France’s Virtue-signalling slavish adherence to green dogma takes another step

Here’s a piece that I planned to post some time ago but never quite got around to;

In what must be one of the most bizarre political stunts in my memory, France will stop granting new oil exploration permits next year as it seeks to end all oil and gas production by 2040.

Yep, you read that right, end all oil and gas production by 2040.

“The proposed legislation is part of President Emmanuel Macron’s broader plan to take the lead against climate change, after U.S. counterpart Donald Trump ditched the landmark Paris agreement to fight global warming.”

Now France doesn’t currently produce a whole lot of oil, but Oil revenues are worth

“as much as 300 million euros ($358 million) in annual revenue, and accounts for as many as 5,000 jobs, directly and indirectly”

Of course France won’t stop requiring fuel, power or petroleum-based products so this plan will have Zero impact on global warming and CO2 emissions and is therefore complete folly.

But they will be able to feel morally superior to the rest of the Western World for taking this decision – perhaps with that warm fuzzy feeling they can turn down their heating, then they might actually make a difference to global warming!

Tough Times Continue

It’s been a while since I’ve blogged here, but I’m going to try and be more consistent again.

Although I got back in to work last July after a short 6-week lay off, things haven’t really improved that much in the industry.

Oil prices have stabilised around the $50/bbl mark and it seems that Saudi Arabia (along with most of Opec) and Russia are in agreement that this needs to be maintained – even if they agree about little else.

There is very little movement in the job market and few vacancies advertised so presumably there aren’t many new projects coming along just yet.

I find this really odd, as it’s clear that the oil price dip has stabilised and contractors and suppliers are desperate for work so prices are at rock bottom. Lead times are minimal as workshops are empty and agency rates are down between 30-50% from highs of a couple of years ago.

Many refineries are sitting on significant reserves built up during the period of low oil price but relatively high product prices so now would be an ideal time to use that money to invest – perhaps to expand capacity or allow processing of heavier/ sourer (and hence cheaper) crudes or even look to expand into more downstream units.

The danger of waiting too much longer is that individuals and companies will be forced out of business, so that when the market rallies and projects get started, contracting companies and suppliers will reach their limit more quickly, prices will rise steeply and lead times extend.

If I was in charge, I’d be looking to get in now.

India’s Big Plan for Growth

As one of the most populous nations on earth, India has the opportunity to be at the centre of global growth and demand over the next 30 years, but it needs a coordinated approach in order to truly benefit.

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This article outlines some of the plans that are being considered;

India plans to form a giant national oil company by combining other state-owned firms, finance minister Arun Jaitley said on Wednesday, as New Delhi wants to expand its foreign presence to meet growing domestic fuel demand.

The problem is that India has a number of separate state-owned companies but individually, they do not have the necessary market capital that allows borrowing of the sums of money necessary for mega-investments.

India has about a dozen state-run oil and gas companies – including Indian Oil Corp, Oil and Natural Gas Corp , Hindustan Petroleum Corp and others – but alone they do not have the financial power to rival global oil majors in bids for overseas exploration and production assets.

Combining them “will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for shareholders,”

The potential for India, Indian companies and Western contractors/ suppliers/ engineers is massive. I hope it succeeds.

 

The Battle For Market Share

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It’s been a while since I blogged about the Oil Price, and since my last note it does appear that things have stabilised and prices are slowly creeping up.

This is good news for for the Oil and Gas Industry and is starting to provide the comfort that producers need to start spending money on new plant again. In particular, it seems that refiners who profited most from the low oil prices early on and have a cash reserve available are starting to look at developing and upgrading their facilities for new and emerging markets.

They are also taking the opportunity to adapt refineries to be able to process heavier (cheaper but poorer quality) crudes and to meet more stringent EU and US fuel specifications.

This article from World Oil paints an interesting picture – a stand-off between those who were prepared to sell on even when oil prices plummeted and those that preferred to keep their oil in reserve and wait for higher prices to return.

 

 

History of Aramco

Jubail Power

Recently World Oil published a potted history of Aramco from one oil well to world’s most valuable company which is quite an interesting read.

Saudi Arabia’s state oil producer is in a league of its own. The world’s most valuable company, which supplies about one in every nine barrels of crude produced and runs refineries from the U.S. Gulf coast to the South China Sea, is preparing for an initial public offering to raise about $100 billion as soon as 2017.

One barrel in every nine – that’s an amazing statistic.

As I’ve mentioned before, I’ve worked on many projects for Aramco – in fact I’m currently working on the pre-FEED phase of my tenth Aramco job. I’ve also had the opportunity to travel to Saudi Arabia on several occasions.

New industry coming to Ras al-Khair

Here’s another interesting story from Saudi Arabia.

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State oil giant Saudi Aramco has extended bidding for dredging and reclamation work at its marine terminal in Ras al-Khair by almost one month, industry sources told Reuters on Wednesday.

Aramco (the national Oil company) are planning to build a large marine terminal in the east of the Country at a place called Ras al-Khair (RAK) – this is a place I know, as I’ve visited there when working on a project for the Saudi national mining company Ma’aden.

Ma’aden are in the middle of a major expansion of their operations in the north of the country (where large phosphate deposits exist) and intend to send some of the products and intermediates by rail to RAK (where they have a fertiliser and animal feed facility at the moment) for further processing and export.

Part of the Ma’aden project was to extend the jetty area around their facility, but this project is;

the first phase of a huge ship repair and shipbuilding complex in the east of the country seen as key in the kingdom’s economic transformation plan.

It’s certainly a prime area for development, with a large expanse of space surrounding the existing RAK port and industrial area. There are already some rail links but I expect these will be upgraded significantly once the marine terminal is built.

As well as the Ma’aden phosphate plant at the site, it’s not too far to other Aramco installations including Ras Tanura, Jubail and Khursaniyah (pictured above).

It’s interesting that Aramco are spearheading the project at this stage although the completed complex will be;

operated by a joint venture between Aramco, the National Shipping Company of Saudi Arabia (Bahri), United Arab Emirates-based Lamprell and South Korea’s Hyundai Heavy Industries.

I guess that a large project like this is the sort of thing Aramco has more experience of than any other entity in the Kingdom and when you look at the potential boost to the economy it’s not surprising that they want a piece of it;

Saudi Aramco has said it expects the complex, which is projected to create 80,000 jobs and allow Saudi Arabia to reduce its imports by $12 billion as well as increase gross domestic product by $17 billion, will be fully operational by 2021.

Oil discoveries at 70-year low

Supply shortfall ahead – No Sh!t Sherlock (as we say in the UK).

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Who would have thought that a lack of investment would lead to a massive reduction in the amount of oil discovered in the past couple of years?

Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand.

Just one tenth of the amount that has been discovered on average over the past 55 years.

Why is this significant?  Well, because without replacing the reserves that are being used up we will find ourselves in a situation where oil becomes limited and prices will rise – hugely.

Not this year, or next, but in the coming 5 to 10 years. And this isn’t just a small reduction in the amount being discovered;

Just 2.7 Bbbl [billion barrels] of new supply was discovered in 2015, the smallest amount since 1947 . . . This year, drillers found just 736 MMbbl [million barrels] of conventional crude as of the end of last month.

 

New discoveries from conventional drilling, meanwhile, are at rock bottom, there will definitely be a strong impact on oil and gas supply, and especially oil.

For big business, big oil and countries like Saudi Arabia that can ride out the storm of low oil prices the future prospects look very good. Don’t be surprised to see oil at $200 per barrel within 10 years – nearly double any previous record high prices.

For smaller companies, individual employees and shorter-term investors the past couple of years have been pretty awful and look set to remain stagnant for the remainder of 2016 at least.

Where is oil going

Oil prices continue to ratchet upwards – good news for the industry, not such good news for consumers.

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The key for companies to start investing again will be when they see this price rally continuing for a few years and an oil price high enough to generate good profits.

This report  suggests that  people are now looking at oil prices above $60 per barrel next year which would certainly provide sufficient margin for investment.

Pretty much every single fundamental that we have points to those commodity prices going up, not down,” Ryan Sitton, one of three elected members of the Texas Railroad Commission

To give you some idea of the impact that low prices have had, the article points out

In Texas alone, Sitton said, state regulators are processing less than a third of the oil and gas well permits they did just two years ago, highlighting the wariness companies have to drill and pump more.

However, not everyone is so optimistic, another commentator stated;

Investors don’t expect prices to climb above $53 at all for the rest of the decade, and most shale oil producers in the United States have begun planning for what they are calling a “lower for longer” price scheme

These differences of opinion often come about as a result of different agendas, which has always been a problem in the Oil industry.

Fingers crossed things are starting to look up.

Is this a turning point?

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After a year of low oil prices which have brought cheaper fuel for most but lack of investment leading to wage and job cuts in the oil and gas industry have we finally turned the corner?

This article in World Oil cites the 27% rise in crude prices in three days amid news that maybe Saudi Arabia and Opec are ready to discuss a cut in output as long as it is a global cut and not just Opec countries.

Some people are trying to downplay the news, maybe they are right, the price of oil seems to be being driven purely by speculators and market makers rather than supply and demand fundamentals.

Remember how many times in the past, when the oil price went up, we were told it was due to instability in the middle east?

Can the Middle East have ever been less stable than right now?  And yet oil is at lows not seen for 6 years.

It’s a strange World out there!

Oil Prices Continue To Remain Low

It’s interesting that the oil price continues to remain low, and has even fallen again in recent months.

Many people predicted that there would be a rise towards $80 per barrel by the summer but instead we are back down around the $55 mark for Brent crude.

This little chart will give you some idea of who this prolonged low price is hurting (and helping).

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Can it be sustained for the rest of 2015 – if the recent fall is anything to go by then I’d say yes.