Oil & Gas - A Slap in the Face

RaceBannon said:

In the very early 80's when I had moved to Seattle to take over flooring bidness one of my first buildings was built for ENI which was one of the many tax shelter oil and gas entities set up. About a 4 story Bellevue building. The head man had a shower in his office which to a small town kid in the early 80s seemed pretty impressive.

Tax code changes, oil goes bust taking Savings and Loans with them and McCain and the rest get the taint of scandal.

The next main tenant for the building was Asymetirix where I met the Paull Allen mob

Tech of course had its own boom and bust but Allen was a winner

Lot of VC went into edifices of nothingness

And Dallas is the best show ever

creepycoug said:

HoustonHusky said:

I'm not in O&G although I might as well be the last few years...

Right now it is brutal on graduates...my nephew's fiance just graduated and got hired on at one of the big oil firms after college but almost all the folks hired on with her were delayed and then un-hired. At UT the Petroleum Engineers always had a bit more status than the Chemical Engineers but that has now switched...a bunch aren't going to get hired for what they were trained for. Add to that a bunch of the smaller oil guys are doing "mergers of equals" which is basically cost/people reductions and its not good out there for those folks.

But with oil it is always give it a year or two...all the banks are saying oil is going even higher this year, but the same analysts are also saying nobody will fund oil guys. Which is true right now if you talk to the banks, but if WTI goes over $60 and maybe even $55 you will see a flood of money go into the oil patch because interest rates are nothing.

I guess the real question is, did the article get it right by suggesting (albeit through anecdotal opinions) oil has a limited future in the long run? I mean, the reference to solar was stupid as far as my understanding of the subject goes; that particular technology doesn't run efficiently or powerfully enough to displace fossil.

creepycoug said:

Swaye said:

1to392831weretaken said:

Oil guy here. Refining, not production or finance, but I'm not blind.

A couple of years ago, I was on an interview team for bringing in new hires. Usually, I would favor younger people who could stick around a while and become useful. On that day, though, I actually found myself using family situation as a tiebreaker, favoring people with families, people a little closer to retirement. I don't expect to retire from my plant, let alone people hiring on now, so I figured we might as well give the job to those who could benefit from it the most while the gettin's still good. My coworkers used to call me Chicken Little when it came to that kind of attitude, but now they all see the writing on the wall and have joined in.

The major oil companies are no longer oil companies. They're "energy" companies, and oil isn't their best investment. Exxon, Shell, BP... they're all running away from oil fast. Even unsubsidized, the current lowest cost per installed kW of energy is terrestrial wind. Second is utility scale solar. Then offshore wind. Then natural gas.

I've seen my company's (well, "my company" at least for the next few months, as my understanding is that my refinery was just sold as part of a purge of downstream oil assets) future prospectus, and the plan is to ditch oil, with LNG (liquified natural gas, used a lot in Asian power plants) as the 50 year bridge fuel to going hydrocarbon free. They're investing heavily in wind.

There was a time when the EROEI (energy returned on energy invested) for oil extraction was a triple-digit number. Nowadays, many wells are single-digit. It's just not as profitable as extraction becomes more difficult.

On top of that, demand in the first world is dropping as vehicles become more efficient, and just about every meaningful market in the world has pledged to electrify their vehicle fleet to some degree (China being the most serious and most aggressive with the timeline) within the next decade or two. It's going to create some weird pricing structures for finished products. As it is, gasoline and diesel seem like a loss-leader for kerosene (jet fuel). Awfully hard to get a half-million pounds off the ground with anything less energy dense than a hydrocarbon fuel, and current batteries are certainly that: far less energy dense. I could see a situation where, just as electric cars are really taking off, the cost of gas drops back down to a buck per gallon. Refining isn't magic: you can't just make kerosene. There's going to be some amount of longer and shorter chain hydrocarbons that we'll have to find something to do with, and supply and demand could make said "waste" hydrocarbons awfully cheap. Or the cost to fly just gets prohibitively expensive.

Our refinery still makes money, so it's not going anywhere just yet. Others don't, like the Convent refinery in Louisiana that didn't sell and so was simply closed, leaving 700 jobless. Still, I give our plant maybe 10 years at most. We're already one refinery heavy in the region, from a supply/demand standpoint, which is depressing finished product pricing and therefore profit. Corners will be cut to maintain profitability, and that's dangerous.

I like learning things. Good poast. I will generate an in-depth look at bug execution one day.

I second that. Fantastic, informative post. I now have a new term to throw around at parties when I'm pretending to be worldly and smart: energy density.

And I'm telling you right now, I'm stealing your actual statement when this comes up:

Party Goer: "Look Creep, your friends on the Finance Board may like oil, but we've? got to stop releasing carbon emissions into the atmosphere, because global warming. Every mode of transportation needs to be battery."

Creep: "Listen asshole, it's awfully hard to get a half-million pounds off the ground with anything less energy dense than a hydrocarbon fuel, and current batteries are certainly that: far less energy dense. So fuck off until you have a better idea."

That's what I'm going to do. In real life.

1to392831weretaken said:

There was a time when the EROEI (energy returned on energy invested) for oil extraction was a triple-digit number. Nowadays, many wells are single-digit. It's just not as profitable as extraction becomes more difficult.

creepycoug said:

HFNY said:

I don't work in O&G but follow it for fun and one of the reasons why XOM did not do well in 2020 is because they have been all in on oil (and bought XTO for far too much 11 years ago). They work on algae and carbon capture but most of it was lip-service.

CVX has been farther along, more disciplined capital wise and farther ahead on LNG (Gorgon plant in Australia especially). I hope they build a ton of solar on that massive amount of acreage they own in Australia.

TOT bought a majority stake in Sun Power in 2011. Sun Power (via their Maxeon spin-off) makes arguably the best panels in the industry.

I have solar on my roof and have been driving a gas-electric car since 2013 though still don't see batteries creating the same kind of culture and music like this:

https://youtube.com/watch?v=MpZV1iJ99g4

I've seen a lot of solar on roofs go up in the last few years. Even up here in the PNW, people are investing in it. From my understanding, the break-even point is several years, so it's a long-term commitment. Same with cars. I haven't been inspired enough to go battery on my car; but at some point the price per gallon may make me do it.