China’s coal consumption continues to slowly decline.  Coal consumption increased  only 1% in 2012, 2% in 2013 and 0% in 2014. Coal supplies two-thirds of China’s overall energy use.

Moody’s and Goldman Sach’s have come out with pessimistic forecasts about the outlook for the crude oil industry over the next two years. Moody’s says that earnings from the global oil and gas industry will decline by 20%this year and only recover modestly in 2016. Goldman’s says the current crude oil surplus may keep prices low for the next 15 years and reiterated that it could take prices as low as $20 a barrel to clear the oil glut which is threatening to overrun storage capacity.

Saudi Arabia is starting to feel the impact of lower crude oil prices as the desert kingdom faces its biggest financial deficit in decades. Steps to cut spending are underway and the privatization of state-owned companies and the elimination of fuel subsidies are likely. The Saudis still have about $660 billion in foreign assets, enough to get them through five years of low oil prices.

Low crude oil prices have thrown the future of East African oil projects into doubt.   With oil prices languishing below $50 a barrel, there’s little incentive for companies such as Tullow Oil Plc, Africa Oil Corp., China’s CNOOC Ltd. and France’s Total SA to keep investing in Kenya and Uganda.

Reduced crude oil demand from China is hurting the Republic of the Congo, Angola, and Mauritania. These Africa countries rely on demand from the Asian country for almost half their oil exports.

The low price of crude oil has led to clear downturns in Norway’s economy and that pressure should persist according to the government  Crude oil prices are down more than 50% from last year, forcing many energy companies to cut back on spending and less production.

The Organization of Petroleum Exporting Countries (OPEC) is now assuming that crude oil prices will rise gradually to $80 a barrel in 2020 as supply growth in the rest of the world weakens. This is a much slower recovery than several OPEC member nations say they need.

More shale oil producers in the US are filing for bankruptcy as the reality sinks in of little likelihood for any recovery in crude oil prices within the next year or two.

Given the glut of shale oil, the US state of North Dakota is considering allowing drillers to temporarily abandon wells that have been drilled but not yet fracked.  Under current rules, drillers must complete wells within one year after they are drilled. There are currently some 900 wells that are awaiting completion. Lifting the requirement that they be drilled within the next year lifts a major financial strain off the drillers.

As stockpiles of crude oil continue to grow in the US, an increasing proportion of oil is being held in tank farms not associated with petroleum refineries. Some owned or leased by the refiners themselves, but many are owned or leased by oil marketers and traders.

The US government said it was offering more than 40 million acres for drilling opportunities in the Gulf of Mexico. The auction is scheduled for March 2016 and will open an area containing an estimated 894 million barrels of oil.

Natural gas production from the seven largest US shale deposits will drop for a fourth straight month in October to the lowest level since March. The decline follows a decade of surging natural gas production that created a glut. The biggest declines are in shale rich deposits such as the Eagle Ford shale formation in Texas.

Canadian natural gas exports to the United States for the seven years ending in 2014 are down significantly because of US shale gas production, a regulator said. For the eastern United States, exports are down more than 65% for the seven years ending 2014 and for the US Midwest, down nearly 23% through 2014.

Norway’s state owned Statoil announced that the world’s first subsea natural gas compression plant is now operating at the Åsgard field in the Norwegian Sea. As a result of this new technology, the recovery from the Midgard reservoir on Åsgard will increase from 67% to 87%, while recovery from the Mikkel reservoir will improve from 59% to 84%.

Russia’s economy continues to deteriorate. To offset growing budget deficits, the government is studying an increased oil extraction tax that could increase the tax burden on crude oil producers by $9 billion. Given the shape of the Russian economy, there is little left to tax other than oil production which is still doing well due to the greatly devalued ruble and large export sales which have combined to leave oil export revenues largely unchanged when measured in rubles.

Work on the “Turkish Stream” pipeline which Russia is planning to build to move natural gas to Europe while bypassing Ukraine has not begun. Delays have moved completion of the project into 2017.


with h/t Tom Whipple

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