US shale becomes world’s lowest-cost oil

US shale reserves are the lowest-cost option for future oil production and are likely to attract more investment than competing projects such as deepwater fields, according to a leading industry adviser.
About 60 per cent of the oil production that is economically viable at a crude price of $60 a barrel is in US shale, and only about 20 per cent is in deep water, said Wood Mackenzie, the consultancy.
Companies with US shale assets are likely to be at a competitive advantage over the next few years. Producers that rely on oilfields in higher-cost regions such as the North Sea and the deep waters off west Africa will have to cut costs or face shrinking output.
After the oil price plunge that began two years ago, production costs have been cut across the industry, but far more so in US shale.
Average costs per barrel have dropped by 30 to 40 per cent for US shale wells, but just 10 to 12 per cent for other oil projects, said Simon Flowers of Wood Mackenzie.
US shale regions that two years ago were in the middle of the cost curve for future oil supplies are now down towards the lower end.
Investments in the Eagle Ford shale of south Texas on average need a Brent crude price of $48 a barrel to break even, on Wood Mackenzie’s calculations, while projects in the Wolfcamp formation in the Permian Basin in west Texas need $39.
“There are more opportunities to invest in the US, and that’s where the investment will take place,” said Mr Flowers.
“If your investment options are in deep water, you’ve got quite a task on your hands. You might be asking: ‘Should we be getting into tight [shale] oil?’”
Brent was trading at $47.59 per barrel on Wednesday.
US companies that have shale oil reserves, including Chevron and ExxonMobil, have stressed the flexibility of those assets, which are developed with many wells costing a few million dollars each, rather than the multibillion-dollar projects often required for offshore production.
On Wood Mackenzie’s calculations, Brazil’s deepwater oilfields are so large that some will be commercially viable, but higher-cost regions could struggle to attract investment.
The number of large projects being given the go-ahead by oil and gas companies averaged 40 a year between 2007 and 2013 but dropped to just eight last year, according to Angus Rodger, also of Wood Mackenzie.
Although there has been a small flurry of investment decisions in the past few weeks, including the Chevron-led $36.8bn expansion of Tengiz in Kazakhstan, Mr Rodger expects only about 10 new big projects will go ahead this year.
While the economics of US shale are generally more attractive, Mr Flowers said the time taken to mobilise finance and workers to increase drilling and production meant that global demand could outstrip supply in a few years. That could drive oil prices to $80 to $85 per barrel in 2019-20, he added.





  

A renewed nationalism is stalking Europe

Nationalism is one of modern Europe’s strongest traditions, but it fell into disrepute after the second world war. Amid the avalanche of crises that have struck the EU over the past decade, of which Britain’s vote to leave the bloc is the latest example, nationalism is making a reappearance.
It takes a different form from the nationalism born in the 1789 French Revolution and buried in 1945. Today’s political and economic conditions are a world apart from those of 19th-century Europe, when many peoples rising to national consciousness had no state of their own. They are a world apart, too, from the 1918-1939 age of ideological extremes — fascism and communism — and severe economic hardship.
Contemporary Europe is, fundamentally, a peaceful and prosperous continent. The EU provides a framework for extremely close co-operation among national governments. It entrusts considerable power to supranational institutions, such as the European Commission, the European Parliament and the European Court of Justice. At a popular level, too, European societies are better acquainted with each other than ever, thanks to advances in communications, education and the ease of mass travel.
Yet nationalism, in new guises, is back on the stage. Its most obvious manifestations are, firstly, a stronger determination on the part of governments to defend their national self-interest within the EU and, secondly, the rise of rightwing populist nativism.
Both developments reflect profound political and social trends. There is a general mistrust of political elites, partly in Brussels but mainly at national level. More specifically, European voters of the moderate centre-left are losing faith in the capacity of 20th century-style social democracy to deliver economic security and protect identity.
The instinct to defend national self-interests in Brussels was never, of course, completely absent even in the heyday of EU integration in the 1980s and 1990s. However, it has soared to new heights amid the eurozone’s struggles to hold itself together and last year’s refugee and migrant emergency.
It is visible in the paralysed effort to deepen Europe’s banking union by means of a common deposit insurance scheme. It is visible in the ceaseless search by some governments to find ways of bending legally enshrined rules on fiscal discipline. And it is visible in a commission decision last week to let national parliaments have a veto over the terms of an EU-Canada trade deal. National self-defence is likely to torpedo a proposed EU-US trade accord, too.
A year ago, the EU’s “five presidents” — of the commission, European Council (which groups national leaders), European Central Bank, eurozone finance ministers’ group and Parliament — published a report on advancing economic, financial, fiscal and political union. Copies of the tepidly received report are gathering dust in the filing cabinets of national capitals.
No big push on integration is conceivable until after next year’s French presidential election and Germany’s parliamentary elections. Even then, it may not happen. France’s centre-right opposition Republicans, who are well-placed to win the presidential contest as well as the ensuing legislative elections, envisage stricter national border controls, a reduced role for the commission and more national influence over common EU policies. This stance has much in common with that of Poland’s conservative nationalist government.
The second form of nationalism in today’s Europe is radical rightwing populism. This is a more potent force than leftwing radicalism, as can be seen in the defeat of Podemos in Spain’s election last month, the increasing unpopularity of Greece’s Syriza-led government and the blind alley into which Jeremy Corbyn and his neo-Marxist allies are leading the UK’s Labour party.
The radical right, at least in western Europe, is less anti-Semitic than it was during France’s Dreyfus affair in the 1890s and under German Nazism. Rather, it is Islamophobic and anti-immigrant. In October, Austria will stage a re-run of its presidential election that may see a candidate of this type become the EU’s first such democratically chosen head of state.
Yet the radical right is more than nativist. It draws on a well of angry attitudes among sections of society that are offended not only by multiculturalism, or by losing out in a globalised economy, but by liberal values as such. Surveys of British voters in the June 23 referendum on EU membership show that one of the surest guides to whether someone would vote Leave was whether they supported a return to capital punishment.
Part of the appeal of rightwing populism is that it hammers away relentlessly on the theme that mainstream political parties, especially since the end of the Cold War, are almost indistinguishable from each other and offer no proper choice. Not without reason, the parties are depicted as corrupt and detached from everyday life. But far from everything is running in the populists’ favour.
Their chief weakness is that they have no economic policies beyond an iconoclastic rage at the euro, free trade and foreigners alleged to be parasites on the welfare state. The new nationalism, in its radical rightist colours, has no credible solutions for a modern Europe that, despite all its troubles, must pin its hopes for a better future on mutual co-operation and an open face to the world.



Tony Barber



Fonte: FT

After Brexit, the EU’s faultlines run through Rome

Europe’s faultline runs through Italy. Such was the candid opinion of one participant in a conference held last weekend by Eliamep, an Athens-based think-tank. Few other participants dissented.
By “Europe” everyone understood, primarily, the 19-nation eurozone. For the question on the minds of European policymakers is where, and to what extent, political, financial and economic contagion may spread from Britain’s June 23 vote to leave the EU.
The sharp falls in Italian banks’ share prices since the British referendum indicate where financial markets smell the danger of contagion. But Italy is the focus of attention not only because of its undercapitalised banks, colossal public debt and miserable economic growth.
Rather, EU governments and the markets sense trouble ahead in the way that Italy’s uncertain political outlook feeds into these problems, making them even harder to tackle. Their paramount concern is the referendum on far-reaching constitutional reforms that Matteo Renzi, Italy’s centre-left prime minister, plans to hold in October.
If voters reject these reforms, Mr Renzi says he will resign. Naturally, the ever-inventive, insouciant premier is free to retract his promise. However, he has staked much on this referendum, having described the reforms as essential for Italy’s reconstruction as a responsibly governed nation.
Defeat would damage Mr Renzi and risk driving Italy into prolonged political and economic instability. Confindustria, Italy’s employers’ group, predicts that defeat would cause the economy to shrink by 0.7 per cent in 2017 and 1.2 per cent in 2018.
Apart from putting Italian banks under more stress, such a recession would undo the good work of Mr Renzi’s government since 2014 in restoring a modicum of economic growth and modestly reducing unemployment. In a country that has recorded almost no growth since it became a eurozone founder-member in 1999, and whose public debt is more than 130 per cent of annual economic output, this would be a heavy blow.
Equally important, defeat for Mr Renzi might boost the fortunes of the anti-establishment Five Star Movement. This party, founded by the blogger-comedian Beppe Grillo, opposes the constitutional reforms. It is wholly inexperienced in government at national level, but it showed its strength last month by winning mayoral elections in Rome and Turin.
At present, the movement is just a few percentage points behind Mr Renzi’s Democratic party (PD) in opinion polls. Parliamentary elections are due in 2018 and only a rash forecaster would write off the Five-Star Movement’s chances. A referendum defeat for Mr Renzi may place the fate of Italy, a nation crucial to the survival of Europe’s currency union, in the hands of an idiosyncratic party that merrily talks of pulling the country out of the eurozone.
Yet a referendum victory for Mr Renzi would not eliminate all risks. The essence of his reform proposals is that Italy should dismantle its bicameral legislature, established in the 1948 constitution, and concentrate power in the lower house. Meanwhile, an electoral law passed by his government guarantees an absolute parliamentary majority for the party that wins a national election.
Mr Renzi’s advisers defend these reforms on the grounds they will cure Italy of its chronic governmental instability. More than 60 governments have come and gone since 1945, holding office, on average, for little more than a year each. Should the reforms take effect and lead to a PD victory in 2018, a five-year spell of strong government dedicated to economic reform might indeed ensue.
But if the Five-Star Movement won, it would find itself — thanks to Mr Renzi’s reforms — in firm control of a legislature reshaped to emasculate opposition to the ruling party.
Several banana skins lie in the EU’s path over the next 12 months, from a potential victory for the far right in Austria’s restaged presidential election in September to next year’s Dutch legislative and French presidential elections. But Italy’s referendum may be the most slippery banana skin of them all.



Tony Barber



Fonte: FT