2009 look see at Simmons &Co.

[Jeromie]

I did my annual look at the corporate website of Simmons & Co International.   In 2008 Simmons did 39 Merger and Acquisition transactions  and 8 offerings for a total value of $46.5 billion.     The  details are linked in the  initial page summary of  Matthew  Simmons business.   Interestingly,  most  to substantially all of the activity relates to unconventional oil and unconventional gas activities I have been discussing as outside the peak oil calculation.   A hefty portion of the deals involve oil and gas service companies , who by location. would be working on marine oil and other tertiary effort oil extraction.  His underwriting business is  dependent  on  Enhanced Oil Recovery,  continental shelf   activity and particularly shale gas.

Now , as an investment banker , he raises the financing to do these deals.  He  convinces people to put their money in these ventures.  Being oil, much of this is syndication activity.

The list of clients  and detail of 2008 transactions tells the story.

He knows there is a big future  in unconventional oil and gas in the future. It is the future of his business. Where he makes his money.  Simmons is privately held , but his fees being a specialty should run around 4 %. On $46.5 bn his gross   would be $186,000,000.     If he kept 10 % of that, his annual take would be $18,600,000.


  Simmons tells us where the long term investment is going. Where the $50 trillion is going.   A huge piece, most of it, will be to extract unconventional's and refine it. The rest will be to shore up conventional oil and gas to get that last trillion bbl of light oil.

Here is the corporate website. 

http://www.simmonsco-intl.com

[picasso moon]

Yes, he's planning to make money on it, doesn't mean he thinks unconventional oil will prevent or significantly delay an oil crash.

[Jeromie]

Might that be quite disingenuous?   

[picasso moon]

What, you think a capitalist will  miss a chance making a buck, even on the way to his own funeral? I'm just going by what he's been consistently stating, which includes his intentions to make money in energy.

[quick]

Might also be true. Kinda like government saying 'all is well' to protect their worthless jobs !!

[slow_dazzle]

Matt Simmons must be anticipating high oil prices in the future. Extracting and refining low quality oil is expensive, both financially and energetically.

Taking this a little further, it means economic recovery will definitely not be possible. If low quality oil is going to be expensive, it surely follows that the lighter oils will be hugely expensive, as a corollary to supply and demand factors. Heavy (pun) oil users might well (another one) be up shit creek sans paddle if oil prices rise; which they almost certainly will. In effect, Matt Simmons' investment pattern seems to point to an increasingly expensive future.

[Jeromie]

Shale gas, coal bed methane and freed stranded gas distributed as LNG will be a severe limiter on upward prices of heavy oil , for example. It has pretty much  been demonstrated from all the reading and investigating I have done that $80 boe  will be the price at  which most unconventional oils will be economic on a long term basis.  There is a lot of cost reducing technology being proven out for heavy oils.   That is why  I repeatedly linked Ivanhoe Energy as an example.  There are quite a few others going into practice currently. Then there is VAPEX and other enhancements to SAGD.     Vapex  injects volatiles that soften the heavy oil as part of Steam Assisted Gravity Drainage.  These volatiles are recoverable.    The Ivanhoe upgrader of heavy oils to raise prices and ease transport also produce steam to be used in SAGD  as a by product.  The oil kids have been very  busy being innovative.    But LNG is now far too big to not go on to completion of present capacity under  construction. Here will be the price limiter.

All in all,  there is a huge new potential life for hydrocarbons. 

But look at how much money Simmons and the other investment banks raised just for Chesapeake  via Simmons in 2008 alone, which is all gas of any kind. That money went for  US shale gas investment.

[slow_dazzle]

Shale gas, coal bed methane and freed stranded gas distributed as LNG will be a severe limiter on upward prices of heavy oil , for example. It has pretty much  been demonstrated from all the reading and investigating I have done that $80 boe  will be the price at  which most unconventional oils will be economic on a long term basis.  There is a lot of cost reducing technology being proven out for heavy oils.   That is why  I repeatedly linked Ivanhoe Energy as an example.  There are quite a few others going into practice currently. Then there is VAPEX and other enhancements to SAGD.     Vapex  injects volatiles that soften the heavy oil as part of Steam Assisted Gravity Drainage.  These volatiles are recoverable.    The Ivanhoe upgrader of heavy oils to raise prices and ease transport also produce steam to be used in SAGD  as a by product.  The oil kids have been very  busy being innovative.    But LNG is now far too big to not go on to completion of present capacity under  construction. Here will be the price limiter.

All in all,  there is a huge new potential life for hydrocarbons. 

But look at how much money Simmons and the other investment banks raised just for Chesapeake  via Simmons in 2008 alone, which is all gas of any kind. That money went for  US shale gas investment.

Yes jeromie, the various scenarios are complex and require detailed analyses. One really important question, though, is EROEI and the issue of net, available energy. At some point the energy input must exceed the energy gained in return, at which point purely economic factors, will be unable to overcome the laws of thermodynamics.

I'm keeping an open mind on how much energy might yet be recovered. Nevertheless, the physics of energy are eventually going to render economic arguments futile. The burning question is we don't know exactly when that point will be reached.

[quick]

I remember reading that Canada's oil sands were being ' recovered' as fast as possible. There were limiters on how fast this could happen. one was the number of people available to work the area. They were building housing as fast as possible to house the workers needed. Another was the heat needed to inject in the ground to allow recovery. There was talk of building a nuclear reactor to provide the heat needed to speed recovery. Now how long does that take.

I hear all this talk of alternatives and my take is, it should have been started years ago ( and the oil sands are an almost drop in the bucket after how many years at it ). The trick will be recovering and refining in time and quantity to keep North America going when the readily available light sweet crude has declined,  OR the dollar as lost value, to the point the America's cant get the imported oil it needs to sustain some semblance of our present lifestyle,  with heated homes, food production and transportation of some sort.

I don't think its gonna happen. BAU is dead and I just hope a die off wont get all of my family tree due to the steps I and a few others in my family have taken.

[Jeromie]

 Well, one can dodge the bullets many ways.  As you  know, I see the US running out of effective ways to pay for imports. In simple terms we run out of ability to import in excess of our exports in any major way. That could be a 2009-2010 happening.   I regard North America as a single survival unit, thus Canadian imports to the US and the reverse are  survival  wash out.  Circumstances will dictate a fixed exchange in the US.

Will new infrastructure be in place enough to offset decline?   I do not know, but circumstances dictate again a geopolitical response along with a very weak dollar.   

 In the last decade a lot of fertilizer production was run offshore due to the need for cheap foreign gas.  The bulk of that import of   fertilizer gets  re exported  as cereals.   Obviously, circumstances will force the heavy curtailment of finished goods imports, including agriculture for internal consumption.  Circumstances  will dictate the cessation of those kinds of imports through import licenses and none being granted for a huge array of imported finished goods.

I read a report on a site I have not linked where a  500,000 acre lease in the Marcellus play  will yield from 2.5 to 5.0  tcf of gas.   The Marcellus covers an area about the size of Pennsylvania, Ohio and  West Virginia combined and they are still testing. Then there are quite a number of other domestic gas fields entering play.   That means GTL and the technology is now very  diverse.   
 But, I have been down that road. 

The crunch comes and  there is rationing of gasoline and fuel oils while GTL is put in place ,     BAU is gone, replaced by a new BAU.

It was started years ago based on all the inquiry work I have done.

[kats]

 

 In the last decade a lot of fertilizer production was run offshore due to the need for cheap foreign gas.  The bulk of that import of   fertilizer gets  re exported  as cereals.   

Not forgetting that a lot of the countries that are importing cereal are importing it in lieu of water. And water shortages are only going to get more acute.

[Jeromie]

 slow_dazzle All the  numbers bantered around are estimates of recoverable oil.    Even the Bentley definition of conventional oil is confined to recoverable oils without new exploration and without tertiary efforts.  The same is true for unconventional estimates.    There is a different parameter for unconventional gas  besides physically possible to recover and the big question there is if the deposit is stranded.   LNG has converted  largely stranded gas  to  economically recoverable via a LNG train.    Then , in recent years ways have been found to free methane in shale.    CBM was largely a question of stranding .     What is  interesting is that stranded CBM  and shale gas can now be  converted to GTL  essentially on site.   The mini GTL  Syntroleum   system would convert totally stranded gas to very high quality middle distillates directly. The stuff goes directly into a tanker or tank barge  for deep water associated gas.     Right now, the choice is  pipeline creation instead.   Take a look at CBM in the Powder River Basin area.  England is discovering they have a lot of high grade CBM too.    

A complete picture would take a big book by some guru.  Put a lot of solutions together with leadership and we have maneuver to survive room to wiggle.  

[slow_dazzle]

slow_dazzle All the  numbers bantered around are estimates of recoverable oil.    Even the Bentley definition of conventional oil is confined to recoverable oils without new exploration and without tertiary efforts.  The same is true for unconventional estimates.    There is a different parameter for unconventional gas  besides physically possible to recover and the big question there is if the deposit is stranded.   LNG has converted  largely stranded gas  to  economically recoverable via a LNG train.    Then , in recent years ways have been found to free methane in shale.    CBM was largely a question of stranding .     What is  interesting is that stranded CBM  and shale gas can now be  converted to GTL  essentially on site.   The mini GTL  Syntroleum   system would convert totally stranded gas to very high quality middle distillates directly. The stuff goes directly into a tanker or tank barge  for deep water associated gas.     Right now, the choice is  pipeline creation instead.   Take a look at CBM in the Powder River Basin area.  England is discovering they have a lot of high grade CBM too.    

A complete picture would take a big book by some guru.  Put a lot of solutions together with leadership and we have maneuver to survive room to wiggle.  

Yeah, I know it's not simple jeromie. The simple, and perplexing, fact that governments have apparently missed/ignored PO speaks volumes. They will have contingency plans to deal with PO (and natural gas). People assume governments are floundering helplessly as PO kicks in, which is exceedingly unlikely. They have known about it for ages and there is no way they have been fiddling while Rome burns. Anyone who thinks we are the only people who are prepping for PO, is being a tad naive.

That being said, I'm certain their fall back position is one most of us won't either like, or benefit from.

[kats]

The trouble with governments planning for the future is that most of them don't. Democratic govts are like corporations, never looking beyond the next report card--quarterly report or election. Communist govts do plenty of planning, but much of it turns out to have been for the wrong thing!

[Jeromie]

Interestingly, I think the geopolitical's have been on  this for over a generation.    If you delve deeply into geopolitics, it is apparent that the single greatest frustration was the fact that the USSR was an exporter of petroleum  with huge gas reserves and the US was  no longer an exporter of petroleum and had now entered light oil   irreversible  decline. Even in 1942, there was considerable angst over  US exports to supply WWII oil needs.    At all costs US policy was designed to insure the US always had a balancing of petroleum  to offset the USSR advantage.  

My  cousin was  a naval  intel guy at the WH during the Carter Administration .  Oil was the constant denominator.    Obviously, finding value in  North American unconventional  gas and oils was a key parameter.  Forcing prices to accommodate these resources would be a very key national security policy. After all, the same set of guru's  as a group have run US foreign policy  since WWII.   From Nitze to now is one unbroken line of global dominance in ALL areas policy thinking.   And oil was the single greatest logistics problem.   That became   ultra important from the day the US forced flexible response as NATO policy .   That was 1956, if I  remember  correctly.  Flexible response as military policy  to contain the parameters of mutually  assured destruction has been  responsible for at least 2/3rds of military expenditures since the fifties.   All the military guru's make that point. If you want a dynamite examination of the whole problem read the first chapter of Transformation of War by Martin Van Creveld.   This is now a required reading book for every officer in most  military establishments.

Nope, the whole problem has been a hot button since WWII geopolitically.