Obama and Off Shore Oil

[david austin]

Some light WSJ reading...
Obama Underwrites Offshore Drilling



You read that headline correctly. Unfortunately, the Obama Administration is financing oil exploration off Brazil.

The U.S. is going to lend billions of dollars to Brazil's state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil's Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil's planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.

The U.S. Export-Import Bank tells us it has issued a "preliminary commitment" letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount. Ex-Im Bank says it has not decided whether the money will come in the form of a direct loan or loan guarantees. Either way, this corporate foreign aid may strike some readers as odd, given that the U.S. Treasury seems desperate for cash and Petrobras is one of the largest corporations in the Americas.

But look on the bright side. If President Obama has embraced offshore drilling in Brazil, why not in the old U.S.A.? The land of the sorta free and the home of the heavily indebted has enormous offshore oil deposits, and last year ahead of the November elections, with gasoline at $4 a gallon, Congress let a ban on offshore drilling expire.

The Bush Administration's five-year plan (2007-2012) to open the outer continental shelf to oil exploration included new lease sales in the Gulf of Mexico. But in 2007 environmentalists went to court to block drilling in Alaska and in April a federal court ruled in their favor. In May, Interior Secretary Ken Salazar said his department was unsure whether that ruling applied only to Alaska or all offshore drilling. So it asked an appeals court for clarification. Late last month the court said the earlier decision applied only to Alaska, opening the way for the sale of leases in the Gulf. Mr. Salazar now says the sales will go forward on August 19.

This is progress, however slow. But it still doesn't allow the U.S. to explore in Alaska or along the East and West Coasts, which could be our equivalent of the Tupi oil fields, which are set to make Brazil a leading oil exporter. Americans are right to wonder why Mr. Obama is underwriting in Brazil what he won't allow at home.


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Soooo many things going on here...


Obama financing a project heavily opposed here at home?
States going bankrupt in the meantime?
Is Sugar the new Oil?


Discuss

[tricky]

from a ny times article about the oil fields in brazil\

This month, Brazil’s government said it wanted the national oil company, Petrobras, to control all future development of the deep-sea fields discovered in 2007, which international geologists estimate could hold tens of billions of barrels of recoverable oil.
The change would make Petrobras the operator for the 62 percent of the new area that has yet to be bid out, consigning foreign companies to the role of financial investors. That would limit their ability to help set the pace for the oil fields’ development, while giving Petrobras significantly more power to generate jobs and award lucrative contracts.

It's better strategically to strengthen our oil interests outside the mid-east and politically easier since it's not US offshore which most of our party is against.

http://www.nytimes.com/2009/08/18/wo...l&st=cse&scp=2

[david austin]

Foreign oil is still foreign oil. While the region may not be as unstable there is still absolutely no reason that Brazil couldnt shove a giant middle finger at America at any point in the process.

So Obama is against digging up our land and seas but he doesnt mind throwing cash at countries so they can dig up theirs?

While their fields are massive it still wont put any sort of dent in global spot pricing for oil. Which begs the question... Why are these billions being spent now while we have so much turmoil within our own borders?

From a pure oil play, this is Obama wanting a piece of the pie... which is fine... but thats more 'big oil' than it is 'green'.

From a alt fuel play this could easily been viewed as a sugar play for our ethanol programs that have been vastly undercut by Brazil

[Ash]

long-term strategic move to possibly destabilize Venezuela or strengthen relationships with it's neighbors in hopes of a regime change 10 years down the road?


hmmmmm?

[david austin]

Venezuela will destabilize itself within 10 years IMO. They are fast on the track of unrest already.

My point with 'big oil' is that the bitching will always continue and the tactics will always remain the same. Oil is in decline and we will again shift money to regions to develop their own without at least working in effort to look for our own.

Im not a drill baby drill person but I still think an effort needs to be made to take ANY percentage of foreign dependence out of the equation.

[Hey Bubu]

Originally Posted by david austin

Venezuela will destabilize itself within 10 years IMO. They are fast on the track of unrest already.

What makes you think that?

Im not a drill baby drill person but I still think an effort needs to be made to take ANY percentage of foreign dependence out of the equation.

I can see that, however investing a little bit of money in our side of the continent makes sense on this level, once production has been tapped out on those markets, we can go in, tap our resources and become NUMBA 1. Holding out on the resource drilling for now, I think, is a good national idea.

[david austin]

Originally Posted by Hey Bubu

What makes you think that?



I can see that, however investing a little bit of money in our side of the continent makes sense on this level, once production has been tapped out on those markets, we can go in, tap our resources and become NUMBA 1. Holding out on the resource drilling for now, I think, is a good national idea.

Civil unrest in VZ is growing at an alarming rate.

Resources arent used all at once and then on to the next field. You have to meet the demand curve at a continuous rate. Thats why the Brazil fields (which arent exactly a new find) wont make much of a dent in spot prices... because that field will only fill in the decline of other fields.

I think its silly to at least not start the process of looking on our own lands. This news is clear that Obama will spend the money to seek out new deals on oil... why not right here where we have the infrastructre and where the benefit is truly needed.

[tricky]

Originally Posted by david austin

Civil unrest in VZ is growing at an alarming rate.

Resources arent used all at once and then on to the next field. You have to meet the demand curve at a continuous rate. Thats why the Brazil fields (which arent exactly a new find) wont make much of a dent in spot prices... because that field will only fill in the decline of other fields.

I think its silly to at least not start the process of looking on our own lands. This news is clear that Obama will spend the money to seek out new deals on oil... why not right here where we have the infrastructre and where the benefit is truly needed.

Originally Posted by nytimes

Lost in the debate, Mr. Gabrielli said, is the reality that the equipment needed to drill the new fields is in short supply. Petrobras executives are trying to motivate suppliers around the world to develop equipment.
Through 2017, Petrobras will need 40 oil rigs capable of drilling deep enough to reach the new fields — more than half the total number of such rigs that exist in the world today, Mr. Gabrielli said. The company is requiring that 28 of them be built in Brazil.
Mr. Gabrielli said the company was keeping its international expansion spending at $16 billion, so that it could focus on developing deepwater fields at home.
“The question is not whether to speed up or not to speed up,” Mr. Gabrielli said. “We are at the limits of the world capacity for the industry.”

....

[The House Rocka]

you guys havent seen shit yet!!!

[david austin]

Originally Posted by The House Rocka

you guys havent seen shit yet!!!

And that is supposed to mean...

[PETA]

Originally Posted by david austin

Discuss

Will he require them to comply with cap and trade standards? Kyoto?

Originally Posted by Hey Bubu

What makes you think that?

oil at less than $70 per barrell

Chavez has run the economy into the ground - especially the oil industry. Other industries have simply dried up. Foreign investors ran away years ago and those who did not lost their captial to nationalization. The gov't revenues are almost entirely depedent on oil revenue. Rather than reivest in captial infrastructure he's siphoned off profits for his anti-American diplomacy efforts. His support for FARC is becoming less and less possible for him to deny and could lead to a confrontation w/Colombia (the Swedish made anti-tank weapons are merely the latest faux pas)

Originally Posted by david austin

Civil unrest in VZ is growing at an alarming rate.

Resources arent used all at once and then on to the next field. You have to meet the demand curve at a continuous rate. Thats why the Brazil fields (which arent exactly a new find) wont make much of a dent in spot prices... because that field will only fill in the decline of other fields.

Would that not tend to stabilize prices though? If new supply merely replaces old supply little will change on a curve with static demand.

If, on the otherhand those new fields didn't come on like to replace supply from an exhausted source then prices would rise w/static demand.

So, the new supply does make as dent in so far as it tends to prevent a price jump? And, presuming increasing demand, it would function to mitigate price increases whereas no new supply would result in less of a check on prices?

[david austin]

Originally Posted by PETA

Would that not tend to stabilize prices though? If new supply merely replaces old supply little will change on a curve with static demand.

If, on the otherhand those new fields didn't come on like to replace supply from an exhausted source then prices would rise w/static demand.

So, the new supply does make as dent in so far as it tends to prevent a price jump? And, presuming increasing demand, it would function to mitigate price increases whereas no new supply would result in less of a check on prices?

Potentially. There are a whole other host of factors at work during the years of build out and then subsequent years of production.

Every scenario could come to fruition... I tend to side with a global depression causing a deflationary spiral with a very fast hyper inflationary turn. This cold to hot transition would likely keep production hands tied until it was too late. As production ramps we have 100$/bbl again.

Brazil would be feeding the replacement with ramping inflation.

[Hey Bubu]

Originally Posted by PETA

oil at less than $70 per barrell

Chavez has run the economy into the ground - especially the oil industry. Other industries have simply dried up. Foreign investors ran away years ago and those who did not lost their captial to nationalization. The gov't revenues are almost entirely depedent on oil revenue. Rather than reivest in captial infrastructure he's siphoned off profits for his anti-American diplomacy efforts. His support for FARC is becoming less and less possible for him to deny and could lead to a confrontation w/Colombia (the Swedish made anti-tank weapons are merely the latest faux pas)

Still doesn't mean that the people will revolt.

This is what, the third dictatorship Venezuela has had? I blame all those Nazi refugees up in the mountains.

my family left Venezuela just as things were starting to unravel back in 88, shit has been going downhill since then and the country is but a shadow of itself.

[PETA]

Originally Posted by david austin

Potentially. There are a whole other host of factors at work during the years of build out and then subsequent years of production.

But if we're isolating that one feauture... the new fields, then my description was - or - was not - accurate?

Originally Posted by david austin

Every scenario could come to fruition... I tend to side with a global depression causing a deflationary spiral with a very fast hyper inflationary turn. This cold to hot transition would likely keep production hands tied until it was too late. As production ramps we have 100$/bbl again.

Brazil would be feeding the replacement with ramping inflation.

Which raises an interesting question regarding the difference between price and relative value. If currency gets devalued due to inflation and price goes up aren't we essentially still at square one paying more for a barrell... but owing to inflation we've got more (devalued) dollars?

I relaize I'm not considering the movement of money withregard to bonds, loans etc.. and debt instruments reliant on interest... inflated dollars make debtors happier than lenders. blah blah bvlah

Originally Posted by Hey Bubu

Still doesn't mean that the people will revolt.

But it does make it more likely.

Originally Posted by Hey Bubu

This is what, the third dictatorship Venezuela has had? I blame all those Nazi refugees up in the mountains.

my family left Venezuela just as things were starting to unravel back in 88, shit has been going downhill since then and the country is but a shadow of itself.

So do you think that makes revolt more or less likely?

[Hey Bubu]

Originally Posted by PETA

So do you think that makes revolt more or less likely?

Less likely, I still have family living there and even the counter government groups aren't like they used to be. Chavez has the majority of the population in his pockets.

Obviously that's just one of many views. I wouldn't be surprised if our government and other governments are working on destabilizing Venezuela even more. There's already been two tries at a coup and they have both failed.