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On Thursday, June 17, BP CEO Tony Hayward will testify before the House Committee on Energy and Commerce. In preparation for the testimony, the Committee Chairmen sent Mr. Hayward a letter listing a series of alleged procedural lapses that could have contributed to the Deepwater Horizon disaster. The letter is worth reviewing because it raises issues regarding the general safety of deepwater drilling and steps that should be taken prior to lifting the moratorium.
Procedural Lapses
The letter contains a number of allegations regarding procedural shortcuts that BP took in order to either reduce direct costs or save time. In fact, the distinction between time and money is a false one since BP was paying Transocean high dayrates for the Deepwater Horizon rig and the project was already behind schedule. Keeping in mind the fact that BP has yet to respond to the allegations, here are the five main points in the letter:
Well Design. The use of a full string of casing from the wellhead to the bottom of the well was criticized as being inferior to installing a “liner-tieback” system which is more expensive but considered safer.
Centralizers. Centralizers are devices that ensure that the casing running down the wellbore is centered properly. If the casing is not centered properly, the “cementing” of the well can fail which can result in gas flowing up the spaces around the casing. Halliburton recommended the use of 21 centralizers but BP only used six of the devices.
Cement Bond Log. Once cementing is complete, engineers run an acoustic test called a “cement bond log” to determine whether the cement has bonded to the casing and the surrounding formation of the wellbore. This is done to detect the potential of gas leaks. The letter alleges that this work was not performed.
Mud Circulation. Circulation of drilling mud allows engineers to test the mud for the presence of gas. The letter alleges that industry best practices calls for a full circulation of mud from the bottom of the well to the top. This is done prior to cementing in order to correct any gas leak issues before the key cementing stage. BP only performed a partial mud circulation test.
Lockdown Sleeve. A casing hanger lockdown sleeve is supposed to provide a barrier to blowouts in addition to the cement at the bottom of the well and the seal at the wellhead on the sea floor. The letter claims that BP did not deploy the lockdown sleeve.
These procedural issues, if accurate, paint a picture of a company that was taking shortcuts in an effort to contain costs and bring the well into production as quickly as possible given that the project was already late. While BP should have an opportunity to respond, it is worth noting that extensive reporting in The Wall Street Journal in recent weeks corroborates important points in the letter. The evidence uncovered so far strongly suggests that human error led to the disaster rather than equipment failure.
Regulatory Implications
In a complex engineering project, there are obviously many cases where good judgment must be used to select the best technique from a menu of possible choices. Even in cases where a company is committed to following best practices, there are risks that incentive systems will be set up in a manner that results in shortcuts being taken. The purpose of government regulation is to ensure that proper procedures are in place when failures have the potential of creating serious economic, safety, or environmental externalities.
In an endeavor as complicated as drilling for oil in over a mile of water, there are clearly numerous potential externalities that could occur and this is why the Minerals Management Service (MMS) has been empowered to approve permits for drilling work. Based on the Congressional letter to Mr. Hayward and many other sources, it is obvious that MMS plays an active role even to the point of micromanaging the techniques to be used on a particular well.
To say that there were regulatory failures in this situation would be a major understatement.
Checklists: Too Simplistic?
At this point, we do not yet have a definitive answer regarding what led to the Deepwater Horizon disaster. However, it is worth noting that the main evidence discussed up to this point question the decision making of individuals involved in the drilling. In other words, human error played a major role in the disaster and it is likely that better safety procedures would have prevented the blow out.
Is it too simplistic to think that a major problem with Deepwater Horizon was a failure to properly use checklists? Atul Gawande’s excellent book, The Checklist Manifesto, points out the problems that can be averted based on using simple checklists even in situations where a great deal of complexity exists. Drilling a deepwater well is obviously a very complex endeavor and there are many judgment calls to be made. Even if BP was motivated to cut corners to save time and money, MMS could have been more stringent regarding the use of a checklist of required safety procedures.
Revisiting the Moratorium
The moratorium on deepwater drilling was a reasonable step to take in the days and weeks immediately following the disaster. At that point, the sequence of events leading to the blowout were not known and there was a great deal of confusion. However, now that more facts are coming to light, regulators need to consider whether the moratorium can be lifted based on enforcement of a more stringent set of rules.
Was human judgment to blame or is drilling in 5,000 feet of water inherently unsafe regardless of the best technology and procedures? Based on the good safety record of such drilling in general and indications that poor decision making was likely the root cause of the problem, the moratorium should be lifted once more stringent rules are put in place.
As with any human endeavor, there are inherent risks that exist even with the best safety procedures. However, one must also consider the secondary effects of prohibiting drilling. Reducing the production of domestic oil will result in greater dependence on foreign sources of oil. Drilling in foreign locations may have weaker environmental and safety regulations than in the United States. More shipments of crude oil will be necessary and there are safety issues related to shipping as well. We must also consider the impact of an extended or permanent moratorium on the Gulf Coast economy which is already reeling from fishing and tourism losses.
As with much else involving energy policy, the risk/reward trade off with deepwater drilling presents us with a menu of less than appealing choices but it remains critically important to strike the appropriate balance.
Disclosure: No position in BP. The author holds investments in companies engaged in oil and gas exploration.
In recent days, we have posted a number of articles regarding the oil industry with a focus on the implications of the Deepwater Horizon disaster. The Financial Times published a graphic that illustrates current activity in the Gulf of Mexico along with the impact of the drilling moratorium in terms of costs, employment, and the domestic supply of oil. The graphic appears below (click to enlarge). Click on this link for a related Financial Times article.
On Friday, President Obama made the following statement regarding the moratorium based on a Wall Street Journal article published yesterday:
Mr. Obama said he was trying to carve a middle path on deepwater drilling, suggesting he did not want to end exploration, but he did not want to cut corners either. “I do not want to see this repeated again,” he said, indicating that if safety and environmental standards were tightened effectively, it could help the oil industry overall.
A final decision on deepwater drilling will be made after an independent commission on the disaster reaches its conclusions in six months. But under pressure from Gulf officials, Mr. Obama said Friday he had instructed the panel’s chairmen to report back as quickly as possible. He indicated a decision could then come sooner.
As we pointed out on Thursday, the confusion regarding shallow water restrictions only needlessly adds to the level of economic uncertainty that already exists along the Gulf Coast. Hopefully, the panel reviewing deepwater drilling will report its findings in a timely manner in keeping with the President’s stated objective.
Disclosure: The author owns shares of Contango Oil and Gas, an oil exploration company with operations in shallow Gulf of Mexico waters. The author owns shares of Noble Corporation, an offshore drilling contractor with operations in the Gulf of Mexico.
Early this afternoon, the Washington Post reported that the Minerals Management Service had rescinded five shallow water permits through emails indicating that all drilling permits would not be approved regardless of water depth. Soon after the story broke, the Interior Department released a statement saying that the policy of allowing shallow water drilling would continue as long as oil and gas companies satisfy environmental and safety requirements. The Post has now published a recap of today’s events. The question on many minds this evening is whether the confusion is a sign of internal debate within the government regarding the possibility of halting all drilling regardless of water depth.
It is worth revisiting the amount of domestic crude oil production attributed to wells in the Gulf of Mexico. According to the United States Energy Information Administration, 29 percent of domestic production in 2009 came from offshore locations in the Gulf of Mexico. Total domestic production of 1.938 billion barrels in 2009 was only 28 percent of total domestic consumption of 6.82 billion barrels. Of course, the remainder must be imported.
As we wrote last month prior to the announcement of the six month moratorium on deep water drilling, prudent regulatory changes are definitely needed in light of the Deepwater Horizon disaster. It is obvious that the system in place prior to the disaster did not insist on enough redundancy to successfully address low probability but catastrophic events. President Obama’s six month moratorium on deep water drilling seems like a balanced approach that would give regulators and industry time to assess the causes of the disaster and put in place improved best practices to avoid a repeat.
It would not be shocking if one arm of the government was not aware of the activities of another particularly in the chaotic environment that now exists due to the ongoing disaster. Perhaps someone at MMS simply misunderstood the nature of the moratorium and rescinded the permits in error. However, it is also possible that the MMS official simply implemented a new policy prematurely before the news had been disseminated by the appropriate government officials. As of this evening, The Interior Department is denying any change in policy.
President Obama will arrive in the Gulf region tomorrow and should use the opportunity to provide clarity regarding the question of shallow water exploration in Gulf waters. According to the Washington Post article, each of the 40 drilling rigs currently working in the shallow water areas of the Gulf employ about 100 people. However, the ripple effects of putting these 4,000 individuals out of work would have a greater impact throughout the area due to support and service jobs associated with the industry. Given the fact that the risk profile of shallow water drilling is in no way similar to the complexities facing wells under 5,000 feet of water, it would be senseless to put in place a moratorium not only because of the lost jobs but because the production of oil is critical for United States domestic energy consumption.
It is important to note that all of the moratoriums involve new drilling and do not impact wells that are already producing. However, a steady stream of new drilling is required to keep production levels up in the coming years since existing wells will eventually be depleted. An already bad situation will become even worse if government stands in the way of exploration in shallow waters. If anything, increased shallow water production may be needed to offset the losses associated with the deepwater moratorium currently in place.
Disclosure: The author owns shares of Contango Oil and Gas, an oil exploration company with operations in shallow Gulf of Mexico waters. The author owns shares of Noble Corporation, an offshore drilling contractor with operations in the Gulf of Mexico.
So how dependent is the USA on ultra deepwater production? I ask that question to have a sense on the government’s flexibility for a short term production moratorium and tough new regulation. This scenario is what the market seems to be predicting as an almost certainty. Well, this is how relevant is the Gulf of Mexico crude production:
30% of crude oil production and 19% of its reserves. If you include all liquid fuels the numbers are better but still big, with offshore GOM representing 8% of production and 15% of reserves. If you also consider that ultra deepwater production is not marginal anymore the probability of a production moratorium without real evidence of widespread negligence and corruption is probably low .
Long term, onshore reserves are a real alternative. It comprises a large percentage of the US crude reserves but it includes secondary recovery techniques like waterflooding that may be more expensive to extract. So expensive regulation of ultra deepwater drilling may be forthcoming.
The outlook for natural gas in the Gulf of Mexico once again surprises. Perhaps counter intuitively, its lower environment impact and less dependency could make it a target for grand standing and short term measures.
Some natural gas GOM E&Ps like McMoRan Exploration have been hit as a consequence of the Macondo blowout and the suspension of exploratory drilling. MMR production is mostly in shallow water but their exploratory efforts are in ultra deep gas.
In that Macondo forgotten even by the birds, where the dust and the heat had become so strong that it was difficult to breathe, secluded by solitude and love and by the solitude of love in a house where it was almost impossible to sleep because of the noise of the red ants, Aureliano, and Amaranta Úrsula were the only happy beings, and the most happy on the face of the earth. - Gabriel Garcia Marquez, Cien Años de Soledad
I thought it was important to put in context the numbers of ultra-deep water exploration in the Gulf of Mexico after a possible market overreaction to the Macondo blowout. The market has left no prisoners, not only taking concern for British Petroleum and Transocean, but also all the contract drillers (Noble, Ensco, Atwood Oceanics, Hercules Offshore, Seahawk Drilling) and some exploration and production companies like ATP Oil and Gas and MacMoran Exploration. I particularly recommend Toby Shute’sarticles on the investment implications of this disaster.
This graph from a recent EIA post (US Energy Information Administration) tells a clear story of dependence on deep water and ultra-deep water production as shallow water production reached its peak in the nineties and began its decline. So drill all you want, but the USA is becoming more dependent on more difficult to find and more costly to produce reserves. And I have not even talked about the cost of potential new regulation.
This is one more indication that energy prices may fluctuate but there is only one trend: up. And this is the present. If you want a peek into the future, let me introduce the proven reserves in the Gulf of Mexico.
PD: You have probably noticed that the natural gas story is different. Subject for another time
Vinod Khosla on Renewable Energy (video and slides)
Vinod Khosla, of course, is one of the most reputable venture capitalists in the world, having co-founded Sun Microsystems and served as partner at Kleiner Perkins for many years. He now runs Khosla Ventures and appears quite focused on investing in companies searching for innovative solutions to the energy problem. We encourage you to flip through the following slide deck and watch the video for additional insight into this topic.
Renewable Energy: Maintech, not Cleantech Vinod Khosla Khosla Ventures April 2009 “all progress depends on the unreasonable man” George Bernard Shaw “A crisis is a terrible thing to waste.” Paul Romer P ob r st er y nd og u is nol M h : c e em T l nd a ng i “The ‘telephone’ has too many shortcomings to be seriously considered a means of communication” -Western Union Internal Memo, 1876 ng si is ns M : tio se ica cu pl Ex Ap “There is no reason for any individuals to have a computer in their home” -Ken Olsen, President, Chairman and Founder of DEC, 1977 P m le ob r st er cs nd si U hy : P nd a ng i of “Heavier-than-air flying machines are impossible” -Lord Kelvin, President, Royal Society 1895 P un T : n m o le isi ob V r el n “Airplanes are interesting toys but of no military value” -Marshall Ferdinand Foch, Professor of Strategy, Ecole Superiure de Guerre Forecasting 8 “It is the mark of an educated person to look for precision only as far as the nature of the subject allows.” Aristotle 9 oil price forecasts (1985-2005) 50 45 40 35 30 25 Forecast Forecast Forecast Actual Actual 5-yr Forecast Error Forecast Actual Forecast Forecast Actual 10-yr Forecast Error Forecast 20 15 Actual Actual Actual 85 19 90 19 95 19 00 20 10 Data/Source: World Oil Prices (current $ / Barrel)- EIA Office of Integration Analysis and Forecasting gas price forecasts (1985-2005) 8 Actual Actual 7 Forecast 6 Forecast 5-yr Forecast Error 5 Forecast 4 Forecast Actual Forecast Actual 10-yr Forecast Error Forecast 3 2 1 85 19 Forecast Actual Actual Actual 90 19 95 19 00 20 11 Data/Source: Natural Gas Wellhead Prices (current $ /1000cf) - EIA Office of Integration Analysis and Forecasting coal price forecasts (1985-2005) 3 Forecast Forecast 2.5 Forecast 5-yr Forecast Error 2 Forecast Forecast 10-yr Forecast Error Actual Forecast 1.5 Actual Actual Actual Actual Actual Actual Forecast 1 85 19 90 19 95 19 00 20 12 Data/Source: Coal Prices to Elec. Generating Plants (current $ /million btu) - EIA Office of Integration Analysis and Forecasting the US market for mobile subscribers Forecast McKinsey for AT&T › 0.9M (1980 => 2000) Actual › 109M 13 Source: American Heritage Magazine - http://www.americanheritage.com/articles/magazine/it/2007/3/2007_3_8.shtml yesterday’s technology, tomorrow’s forecast › 1980’s phone › The actual market 14 quantitative modeling flaws › Models with given inputs are precise but inaccurate › low “standard deviation”, but with high “standard error” › input the measurable, ignore the immeasurable Black Swan’s › obscured embedded assumptions › Food price controversy › World Bank study 75% of price rise due to biofuels › USDA notes only 3% of total price change 15 “extrapolation of the past” vs. “inventing the future” 16 Redefining swans… “black swan” solutions ? Technology shocks are classic “Black Swans”! “rarity, extreme impact, and retrospective (though not prospective) predictability” Strategy: More “at bats”; “shots on goal” Source: Nassim Nicholas Taleb, author of “The Black Swan” “what if…” Calera › Cement that sequesters CO2, instead of emitting it! “more coal plants meant cleaner air” “cement was carbon negative & free” 20 Kior: “biocrude” replaces crude Crude oil Millions of Years “more driving meant less carbon” “a million year crude production cycle reduced to hours?” Biocrude Refinery 21 Transonic “2X efficient engines cutting world oil consumption in half” 22 Battery Black Swan? …probably the only battery worth working on … for both cars & wind/solar storage … along with other Black Swan’s …”relevant scale” solutions for … oil … coal … materials … (efficiency of oil & coal use) 24 But how do we evaluate solutions…? …”relevant cost” …”relevant scale” …”relevant adoption” …the chindia test only scalable if competitive unsubsidized 1990: Chindia ≈ 13% of CO2 emissions 2005: Chindia ≈ 23% of CO2 emissions 2030: Chindia ≈ 34% of CO2 emissions EIA “China and India together account for 79 percent of the projected increase in world coal consumption from 2005 to 2030” EIA Unsubsidized market competitiveness? …the scaling model brute force or exponential, distributed… key criteria › Trajectory: “What is” or “What Can Be” › Cost Trajectory › Scalability Trajectory › Adoption Risk › Capital Formation › Optionality › Carbon Reduction Capacity …cost and carbon trajectory Cost trajectory: Undesirable (hydrogen fuel cell?) Cost Fossil + Carbon Cost Fossil Fuel Cost Subsidy/Support Needed Time cost: driving down the cost curve Source: “The Carbon Productivity Challenge”, McKinsey – Original from UC Berkely Energy Resource Group, Navigant Consulting cost: not all technology curves are the same C t (Norm ed) os aliz Cheapest now Wind not mean does Coal cheapest later! Solar PV Trajectory Matters! 2010 2015 2020 2025 2030 2035 declining technology cost… Generations of Solar Photovoltaics… Crystalline Silicon Amorphous Silicon Thin-Film Thin-Film Multi-Junction 37 but tech cost decline isn’t enough… Total Cost Cos (Norm ed) t aliz Total cost decline is based on relative proportion of cost “types”… Construction Cost Inputs (Feedstock/Land) Technology Cost 2010 2015 2020 2025 2030 2035 2040 Carbon trajectory: Carbon Emissions Trajectory Undesirable (natural gas?) Desired Goal (80% below fossil?) Time Scalability… Scalability:Land is not (remotely) a constraint 3000 km world electricity demand (18,000 TWh/y) can be produced from 300 x 300 km² =0.23% of all deserts distributed over “10 000” sites 41 Source: Gerhard Knies, CSP 2008 area requirements to power the USA (150 km)2 of Nevada covered with 15% efficient solar cells could provide the USA with electricity ½ as much land with 30% efficient turbines Source: J.A. Turner, Science 285 1999, p. 687. …the adoption risk financial, consumer acceptance, market entry adoption risk - $2,500 nano Internal combustion engine or Hydrogen / electric? adoption risk: U.S. mill closures …optionality optionality: biofuels feedstocks & pathways … Natural Oils Transesterification Methanol/Ethanol Fermentation ETG via catalysis Glycerin BioDiesel (FAME or FAEE) Ethanol, Butanol, Renewable Petroleum FermDiesel Biogasoline Dimethylfuran Gasoline, Diesel, Hydrocarbons Sugars/ Starch Catalytic Conversion Catalysis and Aqueous phase Reforming Algae + Sunlight – CO2 Cell Mass Hydrocracking BioDiesel (FAME or FAEE) Cellulose/ Hemicellulose Acid or Enzyme Hydrolysis Saccharification Fermentation Ethanol Butanol Diesel Mixed Higher Alcohol Biocrude Biomass Mixalco Process Pyrolisis Microbial cultures Gasification Syngas Fermentation Catalytic Conversion Fischer-Tropspch catalysis Methane Ethanol/Butanol Ethanol BTL Diesel Waste optionality: hybrids or biofuels? 100% 0% % of power from liquid fuel Fast (relative) battery tech development Slow battery tech development 100% Time % of power from electric sources 0% …capital formation capital formation › Short Innovation Cycles (3-5 years) › Short investor return cycles Private money will flow to ventures that return investment in › Mitigate technical & market risk cheaply 3-5 year cycles! › Unsubsidized market competition …carbon reduction capacity carbon reduction capacity: 10X increase in carbon productivity! 10 9 Carbon Productivity = GDP / World GDP Growth Emissions 8 7 Index (2 008=1 ) 6 5 4 3 2 1 0 2005 Less reduction now, but greater capacity to respond in the future? Carbon Productivity Growth Required = 5.6%/yr World GDP Growth = 3.1%/yr Emission decrease to 20GT CO2e by 2050 = -2.4%/yr 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: “The Carbon Productivity Challenge”, McKinsey – Original GDP projection from Global Insight through 2037 carbon reduction capacity is key 1.9 1.7 1.5 Index (2008=1) Growth Offers the Greatest Carbon Reduction Opportunity! 1.3 1.1 0.9 0.7 0.5 0.3 2008 Growth stock Replacement of old stock Improvement of current stock 2013 2018 2023 2028 goal: cost, carbon reduction capacity, carbon & scaling trajectory, capital formation, low adoption risk, & optionality But be wary of irrational ideas…. irrational ideas: toilet paper I propose a limitation be put on how many sqares [sic] of toilet paper can be used in any one sitting. Now, I don't want to rob any law-abiding American of his or her God-given rights, but I think we are an industrious enough people that we can make it work with only one square per restroom visit, except, of course, on those pesky occasions where 2 to 3 could be required. - Sheryl Crow • Source - http://blogs.usatoday.com/ondeadline/2007/04/singer_turned_a.html irrational ideas: “green bikinis” • Source - http://www.alternativeconsumer.com/2008/07/29/eco-bikini-from-niksters/ irrational ideas: eat kangaroos, not cows! Farming kangaroos instead of sheep and cattle could cut greenhouse gases produced by grazing livestock… Source – http://www.reuters.com/article/environmentNews/idUSSYD8867720080808 irrational ideas: “no flags, no footprint” But a few days into the Euro 2008 football championships fans are being advised not to fly their flags - because they could damage the environment… - The Guardian • Source - http://www.guardian.co.uk/world/2008/jun/10/germany.euro2008 irrational ideas: Shell’s “sustainable” tar sands • UK advertising authority: Shell mislead public by claiming tar sands as “sustainable” source! Source – http://www.guardian.co.uk/environment/2008/aug/13/corporatesocialresponsibility.fossilfuels irrational ideas: “how to green” books • Source - http://www.amazon.com/Lazy-Environmentalist-Guide-Stylish-Living/dp/1584796022 irrational ideas: zero-emission buses? 3-year Oakland pilot : zero-emission hydrogen fuel cell buses solutions must make economic sense! diesel @ $1.61/mile vs. hydrogen @ $51.66/mile! 62 Source: ABC News - http://abclocal.go.com/kgo/story?section=news/local&id=5984013 San Francisco Photovoltaics? Or Mojave? Irrational ideas: scalable wind Good: › Wind turbine shows declining costs over time Storage is the key for wind power … but › Technical: Betz limit (59.6%) › Scalability: good sites declining › Adoption Risk: Systems for distributed sources irrational ideas: Zero Emission Buildings ... the new fashion? irrational ideas: palm-oil based biodiesel “The European Union was recently shocked to learn that some of its imported biodiesel, derived from palm trees planted on rain-forest lands, was more than twice as bad for climate warming as petroleum diesel” - David Tilman and Jason Hill • Source - http://www.deseretnews.com/article/1,5143,660207597,00.html?pg=3 …”lets face the facts” … Prius: vs. painting 1000 sq-ft of roof white … Electric cars? Electric Cars? and renewable electricity? …stacking one risky transformation on another? Shower or Not? › Showering/Drinking (in North America): 100-250L › Growing 1 KG of Wheat: 1,000L If you really want to save water, become a vegetarian! › Growing 1 KG of Beef: 15,000L! Source: The Economist TOOrational ideas: the “Exxon view”? • Discipline, Patience, Vision ≠ Green! Source – NY Times “no change bigotry” vs. “environmental everything” vs. pragmentalists 72 TOOrational ideas: the “Exxon view”? • Discipline, Patience, Vision ≠ Green! Source – NY Times …technology expands the “Art of the Possible” …today’s “unimaginable” or tomorrow’s “conventional wisdom” and remember…. New Technology Has A History ... 7,000,000 Connections in London 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 90 93 95 99 Source: When Old Technologies Were New “In 1885, Yale students who were getting ‘more light than they relished’ chopped down an electric pole erected at the corner of the campus…” Dotcom bubble but … net “traffic” growth continued 1400 Internet Traffic Morgan Stanley High Technology Index 1050 950 850 750 1200 800 650 600 550 450 350 200 250 150 400 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: Andrew Odlyzko (University of Minnesota – Digital Technology Center) Morgan Stanley Technology Index from Yahoo Finance Morgan Stanley High Technology Index 1000 Terabytes “Triumph of the Optimists: 101 Years of Global Investment returns” 200yrs of Technology Speculation …our renewable portfolio Not Your Niche Markets Anymore! The New Green: Maintech not Cleantech The Markets You Think Of › › › › Engines ($200B) › Corn Ethanol Lighting ($80B - US) › Biodiesel Appliances ($10’sB+) › Solar PV Batteries + Flow Cells ($50B+) › Wind › Geothermal › Gasoline ($500B+) › Diesel ($500B+) › Jet Fuel ($100B+) › Cement ($100B+) › Water ($500B+) › Glass ($40B) › Home Building (!!!) › BioPlastics ($10’sB+) Generation - $250B - US › Solar Thermal › EGS › Clean Coal › New Nukes 80 Sequestration Tools EPC Dis t Uti ribut e lity Sca d Sola r le S ola r Khosla Ventures Renewable Portfolio W Wa aste ter W Des ater alin atio n Tools Water Plastics Solar Wind Geothermal Natural Gas he ot ge Gas Ge a l d tor ura re S t ee ind Na gin W tic En he nt Sy al m r PVC Plasticizers Polyurethane Polyethylene Glass Cement Coal Materials Electrical Efficiency Building Efficiency Materials Mechanical Oil Corn/ Sugar Fuels Efficiency Cellulosic Future Fuels Lighting Batteries Motors cks sto cks ed Fe dsto ar ee Sug rch F Sta Homes Engines Appliances Pumps Cellulosic Ethanol Butanol Cellul. Diesel Cellul. Gasoline Cellul. Jet Fuel Khosla Ventures Renewable Portfolio Nanostellar Codon Stion Ausra Infinia PVT y NanoH2O Tools Water Solar Wind Geothermal Natural Gas G k rg oc Ene R lta int A o P at re Draths Segetis Soladigm Calera Coal Materials Electrical Efficiency Building Efficiency Materials Mechanical Oil Corn/ Plastics Sugar Fuels Efficiency Cellulosic Future Fuels Seeo Kaai Sakti3 Soraa Firefly Lumenz Ramu Topanga GIV Gridshift PAX Streamline EcoMotors Transonic Tula Hybradrive Cilion Mascoma Range Coskata Lanza Amyris LS9 Gevo KiOR Together, our products will improve the way all people live 83 Calera Corporation Built on carbon negative cement 84 Living Homes And prefabricated, environmentally friendly, cheaper, LEEDS homes 85 Soladigm Using electrochromatic windows 86 Amyris LS9 Gevo Kior Mascoma Range Fuels Coskata LanzaTech Fueled from renewable sources 87 Ramu EcoMotors Transonic Firefly Seeo Sakti3 Nanostellar Tula Technologies Hybradrive With reduced fuel consumption and CO2 emissions 88 Topanga Lit by high intensity, low power discharge lighting 89 Ausra Altarock Infinia Stion PVT Solar Using renewable electricity 90 Great Point Energy Cooking with natural gas from clean coal & biomass 91 Lumenz Group IV Soraa Reading with LED lighting 92 Kaai Watching HD laser TV 93 NanoH2O Drinking desalinated water 94 Segetis Safely using biobased plastics and chemicals 95 Draths Biobased materials for your home 96 Pax Streamline Staying comfortable with more efficient air conditioning 97 Change every aspect of daily living 98 to predict the future, invent it! Forecast 2015: New “cheaper than fossil” technologies proven Forecast 2030 : How will oil compete? “In my view for the United States, it is the greatest economic opportunity we've had since we mobilized for World War Two. If we do it right, it will produce job gains and income gains substantially greater than the 1990s.“ Bill Clinton on the “green economy” 100 Source: Speech at U.S Conference of Mayor’s Climate Protection Summit Challenge conventional solutions… The nine dots problem Source: Amory Lovins, RMI Standard nine dots solution Source: Amory Lovins, RMI Standard nine dots solution Source: Amory Lovins, RMI Better: use just three lines But…how about just one line? Source: Amory Lovins, RMI Geographer’s Solution Source: Amory Lovins, RMI Mechanical Engineer’s Solution Source: Amory Lovins, RMI Origami Solution Source: Amory Lovins, RMI Wide Line Solution Source: Amory Lovins, RMI …or get to work vk@khoslaventures.com khoslaventures.com/resources.html
On Thursday, June 17, BP CEO Tony Hayward will testify before the House Committee on Energy and Commerce. In preparation for the testimony, the Committee Chairmen sent Mr. Hayward a letter listing a series of alleged procedural lapses that could have contributed to the Deepwater Horizon disaster. The letter is worth reviewing because it raises issues regarding the general safety of deepwater drilling and steps that should be taken prior to lifting the moratorium. 
It is worth revisiting the amount of domestic crude oil production attributed to wells in the Gulf of Mexico. According to the United States Energy Information Administration, 29 percent of 
