Sober Realist

Iraq Production, Conservation Could Keep Oil Price in Check for Years

Pinelli nails it on the head. The tremedous drop in the oil price has been accompanied by the cobweb cycle of oil exploration and production projects coming to a complete stop. Look at a few projects recently reported to have been scaled back or mothballed:

Nov. 6 - Canadian Natural Resources Ltd (CNQ.TO: Quote, Profile,
Research, Stock Buzz) slows spending on second phase of Horizon oil
sands project for 2009 after first phase costs rise to C$9.7 billion,
up 42 percent from 2004 estimate. Company, citing low oil prices and
high costs, also scraps timelines for phase 2, which would lift output
to 250,000 bpd from 110,000.


Nov. 6 - ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz)
and Saudi Aramco halt bidding on the construction of a 400,000 barrel
per day joint- venture Yanbu refinery in Saudi Arabia, citing
uncertainties in the financial and contracting markets. Saudi Aramco
previously sought to renegotiate contracts for equipment for Yanbu, as
well as for a refinery joint venture with France's Total SA(TOTF.PA:
Quote, Profile, Research, Stock Buzz).


Nov. 5 - Saudi Arabia may renegotiate contracts for long- term oil and
gas field projects, an oil official told the International Oil Daily.
The giant Moneefa oilfield expansion and the Karan gas scheme had been put out to bid when the cost of labor and materials were soaring.


Nov. 5 - Sunoco Inc (SUN.N: Quote, Profile, Research, Stock Buzz) to
save $375 million by scrapping upgrade of refinery in Tulsa, Oklahoma;
still looking to sell the refinery, which accounts for just under a
tenth of the U.S. company's 910,000 barrels per day capacity.


Oct. 30 - Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research,
Stock Buzz) said it would delay its investment decision on a second
expansion of its Athabasca oil sands project.


Oct. 29 - Thai refiner and petrochemical company IRPC IRPC.BK reviews a $1.5 billion investment plan. Has delayed a refinery expansion to 260,000 barrels per day and cut its run rate by 10,000 barrels per day to about 160,000-170,000.


Oct. 23 - Suncor Energy Inc (SU.TO: Quote, Profile, Research, Stock
Buzz) delays construction of oil sands upgrader for C$20.6 billion
Voyageur expansion by one year to 2013. Expansion boosts production
from Suncor's oil sands operations near Fort McMurray, Alberta, to
550,000 bpd from 350,000.


Oct. 23 - Petro-Canada (PCA.TO: Quote, Profile, Research, Stock Buzz)
mulls deferring upgrader for proposed C$21 billion Fort Hills oil
sands project to save up to C$10 billion. Move would mean partners
build mine and extraction plant and sell as much as 160,000 barrels a
day raw bitumen into the open market starting 2011. Decision before
year-end.


Oct. 23 - Nexen Inc (NXY.TO: Quote, Profile, Research, Stock Buzz) and
Opti Canada Inc (OPC.TO: Quote, Profile, Research, Stock Buzz) delay
decision on second phase of Long Lake oil sands project to some time
in 2009. Expansion would double production of synthetic crude to
120,000 barrels a day. First phase cost C$6.1 billion and is now just
starting up.


Oct. 23 - Value Creation Group construction of C$4 billion Heartland
upgrader near Edmonton, Alberta, reported halted. First phase would
have processed 77,500 barrels a day of bitumen into synthetic crude.
Privately held company has regulatory approval for plant with 260,000
bpd capacity.


Oct. 22 - Baker Hughes Inc (BHI.N: Quote, Profile, Research, Stock
Buzz) expects about 200 oil and gas drilling rigs in North America
would be idled during the fourth quarter because of the tighter credit
markets and the declines in oil and gas prices. (Writing by Braden
Redall; Editing by Walter Bagley and Andre Grenon)


Do you hear the sound of the passing tumbleweed across the desolate plains? No energy investment now means no flow of oil to market when it will inevitably be needed and demanded in the future. Unless, of course, the economy never recovers and continues to contract and all the world's people of the emerging economies agree to forego the western standard of living. Accompany this with the natural oil depletion that is occuring and you have a big problem. Oil is now a yoke on all future economic activity.