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| PEAK OIL AND ENERGY CRISIS NEWS ARCHIVES 2015 | ||
| To Go Direct To Current Energy News Reports - Click Here To Go Direct To 2015 News Reports Archive - Click Here | ||
| Peak Oil and Energy Crisis News Current Earlier Peak Oil And Energy Crisis News |
"Ten years ago you couldn’t avoid it
if you tried. Books by James Howard Kunstler, Richard Heinberg, Kenneth Deffeyes, and others were warning that worldwide oil
production would inevitably peak soon, based on analysis similar to that of celebrated
geologist M. King Hubbert, who predicted, in 1956, that U.S. oil production would peak between 1965
and 1970. Darn if he wasn’t right. With the presumed world peak in oil production,
national economies hooked on injecting oil straight into their largest arteries then
began to decline. Peak oil doesn’t mean oil would disappear – half of it would
still be left – just that less of it would be produced each year going forward, and
shell-shocked economies would fall into a permanent state of recession as consumers
battled, Mad Max-like, for every last barrel. Except “events never play out the way
one expects,” said James Murray, a speaker at a session entitled “Is Peak Oil Dead and What Does It Mean for Climate Change?” at
the AGU Fall Meeting in the City by the Bay.
Technology came to the rescue, in the forms of fracking and three-dimensional directional
drilling. U.S. oil production soared upward 54 percent in just five years, from 3.3
billion barrels in 2009 to 5.1 billion barrels in 2014. Although world oil production
increased by only 8.5 percent in that time, it was enough to keep it from peaking. So is
peak oil now an outdated concept, or does it still lie in our future? The latter, most
experts at the AGU meeting were saying, while admitting they hadn’t foreseen the
technological revolution that has allowed U.S. oil and gas production to soar over the
past decade. Those resources are finite, and the cost of extracting them increases once
the low-hanging fruit are picked. Oil has dropped to about $35 per barrel because oil
producers, hungry for unconventional oil from tar sands and gas from shale, overproduced.
Yet they’re still not making money, said James Murray from the University of Washington. Shale oil – what
the industry calls “tight shale” – “is profitable for drillers, hotels
and restaurants, but not for investors,” he said. Cash flow in this sector was $10
billion in the red in 2014, even as yet more money is plowed into it from, Murray thinks,
investors desperate for yields as the Federal Reserve keeps inerest rates extremely low. Murray
said the break-even price for conventional oil is $20 per barrel, but $75 per barrel for
tight oil. So oil companies are drawing back: U.S.
oil production seems to have peaked in July 2015, and even the Eagle Ford shale basin in
Texas and the Bakken field in North Dakota are cutting back. “The world may be close
to peak oil production,” Murray concluded....David Hughes, president of Global Sustainability Research, Inc. in
Calgary, pointed out that “the remaining reserves [of fossil fuels] are large, but of
lower quality and require more energy to produce.” He
estimated that more than 90 percent of what are known in the field as 'unconventional
sources' – shale gas and oil and tar sands oil – 'are not recoverable.'" |
|
| Contact | 'We need a new way of thinking' - Consciousness Based Education |
| PEAK OIL AND ENERGY CRISIS NEWSBITES |
2015 - 2014 - 2013 - 2012 - 2011 - 2010 - 2009 - 2008 - 2007 |
| 2015 |
"Oil
explorers shut down more rigs in U.S. fields to finish out the worst year for drilling
cutbacks in almost three decades. Rigs targeting crude in the U.S. fell by 2 to 536 in the
past week, Baker Hughes Inc. said on its website Thursday. Natural gas rigs were unchanged
at 162, bringing the total of working rigs to 698. Drillers searching for oil idled 59
percent of their rig fleet this year, the steepest annual cut since at least 1988. The
downward slide in working rigs probably will continue into the new year, crimping output
from shale fields by at least 400,000 barrels a day, Andrew Cosgrove and William Foiles,
analysts at Bloomberg Intelligence, said in a Dec. 28 report. Rigs designed to drill straight down into traditional fields have been hit
harder than those capable of boring sideways through shale, Baker Hughes’ data
showed. Vertical rigs are taking a bigger hit “as lower oil prices pressure
development of legacy fields, mainly in Texas,” the analysts wrote. Two-thirds of oil
rigs in the U.S. have been parked since drilling peaked in October 2014. Growing supplies
of crude outpaced demand, deflating prices below $40 a barrel and forcing severe spending
cutbacks throughout the industry. U.S. crude dipped below $35 -- its lowest price in 11
1/2 years -- earlier this month. U.S. oil production fell to a low this year of 9.1
million barrels a day with the decline in drilling, but rose to 9.2 million as of Dec.
25....Demand for the costliest rigs -- those searching in deep seas for crude -- is at its
lowest since a 2010 federal moratorium that shut most Gulf of Mexico exploration after the
oil spill disaster at BP Plc’s Macondo well." |
"Uranium
has fallen from around $US152 per pound in 2007 to well under $US60 since the global
financial crisis, with a low just above $US28 in May 2014. This year, it
peaked around $US40 in March. It is currently trading at $US35.35, which is just
off the year's lows. Mr Schembri said that the price
would return to $US40, rising to $US50 in the longer term. At these price levels, existing
mines would remain viable and new ones would open, he said. ... Toro Energy, which
hopes to develop the Wiluna uranium desposit in Western Australia, was
upbeat about the future in its 2015 annual report. "Market sentiment
continues to improve as emerging economies embrace low-emission nuclear power," said
Toro. "Demand increases of between 15 per cent and 22 per cent by 2020 and 37 per
cent to 58 per cent by 2025 are expected." Long-term prices for a pound of uranium
were around $US44-$US45, the company said, with China, India and Japan the key
drivers of demand. Globally, said Toro, there
were 442 reactors around the world producing 380 gigawatts of power. In 2025,
this is expected to increase to 512 reactors producing 471 gigawatts. In 2030,
there are expected to be 576 reactors producing 560 gigawatts. Australia, which
produces 11 per cent of the world's uranium and is the world's third-largest producer
after Canada and Kazakhstan, currently
has three operating uranium mines: Ranger in the Northern Territory, Olympic Dam (the
world's largest uranium deposit) in South Australia and Four Mile in South
Australia. Australian-listed uranium miners and explorers include Energy Resources of
Australia, BHP Billiton, Rio Tinto, Paladin Energy, and Mintails. There are a
numerous proposals for new Australian mines, including four well-advanced
proposals in Western Australia alone: Lake Way (Wiluna), which Toro Energy hopes to
mine; Yeelirrie and Kintyre, which Canadian uranium miner Cameco wishes to
develop; and Mulga Rock, which Vimy Resources has an interest in. However, the new mines
– which could create up to 1300 long-term jobs and be worth $1 billion a year to
Western Australia by 2020 – have still not been formally approved and are
dependent on the uranium price improving as forecast." |
"It
is misleading to say the world sits on excess stocks of 3 bn barrels of oil, 2.7 bn of
which are already needed in both crude and product stocks for a smooth operation of the
refining and distribution system. Most of the stock
build since mid 2014 seems to be related to US light tight oil which refineries could not
accommodate due to their original designs." |
"In 2015, the fracking outfits that dot
America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope
with the 50 percent price plunge, they laid off thousands of roughnecks, focused their
rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil
they could out of every well. Those efforts, to the surprise of many observers, largely
succeeded. As of this month, U.S. oil output remained within 4 percent of a 43-year high.
The problem? Oil’s no longer at $50. It now trades near $35. For an industry that
already was pushing its cost-cutting efforts to the limits, the new declines are a
devastating blow. These drillers are “not set up
to survive oil in the $30s,” said R.T. Dukes, a senior upstream analyst for Wood
Mackenzie Ltd. in Houston. The Energy Information Administration now predicts that
companies operating in U.S. shale formations will cut production by a record 570,000
barrels a day in 2016. That’s precisely the
kind of capitulation that OPEC is seeking as it floods the world with oil, depressing
prices and pressuring the world’s high-cost producers. It’s a high-risk
strategy, one whose success will ultimately hinge on whether shale drillers drop out
before the financial pain within OPEC nations themselves becomes too great..... Even a
plunge in U.S. output may not be enough to drain a global supply glut that has almost 3
billion barrels of oil and products like gasoline in developed countries’ storage
tanks, according to the International Energy Agency. The world will likely be oversupplied
by about 1 million barrels a day through the first half of next year before balancing,
Jefferies LLC analysts including Jason Gammel said in a Dec. 18 research note." |
"With oil prices touching decade lows,
misery pervading the oil and gas sector, and 2016 just around the corner, forecasters are
out in force with their predictions – and by and large calling for a long, low
oil-price run. After missing the signs that led to oil’s crash to US$35 a barrel, the
oracles now believe nearly free oil will keep rushing into a saturated global market.
Goldman Sachs analysts are out in front, as they often are, predicting prices could touch
US$20 a barrel in 2016 — and potentially stay low for the next 15 years. Scotiabank
sees West Texas Intermediate oil averaging “no more than US$40-45 per barrel for 2016
and US$45-50 for 2017.” Suncor Energy Inc., as part of its efforts to ensnare
competitor Canadian Oil Sands at the bottom of the cycle, says “oil price futures
suggest we won’t see US$55 per barrel until at least 2020.” Really? The fact is
that oil – and gas — forecasting is a crap shoot, that too many people become
invested in their own views to see contrarian trends, and that reality changes all the
time. That’s why everyone missed the current crash, and why predictions that oil is
down and out should be regarded with skepticism. Corporations are adjusting their plans to
the “lower for longer” oil environment, based on two top assumptions: Growing
U.S. tight oil has ushered an era of oil abundance, and the OPEC cartel has unraveled,
leaving oil prices adrift at a time the market is so obsessed with a 1.5 per cent world supply surplus it has pushed down oil prices
by more than 60 per cent." |
"After
37 miserable years of the so-called Islamic Republic (IR) and more than $1.6 trillion of
oil income, Iran's oil and gas infrastructure has become ineffective and is suffering from
poor management and chronic corruption. As a result, the well-respected healthy national
oil company, with a 6.3 million b/d crude production prior to the revolution, plunged to a
near bankrupt industry with at best a little above 3 million b/d production. Iranian
output has reached a plateau for some time now, and production has been on the wane by
over 200,000 barrels/day/per year for the past decade. Pressure dropping in reservoirs and
continuous year-to-year decline in production appear to have been triggered by long
periods of technical constraints on operations and by natural aging of the Iranian fields.
The lack of regular maintenance and application of new technology, and particularly
extensive neglect of the fields in the last several years under sanctions, have resulted
in further damage to the Iranian reservoirs. Geologically, high degradation of reservoirs
can take place while wells have been shut-in or declining in production. This condition is
exacerbated if gas injection has not been performed on reservoirs for a while. According to U.S. EIA, the National Iranian Oil Company (NIOC) needs to
inject at least 260 million cubic meters of gas daily to its matured oil fields. But in
recent years, NIOC has never had the capability to inject more than half of this volume
per day, and recently, since the production of gas is hardly even equal to domestic
consumption, no gas remains to be injected. Therefore,
EIA concludes that old Iranian oil fields are naturally losing pressure, which causes 8 to
13 percent oil production to deplete each year.
Currently, the majority of power plants in the country use liquid fuel due to scarcity of
gas, which leads to terrible air pollution. ...Investors that are planning to make deals
with the Islamic Republic should be aware that they still face a lot of uncertainty and
risk with the possibility of the return of sanctions looming for years to come. Oil
companies planning to do business in Iran should be wary of the problem of chronic
corruption in the governing system of the country. There are bureaucratic attitudes that
dominate the business environment in Iran. So long as
this ill-managed regime is in control, investments in the Iranian oil industry, along with
opportunities they might provide, could also be a great risk to prospective contractors.
Further, the present governing system in Iran certainly raises questions over the security
of investments by major oil companies in Iran. Therefore, the question is, can NIOC
deliver as its officials claim? The fact is, the capabilities of Iran's petroleum industry
fall short of said rhetoric." |
"Opec
said demand for its crude will slide to 2020, though less steeply than previously
expected, as rival supplies continue to grow. The organization will need to pump 30.7
million barrels a day by the end of the decade, Opec said on Wednesday in its annual World
Oil Outlook. That’s 1.7 million barrels more than projected a year ago, and 1 million
less than the group pumped in November. The forecast underlines the struggle faced by the
organization of petroleum exporting countries as it seeks to defend market share against a
surge in output from rivals such as the US and Russia. While Opec is slowly taming the expansion of competitors, the collapse in
oil prices means the financial costs of its strategy are immense. Brent crude futures
touched an 11-year low of $36.04 a barrel on 21 December. “Although lower oil prices
continue to foster some demand growth, their impact seems to be limited by other
factors,” the group said. “The removal of subsidies and price controls on
petroleum products in some countries and ongoing efficiency improvements will all likely
continue restricting oil demand growth.” The 30.7 million barrels of daily output
needed from 12 of Opec’s members in 2020 is about 300,000 a day less than required
this year, when it repeatedly pumped above its production target before scrapping the
limit altogether earlier this month. The supply total excludes Indonesia, which formally
rejoined Opec on 4 December. Opec assumes that prices will rise to average $80 a barrel in
nominal terms in 2020, and $70.70 in real terms. .... The group cut forecasts for non-Opec
supply in 2020 by 1 million barrels a day to 60.2 million a day as “market
instability” leads to reductions in spending and drilling. Non-Opec supply will still grow by 2.8 million barrels a day this
decade, including 800,000 barrels of additional US shale oil. Opec said the outlook, which
incorporated some data set in the middle of the year, was “clouded by
uncertainties.” The report also forecasts supply and demand through to 2040. Non-Opec
supply will contract in the last two decades of the period to 59.7 million barrels a day,
the group said. As a result, demand for Opec’s crude will rise to 40.7 million
barrels a day, expanding its market share to 37%. Almost
$10 trillion, in 2014 terms, will need to be invested in the oil industry through to 2040
to develop the required supplies, with $7.2 trillion of this in exploration and
production." |
"Petroleos
Mexicanos plans to cut jobs next year after posting a record loss and seeing oil
production fall to a 25-year low. The state-owned oil producer is set to announce the
staff reduction as part of the plan to restructure the company and to synchronize itself
to industry standards, interim Chief Financial Officer Rodolfo Campos said in a phone
interview Wednesday. Mexico is opening its energy industry to foreign companies for the
first time in decades to help stem a persistent decline in production at a time when
falling prices are already reducing income. Oil output at Pemex in 2015 will drop to the
lowest since at least 1990 as a series of accidents and budget cuts curbed supply. The company is nearing $100 billion in debt and recently posted a record
loss of about $10.2 billion in the third quarter....Pemex’s
output is set to drop 6.7 percent from 2014, falling for an eleventh straight year.
Production is more than 100,000 barrels a day below the original 2.4 million forecast for
the year by Chief Executive Officer Emilio Lozoya." |
"According
to Inside EVs, a
website that reports on EV sales, through the first 11 months of 2014 there were 110,011
EVs sold in the U.S. This year, sales in the first 11 months have fallen to 102,898
vehicles — a decline of 6.5%. Annual EV sales did grow rapidly from 2011 to 2013, but
haven’t grown much beyond 2013's 97,507 vehicles sold. But 100,000 vehicles per year is nothing to sneeze at, right? Well,
let’s compare that against overall vehicle sales. According to Automotive News, the first 11 months of
2014 saw overall vehicle sales in the U.S. of 15,015,434 automobiles (cars, light-duty
trucks, and SUVs). That means that electric cars sales accounted for about 0.7% of the
market. But what’s much more revealing is that overall vehicle sales in the U.S. this
year through November were 15,826,634 automobiles. Thus, in one year the number of cars
sold in the U.S. has increased by 811,200 vehicles. That’s a one-year increase
that’s more than double the total EV sales of the past 5 years — and almost all
of those vehicles run on petroleum." |
"Security
researcher Brian Wallace was on the trail of hackers who had snatched a California
university's housing files when he stumbled into a larger nightmare: Cyberattackers had
opened a pathway into the networks running the United States power grid. Digital clues
pointed to Iranian hackers. And Wallace found that
they had already taken passwords, as well as engineering drawings of dozens of power
plants, at least one with the title "Mission Critical." The drawings were so
detailed that experts say skilled attackers could have used them, along with other tools
and malicious code, to knock out electricity flowing to millions of homes. Wallace was
astonished. But this breach, The Associated Press has found, was not unique. About a dozen
times in the last decade, sophisticated foreign hackers have gained enough remote access
to control the operations networks that keep the lights on, according to top experts who
spoke only on condition of anonymity due to the sensitive nature of the subject matter.
The public almost never learns the details about these types of attacks — they're
rarer but also more intricate and potentially dangerous than data theft. Information about
the government's response to these hacks is often protected and sometimes classified; many
are never even reported to the government. These intrusions have not caused the kind of
cascading blackouts that are feared by the intelligence community. But so many attackers
have stowed away in the largely investor-owned systems that run the U.S. electric grid
that experts say they likely have the capability to strike at will. And that's what
worries Wallace and other cybersecurity experts most. "If the geopolitical situation
changes and Iran wants to target these facilities, if they have this kind of information
it will make it a lot easier," said Robert M. Lee, a former U.S. Air Force
cyberwarfare operations officer. "It will also help them stay quiet and stealthy
inside." In 2012 and 2013, in well-publicized attacks, Russian hackers successfully
sent and received encrypted commands to U.S. public utilities and power generators; some
private firms concluded this was an effort to position interlopers to act in the event of
a political crisis. And the Department of Homeland Security announced about a year ago
that a separate hacking campaign, believed by some private firms to have Russian origins,
had injected software with malware that allowed the attackers to spy on U.S. energy
companies. "You want to be stealth," said Lillian Ablon, a cybersecurity expert
at the RAND Corporation. "That's the ultimate power, because when you need to do
something you are already in place."" |
| "China’s coal consumption
has been falling for two years and may never recover as the moment of "peak
coal" draws closer, the International Energy Agency (IEA) has said. The energy
watchdog has slashed its 2020 forecast for global coal demand by 500m tonnes, warning that
the industry risks unstoppable decline as renewable technologies and tougher climate laws
shatter previous assumptions. In poignant symbolism,
the peak coal report came as miners worked their final shift at Britain’s last surviving deep
coal mine at Kellingley in North Yorkshire, closing the chapter on the British industrial revolution. Mines around
the world are at increasing risk as prices slump to 12-year lows of $38 a tonne, and the
super-cycle gives way to a pervasive glut. The IEA said the $40bn Galilee Basin project in
Australia may never become operational. There is simply not enough demand, even for cheap,
open-cast coal." International Energy Agency sees 'peak coal' as demand for fossil fuel crumbles in China Telegraph, 19 December 2015 |
"Inflation will fall back to levels not
seen since before the Second World War across the advanced world this year. The past 12
months are set to mark the first year since 1932 that inflation has fallen below 2pc in
every economy in the G7, according to City analysts, reflecting the drag brought on by a
slump in commodity prices. A dramatic oil price rout
beginning in the summer of 2014 has pulled down price growth across the group. Not since the Great Depression has price growth been so weak, according
to historical data compiled by economists Carmen Reinhart and Kenneth Rogoff." |
"Ten years ago you couldn’t avoid it
if you tried. Books by James Howard Kunstler, Richard Heinberg, Kenneth Deffeyes, and others were warning that worldwide oil
production would inevitably peak soon, based on analysis similar to that of celebrated
geologist M. King Hubbert, who predicted, in 1956, that U.S. oil production would peak between 1965
and 1970. Darn if he wasn’t right. With the presumed world peak in oil production,
national economies hooked on injecting oil straight into their largest arteries then
began to decline. Peak oil doesn’t mean oil would disappear – half of it would
still be left – just that less of it would be produced each year going forward, and
shell-shocked economies would fall into a permanent state of recession as consumers
battled, Mad Max-like, for every last barrel. Except “events never play out the way
one expects,” said James Murray, a speaker at a session entitled “Is Peak Oil Dead and What Does It Mean for Climate Change?” at
the AGU Fall Meeting in the City by the Bay.
Technology came to the rescue, in the forms of fracking and three-dimensional directional
drilling. U.S. oil production soared upward 54 percent in just five years, from 3.3
billion barrels in 2009 to 5.1 billion barrels in 2014. Although world oil production
increased by only 8.5 percent in that time, it was enough to keep it from peaking. So is
peak oil now an outdated concept, or does it still lie in our future? The latter, most
experts at the AGU meeting were saying, while admitting they hadn’t foreseen the
technological revolution that has allowed U.S. oil and gas production to soar over the
past decade. Those resources are finite, and the cost of extracting them increases once
the low-hanging fruit are picked. Oil has dropped to about $35 per barrel because oil
producers, hungry for unconventional oil from tar sands and gas from shale, overproduced.
Yet they’re still not making money, said James Murray from the University of Washington. Shale oil – what
the industry calls “tight shale” – “is profitable for drillers, hotels
and restaurants, but not for investors,” he said. Cash flow in this sector was $10
billion in the red in 2014, even as yet more money is plowed into it from, Murray thinks,
investors desperate for yields as the Federal Reserve keeps inerest rates extremely low. Murray
said the break-even price for conventional oil is $20 per barrel, but $75 per barrel for
tight oil. So oil companies are drawing back: U.S.
oil production seems to have peaked in July 2015, and even the Eagle Ford shale basin in
Texas and the Bakken field in North Dakota are cutting back. “The world may be close
to peak oil production,” Murray concluded....David Hughes, president of Global Sustainability Research, Inc. in
Calgary, pointed out that “the remaining reserves [of fossil fuels] are large, but of
lower quality and require more energy to produce.” He
estimated that more than 90 percent of what are known in the field as 'unconventional
sources' – shale gas and oil and tar sands oil – 'are not recoverable.'" |
"Russian
President Vladimir Putin said on Thursday the $50 per barrel price for oil factored in the
2016 budget was too optimistic and the government needed to make adjustments. "We had calculated next year's budget based on $50 per barrel. This
is a very optimistic valuation today. Now it's already $38. That's why we will have to
correct something there," Putin said at his annual news conference. He said the peak
of the economic crisis in Russia had passed but the government's forecasts for 0.7 percent
economic growth in 2016 and 1.9 percent growth in 2017 were based on assumptions the oil
price would be $50 per barrel." |
"40,000
Alberta oil jobs
lost since the price of petroleum plummeted late last year. According to Petroleum
Labour Market Information, 185,000 will have been lost by spring, as a result of the
market crash.... Between January and June, suicides spiked
30% compared to 2014. At this rate, 654 Albertans will have killed themselves this
year, an unprecedented number for a region that already had the second highest suicide
rates amongst the 10 provinces. Only Saskatchewan, another energy-dependent region, has a
higher rate, and it’s seen 19% more suicides this year. In a widely circulated story
this week, the CBC
correlated Alberta’s suicides with economic recession." |
"Turkmenistan
on Sunday started work on its part of a natural gas pipeline to Afghanistan, Pakistan and India (TAPI), a $10 billion project designed to reduce its dependence on gas sales to
Russia and China. The ground-breaking ceremony took place near the city of Mary in the
southeastern part of the central Asian country, close to the giant Galkynysh gas field
which is meant to provide gas for the 1,814-kilometre (1,127-mile) link. "By December
2019, the pipeline will be completed. It will have a capacity of 33 billion cubic
metres," Turkmen President Kurbanguly Berdymukhamedov said at the ceremony also
attended by Afghan President Ashraf Ghani, Pakistan
Prime Minister Nawaz Sharif and Indian Vice President Hamid Ansari. Although it is backed
by hydrocarbon resources, the TAPI project faces several risks, such as the deteriorating
security situation in Afghanistan and lack of clarity about its financing. TAPI's
construction is led by state gas firm Turkmengas and none of global energy majors have so
far committed to the project that will cost as much as a third of Turkmenistan's total
2016 budget. The only company known to be in talks on TAPI currently is Dubai-based Dragon
Oil which produces oil off Turkmenistan's Caspian coast. Gazprom was also looking to join
the project in the past." |
"The oil price has fallen to a new
seven-year low after the International Energy Agency (IEA) forecast a slowdown in growth
in demand for oil. The price of Brent crude oil fell below $39 a barrel at one
point, its lowest since December 2008. The IEA said demand in the current quarter was
growing by 1.3 million barrels a day, down from 2.2 million barrels in the previous
quarter. The IEA predicts that will slip back to 1.2 million
barrels a day next year. The price of Brent crude fell to $38.90 a barrel at one point,
before recovering slightly to $39.13 - still down 60 cents in the trading session. US
crude oil also fell, down 50 cents to $36.12 a barrel. Oil prices are down more than 10%
over the week. The trigger was a meeting of oil producers' cartel Opec late last week,
which broke up in disarray as the member countries failed to agree to put a lid on
production. Opec producers pumped more oil in November than in any month since late 2008,
almost 32 million barrels per day. That comes at a time when the world's economic growth
is slowing, blunting demand for raw materials. The IEA said that although consumption was
likely to have peaked in the third quarter, demand growth of 1.2 million barrels a day was
still healthy. Earlier this week, the US Energy
Information Administration forecast that US shale oil production, now a major source of
oil supply, would fall in January for the ninth month in a row. Sustained falls in output could help to stabilise the price of oil,
although some market forecasters suggest the price could continue to fall to as low as $20
a barrel." |
"Russia's
Gazprom (GAZP.MM)
has held talks with a small Siberian energy firm on using its gas to fill a pipeline to
China if the state-controlled giant's own projects to produce and transport the gas are
not ready in time, industry sources said. As part of
Russia's strategic shift eastwards prompted by rows with the West, Gazprom agreed last
year to start pipeline gas supplies to China in
2018-2019, raising them gradually after that to make China one of the biggest customers
for Russian gas. However, Gazprom has less money available to finance the scheme than it
had expected because low world gas prices have hit its revenues, while sanctions imposed
on Russia over Ukraine are making it hard
to secure loans from the West. One industry source told Reuters that Gazprom had asked the
privately-owned Irkutsk Oil Company, which holds large gas reserves in the region and some
infrastructure, to pledge up to 7 billion cubic metres of gas per year for Gazprom's
future supplies to China. "There is an agreement in principle, but we don't know the
prices yet," the source said." |
"Russia
is battening down the hatches for a Biblical collapse in oil revenues, warning that crude
prices could stay as low as $40 a barrel for another seven years. Maxim Oreshkin, the deputy finance minister, said the country is drawing
up plans based on a price band fluctuating between $40 to $60 as far out as 2022, a
scenario that would have devastating implications for Opec. It would also spell disaster
for the North Sea producers, Brazil’s off-shore projects, and heavily indebted
Western producers. “We will live in a different reality,” he told a breakfast
forum hosted by Russian newspaper Vedomosti. The cold blast from Moscow came as US crude plunged to $35.56, pummelled by continuing fall-out from the
acrimonious Organisaton of Petrol Exporting Countries meeting last week. Record
short positions by hedge funds have amplified the effect. Bank of America said there was
now the risk of “full-blown price war” within Opec itself as Saudi Arabia and
Iran fight out a bitter strategic rivalry through the oil market. Brent crude fell to $37.41, even though demand is growing briskly. It is the
lowest since the depths of the Lehman crisis in early 2009. But this time it is a
'positive supply shock', and therefore beneficial for the world economy as a whole. ...The
International Energy Agency said in its monthly market report that Opec has stopped
operating as a cartel and is “pumping at will”, aiming to drive out rivals at
whatever cost to its own members. Opec revenues will fall to $400bn (£263bn) this year if
current prices persist, down from $1.2 trillion in 2012. This is a massive shift in global
wealth. .... The Russian contingency plans convey a clear message to Riyadh and to
Opec’s high command that the country can withstand very low oil prices indefinitely,
thanks to a floating rouble that protects the internal budget. Saudi Arabia is trapped by
a fixed exchange peg, forcing it to bleed foreign reserves to cover a budget deficit
running at 20pc of GDP. Russia claims to have the strategic depth to sit out a long siege.
It is pursuing an import-substitution policy to revive its industrial and engineering
core. It can ultimately feed itself. The Gulf Opec states are one-trick ponies by
comparison. The deputy premier, Arkady Dvorkovich, told The Telegraph in September that
Opec will be forced to change tack. “At some point it is likely that they are going
to have to change policy. They can last a few months, to a couple of years," he said.
Kremlin officials suspect that the aim of Saudi policy is to force Russia to the
negotiating table, compelling it join Opec in a super-cartel controlling half the
world’s production. Abdallah Salem el-Badri, Opec’s chief, came
close to admitting this last week, saying the cartel is no longer big enough to act
alone and will not cut output unless non-Opec producers chip in. ... Russia is in effect
calling Opec’s bluff, gambling that it has the greater staying power. It cannot
easily cut output since its main producers are listed companies, answerable to
shareholders. Any arrangement would have to be subtle." |
"Drained
by a 17-month crude rout, some U.S. shale oil companies are merely hanging on for life as
oil prices lurch further away from levels that allow them to profitably drill new wells
and bring in enough cash to keep them in business. The slump has created dozens of oil and
gas "zombies," a term lawyers and restructuring advisers use to describe
companies that have just enough money to pay interest on mountains of debt, but not enough
to drill enough new wells to replace older ones that are drying out. Though there is no single definition of a zombie, most investors and
analysts consulted by Reuters say they tend to have exceptionally high debt loads and face
the prospect of shrinking oil reserves. About two dozen oil and gas companies whose debt
Moody's rates toward the bottom of its junk bond scale broadly fit that description.
Investors and analysts mentioned SandRidge Energy Inc., Comstock Resources, and Goodrich
Petroleum Co as some of that group's more prominent members. To stay alive, zombie
companies have curbed costly drilling and are using revenue from existing production to
pay interest and other expenses in a process some describe as "slow-motion
liquidation." Bankruptcies and defaults loom because the cutbacks in new drilling
have been so deep that many companies risk getting caught in a vicious circle of shrinking
oil reserves, falling revenue and declining access to credit, experts say. As long as oil prices stay below the estimated break-even level of
$50 a barrel, the zombie group is set to grow. In
fact, so many oil companies are struggling that "zombies" are the topic of a
keynote address at a big energy conference in Houston on Thursday." |
"Crude prices fell on Monday in the first
trading session after OPEC members failed to agree on output targets to reduce a bulging
oil glut that has cut prices by more than 60 percent since June 2014. The Organization of the Petroleum Exporting Countries failed to
agree on an oil production ceiling on Friday after a disagreement between Saudi Arabia and
Iran meant that the group for the first
time in decades didn't even mention an output quota, which previously stood at 30 million
barrels per day (bpd). "Past communiques have
at least included statements to adhere ... or maintain output in line with the production
target (of 30 million barrels per day). This one glaringly did not," Barclays bank
said. By ditching any output limits, analysts said the group was sending a message to
other producers such as Russia
or North American shale drillers that it was willing to accept low oil prices to defend
market share." |
"Turkey’s president renewed his
rhetorical attacks on Russia on Saturday, vowing to break his country’s dependence on
the Kremlin’s oil and gas. During a televised speech, Recep Tayyip Erdogan kept up
the verbal barrages that Turkey and Moscow have exchanged since Nov 24, when the Turkish
air force shot down a Russian jet fighter. Turkey imports almost all of is energy, with
more than half of its gas imports – and about 10 per cent of its oil – coming
from Russia. Mr Erdogan made a point of commending Turkey’s energy-rich friends like
Qatar and Azerbaijan. “It is possible to find different suppliers,” he said,
referring to energy imports. Since the jet was shot down, Russia has banned imports
of food from Turkey and prevented its citizens from going on holiday in the country. But
Mr Erdogan said that his country “will never bow down to pressure from Russia,”
adding that he “did not care whether Russia buys Turkish food or not”. Russia has also suspended negotiations with Turkey on a proposal
for a new gas pipeline across the Black Sea. But Mr
Erdogan claimed that Turkey had already decided to break off the talks because of
Russia’s “non-compliance with our demands”." |
"The next two quarters will be tough on
crude prices, but 2016 will be a year of transition for oil markets, IHS Vice Chairman Dan
Yergin said Friday. Yergin told CNBC's "Squawk Box" he expects oil markets to begin to balance next
year or in 2017. "The oil market "can't
stay low like this because you're not going to have the investment you need," he
said." "By 2020, the world oil market is going to need another 7 million barrels
a day of production." "Right now, the whole mantra is slow down, postpone,
cancel projects," he added. Multinational
energy companies and U.S. shale oil producers have slashed capital spending in order to
protect their balance sheets as their revenues plummet and cash flow dries up. Crude
prices began to sink from historic highs last fall, and the downturn accelerated after
OPEC announced it would not cut supply to balance oil markets. Despite expectations that high-priced American crude production
would collapse at $70 a barrel, U.S. producers can perform well at $55 to $60 per barrel.
However, current prices in the $40 to $50 range are creating "great pain," he
said. Yergin said he does not expect OPEC to change
its policy of maintaining current oil output levels to defend market share. The 12-member orgnization is meeting
Friday in Vienna....After years of sanctions on
Iranian oil, Iran's leaders have said they plan to bring 500,000 barrels per day to
markets as soon as possible, and they anticipate reaching 1 million barrels. The world is already oversupplied with about 1.5 million barrels of
oil." |
"....researchers
report that they’ve created a novel type of flow battery that uses lithium ion
technology—the sort used to power laptops—to store about 10 times as much energy
as the most common flow batteries on the market. With
a few improvements, the new batteries could make a major impact on the way we store and
deliver energy." |
"Fuel
accounts for more than 70 percent of Russia's exports (in countries such as Iraq, Libya,
Venezuela, Algeria or Kuwait, it exceeds 90 percent), but oil rents only make up 13.7
percent of the country's gross domestic product. So
there's a dependence on oil revenue but perhaps not a life-threatening addiction. Kuwait
and Saudi Arabia have more to worry about, with oil rent at 57.5 percent and 43.6 percent,
respectively." |
"A wave of company failures is
“inevitable” in Britain’s oil and gas industry, with businesses supporting
the wider energy sector the first to fail, according to advisory firm FRP. The prediction
comes in the wake of the Autumn Statement, which set out a bleak prediction for future of the
North Sea industry with an expected collapse in tax receipts, but offered no relief for
the sector. Data from the Office for Budget Responsibility predicted that the tax take
from the North Sea would collapse from £2.2bn last year to just £130m in 2015/16,
highlighting the intense pressure the sector is under from the oil price crash. Four years
earlier the sector’s tax contribution was almost £11bn. " |
"One of the biggest stories over the past
year and a half has been oil's epic tumble, which has reduced the price of a barrel of crude from nearly $110 to
just more than $40. But one strategist says the commodity is set to stage a striking
turnaround. According to Emad Mostaque, a strategist at consulting company Ecstrat, crude
oil is now trading at what is known as "half cycle costs"; that is, roughly the
cost of getting the oil out of the ground. His point
is that $42 oil does not account for other important costs like that of finding the oil or
purchasing the land in which the crude is situated. That would imply that the supply of
oil will dry up over time. "The case for triple
digit oil is simply that demand stays where it is but supply starts to roll over into next
year, but particularly into 2017, due to lack of investments," Mostaque said in a
Tuesday "Trading Nation"
interview." Further, the market is extremely susceptible to geopolitical risks, he
said. This is because there is no "geopolitical premium" baked into current
prices, and yet falling oil prices could themselves create instability in one or more
oil-producing nations. If that happens, "you could easily get up above $130, because
we just don't know where the easy oil is, because we're
slashing our exploration spending," Mostaque
said." |
"Most
of Britain’s major cities will be run entirely on green energy by 2050, after the
leaders of more than 50 Labour-run councils made pledges to eradicate carbon emissions in
their areas. In a highly significant move, council
leaders in Edinburgh, Manchester, Newcastle, Liverpool, Leeds, Nottingham, Glasgow and many
others signed up to the promise ahead of the crucial international climate talks that will
take place next month in Paris. Labour said this would cut the UK’s carbon footprint
by 10%. The pledge, coordinated by Lisa Nandy, the shadow energy and climate change
secretary, will mean green transport, an end to gas heating and a programme of mass
insulation of homes in cities across the UK." |
"Low
gas prices are here to stay for the rest of this decade, new official forecasts suggest,
raising the prospect of lower fuel bills for consumers. The Department of Energy and Climate Change has slashed its projections
for wholesale gas prices for the second year running, cutting its estimate of gas prices
for 2020 by 14pc, new figures released on Wednesday show. Wholesale electricity price
forecasts, which are linked to gas, have also been revised down again, with 2020
projections cut by 12pc on last year's - making subsidised renewable energy even more
expensive by comparison. Experts said the fall in gas prices has been driven by a
combination of the plunge in oil prices, increased global supplies of liquefied natural
gas (LNG), and mild winters in Europe."" |
"The
UK will close all coal-fired power plants by 2025, the first major country to do so, but
will fill the capacity gap largely with new gas and nuclear plants rather than cleaner
alternatives. The announcement came in a speech by
the energy secretary, Amber Rudd, which she described as a “reset” of
Britain’s energy policy on Wednesday. Rudd said she wanted policy to focus on making
energy affordable and secure. The government wanted a “consumer-led,
competition-focused energy system that has energy security at the heart of it”, she
said, adding that the balance had swung too far in favour of climate change policies at
the expense of keeping energy affordable." |
"US
production peaked in April and has since been drifting lower, dropping 274,000 barrels a
day to 9.324m b/d in August, as a result of the
sharp slowdown in drilling that followed last year’s crash in oil prices. The slowdown would
have been sharper but for two factors: projects coming on stream in the Gulf of Mexico,
where lead times are longer and reactions to price movements are slower; and the strength
of production in the Permian basin. Output from the other two principal US tight oil
“plays” — the Bakken formation of North Dakota and Eagle Ford in south
Texas — has been falling. By December the US government’s Energy Information Administration thinks
oil production in the Bakken will be down 12 per cent from its peak at the end of last
year, while production in Eagle Ford will be down 25 per cent from its peak in March.
Production in the Permian, however, is expected to be down just 1 per cent from its level
in September. Amrita Sen of Energy Aspects, a consultancy, expects the divergence to
persist. By April of next year total US production is likely to be down about 1m b/d from
the equivalent period of 2015, but that drop will be driven by other regions. Output in
the Permian will be “certainly not be falling”, she says. The Permian, a region
about 300 miles by 250 miles that stretches from west Texas into eastern New Mexico, is
the most recent of the US shale regions to be developed, and producers there are still
climbing the learning curve, raising productivity faster than in other areas. That has
made them cut activity there less than in Eagle Ford or the Bakken. EOG
Resources, an independent oil group that was the leader in opening Eagle Ford, said
this month it had paid $368m for drilling rights on 26,000 acres of the Delaware basin,
part of the Permian. It also almost doubled its estimate of its recoverable
resources in the region, from 1.35bn barrels of oil equivalent to 2.35bn boe....Some
observers have become so excited about the basin’s prospects they have begun to draw
parallels with the Marcellus, the most prolific shale gasfield in the US. However, there
is no evidence yet that the Permian will become the “Marcellus of oil”,
eclipsing all other regions, according to RT Dukes of Wood Mackenzie, the research
company. The striking feature of the Marcellus was that the wells kept on getting better.
By contrast estimated recoveries from Permian wells are about the same as in the
Bakken." |
"Saudi Arabia is conducting a major
budget review to counter claims that it is running out of money as falling oil prices cut government income.
Advisers to the royal court and members of the newly powerful economic council have
admitted to the Telegraph that the dependence on oil revenues for 80pc to 85pc of
government income was a “dilemma”. However, they played down the idea that the
reduction in the oil price to well below $100 a barrel, currently regarded as “break
even” for the budget, to something nearer $40 presented a terminal crisis for the country, as some have claimed.
“The economic council believes that this is a window of opportunity to create new
prospects for economic diversification,” they said in a statement. “There are
new areas that have not been tapped yet in a market that is the largest in the region with
a high purchasing power and hi-tech.” The change
in leadership in Riyadh following the death of King Abdullah in January has added to the
uncertainty over Saudi Arabia’s future caused by the changing politics of the
international oil price. The new King Salman, and his favoured younger son, Prince
Mohammed bin Salman, who was promoted at the age of just 30 to be head of the royal court,
head of the economic council and defence minister, have continued their predecessor’s
policy of maintaining oil production." |
"Britain
will no longer pursue green energy at all costs and will instead make keeping the lights
on the top priority, Amber Rudd, the energy secretary, will vow this week. Households
already face paying over-the-odds for energy for years to come as a result of expensive subsidies handed out to wind and solar farms by her Labour and
Lib Dem predecessors, Ms Rudd will warn. In a major speech setting out a new strategy,
the energy secretary is expected to say that from now on, policies will balance "the
need to decarbonise with the need to keep bills as low as possible". "Energy
security has to be the first priority. It is fundamental to the health of our economy and
the lives of our people," she will say... Ms
Rudd is also expected to make clear that eking out more power from Britain’s ageing
and polluting coal-fired power stations is not the solution to keeping the lights on, and
new gas and nuclear plants are needed instead. The energy department is understood to be
considering announcing a closure date for Britain’s remaining coal plants -
potentially requiring a shutdown as early as 2023, although policy details were still
being thrashed out this weekend. Any such move would be highly controversial as coal power
stations produced 29 per cent of UK electricity last year and the closure of some plants
has already increased the risk of blackouts. But Ms Rudd is expected to warn that the
remaining old coal plants are becoming increasingly unreliable, highlighting breakdowns at several plants earlier this month that forced National Grid
to resort to emergency measures to keep the lights on." |
"In a note on Friday, JPMorgan's Vivek
Juneja broke down the results from the 2015 Shared National Credits exam,
a Federal Reserve initiative to review and classify large syndicated loans. The review
captures any loan bigger than $20 million that is shared by three or more supervised
institutions. The SNC provides insight on so-called classified loans, or loans with unpaid
interest and principal outstanding that are in danger of defaulting. According to the results of the SNC, classified loans to oil and
gas companies jumped four-fold. The report said:
"O&G classifieds rose to about 12% of total O&G commitments, well above the
5.3% ratio of classifieds for all other loan commitments. Put another way, O&G
classified loans now account for 15% of total classifieds, up from 3.6% a year ago."
That means around one in seven loans to oil and gas companies are edging toward
default." |
"More than 100m barrels of crude oil and
heavy fuels are being held on ships at sea, as a year-long supply glut
fills up available storage on land and contributes to port congestion in key hubs. From China to the Gulf of Mexico, the growing flotilla of
stationary supertankers is evidence that the oil price crash may still have further to
run, as the world’s energy infrastructure starts to creak under the weight of
near-record inventory levels. The amount of oil at
sea is at least double the levels of earlier this year and is equivalent to more than a
day of global oil supply. The numbers of vessels has been compiled by the Financial Times
from satellite tracking data and industry sources. Unlike the last oil
price collapse during the financial crisis only half of the oil held on the water has been
put there specifically by traders looking to cash in by storing the fuel until prices
recover. Instead, sky-high supertanker rates have prevented them from putting more oil
into so-called floating storage, shutting off one of the safety valves that could prevent
oil prices from falling further. JBC Energy, a consultancy, said in many regions onshore
oil storage is approaching capacity, arguing oil prices may have to fall to allow more to
be stored profitably at sea." |
"Oil
tankers are set to deliver the biggest volume of Iraqi crude to U.S. shores in more than
three years, as OPEC's second-largest producer vies for market share as pressure mounts on
U.S. shale production. According to Reuters shipping
data, tankers carrying nearly 20 million barrels of Iraqi oil are due to sail to the
United States in November, almost 40 percent above the amount booked to arrive in October.
At an average rate of more than 660,000 barrels per day (bpd), it would be the largest
monthly import since mid-2012, according to U.S. data. The supply surge is emerging at a
time when low oil prices are muscling U.S. shale producers out of the market, heightening
competition among some OPEC members to secure market share. In Europe, Saudi Arabia is
targeting traditional buyers of Atlantic Basin and Russian crudes. In the United States,
where Saudi Arabia has long been the biggest OPEC supplier, favourable prices are helping
Iraq regain share among U.S. refiners that run heavier, high sulphur or sour grades." |
"The
oil market will remain oversupplied until the end of the decade as the push for cleaner
fuels and greater efficiency offsets the effect of lower prices, the world’s leading
energy forecaster said. In its annual outlook, the International Energy Agency said oil
demand would rise by less than 1 per cent a year between now and 2020, slower than
necessary to quickly mop up an oil glut that has driven prices to multiyear low. The
slowdown in oil demand growth follows a near 15-year surge in consumption, driven by the
rapid industrialisation of China and other emerging market economies. But Beijing is now
moving away from dirtier fuels and to less energy-intensive growth as it heads towards a
more consumer-led economy. “We are approaching
the end of the single largest demand growth story in energy history,” Fatih Birol,
executive director of the IEA, told the Financial Times. Mr Birol was appointed IEA head
in September after 20 years with the west’s energy watchdog. “Demand is not as
strong as we have seen in the past as a result of efficiency [and climate] policies
[globally],” he added, saying the growth in renewables will further restrict demand
for oil. The IEA does not expect crude oil to reach
$80 a barrel until 2020 under its “central scenario”, as excess supplies are
slowly soaked up. After 2020, oil demand growth is expected to grind almost to a halt,
increasing just 5 per cent over the next 20 years, the IEA said." |
"Renewable
energy accounted for almost half of all new power plants in 2014, representing a
“clear sign that an energy transition is underway”, according to the
International Energy Agency (IEA). Green energy is now the second-largest generator of
electricity in the world, after coal, and is set to overtake the dirtiest fossil fuel in
the early 2030s, said the IEA’s
World Energy Outlook 2015 report, published on Tuesday. “The biggest story is in the case of renewables,” said IEA
executive director, Fatih Birol. “It is no longer a niche. Renewable energy has
become a mainstream fuel, as of now.” He said 60% of all new investment was going
into renewables but warned that the $490bn of fossil fuel subsidies in 2014 meant there
was not a “fair competition”. Amid the energy transition, the IEA said the price
of oil, currently under $50 a barrel, was likely to recover only to $80 by 2020 and see
modest growth beyond.The IEA said investment in oil exploration and production was set to
fall by 20% in 2015, as high cost projects in the US, Canada, Russia and Brazil continue
to be shelved. But it said US shale oil producers could move back into profit with
prices of $60-$70 a barrel.The IEA, which was founded in response to the oil shocks of the
1970s, also warned that if the oil price remained at $50 for a decade or more, cheaper oil
from the Middle East would come to dominate exports, with 75% market share. Birol said
that the scenario was “unlikely”, but that if it came to pass, “reliance on
a very few number of countries in a region that is in turmoil may not be the best news for
oil security.”“Now is not the time to relax,” he said. “Quite the
opposite: a period of low oil prices is the moment to reinforce our capacity to deal with
future energy security threats.”" |
"With oil prices down 45 percent from
where they were last year, the troubling economic climate for continued exploration and
drilling is having repercussions in Utah. The Southern Utah Wilderness Alliance was
celebrating what it viewed as the demise of Enefit's
big oil shale extraction project in eastern Utah after the head of the parent company said
it had been "stopped," and there was no business plan to continue. An article posted on Estonia
Public Broadcast included comments from Hando Sutter, chief executive officer of the
state-owned Eesti Energia, about the Enefit project's remote location and other
challenges." |
"Royal
Dutch Shell’s chief executive says uncertainty over pipelines such as Keystone XL,
killed by the U.S. government on Friday, played a role in the company’s decision to
scrap a major oil sands project last month – a
sign that export constraints are squeezing some of the industry’s largest players.
Last month, Shell took a $2-billion (U.S.) hit after halting construction of its 80,000
barrel-per-day Carmon Creek development in northwest Alberta. It cited high costs and
insufficient pipeline capacity to move the supplies to market as reasons." |
"The
head of the Ukrainian state-run energy company Naftogaz has said a proposed new pipeline
to pump Russian gas to Europe would spell the
end for Ukraine's gas transport business. In September, Russia's Gazprom formed a
consortium with E.ON, BASF/Wintershall, OMV , ENGIE and Royal Dutch Shell to develop the
Nord Stream-2 pipeline, which could allow Russia to bypass Ukraine completely from 2019. "If Nord Stream-2 operates, Ukraine will be dead as a transit land
for Russian gas," Naftogaz CEO Andriy Kobolev told the German daily Handelsblatt in
an interview published on Friday. A U.S. official this week said the pipeline risked
depriving Ukraine of more than $2 billion in transit fees, and ran counter to the EU's
goal of reducing its energy reliance on Russia. Gazprom already sends gas to Germany across the Baltic Sea via the
Nord Stream pipeline, and Nord Stream-2 would double the capacity of that pipeline to 110
billion cubic metres (bcm) per year. Naftogaz has said that it lost at least 34 billion
cubic metres of gas transit volume last year because of Nord Stream. Ukraine, which has
the capacity to pump 151 bcm of gas a year to Europe, transported 62 bcm of Russian gas in
2014." |
"Just
as the energy industry has brushed aside concerns that the world could run out of oil,
industry executives now say they believe it is demand, rather than supply, that is nearing
its apex. In 1985, Ian Taylor, today the chief executive of the world's largest oil trader
Vitol, was part of a team at Royal Dutch Shell that forecast oil prices would rise five
fold to $125 a barrel in 2015 as global reserves were expected to become more scarce. Now
he says it is unlikely to ever reach those levels again. Oil today stands at around $50 a
barrel, having more than halved since June 2014 after global supplies dramatically rose
due in large part to the U.S. shale oil boom but also due to the unlocking of huge
offshore reserves in Brazil, Africa and Asia. "We
all talk about 'peak supply' and maybe with shale that is becoming a disabused concept. I
have begun feeling that... we are coming to peak demand towards 2030," Taylor said on
Wednesday at The Economist Energy Summit in London. "I believe we may not see $100 (a
barrel) ever again," Taylor said.... The United Nations believes sharp reductions in
fossil fuel use are also necessary to protect the earth from catastrophic effects of
climate change. Higher fuel efficiencies for cars and the industry's switch towards
less-polluting sources of energy such as gas, biofuels, solar and wind power, mean that
oil demand could plateau in the coming decades. Fossil fuel consumption could be further
clipped if governments tighten regulations in order to combat climate change at a U.N.
conference in Paris next month.... BP earlier this week said the world is no longer at
risk of running out of oil or gas for decades ahead. Existing technology is capable of
unlocking so much fossil fuel that global reserves would almost double by 2050 to 4.8
trillion barrels of oil equivalent (boe), the British giant said. With new exploration and
technology, the resources could leap to a staggering 7.5 trillion boe, it said." |
"The UK is sitting on a plutonium stockpile that represents
"thousands of years" of energy in the bank, according to a leading nuclear
scientist. Tim Abram, professor of nuclear fuel technology at the University of
Manchester, made the comments at a briefing to discuss the fate of the UK's plutonium. The Sellafield
nuclear plant in Cumbria has around 140 tonnes of the material. It is now the largest
stockpile of civil plutonium in the world. The government is yet to decide on its fate,
although the Department of Energy and Climate Change (DECC) stated in 2013 that rather
than being disposed of, its preference was that it should be reused as fuel. This is not,
however, a straightforward process; it requires new nuclear reactors to be built that are
capable of using plutonium as fuel. Plutonium is
extracted from reprocessed nuclear waste and was originally stockpiled as a source of fuel
for a new breed of experimental nuclear reactors. But in the 1990s, the government-backed
programme of research to develop these new reactors was cancelled, on both cost and safety
grounds. This left Sellafield storing plutonium with no long-term plan for it. It also,
somewhat ironically, put new nuclear reactor technology back on the government's list of
priorities. DECC tasked the Nuclear Decommissioning Authority (NDA) with assessing the
technical, safety and economic pros and cons of the three "credible" types of new generation
nuclear reactor that would allow the plutonium to be used as fuel. The NDA said it was
still "in the middle" of this complicated consultation. "A decision is
expected to be made by ministers on how to proceed during 2015/16," the authority
said in a statement. "However, only when the Government is confident that its
preferred option could be implemented safely and securely, in a way that is affordable,
deliverable and offers value for money, will it be in a position to proceed."" |
"Advanced
biofuel made from agricultural waste — the so called Holy Grail of the alternative
energy industry — will not be competitive with
conventional fuel until the oil is back to $70-$80 per barrel, DuPont
has said. This prediction from the US chemicals group, which last week formally
opened the world’s largest cellulosic
ethanol plant, underscores the challenge facing makers of
“second-generation” biofuels. After a
decade pursuing an elusive production process, companies are finding their business models
threatened by the changing economics of the industry — as well as the politics of the
US." |
"Only
1% of the Bakken Play area is commercial at current oil prices. 4% of horizontal wells
drilled since 2000 meet the EUR (estimated ultimate recovery) threshold needed
to break even at current oil prices, drilling and completion, and operating
costs. The leading producing companies evaluated in this study are losing $11 to $38
on each barrel of oil that they produce, the very definition of waste. Although
NYMEX prices are about $46 per barrel, realized wellhead prices in the Bakken
are only $30 per barrel according to the North Dakota Department of Mineral Resources. At that price, approximately 125,000 acres of the drilled play area of
10,500,000 acres is commercial (green areas in Figure 1)....There has been much debate
about the break-even price for tight oil plays in the U.S. This discussion is largely
meaningless because there is no single break-even price for any play. Break-even
price depends on EUR and every well has a different EUR. EUR depends on
reservoir geology and geology varies geographically. Drilling and completion technology
cannot make up for bad geology. An area with poorer geology costs more to produce and
will never perform as well as an area with better geology. And technology comes at a
price. Longer laterals and more frack stages mean that a higher EUR is needed to
to pay out the additional costs..... Sweet spots are found and not
predicted. They are evident only after thousands of wells have been drilled and
produced for some time. By then, all land has been captured. A company has to work
with the position it was able to acquire in the land grab that characterizes shale plays.
Late entrants like Statoil in the Bakken or Devon in the Eagle Ford pay a premium to buy
into an existing sweet spot. The failure of a late entrant like Shell in the Eagle
Ford resulted from paying a premium for a position outside the sweet spot. There are no
significant differences in technology or operator competence among the companies evaluated
in this study. Technical success in the Bakken is largely based on luck in the
initial selection of a lease position. The manner in which operating companies have
managed their production growth, cash flow and balance sheets, however, differs
considerably and is based on choice and not on luck. Figure 3 shows key financial data for
companies evaluated in the Bakken Play. On average, the evaluated companies spent more
than double their cash flow on drilling and completion (capex) in the first half of 2015.
In other words, they lost more than a dollar for every dollar they earned. Companies
like Whiting and Marathon outspent cash flow by a factor of more than 3-to-1 while a
company like XTO (ExxonMobil) earned more than it spent. Evaluated
companies’ debt-to-cash flow ratio averaged 6.3. This means that it would take
more than 6 years to pay off their debt if all revenue were used for that purpose. Many
banks use a debt-to-cash flow ratio of 2.0 as the threshold for calling loans (debt
covenant). The E&P industry’s average ratio from 1992 to 2012 was 1.58 (also
see Assessing Systemic Risk With Debt to Cash Flow). Every company
evaluated in this study, therefore, is in the danger zone as far as banks are
concerned. Marathon and Whiting have debt-to-cash flow ratios of 5 times greater
than the threshold of 2.0, while EOG, Statoil and XTO are at least below the average for
this group of companies. A continuation of low oil pricing may have profound and
negative implications for Whiting, Marathon, Hess and Continental based on this financial
performance data....Tight oil is expensive to produce. The biggest increase in Bakken
production occurred after oil prices reached more than $90 per barrel in 2011 (Figure 4).
Since oil prices collapsed in 2014, capital and operating costs have fallen almost as much
as product prices. Lower costs, hedges, a price rally to around $60 per barrel from March
to early July 2015, and continued availability of outside capital have allowed
most producers to survive. Higher-priced hedges are running out and service company costs
cannot fall much further without bankrupting those companies. Also, I do not believe
that efficiency gains are significant going forward. All
Bakken producers in this study can break even at $60-70 per barrel wellhead oil prices at
current low drilling and completion costs. At $30 realized prices, they are all in serious
trouble. Their investor presentations give little sense of how perilous their
situation is in this price environment....
Bakken oil production has fallen only 26,000 barrels per day since its peak in December 2014 and the number
of producing wells reached an all-time high of 12,940 in July. This makes no sense at all given the economics of $30
oil. If producers cannot change their behavior and demonstrate discipline in their
spending, the market will do it for them with much lower oil prices." |
"When the International Energy Agency
published a report four years ago heralding a “golden age of gas,” it seemed
little could derail a bright future for the energy source. Now, with prices slumping and
demand in key consuming countries such as China looking shaky, the energy industry’s
optimism about gas seems to have fizzled out. ... Particular concern hovers over the
market for liquefied natural gas—gas that is chilled into liquid form, then loaded on
ships for transport elsewhere. In recent years, major oil-and-gas companies, such as Chevron Corp. and Royal Dutch Shell PLC, have invested
billions of dollars in LNG projects in countries like Australia and Qatar, while further
vast sums have been spent on plants that turn LNG back into gas in consuming countries,
all in the belief that the world’s need for the fuel would rise
rapidly—especially as countries, particularly in Asia, sought to move away from
more-polluting energy sources such as coal. Yet the pessimism now surrounding the LNG
industry was unmistakable at this past week’s Gastech conference, a major annual
industry event held in Singapore. “The entire industry is worried because it is hard
to tell when China’s demand will pick up again,” said an LNG strategist at a
Malaysian energy company who attended the event. “Rising demand from smaller
countries such as Pakistan, Egypt and Bangladesh is not enough to offset the declining
demand from north Asia.” LNG prices are certainly in a funk. Two years ago, gas
headed for big North Asian countries like Japan and Korea sold at around $15 to $16 a
million British thermal units. In October, deliveries there are selling for $6.65 a
million BTUs, down 12% from September, according to research firm Energy Aspects. It
expects prices to fall further in Asia next year, to under $6 per million BTUs, as a wave
of new gas supply in countries from the U.S. to Angola to Australia comes on line. LNG
prices are like “a train wreck happening in slow motion,” Neil Tomnay, global
head of gas and LNG research at Wood Mackenzie, said in an interview. “The gas market
is not presently oversupplied. But the concern is with all the new supplies coming online,
that’s all going to change.” Gas producers
can no longer rely on China’s rapid industrialization to soak up extra supply, with
its economic growth slowing. The industry now believes China won’t be able to digest
all of the LNG it has contracted to buy, Mr. Tomnay said. Currently, LNG accounts for 5%
of China’s total energy mix, and Beijing wants to increase that to 10% by 2020. Yet
recent data show Chinese LNG imports have fallen 3.5% so far this year, compared with a
10% rise in 2014. In line with Mr. Tomnay’s
comments on oversupply in China, oil giants PetroChina
Co. and Cnooc Ltd. offered three cargoes of LNG for resale in September,
according to Energy Aspects. The gas market is likely to see more such reselling if demand
remains tepid, he said." |
"The
plummeting price of oil has ripped into the once
booming US energy industry so dramatically that the oil sector has laid off 87,000
people so far this year. Chevron became the latest
company to dismiss workers on Friday, announcing that it would lose between 6,000 and
7,000 jobs – the second four-figure round of dismissals at the company since
July. The company is cutting investment by a fourth. “With the lower investment,
we anticipate reducing our employee workforce by 6,000-7,000,” the chairman and CEO,
John Watson, said in a statement." |
"Russian
oil output is poised to break a post-Soviet record for the fourth time this year as the
nation’s producers once again prove themselves resilient to a slump in crude prices.
Production of crude and a light oil called condensate is on track to reach 10.77 million
barrels a day in October, topping the previous month’s revised figure and setting a
record for the second month running, according to Bloomberg estimates based on Energy
Ministry data. Russian production has withstood a collapse in oil prices amid a global
supply glut, while output in the U.S. has fallen about 5 percent from its June peak. Oil-extraction and export tax rates shrink in Russia at lower prices,
giving companies a buffer against the slump, while the weaker ruble has reduced costs.
“Russian oil companies are insulated from oil price corrections,” said Artem
Konchin, an oil and gas analyst at Otkritie Capital in Moscow. “Through the tax
framework, the government took the brunt of the blow, just as it used to take most of the
windfall profits. The rest of the story is in the ruble depreciation.” The production
figure for October is derived from output data from the Energy Ministry’s CDU-TEK
unit for the first 28 days of the month. The remaining days were estimated using an
average of the previous seven days." |
"Shell, though, is far from alone. It may
have made the biggest U-turn on a new project since the market rout, but this week’s
third-quarter results show the speed at which the industry is reacting to the market
collapse. As cash flow dwindles, the oil majors are scrambling to cut costs in order to
maintain their dividends. As a result, any new
project requiring an oil price of more than $60 a barrel — almost 50 per cent below
last year’s peak — is now either being scrapped or deferred until industry costs
have come down sufficiently. Hence BP’s decision to
delay its Mad Dog 2
project in the Mexican Gulf. Along with French oil major Total,
the UK-based energy group has pledged to balance its books on $60 oil, aiming to cover its
dividend from cash flow by 2017. Norway’s Statoil
also says the “break-even” price for its Johan Castberg project in the Arctic,
awaiting a green light, is now $60 a barrel." |
"As
the price of oil continues its decline, economists have warned on a lack of upward price
pressures for the commodity for at least another two years. Thomas Pugh economist at
Capital Economics predicts oil could hit $55 per barrel for Brent crude at the end of
2015, with oil to remain in surplus for another couple of years. "The market is still
going to be in surplus by this time next year, so by the time you actually have supply and
demand starting to equate, it will be well into 2017," he told CNBC via telephone. The oil industry is full of booms and busts. The norm for oil for the last
decade has been $90 - $100 per barrel, but Brent
is currently trading closer to $45 a barrel. The U.K. oil giant BP announced on Tuesday it
was slashing costs as it prepares for a long term low oil price environment. The company
is planning for oil to be around $60 per barrel until 2017." |
"U.S.
imports of foreign oil are rising again after a long decline, as the oil bust forces
domestic producers to scale back. Less than a year after the Organization of the Petroleum
Exporting Countries opted to continue production despite plummeting prices, member
countries including Saudi Arabia and Iraq are clawing back market share they ceded to oil
companies pumping in Texas and North Dakota. U.S. crude imports declined 20% between 2010
and 2014 amid the domestic energy boom but have recently started to rise again. Total
crude-oil imports rose for three straight months between April and July—a total of
1.7% in the period, according to the most recently available data from the Energy
Information Administration. Imports of light crude grew more rapidly, from 5.6% of total
imports in April to 11% in July. On the Gulf Coast,
vessels carrying nearly a week’s worth of imports waited offshore Friday to unload,
according to shipping tracker ClipperData. The slowdown in the nation’s shale-oil
output has pushed up the price of high-quality U.S. oil relative to global prices, giving
U.S. refiners a reason to buy from countries such as Nigeria. Until very recently, the
boom in U.S. shale-oil production forced countries that exported oil to the U.S. to hustle
for new customers....the shifts in oil flows spurred by declining U.S. output show how
some of the ripple effects of the shale-oil boom are going into reverse following the
plunge in oil prices. U.S. oil producers have sharply cut spending on new drilling, and
transportation companies that profited from shipping crude by rail and barge in recent
years have seen volumes decline... Globally, the glut of crude oil that sent prices
tumbling last year still persists, and benchmark oil and gasoline prices remain near
six-year lows. Falling U.S. output is unlikely to have an immediate impact on prices,
because other countries are still pumping at high rates and Iran is expected to increase
production in the coming months. In the U.S., however, the adjustments have been swift.
U.S. crude production has fallen to about 9 million barrels a day from a 43-year peak of
9.6 million barrels in April and is forecast to keep declining." |
"SNP
ministers must start being open and honest about Scotland’s finances after it emerged
the taxpayer has made a loss for the first time from the North Sea oil and gas industry,
Labour has said. Jackie Baillie, Labour’s wealth creation spokesman, urged the
Scottish Government to revive its practice before the independence referendum of
publishing regular civil service bulletins examining revenues from the key sector. She
said new official figures showing oil producers claimed back £39 million more from the
Exchequer than they paid in tax in the past six months demonstrated the
SNP’s “fantasy economics”. Ms
Baillie said there would have been a “devastating impact” on schools and
hospitals if Scots had voted for independence last year. But she argued that the Scottish
Government must be “transparent” about the sector “rather than trying to
avoid talking about a serious issue because it’s politically inconvenient.”
Nicola Sturgeon told voters during last year’s referendum that Scotland was on the
verge of a second oil boom. ...The official figures from HM Revenue and Customs (HMRC) are
thought to show the first loss recorded by a six-month period since North Sea oil started
production 40 years ago. Although the Treasury collected £248 million in corporation tax
and petroleum revenue tax (PRT) in the first half of this year, it paid out £287 million
in rebates to producers. SNP ministers based their financial planning for independence on
an oil price of $113 (£74) per barrel, claiming the sector would generate between £15.8
billion and £38.7 billion for the public purse over five years." |
"Greenhouse
gas emissions in Europe have plunged to the lowest level ever recorded after the
EU’s member states reported an estimated 23% drop in emissions between 1990 and 2014.
The bloc has now overshot its target for 2020 of cutting emissions by one-fifth – at
the same time that its economy grew by 46%, according to the EU’s climate chief,
Miguel Arias Canete . “We have shown
consistently that climate protection and economic growth go hand-in-hand,” he said.
“This is a strong signal ahead of the Paris climate conference.”... The study
says that it will be “challenging” for the EU to achieve its 2030 goals of a 27%
share of renewables in its energy mix, and 27% energy efficiency improvement. Even if this
is achieved, European countries will still have to double or even triple their emissions
cutting efforts after 2030 to get onto a path that could limit global warming to 2C by
mid-century." |
"Britain’s
oil giants are preparing to make further cuts to their investment plans in the face of
plummeting crude prices. Shell, like many oil
explorers, has already slashed spending and jobs to counteract the effects of a 40pc slump
in oil prices in the past year, with the price sliding as low as $43 a barrel from highs
of more than $110 in 2014. However, Shell is this week expected to unveil a new round of
cuts alongside its third quarter results, which are set to show a 38pc slump in sales to
$67bn (£43.7bn) and a 54pc drop in adjusted earnings. The budget cuts will come on top of
the £10bn reduction in investment that was announced in January. The company also halted
drilling in the Arctic in September after disappointing tests. Many oil firms are expected
to burn through their cash flows this year, leaving spending cuts and asset sales as tools
to avoid sacrificing their dividends. Shell’s position is complicated by
a pending cash-and-shares takeover of BG Group, which at current prices is worth more
than £40bn." |
"Stagnating
rig productivity shows U.S. shale oil producers are running out of tricks to pump more
with less in the face of crashing prices and points to a slide in output that should help
rebalance global markets. Over the 16 months of the crude price rout, production from new
wells drilled by each rig has risen about 30 percent as companies refined their
techniques, idled slower rigs and shifted crews and high-speed rigs to "sweet
spots" with the most oil. Such "high-grading" helped shale oil firms push
U.S. output to the loftiest levels in decades even as oil tumbled by half to less than $50
a barrel and firms slashed rig fleets by 60 percent. But recent government and private
data show output per rig is now flatlining as the industry reaches the limits of what
existing tools, technology and strategies can accomplish. "We believe that the majority of the uplift from high-grading is
beginning to wane," said Ted Harper, fund manager and senior research analyst at
Frost Investment Advisors in Houston. "As a result, we expect North American
production volumes to post accelerating declines through year-end." Drillinginfo, a
consultancy with proprietary data, told Reuters well productivity has fallen or stabilized
in the top three U.S. shale fields - the Permian Basin and Eagle Ford of Texas and the
Bakken of North Dakota – since July or August. The U.S. Energy Information
Administration, whose benchmark drilling productivity index is based in part on
Drillinginfo data, forecasts next month's new oil production per rig in U.S. shale fields
to stay at October levels, which it estimates at 465 barrels per day (bpd). The big challenge of shale oil work is that well output drops off
quickly - often more than 70 percent in the first year alone. So producers need to keep
squeezing more oil out of new wells drilled by the currently deployed rig fleet just to
offset steep declines in what existing wells produce. If that is no longer possible and
firms remain reluctant to add rigs because of low crude prices and an uncertain outlook,
overall production is set to sink. (Graphic: link.reuters.com/jem85w) Chip Davis, managing
partner at energy venture capital firm Houston Ventures, says the downward pull of
declining output from older wells is getting stronger. In the Eagle Ford, production from
so-called legacy wells fell by 145,485 bpd last month, a drop that was 23 times larger
than the 6,293 bpd lost in September of 2010, before the fracking boom brought thousands
more wells online. "The boulder that is decline is much bigger in size and rolling
much faster than before," Davis said. "We’ve got very few rigs to buttress
the rate of decline." That growing drag suggests the fall in U.S. output could be
sharper than a 10 percent drop the EIA sees between a peak of 9.6 million bpd in April and
next August, when it expects production to bottom at 8.66 million bpd before starting to
recover. Producers' coping strategies with the worst cash crunch in years could be also
hurting productivity of new wells. To save money, many have started drilling shorter and
cheaper vertical wells. They have also cut back in some cases on the size of multi-million
dollar hydraulic fracturing jobs for long horizontal wells. Both factors can hurt the
average amount of oil being added by new wells. Analysts say it is hard to predict how
much U.S. output will fall and whether it will undershoot official forecasts because lower
production could lift prices and that in turn might prompt producers to redeploy idle rigs
to pump more. But for now, most companies are budgeting less next year for new drilling
work and the U.S. rig count has tumbled to 595, according to Baker Hughes." |
"As President Vladimir Putin tries to
restore Russia as a major player in the Middle East, Saudi Arabia is starting to attack on
Russia's traditional stomping ground by supplying lower-priced crude oil to Poland. At a
recent investment forum, Igor Sechin, chief executive of Rosneft, Russia's biggest oil
company, complained about the Saudis' entry into the Polish market. "They're dumping
actively," he said. Other Russian
oil executives are worried, too. "Isn't this move a first step toward a redivision of
Western markets?" Nikolai Rubchenkov, an executive at Tatneft, said at an oil roundtable
Thursday. "Shouldn't the government's energy strategy contain some measures to
safeguard Russia's interests in its existing Western markets?" European traders and
refiners confirm
that Saudi Arabia has been offering its oil at significant discounts, making it more
attractive than Russian crude. And, even though most eastern European refineries are now
technologically dependent on the Russian crude mix, Russia's oilmen are right to be
worried. In the 1970s, Saudi Arabia sent half of its
oil to Europe, but then the Soviet Union built export pipelines from its abundant
West Siberian oil fields, and the Saudis switched to Asian markets, where demand was
growing and better prices could be had. The Saudi share of the European crude market kept
dropping; in 2009, it reached a nadir of 5.9 percent. Russia's share peaked at
34.8 percent in 2011. In recent years, Saudi Arabia slowly increased its presence,
reaching a 8.6 percent share in 2013, but it had
never tried its luck in Poland. Like most of central and eastern Europe, Poland has long
been a client of Russian oil companies. Last year, about three-quarters
of its fuel imports came from Russia, with the rest from Kazakhstan and European
countries. Poland, however, is at the center of efforts to reduce the European Union's
dependence on Russian energy. Since Putin annexed Crimea from Ukraine last year, Poland,
Ukraine's neighbor, has increased military expenditures and other efforts to shore up its
security. It's working with its smaller neighbors, too. On Thursday, it announced an
agreement with Lithuania, Latvia and Estonia to build a natural gas pipeline to and
from the Baltic States, ensuring their future independence from Russian gas
supplies. In this context, a new and reliable supplier is a godsend. As for the
Saudis, they need to expand outside Asia where demand is falling." |
"Barack
Obama blocked off the prospects for future oil drilling in the Arctic on Friday, imposing new
lease conditions that make it practically impossible for companies to hunt for oil in the
world’s last great wilderness. The Department
of Interior said it was canceling two future auctions of Arctic offshore oil leases in the
Chukchi and Beaufort seas, and turned down requests from Shell and other oil companies for
more time on their existing leases." |
"A few weeks ago, a
big hedge fund manager in New York asked a major Wall Street bank what was happening to
energy sector loans. The answer was sobering. “They said that the covenants on 72 out
of the 74 loans to the oil and gas sector had recently been
modified,” this investor reports. Or to put this into plain English, this bank now realises that most of its energy sector borrowers
are struggling — so it is quietly relaxing the borrowing conditions, to avoid the
embarrassment of seeing loans it has made go into default." |
"More
than $200 billion worth of oil and natural gas assets are for sale globally as companies
come under renewed financial pressure from the prolonged commodity price rout, according
to IHS Inc. There are about 400 buying opportunities as of September, IHS Chief Upstream
Strategist Bob Fryklund said in an interview. Deals will accelerate later this year and
into 2016 as companies sell assets to meet debt requirements, he said. West Texas Intermediate crude has averaged about $51 a barrel this year,
more than 40 percent below the five-year mean. Low prices have slashed profits and as
of the second quarter about one-sixth of
North American major independent crude and gas producers faced debt payments that are more
than 20 percent of their revenue. Companies have announced $181.1 billion of oil and gas
acquisitions this year, the most in more than a decade, compared with $167.1 billion the
same period in 2014, data compiled by Bloomberg show. “Basically almost everything is
for sale,” Fryklund said Oct. 8 in Tokyo. “Low cycles are when a lot of these
companies can rebalance their portfolios. In theory, this is when you upgrade your
existing portfolio.”" |
"Russia has abandoned hopes for a lasting
recovery in oil prices, bracing for a new era of abundant crude as US shale production
transforms the global energy market. The Kremlin has launched a radical shift in strategy,
rationing funds for the once-sacrosanct oil and gas industry and relying instead on a
revival of manufacturing and farming, driven by a much more competitive rouble. "We
have to have prudent forecasts. Our budget is based very conservative assumptions of oil
at around $50 a barrel," said Vladimir Putin, the Russian president. "It is no
secret that if the price goes down, investment peters out and disappears," he told a
group of investors at VTB Capital's 'Russia Calling!' forum in Moscow. The Russian finance
minister, Anton Siluanov, said over-reliance on oil and gas over the last decade had been
a fundamental error, leading to an overvalued currency and the slow death of other
industries in a textbook case of the Dutch Disease...Igor Sechin, chairman of Russia's oil
giant Rosneft, accused the government of turning its back on the energy industry,
lamenting that his company is being throttled by high taxes. He warned that the Russia oil
sector will slowly shrivel unless there is a change of policy. Mr Sechin said Russia's oil
companies are already facing "negative free cash flow". They face an erosion in
output of up to 6pc over the next three years as the Soviet-era fields in Western Siberia
go into decline. "You have to maintain investment," he said Rosneft, the
world's biggest traded oil company, is facing taxes and export duties that amount to a
marginal rate of 82pc on revenues. "This is enormous, it's unbelievable. The
attractiveness of the oil industry is all about tax rates," he said...Mr Sechin said
Russia faces stiff competition from Saudi Arabia, which has begun ship oil at cut-throat
prices into the Baltic through the Polish port of Gdansk, taking local market share from
under the noses of the Russians. But the 'game changer' is US shale that has displaced
Saudi Arabia as the fundamental price-setter for the world. He said the immediate
prospects of the global oil industry now depend on whether shale producers have enough
hedging contracts to last beyond the end of the year. Russia
is currently the world's largest oil producer, extracting 10.7m barrels a day (b\d), but
is living off legacy investments. Plans to develop the off-shore fields in the Arctic and
the vast shale reserves of the Bazhenov Basin are not viable at current oil prices, and in
any case rely on imported technology that is subject to western sanctions." |
"Higher oil output from Opec and a slowdown in world economic
growth means the crude oil glut will persist through next year, the
world’s leading energy forecaster said on Tuesday. The International Energy Agency said it expected a “marked
slowdown” in oil demand growth as the stimulus from lower prices faded and as
economic activity weakened in countries dependent on commodity revenues. “Oil at $50
a barrel is a powerful driver in rebalancing the global oil market,” the IEA said in
its closely watched monthly report. “But a projected marked slowdown in demand growth
next year and the anticipated arrival of additional Iranian barrelsare likely to keep the
market oversupplied through 2016.” An increase in production from Opec member Iran
once sanctions are lifted is expected to overshadow the first drop in US oil output since
2008, the IEA added. The collapse
in oil prices has supported the strongest oil demand growth in almost a decade, with
low prices helping boost demand by 1.8m barrels a day to 94.5m b/d. Gasoline demand has been particularly strong, suggesting motorists have
been encouraged to drive more by lower prices. But the IEA forecasts that effect will
fade, with demand growth set to slow to 1.2m b/d next year." |
"Although
US shale oil accounts for less than 5 per cent of the global oil market, it has already
had a profound impact. The rapid growth in US shale oil last year was the main factor
causing the collapse in oil prices: US oil production increased by more than twice the
entire expansion in global oil demand. More generally, the different production techniques
and financing structures found in the US shale industry are likely to have a lasting
impact on global oil market dynamics, in at least three important ways. First, shale oil
is likely to respond far more quickly to changes in prices. The lead times between
investment decisions and production of US shale can be measured in weeks, rather than the
years taken for conventional production. And the life of a shale well tends to be far
shorter than that for a conventional well, with production typically falling by as much as
70-80 per cent in the first year. As such, as prices fall, investment and drilling
activity will quickly decline and production will soon follow. But the contraction of the
shale industry that we are now observing should not be seen as a fatal blow: as prices
recover, US shale is likely to bounce quickly back. This greater responsiveness of supply limits the extent to which prices
need to move to balance the market. In effect, shale oil acts as a form of partial shock
absorber for the global oil market: the greater responsiveness of supply damps the
volatility of oil prices. Second, US shale producers are far more exposed to the vagaries
of the banking system. Relative to the major National Oil Companies (NOCs) and
International Oil Companies (IOCs) that dominate conventional supplies, the independent
shale producers are much smaller, more highly geared and most are dependent on a continued
flow of borrowing to fund the investments needed to maintain production levels. The
financial crisis of 2008 demonstrated the role that credit and banking flows can play in
spreading and increasing economic volatility. The size and financial strength of the NOCs
and IOCs mean that until now the oil market has been largely insulated from these effects.
The financial characteristics of the small independent shale producers change that.
Third, shale has introduced manufacturing-like processes into the oil industry. The same
rigs are used to drill multiple wells using the same processes in similar locations. This
differs from the large-scale, bespoke engineering projects that typify many conventional
projects. And, as with many repeated manufacturing processes, US
shale is generating strong productivity gains. Productivity growth in US shale, as
measured by initial production per rig, averaged in excess of 30 per cent year between
2007 and 2014. US shale throws down the gauntlet of
whether the lessons of lean manufacturing can be applied to conventional oil
production." |
"Poland
is set to sign a deal to build a highly strategic gas pipeline to the Baltic states as
part of an effort to break Russia’s energy stranglehold over the three EU members. The deal is a sign of mounting international support for Lithuania, Latvia
and Estonia, coming only days after the UK said it
would send troops to join US and German forces in the region to shore up defences
against Russia. Energy supplies are one of the chief weak spots Moscow is able to exploit
against the Baltic countries. Until recently, they were entirely dependent on
Soviet-era pipelines, giving them no leverage to haggle over prices." |
"President
Tayyip Erdogan, angered by Russian incursions into Turkish air space, has warned Russia
there are other places Turkey could get natural gas and other countries that could build
its first nuclear plant. Russian aircraft twice entered Turkish air space at the weekend
as Moscow carried out air strikes in Syria. Turkish F-16 jets have also been harassed by Syrian-based missile systems
and unidentified planes since then. "We can't accept the current situation. Russia's
explanations on the air space violations are not convincing," the Turkish daily Sabah
and other media quoted Erdogan as telling reporters as he flew to Japan for an official visit. Russia's air
strikes in support of President Bashar al-Assad's forces have shifted the balance of power
in the Syrian conflict and dealt a blow to Turkey's aspirations of seeing Assad removed
from power. But beyond protesting, there is little Turkey can do. Russia is Turkey's
largest natural gas supplier, with Ankara buying 28-30 billion cubic meters (bcm) of its
50 bcm of natural gas needs annually from Russia. Other major suppliers are Iran and Azerbaijan, with a small amount
planned from Turkmenistan. Turkey commissioned Russia's state-owned Rosatom in 2013 to
build four 1,200-megawatt reactors in a project worth $20 billion, although a start date
for what will be Turkey's first nuclear power plant has not yet been set.... The
inflexible nature of gas infrastructure means shifting from one supplier to another is not
straightforward. Turkey imports Russian gas primarily through two pipelines, one passing
through the northwestern region of Thrace, the other entering Turkey from under the Black
Sea. "Erdogan's statements on gas are not realistic at all. Turkey is dependent on
Russia in the short and medium terms," said one private-sector gas official. "No
gas entry from Thrace means the end of Turkey as that gas pipeline feeds all of Istanbul
and the Marmara region. There is no alternative pipeline system that can bring this
gas." Turkey could look to boost purchases of liquefied natural gas (LNG) from
Nigeria and Algeria to plug a potential gas shortage, although that would be a costly
option for a country whose annual energy imports bill already exceeds $50 billion. It is
already looking to increase gas imports from Turkmenistan, currently a marginal supplier,
but energy analysts say Russia has blocked such moves. Erdogan is due to visit
Turkmenistan on Monday. The Trans-Anatolian Pipeline
(TANAP), in which Turkey has a 30 percent stake, is expected to bring Turkey 6 bcm of
Azeri gas but only after mid-2018 when the pipeline becomes operational. Turkey's surplus
in electricity generation means it can afford to live without a nuclear power plant for
several years to come." |
"Onshore
wind energy has become cheaper than electricity from any other source in the UK for the
first time, in what could be a landmark moment for renewable energy in Britain.Yet the Government has been accused of scuppering Britain’s best
chance of meeting the country’s ambitious environmental targets through its continued
resistance to onshore turbines, despite growing evidence that they are the most affordable
option. However, new figures show they not only produce cheaper energy than coal, oil or
gas power stations, but also remain far cheaper than offshore turbines, which the
Government is championing. Onshore wind farms currently produce about 60 per cent of the
UK’s wind power output. Although they are set to remain the predominant form of
renewable energy in the next few years despite opposition in Westminster – which has
stopped subsidies and given the final say on whether a project should go ahead to local
residents – supporters of green energy say the country is missing a chance to
maximise their potential. The cost of onshore wind
power has fallen from $108 (£70.20) per megawatt hour (mWh) a year ago to $85 today, as
they become more efficient and cheaper to build. Over the same period, coal-fired power
stations have seen their costs rocket from nearly $98 mWh to $115 and gas from $100 to
$114, after the EU agreed new rules that will greatly increase the amount they must
pay for their carbon emissions. Offshore wind costs $175 mWh, according to the research,
by Bloomberg New Energy Finance. A steep decline in
borrowing costs, with bank lending rates hovering around all-time lows, is also much more
beneficial for wind farms than for fossil-fuel plants. This is because far more of the
cost of renewable energy projects relate to their construction, which is funded by
loans." |
"Much of the focus on the impending
opening up of Iran has been on what this means for the oil industry. However, even bigger
shockwaves could be felt in the natural gas sector, should economic sanctions restricting
the Persian Gulf powerhouse be fully lifted. Tehran’s
reintroduction to the international community would fire the starting pistol on a natural
gas race that could have profound long-term implications for international oil companies
such as Royal
Dutch Shell, which have ploughed billions of dollars into developing higher-cost gas
projects in areas such as Australia. Iran shares access to the world’s single largest
natural gas field with Qatar but has so far been unable to fully develop its share of this
vast resource. The South Pars field is thought to hold at least 325 trillion cubic feet of
natural gas, enough to supply all of Europe’s needs for the next 16 years. Prior to the imposition of tougher economic sanctions on Iran, the
country had made progress in tapping into South Pars, which had been broken down into 24
phases of development. The Iranians were able to move ahead with early phases intended to
provide energy for the country’s domestic market but more lucrative plans to export
liquefied natural gas (LNG) have been delayed. Iran had signed deals with international
oil companies to develop LNG projects under a five-year plan that had envisaged exporting
70m tonnes of the fuel each year. However, many of these deals were cancelled, setting
back Iran’s gas industry by decades as its big rival Qatar pressed ahead with its own
developments on the other
side of the Gulf. Qatar’s North Field, which is adjoined to South Pars, is
estimated to hold in excess of 900 trillion cubic feet of gas. Combined, the field is the
single largest deposit of the energy source to be found anywhere in the world. The Qataris
have raced ahead of Iran in terms of developing their share of the deposit, in partnership
with companies such as Royal Dutch Shell, Total and Exxon Mobil. The tiny
Arab sheikhdom has the capacity to ship 77m tonnes of LNG per year from 14 so-called
LNG trains that stretch along its coast at Mesaieed and Ras Laffan. Since 2005 the Qataris
have had a moratorium in place on further developments of its North field but, should Iran
begin to suck more natural gas from the adjacent South Pars, this policy may change as
both sides race to drain the resource. Qatar is already predicted to see its income
from LNG exports fall over the next decade as output has peaked and global markets become
flooded with the fuel source. The moratorium on development of the North Field pushed
international oil majors into developing more expensive projects in deep waters close to
Australia. Although these projects have been more expensive to develop, they have
benefited from being closer to fast-growing Asian markets, where the majority of new
demand for LNG is expected to occur. At the same time, the development of the shale
gas industry in the US has shut out growth of LNG imports into the world’s
largest economy. Many of Qatar’s LNG projects were originally aimed to supply the US
market before the North American shale revolution reduced the country’s need for
foreign imports from the Middle East. This has contributed to the collapse in LNG prices
despite rising demand. Landing prices for spot cargos in Asia have fallen to $8 per
million British thermal units (btu), from $20 per btu in 2014. Long-term prices could fall
much further should Tehran’s reintegration into the international economy provoke
Doha to lift its own moratorium on the development of the North Field. Faced with
declining prices, and a market that Citi Research estimates could be oversupplied by as
much as 28m tonnes of LNG by 2018, the last thing the industry needs is a flood of cheap
Iranian gas to come on stream. Iran’s oil minister, Bijan Zanganeh, has already said
that he wants to see his country exporting gas to Europe. But for that to happen the
country will first need to attract the investment of international oil companies to build
the giant facilities capable of freezing the fuel to a liquid before it can be loaded onto
tankers. Even if partners can be found once sanctions are lifted, it would take at least
five years to build the infrastructure that would be required for Iran to export LNG on a
global scale. However, Iranian gas would have the advantage of being relatively cheap to
produce and export when compared with the highly expensive deep-water projects in
Australia. For companies such as Shell, which are betting their future on natural
gas, the start of a race between Qatar and Iran to exploit their vast resources could be
disastrous. The Anglo-Dutch company and shareholders are poised to commit
£47bn to buy BG Group, increasing its exposure to LNG in the long term. Shell has
already pulled back on some of its plans for further LNG investments by recently ditching
a new $20bn scheme in Queensland, Australia." |
"After oil prices plummeted, I went on
the record saying I thought they'd be back above $70 per barrel by the end of 2015. The
year isn't over yet, but my prediction isn't looking good. I thought worldwide demand
would go up — and it has. The latest from the International Energy Agency shows
demand is already up about 1.7 million barrels a day. I thought supply from the United
States would go down — and it has. Companies
have been laying down rigs, and U.S. production has dropped by 500,000 barrels a day since
June. So where'd I go wrong? One word: OPEC. Could oil prices really shrink to… $20
per barrel? I thought supply from the Organization of the Petroleum Exporting Countries
— and specifically Saudi Arabia — would also go down. You can't get rich selling
anything for less than it costs to maintain the country. I expected they would at least
maintain, if not cut, production to command a better price. That didn't happen. Rather
than cutting back or holding steady, OPEC drove prices even lower as Saudi Arabia has
increased production by almost a million barrels a day. I erred in underestimating OPEC's determination to keep the flow of oil
under their control. The OPEC cartel is controlled by leaders whose top priority isn't to
make money for stockholders, it's keeping themselves in power. Even knowing that, I didn't
expect to see Saudi Arabia, Qatar, Kuwait and the United Arab Emirates all working to
increase their market share by bringing new production online over the next few years.
They won't be alone going forward. Iran will become an even bigger factor in the next few
years now that the removal of sanctions allows them access to more of the world market.
And Iraq has some of the world's largest reserves. If the country ever settles down, the
Iraqis will have a major say in world prices. When it comes to the price of oil, which
remains in the mid-forties, all of that gets taken into account. What doesn't get taken
into account is that the nations of OPEC have a long-term strategy, America doesn't. And,
on top of all that, we have Russia moving into Syria. That will invariably add a new
dimension to the Middle East energy equation. Even as OPEC loses money, they are growing
their market share. When prices rise, they'll rake in profits while the competition
scrambles to catch up. It's also a geopolitical move. The world depends on oil, and
they've got their hands on the spigot. The United States, however, is taking a short-term
view. Our economy is powered by cheap energy, and $2 gasoline makes a lot of folks happy.
We know it'll hurt when prices go back up — which they will — but the American
public has pretty much made energy a back-burner issue. Things are good today, so we'd
prefer to wait until tomorrow to worry about the future." |
"A company drilling for oil on the Golan
Heights claims to have found “significant amounts” in the plateau.
“We’re talking about a layer 350 meters thick,” Yuval Bartov, chief
geologist of Afek Oil and Gas, a subsidiary of the American company Genie Energy, told
Channel 2. The layer is ten times larger than the average oil find worldwide, Bartov said,
“and that’s why we’re talking about significant amounts. What’s
important is to know that there’s oil in the rock, and this we know.” Three drilling sites on the Golan have uncovered what is
potentially billions of barrels of oil, enough to fulfill the Israeli market’s
270,000-barrel-per-day consumption for a very long time, the report claimed. Exploratory drilling began in December 2014. In recent weeks, Afek
requested permission to drill an additional 10 wells. While it says the oil find is
confirmed, the firm says the quality, more precise measures of quantity and
cost-effectiveness of extracting the oil won’t be known until the extraction is
begun." |
"Energy
is vital for society and the military and NATO continues to consult on and develop its
capacity to contribute to energy security. The changing energy landscape and its security
implications for NATO Allies and partner countries was the focus of the first Energy
Security Strategic Awareness Course held at the NATO School in Oberammergau which
concluded on 2 October....The students attended
lectures on the geopolitics of energy security, maritime security, cyber defence, the role
of the private sector in energy security and other related subjects. They also worked in
syndicates to develop their own solutions to energy-related security challenges. The NATO
Energy Security CoE provided several speakers. The Dean of the NATO School, Colonel
Timothy Dreifke, expressed strong support for the course. “Studying energy security was part of my military education. I felt that the time had come to offer such a course for Allies and
partners. Our commandant, Captain Scott Butler, had long been supportive of such a new
course. I am glad we could make it happen,” he explained. The course is likely
to become an annual event." |
"Russia and Saudi Arabia—the
world’s two biggest oil producers—indicated Friday they weren’t pulling
back from huge crude output levels that have helped send prices
tumbling. Russia said it produced oil in September at
levels not seen since the fall of the Soviet Union, pumping an average of 10.74 million
barrels a day, government data showed on Friday. Oil
production increased 0.4% from August. On the same day, one of the world’s most
influential oil ministers—Saudi Arabia’s Ali al-Naimi—said his country
would continue investing in oil and gas, saying his country remained committed to energy
resource development, according to a Saudi Press Agency report. The world’s largest
exporter has ramped up production above 10 million barrels a day for the past few
months." |
"Iran is inviting foreign investors to
actively develop its energy industry after sanctions are expected to ease in 2016, under a
nuclear deal between Iran and six global powers, deputy Oil Minister Rokneddin Javadi told
Reuters on Thursday. "We welcome all oil companies, including the Americans, that
meet Islamic Republic’s requirements to invest in Iran. We welcome competition among foreign oil companies," Javadi said in
a telephone interview from Tehran.... Iran after the July 14 deal, in which Tehran agreed
to curb its nuclear programme in exchange for an end to economic sanctions that have hit
the country's oil production. Major Western oil companies started withdrawing from OPEC
member Iran after the United States and European Union imposed sanctions on the country in
2012." |
"The Canadian tar sands, or oil sands,
are much more carbon-laden than most other fossil fuels produced in North America, and
their possible outsized impact on the climate is one of the primary reasons the proposed Keystone
XL pipeline, which would carry tar-sands oil to Texas refineries, is so
controversial. Despite long odds as oil prices
continue their dip below $50 per barrel, commercial tar-sands
mining is coming for the first time to the U.S., where an Alberta company called U.S. Oil Sands has begun producing tar sands from
a mine in eastern Utah. Up to 76 billion barrels of recoverable crude oil may be locked up
in deposits of thick claylike and hydrocarbon-laced sand called bitumen beneath the
state’s red rock canyon country, according to University of Utah estimates. (The Canadian oil industry refers to the sticky bitumen as “oil
sands,” but in the U.S., the federal government uses
“tar sands,” a
name the Canadian industry considers pejorative
because it is used by its critics.) Oil price volatility makes tar-sands development in
Utah — the only state in
the U.S. with large deposits of it — uncertain. But if successful, it will be a
historic moment in the history of oil and gas production in the U.S. “There have been
numerous attempts to develop the oil-sands resource in Uintah County, Utah, over the past
eight decades,” Jennifer
Spinti, a research associate professor for the Institute for Clean and Secure Energy
at the University of Utah, said. “While the oil sands have been exploited
commercially for use as a paving material, no company has ever produced bitumen at a
commercial scale.” If the industry does gain a foothold in the U.S., the climate
implications could be significant." |
"Shell’s
decision to put its Arctic
oil exploration plans in deep freeze will have several knock-on effects for global oil
exploration, environmental protests and the future of the company itself. The broader
Arctic retreat by energy firms once bullish about polar prospects has now left just two
working operations in the region: BP’s Prudhoe Bay field, which feeds the
Trans-Alaskan pipeline, and Gazprom’s largely symbolic Prirazlomnoye platform in the
Pechora Sea. Publicly, Shell
blames disappointing exploratory results, high operating costs and strict US
environmental regulations for its decision to quit Alaska’s Berger field after about
$7bn (£4.6bn) of investment. But company sources also accept that Arctic oil polarised
debate in a way that damaged the firm. “We were acutely aware of the reputational
element to this programme,” one said." |
"One
hundred and fifty miles from the Alaskan coast lies what must be the most expensive oil
well ever drilled. Shell’s
decision to abandon the Burger J prospect, along with its entire Arctic exploration
campaign, marks an outcome that many at the oil major must have dreaded since it bought
the leases in 2008. That is not because of the cost — enormous though it is — of
setting up remote platforms and drilling into rock that lies beneath 140ft of water. Shell is reckoned to have spent about $7bn on
the exploration effort; some estimates put the figure even higher. But its balance sheet
is strong enough to absorb the loss. Nor will the
public ill-will generated by years of exploration in pristine Arctic waters last for ever.
Indeed, for some senior executives at Shell, the prospect of success in the Arctic was
more worrying than the possibility of failure. Building the permanent facilities needed
for actual production would have been far more contentious than the limited (if sometimes
hapless) exploration work. Among the people on record as opposing Arctic drilling is
Hillary Clinton, the frontrunner for the Democratic nomination for president. That is a
battle that Shell will no longer have to fight. More worrying, from Shell’s point of
view, is the prospect of a declining reserves base. In common with several of the other
oil majors, it is pumping oil faster than it can book new reserves of bankable assets.
This was the reason for pushing on in
the Arctic against public criticism and deteriorating economic prospects for so long.
If, as some of the company’s executives believed, the Chukchi Sea blocks held about
35bn barrels of oil, Shell’s reserve base would have been secured and much effort
would have been devoted to winning hearts and minds and pushing down costs. As it stands,
the reserve base will continue to decline. Shell’s $70bn purchase
of BG Group, if completed, will bring access to some identified resources — for
instance off the coast of Brazil — but the cost of development is high and success is
very uncertain. In the long run, this is little short
of an existential challenge. Can the existing reserves base be replaced with resources
that can be developed commercially? Or is a period of corporate decline inevitable? For
the past three years Shell has failed to find sufficient resources to replace production
despite heavy exploration expenditure. In 2014 it replaced only 26 per cent of its oil and
gas production. Over the past three years the figure is just 67 per cent. The problem is
not a shortage of oil and gas. The problem is access. Over the past decade, according to
the BP Statistical Review, global oil
reserves rose 24 per cent, despite 10 years of growing production, and gas reserves
climbed 20 per cent. But the majors do not have access to much of it. Saudi Arabia and Venezuela are closed to foreign ownership. Much of Iraq
is a war zone and politics limits access in areas such as Kurdistan even for the boldest
independents. Libya is in a state of civil war. Iran is walled off by sanctions, which the
nuclear deal only partially removes. Russia is also subject to sanctions. There are
significant volumes of oil and gas to be developed from shale rocks in the US and
elsewhere but the economics do not look good at $50 a barrel." |
"The
man tasked with saving the UK’s North Sea oil industry says it will take two years or
more to recover from its problems and that Britain should start preparing for life without
oil. Last year Sir Ian Wood wrote
a report, commissioned by the government, into how to maximise the North Sea’s
oil and gas, which has been a big driver of the economy since the 1970s but has been in
long-term decline since the late 1990s. In an interview with the Financial Times, Sir Ian
Wood warned: “Oil at $35 to $55 [per barrel] is the likely scenario into 2017, and I
think the best guess right now for a recovery in the North Sea is 2017-18.” The North
Sea today produces about 1.5m barrels of oil per day, compared with 4.5m at its peak. Its
problems have increased significantly over the past year, however, as the price of Brent
crude has dropped from $115 a barrel last June to about $50. The Office for Budget Responsibility, the UK’s independent
forecaster, has told ministers to expect
just £2bn from North Sea tax revenues between 2020 and 2040. Officials believe any
revenue generated during that period will be all but cancelled out by the costs of
decommissioning old platforms. The government has become so concerned about the entire
future of the industry that it has put in place a rescue plan involving tax breaks and
greater co-operation between operators. But Sir Ian, who devised that plan, believes the
pain is far from over. North Sea divisions of multinational producers would find it
increasingly difficult to secure funds from head office, he warned, not least because it
was cheaper to drill for oil in every other part of the world. “It is going to be a
very tough budgeting round for the [multinational] operators. I think there will be
significant reductions in the level of budget made available [to their UK branches].”
Since the beginning of 2014, about 5,500 jobs have been lost in the industry, while
exploration has slowed significantly. Executives say permanent damage could be done if
companies fail to maintain capital spending, stop exploring for new oil and start
decommissioning early. Sir Ian echoed those warnings: “The industry will lose jobs,
whole teams, plants and equipment. But we must be really careful we don’t lose
infrastructure, as the damage will then be permanent.”" |
"Heirs to the Rockefeller family, which made its vast fortune from
oil, are to sell investments in fossil fuels and reinvest in clean energy, reports say. The Rockefeller
Brothers Fund is joining a coalition of philanthropists pledging to rid themselves of
more than $50bn (£31bn) in fossil fuel assets. The announcement was made on Monday, a day
before the UN climate change summit opens on Tuesday. Some 650 individuals and 180
institutions have joined the coalition. It is part of a growing global initiative called Global Divest-Invest, which began on university
campuses several years ago, the New York Times reports. Pledges from pension funds,
religious groups and big universities have reportedly doubled since the start of
2014." |
"A
wave of bankruptcies and closures is sweeping across the oil patch, with dozens of
hydraulic-fracturing companies at risk, industry experts say. Most of the companies that
help oil-and-gas explorers drill and frack wells are small, privately owned and just a few
years old. They are part of a flood of new entrants in the energy business—one that
is drying up as oil prices languish below $50 a barrel. One of the latest casualties is Pro-Stim Services. Launched in 2011 with
backing from Turnbridge Capital LLC, a private-equity firm, the company did work for
oil-and-gas producers eager to coax more fuel out of the ground in places like Texas and
Louisiana. “The Haynesville Shale was blowing and going at that time,” said
Bubba Brooks, who founded the company in Longview, Texas, after working in the oil
industry for close to 20 years. Pro-Stim survived its early years despite stiff competition. Even though a new
competitor seemed to enter the market every week, the price of oil was strong—and
rising—and demand for fracking services was high. But U.S. crude prices plunged by
50% between last summer and the start of 2015, and Pro-Stim shut down earlier this year.
Several other companies are in a similar fix. At least five frackers have filed for
bankruptcy, stopped fracking, or shut their doors altogether, according to consulting firm
IHS Energy. Other analysts say that number may be higher, and they expect many more
companies to follow suit or consolidate in a merger frenzy. Energy analysts at Wells Fargo & Co. say as much as
half of the available fracking capacity in the U.S. is sitting idle. Traditionally,
oil-field service companies that helped drill and complete wells were massive
conglomerates—such as Schlumberger Ltd. and Halliburton Co. —with operations all
over the world. Schlumberger has dual headquarters in Paris and Houston, and Halliburton
is based in both Houston and Dubai. They, too, are struggling with low oil prices and,
along with their peers, have laid off 55,000 people
around the globe so far during the current downturn.
To cope, big service companies are also slashing their prices, in some cases so low that
it is driving out smaller players, analysts and industry experts say. Small startups began
to challenge the Schlumbergers and Halliburtons of the world in 2008, as American
wildcatters embraced fracking, the process of blasting a slurry of water, sand and
chemicals down a well to break apart densely packed rock, unlocking trapped oil and
natural gas. The high-intensity technique has helped push U.S. oil production to its
highest level in nearly half a century. The drilling boom, which began in the wake of the
global economic recession and later picked up steam, offered the dozens of new outfits
plenty of fracking work from Texas to North Dakota. “There was that first initial
overbuild; everybody kind of went crazy. Mom-and-pop shops were popping up,” said
Caldwell Bailey, a consultant at IHS. There are nearly 50 firms in North America that
frack wells, he said. Even when oil prices peaked at more than $100 a barrel last summer,
the keen competition among small fracking companies meant many of them were battling to
protect their profit margins. The market has gone from cutthroat to nearly nonexistent in
some oil-and-gas fields. So far this year, the amount
of fracking work has fallen about 40% from a year earlier, and the price of a frack job
has fallen 35%, according to Spears & Associates, a consulting firm for oil-service
companies." |
"French
energy group Total announced Wednesday that
is was slashing capital spending, delaying the start date of several projects and upping
its cost-cutting targets in a response to dramatically lower global oil prices. In the group's Strategy and Outlook presentation Wednesday, Total's Chief
Executive Patrick Pouyanne told investors that the group was reducing the amount it spends
on oil and gas projects from a peak of $28 billion in 2013 to $23-24 billion this year and
further to $20-21 billion in 2016. The group saw a "sustainable level" of capex
of $17-19 billion from 2017 onwards, according to the presentation. Total was one of the
first oil majors to announce a sharp cost-cutting regime in 2014, reacting quicker than
others to the sharp decline in global oil prices on the back of a glut in supply and lack
of demand. From a peak price of $114 a barrel in June 2014, now, a barrel of benchmark
Brent crude costs $49.66." |
"Across
the [oil] industry, the scale of the cost-cutting challenge is huge. Wood Mackenzie, the energy consultancy, says $1.5tn of
future spending is uneconomic with oil at under $50 a barrel and unlikely to go ahead. As such,
industry operators are trying to drive down the cost of new projects by 20-30 per
cent....In the North Sea — an ageing,
high-cost oil region hit hard by the market slide — some big efficiency savings have
been identified. Shift patterns are being changed to cut costs. A move to a “three
weeks on, three weeks off” rota for offshore workers will require fewer crews but see
staff spending longer stints on platforms. Companies are also trying to cut the time taken
to issue “permits to work”. Up to 100 of these permits are needed every day to
ensure maintenance work on platforms is completed quickly but workers can wait hours for
them. Other efficiency improvements include ensuring that all repairs to a piece of
machinery are done at the same time, to minimise the time it is out of action." |
"U.S. drillers have cut the rigs in
operation three straight weeks as cheap oil is causing them to hold up production plans,
triggering an increase in prices on Monday..... "The
current rig count is pointing to U.S. production declining sequentially between 2Q15 and
4Q15 by 255,000 barrels per day at the observed path of the U.S. horizontal and vertical
rig count across the Permian, Eagle Ford, Bakken and Niobrara shale plays," Goldman
Sachs said. "The implied year-on-year growth by
4Q15 of 120,000 barrels per day is lower than the prior week's estimate of 125,000 barrels
per day," it said. Analysts said low prices would have a bigger impact in the longer
term as producers struggle to cut enough costs. "While operators are seeking an
average cost reduction of 20-30 percent on projects, supply chain savings through
squeezing the service sector will only achieve around 10-15 percent on average,"
energy consultancy Wood Mackenzie said. "$1.5
trillion of uncommitted spend on new conventional projects and North American
unconventional oil is uneconomic at $50 a barrel," Woodmac added. Despite such a cut to U.S. spending plans, analysts said prices were
expected to remain at low levels for some time to come as other producers, especially in
the Middle East and Russia, keep pumping near record levels." |
"Plunging
oil prices have rendered more than a trillion dollars of future spending on energy
projects uneconomic, according to a study that suggests that the impact on industry
operators is worsening. A report published Monday says $1.5tn of potential investment
globally — including in
North America’s shale-producing heartlands — is “out of the money”
at current oil prices close to $50 a barrel and unlikely to go ahead. Industry operators expect capital spending on new projects to decline by
between 20 and 30 per cent on average in the wake of the price slide, says Wood Mackenzie, the energy consultancy. It calculates that $220bn of
investment has been cut so far, about $20bn more than it estimated two months ago and much
of it the result of projects being deferred. Such a decline in spending means that the
price crash since last summer — the result of weaker Chinese demand, record US
production and Saudi Arabia’s
decision not to cut output — could resemble the savage downturn of the mid-1980s.
After a brief recovery in the spring, oil prices spiralled lower in July. Brent crude
— the global benchmark — fell to its lowest point in more than six years during
August’s wider market turmoil. It now stands at $47.47 a barrel, down from $115 in
June last year. Just half a dozen new projects will be approved this year, says the Wood
Mac report, and 10 or 11 in 2016, compared with an annual average of 50 to 60. Onshore US
producers, including the “fracking” industry, which has unlocked previously
hard-to-access reserves, have reacted fastest to the market collapse. “Deep
cuts” in North America account for more than half of a 45 per cent fall in capital
spending across the Americas.... a prolonged period of low oil prices over a number of
years is likely to be needed to bring about more profound changes to industry costs, the
report argues. Despite comparisons with the 1980s, Wood Mac believes that such a deeper,
structural shift is unlikely. “In our view oil
prices will rise sharply from 2017, and there is a real risk that cost inflation pressures
will then return,” it says." |
"The
number of Britons with asthma could almost double by 2050 because the air inside homes is
becoming more polluted as they become more energy-efficient, a new report warns. The trend towards airtight houses could also worsen allergies as well as
breathing problems, and even exacerbate lung cancer and heart problems, according to a
leading expert in indoor air quality. Airborne pollutants created by cooking, cleaning and
using aerosols such as hairsprays will increasingly stay indoors and affect people’s
health as homes are made ever more leak-proof to help meet carbon reduction targets, a
report by Professor Hazim Awbi claims. Small amounts of chemicals found in detergents can
stay on the fibres of washed clothes, be emitted into the air and combine with particulate
matter from logs burned in a real fire, for example." |
"The
retrenchment in drilling for U.S. oil is threatening to leave a different market short:
natural gas. “The impacts of oil rig counts extend beyond oil: the outlook for U.S.
natural gas is critically dependent on the outcome of this balancing act in U.S. oil
rigs,” Anthony Yuen, a strategist at Citigroup Inc. in New York, said in a report to
clients Wednesday. “If the oil market remains oversupplied and oil-rig counts fall,
the decline in associated gas production would leave the market short of gas.” Associated gas is the gas that comes out of oil wells along with the
crude. Supplies of this byproduct from fields
including the Bakken formation in North Dakota and the Eagle Ford in Texas may fall by
about 1 billion cubic feet a day next year as drillers idle rigs in response to the
collapse in oil prices, Yuen said. That’s about 7 percent of U.S.
residential gas demand. The U.S. Energy Information Administration has already forecast
that shale gas production will drop in October for the fourth straight month, a record
streak of declines. U.S. oil has lost half its value
in the past year amid a worldwide glut of crude. Drillers have responded by sidelining
almost 60 percent of the country’s oil rigs since Oct. 10." |
"A
new report published by Oil & Gas UK has projected that the North Sea industry will
need a £2bn reduction in operating costs of existing assets by the end of 2016. The new
economic report says that the oil and gas industry industry is making efforts to improve
international competitiveness in a challenging business environment. The report said that the offshore sector is facing challenges such as a
drop in commodity prices due to reduced production, and the increasing costs. Oil &
Gas UK economic director Mike Tholen said: "Strong investment in asset integrity over
the last four years, coupled with measures being taken to improve the efficiency of assets
offshore, have resulted in better output from many existing fields and we expect the rate
of decline in production from those fields to slow significantly over the next two years.
"Taken together with the start-up of the sizeable Golden Eagle field, the
government's provisional data show that production in the first half of 2015 was 3% higher
than the same period in 2014, an indication that over this year, we are likely to see
annual production increase." The improvement will be balanced to some extent by
operating expenditure of £1.1bn relating to new fields brought on stream in the
intervening period. According to the report, the
positive production outlook is expected to help reduce the average operating cost per
barrel of oil equivalent (boe) for across all fields. The cost will be reduced from an
estimated £17.80 in 2014 to £17 this year and by a further £2-£3/boe to around £15boe
by the end of next year. Oil & Gas UK chief
executive Deirdre Michie said: "Last year, more
was spent than was earned from production, a
situation which has been exacerbated by the continued fall in commodity prices. "This
is not sustainable and investors are hard-pressed to commit investment here because of
cash constraints. "Exploration for new resources
has fallen to its lowest level since the 1970s and with so few new projects gaining
approval, capital investment is expected to drop from £14.8bn (2014) by £2bn-£4bn in
each of the next three years." Michie added
that employment generation in the sector has dropped by 15% since the start of 2014 to
375,000 jobs. Michie said: "Over 43 billion boe have been produced to date from the
UKCS and almost half again remains to be extracted...." |
"Russia
will not cut oil production, Arkady Dvorkovich, Deputy Prime Minister of the Russian
Federation, told CNBC Friday. "For Russia,
given the structure of production, it's very difficult to cut supply artificially,"
he said. "If oil prices will be low enough for a long period of time, supply will go
down in (a) natural way, and I think this (is the) most efficient stabilizer for the
market." Russia is a major oil producer and is highly dependent on the proceeds from
the sale of oil, the prices of which have roughly halved in value since 2014 as a result
of oversupply in global oil markets and concerns about weakening demand. Moscow meanwhile
has been keen to keep its production high to defend its market share. Dvorkovich said that
Russia was used to fluctuating oil prices. "Certainly, we are better off with prices
more like $80, $90 per barrel, but even with $50 and $60 we can optimize, rationalize
budget expenditure and other spending to live normally with those levels." |
"China's economic slowdown has finally
left its imprint on global stock markets. But the impact has been discernible in the oil
market for many months and it has gone further in the last few days. The reason: China is the world's biggest importer of crude oil. It took top spot in April this year and even before that was
behind only the United Sates. Slower economic growth in China means less demand for oil
than there would otherwise have been. Of course
there are other factors behind the oil price collapse of the last year, some of them
leading to abundant supplies. The rise of shale oil in the United States and Saudi
Arabia's unwillingness to respond by curbing its own output have also put pressure on the
oil price. But demand is an important element. .... Cheaper oil is a great boon for
struggling economies that have to import the stuff. There are plenty of them around,
notably the eurozone. But it is an increasingly serious problem, certainly economically
and perhaps politically too, for oil-exporting countries. Oil accounts for a very large
share of government revenue in many countries. The IMF says it's more than half for many oil
exporters and as high as 80-90% in some, including Iraq, Qatar, Oman and Equatorial
Guinea. The IMF has also estimated the oil price it would
take for some countries in the Middle East and North Africa (and a couple in the former
Soviet Union) to balance their government budgets. For
all of them that "breakeven" price is higher than today's level. For several,
including Saudi Arabia and Iran it would take a lot more than double what it is now to
balance the budget. For Libya it is more than $200 a barrel, higher than the oil price has
ever been. Economists at Deutsche Bank have done a similar analysis
and extended it to a few more countries. They suggest that Venezuela and Nigeria would
also need an oil price of about $120 a barrel to balance the books. The IMF is forecasting
a deficit in the Saudi government finances of 14% of national income this year. Saudi
Arabia has reserves it can draw on, savings built up in years of higher oil prices. The
same is true of some other oil producers, but such a low oil price would be a problem even
for these countries if it were to persist for several years. The state has had a central
role in the economic life of many countries across the Middle East and North Africa. It
has been called a social contract. The World Bank said: "The old development model
- or social contract - where the state provided free health and education, subsidized food
and fuel, and jobs in the public sector, has reached its limits." This social
contract is not confined to the oil producers, though an earlier World Bank report said that oil is
important to other countries in the region as migrant workers get jobs in the sector and
send funds home. The limits on this social contract were a key factor behind the political
turmoil known as the Arab Spring. And many of the big oil exporters in the region are
relatively authoritarian political regimes. Rising living standards and public services
funded by oil revenue play an important part in the political balance in countries such as
Saudi Arabia." |
"America’s oil boom is faltering,
and with US crude oil prices hitting lows unseen since 2009 this week, experts believe the
fall may continue taking thousands of jobs with it. Consumers may cheer the lower prices
at the pump, but jobs are being lost in the energy industry across the world. In June, the Energy Information Administration said the US
petroleum industry lost about 6.5% of its jobs from October to April, or about 35,000 of
its 538,000 workers, citing US Bureau of Labor Statistics data. On Wednesday, Royal Dutch
Shell said it would eliminate 6,500 jobs worldwide as the company tries to reduce costs
because of the lower oil prices. Declines in oil and natural gas extraction and support
employment tend to lag declines in crude oil prices, so given the recent return to lower
prices, more job cuts could be on the way. Global
stock markets have been rattled by the fall and continuing woes in China. The Dow Jones
Industrial average hit a low for 2015 on Thursday and is expected to come under renewed
pressure on Friday. “Globally there’s
probably been approaching a quarter-million layoffs from the oil industry. And hundreds
and billions in cancelled projects,” said Walter Zimmermann Jr, vice president and
chief technical analyst at United-ICAP. ... The boom
that started in 2008 when oil prices reached nearly $150 a barrel – high enough to
make new fracking technology affordable. All that fracking oil has contributed to a glut
and the inevitable boom and bust cycle has come full circle again. But the price is also
being hit by the jitters affecting financial markets overall, such as the stronger US
dollar, general weakness in commodity prices, fears about China’s economy and
uncertainty about the Federal Reserve’s possible interest-rate hike." |
"Non-Opec
oil production is set to plunge next year by the most in 24 years as Saudi Arabia’s
strategy of shielding its market share squeezes drillers including producers in the US
shale industry, according to the International Energy Agency (IEA). Weaker oil prices are
set to trigger a fall of 500,000 barrels per day in 2015 in non-Opec production, the IEA said in a monthly report which suggested a Saudi push to knock
out US shale gas production appeared to be working. About four fifths of that total will
come from US shale, said the report from the IEA, Paris-based..." |
"Oilfield services company Baker Hughes
Inc. said Friday the number of rigs exploring for oil and natural gas in the U.S. this
week declined by 16 to 848. But Utah was one of eight states in which the numbers were
unchanged. Baker Hughes said 652 rigs were seeking
oil and 196 explored for natural gas. A year ago, with oil prices about double the prices
now, 1,931 rigs were active. Among major oil- and
gas-producing states, only Alaska posted an increase — up one." |
"The
U.S. oil boom could take a big hit next year in the largest plunge in global crude
production since 1992, as OPEC’s strategy of fighting for a bigger cut of the global
market seems to be working, the International Energy Agency says. The shale plays in Texas
and North Dakota at the center of the nation’s energy supply surge over the last
seven years could lose 400,000 barrels a day in 2016 after the latest collapse in oil
prices. That’s because oil is trading below the break-even price for most shale
plays, the IEA said. “In the U.S., the recovery
in drilling activity and output expected for next year is starting to look elusive,”
the IEA said. Oil futures contracts for 2016 are around $10 a barrel lower than they were
in July. The IEA expects drilling and completion activity in the U.S. to decline by 20
percent to 70 percent next year. Outside of the
Organization of Petroleum Exporting Countries, crude production in the United States,
Russia, the North Sea near the United Kingdom and other regions could fall by 500,000
barrels a day, the biggest decline in more than two decades, and U.S. output “is
likely to bear the brunt” of that, even after putting out 1.7 million additional
barrels of oil last year, the IEA said. “On the face of it, the Saudi-led OPEC
strategy to defend market share regardless of price appears to be having the intended
effect of driving out costly, ‘inefficient’ production,” the Paris-based
group said in its monthly Oil Market Report on Friday....Oil
production in the U.S. shale plays has for months been considered far more resilient to
the oil-market crash than investors and market participants had expected. Technological
breakthroughs like multi-well drilling on platforms called pads have enabled more
efficient drilling since 2013, making the nation’s number of rigs a less important
factor in its oil production. And further advances have been made this year to make
drilling more efficient and to make oil wells more fertile. But the IEA says even these
advances can’t withstand the pressure of the latest crude crash..... “Oil’s price collapse is closing down high-cost production from
Eagle Ford in Texas to Russia and the North Sea,” the group said. “Marginal
fields are being shut or are at risk as companies seek to stem losses from high operating
costs. Spending curbs are also accelerating decline
rates.” A Barclays survey showed this week oil producers expect to cut capital
spending by 10 percent to 15 percent in North America, on top of their 35 percent cut in
spending this year." |
"The
UK’s oil and gas industry expects to continue shedding jobs and heavily cutting its
costs despite reducing its workforce by more than 65,000 in the last 20 months. The annual economic report for Oil & Gas UK disclosed on
Wednesday that the total number of people employed in the sector had fallen from 440,000
to 375,000 since the beginning of 2014, largely due to the crash in world oil prices. Deirdrie Michie, the industry body’s chief executive, said more jobs
would go and cuts in the sector’s cost base would continue before the industry was
lean enough to weather the crisis, despite a recent rise in production of 3%." |
"Britain's North Sea oil and gas sector has shed more than 5,000
jobs since late last year, the country's new Oil and Gas Authority said on Monday, putting
an official figure on job losses resulting from a year-long decline in oil prices. North
Sea oil companies have been particularly hard hit by the near 55 percent decline in Brent
crude prices since June 2014, as they were already facing some of the industry's
highest operating costs in one of the world's most mature basins. "Regrettably, this has led to the loss of around 5,500 jobs since
late 2014," Andy Samuel, chief executive of the OGA, said in a report summarising the
newly-created body's first months. North Sea operators, including Shell (RDSa.L), BP (BP.L), Chevron (CVX.N) and
ConocoPhillips (COP.N),
have all announced staff cuts, a trend that has raised concerns about an emerging skills
gap. The OGA, established as an executive body five months ago, is tasked with helping
North Sea operators squeeze as much oil and gas out of the basin as possible. The oil and
gas sector employs around 375,000 people and remains an important source of tax revenue,
despite those receipts dropping. UK oil production has fallen to the lowest since output
started in the mid-1970s as old fields run out of resources. Two operators recently
announced their intention to shut fields early, making the OGA's mission more pressing
than ever. The body said it had helped mediate commercial discussions between companies
involved in the running of Theddlethorpe gas terminal, and the Sullom Voe terminal on the
Shetland Islands, key facilities in the North Sea but which are expensive to
operate." |
"A
leading British maker of oilrigs is set to make almost half its workers redundant,
underlining the challenges facing the industry in the North Sea. OGN, which has operations on Tyneside and in Suffolk, received a hammer
blow last month when it failed to reach the shortlist to build a platform for Chevron, the
American giant." |
"The
plunge in energy prices has forced companies drilling for oil and natural gas in the U.S.
to cut spending substantially and lay off thousands of workers in Texas, North Dakota and
other states that depend on the industry. And those companies will likely pull back even
more if the banks they rely on for loans tighten their purse strings in anticipation of a
slow recovery for oil prices. A new report by Moody's says there are more concerns than
ever about the impact of low oil prices on U.S. banks that are deeply involved in oil and
gas lending. The ratings agency did the analysis in a period when oil prices fell below
$40 a barrel for the first time since 2009. "This
price decline, along with our expectations that oil prices will remain depressed until at
least the end of 2016, is credit negative for U.S. banks with significant energy-lending
concentrations because it will result in higher loan-loss provisions in coming
quarters," the Moody's report said. Those provisions require banks to set aside money
to cover potential losses on loans. "We don't see imminent significant losses
coming," Joseph Pucella, a vice president and senior credit officer at Moody's, said
of the agency's review of seven institutions with the highest concentration of energy
loans among the banks that it rates. On average, energy portfolios account for close to
75% of the seven banks' capital, much more than is the case for such lending at U.S. banks
as a whole, according to Moody's. The banks cited – BOK Financial, Hancock Holding
Company, Cullen/Frost Bankers, Texas Capital Bancshares, Zions Bancorporation, Comerica
and BBVA Compass Bancshares – have stable ratings from Moody's, including some with
relatively high ratings. "The banks do have strong capital positions, if you look at
their metrics," Pucella said in an interview. "But to the extent that we see oil
prices staying depressed over a longer period, that ultimately puts more pressure on the
energy companies that these banks lend to, and so it could mean higher losses" for
the banks. As far as oil prices are concerned, Moody's, like other analysts, now expects
them to stay lower for a longer time than previously anticipated, and well off from a peak
of $115 a barrel as recently as June 2014. In its latest forecast for oil, issued in
August, Moody's said it expects prices to rise "only gradually" in 2016 and to
average $52 a barrel for the year. Previously, the agency forecast oil prices increasing
slowly to $60 in 2016. Among the reasons for the more bearish outlook for oil prices are a
large buildup in inventories and the potential for Iran to increase oil exports starting
in 2016, thanks to the nuclear deal between Tehran and the U.S. and other world powers.
"The longer the prices stay low, the greater the risks to the banks," and the
less likely they will be to lend to companies drilling for oil and gas, Pucella said. At
the same time, Moody's makes clear that lower oil prices are by and large good for most
banks, whose concentration of energy loans is much less than that of the regional banks
the agency cited in its report." |
"Oil-sands
companies are poised to crank up billions’ worth of new production just when the
market doesn’t need it, deepening a supply glut even as profit margins in the
high-cost sector shrivel. Major producers, such as Suncor Energy Inc., ConocoPhillips Co.,
Husky Energy Inc. and others, are pressing ahead with expansions that could add roughly
800,000 barrels per day of fresh capacity in northern Alberta by 2018, according to new
data compiled by ARC Financial Corp. About half of the total will start up this year, in
the midst of a deep slump in energy markets that has prompted thousands of layoffs and
rendered some oil-sands production uneconomic. The timing highlights a stark dilemma for
companies that sank billions into megaprojects when oil prices were higher, and now face
the prospect of a lengthy downturn: Should they keep pumping at all? “At these
prices, you’re not even getting a return,” said Jackie Forrest, vice-president
at ARC, a Calgary-based private-equity firm. “You’re just covering your
operating costs. You’re not even able to pay off a big, upfront capital investment
that you made.” U.S.-based ConocoPhillips last
week started production from the second phase of its Surmont oil sands project. The joint
venture with Total SA of France started construction in 2010 and is expected to yield
118,000 barrels per day by 2017. Also last week, Husky said it took initial steps to boost
output at its multibillion-dollar Sunrise joint venture with BP PLC, saying production
would climb to 60,000 barrels daily by year-end 2016. It makes sense to go ahead with such
projects even as oil prices languish below $50 (U.S.) a barrel, Ms. Forrest said, in part
because much of the big capital is spent up front. “If you don’t do anything
with this asset, you still spent $2-billion,” she said. It’s a sharp contrast with U.S. shale producers, who have parked
drilling rigs by the hundreds to cope with the collapse in oil prices. Production in
once-booming regions in Texas has begun to moderate, falling 1.9 per cent between May and
June, the U.S. Energy Information Administration reported last week. Oil-sands production,
by contrast, is forecast to keep climbing until the end of the decade, even as low prices
crimp margins. The break-even cost for steam-driven plants, including operating costs,
maintenance and sustaining capital, varies from $47 a barrel
up to $65 a barrel, depending on the producer, according to
ITG Investment Research. U.S. crude on Friday closed
at $46.05 per barrel. Unlike shale drillers, however, oil-sands companies cannot easily
cease production to cope with low prices. Nor are they likely to pull back on projects
already under development, analysts say. Instead, producers have focused on slashing
costs, betting that prices will rise enough over time to justify today’s
multibillion-dollar investments." |
"US shale producers reported a
cash outflow of more than $30bn in the first half of the year, in a sign of the challenges
facing the US’s once-booming industry as the slump in oil prices begins to take
effect. The shortfall points to a rise in bankruptcies and restructurings in the US shale oil industry, which has expanded
rapidly in the past seven years but has never covered its capital expenditure from its
cash flow. Capital spending by listed US independent oil and gas companies exceeded their
cash from operations by about $32bn in the six months to June, approaching the deficit of
$37.7bn reported for the whole of 2014, according to data from Factset, an information
service. US oil production fell in May and June, according to the US Energy Information
Administration, and some analysts expect it to continue falling as financial constraints
limit companies’ ability to drill and complete new wells. Companies have sold shares and assets and borrowed cash to increase
production and add to their reserves. The aggregate net debt of US oil and gas production
companies more than doubled from $81bn at the end of 2010 to $169bn by this June,
according to Factset. Terry Marshall of Moody’s, the rating agency, said: “The
capital markets have been so strong and so open for these companies that a lot of them
were able to raise a lot of debt.” Capital markets have remained open for US oil and
gas companies despite the crude price more than halving
in the past year. However, there are now signs that the flow of capital is slowing. US
exploration and production companies sold $10.8bn of shares in the first quarter of the
year, but that dropped to $3.7bn in the second quarter and under $1bn in July and August,
according to Dealogic. Similarly, those companies were selling an average of $6.5bn worth
of bonds every month in the first half of the year, but the total for July and August was
just $1.7bn. The next hurdle facing many US oil companies is the resetting of their
borrowing base: the valuation of their oil and gas reserves that banks use to determine
how much they will lend. Borrowing bases are generally set twice a year, and the new
levels, which will typically take effect from October 1, will reflect significantly lower
expectations for oil prices than the round agreed in the spring. Edward Morse, global head
of commodities research at Citigroup, said there would have to be a shake-up in the US
shale oil industry to separate the good companies from the bad. “Just as it drove the
industry to spectacular growth, the financial sector is going to drive the industry to
consolidate and contract,” he said. US shale oil
producers have reported steep improvements in the productivity of the rigs they use and
the wells they drill. In the Eagle Ford shale of south Texas, the volume of oil produced
from new wells for every rig running has risen by 42 per cent in the past year, from 556
barrels per rig per day to 792, according to the EIA. However, the number of rigs drilling
for oil in the US has fallen 59 per cent from its peak last October, and that now appears
to be having an effect on the country’s oil output. Virendra Chauhan, of consultancy Energy Aspects, said he expected
fourth-quarter oil production in the US to be running at a lower rate than in the same
period last year." |
"Power firms expect new Energy Secretary Amber Rudd to take account
of changes in technology that will see the need for fewer power stations as households cut
energy use. Rudd, who cut subsidies for wind and solar power after both grew faster than
expected, is due to outline her plans for the sector later this autumn. Energy sources say
she will focus on how technology could transform the industry. ‘The changes we see
coming at an extraordinary pace will result in central power generating capacity becoming
redundant. It will mean fewer of everything including fewer big power stations,’
said a high-ranking energy source, speaking after a further delay was announced to the
building of a new nuclear reactor at Hinkley Point in Somerset. ‘It’s akin to developments in computing, when the old mainframe
computers were made redundant by the advent of hundreds of smaller computers, which proved
far more reliable and much, much cheaper.’ Much more electricity could be
generated by smaller power stations, including solar ones. Lower demand at peak times is
also expected as a result of the ‘internet of things’ ,where appliances can be
switched off and on at suitable times. The final
element is greater progress on energy storage as firms such as Tesla and GE develop
batteries capable of storing a home’s energy needs. Stephen Lovegrove, Permanent Secretary to the Department of Energy, told
Parliament: ‘One of the things we’ve recently learnt is that technology across
the energy system moves much more quickly than we thought.’" |
"The low crude price is putting US
banks under pressure from regulators to move quickly in classifying oil and gas loans as
troubled assets when borrowers slide into difficulty, says a top financier. Bill White,
chairman of the Houston office of investment bank Lazard and a former US Deputy Secretary
of Energy, highlighted the trend and told the Financial Times it was worrying because it
could cut off the prospect of loan extensions and force fire sales of assets. His comments point to tension between regulators that want lenders to
take a conservative view of crude prices — which hit their lowest levels since 2009
in the past week — and bankers hoping for a partial recovery. Mr White said that
because no regulator wanted to take the blame for a bank failure, the Office of the
Comptroller of the Currency, which supervises national banks, was pushing lenders to act
expeditiously in moving loans at risk of or in default to their troubled asset or
“workout” groups. “What worries me is when things are moved too quickly
into the workout,” he said. “This is going to happen and it’s not
particularly good news.” Once loans are in the hands of troubled asset specialists,
sustaining the borrower takes a back seat to the short-term goal of recovering as many
cents as possible on the loan dollar, he said. The US
oil boom of the past six years has been fuelled by a surge in borrowing by small and
midsized companies..... A prolonged slump in the crude price would pose a risk to banks
with a high proportion of loans to oil and gas companies, including BOK Financial,
Hancock Holding, Comerica, Texas Capital Bancshares and Cullen/Frost Bankers, according to
credit rating agency Moody’s.... Even when oil was at $100 per barrel, the shale industry was not
covering its capital spending from its operating cash flows. The plunge in oil prices over the past year is causing severe financial
difficulties for the companies that borrowed heavily and have less productive and
higher-cost assets..... Texas, the US’s biggest oil-producing state, suffered a wave
of bank failures in the 1980s after an oil boom turned into a bust. It is common for
periods of financial stress to heighten tensions between banks and their regulators. Extra
pressure is emerging from an annual regulatory review under way of syndicated loans of
more than $20m. The review will result in a public report on whether banks have a
realistic view on the health of their loan portfolios. Many
oil companies active in shale-producing zones have been slashing jobs and expenses to
offset a fall in cash flow because of the low crude price. Yields on bonds issued by US
oil and gas companies have risen sharply as the oil price has fallen, a sign of growing
fears of default." |
"... there
has been a phenomenal increase in productivity per rig. For example, the EIA estimates
that operating a rig for a month in the Bakken would have led to a gross production
increase of 388 barrels/day two years ago but can add 692 barrels today. A key factor in
the productivity gains is that companies are finding ways to complete wells faster, so
that more wells can be drilled each month from the same number of rigs. For example, The
Barrel reports that Occidental Petroleum “has seen a 40% decrease in spud to rig
release time in the Wolfcamp area of its Permian holdings from 43 days in 2014 to 26 days
in March this year with a target of eventually reaching 16 days.” The modest drop in U.S. production has been enough to start to bring
inventories down. U.S. crude oil stocks last week were down more than 30 million barrels
from April. But that still leaves them way above normal. The drillers’ cash flow is
assisted not only by the improvements in efficiency just mentioned but also by the fact
that the drop in demand for rigs means companies are seeing drops
in day rates and other costs. Even so, major shale producers like EOG, Whiting, Pioneer, and Devon reported before-tax losses
each of the last two quarters. West Texas Intermediate averaged $53/barrel the first six
months of this year. Last week it went as low as $38 before rebounding back to $45 by the
end of the week." |
"Ministers
moved to slash massive subsidies for solar panels yesterday, amid signs the
Government’s enthusiasm for green energy is waning. In a surprise move, Energy Secretary Amber Rudd announced a consultation
aimed at cutting the subsidies by almost 90 per cent. If implemented, such a step would
remove virtually all incentive for home owners to install the panels and could mean the
end of Britain’s solar power boom. In recent weeks, ministers have tightened planning
restrictions and reduced subsidies for wind farms. They also closed the £540million Green
Deal, which gave out loans for domestic energy efficiency improvements. Ministers claim
they are taking ‘urgent action’ to tackle overspend within the Department of
Energy and Climate Change and to protect ‘hard-working bill payers’. Its
latest consultation says government spending on feed-in tariffs – schemes that pay
producers a subsidy for the electricity they generate – should be limited to between
£75million and £100million by 2018/19. Feed-in-tariff payments on domestic solar panels
will also be cut by £192 a year for the typical household, according to calculations. The
Tories have already announced that taxpayer subsidies for wind farms are to be axed a year
early, part of a ‘big reset’ of support given to renewable energy. The
Government is expected to go further and review all support given to green energy which is
funded by levies on bills worth £4.3billion-a-year. The latest announcement will come as
an embarrassment for energy minister Amber Rudd, who promised in May to ‘unleash a
new solar revolution’. Green energy campaigners have criticised the
‘absurd’ Government plans as ‘politically motivated’." |
"That is more wishful thinking than a
likely possibility. There is little chance that Riyadh would retreat now just as the worst
pain is really beginning to set in for rival producers. Sure, Saudi Arabia is suffering
from low prices, but its competitors are hurting worse. U.S.
oil production, after years of blistering growth, has not only ground to a halt, but has
started to decline. Output peaked in March at 9.69 million barrels per day (mb/d),
dropping to 9.51 mb/d in May (the latest month for which accurate data is available). In all likelihood, the decline has picked up pace in the intervening
months. And more to the point, U.S. oil production will continue to decline the longer
Saudi Arabia holds out. Several companies have already gone bankrupt, and more are no
doubt coming down the pike. That will allow Saudi Arabia to achieve its goal of holding
onto market share, and letting prices adjust on the back of rival producers." |
"The U.S. oil-rig count ticked up by one
in the latest week to 675, marking the sixth consecutive week of increases, according to Baker Hughes Inc. The number of U.S.
oil-drilling rigs, which is a proxy for activity in the oil industry, has fallen sharply
since oil prices headed south last year. The rig
count dropped for 29 straight weeks before climbing modestly in recent weeks. Despite
recent increases, there are still about 58% fewer rigs working since a peak of 1,609 in
October. According to Baker Hughes, gas rigs fell by
nine from the prior week to 202. The U.S. offshore rig count fell to 30 in the
latest week, down two from last week and 36 a year earlier. For all rigs, including
natural gas, the week’s total was down eight to 877." |
"Total,
one of the biggest energy firms operating in the North Sea, has sold off $900m (£585m) of
UK gas interests to cut costs, amid the continuing collapse of oil prices. The French
group is disposing of its interests
in two pipelines – one which delivers gas from 20 North Sea fields – and its
ownership of the St Fergus gas terminal in Scotland. The sale brings the value of
disposals by Total to more than £1bn in the last two months. It follows an announcement by Maersk Oil yesterday that the company
plans to shut the Janice field in the North Sea and cut 200 jobs....Critics fear the
retreat of the big oil companies such as Total, Shell and BP, spells the ultimate demise
of North Sea production. But the company that bought the Total assets denied this and said
companies of its scale and interest could find opportunities larger firms might not." |
"British
Gas is reducing gas prices by five per cent from today but campaigners claim cuts should
be much bigger as wholesale costs have now been low for over a year. Some 6.9million
British Gas customers on its standard and fix and fall tariffs will pay around £35 less a
year for gas. This is the second gas price reduction
in six months, bringing the average total saving to £72 a year. However, uSwitch consumer
policy director Ann Robinson accused British Gas of 'short-changing' its customers and
said since it is the biggest energy provider in the country, it should set an example for
other suppliers to follow. Energy providers say they do not cut prices more because they
buy stock in advance, thus at a higher price. But Robinson said that excuse 'no
longer holds water' and that it was time for big suppliers to treat customers 'fairly'.
The wholesale gas price fell 28 per cent in 2014 alone. But the price cuts announced this
year by all the 'big six' energy companies have fallen well short of industry estimates,
suggesting bills could be reduced by £136 a year if suppliers were to pass on the full
drop in wholesale prices. EDF reduced gas bills by a measly 1.3 per cent, E.ON by 3.5 per
cent, Scottish Power by 4.8 per cent and Npower by 5.1 per cent." |
"Across
the industry, international wildcatters like Genel—which got an 18-month extension in
Ethiopia—are renegotiating drilling commitments, selling off stakes in licenses and
canceling plans to drill exploration wells, in an attempt to pare back budgets that once
hinged on expensive drilling programs. 'When capital becomes very scarce, you end up
having sensible discussions with governments about how to re-phase activity to reflect the
realities of the day,' said Tony
Hayward, former chief executive of BP PLC
and now chairman of Genel, in an interview. The move by these exploration companies
reflects a much broader scramble by the industry—from the world’s biggest
integrated oil companies to state-owned giants—to cut costs....Earlier exploration pullbacks have been blamed for subsequent tight
markets. In the late 1990s, oil prices crashed, triggering a round of big consolidation
and a pullback in exploration spending. That came back to haunt the world when Asian
demand took off just a few years later, and supply growth couldn’t keep
up—sending prices soaring. 'There’s no doubt that when you take this much
capital out of this industry it has consequences on future supply,' Mr. Hayward said. 'It
will probably take a couple of years before it becomes really apparent.' The pullback comes on top of cancellations and delays of around
$200 billion in new oil and natural-gas projects, according to estimates from energy
consultancy Wood Mackenzie. This year, exploration spending across the global oil industry
is forecast to fall an average of 30% from last year’s $70 billion. U.S. oil company Exxon Mobil
Corp. cut its capital and
exploration expenditure by 16% in the second quarter of this year compared with the
corresponding period a year earlier. The number of
exploration wells either drilled or planned this year around the world is expected to fall 26% to 1,004—the lowest level in
five years, according to Mangesh Hirve at U.K. energy database provider 1Derrick. .... 'To make investment decisions you need stability [in the oil price]
and there’s no stability at the moment,' said Aidan Heavey, chief executive of Tullow Oil PLC, the U.K.’s
biggest independent oil explorer. The Africa-focused company has already slashed its
exploration budget by 80% to $200 million. .... This year’s pullback by explorers
follows almost two years of lower spending in exploration in the first place, as investors
soured on a number of smaller companies after a poor run of drilling and ever-mounting
costs. Even before oil prices began to slide last June, the share prices of explorers
traded in London—a favorite listing destination for international explorers—were
underperforming the bigger oil companies." |
"Israel
has imported as much as three-quarters of its oil from Iraq’s semi-autonomous Kurdish
north in recent months, providing a vital source of funds to the cash-strapped region as
it fights militants of the Islamic State of Iraq and
the Levant (Isis). The sales are a sign of Iraqi Kurdistan’s growing
assertiveness and the further fraying of ties between Erbil and Baghdad, which has long
harboured fears that the Kurds’ ultimate objective is full-scale independence from
Iraq.... The emergence of Israel as one of the
biggest buyers of oil from Iraq’s north illustrates another fissure between Erbil and
the federal government. Baghdad, like many Middle Eastern capitals, refuses to recognise
Israel and has no official ties with the country. The US, a close ally of both Israel and
the KRG, has urged Erbil to work with Baghdad on oil sales....Israel’s government
does not comment on the source of energy supplies, which it views as a matter of national
security. Insiders say it continues to import oil from Azerbaijan, Kazakhstan and Russia,
its main suppliers for much of the past decade. Israel is by no means the only country
that has been buying more Kurdish oil." |
"North Sea oil revenues in the first three months of 2015 were down
75% on the previous quarter, the Scottish
Conservatives have said. The Scottish government's quarterly national accounts show that
the amount received in tax receipts between January and March was £168m. This was down
from £742m oil revenues in the final three months of 2014. Finance Minister John Swinney
said oil was a bonus - not the basis of the economy. The industry has suffered from the
collapse of global oil prices, which have tumbled sharply since June last year. The
Scottish Conservatives said the figures for Scotland's geographical share of oil revenues,
which they claimed were "buried" in a table in a report, showed "how wildly
wrong" the SNP's pre-referendum calculations had been. The Tories said the figures
also further demonstrated the case against full fiscal autonomy for Scotland - an SNP
policy. In its oil and gas bulletin published in May 2014, the Scottish government
estimated that oil revenues would be between £15.8bn and £38.7bn between 2014/15 and
2018/19. It latest bulletin, published in June this year, said revenues could be as low as
£2.4bn for 2016/17 to 2019/20, with it highest estimate at £10.8bn, based on a best-case
scenario of the oil price returning to 100 US dollars per barrel. Scottish Conservative
finance spokesman Murdo Fraser said: 'The plunge in oil revenues for the first three
months of this year is incredible. Whichever way you look at it, and with the best will in
the world, there is just no way an independent Scotland could survive on this. We knew the
price of oil was volatile and that this would be a risk. But to see such a radical drop is
alarming."" |
"In
the North Sea, a 15-year slump in oil production will almost certainly be halted this
year. The turnaround after so many years is but one
of a myriad of reasons that the global price of Brent blend crude fell last week to $46
per barrel, from highs of above $65 in the spring – a fall seen on stock markets
around the world as a signal to sell. The UK produced
about 850,000 barrels a day last year – less than 1% of the world’s total and
down from nearly 2.1m a decade earlier. But a surge in investment – mainly before
June 2014, when the global price of oil stood at a heady $115 – has, for now, borne
fruit: provisional figures have shown a 3% increase in output from the UK continental
shelf in the first six months of the year. Output
has risen despite a big drop in exploration drilling and jobs (especially compared with
June 2014). But that increased production has come at a time of faltering demand and
economic growth – not least in China, now the world’s biggest crude importer.
The price decline has been exacerbated by increasing supply; and while Britain has been
playing its part, the real powerhouses of new output have been elsewhere. One is the US,
where the shale 'revolution' has turned the country from a major oil importer into an
exporter. In addition new supplies have come from
Iraq, while Opec, led by Saudi Arabia, has refused
to cut back output to counter the price slump, as it has in the past. The
most recent falls in the value of oil have been driven by new factors such as the
rapprochement between the west and Iran, stemming from the Middle East country’s
willingness to curb its nuclear programme.... These lower energy costs are bad for oil
companies and tax revenues in producer nations, but good for importing countries,
inflation figures and a swath of heavy-fuel-using sectors such as transport and
manufacturing. The AA motoring group reports unleaded petrol now costs around 117p per
litre, with diesel at 121p, compared with 132p and 136p respectively at this time a year
ago. Gas prices have also slumped, bringing some
reductions in household heating bills – but also undermining the economics of both a
British shale boom and North Sea investment." |
"China's
economic slowdown is, and will continue to be, the oil market's biggest problem moving
forward, John Kilduff, founder of Again Capital, said Friday. 'This China
situation, to me, is very disturbing,' he said in a CNBC 'Squawk Box' interview. 'It's
the very key demand center for oil and we're not going to have the kind of growth that
we've experienced over the years. The whole commodity infrastructure got built out in the
last several years to satisfy what was seen as insatiable Chinese demand for everything,'
Kilduff added. U.S.
crude futures have taken a tumble since late June, falling from about $60 a barrel to
around 6 ½-year lows. 'Some of the data we've been getting out of China is worsening. I
think the government's reaction to what's going on with the Shanghai [composite] means
it's in a much worse situation than it's being talked about.' The Shanghai composite dropped
more than 4 percent overnight, leading Japan's Nikkei 225 index to fall
nearly 3 percent. Amid this drop in oil, the latest Federal Reserve minutes and the
decline in global equities, the foreign exchange market has seen a reversal in some
currency positions, especially within the euro, Boris Schlossberg, managing director of FX
strategy at BK Asset Management, said in the same interview." |
"The value that commodity producers have
lost in the past year almost equals India’s entire economy. Slumping prices for raw materials have wiped out $2.05 trillion
from the shares of mining and oil companies since the middle of last year, data compiled
by Bloomberg show. That compares with India’s
$2.07 trillion gross domestic product. Prices plunged after years of over investment led
to a supply glut at the same time that economic growth is slowing in China, the
biggest consumer of commodities. The Bloomberg Commodity Index of 22 raw materials dropped
Wednesday to its lowest since 2002, paced this year by declines in nickel, sugar, and
crude oil." |
"Last week reporters at the Wall Street
Journal sat down and did some arithmetic. They looked at how much oil was selling for in
the spring of 2014 (over $100 a barrel); looked at what it is selling for today (under
$50); and concluded that if prices stay low for the next three years, the global oil
industry and the countries it finances will be out $4.4 trillion in revenues. As these oil
companies, nationalized and publically traded, will be producing roughly the same amount
of oil in the next few years, the $4 trillion will have to come mostly out of profits or
capital expenditures. This is where the problem for the future of the world’s oil
supply comes in. The big oil companies, especially those that export much of their
production, have been doing quite well in recent years. National oil companies have earned
vast profits for their political masters. Publically traded ones have developed a
tradition of paying out good dividends which they are loathe to cut. This leaves mostly
capital expenditures on exploring for and producing more oil in coming years to take a
dive as part of the $4 trillion revenue hit. Even if oil prices of $50 a barrel or less do
not continue for the next three years, this still works out to a revenue drop of $1.5
trillion a year or about three times the planned capital expenditures of some 500 oil
companies recently surveyed. The International Energy
Agency just came out with a new forecast saying that while current oil prices have the
demand for oil products increasing rapidly, there is still so much over-production that
the oil glut is expected to last for another year or more before supply/demand comes back
into balance. The return of Iran to unfettered production would not help matters. In
looking at the next five years there are several trends or major issues that are likely to
impact the supply and demand for oil. First is the recent price collapse that no longer
makes it profitable to start projects to produce new oil, most of which now comes from
deepwater, tar sands, or shale oil fields and is far more expensive to produce than
'conventional' oil. As a result, investment in new
oil production projects has dropped substantially in the last year and is likely to fall
further. On the demand side of the equation China is the biggest unknown. For the last 30
years the Chinese have enjoyed unprecedented economic growth, but recently the
'world’s factory' has not been doing as well. Its government has been thrashing
around wildly trying to stimulate growth and fend off a collapse in its stock market. Some
believe China is a huge economic bubble that is about to collapse taking much of the world
with it, and obviously reducing its ever-increasing demand for more oil.... Conventional wisdom currently says that oil prices are likely to
be closer to $50 a barrel than to $100 for the next year or more. Capital spending on new production to offset declining production from
existing oilfields is likely to drop still further leaving us in the situation where
depletion may exceed the oil coming from new wells or fields. This is the argument that
those who believe that we are at or near the all-time peak of world oil production about
now are using." |
"With oil
prices collapsing and companies in retrenchment, a federal auction in the Gulf of Mexico
on Wednesday attracted the lowest interest from producers since 1986. It was the clearest
sign yet that the fortunes of oil companies are skidding so
fast that they now need to cut back on plans for production well into the future. The
auction, for drilling leases, attracted a scant $22.7 million in sales from five
companies, but energy analysts said that came as no surprise on a day when the American
oil benchmark price plummeted by more than 4 percent. For the first time since the
recession, it is approaching the symbolic $40-a-barrel level. Last summer, it was above
$100 a barrel. A glut on American and world markets is to blame for the depressed prices,
but the unusually large daily decline occurred after the Energy Department, in a report,
lowered its oil price projections and showed a considerable increase in inventories. 'The
financial squeeze is tighter than people thought, so tight that the companies can’t
even bargain-hunt for leases for future production,' said Michael C. Lynch, president of
Strategic Energy and Economic Research, a consultancy. 'It’s
the long-term production profile that is suffering now, and they will pay for it later.'.... Offshore
drilling has suffered from the overall oil market downdraft. Hercules Offshore, a
leading shallow-water gulf driller, filed for bankruptcy this month and Fitch Ratings has
suggested that more bankruptcies among offshore drillers may be coming soon. An oversupply
of rigs is developing as contracts expire. Fitch recently estimated in a report that day
rates for ultra-deepwater rigs, which have generally run between $400,000 to $600,000 in
recent years, will come down to $325,000." |
"Wholesale
gas
prices hit a record low yesterday – piling
fresh pressure on suppliers to cut bills. Gas for delivery over the coming winter fell to
44.1p per therm because of plentiful stocks. The drop will deliver savings for energy suppliers. But just one of the Big Six –
British Gas – has announced a price cut since last winter. Even then, its paltry 5%
off – saving the average customer just £35 a year – won’t take effect
until later this month. None of the other big suppliers – SSE, npower, E.ON, Scottish
Power or EDF Energy – has followed suit. Some experts reckon the firms will use
falling wholesale cost to boost their coffers. Head of natural gas at Energy Aspects
Trevor Sikorski said: 'Utility firms will see this as a way of enhancing their
profitability.' He added: 'Not enough people pay attention to what they pay for their
gas.' Big suppliers have posted mixed results for the first six months of this year.
Profits at British Gas nearly doubled to £528million. But npower last week announced
half-year profits slumped by two-thirds, with 300,000 customers ditching the firm in the
past year. Wholesale costs have been driven lower by
an oversupply of gas, with increased imports of liquefied natural gas adding to the glut. Meanwhile, the same factor has led to a drop in oil prices – which
hit a six-and-a-half year low yesterday." |
"Wholesale
gas
prices hit a record low yesterday – piling fresh pressure on suppliers to cut
bills. Gas for delivery over the coming winter fell
to 44.1p per therm because of plentiful stocks. The drop will deliver savings for energy suppliers. But just one of the Big Six –
British Gas – has announced a price cut since last winter. Even then, its paltry 5%
off – saving the average customer just £35 a year – won’t take effect
until later this month. None of the other big suppliers – SSE, npower, E.ON, Scottish
Power or EDF Energy – has followed suit." |
"... data
from oil
driller Baker Hughes and the Federal Reserve this week indicated that oil
companies are starting to reverse their behavior of shutting down wells and halting
production, a sign that some companies may think the worst is over for the oil
market. On Friday, data from Baker Hughes showed
that for the fourth straight week, the number of rigs in use rose, with the total number
of rigs online now back to April levels.....
Earlier this week we got word that production
out of OPEC, the 12-state oil cartel led by Saudi Arabia, hit a three-year high in
July despite a continued glut of supply in global markets and prices continuing to
decline. But with The
Telegraph recently highlighting data that current oil prices have all OPEC members
missing their budget projections, governments depending on oil revenues need to bring in
whatever they can manage.... Last week, we noted
that according to data from Credit Suisse, US oil production has continued to hum along
despite the decline in oil rig count. Though, as some readers noted, this chart doesn't
tell the whole picture as the rigs already shut down were likely not big producers
anyway. And it does look like US production and supply could soon provide the market
with some relief, as the Energy
Information Administration said in a report this week
that daily production is set to fall to 9 million barrels a day next year from a projected
9.4 million barrels in 2015." |
"The devastation wrought by the oil price
crash on Britain’s North Sea industry is set to be laid bare when one of the
region’s biggest contractors reveals that it has cut 4,000 jobs since the start of
the year. Wood Group
, which provides engineering and production services to some of the
world’s biggest oil companies, is understood to have cut more than 10pc of the
45,000-plus employees it has worldwide in the first six months of 2015. 1,000 cuts have
been made in Britain. The job losses will be detailed when the FTSE 250 company, which
lays pipes for oilfields and helps staff oil rigs, announces its interim results on
Tuesday. The price of oil has collapsed over the past year from more than $100 dollars a
barrel 12 months ago to below $50. Energy companies have slashed capital expenditure in the face of the
lower price, and more than $200bn of investment in new projects is estimated to have been
put on hold as a result. The North Sea has been hit hard by reduced spending, as the oil
and gas pumped from its offshore rigs is relatively expensive to produce, meaning that it
was one of the first areas energy companies looked at when seeking cost cuts.
According to some estimates, the cost of producing a barrel of North Sea oil is $80 from
some older fields... Industry body Oil & Gas UK
(OGUK) estimates that about 5,500 jobs in North Sea oil or its supply chain had already
been lost this year, prior to have the redundancies at Wood Group." |
"China continues to present significant
risks to the oil market. On August 11, China decided to devalue its currency in an effort
to keep its export-driven economy competitive. The yuan fell 1.9 percent on Tuesday, the
second largest single-day decline in over 20 years. The yuan dropped by another 1 percent
on Wednesday.... For oil, the move has raised concerns that oil demand will take a hit.
China is the world’s largest importer of crude, and a devalued currency will make oil
more expensive. On August 11, oil prices dropped to fresh six-year lows, surpassing oil’s low point from earlier this year. But with China’s economy – once the engine of global
growth – suddenly looking fragile, it would be difficult to argue with any certainty
that oil has hit a bottom. China’s economic growth was already slowing, but its GDP
growth rate could dip below 7 percent this year, and drop to 6.5 percent in 2016. The EIA estimates that WTI will average
just $49 per barrel in 2015, and $54 next year, an acknowledgement that the recent
downturn in oil prices may last longer than expected." |
"The global oil glut will persist well into
2016, the world’s leading energy body said on Wednesday, even as the collapse in
prices is pushing up demand at the fastest pace in five years. The International Energy Agency,
the west’s oil watchdog, said global oil supplies are still growing at 'breakneck
speed' and outstripped consumption in the second quarter by 3m barrels a day, the most
since 1998.....Oil’s plunge to below $50 a barrel from a high of $115 a barrel in
June last year threw the budgets of oil exporting countries into disarray, rocked the
financial markets and forced the world’s biggest energy companies to tear up their
investment plans. The oil industry is hunkering down for an extended period of depressed
prices and has adopted the 'lower for longer' mantra, the IEA said. While output growth from countries outside the Opec oil
producers’ cartel has shrunk from 2014 highs and contributed to the 600,000 barrels a
day fall in global supply to 96.6m b/d in July,
non-Opec output growth is still running at about 1.2m b/d above 2014 levels so far this
year. The agency said this was due to big investments in US shale and other supplies made
previously. Although non-Opec supply growth will weaken by the end of this year it will
not contract until 2016 when the IEA expects a 200,000 b/d drop to 57.9m b/d, led by lower
supplies from the US. ... Demand has reacted more
swiftly than supply to lower prices. Global oil demand is forecast to grow 1.6m b/d this year
— an upward revision of about 200,000 b/d and the fastest pace in five years —
to 94.2m b/d. The US, China, Russia and Brazil were behind the upgrades to estimates. The
IEA estimates growth of 1.4m b/d to 95.6m b/d for 2016. 'Even with the slowdown in non-Opec production and higher demand growth, a
sizeable surplus remains,' the IEA said. Output from
Opec is still near a three-year high above 31.5m b/d, the cartel said on Tuesday, far
exceeding the IEA’s assessments of demand for the group’s crude of 30.6m b/d by
the end of this year and 30.8m b/d in 2016. Opec
crude production, however, inched lower last month by 15,000 b/d as Saudi Arabia slowed
production, offsetting increases from Iraq — which reached a record — and Iran,
the IEA said. The huge 3m b/d overhang in the second quarter of 2015 will steadily shrink
from the latter half of this year and drop to an average 850,000 b/d in 2016, the IEA
said. The outlook does not include higher Iranian
output should sanctions be lifted.... The IEA said the hundreds of billions of dollars of
investment cuts by energy companies will eventually help rebalance the market. But if
demand continues as it has done this year, the situation will become 'increasingly
sensitive', the IEA added." |
"Data
from the U.S. Federal Highway Administration show Americans drove a record 1.26 trillion
miles during the first five months of 2015, compared with the previous record of 1.23
trillion miles driven in the first five months of 2007. .... U.S. crude oil production is
projected to increase from an average of 8.7 million b/d in 2014 to 9.4 million b/d in
2015 and then decrease to 9.0 million b/d in 2016.
The forecast is about 0.1 million b/d lower and 0.4 million b/d lower for 2015 and 2016,
respectively, than in July's STEO. The decrease in the crude oil production forecast
reflects a lower oil price outlook that will reduce expected oil-directed rig counts and
drilling and well-completion activities throughout the forecast period. EIA estimates that
U.S. crude oil production averaged 9.5 million b/d in the first half of 2015. This level
is 0.3 million b/d higher than the average production during the fourth quarter of 2014,
despite an almost 60% decline in the total U.S. oil-directed rig count since October 2014.
The most recent production estimates indicate U.S. crude oil output was 9.5 million b/d in
May. EIA estimates that total U.S. production was
unchanged in April and began declining in May, falling 180,000 b/d from the April level.
Some of this decline reflects outages in the Gulf of Mexico that are expected to be
temporary. The decrease in total production was preceded by declines in onshore
production, which began in April. EIA expects U.S. crude oil production declines to
continue through the third quarter of 2016, when total crude oil production is forecast to
average 8.8 million b/d. Forecast production begins rising in late 2016, returning to an
average of 9.1 million b/d in the fourth quarter. A
total of 13 projects are scheduled to come online in the Gulf of Mexico in 2015 and 2016,
pushing up Gulf of Mexico production from an average of 1.4 million b/d in the fourth
quarter of 2014 to more than 1.6 million b/d in the same period of 2016. Expected crude oil production declines from May 2015 through the
third quarter of 2016 are largely attributable to unattractive economic returns in some
areas of both emerging and mature onshore oil production regions, as well as seasonal
factors such as anticipated hurricane-related production disruptions in the Gulf of
Mexico. Reductions in 2015 cash flows and capital expenditures have prompted companies to
defer or redirect investment away from marginal exploration and research drilling to focus
on core areas of major tight oil plays. Reduced investment has resulted in the lowest
count of oil-directed rigs in nearly five years and well completions that are
significantly behind 2014 levels." |
| "After Iran
struck a deal with world powers over its nuclear programme, Hossein Zamaninia, its deputy
oil minister, struck a hopeful tone, saying Europe could be a market for the
country’s natural gas in the years to come. Iran may be the world’s third
largest gas producer, but it faces several challenges in exporting the country’s most
abundant commodity to Europe. These include a looming oversupply
of liquefied natural gas; growing competition from other producer countries; demand weakness in the continent; and infrastructure troubles at home.
The global LNG market is about to lurch into a period of oversupply. Waves of new
liquefaction facilities from Australia to the US will begin loading large volumes of gas
as early as this year. By the end of the decade, LNG supply capacity will grow by more
than 160bn cubic metres (bcm) a year. Asia should be
the first port of call for many of these cargoes, but the gas demand outlook in Asia
remains modest for the next few years at least, meaning Europe would take the remainder as
it has done this year. Gas coming from Azerbaijan’s giant Shah Deniz field is on the
rise. A pipeline from Azerbaijan to Turkey is under construction and works on the
Trans-Anatolian pipeline began early this year. This means by 2018, up to 16 bcm of
Azerbaijani gas will find its way to Europe. The
cancellation of the South Stream pipeline seemed to have knocked Russian efforts to send
more gas into southern Europe, but it was quickly replaced with the similar Turkish Stream pipeline. This 60 bcm per year subsea pipeline will
compete directly with any effort by Iran to market its gas in Europe. In fact, Iran has been losing market share to Russia in Turkey, the only
gateway market into Europe it supplies. In 2010, Iran supplied around 20 per cent of
Turkey’s gas imports, but last year it fell to 18 per cent. Over the same period,
Russian gas exports to Turkey have almost doubled to 30 per cent. Turkey’s neighbour
Greece is now also a target market for new Russian gas. Meanwhile, plans to expand the 45
bcm per year Nord Stream pipeline that brings gas directly from Russia to Germany is
moving ahead, giving it a stronger presence in Western Europe. European gas demand has
been in decline since 2008, reflecting industrial sector stagnation and the growth of
renewable power generation. The only source of long-term upside to European gas demand is
the power sector and the impact of carbon emissions policies. While this could eventually
increase the volumes of gas used in Europe, emissions prices would have to significantly
increase to encourage utilities to switch from burning coal to gas in meaningful
volumes." Iran faces hurdles in supplying gas to Europe Financial Times, 11 August 2015 |
"OPEC
pumped the most crude last month in more than three years as Iran restored output to the
highest level since international sanctions were strengthened in 2012. The Organization of Petroleum Exporting Countries, responsible for 40
percent of world oil supplies, raised output by 100,700 barrels a day to 31.5 million last
month, the group said in its monthly market report, citing external sources. This increase
came even as Saudi Arabia, which often curbs output toward the end of peak summer demand,
told OPEC it cut production by the most in almost a year. Oil prices slumped to a
six-month low below $50 a barrel in London last week as rising OPEC supplies, resilient
U.S. production and concerns over Chinese demand prolong a global glut. Iran may further
expand output after reaching an accord with world powers on July 14 that will ease
sanctions on oil exports later this year in return for curbs on its nuclear activity.
'Iran has been rising slowly but surely for a while now,' Abhishek Deshpande, an analyst
at Natixis SA in London, said by e-mail. 'It doesn’t need foreign investment to
revamp existing infrastructure and prepare fields, resulting in the small increases you
can see now. But the bulk of the increase is expected once it becomes clear sanctions will
definitely be lifted.' Iran increased output by
32,300 barrels a day in July to 2.86 million a day,
the highest since June 2012, according to data OPEC compiles from 'secondary sources' such
as media agencies and international institutions. Sanctions to deter the nation’s
nuclear research took effect in July that year. Iraq, OPEC’s second-largest producer,
led gains in output last month, increasing production by 46,700 barrels a day to 4.1
million, the group’s data show. The report also includes data directly submitted by
OPEC’s 12 members. In these figures, Saudi Arabia said it reduced output in July by
202,700 barrels a day to 10.36 million. That’s the biggest reduction since August
2014. A group total was unavailable for these statistics because Libya didn’t provide
a production estimate.... OPEC increased estimates
for global oil demand in 2016 by about 100,000 a barrels a day. World consumption will
climb by 1.3 million barrels a day, or 1.4 percent, to 94 million barrels a day in 2016. The growth rate is slightly lower than this year’s projected 1.5
percent expansion. 'Crude oil demand in the coming months should continue to improve and,
thus, gradually reduce the imbalance in oil supply-demand,' OPEC’s Vienna-based
secretariat said in the report. Investor concern that oil could by dragged down further by
an Iranian sale of crude inventories once sanctions are lifted is overdone, according to a
Bloomberg Intelligence survey published Tuesday. Iran’s stockpile of crude amounts to
20 to 40 percent of one day’s global oil demand and the
nation will add less than 1 million barrels a day to crude supply next year, most of the survey’s 121 respondents said." |
"Hinkley Point, the planned £24.5bn
nuclear power station in Somerset, is under intensifying criticism from the energy
industry and the City, even as the government prepares to give the final go-ahead for the heavily
subsidised project. The plant, due to open in 2023, will cost as much as the combined
bill for Crossrail, the London 2012 Olympics and the revamped Terminal 2 at Heathrow,
calculated Peter Atherton, energy analyst at investment bank Jefferies. He said that, for
the same price as Hinkley Point C, which will provide 3,200MW of capacity, almost 50,000MW
of gas-fired power capacity could be built. 'This level of new gas build would effectively
replace the entire thermal generation fleet in the UK – much of which is old and
inefficient – with brand new, highly efficient, low carbon, gas generation,' said
Atherton. Doubts about Hinkley Point have deepened after a detailed report by HSBC’s
energy analysts described eight key challenges to the project, which will be built by the
state-backed French firm EDF and be part-financed
by investment from China. These challenges include: declining demand for power in the
UK, currently falling at 1% a year as energy-saving measures take effect; a three-fold
jump in the UK’s interconnection capacity with continental Europe by 2022, massively
increasing the country’s ability to import cheaper supplies; and 'a litany of setbacks' in Finland, France and China for EdF’s
European
Pressurised Reactor (EPR) model, the same type as planned for Hinkley Point.
HSBC’s analysts described the EPR model as too big, too costly and still unproven,
saying its future was bleak. They also pointed out that wholesale power prices have fallen
by 16% since November 2011 when the government agreed a 'strike price' for Hinkley
Point’s output – effectively a guaranteed
price of £92.50 per megawatt hour, inflation-linked for 35 years and funded through
household bills." |
"In
a note to clients this week, analysts at Credit Suisse noted that ConocoPhillips and Total
have both said the cost of production for US shale will fall 30%, and that 80% of shale
oil produced will make financial sense to produce with prices below $60 a barrel at the
end of this year. The oil-futures market projects
oil prices will bounce back to near $70 a barrel. The price of West Texas Intermediate
crude oil finished the week below $44 a barrel. Credit Suisse also notes that, despite the
massive drop in the US oil rig
count, production has remained steady." |
"Oil majors around the globe are
struggling to make the best of a bad situation, but at the moment the return on every
project shelved and job shed seems to be yet more adversity. The confirmation last week
that BP will pump an additional $1 billion (£646 million) into one of its cornerstone
North Sea assets was welcome respite for Britain’s offshore industry, yet next
month’s economic report from Oil & Gas UK is still set to make grim reading.
Exploration, investment and employment are all on the decline, with no end on the
immediate horizon. BP’s decision to extend the life of its Eastern Trough Area
Project (ETAP) to 2030 is an apposite sign of the times. With the flood of crude on the
market pushing oil prices ever lower, the majors are slashing costs while at the same time
attempting to wring every last drop from their existing assets. Those such as BP, Shell
and Total are helped by profitable refining operations, but increasing output has
exacerbated oversupply. BP managed to cut $1.7bn in costs during the first half of this
year, but its profits still plunged by 64 per cent in the second quarter, when the price
of Brent crude averaged $62 a barrel. That was down from $110 in the second quarter of
2014. This dramatic act took another downward turn last week as Brent fell through the key
$50 barrier to a fresh six-month low. Producers are
digging in for a prolonged downturn, as outlined by BP chief executive Bob Dudley during
the latest financial results. 'We hold the view that oil prices will be lower for longer,'
he said. 'If you look at the impact of what could be increasing Iranian production next
year, slower Chinese growth… and if you take the three largest oil producing areas on
the planet – the US, Saudi (Arabia) and Russia – all their production is
rising.'" |
"Business
is so tough for oilfield giants Schlumberger NV and Halliburton Co that they have come up
with a new sales pitch for crude producers halting work in the worst downturn in years. It
amounts to this: 'frack now and pay later.' The
moves by the world's No. 1 and No. 2 oil services companies show how they are scrambling
to book sales of new technologies to customers short of cash after a 60 percent slide in
crude to $45 a barrel. In some cases, they are willing to take on the role of traditional
lenders, like banks, which have grown reluctant to lend since the price drop that began
last summer, or act like producers by taking what are essentially stakes in wells." |
"The
United States has added a Russian oil and gas field, the Yuzhno-Kirinskoye Field, to its
list of energy sector sanctions prompted by Moscow's actions in Ukraine, drawing a prompt
rebuke from the Kremlin on Friday. The federal
government said on Thursday the field, located in the Sea of Okhotsk of the Siberian coast
and owned by Russia's leading gas producer Gazprom, contains substantial reserves of oil
in addition to reserves of gas. "The Yuzhno-Kirinskoye Field is being added to the
Entity List because it is reported to contain substantial reserves of oil," according
to a rule notice in the Federal Register. A Kremlin spokesman criticized the move.
"Unfortunately, (this decision) further damages our bilateral relations,"
spokesman Dmitry Peskov told reporters. Gazprom declined to comment. Adding the field to
the list means a license will be required for exports, re-exports or transfers of oil from
that location, it said. The gas and condensate field was discovered in 2010, according to
Gazprom. Douglas Jacobson, an international trade lawyer in Washington, said the
addition "represents a new arrow in the quiver of U.S. sanctions on
Russia." He said the addition means that no U.S. origin items or non-U.S.
origin items containing more than 25 percent U.S. content can be exported or re-exported
to the field without a Commerce Department license, which he said was not likely to be
issued." |
"If the oil futures market is correct,
Saudi Arabia will start running into trouble within two years. It will be in existential
crisis by the end of the decade. The contract price of US crude oil for delivery in
December 2020 is currently $62.05, implying a drastic change in the economic landscape for
the Middle East and the petro-rentier states. The Saudis took a huge gamble last November
when they stopped supporting prices and opted instead to flood the market and drive out
rivals, boosting their own output to 10.6m barrels a day (b/d) into the teeth of the
downturn. Bank of America says OPEC
is now "effectively dissolved". The cartel might as well shut down its offices
in Vienna to save money. If the aim was to choke the US shale industry, the Saudis have misjudged badly, just as they misjudged the growing shale
threat at every stage for eight years. "It is becoming apparent that non-OPEC
producers are not as responsive to low oil prices as had been thought, at least in the
short-run," said the Saudi central bank in its latest stability report. 'The
main impact has been to cut back on developmental drilling of new oil wells, rather than
slowing the flow of oil from existing wells. This requires more patience,' it said. One Saudi expert was
blunter. "The policy hasn't worked and it will never work," he said. By causing the oil price to crash, the Saudis and their Gulf
allies have certainly killed off prospects for a raft of high-cost ventures in the Russian
Arctic, the Gulf of Mexico, the deep waters of the mid-Atlantic, and the Canadian tar
sands. Consultants Wood Mackenzie say the major oil and gas companies have shelved 46
large projects, deferring $200bn of investments. The
problem for the Saudis is that US shale frackers are not high-cost. They are mostly mid-cost, and as I reported from the CERAWeek energy forum in Houston, experts at IHS think
shale companies may be able to shave those costs by 45pc this year - and not only by
switching tactically to high-yielding wells. Advanced pad drilling techniques allow
frackers to launch five or ten wells in different directions from the same site. Smart
drill-bits with computer chips can seek out cracks in the rock. New dissolvable plugs
promise to save $300,000 a well. 'We've driven down drilling costs by 50pc, and we can see
another 30pc ahead,' said John Hess, head of the Hess Corporation. It was the same story
from Scott Sheffield, head of Pioneer Natural Resources. 'We have just drilled an 18,000
ft well in 16 days in the Permian Basin. Last year it took 30 days,' he said. The North
American rig-count has dropped to 664 from 1,608 in October but output still rose to a
43-year high of 9.6m b/d June. It has only just begun to roll over. 'The freight train of
North American tight oil has kept on coming,' said Rex Tillerson, head of Exxon Mobil." |
"British public support for nuclear power
and shale gas has fallen to its lowest ever level in a long-running official government
survey, which has also briefly ceased polling showing widespread public support for
renewable energy. Nuclear and fracking for shale gas are key planks of the Conservative
government’s energy policy, but the
polling published on Tuesday shows just one in
five people now support shale gas and one in three support nuclear. Government
sources warned last week that fracking plans could be delayed for 16 months after
Lancashire county council rejected applications by shale gas company Cuadrilla to drill
and frack wells in Fylde. Plans for a new nuclear power station at Hinkley in Somerset
have also come under fire recently, with the Conservative peer Lord Howell of Guildford warning
of rising costs of the 'elephantine' project and HSBC
criticising the £25bn cost for Hinkley’s new reactors. Green campaigners and
renewable trade bodies said the polling showed the government was at odds with the
public." |
"Oil
and gas production in UK waters is set to rise for the first time in 15 years this year.
Industry body Oil and Gas UK said provisional figures showed production for the first six
months of the year could be up 2.5% on the same period last year. The Golden Eagle field, which started producing in November,
is thought to have played a part. Increased efficiency from existing assets is also being
highlighted.....The rise in oil and gas output - of about 40,000 barrels per day - is not, perhaps, what you would expect when the price has been falling
and the industry has been slashing at costs and investment. It reflects less downtime for
maintenance, and the industry points to its efficiency measures working. But it mainly
reflects previous years of investment. More than
£30bn in the past few years has secured a second wind for the North Sea and new projects
west of Shetland. And with output at around
two-thirds of its peak level at the turn of the century, only one field can make a big
difference. The Golden Eagle field, 40 miles north-east of Aberdeen and operated by
Chinese-owned Nexen, can pump up to 70,000 barrels per day and only started production
last November. It has been forecast that output will
remain at a slightly higher level for the rest of this decade, before returning to
long-term decline as fields deplete." |
"The
UK is the only country where total energy consumption is lower today than it was in 1965,
according to newly released energy data from BP.
Energy consumption has gone down by close to five per cent over the past 50 years - even
as the economy has tripled in size and population. This makes the UK the only country in
the world where consumption is down over this time period, at least among the countries BP
has historical data for. Britain’s energy use peaked in 2005 and has fallen steeply
since, with consumption down 6.3 per cent over the past year. Part of the explanation for
this is the UK’s dropping industrial output, but rising energy efficiency accounts
for the majority of the fall. The industrial sector
has improved its efficiency most, data from the department of energy and climate change
(DECC) shows, while the transport sector is the only one with no change in energy
efficiency since 1970. Today it accounts for 38 per cent of the UK’s consumption.
BP’s data reveals that the rise of energy consumption globally is slowing, increasing
just 0.9 per cent in 2014, the weakest growth since 2009." |
"Oil and gas production from the North
Sea is expected to increase for the first
time in 15 years despite a global slump in the price of crude and hundreds of job
losses in the industry. Offshore watchdog Oil and Gas UK has said that output from the UK
Continental Shelf (UKCS) over the first six months of this year could be 2.5pc higher than
the same period last year. On these estimates, the body believes that the North Sea could
increase production this year for the first time since 2000. While production has climbed,
oil and gas operators in the North Sea and Aberdeen have slashed jobs and cut costs
aggressively since last November, when the Organisation of the Petroleum Exporting
Countries triggered a collapse in the price of oil. Brent crude - a global benchmark for
oil - is now trading at just over 50pc down on 2014 at $50 per barrel. ... In March, the
Chancellor George Osborne offered some relief to oil and gas operators in the North Sea by
cutting taxes on the region. Tax rates on production from older oil and gas fields were
cut from 80pc to 75pc, falling to 67.5pc from next year. For newer fields, effective rates
were trimmed from 60pc to 50pc. Combined with other incentives, the Treasury claimed that
these measures would lead to more than £4bn
of new investment and the production of a further 120 million barrels of oil over the
next five years. However, despite these incentives, the
high cost of operating offshore - estimated to be in the region of $80 per barrel in some
older fields - means that the North Sea remains vulnerable to price volatility. BP's chief executive Bob
Dudley has warned repeatedly that the region will have to adjust to the new economics
of lower prices. There has also been a worrying drop off in exploration activity for new
resources in the North Sea. Around16 billion barrels of recoverable oil is still thought
to exist offshore of Aberdeen and west of the Shetland Islands. But exploratory drilling in the region fell to just 12 wells last
year, down from 44 in 2008." |
"Russia’s
plan for a new undersea route to ship gas to Europe without going through Ukraine has
taken another hit with the news that Russia and Turkey have suspended talks for the new
Turkish Stream pipeline. Turkish officials told Reuters yesterday that talks were
suspended after Moscow failed to sign off on a key gas price discount agreement. In
February Ankara obtained verbal agreement a 10.25% price discount on the 28-30 billion
cubic meters of gas it buys from Russia but a final signature has not been forthcoming.
Russian energy company Gazprom and its Turkish counterpart Botas had six months to sign
off on the price but that window lapsed on 29 June without agreement. According to Reuters, Turkish officials said another sticking point has been
Russia’s insistence that Ankara grant permits for the construction work on four
planned lines in the project. Turkey has so far only given licenses for the first line.
Russian Energy Minister Alexander Novak said on 29 July that there was a risk construction
of the pipeline could be delayed if a related intergovernmental agreement was not signed
soon, the Interfax news agency reported. Earlier this
month Gazprom subsidiary South Stream Transport BV, the company developing the pipeline,
without warning cancelled the pipe-laying contract with Italian contractor Saipem,
throwing the Turkish Stream project into doubt. The
Turkish Stream plan sees Russian natural gas piped under the Black Sea to Turkey and then
onward to Europe through Greece." |
"The price of oil could be stuck firmly
at around $50 a barrel by 2020, a Goldman
Sachs analyst told CNBC, raising new fears about the energy companies that have
already started to cut costs, projects and jobs to cope with falling revenues. Several big
oil and gas companies announced this week they intend to make cutbacks to stay afloat in
this sinking environment. Royal Dutch Shell expects to cut 6,500 jobs, 6,000 for Centrica, and at Chevron, a 2 percent slash to
its global workforce. These measures were introduced while Brent crude and West Texas
Intermediate (WTI) crude are trading around $53 and $48 a barrel respectively as the Organization of Petroleum Exporting
Countries has kept its supply high – and process low – in its battle for
market dominance over U.S. shale oil. But Michele Della Vigna, co-head of European equity
research at Goldman Sachs, told CNBC Friday that by 2020, they see oil around $50 per
barrel. 'What we've learned from this reporting
season is that deflation is accelerating from a cost perspective. Efficiency is improving
in all the mature regions and productivity is sharply improving in almost all the shale
places in the U.S.' 'With all of that compounds to
what we think will be a multi (year) deflationary trend in oil. If we look to the end of
the decade, we see oil at $50, as this productivity continues and as costs keep coming
down.'" |
"Shell sees no quick end to the slump in
oil prices and plans to further slash annual spending, sell off assets and bring the total
number of job cuts to 6,500 by the end of 2015. But the Anglo-Dutch group has vowed to
press on with its expensive and controversial
exploration programme in Arctic Alaska, saying it was a 'long-term play' that could
not be influenced by current energy prices. Capital
expenditure will be reduced by a further $3bn (£1.9bn) meaning a fall of 20% overall
across 2015 compared to last year while more than
$30bn assets are to be disposed of by 2018 once its takeover of BG is complete." |
"Years of mismanagement and politically
driven expansion are catching up to the Russian state-owned natural gas company Gazprom.
Output this year is forecast to be the lowest in its history, pipeline projects are
floundering and it's not doing well in Europe, its key market. In June 2008, when
Gazprom's market value reached $360 billion, Chief Executive Officer Alexei Miller predicted the
company would be the world's biggest enterprise, worth $1 trillion, in seven or eight
years. Miller, who worked with President Vladimir Putin in the St. Petersburg mayor's
office in the 1990s, was proud of what he had achieved since taking over in 2001. He
returned valuable assets stripped from the company by previous managers, expanded
production and increased Gazprom's revenue to $94 billion from $21 billion. Miller could
be excused for thinking the sky was the limit. He was wrong. Seven years after his
prediction, Gazprom is worth $55 billion. It's not even in the top 100 of global
companies. And it's looking like a fish out of water. The
Russian economics ministry predicted this week that Gazprom's output would drop to
414 billion cubic meters of gas this year, lower than ever and one-third below
capacity. The company had been counting on growth in both domestic consumption and
exports. But the former has slumped because of Russia's recession, and the latter
have shrunk because Europe, Gazprom's biggest export market, has diversified its
energy sources. In 2014, Gazprom's exports were 90 billion cubic meters lower than in
2008. As exports dropped, the company kept investing
in extraction and pipelines. The Russian business daily Vedomosti estimated that
Gazprom, under Miller, may have spent 2.4 trillion rubles ($40 billion) on unnecessary
expansion. He may have done this to benefit Gazprom's billionaire contractors, including
Arkady Rotenberg and Gennady Timchenko, both Putin friends who are living under
international sanctions. The Russian edition of
Forbes says their companies made $1.9 billion just on the abortive South
Stream pipeline, which was supposed to supply gas to southern Europe without
crossing Ukraine. That investment can still be recouped if the replacement pipeline,
Turkish Stream, is built, but so far Gazprom's negotiations with the Turkish gas company
Botas haven't yielded a final deal." |
"The
Bakken-shale-focused oil-and-gas producer uttered the 'F' word in its 2016 outlook: Fifty.
That is the oil price underpinning its cash-flow and production targets for next year. It is slightly above where the price is now but fully one-fifth below the
consensus forecast. Whiting’s shares plunged 6% on Thursday. The bigger story from
Whiting’s uncharacteristic display of hunkering down is its bearish implication for
oil prices. First, consider that based on $50 oil, Whiting plans to lay out $1 billion on
capital expenditure in 2016, equal to projected cash flow. That would be a 53% cut in
investment versus guidance for this year, leading to just an expected 10% drop in output. That reflects productivity gains with Whiting reporting output
gains of 40% to 50% in some recently completed wells.
Second, Whiting also said Thursday that its budget is 'flexible.' There is a certain irony
in this: The company just trimmed its 2015 budget, having only raised it a couple of weeks
ago. The point is that Whiting anticipates that it can move reasonably quickly to add more
rigs if oil prices rally—thereby capping that rally. Witness the recent increases in U.S. oil rigs
deployed that likely stemmed from the second-quarter rebound in oil prices. The great enabler of all this is capital. Whiting
likely has its eye on coming reviews of credit facilities that usually happen in the fall.
James Sullivan of Alembic Global Advisors estimates that under Whiting’s 2016
scenario, it may have to rely on asset sales or selling more shares to keep leverage in
check next year." |
"It may be high summer on the calendar,
but Canada's energy companies are already looking towards the coming winter. What they see
is looking worse now than it was even a month ago. After a rough start to the year
that saw companies lay off thousands of workers amid falling crude prices, lower cash flow
and wounded share prices, a spring rally in oil was stirring hopes the dreaded other shoe
might not drop. A July-long slide took oil prices back below $50 a barrel, so a rally is
looking less likely. 'It's a very difficult time in our industry, one of the most
difficult in decades,' said Tim McMillan, chief executive of the Canadian Association of
Petroleum Producers, the lobby group for the energy industry. 'The mantra that I've heard
pretty consistently from companies is preparing for lower for longer.' Whether the earlier
rounds of staffing cuts and budget reductions are preparation enough to weather what's
expected to be a dismal winter drilling season is a question that is already starting to
be answered. In the next few weeks, Canada's oil companies will get down to the serious
work of crafting next year's budgets. Those plans will come together in September on the
way to getting approved in November. ... 'Either they're holding their cards tight to
their chest and not letting anyone know what their plans are or they don't know themselves
at this point,' said Duncan Au, chief executive of CWC Energy Services. 'Even now at $50 [oil] we are seeing maybe those plans that were
in place are now starting to be put off or put on hold.' The nature of the oil industry means drillers are the first to get hit
when a downturn comes and the first to come back when the cycle turns for the better. Compared to last year at this time, the number of active drilling
rigs in Western Canada is down by half. Against this backdrop, many drilling companies
have already cut staffing levels by a third." |
"More than 5,500 North Sea jobs have
disappeared in the past year due to the slump in the price of oil. Industry watchdog Oil
and Gas UK believes that estimate may be conservative, while trade union chiefs say the
total is 'at least' 4,000. Unite, which represents many of the workers involved, is
concerned the cuts could pose safety issues, placing remaining employees at risk. Experts
believe the worrying trend is set to continue as oil bosses conduct 'major reassessments
and cost reducing initiatives'. They believe that the oil price could stagnate for years.
But despite the adverse impact on jobs, insiders are also predicting a 'silver lining'
with firms now adopting innovative methods to boost efficiency....Last year, North Sea exploration reached its lowest level in at
least two decades with only 14 explorations wells drilled, compared to 44 in 2008.... Alex Kemp, professor of petroleum economics and director of the
Centre for Research in Energy Economics and Finance at Aberdeen University, said: 'There have had to
be major reassessments and cost reducing initiatives, and that’s going to continue
this year and beyond. 'We’ve done modelling which shows that at a $70 price, there will be much less investment than at $90.
Something like $70 could be the position for several years ahead.'" |
"Oilfield
giants Schlumberger Ltd and Halliburton Co and many others in the oil and gas industry
have announced plans to lay off thousands of people in the past few months as global oil
prices have fallen more than 40 percent since June last year. Brent prices fell to near six-year lows in January, hurt
by a global supply glut and OPEC's decision not to curtail production. Oil producers in
response have trimmed their budgets and lowered the number of rigs planned for 2015,
hurting their suppliers and service providers. Schlumberger, the world's No.1 oilfield
services provider, said earlier this month that expects little improvement in pricing
levels in the near future as customers continue to keep a tight lid on budgets.
Houston-based Schlumberger also said in April that it plans to cut another 11,000 jobs,
bringing the total job cuts announced this year to 20,000 - about 15 percent of its
workforce. Halliburton Co, which is buying smaller peer Baker Hughes Inc in a $35 billion
deal, said on Friday it had initiated a company-wide reduction in workforce by about 16
percent during the first half of 2015." |
"Energy firm bosses should take action
now to adopt technological advances and innovative business models if they are to
capitalise on long-term opportunities. This was a central theme in a white paper we
collated from the discussions and presentations at our recent annual FWB Park Brown
Leadership Dinner, taken from an audience of 140 oil and gas industry leaders which
outlined a number of key trends business leaders are, or should be aware of. Ian Marchant,
current chairman of Wood Group Plc and former chief executive of SSE, was keynote speaker
at the event. Speaking in a personal capacity, Marchant said even though the word
'strategy’ is often said and heard, the energy industry often focusses on short-term
tactical goals rather than adopting a truly strategic approach, with questions around oil
price, and short-term project and cost-planning, dominating the industry over the last
year. Marchant went on to outline so-called 'mega-trends' the industry currently faces,
which include: * The rise of Asia, particularly China as a global financial powerhouse and
increased Chinese ownership of the world’s natural resources, which the attendees
said could mean the West's hegemony in oil and gas 'could be short-lived'. * Changes in
energy demand and consumption and a potential new 'golden age' for gas led by LPG and
fracking. Energy consumption is seen to have
plateaued in many of the Organisation for Economic Co-operation and Development (OECD)
economies, though consumption is expected to grow by 60 per cent in non-OECD countries,
notably India and China. * Resource scarcity, and mentions of peak oil which the report
found 'seem to have disappeared from industry rhetoric for now - but they will inevitably
return' though it is anticipated access to clean
water will become a 'major constraint' in many areas of the world sue to the industry's
reliance upon water-intensive processes." |
"Iraq's
southern oil exports have risen above 3.0 million barrels per day (bpd) so far in July,
according to loading data and an industry source, setting shipments from OPEC's
second-largest producer on course for a monthly record. The Iraqi boost is an indication of continued high output from the
Organization of the Petroleum Exporting Countries, which is focusing on keeping market
share rather than curbing supply to support prices. Exports
from Iraq's southern terminals averaged 3.06 million bpd in the first 23 days of this
month, up from a record 3.02 million bpd in all of June.... The southern fields produce most of Iraq's oil. Located far from the
parts of the country controlled by Islamic State militants, they have kept pumping despite
the conflict. Shipments from Iraq's north via Ceyhan in Turkey have remained steady
despite tensions between Baghdad and the Kurdistan Regional Government over budget
payments....Iraq's growth follows investment by Western oil companies in the southern
oilfields and an easing of export bottlenecks. Risks include bad weather, technical
problems and unrest." |
"Crude
oil futures markets have grown increasingly gloomy about the outlook for prices,
but UBS believes the scene is set for a recovery over the next three years, with potential
spikes above $US100 a barrel. UBS is sticking with its prediction that Brent
crude oil prices will rise to an average of about $US70 a barrel in 2016, then
continue north to $US90 by 2018. That contrasts with the forward curve for Brent crude
oil, which shows a price of just $US64 in three years' time amid prospects for
increased supply from Iran and stubbornly high US production. The $US8 increase from current prices within three years
compares with a $US17 recovery the forward curve was signalling six months ago,
showing most market participants believe the price weakness will be around for longer. But
UBS energy analyst Nik Burns believes that while the markets are likely to stay
oversupplied for another 18 months, a turnaround is likely sooner rather than
later given the much higher prices needed to stimulate investment in new
production that will soon be needed to meet growing demand. 'You only really have one year to 18 months of growth in demand
before you get the markets back into balance: the market is going to look through
that," Mr Burns said at a briefing in Sydney. "Supply just is not going to be
there: that could result in prices heading up to or potentially north of
$US100 a barrel.'...Mr Burns said no oil company had
sanctioned a new conventional oil development for the last six months as low prices deter
investment. That would result in a material drop in conventional oil supply starting
to emerge within 18-36 months as fields naturally decline....Mr
Burns said in the past five years when oil prices averaged about $US100 a barrel, oil
production outside OPEC and the US had been flat even as companies were investing heavily
to increase supply. "Everyone was running as hard as they possibly could on
this treadmill to add more oil production and the best they could was keep it flat, and
that was at north of $US100 a barrel," he said.
As a result, UBS expects prices to have to recover, but the softening in oil services
costs means the price required was no longer as high. "The question we still
continue to debate is how far can cost deflation bring that incentive price of oil
down to. Is $US90 the right number? Could it be higher, could it be lower?"" |
"Anyone who understood that U.S. drillers
in shale plays had large inventories of drilled, but not yet completed wells, knew that
production would probably rise for some time into 2015--even
as the number of rigs operating plummeted. Shale drillers who are in debt--and most of
the independents are heavily in debt--simply must get some revenue out of wells already
drilled to maintain interest payments. Some oil production even at these low prices is
better than none. Only large international oil companies--who don't have huge debt loads
related to their tight oil wells--have the luxury of waiting for higher prices before
completing those wells. The drop in overall U.S. oil production (defined as crude including lease condensate)
is based on estimates made by the U.S. Energy Information Administration (EIA). Still
months away are revised numbers based on more complete data. But, the EIA had already said
that it
expects U.S. production to decline in the second half of this year. What this first sighting of a decline suggests is that glowing
analyses of how much costs have come down for tight oil drillers and how much more
efficient the drillers have become with their rigs are off the mark. It was inevitable
that oil service companies would be forced to discount their services to tight oil
drillers in the wake of the price and drilling bust or simply go without work. And, it makes sense that the most inefficient uses of drilling rigs would
be halted. But the idea that these changes would
somehow allow tight oil drillers to continue without missing a beat were always promoted
by an
industry sinking into a mire of over indebtedness in the face of lower prices. In
order to maintain the flow of capital to the industry--which
has consistently spent more cash than it generates--the illusion of profitability had
desperately to be maintained. A recent renewed slump in the oil price may finally pierce
that illusion among investors. As Iranian oil exports start to ramp up in the wake of an
agreement on nuclear weapons--the Iranians aren't allowed to have any--and the resulting
end of economic sanctions, the oil price is likely to fall further, putting even more
pressure on U.S. domestic drillers. OPEC, which has
refused to reduce output in the face of slackening world oil demand growth, continues to
say that others--such as U.S. tight oil drillers--will have to "balance the
market," a euphemism for cutting production in order to push up prices. It looks as
if U.S. drillers may finally be doing just that. Who knew that 45 years after abandoning
the role of the world's swing producers--that is, producers who adjust production up or
down to maintain stable world oil prices--U.S. oil companies would be forced into that
role again entirely against their will?" |
'Russia
is going to be in a very difficult fiscal situation by 2017,' said Lubomir Mitov from Unicredit. 'By the end of next year there
won’t be any money left in the oil reserve fund and there is a humongous deficit in
the pension fund. They are running a budget deficit of 3.7pc of GDP but without developed
capital markets Russia can't really afford to run a deficit at all.' A report by
the Higher School of Economics in Moscow warned that a quarter of Russia’s 83 regions
are effectively in default as they struggle to cope with salary increases and welfare
costs dumped on them by President Vladimir Putin before his election in 2012. 'The regions
in the far east are basically bankrupt,' said Mr Mitov. .... 'Frankly, I don’t think
they can weather this crisis. There has been almost
no investment in new oil production except in Western Siberia. They are still relying on
old Soviet wells,' said Mr Mitov. The depletion rates in the traditional fields of Western Siberia
are running at 8pc-11pc a year. 'They can’t keep up production without access
to foreign imports and technology, so we think there could be a fall in output of 5pc to
10pc by 2018,' he said..... Russian producers have taken advantage of a new tax regime to
raise output this year to 10.7m b/d, close to the post-Soviet peak. But they are relying
on legacy investments and imported machinery that must be replaced sooner or later. Mr
Putin’s long-term strategy depends on opening up the Arctic and the vast shale
reserves of the Bazhenov
basin and the Volga-Urals. Drilling in these regions is covered by sanctions, forcing
Western firms to freeze joint ventures. Russia lacks the technology to make these projects
viable. Average fracking costs in Russia are three times higher than those of cutting-edge
drillers in the US." |
"Imagine parking your $300 million boat
for months out in the open sea, with well-paid mechanics hovering around it and the engine
running. The Gulf of Mexico and the Caribbean Sea have become a garage for deepwater
drillships -- at a cost of about $70,000 a day each. It’s either that or send your
precious rig to a scrapyard. The dilemma underscores how an offshore industry that geared
up for an oil boom is grappling with a bust. Rig
owners are putting equipment aside at unprecedented numbers as customers including
ConocoPhillips pull back from higher-cost deepwater exploration. That’s helped make Transocean Ltd. and Ensco Plc two of the three
worst performers in the Standard & Poor’s 500 Index over the past year. 'Most
contractors have never seen an environment like this, where demand is falling as quickly
as it is,' David Smith, an analyst at Heikkinen Energy Advisors in Houston, said in a
phone interview. 'It’s been a big headache, and the problem is that we’re not
halfway through.' A growing glut of newly built exploration vessels looked worrisome
enough before the oil rout. Now it’s beginning to look disastrous. Shipyards continue
to roll out new units to meet orders made during the boom, but the rig providers may not
need them anymore. As contracts expire, many producers may not renew them, and some are
being canceled....
The number of idle drillships has more than tripled since the beginning of last year to
31, or about one in every four of such vessels floating around the globe, according to
data in a Bloomberg Intelligence report. That’s the most since at least July 2008,
the data show. About a third of those unused ships are in the Gulf of Mexico and the
Caribbean. The numbers for idle deepwater platforms
known as semi-submersibles aren’t reassuring either. Of the 190 around the world, 46
are idle, up from 39 in early 2014.... Deliveries of
more than 60 new rigs booked through the end of 2018 will only worsen the outlook as crude
oil trades at less than half its value in mid-2014, with no signs of a major recovery.
About 50 deepwater rig contracts are due to expire this year, according to Bloomberg data.
If a rig can’t get immediate work from a new deal, the owner must decide whether to
idle the vessel or scrap it.... Few new contracts are being signed and even existing rig
leases are in question. ConocoPhillips said July 16
it will cancel a three-year contract with Ensco for a drillship that would have cost about
$550,000 a day to work in the Gulf of Mexico. The
producer will still have to pay Ensco a penalty that amounts to two years of day rates, or
about $400 million, Ensco said. The contractual penalties help offset the revenue loss.
But they don’t change the fact that an idle rig is a big overhead.... As recently as last year, Transocean’s Deepwater Expedition,
a ship that was capable of drilling in waters as deep as 8,500 feet (2,600 meters), was
being leased for $650,000 a day, one of the highest day rates ever signed. After its
contract ended in November, the rig was costing the world’s largest offshore rig
owner close to $100,000 a day, Heikkinen’s
Smith said. Transocean soon put it up for sale. 'You just didn’t have rigs coming off
contract and being sent to the scrapyard,' Smith said. 'The fact they’re doing that
now is an under-appreciated signal of how bad the contractors think things are going to
be.'" |
"Barack Obama has removed one of
the last obstacles to oil drilling in Arctic waters, granting Shell permission to bore two
new exploratory wells. However, the drilling permit
granted by the Interior Department on Wednesday bans Shell from drilling into oil-bearing
zones until critical spill-response equipment is in place – and that equipment is
aboard a damaged icebreaker en route to Oregon for repairs. The restrictions could
severely limit Shell’s operations during the brief Arctic season, which winds down in
late September. The company has spent $7bn and seven years trying to open up the Arctic to oil and gas
drilling." |
"Of the roughly two million barrels a day
that Canada currently produces from its oil sands, about half is mined from the surface
using giant excavators and the world’s tallest dump trucks. The rest is too deep to
mine and must be recovered by newer technology such as injecting steam underground to
leach out oil deposits. That accounts for about 80% of Canada’s reserves—the
world’s third-largest source of untapped crude. The global downturn in oil prices is
shining a harsh light on the high cost of extracting Canada’s oil sands, which are
the biggest single source of U.S. crude imports. Some of the world’s biggest oil
companies, including Royal
Dutch Shell PLC and Exxon Mobil Corp. ’s Canadian unit, Imperial Oil Ltd. , are counting on those
deeply buried oil sands deposits to increase cash flows and shore up their global
production levels. Chronic cost overruns amid the pressure of lower oil prices are calling
into question how much of those reserves can be recovered profitably. The most common
technique for extracting the deepest deposits involves drilling a pair of horizontal
tunnels that bracket an underground oil formation from above and below. Steam pumped into
the top chamber melts solidified oil, which gradually drips into the lower well, where it
is collected and pumped to the surface. In industry circles, it is known SAGD, or steam
assisted gravity drainage and has no relation to hydraulic fracturing, which uses a single
well and high-pressure injections of unheated water to release oil from shale formations.
But this method is turning out to be more technologically complex and unpredictable than
billed when first deployed commercially in the early 2000s. The key unforeseen challenge
with the technology has been the lack in uniformity in reservoirs of heavy crude, or
bitumen, in ancient river beds that now lie buried under the boreal forests in
Canada’s western Alberta province. Operators are having to drill more wells, pump
more steam underground and lay more pipe above ground to meet targets, thanks to varying
thickness, impermeable rock formations and high water-saturation levels. The result is a
lot of trial and error as kinks are worked out. 'The technology isn’t
one-size-fits-all,' said Reynold Tetzlaff, PricewaterhouseCoopers’ Canada energy team
leader, noting that the continuing capital requirements necessitate strong balance sheets.
'It’s getting harder and harder for smaller companies to make a go of SAGD.' Many of
their projects were greenlighted when prices were higher, or believed to be heading
higher. But what was tolerable a year ago at $100 a barrel has become less
profitable—or unworkable—in today’s world of $50 a barrel crude. The break-even point for a brand-new SAGD project, including a 9%
average return on investment, requires crude prices of at least $65 a barrel, which is
among the highest extraction cost in the oil industry, according to the Bank of Nova
Scotia.... Several once-promising Canadian junior
oil-sands producers that bet on this form of extraction have suspended operations and
sought protection from creditors, including Connacher Oil & Gas Ltd., Ivanhoe Energy
Inc., Laricina Energy Ltd. and Southern Pacific Resource Corp. Most oil-sands startups and
a few large producers—such as Cenovus—rely entirely on SAGD and most of the oil
sands’ multinational players also use it for some of their current output or are
counting on it for their future production plans. Cenovus, Canadian Natural Resources
Ltd., Suncor Energy Inc. and Shell all announced plans earlier this year to
shelve—but not abandon—plans for new or expanded subsurface oil sands projects
until global oil prices rebound or costs can be reduced dramatically. Even before the
tumble in oil prices, France’s Total SA and Statoil ASA of Norway indefinitely
postponed a pair of underground oil sands projects last year, citing cost issues....
Cenovus talked boldly this time last year of introducing mass manufacturing to
Canada’s remote oil patch by ramping up installation of 30,000 to 50,000 barrel-a-day
well-site modules. But after the crude price slump, the company slashed its 2015 spending
budget, deferred new SAGD expansion phases and, in late May, ushered out half its
executive leadership, including the COO." |
"The
United States is not alone in having massive shale gas resources: shale formations rich in
gas can be found all over the world. But so far no other country has come close to
replicating the U.S. boom that has led to relatively cheap natural gas and helped curb
yearly carbon dioxide emissions. According to recent numbers
from the U.S. Energy Information Administration, only two other countries—Canada and
China—are now producing commercial volumes of gas from shale formations, a process
made feasible relatively recently thanks to the development of hydraulic fracturing and
horizontal drilling technology (see 'Natural Gas Changes the Energy Map'). Those countries lag far behind
the United States in production, however. Though China, the world’s largest annual
emitter of carbon dioxide, has nearly as much technically recoverable shale gas as the
U.S. according to recent EIA estimates, challenging geology has been a major obstacle,
and the country has had to scale back its near-term goals dramatically (see 'China’s
Shale Gas Bust'). According to the EIA, recent
developments indicate that China is on schedule to produce some 17 million cubic meters
per day by the end of this year. By comparison, current
U.S. production is roughly 1.3 billion cubic meters per day. Canada, the second-largest
shale gas producer, produced roughly 113 million cubic meters per day last year. Mexico
has begun to produce a very small amount of the gas, and Poland, Algeria, Australia,
Colombia, and Russia are all exploring the potential for developing oil and gas resources
from their own shale formations. But according to the
EIA, the 'logistics and infrastructure' necessary to support production at the level seen
in the United States does not yet exist in other countries besides Canada and China." |
"Iran
could restore oil production halted by sanctions faster than anyone anticipates if the
history of previous shutdowns is any guide. The consensus among analysts and traders
is that Tehran needs at least a year after sanctions are lifted to raise output to the
level prevailing before restrictions were imposed in 2012. Similar pessimistic assessments
for supply disruptions at OPEC members Libya and Venezuela were confounded by
quicker-than-expected recoveries, according to data compiled by Bloomberg. .... 'There really isn’t any compelling reason to doubt that
Iran could ramp up quite quickly in terms of technical capacity,' said Antoine Halff, head
of oil markets at the IEA. The agency doesn’t agree with the 'skeptical' view that
Iran’s oil fields have been degraded or damaged by the sanctions, he said. The consensus among most analysts including Wood Mackenzie
Ltd. and Standard Chartered Plc is that Iran will need at least a year to
return to its pre-sanctions level of production of 3.8 million barrels a day from 2.8
million barrels today." |
"Britain’s
first low cost ‘energy positive’ house, which can generate more electricity than
its occupants will use, opens on Thursday despite George Osborne axing plans to make
housebuilders meet tough low carbon housing targets from next year. The modest
three-bedroom house built in just 16 weeks on an industrial estate outside Bridgend in
Wales cost just £125,000 to build and, said its Cardiff
University designers, will let occupants use the sun to pay the rent. Using batteries
to store the electricity which it generates from the solar panels that function as the
roof, and having massive amounts of insulation to reduce energy use in winter months, it
should be able to export electricity to the national grid for eight months of the year.
For every £100 spent on electricity used, it should be able to generate £175 in
electricity exports, said Professor Phil Jones, whose team from the Welsh School of
Architecture designed the house specifically to meet the
low carbon housing targets set by the Labour government in 2006....According to Jones,
the building costs of the 100 square metre energy positive house could drop below
£100,000 if several were built at the same time. 'We save money and space by making the
photovoltaic panels the roof itself and by dispensing with radiators and making the air
collector part of the wall,' he said." |
"For many, the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas
pipeline is nothing but a pipe dream. Its starting point is in Turkmenistan, one of the
most isolated and closed-for-business states in the world, before it goes through war-torn
Afghanistan and then reaches two countries that are hard to describe as partners -
Pakistan and India. However, Turkmenistan insists that the pipeline's construction will
start by the end of 2015. The visit in May of Pakistani Prime Minister Nawaz Sharif to
Ashgabat seemed to confirm this - both sides pledged to put fast track the project.
Likewise the recent visit of Indian Prime Minister Narendra Modi to Turkmenistan is also
being seen as a boost to the project. Pakistan and India will each get 42% of that volume
- the rest will be purchased by Afghanistan. The US
strongly supports the pipeline plan, calling it 'a transformative project for the entire
region'. If implemented, it will help to attract much-needed investment to Afghanistan,
increasing budget revenues through transit fees and contribute to the country's overall
development. The project is also crucial for India and Pakistan who are both facing severe
energy shortages. By 2020-21, demand for gas in India is expected to double and according
to the Oxford Institute for Energy Studies, demand for gas in Pakistan over roughly the
same timeframe will be three times higher than supply. Turkmenistan is keen to implement
this project in order to diversify its export routes and decrease its dependency on China.
At the moment Beijing is the main buyer of the Turkmen gas and by 2020 it will import two
times more Turkmen gas than now. .... It is not clear who will finance the project that is
estimated to cost $10bn. The Pakistani and Indian governments show no indication that they
can pay for the pipeline. None of the four energy companies that formed the consortium has
enough resources to fund the construction. They have debated from the very beginning about
inviting a global energy giant to finance the project in the form of a private company
with sufficient funds and expertise. Chevron, Exxon Mobil, Total and a few others have
been mentioned as possible companies who could get involved. However, all these companies
have demanded a share in developing the gas field if they are to take the risk of
financing it. Construction of the pipeline is a
costly and risky venture, and companies want to make sure that they will make enough money
in order to return their investments and make a profit. 'You don't really make money from
operating a pipeline,' energy specialist John Roberts said. 'You make money from
developing a gas field and being able to export the gas.' The problem is that Turkmenistan
refuses to let any foreign company have a stake in its gas fields....It seems there is no coherent
mechanism in place to prevent participating states from using the pipeline as political
leverage against neighbours, particularly if there is a dispute between Pakistan and
India. Turkmenistan's approach is to sell its gas at its border and argue that it is not
responsible for whatever happens afterwards, says John Roberts. So it is not clear who will ensure that Pakistan will not cut off the gas
flow into India if there is a new wave of tension between the two countries.... Security
issues are another major challenge for this project. More
than 700km of the pipeline will cross through Afghanistan, including Helmand and Kandahar
provinces that are traditionally considered to be Taliban strongholds. The Afghan
government has promised to provide troops to protect the pipeline. However, with the end of Nato's operation, the security situation seems
to be deteriorating. Recent reports about clashes near the Turkmen-Afghan border and the
Taliban gaining strength in the north makes the project even less attractive for
investors. The pipeline was expected to be
operational from 2017 but has been pushed back to 2018. Recently, Afghan President Ashraf
Ghani said that the pipeline would not be completed in the next five years, casting even
more doubt on its future. So a combination of security issues and financial questions
means that there is a long to go before the Tapi project gets off the ground." |
"Royal Dutch Shell expects oil prices to
recover gradually over the next five years, with progress
slowed by persistent global oversupply and receding Chinese demand growth. The Anglo-Dutch energy giant is betting on crude rising to $90 a barrel by
2020, a key assumption in its move to buy rival BG Group for $70 billion to help transform
it into a leading player in the costly deepwater oil production and liquefied natural gas
(LNG) markets. 'We are not banking on an oil price recovery overnight. It will take
several years but we do believe fundamentals will return,' Andy Brown, Shell's upstream
international director, who oversees the company's oil and gas production outside North
America, told Reuters in an interview." |
"The nuclear
deal reached between Iran and the P5+1 could weaken oil prices, but not just yet.
In a note to clients on Wednesday, Goldman Sachs analysts predicted that the lifting of
sanctions on Iran will be bearish for oil, though the effects won’t be seen until
2016. ... Goldman added that oil supply is at
risk of being too high in 2016, because previous estimates had 'conservatively assumed no
increase in Iranian flows.' Plus, other OPEC members
have already increased their production, exceeding Goldman’s initial 2016 forecast,
and even bringing risk to 2H15 forecasts. Simply put, more oil production from OPEC
countries, including Iran, — which attempt to collude to keep supply low and prices
high — will bring prices down. A gradual increase in Iran’s oil exports would
start with the drawn down of the Islamic Republic’s floating storage of c.20-40 mb,
once the EU import bans are lifted. This would be followed by a jump in production, which
Goldman says could lead to a c.200-400 kb/d increase in Iranian exports in 2016.... The
full potential of Iranian oil exports is not
expected within the next year, because the production infrastructure still needs
to be brought back to life. And so Iraq's surging production is a more immediate
threat to oil prices, which last week fell for a third straight week." |
"Households face higher energy bills this
winter as power chiefs have been forced to spend £36million protecting against the risk
of winter blackouts. So many power plants have closed recently that the grid will be
dangerously close to full capacity during periods of peak demand in the winter months.
National Grid has announced that it is spending millions putting mothballed plants on
standby, and will pay companies to shut down their factories when the grid is overloaded.
Without the new emergency measures, the grid would have had just 1.2 per cent of spare
capacity during the coldest, darkest evenings in the coming winter. The company said that
if the country were hit with unusually cold weather, the network would risk becoming
overloaded, leading to widespread blackouts. The
£36million insurance measures will secure an extra 2.56 gigawatts of power, boosting the
capacity margin to 5.1 per cent, according to National Grid. However, the cost will be
passed on to consumers, with an average rise of 50p for every household's energy bill." |
"Saudi
Arabia has borrowed $4bn from local markets in the past year, selling its first bonds for
eight years as part of efforts to sustain high levels of public spending as oil prices
slump. Fahad al-Mubarak, the governor of the Saudi
Arabian Monetary Agency, said the government would use a combination of bonds and reserves
to maintain spending and cover a deficit that would be larger than expected." |
"Despite lower oil prices and other
challenges, growth in Canadian oil sands will continue and remain one of the top sources
of global supply growth in coming years, according to a new report by IHS Inc. (NYSE: IHS), a leading
global source of critical information and insight. Oil
sands growth, which previously rose 1.2 million barrels per day (mbd) from 2005 to 2014,
is expected to add an additional 800,000 barrels per day (b/d) of new production by 2020.
This would keep Canada the third largest source of supply growth in the world through that
period (a rank it has held since 2005). The report,
entitled Why the Oil Sands: How a
Remote, Complex Resource Became a Pillar of Global Supply Growth, is a research
project of the IHS Oil Sands Dialogue. Drawing on previous IHS research into specific
aspects of the oil sands, the report provides a historical context of oil sands growth
over the past decade and a half and discusses the reasons that growth continues." |
"The
US generated more of its electricity from gas than from coal for the first time ever in
April — in a sign of how the shale boom is putting mounting pressure
on the country’s mining industry. Plunging prices for natural gas, which have fallen
alongside oil since last summer, led to it being used to generate 31 per cent of
America’s electricity in April, while coal contributed 30 per cent. This was the
first month in US history that gas-fired electricity generation surpassed coal-fired
generation, according to SNL Energy, a research firm
— although it came close in 2012 when gas prices were also very weak. In 2010, coal
provided 45 per cent of US power. Since then, competition
from cheap shale gas — unlocked by the rise of horizontal drilling and hydraulic
fracturing — plus a growing regulatory burden on coal-fired power plants, has
squeezed out coal use. That trend has accelerated in 2015." |
"The
country's oil production hit an all-time high in June at 4.1 millions of barrels of oil
per day, according to the International Energy
Agency. Iraq's oil surge is remarkable considering the uphill battle it's fighting.
'Already in 2015, OPEC's second-biggest producer has made huge strides to expand output
despite the twin challenge of low oil prices and a costly battle against' ISIS, the IEA
noted.... The price of a barrel of oil has slid below $51 this week, matching lows
last seen in April. "What they lost in price significantly exceeds the production
growth," says Fadel Gheit, managing director of oil and gas research at Oppenheimer
& Co. The Islamic State continues to commandeer many of Iraq's oil rigs, robbing the
Iraqi government of much-needed oil money. ISIS controls about 10% of Iraq's oil fields.
However, ISIS has to sell its oil at a discount because it must go to the black market for
buyers.... "Despite all these obstacles, despite all these problems...we still have 4
million barrels a day of Iraqi production. If that was under normal circumstances, Iraq
would've been close to 4.5 to 5 million barrels," says Gheit. But as Gheit and the
IEA point out, Iraq's current production level won't be permanent. The government has
already told major oil companies that run its southern oil fields, like ExxonMobil (XOM), that they need to slow production later this year. U.S. companies
don't stand to win or lose much since they don't own the oil fields there -- they're only
paid a service fee by the government, experts say. With ISIS claiming more and more oil
fields, Iraqi officials are planning budget cuts, which will curtail oil production later
this year. " |
"Oil
prices are set to come under further pressure from easing global demand and an expanding
glut of crude while a rebalancing of the markets may last well into next year, the
International Energy Agency has said. The IEA said
it expected global demand growth to slow next year to 1.2m per day (bpd) from 1.4m this
year - far less than needed to balance stubbornly growing non-OPEC and OPEC supply. 'The
bottom of the market may still be ahead,' the IEA said in its monthly report. 'The
rebalancing that began when oil markets set off on an initial 60pc price drop a year ago
has yet to run its course. Recent developments suggest that the process will extend well
into 2016. The oil market was massively oversupplied in the second quarter of 2015, and
remains so today. It is equally clear that the market's ability to absorb that oversupply
is unlikely to last. Onshore storage space is limited. So is the tanker fleet ...
Something has to give,' it said. The global glut arose from a steep spike in US oil supply
on the back of the shale revolution and OPEC's decision not to reduce output but rather to
fight for market share with rival producers. But the fall in prices to $50-$60 per barrel
in recent months from as high as $115 a year ago has yet to depress North American supply.
'The expected timing of the rebalancing has shifted a bit, but the story line has not
changed. The supply response to lower prices is on the way,' the IEA said, adding it may
take another price drop for a full supply response to unfold. 'Cost savings, efficiency gains and producer hedging have let light tight
oil producers defy expectations until now, but growth ground
to a halt in May and will likely stay there through
mid-2016,' it said. US supply grew by 1m bpd in the first five months of 2015, down from
1.8m in 2014, according to the IEA. 'Total US supply
will keep growing through 2016, but much more slowly than in 2014, and thanks to natural
gas liquids and new deepwater plays rather than onshore crude supply,' it said. Non-OPEC supply as a whole, after expanding by a massive 2.4m bpd in 2014,
looks on track to slow to growth of 1m bpd in 2015 and stay flat in 2016, the IEA said. Among other bearish signals, the IEA said world oil demand growth
appeared to have peaked in the first quarter of 2015 at 1.8m bpd and would continue to ease throughout the rest of this year and into
next. That means the need for OPEC's oil will stand at 30.3m bpd next year, up 1m bpd on
2015, but still a whopping 1.4m bpd below current OPEC production. 'And the group is not
slowing down,' the IEA said. 'On the contrary, its core Middle East producers are pumping
at record rates and the outlook for Iraqi capacity growth - accounting for most projected
OPEC expansions - keeps improving.'" |
"A
handful of optimistic U.S. shale drillers are sticking with plans to deploy more rigs in
the coming months even as oil prices take a sharp dive well below many producers'
$60-a-barrel breakeven point. On
Wednesday, Pioneer Natural Resources Co. became the first big company to
publicly confirm it was drilling more wells, saying it had already added two rigs in the
Permian Basin of Texas this month and would keep on adding two a month as long
as the oil price 'remains constructive.' Smaller shale oil producer WPX Energy Inc, whose
operations are focused on North Dakota's Bakken shale, said this week that its
decision to add two rigs later this year was unaffected by a nearly $8 drop in crude
prices since June to toward $50 a barrel. While half a dozen or so other companies in the
U.S. shale industry have indicated they may add rigs, none have publicly confirmed a move,
although a few have quietly done so. Last week the
U.S. oil drilling rig count rose for the first time since December, inching up by 12 to
640 across the country. The industry is now in a difficult bind. While executives were
quick to slash rigs to a five-year low as oil prices halved through the first quarter,
many were beginning to grow hopeful that a new equilibrium was settling in the market, as
U.S. crude traded steady in May and June at around $60 a barrel. 'Based on recent
discussions with operators, companies were planning on increasing activity at $60 to $65 a
barrel,' analysts at Houston-based energy investment bank Simmons & Co said in a
note on Tuesday." |
"Greece
has admitted for the first time it is planning a €2bn gas pipeline with Russia. The move is likely to worry the US, which has stepped up its involvement
in Greece's
debt talks with international creditors over fears the cash-strapped country could
drop out of the single currency and come under the influence of its Cold War rival.
Panayotis Lafazanis, Greece's energy minister, said the move would be a key part of the
country's "multi-faceted" foreign policy and would create 20,000 jobs, the Financial
Times reported." |
"Goldman
Sachs says lower oil prices will probably disappoint the U.S. petroleum industry’s
hope of a drilling recovery in the second half of the year. The U.S. oil price’s
recent fall to around $52 a barrel will rule out the possibility that oil companies will
send 100 to 150 drilling rigs to U.S. oil fields this year – a bullish market
expectation born out of two months of stable $60 oil, which ended late last week. Goldman
Sachs analysts wrote they project only 20 to 50 rigs will return to work by the end of the
year. That $8-a-barrel difference could have big
implications for the oil field job market: Each rig employs scores of workers, directly
and indirectly. The nation’s land rig count has fallen 61 percent from its peak last
October, and predictably, the oil field service industry’s workforce has shrunk
dramatically since the beginning of the year, with the four biggest firms cutting a
combined 49,500 jobs in the first half of the year. The
decline comes just as oil companies were getting comfortable with $60 oil. They had added
a dozen oil rigs to their active roster last week, according to Baker Hughes. That was
evidence, Goldman said, that producers can increase drilling activity at $60 oil with oil
field service costs coming down 30 percent. Goldman believes the price of U.S. crude will
sink to $45 a barrel by October — a bearish
forecast compare to most, including the U.S. Energy Information Administration, which
expects light, sweet crude to average $55 a barrel this year." |
| "The Financial Times
identifies five key factors behind the falling oil price. The first is the Iran nuclear
deal, which is expected to be completed by the end of the week. If it goes through, it is likely that sanctions limiting Tehran's ability
to trade oil will be lifted, which could add up to 800,000 barrels a day to the market
within a year. The second factor is China's economic slowdown, which will affect demand.
"When China's economy wobbles, the oil market is quick to respond", the FT says.
Carsten Menke, a commodities analyst at Julius Baer echoes the FT's analysis, noting that
"commodity markets are signalling broad-based concerns about Chinese demand and the
government's ability to stimulate growth". Another factor causing oil to re-enter a
bear market is the ongoing turmoil in Greece. The country's No vote in last Sunday's
referendum on whether to accept the latest bailout package has catapulted the country into
a new period of uncertainty. While the country's difficulties are unlikely to have a
direct impact on demand for oil, they have led to a gradual strengthening of the US
dollar. As the FT notes, "commodities like oil that are priced in dollars tend to
move inversely to the US currency". Fourth is
the unexpected resilience of the US shale gas market which has proved itself to be more
immune to lower oil prices than many analysts expected. Shale gas production in
conjunction with oil coming from traditional sources has contributed to a global glut that
has pushed energy prices down. Finally, Opec's
refusal to curb its own output has contributed to oil inventory levels in Western Europe
hitting their highest levels in two years. So can we expect to see the oil price rebound?
Possibly, say analysts at consultancy Facts Global Energy, but not any time soon:
"Low prices will eventually cure low prices. But we must not get too excited too
quickly," they said in a note." Oil price: five reasons why oil has re-entered a bear market The Week, 8 July 2015 |
"There
was more news last week concerning the Rosch Innovations Kinetic Power Plant
generator....this device makes electricity by using the force of buoyancy. Floats in a column of water are filled with air at the bottom and are
pushed to the top by buoyancy, which drives an electric generator that pressurizes the
floats and produces excess energy. As compared with other possible sources of cheap power,
this technology is simple to understand; cheap to make; requires no fuel; leaves behind no
pollution, and operates 24 hours a day. Of course, 'too good to be true' is what many are
saying. This is clearly a claim of 'perpetual motion' and as anyone who has been exposed
to the laws of physics knows is impossible. The problem for the skeptics, however, is that
in so far as numerous independent observers who have actually looked at the technology up
close can tell – it works. The basics of the Rosch’s device are almost
ludicrously simple for what it purports to do although the subtleties of the electronic
control system are proprietary and patented. The company’s demonstration devices have
been taken apart and thoroughly examined without any sign of fraud or trickery many times.
One Rosch’s tech noted that he has had to drain and refill the large buoyancy tank
containing the floats 20 times so that skeptical prospective purchasers could poke around
inside looking for hidden wires or motors. Rosch’s technology now has been granted a
German patent after it was examined by an independent testing laboratory and was certified
to work.... The release of the outside technical report, used to convince the German
patent office that the Kinetic Power Plant generator is a genuine discovery of a new
phenomenon, was an important part of the conclusion that no fraud is taking place.
According to company officials, plans to further develop the system are well underway. The
parts for a 100 kilowatt generator are already on site and the device is supposed to be
operational this month. For a technology that has yet to be mentioned in the mainstream US
media and is being subjected to a stream of skepticism as a likely fraud in Europe, the
company says the devices are selling well based on demonstrations for prospective buyers.
Except for the small 5 kW devices that were offered for sale by GAIA last month, Rosch
itself will sell only 200 kW or larger generators. One and five megawatt installations,
based on 500 kW generators, are said to be under construction in Croatia and Slovenia. The
secret of how this electricity-generating device works is in its proprietary circuitry,
which controls the device’s operation by regulating the amount of air that is
injected into each float before it begins its ascent to the top of the tank. As we can all
recall from 7th grade science, buoyancy forces things upwards with a force equal to the
weight of the water displaced. Although the mechanics of the system – an electrical
generator, a water tank, bicycle chains, and an air compressor — have been around
since late in the 19th century, it takes 21st century electronics to make the device work.
The highly efficient generator and air compressor required to make the generator work are
also of an advanced design and are proprietary." |
"Smart
meters will cost as much as the Trident nuclear deterrent to implement, with the full cost
of the scheme rising to £19bn, according to a government report. Total lifetime costs of the programme have now risen by £2bn since 2013,
according to a report by the Major Projects Authority. In contrast, the Trident
replacement programme has a cost estimated at between £17.5bn and £23.4bn.
Surprisingly, the smart meter project has been flagged as "amber" — meaning
"successful delivery appears feasible but significant issues already exist."
This is despite a number of warnings that the programme is in danger of turning into a
"costly failure". Earlier
this year a report by the Energy and Climate Change Committee said it does "not
believe" plans to install 53 million devices in homes and businesses by 2020 will be
achieved." |
"Investors are beginning to bet on a sharp
rebound in the oil price by the end of the year, on the back of rising demand and a
slowdown in US production. Insch Capital Management, a Swiss hedge fund, is predicting
that prices will be trading at about $82 per barrel by the beginning of next year, and
already claims the market is oversold. The Lugano-based fund says it plans to ramp up
investments in the sector in preparation for an expected 50pc uptick in the price of crude
by 2016. Oil prices have recovered somewhat since falling sharply to below $50 a barrel
after the Organisation
of the Petroleum Exporting Countries (Opec) decided in November to maintain production
levels, despite weaker demand. Brent crude is currently trading at $64 a barrel. However,
consensus is forming among investors that the oil market could be poised to recover
quickly, spurred by strong
demand and an expected slowdown in US production, thanks to the high number of drilling rigs that are being closed." |
"Record oil production meeting a wave of
surprisingly strong demand has reined in world oil prices, creating a delicate balance
that could be tipped either way—and the most immediate catalyst may be the Iranian
nuclear talks. The market has been awaiting the
outcome of the negotiations ahead of a June 30 deadline, as an agreement could put 1
million barrels of Iranian crude back on the market eventually. U.S. crude futures have been locked between $57 and $62 per
barrel—since late April. But an Iran agreement now appears elusive, and the market expects the talks
to continue past the deadline, even as Secretary of State John Kerry headed back to
Vienna on Friday for negotiations." |
"With crude oil prices down sharply from
last year and the oil glut at risk of increasing, private security consultant Charles
Clifton's phone has been ringing. His company, Knightsbridge Risk Management, a private
security firm in Dallas that serves the oil and gas industry, is getting calls from
companies that want to plan ahead in case they shut down drilling operations in North
Dakota and the Bakken shale formation. The oil producers want to prevent theft and
vandalism of the drilling sites—often a problem when operations have abruptly come to
a halt in other states, said Clifton, manager for The Americas for Knightsbridge. Workers
and subcontractors who have suddenly been left with no income have sometimes retaliated by
stealing or damaging equipment, from well caps to bulldozers, he said....The ongoing pressure since oil prices dropped sharply last fall is
squeezing drilling operations in North Dakota and the Bakken Formation. The number
of active rigs in North Dakota was 77 as of June 12, down from 145 rigs the same day last
year. American Eagle Energy, a Colorado firm drilling in the Bakken Formation, filed in
May for Chapter 11 bankruptcy protection in Denver. Still, many players in the
region have the strength to withstand the lower prices, according to Wayne Wilson, who
specializes in calculating the value of oil and gas assets as managing director with HSSK,
a business valuation and litigation consulting firm that has offices in Houston, Dallas
and Austin. Shale oil producers that are currently producing should generally be able to
survive the next 48 months unless they have an unfavorable debt structure, he said." |
"Royal
Dutch Shell executives have recently met with officials in Iran as international oil
companies begin to explore the potential of re-entering the country should Western
sanctions be lifted. A Shell spokesperson confirmed
to The Telegraph that the talks had taken place in Tehran. 'They discussed Shell’s
outstanding debt to NIOC (National Iranian Oil Company) for crude lifted but not paid for,
and potential areas of business cooperation should sanctions be lifted,' said the
spokesperson. The meeting, which was first reported by the Financial Times, comes ahead of talks on June 30 with world powers
that may lead to the lifting of economic sanctions which prevent international oil
companies (IOCs) such as Shell from dealing with the country. Iran is understood to be
sweetening the terms of their contracts for IOCs to invest and develop the country’s
oil fields. Despite concerns over the tough terms and the high level of political risk
associated with the country, IOCs would be foolish to ignore the potential of one of the
world’s last great conventional oil basins. ... At
its peak before the Islamic revolution in the 1970s, Iran was producing between 5m and 6m
barrels of oil a day, and has the potential to return to that level if it can be relieved
from sanctions." |
"Energy
bills have risen by a shocking 73% in the last decade according to exclusive analysis by
consumer group Which? - an average increase in annual bills of around £580 per household.
|
"Russia and Saudi Arabia yesterday signed an agreement to cooperate
in the development of nuclear energy for peaceful purposes. The document was signed by Rosatom director general Sergey Kirienko and
the president of the King Abdullah City for Atomic and Renewable Energy (KA-CARE) Hashim
Abdullah Yamani....Although Saudi Arabia's nuclear program is in its infancy, the kingdom
has plans to construct 16 nuclear power reactors over the next 20 years. A 2010 royal
decree identified nuclear power as essential to help meet growing energy demand for both
electricity generation and water desalination while reducing reliance on depleting
hydrocarbon resources." |
"Saudi
Arabia is pumping oil at a record high as it focuses on keeping market share, while
Russian output hit a post-Soviet high of 10.71 million barrels per day (bpd) in April. Despite ample supply, oil prices have rallied to almost $65 a barrel in
2015 after sliding toward $45 in January, supported by stronger-than-expected demand and
signs the supply glut will ease." |
"Russian
energy giant Gazprom has confirmed plans to expand its Nord Stream gas pipeline beneath
the Baltic Sea and into Germany. The new pipeline would be built in cooperation with Eon,
OMV and British-Dutch Shell. The key partners in the deal signed a memorandum on Thursday
at the international
economic forum currently taking place in St. Petersburg, Russia. 'The construction of additional transport infrastructure along the
shortest route between gas fields in northern Russia and markets in Europe will contribute
to increasing the safety and reliability of deliveries for new contracts,' said Gazprom
CEO Alexei Miller. The two proposed new pipelines
mark part of an effort by Gazprom to deliver an additional 55 billion cubic meters of gas
to the European Union. 'The implementation of Nord
Stream has demonstrated that transporting gas through the Baltic Sea is a reliable
solution that helps to meet the energy demand,' Germany's largest gas supplier Eon said in
a statement on Thursday. The expansion of the Nord Stream would also circumvent Ukraine
for gas deliveries to western Europe as of the new pipeline's planned completion in 2020.
The ongoing war in eastern Ukraine has also complicated economic issues between the Moscow
and Kyiv. Russia considers Ukraine to be an unreliable transit partner and has complained
in the past of illegal gas tapping. The two countries have also argued on several
occasions over delivery prices and gas debt, with Moscow initially allowing the
construction of the Nord Stream pipeline in order to reduce dependency on Kyiv. As well as extending the Nord Stream, Gazprom also intends to
construct a new Turkish Stream through the Black Sea. The pipeline will have the capacity
to annually deliver 63 billion cubic meters of gas to Turkey and Greece. In January, Gazprom had initially said it would not extend the Nord
Stream. Demand for Russian gas has fallen in recent years, mainly due to milder
temperatures in western Europe." |
"The new boss of the UK's oil and gas body has warned that the
sector faces a future in which long term oil prices are about $60 a barrel. Deirdre Michie
told a gathering in Aberdeen that the industry needed to adjust and find a fresh way
forward. Oil prices have fallen from about $115 a barrel to $63 since last June. The
annual oil and gas industry conference also heard from First Minister Nicola Sturgeon, who
wants no new tax rises for the sector. .. North Sea
exploration reached its lowest level in at least two decades in 2014, with 14 explorations
wells drilled compared with 44 in 2008. Ms Michie said: 'We have paid more to the Treasury
than most other industrial sectors, we generate hundreds of thousands of skilled jobs, we
have a vibrant supply chain, at home and abroad, and make a key contribution to the UK's
security of energy supply. It is an industry that has grown and evolved for 50 years.
However, we now face real and present threats that are challenging our future. At $60 oil, 10% of our production is struggling to make money and
there is a shortage of capital and a shortage of investors willing to place their money
here. Therefore it is not unreasonable for the North
Sea to set out its stall at being sustainable in a $60 world. As a target, it's one that
we as a trade association can champion, government can align with and the regulator can
pursue as an enabler, for example, to focus on key infrastructure.' She added that focusing on efficiencies would be a key factor for
the industry's future.... When Oil and Gas UK, the
trade body, convened this conference last year, the oil price was about to start its slide
from $115 per barrel. By January, it hit $45. It's now in the mid-60s, with conflicting
signs of its future direction of travel. Few think it
will rise much above $70, because that's the point at which fracking starts again in North
America, pushing up supply. Fracking is much more
responsive to price than offshore producers can afford to be. That
plunge in the value of this asset has focused attention on the problem of the high cost of
operating in British waters. Along with some North
American reserves of oil and gas, this is seen in a global context as among the most
expensive places to operate. Costs per barrel have
been rising very steeply; partly because fewer barrels are flowing from older, smaller and
hard-to-reach reserves: as old equipment needs more and longer shutdowns for maintenance:
and partly because the industry had become inefficient through recent years of booming
investment." |
"As a battle for market share rages
in the oil industry, Libya is struggling to stand its ground. The holder of
Africa’s largest reserves is producing 432,000 barrels of oil a day, according to
Mustafa Sanallah, chairman of Libya’s National Oil Corporation, more than 300,000 b/d
of which is exported. Although an improvement from last year’s low of around 200,000
b/d, the Opec member’s output is still down more than 70 per cent from levels
achieved before the 2011 revolution that ousted former ruler Muammer Gaddafi. Since the civil war, Libya’s oil industry has been hit by unrest. The
state-run oil company has been caught in the middle of a conflict that has divided the
country between an internationally recognised government and an Islamist militia that
controls the capital of Tripoli. Attacks by radical group Isis, worker strikes and
sabotage of facilities have also hampered the oil sector. Speaking to the Financial Times
on the sidelines of an industry conference on Wednesday, Mr Sanallah said Libya was
looking to raise output by 200,000 b/d in the next five weeks, through the repair of
damaged fields and dialogue with the factions that have brought about blockages. The
Es Sider port, the country’s largest export terminal, has been under force majeure
since December, when violence between rival groups led to a fire. Fighting damaged fields
feeding into it in March.... Mr Sanallah said the National Oil Company was working to
rebuild relations with factions that would enable El Sharara and El Feel oilfields to pump
in excess of 400,000 b/d once more. 'Dialogue is improving day after day. Hopefully [we
will be able] to open the valves very soon,' Mr Sanallah said. Although Libya still
harbours ambitions to increase production this year to 1m b/d as demand from India, China, Japan and eurozone countries remains robust, analysts
are not so optimistic. 'Libyan production has crept up from recent lows, but these gains
are minimal. I don't think they will be able to get above 800,000 b/d,' said Richard
Mallinson, geopolitical analyst at Energy Aspects. 'Even
if all the political and security issues were to disappear overnight, it would struggle to
get the 1m b/d target. Their
ability to produce at these levels has gone, as the fields have not been properly
maintained,' said Mr Mallinson.... Opec’s
November decision not to cut production and focus on a market share battle accelerated a
slide in oil prices to $45 a barrel in January. Although crude has rebounded
to $60-65 a barrel, Libya is still cash constrained." |
"Project delays and spending cutbacks in
the oil industry pose a risk to future supplies, according to the Organisation of the
Petroleum Exporting Countries (Opec). Speaking at the conclusion of the group’s
recent meeting in Vienna, acting group president Mohammed Saleh al-Sada said that the
impact of cost cutting across the industry needed to be assessed to ensure that enough new
production would come on stream to replace natural declines. 'The degree of investment
cuts is substantial due to the oil price of today,' warned Al-Sada who is also the oil
minister of Qatar. He said that countries in Opec that pump a third of the world’s
oil had to invest heavily to replace an average 5pc-6pc natural decline in oil production
from existing wells. His remarks were echoed by Abdalla Salem el-Badri, the group’s
secretary general, who said: 'If we don’t have
investment now will have problems in the future.' In Europe and the UK around £55bn-worth
of oil and gas developments are under threat while prices remain at their current levels,
according to estimates made by Wood MacKenzie. Most of these projects are centred around
the North Sea, one of the world’s most expensive operating areas. Oil prices have recovered around 30pc this year to trade near $65 per
barrel. According to Opec, the world will need to
find and produce at least another 20m barrels per day (bpd) of crude by 2040 when global
demand is expected to reach 111m bpd." |
"The
U.S. oil-rig count fell by seven to 635 in the latest week, according to Baker Hughes Inc., marking the 27th straight
week of declines. The number of U.S. oil drilling rigs, which is a proxy for activity in
the oil industry, has fallen sharply since oil prices headed south last year. There are
now about 61% fewer rigs working since a peak of 1,609 in October. Crude oil futures were recently down by less than 1% to $60.22 a barrel.
Last week, OPEC said it would keep its production ceiling unchanged, the second time in
six months it decided to take no action amid the global glut. Oil prices have traded in a
tight range recently, with U.S. prices pivoting around the psychologically key
$60-a-barrel level. Forecasts that the global glut of crude oil will shrink, due to
growing demand and a decline in drilling, have boosted prices from multiyear lows earlier
this year. But some investors remain hesitant, especially because some U.S. companies say
they can increase production if prices hold above $60." |
"The
Mexican state oil company Pemex has announced one of its biggest discoveries in years,
unveiling new shallow water oil fields in the southern Gulf of Mexico that it says could
produce 200,000 barrels per day by mid-2018. The
total proven, probable and possible reserves of the fields could be as high as 350m
barrels of crude-oil equivalent, said Pemex’s chief executive officer, Emilio Lozoya.
The new fields off the coast of Tabasco and Campeche states comprised three of light crude
and one of heavy crude, and could start coming onstream in 16 months, Pemex said.
'It’s a recent achievement and one of great magnitude,' Lozoya said. The fields would
take around three years to reach their full 200,000 barrel per day capacity, said Jose
Antonio Escalera, director of exploration for Pemex. Pemex described the finds as its
biggest exploration success in the last five years after the discoveries in Tsimin-Xux and
Ayatsil, also in the southern Gulf.... Output at
Pemex has fallen from a peak of 3.4m barrels per day in 2004 to less than 2.4m currently. Following a reform to end the company’s oil and gas monopoly, Pemex
also faces the prospect of tough competition from oil majors and other private companies
coming to Mexico." |
"Confidence
in the North Sea oil and gas industry has plummeted to a record low with two- thirds of
operators being forced to cancel projects because of the fall in the price of oil, a new
survey has revealed. The bleak picture is outlined in the 22nd Oil and Gas study conducted
by Aberdeen and Grampian Chamber of Commerce, which claims the industry is in a 'mid-life
crisis'. It shows that confidence in the UK
Continental Shelf (UKCS) was now at its lowest ever point since the influential
twice-yearly survey began in 2004. The drastic fall in oil prices, it says, has been
the major contributory factor to the reduction in activity levels within the sector.
James Bream, research and policy director at the Chamber of Commerce, said: 'Confidence
levels are at an all-time low and we are now experiencing our first ‘recession of
confidence’, and it looks gloomy in the year ahead, too....The oil price yesterday
remained at around $60 a barrel, compared to well over $100 a year ago. Earnings for
companies that have made record profits in recent years have fallen, forcing them to
decommission rigs and sharply cut investments in exploration and production. Thousands of
jobs have also been lost as a result. The price of a barrel of oil, which has been cut
roughly in half since last June, has reached levels which were last seen during the depths
of the 2009 recession. The Chamber of Commerce survey, carried out in partnership with law
firm Bond Dickinsons, does however reveal an increase
in decommissioning activity, which is described as a
'bittersweet positive'. The survey approached 700
operator, contractor and service companies in March and April. It asked about the
consequence of the falling oil price on the behaviour of companies, with two-thirds of
operators and one-third of contractors selecting the 'cancel projects' option." |
"Royal
Dutch Shell has notified Ukraine that it will pull out of a shale gas exploration project
in the east of the country, where government forces are battling Russian-backed
separatists. Shell’s
decision is the latest example of how the conflict is exacting a heavy toll on
Ukraine’s economy and dashes the cash-strapped government’s hopes of raising up
to $10bn of investment and diversifying away from Russian gas imports." |
"The growth in global demand for energy slowed to levels not seen
since the late 1990s, a new report suggests. BP's Statistical Review of World Energy said global
energy consumption 'slowed sharply' to an increase of just 0.9% in 2014. BP said slow
growth for energy demand was largely due to China's economy moving away from
'energy-intensive sectors'. Separately, it said
increased US shale supply was a 'continuing revolution'.... The growth in Chinese coal
consumption slowed to 'unusually weak' levels, due to the slowing pace of
industrialisation in the country. Globally, production increased for all fuels except
coal. Meanwhile, worldwide demand for all other fuels increased the report said. Global
growth in natural gas was weak, due to a mild European winter - which led to a sharp fall
in the continent's gas consumption. But renewable energy continued to see the fastest
growth in demand, now fulfilling 3% of the world's energy needs, the report said." |
"Saudi
Arabia increased its oil production to a record level in May in an attempt to win back
more customers and meet demand for its crude.
Output in May reached 10.33m barrels a day, according to numbers submitted by Riyadh to
Opec, the oil cartel, confirming the widely held view that Saudi Arabia’s
production is heading higher. The kingdom’s oil output had been 10.31m b/d in
April, Riyadh told Opec. In its monthly oil market report Opec said
world oil demand would stand at 92.5m b/d this year,
up from 91.3m b/d in 2014, unchanged from the
previous month’s report. 'The global economy recovery appears to have stabilised at a
moderate level,' said the cartel on Wednesday. It expects non-Opec supply to decline in
the second half of the year, compared with an increase in the first six months. A forecast
of slower annual growth of 680,000 b/d was in line with previous predictions. 'The current
oversupply in the market is likely to ease in the coming quarters,' the group said. Opec
expects demand for its crude to stand at 29.3m b/d a day in 2015 but output from the
producers’ group stands at almost 31m b/d, according to estimates by analysts and
traders." |
"U.S.
oil output will peak at a 43-year high in 2015 as producers work through a backlog of
uncompleted wells before trailing off in the second half of the year.Production will
increase to 9.43 million barrels a day this year, the most since 1972, the Energy
Information Administration said Tuesday in its monthly Short-Term Energy Outlook. That’s 240,000 barrels higher than last month’s estimate. Monthly output will fall in June through early 2016. The U.S. is producing more oil this year even as the number of oil rigs
slid to the least since August 2010 in response to last year’s price crash. Prices
are still high enough to support drilling in key shale formations in North Dakota, Texas
and other states. 'Production has increased as producers work through the backlog of
uncompleted wells,' the EIA said in the report. 'Projected 2015 oil prices remain high
enough to support continued development drilling in the core areas of the Bakken, Eagle
Ford, Niobrara, and Permian basins.' The increase in this year’s production forecast
reflects revisions to estimated output in the first quarter, the EIA said. Oil production in May reached 9.59 million barrels a day, also the highest
level since 1972. 'U.S. oil production since mid-2014 has been more resilient to lower
crude prices than many had expected,' EIA Administrator Adam Sieminski said in an e-mailed
statement....Oil production will start to decline in the second half of this year,
'largely attributable to unattractive economic returns in some areas of both emerging and
mature onshore oil production regions,' the EIA said. Output
will rebound in the second half of 2016, returning to an average of 9.6 million barrels in
December. Total output next year is forecast to reach 9.27 million barrels a day. Crude output from the prolific tight-rock formations will shrink 1.3
percent to 5.58 million barrels a day this month, based on EIA estimates from the monthly
Drilling Productivity
report released on Monday. It’ll drop further in July to 5.49 million, the lowest
level since January." |
"The
shale oil boom that turned the U.S. into the world’s largest fuel exporter and
brought $3 gasoline back to America’s pumps is grinding to a halt. Crude output from
the prolific tight-rock formations such as North Dakota’s Bakken and Texas’s
Eagle Ford shale will shrink 1.3 percent to 5.58 million barrels a day this month, based
on Energy Information Administration estimates. It’ll drop further in July to 5.49
million, the lowest level since January, the agency said Monday. With the
Organization of Petroleum Exporting Countries maintaining its own oil production, U.S.
shale is coming under pressure to rebalance a global supply glut. EOG Resources Inc., the country’s biggest shale-oil producer, hedge
fund manager Andrew J. Hall and banks including Standard Chartered Plc have forecast
declines in U.S. output following last year’s plunge in crude prices. The nation was
still pumping the most in four decades in March. 'Production has to come down because rigs
drilling for oil are down 57 percent this year,' James Williams, president of energy
consultancy WTRG Economics, said by phone Monday from London, Arkansas. 'Countering that
is the fact that the rigs we’re still using are more efficient and drilling in areas
where you get higher production. So that has delayed the decline.'.... Despite the U.S.
oil rig count falling for 26 straight weeks, domestic crude production surged 126,000
barrels a day, or 1.3 percent, to 9.53 million in March, the most since 1972, Energy
Information Administration data show. 'We do not believe that the direction of U.S. oil
output has changed,' Standard Chartered analysts including Nicholas Snowdon said in a
research note June 1. 'In our view, U.S. oil supply is still falling, and it is likely to
carry on falling for the rest of this year.' Shale
oil output will decline by 105,000 barrels a day in July after dropping 86,000 barrels in
June, according to the London-based bank. EOG Resources Chief Executive Officer Bill
Thomas said at a conference last month that U.S. production would drop through the end of
the year...Output from the Eagle Ford in Texas, the second-largest oil field in the U.S.,
will contract by 49,000 barrels a day in July to 1.59 million. Production in the Bakken
shale region of North Dakota will slip by 29,000 to 1.24 million, the EIA said. Yield from
the Permian Basin in West Texas and New Mexico, the largest U.S. oil field, will rise by
3,000 barrels a day to 2.06 million. The EIA’s
oil-production forecasts are based on the number of rigs drilling in each play and
estimates on how productive they are. U.S. drillers are retreating from oil fields as
OPEC, which accounts for more than a third of the world’s oil, continues to resist
calls to curb its own supply. The 12-nation group decided last week to instead maintain a
combined daily crude-production target of 30 million barrels. Output from the group has
exceeded that level for each of the past 12 months, according to data compiled by
Bloomberg." |
"Since
May 2005, global conventional crude oil + condensate production (C+C) has been constrained
to a bumpy plateau of around 73.2 Mbpd. That limit was breached in December 2014 with a
new high of 74.28 Mbpd (Figure 1, blue area is conventional C+C). This comes on the back of a prolonged period of record high oil price. It seems likely that the reason for the new high is OPEC
abandoning constraint rather than an actual expansion of global conventional C+C
production capacity.... A part of the Peak Oil story
unfolded in the period 2002 to 2008 when the world ran short of easy to find and produce
conventional cheap crude oil. This sent the price up to over $100 / barrel. The prolonged
spell of high price has resulted in a greater number of men and machines and larger
amounts of energy being expended on the quest for these highly prized C-H bonds. There are
a number of variables that need to be factored into future analysis and forecasts of
global oil production. Amongst these are 1) time lags between price signal and new
production, 2) tolerance of global society to higher energy prices, 3) technology
developments, 4) political interference (that may be positive or negative) and 5) last but
not least reserves depletion." |
"Iraq
is mobilising a 27,000 strong army of security personnel to protect its oil and energy
facilities from attacks by Islamic State insurgents.
Adel Abdel Mahdi, Iraq's oil minister, gave details of the new force at the end of the
meetings of the Organisation of the Petroleum Exporting Countries (Opec). The onslaught of
the Islamic State of Iraq and the Levant (Isil) has raised concern's that Baghdad's vast
oil fields and complex network of refineries and pipelines are vulnerable to attack
and sabotage. Mr Abdel Mahdi said that the security force, which essentially amounts
to an oil army, would be drawn from an existing energy police corp that is under control
of the country's Interior Ministry. He added that meetings will take place in the coming
weeks to finalise the structure of the force, which will receive additional training and
equipment. 'Their mission is to secure all oil and electricity facilities,' said Mr Abdel
Mahdi. Although Iraq has asserted that its oil facilities are safe and secure from Isil
its pipelines were frequently attacked by insurgents following the US occupation, which
followed the 2003 invasion. Iraq is now producing
close 4m barrels per day (bpd)
of oil and now ranks as the second largest producer in Opec after Saudi Arabia. British oil
majors Royal Dutch Shell and BP are both active in Iraq operating some of the country's
largest fields in the Shia-Muslim dominated South.
Iraqi troops have been fighting Isil forces dug in around the major Baiji
oil refinery just over 100 miles North of Baghdad." |
"Crude
oil prices fell on Monday as China's oil imports dropped sharply and markets were expected
to be increasingly oversupplied following OPEC's decision to keep its production targets
unchanged. China, the world's biggest net oil importer, bought nearly a quarter less crude
in May than it did in the previous month, according to data from China's General
Administration of Customs. Its imports of oil
products also fell just over six percent while product exports fell 10 percent. China's
report of a fall in import demand came after the Organization of the Petroleum Exporting
Countries (OPEC) agreed on Friday to stick to its policy of not limiting its output, which
currently stands above 30 million barrels per day. Both exacerbate worries about a glut in
a market where millions of barrels of crude are stored in tankers without a buyer. 'The
world's crude demand/supply remains in excess of supplies,' said Yasushi Kimura, president
of the Petroleum Association of Japan
(PAJ) after OPEC's decision." |
"Drax
was once Britain’s biggest coal-fired power station. It now burns millions of tons of
wood pellets each year, and is reputed to be the UK’s biggest single contributor
towards meeting stringent EU green energy targets. But astonishingly, a new study shows
that the switch by Drax from coal to wood is actually increasing carbon emissions. It says they are four times as high as the maximum level the Government
sets for plants that use biomass – which is defined as fuel made from plant material
that will grow back again, therefore re-absorbing the CO2 emitted when it is burnt. At £80 per MW/hr, Drax’s biomass energy is two-and-a-half
times more expensive than coal – a cost passed on to customers. Last year Drax soaked
up £340 million in ‘green’ subsidies that were added to British consumers’
power bills – a sum set to rocket still further. Without these subsidies, its biomass
operation would collapse. Perhaps most damningly of all, its hunger for wood fuel is
devastating hardwood forests in America, to the fury of US environmentalists, who say that
far from saving the planet, companies like Drax are destroying it. Drax denies this, saying it only uses dust and residues from sawmills, as
well as wood left over when others log trees for purposes such as construction. Inquiries
by The Mail on Sunday investigation suggests this claim is highly questionable. In 2013,
Drax’s first year of biomass operation, only one of its six units – which each
have a capacity of 650MW – was burning pellets. Its total green subsidy then was
£62.5 million." |
"Weak
global economic growth momentum and a supply glut will cap oil prices at around $60 for
the rest of 2015 and into 2016, analysts say. 'WTI oil futures will
remain range bound at around $60 for the rest of 2015 and will only start trending up
towards $70 a barrel heading into the end of 2016,' Mizuho Research Institute
senior economist Jun Inoue told CNBC in a phone interview. 'Global economic growth looks soft, but there are no signs that oil
supplies will fall,' he said. After falling to six-year lows earlier this year, oil prices
have stabilized over the past two months. WTI futures have hovered in a $50-$60 a barrel
range since early April. Ahead of Friday's Organization of Petroleum Exporting Countries (OPEC) meeting,
ministers from oil-producing countries such as Iraq, Venezuela and Angola, have been
touting a higher target of around $75—$80 range, Reuters reports. But analysts don't
see much scope for upside to those levels. 'Oil
prices appear to be settling in a range of $60 to $70 per barrel,' said Capital Economics
in a note on Wednesday. 'We think that prices are more likely to fall than to rise over
the remainder of this year.' Capital Economics is forecasting Brent at $60 by the end
of the year. Brent futures were trading at $63.38 a barrel at mid-day Asia Thursday." |
"India’s already voracious appetite
for oil is growing. Never mind that Asia’s third largest economy imports almost two-thirds of its total oil requirement—or that a
ballooning oil import bill will do nothing to help its fiscal deficit problem. Since last year, India has been locked in a see-sawing battle with
Japan to lay claim as the world’s third largest consumer of oil, after the United
States and China. This quarter, according to data from the International Energy
Agency (IEA), India’s just about to trounce Japan, although the latter is expected
to win back its place by the end of the year. From being millions of barrels behind
Japan in 2012, India has built up a steady appetite for oil, backed by an expanding
economy and a robust demand driven by factories and the automobile sector. In particular,
the Indian oil demand has been supported by a thirst for diesel and gasoline
(petrol), said Rhidoy Rashid, an analyst with Energy Aspects, a London-based consultancy. 'Diesel demand is being driven higher by a marked shift towards more
manufacturing activity, away from the service sector, under the current government,'
Rashid told Quartz in an e-mail response. IEA further estimates that India’s oil
demand will rise to 4.7 million barrels per day in 2020, at a compounded annual growth
rate (CAGR) of 3.4%. In its 2015 Medium Term Oil Market report, the agency said that
'despite the Indian economy’s persistent reliance on still much less energy-intensive
services for the majority of its economic growth, expectations of lower oil prices should
stimulate additional transport fuel demand.' Most of the increase in demand would be
driven by transportation fuels: Car sales in India increased 18.14% in April, the highest in around three years driven by
a strong urban and semi-urban markets. Japan, on the other hand, has come out of a recession and is relying heavily on nuclear
power. In fact, the country’s oil use is estimated to drop 33% by 2030 to around 2.5 million barrels per
day, as the government pushes for more nuclear power." |
"The
world's second-largest economy become the top oil importer in April. The key reason? China
is taking advantage of cheap oil to boost its strategic reserves. 'They've been building
out strategic storage. The goal is to build out to about 500 million barrels, compared to
the U.S. capacity of 700 million to 800 million barrels,' said Jeff Brown of
Singapore-based energy consultants FGE. Brown said
that while the numbers are a little murky, China has already built out about 150 million
barrels of extra storage, with more capacity planned through the end of the year. 'They
take a lot of pride in buying oil when it's cheap,' he said. Despite the massive capacity
boom, China is still buying more oil than it can store -- and all that crude has to go
somewhere. The solution lies in the Strait of Malacca. At anchor just a few kilometers off
the coast of Malaysia lies the TI Europe, brimming with about 3 million barrels of oil
destined for China. This 440,000 tonne monster is the world's biggest tanker. She has been
leased by the China's state owned oil company at an estimated cost of $40,000 a day, to
store oil until it can be shipped to China in smaller vessels. And she's not the only one.
Oil tanker analyst Richard Matthews of Gibson Shipbroking in the U.K. says there has been
a surge in the number of supertankers being leased for storage. 'Normally, excluding
Iranian ships, you might see only two or three ships storing, and they could be supporting
offshore projects,' he said. 'Now there are up to 17 or 18 non-Iranian tankers.'
Supertankers can also be used to store oil in a market where the future price of crude is
expected to be significantly higher than the current price. Speculators buy cheap, bear
the huge cost of storage and finance, and still make a profit when they sell a few months
later. But analysts say that, for now, the difference between the current and future price
is not wide enough to rake in speculative profits, which points to China filling its
boats. China could also turn to land facilities for storage, mainly in South Africa. But
the Strait of Malacca has an advantageous location, situated halfway between the big oil
producers and the Chinese mainland. Even as China builds out and fills it strategic oil
reserves, consumers continue to gobble up fuel. Much of the demand comes from motorists,
who are in the middle of a love affair with gas-guzzling SUVs. In the first three months
of the year, sales of SUVs soared an eye-watering 48% in China over last year. Neil
Beveridge, senior oil analyst at Sanford C. Bernstein in Hong Kong, said that oil
consumption in China has remained steady at around 10 million barrels a day over the past
few months, despite slower economic
growth of nearly 7%." |
"Oilman
T. Boone Pickens said Thursday that Saudi production is topping out at about 10 million
barrels per day and oil prices will return to $70 per barrel by the end of the year. OPEC
is 'all in at 31 million barrels a day. That's about all they can do,' Pickens said on
CNBC's 'Squawk Box.' 'They
talk a lot about it, what they can do, and the Saudis say 12 and half. Well show me. I'm
ready to see 12 and a half. They're making 10.3, and they struggle at 10, I think. I think
10 is about all the Saudis can do.' Oil Minister Ali al-Naimi said Saudi Arabia produced
some 10.3 million bpd of crude in March, eclipsing a previous high of 10.2 million in
August 2013. The Organization of the Petroleum
Exporting Countries is expected at a meeting on Friday to keep a group output target of 30
million bpd, a ceiling it has been exceeding for most of the last two years, weakening
prices. The cartel is now pumping about 2 million bpd more than needed, analyst say,
feeding a glut that has left millions of barrels stored on tankers without a buyer and
kept prices at close to half their peak levels last year. Production declines in the
United States will also support prices, Pickens said, noting that output has dropped off
in North Dakota's Bakken formation and Texas's Eagle Ford play as drillers have taken
about 1,000 rigs out of oilfields since December. 'Now, you shut down 1,000 rigs,
we're dealing with decline curve,' said Pickens, chairman of BP Capital Management. 'If
you're trying to grow production, you've first got to maintain production.' Oil
wells—whether conventional or unconventional—reach peak production soon after
they yield the first drop of crude. The U.S. industry is dominated by unconventional
wells. Conventional wells go through a long period of steady, flat production between peak
and decline. In contrast, production falls rapidly in the first three years of
unconventional wells—those in shale, sandstone and carbonates. They then enter a long
phase of very low production. 'Just as soon as you get an oil well, put it on production,
it starts to decline,' Pickens said. 'Now how fast is it going to decline is very
important.'" |
"There
will be no US-style shale gas revolution in Europe, the president of the International Gas
Union (IGU) has told the BBC. 'You cannot duplicate [the US experience] in Europe,' said
Jerome Ferrier. 'Politicians are hesitating to
accept shale development.' Abundant shale gas in the US has helped domestic energy prices
fall. As a result some European governments, not least the UK, are keen to develop their
own shale resources. Mr Ferrier's comments come a day after a number of major energy firms
called for a working price of carbon. The IGU president, talking to the BBC at the World
Gas Conference in Paris (WGC), said there was resistance to shale development in the UK
and Poland, while there was 'no way' it would take place in France.
Other countries, including Germany, Romania and Bulgaria, have placed moratoriums on
fracking. He added that it was 'a pity' not to
explore the possibility of shale development, but said 'the future of gas does not depend
on shale gas - there is enough conventional gas [to meet demand] for more than a
century'." |
"...recent
falls in the price of natural gas have played havoc with developers' plans. With US gas
prices, known as Henry Hub, hovering around the $3 mark, the economics of gas liquefaction
and export depend entirely on getting a higher LNG price in the export market. Last year,
with gas prices in Asia, for instance, up above $15, exporting LNG was a no-brainer. Now
the price is about $7.5, as most gas contracts are linked to the price of oil that has
plummeted more than 40% in the past year. Take the basic cost of the gas at $3, add in a
small mark up, liquefaction costs of $3 and transport costs of $2, and suddenly, as Luis
Barallet at Boston Consulting Group says, 'the economics don't work that well'. A similar story is true for Europe, where cheaper transport costs are
offset by a lower gas price of about $6.5. For this simple reason, export projections have
had to be scaled back significantly. There are currently five licensed export terminals
under construction in Texas, Louisiana and Maryland, and with long-term supply contracts
signed, they will export huge quantities of LNG in the coming years. Even if the numbers
do not seem to add up, companies buying the gas, such as BG or Gas Natural, may still
decide to export - selling the gas in Europe at a $1 loss can represent a better deal than
spending $3 on liquefaction and just sitting on the LNG. Of the remaining proposed
terminals, some have customers but no regulatory approval, while the rest have neither.
For now, most of these are unlikely to go ahead. As Anastasios Giamouridis at Poyry
Managing Consultants says: 'Without long-term contracts signed with buyers, there is no
guarantee of revenue stream, so it's very difficult to get financing.'...What US LNG will
do is introduce a major new supply of gas that is far more resilient to fluctuations in
the oil price. More importantly, it will boost overall supply significantly, and this will
inevitably push prices lower. But the impact is likely to be short lived, for the very
simple reason that demand for LNG is set to rise to meet supply. 'There will be a glut [of
LNG] for a while, as demand cannot pick up so fast, but prices will eventually rise,' says
Mr Giamouridis. Demand for LNG in Europe is currently half what is was just five years
ago, and falling prices would see it pick up quickly. There are also a number of new
markets buying LNG for the first time, such as Poland, Lithuania, Egypt and Jordan. But
the biggest surge will come from China, where demand for energy is expected to triple by
2050, and where pollution is forcing the government to reduce its reliance on dirty coal.
Despite the deluge of new supply, then, global gas prices are unlikely to be affected in
the long-term by the US exporting its abundant gas. The American shale revolution may have
seen gas prices tumble at home, but exporting its spoils will have nothing like as
dramatic an impact on the rest of the world." |
"Those
who assess oil borrowers have started to sound warnings as well. Credit rating agency
Fitch has said defaults start to appear about nine to 12 months after price declines
begin. Moody’s last month predicted default rates for exploration and production
companies (responsible for a third of the debt total) will rise from 3 per cent in March
to 7 per cent next year. UBS thinks defaults could be twice that rate, in which case the spread between energy debt and the high yield index
might be expected to double, from about 150bp to about 300bp. Still, few sold their 2016
production two years early and they are now having to talk to lenders about their rolling
credit facilities, which are part of the $1.2tn of outstanding oil industry loans
identified by credit strategists at UBS. Such 'bank revolvers' tend to be agreed every 6
months, in April and October. Early this year, a price of $100 a barrel did not seem so
distant, but banks have been cutting exposure to the industry and the autumn conversations
are likely to be tougher. ... Most companies that suck oil out of the ground agree a price
for their product well in advance, so it is sold today at last year’s prices, giving
indebted companies some time to adjust." |
"Thick black smoke rising from the Baiji
oil refinery could be seen as a dirty smudge on the horizon as far away as Baghdad
after fighters from the Islamic State of Iraq and the Levant (Isil) set fire to the
enormous processing plant just over 100 miles north of the capital last week. The decision
to torch the refinery, which once produced around a third of Iraq’s domestic fuel
supplies, was made as the insurgents prepared to pull out of Baiji, which they captured
last June in a victory that sent shock waves across world oil markets. A year on from the
start of the siege and a shaky alliance of the Middle East’s major Arab powers, with
the limited support of the reluctant US government, has failed to contain the expansion of
Isil. The problem for the US and the rest of the
industrialised world is that the Middle East controls 60pc of proven oil reserves and with
it the keys to the global economy. Should Isil capture a major oil field in Iraq, or
overwhelming the government, the consequences for energy markets and the financial system
would be potentially catastrophic. Many of the
countries most threatened by the onslaught of the extremist group, which has grown out of
the chaos of Syria but was initially dismissed as a wider threat to regional stability,
will gather at the end of this week in Vienna for the meetings of the Organisation
of the Petroleum Exporting Countries (Opec). According to Daniel Yergin, the energy
expert and vice-chairman of IHS, the business information provider, the biggest threat to
oil prices is the political chaos that threatens to engulf the Middle East, combined with
the West’s reluctance to intervene. Speaking to The Sunday Telegraph, Mr Yergin
argued that the price of a barrel of oil could skyrocket to levels above $100 per barrel
if Isil is allowed to press deeper into Iraq, the second-largest producer in the cartel
after Saudi Arabia. 'Isil presents a whole new reality for the region, which just
isn’t reflected in the oil market at the moment,' said Mr Yergin. 'It’s an
increasingly grave situation for most of Opec and the Middle East. At some point the
security issues will start to come back into the price of oil.' Up to this point,
oil markets have shrugged off the risk of a major supply disruption caused by the
worsening security situation. Traders have remained focused on the market fundamentals
that almost 2m barrels per day (bpd) of excess oil capacity will be more than enough to
absorb any supply-driven shock. A rally in the price of Brent crude – a global
benchmark – which began in January and saw prices push close to $70 per barrel has
lost momentum amid signs that higher prices could revive drilling in the US." |
"Oil
explorers idled rigs in US fields for the 25th straight week, drawing out an unprecedented
retreat in drilling that has curbed the country’s shale oil boom and helped crude
prices rally.Rigs targeting oil in the US declined by 13 to 646, the lowest since August
2010, field services company Baker Hughes Inc. said on its website Friday. Most of the
losses were outside of major basins, with drilling subsiding in states including
California and Louisiana. US energy producers sidelined more than half of the rigs
drilling for oil after crude prices collapsed in the second half of last year. The retreat brought production growth from the nation’s biggest
shale formations to a halt, suspending a boom that turned the country into the
world’s biggest fuel exporter. 'The major basins aren’t bleeding as much as they
were, so we’re near the bottom,' James Williams, president of energy consultant WTRG
Economics, said by phone from London, Arkansas, on Friday. 'We should see a moderate
upward move in rigs sometime next month.'.... Texas’s Eagle Ford formation, one of
the most productive US shale plays, gained an oil rig this week. The Permian Basin of
Texas and New Mexico, the country’s biggest oil field, and the Williston Basin, home
of North Dakota’s prolific Bakken shale, each lost one. 'Most service companies we
speak with feel that ‘the bottom is in’ for US drilling,' Raymond James Ltd.
energy analysts including Andrew Bradford said in an e-mailed research note Thursday. 'Our
estimates had forecast a bottoming in mid-June followed by a painstakingly slow recovery
until mid- to late fall, at which point the recovery pace picks up modestly.'" |
"The
European nuclear industry, led by France, seems to be in terminal decline as a result of
the cancellation of a new Finnish reactor, technical faults in stations already under
construction, and severe financial problems. The French government owns 85% of both of the
country’s two premier nuclear companies – Areva, which designs the reactors, and Électricité
de France (EDF), which builds and manages them. Now it is amalgamating the two giants
in a bid to rescue the industry. Even if the vast financial losses involved in building
new nuclear stations can be stemmed, there is still a big question mark over whether
either company can win any new orders. Their
flagship project, the European Pressurised Reactor (EPR), billed as the most powerful
reactor in the world, has two prototypes under construction - one in Finland and the
second in France. Both of the 1,650 megawatt reactors are years late and billions of
Euros over budget, with no sign of either being completed.... The French government
is keen to rescue the industry, but had already decided against ordering any more reactors
after the fiasco in building Flamanville, which was years late and over budget even before
the latest hiccup. All this leaves the UK as the last
country in the world anxious to buy a French reactor. With a new Conservative government
in power for less than a month, its energy policy is already in disarray. Plans to build
four 1,650 megawatt EPRs in Britain to produce 14% of the country’s electricity -
announced before this month’s general election - look ever more unlikely. Even with
the first two at Hinkley Point in the west of England - where site preparations have been
made, and a final agreement was expected with EDF this summer - nothing is likely to
happen for months. The most likely course must now
be cancellation. Plans have been put on hold while EDF and Areva sort out the problems at
Flamanville, and then try to find a way of financing the project. Four hundred workers on
the Hinkley Point project have already been laid off. The
new British government is already facing legal challenges from Austria and Luxembourg and from various
renewable energy groups for unfair state aid for this nuclear project. Even if ministers
see these threats off, it seems unlikely that anyone will commit to building new EPRs in
the UK until at least one of the four reactors under construction in China, Finland and
France is actually shown to work. There is no guarantee that will happen in the next three
years, so the chances of Britain getting any new nuclear power stations before 2030 are
close to zero. Currently, the UK is closing
coal-fired stations to comply with European Union directives to combat climate change, but
it has not developed renewables as fast as Germany and other European neighbours -
claiming that new nuclear build would fill the gap. It now looks as though the government
will urgently need to rethink its energy policy." |
"Just two years ago, Gazprom spent a
reported $1bn on its 20th birthday celebrations, with Sting and the Bolshoi ballet
entertaining President Putin and company executives in a lavish gala dinner hosted at the
Kremlin. And there was much to celebrate. Russia was the undisputed king of gas - the
world's biggest producer with the biggest reserves and the biggest exports. But the party
has since fallen rather flat. Weaker demand in Europe and plunging natural gas prices have
hit revenues, while US and EU sanctions over the country's actions in Ukraine are
targeting Russia's energy sector. Add an EU charge of monopoly abuse, increased
competition from Qatar and a potential glut of US liquefied natural gas (LNG) flooding the
market next year - not to mention the possible unleashing of Iran's vast gas resources if
sanctions are lifted following a nuclear deal with Tehran - and the threats are both
numerous and real. With state-controlled Gazprom, which dominates Russia's gas industry,
one of Moscow's primary foreign policy levers, the stakes could not be higher. As the
biggest single supplier of gas into Europe, will Russia's influence on the continent begin
to wane, and will she flirt ever more with China to compensate? Most gas contracts are
indexed to the price of oil, which has slumped more than 40% since last summer, dragging
natural gas prices down with it. Mild weather and cutting off supply to Ukraine following
a contract dispute compounded the problem - Gazprom saw profits plunge almost 90% last
year, from more than $20bn to $3bn. And with the oil price likely to remain relatively
weak for the foreseeable future, revenues will remain under pressure. As Michael Moynihan
at energy consultants Wood Mackenzie says, 'the gas price is low and it's not going back
to the highs of two years ago'. But low prices are hitting all gas producers. In fact, Mr
Moynihan says, a weak rouble is helping to make Russian gas companies, which also include
big producers such as Rosneft and Novatek, more competitive - allowing them to make the
same profit margins despite falling prices. The question for Gazprom now is whether to cut
exports to combat oversupply, thereby supporting prices, or to keep volumes high to
protect its market share. Rather like Saudi Arabia in the oil market, the company is
perfectly able to withstand a prolonged period of low prices....Russia's gas fields are
running well below capacity, according to Irina Gaida from Boston Consulting Group. 'Russia's gas industry has better production potential [than its
oil industry] as the gas fields are much younger and are in the early stages of
development'.... The US and EU sanctions are
primarily targeted at the country's oil industry, for very obvious reasons. Russia provides about 30% of Europe's gas, so it's simply not in the EU's interests to compromise Gazprom's ability
to produce and export gas. This month's deal with the UK's Centrica to increase gas supplies by
70% to more than 4 billion cubic metres (bcm) a year provides ample proof of this.
Equally, the sanctions are designed to hamper financing and stop Russian companies
importing new technologies. But Russia's vast resources of conventional natural gas mean
it doesn't need to develop new techniques to frack shale rocks, and it already knows well
enough how to extract gas and build pipelines. If sanctions remain in place over the long
term, raising finance may become an issue, but right now they are having little impact on
Russian gas producers. But while Europe's actions are having little direct impact on
Russia's gas industry, their indirect repercussions are profound, not least pushing Moscow
towards closer ties with Beijing. 'Russia has been
talking to China for 10 years about exporting gas, but for various reasons they couldn't
find alignment,' says Mr Lough. 'It has not been prepared to go the last mile, but the
pressure to sidle up to China has now increased.' Feeling ever more isolated in Europe and
suffering from wider economic sanctions, Russia signed two significant gas deals with
China last year. The first, worth $400bn at the time, provides for
38bcm a year from 2018. Construction of the pipeline to transport the gas from East
Siberia began in September. A provisional deal for a further 30bcm was signed a month
later, with gas potentially being delivered from West Siberia through the Altai region in
southern Russia. Some of this gas could, Mr Moynihan says, come from fields that currently
export to Europe. The combined 68bcm is half the 140bcm Russia currently delivers to
Europe, but when the pipelines are in place, that number could grow significantly. China's
demand for energy to satisfy its rapidly expanding economy and increasingly wealthy
population is growing fast, while environmental concerns - mainly pollution and water
shortages - mean the country needs to reduce its dependency on coal. As Ms Gaida says:
'The share of gas in China's overall fuel mix will rise rapidly. The potential of China
far exceeds that of Europe'. And Russia's resources
are such that it would have no problem supplying both. There is also the tantalising
possibility of a deal with India, another potentially gargantuan market for Russian gas.
Any such agreement, however, appears a long way off with no easy route for a pipeline
between the two countries.... With serious questions about whether Europe can develop a
viable shale gas industry at all, let alone in the foreseeable future, and the slow
adoption of genuinely clean, renewable energy technologies in many countries, Gazprom, and
by proxy Moscow, will continue to hold the trump cards in any negotiations with the EU. US
and Iranian gas may offer another way out, but until European countries are able to wean
themselves off Russian gas, this will remain the case." |
"A
groundbreaking and ground-based technology dreamed up by a 29-year-old industrial design
engineer uses the simple power of the footstep to create electricity. Laurence Kemball-Cook's design, called Pavegen, which harnesses the
kinetic energy of footsteps, was tested today in the capital's
Canary Wharf finance hub. The system turns each step on one of its special tiles into
around three joules of energy, increasing with the weight of each footprint. Mr
Kemball-Cook developed the concept while investigating kinetic energy solutions in environments where renewable
energies, like solar and wind power, were not possible. With a daily footfall of around
100,000 commuters passing through Canary Wharf, the revolutionary system could potentially
keep street lights on and power other electricity-using installations in the financial
district's square. Mr Kemball-Cook hopes to get Pavegen introduced to many high footfall
areas across the globe. And world-famous Professor Stephen Hawking is convinced it could
be a world-changing design. He said: 'This technology has the potential to radically
change the way we source power in the future.'" |
"As
the United States raced over the past five years toward becoming a global petroleum
powerhouse, the world's biggest oil exporter Saudi Arabia quietly seized a market
milestone from America: the largest source of peak summer demand. From June through
August, when temperatures in Riyadh routinely rise above 100 degrees Fahrenheit (38
degrees Celsius), Saudi Arabia diverts as much as a tenth of its crude output to fuel
power plants that run full tilt to meet surging demand from air conditioners. The result is that Saudi Arabia's winter-to-summer 'swing' in oil
consumption has eclipsed that of the United States, where gasoline consumption jumps by as
much as 10 percent every summer as millions of families take advantage of school holidays
and warm weather to embark on the classic American road trip. This May 23-25 Memorial Day
weekend, however, that trend may begin to reverse as the most Americans in a decade will
fill up their gas tanks and rev up their engines for highway holidays, taking advantage of
lower gasoline prices and a growing economy. The American Automobile Association predicts
a 5.3 percent rise in Memorial Day car travel to the highest level in 10 years. The boost
at the pumps will add to already strong demand for gasoline after years of diminishing use
because of a switch to more fuel-efficient cars. 'The fall in prices is trumping the
efficiency gains for the summer,' says Amrita Sen, chief oil analyst at Energy Aspects.
Saudi Arabia is likely to maintain or even extend its use of domestic crude and fuel in
power plants this summer, according to Sen and other analysts. Yet the country appears to
be making some progress toward slowing its dependence on one of the most costly forms of
electricity. There is growing debate in Saudi Arabia over higher power tariffs that might
curb wasteful use, and a younger generation of Saudis are coming of age in an era of
conservation, says Professor Paul Stevens, a Senior Research Fellow for Energy at Chatham
House who co-authored a 2011 report on the issue. Saudi use of oil for power will be
'continually growing, but not at the sort of growth rates of the past 10 years,' Stevens
said. The surge in summer demand this year will have an even greater significance for
global oil prices than usual, as bullish traders are counting on it to help drain
inventories that swelled at a rate of more than 1.5 million barrels per day in the first
half of this year." |
"In the past year yet another technology
that seems to produce cheap, pollution-free energy has emerged. If this technology proves
viable, it could join with cold fusion and hydrinos as an alternative to the combustion of
fossil fuels. For several years now, I have been reporting on the progress in the
development of cold fusion, or if you prefer Low Energy Nuclear Reactions, and a second
technology developed by Blacklight Power, which is a method of compressing hydrogen atoms
while releasing large amounts of energy. I realize that many of you have trouble accepting
the validity of these technologies as they appear on the surface to be in violation of
some key principles of currently accepted science; however, progress in these technologies
keeps being made and so far there is no definitive evidence that they are not valid. At
first glance, this third new technology sounds ridiculous for it seems to be a form of
perpetual motion, which we all learned in 7th grade science is impossible. Production of
energy from nothing but gravity seems to violate a fundamental law of physics which says
that energy can neither be created nor destroyed, only transferred into another form. The
people developing this technology, however, say that its basis 'is the use of the laws of
buoyancy in conjunction with a special generator. This is not a perpetual motion machine,
but simply the use of energy differences between two systems.' This of course needs
further explanation from scientific theorists once it is solidly established that the
technology actually works. This new technology, which
was demonstrated last year in Central Europe, is based on buoyancy that as we all learned
at the age of two in the bathtub forces objects lighter than water to the surface and lets
them float. This technology is so simple that it makes one wonder why somebody did not
figure it out 100 years ago for with the exception of a modern efficient electric
generator it is mostly late 19th century – floats, gears, bicycle chains and
compressed air. The developer says that all one needs to produce electricity is a
relatively tall tank of water containing a series of floats attached to a chain that
allows the floats to move from the bottom of the water tank to the top, and when emptied
of air, go down again in an endless circular motion. While dropping to the bottom of the
tank the floats are filled with water, when they get there, the water is blown out of the
floats by compressed air so that air-filled floats are constantly being buoyed up pulling
the chain along with them. Upon arriving at the top, the floats are filled with water
again, and then dragged to the bottom by the attached chain. There are detailed descriptions, pictures, and videos of the system in
operation on the Rosch Innovations AG web site for those interested in better
understanding how this technology works. The constantly moving chain is geared to an
electric generator, which drives the air compressor to force the water out of the floats
and also produces excess electricity for any purpose without using any type of fuel or
producing waste products. The discoverer of this new technology seems to be a 'club' in
central Europe with the interesting name of the 'Global Association for Independent Energy
and Altruism' (GAIA). This group, which has put on numerous demonstrations of prototype
devices during the past year, has partnered with a Swiss-based manufacturing company,
Rosch Innovations AG with offices in Germany and Serbia, to build and sell these
devices." |
"Norway
has overtaken Russia as western Europe's top gas supplier, data from state firms shows,
indicating the European Union's drive to reduce its dependence on Russian energy is
bearing fruit. The sharp drop in oil prices has been
another factor, as Norway offers more flexible pricing and big buyers held off buying from
Russia in the hope the fall in crude price levels would eventually filter through to
Russian gas. Norway exported 29.2 billion cubic
metres (bcm) to western Europe in the first quarter of this year, figures from Norwegian
state operator Gassco show, while Russia sold 20.29 bcm, according to data from Gazprom's
regulatory filing and Gazprom officials. The data
showed the trend began in the final quarter of 2014 when western Europe bought 29.5
billion bcm from Norway and 19.8 bcm from Russia, according to Gassco and Gazprom
respectively. Exports to EU members in eastern Europe are not included
in the data. It was the first time Norwegian exports have convincingly overtaken Russia's
since a brief period in 2012. The European Union has been striving to reduce its
dependence on Russian imports and buy more from Norway and other gas producers, mindful of
Russia's dispute with Ukraine, the biggest transit route for Russian exports to the
EU." |
"The reason behind developments in
Macedonia is a desire to influence the government of Nikola Gruevski in connection with
its refusal to join anti-Russian sanctions, Russian Foreign Minister Sergey Lavrov said on
Wednesday, speaking at the Federation Council. While pointing to the need to rule out
support for coups patterned after events in Ukraine and Yemen, Lavrov noted that 'there
were attempts to organize something similar in Macedonia using the Albanian factor in an
unconstructive fashion.' 'The Macedonian events are blatantly controlled from the
outside,' he said. 'They are trying to accuse Gruevski’s government of not fulfilling
its obligations to the population. However, the
reason behind this is a desire to influence it in connection with its refusal to join
anti-Russian sanctions, support of the South Stream and willingness to be involved in the
implementation of other options of fuel delivery, including the so-called Turkish Stream.' 'It is very sad and dangerous that they are trying to use the Albanian
factor for that,' the minister added. 'Many years ago there were serious contradictions,
and then the Ohrid Agreement was signed [in 2001]. And now they are talking about
Macedonia’s further federalization and even suggest dividing the country, giving part
of it to Albania and another part to Bulgaria.'" |
"China’s industrial
output numbers for the first four months of 2015 shows the size of the
shift from high-CO2 to cleaner forms of industrial production. While industrial value
added actually grew 6% from January to April, coal output fell by 6.1% and power
generation from coal, gas and other thermal plants fell by 3.5%. Cement output fell by
4.8% and crude steel output by 1.3%, while higher value industries such as electronics and
chemicals maintained high growth. The data suggests China’s industrial and economic
structure is undergoing not just a temporary slowdown but a rapid overhaul, profoundly
changing the outlook for CO2 emissions (and the coal industry). At the same time as
industrial output is becoming less carbon intensive, energy production from low-carbon
sources is increasing. Most of the added generation continues to come from hydropower.
China’s massive hydro projects – including the Three Gorges Dam, the
world’s largest – have come under fire for poor environmental oversight that may
have caused droughts and geologic disasters. It
has also been alleged that the Chinese state has displaced millions of residents to make
room for these projects. But the significant growth rates of wind, solar, bioenergy
and gas suggest that these energy sources could pick up much of the slack once
hydropower’s potential is exhausted. A
recent projection by a Chinese government think tank sees the country getting
half of its electricity from renewable energy in 15 years, and almost phasing out fossil
fuels in power generation by mid-century. Under these projections China in 2050 would
produce half of the current electricity consumption of the entire world from wind and
solar alone, or more than twice as much as as China currently does from coal. Most of the reduction in coal consumption in 2014 took place in
the power sector and we
already have a pretty detailed picture of what happened there, a break between GDP and
electricity generation and a switch from fossil generation to gas and non-fossil fuel
power, along with ongoing improvements in power plant efficiency... Over the past decade, until 2013, China’s skyrocketing coal
consumption dominated global CO2 emission trends, being responsible for more than half of
total growth. The trend only accentuated in 2010-2013, pushing global CO2 emissions and
CO2 levels already in the atmosphere to ever more dangerous levels and making the task of
peaking and declining global emissions very urgent. With the prospect of very slow growth
or even continued reductions in China’s CO2 emissions, the chances of achieving a
peak have changed from near-impossible to achievable with some determination." |
"By
2040, the Organisation
of the Petroleum Exporting Countries (Opec) predicts the world will need to produce 111m
bpd of crude to meet world demand. That represents another 20m bpd on top of existing
output which means the world needs to find and develop and additional 800,000 bpd of oil a
year on average to keep up with supply. To put that challenge into perspective, this
figure represents repeating the US shale oil boom all over again, or finding a developing
a new North Sea 20 times over. Although, Mr Simmons
was perhaps wrong in focusing on a potential collapse in Saudi Arabia’s oil
production he was right in warning about the dangers of 'Peak Oil' but too early in
predicting its onset. That time is now upon us. Despite, oil prices being forced lower
over the last six months the world is entering into a 'peak oil' scenario whereby the cost
of a barrel could feasibly
quadruple to around $200 per barrel over the next 10 years. Even though the current
weakness in oil
prices below $100 per barrel has been caused by a glut in global supply this will be
short lived. Most of the new oil has come from three
sources, US shale, Iraq and Africa. Each has its own problems going forward that will
limit its potential to deliver the incremental increases in supply that will be required
to meet even the most pessimistic forecasts for demand by 2040. In the case of US shale
this oil already represents the bottom of the barrel. Lower prices mean that US
output will plateau this year at around 9.3m bpd as oil companies shut down rigs at a
record rate. However, even when these rigs eventually return once prices recover, as they
have since March, it is unlikely that America’s oil output will ever repeat the
staggering growth seen over the last decade. The country’s shale oil wells will be
fracked to oblivion long before demand peaks in 2040 creating a potential energy shock in
the world’s largest economy. Then there is
Iraq, which is now exporting crude at a record level. The war-torn country is now
Opec’s second-largest producer pumping around 3.3m bpd of crude but with big
ambitions to potentially double this over the next five years. This is sadly a pipe dream.
Boosting Iraq’s production long term would require billions of dollars of investment
and a stable secure government. However, the former cannot exist without the latter
especially with the Islamic
State (Isis) now controlling Anbar province, one of the country’s biggest
regions. The fact that so much of the incremental
increase in net production from the Middle East is forecast to come from Iraq shows the
precarious state of the world’s oil supply. Can
any oil economist who is currently predicting that low oil prices will last really say
with confidence that the government in Baghdad will be able to drive Isis out of the
country, or even survive? After Iraq the next great hope for increasing oil production in
the Middle East is Iran. Tehran believes that it can boost oil production to 5m bpd if
sanctions are fully lifted. Although a framework agreement with the West over its nuclear
programme is in place this is a long way short of a binding deal. Boosting Iranian oil
production could take years and would require the investment of international oil majors.
It’s still unclear whether Iran is willing to offer the right terms to attract this
investment, or indeed whether oil companies are willing to take the risk while the Shiite
Mullahs still hold the balance of power in Tehran. Finally there is Africa, Russia and
Latin America. All three regions hold vast oil resources but lack either the political
stability or credible leadership. In Russia, the recent actions of President Vladimir
Putin have called into question whether it can be relied upon as a mainstay of global
energy supply. In Africa, major producers such as Nigeria are hamstrung by corruption,
while Libya barely exists as a country. Latin American states such as Brazil hold
potential but they won’t be enough to head off 'Peak Oil'. In the UK, the North Sea
is in terminal decline and will cease to be productive in 25 years when we need the oil
most. Although, the UK has shale oil in places such as the Weald Basin even based on this
most optimistic forecasts this won’t be enough. This brings us to Royal
Dutch Shell and its persistence in gaining a foothold in the Arctic despite the
environmental challenges this presents. The Anglo-Dutch company, which is the most
cautious of the major international oil companies, is prepared to soak up the bad
publicity of hundreds of activists taking to the water in Seattle to confront the arrival
of its Arctic drilling rigs over the weekend. It knows that the Chukchi Sea is one of the
last remaining regions that contain world-scale oil reserves that can be reached without
taking a major geo-political risk. More companies will follow Shell into the Arctic and it
is absolutely vital to the global economy that they do. Shell believes it can eventually
produce around 400,000 bpd from the region, which is about half of what the world needs to
find and develop ever year for the next 25 years to avoid running out of oil. Therefore,
Shell’s Arctic rigs literally represent the real beginning of the era of 'peak oil'
that Mr Simmons originally predicted which will eventually lead to the $200 barrel." |
"It used to be that nothing could compare
to crude oil for transportation use. And yet that is changing now. Electric vehicles (EVs) are already cheaper to run than internal
combustion engine (ICE) automobiles. The U.S. Department of Energy, using data from the Idaho
National Laboratory, estimates that the cost to run an ICE car is just under 16
cents/mile whereas the cost to run an EV is about 3 cents/mile. And EVs are not anywhere near scale so we can reasonably assume that these
costs could fall further. Now suppose that wind and solar continue to gain market share
and costs continue to plunge. Those cost savings will be translated into cheaper
electricity costs which in turn makes running an EV that much cheaper. And yet EVs are
already about five times cheaper than a traditional car. You begin to get the picture.
Simple economics tell us that it is in our best interest to buy an EV rather than an ICE
automobile. Hence we do not need crude oil to the extent that we have in the past. And
crude oil is overwhelmingly used only for transportation. Automakers
like BMW have grasped this reality and have announced that they will no longer make a
stand alone ICE automobile by 2022, a mere seven years away. All of their vehicles will be
either pure EVs or hybrids." |
"After
slashing the number of drilling rigs for months, U.S. shale-oil companies say they are
ready to bring rigs back into service, setting up the first big test of their ability to
quickly react to rising crude prices. Last week, EOG
Resources Inc. said it
would ramp up output if U.S. prices hold at recent levels, while Occidental Petroleum Corp. boosted planned production
for the year. Other drillers said they would open the taps if U.S. benchmark West Texas
Intermediate reaches $70 a barrel. WTI settled at $60.50 Wednesday, while global benchmark
Brent settled at $66.81. An increase in U.S.
production, coupled with rising output by suppliers such as Russia and Brazil, could put a
cap on the 40% rally in crude prices since March and even push them lower later in the year, some analysts
say....As prices fell last year, shale companies began furiously decommissioning rigs.
Twenty-two consecutive weeks of aggressive cuts have left the industry with 930 fewer
rigs, a 58% cut from their 1,609 peak in October, according to Baker Hughes, which tracks drilling
activity. In a report on Wednesday, the International Energy Agency, a Paris-based
watchdog of the world’s biggest oil consumers, said it expects U.S. shale-oil output
growth to slow by 80,000 barrels a day this month.... Goldman
Sachs said that if U.S. benchmark West Texas Intermediate oil prices settle above $60 a
barrel, U.S. producers will eventually ramp up activity, spurred by improved returns, as
costs have fallen due to efficiency gains. A slowdown in the rig-count decline suggests
that producers are increasingly comfortable at current prices, Goldman says. Last week,
the rig count fell by 11 to 668 rigs, the smallest drop since early April, after declining
by 24 and 31 rigs in the previous two weeks and after shedding close to 100 rigs a week
earlier this year. Shale producers’ agility
isn’t a given. OPEC has enjoyed its position as a swing producer because several key
member governments, especially Saudi Arabia, have invested billions of dollars in
developing spare capacity—wells they can quickly turn on and off in a crisis. Shale
producers, by contrast, are typically much smaller, independent actors, who react to
prices—not to the whims of their governments. It
is still unclear whether the flood of money that helped start and propel the shale boom
can be turned on and off as quickly as the oil. In past oil cycles, companies have also
struggled to quickly turn on the taps after throttling back—amid logistical hurdles
like securing equipment and enticing recently let-go workers back to the oil fields. The IEA said Wednesday U.S. shale producers have already learned to shave
costs. The recent price rebound 'is giving [shale] producers a new lease on life,' the
agency said. 'Several large [shale] producers have been boasting of achieving large
reductions in production costs in recent weeks.'" |
"China
is now the largest importer of crude oil in the world. In April, it surpassed
the U.S., which has traditionally held the slot, with imports of 7.4 million barrels per
day (bpd) or 200,000 more than the U.S., according to the Financial Times. The news comes as a surprise because the Chinese economy has been slowing
and just this weekend, in an effort to stimulate growth, the People’s Bank of China
cut interest rates for the third time in 6 months. Over the next few months, the U.S. and
China may be in and out of the top spot, but because American imports dropped by about 3
million bpd in the last decade (thanks in large part to shale extractions) and because
China’s purchases have boosted seven-fold, the Chinese should be the top crude oil
importer on a long term basis.China overtook
the United States as the world’s top energy consumer in 2010 and is already the
number one purchaser of many commodities, such as coal, iron ore and most metals." |
"The
Conservative election victory has dealt a severe blow to Britain’s green energy
industry, campaigners have warned, as the new majority government prepares to scrap
crucial subsidies for renewable power; champion the development of polluting shale gas;
and make significant cuts to spending. The renewable
industry is most worried about the future of onshore wind farm developments, which the
Tories have repeatedly dismissed as an unwanted eyesore despite being cheaper than other
forms of green energy. The party’s manifesto pledges 'to halt the spread of onshore
wind farms' – and although it is not clear exactly when subsidies for new land-based
turbines will be scrapped, an announcement is expected soon. But the Government’s axe
is likely to fall across much of the renewable energy industry, campaigners say. They
point to David Cameron’s plan to remove what he in 2013 reportedly called the 'green
crap' that subsidises renewable power from Britain’s energy bills as evidence of his
dislike for alternative energy sources." |
"Avoiding a power blackout will be one of
the first priorities for whoever forms the next government, a leading consultant has
suggested. Ahead of the results of one of the closest elections in decades, Simon Virley,
UK chair of energy and natural resources at KPMG, has warned of tight energy capacity in
2015 and 2016. 'The next couple of winters are expected to be among the tightest this
decade in terms of electricity capacity margins due to announced plant closures; while
Britain’s overall dependence on imported energy is soaring as North Sea production
declines,' he said. According to KPMG, the margin for power generation this winter could
be even lower than the 4.1pc winter outlook provided by National Grid last year following
the potential closure of plants at Killingholme and Longannet...Meanwhile, plans for Britain's first new nuclear plant in a
generation at Hinkley
Point still depend on receiving final investment approval from French utility EDF. The
company said last year it wanted to decide on the £24.5bn project in Somerset by the end
of March but that deadline has now slipped. Some
critics argue that a focus on renewables
has left Britain’s power network now dangerously short of spare capacity. Official
figures show that renewables generated 19.2pc of UK supplies in 2014, with solar
contributing 1.2pc." |
"There are currently four reactors under construction in the U.S., and one new
reactor—conceived in the 1970s and taking decades to complete—will open
soon at the Tennessee Valley Authority's Watts Bar power plant in Tennessee. But that will
not be enough to replace all the reactors retiring for economic or age-related reasons,
including the Oyster Creek station in New Jersey—the nation's oldest operating power
reactor—which will cease fission in 2019. As a
result, the amount of electricity
produced by nuclear power plants in the U.S. continues to drop, replaced in many cases
by burning natural gas, which results in more air
pollution. Now, the nation's reactors produce only a little more than 60 percent of low-carbon electricity in the U.S., a percentage that looks set to
dwindle." |
"For the first time in five months, a rig
in the Williston Basin, where North Dakota’s Bakken shale formation lies, sputtered
back to life and started drilling for crude once again. And then one returned to the
Permian Basin, the nation’s biggest oil play, field services contractor Baker Hughes
Inc. said Friday. Shale explorers including EOG
Resources Inc. and Pioneer Natural Resources Co. say they’re preparing to bounce back
from the deepest and most prolonged slowdown in U.S. oil drilling on record. The country
has lost more than half its rigs since October, casualties of a 49 percent slide in crude
prices during the last half of 2014. Futures rallied
above $60 a barrel earlier this week, and a sudden return to oil fields would threaten to
end this fragile recovery. 'You’re inviting a lot of pent-up supply to come back into
the market — not only do you have people drilling again, but you have this fracklog
of over 4,000 uncompleted wells,' Harry Tchilinguirian, the head of commodity markets
strategy at BNP Paribas SA in London, said by phone. 'And then we’re in a situation
where the market could easily go back into the mid- $50’s.' While rigs are returning
to some fields, the total U.S. count has continued to decline, losing 11 this week to
reaching a four-year low on Friday. The drilling slowdown won’t reach a real bottom
for about another month, James Williams, president of energy consultant WTRG Economics,
said by phone from London, Arkansas....The U.S. rig count may recover to 1,200 to 1,300
should prices rally past $70 a barrel, Allen Gilmer, chief executive officer of the
Austin-based energy data provider Drillinginfo, said by phone on May 1." |
"Energy
group IGas yesterday announced plans to cut more than 25 per cent of its 200-strong
workforce and close its office in Stirling to reduce costs in the wake of the fall in oil
prices. The news came just a day after the onshore
explorer completed the sale of its shale gas exploration licence around Grangemouth to
chemicals group Ineos." |
"Blackouts have been a persistent concern
for UK business. Last year National Grid was forced to unveil a series of measures to keep
more power generation in reserve in an effort to boost spare capacity to 6pc, a level
perceived to be a safe threshold. National Grid’s forecasts
show that without the emergency measures an exceptionally cold winter last year could
have cut the margin to 2.8pc, assuming full imports of power from the continent, and eaten
into reserve margins if imports were unavailable..... plans
for Britain's first new nuclear plant in a generation at Hinkley
Point still depend on receiving final investment approval from French utility EDF. The
company said last year it wanted to decide on the £24.5bn project in Somerset by the end
of March but that deadline has now slipped. Some
critics argue that a focus on renewables
has left Britain’s power network now dangerously short of spare capacity. Official figures show that renewables generated 19.2pc of UK
supplies in 2014, with solar contributing 1.2pc." |
"Take
a look around most American homes and you'll see plenty of appliances, smartphones,
chargers, computers and other electronic devices plugged in - all the time. Most people
don't give the practice a second thought. But a new study from the Natural Resources
Defense Council suggests the powering of so many devices around the clock is using
huge amounts of energy - $19 billion worth of electricity on an annual basis, equivalent
to the output of 50 large power plants. In
California alone, the study found that these inactive devices account for nearly 23
percent, on average, of the electricity consumption of homes. 'One reason for such high
idle energy levels is that many previously purely mechanical devices have gone digital:
Appliances like washers, dryers, and fridges now have displays, electronic controls, and
increasingly even Internet connectivity, for example,' Pierre Delforge, the report's
author and NRDC's director of high-tech sector energy efficiency, said. "In many
cases, they are using far more electricity than necessary." |
"Europe
will remain dependent on Russian gas for years to come, energy giant Centrica has warned,
dismissing suggestions the EU can replace it with other sources as 'unrealistic'. European
leaders have scrambled to try to cut reliance on imports from Vladimir Putin's Russia
since the Ukraine crisis escalated last year, with Ed
Davey, the energy secretary, suggesting loft insulation and wind farms were needed to
'take on the Kremlin'. But Rick Haythornthwaite, Centrica chairman, told
shareholders on Monday: 'Whatever we might want as Europe, we need to be very careful
about being pragmatic about the realities of it... I think it's unrealistic to think that
Russian gas is going to be replaced in the near-term.' Iain Conn, Centrica chief
executive, added: 'Russia supplies... about a third of Europe's gas. You can't switch that
off easily without huge consequence. There is no way the
United States can supply that volume of LNG to replace it.' If sanctions were imposed
on Russian gas companies would have to comply, he said, but it would have 'a very
significant impact on Europe's ability to balance its natural gas sources and uses',
particularly in Eastern Europe which was 'not plumbed in to many alternatives'. But he
added that Russia had been a 'a reliable supplier of gas all the way through the Cold War'
and that it needed European demand. Russia realises that plays a very important part in
Russia's own future and there's as much value in this co-dependency as there is potential
threat,' he said. Both men were speaking at Centrica's Annual General Meeting, where 33
per cent of shareholders voted against the energy giant's executive pay report and
investors complained the board was 'paying itself large sums of money for cutting our
dividend". " |
"The Internet is heading towards a
‘capacity crunch’ and could reach its limit in just eight years, say scientists.
The cables and fibre optics that relay information to our laptops, smartphones and tablets
will have reached their limit within eight years, and fibre optics can take no more data
from a single optical fibre, scientists warned. 'At
the current usage rate, all of Britain’s power supply could be consumed by Internet
use in just 20 years,' scientists said. Leading
engineers, physicists and telecoms firms have been summoned to a meeting at London’s
Royal Society later this month, to discuss what can be done to avert a web crisis, Daily
Mail reported. 'We are starting to reach the point in the research lab where we can’t
get any more data into a single optical fibre,' professor Andrew Ellis, who has
co-organised the Royal Society meeting on May 11, was quoted as saying by Daily Mail.
'Demand is increasingly catching up. It is growing again and again, and it is harder and
harder to keep ahead. We have done very well for many years to keep ahead. But we are
getting to that point where we can’t keep going for ever,' he added. The boom of
Internet television, streaming services and ever-more powerful computers has increased the
strain on our communications infrastructure. The Internet companies could always put down
additional cables – but that will mean higher bills. Experts said users could be
faced with paying double or will have to put up with an Internet that switches off
intermittently. In 2005, broadband Internet had a maximum speed of 2 Megabits per second.
Today 100Mb-per-second download speeds are available in many parts of the world." |
"Russian
President Vladimir Putin
on Saturday ratified a gas supply agreement with China via the so- called Eastern route. 'The agreement is aimed at strengthening the Russian-Chinese energy
cooperation, and defines the main terms of the natural gas supply from Russia to China
through the East-Route, including the cross-border section of the gas pipeline across the
Amur River ( the Heilongjiang River in China) near Blagoveshchensk (capital of the Amur
region in the Russian Far East) and China's border city of Heihe,' an online official
statement said. The agreement was passed on April 24 by parliament's lower house, or the
State Duma, and approved by the upper chamber namely the Federation Council five days
later. During Putin's official visit to China last
May, the two sides signed a 30-year gas supply contract that will see the East-Route
Pipeline start providing China with 38 billion cubic meters of natural gas annually from
2018." |
| "The European Union, keen to
lessen its dependence on Russia
for energy supplies, expects to start receiving natural gas from Turkmenistan by 2019,
European Commission Vice President Maros Sefcovic said in an interview. Russia currently supplies around a third of Europe's gas needs, but Moscow's annexation of Crimea and its
involvement in the military conflict in eastern Ukraine has added urgency to the EU's
search for gas from alternative sources.... The project, designed to bring Turkmen gas to
Europe across the Caspian Sea via the so-called 'southern gas corridor' which includes
Azerbaijan and Turkey,
has been stuck for years due to political, ecological and financial uncertainties. 'Now
there is a political decision that Turkmenistan will become part of this project and will
feed the European direction,' Sefcovic said. Last year, Turkmenistan and Turkey signed a
framework agreement to supply gas to the proposed Trans-Anatolian natural gas pipeline
project (TANAP), which will take gas from Azerbaijan's Shah Deniz II field in the Caspian
Sea. To connect to TANAP, Turkmenistan needs to build its own, 300-km (187-mile) link
under the Caspian Sea, a disputed area between Russia, Kazakhstan, Turkmenistan, Iran and Azerbaijan. TANAP will be built
from the Turkish-Georgian border to Turkey's frontier with Bulgaria and Greece. Its construction is expected to
be completed by the end of 2018 in order to start deliveries of gas from Shah Deniz II in
2019....Turkmen officials said in March that 'active'
negotiations were under way to supply Europe with 10 to 30 bcm of gas per year. This
compares to around 30-35 bcm which Turkmenistan annually exports to China." European Union sees supplies of natural gas from Turkmenistan by 2019 Reuters, 2 May 2015 |
"In
2014 oil prices crashed. Americans jumped for joy. Small wonder: each year the average
American consumes more energy than a Briton and a Japanese person put together. The
oil-price drop pleased economists, too. Many were sure that it would give the economy a
nice boost. However, the oil bust was followed not by a boom but a slowdown (see chart).
Figures released on April 29th showed that growth in the first quarter of this year was
just 0.2%. All this leads wonks to wonder: are lower oil prices such a good thing? Gross domestic product (GDP), the total annual output of an economy, is
made up of four things: government spending, net exports, consumer spending and
investment. The oil price does not much affect government spending, but has a big impact
on the other three..... low oil prices have helped in one important way (besides the
obvious one of easing motorists’ pain at the pump). They have pushed down inflation.
The headline rate is now hovering around zero—well below the Federal Reserve’s
target of 2%. When prices are rising so slowly, the Fed can keep policy very loose.
Indeed, at a meeting on April 29th it decided to keep interest rates at rock bottom, as it
has done since late 2008. Such ultra-low rates stimulate growth without the threat of
inflation. In the past few weeks, however, the oil price has stopped falling, so this
deflationary effect is wearing off. Economists are left wondering how what seemed like
such a big bonus for the American economy could have had so little effect." |
"Saudi
Arabia's state oil company is to be separated from the oil ministry as part of a wider
restructuring. The move was approved by the Supreme
Economic Council, which was set up by King Salman this year to replace the Supreme
Petroleum Council. The new 10-member council is headed by the King's son, Prince Mohammed
bin Salman. He was appointed this week as the new deputy crown prince and is regarded as
second in line to the throne. On Wednesday, King Salman appointed Saudi Aramco's chief
executive Khalid al-Falih as chairman of the company and health minister as part of a
major political reshuffle. He has been replaced by Aramco senior vice-president Amin
al-Nasser. The main facets of Saudi oil policy - including maintaining the ability to
stabilise markets by holding extensive reserves and a reluctance to interfere in the
market for political reasons - are set by the top members of the ruling royal family. There are no signs that the move will lead to any significant
changes in the way that the world's top oil exporter and de facto Opec leader makes its
decisions. However, separating Aramco from the oil
ministry is likely to be just the first step in a shake-up of the Saudi oil sector,
according to analysts." |
"The
EIA has said that US energy consumption has slowed recently and is not anticipated to
return to growth levels seen in the second half of the 20th century. Reference case
projections in the Annual Energy Outlook 2015 (AEO2015) show that domestic consumption is
expected to grow at a modest 0.3%/y through 2040, less than half the rate of population
growth. Energy used in homes is essentially flat, and
transportation consumption will decline slightly,
meaning that energy consumption growth will be concentrated in US businesses and
industries." |
| "The U.S. oil production decline
has begun. It is not because of decreased rig count. It is because cash flow at current
oil prices is too low to complete most wells being drilled. The implications are profound.
Production will decline by several hundred thousand of barrels per day before the effect
of reduced rig count is fully seen. Unless oil prices rebound above $75 or $85 per barrel, the rig
count won’t matter because there will not be enough money to complete
more wells than are being completed today....The decrease in well completions provides
additional evidence that the true break-even price for tight oil plays is
between $75 and $85 per barrel. The Eagle Ford Shale is the most attractive play with a
break-even price of about $75 per barrel. Well
completions averaged 312 per month from January through September 2014 when WTI averaged
$100 per barrel (Figure 2). When oil prices dropped below $90 per barrel in October,
November well completions fell to 214. As prices fell further, 169 new producing wells
were added in December and only 118 in January. Bakken break-even prices are higher at
about $85 per barrel. Well completions averaged 189 per month from January
through September 2014. In November, only 80 new producing wells were added. In
December and January, 123 and 114 new wells were added, respectively. Orders for rail cars
used to transport oil decreased by 70% in the first quarter of 2015 compared with the
fourth quarter of 2014. Permian 'shale' play break-even prices are also about $85 per
barrel based on declining well completion data. Well completions averaged 175 per
month from January through September 2014. In January 2015, only 35 new producing wells
were added. Much of the commentary about the backlog of deferred completions is exaggerated
and irrelevant unless oil prices increase to $75 or $85 per barrel. The
assumption underlying most industry chatter these days is that oil prices will return
to normal. The world oil market is undergoing a fundamental structural change in response
to expensive oil. Producers are trying to survive by limiting expenditures. While
analysts have been focused on rig counts, deferred completions have emerged as the
initial path to lower U.S. oil production. This unanticipated outcome suggests
that others may follow." Art Berman - The U.S. Production Decline Has Begun Petroleum Truth Report, 29 April 2015 |
"A
study has found that many people in the UK are worried about having smart meters in their
homes because they fear that data about their personal energy use will be shared. The UK government says it wants
all homes to have smart meters within five years. These will allow users to set
equipment that only needs energy intermittently – such as washing machines and
freezers – to switch on at times when the grid has spare capacity and power is cheap.
The meters will save people money, as well as making it easier for the grid to incorporate
fluctuating sources of renewable energy such as wind and solar power – thus helping
to cut greenhouse-gas emissions. But in an online survey of more than 2400 people in the
UK, Alexa Spence of
Nottingham University found that a fifth would be "uncomfortable" with the data
sharing needed to do that. Strangely, she says, people who were worried about their energy
bills were the most fearful, whereas those who were more concerned about climate change
tended to be more amenable to data sharing." |
"Vitol
Group, the world's biggest independent oil trader, said crude prices won't drop below $50
a barrel for sustained periods - because that's a level some producers need in order to
invest in new supply. 'We still subscribe to the
likelihood that over time prices still have to go back up again because you still need to
invest,' said Vitol CEO Ian Taylor last week. 'People won't invest unless they can make
the upstream business work - and it's not just US shale; at $50 a barrel it doesn't work.'
Oil prices collapsed almost 50pc last year as OPEC kept its output ceiling at about 30
million barrels a day, insisting producers outside the 12-nation group help tackle a
surplus. While the US pumped 9.38m barrels a day last week - the highest output for this
time of year in at least three decades - its output slid 0.4pc in the past month. Prices
will trade from $50 to $70 a barrel in the second half of this year, Taylor said. Brent,
the global benchmark, ended at $62.08 on the ICE Futures Europe exchange last week. West
Texas Intermediate (the US benchmark), was at $55.26. 'US production growth is beginning
to slow down and demand is looking quite good for the year, so the combination of all of
that means that probably price, if anything, moves up a little bit,' Taylor said.... Prices need to rise to about $80 a barrel in order to attract
investment and replace lost production, said Marco Dunand, CEO of Mercuria. Field depletion means markets are losing as much as five million barrels
a day from supply that needs to be replaced each year, he said." |
"Oil
needs to recover to $65 a barrel for U.S. drillers to tap a
pent-up supply locked in shale wells and unleash more crude on markets than is produced by
Libya. Dipping into this 'fracklog' would add an extra 500,000 barrels a day of oil into
the market by the end of next year, Bloomberg Intelligence said in an analysis on
Thursday. Producers in oil and gas fields from Texas
to Pennsylvania have 4,731 idled wells at their disposal. Prices are rebounding from a
six-year low after drillers idled half the nation’s oil rigs, slowing the shale boom
that boosted production to the highest in four decades. The number of wells waiting to be
hydraulically fractured, known as the fracklog, has ballooned as companies wait for costs
to drop. That could slow the recovery as firms quickly finish wells at the first sign of
higher prices....U.S. oil futures tumbled by more than $50 a barrel in the second half of
last year amid a worldwide glut of crude. West Texas Intermediate for June delivery fell
$1.16 to $56.58 a barrel at 11 a.m. on the New York Mercantile Exchange. Oil production in
the lower 48 states would rise to 7.67 million barrels a day in the fourth quarter of 2016
if drillers start shrinking their fracklogs by 125 wells a month in October and put some
rigs back to work, Bloomberg Intelligence models show. The U.S. fracklog has more than
tripled in the past year, with oil wells making up more than 80 percent of the total. 'One
of the big reasons why production is finally falling is because of these fracklogs,' Phil
Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone on
Thursday. 'That’s an overhanging bearish fundamental.' The Permian Basin, which
covers parts of Texas and New Mexico, had the biggest collection of unfracked wells as of
February, with 1,540 waiting to be completed. The count totaled 1,250 in Texas’s
Eagle Ford formation and 632 in North Dakota’s Bakken shale. Last week, Raoul
LeBlanc, an oil analyst with Englewood, Colorado-based consultant IHS Inc., pegged the
U.S. fracklog at around 3,000 wells. Halliburton Co., the world’s second-biggest
provider of oilfield services, estimated there are about 4,000 uncompleted wells, citing
'third party estimates.' Fracklogs are growing faster in the fringe areas of plays where
the wells are less productive, according to the Bloomberg Intelligence analysis. In the
Eagle Ford, for example, counties at the edge, such as Lee and Lavaca, saw companies go
from completing more than 60 percent of their wells in November to less than 20 percent in
February. Large independent producers from ConocoPhillips to EOG Resources Inc. hold a
significant portion of the uncompleted wells. Those companies are already seeing more
incentive to start eating into their backlog as crude has risen by a third since
mid-March. After-tax returns would be 5 to 10 percent higher than they were just two
months ago when oil was at $45, Cosgrove said." |
"The
US is scrambling to head off a Greek pipeline deal with Russia, fearing a disastrous
change in the strategic balance of the Eastern Mediterranean as Greece’s radical-Left
government drifts into the Kremlin’s orbit. Ernest Moniz, the US Energy Secretary,
said his country is pushing for an alternative gas pipeline from Azerbaijan that would
help break the stranglehold that Russian state-controlled firm Gazprom has on European
markets. 'Diversified supplies are important and we
strongly support the ‘Southern Corridor’ to bring Caspian gas to Europe,' he
told a group of reporters on the margins of CERAWeek oil and gas forum in Houston. He
insisted that it was vital to uphold 'collective energy security' in Europe. Greece’s
foreign minister, Nikos Kotzias, said Gazprom made a 'very good offer', with guaranteed
gas supplies for 10 years at good prices. He asked how his Syriza government could justify
turning down such an opportunity unless the Western powers could come up with something
better. The once-unlikely 'Turkish Stream' deal with
Russia has suddenly become a stark reality as President Vladimir Putin seizes an
opportunity created by the eurozone’s inept handling of the Greek crisis. Under the terms of the offer, Russia would supply 47bn cubic metres (BCM)
of gas to Greece, generate much-needed revenue for the Greek authorities, create 2,000
jobs and turn the country into an energy hub. Sources in Athens have confirmed to The
Telegraph that it could also bring €3bn (£2.2bn) to €5bn in advance payments,
greatly alleviating Syriza’s budget strain as it raids local authority funds in a
last, desperate attempt to put off default. The deal was due to be signed on Tuesday, but
overtures from Washington caused a delay, much to the irritation of the Russians. The
talks were complicated by Greek complaints over Gazprom’s tough line on 'take-or-pay'
violations by the Greek natural gas company DEPA, whereby it was required to pay for
unused gas. It is now clear that Greece is playing every possible card in an escalating
form of four-way brinkmanship, in this case trying to play off Washington against Moscow.
This is a high-risk strategy as it risks irritating Syriza’s increasingly exasperated
friends in the White House, all the more so as tensions between Russia and the West flare
up again over Ukraine. It also risks pushing Moscow too far. Mr Kotzias said after a trip
to Washington this week that the US is preparing a 'counter-offer' and will send an
emergency mission to Athens in coming days, led by the State Department’s energy
troubleshooter, Amos Hochstein." |
| "Tony Hayward, the former BP
chief executive who runs Iraqi Kurdistan-focused Genel Energy, on Wednesday said oil prices are set to soar as Opec has
taken just six months to stop the US shale oil boom in its tracks. Speaking at the FT
Commodities Global Summit in Lausanne, Switzerland, Mr Hayward said Opec had shown itself
to be 'the most successful cartel in history', predicting oil prices would soon return to
near $80 a barrel. 'The supply base is
shrinking, they [Opec] are maintaining their market share. It seems like it’s been a
big success,' said Mr Hayward, who left BP after the 2010 Deepwater Horizon oil spill.
Opec’s decision in November to hold production steady in the face of fast-growing US shale output helped accelerate the
oil price collapse. But an increasing number of big oil executives and traders argued this
week that the worst of the oil rout is over, having forced a quick response from the
market. The drop in oil prices from above $110 in June to near $45 in January has led to a
marked reduction in the number of rigs drilling for oil in the US. Many energy majors and
national oil companies have also slashed investments in production worldwide. On
Wednesday, Ice June Brent was trading up 53 cents at $62.60 a barrel. The heads of Vitol and
Gunvor, two of the world’s largest independent oil traders, said on Tuesday that oil
prices had probably bottomed. 'The low price is behind us,' Gunvor chief executive
Torbjorn Tornqvist told a panel at the FT Summit. Mr Hayward, who said he will take a less
active role in the day-to-day running of Genel by the end of this year, said US oil output
will soon slow or fall." Former BP chief says oil prices set to soar Financial Times, 22 April 2015 |
| "Industry leaders at the World
Economic Forum on East Asia have said they expect oil prices to rise further. The leaders, meeting in the Indonesian capital, Jakarta, said the
long-term view was that demand for oil is growing. Oil prices are around their highest
levels for the year. The price of Brent crude was at $63 a barrel on Tuesday, up 40% from
its January low of $45 a barrel and near its high for the year of $65. Oil prices
more than halved in the second half of last year, as falling demand and high levels of
output caused a glut in supply. Melody Boone Meyer, president of Asia-Pacific exploration
and production at US energy giant Chevron, said that dramatic falls were not an uncommon
feature of the oil market." Oil prices 'will hit optimum level' as demand grows BBC Online, 21 April 2015 |
"Renewables are finally becoming a
globally significant source of power, according to a United Nations Environment Programme report
released in March by Frankfurt School UNEP Centre and Bloomberg New Energy Finance.
Driven by rapid expansion in developing countries, new installations of carbon-free
renewable power plants in 2014 surpassed 100,000 megawatts of capacity for the first time,
according to the Global Trends in Renewable Energy Investment report. It
appears that renewable energy is now entering the market at a scale that is relevant in
energy industry terms – and at a price that is competitive with fossil fuels. The
numbers are compelling. Renewables
such as wind, solar and biomass generated an estimated 9.1% of the world’s
electricity in 2014, up from 8.5% in 2013, according to the report. These sources made up the majority of new power capacity in Europe, and
also brought electricity to new markets. They also caught the eyes of investors: in 2014,
energy investment in rose 17% over the previous year, surging to $270bn, according to the
report. Some
experts still predict that fossil fuels will supply the majority of our energy for
decades to come, but the evidence strongly points in another direction. As the Global
Trends report points out, the clean energy investment that funded almost half of all new
power plants in 2014 came at what would, seemingly, be a very bad time for renewables.
While oil prices were rapidly falling and China’s coal consumption was decreasing,
both commodities were, if anything, more economically viable. But at the same time,
renewables appear to be increasing rather than decreasing in competitiveness. For example,
a large-scale
solar plant in Dubai has recently bid to provide electricity at less than $0.06 per
kilowatt-hour. To put this in context, this is less than what the vast
majority of consumers around the world pay to keep the lights on. It’s a third of
the cost of electricity in Africa. Grid parity for solar is already available in many
countries; in others, it’s just around the corner." |
"Shale
drillers will see production drop sooner than expected under a U.S. government forecast, a
momentum change that hints at an eventual price rally. Just five months after Saudi Arabia put the market into a tailspin by
refusing to cut supply despite a global glut, the shale oil industry will record its first
monthly dip since U.S. officials began weighing output in 2013. The projected production
drop is small, just 1 percent. Yet investors took note, pushing oilfield stocks to the top
five spots in the Standard & Poor’s 500 Index on Tuesday, led by rig operators
Ensco Plc and Diamond Offshore Drilling Inc. The decline lags the idling of rigs because
of a backlog of already-drilled wells that have gradually been coming online. 'OPEC’s
plan is playing out and price is correcting the oversupply,' said Michael Scialla, an
analyst at Stifel Nicolaus & Co. in Denver, in a telephone interview. West Texas
Intermediate crude, the U.S. benchmark, climbed 3 percent to $53.47 a barrel at 2:03 p.m.
in New York, extending the rising streak to a fourth trading session. Shale fields make up
about half of total U.S. production, which will continue growing this year and next,
rising to 10.3 million barrels a day in 2025, according to a new longterm forecast by the
Energy Department Tuesday. Crude lost almost 60 percent of its value since late June,
making some shale fields unprofitable to develop and forcing companies to cut back
exploration prospects. Oil explorers were forced to shut down more than half the rigs
drilling for crude in the U.S. since the Saudi statement in November, and canceled
expansion plans to conserve cash." |
| "A respected oil and gas expert
has slammed claims made by entrepreneur David Lenigas that 100bn
of oil lies under the South of England within a few miles of Gatwick Airport as
"wildly optimistic" and "misleading". Last week UK Oil & Gas Investments - a company controlled by Mr
Lenigas - claimed that it had discovered the UK's largest onshore oil find at
its site at Horse Hill on the edge of the Mole Valley. According to the company, 100bn
barrels of oil exist under the Sussex Weald, equivalent to the proven reserves of Iran.
Shares in the AIM-listed oil explorer surged more than 200pc following the announcement
last week, which promised a "Dallas" style oil-rush across large areas of Green
Belt countryside. "Estimates for 100bn barrels of oil are very misleading," said
Matthew Jurecky, GlobalData’s head of oil & gas research and consulting.
"Rarely are formations that homologous where a single discovery can be extrapolated
over a very wide area." Last week, UK Oil & Gas Investments Chief Executive
Stephen Sanderson said: "We think we've found a very significant discovery here,
probably the largest onshore in the UK in the last 30 years, and we think it has national
significance." However, Mr Jurecky has dismissed such claims based on limited
results produced by a single well. He argues that just 15m barrels of oil may actually be
recoverable from the Horse Hill site based on conventional understanding of the geology
and restrictions in the local area. Mr Jurecky said: "The play pinches out and is too
thin, or lacks certain characteristics across the wider formation that are present in
producing areas.' Producing commercial quantities of oil from the area are also unlikely
given the current slump in the price of crude, which is expected to trade well below $100
per barrel for the foreseeable future amid a glut of supply." Gatwick oil gusher claims 'wildly optimistic' warns expert Telegraph, 14 April 2015 |
"Chinese
diesel demand, after rising an average of 8 percent a year for a decade, actually fell in
2013 and 2014. The International Energy Agency
attributes this partly to the country’s rapidly expanding fleet of natural gas
vehicles. Chinese demand for oil this year is expected to rise to 10.6 million barrels a
day, an increase of 2.6 percent, or half the average annual growth of the past decade and
one-sixth the rate in 2004. China’s oil use is still climbing twice as fast as global
consumption, but the IEA has in the past year
shaved 500,000 barrels from its 2019 China demand forecast. More
efficient autos and factories reduced the overall oil intensity of China’s
economy—oil burned per unit of GDP—by 18 percent from 2008 to 2014." |
"Just
when you thought the US oil-drilling retreat was slowing, explorers dropped 42 rigs in a
single week. Those actively drilling for oil slid to 760 this week, the lowest since
December 2010, the Houston-based field services
company Baker Hughes Inc. said on its website Friday. The slide followed two weeks of
modest declines that appeared to show the pace of an unprecedented retrenchment in
drilling was easing. Producers instead pulled 20 rigs this week out of the Permian Basin
of New Mexico and Texas alone....The steep decline in the rig count this week 'a little
bit surprising,' James Williams, president of energy consultant WTRG Economics, said by
phone on Friday. 'What is clear is that US oil production will, if it hasn’t already,
peak by next month, and by the second half of this year, we will be seeing measurable
declines.' Evercore ISI analysts including James West said in a research note on Thursday
that the 'impending supply drop' will coincide with increased US refinery runs heading
into the peak summer driving season and work to correct 'the global supply-demand
imbalance.' The slowdown in drilling has yet to make a real dent in US oil production,
which reached a weekly record in March because of bigger and higher-yielding shale wells.
Output climbed 18,000 barrels a day last week to 9.4 million, Energy Information
Administration data show. 'It takes a while for the production to moderate,' Janelle
Nelson, a Minneapolis-based portfolio analyst with RBC Wealth Management’s portfolio
advisory group, said by phone on April 8. 'There may be fewer rigs drilling, but
they’re drilling the best wells with the best productivity with the best
operators.'" |
"Exploration firm UK Oil & Gas
Investments (UKOG) says it has made "a very significant discovery" of oil in
southern England that could amount to 100 billion barrels. But is it really there, and how
easy will it be to get at it?The find is - in theory - a huge one. Even so, UKOG have said
that out of 100 billion barrels potentially underground, only an absolute maximum of 15
billion barrels could be extracted from the field. Nonetheless, this would be 10 times
bigger than the biggest oil field found in the last 20 years in the North Sea. ....
There's a lot more to be done first, and the numbers are still pretty vague. David Aron, managing director of Petroleum Development
Consultants, says: 'It's much too premature to predict when we can start extracting from
this. "First, they need to do further testing to get some idea of the area of it,
then test to see if the wells are productive.
"Previous cases where oil production was not as big as was thought include Regal
Petroleum in Romania. It said they had trillions of cubic metres of gas, but after testing
the well, it produced at a low rate and it was a small area.'... Last year, the British
Geological Survey (BGS) produced a report suggesting there were 4.4 billion barrels of oil
trapped in shale rock under southern England - which would need fracking to get it out.
This latest discovery, if accurate, would be easier and cheaper to exploit. But the oil is
sitting under wealthy residential suburbs and protected environmental areas." |
"China
will build a pipeline to bring natural gas from Iran to Pakistan to help address
Pakistan’s acute energy shortage, under a deal to be signed during the Chinese
president’s visit to Islamabad this month, Pakistani officials said. The arrival of President Xi Jinping is expected to showcase China’s
commitment to infrastructure development in ally Pakistan, at a time when few other
countries are willing to make major... " |
"U.S.
crude production will peak this month, according to revised forecasts published by the
country's Energy Information Administration (EIA). Output will average 9.37 million
barrels per day (bpd) in April and the same in May before falling to 9.33 million bpd in
June and 9.04 million bpd by September, the EIA predicted in the April edition of its
Short-Term Energy Outlook (STEO). Production is expected to peak a month earlier and
10,000 bpd lower than the EIA forecast in the January STEO, reflecting continued low
wellhead prices and a sharper-than-expected slowdown in new well drilling. Production is forecast not to exceed this month's level for another 18
months. The EIA has cut its forecast for the end of 2016 by
230,000 bpd compared with three months ago. While
the EIA's Brent price forecast is largely unchanged, prices for West Texas Intermediate
crude have been marked down through the rest of 2015 and 2016, reflecting the build-up of
crude stocks and persistent weakness of U.S. grades. The
number of rigs drilling for oil has fallen further and faster than was anticipated last
year. Baker Hughes reported there were 802 rigs drilling for oil last week, down exactly
50 percent since early October. It is unlikely a halving of the rig count can be
completely offset by greater target selectivity and other efficiency improvements such as
employing only the most powerful rigs, drilling longer laterals and reaching target depth
faster. Drilling data points to a strong probability that production from new wells will
soon start to fall - if it is not falling already. Given the rapid declines in output from
wells drilled in 2013 and 2014, total output from new and legacy wells should start to
fall soon. The most common question I am asked at the moment
is: if the rig count has fallen by 50 percent, why is output still rising? The simple
answer: there is a delay of six months or more between changes in the number of new wells
being drilled and reported changes in production. It
can take 20-30 days for a rig to drill a new well and then another 60 days or more for the
well to be fractured and all the above-ground equipment put in place before the well flows
its first oil. Most major oil-producing states require well operators to submit a monthly
report on the amount of oil and gas produced, but the first report is not usually due for
up to two or three months after a new well has begun flowing. Even then, the first report
may not be representative of a full month's production because the well may have started
flowing part way through the month in question. Once production reports are submitted they
have to be compiled and published by state regulators, adding a further delay. Then there
are late filings ('delinquent wells') from operators submitting after the formal legal
deadline has passed, which means the initial production totals can be revised, sometimes
substantially, especially in Texas where there are lots of small owners and operators....
Trying to predict future production based on current production reports is like attempting
to drive by looking in the rear-view mirror. Even if production peaks this month or next,
it will not be visible in the statistics until at least July or August, and maybe later.
But by the time the production peak becomes visible,
output will likely have been falling for several months." |
| "A group of British exploration
companies have discovered oil and gas in an offshore area north of the Falkland Islands, which could raise tensions with Argentina over their disputed ownership. Falkland Oil and Gas, which shares the exploration
area with Rockhopper and Premier Oil, said the 'Zebedee' exploration well was 'better than
expected'. The London-listed oil explorers found an oil reservoir 25 metres thick and a
gas deposit 17.5m thick sandwiched between sands. The well was drilled on a licence area
that is 40pc owned by Falkland Oil and Gas, 36pc Premier Oil, and 24pc Rockhopper
Exploration." Oil and gas discovered off Falkland Islands Telegraph, 2 April 2015 |
"China’s
biggest oil refiner is signaling the nation is headed to its peak in diesel and gasoline
consumption far sooner than most Western energy companies and analysts are forecasting. If
correct, the projections by China Petroleum & Chemical Corp., or Sinopec, a
state-controlled enterprise with public shareholders in Hong Kong, pose a big challenge to
the world’s largest oil companies. They’re counting on demand from China and
other developing countries to keep their businesses growing as energy consumption falls in
more advanced economies. 'Plenty of people are
talking about the peak in Chinese coal, but not many are talking about the peak in Chinese
diesel demand, or Chinese oil generally,' said Mark C. Lewis, an analyst at Kepler
Cheuvreux in Paris who has written on how oil companies should broaden their activities to
produce all forms of energy. 'It is shocking.' Sinopec has offered a view of the country
that should serve as a reality check to any oil bull. For
diesel, the fuel that most closely tracks economic growth, the peak in China’s demand
is just two years away, in 2017, according to Sinopec Chairman Fu Chengyu, who gave his
outlook on a little reported March 23 conference call. The high point in gasoline sales is
likely to come in about a decade, he said, and the company is already preparing for the
day when selling fuel is what he called a 'non-core' activity. That forecast, from a company whose 30,000 gas stations and 23,000
convenience stores arguably give it a better view on the market than anyone else, runs
counter to the narrative heard regularly from oil drillers from the U.S. and Europe that
Chinese demand for their product will increase for decades to come. 'From 2010 to 2040,
transportation energy needs in OECD32 countries are projected to fall about 10 percent
while in the rest of the world these needs are expected to double,' Exxon Mobil Corp. said
in a December report on its view of the future. 'China and India will together account for
about half of the global increase.' Exxon expects most of that growth to be driven by
commercial transportation for heavy-duty vehicles, specifically ships, trucks, planes and
trains that run on diesel and similar fuels. BP Plc’s latest public projection for
China, released in February, sounds a similar note. 'Energy consumed in transport grows by
98 percent. Oil remains the dominant fuel but loses market share, dropping from 90 percent
to 83 percent in 2035.' The oil companies aren’t alone in their view. The
International Energy Agency in Paris, the adviser to 29 governments including the U.S.,
forecasts China’s oil demand is most likely to increase at least through 2040. But signs of China’s energy slowdown are already evident.
Diesel demand declined last year, and growth in crude oil consumption has shriveled. Crude
use is projected to rise about 3 percent this year, less than half the rate of the total
economy. Also, China’s political leadership is trying to wean the economy off
debt-fueled property investment and old-line smokestack industries, shifting toward
services and domestic-consumption led growth. Sinopec itself is already planning for the
time when its primary business isn’t selling fuels but consumer goods at its shops
and filling stations that blanket the nation." |
"UK gas suppliers could be forced to pay
higher prices this winter after Centrica announced
that capacity at Britain’s biggest storage site would
be cut sharply for six months, raising the possibility of higher consumer bills. The energy group said that the Rough site, Britain’s only
so-called long-range storage facility and lying beneath the North Sea, would have to
impose limits on the pressure in its wells due to doubts over their 'integrity'. The
decision means that the amount of gas that can be held in Rough will be
cut from a maximum of 41.1 terawatt hours to between 29 TWh and 32 TWh, up to 29 per cent
less than current levels. Centrica said in a statement on
Friday that, given the age of the field and installation, it had taken 'the prudent step
to test and verify the operating parameters of the Rough wells'. It declined to elaborate
further." |
| "The fifth anniversary of the Deepwater Horizon disaster is
approaching, but in the intervening years since the well blowout deep offshore, oil and
gas drillers have pushed even deeper and even farther afield. Oil exploration companies are hitting the pause button in 2015 due to the
bust in prices and the supply glut, and may not take on massive new projects. But over the
long-term, in order to boost flagging production, the oil majors’ directive is pretty
clear. A lot of the 'giant' oil fields are mature and declining while fewer and
fewer are being discovered each year to replace depleting output. As easy oil runs
out, drillers are forced to look in difficult places for new sources of oil." The Most Challenging Oil and Gas Projects in the World TIME, 26 March 2015 |
| "Canada’s oil industry may
have hit peak investment. In a grim report on the state of the oil industry, the
Conference Board of Canada forecast that capital spending will decline by 20 per cent this
year and may never recover to the high-water mark of $56-billion hit last year. The
industry can expect further cuts to capital spending well into next year and more layoffs,
Mike Shaw, a Calgary-based economist with the not-for-profit research group, said in the
report. He forecast the industry will post $3-billion in pretax losses in 2015, with much
of the damage coming in the first three months as prices average below $50 (U.S.) a barrel
and companies are booking restructuring cost related to layoffs.... The sector is currently proceeding with expansions that will add
600,000 barrels a day of oil sands production within three years, and have spent too much
money already to rein in those projects. With the new projects and ongoing improvements in
existing facilities, the oil sands will see production grow to three million barrels a day
by 2019, from 2.2 million last year. Canadian companies will have to work to reduce their
break-even thresholds in order to prosper at those price levels. The conference board notes that break-even costs for steam-assisted,
gravity-drainage (SAGD) projects range from $60 a barrel to
$80, while integrated mines requires prices above $90 to break even." Oil-sector investment in Canada may never again hit 2014 peak, report says Globe & Mail, 25 March 2015 |
"Libya’s
state-owned National Oil Co. has issued a declaration of independence. The company said on
its website Thursday it was neutral in the conflict between an internationally recognized
government based in the country’s eastern city of Baida and Libya Dawn, a group of
Islamist militias that control the capital of Tripoli. The company said it'receives no directives from either the Tripoli- or
Baida-based governments and operates in complete independence from both sets of
authorities.'As the keeper of the country’s most valuable natural resource, the
National Oil Co. has been increasingly caught in the cross hairs of a violent struggle to
rule Libya since longtime dictator Moammar Gadhafi was overthrown and killed in a 2011
uprising. Its oil fields and pipelines have been
crippled in recent weeks as saboteurs, a faction of Islamic State and militias have
attacked its facilities, forcing production down to 500,000 barrels of crude a day—a
third of its capacity. A United Nations panel is
trying to broker an agreement to form a unity government, but the talks haven’t been
successful. Because of its offices in Tripoli and the presence of some major pipelines and
fields in its vicinity, the National Oil Co. had been seen as closer to the government
aligned to Libya Dawn, which controls much of the country’s west. The company denies
being allied with Dawn." |
"Oil has plummeted 60 percent since late
June, falling to a six-year low of $42.75 a barrel Thursday amid sluggish demand and
bountiful supply. But legendary energy
entrepreneur T. Boone Pickens doesn't think the bad times will last for black gold. In an
interview with CNBC, he predicted a price
of $70 by year-end and $80 to $90 within 18 months.
Given that U.S. oil output and inventories are at more than 30-year highs, what's behind
Pickens' forecast? A plunging rig count in the United States will help spark the rebound,
putting supply and demand in better balance, Pickens explained. The rig count totaled 866
last Friday, down 41 percent from a year earlier and 6 percent from a week earlier,
according to Baker Hughes. 'We produced too much oil, and now supply is greater than
demand,' Pickens said. But with the rig count dropping, 'we are getting ready to balance
the market.'" |
| "Nicola Sturgeon has been forced
to admit for the first time that the SNP had got its independence predictions for North
Sea oil wrong as it emerged the growing shortfall in Scotland’s finances is the
equivalent of a 17p hike in income tax. The First Minister bowed to opposition pressure
and promised to produce revised estimates after the Telegraph disclosed official
figures predicting oil will generate more than 90 per cent less than she claimed
during the referendum. She argued that the UK
Government had also got its estimates wrong, but the SNP figures were far
more inflated and only a Yes vote would have made Scottish public spending dependent
on oil revenues. Her admission came as the impartial Institute for Fiscal Studies
published updated figures showing the drop in oil revenues would mean a separate or
fiscally autonomous Scotland would be £7.6 billion deeper in the red than at present. The
respected economic think tank said Scotland’s position had got worse by £1 billion
taking into account the latest estimates for oil revenues, published alongside the Budget.
Scotland’s deficit is predicted to be 8.6 per cent of GDP in the coming financial
year, more than twice the UK figure of four per cent. Closing the gap would be the
equivalent of adding almost 17p on every band of income tax. This newspaper reported
yesterday how the independent Office for Budget Responsibility (OBR) has dramatically
revised down its predictions for how much oil and gas will generate for the rest of the
decade, projecting tax revenues of only £600 million in 2016/17, the year the SNP said
Scotland would become independent. But the Scottish Government’s White Paper on
independence predicted that up to 13
times as much – between £6.8 billion and £7.9 billion – would flow into
the public purse in that year. Ms Sturgeon also promised referendum voters that
another'oil boom'was on the horizon but the OBR said revenues will fall to 0.05 per cent
of national wealth in 2015/16, the lowest level in 40 years. Two years ago, the OBR
predicted that oil would generate £4.4 billion in 2017/18 but the Scottish Government
insisted revenues would be as high as £11.8 billion. According to the latest estimate,
the actual figure will be £700 million." Nicola Sturgeon admits independence oil figures were wrong Telegraph, 19 March 2015 |
"World
powers have offered to suspend U.S. and European restrictions on Iranian oil exports, but
only if the Islamic Republic accepts strict limits on its nuclear program for at least a
decade, according to American and European officials.
The offer to begin lifting some sanctions within months of a deal comes amid the effort in
Lausanne, Switzerland to reach the framework of an agreement by the end of the month, with
the outcome still in doubt.... Amid a worldwide glut of crude, a deal permitting more
Iranian exports to Asia and Europe could drive prices even lower. If Iranian oil returned to the market, two officials said, the
price of crude would drop another $10 a barrel.
Brent crude, the international benchmark, has fallen 12 percent this month to $54.43 a
barrel on the London-based ICE Futures Europe exchange as of 4:00 p.m. Thursday in New
York. Any increase after an agreement would take time.'Iran will have to disconnect pipes,
decontaminate machines, physically haul them out of tight, confined spaces, and then
submit them to verification'so there’s accountability that designated centrifuges
aren’t operating, said Richard Nephew, the former lead sanctions negotiator on the
U.S. team, who is now a fellow at the Center for Global Energy Policy at Columbia
University in New York. Once allowed to do so, Iran could export some additional oil
quickly because it has millions of barrels stored in tankers. It
might be able to reach its pre-sanctions exports within a year of signing a deal,
officials said, though exceeding that level quickly would be difficult because of limits
on its infrastructure. Iran produced 2.8 million barrels of oil a day last month compared
with 3.6 million at the end of 2011, according to data compiled by Bloomberg. The second-biggest producer in OPEC before oil sanctions were imposed
almost three years ago, Iran has dropped to fifth place." |
"Green
levies on energy bills will treble by 2020 because of renewable targets, official figures
suggest. The cost of environmental levies to support projects such as wind farms,
solar panels and biomass plants will rise from £3.1billion last year to £9.4billion by
the end of the decade, according tothe Office for Budget Responsibility. Separate
figures published last year show that the policies account for 5 per cent of energy
bills at present - equivalent to £68 a year - to 15 per cent of an annual energy bill by
2020, equivalent to £226. The rise is being
driven by renewable energy targets, which require 30 per cent of Britain's electricity to
come from renewable sources by 2020. It comes
despite growing concern among senior Conservatives that subsidies for renewable energy are
pushing up people's gas and electricity bills. David Cameron has reportedly said that the
government needs to get rid of 'this green crap' amid concerns about renewable energy
subsidies. He vowed last year to 'roll back' green taxes which add an average of £100 a
year to average fuel bills. In an appearance before MPs earlier this month he also said
that people are 'fed up' with onshore wind farms being built and that 'enough is
enough'." |
| "The true cost of wind farms and
other green power projects is far higher than ministers have admitted, a new Centre for
Policy Studies report claims, claiming renewable energy will be 'the most expensive policy
disaster in modern British history'. Scrapping the
UK's green energy targets in favour of gas-fired power plants would save consumers £214 a
year by 2020, the report suggests – despite ministers’ insistence that the total
impact of the policies will be only £141 per household by then. Wind and solar farms rely
on subsidies to be economically viable and the costs of the subsidies are charged to
consumers through so-called ‘green levies’ on energy bills.'The costs of
intermittent renewables are massively understated,' the CPS argues, accusing ministers of
an unstated policy objective to deliberately' hide the full cost and operational
implications'of green power. As well as subsidies for the wind and solar farms, the CPS
report points to the need for dozens of backup
power plants to keep the lights on when the wind doesn't blow and the sun doesn't shine." Green energy costs 'far higher than ministers admit' Telegraph, 18 March 2015 |
| "Citigroup Inc., Goldman Sachs
Group Inc., UBS AG and other large banks face tens of millions of dollars in losses on
loans they made to energy companies last year, a
sign of investor jitters in a sector battered by the oil slump. The banks intended to sell
the loans to investors but have struggled to unload them even after cutting prices, thanks
to a nine-month-long plunge that has taken Nymex crude futures to their lowest
level...." Banks Struggle to Unload Oil Loans Wall St Journal, 18 March 2015 |
"Canadian
heavy oil prices fell below $30 for the first time in more than six years as Bank of
Montreal warned that oil sands producers must cut costs. Western Canadian Select fell 59 cents to $29.85 at 12:28 p.m. Mountain
time, the lowest since Feb. 18, 2009, according to data compiled by Bloomberg. The
grade’s discount to U.S. benchmark West Texas Intermediate narrowed 80 cents to
$13.60 a barrel. Crude futures settled at a six-year low of $43.88 in New York on concern
record supply may strain storage capacity. The cash costs of oil sands producers must
shrink to remain competitive in the'new normal of lower oil prices for longer,'BMO analyst
Randy Ollenberger said in a note today. The majority of Canada’s crude comes from oil
sands in Northern Alberta and is among the most expensive to produce. Companies including
Royal Dutch Shell Plc and Cenovus Energy Inc. have cut costs and suspended projects as
prices plunged.... Canadian Oil Sands Ltd., among the largest five producers, needs a WTI
price of about $50 a barrel to sustain business with no production declines, Chief
Financial Officer Robert Dawson said March 11. Smaller companies are facing financial
troubles. Southern Pacific Resource Corp. has defaulted on debt and Connacher Oil and Gas
Ltd. says it’s in danger of not being able to pay creditors. Canada’s oil sands
production will grow 8.3 percent this year, the country’s National Energy Board said
Feb. 10. Projects to extract bitumen require billions of dollars of up-front investment. Most producers will continue producing from existing operations
and complete projects under construction, Jackie Forrest, vice president of Calgary-based
ARC Financial Corp., said in a Jan. 29 e-mail. WTI crude would have to stay between $30
and $35 a barrel for at least six months before wells and mines are shut, Dinara
Millington, a vice president at Canadian Energy Research Institute, said Feb. 19." |
"The
supply glut which has led to a 50pc slide in oil prices over the past year will begin to
grip the other major hydrocarbon product vital to global economies, liquefied natural gas
(LNG). This year will see a 'wave'of new LNG production flooding on to international
markets as several major projects in Australia finally come on stream after years of
development and hundreds of billions of pounds invested. LNG – natural gas chilled
for transportation by giant tankers – has grown in popularity over the past decade
through a mixture of higher demand from booming Asian economies and the need to cut carbon
emissions. The US Department of Energy estimates
that natural gas burned in power plants produces about half as much carbon dioxide as coal
and fewer nitrogen oxides, too. According to BG Group, supply has remained stalled at
levels recorded in 2011. The UK energy company estimates that last year shipments grew by
only 1.5pc to around 243m tonnes. However, by 2025, the company is forecasting that the
LNG supply will reach 400m tonnes, requiring more infrastructure and giant tankers. This
would represent a 5pc annual increase in demand over the next decade and almost twice the
rate of growth expected to occur in consumption over the same period. Experts are now concerned that the market will be unable to keep
pace with supply, leaving some LNG projects redundant. Andrew Walker, BG Group vice-president of global LNG, said: 'After four
years of flat supply, we are entering a period of supply growth. 2014 marked the start of
a new wave of supply from Australia. This will be joined by the first volumes from the US
Gulf of Mexico around the end of 2015." |
"French
oil major Total is auctioning a
stake in one of the UK’s most promising natural gasfields, sounding out possible
buyers in what could be the first of a wave of deals in the North Sea. Total is looking to sell a 20 per cent stake in Laggan-Tormore, a
deepwater project 125km west of the Shetlands and considered a prime asset in the energy
group’s portfolio. The decision highlights
accelerating industry-wide moves to pare back exposure to high-cost
regions where falling oil and gas prices have hit
profitability. Total is one of the UK continental
shelf’s biggest operators. The planned disposal would reduce its holding in the
project from 80 per cent to 60 per cent. The move comes amid industry hopes that George
Osborne, UK chancellor, will make a headline cut to the so-called supplementary rate of
tax paid by North Sea producers in this week’s Budget and announce an investment
allowance designed to encourage new exploration and production." |
| "The U.S. has so much crude that it is running out of places to put
it, and that could drive oil and gasoline prices even lower in the coming months. For the
past seven weeks, the United States has been producing and importing an average of 1
million more barrels of oil every day than it is consuming. That extra crude is flowing
into storage tanks, especially at the country’s main trading hub in Cushing,
Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, the Energy
Department reported last month. If this keeps up, storage tanks could approach their
operational limits, known in the industry as'tank tops,'by mid-April and send the price of
crude — and probably gasoline, too — plummeting.'The fact of the matter is we
are running out of storage capacity in the U.S.,'Ed Morse, head of commodities research at
Citibank, said at a recent symposium at the Council on Foreign Relations in New York. Morse has suggested oil could fall all the way to $20 (U.S.) a
barrel from the current $50. At that rock-bottom price, oil companies, faced with mounting
losses, would stop pumping oil until the glut eased.
Gasoline prices would fall along with crude, though lower refinery production, because of
seasonal factors and unexpected outages, could prevent a sharp decline." U.S. running out of room to store crude Associated Press, 12 March 2015 |
"The
political upheaval in Yemen has dealt a powerful blow
to the country’s oil industry, forcing companies to abandon productive oil patches
and evacuate staff as a rebel group consolidates power. Houston-based Occidental
Petroleum Corp. , which has been operating in Yemen for nearly three decades, flew its
staff out of the country in January, executives and local officials said, after gunmen
stormed its compound in the capital, San’a, where Houthi militants have tightened
their grip on power. Since then, executives and local officials said, Norway’s DNO AS A, Dove Energy Group
of Dubai and Nexen Inc., which is owned by China’s Cnooc Ltd. , are all moving to
relinquish their rights to blocks that produce thousands of barrels of crude a day." |
| "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. 'It has postponed the
reckoning,'said Julie Hilt Hannink, head of energy research at New York-based CFRA, an
accounting adviser." The Price of Oil Is About to Blow a Hole in U.S. Corporate Accounting Bloomberg, 4 March 2015 |
| "Russian oil output is expected to fall 8 percent in the next two
years, the steepest fall since President Vladimir Putin took power at the end of 1990s, as
low prices force companies to cut back on drilling in Siberia, a top Russian oil executive
said. Leonid Fedun, vice-president and a large shareholder in Russia's top private oil
firm Lukoil, said the drop could amount to as much as 800,000 barrels per day (bpd) by the
end of 2016. His forecast is one of the most
pessimistic yet by a Russian oil executive since the country was hit by sanctions and a
steep drop in oil prices. By contrast, the energy ministry expects Russian output to be
steady this year at around 10.56-10.60 million bpd. Oil and gas sales account for half of
Russia's budget revenue. Russian oil output halved in the 1990s following the collapse of
the Soviet Union but has recovered by more than 70 percent on the back of high oil prices
since Putin took over as president in 1999. Russia is the world's largest oil producer. Sanctions imposed on the
country over its role in the Ukraine crisis have drastically limited Russian firms' access
to Western capital and technology over the past year while low oil prices are forcing them
to slash exploration budgets. 'Everyone will reduce production because everyone is
reducing drilling,' Fedun said. He said he expected drilling in Siberia to drop by as much
as 15-20 percent. Fedun said Lukoil's output was likely to stay flat or drop slightly in
2015 as the company was drilling fewer wells in Siberia. In 2016, it could recover as it
brings new fields in Russia on-stream, he said." Lukoil predicts 8 pct Russian oil output decline in next two years Reuters, 3 March 2015 |
"The United States will not develop into
the 'next Saudi Arabia' of the energy market despite its position as one of the biggest
new producers in the world, warned the head of the International Energy Agency. Speaking
at the Telegraph's Middle East Congress,
Fatih Birol, the newly selected executive director of the IEA, said traditional energy
exporters in the Gulf would continue to dominate global production in years to come. The
shale gas revolution in the United States was 'excellent news' for America's economy, but
would not see the country meet the world's global energy needs, said Mr Birol. 'The United
States will never be a major oil exporter. Their import needs are getting less but the US
is not becoming Saudi Arabia,' said Mr Birol. 'Their production growth is good to
diversify the market but it will not solve the world's oil problems.' Energy production
outside of the Organisation of Petroleum Exporting Countries (Opec) reached its highest
level in 30 years last year, contributing to a glut in the world's oil supply. But Mr
Birol said Opec members, who include the likes of Saudi Arabia and Iraq, would remain well
placed to meet global demand over the next decade. 'Only
the Middle East can fill the gap in oil production when new players, such as the US,
Canada and Brazil see their production slow down,' added Mr Birol. ... Last year, the Middle East enjoyed oil revenues of $1 trillion. The
IEA now estimate that the new lower price will see revenues more than halve to $400bn.
For all the region's potential, the Middle
East still requires $90bn in investment to tap new energy resources in the region, said Mr
Birol, who warned that political instability in the region such as the rise of Islamic
State (Isil) meant 'appetite for investment in many countries is close to zero.' Despite falling prices, global demand is not expected to increase
substantially in 2015, calculate the IEA. China's reduced appetite for the commodity,
which comes from move towards less oil intensive growth, will be the main depressant of
global demand, said Mr Birol." |
"Investment
in the oil and gas industry slumped in the final three months of last year, amid a dramatic collapse in the price of oil. Business investment fell
by £0.6bn in the final quarter of 2014, down 1.4pc on the previous three months, the Office for National Statistics (ONS) said. The unexpected drop marked
a second quarterly fall in investment. The Bank of England had pencilled in growth of
2.5pc for the period." |
"The
EU is stepping up a charm offensive in Azerbaijan and Turkmenistan as relations with
Russia worsen, in a drive to put the gas-rich but politically sensitive countries at the
heart of the bloc’s energy strategy. Brussels will unveil its long-term energy
blueprint on Wednesday. Early drafts of the plan seen by the Financial Times show the EU
will pledge to'use all its foreign policy instruments to establish strategic energy
partnerships'with alternative suppliers such as Azerbaijan,
Turkmenistan and Algeria....Since taking on his portfolio late last year, Mr Sefcovic has prioritised
the $45bn'southern
corridor'pipelines that will bring gas into southeastern Europe from the Caspian Sea
region and potentially the Middle East. The final section of this network will be the Trans-Adriatic Pipeline, partly owned by BP, which will run to
Italy and is due to provide Europe with 10bn cubic metres of Azeri gas by 2020.
Mr Sefcovic said the EU would throw all its political weight behind TAP to ensure work was
completed by the end of 2019. Brussels has already designated the pipeline as a 'project
of common interest', allowing it to bypass EU competition restrictions. But Mr Sefcovic
said there was far more to be done to ensure the scheme ran smoothly, adding that he had
held talks with Ilham Aliyev, the Azeri president, about ways to cut red tape....The focus on southeastern Europe has been amplified by Russia’s
cancellation of its $50bn South Stream pipeline, which was intended to supply Europe
with 63bn cubic metres of gas. While the TAP project will only supply roughly 2 per cent
of European demand, the project’s executives say capacity can be lifted to 20bn cm after 2020. To secure those increased volumes, Mr Sefcovic has embarked on a
courtship of Turkmenistan, a reclusive and repressive state that holds the world’s
fourth-biggest gas reserves. He met the Turkmen ambassador to Brussels on Monday with a
view to signing a preliminary agreement soon, with the environmental and legal groundwork
for a deal already laid. The biggest obstacle to any deals from the Caspian is
Russia, which insists that countries can only export from the region if all the other
littoral states agree, effectively giving Moscow a veto. Mr Sefcovic said he believed it
would still be possible to find a'technical and legal'framework for Turkmen exports to the
EU. The EU’s race against China to secure Turkmen gas gathered pace this month when
Gazprom announced that it was slashing its imports from Turkmenistan, forcing Ashgabat to
find new export markets. With unusual candour, a state oil institute in Turkmenistan
criticised Russia as an'unreliable partner'." |
| "The UK offshore oil and gas
industry has reported its worst annual performance for four decades. Industry body Oil
& Gas UK said falling oil prices and rising costs meant the sector spent and invested
£5.3bn more than it earned from sales during 2014. That
outflow of cash was the biggest since massive investment in platforms in the 1970s
preceded the flow of oil. The body's annual survey also indicated that investment in the
industry is set to fall this year, as well as drilling. Oil & Gas UK said the 'bleak'
findings emphasised the urgency of government action to secure the industry's long-term
future.... The cost per barrel extracted has risen to a record high of £18.50. That is
expected to fall as the industry cuts back on its costs, including a controversial move to
change rota patterns for offshore workers. It is claimed that cost and efficiency measures
need to improve by up to 40% per barrel of oil if there is to be a sustainable future for
the UK's offshore sector. Oil & Gas UK chief executive Malcolm Webb said: 'Even at $110 per barrel, the ability of the industry to realise
the full potential of the UK's oil and gas resource was hamstrung by escalating costs, an
unsustainably heavy tax burden and inappropriate regulation.'" Oil and gas industry in 'bleak' 2014, finds survey BBC Online, 24 February 2015 |
"Shell
has shelved plans for a major new tar sands mine in Canada, the largest project yet
to fall victim to low oil prices. The company has
withdrawn its application for the 200,000-barrel-per-day (bpd) Pierre River project and
will instead concentrate on boosting the profitability of its existing 255,000-bpd oil
sands operations." |
"The
U.S.’s role as a so-called world swing oil producer won’t last long as its
petroleum growth will peak sometime in the next decade and then go into decline, BHP
Billiton PLC’s chief for oil and gas production said Tuesday. 'U.S. liquid growth is relatively short lived…I expect to see it
peak within the next decade,' said Tim Cutt, president of the petroleum and potash
division of the Anglo-Australian company..." |
"The
deluge of Canadian oil that’s adding to a global glut and driving prices lower is
showing few signs of slowing. Even with crude down 52 percent since June, output will grow
3.5 percent this year from the world’s fifth-biggest producer. The Canadian dollar is near a six-year low and materials cost less,
helping oil sands producers cut costs and keep pumping. Oil would have to stay between $30
and $35 a barrel for at least six months, down from about $50 now, before wells and mines
are shut, according to the Canadian Energy Research Institute. Surging North American
production has contributed to a global glut, pushing U.S. supply to the highest in three
decades. OPEC opted in November to maintain output to hold on to market share. Oil sands
supply is growing even as the number of rigs drilling for oil in the U.S. has fallen to
the lowest in almost four years. RBC Dominion Securities estimates that oil companies have
cut $86 billion from spending plans. ... While it can
take years for a new oil sands operation to ramp up to full production, a total of 423,000
barrels a day of new capacity is under construction and scheduled to be in operation this
year, up from 116,000 barrels added last year, according to data published in
Alberta’s winter 2015 Oil Sands Industry Quarterly update. Most of the oil sands companies are 'global players' and 'they can afford
to operate at a loss within the oil sands area,' Dinara Millington, a vice president at
CERI, said by phone yesterday. Oil sands miners would have to spend billions of dollars on
reclamation of tailing ponds if they shut, she said. 'It’s not as simple as turning
off a truck or shutting in a well.' " |
"It
may be difficult to look beyond the current pricing environment for oil, but the depletion
of low-cost reserves and the increasing inability to find major new discoveries ensures a
future of expensive oil. While analyzing the
short-term trajectory of oil prices is certainly important, it obscures the fact that over
the long-term, oil exploration companies may struggle to bring new sources of supply
online. Ed Crooks over at the FT persuasively summarizes the predicament. Crooks says that 2014 is shaping up to be the worst year in the
last six decades in terms of new oil discoveries (based on preliminary data). Worse still,
last year marked the fourth year in a row in which new oil discoveries declined, the
longest streak of decline since 1950. The industry did not log a single 'giant' oil field.
In other words, oil companies are finding it more and more difficult to make new oil
discoveries as the easy stuff runs out and the harder-to-reach oil becomes tougher to
develop. The
inability to make new discoveries is not due to a lack of effort. Total global investment
in oil and gas exploration grew rapidly over the last 15 years. Capital expenditures increased by almost threefold to $700 billion between
2000 and 2013, while output only increased 17 percent (see IEA chart). Despite record
levels of spending, the largest oil companies are struggling to replace their depleted
reserves. BP reported a reserve replacement ratio – the volume of new reserves added
to a company’s portfolio relative to the amount extracted that year – of 62
percent. Chevron reported 89 percent and Shell posted just a 26 percent reserve
replacement figure. ExxonMobil and ConocoPhillips fared better, each posting more than 100
percent. Still, unless the oil majors significantly step up spending they will not only be
unable to make new discoveries, but their production levels will start to fall (some of
them area already seeing this begin to happen). The IEA predicts that the oil industry
will need to spend $850 billion annually by the 2030s to increase production. An estimated
$680 billion each year – or 80 percent of the total spending – will be necessary
just to keep today’s production levels flat. However, now that oil prices are so low,
oil companies have no room to boost spending. All have plans to reduce expenditures in
order to stem financial losses. But that only increases the chances of a supply crunch at
some point in the future. Put another way, if the oil majors have been unable to make new
oil discoveries in years when spending was on the rise, they almost certainly won’t
be able to find new oil with exploration budgets slashed. Long lead times on new oil
projects mean that the dearth of discoveries in 2014 don’t have much of an effect on
current oil prices, but could lead to a price spike in the 2020’s. All of this comes
despite the onslaught of shale production that U.S. companies have brought online in
recent years. U.S. oil production may have increased by 60 to 70 percent since 2009, but
the new shale output still only amounts to around 5 percent of global production. Not only
that, but shale production is much more expensive than conventional drilling. As
conventional wells decline and are replaced by shale, the average cost per barrel of oil
produced will continue to rise, pushing up prices. Moreover,
with rapid decline rates, the shale revolution is expected to fade away in the
2020’s, leaving the world ever more dependent on the Middle East for oil supplies.
The problem with that scenario is that the Middle East will not be able to keep up. Middle
Eastern countries 'need to invest today, if not yesterday' in order to meet global demand
a decade from now, the International Energy Agency’s Chief Economist Fatih Birol said
on the release of a report in June 2014. In fact, half of the additional supply needed
from the Middle East will have to come from a single country: Iraq. Birol reiterated those comments on
February 17 at a conference in Japan, only his warnings have grown more ominous as the
security situation in Iraq has deteriorated markedly since last June. 'The security
problems caused by Daesh (IS) and others are creating a major challenge for the new
investments in the Middle East and if those investments are not made today we will not see
that badly needed production growth around the 2020s,' Birol said, according to Reuters.
If Iraq fails to deliver, the world could see oil prices surge at some point in the coming
decade. Despite the urgency, 'the appetite for investments in the Middle East is close to
zero, mainly as a result of the unpredictability of the region,' he added." |
"Discoveries
of new oil and gas reserves dropped to their
lowest level in at least two decades last year, pointing to tighter world supplies as energy
demand increases in the future. Preliminary figures suggest the volume of oil and gas
found last year, excluding shale and other reserves onshore in North America, was the
lowest since at least 1995, according to previously unpublished data from IHS, the
research company. Preliminary figures suggest the volume of oil and gas found last year,
excluding shale and other reserves onshore in North America, was the lowest since at least
1995, according to previously unpublished data from IHS, the research company. Depending
on later revisions, 2014 may turn out to have been the worst year for finding oil and gas
since 1952. The slowdown in discoveries has been particularly pronounced for oil,
suggesting that production from shales in the US and elsewhere, and from Opec, will play
an increasingly important role in meeting growing global demand in the next decade. New
finds of oil and gas are likely to have been about 16bn barrels of oil equivalent in 2014,
IHS estimates, making it the fourth consecutive year of falling volumes. That is the
longest sustained decline since 1950. Because new oilfields
generally take many years to develop, recent discoveries make no immediate difference to
the crude market, but give an indication of supply potential in the 2020s. Peter Jackson of IHS said: 'The number of discoveries and the size of the
discoveries has been declining at quite an alarming rate... you look at supply in 2020-25,
it might make the outlook more challenging.' So far there has not been a single new
'giant' field — one with reserves of more than 500m barrels of oil equivalent —
reported to have been found last year, although subsequent revisions may change that. The figures for declining discoveries are particularly striking
because exploration activity in 2014 showed little impact from the sharp fall in oil prices
in the second half of the year. The last time oil and gas discoveries were around
2014’s level was in the mid-1990s, when exploration activity was hit by a period of
weak prices. Last year, the number of exploration and appraisal wells drilled worldwide
was only 1 per cent lower than in 2013. This year,
exploration budgets are being cut back across the industry and the number of wells drilled
is likely to fall further. New discoveries are not the only sources of future oil supply.
Companies can also add to their production potential with extensions of existing fields,
and there are large known reserves — both 'unconventional', including shale in North
America and heavy oil in Canada and Venezuela, and 'conventional' in countries including
Saudi Arabia, Iran, Iraq and the United Arab Emirates. The weakness of new discoveries
increases the need for production from those sources to rise if, as expected, global
demand for oil continues to increase. The shale boom has transformed the outlook for oil
in the US, and played a critical role in creating the oversupply that led to the collapse
in prices, but it is still relatively small on a global scale, Mr Jackson said, accounting
for about 5 per cent of world oil production. There are also very large shale oil reserves
in countries including Russia, China, Argentina and Libya, but the industries there are
still in their infancy. Shale is also a relatively high cost source of oil compared with
reserves in the Middle East, and requires higher crude prices to be commercially viable.
Mr Jackson said that with crude prices around their present levels, it would be 'very
difficult' to start up new shale production projects." |
"Energy
consumption in the European Union has fallen to levels last seen more than two decades
ago, statistics
published on Monday showed. The dramatic drop in annual consumption – in 2013,
the year to which the new research applies, it was down by more than 9% from its 2006 peak
– reflects in part the continuing economic troubles in the eurozone, but also efforts
taken by member states and businesses to cut energy use and improve efficiency. Despite the plunge, Europe remains heavily dependent
on fuel imports, with more than half of energy needs supplied by production from abroad,
including the Middle East and Norway. Under oil prices at the time, that amounted to a
cost of more than €400bn (£297bn) in imports in the year in question, but that
figure is now volatile owing to the effects of a sharply lower oil price and the exchange
rate of the Euro. The UK was one of the least dependent on imports of the biggest member
states, buoyed by its offshore fossil fuel supplies, with 46.4% of primary energy coming
from overseas. That relative independence is likely to be eroded further in future years,
however, as the North Sea supplies of oil and gas are dwindling fast. France, where
nuclear reactors supply the vast majority of electricity needs, was also less dependent
than the average, at 48% of supplies imported. By contrast, about 63% of Germany’s
energy came from outside, and 77% of Italy’s. Nuclear
power accounted for the biggest slice of the EU’s own generation of electricity,
with 29% of production. Just behind came renewable sources of energy, which in total
generated just under a quarter of homegrown power." |
"Claims
that nuclear power is a 'low carbon' energy source fall apart under scrutiny, writes Keith
Barnham. Far from coming in at six grams of CO2 per unit of electricity for Hinkley C, as
the Climate Change Committee believes, the true figure is probably well above 50 grams -
breaching the CCC's recommended limit for new sources of power generation beyond 2030.... When comparing the carbon footprints of electricity-generating
technologies, we need to take into account carbon dioxide emitted in all stages in the
life of the generator and its fuel. Such a study is called a life cycle analysis (LCA).
There are other gases such as methane that are more dangerous greenhouse gases than carbon
dioxide. The most reliable LCAs take all greenhouse gases into account and present
equivalent carbon dioxide emissions. In a recent paper in Energy Policy,
Daniel Nugent and Benjamin Sovacool critically reviewed the published LCAs of renewable
electricity generators. All the renewable technologies came in below the 50 gCO2/kWh
limit. The lowest was large-scale hydropower with a carbon footprint one fifth of the CCC
limit (10 gCO2/kWh). A close second was biogas electricity from anaerobic digestion (11
gCO2/kWh). The mean figure for wind energy is 34 gCO2/kWh, and solar PV comes in a shade
under the 50g limit, at 49.9 gCO2/kWh. Bear in mind that rapidly evolving PV technology
means that this last figure is contantly falling..... I have reviewed the LCAs of all the
light water reactors and pressurised water reactors that passed the selection procedures
of either the Sovacool or the Warner-Heath meta-analyses. I have further refined their
selection by excluding any LCA that does not estimate a carbon footprint for all five
stages of the life cycle. Only eight LCAs survive. The figure shows the carbon footprints
of the eight LCAs that pass this more rigorous test. All eight LCAs considered different
assumptions that resulted in a range of estimates for the carbon footprints indicated by
the vertical error bars. The circles show the average carbon footprint in the range of
estimates. The most important point to notice in the figure is that four of the circles
fall below the horizontal broken line at 50 gCO2/kWh and four above. Half the most
rigorous of the published LCAs are below the CCC limit and half are above. The conclusion
from the eight most rigorous LCAs is therefore that it is as likely that the carbon
footprint of nuclear is above 50 gCO2/kWh as it is below. The evidence so far in the
scientific literature cannot clarify whether the carbon footprint of nuclear power is
below the limit which all electricity generation should respect by 2030 according to the
CCC.... Nuclear fuel preparation begins with the mining of uranium containing ores,
followed by the crushing of the ore then extraction of the uranium from the powdered ore
chemically. All three stages take a lot of energy, most of which comes from fossil fuels.
The inescapable fact is that the lower the concentration of uranium in the ore, the higher
the fossil fuel energy required to extract uranium. Table 12 in the Berteen paper confirms
the van Leeuwen result that for ore with uranium concentration around 0.01% the carbon
footprint of nuclear electricity could be as high as that of electricity generation from
natural gas. This remarkable observation has been further confirmed in a
report from the Austrian Institute of Ecology by Andrea Wallner and co-workers. They
also point out that using ore with uranium concentration around 0.01% could result in more
energy being input to prepare the fuel, build the reactor and so on, than will be
generated by the reactor in its lifetime. According to figures van Leeuwen has compiled
from the WISE Uranium Project around 37% of the
identified uranium reserves have an ore grade below 0.05%. A conservative estimate for the
future LCA of nuclear power for power stations intended to continue operating into the
2090s and beyond would assume the lowest uranium concentration currently in proven
sources, which is 0.005%. On the basis that the high concentration ores are the easiest to
find and exploit, this low concentration is likely to be more typical of yet to be
discovered deposits. Using 0.005% concentration uranium ores, the van Leeuwen, Berteen and
Wallner analyses agree a nuclear reactor will have a carbon footprint larger than a
natural gas electricity generator. Also, it is unlikely to produce any net electricity
over its lifecycle." |
"In
the past week drillers idled 98 rigs, marking the 10th consecutive decline. The total U.S.
rig count is down 30 percent since October, an unprecedented retreat. The theory goes that when oil rigs decline, fewer wells are
drilled, less new oil is discovered, and oil production slows. But
production isn't slowing yet. In fact, last week the U.S. pumped more crude than
at any time since the 1970s. 'The headline U.S. oil rig count offers little
insight into the outlook for U.S. oil production growth,' Goldman Sachs analyst Damien
Courvalin wrote in
a Feb. 10 report. ... Why is this happening? For one thing, both the rigs
and the oil wells are becoming more productive. Producers are getting better at blasting
oil and gas out of the ground. The rigs that are
being idled tend to be the older machines, and the most effective rigs are being
concentrated on the most-productive oil fields. 'The relationship between rigs and
energy production disconnected in 2008,' Eric Kuhle, a Wood Mackenzie analyst covering oil
and gas in North America,
told Bloomberg News reporter Lynn Doan. 'We see oil production growth slowing, but not
declining.'" |
"New U.S. oil production capacity for
February is down 9 percent from last month, even though the number of new wells was down
20 percent, according to Drillinginfo data released this week. For example, in West Texas'
Permian Basin, the number of new wells in February fell 26 percent compared to the month
before, while new production capacity only declined 10 percent. The reason? The drop in new wells 'came almost entirely from
vertical wells, which are much less productive than horizontal wells.' Advances in
horizontal drilling, along with hydraulic fracturing, are credited with the boom in U.S.
production from dense shale formations. Lipow said that while producers are cutting back
on onshore drilling this year, measures over the past few years to reduce costs and
increase efficiencies will mean 'the decline in the growth rate of oil is less than the
market expects.' North Dakota's oil production broke
records in December, growing to nearly 1.2 million barrels a day, even though rigs in the
region continued to go silent and crude prices fell, according to North Dakota's
Department of Mineral Resources." |
"BP and Royal Dutch Shell are in danger
of making a strategic error should they decide to walk away from a historic oil deal with
Abu Dhabi, which has provided the commercial foundations for Britain’s broader
relationship with the sheikhdom. Negotiations have dragged on for more than a year and now
appear to have reached an impasse over the emirate’s demands for upfront payments.
The money amounts to about $7bn (£4.5bn) for rights to operate some of the world’s
biggest onshore oilfields including Bu Hasa, Bab and Asab. At stake is rare upstream
access to the deserts of Abu Dhabi, which hold close to 6pc of the world’s proven oil
reserves, and Britain’s overall political and business influence in one of the
region’s most potent sheikhdoms. To complicate the already fraught talks, the outlook
for oil prices remains at best volatile over the short term and potentially bleak further
ahead. Although the price of a barrel of Brent crude rallied back above $60 per barrel
this week, oil majors such as Shell and BP remain profoundly sceptical that this
represents the early shoots of any kind of spring recovery.... Britain’s entire relationship with Abu Dhabi has arguably
been built on access to oil. As early as the 1930s, the Foreign Office was determined to
ensure that British companies would have a virtual monopoly to explore and develop
oilfields thought to exist in the strip of Arabia known then as the Trucial States. Abu
Dhabi granted its first oil concession in 1939 to the British-controlled Trucial Coast
Development Company. In 1953, D’Arcy Exploration, a forerunner of the conglomeration
of companies that would eventually morph into today’s Shell, was granted the first
contract to search for oil offshore in its coastal waters. It would eventually see rig
platforms replace pearl fishing 'dhows' which had been the mainstay of the Bedouin
economy." |
"One of Norway’s biggest-ever oil
projects edged closer to production Friday, a field of rare size and potential that
officials said could be profitable even if crude prices fall further. The Johan Sverdrup
field in the North Sea will start pumping oil by 2019 under a plan presented by Statoil AS A and its
partners to the Norwegian government on Friday. The field is among a handful of
'elephants'—fields exceeding one billion barrels of recoverable resources—found
globally each year. It is estimated to hold between 1.7 billion and 3 billion barrels.
'This is a monster,' C. Ashley Heppenstall, chief executive of Lundin Petroleum AB, one of
the project’s partners, told The Wall Street Journal. 'In
a $50 oil price environment, Johan Sverdrup is probably one of the very few projects which
will go ahead, globally.' Even as oil companies
including Statoil slash their capital spending as crude prices flounder near 5½-year
lows, Johan Sverdrup has demonstrated potential for big profits, analysts said. Statoil
has said Johan Sverdrup would be the only major project to get the go-ahead this year
because of lower oil prices and spending cutbacks. 'This plan represents the most
extensive development of any oil field on the Norwegian continental shelf since the big
giants in the 1980s,' Statoil Chief Executive Eldar Sætre told an Oslo news conference
Friday. 'The field has robust economics with a
break-even price at below $40 per barrel.'....
Statoil said the field’s crude could be profitable even if the oil price were to fall
to $40 a barrel. The Brent crude benchmark was trading at about $61 on Friday afternoon,
up about 3.1% on the day. Norwegian oil projects usually require prices at between $40 and
$70 a barrel to make a profit. Statoil last week said 14 other planned projects, including
assets in Norway, Tanzania and the U.S., risk delays at current oil prices. Johan
Sverdrup’s potential stems from the high quality of its oil and its location in
shallow waters near existing infrastructure, as well as its sheer size. Discovered in
2010, Johan Sverdrup will be a cornerstone of Norway’s
oil production, contributing about 40% of the country’s total crude output in the
2020s, Statoil said.' |
"Experts point to two major factors
helping the [Russian] companies in a low-price environment: Moscow's tax rate on producers
shifts lower as the price of oil falls (meaning the cost is mostly borne by the state),
and most of the oil companies' expenses are denominated in rubles. Together, those factors largely offset any negative impact from
oil prices, Goldman Sachs energy analyst Geydar Mamedov wrote in a recent note. 'The currency point is key: Russian energy companies' expenditures are
largely conducted in rubles because there is a strong local oilfield services sector, and
their revenues are dollar-denominated. So as the Russian currency has fallen against the
dollar, the firms have been nearly totally insulated from oil's price decline." |
"In recent
weeks, the market has shifted its attention from cratering crude prices to the falling
number of rigs operating in American oilfields. But in the coming months, the very life
cycle of many of those wells may have many market watchers concerned about output and
price stability, experts told CNBC. Oil wells whether
conventional or unconventional reach peak production soon after they yield the first drop
of crude. The difference is how quickly they enter decline. Conventional wells go
through a long period of steady, flat production between peak and decline. In contrast,
production falls rapidly in the first three years of unconventional wells those in shale, sandstone and carbonates. They then enter a long phase
of very low production. In order to even keep production steady across an
unconventional oilfield, producers must constantly drill new, high-producing wells. Now
they're cutting back on exploration, and many investors and energy companies do not fully
appreciate how many new wells producers will have to drill in order to get production back
to where they were, said Michael Rowe, vice president of exploration and production
research at Tudor Pickering Holt. On Tuesday, the International Energy Agency
projected that oil supplies will continue to increase throughout this year. But in
fact, oil supplies and prices may be much more volatile over the coming couple years, said
Murray Olson, a former geological engineer and co-founder of Calgary-based Northern
Blizzard Resources. 'These rapid changes in the price of oil will be a feast-and-famine
set of economic consequences for the next few years, with much instability,' Olson said.
For the last nine years, American oil production has only climbed, growing steadily from 5
million barrels per day in 2005 to 8.6 million last year. Drillers
in the top seven U.S. shale plays get 43 to 64 percent of the oil out of their wells in
the first three years of pumping, according to research by David Hughes, a fellow at the
Post Carbon Institute. In reports published in 2013 and 2014, Hughes has said that the
U.S. Energy Information Administration's long-term oil output projections are overly
optimistic. The problem at present is that so-called
'tight oil' drillers are cutting capital expenditure budgets, and creating new wells is a
front-loaded investment. Nearly all of the costs come in the first two phases: drilling
for exploration and hydrofracking, the process of pumping a mixture of water and chemicals
into the ground to break up rock formations and release oil and gas. The number of rigs drilling new oil and gas wells in the United
States has fallen 25 percent from the highs in September. The slide has accelerated in the
last two weeks, with another 177 rig reductions, bringing the total number of operating
rigs to 1,456. To be sure, some new wells have been drilled, but producers have delayed
fracking them. In its most recent report, the North
Dakota Industrial Commission pointed out that 775 drilled wells in the state's Bakken
Shale were waiting to be completed at the end of November. While some of the wells were
not being completed due to a backlog of work for fracking crews, some companies have made
the strategic decision to put off the investment in the second phase, Hughes told CNBC.
However, they've already drilled many of the most economic wells. Currently, exploration and production companies are
'high-grading,' or moving rigs from marginal parts of their portfolios to areas with more
economical wells. In the medium term, they will have to start drilling the less economical
wells, Hughes said. That means their break-even prices will only get higher over
time. 'The wells don't get any cheaper when
you drill in a poor location,' Hughes said. 'As the sweet spots become saturated, the
amount of money you have to spend to keep the production rate flat goes up.' Hughes estimates that drillers have worked their way through only
about a quarter of the Bakken but said they have tapped about three-quarters of its sweet
spots. The
Energy Information Administration projects that average production will continue to grow
in 2015, reaching 9.3 million barrels per day and then slow to 9.5 million barrels per day
in 2016. Hughes thinks U.S. producers could come close to the estimate this year, but
average production in 2016 will fall short and come in below 2015 output. Cutbacks in the U.S. oil patch show that Saudi Arabia's poker game
will be successful in the next few quarters, Olson said. In November, the world's top oil
exporter declined to agree to output cuts that other OPEC members sought in order to put a
floor under oil prices. Instead, the Saudis have resolved to let crude prices remain
low, which squeezes high-cost production in the United States. 'Their production is
more convention, so they have lesser declines to deal with and more ability to put
low-cost production on quickly,' Olson said. 'They are holding the cards.'" |
"A well in the Eagle Ford shale formation of south Texas last year took on
average less than nine days to drill for EOG Resources, and 13
days for Marathon Oil. A
deepwater well in the Gulf of Mexico, by contrast, will take months. Shale wells also typically deliver most of their output in their first
year of production, so short-term prices are more important than for conventional fields
that decline much more slowly. That has meant the
oil industry has reacted to low prices faster in the US onshore than in any other region. From their peaks in October, the numbers of rigs drilling for oil in Eagle
Ford and the Permian basin in west Texas have dropped 27 per cent, while the number in the
Williston basin in North Dakota has dropped 32 per cent. Over the same period, the number
drilling for oil in the US Gulf of Mexico has dropped just 14 per cent. But while drilling
has dropped off faster in shale than anywhere else, it does
not necessarily follow that it will also rebound more quickly.... One theoretical obstacle to a bounce back in shale, the exhaustion of
all the most productive locations, appears not be a real issue, at least for the time
being. The drilling productivity data published by the US Energy Information
Administration show that oil production per rig from new wells has continued to rise
steadily in the three main shale oil areas: the Bakken of North Dakota, the Eagle Ford and
the Permian basin. There is a more significant
threat, though, in the shale industry’s need for financing. Even with crude at $100-plus, the US exploration and production sector
overall was running a substantial cash deficit. Companies
funded their drilling programmes with a steady inflow of capital. As Philip Verleger has
pointed out, financial markets were as critical to the US shale boom as the
industry’s knowledge base, the ownership of mineral rights, the installed
infrastructure or supportive government regulation. In the eight years 2007-14, the US
exploration and production sector raised $95bn in equity, $206bn in bonds and $574bn in
syndicated loans, according to Dealogic. If that flow of capital were to dry up, then the
shale industry would quickly run out of fuel. While
some investors have clearly taken fright at the slump in crude prices, as reflected in
share and bond prices, others such as private equity have not. Even so, there must be a
real possibility that once burnt, investors will be wary of putting their hands back into
the fire. If they are, the rebound in US crude production will be slower, and future oil
markets will be tighter, than many people currently expect." |
"The
surge in US shale oil production over the past five years has been truly phenomenal, but
the notion that it was ushering in a new age of global oil abundance was always overdone
and is looking more exaggerated by the day. One need
only look at the trend in the number of rigs drilling for oil in the US as published
weekly in the benchmark Baker Hughes
survey to see that the shale oil industry is now in severe crisis. The rig count is a
leading indicator of US supply, and given the dramatic
cutbacks in capital expenditure announced by shale oil operators in the past couple of
months in response to tanking oil prices, it is
one of the most closely watched indicators in world oil markets at the moment.... The
reason this matters is that US shale oil has been the
main driver of global supply growth in the past few years. It has increased by 4.1m
barrels per day in the past six years to reach 4.7m b/d in 2014 from only 0.6m b/d in
2008. Indeed, without US shale oil, global crude oil output would have been lower in 2014
than it was in 2005. ... Based on the preliminary 2014 supply data provided by the US
Energy Information Administration in its most recent Short Term Energy Outlook, the
total world crude oil supply increased by 3.5m b/d over 2005-14, rising to 77.3m b/d from
73.8m b/d. However, if we strip out the impact of rising
production from US shale oil, the global crude oil supply actually declined by around 1m
b/d over this period, to 72.6m b/d from 73.5m b/d. In turn,
this means the outlook for continuing growth in global crude oil output in the next few
years depends crucially on the outlook for continuing growth in US shale oil production.
And that is a problem as the decline rates of shale oil wells are much higher than for
conventional oil wells, which means a large number of new wells must be drilled every year
simply to offset natural decline. This drilling treadmill gives rise to a capex treadmill,
whereby constant infusions of new capital are required to enable the drilling to
continue. The implications of shale oil’s treadmill dynamics have until now
been largely overlooked by the market, but are well
understood by Saudi Arabia. Ultimately it is the Saudi policy to maintain production in
the face of a supply glut estimated at 1.5m-2m b/d that has caused the 50 per cent drop in
oil prices in recent months and thereby prompted the sharp drop in the US rig count. The
Saudis and their Gulf Opec allies realise that the high cost nature of shale oil production
requires high prices to keep the drilling treadmill in motion. They calculate that a
period of much lower prices will expose the fundamental vulnerability of the shale oil
model, thereby prompting a reappraisal. And that is arguably what is now beginning to
happen, with Brent, the international benchmark, up 20 per cent since the catalyst
provided by the rig-count data of January 30. After such a rapid bounce there is probably
not much further price upside in the short term, as the current oversupply remains large
and US shale oil production will probably continue to grow for the next three to four
months given the price hedges in place and the backlog of wells still waiting to be
completed. However, once the impact of a dramatically lower rig count starts feeding
through into shale oil supply from the middle of the year, prices should start to rally on
a more sustained basis, with Brent likely to be back at $75 a barrel by year-end. The shale model simply does not work without high prices, and the
market is starting to understand that." |
"Britain’s
growing dependence on foreign oil and gas has been laid bare in damning new EU figures. In
just over 10 years, the UK has gone from exporting oil and gas to being dependent for
almost half its energy. The rapid increase in energy dependence is the worst across the
whole of the European Union. In 2002 the UK produced 112.3 per cent of the energy homes
and businesses used. But by 2013, the latest figures published by the EU, Britain was only
meeting 53.6 per cent of its energy needs. Two
thirds of the other countries in the EU, including rival economies like France and the
Netherlands, have managed to cut their reliance on imported energy. Only Denmark has seen
a similar spike in oil and gas imports to Britain.... Dan Lewis, Senior Infrastructure
Adviser at the Institute of Directors, attacked the Government's failure to replace
failing North Sea oil and gas reserves. He said: 'These figures show the cost of refusing
to be realistic about our energy policy. 'Years of dithering and indecision mean that
we’re way behind with replacing our nuclear plants, renewables are intermittent and
have been able to meet about one sixth of our electricity needs at best, so all that's
left is fossil fuels. That means prioritising the cleanest, gas. 'Luckily, we have
significant shale gas resources in the UK. If we don’t embrace fracking we will be
throwing away jobs, tax revenues and a source of raw material for our manufacturing
industries.'" |
"U.S. oil
rigs continued to get crushed this week despite record levels of production. Drillers
idled 83 rigs, following a decline of 94 rigs in the prior week, Baker Hughes reported
Friday. The total U.S. rig count is down 25 percent
since October, an unprecedented four-month retreat. The collapse in oil prices is
wiping out more than 30,000 oil jobs, according to a tally of announced layoffs by
Bloomberg News. Cowen & Co. estimates that spending on exploration and production are
declining more than $116 billion, a 17 percent decline. The oil crash hasn’t yet shown up in
U.S. jobs numbers, and American oil production is at the highest level for this
time of year since at least 1983. Still, there’s mounting
anecdotal evidence of an industry in distress, and the rig counts appear to be in free
fall." |
"Crude oil
will likely continue falling before posting only a mild recovery in the second half of
this year, a Reuters survey of analysts showed on Friday, with prices set to average even
less in 2015 than during the global financial crisis. The
survey of 33 economists and analysts forecast North Sea Brent
crude would average $58.30 a barrel in 2015,
down $15.70 from last month's poll, in the biggest month-on-month forecast revision since
prices last collapsed in 2008-2009." |
| "Oil prices roared back from six-year lows on Friday, rocketing more
than 8 percent as a record weekly decline in U.S. oil drilling fueled a frenzy of
short-covering. In a rally that may spur speculation that a seven-month price collapse has
ended, global benchmark Brent
crude shot up to more than $53 per barrel, its highest in more than three weeks in its
biggest one-day gain since 2009. The late-session surge was primed by Baker Hughes data showing the number of rigs drilling for oil in the
United States fell by 94 - or 7 percent - this week. Earlier gains were fueled by reports
of Islamic State militants striking at Kurdish forces southwest of the oil-rich city of
Kirkuk.... According to Baker Hughes, the decline in
oil drilling rigs was the most since it began keeping records in 1987. With drillers having idled about 24 percent of their oil drilling rigs
since the summer, some traders may be betting that an anticipated slowdown in U.S. oil
production is nearer than expected." Oil surges 8 pct as U.S. rig count plunges, shorts scramble Reuters, 30 January 2015 |
"Ethanol was
supposed to do a lot for the US. It was supposed to help reduce our dependence on foreign
oil. It was supposed to combat climate change. It was supposed to be a gateway for more
renewable fuels technology. It was supposed to reduce gasoline prices because it was
cheaper. So when Congress mandated in 2005 that 10% of the nation’s fuel supply had
to be blended with ethanol, which is derived from corn, there were some idealistic hopes
that renewable fuels would wean us off fossil fuels. It hasn’t worked that way. The
US is reducing its dependence on foreign oil, but not because of ethanol. It’s
because we’re pumping more of our own oil here, thanks to fracking. It hasn’t
led to more research and development of advanced biofuels. Instead, we’re putting nearly 40% of the US corn crop in our gas tanks, which some argue pushes up food prices. And lately ethanol is not
even a cheaper alternative to gasoline. Since mid-December, ethanol prices have risen
above reformulated gasoline prices because of the sharp drop in crude-oil and gas prices,
along with a rise in corn prices." |
| "According
to academics from the Universities of Portsmouth, Warwick and Essex, foreign intervention
in a civil war is 100 times more likely when the afflicted country has high oil reserves
than if it has none. The research is the first to confirm the role of oil as a dominant
motivating factor in conflict, suggesting hydrocarbons were a major reason for the
military intervention in Libya, by a coalition which included the UK, and the current US
campaign against Isis in northern Iraq. It suggests we are set for a period of low
intervention because the falling oil price makes it a less valuable asset to protect. 'We found clear evidence that
countries with potential for oil production are more likely to be targeted by foreign
intervention if civil wars erupt,' said one of the report authors, Dr Petros Sekeris, of
the University of Portsmouth. 'Military intervention is expensive and risky. No country
joins another country’s civil war without balancing the cost against their own
strategic interests.' The report’s starkest finding is
that a third party is 100 times more likely to intervene when the country at war is a big
producer and exporter of oil than when it has no reserves. 'After a rigorous and systematic analysis, we found that the role of
economic incentives emerges as a key factor in intervention,' said co-author Dr Vincenzo
Bove, of the University of Warwick. 'Before the Isis forces approached the oil-rich
Kurdish north of Iraq, Isis was barely mentioned in the news. But once Isis got near oil
fields, the siege of Kobani in Syria became a headline and the US sent drones to strike
Isis targets,' he added. The study, published in the Journal of Conflict Resolution, analysed 69
civil wars between 1945 and 1999, but did not examine foreign invasions. It noted that civil wars have made up more than 90 per cent of all armed
conflicts since the Second World War and that two-thirds of these have seen a third-party
intervention." The researchers drew their conclusions after modelling the
decision-making process of the third-parties’ interventions. This assessed a wide
range of factors such as their military power and the strength of the rebel army, as well
as their demand for oil and the level of supplies in the target country. It found that the decision to intervene was dominated by the
third-party’s need for oil, far more than historical, geographic or ethnic ties. The
US maintains troops in Persian Gulf oil producers and has a history of supporting
conservative autocratic states in spite of the emphasis on democratic reform elsewhere,
the report says. However, the recent surge in US oil
production suggests the country will be intervening less in the future – with China
potentially taking up the role as lead intervener, the report suggests." Britain
intervened in the Nigerian Civil War, also known as the Biafran War, between 1967 and
1970. During this period the UK was one of the biggest importers of oil in the world, with
North Sea oil production only starting in 1975. BP’s presence in the oil-rich eastern
region of the country meant stability in the area was of critical importance. The invasion
of Iraq in 2003, led by the US and the UK, wasn’t covered in the research because it
wasn’t a civil war. However, the report notes previous claims that a thirst for oil
was 'the alleged ‘true’ motivation of the US invasion of Iraq'. David Cameron was instrumental in setting up the coalition that
intervened in Muammar Gaddafi’s Libya in 2011, a country with sizeable oil
reserves. Britain watched on as Sierra Leone’s Revolutionary United Front, with
support from Charles Taylor’s National Patriotic Front of Liberia, attempted to
overthrow Joseph Momoh’s government. The resulting civil war lasted 11 years (1991 to
2002) and enveloped the country, leaving more than 50,000 dead. The UK also opted not to intervene in the Rhodesian Bush War between 1964
and 1979 – a three-way battle between the Rhodesian government, the
military wing of Robert Mugabe’s Zimbabwe African National Union and the Zimbabwe
People’s Revolutionary Army. More recently, the UK failed to take action in Syria,
another country suffering at the hands of a dictator – but with little in the way of
oil reserves." Intervention in civil wars ‘far more likely in oil-rich nations’ Independent, 28 January 2015 |
"For the first time this century China’s coal consumption has
fallen, according to preliminary data from both the Chinese Coal Industry
Association and the National Energy
Administration. The amount by which coal use declined last year remains an open
question, with the Coal Industry Association reporting a reduction of around 3.5% but NEA
data showing a fall of only 0.4%." |
"OPEC’s secretary-general said oil prices as high as $200 a
barrel is possible if there’s a lack of investment in new supply. 'If you don’t invest in oil and gas, you will see more than $200,'
Abdullah Al-Badri said in an interview in London Monday. Brent, the global benchmark,
erased an earlier 2.5 percent decline, trading as high as $48.94 in London. Crude oil
prices collapsed almost 50 percent last year as Saudi Arabia and other members of the
Organization of Petroleum Exporting Countries said they won’t curb output in response
to a surplus. That excess is 1.5 million barrels a day, Al-Badri said. Oil prices turned
positive on Monday, erasing early losses after the Secretary-General of the OPEC producer
group said he expected the market to bottom out around current levels. March Brent crude
LCOc1 was trading at $49.13 per barrel by 1317 GMT, up 34 cents, bouncing from an early
low of $47.57. "Now the prices are around $45-$55 and I think maybe they reached the
bottom and will see some rebound very soon," Al-Badri said." |
"British banks including Royal Bank of Scotland and Barclays may be
sitting on billions in losses from the collapse in oil prices after a surge in junk loans
to the industry. UK banks have been behind more than $50bn of leveraged loans —
high-yield, non-investment grade debt — to the oil and gas industry in the past four
years, according to data from Dealogic. Although British lenders are not the most exposed
to the oil collapse, with most debt issuance arranged by US and Canadian institutions,
leveraged loans arranged by UK lenders have more than doubled since 2011 amid the North
American shale boom. The price of Brent crude has
slumped from $110 a barrel last summer to $48.91 on Friday, amid a glut in supply and
falling global demand. While low prices are likely to give a shot in the arm to consumers
and manufacturers, many oil producers, particularly in America’s shale gas fields, are likely to be driven out of business. A lengthy period of cheap
crude is likely to trigger widespread defaults and many oil and gas loans are now changing
hands for well below their face value as investors fear they will not get their money
back. Banks will offload many of the loans and hedge their losses, and some will have
stricter lending standards for high-yield loans than others. Losses will also depend on
how long the oil price stays low, so it is unclear precisely how exposed the banks are to
the energy industry’s woes. Some lenders have privately indicated that they consider
the oil price fall to have a positive impact, with the wider economic benefits offsetting
the loans they are writing off. However, significant losses are seen as inevitable if
prices fail to rebound." |
"When Russia
canceled a planned pipeline to deliver natural gas to Europe across the Black Sea last
month and said it would redirect the project to Turkey, some thought it was a bluff,
others a sign of financial weakness and still others a rebuke to the West over Ukraine as
President Vladimir Putin turned elsewhere to look for new partners. In reality, the
change made good commercial sense and should have happened years ago, according to a new report by some
of the most knowledgeable people on Russia's gas industry. The shift also means that
Gazprom, Russia's state-controlled gas company, won't be able to completely cut Ukraine
out of the transit business, as the original South Stream pipeline had sought to do, for
years to come. And, the authors might have added, the new arrangement is healthier for
Europe, too. The cancellation of South
Stream is part of a broader change of strategy for Gazprom that plays to the company's
strengths, say Jonathan Stern, Simon Pirani and Katja Yafimava at the Oxford Institute for
Energy Studies. The previous strategy to acquire distribution networks deep in EU markets.
And while the report's authors are more cautious, this was also in part politically
motivated. It was meant to exert Russian political power as much as to make profits for
Gazprom, which is one reason the European Union drew up regulations to obstruct it. South Stream was expensive -- conservatively priced at about $20 billion
and by some estimates as much as $65
billion. It never made commercial sense, even when EU demand for gas was projected to soar
and Gazprom controlled prices by negotiating separate long-term contracts with individual
buyers. Today, Gazprom faces new price competition from spot markets at gas hubs around
the EU. Plus, new EU rules -- some still being written -- would force Gazprom to open up
its European pipelines to other suppliers and distributors. The Ukraine crisis prompted EU
officials to move aggressively against South Stream for not complying with the new rules.
And collapsing oil prices (to which long-term gas contracts are tied) made the economics
of South Stream look even worse. Eventually, Gazprom pulled the plug. The company then proposed redirecting the pipeline project to
Turkey, its second-largest customer in Europe and the only European market projected to
grow strongly. The gas Turkey now gets via Ukraine would come direct from Russia. And any
additional amounts could be taken to a hub at Turkey's EU border and sold. Nevertheless,
Gazprom would still need to send substantial amounts of gas to Europe through Ukraine
until at the very least 2020, according to the Oxford report. It's by now clear that
Gazprom's pivot to Turkey was not
a bluff, even if negotiations on price and the pipeline's route continue. Gazprom has
already allocated resources to the Turkish project.
Nor was the South Stream decision based only on cost. That couldn't explain why Gazprom
hired two barges and 200 personnel to start laying pipes on the seabed, Stern and his team
said." |
"Oil drillers will begin collapsing under the weight of lower crude
prices during the second quarter and energy explorers who employ them will shortly follow,
according to Conway Mackenzie Inc., the largest U.S. restructuring firm. Companies that
drill wells and manage fields on behalf of oil producers will be the first to fall after
the benchmark American crude, West Texas Intermediate, lost 57 percent of its value in
seven months, said John T. Young, whose firm led the city of Detroit through its 2013
bankruptcy. Oil companies have slashed thousands of
jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans
in response to the prolonged rout in crude prices. For oilfield service providers that
test wells and line the holes with steel and cement, the impact of price reductions forced
upon them by explorers will start to pinch hard during the second quarter, Young said
Thursday.... Young, who has restructured more than a dozen energy companies and advised
Kirk Kerkorian’s Delta Petroleum Corp. through its 2011 bankruptcy, is warning
drillers to monitor whether the oil producers they work for have protected future cash
flows with hedging instruments like swaps and collars. The amount of projected 2015 oil
and natural gas output a company has hedged is a strong indicator of whether they’ll
be able to pay their bills, he said. Another important metric is how much is drawn on
revolver loans, Young said. 'I’m telling them they really have to keep an eye on this
stuff and you’ve got to be the squeaky wheel,' he said. 'You’ve got to start
filing liens if you see a company starting to go down.' In the U.S., a lien is a legal
claim against a debtor’s property to force payment of a delinquent bill. West Texas
Intermediate, or WTI in oil-patch parlance, fell 3.1 percent to $46.31 a barrel Thursday
in New York. The price
has been below $70 since the beginning of December and touched a 5 1/2-year low of $44.20
on Jan. 13. 'When I saw WTI hit $65, I thought we’re going to be really busy with
restructurings,' Young said. 'When it hit the $40s, I knew we were looking at outright
liquidations.'" |
"U.S. drillers have taken a record number of oil rigs out of
service in the past six weeks as OPEC sustains its production, sending prices below $50 a
barrel. The oil rig count has fallen by 209 since Dec. 5, the
steepest six-week decline since Baker Hughes Inc. (BHI) began tracking the data in
July 1987. The count was down 55 this week to 1,366.
Horizontal rigs used in U.S. shale formations that account for
virtually all of the nation’s oil production growth fell by 48, the biggest
single-week drop. Analysts including HSBC Holdings Plc say the decline shows that the
Organization of Petroleum Exporting Countries is winning its fight for market share and
slowing the growth that’s propelled U.S. production to the highest in at least three
decades. OPEC’s decision not to curb its output amid increasing supplies from the
U.S. and other countries has driven global oil prices down 58 percent since June.
'OPEC’s strategy is working, and it will be obvious in U.S. production
by midyear when growth from shale plays will come to a halt,' James Williams, president of
energy consulting company WTRG Economics in London, Arkansas, said by
telephone Friday. 'You can imagine the impact on any industry from a 50 percent impact on
sales.'" |
"Royal Dutch Shell and its partner Qatar Petroleum have ditched a
$6.5bn (£4.3bn) project in the latest sign of the broadening impact of falling oil and
gas prices on the hydrocarbons industry. In a statement on Wednesday, Shell said the
decision to abandon the Al-Karaana petrochemicals project "came after a careful and
thorough evaluation of commercial quotations from EPC (engineering, procurement and
construction) bidders, which showed high capital costs rendering it commercially
unfeasible, particularly in the current economic climate prevailing in the energy
industry." International oil companies are
cutting back on spending aggressively amid a brutal slump in oil prices. Brent has fallen
50pc since July to trade around $46 per barrel as Saudi Arabia and its close allies in the
Organisation of the Petroleum Exporting Countries (Opec) seek to win back market share
from producers outside the cartel." |
"For now, the only sign that U.S. crude oil production may shrink
is the falling number
of operational oil rigs in the U.S. It was down to 1750 last week, 61 less than
the week before and four less than a year ago. Oil output, however, is still at a
record level. In the week that ended on Jan. 2, when
the number of rigs also dropped, it reached 9.13 million barrels a day, a 44-year high.
Oil companies are only stopping production at their worst wells, which only produce a few
barrels a day -- at current prices, those wells aren’t worth the lease
payments on the equipment. Since nobody is cutting production, the price keeps
going down; today, Brent was at $48.27 per barrel and trends are still heading downward.
All this will eventually have an impact. According to a fresh analysis by
Wood Mackenzie, "a Brent price of $40 a barrel or below would see producers
shutting-in production at a level where there is a significant reduction in global oil
supply. At $40 Brent, 1.5 million barrels per day is cash negative with the largest
contribution coming from several oil sands projects in Canada, followed by the U.S.A. and
then Colombia." That doesn't mean that once Brent hits $40 -- and that is the level
Goldman Sachs now expects,
after giving up on its forecast that OPEC would blink -- shale production will
automatically drop by 1.5 million barrels per day. Many
U.S. frackers will keep pumping at a loss because they have debts to service: about $200
billion in total debt, comparable to the financing needs of Russia's state energy
companies. The problem for U.S. frackers is that it's impossible to refinance those
debts if you're bleeding cash. At some point, if prices stay low, the most leveraged of
the companies will go belly up, and the more successful ones won't be able to take them
over because they will have neither the cash nor the investor confidence that would
help them secure debt financing. The insolvencies and lack of expansion will finally
lead to output cuts. The U.S. Energy Information Administration still predicts that U.S.
crude production will average 9.3 million barrels a day, 700,000 barrels a day more than
in 2014. But if Brent goes to $40, that forecast goes out the window. It's probably
overoptimistic even now." |
"North Sea oil and gas companies are to be offered tax concessions
by the Chancellor in an effort to avoid production and investment cutbacks and an exodus
of explorers. George Osborne has drawn up a set of tax reform plans, following warnings
that the industry’s future of the industry is at risk without substantial tax cuts. But the industry fears he will not go far enough. Oil & Gas UK, the
industry body, is urging a tax cut of as much as 30pc and an overhaul of what it says is a
complex, unfriendly and outdated tax structure. Mr Osborne asked Treasury officials to
work on a new, more wide-ranging package than the 2pc tax cuts he promised in the Autumn
Statement last month. The basic tax levy is currently 60pc but can run to 80pc for
established oil fields. He plans to open talks with industry leaders this week on new
options for the pre-election March Budget.... Industry leaders have presented the
Chancellor with a bleak picture of the North Sea outlook after the big falls in the price
of crude since the summer, and particularly the impact on the Scottish economy. Mike
Tholen, the economics director at Oil and Gas UK, dramatically summed up the situation.
'If we don’t get an immediate 10pc cut, then that will be the death knell for the
industry,' he said. The industry sees the 10pc cut as a 'down payment' to be followed by a
further 20pc reduction to provide an investment incentive. The speed and scale of the
collapse in oil prices, down almost 60pc to
below $50 a barrel over the past five months, has forced North Sea operators in a
high-cost oil basin to take emergency action. A modest recovery in exploration is almost
at a standstill, some projects have been mothballed and cost-cutting programmes
accelerated. Oil contract workers’ pay has been slashed by 15pc and redundancy
programmes are under review. The industry’s 'rescue' programme is simple, but costly.
Allowances, supplementary taxes and other additions have made North Sea taxation one of
the most complex in the business." |
"Three of
the UK’s most closely watched junior oil and gas exploration and production companies
are due to provide the first snapshot of how the industry is struggling to adjust to a
50pc slump in the price of crude over the past year. Premier Oil, Cairn Energy and Tullow
Oil will update the market on trading this week. Amid
an operating environment in which Brent crude would be trading at about $50 (£33) per
barrel, with no sign of a rebound, the three firms have seen about £4.2bn wiped off their
market value since the slide began, prompting downgrades and speculation of potential
takeover bids. 'If the sector wasn’t able to sustainably outperform in a high-price
environment then the next two years could be a struggle,' said UBS analysts in a recent
note on to investors on the European oil and gas sector." |
"Citing the
collapse in global oil prices, U.S. Steel Corp. will idle its plant in Lorain, Ohio,
laying off 614 workers, a company spokeswoman said Tuesday. The
plant makes steel pipe and tube for oil-and-gas exploration and drilling. With oil prices
currently around $50 a barrel, their lowest level since 2009, energy companies have far
less incentive to drill for new supply, reducing demand for the plant’s products." |
"The Government is relying on 'luck' to deliver Britain’s gas
supplies and must safeguard national security by building more storage facilities, Charles
Hendry, the former energy minister, has warned. Recent low oil and gas prices will hasten
the demise of North Sea fields and deter investment in fracking for new shale resources,
making the UK more dependent on gas imports even sooner than had been feared, he said. Mr Hendry, the Conservative MP, served as energy minister until 2012. A
year later, one of his successors, fellow Conservative Michael Fallon, ruled
out intervention to encourage new gas storage, despite Government-commissioned
analysis showing it could save consumers £1bn. Britain can hold only about 15 days of gas
supplies in long-term storage, compared with about 100 days for European counterparts
– a situation the Conservatives pledged in opposition to address. Writing
in Monday's The Daily Telegraph, Mr Hendry says
that in four of the last nine winters, UK gas storage reserves fell to "disturbingly
low" levels – including in 2013 when cold weather pushed the country to 'within
hours of running out of gas'. ... Hope that the North Sea could benefit the UK for decades
to come 'now looks optimistic' as lower
prices make investment the area uneconomic, risking the closure of some fields. 'That in turn would threaten other fields, which rely on a shared pipeline
infrastructure,' he said. ... Mr Hendry said: 'This is so central to our national security
that we now need to go further and require more capacity to be built. It is an insurance
programme, with little downside, and many benefits.'" |
"Oil supplies in Iraq and Russia surged to the highest
level in decades, signaling no respite in early 2015 from the glut that has pushed crude
prices to their lowest in five years. Russian oil production rose 0.3 percent in December
to a post-Soviet record of 10.667 million barrels a day, according to preliminary data
e-mailed today by CDU-TEK, part of the Energy Ministry. Iraq exported 2.94 million barrels
a day in December, the most since the 1980s, said Oil Ministry spokesman Asim Jihad. The
countries provided 15 percent of the world’s oil in November, according to the International
Energy Agency.... Iraq, OPEC’s
second-biggest producer, reached a deal with its semi-autonomous Kurdish region last month
over the Kurds’ oil exports through Turkey, after years of disagreement on the territory’s right to
independently develop its energy resources. The agreement 'looks to have had a positive
effect on exports to the north,' analysts at consultants JBC Energy GmbH in Vienna said in
a report today. The agreement allows the shipment of as much as 550,000 barrels a day of
oil from northern Iraq to the port of Ceyhan on the Mediterranean, along a pipeline to the
Turkish border operated by the Kurdistan Regional Government. This includes 300,000
barrels a day from the Kirkuk oilfields in northern Iraq, under the control of Kurdish
forces since they moved to repel an offensive by militants from the Islamic State in June.
Iraq exported 5.579
million barrels of Kirkuk oil in December, equivalent to about 180,000 barrels a day, Oil
Ministry spokesman Jihad said by text message today. That’s more than a six-fold
increase from 836,000 barrels in November, according to the Oil Ministry. The Russian
production figure is for crude and condensates, an ultralight oil that yields a greater
proportion of high-value fuels. Production averaged
10.58 million barrels a day for 2014, also a post-Soviet record. Preliminary data, which
didn’t reflect shipments by Gazprom Neft and may be revised, showed a decline in
exports. The previous post-Soviet oil production record was 10.64 million barrels a day in October, CDU-TEK
data show. It rose above 11.4 million barrels a day in 1987, the
Soviet-era peak, data from BP Plc show." |
"Falling world oil prices will hurt countries across the Middle
East unless Saudi Arabia,
the world's biggest crude exporter, takes action to reverse the slump, Iran's deputy
foreign minister told Reuters. Hossein Amir Abdollahian described Saudi Arabia's inaction
in the face of a six-month slide in oil prices as a strategic mistake and said he still
hoped the kingdom, Tehran's main rival in the Gulf, would respond. Oil prices closed on
Wednesday at a 5-1/2 year low, registering their second-biggest ever annual decline after
OPEC oil exporters, led by Saudi Arabia, chose to maintain oil output despite a global
glut and calls from some of the cartel's members - including Iran and Venezuela - to cut
production. 'There are several reasons for the drop
of the price of oil but Saudi Arabia can take a step to have a productive role in this
situation,' Abdollahian said. 'If Saudi does not help prevent the decrease in oil price
... this is a serious mistake that will have a negative result on all countries in the
region,' Abdollahian said in an exclusive interview on Wednesday evening. His comments
highlight continued tensions between the Shi'ite Muslim republic and Sunni Muslim kingdom,
locked in a battle for regional power and influence despite hopes of rapprochement since
the inauguration of Iran's President Hassan Rouhani in August 2013. Abdollahian said Iran would have more
discussions with Saudi Arabia about the oil price, both through oil officials at OPEC and
through the foreign ministry. He did not give specific details on when any meeting might
take place. Saudi Arabia said last month that it would not cut output to prop up oil
markets even if non-OPEC nations did so. The Iranian deputy minister also criticized Saudi
military involvement in Bahrain, which has been gripped by tension since 2011 protests led
by majority Shi'ite Muslims demanding reforms and a bigger role in running the Sunni-ruled
country. Abdollahian said Bahraini authorities' continued detention of Shi'ite opposition
leader Sheikh Ali Salman would have 'serious consequences' for the government there.
Tehran and Riyadh accuse each other of interfering in the pro-Western Gulf island kingdom,
one of several countries where their power struggle has played out. They also support
opposing sides in wars and disputes in Iraq, Syria, Lebanon and Yemen. Abdollahian
dismissed United States efforts to fight Islamic State, also known by its Arabic acronym
Daesh, as a ploy to advance U.S. policies in the region. 'The reality is that the
United States is not acting to eliminate Daesh. They are not even interested in weakening
Daesh, they are only interested in managing it,' he said. The United States and its allies
have carried out hundreds of air strikes against Islamic State in Iraq and Syria. Washington has also sent
military support to Baghdad's Shi'ite-led government but its role in Syria - where it has
called for President Bashar al-Assad to step down - is more limited. Iran has sent
Revolutionary Guard commanders to help its Shi'ite and Alawite allies in Baghdad and
Damascus battle Islamic State and other Sunni fighters. But Abdollahian denied that Iran
conducted aerial attacks on Iraqi sites. 'On the ground, where the U.S. should take
serious action, there are no serious actions taking place. The US is not doing anything,'
he said, accusing Washington of pursing a contradictory policy towards Islamist militants.
'One day they support Daesh, another day they are against terrorism,' he said. Abdollahian
reaffirmed Iran's commitment to Assad, saying the Syrian president must be involved in any
political transition aimed at ending more than three years of conflict." |
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