Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Category Archives: Energy

Citgo’s Future in Doubt, Thanks to its Takeover by Venezuela’s Military

This article was published by The McAlvany Intelligence Advisor on Friday, December 1, 2017:

Immediately following Maduro’s arrest of 50 people running his oil company, allegedly in an attempt to eliminate corruption at that company, PdVSA, he named a military general as his oil minister and replaced the company’s manager with a political crony. Neither has any oil industry experience.

At first glance, the move seems insane. Production by PdVSA is half what it was just two years ago under skilled (many U.S.-trained) executives, and now the Marxist dictator has replaced them with people who know nothing at all about how to run an oil company. Maduro said he was rooting out corruption at the company, claiming that the executives fudged the company’s production numbers in order to make the company’s dismal and declining profitability appear better than it is.

Citgo was once a jewel of the PdVSA, operating more than 5,000 gas stations in the U.S. and many refineries on the Gulf Coast specifically designed and built to refine the heavy Venezuelan oil flowing out of the world’s largest cache of crude oil reserves. The 4,000 employees, many of them working in Houston, are now in limbo, wondering how further destruction of the parent company in Venezuela will affect them.

For five of those top executives, all American citizens, the future is particularly dim. The Trump administration, which has repeatedly excoriated the Marxist dictator, is now attempting to have them moved from their present incarceration into the American embassy.

For those 4,000 employees working for Citgo, many are no doubt polishing their resumes to secure their future in other companies in the American oil industry.

For Maduro, the military takeover of PdVSA makes perfect sense. First, it virtually completes the military takeover of every aspect of the failing country’s economy. Prior to Monday’s announcement, the military was in charge of food production and distribution, imports and exports, and communications.

Second, the military secures Maduro’s position as president of the country, at least for the moment. With its support he has little to fear from the vast majority of his serfs who oppose his dictatorship. Next, as the country’s economy continues to crater, the military will have only themselves to blame, keeping Maduro out of the line of fire.

Finally, the move secures the military’s ability to finance itself, rather than relying on Maduro’s slim and slowly evaporating revenue stream. As Chris Tomlinson, writing for theHouston Chronicle noted, “The military supplements its income by demanding bribes, smuggling fuel to neighboring countries, and facilitating illicit narcotics shipments to Mexico and other Caribbean countries.”

As far as Citgo itself is concerned, Maduro sold 49.6 percent of it to Russia’s Marxist leader, Vladimir Putin, in exchange for a loan of $1.5 billion to keep his faltering regime afloat for a few more months.

With military people now in charge of Maduro’s only revenue stream through PdVSA, it’s only a matter of time before his regime collapses, either by the military which is now calling the shots, or by pressure from bondholders facing inevitable defaults on some $150 billion that Maduro owes them.

By the time the dust settles, it’s increasingly likely that Citgo, which used to be under the thumb of one Marxist dictator, will be owned, operated and controlled by another, this one in Moscow.

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Related article:

Tracking Socialist Venezuela’s Death Spiral: 4,000 Percent Inflation

IEA: United States to Dominate World Energy Market Within Eight Years

This article appeared online at TheNewAmerican.com on Wednesday, November 15, 2017:

According to the International Energy Agency (IEA), the growth of energy production in the United States, doubling as it has in just the last eight years, is expected to double again in the next eight. Authors of the IEA’s annual World Energy Outlook report released on Tuesday could hardly contain their surprise: “A remarkable ability to unlock new resources cost-effectively pushes combined United States oil and gas output to a level 50% higher than any other country ever managed; already a net exporter of [natural] gas, the U.S. becomes a net exporter of oil in the late 2020s. In our projections … the rise in US tight oil output [fracking] from 2010 to 2025 would match the highest maintained period of oil output growth by a single country in the history of oil markets.”

The U.S. production increase makes up an astonishing

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Aramco CEO Not Worried About American Frackers

This article appeared online at TheNewAmerican.com on Thursday, October 26, 2017:

English: Headquarters of Aramco Services Company

Headquarters of Aramco Services Company

Saudi Aramco CEO Armin Nasser told CNBC’s Squawk Box on Sunday that he wasn’t at all worried about American frackers, since they are concentrating on “sweet spots” — the richest fields with the highest returns — which can’t last forever: “The concentration that we are seeing today [by American frackers] is on the sweet spot of shale, and this will not last forever. You can concentrate for some time on the sweet spots and produce more oil. But ultimately you need to venture downward, and that’s where you have less quality and you require more cost to produce these barrels. Shale oil will contribute additional barrels [to world crude oil supplies], but it will all depend on the price of crude.”

Nasser no doubt was referring to data released last week that showed

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Aramco’s CEO Tells Half a Truth

This article was published by The McAlvany Intelligence Advisor on Friday, October 27, 2017: 

Carbon print of Alfred Lord Tennyson, 1869, pr...

Alfred Lord Tennyson, 1869

A Yiddish proverb holds that “a half-truth is a whole lie,” while Ann Landers said that “the naked truth is always better than the best-dressed lie.” Alfred Lord Tennyson said it best: “A lie which is half a truth is ever the blackest of lies.”

Whether Aramco’s CEO intended to tell a lie or just wasn’t completely forthright remains unknown. What Armin Nasser did tell CBNC’s “Squawk Box” on Sunday certainly wasn’t the whole picture. He blew off America’s energy frackers:

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Venezuela Falling Behind on Its Payments, Putting Maduro’s Regime in Jeopardy

This article appeared online at TheNewAmerican.com on Monday, October 23, 2017: 

English: "El Palito" - PDVSA Refiner...

PDVSA Refinery, Venezuela

Venezuela failed to make five payments due on its debt last week in order to make a big payment on Friday and another one next Thursday. The $350 million in missed payments each have a 30-day grace period, while Friday’s payment of nearly $1 billion and another one of $1.2 billion due the following Thursday must be paid on time. Another $1.2 billion of principal and interest payments are due before the end of the year.

Venezuelan President Nicolás Maduro is running out of both time and money. With less than $10 billion in foreign reserves (and much of it illiquid), he is scrambling to keep from defaulting.

His state-owned energy company, PDVSA, is so far behind on payments to storage terminals in the Caribbean that it is being barred from using them until they get caught up. One such facility, NuStar’s Statia facility on the island of St. Eustatius, is owed $26 million by PDVSA, not having received any payments for nearly a year. PDVSA set up a payment schedule with NuStar but then missed the first payment. So NuStar is holding an auction of Venezuela crude that’s currently in storage in order to make up for those missed payments.

On top of that, quality control issues are plaguing PDVSA, thanks to shoddy performance by its workers, resulting in crude that is contaminated with water, soil, and other minerals. The situation has deteriorated over the past two years to such a point that refineries aren’t taking shipments, or are demanding discounts to offset the additional costs of refining the crude. One PDVSA worker told Reuters news agency, “We’re refitting chemical injection ports, recouping pumps and storage tanks but without chemicals, we can’t do anything.” Those chemicals cost money that PDVSA doesn’t have, and its suppliers aren’t willing to extend any further credit.

So far this year, Phillips 66 has canceled at least eight shipments due to the low quality of Venezuela’s crude being shipped to their refineries.

PDVSA provides 90 percent of Maduro’s revenues. The combination of low oil prices, expert workers at PDVSA being replaced two years ago with his political cronies, the resultant incompetence and corner-cutting to keep costs down, the barring by storage facilities of taking the company’s crude, the necessity of making those payments in the next two weeks, and the sanctions by the United States inhibiting Maduro and his people from accessing crucial funds are creating severe problems for him. The problems border on existential, with observers now estimating the chances of default somewhere between 15 and 40 percent before the end of the year. Said Ray Zucaro, chief investment officer at RVX Asset Management, Maduro’s “getting close to the edge of not [having] enough money in the checking account to pay the bills.”

There is one beneficiary enjoying Maduro’s problems: Russia. It is continuing to provide credit to the staggering and faltering communist regime in exchange for precious oil reserves. Helma Croft, global head of commodity strategy at RBC Capital Markets, explained the pickle Maduro is in and how Russia is taking advantage of it: “While it makes sense [for Maduro] to preserve as much cash to avoid default, [he] will not be able to do it without Russia. So the question will be: how much acreage will this cost [him]? Rosneft [Russia’s state-owned energy company] is acquiring Venezuela assets at fire sale prices.”

What if Your Customer Can’t Buy Your Product, but Wants to?

This article was published by The McAlvany Intelligence Advisor on Monday, October 16, 2017:

There are two basic rules of economics. The first is: if prices go down, more will be demanded. The second is: both sides of any economic transaction must benefit or there’s no deal.

The fracking revolution in the United States has pushed the price of crude oil down to the point where it is threatening the very existence of the OPEC cartel. Consumers are saving at the pump and the energy industry in the U.S. employs more than 10 million people, making up eight percent of the country’s gross domestic product.

But there’s been an all but invisible transformation taking place in natural gas. At least two of the Big Oil companies sell more natural gas than they do crude oil.

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U.S. Natural Gas Exports to Add 500,000 Jobs, $73 Billion to Economy

This article appeared online at TheNewAmerican.com on Monday, October 16, 2017:

Liquefied natural gas (LNG) tanker, section vi...

Liquefied natural gas (LNG) tanker, section view from side.

The latest estimate from API, the energy trade group, is that increased exports of LNG (liquefied natural gas) over the next 20 years will add nearly 500,000 jobs to the American economy and $73 billion to the country’s gross domestic product (GDP). Marty Durbin, API’s chief strategy officer, stated, “This report confirms that increasing U.S. LNG exports would bring great benefits to American workers and consumers and [to] the U.S. economy. Increasing the use of U.S. natural gas throughout the world means more production here at home, cleaner air, and increased energy security for our nation and our allies.”

The revolution taking place in natural gas has been almost completely overlooked.

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EV Revolution to Drive Oil to $10 a Barrel, Says Forecaster

This article appeared online at TheNewAmerican.com on Monday, October 16, 2017:

Shell Oil Company

Chris Watling, the CEO of Longview Economics, told CNBC on Friday that Saudi Arabia should hasten the sale of part of its Aramco oil company while the price of crude is still high: “I think they need to get it away quick before oil goes to $10 [per barrel].” Added Watling: “We forget, don’t we? 120 years ago the world didn’t live on oil. Oil hasn’t always driven the global economy. The point is, alternative energy in some form is gathering speed.… Things are changing.”

Watling’s views coincide with those of Bloomberg New Energy Finance (BNEF) in their just-released 2017 Long Term Electric Vehicle Outlook, which concluded that by 2040

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Latest Report: Crude Won’t See $60 a Barrel For at Least a Year

English: Flag of the Organization of Petroleum...

This article appeared online at TheNewAmerican.com on Friday, October 13, 2017:

According to oil seers, there are two magic numbers: the five-year average of five billion barrels in crude-oil reserves held around the world in salt caverns, oil tankers, and oil storage tanks; and $60 for a barrel of oil, priced in London.

In January there were 318 million barrels of “surplus” crude above that five-year average, but by the end of September that number had dropped to “only” 170 million barrels of “surplus.” Oil traders saw the trend toward “balance” — that magical, mystical, and entirely theoretical moment when worldwide crude-oil inventories would hit that five billion barrel marker and thus be “balanced” — and started getting excited. Placing bets that oil prices would move higher as worldwide inventories continued to drop, they placed bullish bets in the futures market, which hit new highs in September.

But according to the monthly report issued by the International Energy Agency (EIA) on Thursday, that’s likely to be as good as it’s going to get:

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OPEC is Textbook Example of Classic Cartel

This article was published by The McAlvany Intelligence Advisor on Wednesday, October 11, 2017:

the new OPEC headquarters in Vienna Español: S...

OPEC headquarters in Vienna

Free market economists have long considered OPEC as a textbook example of the anti-free market cartel. Its mission statement confirms it:

To coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic, and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.

This is of course the “siren song” of every cartel:

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OPEC Asks U.S. Oil Industry to Join Its Cartel

This article appeared online at TheNewAmerican.com on Tuesday, October 10, 2017:

At a speech in New Delhi on Sunday, OPEC’s Secretary General Mohammed Barkindo offered an olive branch to the American oil industry: Come join our cartel and together we’ll keep prices up and everyone profitable. These are his exact words:

We urge our friends [we’re all friends, now] in the shale basins of North America to take this shared responsibility with all [the] seriousness it deserves, as one of the key lessons learned from the current unique supply-driven cycle.

Translation:

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Hurricanes Hammer OPEC as Well

This article appeared online at TheNewAmerican.com on Monday, September 11, 2017: 

English: Flag of the Organization of Petroleum...

Estimates are that Hurricane Irma knocked out the power to nearly six million Floridians’ homes and businesses, while both Harvey and Irma have either destroyed or heavily damaged 300,000 homes in Texas and hundreds of thousands more in Florida. Further estimates are that these two massive storms have reduced demand for oil by nearly a million barrels a day.

This is being reflected in the price of NYMEX (New York Mercantile Exchange) crude oil dropping to $47 a barrel early Monday. Last Wednesday crude was selling at more than $49.

Part of the problem facing OPEC and its grand plan to cut production to raise oil prices was its assumption that

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Hurricane Harvey, President Trump Putting More Pressure on Venezuela

This article appeared online at TheNewAmerican.com on Sunday, August 27, 2017:

On Friday President Donald Trump once again ramped up sanctions against Venezuela’s Marxist dictator, shutting off his ability to sell new debt or equity in the U.S. financial markets. On Saturday, Hurricane Harvey, the worst hurricane to hit the Gulf Coast in 50 years, has all but sealed Maduro’s fate.

Following Maduro’s installation of his illegal “constituent assembly” in July, President Trump placed sanctions on Maduro himself, freezing any and all of his assets lying within American jurisdiction. A week later Trump added a few of Maduro’s cronies to that list, and on August 9 he added a few more. At the time The New American expressed skepticism that they would have any effect on Maduro’s obstinacy and determination to continue policies that have caused Venezuela’s economy to shrink by 35 percent just since 2014.

On Friday the Trump administration broadened those sanctions to include

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OPEC Leaving Its Options “Open” as Production Cuts Fail to Raise Oil Prices

This article appeared online at TheNewAmerican.com on Friday, August 25, 2017:  

Even the subtitle was misleading: “JMMC Reports Positive Indications of Oil Market Rebalancing in Progress.” That is the subtitle of the report issued on Thursday by OPEC’s Joint Ministerial Monitoring Committee, the toothless enforcement arm of OPEC.

OPEC is down to its last option: verbiage. The JMMC reported that everything is rosy:

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Dakota Pipeline Co. Sues Greenpeace, Earth First! Under RICO for Conspiracy to Halt Construction

This article appeared online at TheNewAmerican.com on Wednesday, August 23, 2017:  

Greenpeace word mark Русский: Текстовый символ...

Energy Transfer Partners (ETP), the company behind construction of the Dakota Access Pipeline, lashed out against the “Enterprise” in a major lawsuit filed on Tuesday. The 231-page lawsuit accused Greenpeace International, Greenpeace, Inc., Greenpeace Fund, Inc., BankTrack, Earth First!, and other environmental organizations and individuals of participating in a criminal effort to damage the pipeline and ETP’s reputation among its partners and lenders. It is seeking nearly a billion dollars in compensatory and punitive damages under the RICO statute.

RICO, enacted as part of the Organized Crime Control Act of 1970, was originally designed to attack the Mafia’s illegal activities, but has been expanded over the years. It extends criminal penalties not only to the miscreants themselves but to their bosses, funders, and enablers.

ETP said that the Enterprise

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Another Nail in OPEC’s Coffin: Fracking Old Wells Dropping U.S. Breakeven Points Further

This article appeared online at TheNewAmerican.com on Monday, August 21, 2017:

Ed Morse, Citigroup’s head of commodity research, told a Bloomberg television audience last week that OPEC’s position “is not sustainable over a long period. In the end, the markets are going to win, and [the winner] is going to be shale. If we’re in a $40 to $45 world, we’ll have enough drilling to add to the [world’s] surplus.”

Morse is reiterating the mantra sung for years: OPEC has long since run out of options and has all but lost its monopoly influence over world crude oil prices. If it reduces supply, prices go up, making U.S. frackers more profitable and inviting more capital in to expand production. If it increases supply, the lower prices cut further into each member’s cash flow, forcing them to continue to deficit spend without gaining any advantage over the Americans.

The breakeven point for U.S. frackers has been estimated to be between $40 and $50 a barrel. On Friday U.S. crude oil closed at $49 a barrel on the New York Mercantile Exchange (NYMEX – see floor photo above).

Now OPEC is faced with another challenge from the American oil industry:

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OPEC Members Continue Non-compliance

This article appeared online at TheNewAmerican.com on Friday, August 11, 2017:

English: Flag of the Organization of Petroleum...

The Paris-based International Energy Agency (IEA) noted in its latest report released on Friday that non-compliance among OPEC’s members, and those non-members who also agreed to cut oil production, increased again in July. Non-compliance is the death knell for any cartel, and OPEC is no exception.

Specifically, non-compliance among the cartel’s members rose to 25 percent in July, the highest since the agreement was inked in January. Among non-OPEC members who signed on to that agreement, non-compliance was at 33 percent in July.

Put another way,

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Additional Sanctions by United States Proving of Little Value in Venezuela

This article appeared online at TheNewAmerican.com on Thursday, August 10, 2017:  

Nicolas Maduro

Nicolas Maduro

The U.S. Treasury Department slapped sanctions on another eight Venezuelan government officials on Wednesday, bringing the total now to nearly 30. This is a partial fulfillment of a promise by the Trump administration to sanction everyone involved in the establishment of the fraudulent Venezuelan “constituent assembly” sworn in on Tuesday.

Included among the eight is Adan Chavez, the late Marxist President Hugo Chavez’ elder brother, who now serves in the new assembly as secretary of its presidential commission.

In making the announcement, Treasury Secretary Steven Mnuchin said,

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U.S.-imposed Sanctions to Squeeze Venezuela’s Marxist Dictator

This article appeared online at TheNewAmerican.com on Wednesday, August 2, 2017:

The sanctions imposed by the State Department on Venezuela’s Marxist dictator Nicolas Maduro and his regime are being carefully staged in to maximize the pain inflicted on Maduro and his cronies, while minimizing the impact on the citizens of the country.

Last week State imposed sanctions on 13 of Maduro’s top people, accusing them of various human rights violations and, as a result, freezing any assets they might have within American jurisdiction. Following Sunday’s fraudulent election, State imposed similar sanctions on Maduro himself, freezing any assets he might personally have in the United States.

Although it’s unknown just how much, if any, of Maduro’s personal wealth would be affected by those new sanctions, what is known is that they

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Fracking’s Vicious Cycle Making Bondholders Nervous

This article appeared online at TheNewAmerican.com on Thursday, July 20, 2017:

King Abdullah ibn Abdul Aziz in 2002

King Abdullah ibn Abdul Aziz

Investors in high-yield bonds issued by small fracking companies are getting nervous. Last year those bonds, according to Bloomberg, gained some 38 percent as they rebounded from lows set earlier. In June they slipped two percent. In the bond business, that’s enough to make bond fund managers and individual investors nervous. It’s bad enough that the S&P 500 Energy Sector Index of energy stocks has lost 16 percent so far this year. What’s worse is the vicious cycle that frackers find themselves in.

For instance,

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.