[bratticus]

So do people think that the plane crash was an accident or what? The part about it exploding as it was landing is weird. I'm not convinced either way though.

[ReverseEngineer]

. There is a giant, ready customer just to their north, with insatiable demand. The stuff (especially weed) grows readily in their rich soil, under the prevailing weather conditions, and transportation is relatively simple, and best of all, the ruling elite that is involved in the other three are already deeply entrenched in the fourth.
There is the minor issue that it's illegal in the US, but the supply chain is already well developed, no problem to get the stuff cheaply in anyplace in the US.
So let the fun begin.

In order to buy drugs, you have to have a relatively better off economy than the drug supplier. That economy is crumbling. So unless you postulate interrnal demand for drugs in Mexico picking up the slack for demand destruction in the USA, its hard to figure how this will generate all that much money for Mexico.

Reverse Engineer

[bratticus]

Can't we keep the discussion on the topic of the potential assassination of a Spanish Mexican official who was trying to open Mexico's closed energy system up to Spanish concerns instead of bullsh!t stoner crap?

[pup55]

its hard to figure how this will generate all that much money for Mexico.

Beer Sales up through Sept

Ethanol Consumption by year, 1934-current

Well, of course the data is not available for dope, since it is illegal, but the closest proxy we have is for alcohol. During the last serious downturn, 1980-81, we had the all time high (sorry for the bad pun) of 2.75 gallons per-capita in the US from all types of booze. I know that part of this was the fact that the baby boom was at prime alcohol consuming age (I can assure you I did my part in those years), but, the suggestion is pretty obvious. There was a smaller uptick in 1990, during the little recession that took place that year.

Too bad it was illegal in 1929-1934 because of prohibition, so we do not have any good data on that.

Sorry for this tendency on my part to overthink one more topic, but it looks as though the big increase those years was in the hard stuff (spirits), suggesting we we were actually hitting it pretty hard in that era.

Interestingly, the higher gas prices got (2004 and 2005) the more we drank. '05 is the newest data.

So, while it remains to be seen what will happen exactly in the market for illegal drugs, it appears that historically, when the going gets tough, the tough get loaded.

Of course, if we descend into mad-max, there is still some question, but this shows that people will go to some sacrifice to get wasted.

[IslandCrow]

This will do nothing for the supply of oil to the market (although it might slow the delivery of oil to the beach), although it looks like it could increase costs. I have not followed the general drilling pattern, but the numbers of abandoned wells that have not been plugged seems high to me.

The US is set to require oil companies to plug 3,500 non-producing Gulf of Mexico oil wells in an effort to prevent future leaks, officials say.

The interior department will also require companies to dismantle 650 unused oil and gas platforms.

Some installations have sat idle for decades without inspection for leaks.
....
In an order issued on Wednesday, the interior department said wells that had not been used in the past five years for exploration or oil production must be plugged and their pipelines and rig structures dismantled.

"As infrastructure continues to age, the risk of damage increases," said Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, in a statement.

http://www.bbc.co.uk/news/world-us-canada-11320852

[dolanbaker]

Just imagine the cost to the oil companies if such an order was made worldwide on land as well as at sea! There must be thousands of abandoned drilling sites around the world.

[ROCKMAN]

There will be no help coming from off the Florida coast anytime soon. The fed offshore sale result are just in and there were no bids for the newly offered tracts in the eastern GOM.

I was surprised but just a little bit. If you search "Destin Dome" you'll find a sad history of very poor exploration results in that area. The eastern Gulf of Mexico, which includes offshore Gulf Coast Florida, has never been a petroleum-producing area. From the 1950s to the 1990s, oil companies drilled exploratory wells off the Gulf Coast of Florida. Nineteen wells were drilled in state waters, and forty were drilled in federal waters.

In the 1970s and early 1980s, oil companies drilled 16 wells on and around the Destin Dome, in federal waters off the Florida Panhandle. None were successful. Then from 1987 to 1995 Chevron made commercial gas discoveries on the Destin Dome 25 miles off the coast. The discovery extended the Norphlet productive trend, which is highly productive in Alabama state waters in Mobile Bay. However, the state of Florida objected to plans to produce the deposits, and in May 2002, the US government agreed to buy back 7 leases from Chevron, Conoco, and Murphy Oil for $115 million.

[ROCKMAN]

pstarr - Probably a bit of both. The potential doesn't look great but there's also the risk that if a company did find something they might get into a 10 year plus legal battle with the state to produce it. It already happened with that NG discovery. Given the demand on capex these days I suspect companies aren't too anxious to get $millions tied up while litigating.

[ROCKMAN]

As I’ve pointed out before the upstream oil patch is very happy with the current administration in Washington. After the BP nightmare at Macondo one has to wonder if an R POTUS would have had the nerve to offer so much more of the GOM to the oil patch. To date this POTUS has offered about 150 million acres in the GOM to the oil patch. Given that the current POTUS is the darling of the left they can hardly give notice to let alone criticize his support for developing fossil fuels:

Oil and gas operators offered over $850 million in high bids for 326 tracts covering more than 1.7 million acres in Wednesday’s GOM Sale 231. Fifty operators offered 380 bids totaling over $1.08 billion. BOEM offered 7,511 tracts encompassing over 39 million acres in the sale. BOEM Director Tommy P. Beaudreau said “While domestic energy production is growing rapidly in the United States, the central Gulf of Mexico, as demonstrated by today’s lease sale, will continue to be one of the cornerstones of the nation’s energy portfolio,” he said. “The Gulf of Mexico is one of the most productive basins in the world, and the Obama administration supports the development of our nation’s offshore oil and gas resources.

[vox_mundi]

Oil platform on fire in Gulf of Mexico

A small offshore oil platform caught fire in shallow water near the coast of Louisiana on Friday and a sheen was seen in the sea after workers were evacuated, officials said.

All 28 workers aboard were taken from the platform, located about 20 miles (32 km) east of the boot tip of Louisiana, onto a nearby supply vessel and taken ashore. No one was hurt, according to the U.S. Coast Guard.

Privately-held Texas Petroleum Investment Co, which owns and operates the platform, shut off production. A company spokesman said the platform can produce up to 2,200 barrels per day of crude oil from up to 60 wells.

The platform is tiny by Gulf of Mexico standards, where big platforms have capacity of up to 250,000 bpd.

The fire was still burning at midday Friday with response vessels on site. It was unclear how much oil had leaked, but the Coast Guard said it had seen a 1.4 nautical mile "rainbow sheen" drifting southwest of the platform.

The platform can store up to 4,000 barrels of crude, but those tanks held just 100 to 120 barrels at the time of the fire, the company said.

The Coast Guard initially said 4,000 barrels of crude were aboard the platform, but later revised that estimate to 130 barrels, closer to the company's number.

Texas Petroleum said no repairs or maintenance work were under way when the fire ignited.

The platform, in Breton Sound Block 21, is in state waters overseen by the Louisiana Department of Natural Resources.

Texas Petroleum Investment Co is a Houston-based, private exploration and production company with operations along the Gulf coast of Texas, Louisiana, Mississippi, and Alabama, according to its LinkedIn profile.

The company was founded in 1989 and operates more than 2,000 producing wells, it said.

[Tanada]

Chevron Corporation (NYSE: CVX) today announced the successful appraisal of the Anchor discovery in the Lower Tertiary Wilcox Trend.

“The positive results of our appraisal work at Anchor indicate a significant discovery of potentially hub class scale.” said Jay Johnson, executive vice president Upstream, Chevron Corporation.

The original Anchor discovery well, located in Green Canyon Block 807, approximately 140 miles (225 km) off the coast of Louisiana in 5,180 feet of water (1,579 m), was drilled in late 2014 to a depth of 33,750 feet (10,287 m) and it encountered 690 feet (210 m) of net oil pay.

http://www.chevron.com/chevron/pressrel ... exico.news

[Keith_McClary]

Chevron Announces Record Setting Well Test at Jack
Sep. 5, 2006

Chevron Corporation (NYSE: CVX) announced today that it successfully completed a record setting production test on the Jack #2 well at Walker Ridge Block 758 in the U.S. Gulf of Mexico. The Jack well was completed and tested in 7,000 feet of water, and more than 20,000 feet under the sea floor, breaking Chevron's 2004 Tahiti well test record as the deepest successful well test in the Gulf of Mexico. The Jack #2 well was drilled to a total depth of 28,175 feet.

The test was conducted during the second quarter of 2006 and was designed to evaluate a portion of the total pay interval. During the test, the well sustained a flow rate of more that 6,000 barrels of crude oil per day with the test representing approximately 40 percent of the total net pay measured in the Jack #2 well. Chevron and its co-owners plan to drill an additional appraisal well in 2007.

Production began in December 2014 and is expected to ramp up to 94,000 b/d of crude and 21 MMcfd of gas by 2020.

[ROCKMAN]

They don't predict the date of first production but they wouldn't be using the current price of oil to run their go-forward economic analysis. Just a WAG on my part but it could easily be 4 to 5 years before they begin selling oil from this field. Notice the drilled the "appraisal well" long after the discovery. In addition to fine tuning the economic analysis they also need more information to design the production facility.

What's really for a DW is when you run your development economic when oil is going for $100/bbl and the first day you begin producing years later oil is selling for $45/bbl. That's actually one of the potential advantage for a DW play during a low price period as we have today: while they can't predict the price very accurately 5 years from now they would have some level of confidence that it will be higher. And for such huge capex projects it's easily to delay the go-forward for a year or two.

[Tanada]

Despite expectations expressed by some experts in the oil industry the latest set of block auctions for the GOM produced disappointing results.

NEW ORLEANS, March 24 (UPI) -- A lack of interest in new oil and gas acreage for sale in the U.S. waters of the Gulf of Mexico may be indicative of a weak energy market, the government said.

The U.S. government said there were $156 million in high bids generated for the 128 parcels on the auction block in the Gulf of Mexico.

"The sum of all bids received totaled $179,172,819," the Bureau of Ocean Energy Management said in a statement. "No bids were received in the Eastern planning area [of the Gulf of Mexico]."

Advocacy groups protested the lease sale held in downtown New Orleans, saying it was time for U.S. energy policies to focus more on clean energy alternatives. The government last week removed drilling consideration for the Atlantic Ocean, where some of the first commercial offshore wind farms are slated for development.

BOEM Director Abigail Ross Hopper said some of the lackluster interest in the new acreage may be a reflection of weakness in energy markets.

"The decline in oil prices and low natural gas prices obviously affect industry's short-term investment decisions," she said in a statement.

Crude oil prices are down 25 percent from this time last year and 62 percent below this date in 2014. That's led energy companies to trim spending on exploration and production in an effort to preserve a competitive edge during the market downturn.

Randall Luthi, president of the National Ocean Industries Association, said those companies that did submit bids were making a statement about the resilience of the oil and gas potential in the Gulf of Mexico.

"Even though the Eastern Gulf sale was a non-starter, and the Central Gulf sale saw the lowest industry interest in the history of such sales, the companies that stepped up and submitted bids demonstrated their commitment to staying in U.S. waters and producing home grown energy, despite a tough operating environment," he said in a statement.

The U.S. Energy Information Administration estimates output from the Gulf of Mexico will account for about 21 percent of total U.S. crude oil production by next year.

http://www.upi.com/Business_News/Energy ... 458813175/

[ROCKMAN]

T - One should understand that interest in the GOM shelf area (above 600' water depth) peaked decades ago. For the last20+ years the focus has been heavily on the Deep Water leases. I don't have time now but if you look at the number of wells drilled on the shelf when oil prices were high you would see a similar lack of enthusiasm as was seen in this latest lease sale. As a consultant in the last 15 years the Rockman has worked on exactly ONE SHELF WELL but has worked on many Deep Water GOM and west coast Africa wells..

[Tanada]

T - One should understand that interest in the GOM shelf area (above 600' water depth) peaked decades ago. For the last20+ years the focus has been heavily on the Deep Water leases. I don't have time now but if you look at the number of wells drilled on the shelf when oil prices were high you would see a similar lack of enthusiasm as was seen in this latest lease sale. As a consultant in the last 15 years the Rockman has worked on exactly ONE SHELF WELL but has worked on many Deep Water GOM and west coast Africa wells..

Admittedly I did not pull out a map and look to see exactly where these leases were located, I just took the headline as good enough. My understanding is the deep water off the coast on the west side of Florida has some crazy restrictions compared to Texas, Louisiana, Mississippi and Alabama.

IIRC about 20 years ago the western counties of the Florida pan handle petitioned to be separated from Florida and joined with Alabama because they wanted to get in on the action and the state government has consistently blocked them every time.

How does Pensacola, Alabama sound? Well, get used to hearing it. The Pensacola City Council and the Escambia County Commission have passed a joint resolution asking that Mobile and the state of Alabama annex the county and its largest city.

"Everything is brighter in Alabama," Mayor John Fogg tells his fellow elected officials. "Mobile is bursting at its seams. Northrup Grumman has been awarded a $40- billion contract to build the new Air Force Refueling Tanker. They already have ThyssenKrupp Steel Mill, Air Bus, a NASCAR track, and a new regional cancer center coming to South Alabama, not to mention all the vendors and sub-contracting companies which attach themselves to all of these industries."

[Tanada]

If this report turns out o be accurate leasing in the GOM may take a decade or more to recover to 2010 levels. The tight oil from shale will have to play out before Deep Water GOM is economic in comparison. Much more at link below quote.

U.S. shale is the lowest cost option for new oil production and is likely to be more competitive than conventional offshore drilling, according to a new report from Wood Mackenzie.

The U.S. shale industry has weathered the oil price downturn, tweaking drilling practices and cutting costs in order to stay in business. A new report from Wood Mackenzie finds that the industry is proving to be resilient and flexible in the face of the worst oil market crisis in three decades.

The report concludes that U.S. shale companies have managed to cut costs by as much as 40 percent since 2014. Much of that comes from lower costs from equipment suppliers and oilfield services firms. But it also comes from improved productivity from the average shale well. Instead of drilling anywhere and everywhere, U.S. shale companies are getting better at finding the “sweet spots.”

Intriguingly, the report finds that conventional oil drillers have not had as much success in reducing costs. Non-shale drilling projects only achieved cost reductions on the order of 10 to 12 percent, Wood Mackenzie found. That means that a lot of large oil projects are not economical with oil prices at $60 per barrel.

By comparison, the Eagle Ford has an average breakeven price of $48 per barrel for Brent, and the Wolfcamp in the Permian Basin has a breakeven price of just $39 per barrel.

In other words, America’s shale industry is now more competitive than places like the North Sea, West Africa or other deepwater drilling areas, places that have seen high levels of interest and investment for a much longer period of time. “There are more opportunities to invest in the U.S., and that’s where the investment will take place,” Simon Flowers of Wood Mackenzie said.

http://oilprice.com/Energy/Crude-Oil/In ... water.html

[ROCKMAN]

T - "The tight oil from shale will have to play out before Deep Water GOM is economic in comparison." For a sense of how unsupportable that statement really consider that the great majority of DW fields were developed at or below current oil prices...adjusitied for inflation of course. At last count I think it was over 160 fields. Also remember the LAG TIME dynamic: a company starting DW exploration program today wouldn't give a sh*t what the price of oil is today or in 5 years since it would probably be 10+ years before they started selling oil. And if a company already had a tossed developed today and ready to lease in the next sale they would have 10 years to develop it.

Granted they can't predict oil prices 10 years out. Just as they couldn't predict $50/bbl ten years ago or predict $146/bbl in 2008 in 1998 when oil was $17/bbl.