Today’s Blog – Tuesday 6th September 2016

This week blogging services may be intermittent due to travel commitments and today we only have time for a “flash” blog

Editorial

Our nominee for the biggest optimist in the oil patch is US company Pioneer Resources’ Scott Sheffield (wait, says Daniel Yergin – that’s my job!).

Sheffield has recently stated that Pioneer’s stomping group of the Permian Basin in West Texas will produce more than 5 mmbopd in the next few years.  That would likely put this super mature (but admittedly large in all 3 dimensions) field into the top 5 producing nations in the world if it was its own country.

Estimating declines elsewhere in the US of say 1 mmbopd, this Permian future would put the US’s total production at say 12 mmbopd – and make it leap-frog as a country above Saudi Arabia and Russia.

We often note that the job of a CEO is to increase his company’s share price, not provide interested observers with objective facts.  We therefore take Sheffield’s latest comments with a huge pinch of salt (other bloggers such as US commentator Art Berman have called into question Sheffield’s methodologies when he has previously stated what his cost of production is – some things seem conveniently to be omitted).

But we could be wrong – and if he is right, this would truly make the Permian the genuine global swing producer – and an effective cap on price through the medium term.

Sheffield is a non-executive Director of Australia’s very own Santos (STO) – c’mon Scott tell those boys in Adelaide to claim that the Cooper Basin can do 5 Bcf per day of gas if they try a little harder!

Commodity prices

US markets did not trade on Monday due to a public holiday (gee whiz – are those guys ever not on holiday?!).  In London, Brent closed up nearly 2% at US$47.63.

The cause was the injection of yet more OPEC Ice into the market – with ongoing rumours about Russia joining in the (to us mythical) upcoming price freeze.

LNG and international markets

Another Power of Siberia development – at the recent G20 meeting hosted in China (where the Baldrick of the PRC decided it would be a cunning plan to humiliate the US President by not rolling up the right sized stairway to Airforce One – that showed those damned Yankees!).

This was the signing of a formal agreement between Gazprom and CNPC for the construction of a pipeline link under the Amur (or Black Dragon) River which marks the border between Siberia and Manchuria.  Back in the 1960s, the countries had military skirmishes here which almost led to full blown nuclear war, so this signature represented somewhat of the bringing to a close of such events.

The Power of Siberia is happening – with consequences for global LNG markets – but just much more slowly than the supposed 2018 start date indicates.

Quote of the day

US Senator and war hero to some (but not all – “I like people who weren’t captured” – guess who?!) John McCain’s summary of Russia’s economy:

“Russia is nothing but a gas station masquerading as a country.”

 

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