More petroleum holdings US

Petroleum

The UK petroleum industry, also referred to as downstream, consists of over 200 companies involved in the refining, distribution and marketing of petroleum products. They range from large, multinational oil companies, supermarket chains and independent retail groups, through to the independent retailer with a single site.

The main product of the downstream industry is transport fuel. This market is split into commercial and retail. The commercial market includes power generators, industrial, transport and agriculture customers, independent fuel distributors, the government and its agencies, public services and the military. The retail market covers fuels mainly sold from high street filling stations. The downstream petroleum industry employs over 150,000 people directly, and several thousands of contract workers. The workforce is mainly employed in stabilising, refining and manufacturing, and in forecourt retailing activities.

Environmental concerns

Increased public concerns about environmental disasters and the effects of fossil fuels on global warming have sharpened the industry’s focus on environmental and safety issues. As the demand for energy grows so do concerns about the impact on the environment.

The UKOOA Sustainability Strategy Update and Progress Report 2005 details the industry’s progress in developing and implementing a sustainability strategy, and the Offshore Oil and Pollution Prevention and Control Regulations 2005, indicate that protection of the environment is high on the agenda of all oil companies. Environmental management now forms a key part of the decision-making process.

Recent improvements include:

• use of ultrasonic leak detection to reduce gas flare losses;
• introduction of more thermally efficient power plants on platforms;
• installation of simultaneous steam and electricity production facilities in refineries to reduce carbon dioxide emissions;
• work with conservation organisations to preserve habitats that will allow species to flourish;
• investments in new technology to maximise output from existing fields.

The offshore industry produces 80% of the UK’s primary energy. It also generates 3% of the country’s carbon dioxide and methane emissions

Politics of Alternative fuels

Vinod Khosla (a well known invester in IT firms and alternative energy) argues[19] that the political interests of environmental advocates, agricultural businesses, energy security advocates (such as ex-CIA director James Woolsey) and automakers, are all aligned for the increased production of ethanol. He pointed out that from 2003 to 2006, ethanol fuel in Brazil has replaced 40% of its gasoline consumption while flex fuel vehicles went from 3% of car sales to 70%. Brazilian ethanol, which is produced using sugarcane, reduces green house gases by 60-80% (20% for corn produced ethanol). Khosla also says that ethanol is about 10% cheaper per given distance. There are currently ethanol subsidies in the United States but they are all blender’s credits, meaning the oil refineries receive the subsidies rather than the farmers. There are indirect subsidies due to subsidising farmers to produce corn. Vinod says after one of his presentations in Davos, a Senior Saudi oil official came up to him and threatened: “If biofuels start to take off we will drop the price of oil.”[20] Since then, Vinod has come up with a new recommendation that oil should be taxed if it drops below $40.00/barrel in order to counter price manipulation.

Ex-CIA director James Woolsey and U.S. Senator Richard Lugar are also vocal proponents of ethanol.[21]

In 2005, Sweden announced plans to end its dependence on fossil fuels by the year 2020.[22]

Petroleum Holding politics en Venezuela

According to the Oil and Gas Journal (OGJ), Venezuela has 77.2 billion barrels of proven conventional oil reserves, the largest of any country in the Western Hemisphere. In addition it has non-conventional oil deposits similar in size to Canada’s – at 1,200 billion barrels approximately equal to the world’s reserves of conventional oil. About 267 billion barrels of this may be producible at current prices using current technology.[14] Venezuela’s Orinoco tar sands are less viscous than Canada’s Athabasca oil sands – meaning they can be produced by more conventional means, but are buried deeper – meaning they cannot be extracted by surface mining. In an attempt to have these extra heavy oil reserves recognized by the international community, Venezuela has moved to add them to its conventional reserves to give nearly 350 billion barrels of total oil reserves. This would give it the largest oil reserves in the world, even ahead of Saudi Arabia.

Venezuela nationalized its oil industry in 1975-1976, creating Petróleos de Venezuela S.A. (PdVSA), the country’s state-run oil and natural gas company. Along with being Venezuela’s largest employer, PdVSA accounts for about one-third of the country’s GDP, 50 percent of the government’s revenue and 80 percent of Venezuela’s exports earnings. In recent years, under the influence of President Chavez, the Venezuelan government has reduced PdVSA’s previous autonomy and amended the rules regulating the country’s hydrocarbons sector.[15]

In the 1990s, Venezuela opened its upstream oil sector to private investment. This collection of policies, called apertura, facilitated the creation of 32 operating service agreements (OSA) with 22 separate foreign oil companies, including international oil majors like Chevron, BP, Total, and Repsol-YPF.

Estimates of Venezuelan oil production vary. Venezuela claims its oil production is over 3 million barrels per day, but oil industry analysts and the U.S. Energy Information Administration believe it to be much lower. In addition to other reporting irregularities, much of its production is extra-heavy oil, which may or may not be included with conventional oil in the various production estimates. The U.S. Energy Information Agency estimated Venezuela’s oil production in December 2006 was only 2.5 million barrels per day, a 24% decline from its peak of 3.3 million in 1997.[16]

Hugo Chávez, the President of Venezuela sharply diverged from previous administrations’ economic policies, terminating their practice of extensively privatizing Venezuela’s state-owned holdings, such as the oil sector.[17] Chávez also worked to reduce Venezuelan oil extraction in the hopes of garnering elevated oil prices and, at least theoretically, elevated total oil revenues, thereby boosting Venezuela’s severely deflated foreign exchange reserves. He extensively lobbied other OPEC countries to cut their production rates as well. As a result of these actions, Chávez became known as a “price hawk” in his dealings with the oil industry and OPEC. Chávez also attempted a comprehensive renegotiation of 60-year-old royalty payment agreements with oil giants Philips Petroleum and ExxonMobil.[18] These agreements had allowed the corporations to pay in taxes as little as 1% of the tens of billions of dollars in revenues they were earning from the Venezuelan oil they were extracting. Afterwards, a frustrated Chávez stated his intention to complete the nationalization of Venezuela’s oil resources. Although unsuccessful in his attempts to renegotiate with the oil corporations, Chávez succeeded in improving both the fairness and efficiency of Venezuela’s formerly lax tax collection and auditing system, especially for major corporations and landholders.

Recently, Venezuela has pushed the creation of regional oil initiatives for the Caribbean (Petrocaribe), the Andean region (Petroandino), and South America (Petrosur), and Latin America (Petroamerica). The initiatives include assistance for oil developments, investments in refining capacity, and preferential oil pricing. The most developed of these three is the Petrocaribe initiative, with 13 nations signing a preliminary agreement in 2005. Under Petrocaribe, Venezuela will offer crude oil and petroleum products to Caribbean nations under preferential terms and prices, with Jamaica as the first nation to sign on in August 2005.

Pipeline diplomacy petroleum

The Baku-Tbilisi-Ceyhan pipeline was built to transport crude oil and the Baku-Tbilisi-Erzurum pipeline (South Caucasus Pipeline) was built to transport natural gas from the western side of the Caspian Sea to the Mediterranean Sea bypassing Russian pipelines and thus Russian control. Following the construction of the pipelines the United States and the European Union proposed extending them by means of the proposed Trans-Caspian Oil Pipeline and the Trans-Caspian Gas Pipeline under the Caspian Sea to oil and gas fields on the eastern side of the Caspian Sea in Turkmenistan and Kazakhstan. In 2007, Russia signed agreements with Turkmenistan and Kazakhstan to connect their oil and gas fields to the Russian pipeline system effectively killing the undersea route.

China has completed the Kazakhstan-China oil pipeline from the Kazakhstan oil fields to the Chinese Alashankou-Dushanzi Crude Oil Pipeline in China. China is also working on the Kazakhstan-China gas pipeline from the Kazakhstan gas fields to the Chinese West-East Gas Pipeline in China.

Petroleum positics holdings US

In 1956, a Shell geophysicist named M. King Hubbert accurately predicted that U.S. oil production would peak in 1970.[1]

Matthew Simmons, an energy investment banker and a former adviser to US president George W. Bush believes that oil production in Saudi Arabia will soon peak, meaning it will not be able to supply the world’s growing energy needs.

In June of 2006, former U.S. president Bill Clinton said in a speech,[2]

“We may be at a point of peak oil production. You may see $100 a barrel oil in the next two or three years, but what still is driving this globalization is the idea that is you cannot possibly get rich, stay rich and get richer if you don’t release more greenhouse gases into the atmosphere. That was true in the industrial era; it is simply factually not true. What is true is that the old energy economy is well organized, financed and connected politically.”

In a 1999 speech, Dick Cheney, the US Vice President and former CEO of Halliburton (one of the world’s largest energy services corporations), said,

“By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from?….While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow.”[3]

Cheney went on to argue that the oil industry should become more active in politics:

” Oil is the only large industry whose leverage has not been all that effective in the political arena. Textiles, electronics, agriculture all seem often to be more influential. Our constituency is not only oilmen from Louisiana and Texas, but software writers in Massachusetts and specially steel producers in Pennsylvania. I am struck that this industry is so strong technically and financially yet not as politically successful or influential as are often smaller industries. We need to earn credibility to have our views heard.”

Prices of oil

economist of the International Energy Agency expressed his opinion in October 2007 that oil prices will remain high for the foreseeable future. Birol says this is due to rapid increases in demand from the rapidly growing economies of India and China.[16] The ministers of OPEC, meeting in early December 2007, appeared to reach a consensus for high, but stable prices. This price point would deliver consistently high income to the oil producing states, but avoid prices so high that they would depress the economies of the oil consuming nations. A range of 70-80 dollars a barrel was suggested by some analysts to be OPEC’s goal.[17] Major oil exporting countries are rapidly developing and are using more oil domestically. Particularly significant are Indonesia, which no longer exports oil, Mexico and Iran, where projected demand will exceed production in about 5 years, and Russia, which is growing rapidly.[18]

Analysis source rocks petroleum geology

Analysis of source rocks

In terms of source rock analysis, several facts need to be established. Firstly, the question of whether there actually is any source rock in the area must be answered. Delineation and identification of potential source rocks depends on studies of the local stratigraphy, palaeogeography and sedimentology to determine the likelihood of organic-rich sediments having been deposited in the past.

If the likelihood of there being a source rock is thought to be high, the next matter to address is the state of thermal maturity of the source, and the timing of maturation. Maturation of source rocks (see diagenesis and fossil fuels) depends strongly on temperature, such that the majority of oil generation occurs in the 60° to 120°C range. Gas generation starts at similar temperatures, but may continue up beyond this range, perhaps as high as 200°C. In order to determine the likelihood of oil/gas generation, therefore, the thermal history of the source rock must be calculated. This is performed with a combination of geochemical analysis of the source rock (to determine the type of kerogens present and their maturation characteristics) and basin modelling methods, such as back-stripping, to model the thermal gradient in the sedimentary column.

Financial Petroleum Holdings

EXECUTIVE SUMMARY

The prospects that have been evaluated all represent either un-tapped proven reserves or re-entry or rejuvenation projects of formerly producing wells in the South Eastern United States. As technology US Petroleum Holdings has continued to improve, old wells and old fields that were once too dangerous, too unproductive or “empty” can be reopened and produce economically. These wells are preferred because they are already along the gas and oil pipeline routes that crisscross the United States (i.e. infrastructure costs to monetize new finds in these old wells are minimal).

These investments represent late-stage investment which mitigates the riskUS Petroleum Holdings  to investors and the time to production on these wells is shorter than if investments were made in the early stages.

Invest in oil or in gas

Some of the world’s wealthiest individuals and companies made their fortunes in oil and natural gas. Investments in this area have the potential to be very profitable, sometimes generating multiple returns on investment. Oil and gas is also an investment that is particularly timely right now, for some of the following reasons:

 

1. U.S. domestic oil production increased throughout the 1950’s and 1960’s. Writing in the 1950’s, American geologist M. King Hubbert predicted that the production of U.S. oil fields would peak in the early 1970’s. It happened that U.S. production began to decline in 1970. Hubbert’s key insight was that production peaks once half the oil in any field has been extracted. Far more oil is extracted in the early stages of production than later on. In 1970, the U.S. satisfied about 70% of its needs from domestic oil production. Now, however, the picture is much bleaker, as the U.S. satisfies about 35% of its needs from domestic production and imports the rest.
2. Since 1969, the North Sea utilizing advanced technology has produced about 15 billion barrels of oil, helping Norway become rich, and Britain to shed its status as a third rate economy. Production in the British sector, however, has already started to decline and Norway close to peak production. The North Sea has shown that technology is a double-edged sword by extracting more oil up front, but hastening the day of reckoning when production starts to decline.
3. Princeton professor Kenneth S. Deffeyes, a colleague of Hubbert, sought to apply Hubbert’s geological precepts on a worldwide basis. Other geologists have made the same effort, and while they do not all agree on the same year, the general conclusion is that world oil production is now close to peaking!
4. The reserves of the OPEC countries are overstated. Quotas for the members are determined by production capacity, and production capacity is directly related to reserves. In 1988 for example, Iraq announced that their reserves had more than doubled to 100 billion barrels. This was a miraculous feat, despite continued production and the total absence of exploration. The Saudis, Iraq, and Iran have all engaged in overstating reserves.
5. China’s economy is growing by leaps and bounds, and has an insatiable thirst for energy. If China’s per capita energy consumption comes anywhere close to that of the U.S., their need for oil will surpass that of the U.S.
6. Present world oil production is around 77 million barrels per day, and the International Energy Agency projects that world oil production will peak at around 80 million barrels per day.
7. Oil from new exploration, including any efforts to open up the Arctic National Wildlife Refuge, will barely make a dent in our growing need for energy.
8. Oil prices are set to soar! The only question is whether they do so rapidly and abruptly sending the economy and financial markets into a tailspin, or gradually, triggering high and rising inflation.
9. Considering the peak reached in 1981, and adjusting for present demand and inflation, some reliable sources have predicted that oil could reach $100 per barrel by the end of the decade.
10. Natural gas is also in short supply in the U.S. Over the next decade, U.S. demand for natural gas is expected to grow by over 30%. Even after natural gas prices soared in 2000, generating record drilling, natural gas production increased only 2% in 2001- not enough to meet one year’s growth in demand.
11. Alternative energy sources (wind, solar, nuclear etc.), are not positioned to replace fossil fuel demand any time in the near future. Coal is not an acceptable alternative because of the environmental problems associated with burning coal.
12. Obviously, given the current level of drilling activity both in the U.S. and overseas, oil and gas development can be a very profitable investment at today’s prices. Looking to the future, the financial picture becomes even brighter, and suggests that now more than ever is the time to get involved and ride the crest of the wave.
13. In the mid 1990s technological breakthroughs, enabled the industry to evaluate seismic survey data in three dimensions. A 3-D seismic survey, versus a 2-D seismic survey, is rather like looking at a CAT SCAN versus a regular X-RAY. In certain geological formations, 3-D seismic can accurately identify accumulations of oil or gas. This has given the smaller independent oil companies the ability to compete with the majors, particularly on the smaller lease plays. In turn, this has benefited private capital and the individual investor by affording the ability to invest in oil and gas prospects, previously considered the domain of the majors.
14. The 1990s also saw technological breakthroughs in the use of horizontal drilling techniques. Horizontal drilling in areas, such as the Austin Chalk in Texas, has boosted the production rates of wells, making them more economical to drill and providing a faster return on investment.

Financial Petroleum Holdings

EXECUTIVE SUMMARY

The prospects that have been evaluated all represent either un-tapped proven reserves or re-entry or rejuvenation projects of formerly producing wells in the South Eastern United States. As technology has continued to improve, old wells and old fields that were once too dangerous, too unproductive or “empty” can be reopened and produce economically. These wells are preferred because they are already along the gas and oil pipeline routes that crisscross the United States (i.e. infrastructure costs to monetize new finds in these old wells are minimal).

These investments represent late-stage investment which mitigates the risk to investors and the time to production on these wells is shorter than if investments were made in the early stages.