International Hydrocarbon Wars: Russia, Saudi Arabia & US Shale (Trump Saves The Day? OPEC+ Cuts 10 Million BPD)

[Oceanmachine]

They didn't lose it, they burned through it.

What is your thoughts on US forex, and forex being gold backed? And the petrol dollar. Or is that for another thread?

 

[ElKarlo]

His millennial status gives things a slightly different feel, but the social and economic reforms have largely been a smokescreen for ever increasing autocracy and even harder clamps on political speech. We tend to innately link economic, social and political freedom in the west, but MBS doesn't see it that way. It's more than worth throwing a couple of the prophet's pointers to the side in exchange for consolidated power.

Good point. He is definitely strengthening the security apparatus. SA had nothing in the way of real police and military. He's making a case for having them. But yes it's at the expense of even more freedom

 

[MVelsor]

Good point. He is definitely strengthening the security apparatus. SA had nothing in the way of real police and military. He's making a case for having them. But yes it's at the expense of even more freedom

Time Stamped.

Deemphasizing Religion for Nationalism.

 

[MVelsor]

Russia is nuts and oddly enough SA is probably the more reasonable one here.

It's already starting.

Russia Sees Oil & Gas Income Fall By Almost $40 Billion

Russia’s revenues from oil and gas will be $39.5 billion (3 trillion rubles) lower than planned due to the tumbling oil prices, Russian Finance Minister Anton Siluanov said on Wednesday, adding that Russia’s budget will be in deficit this year.

The COVID-19 pandemic and lower economic activity, coupled with oil prices half the level before Russia and Saudi Arabia broke up the OPEC+ production cut deal two weeks ago will weigh on Russia’s budget this year, which will tip into deficit.

Russia will use reserves from the National Wealth Fund (NWF), Siluanov said on Wednesday. According to analysts at Gazprombank cited by Reuters, the fund has enough reserves to compensate for lower budget revenues due to low oil prices for more than five years.

Last week, a day after oil prices collapsed in the worst drop in nearly three decades—courtesy of the renewed Saudi-Russia rivalry on the oil market – Russia’s Finance Ministry said that Moscow had enough resources to cover budget shortfalls amid oil prices at $25-30 a barrel for six to ten years.

 

[DivineMind]

A consolidation thread of sorts.

It's obviously rather geopolitically advantageous to remove foreign oil dependency and not be subject to the whims of global disruptions. When you can supply your own needs, it allows money to be cycled more easily back into the economy. The shale boom has lowered the cost of operations for American manufacturers, made for a growing field of domestic raw materials suppliers and accelerated the demise of the domestic coal industry.

Given that climate change is both very real and imminent, it goes without saying we should be concurrently doubling down on green tech investment and develop a coherent, realistic transition strategy to implement over the next couple decades. We can't do it within ten years per Green New Deal mandate, neither technologically nor logistically.



This has a recent precedent.

As political intelligence consultant Gary K. Busch put it:

"There were lessons learned in the production of fracked oil and gas in the United States with OPEC’s desire to drive the US industry to its knees and start an oil pricing war to make fracking uncompetitive. Instead of folding up their hands, US producers innovated new processes and introduced new technologies which drove down operating costs. Now, OPEC cannot compete and is fighting a losing battle to drive out US shale. America will be self-sufficient in energy by late 2019.

There are numerous new techniques being applied including smart drill-bits with computer chips that can seek out cracks in the rock and adjust the drilling accordingly, fully degradable fracture balls and seats to isolate zones during well stimulation that eliminates previous limitations on lateral lengths and maximizes estimated ultimate recovery while reducing risks and costs as well as expandable tubulars, more cost-effective rotary steerable systems, and intelligent drill pipe for high-rate bottomhole data telemetry drilling to depths no longer limited by initial hole diameter.”

The biggest difference today is that during the 2014-16 pricing war, shale drillers had a nearly endless supply of credit supplied by banks, investors and private equity. It gave them the breathing room to innovate at an insane, balls-to-the-wall level and stay afloat. The crude extraction industry is currently sitting on a mountain of debt and the Trump Administration has recently floated the idea of federal government intervention, to the loud outrage of Democrats on Capitol Hill who would have to approve of it.

But how long can Russia and Saudi Arabia turn the screws? There's no country in the world that can compete with Saudi Aramco's $15 average breakeven and it's quite easily the most profitable corporation on the planet. However, it's important to remember that oil producer breakevens aren't the same thing as fiscal breakevens. Unlike America, the economy of both countries is dangerously dependent on energy and in the KSA's case, their entire society virtually hinges on it.

Putin claimed last week that Russia could withstand oil at $25 for up to 10 years. The country's current budget balances at around $42 but it has a National Wealth Fund of around $120 billion to lean on and fund the gap. However, that NWF is supposed to serve a variety of social and infrastructure projects in the country. Saudi Arabia requires nearly double that but MBS is sitting on $500+ billion in foreign exchange reserves.

Anyway, in today's news...

$30 Oil Won’t Keep U.S. Shale From Setting Production Record

And in last year's news...

U.S. Shale Can Add A Saudi Arabia And (Easily) Pay Investors

Breakevens are low but there's also hedging, certain producers are fully hedged for a number of years, a 12 month pandemic won't really hurt them.

 

[MVelsor]

 

[MVelsor]

Breakevens are low but there's also hedging, certain producers are fully hedged for a number of years, a 12 month pandemic won't really hurt them.

I'm not liking the early signs, this is going to be a rough one. It's not really independence and is quite frankly intolerable that foreign entities can still pose such a threat to the solvency of domestic industry. Shale is filled with thousands of small business drillers who will be squeezed.

They also tend to be far leaner operations that are less cautious about the switch towards industrial digital tech and software. It's going to have to be implemented even more rapidly than before. We're also still only able to extract about 15% of the oil and gas available in American shale formations.

 

[MVelsor]

 

[MVelsor]

There are actually a handful of US producers who can presently handle sub-$30 prices depending on the regional play and wells being drilled. They're damn few but namely Continental, EOG, SM, Parsley, Magnolia, Murphy and CrownQuest among them. There's already tons of restructuring taking place and requests for field suppliers to temporarily slash their prices by up to 25%.

 

[10mm]

Saudi and Russia's leaders should inject themselves with covid. The plunge of oil is getting overlooked due to the covid shitstorm. Its quite infuriating that the decision of another country can effect the US to this degree.

 

[MVelsor]

Saudi and Russia's leaders should inject themselves with covid. The plunge of oil is getting overlooked due to the covid shitstorm. Its quite infuriating that the decision of another country can effect the US to this degree.

The only solution is to advance production efficiency to such a degree that it simply doesn't matter if the Saudis and Russians deliberately crash the market like this. It was a massive achievement to go from an average $80 to $40, and almost breathtaking how rapidly they were able to achieve it. It's just unrealistic that it can be halved again in such a short span. The tech for that is as much digital and software based as it is physical and mechanical, still in development.

 

[Rod1]

The only solution is to advance production efficiency to such a degree that it simply doesn't matter if the Saudis and Russians deliberately crash the market like this. It was a massive achievement to go from an average $80 to $40, and almost breathtaking how rapidly they were able to achieve it. It's just unrealistic that it can be halved again in such a short span. The tech for that is as much digital and software based as it is physical and mechanical, still in development.

The only solution is to get the fuck out of oil, not only is fracking fucking up underground water for decades, the whole climate change thing is also a problem.

 

[MVelsor]

The only solution is to get the fuck out of oil, not only is fracking fucking up underground water for decades, the whole climate change thing is also a problem.

Oh, pues -- don't be such a commie!

https://ngwa.onlinelibrary.wiley.com/doi/abs/10.1111/gwat.12917

Fracking Has Less Impact On Groundwater Than Traditional Oil & Gas Production

(it's the inevitable end game, but we play for now)

 

[10mm]

The only solution is to advance production efficiency to such a degree that it simply doesn't matter if the Saudis and Russians deliberately crash the market like this. It was a massive achievement to go from an average $80 to $40, and almost breathtaking how rapidly they were able to achieve it. It's just unrealistic that it can be halved again in such a short span. The tech for that is as much digital and software based as it is physical and mechanical, still in development.

True. In 2016 the industry couldn't make a dime on $45 oil. Adapt. We are going to hunker down and ride this out if possible and design new product. When it comes back, most of the competition will be gone or absorbed.

 

[10mm]

Oh, pues -- don't be such a commie!

https://ngwa.onlinelibrary.wiley.com/doi/abs/10.1111/gwat.12917

Fracking Has Less Impact On Goundwater Than Traditional Oil & Gas Production

(it's the inevitable end game, but we play for now)

"Ban fracking on the first day" These politicians have no idea what fracking is. Its pointless.

 

[Rod1]

(it's the inevitable end game, but we play for now)

Its actually the best time to get the fuck out of oil, considering how cheap oil is right now its time to invest in green energies.

Its quite funny how Republicans bitch about the green new deal, yet they non-chalantly throw 77 billions to buy overpriced oil.

 

[10mm]

Its actually the best time to get the fuck out of oil, considering how cheap oil is right now its time to invest in green energies.

Its quite funny how Republicans bitch about the green new deal, yet they non-chalantly throw 77 billions to buy overpriced oil.

How exactly do you "get the fuck out of oil"
The planet earth will rely on oil for a very long time. Invest in green when oil is cheap? This is not the way the world works. Yes, invest in renewable and everything under the sun. You're gonna need a new power grid and a source for generating the electricity so everyone can plug their cars in at night. Get started. Nothing wrong with that, but it will take time. I will be retired/dead and out of O&G by then. Many dems think electricity is that free stuff that comes from the outlet in the wall.

 

[Rod1]

How exactly do you "get the fuck out of oil"

By investing in renewables.

Invest in green when oil is cheap? This is not the way the world works.

As opposed to investing in oil when oil is cheap?

Yes, invest in renewable and everything under the sun. You're gonna need a new power grid and a source for generating the electricity so everyone can plug their cars in at night. Get started.

People are getting started if you havent realized, but funding would make the transition faster.

Nothing wrong with that, but it will take time. I will be retired/dead and out of O&G by then. Many dems think electricity is that free stuff that comes from the outlet in the wall.

Electricity isnt free.

Also the hipocrisy point still remains we are bailing energy companies by propping up oil through taxes.

Its socialism when we are trying to save the fucking planet, but its not socialism when its about saving oil?

 

[10mm]

Anyone is free to start a company and design, market and sell renewable. Either way, oil is with us for a long time.
https://whgbetc.com/petro-products.pdf

 

[MVelsor]

"Ban fracking on the first day" These politicians have no idea what fracking is. Its pointless.

Ban Fracking = Become Massive Net Importer (Again).

Its quite funny how Republicans bitch about the green new deal, yet they non-chalantly throw $77 billions to buy overpriced oil.

It's not $77 billion, they're buying 77 million barrels of US crude to top off the Strategic Petroleum Reserve and it's really a pittance that isn't going to have much impact. The American Petroleum Institute (industry trade association) isn't asking for a bailout at this time. They're looking to restructure their operations, cut deals with creditors and negotiate lower prices from field suppliers.