David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    Musings From the Oil Patch August 13th 2019

    Thanks to a subscriber for this edition of Allen Brooks’ ever-interesting report for PPHB. Here is a section:

    Today’s energy world is nothing like what it was prior to OPEC’s move.  It is even moving away from the model that evolved immediately after the price collapse.  Both of those models have been shunned by investors.  A new model is evolving in response to investor demands that energy companies be profitable and return cash to investors.  This new model is evolving in response to the disconnect between energy company fundamentals and their share prices.  That disconnect is evident in Exhibit 8, which tracks oil prices and stock indexes reflecting oil and oil service companies since mid-2014 when oil prices began sliding, before OPEC delivered its coup de grâce.  Oil company stocks (XLE) performed better during this period, largely because they pay dividends, offering investors income while waiting for share values to reflect higher oil prices.  Oil service stocks (OSX) fell steadily in this period, because of too much debt and shrinking market activity leading to substantial asset impairment and eroding company values.  

    This section continues in the Subscriber's Area.

    Mysterious radiation leak, 100x larger than Fukushima disaster, traced to Russian facility

    This article from the Bigthink.com may be of interest to subscribers. Here is a section:

    "Today most of these European networks are connected to each other via the informal 'Ring of Five' (Ro5) platform for the purpose of rapid exchange of expert information on a laboratory level about airborne radionuclides detected at trace levels," it says. "In October 2017, an unprecedented release of ruthenium-106 into the atmosphere was the subject of numerous detections and exchanges within the Ro5."

    State-owned Russian nuclear corporation Rosatom denied the findings of the recent study.

    "We maintain that there have been no reportable events at any Rosatom-operated plants or facilities," Rosatom said. "Both the national regulator and experts from an independent international inquiry inspected the Mayak facility back in 2017 and found nothing to suggest that the ruthenium-106 isotope originated from this site, nor found any traces of an alleged accident, nor found any evidence of local staff exposure to elevated levels of radioactivity."

    This section continues in the Subscriber's Area.

    As Shale Drillers Stumble, Big Oil Says It Can Do Permian Better

    This article by Rachel Adams-Heard for Bloomberg may be of interest to subscribers. Here is a section:

    Concho Resources Inc., long considered one of the Permian’s premier operators, was forced to scale back activity after drilling almost two dozen wells too closely together. That move by the Midland, Texas-based producer spooked investors across the industry, with Evercore ISI predicting the “carnage” would have a lasting impact.

    Concho’s problem with well spacing highlights the challenges of fracking so-called child wells: Too close to the “parent,” and output is less prolific; too far apart, and companies risk leaving oil in the ground.

    Exxon and Chevron say they aren’t as exposed to those problems. Because of their size relative to smaller independent producers, the oil giants are able to lock up acreage, giving them room to be more conservative in their well spacing.

    This section continues in the Subscriber's Area.

    Tesla's big battery in South Australia is a "complete waste of resources," claims Nissan

    This article by Simon Alvarez for Teslarati.com may be of interest to subscribers. Here is a section:

    Thomas’ statement comes as he was discussing the new Leaf’s vehicle-to-grid/vehicle-to-home (V2G/V2H) system, which will allow the all-electric car to serve as a home battery unit. With the system in place, the Leaf will not only store energy by plugging into a home or business; the vehicle could also serve the energy back when needed. V2H is already in use in countries such as Japan, and a release in Australia is expected within six months. 

    The Nissan executive noted that the Leaf’s V2G system has the potential to help homeowners save money, especially if the vehicle charges through a rooftop solar system during the day, and uses its stored energy to power appliances and lights at night. 

    “The way we distribute and consume energy is fundamentally inefficient … what we need is flexibility in the system. It’s great that we’ve invested all this money in renewable energy, but fundamentally we’re wasting most of that energy because it’s all being generated in the middle of the day when we don’t really need it,” he said. 

    Tim Washington, CEO of charging solutions provider Jetcharge, noted that Nissan V2H technology has a lot of potential, considering that vehicles spend much of their time just parked, or in the case of electric cars, plugged in. 

    This section continues in the Subscriber's Area.

    The Top Miners Are Split on How to Chase the EV Battery Boom

    This article by David Stringer for Bloomberg may be of interest to subscribers. Here is a section:

    “We did a review of all the battery input materials -- nickel, cobalt, lithium,” said Eduard Haegel, asset president at the BHP’s Nickel West unit. “We think that in the medium-to-longer term there will be a margin that will be sticky for nickel -- we think it’s an attractive commodity.”

    BHP, the biggest miner, this year reversed long-term efforts to seek a buyer for the division, opting to retain Nickel West to benefit from forecast growth in lithium-ion batteries and a scarcity of high-quality nickel supply. From the second quarter of 2020, the unit will begin production of bright-turquoise colored nickel sulphate -- a premium raw material for the battery supply chain -- from a nickel refinery south of Perth, with plans to potentially carry out the industry’s largest expansion.

    This section continues in the Subscriber's Area.

    Evaluating US Nuclear Competitiveness and its Future as a Carbon-Free Clean Energy Source

    Thanks to a Keith Rabin for this interview of Dr.Robert F.Ichord. Here is a section:

    Both Russia and China are strongly committed to domestic nuclear development, international nuclear power exports, and the development of small modular reactors (SMR) and advanced nuclear reactors. Russia is building seven third–generation VVER–1200 reactors domestically and over twenty internationally. China is building domestically about eleven indigenous units, not including the Russia VVERs, the French EPRs or the recently completed US AP–1000s. They have two reactors of the Hualong One design under construction in Pakistan near Karachi and one planned at Chasma, the site of older, smaller Chinese reactors. They are also pursuing deals in the UK, Romania and Argentina as well as Bulgaria and several other countries. These strong state–financed commitments create the domestic and industrial capabilities needed for future innovation as well as to establish long–term political and economic relationships with countries of strategic interest. US historical influence over international standards and regulatory system development is therefore being challenged as well as US overall foreign policy interests in democracy and open markets. South Korean and Japanese companies are also international competitors but remain long–time US collaborators.

    According to the World Nuclear Association about 30 countries are considering, planning or starting nuclear power programs. These range from sophisticated economies to developing nations. Is nuclear a viable option for emerging and frontier economies and how does installation and utilization differ in these locations from developed economies in terms of safety, non–proliferation as well as political stability, environmental and regulatory standards, supporting infrastructure and other factors?

    I believe there is a major shift occurring in the global nuclear industry from the industrial countries to the non–OECD countries. Most of future global electricity growth will be in these countries and they want to diversify and develop cleaner energy systems. Despite the huge upfront costs, countries are deciding to accept attractive Russian and Chinese financing for these large, multi–billion dollar units. There is the national pride involved from joining the “nuclear club' as well as possible corruption in certain cases. Russia also offers military equipment as well as full fuel and operating services in its strategy to expand influence. Although both Russia and China have significant training efforts to develop local capacities, overall governance and transparency in a number of these countries is weak and the commitment to competent Nuclear Regulatory Commission (NRC)–like regulatory institutions is questionable. Although most of the countries have signed the Non–Proliferation Treaty (NPT) and the International Atomic Energy Agency (IAEA) Additional Protocol, the introduction of current nuclear power technologies in countries and regions – in which there are significant tensions and political conflicts, e.g. Middle East – raises serious concerns for US foreign policy.

    This section continues in the Subscriber's Area.

    Email of the day on climate change from Dr. David Brown:

    I am impressed by your bravery in questioning much that appears in the media about 'climate change'. I am sure the climate is changing, as it is still warming from the last ice age, but that is a natural cycle. As a dyed-in-the-wool scientist, trained carefully in my PhD studies in the logic, method and philosophy of science, I have been horrified by the apparent abandonment of scientific method by many in research on our climate. 

    I say this for two reasons. The first is that a basic premise of scientific method is that nothing can ever be proven for certain, that all conclusions are subject to change. Adoption of that approach was a key step in development of the scientific method and abandonment of religious-type certainty, yet it appears to have been abandoned as far as climate research in concerned. Second, you may remember that ex-president Obama opined that no grant money should be given to scientists seeking to disprove theories of climate change, yet the whole scientific method IS to generate experiments to disprove a hypothesis. I recommend subscribers read Karl Popper on this matter, as he explains the scientific method very clearly. 

    I do not know whether human activity is particularly relevant to climate change, but I do know that much that passes as 'scientific research and comment' is just the opposite. I am more concerned about pollution that carbon dioxide, and that focus would have been much wiser than the approach adopted by the EU that ignored common sense, led to subsidy of diesel engines, and caused tens of thousands of premature deaths. (Was anyone ever held to account?). I never switched to diesel.

    Well, despite Obama, there are alternative research views being published and this article refers to one quite contrary to the carbon dioxide hypothesis.

    The original research article can be accessed by links in the article and I strongly suggest subscribers do read it to at least loosen their views a little.

    It suggests that human influence is negligible and that any changes are mostly due to increased cloud cover generated by cycles in cosmic radiation. However, I fully expect the response to an alternative view will be as you stated: "Confirming evidence is accepted at face value but non-confirming evidence is dismissed. This practice is justified by the urgency of the problem and the need for action, but it is exactly when a vital decision needs to be made that cool heads need to prevail." 

    Well done Eoin for stating this. You are impressive in your clear thinking and all subscribers benefit from your wisdom if they learn from you while investing.

    This section continues in the Subscriber's Area.

    Email of the day on climate change.

    Regarding the Allen Brooks piece on Climate change. I have to say I find the benign conclusions of the report totally unconvincing. Over the years I have read widely on the subject and have been especially impressed by the publications and books of one of the most eminent climate scientists whose work goes back more than 50 years. I refer to Professor James Lovelock. In a recent BBC interview, he suggested that global warming may be entering an acceleration phase. As I write this reply a news story has just announced that a high-pressure dome is due to affect the Eastern states of the US with predicted city temperatures likely to exceed 40 deg C. The simple fact is that you cannot expect hydrocarbons that have been trapped in the Earth’s crust over many millions of years, to be exploited by man over a few decades with the bye products going into the atmosphere, without grave consequences.to follow. Globally we have just experienced the hottest June ever and significantly Siberia has been 7 deg C above normal for the time of year. I mention this in respect of the melting permafrost which is now releasing methane in significant amounts. A gas thirty times more significant than CO2.as a greenhouse gas Of course this topic is an extremely emotional one, simply because the decisions made now on how we collectively proceed could not be more important. On balance I think I would go with the IPCC and James Lovelock. His books on Gaia theory, by the way, are worth reading

    Read entire article