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.

The Battle For Market Share

image001

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.

 

 

Oil discoveries at 70-year low

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

oil_breakdown_464

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.

More news from Saudi Arabia

Refinery 3 s

Two new stories emerge today that underline a new dominance that Saudi Arabia is creating in the Oil Industry.

It is well known that as the most influential oil producer in the World, the actions of Saudi Arabia have significant influence over the global crude oil price (crude oil is a stabilised product that is sold to refineries around the world to be turned into ‘refined’ products such as gasoline, kerosene, diesel etc.).

In recent months Saudi has been increasing its output (as previously reported here) and will probably exceed Russia in the first two quarters of this year to regain top spot as the World’s largest oil-producing nation.

As I have postulated before, the aim of flooding the market with cheaper oil is to retain (and increase) market share and this is spelled out in an article from Downstream Today that states

“Saudi Arabia expanded its share of China’s oil market last month, outpacing rival producers as they compete to meet record demand from the world’s biggest energy consumer.”

It goes on to say;

“China’s imports from the Middle East producer jumped 37 percent from a year earlier to the highest level since July 2013, according to customs data. The world’s biggest crude exporter was the No. 1 supplier to the Asian nation, accounting for 17.4 percent of its overseas purchases, up from 15.1 percent in March. The next three largest sellers — Russia, Iran and Angola — lost market share.”

So the plan is clearly working. But low oil prices whilst good for refiners (and to a lesser extent petrol consumers) are bad for oil producers.  Saudi Arabia has already thought of this, and for some time has been building up refining capability in-Kingdom and out-of-Kingdom to take advantage as another article from Downstream Today outlines. I worked on the FEED phase of the Jizan refinery mentioned in the article – an amazing project and vision [VIDEO HERE];

“The kingdom now has stakes in more than 5 million barrels per day (bpd) of refining capacity, at home and abroad, landing it a place among the global leaders in making oil products. Its own target of 8-10 million bpd of refining firepower would eclipse even ExxonMobil.”

Why does this matter?

Well firstly, the statement that China is demanding more oil suggests an upturn in the global economy which is a good thing for all of us.

Secondly, additional refining capacity at state of the art (e.g. high efficiency) refineries located right next door to the oil sources will enable Saudi Arabia to make good margin on refined products during periods of low oil prices, which will enable them to sustain low crude oil prices for longer if they wish – this will hurt oil producers with a higher break-even price.

Finally, as well as flooding the market with cheap crude oil, they will also be able to supply cheap refined fuels across the Arab region and the wider world, putting further pressure on European refineries which are already struggling with high energy costs, aging plants and lack of investment. This in turn could lead to the closure of UK refineries, lost jobs and a greater reliance on imported fuels.

Governments across Europe (including our own) have failed to see this coming and continue to bicker over CO2, emissions, green renewables, taxation etc. Within the next 5 years it will become apparent to all that we are firmly in the grip of the Middle-East when it comes to our crude oil and refined fuels.

What Is In A Barrel Of Oil?

Basic refinery

After my recent post (on my politics blog) about oil reserves around the World, I received a comment with a couple of questions that I thought might make a good follow-up article on this blog.

okay. I’ve always wanted to ask this question of someone, now’s my chance….. hope you have the answer Paul…..

How many gallons (or even litres!!) are there in one barrel (in terms of crude oil I think).

You would expect there to be an easy answer, but it is muddied somewhat by different definitions of barrels and gallons, but official values based on Oil Industry standards;

A US Barrel of oil is 159 litres which is about 35 UK gallons or 42 US gallons

The second question was even more interesting;

I realise crude needs to be refined to get what we call petrol etc, so maybe a secondary question, how many gallons of petrol do we get from one barrel?

A barrel is a bit of a difficult measurement to be clear upon, whereas at least gallons or litres are easier to visualise in everyday terms

The amount of petrol (gasoline) that is distilled from a barrel of crude oil depends on the type of crude, which varies enormously across the World.  There are many variables and impurities including; sulphur, metals, paraffins (wax), nitrogen, oxygen etc. that all impact the way the crude is processed.

The main variable however is the assay of the crude which determines how much of the various fractions are present to form the main refinery products; natural gas, propane/ butane, gasoline, diesel, fuel oil, heavy fuel oil, bitumen etc.

There are a number of grades of crude oil; ‘Light’ or ‘Extra Light’ contain larger quantities of gasoline and are correspondingly more expensive. A medium crude contains less gasoline and more heavier material. A heavy crude may contain 70% heavy material and is very difficult (and expensive) to process but is also a lot cheaper.

The aim of a modern refinery isn’t normally to just separate the various components of a barrel, but also to ‘upgrade’ heavy products into lighter, more saleable products through a number of energy intensive (usually high temperature and high pressure) processes.  These cause the longer heavier carbon chains to ‘crack‘ into shorter lighter (more valuable) chains.

Different refineries are set up in different ways. Some aim to produce more gasoline, others more diesel. Some will specialise in ‘bottom of the barrel’ processes – meaning they are built to process heavy crudes and residues – others will be simple topping or hydroskimming refineries.

It is therefore difficult to to give a specific answer, but after looking over a range of refinery outputs of different types, a ‘typical’ barrel of oil will generate something like;

Product 159
Gasoline 47% 74.73 litres
Heating Oil/ Diesel Fuel 19% 30.21
Jet Fuel (Kerosene) 11% 17.49
Natural Gas Liquids (Propane, Butane etc.) 6% 9.54
Natural Gas 4% 6.36
Other 13% 20.67