• “The Future of Venezuela’s Oil Industry” by Rafael Sandrea and Martin Essenfeld

    Throughout much of the developed world, there is a consensus that concern over climate change is leading to a rapid downturn in petroleum use and that petroleum will likely have a rapidly declining role in the world’s energy mix over the next 30 years. However, a rapid energy transition to a world no longer reliant on fossil fuels represents a formidable challenge and a high likelihood remains, especially in the developing world, that petroleum’s important and large contribution to the world energy mix will not be so easily displaced. Recent EIA forecasts show that world oil and gas demand has reverted to trend. Supply requirements for the end of 2022 are likely to exceed 100 million barrels/day, a remarkable recovery from a decline in liquids demands of over 15 million barrels a day in 2020 from the Covid-19 pandemic. Although Venezuelan oil production has been constrained by both technical mismanagement and sanctions, the size of its reserve base documents its potentially important role in meeting future world oil demand.

    The timing of Venezuela’s petroleum future depends on whether it can enter the world oil market under traditional commercial conditions. On June 25, 2021, the U.S., Canada, and the E.U. issued a joint communiqué that made clear that a decision regarding the timing and specifics of the sanctions on Venezuela remains the primary determining factor on when and if Venezuela can play a larger role in the world oil market.

    Even if Venezuela were somehow to find its way free of sanctions, the road back to higher production will require massive capital investment. Venezuela, which produced over 3 million barrels in day in the 1970s, is now at only 600,000 barrels per day. The authors estimate that the level of investment and amount of time required to rehabilitate the production potential of Venezuela would approach $30 billion USD in two stages:

    Stage 1 – Pre-sanctions recovery: An investment of $7-9 billion over 2-3 years to get back to production prevalent before sanctions started in 2017 (about 2 million barrels/day).

    Stage 2 – Post-recovery: An investment of an additional $20 billion/year for 2-3 years. These investments would take 4-5 years to yield additional production. This would require investment into offshore and underdeveloped onshore projects to bring them up to full production capacity. With proper investment, Venezuela can sustain a production output of approximately 2.5 million b/d over the next 20-30 years.

    The authors provide an overview of Venezuela’s production potential, and evaluate the technical obstacles that must be addressed to restore Venezuelan oil production. Their paper can be found here.

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  • “With Global Oil Demand on the Rebound, What About Supply?” By Rafael Sandrea

    EPRINC’s Rafael Sandrea has published another paper, this one entitled “With Global Oil Demand on the Rebound, What About Supply?” The piece analyzes the impact of COVID-19 and the Texas Freeze on global oil demand and supply. Rafael also examines future oil supplies moving forward into 2021 by discussing trends in exploration and providing fresh comparative economics regarding oil supply vs. renewables. 

     

    Rafael’s paper can be found here.

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    The Pandemic and the End of Oil? The Pandemic, Peak Oil Demand, and the Oil Industry – By Michael Lynch and Ivan Sandrea

    Recent months have seen a growing crescendo of claims that a peak in oil demand may be near, or even be past. Pandemic-related changes in behavior such as working from home are predicted to persist after the emergency ends, and advances in technology are said to make oil-fueled vehicles increasingly obsolete. Michael Lynch and Ivan Sandrea have examined these arguments in a new study by the Energy Policy Research Foundation and found strong reasons for skepticism. People in post-pandemic China do not show major changes in their behavior and the increasing demand globally for SUVs implies consumers are not focused on reducing emissions. Further, battery electric vehicles perform significantly worse than internal combustion engines in key metrics, whereas the previous transition, from horses to cars, was due to major improvements in range, speed and carrying capacity, as well as convenience.

    The primary findings:

    • Many of the forecasts are aspirational rather than predictive, that is, describing what needs to happen to achieve climate goals not what is likely to happen;
    • Forecasters too often presume transient market events like the pandemic will have permanent effects;
    • Consumer behavior generally shows little desire for sustainable practices;
    • The capability of electric vehicles is being exaggerated and their shortcomings downplayed; and
    • Past transitions do not suggest a peak and a decline in oil demand is likely.

    The case for a near-term peak in oil demand is certainly more plausible than that of peak oil supply, but its popularity reflects a degree of exuberance that is not warranted by the data.

    Click here to access the paper on this topic written by primary author Michael Lynch, Distinguished Fellow with EPRINC and the author of The Peak Oil Scare and the Coming Oil Flood (Praeger 2016), and Ivan Sandrea, trustee of EPRINC and the former CEO and founder of Sierra Oil and Gas.

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  • EPRINC’s First Webinar, “Crisis in the Oil Market: Remembrances of the Past, Policy Responses for the Future”

    EPRINC has produced its first webinar, entitled “Crisis in the Oil Market: Remembrances of the Past, Policy Responses for the Future.” The webinar featured a roundtable discussion from EPRINC’s staff, distinguished fellows and trustees. They examined the major forces shaping the oil market since 1973-74 Arab Oil Embargo and what we’ve learned in the interim about opportunities and strategies for the industry and policy makers going forward. One of the takeaways was that yes, the crisis in the oil patch is in many ways unprecedented, but we’ve seen this movie before.

    The discussion was led by EPRINC’s president, Lucian Pugliaresi, and drew upon the knowledge base of Larry Goldstein, Michael Lynch and Ivan Sandrea. Lynch and Pugliaresi both presented some slides to facilitate the discussion, and the ones that Pugliaresi used were created by EPRINC’s Max Pyzuir. Both presentations can be found below.

    Larry Goldstein is the former president of EPRINC and a co-founder of Petroleum Industry Research Associates in New York City. Michael Lynch is a Distinguished Fellow at the Energy Policy Research Foundation and President of Strategic Energy and Economic Research. Ivan Sandrea is former CEO of Sierra Oil and Gas, a Mexican independent oil and gas company. Prior to becoming CEO of Sierra, Ivan held a number of leadership and technical positions, including senior partner at EY London, where he was responsible for global oil and gas in emerging markets, and president at Energy Intelligence.

    If you missed the webinar, it has been recorded and is available “on demand” by clicking here.

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  • EPRINC’s Lucian Pugliaresi and Larry Goldstein Publish a Commentary on Policy Responses to the Current Crisis in the World Oil Market in Real Clear Energy

    EPRINC President Lucian Pugliaresi and former EPRINC President Larry Goldstein have written a piece for Real Clear Energy entitled “Oil Quotas and Import Fees? No, Get America Back to Work.” In this piece, they examine the current issues in petroleum in light of the COVID-19 pandemic, as demand destruction coincides with an oversupplied market. They write about their concerns with oil quotas and import fees as realistic solutions to this issue, and provide their thoughts on a possible solution. Click here to read their article.

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Deepwater Oil Exploration in the Gulf of Mexico

Peter Stark and EPRINC Fellow Raphael Sandrea have published this piece, entitled “Deepwater Oil Exploration in the Gulf of Mexico: A Spatial Model Provides Clues for Undiscovered Potential.”

Sandrea and Stark bring long experience and unique expertise in evaluating the resource potential of geologic basins worldwide. Their paper on the isoOIP model demonstrates how simple and inexpensive decision support tools can continue to contribute to cost effective development of the nation’s oil and gas resources.

Oil and gas development throughout the U.S. outer continental shelf (OCS) provides a large portion of the nation’s oil and gas supply. Oil and gas reservoirs are found under the sea in both state and federal lands offshore from Louisiana, Texas, California, and Alaska. However, it is the resources located in the Gulf of Mexico that have proved the most prolific. According to the Energy Information Administration, Gulf of Mexico federal offshore oil production accounts for 17% of total U.S. crude oil production. In calendar year 2019, the U.S. Department of Interior reported that bonus bids, rents, and royalties from offshore oil and development generated over $5 billion USD in revenues to the U.S. Treasury.

EPRINC Hosts Virtual Workshop: There Will Be Oil

On Tuesday, July 7, 2020, EPRINC hosted another virtual workshop in its series on COVID-19 and the Future of Oil and Gas. This workshop was titled “There Will Be Oil,” and the topics covered prospects for recovery for U.S. oil production and world petroleum demand. The discussion examined the nature and timing of U.S. oil production recovery and petroleum demand outlook as the world economies emerge from COVID-19 lockdowns. The presenters at the workshop were EPRINC Distinguished Fellows Trisha Curtis (co-founder, PetroNerds), Ash Shastri (founder, EnerStrat Consulting), and Michael Lynch (President Strategic Energy and Economic Research), EPRINC President Lucian Pugliaresi, and EPRINC’s newest Distinguished Fellow, Glen Sweetnam. As always, workshop participants will also be able to pose questions during the event. A recording of the workshop can be accessed after registering here, and the presentations can be found below.

EPRINC’s First Webinar, “Crisis in the Oil Market: Remembrances of the Past, Policy Responses for the Future”

EPRINC has produced its first webinar, entitled “Crisis in the Oil Market: Remembrances of the Past, Policy Responses for the Future.” The webinar featured a roundtable discussion from EPRINC’s staff, distinguished fellows and trustees. They examined the major forces shaping the oil market since 1973-74 Arab Oil Embargo and what we’ve learned in the interim about opportunities and strategies for the industry and policy makers going forward. One of the takeaways was that yes, the crisis in the oil patch is in many ways unprecedented, but we’ve seen this movie before.

The discussion was led by EPRINC’s president, Lucian Pugliaresi, and drew upon the knowledge base of Larry Goldstein, Michael Lynch and Ivan Sandrea. Lynch and Pugliaresi both presented some slides to facilitate the discussion, and the ones that Pugliaresi used were created by EPRINC’s Max Pyzuir. Both presentations can be found below.

Larry Goldstein is the former president of EPRINC and a co-founder of Petroleum Industry Research Associates in New York City. Michael Lynch is a Distinguished Fellow at the Energy Policy Research Foundation and President of Strategic Energy and Economic Research. Ivan Sandrea is former CEO of Sierra Oil and Gas, a Mexican independent oil and gas company. Prior to becoming CEO of Sierra, Ivan held a number of leadership and technical positions, including senior partner at EY London, where he was responsible for global oil and gas in emerging markets, and president at Energy Intelligence.

If you missed the webinar, it has been recorded and is available “on demand” by clicking here.

EPRINC’s Lucian Pugliaresi and Larry Goldstein Publish a Commentary on Policy Responses to the Current Crisis in the World Oil Market in Real Clear Energy

EPRINC President Lucian Pugliaresi and former EPRINC President Larry Goldstein have written a piece for Real Clear Energy entitled “Oil Quotas and Import Fees? No, Get America Back to Work.” In this piece, they examine the current issues in petroleum in light of the COVID-19 pandemic, as demand destruction coincides with an oversupplied market. They write about their concerns with oil quotas and import fees as realistic solutions to this issue, and provide their thoughts on a possible solution. Click here to read their article.

Regulatory Reform: The National Environmental Policy Act (NEPA)

On January 10, 2020, the Trump Administration proposed a series of regulatory reforms to streamline compliance with the National Environmental Policy Act (NEPA).  For the uninitiated, the  purpose of NEPA is to ensure that environmental factors are weighted equally when compared to other factors in the decision making process for so-called major actions undertaken by federal agencies. 

From the concerns raised by critics in the environmental community, one might conclude that this is a rushed and nefarious initiative  to “gut” environmental reviews. In contrast, critics of the NEPA process point to a  vast number of  projects from the construction of new roads to approval of pipelines that remain tied up in judicial reviews which often have little to do with the merits of the projects.

If you need a reminder that concerns over the NEPA process has been with us for some time, we refer you to “EIS’s vs. the Real World,”  published in the Public Interest by Professor Gene Bardach and EPRINC’s Lucian Pugliaresi back in 1977.  EIS writers at the time, the authors   point out that  the Bureau of Land Management’s agreement to prepare 212 EIS’s in connection with capital investments in rangelands cost in excess of $100 million (ten times the annual budget for the investments themselves during an average year in the early 1970’s). You can find their article here.

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