A Sinopec station in China. Sinopec and other big NOC’s are slashing prices to take business from Chna’s small private “Tea Pot” refiners.
Last week, I was quoted on my assessment of how China’s “Tea Pot” refineries (small, private outfits) will fare in the face of China’s big National Oil Companies (NOCs) cutting prices to grab the Tea Pots’ business. My main point to Newsbase reporter Saw Wright was that China is far from a completely “free market” and the state can be expected to weigh in on one side or another, complicating any outcome predictions based on market and/or tech strengths and weaknesses. I’m quoted a couple times near the article’s end, here:
Posted in China, Energy and Geopolitics, Global Oil Market, Global Oil system, Oil prices, Oil supply, OPEC, shale oil, Tight oil, Trade and Commerce, U.S. oil, Uncategorized
Tagged China, Economics, noc, oil sector, refineries, shale, tea pots
Credit: CNNMoney, 9 August 2016
Mr. Trump promises he’d use the USA’s shale-oil revolution to deliver “complete” independence from foreign oil, telling voters in May: “Imagine a world in which our foes and the oil cartels (sic) can no longer use energy as a weapon. Wouldn’t that be nice?” But, he is confusing two quite distinct things:
“Energy independence” – in the sense of the USA producing more oil than the country consumes – is indeed possible, even “tantalizingly close” as this CNNMoney article (Aug. 9, 2016, by Matt Egan) makes clear, citing myself and other experts. For clarity, I’ll call this “net oil-exporter status.”
However, Donald Trump asks us to “imagine” he can use this net oil exporter status, to make the US independent of the global oil market and oil in geopolitics where our “foes” and “cartels” have leverage. Continue reading
Posted in Energy and Geopolitics, Energy and Geostrategy, Gas globalization, Global Oil Market, Global Oil system, international relations, Iran sanctions, Iraq, Iraqi oil, Libya, oil, Oil prices, Oil supply, OPEC, Resource conflicts, Russia, Sanctions, Saudi Arabia, shale gas, shale oil, The USA, U.S. oil, Ukraine, Uncategorized
Tagged Ali Al-Naimi, Energy, geopolitics, Iran, Iraq, Middle East, natural gas, Obama, oil sector, OPEC, Persian Gulf, United States
CNN 20 July 2016
The oil market remains glutted, with price in the mid-$40’s. Despite furtive hopes over recent weeks by the business press about “imminent re-balancing” of global supply v. demand and about “draw downs” of record-high global storage inventories, data reveal only incremental re-balancing has occurred since fall of 2014 when this all began. (And, from November 2014, the Saudi’s responded by fighting for their market-share rather than for boosting price, which would have been impossible for OPEC to do on its own given the huge supply glut.)
Posted in Energy and Geopolitics, Gaddafi, Global Oil Market, Global Oil system, Libya, Oil prices, Oil supply, OPEC, Saudi Arabia, Uncategorized
Tagged Libya, Middle East, oil market, oil prices, oil sector, OPEC, Saudi Arabia
Gillian Rich at Investors’ Business Daily News (17 June 2016) writes a quite informative survey of the many new technological methods pushing the cost of US shale production ever downward. Here’s Gillian’s article. She asked me about the impact on OPEC producers and my central point (my quotes are below) was that it will be the high-tech, most-efficient producers (such as US shale) and NOT necessarily those with the largest and easiest-to-access proven reserves (e.g., countries such as Venezuela and much of OPEC, many corrupt Russian and Chinese state-dominated firms, etc.) that will set the pace in the new oil order
If the latter actors can’t find ways to innovate in technology and operational methods they will be at a disadvantage because shale production looks more like manufacturing than traditional oil extraction. Many OPEC and other state-owned firms never had to think like a combination of Henry Ford and Silicon Valley, but could instead count on huge, low-cost reserves, inefficient exploration and production and cheap local labor.
Eventually, the new shale methods will of course spread to promising shale fields in Argentina, China, Eastern/Central Europe and elsewhere; but this will require big advances in local infrastructure, training and government regulatory capacity. Again, things those countries must think about very seriously. Here are my quotes (from near the end of her long article).
New Oil Order
…. OPEC countries like Nigeria and Venezuela that haven’t invested in newer technology will be hurt by advances in the U.S., said Thomas O’Donnell, a senior energy analyst at the consulting firm Wikistrat. Russia also can’t exploit shale and Arctic assets because of economic sanctions that limit Westerners from helping develop the new fields.
Meanwhile, Saudi Arabia has low-cost production fields, and state-run oil company Saudi Aramco can bring in foreign experts knowledgeable about fracking and new technologies, he added.
Still, OPEC must now grapple with U.S. shale producers on the rebound, which could lead to volatility, O’Donnell said. “The oil order has changed. It’s conventional oil on one side, and new shale oil on the other.”
Posted in Energy and Geopolitics, Enhanced oil production, Global Oil Market, Global Oil system, High technology, Oil prices, OPEC, Saudi Arabia, shale gas, shale oil, The USA, Tight oil, Uncategorized, Venezuela oil
Tagged China, Energy, oil sector, OPEC, Saudi Arabia, United States, Venezuela
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
Posted in Brazil, Chavez, China, Economic Crisis, Energy and Geopolitics, Faja of the Orinoco, Global Oil Market, Global Oil system, heavy oil, Hugo Chávez, Latin America, Oil prices, OPEC, PDVSA, PDVSA weakness, Rosneft, Russia, Sechin, shale oil, The USA, Uncategorized, Venezuela oil
Tagged Beijing, Caracas, Chavez, China, Energy, Heavy crude oil, Hugo Chávez, Latin America, Nicolás Maduro, oil sector, OPEC, PDVSA, Petróleos de Venezuela, United States, USA, Venezuela
This Wikistrat Report on the Saudi kingdom’s “reform” plans and the future of oil is from a press webinar I did on 17 May together with Dr. Ariel Cohen (Atlantic Council, Washington) and Prof. Shaul Mishal (Middle East Division, IDC Herzliya & Tel Aviv U.). A nicely done report on oil market and geopolitical hot topics.
30May16 note: A couple typos I had found have been fixed by Wikistrat since I initially posted this Report. The latest version is now linked here. – T.O’D.
Posted in AICGS, Energy and Geopolitics, Energy and Geostrategy, Enhanced oil production, Global Oil Market, Global Oil system, international relations, Iran nuclear, Iraqi oil, Obama, Oil prices, Oil supply, OPEC, Persian Gulf, Russia, Saudi Arabia, shale oil, The USA, Tight oil, U.S. oil, Uncategorized, Venezuela oil
Tagged Ali Al-Naimi, Energy, geopolitics, Iran, Iraq, Obama, oil sector, OPEC, Persian Gulf, Saudi Arabia, United States, Washington
Here’s my live interview recently on Sky News – the all-news UK channel. It just went up.
Here’s the gist: Years-long high prices brought the US shale revolution and other new higher-cost oil online like offshore of Brazil and Africa. This glut was already dropping prices when the Saudi’s decided in November 2014 that OPEC alone could not cut enough production to reverse the slide. So what to do if Russia and Mexico won’t join an OPEC cut? Continue reading
Posted in Energy and Geopolitics, Global Oil Market, Global Oil system, Mexico, Oil prices, Oil supply, OPEC, PDVSA, Russia, Saudi Arabia, The USA, Tight oil, Trade and Commerce, Uncategorized
Tagged oil prices, oil sector, OPEC, PDVSA, Saudi Arabia, United States
Russian Production & Stakes in Venezuelan Oil Projects (40% stake is limit)
Last October & November I succeeded in interviewing several people in the Venezuelan private sector directly knowledgeable of Russian oil projects with PDVSA. Many Venezuelans wonder what all the Russians-known for their secrecy-are up to there. Some of my key findings are in Americas Quarterly‘s Winter 2016 edition. Read on …
Russia Is Beating China to Venezuela’s Oil Fields – By THOMAS W. O’DONNELL
The profits, politics and luck behind Russia’s growing footprint.
The late Venezuelan President Hugo Chávez, had long envisioned China becoming Venezuela’s biggest oil-sector production partner. So when Rafael Ramírez, then president of Petróleos de Venezuela, S.A. (PDVSA), announced in January 2013 that Russia would produce enough oil with PDVSA by 2021 to become “the biggest petroleum partner of our country,” very few people believed him. It sounded like empty hype.
Yet it turns out that Ramírez was serious. Three years later, Russian companies are already producing more oil in joint projects with PDVSA than their Chinese counterparts. Official figures are either unreliable or unavailable, but according to field data provided by Global Business Consultants (GBC), a Caracas-based energy consulting firm, Russia-Venezuela production as of late 2015 was 209,000 barrels per day (bpd), compared to China-Venezuela’s at a bit over 171,000 bpd.
Posted in Chavez, Chavez lagacy, China, Energy and Geopolitics, Energy and Geostrategy, Faja of the Orinoco, Global Oil Market, heavy oil, Hugo Chávez, international relations, PDVSA, PDVSA weakness, Putin, Rosneft, Russia, Sanctions, Sechin, Uncategorized, Venezuela oil, Zulia
Tagged China, geopolitics, Hugo Chávez, oil sector, PDVSA, Petróleos de Venezuela, Venezuela
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
Posted in Faja of the Orinoco, Global Oil Market, heavy oil, Oil prices, OPEC, PDVSA, PDVSA weakness, Venezuela oil
Tagged Eulogio Del Pino, Heavy crude oil, Nicolás Maduro, oil sector, OPEC, PDVSA, Petróleos de Venezuela, Venezuela
Presidents Rouhani of Iran and Putin of Russia holding discussions
(AICGS Analysis, by Tom O’Donnell) Since Russia’s president, Vladimir Putin, decided to annex Crimea and back east Ukrainian separatists with troops, many have worried he might use his “energy weapon” to counter U.S.-EU sanctions, as Russia supplies around a third of the EU’s natural gas imports. But what about Russian retaliation in the oil sector?
That’s hard to imagine. While gas is marketed in bi-lateral, pipeline-mediated relationships, oil is not. It’s liquid, fungible, and marketed in a unified open market—“the global barrel” [and name of this blog, T.O’D.]—which means there are no bi-lateral oil dependencies.
So, when EU leaders were cajoled by Germany’s Angela Merkel into joining the United States in applying sanctions, Russia could do little to retaliate from within the oil sector. In reality, it is the EU and the U.S., not Russia, that have an “oil weapon” in hand. And, the flurry of Russian oil diplomacy with OPEC, Iran and China over the past couple of weeks has a distinct whiff of desperation to it. Continue reading
Posted in AICGS, Aramco, China, Energy and Geopolitics, Energy and Geostrategy, Euroepen Union, Gas globalization, gas internationalization, Germany, Global Oil Market, Global Oil system, international relations, Iran nuclear, Iran sanctions, negotiations, Obama, Oil prices, OPEC, Putin, Rouhani, Russia, Sanctions, Saudi Arabia, shale oil, The USA, Ukraine, Venezuela oil
Tagged Ali Al-Naimi, Berlin, China, European Union, geopolitics, Germany, Iran, Middle East, natural gas, oil sector, OPEC, Putin, Sanctions against Iran, Saudi Arabia, United States, Venezuela, Vladimir Putin