 2010-11.

All good things come to an end, however.

Following two production peaks, one in the mid-1980s and the second in 1999 at about 7 million barrels per day, production has declined sharply to about 4 million bpd by 2007 and 3 million bpd today. However, changes to what may appear obscure tax allowances have fired up a renaissance of sorts, particularly in the development of smaller, previously less economically attractive new fields. All of which will ultimately add to the headache that decommissioning will be.

According to the Economist, the British sector of the North Sea alone (Britain shares the seabed, and hence oil reserves, with Norway, Denmark and the Netherlands) is home to more than ten million tons of steel and concrete. One day, when as much oil and gas has been extracted as is feasible, the installations there will have to be removed.

The Economist says dismantling the 5,000-odd wells and platforms and 10,000 kilometers of pipelines will cost around £31 billion ($49 billion) on current estimates, spurring an alternative industry in its own right.

How will this be done?

Check back in tomorrow for Part Two

Continued from Part One.

While Johnson Controls claims China could be deterring their production via quotas, local officials are now saying the plant may not be given a new quota and, at best, Johnson Controls may be allowed to run some downstream activity like initial charging, rather than cell plate casting and battery construction work.

The Shanghai plant’s annual capacity at 2.6 million batteries is less than the firm’s Jiangsu Province plant that can produce 8 million units, and a plant being built in Chongqing with a capacity for 6 million batteries annually. To make up the shortfall, Johnson Controls imports batteries to meet local demand, but even the firm admits that this is of questionable economic benefit and merely serves to keep them active in what is seen as a massive and still-growing market.

Is this a case of local environmental health authorities simply jumping to the wrong conclusions? Or is it an indication of a more sinister anti-Western attitude toward foreign firms on the part of the authorities?

In the West, Chinese firms can sometimes find it hard to invest in Western firms or set up local manufacturing operations if the activity is considered sensitive in terms of national safety, local employment or for political reasons; but on the whole, once a firm is given approval, it exists side by side with domestic firms on an equal footing.

In China, though, the political winds can change — both nationally and locally — at short notice, and foreign firms can be targeted more harshly than local companies.

Last year, the BBC reported that China’s National Development and Reform Commission accused Wal-Mart, and its French rival Carrefour, of manipulating prices at 19 stores, while allegations that Wal-Mart had been mislabeling pork led to the closure of 13 stores and detention of 37 Wal-Mart employees. Last summer, the Chinese media roundly criticized the oil company ConocoPhillips over a June oil spill off China’s east coast. The State Oceanic Administration threatened to sue ConocoPhillips, but not its state-owned partner, CNOOC, which got off without censure.

Such stories underline the challenges facing Western firms looking to operate in China — it’s a culture that is unlikely to change anytime soon.

Reports in the FT that authorities in China had directly linked lead pollution that sickened local children to emissions from a battery plant of US company Johnson Controls were subsequently proved unfounded; a Bloomberg article this week confirmed it.

The authorities had indicated the facility would not be allowed to process lead in the future, after the Shanghai Municipal Environmental Protection Bureau said the Johnson Controls plant in an area of the city called Kangqiao had a role in lead pollution that sickened 49 children.

Johnson Controls had rejected the claims and an independent study by the China Electric Equipment Industry Association concluded the contamination came from a garbage recycling plant nearby. Ten children were hospitalized with lead levels three times the Chinese national limits and zinc levels 15 times the national limits.

At the time, Johnson Controls said “the lead emission average at our Shanghai facility is about [one-seventh] of Chinese national standard, whilst our lead discharge through waste water treatment facility average is about [one-tenth] of Chinese national standard. Our plant employees are regularly tested to ensure their blood lead levels are sufficiently low, and in fact our blood lead over 200 ug/L rate is world class at 0.7%,” a position that was subsequently supported by the independent report.

Johnson Controls’ involvement in the original accusations brought the case to a wider audience than may otherwise have been the case. China suffers environmental scares, plant closures and environmental pollution-related public demonstrations on an almost weekly basis somewhere in the country — most go unreported to the outside world.

In this case, Johnson Controls feels the local officials’ reaction suggests that the accusations (made last September after a routine back-to-school test for children) are part of a wider policy to deter the firm from restarting production. According to a Wall Street Journal article, the plant operates under a quota system which only allows them to process so much lead a year; the quota was used up in the fall and so the plant was due to be closed in September until the start of the this year anyway.

To be continued in Part Two.

Looks like ZincOx will drop the mining yoke and start pulling the recycling plow.

The FT reported that the UK-based company, originally invested in zinc mining, will be shifting over to zinc recycling to become profitable again. ZincOx built a plant in South Korea, and after it finally begins producing and selling finished zinc, looks to expand to Turkey, China, and the US.

The zinc market, as the FT points out, has had its share of volatility. LME inventories have risen since the start of 2012 in an already oversupplied market, as the graph below shows, and the zinc price is more than $2,000 per ton. (This, after falling from about $4,500 a ton in 2006 to just over $1,000 a ton in late 2008, according to the paper.)

Source: John Gross/Copper Journal

ZincOx will be adding to net global zinc production soon — perhaps as soon as five weeks from now, following final tests.

How the Technology Works

Electric arc furnace dust (EAFD) is a toxic byproduct of the EAF steelmaking process, containing cadmium, lead and zinc (18-24% grade). ZincOx has been honing a process for six years, by which they can extract the zinc portion from EAFD (at a purer grade than mining it from the ground, no less) and produce zinc concentrate.

For context, about 1.5 million tons of zinc are lost to dust during the EAF steelmaking process per year, while zinc production is about 12 million tons per year, according to a presentation last September by Andrew Woollett, ZincOx’s executive chairman.

In the presentation, Woollett outlined how the technology works by showing this slide:

Source: ZincOx Resources-Andrew Woollett

They take the dust and mix it with pulverized coal and put it into a briquette. Then they dry, cure and screen it to insert clean briquettes into a rotating hearth furnace (RHF), Woollett said. That yields 58% grade zinc concentrate, which goes to a zinc smelter, while the iron-based remainder can go back to EAF mills. Ultimately, it’s a sustainable, closed-loop process. (More detail on that here.)

How Steelmakers Win

EAFD has been a thorn in steelmakers’ sides for years, according to Joanne Hart in this article. “Many treat it as toxic waste, placing it in special bags and sending it to landfill sites, a process that is wasteful, environmentally questionable and costly.”

According to the FT, that can cost $40-50 per ton. Hart writes that operators of special kilns that recycle the waste “charge at least £50 [$78] a ton to remove the dust from steel furnaces and the zinc produced is relatively low grade.”

However, ZincOx offers to take the EAFD off steelmakers’ hands for free. (The new Korean plant will be able to process 200,000 tons of dust per year.)

“‘It’s very important to get the dust supply,” Woollett told the FT, ‘adding that he was forging strong ties with the steelmakers by offering deals where the waste suppliers would be compensated for rises in the zinc price. “‘We cut them in on the upside.’”

How the Zinc (Supply) Market Wins

  • Total zinc production potential next year: 92,000 tons. (Every 100 tons of dust can yield 22 tons of zinc.)
  • Companies such as Korea Zinc (with which ZincOx has already inked a deal) agree to buy the finished zinc; essentially a market is already in place.
  • Environmentally friendly recycling could make a dent in cleaning up China’s dirty zinc smelting industry.
  • According to the USGS, about 53% (134,000 tons) of the slab zinc produced in the US in 2011 was recovered from secondary materials—mainly electric arc furnace dust; this figure could definitely increase if ZincOx successfully brings its technology here.

I would like to say that research carried out in the Netherlands and reported in a recent Telegraph article could have far-reaching implications for the roll-out of wind power in the UK, if not in Europe and beyond.

But such a statement pre-supposes politicians actually take any notice of research or that they can see beyond their personal obsessions. The reality is most don’t, or can’t, depending on which applies; and as such, the rest of us will continue to pay through the nose for an electricity-generating technology that is fundamentally flawed.

I write, of course, of the intermittent nature of wind power and the need for backup-power-generating capacity, sometimes in the form of coal, but increasingly in the form of gas-fired power stations. The cost of building and maintaining gas-fired backup is at least part of the problem in the uneconomic business model that is wind power, but a Civitas think tank report warns that Britain is in danger of producing more carbon dioxide (CO2) than necessary.

Indeed, more CO2 than the country would produce if it built purely natural gas-fired power stations than the mix of wind power and natural gas required to power for the estimated 70 percent of the time any particular wind turbine is unable to generate electricity.

Wind turbines fail to deliver the hoped-for low carbon electricity generating model on a number of fronts, retired physicist (and producer of the report) Dr. C le Pair concludes. They consume a substantial amount of electricity in producing the turbines, relative to the short life span of a wind turbine compared to a gas-fired power station.

Although supporters of wind power say turbines do not require backup — and that instead they’re integrated into the existing system to act as fuel savers such that they harness a free source of power when it is available — are really playing with words.

If wind power were really used that opportunistically, turbines would run for even less time than they do and much of what they produce would be lost. Base-load still needs to be produced from somewhere – it either comes from wind with gas backup, or gas with wind providing an occasional top-up – either way, wind’s shorter plant life, higher maintenance and unreliable supply explain the heavier subsidy required.

If these are all acceptable shortcomings, then put the money into tidal; at least tidal turbines are predictable for years in advance in terms of generating hours each day.

Not all renewables are quite so dubious, though. Continued in Part Two.

–Stuart Burns


In 2011, the two energy industries that received perhaps the most attention in our coverage were oil and gas (due to the tremendous potential for further exploration and drilling for crude, shale oil and shale gas), and nuclear (due to the cloud of questions post-Fukushima).

The readership of such pieces reflected that:

1. In Wake of Japan Tsunami, Is Global Nuclear Power Freeze the Answer?

2. Shale Oil Could Be US Answer To Reliance On The Middle East

3. A Different Take on the Japanese Tsunami: Long-Term Impact on the Nuclear Industry

MetalMiner also released a series of interview videos related to the energy sector policy:

–Taras Berezowsky

Continued from Part One.

Source: Exxon Mobil

As the graph above shows, the firm predicts oil will continue to be the largest energy source, suggesting they do not expect electric cars to replace the internal combustion engine by 2040. Nor, to the disappointment of The Greens, do they appear to think wind and solar will become major sources of energy; despite predicting a 900 percent increase in energy generation over the period, they will still represent a small part of the whole.

Ironically, biomass, an important source of energy in underdeveloped countries in the form of wood and dung, will become less important there as electricity and oil take over. Nonetheless, they will rise slightly with subsidy support in developed markets, as recycled biomass fuels such as wood chips, sugar cane waste and so on catch on.

Despite Fukushima, nuclear is expected to continue to grow, particularly in emerging markets such as China, India and other parts of Asia. For the next ten years or so, the billions that mining companies are pouring into coal investments will continue to pay off with rising demand. Indeed, in emerging markets like China and India, new coal plants continue to be built and have an expected life of some 30 years. Relatively speaking, however, the greatest investment will be in drilling and exploitation of natural gas and, where appropriate, LNG. This will be a major market for stainless steel, nickel alloy and aluminum producers supplying tubular and plate products for drilling, processing, transportation and storage.

Exploration and production will have to take place in increasingly inhospitable regions such as the Arctic and in deep water, challenging metals producers to develop materials that can operate reliably in these environments.

–Stuart Burns

Exxon Mobil has released their annual “Outlook for Energy report, a 43-page survey of what the global energy market holds in store up to 2040.

With vast global reach in the energy market and more money at their disposal than many small countries, Exxon Mobil’s research is arguably as good as any bank or government research anywhere in the world. Best of all, it’s free, and for those of us in the metals markets, holds some interesting predictions that could have far-reaching effects on our industry.

Firstly, the report is based on the premise that the global economy will continue to grow, but at varying rates. The energy major sees OECD economies expanding by about 2 percent a year on average through 2040, as the United States, European nations and others gradually recover and return to sustained growth. Non-OECD economies will grow much faster, at almost 4.5 percent a year.

In large part this will be driven by demographics, as OECD countries and China will have static or falling populations by 2025, while India and Africa will continue to have rapidly growing populations with large numbers of workers in the productive labor force, as this graph shows:

Source: Exxon Mobil

This economic growth and the improved living standards it enables will require more energy. Exxon Mobil expects global energy demand to be about 30 percent higher in 2040 than in 2010.

In turn, improved efficiencies and better energy management spurred by the cost of CO2 emissions will temper this rise in power demand. For example, GDP in OECD markets is expected to double by 2040, but this will be achieved while energy demand remains flat. The cost of CO2 emissions will be part of the driver to switch from coal to natural gas, but the lower cost of natural gas from non-traditional sources such as shale beds and the lower cost and greater energy efficiency of gas power electricity generating plants will also play a significant part.

Core to the firm’s prediction is that natural gas will become the second-most widely used source of energy in coming years, overtaking coal by 2025. Not only are natural gas plants cheaper to build, but they are very much more energy efficient than coal or even nuclear energy. According to the report a new turbine-powered coal or nuclear plant is about 40% efficient, meaning 60 percent of the energy released is lost, whereas gas-powered plants can be 60% efficient, contributing to their green credentials as well as cost of production.

Continued in Part Two.

–Stuart Burns

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