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Page added on August 14, 2018
After Billions in Blowouts, Mega Oil and Gas Projects Are Back
Investors are about to find out whether the world’s largest oil companies have learned their lesson from $80 billion of cost blowouts in major projects during the era of $100 crude.
From liquefied natural gas in Mozambique to deep-oil in Guyana, the world’s biggest energy companies are gearing up to sanction the first slate of mega-projects since the price crash in 2014, Wood Mackenzie Ltd. analysts including Angus Rodger said in a report. Firms will approve about $300 billion in spending on such ventures in 2019 and 2020, more than in the three years from 2015 to 2017 combined.
That spree will provide the first real test to the capital discipline that energy companies have vowed they adopted after oil’s collapse, when they downsized their ambitions and began to complete projects on time and below budget. Before the crash, the 15 biggest oil and gas projects combined went $80 billion over budget, eating away at investor returns, Rodger said.
“Oil companies have improved their delivery in small projects, but can they do it with bigger ones?” Rodger said in a phone interview from Singapore. “There’s massive upside on the table if they can show sustained success with capital discipline as oil prices rise. They could deliver the best returns in a decade.”
Cost Overshoot
Several years of oil prices in the $100s at the start of this decade emboldened companies to take on massive, complicated projects to extract as much of the valuable oil and gas as they could, Rodger said. That spurred developments like Chevron Corp.’s Gorgon LNG project on the remote Barrow Island in western Australia, where costs ballooned from an initial expected $37 billion to $54 billion.
Cost overruns on projects sanctioned from 2008 to 2014 diluted returns to 12 percent on average, compared with an expected 19 percent at the time of investment, according to Wood Mackenzie.
“Oil companies already had a history of bad project management, and then adding $100 oil to that was like pouring gasoline on a fire,” Rodger said. “Costs got out of control.”
Those weak returns and plummeting oil prices that began in 2014 forced energy companies to rethink the way they spend. They started targeting smaller fields or expansions of existing projects that were cheaper and could be finished quicker. Fields sanctioned since 2014 have on average been delivered ahead of schedule and under budget, Wood Mackenzie said.
Scaling Up
While the dearth of mega projects has helped energy prices recover, with oil and LNG returning to the highest levels since 2014 earlier this year, large investments are again needed, Rodger said. What’s uncertain is whether the cost discipline energy companies enforced on smaller projects could be replicated on a much bigger scale.
For example, oilfield service providers like Halliburton Co. and Schlumberger Ltd. shrunk their workforce during the downturn, leaving only the best roughnecks to work on projects. It remains to be seen if such companies will be able to deliver as efficiently as they scale up to handle new projects, Rodger said.
Oil companies will also have to avoid the temptation from rising oil and gas prices to expand the scope of projects in order to maximize production, Rodger said. Benchmark crude Brent was trading up 0.7 percent at $73.13 a barrel as of 9:09 a.m. London on Tuesday, about 44 percent higher than a year ago.
“Will they live with a lean approach and leave value in the ground, or as prices rise will they want to return to big projects,” he said. “If they feel the latter way, we could see the same mistakes again.”
46 Comments on "After Billions in Blowouts, Mega Oil and Gas Projects Are Back"
Cloggie on Wed, 15th Aug 2018 5:17 am
Heinberg was right about the low-hanging fruit, but he had no idea how much high-hanging fruit there actually is. And all it takes is a higher ladder (=technology) to actually pick it.
Duh.
#ThirdCarbonAge
print baby print on Wed, 15th Aug 2018 6:23 am
good luck . I hope on some new Gawars
Antius on Wed, 15th Aug 2018 6:49 am
“Heinberg was right about the low-hanging fruit, but he had no idea how much high-hanging fruit there actually is. And all it takes is a higher ladder (=technology) to actually pick it.”
Highly questionable. Technology can extend our reach in terms of accessible resources. But it is far less effective at improving the net energy balance (i.e. EROI). Deepwater drilling is a good example, as is tight oil. Technology is basically another word for engineering complexity. It is not a magic wand that turns lead into gold.
But I think you are basically correct that the world is not running out of fossil fuel as such. The problem is that most of what remains is lower grade. We need to figure out ways of reducing the amount of fossil fuel consumed per unit of wealth produced. One way of doing that is with renewable energy with backup. Hybrid cars are another example.
makati1 on Wed, 15th Aug 2018 7:14 am
Antius, as you said, net energy from petroleum is going down. The window for oil prices is narrowing. Too high and the demand collapse’. Too low and the producers go bankrupt. All that has kept the system going is a huge and growing debt on all sides.
As for ‘renewables’, they do not really exist. ALL ‘renewables’ require petroleum energy in some form during construction, fueling and maintenance. When oil goes, so goes all of the ‘renewables’ as they wear out or are unable to get recharged.
Davy on Wed, 15th Aug 2018 7:27 am
“But I think you are basically correct that the world is not running out of fossil fuel as such. The problem is that most of what remains is lower grade. We need to figure out ways of reducing the amount of fossil fuel consumed per unit of wealth produced. One way of doing that is with renewable energy with backup. Hybrid cars are another example.”
I would put a time frame on it and a required behavior behind it. We better get to with changing our behavior and quick. Living with lower net energy requires different living arrangements. It is not clear if our system can live differently. If we do embrace lower net energy strategies and adapted behavior it may not produce enough economic activity to allow a transformation of our system to renewables and conservation. What this means is embracing renewables and personal behavior changes may bring down the system if we embrace them too quick. It is not at all clear how much destructive change we can handle. How much change can be constructive and how much can be destructive/constructive? These are questions that do not have an answer. We will have to wade through the swamp as best we can. My opinion is we have to try and the only way to try is to change behavior and embrace renewables. We need to realize we cannot leave fossil fuels without a collapse. We cannot leave NUK power because it is too big a component. What we have to do is like any terminal illness and that is maintenance of our decline down and hope we can make our situation less dire. This is a planetary gradient that will not be altered. We are going down and so is the planet. We can make that gradient less steep by behavior and the proper employment of technology.
Antius on Wed, 15th Aug 2018 7:04 pm
Superb article on the use of renewable energy to create compressed air.
http://www.lowtechmagazine.com/2018/05/history-and-future-of-the-compressed-air-economy.html
By using a wind turbine to directly generate compressed air instead of electricity and directly converting the compressed air to mechanical power; the efficiency of compressed air energy storage is increased and total costs are reduced.
Cloggie on Wed, 15th Aug 2018 11:10 pm
Compressed air is an important part of the EU renewable energy program (RICAS):
https://deepresource.wordpress.com/2017/04/08/ricas-2020-compressed-air-storage/
MASTERMIND on Wed, 15th Aug 2018 11:21 pm
Clogg
.
Limits to growth had 12 models. One of those models, the “standard run” or, alternatively, the “business as usual” model was the one that 30 years of historical data tracked/followed. And according to that model the global economy will collapse by 2030.
Scientific American: Apocalypse Soon: Has Civilization Passed the Environmental Point of No Return?
https://www.scientificamerican.com/article/apocalypse-soon-has-civilization-passed-the-environmental-point-of-no-return/
Peer Reviewed Study: Limits to Growth was Right. Research Shows We’re Nearing Global Collapse (Turner, 2014)
https://www.scribd.com/document/379418787/Is-Global-Collapse-Imminent-An-Updated-Comparison-of-The-Limits-to-Growth-with-Historical-Data-Turner-2014
Looking Back on the Limits of Growth – Smithsonian
https://www.smithsonianmag.com/science-nature/looking-back-on-the-limits-of-growth-125269840/
.https://imgur.com/a/ZUUkN4c
MASTERMIND on Wed, 15th Aug 2018 11:25 pm
Clogg
Give it up already..We both know there is no such thing as renewable s, its just marketing..And they aren’t efficient enough to run industrial civilization..
Bellinghamster on Thu, 16th Aug 2018 11:26 am
So, did industrial output per capita collapse in 2015 per the standard run? Or did tight oil push the timeline further out?
Perhaps the unfortunate cratering of Venezuela and reducing various places to smoking ruins indicates that the standard run is on schedule, but it’s more granular than those 40 year old computer simulations predicted. It’s looking like different places have different rates.
Abstract from Turner 2014
The Limits to Growth
“standard run” (or business-as-usual, BAU) scenario produced about forty years ago aligns well with historical data that has been updated in this paper. The BAU scenario results in collapse of the global economy and environment (where standards of living fall at rates faster than they have historically risen due to disruption of normal economic functions), subsequently forcing population down. Although the modelled fall in population occurs after about 2030—with death
rates rising from 2020 onward, reversing contemporary trends—the general onset of collapse rst
appears at about 2015 when per capita industrial output begins a sharp decline. Given this imminent
timing, a further issue this paper raises is whether the current economic difculties of the global nancial crisis are potentially related to mechanisms of breakdown in the
Limits to Growth
BAU scenario. In particular, contemporary peak oil issues and analysis of net energy, or energy return on (energy) invested, support the
Limits to Growth
modelling of resource constraints underlying the collapse
Davy on Thu, 16th Aug 2018 1:24 pm
“Virtually Everybody Knew This Was Coming”
https://tinyurl.com/y9j9kxtl
“Was it Turkey’s “executive presidency” and its unwillingness to hike rates in the face of soaring inflation? Or maybe the record global debt accumulated over the past decade? Maybe the artificially low interest rates? Or perhaps it was the pervasive current account deficits amid easy outside capital. How about the rapid slowdown in China, its escalating trade war with the US, and the Yuan devaluation? Or perhaps it’s just the rising US interest rates and global quantitative tightening soaking up billions in excess liquidity? However one justifies the current emerging market crisis, one thing is clear “virtually everybody knew this was coming.”
“Many commentators have thought for some time that Turkey was a macro-accident waiting to happen. But the key issue is not Turkey’s idiosyncratic macro problems. The unfolding crisis in EM is the direct result of Fed tightening and the strong dollar. The Fed always raises rates until something breaks. But Turkey breaking will not be enough to derail this Fed’s tightening mission. But what is the significance of China’s ongoing devaluation in the face of rapidly weakening growth and trade tensions? Is that also playing a role in draining global liquidity from the financial markets?”
“To be sure, it’s hardly rocket science to blame convulsing emerging markets on Fed policy, US interest rates, and a strong dollar. What else can there be, or as Edwards asks, “apart from Turkey-specific issues, has there been anything else that has triggered the immediate EM crisis that we should be watching closely?” The answer to that is yes, China.”
“Which bring us to the conclusion, and the question which Edwards believes no-one is asking: is the entire house of Emerging Market cards about to topple, and is China – the dynamo behind the world’s EM (and DM) growth – losing control of its economy and using the RMB as a cushion? “No-one is asking this question because we have got so used to the China naysayers (such as myself) being wrong that we dismiss their worries out of hand nowadays”, Edwards surmises. And in the very next sentence, he leave with some ominous words: “that is the same complacency that we saw during the run-up to the 2007 financial crisis and indeed in the run-up to the current Turkish crisis, which also defied the bears for so long until now.”
GregT on Thu, 16th Aug 2018 2:05 pm
What does yet another self admitted ‘China naysayer’ article, cut and pasted from TheHedge™ (a site identified as being a spreader of Russian clickbait disinformation), in any way have to do with the above article:
“After Billions in Blowouts, Mega Oil and Gas Projects Are Back”
?????
Davy on Thu, 16th Aug 2018 2:53 pm
greggie must be pissed, he can’t get enough of trolling me. LMFAO. greggie you look stupid when you lose your shit. BTW, look at the comment above mine and go from there, troll. Try building on your comment from earlier instead of multiple troll comments. I thought there was hope for you but it appears you can’t control your emotions.
GregT on Thu, 16th Aug 2018 3:06 pm
“greggie must be pissed, he can’t get enough of trolling me. LMFAO.”
Not at all. Amused actually, that the self appointed moderator of an unmoderated internet forum (LOL) is still focussed on self admitted Chinese naysayer articles, when the topic of discussion was energy, and more specifically, energy from oil and gas.
Davy on Thu, 16th Aug 2018 3:57 pm
Translation: grehgster does not understand the article and the thread the article was part of so he turns to trolling noises. Greggie, did make a comment today and did reference an article. This was a big start for the troll. Yet, he is back to his old ways of trolling and gumming up the board. He can’t help it he is obsessive compulsive and a liar.
MASTERMIND on Thu, 16th Aug 2018 4:01 pm
21st Century NNR Scarcity – Blip or Paradigm Shift (Clugston 2013)
The “Squeeze” is On
Picture a vise tightening around the collective skulls of humanity in a relentless, remorseless “squeeze”. The handle of the vise turns at only 1/1000th of a revolution per day, which causes incremental pain that is almost imperceptible on a day-to-day basis. Over a period of 10 years, however, the vise handle makes 3+ complete revolutions; over 20 years, 7+ revolutions; and over 30 years, 10+ revolutions. While nobody can predict the timing with certainty, somewhere along the way humanity will crack…
The sad irony is that through our unsustainable natural resource utilization behavior – i.e., our continuous utilization of enormous quantities of finite, non-replenishing, and increasingly scarce NNRs – it is we ourselves who are turning the handle!
The saddest irony is that we have no choice – in order to perpetuate our industrialized existence, we must persist in our unsustainable natural resource utilization behavior, thereby continuing to turn the handle!!
We are the hapless perpetrators of our own demise…
Increasingly Scarce and Expensive NNR Inputs > Slowing Economic (GDP) Growth > Moderating Material Living Standard (Per Capita GDP) Improvement
And as we “roll over”
Permanently Scarce and Prohibitively Expensive NNR Inputs > Economic Collapse > Global Societal Collapse
https://www.scribd.com/document/386142927/21st-Century-NNR-Scarcity-Blip-or-Paradigm-Shift-FINAL
https://imgur.com/a/gVGtwI3
JuanP on Thu, 16th Aug 2018 4:32 pm
Delusional Davy “He can’t help it he is obsessive compulsive and a liar.”
I have never met a farmer that had so much time to waste. I go do something, I come back, and Davy is here. Every. Single. Time. Farmer my ass. I think Davy is nothing more than a pathetic basement dweller. There is no way this fucker is running a farm. That must be another one of his lies! LOL! LIAR!
MASTERMIND on Thu, 16th Aug 2018 4:42 pm
U.S. Life Expectancy Drops, Now Lowest Among High-Income Countries, New Study Finds
https://ktla.com/2018/08/16/u-s-life-expectancy-drops-now-lowest-among-high-income-countries-new-study-finds/?
Davy on Thu, 16th Aug 2018 4:48 pm
Phony Juan, I am twice as efficient as you. I work all day and everyday. I enjoy being here. Breaks up the day. I think you are whining because I am so much more capable than you. Sorry, next time stay in school.
JuanP on Thu, 16th Aug 2018 5:10 pm
Delusional Davy “Phony Juan, I am twice as efficient as you. I work all day and everyday.”
More BS lies from the board’s biggest liar and denialist. LOL! You are so fucking pathetic it is really, really hard to believe.
MASTERMIND on Thu, 16th Aug 2018 5:22 pm
Why are protesters dressing like The Handmaid’s Tale in Argentina?
https://www.theguardian.com/world/video/2018/aug/03/why-are-protesters-dressing-like-the-handmaids-tale-explainer
Davy on Thu, 16th Aug 2018 5:31 pm
Phony Juan, another thing, I live local. You spend too much time on the road so you can live you playboy life at the beach. Miami Beach is environmentally disgusting but you still want to live there.
makati1 on Thu, 16th Aug 2018 6:27 pm
Davy doesn’t seem to realize that everything he posts about someone else here is a prefect description of himself. That is why I quit reading his bullshit. His cutesy names and other immature accusations speak loudly of his mental state. Chaos.
JuanP on Thu, 16th Aug 2018 6:28 pm
Delusional Davy “Phony Juan, another thing, I live local. You spend too much time on the road so you can live you playboy life at the beach. Miami Beach is environmentally disgusting but you still want to live there.”
I actually drive very little Davy, and my wife and I share a car. I don’t like driving and I never did. Last year my wife and I put around 6,000 miles in our car between both of us. My wife walks to her office. I deeply dislike ICE, too. When I drive it is to help others or to go to farms, nurseries, and community gardens to grow organic food and teach others how to do it. I walk to the beach, the supermarket, the post office, the pharmacy, and restaurants, and ride the elevator to the the gym and pool. I enjoy my life in Miami Beach and moving elsewhere wouldn’t change anything, so why would I move. Living in urban areas is more resource efficient than living in rural areas in a country like the USA, and I know that you are aware of it.
Davy on Thu, 16th Aug 2018 6:31 pm
Now slip slidin joins the fray. LOL. Slip slidin come out of his little dog house when his gang members are here to protect him otherwise slip slidin is afraid to go out. LMFAO
JuanP on Thu, 16th Aug 2018 6:32 pm
Mak “Davy doesn’t seem to realize that everything he posts about someone else here is a prefect description of himself.”
I completely agree, Mak! I have never met anyone who projected more than the Exceptionalist. He really must not be aware of how much his comments betray his nature. If he understood what he looks like he would obviously stop. It’s absolutely amazing how fucked up his mind is. LOL!
Davy on Thu, 16th Aug 2018 6:33 pm
playboy, your life is an example of a stuck up snob who lives the high life on the backs of others. Leave our country. We don’t want people like you here. Miami Beach is an example of the worst of what modern life has created.
JuanP on Thu, 16th Aug 2018 6:34 pm
Delusional Davy “Slip slidin come out of his little dog house when his gang members are here to protect him otherwise slip slidin is afraid to go out.”
More lies from the board’s biggest liar. Mak took you on for years on his own, Exceptionalist. He never needed anyone to back him up. He could always handle you all by his lonesome.
Davy on Thu, 16th Aug 2018 6:35 pm
More stuttering noises from the senile old man and his playboy. Why don’t you two troll debate some of my comments? Your trolling is so boring. It is the same shit just another day
Davy on Thu, 16th Aug 2018 6:37 pm
slip slidin hides like a coward until you are greggie come out to run cover for him.
JuanP on Thu, 16th Aug 2018 6:38 pm
Delusional Davy “Leave our country. We don’t want people like you here.”
When I choose to leave, which I will do at some point, I won’t even tell you just to keep fucking with you because it is so much fun.
I want to warn the US government that Davy is a deranged sociopath and a danger to society and should be investigated by law enforcement agencies. He should be institutionalized to protect the American people from this potential terrorist.
JuanP on Thu, 16th Aug 2018 6:43 pm
Delusional Davy “Why don’t you two troll debate some of my comments? Your trolling is so boring. It is the same shit just another day.”
What comments are you talking about? You’ve posted nothing but insults and lies for hours! Besides, that is not what I am here for; I am here to fuck with your mind. My trolling may be boring to you, and undoubtedly annoying to others, but it is a lot of fun to me. I am really enjoying fucking with you. There are few things I like more than bullying bullies.
Davy on Thu, 16th Aug 2018 6:43 pm
phoney juan, you realize you can’t hate Americans and spread anti-Americanism then claim you have every right to be here. You don’t you ugly asswipe. You are a guest here. If you want to become a citizen and hate us that is a different story. Right now you are an asshole resident alien non-gratis. You are sucking wealth out of us and we don’t like it. People like you represent the worst of what immigration has become. Stuck up asswipes who come here and think this is their country. Get the hell out of my country cunt
JuanP on Thu, 16th Aug 2018 6:47 pm
You have completely lost it, fool. Mission accomplished! Time for a break. I am going out to a restaurant to have dinner with friends. I will walk a whole block to get there! I will be back to fuck with you some more in a couple of hours! ROFLMFAO!
Davy on Thu, 16th Aug 2018 6:47 pm
“My trolling may be boring to you, and undoubtedly annoying to others, but it is a lot of fun to me.”
Exactly phony juan and this is how you are ruining this board. You could give a shit about others. It is all about you and the fun you are having. You are a total cunt.
GregT on Thu, 16th Aug 2018 6:56 pm
“Get the hell out of my country cunt”
What a seriously deranged nutcase. Get help.
Davy on Thu, 16th Aug 2018 6:59 pm
greggie, takes it and is running. LMFAO. Like I said this is a gang affair. These cunts want to own the board. Greggie, debate something and quit your trolling. The board is sick and tired of it. Debating is not trolling.
fmr-paultard on Thu, 16th Aug 2018 7:07 pm
bony juan the tard, lover of humanity and so is aswang. fake fake
please stop bothering supertard and go back to s america
MASTERMIND on Thu, 16th Aug 2018 7:42 pm
Will you guys please talk about the articles posted or post an article of your own to create discussion..
Talking trash all day long to people you don’t know and will never met is meaningless..
MASTERMIND on Thu, 16th Aug 2018 7:52 pm
Trump has increased the number of troops in Afghanistan..He has dropped the mother of all bombs..He has attacked Syria twice..He has cut the taxes for all the war industry..And has increased the military budget..And now wants to add another branch to the military “space force”..And wants to throw a military parade..
And his supporters think he is fighting the deep state?
He is the greatest dream come true to the deep state..
MASTERMIND on Thu, 16th Aug 2018 7:53 pm
All-Time Low Spare Capacity Could Send Oil To $150
According to Pierre Andurand, who manages the US$1.2-billion Andurand Commodities Fund, the world’s spare capacity is at its lowest ever, and this will be a real issue with global oil supply.
Replying to one of President Trump’s tweets blaming OPEC for the “too high” oil prices, Andurand said in mid-June that “OPEC has the lowest spare capacity ever right now. There is going to be a real issue. Prices will be above $150 in less than 2 years.
https://oilprice.com/Energy/Energy-General/All-Time-Low-Spare-Capacity-Could-Send-Oil-To-150.html
makati1 on Thu, 16th Aug 2018 8:17 pm
MM, most of the oily articles here are boring and repetitive. All they are are money makers for their authors, not real news.
They are guesses about the price of oil next week/year and/or how many barrels are left and where. Not relevant to today’s problem of climate change and the failing financial system of the West.
Only oily investors/suckers could have any interest in those guesses. When the financial system finally crashes, so will all of the oily projections. None of the authors even hint at that dinosaur in the room because it would show that their guesses are pure fiction.
JuanP on Thu, 16th Aug 2018 9:56 pm
Delusional Davy “Exactly phony juan and this is how you are ruining this board. You could give a shit about others.”
You are projecting again, Exceptionalist! LOL!
JuanP on Thu, 16th Aug 2018 9:58 pm
Fmr “bony juan the tard, lover of humanity and so is aswang. fake fake
please stop bothering supertard and go back to s america”
I see that the Exceptionalist has been reduced to using sock puppets again! What a sad fuck!
JuanP on Thu, 16th Aug 2018 10:10 pm
Delusional Davy “phoney juan, you realize you can’t hate Americans and spread anti-Americanism then claim you have every right to be here. You don’t you ugly asswipe. You are a guest here. If you want to become a citizen and hate us that is a different story. ”
I don’t hate Americans, fool, not even you. You are a pathetic, sad fuck so I pity you and I also dislike you because you are a despicable person, but I don’t hate you or the USA. But, even if I did I would still have the right to live here. Not hating the USA is NOT a requirement to have the right to live here, moron. And, why on Earth would I want to become an American? There is no good reason for a person like me to become a US citizen, fool; as a legal resident alien I enjoy all the same rights and privileges that US citizens do, except the right to vote, which I am not interested in doing because I don’t believe in democracy, and there are several disadvantages to becoming a US citizen, particularly having to pay taxes to the US government on the income I generate abroad, on which I don’t pay taxes at this time.
Anonymous on Sun, 19th Aug 2018 12:45 pm
I think I am the only one commenting on the article.
I do agree that both oil and LNG projects are picking up a bit but for different reasons. Oil price is up from demand and from OPEC action. LNG is up from China demand. But even with indexed pricing they really are different commodities with different drivers.
In both cases also costs have come down because of pressure on the service industry. But for LNG also differences in where to do projects. And really for all the talk we are still waiting for the next big lng fid. But oil projects are moving forward.