Comments for oil and natural gas should be posted here.
205 thoughts to “Open Thread Petroleum-Feb 5, 2017”
After the closure of Spain’s only oil wells (on land) the country is 0,01% more dependent on imported petroleum. http://economia.elpais.com/economia/2017/02/04/actualidad/1486223555_424253.html
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The Ayoluengo field in Burgos, in the North-center of the country worked for 50 years.
There’s perhaps some oil left but the concession run out, and Leni Gas & Oil http://www.lgo-energy.com/# has to apply again, and other companies.
The oil from this field was always little and of bad quality, I understand that it was used mostly to make lubricants.
Only 18 people worked directly on site. If it doesn’t restart it is the death knell for the town, Sargentes de Lora, 110 inhabitants in the middle of nowhere.
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Spain imports all its petroleum, methane gas and practically all the coal it consumes.
People don’t understand that’s a problem and that the fuels are “paid” with debts, Spain is one of the most indebted countries in the world, there with the UK, there goes another one.
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The photographs could interest you, nodding donkeys, and wind generators in the hills.
. http://ep00.epimg.net/elpais/imagenes/2017/02/04/album/1486242280_948306_1486244012_album_normal.jpg
A lot of people make fun of the Spanish governments efforts to get off fossil fuel and onto fuel cost free domestic wind and solar electricity.
There is little doubt in my mind that the effort was badly mismanaged in some key respects, especially in setting the purchase price of domestic solar electricity so high, or at least not lowering it sooner.
But every solar panel, and every wind turbine in the country will continue to produce SOME electricity even if Spain goes totally bust, and can’t import even one tanker load of oil or one shipload or trainload of coal for lack of money to pay.
Every kilowatt hour produced fuel free means buying one less kilowatt hour’s worth of coal and or gas.
Here’s a thought for people who think long term. Virtually all commodities that are widely used are subject to price cycles , but in the long run, all the ones that I can think of right off the bat sell for more nominal dollars now than they did some years ago.
The long term average price generally keeps right on creeping up, unless a substitute product captures the market, or the economy changes in such a way that nobody wants that particular commodity any more. Men’s hats are a good example, most men just don’t wear hats anymore.
My personal opinion is that if a country can install wind and solar infrastructure efficiently and pay for it with low cost loans, the odds are EXCELLENT that the investment will pay for itself within two decades.
Consider western coal for example. Last time I checked it was selling for twelve dollars a ton at the mine , but in the state of Georgia, it was selling for over sixty, with the difference being the shipping cost. If the price of coal at the mine collapses to six dollars a ton, well, the people of Georgia will get it only about ten percent cheaper.
If the nominal dollar cost of shipping coal goes up three percent a year, it would take only about three years to wipe out the savings due to the mine mouth price collapse.
Countries that are compelled to import fossil fuels in quantity are almost dead sure to be paying more, on average, as the years go by, for DELIVERED fuel.
It’s not just supply and demand, or depletion, in simple terms. A country with gas enough to export some might turn populist and decide to slap the biggest export tax on gas that the market will bear, and spend the revenue on food and medical care and maybe a few new soccer stadiums, lol.
The real beauty of coal as a back up fuel is that it is extraordinarily easy to store, you can just pile it up anywhere the ground is hard and well drained, and about all you have to do to look after it is to makes sure it doesn’t catch on fire by accident.This means that the equipment , usually a railroad, or a railroad plus a ship, used to deliver it can be kept in near constant service, thus contributing to the lowest possible delivery price.
I fully understand that gas is about four times or so cleaner, environmentally , than coal, as generating fuel, but the fact is that there are lots of places where there are no gas pipelines, and building new ones just to deliver just enough gas to serve as backup fuel as the renewable transition progresses is likely to be out of the question. Pipelines are like hotels, they need to be full and busy to make enough money to pay for them and have a few dollars left over.
Gas storage on the grand scale is generally just about out of the question, except in the relatively few places that have old salt mines, etc, that can be used as storage reservoirs, for now at least. Maybe later on new technology will make cheap gas storage a reality.
So my guess is that we will be collectively burning some coal maybe for as long another thirty or forty years, because it might take that long to build out enough wind and solar capacity, plus the necessary transmission lines, to count on one hundred percent renewable electricity.
And while some people want to get all righteous about it, a CO2 molecule once it’s in the atmosphere is a CO2 molecule, whether it’s sourced as cow farts, or wood decay or combustion , or burning coal, or simply breathing.
What we need to do is lower the TOTAL emission of CO2 as best we can, rather than getting all righteous and religious about some particular SOURCE of CO2.
If we can cut the use of coal as generating fuel by say ninety five percent, and keep using the last five percent as backup fuel, that ought to be sufficient, considering that there are other equivalent quantity sources of CO2 that can probably be eliminated cheaper and easier than that last five percent.
I am not arguing that we can’t eventually go totally renewable on electricity, because I’m convinced it’s technically possible. All I’m saying is that the most practical and economical way to get there is to continue to use a modest and shrinking amount of coal as back up generating fuel for a rather long time, maybe as long as a couple of generations when it’s not practical to use gas.
And I will along by agreeing that MAYBE we can build out enough storage, long distance transmission lines, and wind and solar capacity to go totally renewable on electricity in as little as ten to twenty years.
A few days ago electricity prices skyrocketed. I did fine because I have a fixed price contract, which made me pay a bit extra in prior years, but now comes in handy. As it turns out we had a severe snow fall, it even snowed on the beach south of Valencia, the wind was blowing too hard for some of the wind park to generate electricity, and anyway it’s winter so days are shorter. Spain relies on nuclear power electricity imported from France, but that genius Hollande has bureaucrats who allowed five nuclear plants to shut down in the middle of the storm for routine inspections. So we couldn’t import, and it got pretty dicey.
Sometimes I wonder if you guys realize what it’s like in real life out here. It’s fairly simple, Spain will not go that crazy and if this trend continues they’ll simply reopen coal plants and return the gas turbines to full operability.
Fernando says “Sometimes I wonder if you guys realize what it’s like in real life out here”. I think you hit the nail on the head. I am not sure why you felt the need to quantify with the word “sometimes”. More often then not, reality plays zero role when such “green” schemes are proposed, debated and regrettably implemented on the less vocal and less politically active (read full time employed) unsuspecting public. I often wonder what many on the forum do for a living other then argue relentlessly for demonstrably proven failed political and economic systems for no apparent economic benefit. Interesting way to spend one’s short life.??
Cheap energy is a dumb idea that doesn’t help anyone, as a matter aof fact. In the soviet block energy was basically free, so the heaters in hotels ran 24/7 even in the summer. If you wanted it cooler, you had to open the window.
The ideology of cheap energy is what needs to go. It makes no sense. It simply leads to waste.
And as my mother taught me, “Waste not,want not”. But She also said “Be square”, so I guess her ideology is dead to your ilk. Waving a flag and throwing insults at the imaginary political positions of your imagined green enemies just shows you don’t have anything intelligent or honest to say.
I don’t see anyone on here arguing relentlessly for demonstrably proven failed political and economic systems for no apparent economic benefit. Perhaps you’re confusing a discussion about peak oil and climate change issues with some sort of debate about political and economic systems. That’s a pretty easy mistake to make if you’ve never studied or read much about politics and economics.
Hi Fernando,
In the real world there are temporary power outages, at least the World that I live in. Perhaps you live in some ideal World where there are never any power outages? 🙂
South Australia has been noted for its very high (40%?) amount of renewable-based electricity generation.
In addition to the blackout several months back due to high winds shutting down bird choppers, there was a blackout yesterday due partially to lack of wind.
Hotels are stocking up on diesel fueled portable generators.
Question. What did environmentalists use before candles?
Answer. Electricity.
Dennis, in well built systems the power outages are caused by unscheduled plant shutdowns, transmission grid failures, etc. When they take place the problem is analyzed and solutions are usually put in place to reduce the risk.
What we see in Europe is a system that’s increasingly unstable, and governments trying to replace the stronger more stable components with even more unstable systems. The imbeciles who run things here are simply unable to grasp just how absolutely stupid they are.
As they force shutdown of coal and nuclear and install more wind and solar we are seeing more and more subsidy charges in the electric bill. If they continue on the current course the cost of electricity will double in the next 10-20 years. And that’s going to be a huge bite for people living at the lower end of the scale.
The main source of instability at the moment are the french nuclear plants.
Here on the western border of Germany we have to fire our own cold reserve of old obsolet coal plants (that is planned for green energy blackouts) in winter to prevent the french grid to break down, because their atomic plants are not strong enough to supply the demand for heating.
So we don’t have a reserve on our own…
The coal plants are modern now – they can fire up and down with solar and wind cycle. It’s just a matter of technique.
The biggest test was a solar eclipse 2 years ago – when solar on a sunny day went from 25% to 5% in a matter of minutes and back again. It was mastered.
Here in Germany, blackouts are seldom. In town I had only 1 blackout in my lifetime so far – and it was some technical defect at a transformator station. In the deep countryside where they have sometimes Pole Powerlines they are more common.
I was thinking in rural areas in the US blackouts are pretty common due to downed power lines during storms.
Life goes on, they go out and fix the lines.
Hi Eulenspiegel,
Can you provide any links in English about what changes the Germans have made to allow them to ramp coal plants up and down easily?
Hi Fernando,
I don’t have a problem with nuclear, that is up to individual nations to decide. Coal will peak just like natural gas and oil, when it does electricity prices will rise.
In many places wind and solar are cheaper than natural gas and probably cheaper than new nuclear. The nuclear fleet is pretty old, the plant does not last forever and upgrades might cost more than a new plant, so nuclear is not always the answer. A widely dispersed interconnected wind and solar power system can operate reliably, but excess capacity is needed, just as is the always the case with any power system.
I’m surprised no one has blamed climate change on the nuclear industry.
Some of us who used to be anti-nuke now accept that it should be considered an option as a source of carbon-free energy.
Global warming definitely makes nuclear energy look more attractive environmentally than it did in the past.
Hi Boomer II,
As you have argued (and I agree), peak fossil fuels will make other forms of energy necessary whether it is nuclear, hydro, wind, solar, geothermal, or tidal power. People who do not like nuclear have reasons such as safety, cost, and non-proliferation. I think individual nations have to decide what is best, wind, solar, hydro, and geothermal seem to be safer options for now, but I think research on better reactors that shut down safely without power and produce little or no products that could be used for nuclear weapons is a good idea.
“What we see in Europe is a system that’s increasingly unstable, and governments trying to replace the stronger more stable components with even more unstable systems.”
Of course you have data that support your statement, or did you – as I fear – pull this out of your lower back?
So is Japan. Countries in this situation, who want a high standard of living, have to import energy and make things of high value with it. They then export their high value items to enable them to pay for their energy. Alternatively, as you say, they increase their debts levels until they go bust.
I saw this on Facebook. Can anyone respond?
“Exxon Mobil, under Rex Tillerson, brokered a deal with Russia in 2013 to lease over 60 million acres of Russian land to pump oil out of (which is five times as much land as they lease in the United States), but all that Russian oil would go through pipelines in the Ukraine, who heavily tax the proceeds, and Ukraine was applying for admission into NATO at the time.
Putin subsequently invaded Ukraine in 2014, secured the routes to export the oil tax-free by sea, and took control of the port where their Black Sea Naval Fleet is based, by taking the Crimean peninsula from Ukraine by force. This was Hitler style imperialism that broke every international law in the free world.
After Obama sanctioned Russia for the invasion, Exxon Mobil could only pump oil from approximately 3 of those 60+ million acres. But now Rex Tillerson is soon to be our Secretary of State, and as of today, there’s information circulating that Donald Trump will likely unilaterally remove all sanctions against Russia in the coming days or weeks.
The Russian government’s oil company, Rosneft, will make half a trillion (500 Billion) dollars from that much untapped oil, all pumped tax-free through Crimea, stolen from Ukraine, now owned by Russia. Putin may have subverted our government just for this deal to go through.”
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Now, a flood of oil on the market from Russia would likely keep US oil prices down, thus hurting US drillers right?
If one is conspiracy-minded, could that be part of the deal, too? Russia uses low oil prices to take down US oil production, and then tries assert itself as one of the countries left standing.
In about 1780, Catherine the Great and the Ottoman Empire agreed that the Crimea was a part of Russia. [Yes, there was conflict for years prior (as with any other piece of land in the world).] In 1954, in honor of the 300th Anniversary of the Republic of Ukraine being a part of Russia, Nikita Krushchev “gave” the governance of the Crimea to the Republic of Ukraine. It was not constitutional under the Russian constitution. The UN said nothing about it, nor any other international law body. Krushchev later trumped up an approval without even a quorum.
So the Republic of Ukraine seceded from Russia and took the Crimea with it. In the US, when states (republics) seceded [having been states for much less than 100 years, let alone over 300 years] the rest of the states killed as many people as they could until they “agreed to rejoin the union.” People might not like it, but the vast majority of people living in the Crimea had ties to mother Russia, and they voted to go back to being governed by Russia. So, Putin accepted. And please, let’s not get into an argument about the fairness of elections, unless your candidate wins.
So, what would we do if Obama gave South Carolina to Florida, and then Florida seceded. I guess that the rest of the states would just say “shucks, we lost South Carolina too.” Especially if South Carolina had the only warm water port in the US [the Crimea has the only warm water port in Russia]. The rest of the ports are in the North Sea, etc. And, yes, that is a critical military point.
“This was Hitler style imperialism that broke every international law in the free world.” That is a pathetic joke! Okay – let’s let the US South secede again, since the Cival War broke every international law in the free world and was exactly the same as Hitler’s imperialism.
clueless, thanks for the answer.
Just one clarification: the ports in Crimea are not the only warm water ports in Russia.
Russia has several other ports in the Black Sea and Azov Sea.
Other ports are in the Baltic Sea, Arctic seas and the Pacific; not in the North Sea
Perhaps I am wrong, but are those other ports large enough and deep enough for military use [which I failed to state clearly]? I beleive that Russia still operated their huge military port in the Crimea even after the Ukraine seceded and prior to Russia taking back the Crimea.
Sevastopol, the largest port in Crimea, was founded by Catherine the Great as Russia’s main military port in the Black Sea.
It had special status when Crimea was part of the Soviet Ukraine, and also when Ukraine became independent. Russia had a long-term arrangement with Ukraine for using Sevastopol.
Russia also has a large military port in Novorossiisk (Russian part of Caucasus); but you are right, Sevastopol is deeper, bigger and more convenient.
There are neither oil terminal, nor large cargo port in Crimea. Sevastopol is mainly military port.
Rurik set up rule in Novgorod, giving more provincial towns to his brothers. There is some ambiguity even in the Primary Chronicle about the specifics of the story, “hence their paradoxical statement ‘the people of Novgorod are of Varangian stock, for formerly they were Slovenes.'” However, archaeological evidence such as “Frankish swords, a sword chape and a tortoiseshell brooch” in the area suggest that there was, in fact, a Scandinavian population during the tenth century at the latest.[3] The “Rurikid Dynasty DNA Project” of FamilyTreeDNA commercial genetic genealogy company reports that Y-DNA testing of the descendants of Rurikids suggests their non-Slavic origin.
Kiev was the Capital of Russia when Moscow was still a hunting camp
Boomer II,
It’s your choice to use Facebook as the main source of information on the oil and gas industry, but please don’t repost this BS on the oil-dedicated thread.
Exxon Mobil didn’t lease any land in Russia. It is the operator of the Sakhalin-1 project in Russia’ Far East (very far from Ukraine); and oil produced from this project is exported by sea (Pacific ocean).
Exxon’s JV with Rosneft has also found an oil field in Kara Sea (Russian Arctic), but this project was suspended due to the sanctions.
In the past Russia was exporting a small part of its oil by the “Druzhba” (“Friendship”) pipeline through Ukraine and was paying normal transporation fee, not taxes.
Now all Russian oil is exported via Russian oil terminals near Novorossiisk (Black Sea) and Ust-Luga and Primorsk (on the Baltic Sea). New transporation routes include East-Siberia – Pacific Ocean (ESPO) oil pipeline linking Russian oil fields in Siberia with the ports on Pacific Ocean and with China’s Daking; as well as oil terminals in the Arctic (Varandey).
If US sanctions on Russia are lifted, Rosneft and Exxon will be able to develop their joint project in the Artcic, but oil found there certainly is not worth “half a trillion (500 Billion) dollars’, and cannot seriously change the global supply-demand balance.
clueless gave you a good answer on Crimea
BTW, 1) there is no oil terminal in Crimea;
2) Russian oil is taxed in Russia
“It’s your choice to use Facebook as the main source of information on the oil and gas industry, but please don’t repost this BS on the oil-dedicated thread.”
I never use Facebook as a source of information on the oil and gas industry. The topic never comes up among my Facebook friends or my news sources on Facebook. When I want gas and oil info, I use Google to look at legitimate news sources from industry observers.
I just wanted some people’s thoughts on that. Your reaction actually tells me a lot about how you think about it.
We’ve had quite a few discussions here about how politics, both domestic and international, shapes oil production, so I was just inquiring about any insight. I’m rather surprised that you are telling me not to even post a question on the subject. Touchy, maybe?
The relationship between Trump and Russia has triggered some questions, not just among Democrats, but also the GOP. And some people are wondering if there is some tie in about oil.
I just asked, that’s all.
“some people are wondering if there is some tie in about oil.”
The only “tie in” is Exxon’s frozen investments in the Pobeda (Victory) field in the Kara Sea. But that’s no secret; you can find information on this project on Exxon’s and Rosneft’s websites and in international business media.
The Sakhalin-1 project is not covered by the sanctions and is being successfully developed.
And basically what I was asking is this? Will a flood of Russian oil affect US oil prices?
If you are playing US politics, do you want to put more foreign oil on the market?
“Will a flood of Russian oil affect US oil prices?”
US and EU sanctions only affect Russian offshore projects in the Arctic and development of Russia’s tight oil. If sanctions are lifted, projects with foreign participation in these two areas will be able to produce meaningful quantities of oil not before 2025. But these volumes will not be sufficient to flood the market.
Russia is participating in OPEC-non-OPEC supply cuts and certainly is not interested in flooding the market and exerting a downward pressure on prices.
So is it possible that the time frame is so far in the future that it’s dead to Exxon even if the sanctions are lifted?
I think Exxon could re-enter the project if the sanctions are lifted. If sanctions are not lifted for several years, Rosneft will likely develop this field independently, but it would take more time as Rosneft lacks experience in offshore projects.
The only Russia’s offshore Arctic project is Prirazlomnoye field developed by Gazpromneft without foreign participation (already producing oil).
In general, even if there were no sanctions, Arctic projects would be developed relatively slowly, due to high costs and environmental issues. Russia’s long-term energy program anticipates more or less meaningful volumes of oil production in the Arctic offshore only in the 2030s.
Hi, AlexS, I disagree. To create all field infrastructure on the Karskoe sea, Rosneft need more time, not less than 15 years. It is deep water shelf, 300 m depth. There are no industrial settlements on shore at all. And oil transportation will be very expensive.
I think, both companies (Exx0n and Rosneft) were going to explore those fields for reserves extensions only; Exxon needs it more than Rosneft.
Now Rosneft is close to the completion of Jurubcheno-Tokhomskoe oilfield plant in West Sibiria. It is giant, 900 mln tonn of oil proved reserves.
Alex K,
I am saying exactly the same: “even if there were no sanctions, Arctic projects would be developed relatively slowly” .
And: “Russia’s long-term energy program anticipates more or less meaningful volumes of oil production in the Arctic offshore only in the 2030s.” That means after 2030.
Yurubcheno-Tokhomskoe oilfield is located in Evenkiya, Krasnoyarsk region. I would call it central Siberia.
Right. No needs to realise any Arctic seas projects. The main purpose of Priraslomnoje platform construction was to get some experience. Becides Rosneft has good licences on Ohotskoe sea.
Sorry, I made gross mistake. Yurubcheno-Tokhomskoe oilfield is located, of couse, in East Sibiria. Two large regions are there, Krasnoyarsk region and Jakutia. Russians don’t know Central Sibiria. West Sibiria is mostly Tjumen region, where I worked during 21 years.
I beg your pardon for my bad English. Unfortunately I don’t speak fluidly because of the little practice. Thank you for your kind explanations.
Thank you, it is absolutely right.
Politics aside, it’s just factually inaccurate.
“Exxon Mobil, under Rex Tillerson, brokered a deal with Russia in 2013 to lease over 60 million acres of Russian land to pump oil out of (which is five times as much land as they lease in the United States), but all that Russian oil would go through pipelines in the Ukraine”
Almost all pipelines through Ukraine are nat gas. Not oil. There is some minor oil flow. “All” is just profoundly absurd.
Russia’s oil output is going to Asia and northern Europe via Transneft lines to Poland and Belarus. Not through Ukraine. Haven’t looked for where those Exxon leases are, but I’m pretty sure that’s the Rosneft joint venture up around the Arctic.
Nowhere near Ukraine. This is all just completely wrong.
Ok. This response is much more helpful.
Now back to my question about prices. What happens when the sanctions are lifted?
Why, sometimes I’ve believed as many as six impossible things before breakfast.
– Alice in Wonderland
FedBook, er I mean Facebook, is a ghetto of sentimentality. I suggest deleting from it. I joined Facebook once for a very short time and the only thing I learnt from it was that most of my friends are idiots.
+10
Also +10
One has to be an idiot to be on Facebook
Everything in that stuff you wrote is baloney. Russia’s Black Sea exports go through Novorossysk and Tuapse. There isn’t an oil pipeline going to Crimea. Furthermore, putting an oil loading port in Crimea is nutty (because the oil comes from the East and it makes much more sense to load as far to the East as possible). There used to be some oil loaded in Odessa, but that was never a big deal.
Regarding the Exxon deal, that’s also baloney. But I don’t feel like trying to explain the basics to somebody who picks up information from Facebook.
I wouldn’t put ANYTHING past Trump and his homies, after seeing what they have done in the last few weeks.
Trump in the opinion of some observers seems to think the best part of being President, and really maybe the only important part, is cutting deals that profit him and his buddies. I’m of much the same mind.
Most people , not the regulars here, but people in general, have a hard time understanding that the government of this country has never given and currently doesn’t give a flying xxxx at a rolling donut about what happens to the PEOPLE in the oil industry, or to the majority of INVESTORS in the oil industry.
Uncle Sam has a very strong interest in the domestic industry AS A WHOLE being big enough and strong enough that we are not at but SO GREAT a risk in terms of depending on imported oil.
And of course any given president or congressman or senator might have a LOT of friends and relatives or donors invested in the oil industry, or even have his OWN MONEY in oil, and therefore want the oil industry to be strong and healthy.
But consider what would have been going thru Obama’s head , on a day to day basis, as President, a man responsible in large part for the economy of the ENTIRE country, and also responsible for helping his D party win as many elections as possible.
Basically this means that the most important item on the agenda is usually the economy,and when the economy is doing well, people are happy, and incumbents WIN ELECTIONS.
A few idiots occasionally argue that cheap oil didn’t and hasn’t contributed to the economy, but what they fail to realize , or else deliberately overlook, is that the economy would have been MUCH WORSE if oil stayed up. Cheap oil is a positive influence on the economy, even if the economy is not doing well.
So nobody in DC really gives a HOOT about the oil industry as a whole, excepting some lobbyists, and maybe a few Senators and Congressmen indebted to the industry. A hundred million people at the polls MATTER to a politician on the national stage. A few tens of thousands of oil workers, etc, well , call’em collateral damage or something , and fuggetaboutem.
Now in the case of a particular politician, and a particular oil company, well now……….
Trump’s for sale, no doubt about it in my mind. I can easily see him cutting a deal involving Exon, his Sec of State, Russia, etc.
I’m not saying he has done so, but I’m willing to entertain the idea.
The thing about accusing Trump of EVERY possible sin and crime is that he’s just one man, and he can’t possibly do but SO MANY things SO FAST.
I used to find it necessary to defend one of my low life relatives occasionally by pointing out that there was no way in hell he could have ever done all the things he was accused of. He worked very hard at being a low life, but he was accused of more things in one year than a hard working crook could hope to get done in FIVE years, lol.
So MAYBE Trump hasn’t done ALL the bad things he’s been accused of. Maybe he can catch up, if his critics will cut him a little slack and quit accusing him of NEW outrages for a few weeks. 😉
My sarcasm light is on for the benefit of HB.
Anybody who maintains that he HAS no low life relatives is either all alone in the world and HAS no extended family , or else he’s a liar.
Some get caught. Some get to be pillars of their community, and founders of universities and charities, etc, if they are talented enough rob and steal on a large enough scale long enough.
Most of the “Successful Businessman ™” tag that Donald Trump enjoys can be attributed to a well-masked infusion of conflict or flight capital from the FSU.
Maybe the USA economy would be better off at $120 per barrel because we would have thousands of rigs working, and this offsets the economic hit from higher oil prices a bit. The competition, such as Europe, China, and India, doesn’t have cheap gas and would face the same expensive oil. Just saying.
” Maybe the USA economy would be better off at $120 per barrel”
Fern,
Basically that is the main goal of current administration. This means that the value of US currency is secured by oil and the value of oil itself is in inverse proportion. Raising the price of the dollar leads to a decline in the oil and vice versa. If current administration wants to turn the US back into an industrial country, the new US administration will have to rely on the combination of cheap dollar – expensive oil. So in essence all this nonsense that we are seeing in US media is projection of fight between elites behind “US dollar/virtual economy” and elites behind “oil/real economy,industry”, and primarily in the US and EU.
Putin is just punching bag for one side just because of simple fact that his and Russia’s interests just happened to align with “oil/real industrial economy” elites of US. It is just accidental and nothing personal.
Hi Fernando,
It would certainly be better off with $120/b oil vs not having adequate supply.
In my view, by July 2018 at least $100/b will be needed to balance supply and demand for oil, as supply is likely to be inadequate and demand too high at under $60/b by that point in time.
Dennis,
I bet by July 2018 oil prices will be much lower than $100/b.
If prices exceed $60 by June 2017, OPEC – non-OPEC agreement will not be prolonged. Libya is gradually restoring output. Iraq also has room for further growth. U.S. will slightly increase production this year and the next. Brazil’s production is still rising. Kazakhstan’ output is up with the ramping Kashagan volumes. Russian production is expected to increase in 2017-19 due to scheduled project start-ups. Canada’s production will be higher this year than in 2016.
Commercial stocks are still well above normal.
The effect of the projects postponed in 2015-2016 will not be felt until 2020.
I think that’s why my model predicts prices will hover around $63 for a while. But I’m not sure why it does that. However, it says that by 2020 it will be a lot higher. It depends on the amount of drilling in the Permian basin.
Hi AlexS,
I doubt that US output will rise very much at $60/b, I think the EIA is too optimistic on LTO output and perhaps on GOM output as well. I doubt Canadian or US output will rise much and there are lots of areas that will continue to decline such as Mexico and China and Venezuela. It is possible that Russia and OPEC will increase production as soon as prices reach $75/b, but they will see revenue fall as a result. Maybe they like shooting themselves in the foot? At some point it will become difficult to raise output to match demand, I think by 2018 that point might be reached.
We will see, supply has been more resilient than I anticipated, at some point this will not be the case and output will be stuck on a plateau even as prices rise as increases in some places are offset by decline in other places.
So what is your expectation for the oil price in July 2018, you believe it will be less than $100/b (2017$ for Brent Oil price), do you think it will be less than $80/b?
I am not supposed to interfere with you guys who are more experienced in the oil market than me. But after using a lot of time to study the oil market my view is that oil prices will stay at a 60-70$ level for quite a few months, before taking the leap to 100$+ in 2018. At that level the debt bubble will not be able to take the toll and we will have a crisis and then after a while we will recover. I am not totally alone in this view it seems, but most would say it is way out of mainstream. I try to be as research based as possible and therefore examine opposing views, and I have to say I think there are some technology improvements behind the Permian hype and all the investment going there as opposed to Eagle Ford and Bakken. It would only slightly adjust the picture though, as capacity restraints in oil service land NA can not offset e.g. the massive decline coming from offshore going forward.
From all that I’ve read, I would conclude that a “flood of oil” out of Russia is about as likely as a “flood of new fracked oil from shales in the United States, not yet drilled.” That is, it’s rather low on the probability meter.
Again from what I’ve read (numerous sources) the Russian oil fields are being extracted just about as heavily as they can be at this time, as are the Saudi fields, again relying on a number of different sources.
Without getting too “tinfoil-hatty” I’d say most of the stories about the global oil markets which promise big bursts of production from (heretofore undisclosed) big new oil fields are in the category of “fake news.” These stories serve to boost U.S. consumer confidence and U.S. automobile and light truck sales, but contradict what people in the industry (such as Art Berman, Tadeusz Patzek et al.) are saying about future supply.
Based on everyone’s comments, it sounds like not only is that Facebook post that I saw inaccurate, the sanctions probably never made any difference anyway.
Maybe Exxon is blaming the sanctions for a stalled deal and loss of money, but maybe that deal wouldn’t have happened as planned anyway because of low oil prices.
So maybe various people are manipulating the facts to suit their interests.
Maybe Exxon is trying to cover its ass with the sanctions story. Maybe there is too cozy a relationship between Trump, Putin, and Exxon, but we don’t yet know any details. The sanctions will probably be removed, but maybe they won’t make much of a difference.
Factbox: Potential impacts of US lifting sanctions on Russian oil sector – Oil | Platts News Article & Story: “The expected negative impact on crude output has also not materialized, with Russia continuing to set post-Soviet output records last year. Sanctions primarily targeted projects that were not set to produce until the next decade, and some analysts have suggested that some cooperation with Western companies stalled due to the fact that these reserves are more expensive to produce than conventional crude, and were not commercially viable when oil prices dropped sharply in the second half of 2014.”
That’s basically what I have said above
The ExxonMobil (XOM) that Rex Tillerson left behind is doubling down on oil at a time of massive uncertainty for fossil fuels — Quartz: “The rise of Trump and the addition of Tillerson to the State Department could significantly restore Exxon’s fortunes by reviving its projects in Russia. But the reality of low oil prices and harsh drilling conditions may result in Exxon banking the reserves from Victory, as Russia named the Arctic field the American company discovered in 2014, for years before actually producing the oil. Shell, for example, abandoned drilling in Alaskan Arctic waters a year ago, despite finding oil; in 2012, France’s Total said it would never drill in the Arctic because a catastrophic spill would exact too high a reputational cost. Exxon, too, could decide to go slow.”
“Of course, the politics of dealing with Putin may require Exxon to proceed with Victory anyway. For Putin, the Arctic is Russia’s only currently known economic driver for the 2020s and beyond. The country relies on oil and gas revenue for more than half the state budget, and much of its GDP growth. So, if sanctions are revoked, Exxon may be pressured to drill Victory regardless of whether it’s profitable. As a sweetener, Exxon could be permitted to proceed with more commercial acreage to which it also has access, in Russia’s vast west Siberian shale, known as Bazhenov. The Bazhenov shale, according to Russia’s energy ministry, contains an astounding 30 billion barrels of oil. Conditions there are difficult, but not on the scale of the Arctic. Exxon has a lot better chance making money there.”
“For Putin, the Arctic is Russia’s only currently known economic driver for the 2020s and beyond.”
This is one of secondary drivers. Much more important is the diversification of the economy.
“Shell, for example, abandoned drilling in Alaskan Arctic waters a year ago,”
Shell didn’t find commercial oil resources in Alaskan Arctic after having spent $7 billion and having lost a platform.
Exxon and Rosneft found the Victory field, containing more than 100 million tons of oil and 338 billion cubic meters of gas, having spent about $1 billion.
Russia could probably be a major exporter of grain and possibly some other agricultural commodities if the economy were sufficiently free, and farmers could buy equipment, fertilizers,etc, on credit.
I haven’t looked into it in recent times though, and a lot of land that used to be considered “Russian” for conversational purposes is no longer under Russian control.
“Russia could probably be a major exporter of grain”
Thanks for that link AlexS. I’ve been interested to read such a report. I’m interested in watching the KSA grain imports rise in the future as they’ve discontinued their wheat production program.
Thanks Alex,
I haven’t kept up with Russian geography and was thinking maybe more of what used to be reported as Russian production would now be reported as coming from other countries.
There is still plenty of upside potential if Russian farmers have access to capital and foreign markets.
The old days of the collective farms are long gone, for sure.
OFM,
Two other former republics of the Soviet Union, Ukraine and Kazakhstan, are also big exporters of grain.
Here’s another article pointing out that economics might have reduced that deal.
So a company might find it useful to suggest that sanctions cost it money, therefore shifting the blame to something other than the economics of oil.
And if those on the Left are convinced this is all about money, then the story is being accepted as it was meant to be: that sanctions and politics, not economics, were Exxon’s problem.
Streetwise Professor � Exxon’s Russian Dealings Are No Reason to Fret About Tillerson. If Anything, the Reverse is True: “Most importantly, development economics depend on prices, and prices are highly volatile. The initial XOM-Rosneft deals were negotiated in 2011-2013 when oil prices were north of $100/bbl, and were expected to stay there for, well, pretty much forever. A mere year later, oil prices cratered, and now the conventional wisdom is that $100/bbl oil is not on the horizon, even the distant horizon. Even absent sanctions, there would have been a massive re-evaluation of the scale and scope of the Rosneft-XOM cooperation.”
The conventional wisdom this guy quotes is wrong. However an outfit like Exxon won’t invest in a Kara Sea development without negotiating a pretty good deal with the authorities. They definitely don’t want the Gazprom-military combine to come in and grab the property like they did at Prirazlmnoye. And this requires boilerplate language in the decree authorizing the development. This may even require a special law through the Duma, like they had to do for the Sakhalin projects.
So low oil prices would likely restrain Exxon from doing much in Russia even if sanctions are lifted.
Perhaps Exxon could be putting some of the political speculation to rest by saying that the sanctions actually don’t matter much to them at this time.
An emphasis on the economics of oil, rather than political deals, might eliminate some of the conspiracy theories. But it would also suggest that Exxon’s future isn’t necessarily bright if sanctions are lifted.
See what I am saying is that all of those articles talking about how much money Exxon lost on the sanctions just adds fuel to the speculation that there is some sort of Putin/Trump/Tillerson deal going on somewhere. I don’t know if there is some sort of deal, but Exxon may have added to the speculations by emphasizing their loss of money and letting the papers report how the company will benefit when the sanctions are removed.
“An emphasis on the economics of oil, rather than political deals, might eliminate some of the conspiracy theories. But it would also suggest that Exxon’s future isn’t necessarily bright if sanctions are lifted.”
Exxon is a very big company, and its fortunes do not depend on just one project and, more generally, on its operations in Russia.
Each quarter, Exxon is loosing more money on its U.S. upstream operations than $1 billion it has invested in its project in the Russian Arctic.
And it has already written down most of these investments in 2015.
All these speculations and conspiracy theories have nothing to do with the reality and are just part of the current political battles in the U.S.
“All these speculations and conspiracy theories have nothing to do with the reality and are just part of the current political battles in the U.S.”
Our future relationships with Russia are being discussed, though. And oil is part of the discussion.
While conspiracy theories can be dismissed, what we choose to do economically, strategically, and militarily with Russia is very much a part of government in the US. We’ve even gotten conservatives questioning why Trump is so fond of Putin.
And our relationship with Russia also spills over into our relationship with other countries.
So this stuff is a very big deal.
“Many people’s thinking is permeated by state perspectives. One manifestation of this is the unstated identification of states or governments with the people in a country which is embodied in the words ‘we’ or ‘us.’… It is important to avoid this identification, and to carefully distinguish states from people…” ~ Brian Martin, ‘Uprooting War’
Prices in 2017 to 2019 won’t influence that much what happens on a long term project.
Exposing bogus phrasing that conceals how renewable energy for transport is insignificant.
From the zerohedge link: Roger focuses on the railway system in the Netherlands, run by NS, which recently claimed that it operates on 100% wind power. This is of course, if you know anything about electricity generation and the grid, a preposterous claim, and that the company has the guts to make such a claim can only serve to prove how little the general public knows about the topic. Or they wouldn’t dare.
There is a difference between what is being said in that article and what is actually happening.
If you don’t like it, you can take it up with many other news organizations, Forbes for example. Or are you suggesting there are now no reputable news organization at all.
World-famous for their picturesque windmills, the Netherlands has always had a love affair with wind energy. While it was originally used to pump water or grind grain, wind is now helping Dutch commuters get to work. Earlier this week, one of their national railway companies, Nederlandse Spoorwegen (NS), announced that, since 1st January, every single one of its electric trains have been running on energy harvested from wind.
That isn’t quite the same as claiming all Dutch trains are running on wind energy!
Seems like everyone is part of the problem now because everyone is spouting fake news left and right, no pun intended.
The important take away is that the Netherlands has a stated goal of getting off fossil fuels the sooner the better. So do many other countries in Europe and elsewhere. i guess we will all get to see how those plans pan out.
“The important take away is that the Netherlands has a stated goal of getting off fossil fuels the sooner the better.”
As usual, Fred has gotten right to the nitty gritty of the question, and pointed out the key fact, which is that the country is making steady progress in using more wind and less fossil fuel.
Over the last couple of weeks, I posted at least a couple of dozen long comments about the way anti renewable mouthpieces can twist our words when we talk about renewable energy without acknowledging such facts as the fact that we are still dependent on fossil fuel for back up, and WILL REMAIN dependent on fossil fuel for years and years to come.
A skillful antirenewable mouthpiece, or for that matter a person who has run the numbers himself, can make anybody who just blithely says wind and solar are cheaper than coal and gas look like a complete fool and charlatan in a single paragraph, something along this line:
So So and So keeps telling us how wind and solar electricity is cheaper than gas and coal electricity, but he can’t point to any country in the world that uses LOTS of wind and solar power on the grid where electricity is cheaper, because there ISN’T any such country.
What he’s deliberately overlooking, like a car salesman going for the sale, is that wind and solar electricity CAN’T carry the load, because the wind and sun aren’t dependable around the clock around the calendar, and therefore we MUST maintain most , nearly all , of our current investment in coal and gas fired generation, NO MATTER WHAT, for at least twenty or thirty years, maybe longer.
So what happens is that you have to pay for both the wind and solar electricity, AND the gas and coal electricity, and the owners of the coal and gas electricity are FORCED to charge more per kilowatt hour, as they sell less kilowatt hours, or else they will go BROKE.
So maybe some of these days, twenty or thirty or forty years down the road, MAYBE, the wind and solar hogs fattening up at the tax trough MIGHT save you some money.
Maybe some day alla them there super duper batteries that’re cheaper than pinto beans might be for real, and alla them there thousands of miles of super duper power lines might be built, but for now, and for a hell of a long time to come, the only place you gonna find ’em is in the imagination of So and So.
He’s full of shit,he’s as bad as a damned car salesman, and he knows it, and I know it, and YOU know it.”
What this guy says has the ring of truth to it when Joe Sixpack and his wife Suzy hear it.
It’s HARD to get people who don’t understand nuance to understand simple facts.
I probably tried to explain a couple of hundred times to dumb ass D’s and R’s BOTH about Alaskan oil going to Japan, while we were buying Middle Eastern oil to take the place of it. The reason was as simple as pie. It was CHEAPER that way. We could send a barrel to Japan for ( out of the air number ) twenty bucks, and replace it the same day with a barrel from Saudi Arabia for LESS than twenty bucks, same quality, because of the shipping costs being what they were.
Maybe a couple of dozen out of a hundred could ever give up feeling cheated and mildly outraged because we were sending oil to Japan while we were importing oil for our own use. The rest would get it, temporarily, but a week later they were bitching AGAIN about sending OUR oil to Japan.
It’s amusing as hell, but the people who got it the easiest, and quickest, and REMEMBERED, were simple semi literate farmers. I would just say suppose you own a grain farm in Nebraska , and hire somebody to run it for you. Now if you need corn here in Carolina, you can either pay to ship your own here, or buy corn from a local grower. Corn’s pretty much corn, and they saw instantly that the best deal was to sell their Nebraska corn THERE and use the money to buy somebody’s locally grown corn HERE.
So long as the windmills are turning, and making juice, and somebody is using it, the amount of fossil fuel is reduced in proportion to the wind energy used.
The train company will probably win, in terms of the PR effort.
The trains ARE running on gas fired juice, literally , for the most part. But somebody someplace else is using LESS gas because the train company is supporting the growth of the wind industry by buying wind energy contracts long term.
When people hear enough bullshit often enough and long enough, they quit believing ANY of it , and grow ever more HOSTILE to the bullshit messenger.
The eventual result is BACKLASH.
Trump is prez today for the most part part because most people in the southern and rural states are hostile to some of the social and cultural changes the liberal / D party coalition has been ramming forcibly down their collective throat for the last couple of generations , and in particular because the working people in the three Rust Belt states that put Trump over the hump and into the WH gave an unmistakable middle finger signal to the D party in general and HRC in particular that they consider HB’s globalization “gold standard” to be even WORSE than bullshit. To THEM, globalization is outright poison.
Bottom line, it pays to consider how the audience will receive your message, and fine tune it so as to offend as few people as possible, and to make it as hard as possible for the opposition to twist it into a pretzel and ram it up your backside, sideways.
Here, IN this forum, it hardly matters, because the audience is small, and sophisticated.
But in OTHER forums………. IT MATTERS.
Hi Old Farmer Mac,
In 1968 someone could have pointed out that it is impossible to land a man on the moon and return him safely to earth.
One could simply point to the fact that nobody had ever done it, so clearly it cannot be done.
Same for manned flight, automobiles, telephones, radio, television, even the printing press.
Always with you what cannot be done… Do or do not, there is no try.
Clearly fossil fuels will be needed, but they will become very expensive as they deplete, energy provided by wind, solar, hydro, and nuclear will be less expensive than fossil fuel energy. Currently in high wind areas (Iowa) or areas with good insolation (Arizona) wind or solar are cheaper than electricity provides by coal or natural gas.
If one likes expensive electricity, then one should stick with fossil fuels exclusively.
Dennis, look this up
“Technical post on Nordhaus’ new DICE model” in my blog. If you follow the link you’ll see how Nordhaus has kept modeling like crazy while ignoring the energy issues in his model.
Hi Fernando,
Not a lot of detail in that post. I agree reserves should be included, but other than that your analysis seems to be the DICE model needs to include limited fossil fuel reserves.
I agree the scenarios by Nordhaus assumes there will be no peak in fossil fuels and is fairly close to RCP8.5 which requires about 5000 Pg of Carbon emissions. I agree it is unlikely that total carbon emissions (fossil fuels, cement production, and land use change) from 1750 to 2500 will be more than 1300 Pg of carbon. When future trends in the cost of fossil fuels (which will rise sharply after the peak in 2030) and non-fossil fuel energy (which will fall over time) are considered, a total carbon emissions target of 1050 Pg of carbon is likely to be achieved in my opinion.
Dennis, I don’t write long technical posts – that one is intended to give me a link to the Nordhaus write up.
My long posts are the interviews, although sometimes I copy material I want my family to read. Did you read my Biff Tannen interview?
Good morning, Dennis
I find myself repeating that I do not disagree with you at all, in principle.
You can search the world over, and you will never find a greater true lover of renewable energy , excepting biofuels, than yours truly OFM.
I have not been talking about the facts of depletion, or about the costs of renewable energy versus the cost of fossil fuels, except in reference to my point concerning the way we talk about renewables in other forums, because as I have said before, it doesn’t really matter here in this forum. This one is very important, but not that many people read it.
Any given article in any well established magazine attracts a far larger, and far more diverse audience.
What I have been talking about is applying just a little bit of common sense in composing our remarks when we participate in OTHER forums, such as for instance if we post a comment at The Atlantic, or the Washington Post or Forbes.
I’m just trying to get it across that we don’t want to come across to like the proverbial used car salesman to people who have little or no knowledge of the actual facts.
If there is any one mistake that I suspect you are guilty of making, it’s underestimating the ignorance of the public. But don’t feel all alone, or insulted, because I am convinced that a technical expert in any field such as finance, engineering, biology , etc, who does really and truly understand the woeful ignorance of Joe Sixpack is a rarity. I mean, it’ easy for a hypothetical engineer to say Joe couldn’t distinguish a hammer from a nail, but the engineer mostly never seems to really appreciate what this means in terms of politics and public policies.
The public is not a sentient organism, at least not in terms of the way it reacts short term. Watch a flock of birds trying to decide where to land, and you will gain some insight into the way the public thinks, or doesn’t.
If you please, consider how EASILY the public has been stoked up to fiery red heat about let us say gun control. Now only a fool would say that the thousands of people that get shot every year in the USA don’t matter, but let’s put it into perspective for a minute, and see just how easily manipulated the public REALLY is, in terms of understanding and getting all hot and bothered about people dying thru no fault of their own, and manipulated by PR campaigns, or the lack thereof.
At least twenty times ( probably a lot more, I just pulled twenty out of the air) as many people die every year in this country as the direct result of the corporate food industry marketing junk food.
BUT nobody at all, except doctors and other health care professionals ( who are by comparison voices in the wilderness) are hot and bothered about junk food, and what it’s doing to us, and they are so few that junk food is not even MENTIONED in political contests, except occasionally in places like NYC or San Francisco.
There is no doubt in my mind that you have forgotten more about some entire fields of knowledge than I have ever known.
BUT if you think we can go around making baby talk about renewables being cheaper than gas and coal, and get our asses kicked in terms of what the public believes, you are wrong. The public as a whole makes up what passes for its mind on the basis of sound bites.
What I’m saying is that we ought not oversell our case. Overselling backfires, politically. We just need to add the qualifiers,which takes only a few extra words, acknowledging that FOR NOW, renewable electricity is NOT cheaper than coal or gas, in terms of the big picture, as seen by consumers looking at their electricity bill, because we must still maintain the vast bulk of the fossil fuel fired installed and sunk investment generating industry, for some time to come.
We can make our case without sticking our chin out, and putting our hands behind our back, and POSING for a knock out response in the sound bite world in which we live.
The people on our side are on our side for one of two reasons, or a combination of the two. They’re either well enough informed to know the REAL price and the REAL problems associated with fossil fuels, or else they are liberals and Democrats. You don’t HAVE to know doo doo from apple butter to be in favor of renewables if you are a Democrat, because the R’s are against them, ‘nuf said. You don’t have to know doo doo from apple butter about health care to be in favor of the preACA health care industry status quo if you’re Republican, etc. The D’s are for the ACA, that’s sufficient, ‘ nuf said.
The people who we have to win over, as a practical matter are the ones in the middle. According to CNN exit polling, Trump won the middle in all the battle ground states. Election results are determined in the middle as a general rule, in this country, excepting the occasional presidential election.
The typical middle of the road voter in this country probably spends less time in a YEAR thinking about renewable energy and fossil fuels than the average regular contributor in this forum spends thinking about it any given week.
You may have heard the old joke about the bearded , pipe smoking, earth shoes , corduroy coat with elbow patches professor at a small New England liberal arts college saying , “I can’t understand how McGovern lost. Everybody I know voted for him. “
Hi Old Farmer Mac,
As I have said several times IN THE BEST AREAS such as Iowa for wind and Arizona for solar. Wind or solar is cheaper than a new natural gas fired plant.
In the interior of the US (Iowa and Nebraska) PPA process for wind are 2 cents per kW hr.
These are very cheap prices and yes fossil fuels are needed for backup, but in the future the fossil fuel prices will rise and the lower the share of electricity provided by MORE EXPENSIVE fossil fuels, the LOWER your electricity bill will be.
Back atcha Dennis,
I will repeat once again that I understand the math, it’s dirt simple.
But tell me this. Could the states of Iowa, Nebraska or Texas run solely on wind and solar power NOW?
Damned right they CAN’T. They still depend on fossil fuel back up, and that means paying for both the wind and solar PLUS the fossil fuel backup.
This is dirt simple reality, and it will REMAIN reality for quite some time, although the amount of fossil fuel capacity can be reduced a little at time as the wind and solar industries grow up.
When we don’t acknowledge this reality, we’re doing about the same thing, in principle, as the people who talk about how cheap coal and gas are without acknowledging the environmental costs and the public health care costs of burning coal and gas.
We do have the moral high ground, since our goal is far better aligned with the true best interests of the people and the country.
And while I EXPECT people like Nick G to stick on message like a PR mouthpiece, and talk about an electric car being the cheapest car on the road, since it’s subsidized……. Well, the COST of a car MUST be paid to the manufacturer, or the manufacturer WILL go out of business. The REAL COST ( although I haven’t picked up an econ text in many years , and may not be using precisely correct terminology ) of that car Nick is yakking about is the SUM of the money paid by the new car buyer PLUS the subsidy paid for by the government.
The real price electricity , as experienced by the real world customer consists of what he pays for the renewable component PLUS what he pays for the fossil fuel ( and or nuclear ) component of his bill, plus taxes, etc.
Arguing that wind and solar is cheaper than fossil fuel fired electricity is like arguing that owning a motor scooter is cheaper than owning a car to a man who can make good use of a motorcycle, on days the weather is nice, but STILL MUST CONTINUE to own a car for days when he has to transport his family, get to work when the roads are slick, etc.
Sure he can make good use of the scooter, but the scooter just can’t giterdone by itself, and wind and solar power combined can’t get the job done YET, and won’t be able to get the job done for some time to come.
I’m talking public relations.
Maybe it’s time I quit talking about this point, because it looks as if it is impossible for most advocates to accept it, just as it’s impossible for most fossil fuel advocates to accept the reality of environmental destruction associated with using fossil fuel fired electricity, or to accept the reality of fossil fuel depletion, or the reality of the cost of defending our access to foreign oil, etc.
You voted for Trump because Clinton was going to be in Wall Street’s pocket.
Trump wants to repeal Dodd-Frank and eliminate the Fiduciary Rule, letting Wall Street return to its pre-2008 ways.
You voted for Trump because of Clinton’s emails. The Trump administration is running its own private email server.
You voted for Trump because you thought the Clinton Foundation was “pay for play.” Trump has refused to wall off his businesses from his administration, and personally profits from payments from foreign governments.
You voted for Trump because of Clinton’s role in Benghazi. Trump ordered the Yemen raid without adequate intel, and tweeted about “FAKE NEWS” while Americans died as a result of his carelessness.
You voted for Trump because Clinton didn’t care about “the little guy.” Trump’s cabinet is full of billionaires, and he took away your health insurance so he could give them a multi-million-dollar tax break.
You voted for Trump because he was going to build a wall and Mexico was going to pay for it. American consumers will pay for the wall via import tariffs.
You voted for Trump because Clinton was going to get us into a war. Trump has provoked our enemies, alienated our allies, and given ISIS a decade’s worth of recruiting material.
You voted for Trump because Clinton didn’t have the stamina to do the job. Trump hung up on the Australian Prime Minister during a 5pm phone call because “it was at the end of a long day and he was tired and fatigue was setting in.”
You voted for Trump because foreign leaders wouldn’t “respect” Clinton. Foreign leaders, both friendly and hostile, are openly mocking Trump.
You voted for Trump because Clinton lies and “he tells it like it is.” Trump and his administration lie with a regularity and brazenness that can only be described as shocking.
Let’s be honest about what really happened.
The reality is that you voted for Trump because you got conned.
I didn’t vote for Trump. But my analysis shows the Florida vote swung to Trump when Obama issued a presidential decree allowing large quantities of rum and cigars be brought by American tourists returning from the island of slavery.
People who voted for Hillary were being conned also. D vs R is con vs con. It doesn’t matter who you vote for, you’re voting for a con. That’s what American politics is. American politics is a political sewer pipe.
Copying HB’s 1:41 am over to the non petroleum thread to reply.
>That isn’t quite the same as claiming all Dutch trains are running on wind energy!
You make this remark while failing to state your assumptions that lead you to the conclusion, so it’s just propaganda. Your assumptions are probably false.
It’s pretty close to the same, since basically all Dutch trains run on electricity. You are probably confused because you are thinking about America’s old fashioned diesel system.
My interpretation of the report is that the Elektrificatiesysteem the seperate DC system that runs the Dutch train system is now, in some sense of the word all wind. I guess it is net wind actually.
But calling the Dutch liars just because the Americans elected a con man to be president is simply projection. Your apparent belief that Dutch trains are run on diesel is also projection of your own experiences onto something you no nothing about.
Worüber man nicht sprechen kann, darüber, muss man schweigen, as Wittgenstein put it.
Why target Russia? Is it because of an impending Seneca cliff in Saudi Arabia? They were supposed to peak 10 years ago but water and nitrogen injections kept them afloat. Now?
“I’ve gotten a couple emails from people who have asked me what I think the “end game” is in regards to Russia. And, indeed, the government is going into extra innings with this whole Russia vilification project. This is worse than someone who has held on to a grudge for years. The government does that, too, but they haven’t done it over ideology (as with Cuba) for quite some time now. What, then, is the motive?
The motive is perfectly clear: Oil. You see, Russia has already eclipsed Saudi Arabia as the world’s biggest oil producer. This means the big Saudi oil fields are drying up. And the government knows that, but they can’t tell us this because it’ll create a panic. One would think this would motivate the United States to get cozier with Russia. However, what the United States government fears is that if we do that, Russia will twig to the motive for it, and realize it has the United States over a barrel. An oil barrel. At which point the price goes up. Not to mention extracting concessions in the global sphere of influence.
Thus, what the United States is playing at here is trying to install a different “regime” in Russia. That being, one that Vladimir Putin does not control or have any influence over. This is easier said than done and the United States knows this. But the stakes are quite a bit higher than controlling the dwindling oil supply in the Middle East. Russia is obviously in control of most of the world’s remaining oil reserves. The United States needs a puppet regime in Russia to have access to that oil without paying the correct market price for it.
At some point, this gambit will fail. Russia is not the Middle East. A war with Russia cannot be won or cease-fired out of. Nor can a United States-backed “regime change” succeed over there. This is not the 1990s Russia of Boris Yeltsin. The United States, however, cannot come clean with the truth to the American people. The reason is because if the American people knew the truth, they’d never sleep nights anymore. The truth is this: Our entire economic system is based on petroleum and low-cost petroleum at that. But the actual nightmare is that our entire agricultural system is based on cheap oil.”
Saudi has had water injection for much longer than ten years on pretty well all it’s fields and I don’t think they are using nitrogen injection anywhere, there may be some small CO2 EOR projects though. Their production has been maintained by developing three old, heavy oil fields that were mostly dormant (Manifa, Khurais and Shaybah), by using a lot of in-fill drilling and intelligent wells (where water breakthrough can be controlled) on maturing fields and by extensively redeveloping offshore fields with new wellhead platforms and adding artificial lift. I don’t think their fields are anywhere near drying up; they may be hitting some limits in surface facilities – probably to do with water injection or treatment of produced water which means they have to continually choke back so as not to damage the reservoirs.
The well quality of Permian is going extreme up, what happened there? Technology revolution, or new findings?
I suspect longer laterals, bigger fracs, and maybe other well designs. I hope others can give some data on this.
Enno,
Many thanks for your latest updates on EFS and the Permian.
There is no data on average well quality for the wells that started production in 2016. Is that because the data for last year is incomplete?
Alex,
“There is no data on average well quality for the wells that started production in 2016. Is that because the data for last year is incomplete?”
If you go to the “Well quality” tab in the first presentation, you’ll see 2016 profiles as well.
The “Ultimate Recovery” overview only supports displaying production histories for wells of the same age. As there are still 2016 vintage wells on which I have no data (the ones that started in Nov/Dec), 2016 is not yet shown if you display it by “Year of first flow”.
However, if you change the selection to “Quarter of first flow”, or “Month of first flow”, then you will see more recent data as well, incl 2016.
You may remember past discussions here where we discussed displaying or omitting incomplete tails in the well profile graphs. The Well Quality tab can show incomplete tails, while the Ultimate Recover tab can’t.
Thanks Enno,
I just found that the number 2016 in the legend was hidden.
Comparing well performance in the Permian and the Eagle Ford, it seems that average IP rates are not that different (582 b/d and 510 b/d, respectively, in the second month of production), but declines in the EFS are much steeper.
As a result, by the tenth month, average well in the Permian produces 210.7 b/d, and in the EFS only 122.6 b/d.
Furthermore, well productivity in the Eagle Ford is detereorating over time compared to the wells drilled in previous years, which may suggest that
longer laterals and bigger fracs result in only slightly higher IPs but much steeper declines.
By contrast, new wells in the Permian continue to perform better than older wells.
That may explain why drilling/completion activity and LTO production in the Permian have remained more resilient and are quickly recovering; while EFS has seen the biggest decline in production among the key LTO plays.
I agree Alex,
Note that Permian wells only now start to approach the well quality of Bakken wells. But the Permian has other factors working for it.
I was trying to find explanation for a sharp drop in production in the Eagle Ford in various research reports and articles, but I could’t.
You charts show it very clearly! So thanks again.
Well performance in the EFS may be a sign that not much potential drilling locations are left in the sweet spots there. In that case production in the EFS will not be able to reach its previous peak (as of March 2015).
As regards the Bakken, production there has declined less than in the Eagle Ford, but much more than in the Permian. I think that a big problem for operators in the Bakken is a significant price differential between ND well head prices and WTI (it was $12 in December). And this differential cannot be eliminated without additional pipeline capacity.
In any case, it seems that the recovery in both the Bakken and EFS will be very slow.
Thanks Alex, that is great to hear.
Hi AlexS,
It looks to me the Eagle Ford wells have not changed very much in 2016 and generally have improved from 2010 to 2015.
I also have difficulty seeing 2016 wells in the Eagle Ford well quality view.
The 2016 well is very similar to the 2015 well for the first 7 months, but falls off a bit by month 8 relative to 2015 wells, the number of wells is very small for 2016, so that may be due to a limited data sample. Three thousand wells for month 9 of 2015 vs only 292 2016 wells at month 9.
You are no doubt correct that the better prospects in the Permian basin has led to less drilling in the Eagle Ford, but higher oil prices may result in increased drilling in the Eagle Ford in the future.
As far as the Permian being “much” more productive.
If we look at 2015 wells at month 20, cumulative output for the Eagle Ford well is 112 kb and Permian Ford 2015 wells at 20 months are 116 kb, so a marginal improvement.
The 2016 Permian wells are significantly better than Eagle Ford wells after 9 months (98.9 kb cumulative vs 76.7 kb).
Dennis,
The legend in the well quality tab may not show scrollbars, but they will become visible if you interact with it. This will allow you to scroll to year 2016. Let me know if this helps.
Hi Enno,
I just looked at individual years, the 2016 curve was hiding behind the 2015 curve, they are not very different as far as well profile, just a statistical variation to my eye for Eagle Ford well profiles from 2015 to 2016.
Eagle Ford has declined due to fewer wells being completed for the most part.
Latest ensemble mean prediction from NOAA’s Climate Forecast System calling for weak #ElNino by peak of Atlantic hurricane season (Aug-Oct)
”In a somewhat related aspect, I’ve not seen an updated graphic from Rune on the cash flow from major Bakken operators.
I’ve always felt that single frame told a very powerful tale, but not so much pessimistic as one might think.”
The chart likely referred to looks at Bakken(ND) as one entity and below is an updated chart as per November 2016 and instead of monthly free net cash flow it has now been annualized (last 12 months total free net cash flow) to enable the same units on both axis.
For all 2016 the companies in Bakken will use about $2,500 Million more than their free cash flow from operations (this is by not including the effects from natural gas sales).
Using Billions = 1,000 Millions on one axis and Millions on the other may be deceptive.
Average gross specific interest cost is now at an estimated $7/bo.
What has to happen for you guys to understand?
Whoever holds that debt doesn’t get repaid. What does that mean?
Nothing. If they are systemically vital to the global financial structure, the central banks (plural) will create the necessary money and GIVE IT TO THEM.
It doesn’t have to mean anything. And further . . . if YOU were in charge of the situation . . . YOU would do exactly the same thing. You would create the money and GIVE IT TO THEM.
How could you not?
There’s also another conceptual leap pending.
If that debt is NOT systemically vital to the global financial system, but IS systemically vital to flowing enough oil for civilization to function — that gets those debt holders bailed out, too.
Watcher,
whatever is the primary source of funds that flow to the LTO industry, if they still flow, LTO production will continue. The recent data suggest that inflows (in the form of IPOs, secondary share issuances, proceeds from asset sales, acquisitions by the oil majors and private equity firms, etc.) are again increasing. That means that investments in shale oil and gas will rise in 2017 and the next several years, and LTO production will rebound. And that will have an impact on the global oil market.
As regards (excess) money printing by central banks, it affects all parts of the economy, not just oil and gas industry. If there were no money printing, people would not be able to spend thousands of dollars on electronic gadgets; cars, including EVs; solar panels, wind turbines, etc.
“That means that investments in shale oil and gas will rise in 2017 and the next several years, and LTO production will rebound.”
But isn’t that what much of the discussion here is about? Whether production will rebound, and if so, for how long?
If they are systemically vital to the global financial structure, the central banks (plural) will create the necessary money and GIVE IT TO THEM.
I guess that’s what happened to the sub-prime mortgage crisis. The banks were “systemically vital to the global financial structure”. They all got bailed out. But the purchasers of those sub-prime mortgages, mostly pension funds and such, were not considered vital. They got nothing!
While you fundamentally misunderstand (“do not understand” would be the correct word here…) how it really works, you are correct in your conclusions…. practically speaking.
Watcher,
You should write a post and ask for it to be posted on POB where you lay out what it is we do not get.
I for one did not get the memo on central banks omnipotence.
That is the key rebuttal.
Are central banks omnipotent? Are they, working in concert (not as competitors seeking the best interests of their particular countries), omnipotent?
They are. Systemic threats have created cooperation and there is no sign of it ending.
They ARE omnipotent. Right up until geology prevents uniform flow and uniform consumption, regardless of funded oil production effort.
THAT is the limit to their omnipotence, and it’s essentially the only limit. Failure of adequate flow regardless of money.
Odds don’t look bad that we’ll see it soon.
Watcher apparently believes that just printing money and passing it out to anybody who must have it to prevent an economic crash, or a disaster of any sort that can be prevented by throwing money at it is a trick that has magical overtones.
From the way he presents his case, it’s easy to draw the conclusion that he thinks this trick is harmless, that it can be used over and over again without fail, but occasionally he does say something entirely rational, such as that when there’s not enough oil in the market, somebody has to do without .
Now somebody like Dennis, who has a very sophisticated understanding of finance and banking might take exception to MY interpretation of how helicopter money can prevent a problem from growing into a catastrophe,.
In this particular case for example, Watcher is saying that if enough money is thrown at the oil industry, the barrels we MUST have will come to market, and he’s arguably RIGHT,at least short to medium term, because there’s still plenty of oil in the ground that can be recovered if the price of it is high enough.
Money’s fungible, and it doesn’t matter much to the guys on a drill rig whether the money in their paycheck originates from the sale of oil at a high price, or from a subsidy paid to their employer, or both. Either way, they will make the oil flow, so long as they are paid, and the bills coming in to the oil company are paid.
Now in a world where everything is on the up and up, and transparency prevails, and everybody talks HONESTLY, rather than like a goddamned car salesman out to get your signature on the paperwork, the matter of subsidizing an industry in order to prevent great harm to the body politic would be dealt with by passing a bill providing the money and providing it by the usual means, via collecting it as taxes. Some of it might or might not be printed, but at least everybody would KNOW.
Now as I see it, printing money on the grand scale, by means of socalled quantitative easing, or whatever other euphemism is used to name the deed of doing it, is basically no more and no less the same thing as Uncle Sam delegating the job of collecting taxes to the central bank and the banksters who run it.
So – there may not any inflation, as measured in the usual ways. But the concept of fungibility also applies to inflation in my way of seeing things, even though it’s concealed, hidden by the noise.
Consider. Suppose I own the oil industry, and I get a few tens of billions in subsidies. I use it to pay my employees, and all the other bills I incur, and hopefully I WOULD bring the barrels to market that we MUST have ( for a good many years to come, of course. ) thus preventing an economic crash due to lack of oil.
Now let’s get into a little DETAIL, add a little NUANCE. I buy up steel by the million tons, I hire skilled workers , directly or indirectly, by the tens of thousands, making the things I buy and getting them to me.
In short order, there’s a million tons less steel available to all other industries that buy steel, ditto everything else I use in my oil biz. There tens of thousands fewer skilled workers available to make the same range of products, etc, for sale to OTHER industries and consumers.
Now the price of steel might not go up, because I’m using so much MORE, and wages might not go up either, just because I’m hiring by the tens of thousands ( most of them indirectly as suppliers of goods or services).
But if I were NOT doing all this extra hiring and buying, well then the most elementary economic theory tells me that all those people and all those goods and services would be available to EVERYBODY ELSE meaning everybody NOT directly or indirectly employed in the oil biz.
Steel would be cheaper, trucking would be cheaper, sand would be cheaper, clean water would be cheaper, new bulldozers and motor graders would be cheaper, etc etc.
Bottom line, the cost of the subsidy is paid in actual fact by all the people of the country,collectively, as a hidden tax.
Inflation caused by printing or creating money out of thin air need not manifest itself as RISING PRICES. It can manifest itself as LESS DEFLATION, which is effectively the same thing, in real terms.
It’s insanely stupid that so many people go around arguing that this or that policy has not helped or has done harm based on a simple correlation with a single variable. Lots of idiots have argued that cheap gasoline hasn’t helped the economy over the last couple of years. All you need to do to see what an ABSURD argument this is, is to envision gasoline still being four bucks, and think about how many MORE people would have gone broke as the consequence, or cut back on eating out, or new clothes or new phones or medical care, ad infinitum.
There’s a limit to how much printed money can be absorbed into the economy before big problems result, problems bigger than the problem that led to the printing in the first place.
I don’t know what the limit is , and I doubt anybody does, because it would change with circumstances.
Sometimes very dangerous medicines are the only treatment that will cure an illness. Chemotherapy comes to mind. It’s hard as hell on the patient, but not as hard as DYING.
Obviously I have been painting fast with a very broad brush, but I haven’t seen any arguments to the contrary that make sense to me.
OFM-“Bottom line, the cost of the subsidy is paid in actual fact by all the people of the country,collectively, as a hidden tax. ”
Absolutely correct. That debt spending, whether it be on fueling the housing industry, the drilling industry, the nursing home and pharma industry, the bomb industry, or the elderly life prolongation industry, is backstopped by the tax payer- current and future.
The banks just act as the interest collecting conduit between the Congress and the public. Remember it is the Congress that does the spending and the industry/bank bailouts- not the Fed.
Trump and Ryans wall, if it ever gets built, will get paid for by the taxpayers as well, American not Mexican.
The late great Garrett Hardin had a name for that game – a game as old as civilization:
The “CCPP” game – Commonized Cost – Privatized Profit. Depending on the specific game board, the “costs” can be financial, environmental, social, and/or political. It is all the same game, though. It is “gaming” the “system” for your private profit. A game at which casino developers and owners are especially adept. And that is what scares me….
Rune, thank you for this. People here I believe had been asking for it, now, unfortunately, it seems to have gone over most peoples heads. There is a fundamental detachment from reality here; people think LTO development in America will have a never ending source of funding, regardless of price, demand, http://oilprice.com/Latest-Energy-News/World-News/EIA-Slashes-Crude-Oil-Demand-Forecast.html or the economic/financial woes of the industry itself. I can’t say that I understand that myself.
Mike, thanks!
I did not expect my post would unleash an avalanche with unsubstantiated claims about central banks making bond holders/creditors whole for losses incurred by shale companies.
Several companies have already been through bankruptcy proceedings (Chapter 11 primarily) and affected bondholders accepted a haircut.
Integrated companies have recognized impairments to their balance sheets.
So if only those who makes/supports these claims could come up with documentation of the conduits by which the bondholders/creditors are made whole by central banks it would be helpful.
The losses/haircuts/impairments will be spread over several years (perhaps decades) and in relative terms the amounts involved do not pose a systemic risk.
If central banks got involved it would be much easier (and better) to manipulate the oil price higher.
Oh I didn’t know this was still alive.
Dood what substantiation do you need for the claim that if global systemic risk exists financially from growing shale debt they will be bailed out? You got a problem with that claim? Where were you in 2008 when nominal and gross credit default swaps were measured in trillions? Know anyone at the ISDA or even the DTCC?
No, of course not. You’re buried in normalcy confirmation bias that believes QE creation of 25% of GDP over about 6 years is completely consistent with markets operating in laissez faire fashion. When did you, oh hell, when did anyone last hear the phrase moral hazard? Think about that when you next posture yourself offended.
Normalcy is gone. It’s not coming back. Oil scarcity is relentless and is the likely cause. I can offer you help in re-evaluating what is and isn’t normal:. Have a look at the German 10 year Bund. 0.3%. German inflation? About 1.2%.
Watcher, thank you!
I understand that you have a serious problem to stick to the subject.
Since you apparently has such unique insights into how it is all connected why not write a coherent post and ask for it to posted here at POB?
Hi Rune,
I would be happy to post it.
Watcher my email is below
peakoilbarrel at gee male dot commercial
Hi Rune,
In the legend it says US$ Million/year for net free cash flow, should that be US$ Billion/year?
Dennis, thanks!
Correct.
The legend should read Billion as shown on the left y-axis.
I’ve been looking at this tanker tracking website (It’s free but it has only been going for a couple of months). http://tankertrackers.com
Singapore and Malaysia’s combined tanker hubs
Clipperdata
While OPEC’s export loadings to Asia were strong in January, we are seeing much lower flows destined for North America. total loadings last month dropped below 3 million barrels per day for the first time since August. http://blog.clipperdata.com/oil-takes-lead-from-lady-gaga
They just don’t come any more anti Trump than Mother Jones.
A cynical Sanders supporter might just interpret it as being mostly about the D party establishment wanting Sanders to bail it’s sorry ass out after losing miserably last election cycle.
And he just might be right.
That would be me, HB. 😉
But I leave it up to the reader to decide for himself.
But there’s a LOT more to it than that, and everybody who would like to see Trump in convict’s stripes or an orange coverall that might compliment his complexion really ought to read it.
This is an open thread for oil and gas. Fascists just cannot seem to grasp that.
Sorry, I usually read carefully, but in this case, I failed to do so. I won’t post any more political comments here, unless they relate to gas and oil.
Okay, now I feel bad. I thought that you had done it intentionally. My mistake.
Hi Clueless,
No problem, but I feel compelled to say I am going to copy HB’s rant over to the non petroleum open thread, and reply to it there, lol.
Sometimes I disagree with you , but I always read your comments for insight , and sometimes I find little gold nuggets in them and wonder how come I didn’t think of THAT myself, lol.
Rats continue to abandon ship:
(The pay to play is mostly over with)
In Wake of Hillary’s Loss, the Clinton Foundation Collapse Continues
“We have reset our cost base, transformed our opportunity set, and we continue to chase improvements. We have the financial capacity and are ready to invest in our next generation portfolio with radically improved break evens. With a sharpened high value, low carbon strategy, Statoil is well positioned for the long term and even more value driven in everything we do”, says their CEO; Google translate couldn’t offer too much help on what that actually means but it sounds like they are running out of opportunities in oil and are concentrating on cost savings there and expanding the renewables business.
Statoil has divested from Canadian oil sands. They are investing in offshore wind and CCS. Offshore wind is marginal in Norway (they mainly use hydropower), CCS is used at Snow White (gas field).
Statoil has gradually become a more high cost producer of oil. If we look at their cash flow statement for 2015 and 2016 combined, the cash flow from operations of 35 bill. usd dollars just about covered capex expenditures of 27 bill. usd and (record low) taxes to the government of 12 bill. usd. Other costs including dividends made Statoil reduce their cash equivalents from 11 bill. usd to 5 bill. usd year end 2016, esentially burning 6 bill. usd of cash in the two year period with low oil prices. Debt levels are slightly down to 27 bill usd.
The strategy set up by former CEO Helge Lund of expanding Statoils international business primarily in North America seems to have pretty much failed completely. The oil sand business is sold with a loss, the same with Marcellus operating leases. While exploration wells in the GOM have been dry. Statoil is left with some acerage in Bakken and Eagle Ford, but it is hard to see how this business is going to be profitable.
Statoil is “all over the place” when it comes to future direction. Renewables, exploration in Barents sea and hopefully (for them) the Lofoten area in Norway. A major investment was done in deepwater Brasil. Further cooperation with russian companies within shale in Russia and offshore projects near russian border is on the agenda. Statoil needs to replace their natural gas reserves going forward, and also their reliance to the Johan Sverdrup field is big (startup late 2019 or early 2020). Gives them a 10 year window to either develop oil in Brasil or find and develop new oil and natural gas fields in Norway.
Just as an FYI, BP’s dividend yield is now almost 6.98%.
Subtle item on that sort of thing, sports fans.
US oils tend to raise their dividend much more frequently and . . . predictably than the Euro oils, but the Euro oils generally have a higher immediate yield.
This means almost nothing.
Douglas-Westwood has issued a new report on deep-water prospects. It costs a lot to buy but there have been a couple of reports on it. They export traditional deep water production from GoM, Brazil, Angola and Nigeria to peak in 2019 at 7.1 mmboepd. Frontier deep water (e.g. west coast Africa) is expected to climb but is mostly gas prone. They identified 118 deep-water projects that could be drilled from now to 2021. Overall they expect $120 billion to be invested to 2017 but declining at 6% per year average (e.g. 27 declining to 21).
“OEMs are beginning to feel the full impact of the downturn due to the low volume of projects sanctioned since 2014 as they are rapidly working through their record backlogs established over the 2011-2014 period. However, a number of mega projects waiting final investment decision (FID) are expected to be up for tender over the next 18 months, as operators hope to take advantage of a more competitive pricing environment. Subsequently, subsea tree installation activity is estimated to grow at a 4% CAGR over the forecast period. DW has identified over 118 deepwater fields in its World Deepwater Market Forecast with potential drilling activity, which demonstrates that many oil majors have and will continue to invest in deepwater operations to replenish dwindling production profiles.”
I haven’t seen many companies talking of making FIDs in their 4q2016 results. Mostly it has been about budget responsibility and reducing debt, though Total and Eni, who haven’t reported yet, might be the most likely for deep-water. Of the 118 fields I’d say about a third are oil tie backs, a third gas and a third oil floating production systems, most of which are projects that have been around a number of years. There is a combination of obstacles for these, difficult reservoirs in Brazil and GoM, political issues in Angola and Nigeria, debt and corruption in Brazil and Nigeria. If the highly specialized subsea OEMs start to run out of orders and have to shrink it might present one of the biggest impediments to recovery in oil supplies in the medium term as they would have trouble getting back the expertise and organization, but then as not much new is being discovered they may not be needed anyway.
This is a pretty good summary of offshore 2016 exploration which I haven’t seen posted here before; it shows how the low discoveries for oil and gas fell compared to previous years. I still haven’t seen anything giving overall discoveries but IHS sometimes come out with something in CERA week.
Baker Hughes rig international rig counts are out for January: oil down 14, gas up 9, miscellaneous up 9 (mostly in Indonesia – I don’t know what they are drilling for – minerals or water?). Oil number is the lowest since 2006 except for a dip last October – Europe and Latin America had biggest drops, Middle East added rigs. Norway dropped 4 – I don’t know if they have seasonal restrictions in the Barents Sea because of ice.
I posted that Facebook item about Russia and Exxon because I wanted to know what people here thought. Those who commented said it was full of errors.
But that led me to do a little research and I’ve been looking at what the sanctions really meant for Exxon. Because of low oil prices, it’s quite likely development would have stalled anyway. But the sanction issue actually provides something of a smokescreen by which Exxon can blame the sanctions rather than low oil prices from not doing anything in the area.
I don’t know much about political conspiracies, but I know enough about corporate PR and spin to be aware that companies sometimes say things and do things to give the appearance of future earnings in order to boost stock prices.
Rex Tillerson misleads on Russian sanctions opposition | PolitiFact: “But at Exxon’s May 2014 shareholder meeting, Tillerson offered a more negative take on sanctions overall. He told reporters that sanctions are ‘imprecise and ineffective’ and that ‘our views are being heard at the highest levels,’ he said, according to the Associated Press.”
I have already wondered aloud if Tillerson, being a gas and oil insider, foresees the future of the industry and knows it isn’t all that bright. He has said that for the moment he plans to keep the sanctions.
Tillerson says would support maintaining Russia sanctions for now | Reuters: “President-elect Donald Trump’s nominee for U.S. Secretary of State, Rex Tillerson, said on Wednesday he would support maintaining U.S. sanctions on Russia until the United States further develops its approach to the country.”
Could it be that in terms of oil prices, it is better to maintain the sanctions, but while at the same time saying the sanctions are bad?
There’s the matter of sorting out what is good for oil prices, what is good for US foreign policy strategy, what is good for Exxon, what is good for rich individuals using their influence to further enrich themselves, etc.
The topic isn’t luckily to go away until there is a better understanding about why Trump seems so supportive of Putin.
I think Trump has an affinity for Putin for two reasons.
He likes the idea of doing lots of business with Russia. He has a natural affinity for working with other white guys, who get things done.
Secondly, he admires bullies, since he is one himself. Certainly Trump is bush league compared to Putin when it comes to brains, strategic thinking, and guts- And that is why Putin was so keen to have Trump elected.
There are some laws of nature:
F = m a
F = G M m / r^2
B = uo I / 2Pi r (Electromagnetics, for the unwashed)
Loose change can often be found between seat cushions.
There are no stupid billionaires.
“There are no stupid billionaires.”
They are smart enough to do the con—
But too stupid to comprehend the results.
Of course, if sociopaths, the second is a feature.
On second thought, forget the second.
The things that makes truisms interesting is are the exceptions.
History provides numerous examples of billionaires who were fool enough to get taken by con men.
The wealthy class that owned German industry for example thought using Hitler would be a handy way to enlarge their fortunes. They wound up dead or destitute as a result of that miscalculation.
He played them like a violin until he got into their good graces and gained their support. After that he was moderately nice to them for a while, during the period they thought the controlled him while he was putting the finishing touches on his long range plans.
Once he had a good grip on the reins of power, he used them just as roughly as he did everybody else.
And various scam artists have made off with large sums of money entrusted to professional managers , who might not have been billionaires in their own right, but they were nevertheless in charge of billions.
“There are no stupid billionaires.”
Alice Walton
whaaa
She graduated from Trinity University in San Antonio, Texas, with a B.A. in economics and finance. She began her career in finance as an equity analyst and money manager for First Commerce Corporation and later served as vice chairperson and head of all investment-related activities at the Arvest Bank Group. In 1988, Walton founded Llama Company, an investment bank engaged in corporate finance, public and structured finance, real estate finance and sales and trading. She served as President, Chairperson and CEO. For a time, she was a broker for E.F. Hutton.
She seems to be an alcoholic, which happens at any IQ level. Why did you think she is stupid?
>There are no stupid billionaires.
Haha. God bless America, and dumb Americans, good Christian folk who believe the rich deserve to be rich and the poor deserve to be poor. Or maybe they’re Libertarian, believing that Adams Smith’s invisible hand is the hand of God Almighty hisself.
No stupid billionaires? Not even in the House of Saud?
An old friend of mine used to beg money from gulf Arabs for Polisario. He’s a real life Commie, I admit. His remark about the people running the show in Saudi Arabia is that they were so dumb they couldn’t keep track of whether they were marrying their niece or their cousin this week.
He also objected to their table manners. It ok to lick your fingers, but licking lamb grease off the palm of your hand at the table is a bit much. Eating from a gold plate doesn’t make you civilized.
Oh, but Americans are much smarter than Arabs, you’re probably thinking. Well, blessed are those who believe that. I mean, we’re talking about a country that elected Donald Trump president.
I found this. The original article wouldn’t load for me, so I have a link to the cached version.
The Paradox of Russian Sanctions Relief – The American Interest: “In the short term, then, a hasty lifting of sanctions could endanger both Russian exporters and the government’s best-laid budget plans. This does not mean that Putin will not push to have sanctions lifted, but he may put the issue on the back burner for the time being, until a more auspicious climate arises and oil prices are on the rise.”
Putin, don’t expect much from Trump's sanctions relief | TheHill: “Lifting sanctions actually may hurt Russia economically in some areas. It will have a negative effect on oil prices. That means less revenue for Russia’s resource-intensive economy, and a poor outlook for its cash flow. Commodity revenue accounts for almost half of Russian state revenues.
And economic pain from removing Russia sanctions could also be felt here. A depressed global oil price will hurt U.S. oil producers struggling for solvency in a bleak market. It will also hurt their prospects to compete in the global crude export market. And when it comes to natural gas, lifting sanctions on Russia will hurt the ability of U.S. LNG suppliers to compete internationally.”
Why would lifting sanctions have a negative impact on oil prices?
This dood has manufactured sides in what one supposes is politics.
But to your question, what is negative? Lower consumer budgets?
Besides that, applause for the question, since no one has proven impact on prices.
Presumably with greater production, lower prices.
I repeat: sanctions did not have any impact on Russian oil production.
The article in Platts says it very clearly.
Why did Exxon say it lost money as a result of sanctions?
What does this mean?
Exxon Has Lost Over $1 Billion From Russian Sanctions | OilPrice.com: “The sanctions forced Exxon to shelve its Arctic plans, and it started to lose money from revenues generated by its ongoing Russian projects, such as the flagship project Sakhalin-1 and a number of joint ventures with Russia’s Rosneft. It also lost future revenues. The Arctic venture alone was valued at $500 billion in total investments.”
Exxon has invested $1 billion in a project that could start production not before 2020. If sanctions are lifted this year, the project will start 2 or 3 years later (2022-2023). By that time, global supply-demand balance will significantly change.
Exxon is not loosing money on the Sakhalin 1 project, which has actually increased output in 2016. In 2015-16, ongoing Russian upstream operations remained profitable for western majors, including BP, Shell, and Exxon.
I found this. In reality Exxon didn’t lose a billion. It appears to be corporate spin. That’s the issue I have been raising.
A spokesman from the company said that the figure represented ‘potential and not actual’ losses.”
So by playing up its “potential” losses, Exxon gave stockholders a reason why the company hasn’t done as well as expected, but at the same time, linking itself to the Russian sanctions had political ramifications with the Trump/Tillerson/Putin discussions.
There are also political ramifications with other aspects of energy: imports/exports, carbon release and environmental laws, laws and dropping of regulations to encourage production, wars over oil supplies, etc.
Oil influences politics and politics influences oil.
Domestic oil and gas prices will likely suffer as the U.S. continues to increase its output, analysts including Francisco Blanch, head of commodities research, wrote in a note dated Feb. 3. Though U.S. oil and natural gas producers could see a surge in investment under Donald Trump’s numerous proposals from a likely reform of the corporate tax code to a possible border tax, prices may suffer from the resulting increase in output.”
The USA won’t continue to raise output at $55. Prices will rise above and hover around $63. That’s what my excel model says.
Hi Fernando,
Does your model predict that oil supply will increase by much at $63/b?
I would think that if the IEA’s oil demand forecast proves correct, that oil supply will be too low at $63/b. The IEA expects oil demand in 2017 will be 1.35% higher than in 2016, I think $63/b would result in flat oil output at best (or perhaps a small decline in C+C output), so $75/b seems a more reasonable guess for 2017 oil prices. I assume $63/b is the average Brent price for 2017.
Dennis, the model is pretty vague. It says prices ought to rise to about $63, hold there for a while because activity raises production, then start a fast climb to over $100. Prices then stabilize in the sense that they oscillate and go up a little more than inflation.
Russia and Belarus tension. Observe the future:
“The border issue is perhaps a stand in for a larger conflict. On Friday, Belarusian President Alexander Lukashenko criticized this move by Moscow, and said that his country’s ties with Russia are deteriorating because Russia is afraid of Belarus turning toward the West. He also spoke of a much larger problem: Russia recently threatened to cut oil exports to Belarus by half. The two countries have been arguing about the price and delivery of oil and gas for months.”
“Lukashenko said Russia had grabbed Belarus “by the throat” by using oil and gas supplies to get its way, declaring, “Independence cannot be compared with oil.” But even as he vowed to find other sources of energy if necessary, he he took care to say that Belarus would not leave the Russia-helmed Collective Security Treaty Organization or Eurasian Economic Union.”
“Lukashenko said Russia had grabbed Belarus “by the throat” by using oil and gas supplies to get its way, declaring, “Independence cannot be compared with oil.”
As I think though what I have been posting, it is this in a nutshell.
The narrative is that sanctions against Russia hurt Exxon.
On one side we have people saying “Get rid of the sanctions to help Exxon.”
On the other side, we have people saying, “Look for a political deal to get rid of sanctions to help Exxon.”
Somewhere in the middle are people saying, “Getting rid of the sanctions probably won’t help Exxon, and may actually hurt Russia and the oil industry in general by depressing oil and gas prices.”
So the whole issue is clouded by Exxon tying itself to this deal. Maybe it would have been better not to have done so.
I don’t mean that Exxon shouldn’t have done the deal. I can’t say whether it was a good idea or not.
Rather, I mean maybe it hasn’t served Exxon well it put out the story about how much money the sanctions have cost the company.
Exxon stated it lost future earnings equivalent to $1 billion due to sanctions. I assume they assumed sanctions are permanent. The sanctions were wrong because Russia was reacting to USA and Europe aggressive moves. It’s easy for governments in cahoots with media to deceive people, and this is what we see all the time. The Russian side sees a terrible threat to national security if NATO takes over Ukraine. Therefore their reaction was predictable. They could have rolled back Ukraine all the way to the river and sat across from Kiev.
I don’t blame the USA public for lacking the understanding to realize eastern Ukraine is extremely sensitive, and Crimea is simply not negotiable under any circumstances. They will defend it like they defended Leningrad and Stalingrad in WWII.
Goldman Sachs said that the data pointed to ‘U.S. gasoline demand falling sharply by 460,000 barrels per day (bpd) year-on-year in January, with such declines only previously (seen) during recessions.’ …
China’s 2016 oil demand grew at the slowest pace in at least three years, Reuters calculations based on official data showed.”
Seems like oil companies might get slammed again. Drilling costs are going up and oil prices are coming down (at least for the moment).
Yep. It was expected. But prices will rise as reality sinks in that $50-55 is too low to keep development activities at a fast enough pace. Once the Gulf of Mexico deep water stalls, the only decent investment spot is Permian basin.
It was expected that cost reflation will restart in 2017.
Oil service cost may rise significantly by the end of 2018.
Speaking of the Permian Basin, we have been discussing Pioneer Natural Resources’ earnings release, 2017 forecast and 10 year forecast.
PXD hasn’t released the 2016 10K, but they do mention proved reserve numbers, and only 7% of proved is undeveloped. About 50 million BOE, which, using PXD’s reported type curve, is only about 40 wells.
However, in 2017 they are planning on drilling and completing around 280 wells. They further state they have “pins on the map” for all 2017-2019 wells. Finally, they are predicting 1 million BOEPD company wide by 2026.
It is true PUDs can only be booked if they will be put on production within 5 years. However, why would PXD only book about 40 or so PUD wells when they say over 800 locations for 2017-2019 have been identified?
The only thing I can think of is only 40 or so out of all of these planned wells are economic at 2016 SEC oil and natural gas prices.
For those PE’s and others in the industry, why would PUD be so low for a company predicting tremendous production growth from new wells, besides they are uneconomic, and therefore cannot be booked?
PXD has stated their LOE is under $2 per BOE on their Spraberry Wolfcamp horizontal wells and F & D costs for these wells are a tad bit over $9 per BOE. They claim to be competitve cost wise with KSA, Kuwait and UAE.
2016 PV10 is $4.2 billion, up a billion from 2015, despite lower SEC oil and gas prices. Of course, once reserves go PDP, F & D costs are no longer included, so very possible they added over 200 MBOE of PDP, even if none of those 2016 wells will ever payout.
$4.2 million PV10. $32 billion market cap. Very interesting stuff.
They may not be booking their “type curve”, used for power point presentations. Those may use proved plus probable. Or they may be something else.
The only thing I know is that presentations tend to be quite different from sec reserves, and that some companies don’t bother to book reserves at all until wells are drilled (I’ve kept reserves as probable until wells were drilled in some cases).
Eni starts production of the East Hub Development Project, deep offshore Angola, ahead of schedule
San Donato Milanese (Milan), 8 February 2017 – Eni has started production of the East Hub Development Project, in Block 15/06 of the Angolan deep offshore, ahead of development plan estimates and with a time-to-market among the best in the sector.
Production is taking place through the Armada Olombendo Floating Production Storage and Offloading (FPSO) vessel, which can generate up to 80,000 barrels of oil per day and compress up to 3.4 million cubic meters of gas per day. With 9 wells and 4 manifolds at a water depth of 450 meters, the FPSO Olombendo will put into production the Cabaça South East field, 350 kilometers northwest of Luanda and 130 kilometers west of Soyo.
Production from the East Hub Project will add to production from the existing West Hub Project in the Sangos, Cinguvu and Mpungi fields, where another vessel, the FPSO N’Goma, is operating. In total, Block 15/06 will reach a peak of 150,000 barrels of oil per day this year.
Cabaça South East brings our number of fields in production to 5, with 2 more expected to start before the end of 2018
They are rampong up Mafumeira Sul, 150 kbpd, and have Kaomba Norte (115 kbpd) this year and Kaomba Sul(same size, both from Total) next. After that nothing on the books, quite a few undeveloped discoveries, but they are increasing deep and difficult reservoirs. Maersk cancelled Chissonga development last year, they have another couple so do BP, Chevron and Eni. There are recent issues with taxes and local content and corruption and nepotism questions, plus a growing insurgency in the Cabinda enclave, which is close to a lot of the oil. They used to have big inflation as well and very high cost of living in Luanda, not sure of the situation at the moment. 2018 onwards could see big declines, and things could get more dodgy unless a sustained oil price rise come along.
Angola is a typical country run by communists who gradually become super corrupt, evolve to have incompetent oligarchs running ministries and state companies, and eventually ignite popular resistance.
Venezuela under Chavez and Maduro has gone through the process at a very fast pace, the communists didn’t get to nationalize everything, but did a really good job destroying the economy, and now oil production is declining in what appears to be an irreversible trend (as long as the commies stay in power the country will be closer to a failed nation).
I’ve noticed quite a few long term forecasts prepared by agencies and private outfits fail to understand just how bad things are, and how much worse they are about to get.
The EIA STEO came out yesterday, sometimes there is a post or comment here on this but so far not.
The only thing any of the media seem to look at in detail is the USA production figures, as below. They have Alaska in continuing slow decline. The LTO lower 48, with most changes from LTO, seems to be tending towards a plateau in late 2018. What I don’t get is how they look at GoM – they seem to make a reasonable go at a detail prediction for 6 months out and then just add the same growth curve of about 300 kbpd over 18 months, no matter what. I think their figures to July this year are probably about right, maybe a bit low unless there is a major lost time event, but after that there just isn’t anything due on line except Stampede (80 kbpd – probably over 6 to 9 months) in early 2018; unless they maybe know that Big Foot is ahead of schedule (due at the end of 2018). Against that there will be 150 kbpd per year decline rates in the online fields from July onwards.
Overall though they are following recent trend of gradually reducing predicted future rates.
George, recall that new find west of Prudhoe that was hyped. Vague recall first production well was to be Feb 2018, though more likely further test drilling first. Smith Bay?
That wasn’t for first production it was for the next test well – the first test well that would actually be flowed – and I think only then if they could get some outside funding. Production from that field is many years away, I think there is very little infrastructure in the area, the reservoir would probably need a lot of wells and may need fracking. And until they successfully test a well, probably more than one, and find someone to put up about $15 billion, there is no proven oil.
This link is not directly related to oil and gas, but renewable electricity is sure as shootin’ already impacting the market for coal and gas to a significant extent, and as the wind and solar electrical industries grow, they will have an ever increasing effect on the market for gas, and gas and oil are joined at the hip because so many oil fields produce some gas, or a lot of gas.
Make what you will of it, but I have made a fool of myself a couple of times already by way of believing peak oil was headed at us like an avalanche, etc. I’m still waiting.
Predicting is hard, sez Yogi.
Knowing something will happen is not at all the same thing as knowing WHEN it will happen.
It’s a superficial article. He points to technologies that didn’t deliver, but doesn’t mention technologies that few saw coming and totally changed entire industries.
He also doesn’t address declines in cheaply available petroleum.
He probably had to turn in a column and these thoughts came off the top of his head.
Hi Boomer,
Maybe so, and it’s a fact that this guy is a business as usual mouthpiece when it comes to oil.
But there’s no real reason, so far as I can see , to bet the farm on him being wrong.
I’m all gung ho for pushing renewable development as fast as possible myself, but I must admit that the durability of the same old same old business as usual day to day reality has fooled the crap out of me more than once.
Some of our regulars think the market for oil will crash within the next few years due to the sale of electric cars growing like crazy.
Maybe.
But the depletion of numerous old fields that have been in production for decades, and the difficulty of finding and producing new fields may well mean that the price of oil stays up for decades to come, even as the quantity used begins to drop.
Products such as computers and cell phones can and do catch on very fast, sometimes, and the number in use may double in a year, several years in a row.
But phones and computers are cheap, and offer enormous utility in relation to the purchase price , and people don’t have to make a sit down and think about it hard decision to buy them. Cars are a different matter, just about every body has to pay close attention to the price, the durability and reliability, cost of maintenance, etc.
I just don’t see electric cars taking over the market any time soon.
And while the performance of computers can double every couple of years, at the same selling price, there is no assurance at all we will ever have affordable batteries capable of running farm machinery, construction machinery, and commercial size trucks.
If such batteries DO come to market, it seems like a pretty safe bet to me at least that it will be at least twenty years before they are invented, perfected, and mass produced in quantities sufficient to cut deeply into the market for oil, other than the oil that goes into cars and light trucks.
My opinion as person who has been taught a little humility by being wrong so far is that the price of oil is at least as likely to go up and stay up, for the next two or three decades at least, as it is to go down and stay down.
I posted a Resilience link down below that makes the case for oil remaining a critical commodity for a LONG time to come.
Following a January announcement according to which the DOE planned to sell 8 million barrels of oil from the Strategic Petroleum Reserve, and which some speculated was the reason for the big buildup in crude inventories in the past several weeks, today the U.S. Energy Department said it will sell 10 million barrels of oil from the government’s emergency crude reserve in late February.
This represents the second sale of oil from the emergency stash this year: according to Reuters, last month Shell bought 6.2 million barrels from the reserve and Phillips 66 bought 200,000 barrels, which was below the 8 million projected for sale. As explained below, that sale was partially held to fund a modernization of the SPR itself. More sales are expected be held in coming years to fund up to $2 billion for the revamp.
Looks like approx. 17 million barrels is up for sale in 2017 and almost 25 in 2018.
This link goes into considerable depth about the future of the oil industry. I haven’t done more than glanced at it , so far, but it appears to be well worth some study and discussion.
I have a new post on all LTO production in the 8 states I cover, which is available here.
One thing that is seldom mentioned in examining the future of the fossil fuel industry is that there WILL inevitably come a time when countries that have enough to export will be in a position to impose significant to hefty taxes on their exported fossil fuels.
Of course there IS a world wide market, and we can assume that competition will mostly keep the price of fossil fuels more or less about the same, after allowing for transportation and variations in the value of different currencies. This might not be a SAFE assumption, but just about everybody makes it anyway.
Consider this. There are two companies that produce gravel near where I live, one to the south , and one to the north. They know precisely what it costs to haul gravel, and when either state highway department puts out bids for a a bulk purchase to be delivered to so and so address, well, if the address is southward, the southern company will bid at let us say eight bucks per ton, and the norther company will bid at say four bucks. They calculate with a very sharp pencil, and once in a while, each company manages to wind a bid in the other companies home turf even though the shipping will be outrageously high.
If I had a coal mine in Georgia, I could get forty dollars a ton in a flash, because it costs Georgia utilities more than that for DELIVERED coal that sells for ten or twelve bucks in Wyoming.
The countries that can export are going to levy some serious taxes on exported gas within the next few years, when they have the competitive advantage of cheaper delivery costs, and you can bet your last can of beans on it.
It will take a while, maybe a long time, for the public to come to understand where its own best interests lie, but it WILL happen, no matter how much money the Koch brothers types spend on keeping Joe and Suzy in the dark.
And this can be a powerful argument, if properly presented, in favor of countries such as Spain, which have to import almost all their ff needs, staying the course and doubling down on building out more renewable energy infrastructure.
I’m a big believer in renewable energy but I’m an even bigger believer in depletion, and so I expect the price of oil and gas to go UP, rather than down, maybe not for little while yet, but soon, and I think the price of oil and gas will STAY up for a long time, barring economic contractions. It’s going to take longer imo for electric cars to take over than the more optimistic observers of the tech scene think it will. Ditto substitute technologies that can displace gas, they aren’t likely to grow up as fast as gas depletes, in MY opinion.
If I’m wrong, I’ll be very happy to admit it, a few years down the road.
Oil exporting countries usually tax it much more than the USA, Canada, or Europe do. The government take is built into the producer tax load. Some countries take 90 % of the gross revenue. So let’s say the market price is $60. The producer gets $6 and the government gets $54. Some governments use an export tax to subsidize national consumption. Some use direct subsidies.
If you mean they will impose a tax above market value that simply won’t work. All of them nibble off the market price. They can however control output and export volume. The USA didn’t allow any exports until recently, and all OPEC countries do try to manage total production.
This is how oil got to be decreed $77/barrel in 2015 Argentina. They tax flow from domestic production, so they needed it to flow, and they were successful in getting it to flow. Domestic production stopped its decline, per BP’s bible.
I notice there are no stories about starvation deaths in 2016 Argentina so it must not be all that bad a thing. Starvation deaths is probably a very good metric.
Russia has export taxes on crude oil, petroleum products and natural gas
This well services company says that they expect increasing demand. And yet Texas RRC completion data isn’t showing an increase in completions, so far
2017-01-09 Bloomberg
Keane Group, a Houston-based provider of fracking services “We have potentially an exponential increase in demand for our services with the rig count that’s increased over the last couple of quarters,” Keane Group Chief Executive Officer James Stewart said in a Jan. 20 telephone interview. “The public equity markets are looking to invest in pure-play completion companies with a footprint and a growth story.” https://www.bloomberg.com/news/articles/2017-02-09/wall-street-s-love-affair-with-energy-heats-up-as-rigs-roll-out?
Wind and solar power have been growing a LOT faster than I ever thought they would, which is great, and which is why I am now cautiously optimistic that we some countries at least can turn the fossil fuel corner without crashing HARD, given a little luck and good leadership.
Note that this article says new wind projects in the USA are running at forty percent capacity, which is a LOT better than the twenty five to thirty percent figure most wind critics use.
Hydro can’t do any better, because there are only a few hydro plants that have a water supply sufficient to run at full capacity more than a few hours out of the day.
But later on, when we have more wind and solar power, and enough transmission lines, we might be able to use hydro mostly as back up rather than as peak load power, which will enable us to collectively save even more on the purchase of gas and coal.
One really beautiful point in favor of hydro is than some plants can ramp up in less than a minute’s time. It’s my impression that even old hydro plants that have not had a recent overhaul can ramp up in five to ten minutes.
The IEA’s world oil production figures released today…
Global oil supplies plunged nearly 1.5 mb/d in January, with both OPEC and non-OPEC countries producing less. At 96.4 mb/d, world oil production stood 730 kb/d below a year ago, with OPEC posting its first year-on-year (y-o-y) decline since early 2015.
(The free highlights) IEA: https://www.iea.org/oilmarketreport/omrpublic/
WSJ graghic of OPEC’s cuts: https://pbs.twimg.com/media/C4UJYK2WIAIl6Nr.jpg
Some news outlets are saying that Russia has increased their exports and so some question their compliance?
This is a desired narrative. Would not surprise me if the data is all incorrect to support it.
The countries that had boosted production before the agreement and were struggling to maintain it have met their commitments and the others haven’t. I’m guessing Venezuela is just continuing their decline and made no changes to anything as a result of the agreement. Expect Angola to come back first as they have new production available now.
“Some news outlets are saying that Russia has increased their exports and so some question their compliance?”
Russia has increased oil exports by 172 kb/d in January vs. December, but refinery throughput declined by 252 kb/d. I have no data for refined product exports, but it is clear that is has declined.
Hence, total exports of crude+products have most likely also declined.
(All numbers are from Russia’s Energy ministry website)
So.
Who didn’t get an order filled?
It is because of taxation changes. Gasoline excise duty was increased by 5% in January.
Excise taxes affect domestic prices and hence (theoretically) domestic demand for oil products.
Oil product exports were declining since early 2016 (for the first time in several years) as crude exports are now more profitable. This is a result of the “tax manoeuvre”, which had introduced relatively higher export duties on fuel oil (mazut) and other low-grade refined products.
According to the Central Bank Of Russia, in the first 9 months of 2016, refined product exports were down 9.6% vs. the same period of 2015; while crude exports increased by 5.1%.
Good analysis. I can’t recall seeing your observation before regarding the decreasing bottom hole pressures causing cement failures leading to water intrusion.
You are correct that Mike and perhaps others here noted some time back that the Bakken reservoir is gas driven and as GOR rises, oil production will decline, and water handling costs will render the wells uneconomic.
Your explanation of water intruding from other formations makes sense, too.
Based on what I know now, looks like you are correct. It will be interesting to see if there ever is a significant increase in production from the Bakken. I just can’t see how, and your indication that few good places are left to drill in the best spots supports that view.
Thanks for sharing your article, and for crediting the work of others.
Jim
Jim, many thanks for your amiable comment…
I expect some additional oil production from Bakken this year by means of new drilling in Dunn and several other counties. Not too many, maybe 100-120 mbopd. But water intrusion process is spreading in all the wells, even if they are idle now. That’s why I think Bakken has entered in the final stage of development.
You said, that I credit the work of others. That is not so.
Firstly, Russia is spending some money to develop the similar formations in Sibiria; in my opinion it is too early to achieve sucсess. It is always useful to study someone else’s mistakes, than make your own.
Secondly, I’m interested in such activity, I like it. It’s my hobby, my enjoyment.
Sorry for my poor English.
After the closure of Spain’s only oil wells (on land) the country is 0,01% more dependent on imported petroleum.
http://economia.elpais.com/economia/2017/02/04/actualidad/1486223555_424253.html
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The Ayoluengo field in Burgos, in the North-center of the country worked for 50 years.
There’s perhaps some oil left but the concession run out, and Leni Gas & Oil http://www.lgo-energy.com/# has to apply again, and other companies.
The oil from this field was always little and of bad quality, I understand that it was used mostly to make lubricants.
Only 18 people worked directly on site. If it doesn’t restart it is the death knell for the town, Sargentes de Lora, 110 inhabitants in the middle of nowhere.
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Spain imports all its petroleum, methane gas and practically all the coal it consumes.
People don’t understand that’s a problem and that the fuels are “paid” with debts, Spain is one of the most indebted countries in the world, there with the UK, there goes another one.
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The photographs could interest you, nodding donkeys, and wind generators in the hills.
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http://ep00.epimg.net/elpais/imagenes/2017/02/04/album/1486242280_948306_1486244012_album_normal.jpg
A lot of people make fun of the Spanish governments efforts to get off fossil fuel and onto fuel cost free domestic wind and solar electricity.
There is little doubt in my mind that the effort was badly mismanaged in some key respects, especially in setting the purchase price of domestic solar electricity so high, or at least not lowering it sooner.
But every solar panel, and every wind turbine in the country will continue to produce SOME electricity even if Spain goes totally bust, and can’t import even one tanker load of oil or one shipload or trainload of coal for lack of money to pay.
Every kilowatt hour produced fuel free means buying one less kilowatt hour’s worth of coal and or gas.
Here’s a thought for people who think long term. Virtually all commodities that are widely used are subject to price cycles , but in the long run, all the ones that I can think of right off the bat sell for more nominal dollars now than they did some years ago.
The long term average price generally keeps right on creeping up, unless a substitute product captures the market, or the economy changes in such a way that nobody wants that particular commodity any more. Men’s hats are a good example, most men just don’t wear hats anymore.
My personal opinion is that if a country can install wind and solar infrastructure efficiently and pay for it with low cost loans, the odds are EXCELLENT that the investment will pay for itself within two decades.
Consider western coal for example. Last time I checked it was selling for twelve dollars a ton at the mine , but in the state of Georgia, it was selling for over sixty, with the difference being the shipping cost. If the price of coal at the mine collapses to six dollars a ton, well, the people of Georgia will get it only about ten percent cheaper.
If the nominal dollar cost of shipping coal goes up three percent a year, it would take only about three years to wipe out the savings due to the mine mouth price collapse.
Countries that are compelled to import fossil fuels in quantity are almost dead sure to be paying more, on average, as the years go by, for DELIVERED fuel.
It’s not just supply and demand, or depletion, in simple terms. A country with gas enough to export some might turn populist and decide to slap the biggest export tax on gas that the market will bear, and spend the revenue on food and medical care and maybe a few new soccer stadiums, lol.
The real beauty of coal as a back up fuel is that it is extraordinarily easy to store, you can just pile it up anywhere the ground is hard and well drained, and about all you have to do to look after it is to makes sure it doesn’t catch on fire by accident.This means that the equipment , usually a railroad, or a railroad plus a ship, used to deliver it can be kept in near constant service, thus contributing to the lowest possible delivery price.
I fully understand that gas is about four times or so cleaner, environmentally , than coal, as generating fuel, but the fact is that there are lots of places where there are no gas pipelines, and building new ones just to deliver just enough gas to serve as backup fuel as the renewable transition progresses is likely to be out of the question. Pipelines are like hotels, they need to be full and busy to make enough money to pay for them and have a few dollars left over.
Gas storage on the grand scale is generally just about out of the question, except in the relatively few places that have old salt mines, etc, that can be used as storage reservoirs, for now at least. Maybe later on new technology will make cheap gas storage a reality.
So my guess is that we will be collectively burning some coal maybe for as long another thirty or forty years, because it might take that long to build out enough wind and solar capacity, plus the necessary transmission lines, to count on one hundred percent renewable electricity.
And while some people want to get all righteous about it, a CO2 molecule once it’s in the atmosphere is a CO2 molecule, whether it’s sourced as cow farts, or wood decay or combustion , or burning coal, or simply breathing.
What we need to do is lower the TOTAL emission of CO2 as best we can, rather than getting all righteous and religious about some particular SOURCE of CO2.
If we can cut the use of coal as generating fuel by say ninety five percent, and keep using the last five percent as backup fuel, that ought to be sufficient, considering that there are other equivalent quantity sources of CO2 that can probably be eliminated cheaper and easier than that last five percent.
I am not arguing that we can’t eventually go totally renewable on electricity, because I’m convinced it’s technically possible. All I’m saying is that the most practical and economical way to get there is to continue to use a modest and shrinking amount of coal as back up generating fuel for a rather long time, maybe as long as a couple of generations when it’s not practical to use gas.
And I will along by agreeing that MAYBE we can build out enough storage, long distance transmission lines, and wind and solar capacity to go totally renewable on electricity in as little as ten to twenty years.
A few days ago electricity prices skyrocketed. I did fine because I have a fixed price contract, which made me pay a bit extra in prior years, but now comes in handy. As it turns out we had a severe snow fall, it even snowed on the beach south of Valencia, the wind was blowing too hard for some of the wind park to generate electricity, and anyway it’s winter so days are shorter. Spain relies on nuclear power electricity imported from France, but that genius Hollande has bureaucrats who allowed five nuclear plants to shut down in the middle of the storm for routine inspections. So we couldn’t import, and it got pretty dicey.
Sometimes I wonder if you guys realize what it’s like in real life out here. It’s fairly simple, Spain will not go that crazy and if this trend continues they’ll simply reopen coal plants and return the gas turbines to full operability.
Fernando says “Sometimes I wonder if you guys realize what it’s like in real life out here”. I think you hit the nail on the head. I am not sure why you felt the need to quantify with the word “sometimes”. More often then not, reality plays zero role when such “green” schemes are proposed, debated and regrettably implemented on the less vocal and less politically active (read full time employed) unsuspecting public. I often wonder what many on the forum do for a living other then argue relentlessly for demonstrably proven failed political and economic systems for no apparent economic benefit. Interesting way to spend one’s short life.??
Cheap energy is a dumb idea that doesn’t help anyone, as a matter aof fact. In the soviet block energy was basically free, so the heaters in hotels ran 24/7 even in the summer. If you wanted it cooler, you had to open the window.
The ideology of cheap energy is what needs to go. It makes no sense. It simply leads to waste.
And as my mother taught me, “Waste not,want not”. But She also said “Be square”, so I guess her ideology is dead to your ilk. Waving a flag and throwing insults at the imaginary political positions of your imagined green enemies just shows you don’t have anything intelligent or honest to say.
I don’t see anyone on here arguing relentlessly for demonstrably proven failed political and economic systems for no apparent economic benefit. Perhaps you’re confusing a discussion about peak oil and climate change issues with some sort of debate about political and economic systems. That’s a pretty easy mistake to make if you’ve never studied or read much about politics and economics.
Hi Fernando,
In the real world there are temporary power outages, at least the World that I live in. Perhaps you live in some ideal World where there are never any power outages? 🙂
South Australia has been noted for its very high (40%?) amount of renewable-based electricity generation.
In addition to the blackout several months back due to high winds shutting down bird choppers, there was a blackout yesterday due partially to lack of wind.
Hotels are stocking up on diesel fueled portable generators.
Question. What did environmentalists use before candles?
Answer. Electricity.
Dennis, in well built systems the power outages are caused by unscheduled plant shutdowns, transmission grid failures, etc. When they take place the problem is analyzed and solutions are usually put in place to reduce the risk.
What we see in Europe is a system that’s increasingly unstable, and governments trying to replace the stronger more stable components with even more unstable systems. The imbeciles who run things here are simply unable to grasp just how absolutely stupid they are.
As they force shutdown of coal and nuclear and install more wind and solar we are seeing more and more subsidy charges in the electric bill. If they continue on the current course the cost of electricity will double in the next 10-20 years. And that’s going to be a huge bite for people living at the lower end of the scale.
The main source of instability at the moment are the french nuclear plants.
Here on the western border of Germany we have to fire our own cold reserve of old obsolet coal plants (that is planned for green energy blackouts) in winter to prevent the french grid to break down, because their atomic plants are not strong enough to supply the demand for heating.
So we don’t have a reserve on our own…
The coal plants are modern now – they can fire up and down with solar and wind cycle. It’s just a matter of technique.
The biggest test was a solar eclipse 2 years ago – when solar on a sunny day went from 25% to 5% in a matter of minutes and back again. It was mastered.
Here in Germany, blackouts are seldom. In town I had only 1 blackout in my lifetime so far – and it was some technical defect at a transformator station. In the deep countryside where they have sometimes Pole Powerlines they are more common.
I was thinking in rural areas in the US blackouts are pretty common due to downed power lines during storms.
Life goes on, they go out and fix the lines.
Hi Eulenspiegel,
Can you provide any links in English about what changes the Germans have made to allow them to ramp coal plants up and down easily?
Hi Fernando,
I don’t have a problem with nuclear, that is up to individual nations to decide. Coal will peak just like natural gas and oil, when it does electricity prices will rise.
In many places wind and solar are cheaper than natural gas and probably cheaper than new nuclear. The nuclear fleet is pretty old, the plant does not last forever and upgrades might cost more than a new plant, so nuclear is not always the answer. A widely dispersed interconnected wind and solar power system can operate reliably, but excess capacity is needed, just as is the always the case with any power system.
I’m surprised no one has blamed climate change on the nuclear industry.
Some of us who used to be anti-nuke now accept that it should be considered an option as a source of carbon-free energy.
Global warming definitely makes nuclear energy look more attractive environmentally than it did in the past.
Hi Boomer II,
As you have argued (and I agree), peak fossil fuels will make other forms of energy necessary whether it is nuclear, hydro, wind, solar, geothermal, or tidal power. People who do not like nuclear have reasons such as safety, cost, and non-proliferation. I think individual nations have to decide what is best, wind, solar, hydro, and geothermal seem to be safer options for now, but I think research on better reactors that shut down safely without power and produce little or no products that could be used for nuclear weapons is a good idea.
“What we see in Europe is a system that’s increasingly unstable, and governments trying to replace the stronger more stable components with even more unstable systems.”
Of course you have data that support your statement, or did you – as I fear – pull this out of your lower back?
So is Japan. Countries in this situation, who want a high standard of living, have to import energy and make things of high value with it. They then export their high value items to enable them to pay for their energy. Alternatively, as you say, they increase their debts levels until they go bust.
I saw this on Facebook. Can anyone respond?
“Exxon Mobil, under Rex Tillerson, brokered a deal with Russia in 2013 to lease over 60 million acres of Russian land to pump oil out of (which is five times as much land as they lease in the United States), but all that Russian oil would go through pipelines in the Ukraine, who heavily tax the proceeds, and Ukraine was applying for admission into NATO at the time.
Putin subsequently invaded Ukraine in 2014, secured the routes to export the oil tax-free by sea, and took control of the port where their Black Sea Naval Fleet is based, by taking the Crimean peninsula from Ukraine by force. This was Hitler style imperialism that broke every international law in the free world.
After Obama sanctioned Russia for the invasion, Exxon Mobil could only pump oil from approximately 3 of those 60+ million acres. But now Rex Tillerson is soon to be our Secretary of State, and as of today, there’s information circulating that Donald Trump will likely unilaterally remove all sanctions against Russia in the coming days or weeks.
The Russian government’s oil company, Rosneft, will make half a trillion (500 Billion) dollars from that much untapped oil, all pumped tax-free through Crimea, stolen from Ukraine, now owned by Russia. Putin may have subverted our government just for this deal to go through.”
______
Now, a flood of oil on the market from Russia would likely keep US oil prices down, thus hurting US drillers right?
If one is conspiracy-minded, could that be part of the deal, too? Russia uses low oil prices to take down US oil production, and then tries assert itself as one of the countries left standing.
In about 1780, Catherine the Great and the Ottoman Empire agreed that the Crimea was a part of Russia. [Yes, there was conflict for years prior (as with any other piece of land in the world).] In 1954, in honor of the 300th Anniversary of the Republic of Ukraine being a part of Russia, Nikita Krushchev “gave” the governance of the Crimea to the Republic of Ukraine. It was not constitutional under the Russian constitution. The UN said nothing about it, nor any other international law body. Krushchev later trumped up an approval without even a quorum.
So the Republic of Ukraine seceded from Russia and took the Crimea with it. In the US, when states (republics) seceded [having been states for much less than 100 years, let alone over 300 years] the rest of the states killed as many people as they could until they “agreed to rejoin the union.” People might not like it, but the vast majority of people living in the Crimea had ties to mother Russia, and they voted to go back to being governed by Russia. So, Putin accepted. And please, let’s not get into an argument about the fairness of elections, unless your candidate wins.
So, what would we do if Obama gave South Carolina to Florida, and then Florida seceded. I guess that the rest of the states would just say “shucks, we lost South Carolina too.” Especially if South Carolina had the only warm water port in the US [the Crimea has the only warm water port in Russia]. The rest of the ports are in the North Sea, etc. And, yes, that is a critical military point.
“This was Hitler style imperialism that broke every international law in the free world.” That is a pathetic joke! Okay – let’s let the US South secede again, since the Cival War broke every international law in the free world and was exactly the same as Hitler’s imperialism.
clueless, thanks for the answer.
Just one clarification: the ports in Crimea are not the only warm water ports in Russia.
Russia has several other ports in the Black Sea and Azov Sea.
Other ports are in the Baltic Sea, Arctic seas and the Pacific; not in the North Sea
Perhaps I am wrong, but are those other ports large enough and deep enough for military use [which I failed to state clearly]? I beleive that Russia still operated their huge military port in the Crimea even after the Ukraine seceded and prior to Russia taking back the Crimea.
Sevastopol, the largest port in Crimea, was founded by Catherine the Great as Russia’s main military port in the Black Sea.
It had special status when Crimea was part of the Soviet Ukraine, and also when Ukraine became independent. Russia had a long-term arrangement with Ukraine for using Sevastopol.
Russia also has a large military port in Novorossiisk (Russian part of Caucasus); but you are right, Sevastopol is deeper, bigger and more convenient.
There are neither oil terminal, nor large cargo port in Crimea. Sevastopol is mainly military port.
Also, the Russian State originated in the Ukraine.
See https://en.wikipedia.org/wiki/Rurik_dynasty
Rurik set up rule in Novgorod, giving more provincial towns to his brothers. There is some ambiguity even in the Primary Chronicle about the specifics of the story, “hence their paradoxical statement ‘the people of Novgorod are of Varangian stock, for formerly they were Slovenes.'” However, archaeological evidence such as “Frankish swords, a sword chape and a tortoiseshell brooch” in the area suggest that there was, in fact, a Scandinavian population during the tenth century at the latest.[3] The “Rurikid Dynasty DNA Project” of FamilyTreeDNA commercial genetic genealogy company reports that Y-DNA testing of the descendants of Rurikids suggests their non-Slavic origin.
Kiev was the Capital of Russia when Moscow was still a hunting camp
Boomer II,
It’s your choice to use Facebook as the main source of information on the oil and gas industry, but please don’t repost this BS on the oil-dedicated thread.
Exxon Mobil didn’t lease any land in Russia. It is the operator of the Sakhalin-1 project in Russia’ Far East (very far from Ukraine); and oil produced from this project is exported by sea (Pacific ocean).
Exxon’s JV with Rosneft has also found an oil field in Kara Sea (Russian Arctic), but this project was suspended due to the sanctions.
In the past Russia was exporting a small part of its oil by the “Druzhba” (“Friendship”) pipeline through Ukraine and was paying normal transporation fee, not taxes.
Now all Russian oil is exported via Russian oil terminals near Novorossiisk (Black Sea) and Ust-Luga and Primorsk (on the Baltic Sea). New transporation routes include East-Siberia – Pacific Ocean (ESPO) oil pipeline linking Russian oil fields in Siberia with the ports on Pacific Ocean and with China’s Daking; as well as oil terminals in the Arctic (Varandey).
If US sanctions on Russia are lifted, Rosneft and Exxon will be able to develop their joint project in the Artcic, but oil found there certainly is not worth “half a trillion (500 Billion) dollars’, and cannot seriously change the global supply-demand balance.
clueless gave you a good answer on Crimea
BTW, 1) there is no oil terminal in Crimea;
2) Russian oil is taxed in Russia
“It’s your choice to use Facebook as the main source of information on the oil and gas industry, but please don’t repost this BS on the oil-dedicated thread.”
I never use Facebook as a source of information on the oil and gas industry. The topic never comes up among my Facebook friends or my news sources on Facebook. When I want gas and oil info, I use Google to look at legitimate news sources from industry observers.
I just wanted some people’s thoughts on that. Your reaction actually tells me a lot about how you think about it.
We’ve had quite a few discussions here about how politics, both domestic and international, shapes oil production, so I was just inquiring about any insight. I’m rather surprised that you are telling me not to even post a question on the subject. Touchy, maybe?
The relationship between Trump and Russia has triggered some questions, not just among Democrats, but also the GOP. And some people are wondering if there is some tie in about oil.
I just asked, that’s all.
“some people are wondering if there is some tie in about oil.”
The only “tie in” is Exxon’s frozen investments in the Pobeda (Victory) field in the Kara Sea. But that’s no secret; you can find information on this project on Exxon’s and Rosneft’s websites and in international business media.
The Sakhalin-1 project is not covered by the sanctions and is being successfully developed.
And basically what I was asking is this? Will a flood of Russian oil affect US oil prices?
If you are playing US politics, do you want to put more foreign oil on the market?
“Will a flood of Russian oil affect US oil prices?”
US and EU sanctions only affect Russian offshore projects in the Arctic and development of Russia’s tight oil. If sanctions are lifted, projects with foreign participation in these two areas will be able to produce meaningful quantities of oil not before 2025. But these volumes will not be sufficient to flood the market.
Russia is participating in OPEC-non-OPEC supply cuts and certainly is not interested in flooding the market and exerting a downward pressure on prices.
So is it possible that the time frame is so far in the future that it’s dead to Exxon even if the sanctions are lifted?
I think Exxon could re-enter the project if the sanctions are lifted. If sanctions are not lifted for several years, Rosneft will likely develop this field independently, but it would take more time as Rosneft lacks experience in offshore projects.
The only Russia’s offshore Arctic project is Prirazlomnoye field developed by Gazpromneft without foreign participation (already producing oil).
In general, even if there were no sanctions, Arctic projects would be developed relatively slowly, due to high costs and environmental issues. Russia’s long-term energy program anticipates more or less meaningful volumes of oil production in the Arctic offshore only in the 2030s.
Hi, AlexS, I disagree. To create all field infrastructure on the Karskoe sea, Rosneft need more time, not less than 15 years. It is deep water shelf, 300 m depth. There are no industrial settlements on shore at all. And oil transportation will be very expensive.
I think, both companies (Exx0n and Rosneft) were going to explore those fields for reserves extensions only; Exxon needs it more than Rosneft.
Now Rosneft is close to the completion of Jurubcheno-Tokhomskoe oilfield plant in West Sibiria. It is giant, 900 mln tonn of oil proved reserves.
Alex K,
I am saying exactly the same: “even if there were no sanctions, Arctic projects would be developed relatively slowly” .
And: “Russia’s long-term energy program anticipates more or less meaningful volumes of oil production in the Arctic offshore only in the 2030s.” That means after 2030.
Yurubcheno-Tokhomskoe oilfield is located in Evenkiya, Krasnoyarsk region. I would call it central Siberia.
Right. No needs to realise any Arctic seas projects. The main purpose of Priraslomnoje platform construction was to get some experience. Becides Rosneft has good licences on Ohotskoe sea.
Sorry, I made gross mistake. Yurubcheno-Tokhomskoe oilfield is located, of couse, in East Sibiria. Two large regions are there, Krasnoyarsk region and Jakutia. Russians don’t know Central Sibiria. West Sibiria is mostly Tjumen region, where I worked during 21 years.
I beg your pardon for my bad English. Unfortunately I don’t speak fluidly because of the little practice. Thank you for your kind explanations.
Thank you, it is absolutely right.
Politics aside, it’s just factually inaccurate.
“Exxon Mobil, under Rex Tillerson, brokered a deal with Russia in 2013 to lease over 60 million acres of Russian land to pump oil out of (which is five times as much land as they lease in the United States), but all that Russian oil would go through pipelines in the Ukraine”
Almost all pipelines through Ukraine are nat gas. Not oil. There is some minor oil flow. “All” is just profoundly absurd.
Russia’s oil output is going to Asia and northern Europe via Transneft lines to Poland and Belarus. Not through Ukraine. Haven’t looked for where those Exxon leases are, but I’m pretty sure that’s the Rosneft joint venture up around the Arctic.
Nowhere near Ukraine. This is all just completely wrong.
Ok. This response is much more helpful.
Now back to my question about prices. What happens when the sanctions are lifted?
Why, sometimes I’ve believed as many as six impossible things before breakfast.
– Alice in Wonderland
FedBook, er I mean Facebook, is a ghetto of sentimentality. I suggest deleting from it. I joined Facebook once for a very short time and the only thing I learnt from it was that most of my friends are idiots.
+10
Also +10
One has to be an idiot to be on Facebook
Everything in that stuff you wrote is baloney. Russia’s Black Sea exports go through Novorossysk and Tuapse. There isn’t an oil pipeline going to Crimea. Furthermore, putting an oil loading port in Crimea is nutty (because the oil comes from the East and it makes much more sense to load as far to the East as possible). There used to be some oil loaded in Odessa, but that was never a big deal.
Regarding the Exxon deal, that’s also baloney. But I don’t feel like trying to explain the basics to somebody who picks up information from Facebook.
I wouldn’t put ANYTHING past Trump and his homies, after seeing what they have done in the last few weeks.
Trump in the opinion of some observers seems to think the best part of being President, and really maybe the only important part, is cutting deals that profit him and his buddies. I’m of much the same mind.
Most people , not the regulars here, but people in general, have a hard time understanding that the government of this country has never given and currently doesn’t give a flying xxxx at a rolling donut about what happens to the PEOPLE in the oil industry, or to the majority of INVESTORS in the oil industry.
Uncle Sam has a very strong interest in the domestic industry AS A WHOLE being big enough and strong enough that we are not at but SO GREAT a risk in terms of depending on imported oil.
And of course any given president or congressman or senator might have a LOT of friends and relatives or donors invested in the oil industry, or even have his OWN MONEY in oil, and therefore want the oil industry to be strong and healthy.
But consider what would have been going thru Obama’s head , on a day to day basis, as President, a man responsible in large part for the economy of the ENTIRE country, and also responsible for helping his D party win as many elections as possible.
Basically this means that the most important item on the agenda is usually the economy,and when the economy is doing well, people are happy, and incumbents WIN ELECTIONS.
A few idiots occasionally argue that cheap oil didn’t and hasn’t contributed to the economy, but what they fail to realize , or else deliberately overlook, is that the economy would have been MUCH WORSE if oil stayed up. Cheap oil is a positive influence on the economy, even if the economy is not doing well.
So nobody in DC really gives a HOOT about the oil industry as a whole, excepting some lobbyists, and maybe a few Senators and Congressmen indebted to the industry. A hundred million people at the polls MATTER to a politician on the national stage. A few tens of thousands of oil workers, etc, well , call’em collateral damage or something , and fuggetaboutem.
Now in the case of a particular politician, and a particular oil company, well now……….
Trump’s for sale, no doubt about it in my mind. I can easily see him cutting a deal involving Exon, his Sec of State, Russia, etc.
I’m not saying he has done so, but I’m willing to entertain the idea.
The thing about accusing Trump of EVERY possible sin and crime is that he’s just one man, and he can’t possibly do but SO MANY things SO FAST.
I used to find it necessary to defend one of my low life relatives occasionally by pointing out that there was no way in hell he could have ever done all the things he was accused of. He worked very hard at being a low life, but he was accused of more things in one year than a hard working crook could hope to get done in FIVE years, lol.
So MAYBE Trump hasn’t done ALL the bad things he’s been accused of. Maybe he can catch up, if his critics will cut him a little slack and quit accusing him of NEW outrages for a few weeks. 😉
My sarcasm light is on for the benefit of HB.
Anybody who maintains that he HAS no low life relatives is either all alone in the world and HAS no extended family , or else he’s a liar.
Some get caught. Some get to be pillars of their community, and founders of universities and charities, etc, if they are talented enough rob and steal on a large enough scale long enough.
Most of the “Successful Businessman ™” tag that Donald Trump enjoys can be attributed to a well-masked infusion of conflict or flight capital from the FSU.
http://www.the-american-interest.com/2016/12/19/the-curious-world-of-donald-trumps-private-russian-connections/?utm_content=buffer55e4b&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
Maybe the USA economy would be better off at $120 per barrel because we would have thousands of rigs working, and this offsets the economic hit from higher oil prices a bit. The competition, such as Europe, China, and India, doesn’t have cheap gas and would face the same expensive oil. Just saying.
” Maybe the USA economy would be better off at $120 per barrel”
Fern,
Basically that is the main goal of current administration. This means that the value of US currency is secured by oil and the value of oil itself is in inverse proportion. Raising the price of the dollar leads to a decline in the oil and vice versa. If current administration wants to turn the US back into an industrial country, the new US administration will have to rely on the combination of cheap dollar – expensive oil. So in essence all this nonsense that we are seeing in US media is projection of fight between elites behind “US dollar/virtual economy” and elites behind “oil/real economy,industry”, and primarily in the US and EU.
Putin is just punching bag for one side just because of simple fact that his and Russia’s interests just happened to align with “oil/real industrial economy” elites of US. It is just accidental and nothing personal.
Hi Fernando,
It would certainly be better off with $120/b oil vs not having adequate supply.
In my view, by July 2018 at least $100/b will be needed to balance supply and demand for oil, as supply is likely to be inadequate and demand too high at under $60/b by that point in time.
Dennis,
I bet by July 2018 oil prices will be much lower than $100/b.
If prices exceed $60 by June 2017, OPEC – non-OPEC agreement will not be prolonged. Libya is gradually restoring output. Iraq also has room for further growth. U.S. will slightly increase production this year and the next. Brazil’s production is still rising. Kazakhstan’ output is up with the ramping Kashagan volumes. Russian production is expected to increase in 2017-19 due to scheduled project start-ups. Canada’s production will be higher this year than in 2016.
Commercial stocks are still well above normal.
The effect of the projects postponed in 2015-2016 will not be felt until 2020.
I think that’s why my model predicts prices will hover around $63 for a while. But I’m not sure why it does that. However, it says that by 2020 it will be a lot higher. It depends on the amount of drilling in the Permian basin.
Hi AlexS,
I doubt that US output will rise very much at $60/b, I think the EIA is too optimistic on LTO output and perhaps on GOM output as well. I doubt Canadian or US output will rise much and there are lots of areas that will continue to decline such as Mexico and China and Venezuela. It is possible that Russia and OPEC will increase production as soon as prices reach $75/b, but they will see revenue fall as a result. Maybe they like shooting themselves in the foot? At some point it will become difficult to raise output to match demand, I think by 2018 that point might be reached.
We will see, supply has been more resilient than I anticipated, at some point this will not be the case and output will be stuck on a plateau even as prices rise as increases in some places are offset by decline in other places.
So what is your expectation for the oil price in July 2018, you believe it will be less than $100/b (2017$ for Brent Oil price), do you think it will be less than $80/b?
I am not supposed to interfere with you guys who are more experienced in the oil market than me. But after using a lot of time to study the oil market my view is that oil prices will stay at a 60-70$ level for quite a few months, before taking the leap to 100$+ in 2018. At that level the debt bubble will not be able to take the toll and we will have a crisis and then after a while we will recover. I am not totally alone in this view it seems, but most would say it is way out of mainstream. I try to be as research based as possible and therefore examine opposing views, and I have to say I think there are some technology improvements behind the Permian hype and all the investment going there as opposed to Eagle Ford and Bakken. It would only slightly adjust the picture though, as capacity restraints in oil service land NA can not offset e.g. the massive decline coming from offshore going forward.
From all that I’ve read, I would conclude that a “flood of oil” out of Russia is about as likely as a “flood of new fracked oil from shales in the United States, not yet drilled.” That is, it’s rather low on the probability meter.
Again from what I’ve read (numerous sources) the Russian oil fields are being extracted just about as heavily as they can be at this time, as are the Saudi fields, again relying on a number of different sources.
Without getting too “tinfoil-hatty” I’d say most of the stories about the global oil markets which promise big bursts of production from (heretofore undisclosed) big new oil fields are in the category of “fake news.” These stories serve to boost U.S. consumer confidence and U.S. automobile and light truck sales, but contradict what people in the industry (such as Art Berman, Tadeusz Patzek et al.) are saying about future supply.
Based on everyone’s comments, it sounds like not only is that Facebook post that I saw inaccurate, the sanctions probably never made any difference anyway.
Maybe Exxon is blaming the sanctions for a stalled deal and loss of money, but maybe that deal wouldn’t have happened as planned anyway because of low oil prices.
So maybe various people are manipulating the facts to suit their interests.
Maybe Exxon is trying to cover its ass with the sanctions story. Maybe there is too cozy a relationship between Trump, Putin, and Exxon, but we don’t yet know any details. The sanctions will probably be removed, but maybe they won’t make much of a difference.
Factbox: Potential impacts of US lifting sanctions on Russian oil sector – Oil | Platts News Article & Story: “The expected negative impact on crude output has also not materialized, with Russia continuing to set post-Soviet output records last year. Sanctions primarily targeted projects that were not set to produce until the next decade, and some analysts have suggested that some cooperation with Western companies stalled due to the fact that these reserves are more expensive to produce than conventional crude, and were not commercially viable when oil prices dropped sharply in the second half of 2014.”
That’s basically what I have said above
The ExxonMobil (XOM) that Rex Tillerson left behind is doubling down on oil at a time of massive uncertainty for fossil fuels — Quartz: “The rise of Trump and the addition of Tillerson to the State Department could significantly restore Exxon’s fortunes by reviving its projects in Russia. But the reality of low oil prices and harsh drilling conditions may result in Exxon banking the reserves from Victory, as Russia named the Arctic field the American company discovered in 2014, for years before actually producing the oil. Shell, for example, abandoned drilling in Alaskan Arctic waters a year ago, despite finding oil; in 2012, France’s Total said it would never drill in the Arctic because a catastrophic spill would exact too high a reputational cost. Exxon, too, could decide to go slow.”
“Of course, the politics of dealing with Putin may require Exxon to proceed with Victory anyway. For Putin, the Arctic is Russia’s only currently known economic driver for the 2020s and beyond. The country relies on oil and gas revenue for more than half the state budget, and much of its GDP growth. So, if sanctions are revoked, Exxon may be pressured to drill Victory regardless of whether it’s profitable. As a sweetener, Exxon could be permitted to proceed with more commercial acreage to which it also has access, in Russia’s vast west Siberian shale, known as Bazhenov. The Bazhenov shale, according to Russia’s energy ministry, contains an astounding 30 billion barrels of oil. Conditions there are difficult, but not on the scale of the Arctic. Exxon has a lot better chance making money there.”
“For Putin, the Arctic is Russia’s only currently known economic driver for the 2020s and beyond.”
This is one of secondary drivers. Much more important is the diversification of the economy.
“Shell, for example, abandoned drilling in Alaskan Arctic waters a year ago,”
Shell didn’t find commercial oil resources in Alaskan Arctic after having spent $7 billion and having lost a platform.
Exxon and Rosneft found the Victory field, containing more than 100 million tons of oil and 338 billion cubic meters of gas, having spent about $1 billion.
Russia could probably be a major exporter of grain and possibly some other agricultural commodities if the economy were sufficiently free, and farmers could buy equipment, fertilizers,etc, on credit.
I haven’t looked into it in recent times though, and a lot of land that used to be considered “Russian” for conversational purposes is no longer under Russian control.
“Russia could probably be a major exporter of grain”
Already is.
World wheat exports, thousand metric tons.
source: US Department of Agriculture, January 2017
https://apps.fas.usda.gov/psdonline/circulars/grain.pdf
Thanks for that link AlexS. I’ve been interested to read such a report. I’m interested in watching the KSA grain imports rise in the future as they’ve discontinued their wheat production program.
Thanks Alex,
I haven’t kept up with Russian geography and was thinking maybe more of what used to be reported as Russian production would now be reported as coming from other countries.
There is still plenty of upside potential if Russian farmers have access to capital and foreign markets.
The old days of the collective farms are long gone, for sure.
OFM,
Two other former republics of the Soviet Union, Ukraine and Kazakhstan, are also big exporters of grain.
Here’s another article pointing out that economics might have reduced that deal.
So a company might find it useful to suggest that sanctions cost it money, therefore shifting the blame to something other than the economics of oil.
And if those on the Left are convinced this is all about money, then the story is being accepted as it was meant to be: that sanctions and politics, not economics, were Exxon’s problem.
Streetwise Professor � Exxon’s Russian Dealings Are No Reason to Fret About Tillerson. If Anything, the Reverse is True: “Most importantly, development economics depend on prices, and prices are highly volatile. The initial XOM-Rosneft deals were negotiated in 2011-2013 when oil prices were north of $100/bbl, and were expected to stay there for, well, pretty much forever. A mere year later, oil prices cratered, and now the conventional wisdom is that $100/bbl oil is not on the horizon, even the distant horizon. Even absent sanctions, there would have been a massive re-evaluation of the scale and scope of the Rosneft-XOM cooperation.”
The conventional wisdom this guy quotes is wrong. However an outfit like Exxon won’t invest in a Kara Sea development without negotiating a pretty good deal with the authorities. They definitely don’t want the Gazprom-military combine to come in and grab the property like they did at Prirazlmnoye. And this requires boilerplate language in the decree authorizing the development. This may even require a special law through the Duma, like they had to do for the Sakhalin projects.
A very recent article.
TASS: Business & Economy – Russia's Finance Ministry says oil prices may hover around $40-60 per barrel in 2017-2019: “MOSCOW, February 6. /TASS/. Oil prices will be hovering around $40-60 per barrel in 2017-2019, according to the Finance Ministry’s Main guidelines for 2017-2019 debt policy released on Monday.”
____
So low oil prices would likely restrain Exxon from doing much in Russia even if sanctions are lifted.
Perhaps Exxon could be putting some of the political speculation to rest by saying that the sanctions actually don’t matter much to them at this time.
An emphasis on the economics of oil, rather than political deals, might eliminate some of the conspiracy theories. But it would also suggest that Exxon’s future isn’t necessarily bright if sanctions are lifted.
See what I am saying is that all of those articles talking about how much money Exxon lost on the sanctions just adds fuel to the speculation that there is some sort of Putin/Trump/Tillerson deal going on somewhere. I don’t know if there is some sort of deal, but Exxon may have added to the speculations by emphasizing their loss of money and letting the papers report how the company will benefit when the sanctions are removed.
“An emphasis on the economics of oil, rather than political deals, might eliminate some of the conspiracy theories. But it would also suggest that Exxon’s future isn’t necessarily bright if sanctions are lifted.”
Exxon is a very big company, and its fortunes do not depend on just one project and, more generally, on its operations in Russia.
Each quarter, Exxon is loosing more money on its U.S. upstream operations than $1 billion it has invested in its project in the Russian Arctic.
And it has already written down most of these investments in 2015.
All these speculations and conspiracy theories have nothing to do with the reality and are just part of the current political battles in the U.S.
“All these speculations and conspiracy theories have nothing to do with the reality and are just part of the current political battles in the U.S.”
Our future relationships with Russia are being discussed, though. And oil is part of the discussion.
While conspiracy theories can be dismissed, what we choose to do economically, strategically, and militarily with Russia is very much a part of government in the US. We’ve even gotten conservatives questioning why Trump is so fond of Putin.
And our relationship with Russia also spills over into our relationship with other countries.
So this stuff is a very big deal.
Prices in 2017 to 2019 won’t influence that much what happens on a long term project.
http://www.zerohedge.com/news/2017-02-06/renewable-lies-and-deception-dutch-commuters
Exposing bogus phrasing that conceals how renewable energy for transport is insignificant.
From the zerohedge link:
Roger focuses on the railway system in the Netherlands, run by NS, which recently claimed that it operates on 100% wind power. This is of course, if you know anything about electricity generation and the grid, a preposterous claim, and that the company has the guts to make such a claim can only serve to prove how little the general public knows about the topic. Or they wouldn’t dare.
There is a difference between what is being said in that article and what is actually happening.
If you don’t like it, you can take it up with many other news organizations, Forbes for example. Or are you suggesting there are now no reputable news organization at all.
http://www.forbes.com/sites/lauriewinkless/2017/01/12/dutch-trains-are-now-powered-by-wind/#16402e504fe7
World-famous for their picturesque windmills, the Netherlands has always had a love affair with wind energy. While it was originally used to pump water or grind grain, wind is now helping Dutch commuters get to work. Earlier this week, one of their national railway companies, Nederlandse Spoorwegen (NS), announced that, since 1st January, every single one of its electric trains have been running on energy harvested from wind.
That isn’t quite the same as claiming all Dutch trains are running on wind energy!
Seems like everyone is part of the problem now because everyone is spouting fake news left and right, no pun intended.
The important take away is that the Netherlands has a stated goal of getting off fossil fuels the sooner the better. So do many other countries in Europe and elsewhere. i guess we will all get to see how those plans pan out.
“The important take away is that the Netherlands has a stated goal of getting off fossil fuels the sooner the better.”
As usual, Fred has gotten right to the nitty gritty of the question, and pointed out the key fact, which is that the country is making steady progress in using more wind and less fossil fuel.
Over the last couple of weeks, I posted at least a couple of dozen long comments about the way anti renewable mouthpieces can twist our words when we talk about renewable energy without acknowledging such facts as the fact that we are still dependent on fossil fuel for back up, and WILL REMAIN dependent on fossil fuel for years and years to come.
A skillful antirenewable mouthpiece, or for that matter a person who has run the numbers himself, can make anybody who just blithely says wind and solar are cheaper than coal and gas look like a complete fool and charlatan in a single paragraph, something along this line:
So So and So keeps telling us how wind and solar electricity is cheaper than gas and coal electricity, but he can’t point to any country in the world that uses LOTS of wind and solar power on the grid where electricity is cheaper, because there ISN’T any such country.
What he’s deliberately overlooking, like a car salesman going for the sale, is that wind and solar electricity CAN’T carry the load, because the wind and sun aren’t dependable around the clock around the calendar, and therefore we MUST maintain most , nearly all , of our current investment in coal and gas fired generation, NO MATTER WHAT, for at least twenty or thirty years, maybe longer.
So what happens is that you have to pay for both the wind and solar electricity, AND the gas and coal electricity, and the owners of the coal and gas electricity are FORCED to charge more per kilowatt hour, as they sell less kilowatt hours, or else they will go BROKE.
So maybe some of these days, twenty or thirty or forty years down the road, MAYBE, the wind and solar hogs fattening up at the tax trough MIGHT save you some money.
Maybe some day alla them there super duper batteries that’re cheaper than pinto beans might be for real, and alla them there thousands of miles of super duper power lines might be built, but for now, and for a hell of a long time to come, the only place you gonna find ’em is in the imagination of So and So.
He’s full of shit,he’s as bad as a damned car salesman, and he knows it, and I know it, and YOU know it.”
What this guy says has the ring of truth to it when Joe Sixpack and his wife Suzy hear it.
It’s HARD to get people who don’t understand nuance to understand simple facts.
I probably tried to explain a couple of hundred times to dumb ass D’s and R’s BOTH about Alaskan oil going to Japan, while we were buying Middle Eastern oil to take the place of it. The reason was as simple as pie. It was CHEAPER that way. We could send a barrel to Japan for ( out of the air number ) twenty bucks, and replace it the same day with a barrel from Saudi Arabia for LESS than twenty bucks, same quality, because of the shipping costs being what they were.
Maybe a couple of dozen out of a hundred could ever give up feeling cheated and mildly outraged because we were sending oil to Japan while we were importing oil for our own use. The rest would get it, temporarily, but a week later they were bitching AGAIN about sending OUR oil to Japan.
It’s amusing as hell, but the people who got it the easiest, and quickest, and REMEMBERED, were simple semi literate farmers. I would just say suppose you own a grain farm in Nebraska , and hire somebody to run it for you. Now if you need corn here in Carolina, you can either pay to ship your own here, or buy corn from a local grower. Corn’s pretty much corn, and they saw instantly that the best deal was to sell their Nebraska corn THERE and use the money to buy somebody’s locally grown corn HERE.
So long as the windmills are turning, and making juice, and somebody is using it, the amount of fossil fuel is reduced in proportion to the wind energy used.
The train company will probably win, in terms of the PR effort.
The trains ARE running on gas fired juice, literally , for the most part. But somebody someplace else is using LESS gas because the train company is supporting the growth of the wind industry by buying wind energy contracts long term.
When people hear enough bullshit often enough and long enough, they quit believing ANY of it , and grow ever more HOSTILE to the bullshit messenger.
The eventual result is BACKLASH.
Trump is prez today for the most part part because most people in the southern and rural states are hostile to some of the social and cultural changes the liberal / D party coalition has been ramming forcibly down their collective throat for the last couple of generations , and in particular because the working people in the three Rust Belt states that put Trump over the hump and into the WH gave an unmistakable middle finger signal to the D party in general and HRC in particular that they consider HB’s globalization “gold standard” to be even WORSE than bullshit. To THEM, globalization is outright poison.
Bottom line, it pays to consider how the audience will receive your message, and fine tune it so as to offend as few people as possible, and to make it as hard as possible for the opposition to twist it into a pretzel and ram it up your backside, sideways.
Here, IN this forum, it hardly matters, because the audience is small, and sophisticated.
But in OTHER forums………. IT MATTERS.
Hi Old Farmer Mac,
In 1968 someone could have pointed out that it is impossible to land a man on the moon and return him safely to earth.
One could simply point to the fact that nobody had ever done it, so clearly it cannot be done.
Same for manned flight, automobiles, telephones, radio, television, even the printing press.
Always with you what cannot be done… Do or do not, there is no try.
Clearly fossil fuels will be needed, but they will become very expensive as they deplete, energy provided by wind, solar, hydro, and nuclear will be less expensive than fossil fuel energy. Currently in high wind areas (Iowa) or areas with good insolation (Arizona) wind or solar are cheaper than electricity provides by coal or natural gas.
If one likes expensive electricity, then one should stick with fossil fuels exclusively.
Dennis, look this up
“Technical post on Nordhaus’ new DICE model” in my blog. If you follow the link you’ll see how Nordhaus has kept modeling like crazy while ignoring the energy issues in his model.
Hi Fernando,
Not a lot of detail in that post. I agree reserves should be included, but other than that your analysis seems to be the DICE model needs to include limited fossil fuel reserves.
I agree the scenarios by Nordhaus assumes there will be no peak in fossil fuels and is fairly close to RCP8.5 which requires about 5000 Pg of Carbon emissions. I agree it is unlikely that total carbon emissions (fossil fuels, cement production, and land use change) from 1750 to 2500 will be more than 1300 Pg of carbon. When future trends in the cost of fossil fuels (which will rise sharply after the peak in 2030) and non-fossil fuel energy (which will fall over time) are considered, a total carbon emissions target of 1050 Pg of carbon is likely to be achieved in my opinion.
Dennis, I don’t write long technical posts – that one is intended to give me a link to the Nordhaus write up.
My long posts are the interviews, although sometimes I copy material I want my family to read. Did you read my Biff Tannen interview?
Good morning, Dennis
I find myself repeating that I do not disagree with you at all, in principle.
You can search the world over, and you will never find a greater true lover of renewable energy , excepting biofuels, than yours truly OFM.
I have not been talking about the facts of depletion, or about the costs of renewable energy versus the cost of fossil fuels, except in reference to my point concerning the way we talk about renewables in other forums, because as I have said before, it doesn’t really matter here in this forum. This one is very important, but not that many people read it.
Any given article in any well established magazine attracts a far larger, and far more diverse audience.
What I have been talking about is applying just a little bit of common sense in composing our remarks when we participate in OTHER forums, such as for instance if we post a comment at The Atlantic, or the Washington Post or Forbes.
I’m just trying to get it across that we don’t want to come across to like the proverbial used car salesman to people who have little or no knowledge of the actual facts.
If there is any one mistake that I suspect you are guilty of making, it’s underestimating the ignorance of the public. But don’t feel all alone, or insulted, because I am convinced that a technical expert in any field such as finance, engineering, biology , etc, who does really and truly understand the woeful ignorance of Joe Sixpack is a rarity. I mean, it’ easy for a hypothetical engineer to say Joe couldn’t distinguish a hammer from a nail, but the engineer mostly never seems to really appreciate what this means in terms of politics and public policies.
The public is not a sentient organism, at least not in terms of the way it reacts short term. Watch a flock of birds trying to decide where to land, and you will gain some insight into the way the public thinks, or doesn’t.
If you please, consider how EASILY the public has been stoked up to fiery red heat about let us say gun control. Now only a fool would say that the thousands of people that get shot every year in the USA don’t matter, but let’s put it into perspective for a minute, and see just how easily manipulated the public REALLY is, in terms of understanding and getting all hot and bothered about people dying thru no fault of their own, and manipulated by PR campaigns, or the lack thereof.
At least twenty times ( probably a lot more, I just pulled twenty out of the air) as many people die every year in this country as the direct result of the corporate food industry marketing junk food.
BUT nobody at all, except doctors and other health care professionals ( who are by comparison voices in the wilderness) are hot and bothered about junk food, and what it’s doing to us, and they are so few that junk food is not even MENTIONED in political contests, except occasionally in places like NYC or San Francisco.
There is no doubt in my mind that you have forgotten more about some entire fields of knowledge than I have ever known.
BUT if you think we can go around making baby talk about renewables being cheaper than gas and coal, and get our asses kicked in terms of what the public believes, you are wrong. The public as a whole makes up what passes for its mind on the basis of sound bites.
What I’m saying is that we ought not oversell our case. Overselling backfires, politically. We just need to add the qualifiers,which takes only a few extra words, acknowledging that FOR NOW, renewable electricity is NOT cheaper than coal or gas, in terms of the big picture, as seen by consumers looking at their electricity bill, because we must still maintain the vast bulk of the fossil fuel fired installed and sunk investment generating industry, for some time to come.
We can make our case without sticking our chin out, and putting our hands behind our back, and POSING for a knock out response in the sound bite world in which we live.
The people on our side are on our side for one of two reasons, or a combination of the two. They’re either well enough informed to know the REAL price and the REAL problems associated with fossil fuels, or else they are liberals and Democrats. You don’t HAVE to know doo doo from apple butter to be in favor of renewables if you are a Democrat, because the R’s are against them, ‘nuf said. You don’t have to know doo doo from apple butter about health care to be in favor of the preACA health care industry status quo if you’re Republican, etc. The D’s are for the ACA, that’s sufficient, ‘ nuf said.
The people who we have to win over, as a practical matter are the ones in the middle. According to CNN exit polling, Trump won the middle in all the battle ground states. Election results are determined in the middle as a general rule, in this country, excepting the occasional presidential election.
The typical middle of the road voter in this country probably spends less time in a YEAR thinking about renewable energy and fossil fuels than the average regular contributor in this forum spends thinking about it any given week.
You may have heard the old joke about the bearded , pipe smoking, earth shoes , corduroy coat with elbow patches professor at a small New England liberal arts college saying , “I can’t understand how McGovern lost. Everybody I know voted for him. “
Hi Old Farmer Mac,
As I have said several times IN THE BEST AREAS such as Iowa for wind and Arizona for solar. Wind or solar is cheaper than a new natural gas fired plant.
For solar see slide 26 from
https://emp.lbl.gov/sites/all/files/lbnl-1006037_slides.pdf
Where power purchase agreements(PPA) at 3 to 4 cents per kWhr have been signed in Texas and the southwest in the fall of 2016.
For wind see slides 21 and 22 from
http://www.nebraskawindandsolarconference.com/assets/2016.11.07_03_mark-bolinger_utility-scale-wind—solar-technology,-cost—performance-trends-nationally-and-in-nebraska.pdf
In the interior of the US (Iowa and Nebraska) PPA process for wind are 2 cents per kW hr.
These are very cheap prices and yes fossil fuels are needed for backup, but in the future the fossil fuel prices will rise and the lower the share of electricity provided by MORE EXPENSIVE fossil fuels, the LOWER your electricity bill will be.
Back atcha Dennis,
I will repeat once again that I understand the math, it’s dirt simple.
But tell me this. Could the states of Iowa, Nebraska or Texas run solely on wind and solar power NOW?
Damned right they CAN’T. They still depend on fossil fuel back up, and that means paying for both the wind and solar PLUS the fossil fuel backup.
This is dirt simple reality, and it will REMAIN reality for quite some time, although the amount of fossil fuel capacity can be reduced a little at time as the wind and solar industries grow up.
When we don’t acknowledge this reality, we’re doing about the same thing, in principle, as the people who talk about how cheap coal and gas are without acknowledging the environmental costs and the public health care costs of burning coal and gas.
We do have the moral high ground, since our goal is far better aligned with the true best interests of the people and the country.
And while I EXPECT people like Nick G to stick on message like a PR mouthpiece, and talk about an electric car being the cheapest car on the road, since it’s subsidized……. Well, the COST of a car MUST be paid to the manufacturer, or the manufacturer WILL go out of business. The REAL COST ( although I haven’t picked up an econ text in many years , and may not be using precisely correct terminology ) of that car Nick is yakking about is the SUM of the money paid by the new car buyer PLUS the subsidy paid for by the government.
The real price electricity , as experienced by the real world customer consists of what he pays for the renewable component PLUS what he pays for the fossil fuel ( and or nuclear ) component of his bill, plus taxes, etc.
Arguing that wind and solar is cheaper than fossil fuel fired electricity is like arguing that owning a motor scooter is cheaper than owning a car to a man who can make good use of a motorcycle, on days the weather is nice, but STILL MUST CONTINUE to own a car for days when he has to transport his family, get to work when the roads are slick, etc.
Sure he can make good use of the scooter, but the scooter just can’t giterdone by itself, and wind and solar power combined can’t get the job done YET, and won’t be able to get the job done for some time to come.
I’m talking public relations.
Maybe it’s time I quit talking about this point, because it looks as if it is impossible for most advocates to accept it, just as it’s impossible for most fossil fuel advocates to accept the reality of environmental destruction associated with using fossil fuel fired electricity, or to accept the reality of fossil fuel depletion, or the reality of the cost of defending our access to foreign oil, etc.
You voted for Trump because Clinton was going to be in Wall Street’s pocket.
Trump wants to repeal Dodd-Frank and eliminate the Fiduciary Rule, letting Wall Street return to its pre-2008 ways.
You voted for Trump because of Clinton’s emails. The Trump administration is running its own private email server.
You voted for Trump because you thought the Clinton Foundation was “pay for play.” Trump has refused to wall off his businesses from his administration, and personally profits from payments from foreign governments.
You voted for Trump because of Clinton’s role in Benghazi. Trump ordered the Yemen raid without adequate intel, and tweeted about “FAKE NEWS” while Americans died as a result of his carelessness.
You voted for Trump because Clinton didn’t care about “the little guy.” Trump’s cabinet is full of billionaires, and he took away your health insurance so he could give them a multi-million-dollar tax break.
You voted for Trump because he was going to build a wall and Mexico was going to pay for it. American consumers will pay for the wall via import tariffs.
You voted for Trump because Clinton was going to get us into a war. Trump has provoked our enemies, alienated our allies, and given ISIS a decade’s worth of recruiting material.
You voted for Trump because Clinton didn’t have the stamina to do the job. Trump hung up on the Australian Prime Minister during a 5pm phone call because “it was at the end of a long day and he was tired and fatigue was setting in.”
You voted for Trump because foreign leaders wouldn’t “respect” Clinton. Foreign leaders, both friendly and hostile, are openly mocking Trump.
You voted for Trump because Clinton lies and “he tells it like it is.” Trump and his administration lie with a regularity and brazenness that can only be described as shocking.
Let’s be honest about what really happened.
The reality is that you voted for Trump because you got conned.
I didn’t vote for Trump. But my analysis shows the Florida vote swung to Trump when Obama issued a presidential decree allowing large quantities of rum and cigars be brought by American tourists returning from the island of slavery.
People who voted for Hillary were being conned also. D vs R is con vs con. It doesn’t matter who you vote for, you’re voting for a con. That’s what American politics is. American politics is a political sewer pipe.
Copying HB’s 1:41 am over to the non petroleum thread to reply.
>That isn’t quite the same as claiming all Dutch trains are running on wind energy!
You make this remark while failing to state your assumptions that lead you to the conclusion, so it’s just propaganda. Your assumptions are probably false.
It’s pretty close to the same, since basically all Dutch trains run on electricity. You are probably confused because you are thinking about America’s old fashioned diesel system.
My interpretation of the report is that the Elektrificatiesysteem the seperate DC system that runs the Dutch train system is now, in some sense of the word all wind. I guess it is net wind actually.
But calling the Dutch liars just because the Americans elected a con man to be president is simply projection. Your apparent belief that Dutch trains are run on diesel is also projection of your own experiences onto something you no nothing about.
Worüber man nicht sprechen kann, darüber, muss man schweigen, as Wittgenstein put it.
Why target Russia? Is it because of an impending Seneca cliff in Saudi Arabia? They were supposed to peak 10 years ago but water and nitrogen injections kept them afloat. Now?
https://www.lewrockwell.com/author/jack-perry/?ptype=article
“I’ve gotten a couple emails from people who have asked me what I think the “end game” is in regards to Russia. And, indeed, the government is going into extra innings with this whole Russia vilification project. This is worse than someone who has held on to a grudge for years. The government does that, too, but they haven’t done it over ideology (as with Cuba) for quite some time now. What, then, is the motive?
The motive is perfectly clear: Oil. You see, Russia has already eclipsed Saudi Arabia as the world’s biggest oil producer. This means the big Saudi oil fields are drying up. And the government knows that, but they can’t tell us this because it’ll create a panic. One would think this would motivate the United States to get cozier with Russia. However, what the United States government fears is that if we do that, Russia will twig to the motive for it, and realize it has the United States over a barrel. An oil barrel. At which point the price goes up. Not to mention extracting concessions in the global sphere of influence.
Thus, what the United States is playing at here is trying to install a different “regime” in Russia. That being, one that Vladimir Putin does not control or have any influence over. This is easier said than done and the United States knows this. But the stakes are quite a bit higher than controlling the dwindling oil supply in the Middle East. Russia is obviously in control of most of the world’s remaining oil reserves. The United States needs a puppet regime in Russia to have access to that oil without paying the correct market price for it.
At some point, this gambit will fail. Russia is not the Middle East. A war with Russia cannot be won or cease-fired out of. Nor can a United States-backed “regime change” succeed over there. This is not the 1990s Russia of Boris Yeltsin. The United States, however, cannot come clean with the truth to the American people. The reason is because if the American people knew the truth, they’d never sleep nights anymore. The truth is this: Our entire economic system is based on petroleum and low-cost petroleum at that. But the actual nightmare is that our entire agricultural system is based on cheap oil.”
Saudi has had water injection for much longer than ten years on pretty well all it’s fields and I don’t think they are using nitrogen injection anywhere, there may be some small CO2 EOR projects though. Their production has been maintained by developing three old, heavy oil fields that were mostly dormant (Manifa, Khurais and Shaybah), by using a lot of in-fill drilling and intelligent wells (where water breakthrough can be controlled) on maturing fields and by extensively redeveloping offshore fields with new wellhead platforms and adding artificial lift. I don’t think their fields are anywhere near drying up; they may be hitting some limits in surface facilities – probably to do with water injection or treatment of produced water which means they have to continually choke back so as not to damage the reservoirs.
I’ve a new post on the Permian, available here.
The well quality of Permian is going extreme up, what happened there? Technology revolution, or new findings?
I suspect longer laterals, bigger fracs, and maybe other well designs. I hope others can give some data on this.
Enno,
Many thanks for your latest updates on EFS and the Permian.
There is no data on average well quality for the wells that started production in 2016. Is that because the data for last year is incomplete?
Alex,
“There is no data on average well quality for the wells that started production in 2016. Is that because the data for last year is incomplete?”
If you go to the “Well quality” tab in the first presentation, you’ll see 2016 profiles as well.
The “Ultimate Recovery” overview only supports displaying production histories for wells of the same age. As there are still 2016 vintage wells on which I have no data (the ones that started in Nov/Dec), 2016 is not yet shown if you display it by “Year of first flow”.
However, if you change the selection to “Quarter of first flow”, or “Month of first flow”, then you will see more recent data as well, incl 2016.
You may remember past discussions here where we discussed displaying or omitting incomplete tails in the well profile graphs. The Well Quality tab can show incomplete tails, while the Ultimate Recover tab can’t.
Thanks Enno,
I just found that the number 2016 in the legend was hidden.
Comparing well performance in the Permian and the Eagle Ford, it seems that average IP rates are not that different (582 b/d and 510 b/d, respectively, in the second month of production), but declines in the EFS are much steeper.
As a result, by the tenth month, average well in the Permian produces 210.7 b/d, and in the EFS only 122.6 b/d.
Furthermore, well productivity in the Eagle Ford is detereorating over time compared to the wells drilled in previous years, which may suggest that
longer laterals and bigger fracs result in only slightly higher IPs but much steeper declines.
By contrast, new wells in the Permian continue to perform better than older wells.
That may explain why drilling/completion activity and LTO production in the Permian have remained more resilient and are quickly recovering; while EFS has seen the biggest decline in production among the key LTO plays.
I agree Alex,
Note that Permian wells only now start to approach the well quality of Bakken wells. But the Permian has other factors working for it.
I was trying to find explanation for a sharp drop in production in the Eagle Ford in various research reports and articles, but I could’t.
You charts show it very clearly! So thanks again.
Well performance in the EFS may be a sign that not much potential drilling locations are left in the sweet spots there. In that case production in the EFS will not be able to reach its previous peak (as of March 2015).
As regards the Bakken, production there has declined less than in the Eagle Ford, but much more than in the Permian. I think that a big problem for operators in the Bakken is a significant price differential between ND well head prices and WTI (it was $12 in December). And this differential cannot be eliminated without additional pipeline capacity.
In any case, it seems that the recovery in both the Bakken and EFS will be very slow.
Thanks Alex, that is great to hear.
Hi AlexS,
It looks to me the Eagle Ford wells have not changed very much in 2016 and generally have improved from 2010 to 2015.
I also have difficulty seeing 2016 wells in the Eagle Ford well quality view.
The 2016 well is very similar to the 2015 well for the first 7 months, but falls off a bit by month 8 relative to 2015 wells, the number of wells is very small for 2016, so that may be due to a limited data sample. Three thousand wells for month 9 of 2015 vs only 292 2016 wells at month 9.
You are no doubt correct that the better prospects in the Permian basin has led to less drilling in the Eagle Ford, but higher oil prices may result in increased drilling in the Eagle Ford in the future.
As far as the Permian being “much” more productive.
If we look at 2015 wells at month 20, cumulative output for the Eagle Ford well is 112 kb and Permian Ford 2015 wells at 20 months are 116 kb, so a marginal improvement.
The 2016 Permian wells are significantly better than Eagle Ford wells after 9 months (98.9 kb cumulative vs 76.7 kb).
Dennis,
The legend in the well quality tab may not show scrollbars, but they will become visible if you interact with it. This will allow you to scroll to year 2016. Let me know if this helps.
Hi Enno,
I just looked at individual years, the 2016 curve was hiding behind the 2015 curve, they are not very different as far as well profile, just a statistical variation to my eye for Eagle Ford well profiles from 2015 to 2016.
Eagle Ford has declined due to fewer wells being completed for the most part.
Latest ensemble mean prediction from NOAA’s Climate Forecast System calling for weak #ElNino by peak of Atlantic hurricane season (Aug-Oct)
Good for GOM production.
https://twitter.com/philklotzbach/status/828640174129111040
From a previous post on POB.
”In a somewhat related aspect, I’ve not seen an updated graphic from Rune on the cash flow from major Bakken operators.
I’ve always felt that single frame told a very powerful tale, but not so much pessimistic as one might think.”
The chart likely referred to looks at Bakken(ND) as one entity and below is an updated chart as per November 2016 and instead of monthly free net cash flow it has now been annualized (last 12 months total free net cash flow) to enable the same units on both axis.
For all 2016 the companies in Bakken will use about $2,500 Million more than their free cash flow from operations (this is by not including the effects from natural gas sales).
Using Billions = 1,000 Millions on one axis and Millions on the other may be deceptive.
Average gross specific interest cost is now at an estimated $7/bo.
What has to happen for you guys to understand?
Whoever holds that debt doesn’t get repaid. What does that mean?
Nothing. If they are systemically vital to the global financial structure, the central banks (plural) will create the necessary money and GIVE IT TO THEM.
It doesn’t have to mean anything. And further . . . if YOU were in charge of the situation . . . YOU would do exactly the same thing. You would create the money and GIVE IT TO THEM.
How could you not?
There’s also another conceptual leap pending.
If that debt is NOT systemically vital to the global financial system, but IS systemically vital to flowing enough oil for civilization to function — that gets those debt holders bailed out, too.
Watcher,
whatever is the primary source of funds that flow to the LTO industry, if they still flow, LTO production will continue. The recent data suggest that inflows (in the form of IPOs, secondary share issuances, proceeds from asset sales, acquisitions by the oil majors and private equity firms, etc.) are again increasing. That means that investments in shale oil and gas will rise in 2017 and the next several years, and LTO production will rebound. And that will have an impact on the global oil market.
As regards (excess) money printing by central banks, it affects all parts of the economy, not just oil and gas industry. If there were no money printing, people would not be able to spend thousands of dollars on electronic gadgets; cars, including EVs; solar panels, wind turbines, etc.
“That means that investments in shale oil and gas will rise in 2017 and the next several years, and LTO production will rebound.”
But isn’t that what much of the discussion here is about? Whether production will rebound, and if so, for how long?
If they are systemically vital to the global financial structure, the central banks (plural) will create the necessary money and GIVE IT TO THEM.
I guess that’s what happened to the sub-prime mortgage crisis. The banks were “systemically vital to the global financial structure”. They all got bailed out. But the purchasers of those sub-prime mortgages, mostly pension funds and such, were not considered vital. They got nothing!
While you fundamentally misunderstand (“do not understand” would be the correct word here…) how it really works, you are correct in your conclusions…. practically speaking.
Watcher,
You should write a post and ask for it to be posted on POB where you lay out what it is we do not get.
I for one did not get the memo on central banks omnipotence.
That is the key rebuttal.
Are central banks omnipotent? Are they, working in concert (not as competitors seeking the best interests of their particular countries), omnipotent?
They are. Systemic threats have created cooperation and there is no sign of it ending.
They ARE omnipotent. Right up until geology prevents uniform flow and uniform consumption, regardless of funded oil production effort.
THAT is the limit to their omnipotence, and it’s essentially the only limit. Failure of adequate flow regardless of money.
Odds don’t look bad that we’ll see it soon.
Watcher apparently believes that just printing money and passing it out to anybody who must have it to prevent an economic crash, or a disaster of any sort that can be prevented by throwing money at it is a trick that has magical overtones.
From the way he presents his case, it’s easy to draw the conclusion that he thinks this trick is harmless, that it can be used over and over again without fail, but occasionally he does say something entirely rational, such as that when there’s not enough oil in the market, somebody has to do without .
Now somebody like Dennis, who has a very sophisticated understanding of finance and banking might take exception to MY interpretation of how helicopter money can prevent a problem from growing into a catastrophe,.
In this particular case for example, Watcher is saying that if enough money is thrown at the oil industry, the barrels we MUST have will come to market, and he’s arguably RIGHT,at least short to medium term, because there’s still plenty of oil in the ground that can be recovered if the price of it is high enough.
Money’s fungible, and it doesn’t matter much to the guys on a drill rig whether the money in their paycheck originates from the sale of oil at a high price, or from a subsidy paid to their employer, or both. Either way, they will make the oil flow, so long as they are paid, and the bills coming in to the oil company are paid.
Now in a world where everything is on the up and up, and transparency prevails, and everybody talks HONESTLY, rather than like a goddamned car salesman out to get your signature on the paperwork, the matter of subsidizing an industry in order to prevent great harm to the body politic would be dealt with by passing a bill providing the money and providing it by the usual means, via collecting it as taxes. Some of it might or might not be printed, but at least everybody would KNOW.
Now as I see it, printing money on the grand scale, by means of socalled quantitative easing, or whatever other euphemism is used to name the deed of doing it, is basically no more and no less the same thing as Uncle Sam delegating the job of collecting taxes to the central bank and the banksters who run it.
So – there may not any inflation, as measured in the usual ways. But the concept of fungibility also applies to inflation in my way of seeing things, even though it’s concealed, hidden by the noise.
Consider. Suppose I own the oil industry, and I get a few tens of billions in subsidies. I use it to pay my employees, and all the other bills I incur, and hopefully I WOULD bring the barrels to market that we MUST have ( for a good many years to come, of course. ) thus preventing an economic crash due to lack of oil.
Now let’s get into a little DETAIL, add a little NUANCE. I buy up steel by the million tons, I hire skilled workers , directly or indirectly, by the tens of thousands, making the things I buy and getting them to me.
In short order, there’s a million tons less steel available to all other industries that buy steel, ditto everything else I use in my oil biz. There tens of thousands fewer skilled workers available to make the same range of products, etc, for sale to OTHER industries and consumers.
Now the price of steel might not go up, because I’m using so much MORE, and wages might not go up either, just because I’m hiring by the tens of thousands ( most of them indirectly as suppliers of goods or services).
But if I were NOT doing all this extra hiring and buying, well then the most elementary economic theory tells me that all those people and all those goods and services would be available to EVERYBODY ELSE meaning everybody NOT directly or indirectly employed in the oil biz.
Steel would be cheaper, trucking would be cheaper, sand would be cheaper, clean water would be cheaper, new bulldozers and motor graders would be cheaper, etc etc.
Bottom line, the cost of the subsidy is paid in actual fact by all the people of the country,collectively, as a hidden tax.
Inflation caused by printing or creating money out of thin air need not manifest itself as RISING PRICES. It can manifest itself as LESS DEFLATION, which is effectively the same thing, in real terms.
It’s insanely stupid that so many people go around arguing that this or that policy has not helped or has done harm based on a simple correlation with a single variable. Lots of idiots have argued that cheap gasoline hasn’t helped the economy over the last couple of years. All you need to do to see what an ABSURD argument this is, is to envision gasoline still being four bucks, and think about how many MORE people would have gone broke as the consequence, or cut back on eating out, or new clothes or new phones or medical care, ad infinitum.
There’s a limit to how much printed money can be absorbed into the economy before big problems result, problems bigger than the problem that led to the printing in the first place.
I don’t know what the limit is , and I doubt anybody does, because it would change with circumstances.
Sometimes very dangerous medicines are the only treatment that will cure an illness. Chemotherapy comes to mind. It’s hard as hell on the patient, but not as hard as DYING.
Obviously I have been painting fast with a very broad brush, but I haven’t seen any arguments to the contrary that make sense to me.
OFM-“Bottom line, the cost of the subsidy is paid in actual fact by all the people of the country,collectively, as a hidden tax. ”
Absolutely correct. That debt spending, whether it be on fueling the housing industry, the drilling industry, the nursing home and pharma industry, the bomb industry, or the elderly life prolongation industry, is backstopped by the tax payer- current and future.
The banks just act as the interest collecting conduit between the Congress and the public. Remember it is the Congress that does the spending and the industry/bank bailouts- not the Fed.
Trump and Ryans wall, if it ever gets built, will get paid for by the taxpayers as well, American not Mexican.
The late great Garrett Hardin had a name for that game – a game as old as civilization:
The “CCPP” game – Commonized Cost – Privatized Profit. Depending on the specific game board, the “costs” can be financial, environmental, social, and/or political. It is all the same game, though. It is “gaming” the “system” for your private profit. A game at which casino developers and owners are especially adept. And that is what scares me….
Rune, thank you for this. People here I believe had been asking for it, now, unfortunately, it seems to have gone over most peoples heads. There is a fundamental detachment from reality here; people think LTO development in America will have a never ending source of funding, regardless of price, demand, http://oilprice.com/Latest-Energy-News/World-News/EIA-Slashes-Crude-Oil-Demand-Forecast.html or the economic/financial woes of the industry itself. I can’t say that I understand that myself.
Mike, thanks!
I did not expect my post would unleash an avalanche with unsubstantiated claims about central banks making bond holders/creditors whole for losses incurred by shale companies.
Several companies have already been through bankruptcy proceedings (Chapter 11 primarily) and affected bondholders accepted a haircut.
Integrated companies have recognized impairments to their balance sheets.
So if only those who makes/supports these claims could come up with documentation of the conduits by which the bondholders/creditors are made whole by central banks it would be helpful.
The losses/haircuts/impairments will be spread over several years (perhaps decades) and in relative terms the amounts involved do not pose a systemic risk.
If central banks got involved it would be much easier (and better) to manipulate the oil price higher.
Oh I didn’t know this was still alive.
Dood what substantiation do you need for the claim that if global systemic risk exists financially from growing shale debt they will be bailed out? You got a problem with that claim? Where were you in 2008 when nominal and gross credit default swaps were measured in trillions? Know anyone at the ISDA or even the DTCC?
No, of course not. You’re buried in normalcy confirmation bias that believes QE creation of 25% of GDP over about 6 years is completely consistent with markets operating in laissez faire fashion. When did you, oh hell, when did anyone last hear the phrase moral hazard? Think about that when you next posture yourself offended.
Normalcy is gone. It’s not coming back. Oil scarcity is relentless and is the likely cause. I can offer you help in re-evaluating what is and isn’t normal:. Have a look at the German 10 year Bund. 0.3%. German inflation? About 1.2%.
Watcher, thank you!
I understand that you have a serious problem to stick to the subject.
Since you apparently has such unique insights into how it is all connected why not write a coherent post and ask for it to posted here at POB?
Hi Rune,
I would be happy to post it.
Watcher my email is below
peakoilbarrel at gee male dot commercial
Hi Rune,
In the legend it says US$ Million/year for net free cash flow, should that be US$ Billion/year?
Dennis, thanks!
Correct.
The legend should read Billion as shown on the left y-axis.
I’ve been looking at this tanker tracking website (It’s free but it has only been going for a couple of months).
http://tankertrackers.com
Singapore and Malaysia’s combined tanker hubs
Clipperdata
While OPEC’s export loadings to Asia were strong in January, we are seeing much lower flows destined for North America. total loadings last month dropped below 3 million barrels per day for the first time since August.
http://blog.clipperdata.com/oil-takes-lead-from-lady-gaga
This link is ESPECIALLY for my little buddy HB.
http://www.motherjones.com/politics/2017/01/democrats-desperate-bernie-sanders-email-list
They just don’t come any more anti Trump than Mother Jones.
A cynical Sanders supporter might just interpret it as being mostly about the D party establishment wanting Sanders to bail it’s sorry ass out after losing miserably last election cycle.
And he just might be right.
That would be me, HB. 😉
But I leave it up to the reader to decide for himself.
But there’s a LOT more to it than that, and everybody who would like to see Trump in convict’s stripes or an orange coverall that might compliment his complexion really ought to read it.
This is an open thread for oil and gas. Fascists just cannot seem to grasp that.
Sorry, I usually read carefully, but in this case, I failed to do so. I won’t post any more political comments here, unless they relate to gas and oil.
Okay, now I feel bad. I thought that you had done it intentionally. My mistake.
Hi Clueless,
No problem, but I feel compelled to say I am going to copy HB’s rant over to the non petroleum open thread, and reply to it there, lol.
Sometimes I disagree with you , but I always read your comments for insight , and sometimes I find little gold nuggets in them and wonder how come I didn’t think of THAT myself, lol.
Rats continue to abandon ship:
(The pay to play is mostly over with)
In Wake of Hillary’s Loss, the Clinton Foundation Collapse Continues
https://pjmedia.com/trending/2017/02/03/in-wake-of-hillarys-loss-the-clinton-foundation-collapse-continues/
Is there a reason you are discussing politics on the Petroleum Thread?
http://www.cnbc.com/2017/02/07/bp-fourth-quarter-earnings-come-in-at-497-million-missing-analyst-expectations.html
Statoil just about broke even on operating income but took a big loss on impairments because of oil price.
https://www.statoil.com/en/news/fourt-quarter-2016-results-and-capital-markets-update-2017.html
“We have reset our cost base, transformed our opportunity set, and we continue to chase improvements. We have the financial capacity and are ready to invest in our next generation portfolio with radically improved break evens. With a sharpened high value, low carbon strategy, Statoil is well positioned for the long term and even more value driven in everything we do”, says their CEO; Google translate couldn’t offer too much help on what that actually means but it sounds like they are running out of opportunities in oil and are concentrating on cost savings there and expanding the renewables business.
Statoil has divested from Canadian oil sands. They are investing in offshore wind and CCS. Offshore wind is marginal in Norway (they mainly use hydropower), CCS is used at Snow White (gas field).
https://www.statoil.com/en/magazine/shaping-the-future-of-energy.html
Statoil has gradually become a more high cost producer of oil. If we look at their cash flow statement for 2015 and 2016 combined, the cash flow from operations of 35 bill. usd dollars just about covered capex expenditures of 27 bill. usd and (record low) taxes to the government of 12 bill. usd. Other costs including dividends made Statoil reduce their cash equivalents from 11 bill. usd to 5 bill. usd year end 2016, esentially burning 6 bill. usd of cash in the two year period with low oil prices. Debt levels are slightly down to 27 bill usd.
The strategy set up by former CEO Helge Lund of expanding Statoils international business primarily in North America seems to have pretty much failed completely. The oil sand business is sold with a loss, the same with Marcellus operating leases. While exploration wells in the GOM have been dry. Statoil is left with some acerage in Bakken and Eagle Ford, but it is hard to see how this business is going to be profitable.
Statoil is “all over the place” when it comes to future direction. Renewables, exploration in Barents sea and hopefully (for them) the Lofoten area in Norway. A major investment was done in deepwater Brasil. Further cooperation with russian companies within shale in Russia and offshore projects near russian border is on the agenda. Statoil needs to replace their natural gas reserves going forward, and also their reliance to the Johan Sverdrup field is big (startup late 2019 or early 2020). Gives them a 10 year window to either develop oil in Brasil or find and develop new oil and natural gas fields in Norway.
Just as an FYI, BP’s dividend yield is now almost 6.98%.
Subtle item on that sort of thing, sports fans.
US oils tend to raise their dividend much more frequently and . . . predictably than the Euro oils, but the Euro oils generally have a higher immediate yield.
This means almost nothing.
Douglas-Westwood has issued a new report on deep-water prospects. It costs a lot to buy but there have been a couple of reports on it. They export traditional deep water production from GoM, Brazil, Angola and Nigeria to peak in 2019 at 7.1 mmboepd. Frontier deep water (e.g. west coast Africa) is expected to climb but is mostly gas prone. They identified 118 deep-water projects that could be drilled from now to 2021. Overall they expect $120 billion to be invested to 2017 but declining at 6% per year average (e.g. 27 declining to 21).
http://www.douglas-westwood.com/report/oil-and-gas/world-deepwater-market-forecast-2017-2021/
http://www.offshore-mag.com/articles/2017/02/frontier-plays-to-lead-deepwater-production-growth.html
“OEMs are beginning to feel the full impact of the downturn due to the low volume of projects sanctioned since 2014 as they are rapidly working through their record backlogs established over the 2011-2014 period. However, a number of mega projects waiting final investment decision (FID) are expected to be up for tender over the next 18 months, as operators hope to take advantage of a more competitive pricing environment. Subsequently, subsea tree installation activity is estimated to grow at a 4% CAGR over the forecast period. DW has identified over 118 deepwater fields in its World Deepwater Market Forecast with potential drilling activity, which demonstrates that many oil majors have and will continue to invest in deepwater operations to replenish dwindling production profiles.”
I haven’t seen many companies talking of making FIDs in their 4q2016 results. Mostly it has been about budget responsibility and reducing debt, though Total and Eni, who haven’t reported yet, might be the most likely for deep-water. Of the 118 fields I’d say about a third are oil tie backs, a third gas and a third oil floating production systems, most of which are projects that have been around a number of years. There is a combination of obstacles for these, difficult reservoirs in Brazil and GoM, political issues in Angola and Nigeria, debt and corruption in Brazil and Nigeria. If the highly specialized subsea OEMs start to run out of orders and have to shrink it might present one of the biggest impediments to recovery in oil supplies in the medium term as they would have trouble getting back the expertise and organization, but then as not much new is being discovered they may not be needed anyway.
This is a pretty good summary of offshore 2016 exploration which I haven’t seen posted here before; it shows how the low discoveries for oil and gas fell compared to previous years. I still haven’t seen anything giving overall discoveries but IHS sometimes come out with something in CERA week.
http://www.offshore-mag.com/articles/print/volume-77/issue-1/frontier-areas/frontier-fields-beckon-despite-downturn.html
Baker Hughes rig international rig counts are out for January: oil down 14, gas up 9, miscellaneous up 9 (mostly in Indonesia – I don’t know what they are drilling for – minerals or water?). Oil number is the lowest since 2006 except for a dip last October – Europe and Latin America had biggest drops, Middle East added rigs. Norway dropped 4 – I don’t know if they have seasonal restrictions in the Barents Sea because of ice.
http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsintl
Weatherford Slashes Another 3,000 Jobs
http://oilprice.com/Latest-Energy-News/World-News/Weatherford-Slashes-Another-3000-Jobs.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+oilpricecom+%28Oil+Price.com+Daily+News+Update%29
re: what is Indonesia drilling for: Geothermal.
http://geothermalresourcescouncil.blogspot.com/2016/09/indonesia-drilling-at-north-sumatran.html
Maybe some coal bed methane too.
I posted that Facebook item about Russia and Exxon because I wanted to know what people here thought. Those who commented said it was full of errors.
But that led me to do a little research and I’ve been looking at what the sanctions really meant for Exxon. Because of low oil prices, it’s quite likely development would have stalled anyway. But the sanction issue actually provides something of a smokescreen by which Exxon can blame the sanctions rather than low oil prices from not doing anything in the area.
I don’t know much about political conspiracies, but I know enough about corporate PR and spin to be aware that companies sometimes say things and do things to give the appearance of future earnings in order to boost stock prices.
Rex Tillerson misleads on Russian sanctions opposition | PolitiFact: “But at Exxon’s May 2014 shareholder meeting, Tillerson offered a more negative take on sanctions overall. He told reporters that sanctions are ‘imprecise and ineffective’ and that ‘our views are being heard at the highest levels,’ he said, according to the Associated Press.”
I have already wondered aloud if Tillerson, being a gas and oil insider, foresees the future of the industry and knows it isn’t all that bright. He has said that for the moment he plans to keep the sanctions.
Tillerson says would support maintaining Russia sanctions for now | Reuters: “President-elect Donald Trump’s nominee for U.S. Secretary of State, Rex Tillerson, said on Wednesday he would support maintaining U.S. sanctions on Russia until the United States further develops its approach to the country.”
Could it be that in terms of oil prices, it is better to maintain the sanctions, but while at the same time saying the sanctions are bad?
There’s the matter of sorting out what is good for oil prices, what is good for US foreign policy strategy, what is good for Exxon, what is good for rich individuals using their influence to further enrich themselves, etc.
The topic isn’t luckily to go away until there is a better understanding about why Trump seems so supportive of Putin.
I think Trump has an affinity for Putin for two reasons.
He likes the idea of doing lots of business with Russia. He has a natural affinity for working with other white guys, who get things done.
Secondly, he admires bullies, since he is one himself. Certainly Trump is bush league compared to Putin when it comes to brains, strategic thinking, and guts- And that is why Putin was so keen to have Trump elected.
There are some laws of nature:
F = m a
F = G M m / r^2
B = uo I / 2Pi r (Electromagnetics, for the unwashed)
Loose change can often be found between seat cushions.
There are no stupid billionaires.
“There are no stupid billionaires.”
They are smart enough to do the con—
But too stupid to comprehend the results.
Of course, if sociopaths, the second is a feature.
On second thought, forget the second.
The things that makes truisms interesting is are the exceptions.
History provides numerous examples of billionaires who were fool enough to get taken by con men.
The wealthy class that owned German industry for example thought using Hitler would be a handy way to enlarge their fortunes. They wound up dead or destitute as a result of that miscalculation.
He played them like a violin until he got into their good graces and gained their support. After that he was moderately nice to them for a while, during the period they thought the controlled him while he was putting the finishing touches on his long range plans.
Once he had a good grip on the reins of power, he used them just as roughly as he did everybody else.
And various scam artists have made off with large sums of money entrusted to professional managers , who might not have been billionaires in their own right, but they were nevertheless in charge of billions.
“There are no stupid billionaires.”
Alice Walton
whaaa
She graduated from Trinity University in San Antonio, Texas, with a B.A. in economics and finance. She began her career in finance as an equity analyst and money manager for First Commerce Corporation and later served as vice chairperson and head of all investment-related activities at the Arvest Bank Group. In 1988, Walton founded Llama Company, an investment bank engaged in corporate finance, public and structured finance, real estate finance and sales and trading. She served as President, Chairperson and CEO. For a time, she was a broker for E.F. Hutton.
She seems to be an alcoholic, which happens at any IQ level. Why did you think she is stupid?
>There are no stupid billionaires.
Haha. God bless America, and dumb Americans, good Christian folk who believe the rich deserve to be rich and the poor deserve to be poor. Or maybe they’re Libertarian, believing that Adams Smith’s invisible hand is the hand of God Almighty hisself.
No stupid billionaires? Not even in the House of Saud?
An old friend of mine used to beg money from gulf Arabs for Polisario. He’s a real life Commie, I admit. His remark about the people running the show in Saudi Arabia is that they were so dumb they couldn’t keep track of whether they were marrying their niece or their cousin this week.
He also objected to their table manners. It ok to lick your fingers, but licking lamb grease off the palm of your hand at the table is a bit much. Eating from a gold plate doesn’t make you civilized.
Oh, but Americans are much smarter than Arabs, you’re probably thinking. Well, blessed are those who believe that. I mean, we’re talking about a country that elected Donald Trump president.
I found this. The original article wouldn’t load for me, so I have a link to the cached version.
The Paradox of Russian Sanctions Relief – The American Interest: “In the short term, then, a hasty lifting of sanctions could endanger both Russian exporters and the government’s best-laid budget plans. This does not mean that Putin will not push to have sanctions lifted, but he may put the issue on the back burner for the time being, until a more auspicious climate arises and oil prices are on the rise.”
Putin, don’t expect much from Trump's sanctions relief | TheHill: “Lifting sanctions actually may hurt Russia economically in some areas. It will have a negative effect on oil prices. That means less revenue for Russia’s resource-intensive economy, and a poor outlook for its cash flow. Commodity revenue accounts for almost half of Russian state revenues.
And economic pain from removing Russia sanctions could also be felt here. A depressed global oil price will hurt U.S. oil producers struggling for solvency in a bleak market. It will also hurt their prospects to compete in the global crude export market. And when it comes to natural gas, lifting sanctions on Russia will hurt the ability of U.S. LNG suppliers to compete internationally.”
Why would lifting sanctions have a negative impact on oil prices?
This dood has manufactured sides in what one supposes is politics.
But to your question, what is negative? Lower consumer budgets?
Besides that, applause for the question, since no one has proven impact on prices.
Presumably with greater production, lower prices.
I repeat: sanctions did not have any impact on Russian oil production.
The article in Platts says it very clearly.
Why did Exxon say it lost money as a result of sanctions?
What does this mean?
Exxon Has Lost Over $1 Billion From Russian Sanctions | OilPrice.com: “The sanctions forced Exxon to shelve its Arctic plans, and it started to lose money from revenues generated by its ongoing Russian projects, such as the flagship project Sakhalin-1 and a number of joint ventures with Russia’s Rosneft. It also lost future revenues. The Arctic venture alone was valued at $500 billion in total investments.”
Exxon has invested $1 billion in a project that could start production not before 2020. If sanctions are lifted this year, the project will start 2 or 3 years later (2022-2023). By that time, global supply-demand balance will significantly change.
Exxon is not loosing money on the Sakhalin 1 project, which has actually increased output in 2016. In 2015-16, ongoing Russian upstream operations remained profitable for western majors, including BP, Shell, and Exxon.
I found this. In reality Exxon didn’t lose a billion. It appears to be corporate spin. That’s the issue I have been raising.
Here’s What Exxon ‘Lost’ From Russia Sanctions “Exxon Mobil said in a 10-k filing with the SEC on Wednesday that it lost a maximum of $1 billion from sanctions. …
A spokesman from the company said that the figure represented ‘potential and not actual’ losses.”
So by playing up its “potential” losses, Exxon gave stockholders a reason why the company hasn’t done as well as expected, but at the same time, linking itself to the Russian sanctions had political ramifications with the Trump/Tillerson/Putin discussions.
There are also political ramifications with other aspects of energy: imports/exports, carbon release and environmental laws, laws and dropping of regulations to encourage production, wars over oil supplies, etc.
Oil influences politics and politics influences oil.
U.S. Oil and Gas Prices May Tumble On Trump's ‘Energy Revolution’ – Bloomberg: “President Trump’s vow to ‘unleash an energy revolution’ by reversing regulations may send oil and natural gas prices tumbling in 2018, according to Bank of America Merrill Lynch.
Domestic oil and gas prices will likely suffer as the U.S. continues to increase its output, analysts including Francisco Blanch, head of commodities research, wrote in a note dated Feb. 3. Though U.S. oil and natural gas producers could see a surge in investment under Donald Trump’s numerous proposals from a likely reform of the corporate tax code to a possible border tax, prices may suffer from the resulting increase in output.”
The USA won’t continue to raise output at $55. Prices will rise above and hover around $63. That’s what my excel model says.
Hi Fernando,
Does your model predict that oil supply will increase by much at $63/b?
I would think that if the IEA’s oil demand forecast proves correct, that oil supply will be too low at $63/b. The IEA expects oil demand in 2017 will be 1.35% higher than in 2016, I think $63/b would result in flat oil output at best (or perhaps a small decline in C+C output), so $75/b seems a more reasonable guess for 2017 oil prices. I assume $63/b is the average Brent price for 2017.
Dennis, the model is pretty vague. It says prices ought to rise to about $63, hold there for a while because activity raises production, then start a fast climb to over $100. Prices then stabilize in the sense that they oscillate and go up a little more than inflation.
Russia and Belarus tension. Observe the future:
“The border issue is perhaps a stand in for a larger conflict. On Friday, Belarusian President Alexander Lukashenko criticized this move by Moscow, and said that his country’s ties with Russia are deteriorating because Russia is afraid of Belarus turning toward the West. He also spoke of a much larger problem: Russia recently threatened to cut oil exports to Belarus by half. The two countries have been arguing about the price and delivery of oil and gas for months.”
“Lukashenko said Russia had grabbed Belarus “by the throat” by using oil and gas supplies to get its way, declaring, “Independence cannot be compared with oil.” But even as he vowed to find other sources of energy if necessary, he he took care to say that Belarus would not leave the Russia-helmed Collective Security Treaty Organization or Eurasian Economic Union.”
“Lukashenko said Russia had grabbed Belarus “by the throat” by using oil and gas supplies to get its way, declaring, “Independence cannot be compared with oil.”
As I think though what I have been posting, it is this in a nutshell.
The narrative is that sanctions against Russia hurt Exxon.
On one side we have people saying “Get rid of the sanctions to help Exxon.”
On the other side, we have people saying, “Look for a political deal to get rid of sanctions to help Exxon.”
Somewhere in the middle are people saying, “Getting rid of the sanctions probably won’t help Exxon, and may actually hurt Russia and the oil industry in general by depressing oil and gas prices.”
So the whole issue is clouded by Exxon tying itself to this deal. Maybe it would have been better not to have done so.
I don’t mean that Exxon shouldn’t have done the deal. I can’t say whether it was a good idea or not.
Rather, I mean maybe it hasn’t served Exxon well it put out the story about how much money the sanctions have cost the company.
Exxon stated it lost future earnings equivalent to $1 billion due to sanctions. I assume they assumed sanctions are permanent. The sanctions were wrong because Russia was reacting to USA and Europe aggressive moves. It’s easy for governments in cahoots with media to deceive people, and this is what we see all the time. The Russian side sees a terrible threat to national security if NATO takes over Ukraine. Therefore their reaction was predictable. They could have rolled back Ukraine all the way to the river and sat across from Kiev.
I don’t blame the USA public for lacking the understanding to realize eastern Ukraine is extremely sensitive, and Crimea is simply not negotiable under any circumstances. They will defend it like they defended Leningrad and Stalingrad in WWII.
Oil prices slump on bloated U.S. fuel inventories, stalling China demand | Reuters: “The sharp declines came on the back of unexpectedly big increases in U.S. fuel inventories, as reported by the American Petroleum Institute (API) on Tuesday. …
Goldman Sachs said that the data pointed to ‘U.S. gasoline demand falling sharply by 460,000 barrels per day (bpd) year-on-year in January, with such declines only previously (seen) during recessions.’ …
China’s 2016 oil demand grew at the slowest pace in at least three years, Reuters calculations based on official data showed.”
Seems like oil companies might get slammed again. Drilling costs are going up and oil prices are coming down (at least for the moment).
Some oil drillers feel the crunch as well costs rise in the hottest US fields
Yep. It was expected. But prices will rise as reality sinks in that $50-55 is too low to keep development activities at a fast enough pace. Once the Gulf of Mexico deep water stalls, the only decent investment spot is Permian basin.
It was expected that cost reflation will restart in 2017.
Oil service cost may rise significantly by the end of 2018.
Speaking of the Permian Basin, we have been discussing Pioneer Natural Resources’ earnings release, 2017 forecast and 10 year forecast.
PXD hasn’t released the 2016 10K, but they do mention proved reserve numbers, and only 7% of proved is undeveloped. About 50 million BOE, which, using PXD’s reported type curve, is only about 40 wells.
However, in 2017 they are planning on drilling and completing around 280 wells. They further state they have “pins on the map” for all 2017-2019 wells. Finally, they are predicting 1 million BOEPD company wide by 2026.
It is true PUDs can only be booked if they will be put on production within 5 years. However, why would PXD only book about 40 or so PUD wells when they say over 800 locations for 2017-2019 have been identified?
The only thing I can think of is only 40 or so out of all of these planned wells are economic at 2016 SEC oil and natural gas prices.
For those PE’s and others in the industry, why would PUD be so low for a company predicting tremendous production growth from new wells, besides they are uneconomic, and therefore cannot be booked?
PXD has stated their LOE is under $2 per BOE on their Spraberry Wolfcamp horizontal wells and F & D costs for these wells are a tad bit over $9 per BOE. They claim to be competitve cost wise with KSA, Kuwait and UAE.
2016 PV10 is $4.2 billion, up a billion from 2015, despite lower SEC oil and gas prices. Of course, once reserves go PDP, F & D costs are no longer included, so very possible they added over 200 MBOE of PDP, even if none of those 2016 wells will ever payout.
$4.2 million PV10. $32 billion market cap. Very interesting stuff.
They may not be booking their “type curve”, used for power point presentations. Those may use proved plus probable. Or they may be something else.
The only thing I know is that presentations tend to be quite different from sec reserves, and that some companies don’t bother to book reserves at all until wells are drilled (I’ve kept reserves as probable until wells were drilled in some cases).
Eni starts production of the East Hub Development Project, deep offshore Angola, ahead of schedule
San Donato Milanese (Milan), 8 February 2017 – Eni has started production of the East Hub Development Project, in Block 15/06 of the Angolan deep offshore, ahead of development plan estimates and with a time-to-market among the best in the sector.
Production is taking place through the Armada Olombendo Floating Production Storage and Offloading (FPSO) vessel, which can generate up to 80,000 barrels of oil per day and compress up to 3.4 million cubic meters of gas per day. With 9 wells and 4 manifolds at a water depth of 450 meters, the FPSO Olombendo will put into production the Cabaça South East field, 350 kilometers northwest of Luanda and 130 kilometers west of Soyo.
Production from the East Hub Project will add to production from the existing West Hub Project in the Sangos, Cinguvu and Mpungi fields, where another vessel, the FPSO N’Goma, is operating. In total, Block 15/06 will reach a peak of 150,000 barrels of oil per day this year.
Cabaça South East brings our number of fields in production to 5, with 2 more expected to start before the end of 2018
https://www.eni.com/en_IT/media/2017/02/eni-starts-production-of-the-east-hub-development-project-deep-offshore-angola-ahead-of-schedule
Maybe they are trying to hold onto personnel.
They are rampong up Mafumeira Sul, 150 kbpd, and have Kaomba Norte (115 kbpd) this year and Kaomba Sul(same size, both from Total) next. After that nothing on the books, quite a few undeveloped discoveries, but they are increasing deep and difficult reservoirs. Maersk cancelled Chissonga development last year, they have another couple so do BP, Chevron and Eni. There are recent issues with taxes and local content and corruption and nepotism questions, plus a growing insurgency in the Cabinda enclave, which is close to a lot of the oil. They used to have big inflation as well and very high cost of living in Luanda, not sure of the situation at the moment. 2018 onwards could see big declines, and things could get more dodgy unless a sustained oil price rise come along.
Angola is a typical country run by communists who gradually become super corrupt, evolve to have incompetent oligarchs running ministries and state companies, and eventually ignite popular resistance.
Venezuela under Chavez and Maduro has gone through the process at a very fast pace, the communists didn’t get to nationalize everything, but did a really good job destroying the economy, and now oil production is declining in what appears to be an irreversible trend (as long as the commies stay in power the country will be closer to a failed nation).
I’ve noticed quite a few long term forecasts prepared by agencies and private outfits fail to understand just how bad things are, and how much worse they are about to get.
The EIA STEO came out yesterday, sometimes there is a post or comment here on this but so far not.
http://www.eia.gov/outlooks/steo/
The only thing any of the media seem to look at in detail is the USA production figures, as below. They have Alaska in continuing slow decline. The LTO lower 48, with most changes from LTO, seems to be tending towards a plateau in late 2018. What I don’t get is how they look at GoM – they seem to make a reasonable go at a detail prediction for 6 months out and then just add the same growth curve of about 300 kbpd over 18 months, no matter what. I think their figures to July this year are probably about right, maybe a bit low unless there is a major lost time event, but after that there just isn’t anything due on line except Stampede (80 kbpd – probably over 6 to 9 months) in early 2018; unless they maybe know that Big Foot is ahead of schedule (due at the end of 2018). Against that there will be 150 kbpd per year decline rates in the online fields from July onwards.
Overall though they are following recent trend of gradually reducing predicted future rates.
George, recall that new find west of Prudhoe that was hyped. Vague recall first production well was to be Feb 2018, though more likely further test drilling first. Smith Bay?
That wasn’t for first production it was for the next test well – the first test well that would actually be flowed – and I think only then if they could get some outside funding. Production from that field is many years away, I think there is very little infrastructure in the area, the reservoir would probably need a lot of wells and may need fracking. And until they successfully test a well, probably more than one, and find someone to put up about $15 billion, there is no proven oil.
This link is not directly related to oil and gas, but renewable electricity is sure as shootin’ already impacting the market for coal and gas to a significant extent, and as the wind and solar electrical industries grow, they will have an ever increasing effect on the market for gas, and gas and oil are joined at the hip because so many oil fields produce some gas, or a lot of gas.
http://www.forbes.com/sites/uhenergy/2017/02/07/wind-and-solar-power-seem-cheap-now-but-will-the-cost-go-up-as-we-use-more-of-it/#9d7ff405b3e3
The site itself is worth a bookmark, because it has tons of great information about many aspects of the energy industry.
http://www.forbes.com/sites/michaellynch/2017/02/08/the-death-of-the-oil-industry-not-this-again/#687126565d51
Make what you will of it, but I have made a fool of myself a couple of times already by way of believing peak oil was headed at us like an avalanche, etc. I’m still waiting.
Predicting is hard, sez Yogi.
Knowing something will happen is not at all the same thing as knowing WHEN it will happen.
It’s a superficial article. He points to technologies that didn’t deliver, but doesn’t mention technologies that few saw coming and totally changed entire industries.
He also doesn’t address declines in cheaply available petroleum.
He probably had to turn in a column and these thoughts came off the top of his head.
Hi Boomer,
Maybe so, and it’s a fact that this guy is a business as usual mouthpiece when it comes to oil.
But there’s no real reason, so far as I can see , to bet the farm on him being wrong.
I’m all gung ho for pushing renewable development as fast as possible myself, but I must admit that the durability of the same old same old business as usual day to day reality has fooled the crap out of me more than once.
Some of our regulars think the market for oil will crash within the next few years due to the sale of electric cars growing like crazy.
Maybe.
But the depletion of numerous old fields that have been in production for decades, and the difficulty of finding and producing new fields may well mean that the price of oil stays up for decades to come, even as the quantity used begins to drop.
Products such as computers and cell phones can and do catch on very fast, sometimes, and the number in use may double in a year, several years in a row.
But phones and computers are cheap, and offer enormous utility in relation to the purchase price , and people don’t have to make a sit down and think about it hard decision to buy them. Cars are a different matter, just about every body has to pay close attention to the price, the durability and reliability, cost of maintenance, etc.
I just don’t see electric cars taking over the market any time soon.
And while the performance of computers can double every couple of years, at the same selling price, there is no assurance at all we will ever have affordable batteries capable of running farm machinery, construction machinery, and commercial size trucks.
If such batteries DO come to market, it seems like a pretty safe bet to me at least that it will be at least twenty years before they are invented, perfected, and mass produced in quantities sufficient to cut deeply into the market for oil, other than the oil that goes into cars and light trucks.
My opinion as person who has been taught a little humility by being wrong so far is that the price of oil is at least as likely to go up and stay up, for the next two or three decades at least, as it is to go down and stay down.
I posted a Resilience link down below that makes the case for oil remaining a critical commodity for a LONG time to come.
Following a January announcement according to which the DOE planned to sell 8 million barrels of oil from the Strategic Petroleum Reserve, and which some speculated was the reason for the big buildup in crude inventories in the past several weeks, today the U.S. Energy Department said it will sell 10 million barrels of oil from the government’s emergency crude reserve in late February.
This represents the second sale of oil from the emergency stash this year: according to Reuters, last month Shell bought 6.2 million barrels from the reserve and Phillips 66 bought 200,000 barrels, which was below the 8 million projected for sale. As explained below, that sale was partially held to fund a modernization of the SPR itself. More sales are expected be held in coming years to fund up to $2 billion for the revamp.
ZH
EIA had a news on it: https://www.eia.gov/todayinenergy/detail.php?id=29692
Looks like approx. 17 million barrels is up for sale in 2017 and almost 25 in 2018.
This link goes into considerable depth about the future of the oil industry. I haven’t done more than glanced at it , so far, but it appears to be well worth some study and discussion.
http://www.resilience.org/stories/2017-01-31/end-of-the-oilocene-the-demise-of-the-global-oil-industry-and-of-the-global-economic-system-as-we-know-it/
I have a new post on all LTO production in the 8 states I cover, which is available here.
One thing that is seldom mentioned in examining the future of the fossil fuel industry is that there WILL inevitably come a time when countries that have enough to export will be in a position to impose significant to hefty taxes on their exported fossil fuels.
Of course there IS a world wide market, and we can assume that competition will mostly keep the price of fossil fuels more or less about the same, after allowing for transportation and variations in the value of different currencies. This might not be a SAFE assumption, but just about everybody makes it anyway.
Consider this. There are two companies that produce gravel near where I live, one to the south , and one to the north. They know precisely what it costs to haul gravel, and when either state highway department puts out bids for a a bulk purchase to be delivered to so and so address, well, if the address is southward, the southern company will bid at let us say eight bucks per ton, and the norther company will bid at say four bucks. They calculate with a very sharp pencil, and once in a while, each company manages to wind a bid in the other companies home turf even though the shipping will be outrageously high.
If I had a coal mine in Georgia, I could get forty dollars a ton in a flash, because it costs Georgia utilities more than that for DELIVERED coal that sells for ten or twelve bucks in Wyoming.
The countries that can export are going to levy some serious taxes on exported gas within the next few years, when they have the competitive advantage of cheaper delivery costs, and you can bet your last can of beans on it.
https://www.theguardian.com/business/2017/feb/09/australia-must-charge-royalties-on-natural-gas-or-lose-billions-says-expert
It will take a while, maybe a long time, for the public to come to understand where its own best interests lie, but it WILL happen, no matter how much money the Koch brothers types spend on keeping Joe and Suzy in the dark.
And this can be a powerful argument, if properly presented, in favor of countries such as Spain, which have to import almost all their ff needs, staying the course and doubling down on building out more renewable energy infrastructure.
I’m a big believer in renewable energy but I’m an even bigger believer in depletion, and so I expect the price of oil and gas to go UP, rather than down, maybe not for little while yet, but soon, and I think the price of oil and gas will STAY up for a long time, barring economic contractions. It’s going to take longer imo for electric cars to take over than the more optimistic observers of the tech scene think it will. Ditto substitute technologies that can displace gas, they aren’t likely to grow up as fast as gas depletes, in MY opinion.
If I’m wrong, I’ll be very happy to admit it, a few years down the road.
Oil exporting countries usually tax it much more than the USA, Canada, or Europe do. The government take is built into the producer tax load. Some countries take 90 % of the gross revenue. So let’s say the market price is $60. The producer gets $6 and the government gets $54. Some governments use an export tax to subsidize national consumption. Some use direct subsidies.
If you mean they will impose a tax above market value that simply won’t work. All of them nibble off the market price. They can however control output and export volume. The USA didn’t allow any exports until recently, and all OPEC countries do try to manage total production.
This is how oil got to be decreed $77/barrel in 2015 Argentina. They tax flow from domestic production, so they needed it to flow, and they were successful in getting it to flow. Domestic production stopped its decline, per BP’s bible.
I notice there are no stories about starvation deaths in 2016 Argentina so it must not be all that bad a thing. Starvation deaths is probably a very good metric.
Russia has export taxes on crude oil, petroleum products and natural gas
This well services company says that they expect increasing demand. And yet Texas RRC completion data isn’t showing an increase in completions, so far
2017-01-09 Bloomberg
Keane Group, a Houston-based provider of fracking services “We have potentially an exponential increase in demand for our services with the rig count that’s increased over the last couple of quarters,” Keane Group Chief Executive Officer James Stewart said in a Jan. 20 telephone interview. “The public equity markets are looking to invest in pure-play completion companies with a footprint and a growth story.”
https://www.bloomberg.com/news/articles/2017-02-09/wall-street-s-love-affair-with-energy-heats-up-as-rigs-roll-out?
https://www.nytimes.com/2017/02/09/business/energy-environment/wind-energy-renewable.html?_r=0
Wind and solar power have been growing a LOT faster than I ever thought they would, which is great, and which is why I am now cautiously optimistic that we some countries at least can turn the fossil fuel corner without crashing HARD, given a little luck and good leadership.
Note that this article says new wind projects in the USA are running at forty percent capacity, which is a LOT better than the twenty five to thirty percent figure most wind critics use.
Hydro can’t do any better, because there are only a few hydro plants that have a water supply sufficient to run at full capacity more than a few hours out of the day.
But later on, when we have more wind and solar power, and enough transmission lines, we might be able to use hydro mostly as back up rather than as peak load power, which will enable us to collectively save even more on the purchase of gas and coal.
One really beautiful point in favor of hydro is than some plants can ramp up in less than a minute’s time. It’s my impression that even old hydro plants that have not had a recent overhaul can ramp up in five to ten minutes.
http://www.cnbc.com/2017/02/09/daniel-yergin-sees-500000-barrel-a-day-rise-in-us-oil-output-in-2017.html
The IEA’s world oil production figures released today…
Global oil supplies plunged nearly 1.5 mb/d in January, with both OPEC and non-OPEC countries producing less. At 96.4 mb/d, world oil production stood 730 kb/d below a year ago, with OPEC posting its first year-on-year (y-o-y) decline since early 2015.
(The free highlights) IEA: https://www.iea.org/oilmarketreport/omrpublic/
WSJ graghic of OPEC’s cuts: https://pbs.twimg.com/media/C4UJYK2WIAIl6Nr.jpg
Some news outlets are saying that Russia has increased their exports and so some question their compliance?
This is a desired narrative. Would not surprise me if the data is all incorrect to support it.
The countries that had boosted production before the agreement and were struggling to maintain it have met their commitments and the others haven’t. I’m guessing Venezuela is just continuing their decline and made no changes to anything as a result of the agreement. Expect Angola to come back first as they have new production available now.
“Some news outlets are saying that Russia has increased their exports and so some question their compliance?”
Russia has increased oil exports by 172 kb/d in January vs. December, but refinery throughput declined by 252 kb/d. I have no data for refined product exports, but it is clear that is has declined.
Hence, total exports of crude+products have most likely also declined.
(All numbers are from Russia’s Energy ministry website)
So.
Who didn’t get an order filled?
It is because of taxation changes. Gasoline excise duty was increased by 5% in January.
Excise taxes affect domestic prices and hence (theoretically) domestic demand for oil products.
Oil product exports were declining since early 2016 (for the first time in several years) as crude exports are now more profitable. This is a result of the “tax manoeuvre”, which had introduced relatively higher export duties on fuel oil (mazut) and other low-grade refined products.
According to the Central Bank Of Russia, in the first 9 months of 2016, refined product exports were down 9.6% vs. the same period of 2015; while crude exports increased by 5.1%.
Russian exports of crude oil and refined products (mb/d)
source: Central Bank Of Russia
http://www.cbr.ru/statistics/?PrtId=svs
It’s true: http://en.angi.ru/news/417-Alexander%20Khurshudov%3A%20It%20has%20been%20a%20really%20hard%20year%85/
Thanks Alex K,
Good summary of key trends in the Russian oil and gas industry in 2016.
Thanks, AlexS,
I write oil and gas analytics during about 15 years. But only several months ago the agency begun to publish English translations.
Allow to present my brief view of the Bakken formation:
http://en.angi.ru/news/553-Contemplations%20over%20the%20sinking%20Bakken/
Alex K
Good analysis. I can’t recall seeing your observation before regarding the decreasing bottom hole pressures causing cement failures leading to water intrusion.
You are correct that Mike and perhaps others here noted some time back that the Bakken reservoir is gas driven and as GOR rises, oil production will decline, and water handling costs will render the wells uneconomic.
Your explanation of water intruding from other formations makes sense, too.
Based on what I know now, looks like you are correct. It will be interesting to see if there ever is a significant increase in production from the Bakken. I just can’t see how, and your indication that few good places are left to drill in the best spots supports that view.
Thanks for sharing your article, and for crediting the work of others.
Jim
Jim, many thanks for your amiable comment…
I expect some additional oil production from Bakken this year by means of new drilling in Dunn and several other counties. Not too many, maybe 100-120 mbopd. But water intrusion process is spreading in all the wells, even if they are idle now. That’s why I think Bakken has entered in the final stage of development.
You said, that I credit the work of others. That is not so.
Firstly, Russia is spending some money to develop the similar formations in Sibiria; in my opinion it is too early to achieve sucсess. It is always useful to study someone else’s mistakes, than make your own.
Secondly, I’m interested in such activity, I like it. It’s my hobby, my enjoyment.
Sorry for my poor English.
http://www.ibtimes.com/political-capital/donald-trumps-labor-secretary-pick-andrew-puzder-owed-millions-ubs-bank-seeks
http://www.cbsnews.com/news/former-adviser-to-three-gop-presidents-questions-trumps-motivations-on-russia/
Read this for insight into why Trump habitually insults and threatens just about anybody, except the Russians.