Giant Oilfields, Rumalia Iraq, Santos-Campos Brazil, Orinoco Basin, Venezuela, South Pars Iran, US Permin Basin, their economic significance

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Gnostam
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January
14th,
2014
Independent Investment Advisor
ENERGY PRODUCTION WORLD
WIDE:
In recent years, the biggest trade deficits
were recorded with China, Japan,
Germany, Mexico and Saudi Arabia. United
States records trade surpluses with Hong
Kong, Australia, Netherlands and Belgium.
As an example of the scale of this shift in
economic potential in the US, consider that
in the last 10 years the deficit balance of
trade in the US has halved. Going forward,
if the US were to export the energy
bonanza, the US balance of trade would be
positive. This will have a huge impact on
capital flows, the value of the US $, and the
attractiveness of US treasuries.
There are over 4,000 actively producing
oilfields in the world. These fields produce
90 million barrels a day of crude oil from
almost one million individual wells. Most of
these oilfields are relatively small. The
average field produces less than 20,000
barrels per day. Three percent of these
oilfields make up almost half of this output.
This paper focuses on this small three
percent of giant oil fields whose daily
production exceeds 100,000 barrels a day.
The IEA caused a stir when it stated in
November of 2013 that it is likely that by
2015, the US would become the biggest
producer of energy, surpassing Saudi and
Russia. It will be very positive for heavy
industry in the US, in particular the
industries that supply machinery and
equipment for drilling wells.
Approximately 120 giant oilfields in the world
produce 100,000 barrels a day or higher.
In total, these fields produce in excess of
42.3 million barrels a day, or 47% of the
world’s total supply. Even within this tiny tip
of the world’s oilfields, half of these 120
giant fields barely exceed the minimum
100,000 barrel per day production
parameter that I have used to define a giant
oilfield. The 62 smallest of these “giant
fields” account for 12% of the world’s daily
oil supply. In contrast, the fourteen largest
account for over 20%. The average age of
these 14 largest fields is 43.5 years. This
data of course does not include the new
discoveries in the US, made possible by the
recovery through “Fracking”. In fact the
production in the US is so great, that it is
likely that the US balance of payments will
be affected.
The United States has been running
consistent trade deficits since 1980 due to
high imports of oil and consumer products.
We have long liked a company called
1

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Gnostam
LLC
PO
Box
960
Inverness,
CA
94937
January
14th,
2014
World Oil Production and Consumption
Source
EIA
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It
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3. Gnostam
LLC
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Inverness,
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January
14th
2014
US
PERMIAN
BASIN:
NEW
DISCOVERY
IS
WORLD’s
SECOND
LARGEST
OIL
FIELD
Location
of
Ghawar,
Saudi
Arabia,
world’s
largest
oil
field

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January
14th
2014

5. 4
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Gnostam
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TABLE OF WHO
FRACKING:
January
14th
2014
HAS THE OIL
PRE
National Oil Well Varco, [NOV] based in Houston
TX. We think the following US companies are
likely to benefit disproportionately from the
increase in energy production:
PAA, Pipelines, Core Labs, [CLB] seismic,
Schlumberger [SLB] diversified, ION Geophysical
[IO] offshore exploration, and Weatherford. We
also like EOG, CLR and PXD.
For this reason we believe that it is of vital
importance that businesses focus on the
opportunity to service these companies, both in
terms of staffing, supplies and as excellent
sources of capital markets demand, see for
example GE’s April 2013 $3.3 bn purchase of
Lufkin Industries, a producer pumps for the oil
industry.
Trend in US Balance of Trade, in
table above shows the incremental
impact of substitution of domestic
crude for water-borne imports. One
impact is clearly that the macroeconomic assumption that the US
$ will continue to weaken as it has for
the past 15 years, is likely false. The
other important impact is the how
important pipelines will become in the
new landscape, as opposed to water
borne tankers.

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Table of largest 10 Oi lfi el ds in the
world, pre US Fracking:
January
14th
2014
Permian Basin, which averaged 1.32 million
bbl/d in 2013, to grow more than any other
region in the United States through 2015.
CONCLUSIONS:
•
•
•
It is interesting that this list of the largest fields
in the world does not include the Permian
Basin in the Unites States, which is estimated
to be capable of over 1.6 million b/d in 2014.
If we look forward from 2012, the largest oil
fields are:
Ghawar, Saudi 1948, past peak;
Orinoco Basin, Venezuela, coming onstream
Permian Basin, USA 2010, capable > 2m/bd
Burgan, Great Kuwait 1927, past peak;
Kirkuk, Iraq, 1938, capable of increases;
Canterell Mexico 1976, capable of increase;
Iran South Pars, 2008, coming onstream.
The Permian Basin in West Texas and New
Mexico includes a variety of thick, overlapping
formations such as the Spraberry, Bone
Springs, and Wolfcamp. Crude oil producers
are investing heavily in research and
implementation of hydraulic fracturing in both
vertical and horizontal wells. The stacked
formations of the Permian allow vertical wells
to reach several productive zones, while
several horizontal wells drilled from the same
surface location can target different formations
or several pay zones within the same
formation. EIA forecasts production in the
•
•
•
•
•
•
The US could produce as much as 11
million b/d of crude in 2020 thanks to
shale, according to the International
Energy Agency, surpassing Saudi
Arabia.
US crude oil production breaches 7
million b/d, levels not seen since the
1990’s in 2015.
Production from key shale plays Eagle
Ford and Bakken rises to over 1.6 mn
b/d in January 2014, 900,000 b/d above
year-ago levels, and could top 3.2 mn
b/d combined in 2016.
Eagle Ford loadings at Corpus Christi
jump to 280,000 b/d in November
thanks to the completion of pipelines
and storage terminals.
Bakken rail car loadings jump to
500,000 b/d in December 2013 as
increasing rail loading and offloading
capacity provides more flexibility for
sellers.
US crude imports collapse in February
2013 to the lowest levels in 12 years at
8 million b/d in response to rising
domestic crude production.
US refiners Valero, Marathon, and
Phillips 66 announce shifts to domestic
shale crudes at many of their refineries;
US Atlantic Coast refiners begin to shift
to Bakken and eschew imports.
Continually wide discounts for WTI
relative to Brent spark US Midcontinent
to US Gulf Coast pipelines projects to
increase total capacity to 1.95 mn b/d
by 2014.
Delays in TransCanada’s northern
830,000 b/d Keystone XL line spur
alternative delivery options for
Canadian heavy.

7. 2
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Gnostam
LLC
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960
Inverness,
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94937
January
14th
2014
BALTIC
DRY
INEX
AS
AN
EFFECTIVE
LEADING
INDICATOR.
The Baltic Dry Index stood at 2,237 of
December 10, 2013. Indexes for Capesize
vessels stood at 4,011, while Panamax
vessels approached close to 2,000, at 1,997.
All three indexes have moved up together
since the last few days of November. On
December 12, the BDI stood at 2,337.
Rates have come a long way since the lows of
2012 and earlier this year on the back of lower
new build deliveries and stabilization in
China’s economic activity. Rates skyrocketed
from mid-August to early September this year
due to an earlier iron ore stocking activity in
China. That surprised the market and pushed
many stocks—like DryShips Inc. (DRYS),
Navios Maritime Partners LP (NMM), Navios
Maritime Holdings Inc. (NM), Safe Bulkers Inc.
(SB), and Diana Shipping Inc. (DSX).
The Baltic Dry Index/Gold shows that there
has been a recovery in Dry Shipping, while
gold has slipped. This can be interpreted as a
good foundation for a recovery, as we have
low input energy prices and cheap funding.
The main problem is that almost all credit
institutions are unable to lend, given their
balance sheets are full of supposed risk free
debt from Euro zone. It will take many years
for the equity and risk capital of the banks to
permit normal cycle lending.
Given the increase in volatility in shipping
rates for iron and copper, it is best perhaps to
avoid DRYS, and focus instead on a recovery
in tanker rates, and a shipper like Frontline,
FRO.

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January
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2014
LARGEST
OIL
FIELDS
IN
MID
EAST
BURGAN
OIL
FIELD
IN
KUWAIT-­‐IRAQ
BORDER

9. Gnostam
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January
14th
2014
Disclaimer:
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believe to be reliable, but we do not represent that they are accurate or complete, and they should not
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performance of an investment and we are expressly prohibited from guaranteeing accounts against
losses arising from market conditions.
Past performance is no guarantee of future results, and current performance may be lower or higher
than the performance data quoted.
Investment Disclaimer All investments involve different degrees of risk. You should be aware of
your risk tolerance level and financial situations at all times. Furthermore, you should read all
transaction confirmations, monthly, and year-end statements. Read any and all prospectuses carefully
before making any investment decisions. You are free at all times to accept or reject all investment
recommendations made. All products sold are subject to market risk and may result in the entire loss
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Gnostam
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