Shell’s incoming CEO Ben van Beurden recently announced that a court ruling has placed “significant obstacles” in the way of oil exploitation in Alaska. Europe’s largest energy company also announced that it will cut capital spending by around $10 billion this year and sell many of its assets in an effort to become more efficient. As old oil fields fade faster than new ones can be tapped into, Shell plans to shift its focus towards liquefied natural gas projects in places such as the Gulf of Mexico and Brazil.
Shell purchased nearly $7 billion worth of shale assets in the U.S. on Voser’s watch, only to write down their value by $2 billion last summer. Investec analyst Neill Morton also predicted that further writedowns in the value of Shell’s North American shales assets are likely, Huffington Post reports. While Van Beurden may not be willing to commit further resources to drilling in Alaska in 2014, he did say that the company would look to resolve the legal issues “as quickly as possible.”
Apart from difficulty gaining access to Alaskan oil fields, overall production was also affected by the closure of wells in Nigeria due to security reasons. Of the five per cent reduction to 3.25 million barrels per day, two can be attributed to the security issues that have occurred in Africa.
While Shell may also reduce investments in Nigeria, their main point of concern is the northern United States. Oil prices remain high around the world, but “North America natural gas prices and associated crude markers remain low, and industry refining margins are under pressure.”
Shell’s decision to give up on Arctic Ocean oil drilling for 2014 is good news for the environment. Now if only the oil companies — and the Obama administration — would give up altogether on the idea of drilling in such a remote and harsh place.
Yes, there are arguments for ramping up domestic oil production to reduce our dependency on foreign oil, but the bigger issue is our dependence on oil, period. It’s mind-boggling that we talk about trying to reduce global warming caused by burning fossil fuels while at the same time pursuing policies that will bring us more fossil fuels to burn, and at a cheaper price. It’s like a heroin addict saying, “Yeah, I’ll get clean, someday.”
The Arctic drilling is doubly problematic because of the harsh conditions. The oil companies assure us that they are taking proper safeguards, they have the technology, they are conscientious stewards of the land, etc. But in July 2012, Shell couldn’t control its drilling rig, Discoverer, and it took the arrival of local tugboats to keep the platform from washing ashore. Earlier, the Challenger ice barge, designed to handle any spills in the frozen north, failed Coast Guard inspections and was forced to remain in port in Washington state until the problems were resolved. And at the end of the 2013 drilling season, the Kulluk drilling barge broke loose while under tow and ran aground off Kodiak.
When you can’t even get your equipment in place, you don’t exactly instill public confidence in your ability to drill safely.
Shell announced Thursday that it was scrapping plans to drill this year after a Jan. 22 ruling by the U.S. 9th Circuit Court of Appeals, which said the government violated the law when it opened the Arctic to drilling in the first place. Though the decision doesn’t preclude Shell and other oil companies from ultimately drilling on leases they bought from the federal government, maybe the court’s ruling will lead the Obama administration to revisit its head-scratching conclusion that such efforts are safe.
Big Oil Has Big Problems
By Matthew Philips January 31, 2014
Some of the world’s largest oil companies are reporting pretty ugly earnings. Profits at Exxon Mobil (XOM), the biggest U.S. oil company, are down 27 percent off its worst fourth-quarter earnings in four years. Royal Dutch Shell (RDS.B), Europe’s biggest oil major, saw its profits tumble 48 percent.
Chevron (CVX) reports on Friday, but given some of the issues it has faced maintaining production levels, there’s not a lot of optimism out there. ConocoPhillips (COP)reported a 74 percent jump in fourth-quarter net income, mostly from all the “non-core”assets it has unloaded recently. Production from continued operations is well below where it was a year ago.
In a way, the world’s major oil companies all suffer from some version of the same problem: They’re spending more money to produce less oil. The world’s cheap, easy-to-find reserves are basically gone; the low-hanging fruit was picked decades ago. Not only is the new stuff harder to find, but the older stuff is running out faster and faster.
Just to maintain production rates, oil companies have to race to find new reserves faster than the old ones dry up. That essentially puts them on a treadmill at which they must run faster just to keep pace—a horrible problem in any business. “It’s like feeding an elephant,” says Fadel Gheit, an energy analyst at Oppenheimer. “You can’t just give him a couple bags of peanuts. You have to find a truck load every day, just to keep him happy.”
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Pops wrote:Big Oil Has Big Problems
By Matthew Philips January 31, 2014
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More including links:
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Command economy vs free market. Exxon and Sisters do big projects well, but they are the dinosaurs, the smaller mammals can squeeze more out of smaller projects and keep going.ROCKMAN wrote:There's a very simple (but not obvious to folks outside the oil patch) reason why you don't see Big Oil making a big splash in the US shale: lack of man power. As expensive as the shale plays may seem they are insignificant to the pocket books of Chevron et al. Continuously drilling shale well after shale well is just too labor intensive. One of the metrics you never see is how much ExxonMobil has to spend per employee. IOW take their annual drilling budget and divide it by the number of geologists, engineers, landmen, etc. in those divisions. I can't find the number right now but Big Oil has to spend many times the amount per employee that Little Oil does.
ROCKMAN wrote:Quinny - I've made that point before. From the perspective of what gets drilled and what doesn't (and not other relationships) EROEI is irrelevant. Forget a ratio of 1:1. Somewhere around 5 or 6 the economics will kill a drilling project before EROEI. The cost of the energy, including the amortized embedded energy, is a relative small component of what makes a well unattractive economically. Which is why EROEI has never been directly used to make a drilling decision. In fact, I doing more than 5% of the oil patch could tell you what that acronym stands for.
The global oil and gas industry needs to invest more than $20 trillion (Dh73.4 trillion) over the next 25 years to meet expected growth in demand and compensate for the natural decline in developed fields, Saudi Aramco Chief Executive Officer Ameen Nasser said on Tuesday. Speaking at the CERAWeek conference in Houston, Nasser said the industry has already lost $1 trillion of investments since the oil price downturn from 2014 to 2016. Future investments needed “will only come if investors are convinced that oil will be allowed to compete on a level playing field, that oil is worth so much more, and that oil is here for the foreseeable future,” Nasser said. “That is why we must push back on the idea that the world can do without proven and reliable sources. We must challenge mistaken assumptions about the speed with which alternatives
baha wrote:Investors are always looking to the future...the future is electric.
And that Saudi dude is sweating it
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