Thursday, August 28, 2014

Shale/Oil companies to Argentina: Give us some stable laws.

Another shale story, this time Argentina. The Economist (Sorry this is last week's. I'm still behind due to holidays ;) ) writes that local towns are already warming up for an oil bonanza from one of the largest shale basins in the world. Yet many oil companies are not yet past exploration phase, and may delay production decisions until the Argentina government adopts some stable laws that safeguard the $140B-$200B required in investments.

Looks like great stuff for research on institutions as well as local economic development in preparation for an Oil boom. If anyone is aware of academic research on this case, let us know!

Wednesday, August 27, 2014

US Shale: Innovation race against exhaustion

FT offers an analysis setting out how oil companies active in US shale oil extraction find new ways to improve production in existing wells, and increase there expected recovery volumes. It is pointed out that without such technical innovation oil wells would exhaust very rapidly and with that the entire US shale boom. How much innovation is left is anyone's guess. Companies are optimistic. Some analysts see risks in the required price (below $100/barrel many wells would not be profitable) and the high decay rate of shale well production, despite technical innovation. At the same time, much of the rapid production growth is made possible through outside finance, rather than earnings through production. A decline in the opportunity to attract outside finance is therefore a risk for further growth. Now, however, the FT reports that this risk is diminishing as companies are able to finance their capital expenditures more and more from earnings of production.

Tuesday, August 26, 2014

Celebs keep coming to Canada's oil sands

Remember Neil Young's visit to Fort McMurrey? Now it's Leonardo DiCaprio going to Fort McMurray and the First Nations community of Fort Chipewyan, Canada's Globe and Mail reports. The article further features some replies from industry and government on the visit, including from a industry spokesman: "Like Canadians, we [the industry] are growing tired of the fad of celebrity environmentalists coming into the region for a few hours or a few days, and offering their ideas and solutions to developing this resource"

Monday, August 25, 2014

The Effect of the Mining Boom on the Australian Economy

Researchers at the Reserve Bank of Australia published a discussion paper on the effects of the Austrialian mining boom.
This paper estimates the effects of the mining boom in Australia, using a large-scale structural macroeconometric model, AUS-M. We estimate that the mining boom boosted real per capita household disposable income by 13 per cent by 2013. The boom has contributed to a large appreciation of the Australian dollar that has weighed on other industries exposed to trade, such as manufacturing and agriculture. However, because manufacturing benefits from higher demand for inputs to mining, the deindustrialisation that sometimes accompanies resource booms – the so-called ‘Dutch disease’ – has not been strong.

More precisely, the authors use the method of creating counterfactuals from a baseline. The counterfactual is the case where no mining boom occurs, while leaving some variables unchanged (i.e. world economic factors) and others to adapt endogenously (i.e. Australian economic factors).

The paper has already found some media coverage see: Sydney Morning Herald [30% went to buying cars], and ABC

Tuesday, August 19, 2014

Some sobering insights from Micheal Levi on world oil and gas markets and politics

In the plane, on my way back from holidays in Georgia, I read an interesting interview with Michael Levi (David M. Rubinstein Senior Fellow for Energy and the Environment and Director of the Maurice R. Greenberg Center for Geoeconomic Studies at the Council on Foreign Relations, a US think tank). For insights on the potential for US LNG to affect European productivity (main effect) and energy security (limited) in the face of severing Russian relations, beneficiaries of Iraqi oil production (in the end everyone), the new US' EPA carbon emission regulations for powerplants (the next best thing after the lack of comprehensive national regulation), and China (in frontier, i.e politically risky, countries, but not yet at the frontier of extraction and production technology), see the original at I read a republished version of the weekly GeorgiaToday.