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

Posts tagged ‘Saudi Arabia’

How OPEC tried, but failed, to kill the Bakken By Patrick C. Miller | July 18, 2017


The full article is here-> http://www.northamericanshalemagazine.com/articles/2019/how-opec-tried-but-failed-to-kill-the-bakken

When OPEC ramped up its production in 2014 to drive down world oil prices, it was engaged in a strategy to put North Dakota’s Bakken shale play out of business, according to Daniel Fine, Ph.D., associate director of the New Mexico Center for Energy Policy.

“The downturn was a flush of flat-out production, and the target was the Bakken,” he said. “The Saudis understand the Bakken. They read everything. The most important consultants to OPEC are based in Houston—they’re Americans.”

Fine, a former MIT professor who’s also the energy policy project leader for the New Mexico State Department of Energy Minerals and Natural Resources, spoke during the opening day of the Bakken Conference & Expo July 17-19 in Bismarck, North Dakota.

He was jointed on the panel by John Yates, president and founder of Abo Empire, to discuss New Mexico’s San Juan and Delaware basins. While Yates covered the economic impact of the basins on New Mexico, Fine explained why their futures are headed in opposite directions, as well as OPEC’s impact on world oil prices.

Fine noted that at one time, the San Juan Basin was No. 2 in U.S. gas production. In recent days, low gas prices have resulted in Conoco, Chevron and WPX announcing plans to sell their interests in the basin. This year, for the first time, the Delaware Basin in southern New Mexico will eclipse the San Juan Basin in gas production.

“What is the future of the San Juan Basin? The future is that in the last 60 to 70 years, only about half of the gas has been recovered, leaving 32 trillion cubic feet of gas,” Fine said.

Turning to the subject of world oil prices, Fine discussed his experience of studying OPEC since the 1970s and what he’s learned from it. For example, in 2014 when OPEC increased its production specifically to target the Bakken and other U.S. shale plays, Fine forecast that prices would fall to $28 to $23 a barrel while others expected them to rebound to $100 a barrel.

“The Saudi mind is not the Bakken,” he said. “The operators here go for very short-term results. Their balance sheet is quarter-to-quarter. Saudi Aramco and the OPEC producers are taught to think in five-year ranges. So I picked the five-year range in 2000 to 2003 and said this might be it. It was $23 to $28.”

Overcapacity and the price of oil Dr. Daniel Fine, New Mexico Center for Energy Policy


The full article is here-> http://www.daily-times.com/story/money/industries/oil-gas/2017/06/25/overcapacity-and-price-oil/397050001/

“With the Saudi Arabian-American strategy of removing ISIS and terror roots in Middle East societies and governments, the global oil and gas service companies have new projects to expand oil capacity of Saudi Arabia. This moves Saudi Aramco into overcapacity production range and a Second Downturn in early 2019 as forecast in this column six months ago.

Saudi oil production capacity should increase to 13 million barrels per day with Haliburton and others working on projects to increase reserves. This is prepared to flow into export markets to deprive Occidental of its short- term export of domestic oil which the production cut-back under the 1,800,000 barrels per day OPEC and Russian “deal” provided as a temporary marketing opportunity.  The price of de-terrorism in the Middle East is more Saudi Arabian oil and lower world prices.  Saudi Arabian demand forecasts are no more than 1 percent per annum growth:  its new capacity addition could reach 4 percent per annum in the next five years following the service company projects signed weeks ago.

OPEC production and imports to the U.S are up as this column is prepared for publication. The Commodity Market, which determines the price of world oil, would have a trading range breakout if Iranian gunboats break the isolation of Qatar and engage the U.S. Persian Gulf naval capability. However, such incidents would move traders for hours only.

Natural gas prices should continue to move upward as risk hedging begins to focus on buying gas and selling crude.  This is a contract which oil price risk is hedged
A laying of the risk of crude oil price declines with a simultaneous buying of natural gas.

Natural gas storage favors San Juan natural gas producers in the winter months ahead. This stimulates a regional Texas offset with new Eagle Ford dry gas promotion.
Lithium prices have sharply declined mainly because of South Korean mining production and investments. This explains the stock market and Tesla Motors. Tesla may not need its mining investment in Nevada to lower the cost of the battery pack.
This shift to downstream concentration which will re-start statewide competition for expanded facilities to relieve its Fremont, California plant. New Mexico economic development competed with three states to capture the giga-factory in Nevada. A second chance for Santa Fe to win in a second round? “

The Panhandle Import Reduction Initiative (PIRI) Calls for New White House Policy: Unfair Trade Endangers U.S. Oil Industry Too


The full press release is here-> http://www.businesswire.com/news/home/20170518005304/en/Panhandle-Import-Reduction-Initiative-PIRI-Calls-White

May 18, 2017 06:00 AM Mountain Daylight Time 

AMARILLO, Texas–(BUSINESS WIRE)–In a letter directed to the President of the United States and received by the White House, the founders of (PIRI), the Panhandle Import Reduction Initiative representing thousands of independent small producers of oil in the Southwest United States wrote, “We call upon President Donald J. Trump for a second Presidential Memorandum to order the Secretary of Commerce, to establish the crude oil industry as a “Core” industry to be added to steel, aluminum, vehicles, aircraft, shipbuilding and semiconductors. Crude oil should be recognized as one of the critical elements of US manufacturing and defense industrial bases, which we must defend against unfair trade practices and other abuses.”

“We call upon President Donald J. Trump for a second Presidential Memorandum to order the Secretary of Commerce, to establish the crude oil industry as a “Core”

The PIRI founders further stated in the letter “Following the Presidential Memorandum on the case for steel against Chinese export practices that you signed, PIRI further calls for an immediate Investigation by the Department of Commerce of Saudi Arabia and OPEC abuse between August 2014 and March 2016 of the American oil industry by expanding production to lower world oil prices to destabilize and cause hardships to American producers mainly of light tight oil (shale oil). This was an announced effort to undermine and shut-down producers with higher costs of production. According to one estimate some 150 US companies filed bankruptcy and $150 billion in capital outlay postponed or cancelled. More than 300,000 US industry-related jobs were lost.”

Oil leaders: OPEC threatening U.S. economy and New Mexico’s lifeblood; Nation has lost 400,000 oil and gas jobs in past two years


The full article is here-> http://rdrnews.com/wordpress/blog/2016/10/08/oil-leaders-opec-threatening-u-s-economy-and-new-mexicos-lifeblood-nation-has-lost-400000-oil-and-gas-jobs-in-past-two-years/

Dan Fine, an oil economist with the New Mexico Center for Energy Policy, speaks at a conference in Carlsbad recently about how foreign oil imports are hurting the American oil industry. Fine said OPEC has flooded the U.S. market with foreign oil since 2014 in an intentional effort to put U.S. producers out of business, while Saudi Arabian-backed companies are trying to buy American companies in an effort to control the flow of oil within U.S. borders. (Hobbs News-Sun Photo)

CARLSBAD — Oil experts say America is under attack by Saudi Arabia and OPEC, but instead of bombs, the OPEC oil cartel is dropping millions of barrels of oil on the U.S. economy in a clear effort to undermine the nation’s oil producers and kill any chance of American energy independence.
The first to feel the flood of foreign oil into the U.S. are the independent oil producers, whose stripper wells in Texas alone account for 20 percent of the nation’s oil and gas production, said Judy Stark, executive vice president of the The Panhandle Producers & Royalty Owners Association.
Stark was one of the half dozen speakers at an event of 25 people Sept. 27 in Carlsbad where the Panhandle Import Reduction Initiative, a group of independents seeking import quotas on foreign oil, met to announce their “white paper” that will be presented to the next president.
“We know OPEC has toyed with our market for many years but what I see coming now is a threat, without a doubt, to our national security,” Stark said. “The Middle East wants control of the U.S. market. When they came out and decided to flood the market with oil and drive U.S. producers out of business, their whole point was to take back their lost market share — our production. They are telling us is they are not going to let us produce our own natural resources. Guess what? They have done a pretty good job.”
The Sept. 27 Carlsbad meeting was a first battle cry that Dan Fine, a co-founder of the initiative and oil economist with the New Mexico Center for Energy Policy, said won’t be taken up by the nation for two years — when the rest of the country wakes up and finds it is too late to stop OPEC from controlling America’s energy industry.
“We are pioneers,” Fine said. “My point is, we are sitting here today 18 months to two years ahead of everyone. Sometime in early 2018, the country will discover what we are having a discussion about here today.”

What’s at stake?

What’s at stake is some 276 billion barrels of oil reserves now estimated to exist in the United States.
According to Fine, that number surpasses what Saudi Arabia has and they are terrified. Fine quoted Harold Hamm, CEO of Continental Resources, concerning the shale oil discoveries made in the United States.
“The United States has increased oil production by an enormous 65 percent over the past five years,” Fine said, quoting Hamm’s statement. “We can and should use our nearly unlimited oil and gas supplies to drive a stake through the heart of OPEC forever.”

Texas Panhandle And Artesia New Mexico Strike Back With Import Quotas On Foreign Oil: A Reaction To Doha Meeting


The complete press release is here-> http://www.prnewswire.com/news-releases/texas-panhandle-and-artesia-new-mexico-strike-back-with-import-quotas-on-foreign-oil-a-reaction-to-doha-meeting-300253143.html

AMARILLO, Texas, April 18, 2016 /PRNewswire/ — The Panhandle of West Texas, a center of American oil since early in the 20th century, answers OPEC and Saudi Arabia with a call for a Presidential Proclamation to establish quotas on imports of foreign oil.

The counter to the Doha meeting is a “line in the sand” against further price and supply wars against oil communities, working families, and producers not only in Texas and the Southwest but across the entire US. The United States should no longer allowSaudi Arabia and the middle east to manipulate our economy by crippling our ability to produce and use our own natural resources. We have been forced to comply with the consequences of decisions made by a country whose intent was to take over a “market share” that was ours and make it theirs.  The results were oil prices plummeting to $26 a barrel.

The “bust” in oil exploration and production has left families, companies, both large and small, with bankruptcy and hundreds of thousands out of work.  Since Thanksgiving of 2014, Saudi Arabia has increased its production to lower prices to shut-in unconventional oil in all areas of the US but specifically in Texas, Oklahoma and Appalachia where “stripper or marginal wells” are more prevalent. It is a price war which has suspended the prospect of American energy self-sufficiency.

The Panhandle Import Reduction Initiative for oil import quotas on foreign oil is nothing new.  It aims to revive the 1959 quota system of President Eisenhower who acted to sustain a healthy oil industry and middle class communities which it employs for reasons of national security.  And it worked for 14 years to keep domestic oil from going out business because of foreign imports.

Import quotas on light tight oil will be 100% — no more imports within the first 60 days of the new American President’s term next year.  Light tight oil or oil from shale is an American technology triumph and the pathway to abundance and security against foreign oil supply cut-off threats. Southwest and Dakota oil will be unbound.  North American oil will avoid the risk of dependence on the world ocean as the transportation for imports.  Oil from shale has so far supported national income savings in the balance of payments of over 500 billion dollars in the last five years.

President Eisenhower’s import quotas limited heavy sour oil to 10-12% of yearly American oil demand — enough to take care ofCanada’s current exports to the United States.

The lower the oil price goes and the longer it stays there because of the Saudis flooding the market, the higher it will go and the longer it will stay there when demand gets greater than supply. This will happen because the US operators and other international companies are not investing in exploration, the oil that we will need in 5 to 10 years is not being discovered and developed today. OPEC cannot supply all the world’s needs. When demand outpaces supply, the price will skyrocket and stay there until the oil operations that are now curtailed can ramp back up. That may take years due to all the layoffs taking place today. All consumers will be hurt by the high prices. That would not happen if we had reasonable prices today to let us keep exploring for and developing new oil reserves for our future needs.

Column: International production means oil prices likely to remain low By Daniel Fine


For the complete article use this link–> http://www.daily-times.com/farmington-opinion/ci_28613365/column-international-production-means-oil-prices-likely-remain “The price of West Texas Crude oil has declined below $50 per barrel as a reaction to the expectation that oil export sanctions against Iran will be lifted within the framework of the multi-nation “deal” to slow the country’s progress toward developing nuclear weapons. The global market is oversupplied and Saudi Arabian production is approaching its highest level since the 1970s.

San Juan and Delaware basin oil producers have sharply reduced costs through efficiencies. American higher-cost production shows no sign of a decline while OPEC lower-cost production increases in spite of lower prices. Saudi Arabia has decided to fight the Americans for market share.

The outlook for Iraq places still more production in the global market. Iraq production, now at 4 million barrels per day and rising, could reach 6 million in two years. The Iranian Oil Company could attract BP and Total to invest capital and technology if sanctions permit. This would drive Iranian production to equal Iraq. In the short-term Iran has the capability of expanding exports by 1.2 million barrels.

Should the “deal” fail or be changed by Congress to a phase-in of Iranian oil exports over a longer period of time and the White House goes along, the price of oil should recover to $60 per barrel. This is a long-shot scenario, however.

There will be more Middle East production for export than anticipated and its impact on American shale oil production will be a three-year, low-price oil regime. On the other hand, the current price war is moving quietly to an old variable. From 2009 to early last year, Saudi Arabia and the Gulf States assumed that American shale technology (horizontal drilling and hydraulic fracturing) was unsustainable. They changed course last year and resorted to the price war for market share.

The reason for this change in strategy was first, the decline ratio of shale horizontal wells; and second, the regulatory obstacles. Simply put, OPEC perceived the environmental/global warming/climate change political group mobilization as capable of winning tighter federal regulations that would cause higher costs to the oil industry stopping the “technology play.”

OPEC now regards the appearance of new methane rules as a revival of its earlier “unsustainable” scenario. Methane mitigation regulations can setback natural gas production but also the associated gas from oil production. San Juan Basin oil producing formations are heavy in associated gas. If methane emissions, leaks or flaring persist, OPEC calculates, it will cause regulatory intervention as part of the new International Treaty on Global Warming.”

Column: Geopolitical events demand rapid response from unconventional producers by oil and gas expert Dr. Daniel Fine -Special to the Daily-Times-


For the complete article by Dr. Daniel Fine use this link-> http://www.daily-times.com/four_corners-news/ci_28389990/column-geopolitical-events-demand-rapid-response-from-unconventional?source=most_viewed

The Saudi-OPEC price war is now nine months old. Two OPEC meetings have passed without revisions or changes in strategy. It is a war against high-cost unconventional American producers that are seen as the principal threat to market share.

The West Texas Intermediate price per barrel has recovered since the low of the mid-$40 bottom to slightly above $60. This has become a trading range with algorithms following momentum making a price range. Financial or paper traders and speculators have moved the price of oil in a “rally” up $15.

Oversupply still overshadows the market. The balance of supply and demand awaits the onset of winter or 2016. The market share for OPEC and Saudi Arabia continues to expand at the expense of non-OPEC producers, but American shale or unconventional production has not declined to the point that an acceptable world balance between supply and demand appears to be in the making.

Daniel Fine

Daniel Fine (Daily Times file photo)

The CEO of Conoco Phillips was invited to the recent preliminary OPEC meeting and he challenged the producer countries with a warning: American “high cost” production will survive the price war with cost-saving efficiency already in process and yet to come. This promises American oil supply at less cost and a prospect of little change in world supply while demand remains weak and possibly weaker with China importing less crude as well as iron ore and other commodities.

What is now at play in oil price formation is geopolitics.

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