Increasing Government Activism in the Oil & Gas Sector

Needless to say, the established global patterns in energy production, transport, refining, and consumption were severely disrupted at the outbreak of the Ukrainian war one year ago.  As that war has played out, course corrections of increasing severity due to embargos, sanctions, sabotage, and bottlenecks have emerged.  Thus, traditional customers for Russian oil and gas have had to look for new sources or alternative ways to accomplish their requirements.  Through all this, new consumers are emerging for Russian oil & gas.  Ditto American NG!  All in all, patterns are changing radically. 

An article from the January 12^th Wall Street Journal entitled “Why Governments Are Pushing Deeper Into Energy Markets” (https://www.wsj.com/articles/energy-markets-governments-security-11673450650?st=isopbo266urv4h9&reflink=desktopwebshare_permalink) is a good read if you care to get down into the weeds of public policy as it pertains to energy – which has expanded as a result of this war. 

The war has prompted many governments, including the U.S., to become much more pro-active in domestic and international markets.  For example, the United States has chosen to draw down its Strategic Petroleum Reserve (SPR) by 180 million barrels – that’s a big number to replace!  That draw-down had the effect of softening upward pricing pressures which naturally helped to dampen the severity of inflationary spikes that peaked in 3Q22.  But, more strategically, will the U.S. government really lower the barriers to permitting much-needed NG pipelines?  Expediting construction of pipeline infrastructure would be a huge factor in weaning Europe off of Russian gas.  Other governments have also expanded their energy activism.  For example, Germany outright nationalized several gigantic natural gas distribution companies!  The Netherlands is giving consideration to reinvigorating its famous Gronigen natural gas field which has been virtually shut down over concerns of seismic activity.  These forces will undoubtedly impact where oil & gas prices will be trending this year and probably next.  Often, the best intentions can result in unexpected consequences as was proven in the 1970s.  The quasi-embargo placed on the Russian crude oil is certainly among the most audacious moves.  In contrast, check out our recent blog posts on the reticence of many U.S.-based oil & gas companies to support the war effort.

We at First Keystone remain focused on delivering high-quality industrial buildings for lease or purchase in Pecos, Texas in order to enable the American oil & gas industry to be a worldwide leader in energy as a strategic force.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

Oil Prices Are Likely to Stay Steady This Year…With a Couple of Big Ifs

Most everyone asks this question:  What’s the price of oil going to be?  Indeed, there is an avalanche of articles that purport to cover this topic, but this article from the WSJ on January 16^th was one of the best renditions of what “the market” will look like this year – https://www.wsj.com/articles/oil-prices-likely-stay-steady-this-year-11673555621.  We recommend especially careful reading of the section on U.S. output.  It provides statistical back-up to the points we have been making on this Blog for many months now that the U.S. shale industry has lagged in responding to the worldwide geopolitical situation and to the market itself.  In fact, during the course of 2022, the U.S. shale sector came up well short of the EIA forecast for U.S. growth.  And the reasons are exactly what we have been bemoaning:  Senior management is fixated on shareholder payouts. 

It is really a shame that an industry that has a predilection to wrapping itself in the flag seems to be oblivious to the tragic situation going on in Eastern Europe.  If they participated in a genuine wartime national effort, as was the case in the early 1940s, this industry would be galvanized into action instead of congratulating itself on record shareholder payouts.  And the financial tragedy of their approach is that with Russian oil production appreciably reduced, any kind of upward production would translate into windfall profits for the industry.  Anyway, we could go on and on, but this article is a must read! 

Finally, First Keystone Pecos Industrial Park is doing its small part to support the “war effort” by staying out front and constructing new warehouses for lease that will support light industrial activities necessary for the oil & gas industry to function competitively. 

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

An Inconvenient Truth

The Economist published a fascinating article, An Inconvenient Truth, on the worldwide crusade to contain global warming at a level of no more than 1.5°C (compared to pre-industrial averages) (https://www.economist.com/interactive/briefing/2022/11/05/the-world-is-going-to-miss-the-totemic-1-5c-climate-target).  Indeed, this magic number has often been portrayed as something akin to a gigantic cliff.  The Economist article quickly points out that this number is not a “cliff”; more importantly, the article points out that there is actually a gradual degradation in climate stability as the world creeps up toward the 1.5°C level and beyond.  It continues on to point out that worldwide warming very well could overshoot that threshold, but be brought back by carbon containment and sequestration – pretty interesting stuff.  Notably, the report points out that the 1.5°C line of demarcation is purely arbitrary, and indeed, that line was based in part on emotion and politics – once again, interesting.

Finally, the article points out several more inconvenient truths that fossil fuels have a role to play as does nuclear.  This article should be mandatory reading for all – both left-wingers and dyed-in-the-wool global warming deniers would each gain an improved grasp of The Big Picture.  Indeed, if oil and gas leaders acknowledged what is going on, that act would be a giant step towards rehabilitating the unwarranted villainous image of a vital industry. 

In wading through this tricky minefield of conflicting politics, we at First Keystone Pecos Industrial Park remain committed to providing infrastructure to support the U.S. domestic oil & gas industry by offering industrial buildings for lease or sale in Pecos, Texas.  It’s part of the solution…not part of the problem!

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

Crack in the Dike at OPEC

No less an authority than Daniel Yergen has weighed in on the attempt by western democracies to force upon the Russians a bifurcated crude oil market.  He did it via an Op-Ed piece in the Wall Street Journal published on December 26, 2022 (https://www.wsj.com/articles/putin-cant-count-on-the-global-oil-market-price-cap-revenue-production-cut-friedman-biden-eu-russia-energy-11672065849?reflink=desktopwebshare_permalink).  It appears that the west has initially gained modest success in forcing the Russians to endure prices that are running roughly $15-$20 per barrel less than Brent Crude.  This is not a massive discount, but it is an involuntary arrangement which is unprecedented price control.  De facto it undermines OPEC’s power.  Recently published statistics indicate the Russians have had to cut back production by roughly 2MM BOPD.  This shift – thought to be dubious – is, at least initially, working.

What Yergen did not go into is the direction of the overall crude oil market in the next two or three years.  That’s the more interesting issue because the fundamental signs are that new supplies are not being brought on fast enough to keep up with demand.  That’s due in large part to lackluster CapEx plans across the U.S.-based shale producers; although Exxon is upgrading as it reports plans to increase output by 20% in the next few years.  (Chevron has a similar story, too.)  Demand, however, is The Wild Card because China’s abrupt reversal on Covid lockdowns is creating economic turmoil.  The overriding issue for the near term is the degree to which the Chinese economy will slow down.  And, no one can make a reliable prediction about that factor at this time.  Offsetting possible softness from China is the struggle that the U.S. Government will face as it attempts to replenish the 180,000,000 barrels of crude that were utilized last year from the Strategic Petroleum Reserve.  Oil prices could be soft or they could soar!  We’ll be monitoring these critical moving parts and keeping you informed as this new year plays out.

In the meantime, we at First Keystone lodged in Pecos (Texas) continue to support the strengthening of the U.S.-based supplies of crude by offering state-of-the-art industrial buildings for lease.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

Managing the Conflict Between “Going Green” and Preventing Disastrous Energy Shortages – Another Expert’s Thoughts

The legendary founder of Cheniere Energy, Inc., Charif Souki, has weighed in on US energy policies with a particular focus on our positioning in the international landscape.  Mr. Souki was born and educated in the Middle East, but is a true American, and it would behoove us all to pay attention to what he has to say in the article below from the October issue of Oil and Gas Investor. 

https://www.1keystone.com/wp-content/uploads/2023/01/C-Suite-Chat-with-Charif-Souki-Oil-Gas-Investor.100322.pdf

First Keystone continues to be part of the solution by building new infrastructure – such as industrial buildings for lease – that is supporting companies that enable the development of strategically important natural gas in Reeves County (Texas’ #1 county for NG production).

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

Managing the Conflict Between “Going Green” and Preventing Disastrous Energy Shortages – Permian Basin Is a Global Strategic Asset

We have shared our views about the importance of more aggressive development of oil & gas reserves as a critical component of a U.S. response to the escalating struggle between autocratic regimes and democracies.  We have pointed out that there really is not a conflict between green energy and fossil fuels in the near term.  And, Tom Friedman of the New York Times best articulated that position as we discussed in our blog post earlier this month .  However, two highly respected investment analysts in the O&G industry, Dan Pickering and Tom Petrie, addressed a Hart Energy Conference in Midland last week underscoring just how critical the Permian Basin is to U.S. oil production, and more importantly, the U.S. has the ability to substantially ramp up its production of hydrocarbons as a means to soften the blow of foregone Russian O&G supplies.

We at First Keystone are 100% behind the policies that Petrie and Pickering are advocating, and thus, we continue to offer for lease industrial warehouses in Pecos, the hub of the Delaware Basin.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

Managing the Conflict Between “Going Green” and Preventing Disastrous Energy Shortages – Revisited Again

There’s a vicious war going on in Europe and it’s clear that Putin sees it as a struggle against the West in general and the U.S.A. in particular.

We have been sounding the alarm about the unwarranted perceived conflict between going green and developing fossil fuel resources more aggressively.  No less an authority than Tom Friedman of the New York Times – many oil & gas people are dismissive of this publication, but shouldn’t be – weighs in on it. Those of you with preconceived notions will be very surprised when you read this article…

The oil & gas industry needs to step up!  First Keystone continues to be part of the solution by offering industrial buildings for lease as our way of supporting companies that enable the development of oil & gas in Reeves County (Texas’ #1 for NG production) to win the war against the USSR!  (Oooops!  Another slip!)

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

Managing the Conflict Between “Going Green” and Preventing Disastrous Energy Shortages – Revisited

Previously, back in the summer, we griped about the lackluster response of mainstream O&G producers in terms of their efforts to ramp up domestic energy volumes (July 19 blog post).  On October 24^th, the conservative-leaning Wall Street Journal reported on this same topic (see article here) pointing out that the priorities of the companies are primarily directed at maximizing shareholder payouts and carping about federal regulations.  What patriots these folks are!  Those regulations they moan about have not radically constricted this industry since the Biden Administration took the reins.  In fact, there are plenty of drillable well sites permitted and ready-to-go in the Permian Basin.  It’s a cop-out excuse!  Indeed, a cynic would wonder whether industry leaders are quietly working to undermine a laudable national strategic goal. 

And, the next question is:  Are shareholders served by this behavior?  The WSJ article points out that industry leaders generally believe that prices are headed upwards, which would be a pretty positive factor in the equation about whether or not production ought to be ramped up.  That certainly would have been the upshot a half-dozen years ago – and the fundamentals are way better nowadays. 

What about ESG considerations?  Well, let’s think about that for a moment.  Should the United States be expanding fossil fuel production when supposedly it is leaning toward reducing greenhouse gas emissions.  The answer to that dilemma h as to be considered in an overall environment where an existential war is being fought in Eastern Europe.  And, if a  powerful coalition is to be held together, then the US must step up big-time to help overcome the shortfalls resulting from embargos imposed on the USSR (oooops!  I meant the Russian Empire).  Where are our flag-waiving oil industry chieftans!?

First Keystone continues to be part of the solution by building state-of-the-art infrastructure – such as industrial buildings for lease – that is supporting companies that enable the development of oil & gas in Reeves County (Texas’ #1 for NG production).

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

Does $70 Oil Make Sense???

Much to our utter surprise, the price of oil dipped into the $70s in late September leaving us scratching our heads as to what are these energy traders thinking!?  The precipitous decline in the price of oil as dramatically depicted in this graph doesn’t make any sense to those who follow global affairs. 

Let’s take a look at some basic facts:

So, the price of oil has abruptly taken off early in October as have many sectors of commodity and financial markets – our question is this:  What new news emerged in the last 3 business days that justifies a major rally in oil prices?  Our view is that maybe those smarty-pants oil traders had time over the past weekend to review market fundamentals and have opted to reverse their bearish positions. 

Indeed, the pendulum on prices could swing violently upward.  Take a look at this New York Times article about that SPR.  Among the many interesting points made in there, it raises the issue of what happens to the pricing of crude oil once the Biden Administration gets around to replenishing the SPR inventory.  And, since then, OPEC+ announced an unexpected roll-back in quotas.

In sum, we at First Keystone view the fundamentals of producing and selling oil and natural gas as favorable in the short-term as well as fundamentally sound in the intermediate term.  Certainly, the worldwide market for natural gas is undergoing radical changes.  We are doing our bit to aid in that process by leasing industrial buildings in Pecos (TX) to serve the oil industry’s needs.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.

Important Immigration Policy Improvements Are Stalled

The well-respected magazine, The Economist, in its July 30th issue weighed in on immigration, but not in a way that one might expect. Specifically, it had a lot to say about America’s need for more immigrants to address the widespread problem of unfilled jobs ranging from resort workers to high-tech engineers. Sadly, the magazine article points out that the never-ending crisis over how to manage the southern border blocks any advance movements toward a sensible reform of which and how many applicants can enter into the US. Much food for thought. (Note: Former president George W. Bush was the last Republican who took on this particular issue.)

You can read the article here: https://www.economist.com/united-states/2022/07/28/a-shortfall-in-immigration-has-become-an-economic-problem-for-america.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization.  First Keystone welcomes responsible fact-based discourses on these topics.