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很親切 May 21, 2018

Posted by hslu in 石油, Life in Taiwan, Oil, Taipei, Taiwan, 台灣, 林口.
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沒想到林口也有 Mobil 的 logo。它很顯眼,很新,很乾淨,看起來倍感親切。畢竟我們家的孩子都是吃 Mobil 的奶長大的,你說是不是?

臺灣沒有 Mobil 的汽油加油站,只有賣 Mobil 潤滑油產品的私人汽車服務中心。

Mobil 在中國已經有百年以上的歷史了。其實,Mobil 的前身是美國的標準石油公司。標準石油在 1890 年就用”美孚”這個商標進入了中國。美孚是美麗,誠信,可靠的意思。標準石油後來分成 Exxon 和 Mobil,後來又合併為一。俗云:合久必分,分久必合了,就是這個道理。不過這是後話,容後再禀。

剛開始,美孚在中國賣煤油燈和煤油。很快的,煤油燈就取代了中國用了千百年的油燈,而中國就成為標準石油在亞洲最大的市場。美孚在中國各地修建儲油槽、倉庫與辦事處,用油罐車、火車與船隻運送石油到中國內陸各地。美孚以上海為中心基地,前後擁有上百艘各式各樣的大,小拖輪及油輪。隨後,汽車開始普遍,美孚研發出了首屈一指的機用潤滑油,於是,美孚也順理成章的在中國賣汽車用的潤滑油了。

二次世界大戰結束,日本戰敗,無條件投降。中國從日本手中接收了臺灣,美孚也開始在臺灣做潤滑油的生意,一直到現在,在臺灣各地還有賣 Mobil 潤滑油的商店。由此可見,美孚與中國的合作維持了一百多年,可謂歷史悠久,合作無間。

我離開 Mobil 已經很久了。在那之前,公司傳出一個謠言說 Mobil 要買 ARCO。幾年來,從 VA 總部那邊傳來的謠言通常都很準。好幾次公司要裁員,我們聽到的謠言說我們這個部門要裁員 20% , 25% 或 33% 都非常準確。我們覺得這一次的謠言應該一樣可靠,不過大家都不怎麽在意,因為如果 Mobil 賣了 ARCO,被裁的也應該是 Arco 的員工,不是 Mobil 的員工。ARCO 在那幾年油價上漲的時候擴張的比 Mobil 還要厲害。油價大跌以後,公司大賠,特賠,好幾年以來,都一蹶不振,股價低迷。他們會被別的公司買去,我們一點都不覺得意外。ARCO在阿拉斯加有油田。Mobil 沒有。ARCO 在加州也許多資產和加油站,跟 Mobil 相當匹配。ARCO 在南中國海有許多海底油田的開產權。Mobil 沒有。看來 Mobil 要買 ARCO 聽起來合理。

要知道,在那十幾年艱苦漫長的日子裏,WTI 油價慘跌。從一九八零年年初的四十塊錢一桶跌到一九八六年的十塊錢一桶。再往下的十幾年,油價都在 十幾塊到二十塊錢之間徘徊。石油公司一再虧損,每個石油公司的員工都度日如年,如坐針毯。我們這個部門,每隔幾年就裁員一次:每次少則 15%,最多的一次居然到 33%,真是悽悽,慘慘,戚戚,人心惶惶,慘不忍睹呀。

在 Mobil 要買 Arco 的謠言滿天飛的時候,WTI 只賣十三,四塊錢一桶。我研究的重油因為它的質量不佳,油裏面的雜質太多,提煉不出來太多的汽油,每一桶重油只能賣到九,十塊塊錢一桶,而我們的生產成本就要七,八塊。扣掉 overhead,根本不能錢賺。我們公司的外海油田更是虧本的厲害。可是,當油價低的時候,煉油廠的成本降低,加油站的生意就賺錢了。其實 Mobil 有很賺錢的 downstream operation,可是 upstream 就虧多了。這是其一。還有,Mobil 在中東的 Qatar 和印尼的 Arun 油田有非常成功而又賺錢的 LNG 計劃,還有十幾艄世界最大的 LNG 油船。這是 Mobil 在石油工業中首屈一指的技術。這些 LNG 有長期的合約賣到日本,韓國,臺灣和新加坡,是讓人家眼紅的資產。還有,Mobil 在非洲也有很多資源,也已經投入大量的資金和人力。只可惜,油價就是上不了,大家只有乾等著,熬一天是一天。

沒多久謠言沒了,看來 Mobil 是不會買 ARCO 了。再過幾個禮拜,一個晴天霹靂的消息公佈了:Exxon 要買 Mobil。新公司叫 Exxon Mobil。這真叫每個人嚇一大跳。很顯然,又要裁員了。不過像我們這種跟生產石油也直接關係的正牌工程師和其他有關的技術人員是不會讓我們走的。畢竟, Mobil 的油田和資產還需要我們經營管理,你說是嗎?許多部門要合併,精簡,我們在 Dallas 的幾個部門所有的員工都要整個搬去 Houston。

這就是我在 2000 年離開 Mobil 的時候。

如今十幾年過去了。時過境遷,人去樓空。當初,我們那個部門去 Houston 的只有 40% 左右。許多人退休,許多人厭煩了常常裁員的日子,離開了石油的行業,去別的工業找工作了。如今,以前的 Mobil 早已成為歷史,除了美國的 Mobil 加油站以外,就只有零零星星的小商店賣 Mobil 的潤滑油了。我們也一家從 Dallas 附近的 Plano 搬到 Northern Virginia,好幾年以後再搬到臺灣的林口。在林口看到 Mobil 的商標還有點懷舊的感傷也帶著一絲絲的親切感。

不知道 Dallas 城中心一個大樓上代表 Mobil 的 Pegasus 還在不在?

Trump’s real message August 27, 2017

Posted by hslu in 美國, Trump.
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Tillerson, the former CEO of the ExxonMobil oil company, said Sunday that Trump spoke for himself on the hate crime committed by White Supremaciests in Chalottesville, Virginia.

Well, what Tillerson didn’t say was that Trump actually spoke for that roughly 35% of American voters who sent their last savior, Trump, into the White House. 

Will Tillerson the target of Trump’s attacking tweets?

Is Tillerson the next one to get fired or be forced out?

What’s between a rock and a hard place December 11, 2016

Posted by hslu in China, Cold War, Economics, Election, Global Affair, Politics, Taiwan.
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Taiwan is. 

However, this time around, Taiwan, more precisely Tsai Ing-wen, will be played like a ping pong ball between two hard hitting ping pong paddles. Tsai ing-wen or a high level Taiwanese official may even get a chance to formally meet with someone from the State Department or DoD as a way to annoy China.

How China will hit back is not clear right now judging by China’s response to the phone call between Trump and Tsai. 

The ball with Tsai ing-wen’sname on it is in China’s court now but China might down play Trump’s comments again because Trump isn’t the president yet. There is no need to be worked up by a TV interview yet. 

Remember Trump’s comment on the phone call after it caused some fuss from the White House and Congress? “It was just a phone call.”

Trump’s intention was very clear though: if I got what I want from China, Taiwan can go back to be part of One China. If I didn’t get what I want, this ball game will continue down to the dark alley with bad outcomes. 

The one player who will get the short end of the stick won’t be the U.S. or China. It will liked be Taiwan.

Whether Trump will follow his words with tough actions against China next year and how China’s Xi Jinping choose to respond will be THE blackswan for the world financial markets to digest. Can the major U.S. indices continue their march to another all time highs? I don’t think so.

It could end very badly. 

The path to an outcome, any outcome good or bad, will be a long, unpredictable and tumultuous one. I don’t think markets will like it. I don’t think Taiwan’s economy will escape the damage either because America has less influence on Taiwan’s economy than China does.

How Tsai ing-wen choose to be played is also worth watching too. What will Taiwan want from Trump? What real and lasting benefits can Taiwan get from Trump? Will Taiwan’s stock market continue to rise next week? Will the New Taiwanese Dollar drop below the recent support of $33.6989 to 1 U.S.dollar?

Trump’s position on Russia is an interesting one too. Apparently Trump is courting Putin because he is considering ExxonMobil’s Tillerson as the Secretary of State. Will Putin fall in line and be played by Trump as well? Not likely.

In any case, brace yourself because the ride will be a very bumpy one and someone will get hurt.

天下要大變了。

Shale Oil and Shale Gas in the United States July 13, 2013

Posted by hslu in Congress, Economics, Energy, Global Affair, Oil.
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Shale Oil and Shale Gas in the United States

頁岩油 and 頁岩氣

 There is no doubt that hydraulic fracture in shale oil and shale gas formations has unlocked a tremendous energy boom (graph) in the United States. It has already helped U.S. importing less foreign oil from countries that are hostile to America. It also has the potential to push oil production in the U. S. to levels above those from Russia and Saudi Arabia. News media tripped over each other to report that shale oil looks like the next best thing since sliced bread. They showed the sky-rocketing production curves from Bakken. They showed thousands of new jobs created in North Dakota and shortage of housing and public services in and around Bakken. They touted the fact that American’s oil import has dropped below what America produces because of shale oil. Some politicians even proclaim on national TV that a new energy revolution is taking shape as if the government or the politicians have something to do with it.

Slide1

This is the good news. But, as the saying goes, the devil is in the details. And news media conveniently ignore the inconvenient truth all together.

There are several key facts about shale oil/gas that many people do not know from watching their favorite TV programs, reading various articles in their beloved newspapers or hearing from their favor politicians. This is because the media and politicians, in reporting the hype, almost always never mention the pitfalls and obstacles because they do not fit the narrative of the day.

The crucial difference between a traditional oil well and a hydraulically fracked horizontal well is their production characteristics. I will discuss them below for your review. I will focus my discussion on shale oil production for now. Data and graphs presented in this report are related more to the Bakken field because it represents majority (63%) of the total shale oil production in the United States. Eagle Ford in Texas, the second largest in the U.S. has 27%. Shale gas production will be briefly addressed in this article too.

Shale oil wells declines much faster

This, to me, will be the Achilles’ heel of shale oil. Typical oil production from a regular well in a traditional oil reservoir, such as Prudhoe Bay in Alaska, usually declines at around 6% per year after maintaining certain levels of plateau production for a number of years. Poorly managed fields, such as Mexico’s Cantarell field, one of its largest in GOM, have seen production decline at as much as 14% per year recently; a crisis in the oil business. That being said, oil production from a fracked horizontal well, many of them extends 2 miles long into shale formations, can decline at an astonishing rate; anywhere from 40% to 60% per year (graph.) Some wells in marginal fields could decline much faster than that.

Slide2

Another major difference is their production rates. Here the contrast has been equally alarming for almost all Bakken wells. The fact of matter is Bakken wells are just not that productive even after massive fracture operations along the lateral of the horizontal section because of exceedingly low permeability in these shale oil formations.

This unique production characteristics of shale oil wells significantly limit the amount of oil they can produce in their life time. And they are as different as day and night when compared to productions from wells in Prudhoe Bay and Saudi Arabia; the largest oil field in the U.S. and the world, respectively:

Life Time Oil Productions

Typical Bakken well                            ~500,000 barrels

Average well in Prudhoe Bay           ~10 million barrels

Average well in Saudi Arabia            ~13 million barrels

The life of a Bakken well can be as short as a few years (5 – 6 years) after achieving peak production immediately after fracking. Wells in Prudhoe Bay, on the other hand, can continue its production after 30 or even 50 years if tertiary recovery techniques are successfully applied. Many wells in Texas are still productive, albeit at one or two barrels per day, after several decades of production. They will remain productive for as long as they are economically viable. At $100 per barrel now, many of these shallow wells will last a long time. That will not be the case for shale oil wells.

To offset the extremely fast decline in oil productions and to maintain a meaningful overall production level in Bakken, oil companies, mostly junior independents, have to drill one horizontal well after another while moving from one area of the field to the next. This almost non-stop drilling activity will eventually end when they reach the boundary of the field or when economics is no longer favorable. They are in it to make money and to make money when oil prices remain high.

There have been thousands of horizontal wells drilled in the Bakken field since 2008 or so. Many of these wells extend several thousand feet into the formation separated by less than 100 feet horizontally. Here is a brief summary of shale oil activity in the Bakken field:

Horizontal well drilled in Bakken             9,000+

Horizontal laterals                                     many as long as two miles

Wells producing 800 b/d or more           14

Average oil production rate                     52 b/d

Oil companies activity in Bakken               EOG, KOG, CLR, COP, XOM, MRO

For comparison:

Production rate from a good GOM well   ~40,000 b/d

As you can see, oil companies in shale oil business have no option but to continuously drill at a frantic pace: be it in Bakken in North Dakota or Eagle Ford in Texas.

This is the quintessential “Drill, baby Drill” mantra.

There is no doubt that billions of dollars have been spent by oil companies to get shale oil to the ground. As such, billions of dollar have been made by oil companies, service companies, oil workers, land owners, trucking companies, railroad companies, pipeline companies and of course governments in additional taxes.

The buzzing activities in North Dakota now are not that dissimilar to California Gold Rush from 1848 to 1855. Like the gold rush in California, shale oil boom will one day end with ghost towns all over the landscape in North Dakota after oil runs out. And oil will run out probably sooner than many people anticipated.

Just how much oil is there in Shale Oil Reservoirs?

To put the potential of shale oil in prospective, let’s first bring up production data from Prudhoe Bay in Alaska because it was the largest oil field ever discovered in the U.S. It had about 25 billion barrels of oil in place originally; more than double the amount in the next largest oil field in the U.S: East Texas oil field. Currently, about 12.8 billion barrels of that 25 billion have been produced. The field was discovered in 1968 by Arco and Exxon. Production commenced in 1977. Peak oil production of about 1.5 million barrels per day was reached in 1979. Development work continued to this date with waterflooding and tertiary recovery in many parts of the field. Keep these figures in mind because it represents realistic production potential of a super giant oil field in the world.

U.S. DoE on June 11, 2013 reported that the world has 345 billion barrels of technically recoverable shale oil in 42 countries (table.) This number was revised up recently to reflect advances in drilling and fracking techniques. Further revision is also possible as more countries participate in the hunt of shale oil.

The key words in DoE’s announcement are “technically recoverable” which is extremely important in our estimation of the role shale oil can play in the broad energy space going forward. This will be addressed later.

Shale Oil Resources by Country

Russia                    75 Billion barrels

U.S.                        58 B bbls, early estimate was 32 B bbls

China                     32 B bbls

Argentina              27 B bbls

Libya                      26 B bbls

According to DoE data, the amount of “technically” recoverable shale oil can satisfy world demand for about 10 years; currently running at about 90 million barrels per day. Please note that as economy recovers around the world, oil demand will increase which, prior to 2008 financial crisis, has been running at roughly 2 to 2.5% per year. As you can see, even though the amount of oil in shale formations is impressive, it is not large enough to be a game changer by any stretch of imagination.

For the U.S., the amount of “technically” recoverable shale oil is good for about 8.5 years at current consumption rate. Currently, the U.S. uses about 19 million barrels of oil per day.

Not that impressive as originally reported by all the TV programs, isn’t it?

TV programs and news reporting have the habit of dramatizing the story to grab audience’s attention in order to sell commercials. More often than not these reporters got caught up in the frenzy of the news and the dollar signs around the edges which always colored their reporting. If it is not dishonest reporting on purpose, it is for sure a disservice to its viewers.

Politicians are even worse. They take every opportunity on TV to make 10-second sound bites when announcing the potential of shale oil and shale gas for the future of the United States. They usually exaggerate or worse, lie, about what they say because reporters are not going to challenge their assertions. It has been abundantly clear that the main street media is in the back pocket of Democrats and the current White House. The media has been doing all it can to pop up a Democrat president. By not reporting the entire story to its viewers, the media is not doing its jobs. And sadly the viewers suffer. Well, I digress. But I am assuming that informed viewers know the difference.

If they don’t, they should.

Another key point needs to be made here. DoE data does not provide enough information to estimate just how much of that “technically” recoverable amount is “economically recoverable at current price of crude. It is critically important to get a good handle on this figure because we all know that only insane oil companies will produce oil or gas, shale not, at a loss. If we assume that 80% of those 345 billion barrels can be recovered economically at current oil price of ~$100/barrel, the U.S. has roughly 45 billion of shale oil reserve; about 6.5 years of current U.S. demand.

If we assume that the shale oil reserve in the U.S. is about 45 billion barrels, not quite two times that of Prudhoe Bay, we can estimate the impact of these additional oil resources on American’s long-term oil production trend. Here we want to know just how big an energy revolution shale oil will make for the U.S. We also want to know whether U.S. will ever become independent in crude oil. If it can achieve that goal, how long will that goal be made by shale oil.

The following graph gives you a perspective of Prudhoe Bay’s impact on American’s oil production. Although the addition of 12.8 billion barrels over the last 30+ years temporarily arrested the decline of U.S. domestic oil production for a few years, a reservoir as big as Prudhoe Bay was unfortunately not large enough to reverse the long term decline of oil production in the U.S. Likewise, shale oil production will peak in a few years as companies rushed to bring projects after projects online to take advantage of the current high oil prices.

Slide3

As indicated by the graph, the addition of shale oil production may one day push America domestic oil production above that of Russia (10.7 million barrels per day) or Saudi Arabia (~10 million barrels per day) in a few years as some TV programs have reported.

However, as sweet spots (good sections of the reservoirs) got drilled first, it will take even more wells in the remaining part of the field to sustain the production level as companies move to less productive sections of the field. The even faster decline rate of these marginal fields will make economics of developing these fields that much more challenging. By extension, it will be extremely difficult to maintain oil productions as well.

As such America may ascend to the top producer position in the world but the pole position may only last for a few years at best. The fad of shale oil will wilt away just like California Gold Rush did roughly 150 years ago. California gold rush lasted 9 years. Shale oil will enjoy its well deserved spot light under the sun for 10 to 15 years or so.

Will it or will it not?

The rapid rise of shale oil production in the U.S. in the past several years has definitely caught many people by surprise. A resurgence of domestic oil production has already made the United States importing less foreign crude in the past year or two. And this trend will likely continue in the near future! Some in the news media even talked about rebalance of the world energy power and declare OPEC will face stiff competition from shale oil supply from the U.S. Energy revolution became hot topics among politicians and a renewed sense of self-reliance became the fad of the day.

Despite all the hype from news media and the feel-good 10-second sound bites on TV from politicians, the question of the day is:

Will shale oil production make the U.S. independent of foreign crude?

The answer is a resounding:”no!”

Just take a look of the graphs below and you will quickly realize that America will continue to import large quantity of foreign oil for decades to come.

Slide4

 

Slide5

How low can it go?

Here I am talking about the price of crude traded on commodity exchanges in the world. The supply of crude oil on the world market is largely fungible and their prices are determined more or less by supply and demand in the world. Geopolitical and financial instabilities will cause oil price to spike. When the influences of these events dissipate, oil price will drift back to an equilibrium level largely supported by the supply and demand picture.

Here lies the potential pitfall which may affect the production of shale oil in the U.S.

United States has about 2% of the world oil reserve; about 23 billion barrels, prior to the advancement of hydraulic fracture technique which rendered oil production from tight shale oil formations economical. If we take DoE’s estimate, oil reserve in the United States could be as high as 70 billion barrels; not an insignificant amount. But it is nowhere close to oil reserves in countries such as Venezuela (296.5 billion barrels,) Saudi Arabia (265.4 billion barrels,) Canada (175 billion barrels,) Iran (251.2 billion barrels,) or Iraq (143.1 billion barrels.)

The increase in U.S. oil reserve is impressive indeed. But there is a catch.

It is reported that the production cost of Bakken shale oil ranges from $60 to $90 per barrel.

On the other hand, countries in Mideast and some parts of Africa can produce their oil for as little as $6 per barrel (Table; in 2008 dollar.) Specifically, Saudi Arabia’s crude is probably the cheapest to produce in the world. It is estimated that Saudi Arabia oil takes between $4 and $6 per barrel to produce even after capital expenditure is included in the calculation.

Oilfields /source                                  Estimated Production Costs ($ 2008)

Mideast/N. Africa oilfields              6 –  28

 Other conventional oilfields            6 –  39

 CO2 enhanced oil recovery            30 –  80

 Deep/ultra-deep-water oilfields    32 –  65

 Enhanced oil recovery                    32 –  82

 Arctic oilfields                                32 – 100

 Heavy oil/bitumen                          32 –  68

 Oil shales                                         52 – 113

 Gas to liquids                                  38 – 113

 Coal to liquids                                 60 – 113

 Source: International Energy Agency World Energy Outlook 2008

The dilemma for shale oil is this: as more and more shale oil is produced from these tight formations, it runs the risk of depressing the price of crude on the open market. As oil price drops, shale oil production becomes its own worst enemy because many shale oil fields will be the first to shut down as they begin to lose money. OPEC controls about 30 million barrels of oil production every day. If the cartel decides to flood the market with additional oil, shale oil production will be the first to go; not oil from Saudi, Iraq or Iran.

Since late June, 2013, oil has been trading at around $100 per barrel because of fresh concerns from unrests in Egypt and Libya as well as prolonged civil war in Syria. If geopolitical situation in the Mideast stabilizes, a war premium of $10 to $15 per barrel will be removed from the market. When it does, oil may trade in the $85 to $90 per barrel range which will make oil companies think twice before rushing into marginal fields with new drilling projects. If the price drops further, oil companies may shut down their marginal shale oil operations to save capital. When that happens, the shale oil fad will go away.

Mentality of the America Oil Producers

Americans and American companies, in general, have a short-term focus mentality. They want instant gratification. Company CEO’s pay more attention to next quarter’s earnings than its long term prosperity. Americans are prone to not able to resist adding credit card debt so that they can have a summer and Christmas vacations or a large screen TV. The federal government via Congress and Senate is willing to pile up unsustainable high budget deficits year after year so that American people can sit at home and collect government subsidies week after week. The politicians use taxpayers’ money to buy votes for the next election so that they can grab power election after election.

The addition of so much shale oil in such a short period of time made politicians and commentators giddy. For instance, while shale oil was making headlines all over the nation, some in the news media suggested that U.S. should get rid of the strategic petroleum reserve. They argue that American’s new found oil wealth made strategic petroleum reserve unnecessary because U.S. no longer needs oil from the Mideast nations. They thought domestic shale oil can solve all the ills plaguing American’s crude oil situation.

America’s short-sightedness is also reflected in its lack of a comprehensive national energy policy. The 1973 oil embargo taught America exactly only one thing: U.S. had to do everything it can to make Saudi Arabia a friend. As such, American’s Mideast policy was hinged on keeping the royal family of Saudi Arabia in power so that Saudi Arabia can supply the world with cheap oil. American’s foreign policy became de facto American energy policy.

It has been 40 years since oil embargo. American’s domestic oil production rate continued to decline until shale oil burst into the lime light. With the addition of almost 50 billion barrels of new oil resources, there was absolutely no discussion on the national level of how to preserve the new resource for raining days. America acted like a “暴發戶” spending the new found riches like there is no tomorrow which is reflected in the rapid rise in oil production in recent years. Oil companies will drill as fast as they can get their hands on a rig and they will produce as much and as fast as they can from shale oil formations in order to enrich companies’ coffer. America will probably one day boast being the country with the largest oil production in the world. They will feel good for the title despite the fact that the pole position will last for only a year or two.

All the while, the federal government will sit tight on the sideline and watch the drama plays out in fast action. In my opinion, America should take this once in a generation opportunity to develop a national energy policy incorporating all domestic crude oil resources such as oil from traditional fields, shale oils, shale gas and oil resources to be found in Alaska and offshore off both coasts. Unfortunately, American people and the federal government will not act because the U.S. has plenty of shale oil to go around now. There is no need to worry what’s coming down in the future. Consequently, America will continue to face the uncertainty of finding out where their next barrel of oil will come from for a long, long time. After shale oil runs out in a decade or so, that is.

Well, what do I know? I guess it is not my business.

Shale Gas

Unlike shale oil where new U.S. productions had an immediate impact on U.S. foreign oil import, shale gas productions had the opposite effect on U.S. domestic gas market; it drove the natural gas price in the U.S. to historical low level (graph) forcing many companies to shut down their shale gas operations. In addition to market dynamics, shale gas wells face the same steep decline as those plaguing shale oil wells (graph.)

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Prior to the discovery of abundance of natural gas in shale formations, America was facing a shortage of domestic natural gas. Several companies have obtained permissions from the federal government to build a number of coastal facilities in preparation for importing LNG from foreign sources such as Mideast or Australia. Shale gas productions shut them all down but there is talk to convert these facilities for gas export in the near future.

The discovery of ample supply of shale gas in the U.S. also stirred discussion of energy revolution for the U.S. in decades to come.

However, natural gas is difficult to transport unless pipeline is readily available nearby. To export natural gas to other parts of the world, such as Europe or Eastern Asia, it has to be liquefied first which adds to its cost base. Transportation across the ocean will push up the cost further. Since there is abundance of LNG from countries such as Qatar and Indonesia and there is plenty of natural gas from Russia, it is doubtful that American companies will face the possibilities of damaging domestic gas market in order to compete in the world LNG market. However, for countries such as Korea, Japan and Taiwan which rely heavily on LNG imports from Mideast or Indonesia, a separate and reliable source from the U.S. may be highly desirable even though there won’t be any price advantages to speak of. On the other hand, Mideast countries can easily manipulate LNG prices in the world and Russia can lower its gas export to European countries which could make exporting American shale gas that much more difficult. Although market dynamics is difficult to predict, it is likely that natural gas prices in the U.S. may remain at depressed level for years if not decades to come. No companies will rush to bring shale gas to the market because a flood of natural gas from shale formations will price shale gas out of the market completely.

The world has plenty of natural gases; as much as 250 years of demand, according to eia (graph.) The addition of shale gas in the US market made importing of natural gas unnecessary. To take advantages of the abundance of natural gas in the U.S., such as using gas for transportation purpose (graph,) more research and huge investment on infrastructural are needed. It is likely that no progress will be made in the near future unless government offers significant incentives to private businesses or even takes on an active leadership role in this area. Politicians will take the opportunity and make people believing that energy revolution is just around the corner.

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However, judging by the difficult fiscal situation facing the federal government, the likelihood of any meaningful progress in this area is not expected in the short term. The closeness of the U.S. gas market and the dynamic nature of natural gas pricing structure act as impediment to the wide development of shale gas in the U.S. The fact that the U.S. relies on free market capitalism to develop shale gas, the pending energy revolution will have to wait.

July 13, 2013

ExxonMobil stock split coming? November 1, 2012

Posted by hslu in Energy, Obama, Oil.
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Is a ExxonMobil stock split coming soon?

The company’s stock has hovered above $90 for almost 2 months now. Base on my recollection, Mobil, before it was bought out by Exxon in 2000, split its stock when it traded above $90 for an extended period of time. I remembered that one of the reasons given to employees for the stock split back them was that company wanted to encouraging stock ownership by individual investors. As such, a $100 stock price seemed like a mental block for many small investors.

Exxon seemed to have the same philosophy judging by stock chart on Yahoo.

ExxonMobil just announced a $5 B stock buy back program which is good for small investors.

I am guessing that the board may announce a 2 for 1 stock split and a ~10% hike of dividend at its next annual meeting, usually in May.

In the age of low interest rate to as far as eye can see, thanks to Bernanke, Operation Twist and Q3, stocks of a high quality oil company such as ExxonMobil, will continue to be bought by individual investors seeking yield and safety.

If Obama is fired next week, and I have no doubt that he will be fired, oil companies will breath a big sigh of relief from the likes of EPA, Dept. of Energy, Interior Dept. and tree huggers. Oil company stocks in general, and ExxonMobil of course, will likely see a jump to new highs.

It’s so predictable April 22, 2011

Posted by hslu in Economics, Energy, Global Affair, Obama, Oil, Politics.
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As gas prices top $5 in some cities in the US, you will see Obama, Senators and Representatives from both parties attack big oil companies such as ExxonMobil because they are easy targets. And I am sorry to say that most Americans are stupid when it comes to crude oil production and how it reaches our favorite corner gas station in the form of gasoline or diesel.

I once heard a caller to Kudlow’s weekend radio talk show and offered this brilliant remedy to solve high gas prices once and for all.

He said that we can all stop buying gas from ExxonMobil and Shell for two weeks which will then force them to lower the gas prices.

What? How stupid can that be? From an American on a business talk show?

He has no idea that ExxonMobil has absolutely no say on gas, for that matter, crude oil, prices.

People like this caller have no idea where does gas come from and have no idea how capitalism works. They have no idea how big a struggle ExxonMobil has to go through to keep their reserve replaced year after year. They have no idea how much oil The US has and they have no idea that most oil in the world is owned by America’s enemies.

It is precisely people like this caller that the politicians are trying to get their votes from.

The politicians have no shame. Some American voters are too stupid and so un-educated to have any common sense at all.

With Libya, China wins and U.S. loses March 31, 2011

Posted by hslu in China, Energy, Global Affair, Islam, Military, Obama, Oil, Politics, Religion.
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With China’s decision not to veto US and other countries’ UN resolution to establish a “No Fly Zone” in Libya, Obama is firmly wedged between a rock and a hard place.

And China wins on the energy front.

No fly zone means about 100 or 200 dead Libya soldiers who were unfortunately enough manning Libya’s radar stations, flying Libya’s fighter jets and operating Libya’s tanks when American, yes most sorties were flown by American fighter let pilots, played video games with their missiles around Eastern Libya desert.

It is a minor inconvenience to Qaddafi and the killings are continuing because Qaddafi soldiers are now using Toyota trucks instead of tanks to do the killing. Well, this is equally effective albeit a bit slower than tanks. But the American fighter pilots couldn’t tell which side the Toyota trucks are on.

Qaddafi soldiers use their AK-47 and machine guns (bought by our gasoline money) to kill the rebels who are ill equipped and ill advised.

Obama is in a hard place because he, nor Hillary, nor Defense Secretary Gates know who the Rebels are. It is reported that some of the so-called “rebels” are actually al Qaeda and Hezbollah members who aren’t exactly Obama or American’s best friends.

Obama is also under a rock because air war will not help “rebel” after Libya’s air defense targets are taken out by fighter jets. Gaddafi will stay and will likely win the war in the end.

This means Obama loses. Sarkozy loses too. But this is expected because France never won anything.

If France with Obama in tow dares to go back to UN requesting a change of the original “no fly zone” mission to “Kill Qaddafi” and “Establish a new government,” China will use its veto power to block the resolution.

At the end of the day, Obama and America will become Libya’s enemies. China and Russia will be Qaddafi’s friends. Russia don’t need Libya’s oil but China does.

Guess where Gaddafi’s oil will flow once this is over. And which country’s oil company will be allowed into Libya? Definitely not ExxonMobil or ChevronTexaco because their assets may be nationalized like they did at Vezenuela.

Obama, a closet black Muslim, managed to bomb another Muslim country without telling American why and without Congress’s knowledge and without killing it’s president, NATO taking over control or not. He managed to start a third war for the United States without telling Americans how this will end and how much this war will cost the American tax payers.

Now you know how incompetent Obama and Hillary are . And you know how Obama and Hillary were out-matched by China at the UN now at UN’s security council. I bet you $5 that Hillary probably called China’s foreign minister before the resolution came to a vote and asked him not to veto this resolution. She is probably asking Obama for a raise for her achievements at the UN.

As for the game Obama played with NATO taking over the control of the military action, he tried to wash his hands and walk away from this mess, just think about this:

The head of NATO is an American Admiral and most of NATO fighter jets are American fighters jets.

And don’t get me started on who are paying for the most of NATO’s bills.

That’s YOU and ME.

Only a liberal can come up a war with this kind of half-baked strategy. He takes credits for starting the so-called humanitarians mission but wants the American people blaming NATO, instead of him, for the ultimate  failure of the military action.

Thanks to all the young people who voted Obama into office. Now get ready to pay for his mistakes if you manage to hold on to your hamburger flipping jobs.

I am going to take my social security checks a few years later so that I can get as much as I can from Obama and this soon-to-be-Greece US government.

Offshore Oil Spills July 22, 2010

Posted by hslu in Economics, Energy, Global Affair.
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ExxonMobil, Chevron, ConocoPhillips and Shell are  setting up a non-profit company called Marine Well Containment Company to come up with a rapid-response system to handle offshore oil spill. It will take 6 months for a team of engineers from each of the four companies to develop a solution to contain future underwater blowout in GM and elsewhere in the world.

The system can be mobilized within 24 hours of the blowout to contain oil spills in water as deep as 10,000 feet and capture up to 100,000 barrels of oil a day.

Each company will put in $250 million and I am sure service companies will be involved.

Over the years, the U.S. oil companies have faced tremendous competition for development leases in foreign countries. They have to survive in the era of wide swings of crude oil prices, Congress’s attack and unfair (windfall profit) taxes, hatred from American public and unfair advantage of National Oil Companies: Saudi Arabia, Iraq, Iran, Chinese, Russian, Kuwait, Venezuela, Indonesia and many others.

One thing that has helped them to survive all these years was the advancement of petroleum technologies in every discipline: geophysics, drilling, production and reservoir engineering; because if it wasn’t for the advancement of technologies, these public traded companies would have ceased to exist.

The easy fruit in the world has already been picked. Now these companies have to go out deep in the ocean and search in the most remote areas of the world to find projects that are worth developing. Without new technologies, development and production costs will be too high and they will not be able to compete with National Oil Companies in the open market.

I have no doubt that American oil companies will overcome this hurdle too.

Feel sorry for BP June 16, 2010

Posted by hslu in Economics, Energy, Global Affair, Obama, Politics.
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I feel sorry for BP’s engineers who have already lost 50% of the value of their 401(k) and their pension may be in danger. Their jobs may be in jeopardy if  BP decide to diversify its deepwater assets.

BP may have to spin off their GoM or US operation and sell it to someone who dare to pick it up. May be China National Oil Company can buy it on the cheap. They have boat (tankers) loads of money and they are anxious to get into the US market. You see about 1/4 of the world oil business is in the US. There is serious money to be made in the United States. Not in the downstream but the upstream!

I am also glad that ExxonMobil wasn’t responsible for the spill.  If it was, ExxonMobil USA may be nationalized by Obama on the day when “Top Kill” failed to “plug that damn hole.” ExxonMobil’s US assets will be liquidated to pay for the damages. All Exxon and Mobil gas stations will change their names to Obama Gas Stations.

Just a week ago Tuesday, I saw  a BP gas station in Vienna closed its door. Many BP gas stations nation wide have reported a 20+% drop in revenue. If this trend continues, many BP gas stations have to close their doors before the leak is stopped.

BP may have to cut its dividend soon, currently at 9.9%, to conserve operating capital. If the first relief well fails to “ply that damn hole” in mid-August, BP may have to declare bankruptcy because BP may run out of money to pay for it. (Sorry I just found out that BP has temporarily suspended the dividend til the end of this year.)

About 12 or 13 years ago when I was still working in the oil industry, I noticed then British Petroleum gradually changed company’s emphasis from technology to “putting on a glossy appearance.” They ran ads on major newspapers and TV to declare BP cared so much about the environment and changed its logo to show that they were a Green company. They down-played their oil business and highlight their involvement in solar energy and other forms of Green energy way before Obama came into the scene.

I commented this observation on BP’s Yahoo BB and voiced my concern on BP’s lack of emphasis on technology which was and still is the central focus of the oil industry. My comments got a lot of negative comments from BP employees.

In a way, I shouldn’t be surprised of this accident because BP has never been known for their technology in our business. In the interest of full disclosure, Mobil wasn’t known for its technology superiority either. That’s why Mobil got bought by Exxon which was and probably still is head and shoulder above everyone else in our business.

Good luck to all BP engineers on your next try to stop this leak.

BP, XOM and other oil related stocks June 3, 2010

Posted by hslu in Energy, stocks.
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Avoid BP because with the government opening a criminal investigation on GoM oil spill, BP’s stock price may suffer even more in the days to come. With the dark cloud on BP the company, it is unwise to buy the stock now. There is more downside risk than upside potential.

If the cost of spill got out of control, BP’s dividend (currently at 7.8% at about $10 billion a year) may be cut to save money. If it did, BP stock will take another hit. I also think that BP will soon set aside a big chunk of money ($5 billion or more) for the clean-up, stopping the spill and legal expenses.

ExxonMobil does not have Gulf oil spill to worry about but its stock and other stocks in the oil industry were punished alone with BP.

If you do not have XOM or other oil company stocks, you might want to buy a small position around $55 to take the advantage of recent calamities.

Once the spill is plugged; yes, it will be plugged even if it will take another two months, stock price of all oil-related companies (including drillers and service companies) will bounce and a relief rally will be a good time to sell into.

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