April Comex Gold futures are trading higher after posting a wicked two-sided trade on Wednesday in reaction to the Federal Open Market Committee’s interest rate
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Mining, Drilling and Discovery
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April Comex Gold futures are trading higher after posting a wicked two-sided trade on Wednesday in reaction to the Federal Open Market Committee’s interest rate
"April Comex Gold futures are trading higher after posting a wicked two-sided trade on Wednesday in reaction to the Federal Open Market Committee’s interest rate decision, monetary policy statement and “dot plot” estimates."
A empresa aponta a actual situação económica e financeira como um dos factores da dificuldade de comunicação de pagamento aos fornecedores internacionais.
"A petrolífera estatal Sonangol esclarece que a escassez de combustível que se verificou nos diferentes postos de abastecimento na semana passada foi motivada por atrasos na descarga do produto nos portos do país."
Spanish oil firm Repsol SA has announced the largest onshore oil discovery in the U.S. in three decades, a 1.2 billion barrel find on Alaska’s North Slope. Repsol has been actively exploring in Alaska since 2008 and finally hit a big one. The find came after drilling two wells with its partner, Armstrong Oil & Gas.
"Spanish oil firm Repsol SA has announced the largest onshore oil discovery in the U.S. in three decades, a 1.2 billion barrel find on Alaska’s North Slope."
The Chamber of Minerals and Energy of WA has welcomed Labor's win as positive for the mining industry.
" The Chamber of Minerals and Energy of Western Australia has welcomed Labor's election win after a nasty campaign in which Premier Colin Barnett took on the mining industry for its personal attacks on Nationals Leader Brendon Grylls. "
Some 1.2 billion barrels of oil have been discovered in Alaska, marking the biggest onshore discovery in the U.S. in three decades. The massive find of conventional oil on state land could bring relief to budget pains in Alaska brought on by slumping production in the state and th
" Spanish oil giant Repsol and its privately-held U.S. partner Armstrong Energy announced the find on Thursday, predicting production could begin as soon as 2021 and lead to as much as 120,000 barrels of output per day."
The huge global oversupply may be clearing as commodity trading giant Vitol Group offers to ship 4 million barrels of Nigerian crude to Europe
"In a sign that the huge global oversupply may be starting to clear, commodity trading giant Vitol Group is offering to ship to Europe 4 million barrels of Nigerian crude oil that it has been stashing away in storage, Bloomberg reports, quoting five traders familiar with the move."
*Sasol sees oil production from Mozambique well in 2-3 years* Mozambique still seen mainly as a gas play By Ed Stoddard JOHANNESBURG, Feb 27-.
"Mozambique still seen mainly as a gas play (Recasts with oil production, hedging)"
A Maltese company purchased US$11.8 million oin tanker from the Chinese sales website Taobao, the Chinese version of eBay or Alibaba
"Online marketplaces are just for buying and selling the everyday consumer goods anymore—think bigger: The Chinese government has just auctioned off a nearly US$12-million oil tanker on Taobao, its version of eBay or Alibaba."
In an effort to resume partial production as an industry-wide strike carries on, the Gabonese government sent the military to recapture oilfield control centers
"The Gabonese government sent the military to recapture oilfield control centers from protestors on Friday in an effort to resume partial production as an industry-wide workers’ strike carries on."
|Scooped by Yididiya Mulatu|
"We'll take one prepackaged bankruptcy to go." That was the upshot of an announcement yesterday from oilfield services company Seventy Seven Energy (SSE)--the
'In January SSE was threatened by the New York Stock Exchange with de-listing its stock (see Seventy Seven Energy’s Stock Threatened with Delisting from NYSE). One of SSE’s ongoing problems is that Chesapeake Energy, itself not in all-that-great-a-shape, provides nearly three-fourths (70%) of SSE’s revenue.'
OPEC has been the most talked about international organization among investors, analysts and international political lobbies in the last few months.
When OPEC speaks, the world listens in rapt attention as it accounts for nearly 40 % of the world's total crude output. With its headquarters in Vienna, Austria, one of the mandates of 12- member OPEC is to "ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry." (Source: opec.org).
However, OPEC has been in the line of fire from the western world in light of its stance of not reducing the production levels of its member nations (excluding Iran). Most view this as a strategy to squeeze the American shale production and other non OPEC nations.
All is not well for OPEC
Simply put, the world has too much oil at the moment which has resulted in the reduction of price levels from approximately $100 to $50 a barrel, and OPEC (as well as US shale producers) has a major role to play in this supply glut. With the decline of average annual crude prices, OPEC earned around $730 billion in net oil export revenues in 2014 (Source: EIA), a big decline of 11% from its previous year. The EIA even predicts that OPEC's net oil exports (excluding Iran) could fall to as low as $380 billion in 2015.
With the huge reduction in its revenues and growing discomfort among its members such as Venezuela, Libya and Nigeria over its current production levels, is OPEC really getting weaker?
Image Source: EIA
Image URL: https://oilprice.com/images/tinymce/Evan1/ada2290.png
Iran Nuclear Deal: A warning sign for OPEC?
With announcement of a historic nuclear deal framework between Iran and six global powers: America, France, Britain, China, Russia and Germany on April2, 2015, there is a good possibility that Iranian crude oil exports will increase greatly after June 2015 when the final nuclear deal is signed. Iran is all set to pump close to 300 million barrels of crude into the market, thereby kick starting another potential decline in oil prices.
This might be one of the most crucial junctures for OPEC and it has to consider the possibility of reducing its current production quotas, mostly due to its internal issues of which the cartel has many.
Containing some of the largest proven oil and gas reserves in the world, Venezuela is one of the founding members of OPEC. However, the country is reeling under a major economic recession since 2014 with an inflation rate of 68.5% (as on December 2014).
Cheap oil has created a huge financial crisis for Venezuela as its economy is heavily dependent on oil exports and oil revenues constitute about 95% of its total foreign exchange earnings. As per its state run oil company PDVSA, the country loses about $700 million a year with every $1 drop in the international oil price.
Image URL: https://oilprice.com/images/tinymce/Evan1/ada2291.png
For a nation that is suffering from shortage of basic requirements such as food and toilet paper, any further reduction in oil prices would result in a total economic collapse. Therefore, it would be in Venezuela's interests to reduce its production levels especially after the Iran nuclear deal.
Nigeria is Africa's largest oil producer and among the top 5 global exporters of LNG. An OPEC member since 1971, Nigeria's oil and gas sector represents about 75% of its total government revenues and 95% of its total export revenues. The African nation's economy is heavily dependent on crude oil prices as its foreign exchange reserves (built as a result of net positive oil revenues) have reduced substantially over the past two years.
Image URL: https://oilprice.com/images/tinymce/Evan1/ada2292.png
Much like Venezuela, Nigeria needs international crude prices to be in the range of $90- $100 a barrel which is not possible unless OPEC reduces its supply.
After Saudi Arabia, Iraq is the biggest crude oil producer in OPEC. It also has the fifth largest proven crude oil reserves in the world. With an increase in its government budget spending, the country requires a stable international oil price of $105 per barrel to achieve its break-even point. The current oil price levels are nowhere near this. Apart from this, issues such as the ongoing ISIS insurgency, western sanctions, heavy economic dependency on oil (more than 90%) and poor infrastructure have added to Iraq's woes.
The OPEC ‘heavyweights'
Apart from being the largest exporter of the total petroleum liquids in the world, Saudi Arabia is also the main driving force behind the cartel's stubborn supply policy. The Saudis, along with Kuwait and UAE have been defending the decision of not reducing the OPEC production levels in order to retain their global market share. It is interesting to note that even if the oil price remains at the current levels, Saudi Arabia, Kuwait and UAE would have enough cash reserves to remain in the game for several years.
In short, these OPEC heavyweights have little to worry about from the current low oil prices for the time being.
United we stand, divided we fall.
In December 2014, the Energy Information Administration warned OPEC to reduce their production levels. According to the EIA, these cuts would be helpful for OPEC members such as Venezuela, Nigeria, Iraq and Iran as reduced OPEC supply and the corresponding increase in oil price would safeguard their uncertain future economic growth.
Leaving the heavyweights to one side; it is quite evident that OPEC, as a group, has become somewhat weakened. Apart from its falling export revenues and the growth of non OPEC producers, especially US shale production, OPEC now stands divided into two factions. One faction that is being led by Saudi Arabia wants to maintain and even increase its production levels while the other faction consisting of Venezuela, Nigeria, Iran, Iraq and Algeria requires just the opposite for safeguarding their national interests. In fact, the latter requires crude prices to be as high as $100 per barrel in order to balance their falling budgets (Source: IMF).
Last year, Saudi Arabia's oil minister Ali Al Naimi said "It is not in the interest of OPEC producers to cut their productions, whatever the price is."
A number of mitigating factors make this year's June meeting of OPEC more interesting than ever.
By Gaurav Agnihotri for Oilprice.com
'...Leaving the heavyweights to one side; it is quite evident that OPEC, as a group, has become somewhat weakened. Apart from its falling export revenues and the growth of non OPEC producers, especially US shale production, OPEC now stands divided into two factions. One faction that is being led by Saudi Arabia wants to maintain and even increase its production levels while the other faction consisting of Venezuela, Nigeria, Iran, Iraq and Algeria requires just the opposite for safeguarding their national interests. In fact, the latter requires crude prices to be as high as $100 per barrel in order to balance their falling budgets (Source: IMF). ...'
What are the top oil producing countries in Africa? Oil is one of the most powerful tools of trade in the world.
A strong earnings report from Transocean (RIG) has everyone understandably wondering: Is it finally time to buy the offshore drillers? I have been exceedingly cautious about offshore and particularly the Deepwater offshore opportunity that RIG delivers, yet share prices are starting to reach such low levels that there is a case to be made for ‘bond-like’ buying of Transocean shares here. Let’s look at both sides of the offshore case again, now that offshore names are seeing their 52-week lows.
It was before the shale oil craze, all the way back in 2007, that Transocean was the world beater in energy – with a near monopoly in Deepwater rigs to lease and with oil soaring towards $150 a barrel, the company couldn’t build or lease out its specialized fleet fast enough. But with the increased production of shale oil that began in the Bakken, which in 2011 translated even more deeply into Eagle Ford finally the Permian basin production, interest in new deep-water projects was practically abandoned. The economics are simple: Oil from shale can cost less than $50 a barrel to retrieve, sometimes even going as low as $30 a barrel – but drilling a well four miles down, seven miles off the coast of Texas or Louisiana is going to run nearly 50% more, with a higher and more costly failure rate, should the project fizzle.
And there, as simply as I can represent it, lies the difficulty that offshore firms found themselves. Having issued massive paper in building, upgrading and maintaining super sophisticated offshore fleets, the premium for the use of those rigs – the day rates – began to swoon.
And have continued to, for the past 2 years. Bonds of RIG and other offshore drillers, barely above junk, and dividends that, having been promised, were difficult to cut (RIG did that disastrously once), put super pressure on shares, despite a stock market that has soared.
Now let’s look at the bright side: One thing that we can be sure of is that offshore is not in a permanent swoon. The opportunities and reserve estimates of some of the offshore assets in the Gulf of Mexico, off the coast of Brazil and Mozambique, in Vietnam, Mexico and Indonesia – these are bankable assets that the oil world will have to return to, when the economics are again right as they were 4 years ago.
But is it happening now? Recent results from Transocean, blowing out estimated earnings have some indication that some of these negative trends are bottoming. Some day rates have been reported to be increasing, including one expensive lease from Total (TOT), more convinced than most that the bottom is near if not already past. But earnings good news this quarter from RIG is more of a smoke and mirror game of cutting costs and unlocking value through their recent MLP offering Transocean partners (RIGP) than a full turnaround. Their risks remain the unwind of long term leases and what new leases will be available and at what rates they will command – if they lease out at all. This remains the overhang I do not see changing so quickly, at least today.
However. (Taking big breath)
Transocean is in reasonable enough shape for me to proclaim their 6.6% dividend safe. . No one can catch a falling knife and I can’t do that here, but I have stayed away so long from the sector that I must imagine the worst losses on this sector are most definitely in. Where can RIG go to? $32? $30? It’s trading decisively under $40 a share now.
Finally, when I turned negative on offshore I was very much alone – now virtually every analyst is also negative offshore drillers. That’s always a decent sign to me that it’s time to perhaps adjust my view. My trader’s motto: Everyone can’t be right at once.
Bottom line: With a longer term outlook, I think you can start to buy Transocean shares here – and start looking at some others as well; (Seadrill (SDRL), Diamond Offshore (DO) and Ensco (ESV)). I take off my hex on RIG shares here at $38. Finally.
Source : oilprice.com
How much faith can we put in our ability to decipher all the numbers out there telling us the US is closing in on its cornering of the global oil market? There's another side to the story of the relentless US shale boom, one that says that some of the numbers are misunderstood, while others are simply preposterous. The truth of the matter is that the industry has to make such a big deal out of shale because it's all that's left. There are some good things happening behind the fairy tale numbers, though—it's just a matter of deciphering them from a sober perspective.
In a second exclusive interview with James Stafford of Oilprice.com, energy expert Arthur Berman discusses:
Arthur is a geological consultant with thirty-four years of experience in petroleum exploration and production. He is currently consulting for several E&P companies and capital groups in the energy sector. He frequently gives keynote addresses for investment conferences and is interviewed about energy topics on television, radio, and national print and web publications including CNBC, CNN, Platt's Energy Week, BNN, Bloomberg, Platt's, Financial Times, and New York Times. You can find out more about Arthur by visiting his website: http://petroleumtruthreport.blogspot.com
Oilprice.com: Almost on a daily basis we have figures thrown at us to demonstrate how the shale boom is only getting started. Mostly recently, there are statements to the effect that Texas shale formations will produce up to one-third of the global oil supply over the next 10 years. Is there another story behind these figures?
Arthur Berman: First, we have to distinguish between shale gas and liquids plays. On the gas side, all shale gas plays except the Marcellus are in decline or flat. The growth of US supply rests solely on the Marcellus and it is unlikely that its growth can continue at present rates. On the oil side, the Bakken has a considerable commercial area that is perhaps only one-third developed so we see Bakken production continuing for several years before peaking. The Eagle Ford also has significant commercial area but is showing signs that production may be flattening. Nevertheless, we see 5 or so more years of continuing Eagle Ford production activity before peaking. The EIA has is about right for the liquids plays--slower increases until later in the decade, and then decline.
The idea that Texas shales will produce one-third of global oil supply is preposterous. The Eagle Ford and the Bakken comprise 80% of all the US liquids growth. The Permian basin has notable oil reserves left but mostly from very small accumulations and low-rate wells. EOG CEO Bill Thomas said the same thing about 10 days ago on EOG's earnings call. There have been some truly outrageous claims made by some executives about the Permian basin in recent months that I suspect have their general counsels looking for a defibrillator.
Recently, the CEO of a major oil company told The Houston Chronicle that the shale revolution is only in the "first inning of a nine-inning game”. I guess he must have lost track of the score while waiting in line for hot dogs because production growth in U.S. shale gas plays excluding the Marcellus is approaching zero; growth in the Bakken and Eagle Ford has fallen from 33% in mid-2011 to 7% in late 2013.
Oil companies have to make a big deal about shale plays because that is all that is left in the world. Let's face it: these are truly awful reservoir rocks and that is why we waited until all more attractive opportunities were exhausted before developing them. It is completely unreasonable to expect better performance from bad reservoirs than from better reservoirs.
The majors have shown that they cannot replace reserves. They talk about return on capital employed (ROCE) these days instead of reserve replacement and production growth because there is nothing to talk about there. Shale plays are part of the ROCE story--shale wells can be drilled and brought on production fairly quickly and this masks or smoothes out the non-productive capital languishing in big projects around the world like Kashagan and Gorgon, which are going sideways whilst eating up billions of dollars.
None of this is meant to be negative. I'm all for shale plays but let's be honest about things, after all! Production from shale is not a revolution; it's a retirement party.
OP: Is the shale “boom” sustainable?
Arthur Berman: The shale gas boom is not sustainable except at higher gas prices in the US. There is lots of gas--just not that much that is commercial at current prices. Analysts that say there are trillions of cubic feet of commercial gas at $4 need their cost assumptions audited. If they are not counting overhead (G&A) and many operating costs, then of course things look good. If Walmart were evaluated solely on the difference between wholesale and retail prices, they would look fantastic. But they need stores, employees, gas and electricity, advertising and distribution. So do gas producers. I don't know where these guys get their reserves either, but that needs to be audited as well.
There was a report recently that said large areas of the Barnett Shale are commercial at $4 gas prices and that the play will continue to produce lots of gas for decades. Some people get so intrigued with how much gas has been produced and could be in the future, that they don't seem to understand that this is a business. A business must be commercial to be successful over the long term, although many public companies in the US seem to challenge that concept.
Investors have tolerated a lot of cheerleading about shale gas over the years, but I don't think this is going to last. Investors are starting to ask questions, such as: Where are the earnings and the free cash flow. Shale companies are spending a lot more than they are earning, and that has not changed. They are claiming all sorts of efficiency gains on the drilling side that has distracted inquiring investors for awhile. I was looking through some investor presentations from 2007 and 2008 and the same companies were making the same efficiency claims then as they are now. The problem is that these impressive gains never show up in the balance sheets, so I guess they must not be very important after all.
The reason that the shale gas boom is not sustainable at current prices is that shale gas is not the whole story. Conventional gas accounts for almost 60% of US gas and it is declining at about 20% per year and no one is drilling more wells in these plays. The unconventional gas plays decline at more than 30% each year. Taken together, the US needs to replace 19 billion cubic feet per day each year to maintain production at flat levels. That's almost four Barnett shale plays at full production each year! So you can see how hard it will be to sustain gas production. Then there are all the efforts to use it up faster--natural gas vehicles, exports to Mexico, LNG exports, closing coal and nuclear plants--so it only gets harder.
This winter, things have begun to unravel. Comparative gas storage inventories are near their 2003 low. Sure, weather is the main factor but that's always the case. The simple truth is that supply has not been able to adequately meet winter demand this year, period. Say what you will about why but it's a fact that is inconsistent with the fairy tales we continue to hear about cheap, abundant gas forever.
I sat across the table from industry experts just a year ago or so who were adamant that natural gas prices would never get above $4 again. Prices have been above $4 for almost three months. Maybe "never" has a different meaning for those people that doesn't include when they are wrong.
OP: Do you foresee any new technology on the shelf in the next 10-20 years that would shape another boom, whether it be fossil fuels or renewables?
Arthur Berman: I get asked about new technology that could make things different all the time. I'm a technology enthusiast but I see the big breakthroughs in new industries, not old extractive businesses like oil and gas. Technology has made many things possible in my lifetime including shale and deep-water production, but it hasn't made these things cheaper.
That's my whole point about shale plays--they're expensive and need high oil and gas prices to work. We've got the high prices for oil and the oil plays are fine; we don't have high prices for the gas plays and they aren't working. There are some areas of the Marcellus that actually work at $4 gas price and that's great, but it really takes $6 gas prices before things open up even there.
OP: In Europe, where do you see the most potential for shale gas exploitation, with Ukraine engulfed in political chaos, companies withdrawing from Poland, and a flurry of shale activity in the UK?
Arthur Berman: Shale plays will eventually spread to Europe but it will take a longer time than it did in North America. The biggest reason is the lack of private mineral ownership in most of Europe so there is no incentive for local people to get on board. In fact, there are only the negative factors of industrial development for them to look forward to with no pay check. It's also a lot more expensive to drill and produce gas in Europe.
There are a few promising shale plays on the international horizon: the Bazherov in Russia, the Vaca Muerte in Argentina and the Duvernay in Canada look best to me because they are liquid-prone and in countries where acceptable fiscal terms and necessary infrastructure are feasible. At the same time, we have learned that not all plays work even though they look good on paper, and that the potentially commercial areas are always quite small compared to the total resource. Also, we know that these plays do not last forever and that once the drilling treadmill starts, it never ends. Because of high decline rates, new wells must constantly be drilled to maintain production. Shale plays will last years, not decades.
Recent developments in Poland demonstrate some of the problems with international shale plays. Everyone got excited a few years ago because resource estimates were enormous. Later, these estimates were cut but many companies moved forward and wells have been drilled. Most international companies have abandoned the project including ExxonMobil, ENI, Marathon and Talisman. Some players exited because they don't think that the geology is right but the government has created many regulatory obstacles that have caused a lack of confidence in the fiscal environment in Poland.
The UK could really use the gas from the Bowland Shale and, while it's not a huge play, there is enough there to make a difference. I expect there will be plenty of opposition because people in the UK are very sensitive about the environment and there is just no way to hide the fact that shale development has a big footprint despite pad drilling and industry efforts to make it less invasive.
Let me say a few things about resource estimates while we are on the subject. The public and politicians do not understand the difference between resources and reserves. The only think that they have in common is that they both begin with “res.” Reserves are a tiny subset of resources that can be produced commercially. Both are always wrong but resource estimates can be hugely misleading because they are guesses and have nothing to do with economics.
Someone recently sent me a new report by the CSIS that said U.S. shale gas resource estimates are too conservative and are much larger than previously believed. I wrote him back that I think that resource estimates for U.S. shale gas plays are irrelevant because now we have robust production data to work with. Most of those enormous resources are in plays that we already know are not going to be economic. Resource estimates have become part of the shale gas cheerleading squad's standard tricks to drum up enthusiasm for plays that clearly don't work except at higher gas prices. It's really unfortunate when supposedly objective policy organizations and research groups get in on the hype in order to attract funding for their work.
OP: The ban on most US crude exports in place since the Arab oil embargo of 1973 is now being challenged by lobbyists, with media opining that this could be the biggest energy debate of the year in the US. How do you foresee this debate shaping up by the end of this year?
Arthur Berman: The debate over oil and gas exports will be silly.
I do not favor regulation of either oil or gas exports from the US. On the other hand, I think that a little discipline by the E&P companies might be in order so they don't have to beg the American people to bail them out of the over-production mess that they have created knowingly for themselves. Any business that over-produces whatever it makes has to live with lower prices. Why should oil and gas producers get a pass from the free-market laws of supply and demand?
I expect that by the time all the construction is completed to allow gas export, the domestic price will be high enough not to bother. It amazes me that the geniuses behind gas export assume that the business conditions that resulted in a price benefit overseas will remain static until they finish building export facilities, and that the competition will simply stand by when the awesome Americans bring gas to their markets. Just last week, Ken Medlock described how some schemes to send gas to Asia may find that there will be a lot of price competition in the future because a lot of gas has been discovered elsewhere in the world.
The US acts like we are some kind of natural gas superstar because of shale gas. Has anyone looked at how the US stacks up next to Russia, Iran and Qatar for natural gas reserves?
Whatever outcome results from the debate over petroleum exports, it will result in higher prices for American consumers. There are experts who argue that it won't increase prices much and that the economic benefits will outweigh higher costs. That may be but I doubt that anyone knows for sure. Everyone agrees that oil and gas will cost more if we allow exports.
OP: Is the US indeed close to hitting the “crude wall”—the point at which production could slow due to infrastructure and regulatory restraints?
Arthur Berman: No matter how much or little regulation there is, people will always argue that it is still either too much or too little. We have one of the most unfriendly administrations toward oil and gas ever and yet production has boomed. I already said that I oppose most regulation so you know where I stand. That said, once a bureaucracy is started, it seldom gets smaller or weaker. I don't see any walls out there, just uncomfortable price increases because of unnecessary regulations.
We use and need too much oil and gas to hit a wall. I see most of the focus on health care regulation for now. If there is no success at modifying the most objectionable parts of the Affordable Care Act, I don't suppose there is much hope for fewer oil and gas regulations. The petroleum business isn't exactly the darling of the people.
OP: What is the realistic future of methane hydrates, or “fire ice”, particularly with regard to Japanese efforts at extraction?
Arthur Berman: Japan is desperate for energy especially since they cut back their nuclear program so maybe hydrates make some sense at least as a science project for them. Their pilot is in thousands of feet of water about 30 miles offshore so it's going to be very expensive no matter how successful it is.
OP: Globally, where should we look for the next potential “shale boom” from a geological perspective as well as a commercial viability perspective?
Arthur Berman: Not all shale is equal or appropriate for oil and gas development. Once we remove all the shale that is not at or somewhat above peak oil generation today, most of it goes away. Some shale plays that meet these and other criteria didn't work so we have a lot to learn. But shale development is both inevitable and necessary. It will take a longer time than many believe outside of North America.
OP: We've spoken about Japan's nuclear energy crossroads before, and now we see that issue climaxing, with the country's nuclear future taking center-stage in an election period. Do you still believe it is too early for Japan to pull the plug on nuclear energy entirely?
Arthur Berman: Japan and Germany have made certain decisions about nuclear energy that I find remarkable but I don't live there and, obviously, don't think like them.
More generally, environmental enthusiasts simply don't see the obstacles to short-term conversion of a fossil fuel economy to one based on renewable energy. I don't see that there is a rational basis for dialogue in this arena. I'm all in favor of renewable energy but I don't see going from a few percent of our primary energy consumption to even 20% in less than a few decades no matter how much we may want to.
OP: What have we learned over the past year about Japan's alternatives to nuclear energy?
Arthur Berman: We have learned that it takes a lot of coal to replace nuclear energy when countries like Japan and Germany made bold decisions to close nuclear capacity. We also learned that energy got very expensive in a hurry. I say that we learned. I mean that the past year confirmed what many of us anticipated.
OP: Back in the US, we have closely followed the blowback from the Environmental Protection Agency's (EPA) proposed new carbon emissions standards for power plants, which would make it impossible for new coal-fired plants to be built without the implementation of carbon capture and sequestration technology, or “clean-coal” tech. Is this a feasible strategy in your opinion?
Arthur Berman: I'm not an expert on clean coal technology either but I am confident that almost anything is possible if cost doesn't matter. This is as true about carbon capture from coal as it is about shale gas production. Energy is an incredibly complex topic and decisions are being made by bureaucrats and politicians with little background in energy or the energy business. I don't see any possibility of a good outcome under these circumstances.
OP: Is CCS far enough along to serve as a sound basis for a national climate change policy?
Arthur Berman: Climate-change activism is a train that has left the station. If you've missed it, too bad. If you're on board, good luck.
The good news is that the US does not have an energy policy and is equally unlikely to get a climate change policy for all of the same reasons. I fear putting climate change policy in the hands of bureaucrats and politicians more than I fear climate change (which I fear).
See our previous interview with Arthur Berman.
By. James Stafford of Oilprice.com
The future of oil exploration lies in new technology--from massive data-processing supercomputers to 4D seismic to early-phase airborne spy technology that can pinpoint prospective reservoirs.
Oil and gas is getting bigger, deeper, faster and more efficient, with new technology chipping away at “peak oil” concerns. Hydraulic fracturing has caught mainstream attention, other high-tech developments in exploration and discovery have kept this ball rolling.
Oil majors are second only to the US Defense Department in terms of the use of supercomputing systems, which find sweet spots for drilling based on analog geology. These supercomputing systems analyze vast amounts of seismic imaging data collected by geologists using sound waves.
What's changed most recently is the dimension: When the oil and gas industry first caught on to seismic data collection for exploration efforts, the capabilities were limited to 2-dimensional imaging. The next step was 3D, which gives a much more accurate picture of what's down there.
The latest is the 4th dimension: Time, which allows explorers not only to determine the geological characteristics of a potential play, but also tells them how a reservoir is changing in real time. But all this is very expensive. And oilmen are zealous cost-cutters.
The next step in technology takes us off the ground and airborne—at a much cheaper cost—according to Jen Alic, a global intelligence and energy expert for OP Tactical.
The newest advancement in oil exploration is an early-phase aerial technology that can see what no other technology—including the latest 3D seismic imagery—can see, allowing explorers to pinpoint untapped reservoirs and unlock new profits, cheaper and faster.
“We've watched supercomputing and seismic improve for years. Our research into new airborne reservoir-pinpointing technology tells us that this is the next step in improving the bottom line in terms of exploration,” Alic said.
“In particular, we see how explorers could reduce expensive 3D seismic spending because they would have a much smaller area pinpointed for potential. Companies could save tens of millions of dollars.”
The new technology, developed by Calgary's NXT Energy Solutions, has the ability to pinpoint prospective oil and gas reservoirs and to determine exactly what's still there from a plane moving at 500 kilometers an hour at an altitude of 3,000 meters.
The Stress Field Detection (SFD) technology uses gravity to gather its oil and gas intelligence—it can tell different frequencies in the gravitational field deep underground.
Just like a stream is deflected by a big rock, SFD detects gravity disturbances due to subsurface stress and density variations. Porous rock filled with fluids has a very different density than surrounding solid rocks. Remember, gravity measurement is based on the density of materials. SFD detects subtle changes in earth's gravitational field.
According to its developers, the SFD could save oil and gas companies up to 90% of their exploration cost by reducing the time spent searching for a reservoir and drilling into to it to determine whether there's actually any oil and gas still there.
“Because it's all done from the air, SFD doesn't need on-the-ground permitting, and it covers vast acreage very quickly. It tells explorers exactly where to do their very expensive 3D seismic, greatly reducing the time and cost of getting accurate drilling information,” NXT Energy Solutions President and CEO George Liszicasz, told Oilprice.com in a recent interview.
Mexico's state-owned oil company Pemex has already put the new technology to the test both onshore and offshore in the Gulf of Mexico, and was a repeat customer in 2012. They co-authored with NXT a white paper on their initial blind-test used of the survey technology.
At first, management targeted the technology to frontier areas where little seismic or well data existed. As an example, Pacific Rubiales Energy is using SFD technology in Colombia, where the terrain, and environmental concerns, make it difficult to obtain permits and determine where best to drill.
The technology was recently contracted in the United States for unconventional plays as well.
By. James Burgess of Oilprice.com
'The refiners have been a very ‘feast or famine’ trade group that I have been wary of playing. But with widening Brent-WTI spreads, along with the collapses of other benchmarks here in the US, I now believe that there is a long-term positive margin trend that is developing. With refining stocks like Tesoro (TSO) and Phillips 66 (PSX) nearer to their 52-week lows, I’m looking for new highs to be made in both stocks. It’s time to buy.
I’ve watched the refinery group make tremendous gains in 2011 and 2012, as WTI/Brent spreads, which are a proxy for refinery margins, soared to unbelievable heights, reaching over $20 at one point. Those stocks just as disastrously fell as the spread did, dropping to near parity at one point this summer. Many of the refinery stocks still have not moved much from that low price point.
But WTI has again shown tremendous weakness to the European benchmarks, because of increasing production from the Bakken, Eagle Ford and Permian shale plays, as well as the endemic outages of refineries in the Gulf Coast and slow refilling of the critical pipelines that service that area.
Some analysts believe that these are temporary trends, but I’m convinced they are not, and one reason I’m in the camp of long-term refinery advantages is because of the relative price action of two OTHER benchmarks of crude pricing, Mars and Louisiana Light Sweet.
If you’re not an oil trader, you might never have heard of these benchmarks, but Mars is the most traded sour (higher sulfur) blend and LLS is used as a benchmark for Gulf Coast crudes. Have a look at this chart from Platts:
What this chart shows is the premium that both Mars and LLS held to WTI – even during the huge glut and discount that WTI carried, Mars and LLS were mostly unaffected, still getting more ‘global’ pricing through much of 2013. So, if you were a refiner, you needed to use WTI solely to capture a margin advantage – if you were a sour refiner or using LLS on the Gulf Coast for export, you were out of luck. As the spread collapsed, so did the premium of Mars and LLS to WTI – this makes a lot of sense. However, now that the spread is again widening, we are NOT seeing a concurrent premium returning to these other important benchmarks.
Bottom line: Now virtually EVERY refiner will experience a tremendous margin advantage, whether they can isolate WTI grades or not.
Further bottom line: I think this is a sustainable trend and creates a new ‘golden age’ of refining which will carry at least into the 1st quarter of 2014.
Now is the time to buy refining stocks. I had thought that a better opportunity to position this trade would be AFTER quarterly reports, as I was convinced that the refiners would report horribly after spreads declined so rapidly in the 3rd quarter.
Valero reported precisely as I expected – badly – then proceeded to rally anyway.
No one is fooled by bad quarterly reports that are “yesterday’s news”, and you shouldn’t be either. Tomorrow’s news is going to be great for them and refiners like Tesoro and Phillips are headed back to their highs.
And you should be buying them.'