More news from the open frontier of energy – 7/17

Amazing things are happening at the energy open frontier. Vaca Muerta is a huge shale gas field in Argentina that I doubt will be a big player anytime soon. US passes Russia as largest oil & gas producer and OPEC revenue slumps.

6/10 – Yahoo Finance – U.S. Ousts Russia as Top World Oil, Gas Producer in BP Data – Data from BP shows that the U.S. is world’s biggest producer of hydrocarbons, surpassing Russia for the first time.

Hmm …. I wonder if there is some correlation to the following …

6/17 – Bloomberg at Rigzone – OPEC Revenue Slumps Below $1 Trillion First Time Since 2010 – Article says combined revenue from petroleum exports is $993.3B, down 11% for the year, which means the prior year revenue was $1128.7B. that is a drop of $135B.

Article says their current account balance dropped 35% to $274B. that means the current account balance was $421B in the prior year, a drop of $147B.

So for the year exports dropped $135B and imports increased $12B.

Blomberg calculates that just about all the members of OPEC aren’t seeing enough oil revenue to balance their budgets.

6/8 – The American Interest – Why Argentina’s So Excited About a Dead Cow – The Vaca Muerta shale formation in Argentina is huge. In terms of shale gas, that field is reportedly the second largest in the world. For shale oil, it is the fourth largest on the planet.

I will not be holding my breath for the dead cow field to be rivaling Bakken or Eagle Ford or Permian Basin anytime in the next few decades.

Article points out several factors that are critical for the shale boom in the United States are severely lacking in Argentina and most places in the world. Private ownership of mineral rights is critical to development. Extreme political volatility destroys the opportunity for long-term development. Argentina has significant problems here. Referring to Brazil and Argentina the article says…

Both also suffered from a kind of bipolar political disorder—power tended to swing between irresponsible populists and repressive oligarchical and military rulers.

The problem with that is the lack of stability and predictability makes it impossible to invest with a 10 or 20 year time horizon.

Jamie, the article’s identified author, is optimistic:

The 20th century was largely an era of wasted opportunities in South America; the 21st won’t be a no-brainer, but things do seem to be looking up.

One of the enduring lessons I learned in grad school was from a professor who repeatedly said the past is the best predictor of the future. Implication of the comment is that something quite dramatic has to change in a person or company or country in order for the past not to be the future. Without major change, the future will be a repeat of the past.

Like I said, I won’t be holding my breath to see Vaca Muerta become a major play in my lifetime. I would love to be wrong. Millions of people in Argentina would have a better life if their governments were to have a change in core personality.

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