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The Race For Arctic Oil Is Heating Up

The Race For Arctic Oil Is Heating Up

Arctic LNG

Despite climate concerns and environmentalist backlash against exploration for oil and gas in pristine sensitive regions of the Arctic, companies continue to explore for hydrocarbon resources in the Arctic Circle, in Russia and Norway in particular.

The largest Russian energy companies are looking to explore more Arctic oil and gas resources on and offshore Russia, while Norwegian and other Western oil firms are digging exploration wells in Norway’s Barents Sea.

Those companies lead the development efforts to tap more Arctic oil and gas resources as legacy oil and gas fields both offshore Norway and onshore Russia mature.  

Russia’s biggest energy firms Gazprom, Rosneft, Novatek, and Lukoil, and Norway’s oil and gas giant Equinor, as well as Aker BP and ConocoPhillips, are the top oil and gas producers in the Artic region, data and analytics company GlobalData said in a new report. Gazprom is the undisputed leader in Arctic oil and gas production, followed, at a long distance, by two other Russian firms, Rosneft and Novatek, GlobalData’s estimates show.

Russian firms are ramping up exploration in Russia’s Arctic, while Equinor and other Western companies drill exploration wells in Norway’s Barents Sea, hoping for a significant discovery that could add to the Johan Castberg oilfield—a massive discovery which was made in 2011, but which hasn’t been replicated in the Barents Sea so far.  

Yet, both Russia and Norway face specific challenges in getting the most out of their respective Arctic oil and gas resources. 

In Russia, the government has made Arctic oil and gas development a key priority and offers tax breaks for firms exploring in the area.

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“Gasmaggedon” Sweeps Over Global Gas Market

“Gasmaggedon” Sweeps Over Global Gas Market

CNOOC LNG

China’s state-owned gas importers are considering declaring force majeure on LNG imports, which would amplify the turmoil in global gas markets.

LNG prices have already plunged to their lowest levels in a decade in Asia as the ramp up of supply in 2019 came at a time when demand has slowed. That was true before the outbreak of the coronavirus. But the quarantine of around 50 million people and the shutdown of huge swathes of the Chinese economy has sent shockwaves through commodity markets.

Shipments of oil and gas are backing up at Chinese ports, which is creating ripple effects across the world. Now, Chinese state-owned CNOOC is considering declaring force majeure on its LNG import commitments, according to the FT. Sinopec and CNPC are also apparently considering the move.

Prices were already in the dumps. JKM prices recently fell to 10-year lows. But they have continued to decline, approaching $3/MMBtu for the first time in history. Just a few weeks ago, JKM prices were trading at around $5/MMBtu, itself an incredibly low price for this time of year.

LNG exports from the U.S. are uneconomical at these price levels. Many exporters have contracts at fixed, higher prices. But shipments can be cancelled for a fee. And any spot trade would be hit hard. The question now is whether shipments will come to halt. “Forward prices for summer are now at levels where U.S. LNG shut-ins begin to seem viable,” Edmund Siau, a Singapore-based analyst with energy consultant FGE, told Bloomberg. “There is usually a lead time before a cargo can be canceled, and we expect actual supply curtailments to start happening in summer.”

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The Oil Industry’s Radioactive Secret

The Oil Industry’s Radioactive Secret

shale operation

“All oil-field workers are radiation workers.”

That quote comes from a blockbuster investigation by Justin Nobel writing in Rolling Stone, who has spent more than a year and a half researching and reporting on radioactivity in fracking waste.

When a well is drilled, it produces a ton of brine, a salty substance that comes out of the ground. Shale wells can produce as much as ten times more brine than they do oil and gas. While hydrocarbons prove to be useful, the brine needs to be hauled somewhere for disposal. Often it is reinjected into disposal wells, or, in some cases it is sent to water treatment plants.

The problem is that the brine can be radioactive. As Nobel writes in Rolling Stone, radioactive brine may be dramatically increasing the cancer risk for people who come in contact with it. The workers who handle the waste are most obviously at risk. But there are plenty of others. The brine is used for de-icing roads, so municipalities are essentially spreading radioactivity all over roads in various parts of the country.

Old oilfield equipment is also repurposed. Rolling Stone spoke with a Louisiana inspector who saw a child sitting on a fence that was so radioactive that someone might receive a full year’s radiation dose in a single hour. Related: Hydrogen Costs Could Be Set To Plunge By 50%

The oil and gas industry dismisses the risk of radioactivity in the brine, which is naturally occurring, as not something that anybody should be worrying about. However, some of the experts that Nobel interviewed argue otherwise. First of all, the notion that just because something exists naturally in the world somehow makes it benign, is odd. “Arsenic is completely natural, but you probably wouldn’t let me put arsenic in your school lunch,” one nuclear-forensics scientist told Rolling Stone.

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Can Europe’s Largest Economy Survive Without Coal?

Can Europe’s Largest Economy Survive Without Coal?

Germany Coal

One of the greatest moral dilemmas that has been creeping into the everyday activities of specialists working with coal, oil and in some cases even gas (despite its being perceived a natural bridge to a low-carbon future) could be phrased in the following way: how do you stop producing fossil fuels when you still have cheap ample reserves? In this context coal stands out – its relative inferiority in terms of environmental pollution prompted governments in developed economies to ban its future usage. Yet whenever its production is not curtailed by government-mandated cuts, producers simply continue to extract as much coal as possible. Straight in the middle of the so-called European approach to coal lies Germany, an erstwhile bulwark of the coal industry. Can it eventually survive without coal?

In stark contrast to oil and gas – of which Germany has traditionally been a major net importer and in both cases looking back to a more than 50-year history of depending on primarily Russian hydrocarbon riches – Europe’s leading economy has substantial reserves of coal, lignite in particular. In fact, Germany remains the world’s largest producer of lignite and burns most of it for power generation, accounting for some 22 percent of the nation’s gross electricity output. Ironically, lignite production is more COintensive than hard coal as it is done by extracting coal from open-cast pits, nevertheless, its mid-term future looks a lot better than that of hard coal mining in Germany.

Whilst lignite remains economically competitive, Germany’s hard coal production went downhill after the government ended its subsidy schemes. The last hard coal mine closed its gates in December 2018, ending a 200-year history of the Ruhr Region and potentially starting a new development phase of Westphalia, a geographical phenomenon inextricably intertwined with coal. 

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Burning Trees For Heating Won’t Help With Climate Change: UK Think Tank

Burning Trees For Heating Won’t Help With Climate Change: UK Think Tank

coal

A suggestion by the UK Committee on Climate Change to burn more wood and plant replacement trees as a sustainable alternative to fossil fuels has drawn criticism from think tank Chatham House, which says this is hardly the best approach to reducing emissions.

“Expanding forest cover is undoubtedly a good thing, if you’re leaving them standing,” energy expert Duncan Brack told the Daily Telegraph. However, Brack, who served as special adviser to the Department of Energy and Climate Change, suggested that burning wood for heating was not the most sustainable way forward. Calling wood burning a carbon neutral process is “highly dubious,” Brack added.

These claims, according to the Telegraph’s environment editor, Emma Gatten, rest on the assumption that the carbon footprint of chopping down trees and burning them is offset by planting new trees to replace them. This assumption excludes the fact that older trees absorb more carbon and that it takes time to replace a forest.

“You can leave trees standing and they will continue to absorb carbon for decades,” Brack says. “But the biomass industry implicitly assumes that forests at some point stop reach a saturation point for carbon intake and can be harvested and simply replaced.” 

The benefit of planting trees to mitigate the effects of climate change has been put to the test on a wider scale as well. A study released last year found that reforestation could work, but it had to be done at a massive scale.

We need to plant 25 percent more trees than there are on Earth right now, or more than half a trillion in total, the study found. This would reduce the amount of carbon in the atmosphere by a quarter, erasing 20 years of emissions. Yet it would not solve the climate problem on its own, without a sustained effort to cut emissions, commentators on the study said.

The “Twin Threats” Facing Big Oil

The “Twin Threats” Facing Big Oil

Wolfcamp rig

The global oil and gas industry is facing the “twin threats” of the loss of profitability and the loss of social acceptability as the climate crisis continues to worsen. The industry is not adequately responding to either of those threats, according to a new report from the International Energy Agency (IEA).

“Oil and gas companies have been proficient at delivering the fuels that form the bedrock of today’s   energy system; the question that they now face is whether they can help deliver climate solutions,” the IEA said.

The report, whose publication was timed to coincide with the World Economic Forum in Davos, critiques the oil industry for not doing enough to plan for the transition. The IEA said that companies are spending only about 1 percent of their capex on anything outside of their core oil and gas strategy. Even the companies doing the most are only spending about 5 percent of their budgets on non-oil and gas investments.

There are some investments here and there into solar, or electric vehicle recharging infrastructure, but by and large the oil majors are doing very little to overhaul their businesses. The top companies only spent about $2 billion on solar, wind, biofuels and carbon capture last year.

Before even getting to the transition risk due to climate change, the oil industry was already facing questions about profitability. Over the past decade the free cash flow from operations at the five largest oil majors trailed the total sent to shareholders by about $200 billion. In other words, they cannot afford to finance their operations and also keep up obligations to shareholders. Something will have to change. 

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Russia Bets Big On The World’s Least Explored Oil Frontier

Russia Bets Big On The World’s Least Explored Oil Frontier

offshore africa

When the inaugural Russia-Africa summit was held in October 2019, most industry observers believed that the majority of projects under discussion would not get past the FID stage – in no small part because of their varied economic prospects. As well as wheat exports, nuclear technologies, conventional weaponry and ore mining, oil loomed large on the agenda. With the OPEC+ agreement entering its third consecutive year and oil prices stabilizing around $60 per barrel, Russian oil firms have enough cash to invest but face an uncertain future with domestic projects as no one really wants to see their own project ending up in the category of “spare production capacity”.

International sanctions and the ramifications they entail have compelled Russia to look beyond their usual investment regions – with little to no investments in Europe since 2014. Gazprom is now an unwelcome investor in Europe and even the privately-owned LUKOIL has mulled divesting its downstream assets and has reduced its retail presence in Europe. Investing in the United States or Canada is completely out of question for reasons predominantly political, whilst Middle Eastern NOCs have grown to become competitors, themselves looking for opportunities to diversify their portfolio. Due to all of the above factors, Africa has emerged somewhat naturally as a suitable region for Russian investment.

The Russian Energy Ministry has repeatedly declined to link Russia’s newly-found interest in Africa and the OPEC+ curtailments, saying that greenfield projects usually require 5-7 years before commissioning and thus the time gap between today’s issues and future production is too wide to impact any forecasts.

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IEA: The Oil Glut Is Going Nowhere

IEA: The Oil Glut Is Going Nowhere

Barrels

Global oil markets will remain well supplied this year, with a possible overhang of some 1 million bpd, the head of the International Energy Agency, Fatih Bitol, told Reuters.close [x]ReplayUnmuteLoaded: 0%Progress: 0%Remaining Time -0:00CaptionsFullscreen

“Non-OPEC production is very strong. We still expect production coming from, not just United States, but also Norway, Canada, Guyana, among other countries,” Birol said, adding “Therefore, I can tell you that the markets are, in my view, very well supplied with oil, and as a result of that, we see prices remain at $65 a barrel.”

Norway is about to experience a sharp jump in oil production in the next four years, a new forecast from its Petroleum Directorate has shown. After a steady decline over several years, production is set for a 43-percent increase between 2019 and 2024, the NPD said, reaching 2.02 million bpd in 2024. This will be thanks to the start of production at the Johan Sverdrup offshore field along with several smaller fields.

In Guyana, Exxon has just begun production from the Liza-1 well. Daily output from the deepwater field should reach 120,000 bpd before the end of 2020. Exxon is also building a second production vessel that should raise the total to 220,000 bpd.

In Canada, meanwhile, oil production is also set to grow despite a government-imposed curtailment aimed at supporting prices. The curtailment was relaxed twice in 2019 and it only concerns large producers, allowing smaller ones to pump as much as they can sell. Based on this, the Canadian Conference Board recently forecast oil production in the country will be growing at 4.2 percent annually between this year and 2024.

Demand growth, however, will be slow, according to Birol.

“We are expecting a demand growth of slightly higher than 1 million barrels per day,” the top IEA man told Reuters.

This means that except sudden spikes in prices due to geopolitical factors or possible production outages in a major producer, oil prices this year will remain largely range-bound.

By Irina Slav for Oilprice.com

Low Gas Prices Crush Appalachia Shale Boom

Low Gas Prices Crush Appalachia Shale Boom

Marcellus shale tower

Low natural gas prices have finally brought the decade-long shale gas boom in Appalachia to a halt.close

Gas production in Appalachia declined by about 1 billion cubic feet per day (Bcf/d) over the past 30 days, bringing output down to an average of 32.7 Bcf/d, according to S&P Global Platts Analytics. That helped drag down overall U.S. gas production to 91.8 Bcf/d, a 1.7 percent decline from 93.4 Bcf/d in November.

The Permian hogs a lot of attention in the press, but the Marcellus shale has been growing at a blistering rate for about a decade. That is now coming to an end as the shale gas industry struggles with oversupply and low prices, lack of profits, debt, investor skepticism and also competition from associated gas in the Permian.

Natural gas prices fell sharply last year, ending the year down more than 25 percent. The rig count in the Marcellus fell by 1 last week, dropping the total to 40. Eight months ago there were 65 rigs operating in the area.

Front-month gas contracts are trading at about $2.12/MMBtu, although at the wellhead prices can be much weaker. S&P said that prices at Dominion South, a hub in the Marcellus, have averaged just $1.78/MMBtu in the past month. S&P says that average breakeven prices are $1.80/MMBtu, but that likely understates the price level that drillers need, given the struggles that many have gone through. Related: How Long Will The Oil Price Fear Premium Last?

“Gas prices are down. It has a big impact, the difference between $2.75 gas and $2.50 gas,” Toby Rice, EQT’s new president and CEO, told the West Virginian legislature in December “A lot of this development doesn’t work as well at $2.50 gas.”

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2020 Will Be A Crucial Year For Oil

2020 Will Be A Crucial Year For Oil

Oil

It’s the start of a new year and a new decade, and the oil market is as unpredictable as ever.

Will OPEC+ extend its cuts? Will U.S. shale finally grind to a halt? Is this the “year of the electric vehicle”? Here are 10 stories to watch in 2020.

Shale debt, shale slowdown. The debt-fueled shale drilling boom is facing a reckoning. Around 200 North American oil and gas companies have declared bankruptcy since 2015, but the mountain of debt taken out a few years ago is finally coming due. Roughly $41 billion in debt matures in 2020, which ensures more bankruptcies will be announced this year. The wave of debt may also force the industry to slam on the breaks as companies scramble to come up with cash to pay off creditors.

Year of the EV. Some analysts say that 2020 will be the “year of the EV” because of the dozens of new EV models set to hit the market. In Europe, available EV models will rise from 100 to 175. The pace of sales slowed at the end of last year, but the entire global auto market contracted. EVs may struggle to keep the pace of growth going, but EVs are capturing a growing portion of a shrinking pie.

Climate change. 2020 starts off with hellish images from the out-of-control Australian bushfires. 2019 was one of the warmest years on record and the 2010s was the warmest decade on record. As temperatures rise and disasters multiply, pressure will continue to mount on the oil and gas industry. As Bloomberg Opinion points out, climate change has surged as a point of concern for publicly-listed companies. Oil executives are betting against climate action, but they are surely aware of the rising investment risk. In the past two months, the European Investment Bank is ending financing for oil, gas and coal, and Goldman Sachs cut out financing for coal and Arctic oil. More announcements like this are inevitable.

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

Russia Halts Oil Supply To Key European Transit Hub

Russia Halts Oil Supply To Key European Transit Hub

Oil Supply

Russia has halted oil supplies to Belarus amid a disagreement over tariffs, according to officials at a Belarusian oil refinery in the northern city of Navapolatsak.

The officials told RFE/RL that the shipments stopped on January 1 and the facility is currently processing only Russian oil delivered before that date.

Belarus has been at odds with Russia over oil-transit prices for some time against a backdrop of increasing pressure by Moscow on Belarusian President Alyaksandr Lukashenka to deepen integration between the two countries.

A two-month deal on natural-gas prices hours before a December 31 deadline helped the sides avoid a gas shutoff to start the year.

Belarus is heavily reliant on Russia for fuel and funding and is a key transit route for Russian energy supplies to Europe. And now, Russia has just broken a new oil production record

Moscow and Minsk signed an agreement in 1999 to form a unified state, but little progress has been made in the ensuing two decades. 

Meetings between Russian President Vladimir Putin and Lukashenka last year failed to bring the two sides together as the Belarusian president complained he was merely seeking “equal” terms.

Belarusian protests in December targeted the perceived secrecy of the talks and objected to closer ties to Russia.

Mike Pompeo this week postponed a planned visit to Minsk to meet with Lukashenka in what would have been the first visit by a U.S. secretary of state to that post-Soviet country in a quarter century.

Burn, Pay, Or Shut It Down: Three Evils For Permian Drillers

Burn, Pay, Or Shut It Down: Three Evils For Permian Drillers

Evil Permian Drillers

There was a time when natural gas was a welcomed byproduct of crude oil drilling, and drillers in the prolific Permian basin enjoyed this consolation prize–at least when natural gas prices were on the rise. All good things come to an end, though, and the amount of natural gas now exceeds the capacity to get rid of it.

With pipeline capacity fully exploited and natural gas prices squarely in the red, Permian drillers today are faced with three lousy choices: burn off the natural gas, pay to have the gas removed, or slow oil drilling activities to staunch the flow of natural gas.

Crude oil and natural gas are like two peas in a pod: when you find oil, you often find gas. 

Crude oil is pumped out of the well, and a small amount of natural gas comes almost inevitably comes with it. 

But over time, this ratio changes: less oil, more natural gas. 

Now, there is simply too much natural gas, and drillers in the American shale patch must face the not-so-pleasant music, with only one question remaining: which shale drillers can hold on until more pipeline capacity comes online?

Burn, Baby, Burn

The first option for drillers trying to weather the natural gas storm is to burn it off. 

This is flaring–and it’s a rather unpopular method, publicly speaking, due to the negative impact on the environment. For drillers, though, it’s a cost-effective way of dealing with the glut, and since they all must answer to shareholders and lenders, flaring is the first choice when it comes to watching the bottom line. 

Flaring has increased exponentially in recent years as the discrepancy between natural gas and pipeline capacity increased, creating unfavorable market conditions and leaving drillers holding a bag of unwanted natural gas. 

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

Germany Aims To Close All Nuclear Plants By 2022

Germany Aims To Close All Nuclear Plants By 2022

Nuclear plant

Germany is going forward with its plan to phase out nuclear reactors by 2022 as another nuclear power plant is going offline on December 31.

Power company EnBW has said that it would take the Philippsburg 2 reactor off the grid at 7 p.m. local time on New Year’s Eve.

This leaves Germany with six nuclear power plants that will have to close by 2022.

In the wake of the Fukushima disaster in Japan in 2011, Germany ordered the immediate shutdown of eight of its 17 reactors, and plans to phase out nuclear power plants entirely by 2022.

The Philippsburg 2 reactor near the city of Karlsruhe in southwestern Germany has provided energy for 35 years. The Philippsburg 1 reactor—opened in 1979—was taken offline in 2011.

Over the past few years, nuclear power generation in Germany has been declining with the shutdown of its nuclear plants, while electricity production from renewable sources has been rising.

In January this year, Germany became the latest large European economy to lay out a plan to phase out coal-fired power generation, aimed at cutting carbon emissions—a metric in which Berlin has been lagging in recent years.

A government-appointed special commission at Europe’s largest economy announced the conclusions of its months-long review and proposed that Germany shut all its 84 coal-fired power plants by 2038

Germany, where coal, hard coal, and lignite combined currently provide around 35 percent of power generation, has a longer timetable for phasing out coal than the UK and Italy, for example—who plan their coal exit by 2025—not only because of its vast coal industry, but also because Germany will shut down all its nuclear power plants within the next three years.

The closure of all nuclear reactors in Germany by 2022 means that Germany might need to retain half of its coal-fired power generation until 2030 to offset the nuclear phase-out, German Economy and Energy Minister Peter Altmaier said earlier this year.

Marcellus Shale

Marcellus Shale

Marcellus

There have been some signs the shale boom that re-energized America’s domestic energy industry a few years back, might be entering a maturing phase of its development. A phase where weaker players would hit a debt wall or be bought out at discounted value. A phase where, companies with cash who might have felt shale plays were too frothy at present levels, and had stayed on the sidelines waiting for the “froth” to dissipate. Biding their time. Now you can now almost hear the knives on the whetstone.

Beginning in 2019 these signs began to take shape in the massive retrenchment of the service industry that powered shale growth. Companies like Halliburton, (HAL) and Schlumberger, (SLB) threw in the towel and began to take charges against earnings, and layoff hundreds of staff.

This trend took on a real and tangible face when in a recent filing Chevron (CVX) said it would write down and put on the auction block its Marcellus shale assets. Assets it acquired from Atlas Energy in 2011 for $3.2 bn.

In the third quarter, 2019 conference call where this news was released to analysts, Michael Wirth, Chairman and CEO of Chevron commented-

“Mr. Wirth said Chevron must be selective about its investments moving forward, focusing on oil-rich regions like the Permian Basin in West Texas and New Mexico.” – WSJ

According to CVX, not all shale is created equal. Let’s make a note of that! My job as an oil industry expert is to dig a little deeper and see if we can determine just what drove this decision.

The Marcellus vs. The Permian

Why is Chevron abandoning the Marcellus for the Permian? Let’s take a look at the isopach maps for both. In the graphic for the Marcellus, noted as Figure 2, you can see it is a relatively thin structure over most of its extent. And thins progressively the farther west it goes. The EIA comments thusly about production in the Marcellus:

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The Human Cost of the EV Revolution

The Human Cost of the EV Revolution

Mining

There’s a chance that the iPhone you’re about to get for Christmas contains cobalt mined by a six-year-old. There’s also a chance that that six-year-old has been killed or maimed in the processes of mining in the Democratic Republic of Congo, where the lion’s share of the world’s cobalt comes from. 

Or, maybe, for those whose Christmas lists are more upscale, you’ll be driving around in a new Tesla next week, with a battery containing cobalt from that same mine. 

Our luxuries are necessarily someone else’s sacrifice – and sometimes that sacrifice is the ultimate one. 

The EV and electronics revolutions have come at a steep human cost: a boom in child labor in the DRC as child cobalt miners offer battery makers and Big Tech cheap labor.

That’s the focus of the first-ever lawsuit targeting giant tech firms as end-users of cobalt from mines in which young children have died. 

Having failed to bring down giant miners of cobalt in DRC, such as Glencore, this time lawyers are going after the end users themselves. 

The first reports about child labor in the cobalt mines in the DRC emerged several years ago. And while no one likes to hear that their Tesla, lithium battery, smartphone, or fitness tracker has cost a child his health—or worse, his life—this is the reality of cobalt mining today.

This week, International Rights Advocates filed a lawsuit against Tesla, Apple, Dell, Microsoft, and Alphabet for knowingly benefiting financially from child labor in the DRC. 

The suit was filed on behalf of 13 families whose children died or were seriously injured while mining for cobalt. The suit also seeks damages from miners Glencore and Zhejiang Huayou Cobalt, which supply cobalt to the tech majors and to Tesla.

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Olduvai IV: Courage
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Olduvai II: Exodus
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