International [Oil & Gas News v2] Freezing Weather Is Knocking Out Millions of Barrels of U.S Oil Output

Iraq's New Prime Minister Doubles Down On Oil & Gas Deals With China And Russia
By Simon Watkins - Nov 14, 2022

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  • Iraq’s new Prime Minister is wasting no time in strengthening energy ties with Russia and China.
  • After Ghani’s appointment, local media announced that NOCs from China and Iraq had begun multiple seismic surveys as part of the first phase of wide-ranging offshore oil and gas exploration between the two countries.
  • Senior officials report that Iraq’s new Prime Minister Ghani will also go along with his predecessor’s intention of allowing Lukoil to go ahead with its planned development program for Eridu.

It is possible that U.S. Secretary of State, Antony Blinken, believed for a moment that his call to the new Iraqi Prime Minister, Mohammed Shia al-Sudani, saying that Washington “is eager to work with the government and people of Iraq to improve respect for human rights, increase economic opportunities, advance Iraq's energy independence, and address the climate crisis” might resonate in Baghdad. A moment only, however, as it transpires that key deals long planned between Iraq and China and Russia are to go ahead, regardless of U.S. wishes. ‘Same Shia, Different Day’, it might be said.

First, regarding China, Iraq’s newly-appointed Oil Minister, Hayyan Abdul Ghani, shows no signs of reversing the extraordinary ‘oil-for-projects’ agreement that was signed between Iraq and China in the middle of 2019. Last week, in fact, after Ghani’s appointment to his new post by new Prime Minister, al-Sudani, local state-endorsed news agencies reported that Iraq’s Oil Exploration Company (OEC) and the China National Offshore Oil Corporation (CNOOC) had begun multiple seismic surveys as part of the first phase of wide-ranging offshore oil and gas exploration between Iraq and China. According to a separate statement from OEC Director, Ali Jassim, CNOOC has started implementing a joint study contract for two-dimensional seismic and geophysical surveys to explore hydrocarbon gatherings in the Iraqi offshores north of the Arabian Gulf. This aligns entirely with the directive of the Iraqi government in October to include ‘vital and strategic projects’ in the 2019 oil-for-projects agreement between Iraq and China. These ‘vital and strategic projects’ include: roads, bridges, infrastructure, energy, oil and electricity, according to Haider Majid, spokesperson for the General Secretariat of the Council of Ministers.

Having effectively now given China the power to do whatever it wants in terms of offshore oil and gas development, Iraq is also allowing Beijing to expand its reach further into key onshore fields as well. In the middle of last month, the China Petroleum Engineering & Construction Corp (CPECC) signed a US$386 million engineering, procurement, and construction contract to build a two-train oil processing facility at Quraynat to develop production in the southern part of the Rumaila field, Iraq’s largest oilfield. The intention is that each train will handle around 120,000 barrel per day (bpd) of oil from the field’s Mishrif formation. There is much potential in the area as the Rumaila field, which lies around 30 kilometres north of Iraq’s southern border with Kuwait, despite it having already produced around 80 percent of all Iraq’s cumulative oil production to date, together with the Kirkuk field. Rumaila is currently managed by the Rumaila Operating Organization (ROO), a joint venture between BOC, Basra Energy Company Limited (BECL) and Iraq’s State Organization for Marketing of Oil (SOMO). BECL is a joint venture between Britain’s BP (with a 47.63 percent share), China’s PetroChina – the listed arm of the state-owned China National Petroleum Corporation - (46.37 percent), and SOMO (5 percent).

A plan originated in November 2020 was for BP to push production up to 2.1 million bpd, from the then-1.4 million bpd, a level which remains around the same today. With an estimated 17 billion barrels in proven reserves, Rumaila is a prime example of a field for which even a relatively small investment could yield significant increases in crude oil output. However, according to a comment at the time in 2020 from BP’s country head, Zaid Elyaseri: “There is an ongoing discussion with the ministry of oil and Basra Oil Co. on how to proceed [it has asked all international oil companies (IOCs) to cut their capex by 30 percent this year], given the low oil price environment and the reduction in the activity set that the ministry has requested all IOCs to do this year as a result of low oil prices.” He added at the time: “There is a discussion on the timing and all other details….[and] We are working to increase production gradually.” The original plan was for BP to add 100,000 bpd every year up to a total of 2.3-2.4 million bpd of production by the original target date of 2020. The chief impediment to achieving this output rise so far, aside from regular government directives for IOCs to reduce their capital expenditures, has been the lack of any progress on the Common Seawater Supply Project (CSSP) water-injection projection project, principally on IOC fears connected to endemic corruption in Iraq’s oil sector.

The CSSP remains absolutely critical for Iraq’s ambitions to reach its previous oil output targets - of 6.2 million bpd by the end of this year, and 9 million bpd by end-2023 - and is vital to the new target of hitting 7 million bpd oil production by 2025. It also hints at why Iraq was so in debt for so long to various international oil companies (IOCs). As exclusively reported by OilPrice.com at the time, U.S. oil supermajor ExxonMobil was long in a prime position to finally expedite the development and completion of the CSSP, as part of the broader US$53 billion Southern Iraq Integrated Project (SIIP) – either alongside the China National Petroleum Corporation (CNPC) or alone – until further consideration of all of the unsavory details attached to the project stopped ExxonMobil in its tracks.

Second, regarding Russia, Iraq’s new Oil Minister also shows no sign of reversing his predecessor’s intention of allowing Russian oil giant, Lukoil, to move ahead with the exploration and development of the huge Eridu oil field, despite Russia’s invasion of Ukraine in February. Located in Block 10, around 120 kilometres west of Basra in southern Iraq, the preliminary consensus opinion was that the field contained between 7 and 10 billion barrels of crude oil reserves. This alone would have made it the biggest oil discovery in Iraq in at least 20 years, but subsequent Russian oil industry estimates point to reserves of up to 12 billion barrels of oil. With a remuneration fee of US$5.99 per barrel – among the highest of all Iraq’s awards under its technical service contract model – and likely peak production of between 250,000 and 300,000 bpd, Lukoil was awarded a 60 percent share in Block 10 in the fourth round of licensing in 2012, along with a 40 percent stake being given to Japan’s Inpex.

Before Russia became a political and economic pariah of the West, following its invasion of Ukraine, Moscow held all the cards in its dealings with Iraq and stalled the development of Eridu as a bargaining tactic to get a better deal on its development of nearby West Qurna 2. At that point back in 2021, Lukoil had a 75 percent stake in West Qurna 2, which it still retains, and had already spent over US$8 billion on developing it, but was only being compensated US$1.15 per barrel recovered. This was the lowest rate being paid to any IOC in Iraq at that time and was dwarfed by the US$5.50 per barrel being paid to Gazprom Neft in its development of the Badra oil field. Coinciding with visit to Washington by then-Prime Minister, Mustafa Al-Kadhimi, Iraq’s Oil Ministry then counter-threatened that Lukoil was free to withdraw from West Qurna 2, but that before it did so it would have to pay the Ministry billions of dollars in compensation for breaking the contract.

As of now, according to a senior source who works closely with Iraq’s Oil Ministry, exclusively spoken to by OilPrice.com last week, although no final decision has been made, the signs are that Iraq’s new Oil Minister Ghani will go along with his predecessor’s intention of allowing Lukoil to go ahead with its planned development program for Eridu. In September, former Oil Minister, Ihsan Abdul Jabbar Ismail, met with Lukoil’s Vice President for Central Asian, Middle Eastern, and North African affairs, Stepan Gorgi, and stated that although the Oil Ministry was awaiting the full view on the subject from the Council of Ministers, he commended the technical study of Eridu by Lukoil. As Ghani also linked the Eridu development with Lukoil’s continued progress on West Qurna 2, and Russia is keen to hold on to the influence it has in the Middle East as its influence over Europe diminishes, it appears as though an accommodation on Eridu may be made by the Russian oil firm.
https://oilprice.com/Energy/Crude-O...n-On-Oil-Gas-Deals-With-China-And-Russia.html
 
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Shell posts $9.5 bln profit

LONDON, Oct 27 (Reuters) - Shell (SHEL.L) on Thursday posted a third-quarter profit of $9.45 billion, easing from the previous quarter's record high due to weaker refining and gas trading, as it announced plans to sharply boost its dividend by year end when its CEO departs. Shell also extended its share repurchasing programme, announcing plans to buy $4 billion of stock over the next three months after completing $6 billion in the previous quarter.
The company said it intends to increase its dividend by 15% in the fourth quarter, when Chief Executive Officer Ben van Beurden will step down after nine years at the helm.
He will be succeeded by Wael Sawan, the current head of Shell's natural gas and low-carbon division.

With a profit of $30.5 billion so far this year, Shell is well on track to exceed its record annual profit in 2008 of $31 billion.

Shell's shares gained over 40% so far this year, lifted by soaring oil and gas prices in the wake of Russia's invasion of Ukraine in February and amid tightening global oil and gas supplies.
It's all Bidens fault though
 
America and Saudi Arabia are locked in a bitter battle over oil. The stakes are massive
Analysis by Matt Egan, CNN Business | October 28, 2022



The relationship between the United States and Saudi Arabia is one of the most important on the planet. And lately, it’s also been one of the most awkward.

Angry officials in Washington vowed “consequences” after Saudi-led OPEC sharply cut oil production earlier this month, driving up pump prices just weeks before the midterm elections.

US lawmakers are threatening steps that were unthinkable not long ago, including banning weapons sales to Saudi Arabia and unleashing the Justice Department to file a lawsuit against the country and other OPEC members for collusion.

Riyadh has been caught off guard by the thirst for revenge from US politicians. And Saudi officials are hinting at payback – including dumping US debt – that could have huge ripple effects in financial markets and the real economy.

Neither side is even trying to hide the tension. After a top Saudi official suggested the kingdom has decided to be the more mature party, a top White House official responded by saying, “It’s not like some high school romance here.”

What happens next is critical.

If this decades-old relationship devolves into a full-blown break-up, there could be enormous consequences for the world economy, not to mention international security.

“This is a new low. We have seen a degradation in the US-Saudi relationship for years but this is the worst it’s been,” said Clayton Allen, director at the Eurasia Group.

So much for that secret deal

The spat is linked to one of the biggest sore spots among voters during the Biden era: Inflation and high gas prices.

After trying and failing to persuade OPEC to ramp up oil production, President Joe Biden reversed his 2020 campaign promise to make Saudi Arabia a “pariah” over its human rights record. Biden visited Saudi Arabia over the summer and even fist-bumped Crown Prince Mohammed bin Salman.

US officials thought they reached a secret deal with Saudi Arabia to finally boost supply of oil through the end of the year, The New York Times reported this week.

They were wrong.

OPEC and its allies, known as OPEC+, responded by increasing oil production by a measly 100,000 barrels per day – the smallest increase in its history. The move was widely viewed as a “slap in the face” of the Biden administration.

What came next was worse.

In early October, OPEC+ announced plans to slash oil production by 2 million barrels per day – a move that briefly drove up oil and gasoline prices at a time of high inflation and infuriated US politicians.

“Neither side seems to understand each other,” Allen said. “Riyadh underestimated the severity of the US backlash. And the US assumed we had an unspoken agreement.”

Fatih Birol, executive director of the International Energy Agency, described the move as “unprecedented” and “unfortunate” in an interview with CNN International on Thursday.

“When the global economy was on the brink of a global recession, they decided to push the prices up,” Birol said.

Saudi official accuses US of manipulating markets

The tensions haven’t eased, and officials from both sides have sharpened their criticism of each other in recent days. In one telling episode, a top Saudi minister went from defending Biden’s energy strategy to slamming it.

During the OPEC+ press conference in early October, Saudi Energy Minister Prince Abdulaziz bin Salman seemed to praise Biden’s decision to release unprecedented amount of emergency oil reserves from the Strategic Petroleum Reserve.

“I wouldn’t call it a distortion. Actually, it was done in the right time,” Prince Abdulaziz told reporters. “If it didn’t happen, I’m sure that things might be different than what it is today.”

Flash forward three weeks, and that same Saudi minister sang a very different tune.

“People are depleting their emergency stocks, had depleted it, used it as a mechanism to manipulate markets while its profound purpose was to mitigate a shortage of supply,” Prince Abdulaziz said during a conference in Saudi Arabia this week. “However, it is my profound duty to make it clear to the world that losing emergency stock may become painful in the months to come.”

The criticism is noteworthy, especially given that OPEC openly manipulates markets in many ways by withholding supply to support prices.

OPEC is unpopular

The risk is that the tension devolves into a tit-for-tat cycle of retaliation that undermines global economic stability, or whatever economic stability there is at the moment.

Lawmakers from both sides of the aisle have stepped up their calls to enact NOPEC (No Oil Producing and Exporting Cartels) legislation that would empower the Justice Department to go after OPEC nations on antitrust grounds. Although NOPEC isn’t new, it seems more possible now than at any point in recent memory. Eurasia Group pegs a 30% chance of NOPEC enactment and a 45% chance of a watered-down version of the bill.

“You can’t overstate how upset a huge number of lawmakers are,” said Allen.

Lawmakers aren’t only upset, they realize OPEC is not exactly endearing itself to voters.

“This is popular. American sentiment is anti-Saudi. This now has domestic political utility for American politicians. That’s where we are now,” said Karen Young, senior research scholar at Columbia University’s Center on Global Energy Policy. “NOPEC would be harder to veto than in the past.”

Could Saudi Arabia dump US debt?

Saudi Arabia could respond to penalties from Washington with drastic steps of their own, ratcheting up the conflict further.

Saudi officials have privately warned that the kingdom could sell US Treasury bonds if Congress passes NOPEC, The Wall Street Journal reported this week, citing people familiar with the matter.

At a minimum, dumping US debt would create uncertainty in markets at an already-perilous moment. A fire sale would drive up Treasury rates, destabilizing markets and raising borrowing costs for families and businesses.

And of course, Saudi Arabia’s own holdings would be damaged in such a fire sale.

Saudi Arabia is sitting on roughly $119 billion of US debt, according to Treasury Department data, making it the world’s 16th largest holder of Treasuries.

Another risk is that Saudi Arabia, the de facto leader of OPEC+, could remove further supply from world oil markets – or at least refuse to respond to future price spikes as the West continues to crack down on Russia.

Further curbs on OPEC supply would lift gasoline prices and worsen inflation, raising already-high recession risks.

All of this explains why a full-blown breakdown in relations between the United States and Saudi Arabia may be the last thing the fragile economy needs right now.

https://www.cnn.com/2022/10/28/economy/saudi-arabia-biden-opec-oil/index.html
 
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Saudi Arabia Reiterates Commitment To China, Regardless Of U.S. Concerns
By Simon Watkins - Nov 01, 2022​

Apparently confirming the view of Saudi Crown Prince Mohammed bin Salman (MbS) that the U.S. is now regarded as just another one of its partners in a new global order that would see Beijing and its allies share the leadership position with Washington, Saudi Arabia last week reiterated its commitment to China as its “most reliable partner and supplier of crude oil,” along with broader assurances of its ongoing support in several other areas. That MbS seemingly now sees the U.S. as a partner just for its security considerations, with no meaningful quid pro quo on Saudi Arabia’s part, whilst regarding China as its key partner economically and Russia as its key partner in energy matters, should not surprise the U.S. Back in March last year it was made clear enough at the annual China Development Forum hosted in Beijing, when Aramco chief executive officer, Amin Nasser said: “Ensuring the continuing security of China’s energy needs remains our highest priority - not just for the next five years but for the next 50 and beyond.” And yet, the U.S. is surprised by the apparent finalisation of the transition of Saudi Arabia away from Washington and towards China, which effectively marks the end of the 1945 core agreement between the U.S. and Saudi Arabia that defined their relationship up until extremely recently. This transition has been seen most recently in the refusal of MbS to take a telephone call from President Joe Biden in which he was to ask for his help in bringing down economy-crimping high energy prices and then in the huge cut in collective OPEC oil production that has only added to energy-driven inflationary fears for global economies.

Given the peremptory way in which the core 1945 agreement was ended by MbS, Washington is angry too, as was evidenced in the highly pointed comments from several senior U.S. officials at the time of the OPEC cut, including from Biden himself, who said that: “There’s going to be some consequences for what they’ve done, with Russia [supporting oil prices by leading OPEC’s 2 million barrel per day (bpd) collective output cut]…I’m not going to get into what I’d consider and what I have in mind. But there will be – there will be consequences.” Just before Biden’s comments, John Kirby, the national security council spokesperson, echoed official doubts on the future of the U.S.-Saudi security relationship, as he said that Biden believed that the U.S. ought to “review the bilateral relationship with Saudi Arabia and take a look to see if that relationship is where it needs to be and that it is serving our national security interests,…in light of the recent decision by OPEC, and Saudi Arabia’s leadership [of it].”

Apparently careless of these ramifications, Saudi Arabia last week stated that, in addition to continuing in its role as China’s partner of choice in the oil market, the two countries would continue “close communication and strengthen co-operation to address emerging risks and challenges,” according to a joint communique from Saudi Energy Minister, Prince Abdulaziz bin Salman and Beijing's National Energy Administrator, Zhang Jianhua. In the context of crude oil, according to Chinese Customs data, Saudi Arabia delivered 1.76 million bpd in shipments to China over the January to August period, marking an increase in its market share to 17.7 percent from 16.9 percent a year earlier.

Additionally, last week saw the two countries pledge to continue discussions on developing joint integrated refining and petrochemical complexes and to cooperate on the use of nuclear energy. Although flagged by Saudi Arabia and China as being ‘the peaceful use of nuclear energy’, the news just before Christmas 2021 that U.S. intelligence agencies had found that Saudi Arabia is now manufacturing its own ballistic missiles with the help of China – and given China’s long-running and extensive ‘assistance’ to Iran’s nuclear ambitions, as analysed in full in my latest book on the global oil markets - ongoing U.S. fears about what Beijing’s endgame might be in building out the nuclear capabilities of key states in the Middle East will not have been alleviated.

This latest round of talks and agreements comes very shortly after the signing of a multi-pronged memorandum of understanding (MoU) between the Saudi Arabian Oil Company – formerly the Saudi Arabian American Oil Company – ‘Aramco’, and the China Petroleum & Chemical Corporation (Sinopec), which can be regarded as a critical step in China’s ongoing strategy to secure Saudi Arabia as a client state. As the president of Sinopec, Yu Baocai, himself put it: “The signing of the MoU introduces a new chapter of our partnership in the Kingdom…The two companies will join hands in renewing the vitality and scoring new progress of the Belt and Road Initiative [BRI] and [Saudi Arabia’s] Vision 2030.”

Crucially for China’s long-term plans in Saudi Arabia, it also covers opportunities for the construction of a huge manufacturing hub in King Salman Energy Park that will involve the ongoing, on-the-ground presence on Saudi Arabian soil of significant numbers of Chinese personnel: not just those directly related to the oil, gas, petrochemicals, and other hydrocarbons activities, but also a small army of security personnel to ensure the safety of China’s investments. At that point in early 2021, Aramco had a 25 percent stake in the 280,000 bpd Fujian refinery in south China through a joint venture with Sinopec (and the U.S.’s ExxonMobil) and had also earlier agreed (in 2018) to buy a 9 percent stake in China’s 800,000 bpd ZPC refinery from Rongsheng. Several other joint projects between China and Saudi Arabia that had been agreed in principle were delayed due to a combination of the ongoing effects of Covid-19, Aramco’s crushing dividend repayment schedule, and concern from both countries – especially China – on how Washington might react to this clear threat to the U.S.’s own long-running interests in, and geopolitical relationship with, Saudi Arabia.

Just prior to this, June saw Saudi Aramco’s senior vice president downstream, Mohammed Y. Al Qahtani, announce the creation of a ‘one-stop shop’ provided by his company in China’s Shandong. “The ongoing energy crisis, for example, is a direct result of fragile international transition plans which have arbitrarily ignored energy security and affordability for all,” he said. “The world needs clear-eyed thinking on such issues. That’s why we highly admire China’s 14th Five Year Plan for prioritising energy security and stability, acknowledging its crucial role in economic development,” he added. The megaproject in Shandong, which is home to around 26 percent of China’s refining capacity and is a key destination for Saudi Aramco’s crude oil exports, will broadly involve the flagship Saudi oil and gas giant creating “stronger ties with the world’s largest oil exporter [that] would enhance China’s energy security, especially as we work on increasing our production capacity to 13 million barrels per day,” according to Al Qahtani. Aside from the fact that Saudi Arabia still cannot produce anywhere near 13 million barrels per day of crude oil, closer cooperation between Aramco and China will mean Saudi Arabia investing heavily in the build-out of a large, integrated downstream business across the country in tandem with its Chinese partners

Given the transition of Saudi Arabia away from the U.S. and towards China – and the senior Saudis do look at the issue in these terms, whatever they say publicly – there is also every reason to expect Riyadh to continue to back China’s efforts to undermine the power of the U.S. dollar in the global energy markets as well. Not only is Saudi Arabia now a prime mover in advancing the China-GCC Free Trade Agreement (FTA) – a key aim of which is to forge a “deeper strategic cooperation in a region where U.S. dominance is showing signs of retreat” – but also the Kingdom is now a prime advocate for switching away from the hegemony of U.S. dollars in the pricing of global oil and gas.

Just after China made a crucial face-saving offer to MbS to privately buy the entire 5 percent stake in Saudi Aramco that he originally wanted to float but could not entice Western investors to buy, the then-Saudi Vice Minister of Economy and Planning, Mohammed al-Tuwaijri, told a Saudi-China conference in Jeddah that: “We will be very willing to consider funding in renminbi and other Chinese products.” He added: “China is by far one of the top markets’ to diversify the funding…[and] we will also access other technical markets in terms of unique funding opportunities, private placements, panda bonds and others.” Moreover, recent reports state that long-running talks between Saudi Arabia and China for Saudi to price and receive payments for some of its oil sales in Chinese renminbi rather than in U.S. dollars have intensified in the past few months.

https://oilprice.com/Energy/Energy-...tment-To-China-Regardless-Of-US-Concerns.html
 
Why Is The U.S. Losing Oil Refining Capacity?
By Robert Rapier - Nov 21, 2022​
  • The U.S. energy policy is clear about its intention to phase out fossil fuels.
  • This has forced refiners to exercise caution in order to stay afloat.
  • It has also resulted in a loss of U.S. refining capacity.
One of the under-reported factors behind the ongoing diesel shortage is the loss of U.S. refining capacity since the start of the Covid-19 pandemic. Today I will discuss the factors that led to this loss.

According to the Energy Information Administration (EIA), at the beginning of the pandemic U.S. refiners had 19.0 million barrels per day (BPD) of operable refining capacity (Source). This was the highest number ever reported by the EIA.

By December 2021, that number had fallen to 17.9 million BPD — a loss of 1.1 million BPD of capacity in less than two years.

Here is the thing many need help understanding about refining. It is a boom-and-bust business, and these refiners do not have crystal balls. It is widely reported when they make huge profits, but they also regularly endure huge losses.

U.S. energy policy has been clear about the intent to phase out fossil fuels. If you are a refiner forecasting billions in losses — and you require massive investments in order to keep your refinery operating safely and in compliance with the laws — you may very well simply make the decision to close down.

There are two excellent sources of information detailing which refineries closed, and why they closed. The first is the EIA.

During the summer, the EIA reported U.S. refinery capacity decreased during 2021 for second consecutive year, in which they discussed one of the major closures in 2021. They also showed this excellent graphic of how refinery capacity has evolved in recent years:

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But I stumbled upon a more detailed look recently. In a Twitter thread, Laura Sanicola, an oil and energy reporter at Reuters, highlighted the individual refinery closures from the start of the pandemic through June 2022:

She reports on nine refinery closures, but the theme is consistent. Most of the refineries were closed due to demand loss as a result of the Covid-19 pandemic.

But, aren’t these companies earning billions of dollars? Isn’t that an argument for keeping these refineries open? There are two points to make on that argument.

First, it is possible to make billions of dollars as a company, but to lose money consistently in an individual refinery. We have seen this happen a lot with East Coast refiners that didn’t have access to cheaper oil from the U.S. shale boom. They had to continue to procure crude oil on the international markets, and that put them at a competitive disadvantage.

Second, current refiner profits are a snapshot in time. Today, U.S. demand for petroleum has largely recovered. In fact, distillate demand has recovered to pre-pandemic levels.

But, these companies are projecting the future. They are looking at long-term demand forecasts for petroleum products. Those projections indicate declining fuel demand over time. Thus, they do not want to invest billions of dollars that could take a decade or more to pay off.

Imagine that you are running a chain of stores. Overall, your company is highly profitable, but you have stores that are consistently unprofitable. Further, those stores are outdated, the outlook for demand in these areas is weak, and it will cost a lot of money to upgrade them. You would probably close those locations.

That, in a nutshell, is why we have lost refining capacity in the U.S. It’s going to take some changes in our energy policy to address this.

https://oilprice.com/Energy/Crude-Oil/Why-Is-The-US-Losing-Oil-Refining-Capacity.html
 
The U.S. Shale Boom Is Officially Over
By Tsvetana Paraskova - Nov 24, 2022, 7:00 PM CST
  • The days of the U.S. shale boom may be over, with production rising at a much slower rate than it did before the 2020 crash and showing no signs of ramping up.
  • A combination of supply chain constraints, inflation, and the new shareholder-focused strategy of shale companies have transformed how the industry operates.
  • With shale production facing headwinds, OPEC has regained its position as the world’s swing producer.

2022-11-24_ftvlxudm9p.jpg


The days of explosive growth in U.S. shale oil production are over. American oil production is rising, but at a much slower pace than it did before the 2020 crash, and at lower rates than expected a few months ago.

The new priorities of the shale patch – capital discipline and a focus on returns to shareholders and debt repayments – have coupled with supply chain constraints and cost inflation to drag down U.S. oil production growth.

The Biden Administration’s mixed signals to the American oil and gas industry, with frequent blaming of the sector for high gasoline prices and, most recently, a threat of more taxes, are not motivating U.S. producers, either. Many are reluctant to commit to spending more on drilling when there isn’t any medium-to-long-term vision of how the U.S. oil and gas resources could be used to boost America’s energy security and help Western allies who depend on imports.

Oil Production Growth Forecasts Lowered

This year, the U.S. Energy Information Administration (EIA) and various analysts have been downgrading their forecasts of crude oil production for 2022 and 2023. Although the EIA still expects output to set a new annual average record next year, it has significantly revised down its projections since the start of this year.

Oil firm executives, for their part, say the U.S. Administration’s policies and anti-oil rhetoric, inflation, contractor time delays, and regulatory uncertainty are negatively impacting drilling and production planning.

The EIA expects U.S. crude oil production to average 11.7 million barrels per day (bpd) in 2022 and 12.4 million bpd in 2023, which would surpass the record high set in 2019, per the November Short-Term Energy Outlook.

Despite the expectation of a record output next year, the EIA has downgraded the numbers several times in 2022 so far. The latest cut is a massive 21% reduction in the growth estimate, according to calculations by Reuters.

In the October forecast, the EIA had already downgraded the average production estimate for 2023 to 12.4 million bpd from the September forecast of 12.6 million bpd.

“Lower crude oil production in the forecast reflects lower crude oil prices in 4Q22 than we previously expected,” the administration said in October.

Weeks before the Russian invasion of Ukraine, which upended global energy markets, Enverus Intelligence Research expected U.S. oil production growth to accelerate in 2022 above around 900,000 bpd.

However, inflation and supply-chain delays from the second quarter onwards have materially worsened the outlook on U.S. crude oil production growth. Enverus Intelligence Research (EIR) cut this month its forecast for U.S. production growth, due to “the headwinds created by oilfield services limitations, the risk of recession and reduced performance from wells drilled recently in the Permian Basin.”

Therefore, the Lower 48 oil production forecast has been significantly downgraded and EIR now expects growth of around 450,000 bpd exit-to-exit in 2022 and 560,000 bpd growth for 2023.

“OPEC Back In The Driver’s Seat”

A top industry executive said last week that the U.S. shale patch is no longer the swing oil producer and OPEC is back as the most important driver of oil supply fundamentals.

“Shale was thought of as a swing producer, the Saudis and OPEC have waited this out. Now, really OPEC is back in the driver’s seat where they are the swing producer,” Hess Corp CEO John Hess said at a conference in Miami last week.

The executive believes that U.S. crude oil production will average 13 million bpd over the next few years, where it will plateau, as investors pressure U.S. oil companies to focus on returning money to shareholders instead of investing in aggressive growth strategies.

The current state and prospects of the U.S. oil industry are in stark contrast with the growth of the decade to 2019.

Between 2009 and 2019, U.S. producers captured all the incremental global consumption in three out of 10 years and at least two-thirds of incremental consumption in six of those years, according to estimates by Reuters’ senior market analyst John Kemp.

“US liquids production increased by 10 million b/d from 2011 to 2022, capturing a scarcely believable 10% of global supply in the process,” Wood Mackenzie said last month. Nearly 6 million bpd of that increase came from Lower 48 crude and condensate production, with two-thirds from the Permian Basin alone, while the rest of the increase is natural gas liquids produced from shale gas plays.

This year, while U.S. oil and gas production continues to increase, the growth is capped by cost pressures and supply-chain delays, executives said in the Dallas Fed Energy Survey for the third quarter. The shale patch cites labor and equipment shortages, as well as the Biden Administration’s inconsistent policies, as the key hurdles to expanding drilling activity.

“The administration's lack of understanding of the oil and gas investment cycle continues to result in inconsistent energy policies that contribute to rising energy costs. This continued inconsistency increases uncertainty and decreases investments in energy infrastructure,” an executive at an oilfield services firm said in comments to the survey.

“We are in an energy death spiral that will lead to higher highs and lower lows. Volatility will increase, and the public is in for a very difficult ride.”

https://oilprice.com/Energy/Energy-General/The-US-Shale-Boom-Is-Officially-Over.html
 
The U.S. Shale Boom Is Officially Over
By Tsvetana Paraskova - Nov 24, 2022, 7:00 PM CST
  • The days of the U.S. shale boom may be over, with production rising at a much slower rate than it did before the 2020 crash and showing no signs of ramping up.
  • A combination of supply chain constraints, inflation, and the new shareholder-focused strategy of shale companies have transformed how the industry operates.
  • With shale production facing headwinds, OPEC has regained its position as the world’s swing producer.

2022-11-24_ftvlxudm9p.jpg


The days of explosive growth in U.S. shale oil production are over. American oil production is rising, but at a much slower pace than it did before the 2020 crash, and at lower rates than expected a few months ago.

The new priorities of the shale patch – capital discipline and a focus on returns to shareholders and debt repayments – have coupled with supply chain constraints and cost inflation to drag down U.S. oil production growth.

The Biden Administration’s mixed signals to the American oil and gas industry, with frequent blaming of the sector for high gasoline prices and, most recently, a threat of more taxes, are not motivating U.S. producers, either. Many are reluctant to commit to spending more on drilling when there isn’t any medium-to-long-term vision of how the U.S. oil and gas resources could be used to boost America’s energy security and help Western allies who depend on imports.

Oil Production Growth Forecasts Lowered

This year, the U.S. Energy Information Administration (EIA) and various analysts have been downgrading their forecasts of crude oil production for 2022 and 2023. Although the EIA still expects output to set a new annual average record next year, it has significantly revised down its projections since the start of this year.

Oil firm executives, for their part, say the U.S. Administration’s policies and anti-oil rhetoric, inflation, contractor time delays, and regulatory uncertainty are negatively impacting drilling and production planning.

The EIA expects U.S. crude oil production to average 11.7 million barrels per day (bpd) in 2022 and 12.4 million bpd in 2023, which would surpass the record high set in 2019, per the November Short-Term Energy Outlook.

Despite the expectation of a record output next year, the EIA has downgraded the numbers several times in 2022 so far. The latest cut is a massive 21% reduction in the growth estimate, according to calculations by Reuters.

In the October forecast, the EIA had already downgraded the average production estimate for 2023 to 12.4 million bpd from the September forecast of 12.6 million bpd.

“Lower crude oil production in the forecast reflects lower crude oil prices in 4Q22 than we previously expected,” the administration said in October.

Weeks before the Russian invasion of Ukraine, which upended global energy markets, Enverus Intelligence Research expected U.S. oil production growth to accelerate in 2022 above around 900,000 bpd.

However, inflation and supply-chain delays from the second quarter onwards have materially worsened the outlook on U.S. crude oil production growth. Enverus Intelligence Research (EIR) cut this month its forecast for U.S. production growth, due to “the headwinds created by oilfield services limitations, the risk of recession and reduced performance from wells drilled recently in the Permian Basin.”

Therefore, the Lower 48 oil production forecast has been significantly downgraded and EIR now expects growth of around 450,000 bpd exit-to-exit in 2022 and 560,000 bpd growth for 2023.

“OPEC Back In The Driver’s Seat”

A top industry executive said last week that the U.S. shale patch is no longer the swing oil producer and OPEC is back as the most important driver of oil supply fundamentals.

“Shale was thought of as a swing producer, the Saudis and OPEC have waited this out. Now, really OPEC is back in the driver’s seat where they are the swing producer,” Hess Corp CEO John Hess said at a conference in Miami last week.

The executive believes that U.S. crude oil production will average 13 million bpd over the next few years, where it will plateau, as investors pressure U.S. oil companies to focus on returning money to shareholders instead of investing in aggressive growth strategies.

The current state and prospects of the U.S. oil industry are in stark contrast with the growth of the decade to 2019.

Between 2009 and 2019, U.S. producers captured all the incremental global consumption in three out of 10 years and at least two-thirds of incremental consumption in six of those years, according to estimates by Reuters’ senior market analyst John Kemp.

“US liquids production increased by 10 million b/d from 2011 to 2022, capturing a scarcely believable 10% of global supply in the process,” Wood Mackenzie said last month. Nearly 6 million bpd of that increase came from Lower 48 crude and condensate production, with two-thirds from the Permian Basin alone, while the rest of the increase is natural gas liquids produced from shale gas plays.

This year, while U.S. oil and gas production continues to increase, the growth is capped by cost pressures and supply-chain delays, executives said in the Dallas Fed Energy Survey for the third quarter. The shale patch cites labor and equipment shortages, as well as the Biden Administration’s inconsistent policies, as the key hurdles to expanding drilling activity.

“The administration's lack of understanding of the oil and gas investment cycle continues to result in inconsistent energy policies that contribute to rising energy costs. This continued inconsistency increases uncertainty and decreases investments in energy infrastructure,” an executive at an oilfield services firm said in comments to the survey.

“We are in an energy death spiral that will lead to higher highs and lower lows. Volatility will increase, and the public is in for a very difficult ride.”

https://oilprice.com/Energy/Energy-General/The-US-Shale-Boom-Is-Officially-Over.html
<mma1>

We need to ban exports
 
Ready for round 2?

https://www.reuters.com/business/en...ice-cap-with-adjustment-mechanism-2022-12-02/

WASHINGTON/BRUSSELS, Dec 2 (Reuters) - The Group of Seven (G7) nations and Australia on Friday said they had agreed a $60 per barrel price cap on Russian seaborne crude oil after European Union members overcame resistance from Poland and hammered out a political agreement earlier in the day.

The EU agreed the price after holdout Poland gave its support, paving the way for formal approval over the weekend.

The G7 and Australia said in a statement the price cap would take effect on Dec. 5 or very soon thereafter.

https://www.cnbc.com/2022/12/02/ope...s-on-the-table-ahead-of-russia-sanctions.html

OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.
The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.
 
Russian $60 oil price cap: Five things you need to know
Al Jazeera answers five key questions to better understand the effect of the EU and G7’s move.



A price cap set by the Group of Seven (G7) as well as an outright ban by the European Union on Russian seaborne oil came into effect on Monday as the two blocs try to reduce the Kremlin’s ability to continue financing the war in Ukraine.

On Friday, the G7, EU and Australia agreed to set a limit on the price of Russian oil at $60 per barrel. Back in May, the EU announced a ban on Russian seaborne crude oil. The 27-member bloc also said a ban on imports of refined petroleum products will be enforced from February 5.

The ban covers more than two-thirds of Russian oil imports coming into the EU, according to European Council President Charles Michel. He referred to this ban as a symbol of EU unity and said in a tweet that it puts “maximum pressure on Russia to end the war”.

While the EU’s oil embargo also applies to EU operators that insure and finance ships carrying Russian crude oil around the world, it does not apply to Russian oil imports coming into the bloc through pipelines.

The Druzhba oil pipeline, which began operating in 1964, has been supplying Russian oil to many Central and Eastern European countries, including Germany, Poland, Hungary, Slovakia, the Czech Republic and Austria.

Germany, Poland and Austria have supported the ban, pledging to completely wean off Russian oil imports by the end of this year.

But Hungary, the Czech Republic, Slovakia and Bulgaria are still heavily dependent on Russian pipeline oil and will be allowed to continue imports temporarily until they develop alternative supplies. However, these pipeline imports cannot be resold to other EU nations or non-EU countries, according to the European Commission.

Here are five things to know about the effects of the EU oil import ban and price cap:

What does the ban and price cap mean for the oil market in the EU?
Before Russia’s war in Ukraine, the 27-member bloc was heavily dependent on Russian oil exports. In 2021, the EU imported $74.8 billion of crude oil and refined oil products from Russia.

These imports of Russian crude oil amounted to 2.2 million barrels per day, including 700,000 barrels per day via pipelines as well as 1.2 million of refined oil products, according to the International Energy Agency (IEA).

With the EU embargoes on Russian sea-borne crude oil coming into force on Monday and on refined oil products in February, the IEA also said the bloc will need to replace 1 million barrels of crude and 1.1 million barrels of oil products per day.

About 10 percent of oil imports coming in from the Druzhba oil pipeline will continue temporarily.

Mats Cuvelier, a Brussels-based lawyer focusing on EU and international trade, told Al Jazeera that the layered EU ban on Russian oil won’t have a big effect on demand and supply within the bloc in the short term.

“This regulation has been on the books for half a year already, giving EU nations enough time to find alternative oil supply routes,” he said. “The bloc has been focusing on replacing Russian oil supply routes with routes from countries in the Middle East and elsewhere, so the EU won’t face a crude oil shortage.”

Philipp Lausberg, an analyst focusing on energy policy at the European Policy Centre, shared a similar view and highlighted that the main effect of the oil embargo could be a rise in oil prices.

“Brent oil will be more expensive, and that is something the EU will have to prepare for,” he told Al Jazeera.

On the day the price cap kicked in, global oil prices rose as much as 2 percent.

But Lausberg said a global economic slowdown will reduce global oil demand in the coming months, which will reduce the oil price once again.

What does it mean for oil vessels dependent on EU finances and insurance?
The EU’s price cap and ban on oil imports also stops EU operators from “insuring and financing the transport, in particular through maritime routes, of Russian oil to third countries”.

According to Lausberg, this will make it particularly difficult for Russia to continue exporting its crude oil and oil products to the rest of the world.

“Many ships from India, China and other countries are insured by companies in Europe and the UK,” he said. “These ships are now subject to the EU, G7 and Australia’s rules on Russian seaborne crude oil. Russia, however, has said that their legislation does not recognise these rules, so how the Kremlin plans to continue exporting oil to these countries with these new rules is yet to be seen.”

What does it mean for Russia?
According to the IEA, Russian oil output is expected to fall 1.4 million barrels per day next year after the EU’s ban on seaborne exports of Russian crude comes into effect.

Cuvelier said Russian vessels could try to evade these sanctions by registering in the Marshall Islands or Liberia and removing their Russian flags.

“But this tactic is on the EU’s radar, and the bloc has beefed up its maritime security to ensure Russian vessels don’t evade sanctions in this manner,” he said.

Meanwhile, Kremlin spokesman Dmitry Peskov said Russia would not accept the recently announced price ceiling, adding that it needed to analyse the situation before deciding on a specific response.

Russia’s permanent representative to international organisations in Vienna, Mikhail Ulyanov, also tweeted, “From this year, Europe will live without Russian oil.”

“Moscow has already made it clear that it will not supply oil to those countries that support anti-market price caps,” he said. “Wait, very soon the EU will accuse Russia of using oil as a weapon.”

Russia has options for how it could retaliate. “Russia has warned it could completely ban pipeline oil to the EU, which could be challenging for the bloc’s countries dependent on this supply route,” Lausberg said.

“While oil supply through maritime channels can be easily replaced, land-locked countries will find it hard to find an alternative if Russia blocks pipeline oil,” he said.

Will countries that are not part of the rules be affected?
Countries like India, China and Turkey are also dependent on Russian oil and continue to import oil from Moscow.

Vivek Mishra, a fellow at the Observer Research Foundation in New Delhi, told Al Jazeera that Russia will most likely negotiate with major buyers like India and China and arrange currency swaps.

“While these mechanisms won’t be able to replace Russian revenue from Europe, it will certainly create a soft landing for Russia,” he said. “I don’t think India is going to lose much as a major buyer of Russian oil. If we go by both statements from Russia and India, it points to the trend of India buying oil from Russia.”

“If anything, India could likely negotiate for more rebates as prices will be capped globally and Russia will be in a position to lose much more because of lack of related factors such as insurance companies not willing to bet on Russian oil tankers,” he added.

How will the embargo and price cap affect the international oil market?
OPEC+, a group made up of the Organization of the Petroleum Exporting Countries and its allies, held a meeting on Sunday to discuss how to ensure the oil market isn’t distorted by the new rules.

It agreed to continue reducing oil production by 2 million barrels per day, or about 2 percent of world demand, until the end of 2023.

Lausberg explained that every oil producer except Russia is meant to benefit from these rules.

“These sanctions are mainly meant to punish Russia for its actions in Ukraine,” he said.

“But if Russia manages to export more oil by buying more tankers or using any other tactics, then how the rest of the world and the oil market responds is yet to be seen.” he said.



https://www.aljazeera.com/news/2022...il-imports-and-g7-price-cap-comes-into-effect
 
Is it?

If you ask these guys, they'll tell you that America is a superhero that saves the world from bad guys:

@Blayt7hh
@Rod1
@MeatheadMike
@Limbo Pete
@DEVILsSON
@KnightTemplar

<36>
No one ever said that. You don’t know any of my opinions. You’re just butthurt because you keep getting proven wrong… in another thread. Now you’re bringing your tantrum meltdown bullshit into a whole other thread and derailing it for no reason other than your pathetic little ego is bruised.
 
No one ever said that. You don’t know any of my opinions. You’re just butthurt because you keep getting proven wrong… in another thread. Now you’re bringing your tantrum meltdown bullshit into a whole other thread and derailing it for no reason other than your pathetic little ego is bruised.

what an angry weirdo.

im not derailing shit you’re just looking for reasons to report me like a snitch
 
BJJ Lover said:
Is it?
If you ask these guys, they'll tell you that America is a superhero that saves the world from bad guys:

@Blayt7hh
@Rod1
@MeatheadMike
@Limbo Pete
@DEVILsSON
@KnightTemplar


Why am I tagged in this nonsense?

I find it strange a guy who lives under the protection of US is talking shit about it? You really want us to argue your strawmans?
 
Last edited:
It's an American tradition to arm both sides of a conflict after all
Isn't russian tradition too?
Live example : weapons sales to Azerbaijan and Armenia while they does have armed conflict in the same time.
30 years in row from time till time.


So Russia is hardcore expert here too.
 
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