Friday, March 9, 2018

GWPF Newsletter: Saudi Arabia Set To Join Shale Revolution

UK Eyes ‘Fracking Friendly’ Policy Changes

In this newsletter:

1) Saudi Arabia Set To Join Shale Revolution
Bloomberg, 7 March 2018 

2) UK Eyes ‘Fracking Friendly’ Policy Changes
Upstream Online, 7 March 2018

3) A ‘Major Second Wave’ of U.S. Fracking Is About to Be Unleashed Upon the World
Time Magazine, 6 March 2018

4) A Nightmare Scenario Is Unfolding For OPEC
Nick Cunningham,, 7 March 2018

5) Paris Climate Deal Advocates Vacating The White House
E&E News, 7 March 2018

6) OPEC Beware: Asia Seen Favoring U.S. Shale Oil as Volumes Soar
Bloomberg, 6 March 2018

Full details:

1) Saudi Arabia Set To Join Shale Revolution
Bloomberg, 7 March 2018 

Saudi Aramco, the world’s largest oil exporter, is set to join the shale revolution with plans to start producing unconventional natural gas this month and exploit a deposit that could rival the Eagle Ford formation in Texas.

Saudi Arabia’s gas resources from shale and other alternative supplies are “huge,” Khalid Al Abdulqader, general manager of unconventional resources at Aramco, said Wednesday in Manama, Bahrain. Production at the kingdom’s North Arabia basin will start by the end of March and reach its target by the end of this year, he said, without giving details.

Aramco is also drilling for unconventional gas in the South Ghawar and Jafurah basins, he said. Jafurah in eastern Saudi Arabia is similar in size to Eagle Ford, the second-biggest U.S. shale play for gas, Al Abdulqader said, without giving an estimate of the gas contained at Jafurah.

“It’s completely believable,” Robin Mills, chief executive officer of Dubai-based consultant Qamar Energy, said of the comparison. “Can they make a commercial proposition of it? That’s the question.”

Freeing Up Crude

State-run Aramco, formally known as Saudi Arabian Oil Co., plans to spend $300 billion on projects over the next 10 years to maintain its spare production capacity for oil and boost exploration for and output of conventional and unconventional gas, Chief Executive Officer Amin Nasser said in July. Any increase in supplies of gas drilled from shale and other hard-to-access rocks would free up crude that Saudi Arabia uses in its power plants, enabling the country to export the oil for a bigger profit.

Eagle Ford in Texas had 22.7 trillion cubic feet of natural gas reserves from shale in 2016, according to a U.S. Energy Information Administration report in February. Aramco plans to double its production of gas resources to 23 billion cubic feet a day over the coming decade, Nasser said. Saudi Arabia is also the biggest producer in the Organization of Petroleum Exporting Countries.

Jafurah is located between Ghawar, the world’s largest oil field, and the Persian Gulf, near the hub of the Saudi energy industry. Pipeline networks and other facilities needed for Aramco to produce unconventional gas at Jafurah are nearby, and this existing infrastructure should help expedite the basin’s development, Mills said.

Dry Holes

Aramco plans to develop the entire basin, using improved technology to reduce fracking costs, Al Abdulqader said. The company will focus on cutting costs at Jafurah before proceeding with plans to produce gas there, he said.

Full story

2) UK Eyes ‘Fracking Friendly’ Policy Changes
Upstream Online, 7 March 2018
Anamaria Deduleasa

Proposed amendments to the UK government’s planning policy have been met with anger by environmentalists, who claim the changes would “favour and facilitate” the exploration and extraction of onshore oil and gas, including fracking, environmental group Greenpeace has said.

The government unveiled its draft new national planning policy framework, which is still under consultation, and proposed changes building on the first framework published in 2012.

Under the proposed amendments, authorities “should recognise the benefits of onshore oil and gas for securing energy supplies and supporting the transition to a low-carbon economy”, it said.

The draft also suggested that mineral planning authorities should put in place policies to facilitate the exploration and extraction of onshore oil and gas, which would include fracking for shale.

In addition, if the amendments go through, a wind energy development of one or more turbines should not be considered acceptable by authorities “unless it has the backing of the local community”.

In response to the proposed changes, Greenpeace accused the government of trying to “skew” planning policy in favour of fracking, as the most recent surveying by the government revealed that just 16% of people support fracking for shale gas. This compared to nearly three-quarters (74%) of people in favour of onshore wind, Greenpeace said.

Greenpeace UK head of energy Hannah Martin said: “Why should popular wind farms require local support to go ahead and not controversial fracking? These glaring double standards are unfair and unjustifiable.

“Ministers were recently forced to admit they have no idea how many fracking wells Britain is going to have in the near future, yet they keep telling everyone that fracking will boost our energy security.

“Instead of staking our energy future on a pie-in-the-sky industry, the Government should back the clean technologies like offshore and onshore wind already delivering jobs, investment and clean energy to Britain,” Martin said.

Greenpeace UK added on social media: “It's 2018, and the same government that's made it near-impossible to build new onshore windfarms now wants to force councils to 'facilitate' oil and gas drilling.”

Interested parties can comment on the changes to the consultation, which runs until 10 May.

Full story (subscription required)

3) A ‘Major Second Wave’ of U.S. Fracking Is About to Be Unleashed Upon the World
Time Magazine, 6 March 2018

U.S. oil and natural gas is on the verge of transforming the world’s energy markets for a second time, further undercutting Saudi Arabia and Russia.

The widespread adoption of fracking in the U.S. opened billions of barrels of oil and trillions of cubic feet of natural gas to production and transformed the global energy sector in a matter of a few years. Now, a leading global energy agency says U.S. natural gas is about to do it again.

The International Energy Agency (IEA) said in a new forecast this week that growth in U.S. oil production will cover 80% of new global demand for oil in the next three years. U.S. oil production is expected to increase nearly 30% to 17 million barrels a day by 2023 with much of that growth coming from oil produced through fracking in West Texas.

“Non-OPEC supply growth is very, very strong, which will change a lot of parameters of the oil market in the next years to come,” Fatih Birol, the head of the International Energy Agency, told reporters at the CERAWeek energy conference hosted by IHS Markit. “We are going to see a major second wave of U.S. shale production coming.”

Republicans politicians and policymakers celebrated the news and sought to take credit for the development. Trump has sought to portray himself as a savior of the U.S. oil and gas industry, opening up federal lands to oil and gas development at a breakneck pace and undoing Obama-era climate regulations.

But analysts attributed the growth in U.S. production to market factors rather than Republican policy. In the report, the IEA forecast that higher oil prices and increased demand from China and India will trigger increased U.S. output to make up the gap. The IEA also predicts that demand for petrochemicals used in plastic will grow overall demand for oil.

Still, the White House sent out a press release highlighting the report on Monday. Republican Sen. Dan Sullivan of Alaska told reporters at CERAWeek that Republican dominated Washington has transformed the federal government from being “basically hostile” to oil and gas under President Obama to actively supporting the industry’s growth. (In reality, Obama promoted natural gas as part of an “all of the above” energy strategy and his signature climate change regulation would have benefited the fossil fuel.)

“There’s never been a more exciting time in the American energy sector,” Sullivan told oil and gas industry insiders. “The American energy renaissance that so many of you in this room are responsible for is now in full swing.”

A second rise in U.S. oil production comes with significant implications for both the global energy markets and geopolitics more broadly. The U.S. supply of oil and natural gas has contributed to political upheaval in the Middle East, creating new competition for oil exports, and in Russia, a leading supplier of natural gas to Europe.

Alexei Texler, Russia’s first deputy energy minister, acknowledged that U.S. shale “poses certain risk” Tuesday but said his country would continue collaborating with partners in Saudi Arabia and elsewhere in response.

“In a shale revolution world, no country is an island,” said Birol. “Everyone will be affected.”

4) A Nightmare Scenario Is Unfolding For OPEC
Nick Cunningham,, 7 March 2018
The U.S. will supply much of the world’s additional oil for the next few years, according to a new report from the International Energy Agency (IEA).

Over the next three years, the U.S. will cover 80 percent of the world’s demand growth, the IEA says in its newly-released Oil 2018 annual report. Canada, Brazil and Norway will cover the remainder, leaving no room for more OPEC supply.

The irony is that the substantial gains in output from shale will only be possible because of the OPEC cuts, which has tightened the market and boosted prices. This fact is not lost on OPEC producers. "If you are a shale oil producer, who brought you back? It was OPEC," the UAE’s oil minister Suhail Al Mazrouei, said at a recent industry conference, according to Bloomberg. "Without OPEC there’d be chaos in the market."

Indeed, the IEA’s new report paints a pretty gloomy picture for OPEC members, who are hoping to phase out their supply cuts after this year. With non-OPEC supply rising quickly, particularly in the U.S., OPEC may struggle to figure out a way to increase output without pushing down prices, according to the IEA’s analysis.

That could put pressure on the cartel to keep the production cuts in place for longer than they had wanted, although it seems hard to imagine they maintain the production ceilings for another three or four years. Doing so would mean handicapping themselves and ceding even more market share to U.S. shale and other non-OPEC producers. Still, it is unclear how this plays out – returning to full production, even if phased in gradually, presents its own problems, if the IEA’s forecast is accurate.

The IEA sees demand for OPEC oil actually declining in absolute terms over the next few years as it is edged out of the market by non-OPEC supply. OPEC production only grows by 750,000 bpd through 2023 under the energy agency’s forecast, although that also takes into account a 700,000-bpd decline in Venezuela.

The bottom line is that the IEA sees oil demand rising by 6.9 million barrels per day (mb/d) by 2023, with more than half of those increases coming from China and India. Meanwhile, supply grows by about 6.4 mb/d, with a whopping 3.7 mb/d coming from the U.S., nearly 60 percent of the total global supply increase.

By sector, petrochemicals starts to take on a larger role in driving oil demand, especially as the transportation sector starts to see a greater adoption of electric vehicles. But it isn’t just EVs – abundant oil and cheap natural gas are fueling a surge in petrochemical investments.

Nevertheless, while the IEA sees an explosion of shale output for the next five years or so, beyond that the story is different. The massive cuts to upstream investment since the collapse of oil prices in 2014 will begin to cause supply problems at the beginning of the next decade. Spending levels are only now starting to pick up, but are still at a fraction of pre-2014 levels, which means that there will be a dearth of new, large-scale conventional oil projects in several years’ time. “This is potentially storing up trouble for the future,” the IEA wrote in its report.

Moreover, natural depletion from existing fields essentially wipes out 3 mb/d of supply every year. That, combined with demand growth, means that the oil industry needs to replace “one North Sea each year,” the IEA says. But the industry is no longer spending enough to cover that gap. In 2017, new oil discoveries fell to another record low, with less than 4 billion barrels of oil equivalent found. The lack of new oil in the works is sowing the seeds of supply problems in the 2020s.

“The United States is set to put its stamp on global oil markets for the next five years,” Fatih Birol, the IEA’s Executive Director, said in a statement. “But as we’ve highlighted repeatedly, the weak global investment picture remains a source of concern. More investments will be needed to make up for declining oil fields – the world needs to replace 3 mb/d of declines each year, the equivalent of the North Sea – while also meeting robust demand growth.”

Full story

5) Paris Climate Deal Advocates Vacating The White House
E&E News, 7 March 2018

The globalists are on their way out of the White House, further diminishing the voices close to President Trump that say humans are warming the planet.

Departures of key personnel have left an energy and environment policy vacuum that many within the White House expect to be filled by nationalist advisers. More exits are likely on the way.

The resignation of National Economic Council Director Gary Cohn, announced yesterday at a White House meeting, was the latest blow to those who remain hopeful for climate policy. His departure is seen as a potential dam break, with other aides likely following his path. The former Goldman Sachs Group Inc. executive supported remaining in the Paris climate accord and convened conversations with carbon tax advocates.

“I think you’ll see good people leaving from the White House,” said a White House official. “I think that their departure dates, which were sometime in the future, are going to be dramatically sped up.”

Peter Navarro, Trump’s trade adviser, is seen by some as likely to make a play for Cohn’s job. Navarro, known as a nationalist voice in the administration, has curried favor with the president for his defense of tariffs on steel and aluminum that have engendered widespread backlash globally and within the GOP.

Cohn opposed the tariffs, which Trump is expected to formally propose any day. The White House said Cohn would still remain on staff for a few more weeks, even as Trump begins to look for his replacement.

“Will be making a decision soon on the appointment of a new Chief Economic Advisor,” Trump tweeted last night. “Many people wanting the job — will choose wisely!”

The NEC had already been weathering turmoil.

George David Banks left last month after failing to get a permanent security clearance. He handled international energy issues and was viewed as a top voice pushing for re-engagement in the Paris climate accord. That, combined with Cohn’s exit, weakens the prospects that the United States will remain in the global agreement. Trump has said he’ll pull out of the Paris pact, but he can’t formally do that until November 2020.

“One thing is for certain, the pro-Paris crowd has certainly been dealt a setback these past few weeks,” said Tom Pyle, president of the Institute for Energy Research.

Full story

6) OPEC Beware: Asia Seen Favoring U.S. Shale Oil as Volumes Soar
Bloomberg, 6 March 2018

OPEC should beware as U.S. shale producers are set to steal a bigger slice of the world’s biggest oil market and threaten the cartel’s foothold in Asia, according to a top industry consultant.
American light crude shipments to Asia will reach almost 1.3 million barrels a day in the next five years from almost nothing in 2016, according to Wood Mackenzie Ltd. This will allow Asian refiners to fill up 40 percent of additional spot demand with U.S. shale, said Sushant Gupta, the firm’s research director.

“This is good news for Asia,” said Gupta, a Singapore-based analyst with Wood Mackenzie. “U.S. tight oil provides an alternative source to help diversify Asia’s crude slate, and complements the declining domestic crude production in Asia.”

Just about two years after lifting the ban for U.S. crude exports, oil varieties ranging from West Texas Intermediate to Thunderhorse and Mars Blend have reached Asia, making it the biggest buyer of American oil. Crude shipped overseas from the U.S. will soar to almost 4 million barrels a day by the mid-2020s, rivaling shipments from Iraq and Canada, Wood Mackenzie said.

The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at

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