AuthorTopic: Hills Group Oil Depletion Economic and Thermodynamic Report  (Read 65060 times)

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🛢️ What Will Follow The Biggest US Rig Count Collapse In History
« Reply #255 on: May 13, 2020, 04:29:43 AM »
That's an EZ question to answer.  Further economic mayhem.

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https://oilprice.com/Latest-Energy-News/World-News/What-Will-Follow-The-Biggest-US-Rig-Count-Collapse-In-History.html

What Will Follow The Biggest US Rig Count Collapse In History
By Rystad Energy - May 11, 2020, 1:30 PM CDT


The Covid-19 pandemic has caused the largest horizontal rig count collapse ever recorded in the US, a Rystad Energy analysis of Baker Hughes data shows. The total horizontal oil rig count fell below 270 rigs last week, a 57% decline from the peak of 624 rigs seen in the middle of March 2020. Horizontal gas drilling was down to 70 rigs last week, which is 54% below the previous peak seen in June 2019.

The magnitude of the decline in horizontal oil drilling makes this downturn even more unique, compared to the previous downturn of 2015-2016, where declines all the way from the peak to the trough reached around 53% to 54%.

While we have not reached the bottom yet, we have most likely passed the peak pace of decline, both in absolute and percentage terms. After several weeks of observing a decrease of 50-55 rigs per week, the oil rig count was down by only 32 rigs last week. On a two-week basis, a 23.4% fall was recorded last week – certainly moderate in comparison to the peak two-week decline level of 25.6% seen the week before.

“The oil price crisis and the impact of Covid-19 has resulted in the most dramatic collapse of the US Land rig market in history. There are two key trends around basin mix; the share of Permian increased in terms of total horizontal oil drilling from around 62% to about 73%, while the share of gas in total horizontal drilling increased from 12% to 21%. We anticipate that both of these shares will continue to climb in the next few weeks.,” says Artem Abramov, Rystad Energy’s Head of Shale Research.

The number of counties with active horizontal oil drilling across the whole country has kept declining. Last week, North Slope in Alaska, Walker Ridge in Louisiana, and Ellis County in Oklahoma saw the departure of their last active rigs. This brought the total number of active counties in the country from 49 to 46, a record-low level in modern history.

Meanwhile, the number of active counties has stabilized in the state of Texas at 28 counties, and in the Permian Basin at 18 counties.

Total horizontal rig count in the Permian fell below 200 rigs and now exhibits more than 50% decline from the peak in March 2020. The three largest sub-basins, Delaware New Mexico, Delaware Texas and Midland North, are now diverging rapidly from each other in terms of the magnitude of decline. Delaware Texas is rapidly losing its rigs having fallen from the peak of 118 rigs to 44 rigs, due to both structural declines and the reallocation of some rigs to sweet spots in New Mexico.

Midland-focused operators with Delaware exposure have always prioritized activity outside Delaware acreage. Drilling in Delaware New Mexico stabilized last week, although additional declines might still be observed in the next few weeks. The relative resiliency of Delaware New Mexico can be largely explained by the lack of drilling activity declines realized by ExxonMobil and Devon Energy, which together account for around 50% of the active rigs now in the sub-basin.

The Midland North Basin is seeing more significant declines than Delaware New Mexico, though these declines are really driven by the eastern portion of the basin, which hosts Howard and Glasscock counties. Midland County, for example, exhibits only 44% decline from the peak, which is comparable to Lea County in New Mexico.

Outside of the Permian, declines persist in Eagle Ford, Bakken and SCOOP & STACK. The total horizontal rig count in these three basins combined is down to 59 rigs which is around a 66% decline from the peak activity level seen in early 2020. Horizontal drilling has been relatively flat in DJ and PRB basins in recent weeks, following a period of material downward adjustment.

Gas-focused drilling has kept declining gradually, although Haynesville is now exhibiting some signs of stabilization. Total horizontal gas drilling in Appalachia, which includes Marcellus and Utica, is already down to 35 rigs. The rig count could fall below 30 by the end of 2Q20 before stabilizing in the second half of the year.

By Rystad Energy
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🛢️ Is EIA Data Disguising A Disastrous Decline In U.S. Shale?
« Reply #256 on: May 14, 2020, 03:45:49 AM »
EIA data is about as reliable as BLS data.  ::)

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https://oilprice.com/Energy/Crude-Oil/Is-EIA-Data-Disguising-A-Disastrous-Decline-In-US-Shale.html

Is EIA Data Disguising A Disastrous Decline In U.S. Shale?
By Nick Cunningham - May 13, 2020, 7:00 PM CDT


The Trump administration claims that the U.S. is “transitioning to greatness,” and that energy companies are going to see “massive gains.” U.S. Secretary of Energy Dan Brouillette says there is “stability” in the oil market, and that economic activity will “explode” on the other side of the pandemic. Thanks to the leadership of President @realDonaldTrump, the transition to greatness is well underway, and our economy along with our U.S. energy companies are going to see massive gains on the other side of this pandemic. pic.twitter.com/EZ2DFnlcUw

Meanwhile, back in reality, U.S. oil production continues to decline as drillers shut in wells and cut back spending. Output has already declined by 1.1 million barrels per day (mb/d), and more losses are likely. New data from Rystad Energy predicts U.S. oil production declines of roughly 2 mb/d by the end of June.

“Actual production cuts are probably larger and occur not only as a result of shut-ins, but also due to a natural decline from existing wells when new wells and drilling decline,” Rystad said in a statement.

Energy expert Philip Verleger, in an article for Energy Intelligence reports that the magnitude of output declines is much larger. His latest research shows that production as of May 10 is down by almost 4 million bpd from its peak as the below chart shows.

Source: PK Verleger LLC

To be sure, the U.S. government is doing quite a bit to try to bailout the oil industry. A new report finds that some 90 oil and gas companies will benefit from the Federal Reserve’s corporate bond buying program. The Trump administration is also quietly reversing environmental protections on the oil and gas industry.

But in the face of a historic meltdown in the oil market, even handouts from Uncle Sam won’t stop declines. The U.S. oil industry continues to idle drilling rigs at a tremendous clip, and the rig count is down by more than half in two months. “[W]e think that the last time there was so little drilling activity in the US was the 1860s during the first decade of the Pennsylvania oil boom,” Standard Chartered analysts said. The investment bank said that the contraction was notably acute in Oklahoma, where rigs fell to just 11 across the state, down 89 percent from the same period a year earlier.

Related: Has Demand For Oil Already Peaked?

The sharp decline in rigs, drilling and completion activity means that the steep decline rates endemic to shale drilling will overwhelm what little new production comes online. Standard Chartered said that if activity were to remain stuck at current levels, U.S. production in the five main shale basins would fall by 2.89 mb/d by the end of 2020.

Those declines would come on top of the output that has only been shut in temporarily. Standard Chartered envisions a “squashed-W pattern” for supply, in which temporarily idled output comes back online in a few months, but more structural declines continue thereafter.

The EIA, characteristically, is much more optimistic about the state of U.S. supply. The agency said on Tuesday that it only sees a 0.5 mb/d decline in oil production this year, compared to 2019 levels. Notably, Secretary of Energy Dan Brouillette says production will increase in the third and fourth quarters as the economy roars back.

Others aren’t so sunny. A report from Wood Mackenzie released on Wednesday says that oil demand will take years to recover.

“Production is falling sharply in the US, and some producers are reluctant to sell forward,” Commerzbank wrote in a note.

But while some oil drillers have hesitated to lock in hedges, others have decided that they can stomach hedges at extremely low prices, not because they can profit at such low levels, but likely only to guard against another meltdown. “The strike prices achieved in the latest surge of hedging have been low, these appear to be hedges designed to improve the probability of survival should market conditions deteriorate further,” analysts at Standard Chartered wrote in a report.

“Some of the hedges have been fixed at very low prices: one company has a USD 20.73/bbl WTI hedge for Q2, another has three-way collars for Q3 and Q4 with a floor of USD 25/bbl Brent,” Standard Chartered added.

The unease from some drillers regarding oil prices is understandable. The Secretary of Energy may predict “greatness” ahead, but others see a long, protracted economic recovery.

By Nick Cunningham of Oilprice.com
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🛢️ U.S. Rig Count Collapse Continues Despite Soaring Oil Prices
« Reply #257 on: May 23, 2020, 12:02:26 AM »
https://oilprice.com/Energy/Energy-General/US-Rig-Count-Collapse-Continues-Despite-Soaring-Oil-Prices.html

U.S. Rig Count Collapse Continues Despite Soaring Oil Prices
By Julianne Geiger - May 22, 2020, 12:00 PM CDT


Baker Hughes reported on Friday that the number of oil and gas rigs in the US fell again this week by 21, falling to 318, with the total oil and gas rigs sitting at 665 fewer than this time last year—a more than 67% drop off in a single year.

The number of oil rigs decreased for the week by 21 rigs, according to Baker Hughes data, bringing the total to 237—a 560-rig loss year over year. It is the fewest number of active oil rigs in play since mid-2009.

The total number of active gas rigs in the United States held at 79 according to the report. This compares to 186 rigs a year ago.

The significant fall in the rig count over the last couple of months is also reflected in the EIA’s estimate for oil production in the United States, which fell again this week to 11.5 million barrels of oil per day on average for week ending May 15, which is 1.6 million bpd off the all-time high and 100,000 bpd lower than the week prior. It is the seventh straight weekly production decline.

Canada’s overall rig count decreased by 2 rigs this week, to 21 rigs. Oil and gas rigs in Canada are now down 57 year on year.

At 12:08 pm, WTI was trading down 2.92% at $32.93. Although down on the day this is nearly $4 up week over week. The Brent benchmark was trading down 3.22% at $34.90 on the day, but up nearly $3 per barrel week over week. The price dip on Friday is courtesy of market fears after China on Friday did not release annual economic outlook as was expected. 

By Julianne Geiger for Oilprice.com
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☀️ America's Oil & Gas Capital Is Turning To Renewables
« Reply #258 on: May 29, 2020, 08:42:27 AM »
A Clusterfuck waiting to happen.   ::)

RE

https://oilprice.com/Latest-Energy-News/World-News/Americas-Oil-Gas-Capital-Is-Turning-To-Renewables.html

America's Oil & Gas Capital Is Turning To Renewables
By Michael Kern - May 28, 2020, 8:30 PM CDT


When we think of Texas, we think of Big Oil. Even more so in its largest city, Houston. Home to some of the world’s largest private energy companies, Houston lives and dies on oil. But it is also the biggest buyer of….renewable energy.

The city of Houston has committed to purchasing 100% renewable energy as a part of a renewed collaboration with NRG Energy. Throughout the seven-year agreement, the city predicts seeing the cost of electricity for the community falling, resulting in $9.3 million saved every year.

Mayor Sylvester Turner noted, “All they see in the city of Houston is Chevron and Shell and Exxon. They kind of look past the city of Houston, but there are some incredible things that are happening in the city of Houston when we start talking about renewables.”

This new deal is just the most recent in a string of initiatives helping to push the city in a more eco-friendly direction. In addition to the renewables pledge, the city is also building new bike lanes and encouraging the use of electric cars. It's even proactively courting Elon Musk to move Tesla Inc. and SpaceX to the "Space City" in hopes the offer will help other businesses see Houston for what it really is, rather than simply the global capital of the oil & gas business.

The strategy also looks to expand Houston's investments in its own renewable resources, with the goal of powering the city with 100% renewable energy by 2025, rather than purchasing it. Houston is currently the biggest customer of renewable energy in the country, according to the United States EPA.

Houston’s chief sustainability officer Lara Cottingham explained, “As a city, we have a really long and strong history of sustainability. From a sustainability perspective, we’ve been the largest municipal user of renewable energy for some time now.”

By Michael Kern for Oilprice.com
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Re: ☀️ America's Oil & Gas Capital Is Turning To Renewables
« Reply #259 on: May 29, 2020, 09:20:51 AM »
A Clusterfuck waiting to happen.   ::)

RE

https://oilprice.com/Latest-Energy-News/World-News/Americas-Oil-Gas-Capital-Is-Turning-To-Renewables.html

America's Oil & Gas Capital Is Turning To Renewables
By Michael Kern - May 28, 2020, 8:30 PM CDT


When we think of Texas, we think of Big Oil. Even more so in its largest city, Houston. Home to some of the world’s largest private energy companies, Houston lives and dies on oil. But it is also the biggest buyer of….renewable energy.

The city of Houston has committed to purchasing 100% renewable energy as a part of a renewed collaboration with NRG Energy. Throughout the seven-year agreement, the city predicts seeing the cost of electricity for the community falling, resulting in $9.3 million saved every year.

Mayor Sylvester Turner noted, “All they see in the city of Houston is Chevron and Shell and Exxon. They kind of look past the city of Houston, but there are some incredible things that are happening in the city of Houston when we start talking about renewables.”

This new deal is just the most recent in a string of initiatives helping to push the city in a more eco-friendly direction. In addition to the renewables pledge, the city is also building new bike lanes and encouraging the use of electric cars. It's even proactively courting Elon Musk to move Tesla Inc. and SpaceX to the "Space City" in hopes the offer will help other businesses see Houston for what it really is, rather than simply the global capital of the oil & gas business.

The strategy also looks to expand Houston's investments in its own renewable resources, with the goal of powering the city with 100% renewable energy by 2025, rather than purchasing it. Houston is currently the biggest customer of renewable energy in the country, according to the United States EPA.

Houston’s chief sustainability officer Lara Cottingham explained, “As a city, we have a really long and strong history of sustainability. From a sustainability perspective, we’ve been the largest municipal user of renewable energy for some time now.”

By Michael Kern for Oilprice.com

Houston is a clusterfuck that already happened. Is still happening.....but actually, renewables in Texas are a decent move...because....we still have a ton of hitherto untapped wind.

Wind is a much better EROEI than solar. At least 3X better, maybe a lot more, depending on who you believe.

What makes the desert beautiful is that somewhere it hides a well.

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🛢️ A Nightmare Scenario For Offshore Oil
« Reply #260 on: May 31, 2020, 01:20:38 AM »
https://oilprice.com/Energy/Energy-General/A-Nightmare-Scenario-For-Offshore-Oil.html

A Nightmare Scenario For Offshore Oil
By Editorial Dept - May 30, 2020, 6:00 PM CDT


Between low demand, soaring inventories, depressed prices, a global pandemic, and now, hurricane season, it seems a perfect storm is forming around the offshore oil industry.  The world's offshore oil market, responsible for 30 percent of all the world's oil production, is facing an impossible set of challenges. With oil sitting at half the price of its yearly high, and doubts forming around the future of demand, in addition to the ongoing COVID-19 pandemic wreaking havoc on the global economy, companies are struggling to rein in capital spending and are beginning to rethink the future of key projects.

The crisis has pushed much of the world's oil production onshore in favor of more flexible rigs and lower operational costs.

Many new offshore projects have even been put on hold as the new reality of the oil market sets in. Companies are now scrambling to suspend federal lease deadlines as the near-term looks increasingly uncertain.

The industry's growing troubles come just as Royal Dutch Shell was forced to airlift a number of coronavirus-infected employees from one of its offshore platforms, highlighting the risks associated with confining workers on offshore rigs during a pandemic.

And Shell isn't the only company grappling with outbreaks.

Related: Oil Prices Are Unlikely To Break $40 This Year

In recent weeks, hundreds of workers at offshore rigs in the Gulf of Mexico, the North Sea, Mozambique, Canada, and Kazakhstan have been infected with COVID-19.

The outbreaks add to the growing list of trials and tribulations the offshore industry is grappling with.

Many firms operating offshore rigs have yet to recuperate from the last oil price collapse in 2014-2015 when prices fell from $100 to below $40, weighing on the entire industry.

“Offshore drillers and offshore vessel providers will generally be unable to pay their total outstanding debt of 2020 based on their cash flow from operating activities, unless they are able to make sufficient capital expenditure cuts,” Jon Marsh Duesund, a partner at energy research firm Rystad Energy explained, adding, “Otherwise, they will have to turn to capital markets for refinancing.”

And with the global economy teetering on the brink, the industry may not be able to secure the funds it needs to stay afloat.

By Michael Kern for Oilprice.com
« Last Edit: May 31, 2020, 01:23:07 AM by RE »
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🛢️ The Oil & Gas Sector Could Already Be In Terminal Decline
« Reply #261 on: June 18, 2020, 02:50:41 AM »
https://oilprice.com/Energy/Crude-Oil/The-Oil-Gas-Sector-Could-Already-Be-In-Terminal-Decline.html

The Oil & Gas Sector Could Already Be In Terminal Decline
By Robert Rapier - Jun 17, 2020, 12:00 PM CDT


The fossil fuel industry has faced serious headwinds for several years, but the rise of renewables combined with the fall in consumption as a consequence of the global corona crisis is pushing it over the edge and into “terminal decline”. Although global coal consumption continues to grow slowly, its use has peaked in developed regions. According to the 2019 BP Statistical Review of World Energy, U.S. coal consumption fell by more than 40% in the past decade, while in the EU it has seen a nearly 27% drop.

The primary culprits behind coal’s decline are competition from cheap natural gas brought on by the shale gas boom in the U.S., as well as a surge of renewable capacity aided by legislation aimed at curbing carbon dioxide emissions.

Victims of Their Own Success

But the natural gas and subsequent oil boom were victims of their own success. Even though demand growth for both of these commodities has been robust over the past decade, prices have plunged. So while it’s unsurprising that the coal industry has suffered immense financial stress over the past decade, the same is true of the oil and gas industry. Despite strong demand growth for its products, the prices of oil and natural gas have fallen by more than 50% in recent years.

The fossil fuel industry has faced an oversupply problem, as well as a public relations problem. Even before the COVID-19 pandemic, the industry was already seen by many as one on its way out, and therefore it struggled to attract investors. Nevertheless, it seemed likely that the industry would enjoy at least another decade of dominance before renewables and electric vehicles combined to put the industry into permanent decline.

COVID-19 Rapidly Changed the Outlook

But COVID-19 has caused a significant change in the industry outlook. In the early stages of the pandemic, China’s economy slowed as the country grappled to contain the virus. This slowdown had a negative impact on fossil fuel demand. As oil demand began to soften, OPEC tried to work with Russia to reduce production. Talks failed, a subsequent price war broke out between Saudi Arabia and Russia, and oil prices collapsed. 
Related: India Looks To Double Oil Refining Capacity By 2030

As COVID-19 spread to other countries and quarantines were implemented, oil prices ultimately fell into negative territory, which had never happened before with a major benchmark. Power demand fell as businesses closed and people stopped travelling or commuting. This created a perfect storm that obliterated fossil fuel demand in April. Global oil demand fell by as much as 30 million BPD, followed by gas and coal demand. Even demand for liquefied natural gas (LNG), which has seen strong growth in recent years, plummeted, and cargos destined for Asia had to be rerouted to Europe, adding to a supply glut there.

Meanwhile, renewables may see a small negative impact from the pandemic in the short term – but the move toward green energy may gain momentum as the COVID-19 threat fades. Underlying demand for clean energy is rising.  Further, the investment climate for fossil fuels will continue to worsen over time, so the industry may find itself struggling to attract new capital even after the crisis.

A Place for Nuclear Power

However, existing infrastructure of fossil fuels will create some headwinds for renewables, as well as nuclear power, the world’s largest source of low-carbon energy. The industry will hardly give up its primacy without a fight.

What this looks like can be observed in Lithuania, which had placed its chips on a new LNG terminal in 2014 to reduce the country’s dependence on Russian gas. However, the Klaip?da terminal was never profitable, and to this day operates at only a fraction of its capacity while incurring costly maintenance fees shouldered by gas consumers. To curb its losses, Klaip?da now receives LNG cargoes from Russia too.

Part of the problem is that the LNG market price was already depressed before the COVID crisis. In 2015, when the terminal went online, the price was lower than the price Lithuania paid to Statoil, which forced the state to levy high terminal fees to cover for the losses from selling gas. Now, with the pandemic having further collapsed fossil fuel prices, the fees are going up accordingly, with no contribution to energy security.
Related: Oil Markets May Not Fully Recover Until 2022

The decision to bank on LNG under these circumstances is seen as one of the factors leading Lithuania to campaign against a nuclear power plant in Astravets in neighbouring Belarus. Besides constantly questioning the plant’s safety – contrary to international assessments – Lithuania has passed laws prohibiting the purchase of energy from Belarus after the power plant begins operations later this and next year. Furthermore, Lithuania is aggressively lobbying Brussels and other capitals in the region for a full boycott of electricity imports from Belarus. If implemented, this could lead to millions of additional CO2 emissions in the region.

The New Energy Order?

The fact remains that the world could find itself with an energy shortfall if the crisis is long-lasting and fossil fuels disappear faster than originally expected. That could hit the power sector because of falling coal and natural gas production, at a time that global demand for electric vehicles is growing.

Nuclear power can be part  of a low-carbon sustainable future along with renewable energy. Indeed, the International Energy Agency estimates that in order to meet the world’s sustainability targets the current rate of nuclear capacity additions, which is about 10-12 gigawatts of electricity (GWe) per annum, must be at least be doubled. With the current crisis impacting the fossil fuel sector, capital budgets are being slashed. That implies a decline in output, which could be larger than the capacity of variable renewables to absorb. The current glut of energy supply may turn into a series of severe intermittent shortages when sun doesn’t shine, and wind doesn’t blow.

Although it would be premature to suggest that the current pandemic marks the end of fossil fuels, it might not be a stretch to call this the beginning of the end. It’s important to focus on the overall system performance and ensure that the transition to a low carbon future is sustainable itself.

By Robert Rapier for Oilprice.com
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🛢️ China’s Oil Industry Is In Crisis
« Reply #262 on: June 23, 2020, 01:50:25 AM »
https://oilprice.com/Energy/Crude-Oil/Chinas-Oil-Industry-Is-In-Crisis.html

China’s Oil Industry Is In Crisis
By Tsvetana Paraskova - Jun 22, 2020, 12:00 PM CDT

    The low oil prices and the economic slowdown from the COVID-19 pandemic have hit the finances of Chinese companies hard.
    Another Chinese oil firm has defaulted on a dollar-denominated bond.
    Hilong Holding is currently assessing the impact of the default on its other indebtedness.


Another Chinese oil firm has defaulted on a dollar-denominated bond, bringing the total value of defaults in all sectors of China’s offshore bond market to US$4 billion so far this year, more than double the value of defaults in the same period last year, Bloomberg estimates.

 

Oil equipment and oil services company Hilong Holding said on Monday that it is defaulting on a US$165-million bond after an insufficient percentage of noteholders had agreed to swap the notes with new debt. The minimum acceptable level of noteholders to agree to the debt exchange offer was 80 percent, while just 63.45 percent had agreed to tender notes for the exchange offer. 

 

“As previously announced, without a consummation of the Exchange Offer, the Company does not and will not have alternative financing means available to repay the Existing Notes upon maturity,” which was June 22, the company said.

 

Hilong Holding is currently assessing the impact of the default on its other indebtedness, it said.

Related: Why The $17.5 Billion Write-Down Is Just The Beginning For BP

 

Earlier this month, Fitch Ratings downgraded Hilong Holding’s Long-Term Foreign-Currency Issuer Default Rating to CC from B to reflect the high refinancing risk related to the US$165-million 7.25% senior unsecured notes due on June 22. According to Fitch, low oil prices may result in a longer-term deterioration in Hilong Holding’s credit metrics as sales decline and margins contract.

 

The low oil prices and the economic slowdown from the COVID-19 pandemic have hit the finances of Chinese companies, including such in the oil industry, and defaults in its so-called offshore bond market have accelerated in recent months.

 

Last month, Hong Kong-listed oil exploration firm MIE Holdings Corporation defaulted on a dollar-denominated bond, becoming the first victim from the oil sector in China’s offshore bond market. Independent oil refiner Shandong Qingyuan Group later also failed to pay a principal installment of a US$1-billion loan. 


By Tsvetana Paraskova for Oilprice.com
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🛢️ Saudi Arabia Eyes Total Dominance In Oil And Gas
« Reply #263 on: July 01, 2020, 12:13:54 AM »
https://oilprice.com/Energy/Crude-Oil/Saudi-Arabia-Eyes-Total-Dominance-In-Oil-And-Gas.html

Saudi Arabia Eyes Total Dominance In Oil And Gas
By Julianne Geiger - Jun 30, 2020, 7:00 PM CDT


Saudi Arabia’s Energy Minister Prince Abdulaziz claimed last week that the Kingdom will be the world’s biggest hydrocarbon producer “even” in 2050.

“I can assure that Saudi Arabia will not only be the last producer, but Saudi Arabia will produce every molecule of hydrocarbon and it will put it to good use … It will be done in the most environmentally sound and safe way and the most sustainable way,” Abdulaziz said when asked about the oil market outlook in 2050 during a virtual conference convened by Saudi Arabia’s Future Investment Initiative Institute (FII-I).

Abdulaziz added that Saudi Arabia “will be the last and biggest producer of hydrocarbon even then,” referring to 2050.

But is Saudi Arabia’s the world’s leading hydrocarbon producer now? And what is its legitimate prospect for being the largest hydrocarbon producer in 2050?

‘Hydrocarbon’ Explained

To unpack what the prince is claiming, we first must understand the hydrocarbon classification. A hydrocarbon is an organic compound that contains only carbon and hydrogen. This encompasses petroleum, natural gas, and condensates.

Is Saudi Arabia the world’s largest hydrocarbon producer?

Saudi Arabia’s oil production in 2019, which includes crude oil, all other petroleum liquids, and biofuels--this would include natural gas plant liquids and condensate--was an average of 11.81 million bpd, according to the Energy Information Administration (EIA). At 12% of the world’s total, it’s no wonder why Saudi Arabia holds so much market sway, especially when in cahoots with the rest of the OPEC members.

Russia, too, is right up there, producing an average of 11.49 million bpd, or 11% of the world’s total. This is also no wonder, then, that when you put Russia and Saudi Arabia together to “stabilize” the world’s oil supply to balance it with demand, it creates a crude oil production powerhouse that is unmatched.

But individually speaking, Saudi Arabia is not king of the oil production hill, for its nemesis--the country that sought to undo every production quota OPEC could come up with, is the United States. On its own, the United States produced 19.51 million barrels of oil (and other petroleum liquids) per day, besting both Saudi Arabia and Russia, and controlling 19% of the world’s oil supplies.

The rest of the countries on their own are significantly further down the list, with not one of them producing more than half of third-place Russia. Still, Canada and China--#4 and #5 respectively--are still worth mentioning.

But Saudi Arabia expects to be the largest hydrocarbon producer “still” in 2050. If they are not so now, what are the chances they will be so thirty years from now?

Perhaps out of step with Saudi Arabia’s grand Vision 2030 plan, The Kingdom is still hoping to be top dog for petroleum production decades from now.

The EIA, in its Annual Energy Outlook 2020, has forecast that global production of crude oil and lease condensate, natural gas plant liquids, dry natural gas, and coal in the United States will reach 90.29 quadrillion Btus in its reference case.  For crude oil and lease condensate, the EIA expects that the United States will be on par with where it is today, in its reference case. For natural gas plant liquids production, the EIA anticipates an increase by 2050.

Source: EIA Annual Energy Outlook 2020

The reason for the EIA assuming oil production will level off in 2022 and holding fairly steady through 2045 is the anticipated decline in well productivity, forcing tight oil producers to hunt for oil is less prolific areas.

For Saudi Arabia, it’s 30-year hydrocarbon plan or abilities are more of an unknown. It has the world’s second-largest crude oil reserves, and it does have plans to add natural gas production in the coming years as it looks to step away from its near-total reliance on crude oil.

For natural gas, Saudi Arabia announced earlier this year that it may actually bring forward its plans to export natural gas by 2030. It did not, however, provide details about this plan, or how it would be implemented.

But it’s detailless plans may run into some trouble. For starters, while Saudi Arabia has an excess of low-cost associated gas reserves that it could tap, the production of said gas would be limited to the amount of crude it can produce. And crude oil production is periodically--and profoundly so right now--capped by OPEC agreements that keep the Kingdom’s fossil fuel ambitions in check.

But the EIA sees the OPEC countries besting non-OPEC countries on the production front by 2050

By 2050, the EIA sees the production of crude oil, lease condensate, natural gas plant

liquids (NGPLs) and other liquid fuels from 2018 to 2050 reaching 121.5 million barrels per day (b/d) in 2050, or about 21% more than 2018 levels.

For crude oil and lease condensate, the EIA sees OPEC members increasing production by 9.5 million bpd, and nonOPEC countries increasing their crude oil and lease condensate production by 8 million bpd. This translates into a 27% increase for OPEC countries and a 17% increase for non-OPEC countries, according to the EIA’s International Annual Energy Outlook.

Overall, the EIA expects the OPEC countries to produce 56% of total global production in 2050.

Most of that production increase that OPEC nations (27%) will see will come from the Middle East, which is expected to increase by 35% to 2050.

Meanwhile, production in Russia (14%) and Canada (123%) are expected to increase at a quicker rate than the United States (8%) and Brazil (50%).

Using historical production figures courtesy of BP and forecasts published by peakoilbarrel, the top four oil producers remain in their positions through 2050.

Toeing the Saudi Line

Prince Abdulaziz’s chest-puffing seems to be in line with Saudi Arabia’s previous assertions that oil will be alive and well in 2050 despite attempts to spur the world along an energy transition. Even as far back as 2007, Aramco said it could boost reserves to as many as 1 trillion barrels by 2027, adding that it would be 2050 or later before production peaks. 

But some of Saudi Arabia’s forecasts of fossil fuel’s future were more sober-minded, even seeing a phasing out of fossil fuels by the middle of this century, Ali al-Naimi, Saudi Arabia’s oil minister at the time said in 2015.

“In Saudi Arabia, we recognize that eventually, one of these days, we are not going to need fossil fuels. I don’t know when, in 2040, 2050 or thereafter,” al-Naimi said, adding that Saudi Arabia was therefore planning on becoming a “global power in solar and wind energy.”

By Julianne Geiger for Oilprice.com
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