The future for oil

[Lanark]

Everything I have read indicates that we will boil the planet through global warming long before we run out of energy sources.

The problem is not that we will run out of oil but that we might not run out in time.

Scarcity and rising prices will ensure that rich people never run out of oil.

[dspp]

World energy consumption

https://en.m.wikipedia.org/wiki/World_e ... onsumption

Try doing without fossile fuels. The real alternative at the moments is limiting population growth which would cause the first world problems - who will look after the ageing population and - as more retire - who will they tax?

Apart from petrochemical feedstock (which are not that significant) a switch is perfectly feasible. Lithium has delivered the missing link, i.e. sufficient storage that, combined with effective grids of an appropriate scale (which can be very small, e.g. microgrid in some places), a global energy transition is perfectly reasonable. Indeed it is underway. Here is what it looks like in one scenario I would call 'fast' where the renewables rollout continues until it hits the industrial capacity constraint that I assume exists, which I set equal to that of the existing fossil etc annual build rate. We know that build rate is possible, because we do it every year now.

Note these graphs are of world primary energy, not just electricity. So maybe 40% of that goes into heating/cooling, 30% to liquid transport fuels, and 30% to electricity (exact numbers are readily available if you look online).



This means that a full transfer can be done in the next 25-years. Actually a full transfer can be done faster, but this was one where I put in some reasonable constraints. Then ask yourself what the price of shares in an oilfield company would be like in 2030 in such a scenario. Then check the reserves/production ratios for the main world oil companies. Then think about the price risk an investor is running in 2020.

In some respects this is more like a mid-case scenario. When one adds in aspects of the electric vehicle (i.e. true BEV) that is underway it could quite reasonably go faster. Equally there are many powerful political/strategic forces seeking to slow it down.

regards, dspp

(notes:
Data from: BP Statistical Review of World Energy 2018, p9, Primary Energy by Fuel
https://www.bp.com/en/global/corporate/ ... nergy.html
Oilfield decline rates, typically 4-8&, avge 6.5%
https://royalsocietypublishing.org/doi/ ... .2012.0448
Typical power plant lifetime 20-40 years
https://www.iaea.org/sites/default/file ... 043133.pdf
renewables rollout peaks at about 6.2% in this case, i.e. less than typical oilfield decline rates, i.e. within that which global industrial capacity can deliver)

[flyer61]

RVF - curious to understand why you think Shell will win out versus BP.

Greta thread BTW!

[Howard]

RVF - curious to understand why you think Shell will win out versus BP.

Greta thread BTW!

And a Great typo too. Very appropriate to the discussion

Howard

[johnhemming]

This is an interesting and what seems mathematically well reasoned piece which argues that the IEA etc are forecasting 1.1m bb/d too high for 2020.
(or at least the end of the year).
https://seekingalpha.com/article/432019 ... oil-prices

This gives the source of the frac spread count
https://twitter.com/primaryvision

Which to be fair has popped up a bit in the last few weeks so that would imply less of a delta on the IEA predictions.

[Proselenes]

Worth a listen

http://blog.gorozen.com/blog/adam-rozencwajg-featured-on-financial-sense-podcast-january-2020

.

[dspp]

This is an interesting and what seems mathematically well reasoned piece which argues that the IEA etc are forecasting 1.1m bb/d too high for 2020.
(or at least the end of the year).
https://seekingalpha.com/article/432019 ... oil-prices

This gives the source of the frac spread count
https://twitter.com/primaryvision

Which to be fair has popped up a bit in the last few weeks so that would imply less of a delta on the IEA predictions.

John,

That excellent SA article (https://seekingalpha.com/article/432019 ... oil-prices?) looks about right, and is in line with what Art Berman has been saying ever since fraccing started up, based on fraccing fundamentals. Unfortunately Art seems to have gone dark as he is now monetising his blog ($$$ https://www.artberman.com/ ). My thinking is along these lines which is why I am still overweight oil & gas, expecting that the peak oil production problems will push price high, rather than peak oil consumption forcing price down. When to get off is the conundrum.

regards,
dspp

[johnhemming]

Its a difficult one to call, but I think I probably agree with you. I don't think that the global political system will actually deliver much control on the oxidation of extracted hydrocarbons. The electorate are likely to vote for BAU.

[dspp]

/sigh

Exxon’s Plan for Surging Carbon Emissions Revealed in Leaked Documents
Internal projections from one of world’s largest oil producers show an increase in its enormous contribution to global warming

"Exxon Mobil Corp. has been planning to increase annual carbon-dioxide emissions by as much as the output of the entire nation of Greece, an analysis of internal documents reviewed by Bloomberg shows, setting one of the largest corporate emitters against international efforts to slow the pace of warming.......Exxon’s own assessment of its $210 billion investment strategy shows yearly emissions rising 17% by 2025, according to the internal documents. The largest U.S. oil producer has never made a commitment to lower oil and gas output "

https://www.bloomberg.com/news/articles ... ium=social

Exxon for engineering & project management & hard-nosedness, good. Exxon on other things, tone deaf.

- dspp

[dspp]

Helpful slidedeck courtesy JohnKempReuters

Oil outlook 2021
Searching for a new equilibrium
https://fingfx.thomsonreuters.com/gfx/c ... 202021.pdf

- dspp

[dspp]

courtesy JohnKempReuters

CIA Briefing Paper on 1974 Oil Crisis (Secret)

https://www.cia.gov/library/readingroom ... 0023-7.pdf

To my eyes what is most interesting is how much remains censored. Energy still matters greatly as it goes to the heart of power.

regards, dspp

[scrumpyjack]

Interesting read -

Small, independent oil producers are seeing the potential for growth over the next decade as major energy companies look to invest in renewables. As big companies are being forced to introduce greener policies, independent producers could profit from this change.

https://oilprice.com/Energy/Crude-Oil/W ... anies.html

RVF

I would have thought 'the last man standing' will be Saudi Arabia who can produce oil for next to nothing, has vast reserves, and virtually no other source of revenue. If oil is going to die out, their best option is to keep undercutting everyone else and pump out all they can, otherwise it will eventually be left in the ground.

[PeterGray]

Interesting read -

Small, independent oil producers are seeing the potential for growth over the next decade as major energy companies look to invest in renewables. As big companies are being forced to introduce greener policies, independent producers could profit from this change.

https://oilprice.com/Energy/Crude-Oil/W ... anies.html

RVF

I would have thought 'the last man standing' will be Saudi Arabia who can produce oil for next to nothing, has vast reserves, and virtually no other source of revenue. If oil is going to die out, their best option is to keep undercutting everyone else and pump out all they can, otherwise it will eventually be left in the ground.

I don't think that makes sense. On two grounds.

- Firstly, by limiting production now (in concert with others) they can gain as much, or more, income from selling less oil.
- Secondly, demand for oil won't stop. It will fall off, massively over time, but over the next couple of decades it won't be that fast, and even then oil will still be very valuable for uses other than energy, though in much smaller quantities.

I'd think their current approach is probably pretty sensible. Try and keep prices up while not giving away too much market. They may still end up with oil in the ground in many decades time, but will have got as much, probably more, revenue than opening taps now.