Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on June 27, 2018
Future of Big Oil Increasingly Shaped by Fate of Global Gas
Big Oil’s fortunes are becoming tied more closely to natural gas than ever before.
Majors including Royal Dutch Shell Plc and BP Plc have boosted their proportion of gas output in recent years, helping them trim Exxon Mobil Corp.’s lead as the world’s most valuable oil company. Meanwhile Chevron Corp. added two giant Australian liquefied natural gas projects and Exxon is punching back with two major projects of its own, in Papua New Guinea and Mozambique.
Natural gas, seen as a clean bridge from coal to renewables, offers the best long-term demand growth among fossil fuels, particularly in its easy-to-transport liquefied form. At the same time, gas exploration comes with high upfront costs and long payback periods. How the majors handle those issues will become key drivers for success moving forward.
“We see the market growing rapidly, with gas demand growing faster than overall energy demand,” said Steve Hill, executive vice president for gas trading at Shell, the world’s biggest LNG producer. “We don’t see renewables as being a threat to gas.”
Industry heavyweights and officials from LNG trading nations — including Qatar, Japan, South Korea and Australia — will discuss global gas dynamics at the World Gas Conference in Washington D.C. starting Tuesday. The meeting is in the U.S. for the first time in 30 years, reflecting America’s shale-prodded gas clout.
Emerging Gap
Liquefied natural gas demand will exceed supply without new projects
Source: Wood Mackenzie Ltd.
Gas emits about half as much carbon dioxide as coal. That means it’s often seen as both a cleaner-burning alternative and a complement to wind and solar since it can produce electricity when the weather doesn’t cooperate. While the global LNG market is likely to be well supplied until 2022, demand will grow by 4 percent to 7 percent annually from 2023 on, according to Bloomberg New Energy Finance.
Growth Path
“In the fossil fuel area, it’s the one clear growth part of the business,” said Brian Youngberg, an analyst at Edward Jones & Co., based in St. Louis, Missouri.
With that growth, there’s a “potential shortage” looming in the mid-2020s that can only be overcome by decisions on new export projects over the next two years, BNEF said in a March report.
Shell’s purchase of BG Group for more than $50 billion in 2016, around the time when oil and gas prices bottomed, was primarily a purchase of gas assets. Shell’s LNG capability is now twice as big as its nearest competitor, according to Edward Jones. It may have helped boost the Anglo-Dutch company’s market value, which is now about $53 billion less than Exxon, compared with about $150 billion before the deal.
Gas Boom
Shell’s integrated gas sales regularly wallop upstream sales
Source: Royal Dutch Shell
BP is also undergoing a gas expansion. By 2020, the British major expects to produce about 60 percent gas and 40 percent oil, a reversal from 2014 when it was the opposite. Last year, six of BP’s seven major projects brought on stream were gas, Chief Financial Officer Brian Gilvary said in an interview.
Chevron shares have returned 40 percentage points more than Exxon over the past three years, mostly because Chevron’s giant Gorgon and Wheatstone LNG facilities in Australia came on stream, moving from a period of building and overspending to cash generation.
“Those assets were being risked quite heavily by the financial markets,” said Tom Ellacott, senior researcher at Wood Mackenzie Ltd. “Now they’re sunk costs and a lot of that risk has been unwound. They’re massive cash generators for the company.”
Also see: LNG’s dormant mega-projects roused by surging Asia demand
Exxon is not standing still. Big Oil’s worst performer over the last five years has made LNG a core part of its strategy to rebuild its upstream portfolio of assets, which is suffering from production declines.
The major sources of new LNG exports are likely to be from the U.S., Qatar, Mozambique and Papua New Guinea, BNEF said. Exxon has substantial gas operations in all of these countries, and the latter two are part of the company’s five key global projects for the next decade.
Changing Mix
Gas accounts for a larger share of global primary energy consumption
Source: BP Statistical Review
Exxon is less worried about competition and more about having the lowest cost assets that will survive the price-swings that affect the market over time, Chief Executive Officer Darren Woods said in an interview last month.
Exxon currently produces about 55 percent oil and 45 percent gas. Woods doesn’t expect that to “dramatically shift” but it may change slightly as major projects come on stream.
Challenged Model
With the growth of renewable energy and the success of independents in shale oil production, Big Oil’s business model is being challenged. The major producers’ weighting in global equity indices is now at a 50-year low, Goldman Sachs Group Inc. said in a March report.
As such, LNG, with its high up-front costs, huge technical difficulty, and good growth rates, has become something of a safe place for the industry.
“The returns tend to be lower but once they’re on stream, the cash margins are generally very high,” said Wood Mackenzie’s Ellacott. “It’s increasingly becoming the domain of the majors.”
57 Comments on "Future of Big Oil Increasingly Shaped by Fate of Global Gas"
Antius on Wed, 27th Jun 2018 7:28 am
I think the trend can be expected to continue for a while to come. Oil and gas production tend to be linked. With the progressive depletion of onshore conventional oil; ever increasing shares of global liquids demand will be met by light condensates, either from fractured shale (tight oil) or deep deposits. These typically have a lot of natural gas associated with them. US natural gas prices are historically low, because the US is producing huge quantities of condensates from tight oil deposits, with huge amounts of associated natural gas. This gets dumped onto the NG distribution system at less than production cost, since the liquids are much more valuable. Hence the US finds itself with a bubble of cheap gas.
Couple that with the low capital and operating costs of a gas-turbine power plant and it is easy to see why natural gas is so popular as an electricity fuel of late. A cheap plant that is quick to build, requiring minimal manning and burning a cheap surplus fuel. That translates into very low cost electricity. Everything would be peachy if this virtuous situation were to last forever. The danger is that it will last just long enough to ruin the US coal and nuclear industries. Never look a gift-horse in the mouth.
Duncan Idaho on Wed, 27th Jun 2018 11:07 am
“We have decreased about 14 million in the past two weeks. We were not close to that this time last year. When the Permian comes back to increase the end of next year, we need to be asking ourselves, do we really want to export all of this?”
JuanP on Wed, 27th Jun 2018 11:50 am
Antius “The danger is that it will last just long enough to ruin the US coal and nuclear industries.”
Bingo! I fear you are right.
rockman on Wed, 27th Jun 2018 1:04 pm
Antius – Nice observation with one possible exception: “This gets dumped onto the NG distribution system at less than production cost, since the liquids are much more valuable.” Are you implying that the cost to produce the associated NG is expensive? Actually, typically just the opposite is true. With the exception of pipeline costs the only expense to producing the NG with the condensate/light oils is the wellsite separation equipment. Which is actually a cost associated with the oil production anyway: pipelines and oil transport trucks limit the NG content of the oil they transport. So whether the NG is shipped out by pipeline or is flared the NG/oil separator has to be bought.
But, again, that equipment is relatively inexpensive. OTOH if the NG contains a high % of NG liquids more expensive equipment is installed. But that expense is easily recovered by the sale of those NGL’s…they sell at a high price. And if it is not economic to separate them at the well head the NG buyer pays a premium for the higher Btu content of the NG due to the NGL’s.
In effect the NG sold with the condensate/light oil production has some of the lowest cost of all NG production…especially compared to conventional NG plays. There are 2 different dynamics at work. First, in deep conventional NG plays the condensate/light oil production is a bonus that improves the economics. The Rockman’s company spent $230 million the first 3 years it existed drilling such deep conventional plays in south Louisiana. But when NG prices fell we abandoned those plays despite high condensate/light oil prices…the bulk of the profit came from the NG production. Second, typically in the shale plays like the Eagle Ford, the NG is considered a bonus as long as pipelines are available. So when condensate/light oil prices fell the same value of the NG wasn’t enough to sustain the high rig count.
rockman on Wed, 27th Jun 2018 1:26 pm
By the end of 2017 the US was consuming 99 BCF/day. At that time the US was exporting 1.94 BCF/day. IOW the US was exporting LNG equal to 1.95% of the amount of the amount of NG it was consuming. The amount of LNG the US exports will likely increase. But for right now it has little impact on our consumers.
https://www.eia.gov/dnav/ng/hist/n9140us2M.htm
https://www.eia.gov/todayinenergy/detail.php?id=35512
shoal on Wed, 27th Jun 2018 6:32 pm
“Weak Dollar Policy And Commodities”
http://realinvestmentadvice.com/weak-dollar-policy-and-commodities
“A correlation of +/- 1.00 implies a perfect relationship between changes in the price of the commodity and the value of the dollar. As shown above, almost all of the short and long-term correlations have a negative sign indicating an inverse relationship. For most commodities, the price falls when the dollar is strengthening and rises when the dollar is weakening. Statisticians consider a correlation of +/-0.70 to be significant, but anything over +/-0.35 denotes a statistically meaningful relationship. While none of the commodities have a longer-term correlation above +/- 0.70, here are some important observations: Precious metals (gold and silver) have shown a durable negative correlation (-0.52 and -0.47 respectively) to the dollar over the long term. In the short run, the correlation for gold has been statistically significant. As John Pierpont Morgan once said, “gold is money,” and somewhat true to his wisdom that gold is in itself a currency, it is not surprising that gold has the strongest correlation to the dollar of all the commodities shown. While the industrial metals tend to have a low correlation with the dollar over the long run, nickel and copper, in particular, have recently demonstrated a higher negative correlation to the dollar than their long-term trends. The price of these metals typically correlates well with global economic activity. As we have seen for the last month, a strong dollar tends to dampen foreign economic activity. The energy sector also has a strong negative correlation over the last year to the dollar. The relationship is even more pronounced over the last month. Interestingly, the price of Brent and Crude oil (WTI) have diverged from their typical correlation to each other. We suspect this short-term divergence will revert to the normal relationship over the coming year. Grains and soft commodities tend to have a slight negative correlation over longer periods but have bucked that trend recently with slightly positive correlations to the dollar. Lean hogs and feeder cattle appear to have little correlation to the dollar over the short and long-term.”
Anonymouse1 on Wed, 27th Jun 2018 6:57 pm
“Natural gas, seen as a clean bridge from coal to renewable’s”
Really? By whom? NG has been around nearly as long as coal and oil, and no one ever talked about NG being a bridge to anything, until recently that is.
And NG is not ‘clean’ at all. Just because it is less dirty than coal, or a different kind of dirty, does not make it ‘clean’. But this is jewberg so, I guess such rhetorical sleight of hand is to be expected.
Perhaps jewberg meant to say, “Oil cartel PR depts and firms employed by, regard NG as a bridge to ‘renweables’.”
There is even a problem with this statement, since this article talks about ramping up the extraction of NG, which wont do a thing for the environment. Well, nothing good at any rate.
Spin and more spin, that is all that matters these day, right narrativeman?
Boat on Wed, 27th Jun 2018 8:22 pm
This nat gas bridge that seems to confuse is needed for decades and like oil will never actually go away. Prices that remain higher for longer open alternative energy sources to take market share. Capitalism 101.
Anonymouse1 on Wed, 27th Jun 2018 10:38 pm
Retard 101. (See comment directly above)
rockman on Thu, 28th Jun 2018 10:39 am
A – So true. I’ll let someone else dig the details out. A lot of NG has to be burned to produce the energy content of coal. And an often overlooked factor in the abandonment of coal fired plants is the inefficiency of decades old designs compared to modern plants. And, of course, increased environmental regulations. Some folks also conveniently forget the effect of booming coal prices a few years ago on abandonment decisions.
If all existing coal fired plants were as efficient as modern designs much fewer plants would be in the process of being abandoned now IMHO. And when NG prices increase significantly (bound to happen eventually) there will be less motivation to switch from coal to NG.
MASTERMIND on Thu, 28th Jun 2018 10:43 am
Shell forecasts global Natural Gas supply shortage in mid-2020s
https://www.cnbc.com/2018/02/26/shell-warns-of-lng-shortage-as-demand-for-liquefied-natural-gas-booms.html
Chevron expects global Natural Gas supply shortage by 2025
https://www.reuters.com/article/us-chevron-lng/chevron-expects-lng-supply-shortage-by-2025-idUSKCN1GI2EH
Europe’s Biggest Natural Gas Producer Is Running Out of Fuel
https://www.bloomberg.com/news/articles/2016-09-16/europe-s-biggest-natural-gas-producer-is-running-out-of-fuel
GregT on Thu, 28th Jun 2018 10:57 am
Your first two above articles are referring to LNG MM, not NG as you have falsely claimed.
MASTERMIND on Thu, 28th Jun 2018 11:08 am
Greg
LNG is natural gas..Everything I post now you try to refute using “red herring”..
Projection of world fossil fuels by country (Mohr, 2015)
Over 900 different regions and subfuel situations were modeled using three URR scenarios of Low, High, and Best Guess. All three scenarios indicate that the consistent strong growth in world fossil fuel (Coal,Oil,Gas) production is likely to cease after 2025. The Low and Best Guess scenarios are projected to peak before 2025 and decline thereafter. The High scenario is anticipated to have a strong growth to 2025 before stagnating in production for 50 years and thereafter declining.
https://www.scribd.com/document/375110317/Projection-of-World-Fossil-Fuels-by-Country-Mohr-2015
GregT on Thu, 28th Jun 2018 2:37 pm
Prepare for higher costs of everything, and much lower standards of living.
GregT on Thu, 28th Jun 2018 3:23 pm
There will come a day, when all of the important things in life, such as smart phones, high speed internet, and hundreds of channels of crap on the TV to choose from, just won’t seem quite so important anymore.
Not to worry though, we didn’t have any of them growing up, and we most certainly didn’t miss them.
MASTERMIND on Thu, 28th Jun 2018 3:34 pm
Greg
Pause for a moment – just imagine the catastrophic consequences of no electricity: no phones or computers, no industry which is electricity based, no dairy products or processed foods, no refrigeration, no water as the water pumps won’t work, no cars or transport because the petrol pumps won’t work, no schools or universities, no banks which can’t electronically process transactions, no employment, no income ..etc..
MASTERMIND on Thu, 28th Jun 2018 3:42 pm
Feeding the gods: Hundreds of skulls reveal massive scale of human sacrifice in Aztec capital
http://www.sciencemag.org/news/2018/06/feeding-gods-hundreds-skulls-reveal-massive-scale-human-sacrifice-aztec-capital
GregT on Thu, 28th Jun 2018 3:48 pm
Thanks MM,
But I’ve been thinking about it for a lot longer than you have. Other than the employment part, we have it all covered. How’s about you? What’s your MASTER plan?
LMAO!
MASTERMIND on Thu, 28th Jun 2018 4:20 pm
Greg
Without the rule of law and a prosperous society in place..You are dead meat..Go try to live in the woods in a place like Syria..As soon as the goons see smoke coming from your prepper chimney..They will know you have food, water, and likely woman..
MASTERMIND on Thu, 28th Jun 2018 4:26 pm
Utah doomsday cult leader gets at least 15 years for sodomizing child
https://www.cbsnews.com/news/samuel-shaffer-utah-doomsday-cult-leader-prophet-gets-at-least-15-years-for-sodomizing-child-knights-of-the-crystal-blade/
This is where delusional thinking like prepping takes you..
Antius on Thu, 28th Jun 2018 4:31 pm
“Pause for a moment – just imagine the catastrophic consequences of no electricity”
Thankfully, this is not a situation that we need face. Below is a link to one of my favourite articles written by Kris De Decker.
http://www.lowtechmagazine.com/2017/09/how-to-run-the-economy-on-the-weather.html
I have not been a great advocate of renewable electricity because I believe there are better alternatives that could deliver power at lower cost. Cheaper more abundant power means higher living standards. None the less, renewable energy is a final option that we can fall back on if we fail to get better options working.
Renewable electricity would be expensive if we use it in the way we use electricity today, because of the need for backup and storage. The other alternative is to largely do away with storage, and simply adjust our demand patterns according to availability of energy. Whilst this would reduce the productivity of many industries, I believe we can make the adjustment without abandoning modern living standards or technologies. It would require a very different way of life to what we are accustomed to. There will be pain along the way, but ultimately, we will adapt.
GregT on Thu, 28th Jun 2018 5:12 pm
MM,
“Without the rule of law and a prosperous society in place..You are dead meat..Go try to live in the woods in a place like Syria..As soon as the goons see smoke coming from your prepper chimney..They will know you have food, water, and likely women..”
We’ve already had this discussion numerous times before. You’re obviously not an overly bright dude.
MASTERMIND on Thu, 28th Jun 2018 5:18 pm
Peak World Oil Production (2021)
Dr. Minqi Li, Professor
Department of Economics, University of Utah
https://imgur.com/a/VtIGd8U
JuanP on Thu, 28th Jun 2018 5:22 pm
MM “As soon as the goons see smoke coming from your prepper chimney.”
Preppers use rocket stoves which produce no smoke.
GregT on Thu, 28th Jun 2018 5:28 pm
I don’t have a rocket stove JuanP. My wood burning stove produces no smoke if the wood Is cured properly. Which it always is.
onlooker on Thu, 28th Jun 2018 5:31 pm
And preppers would not live in Syria.It defeats the purpose .Stop being so one dimensional with PO Armaggedon
MM, it is getting old
Antius on Thu, 28th Jun 2018 5:32 pm
“Without the rule of law and a prosperous society in place..You are dead meat..Go try to live in the woods in a place like Syria..As soon as the goons see smoke coming from your prepper chimney..They will know you have food, water, and likely women..”
To a certain extent this is true. Though it will depend on where you live. If you live in or on the outskirts of a city with a sizable black or other wog population, then don’t expect to be safe. If you live in a largely white area, especially a rural area, you will most likely do OK. Indeed, if you have a surplus of something or other, you will suddenly find you have a lot of friends that you never knew you had. As lines of communication break down and the world around them looks more and more hostile, small communities with shared ethnicity are more likely to pull together than they are to prey upon each other. Whilst peak oil could spell the end of black America; white Americans could come out of the crisis, stronger and harder, with a renewed sense of who they are. These are the descendants of frontier farmers after all.
MASTERMIND on Thu, 28th Jun 2018 5:35 pm
Antius
Survivalism is an undiluted cocktail of solipsism and fear. Its adherents are — undoubtedly — bananas..
GregT on Thu, 28th Jun 2018 5:39 pm
MM,
If not for survivalism, none of us would be alive.
Makati1 on Thu, 28th Jun 2018 6:06 pm
Antius, You paint a rosy picture of White America. I am white, but I disagree. Did you know that there are two million MORE whites on welfare than colors? That whites make up the largest percentage of suicides, and, likely, the largest percentage of opioid users? Also, the most guns are in whitey’s hands. Not to mention that, for the most part, whites have the most to lose when the SHTF?
Farmers? less than 5% of Americans farm these days and most are retirement age. Few Americans will be able to go ‘back to the farm’ to live when the SHTF. I would not feel so secure in a white neighborhood if I were you.
Makati1 on Thu, 28th Jun 2018 6:14 pm
MM, ““Without the rule of law and a prosperous society in place…”
Rule of law is gone in America for the likes of you. If you are not rich and connected, you go to jail, have your property taken, and your security nonexistent. Didn’t you notice the change?
As for a “prosperous” society. That too is gone forever for you and most Americans. Not even a chance to attain it. “You don’t belong to the club”, as George Carlin once said. You are a debt slave, a serf to your masters. You have two options, MM. Emigrate to a better place or stay and be bled almost to death by your government. Oh, and your suicide is a final option.
onlooker on Thu, 28th Jun 2018 6:15 pm
Yes, I wouldn’t be so sanguine about Whites.
White, Middle-Age Suicide In America Skyrockets
https://www.psychologytoday.com/us/blog/reading-between-the-headlines/201305/white-middle-age-suicide-in-america-skyrockets
MASTERMIND on Thu, 28th Jun 2018 6:33 pm
Onlooker
Muh mustard race!
LMFAO!
MASTERMIND on Thu, 28th Jun 2018 6:45 pm
Onlooker
So much for “They will not replace us”
Goodbye White Devil!
LMFAO!
Makati1 on Thu, 28th Jun 2018 6:55 pm
“Muh mustard race!” What an intelligent comment. NOT!
MASTERMIND on Thu, 28th Jun 2018 7:16 pm
Madkat
Lighten up you fearful old has been..Why don’t you go watch Wheel of Fortune and go rot away..like all the other elderly retards..
Makati1 on Thu, 28th Jun 2018 7:19 pm
The immature MM has spewed his usual third grade playground putdowns when he has no intelligent rebuttal. Or intelligence. LMAO
MASTERMIND on Thu, 28th Jun 2018 7:42 pm
Madkat
“I won’t slave for beggars pay.
Likewise, gold & jewels.
But I would slave to learn the way
To sink your ship of fools.”
— The Grateful Dead, Ship of Fools
GregT on Thu, 28th Jun 2018 7:56 pm
“Onlooker
So much for “They will not replace us”
Goodbye White Devil!
LMFAO!”
You really have no clue as to how stupid you just made yourself look, do you MM?
Makati1 on Thu, 28th Jun 2018 8:03 pm
MM has only old quotes and old lyrics to support his unintelligent, immature rebuttals.
MASTERMIND on Thu, 28th Jun 2018 8:06 pm
Greg you bitch and whine more than a female..You are a beta male..
GregT on Thu, 28th Jun 2018 8:41 pm
MM isn’t anywhere near as smart as he thinks that he is Makati.
MASTERMIND on Thu, 28th Jun 2018 9:15 pm
Greg you can’t face me one on one..You have to go get your lap dog Madkat? Cocksucker!
Makati1 on Thu, 28th Jun 2018 9:32 pm
First, MM, you are not even “one”. You are a loser relying on a cowards way out when the going gets tough.
Second, you show that you don’t even have an average IQ by the immature, unintelligent, irrelevant comments you make.
Third, no one here gives a shit if you live or die.
Now, how does THAT make you feel?
GregT on Thu, 28th Jun 2018 9:39 pm
I have to admit MM, I find your abhorrent and deranged behaviour quite fascinating. I’ve read a lot about your type, but I never thought I’d be corresponding with one of you on a personal basis.
MASTERMIND on Thu, 28th Jun 2018 9:51 pm
Twitter account for the Maryland Shooter…PSYCHO!
https://twitter.com/erichartleyfrnd?lang=en
GregT on Thu, 28th Jun 2018 10:08 pm
The guy expresses himself in much the same manner that you do MM. I wonder if he had a manifesto? That seems to be a common denominator with psychopathy.
MASTERMIND on Thu, 28th Jun 2018 10:14 pm
Greg
Geez you have a hard on for me..It must be sad to have a limp dick and have to waste your days slandering young people on the internet..
Makati1 on Thu, 28th Jun 2018 10:26 pm
MM keeps proving that we are correct. LOL
GregT on Thu, 28th Jun 2018 11:00 pm
What goes around, comes around MM. Obviously you’re a very slow learner, but I’m sure you’ll eventually figure things out the hard way.