Why Don't Oil Companies Drill On Existing Leases

Discussion in 'Economy' started by Listening, Aug 25, 2012.

  1. Listening
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    Listening Gold Member

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    FactsPlusLogic: Why Don't They Drill on Existing Oil Leases?

    There is plenty of oil in offshore areas already leased to oil companies, so why don’t the oil companies just go get that oil rather than ask for new leases. The reason is that the current price of oil is not high enough to make it profitable. It is a great mistake to suppose that all new oil comes at the same price.

    The price of recovering an additional barrel of oil includes exploring the geology, leasing the area, drilling test wells, drilling production wells, applying technology to help increase the recovery, and shipping it. The early steps require capital investment that has costs of either borrowing or losing income that would have resulted from investing it elsewhere. Chevron invested $2 billion in a new oil field 190 miles off of Louisiana prior to any oil flowing.

    ***************************

    This thread will be to address the conspiracy theories of people like EdTC. It relates to oil drilling and oil refining.
     
  2. uscitizen
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    uscitizen Senior Member

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    They prefer to sit on the leases till the price goes up.
     
  3. Listening
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    Listening Gold Member

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    This is supposed to prove something. There are no numbers. No annual reports. Nothing. Just because some pissed off group mouths off...you think it is so ? Please provide your "proof".

    Here is from your link:

    It takes about four years to build a large refinery, so any substantial addition to capacity from new plants would have had to begin by the mid-1990's, energy experts acknowledge.

    But industry documents obtained by Senator Ron Wyden, Democrat of Oregon, suggest that in the mid-1990's, oil companies had no interest in building refineries because of low profit margins and, in fact, were discussing the need to curtail refinery output to increase profits.

    ******************

    In the mid 1990's, oil refineries were at about 84% untilization. That is death for a refinery. They often work on razor thin margins and volume is key. If you check, you'll see that at this time, most of the majors were selling off refineries. Tosco was picking up BP and assets an Valero was going from a one refinery company to almost 19 refineries. Why ? Because the majors were getting out. Texaco no long has any refineries in the U.S. It was a losing business. They all wanted to produce oil.

    There was nothing secret about the need to cut capacity.l

    In about 2006, when margins were good....many refineries announced huge expansions. And were moving forward until the bottom dropped out in 2008.

    You will also find that Reliance (India) and the Saudi's have brought huge export refineries on line which were contributors to the shutting down of the refineries on the east coast (which just happened.....you never addressed...your freaking article is years ago and has nothing to do with those refineries shutting down).

    Shell wanted to shut Bakersfield because it had no conversion capacity. It does not even have an alky plant. Barbara B.S. Boxer made a deal to get it sold to Flyng J and promised she'd help out with the environmental regs. There are still huge pieces of equipment sitting on the ground out there (including a hydrocracking reactor) because they never got permits. Flying J went bankrupt because of this and some bad oil purchasing practices. The refinery was bought by Alon who is now running it. I am sure Flying J appreciates BBSB.

    Lets hear some more Ed...you got any more 20 year old don't apply any more bull crap articles.
     
    Last edited: Aug 25, 2012
  4. Mr. H.
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    Mr. H. Diamond Member

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    It's extremely expensive to drill offshore. When geologists identify a likely source reservoir, several surrounding blocks are often leased in order to provide a cushion of sorts in the event a significant play is found. Also, an inventory of blocks is accumulated and ranked by priority with the most promising blocks explored first.

    Your link has some good stuff in it, but overall it's bullshit.
     
  5. Listening
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    Listening Gold Member

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    I don't hold to the link as an absolute source. There are so many other factors involved.

    What part or parts of it do you find objectionable ?
     
  6. Politico
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    Politico Gold Member

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    Just because someone has a lease doesn't mean they are allowed or able to drill on it. But ultimately you can pump all the oil in the world but it does no good unless you have the refining fining capacity to convert it.
     
  7. expat_panama
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    expat_panama Silver Member

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  8. Mr. H.
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    Mr. H. Diamond Member

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    The tone of the article perpetuates the liberal myth that oil and gas operators are purposefully withholding reserves by not developing all offshore acreage. This argument is being used against the industry as a reason for not opening the eastern Gulf, the Atlantic coast, and the Pacific coast.

    There is plenty of oil in offshore areas already leased to oil companies...
    Says who? The author?

    Again- there are some good and accurate facts in the story but it leaves this reader with the impression that industry has no merit in seeking permits for offshore areas that are currently off-limits (see above).

    The government could contract to buy large quantities of newly developed oil from American producers at, say, $120 per barrel, for delivery starting in five years.

    That's just plain silly.
     
  9. Sallow
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    Sallow The Big Bad Wolf. Supporting Member

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    That's it in a nutshell.

    Oil companies have no interest in flooding the market with their product.
     
  10. Sallow
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    Sallow The Big Bad Wolf. Supporting Member

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    The "silliness" is relying in an old, expensive, dirty energy source that driven by people with more money concentrated into their sector then all monies generated by every capitalistic venture in history combined. With that sort of wealth comes enormous power and a vast interest in holding on to it.

    But bottom line..the interest of oil companies is profit. That's it.
     

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