Friday, July 17, 2015

Casualties In The Oil And Gas Industry; Look At The Brazilian Numbers -- Staggering -- July 17, 2015

This is really quite a remarkable story.

On June 1, 2015, I posted this:
With today's Wall Street Journal article on the slump in oil prices, I was reminded of the list I posted back in January.
Countries on the watch list with plummeting oil prices:
  • Venezuela
  • Russia
  • Jordan
  • Lebanon
  • Nigeria
  • Brazil 
One can add Argentina to that list.
One can add Columbia to the list.
Add Mexico to the list.
So, where do we stand? Bloomberg/Rigzone is reporting:
Eight months into OPEC’s plan to hit rival oil producers, the casualties are mounting.
Surprisingly, the most resilient may be the one that triggered the fight: the U.S.
Projections for combined daily output from Brazil, Canada, Russia, Mexico and Colombia by the end of the decade were cut by 2.8 million barrels since oil slumped last year, data from the countries and the International Energy Agency show.
In contrast, the U.S. Energy Department increased its estimate for crude output in 2020 by more than a million barrels.
Prices fell more than 45 percent in the past year after the Organization of Petroleum Exporting Countries refused to cut output, instead pressuring rival producers to eliminate a global supply glut.
While the number of active U.S. oil rigs has halved, production remains close to a three-decade high and is forecast to keep growing after a pause in the coming year.
Projects elsewhere will suffer more, according to Standard Chartered Plc and BNP Paribas SA.
“Some have misinterpreted OPEC’s strategy as targeting U.S. shale oil production,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas in London.
But any attempt at shutting down U.S. shale oil will prove futile. Rather, OPEC has aimed at crowding out investment in higher cost and less efficient conventional basins.”
I'm not exactly sure how Bloomberg can say the "US triggered the fight." It's my understanding that back in October, 2014, with a glut of oil on the world market, the country (or organization) that has historically cut back on production to keep prices high, specifically said they were not going to cut production. In fact, Saudi Arabia suggested that they would be increasing their production.

But I have trouble agreeing that the US started this fight.

Also, note that the Red Queen is still on the treadmill. From the article: "While the number of active U.S. oil rigs has halved, production remains close to a three-decade high and is forecast to keep growing after a pause in the coming year."

To the list above, Mexico needs to be added.

Memo to self: another note to Jane Nielson.

More at the linked story:
Brazil and Canada are among those “most in the firing line” at current prices, Paul Horsnell, the head of commodities research at Standard Chartered in London, said July 13.
Brazil’s so-called pre-salt offshore fields, and Canada’s tar sands are “frontier” oil provinces where costs are higher because of their technical complexity or remoteness, he said.
Petroleo Brasileiro SA cut its 2020 production target by 1.4 million barrels a day to 2.8 million, reducing planned capital expenditures through 2019 by a third, the Rio de Janeiro-based company said June 29.
The Canadian Association of Petroleum Producers reduced its 2020 oil production forecast by 270,000 barrels a day to 4.64 million on June 9.
The IEA pared its 2019 production estimates for a range of non-OPEC nations on Feb. 10. Its forecast for Russia was cut by 5.4 percent to 10.45 million a day while Mexican output was projected at 2.67 million, 8.9 percent lower than previously.
“U.S. production is going to continue to tick up over the next few years,” said Standard Chartered’s Horsnell. “Non- shale, non-OPEC is going to struggle.”

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