Energy Sector

[bizaro86]

My prediction is that in 10 years people will be saying fusion is 10 years away. Just like what they're saying now, and what they were saying 10 years ago.

[mjm]

53 minutes ago, bizaro86 said:

My prediction is that in 10 years people will be saying fusion is 10 years away. Just like what they're saying now, and what they were saying 10 years ago.

https://www.olcf.ornl.gov/2017/06/27/how-hot-is-too-hot-in-fusion/#:~:text=Fusion%2C the energy that powers,the center of the sun.      

might take a few years

[sholland]

Agreed - I believe that the difficulty of holding the extreme temperatures and pressures over a significant amount of time (the triple product or Lawson Criterion) will prevent fusion from being a viable energy source for several decades, if ever.

[modiva]

I am investing in a private oil field in Texas, which has proven quality reserves with reliable monthly distributions, long-term attractive returns and significant upside potential.  If anyone is interested to learn and/or participate, I am happy to share details.  Please ping me privately.  

[james22]

The old joke is that fusion is always 30 years away and has been for the last 30 years. Except now it's not.

 

... for the first time ever, the development of fusion energy technology is happening in the private sector on a fairly large scale. And there’s multiple well-funded entrepreneurial ventures pursuing this really in parallel with government efforts as well.

 

... multiple groups are going to achieve the scientific goal of energy breakeven by 2030.

 

https://www.mauldineconomics.com/frontlinethoughts/technology-turning#disqus_thread

[rkbabang]

AI has always been 20 years away for something like 70 or 80 years and all of the sudden huge leaps seem to be being made now.  Hopefully fusion is next.

[Spekulatius]

1 hour ago, rkbabang said:

AI has always been 20 years away for something like 70 or 80 years and all of the sudden huge leaps seem to be being made now.  Hopefully fusion is next.

It harder to make large leaps with real hardware and systems. Also, the buyer of these are utilities which move very very slowly.

Energy parity just means that this reactor puts out more power than you put in. From there , it’s a long way until it becomes commercially viable.

[Eng12345]

Biden’s Billion-Dollar Oil Trade Faces a Big Test - WSJ

 

 

This is almost becoming comical

[Spekulatius]

Interesting take on the crude market and Saudi Arabia and Russia.

 

When you look at the recent announcement and market action, it is clear that the Russians did not cut production as they said they would do (500K barrel cut). I am not even sure that the rest of Opec did cut.

The Saudi's have been very focused on manipulating the crude markets via narratives, but  that does not change the supply/ demand.

https://finance.yahoo.com/news/russia-real-threat-saudi-arabia-041019689.html

 

Edit - you see similar dynamics with fertilizers and potash. Belarus exports plenty of Potash currently for example and that's why prices have been so weak.

Edited May 25, 2023 by Spekulatius

[Spekulatius]

So now that Europe diversified away from Russian NG, NG get's cheaper there....

[Sweet]

16 minutes ago, Spekulatius said:

Interesting take on the crude market and Saudi Arabia and Russia.

 

When you look at the recent announcement and market action, it is clear that the Russians did not cut production as they said they would do (500K barrel cut). I am not even sure that the rest of Opec did cut.

The Saudi's have been very focused on manipulating the crude markets via narratives, but  that does not change the supply/ demand.

https://finance.yahoo.com/news/russia-real-threat-saudi-arabia-041019689.html

 

Edit - you see similar dynamics with fertilizers and potash. Belarus exports plenty of Potash currently for example and that's why prices have been so weak.

Russia just lie all the time.  OPEC cut only took effect in May and likely only seeing the reduced volumes in transit now.

[SharperDingaan]

SA used a much higher average oil price for budget purposes, and can be expected to act accordingly. Longer term supply/demand clearly favors higher prices; whereas todays pricing is largely a paper oil manufacture, with contracts held for physical being met primarily out of SPR's and ship-to-ship delivery. 

 

Western SPR's are dwindling, Asian SPR's are rising. It is a simple thing to co-operatively slow down ship-to-ship delivery for a time, let Asian refiners draw down their SPR for a bit, and sell their resultant refined product at much higher prices. NA and Europe are in summer driving season, and the suck on refined product inventories has already begun. 

 

Russian runs on Chinese banking platforms, gets paid in Yuan, and will do as its told.

 

SD

[Spekulatius]

9 minutes ago, Sweet said:

Russia just lie all the time.  OPEC cut only took effect in May and likely only seeing the reduced volumes in transit now.

I think Opec lies all the time as well. The Saudi's in particular may not directly lie in terms of their output, but others are. The Saudi's are also spinning narratives. They need the high crude prices to keep their economy from falling apart, but you don't just get something because you need it.

 

Longer term, the northern offshore fields in South America Guyana, Suriname, likely Brazil, Columbia are something to watch for. It's monster in the making but will take another 5 years to come online (at least) but I think over another decade, it may just be the equivalent of the US shale supply coming from this area.

[SharperDingaan]

58 minutes ago, Spekulatius said:

Longer term, the northern offshore fields in South America Guyana, Suriname, likely Brazil, Columbia are something to watch for. It's monster in the making but will take another 5 years to come online (at least) but I think over another decade, it may just be the equivalent of the US shale supply coming from this area.

 

Hate to tell you this, but those fields are not coming into production for a very long time, if ever; ongoing development will be kept marginally above the annual lease requirement, but that's about it. Simply because the majors will run down their existing fields (20-40 yr+ lives at current technology) first, and then assess whether the development of this field (in an EV world) is even required. Keeping it in the ground, serves everyone a lot better.

 

SD

[Spekulatius]

39 minutes ago, SharperDingaan said:

 

Hate to tell you this, but those fields are not coming into production for a very long time, if ever; ongoing development will be kept marginally above the annual lease requirement, but that's about it. Simply because the majors will run down their existing fields (20-40 yr+ lives at current technology) first, and then assess whether the development of this field (in an EV world) is even required. Keeping it in the ground, serves everyone a lot better.

 

SD

The fields are definitely coming online and they are monsters. We are talking about Billion brl fields here. Suriname had big finds here as well and Petrobas believes there is black gold on the northern Brazilian coast as well.

https://corporate.exxonmobil.com/locations/guyana

 

I am not a geologist, but I can draw a line from offshore/onshore Venezuela, Suriname, Guyana, French Guyana to Brazil and I think they  might just find oil allover the place.

 

Your post is quite frankly gibberish, it makes no sense to me whatsoever.

[SharperDingaan]

You might want to look at hard economics, and not press releases.

 

We are entering a world when there will be a lot less oil usage, as energy consumption moves away from both internal combustion engines, and plastics; the major users of oil. Over the long-term; less demand, on the same supply adds up to a lower future price, and a shut-in of all fields with a marginal variable cash cost/bbl above that future expected price. 

 

An off-shore field is economic, primarily because it is both prolific and expected to have a long life; either because of low decline rates, or ability to tie into additional nearby reserves at low cost. You need to add the interest cost on the development debt/expected life/expected annual bbl output, to the variable cash cost/bbl; if it is above that future expected price the field is uneconomic, and not developed. 

 

But if you are a major, and you collectively stop developing new off-shore fields (i.e. discipline), supply shrinks and that future expected price will be higher than it otherwise might have been. The existing off-shore fields that you already produce from will be able to produce for longer, you will not have to finance anything much more than maintenance capex, and you can use the massive cashflow savings to pay down debt, buy back shares, pay dividends, etc. Exactly what we see happening today.  

 

At the same average oil price; a field with a 25 year reserve life will typically have a payback period of < 10 years, and will be highly profitable from then on until roughly the last 5-8 years of expected life. At which point profitability will sink according to the cost of secondary and tertiary recovery, divided by the expected life extension (35-25 years). Of course the reality is that oil prices will move up/down, and the field will either boom or shut-in as price changes.

 

There is lots of undeveloped oil in the world. It is just not economic to produce, and is becoming even less so as we all move to alternative sources of energy. The mindset of 'we have to develop it' .... just isn't true anymore, the world has moved on.     

 

SD

 

 

[Spekulatius]

3 hours ago, SharperDingaan said:

 

But if you are a major, and you collectively stop developing new off-shore fields (i.e. discipline), supply shrinks and that future expected price will be higher than it otherwise might have been. The existing off-shore fields that you already produce from will be able to produce for longer, you will not have to finance anything much more than maintenance capex, and you can use the massive cashflow savings to pay down debt, buy back shares, pay dividends, etc. Exactly what we see happening today.  

 

 

Well, i agree with everything you wrote but the majors are definitely not stopping to develop of new oil fields. I posted above the press release straight from Exxon website- they are in this big time and other majors are crawling around too (Total, Petrobas soon joining) in  addition to some smaller players like Apache.

You also know that Capex in E&P is going up this year not down. Pretty much any major or oil and gas of decent size will have increasing Capex this year. Exxon for example announced a 9% higher Capex budged, Chevron is even + 25%. BP is up 5% and only Shell is about flat.

[SharperDingaan]

Just keep in mind that capex investment is often deceptive; and Exxon is a good example. What is Exxon actually doing?  It continues to buy back stock in a big way, and has chosen to accelerate maintenance expense instead of having to pay the money out as 'windfall' taxes. Where is that additional capex going? Primarily into things that either reduce depletion/reduce production costs/lengthen reserve life, or enhance ESG reporting (lower emissions, etc.). Why? The more extractable oil there is the lower the cost/bbl, and the better the ESG; the less pressure on Exxon to sell 'dirty' assets, at a deep loss.

 

X% of net income before tax, about equal to the incremental capex.

Smart.

 

SD

 

[Mephistopheles]

I’m looking for a paper that was circulated last year, about 20-30 pages long. It gave a very detailed analysis of why o&g, coal demand isn’t going away and spoke about the various green energy bottlenecks regarding lithium, copper, permitting etc. 

 

it was very well written and informative , had charts and graphs too.

 

Anyone have it or know which one I’m talking about?? 

[sholland]

Not giving us much to go on, but perhaps you are talking about Goehring and Rosencwajg

 

https://4043042.fs1.hubspotusercontent-na1.net/hubfs/4043042/Content Offers/2022.Q4 Commentary/2022.Q4 GR Market Commentary.pdf

Edited May 29, 2023 by sholland

[jfan]

18 hours ago, Mephistopheles said:

I’m looking for a paper that was circulated last year, about 20-30 pages long. It gave a very detailed analysis of why o&g, coal demand isn’t going away and spoke about the various green energy bottlenecks regarding lithium, copper, permitting etc. 

 

it was very well written and informative , had charts and graphs too.

 

Anyone have it or know which one I’m talking about?? 

Are you referring to jpm annual energy report? They cover a breadth of topics and is around that length.

[Mephistopheles]

On 5/29/2023 at 6:58 PM, sholland said:

Not giving us much to go on, but perhaps you are talking about Goehring and Rosencwajg

 

https://4043042.fs1.hubspotusercontent-na1.net/hubfs/4043042/Content Offers/2022.Q4 Commentary/2022.Q4 GR Market Commentary.pdf

 

On 5/29/2023 at 8:04 PM, jfan said:

Are you referring to jpm annual energy report? They cover a breadth of topics and is around that length.

It’s neither of these but I will take a look, thanks for sharing!

And I found the one I was referring to- enjoy! It’s good

 

 

https://manhattan.institute/article/the-energy-transition-delusion

[Spekulatius]

This is what can happen if you can’t trade in freely convertible currencies. Russia is stuck with Indian Rupee for their oil exports  and can’t do anything with them for now:

https://finance.yahoo.com/news/russia-rupee-trap-adding-147-040000882.html

Edited June 2, 2023 by Spekulatius

[InsecurityAnalysis]

https://oilprice.com/Energy/Energy-General/Oil-Prices-Climb-As-Saudi-Arabia-Goes-It-Alone-With-Additional-Cut.html

 

Current OPEC+ production cut will go to end of year. Then in 2024, production will go down another 1.4M bpd.

 

Saudi doing a voluntary cut in July of 1M bpd. Sounds like they could extend that to get the outcome they're looking for with prices.

They called the additional cut “a Saudi lollipop" for the rest of OPEC+, since other members would not have to make deeper cuts to their production. Weird metaphor, but I get it.

[Spekulatius]

5 hours ago, InsecurityAnalysis said:

https://oilprice.com/Energy/Energy-General/Oil-Prices-Climb-As-Saudi-Arabia-Goes-It-Alone-With-Additional-Cut.html

 

Current OPEC+ production cut will go to end of year. Then in 2024, production will go down another 1.4M bpd.

 

Saudi doing a voluntary cut in July of 1M bpd. Sounds like they could extend that to get the outcome they're looking for with prices.

They called the additional cut “a Saudi lollipop" for the rest of OPEC+, since other members would not have to make deeper cuts to their production. Weird metaphor, but I get it.

I don't think market participants are too impressed. Putin and some other folks will probably pump more.

 

These may all be paper cuts.