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Peak Investment = Peak Oil

Discussions about the economic and financial ramifications of PEAK OIL

Re: Peak Investment = Peak Oil

Unread postby Plantagenet » Thu 30 Jan 2014, 12:58:38

Shell just announced they aren't going to pursue their Alaska/Arctic Ocean drilling program this summer----its just too darn expensive.

Peak Investment = Peak Oil. :!:
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Re: Peak Investment = Peak Oil

Unread postby ROCKMAN » Thu 30 Jan 2014, 13:31:01

P - A cross post from the front page in case you didn't see it: Actually much of the change at Shell may be due to the new top dog there. He’s a downstream guy… refining/marketing. Historically those guys hate us upstream/exploration types. I know that sounds odd since without the upstream side of the biz the downstream guys wouldn’t have a job. But that’s how it has always been. So the new head man is going to focus on maximizing profits from the downstream side while reducing expenditures on the upstream side. Which can look good on paper today but eventually without the upstream side producing new reserves the downstream side runs out of stuff to refine/market. But Mr. I’mdownstreamandproudofit will make his bonuses and retire long before that day comes so it won’t be his problem.
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Re: Peak Investment = Peak Oil

Unread postby Synapsid » Thu 30 Jan 2014, 14:45:27

Plantagenet,

Yep, mounting costs atop mounting costs. There's another ingredient too: a judge ruled that the government had issued drilling permits illegally. Shell said that they'll wait till the parties involved sort all that out. That's a bit of a face-saver for the company.
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Re: Peak Investment = Peak Oil

Unread postby Graeme » Thu 30 Jan 2014, 15:52:23

There's more info in this story.

Shell to Stop Drilling for Alaskan Oil Due to Falling Profits

Shell’s incoming CEO Ben van Beurden recently announced that a court ruling has placed “significant obstacles” in the way of oil exploitation in Alaska. Europe’s largest energy company also announced that it will cut capital spending by around $10 billion this year and sell many of its assets in an effort to become more efficient. As old oil fields fade faster than new ones can be tapped into, Shell plans to shift its focus towards liquefied natural gas projects in places such as the Gulf of Mexico and Brazil.

Shell purchased nearly $7 billion worth of shale assets in the U.S. on Voser’s watch, only to write down their value by $2 billion last summer. Investec analyst Neill Morton also predicted that further writedowns in the value of Shell’s North American shales assets are likely, Huffington Post reports. While Van Beurden may not be willing to commit further resources to drilling in Alaska in 2014, he did say that the company would look to resolve the legal issues “as quickly as possible.”

Apart from difficulty gaining access to Alaskan oil fields, overall production was also affected by the closure of wells in Nigeria due to security reasons. Of the five per cent reduction to 3.25 million barrels per day, two can be attributed to the security issues that have occurred in Africa.

While Shell may also reduce investments in Nigeria, their main point of concern is the northern United States. Oil prices remain high around the world, but “North America natural gas prices and associated crude markers remain low, and industry refining margins are under pressure.”


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Re: Peak Investment = Peak Oil

Unread postby Graeme » Thu 30 Jan 2014, 19:10:34

Shell abandons (for now) Arctic oil drilling. Let's make it permanent.

Shell’s decision to give up on Arctic Ocean oil drilling for 2014 is good news for the environment. Now if only the oil companies — and the Obama administration — would give up altogether on the idea of drilling in such a remote and harsh place.
Yes, there are arguments for ramping up domestic oil production to reduce our dependency on foreign oil, but the bigger issue is our dependence on oil, period. It’s mind-boggling that we talk about trying to reduce global warming caused by burning fossil fuels while at the same time pursuing policies that will bring us more fossil fuels to burn, and at a cheaper price. It’s like a heroin addict saying, “Yeah, I’ll get clean, someday.”
The Arctic drilling is doubly problematic because of the harsh conditions. The oil companies assure us that they are taking proper safeguards, they have the technology, they are conscientious stewards of the land, etc. But in July 2012, Shell couldn’t control its drilling rig, Discoverer, and it took the arrival of local tugboats to keep the platform from washing ashore. Earlier, the Challenger ice barge, designed to handle any spills in the frozen north, failed Coast Guard inspections and was forced to remain in port in Washington state until the problems were resolved. And at the end of the 2013 drilling season, the Kulluk drilling barge broke loose while under tow and ran aground off Kodiak.

When you can’t even get your equipment in place, you don’t exactly instill public confidence in your ability to drill safely.
Shell announced Thursday that it was scrapping plans to drill this year after a Jan. 22 ruling by the U.S. 9th Circuit Court of Appeals, which said the government violated the law when it opened the Arctic to drilling in the first place. Though the decision doesn’t preclude Shell and other oil companies from ultimately drilling on leases they bought from the federal government, maybe the court’s ruling will lead the Obama administration to revisit its head-scratching conclusion that such efforts are safe.


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Re: Peak Investment = Peak Oil

Unread postby sparky » Thu 30 Jan 2014, 23:58:18

.
@ Synapsid , the mirror of Brazil pre salt would be the African coast South of the gulf of Guinea
that's Gabon ,Congo and Angola , more or less
https://www.google.com.au/search?q=afri ... 36&bih=738
there is already off shore fields operating in Gabon and Angola enclave of Cambida
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Re: Peak Investment = Peak Oil

Unread postby Synapsid » Fri 31 Jan 2014, 11:55:35

sparky,

Yes, I caught that in a later reply. Thanks. Production along that stretch of the African coast is fairly straightforward, I believe; I'd been wondering about something like Brazil's below-the-salt targets.

Morocco would line up with the East Coast of North America and that part of the Atlantic may not have opened in the same way as the South Atlantic did (sort of like a zipper, south to north, with salt water intruding and evaporating) so thick salts may not be there.

There are some wonderful rift valleys inland from the East Coast, by the way. The Connecticut River flows down one. They extend from North Carolina all the way up into New England. You should come visit.
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Re: Peak Investment = Peak Oil

Unread postby Pops » Fri 31 Jan 2014, 12:40:55

Big Oil Has Big Problems
By Matthew Philips January 31, 2014

Some of the world’s largest oil companies are reporting pretty ugly earnings. Profits at Exxon Mobil (XOM), the biggest U.S. oil company, are down 27 percent off its worst fourth-quarter earnings in four years. Royal Dutch Shell (RDS.B), Europe’s biggest oil major, saw its profits tumble 48 percent.

Chevron (CVX) reports on Friday, but given some of the issues it has faced maintaining production levels, there’s not a lot of optimism out there. ConocoPhillips (COP)reported a 74 percent jump in fourth-quarter net income, mostly from all the “non-core”assets it has unloaded recently. Production from continued operations is well below where it was a year ago.

In a way, the world’s major oil companies all suffer from some version of the same problem: They’re spending more money to produce less oil. The world’s cheap, easy-to-find reserves are basically gone; the low-hanging fruit was picked decades ago. Not only is the new stuff harder to find, but the older stuff is running out faster and faster.


Just to maintain production rates, oil companies have to race to find new reserves faster than the old ones dry up. That essentially puts them on a treadmill at which they must run faster just to keep pace—a horrible problem in any business. “It’s like feeding an elephant,” says Fadel Gheit, an energy analyst at Oppenheimer. “You can’t just give him a couple bags of peanuts. You have to find a truck load every day, just to keep him happy.”

More including links:
http://www.businessweek.com/articles/20 ... picks=true
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Re: Peak Investment = Peak Oil

Unread postby Quinny » Fri 31 Jan 2014, 15:28:16

Don't think I've seen this before, but it doesn't look good. EROEI is irrelevant :roll:

https://skydrive.live.com/redir?resid=B906A04A3351037!3608&authkey=!AG5W20fOsGbJnt8&v=3&ithint=photo%2c.png

Image

Sorry but for some reason the image isn't working in post, but link does!
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Re: Peak Investment = Peak Oil

Unread postby dorlomin » Fri 31 Jan 2014, 16:39:21

Pops wrote:
Big Oil Has Big Problems
By Matthew Philips January 31, 2014

....
More including links:
http://www.businessweek.com/articles/20 ... picks=true


Seems the model is fading, not enough places need the huge money to drill outside of the tightly controlled nations like Saudi and the new oil that is being drilled is being done by smaller more nimble companies.
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Re: Peak Investment = Peak Oil

Unread postby ROCKMAN » Fri 31 Jan 2014, 17:00:55

Quinny - I've made that point before. From the perspective of what gets drilled and what doesn't (and not other relationships) EROEI is irrelevant. Forget a ratio of 1:1. Somewhere around 5 or 6 the economics will kill a drilling project before EROEI. The cost of the energy, including the amortized embedded energy, is a relative small component of what makes a well unattractive economically. Which is why EROEI has never been directly used to make a drilling decision. In fact, I doing more than 5% of the oil patch could tell you what that acronym stands for.
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Re: Peak Investment = Peak Oil

Unread postby ROCKMAN » Fri 31 Jan 2014, 18:15:58

Dolomin - Sometimes the elephant in the room is difficult to see even when you're pointing it out. Consider from the article: "Part of the problem for the biggest oil companies is that they came late to America’s shale revolution. Many have bought in, but the timing hasn’t been great for a lot of those deals, as when Exxon bought natural gas producer XTO Energy for $41 billion in 2010, just before gas prices crashed. Gheit traces the problem back decades, to when companies like Exxon and Chevron pulled out of the U.S. in search of what turned out to be higher-cost oil in such places as Africa and Asia." First, ExxonMobil didn't buy XTO for their undrilled shale acreage. And they didn't buy them for their expertise drilling shale wells: the service companies would put that on then table for free. They bought it for their proved PROUCING reserves. The XTO acquisition ALONE represented 80%+ of the proved PROUCING reserves XOM added to their books that year. And Shell Oil's effort to catch up in the US shale play? They paid $1 billion for a single lease in S. Texas and in just a few years drilled 185 Eagle Ford wells. So how did that work out for them. While some companies were reporting initial flow rat of 500+bopd the Shell wells and an average INITIAL FLOW RATE of 79 bold and 1,000 mcfpd. Little wonder they took a $2 billion write down and ran like a scalded dog from the shale play. Deep pockets are great but they don't offset incompetence. Is it any wonder why the head upstream exploration dog got replaced by the new head downstream refining dog? LOL. Decades ago Big Oil was unable to add reserves thru domestic drilling to replace what they were producing. Do they even notice who they are referring to when they point out XOM? It's not Exxon...it's ExxonMobill. Where did the Mobil part come from? In 1998 the $82 billion merger of Exxon and Mobil created the world's largest oil company. ExxonMobil did not become the monster oil/NG producer it is today by drilling wells. It did it with a bunch of signatures on closing documents. I wonder how many folks here are old enough to remember names like Texaco, Gulf Oil, Arco, Getty Oil, Amoco, etc. Yes...we eat our own...and have for many years. LOL. BTW at one time I worked Mobil Oil. And Exxon. And ExxonMobil. And though I doubt I'll live that long but maybe one day I'll work for ExxonMobilXxxxx. A paycheck is a paycheck regardless of who writes it.

There's a very simple (but not obvious to folks outside the oil patch) reason why you don't see Big Oil making a big splash in the US shale: lack of man power. As expensive as the shale plays may seem they are insignificant to the pocket books of Chevron et al. Continuously drilling shale well after shale well is just too labor intensive. One of the metrics you never see is how much ExxonMobil has to spend per employee. IOW take their annual drilling budget and divide it by the number of geologists, engineers, landmen, etc. in those divisions. I can't find the number right now but Big Oil has to spend many times the amount per employee that Little Oil does. If they allocated all their work force to developing the US shales I doubt they could spend 25% of their budget. But they can easily use a relatively small number of hands to develop a $1 billion Deep Water GOM project. This has always been their strength and weakness. The strength: they had the capex to take on huge projects. The weakness: a lack of huge projects available. That's why Big Oil shifted from the US to the foreign arena decades ago. And that was working out OK...until the NOC's (national oil companies) started taking control. From a global standpoint collectively US Big Oil has today been relegated to the role of a relatively minor player. ExxonMobil may be the largest oil companies in the old but they control only a rather small % of the remaining global reserves.

The future growth of US Big Oil today is the same as it has been for many years: acquisition/consolidation. They can't maintain themselves in the long run with the drill bit let lone grow.
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Re: Peak Investment = Peak Oil

Unread postby dorlomin » Fri 31 Jan 2014, 18:40:15

ROCKMAN wrote:There's a very simple (but not obvious to folks outside the oil patch) reason why you don't see Big Oil making a big splash in the US shale: lack of man power. As expensive as the shale plays may seem they are insignificant to the pocket books of Chevron et al. Continuously drilling shale well after shale well is just too labor intensive. One of the metrics you never see is how much ExxonMobil has to spend per employee. IOW take their annual drilling budget and divide it by the number of geologists, engineers, landmen, etc. in those divisions. I can't find the number right now but Big Oil has to spend many times the amount per employee that Little Oil does.
Command economy vs free market. Exxon and Sisters do big projects well, but they are the dinosaurs, the smaller mammals can squeeze more out of smaller projects and keep going.
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Re: Peak Investment = Peak Oil

Unread postby ROCKMAN » Fri 31 Jan 2014, 21:48:04

D - In fact, from my earliest days in the 70's Little Oil focused on following Big Oil into fields they had controlled for decades. In the early 90's we bought an offshore field from Conoco that they estimated had only $X million in reserves left to produce. In 3 years we increased production 5 fold and the field would ultimately recovered $4X in reserves. It wasn't that we were that much smarter then them but we had to focus on maxing recovery because that was providing our livelihood. The Conoco hands had to focus on projects that would impact their bottom line. Our bottom line was much lower. But there are much fewer such opportunities today's since Big Oil began moving away from domestic operations decades ago. IMHO Big Oil trying to move back into the US (excluding the Deep Water) is a very clear sign of desperation. A couple of years ago ExxonMobil said they would spend $100 million/day looking for oil/NG everywhere. My very Little Oil will spend less than $100 million in the next 2 to 3 years drilling conventional onshore projects. We would be thrilled to spend 5X as much...we have the capex . But we don't have the projects that would provide a rate of return my owner requires. XOM has the purse to play the Deep Water GOM...we don't. But we could go toe to toe with XOM on any convention onshore play in the country. And I don't consider them competition.
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Re: Peak Investment = Peak Oil

Unread postby Quinny » Sat 01 Feb 2014, 03:34:46

I was actually pointing out that IMHO they graphs illustrate the link between EROEI and the $. I think your point is not that it's irrelevant, but the $ decisons kill projects before it kicks in. My point is that the $ value will eventually become irrelevant and EROEI will become the measure (even if via some other more meaningful currency),

ROCKMAN wrote:Quinny - I've made that point before. From the perspective of what gets drilled and what doesn't (and not other relationships) EROEI is irrelevant. Forget a ratio of 1:1. Somewhere around 5 or 6 the economics will kill a drilling project before EROEI. The cost of the energy, including the amortized embedded energy, is a relative small component of what makes a well unattractive economically. Which is why EROEI has never been directly used to make a drilling decision. In fact, I doing more than 5% of the oil patch could tell you what that acronym stands for.
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Re: Peak Investment = Peak Oil

Unread postby ROCKMAN » Sat 01 Feb 2014, 10:45:00

Quinny - "''...the $ value will eventually become irrelevant and EROEI will become the measure..." Irrelevant to who? Certainly not to the folks who drill. An EROEI of two won't get a well drilled if it isn't profitable. EROEI maybe be relevant on various levels to different folks. But it has always been irrelevant and always will be to the companies drilling. Again, folks grossly over estimate how much energy is used to drill a well compared to how many non-energy $'s that goes into the process.
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Re: Peak Investment = Peak Oil

Unread postby Quinny » Sun 02 Feb 2014, 11:40:35

I was going to say that every $ had energy embodied in it, but then with QE it probably hasn't. The point is that although currency is currently divorced from real value, it cannot always be and it will become linked to reality in the future. IMHO I think this will be sooner rather than later. As the graphs show, despite massive growth in $ investment production is more or less flat. Why is this happening if not due to declining EROEI?
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‘Global oil sector needs $20tr investments over 25 years’

Unread postby AdamB » Wed 07 Mar 2018, 13:53:09


The global oil and gas industry needs to invest more than $20 trillion (Dh73.4 trillion) over the next 25 years to meet expected growth in demand and compensate for the natural decline in developed fields, Saudi Aramco Chief Executive Officer Ameen Nasser said on Tuesday. Speaking at the CERAWeek conference in Houston, Nasser said the industry has already lost $1 trillion of investments since the oil price downturn from 2014 to 2016. Future investments needed “will only come if investors are convinced that oil will be allowed to compete on a level playing field, that oil is worth so much more, and that oil is here for the foreseeable future,” Nasser said. “That is why we must push back on the idea that the world can do without proven and reliable sources. We must challenge mistaken assumptions about the speed with which alternatives


‘Global oil sector needs $20tr investments over 25 years’
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
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Re: Peak Investment = Peak Oil

Unread postby baha » Wed 07 Mar 2018, 14:01:42

Lack of Investment money is what will bring down the oil industry.

Do you know how many solar panels you could install with $20 trillion? It's mind boggling. And then they make power for 20-30 years instead of having to re-frack every few years. No pipelines or refineries needed. You can install the powerplant in your backyard.

Investors are always looking to the future...the future is electric.

And that Saudi dude is sweating it :)
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Re: Peak Investment = Peak Oil

Unread postby AdamB » Wed 07 Mar 2018, 14:19:35

baha wrote:Investors are always looking to the future...the future is electric.

And that Saudi dude is sweating it :)


As the wife tootles off to work and back, day in and day out, happily using all the free electric fuel the bank will give her, the demise of oil just doesn't even seem all that important at all. And then of course, there is always the opportunity to UPGRADE!!
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
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