Archive for junio 2012

Key points from OPEC’s Fifth International Seminar, Vienna, 13th June

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Indian oil minister, Sudini Jaipal Reddy: 

  • “Higher oil prices raise the cost of fertilizers, hence the cost of food, thus hitting hard the poorest economies and the poorest within those poor economies”.
  • “High oil prices lead to domestic inflation, increased import cost, higher interest rates and slow economic growth”.  
  • “A sustained $10/b increase in the oil Price leads to a 1.5 reduction in the GDP of developing countries”.
 Nigerian oil minister, Diezani Allison-Madueke:  
  • Warns of the risk of a “sharp demand destruction in the second half of the year”.
OPEC Member Countries: 
  • Will invest $280 Bn over five years in 166 upstream projects to increase crude output capacity. These projects will provide a net increase in crude and condensates output of around 7 Mn b/d.
  • Expects its production capacity of 3 Mn b/d to rise to 3.4 Mn b/d by the end of this year. A further capacity increase of 500,000 b/d in 2013 and an additional increase of 700,000 b/d in 2014 will take capacity to 4.5 Mn b/d by the year 2015              
Emirates Oil Minister, Mohammed al-Hamli:  
  • UAE is making investments to increase its crude capacity by 200,000 b/d by the end of 2012.
Kuwait Oil Minister, Hani Hussein: 
  • Kuwait “will spend some $170 Bn over the next 10 years” to meet its “2020-30 vision” of reaching capacity of 4 Mn b/d, “starting in 2020 and going on to 2030”.
Saudi Arabia: 
  • Has built up 80 Mn barrels of domestic crude inventories and 10 Mn barrels of stocks abroad in a bid to convince the market that it is serious about meeting any increased demand for its crude from buyers.
EU Energy Commissioner, Guenther Oettinger: 
  • The EU imports more than 80 percent of its oil needs and “even with our energy efficiency and broader energy base strategy this figure may increase up to 90 percent or more within 10 years”.
ConocoPhillips CEO, Ryan M. Lance states that:  
  • The growth of U.S. unconventional oil and natural gas is one limit to OPEC’s influence.

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Iranian oil exports have dropped by over 40 percent over the past six months. Oil prices have also dropped due to global economic worries, which has further hurt the finances of the Islamic Republic. In addition to previous data on reduced imports Reuters informed that Turkey's crude oil imports from Iran dropped by more than 35 percent in May from April .

Official trade data showed the country imported 161,000 barrels per day (bpd) of Iranian oil, down from 249,000 bpd in April and 270,000 bpd in March .


According to Reuters, a National Iranian Oil Company official in Moscow acknowledged for the first time that its oil exports have fallen sharply, down 20-30 percent from normal volumes of 2.2 million barrels daily, saying that oilfields were under maintenance and crude production was being diverted for refining. The figure means oil exports are down between 20-30 %.

UAE: Abu Dhabi pipeline avoids Strait of Hormuz

Abu Dhabi National Oil Company (ADNOC) expects to load its first test cargo of crude this week from its Strait of Hormuz bypass pipeline that ends at Fujairah, a major oil storage and fuel bunkering hub on the Gulf of Oman.

The 380km, 1.5Mn b/d pipeline will lessen the United Arab Emirates’ dependence on the Strait of Hormuz, which Iran has threatened to block. The UAE exports about 2.4Mn b/d of crude.

Part of the project is a main oil terminal with storage capacity of 8Mn barrels. The total capacity of the project, about 11Mn barrels, will represent almost five days of UAE’s crude exports.

Strong OPEC production growth in spite of expected supply loss from Iran 

According to July 2012 forecast from the Economist Intelligence Unit (EIU), OPEC production is expected to show strong growth this year of 6.7%, with increased output from Saudi Arabia, the Gulf states, and especially Iraq, offsetting lower Iranian production. The Organization’s supply position stood at 31.9 Mn b/d in April with a light fall to 31.87 Mn b/d in May. Saudi Arabia’s production was particularly strong.

The EIU considers that the European Union (EU) embargo on Iranian oil which is set to be effective on the 1st July will mean a loss of Iranian supply of approximately 400,000 b/d this year and around 300,000 b/d in 2013. Iran, nevertheless, adds the EIU, is expected to find markets for much this oil, particularly in Asia, that it would in normal conditions have exported to Europe, some disruption to supply, however, appearing to be inevitable.

With respect to OPEC production, the EIU sees steady growth at an annual average of 2.7% during the period 2013 to 2016, this being boosted by firm growth in output from Iraq and the coming on stream of the massive 900,000 b/d Manifa field in Saudi Arabia.

In terms of non-OPEC production, the EIU expects strong growth for 2012 and beyond in unconventional North American production, in the tar sands in Canada and in shale oil in the United States. Output increases are also expected in Colombia, Brazil and Russia, but in the total of non-OPEC production will be depressed by the loss of oil from South Sudan, Yemen and Syria, as well as weak North Sea output. On an annual average basis, the EIU forecasts that non-OPEC output will grow by a modest 1.3% in 2012 to 2013, and towards the end of the forecast period growth in non-OPEC supply will be driven by further increases in production from Brazil and North America.

Proximity of ban on oil imports from Iran does not stop prices falling

25th June, 2012
Oil is on track to post its biggest quarterly fall since the financial crisis in 2008 as the eurozone crisis and weak growth in the United States roil global markets, while ample supply from the Organization of the Petroleum Exporting Countries has added to the downward pressure on prices. 

“Another round of European sovereign debt issues ... and bearish fundamentals have already started to weigh on oil prices", Morgan Stanley said in a research note.

"If OPEC production continues at today's levels, stocks would build above normal through the third quarter and supply would outstrip demand in 2012.”

The EU’s sanctions against Iran, including a ban on oil imports and a ban on the provision of insurance for tankers shipping Iranian oil, will come into force as planned on 1st July, the EU's foreign affairs chief Catherine Ashton said today. In a statement, Ashton said there would be no review of the already agreed sanctions. “There is no change in terms of how we’re going forward on July 1st,” she said. “The sanctions that have been agreed will be implemented”, Platts reports.

For its part, Bloomberg informed that oil traded below $80 a barrel for a third day in New York amid concern that Europe's debt crisis will curb demand for fuels. Futures slid as much as 1.2 percent as George Soros warned that a failure by European Union leaders meeting this week to produce drastic measures could spell the demise of the bloc’s shared currency. Developed economies are running into the limits of monetary policy, the Bank for International Settlements said in its annual report yesterday.

All of this news comes amidst a report by UPI that a stagnant U.S. economy and trouble in the eurozone is keeping demand for fuel products at lower levels, an economist from trade group API said. The American Petroleum Institute stated that U.S. gasoline demand for the first five months of the year was down 0.6 percent compared with the same period last year. API Chief Economist John Felmy said part of the slump in demand may be attributed to better fuel efficiency but most of it was because of a weak economy.

Mazhar Al-Shereidah.

Libro Enfóque Petrolero..


Prólogo Enfoque Petrolero

La literatura petrolera venezolana requiere aportes de profesionales, profesores y pensadores en general, interesados en la materia.
Estos aportes se necesitan para recordar, reiterar o analizar principios, eventos o actuaciones encaminados a orientar el tratamiento que debe darse a los hidrocarburos con el propósito de que sirvan a los intereses nacionales.
Con no poca frecuencia, principios básicos de ancestral y universal aceptación y con mayor posibilidad eventos y actuaciones, corren el riesgo de ser olvidados, eludidos, disminuidos, mal interpretados o maliciosamente aplicados, consciente o inconscientemente, para dar paso a criterios meramente mercantiles o favorecer a grandes centros de poder
Económico o político, cuyos intereses no coinciden con los nacionales.
Esos aportes son igualmente necesarios para fomentar la discusión sobre lemas popularizados y metas propuestas, a fin de examinar su validez y tratar de saber si han sido debidamente aplicados o alcanzadas y si los resultados han sido negativos o positivos para los intereses colectivos.
La Cátedra Petrolera “Dr. Gumersindo Torres” de la Universidad del Zulia patrocina la publicación de obras relacionadas con los hidrocarburos y hoy presenta este libro del profesor Mazhar Al-Shereidah, pensador y publicista de la materia, cuya preocupada y larga dedicación a ella, así como su acuciosidad y seriedad académica, coadyuvan con los propósitos señalados.
Aunque el título de la obra “Enfoque Petrolero en Venezuela”, con sub-título “De la apertura al Paro”, se encamina a tratar asuntos petroleros en el ámbito espacial venezolano y específicamente dentro de un período acotado por dos criticables actuaciones, las cuales el autor analiza con intensidad, el libro desborda esos límites espaciales y temporales y se ocupa del petróleo en ámbitos geográficos distintos del venezolano y se refiere a períodos diferentes del acotado por las actuaciones mencionados en el subtítulo. Todo ello requerido para hacer necesarias comparaciones entre el petróleo venezolano y el de otras regiones del mundo y señalar precedentes, acontecimientos o conductas, que recíprocamente
los afectan. La obra visualiza un panorama amplio, nacional y mundial, donde la mirada se paseó por gran parte de la temática petrolera: reservas, producción,comercio, conservación y enfocó, como lo sugiere el título, especialmente
la apertura y el paro petrolero en Venezuela. La visión que
resulta de este enfoque es altamente crítica. Ambas actuaciones aparecen como Intencionales y premeditadamente dirigidas: la primera, a reprivatizar las actividades petroleras y terminar con la tendencia nacionalizadora y el segundo, a tumbar el gobierno para mantener la trastocación de funciones entre el Estado y PDVSA, sin detenerse sus protagonistas en el uso de medios ilícitos y desproporcionados ni en los graves daños que producirían a la nación. Los cálculos sobre los daños causados a esta por el Paro-Sabotaje petrolero son una importante referencia para el establecimiento de responsabilidades.
Con respecto a Venezuela comienza el autor por recordar el “antiguo y arraigado tratamiento legal” de nuestra cuestión petrolera, que data del “Derecho de Indias de la temprana época colonial” y que lo conduce a resumir que el “petróleo es de interés nacional”. Principio sin duda básico para todo cuanto tiene que ver con la lucha por el reclamo de un adecuado manejo social del petróleo y uno de aquellos muchas veces descuidado y no invocado, pero siempre válido y digno de ser protegido y preservado, como base de lo que el autor reconoce como “una ideología” petrolera nacional, no exenta de “mitos y creencias”, pero “cuya existencia se puede constatar”. Tal vez esta ideología no se haya decantado y sistematizado como para cristalizar en un conjunto de necesaria o forzosa ejecución integral y haya sufrido debilidades en su aplicación gubernamental, pero sin duda tiene raíces sembradas en lo nacional que la ha hecho trascender los límites del anhelo popular para asumir aspiraciones de política de Estado, con asiento en la bases constitucionales de este, cuya demostración encontramos en nuestra vigente Constitución Nacional. Las ideas recogidas en este libro ayudan a la búsqueda de una política de esa naturaleza.
La política nacional, con aspiraciones de política de Estado, ya con algunas concreciones en la legislación y en el ánimo popular, tiene además un aliento internacional, no solo por la importancia universal de los hidrocarburos, sino sustentada también en ideales de justicia política y social. El autor, recuerda que Venezuela ha tenido una legislación de hidrocarburos “pionera y progresista” en materia petrolera y que varios de sus logros han sido mostrados a otros países, los cuales los han adoptado; ejemplifica con la región del Medio Oriente, cuyos bondadosos yacimientos y calidades de petróleos, aparecen con ventajas frente a los nuestros, lo que impulsó la acertada política venezolana de acercamiento a esa región, que culminó con la creación de la OPEP; política que por
la acogida que tuvo en gobiernos de varios tiempos y de signos políticos diferentes, apuntó igualmente hacia una política de Estado.
La celebración del Primer Congreso Venezolano del Petróleo en
1951 y la invitación a él de un “selecto grupo de futuros líderes petroleros del Medio Oriente”(Abdullah Al Tariki, Manucher Farmafarmaian) y “la información sobre el 50-50 llegada de Caracas a Teherán en 1949, que sin duda alguna influyó en el ánimo de Mossadeq, cuando decide nacionalizar el petróleo Iraní en 1951”, así como el envío de calificadas comisiones a la región, son pruebas que aporta el autor de cómo la política de acercamiento entre Venezuela y el Medio Oriente, fue acertada nacional e internacionalmente. Que en la formación de la OPEP, que es un logro trascendente de esa política, hayan influido hechos o intereses políticos o de otra naturaleza, de aquella región y del mundo, no demerita la política de acercamiento y sus positivos efectos para ambas regiones y si se quiere para el mundo, por los justos fines perseguidos y por sus resultados. El primer Congreso Petrolero Árabe que se celebró en abril de 1959 y que de nuevo “planteó la oportunidad de enviar una delegación al Medio Oriente para ver la posibilidad de defender el ingreso petrolero” y de concretar entendimientos, que llevaron a la creación de la OPEP, luce como una continuación de todo lo anterior.
El nacimiento de la OPEP y las condiciones socio-económicas y
geopolíticas mundiales que rodearon ese hecho, con énfasis en el Medio Oriente, ocupan especialmente la atención del autor y dados sus vinculaciones y conocimientos de la región, sus apreciaciones son fuente de primer orden para el análisis de tan trascendental acontecimiento y sobre el papel de esa Organización en la posterior lucha de los países miembros por la defensa de sus intereses petroleros y de su impacto en los asuntos políticos de los mismos y en la política mundial.
El autor toma como premisa “que la OPEP, en primer término, fue una necesidad venezolana y venezolanista”, que “Juan Pablo Pérez Alfonzo fue el visionario primero (1945-48) en comprender que los dueños del recurso petrolero necesitaban una organización propia para defender sus intereses”, que no se materializó entonces por el derrocamiento del Presidente Rómulo Gallegos, pero que la idea continuó en gobiernos posteriores.
Esta obra es prolija en datos y análisis, donde los lectores comunes pueden encontrar informaciones ilustrativas; los estudiosos, abundantes cifras y descripción de hechos con valoraciones de los mismos, útiles para la profundización de temas específicos, para la motivación de tesis o para la discusión y la polémica; y los administradores y políticos, algunas guías para sus actuaciones.
El libro contiene abundantes citas de publicaciones periódicas, que reflejan las opiniones, actuaciones y controversias del día a día de gerentes, políticos y personajes involucrados en la cuestión petrolera, así como remisiones a trabajos técnicos o libros que recogen las más reposadas posiciones de profesores y académicos.
El autor hace desfilar por el libro a personajes, nacionales y extranjeros, de épocas pasadas y contemporáneas, vinculados con el petróleo, cuyas posturas técnicas, empresariales, políticas, y académicas, menciona o analiza, como testimonios de tendencias o comportamientos.
El autor cuando procede como analista, no lo hace solo en atención a eventos o circunstancias recogidos de fuentes ciertas, sino que en variadas ocasiones lo hace como testigo de ellos y no mero testigo de vista u oído, sino testigo actor, que difícilmente puede escapar del contagio de la pasión que la temática petrolera y su correlato político nacionalista inspiran, por lo cual ha sufrido también los efectos que debe esperar todo aquel que entra o se acerca al combate.
Imbuido de esa pasión, pero con toda racionalidad afirma el autor que “Es un insulto a la inteligencia humana aceptar lo que ahora nos quieren inculcar algunos en el sentido de que el petróleo es una simple mercancía que carece de valor estratégico”. Para esos personajes la soberanía, los principios políticos, la defensa de los intereses colectivos, son antiguallas, que hasta con la protección del ambiente, deben ser abandonados o pospuestos ante la mera búsqueda del lucro, a lo cual el Profesor Al-Shereidah contrapone una postura amigable con la razón y por tanto muy difícil de rebatir, cuando dice: “Para algunos pensadores,
poseer petróleo en el subsuelo equivale a una especie de antídoto contra la pobreza y a partir de esta creencia elaboran teorías y posturas sociopolíticas de dudosa validez. Creemos, en cambio, que la clave para que el pueblo tenga acceso a la riqueza generada en su territorio, radica en el sistema político establecido en el respectivo país. Ese sistema tiene que apoyarse en un conjunto de valores ético-morales que cohesione a la sociedad, inculcando virtudes que impulsen al hombre hacia la educación, la solidez familiar, el trabajo y la creencia en la posibilidad y necesidad de la perenne lucha por la superación, tanto material como espiritual”.

Dr. Álvaro Silva Calderón

A pipeline to avoid the Strait of Hormuz

Abu Dhabi National Oil Company (ADNOC) expects to load its first test cargo of crude  this week from its Strait of Hormuz bypass pipeline that ends at Fujairah, a major oil storage and fuel bunkering hub on the Gulf of Oman.

The 380km, 1.5mn b/d pipeline  will lessen the UAE’s dependence on the Strait of Hormuz, which Iran has threatened to block. The UAE exports about 2.4mn b/d of crude.
Part of the project is a main oil terminal with storage capacity of 8mn barrels. The total capacity of the project – about 11mn barrels ‐ will be almost five days of UAE’s crude exports.

- Jun 22, 2012, Bloomberg

Daniel Yergin said in an interview  - Jun 22, 2012 Bloomberg ,"Putin wants strong Russian international majors. There is a natural tendency when you have a strong domestic industry to want to grow it internationally,"   
President Vladimir Putin asked the chief executives of U.S. and European energy producers to grant Russian companies access to international assets, holding out some of the world's biggest untapped resources as a prize.

Putin is hosting the heads of Royal Dutch Shell Plc (RDSA), ConocoPhillips, BP Plc (BP/) and Eni SpA (ENI) at the St. Petersburg International Economic Forum, using the three-day event to say Russia is one of the most welcoming countries for energy investments.

"Far from all countries allow such a broad involvement by foreign companies in the energy sector," Putin said in a speech yesterday, pointing to Mexico and Norway as countries where state-owned companies dominate the energy industry.

Zeroing In On Long-Term Oil Prices

By 2020, oil prices look likely to stabilize at $80-90, but could fall well below these levels

 | 4 June 2012 

According to the Centre for Global Energy Studies, (CGES) 18 June Monthly Oil Report
Saudi Arabia Has ‘Free Hand’….

  • What happens to oil prices over the next six months, is largely in the hands of OPEC or, more accurately, of Saudi Arabia, which has effectively been given a free hand to produce as it sees fit in the absence of a meaningful output agreement. How much oil the kingdom needs to produce in the second half of the year will depend on its own price ambitions and on the level of production from Iran.
  • Iraqi output is rising for the second month in a row in May exceeding 3mn b/d; The country is targeting end‐year output of 3.4mn b/d. In addition, the Kurdistan Regional Government (KRG) is currently producing around 150,000 b/d. Baghdad announced a next year 500,000 b/d of new capacity to be added. Another 700,000 b/d by end‐2014. 2014, would give Iraq a sustainable capacity target of around 4.5mn b/d .

Unconventional Oil: Illuminating the global Paradigm Shift to New Petroleum Fuels

Unconventional Oil: Illuminating the global Paradigm Shift to New Petroleum Fuels
Juliet Eilperin, James Bukhard
Brenda Brenda Pierce, David Burwell
Deborah Gordon
Wednesday, February 8, 2012
-Washington, D.C.

The make-up and geography of oil is changing. The international Energy Agency (IEA), projects that several new oil types will be introduced into the market to replace the loss of nearly 50 percent of conventional oil by 2035. Yet despite expert warnings, global policymaking communities lack a comprehensive understanding of the changing composition of the oil supplies and their impact on the global climate. Brenda Pierce of the U.S Geological Survey, Jim Burkhard of HIS-CERA, the Washington Post Juliet Eilperin, and Carneige’s Deborah Gordon discussed the world of unconventional oil and the paradigm shift underway in the petroleum resources. Camegie’s David Burwell moderated

BP Statistical Review 2012

A comment...

Just as some still propagate the notion of peak oil, facts show the opposite.

World proven reserves in 1991 stood at 1032,7 thousand million barrels.

Ten years later,  with average prices  well below $ 20 per barrel  the figure grew by 234,7 thousand million barrels, all of which  were conventional crudes.

A decade after that, with average price in nominal terms  had more than doubled,  a new addition of 385,2 thousand million barrels brought the total to 1652,6. A big proportion of this addition was made of unconventional oil.

North America, the New Middle East?

North America, the New Middle East?
Citi GPS: Global Perspectives & Solutions
20 March 2012

Edward L Morse

For the first time since 1949, the US has become a net petroleum product exporting country and has edged out Russia as the world’s largest refined petroleum exporter.
A simple explanation would point to lower demand and a struggling economy which requires less imported energy. But, that would only get you half the answer. US demand has fallen by some 2-m b/d since its peak in 2005 in part due to the recession but also due to a structural change due to demographic changes, policies on fuel efficiencies and the mass-commercialization of technologies.
The more exciting part of the answer is on the supply side as the US has become the fastest growing oil and natural gas producing area of the world and is now the most important marginal source for oil and gas globally. Add to this steadily growing Canadian production and a comeback in Mexican production and you get to a higher growth rate than all of OPEC can sustain.

BP Statistical Review 2012


The U.S. Geological Survey estimated there are at least 665 billion barrels of undiscovered oil in reserves outside United States.

"The USGS estimates that the mean undiscovered, conventional reserve additions in the world total 665 billion barrels of oil, 1,429 trillion cubic feet of natural gas and 16 billion barrels of natural gas liquids," it said.

Its assessment didn't include oil and natural gas fields in the United States, unconventional accumulations or so-called tar sands.
BP, in its annual review of world energy, said trends in renewable energy development indicate consumption of energy from non-fossil fuels increased substantially.

Renewables represent 2 percent of the global energy mix, however, showing most of the world relies on fossil fuels for the bulk of its energy needs.

BP Chief Executive Officer Bob Dudley said at the London presentation of the annual report that emerging economies were putting strains on oil supplies as demand increases.

Nevertheless, he said, fears of peak oil were overblown.

By Javier Blas in New York

The Financial Times

Prices of crucial shale gas byproducts, such as ethane and propane, have tumbled to 10-year lows due to booming output, further hurting the profitability of energy companies such as ExxonMobil and BHP Billiton which are already battling with ultra-low natural gas prices.

US producers have tried to offset the impact of depressed gas prices by shifting their drilling from so-called "dry gas" wells, which produce only gas, to "wet wells", which produce a mix of gas and more expensive oil liquids for the petrochemical industry.

That shift has so far helped companies including Devon and Chesapeake to weather the impact of low gas prices, but it has now unleashed fresh natural gas liquid output that has pushed prices to the lowest level since 2002.

Sometimes a collective stance is necessary, yet individual national interests and capabilities have to be taken in account.
Jun 11, 2012

Bloomberg informed that Saudi Arabian Oil Minister Ali al- Naimi said "maybe" there is a need for higher group production from the Organization of Petroleum Exporting Countries. Al-Naimi responded to questions from reporters after the Gulf Oil Review published a report quoting him as saying in a June 2-3 interview that OPEC might need to enlarge its collective production ceiling of 30 million barrels a day.

"I didn't say it that way, I said maybe, be careful," he told reporters upon arriving at his hotel yesterday evening. "Maybe more, maybe it can be anything, it can be less."
Brent crude futures fell to $98 a barrel yesterday on al-Naimi's comments and amid concern that Europe's debt crisis will derail global growth, curbing energy demand.
OPEC's 12 members exceeded their quota by 1.9 million barrels a day in April, according to the International Energy Agency.

Now that OPEC agreed to reduce its production by 1.6 million barrels a day, it is still too early  to know how much  oil the market will receive , be that from oil in transit, withdrowal from floating invenories  or from continued increasing production potentials  for the rest of this  year as they had been announced in Iraq , Venezuela, Kuwait, UAE among others, let alone the expected growth in US shale oil production.

12. June 2012
Iraq is producing 3 million barrels of oil a day, and is targeting to raise its daily crude oil exports to 2.9 million barrels from 2.4 million barrels at present, the country's oil minister said... The increased production is coming from southern oil fields which are being upgraded by some of the oil majors such as Royal Dutch Shell   BP   Exxon Mobil Corp and Eni.

As the following article indicates, OPEC is already showing concerns about this issue. In other words, OPEC cannot just sit and watch how it’s price defence policy enables others to replace it’s low cost oil and gas.

April Yee
The National
Jun 18, 2012

How can OPEC deal with the threat of shale gas and oil?
There are certain countries in OPEC that are gas exporters, so they probably have more to worry about from the unconventional gas, like Qatar and Algeria.
The other issue is the shale oil, which should worry OPEC.
From the latest information we have this year; the United States basically increased its production to the equivalent of Algerian production from shale oil. So that tells you it's very important.
Let's assume United States becomes self-sufficient. That's good, in the sense it doesn't need to import what it's importing now. But at the same time you're going to have an expanding market in other countries like China, India, and Saudi Arabia.
Do you think there are threats to OPEC’s current market share?
No, I don't think so. All the forecasts show that OPEC will participate in the market by between 37 and 50 per cent, so if OPEC takes more and more share, that means other people are not able to do it. But the price is a function of what's going to happen in the Arctic, in the deep offshore. Unless you have that higher price those guys are not going to invest.

Defenders of high oil  price
June 07, 2012

"OPEC has all the means to prevent (crude) oil prices falling too low," Mr. de Margerie said . underscoring his compan's concerns about the sharp drop in crude.
A balanced price which supports long term investments is around one hundred dollars a barrel, Total   Chairman and Chief Executive Christophe de Margerie said , June 6th 2012 adding that Total has also estimated $80 a barrel as sustainable for short term investments. 
In addition, with a rather long period of high oil prices, renewables are increasing their shar in the energy mix.  So, U.S. SOLAR MARKET SEEN DOUBLING IN 2012 as reported on13 June 2012, Wall Street Journal. The U.S. market for solar panels is likely to double in 2012, thanks to government policies and falling prices, although new tariffs on panels imported from China could contribute to slower growth in 2013.

U.S. developers are likely to install about 3,300 megawatts of solar panels this year, nearly double the amount installed in 2011, according to the study   by the Solar Energy Industries Association and GTM Research.

The global solar-power market has been turbulent for manufacturers, as prices have plunged amid an oversupply of panels. But the falling prices, as well as faster development for large-scale solar power plants, have driven strong demand for solar in the U.S., the report found.

Now that MARGINAL OIL PRODUCTION COST  are  increasing, according to Peak Energy , June 19th., energy analysts at Bernstein say the marginal cost of oil production, already $92 per barrel, is nearing $100 per barrel. This includes  marginal costs for the 50 largest oil and gas producers could reach close to US$100/bbl, but their analysis does not include  large producers as OPEC or former Soviet Union producers. But this does not matter for  the followers of Peak Oil theory , because their assumption is that  the marginal cost of the other producers will determine at what price rising demand and market price will meet  growth  recovery This approach imply that OPEC would just observe  passively  it’s  diminishing  marketshare .

The New American Oil Boom implications for energy security


MARCH 2012   

In 2011, net U.S. imports of crude oil and refined petroleum products declined for the sixth consecutive year, reversing a decades-long trend of rising reliance on foreign suppliers. A number of factors played a role, including reduced demand for petroleum fuels as a result of the recession and rising levels of efficiency in the nation’s automotive fleet. Recently, however, increased domestic production of liquid fuels has accounted for a substantial portion of the shift, rising by 1.4 million barrels per day (mbd) between 2008 and 2011 while net imports declined by 2.7 mbd. Based on current U.S. dynamics, both trends—rising production and falling imports—appear to be sustainable for the next decade and possibly longer.

I. origins.

A number of factors surely played a role in the changing U.S. outlook, a   the combination of trends and developments that truly catalyzed the rapid   represents a kind of ‘perfect storm’ of price, technology, and opportunity.

Oil Prices: High and rising oil prices sustained over a period of several years sent a clear investment signal to the U.S. oil industry, which tends to be among the most price-sensitive in the world.  

Technology: On its own, a strong price signal would not necessarily have translated directly into meaningful increases in U.S. oil production. Higher prices needed to be complemented by an increase in producible resources—  together beginning in the mid-2000s.

While a number of factors surely played a role in the changing U.S. outlook, a handful of major developments stand out. In fact, the combination of trends and developments that truly catalyzed rapid expansion of U.S. oil production over the past several years represents a kind of ‘perfect storm’ of price, technology, and opportunity.

Oil Prices: High and rising oil prices sustained over a period of several years sent a clear investment signal to the U.S. oil industry, which tends to be among the most price-sensitive in the world. No doubt, there have been periods of immense volatility, and prices have occasionally retreated as they did at the height of the global financial meltdown in late 2008. But taken as a whole, the majority of the past decade has been characterized by a steady upward march in oil prices, which averaged less than $30/bbl in 2003, doubled to more than $60/bbl by 2006, surpassed $90/bbl in 2008, and averaged a record $111.26/bbl in 2011.24 This progressive increase in prices—which, critically, has been viewed by most industry participants as predominantly driven by long-term global economic fundamentals—created a strong incentive to invest in upstream oil exploration and development.

There are number of reasons why oil production in the United States tends to be price sensitive. A stable and transparent regulatory environment and generally low barriers to entry relative to other oil producing regions facilitate a high level of capital mobility. More important, however, is the relatively high marginal cost of incremental U.S. production.

A 2010 analysis from Sanford Bernstein concluded that the U.S. marginal production cost for oil was between $83/bbl and $86/bbl, including operating costs, production taxes, and depreciation.25

More specifically, IEA recently estimated the breakeven cost (including royalties) for U.S. tight oil resources at $50/bbl.26

 For the U.S. offshore, the Department of Energy reports total upstream costs (finding and lifting) averaged $74.20/bbl between 2006 and 2008.27

This figure retreated to $51.60/bbl between 2007 and 2009, in large part due to sharply reduced capital and operating costs in the wake of the financial crisis. Given current dynamics in global upstream costs, the 2006-2008 figure is likely a closer representation of current U.S. offshore costs.

It is important to place these costs in a production context.

Currently, approximately one-fifth of U.S. crude oil production originates from extremely price sensitive marginal wells that produce less than 15 barrels per day.28

An additional 22 percent of production originates from higher flowing, but also expensive, projects in the deep and ultra deepwater federal Gulf of Mexico.29

Tight oil production currently accounts for approximately 11 percent of U.S. supplies.30

In other words, more than half of U.S. crude supplies are identifiable as high marginal cost resources that require oil prices of at least $50/bbl just to break even.

Clearly, a high level of confidence in supportive oil prices is needed to develop U.S. resources,  and that is exactly what the market has provided since at least 2003.

Technology: On its own, a strong price signal would not necessarily have translated directly into meaningful increases in U.S. oil production. Higher prices needed to be complemented by an increase in producible resources—either through new discoveries, new recovery methods, or better drilling technology. In fact, a combination of all of these things came together beginning in the mid-2000s, most impressively in the onshore region of the lower-48 United States.

The story begins not with oil, but with the massive increase in development of unconventional natural gas. For decades, industry geologists were aware of the existence of natural gas resources deep in underground shale formations.31 However, the resource was viewed as technologically difficult to access and economically unattractive. In essence, shale and other tight reservoirs are defined by reduced porosity vis-à-vis conventional reservoirs.32 This reduced porosity made it difficult to collect commercial quantities of natural gas without expending tremendous capital.

Throughout the 1990s, the public and private sectors each invested significantly in research and development efforts designed to improve existing drilling technologies in order to profitably unlock shale gas.33

A 1999 report from the Office of Fossil Energy noted that the DOE-led Natural Gas and Oil Technology Partnership promoted a number of advances in hydraulic fracturing.34 The report also cites advances made by the DOE-funded Gas Research Institute during the 1990s, including better diagnostics and greater ultimate recovery. Beginning in 2003, surging natural gas prices added a final incentive for the industry to focus on achieving commercial production of natural gas from unconventional reservoirs. After averaging $3.96 per million Btu (MMBtu) in 2001 and $3.36/MMBtu in 2002, prices rose to average $5.47 and $5.89/MMBtu in 2003 and 2004 respectively.35 Between 2005 and 2007, the annual spot price for natural gas in the United States never fell below $6.73/MMBtu.

By 2008, rising prices and better application of drilling technology resulted in a virtual revolution in the natural gas industry. Proved reserves increased by 54 percent between 2000 and 2009—from 177 trillion cubic feet (tcf) to 273 tcf. 36 Moreover, proved reserves present only part of the picture.

The Colorado School of Mines Potential Gas Committee estimates that potential U.S. gas resources could be closer to 2,000 tcf, resulting in a theoretical reserves-to-production ratio of nearly 100 years at today’s consumption levels.37

The recovery technology that the industry used to unlock shale resources is known as hydraulic fracturing. Although fracturing existed in the industry for decades, its combination with new drilling techniques and other process improvements proved revolutionary. In order to extract natural gas from deep shale reservoirs, hydraulic fracturing over-pressurizes the source rock, creating multiple fractures in which gas supplies can accumulate. The fracturing process is typically achieved using fluids (like water under high pressure) along with viscosity-enhancing chemical agents (surfactants).

In addition, producers typically inject a proppant, or propping agent, into the well to keep the fractures from closing when pressure is reduced.38 Instead of using traditional vertical wells, hydraulic fracturing and recovery take place via horizontal wells, which increase exposure of the well bore to the gas-producing zone.

The growing attractiveness of horizontal drilling is reflected in the U.S. well count beginning in 2005, when the number of horizontal and directional wells drilled began expanding slowly. In the first week of January 2005, 127 horizontal wells were drilled. For the same period in 2006, the number was more than 320.

By 2008, high and rising natural gas prices drove an influx of investment in natural gas production, and the horizontal well count surged. In the week ending December 5, 2008, 625 horizontal wells were drilled in the United States.39

By the end of 2009, companies that had been active in unconventional gas production began to shift capital and drilling programs toward liquids production. Compared to persistently low natural gas prices, high and rising oil prices provided an attractive target.

In a  henomenon largely unique to the United States, the ratio of oil prices to gas prices began to expand dramatically. Between 2005 and 2007, a barrel of oil was on average worth about 1.5 times an equivalent amount of natural gas. By the fourth quarter of 2009, the oil-to-gas price ratio in the United States had expanded to 3.1.49 It would average 3.2 in 2010 and 4.9 in 2011. In March 2012, a barrel of oil was worth an astounding 10 times the equivalent volume of natural gas.

Fortunately, some of the most significant unconventional gas plays were known to contain 
sizeable liquid-bearing formations, and a number of other unconventional resource plays throughout the United States were known to be primarily liquids-rich.

In April 2011, the number of rigs drilling for oil in the United
States surpassed the number drilling for gas for the first time since 1995, and the oil rig count has only continued to grow.50

49 SAFE analysis based on data from: DOE, EIA, online statistics, “Natural Gas Spot and Future Prices (NYMEX)” and “Oil Spot Prices”
50 Baker Hughes, “North American Rotary Rig Count—U.S. Oil and Gas Split”

By early 2012, there were more rigs drilling for oil in the United States— approximately 1,296— than at any time since Baker Hughes began reporting the count in 1987.51

22 DOE, EIA, AER 2010, Table 5.2.
23 SAFE Analysis based on data from: DOE, EIA, AER 2010, Table 5.2; and World Oil Online, “U.S. Well Counts Rise in All Regions,”
Volume 233 No.2, February 2012
24 DOE, EIA, online statistics, “Spot Prices,” at
25 Sanford Bernstein, “Bernstein Energy: 2010 U.S. Marginal Cost Curve – Oil Floor and Gaspiration?” May 27, 2011

26 IEA, World Energy Outlook 2011, at 128
27 DOE, EIA, Financial Performance of Major Energy Producers 2009, Table 11
28 DOE, EIA, “Distribution of Wells by Production Rate Bracket,” at
29 DOE, EIA, AEO 2012, Table 132
30 SAFE Analysis based on data from: IEA, Monthly Oil Market Report, December 2011, at 25
31 DOE, Office of Fossil Energy and National Energy Technology Laboratory, Modern Shale Gas Development in the United States: A Primer, at 13 (April 2009)
32 Id. at 14
33 See, e.g., Massachusetts Institute of Technology, The Future of Natural Gas, at 73-75 (2010) and Jesse Bogan, "The Father of Shale Gas: Interview with George Mitchell," Forbes, July 16, 2009

34 DOE, “Environmental Benefits of Advanced Oil and Gas Exploration and Production Technology,” Drilling and Completion
Technology Fact Sheet, at 7 and 8, (1999)
35 DOE, EIA, online statistics, “Natural Gas Spot and Futures Prices (NYMEX),” at
36 DOE, EIA, AER 2010, Table 4.2
37 Potential Gas Committee, “Potential Supply of Natural Gas in the United States,” December 31, 2010
38 DOE, Modern Shale Gas Development, at 56

BP Statistical Review 2012


 Amy Myers Jaffe
The New York Times , 18.6.2012

The latest round of briefing papers on oil published over the last week on Wall Street is a testament to how quickly things can change when it comes to oil prices. Less than a few months after Brent crude prices topped $125 a barrel, Wall Street is suddenly predicting a possible collapse in oil prices to $50 a barrel

The forecasts, which may or may not prove to be correct, reflect more than just a cloudy economic outlook for Europe. There appears to be a definitive shift brewing in long-range perceptions about future oil supplies.
With the shale oil boom promising over one million barrels a day of new oil production within a year in the United States, analysts are coming out of the woodwork to embrace falling oil prices. The new word on the street when it comes to oil is "sell."

Already, the long oil price, that is, futures prices going out past a year, has fallen to $85 a barrel, down from over $100 a barrel earlier this year.

Citigroup Global Markets took the lead last week with predictions of a cyclical shift that could cause prices to slide in the long term to as low as $50 a barrel.

In their latest publication, "Zeroing In On the Long-Term Oil Prices,"Citi analysts state: "Signs are abounding that the escalation in upstream capital spending is bearing fruit, with a surge in discoveries and reserve bookings that is already being converted into new production, particularly in North America.

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