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Say Goodbye to Peak Oil, for The Time Being

COMMENT: We’ve exam­ined the Peak Oil pro­pa­gan­da phe­nom­e­non in sev­er­al past broad­casts. Based on the notion that the world is run­ning out of oil, it has been used as jus­ti­fi­ca­tion for cast­ing aside envi­ron­men­tal con­cerns, rais­ing prices and impos­ing dra­con­ian social pro­grams to deal with the “emer­gency.”

As we saw in FTR #506, the petro­le­um com­pa­nies have been say­ing the world has been run­ning out of oil since the 1920’s. (That was the jus­ti­fi­ca­tion for the devel­op­ment of the Fischer/Tropsch process to syn­the­size oil from coal.)

The epi­cen­ter for the Peak Oil ide­ol­o­gy is HIS Ener­gy Group, a sub­sidiary of Thyssen/Bornemisza indus­tries, which draws its con­clu­sions based on data fed to them by the very com­pa­nies that ben­e­fit from the dis­sem­i­na­tion of the the­o­ry.

It is no coin­ci­dence that Thyssen/Krupp bought the Leu­na hydro­gena­tion plant, orig­i­nal­ly built by I.G. Far­ben dur­ing World War II to syn­the­size oil uti­liz­ing the Fischer/Tropsch process.

The fear mon­ger­ing over Peak Oil has been used to pro­pose a Nazi-linked social agen­da.

For now at least, the oil com­pa­nies and their amen cho­rus have relaxed their pro­pa­gan­da, see­ing plen­ty of oil for decades to come.

It will be inter­est­ing to see how long this “Petro­le­um Pro­pa­gan­da Ploy” remains dor­mant. When prices get too low, or envi­ron­men­tal restric­tions too high for the lik­ing of the oil barons, don’t be sur­prised to see it reemerge.

In pass­ing, I will note that I am fun­da­men­tal­ly crit­i­cal of the fos­sil fuels industry–two thumbs down on oil. We should be going full speed ahead to devel­op renew­al ener­gy sources. Many pro-envi­ron­ment advo­cates have been suck­ered by the peak oil phe­nom­e­non, see­ing it as a “green issue.” It is noth­ing of the kind.

“Peak Oil Scare Fades as Shale, Deep­wa­ter Wells Gush Crude” by Joe Car­roll; Bloomberg News; 2/6/2012.

EXCERPT: When Daniel Lacalle, in his ear­ly 20s, took a job with Span­ish oil com­pa­ny Rep­sol YPF SA in 1991, friends chid­ed him for enter­ing a field with no future. “They all said, ‘Why do you want to do that? Don’t you know only 20 years of oil is left in the whole world?’ ” he recalls.

Two decades and four ener­gy crises lat­er, the U.S. Geo­log­i­cal Sur­vey esti­mates that more than 2 tril­lion bar­rels of untouched crude is still locked in the ground, enough to last more than 70 years at cur­rent rates of con­sump­tion. Tech­no­log­i­cal advances enable com­pa­nies to image, drill and shat­ter sub­ter­ranean rocks with pre­ci­sion nev­er dreamed of in decades past. Tril­lions of bar­rels of petro­le­um pre­vi­ous­ly thought unreach­able or nonex­is­tent have been iden­ti­fied, mapped and in many cas­es bought and sold dur­ing the past half decade, from the bog­gy wastes of north­ern Alber­ta, to the arid moun­tain val­leys of Patag­o­nia, to Africa’s Rift Val­ley.

“Bet­ting against human inge­nu­ity has been a mis­take,” says Lacalle, who today helps over­see $1.3 bil­lion as a port­fo­lio man­ag­er at Ecofin Ltd. in Lon­don. “The resource base is absolute­ly enor­mous, so much so that we will not run out of oil in my life­time, your life­time, our chil­dren’s life­times or our grand­chil­dren’s life­times.” . . .


10 comments for “Say Goodbye to Peak Oil, for The Time Being”

  1. Posted by Keith | February 23, 2012, 5:13 am
  2. Heh, the US is cur­rent­ly export­ing so much oil that we now have Thomas Fried­man ask­ing the ques­tion “Should the US join OPEC?”.

    Posted by Pterrafractyl | February 26, 2012, 3:36 pm
  3. Peak Water, com­ing to a future war zone near you. Actu­al­ly, there’s noth­ing to wor­ry about...the water wars aren’t expect­ed start for anoth­er decade. That should be plen­ty of time to pre­pare for the loss of a vital resource:

    Fights over WATER will spark this cen­tu­ry’s wars, says U.S. (just like Bond film Quan­tum of Solace)

    By Dai­ly Mail Reporter

    PUBLISHED: 21:03 EST, 22 March 2012 | UPDATED: 21:21 EST, 22 March 2012

    The strug­gle over access to water sup­plies could spark glob­al war in the next few decades, accord­ing to a new report from U.S. offi­cials.


    U.S. intel­li­gence agen­cies said in a report released on Thurs­day that drought, floods and a lack of fresh water may cause sig­nif­i­cant glob­al insta­bil­i­ty and con­flict in the com­ing decades, as devel­op­ing coun­tries scram­ble to meet demand from explod­ing pop­u­la­tions while deal­ing with the effects of cli­mate change.

    An assess­ment reflect­ing the joint judg­ment of fed­er­al intel­li­gence agen­cies says the risk of water issues caus­ing wars in the next 10 years is min­i­mal even as they cre­ate ten­sions with­in and between states and threat­en to dis­rupt nation­al and glob­al food mar­kets.

    But beyond 2022, it says the use of water as a weapon of war or a tool of ter­ror­ism will become more like­ly, par­tic­u­lar­ly in South Asia, the Mid­dle East and North Africa.

    The report is based on a clas­si­fied Nation­al Intel­li­gence Esti­mate on water secu­ri­ty, which was request­ed by Sec­re­tary of State Hillary Rod­ham Clin­ton and com­plet­ed last fall.

    It says floods, scarce and poor qual­i­ty water, com­bined with pover­ty, social ten­sion, poor lead­er­ship and weak gov­ern­ments will con­tribute to insta­bil­i­ty that could lead the fail­ure of numer­ous states.

    Those ele­ments ‘will like­ly increase the risk of insta­bil­i­ty and state fail­ure, exac­er­bate region­al ten­sions, and dis­tract coun­tries from work­ing with the Unit­ed States on impor­tant pol­i­cy objec­tives,’ said the report, which was released at a State Depart­ment event com­mem­o­rat­ing World Water Day.


    The report not­ed that coun­tries have in the past tried to resolve water issues through nego­ti­a­tion but said that could change as water short­ages become more severe.

    ‘We judge that as water short­ages become more acute beyond the next 10 years, water in shared basins will increas­ing­ly be used as lever­age; the use of water as a weapon or to fur­ther ter­ror­ist objec­tives, also will become more like­ly beyond 10 years,’ it said.

    The report pre­dicts that upstream nations — more pow­er­ful than their down­stream neigh­bors due to geog­ra­phy — will lim­it access to water for polit­i­cal rea­sons and that coun­tries will reg­u­late inter­nal sup­plies to sup­press sep­a­ratist move­ments and dis­si­dent pop­u­la­tions.


    The unclas­si­fied sum­ma­ry of the intel­li­gence esti­mate does not iden­ti­fy the spe­cif­ic coun­tries most at risk.

    But it notes that the study focused on sev­er­al spe­cif­ic rivers and water basins. Those includ­ed the Nile in Egypt, Sudan and nations fur­ther south, the Tigris and Euphrates in Iraq and the greater Mid­dle East, the Mekong in Chi­na and South­east Asia, the Jor­dan that sep­a­rates Israel from the Pales­tin­ian ter­ri­to­ries, the Indus and the Brahma­pu­tra in India and South Asia as well as the Amu Darya in Cen­tral Asia.

    This is one of those arti­cles that’s a reminder that the col­lapse of the ecosys­tem may be bad for just about every­thing and every­one but it’s great for war-prof­i­teersbusi­ness!

    Posted by Pterrafractyl | March 29, 2012, 10:27 pm
  4. @Pterrafractyl: Sad but true. One must won­der how soon these ‘water wars’ could start........and just how bad ter­ror­ism could real­ly get. Pos­si­bly even a nuke or two being explod­ed, over say, Tel Aviv or Cairo? Not pleas­ant stuff to think about. =(

    Posted by Steven L. | March 30, 2012, 11:06 am
  5. At least “peak-dia­monds” should­n’t be an issue for human­i­ty any time soon:

    Rus­sia reveals shiny state secret: It’s awash in dia­monds

    ‘Tril­lions of carats’ lie below a 35-mil­lion-year-old, 62-mile-diam­e­ter aster­oid crater in east­ern Siberia known as Popi­gai Astrob­lem. The Rus­sians have known about the site since the 1970s.

    By Fred Weir, Cor­re­spon­dent / Sep­tem­ber 17, 2012


    Rus­sia has just declas­si­fied news that will shake world gem mar­kets to their core: the dis­cov­ery of a vast new dia­mond field con­tain­ing “tril­lions of carats,” enough to sup­ply glob­al mar­kets for anoth­er 3,000 years.

    The Sovi­ets dis­cov­ered the bonan­za back in the 1970s beneath a 35-mil­lion-year-old, 62-mile diam­e­ter aster­oid crater in east­ern Siberia known as Popi­gai Astrob­lem.

    They decid­ed to keep it secret, and not to exploit it, appar­ent­ly because the USS­R’s huge dia­mond oper­a­tions at Mirny, in Yaku­tia, were already pro­duc­ing immense prof­its in what was then a tight­ly con­trolled world mar­ket.


    It will be inter­est­ing to see what, if any, impact this has on the price of dia­monds because it’s not like there has been any­thing remote­ly approach­ing a “free-mar­ket” in dia­monds for a long time.

    Then again...

    The Oppen­heimers and De Beers are no more. Here’s a 30-year old arti­cle that pre­dict­ed the cartel’s undo­ing
    Frik Els | March 29, 2012

    De Beers and the Oppen­heimer fam­i­ly, one of min­ing’s most sto­ried rela­tion­ships, has come to an end after three gen­er­a­tions.

    In March reg­u­la­tors gave the go-ahead to Nicky Oppen­heimer (pic­tured in 2011) to sell his fam­i­ly’s remain­ing 40% in the empire which for most of its exis­tence pros­pered by keep­ing an iron grip on the pro­duc­tion and sale of rough dia­monds world­wide.

    Cecil John Rhodes formed De Beers Con­sol­i­dat­ed Mines in 1888 in South Africa. Rhodes either bought up or squelched com­peti­tors but Ernest Oppen­heimer who trad­ed dia­monds from the famous Cul­li­nan mine north of Johan­nes­burg refused to join the car­tel.

    Ernest Oppen­heimer’s Anglo-Amer­i­can, a com­pa­ny co-found­ed with US financier JP Mor­gan, even­tu­al­ly bought out De Beers and Ernest Oppen­heimer became chair­man of the dia­mond firm in 1927.

    The Oppen­heimers con­tin­ued the monop­oly busi­ness mod­el exe­cut­ed through its Dia­mond Trad­ing Com­pa­ny through­out the 20th cen­tu­ry but in the 1990s changed tack because it was becom­ing increas­ing­ly dif­fi­cult to keep its grip on the glob­al mar­ket.

    It stopped stock­pil­ing rough dia­mond sup­ply and moved into retail and jew­ellery man­u­fac­tur­ing.

    The Oppen­heimers took the com­pa­ny pri­vate in 2001 after a cen­tu­ry-long list­ing on the Johan­nes­burg Stock Exchange. The Oppen­heimer fam­i­ly’s wealth is esti­mat­ed at $6.8 bil­lion.

    Here’s an excerpt from an in-depth arti­cle on how De Beers “invent­ed” the dia­mond mar­ket that appeared in The Atlantic mag­a­zine in Feb­ru­ary 1982.

    The writer, Edward Jay Epstein, spec­u­lates how “An unruly mar­ket may undo the work of a giant car­tel and of an inspired, decades-long ad cam­paign.”

    The excerpt cen­tres on how the Oppen­heimers piv­ot­ed the busi­ness dur­ing the 1970s to counter the threat of small Russ­ian dia­monds flood­ing the mar­ket.

    It is also pre­sent­ed as an exam­ple of how mar­ket­ing can be used to cre­ate demand – essen­tial in the dia­mond busi­ness – because the gems hold “lit­tle intrin­sic val­ue”:

    Almost all of the Sovi­et dia­monds were under half a carat in their uncut form, and there was no ready retail out­let for mil­lions of such tiny dia­monds. When it made its secret deal with the Sovi­et Union, De Beers had expect­ed pro­duc­tion from the Siber­ian mines to decrease grad­u­al­ly. Instead, pro­duc­tion accel­er­at­ed at an incred­i­ble pace, and De Beers was forced to recon­sid­er its sales strat­e­gy. De Beers ordered N. W. Ayer to reverse one of its themes: women were no longer to be led to equate the sta­tus and emo­tion­al com­mit­ment to an engage­ment with the sheer size of the dia­mond. A “strat­e­gy for small dia­mond sales” was out­lined, stress­ing the “impor­tance of qual­i­ty, col­or and cut” over size. Pic­tures of “one quar­ter carat” rings would replace pic­tures of “up to 2 carat” rings. More­over, the adver­tis­ing agency began in its inter­na­tion­al cam­paign to “illus­trate gems as small as one-tenth of a carat and give them the same emo­tion­al impor­tance as larg­er stones.” The news releas­es also made clear that women should think of dia­monds, regard­less of size, as objects of per­fec­tion: a small dia­mond could be as per­fect as a large dia­mond.

    DeBeers devised the “eter­ni­ty ring,” made up of as many as twen­ty-five tiny Sovi­et dia­monds, which could be sold to an entire­ly new mar­ket of old­er mar­ried women. The adver­tis­ing cam­paign was based on the theme of recap­tured love. Again, sen­ti­ments were born out of neces­si­ty: old­er Amer­i­can women received a ring of minia­ture dia­monds because of the needs of a South African cor­po­ra­tion to accom­mo­date the Sovi­et Union.

    The new cam­paign met with con­sid­er­able suc­cess. The aver­age size of dia­monds sold fell from one carat in 1939 to .28 of a carat in 1976, which coin­cid­ed almost exact­ly with the aver­age size of the Siber­ian dia­monds De Beers was dis­trib­ut­ing. How­ev­er, as Amer­i­can con­sumers became accus­tomed to the idea of buy­ing small­er dia­monds, they began to per­ceive larg­er dia­monds as osten­ta­tious. By the mid-1970s, the adver­tis­ing cam­paign for small­er dia­monds was begin­ning to seem too suc­cess­ful…”

    Posted by Pterrafractyl | September 18, 2012, 1:03 pm
  6. Peak oil...it’ll be here soon enough...any cen­tu­ry now...

    Oil at $60 or $120 Doesn’t Pre­vent U.S. Sup­plant­i­ng Saud­is
    By Asjy­lyn Loder, Antho­ny Dipao­la & Grant Smith — Dec 13, 2012 8:58 AM CT

    Whether crude costs $60 a bar­rel or twice that amount, the U.S. is almost free of depend­ing on import­ed ener­gy and posi­tioned to sup­plant Sau­di Ara­bia as the world’s No. 1 pro­duc­er of oil.

    Even if U.S. bench­mark West Texas Inter­me­di­ate oil drops 30 per­cent from the cur­rent $86 a bar­rel, oil com­pa­nies will boost pro­duc­tion as new tech­nolo­gies allow them to extract crude from shale for­ma­tions, said Ed Morse, the glob­al head of com­modi­ties research at Cit­i­group Inc. The nation, which was last self- suf­fi­cient when Har­ry S. Tru­man was pres­i­dent in 1952, met 83 per­cent of its ener­gy needs in the first eight months of this year, accord­ing to the Ener­gy Depart­ment in Wash­ing­ton.

    Sau­di Ara­bia can’t afford a decline of that mag­ni­tude after the gov­ern­ment pledged an unprece­dent­ed $630 bil­lion on social wel­fare and build­ing projects. The king­dom, which uses Brent crude to help set export rates, couldn’t meet those com­mit­ments if prices fell 25 per­cent from the cur­rent $109 a bar­rel, accord­ing to Samuel Ciszuk, an oil con­sul­tant at KBC Ener­gy Eco­nom­ics in Wal­ton-on-Thames, Eng­land.

    “U.S. shale oil pro­duc­ers can’t lose,” Leo Drol­las, the chief econ­o­mist at the Lon­don-based Cen­tre for Glob­al Ener­gy Stud­ies, which was found­ed by Sau­di Arabia’s for­mer oil min­is­ter, said in a Dec. 10 tele­phone inter­view. “The Saud­is real­ly need to bal­ance their bud­get at about $95. For the U.S. pro­duc­ers, that is more than ample.”

    New Deposits

    U.S. aver­age dai­ly out­put will climb 14 per­cent this year, the most in six decades, accord­ing to the Ener­gy Depart­ment, as Anadarko Petro­le­um Corp. and Chesa­peake Ener­gy Corp. exploit new deposits from North Dako­ta to Texas. Even though America’s 6.8 mil­lion bar­rels a day in Novem­ber was 30 per­cent less than Sau­di Arabia’s 9.7 mil­lion, the Inter­na­tion­al Ener­gy Agency says the U.S. will be big­ger by 2020.

    West Texas Inter­me­di­ate, or WTI, will rise about 15 per­cent through 2015, to $100 a bar­rel, accord­ing to the medi­an of 13 ana­lyst esti­mates com­piled by Bloomberg. Brent, the bench­mark for Arab Light and Arab Medi­um grades, may gain less than 1 per­cent, to $110, the fore­casts show.

    WTI slipped 35 cents, or 0.4 per­cent, to $86.42 a bar­rel at 9:54 a.m. on the New York Mer­can­tile Exchange. Brent for Jan­u­ary set­tle­ment on the Lon­don-based ICE Futures Europe exchange fell 71 cents to $108.79 a bar­rel. The Orga­ni­za­tion of the Petro­le­um Export­ing Coun­tries yes­ter­day kept its offi­cial pro­duc­tion ceil­ing at 30 mil­lion bar­rels a day.
    Abdullah’s Pledge

    While Morse says U.S. pro­duc­ers break even with prices of about $72 to $75 a bar­rel, and will keep drilling new shale wells at $60 because they’ve already hedged future out­put, Sau­di Ara­bia faces dif­fer­ent chal­lenges.

    Last year, as pop­u­lar upris­ings top­pled lead­ers in Tunisia, Libya and Egypt and sparked a civ­il war in Syr­ia, Sau­di King Abdul­lah promised to spend $130 bil­lion on extra sub­si­dies for hous­ing and ben­e­fits as well as $500 bil­lion for pre­vi­ous­ly announced infra­struc­ture projects.

    The kingdom’s pop­u­la­tion of 28.4 mil­lion is grow­ing 2.9 per­cent a year, accord­ing to the Cen­tral Depart­ment of Sta­tis­tics and Infor­ma­tion. At cur­rent rates, it will need all its own oil by 2032, leav­ing noth­ing to export, Cit­i­group said in a Sept. 4 report. The coun­try uses about 25 per­cent of its fuel pro­duc­tion domes­ti­cal­ly, more per capi­ta than any oth­er indus­tri­al­ized nation, the report said.

    Fuel Mis­use

    Waste and mis­use of fos­sil fuels threat­en to dou­ble con­sump­tion by 2030, Sau­di Oil Min­is­ter Ali al-Nai­mi said in a Nov. 24 speech in Riyadh. The king­dom con­sumes an aver­age of 2.5 bar­rels of oil and oil equiv­a­lents to pro­duce $1,000 of nation­al income, twice the glob­al aver­age, he said.

    “The Saud­is are try­ing to do two things: they want to keep prices from going too high to hurt eco­nom­ic activ­i­ty and at the same time not let oil go below $100 a bar­rel,” Ciszuk, the KBC Ener­gy con­sul­tant said in a tele­phone inter­view Dec. 5. “I would strug­gle to see the Saud­is will­ing or able to take oil prices low enough to cut off U.S. shale devel­op­ments since even they need oil in the $80s to bal­ance the gov­ern­ment bud­get through 2013 and 2014.”

    For all the growth in U.S. pro­duc­tion, Al-Nai­mi told reporters at yesterday’s OPEC meet­ing he isn’t con­cerned by the bur­geon­ing out­put from shale deposits, while Unit­ed Arab Emi­rates Oil Min­is­ter Mohammed Al-Ham­li said pro­duc­ers are “very con­cerned” and will pro­tect their inter­ests.


    Big Short

    The last time the U.S. rivaled Sau­di Ara­bia proved a dis­as­ter for America’s oil indus­try and for the king­dom. U.S. pro­duc­tion expand­ed 10 per­cent from 1976 to 1985, reach­ing the high­est lev­el since the Arab embar­go in 1973.

    By late 1985, the Saud­is were pump­ing more crude to defend their mar­ket dom­i­nance. WTI plunged to $10 a bar­rel in March 1986. U.S. out­put declined for 21 of the next 22 years and didn’t start grow­ing again until 2009.

    Now, the U.S. may be pro­duc­ing too much oil and WTI may drop as low as $50 a bar­rel with­in the next two years unless pol­i­cy mak­ers scrap a law lim­it­ing exports, Fran­cis­co Blanch, the head of com­modi­ties research for Bank of Amer­i­ca Mer­rill Lynch in New York, said in an inter­view.


    The rela­tion­ship between the US oil-shale boom and sta­bil­i­ty in the Mid­dle East is going to be some­thing to watch going for­ward. If Sau­di Ara­bia is going to be depen­dent on $80+ a bar­rel just to finance its own social spend­ing projects and ward off its own “Sau­di Spring”, what’s going to hap­pen if the price of oil real­ly does fall to $50. There are a lot of nations that rely on bil­lions in Sau­di for­eign aid and they may respond well to peak aid

    Saudi’s for­eign aid bill piles up
    By Una Galani
    May 28, 2012

    By Una Galani

    The author is a Reuters Break­ingviews colum­nist. The opin­ions expressed are her own.

    Sau­di Arabia’s for­eign aid bill is mount­ing. Egypt Jor­dan, Bahrain, Oman and Yemen – the Arab spring has elicit­ed a string of pledges of loans and grants from the oil-rich king­dom to its trou­bled, resource-poor neigh­bours.

    Char­i­ty is a key tenet of Islam and the king­dom is an estab­lished donor. The Sau­di Fund for Devel­op­ment sup­ports infra­struc­ture projects, pre­dom­i­nant­ly across the Islam­ic world. The Sau­di cen­tral bank report­ed that for­eign aid totalled $3.7 bil­lion or 0.8 per­cent of GDP in 2010. That’s rough­ly in line with the Unit­ed Nations’ tar­get.

    The real cost of the for­eign aid bill is like­ly to be much high­er. That now includes bilat­er­al pledges relat­ed to unrest that will come to more than $12 bil­lion, assum­ing the Saud­is con­tribute one quar­ter of the $20 bil­lion pack­age promised by Gulf coun­tries to Oman and Bahrain. Out­siders have lit­tle knowl­edge about the tim­ing and nature of such aid; econ­o­mists treat Saudi’s help­ing hand as an off-bal­ance sheet item.

    Saudi’s expen­sive for­eign pol­i­cy prob­a­bly isn’t too unpop­u­lar at home. The aid is a clear expres­sion of Arab sol­i­dar­i­ty while also shoring up sup­port for the region’s club of kings. And while GDP per capi­ta is low­er in Sau­di than in oth­er, less pop­u­lous Gulf coun­tries, the king­dom has pledged mas­sive domes­tic spend­ing that should be suf­fi­cient to deal with its own chron­ic hous­ing short­age and help tack­le high unem­ploy­ment. At the cur­rent oil price, and with low debt, Sau­di can afford to be gen­er­ous with its wealth.


    Keep in mind, though, that while “peak petro-aid” could lead to greater region­al insta­bil­i­ty, that petro-aid was­n’t always for financ­ing sta­bil­i­ty:

    The Per­ils of Sau­di Ara­bia Bankrolling U.S. For­eign Pol­i­cy
    Post­ed: 09/12/2012 3:10 pm

    Jonathan Mar­shall

    Almost every­one agrees that overde­pen­dence on Mid­dle East­ern oil is bad for Amer­i­ca’s econ­o­my and nation­al secu­ri­ty. So why don’t we rec­og­nize the sim­i­lar dan­gers of overde­pen­dence on Mid­dle East­ern mon­ey to achieve U.S. for­eign pol­i­cy objec­tives?

    Gulf State mon­ey helped pay for the over­throw of Libyan dic­ta­tor Muam­mar Gaddafi and now is fund­ing the armed oppo­si­tion to the Assad regime in Syr­ia. Both caus­es were backed by the Oba­ma admin­is­tra­tion and applaud­ed by some human­i­tar­i­an activists, as well. But in each case — as in Afghanistan before them — such mon­ey has strength­ened dan­ger­ous Islamist ele­ments, trans­form­ing reformist polit­i­cal caus­es into dan­ger­ous jihadist move­ments.

    For more than a quar­ter cen­tu­ry, Sau­di Ara­bia and the Unit­ed States have had a grand bar­gain: they sell us over­priced oil in exchange for vir­tu­al­ly unlim­it­ed access to our advanced weapons. (Of the $66 bil­lion in U.S. arms sales abroad last year, half went to Sau­di Ara­bia.) In addi­tion, Riyadh agreed to fund U.S. covert oper­a­tions around the world with its sur­plus petrodol­lars.


    In 2007, Stu­art Lev­ey, the Trea­sury Depart­men­t’s top expert on ter­ror­ist finances, tes­ti­fied that “wealthy donors in Sau­di Ara­bia are still fund­ing vio­lent extrem­ists around the world, from Europe to North Africa, from Iraq to South­east Asia.” As Lev­ey told an inter­view­er, “If I could some­how snap my fin­gers and cut off the fund­ing from one coun­try, it would be Sau­di Ara­bia.”

    It should come as no com­fort, there­fore, that Sau­di sources, both offi­cial and unof­fi­cial, have been pour­ing mil­i­tary sup­plies into Syr­i­a’s rebel move­ment for months. The New York Times reports that the Oba­ma admin­is­tra­tion has encour­aged such pro­vi­sions to sup­ple­ment its own “non-lethal” aid. “Admin­is­tra­tion offi­cials say that out­sourc­ing the sup­ply of mon­ey and arms to the rebels main­tains a cru­cial dis­tinc­tion that keeps Amer­i­can mil­i­tary fin­ger­prints off a con­flict that has already turned into a bloody civ­il war.”

    Efforts by CIA offi­cers to steer the arms to non-jihadist groups appear to be of lit­tle avail. The resis­tance move­ment is increas­ing­ly turn­ing Islamist, even join­ing up with fight­ers from al Qae­da. The con­se­quences for human rights, espe­cial­ly for Syr­i­a’s minori­ties, have been ter­ri­ble.

    In the words of one Indi­an jour­nal­ist writ­ing for the New York Times, “As Sau­di Ara­bi­an arms and mon­ey bol­ster the oppo­si­tion, the 80,000 Chris­tians who’ve been ‘cleansed’ from their homes... by the Free Syr­i­an Army have grad­u­al­ly giv­en up the prospect of ever return­ing home... The seem­ing indif­fer­ence of the inter­na­tion­al com­mu­ni­ty... is breed­ing a bit­ter anti-Amer­i­can­ism among many sec­u­lar Syr­i­ans who see the Unit­ed States align­ing itself with Sau­di Ara­bia, the fount of Wah­habism, against the Arab world’s most res­olute­ly sec­u­lar state.”

    He is not alone in rais­ing the alarm. Iraq’s Prime Min­is­ter Nuri al-Mali­ki warned that by “send­ing arms instead of work­ing on putting out the fire,” Sau­di Ara­bia and Qatar “will leave a greater cri­sis in the region.”

    Even some neo­cons, who for years have cham­pi­oned the down­fall of Syr­i­a’s regime, now sound uneasy about the prospect of Sau­di Ara­bi­an mon­ey dic­tat­ing the out­come of what increas­ing­ly is turn­ing into a region­al con­flict.

    “Wash­ing­ton must stop sub­con­tract­ing Syr­ia pol­i­cy to the Turks, Saud­is and Qataris,” declared Danielle Plet­ka of the Amer­i­can Enter­prise Insti­tute. “They are clear­ly part of the anti-Assad effort, but the Unit­ed States can­not tol­er­ate Syr­ia becom­ing a proxy state for yet anoth­er region­al pow­er.”

    Sure­ly we already have enough dan­ger­ous fires to put out, from Islamists attack­ing a nuclear air base in Pak­istan to jihadists ram­pag­ing across North­ern Africa in the wake of the Libya cam­paign. The Oba­ma admin­is­tra­tion is right to resist fool­hardy calls for direct mil­i­tary inter­ven­tion in anoth­er sec­tar­i­an con­flict in the Mid­dle East. But out­sourc­ing our inter­ven­tion to Sau­di Ara­bia is an abdi­ca­tion of respon­si­bil­i­ty, an eva­sion of account­abil­i­ty, and a set-up for long-term dis­as­ter.

    Posted by Pterrafractyl | December 13, 2012, 9:09 am
  7. How to mur­der the future in one sim­ple step:

    Step 1. Do noth­ing.

    All done!:

    We just can’t afford a future
    Sun­day, April 14, 2013
    by dig­by

    If this is a prob­lem, why isn’t it fixed?

    Let me say that when I’m talk­ing to you here right now, my posi­tion on cli­mate change was very mod­er­ate and actu­al­ly very main­stream. And that is this: If you think that the sci­ence on cli­mate change is set­tled, you’re sim­ply over­stat­ing the facts. And let me give you an exam­ple of that. Two years ago, Pres­i­dent Oba­ma con­trolled the House and the Senate—the Sen­ate by a 60-vote mar­gin. They did not put forth a vote on human cli­mate change. And do you know why? Why do you sup­pose they did­n’t? Because they rec­og­nized that sci­ence behind this...

    Well, that’s not true, actu­al­ly but con­sid­er­ing that they were deal­ing with an eco­nom­ic cat­a­stro­phe solu­tions for which the Repub­li­cans were deter­mined to obstruct, it’s amaz­ing they even got that done. But you have to love the log­ic that says “the Democ­rats did­n’t fix it so it must not be real.”

    But this one’s a real doozy:

    There’s one final thought that’s real­ly impor­tant in this, which is that even if you con­cede that cli­mate change is real, even if you con­cede, there are no rea­son­able reme­dies that don’t absolute­ly bank­rupt the West.

    So let’s par­ty! Our kids and grand­kids are gonna die any­way, amirite?

    The good news is that when we go down, we won’t be in debt so at least we’ll have that.

    I’m sure you’re won­der­ing why I’m quot­ing some GOP back bench moron. Who cares what he thinks, right? Well, unfor­tu­nate­ly this guy hap­pens to be chair­man of the House Sub­com­mit­tee on the Envi­ron­ment. Yep.

    Posted by Pterrafractyl | April 14, 2013, 7:59 pm
  8. Just in time for a poten­tial tar sand oil export boom to EU: The petro­le­um indus­try wants you to know it’s been sys­tem­at­i­cal­ly over­es­ti­mat­ing how much oil is down in those tar sands:

    Old Math Casts Doubt on Accu­ra­cy of Oil Reserve Esti­mates
    By Asjy­lyn Loder Apr 3, 2014 4:33 AM CT

    Jan Arps is the most influ­en­tial oil­man you’ve nev­er heard of.

    In 1945, Arps, then a 33-year-old petro­le­um engi­neer for British-Amer­i­can Oil Pro­duc­ing Co., pub­lished a for­mu­la to pre­dict how much crude a well will pro­duce and when it will run dry. The Arps method has become one of the most wide­ly used mea­sures in the indus­try. Com­pa­nies rely on it to pre­dict the prof­itabil­i­ty of drilling, secure loans and report reserves to reg­u­la­tors. When Rep­re­sen­ta­tive Ed Royce, a Cal­i­for­nia Repub­li­can, said at a March 26 hear­ing in Wash­ing­ton that the U.S. should start export­ing its oil to under­mine Russ­ian influ­ence, his fore­cast of “increas­ing U.S. ener­gy pro­duc­tion” can be traced back to Arps.

    The prob­lem is the Arps equa­tion has been twist­ed to apply to shale tech­nol­o­gy, which didn’t exist when Arps died in 1976. John Lee, a Uni­ver­si­ty of Hous­ton engi­neer­ing pro­fes­sor and an author­i­ty on esti­mat­ing reserves, said bil­lions of bar­rels of untapped shale oil in the U.S. are count­ed by com­pa­nies rely­ing on lim­it­ed drilling his­to­ry and tweaks to Arps’s for­mu­la that exag­ger­ate future pro­duc­tion. That casts doubt on how close the U.S. will get to ener­gy inde­pen­dence, a goal that’s near­er than at any time since 1985, accord­ing to data from the U.S. Ener­gy Infor­ma­tion Admin­is­tra­tion.

    “Things could turn out more pes­simistic than peo­ple project,” said Lee. “The long-term pro­duc­tion of some of those oil-rich wells may be over­stat­ed.”

    Cal­cu­late Reserves

    Lee’s crit­i­cisms have opened a rift in the indus­try about how to mea­sure the stores of crude trapped with­in rock for­ma­tions thou­sands of feet below the earth’s sur­face. In a newslet­ter pub­lished this year by Hous­ton-based Ryder Scott Co., which helps drillers cal­cu­late reserves, Lee called for an indus­try con­fer­ence to address what he said are incon­sis­tent approach­es. The Arps method is par­tic­u­lar­ly open to abuse, he said.

    U.S. oil pro­duc­tion has increased 40 per­cent since the end of 2011 as drillers tar­get lay­ers of oil-bear­ing rock such as the Bakken shale in North Dako­ta, the Eagle Ford in Texas, and the Mis­sis­sip­pi Lime in Kansas and Okla­homa, accord­ing to the EIA. The U.S. is on track to become the world’s largest oil pro­duc­er by next year, accord­ing to the Paris-based Inter­na­tion­al Ener­gy Agency. A report from Lon­don-based con­sul­tants Wood Macken­zie said that by 2020 the Bakken’s out­put alone will be 1.7 mil­lion bar­rels a day, from 1.1 mil­lion now.

    U.S. crude bench­mark West Texas Inter­me­di­ate fell 41 cents to $99.21 a bar­rel at 10:10 a.m Lon­don time in elec­tron­ic trad­ing on the New York Mer­can­tile Exchange. It has risen 0.8 per­cent this year.

    Inher­ent­ly Uncer­tain

    Pre­dict­ing the future is an inher­ent­ly uncer­tain busi­ness, and Arps’s method works as well as any oth­er, said Scott Wil­son, a senior vice pres­i­dent in Ryder Scott’s Den­ver office.

    “No one method does it right every time,” Wil­son said. “Arps is just a tool. If you blame Arps because a fore­cast turns out to be wrong, that’s like blam­ing the gun for shoot­ing some­body. As far as Arps being old, the wheel was invent­ed a long time ago too but it still comes in handy.”

    Ris­ing reserve esti­mates gives the U.S. a false sense of secu­ri­ty, said Tad Patzek, chair­man of the Depart­ment of Petro­le­um and Geosys­tems Engi­neer­ing at the Uni­ver­si­ty of Texas at Austin.

    “We have deceived our­selves into think­ing that since we have an infi­nite resource, we don’t need to wor­ry,” Patzek said. “We are stum­bling like blind peo­ple into a future which is not as pret­ty as we think.”

    The Arps for­mu­la is only as good as the assump­tions a com­pa­ny puts into it, Patzek said. Esti­mates can be inflat­ed when Arps is based on lim­it­ed drilling his­to­ry for data or on a few high-per­form­ing wells to pre­dict per­for­mance across a wide swath of acreage. Fore­casts can also be skewed high­er by assum­ing slow­er pro­duc­tion declines than Arps observed.


    Gas Pock­ets

    In 1945, oil pro­duc­tion meant drilling straight down to hit pock­ets of oil and gas that had become trapped after migrat­ing upward from deep lay­ers of rock. Today’s drilling tar­gets those deep lay­ers, bor­ing through thou­sands of feet of the earth’s crust, then turn­ing side­ways to chew for a mile or more through lay­ers that are hard­er and less porous than a gran­ite coun­ter­top. The rock is shat­tered by a high-pres­sure jet of water, sand, and chem­i­cals to cre­ate a net­work of small cracks to allow the oil and gas to escape. The largest fis­sures are nar­row­er than the width of a paper clip. The small­est are thou­sands of times thin­ner than a human hair.

    On a graph, these frac­tured wells appear to fol­low a dif­fer­ent tra­jec­to­ry of decline than the con­ven­tion­al wells Arps stud­ied, said Lee.

    To replace the Arps cal­cu­la­tion, researchers are test­ing new for­mu­las with names wor­thy of indie bands: Stretched Expo­nen­tial, which Lee helped devel­op; the Duong Method, devised by Anh Duong, prin­ci­pal reser­voir engi­neer for Cono­coPhillips; and Sim­ple Scal­ing The­o­ry, which the Uni­ver­si­ty of Texas’s Patzek worked on.

    Rietz has made a well sim­u­la­tion mod­el to pre­dict pro­duc­tion.

    “Come back to me in 10 years, and I’ll tell you how reli­able it was,” he said.

    Could this be a legit­i­mate revi­sion? Is Peak Oil back, at least accord­ing to the indus­try? Did it ever leave? One thing is clear: The peak cost-to-ben­e­fits ratio for human­i­ty’s ener­gy addic­tion is nowhere in sight.

    Posted by Pterrafractyl | April 3, 2014, 8:17 am
  9. Here’s an arti­cle about how the plung­ing price of oil isn’t real­ly threat­en­ing to dri­ve the oil shale indus­try out of busi­ness, as is often sug­gest­ed. It’s mere­ly threat­en­ing to ensure that the North Amer­i­can oil shale indus­try is even more con­cen­trat­ed in the hands of the big boys with deep pock­ets once the shake­out is over:

    Bloomberg News
    Get Ready for Oil Deals: Shale Is Going on Sale
    by Bradley Olson
    11:00 PM CDT
    March 10, 2015

    (Bloomberg) — A deci­sion by Whit­ing Petro­le­um Corp., the largest pro­duc­er in North Dakota’s Bakken shale basin, to put itself up for sale looks to be the first tremor in a poten­tial wave of con­sol­i­da­tion as $50-a-bar­rel prices under­cut com­pa­nies with heavy debt and high costs.

    For the first time since wild­cat­ters such as Harold Hamm of Con­ti­nen­tal Resources Inc. began extract­ing sig­nif­i­cant amounts of oil from shale for­ma­tions, acqui­si­tion prospects from Texas to the Great Plains are look­ing less expen­sive.

    Buy­ers are ulti­mate­ly after reserves, the amount of oil a com­pa­ny has in the ground based on its drilling acreage. The val­ue of about 75 shale-focused U.S. pro­duc­ers based on their reserves fell by a medi­an of 25 per­cent by the end of 2014 com­pared to 2013, accord­ing to data com­piled by Bloomberg. That’s open­ing up new oppor­tu­ni­ties for big­ger com­pa­nies with a bet­ter han­dle on their debt, said William Arnold, a for­mer exec­u­tive at Roy­al Dutch Shell Plc.

    “In this mar­ket, there are whales and there are fish­es, and the whales are well armed,” said Arnold, who also worked as an ener­gy-indus­try banker and now teach­es at Rice Uni­ver­si­ty in Hous­ton. “There are some very vul­ner­a­ble lit­tle fish­es out there try­ing to sur­vive any way they can.”

    Small­er pro­duc­ers with sig­nif­i­cant debt that depend on high­er prices to make mon­ey are the most like­ly ear­ly tar­gets for buy­ers such as Exxon Mobil Corp. or Chevron Corp., com­pa­nies that have bid­ed their time for years as the val­ue of some shale fields soared to $38,000 an acre from $450 just a few years ear­li­er.

    ‘Con­sol­i­da­tion Game’

    The mar­ket crash is cre­at­ing “a con­sol­i­da­tion game,” Con­cho Resources Inc. Chief Exec­u­tive Offi­cer Tim­o­thy Leach said on a Feb. 26 call with investors. “It’s hard­er to be a small com­pa­ny today than it has been in the past.”

    In the pre-plunge days, acqui­si­tions were dom­i­nat­ed by for­eign buy­ers over­pay­ing to get a seat at the shale boom table. That buy­ing fren­zy was fol­lowed by an explo­sion in asset sales as com­pa­nies pieced togeth­er their ide­al drilling port­fo­lios. Joint ven­tures were a pop­u­lar way of fund­ing what seemed like an unstop­pable drilling machine.

    Now, an expect­ed surge of deals is more like­ly to fea­ture fire sales by com­pa­nies unable to pay expens­es, falling asset prices and a widen­ing divi­sion between the haves and have-nots.

    Heavy Debt

    Sell­ers will be com­pa­nies like Whit­ing, hand­i­capped by heavy debt and lack­ing the cash reserves or hedg­ing con­tracts that would have pro­vid­ed some insu­la­tion from the mar­ket crash. Among the three biggest pro­duc­ers in North Dako­ta — Whit­ing, Con­ti­nen­tal and Oasis Petro­le­um Inc. — the val­ue per-bar­rel of reserves has fall­en by about half since June, the data show, mean­ing those reserves would cost a buy­er half what they were worth eight months ago.

    Exxon is the only major oil com­pa­ny with a AAA cred­it rat­ing, which gives it unpar­al­leled bor­row­ing pow­er for financ­ing deals. More impor­tant­ly, the com­pa­ny has $226 bil­lion of its own shares stashed away from buy­backs that it could use to buy oth­er com­pa­nies. That was how Exxon paid for Mobil in 1999 and XTO Ener­gy Inc. in 2010.

    Chevron holds $43 bil­lion of its own shares in its trea­sury along­side $13 bil­lion in cash, and the com­pa­ny has ample abil­i­ty to bor­row.

    An analy­sis by Wolfe Research LLC’s Paul Sankey found the like­li­est takeover can­di­dates among major U.S. and Cana­di­an pro­duc­ers includ­ed Con­ti­nen­tal, Apache Corp., Devon Ener­gy Corp. and Anadarko Petro­le­um Corp. Those com­pa­nies are big enough to help a buy­er such as Exxon gain oil reserves at a cheap­er price com­pared to peers, Sankey wrote Feb. 2.

    In the head­i­est days of the shale-buy­ing spree, exec­u­tives includ­ing Occi­den­tal Petro­le­um Corp. CEO Stephen I. Chazen swore off deal-mak­ing, say­ing it would be more prof­itable to focus on devel­op­ing the assets they’d already acquired.

    Now they’re singing a dif­fer­ent tune.

    Eyes Open

    For the first time in years, EOG Resources Inc. Chair­man and CEO William R. Thomas said Feb. 25 the com­pa­ny was weigh­ing larg­er deals to scoop up acreage at a bar­gain, depart­ing from its usu­al pref­er­ence for more incre­men­tal pur­chas­es. Exxon Chair­man and CEO Rex Tiller­son sug­gest­ed last week at an investor pre­sen­ta­tion in New York that the glob­al oil giant is keep­ing its eyes open for oppor­tu­ni­ties in the down­turn.

    Whit­ing has reached out to poten­tial buy­ers includ­ing Sta­toil ASA about a sale, peo­ple famil­iar with the mat­ter said this week.

    The com­pa­ny took on $2.2 bil­lion in addi­tion­al debt for its $6 bil­lion acqui­si­tion last year of fel­low shale pro­duc­er Kodi­ak Oil & Gas Corp., just as crude prices had begun a decline from more than $100 a bar­rel to less than $50 at the start of the year.


    ‘Stock for Stock’

    “Now is the time to do a stock-for-stock deal,” Bock said. “For the most part, it’s going to be uncon­ven­tion­al play­ers com­bin­ing.”

    Since oil com­pa­ny shares have fall­en along­side the mar­ket crash, an equi­ty deal allows both buy­er and sell­er to reap the upside when shares gain in a recov­ery, said Tim Balom­bin, an ener­gy invest­ment banker with Wells Far­go & Co.

    Whit­ing has fall­en 54 per­cent since June, about the same as oil prices in that time. The Stan­dard & Poor’s 500 ener­gy pro­duc­er index has declined 33 per­cent, accord­ing to data com­piled by Bloomberg.

    As oil prices have sta­bi­lized this year, Whit­ing has climbed 13 per­cent.

    “The com­pa­nies that have good cur­ren­cy in their stock are will­ing to deploy it aggres­sive­ly,” Balom­bin said in a tele­phone inter­view. “The best com­pa­nies that come out of these down­turns come out of it big­ger and stronger.”

    And here’s an arti­cle that high­lights one of the dri­ving forces behind the expect­ed con­sol­i­da­tion: While prices may be falling, the costs are falling too:

    The Wall Street Jour­nal
    Exxon Mobil: Shale to the Chief
    Falling costs in U.S. shale drilling present a major head­wind to oil price ral­lies

    By Liam Den­ning
    Updat­ed March 5, 2015 10:21 a.m. ET

    Some­times, it’s what doesn’t hap­pen that real­ly counts.

    The relent­less rise in U.S. oil inven­to­ries con­tin­ues. Indeed, tanks at Cushing—the big pipeline hub in Oklahoma—are two-thirds full already, accord­ing to Ener­gy Depart­ment data released this week. Think of that as a giant buck­et fill­ing up above the heads of oil investors.

    But there is an even big­ger buck­et out there: Big Oil.

    On the same day the inven­to­ry fig­ures came out, Exxon Mobil was giv­ing its annu­al strat­e­gy pre­sen­ta­tion in New York. And Chief Exec­u­tive Rex Tiller­son had some pret­ty bear­ish things to say on oil.

    In par­tic­u­lar, while he didn’t see a per­fect par­al­lel between shale gas and shale oil, he said there were “lessons” to be learned. The drop in oil prices has prompt­ed 39% of U.S. oil rigs to be idled since Octo­ber, stok­ing expec­ta­tions of a rebound in the mar­ket.

    Yet Mr. Tiller­son point­ed out that the col­lapse in nat­ur­al-gas prices sim­i­lar­ly had led the num­ber of rigs drilling for that fuel to drop to 280 from north of 1,600 in 2008. Gas out­put jumped 50% in that time, he said. That is what you call resilience.

    The more insid­i­ous mes­sage con­cerned what Exxon hadn’t been doing in recent years: name­ly, ramp­ing up its own North Amer­i­can shale-oil out­put. In 2010, Exxon plunged into shale with the acqui­si­tion of XTO Ener­gy. Back then, it had about 12 rigs drilling in three big shale basins, the Per­mi­an, the Wood­ford and the Bakken. Five years on, that has risen, but only to about 45, the com­pa­ny says.

    Why such grad­u­al­ism? Rather than chase near-term cash flow, Mr. Tiller­son said Exxon has been putting itself through shale class, learn­ing “how to get the most out of these rocks in the most cost-effi­cient way.”

    That rep­re­sents a bear­ish trend that will weigh on oil prices for years to come. Exxon says its costs in the Bakken have dropped by 20% to 25%. So, many prospects that made sense at $100-a-bar­rel oil still make sense now, the com­pa­ny says.

    This gives Exxon, along with its peers, a base of resources from which it can grow pro­duc­tion prof­itably. That is even if, as now, low­er oil prices force delays in advanc­ing the big tick­et, mul­ti­year projects such as liq­ue­fied nat­ur­al gas that the majors are usu­al­ly known for. Indeed, rough­ly half the increase in out­put that Exxon tar­gets by 2017 is expect­ed to come from U.S. onshore wells.


    Inven­to­ries should be a con­cern for investors right now. But it is the mar­riage of shale resources with the likes of Exxon’s long-stand­ing focus on cut­ting costs that presents the big­ger head­wind to oil ral­lies.

    “Why such grad­u­al­ism? Rather than chase near-term cash flow, Mr. Tiller­son said Exxon has been putting itself through shale class, learn­ing “how to get the most out of these rocks in the most cost-effi­cient way.”

    That rep­re­sents a bear­ish trend that will weigh on oil prices for years to come. Exxon says its costs in the Bakken have dropped by 20% to 25%. So, many prospects that made sense at $100-a-bar­rel oil still make sense now, the com­pa­ny says.“ ‘
    That’s all part of why we might expect to see quite a bit of con­sol­i­da­tion in the oil shale sec­tor the longer these prices stay low: when prices are too low for Exxon’s small com­peti­tors, but not too low for Exxon and its larg­er peers, con­sol­i­da­tion is pret­ty much inevitable.

    So is the “wild­cat­ter” phase of the great North Amer­i­can oil shale boom about to come to an end, with the ush­er­ing in the inevitable era of Big Oil dom­i­na­tion? We’ll find out. But here’s a reminder that, while North Amer­i­can oil shale is clear­ly a grow­ing seg­ment of Exxon’s port­fo­lio, North Amer­i­ca is not where the future of Exxon’s growth lies. Oil shale, as a dri­ver for Big Oil rev­enue growth, has com­pe­ti­tion:

    Bloomberg News
    Exxon Rus­sia Expo­sure Surges as Long View Out­weighs Pol­i­tics

    by Joe Car­roll
    6:00 PM CST
    March 2, 2015

    (Bloomberg) — Exxon Mobil Corp. shook off the chill of sanc­tions and con­tin­ued to snap up drilling rights in Rus­sia last year, giv­ing it more explo­ration hold­ings in Vladimir Putin’s back­yard than in the U.S.

    Tak­ing the long view, Exxon boost­ed its Russ­ian hold­ings to 63.7 mil­lion acres in 2014 from 11.4 mil­lion at the end of 2013, accord­ing to data from U.S. reg­u­la­to­ry fil­ings. That dwarfs the 14.6 mil­lion acres of rights Exxon holds in the U.S., which until last year was its largest explo­ration prospect.

    While U.S. and Euro­pean Union sanc­tions against Rus­sia forced Exxon to shut down an Arc­tic drilling project in Octo­ber, there were no legal obsta­cles bar­ring the com­pa­ny from stak­ing claims to areas that could yield tens of bil­lions of bar­rels in com­ing decades. The bet on Rus­sia fol­lows a string of drilling fail­ures else­where and spend­ing cuts that will like­ly be addressed in Chief Exec­u­tive Offi­cer Rex Tillerson’s investor meet­ing Wednes­day.

    Exxon is “def­i­nite­ly look­ing at the longer-term oppor­tu­ni­ty,” Bri­an Young­berg, an ana­lyst at Edward Jones in St. Louis, said in an e‑mail. “Even before oil fell, it was going to be a longer-term play with no con­tri­bu­tion until at least 2020.”

    Sanc­tions to pun­ish Rus­sia for sup­port­ing sep­a­ratists in east­ern Ukraine and for the annex­a­tion of Crimea pro­hib­it com­pa­nies based in the U.S. and EU from prob­ing Russia’s deep-sea, shale and Arc­tic fields. They don’t bar activ­i­ties such as seis­mic sur­vey­ing or acquir­ing drilling rights, open­ing an avenue for Exxon’s bold cam­paign.

    Drilling Rights

    The pro­duc­er, based in Irv­ing, Texas, added drilling rights in the Laptev and Chukchi seas last year to hold­ings it already had in the Kara and Black seas under joint-ven­ture agree­ments with state-con­trolled OAO Ros­neft, the fil­ings showed. The explo­ration rights have var­i­ous expi­ra­tion dates span­ning from 2017 to 2023.

    Geol­o­gists have no esti­mate of how much oil is trapped beneath the acreage Exxon amassed. In 2012, Russ­ian offi­cials said the resources were so vast that they would require new air­ports to be built to han­dle thou­sands of rough­necks and scores of off­shore plat­forms to man­age crude pro­duc­tion.

    The Kara and Black sea assets alone will cost as much as $350 bil­lion to devel­op, Igor Sechin, the Ros­neft chair­man who was deputy prime min­is­ter at the time, said in April 2012.

    The work with Ros­neft that was halt­ed by sanc­tions in late 2014 may pro­duce a max­i­mum loss of $1 bil­lion, Exxon said in a pub­lic fil­ing last week.

    No Sid­ing

    Tiller­son is sched­uled to brief a gath­er­ing of investors and ana­lysts on the company’s growth out­look at the New York Stock Exchange on Wednes­day. Exxon closed the trans­ac­tion for the addi­tion­al acreage in May, com­plet­ing an agree­ment made 15 months before, said Patrick McGinn, a com­pa­ny spokesman. The May clos­ing was about two months after the Russ­ian annex­a­tion of Crimea that spurred U.S. and EU lead­ers to esca­late sanc­tions.

    “We don’t take sides in any geopo­lit­i­cal events,” Tiller­son said of the con­flict in Ukraine in a meet­ing with reporters a year ago. “We have nav­i­gat­ed these kinds of chal­lenges before.”

    The company’s fourth-quar­ter out­put tum­bled to a 15-year low, and its shares lost 8.7 per­cent of their val­ue in 2014, the steep­est annu­al decline since 2009.

    The U.S. oil explorer’s will­ing­ness to expand in Rus­sia when west­ern gov­ern­ments are work­ing to iso­late Pres­i­dent Putin’s regime may indi­cate it expects sanc­tions to be short-lived, said Tim­o­thy Ash, chief econ­o­mist for emerg­ing mar­kets at Stan­dard Bank Plc in Lon­don.

    “They’ve got peo­ple much bet­ter at read­ing geopol­i­tics inter­na­tion­al­ly than any­one else,” Ash said. Still, the EU appears more like­ly to “extend, deep­en, enlarge” sanc­tions rather than sus­pend them.

    Ukraine Sit­u­a­tion

    Exxon has scant prospect of exploit­ing those hold­ings as long as Rus­sia remains com­mit­ted to sep­a­ratists in east­ern Ukraine and the annex­a­tion of Crimea, said Philipp Chladek of Bloomberg Intel­li­gence.

    Euro­pean lead­ers “can­not accept one coun­try annex­ing another’s ter­ri­to­ry like that,” said Chladek, a petro­le­um ana­lyst based in Lon­don and for­mer strate­gist at OMV AG, cen­tral Europe’s biggest oil com­pa­ny. “Europe is very keen on not cre­at­ing any prece­dents for sim­i­lar moves.”


    “Tak­ing the long view, Exxon boost­ed its Russ­ian hold­ings to 63.7 mil­lion acres in 2014 from 11.4 mil­lion at the end of 2013, accord­ing to data from U.S. reg­u­la­to­ry fil­ings. That dwarfs the 14.6 mil­lion acres of rights Exxon holds in the U.S., which until last year was its largest explo­ration prospect.”

    As we can see, despite the low oil prices, there’s no short­age of new prospects for the big boys. Try to enjoy the good news.

    Posted by Pterrafractyl | March 11, 2015, 11:49 am
  10. FYI, if you’re liv­ing in one of the many regions of the world fac­ing the grow­ing threat of ‘peak water’ and just assume that you’ll be able to build a giant pipeline and buy the water from else­where, keep in mind that it’s going to be a sell­er’s mar­ket:

    UN warns world could have 40 per­cent water short­fall by 2030

    AP Envi­ron­ment Writer

    NEW DELHI (AP) — The world could suf­fer a 40 per­cent short­fall in water in just 15 years unless coun­tries dra­mat­i­cal­ly change their use of the resource, a U.N. report warned Fri­day.

    Many under­ground water reserves are already run­ning low, while rain­fall pat­terns are pre­dict­ed to become more errat­ic with cli­mate change. As the world’s pop­u­la­tion grows to an expect­ed 9 bil­lion by 2050, more ground­wa­ter will be need­ed for farm­ing, indus­try and per­son­al con­sump­tion.

    The report pre­dicts glob­al water demand will increase 55 per­cent by 2050, while reserves dwin­dle. If cur­rent usage trends don’t change, the world will have only 60 per­cent of the water it needs in 2030, it said.

    Hav­ing less avail­able water risks cat­a­stro­phe on many fronts: crops could fail, ecosys­tems could break down, indus­tries could col­lapse, dis­ease and pover­ty could wors­en, and vio­lent con­flicts over access to water could become more fre­quent.


    In many coun­tries includ­ing India, water use is large­ly unreg­u­lat­ed and often waste­ful. Pol­lu­tion of water is often ignored and unpun­ished. At least 80 per­cent of Indi­a’s pop­u­la­tion relies on ground­wa­ter for drink­ing to avoid bac­te­ria-infest­ed sur­face waters.

    In agri­cul­ture-intense India, where stud­ies show some aquifers are being deplet­ed at the world’s fastest rates, the short­fall has been fore­cast at 50 per­cent or even high­er. Cli­mate change is expect­ed to make the sit­u­a­tion worse, as high­er tem­per­a­tures and more errat­ic weath­er pat­terns could dis­rupt rain­fall.

    Cur­rent­ly, about 748 mil­lion peo­ple world­wide have poor access to clean drink­ing water, the report said, cau­tion­ing that eco­nom­ic growth alone is not the solu­tion — and could make the sit­u­a­tion worse unless reforms ensure more effi­cien­cy and less pol­lu­tion.

    “Unsus­tain­able devel­op­ment path­ways and gov­er­nance fail­ures have affect­ed the qual­i­ty and avail­abil­i­ty of water resources, com­pro­mis­ing their capac­i­ty to gen­er­ate social and eco­nom­ic ben­e­fits,” it said. “Eco­nom­ic growth itself is not a guar­an­tee for wider social progress.”

    Posted by Pterrafractyl | March 20, 2015, 3:17 pm

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