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07 February 2015

Press review 07-02-2015 - Intertwining

It is interesting how sometimes events intertwine. The ever more complex war in Ukraine is rapidly merging with the stand off over Greece's sovereign debt. The freshly elected Greek government will probably use a veto to further sanctions on Russia as a trump card. Or even threaten to re-approach Russia if a new debt repayment programme is not struck. The geography of all this is nothing short of remarkable.

Europe faces another make or break moment, the frequency of which is less and less reassuring. The more of these D-days repeat the likelier a bad outcome becomes. The Greek democracy can not possibly survive another 4 years of abject austerity, but the masters of the Council seem tightly gripped to their beliefs.

On more mundane matters there was a noticeable rally in petroleum prices, with the Brent index consolidating gains that started late last week. It is however, to little, to late for the industry, and is more likely to signal a bottom than a definitive return to comfortable prices. Midweek I posted an entry level article on what this may mean to the US financial markets.

The Guardian
BP to follow Shell in cutting spending
Terry Macalister, 01-02-2015

BP will on Tuesday unveil plans to slash billions of pounds off its capital spending programme in a bid to counter the impact of plunging oil prices and a 40% fall in its fourth quarter profits.

The company, which has already cut hundreds of jobs in Aberdeen and thousands around the world, is expected to announce spending reductions of over 10% bringing the official target below $22bn (£15bn) for 2015.

Bob Dudley,BP’s chief executive, is expected to further sweeten the pill for investors by making no changes to the dividend while not making any further specific redundancies.

BP said in December that it was taking a $1bn charge to pay for restructuring – almost all for job cuts – and has since made local announcements about new staffing levels in Houston, Trinidad and Azerbaijan.
Exploratory activity has essentially stopped; new projects are adjourned sine dia. This is the present state of the petroleum industry.
LA Times
Plunging oil prices choke off boom in Bakersfield
Tiffany Hsu, 29-01-2015

Each year, the American Assn. of Drilling Engineers hosts a meeting here affectionately called the Liar's Club.

A cocktail-fueled crowd hears oil companies' well-drilling and production forecasts — estimates often so grandiose everyone understands they are exaggerations. Pledges to drill thousands of wells are common.

But at this month's meeting, no one felt like telling tall tales. Fewer than 10 wells were promised, all by small, independent companies. Giant firms — Chevron, Occidental — promised nothing, said Dave Rippy, general manager of Bakersfield Drilling Consultants, who has attended for two decades.

"I've never seen anything like it," he said. "It was very somber, very eerie."

Plunging oil prices worldwide are landing hard in Bakersfield, choking off the boom of recent years in one of America's great oil towns
Algeria was almost the sole country in northern Africa to fare unscathed trough the so called "Arab Spring". But now, the petroleum price rout, compounded with declining extraction rates, is threatening the status quo. It is never too much to remind how important of a neighbour Algeria is, both geographically - Algiers is closer to Brussels than various member state capitals - and energetically - the second largest gas supplier to Europe.
Al Jazeera
Oil price slump threatens to erode Algeria's status quo
Djamila Ould Khettab, 03-02-2015

In Algeria, the hydrocarbon sector accounts for 97 percent of the country's total exports and 58 percent of its total fiscal revenues, according to the International Monetary Fund. While oil prices dipped below $50 a barrel in January, Algeria needs the country's main crude grade to be traded at $121 a barrel in order to avoid a budget deficit.

As a consequence, Algeria slipped into the red in 2014, with a deficit reaching 18 percent of the gross domestic product (GDP) for the first time in 15 years.

When oil prices plunged in 1986, Algeria was on the verge of bankruptcy, and riots broke out across the country. At the time, the slump in oil prices was among the factors leading to the "black decade", Algeria's civil war, which killed more than 200,000 civilians.

But government officials maintain history will not repeat itself this time around, since the country's foreign exchange reserves would be able to cushion any short-term shock.
In other geographies, a relevant increase in petroleum exports out of Iran is reported. This is another key element to the recent collapse in petroleum prices.
Hellenic Shipping News
Asian imports of Iran crude rise 20 pct, hit 3-yr high in 2014

Asian imports of Iranian crude rose by 19.8 percent last year to hit a three-year high, although further increases by the OPEC nation’s biggest buyers will depend on whether Tehran and world powers can settle the dispute over its nuclear programme.

Imports by Iran’s four biggest buyers – China, India, Japan and South Korea – averaged 1.12 million barrels per day (bpd) in 2014, government and tanker-tracking data showed, the highest since the region took more than 1.5 million bpd in 2011.

Soaring imports last year by China and India after the partial easing of economic sanctions at the end of 2013 more than offset declining shipments into Japan and South Korea.
In a display of courage, Ron Patterson comes out calling "Peak Oil now". Considering the growth potential in Iraq, Canada, and to some extent Iran, I feel less certain (there is also Lybia, but that issue is not going to be solved any time soon). Nevertheless, what is exactly the meaning of this peak? Had world petroleum extraction been 77 Mb/d in 2004 and 74 Mb/d in 2014, would the world be different today? Probably not much.
Why we are at Peak Oil Right Now
Ron Patterson, 01-02-2015

In this life nothing is certain. Therefore I am not declaring, absolutely, that we are at peak oil, only that it is a near certainty. But I am putting my reputation on the line in making the claim that the period, September 2014 through August 2015 will be the year of Peak Oil. Below are my reasons for making this claim.

First of all, Peak Oil is not a theory. The claim that Peak Oil is a theory is more than a little absurd. Fossil hydrocarbons were created from buried alga millions of years ago and they are finite in quantity. And as long as we keep extracting them in the millions of barrels per day, it is only common sense that one day we will reach a point where their extraction starts to decline. In fact most countries where oil is extracted are already in decline. So obviously if individual countries can experience peak oil then the world as a whole can also experience peak oil.
Euan Mearns is out with the second edition of the revived version of the Oil Watch Monthly.
Energy Matters
Oil Production Vital Statistics – February 2015
Euan Mearns, 02-02-2015

  1. The continued growth in production into December shows that global production growth had significant momentum that has not yet been curtailed by the price rout.
  2. The fall in the oil price continued throughout January, WTI hitting a low of $44.80 on January 26th and Brent hitting a low of $45.13 on January 13th.
  3. The main dynamic statistic has been the plunge in US oil rig count down to 1223 rigs on January 30th from a recent high of 1609 rigs on October 10th 2014.
  4. The rig count news lead to a strong rally in oil price on 30th January.
  5. I anticipate that the price rout is not yet over and it will require significant falls in production to take root before a real price recovery gets underway.
Arthur Berman features in another long interview to the media. The "shale" story in his country is really something extraordinary, that remarkably attests to the present collective/societal mindset of effortlessly making money overnight. And here I am not restricting to the US.
Petroleum Truth Report
From 'The X-Files' to shale, skeptic Berman wants to believe
Edward Klump, 03-02-2015

"I want to believe," Berman said during a recent interview in his office near this city's famous Galleria shopping district. "We all want to believe. And I get it. I really do.

"But is that really a smart way to venture out into the world of international politics, if not warfare and economic competition and diplomacy? I don't think so."

Berman, 64, has become something of a household name in energy circles over the past decade as he crunches well data and challenges conventional wisdom about how much -- and at what cost -- natural gas and oil should be expected to come from U.S. shale formations.
Below a detailed reportage of the economic havoc endured by Ukraine. Destruction this deep will take decades to recover, even if the war stops right away.
USA Today
Collapsing economy is second front in Ukraine's war
Oren Dorell, 04-02-2015

[...] "We lost 20% of industrial output — most of Ukraine's mines are in Donetsk," Prystaiko said. "We lost fertilizer and metallurgical products, we lost our biggest trade partner (Russia)," which recently began rearming the resurgent separatists.

Before protesters ousted Ukraine's former pro-Russian president, Viktor Yanukovych, Russia accounted for one-third of the country's foreign trade, on par with all of its trade with the European Union, Prystaiko said.

Today, that trade has fallen off sharply, and Western sanctions intended to punish Russia for its support of separatists are harming Ukraine, too. "Sanctions on Russia are killing us," Prystaiko said.
James Howard Kunstler has an interesting perspective on Ukraine, echoing the concerns of those that see little gain in destabilising established democracies. Kunstler is always a fascinating read.
Clusterfuck Nation
Apocalypse Now and Forever
James Howard Kunstler, 02-02-2015

As a political psychoanalyst I find the Super-bowl halftime show the best concise index of how psychotic American culture is becoming from year to year, and the 2015 version signaled a complete break from reality, a nightmare of twerking robots in a hall of mirrors, as if America had utterly surrendered its tattered soul to some rogue motherboard pulsing deep within Dr. Evil’s subterranean palace of sin. Hence it is the perfect analog for understanding otherwise incomprehensible happenings such as the USA’s role in fomenting further chaos and mayhem in Ukraine.

How otherwise to explain things like this morning’s New York Times report that the USA “now supports providing defensive weapons and equipment to Kiev’s beleaguered forces, and an array of administration and military officials appear to be edging toward that position….”

Earth calling New York Times readers: I regret to inform you that this decision was already reached a year ago when we paid for the coup d’état against the elected President, Viktor Yanukovych, after the poor sap decided to not sign up with EU but rather the Russian-backed Eurasian Customs Union. Whoops! You’re so out of here, Bub, State Department Under Secretary Victoria Nuland burbled in a clandestinely recorded phone call to the American ambassador. Will somebody please find Yats! Yes Yats! [UKR politician Arseniy Yatsenyuk] and plug the Bluetooth earpiece of power into his skull!
What reads bellows is not a joke, it is another demonstration of how the EIA creates resource hypes out of thin air. There are gazillions of marshmallows hanging from trees in the US, I am just not sure where, nor exactly how much.
Opposition, disappointing data wither Europe's shale gas prospects
Michael Kahn and Nina Chestney, 02-02-2015

A shale gas boom in the United States over the past few years has reduced its energy dependence, but Europe is in the early stages of development and no commercial drilling has yet started.

The U.S. Energy Information Administration has estimated Europe could hold trillions of cubic metres of recoverable shale gas but it is still uncertain where reserves are located, how large they are and whether they are commercially viable.

In fact, revisions to estimates of technically recoverable resources, disappointing outcomes and growing opposition to shale gas have reduced the hype about development prospects in Europe.
The musical suggestion of the week is an old track from the 1980s. Literally translatable to "Glory Lift", this song is an astute metaphor, using the rail cart of the same name linking down town Lisbon to the up town Glória neighbourhood, to draw a parallel with the apparent short space between anonymity and fame. The LP had the same title and ended up being the band's greatest success.

Have a pleasant weekend.

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