Opinion

Dr. Daniel Fine: Oil and Gas: A Look at What 2018 May Bring


Trump leads mass deregulation effort; comeback seen for San Juan Basin by Dr. Daniel Fine

The price of oil in 2018 will be volatile with commodity market traders selling on signals of OPEC-Russia “cheating” or members producing more oil than the extended Algiers Agreement output quotas. This should be expected as U.S. shale producers push past 10 million barrels per day and exceed 1970 as the all-time high for the United States.  

At 10.4 million bpd (barrels per day), American oil production will surpass Saudi Arabia and Russia.  Herein lies the price range: 2015 all over again.  

Real OPEC and Russian output will break Algiers (1.8 million barrels off the world market until September). Price range to $62.50 WTI high in the first half of the year and $38.65 at end of the second half or one year from today; 2019 would resemble most of 2015.

There is a second threat to price and production in the Southwest and Dakota. Hedge funds invested in public or listed companies want share buy-backs or dividends. In short, they want to make money now as opposed to operators sinking more cashflow into new production projects. The conflict inside Hess is the first example.

Traditional oil operators are 5-year business planners for returns on investment while the new private equity owners or investors are quarterly or payback pressure points for higher stock market share prices and distribution. OPEC/Russia is the external market threat leading to the lower price range alongside an internal investor/owner threat of less cash flow plow back for future production projects and more for short-term return on investment.

Oil price and production will also reflect Saudi Arabian domestic instability over its simultaneous offensive against Iranian influence in the Middle East and social and economic modernization against traditionalism. The plan is for less dependence on oil exports with technology and manufacturing in the national economy: social change and the status of women in the “revolution.”

President Donald Trump cuts a ribbon during an event on federal regulations in the Roosevelt Room of the White House, Thursday, Dec. 14, 2017, in Washington. (Photo: Evan Vucci, AP)
 
President Trump and oil and gas policy chief Secretary Ryan Zinke will complete the massive deregulation implementation with the so-called methane rule tabled in response to industry self-initiation of methane curtailment or elimination in air emissions. 

This would be a response to state government substitution for the objectives of the Paris Agreement on Climate Change which the Trump Administration rejected. Democratic state governors of oil and gas producing states will be under party pressure to follow California's Governor Brown's state and local substitution for United States participation.

Trump-Zinke have established oil and gas “world domination” as American policy and eliminated the “dependence” since 1973 as a pervasive consensus.

American oil and much less natural gas exports have displaced OPEC and Russian foreign mainly as a deterrent to Russia and an alternative to the Middle East. If exports of oil are nearly 2 million bpd, how much of that is displacement of OPEC-Russia under the production cut-back agreement, and how much will OPEC-Russia recover when world oil balancing allows them to produce at market?

Join now for as low as
$9.99/YR
Subscribe Now

"A technological revival of coal-bed natural gas is taking place.  Strike the world “declining” from a description of the San Juan Basin in 2018."

The Obama Federal Lands policy will have been rejected and BLM implementers replaced. Nuclear energy should be stabilized and coal burning power replaced by natural gas under market conditions. Changes and reforms in royalty determinations on federal land for oil and gas should reflect market reasonableness as opposed to the politics and climate change bias.

The State of New Mexico's Delaware Basin oil reserve study from the United States Geological Service (USGS) should be completed with 23-25 billion barrels of oil.

This will be larger than the Texas part of the Permian Basin and will deliver revenues to state and local governments accordingly. However, the price of WTI oil will determine the size of those revenues. With oil averaging $44 per barrel, the low cost or prolific wells are the “sweet spots” and Chevron, for example, will endure the low end of prices with its refining capacity. The Delaware will look better on the balance sheet than Venezuela or offshore in the Gulf of Mexico outside the U.S.

There will be a new Governor-elect and an energy policy review. Oil and gas energy in New Mexico benefited from the Governor Susana Martinez “all of the above” energy policy which rejected the previous Governor's alternative fuel/conservation efforts (dependency and climate change objectives).  Her energy policy and its oil price recovery success should be a substantial part of the election voting mix.

The San Juan Basin natural gas in the Mancos Shale will generate an upward recovery in the Four Corners. A technological revival of coal-bed natural gas is taking place.  Strike the world “declining” from a description of the San Juan Basin in 2018.

Natural gas prices are not determined by the factors discussed (above). New markets for natural gas exports from the Delaware Basin (gas associated with oil) and the San Juan Basin will emerge. Storage and weather remain a dominant variable. LNG for American export is here with geopolitical opportunity, for example, the future of world-dominant supply from Qatar caught between Saudi Arabia and Ukraine.

Daniel Fine is the associate director of New Mexico Tech's Center for Energy Policy. The opinions expressed are his own.



New service from OilVoice
Trip Shepherd is for companies who need to track their staff in areas of risk.
It's free to use, so we invite you to try it.

Visit source site

daily-times.com/story/money/business/2017/12/24/fi...

Donald TrumpPresident TrumpTrump2017 Oil industry PredictionsOil pricesOPECNon-OPECNon-OPEC ProductionOPEC MEETINGKingdom of Saudi ArabiasaudiSaudi ArabiaSaudi AramcoPrince Mohammed bin Salmon2018All-Energy 2018energy securityEnergy DominanceAmerica FirstAmericaeconomic nationalismEnergycrude oil tradingOil Tradersinternational oil tradingoil tradingpro russiaRussiaElectionsPutinBakken crudeBakkenBakken GasBrent CrudeCrudeCrude ExportsCrude ImportsCrude oilcrude expertsCrude ProductionPermian BasinPermianDelaware BasinWest Texas Delaware Basin USASan Juan BasinParadox BasinTexas Oil and GasTexasEagle FordMexicoNew MexicoOklahomaOklahoma CityLouisianaGulf Of MexicoPennsylvaniaMarcellus ShaleMarcellusOhioOhio ShaleGeopoliticsCaliforniaAlaskaupstreamMidland BasinPanhandle Oil and GasmidstreamdownstreamBusinessBusiness newsDr. Daniel Fine

More items from wfine94268


Oil bust could spur natural gas turnaround in San Juan Basin

If Merrion and key industry analysts are correct, there might be a silver lining in the oil crash caused by the coronavirus pandemic — it could end up helping northwestern New Mexico natural gas producers and even give a lift to state revenue in a time of crisis. The potential upside: The drop in ...

Will Fine


Posted 4 months agoLink > San Juan Basinnatural gasoil bust +36

Massive revenue shortfall in new state forecasts

The last time state economists released revenue forecasts, New Mexico had a massive oil boom with no end in sight. Those same economists released dire revenue projections on Wednesday, suggesting New Mexico could take in between $1.7 billion and $2.4 billion less than originally expected during t ...

Will Fine


Posted 5 months agoLink > Santa FeSANTAFENewMexico +58

New Mexico watching as Texas considers limits on oil production

Laws governing oil production in New Mexico stem from the Oil and Gas Act of 1935, which, among many other things, suggests the state can impose statewide caps on oil production, as well as more explicitly allowing it to cap output at specific reservoirs or “pools” of oil to “prevent waste.” If p ...

Will Fine


Posted 6 months agoLink > Dr. Daniel FineFarmington New MexicoGovernor of New Mexico +54

Dr. Daniel Fine & T Greg Merrion on the OIL PRICE WAR and U.S. collapse

Interview with Oil and Gas Expert Dr. Daniel Fine with T.Greg Merrion of Merrion Oil D r. Daniel Fine and T. Greg Merrion of Merrion Oil are experts in their fields.  Dr. Fine raises the fact the oil market was manipulated and explains just how it was done.  T Greg gives an acrual account of from ...

Will Fine


Posted 6 months agoOpinion > oil newsBusinessNewsBusiness news +44

Trump promises oil, gas industry assistance a day after WTI traded negative

Natural gas prices may increase Reducing oil production may have some positive impact on the San Juan Basin. Because the Permian Basin has been producing a surplus of natural gas, and there is no way to send all the natural gas to markets, the San Juan Basin natural gas prices have reached histor ...

Will Fine


Posted 6 months agoLink > Dr. Daniel FineFarmington New MexicoGovernor of New Mexico +27
All posts from wfine94268