Oilfield Daily News

They’re playing a global game of chicken.

At stake: nearly one-fifth of the world’s oil supply.

And it appears as though nobody wants to flinch first.

Sure, we’ve heard the bluffing before; but the latest warning from Iran that they will definitely close the Strait of Hormuz if the EU oil embargo interrupts their crude exports could prove disastrous.

Of course, Obama made his position clear during his State of the Union address on Tuesday night — and it didn’t bode well for a peaceful resolution:

The regime is more isolated than ever before; its leaders are faced with crippling sanctions, and as long as they shirk their responsibilities, this press will not relent. Let there be no doubt: America is determined to prevent Iran from getting a nuclear weapon, and I will take no options off the table to achieve that goal.

So much for not flinching…

We may only give the president’s hard-lined words a passing thought, especially considering our oil imports from Saudi Arabia have fallen by about 30% over the last four years — and continue to decline.

Some countries can’t say the same…

Chinese Woes and Canadian Cheers

Between Saudi Arabia and Iran, almost two million barrels per day are flowing into China.

As the second-largest crude buyer in the world (yes, Uncle Sam still holds on tightly to that crown), they can’t be too happy with U.S. foreign policy at the moment.

Then again, we’re not expecting China to sit idle while a third world war looms. And we have a good idea where they’re looking to secure that energy.

A North American Energy Comeback

Make no mistake about it: Canada and the U.S. are flush with natural gas.

Now, that’s not to say consumption has tapered off. Rather, we’re consuming more of the stuff than ever before:

And as Nick Hodge explained yesterday, that demand is going nowhere but up from here on out.

But even when our natural gas supply glut eases over the next few years (a situation I’ll delve into deeper next week), there will still be a certain degree of shipping it across the Pacific — especially with prices this low here at home:

For investors, some charts can get even uglier:

It wouldn’t surprise me if Obama had a stake in UNG. Despite all the bullish rhetoric in his speech, he got one part dead wrong.

~~eac_nat_gas~~

Obama’s Slipup

Oddly enough, it wasn’t just Obama’s ‘No Options Off the Table’ approach to dealing with Iran that caught me off guard.

I practically fell out of my chair after the president said, “Our experience with shale gas shows us that the payoffs on these public investments don’t always come right away.”

It was easy to see how he had missed the mark with that statement. Had he followed my Energy and Capital readers and me in 2010, he could have nearly doubled his investment on burgeoning shale plays like Range Resources (NYSE: RRC):

Believe me, that’s not an anomaly for us.

The increase of M&A deals steamrolling through North America has given investors a sudden flurry of profits.

One of the best recent examples of this was last summer when BHP shelled out $12.1 billion in cash for Petrohawk Energy. That same day, shale gas investors pocketed a 61% premium on their Petrohawk shares.

In 2008, we saw the same situation unfold as ExxonMobil bought out XTO Energy, a strong natural gas player in the U.S. Exxon’s entrance into the shale industry — one that came with a $41 billion price tag.

Although Obama didn’t get the memo on how profitable these companies can be, we can certainly understand why he was excited, can’t we?

After all, our domestic gas production is on the verge of exceeding our consumption, with billions of dollars in future LNG exports all but guaranteed.

And the EIA is optimistic that our crude output will reach 6.7 million barrels per day by 2020.

You see, there’s a reason this surge in M&A deals will continue over the next few years…

Fact is, many of the large oil and gas companies are having a tough time keeping their own production afloat — and they’re willing to spend billions to do it. ConocoPhillips, for example, just announced a 17% increase in year-over-year revenue, yet production declined by almost 8% in their fourth-quarter production.

As for the payoffs for public investments, Mr. Obama, the future of our U.S. oil and gas production is ripe for the picking.

~~nat_gas2~~

~~keiths_signoff~~

Natural Gas Rebound originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

On Tuesday, President Barack Obama’s State of the Union address outlined a number of successes in the recent past and focuses for the nation moving into 2012.

One of the hot topics was his attention to clean energy.

The President noted that in 2011, the United States cut down dependence on foreign oil, but he acknowledged that this small decline isn’t enough.

He called for a move away from oil subsidies, turning toward renewables instead.

“It’s time to end the taxpayer giveaways to an industry that rarely has been more profitable and double down on a clean energy industry that never has been more promising.”

One way to end foreign dependence is an increase in renewable forms of energy, and he proposed providing more incentives to energy companies.

He urged Congress to “set a clean energy standard that creates a market for innovation.”

The President even expressed his opinion that moves should be made to prevent further climate change.

His address announced a move by the U.S. Navy to purchase a large portion of clean energy capacity, and he urged others to follow suit.

He called for incentives for manufacturers to upgrade their energy plans to renewable sources.  Not only will it eliminate waste, but it will also save the companies money.

“Their energy bills will be a hundred billion dollars lower over the next decade. And America will have less pollution, more manufacturing, more jobs for construction workers who need them.”

Appealing to both sides on fracking, he announced that he will be sure companies participating in hydraulic fracturing proceed safely and expose the details of their processes.

The President did not mention his recent rejection of Keystone XL or the specific failure of Solyndra.

That’s all for now,

Brianna

State of the Union’s Energy originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

AWE has executed a Sale and Purchase Agreement with a subsidiary of Genting whereby a wholly owned subsidiary of AWE will acquire a 100% interest and operatorship of two PSCs offshore Indonesia.

North Sea Energy has hired Senergy to commence additional work on its Bobcat Prospect, Bass Prospect, Badger Prospect, Bluebird Discovery and Blackbird Prospects.

Lucas Energy, Inc. announced that the Company has spudded the Hagen Ranch Unit No.1HST well in Gonzales County, Texas.

Far East Energy announced positive test results from three more appraisal wells located at significant distances from the 1H Pilot Area in the Company’s Shouyang Block.

“We are also very encouraged by the shale encountered at Ince Marshes as this exceeds what we expected and we look forward to the results of the interpretation of the logs and samples,” said Andrew Austin.

Baker Hughes declared the regular quarterly cash dividend of $0.15 per share of common stock.

Lucas Energy, Inc. announced that the Company has spudded the Hagen Ranch Unit No.1HST well in Gonzales County, Texas.

A JV between Iraq, Shell and Mitsubishi to capture and process huge volumes of gas flared from its giant southern oil fields is expected to start production this year, said Iraqi official.