Kezorm

29 Comments

    • Crude Oil: How Far Will It Fall? [view article]
      Several large oil exporters have threatened to cut production to support crude prices if they fall too far. Why should any exporter sell many barrels at low prices when they can sell fewer, for higher prices while also extending the productive life of their reserves and increasing the ultimate yield?
      Aug 07 10:49 PM
    • Why I'm Not Buying Oil's Recent 'Correction' [view article]
      Quick comments:

      Russia just increased export tariffs on crude to $70/bbl. Given the enormous output of Russian crude, this number has got to be part of the equation for calculating a new price floor. After all, $70 is just the tariff.... It does not include lifting, profit, or shipping.

      Saudi Arabia and Libya have threatened or promised to slash production if oil fell too far, too fast. Although I do not recall a "strike price" being stated, I'd guess they would defend at $100/bbl or so.

      The USA crude oil demand experiences very consistent seasonal variations and we are at the second of two predictable summer minima. From the fourth week of July, till the last week of September, demand traditionally builds. Expect this effect to exert itself, even if other political factors overlap.

      Abiotic Oil? It is fascinating that the famous Brazilian prospect called Sugarloaf or Carioca will be the subject of exploratory drilling by Seadrill's West Polaris, on behalf of XOM, HES and PBR over the next year. The particular block being drilled is BM-S-22. The basement structure which is responsible from producing this particular hydrocarbon target is a failed spreading center related to earlier rifting tween SA and Africa. Two miles of salts overlie the old rifting center. See this site: www.searchanddiscovery...
      Combine this especially attractive prospect with the recent news about abiotic hydrocarbons found at the Lost City Hydrothermal field, and one is forced to wonder if the massive Brazilian sub-salt reservoirs might be created by inorganic reactions between water and ultra-mafic rocks.       Jul 28 12:36 AM
    • Insiders Preparing for Major Drop in Oil Prices [view article]
      Forgive this paltry submission to an otherwise worthy pile of messages, but if you look at long term crude oil demand in the USA versus season, there are strong variations and we are at a local minima (third week of July) and set to see demand climb as refiners build inventories and increase demand until the end of September. Surely this is only one variable among many, but didn't the Saudi's, Libyans and other promise or threaten to slash supply if crude neared $100? And didn't the Russians just increase their export tariff to $70/bbl? Another factor is this. IF gasoline prices fell to $3.50/gallon, there would be alot of folks "escaping to Wisconsin" in their SUV's. That is the flip side of destroyed demand - it comes right back if prices fall. Jul 28 12:00 AM
    • Oil Majors vs. Drillers: The Battle for Profits [view article]
      Who builds drilling rigs? Samsung. Also check out USA company ROWAN (RTC I think.) Good luck. Jul 25 12:11 AM
    • Gas Lines Coming This Fall [view article]
      AvA, concerning your doubt about converting truck transport to natural gas: www.cumminswestport.co...
       Jul 16 12:40 AM
    • Speculation and the Price of Oil [view article]
      Excerpt from article:

      "Speaking as a teacher of economics and finance, I would advise my political masters to always assume that they (the suppliers of crude in this case) do have this intention (maximize profit) until they obtain irrefutable proof that such is not the case, because the kind of economics that I study and teach leads me to insist that, theoretically, adjusting supply in such a manner as to keep the dollars rolling in makes all the sense in the world."

      So, if the Saudi's do release an extra 500,000 bbl's/day, might that inspire other suppliers to restrict their outputs by comparable amounts?       Jun 15 09:33 AM
    • Transocean: Cheap Stock, Worth a Look [view article]
      Marvin,

      The Brazilians ARE finding enormous quantities of oil and gas at depths of 35000 or more feet.

      And, yes, the technologies are, or will be available to enable production from these depths. It might not be as cheap to produce as oil used to be, but it will be there through the transition to alternative supplies of energy.

       Jun 11 11:50 PM
    • Transocean: Drilling For Profits [view article]
      Leonard, wonderful article. Refreshing for it's lack of hyperbole. The statistic you mentioned about RIG having 7 of the 15 deep-water rigs that will be available between now and 2010 was especially interesting. These rigs are badly needed in Brazilian and Mexican waters, if not elsewhere. I suspect they will be contracted for excellent rates.

      One thing you did not mention, which I think would have been worthy of mention, is the recent depth record in Qatar - something like 40,000 feet of reach drilled without incident in 36 days! What an advertisement for "getting-what-you... !

      To Startouch, I would hope that crews are routinely evacuated before killer storms arrive. If so, the loss of one rig would be bad for any company, but the vast size of Transocean would hopefully allow them to weather such a loss somewhat better than their smaller competitors.

       Jun 11 11:39 PM
    • Petrobras: Extremely Overvalued [view article]

      Lifting costs for oil at Tupi. Around $8 per barrel.

      www.reuters.com/articl...

      Compare the above projections to Von Altendorf:

      "Amortizing exploration and infrastructure, Tupi-Carioca lifting costs may be as little as $40/barrel if they produce 5+ billion barrels, or as high as $80/barrel if reservoirs are compartmentalized.&quo...

      I concur with Anaconda that this was a hit piece. There are links to this article all over the internet and they give an impression of Petrobras that is utterly false.       Jun 11 12:56 AM
    • Investing Into the End of the Hydrocarbon Age [view article]
      Response to Anaconda:

      I have read alot about abiotic oil but will not digress. I want to make one point in defense of biotic formation for that sub-salt oil. What must have happened to deposit the salt? Yes, sea-water was getting concentrated in a closed basin where evaporation exceeded inflow. What might have been the condition of this closed sea just before the deposition of the salt? That's right, warm, stagnant water. Probably with so little circulation that it was anoxic at depth. So, any algae that grew at the surface; died, and got buried without decaying. Cover this stuff with salt, cook at 300F, and those hydrocarbons which may form, cannot easily escape because of the mile of salt forming above.

      I don't know whether the oil is biotic or abiotic, but the geological context of the Brazilian discoveries makes biotic formation at least plausible.       Jun 05 09:16 PM
    • Petrobras: Extremely Overvalued [view article]
      Long, long ago in 2002 some geologists were very excited about the Brazilian sub-salt. Read this for background:

      www.searchanddiscovery...

      Since this was written at least 8, possibly 11 or even 15 holes (depending on the vintage of the article) have been drilled through the deep salt and producible hydrocarbons were found every time. Of the several recent announcements of oil, they have found oil with similar viscosity leading some to suspect potential linkage between reservoirs or even one extremely large reservoir. Given the seismic images in the articles, it seems there may indeed be giant systems spanning tens of miles.

      The author may be confused or befuddled about some things. Here are some examples:

      Altendorf: "Tupi and Carioca..... It is inconceivable that large scale production development can be achieved in less than 10 years."

      OK. So they might not have a hundred wells producing for ten years. So what. Investor's seek growth and opportunity. But this comment should be compared to Brazil's previous accomplishments at disproving the critics. Look at the 4th paragraph of this article recalling the development of the Campos basin:

      www.rigzone.com/news/a...

      excerpt:
      "Pressured by high oil import costs and by the urgent need to trim Brazilian dependence on imported oil, it was at this basin (Campos) that Petrobras created one of the most advanced production development concepts in the world, one that would serve as a model for the industry. Seeking to slash the delay between discovery and production, company technicians opted to install the first Anticipated Production System (APS) on a floating platform in Enchova. The conventional offshore production systems adopted the world over had a very long maturation time, ranging from four to six years. With the APS, the delay between discovery and early production was slashed to a mere four months, leading to great agility, operating flexibility and huge savings in investments. This allowed the company to kick production off while definitive fixed platforms, which would be installed later on, were under construction."

      Fred's comment: One can assume that PBR engineers are even more capable, confident and experienced today.

      Altendorf: "Tupi and Carioca are geologically unrelated to oil-producing Campos reservoirs in a younger formation...."

      Santos Basin, Campos Basin. Two different structures. Are you correcting your own misperception here? Or are you implying some dishonesty or exageration on the part of PBR?

      www.rigzone.com/news/i...

      Altendorf: "...and in contrast they are primarily gas plays because of burial age and maturation in a high temperature-high pressure environment."

      PBR found oil. They intend to produce - oil. And where they found mostly gas, as at Jupiter, they stated that. You seem to think that the theory you were taught once upon a time is more important than what they are actually finding. By implying they are reporting oil when they only, actually found gas...is to basically impugn the honesty of PBR and every journalist who has reported on the subject. Is everyone missing something?

      But the maturation issue is important. Everyone schooled in petroleum geology decades ago was taught about oil depth and temperature windows, below which or beyond which it would be silly to look because the oil would presumably... have been cooked to gas. But oil is where you find it and of late, it is being found at depths where they used to say it could not be. Arthur Eddington once said that "no fact should be accepted until confirmed by theory." I guess you are in Arthur's camp in this regard. But dozens of articles are reporting the API degrees (viscosity) of the oil being found and that is a rather brazen lie if all they are finding is natural gas.

      Temperature? 400 degrees does not melt steel, and PBR is researching products made by companies like Aspen Aerogel who make efficient insulation systems for pipes that will keep the oil warm till it gets to the surface - which is an important point - you want it to stay warm until you get it to your separator. That way paraffins stay dissolved, and the lower viscosity encourages flow.

      Here are articles that seem more careful or honest:

      www.aapg.org/explorer/...

      www.reuters.com/articl...

      In summary, the Brazilian ANP has removed 41 blocks from auction surrounding the BM-S-8,9,21 and 22 area. And they have gone on a shopping spree for drilling rigs. In order for your criticisms to be taken seriously requires us to believe that this is all merely a show, and that the recent discoveries do not actually make PBR a better investment than another company which does not even claim to be making such discoveries. But even that does not make sense for XOM will be drilling at BM-S-22 this year, and are we to believe that they would change their plans about that if only they had your insights on the matter?       Jun 02 11:18 PM
    • In Light of Peak Oil, Financial Diversification Is a Bad Idea [view article]
      Hmmm. The S&P 500.... While I am very long oil and minerals, I strongly suspect that the S&P 500 might be a sleeping giant about to awaken. If you look at USA manufacturers who have been profitable in the past few years, just imagine how further declines in the value of the dollar will provide a hurricane-like tailwind. Anyone who recalls the Bucyrus-Erie company in the 1960's would probably classify it as a quintessential rust-belt company. But look at it today! And realize that Milwaukee/Southern Wisconsin has dozens more companies just like that one. So, the falling dollar is not all bad. It just might be restoring an imbalance that sent too many jobs overseas. In fact, when viewed in that weird glow of the falling dollar, the diverse and dynamic USA economy begins to look more and more like Brazil... After all, we have great mineral wealth, monster agriculture, high-tech, excellent infrastructure, and probably also a bounty of energy supplies that have been wisely protected from development under a probably false ecological pretense. So, keep a keen eye on the S&P 500 and especially those that export goods. As the dollar sets, it may rise.

       May 31 11:08 PM
    • Oil & Gas Exploration SPDR Charts a 'Shooting Star' [view article]
      I don't know anything about TA, and must admit a certain contempt for it, but here is a question: Wouldn't such accelerations in the uptrend be the natural outcomes of a genuine, historical mismatch between supply and demand? Image an affluent, and extremely large crowd locked in a giant cavern, and the concession stands have a limited number of hotdogs and sandwiches to sell. Wouldn't the price of the sandwiches tend to accelerate in waves, just like your chart, as people begin to realize their predicament?

      Another question. Suppose the world is making a transition from undervaluing oil, in times of surplus production to one where it's importance and finite supply are finally recognized. What might the shape of that curve be during the transition? Even if we can drill and generally innovate our way out of the scarcity crisis, the curve during that crisis might look very much like the present curve.       May 31 09:31 PM
    • The Case for Not Drilling ANWR [view article]
      To Chad Gray: Good thinking. It would be idiotic to release such a wonderful and valuable resource to the market while profligate uses are encouraged by low prices. Much better for high quality, local sources to be conserved for a time when they are better appreciated and are used by more efficient machines, (like my 1990 Geo Metro for instance.) :)
      To those who reacted negatively to Chad's suggestion, what would you have us do? Release all such known reserves to maintain cheap oil right up until there is zero surplus production, and then expect decades of technological innovation and adaptation to happen overnight - and in the midst of a probable worldwide recession, if not also in the midst of world resource wars?
      Chad is right. Cheap oil will prevent the change that needs to happen, from happening until it would be too late for changes to avert disaster.       May 26 11:37 PM
    • Odds Favor Short-Term Slip in Crude Prices [view article]
      Until a couple year ago, there was always more supply of light crude than there was demand. It was like a rope which always had slack. For a number of natural and artificial reasons, that has changed. Statistical arguments that do not recognize that fact are bogus. The more you pull on the rope now, the tighter it gets. Until someone begins to remove artificial inhibitions on potential oil supplies, or until high price destroys enough demand, the rope will tighten, price will climb and arguments based on the statistical behavior of prices during times of surplus supply... will fail. May 16 11:25 AM
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