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Page added on February 8, 2015
Here’s Why Big Oil Companies Are Unable To Increase Reserves To Counter Declining Production
According to the quarterly results announced during the past few weeks, major oil companies have reported a mediocre performance for last year, as far as exploration and production of crude oil and natural gas reserves is concerned. At the same time, companies have also reduced their capital spending budgets for this year, which might exacerbate their lower production problem.
Over the last decade, some of the biggest oil companies have seen their production drop and their growth of reserves stutter, even though oil price was going up for the most part. Royal Dutch Shell plc (ADR) (NYSE:RDS.A), BP plc (ADR) (NYSE:BP), ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM), and Chevron Corporation (NYSE:CVX) are five of the biggest global oil and gas companies, which saw their production drop 3.25% year-over-year (YoY) on average last year, while failing to replace the crude oil and natural gas – they extracted last year – with new reserves
As oil price has crashed over the last six months, concerns have been growing about cash flow preservation. After trading over $100 per barrel last summer, crude oil price has halved now. West Texas Intermediate crude oil futures for March delivery are trading at $51.69 per barrel, while Brent crude oil futures are currently trading at $57.80 per barrel.
In attempts to grapple with the low oil price and maintain dividends, companies all over the world have reduced their capital expenditure (capex) budgets significantly. It raises further questions about how the falling production will be increased.
Analysts and industry experts believe that the capex cuts may prove too extreme in some cases, and may hurt the companies in the long term. Some view capex reductions as elongating the problem and not essentially solving it.
ConocoPhillips slashed its capex by 33% YoY, while BP and Chevron have lowered their capital spending budgets by 13% YoY. Shell has not announced a reduction yet, but the company did scrap off a $6.5 billion petrochemicals megaproject in Qatar, where it had a 20% stake.
As the US experienced the shale oil boom, reserve replacement was not much of a concern. North American oil producers were pumping up so much oil that it lead to a supply glut on a global level. However, oil and natural gas extraction from shale reserves is far more costly than that of conventional reserves. In the current low-price environment, companies will find it difficult to derive any significant profits from the shale operations.
According to Jim Chanos, the US shale revolution was uneconomic to begin with. He believes major oil producers will run into deeper troubles as their entire business models stand challenged. In his interview with CNBC last month, Mr. Chanos boldly said: “Days of finding cheap oil is over.”
Oil companies believe the concerns about oil sector’s health are premature, claiming that lower production reflects the companies’ efforts to become lean and focused on profits. However, certain executives do admit that the reductions in capital spending can come back to haunt the sector in the long term. Attractive investment opportunities may be missed, as oil firms restrict their capital budgets.
Another concern is the acceleration in the depletion rates of current oil resources. According to Reuters, oilfields deplete on average by 15% each year. But companies manage to reduce the depletion rates to as low as 3% by using techniques that require significant expenditure. As firms reduce their spending budgets, depletion rates could rise much higher than 3%. A single percentage point increase in depletion rates can reduce oil production by millions of barrels per month.
Companies face a growing need to increase their reserves, which can come from acquisitions or significant capital spending.
51 Comments on "Here’s Why Big Oil Companies Are Unable To Increase Reserves To Counter Declining Production"
westexas on Sun, 8th Feb 2015 9:18 am
Would be nice if people would stop using depletion when they mean decline rate.
In reality, an increase in production, or a reduction in the decline rate from existing production, means an increase in the depletion rate.
Davy on Sun, 8th Feb 2015 9:53 am
WT, what if depletion is used in a systematic way and not as a geologic description? For example BAU is in a macro oil depletion environment of quality of economic oil and declining rates of production of oil. I would like to use terms properly and or understand the proper meaning per the experts.
Dredd on Sun, 8th Feb 2015 10:43 am
Oilah Akbar! Here come the prayer vigils for god’s sake.
Plantagenet on Sun, 8th Feb 2015 12:31 pm
This oil glut will give the oil majors an opportunity to buy up smaller oil companies (and their reserves) on the cheap.
Keith_McClary on Sun, 8th Feb 2015 12:54 pm
westexas:
Do “depletion rate” and “decline rate” have generally accepted meanings, eg. :
http://www.peakoil.net/about-peak-oil/glossary
Does “depletion” have a quantitative meaning?
Aire on Sun, 8th Feb 2015 1:30 pm
It’s funny how Plant likes to be a one word or phrase kinda guy. It was nothing but Obama this, Obama that and now it’s this “oil glut” … it’s like he gets fixated in saying it over and over. Kinda reminds me of Fox News. But anyway it seems like there’s more articles and media saying we’re heading off a cliff in oil production soon… even in main stream media. Good Bye “oil glut” as Plant would say and call it.
eugene on Sun, 8th Feb 2015 2:10 pm
Seems to me the long term impact of the present situation cannot be good. In a time of depletion/decline, present cut backs in capex means trouble later on. Trouble in the sense that, assuming global growth occurs at some level, oil/gas supplies will be less. As far as “oil glut”, seems to me it’s due to a slowing global economy which has it’s own ramifications. Personally, I don’t have much use for the blame game. We’ve all played. Kind of like a drunken party, hangover is always in store.
rockman on Sun, 8th Feb 2015 2:50 pm
Davy – Depletion is a systemic dynamic regardless of the commodity involved. Your warehouse has 1 million widgets. And your widget factory has burned down…no more widgets. You might have been selling 100,000 widgets per year…a 10% depletion rate. But this year you only sell 50,000 widgets: you’ve experienced a 50% reduction in DECLINE RATE. But more important: you still have fewer widgets left in your warehouse: depletion, like rust, never stops even if your decline rate slows up. Even more important: doubling your sales rate to 200,000 widgets per year (i.e. increasing your delivery of widgets two-fold) only increases your depletion rate.
Of course you could build another widget factory (i.e. frac the shales) and now you”ve reversed the depletion of your widget inventory. Until the cost of producing widgets suddenly cost more the you sell your widgets for. The you experience a huge decline rate.
Speculawyer on Sun, 8th Feb 2015 3:32 pm
I don’t know how the IOCs will increase their reserves these days without the price of oil rising. Many of the best prospects around the world are controlled by National oil companies so they are shut out of those. With prices low, a lot of the tar sands and shale deposits probably moved from reserves into the resources category (oil but not economically viable at current prices). So they have to find some not-too-hard to extract conventional oil. Good luck with that. I guess Africa may still have some opportunities.
Plantagenet on Sun, 8th Feb 2015 4:11 pm
The IOCs may buy up some of the depressed US shale oil companies. Why not?
When the oil glut ends the price of oil is going to head back up again.
Perk Earl on Sun, 8th Feb 2015 6:08 pm
“I don’t know how the IOCs will increase their reserves these days without the price of oil rising.”
Govt. subsidies.
As cost of new production escalates above consumer affordability, the only way to make up for the difference is artificially, i.e. subsidize. Is it coming? Sure, it will be another last gasp desperate fiscal attempt in a long line of ‘extend and pretend’ policies.
shortonoil on Sun, 8th Feb 2015 6:08 pm
Does “depletion” have a quantitative meaning?
We use a simple percentage to express the depletion status of the 2,285 Gb of theoretically extractable resource. That is determined by the mathematical treatment of the EIA’s production data set. It is called the Etp Model. Since not all of that 2,285 Gb will be removed because of entropy production in the petroleum production system, the percentage represents what will ultimately be extracted.
You can find a more detailed evaluation at our site:
http://www.thehillsgroup.org/
A complete derivation of the Etp model is available from our 57 page engineering report, “Depletion: A determination for the world’s petroleum reserve”.
dave thompson on Sun, 8th Feb 2015 6:43 pm
The output for world oil production, that is conventional oil, has been stuck at 74 to 76 mil. bbls per day since 2004. Peak oil is and has been our reality.
rockman on Sun, 8th Feb 2015 6:54 pm
“The IOCs may buy up some of the depressed US shale oil companies. Why not?” Easy answer: because after several years of production the shales wells are producing so little they aren’t worth the effort for an IOC. In fact, they aren’t really worth anything to anyone other then mom/pop operators. The production cost, low production rates and high maintenance make them very unsuitable for any large US operator let alone an IOC.
Consider my little company: 1 geologist, 1 geophysicist and 1 engineer plus support staff. And we wouldn’t buy Eagle Ford producers on a bet: zero upside. The IOS’s gobble up low rate oil wells??? Hell, major US oils gave up on that kind of production more than 2 decades ago: flipped most of that production to Little Oil.
And the undrilled acreage? First, if an IOC wanted to get in the US shales they would have jumped in years ago. Second, shale lease have an automatic expiration date: take a couple of years for oil prices to rebound to former levels and the vast majority of leases will expire before they see a drill rig. Residual shale lease value: not very much. If I wanted to drill an Eagle Ford well there are a dozen companies that would give me access to leaseholds for free. And I’m still not interested.
At current oil prices the US oil potential is on its death bed IMHO. Go back 10 years when prices were this low and check out how many rigs were drilling. And be prepared to be very unimpressed when you discover the great majority of those rigs were drilling NG prospects.
Dave on Sun, 8th Feb 2015 7:00 pm
Plant says “when the oil glut ends the price of oil is going to head back up again”. Wow, so profound. If the masses of the world could afford much in the way of oil, no glut would be evident now even with fracking and tar sands etc. Sir, the age of cheap oil is over, in spite of market gyrations, that we all should expect from time to time. Not only can humanity not afford much oil in the future, but climate effects are real and increasing.
Plantagenet on Sun, 8th Feb 2015 7:04 pm
Hi Rockman:
I have to disagree with you on your suggestion that the big IOCs won’t buy up shale oil positions. The facts are pretty clear that IOCs are ALREADY buying into shale positions. For instance, Shell is one of he biggest players in the Utica and the Marcellus—and they are still building their land position, buying more in November 2014.
http://www.ogj.com/articles/uogr/print/volume-2/issue-5/shell-expands-leasehold-position-in-marcellus-utica.html
Other major IOCs like Exxonmobil, Chevron and Total are all players in the Vaca Muerte shale play in Argentina. And IOCs don’t get any bigger then Exxon and Chevron.
Cheers!
Plantagenet on Sun, 8th Feb 2015 7:09 pm
@Daver
I had to laugh at your suggestion that “the age of cheap oil is over”. Gasoline is $1.99 a gallon at the pump right now!! Thats cheap in my book!
Have you bought any gas for your scooter recently? Oil prices are down 60% and gasoline has come right down with it. We are in a transitory oil glut—when the excess capacity gets wrung out of the system oil prices will go back up. It may take months or years for the price to go back up, but thats how supply and demand works.
Cheers!
Apneaman on Sun, 8th Feb 2015 7:21 pm
Even the nation burger flippers are getting laid off…must be a glut of hamburgers. Maybe their parents will give them a gas allowance to get them out of the basement once in awhile. Does not matter how low gas gets when people don’t have jobs for cars, insurance, repairs.
Over Half Of Young American Adults Live With Their Parents In These 12 States
http://www.zerohedge.com/news/2015-02-08/over-half-young-american-adults-live-their-parents-these-12-states
Davy on Sun, 8th Feb 2015 7:30 pm
How do you know what oil is going to do Planter? Nobody has ever figured out oil prices for very long. Cheap oil is over per the demand destruction oil glut. This type of glut proves the economy can’t afford the oil produced today.
Planter put away your high school Econ 101 books and realize change happens. We are now in a bumpy descent with a demand destruction oil glut. The demand destruction oil glut may end but not for long until the next round of demand destruction hits. This is an epochal change with a paradigm shift from growth to descent. Your Econ 101 basics can’t comprehend this.
Apneaman on Sun, 8th Feb 2015 7:53 pm
There is a glut of everything.
“The Baltic Dry Index, a measure of global freight rates for commodities, fell on Thursday to within 1.8 percent of the all-time low in July and August of 1986.”
http://www.hellenicshippingnews.com/shipping-costs-test-new-low-as-china-coal-imports-slide/
GregT on Sun, 8th Feb 2015 7:59 pm
dave thompson said:
“The output for world oil production, that is conventional oil, has been stuck at 74 to 76 mil. bbls per day since 2004. Peak oil is and has been our reality.”
dave thompson is correct.
The unconventional oil that came online as a result of high prices, is unaffordable to our economies. The damage done to our economies by high oil prices is what has caused the recent pullback in prices. Oil is still selling at twice the price that it was only a decade ago. We are past the peak of conventional oil production, and have already begun the decent towards a post oil world, and we are totally unprepared.
GregT on Sun, 8th Feb 2015 7:59 pm
The only thing that there is a glut of, is stupidity.
Apneaman on Sun, 8th Feb 2015 8:14 pm
And denial.
shallowsand on Sun, 8th Feb 2015 8:30 pm
Plant. Utica and Marcellus are gas plays for the most part.
Look at the US oil rig count from 2000-2014. It stayed below 400 until it rocketed in 2010 when it shot up over 1,400 and it stayed there until bumping up to 1,600 last fall. It is now in free fall.
ConocoPhillips is in shale oil through Burlington Resources and ExxonMobil is also through XTO. There are probably some areas majors would be interested in in US shale, but I don’t see them buying out everyone or leasing up acreage because most just isn’t that great. They are not going to buy deals in shale that need $100+ oil IMO, especially when oil is $50.
As I’ve posted repeatedly, $6-10 million wells that produce 300-500 boe over 30+ years are not that great. It is not much different than stripper well guys drilling $60-100 thousand wells that produce 3000-5000 boe in 30+ years. It just had a big enough scale to get the institutions interested in trying to figure out how they could make a buck on it.
Plantagenet on Sun, 8th Feb 2015 8:42 pm
@shallowand
1. Yes, but there is oil in the Utica. Its tricky to complete the well so the oil will flow, but Enervest is producing oil nicely from their new Utica well.
2. Of course the majors aren’t going to pay $100 bbl for shale oil reserves that are now only worth $50 bbl. The IOCs will pay $40-50 bbl for shale oil reserves that will be worth $100 bbl when the price of oil goes back up.
3. Yes, the scale is the thing. Where else can the IOCs find billions of barrels of oil to add to their own reserves other than by buying out oil shale companies?
Cheers!
shallowsand on Sun, 8th Feb 2015 9:28 pm
I don’t know Plant. I think I’m going to side with Rockman on this one. Maybe there is a reason they are waiting, but would think we would be seeing more m & a than we are.
Ted Wilson on Sun, 8th Feb 2015 9:36 pm
What if Saudi Oil company like Aramco starts buying small oil companies in US & EU. Its just legal to buy a property here.
They will have much better control over the World’s Oil.
Plantagenet on Sun, 8th Feb 2015 9:41 pm
The oil majors are sluggish dinosaurs. They aren’t going to jump to buy anything very quickly. When I worked for an IOC it took weeks for memos to go up the chain of command to the CEO, and more weeks for the CEO to make a decision, and more weeks for the command from the dinosaur brain to reach the dinosaur body and get it starting to move.
GregT on Sun, 8th Feb 2015 9:48 pm
CEOs of organizations do not make these decisions. They are made by boards of directors and/or the shareholders.
rockman on Sun, 8th Feb 2015 10:09 pm
Pop quiz: 1) Name the number of significant positions taken in any shale play on the planet by any IOC since oil fell under $60/bbl. 2) How many wells will be drilling by any IOC in 3 months in any US shale play?
Plant – You make valid points from time to time. But you truly have no sense of the magnitude of reserve building the IOC’s must accomplish. If they weren’t able to add significant PROVEN reserve additions by drilling the shales when oil was $100/bbl why would anyone expect them to do it with $55/bbl oil?
And as I pointed out, and Shallow can credibly confirm, no IOC is capable of handling stripper shale wells…a status that every existing well will reach in the near future. Even an operator like Shallow would have difficulty taking over EFS wells and making much of a go of it.
And again the obvious: Shell Oil??? You mean the company that invested over $3 billion in the EFS and then sold their entire position to Sánchez for $700 million and shut down the rest of their US shale plays? I would imagine Sánchez is having severe buyers remorse now from paying that price based upon $95/bbl oil. BTW: have you heard that Sánchez currently appears to be in serious financial trouble. I wonder bow that happened? LOL
And overseas shale plays by the IOC’s??? Do us a big favor, bud: add up the current production from all the shale plays outside the US that were developed by IOC’s when oil was $100/bbl and how much you expect them to increase that rate with $55/bbl oil. Those numbers would really clarify the situation.
GregT on Sun, 8th Feb 2015 10:20 pm
OK,
I’ll take a stab at your pop quiz rock.
1) Zero.
2) Zero.
Do I win anything? Or am I booted off of the island?
Plantagenet on Sun, 8th Feb 2015 10:52 pm
Rockman You make valid points from time to time, but I respectfully disagree with you here.
1. How do you imagine the IOCs are going to build their reserves if they don’t buy out smaller oil companies and take over their reserves? There is a long history of this—how do you think Exxon became Exxonmobil?
2. As I said in a post above, I don’t expect IOCs to drill shales at $50 bbl. I expect them to BUY shale oil now when oil is priced at $50 barrel and then drill it when oil goes back to $100 bbl after the oil glut ends.
3. Yes, Shell oil owns huge amounts of shale oil acreage. And ExxonMobil And Chevron. And Total. Your claim that no IOCs are invested in shale oil is rubbished—why not face facts?
4. Your suggestion that IOCs might make more from overseas shale oil at $55 bbl then they did at $100 bbl does’t make any sense. The math doesn’t work that way. But IOCs aren’t like the little company you work for that is counting its pennies on every well—-IOCs are huge entities that can afford to undertake corporate buyouts of smaller oilcos that may take years and years to finally show a profit.
When I worked for an IOC we took over a smaller company for their reserves. Of course more IOCs are going to make that kind of move—-its the only way the IOCs can build their reserves now that the big conventional fields are mostly drilled.
CHEERS!
Dave on Sun, 8th Feb 2015 11:03 pm
Plant we’ll just see how long $50 oil lasts if the world economy revives to any extent. Meanwhile depletion of the easiest to reach reserves marches on.
Cheers to you too my friend.
shallowsand on Sun, 8th Feb 2015 11:47 pm
ROCKMAN What happens to the lateral part of the wellbore after a few years? Isn’t it going to fill up with crap that will cost a fortune to clean out?
I guess I wonder who is going to want a hole that makes less than 20 bbl per day that is 4 miles TD, with 2 of those miles going sideways, that will need a 7 figure workover at some point. Think we will stick to our sub 2500′ variety.
I freely admit my knowledge is strictly of the short hole variety, so if I’m missing something here, please advise.
yoananda on Mon, 9th Feb 2015 3:52 am
There is the number of barrels of oil.
There is the oil (with various quality so the best is to count in BTU instead of volume) from this barrels.
There is the net energy we get from this oil (cf EROEI).
There is the net energy PER CAPITA we can get.
Focusing on the amount of BARRELS is dellusive.
What matter is how many net energy people can get.
There is a barrel glut.
There is an energy per capita shortage.
We are in a deflation cycle. If gasoline is “cheap” that because less and less people on the planet can afford to buy it.
Example : for a egyptian, 80% of it’s budget is dedicated to food. What do you think happen when food prices go up ? He buys less and less “any thing else”, so, oil demand goes down …
This is a worldwide phenomenon after 3yr of high oil prices and skyrocketing debts.
marmico on Mon, 9th Feb 2015 4:45 am
Depletion is a systemic dynamic regardless of the commodity involved
WTF?
The depletion rate is a flow divided by a stock. In your “burned down” widget factory example, the depletion rate is zero. There is no production.
pinkdotR on Mon, 9th Feb 2015 5:19 am
Plant, do you know what “glut” means in my language? It means “snot”. Seeing this word in every post of yours makes me read it without translation. I have enough of it just like I have enough of the mentioned substance in my nose every time I catch a cold.
We already know very well there is an oil glut right now but it is so temporary as snow in winter and not worth talking about so much. Much more interesting subject is whether this is the last “snow” we will ever see.
marmico on Mon, 9th Feb 2015 5:59 am
We are in a deflation cycle
CPI, PCE, GDP deflators.
What a crock of shit.
Davy on Mon, 9th Feb 2015 6:08 am
Marm there is reality then their is Fred numbers. Join us in rejecting the lies. We need a smart finance guy like you on our side.
Davy on Mon, 9th Feb 2015 6:19 am
Planter, if the oil majors have been among the biggest of stock buy-back folks to support their market numbers why would they go into Shale plays where they have already shown they are unprofitable at profitable oil price levels? The oil majors are in a consolidation phase of declining market share. They are a dying breed but a tough breed that will carry on but not by getting into places they don’t belong. The oil majors just don’t belong in those niche locations. Have you seen the fat girls at Walmart in tight cloths?
I second Rock in saying you make some good points here but then you get your bone and obsessively chew on it. You have a tendency to hold on to positions that are proven dubious. This causes many here irritation. Why irritate our friends here.
rockman on Mon, 9th Feb 2015 6:44 am
Plant – “How do you imagine the IOCs are going to build their reserves if they don’t buy out smaller oil companies and take over their reserves?” Don’t star from the topic: I wasn’t talking about IOC’s not buying smaller companies. The topic was IOC’s going after the damaged US shale producers. There’s much too little PROVED PRODUCING RESERVES to attract any attention from them. Going after large Deep Water reserves, such as Devon sold to Chevron after the bust of the shale gas play nearly put them out of business, is one obvious target. But even such acquisitions are relatively small compared to the annual production of the IOC’s that need to be replaced.
Big Oil is a victim of their own bigness. The only way for them to add significant reserves in the future is to start cannibalizing each other.
Shallow – As I understand it the main problem with squeaking out a living with EFS strippers is pumping high water cut oil from those depths. Typically not much downhole problems…just crappy economics at current prices.
rockman on Mon, 9th Feb 2015 6:45 am
“don’t STRAY from the topic”
marmico on Mon, 9th Feb 2015 6:57 am
“don’t STRAY from the topic”
I’m not. You are. You don’t know the difference between IOC depletion rates and a widget inventory draw.
shallow sand on Mon, 9th Feb 2015 7:12 am
If there is a lot of produced water they will need to develop a water disposal system on the lease. Truck hauling water really hurts the economics.
I’m not talking about down hole issues now. I’m looking 10-20 years down the road. Would hope new wells would not have issues now. What I am getting at is there will be a large number of 20,000′ stripper wells. How do you work over one of those without breaking the bank? Heck what does it cost just to repair a tubing hole on one of those? Looks to me if they produce a lot of water there are going to be mechanical failures.
marmico on Mon, 9th Feb 2015 7:50 am
Join us in rejecting the lies
No can do. Neo-Malthusians have been worshipping at the alter of a false prophet for 200+ years. That’s why FRED matters more than epochal paradigm shifts (whatever that means).
When it comes to oil, depletion rusts and reserves grow. In 2013 BP says 50 years of rust divided by reserves. In 1980 the rust reserves ratio was 30 years. That time frame may fairly describe your shift from an MBA student to a prepper. Who is lying?
shortonoil on Mon, 9th Feb 2015 8:34 am
Focusing on the amount of BARRELS is dellusive.
What matter is how many net energy people can get.
There is a barrel glut.
There is an energy per capita shortage.
1.2 mb/d, or 37% of LTO production has an API greater than 50. Crude with an API greater than 50 is not converted into transportation fuels. It is used as a feedstock, and as such does not supply energy to the petroleum energy system. It does, however, require energy to extract, and process it. LTO is a liquid hydrocarbon that does not power the economy.
Nothing moves without using energy, and that includes an economy. When 3 1/2% of the world’s hydrocarbon production does not contribute to that economy, it becomes a dead weight to it. It slows it down, with the result that there is a surplus of liquid hydrocarbons. These are barrels of oil, but it is oil that the economy can not use. The world does not need barrels of oil, it needs barrels of oil that can power its economy.
The world is now collecting more, and more oil, but much of it is oil that it can not use. Unless this trend can be reversed prices will continue downward. The surplus of barrels that now exists will continue unless they are replaced with barrels that the economy can put to use.
http://www.thehillsgroup.org/
marmico on Mon, 9th Feb 2015 9:26 am
There is an energy per capita shortage.
Not for the last 35 years when it comes to petroleum.
And U.S. condensate blended with heavy oil is just copacetic for inputs to U.S. refineries.
OFT on Mon, 9th Feb 2015 10:18 am
Seems like there is scope for a timely piece here on the business models of the IOCs in today’s constrained markets. This is not that piece, but…
Rockman is correct. IOCs can’t get ‘no satisfaction’ from US shale oils. Elsewhere in the world shale oil production has so far proved a dud. Australia? (no points, mate.) Poland/Europe (zip.) Russia – huge potential in the Bazenhov Shale, but even bigger obstacles in geography and build-up of required drilling infrastructure (niet).
IOCs need big-ticket investments to pay off (100-500k bbl/day increases, or new production please, answers in an envelope) to meet shareholder expectations and executive bonus schemes. Think offshore Africa and S America. Or anywhere to be honest, where the National Oil Companies (NOCs) will give them half-a-chance to secure licence blocks, with reasonable terms on production sharing profits, and a modicum of long-term security for political and fiscal stability, to ensure some investment return on the huge up-front capital investments that are needed.
If they can’t find these then what to do? You could cut back on CAPEX, or sell some assets…, that’ll see the shareholders good for another year, and secure a decent 2015 bonus for the board. Job one.
Ralph on Mon, 9th Feb 2015 10:34 am
Chinese imports of commodities are down 19% yoy. There is your oil (coal iron ore copper etc) glut in one sentence.
I have no idea what the near term future holds, but right now China is the key to the global economy.
bobinget on Mon, 9th Feb 2015 11:47 am
Ralph,
For a number of reasons, data for ‘Chinese commodities’ is less then transparent.
Unannounced transfers form sanctioned Iran can be sited, for example.
Here’s a fairly comprehensive list of MAJOR commodities widely traded. (water, electricity, uranium, not listed)
http://finviz.com/futures.ashx
Can anyone demonstrate techniques for mining, growing, transporting, delivering ANY bulk commodity listed without fossil fuel energy?
No while almost every commodity made great strides in collection, growing efficiencies, communication, without ample supplies of water and fossil fuels modern life, to which we have grown accustomed, would be impossible.
When we gradually entered the ‘gas-age’ will be debated.