Oil

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adrian2
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Re: Oil

Post by adrian2 » 30 May 2016 19:39

like_to_retire wrote:
"It is increasingly plausible to foresee a future in which cheap renewable electricity becomes the world's primary power source and fossil fuels are relegated to a minority status,"
If you live in Ontario, you know the cheap electricity claim is simply not true.
And cheap renewable electricity is an ever bigger lie.
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Re: Oil

Post by AltaRed » 07 Jul 2016 16:33

US production continues to fall off http://www.eia.gov/dnav/pet/hist/LeafHa ... rfpus2&f=w Down 1.2 million barrels per day in just over a year. The decline has been accelerating in recent months albeit the time period is too short yet to call it a trend. That said, a drop of another 0.5-1.0 million barrels per day is not inconceviable by year end if the trend more or less continues and that will definitely help to firm up the market.
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Re: Oil

Post by 8Toretirement » 11 Jul 2016 14:20

AltaRed wrote:US production continues to fall off http://www.eia.gov/dnav/pet/hist/LeafHa ... rfpus2&f=w Down 1.2 million barrels per day in just over a year. The decline has been accelerating in recent months albeit the time period is too short yet to call it a trend. That said, a drop of another 0.5-1.0 million barrels per day is not inconceviable by year end if the trend more or less continues and that will definitely help to firm up the market.
Tight oil is ready to come back online as soon as the price is viable. Causing a renewed cycle. The only way this price destruction ends is when the Saudis decide to restrict oil flow to firm up the price. It's incredible that they have gone this long without restricting oil flow. By all accounts they need about $70/barrel to balance their budget, although they have made some unpopular reductions on subsidies within the Kingdom so maybe they trimmed $10 a barrel off their bottom line. Still, they are drawing down assets in their wealth funds to balance the budget. This can only go on for another couple of years and they will be broke. We can outlast them but it will be ugly. Saudis only have oil, not much else to offset GDP.

Our smaller oil companies may go bankrupt but they will be absorbed by stronger balance sheets. Still, costs are being driven down each quarter, which will make them much more profitable when the price recovery comes. The question is which ones?

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Re: Oil

Post by AltaRed » 11 Jul 2016 15:04

8Toretirement wrote:Tight oil is ready to come back online as soon as the price is viable. Causing a renewed cycle. The only way this price destruction ends is when the Saudis decide to restrict oil flow to firm up the price.
It is my view the Saudis will not allow oil price to rise appreciably. They will ultimately find ways to keep oil below $70 and perhaps even $60 longer term. They now know the shit kicking they took allowing price get way ahead of fundamentals. At that $60-70 price level, some US tight oil will certainly come back but I think the heyday of 9.6 million barrels per day of US production are over for the indefinite future.

Beyond that, the Saudis want to keep Russia weak(ish) financially. They are pissed at Putin's interference in Syria and his support of Iran. I believe the Saudis are ready to take on some domestic pain to keep their 'competitors' constrained. I am thus not at all keen to dip into the O&G equity markets. I dumped my partial CNQ holding recently at a profit... never to return (I think).
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Re: Oil

Post by gobsmack » 12 Jul 2016 12:09

When I was living in Texas back in 99, I was paying $0.99 a gallon (about $1.43 in today's dollars). The Saudis seemed pretty happy with that price level at the time so my guess is that they can accommodate a tighter budget then we think.

I am a completely lay person when it comes to O&G so this is probably a dumb question:

Even if prices do rise, I think this downturn shows how fragile the position of our oilsands producer is. They are stuck producing some of the most expensive oil in the world and selling it at a steep discount because we can't build pipelines to export this stuff. Therefore, my expectation was that companies like Suncor would be using their cash to invest outside of Canada where they could hopefully produce oil for cheaper and offset the high cost of their Canadian operations. They seem to be doubling down on the oilsands with their acquisitions though. Any idea why this makes sense? Even if oil does eventually rise back to $100 dollars, wouldn't they be better off in a locale where they could produce cheaper oil and hence profit more when selling it?

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Re: Oil

Post by AltaRed » 12 Jul 2016 14:16

Oil reserves do not come for free. It can take decades to acquire a concession, then find and if lucky, develop new reserves, often in places of high political instability. Venezuela has nationalized twice over the decades. The big companies risk these projects in the 10% probability of success range. All we really hear about on the world stage are the successful developments. Those are the lucky few that have made it through the obstacle course.

Recent example: Kashagan in the Caspian Sea. It took many years in the 1990's to negotiate a concession and fiscal regime (from about 1993 until a deal was signed circa 1997), An oil discovery was made in 2000 (or therebouts). After spending many blllions, first oil was produced in 2013. Then there is the challenge to get the oil out through Azerbijan, Russia and/or Turkey or all of the above. Google for details. http://www.platts.com/news-feature/2013 ... n-timeline

And that is a successful venture given that the parties involved were virtually certain oil was there to begin with. There are very few places left in the world where companies have the resources, patience, and skillset to find new reserves. There is no cheap oil left to find and develop. While US (and to a lesser extent, Canadian) tight oil has made a difference and it will likely be the marginal price setter for years to come, it will not last forever.

The alternative is to buy into known oil reserves that are in development or already in production. That in itself is highly expensive because those that took the monetary risk to acquire and find the reserves in the first place need to be paid for the value of those assets.

That makes our oil sands look pretty good, cost of production notwithstanding. Suncor has decided that the virtual certainty of producing oil out of the oil sands offsets much of the cost of production when a project is looked at on a 30-50 year full cycle basis. They are concentrating their ownership and assets to double down on costs and seem to be making progress on that. It is hard to argue with their strategy given the risky global alternatives. Ultimately, the transportation problem will be solved (to some extent). Either more pipelines will be built or more rail capacity will be built. The oil will move because the world continues to need it.
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Re: Oil

Post by 8Toretirement » 12 Jul 2016 14:48

gobsmack wrote:When I was living in Texas back in 99, I was paying $0.99 a gallon (about $1.43 in today's dollars). The Saudis seemed pretty happy with that price level at the time so my guess is that they can accommodate a tighter budget then we think.

I am a completely lay person when it comes to O&G so this is probably a dumb question:

Even if prices do rise, I think this downturn shows how fragile the position of our oilsands producer is. They are stuck producing some of the most expensive oil in the world and selling it at a steep discount because we can't build pipelines to export this stuff. Therefore, my expectation was that companies like Suncor would be using their cash to invest outside of Canada where they could hopefully produce oil for cheaper and offset the high cost of their Canadian operations. They seem to be doubling down on the oilsands with their acquisitions though. Any idea why this makes sense? Even if oil does eventually rise back to $100 dollars, wouldn't they be better off in a locale where they could produce cheaper oil and hence profit more when selling it?

You struck on one of the largest problems with Canadian oil. Lack of distribution channels. Alberta and Saskatchewan need pipelines to other markets than the US. For all the free trade treaties we have, the US only enacts free trade when it serves them well. They piecemeal free trade. They don't look at the whole but at individual markets, and their lobby groups are provided to much power in Washington. Thus, our problems with oil, lumber, beef, vehicles, and overall pricing of goods in Canada.

If we ever get pipelines to open water we will truly have an open market on oil. We are among the leaders in oil and gas technology but we can't compete when are products are sold at a discount to WTI. Provincial governments that are stonewalling pipelines are destroying Canadian Capital. No other country would leave such an asset in the ground and no country would accept a 35% discount on the production of materials, on top of the destruction of capital and loss of tax revenue. Eventually, common sense should prevail.

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Re: Oil

Post by Shakespeare » 12 Jul 2016 21:35

From G&M subscriber channel:

Nexen to cut 350 jobs in aftermath of oil-sands blast, low crude prices - The Globe and Mail [Subscribers]
they believe the Jan. 15 explosion at the hydrocracker, a part of the upgrader....highlights gaps in our safety culture.....

a short-term repair to the upgrader is not feasible....

pipeline leak found the project design was incompatible with the muskeggy ground conditions....

And while many oil sands operators avoided the full brunt of the wildfires in the Fort McMurray region in May, the blaze passed right through Nexen’s Long Lake facility.

Production is set to increase over the next month to about 27,000 barrels a day – compared with 40,000 to 50,000 b/d before the January explosion.
The Chinese must think they got sold a pup with this one.
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Re: Oil

Post by SkaSka » 13 Jul 2016 11:35

Shakespeare wrote:From G&M subscriber channel:

Nexen to cut 350 jobs in aftermath of oil-sands blast, low crude prices - The Globe and Mail [Subscribers]
they believe the Jan. 15 explosion at the hydrocracker, a part of the upgrader....highlights gaps in our safety culture.....

a short-term repair to the upgrader is not feasible....

pipeline leak found the project design was incompatible with the muskeggy ground conditions....

And while many oil sands operators avoided the full brunt of the wildfires in the Fort McMurray region in May, the blaze passed right through Nexen’s Long Lake facility.

Production is set to increase over the next month to about 27,000 barrels a day – compared with 40,000 to 50,000 b/d before the January explosion.
The Chinese must think they got sold a pup with this one.
To quote a favourite acronym around here: YMMV :lol:

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Re: Oil

Post by AltaRed » 13 Jul 2016 14:07

One needs to be careful not to paint all O&G companies with the same brush. I believe Nexen (and its predecessor namesake Canadian Occidental) had a reputation for less than stellar results in a number of areas, or at least that was one of the old wive's tales in my oilpatch days. If so, perhaps not surprising there were some cultural and/or design issues that have begun to rear their head, especially after the CNOOC takeover. As suggested, YMMV amongst the various O&G companies.
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Re: Oil

Post by Shakespeare » 13 Jul 2016 14:19

I was not attempting a 'broad brush', but rather suggesting Nexen in particular seemed to have problems.

IIRC, they had problems aligning the steam lines with the oil lines in their SAGD, and seemed to have regular visits from what Keith Cowan called the 'fuckup fairy'.
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Re: Oil

Post by AltaRed » 13 Jul 2016 15:52

Shakespeare wrote:I was not attempting a 'broad brush', but rather suggesting Nexen in particular seemed to have problems.
Yeppers, I understood that. The CIBC of the O&G majors.
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Re: Oil

Post by OnlyMyOpinion » 15 Jul 2016 22:49

Oil Sands Advisory Group
The mix of members on this group should make for some interesting and potentially "explosive" meetings:
On Wednesday, the province announced the members of an 18-member advisory group to implement Alberta's climate-change plan.
The group's mandate is to provide advice on ways to ensure that initiatives created as part of the government's climate-change plan, announced last year, are effective and widely supported...Shannon Phillips, Alberta's minister of environment, said the group will help the government address "central issues" facing the oilsands. Those include advice on how to implement greenhouse-gas emission limits, where to invest in innovation, and developing processes to address "local and regional environmental issues."...

One of the co-chairs of the group, Tzeporah Berman, an adjunct professor of environmental studies at York University in Toronto, has vocally criticized the oilsands in the past.
She did make some conciliatory sounds: ... "They are the words and tone from my past campaigning and don't reflect the opportunity I have today to be part of helping advise on the critical questions on how Alberta will operate under a [greenhouse gas] limit, innovate, better protect its environment and determine the infrastructure needs of its future production," http://www.cbc.ca/news/canada/edmonton/ ... -1.3677366 Ok, right.

You probably have an opinion of Ezra /The Rebel, irreverent, some would say manipulative, but there is little doubt in this clip what Berman's past position on the oil sands and pipelines is: https://www.youtube.com/watch?v=n-ltC3hO89A. Frankly it is hard to imagine her on the committee for any reason except trying to hammer nails into a coffin for what she hopes will be a funeral.

Second co-chair is Dave Collyer, past president of CAPP (ex-Shell). The third is Melody Lepine, dir industry & gov't relations, Mikisew Cree Nation. Lepine ran unsuccessfully for the NDP in last fall's federal election.

Along with the co-chairs are 15 plenary members, including 7 representing oil companies active in the oil sands http://www.alberta.ca/oilsands-advisory ... embers.cfm.

As they say, stay tuned. :shock:

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Re: Oil

Post by AltaRed » 16 Jul 2016 12:14

Quite the mixed bag BUT does have some reasonable oil/enviornmental balance. Both parties need some weight at the table for the group to have any legitimacy. That said, it is quite the motley group and it is unclear whether any material consensus will be possible. Perhaps a manipulation by the NDP to say....they tried, but since the advisory group was useless, here is what we are going to do. I like the thought of conspiracies. :?
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Re: Oil

Post by nisser » 16 Aug 2016 01:40

Oil continues to puzzle me. Most OnG companies are at their 52 week highs when oil inventories continue to be at their peak (and climbing) and everyone's losing money every quarter.

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Re: Oil

Post by AltaRed » 16 Aug 2016 10:41

nisser wrote:Oil continues to puzzle me. Most OnG companies are at their 52 week highs when oil inventories continue to be at their peak (and climbing) and everyone's losing money every quarter.
Blame it on a whole group of investors that are sector rotators and/or early market timers. I tend to call it a 'dead cat bounce'. But that cat bounced once already. Maybe the carcass didn't hit hard enough the first time?
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Re: Oil

Post by 8Toretirement » 18 Aug 2016 10:34

nisser wrote:Oil continues to puzzle me. Most OnG companies are at their 52 week highs when oil inventories continue to be at their peak (and climbing) and everyone's losing money every quarter.
I bought CVE a while ago and continue to add to my position when it trends down. I am only up about 5%, however, I am buying on the belief that oil at these prices is uneconomical. The Saudi's will eventually realize the current oil price is self defeating. They need higher prices to keep their economy going as it is almost entirely based on oil production. They will have to give up market share to get higher prices. Oil might settle around $60 in several years but it will be higher. This is a price war, nations are not going to leave their oil in the ground. Western oil companies will become more efficient on production and operation costs and this will make them more profitable when the price of oil rises to a more sustainable level.

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Re: Oil

Post by ghariton » 20 Aug 2016 23:32

8Toretirement wrote:Oil might settle around $60 in several years but it will be higher. This is a price war, nations are not going to leave their oil in the ground. Western oil companies will become more efficient on production and operation costs and this will make them more profitable when the price of oil rises to a more sustainable level.
I don't think I understand this.

If nations are not going to leave their oil in the ground, then they will put it on the market. This will increase supply relative to demand, and ensure that prices stay low. The only way to get prices higher is for some nations to sacrifice themselves and cut back production, essentially leaving oil in the ground indefinitely.

Furthermore, if Western oil companies become more efficient and less costly, they will likely be forced to pass these cost reductions on, in the form of lower prices. Not doing so would leave them exposed to their competitors (who are also becoming more efficient) and to the sovereign producers, all of whom are looking for increased market share.

ISTM that the only way oil prices will rise is through a significant number of bankruptcies or consolidations. The question then becomes: Who will be the unlucky producers to go under?

George
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Re: Oil

Post by 8Toretirement » 23 Aug 2016 15:10

ghariton wrote:
8Toretirement wrote:Oil might settle around $60 in several years but it will be higher. This is a price war, nations are not going to leave their oil in the ground. Western oil companies will become more efficient on production and operation costs and this will make them more profitable when the price of oil rises to a more sustainable level.
I don't think I understand this.

If nations are not going to leave their oil in the ground, then they will put it on the market. This will increase supply relative to demand, and ensure that prices stay low. The only way to get prices higher is for some nations to sacrifice themselves and cut back production, essentially leaving oil in the ground indefinitely.

Furthermore, if Western oil companies become more efficient and less costly, they will likely be forced to pass these cost reductions on, in the form of lower prices. Not doing so would leave them exposed to their competitors (who are also becoming more efficient) and to the sovereign producers, all of whom are looking for increased market share.

ISTM that the only way oil prices will rise is through a significant number of bankruptcies or consolidations. The question then becomes: Who will be the unlucky producers to go under?

George

That would be so if the price of oil swings from western nations but it doesn't. State oil is swinging the hammer, Nigeria, Saudi Arabia, Iran, Iraq, Venezuela, and to a lesser extent Russia as they are more market driven. All these countries require oil at a certain level to balance their budget. Their GDP is oil dependent, they will eventually come together to drive up the price of oil or their leaders will be deposed and new ones will do the work. Same story as 1986. Eventually the idiots in charge are going to realize that even if they lose some market share the increase in price per barrel will increase the overall amount of revenue received. At some point it will go back to money...Saudi Arabia is the lynchpin in all this.

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Re: Oil

Post by like_to_retire » 23 Aug 2016 15:30

8Toretirement wrote:That would be so if the price of oil swings from western nations but it doesn't. State oil is swinging the hammer, Nigeria, Saudi Arabia, Iran, Iraq, Venezuela, and to a lesser extent Russia
I know little to nothing about the topic, but it always makes me curious when I see the influence the countries mentioned have on world oil price when I look at a chart of world production by country and never see Canada mentioned?

Canada is #5, while it's Nigeria #13, Iran #7, Irag #8, Venezuela #12.

Does Canada have no influence?
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Re: Oil

Post by newguy » 23 Aug 2016 15:55

like_to_retire wrote:Canada is #5, while it's Nigeria #13, Iran #7, Irag #8, Venezuela #12.
Make a new list ranked by net exports.

https://en.wikipedia.org/wiki/List_of_c ... il_exports
https://en.wikipedia.org/wiki/List_of_c ... il_imports

I think Canada is maybe 500k - 1 million bbl/day where Saudi is 7 million. The other small players export much more than Canada.

Still, domestic production-consumption is important but maybe not so much for getting in the news. I think US consumption is a bigger story than production. It's still down from a 2005 peak.

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Re: Oil

Post by like_to_retire » 23 Aug 2016 16:13

newguy wrote:Make a new list ranked by net exports.
Huh, so Canada is 11th in the list of net oil exports in the world. I would still think we would garner a mention once in a while.
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Re: Oil

Post by newguy » 23 Aug 2016 16:26

like_to_retire wrote:
newguy wrote:Make a new list ranked by net exports.
Huh, so Canada is 11th in the list of net oil exports in the world. I would still think we would garner a mention once in a while.
But subtract the imports. I only use pure venuzualen oil in my car (and columbian coffee for me!) .

It's a east/west thing until we build some pipelines.

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Re: Oil

Post by AltaRed » 24 Aug 2016 00:45

The numbers have changed in 4-5 years, e.g. Canada 's net exports (which already takes into consideration imports into the east) have increased with a number of oil sands projects. Still, Canda is not mentioned because most of its production is "fixed" and goes to one market.

When US production was at its peak, Canadian exports to the USA exceeded those imported from SA. Still might do so but have not researched recent data.
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Re: Oil

Post by newguy » 24 Aug 2016 12:50

AltaRed wrote: Canada 's net exports (which already takes into consideration imports into the east)
The wiki says 'exports' not 'net exports', ltr just added the net. However on further checking it seems to me like the CIA source of the data used net exports for just Canada in their data. It's hard to tell since only Canada and the US have much back and forth trading. All other exporters import only a small fraction. But in the case of the US with a positive number for exports, it's not net. For Canada I looked up the data and it's close-ish to the StatsCan numbers for net.

https://www.neb-one.gc.ca/nrg/sttstc/cr ... 5-eng.html

* multiply m^3 * 2π for barrels (another weird π coincidence).

Alta's right that there's been big changes in net exports over the time frame, they've almost doubled as Canada produces more and imports less. Seems I may be getting my oil from Alberta, that's ok as long as my coffee doesn't come from BC.

2015 is about 2.5mmbd of NET exports. So I think ltr should move us back near the top of the list.

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