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OIL, Discussion
post Posted: Aug 11 2014, 09:11 PM
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The International Energy Agency in Paris says global investment in fossil fuel supply rose from $400bn to $900bn during the boom from 2000 and 2008, doubling in real terms. It has since levelled off, reaching $950bn last year. The returns have been meagre. Not a single large oil project has come on stream at a break-even cost below $80 a barrel for almost three years.

A study by Carbon Tracker said companies are committing $1.1 trillion over the next decade to projects requiring prices above $95 to make money. Some of the Arctic and deepwater projects have a break-even cost near $120. "The oil majors like Shell are having to replace cheap legacy reserves with new barrels from much more difficult places," said Mark Lewis from Kepler Cheuvreux.

The new worry is that many companies will be left with "stranded assets" as climate accords kick in. The IEA says companies have booked assets that can never be burned if there is a deal limit to C02 levels to 450 (PPM), a serious political risk for the industry. Estimates vary but Mr Lewis said this could reach $19 trillion for the oil nexus, and $28 trillion for all forms of fossil fuel.

The world's leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry.

The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets.

This is a major departure from historical trends. Such a shortfall typically happens only in or just after recessions. For it to occur five years into an economic expansion points to a deep structural malaise.

The EIA said revenues from oil and gas sales have reached a plateau since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit and are being forced to explore fields in ever more difficult regions.

The EIA said the shortfall between cash earnings from operations and expenditure -- mostly CAPEX and dividends -- has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011.

The agency, a branch of the US Energy Department, said the increase in debt is "not necessarily a negative indicator" and may make sense for some if interest rates are low. Cheap capital has been a key reason why US companies have been able to boost output of shale gas and oil at an explosive rate, helping to lift the US economy out of the Great Recession.

The latest data shows that "tight oil" production has jumped to 3.7m barrels a day (b/d) from half a million in 2009. The Bakken field in North Dakota alone pumped 1m b/d in May, equivalent to Libya's historic levels of supply. Shale gas output has risen from three billion cubic feet to 35 billion in just seven years. The EIA said America will increase its lead as the world's largest producer of oil and gas combined this year, far ahead of Russia or Saudi Arabia.

However, the administration warned in May that "continued declines in cash flow, particularly in the face of rising debt levels, could challenge future exploration and development". It said that upstream costs of exploring and drilling have been surging, causing companies to raise long-term debt by 9pc in 2012, and 11pc last year.

Upstream costs rose by 12pc a year from 2000 to 2012 due to rising rig rates, deeper water depths, and the costs of seismic technology. This was disguised as China burst onto the world scene and powered crude prices to record highs. Major disruptions in Libya, Iraq, and parts of Africa have since prevented oil from falling much below $100, even though other commodities have been in the doldrums. But even flat prices for three years have exposed how vulnerable the whole oil and gas edifice is becoming.

"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time."
- Dr John Hussman

Said 'Thanks' for this post: triage  
post Posted: Aug 7 2014, 08:10 PM
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In Reply To: marketwinner's post @ Aug 1 2014, 05:16 PM


Oil Traders Flee Brent as Prices Signal Glut: Chart of the Day

Said 'Thanks' for this post: Alethia  
post Posted: Aug 1 2014, 05:16 PM
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In Reply To: nipper's post @ Jul 14 2014, 09:14 PM


WTI Trades Near 4-Month Low as Fuel Supplies Expand.

post Posted: Jul 14 2014, 09:14 PM
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In Reply To: marketwinner's post @ Jul 14 2014, 07:54 PM

The world has 53.3 years of oil left

I would rather be roughly right than exactly wrong

"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time."
- Dr John Hussman
post Posted: Jul 14 2014, 07:54 PM
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In Reply To: marketwinner's post @ Jul 5 2014, 06:22 AM


The world has 53.3 years of oil left.

post Posted: Jul 5 2014, 06:22 AM
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In Reply To: marketwinner's post @ Jun 29 2014, 07:10 AM


U.S. Seen as Biggest Oil Producer After Overtaking Saudi Arabia


post Posted: Jun 29 2014, 07:10 AM
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In Reply To: flower's post @ Jun 13 2014, 10:32 AM


U.S. Resists Rising Oil Prices

post Posted: Jun 13 2014, 10:32 AM
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As the situation inn the Middle East rapidly deteriorates into near Civil War, the price of oil continues to rise and rise.

As of today spot WTI is USD106, TAPIS USD115, and BRENT USD113 pb.

Should any or all of these oils start to seriously break right out, we need to keep a very close eye on our ASX oil watch lists for trading possibilities, IMHO.
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post Posted: Apr 4 2014, 06:39 AM
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In Reply To: flower's post @ Apr 3 2014, 02:49 PM

sheik john key seem sto have been a quiet achiever

<h1 class="breadcrumbs">News & Issues > Issues > Economic Contribution to NZ</h1> <h1 class="pageIntroText">Oil is our 4th largest export (after dairy, meat and wood), with a value of around $2.2 billion</h1>
Economic Contribution to NZ and Industry Quickfacts
Oil and gas already make a significant contribution to the New Zealand economy:

  • Oil is our 4th largest export (after dairy, meat and wood), with a value of around $2.2 billion.
  • Gas is an important contributor to domestic industries and electricity generation – generated 18% of New Zealand’s electricity supply in 2011.
  • Oil, gas and minerals industries contributed over $4.2 billion to GDP in 2009 (with oil and gas contributing over $2.5 billion).
  • The oil and gas industry invested $1.2 billion in petroleum exploration and production in 2011.
  • Government collects around $300 million in company tax per annum.
  • Government collects around $400 million in royalties per annum from petroleum (and has collected over $4 billion in royalties to date).
  • At a minimum, the industry provides 3,730 full time equivalent jobs and supports a further 3,970 FTEs in other parts of the economy (total FTEs nationwide 7,700).
  • New Zealand companies capture between 30 and 80 per cent of the construction of major oil and gas projects in New Zealand, and there is the potential to capture more.
  • The government will receive around 42%[1] of the profit of new oil and gas developments.
  • Future royalty income from known oil and gas reserves = $3.2 billion net present value. Royalty income could rise to $12.7 billion with a 50% increase in exploration.

Production and reserves
  • One producing petroleum basin – Taranaki – but a further 17 recognised petroleum basins.
  • 19 producing oil and gas fields in Taranaki.
  • 52 wells were drilled in 2011, up from 45 in 2010.
  • Oil production declined 14% in 2011 to 17 million barrels.
  • Total remaining oil reserves declined 11% due to on-going production and a downgrade of ultimate recoverable reserves at the Tui field.
  • Gas production dropped 10 per cent from 2010, mainly due to a decrease in demand for gas-fired electricity generation.

    [1] The 42% figure is the combination of current royalty rates (the higher of 5% ad valorem and 20% accounting profits) and corporate taxes (28% of accounting profit, noting that royalties are a deduction for the purposes of income tax). The 5% ad valorem royalty gets paid for a very short period of time, typically one year or less, with most royalty collected at the 20% rate.
  • First well drilled in 1865 at Moturoa on the Taranaki foreshore. Since then over 1,000 petroleum wells have been drilled in New Zealand, of which more than 350 since 2011 and 197 offshore (of the 197 offshore wells, 176 are offshore Taranaki).
  • Kapuni was the first oil/gas field in New Zealand. It started production in 1969.
  • Total number of permits (first quarter 2012): 1,030 of which:
797 (77.4%) minerals permits

83 (8.1%) petroleum permits.

  • Oil exports dropped 14% in 2011 to 16 million barrels due to decreased production from fields

post Posted: Apr 3 2014, 02:49 PM
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CVN are updating their shareholders on a regular basis about the whole of the North West Shelf, its worth noting that as Australian refineries close, we will soon have only three, we will have to finance and depend on oil imports much more.

Given our oil producing potential, that seems scandalous, we should be oil self sufficient nearly.

Purpose of CVN's latest update is to highlight obviously the upcoming Phoenix South well, but just as importantly to have a look at what Woodside are doing. WPL are about to start a large NW Shelf drilling programme, and given the size of the existing infrastructure and the size of CVN's acreage holding (apart from the Phoenix sites) it is of extreme importance to CVN especially that WPL are successful in this drilling programme, hope some find this a worthwhile read:

Good luck, Woodside a follow up to the "Next Big Thing"

Thursday, 3 April 2014. David Upton EnergyNewsPremium.net
THIS column recently looked at forthcoming drilling in the Roebuck Basin and pointed out it could herald the next big thing in Australia’s petroleum sector.
The focus of that story was on Apache and its junior partners in Phoenix South-1 (Carnarvon Petroleum, Finder Petroleum).
The other well about to spud is the Woodside-operated Hannover South-1, which will be followed in quick succession by Steel Dragon-1 and Anhalt-1.
All three wells are targeting multi-trillion cubic feet gas prospects in untested Triassic reservoirs between the Carnarvon and Browse Basins.
It is difficult to recall more important wildcats in the history of Woodside.
Gnarlyknots-1 in the Great Australian Bight a decade ago might match these wells in terms of upside from a frontier. It targeted oil and could have been transformational even for a company as large as Woodside.
However, a decade ago, Woodside did not need a big new discovery as badly as it does today.
Recent annual reports show Woodside’s reserve life (2P developed and undeveloped reserves divided by annual production) has shortened alarmingly from 25.3 years in 2011 to only 15.9 years in 2013.
This reflects the lack of commercial discoveries in Australian waters since Ragnar-1/1A in early 2012, and, far more significantly, the commissioning of Pluto LNG.
Pluto has dramatically increased the rate Woodside is burning through its reserve base from about 65 million barrels of oil equivalent to 90MMboe per annum.
Woodside is engaged in many different projects to turn this around. The best of these in terms of immediate fixes is the 4000sq.km Fortuna 3D seismic survey over the heart of the North West Shelf.
The survey has just been completed with Schlumberger’s remarkable Isometrix technology, which collects 60 times more data than a conventional 3D survey.
One of the major objectives of the technology is to penetrate the carbonate rocks along the Madeleine Trend that have defied seismic exploration efforts for the past 30 years.
The Madeleine Trend is parallel to the coast and slightly inboard from the main fields and production facilities.
If there is still undiscovered oil and gas in the core areas of the North West Shelf, Woodside and its partners will find it soon.
Woodside’s other hopes for boosting its 2P reserve base are quite a mixed bag.
A final investment decision on a floating Browse LNG project, which is scheduled for the third quarter of next year, would convert a contingent resource of 955MMboe (Woodside’s share) to 2P reserves, and add about 10 years to reserve life.
However, given it might take five years from now to reach production, even Browse LNG would not restore the company’s reserve life to pre-Pluto LNG levels.
Sunrise LNG, if development agreement with Timor-Leste could ever be reached, would add only four years to the company’s reserve life.
Against this background, it is easy to see why the idea of buying a large volume of 2C resources from Leviathan’s partners is such a priority.
Woodside has, over the past year, ventured into a number of international frontiers with big upside, including Myanmar, Ireland and New Zealand.
All of these projects are at least two years behind the Roebuck Basin and work in the adjacent Beagle sub-basin of the Northern Carnarvon Basin.
Woodside and its partner Shell wrapped up 11,000sq.km of 3D seismic at the end of 2012, and have the Deepwater Millennium on site spudding the first of up to eight wells by the end of next year.
There are plenty of critics out there that hope Woodside and Shell will fail.
It will add to the narrative of a company that has lost its way, with an exploration department that cannot seem to make discoveries any more.
All Australians at this point ought to be sending their good wishes to Woodside, though, because it is the closest thing we have to a national oil company.
Discovery in the Roebuck Basin could open a rich petroleum frontier for the country and solve many of Woodside’s most pressing challenges.
It would also revive the spirits of the beleaguered exploration department, and encourage continued investment by Woodside in Australia’s petroleum geoscientists.
Exploration is a difficult and unpredictable business. It is not understood by most finance people, despite the fact they owe their jobs to the explorationists.
Geoscientists are the real wealth creators in the petroleum business.
When discoveries are not made for a period of time, the finance people start questioning why all this money is being wasted and demand budgets be cut.
Woodside’s exploration budget was halved in 2012 to $260 million compared to the previous year, and remained at this level in 2013. It is budgeted to reach about $450 million this year, but is still well short of the historical levels of $600 million or more per annum.
If exploration in the Roebuck Basin is not successful, Woodside’s support for petroleum geoscience in this country will come under greater challenge.
There will also be a sharp rise in pressure from the finance people for Woodside to engage in mergers and acquisitions of the Leviathan kind.
Let us wish them good luck for the 2014 exploration program.

Combining Fundamental comments with Fundamental charts.

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