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Thread: Oil is at a 12-year low

  1. #121
    Padishah Shahanshah Senior Contributor xerxes's Avatar
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    Quote Originally Posted by astralis View Post
    OPEC agreed to continue production as is to drive down the price of oil-- in part to shutter US shale oil production. to some extent, it worked-- numerous US shale oil lines were shut down. however, the Saudis et al (and quite a few US observers) were surprised to find out that the surviving shale oil lines already had most of their costs sunk already, and are still profitable at the $35 per barrel point.

    moreover there's a double whammy, OPEC was surprised by the extent of the Chinese downturn. i think OPEC was trying to get oil to fall down to $60-70 a barrel, where they'd be comfortable; they didn't foresee the huge drop past that.
    Astralis,
    The sunk cost concept applies to all producers: shale, tar sands, Big Oil and national producers. it is not unique to shale as you say. What is unique to shale is its rather short lead-time of 2-3 years of output before very rapid drop in output. As oppose to the long cycle tar sands project in Canada that go producing for years on, never mind prices. Suncore for instance has a operating cost near $30 and most people don't know that as they assume that because it is operating in the tar sands so it must have high cost. Fact is, after the initial CAPEX has been sunked what remains is the very low operating cost needed to run the operation.

    What make shale the swing producer is its short lead-time of 2-3 years, which gives it flexibility to adapt to the whims of the market (much like how the Saudi were doing by closing the valve). No matter how huge the tar-sands were they could never become the swing producers. For them closing the valve, is like turning a super-tanker.

    Lastly, given the shaky nature of shale producers, banks (back in the day) mostly insisted the producers to hedge their production. Those hedge that were placed by the shale producers (the ones that did) has infact delayed their day of judgment and gave them a year or so time.
    If we contrast the rapid progress of this mischievous discovery of gunpowder with the slow and laborious advances of reason, science, and the arts of peace, a philosopher, according to his temper, will laugh or weep at the folly of mankind. - Edward Gibbon

  2. #122
    Official Thread Jacker Senior Contributor gunnut's Avatar
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    February 18, 2016 6:28 PM

    Feds to open 45M more acres in Gulf for energy development

    By Tony Pugh

    tpugh@mcclatchydc.com

    WASHINGTON —

    The federal government will hold lease sales next month to open up 45 million acres in the Gulf of Mexico for oil and gas exploration, the Obama administration announced Thursday.

    The sales mark the ninth and 10th offshore auctions as part of the administration’s five-year Continental Shelf Oil and Gas Leasing Program.

    More than 60 million acres were offered in the first eight auctions, which drew $3 billion in high bids, according to the federal Bureau of Ocean Energy Management.

    The new auctions – Central Planning Area Lease Sale 241 and Eastern Planning Area Lease Sale 226 – will be March 23 in New Orleans.

    “These lease sales continue the president’s commitment to create jobs through the safe and responsible exploration and development of the nation’s domestic energy resources,” said a statement from bureau director Abigail Ross Hopper. “As an important component of the U.S. energy portfolio, the Gulf of Mexico holds vast energy resources that can continue to spur economic opportunities for Gulf-producing states as well as further reduce the nation’s dependence on foreign oil.”

    About 44.3 million acres will be offered in Sale 241, ranging from 9 feet to more than 11,115 feet of water off the Louisiana, Mississippi and Alabama shores.

    Sale 226 covers nearly 600,000 acres from 2,657 feet to 10,213 feet deep. The location is south of eastern Alabama and western Florida, with the nearest point of land some 125 miles northwest in Louisiana.

    The sales follow a public comment period and extensive environmental analysis. Sales terms will require lease purchasers to protect biologically sensitive resources, reduce potential adverse effects on protected species and avoid possible conflicts related to energy development in the region.

    The Gulf Restoration Network, a New Orleans environmental group, opposes the plan, citing a failure by the oil and gas industry and government officials to improve the safety of offshore drilling and production, said executive director Cyn Sarthou.

    The industry already has over 23 million acres under lease in the Gulf of Mexico’s federal waters, but only 18 percent are currently producing oil or gas, Sarthou said. That leaves more than 19 million acres of unexploited leases, which Sarthou said was enough to fuel the industry.

    “As a region, the Gulf needs to reduce the risk posed by oil and gas development and move away from our reliance on the oil and gas industry by diversifying our economy,” Sarthou said.

    The terms and conditions for both lease sales are available for viewing.

    Offshore drilling remains controversial among the Gulf states. Sen. Bill Nelson, a Florida Democrat, made a floor speech this month blasting a Republican proposal to increase revenue-sharing opportunities for states that allow drilling in the Gulf of Mexico. The proposal, from Sen. Bill Cassidy, R-La.,would boost revenue-sharing for Louisiana, Alabama, Mississippi and Texas.


    Tony Pugh: 202-383-6013, @TonyPughDC
    http://www.miamiherald.com/news/nati...e61166657.html

    More land for oil exploration....
    "Only Nixon can go to China." -- Old Vulcan proverb.

  3. #123
    Official Thread Jacker Senior Contributor gunnut's Avatar
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    March 1, 2016 4:11 PM

    Low oil prices don't matter: Gulf of Mexico output to hit record in 2017

    By Tony Pugh

    tpugh@mcclatchydc.com

    WASHINGTON —

    Oil production in the Gulf of Mexico is expected to increase next year even as new offshore development and exploration have slowed to a crawl, weighed down by a drastic drop in oil prices.

    The increased production – the Obama administration expects a record high of nearly 1.8 million barrels per day in 2017 – won’t be driven by new projects. And it has nothing to do with the president’s latest plans to open an additional 45 million acres in the Gulf of Mexico to oil and gas exploration.

    Instead 14 Gulf of Mexico drilling projects in various stages of development and expansion will fuel the increased output for this year and next.

    That makes perfect sense, said Phil Flynn, senior market analyst at the PRICE Futures Group in Chicago.

    He said the long slog from discovery to permitting to construction and, finally, to production can sometimes take more than a decade and require billions of dollars of capital investment. So companies aren’t likely to stop a deepwater project even when oil prices bottom.

    “There’s a point where you pass the rubicon,” Flynn said, “and even if prices collapse, you’ve already spent so much money that you’ve got to complete the process. Even though I think a lot of these companies are remorseful that they started them a few years ago.”

    Tom Floza, global head of energy analysis at the Oil Price Information Service in Wall, N.J., agreed.

    “These (projects) were sanctioned and were funded back when oil was between $80 and $100 per barrel, so I’m sure they would like to have a do over,” Floza said.

    As prices remain low, Gulf operators have cut deepwater exploration and the number of active rigs. The turbulence has created labor market uncertainty along the Gulf coast, where new oil-patch jobs for geologists, engineers and general laborers are harder to find.

    Seventeen percent of crude oil produced in the United States comes from federal offshore drilling in the Gulf of Mexico. And nearly half of the nation’s oil-refining capacity is based along the Gulf coast, making it a powerful economic force in the region.

    But despite the industry depression, the Obama administration expects Gulf oil production to average more than 1.6 million barrels per day in 2016 and reach a record high of nearly 1.8 million per day in 2017.

    In fact, daily output in the Gulf could top 1.9 million barrels per day in December 2017, according to the U.S. Energy Information Administration.

    The backlog of under-development projects in the Gulf of Mexico is testimony to the once-strong demand for Gulf oil exploration following the moratorium on deepwater drilling that was imposed after the Deepwater Horizon spill in April 2010. The ban lasted nearly six months until October 12, 2010.

    After slowly rebounding through 2013, the number of new deepwater drilling projects in the Gulf rose to eight in 2014 and eight more in 2015. But new deepwater projects will fall to four this year, and only two are expected in 2017.

    The slowdown reflects the “decreasing profit margins and reduced expectations for a quick oil price recovery,” according to a recent report from the U.S. Energy Information Administration.

    But as new Gulf projects are scaled back amid the worldwide oversupply of oil, the Obama administration will hold lease sales on March 23 in New Orleans to open up 45 million acres in the Gulf of Mexico for oil and gas exploration.

    About 44.3 million acres will be available off the Louisiana, Mississippi and Alabama shores. Nearly 600,000 more acres will be available south of eastern Alabama and western Florida, with the nearest point of land some 125 miles northwest in Louisiana.

    The sales follow a public comment period and extensive environmental analysis. Sales terms will require lease purchasers to protect biologically sensitive resources, reduce potential adverse effects on protected species and avoid possible conflicts related to energy development in the region.

    But Glenn Compton, chairman of ManaSota-88, an environmental protection group in the Bradenton, Florida, area, said the federal government should cancel the upcoming lease auction.

    In a public comment letter to the federal Bureau of Ocean Energy Management, Compton said the federal government’s environmental analysis supporting the lease sales was not thorough; that an oil spill could cause severe economic and environmental damage to the gulf coast region and that the federal government lacks the staff to ensure drilling is done safely.

    Compton also said that low oil prices and the glut of oil worldwide would deflate the selling price for the gulf drilling rights.

    “The American taxpayers will lose out on billions of dollars of oil revenues,” Compton wrote. “The glut of oil leases already offered has provided the oil industry an opportunity to lease large blocks of submerged lands at bargain basement prices.”

    Energy analyst Floza said he expects oil prices to rebound to more than $50 per barrel in the next few years. But the current slowdown in new Gulf drilling projects will be felt in future years, he said.

    “That’s going to mean Gulf of Mexico (oil) production will be quite slow as we start the next decade,” Floza said. “It’s going to be sluggish.”


    Tony Pugh: 202-383-6013, @TonyPughDC
    http://www.centredaily.com/news/nati...e63380167.html

    Gulf oil production is set to increase, in addition to more land for oil exploration.

    This is getting better and better.

    I seem to recall there was a very intelligent person who said something about "drill here, drill now" back when oil was $130, in order to drive down prices. Was it The Obama? Certainly only the smartest president in the history of this republic could have the intelligence and wisdom to foresee the future. I can't imagine anyone but him to come up with such a brilliant yet simple market solution to a supply problem.
    "Only Nixon can go to China." -- Old Vulcan proverb.

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