Energy Week

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China and Iran Strengthen Ties
Article from Platts
Will China be able to keep importing oil from Iran? Iran is the 6th largest supplier of oil to China, which is not an insignificant amount of oil.
Potential for Trump to use Iran in negotiations with China over trade and North Korea.

ExxonMobil and Plains to partner on Permian pipeline
https://www.chron.com/business/energy/article/Exxon-Mobil-Plains-partner-on-Permian-pipeline-12987234.php
Exxon plans to triple its production of oil and gas by 2025. More pipeline capacity expected to come online in Permian such that there may even be excess capacity by 2020. How will this impact the WTI/Brent spread? Will it ever come back within the $3-$4 range?

Canadian oil Production to Rise
https://www.bnnbloomberg.ca/canadian-oil-production-to-rise-despite-competitiveness-gap-industry-group-says-1.1091585#
Industry group predicts an increase in Canadian oil production, particularly from Canadian oil sands regions. Expects to see increase of 1.4 million bpd by 2035.

Interview with Markham Hislop, Energy Journalist and publisher of Energi.news
Trans-Mountain Pipeline project update
5900 barrel capacity.
Canadian system currently at capacity. Expansion was proposed in 2013, green lighted in 2016.
Opposition originated in Vancouver area. Concern over spills in the city and in the inlet.
Last summer, NPD government elected - ran against the Trans-Mountain pipeline specifically
British Columbia government delayed and delayed permitting until Kinder Morgan finally gave an ultimatum.
Canadian government bought Kinder Morgan Canada's existing assets.

Ellen's Articles:
Sanctions or Self-Sabotage? The Story of Iran’s Oil Industry - http://bit.ly/2sV45uP

8 Major Companies Still In Iran As U.S. Sanctions Inch Closer - http://bit.ly/2MqOhYO

10 Companies Leaving Iran As Trump's Sanctions Close In - http://bit.ly/2Mp6HJi

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OPEC’s Relevance Grows Despite Shale - http://energyfuse.org/opecs-relevance-grows-despite-shale/
Predictions of OPEC's demise were greatly exaggerated. Group remains a force within the oil market, though we shouldn't fall into the trap of thinking that OPEC is still as powerful as it was in 1973. We still have a psychological trauma from the oil shocks that leads up to see OPEC as more powerful than it actually is, even when OPEC does exert itself on the market. At the same time, we shouldn't under or over-estimate the US shale oil industry. Shale producers are still trying to figure out how to make money and aren't a monolithic force in the market.

US crude exports could be a victim of brewing trade war with China - https://www.platts.com/latest-news/oil/washington/us-crude-exports-could-be-a-victim-of-brewing-21057130
It is possible that China could use US energy exports to China as a chip in its trade negotiations, but US exports to China are minimal in the grand scheme of Chinese oil imports. The US would like to significantly increase its exports to China, and China could decide to take advantage of that in the trade negotiations, but maybe not.

Qatar Petroleum buys stake in Exxon's Argentina shale assets - https://www.reuters.com/article/us-qatar-qp-exxon-mobil/qatar-petroleum-buys-stake-in-exxons-argentina-shale-assets-idUSKCN1IZ0U0
Wondering what happened to Exxon's assets in Argentina? http://www.energyboardroom.com/country_reports/argentina-inside-oil-gas-report/
Exxon having problems developing those assets, sold 30% stakes to Qatar Petroleum. Qatar may be happy to hold on to them until prices are higher.

Banks Sharply Raise Oil-Price Forecast on Geopolitical Risks - https://www.wsj.com/articles/banks-sharply-raise-oil-price-forecast-on-geopolitical-risks-1528108200?mod=searchresults&page=1&pos=6
Banks keep changing their forecasts for oil prices - now forecasting prices $6 higher because of Iran and Venezuela, but perhaps they should have anticipated the Venezuela issue because the declines we clear back in January. May change their forecasts based on what OPEC decides in Vienna in June.

Saudi Aramco restructures non-oil assets ahead of IPO - https://www.reuters.com/article/us-saudi-aramco-ipo-restructuring/saudi-aramco-restructures-non-oil-assets-ahead-of-ipo-sources-idUSKCN1J01F7
Could be a reaction to the Riyadh Ritz Roundup but could also be a desire to reduce risk exposure heading into valuation.

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Elon Musk and Tesla - Has he really gone off the deep end? Seems to be a disconnect between information about Tesla and the actual health of the company - people believe that Tesla is much more successful than it is even though it has not returned a profit and almost never meets its production quotas.

Canada and the Trans-Mountain Pipeline
The Canadian government has announced it intends to buy the pipeline from Kinder Morgan to ensure that the expansion project is completed. It will look for a third-party buyer. Wonder if there is something more going on with this pipeline than just permitting problems or something going on with Kinder Morgan than makes them want to get out of the project regardless of the local hostility towards it.

https://www.thestar.com/news/canada/2018/05/28/ndp-says-government-should-not-aid-trans-mountain-pipeline.html
https://www.ogj.com/articles/2018/05/canada-to-buy-kinder-morgan-s-trans-mountain-expansion-project.html

Aramco crude oil reserves
Will Aramco try to convert its probable/possible/contingent reserves (listed at 400 billion barrels) into proven reserves (now listed at 260 billion barrels)? Is it in the company's interest to spend money in R&D to find ways to make it economical to produce these reserves? Would adding to Aramco's total reserves impact the price of oil? Also, where are the reserves accessible by horizontal drilling listed?

http://www.arabnews.com/node/1310656

Russia
Russian energy minister says that there could be a gradual increase in output starting in the third quarter of the year but that the amount is undecided. Saudi Arabia, the UAE and Kuwait plan to meet in Kuwait on Saturday to discuss increasing production. Gulf oil producers tend to consult amongst themselves before OPEC meetings about any policy shift.

https://www.upi.com/Russia-Expect-more-oil-in-the-second-half-of-the-year/3471527250009/?spt=su&or=btn_tw

Iran sanctions update
EU and Turkey dropping Iranian oil - Turkey replacing imports from Iran with imports from Iraq - of course the oil swap deal Iran and Iraq have going complicates that. Could some of that oil really be Iranian oil?

https://www.platts.com/latest-news/oil/london/analysis-irans-market-share-starts-slipping-in-27987317?utm_source=twitter&utm_medium=social&utm_term=oil&utm_content=photo&utm_campaign=news&hootpostid=9596058fff0c0e01ad34c8fe67a9a2d7

India says it will only abide by UN sanctions, not US
But, not so fast, India might have to cut down on the amount of Iranian it buys (like last time) because of the sanctions put on Iran's central bank and other financial institutions.

https://www.reuters.com/article/us-india-iran/india-says-it-only-follows-un-sanctions-not-us-sanctions-on-iran-idUSKCN1IT0WJ

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Trump bans purchase of Venezuelan debt in new sanctions
https://www.ft.com/content/3202dad2-5d27-11e8-9334-2218e7146b04
(of related interested from April 10 - https://www.reuters.com/article/us-venezuela-goldman/amid-venezuela-default-goldman-receives-hunger-bond-payment-sources-idUSKBN1HH36H)
- With Venezuela's "sham" election, Trump administration banned purchase of Venezuelan or PdVSA debt in US
- What impact will this have on Goldman Sachs, which recently purchased PdVSA debt? Will Goldman be stuck with the debt or will it be allowed to sell it at some point?
- What hope is there for Venezuela? Actually could be very attractive place for investors is there's a change in government. Lots of potential with the oil industry for non-state actors to invest in production there.

China is where demand for shale oil meets US supply
http://thehill.com/opinion/energy-environment/388598-china-is-where-demand-for-shale-oil-meets-us-supply
- Is China a potential buyer for U.S. shale oil? Argument that Chinese independent refineries are perfect match for light oil produced by U.S. shale, especially as China's economy continues to shift to consumer based and more specialty petrochemical products are needed.
- Potential impact of US-China trade negotiations looms large over this prospect

Pick Your Stock-Market Boom: Big Oil vs. Big Tech
https://www.wsj.com/articles/pick-your-stock-market-boom-big-oil-vs-big-tech-1526922571
- How long will big tech boom last?
- Even with incase in oil prices, big tech companies are still valued significantly higher than oil giants.
- Potential for M&A with small oil and big oil whereas small tech doesn't necessarily get bought by big tech because lack actual assets.

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Iran deal oil market impact:
- ENI pulling out of Iran
- Allianz pulling out of Iran
- Will China go into Iranian market? This may be a card to play during trade negotiations.
Head of Iranian central bank declared terrorist by U.S. government - all Iranian oil transactions cleared through Iranian central bank.

Burgrabben Report https://www.dropbox.com/s/uhk2xxq9vfzdknt/Burggraben%20Crude%20Oil%20Presentation%20041818.pdf?dl=0
Forecasts $100 oil next year
$40 by 2020.
Global demand for oil being underestimated significantly

Curacao - http://curacaochronicle.com/main/curacao-is-looking-for-third-party-to-operate-the-refinery/
Refinery looking for new operator without PdVSA

Other articles to check out:
U.S. Shale Forecast Looks Up, But Debt Looms
Can Anything Stop Oil Prices From Going Higher?

Also, email us [email protected] with questions and topics you'd like us to discuss in future podcasts.

Interview with David Blackmon
https://www.forbes.com/sites/davidblackmon/
https://shalemag.com


Shale oil reserves - some estimates are understands because looking at only the data being reported to the SEC and that only includes wells drilled, not wells intended to drill

Infrastructure - pretty much running at full capacity now. Dozens of pipelines in process of being constructed over next year. Over 1/2 dozen high capacity pipelines will come online in a year.

Producers who don't have contracts or reserved capacity currently have to sell their oil at a discount. Prices for transport are high because lots of competition for space in pipelines

Personnel constraints - Pipelines larger constraint for smaller companies. Larger companies don't have enough welders, truckers, roughnecks - shortage is severe. (can make $80-$100 K/year driving a sand truck!)

Sand constraints will be alleviated soon as new sand minds coming online.

There is a potential for US to gain global market share.

Constraining factor is refining capacity. Gulf refineries are running out of capacity to refine light, sweet grade of crude.

Port constraints significant in terms of preventing US from exporting more. Ports need dredging to accommodate larger ships, especially port of Corpus Christi. Lack money to dredge this port, project must be done by Army Corps of Engineers.

Refineries: Haven't built new refineries in the US since the 1980s - right now 1 being built in south Texas and 1 in South Dakota that are geared toward processing all the light crude oil but in order to really increase US capacity to refine the crude we are producing, would need to invest significant amount of money in refineries. Refineries have become prohibitively expensive in US due to environmental regulations and permitting. Would require a great deal of capital.

Demand growth has exceeded projections from EIA and IAE from earlier this year.

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Trump pulls out of the Iran Deal, what does it mean for geopolitics and oil?
- sunset clauses in the agreement were clearly an issue, do not prevent Iran from getting a nuclear weapon in the future. Apparently Obama admin banking on regime change or regime moderation?
- CNBC Power Lunch appearance: https://www.cnbc.com/video/2018/05/08/iran-nuclear-deal-whats-at-stake.html
Message this sends to North Korea could be a challenge
Iran's economy is already failing - January protests
Boeing deal with Iran - US will revoke Boeing's license but Boeing appears to have other buyers lined up

US talks to oil producers about increasing output
https://www.ft.com/content/c758f11c-530d-11e8-b24e-cad6aa67e23e
Secretary Mnuchin wants oil producers outside the US to increase production but will OPEC be interested in this? Impact on US producers is positive!

More problems for Venezuela
https://www.reuters.com/article/us-conocophillips-pdvsa-assets/conoco-moves-to-take-over-venezuelan-pdvsas-caribbean-assets-sources-idUSKBN1I70RA
Conoco was awarded a $2billion settlement from Venezuela for nationalizations that happened a decade ago and Conoco is now confiscating assets from Venezuela's oil company in the Caribbean. Venezuela says it will divert oil from there, but can it?!

Forecasters aren't just wrong, they're REALLY wrong when it comes to oil prices
https://www.wsj.com/articles/oil-costs-how-much-how-the-oil-rally-took-forecasters-by-surprise-1525608000

Check out Ellen's opinion piece in the New York Times:
"How to Save the Saudi Golden Goose"
https://www.nytimes.com/2018/05/08/opinion/saudi-aramco-ipo-independence.html

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Ryan Ray and Ellen Wald discuss:

Schlumberger Q1 earnings report: http://investorcenter.slb.com/phoenix.zhtml?c=97513&p=irol-newsArticle&ID=2343687
Note the following "However, production challenges in US shale are emerging that are linked to infill drilling well-to-well interference, the potential lower production of step-out drilling from Tier 1 acreage, and significant infrastructure constraints. It is, therefore, becoming increasingly likely that the industry will face growing supply challenges over the coming year and a significant increase in global E&P investment will be required to minimize the impending deficit."
Outlook differs significantly from big banks, oil analysts outlook and forecasts on oil prices. They expect shale oil production to drive prices down in H2, but perhaps production won't be as significant as forecast.


Halliburton Writes Off Remaining $312 Million Invested in Venezuela
https://www.nytimes.com/2018/04/23/business/halliburton-venezuela-pdvsa.html
Significant that US may decide to increase sanctions after Venezuela's May 20 election that could prevent US oil producers from exporting light oil to Venezuela.

Rig count:
https://www.bloomberg.com/news/articles/2018-04-20/explorers-crank-rig-count-higher-as-u-s-crude-supplies-dwindle
Baker Hughes rig count differs from Drilling Info data but rig count release on Friday didn't seem to have much impact on the market.

North Korea:
North Korea with a much "milder" tone on nuclear weapons https://www.wsj.com/articles/north-korea-suspends-nuclear-long-range-missile-tests-and-plans-to-close-nuclear-test-site-1524264301
Could be some implications for the Iran sanctions issue depending on what tone the Trump administration wants to send North Korea.

Platts on the latest OPEC meeting.
https://www.platts.com/latest-news/oil/jeddah-saudiarabia/russian-energy-minister-novak-says-should-continue-26945013
Al-Falih (Saudi oil minister) signals he wants to continue production cuts (the journey is not yet over) whereas Novak (Russian oil minister) is not so sure.

Trump's oil tweet -
sites/ellenrwald/2018/04/20/trump-tweet-blames-opec-for-higher-oil-prices-market-responds/
The tweet sent oil prices tumbling on Friday, but was probably designed to blame OPEC - instead of American oil producers - for rising gasoline prices.

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Canadian Prime Minister sides with pipeline company in spat with British Columbia that threatens to derail Kinder Morgan's trans-mountain pipeline.

- British Columbia trying to block pipeline from Alberta to Vancouver that will carry oil produced in Alberta to the coast for export.

- Justin Trudeau is trying to "bribe" B.C. into submission with offers of funding for other projects but B.C. premier is standing firm.

- Kinder Morgan says it will scrap the entire project if permit aren't approved soon.

https://www.bloomberg.com/news/articles/2018-04-15/kinder-gridlock-deepens-as-trudeau-fails-to-ease-provincial-rift

https://www.reuters.com/article/us-kinder-morgan-cn-pipeline-canada/alberta-readies-to-cut-b-c-fuel-shipments-in-canada-pipeline-row-idUSKBN1HN2PU

Oil prices rise then fall on Syria unrest

- Is geopolitics REALLY impacting oil prices as much as it used it? Unrest in Syria isn't impacting oil fundamentals.

https://www.wsj.com/articles/oil-retreats-from-three-year-high-as-syria-tensions-simmer-1523873777

Oil predictions

- Analyst predicts oil will collapse in H2 2018

https://www.cnbc.com/2018/04/16/oil-prices-are-likely-to-collapse-later-this-year-barclays-forecasts.html

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ExxonMobil and Qatar Natural Gas assets: https://www.wsj.com/articles/exxon-qatar-in-talks-on-u-s-shale-deal-1523358862

Foreign ownership of oil and gas assets in U.S. is nothing new
Qatar already owns significant portion of natural gas liquefaction facility in US
Foreign ownership of assets can also promote better diplomatic and political relations

Bloomberg: Saudis signal desire for $80 oil https://www.bloomberg.com/news/articles/2018-04-10/saudi-arabia-is-said-to-signal-ambition-for-80-oil-price

Media making a mountain out of nothing – Saudis likely don’t have a target and if they did they wouldn’t share it.

Platts – China looking for more oil, will seek from Iran and Russia as opposed to Saudi Arabia https://www.platts.com/latest-news/oil/singapore/analysis-china-may-seek-extra-iran-russia-crude-27953208

Should Saudi Arabia be concerned? Saudis have deep ties to Chinese refining so unlikely to lose much as a result of Saudi decision not to sell more to Asia

Tesla investors get angry about my analysis of Tesla Q1 production numbers for the Model 3 : https://www.forbes.com/sites/ellenrwald/#23ec4a8d3eba

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Ellen’s visit with Saudi Shoura Council – learned about what council does and how situation for women is changing in Saudi Arabia. http://bit.ly/2DZw8f1

New Mexico and fracking: - https://lat.ms/2I9TRfb

Permian is not just in Texas, also extends to New Mexico. What do companies do about water?
1) price 2) environmental agencies 3) local interests
for some, drilling oil wells can being needed access to water but others may be negatively impacted
producers being proactive in how to handle water issues with communities

Trouble in EIA data collecting land - http://bit.ly/2DZHVtM

lag between data reported to EIA and TRC – EIA shows difference
½ rigs in the nation are in Texas so the difference in reporting is noticeable

Total and Exxon to drill ultra deep well in Mexico in October - http://bit.ly/2GfcAcw

Big companies not put off by anti-foreign oil company rhetoric in upcoming Mexican election


China offers oil futures contracts in Yuan - https://on.wsj.com/2DYVY34

Is there a future in oil contracts denominated in a currency other than the dollar?
- used to be in pounds sterling
- dollar picked up steam in 2nd half of 20th c
- pre WWI almost all trading in pounds
- mid-1920s almost equal between dollar and pound
- post-WWII dollar became favorite
-1970s still 1/5 denominated in pounds sterling
- possible but just not the renminbi nor the time for renminbi?


New on Forbes: How Trump, Bolton And Pompeo Pushed Oil Prices Higher - http://bit.ly/2DWqYAt

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