New No Slide Title · 2015. 3. 17. · 1980 1985 1990 1995 2000 2005 2010 2015 POA P O A L P O A H...
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March 17, 2015 Dr. Loren C. Scott Loren C. Scott & Associates, Inc. www.lorencscottassociates.com
Transcript of New No Slide Title · 2015. 3. 17. · 1980 1985 1990 1995 2000 2005 2010 2015 POA P O A L P O A H...
March 17, 2015
Dr. Loren C. Scott
Loren C. Scott & Associates, Inc.
www.lorencscottassociates.com
Energy Prices
Our Forecast in Early September
0
20
40
60
80
100
120
140
1980 1985 1990 1995 2000 2005 2010 2015
POA POAL POAH
Fig. 6: Oil PricesP
ric
e p
er
Ba
rre
l
2014 2015 2016
Average $100 $95 $90
Low $85 $85
High $120 $120
The Shale plays
We have gained allies
HIS - Shale plays Responsible for:
• U.S. oil production up 70% since 2008---highest
growth of any country in world over that period
Still Net Importer of
Crude Oil
• 2014:
– U.S. Production: 8.6 mmb/d
• (EIA: 9.2 mmb/d by 2015)
– U.S. Imports: 6.7 mmb/d (44%)
• 2008:
– U.S. Production: 5.0 mmb/d
– U.S. Imports: 9.8 mmb/d (66%)
Each shale play is different
Technology not as easily
transferable
North Dakota’s Bakken Field:
A Hard Rock Shale
• 2003: 10,000 b/d produced
• 2015: 1,200,000 b/d produced---120-fold increase
• ND surpassed Alaska as 3rd largest source of domestic oil in 3/12
• Large amounts of “associated” natural gas being produced
Tuscaloosa Marine Shale: A
Clayey Shale
Result: Different Plays
Different Breakeven Prices
Breakeven Oil Prices by Play (Rodgers Oil & Gas Consulting)
• Monterey (CA) $36
• Eagle Ford (TX) $49
• Bakken (ND) $50
• Granite Wash (OK) $57
• Niobrara (CO) $66
• Tuscaloosa (MS) $69
• Tuscaloosa (LA) $92
Breakeven Within Plays:
Bakken
• County BE
• Dunn $29
• McKenzie $30
• Williams $36
• Stark $37
• Mountrail $41
• Billings $44
• County BE
• BOT-REN $52
• Burke $62
• Divide $73
• BOW-SLP $75
• McLean $77
Weird Bakken Effect on Oil
Prices
Oil Price Trends
Oil Price Trends
Desire to Export Oil
• Key to recent price decline
• Export of petroleum illegal since
1970s
• Export of petroleum products is
legal
Oil Product
Demand/Production
What is a “product”?
Is a field-level $500K to $5mm
facility to strip off volatile
propane and butane so
condensate can safely flow
through pipelines make it a
“product”?
Why have oil prices declined?
Why did they drop so quickly?
Was it rising U.S. Production?
Quick drop: Look to Saudis
Saudis & OPEC
Is it a desire to enforce discipline
within OPEC---a’ la 1982?
Or a desire to maintain market
share?
Saudi Math
• Production =9.0 mmb/d
• Less Internal needs = 2.9 mmb/d
• Available to market =6.1 mmb/d
• @$90 = $549 mm/d for budget
Saudi math
• Production =9.76 mmb/d
• Less Internal needs = 2.9 mmb/d
• Available to market =6.86 mmb/d
• @$80 = $549 mm/d for budget
Saudi math
• Production =12.4 mmb/d
• Less Internal needs = 2.9 mmb/d
• Available to market = 9.5 mmb/d
• @$57.80 = $549 mm/d for budget
Main restraint on consistently
lower oil prices:
“Lets have a meeting!”
Kill the Edges:
Impact on U.S. production will
be swift.
Bakken oil production already
peaking
0
200
400
600
800
1,000
1,200
1,400
5 10 15 20 25 30 35 40 45
Typical Bakken Well ProductionB
arr
els
Pe
r D
ay
Year
Source: ND Dept of Mineral Resources
Steep Declines:
65% 1st year
35% 2nd year
15% 3rd year
10% thereafter
Impact on the Gulf of Mexico
• The long term planning horizon
• The breakeven point?
– LLOG: $20
–ExxonMobil: $30
–Stone Energy: $50
–Chevron: $65-$75
Breakeven Point: GOM (Wood McKenzie – 2013)
• Conventional Pliocene/Miocene: $35
• Subsalt Pliocene/Miocene: $40
• Jurassic: $50
• Lower Miocene: $54
• Paleocene: $72
• (The GOM has “edges”?)
Benefits of the Gulf?
• Elephant finds
– Chevron St. Malo Field, lower tertiary: 170,000 b/d
– Typical well costs $130mm v $8 mm onshore
• Straddles world’s biggest consumer
• Politically stable area (Argentina alarm)
• Cost of taxes, royalties, and regulations among
lowest in world
• Lots of opportunities from small, low risk
prospects to giant targets in extreme conditions
• Vast network of pipelines & refineries
Pacto por Mexico
• Ended the national monopoly on oil and
gas exploration and development of past
75 years
• Declared constitutional on December 18,
2013
• Working on final rules & regulations
– Watch out for local content rules
Pacto por Mexico
• Secondary laws and regulations to be
worked out
– Rules & regs for contracts with Mexican
government
• Production-sharing, profit-sharing, pure service
contracts
– How much and what properties can Pemex
keep (9/15/14 decision by Ministry of
Energy);
• Estimated – Pemex gets 75% v 25% to private
cos;
• Latter likely in deep waters and prospective shale
plays
• Targeting June 2015 for first bids
Trans-Boundary Hydrocarbons Agreement
