Friday, February 23, 2018

Peak oil? What peak oil? During the past two years there have been numerous articles on lack of investment in offshore projects which some suggest are desperately needed to forestall a shortage of oil in the out year (think, "Peak Oil"). Today, from a GlobalData press release: investment of $97 billion on top ten offshore oil projects will add 1.6 million bopd by 2025. This appears to be an update of their January 26, 2018, press release when they said the top ten fields would add 1.1 million bopd, and the investment amount has increased from $85 billion to almost $100 billion. Now, an additional 1.6 million and $97 billion in spending. From the earlier press release:

• 10 projects selected from 126 onshore projects globally
• about $85 billion in CAPEX will be spent over the lifetime of these top 10 onshore projects
• these top 10 projects will produce almost 10 billion bbls of crude oil
• [for comparison, the Bakken, a reservoir of at least 500 billion bbls, at 20% primary production, will produce 100 billion bbls; so far the Bakken has produced about 1 x 365 x 8  = 3 billion bbls of crude oil]
• the average development breakeven = $55/bbl [for comparison, the breakeven across North Dakota is $21/bbl]
• projects in Russia have the greatest break-even at $92/bbl
• to bring the 10 projects online: $85 billion
• by 2025: CAPEX forecast at $50 billion
• conventional oil Kuyumbinskoye development in Russia leads capital investment with $13 billion over its development lifetime
• second, in CAPEX: Canada's Telephone Lake (Cenovus Energy), a $10 billion CAPEX development cost

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Back to the Bakken

IP30 Data in the Bakken: from a SeekingAlpha article last August 23, 2017 -- I will come back to this one later today. 

Active rigs:

$62.74→	2/23/2018	02/23/2017	02/23/2016	02/23/2015	02/23/2014
Active Rigs	56	41	39	126	187

RBN Energy: a downside for many midstreamers in new tax law.

While the recently enacted federal tax cuts have been widely viewed as a boon to corporate America, including businesses in the energy sector, a new report by our friends at East Daley Capital finds a major drawback in the law for midstream companies. By slashing the corporate tax rate from 35% to 21% — and by allowing partnerships and “pass-through” entities to take a 20% deduction on their income pre-tax — the new law will increase the return on equity that midstreamers earn on their crude oil, NGL and natural gas pipelines.

That may well lead the Federal Energy Regulatory Commission (FERC) to re-set its formula rates for at least some gas pipelines, and also is likely to heighten regulatory scrutiny of the rates charged by the owners of oil and NGL pipelines. Today, we continue our review of East Daley’s new “Dirty Little Secrets” report with a look at the tax law, the higher pipeline ROEs resulting from the tax cuts, and the midstream companies that may be affected most.