Member Info for Dumbly

Thanks, Stevo.

Stevo12, that's a disgraceful and cynical use of statistics by Labour and they need to be called out and the claim retracted.
I want to help get this done, but I first want to make sure I fully understand what you're claiming. You mean they compared the government's fixed price for electricity in the recent round of wind farm bids, which is 105p per therm (guaranteed and inflation linked for 15 years) with the price of electricity on JUST ONE DAY in August 22 when the wind did not blow and, combined with Ukraine effect, gas prices were close to 900p a therm . As result of the "marginal pricing" method for electricity pricing, where gas is normally the fuel used to generate the last amount of electricity required, the cost of electricity on that day was abnormally high. This was a short spike and gas prices are now down to 100p a therm and below cost of wind again.
If I am not getting it right I would appreciate you "correcting" so I don't run the risk of sending out something which could easily be dismissed. Thanks.

Tarmak, you mean you would like to see the source for the prices I gave?
Take a look at the first table here: https://inflationdata.com/articles/inflation-adjusted-prices/historical-crude-oil-prices-table/. It is based on Illinois Crude, which typically is a couple of dollars cheaper per barrel than WTI. I added together the 20 years from 2003 to 2022 to get the $80 average figure, then added $2 to get from Illiniois Crude to WTI and another $3 to get from WTI to Brent to reach $85.. Maybe the WTI to Brent spread over that period is more like $2 than $3, as until 2011 they were pretty much in lockstep before Brent pulled away https://rarepetro.com/brent-wti-crude-price-spread-an-ever-changing-dynamic-in-commodity-futures/. I don’t know which country’s inflation rate was used, but assume it was the US’s.
I can't find something that calculates things directly on Brent and uses the UK's inflation rate.

Tarmak, I have the INFLALTION ADJUSTED average price since 2003 for WTI as $80 and Brent $85.

Absolutely, romaron, how on earth can any state authority expect a private company to maintain their side of an arrangement when the government changes the rules of the game in such a drastic way.
See also: https://www.nstauthority.co.uk/news-publications/news/2023/nsta-gets-tough-with-firm-suspected-of-undermining-uk-energy-security/

On barbers and haircuts. This person https://en.wikipedia.org/wiki/Friederike_Otto is part of the group of scientists advising the UN. Yesterday I heard her on RD 4, in answer to the question about what is going to happen to new hydrocarbon projects, say that "they will become stranded assets". She did not say how much and where living standards would need to fall to allow this.

romaron, yes, or as per Oxygen, by 23rd March when the Finance Bill gets published and when any amendments to the EPL should be known.

Good time to slip out a perfectly justified price floor for the EPL

"Rishi Sunak delays key announcements on crime, energy and pensions as Boris Johnson returns to the limelight.
Rishi Sunak is running out of time to deliver a number of key policies which have been delayed as a result of Boris Johnson and Brexit taking centre stage this week. To avoid getting crowded out of the news agenda, No 10 has decided to push back multiple announcements which had previously been mooted for this week. The energy security strategy, which will lay out a plan to reach net zero carbon emissions by 2050 while creating new jobs in the green economy, is legally required to be published this month. https://www.msn.com/en-gb/news/world/rishi-sunak-delays-key-announcements-on-crime-energy-and-pensions-as-boris-johnson-returns-to-the-limelight/ar-AA18OS3A?ocid=msedgntp&cvid=1658478ca499441f967f6e80d0e0b481&ei=23

Someone needs to explain to the workers, altho they probably know, that the money (especially from the UK-centric companies) has gone to the government. Disgraceful behaviour and words from the union bosses.
The result of all this demonising and attacking the O&G companies is going to be a massive reduction of investment in the UKCS.

mrc, Krak, Jan, I am not disagreeing with you as, obviously, none of us know what will happen. But let me explain my (wishful?) thinking. Rosebank, a massive field, is awaiting a FID “in the Spring”. Equinor have made it clear going ahead is dependent on changes to the EPL and a stable fiscal environment. If there is no change to the EPL and they still go ahead then they it will look like they cried wolf. Not impossible they would proceed anyway, but unlikely. And even if there are changes to the EPL Equinor will still want Labour to set-out their energy supply security strategy stall, as if this is not known then the business case risks of proceeding are too big. Modifying the EPL now, especially given the progression of the price of Brent from a brief peak of $123 to its current $73, is entirely reasonable and defendable, and it would force Labour to make their position clear regarding energy security and hydrocarbons. If Labour maintain the position expressed at Davos - https://www.cityam.com/starmer-tells-davos-labour-would-ban-oil-and-gas-projects-as-critics-sat-it-would-jeopardise-net-zero-and-energy-security/?amp=1 - then likely Rosebank and other projects would not proceed and the Cons would pin the blame for this and future related consequences (jeopardising net zero results and energy security) fairly and squarely on Labour.
During Davos, a Labour party spokesperson said: “As part of the [“clean energy superpower.”] plan, Labour will manage existing oil and gas wells sustainably [WTF does that mean?] over the coming decades recognising the jobs and local economic value they bring. The transition to net zero is an opportunity for industry, and a process. We won’t turn off the taps, but part of our plan is to stop licenses for new oil and gas fields.” Well, the “taps” will be turned significantly down if new licences are stopped and/or investment is not made to maintain production at existing fields.

Let’s have some fun! We need it!!
An “EPL Challenge” to guess what will be announced this week, from sod all to… Closest with the detail wins. No prize just the honour. What you think will happen, not what you want. Can be tough to separate the two.
I’m between nothing being announced and a floor price of $65, with my guess being the latter. I see tiered rates and realised prices as too complicated to administer.
Good luck!

At the end of the article:
https://www.telegraph.co.uk/business/2023/03/17/lower-quality-gas-pumped-households-boost-energy-security/

mrc, noted, thanks.

Stevo12, thanks for the explanation. Presented like that, as said, it does not make good reading. For this reason, I guess, the companies do not present/highlight the figures in this way. However, this indicator of total cost per barrel (excluding debt payments and tax) together with the realised oil price provides a more transparent way and useful way for understanding and evaluating the situation. As we all seem to agree, a great deal now hinges on what will, or will not, be done regarding the EPL.

Thanks, Stumpy. That article was dated 10/3 and was referring to what may be announced in the budget. I had understood from your post that something had been written since the budget suggesting next week something will be announced about the EPL.

Stumpy,
Re "SS17 on the HBR board posted a link from Oilvoice suggesting that Hunts details on the EPL will come next week" - I cannot find this, are you able to post the content that led to this suggestion? Thanks.

Stevo12, the info in your 00:28 post about EnQuest's cash outflows, excluding debt repayments and tax, being $60 per barrel in 2022 does not make good reading. I can see you know your stuff, so I assume this $60 figure is correct. As this is such a key value indicator, why do the companies not highlight it more? Or, do they and I am just missing it?

Banburyboy,
Agreed. . That's why first on my list is to get a floor,. Any floor! We can discuss the details after that, but first a floor please.

garyn,
MY EPL hierarchy of needs are:
1. Get a floor in place
2. The floor to be above $70 (Brent’s inflation-adjusted average since 2000 is $85)
3. The floor based on realised, post-hedging, prices (doubt it, tho, as this would open up the opportunity for financial engineering to show hedge just below the/a floor)
4. The tax rate to be staggered across several different floors

Concerning the EPL and Norway, reports suggest the possibility of Equinor pulling out of the Rosebank project could be a major factor to cause the government to bring in a price floor to the EPL. Rosebank is massive, nearly three times the size of the Cambo field, and is potentially the source of 500m barrels of oil and gas. Equinor are owned 67% by the Norwegian government and own 80% of the Rosebank project. Rosebank is currently awaiting a final investment decision - expected later this year. In 2021 the UK imported £14.5 billion of gas from Norway, which accounted for 77% of all UK gas imports. Norway was the UK's main crude oil supplier in 2021, with 49.9% (£8.8 billion) of the total crude oil imports coming from Norway. In 2020, 40% of Norway's exports stemmed from the petroleum sector, and 87% of Norway’s O&G production is exported. I can’t find the percentage of production from government controlled companies. Must be… 30% or so. Anyway, the tax rate is 78%, so in any case the Norwegian government gets a big cut of all production. Coming back to Rosebank and the EPL, Equinor’s leverage with the UK government would appear significant, as why would they plough funds into the UKCS and, eventually, pay 75% to the UK government (the assumption has to be, until evidence suggests otherwise, that the EPL will be permanent) when they could put the funds into their own CS (assuming the reserves are there) and keep the 78% or more for themselves, plus create jobs etc etc. And probably sell this extra production from Norway to… the UK. What are the thoughts on his reasoning, that Equinor has big leverage re Rosebank and really could pull the plug if the EPL conditions are not modified and, ideally, a long-term stable tax environment put in place (which means Labour's agreement too) ?

Stevo, only saw your last post after my last 2 posts. We are saying the same thing, just you express it better :)