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Shale’s Debt-Fueled Drilling Boom Is Coming To An End

Shale’s Debt-Fueled Drilling Boom Is Coming To An End

Marcellus shale

The financial struggles of the U.S. shale industry are becoming increasingly hard to ignore, but drillers in Appalachia are in particularly bad shape.

The Permian has recently seen job losses, and for the first time since 2016, the hottest shale basin in the world has seen job growth lag the broader Texas economy. The industry is cutting back amid heightened financial scrutiny from investors, as debt-fueled drilling has become increasingly hard to justify.

But E&P companies focused almost exclusively on gas, such as those in the Marcellus and Utica shales, are in even worse shape. An IEEFA analysis found that seven of the largest producers in Appalachia burned through about a half billion dollars in the third quarter.

Gas production continues to rise, but profits remain elusive. “Despite booming gas output, Appalachian oil and gas companies consistently failed to produce positive cash flow over the past five quarters,” the authors of the IEEFA report said.

Of the seven companies analyzed, five had negative cash flow, including Antero Resources, Chesapeake Energy, EQT, Range Resources, and Southwestern Energy. Only Cabot Oil & Gas and Gulfport Energy had positive cash flow in the third quarter.

The sector was weighed down but a sharp drop in natural gas prices, with Henry Hub off by 18 percent compared to a year earlier. But the losses are highly problematic. After all, we are more than a decade into the shale revolution and the industry is still not really able to post positive cash flow. Worse, these are not the laggards; these are the largest producers in the region.

…click on the above link to read the rest of the article…

Art Berman: Houston, We Have A Problem

Art Berman: Houston, We Have A Problem

The surplus energy that powers the world is declining

Every week in our Off The Cuff Series, we interview expert minds on the premium side of PeakProsperity.com. These discussions are unscripted and informal, where my partner Chris Martenson and his guest react to recent macro developments and predict the likeliest repercussions.

Every once in while, when we have an exceptionally timely conversation, we’ll make it available to the public. And we’re doing that this week.

Chris caught petroleum geologist Art Berman right before he went on stage to deliver a presentation on the limitations of shale oil (his excellent slides can be found here). The world is finally starting to realize that the profit-making potential of this space was drastically over-hyped.

But more important, warns Art, is that the souring sentiment on shale oil is a reflection on the bigger challenge ahead of us: How we will power the world in a future of declining net energy?

When we reflect upon the material progress of humankind over the hundred and fifty years, it seems very clear to me that much, if not most, of it happened because humankind moved basically from wood to coal to oil/natural gas. To increasingly more dense sources of energy.

And the result is that we get a whole lot more work out of whatever energy we expend. Less and less of that is done by manual labor.

Everything works to live. Look at the African savanna: it’s all about energy. The animals spend all day long getting food one way or another.  That’s the way life on earth works.

But not so much for us, because we’re fortunate — we humans have all this fossil energy at our disposal. You and I can sit and chat on Skype here without having to do very much.

…click on the above link to read the rest of the article…

The Top 5 Ways We Use Oil & Gas

The Top 5 Ways We Use Oil & Gas

Petchem

If climate change and the use of fossil fuels is starting to worry you, consider this: The lion’s share of the petroleum in the United States is being used just to get around–to get people and things from point A to point B. 

Industrial, residential, commercial and electrical power usage of petroleum pales in comparison.   

Fossil fuels–which include crude oil and other liquids–are refined into petroleum products for a multitude of uses, and last year, the United States consumed over 20 million barrels per day. 

A whopping 69 percent of that was consumed by transportation. Industry, which the masses like to villainize most in terms of fossil fuel consumption and greenhouse gas emissions, used only 25 percent. Residential usage accounted for only 3 percent of our petroleum consumption, and commercial, only 2 percent. 

What about electricity? American electricity generation used only 1 percent of those petroleum products. 

Source: EIA

So, for anyone looking to pinpoint where we need to start cheerleading for renewables or fossil-fuels shaming, here are the top 5 uses of petroleum products to help redirect the debate: 

#5 Oceans of Plastic: Still Gas, 0.703M BPD

While primarily referring to methane and ethane, “still gas” is any form or mixture of gases produced in refineries by distillation, cracking, reforming, and other processes. That means it also includes ethylene, normal butane, butylenes, propane, propylene, and others. 

It’s used most as refinery fuel or petrochemical feedstock. 

The conversion factor is 6 million Btus per fuel oil equivalent barrel.

U.S. refineries burned nearly 240 million barrels of still gas in 2018. 

But petrochemicals are one of the largest drivers of global oil demand, so it’s a circular competition here for still gas. 

 …click on the above link to read the rest of the article…

Saudi Bases and the Bin Ladens: A Love Story

Saudi Bases and the Bin Ladens: A Love Story

What is Trump really up to? It’s almost unknowable. At the same time that the president was pulling (some) troops out of Northeast Syria, giving an antiwar speech, and then sending other troops back into Syria to “secure the oil,” he also quietly sent another 1800 service members into Saudi Arabia. What little Trump did say about it consisted of a peculiar defense of his actions. Faced with the obvious question from a reporter: “Mr. President, why are you sending more troops to Saudi Arabia when you just said it’s a mistake to be in the Middle East?” Trump argued that there was no contradiction in his policy because, well, the Saudis “buy hundreds of billions of dollars’ worth of merchandise from us,” and have “agreed to pay us for everything we’re doing to help them.” It seems the U.S. military is going full mercenary in the Gulf.

While I’ve noted that Trump’s recent antiwar remarks were profound – though largely unfulfilled – these words will amount to nothing if followed by a military buildup in Saudi Arabia that leads to a new, far more bloody and destabilizing, war with Iran. Nothing would please the “three Bs” – Israeli Prime Minister Bibi Netanyahu, Saudi Crown Prince Mohammed Bin Salman, and former National Security Adviser John Bolton – more than a US military strike on the Islamic Republic, cost and consequences be damned.

It’s just that an Iran war isn’t the only risk associated with basing majority-Christian, foreign American troops in the land of Islam’s two holiest cities. And a brief historical review of US presence in Saudi Arabia demonstrates quite clearly the potential transnational terrorist “blowback” of Washington’s basing decisions. In fact, Trump’s latest deployment constitutes at least the third time the US military has been stationed on the Arabian peninsula.

 …click on the above link to read the rest of the article…

US Needs To Occupy Syria Because Of Kurds Or Iran Or Chemical Weapons Or Oil Or Whatever

US Needs To Occupy Syria Because Of Kurds Or Iran Or Chemical Weapons Or Oil Or Whatever

President Trump reiterated to the press today that the United States is maintaining its military presence in Syria not to patrol the nation’s border with Turkey, but to control its oil fields.

“We’ve kept the oil,” Trump said. “We’ve stayed back and kept the oil. Other people can patrol the border of Syria, frankly, and Turkey, let them – they’ve been fighting for a thousand years, let them do the border, we don’t want to do that. We want to bring our soldiers home. But we did leave soldiers because we’re keeping the oil. I like oil. We’re keeping the oil.”

This open “kick their ass and take their gas” policy is nothing new for America’s reality TV president; he’s been saying it for years. It was recently addressed head-on by Syrian president Bashar al-Assad, who said during an interview that it’s nice to have a US president who is honest about America’s true motives in the Middle East for once.

“As for Trump, you might ask me a question and I give you an answer that might sound strange,” Assad said. “I say that he is the best American President, not because his policies are good, but because he is the most transparent president.  All American presidents perpetrate all kinds of political atrocities and all crimes and yet still win the Nobel Prize and project themselves as defenders of human rights and noble and unique American values, or Western values in general.  The reality is that they are a group of criminals who represent the interests of American lobbies, i.e. the large oil and arms companies, and others.

 …click on the above link to read the rest of the article…

First Images Of US Troops Occupying Syria’s Oil Fields Stir Outrage

First Images Of US Troops Occupying Syria’s Oil Fields Stir Outrage

The reality of American foreign policy all in one stunning image: regional Iraqi Kurdistan24 television has broadcast the first footage of the United States Army seizing and ‘protecting’ a Syrian oil field in the country’s northeast

Specifically the images are of a US armed convoy at Rumelan oil field, and are the first to show Trump’s ordered “secure the oil” policy in action. A Salon op-ed aptly quips in reaction: It’s about the oil, stupid: Trump wants to end the forever wars, except the one about oil and money.”


US forces began patrols at oilfields on Mount Qarachokh near Derik in northeastern #Syria on Friday. #TwitterKurds


Middle East war correspondent Jenan Moussa, who has covered the Iraq war and other US occupations in the region, voiced the growing outrage over the US resource theft underway in Syria:

Since discovery of oil in the MidEast, many in the region said: the U.S. is only here to steal our oil. U.S. denied it, and claimed it’s about democracy, human rights, women etc.

Not sure if Americans realize but these pictures of U.S. troops in northeast Syria are HUGELY damaging to U.S. image.


Since discovery of oil in MidEast, many in region said: U.S. only here to steal our oil.

U.S. denied, claimed it’s about democracy, human rights, women etc.

Not sure if Americans realize but these pictures of U.S. troops in northeast Syria are HUGELY damaging to U.S. image.


One Syrian commentator said sarcastically on social media: 

The Few. The Proud. The Marines. stealing Syria’s oil. 

And further pointed out that, “Trump just showed you the naked truth about US foreign policy in the Middle East.”

 …click on the above link to read the rest of the article…

Assad Calls Trump “Best US President” Ever For “Transparency” Of Real US Motives

Assad Calls Trump “Best US President” Ever For “Transparency” Of Real US Motives

Arguably some of the most significant events since the eight-year long war’s start have played out in Syria with rapid pace over just the last month alone, including Turkey’s military incursion in the north, the US pullback from the border and into Syria’s oil fields, the Kurdish-led SDF’s deal making with Damascus, and the death of ISIS leader Abu Bakr al-Baghdadi. All of this is why a televised interview with President Bashar Assad was highly anticipated at the end of this week. 

Assad’s commentary on the latest White House policy to “secure the oil” in Syria, for which US troops have already been redeployed to some of the largest oil fields in the Deir Ezzor region, was the biggest pressing question. The Syrian president’s response was unexpected and is now driving headlines, given what he said directly about Trump, calling him the “best American president” ever – because he’s the “most transparent.”

“When it comes to Trump you may ask me a question and I’ll give you an answer which might seem strange. I tell you he’s the best American president,” Assad said, according to a translation provided by NBC.

“Why? Not because his policies are good, but because he is the most transparent president,” Assad continued.

“All American presidents commit crimes and end up taking the Nobel Prize and appear as a defender of human rights and the ‘unique’ and ‘brilliant’ American or Western principles. But all they are is a group of criminals who only represent the interests of the American lobbies of large corporations in weapons, oil and others,” he added.

 …click on the above link to read the rest of the article…

The Climate Crisis Is Real: Here’s the Expert Advice on What We Need to Do

The Climate Crisis Is Real: Here’s the Expert Advice on What We Need to Do

A global primer on next steps, from keeping oil in the ground to changing our diets to shifting to a green economy.

GretaThunbergMarch.jpg
Greta Thunberg helped launch a movement. But dealing with the climate crisis is up to us. Photo by campact Creative Commons licensed.

“The world is waking up,” Thunberg told world leaders at the recent UN Climate Action Summit. “And change is coming whether you like it or not.”

But how long that awakening takes could be decisive for warming this century. A report published ahead of the summit declared that the impacts of climate change are accelerating — global emissions of carbon dioxide grew by 20 per cent between 2015 and 2019, while the average rate of sea level rise has increased to five millimetres per year over roughly the same period.

One author warned that limiting global temperature rise to two degrees Celsius would require tripling current commitments to reduce emissions. To hold temperatures to 1.5 degrees Celsius above pre-industrial levels, global ambition would need to increase by a factor of five.

The debate over whether climate change is happening is over, and the conversation about what should be done is beginning in earnest. We’ve asked experts from around the globe to describe how the world should respond to the threat of climate breakdown. We share their insights here.

The state of the Earth

Nowhere are the effects of climate change more visible than in the Arctic, a region that’s estimated to be warming at least twice as fast as the global average. Arctic sea ice reached its second-lowest extent on record in September 2019.

A new report by the Intergovernmental Panel on Climate Change has revealed the changes that are under way in the oceans and the ice-covered regions of the world, and the message is stark.

 …click on the above link to read the rest of the article…

Trump Wants Deal With Exxon or Other Company to Take Syrian Oil

Trump Wants Deal With Exxon or Other Company to Take Syrian Oil

‘We should be able to take some’

Having sent growing numbers of troops into eastern Syria explicitly to control the oil, President Trump now says he is seeking a deal with Exxon Mobil or “one of our great companies” to go into occupied Syria and take the oil.

Trump has long suggested that in his view, the US should be able to just take oil from countries it is involved in militarily, as a way to recover some of the costs of his various wars. Trump said on Sunday that the oil is valuable and “we should be able to take some also.”

That Trump is sold on this idea is one thing, but convincing a US Oil and Gas Major to go along with the operation is another thing. The legal basis, particularly internationally, of taking Syrian oil without Syrian permission, and keeping US military forces there to keep Syria from stopping them, is going to be complicated, to say the least. 

Trump’s conviction that legally it’s probably fine, after all, doesn’t mean the US company, whichever it turns out to be, wouldn’t get sued in the US or internationally for looting Syria’s oil.

These huge multinational companies are notoriously risk-averse about conflict, and would likely be so about joining the president in an oil-taking scheme of this sort. That means while Trump continues to war to keep the oil, he’s going to face a big job selling the idea to any company. 

It’s Official: Trump Says US Keeping Syria’s Oil, Secured By “Small Number” Of Troops

It’s Official: Trump Says US Keeping Syria’s Oil, Secured By “Small Number” Of Troops

“Now we’re getting out… let someone else fight over this long bloodstained sand,” President Trump said during a major, unannounced speech from the White House declaring America’s “big success” in Syria. 

As we predicted, he confirmed the US is “getting out” but it’s not quite the reality, because he also confirmed a “small number” of American troops will stay in Syria to protect oil in the region

“We have secured the oil and, therefore, a small number of U.S. Troops will remain in the area where they have the oil,” Trump said. “And we’re going to be protecting it, and we’ll be deciding what we’re going to do with it in the future.”

But of course, this oil belongs to the Syrian state and its people, as even former top White House Syria and Iraq envoy Brett McGurk, stated bluntly this week: “Oil, like it or not, is owned by the Syrian state.”

Trump also acknowledged during the Wednesday televised address, in a rare reference to past White House policy, that Obama embarked on a failed “regime change” bid in Syria, which morphed into a nightmarish war taking 500,000 lives. 

Currently, even amid a US troop pullback in the north, American special forces and Kurdish-led SDF forces remain in control of the key oil and gas infrastructure in the Deir Ezzor region, east of the Euphrates. The major oil and gas fields in the eastern region such as al-Omar, Conoco field, and Rumeilan oil field, remain Syria’s only significant domestic energy access.

 …click on the above link to read the rest of the article…

Energy vs DNA

Energy vs DNA

Rembrandt van Rijn Landscape With the Rest on the Flight into Egypt 1647

Hmm, energy. Is it a good idea I be drawn back into the subject? We used to do so much on the topic, Nicole Foss and I, in the first years of The Automatic Earth, and before that at the brilliant Oil Drum, where we had all those equally brilliant oil professionals to guide us on. So why revisit it? Well, for one thing, because a friend asked.

And for another because things -may have – changed over the past 15 years or so. Not that I think the peak oil idea, which is that we reached the peak in 2005 or so, changed. Yeah, unconventional oil, shale, fracking etc., came about, but that has nothing to do with peak oil. Just look at the EROEI (energy return) you get from shale. You go from 100:1 to, if you’re lucky, 5:1. You can’t build a complex society on that.

It’s not an accident that shale oil firms are going broke all over; even ultra low interest rates can’t save them. But all that still doesn’t come close to scratching the surface of our energy -or oil, for that matter.- conundrum.

I’ve never understood what the idea behind the Extinction Rebellion is. Or, you know, that they know what they’re talking about. Do they know the physics?

The general idea, yeah, but not how they aim to reach their goals. Far as I can tell, it’s about less CO2 -and methane, supposedly- emissions, but I don’t get how they want to achieve that. I’ve read some but not all of their theories, and it’s not obvious. It feels like they want less of various things, only to replace them with something else. Like they think once oil is gone, you can put wind and solar in its staid, and off we go. Tell me how wrong I am. Please do.

 …click on the above link to read the rest of the article…

Getting Real About Green Energy: An honest analysis of what it CAN’T promise

Getting Real About Green Energy: An honest analysis of what it CAN’T promise

I want to be optimistic about the future. I really do.

But there’s virtually no chance of the world transitioning gently to an alternative energy-powered future.

These Are The ‘Good Old Days’

I’m often asked where I stand on wind, solar and other alternative energy sources.

My answer is: I love them. But they’re incapable of enabling our society to smoothly slip over to powering itself by other means.

They’re not going to “save us”.

Some people are convinced otherwise. If we can just fight off the evil oil companies, get our act together, and install a national alternative energy system infrastructure, we’ll be just fine.  Meaning that we”ll be able to continue to live as we do today, but powered fully by clean renewable energy.

That’s just not going to happen. At least, not without a lot of painful disruption and sacrifice.

The top three reasons why are:

  1. Math
  2. Human behavior
  3. Time, scale, & cost

I walk through the detail below. I’m doing so to debunk the magical thinking behind the current “Green Revolution” because I fear it offers a false promise.

Look, I’m a huge fan of renewable energy. And I’m 1,000% in favor of weaning the world off of its toxic addiction to fossil fuels.

But we have to be eyes wide open about our future prospects. Deluding ourselves with “feel good” but unrealistic expectations about green energy will result in the same sort of poor decisions, malinvestment, and crushed dreams as fossil-based system has.

As we constantly repeat here at Peak Prosperity: Energy is everything.  

Without as much available, the future is going to be exceptionally difficult compared to the present. Which is why I call the time we’re living in now The Good Old Days.

 …click on the above link to read the rest of the article…

How much oil left in America? Not much

How much oil left in America? Not much

If you think no worries because we can get arctic oil, think again. We can’t because icebergs knock the drilling platforms down, and massive amounts of new infrastructure — roads, rail lines, platforms, buildings — are needed to set up drilling in Alaska, since the permafrost soil heaves and sinks like a bucking bronco trying to shake them off.

It’s kind of dumb to be in this situation. In the first two oil shocks in the 1970s, many intelligent people proposed we should buy oil from other nations to keep ours in the ground when foreign oil declined. But hell no, Texas, Oklahoma, and other oil states said we need jobs and huge fat profits for shareholders more than national security as long as possible. I would guess this makes war a likely outcome in the future, which wouldn’t have occurred if we’d kept our oil in the ground.

The source material for this post is: Jean Laherrère, Updated US primary energy in quad (April 30, 2019) https://aspofrance.files.wordpress.com/2019/04/updateduspe2019-3.pdf

***

Philippe Gauthier. May 3, 2019. US Oil Exploration Drops by 95 Percent. Resilience.org 

It is well known that oil discoveries are in continuous decline worldwide in spite of ever-increasing investments. What is less known, however, is that spending on oil exploration is fast dropping in the United States. Exploratory drilling has been decreasing year after year and now stands at only five percent of its 1981 peak. In other words, once the currently producing shale oil wells are gone, there won’t be much to take their place.

According to figures derived from US Energy Information Agency (EIA) data by French oil geologist Jean Laherrère, oil exploration has already peaked twice in the United States. The first time was in the mid-1950s, with just over 16,000 wells drilled in a single year. The second major peak dates back to 1981, with 17,573 exploration wells. This number fell to only 847 in 2017.

 …click on the above link to read the rest of the article…

MbS: War With Iran Would Send Oil To Highs “That We Haven’t Seen In Our Lifetimes”

MbS: War With Iran Would Send Oil To Highs “That We Haven’t Seen In Our Lifetimes”

In an interview that aired just days before the one-year anniversary of Saudi journalist Jamal Khashoggi’s disappearance and presumed murder, Saudi Crown Prince Mohammad bin Salman sat for an interview with 60 Minutes – reportedly the most extensive interview he has ever given to a Western media outlet.

During the nearly 15-minute discussion with ’60 Minutes’ correspondent Norah O’Donnell (in an interview that, fittingly, was aired during ’60 Minutes’ 52nd season premier), MbS addressed every controversy afflicting his regime: tensions with Iran and the recent attacks on Abqaiq, the murder of Khashoggi, MbS’s hopes for peace in Yemen and the arrest of female activists despite MbS’s landmark gender reforms like granting women the right to drive.

The two issues from the interview that garnered the most attention were MbS’s insistence that he wasn’t aware of the plot to kill Khashoggi (but that he ‘accepts responsibility’, as a leader should), and the disruption in global oil supplies – triggering a spike in global prices – that could result from a war with Iran (just look at how global benchmarks responded to the attack on Abqaiq, with the largest one-day spike since Saddam Hussein invaded Kuwait).

Asked point-blank whether he ordered Khashoggi’s murder, MbS replied “absolutely not” and described the attack as a “heinous crime” (all via a translator).

“Absolutely not. This was a heinous crime. But I take full responsibility as a leader in Saudi Arabia, especially since it was committed by individuals working for the Saudi government.”

When pressed about how he could’ve been unaware of a mission in which some of his closest associates participated, MbS insisted that it would be ‘impossible’ for him to monitor what KSA’s 3 million government employees do on a daily basis.

 …click on the above link to read the rest of the article…

Oil Explodes 20% Higher, Biggest Jump On Record

Oil Explodes 20% Higher, Biggest Jump On Record

With traders in a state of near-frenzy, with a subset of fintwit scrambling (and failing) to calculate what the limit move in oil would be (hint: there is none for Brent), moments ago brent reopened for trading in the aftermath of Saturday’s attack on the “world’s most important oil processing plant“, and exploded some 20% higher, to a high of $71.95 from the Friday $60.22 close, its biggest jump since futures started trading in 1988.

Source: Bloomberg
Source: Bloomberg

As Bloomberg notes, “for oil markets, it’s the single worst sudden disruption ever, surpassing the loss of Kuwaiti and Iraqi petroleum supply in August 1990, when Saddam Hussein invaded his neighbor. It also exceeds the loss of Iranian oil output in 1979 during the Islamic Revolution, according to data from the U.S. Department of Energy.”

Furthermore, in light of news that the Saudi outage could last for months, this could be just the start. As a reminder, according to Morningstar research director, Sandy Fielden, “Brent could go to $80 tomorrow, while WTI could go to $75… But that would depend on Aramco’s 48-hour update. The supply problem won’t be clear right away since the Saudis can still deliver from inventory.”

Of course, should Aramco confirm that the outage – which has taken some 5.7mmb/d in Saudi output after 10 drones struck the world’s biggest crude-processing facility in Abqaiq and the kingdom’s second-biggest oil field in Khurais – will last for weeks, expect the crude juggernaut to continue until the price hits $80, and keeps moving higher.

Finally, here is the price summary from Goldman commodity strategist Damien Courvalin, who earlier today laid out four possible shutdown scenarios, and the price oil could hit for each:

 …click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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