No mystery on the reduced activity in the GOM since fracking. Fracking BE numbers are something around $50/bbl give or take, this influx of bbls will be setting the long term price of crude around the $70 mark for folks evaluating investment. At that level deep water E&P is not economic.
It is almost impossible to overstate the impact of tight oil on the industry and for that matter the country.
What on earth are you talking about? Fracking in GOM deepwater has been going on for decades. I never worked on a new GOM well that didn’t involve fracking. And if you think a $70 price mark is not sufficient for investment at $50 Break Even, then you haven’t been reading the numbers.
Of the wells I listed in a previous post, these are were the projected BE numbers before they were approved, and they were still approved, one of them just 2 months ago:
Ballymore: $57 BE
North Platte: $50 BE
Whale: $41 BE
Shenendoah: $25 BE
Part of todays lower BEs are due to efficiencies of modern deepwater rigs. Most new contract announcements include significant bonus structure for completion ahead of schedule (rig day-rate and duration being a contributing factor to overall well cost and BE), and there have been significant investment in the last 5 years by drilling contractors to streamline rig operation to earn these bonuses.
to be clear I meant fracking on shore - which has significant cost savings over deep sea production.
and I was replying to the graph you shared showing the decline in investment offshore beginning 2011 ish and going flat at low levels after 2016 - coincidently about the time of major tight oil production, and maybe just as important, the lift of the crude oil export ban.
But here’s the thing, people on here are saying that a favorable or unfavorable administration has strong effects in investment and subsequently that will effect prices.
However the ending of the crude oil export ban should have and did increase production (at the cost of us refining profit and Jones act shipping, apparently) and was followed the year after by the beginning of a very oil friendly President.
So why in that case, during a period of export opportunities and pro-oil administration did, as you point out, investment on new leases remain at historic lows from 2016-2019?
because it has nothing to do with any administration - the medium to long term impacts the administration has on the energy industry is near zero. It is all, or very nearly all, long term economics.
Easy to find, produce and transport tight oil reduces long term oil price projections, which make investments off shore harder to do - not impossible - and some projects as you point out will still get done - but it is harder to justify the investment.
True. The oil people do not make long term investment decisions based on who the president of the USA is at the time. Offshore oil leases went down during ter Trump administration 2016-2019, it had nothing to do with Trump. Offshore leases in US waters require the lease holder to do some drilling within a certain time frame. If the price of oil is down it is ludicrous for them to buy a lease and go thru the expense of punching holes in the bottom of the sea even if there is no ban on exporting.
My goodness even a pig farmer knows that if pork is selling for 10 cents a pound you don’t invest in more sows and produce more pigs.
Oil,gas, copper, wheat, gold and even pigs are commodities controlled by world markets not presidents. International events such as the Russia Ukraine mess upset the markets as international incidents are prone to do. Commodity brokers get rich or go broke during such times.
The dollar is up across the world currencies, it’s now on par with the EUR, did the current administration cause that too?
I was in the oil business for more than 30 years. Many times the cargo was rebid before it arrived. Sometimes changed destinations because of that. The brokers are ass deeeep in the price of oil. Supply and demand is, and will continue to be a large player in the eventual price at the pump.
Absolutely. Most people would be surprised to learn that the oil companies also have “separate” commodity brokerage divisions. Koch and BP among others. One would think that would be trading on insider information and be illegal but they claim there is a steel curtain between the production and commodity divisions. 
A few friends from quite sometime ago (Including cadets who moved into that business) would probably not dispute that semi-unknown fact. I believe most of them were honest dealing with vipers.Sometimes they won, sometimes they lost. Nature of the beast. Those pals I mentioned are happily retired with premature gray hair. Tough business all around.
Serious question, and one I found no definitive answer to:
Does rig count reflect present events and can it be used as a metric to assess the impact of near-term changes in policy or administration?
From what I can gather with a quick look, rig demand, use or leasing is a long-lead item, requiring years of planning at great cost, and there are examples of fixed structures that go online after market conditions change and lead to short-term losses. A web search on Seadrill with their mobile units indicates there have been massive ‘kill fees’ in the past as the price of breaking a charter.
Putting that together, I’m not sure that rig count is a stand-in metric for present conditions, but rather, past.
It seems as though new contracts and committments would be a better reflection of support for some of the ideas presented here rather than things set in motion 5-10 years ago. And finally the ‘Everything is Fine’ crowd here still hasn’t addressed the Doomer faction’s concerns about long-term and second-order effects of present policy, in terms of hard or soft power.
Where I live gas prices are generally 30 to 40 cents below the national average.
Keystone XL was never going to benefit US producers anyway. I’m glad Biden put it out of its misery.
Except demand is outpacing rig availability currently. Everyone is unstacking all available equipment and make are bringing new builds online as well.
Also be careful if looking at historic data, rig efficiency in the tight oil fields has changed dramatically since the early days. We are doing way more with less these days than 5 - 10 years ago.
Former associates tell me the same they also said maintenance budgets are still down though bonuses are up. Scary combination for anyone familiar with the business
Nice how you neglected to include prices during Biden’s inauguration. As I said previously prices were steadily climbing before the Ukraine invasion… gas light much?
Sure, very slowly.
You don’t know what gaslighting means so stop using it until you learn.
