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Fracking - A National Security Interest


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#1 George Rowell

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Posted 19 June 2019 - 12:29 AM

The break even cost of fracking is anybodies guess which is alarming since America has overtaken Saudi Arabia and Russia in oil production. Trump has destabilized and largely removed Venezuela from the equation and has the stated aim of cutting Iran's export to zero.

American national security needs fracking to limit the progress of Russia whose main income is oil. While the oil price cannot be allowed to get too high, it cannot be allowed to get too low either, because of fracking fundamentals and of course Saudi Arabia who are reported to have a break even price point of $46. There is a lot of obscuration, misinformation and mistaken information about the real cost of fracking but can something so vital to national security be allowed to die? I doubt it very much. Maybe Trump will eventually openly find a way to fund fracking.

My feeling is that if the price of oil goes below $55 a barrel something unpleasant could happen in the World and the price of oil will surge and this will support fracking. I also see a scenario where fracking gets Federally funded - that would not surprise me at all. On the other hand if the price of oil goes above $75 Saudi will start pumping until it eases again, targeting a range of $55-$75. In the short term if Trump does start a war then the oil price is bound to surge past this range for a period. Given the Dump administrations current rhetoric and being BFF with Israel, I reckon oil stocks are good for a gamble right now. ET Energy Transfer and XOM Exxon look well placed. If President Dump does start a war then at least it will be bitter sweet.
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#2 George Rowell

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Posted 19 June 2019 - 12:47 AM


"Rystad Energy estimates in its latest cost of supply curve update that the average Brent Crude breakeven price for tight oil is now US$46 a barrel, just four dollars above the average $42 per barrel breakeven oil price for the giant onshore fields in Saudi Arabia and other Middle Eastern countries.

To compare, in 2015, North America’s shale ranked as the second most expensive resource in Rystad Energy’s global liquids cost curve, with an average breakeven price at $68 per barrel.

In 2019, onshore Middle East leads the cheapest source of supply, followed by North American shale, offshore shelf with average breakeven price of $49 a barrel, deepwater with a $58 breakeven price, and Russia onshore with $59 a barrel breakeven;

https://oilprice.com...Oil-Supply.html

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#3 Rich T Bikkies

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Posted 19 June 2019 - 02:21 AM

 George Rowell, on 19 June 2019 - 12:47 AM, said:


"Rystad Energy estimates in its latest cost of supply curve update that the average Brent Crude breakeven price for tight oil is now US$46 a barrel . . . .

I always immediately think of that obtrusive American oil billionaire, Brent S. Crude III.
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#4 George Rowell

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Posted 19 June 2019 - 03:52 AM

 Rich T Bikkies, on 19 June 2019 - 02:21 AM, said:

I always immediately think of that obtrusive American oil billionaire, Brent S. Crude III.
You have an evil mind. But I like you.
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#5 baw1064

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Posted 19 June 2019 - 08:16 PM

You can always just impose tariffs, so the breakeven price only matters to the extent you allow it to.
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#6 George Rowell

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Posted 20 June 2019 - 12:23 AM

 baw1064, on 19 June 2019 - 08:16 PM, said:

You can always just impose tariffs, so the breakeven price only matters to the extent you allow it to.
The US is a net exporter of oil and gas, where would you put the tariffs?
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#7 LFC

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Posted 24 June 2019 - 11:43 AM

 George Rowell, on 19 June 2019 - 12:29 AM, said:

My feeling is that if the price of oil goes below $55 a barrel something unpleasant could happen in the World and the price of oil will surge and this will support fracking. I also see a scenario where fracking gets Federally funded - that would not surprise me at all.

This would require the free market Republicans, the same ones screeching about a single federal dollar going to renewable energy, to turn their backs on their free market principals to "pick a winner" and completely distort the market. I simply can't believe they'd ever do this. [/snark]
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#8 LFC

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Posted 18 December 2019 - 06:35 PM

 George Rowell, on 19 June 2019 - 12:29 AM, said:

The break even cost of fracking is anybodies guess which is alarming since America has overtaken Saudi Arabia and Russia in oil production.

It appears that the go, go, go mentality has not been good for drilling companies and investors. Is it any wonder why they're cutting corners on safety and looking to dump contaminated wastewater on roads all over Pennsylvania?

Quote

Steve Schlotterbeck, who led drilling company EQT as it expanded to become the nation’s largest producer of natural gas in 2017, arrived at a petrochemical industry conference in Pittsburgh Friday morning with a blunt message about shale gas drilling and fracking.

“The shale gas revolution has frankly been an unmitigated disaster for any buy-and-hold investor in the shale gas industry with very few limited exceptions,” Schlotterbeck, who left the helm of EQT last year, continued. “In fact, I'm not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change.”

“While hundreds of billions of dollars of benefits have accrued to hundreds of millions of people, the amount of shareholder value destruction registers in the hundreds of billions of dollars,” he said. “The industry is self-destructive.”

Schlotterbeck is not the first industry insider to ring alarm bells about the shale industry’s record of producing vast amounts of gas while burning through far more cash than it can earn by selling that gas. And drillers’ own numbers speak for themselves. Reported spending outweighed income for a group of 29 large public shale gas companies by $6.7 billion in 2018, bringing the group’s 2010 to 2018 cash flow to a total of negative $181 billion, according to a March 2019 report by the Institute for Energy Economics and

But Schlotterbeck’s remarks, delivered to petrochemical and gas industry executives at the David L. Lawrence Convention Center in Pittsburgh, come from an individual uniquely positioned to understand how major Marcellus drillers make financial decisions — because he so recently ran a major shale gas drilling firm. Schlotterbeck now serves as a member of the board of directors at the Energy Innovation Center Institute, a nonprofit that offers energy industry training programs.

His warnings on Friday were also offered in unusually stark terms.

“The technological advancements developed by the industry have been the weapon of its own suicide,” Schlotterbeck added, referring to the financial impacts of shale gas drilling on shale gas drillers. “And unfortunately, the industry still has not fully realized how it's killing itself. Since 2015, there's been 172 E&P company bankruptcies involving nearly a hundred billion dollars of debt.”

“In a little more than a decade, most of these companies just destroyed a very large percentage of their companies' value that they had at the beginning of the shale revolution,” he said. “It's frankly hard to imagine the scope of the value destruction that has occurred. And it continues.”

At the Friday conference, he displayed a slide showing the stock prices of eight major Marcellus shale gas drillers: Antero, Range Resources, Cabot Oil and Gas, Southwestern Energy, CNX Gas, Gulfport, Chesapeake Energy, and EQT, the company that Schlotterbeck ran until he resigned in March 2018. Seven of the eight companies saw their stock prices fall between 40 percent and 95 percent since 2008, the slide showed.

“Excluding capital, the big eight basin producers have destroyed on average 80 percent of the value of their companies since the beginning of the shale revolution,” Schlotterbeck said. “This is not the fall from the peak price during the shale decade, this is the drop in their share price from before the shale revolution began.”

Mr. Schlotterbeck credited the shale rush with lowering power and natural gas bills nationwide and offering significant economic benefits since 2008, when he said the shale revolution began.

“Nearly every American has benefited from shale gas, with one big exception,” he said, “the shale gas investors.”

Residents of communities where shale gas drilling and fracking have caused disruptions and health issues might take exception to Mr. Schlotterbeck’s categorical description of the beneficiaries of shale gas, as might climate scientists who have warned that the shale industry’s greenhouse gas emissions are so severe that burning gas for power may be worse for the global climate than burning coal.


There's further support that the whole shale gas model doesn't work.

Quote

This month, the energy consulting firm Wood MacKenzie gave an online presentation that basically debunked the whole business model of the shale industry.

In this webinar, which explored the declining production rates of oil wells in the Permian region, research director Ben Shattuck noted how it was impossible to accurately forecast how much oil a shale play held based on estimates from existing wells.

“Over the years of us doing this, as analysts, we’ve learned that you really have to do it well by well,” Shattuck explained of analyzing well performance. “You cannot take anything for granted.”

For an industry that has raised hundreds of billions of dollars promising future performance based on the production of a few wells, this is not good news. And particularly for the Permian, the nation's most productive shale play, located in Texas and New Mexico.

Up until now, the basic premise of the fracking business model has been for a company to lease some land, drill until finding a high-volume well, hype to the press this well and the many others it plans to drill on the rest of its acreage, and promise a bright future, all while borrowing huge sums of money to drill and frack the wells.

Throughout the seminar, Wood MacKenzie analysts emphasized that companies can't reliably predict future oil production by “clustering” wells, that is, estimating volumes of many future wells based on the performance of a small number of nearby existing wells, and described the practice as potentially “misleading.”

Shattuck called out how the old business model of firms borrowing money from investors while hoping for future payouts on record-breaking wells no longer works. He summed up the situation:

Quote

“We’re transitioning to a point in time, where the investment community was enamored of the next well and how big it might be. That has changed for a variety of reasons. One very important reason is the next well might not be bigger. It might be smaller.”

The fracking industry is now being asked to produce positive financial results — not just promises of new super wells, or cube development, or artificial intelligence. And yet the industry couldn’t deliver profits while drilling all the best acreage over the last decade. Now, shale companies need to do that with oil wells that may not produce as much.

Seven years ago, Rolling Stone referred to the fracking industry as a “scam” while profiling the “Shale King” Aubrey McClendon, the man generally credited with inventing the business model the shale industry has used the past decade. Today, McClendon's old company Chesapeake Energy is in danger of going bankrupt.

Perhaps investors are finally catching on.

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#9 LFC

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Posted 26 December 2019 - 10:43 AM

Another fracking disaster, kept fairly quiet of course.

Quote

In February 2018, an explosion at a fracking site in Belmont County, near the Ohio-West Virginia border, forced residents within a 1-mile radius to evacuate their homes for several weeks.

A study this week in the Proceedings of the National Academy of Sciences revealed that the accident resulted in one of the largest methane leaks ever recorded in the U.S.

Powhatan Point fire chief Tom Nelms was among the first to respond after the explosion.

"At that time, that day, there were probably 50-80 people," Nelms said. The fire lasted for three days, but some people weren't able to return to their homes for weeks.

Nelms says he knew the methane leak was a big deal, but at the time no one really understood the magnitude of it.

Until now. A satellite designed to monitor Earth for methane leaks revealed that accident was one of the largest leaks recorded in the U.S.

“The blowout and the period of time it was occurring contributed 60,000 tons of methane to the atmosphere, and it represents in the case of Ohio one-quarter of the annual emissions coming from the oil and gas industry,” says Steven Hamburg, one of the study authors and the chief scientist at the Environmental Defense Fund.

In fact, the Belmont County incident released more methane than the reported emissions of oil and gas industries of entire European countries.

“Methane is responsible for one-quarter of the warming that we’re currently experiencing,” Hamburg says. “It’s a very potent but short lived green house gas, so reducing those emissions will have the biggest impact on slowing the rate of warming.”

He says because of the nature of the odorless, colorless gas, it’s really hard to know when a leak has occurred.

“None of us pay attention to that which we can’t see or measure,” he says. “We’re giving the tools to be able to measure and quantify emissions around the globe which we didn’t have before.”

" 'Individual conscience' means that women only get contraceptives if their employers, their physicians, their pharmacists, their husbands and/or fathers, pastors, and possibly their mayors, Governors, State Secretaries of Health, Congressmen, Senators, and President all agree that in that particular case they're justifiable." --D.C. Sessions

"That's the problem with being implacable foes - no one has any incentive to treat you as anything more than an obstacle to be overcome."

"The 'Road to Serfdom' is really all right turns." --Progressive Whisperer

""The GOP ... where every accusation is also a confession." --Progressive Whisperer

#10 D. C. Sessions

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Posted 26 December 2019 - 11:24 AM

 LFC, on 18 December 2019 - 06:35 PM, said:

There's further support that the whole shale gas model doesn't work.

Who could possibly have predicted that there might be problems with highly leveraged investment in a declining market with no real growth prospects?

Gas is not competitive with oil for transportation.
Gas is not competitive with solar and wind for primary electrical generation (and coal is not competitive with gas).
Gas is capital-intensive and has unquantified long-term liabilities.
The net amortization for gas is speculative.

Brilliant. Just brilliant.
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#11 George Rowell

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Posted 27 December 2019 - 09:08 AM

That brings us back to the topic, is Fracking a national security issue? With the Fracking euphoria gone, banks cautious and disenchantment settling in I am wondering if the administration will feel it necessary to do something to raise the oil so that fracking makes sufficient profit yet still constrains our nemesis the Soviet Union. Venezuela has already been stymied. Perhaps topple another eastern oil state, but with Syria, Iran, Libya and Iraq all out of the way the choices are dwindling. Maybe Qatar will find itself on the axis of evil. With Bolton gone this looks less likely.

To be sure the last thing on the administrations mind will be the environmental damage being wreaked over the US or the contamination of everyday peoples water supplies.
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#12 D. C. Sessions

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Posted 27 December 2019 - 10:45 AM

 George Rowell, on 27 December 2019 - 09:08 AM, said:

I am wondering if the administration will feel it necessary to do something to raise the oil so that fracking makes sufficient profit yet still constrains our nemesis the Soviet Union.

Oil and gas are not competitors. Coal and gas are, but only at the margin -- coal plants were being retired before the price of gas accelerated the process, and both of them are under serious pressure from wind and solar.

Oil still has transportation -- and only transportation --- largely to itself until electric vehicles become a major market.
The way a lot of catastrophes happen is that X doesn't occur because there are safeguards in place, therefore people assume X isn't a worry and they remove the safeguards. Then X happens.
— Nate Silver
"Robots aren't the problem. Capitalism is." -- Last words of Stephen Hawking.
These days, "libertarian" is just a euphemism for a Nazi who's afraid to commit.
"If you're not outraged, you're not paying attention." -- Heather Heyer
"I'd rather have my child, but by golly, if I gotta give her up, we're gonna make it count." -- Her mother
"Your purpose, then, plainly stated, is that you will destroy the Government, unless you be allowed to construe and enforce the Constitution as you please, on all points in dispute between you and us. You will rule or ruin in all events." -- some RINO

#13 George Rowell

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Posted 11 January 2020 - 01:51 AM

What's that Pompeo, waste Soleimani and the dumb Iranians will cut off the Straits of Hormuz, then there will be a short sharp war which we will win in a couple of days, and then the price of oil will shoot up. Heck, bump of that guy and it will go up anyway. That's how to save frackin. Good man!

Thank you Mr president.
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