Analysis by the father of American Geopolitics Dr. Daniel Fine, MIT.

Posts tagged ‘BLM’

Analysis: Things are flat in the Permian, and there’s a push for renewables in Santa Fe by Dr. Daniel Fine


 

The article by Dr. Daniel Fine is here-> https://www.daily-times.com/story/money/industries/oil-gas/2019/01/27/analysis-things-flat-permian-governor-wants-renewables/2595583002/ The Permian-Delaware Basin rig count should start falling as oil operators, large and small, are flat for 2019.

Spending has been sharply reduced as supply now dominates the A.I. (Artificial Intelligence) used by many commodity traders in oil.

The large or integrated oil companies have all the rigs of 2018 in place for 2019. This would make October the price peak of the latest boom or recovery in oil. Permian-Delaware Basin production would decline at least 500,000 barrels in 2019 to offset the supply glut and stabilize at $50 per barrel.

OPEC members, notably Saudi Arabia, need a fiscal price of oil of $85 per barrel to pay for government and social spending. But at $60 per barrel, cash flow will not make it.

Its new public relations-lobbying in the U.S will require Sovereign Wealth Fund borrowing at market rates, which will be higher mainly because of U.S Senate sanctions over the murder of a Saudi journalist writing for the Washington Post.

This writer forecast a 2019 $50 per barrel average price of oil when prices fell to $43.00 last month.

At the same time, many small and independent producers have break-even at $50 with high-interest debt!

There are Chapter 11 bankruptcies valued at $140 billion from the Panhandle in Texas to the San Juan Basin that resulted from the OPEC -Saudi Arabian price and market share war of 2014-2016 against Southwestern small/independent shale and tight sands producers who now want reparations or damages.

This could hold up financial public relations as state courts hear from local energy banks and their Chapter 11 or equivalent clients.

Saudi Aramco is looking at American LNG investment in the Gulf Coast.
But that would compete against Russian Gazprom export pipeline gas to the European market.

This would confront Russia with Saudi Arabian conflict and threaten Russian-Saudi Arabian accord in OPEC.

Governor Michelle Lujan Grisham of New Mexico has announced a target of 50 percent renewable energy in 10 years. Electricity rate payers would bear the cost. She also placed New Mexico in the Climate Change Treaty Camp. However, if the Democratic Party wins the White House in 2020 there is no doubt that Washington will follow Santa Fe and our new governor.

In the meantime, the new Secretary of Energy Minerals and Natural Resources, Sarah Cottrell Probst, is a world expert in carbon tax architecture to mitigate global warming.
And there could be trade-offs with the super-majors in the Permian-Delaware basins.
The new Administration is expected to create a new energy policy that will replace the effort of ex- Governor Martinez. One issue that did not appear in 2015 was well-density.

The current company-state conflict centers around increased density because of down-spacing in the sub-surface. The opposition is beyond this specific technical capability: it is about more production of oil and carbon in relation to climate change.
What happens in New Mexico will have an impact on regulations in other states and, later, in national energy policy.

This column is an independent analysis by Dr. Daniel Fine, who is the associate director of New Mexico Tech’s Center for Energy Policy and the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own.

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Dr. Daniel Fine: Oil – before and after the November election (USA TODAY Farmington Daily Times)


The article can be found here-> https://www.daily-times.com/story/opinion/columnists/2018/06/24/fine-oil-before-and-after-november-election/699460002/  The Trump Administration is moving towards less royalty rates on Federal land leases, less Bureau of Land Management discretion on Environmental Protection Act obstruction on the Application for Petroleum Drilling process, less coal and nuclear power generation decline, and less oil supply confidence in OPEC-Russia world price management.

This is the thrust of the signature world energy domination policy of Secretary Ryan Zinke for the last 16 months. It accounts for the action of OPEC-Russia 10 days ago. Saudi Arabia led OPEC to increase oil production to respond to President Donald Trump, but averted a price shock with gradualism. More output from OPEC offers increased revenue in the very short term.

It now faces an election to decide majority party control of Congress. Should the Democratic Party win at least in the House of Representatives, President Donald Trump will be set back on energy policy and its action realization. He will be forced to use executive power narrowly.

The Democratic Party will prepare for 2020 and the foreclosure of Trump-Zinke on world energy domination through an American petroleum system and public land dispensation.

What will the Democratic Party control of energy in Washington and Santa Fe look like?
Imported oil is consistent with a resumption of climate change energy policy which is less carbon in the economy and more renewables as the alternative.

World investment flows are putting solar and wind ahead of oil and gas for the first time. Electric cars are now one to every six in sales in California and soon in Europe, displacing diesel engines.

The Democratic Party in Washington in 2020 will no doubt align with the European Union in Climate Change with a roll-back of the Trump Administration regulatory reform.

Methane, public land access, a return of BLM dominance, along with tax and infrastructure incentives can be expected. Battery charging technology and its placement capacity expansion on the Interstates will promote the market for electric vehicles. New issues restricting unitization, spacing and density of oil and gas wells should appear on state and Federal land.

In Santa Fe, the current Martinez energy policy and plan (2015) would be rejected in favor of a new Democratic Governor’s choice to start over in 2019.  It should be like Colorado’s energy policy but with strong regulatory hydraulic fracturing intervention and fresh water use conservation emphasis.

The oil and gas industry concentration on the Delaware, Permian, Williston (along with the Bakken Formation), Eagle Ford basins along with the Marcellus in natural gas will double up at heavier entry cost and consolidation.

This process, however, promises San Juan Basin natural gas higher prices. New exploration and production on public land would be minimal and legally challenged.

New off-shore U.S oil would be closed with “national monument” type public law.
The Democratic Party has no conservative business Democratic faction to offset the impact on American oil and gas as an industry.

In New Mexico, county leaders from San Juan, Eddy and Lea will continue to argue on the basis of statewide revenue. The Democratic Party in Santa Fe must demonstrate economic development through diversity while oil and gas is politically isolated.

With Canadian imports and even Russian gas in Boston harbor in very cold and snow-storm winters, the East Coast can return to the way it was before Trump on foreign oil imports – America no longer “First.”

The West Coast without refineries and wired power from natural gas is already there in Democratic Party dominance and declining combustion engines.

Dr. Daniel Fine is the associate director of New Mexico Tech’s Center for Energy Policy and the State of New Mexico Natural Gas Export Coordinator. The opinions expressed are his own.

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