[AirlinePilot]

Drilling of oil and gas wells is expected to plunge 41% in Canada in 2009


The number of new oil and gas wells to be drilled in Canada will drop by 41% to 10,000 this year as low prices and capital worries hammer the country's
oilfield service sector, an industry association forecast yesterday. Drilling activity has plunged to the lowest level since 1999 as weak commodity prices
convince oil and gas companies to husband their cash and restrain exploration budgets until higher prices return, the Petroleum Services Association of
Canada said. The new estimate is down from an earlier forecast for 2009, issued in January, when the association estimated that 13,500 wells would be drilled, itself a big drop from the 16,940 wells completed last year. "Demand is down, commodity prices are low, and access to capital is limited, which, in addition to other factors, has caused exploration and production companies to significantly pull back their spending," said Roger Soucy, PSAC's president.

http://www.nationalpost.com/todays-pape ... id=1551349

[copious.abundance]

AP, you seem to believe the credit crunch will go on forever, or at least for a very, very long time. Good luck in holding on to that belief as time passes.

[AirlinePilot]

The fundamentals of our banking and monetary system will become far more conservative and tight than they are today. It will be brought on by a matter of necessity due to overspending and our inability to grow as we have in the past. You believe what you want, i'll sick with the math and reality.

You cant go on forever creating bubbles and destroying wealth which was created by lies and Ponzi schemes. We're going to try really hard to though. That will result in drastic changes when it becomes painfully evident that it wont be possible. Long term change will likely be positive but getting there is going to take time and a lot of pain.

[copious.abundance]

I agree the lending institutions will become more conservative than they were before, at least for the next 5-10 years. The question is, whether or not this will apply to the oil and gas industry, and/or to what extent. If demand for oil and gas increases, the price goes up, and it becomes a more profitable industry again, then lending institutions will be eager to extend the industry credit. On the other hand, if demand for oil and gas remains weak over this time period, inventories remain high and prices tank, then lending institutions will not be so willing to extend credit to the industry - but it won't matter because there will be plentiful supplies.

One way or another the credit markets will respond to industry market conditions.

[copious.abundance]

pstarr, you obviously didn't realize it but even your #3 describes a scenario in which the credit markets also respond correctly to market conditions!

If demand will be "dead as a door nail" due to rising prices and peaking production, then yes, the credit markets would be correct in not extending much credit to the industry because it will be a dying one!



Of course, if this went on long enough the price would eventually crash, but I don't suppose you learned anything from last summer.

[copious.abundance]

$this->bbcode_second_pass_quote('pstarr', 'T')hat third scenario has a name. It is called Stagflation and the last time it occurred was for a good and similar reason: Post USA-Peak

[copious.abundance]

How can "the market can not and does not respond?" You even said it did when you said this:
$this->bbcode_second_pass_quote('pstarr', 'S')cenario 3) On the other hand, if demand for oil and gas remains weak over this time period, inventories decline (due to Peak) and prices increase, then lending institutions will not be so willing to extend credit to the industry - but it won't matter because demand will be dead as a door nail.

[AirlinePilot]

How does your market work when demand is falling but YOY decline outpaces it? What is the outcome of large price spikes and dips due to global social disruption and resource(production) problems in producing countries?

My scenario is one in which over the longer term price continues to increase due to decline outpacing the demand drops. This situation makes the current problem with lending even worse as wealth continues to be destroyed. No growth means we cant reinflate the credit bubble. Credit will be a problem for the industry as long as oil prices remain unpredictable and or volatile. This is for me the more plausible scenario as we move past peak. Without drastic action towards conservation/rationing and very aggressive moves towards transport replacement fuels I see this as the outcome. We are already years behind the eight ball in accomplishing that. It will not happen quickly.

$this->bbcode_second_pass_quote('', 'H')ow does your market work when demand is falling but YOY decline outpaces it?

[copious.abundance]

Sometimes you get end-of-credit-crunch tidbits in company quarterly statements:

>>> EOG Resources Reports First Quarter 2009 Results <<<
$this->bbcode_second_pass_quote('', '[')...]

"Based on economic investments at current crude oil and natural gas prices, we are increasing our total 2009 production growth target to 5.5 percent, all organic. EOG is positioned to achieve total company liquids growth of 22 percent, to approximately 75,000 barrels per day in 2009. The majority of the increases will come from U.S. crude oil and natural gas liquids production during the second half of the year," said Mark G. Papa, Chairman and CEO. "With this momentum, we are targeting total liquids growth of 20 percent, to roughly 90,000 barrels per day in 2010."

EOG plans to resume full crude oil production in the North Dakota Bakken Parshall Field by July. The completion of wells drilled during EOG's winter program also is expected to commence early in the second half of 2009. To transport its Bakken crude oil production closer to markets, EOG is moving forward with a project that would utilize rail to move volumes from North Dakota to a terminal in Oklahoma by early 2010.

[...]

Now that oil is around $57-$58 looks like we're gonna see production come from some areas that had been put on hold. Assuming this price holds, of course.

For example, Whiting Petroleum has some large leases in a non-core area of the Bakken (they're calling it the Lewis & Clark play) that they've been waiting to go into until the price of oil got high enough.

>>> Whiting Petroleum Corporation, Q1 2009 Earnings Call Transcript - Seeking Alpha <<<
$this->bbcode_second_pass_quote('', '[')...]

We are in I can simply say that I believe that the Lewis and Clark area where Whiting has about 280 square miles under lease and we have 181,000 gross acres here. And where we have drilled one well in the Three Forks that came in at 1,000 barrels a day, another one didn’t quite that well because we drilled it out of a essentially well with lower casing, with smaller casing, so we couldn’t frac it as well. But nevertheless I believe that we are getting close to what I would call the solution number six here and that as I mean drilling grass roots wells here at about 6 million bucks per well and getting at least 600,000 BOEs per well, that is if we can achieve that I believe we’ll be in the range here roughly a solid three to one on our money at well prices assuming we can basically get a net here in the Bakken in this particular, Three Forks in this particular area of around $50 at the wellhead. And therefore about, so that would require let's say about $57, $58 NYMEX, so we're close here.

[...]

[AirlinePilot]

http://www.arabianbusiness.com/555024-s ... nergy-plan


Saudi Arabia’s five year energy plan has been revised and spending cuts introduced as a result of a fall in oil prices, it emerged on Saturday.

According to Middle East Economic Survey (MEES) the kingdom has put several of its energy projects on hold, including the offshore Hasbah natural-gas field and a gas-to- liquids facility at Shaybah.

[copious.abundance]

$this->bbcode_second_pass_quote('AirlinePilot', 'R')ock,

I agree, but Im just trying to post the links to the pieces which I think have some merit.

Here is another, although I think Phil Flynn is an idiot also, he does appear to see what I am seeing. There is a huge headwind in delayed projects and spending developing right now which is going to have serious implications the minute the economy is PERCIEVED to be coming back.

Potential supply crunch.....

http://www.reuters.com/article/GCA-Oil/ ... 7L20090212

[copious.abundance]

$this->bbcode_second_pass_quote('AirlinePilot', 'I') find more good news every day!
link and link

“Both the mothballing of this site’s facilities and the possible complete removal of assets from this site are being studied,” the report said. Reserves for the site were “debooked” from the end of last year.

[copious.abundance]

>>> LINK <<<
$this->bbcode_second_pass_quote('', '[')b]ExxonMobil And Hess Win Oil, Gas Exploration Licenses In Eastern Indonesia
Published:05-May-2009
By Staff Reporter

Exxon Mobil Corporation (ExxonMobil) and Hess Corporation (Hess) have received new oil and gas exploration licenses in eastern Indonesia and pledged a total investment of $66 million over the next three years. ExxonMobil won the licenses to drill the Cendrawasih block off Papua with partner Biak Petroleum. Both the company will invest $40 million over the first three years. Hess won exploration rights in the South Sesulu block off Kalimantan.

Hess is committed to invest $26 million in the South Sesulu block off Kalimantan during the first three year.

ExxonMobil and Hess were among the winners of 11 new oil and gas blocks announced by the Energy and Mineral Resources Ministry last week, reported.

The government of Indonesia expects to draw in total investment of $189 million into these 11 blocks, the ministry’s director general for oil and gas Evita H. Legowo said.

Legowo said the investment for the first three years exploration would be for geological and geophysical studies, seismic surveys and drilling of exploration wells.

[...]

[copious.abundance]

They've started construction of a new portion of the Keystone Pipeline.

>>> LINK <<<
$this->bbcode_second_pass_quote('', '[')b]Yankton Area Welcomes TransCanada Project Workers
Pipeline Officials Have Groundbreaking Ceremony
By Nathan Johnson
Published: Thursday, May 7, 2009 10:58 PM CDT

Officials with the TransCanada Keystone Pipeline project took the opportunity Thursday to praise the welcoming hand the Yankton area has extended to them.

“I thought southern hospitality was only south of the Mason-Dixon Line, but this is really, really nice and we appreciate it very much,” said Tommie Hardwicke with a thick Oklahoma accent.

The more than 50-year veteran of pipeline construction is a project superintendent for Price Gregory, the contractor for the local spread of pipeline that will be laid from Hutchinson County to Colfax County, Neb., this year.

Pipeline officials were in Yankton Thursday for a groundbreaking ceremony held behind the Yankton Area Chamber of Commerce building along Highway 50. With heavy equipment that will be used on the pipeline project looming in the background, various pipeline and local government officials planted shovels in the ground during the event.

[...]

“We’re in the process of developing one of the first major continental crude oil pipelines to be built in quite some time. This new pipeline will open up new sources of Canadian crude oil to markets across the Midwest,” he said. “It is very exciting for TransCanada to be part of such an important project that will change the landscape and dynamics of the North American energy industry over the long term. We are connecting a safe, secure supply of Canadian crude oil to one of the world’s largest sources of demand in the United States.”

The 2,148-mile pipeline will carry crude oil from the tar sands of Alberta, Canada, to refineries in Illinois and Oklahoma.

Despite the weak economy, Cowling said the pipeline has no shortage of long-term contracts. If all goes as planned, TransCanada officials say the 30-inch pipeline will be operational by the end of 2009 and carry 590,000 barrels of oil a day by the end of 2010.

[...]