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[SKEP + 229]

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Edited August 13, 2019 by SKEP

[Douglas Buckland + 6,308]

I think that you are assuming that the US shale oil miracle has 'legs' (longevity) while OPEC does not believe it does.

If this is the case, OPEC is simply 'playing the long game' and will simply wait for the US shale game to falter and fail.

US industry generally is not adept at long term strategies which may take several years to come to fruition. Much of this is due to the uncertainty created by a four year election cycle.

 

[SKEP + 229]

On 7/31/2019 at 9:57 PM, Douglas Buckland said:

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Edited August 13, 2019 by SKEP

[Douglas Buckland + 6,308]

Perhaps you are correct, but for the life of me I just cannot see how dumping oil into an already saturated market is beneficial to ANYONE!

This unrestrained production can only drive the price of oil DOWN. This not only affects the margins, it will likely drive some companies out of business.

In layman's terms, can someone explain to me how dumping even more oil into an already over-supplied market is beneficial to our industry?

[Douglas Buckland + 6,308]

7 hours ago, SKEP said:

I do agree US short sighted. But reserves are reserves. 

I also believe shale has longevity. 

Apparently so do the companies investing Billions in even more Permian pipelines (Exxon) and 3 new export terminals Trafigura   Carlyle Group, Chevron, Enterprise Products.  

They are putting up Billions .  Would not do that for short term. 

Several companies recently confirmed they have slowed or stopped Permian production until pipelines come on board. BP stated in interview yesterday.

Time will tell.  

These companies see the headlines "Electric Vehicle Sales Explode In Europe" Just watch . .  Within 5 year there will be panic selling as demand plateaus and supply increases.

EIA latest shale reserve estimate 98 Billion Barrels.

Lot of opinions out there.  This is mine.

There is a big difference between estimated reserves (usually a wild-assed guess to attract investors) and proven reserves.

My opinion is that the 'shale game' (pun intended) is a house of cards built on debt.

Regardless of who owns the lease, a 'mom & pop' operator or a multinational, they both own the same piece of rock, the same fluid characteristics, the same pressure regimes, and so forth.

If a multinational buys 'mom & pop's' operation, they also buy the drastic production decline curves, the lack of pipelines for oil and gas, the flaring issue, the sibling well problem, to name a few.

There is no magical 'new' technology available to resolve these issues that was not available to 'mom & pop', the access to any new technology is simply a matter of money, which 'mom & pop' had access to until just recently.

Furthermore, the multinationals are getting into the game late with many, if not all, of the sweetspots already drilled and now well into their spectacular declines.

Yes, the multinationals are pumping billions into pipelines for an EXPECTED production boom, but this money does nothing to address the actual production performance at the wellheads.

Why do the multinationals believe that they can succeed where so many others have failed (from a positive cash flow point of view)? Is it simply arrogance?

Finally, let's assume that the multinationals do in fact have all the clever drilling engineers, geologists and geophysicists and the rest of us are just pretenders, and they unleash the LTO genie. How is dumping a huge volume of oil, on an already over supplied market, a feasible business plan? Driving the price of your product down does not make sense to me.

[SKEP + 229]

On 7/31/2019 at 11:16 PM, Douglas Buckland said:

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Edited August 13, 2019 by SKEP

[SKEP + 229]

On 7/31/2019 at 9:57 PM, Douglas Buckland said:

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Edited August 13, 2019 by SKEP

[Old-Ruffneck + 1,177]

9 hours ago, Douglas Buckland said:

I think that you are assuming that the US shale oil miracle has 'legs' (longevity) while OPEC does not believe it does.

If this is the case, OPEC is simply 'playing the long game' and will simply wait for the US shale game to falter and fail.

US industry generally is not adept at long term strategies which may take several years to come to fruition. Much of this is due to the uncertainty created by a four year election cycle.

 

There really isn't much assuming in this. The billions alone in pipeline capacity and digging a trench in the gulf to support VLCC of 2mb is underway, and the hundreds of billions invested in all the wells. Shale is going to be around for awhile, and maybe some investors can get some reward back? Will see on the latter.

[Douglas Buckland + 6,308]

28 minutes ago, SKEP said:

Doug, how does the election play in oil price.

You do not think that whoever is in the office of POTUS does not effect the markets? Don't be naive!

If Trump was not in office, and decided to address the trade imbalance with China, would we have the present trade war? Is the present trade war having an effect on the global economy? Has the trade war had an impact on the global demand for oil?

I will not go into whoever is in office having a serious impact on the present situations in Iran and Venezuela.

So yes, elections DO affect the price of oil.

[Douglas Buckland + 6,308]

40 minutes ago, SKEP said:

It's called Free Markets. 

" . . . .  It will likely drive some companies out of business".   Not likely, IT WILL drive some companies out of business.  Many businesses go out of business.

Are you saying Chevron, Exxon and Oxy should not increase production so Rosneft, ARAMCO, NIGERIA can sell more oil and balance their budget. 

Or they should cut back so some shale producer that negotiated excessive royalty rates and over leveraged so they can service their debt.  Who cuts back . . . and how much.  

It's how the world works.  

Maybe you're right, maybe OPEC is right.

This argument is getting tired. 

" In layman terms, can someone explain to me  . . . .   ".

I have 5 times.  

 

 

 

You haven't explained clearly and concisely ANYTHING five times, in my humble opinion.

Are you saying that in a 'free market' it is desireable to flood an already saturated market and drive the price of your product down? Is the drive for market share at the expense of common sense?

Is it required to sell our shale oil at the present price or perhaps sell it later at a higher price?

[William Edwards + 708]

In a world where oil supply capability almost always exceeds consumption, we have the perpetual problem resulting from the fact that it is impossible to put ten gallons of oil in a five gallon bucket. Therefore ALL producers adopt the strategy "You cut!". It has been said that ignorance is bliss; likewise, failure to understand the simple arithmetic of supply and demand is also bliss, I suppose. One unintended result of these facts is a perpetual discussion of how the producers can circumvent the restrictions resulting from simple arithmetic. Only a well disciplined, effective cartel with enforcement powers can set both price and production simultaneously. Is the producing world ready for that?

[Ward Smith + 6,615]

3 hours ago, Douglas Buckland said:

There is a big difference between estimated reserves (usually a wild-assed guess to attract investors) and proven reserves.

My opinion is that the 'shale game' (pun intended) is a house of cards built on debt.

Regardless of who owns the lease, a 'mom & pop' operator or a multinational, they both own the same piece of rock, the same fluid characteristics, the same pressure regimes, and so forth.

If a multinational buys 'mom & pop's' operation, they also buy the drastic production decline curves, the lack of pipelines for oil and gas, the flaring issue, the sibling well problem, to name a few.

There is no magical 'new' technology available to resolve these issues that was not available to 'mom & pop', the access to any new technology is simply a matter of money, which 'mom & pop' had access to until just recently.

Furthermore, the multinationals are getting into the game late with many, if not all, of the sweetspots already drilled and now well into their spectacular declines.

Yes, the multinationals are pumping billions into pipelines for an EXPECTED production boom, but this money does nothing to address the actual production performance at the wellheads.

Why do the multinationals believe that they can succeed where so many others have failed (from a positive cash flow point of view)? Is it simply arrogance?

Finally, let's assume that the multinationals do in fact have all the clever drilling engineers, geologists and geophysicists and the rest of us are just pretenders, and they unleash the LTO genie. How is dumping a huge volume of oil, on an already over supplied market, a feasible business plan? Driving the price of your product down does not make sense to me.

I don't have it handy right now, but did you watch the CERAweek interview with the CEO of Chevron? He made some interesting points, one of which was that at no time in the history of the petroleum industry have they only recovered 10% of the OOIP.  The assumption is, and has a always been, that "someone" will figure out how to increase the production from those wells. 

The question is, will it happen in our lifetimes? 

As for the rest, the problem (currently) isn't supply, it's Demand. For lots of reasons, some of which I've posted here, demand is not increasing very fast, and as I proved, it has already gone DOWN in places like Japan. At the same time, supply Is increasing. Economics 101 says price will move down as a consequence of that. 

Middle East governments can play sit and wait, but meanwhile they have restive populations who want services, which oil revenue pays for. 

[SKEP + 229]

On 8/1/2019 at 2:36 PM, Ward Smith said:

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Edited August 13, 2019 by SKEP

[ronwagn + 6,290]

21 hours ago, Douglas Buckland said:

I think that you are assuming that the US shale oil miracle has 'legs' (longevity) while OPEC does not believe it does.

If this is the case, OPEC is simply 'playing the long game' and will simply wait for the US shale game to falter and fail.

US industry generally is not adept at long term strategies which may take several years to come to fruition. Much of this is due to the uncertainty created by a four year election cycle.

 

Most OPEC countries are getting into deep economic problems because of their "long game". They cannot depend on it working for them. There are many other energy options to compete with. They will be more competitive as time goes on. 

[shadowkin + 584]

21 hours ago, ronwagn said:

Most OPEC countries are getting into deep economic problems because of their "long game". They cannot depend on it working for them. There are many other energy options to compete with. They will be more competitive as time goes on. 

And OPEC countries have no alternative industry to fall back on to replace the lost oil revenue. They can only slow down the inevitable at this point.

[Old-Ruffneck + 1,177]

2 hours ago, shadowkin said:

And OPEC countries have no alternative industry to fall back on to replace the lost oil revenue. They can only slow down the inevitable at this point.

They aren't DIVERSIFIED!!