Tenth Annual Energy Paper
Comment of the Day

September 04 2020

Commentary by Eoin Treacy

Tenth Annual Energy Paper

Thanks to a subscriber for this report from JPMorgan which may be of interest. Here is a section:

We expect some of the “base” decline from existing shale wells to be replaced by new wells; the harder question is by how much. Operating and development costs have declined, well productivity has improved and there are large sunk costs in Appalachia (i.e., lease agreement options) that may compel many producers to keep drilling irrespective of lifecycle economics. Furthermore, if the onshore shale boom fades, we might see a revival of US offshore oil & gas production in the Gulf of Mexico. US oil production is also very sensitive to price: $55-$65 oil prices could add 1-3 mm bpd to US production when compared with JP Morgan’s $40 base case WTI price forecast. Even so, the US may now be close to peak oil and natural gas production and peak energy independence given financial pressures on the shale industry, and environmental pressures discussed next.

Eoin Treacy's view

A link to the full report is posted in the Subscriber's Area. 

This report is laden with interesting graphics and statistics which highlight the challenges of developing renewable as well conventional and unconventional energy solutions. The correlation between renewable stocks and oil prices broke down late last year. That was a meaningful event and suggested the market has moved on from thinking of renewables solely in terms of cost competition with oil. That implies an alternative set of metrics is now be used to value the sector.

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