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The future for oil

Clitheroekid
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The future for oil

#166958

Postby Clitheroekid » September 17th, 2018, 3:10 pm

An interesting article, and food for thought - https://www.ii.co.uk/analysis-commentar ... 70918%20(1)

Ironically, it says that the short-term prospects for oil companies and their investors may actually improve, as the companies may decide to reduce the huge sums they currently spend on exploration, thereby considerably increasing their short to mid term profitability.

I'm also not at all convinced that the demand for oil will reduce as quickly as predicted. There are many third world countries, including India, where environmental considerations are, unfortunately for the rest of us, very much a secondary consideration. As they continue to expand their economies I suspect that oil will be their main source of energy for quite a long time.

I certainly don't anticipate selling my oilies any time soon! ;)

youfoolishboy
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Re: The future for oil

#167507

Postby youfoolishboy » September 19th, 2018, 4:50 pm

There is certainly plenty of capacity in the world just now the reason prices are rising is that Venezuela and Iran 2 of the biggest producers are coming off line. Besides not investing in more oil reserves means oil will spike very high if they are wrong and what reserves they do have will be worth a lot more then. Win Win :0)

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Re: The future for oil

#167553

Postby PeterGray » September 19th, 2018, 8:30 pm

They've already not been investing in explo, in anything like the way needed for several years. If oil demand doesn't collapse a lot quicker than I see as likely there's going to be a lot of catching up to do.

Peter

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Re: The future for coal & oil & gas

#172584

Postby dspp » October 9th, 2018, 3:01 pm

Coal-fired power has to end by 2050 to save the planet. That seemingly simple but bold sentiment is likely to set much of the political, social and economic agenda for the coming decades, but in the end it will come down to what China does.

The United Nations Intergovernmental Panel on Climate Change (IPCC) said in a report on Monday that “unprecedented” changes will have to take place to limit the rise in the Earth’s temperature to 1.5 degrees Celsius (2.7 degrees Fahrenheit), warning of devastating weather events and species loss if the target is exceeded.

In order to achieve the goal, the IPCC said coal burning would have to drop to between zero and 2 percent by 2050, while even natural gas, coupled with carbon capture and storage (CCS), would have to decline to 8 percent of electricity generation by the middle of this century.

While coal has long been the bogeyman of climate activists, the IPCC has effectively thrown down the gauntlet and given world leaders a little over 30 years to phase it out entirely.

Initial reaction to the IPCC report has been predictable, with supporters of renewable energy cheering it, and backers of fossil fuels resorting to the familiar arguments that somehow the science is either wrong or a hoax.


etc via Reuters : https://in.reuters.com/article/column-r ... NKCN1MJ0E3

(fwiw I cannot see CCS ever being economically viable).

regards, dspp

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Re: The future for oil

#239492

Postby dspp » July 26th, 2019, 2:32 pm

courtesy John Kemp, Reuters:

what-would-the-saudi-economy-have-to-look-like-to-be-post-rentier
https://pomeps.org/what-would-the-saudi ... st-rentier

This memo will spell out what transition to a “post-oil” economy would mean in the case of Saudi Arabia, the MENA region’s most important rentier state. The key finding is that to support a “normal”, non-oil fiscal system and a “normal”, non-oil labor market, the Saudi private sector would need to undergo drastic changes. It would need to grow dramatically if it were to support current levels of state spending through non-oil domestic taxes, all the while dealing with severe contractionary and inflationary effects of taxation. Private employment of Saudis would have to grow by a factor of four or more in order for the kingdom’s labor market to resemble that of non-oil economies. The path to such a non-oil economy is, at best, very long, measured in generations rather than decades.

Even under ideal conditions, it will be impossible to become “post-rentier” by 2030 and hard to imagine even by 2050. The maths are quite similar for other high-rent countries, including those of the GCC. The note has assumed that Saudi Arabia will remain a high-income country. There is in fact a quicker way to become post-rentier: through pauperization due to falling and eventually vanishing resource rents.


hot, sweaty, poor, densely populated, water-stressed, .... what could possibly go wrong ?

regards, dspp

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Re: The future for oil

#267624

Postby dspp » November 27th, 2019, 11:52 am

China oil misconceptions (Oxford Energy)

https://www.oxfordenergy.org/wpcms/wp-c ... n-2019.pdf

In 2019, markets were bracing for a slowdown in China’s oil product demand growth, but were
grappling to quantify it given the uncertainty surrounding the US–China trade negotiations. At the
same time, with the start of two new mega-refineries, markets were expecting strong crude demand,
alongside a deluge of product output and exports. In this comment..........,


dspp

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Re: The future for oil

#267639

Postby ReallyVeryFoolish » November 27th, 2019, 12:38 pm

dspp wrote:China oil misconceptions (Oxford Energy)

https://www.oxfordenergy.org/wpcms/wp-c ... n-2019.pdf

In 2019, markets were bracing for a slowdown in China’s oil product demand growth, but were
grappling to quantify it given the uncertainty surrounding the US–China trade negotiations. At the
same time, with the start of two new mega-refineries, markets were expecting strong crude demand,
alongside a deluge of product output and exports. In this comment..........,


dspp

I expect at least another decade of oil demand growth. And given the lack of any new oil based mega projects across the globe, I expect the price to head north sooner than many would like to think. And the middle east is increasingly moving to utilise it's own resources to generate downstream value added goods for growth in jobs and to hep regenerate their economies away from being wholly dependant on oil. In turn, that will displace downstream capacity in other countries as the shift in economics takes place alongside advances in cracking technology. I expect what naptha crackers remain in service to become obsolete and even the newer ethane/mixed feed crackers to be economically challenged. Watch carefully, this is all happening.

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Re: The future for oil

#267834

Postby JoyofBricks8 » November 28th, 2019, 3:01 am

ReallyVeryFoolish wrote:
dspp wrote:China oil misconceptions (Oxford Energy)

https://www.oxfordenergy.org/wpcms/wp-c ... n-2019.pdf

In 2019, markets were bracing for a slowdown in China’s oil product demand growth, but were
grappling to quantify it given the uncertainty surrounding the US–China trade negotiations. At the
same time, with the start of two new mega-refineries, markets were expecting strong crude demand,
alongside a deluge of product output and exports. In this comment..........,


dspp

I expect at least another decade of oil demand growth. And given the lack of any new oil based mega projects across the globe, I expect the price to head north sooner than many would like to think. And the middle east is increasingly moving to utilise it's own resources to generate downstream value added goods for growth in jobs and to hep regenerate their economies away from being wholly dependant on oil. In turn, that will displace downstream capacity in other countries as the shift in economics takes place alongside advances in cracking technology. I expect what naptha crackers remain in service to become obsolete and even the newer ethane/mixed feed crackers to be economically challenged. Watch carefully, this is all happening.


I am overweight in oilcos because the relationship between industrial society and oil is somewhat like that of the late chef Keith Floyd and wine- it is hard to picture one without the other.

Oil demand keeps ratcheting up unless there is an economic crisis, or perhaps one could express the interrelationship as working both ways, with the availability of cheap oil allowing continued economic growth and continued economic growth spurring oilfield investment. It’s a virtuous circle that is ultimately unsustainable but my goodness, while it lasts it has given us quite the party.

It isn’t yet clear when the music will stop, but my gut estimate and that of a lot of geologists is we are probably nearer the end than the beginning of the industrial society, given the lack of discoveries to replace conventional reserves that are being extracted.

Certainly one wonders how much more conventional light sweet crude can be wrung from the earth. That looks to be a commodity that is peaking, though the ingenuity of oil and gas engineers in exploiting unconventional oil has been a surprise. Such production has been a welcome bonus that has allowed us a bit more growth. Who knows how much more can be done? Since I first became aware of peak oil in 2001 the surprises have all been to the upside. That should give us some reason to be optimistic and invested in oil.

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Re: The future for oil

#267988

Postby StepOne » November 28th, 2019, 4:49 pm

JoyofBricks8 wrote:Since I first became aware of peak oil in 2001 the surprises have all been to the upside.


2008?

JoyofBricks8
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Re: The future for oil

#268056

Postby JoyofBricks8 » November 28th, 2019, 11:20 pm

StepOne wrote:
JoyofBricks8 wrote:Since I first became aware of peak oil in 2001 the surprises have all been to the upside.


2008?


2008 really confirmed the link between oil and the economy. Oil hit $147 per barrel and the economy tanked. When we chart global GDP vs oil output we saw oil production cut back in lockstep with the economic downturn, and recovery in tandem.

What that means: There is quite a tight couple between global economy and oil production.

Given the paradigm accepted by our leaders that economic growth to the moon is desirable, we may expect oil production to follow. Or to express it another way, as near-infinite economic growth is universally accepted as the desired end state of our political economy, oil production will necessarily have to be engineered to make this possible.

Of course due to diminishing returns from geology in order to provide new supplies one has to look further and further down the resource pyramid; the easy to exploit fields at the top have been drained. That’s is why we see hydrofracking and oil-sands and other sources being exploited, despite their inferior economics.

Due to the inferior economics of unconventional production, if oil output (and thus the economy as a whole) is to grow, more resources will have to be allocated to the effort. Thus an increasing share of the economy will have to be dedicated to the industry of extraction.

What am I trying to do by investing? I am trying to increase my share of the future economic pie. Which sector is necessarily going to see its share of the pie increase?

That’s why I think the oil industry has a future far brighter than many electric car advocates can elaborate.

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Re: The future for oil

#274809

Postby dspp » January 3rd, 2020, 11:44 am

"Shell’s green energy plans are some of the most ambitious in the oil industry, despite assigning just a 10th of its spending pot to “new energies”.

Shell told investors in 2017 it would spend between $1bn to $2bn a year developing a clean energy business up to the end of 2020, up from a previous plan to spend up to $1bn a year in the same period. Under the plans Shell would spend up to $6bn on green investment , but instead it is on track to meet a third of this, with only a year left for the company to meet its guidance. Up to the end of 2019, Shell’s guidance suggests it should have spent at least $3bn.

In the same four years the company spent more than $120bn developing fossil fuel projects and set out plans to increase its total spending to $30bn a year in the early 2020s. A spokesman for Shell declined to comment.

Shell is considered a climate leader within the oil industry despite spending a fraction of its total budget on new energies, which include biofuels, hydrogen and electricity investments."


https://www.theguardian.com/business/20 ... gy-targets

The obvious thing for Shell to do is to make some big green acquisitions and fund some big green projects in the course of 2020.

regards, dspp

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Re: The future for oil

#277718

Postby colin » January 15th, 2020, 8:26 pm

Scottish Mortgage fund manager thinks renewables could render fossil fuels economically irrelevant.!


https://www.trustnet.com/news/7461383/o ... 6-75457305

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Re: The future for oil

#277751

Postby 1nvest » January 16th, 2020, 3:47 am

JoyofBricks8 wrote:2008 really confirmed the link between oil and the economy. Oil hit $147 per barrel and the economy tanked. When we chart global GDP vs oil output we saw oil production cut back in lockstep with the economic downturn, and recovery in tandem.

What that means: There is quite a tight couple between global economy and oil production.

Yep. Production and transport requires energy
What am I trying to do by investing? I am trying to increase my share of the future economic pie. Which sector is necessarily going to see its share of the pie increase?

States induce inflation to avoid people otherwise just stuffing their mattress with money. With (target rate) 2% inflation that money loses purchase power, so people instead have to seek methods that reduce the effects of their money losing purchase power. A whole army of others thrive from that, the Financial sector the most. They are very skillfull in extracting little bits from here and there in a almost unnoticeable way. States also benefit from the tax revenues. Take a world index tracker for example. The average dividend withholding taxes applied by coutries is around 20%, 4% dividend paid out, 0.8% retained (withheld). Funds then compare their performance typically relative to benchmarks - that are measured net, so investors look and see a fund with a 0.1% expense ratio returning 10% versus perhaps a indicated benchmark 10.1%, whereas the Index actually gained 10.9%. But when it comes to suggesting possible rewards (marketing their products) they'll use the 10.9% figure. Then there are platform fees, brokers fees, market makers spreads, currency conversion costs etc. etc. ... that collectively enable Financials to put up expensive high rise buildings in high cost areas and pay there managers high wages (and of course pay high levels of tax to the state). So rich are the pickings and so intense the competition that some funds nowadays even levy 0% expense fees and yet others even levy no trading fees, just having private investors sums invested with them is enough for them to make good profits via the magic trickery they use to generate profits.

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Re: The future for oil

#279706

Postby dspp » January 24th, 2020, 2:44 pm

"The oil and gas industry is facing increasing demands to clarify the implications of energy transitions for their operations and business models, and to explain the contributions that they can make to reducing greenhouse gas (GHG) emissions and to achieving the goals of the Paris Agreement.

The increasing social and environmental pressures on many oil and gas companies raise complex questions about the role of these fuels in a changing energy economy, and the position of these companies in the societies in which they operate.

But the core question, against a backdrop of rising GHG emissions, is a relatively simple one: should today’s oil and gas companies be viewed only as part of the problem, or could they also be crucial in solving it?

This is the topic taken up by the International Energy Agency (IEA) in this report, which builds on a multi‑year programme of analysis on the future of oil and gas in the IEA World Energy Outlook (WEO) series."


etc ....... from the IEA, courtesy JohnKemp Reuters

https://www.iea.org/reports/the-oil-and ... ransitions

dspp

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Re: The future for oil

#279757

Postby feste » January 24th, 2020, 4:42 pm

This article suggests that the majors are indeed - quelle surprise ! - adjusting their strategies to the changing times...

https://economicconfidential.com/2020/0 ... ploration/

…"A member of Wood Mackenzie’s global exploration team, Alana Tischuk, said: “Some investors are questioning the need to explore at all given the vast discovered resource base yet to be developed.“However, lower-carbon opportunities very often have lower costs and better economics. The challenge is to achieve success at scale.“Companies will drill in the hope of finding better resources than those they already have – lower cost barrels with a higher margin.” ….... Wood Mackenzie also expects some companies to announce a strategic move towards acquisition-led growth or new energy businesses, while others are boosting their gas portfolios, viewing it as the fuel that would power the energy transition.
Tischuk said: “The move towards gas shows that exploration is not mutually exclusive with a low-carbon future. A diverse inventory of low-breakeven opportunities will be key as the energy transition unfolds. Those prospects with a clear route to commercialisation are likeliest to be drilled.” “Traditionally, Majors have held their acreage to the end of term, but we expect them to adopt the swift turnaround approach of their smaller, nimbler cousins. Many of the areas the Majors have added are ultra-frontier, giant blocks, added for minimal commitments. This trend of fast turnover of new acreage may not become apparent in 2020, but instead materialise in the next three years or so.” …

ATB

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Re: The future for oil

#279816

Postby ReallyVeryFoolish » January 25th, 2020, 3:53 am

Expect a supply side crunch as present resources deplete quicker than new resources come on line. Even "if" we see demand growth slow, nevermind reverse, the lack of mega-projects in the industry is a forward indicator. I may be mistaken, but I don't think in recent history, there has ever been a quieter period for oil related mega-projects than now.

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Re: The future for oil

#279838

Postby dspp » January 25th, 2020, 9:45 am

ReallyVeryFoolish wrote:Expect a supply side crunch as present resources deplete quicker than new resources come on line. Even "if" we see demand growth slow, nevermind reverse, the lack of mega-projects in the industry is a forward indicator. I may be mistaken, but I don't think in recent history, there has ever been a quieter period for oil related mega-projects than now.


The question is to what extent a shareholder will be able to harvest sufficient value out of any spike upticks to compensate for the expected general shareprice downtrends.

That is what I am personally struggling to assess in my overweight (RDSB, BP) weighting. I have been mulling this over for several years and tend towards holding for a while longer, but that doesn't mean I am correct in doing so.

regards, dspp

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Re: The future for oil

#279842

Postby ReallyVeryFoolish » January 25th, 2020, 10:05 am

dspp wrote:
ReallyVeryFoolish wrote:Expect a supply side crunch as present resources deplete quicker than new resources come on line. Even "if" we see demand growth slow, nevermind reverse, the lack of mega-projects in the industry is a forward indicator. I may be mistaken, but I don't think in recent history, there has ever been a quieter period for oil related mega-projects than now.


The question is to what extent a shareholder will be able to harvest sufficient value out of any spike upticks to compensate for the expected general shareprice downtrends.

That is what I am personally struggling to assess in my overweight (RDSB, BP) weighting. I have been mulling this over for several years and tend towards holding for a while longer, but that doesn't mean I am correct in doing so.

regards, dspp

I have full confidence, you aren't on your own. Companies like Shell throwing off more than six per cent a year I am quite happy to wait. How long am I going to live? Long enough to see a supply side crunch, I'll make sure of it. Meanwhile, there are multi-decade experienced professionals out there with no work and no prospect of work in mega energy projects unless they at least half their rate expectations even if a job comes along and they aren't. It all points to a crunch. No one in China, India or Africa is listening to young Greta. They want to live like we do.

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Re: The future for oil

#279881

Postby dspp » January 25th, 2020, 1:00 pm

ReallyVeryFoolish wrote:
dspp wrote:
ReallyVeryFoolish wrote:Expect a supply side crunch as present resources deplete quicker than new resources come on line. Even "if" we see demand growth slow, nevermind reverse, the lack of mega-projects in the industry is a forward indicator. I may be mistaken, but I don't think in recent history, there has ever been a quieter period for oil related mega-projects than now.


The question is to what extent a shareholder will be able to harvest sufficient value out of any spike upticks to compensate for the expected general shareprice downtrends.

That is what I am personally struggling to assess in my overweight (RDSB, BP) weighting. I have been mulling this over for several years and tend towards holding for a while longer, but that doesn't mean I am correct in doing so.

regards, dspp

I have full confidence, you aren't on your own. Companies like Shell throwing off more than six per cent a year I am quite happy to wait. How long am I going to live? Long enough to see a supply side crunch, I'll make sure of it. Meanwhile, there are multi-decade experienced professionals out there with no work and no prospect of work in mega energy projects unless they at least half their rate expectations even if a job comes along and they aren't. It all points to a crunch. No one in China, India or Africa is listening to young Greta. They want to live like we do.


RVF,

I tend to agree with you on the first set of points, that is why I am holding my E&P exposure. On the China/India/etc point I absolutely disagree - as I traipse around these places working in the electricity industry I see a phenomenal push to renewables, as well as in Europe and (to a lesser extent) North America. That is why I sold out of coal as that has the highest truncation risk.

regards, dspp

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Re: The future for oil

#279885

Postby ReallyVeryFoolish » January 25th, 2020, 1:12 pm

dspp wrote:
ReallyVeryFoolish wrote:
dspp wrote:
The question is to what extent a shareholder will be able to harvest sufficient value out of any spike upticks to compensate for the expected general shareprice downtrends.

That is what I am personally struggling to assess in my overweight (RDSB, BP) weighting. I have been mulling this over for several years and tend towards holding for a while longer, but that doesn't mean I am correct in doing so.

regards, dspp

I have full confidence, you aren't on your own. Companies like Shell throwing off more than six per cent a year I am quite happy to wait. How long am I going to live? Long enough to see a supply side crunch, I'll make sure of it. Meanwhile, there are multi-decade experienced professionals out there with no work and no prospect of work in mega energy projects unless they at least half their rate expectations even if a job comes along and they aren't. It all points to a crunch. No one in China, India or Africa is listening to young Greta. They want to live like we do.


RVF,

I tend to agree with you on the first set of points, that is why I am holding my E&P exposure. On the China/India/etc point I absolutely disagree - as I traipse around these places working in the electricity industry I see a phenomenal push to renewables, as well as in Europe and (to a lesser extent) North America. That is why I sold out of coal as that has the highest truncation risk.

regards, dspp

Talk to the bloke in the street, I suggest he doesn't care a monkey's where the power originates to run his new fridge, telly and mobile phone charger. All of which are primarily downsream products of the hydrocarbon industry anyway. Don't you think it's rather odd that angry young Greta doesn't go to those places and explain to the hundreds of millions of poor people why they shouldn't have that motor scooter they always dreamed of? Anyway, it's moot. The trend is clear, we must expect an energy crunch within a decade.


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