AuthorTopic: Hills Group Oil Depletion Economic and Thermodynamic Report  (Read 51384 times)

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🛢️ 3,000 Jobs in Canada’s Oil Industry Gone in a Month
« Reply #225 on: June 29, 2019, 12:55:07 AM »
Fracking wil save us!  NOT!

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3,000 Jobs in Canada’s Oil Industry Gone in a Month
By Irina Slav - Jun 28, 2019, 11:00 AM CDT


Calgary: An Oil Age Boom Town

Some 3,000 people in Canada’s oil and gas industry lost their jobs between April and May this year, a new report from Petroleum Labour Market Information found as cited by The Star. According to the report, this represented a decline of a bit over 2 percent with more jobs opening in other industries, notably healthcare and education.

Unsurprisingly, it was the exploration and drilling segments of the industry that suffered the hardest blow as Canadian producers curb investment in these activities to focus on ongoing projects amid a persistent pipeline shortage that is constraining their expansion plans.

A PetroLMI official, however, said the job losses could be a temporary occurrence: the spring is a slow period for Canadian oil as the frost thaws, the ground gets muddy and unsuitable for drilling until it dries. Still, the abovementioned factors may have contributed and they could drive a longer-term job loss in the industry.

An earlier report from PetroLMI found that this year’s hiring requirements of Canada’s oil and gas industry will be 8,236 people lower than a year ago, with projected employment for the year seen at 173,348. That’s almost 12,500 people fewer to be hired by the industry because of slower activity.

This is understandable in light of spending projections for Canada’s oil and gas from PetroLMI. The agency calculated that capital spending on conventional oil and gas this year will be 28 percent lower this year than last, at US$15.28 billion (C$20 billion). Capex in the oil sands segment was seen down 5 percent to US$9.17 billion (C$12 billion).

With this year’s projected job losses in the oil and gas industry, the total lost since the 2014 crisis struck could reach 23 percent of the total five years ago. At the time, Canada’s oil and gas industry employed 226,500 people.

By Irina Slav for Oilprice.com
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🛢️ OPEC’s Future Looks Bleak As It Extends Deal
« Reply #226 on: July 02, 2019, 01:26:53 AM »
Can OPEC just roll over and die already?

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https://oilprice.com/Energy/Crude-Oil/OPECs-Future-Looks-Bleak-As-It-Extends-Deal.html

OPEC’s Future Looks Bleak As It Extends Deal
By Cyril Widdershoven - Jul 01, 2019, 6:00 PM CDT


OPEC and its partners have decided to roll over the existing production cut agreement for another 9 months. After weeks of deliberations, infighting, global pressure and media hype, OPEC and Russia have confirmed the global oil market still needs support. OPEC officials stated the latter to the press, repeating Russian President Putin’s and Saudi Minister of Energy Khalid Al Falih’s former statements. Russian President Vladimir Putin said on Saturday that he had agreed with Saudi Arabia to extend existing output cuts of 1.2 million barrels per day, or 1.2% of global demand, until December 2019 or March 2020.

Fears about a possible US-China Trade War, resulting in lower global economic growth, and the continued growth of US shale output has put oil prices under pressure, especially after several unexpected inventory builds earlier this year. The geopolitical instability in the Persian Gulf, a looming military confrontation in the East Mediterranean and sanctions on Iran, Venezuela and even Russia, did nothing to quell the negative price spiral. Emotions were ruling, not facts. Oil prices, however, now seem to get some space to rally, as China and the U.S. have agreed to renegotiate a trade deal, demand still appears to be growing, and US storage volumes have shown signs of reversing. Oil bulls have regained a bit of hope, but financial analysts are still warning for a possible negative price correction, based on the still unresolved China-US situation. Strangely enough the same analysts are not incorporating possible negative repercussions from the ongoing situation in the strait of Hormuz, a looming conflict in Libya and the still relatively strong economy.

At the same time, optimism within OPEC itself is waning, as severe rifts in the cartel have occurred in preparation to this week’s OPEC Vienna meeting. Iran and Venezuela are increasingly putting their foot down, as they claim that the rest of OPEC, especially Saudi Arabia and the UAE, are taking advantage of the US sanctions. The last weeks the Kingdom, but also the UAE, have signed major deals with China, Japan and South Korea to lock-in future demand in these countries. The Iranian sanctions, even if they have not brought exports to zero as US president Trump likes to claim, have been a boon for other OPEC producers, filling in the gaps left by Tehran in Asia and Europe. Iran’s geopolitical supporter no. 1 Russia also has taken advantage of the Iranian predicament.

This situation has stirred up anger in Tehran and Caracas. In contrast to official statements made by the separate Arab OPEC countries, all have taken the opportunity to expand market share. Iran will have a hard time to regain its position. At the same time, Venezuela is confronted by the same developments, leaving the heavy-oil producer no chance to regain its former glory for a very long time.

At present, Iran does not have a lot of instruments to counter the Saudi-UAE-Russian actions. Blocked by US sanctions, no economic options are available to the Iranian regime. Still, Tehran has been able to deliver a major blow the last hours. Without leaving the cartel, Iran has openly defied the growing willingness inside of OPEC and Russia to formalize the ongoing OPEC+ cooperation.
Related: API: Trade War Already Hurts U.S. Energy Exports

In a surprise remark to the press, Iran's oil minister Bijan Zanganeh said that he will veto OPEC's long-mooted charter intended to formalize its oil market coordination with Russia and nine other non-OPEC partners. The latter means not only a blockade of Saudi-UAE dreams to incorporate Russia officially, but it also is a slap in the face of Russian president Vladimir Putin and Russia’s Energy Minister Novak. The two Russians have been eager to formalize the OPEC+ deal, supported on the Saudi side by Crown Prince Mohammed bin Salman. The formalization seems to have been one of the discussion points between Putin and MBS at the G20 in Osaka, Japan. The Iranian threat also will complicate the OPEC+ meeting, which is set for Tuesday, after the official OPEC meeting.

The Iranian move is almost a rehearsal of the 2007 Riyadh meeting, when Tehran and Caracas blew up the 2nd OPEC Heads of State Meeting. By supporting an OPEC production agreement, but blocking a formal participation of Russia, Tehran keeps its position in balance. If the Saudi-Russian cooperation would be formalized and included under the OPEC umbrella, Tehran fears to be pushed out of the power centers. Officially Iran wants to block the OPEC+ formalization due to Saudi-UAE support for US Iran sanctions, but Tehran wants to be in power when deals are made between OPEC and Russia. With a formalization of the OPEC+ situation, the Riyadh-Moscow-Abu Dhabi trilateral becomes the decision making center without interference of others.  Tehran fears a so-called unilateralism by OPEC+ (Moscow/Riyadh). Iranian Oil Minister Zanganeh reiterated that he fears that OPEC+ could mean the end of the current Middle East led oil producers group. With the incorporation of Russia the power center would clearly move to Riyadh-Moscow.

Looking back at today, a production cut agreement has been reached, and the official statements will follow after the OPEC+ meeting. Brent and WTI prices are expected to inch higher the next couple of days. An internal power struggle, as some expect, inside of OPEC, however, could blow up the current stability with a big bang. An open battle between Tehran and Riyadh, combined with increased military and proxy actions in the Persian Gulf, could be the last drop in the bucket.

Regional military actions against Iran, or more worrying Iranian proxies in Iraq, could effectively reshape the supply situation in crude markets. No reason at present suggests that oil bears can lean back. Global crude supply is more in danger than financial analysts are recognizing. The Iran situation could easily involve Iraq or trade routes at the same time.

By Cyril Widdershoven for Oilprice.com
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https://www.npr.org/2019/07/02/738061521/opec-formally-embraces-russia-other-non-members-in-expanded-opec

OPEC Formally Embraces Russia, Other Non-Members In Expanded "OPEC+"

July 2, 20195:18 PM ET
Camila Domonoske square 2017


A Saudi worker adjusts flags of participating countries before a meeting of energy ministers from OPEC and its allies in Jeddah, Saudi Arabia, on May 19. OPEC+ countries met again in Vienna on Monday and Tuesday and agreed to formalize their relationship in a "Charter of Cooperation."
Amr Nabil/AP

OPEC used to shift world oil markets with a single announcement. These days, the Saudi-led organization needs help from some key partners — most significantly Russia — to exert that kind of influence.

The expanded alliance, which also includes Kazakhstan, Mexico and other nations, is known as "OPEC+." And on Monday and Tuesday, OPEC+ made its unofficial expansion a little more official.

Member and non-member states have agreed on a "Charter of Cooperation" to formalize their relationship, pending approval from individual governments.

Khalid Al-Falih, the Saudi oil minister, called the move "historic."

The charter "has created one of history's strongest producer partnerships, spanning the entire world from east to west," he said Tuesday. "Our objectives related to market stability are now matched by the horsepower needed to deliver them."

For many decades, OPEC had that horsepower all on its own: its members controlled a majority of the world's crude supply.

But the balance of power in the global oil market has changed. A technological revolution unlocked vast quantities of previously tough-to-access crude. The U.S. unexpectedly became the world's No. 1 oil producer and a significant exporter. OPEC found itself controlling less than half the world's crude, and watched as oil prices dropped.

So Saudi Arabia looked to a country that, until just a few years ago, had never cooperated with OPEC cuts and was regarded by key OPEC members as an oil rival instead of an ally: Russia. After the U.S. and Saudi Arabia, Russia is the world's third-largest oil producer.

"There is no question that OPEC's need to reach out to other large producers like Russia was a direct result of the fact that they were losing their power and influence over the oil market because of the rise in U.S. production and U.S. exports," says Amy Myers Jaffe, the director of the program on energy security and climate change at the Council on Foreign Relations. "Russia and OPEC decided that they would have to form a partnership or they would lose their influence completely."

Fortified by Moscow and other cooperating non-members, OPEC+ once again controls most of the world's crude oil supply. In late 2016, the group agreed on production cuts that are credited with helping stabilize oil prices after their two-year slide. They've been extended repeatedly since then.

Building this partnership has not been easy. Iran, a founding member of OPEC, has always been wary of the power its regional rival Saudi Arabia wields within the group, and the new OPEC+ arrangement — which pivots on the partnership between Riyadh and Moscow — gives even more authority to the Saudis.

Meanwhile, Iran also has reason to be worried that the Saudi-Russia partnership could threaten the existing strategic military alliances between Iran and Russia, explains Jaffe.

"Iran is pretty isolated," she says. "If ... Russia feels there's some benefit to itself from having a tight relationship with Saudi Arabia, then who does Iran go to for any assistance?"

As a result, while Iran has accepted the OPEC+ production cuts, it has spoken out against formalizing the expanded coalition — that is, it accepted the functional reality of the partnership but objected to putting it down in writing. Ahead of the OPEC meeting on Monday, Iran vowed to veto the plans for the charter of cooperation.

Oil minister Bijan Zangeneh went so far as to say that "OPEC might die" as a result of domination by Saudi Arabia and Russia.

But after marathon negotiations on Monday, Iran was persuaded to sign off on the draft text of the charter, which was approved by the participating non-member states on Tuesday.

OPEC+ members welcomed the charter as a tool for strengthening producers' influence over the oil market.

However, Jaffe notes that even bolstered by the expansion, OPEC+ may not have the ability to move the price of oil as significantly as in the past. Many OPEC members are struggling with involuntary production cuts — from Venezuela's collapse to U.S. sanctions on Iran. Meanwhile, the U.S. and other non-OPEC producers can ramp up production very quickly, thanks to new drilling technologies.

And if OPEC does push succeed in pushing prices up significantly, Jaffe says, it could backfire — from an oil producer's standpoint — by pushing the world to more quickly reduce its demand for oil.

"If the price of oil were to go up today ... more and more people would be inclined to buy an electric car," she says. "There are all kinds of features today with new technology that make it actually very dangerous to OPEC's long-term interest to really jack around the price of oil."
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🛢️ Tomgram: Michael Klare, It's Always the Oil
« Reply #228 on: July 15, 2019, 03:14:51 AM »
http://www.tomdispatch.com/blog/176584/

Tomgram: Michael Klare, It's Always the Oil
Posted by Michael Klare   at 7:53am, July 11, 2019.
Follow TomDispatch on Twitter @TomDispatch.


What more did you need to know once Secretary of State Mike Pompeo insisted that a suicide bombing in Kabul, Afghanistan, claimed by the Taliban, was Iranian-inspired or plotted, one “in a series of attacks instigated by the Islamic Republic of Iran and its surrogates against American and allied interests”? In other words, behind the Sunni extremist insurgents the U.S. has been fighting in Afghanistan since October 2001 lurks the regime of the Shiite fundamentalists in Tehran that many in Washington have been eager to fight since at least the spring of 2003 (when, coincidentally enough, the Bush administration was insisting that Saddam Hussein's Iraqi regime had significant ties to al-Qaeda).

It couldn’t have made more sense once you thought about it. I don’t mean Pompeo’s claim itself, which was little short of idiotic, but what lurked behind it.  I mean the knowledge that, only a week after the 9/11 attacks, Congress had passed an authorization for the use of military force, or AUMF, that allowed the president (and any future president, as it turned out) “to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons.”

In other words, almost 18 years later, as Pompeo knows, if you can link any country or group you're eager to go to war with to al-Qaeda, no matter how confected the connection, you can promptly claim authorization to do your damnedest to them. How convenient, then, should you be in the mood to make war on Iran, if that country just happens to be responsible for terror attacks linked to the Taliban (which once did harbor al-Qaeda and Osama bin Laden). Why, you wouldn’t even need to ask Congress for permission to pursue your war of choice. And keep in mind that, recently, Congress -- or a crew of corrupted, degraded Republican senators -- simply couldn’t muster the votes or the will to deny President Trump the power to make war on Iran without its approval.

Let me hasten to add that the supposed link to al-Qaeda isn’t the only thing the Trump administration has conjured up to ensure that it will be free to do whatever it pleases when it comes to Iran. It’s found various other inventive ways to justify future military actions there without congressional approval. Pompeo and crew have, in that sense, been clever indeed. As TomDispatch regular Michael Klare, author of the upcoming book All Hell Breaking Loose: The Pentagon’s Perspective on Climate Change, points out today, there’s only one word largely missing from their discussions of the increasingly edgy situation in the Persian Gulf, the most obvious word of all. But read him yourself if you want to understand just how, when it comes to Iran and that missing word -- to steal a phrase from the late, great Jonathan Schell -- the fate of the Earth is at stake. Tom

    The Missing Three-Letter Word in the Iran Crisis
    Oil’s Enduring Sway in U.S. Policy in the Middle East
    By Michael T. Klare

    It’s always the oil. While President Trump was hobnobbing with Saudi Crown Prince Mohammed bin Salman at the G-20 summit in Japan, brushing off a recent U.N. report about the prince’s role in the murder of Washington Post columnist Jamal Khashoggi, Secretary of State Mike Pompeo was in Asia and the Middle East, pleading with foreign leaders to support “Sentinel.” The aim of that administration plan: to protect shipping in the Strait of Hormuz and the Persian Gulf. Both Trump and Pompeo insisted that their efforts were driven by concern over Iranian misbehavior in the region and the need to ensure the safety of maritime commerce. Neither, however, mentioned one inconvenient three-letter word -- O-I-L -- that lay behind their Iranian maneuvering (as it has impelled every other American incursion in the Middle East since World War II).

    Now, it’s true that the United States no longer relies on imported petroleum for a large share of its energy needs. Thanks to the fracking revolution, the country now gets the bulk of its oil -- approximately 75% -- from domestic sources. (In 2008, that share had been closer to 35%.)  Key allies in NATO and rivals like China, however, continue to depend on Middle Eastern oil for a significant proportion of their energy needs. As it happens, the world economy -- of which the U.S. is the leading beneficiary (despite President Trump’s self-destructive trade wars) -- relies on an uninterrupted flow of oil from the Persian Gulf to keep energy prices low. By continuing to serve as the principal overseer of that flow, Washington enjoys striking geopolitical advantages that its foreign policy elites would no more abandon than they would their country’s nuclear supremacy.

    This logic was spelled out clearly by President Barack Obama in a September 2013 address to the U.N. General Assembly in which he declared that “the United States of America is prepared to use all elements of our power, including military force, to secure our core interests” in the Middle East. He then pointed out that, while the U.S. was steadily reducing its reliance on imported oil, “the world still depends on the region’s energy supply and a severe disruption could destabilize the entire global economy.” Accordingly, he concluded, “We will ensure the free flow of energy from the region to the world.”

    To some Americans, that dictum -- and its continued embrace by President Trump and Secretary of State Pompeo -- may seem anachronistic. True, Washington fought wars in the Middle East when the American economy was still deeply vulnerable to any disruption in the flow of imported oil. In 1990, this was the key reason President George H.W. Bush gave for his decision to evict Iraqi troops from Kuwait after Saddam Hussein’s invasion of that land. “Our country now imports nearly half the oil it consumes and could face a major threat to its economic independence,” he told a nationwide TV audience. But talk of oil soon disappeared from his comments about what became Washington’s first (but hardly last) Gulf War after his statement provoked widespread public outrage. (“No Blood for Oil” became a widely used protest sign then.) His son, the second President Bush, never even mentioned that three-letter word when announcing his 2003 invasion of Iraq. Yet, as Obama’s U.N. speech made clear, oil remained, and still remains, at the center of U.S. foreign policy. A quick review of global energy trends helps explain why this has continued to be so.

    The World’s Undiminished Reliance on Petroleum

    Despite all that’s been said about climate change and oil’s role in causing it -- and about the enormous progress being made in bringing solar and wind power online -- we remain trapped in a remarkably oil-dependent world. To grasp this reality, all you have to do is read the most recent edition of oil giant BP’s "Statistical Review of World Energy," published this June. In 2018, according to that report, oil still accounted for by far the largest share of world energy consumption, as it has every year for decades. All told, 33.6% of world energy consumption last year was made up of oil, 27.2% of coal (itself a global disgrace), 23.9% of natural gas, 6.8% of hydro-electricity, 4.4% of nuclear power, and a mere 4% of renewables.

    Most energy analysts believe that the global reliance on petroleum as a share of world energy use will decline in the coming decades, as more governments impose restrictions on carbon emissions and as consumers, especially in the developed world, switch from oil-powered to electric vehicles. But such declines are unlikely to prevail in every region of the globe and total oil consumption may not even decline. According to projections from the International Energy Agency (IEA) in its “New Policies Scenario” (which assumes significant but not drastic government efforts to curb carbon emissions globally), Asia, Africa, and the Middle East are likely to experience a substantially increased demand for petroleum in the years to come, which, grimly enough, means global oil consumption will continue to rise.

    Concluding that the increased demand for oil in Asia, in particular, will outweigh reduced demand elsewhere, the IEA calculated in its 2017 World Energy Outlook that oil will remain the world’s dominant source of energy in 2040, accounting for an estimated 27.5% of total global energy consumption. That will indeed be a smaller share than in 2018, but because global energy consumption as a whole is expected to grow substantially during those decades, net oil production could still rise -- from an estimated 100 million barrels a day in 2018 to about 105 million barrels in 2040.

    Of course, no one, including the IEA’s experts, can be sure how future extreme manifestations of global warming like the severe heat waves recently tormenting Europe and South Asia could change such projections. It’s possible that growing public outrage could lead to far tougher restrictions on carbon emissions between now and 2040. Unexpected developments in the field of alternative energy production could also play a role in changing those projections. In other words, oil’s continuing dominance could still be curbed in ways that are now unpredictable.

    In the meantime, from a geopolitical perspective, a profound shift is taking place in the worldwide demand for petroleum. In 2000, according to the IEA, older industrialized nations -- most of them members of the Organization for Economic Cooperation and Development (OECD) -- accounted for about two-thirds of global oil consumption; only about a third went to countries in the developing world. By 2040, the IEA’s experts believe that ratio will be reversed, with the OECD consuming about one-third of the world’s oil and non-OECD nations the rest. More dramatic yet is the growing centrality of the Asia-Pacific region to the global flow of petroleum. In 2000, that region accounted for only 28% of world consumption; in 2040, its share is expected to stand at 44%, thanks to the growth of China, India, and other Asian countries, whose newly affluent consumers are already buying cars, trucks, motorcycles, and other oil-powered products.

    Where will Asia get its oil? Among energy experts, there is little doubt on this matter. Lacking significant reserves of their own, the major Asian consumers will turn to the one place with sufficient capacity to satisfy their rising needs: the Persian Gulf. According to BP, in 2018, Japan already obtained 87% of its oil imports from the Middle East, India 64%, and China 44%. Most analysts assume these percentages will only grow in the years to come, as production in other areas declines.

    This will, in turn, lend even greater strategic importance to the Persian Gulf region, which now possesses more than 60% of the world’s untapped petroleum reserves, and to the Strait of Hormuz, the narrow passageway through which approximately one-third of the world’s seaborne oil passes daily. Bordered by Iran, Oman, and the United Arab Emirates, the Strait is perhaps the most significant -- and contested -- geostrategic location on the planet today.

    Controlling the Spigot

    When the Soviet Union invaded Afghanistan in 1979, the same year that militant Shiite fundamentalists overthrew the U.S.-backed Shah of Iran, U.S. policymakers concluded that America’s access to Gulf oil supplies was at risk and a U.S. military presence was needed to guarantee such access. As President Jimmy Carter would say in his State of the Union Address on January 23, 1980,

    “The region which is now threatened by Soviet troops in Afghanistan is of great strategic importance: It contains more than two thirds of the world's exportable oil... The Soviet effort to dominate Afghanistan has brought Soviet military forces to within 300 miles of the Indian Ocean and close to the Strait of Hormuz, a waterway through which most of the world's oil must flow... Let our position be absolutely clear: an attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”

    To lend muscle to what would soon be dubbed the “Carter Doctrine,” the president created a new U.S. military organization, the Rapid Deployment Joint Task Force (RDJTF), and obtained basing facilities for it in the Gulf region. Ronald Reagan, who succeeded Carter as president in 1981, made the RDJTF into a full-scale “geographic combatant command,” dubbed Central Command, or CENTCOM, which continues to be tasked with ensuring American access to the Gulf today (as well as overseeing the country’s never-ending wars in the Greater Middle East). Reagan was the first president to activate the Carter Doctrine in 1987 when he ordered Navy warships to escort Kuwaiti tankers, “reflagged” with the stars and stripes, as they traveled through the Strait of Hormuz. From time to time, such vessels had been coming under fire from Iranian gunboats, part of an ongoing “Tanker War,” itself part of the Iran-Iraq War of those years. The Iranian attacks on those tankers were meant to punish Sunni Arab countries for backing Iraqi autocrat Saddam Hussein in that conflict.  The American response, dubbed Operation Earnest Will, offered an early model of what Secretary of State Pompeo is seeking to establish today with his Sentinel program.

    Operation Earnest Will was followed two years later by a massive implementation of the Carter Doctrine, President Bush’s 1990 decision to push Iraqi forces out of Kuwait. Although he spoke of the need to protect U.S. access to Persian Gulf oil fields, it was evident that ensuring a safe flow of oil imports wasn’t the only motive for such military involvement. Equally important then (and far more so now): the geopolitical advantage controlling the world’s major oil spigot gave Washington.

    When ordering U.S. forces into combat in the Gulf, American presidents have always insisted that they were acting in the interests of the entire West. In advocating for the “reflagging” mission of 1987, for instance, Secretary of Defense Caspar Weinberger argued (as he would later recall in his memoir Fighting for Peace), “The main thing was for us to protect the right of innocent, nonbelligerent and extremely important commerce to move freely in international open waters -- and, by our offering protection, to avoid conceding the mission to the Soviets.” Though rarely so openly acknowledged, the same principle has undergirded Washington’s strategy in the region ever since: the United States alone must be the ultimate guarantor of unimpeded oil commerce in the Persian Gulf.

    Look closely and you can find this principle lurking in every fundamental statement of U.S. policy related to that region and among the Washington elite more generally. My own personal favorite, when it comes to pithiness, is a sentence in a report on the geopolitics of energy issued in 2000 by the Center for Strategic and International Studies, a Washington-based think tank well-populated with former government officials (several of whom contributed to the report): “As the world’s only superpower, [the United States] must accept its special responsibilities for preserving access to [the] worldwide energy supply.” You can’t get much more explicit than that.

    Of course, along with this “special responsibility” comes a geopolitical advantage: by providing this service, the United States cements its status as the world’s sole superpower and places every other oil-importing nation -- and the world at large -- in a condition of dependence on its continued performance of this vital function.

    Originally, the key dependents in this strategic equation were Europe and Japan, which, in return for assured access to Middle Eastern oil, were expected to subordinate themselves to Washington. Remember, for example, how they helped pay for Bush the elder’s Iraq War (dubbed Operation Desert Storm). Today, however, many of those countries, deeply concerned with the effects of climate change, are seeking to lessen oil’s role in their national fuel mixes. As a result, in 2019, the countries potentially most at the mercy of Washington when it comes to access to Gulf oil are economically fast-expanding China and India, whose oil needs are only likely to grow. That, in turn, will further enhance the geopolitical advantage Washington enjoyed as long as it remains the principal guardian of the flow of oil from the Persian Gulf. How it may seek to exploit this advantage remains to be seen, but there is no doubt that all parties involved, including the Chinese, are well aware of this asymmetric equation, which could give the phrase “trade war” a far deeper and more ominous meaning.

    The Iranian Challenge and the Specter of War

    From Washington’s perspective, the principal challenger to America’s privileged status in the Gulf is Iran. By reason of geography, that country possesses a potentially commanding position along the northern Gulf and the Strait of Hormuz, as the Reagan administration learned in 1987-1988 when it threatened American oil dominance there. About this reality President Reagan couldn’t have been clearer. “Mark this point well: the use of the sea lanes of the Persian Gulf will not be dictated by the Iranians,” he declared in 1987 -- and Washington’s approach to the situation has never changed.

    In more recent times, in response to U.S. and Israeli threats to bomb their nuclear facilities or, as the Trump administration has done, impose economic sanctions on their country, the Iranians have threatened on numerous occasions to block the Strait of Hormuz to oil traffic, squeeze global energy supplies, and precipitate an international crisis. In 2011, for example, Iranian Vice President Mohammad Reza Rahimi warned that, should the West impose sanctions on Iranian oil, “not even one drop of oil can flow through the Strait of Hormuz.” In response, U.S. officials have vowed ever since to let no such thing happen, just as Secretary of Defense Leon Panetta did in response to Rahimi at that time. “We have made very clear,” he said, “that the United States will not tolerate blocking of the Strait of Hormuz.” That, he added, was a “red line for us.”

    It remains so today. Hence, the present ongoing crisis in the Gulf, with fierce U.S. sanctions on Iranian oil sales and threatening Iranian gestures toward the regional oil flow in response. “We will make the enemy understand that either everyone can use the Strait of Hormuz or no one,” said Mohammad Ali Jafari, commander of Iran’s elite Revolutionary Guards, in July 2018. And attacks on two oil tankers in the Gulf of Oman near the entrance to the Strait of Hormuz on June 13th could conceivably have been an expression of just that policy, if -- as claimed by the U.S. -- they were indeed carried out by members of the Revolutionary Guards. Any future attacks are only likely to spur U.S. military action against Iran in accordance with the Carter Doctrine. As Pentagon spokesperson Bill Urban put it in response to Jafari’s statement, “We stand ready to ensure the freedom of navigation and the free flow of commerce wherever international law allows.”

    As things stand today, any Iranian move in the Strait of Hormuz that can be portrayed as a threat to the “free flow of commerce” (that is, the oil trade) represents the most likely trigger for direct U.S. military action. Yes, Tehran’s pursuit of nuclear weapons and its support for radical Shiite movements throughout the Middle East will be cited as evidence of its leadership’s malevolence, but its true threat will be to American dominance of the oil lanes, a danger Washington will treat as the offense of all offenses to be overcome at any cost.

    If the United States goes to war with Iran, you are unlikely to hear the word “oil” uttered by top Trump administration officials, but make no mistake: that three-letter word lies at the root of the present crisis, not to speak of the world’s long-term fate.

    Michael T. Klare, a TomDispatch regular, is the five-college professor emeritus of peace and world security studies at Hampshire College and a senior visiting fellow at the Arms Control Association. His most recent book is The Race for What’s Left. His next book, All Hell Breaking Loose: The Pentagon’s Perspective on Climate Change (Metropolitan Books) will be published in November.
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🛢️ Job Losses Hit As Shale Slows Down
« Reply #229 on: July 24, 2019, 02:10:56 PM »
https://oilprice.com/Energy/Energy-General/Job-Losses-Hit-As-Shale-Slows-Down.html

Job Losses Hit As Shale Slows Down
By Nick Cunningham - Jul 24, 2019, 11:00 AM CDT


Halliburton is cutting its workforce and shelving fracking equipment amid a slowdown in the U.S. shale industry.

The oilfield services giant said that its revenue fell 13 percent in the second quarter, and it decided to cut its North American workforce by 8 percent. The company’s share price jumped 9 percent on the news, with shareholders apparently heartened by the cost-trimming measures.

Halliburton “is emphasizing a return on capital approach, and has stacked additional equipment in 2Q where returns were not justified, and expects activity down in [North America] in 3Q,” Morgan Stanley wrote in a note.

In an earnings call with analysts and shareholders on Monday, Halliburton CEO Jeff Miller laid out a few strategies in response to the weak shale market. The company has slashed capex by 20 percent as demand for its services has slowed. “We have sufficient size and scale in this market and see no reason to invest in growth when it comes at the expense of returns,” Miller said.

Also, Halliburton is “removing several layers of management.” Finally, the company has “stacked” – or removed – unused equipment “throughout the quarter and will continue to do so where we do not see acceptable returns,” Miller said. “The pressure pumping market remains oversupplied and we're not afraid to reduce our fleet size, as it contributes to righting the supply and demand imbalance.”

On the call, analysts seemed to approve of the measures. “Kudos for being proactive on stacking equipment in this market versus fighting for share,” Angie Sedita of Goldman Sachs said to Halliburton CEO Jeff Miller.

Last week, Schlumberger, the world’s largest oilfield services company, also relayed its experience with the slowing shale market. “North America land remains a challenging environment,” Olivier Le Peuch, Chief Operating Officer and soon-to-be CEO of Schlumberger, said in an earnings call on July 19. “Indeed, the E&P operator focus on cash flow has capped activity, and continued efficiency improvements have also reduced the number of active rigs and frac fleets, so far without major impact on oil production.”

For the oilfield services companies, it wasn’t all bad news. Drilling activity was up in other parts of the world, compensating for the decline in U.S. shale. The rather downbeat comments about U.S. shale stood in sharp contrast to how Schlumberger saw the international market, which the company says is in the midst of “broad-based activity growth.” Schlumberger’s Le Peuch noted that “as offshore momentum builds, shallow-water rig activity grew by 14%” in the second quarter, and whether in Latin America, Europe, Africa or Central Asia, the oilfield services giant saw strong growth.

In other words, the oilfield services company had a dramatically different experience in the shale patch compared to elsewhere. “At the close of the first half of 2019, international revenue has increased 8% year-over-year, while North America land revenue has declined 12% year-over-year,” Le Peuch said.

Outgoing Schlumberger CEO Paal Kibsgaard expanded on these themes in the conference call with analysts and shareholders. He said that U.S. shale is one of the few sources of supply growth, but “the consolidation among North American E&P companies is further strengthening the shift away from growth focus towards financial discipline.”

Globally, Kibsgaard said that sources of new supply will “start to fade in 2020,” thereby tightening up the market. In the meantime, “the cash flow focus amongst the E&P operators confirms our expectations of a 10% decline in North America land investments in 2019,” he said.

“This means the welcome return of a familiar opportunity set for Schlumberger,” Kibsgaard said. “For the first time since 2012 and 2013, we see high and single-digit growth in the international markets, signaling the start of an overdue and much needed multi-year international growth cycle.”

It’s a role reversal from just a few years ago, when capital flowed into Texas and North Dakota when drilling was growing at a torrid pace. At the time, global drilling activity outside of North America was depressed.

Meanwhile, a few other indicators also point to stress in the shale industry. The backlog of drilled but uncompleted wells (DUCs) has declined for the fourth straight month in June, which analysts view as a sign that drillers are resorting to a strategy of completing their already-drilled inventor as a way growing production while keeping a lid on costs. “They have already sunk their cash into the drilling portion,” Elisabeth Murphy, an analyst at ESAI Energy LLC., told Bloomberg last week. “Now it’s just a matter of completing rather than drilling new wells.”

However, new satellite data from data firm Kayrros finds that the number of DUCs is likely vastly smaller than public data suggests. Even more damning is that the number of wells completed last year might have been much higher than previously thought, which suggests that the industry needs more wells than expected to produce as much as they are.

Kayrros said that according to satellite data, “more than 1,100 wells were completed in the Permian basin but not reported through state commissions or FracFocus, a public repository for information on the chemicals used during fracking,” Kayrros said in a statement. “Kayrros measurements reveal that public data fail to capture the full scale of fracking. The macroeconomic implications of this underreporting are far-reaching.”

Because it takes many more wells to produce the current volume of oil, “the average well is both less productive and higher-cost than reflected in public data,” Kayrros said.

Andrew Gould, former Chairman of BG and Chairman CEO of Schlumberger and Kayrros advisory board chairman, put it bluntly: “With far more wells contributing to Permian and US oil production than accounted for, current shale oil production is substantially more water- and sand-intensive than is commonly believed,” he said in a press release.

By Nick Cunningham of Oilprice.com
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🛢️ Natural Gas Glut Is Crushing US Drillers
« Reply #230 on: July 30, 2019, 12:00:13 AM »
https://oilprice.com/Energy/Natural-Gas/Natural-Gas-Glut-Is-Crushing-US-Drillers.html#

Natural Gas Glut Is Crushing US Drillers
By Nick Cunningham - Jul 28, 2019, 6:00 PM CDT


The outlook for natural gas producers is not great. They are getting clobbered by low prices today, amid a glut. But the medium- and long-term looks even worse, with renewable energy increasingly taking market share.

The gas industry has drilled itself into this predicament. Gas production continues to ratchet higher, rapidly replenishing inventories, which had plunged to a 15-year low heading into this past winter season. Inventories are still below the five-year average, but have climbed quickly in recent months.

(Click to enlarge)

If the natural gas industry had hoped that a stunning heat wave sweeping over a large swathe of the East Coast would rescue prices, they are surely now disappointed. Natural gas prices continue to fall, despite the heat, and there is little prospect of a rebound. On Friday, spot natural gas prices fell by another 3 percent, dipping below $2.20/MMBtu.

Record production from the Marcellus is one of the main reasons. But oil drillers are also to blame. The frenzied pace of drilling in the Permian – which, to be sure, has been slowing as of late – has produced a wave of natural gas so large that the industry is flaring enormous volumes of gas because of the lack of pipelines. Texas regulators seem unwilling to regulate the rate of flaring over fear of hurting the industry, so the flaring continues. 
Related: Is This The Last Bottleneck For Nord Stream 2?

Still, record levels of associated gas production from the Permian are dragging down prices. New midstream capacity later this year from the Gulf Coast Express pipeline will bring more gas to market, adding to supply woes. More pipelines are in the offing for 2020 and 2021.

Even the increasing volumes of gas exported overseas is not enough to tighten up the market. “We expect the current oversupply to persist as production growth, mainly associated gas from oil basins, matches LNG export growth over the next year,” Bank of America Merrill Lynch wrote in a note.

While some of this is not new news, the surprising thing is that the outlook does not seem to improve the further out one looks. There is little reason to expect things to turn around. Gas production is still rising and inventories will be well-stocked next winter. “[T]oo much gas past peak winter keeps pressure on next summer and allows us to maintain our $2.6/MMbtu price projection for the 2020 strip,” Bank of America said.
Related: Why Oil Tankers In The Middle East Shouldn’t Hire Mercenaries

Even more shocking still is that the investment bank said that the market becomes more depressed as we move into 2021. “Our lofty 4.5 tcf inventory outlook for 2021 is quite bleak and drives our 2021 average price forecast of $2.4/MMbtu, which is $0.15/MMbtu below the current curve,” the bank said.

Beyond that, the queue of new LNG projects dries up, taking away a growing source of demand. The glut of LNG capacity over the last few years lead to a dearth of FIDs in new export facilities. As the list of projects currently under construction finishes up, there are few projects coming in behind them. “The real problem, in our opinion, is not the LNG export capacity growth over the next year, but is instead the lack of LNG capacity additions in 2021-2023,” Bank of America said. “During the lull in US LNG export growth, the US will likely have to rely on some combination of other sources of demand and a slowdown in production growth.”

But here is where it gets really tricky for the gas industry. Even amid the current down market, demand has also been growing quite a bit. Cheap gas has opened up new markets in petrochemicals, electric power and exports. But by the mid-2020s, renewable energy really starts to begin eating into the gas industry’s market share. To date, natural gas in the electric power sector has grown briskly, seizing market share from the mortally wounded coal industry. But in the 2020s, gas will have a tougher time, as it begins to fall prey to clean energy.

The writing is already on the wall. NextEra Energy Resources signed a deal in recent days that may offer a glimpse into the future. The deal with Oklahoma-based Western Farmers Electric Cooperative calls for a renewables combo – 250 megawatts of wind, 250 MW of solar, and 200 MW of battery storage. Integrated together, the project addresses intermittency concerns. The kicker? It’s cheaper than natural gas. “It’s actually cheaper, economically, than a gas peaker plant of similar size, particularly with the tax credits that are available right now,” Phillip Schaeffer, the principal resource planning engineer at Western Farmers, told Greentech Media. “Prices have fallen significantly over the last several years.”

As the deal shows, this is not an abstract far-off threat for gas. Gas is losing out to renewables today. “[R]enewable energy could provide headwinds for power sector natural gas demand,” Bank of America said. “Wind and solar projects, even without subsidies, are now competitive with new build natural gas generation, which is a depressing statistic for potential longer term natural gas bulls.”

“The lull in LNG demand growth that begins in 2021 and renewable headwinds are too much for the natural gas market to overcome,” Bank of America concluded. Natural gas companies are ultimately going to have to hit the brakes on new drilling, the bank said.

By Nick Cunningham of Oilprice.com
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🛢️ Will Shale Rise From The Dead?
« Reply #231 on: August 13, 2019, 01:34:51 AM »
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https://oilprice.com/Energy/Crude-Oil/Will-Shale-Rise-From-The-Dead.html

By Kurt Cobb - Aug 12, 2019, 12:00 PM CDT

Will Shale Rise From The Dead?


A flurry of coverage about the gloom and outright calamity in the shale oil business appeared last week. Low prices continue to dog the industry. But so does lack of investor interest in financing loss-making operations for yet another season. Plunging stock prices portend more bankruptcies if circumstances don't change.

I received considerable pushback last January when I asked whether U.S. shale oil had entered a death spiral. The almost constant refrain of the cheerleaders for the shale oil industry has been that increasing production demonstrates there is something wrong with my analysis and that of others who have been skeptical of the industry's claims.

We skeptics have certainly been wrong about how long the boom could go on. We could not fathom why investors kept funneling capital into businesses that were consistently consuming it with no hope of ever providing a long-term return.

I can remember when Alan Greenspan, the former U.S. Federal Reserve Bank chair, opined in December 1996 about "irrational exuberance" in the U.S. stock market. His speech turned out to be only an inflection point for the technology sector boom. The tech-heavy NASDAQ stock exchange rose 288 percent between the day Greenspan spoke and the index's peak in March 2000.

In the subsequent bust the bankruptcy courts were littered with companies that had never made dime.

So far this summer season we have heard two unthinkable utterances come from shale oil industry executives. The first linked above was that the industry has destroyed 80 percent of the capital entrusted to it since 2008. This came from a CEO no longer in the industry.

The second, however, came from one of the largest players in the Permian Basin, the hotbed of shale oil activity. Pioneer Natural Resources CEO Scott Sheffield said that the industry is running out of so-called Tier-1 acreage. That's oil-speak for "sweet spots." Those are the circumscribed areas in shale deposits within which extraction costs are low enough to justify drilling.

Outside the sweet spots there is oil, but it is much more costly to extract. The industry at one time likened shale oil production to a manufacturing operation, claiming the one could drill practically anywhere in a shale deposit and get oil out profitably. No one is making such claims credibly any more.
Related: Germany’s Big Bet On Hydrogen

Now, just two years ago the same Scott Sheffield mentioned above compared the Permian Basin to Saudi Arabia. To be fair to Mr. Sheffield, his job is to attract investors so he can drill more wells. So, I fault mostly the investors for not looking carefully at the economics of shale oil which have been free cash flow negative for the industry as a whole for almost a decade.

Some have called shale oil a Ponzi scheme. In a Ponzi scheme the books of the Ponzi operator are kept hidden from the investors so as to make sure they don't catch on that money from new investors is being used to pay exorbitant returns to old ones. In the case of shale oil, the financials were published quarterly by the publicly traded companies for all to see. And, the wealth extracted by company managements could be calculated practically to the penny.

So, why didn't investors understand what they were looking at? One possible explanation comes from an oil company executive who explained to me way back in 2009 that oil and gas companies often promote themselves as so-called "asset plays" to investors. They drill a lot of very marginal prospects to get reserves on their books and then tout the growth in their reserves. But much of those reserves will never be exploited at a profit. They are essentially a mirage.

Resource investing is tricky and most investors, even sophisticated ones, can be fooled by the hype. It's very difficult to know whether something a company calls a reserve is actually a reserve—even more so since 2008 when the Securities and Exchange Commission allowed companies to use "proprietary methods" to determine reserves that are not subject to disclosure.

It's true that the amount of oil in any one formation can be huge. But that is of no practical consequence if you can't get the oil out at a profit and do that consistently.
Related: The Revival Of A $53 Billion Megaproject

To illustrate, there is enough gold dissolved in the world's oceans to make all those who are reading this piece millionaires. But the gold remains far too costly to extract.

It seems now that investors are finally realizing that the promise of most of these "asset plays" is never going to be realized.  Even a cheerleading trade publication last week ran a piece entitled "Is the US Shale Boom Winding Down?"

We skeptics said shale oil would not work on the so-called "manufacturing model" asserted by industry. It turned out we skeptics were right. The industry actually focused on "sweet spots" that allowed lower-cost extraction.

We skeptics said that a large portion of the sweet spots would probably be exploited within a decade or so depending on the pace of drilling and the price oil. Now one of the industry's most prominent CEOs is lamenting in public about the paucity of sweet spots remaining.

We skeptics said that investors would at some point realize that shale oil was a long-term money loser. A former industry CEO did the math and calculated the damage as minus 80 percent for investors in the industry as a whole since 2008. Lately, investors seem to be reacting to facts rather than the hype.

Will shale oil rise again from the dead as it did after the 2014-2016 price decline? That will happen only if two things occur: 1) The oil price rises significantly and 2) investors have a serious bout of amnesia.

By Kurt Cobb via Resourceinsights.com
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