Demise of Shale Gas

OIL at 40 USD a Barrel is best of Global Economy

The burst of oil was long overdue. This is very good for global economy.

The Fake Shale Gas

Many experts have touted $50 as a threshold, the minimum the shale industry needs to break even. But in reality, it is more complicated. $50 is an average, and although some wells, in certain areas of the Permian, can break even at prices between $32 and $47 per barrel, other wells, even in the same areas, need as much as $65 to break even. Outside of the Permian region, breakeven prices are even higher.

Bloomberg New Energy Finance’s breakeven prices in the Permian range from $46 per barrel in Loving County to $87 per barrel in Reagan County.

Potential environmental considerations associated with shale gas

Shale gas extraction raises environmental concerns in relation to:

·        carbon dioxide (CO₂) and methane (CH₄) emissions, particularly the potential for increased fugitive CH₄ emissions during drilling compared with drilling for conventional gas

·        the volumes of water and the chemicals used in fracking and their subsequent disposal

·        the possible risk of contaminating groundwater

·        the physical effects of fracking in the form of increased seismic activity

Shale gas 'worse than coal' for climate

Drawn from rock through a controversial "fracking" process, some hail the gas as a "stepping stone" to a low-carbon future and a route to energy security.

But US researchers found that shale gas wells leak substantial amounts of methane, a potent greenhouse gas. This makes its climate impact worse than conventional gas, they say - and probably worse than coal as well.

Oil price war sends US shale producers into survival mode

Already hard-pressed North American shale oil producers are contemplating a new round of spending and drilling cuts on Tuesday as they try to quell investor concerns about profitability in the wake of the oil price war unleashed by Saudi Arabia over the weekend.

Oil prices tanked by around a third on Monday after Saudi Arabia over the weekend slashed the price it charges for oil, sending a shock wave through an industry that had already been cutting costs since the 2014-2016 oil price collapse.

Research firm Rystad Energy predicted total industry spending on oil exploration and production would be cut by $100bn this year and another $150bn in 2021 if oil prices remained around $30 a barrel. The global benchmark was trading about $36.50 on Tuesday, up nearly six percent from Monday.

At the heart of the collapse in oil prices is the breakdown in the alliance between the Saudi-Arabia led OPEC and Russia, its most important ally.

Shale production has soared over the past eight years, pushing US output and exports to record highs, but that has come courtesy of strict production limits that the Saudis rolled back after the collapse of talks between OPEC and its allies last week.

"If these oil prices persist, the only real discussion is whether or not to continue operations in North American land," said Ian Bryant, Chief Executive Officer of Packers Plus Energy.

The Oil in the range of USD 30 is very bad news. That’s very bad news for Texas, North Dakota and anyone still left invested in oil and gas stocks. Shares of Chevron are down 20% in 2020, making it the best performing energy stock in America.  Most are down 30%, 40% or even 50% since January 1st.  The S&P Oil & Gas ETF (XOP) is down 33% this month.

The industry is facing a three-sided attack: falling prices, a move of institutional investors to divest from fossil fuel companies, and crushing debt loads.  

Debt is the problem. The U.S. oil and gas industry has about $86 billion of rated debt due in the next four years, according to Moody’s.  Nearly all of that debt is either junk rated, or rated just above junk. More simply put, if we fall to $25-$30 per barrel for an extended period of time, many traders and executives believe that stockholder pain will only get worse, and bankruptcy lawyers will be busy. 

What everyone does seem to agree on is that the shale industry, its employees and its remaining investors are going to experience very sharp pain in the near term.  A Capital IQ search shows that publicly traded oil and gas companies employ nearly 700,000 people.  That’s not including the millions more who work for private companies or in the halo of the industry.

 

The Shale Boom Is Becoming a Bust

The math is simple. If each new well drilled produces less than the earlier, and unprofitable, wells, then the peak is quickly approaching.

Negative cash flow

Bankruptcies are mounting across the sector, underlining a squeeze on funding. The money pipeline is running dry for large portions of the US shale oil sector, tipping drillers into bankruptcy and threatening the industry’s breathtaking growth in oil production.

As funding becomes scarce, bankruptcy filings are on the rise this year. Haynes and Boone, a law firm, counted 33 by the end of September, 27 of them since May, which is almost as many as in the whole of 2018. This month EP Energy filed for bankruptcy with $4.6bn in debt, citing “challenging dynamics as a result of depressed commodity prices.”

The story of indebted shale drilling is not a new one. For years, much of the shale industry was unprofitable and cash flow negative, but was able to finance aggressive drilling programs through a variety of means.

By some measures, this has led to some progress. After burning through around $200 billion in cash flow over the past decade, the top few dozen shale companies have come close to positive cash flow this year. In the second quarter, one study found that the top 29 shale companies posted slightly positive numbers, which was the best performance to date.

According to Rystad Energy, the top 40 companies spent $28 billion on capex in the first half of 2019, but only took in $23.7 billion in cash flow from operations

OPEC and Production Cut

Why Should OPEC Subsidize Shale Gas of US

By bringing down production or cutting production OPEC actually maintained Price tag so that, US Shale gas can keep producing. If OPEC kept their production, Shale can never survive the market competition

New Decade, New OPEC Oil Curbs. Same Mixed Results

OPEC+ reset the terms of its agreement as of Jan. 1. Half of the 10 OPEC countries now participating in supply cuts conformed last month, for a rate of 138%, according to Bloomberg calculations from the group’s secondary source data. Non-OPEC adherence was 76%, estimates from preliminary International Energy Agency data on crude supply show. Overall, the OPEC+ coalition had a compliance rate of 119%.

In recent years, OPEC+ has been forced to contend with rising American production and a trade war between the U.S. and China, both of which weighed on crude prices. Now there’s a third threat: the coronavirus outbreak, which has killed thousands in China while bringing the country to a halt. Chinese demand for oil products is likely to plunge by more than 35% year-on-year in the first quarter, Morgan Stanley said in a recent report, citing data from researchers at China oil giant CNPC.

Kuwait to table corporate tax bill in 2 years - finance minister

LONDON, June 8 (Reuters) - Kuwait expects to table a bill to harmonise corporate tax rates between local and foreign firms in around two years' time, offering incentives to key sectors like telecoms and IT, the country's finance minister said on Monday.
Kuwait said in April it was studying proposals to introduce the same levy for domestic firms, which generally pay little or no tax on income, and foreign companies, whose commercial activities are taxed with a rate of 55 percent in the highest bracket. 

"We are looking at many, many scenarios ... but we are definitely looking at matching them," Finance Minister Anas al-Saleh told Reuters on the sidelines of a conference in London. 

"We need to draft legislation ... in 24 months we should have a law that can go to parliament." 

Saleh expected the rate for international firms to fall and the levy on local companies to rise, though he declined to indicate a level. He added the government was also looking at introducing tax breaks for companies operating in key sectors like IT, telecommunications and petrochemicals. 

"There will also (be) incentives, incentives to encourage corporates to focus on certain sectors that are needed for our economy," he said. 

Introducing a new corporate tax will be politically sensitive in Kuwait, which has seen pressure on its state finances because of the plunge in oil prices. Officials say they want to diversify revenue sources beyond oil. 

Saleh reiterated there were no plans to introduce income tax for individuals. 

citation : taken from zawya - https://goo.gl/4jAxyZ

Oil @ 150……..200………..250 US$ and Japan

Oil @ 150……..200………..250 US$ and Japan

When production loss in the world is growing, 

Nation       Capacity loss                 

Libya - 1.6 million barrels         1 million barrel - will take at least 1 year to reach pre-revolution 

Yemen - Loss 300,000 barrels

South Sudan - 350,000 barrels main buyer China

Syria - 250,000 barrels

Nigeria, and other African nations - 

Total loss of production 2 million barrels - total spare capacity - Saudi Arabia - 2 million barrels a day, presents products is already using 1.5 million barrels spare capacity. There is no more spare capacity which can be brought into use.

Oil 150 US$ soon..............200 after some more time........

No alternative for Japan rather than buying Iran oil in short and long term

Japan posts record trade deficit

Increased energy imports contributed to Japan last year recording its first annual trade deficit since 1980. 

The Japanese economy is one of the third largest in the world. Only the USA and China have a higher GNP. Japan is the 3rd largest economy in the world behind the US and China. In 2010, Japan's GDP (Current Prices, US dollars) was US$5.458 trillion and its GDP (PPP) was US$4.309 trillion.

Imports: Japan has a surplus in its export/import balance. The most important import goods are raw materials such as oil, foodstuffs and wood. Major supplier is China, followed by the USA, Australia, Saudi- Arabia, South Korea, Indonesia and the United Arab Emirates.

Industries: Manufacturing, construction, distribution, real estate, services, and communication are Japan's major industries today. Agriculture makes up only about two percent of the GNP. Resources of raw materials are very limited and the mining industry rather small.

• Japan needs to import about 84% of its energy requirements.
• Its first commercial nuclear power reactor began operating in mid-1966, and nuclear energy has been a national strategic priority since 1973.
• The country's 50 main reactors have provided some 30% of the country's electricity and this was expected to increase to at least 40% by 2017.
• Japan has a full fuel cycle set-up, including enrichment and reprocessing of used fuel for recycle.
• Japan posts a record trade deficit of $18.7 billion in January – 2012
• Rise due to the increase in oil prices and increase of fossil fuel imports
• Deficit fueled by the shutdown of Japan's nuclear power plants
• Only five reactors out of 54 still online after March 11 earthquake and nuclear disaster

Japan has posted a record trade deficit for January after its nuclear crisis shut down nearly all reactors, sending fuel imports surging.

The Y1.48 trillion ($A17.27 billion) deficit reported on Monday has highlighted Japan's increased dependence on imported fuel after the March 11 earthquake and tsunami sent the Fukushima nuclear plant into multiple meltdowns.

Now, Japan is importing more natural gas and oil as utilities boost non-nuclear power generation. Imports of natural gas in January increased 74 per cent from a year earlier and imports of petroleum jumped nearly 13 per cent.

Despite producing only trifling amounts of oil domestically from fields off its west coast, Japan is the third largest oil consumer in the world behind the U.S. and China, as well as the third largest net importer of crude oil. Imported oil accounts for some 45 percent of Japan’s energy needs. Besides bringing in a lot of oil, Japan is the world’s largest importer of both coal and liquefied natural gas.

Supplying the same amount of electricity by oil, for example, would increase oil imports by about 62 million metric tons per year, or about 1.25 million barrels per day,” says Toufiq Siddiqi, a researcher with the nonprofit East-West Institute. He adds that at the current price of oil per barrel (roughly $100), switching out nuclear for oil would cost Japan upwards of $46 billion per year. “Further, it would take almost a decade to build enough new oil, coal or natural gas-fired power plants to provide the equivalent amount of electricity, and tens of billions of dollars per year would be required to do so,” he concludes.

Japan January Liquefied Natural Gas Imports Rise 28.2%;

Japan’s liquefied natural gas imports rose to a record in January after the Fukushima nuclear disaster led to the shutdown of most of the country’s atomic reactors, causing utilities to use more fossil fuels.

The nation’s LNG imports climbed 28.2 percent from a year earlier to 8.15 million metric tons, according to a preliminary report released today by the Ministry of Finance.

Japan appears to be looking to natural gas, specifically liquefied natural gas (LNG), to compensate, increasing LNG imports by 27 percent year-on-year in January 2012 and receiving imports from new sources such as Qatar and Russia.  Japan was only meeting about 16 percent of its energy demand through domestic production before the disaster, and 30 percent of that production came from nuclear energy.

Natural gas and other conventional fuel imports will rise after Japan's nuclear disaster. Asian exporters of natural gas, coal, and oil should see the biggest boost.

But analysts say the amount of fuel Japan must import to make up for shutdown nuclear generation will greatly outstrip the immediate drop in consumer demand. Goldman Sachs estimates Japan must import 247,000 barrels a day of oil to compensate for the country's lost nuclear capacity while demand will drop only 16,000 barrels a day due to an expected economic slowdown in the first half.