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Oil and gas majors now cutting back in U.S. shale gas fields

In the last 10 days, British Petroleum, Chevron, ExxonMobil and Royal Dutch Shell have all announced they will be spending less on oil and gas exploration in the U.S.
[ more examples in the Examiner Article ]


Unfortunately, the results of the shale revolution have been disappointing, leading to significant asset impairment charges and negative cash flows,” [An investment banker] further asks, “Will that capital continue to be available, or will it, too, begin demanding profits rather than reserve additions and production growth?”

Also at stake are a number of high profile U.S. politicians who have staked, to a large degree, their upcoming reelection by campaigning on the claimed successes of the oil and gas companies operating within their state’s shale formation. One such politician seeking reelection this year is Pennsylvania’s Governor Tom Corbett who has been heavily touting what several leading Pennsylvanian labor economists believe are questionable job creation numbers in the state’s Marcellus Shale formation. Corbett has also offered Shell Oil more than $1.6 billion in state tax credits to locate and build an ethane refinery plant outside of Pittsburgh, Pennsylvania.

For more than 18 months Shell Oil has been unwilling to date to sign the record breaking state tax incentives agreements with Gov. Corbett and move ahead even as the governor continues to campaign on this issue. With Shell’s new CEO announcing a more than 20% cutback in its U.S. shale gas operations just last week, further doubt is now being cast on this deal.

We are not at peak oil, we are at peak affordable oil.   This can lead to a worldwide financial collapse. For more on this see my  comment on Our Finite World.  For even more, read the blog, and the (mostly) intelligent discussion.
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Comment Preferences

  •  I can't wait (2+ / 0-)
    Recommended by:
    lehman scott, Calamity Jean

    People will have to find out with their wallets that buisness as usual isn't.

    Little that they know how close that is.

  •  That was quick. (1+ / 0-)
    Recommended by:
    lehman scott
    •  I suppose you could say it was quick, but (6+ / 0-)

      more than 30 years ago, I asked one of the world's leading exploration geophysicists when this potential energy source might become feasible, and he responded, "Never." He explained it would require more energy to produce than would be produced, a net negative, pretty much the consensus among geophysicists in those days. In recent years, I've wondered whether they were all wrong (it can happen). Now, it's looking more like they were right all along.

      "Portion of the adolescent prisoners in solitary on Rikers Island who have been diagnosed with a mental illness: 7/10." Tell someone.

      by RJDixon74135 on Mon Apr 28, 2014 at 06:32:05 AM PDT

      [ Parent ]

  •  More Chicken Little Nonsense (0+ / 0-)

    OurFiniteWorld is a hack site that is almost always wrong.  I guarantee you we will be producing more Natural Gas 5 years from now.

    •  At what price? (1+ / 0-)
      Recommended by:
      Calamity Jean

      Bueause we all understand gas will still be used. The question is who will be able to afford it.

      •  Price has a rationing function. Low prices for oil (1+ / 0-)
        Recommended by:

        or gas drive investment out of that sector to other pursuits. High prices attract investment but suppress demand.
          Higher priced gas/oil means that consumers will look for substitutes and overall demand (quantity demanded, to be exact) will fall.
           IOW, prices and demand will oscillate around a slightly upward sloping trend line for a long time to come.
           Oil and gas will always be "affordable" to a great many people.

        •  There is a cognitive dissonance in your (0+ / 0-)


          Like the fact the last gasoline/oil price gouge made shipping costs eat the profit margin from offshored goods.

          From a Wall Street perspective this is all well and good. From a main street perspective not at all.

        •  Those are going to be BIG oscillations. (1+ / 0-)
          Recommended by:
          IOW, prices and demand will oscillate around a slightly upward sloping trend line for a long time to come.
          Electric suppliers, in particular, will become seasick from them.  Renewables, which have a steady price for years to come, will look better and better.  The up-and-down price of gas will be like a dying fish flopping.  

          "My country, right or wrong; if right, to be kept right; and if wrong, to be set right." -- Sen Carl Schurz 1872

          by Calamity Jean on Tue Apr 29, 2014 at 04:07:43 AM PDT

          [ Parent ]

    •  Check out this on from early Jan. 9 2008. (2+ / 0-)
      Recommended by:
      Horace Boothroyd III, corvo

      By Gail Tverberg , the author Finite World, posting on The Oil Drum

      Her predictions look pretty good.  Better than our financial "experts".

  •  less than 5$ (0+ / 0-)

    look im all for transitioning to renewable but that is going to take a LONG time with the type of modern society we have.  At least Nat Gas burns far cleaner than goal to help us through the transition.

  •  Thanks for the Diary, interguru, those recent (2+ / 0-)
    Recommended by:
    Horace Boothroyd III, corvo

    decisions by the major oil players should signal to everyone that the game is about up.  Of course the MSM cannot transmit that signal... yet. Those who do monitor these developments are aware, of course, and many of us seem to have (mostly understandably) thrown in the towel recently as events are unfolding.  I have not.  I cannot.

    Really liked your elevator comment, btw.  Spot-on and succinct - - perfect.

    Pessimism of the intellect; optimism of the will. - - Antonio Gramsci

    by lehman scott on Mon Apr 28, 2014 at 04:45:51 AM PDT

  •  I've seen the receipts from oil & gas production (2+ / 0-)
    Recommended by:
    Just Bob, oldmaestro

    in the Texas Barnett shale belt sky rocket in the past 3 years; clients tell me that production has been falling and 2104 will not have the high revenue as previous years.

    The bulk of what was down there has been fracked and extracted already.

    Unless producers are holding out for higher prices.

    Notice: This Comment © 2014 ROGNM UID 2547

    by ROGNM on Mon Apr 28, 2014 at 06:44:39 AM PDT

  •  so that means those areas are getting played out (2+ / 0-)
    Recommended by:
    lehman scott, Calamity Jean

    fracking is a short term boom and bust, much like gold or silver in the old days. Nevada is called the silver state due to the discovery of the Comstock lode in the 1860s. as long as gold and silver keep being produced, things are fine, but once it dries up, so do the communities around those sources there's a reason no gold silver or coal mine has lasted a century, the supply in that area isnt enough to last 100 years. those areas being fracked wont last 10 years, let alone 100, they are being played out very rapidly.

  •  This helps explain . . . (2+ / 0-)
    Recommended by:
    lehman scott, Calamity Jean

    . . . the "informational articles" appearing in biz sections on the virtues of investing in energy stocks.  

    "Such a deal I've got for you!"

  •  There Is No Difference (2+ / 0-)
    Recommended by:
    lehman scott, Calamity Jean

    ...between peak oil and peak affordable oil. It's possible that crude oil production--not the crude plus condensate which as become the common (and purposefully vague) stat cited in recent years--but actual crude, which exists in the reservoir as a liquid--peaked in 2005-06.  And even though C+C production is higher now than at any point in history, the price, hovering around $100/bbl, is an indicator of how much capital the industry has to invest to produce it, as well as of the tightness of the global market.

    Simply put, when production (even C+C, which is kind of a pathetic last gasp of the industry to maintain the cornucopian fiction) begins to decline, that will mark the passage of peak oil. Since production stats from many parts of the world are vague, we likely won't know for several years that we've passed it. But as one very intelligent observer of the petroleum industry puts it, we might not be exactlyat peak oil right now, but the global economy is now dominated inexorably by the peak oil dynamic--the constraints that limited and very expensive supply of oil places on growth (look at Europe of the last five years for proof positive of this).

    Saying we're at "peak affordable oil" I think is a misnomer like Daniel Yergin's intentional muddying of the waters by saying that we won't experience peak supply, but rather peak demand.  The two can't be separated. And the reason for both is the physical limitations on our ability to extract.

    •  Not just "affordable" in $$$ (1+ / 0-)
      Recommended by:
      lehman scott

      The issue which was constantly addressed in The Oil Drum blog is that the actual energy consumed to extract oil/gas needs to be less than the amount of oil/gas recovered. Saudi Arabia and Texas used to be around 1 barrel per 100 barrels recovered. Cantaral in the Gulf of Mexico was also a very prolific and easy to produce field.

      The ethanol process is a good example, worth while to obtain energy in a specific form, i.e. liquid, however it is barely above the break even ratio.

      It is simply very difficult to equal mother nature's kitchen, millions of years of sun light and the serendipity of ideal geological conditions. Sure we can make petroleum, at the price of high energy input instead of very, very slow natural processes

      •  Yup, EROEI. (0+ / 0-)

        (Or EROI, but I prefer EROEI because it specifies energy, and not dollar, return.)

        We've seem the same stats, I guess, about how the century-ago 1:100 ratio is now down to 1:10, and in cases like tar sands, as low as 1:4. And yes, ethanol is barely better than 1:1. Coal-to-gas schemes are less than 1:1, though that didn't stop the Nazis in World War II because they had no other way to power their air force.

        That's also why anyone who even bothers to count the Green River deposits of kerogen (bachmann did on the campaign trail a few years ago, and every now & then some republican trots out that old canard) is either stupid or knowingly mocking their listeners.  (Whenever I hear or read anything rand paul says about energy, I can't decide which of the two applies to him.)

        But yes, point taken: affordability also in terms of energy alone. And we're as badly off there as with any other metric.

  •  Cost of capital and state CO2 regulation (1+ / 0-)
    Recommended by:
    Calamity Jean

    Building new power plants to replace the 40+ year old existing plants, or to bring them up to current federal and state emissions regulation - those costs keep rising.  Publicly owned utilities such as San Diego Gas and Electric,and  PG&E, for 2 examples, are obliged to meet return on investment standards and are obliged to meet California renewable energy standards.  As a source of energy, oil and coal are on the way out.  With respect to fracking, the west in general has to choose how to spend its water, and water is the limiting factor.  

    This is us governing. Live so that 100 years from now, someone may be proud of us.

    by marthature on Mon Apr 28, 2014 at 09:21:58 AM PDT

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