Replies to This Discussion

Permalink Reply by jffree1 on December 2, 2013 at 6:06

I didn't read anything other than the headline (pay wall) but I think there is a possibility that OPEC will tighten up to bolster price even if they don't outright ration the world (US) for political reasons (ala Carter). Some are "displeased" with our FP at the moment.

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Permalink Reply by Skip Peel - Mineral Consultant on December 2, 2013 at 6:12

That would be a bet that Iraq will restrict production to allow Iran to increase production or that Saudi Arabia is willing to curtail its production to accommodate both.  I try to never underestimate the Arab/Persian proclivity to squabble over anything and everything.  Cooperation between Shi'ites and Sunnis would seem the most unlikely bet of all.  Between a net increase in export by OPEC, of whatever magnitude, and rising US domestic production, crude prices will be squeezed unless one or more emerging economies really catches fire.  There does not appear to be in evidence for that possibility at the moment.

Permalink Reply by adubu on December 2, 2013 at 11:47

jfree1-- " Displeased" is politic correct nice wording I have other words re: Obama's FP, but would get deleted if used them

Permalink Reply by jffree1 on December 2, 2013 at 12:18

That's why I used the PC version : )

Permalink Reply by ledlights on December 20, 2013 at 13:09

jffree1,

Just so you know - the WSJ pay wall is pretty easy to step over. It invariably comes up when you click on a posted link like the one posted above. But my consistent experience has been if I highlight the article title on that WSJ page and do a search, when I click on the wsj article link in the search results - voila, I can read the full article.  

Permalink Reply by jffree1 on December 21, 2013 at 2:38

Thanks, LL, good to know.

Permalink Reply by cocodrie man on December 2, 2013 at 5:32

Your reply seems like very good news for royalty owners.  Do you suppose that when $5.00 is the new "low" price for NG that drilling will increase in dry gas plays such as the Haynesville? If $5.00 is not the value to trigger new activity, what price for NG do you think would be necessary to warrant new and increased activity?  Thank you for your insight and your response.

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Permalink Reply by tc on December 2, 2013 at 6:11

my 2 cents. The longer that NG stays cheap the more time there is to build pipelines for Marcellus gas to closer end users.  That means going forward Haynesville growth will depend on the growth of exported NG and the growth of exported gas will have to be greater than the loss of the U.S. Great Lakes and Northeast markets.

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Permalink Reply by Krkyoldhag on December 7, 2013 at 7:47

What will the impact of Shell pulling the plug on the proposed refinery in Louisiana? 

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Permalink Reply by Skip Peel - Mineral Consultant on December 7, 2013 at 8:08

It's a drop in the bucket when compared with the total nat gas related investment in expansions and new plants underway or announced for S LA.  The project was not a refinery.  It was a gas-to-liquids (GTL) plant.

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Permalink Reply by Joe Aldridge on December 7, 2013 at 9:15

I think the only difference is on the upside long term. That facility was not planned to come on line for at least 5 years. I don't know and have not seen any projections of how much NG they were planning on using per day, per month or per year. But for a plant of that size to be practical it would have to have a considerable source of NG at a reasonable price long term. I think that if nothing else it could have acted as a buffer between storage and draw down cycles.

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Permalink Reply by jim weyland on December 7, 2013 at 13:02

the plant output was to be 140K bbls/d. an accepted "quick and dirty" is there are 6 Mcf's of btus per bbl; put another way there are 6 MMBtu per bbl. Note: pl quality gas is nominally 1000 Btu/cf. 

the plant would have employed the fischer-tropsch process, invented in pre-war germany. it was used by the nazis during the war to turn coal synthesis gas into liquids. it also was later used by sasol, the south african national oil company, during the international boycott over apartheid.

the f-t process is extremely energy consumptive. (and capital intensive too boot). i have no basis in knowledge as to what % of energy input would be needed for fuel and loss. my uneducated guess would be above 10%, how much above i don't know. maybe we've got a chme on the board that could provide some expert input.

all of that having been said. the project was cancelled, IMO because they have a cash flow issue. it's got to be embarrassing to give an update on the project just this past sept and in dec claim an estimated all in cost of $20B as a cancellation factor when the original estimate was $12.5B. they didn't know of projected cost increases in sept, really?  another part of the story is they revisited the fact they'd have to buy gas on the open market. they just came to that revelation, really?

not that it's their fault, i imagine there are resumes floating around from some company folks involved in supervising the project FEED work

one example as to cash flow (and there are more, just google it): they're part of a massive caspian sea project that's long been snake bit. the latest boo-boo came during export line commissioning when a pressure loss was detected. it's relevant that it's a sour oil/gas deal. best case is that a smart pig will find a bad field joint weld. the much worse case is that they'll find that an inappropriate weldment alloy was chosen or even worse, but not by much, the line pipe alloy choice was incorrect and it has been corroded.

my last thought is towards our friends in the 4th estate, i.e. the press.  i know the press in d.c. is in the bag, but after reading the multiple instances of energy press regurgitation as to why the project was being terminated i came to the conclusion that shell could have told them their new analysis showed that shell would get a better NPV by ranching unicorns on the plant site. i'm sure it would have been reported verbatim.

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