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The financing of future hydrocarbon projects

Hallucigenia
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The financing of future hydrocarbon projects

#488523

Postby Hallucigenia » March 23rd, 2022, 10:31 am

It's been clear for a while that Western financial institutions would see increasing pressure to stop financing hydrocarbon projects, so the announcement by ING that they would no longer finance new projects (whilst continuing existing ones) is not a surprise. But it still feels like a bit of a landmark on the way to oil companies having the same pariah status (or worse) than eg tobacco companies, and will increase the pressure on other banks to do the same.

https://www.reuters.com/business/sustai ... 022-03-23/

Any reduction in sources of finance will mean it costing more and fewer projects getting approved, which means higher oil/gas prices which in turn accelerates the move away from fossil fuels at the expense of those who can't afford major capex at a personal level to improve the energy efficiency of their house etc.

absolutezero
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Re: The financing of future hydrocarbon projects

#488534

Postby absolutezero » March 23rd, 2022, 11:12 am

Add in all this silly talk of windfall taxes and oil/gas prices should only increase from here.

anon155742
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Re: The financing of future hydrocarbon projects

#488673

Postby anon155742 » March 23rd, 2022, 8:38 pm

The financing of future projects will involve a lot of their own cashflow. A few more months of >$100 oil and they will be gold plating the office door handles just to get rid of it

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Re: The financing of future hydrocarbon projects

#488691

Postby absolutezero » March 23rd, 2022, 9:03 pm

anon155742 wrote:The financing of future projects will involve a lot of their own cashflow. A few more months of >$100 oil and they will be gold plating the office door handles just to get rid of it

Dividends and buybacks are wonderful things.
Though I would prefer increased exploration and production.

88V8
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Re: The financing of future hydrocarbon projects

#488806

Postby 88V8 » March 24th, 2022, 10:21 am

Hallucigenia wrote:...higher oil/gas prices which in turn accelerates the move away from fossil fuels at the expense of those who can't afford major capex at a personal level to improve the energy efficiency of their house etc.

It's faintly amusing how the predominantly left-wing media are cheerleading the middle classes' move to EVs and heatpumps, subsidised by 'the working man'.
And now we have the notion of toll roads to offset the fall in revenue from untaxed EVs, so the 'working man' will then pay double taxation in fuel duty + tolls. That should have been greeted with howls of outrage from Labour.

And if all new exploration projects were canned, how long before we run out of o&g...

Are there a lot of myopic nutters about, or is it me....

V8 (long oilies)

scrumpyjack
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Re: The financing of future hydrocarbon projects

#488817

Postby scrumpyjack » March 24th, 2022, 10:59 am

It's not you, there are plenty of myopic nutters out there, including most of the current government, who on the one hand accept that we will be using hydro carbons for decades but then think we should only be using other countries hydron carbons rather than our own - patently idiotic.

As for moving to road pricing to raise the £35bn currently raised by fuel taxes and car tax, I think that is sensible. Now that the technology exists to implement it relatively unobtrusively, it would be a huge help in spreading road usage to cut down traffic jams by pricing specific roads more highly at certain times of day and so reducing congestion.

PeterGray
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Re: The financing of future hydrocarbon projects

#488837

Postby PeterGray » March 24th, 2022, 11:41 am

88V8 wrote:It's faintly amusing how the predominantly left-wing media are cheerleading the middle classes' move to EVs and heatpumps, subsidised by 'the working man'.
And now we have the notion of toll roads to offset the fall in revenue from untaxed EVs, so the 'working man' will then pay double taxation in fuel duty + tolls. That should have been greeted with howls of outrage from Labour.

And if all new exploration projects were canned, how long before we run out of o&g...

Are there a lot of myopic nutters about, or is it me....

V8 (long oilies)


I don't think anyone has suggested road pricing as well as existing levels of duty, though some additional charges on diesel/petrol use will continue to make sense to discourage their use where possible. Road pricing to replace the revenue that will inevitably be lost over time from fuel duty makes a lot of sense, and will allow costs to be targeted better. So those driving in rural areas with low traffic densities and little access to public transport can be charged a low price while people in congested areas with good public transport or distances that can be walked or cycled pay more if they drive. You could no doubt also add exemptions or those with mobility needs etc.

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Re: The financing of future hydrocarbon projects

#489116

Postby spasmodicus » March 25th, 2022, 12:28 pm

The energy we use has to come from somewhere. It seems that quite a lot of people are already unable to pay their energy bills, so the idea that they can suddenly cough up thousands of pounds up front for some expensive alternative to oil and gas seems to be completely unworkable. Whilst the words "heat pump" have entered the vocabulary of even the thickest journalists, the real difficulties of converting 20 million or so domestic gas central heating systems to something else (heat pumps? hydrogen? mini-nuclear? geothermal? I dunno, somebody tell me) along with the cost of insulating all our old houses, have not diffused into the skulls of any of our politicians. Amortisation of the cost of the infrastructure, both domestic and national, required to do it, is going to make the effective cost of heating a home hugely more than it was in the good old days of cheap gas, r.i.p!

At best, weaning ourselves off oil and gas would require a gradual run-down of hydrocarbon usage, suggesting that oil and gas exploration expenditure needs to be tapered off in parallel. What has actually happened is that exploration activity has been slashed almost to zero, while there is a huge step change supply side shock looming from sanctioned russian production. I see no signs whatsoever of any reversal in the hostile attitude of journalists, the general public and financiers towards any kind of oil and gas exploration. It reminds me of the way the russian population has bee zombiefied by their state controlled media. Something has got to break, methinks.
S
(a semi retired exploration geophysicist)

BullDog
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Re: The financing of future hydrocarbon projects

#489147

Postby BullDog » March 25th, 2022, 1:18 pm

88V8 wrote:
Hallucigenia wrote:...higher oil/gas prices which in turn accelerates the move away from fossil fuels at the expense of those who can't afford major capex at a personal level to improve the energy efficiency of their house etc.

It's faintly amusing how the predominantly left-wing media are cheerleading the middle classes' move to EVs and heatpumps, subsidised by 'the working man'.
And now we have the notion of toll roads to offset the fall in revenue from untaxed EVs, so the 'working man' will then pay double taxation in fuel duty + tolls. That should have been greeted with howls of outrage from Labour.

And if all new exploration projects were canned, how long before we run out of o&g...

Are there a lot of myopic nutters about, or is it me....

V8 (long oilies)

What's happening beyond the short to medium term is that the publicly quoted O&G super majors in the West will be chased and chivvied into more and more investment away from their traditional core businesses. Already, there's been court cases against Shell for one, forcing a more rapid fall off in traditional business than the company would like. Of course, the world demand for oil and gas is going to carry on increasing for at least a couple of decades. Who will provide the supplies if the western super majors don't?

Well largely, it's going to be the national oil companies who will have no qualms whatsoever about increasing their oil and gas production to meet the demand.

Yet again, the western economies will sleep walk into a situation where world oil and gas is controlled by the Middle East gulf states, Iraq, Iran, Libya, Nigeria, Venezuela........ What could possibly go wrong with that then?

Well - Quite a lot actually, as we have just seen with most of Europe relying on Russian gas supplies. It's just fine, until it's not.

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Re: The financing of future hydrocarbon projects

#489148

Postby BullDog » March 25th, 2022, 1:21 pm

spasmodicus wrote:The energy we use has to come from somewhere. It seems that quite a lot of people are already unable to pay their energy bills, so the idea that they can suddenly cough up thousands of pounds up front for some expensive alternative to oil and gas seems to be completely unworkable. Whilst the words "heat pump" have entered the vocabulary of even the thickest journalists, the real difficulties of converting 20 million or so domestic gas central heating systems to something else (heat pumps? hydrogen? mini-nuclear? geothermal? I dunno, somebody tell me) along with the cost of insulating all our old houses, have not diffused into the skulls of any of our politicians. Amortisation of the cost of the infrastructure, both domestic and national, required to do it, is going to make the effective cost of heating a home hugely more than it was in the good old days of cheap gas, r.i.p!

At best, weaning ourselves off oil and gas would require a gradual run-down of hydrocarbon usage, suggesting that oil and gas exploration expenditure needs to be tapered off in parallel. What has actually happened is that exploration activity has been slashed almost to zero, while there is a huge step change supply side shock looming from sanctioned russian production. I see no signs whatsoever of any reversal in the hostile attitude of journalists, the general public and financiers towards any kind of oil and gas exploration. It reminds me of the way the russian population has bee zombiefied by their state controlled media. Something has got to break, methinks.
S
(a semi retired exploration geophysicist)

Very well said indeed. We need a lot more people saying this in public.

88V8
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Re: The financing of future hydrocarbon projects

#511333

Postby 88V8 » July 2nd, 2022, 12:52 pm

And three months on, an interesting overview from Goehring & Rozenwajg linking the drawdowns in strategic reserves to falling production capacity and reserves, and discussing the negative impact of ESG.

OECD inventories (a good proxy for global inventories) peaked at the height of COVID-19 related restrictions in July 2020 at 4.8 bn bbl – 380 mm bbl above the 10-year seasonal average. Just as global inventories peaked -- along with bearish investor sentiment -- we wrote that we were on the verge of an energy crisis. Demand was likely to rebound much faster than supply, pushing oil markets into severe deficit and resulting in strong inventory drawdowns. Since then, inventories collapsed by 1.2 m b/d, the fastest sustained rate in history. In their latest release, the IEA estimates that OECD inventories ended February at less than 4.1 bn bbl, the lowest absolute level since 2007 and the lowest level relative to 10-year seasonal averages since our dataset begins in 1980. This all took place before Russia invaded Ukraine on February 24th.

and

With demand running higher than expectations and non-OPEC+ supply disappointing, all eyes are on OPEC+. President Biden asked the cartel to produce more oil in November 2021 and again in February 2022 and both requests were ignored. Most analysts we speak with believe that OPEC+ (led by Saudi Arabia) chose not to increase production; however we believe they tried but were ultimately unable to.

Ah, peak oil, yawn, you may say.

I think they make a good case. A while ago, DSPP, it may have been, wrote that we might see a last hurrah for big oil and that would be a chance for investors to get out. I now suspect the hurrah in O&G will be sustained and significant, and far from being a good time to get out, it's a good time to get in.
https://blog.gorozen.com/blog/running-out-of-spare-oil-capacity?utm_campaign=Weekly%20Blog%20Notification&utm_medium=email&_hsmi=218218396&_hsenc=p2ANqtz--nwbzl5AWU97kXnh1gpE35-mgq01yV40TaauTjfHrqAW4OHZGTsA1ZvMeoS07OZ11aA_gapkqX4kJbqr7Bggn91jEXdw&utm_content=218218396&utm_source=hs_email

V8 (even longer, oilies)

BullDog
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Re: The financing of future hydrocarbon projects

#511335

Postby BullDog » July 2nd, 2022, 12:59 pm

88V8 wrote:And three months on, an interesting overview from Goehring & Rozenwajg linking the drawdowns in strategic reserves to falling production capacity and reserves, and discussing the negative impact of ESG.

OECD inventories (a good proxy for global inventories) peaked at the height of COVID-19 related restrictions in July 2020 at 4.8 bn bbl – 380 mm bbl above the 10-year seasonal average. Just as global inventories peaked -- along with bearish investor sentiment -- we wrote that we were on the verge of an energy crisis. Demand was likely to rebound much faster than supply, pushing oil markets into severe deficit and resulting in strong inventory drawdowns. Since then, inventories collapsed by 1.2 m b/d, the fastest sustained rate in history. In their latest release, the IEA estimates that OECD inventories ended February at less than 4.1 bn bbl, the lowest absolute level since 2007 and the lowest level relative to 10-year seasonal averages since our dataset begins in 1980. This all took place before Russia invaded Ukraine on February 24th.

and

With demand running higher than expectations and non-OPEC+ supply disappointing, all eyes are on OPEC+. President Biden asked the cartel to produce more oil in November 2021 and again in February 2022 and both requests were ignored. Most analysts we speak with believe that OPEC+ (led by Saudi Arabia) chose not to increase production; however we believe they tried but were ultimately unable to.

Ah, peak oil, yawn, you may say.

I think they make a good case. A while ago, DSPP, it may have been, wrote that we might see a last hurrah for big oil and that would be a chance for investors to get out. I now suspect the hurrah in O&G will be sustained and significant, and far from being a good time to get out, it's a good time to get in.
https://blog.gorozen.com/blog/running-out-of-spare-oil-capacity?utm_campaign=Weekly%20Blog%20Notification&utm_medium=email&_hsmi=218218396&_hsenc=p2ANqtz--nwbzl5AWU97kXnh1gpE35-mgq01yV40TaauTjfHrqAW4OHZGTsA1ZvMeoS07OZ11aA_gapkqX4kJbqr7Bggn91jEXdw&utm_content=218218396&utm_source=hs_email

V8 (even longer, oilies)

Yes, I agreed with DSPP's position on that. Fact is there's been virtually no investment in new hydrocarbon mega projects since 2014. Resources are being depleted and no new resources are in the wings waiting to take up the slack. The only major project that I can think of that's likely to go ahead is Qatari expansion of LNG capacity and bringing their North Field expansion on line. That's it.

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Re: The financing of future hydrocarbon projects

#511509

Postby BullDog » July 3rd, 2022, 12:50 pm

88V8 wrote:And three months on, an interesting overview from Goehring & Rozenwajg linking the drawdowns in strategic reserves to falling production capacity and reserves, and discussing the negative impact of ESG.

OECD inventories (a good proxy for global inventories) peaked at the height of COVID-19 related restrictions in July 2020 at 4.8 bn bbl – 380 mm bbl above the 10-year seasonal average. Just as global inventories peaked -- along with bearish investor sentiment -- we wrote that we were on the verge of an energy crisis. Demand was likely to rebound much faster than supply, pushing oil markets into severe deficit and resulting in strong inventory drawdowns. Since then, inventories collapsed by 1.2 m b/d, the fastest sustained rate in history. In their latest release, the IEA estimates that OECD inventories ended February at less than 4.1 bn bbl, the lowest absolute level since 2007 and the lowest level relative to 10-year seasonal averages since our dataset begins in 1980. This all took place before Russia invaded Ukraine on February 24th.

and

With demand running higher than expectations and non-OPEC+ supply disappointing, all eyes are on OPEC+. President Biden asked the cartel to produce more oil in November 2021 and again in February 2022 and both requests were ignored. Most analysts we speak with believe that OPEC+ (led by Saudi Arabia) chose not to increase production; however we believe they tried but were ultimately unable to.

Ah, peak oil, yawn, you may say.

I think they make a good case. A while ago, DSPP, it may have been, wrote that we might see a last hurrah for big oil and that would be a chance for investors to get out. I now suspect the hurrah in O&G will be sustained and significant, and far from being a good time to get out, it's a good time to get in.
https://blog.gorozen.com/blog/running-out-of-spare-oil-capacity?utm_campaign=Weekly%20Blog%20Notification&utm_medium=email&_hsmi=218218396&_hsenc=p2ANqtz--nwbzl5AWU97kXnh1gpE35-mgq01yV40TaauTjfHrqAW4OHZGTsA1ZvMeoS07OZ11aA_gapkqX4kJbqr7Bggn91jEXdw&utm_content=218218396&utm_source=hs_email

V8 (even longer, oilies)

A worth while read linked below supporting this view-

Partial quotation - Our biggest short-term problem is that we are now running out of spare oil pumping capacity. In every prior energy shortage, including the dual oil crises of the 1970s and the rally of 2008, OPEC maintained ample spare capacity that could quickly be brought online. In past letters, we explained why the second half of 2022 would mark the first time in history that global demand bumped up against total pumping capacity.

Article link - https://blog.gorozen.com/blog/running-o ... l-capacity

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Re: The financing of future hydrocarbon projects

#511526

Postby Hallucigenia » July 3rd, 2022, 1:52 pm

BullDog wrote:Partial quotation - Our biggest short-term problem is that we are now running out of spare oil pumping capacity. In every prior energy shortage, including the dual oil crises of the 1970s and the rally of 2008, OPEC maintained ample spare capacity that could quickly be brought online. In past letters, we explained why the second half of 2022 would mark the first time in history that global demand bumped up against total pumping capacity.


It's not just upstream - there's huge stress in downstream as well, there's been some crazy refining margins recently.

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Re: The financing of future hydrocarbon projects

#511529

Postby BullDog » July 3rd, 2022, 2:04 pm

Hallucigenia wrote:
BullDog wrote:Partial quotation - Our biggest short-term problem is that we are now running out of spare oil pumping capacity. In every prior energy shortage, including the dual oil crises of the 1970s and the rally of 2008, OPEC maintained ample spare capacity that could quickly be brought online. In past letters, we explained why the second half of 2022 would mark the first time in history that global demand bumped up against total pumping capacity.


It's not just upstream - there's huge stress in downstream as well, there's been some crazy refining margins recently.

Correct. It's the entire supply chain that's under pressure.

Of course, what few refineries we have remaining in the UK are ancient and on their last legs. With the exception of ExxonMobil (Fawley) and Philips66 (Humber), the other refinery operators now are non league players in the main. Like Valero, Prax, Petroineos and Essar who just use the refineries as cash cows and export what profit is made. I foresee a day when almost all our road fuel needs are imported. It's shocking even now when you look at the numbers how much fuel, especially diesel, we import.


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