Oil and Gas

I actually support the XL because without it, canadian production lags and the ones producing are working on thinner margins which leads to less environmental responsibility and rehab of mined areas. Smaller, more likely to go bankrupt and reorganize to avoid environmental cleanup costs, are the ones that will work on the tighter margins.

The upgrade costs for both the large Philly and the St Croix refineries was not economically viable in the former price environment with the reduced crack spread. As refinery capacity is squeezed and the crack spread increases, it may be worth it but the patient money required to finance the improvements has no confidence that the margins will remain that large over time. Demand destruction from covid has really spooked oil investment.

Nobody bid on the Alaska leases, or at least nobody with the resources to develop them. The challenges related to the permafrost thawing makes it almost impossible to assure continues access to those areas with anything other than a helicopter. And Alaska oil almost goes exclusivley to the far east as the Jones act requires US flagged vessels to move it to the west coast. Those vessels transport costs make it cheaper to buy oil from others than ship oil from California. But even if that oil was exported, it would add to the global supply which would not be a bad thing.

The GOM has the largest proven, accessible reserves and the nearby industry support mechanism for development and it isn't getting developed for the same reason that people don't invest in fixing the old refineries, no long-term confidence int he price of oil that is needed to pay back these 10 - 20 year projects. Talking about other areas that are off limits and have no support structure or record of discovery is a red meat thing for people to complain about with no basis in reality. The GOM is the lowest hanging fruit and it isn't getting picked, what makes you think someone is going to try and climb higher in the tree when there is fruit at ground level?

And those environmental restrictions that shut down the refineries are legit to prevent cancer etc in surrounding communities and have been around a long time before Biden became POTUS..

DT even had standards waived for the Philly plant and they still couldn't make it work. Carlysle group, one of the most politically connected groups in DC, made bank ont he process though. They pulled off a classic DT business move by pulling large management fees even as the company formed to run the refinery went bankrupt. That $600M that was siphoned off by Carlysle Group would have been much better spent implementing the upgrades, but nobody was watching as they ran the business into the ground and took all the profits.

Refiner goes belly-up after big payouts to Carlyle Group | Reuters

Although little oil flowed, plenty of money did.

Under a deal Philadelphia Energy Solutions (PES) signed in 2015, the refiner paid minimum quarterly payments of $30 million to terminal owner North Yard Logistics LP - even if little crude arrived. Much of that cash, in turn, flowed to the investors that own both PES and North Yard, led by the Carlyle Group, a global private equity firm with $178 billion in assets.

The deal in effect guaranteed lucrative payouts to Carlyle regardless of whether the refinery benefitted from the arrangement. When oil market conditions made the rail shipments unprofitable later that year, the refinery took heavy losses while its investors continued to collect large distributions for two more years.

The rail contract exemplifies the financial demands Carlyle imposed on PES in the years leading up to the refiner’s bankruptcy in January. The Carlyle-led consortium collected at least $594 million in cash distributions from PES before it collapsed, according to a Reuters review of bankruptcy filings. Carlyle paid $175 million in 2012 for its two-thirds stake in the refiner.

As for off shore drilling there are more places off shore than GOM that would also move the needle. These places are off limits. Alaska (no hurricane disruptions) certainly has the capacity for oil production which is also off limits.

The SPR is now down by over 200M barrels and we need to extend the releases to counter the Russian and OPEC+ cuts. We could easily agree to purchase 400M barrels over a 5 - 10 year period beginning in 2 years at ana greed to price ($80 per barrel with inflation escalators) and that would get the GOM development financed quickly

 

Oil Tumbles Anew as China’s Covid Bogeyman Returns (msn.com)

Investing.com -- If Vladimir Putin and OPEC are oil bulls’ best friends, you can count on China and the Federal Reserve for having the back of the bears.

In a way that’s become quite predictable these days, China’s Covid bogeyman pops up after crude prices have stacked up double-digit gains to announce new social curbs in the world’s largest oil importer.

So was the case on Tuesday as Shanghai and other big Chinese cities, including Shenzhen, ramped up testing as coronavirus infections rose, with some local authorities hastily closing schools, entertainment venues and tourist spots.

The result: a 3% tumble in crude prices since this week began, after last week’s 17% run-up.

 

ANother 14 million barrels from the SPR to the market. I hope they start issuing some long-dated purchase contracts to companies to develop deepwater GOM soon

Biden just took a big swing at lowering gas prices ahead of the midterm elections | Business Insider India

President Joe Biden is once again stepping in to try and curb soaring gas prices, as Americans feel the pinch of higher prices and turn away from Democrats as the midterm elections approach.

According to Reuters, Biden is expected to release 14 million more barrels of oil from the Strategic Petroleum Reserve (SPR). It's another effort to help bring down gas prices, which have skyrocketed due to a confluence of reduced oil production in the US alongside Russia's invasion of Ukraine. The reported move from Biden comes after gas prices began creeping up again at the end of September, another strain on Americans' wallets as inflation rose to 8.2% and core inflation, which excludes volatile food and energy prices, reached a 40-year high.

Press Secretary Karine Jean-Pierre said in early October that the administration was not considering new releases from the SPR. But now more seem to be coming.

 

this is correct that some areas have been declared off limits. The reality is these areas have never even been explored or proven to hold any reserves. The areas that are known to hold reserves and have the infrastructure to support offshore drilling are not being drilled for a reason. The uncertainty of future oil price prevents the investment required for the development of the resources and that doesn't change if it is GOM or the Pacific or Atlantic coasts or the Alaskan tundra. Large scale oil development will not happen without certainty on future oil revenues. That certainty can be provided by long-dated, fixed (w/ inflation escalator) price contracts. If you want us to develop our resources, go tell Exxon that you will pay $85 per barrel (inflation adjusted) for 400 M barrels over 8 - 10 years to refill the SPR and the machine will start. Do you support long dated fixed (+inflation) contracts. If you do, please let your senator know that the SPR legislation needs to be amended.

small and medium production companies doing inland fracking do not have the pipeline or reserve capacity to expand at that scale

the dems were wrong not to refill SPR when prices were low depending on the structure of the contract. If it committed to spot prices like the SPR language requires, that is too big of a chunk to take at spot prices lest the contract could be suspende dif oil reached X $ per barrel.

 

that will be another exporter to the EU when they finally get it built. Israel already exports small volumes of LNG to the EU but this additional production will really ramp up the volume that Israel can push out to the market. Big blow to Iran and Hezbollah who didn't want the Lebanese gubmnt to get financing from the royalties on this resource. I wish they would build a pipeline to the EU instead of having to use LNG

An Israel-Lebanon Border Deal Could Increase Natural Gas Supplies - The New York Times (nytimes.com)

The increased production won’t make up for the gas that Europe is no longer getting from Russia. But energy experts say an Israeli-Lebanese agreement should give a vital push to efforts to produce more gas in that part of the world. Over the last four years, energy production in the eastern Mediterranean has been growing as Israel, Egypt, Jordan and Cyprus have worked together to take advantage of oil and gas buried under the sea.

“This is a very important step for the region to come into its own,” said Charif Souki, the Lebanese American executive chairman of Tellurian, a liquefied natural gas company based in Houston. “Players are finally realizing that it’s better to cooperate than to continuously fight.”
.................................................................
Chevron, the second-largest U.S. oil and gas company, and several smaller businesses are already producing gas from two larger fields off Israel’s coast. That fuel has increasingly replaced coal in the country’s power plants and factories. Israel now has so much gas that it has become a net exporter of energy, sending fuel to neighbors like Jordan and Egypt. Some of that gas has also found its way to Europe and other parts of the world from L.N.G. export terminals in Egypt.

Chevron and its Israeli partners are discussing the possibility of building a floating liquefied natural gas platform in the Leviathan gas field, Israel’s largest. The companies are expected to make a decision on the project in a few months. But getting the gas out of the region will not be easy. Floating export terminals are vulnerable to terrorist attack. And, even if they could be adequately secured, the terminals will not be able to process as much gas as the larger coastal facilities used in major gas producers like the United States, Qatar and Australia. Building terminals on land can take several years, and often longer, because of opposition from environmental and other groups.

 

that definitely should have happened. dems screwed the pooch on that one

 

on the bright side, refineries that have been shut down for transition from summer blends and maintenance are coming back online so refinery output should be increasing heading into a time of decreased demand as summer driving season ends. This confluence of events should push distillate products volumes in storage up over the next couple of weeks which should tamper gas prices. French refinery workers also ended their strike so diesel exports should be reduced which will help to build volumes in storage

Explainer: U.S. gasoline prices are falling again - here's why | Reuters

U.S. oil refineries are running hard to replenish low inventories even has cold weather sets in, which usually corresponds with a drop in demand for fuel. The four-week moving average of gasoline demand is 2.4% lower than this time last year, while refinery utilization is 5% higher. Last month, U.S. gasoline prices rose largely due to regional refinery outages in the west coast and the Midwest. In California, costs are up more than $1 per gallon in the last month whereas in Texas, prices remain lower than a month ago.

Refinery maintenance often occurs in the fall when demand drops after summer driving season. This fall, however, some refineries had to shut units without warning due to infrastructure problems. Three refineries in Washington state and California had planned maintenance while another had an unplanned outage in September, according to Refinitiv data and refining sources. In the Midwest, BP-Cenovus' Toledo refinery is still offline after a fatal explosion shut the plant late last month.

In October, several French refineries shut as workers went on strike to combat the higher cost of living, which sent global distillate inventories lower and increased U.S. distillate exports.