Thoughts On BP's Comments That It Underestimated Renewable Energy -- April 26, 2018

I posted this about an hour ago, but it's worth re-posting.

Don't get fooled by the headline: BP admits it underestimated renewable energy growth. Near the end of the story --

China’s solar race could start sputtering some time in the future. This should be a safe enough prediction: sooner or later the local energy market will become saturated with solar power capacity.

When I think of shale oil, about the last company I think of is BP. I very, very seldom see BP involved with shale oil.

My hunch with regard to the the BP/CEO stating unequivocally that "BP underestimated renewable energy growth" is this: this is his attempt to get investors to look at what BP really, really underestimated -- how fast US shale oil would grow.

It's an old media trick.

BP's expertise? Oil and gas. Not renewable energy. They can be excused for underestimating how fast renewable energy grew. But BP's expertise is in oil and gas exploration and production. There is no excuse for underestimating US crude oil shale.

Two stories side-by-side. First, this Financial Times story less than six months ago: "BP chief says shale will have limited effect on global market. Bob Dudley says technical challenges reduce ability to rival conventional output. On December 20, 2017 --

There is a limit to how big a role US shale can play in the global oil market, according to the chief executive of BP, who said traditional producers such as Saudi Arabia would continue to exert more influence over crude prices. 

Bob Dudley said he had become less worried about the extent to which US shale resources could hold down prices as more was learned about their geology. “There are cracks appearing in the model of the Permian being one single, perfect oilfield,” he told the Financial Times, referring to the region of Texas and New Mexico at the centre of the shale revolution.

Yes, both Mark Papa (former CEO/EOG) and Bob Dudley talk about the challenges in the Permian -- but they are all logistical (mostly takeaway capacity) and those challenges will be addressed. Successfully.

Now, the second story, the Permian is projected to be the largest oil patch in the universe. Data points from Bloomberg:

• growing into the largest oil patch in the world
• will hit record production in May, 2018 (3.2 million bopd)
• will produce more than 5 million bopd by 2020 (previously reported; another source)
• Saudi Arabia, Iran, Iraq, the Permian now
• Saudi Arabia, the Permian, Iran, Iraq by the end of the year
• Iran and Iraq each produce less than 5 million bopd
• Iran: produced about 3.81 million bopd in March, 2018

What was not said, about the Permian:

• terror-free
• once built, infrastructure tends not to be blown-up the next day
• located in an oil-friendly state 

It looks like BP underestimated renewable energy and the US shale oil revolution.