Oil

Venezuela and the oil market after Chávez

March 5, 2013 10:50 pm by Nick Butler

The death of Hugo Chávez and the prospect of a regime change in Venezuela will cause no more than a momentary blip in the oil market. This is a remarkable change from the situation a few years ago, when developments in Carcacas would have destabilised prices across the world.

In reality, Chávez diminished Venezuela’s potential role in the international oil business by undermining the status of the state company Petróleos de Venezuela SA and excluding major international investment. Production and exports from Venezuela are now well below their potential levels.

To restore PDVSA to its former glory will take time. Many of the people best able to build the company and the country now live comfortably in London or New York and will take some persuading to go back home. Oil industry investors will be circling the airport in their private jets, but there is no new consensus as yet as to the terms on which they might be allowed to return. That too will take time. Read more

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Posted in Oil, Policy |

Oil demand could peak within five years

March 4, 2013 5:04 pm by Nick Butler

US oil rig. Getty Images

I have always been sceptical of the extensive theories of peak oil built around the study first published in 1956 by M King Hubbert. Those studies have always seemed to ignore the reality of technical progress that opens new frontiers and reduces costs. They have been much used to support the idea that oil prices should be ever increasing, on the basis that scarcity should be reflected in high prices.

The reality is that oil provinces (think of the North Sea) keep going well beyond their original schedule, and recovery rates from established fields keep rising. On average, even after some advances in reservoir management technology, only some 50 per cent of the oil in place is recovered from most fields, so there is a long way still to go. On top of that, we now have tight oil (the oil equivalent of shale gas), which BP in its latest Long Term Outlook now expects to provide some 9 per cent of global production in 2030. Read more

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Posted in Climate, Environment, Gas, Oil |

Is it time to turn gas into oil?

February 25, 2013 5:09 pm by Nick Butler

Oil refinery. Getty Images

The energy market is moving on two very different tracks. Oil prices are stubbornly high and gas prices are low, especially in the US, and look set to fall further across the world. The question is when, if ever, will these two tracks meet?

Let’s start with why the oil price at $114 a barrel for Brent remains so high. There is no physical shortage and demand growth worldwide is minimal. The answer lies in fear of what might happen next. The threat of an open conflict between Israel and Iran may have receded but there are enough uncertainties in the market to keep people nervous. Libya is out of control because of the limited international support for the new government following last year’s military intervention by France and Britain. There is continued nervousness about events in Algeria after the terrorist attack last month and concern about the negative effect on investment of the renewed outbreaks of violence in Iraq. Read more

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Posted in Gas, Oil |

The problems with Petrobras

February 7, 2013 10:50 am by Nick Butler

Petrobras is in a mess. The Brazilian state company makes promises year after year, only to disappoint. Worse still, the Brazilian government heaps on the pressure by trying to push up production targets. But it refuses for national political reasons to give the company the means and freedom to deliver.

To start with the good news. Petrobras keeps discovering huge volumes of oil and gas. The Lula field for instance is estimated to hold 8bn bbls of oil, making it a world-class elephant. Offshore Brazil is clearly one of the most prolific new provinces in the world.

That’s the end of the good news. The bad news is that Petrobras seems unable to either set or deliver credible development plans for the resources it holds. Read more

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Posted in Oil, Politics |
From FT.com January 29, 2013

Western oil workers at In Amenas, the gas plant in Algeria that militants stormed on January 16, knew how vulnerable they were.

An executive from Statoil, the Norwegian oil company, told a visitor to the facility in 2007 that he worried about the risks to expatriate staff travelling to and from the site. After flying from Algiers into the middle of the Sahara, they faced an hour-long bus trip to In Amenas. “We want to build an airstrip near the plant and avoid bus transportation from the airport,” he said. Read more

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Posted in Oil |
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