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In reply to: Harold on Saturday 25/02/06 10:11pm



The reports were interviews I heard on CNBC. Less oil is sold when the price goes too high, and this affects cashflow.


I say GDP is a limiting factor because its reflects the productivity of a nation. When this drops so does the need for oil. However, a growing GDP, today, also includes the use development of alternative energy sources and, as a consequence, less need for oil on a per capita basis.


Climate change maybe a problem, not sure for who, though. Unless you mean when the winters are warmer and less heating oil is used in the US. As for Tim Flannery and the likes, not into his religion--the last I heard he was saying that climate change was the greatest problem facing humanity...I always thought the greatest problem was the effects of old age. Most people's ancestors will tell anybody that, if they were still alive to do so.


Computerization and technology has advanced so much since the seventies when nanotechnology was science fictionm, these are making alternative energy more economical.


As for your guess, it might be better than one I would make. But I have heard commentators (Stever Forbes and others) say they expect the POO to be less than what it is currently.





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QUOTE (happy2 @ Saturday 25/02/06 10:31pm)

Waste of time trying to predict future oil prices imho, simply because major supply lines can be so easily interrupted by terrorist attacks, or by outright political manipulation.


Barring such events though the oil shoiuld show some short term price weakenss until consumption matches production capabilities. Many commentators point to declining reserves as a harbinger of what's to come, but there is debate on what constitutes "reserves" and these reserves are subject to variation with price. Economics of alternatives are likewise affected.


Oil is a comparatively diminished (although still the major) component of our energy mix, and thus GDP, now than during prior price spikes and it appears global economies can cope with these elevated prices whilst maintain their profligate consumption.


Personally prefer a drop of good Hunter Valley Shiraz. Much to my displeasure global warming will adversely affect the quality of same, but not to the same degree as the quality of life of the 200 million or so living near sea level.

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In reply to: happy2 on Saturday 25/02/06 08:21pm

Interestingly, some reports have oil men saying that at levels above $50, their businesses are less profitable.


i know that wpl ceo said something along those lines...


maybe he said that so wpl sp wont suffer as much when POO goes down?

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In reply to: nizar on Saturday 25/02/06 11:01pm

i think maybe volte was talking about demand destruction & the move towards alternatives impacting the industry. i think they would be very happy with $60... not too high, not too low... just right....


dunno why the industry would be happy with anything less when the cost of doing business is becoming more & more expensive....


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Yes, there is new production coming on line.


But we've got current production of, what, 85 mmbd, so if you plug in a generalised 3% decline number for current production, thats about 2 million barrels per day per year to stay ahead.


And remember, Cantarell is in trouble, and Burgan is in trouble ... and they are the #2 and #3 fields in the world.


Thats what I see the new projects coming in at about - couple of mmbd per year between them.


Add in a mmbd for China and India - and they are doing that - and remember we dont have the comfortable 5-10 mmbd cushion we used to.


Basically, the market will bounce around, but the world is burning every barrel as and when it can get pulled out of the ground.


I can see 50, but I really can't see it going lower than that.


Ian Whitchurch

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Interesting article regarding Cantarell........the world's second largest oil field. It's now in decline. Interestingly Pemex wont release their technical studies externally. Currently 6 out of 10 barrels from GOM are from Cantarell.


I have pasted the article below. Quite possible that this one field will drop from 2.1 mbo daily to 520,000 bo daily by 2008.






February 10, 2006


PetrÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚³leos Mexicanos, the nationÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´s oil monopoly, may face plummeting production at its largest oil field in the next several years, increasing the likelihood the nationÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´s exports will decline, said Energy Secretary Fernando Canales.

Canales said Pemex has done a study that shows production may decline. Pemex said Dec. 8 that Cantarell will decline 6 percent this year to 1.9 million barrels per day. Last year, Pemex exported 1.82 million barrels per day, most of it to the United States.


"Parallel to the decline of Cantarell, which is a fact, we are exploring and drilling new fields that will replace this capacity," Canales said in an interview in Houston.


The study, reported on Thursday in the Wall Street Journal, has sparked a discussion over how rapidly Cantarell, the worldÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´s second-largest oil field, will decline and whether Pemex can increase production in other fields to make up for the drop, said John Padilla, director of IPD Latin America, an energy consulting firm with offices in Mexico City, Caracas and New York.


The study shows Pemex production in Cantarell may fall to as low as 520,000 barrels per day in 2008 from 2 million barrels a day in 2005, the Wall Street Journal reported.


Pemex forecasts production will rise to more than 3.4 million barrels a day in 2006, a 2 percent increase from last year, as drilling picks up in the companyÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´s Ku-Maloob-Zaap field.


Pemex is running into heavier crude in that field, making it more complicated and expensive to extract, Padilla said.


"The big question is can they have that much production online from Ku-Maloob-Zaap," Padilla said. "The problem is they donÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´t have a plan B."




David Shields, a Mexico City-based energy consultant, published parts of the internal Pemex study in the February-March issue of his magazine Energia a Debate. The study says Cantarell production could drop to 875,000 barrels per year at the end of 2007 and 520,000 barrels per day at the end of 2008 based on a 30 percent recovery rate, according to the magazine.


PemexÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´s forecast for a 6 percent decline in the fieldÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´s production this year is based on a 52 percent recovery rate, which would put CantarellÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´s output at more than double the worst-case scenario at the end of 2008, Shields said.


Pemex declined to make the study available to Bloomberg.






Canales said Pemex needs to double its investment budget to increase production and make up for the Cantarell decline. Pemex has been investing more than US$10 billion a year since President Vicente Fox took office in December 2000, more than double from previous years.


"We have invested like never before in exploration and drilling so that the rate of reserve replacement has increased from 17 percent five years ago to about 50 percent," Canales said.


Pemex has borrowed to finance much of the investment increase, doubling its debt to US$46 billion since Fox took office because the government takes 62 percent of PemexÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´s revenue in taxes, leaving it with little cash.


Canales said he will continue to lobby Congress, which is now in session, to approve legislation to open the Mexican oil industry to private investment. Fox, who is barred from re-election, will step down on Dec. 1 following the July 2 presidential vote.


Pemex invested in boosting production at Cantarell by injecting nitrogen in Cantarell to increase pressure beginning in 2000, a measure that likely hastened the production decline, Padilla said.


Production from Cantarell jumped to 2 million barrels per day last year from 1.23 million barrels a day in 1999.


"They ramped up production very, very fast," Padilla said. "You canÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´t pump out those levels of production without shortening the life of the field.ÃÆâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´ÃƒÆ’Æâ€â„¢ÃƒÆ’ƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚´


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In reply to: kahuna1 on Saturday 25/02/06 05:26pm

Hi Kahuna


Thanks for your bit on oil sands in Canada....one suspects that many are under-estimating the potential output and recoverable reserves from the "blue-eyed sheikhs" from Alberta!


What I am hazarding to think, though is that such production "should" in the model world, only come into being if the contracted oil price is greater than the levelised cost of production (which takes into account capital costs)...previously $30-$35/bbl....but I think now with rising construction costs, steel costs, natural gas costs, water costs etc necessary to get an oil sands development....say (guessing here) ???$40-$60/bbl???


....correct me if I am wrong.


In simple terms....if you had $5 BILLION and were asked as to build an oil sands project (or coal-to-oil) project, you would say "sure thing Mr ExxonMobil/BP/Shell/Chevron, but give me a 10-year offtake agreement for 100,000 bopd at say US$65/bbl indexed too PPI").


In which case, although the spot oil price traded in the market may go to $50 or $40/bbl, you don't care, as your price of US$65/bbl covers your long-run marginal cost.


So in terms of investing, returns may not just depend on the spot oil price, but on the ability of your company that you are investing in to negotiate beneficial off-take contracts (a la BHP, RIO, CVRD on iron ore & coking coal and WPL et al on LNG) with customers.









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Eight New Exploration Permits Released Offshore Western Australia
Friday, February 24, 2006

Australian Resources Minister Ian Macfarlane has released eight new offshore petroleum exploration permits in Western Australia, following a lively first round of bidding in the 2005 Offshore Acreage Release.

..."There was intense bidding interest in the Browse Basin near major gas discoveries and there was strong investor interest in release areas across the country.

....The new permits awarded are as follows:

    * One in the Browse Basin, a proven major hydrocarbon province, to Shell Development (Australia) who propose 12 exploration wells;

    * Five in the Carnarvon Basin to Woodside Energy, Total E&P Australia and Japan Australia LNG; Chevron Australia, Shell Development (Australia) and Mobil Australia; and Holloman Corporation, some in deep water, close to giant gas discoveries, others in shallow water, close to production infrastructure and

    * Two in the Bonaparte Basin, adjacent to significant hydrocarbon discoveries, to Goldsborough Energy Pty Ltd, which plans significant 3D seismic work.

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