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It's almost like I offended somebody over at the WSJ. I'll stand by my previous comments.
The paragraph between your snippets carries the real reason why Obama and friends stand in the way: "Koch Pipeline Company ..."
The argument about flexibility doesn't fly. Yeah, if they piped to the gulf coast now they'd be flooding the market and the price would be lower but pipelines don't have to go only to the gulf coast. In fact the completed phase 1 section of Keystone goes to Illinois via Canada and EASTERN North Dakota and the section being blocked would carry oil directly from the Bakken (and Canada) to the section that connects directly to the phase 1 section. if anybody wants flexibility they might want to consider the concept of barges. Cheaper and arguably safer and strangely enough Keystone happens to go conveniently close to the Ohio and Mississippi Rivers.
BTW on my drive thru Nebraska in December, I saw a lot of pipeline pipe being moved. The pipelines are being built but I suspect a fully integrated and fully functional system linking the producing areas of MT, ND, Alberta, and Saskatchewan with refineries on the gulf coast and Midwest won't exist until after 2017. Alternatively, I wouldn't be surprised if Bakken producers end up piping north to Canada and then east or west.
I don't know doodly about Atwood and it would probably be inappropriate for me to comment if I did.
I'm not impressed by the writer. On the substance front: a lot of deep water drillers have new ships. The writer says Noble and TransOcean have ships that are 30 yrs old. So what? They also have several that just came out of the yards. The bit about when contracts come up is relevant but this goes back to what I've pointed out before about the E&P companies having leverage over the past ~6 yrs because of the current demand/pricing situation. I'd bet every driller has had most of their contracts come up for renewal in that time. Unless Venezuela goes down the crapper and a war starts in the Ukraine, I don't see a change coming soon. I suspect the drill ship biz is or will be like airlines without the ugliness caused by government ownership: the renters will choose by performance quality and adherence to scheduling (or at least being least horrible on that front). Conversely, some NOCs might have some non-standard drivers for their drilling programs so anybody looking to invest in a driller might want to look at whether that driller is "favored" by certain countries with large offshore oil reserves/opportunities and motivations to drill those targets regardless of market conditions.
From today's WSJ on new rail transport regs:
"The oil industry embraced train transport because it was quicker and easier to build rail infrastructure than it was to lay pipelines. In addition, even though moving oil by trains was more expensive than via pipelines, the industry could ship the crude to wherever prices were highest."
Total bullocks.
If Obama and friends would get out of the way, these "safety" problems would not have come about. I'm amazed that he has managed to avoid any culpability by even the few conservative news organizations. The only reason rail was "quicker and easier" was because Obama got in the way of pipelines.
I'd like to know what u find troubling. ;^)
I agree with about 70% of what he said (that number kept dropping as I wrote this). Differences: 1. I don't think oil prices are holding back GDP growth and I think he has his production-GDP relationship backwards, 2. I don't think Shell is a barometer for the industry 3. I don't think the divestitures "to raise cash" are being done as some sort of desperation move to mollify investors. In many cases the properties being divested were acquired during what was effectively a mindless feeding frenzy and having assessed those properties, the chaff is now being sold to equally undiscerning folks (although arguably dumber). It is implicit in his argument that the assets can be productive and that just ain't always true. The asset fire sale he referred to could make coal look fashionable.
I find his Goldman-Sachs graph difficult to believe. I would never put money in most of the companies on the far left of that graph (there are a few in the middle and right too ;^) )
Oil companies are cutting capex but those are some very lofty numbers and as the man implied, oil companies have a long history of being reckless with money because there was always more. Gaining discipline is not a bad thing. Some companies have been good about this for a long time but even the best have made the occasional colossal blunder.
As part of the increasing cost to oil companies, I'm quite happy with the situation. However, a sustained period of a non-supply constrained market (now approaching 6 yrs) has given the oil companies much greater control of their costs. Conversely, humans, or lack thereof, is a cost they do not have control of.
I agree the world is "oil short" in the long run although at the moment it certainly is not. I would've called the oil short situation "supply constrained". As he said, when oil is made available, it is consumed. The folks with the stashes are regulating the supply and price. Joe Shmoe is not cutting back on his activities because oil is $100/bbl and he seems to celebrate every time it approaches $90. As one of my former colleagues observed of traffic in Cambridge, MA in 2007 when oil was well over $100 and economies were booming: "I'll believe oil prices are hurting the consumer when every other car on the street isn't an SUV occupied by one person". I haven't noticed a huge decline in SUVs on the road.
I haven't personally handled Bakken crude but I've handled a bunch from other places that fit the 'gasoline' description. The difference is those other places don't ship by rail.
Refined gasoline is transported by pipeline over long distances to major population centres so shipping Bakken crude by pipeline shouldn't scare anybody. The pipeline objections are just a charade.
"who's rolling in the dough?"
Lots of uninvestable entities such as universities and politically favored private companies. In principle, those folks blow the money on materials and equipment but I think jbog's posts make it clear why there are problems there. Dew hit the substantive problems underlying PBR.
Folks should read the Wikipedia entry for the Lac-Mégantic derailment. It appears to me that accident had very little to do with oil and a lot to do with practices associated with the train.
If somebody leaves their malfunctioning car running on a road at the top of a hill and takes a taxi home for the night and then that car rolls down the hill, crashes, catches fire, blows up and kills some people, is it really the fault of the oil company that produced the gas for the car?
No amount of making sure the oil matched the rail car capabilities would've prevented the Lac-Mégantic disaster if the train folks did everything else the same.
I have portfolio of ~20 oil companies I keep track of; the only ones that went up today were Continental, Husky, and Kodiak - all of whom will benefit and are concentrated in the region. Somewhat strangely HES went down with the rest of the group.
If I were really paranoid I'd say the news leaked before it made to the various news agencies.
I was referring to the bit from Barron's: principally the 2nd paragraph of the article.
Starting w the 1st sentence: the 1st 20% of a well's production does not necessarily gush out due to "natural pressure". The 2nd 20% can not necessarily be extracted using water and even if water flooding is possible and effective, then use of CO2 is not necessarily useful. If the reservoir rock contains a lot of water sensitive clay, then adding water is a bad idea. Likewise, CO2 does not always "love" oil and for oils with significant asphaltene concentrations, addition of CO2 can kill production.
CO2 is used extensively in west Texas and in southern Alberta because the oil is compatible with CO2 and bypass/fingering isn't too bad. Denbury has gotten a bunch of DOE money for injecting CO2 into reservoirs along the Gulf coast (principally Mississippi, I think) as part of CO2 sequestration projects even though most of the CO2 did not come from power plants (I could be wrong on that). In the case of w Texas it is cheap enough to pipe CO2 from natural CO2 reservoirs in Colorado. I don't know if the nice tax credit is still available for recycling CO2 from one reservoir to another (one of the greenhouse gas/climate change bills ~2009 established different credits for injecting 'anthropogenic' and natural CO2).
Most of your quoted blurb is either BS or grossly over generalized.
Firstly, both articles need to get their chickens and eggs straight. What caused the trains to derail? Did exploding oil tanker cars cause the derailment or did the derailments cause the oil tanker cars to explode?
My other objections are with the folks cited in the articles. I'm all for safety but I smell some regulatory folks looking for another club to beat the oil industry. In addition, the comments along the lines of "crude oil doesnt explode like that" are gross over-generalizations. The ignition point (auto- or otherwise) will depend strongly upon the chemical components of the crude and crude compositions are all over the map from tar to what is effectively gasoline. Most of us grown-ups know one of those will ignite a bit more easily and spectacularly than the other.
I've always thought transport of crude oil by train was inherently more dangerous than by pipeline but then i guess the question of whether dangerous to cranes or dangerous to humans is the concern.
If there really is some merit to the supposition that Bakken oils are behaving differently from other rail transported oils (as opposed to there just being a lot more rail transported Bakken oil than other oils being transported by rail), then I doubt it is due to stimulating acids. If the oils are heavily emulsified when they go into the cars, then I wouldnt be surprised if a few hundred miles of jostling down a railroad track helped to separate an acidic aqueous phase which didn't play well with the steel but I suspect this would take repeated instances. If the cars are cleaned and inspected between loads, then I'd expect this problem would've been identified if it existed.
In addition, acid is used to stimulate many reservoirs and some of those oils must be transported by rail so if acid is the culprit, then there has to be something specific about the chemistry of the Bakken oil which makes the emulsion particularly unstable. Of course, I have no idea what kind of treatment the produced oil undergoes between the wellhead and the tanker cars. If the oil undergoes thorough de-watering prior to going into the cars, then corrosion by stimulating acid is almost certainly not the problem. Corrosion may still be a problem but it won't be due to those nefarious, evil fracking/stimulating fluids (and I get really sick of people who worry about c's or k's in fracking).
I wouldn't be surprised if the sustained mechanical vibration of rail transport caused some separation of crude components - either by destabilization of a dispersion or by destabilization of a kinetically inhibited metastable state. It's also possible that the ambient temperature may play a role - possibly in junction with the phase state (i.e. metastable solution or multi-phase dispersion).
However, I think it is much more likely that this 'story' is yet another case of folks not doing a proper statistical analysis which is more your bally-hoo. However, that analysis is frought with problems which is probably why folks are chasing other rabbits. I suspect the only other country where oil (with similar characteristics) is transported by rail in similar quantities to the Bakken is Russia and my prejudices would be that Russian rail lines and documentation of accidents is not quite up to par with those in the US and Canada.
ps: i'm back at my former employer but now north o the border
i think there is some spin here regarding the word 'supply' vs 'proven reserves'. Supply in this case refers to what is being produced versus what could be produced and that is where the money being discussed is spent.
I also dont understand why the author differentiated oils in the way that he did. From a downstream perspective, oils from deep/ultra-deep water, oil-sands, and 'conventional' reservoirs are a lot more similar to each other than to the 'oils' produced from shales like the Marcellus and Utica which are what i think he's calling NGLs. The costs of developing 'light-tight', oil-sands, and NGL reservoirs are all over the map so i think his 'distinction' is BS.
the bit about $/bbl prices is also deranged. I wouldnt be surprised if oil from oil sands is currently trading nearer to $50/bbl than $90. "Conventional" crude (what i think most folks would interpret as WTI, Brent, LLS, Arab, etc) generally trade at a premium to oil from oil sands or the Bakken (which i would consider to be 'light-tight'). I think condensate oils are trading in the $30s/bbl (again, what i think he's calling NGLs).
if crude prices get to $10/bbl, then it will be a world without automobiles with combustion engines. Batteries dont run on fairy dust so i don't see that being the cause of conventional automobiles disappearing.
the big capex is spent on oils which i suspect are generally <40 API whereas NGLs are generally >50 API. I think it would've been much wiser to differentiate the oils being discussed based on their average C number, viscosity, and sulfur content (or other compositional variables) rather than a mixed reference frame of reservoir types and gas association.
wikipedia has a nice graph in their 'price of petroleum' entry which shows crude oil prices in 2011 dollars which makes it look like oil is expensive now (e.g. similar to late 1970s thru mid 1980s), c.f. http://www1.eere.energy.gov/vehiclesandfuels/facts/2012_fotw741.html
I suspect that prices now will look like a bargain in another 10 yrs.
while i disagree with the title and its related points, i agree with the point that supply will have a hard time meeting demand and that will sustain and increase prices over the long haul.
after hearing about US oil production on CNBC tonight I went back to check things.
i failed to notice the term "Total Oil Supply" vs "Crude Oil Production". The former "includes the production of crude oil (including lease condensate), natural gas plant liquids, and other liquids, and refinery processing gain"
the WSJ and the CNBC folk are correct for crude oil production. The US is 3rd at ~7.1 Mbbls/day. Saudi is 9.8 and Russia is 9.9 Mbbs/day.
So it looks like most of the difference between 11 Mbbls/day and 7 Mbbls/day is "condensate" and "natural gas liquids"
that wasnt a particularly well researched article. As of the most recent data I've seen (Feb 2013) the US is the world's largest producer of oil (11.7 Mbbls/day). Saudi Arabia was at 10.85 and Russia at 10.5.
http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=50&pid=53&aid=1&cid=&syid=2012&eyid=2013&freq=M&unit=TBPD
Russia's production was flat for 2012 and i've heard that there has been mass culling of oil-field workers which tells me that their 2013 production will be lower. Saudi Arabia's production is also decreasing.
The WSJ's graph shows 2012 US production under 10 Mbbl/day whereas the eia's data has monthly production well over 10. Eyeballing it says avg 2012 production was very close to 11 Mbbl/day.
As for regional gluts: i live in oklahoma and was in california 2 weeks ago. I was amazed to see that gasoline prices were identical between the 2 states. I wouldnt be surprised if prices were lower in the western and middle Great Lake states than either OK or CA. This is a result of the Bakken being nearly stranded with respect to pipelines and existing pipeline routing out of Canada. Hate to be cynical ;^) but i think this is part of obama's game plan.
As for Nigeria and Venezuela: aging oil fields are not their problem; rather domestic corruption and ineptitude combined with abundant supplies from elsewhere and crappy economies around the world.
The good one's will figure it out eventually. Hell, I might poach one myself for the one COP stole from me.
agreed. unfortunately, the same con-folk are slowing the process.
i didn't think the yahoo blurb you posted was that bad except for 2 pts: 1. the common mistake of mixing up the shale gas boom with greater domestic oil production 2. the speculation that 'alternative' energy sources would become a major electrical power supplier. Regarding the 1st point i'd bet the Bakken makes up most of the increase in US oil production (again, this is something DOE would have tabulated on their web site).
The WSJ has an op ed this weekend which addresses your most recent questions:
Jenkins: Why the Energy Mopes Are Wrong
America's fossil-fuel boom is not a curse upon the world
http://online.wsj.com/article/SB10001424127887324266904578460910324343072.html?mod=hp_opinion
America will be energy independent by 2020. Look out, world.
The first prediction comes from the Paris-based International Energy Agency and other prognosticators. The second comes from us.
At least that's how we interpret a flurry of warnings from foreign-policy experts and various op-eds about alleged downsides to America's energy boom (see the May cover story in the Atlantic). The method of these jeremiads is straightforward: Take the assumptions of U.S. energy rhetoric since the 1970s and turn them on their head.
Oil prices will collapse. Because of shale energy and other drilling breakthroughs, chaos will ensue in the Middle East and other unstable petro-regions. The U.S., no longer needing to secure its oil sources, will either withdraw from the world or—take your pick—feel free to throw its military weight around recklessly.
These alarms are as questionable as the inverted Carter-era premises on which they are based. First, energy prices are likely to carry on pretty much as before....
they point out that adjust to 2006 dollars, gasoline has stayed between $2 and $4/gallon since 1913.
fools and the naive like to gripe about the price of oil and oil company profits but they're griping about the wrong thing (Of course, con-folk like Carter, Pelosi, and Obama also like to gripe about oil company profits but no need to expand on that...). I'm confident that oil and toilet paper companies will continue to keep pace with inflation. Conversely, solar panel related companies are are over-crowding the grave yards in spite of the huge tax-payer subsidies thrown at them.
Gas and oil: when people see those words alone people don't seem to have a problem discerning a difference yet when the word shale is thrown in front of gas some folks start thinking about another oil source.
In the US most oil is consumed as transportation fuel (gasoline, diesel, jet A) while most natural gas is used in electrical power generation. I suspect fertilizer, urethane, and plastics production, and reforming for refining consume most of the remainder (DOE and other US agencies regularly produce reports detailing these things if you want to check). I suspect China would or has a similar pattern of consumption and consequently shale gas development could only affect their coal consumption. Since china's coal reserves aren't particularly large, a domestic gas resource would be important. How much it will affect their air pollution problem is a different matter. I suspect the best that could be hoped for is that the rate of growth in atmospheric particulate matter, NOx and SOx will slow (no diminishment) since I think they'll still need an enormous number of coal-fired plants.
Some shales do contain liquids but I'm guessing that of those that can be produced > 99% of the hydrocarbons are < C8 (generally called condensates or 'gas liquids' - terms which are sometimes inaccurate or ridiculous, respectively). Liquid transportation fuels contain mostly C8 and higher hydrocarbons.
I'd be wary of EIA estimates in general but as the article points out, having the resource doesn't guarantee supply. The part of the article attributed to the Washington Post is good. The part starting with the Bloomberg attribution is superficial crap - particularly the backhanded claim of groundwater pollution and methane release as problems which 'dog' US projects.
I'm very skeptical of china's ability to develop and produce their oil and gas resources in an efficient manner. I've heard stories of oil reservoirs ruined by typical 3rd world practices. I don't think their shale gas development will be any better.
http://www.bp.com/assets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2011/STAGING/local_assets/pdf/statistical_review_of_world_energy_full_report_2012.pdf
http://www.bp.com/sectiongenericarticle800.do?categoryId=9037157&contentId=7068604
http://www.eia.gov/countries/country-data.cfm?fips=CH#ng
http://www.theoildrum.com/node/9455
Note the comments about relative expense for developing resources. Ignore the gibberish about alternative energy and theories about consumptive strategies. tic-tac-toe involves more strategy.
You should also note the lack of growth in reserves/production and compare to growth in consumption.
I'm happy being in the oil and gas business. It has a marvelous future in spite of our current president.
Palin was commenting on US funding for science being done in France - not as the ever objective Madcow portrayed Palin's comment.
Peer-review for grant funding in the scientific fields I've been involved in is greatly flawed. The "I'll scratch your back and you scratch mine" happens frequently. I've had federal program managers tell me that decisions on programs to be cut have been made before program reviews for that purpose occurred. I've also listened to a couple of professors bragging about how much DOE money they were going to get for their new research institute even though the reviews hadn't been conducted because certain Californian politicians had assured them that the money would be forth-coming.
Of course, in principle peer-review is a great thing; however, as it is frequently practiced it is often corrupt. A PhD and an understanding of science does not assure ethical behavior.
On the 1st part: my point was that using a $/bbl oil benchmark doesn't make sense for most producers from shale. The price break is probably more closely related to the price of natural gas.
On the 2nd part. I think there are probably big salary disparities between CLB and some of the competitors trying to compete with CLB. At the moment things are a bit static and I think more folks are worried about keeping jobs than seeking out higher bidders. That will change when economies around the world get back in sync and oil demand increases.
The job situation in the oil patch is not like 2007. It's not like 2009 either but I suspect more people are worried than greedy.
Knowing what I know now; I suspect clb has a cost advantage on some of their services that will be hard to beat. However, I suspect that as more of their employees figure out they can make more elsewhere, those cost advantages will decrease but we'll need higher oil prices before that becomes a big problem.
I disagree with the comment about shale oil not making money below $91. But then for a lot of shale oil producers, benchmarking against WTI is wrong. The term oil is used a bit fast and loose. Condensate is the term generally used but I also doubt that term is accurate in most cases. The 'oil' is frequently composed of <C8 hydrocarbons so a good chunk of it doesn't go to gasoline which is where the money is (although if really desperate, some of these 'oils' could be pumped straight into your car and it would run. Maybe not smoothly but that's a different matter)
While the part about diversification is true, that is no help at the moment because their position in NAM is weaker than HAL.
I dont think any of the major service companies will regain pricing power anytime soon
I'll say it again: technology and geology are not necessarily the barriers to shale gas development. And even when technology and politics favorably coincide, the geology is not quite as favorable as some folks are led to believe.
It's a country where a large part of the population is afraid that consumption of gm crops may cause human mutations. They aren't that advanced.
And Clovis has licensed 1 or 2 drugs from Clavis. Guilt by association and similarity in name is scary enough for me
Care to speculate on effect on CLVS?
Exactly how many years is in a that?
Yanyt-poc
Petrobras does indeed have huge problems but they exist by design: it's set up as a wealth transfer device rather than a US style corporation. The writer briefly touches upon the disease with his note about state mandated ship building yet he mysteriously or incompetently is oblivious to the fact that similar sorts of mandates on Petrobras effectively cripple the company. The writer also does the usual apple-orange comparison when trying to juxtapose gasoline imports and oil production. Apparently, he never heard of Mexico.
Journalism is brain dead
ij,
fertilizer is just stuff that completes the mass balance. You're not thinking of C, O, and H as fertilizer just because it's effectively free. There's lots of N that would be effectively free but people are impatient and prissy so they're happy to pay nominal amounts for some more pleasant and manageable form of ammonium/amine.
Things like sulfur and magnesium that are consumed by plants in large quantities are readily/cheaply available from so many sources that i'd ignore any fertilizer supplier whose income relied on supplying those components (i.e. potash suppliers). Today's oil refiner could be tomorrow's fertilizer supplier and they'll do it just to get rid of waste.
And that brings up another point: with the exception of phosphorus, a lot of what is waste in other processes is fertilizer. The top example being poop. Phosphate is the only fertilizer material which is not conveniently available in a concentrated form from a large number of sources.
i'd quibble a little bit with Roy's use of 'efficiency'. Ag biotechs have produced plants that produce a higher ratio of fruit/(non-fruit plant parts) and those plants grow in higher density (plants/acre). The reason for my quibble is that i suspect a higher mass fraction of materials that must be replaced as 'fertilizer' are removed in the fruit. However, since most of that 'lost' mass is cheaply replaced his point is valid.
slight correction on your legumes comment: the nitrogen fixers are usually symbiotic bacteria that grow amongst the plant roots. maybe the next area for ag biotechs will be to modify symbiotic bacteria to more rapidly cycle inorganic materials to their biologically useful forms.
charlie
Remember most of the plant is not the fruit and most of both is carbon, oxygen, and hydrogen which are as readily available as N2. Phosphorus and magnesium are highly utilized and aren't so readily available so they must be replaced. Same for sulfur, but maybe to a lesser extent. The only other things necessary are micronutrients (iron, Mo, etc.) but they are consumed in minuscule quantities. Most of the P, Mg, S, micronutrients , as well as a lot of C, H, O, and N, get recycled in the non-fruit parts (leaves, stems, roots).
Regarding the 2nd link: 2015 target won't happen. The article is is so vague as to be worthless. What's a "fracturing equipment unit"?
I know of a former professor in china who bought 3 houses as investments but also to house his 3 mistresses. His wife was in the US. Of course, a professor's salary doesn't quite cover 5 homes (1 for himself and 1 in the US), 4 women, a kid and himself so he "borrowed" money from his research grants. Didn't take long for things to devolve and he's in a Chinese prison now but I wouldn't be surprised if similar "flipping" schemes with misbegotten funds are common - though probably less colorful.
Typical NYT. Very Obama-like in their failure to state time frames and conflating responsibilities and problems of different entities. Shell or Noble didn't create the storm that damaged the ships and my memory of the event was that the efforts to save the drill ship and avoid environmental problems was on the heroic level.
The NYT article exemplifies Shell's statement regarding social sensitivities.
Maybe the times should spend more time harping on the contributions of union and political corruption to the prolonged and repeated utilities failures every time a decent sized storm hits the northeast.
Fwiw: the Pearl facility was a much more technically difficult beast to build than anything they'll have to do in GA. The FTA thing will be inconsequential.
PKI also manufactures X-ray diffraction machines (I'm assuming this is still the case)
geniuses like Ed Markey don't need no studies 'cause they know better.
taking the liberty to pass on what my father, who is a lawyer, told me a couple weeks ago:
Any company that makes ethylene based plastics and any company which produces or consumes ammonia in production of other chemicals.
It's probably a shorter list if you asked which chemicals companies do not benefit from low natural gas proces
Yes, yes and I agree
I only own one o&g producer but i won't be buying any now 'cause I think the economy is going to tank and oil prices will drop or, at best, be flat.
Historically, most South American governments have not provided very useful investment environments; that includes brazil. So I'm unlikely to invest in any South American companies or any company which is highly leveraged on s American assets. However, I think the Ecuadorean stuff will be inconsequential to cvx even if Argentina does something nutty.