Oil

Recommended reading, economic debates, predictions and opinions.
User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18287
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Oil

Post by AltaRed » 12 Oct 2017 10:03

Brazil potentially has huge reserves of what is called 'sub-salt' oil (and pre-salt oil) but essentially means below the salt layers. Much of the prolific deepwater zones in the Gulf of Mexico are also pre-salt layers which can be more than 2000 metres thick. It is expensive oil. IMO, absent a major technological breakthrough, much of this undeveloped oil will be stranded due to cost. I just don't see too many publicly traded muli-nationals getting too committed developing this stuff given many likely believe high oil prices needed to support this effort are not sustainable any more. Mexico opened up its pre-salt deepwater exploration and development not too many years ago but that may also be too little, too late as well.

My take is global oil demand may continue to creep upward to somewhere just over 100 million barrels per day before starting a gentle decline thereafter as conservation (and climate change) efforts, including EVs, changes the dynamic. What it will tail off too is anyone's guess, but I suspect the tail will be somewhere in the 50 million barrels per day range (or less) in 3-4 decades. In any event, eventual decreasing demand will keep a lid on oil prices and that will naturally strand expensive oil development. If the infrastructure is not already in place, aka the Gulf Coast and the Canadian oil sands, even Venezuela, I don't hold out much hope for Brazil's (and Mexico's) deepwater. Land based shale oil will (should) remain more economic.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

User avatar
Shakespeare
Diamond Ring
Diamond Ring
Posts: 20734
Joined: 15 Feb 2005 23:25
Location: Lethbridge, AB
Contact:

Re: Oil

Post by Shakespeare » 15 Oct 2017 11:59

New era of oil supply certainty force changes in Canadian producers’ strategies | Financial Post
The world’s current oil oversupply has been largely driven by U.S. shale oil and gas plays, Reynish said. According to the U.S. Energy Information Administration, Canada’s largest energy customer has boosted domestic oil production from less than four million barrels per day in 2008 to 9.2 million bpd now, while gas output has risen from 67 million cubic feet per day to 89 million cf/d....

“Between US$50 and $53 WTI (per barrel) is perfect,” he said in an interview.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18287
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Oil

Post by AltaRed » 15 Oct 2017 14:12

Tsk....tsk. They are soooo far out of date. US production has again recovered essentially to its prior peak of circa 9.6 million barrels per day.

https://www.eia.gov/dnav/pet/hist/LeafH ... RFPUS2&f=W
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

randomwalker
Gold Ring
Gold Ring
Posts: 1887
Joined: 14 Apr 2005 20:55

Re: Oil

Post by randomwalker » 10 Nov 2017 06:26

Bankrupt oil companies dump $100 million in clean up costs on Orphan Well Association in under two years
The Alberta government is concerned more companies will strip off bad assets,
handing the bill to the OWA, and potentially, onto taxpayers

by Geoffrey Morgan
National Post, November 9, 2017

"This year, the Alberta government provided $235 million to the energy industry to help pay for clean up costs of orphaned wells and the federal government agreed to cover $30 million in interest payments on the loan."

http://business.financialpost.com/commo ... r-two-year.



more here
http://business.financialpost.com/commo ... it-c-d-how

and here
http://business.financialpost.com/commo ... -insolvent

Full disclosure I am long IXC nyse

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18287
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Oil

Post by AltaRed » 10 Nov 2017 10:42

Canada's Supreme Court has agreed to hear a case from AB, supported by BC and SK, that liabilities owed the people of Alberta, i.e. clean up of abanadoned wells, should be considered an 'equal' to secured creditors in bankruptcies. The regulator had lost the case in AB, and that was upheld in the Appeal's Court, but the Supremes have agreed to hear it. It is a question of liabilities of companies which do not obey the laws during operation can have their obligations delegated to the trash heap on company windup.

Big companies operating in AB had been telling the regulators for years that the 'fees' assigned to lower creditworthy companies as part of well licenses were not going to be high enough to cover the liabilities. I was part of the debate back in the '80s and even '90s (through CAPP) saying the tiered licensing fees needed to have have stiffer fees for the least creditworthy and perhaps even bonds should be posted. Don't know what evolved over the last 20 years or so, but I doubt AB would have as big a problem it has today had it imposed higher fees on the less creditworthy. The time to collect the fees is when the companies have the funds to drill the wells in the first place. The problem is more complex than that such as what ongoing liability should remain with the seller when a company sells assets with a lot of dormant wells to a junior that may indeed walk some day. Regardless, the rules should have been tightened some time ago, and there will be lots more to this story to come.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

OnlyMyOpinion
Silver Ring
Silver Ring
Posts: 659
Joined: 24 Jan 2014 23:17

Re: Oil

Post by OnlyMyOpinion » 13 Nov 2017 11:21

Recent article about the export constraints that Alberta's oil is facing, some projections and stats.

Forgot About Keystone? Canada's Oil Majors Haven't (Liam Denning, Bloomberg 13-Nov-2017)
... the bigger issue is that Alberta's production is outpacing its pipelines. And the problem will get worse before it gets better: Futures imply average spreads of about $17 a barrel over the next two years.
... Western Canada produced 3.9 million barrels a day in 2016, and that's set to reach almost 4.8 million a day in 2022, according to the Canadian Association of Petroleum Producers.
... With about 3.3 million barrels a day of effective pipeline export capacity , that leaves about 330,000 barrels a day looking for a way out this year. That jumps to more than 600,000 a day next year and almost 700,000 a day by 2019.
... Oil that can't secure space on a pipe has to go by rail instead, which costs more like $13-$18 a barrel to get to the Gulf Coast. Hence the widening spreads in futures prices
... Three proposed pipeline projects could eventually add another 1.5 million barrels a day of export capacity for western Canada's oil producers (Line 3, Trans Mountain, KeystoneXL)
... For the next two years, at least, therefore, pricing will be a headwind for producers in western Canada
... Imperial Oil Ltd. and Cenovus Energy Inc. are more exposed because they refine less of their own heavy oil production compared to, say, Canadian Natural Resources Ltd. and Suncor Energy Inc. On the flip-side, Canadian National Railway Co. and some of its peers should benefit as more barrels switch to rail


https://www.bloomberg.com/gadfly/articl ... -oil-stuck

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18287
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Oil

Post by AltaRed » 13 Nov 2017 11:36

That is one of the better articles I've seen for some time capturing the holistic view of the Cdn oil market.

It's been well understood though that 'all' of the pipeline projects would result in stranded capacity, or at least excess capacity someone is paying for but not using. Piipelines don't get funding from the banks unless close to 100% of the capacity is contracted for (as I used to understand it, the ratio of contracted to total capacity to attact bank financing can vary some depending on the equity component of pipeline funding). Tis one of the reasons Energy East died...given the increased likelihood of XL going ahead. None of the 3 pipelines are yet a slam dunk.

I also think projected production of 4.8 million barrels per day is a stretch. Oil producers are always over optimistic and thus CAPP totals based on producer submissions is always (to my recollection) too high. The actual number will tie closer to 'expected' secured and available pipeline capacity at the time. IOW, if all 3 pipelines were to undergo construction, you would see a surge in oil production capex spending to help fill contracted pipeline space. OTOH, increases in oil production will be considerably more muted if say, only one pipeline undergoes construction. It is simply a matter of economics and thus, surplus/demand will be more closely correlated than the article suggests. All assuming of course, oil prices hold.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

bolt
Bronze Ring
Bronze Ring
Posts: 24
Joined: 03 Nov 2008 12:08

Re: Oil

Post by bolt » 16 Nov 2017 22:13

AltaRed wrote:
15 Oct 2017 14:12
Tsk....tsk. They are soooo far out of date. US production has again recovered essentially to its prior peak of circa 9.6 million barrels per day.

https://www.eia.gov/dnav/pet/hist/LeafH ... RFPUS2&f=W
My understanding is over X/per barrel most USA Crude production starts /stops. :oops:

milton
Bronze Ring
Bronze Ring
Posts: 97
Joined: 16 Feb 2007 15:33

Re: Oil

Post by milton » 17 Nov 2017 14:40

Norway's one trillion dollar sovereign wealth fund may divest from oil:

https://www.bloomberg.com/news/articles ... -the-world

Some figures from (http://business.financialpost.com/commo ... il-and-gas) :
Some of the fund’s largest equity positions include a US$541 million stake in Suncor Energy Inc., a US$358 million stake in TransCanada Corp., a US$313 million stake in Enbridge Inc. and a US$285 million stake in Canadian Natural Resources Ltd.

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18287
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Oil

Post by AltaRed » 17 Nov 2017 14:46

That is smart for obvious reasons. Why have your sovereign wealth fund exposed to the same industry as a significant portion of your GDP? Same issue as disproportionately holding the stock of your company you work for, or if not your company, the industry that you work in.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

Post Reply