Happy New Year 2024 (and sorry for the forum being offline some hours) /DM
The business world is full of sometimes conflicting theories about what caused the plunge in oil prices during the past seven months, and how low that price will go. But Goldman Sachs seems to have come up with a unified theory........It began late in the afternoon of Jan. 26 when Gary Cohn, the president of Goldman Sachs Group Inc., told the CNBC television program “Closing Bell” that he expected the average price of oil, now around the $45 range per barrel, to fall further, perhaps as low as $30 per barrel.“My view is we’re probably in the lower, longer view,” said Cohn, a former oil trader. “We could definitely get down to $30.”On the same day, Jeff Currie, Goldman’s chief commodity analyst, issued a research paper saying the demand for oil is slowing down in emerging economies, including China, meaning that the price of crude will stay low for a long time, and may never return to the prices they fetched 10 years ago..............And Bob Dudley, BP’s CEO, said Jan. 21 at the World Economic Forum in Davos, Switzerland, that he expects the price of oil to stagnate at current levels for as long as three years, causing broad job losses and lower investment in the industry....
What to do about the plague of earthquakes is, however, very much an open question in Oklahoma. Last year, 567 quakes of at least 3.0 magnitude rocked a swath of counties from the state capital to the Kansas line, alarming a populace long accustomed to fewer than two quakes a year.
Industry Minister Nasser al-Esawi told a news conference the Nibras complex, which is expected to come online within five to six years, would make his country the largest petrochemical producer in the Middle East.
The resolution requests more information on the company's operational emissions management, the resilience of its assets to climate change, low-carbon energy research and development and investment strategies, relevant key performance indicators and its public policy positions on climate change.Shell said the company will provide the additional disclosures in its next annual report.With global oil prices falling around 60 percent since June, public interest and shareholder groups have been warning energy firms about the financial and climate risks of investment in carbon-intensive fossil fuel projects.ConocoPhillips, which previously announced plans to cut 2015 spending by 20 percent in December, announced Thursday it would slash a further $2 billion in spending. South Africa's Sasol also announced it would shelve an $11 billion gulf coast gas-to-liquid plant.Andrew Logan, an analyst at sustainability-focused investor group Ceres, said such moves by a company to recommend an activist group's resolution is rare and reflects the pressure placed on Shell to address climate change.
The oil industry is dead-serious when it talks about slashing operating costs and capital expenditures. It has to. Preserving cash is suddenly a priority, after years when money was growing on trees.In the US, the cost cutting has reached frenetic levels. One place where it shows up on a weekly basis is the number of rigs actively drilling for oil. And that rig count dropped by 94 to 1,223 in the latest week, as Baker Hughes reported today. A phenomenal plunge, by far the worst ever. In January, the rig count crashed by 276, the most ever for a calendar month. That’s 18.4%! the rig count is now down 386 from its peak on October 10, by nearly a quarter!And yet, it’s still just the beginning...During the financial crisis, the oil rig count fell 60% from peak to trough. If this oil bust plays out the same way, the rig count would drop to 642! The bloodletting in the industry would be enormous.....
LONDON — Chevron said on Friday that it would abandon efforts to find and produce natural gas from shale rock in Poland, in perhaps the biggest setback yet to fledgling efforts to start a European shale oil and gas industry that might help replace the region’s dwindling fuel resources.
Fracking is set to be banned on two-fifths of the land in England being offered for shale gas exploration by the government, according to a Guardian analysis.Such a wide-ranging ban would be a significant blow to the UK’s embryonic fracking industry, which David Cameron and George Osborne have enthusiastically backed....Ministers were forced to accept Labour’s new environmental rules last week to avoid a rebellion by Conservative and LibDem backbench MPs, many of whom are facing opposition to fracking from constituents.
Ratings agency Fitch had already warned about Canada’s magnificent housing bubble that is even more magnificent than the housing bubble in the US that blew up so spectacularly. “High household debt relative to disposable income” – at the time hovering near a record 164% – “has made the market more susceptible to market stresses like unemployment or interest rate increases,” it wrote back in July.On September 30, the Bank of Canada warned about the housing bubble and what an implosion would do to the banks: It’s so enormous and encumbered with so much debt that a “sharp correction in house prices” would pose a risk to the “stability of the financial system” [Is Canada Next? Housing Bubble Threatens “Financial Stability”].Then in early January, oil-and-gas data provider CanOils found that “less than 20%” of the leading 50 Canadian oil and gas companies would be able to sustain their operations long-term with oil at US$50 per barrel (WTI last traded at $47.85). “A significant number of companies with high-debt ratios were particularly vulnerable right now,” it said. “The inevitable write-downs of assets that will accompany the falling oil price could harm companies’ ability to borrow,” and “low share prices” may prevent them from raising more money by issuing equity.In other words, these companies, if the price of oil stays low for a while, are going to lose a lot of money, and the capital markets are going to turn off the spigot just when these companies need that new money the most. Fewer than 20% of them would make it through the bust....
On Wednesday, Statistics Canada rejiggered its job creation and unemployment numbers by slashing the number of jobs created in 2014 to a mere 121,000. December proved to be even drearier than previously reported: a total of 11,300 jobs were lost.Now layoffs have begun to cascade through the Canadian oil patch, with 20,000 to 25,000 job cuts already announced so far. They will trigger additional job cuts in other industries. Plus Target’s 17,500 cuts to hit when it leaves Canada. Alberta’s Labor Minister, Ric McIver, told AM 770 on Saturday that the number of unemployed workers would jump by 22%.....
Citing dangerous conditions, including leaks and explosions, and asking for pay increases, the United Steelworkers Union (USW) called for its largest national strike of oil workers since 1980 on Sunday after talks broke down with Shell Oil, which is leading the industry-wide bargaining effort. After nearly two weeks of negotiations, USW asked about 3,800 workers at nine refineries to walk out after their previous contract expired in what represents about 10 percent of U.S. refining capacity.
Shell to dismantle North Sea oil platforms after four decades
A chapter in the history of oil production in the North Sea is about to end as Royal Dutch Shell seeks approval to decommission its platforms of the Brent field which have produced 10pc of the region’s oil and gas since 1976........As North Sea fields begin to run dry over the next 25 years, it is estimated £40bn will have to be spent removing redundant platforms and pipelines as well as plugging spent oil wells.Around 16bn barrels of oil is thought to be recoverable from the UK’s North Sea but production rates have declined as companies have been forced to drill deeper and invest more capital....
But it’s far from a gloomy scenario. North Sea oil and gas fields offer the UK the chance to create a world-class hub for the safe and responsible decommissioning of platforms and pipelines. We have the potential to develop expertise that can be exported throughout the world, from the Gulf of Mexico to the South China Sea, and create thousands of highly skilled jobs.Over the next 30 years, almost all the 470 offshore installations in the North Sea’s UK Continental Shelf, such as platforms, will need to be decommissioned, according to Oil & Gas UK’s Economic Report 2013. That means expenditure of between £35bn and £50bn, at least as much as the UK government plans to spend on our railway network over the next five years....Decommissioning suggests that work winds down as production dries up. But that’s not the case. The decommissioning of Brent will run for more than 10 years. It will require around 1,000 skilled people working offshore as well as more people working onshore, including many engineers.
Over the years, GOM has developed into an area with an extensive installed operational infrastructure housing more than 3,275 platforms, 669 subsea units including 503 subsea satellite template wells and 6,855 pipelines, according to data compiled by Infield energy analysts....
Staff at the Oklahoma Corporation Commission directed that an injection well operated by SandRidge Energy be shut down Tuesday due to continuing earthquakes in Alfalfa County near the Kansas border.
On Wednesday, the Welsh parliament voted in favor of a measure calling on the government to prevent fracking from taking place “until it is proven to be safe in both an environmental and public health context.”
“The main factors for the lower growth prediction in 2015 are price expectations, a declining number of active rigs in North America, a decrease in drilling permits in the U.S. and a reduction in the 2015 spending plans of international oil companies,” OPEC’s Vienna-based research department said in its monthly market report....U.S. oil supply will increase 820,000 barrels a day in 2015 to 13.64 million a day, about half the gain recorded in 2014, according to the report.
The outlook on oil prices is clear: Oil will crash. Unless prices surge. Definitely one or the other.
Citibank: Oil Could Plunge to $20, and This Might Be 'the End of OPEC'This time is different.http://www.bloomberg.com/news/articles/2015-02-09/citi-oil-could-plunge-to-20-and-this-might-be-the-end-of-opec-
"It looks exceedingly unlikely for OPEC to return to its old way of doing business," Morse wrote. "While many analysts have seen in past market crises 'the end of OPEC,' this time around might well be different," Morse said.
Drillers Take Second Crack at Fracking Old Wells to Cut CostBeset by falling prices, the oil industry is looking at about 50,000 existing wells in the U.S. that may be candidates for a second wave of fracking, using techniques that didn’t exist when they were first drilled.New wells can cost as much as $8 million, while re-fracking costs about $2 million, significant savings when the price of crude is hovering close to $50 a barrel, according to Halliburton Co., the world’s biggest provider of hydraulic fracturing services.While re-fracking offered mixed results in the past, earning it the nickname “pump and pray,” the oil crash is forcing companies to pursue new technologies to produce oil more cheaply. Analyzing reams of data from older wells has become a key piece of the puzzle, identifying the best candidates for re-fracking instead of picking them simply at random, said Hans-Christian Freitag, vice president of integrated technology at Baker Hughes Inc.“You want to talk about the next step to increasing production without increasing costs?” said Carl Larry, Houston-based director of oil and natural gas at Frost & Sullivan, a consulting firm. “Re-fracking looks great.”.....
.The chart shows that demand exceeded supply through the 4th quarter of 2013. That’s why oil prices were high in much of 2013 and in the first half of 2014. Supply has exceeded demand for all of 2014. That’s why oil prices fell (a lag before the market reacts to a change in supply-demand balance is common).The difference between supply and demand was greatest in the 2nd quarter of 2014 (1.27 mmbpd supply surplus) and then it dropped to 0.84 and 0.81 mmbpd in the 3rd and 4th quarters, respectively. Better but still too much of a supply surplus.EIA publishes monthly supply and demand data, and a forecast. The second chart incorporates that data.IEA World Demand Price ReboundWorld monthly liquids supply, demand and 2015 forecast. Data to the right of the vertical dashed line is an estimate. Source: EIAThis chart shows that production fell from its high in October 2014 but so has demand. The difference between supply and demand in October was a 1.19 mmbpd supply surplus. It fell to 0.68 mmbpd in December but has increased to 0.97 mmbpd in January 2015 (world demand usually falls in the first part of the year).That is better but still too much of a supply surplus. EIA data says the U.S. production continues to increase as expected but not part of a reason for an oil price bottom or rebound.I don’t have a lot of confidence in forecasts but let’s understand what EIA’s forecast means. It suggests that supply and demand will be almost in balance in February 2015 but that the supply surplus will return in force in March. After that, the gap will narrow and by September 2015, balance will return and remain through the end of the year.That is when oil prices may start to rebound.....
The World’s Top 200 Public Fossil Fuel Companies Ranked by the Carbon Content of their Fossil Fuel ReservesThe Carbon Underground 200 identifies the top 100 public coal companies globally and the top 100 public oil and gas companies globally, ranked by the potential carbon emissions content of their reported reserves. The reserves of these companies total 555 gigatons (Gt) of potential CO2 emissions, almost five times more than can be burned for the world to have an 80% chance of limiting global temperature rise to 2°C (3.6° F).
The number of oil rigs drilling new wells in the U.S. has collapsed at an unprecedented rate. The weekly number has gathered a huge following as investors try to figure out when the crash in oil prices has reached its bottom. Strangely, the number may be irrelevant.
The fracking-for-oil boom started in 2005, collapsed by 60% during the Financial Crisis when money ran out, but got going in earnest after the Fed had begun spreading its newly created money around the land. From the trough in May 2009 to its peak in October 2014, rigs drilling for oil soared from 180 to 1,609: multiplied by a factor of 9 in five years! And oil production soared, to reach 9.2 million barrels a day in January....On the drilling side, the bust began in mid-October last year, after the price had been plunging for over three months. At that time, 1,609 rigs were actively drilling for oil, according to Baker Hughes. Since then, week after week, drillers were idling rigs as fast as they could.In the latest reporting week, drillers idled another 84 rigs, the second biggest weekly cut ever, after idling 94 rigs two weeks earlier. Only 1056 rigs are still drilling for oil, down 443 for the seven reporting weeks so far this year and down 553 – or 34%! – from the peak in October.Never before has the rig count plunged this fast this far:
The natural gas fiasco has shown that a price that falls below the cost of production is no incentive to cut production for the industry as a whole, as long as it gets new money to drill into the ground. The Fed’s boundless liquidity and its interest-rate repression have seen to it. But the emphasis is on producing more with less – and paper over the losses.The number of rigs drilling for natural gas in the last reporting week fell by 14 to 300, the lowest since May 1993, having collapsed by 81% since 2008:...But natural gas production is still soaring from record to record. And the price destruction continues to this day.
Small earthquakes shaking Oklahoma and southern Kansas daily and linked to energy drilling are dramatically increasing the chance of bigger and dangerous quakes, federal research indicates.
Germany has proposed a draft law that would allow commercial shale gas fracking at depths of over 3,000 metres, overturning a de facto moratorium that has been in place since the start of the decade
Apache Corp.’s decision to sharply curb the growth of its oil output this year suggests that the major U.S. shale producers who helped create a global oil glut will be able to reduce supplies faster than expected.One of the biggest operators in Texas’s prolific Permian basin, Apache will cut the number of rigs it uses to drill for oil by 70 percent by the end of the month, the company said Thursday in a statement. That’s going to slow output enough to keep production flat for the year, compared with the Houston-based company’s November forecast for growth of as much as 12 percent....Apache’s production cuts underscore how completely oil markets have changed amid an unexpected U.S. energy renaissance. Now, instead of Saudi Arabia and its OPEC allies controlling world prices, the pressure is on U.S. drillers such as Apache to rebalance the market.
....With total operating revenues of nearly $6 billion in the fourth quarter 2014, Devon isn’t the largest oil company out there, but it’s one of the larger players in the US shale revolution.... CEO John Richels explained the phenomenon in the press release:We expect to sustain operational momentum in 2015 with the significant improvements we have seen in our completion designs and a capital program focused on development drilling. With strong results from our enhanced completions and a focus on core development areas, we expect growth in oil production to be between 20 and 25 percent in 2015, even with a projected reduction of approximately 20 percent in E&P capital spending compared to 2014.So, despite slashing the capital expenditure budget by 20%, the company’s oil production in 2015 would grow 20% to 25%....Devon will drill $1.1 billion in capital expenditures into the ground to achieve its oil production goals. It will use fewer rigs but accomplish more with them: its drill times, thanks to innovation, have improved by 47% over the last three years. And these rigs will be focused “almost exclusively” in DeWitt County, its most productive play in the Eagle Ford shale.Other drillers are doing the same. Innovation, design improvements, efficiencies, and a relentless focus on the most productive plays will see to it that production continues to rise, despite the plunging rig count, despite the evaporating capital expenditures, despite the layoffs.They will lose money. They have a lot of debt because the fracking boom was funded by debt. To stay alive, they must meet their interest costs. But if they slow down drilling, and production tapers off in line with the steep decline rates of fracked wells, their interest costs might eat up 50% or more of their shrinking operating profits, and the risk of default would soar – turning off the money-spigot entirely. Default might be next.This is the brutal irony: drillers are hoping that rising production achieved with greater efficiencies allows them to meet their interest costs; but rising production pressures the price of oil to a level that may not be survivable long-term for many of them. They can lose money, burn through cash, and keep themselves above water through asset sales for only so long. And this is the terrible fracking treadmill they’ve all gotten on and now can’t get off.
How Much Crude Oil Do You Consume On A Daily Basis?Oil. The commodity. We know what it’s worth – at least we thought we did – but what does a barrel of the black stuff get you in real life? Before we get theoretical, let’s first consider how much oil you use.....
...on Monday Royal Dutch Shell announced it was shelving plans to build a new tar sands mine in northern Alberta — the largest such project to be deferred....Tar sands are extremely GHG intensive, and the shelving of the Pierre River project along with two other tar sands endeavors — Total’s Joslyn North and Statoil’s Corner Project — has helped avoid the emissions of 2.8 billion metric tons of carbon dioxide, which is equivalent to stopping the construction of 18 new coal plants with a lifespan of four decades
When the Oklahoma Geological Survey (OGS) did cautiously agree with other scientists about such a link, emails obtained by EnergyWire show the state seismologist was called into meetings with his boss, University of Oklahoma President David Boren, and oil executives "concerned" about the acknowledgement.One of the oilmen was Continental Resources Chairman Harold Hamm, a leading donor to the university.The seismologist, Austin Holland, told a senior U.S. Geological Survey official that as far back as 2010, OGS officials believed an earthquake swarm near Oklahoma City might have been triggered by the "Hunton dewatering," an oil and gas project east of the city."Since early 2010 we have recognized the potential for the Jones earthquake swarm to be due to the Hunton dewatering," Holland wrote to USGS science adviser Bill Leith in 2013. "But until we can demonstrate that scientifically or not we were not going to discuss that publicly."Instead, he pointed to changing lake levels.And when USGS officials linked a "remarkable" surge in earthquakes in Oklahoma and other states to drilling waste disposal in 2012, OGS criticized their "rush to judgment."
The U.S. Securities and Exchange Commission requires drillers to calculate the value of their oil reserves every year using average prices from the first trading days in each of the previous 12 months. Because oil didn’t start its freefall to about $45 till after the OPEC meeting in late November, companies in their latest regulatory filings used $95 a barrel to figure out how much oil they could profitably produce and what it’s worth. Of the 12 days that went into the fourth-quarter average, crude was above $90 a barrel on 10 of them.So Continental Resources Inc., led by billionaire Harold Hamm, reported last month that the present value of its oil and gas operations increased 13 percent last year to $22.8 billion. For Devon Energy Corp., a pioneer of hydraulic fracturing, it jumped 31 percent to $27.9 billion.This year tells a different story. The average price on the first trading days of January, February and March was $51.28 a barrel. That means a lot of pain -- and writedowns -- are in store when drillers’ first-quarter numbers are announced in April and May.
Add to this potential nightmare scenario another little fact: Shell has garnered a well-deserved reputation as “the company with the spottiest Arctic record.” In September 2012, it initiated exploration drilling in U.S. Arctic waters with a conditional permit from the Obama administration, only to end a disastrous year in which one of its two drill rigs, the Kulluk, was grounded in the Gulf of Alaska on New Year’s Eve. The other ship, Noble Discoverer, suffered damage after catching fire, while both were fined by the Environmental Protection Agency for violating the Clean Air Act, and the contractor Noble Drilling pleaded guilty in 2014 to all eight felony charges leveled against it for environmental violations and agreed to ante up $12.2 million in fines and community service payments. Because of the damage to its rigs, Shell was forced to give up its 2013 drilling plans. A court ruling in January 2014 in favor of local Iñupiat tribes and environmentalists forced the company not to drill that summer either.Since then, the price of oil has plunged, sending a shock wave across the oil industry and deep-sixing all sorts of prospective plans planet-wide to drill in Arctic waters: Norway’s Statoil shelved its 2015 drilling plan in the Barents Sea off that country’s northern coast and handed back the three leases it had purchased in the Baffin Bay off the west coast of Greenland. Chevron put its plan to drill in Canada’s Beaufort Sea on indefinite hold. Following the Ukraine crisis and American sanctions on Russia, ExxonMobil wasprohibited from working with the oil company Rosneft on a joint plan to drill in the Kara Sea in the Russian Arctic. Even had those sanctions not been in place, the low price of oil would have made such exploration a far less appetizing prospect for the moment.“It is up to Shell then to keep the oil industry’s Arctic dreams alive,” one journalist suggested and indeed, on January 29th, that company announced that, after a two-year hiatus, it would drill this summer in the Chukchi Sea. Two weeks later, the Obama administration issued its final supplemental environmental impact statement on the site where the drilling would take place, the controversial Chukchi Lease Sale 193, bringing Shell’s plan one step closer to reality.
