Reality Check:
100% of GOM (Gulf of Mexico) oil out (and look at the percentage figures for the past month below), 20% of the country's refineries down, NG Henry Hub down.
Date Percent of GOM Oil Shut-in(offline) Percent of GOM Gas Shut-in
=================
August 30 95.20 87.99
August 31 91.45 83.46
September 1 90.43 78.66
September 2 88.53 72.48
September 3 78.98 57.80
September 4 No data reported No data reported
September 5 69.57 54.13
September 6 58.02 41.06
September 7 57.37 40.36
September 8 60.12 40.20
September 9 59.88 38.29
September 10 59.84 38.21
September 11 No data reported No data reported
September 12 57.38 37.84
September 13 56.45 37.20
September 14 56.25 35.18
September 15 56.14 34.11
September 16 56.06 33.84
September 19 55.84 33.75
September 20 58.49 34.82
September 21 73.16 47.13
September 22 91.93 65.95
September 23 99.13 72.04
September 24 100 74.88
September 25 100 80.47
(perspective: The GOMEX produces 1.5 MBOPD (oil) and 10 BCFPD (NG). Overall US consumption is 20ish MBOPD for oil and 62.4 BCFPD for NG.
Global economic outlooks:
Downbeat G7 warns of fallout from high oil prices
Finance ministers and central bank governors of the world's leading industrial countries have warned of economic disruption from high oil prices and and vulnerabilities in financial markets.
The mood at the International Monetary Fund and World Bank annual meetings was downbeat, with senior politicians and officials airing their fears that global economic expansion may have peaked and that more challenging times lie ahead.
Jean-Claude Trichet, president of the European Central Bank, said that high oil prices were having a "very significant impact" on growth and inflation.
The communiqué of the international monetary and financial committee - the ministerial board that oversees the IMF - said: "Global growth is expected to continue, although downside risks to the outlook have increased, especially high and volatile oil prices, recently exacerbated by the effects of Hurricane Katrina, increasing protectionist sentiment and the possibility of tighter financial market conditions."
A senior US Treasury official said: "We freely acknowledged the things that we worry about - do interest rates appropriately reflect the risks?"
Indeed...apparently the FOMC believes,
"The next six months will be a challenging time, dealing with the high oil price, and global imbalances loom. The global economy has peaked and liquidity conditions are set to tighten. When things turn around you can have significant fallout."
Meanwhile, back in the Middle East:
Iran is talking tough (as you might expect, given the state of the oil market right now), which puts China in a hard spot (and India too) while the west talks tough on nukes....
Saudi Arabia's specific production risk stems from the fact that almost 90% of its supply comes from only five key but aging giant oil fields. Each of those aging fields is exposed to a potential production decline. The implications of this risk are enormous, since 35 years of intense exploration in the kingdom has unearthed only one significant new oil field, Shaybah. Its peak production is less than 3% of Saudi Arabia's oil output.
From Matt Simmons:
"The likelihood that Saudi Arabia can increase its output to even 15 million bbl. a day is remote. Even maintaining its current production rate for an indefinite period of time is hardly a certainty. The Ghawar, Abqaiq and Berri fields (which still make up about 90% of Saudi Arabia's light crude) now pump oil from water-injection wells--essentially the low-hanging fruit. Once that ends, oil production in those key fields will decline, and the declines could be steep. The two other giant fields producing lesser-quality oil are subject to this same risk. Quantifying the timing and the magnitude of the pending drop is impossible based on the skimpy data Saudi Arabia now discloses. But the risk is real, and the drop could happen soon.
The bottom line: the global oil supply has probably peaked. While the world expects to consume 120 million bbl. a day two decades from now, actual supply may be half that rate. This conclusion aptly portrays the potential magnitude of the energy ditch we are now in. It is impossible to calculate the odds of this supply-demand imbalance happening, but prudent planning argues that the world should assume the bleaker scenario. Then it follows that a global plan to use oil more rationally must be urgently developed and implemented."
Saudi official warns of widening Iraq war:
Sept. 23 -- Saudi Arabia's foreign minister warned the war in Iraq could easily spread and involve the country's neighbors.
Saudi Foreign Minister Saud al-Faisal said Thursday the proposed Iraqi constitution doesn't offer a unifying document but, rather, pushes the country's three main ethnic groups apart.
The result, the foreign minister told USA Today, is a split of the Sunnis and Shiites in central and southern Iraq while northern Iraq, the population of which is mostly Kurdish, would be more autonomous.
Faisal said: "If things go the way they are, there will be a struggle among the three for natural resources." That would lead nearby countries to become involved, with Iran likely to support the Iraqi Shiites and Turkey entering northern Iraq to forestall an independent Kurdish area. He added the region's Arab counties would not likely abandon the Iraqi Sunni population.
The U.S. State Department had no comment on the foreign minister's statements.
And on to natural gas in general for the US:
Since Hurricane Katrina swamped a significant portion of the nation's natural gas production, leading to government predictions of sky-high home heating costs this winter, policymakers are talking about the need to find more gas outside the disaster corridor. But U.S. natural gas production is already approaching its limits. A new geological assessment by the Potential Gas Committee, a volunteer group of experts from industry, government, and academic institutions, finds that the energy industry is barely uncovering enough new natural gas in the United States to make up for what the nation is consuming each year. In the biennial report, the committee estimates that the country's natural gas resource base is now 1,119 trillion cubic feet (TCF), down 0.7 percent from the last measurement two years ago.
Some resources are expanding, according to the group, which is sponsored in part by the big electric utility organization the American Gas Association. More natural gas can be recovered from shale and other deep underground formations, for example, on account of technology improvements. But those increases are almost entirely offset by the 38 TCF in additional gas the nation has consumed since 2002.
There's still plenty of natural gas in the United States. The problem is, much of it is out of reach. Since the most accessible gas fields have already been tapped, the industry will have to dig ever deeper wells that cost more money. Parts of Alaska are brimming with gas–but there are no pipelines ranging from the gas-rich regions to the lower 48. And there's a federal moratorium on drilling into the known resources on both coasts of the country.
That means that the Gulf of Mexico will continue to be the "biggest player" in the business as far out as 2025, says John Curtis of the Colorado School of Mines, director of the Potential Gas Committee. The Gulf contains 26.2 percent of the nation's future natural gas resources and 34.1 percent of the resources in the lower 48 states. In the future, says Curtis, harsh weather and other factors will pose "significant challenges" to keeping production up in this region.
The bottom line: higher natural gas prices for the indefinite future.
In short...oh shit. |
