Energy Sector

[SharperDingaan]

5 hours ago, Spekulatius said:

Nuclear power is much more expensive than NG power plants right now. I can’t imaging anything beating power generation at <$3 MCFE right now, not even coal.

 

Costs more, and takes longer to build the modern nuke; but it's all base load, running 24/7, in quantity, and at a cost/MW that is pretty hard to beat. Only things that slow it down are national/local legislation, the hybrid/EV mix, and local charging from neighbourhood solar charged Tesla Walls.  

 

If JOE built out a new community where every rooftop was solar, with cheap green power fed into each unit first, then community Tesla Walls that powered resident EV's and golf carts at nominal cost/KW ... would you buy into it? 'Cause if you would ... this whole thing is a lot closer than you think ...... and it doesn't slow down nuclear, unless it takes off.

 

Different take.

 

SD

Edited February 25 by SharperDingaan

[Value_Added]

On 2/25/2024 at 11:32 AM, Spekulatius said:

Nuclear power is much more expensive than NG power plants right now. I can’t imaging anything beating power generation at <$3 MCFE right now, not even coal.

 

I agree Ng is oversupplied in the US - all the more reason to export NGL right now not ban/ stall export licenses.

The inflation reduction act has made nuclear power an amazing business in the U.S. for the next 10 years.  Guaranteed money with a near completely protected downside.  There’s a lot of upside optionality as well such as above 2% inflation, volatile power prices and selling their base-load power at a premium to mega cap and tech companies who are “going green”.  Take a look at CEG (Constellation) earnings call and accompanying presentation from yesterday.  Pretty impressive how much the inflation reduction act has helped them.  

Edited February 28 by Value_Added

[Ulti]

https://oilprice.com/Energy/Energy-General/Worlds-Top-Oil-Trader-Sees-Oil-Demand-Peak-After-2030.html

[formthirteen]

33 minutes ago, Ulti said:

https://oilprice.com/Energy/Energy-General/Worlds-Top-Oil-Trader-Sees-Oil-Demand-Peak-After-2030.html

 

This article needs to be translated:

 

Quote

Vitol CEO Hardy: Overall global demand for oil, natural gas, and coal is also set to peak later than expected as the energy transition is progressing slower than initially thought.

 

Should be:

 

Quote

Global demand for oil, natural gas, and coal is expected to continue increasing in the foreseeable future, with the peak of demand remaining uncertain.

 

https://www.iea.org/reports/oil-2020

[formthirteen]

Coal demand at record levels even after moving factories from the US and EU:

https://www.iea.org/news/global-coal-demand-set-to-remain-at-record-levels-in-2023

 

Asia:

 

Quote

 

Continued strong growth in Asian economies offsets declines in Europe and North America, highlighting need for stronger policies and investments to accelerate growth of clean energy

 

Quote

Coal consumption in 2022 rose by 3.3% to 8.3 billion tonnes, setting a new record, according to the IEA’s mid-year Coal Market Update, which was published today. In 2023 and 2024, small declines in coal-fired power generation are likely to be offset by rises in industrial use of coal, the report predicts, although there are wide variations between geographic regions.

 

Quote

“Coal is the largest single source of carbon emissions from the energy sector, and in Europe and the United States, the growth of clean energy has put coal use into structural decline,” said IEA Director of Energy Markets and Security Keisuke Sadamori. “But demand remains stubbornly high in Asia, even as many of those economies have significantly ramped up renewable energy sources. We need greater policy efforts and investments – backed by stronger international cooperation – to drive a massive surge in clean energy and energy efficiency to reduce coal demand in economies where energy needs are growing fast.”

 

The shift of coal demand to Asia continues. In 2021, China and India already accounted for two-thirds of global consumption, meaning together they used twice as much coal as the rest of the world combined. In 2023, their share will be close to 70%. By contrast, the United States and the European Union – which together accounted for 40% three decades ago and over 35% at the beginning of this century – represent less than 10% today.

 

The same split is observed on the production side. The three largest coal producers – China, India and Indonesia – all produced record amounts in 2022.

 

 

EU:

 

Quote

China, India and Southeast Asian countries together are expected to account for 3 out of every 4 tonnes of coal consumed worldwide in 2023. In the European Union, growth in coal demand was minimal in 2022 as a temporary spike in coal-fired power generation was almost offset by lower use in industry.

 

Maybe it's not too late to invest in coal and BTU. I wish I had bought BTU at 0.85 USD, now trades at 24.72 USD and P/E ~5:

 

 

[nafregnum]

https://www.energypolicy.columbia.edu/methane-detection-just-got-a-lot-smarter/

 

Detecting methane leaks via a new satellite that the Environmental Defense Fund will be launching in a month or two, with support from Google and some funding from Bezos Earth Fund.

https://www.bezosearthfund.org/ideas/satellites-for-climate-and-nature

 

https://blog.google/outreach-initiatives/sustainability/how-satellites-algorithms-and-ai-can-help-map-and-trace-methane-sources/

 

It will have the ability to detect methane concentrations down to the resolution of 400m square pixels, and can watch 200 sites that are 200km square, so it'll be able to keep an eye on all the major O&G basins to identify where the worst leaks are so they can be remediated.  

 

The old quote comes to mind: "Only when the tide goes out do you learn who has been swimming naked."

 

I have read that Obsidian Energy prides itself on its monitoring and leak prevention/remediation program.  I'm interested to see what this kind of transparency does.  I've heard that North American O&G extraction is much cleaner than in other countries, but we will all soon find out.

[SharperDingaan]

It's one thing to find methane leaks ... but expect anything that comes back from these satellites to 'disappear', near permanently.

 

The overwhelming majority of methane emissions are natural; not from o/g, and agriculture. As permafrost melts it releases methane, and there have been multiple explosive methane releases all across the Arctic and Siberia, for quite some time. As long as the rotting biomass remained frozen, and the ice caps remained both thick/frozen (capping fossil methane egress) there wasn't a problem, but with the warmth of ice-melt, large quantities of methane have been bubbling through arctic lakes, and exploding through thinner ice-caps. Some of the releases have been continuous enough to catch fire, remain lit 24/7, and are visible at night. All of which has been going on for some time now.

 

The Kyoto Accords were driven from climate models with predictability that have proven to be utter sh1te. While they were state-of-the-art models at the time, the implementation of corrective policy was badly botched; a common outcome when research is commercialised. The extent of record arctic methane releases, growing undersea fire-ice methane releases (warming China Sea), smoke from record global fire seasons, and geologic change/eruption was not adequately modelled; resulting in both significant and material understatement. https://theweek.com/environment/fire-ice-methane

 

A good chunk of the 'new' economy is based on green energy, and polluter pay toll charging; plus redirection of new investment away from conventional o/g and into these 'new' areas. Materially undermine the Kyoto accords on which this is all based ..... and it all ends badly; so if you find things that burn the 'trust the data' playbook (i.e: the Kyoto models were junk), expect your findings to be suppressed (not talked about) 

 

The reality is that polluter pay is purely a rich mans problem, and that most of the world isn't rich. Coal burning power stations may be very dirty, but coal is widely available, and it enables the production of electricity that lets modernisation happen; even if for a few days/year there is a need to shut them down so that people can see/breathe again. Nations get around the problem by going directly to wind/solar; hence, there is a reason why China is so prominent in these industries.

 

Most would expect o/g to remain the villain, and to asset strip to fund buybacks/dividends for many years to come. Polluter pay is not a bad thing, but ultimately the market will decide it over time. Today's younger generations have few issues with the principle, and in 10-15 years they will be running the place, whereas today's objecting older generations will all be in nursing homes.  

 

SD 

 

 

   

 

 

Edited March 16 by SharperDingaan

[KJP]

On 2/10/2024 at 8:28 PM, treasurehunt said:

Thanks. I found this presentation very interesting. At least EPD is financially motivated to do a good job of modeling supply and demand.

 

More today on EPD's view: https://ir.enterpriseproducts.com/news-releases/news-release-details/enterprise-build-new-natural-gas-processing-plant-delaware-basin

[nafregnum]

https://blog.gorozen.com/blog/is-us-oil-production-surging

 

This article is suggesting shale production in the US is going to be peaking this year, that 50% has already been extracted from all major shale basins, and that the reason for recent growth has been prioritization of best performing areas, a process known in the mining industry as "high-grading", and that the actual figures are hidden behind some funny accounting using an "EIA Crude Adjustment Factor" (graph shown on the page) ... 

 

Opinions on the usefulness/accuracy of this information?  Is this the kind of information people will be pointing to if Warren Buffett's big OXY bet plays out fantastically, or am I reading a conspiracy theory website?   

[Williams406]

1 hour ago, nafregnum said:

https://blog.gorozen.com/blog/is-us-oil-production-surging

 

This article is suggesting shale production in the US is going to be peaking this year, that 50% has already been extracted from all major shale basins, and that the reason for recent growth has been prioritization of best performing areas, a process known in the mining industry as "high-grading", and that the actual figures are hidden behind some funny accounting using an "EIA Crude Adjustment Factor" (graph shown on the page) ... 

 

Opinions on the usefulness/accuracy of this information?  Is this the kind of information people will be pointing to if Warren Buffett's big OXY bet plays out fantastically, or am I reading a conspiracy theory website?   

The firm behind the website is one of the few commodity voices I pay attention to. No one gets every call right, but Goehring & Rozencwajg offer pretty good detail behind their calls in their quarterly reports. No opinion on the shale peak call.

[Stuart D]

Between this shale call and their note on Saudi’s reserves, the supply side isn’t looking great. To balance the market it’ll need some more Venezuelan production (or maybe Argentinian shale?).

[james22]

VDE 15.6% YTD

 

I'll take it.

[SharperDingaan]

On 4/4/2024 at 1:38 PM, nafregnum said:

https://blog.gorozen.com/blog/is-us-oil-production-surging

This article is suggesting shale production in the US is going to be peaking this year, that 50% has already been extracted from all major shale basins, and that the reason for recent growth has been prioritization of best performing areas, a process known in the mining industry as "high-grading", and that the actual figures are hidden behind some funny accounting using an "EIA Crude Adjustment Factor" (graph shown on the page) ... 

 

The uncomfortable truth is that EIA reporting just isn't accurate, or reliable. It has some useful data points, but the 'roll-up' to aggregate quantities is very suspect. Sadly, the EIA is now also far from what it was, and has become a political tool - to artificially create lower prices at the pump.

 

It has been well known, and for some time, that US shale was high-grading. Much of the recent consolidation has been driven from high-grade (high flow, fast deplete, few wells) no longer being available, and consolidation for 'manufacturing' (moderate flow, moderate deplete, many wells) purposes now being the next best alternative. Within reason, drilling long horizontals close to each other, fracking them, and controlling pressure via water injection, will get you comparable production - but at the price of a material bump in initial capex investment; hence consolidation. The downside is the huge quantity of water required, a growing issue in the US.  

 

It has also been well known, and for some time, that the EIA has issues around liquids and gas reporting. Report gas at the traditional 6:1 gas to oil conversion; as the shale gas cut progressively increases, a rising portion of the reported 'oil' production isn't actually real. Then remind yourself that shale is a gas field producing oil as by-product .....

 

Most would expect Canada's TMP expansion to rapidly reach its new 590K bbl/day of egress, and that most of it will go to the western US (shortest sea route). Post refining; every 1 barrel of crude imported will turn into 1+ barrels of refined/blended product, and that '+' will be reported by the EIA as US 'production'. 

 

Manipulation that is just par for the course.

 

SD

 

 

Edited April 6 by SharperDingaan

[fareastwarriors]

FT: How Europe solved its Russian gas problem

[Stuart D]

Surprised there is no chat here on the supposed 500 billion barrel Russian discovery in Antarctica. It seems too big to be real, right?

Edited May 13 by Stuart D

[lnofeisone]

6 hours ago, Stuart D said:

Surprised there is no chat here on the supposed 500 billion barrel Russian discovery in Antarctica. It seems too big to be real, right?

A 1959 Treaty prevents drilling in the region. The oil field is also in British Antarctic territory (though this isn't really recognized), and Russia lacks the technical expertise to drill there. If they do drill, I'd be surprised if this is anything that would come online in the next 10 years. 

[Stuart D]

2 hours ago, lnofeisone said:

A 1959 Treaty prevents drilling in the region. The oil field is also in British Antarctic territory (though this isn't really recognized), and Russia lacks the technical expertise to drill there. If they do drill, I'd be surprised if this is anything that would come online in the next 10 years. 

I keep forgetting how long the timelines are in this business. 10+ years, wow.

[Pelagic]

18 hours ago, Stuart D said:

Surprised there is no chat here on the supposed 500 billion barrel Russian discovery in Antarctica. It seems too big to be real, right?

 

Without exploration wells being drilled any number attached to its size is just there to grab headlines. This is a really good article on a field discovered in the Gulf of Mexico almost 20 years ago that clearly holds a lot of oil but has for a variety of reasons, technology to drill it mainly, has not been developed yet. The Kaskida field or other ultra deepwater plays are probably a fairly good analogue to any discovery in Antarctica where the geology says there's oil, and in the GoM case an exploration well was drilled to prove that, but whether that oil ever gets brought to market is a function of technology, regulatory environment, and oil price.

 

https://www.bloomberg.com/opinion/features/2024-05-03/bp-big-oil-return-to-the-gulf-of-mexico-remember-deepwater-horizon-spill?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTcxNTUwNDI4NCwiZXhwIjoxNzE2MTA5MDg0LCJhcnRpY2xlSWQiOiJTQ1c1U1pEV1gyUFMwMCIsImJjb25uZWN0SWQiOiI0NEMyQzc4RTVBMjQ0NjdDOTU5MDI0NjRBQjUwQ0U2MSJ9.dWooomsUHORJ0q5Z7q1ZjXxiQH-Zv5cy5XwrY2q7GQ0

[bizaro86]

9 hours ago, Stuart D said:

I keep forgetting how long the timelines are in this business. 10+ years, wow.

 

10+ years would be more of a timeline for first oil from a new ultra deep water field in an existing area. 

 

10 years isn't close to possible for a frontier area without clear title, where no exploration well has been drilled. 

[lnofeisone]

I think I was a tad unclear. I think 10-year lead time would be absolutely the best-case scenario. Given where it is and the expertise required, this will be a much, much, much longer project. 

[Stuart D]

17 hours ago, Pelagic said:

 

Without exploration wells being drilled any number attached to its size is just there to grab headlines. This is a really good article on a field discovered in the Gulf of Mexico almost 20 years ago that clearly holds a lot of oil but has for a variety of reasons, technology to drill it mainly, has not been developed yet. The Kaskida field or other ultra deepwater plays are probably a fairly good analogue to any discovery in Antarctica where the geology says there's oil, and in the GoM case an exploration well was drilled to prove that, but whether that oil ever gets brought to market is a function of technology, regulatory environment, and oil price.

 

https://www.bloomberg.com/opinion/features/2024-05-03/bp-big-oil-return-to-the-gulf-of-mexico-remember-deepwater-horizon-spill?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTcxNTUwNDI4NCwiZXhwIjoxNzE2MTA5MDg0LCJhcnRpY2xlSWQiOiJTQ1c1U1pEV1gyUFMwMCIsImJjb25uZWN0SWQiOiI0NEMyQzc4RTVBMjQ0NjdDOTU5MDI0NjRBQjUwQ0U2MSJ9.dWooomsUHORJ0q5Z7q1ZjXxiQH-Zv5cy5XwrY2q7GQ0

Thanks for posting.

[ValueArb]

nm

 

Edited May 23 by ValueArb
wrong thread

[fareastwarriors]

ConocoPhillips to buy Marathon Oil in $17 billion all-stock deal that bolsters shale assets

[Pelagic]

A good podcast on some of the issues offshore wind has faced in the US. It's funny he mentions that they (Orsted) are generally supportive of the Jones Act but then throughout the episode lists a lot of issues with it, and how it contributes to higher costs here in the US. I suspect their support comes from the regulatory capture element that requires firms to invest a ton of capital to be compliant in the US making the threat of Orsted's European competitors coming in and challenging them fairly low.

 

 

[Saluki]

Part of the appeal of crypto is that it can't be inflated away by printing more in the same way that fiat currency can. The other half is FOMO.  Buffett had a famous essay that was titled something along the lines of "how inflation swindles the equity investor."  Fixed assets seems to do well in inflation because accounting doesn't properly the replacement costs in an inflationary environment so it looks like you are earning higher and higher returns on capital until it's time to replace that factory or make repairs to that refinery. That's the appeal of brands which are idea, and can raise prices to keep up with inflation.  

 

I think for the energy majors, inflation doesn't help much because they sell oil, and have to find more at higher prices.  But people with oil royalties or people with large reserves (Texas Pacific, and hopefully VTS) that they can monetize what they already have and don't want to acquire replacement acreage should do well. Energy goes into every facet of the economy. I remember seeing something where if your dinner plate was a pie chart, more than half of the cost of it would be from energy.

 

If 100% of the cost of food was energy ( and everything else), then it's an interesting thought experiment because you can inflate dollars, but not energy.  So as you depreciate the dollar, the energy stays fixed (or goes down because you are using it up) so the remaining energy should go up in value at least as much as the depreciation in currency.  But if you have a currency that is being depreciated by printing, and you have increased demand for energy (AI, computing power, more protein consumption in developing countries, more air conditioning and cars in developing countries), then you have that force multiplier.  Throw in peak oil and it really gets interesting.