Shale Series Part 1 - Art Berman discusses recent WSJ article on shale production

The Wall Street Journal recently wrote an article stating that shale production was coming in at around 10% less than forecasted. Art Berman recently discussed this on Peak Prosperity. Art Berman is a geologist who is an oil expert. He's been saying for awhile that shale production was coming in lower than anticipated. Here some of his thoughts on the article:

1. He believes the gap is really greater than 10%.

2. This is based on what the definition of "average" means. He suspects that the data given to the Wall Street Journal was cherry picked. That is, they were coming up with the 10% based on the best locations. He's looked at total wells drilled and therefore is coming up with a much lower figure.

Venezuela: Thoughts on Protests

The LA Times has been covering the situation in Venezuela. (Here are a couple links: Jan 22 and Jan 25).

The current anti-Maduro protests appear to have started based on:

The march is coming at a critical moment, with Maduro seemingly off balance after several dozen mutinous national guard soldiers stormed a military post in central Caracas, seizing weapons and calling on other members of the armed forces for support. The government quickly put down the uprising, arresting 27 and dismissing it as an isolated incident.

From this, the president of the National Assembly, Juan Guaido, declared himself the leader of the country:

In his first public speech since Wednesday, when he proclaimed himself Venezuela’s legitimate leader in a massive protest march in the capital, Caracas, the 35-year-old president of the National Assembly tried to capitalize on discontent with the Maduro government while making the case that a better future was within reach.

Let's first remember that Venezuela had massive protests in 2017, which ultimately failed to over-throw Maduro. So what do I think the chances are for Guaido to force Maduro out of power?

Libya: Notes on what is going on in Tripoli

This post is an update about what is going on in Tripoli.

Back on Dec 12th, Reuters had an article up on the situation in Tripoli. It is filled with names and details so is a little hard to follow. Here's me trying to simplify:

Tripoli Revolutionaries Brigade (headed by Haithem Tajouri). Tajouri had left the country for a month and returned "dressed in blue Emirati robes." That led to speculation that he was aligned with the UAE, which just so happens to back Khalifa Haftar in the east.

Rada (headed by Abdulraouf Kara). Their base is at the airport and is linked to other militias outside the capital that hold ultraconservative religious ideology.

Sweden: a government is finally formed

Stefan Löfven of the Social Democrats won a second term as Prime Minister of Sweden. It took over 4 months for the Swedes to form a government. Why did it take so long?

Here's a summary of seat totals between the two major blocs (Centre-left and Alliance) and the Sweden Democrats.

Centre-left bloc parties (144 total seats):

Social Democrats (100 seats)
Left Party (28)
Green Party (16)

Alliance parties (143 total seats):

Moderates (70)
Centre Party (31)
Christian Democrats (22)
Liberals (20)

Sweden Democrats (62)

The problem is that in Sweden an alliance needs 175 votes to win a majority rule. Neither bloc had 175 votes and neither were willing to form a government with the far-right Sweden Democrats. Another option is the minority government, which is what happened.

So how was Stefan Löfven able to form a government? The Guardian provides the details:

Löfven’s second attempt was approved because although only 115 MPs voted in favour and 153 against, with 77 abstentions, there was no majority against him. Under Swedish law, prime ministers can govern as long as a majority in parliamentary do not actively vote against them. The former welder and trade union leader succeeded in peeling the Centre and Liberal parties away from their centre-right bloc by offering major concessions, promising notably to cut taxes, reform the rental housing market and relax Sweden’s strict employment laws.

WSJ: Shale estimates overly aggressive

The Wall Street Journal recently had an article that looked into projections by fracking companies between 2014 - 2017. Via Rystad Energy AS, WSJ came to the conclusion that actual oil and gas production would come in 10% lower than estimated. This excluded oil majors such as Exxon Mobil. Some of the interesting points from the article are:

1. The Journal’s findings suggest current production levels may be hard to sustain without greater spending because operators will have to drill more wells to meet growth targets. Yet shale drillers, most of whom have yet to consistently make money, are under pressure to cut spending in the face of a 40% crude-oil price decline since October.

2. Schlumberger Ltd. , the oil-field-services giant, reported in a research paper that secondary shale wells completed near older, initial wells in West Texas have been as much as 30% less productive than the initial ones.

3. One reason thousands of early shale wells aren’t meeting expectations is that many companies extrapolated how much they would produce from small clusters of prolific initial wells, according to reserves specialists. Some also excluded their worst-performing wells from the calculations, which is akin to eliminating strikeouts when projecting a baseball player’s batting average.

Venezuela: Maduro's new presidential term

Washington Post reports that this past Thursday, President Nicolas Maduro started his new six year term. To celebrate his new term, the opposition went after Maduro:

The opposition-controlled National Assembly — stripped of its powers by Maduro in 2017 — declared the president an “usurper” and called itself the country’s only “legitimate power.” The assembly’s newly named president, Juan Guaidó, said in a video statement that the body would work with foreign powers toward a political transition in Venezuela.

The article goes on to state that one of the problems with the opposition is that they can't put together a coordinated plan to dispose of Maduro. Also, Maduro has threatened to dissolve the National Assembly.

Al Jazeera makes the real points on why it will be difficult to get rid of Maduro even if "a recent survey by the country's most reliable pollster, Datanalisis, found that nearly 72 percent of people wanted Maduro to resign, rather than begin his second term."

Sweden: Post Christmas Election News

Sweden put discussions regarding forming a new government to the side until after Christmas. For those following Sweden political affairs, elections in September 2018 left both political blocs (Centre Left - Social Democrats, Left Party, Green Party - and Alliance - Moderates, Centre Party, Christian Democrats, Liberals) without enough votes to win a vote on the next Prime Minister. This is driven by the fact that the Sweden Democrats (a far right party) did so well in the elections and neither bloc (or at least a portion of the Alliance bloc) wishes to work with them. Sweden has already attempted two votes for Prime Minister. Both failed and there are two more votes schedules for January 16th and January 23rd. If the next two votes fail, a new election will be held.

The Local (3 January) had the following to say:

On Friday, the leaders of the centre-left Social Democrats and centre-right Moderate Party will meet the parliamentary speaker to update him on any progress made over the Christmas break. The three also spoke directly after Christmas, but a statement from parliamentary speaker Andreas Norlén merely said that he had "taken note of their respective assessments of the process of government formation".

The article also mentions that no one knows who will be running for Prime Minister on the January 16th vote.

California: Sacramento budget and the stock market

CNBC has an article up on how the recent December stock market correction might impact California's budget:

December's ugly stock market is very bad news for California's finances. That's because the state's top 1 percent of personal income tax earners — roughly 164,000 tax returns — generate about half of the personal income taxes in California.

That's right, 1 percent of tax earners pay half of all personal taxes in California. The article later points out that 70% of the state's total general fund revenue and transfers (not exactly sure what is a transfer) is via personal taxes. So that means 35% of all general fund revenue and transfers is driven by the 1 percent.

Venezuela: Military Control of the Oil Industry

Reuters wrote a lengthy report on Venezuela's oil industry and the role of the military. Petroleos de Venezuela SA (PDVSA) is Venezuela's state-owned oil company. In November 2017, President Madura placed Major General Manuel Quevedo in charge of the company. Since then, not much good has happened. Per the article, oil production has dropped 20% to 1.45 million barrels per day. Employees continue to leave, dropping 27% since 2016, currently at 106,000 (estimate). Here are some quotes about the increasing role of the military:

Military chieftains, moonlighting in the private sector, are elbowing past other contractors for lucrative service and supply business with PDVSA.

Quevedo has appointed more than 100 aides and advisors from the military and from a previous post as a government minister to senior positions, according to a person familiar with PDVSA’s human resource records.

Back in November 2017, Reuters had an article that focused on the arrests of US citizens who worked for Citgo, but it also discussed a larger crackdown on corruption within Venezuela's oil industry. Around the time of the article was when Madura handed the reigns of PDVSA to Quevedo. What is the likelihood the corruption just shifted from one group of employees to another (which in this case is the military)?

Venezuela, Guyana and Oil

Venezuela recently sent a naval vessel to disputed waters that are claimed by both Venezuela and Guyana. The naval ship approached an ExxonMobil ship that was doing a seismic survey.

In 2017, the New York Times has an article about the oil being found off the coast of Guyana:

With a population of fewer than one million people, Guyana — Venezuela’s eastern neighbor on the continent’s north coast — would be able to export nearly all of the oil that it will begin producing, probably starting around 2020.  Early rough estimates by experts of how much recoverable oil Guyana could have range to more than four billion barrels, which at today’s prices would be worth more than $200 billion.

As mentioned in the article, oil prices at the time were around $50. One should also note that the population of Guyana is less than one million. This country could end up being the equivalent of Norway. Of course, the problem is that Venezuela holds claims on this area (or at least parts of this area).

Associated Press (22 December 2018) had this to say after the Venezuelan naval vessel approached the ExxonMobil ship: