Yikes! But, cheap gas!
- Thread starter Weatherdemon
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I guess the Opec doesn't give a flying fk about their timing, and what it could do. World economies are going to be taxed twice by their little fight for market share. Between Corona & Opec we will be in a recession before the election even gets here.
On the plus side, it appears the dems have averted putting a commie in office ready to seize the means of production during a crisis
Its all a Russian plot, they are colluding with the dems to get Biden elected by crashing the economy...
With you being in the industry, I’m interested in what your thoughts are about how hard the hit is going to be and how our companies will adjust. Seems like there are lots of people saying it might make fracing unprofitable.
Completing new oil wells might be unprofitable in the near term. US production will fall as companies go under and rig count goes down.
The majors will live. The over leveraged shale players will die painful deaths. The market will eventually re-stabalize. Though demand growth will begin to fall off as cleaner energy begins to take hold.
Similar to 86, but with better technology to "flip the switch" to restart American production when prices begin to rise again. Also, add in the clean energy caveat.
I work for a software services company that sells to O&G companies, we are seeing an impact from it already.
Ya, the shale industry was allowed to consolidate, restructure, and get new private equity after the 2014/15 bust. Most of their cash flows since then have been abysmal though. I doubt Wall Street gives many of these companies a second chance. We're about to see a LOT of bankruptcies and fire sales.
This is akin to Reagan encouraging the Saudis to kick open the taps in the 80s in exchange for F15s and F16s with advanced avionics... Reagan needed a way to kill the Soviet Union without going to war.. Cutting off their hard currency oil sales would do the trick... it nearly killed the domestic industry..
This is similar in feeling..
Most shale frac'ing ops need at least $25-$30 to make it work.. maybe a little more..
It may help the Marcellus nat gas frac'ers as the Permian gas over supply chokes off...
Drilling is different now.. staffs are smaller, more tech is used, laterals are often 2 miles long.. fracs are often 50 plus stages.. and economics are better.. but.. the wells still need to be operated..
I see a lot of consolidation. A lot of bankruptcies. Locally i think DVN, CHK, SR, CNTL will struggle.. Majors who walked away from international assets to come home may struggle. CVX comes to mind especially since the govt is about to revoke their licence to operate in VZ...
If it lasts, it will ripple through the economy as shale frac'ers use a lot of steel and support a lot of small communities... a lot of office space un big cities will go vacant.. if it lasts.. debt default may become a problem..
Its tough to really explain this in a post.. this is a really complex machine..
In terms of Tulsa companies who could struggle: Cimarex, Samson (2.0), Kaiser Francis, Unit, Apache and Rebellion Energy come to mind.
Yup...as well as small area companies who sell supplies or provide services to the industry. I have several friends who work for these types of companies. Still likely not as bad as what industries such as airlines, hotels, cruise lines, etc... are about to experience.
It was in the low 30's to the high 20's between 1993-2004. I don't think the technology has come that far in 15 years. Quit fantasizing about you and Al Gore's pipe dream when the most recent dip only passed a few years ago. You talk about 1986 like that has anything to do the issue. Come on, wake up to the real world.
Could be wrong, but it seems like companies would be least likely to start using renewables while gas is so cheap.
Also in the 1980s there was a coal strike in UK and they were buying more crude for heavy fuels, then dumping the gasoline on the East Coast market in the US. Refiners were losing money on every barrel that they sold. This sped up the closing and layoffs at refineries.
This landed me in beautiful Port Arthur, TX until the Texaco Refinery here was reopened as Sinclair.
I'm just telling you what the industry is seeing. The rate of demand growth has been slowing for the past few years and that's unrelated to this new virus. I'm a petroleum engineer. I'm not overly excited about growth in the renewable energy sector. I'm just telling you that it's growing to the detriment of O&G.
I agree to a point... it might slow their growth, but the problem we've been seeing is that the cost of renewable energy was starting to compete with O&G prior to this weeks crash. EIA is projecting renewables to soon outpace coal and nuclear in terms of electricity generation, and eventually to surpass natural gas.
https://www.eia.gov/todayinenergy/detail.php?id=42655#
Of course the EIA projections were before this supply shock. Maybe we will see downward pressure on renewables... All I know is I want fewer competitors and higher prices per barrel (or MCF) in the medium term so I can make a living in the industry before I retire and O&G goes defunct.
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Yes it's growing, at a measured pace. I doubt that will be affected by the dip in oil prices, or the corona virus, one way or the other.
Oh, I wasn't arguing that the coronavirus, or Saudi's output hike would influence the growth rate of the renewable sector.... just that the existence of a more robust renewable sector was going to make a recovery in the O&G sector more difficult, even if the global hydrocarbon supply starts to fall as US shale producers go under.
Well, my apologies then. I'm a pretty realistic person when it comes to my career, if anything I prefer to be a bit overly cautious and look at the worst case scenario. So if I mention renewables, it's just because they make me nervous about the longevity of being a petroleum engineer. Not because I prefer them to more traditional energy sources.
What's your take on Germany's struggle to produce renewable energy at a competitive price point? I believe they have attempted the largest conversion to date.
If anyone is interested, total energy usage across all industries and all sources (and uses) is something that Livermore National Laboratory tracks and puts out an annual flowchart for. They haven't finished 2019's yet, but here is 2018s:
https://flowcharts.llnl.gov/content/assets/images/energy/us/Energy_US_2018.png
And here is 2000, for comparison for ~20 years prior:
https://flowcharts.llnl.gov/content/energy/energy_archive/energy_flow_2000/ucrlID129990-00.pdf
And here is 2009, for a halfway point reference. Note energy usage is down across the board in 2009, but this is due to the recession more than overarching trends. I still think it is likely useful for observing trends in overall marketshare of energy sources:
https://flowcharts.llnl.gov/content/energy/energy_archive/energy_flow_2009/EFC_2009_Annotated.pdf
Total energy usage is up only ~3% in that timeframe. However, wind/biomass/geothermal/solar went from "Other" and accounting for about ~7% of energy demand (if you count hydropower) to each having their own separate tracking, and accounting in aggregate for about 11% of energy demand.
Coal usage has been nearly cut in half. Nuclear has basically stood pat, up about 5%. Total petroleum usage went down somewhat, but essentially held steady (38.8 Quads in 2000 to 36.9 in 2009). I would expect that to continue in a long slow steady decline in market share as automotive transportation gradually shifts to electrical sources and a bigger emphasis on vehicles with better mileage efficiency (and also ride sharing/decay of private automobile ownership), but I don't think there is an existential threat to the industry (as there is coal) for at least a couple of decades. The petroleum industry as a whole will probably suffer this year as is being discussed in this thread, but I don't think this year's events are going to effect the industry long term beyond an aggressive round of consolidation. 2020's chart will be interesting though...
Natural Gas has mostly picked up the slack from dropping coal numbers, and has gone up by ~60%. I would expect that to hold steady or grow as coal continues to crater.
I am not an industry insider by any stretch, but I do work for the DOE in a roundabout way. Just my $0.02.
https://flowcharts.llnl.gov/content/assets/images/energy/us/Energy_US_2018.png
And here is 2000, for comparison for ~20 years prior:
https://flowcharts.llnl.gov/content/energy/energy_archive/energy_flow_2000/ucrlID129990-00.pdf
And here is 2009, for a halfway point reference. Note energy usage is down across the board in 2009, but this is due to the recession more than overarching trends. I still think it is likely useful for observing trends in overall marketshare of energy sources:
https://flowcharts.llnl.gov/content/energy/energy_archive/energy_flow_2009/EFC_2009_Annotated.pdf
Total energy usage is up only ~3% in that timeframe. However, wind/biomass/geothermal/solar went from "Other" and accounting for about ~7% of energy demand (if you count hydropower) to each having their own separate tracking, and accounting in aggregate for about 11% of energy demand.
Coal usage has been nearly cut in half. Nuclear has basically stood pat, up about 5%. Total petroleum usage went down somewhat, but essentially held steady (38.8 Quads in 2000 to 36.9 in 2009). I would expect that to continue in a long slow steady decline in market share as automotive transportation gradually shifts to electrical sources and a bigger emphasis on vehicles with better mileage efficiency (and also ride sharing/decay of private automobile ownership), but I don't think there is an existential threat to the industry (as there is coal) for at least a couple of decades. The petroleum industry as a whole will probably suffer this year as is being discussed in this thread, but I don't think this year's events are going to effect the industry long term beyond an aggressive round of consolidation. 2020's chart will be interesting though...
Natural Gas has mostly picked up the slack from dropping coal numbers, and has gone up by ~60%. I would expect that to hold steady or grow as coal continues to crater.
I am not an industry insider by any stretch, but I do work for the DOE in a roundabout way. Just my $0.02.
Their biggest problem (IMO) is that they abandoned nuclear.
I never looked into it enough to realize. My one realization was a shocking disbelief that hydro was so minuscule to Gas & Nuclear in the production of electricity. I thought the ratio would be a lot closer to equal.
I think Germany is in a poor geographical location in terms of overall potential for renewable energy generation. (Europe in general isn't great for it) They have fewer hours of sunshine than other large population countries like China, USA, India, Nigeria, Brazil, Mexico, etc... They do; however, have a good deal of wind energy production, but the oversupply of cheap natural gas from Russia during this price downturn makes it hard for their renewable projects to keep up.
Germany also has the problem that their wind energy is almost all occurring at the Northern end of the country and they don't have the infrastructure to transport the power down to the industrial areas in the southern portion. There are certainly logistical / regulatory problems that their renewable industry need to overcome before being completely viable, but so did the energy industry 100 years ago. It took a couple of world wars for the US to put in the infrastructure to make oil and gas completely viable for use across the country.
Does anybody think Germany will make a go of it with the Hydrogen energy sector, to combat Opec and Russia.
The German people are close to full out revolt against wind power. I could see them exploring other options for a variety of reasons.
And 85% of the shares in the national nuclear energy company are owned by their governemnt. Talk about seizing a means of production.
Lol well I try not to speak ill of the french because I work with some nice people there
Wind has always been one of my least favorite options. It works well as a local supplement to power, but it scales horribly. It takes up more land/GW than any other energy source and as such I find it very environmentally unfriendly. Unless you like seeing every last open mountainside and open field coated with wind turbines. I don't, and I am guessing the Germans don't either. Also, they are a maintenance nightmare when you start to put thousands of them together in a serious wind farm.
Wind might grow a bit more, but I think the best use of wind is as a supplement. Hydro is maxed out already. Solar is where the real renewable growth will be in the coming years. If we were smart, we'd start to build new nukes, which are the only proven technology that we know can scale largely that also provide zero-emissions. But the political will is simply not there.
Nuclear facilities will always have negative public perception against them as long as we keep seeing the Fukashima / Three Mile Island / Chernobyl type events occurring. In all honesty, other types of energy might have more detriment to humans, but the scale of nuclear meltdowns scares people.
That's the good thing about oil and gas in the US. For the most part, it's explored in regions that are less populated.
I think solar has the benefit that it's relatively passive in terms of manufacture and operations. The problem with solar is that it takes a lot of rare earth metals, which we don't currently mine enough of to supply an entire energy production industry on top of the electronics / industrial industries that are already using the rare earth metals. (Also, a lot of the metals come from China which I'm not necessarily a fan of)
Agree about solar in terms of the rooftop solar panels. Those will continue to grow but will be ulitimately limited by the issues you bring up. I was thinking more along the lines of these things:
https://en.wikipedia.org/wiki/Solar_power_tower
It still kills birds like wind turbines do, but it does so with gusto! From the wikipedia link: "Near the center of the array temperatures can reach 550 oC which, with the solar flux itself, is enough to incinerate birds while further away feathers are scorched leading to the eventual death of the bird. Workers at the Ivanpah solar power plant call these birds “streamers,” as they ignite in midair and plummet to the ground trailing smoke."
Anyhow, it seems like flocks of dead birds, as distasteful as it is, is probably the least bad option out there. And it seems they have some room to mitigate that problem some.
The ones protesting, and having such a negative impact on them being built are generally Democrats. The same Democrats who are screaming bloody murder because we are going to kill the earth. If the attitudes had been more accepting, that one incident every 20-40 years was worth how much it would help stop climate change...
We learn from every incident with NPP that happens, and make them safer. So building more, and having a few more rare incidents every time we put more in production, is part of the learning curve.
It's like how we obsess over airplane crashes when it's safer than a car. Both China & India are ramping up building them, while we are not.
(This is not meant as anything against you aston, I was just responding to the point that no one had WILL recently. Like for 30+ years.)
You don't see them being built in Republican states either though. I mean, Wyoming would be perfect for one. They have the uranium mined right in the state, and you could power the entire state of Colorado. It's not just Dems who don't want them in their states.
I agree that they're viable scientifically, but they do have a public stigma for whatever reason. France seems to do pretty well with them.
Wouldn't you think the birds would eventually learn not to fly into the beams of light? Like you don't see a bunch of birds flying into raging whitewater.
Yeah to be fair at any point in time there are at most three republicans talking about nuclear energy. Not a political winner for them from either a donor or voter standpoint.
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