I don’t look to the Weekly Standard for energy news or opinion – or any news or opinion for that matter. Each to his or her taste I guess.
From: [email protected] [mailto:[email protected]] Sent: Thursday, December 25, 2014 10:28 AM To: [email protected] Subject: Re: Natural gas: The fracking fallacy Sent from AOL Mobile Mail In addition to not being the energy future we all wanted, here, to my mind, is the next likely step, by price, by technology, in energy. I don't completely trust the author, but his summary is thorough. The author links this source even, to co2 remmediation. In a way, its like having George Jetsons' flying fliver, powered by gasoline, rather then atoms or photons. The article also presages the shale gas revolution, to being something very long in the process (decades), to this source. Seeing how 98% of us were paying attention other things, it came as a surprise to the vast majority. This will as well. http://m.weeklystandard.com/articles/next-shale-revolution_821866.html?page=3 From: 'Chris de Morsella' via Everything List <[email protected]> To: everything-list <[email protected]> Sent: Thu, Dec 25, 2014 01:37 AM Subject: RE: Natural gas: The fracking fallacy From: [email protected] [mailto:[email protected] <mailto:[email protected]?> ] Sent: Wednesday, December 24, 2014 9:10 PM To: [email protected] Subject: Re: Natural gas: The fracking fallacy Sent from AOL Mobile Mail It could be just as you suggest, a chemical, toxic, nightmare, to be footed by the tax payers. But I am thinking not so much, as the chemicals used have been around for decades, with no great problem detected. Notice how cheaper the gasoline is now? Notice how russia, iran, and the saudi economy has been upended? The idea is a civilization completely powered by the sun. The real is fracking. But we can always hope. In energy matters I prefer to look at five year moving averages for understanding price trends; doing so helps eliminate the noise of volatility in the market. Most of the independent drilling companies that dominate US shale production sell futures contracts to show lenders they have locked in an oil price that is higher than their cost of production. This is especially true for the many independent smaller operators; if they can’t hedge above their cost of production, they are dead in the water. The US shale play needs a sustained minimum of above $90 on the world oil futures markets in order to be able to sell these hedges and use them as the basis on which they can get new capital to continue drilling. There are trillions of dollars of future hedge contracts most of which were underwritten by big money center banks whose models did not account for this global market plunge. Big money center banks are feeling quite exposed now and if this price slump lasts longer than a year they could be in very serious trouble again, in a repeat of 2007-2008 when the housing derivatives market collapsed. Estimates put the six largest “too big to fail” banks commodity derivatives contracts holdings around $3.9 trillion, a majority of which is comprised of various flavors of oil future hedges. Most of the drillers in the tight oil sector in the US have already locked in future prices for next year and up into 2016 at around $90 per barrel. For example, Noble Energy and Devon Energy have both hedged over three-quarters of their output for 2015, and Pioneer Natural Resources has options covering 67% of its likely production through 2016. These drillers have locked in price volatility protection for themselves (as long as the banks honor their losses), but what about the big banks themselves? If global oil spot price stagnates for much longer and these contracts start coming due the losses are going to be astronomical. Who will endup covering these losses? Interesting side note: Harold Hamm, the Oklahoma oil billionaire (heavily invested in the Bakken) has bet a big chunk of his fortune that oil prices will rise soon; cashing in on almost 40 million barrels worth of future hedges, reaping a current profit of over $433 million for this quarter, but exposing his firm to price volatility if oil spot prices should stagnate or even decline further. -Chris -----Original Message----- From: 'Chris de Morsella' via Everything List <[email protected]> To: everything-list <[email protected]> Sent: Wed, Dec 24, 2014 03:31 PM Subject: Re: Natural gas: The fracking fallacy _____ From: spudboy100 via Everything List <[email protected]> To: [email protected] Sent: Wednesday, December 24, 2014 12:22 PM Subject: Re: Natural gas: The fracking fallacy >>It could be a bubble but its not. Nothing has paid off like shale gas. >>Nothing else in the world has paid off like this. Wait till the taxpayer gets dumped on with all those underwater derivatives the big money center banks have just made sure we are liable for. You have no idea of the mountain of debt that is about to avalanche down on the US financial system. Even a report I saw today on energy policy encouraged more expansion into solar so that it will acquire 10% of the US electricity market. If this is correct, then solar will be marginal unless there's a vast improvement in production and storage, like we all hoped for. It's like all the wonders dreamed of over the last several decades keep fading into the future, further and further. Probably solar or fusion will never be marginal, this century, and the next energy source after shale will be methane hydrates, and we all know what the fear of AGW is focused on, as well as Siberia. I guess we play the hand we're dealt, even though its not what we wanted. Ho Ho Ho Merry Scrooge Day and be in all the earlier tomorrow! -----Original Message----- From: 'Chris de Morsella' via Everything List <[email protected]> To: everything-list <[email protected]> Sent: Wed, Dec 24, 2014 2:36 pm Subject: Re: Natural gas: The fracking fallacy _____ From: John Clark <[email protected]> To: [email protected] Sent: Wednesday, December 24, 2014 10:53 AM Subject: Re: Natural gas: The fracking fallacy On Wed, Dec 24, 2014 'Chris de Morsella' via Everything List <[email protected]> wrote: > the very same EIA that got it so wrong with the Monterey shale deposit > reserve projections it made in 2011 >>Yes they got it wrong with Monterey, estimating reserves isn't easy and is >>more a art than a science, but given that as far as anybody knows they got it >>right with the Bakken and Eagle Ford formation and they alone account for 70% >>of reserves so it's not a major consideration. Could they be wrong again? >>Sure. Could you also be wrong about reserves? No way! Wrong!. Utterly wrong in fact, the Bakken did not account for 70% of the reserve picture presented by the EIA between 2011 and the middle of 2014 when they finally downgraded the Monterey shale reserve projections. The Monterey reserves as stated by the EIA in their very highly visible projections they made in 2011 accounted for well over 60% of the TOTAL tight oil reserves in the USA INCLUDING the Bakken, Marcelus and Eagle Ford formations. In other words the Bakken, the Marcelus and the Eagle Ford lumped together accounted for less than 40% of the reserve figures touted by the EIA AND used to blow up this massive bubble that is no bursting. The Monterey shale was the big daddy of them all, according to the EIA. This announcement was highly cited by the boosters of this bubble in order to whip up the mania of "The US becoming the Saudi Arabia of shale". Only after the hoopla had served its intended purpose (convincing investors that this was absolutely huge) were these non-existent reserves quietly downgraded -- in a non media event "quiet" announcement -- and by a whopping 94%! > The EIA, IMO, is complicit in this fraud. And as evidence I produced the > grossly overstated reserve numbers it produced for the Monterey shale > deposits in 2011 >>If you don't like the way they do it please describe the far superior method >>that you have developed for estimating how much oil and gas in the ground can >>be economically extracted. I'm all ears. I am not the one calling myself "The Energy Information Agency of the United States of America" now am I. You give me the same monetary, human, legal and political resources as the EIA and in five years I will give you numbers. Deal? > I am describing a huge financial bubble, >>The first financial bubble in the history of the planet that went down not >>up. You really don't get bubbles do you? Bubbles go down when they blow up silly man. When the housing bubble blew to pieces in 2007-2008 did housing prices continue to rise? The shale play already has gone up John - it has sucked in trillions of dollars and made the insiders billions of dollars. What the hell do you think HAS BEEN happening during the past four years? This mania is now bursting. > tied to tight oil sector energy derivatives that is bursting as we speak, > yes. >>Since the value of a energy derivative is a function of the value of the oil >>(or gas) in the ground, and since the value of a barrel of oil is less than >>half what it was just a few years ago then of course the value of those >>energy derivatives are going to go down too. But you need to put your money >>where your mouth is, you think the drop in the cost of oil is a very >>temporary thing, therefore you should be buying those energy derivatives as >>fast as you can. And you should be buying them on margin to give yourself >>leverage, of course if you're wrong then the leverage works against you but >>I'm sure there is no possibility you're wrong. You should not be giving others free advice John. > I am describing this investment and perception mania that was manufactured on > promises of endless supplies of new shale deposits. >>Bullshit, nobody promised endless supplies of anything. Bullshit -- read the press releases and the perception management that flooded the media and was produced by think tank after think tank tied to these interests. The shale boom was very much presented as being able to supply the US with a secure and almost inexhaustible supply of fossil energy for a period of four or more decades. I argued with some of these boosters during the ramp up to this buble in 2009-2011 -- to hear them tell it the Bakken formation extended down all the way to China -- I jest, but that is the essence of their position. This boom has been sold as being able to secure America's energy needs for many decades and in fact it was supposed to turn America into a major supplier of gas and even oil to the the EU for example. You do not seem to grasp the concept of low cost producers being able to put the squeeze on the high cost producers >>It's only right and just that low cost producers put high cost producers of >>oil or of anything else out of business, so if OPEC wishes to keep the shale >>people out of the oil business they're going to have to keep their production >>high enough that oil costs less than what the shale people cam make it for. >>Currently it costs between $95 and $30 to produce a barrel of oil from shale >>depending on the particulars of the geology, and as technology improves the >>cost will go down. That explains why $147 for a barrel of oil as it was at >>its peak in 2008 is not sustainable however much OPEC may wish it were, and >>Saudi Arabia will run out of oil before the USA runs out of shale. You have bought into the line presented by the cornucopean press releases hook line and sinker. SHale oil does not cost $30 a barrel to produce. To pretend that this is the low end of the typical cost curve is akin to pretending that smoking crack is not damaging for your health. Given the very high depletion rate and the need to "re-frack" existing wells within just a few years because the fracking induced micro fractures tend to seal up quite rapidly -- even with all those injected poppants -- a massive number (and massively expensive) of drilling and fracking operations need to be sustained. This has proven unsustainable -- and in fact the major oil companies of the world agree with me, and have been getting out of the tight oil sector. Sure there is some oil and gas in those shale formations, but not nearly as much as the grossly unreliable EIA has been reporting. It is getting that kerogen and gas out of the rock that is hard to do. You try squeezing oil out of rock. It is not easy AND it is not cheap either. Saudi Arabia IS the world's low cost producer. The Saudi's CAN afford this price war -- for the time being at least -- the US tight oil sector CANNOT. Oil at under $60 is driving them bankrupt. -Chris John K Clark <https://ssl.gstatic.com/ui/v1/icons/mail/images/cleardot.gif> <http://www.reuters.com/article/2014/11/27/us-opec-meeting-idUSKCN0JA0O320141127> image VIENNA (Reuters) - Saudi Arabia blocked calls on Thursday from poorer members of the OPEC oil exporter group for production cuts to arrest a slide in global prices,... <http://www.reuters.com/article/2014/11/27/us-opec-meeting-idUSKCN0JA0O320141127> View on www.reuters.com Preview by Yahoo -- You received this message because you are subscribed to the Google Groups "Everything List" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send email to [email protected]. Visit this group at http://groups.google.com/group/everything-list. For more options, visit https://groups.google.com/d/optout. -- You received this message because you are subscribed to the Google Groups "Everything List" group. 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