Credit crunch impacts on production

TheDude · **Posted:** Mon Aug 03, 2009 5:16 pm

OfficialWire: More Than 3.5 Mb/d Of Crude Oil Production Capacity That Was Supposed To Come Online Between 2009-13 Has Been Postponed

Quote:

The Report on ‘Global Financial Credit Crunch: Will it lead to a Global Oil and Gas Supply Crunch’ analyzes the oil and gas markets focusing on the effects of the reduction in capital expenditure by oil and gas companies and the delayed and cancelled upstream and downstream projects on the future of the oil and gas industry. The report provides an in-depth analysis of the effects of the credit crisis on the capital expenditure of companies and the current and future projects in the upstream and the downstream sectors. The report highlights the key issues leading to a future supply crunch and the role of government policy in the energy markets. Finally, the report tries to map out the consequences of the low investments on the future production capacity and compares them with the future demand growth estimates. The report analyses current and future demand and supply projections to propose three scenarios for the future possible evolution of the world oil industry and examines the possibility of a supply crunch in the near future.

Quote:

The investments in the upstream oil and gas industry are the most affected due to the credit crisis and the current economic downturn. Most of the suspended or cancelled upstream projects are in the oil sands sector due to the high cost of development. More than 15 projects in the Canadian oil sands have been suspended since late 2008 amounting to more than 1.72 mb/d of oil production capacity. More than 3.5 mb/d of crude oil production capacity that was supposed to come online in the next three years have been postponed, delayed or cancelled due to the financial crisis and the global economic slowdown. Similarly, more than 3.5 mb/d of crude oil production that was expected to come online from 2013 to 2015 has been postponed, delayed or cancelled. Investments in the downstream sector have been relatively less affected than the upstream sector. Nonetheless, some of the refining projects have been delayed as a result of the financial crisis and the weaker outlook in oil product demand.

This is the abstract of a report that costs £2,016.00.

OilFinder2 · **Posted:** Fri Aug 07, 2009 12:44 pm

Rig count now up 7 of the past 8 weeks.
LINK

OilFinder2 · **Posted:** Fri Aug 21, 2009 4:07 pm

US rig count up by 17 in the last week. I think that's up 9 of the past 10 weeks, if I'm not mistaken.

>>> LINK <<<

Even the natural gas rig count has been going back up. Why - I haven't a clue. Anyone doing more gas drilling these days outta have their heads examined!

OilFinder2 · **Posted:** Fri Aug 28, 2009 6:24 pm

US rig count up 14 this past week. I believe that's up 10 of the past 11 weeks now.

>>> LINK <<<

OilFinder2 · **Posted:** Wed Sep 02, 2009 9:22 pm

In addition to rig counts starting to climb once again, we also have some projects which were put on hold earlier in the year being put back on the front burner. In addition to the revived oil sands project I posted a couple months or so ago, here's another example. I can find others, if y'all are interested.

Certain people *cough cough* in this thread seemed to act as if the pullback was permanent and would have long-term consequences, but with some of these drilling plans and projects only having been put on hold for mere months, in the long term their postponement will hardly be noticed.

>>> LINK <<<

Quote:

[...]

HOUSTON, Sept. 1 – MegaWest Energy Corp., Calgary, signed agreements to recapitalize the company and restart its Marmaton River and Grassy Creek enhanced oil recovery projects in Missouri.

An investor group led by Iroquois Capital Opportunity Fund LP will buy $2.2 million in MegaWest preferred stock, and Mega Partners 1 LLC (MP1) paid $2 million for a 10% working interest partner in two existing Missouri heavy oil projects. MP1 will hold as much as a 20% working interest in future development on 15,313 acres in Missouri and Kansas.

MegaWest will receive services from Iromad LLC, a production enhancement and project management consultancy. Proceeds from the initial funding will be used to restart the two existing projects.

OilFinder2 · **Posted:** Fri Sep 04, 2009 5:47 pm

She's back over 1,000! :-D

>>> 1009 <<<

AirlinePilot · **Posted:** Sat Sep 05, 2009 2:18 pm

I never said anything of the sort about permanence. I said that price had an effect and it was and still is completely evident that many projects were put on hold or cancelled.

Now that price has rebounded a bit you are seeing the obvious results of that. The results still remain to play out. It is not and will not be evident until the price and demand signals recover enough to estimate the longer term effects of last years price crash in crude. I still stand by my premise that the impact will remain and any large scale production increases will lag real demand significantly.

On a macro scale the industry is still far below what one could consider normal times when you consider capital outlay and project schedules. Your pointing to minor increases in drilling rigs, production projects etc and claiming we are somehow out of the woods. We still have a very large issue with credit and lending. The velocity of normal money/lending is still crippled and will continue to be as long as large banks and financial institutions are allowed fantasy asset valuations by the regulatory structure.

What you are seeing is a simple small scale uptick in activity due to the price of crude moving off it's bottom. That's the proper and accurate context OF.

OilFinder2 · **Posted:** Sat Sep 05, 2009 6:01 pm

AirlinePilot wrote:

What you are seeing is a simple small scale uptick in activity due to the price of crude moving off it's bottom. That's the proper and accurate context OF.

Belittling the increased activity, eh? You surely aren't expecting the US rig count to go from 900 to 1500 in a month or two. As with most things economic (and otherwise), a climb up from the bottom is just that - a climb. It doesn't happen overnight. I'll remind you of this concept with a little graphic which I know you've seen before. THIS is the proper context:

AirlinePilot · **Posted:** Sat Sep 05, 2009 6:34 pm

Recession impacts still being felt

Europe's largest oil company by market value said it planned to restructure its exploration division and divide it into two units, one focused on the Americas and another focused on the rest of the world. Since, then new Chief Executive Peter Voser has announced hundreds of job cuts across the company as it struggles with plunging revenues after oil prices collapsed from a record above $147/barrel in July 2008. On Thursday, ratings agency Standard and Poors lowered its long-term rating on Shell to "AA" from "AA+", citing concerns about its cash flows.

http://www.reuters.com/article/rbssEner ... 4?rpc=401&

In Context....

U.S. natural gas drilling rigs are still down sharply since peaking above 1,600 September last year, and now stand at 885 rigs below the same week last year.
During the week ended July 17, 2009, the natural gas rig count dipped to 665, its lowest level since May 3, 2002, when there were 640 gas rigs operating. Tighter access to credit and a 75 percent slide in natural gas prices to below $3 per mmBtu over the last year or so have forced many producers to scale back gas drilling operations.

http://www.reuters.com/article/rbssEner ... 4?rpc=401&

AirlinePilot · **Posted:** Sat Sep 05, 2009 6:36 pm

Tough sell in VZ

The risk is not geological. Everyone knows where the oil is. The upgrading and refining facilities required to turn tar to oil cost billions of dollars, but the technology is tried and tested. Environmentalists, so vocal about Canada’s tar sands (see article), have so far been silent over Venezuela’s bitumen.

It does not help that PDVSA wants a 60% share and operational control in each block while not putting up any money. On top of that the government will take a 33% royalty and a windfall tax. Even so, state-owned oil firms from China, Russia and India have expressed interest in the blocks, along with Brazil’s Petrobras and multinationals such as BP, Chevron, Royal Dutch Shell and Total. Two things have prompted them to hesitate, says Michelle Billig of Pira Energy, a consultancy. The first is the world recession and the fall in the oil price—factors that lay behind disappointing bidding rounds in Algeria and Iraq earlier this year.

http://www.economist.com/world/americas ... 5&fsrc=rss

AirlinePilot · **Posted:** Sat Sep 05, 2009 6:38 pm

Oil project delays hit sub sea sector

Contractors and shipowners face struggle as drop in activity set to persist for 18 months

Martyn Wingrove - Thursday 27 August 2009

THE sub sea construction sector continues to be challenging for contractors and shipowners as oil companies delay projects and call for cost reductions.
European contractor Acergy has found the market tough in northwest Europe as the number of oil field developments has slowed. It is also finding it tough to win new sub sea installation orders in Africa and the ME...

http://www.lloydslist.com/ll/news/oil-p ... tm?src=rss

AirlinePilot · **Posted:** Sat Sep 05, 2009 6:43 pm

OilFinder2 wrote:

She's back over 1,000! :-D

From your link...once again for the CONTEXT.

"US drilling activity continued to climb, with 10 more rotary rigs active this week for a total 1,009 units—just slightly more than half the 2,013 units drilling in the same period a year ago, Baker Hughes Inc. reported. "

"Canada’s rig count was unchanged at 184 units drilling, compared with a rig count of 418 during the same period last year."

An improvement to be sure, but still down significantly in the greater picture of production.

OilFinder2 · **Posted:** Sat Sep 05, 2009 7:11 pm

AirlinePilot wrote:

"US drilling activity continued to climb, with 10 more rotary rigs active this week for a total 1,009 units—just slightly more than half the 2,013 units drilling in the same period a year ago, Baker Hughes Inc. reported. "

Bump for your edification.

OilFinder2 wrote:

AirlinePilot wrote:

What you are seeing is a simple small scale uptick in activity due to the price of crude moving off it's bottom. That's the proper and accurate context OF.

Belittling the increased activity, eh? You surely aren't expecting the US rig count to go from 900 to 1500 in a month or two. As with most things economic (and otherwise), a climb up from the bottom is just that - a climb. It doesn't happen overnight. I'll remind you of this concept with a little graphic which I know you've seen before. THIS is the proper context:

OilFinder2 · **Posted:** Sat Sep 05, 2009 7:20 pm

No problem getting investors for Canada's oil sands! :lol:

>>> LINK <<<

Quote:

China's $1.9B Alberta oilsands deal
PetroChina partners with Athabasca Oil Sands
By Dina O'Meara, With Files From Canwest News Service
September 1, 2009

CALGARY - In a blockbuster deal, privately owned Athabasca Oil Sands Corp. said PetroChina International Investment Co. Ltd. will buy a majority stake in its operations for $1.9 billion, marking the largest venture by China in the Canadian oilsands to date.

Athabasca Oil Sands said the state-owned firm, one of the world's most valuable oil and gas companies, will acquire a 60 per cent working interest in the MacKay River and Dover oilsands projects.

[...]

OilFinder2 · **Posted:** Sat Sep 05, 2009 7:28 pm

And guess where some of those new rigs are going? :-D

>>> LINK <<<

Quote:

September 05 2009
N.D. oil industry optimistic about the year ahead

MEDORA, N.D. (AP) — A record 381 oil wells were drilled in North Dakota in the past year and more are expected this year, the state mineral resources director told oil representatives Thursday.

Lynn Helms gave his report to about 250 people at the North Dakota Petro-leum Council’s annual meeting.

He said 335 of the wells drilled in the past year were in the Bakken and Three Forks shale formations in western North Dakota. Geologists have been trying to figure out whether the two formations are separate or one.

"The jury’s still out," Helms said.

Helms expects about 500 wells to be permitted this year, though he said oil prices remain so volatile he now compares them to a bungy cord rather than a roller coaster.

The number of applications for drilling permits dropped off in February, when oil prices were lower, to about two per week, Helms said. But as oil prices have increased, the number of applications has grown to at least two per day, he said.

[...]

Credit crunch impacts on production

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