[sparky]

.
It must be pointed out that Pops ( which I do respect hugely )
has given us a chart of the oil majors investment ,
that is true but also misleading ,
The oil majors have been severely elbowed out by the new guys
Petronas , Sinopec ,CNOOC , Rosneft , Petrobras and good old Aramco
it is , now more than ever national companies doing the running

the game has changed and increasingly the majors are used as technical experts
while the oil resources are kept away from them

[ROCKMAN]

Pops - "Oil extraction is a money making business, not an energy making business". Exactly. The oil patch would readily spend twice what they spent last year...if it had the profitable prospects to drill. The banks would be thrilled to finance the effort since they could secure such loans with the value of the existing reserve base. If ExxonMobil needed a $trillion to finance projects the banks would battle each other to make the loan. But XOM doesn't need anyone to bankroll their drilling program...they have more than enough cash on hand to cover what they have to drill. So XOM will do what Big Oil has done for decades to increase it's reserve base: acquire pieces of Little Oil production as fast as possible. Just like the year XOM acquired XTO: that single proved reserve gain represented 80%+ of XOM's total proved reserve increase that year. Also a recent and very interesting story about Shell Oil: their new leadership has declared a shift in emphasis from upstream efforts, such as drilling, to downstream projects like LNG plants. BTW the new top dog with them is a career downstream guy...go figure. LOL.

And why pay premium prices for proven reserves and not focus solely on more profitable efforts? Because IMHO it's the emphasize Wall Street places on increasing a pubco's reserve base y-o-o. Which IMHO also explains in part the boom in the shale plays. Consider how totally these plays are dominated by pubco's compared to private companies. If the shales were really as profitable as some claim why is this so? There are a great many privco's just like mine. We don't give a crap about how Wall Street views our reserve base and they also have no interest in us for the obvious reason. But that isn't to say we wouldn't have spent $500+ million for shale acreage...if we had existed in the early days of the play. If so we might have done the same as Petrohawk. They picked up a lot of leases early on, drilled some wells and sold the company for $14 BILLION to BHP Billion just about 10 YEARS after the company was created. Not bad for a new startup, eh? Who says you can make big money in the shale plays: just sell your position and let someone else drill the wells. LOL. We spend money only were the profit potential satisfies my owner which is why we were involved in $400+ million worth of NG drilling projects when we started. And that's also why we haven't spent $1 on the same projects after NG prices collapsed. We probably would have shut the company down a year ago: why pay the Rockman and his cohorts all that money if we aren't drilling? Fortunately we were able to buy into two major conventional oil drilling joint ventures. We'll begin poking holes this quarter.

Which gets back to Pop's point about making money. But there's a variety of ways to do that. And one time honored methods is to build a pubco's reserve base as big as possible regardless of the profitability, then dump your stock position for big bucks and let the new owner deal with keeping the treadmill running. But THE critical requirement in doing this is to convince Wall Street that you can keep growing your reserve base. But have no fear: Wall Street won't ignore such companies if their treadmill breaks down...lots of money to also be made shorting a company's stock. LOL. Just MHO, of course, but if the US not had our pubco's we would not have seen the surge in oil production. This is one of several reasons why the US has remained the center of the shale development universe.

[Plantagenet]

$this->bbcode_second_pass_quote('ROCKMAN', ' ')If ExxonMobil needed a $trillion to finance projects the banks would battle each other to make the loan. But XOM doesn't need anyone to bankroll their drilling program...they have more than enough cash on hand to cover what they have to drill. So XOM will do what Big Oil has done for decades to increase it's reserve base: acquire pieces of Little Oil production as fast as possible. Just like the year XOM acquired XTO: that single proved reserve gain represented 80%+ of XOM's total proved reserve increase that year.

[AndyA]

$this->bbcode_second_pass_quote('', '3')0 years of stagnation in Japan hasn't been so bad

[AndyA]

$this->bbcode_second_pass_quote('', 'T')he only hope I see is if governments decide energy production is the key to survival and hey pay for production despite the fact that it costs more than it returns. That might happen, but I doubt it would be a long term practice.

[Ron Patterson]

Andya wrote: $this->bbcode_second_pass_quote('', 'P')roven reserves give a reserve production ratio of about 50 years. This is discovered oil that is economic to produce in the current economic conditions.

[dolanbaker]

$this->bbcode_second_pass_quote('AndyA', '')$this->bbcode_second_pass_quote('', 'T')he only hope I see is if governments decide energy production is the key to survival and hey pay for production despite the fact that it costs more than it returns. That might happen, but I doubt it would be a long term practice.

[AndyA]

$this->bbcode_second_pass_quote('', 'S')parky's staircase to hell is the most likely outcome, particularly when you consider that most people will cling on to BAU until they are forced to drop an expensive activity to enable them to afford the more basic essentials (to them) of life. For people in better off countries this is a long staircase, for poorer people of course it's much shorter, but eventually, an ever increasing percentage of the population will end up on the bottom step.

[AndyA]

$this->bbcode_second_pass_quote('', 'J')apan is interesting. Like the US, Japan had the good fortune and inexpensive resources in the past to invest heavily in infrastructure. We are living on legacy oil/industrial wealth.

[AndyA]

$this->bbcode_second_pass_quote('', 'I') believe your point is different regions/cultures/development-levels have different oil-price requirements? Yes, you are correct. A Bangladeshi farmer can make do with one $4.00/gal diesel once per day to pump his farm wells. An American corn farmers can also make do with $4.00, but he needs 100 gals each day. On other other hand, neither an Irish nor an Libyan office worker can stand that price. Oil needs are complex.

[AndyA]

$this->bbcode_second_pass_quote('Ron Patterson', 'A')ndya wrote: $this->bbcode_second_pass_quote('', 'P')roven reserves give a reserve production ratio of about 50 years. This is discovered oil that is economic to produce in the current economic conditions.

[davep]

$this->bbcode_second_pass_quote('AndyA', '')$this->bbcode_second_pass_quote('Ron Patterson', 'A')ndya wrote: $this->bbcode_second_pass_quote('', 'P')roven reserves give a reserve production ratio of about 50 years. This is discovered oil that is economic to produce in the current economic conditions.

[Keith_McClary]

$this->bbcode_second_pass_quote('AndyA', 'I')t's worth noting that the money is still spent, thus GDP is still the same.

[AndyA]

$this->bbcode_second_pass_quote('', 'S')o why say "Proven reserves give a reserve production ratio of about 50 years. This is discovered oil that is economic to produce in the current economic conditions. "?

[Pops]

$this->bbcode_second_pass_quote('sparky', 'T')he oil majors have been severely elbowed out by the new guys
Petronas , Sinopec ,CNOOC , Rosneft , Petrobras and good old Aramco
it is , now more than ever national companies doing the running
the game has changed and increasingly the majors are used as technical experts
while the oil resources are kept away from them

[Plantagenet]

$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('sparky', 'L')uckily a little blip of expensive new oil has come online. I say luckily because it allows folks a little time to change habits - those who get the message that the decline of cheap oil could be much closer than it appears...,.