Tag Archives: Heavy crude oil

What’s keeping foreign oil firms out of Iran? IRG? [CNNMoney quotes me]

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To put Iran’s recent production increases in perspective: On its own, for 37 years, Iran has struggled to produce two-thirds of its pre-revolutionary level of 6 million barrels/day. Now, domestic opposition is again limiting foreign oil companies’ participation to boost production.

Since the Obama-administration’s and Europe’s nuclear sanctions were lifted early this year (marked ‘e’ on the chart), Iran has been expanding its production and exports more rapidly than most experts had expected. Tehran has actually tripled exports since late-2015 (see point ‘f’).  But, here’s the big question: Can Iran sustain this years’ production gains?
If to, this could seriously undermine Saudi Arabia’s global oil-market share, and boost Iran’s sanctions-damaged economy to a long-awaited recovery.
The short answer: Now that foreign sanctions are finally lifted, the battle to boost Iran’s oil exports has shifted to a domestic clash over whether to allow foreign oil companies to have significant upstream involvement. This is a domestic Iranian issue with a long history.
Historical perspective
Let’s start with some historical perspective: The Iranian National Oil Company (NIOC) can only do so much on its own to boost production. After decades of sanctions, it lacks the needed technology and finance.  I told CNNMoney‘s Matt Egan, on Wednesday, that the faster Iran expands on its own, the faster production will plateau. (His CNNMoney article today quotes me .).
This was what happened after the 1980-1988 Iran-Iraq war.(‘b’ on the chart). By about 1992, production had plateaued at almost 4 million barrels/day, under 2/3 of the pre-revolutionary, late-1970’s level of roughly 6 million barrels per day. (‘a’ on chart).  The Iranian president at the time, Rafsanjani, argued to religious conservative and nationalist members of the Majilis that only foreign oil companies’ technology and investments could expand production further. However, he only won grudging approval for an offshore project due to fears that foreigners would bring their irreligious ways ashore and/or undermine the hard-won nationalization of Iran’s oil sector.
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Don’t write off American oil boom despite OPEC – CNNMoney cites my analysis

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I was interviewed today by CNNMoney’s Matt Egan on what  OPEC should expect from US shale as they hold their 169th “Ordinary Meeting” in Vienna tomorrow (2 June).  Indeed, at some point oil production and demand will balance (likely in 2017), and then the Saudis and OPEC will have to cautiously test the presently unknown dynamics of high-tech US shale on the rebound. -Egan cites my point  of view in his article. Read on … – Tom O’D.

Don’t bet against the resilience of U.S. oil companies

by Matt Egan @mattmegan5 CNNMoney (New York) June 1, 2016: 12:23 PM ET

Many expected U.S. oil output would collapse under the weight of a lengthy price war with the mighty OPEC, the fractured oil cartel that’s meeting in Vienna Thursday.

The U.S. oil boom, fueled by the shale revolution, has obviously taken a few punches from OPEC’s strategy of all-out pumping. But the latest numbers show that American production continues to remain stubbornly high in recent months despite the crash in crude to as low as $26 a barrel in February.

The U.S. pumped 9.13 million barrels per day in March, down by a miniscule 6,000 barrels from the prior month, according to stats released this week by the U.S. Energy Information Administration. That represents a deceleration from recent monthly declines. By comparison, daily U.S. output dropped by 58,000 barrels in February and by 83,000 barrels in December.

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Latin American Oil: Beijing Still Lending, But for How Long? – I’m quoted by Energy Compass

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Last week, Energy Intelligence (EI) quoted me on China’s continued appetite for oil and gas investments in Latin America even with its own  economic slowdown and LatAm’s many political upheavals. (Sincere thanks to EI for a PDF of their proprietary Energy Compass to share on my blog. You can access it below here.)

Some thoughts on China’s strategy: In the case of Venezuela, as the price of oil fell, Beijing quickly eased up on PDVSA’s repayment terms for its huge outstanding loans which are repayable in oil. This shows some willingness to help Venezuela cope with the falling market value of oil. Why? Because, mainly, it is the oil that China has always been laser-focused on – not making interest on these loans.

Generally, it is clear that new Chinese investments or loans are still possible in Latin America. In Venezuela however, Continue reading

Venezuela: Default risks grow (I’m quoted in Platts)

PDVSA president, Eulogio Del Pino, leads a meeting to

PDVSA president, Eulogio Del Pino, meets to “consolidate the new PDVSA.” (‏@delpinoeulogio Aug 11)

Mery Mogollon quotes me several times on PDVSA’s trajectory in Platt’s September Energy Economist.  Here it is:

Venezuela, South America’s biggest oil producer, has seen the value of its oil exports fall to its lowest level since 2004. The economy faces hyperinflation and increasing shortages of basic goods. Debt default seems highly likely. State oil company PDVSA has neither the institutional capacity nor the funds to expand oil production. It is a downward spiral that will lead to political change.  Continue reading

Paralyzed on Economic Reforms, Venezuela Will Mortgage Citgo [My Americas Quarterly analysis]

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Photo:: Listverse.com

[My post at Americas Quarterly, 5 Feb 2015]  Since before the death of Venezuelan President Hugo Chávez in March 2013, his successor, Nicolás Maduro, has remained paralyzed to enact reforms needed to escape the economic dysfunction Chávez left behind.

In his latest national address on the economy on January 21, Maduro finally acknowledged the recession and shortages faced by Venezuelan citizens. Yet, he failed again to clearly implement any of the pragmatic economic reforms[1] advocated by Rafael Ramírez, the former minister of energy and former president of Petróleos de Venezuela, S.A. (Petroleum of Venezuela—PDVSA)— such as a de facto bolívar-to-dollar devaluation via unification of Venezuela’s multi-tier foreign exchange (FX) system, measures to attract more foreign financing for oil production, and removing internal price controls, especially for gasoline.  Meanwhile, in September 2014, Ramírez was demoted to foreign minister, and then to UN ambassador several months later.

According to insiders, Maduro’s failure to implement pragmatic reforms stems principally from two sources.
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[Spanish] Mi opinión en Petroquía: China se involucra en los principales proyectos de América Latina

Here’s my piece [in Spanish] in Petroguía 2015, the oil-&-gas sector catalog for Latin America  Note: Hemispheric integration (e.g., energy infrastructure) was endlessly promoted by Hugo Chavez.  In the end, he built none. The region’s resources continue going mainly to develop other regions, such as China. Continue reading

“Venezuela: Petroleum, Politics & Economics in the Post-Chavez Era”–My Columbia U. talk, with Luiz Pinto, 9 October

If you’re in New York:  Luiz Pinto and I speak at Columbia University’s Institute for Latin American Studies (ILAS) on post-Chavez Venezuela, 12-noon, Thursday, 9 October: ilas_venezuela_columbia_talk_09oct14

Estoy citado en “Dinero”: La caída en la acción de Ecopetrol de Colombia no se debe únicamente a los ataques guerrilleros

Javier Gutiérrez Presidente de Ecopetrol  - La compañía tiene la meta de alcanzar el millón de barriles diarios de producción en 2015. Es claro que esa cifra está lejos de ser cumplida.

Javier Gutiérrez Presidente de Ecopetrol – La compañía tiene la meta de alcanzar el millón de barriles diarios de producción en 2015. Es claro que esa cifra está lejos de ser cumplida. (Dinero)

English Summary (Resumen en Inglés): I am quoted at length by Dinero  (Publicaciones Semana,  Bogotá) on the steep fall in value of the stocks of Colombia’s national oil company and largest corporation, Ecopetrol.  This had been blamed on FARC and ELN guerrilla attacks on pipelines this year. However, while attacks are up versus 2013, they are significantly below the numbers in several prior years.  Others blame the fall on a failure to expand reserves. Indeed, Ecopetrol has a very low exploration-drilling success rate. However,  I stressed that discovery of new reserves is not so much the problem as is the need to begin employing enhanced oil production (EOP) methods to Ecopetrol’s existing fields.  The percentage of oil Ecopetrol extracts is low.  To get more oil out of existing reserves, Ecopetrol needs to learn how to do EOP.  And, in certain formations, it has to learn how to drill much deeper.  Here is the article …

DINERO | 8/21/2014:   No solo violencia

La caída en la acción de Ecopetrol no se debe únicamente a los ataques guerrilleros. El principal problema de la compañía es operativo: no ha podido encontrar nuevas reservas.

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Aside

Last week, I was quoted in the Wall Street Journal on why Petróleos de Venezuela SA (PDVSA) is looking to sell its Citgo refining affiliate in the USA. The key motivation, in my estimation, is to finance projects critical to … Continue reading

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Venezuelan state’s economic response to protests: Rationing plus Chinese and Russian loans to float a liberal dollar market

The anti-government protest in eastern Caracas 13 March ended in clashes with Venezuelan police BBC
The anti-government protest in eastern Caracas 13 March ended in clashes with Venezuelan police. Three more died in widespread protests. BBC

As protests continue against Venezuela’s faltering “oil revolution,” the political strategy of the chavista administration is striking for its intransigence. President Maduro has refused to recognize any grievances by students or other protesters. He calls protesters “fascists” and blames them for all the ills of the economy.  Protests are attacked by the national guard and often by state-organized paramilitary gangs on motorcycles who are praised by the president.

The administration’s strategy so far appears to be that protests will burn themselves out if they can be delegitimized and contained within middle-class areas.  Accordingly, the president’s rhetoric aims at inciting poorer citizens against protesters.  All in all, this is a risky strategy.  Protests have constantly intensified, with perhaps 25 persons dead now.
After a month of protests, the administration has taken urgent economic measures it hopes will undermine the protests and prevent their spread to poor and working-class barrios.
1. Ramirez announces Chinese and Russian loans and the launch of a very liberal Sicad 2