Archive for the ‘Oil’ Category

Is Saudi Arabia giving up on its oil wars?

September 29, 2016

There is a faint whiff of realism entering into Saudi Arabian government policy. They have started to curb public expenditure, they have flagged salary cuts for public employees (not just now but in 2 years), they are desperately trying to diversify their economy. Much of the change has been forced due to self-inflicted collateral damage to their various “oil wars” against shale oil, against Iranian oil and against Russian oil. They have tried to use low oil price as a weapon in their political and ideological battles. But Saudi Arabia has not yet developed the capabilities (and competence) among its indigenous work force to cope without the fat cushion of oil revenues. Without foreign competence and labour, Saudi would collapse and the only thing keeping the foreign competence and labour there is oil money.

It may be a faint hint of an increasing pragmatism that for the first time in 8 years the Saudis and OPEC have agreed to a modest cut in oil production.

It is not the end of the  oil wars but it may be the beginning of the end.

Reuters: 

OPEC agreed on Wednesday modest oil output cuts in the first such deal since 2008, with the group’s leader Saudi Arabia softening its stance on arch-rival Iran amid mounting pressure from low oil prices.

“OPEC made an exceptional decision today … After two and a half years, OPEC reached consensus to manage the market,” said Iranian Oil Minister Bijan Zanganeh, who had repeatedly clashed with Saudi Arabia during previous meetings.

He and other ministers said the Organization of the Petroleum Exporting Countries would reduce output to a range of 32.5-33.0 million barrels per day. OPEC estimates its current output at 33.24 million bpd.

“We have decided to decrease the production around 700,000 bpd,” Zanganeh said.

The move would effectively re-establish OPEC production ceilings abandoned a year ago.

However, how much each country will produce is to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia.

Oil prices jumped more than 5 percent to trade above $48 per barrel as of 2015 GMT. Many traders said they were impressed OPEC had managed to reach a compromise after years of wrangling but others said they wanted to see the details.

“This is the first OPEC deal in eight years! The cartel proved that it still matters even in the age of shale! This is the end of the ‘production war’ and OPEC claims victory,” said Phil Flynn, senior energy analyst at Price Futures Group. 

Jeff Quigley, director of energy markets at Houston-based Stratas Advisors, said the market had yet to discover who would produce what: “I want to hear from the mouth of the Iranian oil minister that he’s not going to go back to pre-sanction levels. For the Saudis, it just goes against the conventional wisdom of what they’ve been saying.”.

Saudi Energy Minister Khalid al-Falih said on Tuesday that Iran, Nigeria and Libya would be allowed to produce “at maximum levels that make sense” as part of any output limits.

That represents a strategy shift for Riyadh, which had said it would reduce output to ease a global glut only if every other OPEC and non-OPEC producer followed suit. Iran has argued it should be exempt from such limits as its production recovers after the lifting of EU sanctions earlier this year.

…….. Saudi Arabia is by far the largest OPEC producer with output of more than 10.7 million bpd, on par with Russia and the United States. Together, the three largest global producers extract a third of the world’s oil.

Iran’s production has been stagnant at 3.6 million bpd in the past three months, close to pre-sanctions levels although Tehran says it wants to ramp up output to more than 4 million bpd when foreign investments in its fields kick in. … Saudi oil revenue has halved over the past two years, forcing Riyadh to liquidate billions of dollars of overseas assets every month to pay bills and cut domestic fuel and utility subsidies last year.

It may even be that the Iranians and the Saudis are actually talking to each other.

Opec Countries (image pinterest.com)

Opec Countries (image pinterest.com)


 

Saudi Arabia is losing its war against oil shale

August 3, 2016

Saudi Arabia started its war on US shale oil in the autumn of 2014. Oil prices in June 2014 were around $110 per barrel and were on the way down as US shale oil producers were ramping up production. The expectation was that the OPEC cartel would reduce production to hold prices up. The conventional wisdom was that whereas Saudi Arabia had a production cost of about $3 per barrel, shale oil had a production cost of over $50 per barrel and upto close to $100. Oil from Canadian tar sands was thought to have a production cost of above $70 per barrel. Both were though to require oil prices well in excess of $70 and close to $100 to be viable.

But Saudi Arabia decided to strangle the burgeoning shale oil industry and started an oil war. It forced other OPEC members to focus on market share and hold production levels. Even though there was a glut of oil on the market. Oil fell to below $30 per barrel earlier this year before recovering to around $45. Saudi’s strategy was based on the assumption that rock-bottom prices would kill off the upstart non-OPEC, US shale producers. Low production costs would allow the OPEC producers to take some pain for a year or so. Certainly this strategy has had some effect. U.S. oil production is about one million barrels per day lower than a year ago.

Certainly some shale oil producers have gone out of business. But US oil production is much higher than thought possible at the prevailing price. The main effect of the Saudi strategy has been counter-productive. There has been a remarkable burst of innovation among the shale frackers which has drastically reduced shale oil production costs. The costs for shale production that I had reported 2 years ago no longer apply.Then the cheapest shale oil to produce was from Marcellus shale at around $24 per barrel. But the cheapest today costs $2.25 a barrel on horizontal wells in the Permian Basin of West Texas. That is directly – and even favourably – comparable with the Saudi production costs.

Reuters: Improved fracking techniques have helped cut Pioneer Natural Resources Co’s production costs in the Permian Basin to about $2 a barrel, low enough to compete with oil rival Saudi Arabia, CEO Scott Sheffield said on Thursday. 

The comments from Sheffield, who is retiring soon, were perhaps the most concrete sign yet that the fittest U.S. shale oil producers will survive the price crash that started in mid-2014 when Saudi Arabia and OPEC moved to pump heavily to win back market share from higher-cost producers.

Dozens of shale companies, many with marginal assets, have filed for credit protection in the biggest wave of corporate bankruptcies since the telecoms crash of the early 2000s. Sheffield said high costs would continue to make U.S. shale plays outside the Permian basin relatively less competitive. 

On Pioneer’s second-quarter results call, Sheffield said that, excluding taxes, production costs have fallen to $2.25 a barrel on horizontal wells in the Permian Basin of West Texas, so it is nearly on even footing with low-cost producers of conventional oil.

“Definitely we can compete with anything that Saudi Arabia has,” he said.

“My firm belief is the Permian is going to be the only driver of long-term oil growth in this country. And it’s going to grow on up to about 5 million barrels a day from 2 million barrels,” even in a $55 per barrel price environment, he added. …….. 

Pioneer expects output to grow 15 percent a year through 2020 after posting production of 233,000 barrels of oil equivalent a day this past quarter. It sees most of its growth in the Permian, though it also has acreage in the Eagle Ford.

Pioneer helps limit costs by doing much of its oilfield services work in-house. It also has its own sand mine, and uses effluent water from the city of Odessa for frack jobs using pressurized sand, water and chemicals to unlock oil from rock.

Pioneer said it is now introducing its third generation of well completion techniques, called version 3.0, that is using even more sand and water than the super-sized volumes introduced at the start of the price crash to pull more oil out of rock.

permian basin texas

Even at prices less than $20 per barrel, some considerable quantities of shale oil would continue to be produced.

The Saudi strategy is backfiring.


 

Saudi Arabia seeks bank loans for first time in a decade

March 9, 2016

I am still of the opinion that the oil price war that Saudi Arabia has been waging against shale oil, Russia and Iran, was misguided and due primarily to a geopolitical machismo that was grossly overestimated. It was misguided because shale fracking is not a technology that is going to go away. In the short term some of the more expensive shale wells may close, but they can very soon start up again. But more importantly, shale gas and oil are available all over the world. They just haven’t been developed yet. And those that don’t have access to shale – like Japan – will have access to gas from methane hydrates within a decade. And there is more gas available from methane hydrate than from shale which, in turn, is more gas than all the natural gas resources known.

In the long run I expect the Saudis to be the losers. Their budget deficit climbed to approach $100 billion last year and now, for the first time in a decade, they are looking to borrow.

Reuters: 

Saudi Arabia is seeking a bank loan of between $6 billion and $8 billion, sources familiar with the matter told Reuters, in what would be the first significant foreign borrowing by the kingdom’s government for over a decade.

Riyadh has asked lenders to submit proposals to extend it a five-year U.S. dollar loan of that size, with an option to increase it, the sources said, to help plug a record budget deficit caused by low oil prices.

The sources declined to be named because the matter is not public. …

The kingdom’s budget deficit reached nearly $100 billion last year. The government is currently bridging the gap by drawing down its massive store of foreign assets and issuing domestic bonds. But the assets will only last a few more years at their current rate of decline, while the bond issues have started to strain liquidity in the banking system. …….. 

…… Analysts say sovereign borrowing by the six wealthy Gulf Arab oil exporters could total $20 billion or more in 2016 – a big shift from years past, when the region had a surfeit of funds and was lending to the rest of the world.

All of the six states have either launched borrowing programs in response to low oil prices or are laying plans to do so. With money becoming scarcer at home, Gulf companies are also expected to borrow more from abroad.

In mid-February, Standard & Poor’s cut Saudi Arabia’s long-term sovereign credit rating by two notches to A-minus. The world’s other two major rating agencies still have much higher assessments of Riyadh, but last week Moody’s Investors Service put Saudi Arabia on review for a possible downgrade. ……. 

The pricing of the loan is likely to be benchmarked against international loans taken out by the governments of Qatar and Oman in the last few months, according to bankers. Because of banks’ concern about the Gulf region’s ability to cope with an era of cheap oil, those two loans took considerable time to arrange and the pricing was raised during that period.

Oman’s $1 billion loan was ultimately priced at 120 basis points over the London interbank offered rate (Libor), while Qatar’s $5.5 billion loan was priced at 110 bps over, with both concluded in January.


 

Positive effects of oil price drop should kick-in by Q2

February 8, 2016

The net effect of lower oil price has always been expected to be positive.

Although oil price gains and losses across producers and consumers sum to zero, the net effect on global activity is positive. The reasons are twofold: simply put, the increase in spending by oil importers is likely to exceed the decline in spending by exporters, and lower production costs will stimulate supply in other sectors for which oil is an input.

Since June 2014, oil price has dropped by over 70%, but the boost to the global economy has not materialised as yet. The “explanations” being produced include – but are not limited to – the turn-down in China, the collapse of various economic “bubbles”, the fear factor, the reluctance of governments (especially in Europe) of allowing a pass-through of the price reduction to consumers and  the too rapid decline of tax revenues in oil producing countries.

Oil price 8th Feb 2016 - Nasdaq

Oil price 8th Feb 2016 – Nasdaq

Certainly the “fear factor” and the reluctance of governments and private players to plan for any extended period with low prices has been a major factor. The stock markets have not hit bottom yet. But the strange thing is that the money pulled out of the stock markets has not all shifted to gold and has resulted in only a modest increase of gold price.  The other traditional safe havens of government paper are providing very low yields.

While company earnings are down they are nowhere near as bleak as the stock markets would indicate. Dividends are somewhat down but also do not match the decline in valuations. Now I see that sales volumes are also not as far reduced as the valuations and that margins are generally holding up. But the first lot of dividends I have received in 2016 convince me that while absolute values are down, the “yield” based on current valuations has actually increased.

Of course markets can still go down. But the drop in earnings will be far less than the loss of valuations that has already taken place. P/E ratios are beginning to look quite attractive and if earnings can hold up in line with sales volume, I expect that dividends will still provide a good “yield” through 2016.

As the IMF puts it:

Low oil prices provide a window of opportunity to undertake serious fuel pricing and taxation reform in both oil-importing and oil-exporting countries. The resulting stronger fiscal balances would create space for increasing priority expenditures and/or cutting distortionary taxes, thereby imparting a sustained boost to growth. In a number of low- and middle-income countries, energy sector reforms aimed at broadening access to reliable energy would have important development benefits.

Maybe I am just an optimist, but new company budgets – especially those for the year starting April 2016 – are now factoring in some of the 70% drop of oil price as being sustainable (typically an oil price of $45 as being taken as a “safe” but sustainable level). That leads me to expect a change of mood and a corresponding change in markets in the second quarter of 2016.


 

Thinking the unthinkable – oil at $10 per barrel

January 12, 2016

Huge stocks, declining consumption and reducing prices. Yet, Saudi Arabian oil production is running at close to maximum, Iraqi oil is increasing and Iranian oil will soon hit the market. Economic theories are being overturned and more than one economist is turning in his grave. (Economists are not, and never have been, very good at forecasts though they are all past-masters at generating theories based on back-casts).

Now, the experts are beginning to contemplate what has been unthinkable so far – oil price diving to $10/barrel.

ReutersCrude oil fell 3 percent on Tuesday, heading toward $30 per barrel and levels not seen in over a decade, with analysts scrambling to cut their price forecasts and traders betting on further declines.

Prices are down around 20 percent since the start of the year, dragged lower by soaring oversupply, China’s weakening economy and stock market turmoil, as well as the strong dollar, which makes it more expensive for countries using other currencies to buy oil.

…… On the supply side, Iraq, which has become the second biggest producer within the Organization of the Petroleum Exporting Countries (OPEC), plans to export a record of around 3.63 million barrels per day (bpd) from its southern oil terminals in February, trade sources said on Tuesday, citing a preliminary loading program, up 8 percent from this month.

“The near-term outlook for the oil market is bleak. OPEC is producing flat-out into a market that is oversupplied by over 1 million barrels per day; already decelerating demand growth could further decay with slowing economic activity; and OECD inventories that are already at record levels are likely to expand through at least the middle of the year,” Jefferies said on Tuesday.

Adjusting to the price rout, analysts have been shifting their price outlooks downward, with Barclays, Macquarie, Bank of America Merrill Lynch, Standard Chartered and Societe Generale all cutting their 2016 oil forecasts this week.

StanChart took the most bearish view, saying prices could drop as low as $10 a barrel.

“We think prices could fall as low as $10/bbl before most of the money managers in the market conceded that matters had gone too far,” the bank said.

crude oil price 20160112

In my simplistic view, a reducing price for something I consume is fundamentally a “good thing”. But I can’t help feeling that this price drop is not a sound, sustainable reduction based on cost reduction. It is manipulated and artificial and is due to a misguided Saudi strategy against shale oil, Russian oil and Iran. And it is going horribly wrong.

Saudi oil policy has ensured the survival of the shale oil producers

January 1, 2016

WTI Crude Oil Price. $107 in June 2104 and $37 yesterday (graphic Bloomberg).

WTI Crude oil price 2014-2015 (Bloomberg)

WTI Crude oil price 2014-2015 (Bloomberg)

In years to come the Saudi strategy through the last 2 years will form the basis of case-studies in business school about classic strategies which back-fired.

The Saudi overproduction has not managed – as they hoped – to kill off the US shale oil producers during 2015. They have reduced their costs much more sharply than the Saudi’s calculated for. They have also developed the ability to “mothball” and restart their wells at short notice. Iranian oil will come into the market in 2016 and their production costs are even lower than the Saudi cost.

Fighting for market share – while the market is down – is an expensive business. But I think the fundamental error in the Saudi strategy is believing that they will be able to retain market share when the market turns up. Not only will they have to fight off the Iranians but with an increase in demand, all the shale producers will be back. Moreover new shale producers in the UK and Asia are waiting in the wings. The Saudi attack on the shale oil producers has only made them far more competitive, very much faster than they ever expected. With the US experience to draw on, the learning curve for new producers in new countries will be that much easier and faster to traverse.

Reuters:

The U.S. shale industry, meanwhile, surprised the world again with its ability to survive rock-bottom crude prices, churning out more supply than expected, even as the sell-off in oil slashed by two-thirds the number of drilling rigs in the country from a year ago.

The United States also took a historic move in repealing a 40-year ban on U.S. crude exports to countries outside Canada, acknowledging the industry’s growth.

“You do have to tip your hat to the U.S. shale industry and their ongoing ability to drive down costs and hang in there, albeit by their fingernails,” said John Kilduff, a partner at Again Capital, an energy hedge fund in New York.

The bottom line is that Saudi oil is no longer without alternatives. That shale oil producers will disappear is a Saudi fantasy. In fact they have now helped the shale oil industry to become lean and mean enough such that their survival is guaranteed. The oil prices during 2015 were insufficiently low to drive an economic recovery but that could well come in 2016. The number of oil producers will only multiply and Saudi oil revenues will be permanently impaired.

Oil down to $12/barrel? Unthinkable? Maybe not

August 18, 2015

When oil reached well over $100/barrel, the “peak oil”, Malthusian scenarios were dusted off and regurgitated ad nauseum.

Then came the drop in demand after the financial crisis and prices came back under $100 as reality set in. The disturbances of reduced production from Iraq, Libya and sanctions-hit Iran could not bring the price back up with demand as low as it was. Then came fracking and flooded the market with oil. Price came down to c. $60. Saudi Arabia did not decrease production but instead started a price war to kill of the nasty frackers and to maintain their market share. Prices should have dropped to less than $30 but stayed up above $50 on hopes of increased demand eventually coming through and hopes that China would get going again. Inventories have grown to record levels.

Oil inventory August 2015

Oil inventory August 2015

But now the hopes of a Chinese recovery anytime soon are beginning to dissipate. Prices have dropped below the psychologically important $50/barrel.

Business Insider: ….. WTI crude oil futures are trading near $42 a barrel while Brent futures are just above $48 a barrel.

And now the talk of oil prices below $20/ barrel, perhaps even as low as $12 are no longer looking ridiculous. David Kotok was talking to Bloomberg.

Oil prices have hit six-year lows, and Cumberland Advisors’ David Kotok thinks the worst may be yet to come.

We could go back to $15 or $20, this is a downward slope, we don’t know a bottom,” Kotok said in a Monday morning interview on Bloomberg TV. …….. 

Kotok said that despite the oil industries apparent belief that things will get better, there is little reason for anything to change.

Hope is not a strategy, it’s a myth,” he said. “The fact is, we don’t have the drivers.”

The good news is that there’s good news. When asked about the lack of an increase in consumer spending despite the more favorable oil and gas prices, he said it will come.

When the oil price goes down that means you get the first kick, but the you have to wait for the consumer to wake up and say ‘Gee, I’m going to have more money for longer, I’m going to spend it’,” Kotok said. I think that there is a huge boost in consumer spending coming when people begin to accept the fact that this is a permanent shift not a temporary shift.”

Some net oil consuming countries will get a “windfall” to help them kick-start their economies. But prices could stay down for a long time yet until a sustained, global consumer boom truly develops.

Iran deal is done, Bibi unhappy, Greek deal done, Greeks unhappy.

July 14, 2015

Reuters and other anonymous sources are reporting that an Iran deal has been done.

Greece yesterday, Iran today, what’s for tomorrow?

Bibi is neither pleased nor amused. A “pre-emptive” strike by Israel on Iran now becomes that much more difficult. Saudi Arabia will not be too pleased either. If sanctions are  lifted and also on weapons sales by Iran then we can see the pro-Iranian factions across the Middle East getting a boost. Which will probably constrain the advance of ISIS somewhat (and whatever the Saudis might say it is private Saudi money funding the barbarians). The pro-Iranian factions in Syria and Iraq will not only get a boost, they may also be more successful on the ground than the US-led coalition.

However Saudi Arabia will not be too unhappy about the additional downward pressure on oil prices. It will be sometime before Iran can ramp up production and during this time, low-cost Saudi oil will win further market share. Though Saudi Arabia failed to wipe out shale oil from the US, it is still increasing production and contributing further to the current oil glut. Saudi seems to be pursuing a revised strategy of keeping oil prices relatively low for 2 years or more in a war of attrition against the higher-cost oil producers. Market share is perceived as their prime weapon to try and get rid of the higher-cost producers. But I think they have miscalculated even here. A discontinued shale oil well can be restarted with very little investment and at very short notice. Production costs of shale oil have decreased sharply. Shale oil developers will just ramp their production up and down depending upon the prevailing oil price. And the larger shale oil wells can make money even with oil prices down at $40/ barrel.

It isn’t quite time for vacation yet in Europe (apart from Sweden which is closed for July). Some kind of framework resolution for the whole package of the 3rd bailout needs to be passed by the Greek parliament by tomorrow. Some resistance is showing today but the resolution will surely pass. Of course that says nothing about the Greek government’s implementation of all they have signed up for. Their track record of implementing what has been solemnly promised is not good. And if the reports today that the ECB will not be pumping liquidity willy-nilly into the Greek banks are correct, then the banking system will have to start issuing IOU’s to keep functioning while the negotiations are concluded. That will effectively be an alternative currency and it won’t be long before the IOU’s start trading at a different value to par. A currency by another name than “Euro” is still a Grexit for as long as that currency is used.

But an Iran back in the international fold is undoubtedly a good thing.

Shale oil resists as Saudi attack fails and oil glut may last till 2017

May 29, 2015

Shale oil production in the US seems to have resisted the Saudi attack. While some of the smaller wells have decreased and even stopped production, they can restart very quickly if and when the price is right. US inventories are extremely high, but perhaps of more significance in the long run is that with the pressure of low oil price, shale oil production costs have come down drastically. The Saudi attack on shale has only forced cost cutting measures which the shale industry had not bothered with when prices were high.

Wells which were thought to have a break-even oil price of $60/brl have come down to $40 and those thought to have been at $40 are now closer to $20. Of course they are a long way from Saudi production levels of about $3/brl, but it is the Saudi attack which has now improved their competitive position. Europe – when it eventually gets past its debilitating green lobbies – will be able to take advantage of the much improved and streamlined shale oil production process. Shale oil with a production cost around half of that from the North Sea could provide a bigger boost for the England economy than North Sea gas provided for Scotland.

Saudi shale war

Saudi shale war

It is still a bit of a mystery as to why oil price has stabilised above $50 when inventories are so high. It is probably because OPEC was expecting to take greater market share – which they haven’t – in a recovering Chinese economy – which has not yet happened. The pressure on price is downwards and the current stability is probably temporary. It is likely that oil price is in for almost 2 years at a price averaging around $45/barrel or less.

US oil inventories may 2015 (EIA)

US oil inventories may 2015 (EIA)

ReutersThe North American oil boom is proving resilient despite low oil prices, producer group OPEC said in its biggest and most detailed report this year, suggesting the global oil glut could persist for another two years. A draft report of OPEC’s long-term strategy, seen by Reuters ahead of the cartel’s policy meeting in Vienna next week, forecast crude supply from rival non-OPEC producers would grow at least until 2017.

Sluggish global demand for oil means the call on OPEC’s crude will fall from 30 million barrels per day (bpd) in 2014 to 28.2 million in 2017, effectively leaving the group with two options – cut output from current levels of 31 million bpd or be prepared to tolerate depressed oil prices for much longer.

….. Brent crude has collapsed from $115 a barrel in June 2014 due to ample supplies amid a U.S. shale oil boom and a decision by OPEC last November not to cut output. Instead the group chose to increase supply in a bid to win back market share and slow higher-cost competing producers.

But shale oil production has proved to be more resilient than many had originally thought. “Generally speaking, for non-OPEC fields already in production, even a severe low price environment will not result in production cuts, since high-cost producers will always seek to cover a part of their operating costs,” the OPEC report said.

…… since 1990, most of the forecasts concerning future non-OPEC oil supply have been pessimistic and often erroneous: “For example, non-OPEC production was once projected to peak in the early 1990s and decline thereafter.”

 

Time to invest in fossil fuels as China discovers vast new reserves

April 21, 2015

There is a campaign in the western “do-gooding” and deluded “green” community (exemplified by The Guardian) to pressurise investors to disinvest from fossil fuels. Fortunately there is no shortage of investors in Asia who would be only too happy to see the European financial institutions and pension funds selling off their shares in oil, shale and coal producing and using companies. There are few better investments than snapping up artificially depressed energy shares. I am watching closely to pick up any bargains that might appear if this campaign has any impact. So far it has had little effect.

In the 1970s and 1980s the alarmist view was that coal, oil and gas would run out catastrophically. Now that peak-oil and peak-gas have been pushed out into the indeterminate future and further new shale reserves are found, the alarmism has shifted to the use of these resources being catastrophic! The campaign itself is rather idiotic (“leave it in the ground”) and counter-productive, since any success can only shift ownership of energy companies eastwards. Supposedly – but misguidedly – it is about climate but the campaign has no measurable or relevant objectives. (Note that no “climate policy”  ever has a climate parameter as an objective and which can be measured.) It will certainly not reduce the consumption of fossil fuels at all – which will instead continue to grow as developing countries develop. In fact the competitiveness of the fossil fuel using countries will be further emphasised as the “do-gooding” countries entrap themselves into a very high-cost electricity production regime based on intermittent solar and wind energy. (It is worth noting that Germany which has installed more renewable energy than any other European country now has an electricity cost which is the highest in Europe and more than twice that of the US. And yet Germany burned more coal last year than they have ever done! The German Energiwende has been a fiasco for all other than those who have milked the subsidies available)

There is – again fortunately – no prospect of India, China and other developing countries in Asia and Africa reducing their use of all the fossil fuels they have available. If I could I would be investing directly in coal and oil and natural gas and shale gas in India and China and Indonesia. At present I must satisfy myself with some indirect investment.

History will be contemptuous of the irrational demonisation of fossil fuels by the alarmists and the “do-gooders” during the late 20th and early 21st century.

Xinhua reports:

China continued to be increasingly successful at discovering crude oil and natural gas reserves last year, new data from the Ministry of Land and Resources indicated on Thursday.

The country discovered nearly 1.06 billion tonnes of new crude oil deposits in 2014, up from 1.1 billion tonnes the previous year, marking a stable increase and the eighth consecutive year in which the amount discovered surpassed 1 billion tonnes. More than 1.1 trillion cubic meters of new natural gas reserves were also discovered in 2014, a record high.

Of the new discoveries, 187 million tonnes of oil and 474.9 billion cubic meters of natural gas can be exploited with current technology, according to the ministry.

New shale gas reserves discovered amount to 106.75 billion cubic meters, with 26.69 billion exploitable.

This is the first time that proven reserves of shale gas have been publicized since the Chinese government approved the listing of shale gas as an independent mineral resource in 2011.

Discoveries of coal-bed methane, an unconventional gas, amounted to 60.2 billion cubic meters, up 155.3 percent year on year.

shale basins China (The Diplomat)

shale basins China (The Diplomat)

The Indian sub-continent too has large shale reserves waiting to be exploited. The shale basins extend into Pakistan and Bangladesh and offers Pakistan the possibility of actually becoming self-sufficient for energy.

shale gas basins India

shale gas basins India


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