Deer Run,(re JDZ gas)
1) -I apologize for being completely tied up in non-ERHE affairs and unable to respond earlier as promised. I have just skimmed the last ~250 posts since my last remark and find it simply impossible to respond to many remarks that have an angle on the gas/oil/sp questions you pose...or to related matters (like the importance of natural gas in the markets).
I did respond (just below to Knownski) on the question of the FLNG floaters, which was also a central issue in a number of posts directed my way on Thursday/Friday. I really wish people would look at that pdf. It throws alot of light and clarity on some of the confusion.
The last remark should be seen as an arrogant statement on my part. I am not a Mr. Know-it-all. But I did have occasion to learn alot on a FLNG project (temporarily frozen due to the financial credit-crunch last year) in a close by Nigerian block - OML122-, with proven gas reserves in excess of 800 Bcf, and probable in excess of 1.5Tcf.....and only ~12Mmbls/oil.
And then there are new issues which this very fecundate bulletin board seems so adept at throwing up (current debate is about our EEZ affairs) on which I want to jump in with what I know or think.
2) - So with that rather long intro out of the way, and bearing especially in mind Homeport (post #190281) reporting JDZ boss speaking today of "indications of hydrocarbons, concretely gas," (concretely meaning specifically, namely, definitely, mostly...???).....here goes:
a) - First, the impact on the sp on finding (commercial)gas rather than (commercial) oil
That is our core concern as investors. We have been weaned for far too long (certainly by the Addax figures) in expectation of finding oil. Large quantities indeed of oil. So if these expectations are unmet, it is natural for people to become disappointed. And that will probably mean a tumbling shareprice.
[Incidentally (as pointed out recently by another poster, Art I think), I find it spurious that while Addax was talking out loud of multi million barrel oil prospects (and just whispering the gas possibility)for the "hoi polloi", in closed door scientific seminars it was speaking primarily in terms of condensate oil or gas, akin to the AKPO finds].
That tumble is what I am keen to see mitigated. And that is why I have been harping on this gas thing for months. First as a remote potential(it would not be a complete disaster if such were to be found, I used to say)..... more recently as the very real - concrete - possibility.
I am not peddling this gas related option because I favour it over gas, or as i have been repeatedly accused, because I am a stock basher. I do not and am not. A large oil find is of course more commercially appealing at this point in time than any large gas find, unless the latter find is huge.
I think we are in the huge category. At least those are the numbers I had for Kina and Lemba and which I alluded to in my iconoclastic posts to this BB. But I also have learned of late, that they have been recently reduced a bit. But they still appear to remain large and hence commercially appealingly.
And that is what matters. Commercial. I do not care what the drill bits have brought up, oil, gas, rich gas, condesnate oil fluid or merimaids. As long as they prove commercial.....and the (both stand-alone and linked) volumes that I know of at Lemba and Kina (and my so attuned gut, as I told you last time, feels is the case with Malanza, hopefully Oki East as well)so speak.
Alot better than dry wells, I can tell you.
Now, if some fellas with their head in the clouds really believed that we were after elephantine finds on each of our blocks, well too bad. They should have listened to some of their more conservative peers. Instead of some super-arrogant dismissals.
Those of us in the "little league" oil group are not, I believe, really too pissed off. And besides this league always placed its hopes on finding stuff on both sides of the JDZ/EEZ fence.....expecting full well a gas component on the EEZ side.
[Maybe a long lasting influence of Meridian ....remember him??? when he wrote;
STP/EEZ is technically challenging. At this stage, I personally do not know if that area is going to be worthwhile pursuing. It is very deep, if you find anything, it will most likely be gas. But with Syntroleum's floating gas-to-liquids unit, a gas find may be valuable/commercial.||| Ihub/#28756 7/March/2006
So put it all together. Discoveries, not dry well, plenty of gas, very possible more to be found in our other JDZ prospects as well as in the EEZ.
By itself, yes the SP would head south just on a gas bearing snapshot capturing what I think is the case from this first round of drilling. But the full picture (as just outlined in the immediately above paragraph), if you bring it into sharper focus, is richer and denser. And that spells out a different valuation.
.....Now, if you add in the Marginal Field dressing, why in the world would anyone but a moron, think we are on to a dead cat investment.
b) The value of natural gas (or LNG)
The opinion which you share with others on this board, that gas is an over-abundant and low-priced commodity, is widespread with most Americans (and American market focused analysts). But hardly anyone else. Here's why;
Some years ago, the US gas market was receiving warning signs that the era of super-abundance was coming to an end, as domestic supplies were dwindling and imports from Canada (the main source)were facing decline for similar domestic reasons. Hence prices began a long upward trend...which is still on-going despite some periodic fall backs due principally (but not totally) to short term factors (weather).
The other factor somewhat affecting prices, is the increasing number of major gas field finds in the GoM, as well as some recent onshore discoveries.....mainly, the super-super giant Haynesville Shale gas field in northwest Louisiana, slated to become the world's largest producing field with a~1.5 quadrillion cubic feet estimate.
These new gas reserves when they come to market, will underpin stability of supply for some time. And it is that which is affecting sentiment and prices.
North Americans live in a blessed land, fully developed and yet still with so many resources in their own back yard. Hence the insulation from the world's troubles they feel, in natural gas, as in so any other things.
Others however,do not have the luxury of living in such a cocoon. And the case of natural gas resources is telling:
Indeed,let me open up a window to this world.
Leaving South America and its very recent rich finds offshore Brazil (most of it to end up in that market), the situation is unsettling to say the least.
Europe, with its 450m internal market has no security of gas supply whatsover. North Sea gas is way past its peak production and output is declining fast. The large Shtokman fields in the far north Barents Sea remain undeveloped due to Russian-Norweigian shelf disputes, while the traditional Libyan and Algerian supplies will eventually start to run out in about five years. Dependency on Russia, which because of its transit route snarls with Ukraine, has left most of Eastern Europe to freeze for two successive winters is growing at an alarming rate.
A Russian vice grip being forced on the European mainland from the north and from the south in the form of two major gas pipeline projects, Nord Stream and South Stream, that will by 2015 or so and see the EU dependent on Russia supplying almost 40% of its (ever-increasing) gas demands.
In an attempt to break this vulnerability, the EU is (with American backing) pushing states to adopt a rival, and directly competing with Southstream, massive European led gas pipeline consortium named Nabucco, that wants to import gas resources from Azerbaijan (for now) and eventually (it was hoped) from Turkmenistan and ultimately, from a post-sanctions Iran.
It is also deeply supportive (and that means committement when the time comes of big euro funding) of the TSGP to bring Nigerian gas accross the Sahara to the shores of the Mediterranean and onwards to the continental mainland.....(a project Gazprom is fighting tooth and nail to get major control of, recently comitting $2.5B for early infrstructure and some gas feed in Northern Nigeria).
And finally, there is a plethora of exploration projects within Europe itself, all looking for gas types...from the Po Valley outside of Bologna,to just outside of Versailles in France,from the Rhine valley in Germany to the over-exhausted oil fields of Romania the Hungarian plains and Slovenia, from the south east of Poland (where Chevron has just been awarded gas exploration rights)....all the way to up the Alps to Switzerland (in the canton of Vaud). And these are just a selection.
But all of these are still simply not enough, as projections of future demand keep escalating...especially with natural gas being a cleaner fuel and thus more eco-freindly to ever greening European populations and industries.
Moreover, it is not only a question of deepening European dependency on Russia.It is a supply security as well. Gazprom's heads have repeatedly warned the Kremlin that growing Russian demands mean that, by around 2015/20, the country will be unable to both cater to its domestic needs and meet foreign supply obligations as well. They asked for smaller foreign committments. And they were immediately repelled by the Kremlin, which however failed to answer EU concerns of what happens when the giant gas fields of Yamal Peninsula (which supply Europe) begin to peak.
On the other side of the Urals, China and the pacific states, are increasing their demands for Russian hydrocarbons. China (after years of Russian straddeling) is primarily funding the world's largest oil pipeline, the ESPO (East Siberia Pacific Ocean) to bring Russian oil from east Siberia into the Chinese fold, while also guaranteeing the feed from anything Gazprom can deliver from this vast undeveloped and forbidding Russian hinterland.
Meanwhile the Chinese are pursuing their relentless push of grabbing anything in sight...be it oil or gas. They have almost completed the West-East oil line from Kazakhstan to their borders. And having beat the Europeans in the bidding and wooing they are now about to take over the most prospective gas fields in gas-rich Turkmenistan via a 1800 km Turkmenistan-China pipeline also that stretches through Uzbekistan and Kazakhstan (parallel to the oil pipeline) into western China's Xinjiang province. Lines that will transit Central Asia energy markets....and remain outside Russian control.
I won't even trouble you with the sustained deepwater search around the seas surrounding China, or the bitter dispute with Japan over gas rights in the Sea of Japan. And if all this was not enought, they are scouring what's left in the world for more.
.....and then there is that other awakening giant, India....
Need I go on. Natural gas is a scarce and precious commodity. The trillions of dollars and euros being spent on trying to access it says so.
Never mind that statistically it appears abundant in North America, used to thinking that long term ends in the next two quarters. Or is registered on the books in Turkmenistan, in Qatar in Oman or Iran. It cannot be accessed without major resources and skills being applied to overcome so many natural and man made barriers to it. And there is just so much of the latter that can be used up. No more.
It clearly is just not enough. And all this perplexing,ever changing and complex global reality is what will be registered when the JDZ is declared a major deepwater gas province.
Registered on our shareprice......sooner or later.
spp119
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