Perhaps this is a quiet week ?

(Perhaps as in  . . .before the storm?)
The tables that Jean Laherrerre used for the amount of reserves that Saudi Arabia has, was, in his paper, drawn from two sources.  In an earlier post on those numbers, I cited only the IHS data from the table that he had published.  The other source is Wood Mackenzie (WM) and in an article yesterday in Rigzone it is noted that WM is seeing that the incentives for new exploration may outweigh that of buying other oil companies.
A study by oil consultants Wood Mackenzie has modelled the effect of oil prices on the profitability of exploration. Assuming they could sell the oil they have discovered for $40 a barrel, the best explorers would have made returns of more than 20 percent on every dollar they have ploughed into finding new oil supplies over the past 10 years.

Even the worst performers out of the 28 top international oil firms surveyed would have made a 12 percent return.

Although WM suggest that the industry will have to spend $40 bn to find enough oil to replace that which is being produced.  Of course this gets us back to the question as to whether, even if they spent that money, would they actually be successful in finding that much oil.  Certainly the fact that companies are not making those investments might be an indication that they, themselves, might not think it feasible.
Last week at this time I also referred to the plots of gasoline statistics at the EIA.  It is worth commenting that the US gasoline production continues to fall according to the plot, (which you may remember is a four-week average) while the actual weekly data shows that production may be starting back up (though obviously we still have refineries off-line). In the same way while imports are still going up on the graph, the weekly data shows that these numbers have stabilized.  The worry with that is that the amount we have "borrowed" from others may well now be starting to reach a ceiling. A couple more weeks of data and we should know.  

And as a final comment for the evening, having been out of touch while wandering around the Mississippi Delta, I have been catching up on comments, and see that we are being told to expect a warm winter everywhere but the far North-East.  Well, rabbits! Since that was where I was hoping to spend Christmas break.

Wow!  For that EIA 4-wk avg "U.S. Finished Gasoline Production" graph to dip down so drastically, there must be some very low figures for the last couple of weeks. And it will probably not bottom out for another couple of weeks.

I wonder if that will grab anybody's attention?

Regarding gasoline statistics at EIA, I am drifting toward the viewpoint that the only number that can be trusted are the stock values.  Why do I say this?  Suppose we define the implied supply as the sum of refinery production and imports.  One would expect this number should have something to do with flow into/out of stocks, and indeed back-testing shows that when this implied supply minus EIA product supplied is about 400 kbbl/d larger than the EIA "product supplied," flow into stocks is neutral.  Smaller than this, there are withdrawls, and larger than this there are stock builds.

Now for the mystery.  The implied supply for the past 4 weeks was actually LARGER than it was for the equivalent period last year by about 80 kbbl/d, and when compared to the EIA product supplied, gives a number of +600 kbbl/d, which should be associated with a stock increase.  However, there was a withdrawl of 2.6 mbbl from stocks. By comparison, last year for the equivalent period this implied supply minus EIA product supplied was +430 kbbl/d, and there was a stock build over the 4 week period of about 1 mbbl of gasoline.

What's going on here?  If the EIA numbers have any connection to reality, there is more gasoline demand out there than is being reported by the EIA, to the tune of at least 200 kbbl/d.  Only time and the gasoline stock numbers will tell...

I saw earlier speculation that maybe the imported gasoline was counted as added to our supply as soon as it was bought, rather than only after it actually arrived in the US.  I don't know if that's true, but it would explain why we had all that supply and yet stocks in the US were being drawn down (with imported gasoline in a tanker en-route).
Certainly the fact that companies are not making those investments might be an indication that they, themselves, might not think it feasible.

It might also be an indication that, until recently, they have not expected oil prices to stay above $40.

Which is true?  I don't know, but the fact that rig demand has exploded tells me that companies think exploration is profitable NOW.  And since geology hasn't changed in the last 12 months, that suggests companies have changed their economic forecasts: prices are high enough that they think they will make money on exploration.

In the latest STEO, EIA is now predicting $63 oil through "the rest of 2005 and 2006".

The latest Wood MacKenzie builds on Exploration Strategy and Performance (released two years ago), where we learn
Exploration Strategy is a fundamental part of the upstream business.

Successful companies will:

* replace the reserves that they produce
* add sufficient reserves to allow for growth in production
* find reserves which can be produced profitably

[from Rigzone]
part of the reason oil companies have been making good returns from exploration is because they have been doing less of it. BP, the most successful, has excelled because it only explores in the most prospective regions.... No completely new oil hotspot has been discovered since 2000, when a string of finds was made off Angola.
It's very hard to see how any company could meet the three criteria for success. As far as new E&P goes, as in Opera, "It's not over until the fat lady sings" and I can hear her warming up....
I have tried to follow the EIA weekly report. I, too, am mystified. Gasoline production  of week ending 7th of October is 7,887 Kbpd, gasoline imports are 1,431 Kbpd and stock withdrawals are (195,454 - 192,803 = 2,651 Kb per week =) 379 Kbpd. This gives a gasoline demand of 9,697 Kbpd, yet supposedly demand is 8,783 Kbpd. Can anyone account for the differences? Or is it that the EIA are trying to calm the market by "massaging" the figures or in plain language lying.
(Perhaps as in  . . .before the storm?)

Yes, things will perhaps not be so quiet if that tropical area continues to organize near Jamaica...see  and take a look at the discussion as well as the technical maps.  It would be the last storm we have name for this year...unless they have to assign the Greek alphabet to name storms.  It has been quite a season!  


For exploration: what about "electromagnetic imaging"? is this technology fairly accurate or reliable? Is it very expensive? I would imagine it's fairly expensive, and fairly accurate. But with oil hoovering at $63 a barrel it might be worthwhile to invest in that expense. the return on investment would be substantial.
Anybody know anything about it?
Are you talking about electroseismic? I am working on something in this field so I will have to leave the discussion if it gets technical.
Pressure waves cause differences in electrical conduction in porous rocks if there is a nonconductor like oil or a conductor like water inside it. Think of oil holding apart two grains of relatively conductive rock and when a pressure wave goes through, the rocks touch and conduct electricity. If the pore holds water instead, then the electricity will conduct at all times instead of only when the pressure wave is going through.
It is much more complicated than that, though.