oilvoice magazine | november 2013

7/27/2019 OilVoice Magazine | November 2013

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Edition twentyNovember 2013

Cover image by Richard Masoner / Cyclelicious

UK North Sea oil production declineGeology beats technology: Shell shuts down oil shale pilot project

Did BP, Shell and Statoil and others fix oil prices and behave anti-competitively?


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1 OilVoice Magazine | NOVEMBER 2013

Issue 20 November 2013

OilVoiceAcorn House381 Midsummer BlvdMilton KeynesMK9 3HP

Tel: +44 208 123 2237Email:[email protected]: oilvoicetalk

EditorJames AllenEmail:[email protected]

Director of SalesTerry O'DonnellEmail:[email protected]

Chief Executive OfficerAdam Marmaras

Email:[email protected]

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Cover image by Richard Masoner

http://www.flickr.com/photos/bike/

Adam Marmaras

Chief Executive Officer

Welcome to the 20th edition of theOilVoice Magazine. This edition

contains articles from Werner R.

Kranenburg, Kurt Cobb, Eoin Coyne,

Keith Schaefer, Ilda Sedja, Euan

Mearns, Jonathan Moore, Peter Parry,

and of course, Andrew McKillop.There are couple of exciting thingshappening over at our sister company,Finding Petroleum.We are now rollingouttraining coursesat the prestigiousGeological Society in London. Eachmonth next year we aim to have adifferent oil and gas course, all lead byone of our experienced trainers. All ofour trainers have a wealth of industryexperience, and our courses can truly

be called 'Master Classes'.Take a lookat the line-up, and I hope to see you atone of the courses.

Have a great November.

Adam MarmarasOilVoice
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Contents

Featured Authors

Biographies of this months featured authors 3Did BP, Shell and Statoil and others fix oil prices and behave anti-competitively?by Werner R. Kranenburg

5

Time out for the petrodollar 'conspiracy'by Andrew McKillop 9Another IEA politically correct oil market reportby Andrew McKillop 12The numbers don't add up to U.S. energy independence

by Kurt Cobb 16Peak prosperity for overpriced oilby Andrew McKillop 19UK North Sea oil production declineby Euan Mearns 22NOC acquisitions lift oil and gas M&A in Q3 2013 to $47.6 billionby Eoin Coyne 27Canadian oil and gas company financings pick up in third quarter

by Jonathan Moore30

A focus on East Africa's junior oil and gas companiesby Ilda Sejdia 33Insight: 2014 oil and gas industry planning cycle - Getting it rightby Peter Parry 36The Tuscaloosa Marine Shale: America's next 'hot money' oil play?by Keith Schaefer 43Geology beats technology: Shell shuts down oil shale pilot projectby Kurt Cobb 48


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Featured Authors

Andrew McKillop

AMK CONSULT

Andrew MacKillop is an energy and natural resource sector professional withover 30 years experience in more than 12 countries.

Werner R. Kranenburg

Kranenburg

Werner R. Kranenburg is an attorney and counselor-at-law admitted topractice law in New York State and various US federal courts and is aqualified arbitrator.

Kurt Cobb

Resource Insights

Kurt Cobb is an author, speaker, and columnist focusing on energy and theenvironment. He is a regular contributor to the Energy Voices section of TheChristian Science Monitor and author of the peak-oil-themed novel Prelude.

Eoin Coyne

Evaluate Energy

Eoin Coyne is an analyst at Evaluate Energy.

Keith Schaefer

Oil & Gas Investments Bulletin

Keith Schaefer, editor and publisher of the Oil & Gas Investments Bulletin.

Ilda Sedja

Evaluate Energy

Ilda Sedja is an Energy Analyst at Evaluate Energy.
http://www.oilvoice.com/description/AMK_CONSULT/82b50237.aspxhttp://www.oilvoice.com/description/AMK_CONSULT/82b50237.aspxhttp://kranenburgesq.com/http://kranenburgesq.com/http://resourceinsights.blogspot.co.uk/http://resourceinsights.blogspot.co.uk/http://www.evaluateenergy.com/http://www.evaluateenergy.com/http://oilandgas-investments.com/http://oilandgas-investments.com/http://www.evaluateenergy.com/http://www.evaluateenergy.com/http://www.evaluateenergy.com/http://oilandgas-investments.com/http://www.evaluateenergy.com/http://resourceinsights.blogspot.co.uk/http://kranenburgesq.com/http://www.oilvoice.com/description/AMK_CONSULT/82b50237.aspx


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Euan Mearns

Energy Matters

Euan Mearns has B.Sc. and Ph.D. degrees in geology.

Jonathan Moore

Evaluate Energy

Jonathan Moore is an Energy Analyst at Evaluate Energy.

Peter Parry

Bain & Company

Peter Parry is a partner in Bain & Companys London office and a leader inthe firm's Global Oil & Gas practice.
http://euanmearns.com/http://euanmearns.com/http://www.evaluateenergy.com/http://www.evaluateenergy.com/http://www.bain.com/http://www.bain.com/http://www.lunarsafari.co.uk/http://www.bain.com/http://www.evaluateenergy.com/http://euanmearns.com/


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Did BP, Shell andStatoil and others fixoil prices and behaveanti-competitively?

Written by Werner R. KranenburgfromKranenburg

In re North Sea Brent Crude Oil Futures Litigation: Civil action addressing'inaccurate' oil pricing continues in New York

In legal proceedings which may prove critical for both physical oil traders and tradersin oil-related financial instruments, who should take note for their own possible takeaction, the focus of attention has of last week firmly shifted to a federal trial court inManhattan for now. The European Commission stating that "[e]ven small distortionsof assessed prices may have a huge impact on the prices of crude oil..." concerns allinvolved and, besides governmental authorities, market participates have their role toplay as well in ensuring the integrity of benchmarks and fairness of competition suchas through the courts.

In August last year, a trading arm of French oil major Total SA submitted a letter tothe International Organization of Securities Commissions ("IOSCO") in which it saysthat "[s]ometimes the criteria imposed by [Price Reporting Agencies] do not assurean accurate representation of the market and consequently deform the real pricelevels paid at every level of the price chain..." It also speaks of the direct impact"inaccurate pricing" and "erroneous prices" have on the pricing of over-the-countercontracts and beyond. IOSCO, an assembly of financial markets regulators,published the letter in its final report1on Principles for Oil Price Reporting Agenciesin October 2012.

Then in May this year, it has been widely reported, three oil majors, namely BP PLC,Royal Dutch Shell PLC and Statoil ASA, and Platts, which compiles and publishesBrent Crude oil prices, were the subjects of unannounced inspections, morecommonly referred to as 'raids', by the respective national competition authoritiescoordinated by the European Commission. As Statoil of Norway reported on the dayof the visit, Norwegian "authorities suspect participation by several companies,including Statoil, in anti-competitive agreements and/or concerted practices contraryto [the European Economic Area free trade] Agreement".

Since then, the scope of the European investigations widened, American authoritiessuch as the Commodity Futures Trading Commission (which is a member of

IOSCO), the Department of Justice and the Federal Trade Commission are reportedto have taken in an interest in the matter and lawsuits have been filed by private
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parties against the three oil majors in various US courts.

The European Commission's regulatory investigations and the US civil legalproceedings focus on two issues: concerns relating to price reporting and regardingpotential violations of competition laws.

Following the raids, the European Commission ("EC") stated2that the "Commissionhas concerns that the companies may have colluded in reporting distorted prices to aPrice Reporting Agency to manipulate the published prices for a number of oil andbiofuel products. Furthermore, the Commission has concerns that the companiesmay have prevented others from participating in the price assessment process, witha view to distorting published prices.' (As Statoil puts it, "[t]he suspected violationsare related to the Platts' Market-On-Close (MOC) price assessment process, used toreport prices in particular for crude oil, refined oil products and biofuels, and mayhave been on-going since 2002.")

The first civil action was filed in New York in the week after the EC's inspections, byPrime International Trading Ltd, a Chicago-based proprietary commodity tradingcompany and member of various commodity exchanges. It was the first of severalsuch filings, in New York and elsewhere, based on alleged violations of US federalcommodity exchange and competition laws and common laws and the same factsregarding whether defendants conspired to fix, restrain trade in, and manipulate theprices of North Sea Brent Crude oil and Brent Crude oil futures contracts:"Defendants deliberately reported inaccurate, misleading and false informationregarding Brent Crude oil prices to Platts... thereby undermin[ing] the entire pricingstructure for the Brent Crude oil market."

Nothwithstanding the final consumers and the potential harm done to them as Totaland the EC point out, the outcome of these civil proceedings may be relevant toanyonetrading from 2002 to the present, in North Sea Brent crude oil derivativestraded on the New York Mercantile Exchange ("NYMEX") and IntercontinentalExchange ("ICE"), regardless of characteristics such as the trader's citizenship orlocation. (Brent Crude oil futures contracts are traded on the NYMEX and onelectronic boards of trade and exchanges, such as the ICE, which are accessible inthe United States.) The legal remedies sought include restitution of any sums the oilmajors received by unjust enrichment, for their alleged unlawful conduct to beadjudged to be in violation of US federal competition law and a measure to prevent

such conduct from occurring again in future.

The latest development as of last week is that a judicial Panel ordered for all therelevant cases to be centralised in the federal trial court in Manhattan, the SouthernDistrict of New York3. In its order, the Panel noted centralisation there will "promotethe just and efficient conduct of the litigation" and cited the Manhattan locations ofthe NYMEX and that of Platts. It has not been established yet which private party willlead the centralised litigation.

So, did BP, Shell and Statoil and others fix oil prices and behave anti-competitively?They are suspectedof doing so based on indications from several market

participants which have led to the regulatory investigations into whether they did andallegationsin legal proceedings they indeed have done so. The time for civil legal


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proceedings and investigations, alongside the regulatory initiatives, is now as well.These are cases to be followed by market participants concerned and for thoseseeking to become involved in the proceedings, who themselves may be locatedanywhere in the world, there is still time to be heard, exert influence in the conduct ofthe litigation and lead in this effort affecting the industry globally from the front.

1. http://www.iosco.org/library/pubdocs/pdf/IOSCOPD391.pdf2. http://europa.eu/rapid/press-release_MEMO-13-435_en.htm3. http://www.jpml.uscourts.gov/sites/jpml/files/MDL-2475-Initial_Transfer-09-13.pdf

Link to Open Letter to Commodity Traders

Contribution by Werner R. Kranenburg from Kranenburg

Werner R. Kranenburg is a New York attorney and qualified arbitrator. Kranenburg,his City of London-based law firm, is concentrated on securities, investment and

corporate litigation and arbitration in all courts in New York State and US federalcourts, including the Southern District of New York, and before specialised tribunals.--http://kranenburgesq.com

View more quality content fromKranenburg
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Time out for thepetrodollar'conspiracy'

Written by Andrew McKillopfromAMK CONSULT

FIRST YOU HAVE TO BELIEVE

I have several articles published on this subject, and I break up the 40-odd years of

'the petrodollar system' into at least 3 clear main phases. More important, thepresent one is the last one. For a valedictory and uncertain, but official rationale forthe present phase, the US Federal Reserve Bank of NY has a full statementhttp://www.newyorkfed.org/research/current_issues/ci12-9/ci12-9.html.

Always thought of by its US and Saudi inventors as a win-win, it has manydownsides and can be lose-lose, also. For the global economy it is only lose-lose.Just as important, the petrodollar and its related recycling started as a secret politicalinitiative and will end political, but possibly public. Its economic, financial andmonetary roles were always placed in the back seat, and handed over to 'experts',for example in the US Fed system, IMF and BIS to whine about. The main policy

pillars of 'the system' - favouring US-Saudi economic relations and bolstering the USdollar - do not have any significant relation to, and do not resist comparison with thereal role, weight and influence of oil and oil trade for the USA, even if it can beconstrued as sometimes highly favourable to Saudi Arabia.

Taking the USA's total for physical oil trade turnover, that is exports plus imports asabout $450 billion a year in 2012, this can be set against either US GDP or USsovereign debt to see how small 'the petrodollar system' really is. We could alsocompare it with Wal-Mart Inc's turnover of about $469 billion a year in 2012. To besure, leverage helps a million (we mean a trillion), but that also applies to real estate,mortgages and bolstering the 'value' of Facebook, Apple or Google shares.

One key factor turning a theoretical and political win-win into an economic, financialand monetary lose-lose, certainly for the USA, stems from US debt and 'dollarhegemony', both of them pushed only one way - further - by the petrodollar system.

The number one American export is US dollars, more precisely the repayment ofcurrent dollars and promise of future dollars on loans to be received and goods to beimported by the USA. Like any fiat money it is paper currency backed up byabsolutely nothing, but the rest of the world's need to import oil (for around 160countries out of 200) means they need dollars to buy oil - when and if it is billed and

settled in dollars. Other trade goods and services, in majority, are billed and settledin dollars, but there's no basic reason this has to be treated as permanent and
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obligatory. The same applies to oil.

The petrodollar system is above all political and concerns the US and Saudi Arabiabefore anybody else, or anything else. Due to current-ruling Saudi potentates,notably the so-called 'Intelligence chief' Prince Bandar bin Sultan claiming Saudi rule

over President Obama's decisions on Syrian bombing, and raging about Obama'snon-bombing, the threat of Saudi Arabia 'abandoning the petrodollar' has beencirculating. When or if Saudi oil exports were increasingly billed and settled incurrencies other than the USD, the present semi-monopoly would disintegrate.

One de facto result would be a strengthening of the USD's world value after a ritualand probably impressive period of 'trial by market'. To be sure market logic, we meanpanic would take some time to adjust to the real world, as ever, but the main reasonthe dollar would strengthen would be the USA's need to print and issue far less andfar fewer 'chaff dollars'.

NO CATASTROPHE

The doomster argument is all too easy. The biggest reason why good relations withSaudi Arabia are so important to the United States is because the petrodollar semi-monopoly will not work without them. For decades, Washington has bowed andcowed, and gone to extraordinary lengths to mollycoddle the Saudis, despite thehuge Saudi exposure to any theoretical crash of the USD's value.

Supposedly, Saudi players still believe what they thought Phase One of thepetrodollar system meant. During its early days (1972-1985) it meant large gains forKSA - more political than economic - but after that it meant several years (1986-1991) of large political-and-economic losses. We could even argue 'the system' wasde facto idled or mothballed for most of the 1992-2001 period, during which it didlittle for the USA - and much less than nothing for Saudi Arabia. Continuing with thatline of reasoning, 'the system' was only brought back into life, under George W. Bushand Hank Paulson, from about 2005. The above-cited US Fed bank of NY statementespecially concerns this last phase - although the bank does not treat it as the end ofthe line.

One thing on the US side is however sure and certain - in no way would US debthave grown so fast, to such extremes, nor the trade deficit have ballooned in the

absence of the 'petrodollar system'. That would certainly not have been acatastrophe! US gains throughout all the phases or formats of 'the system' werealways more apparent than real - but the US political elite feeds off appearances,which is one of its basic defects.

The Saudi side, unfortunately, only has defects. With Bandar bin Sultan these aremonstrously evident. One of his latest tirades was to also criticize the US for notbacking Saudi Arabia's military rampage in nearby small-sized Bahrain, killinghundreds of peaceful demonstrators against the ruling Sunni clique of Bahrain, whichtotally depends on Saudi support. Concerning Syria, of course, the Saudis could intheory always go and fight their own war, but that is not at all the way that Saudis

'heroically' do things. Presented as a supposed sign of bargaining strength withWashington, aides to bin Sultan repeatedly point out that KSA central bank foreign


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exchange assets are close to $700 billion 'and are almost exclusively denominated inUS dollars'. The Saudis could sell these, of course, but dumping that amount on themarkets in a princely flourish will result in stupendous losses for Saudi Arabia.

Due to 'the system' always having been secret as well as political, most Americans

and the majority of non-Americans have absolutely no idea about it. Because of this,they can more easily believe the one-liner that terminating 'the system' could only'severely damage the U.S. and world economy'.

Without the prop of petrodollar recycling and its leverage, operated by the USFederal Reserve banking system, and the leading money market banks, it would bevery unlikely that the US could run its present fantastic annual trade deficits. The USeconomy would have to 're-localize', or 'de-offshore'. Would this be a disaster?

CATASTROPHE FOR THE SAUDIS - AND OTHERS

Conversely, the disaster for Saudi Arabia would be real and would not ebb awayafter a few weeks of market panic. We would assume that Bandar bin Sultan's wasable, domestically, to put his threats to execution, and Saudi Arabia suddenly sold alarge slab of its $700 billion FX stash. It would also exactly invert the petrodollarsystem - henceforth demanding oil payment in any currency but the dollar. No dollarsaccepted! What price would KSA set for its oil exports? What would other OPECexporters do? How would they settle oil sales?

Almost certainly the global oil market system would mutate back to pre-1987, beforewidespread market trading mainly in dollars. Oil supplies and sales would utilise awide range of settlement systems. These included baskets of currencies, trade offsetbilateral arrangements, barter-type settlement, netback deals, technology deals,even gold and other PMG metals used as payment.

In any event total oil shipments would decline for some time - possibly months orseveral years. Expressed in some reliable measure-of-value, excluding fiatcurrencies, oil prices could only decline. Saudi Arabia's government, basically itsroyal family and its princely clans, gets 92% of its revenues from oil. Putting theBandar bin Sultan menace to execution, they would have blown their stash of centralbank FX reserves, and weakened their economy going forward, probably for yearsahead.

For the US and inevitably, the end of petrodollars and their recycling will mean anend to the era of cheap imports and super low interest rates, but will also reset theglobal economy - not at all to the disadvantage of the USA. China, now the world'sNo 1 oil importer, will be obliged to move fast to replace dollars for its oil trade. Thiswill mean the RMB appreciates, which is what China doesn't want, but has to accept.One thing is certain, Saudi sabotage of the US dollar will not be germane to China -which holds about $1.25 trillion of US Treasury bonds.

The likelihood of China aligning with the US - if only to save its dollar stash - can betaken as relatively high, but it is sure and certain that China will be limiting its

purchase of US debt in the future and itself seeking other trade-and-currencyarrangements. This is already a 'sombre signal' for the US, but only if it want to


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continue its race to the cliff edge.

Unfortunately, the petrodollar system, although 'secret' only works if the rest of theplanet has faith in it, but aided by 'the system' becoming dysfunctional, perverse ornon-performing, the United States is systematically destroying the faith in the dollar

that the rest of the world has in our global financial system. Put another way, if for noother reason (and there are plenty!) US debt growth had to decline, due to thepetrodollar system terminating, this could only further limit the USA's recklessaccumulation of debt. Given the broken back out-of-sight state of national financesand economic expectations in most countries, this would be a 'disaster' but in realterms is not.

View more quality content fromAMK CONSULT

Another IEA politically

correct oil marketreport


IEA THEORY - DEMAND GROWTH AND HIGHER PRICES

The IEA's latest Oil Market Report for 12 September 2013 was highly predictable.Only able to report world oil demand growth at 0.9% for 2012-2013 to date, it pushedforward its estimate for renewed demand growth to 2014, with a 1.1% or 0.9 millionbarrels-a-day (Mbd) growth forecast. This would raise aggregate world demand toaround or about 92.6 Mbd by late 2014.

On prices, the IEA's September report merely said that 'rising geopolitical tensionsover Syria's suspected use of chemical weapons and the near total shut-in of Libyanproduction' raised prices despite record Saudi and Iraqi production inside OPEC, andrecord US and Russian production outside the cartel. It also noted that prices turneddown from mid-September 'as a Russian proposal for Syria to surrender its chemical

weapons gained traction'. Since the report's release and to date, October 7, Brentand WTI have lost about $5-$6 per barrel.
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A Wall Street Journal analysis of global energy,published October 7 shows that the U.S. is ontrack to pass Russia as the world's largestproducer of oil and gas combined this year-if ithasn't already. One reason is that Russian output

growth is slowing due to multiple reasons includingaging oilfield infrastructures and the slow pace ofRussia adopting 'fracking' technology, but the mainreason is surging US output growth of both oil andso-called natural gas liquids (NGLs) or oilcondensates from mixed oil-and-gas outputstreams. Combined with the reality of weak globaloil and gas demand growth, surging supply meansthat high prices have to turn down - sooner ratherthan later. On a strict fuel price equivalent base,current US natural gas prices are about $21 per

barrel of oil equivalent.

RISING SUPPLY AND STAGNANT DEMAND

The IEA avoids the demand-side reasons for 'bearish' price outlooks for world oil inparticular, and for global natural gas within 3 - 5 years. The key surrogate for globaloil energy demand, excluding non-energy end uses, is world refinery runs. Here, thelatest IEA report was able to say that global refinery crude runs reached a seasonalpeak in July at about 78.2 Mbd, about 1.8 Mbd more than a year earlier, but rapidlyshrinking margins due to weakening demand will soon shift this to an IEA forecastaverage run of 76.8 Mbd in 3Q 2013.

Compared with one year previous this is a growth of 0.4 Mbd or 0.5%.

Global oil demand for combined fuel + nonfuel utilisation is likely growing at ratesmuch lower than IEA forecasters' estimates and forecasts, for the present year setby the 'oil watchdog' agency at 0.9%, followed by 1.1% for 2014. The IEA, mostly forpolitical-correct reasons, but also through its forecasting methods has a long trackrecord of over-estimating world oil demand growth. Its 'Refinery marginsMethodology notes' publication provides ample details on typical refinery outputprofiles in major world regions, for example much higher diesel fuel yields and

therefore operating costs in Europe than USA, due to very different car fleetcompositions. The previous economic policy rationale for 'dieselization' of car fleetsin Europe - to use lower cost high sulfur crudes - ignoring the cancer threat andhealth costs of diesel fuel and its residues, has been overturned by increasing worldNGL and condensate supply and also by the closing of high sulfur-low sulfur crudeprice spreads. As a result, fuel prices are high in Europe and set to stay that way -further depressing demand growth potentials.

Conversely, refinery operating costs are very low in Asia, as low as $1.50 per barrelcompared with extremes up to $7.50 a barrel in Europe, making it rational to forecastcontinuing Asian demand growth on a pure fuel price basis. This however ignores

the global macroeconomic context, as well as national energy, economic andenvironment policy factors and pressures. At the global macro scale the energy


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Nowhere to hide in Tioga CountyMulti-measurement imaging

reveals secrets of the elusive Marcellus

Thanks to unconventional drilling and

extraction techniques, the Appalachian

Basin has experienced a multi-billion dollar

economic resurgence. In Tioga County,

Pennsylvania, a methodology called Multi-

measurement Interpretation (MMI) has

been introduced by NEOS GeoSolutions to

provide a better understanding of the basin.

NEOS acquired airborne geophysical data

magnetic, electromagnetic (EM), radiometric,

gravity, and hyperspectral over 1,000

square miles of Tioga County. These data

were integrated with existing geophysical,

geochemical, and seismic measurements

from various public domain and third-

party sources and interpreted by NEOS and

operator geoscientists. This low-impact,

environmentally friendly approach revealed subsurface features from the basement to the surface, helping

explorationists pinpoint the sweet spots and avoid shallow gas geo-hazards in the play.

Using hyperspectral analysis, which classifies substances on the surface based on unique spectral signatures

associated with the reflectance and absorption of both visible and invisible light, interpreters located numerous

oil seeps and gas plumes. Of these, 90% were verified by geo-technicians on the ground. The seeps and plumes

were then traced back into the subsurface along various pathways, including faults that had been mapped using

an analysis of magnetic, seismic, log, and EM data.

Airborne EM resistivity measurements provided insights into both lateral and vertical resistivity variations

throughout the geologic column, down to roughly 10,000 feet. When the EM voxel was depth-sliced at the

Marcellus interval, geoscientists noted that resistive hot spots in the Marcellus corresponded to many of

the countys best well locations.

In addition to analyzing the airborne datasets, geoscientists on the project also incorporated more traditional

geophysical measurements into the interpretation. Well logs were analyzed to enhance structural control

and to calibrate the airborne EM data. Seismic data were incorporated into the regional structural model and, in

combination with the magnetic and EM data, provided insights into how faults were creating pathways for

hydrocarbons to migrate toward the surface.

Finally, a cutting-edge geostatistical technique called predictive analytics was applied. The technique allowed

geoscientists to mine all geo-datasets for subtle patterns and correlations that corresponded to the best wells,and to then pattern search for similar correlative attributes in areas that had yet to be drilled. This helped the

projects underwriters to optimize their leasing, drilling, and hydraulic fracturing programs and to target future

ground-based geophysical acquisitions in the most promising areas.

MMI has captured the attention of th e regions major E&P producers. Since the early surveys in Tioga, NEOS has

undertaken additional projects in Pennsylvania, compiling nearly 5,000 square miles of available regional data

that are delivering unique, cost-effective insights into the Marcellus and Utica shale plays.

To learn more about this project or others in the Unlock the Potential series, visit: www.ThePotentialUnlocked.com

Sweet spot map (zoom) over a roughly 200-square-mile area in Tioga

County, Pennsylvania. Hot colors indicate areas most similar to best

producing wells in the region. Circles are sized to the first six months of

production for all horizontal wells.

UNLOCK THE POTENTIAL IN YOUR FIELD | #1IN A SERIES NOVEMBER 2013

OilVoice

KEY TECHNOLOGIES:

MAGNETIC

PASSIVE-SOURCE EM

RADIOMETRIC

GRAVITY

HYPERSPECTRAL

PREDICTIVE ANALYTICS

AREA: Appalachian Basin, Pennsylvania

CUSTOMER: Supermajor

FOCUS:Regional Mapping

TYPE: Unconventional

KEY INTERPRETIVE PRODUCTS:

Regional resistivity voxels

down to 10,000 feet

Maps of lineaments, fault

networks, and intrusives

Maps of regional prospectivity

derived via predictive analytics

CUSTOMER BENEFITS:

Cost-effective regional insight depicting

the most (and least) prospective areas for

leasing, drilling, or further geological and

geophysical (G&G) study.

HIGHLIGHTS


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100% of current U.S. natural gas production in four years, just to maintain currentproduction, or we would need the productive equivalent of 30 newBarnett Shaleplays over 10 years, in order to maintain current natural gas production.

Companies are not finding one new Bakken play each year; nor are they finding

three new Barnett Shale-sized plays each year. In fact, production ofU.S. naturalgas has been just about flat since the beginning of 2012.U.S. crude oil productioncontinues to grow,outpacing most projections. But, the United States would have tomore than double its output from here to supply all of the country's needs.

Keep in mind that U.S. energy independence has almost always been about oil. U.S.coal production has long satisfied U.S. consumption. And, U.S. natural gas importsfrom 1990 through 2010 averaged just 16.8 percent of total U.S. consumption.Almost all of that came from Canada, the country's northern neighbor and longtimeally.

That percentage came down in 2011 and 2012 to 14.2 percent and 12.5 percent,respectively. It's possible that U.S. production may yet grow just enough to bring thatpercentage down to zero. But, given the steep production decline rates for naturalgas wells being drilled today, it's doubtful that production at a level high enough toavoid net imports could be maintained for very long.

That leaves us with oil. On average from 1990 through 2012, for domestic use theUnited States imported about 54 percent of its crude oil and petroleum products suchas gasoline and diesel fuel (based on historical data gathered by the EIA). In 2012the percentage had come down from that average to 48.3 percent.* It's progress, butthe country is not even close to becoming energy independent. These percentagesare based on crude oil and total petroleum products which include natural gas liquidsthat come from natural gas wells. It isn't clear how to back out these non-oil liquids inthe statistics.

Still, the numbers give us a reasonable look at what the data actually say about theprospect of U.S. energy independence, which really means oil independence. Theprospects are not good.

Brown points out that we've been down this road once before when the huge oil findaround Prudhoe Bay in Alaska boosted U.S. oil production for a time in the 1980s.

But Prudhoe Bay peaked in 1988 and has been on the decline ever since then.And,with it went total U.S. production until recently.

Given the potential for U.S. tight oil in deep shale deposits and a high oil price whichmakes it possible to incur the high costs of getting it out, U.S. production could growfor a time. But at some point the high production decline rates for tight oil wells(around 40 percent per year) will be too much of a barrier, and total U.S. crude oilproduction will begin to decline once again, Brown believes.

Thecornucopian'sargument is that the third time's the charm, that the industry cannow do what they could not do from 1970 to 1977 [after the peak in U.S. oil

production] and what they could not do from 1984 to 1991 [during the boom inAlaskan oil production], i.e., indefinitely maintain the rate of increase in production.
http://en.wikipedia.org/wiki/Barnett_Shalehttp://en.wikipedia.org/wiki/Barnett_Shalehttp://en.wikipedia.org/wiki/Barnett_Shalehttp://www.eia.gov/dnav/ng/hist/n9050us2m.htmhttp://www.eia.gov/dnav/ng/hist/n9050us2m.htmhttp://www.eia.gov/dnav/ng/hist/n9050us2m.htmhttp://www.eia.gov/dnav/ng/hist/n9050us2m.htmhttp://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=Mhttp://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=Mhttp://www.eia.gov/todayinenergy/detail.cfm?id=7970http://www.eia.gov/todayinenergy/detail.cfm?id=7970http://www.reference.com/browse/cornucopianhttp://www.reference.com/browse/cornucopianhttp://www.reference.com/browse/cornucopianhttp://www.eia.gov/todayinenergy/detail.cfm?id=7970http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=Mhttp://www.eia.gov/dnav/ng/hist/n9050us2m.htmhttp://www.eia.gov/dnav/ng/hist/n9050us2m.htmhttp://en.wikipedia.org/wiki/Barnett_Shale


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Peak prosperity foroverpriced oil


THE DEBT CEILING SUPERCEDED AND REPLACED

Simple, easily available data on US debt shows the US actually hit its debt ceiling - ifwe call it $16.7 trillion - back in May 2013, at least five months ago. Today, thesovereign debt of the US is well above $17 trillion, but curiously enough this simplefact never features in the media. What happened is the US Federal Reserve took

'extraordinary measures', followed in the fullness of political time - with the obligatorycliffhangers for TV audiences - by a three-month political extension to any practicaldecision, except to keep borrowing and spending.

As Warren Buffett said in an interview with CNBC, Washington would get close tothe point of extreme stupidity, 'but would not cross that line'.

Likewise the ultra-magic triple-digit price in dollars of US WTI needs extraordinarymeasures to stay that over-priced. Oil flirted with the $99.99 price floor, today, 21October. Not so long ago, WTI was very confidently forecast by some of WallStreet's most powerful market manipulators - sometimes called 'investors' - as easilyable to attain $125 per barrel before December 31st.

Even by mid-morning, New York time, 21 October, the plunge protection team wasclearly at work trying to repair the damage, because falling oil prices are a challengeto New Normal.

The extent to which the team succeeds in its quest, which is recurrent and evencyclic, with its most recent peak in 2008, can be questioned this time around. Onstrict fundamentals-only, oil is overpriced by at least $20 a barrel. Leaving in placethe Syrian surcharge or Middle East risk premium of perhaps $10 a barrel, we get a

realistic non-manipulated target price around $89 per barrel for WTI. Without that riskpremium we get a maximum sticker price of $80 per barrel for WTI.

HELPED OR HINDERED BY THE DOLLAR?

Conventional oil analysts and trader lore says that if the USD declines, oil prices indollars normally rise 'mutatis mutandis' but even if we forgot our Latin, the outlook forthe USD plunging - against what? - presents a lot of intellectual problems. Against oilis what the oil bulls hope.

Quoted on Pravda.ru, October 16, scholar Mikhail Khazin said: "Those who are

professionally engaged in economic matters, in one voice say that there are notyears, but months or even weeks left before the collapse." To be sure he meant a
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collapse of the USD and its role in world trade - especially oil trade. Conversely,Khazin said nothing at all about the Russian ruble becoming the world's newpetrodollar, nor the RMB, nor gold - we can tell him that oil-gold trades will behampered by persistent weakness inside the bullion market, upstream corporatedebt for miners hitting extremes, but revenues declining, and soft gold mining stock

prices being sure and certain for some while forward.

Forecasts that the USD is going to tank - against what? - face so many hurdles in thereal world we can bet with the contrarians that the world value of the dollar will rise alittle, if not a lot, in coming days and even weeks. Dragging down the oil price.

In a normal world, nothing like New Normal, as pointed out by Alistair Macleod in along interview with Chris Martenson on 'Peak Prosperity', October 19, the role of QEworldwide, whether its the US Fed, the ECB, the BOE or BOJ has reached asaturation effect in artificial wealth creation, and is now only a wealth transferoperation. Only those players close to the money spigot will now get the spinoff or

'trickle down' from printed money. Everywhere else in the economy, local and global,we get deflation. Oil prices will therefore deflate - not inflate.

TIMELINES FOR CHANGE

Right across the commodities space - except oil - natural resource prices are wilting.This is new normal. The back-flow current and negative feedback effect is strong, butoil still counts a large number of deep-pocket players habituated - or addicted togetting a reliable return from betting that oil prices will rise. Being slow-witted andslow to change, their paradigm change takes time.

Measured by mostly all-time record highs for major stock exchanges, as in Europeduring its fifth straight year of economic decline with 27 million unemployeds -making Jobless Europe the No 7 'country' in the EU 28-country grouping - assetprices have reached a peak, or very close to. Further growth can only be slow, butdecline can only be fast.

Oil tracks equities a lot more than the USD's world value, meaning that whenequities tank - oil tanks.

Whether or not equity markets can be maintained at extreme highs, and then grown

some more, is a daily question these days, and the answer will soon be No. Somewhile before that 'unexpected crisis' occurs, oil will have to tiptoe away from itsprevious overpriced peak value. At that time, the plunge protection team willabandon its warm, previously reliable support to overpriced oil - and that time couldbe now or very soon.

View more quality content fromAMK CONSULT
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UK North Sea oilproduction decline

Written by Euan MearnsfromEnergy Matters

The streets of Aberdeen are lined with Range Rovers, Porsches and Audis. Newcommercial property and residential developments are popping up all over andaround the city. It is boom time in Europes oil capital. And yet UK North Sea oilproduction is in free fall, despite record high expenditure.

Oil Field Decline and Decline Rates

Production from most oil fields begins to decline within a few years of productionstarting as a result of pressure depletion and reserves depletion and ingress of wateror gas into the previously oil bearing strata. During the early years of a basindevelopment new discoveries that come on line will normally more than compensate

for decline and production may grow. However, as new discovery rate falls and thenumber of new fields coming on line goes down, decline takes over and can bedifficult to reverse.

UK oil production peaked in 1999 and has since declined at an annual rate between5 and 10% (Figure 2). However, in 2011 decline accelerated to an unprecedented17.9%. A number of factors contribute to this (Figure 2) including an increase intaxation on North Sea production made without warning in March of that year.

Figure 1In the period 1999 to 2008,sharply rising oil price more thanoutweighed plummeting productionand the total value of that productionkept rising. But with oil price nowstabilised and range bound $100-$120 / barrel, a continued fall inproduction will begin to drag thevalue of that production downwardsas capital and operating costs go up.Data from theBP statistical review of

World Energy 2013.Click on allcharts to get a larger copy.
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Upcoming Events and

Training Courses

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Finding opportunities in the Middle East...to be avoided or too good to turn down?London, 12 Dec 2013

Oil in North West Europe...will independence of supply just be a mirage?

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NOC acquisitions liftoil and gas M&A in Q32013 to $47.6 billion

Written by Eoin CoynefromEvaluate Energy

Upstream mergers and acquisitions bounced back in the third quarter of 2013 driven

by new acquisition activity by NOCs. This follows two relatively subdued quarters in

the earlier part of the year. The total outlay of $47.6 billion represents an increase of99% from Q2 2013 and brings the quarterly tally back into line with the average

spending per quarter since the start of 2011 of $48 billion.

A logical conclusion from this rise is that confidence is returning to the oil & gas

market following a nervous start to the year, which primarily emanated from

economic fears across the western economies. Delving deeper into the data,

however, reveals that over $27 billion worth of acquisitions during the quarter were

made by either National Oil Companies or companies with a significant government

ownership. These companies operate largely outside of the free market, especially in

regards to raising finance and passing typical investment appraisals and therefore

serves as a poor barometer for the general sentiment of the industry. An equally

credible conclusion may be be that the fears that hung over the first half of the year

are still resident today, especially with the on-going US debt ceiling stand off and the

at best tepid recovery of the European economy. As the graph below demonstrates,

deal value by public and private companies were actually lower in Q3 2013 than any

period in the past 2 years, as was the total number of upstreamdealsby any type of

company.

The top twodealsof the quarter by

value were conducted by National Oil

Companies and were also for the

same asset. Initially, in late 2012,

ONGC had a $5 billion bid accepted

by ConocoPhillips for an 8.4% stake

in the Kashagan field in Kazakhstan.KazMunayGas then invoked their
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This report was created usingCanOilsfinancings database which tracks allCanadian TSX and TSX-V listed E&P financingdealson a daily basis and provides acomprehensive set of deal metrics.CanOilsalso tracks dailyM&Adeals,provides10+ years of historicalfinancial and operating dataforTSX and TSX-V listed oil &gascompanies as well as guidance, forecasts and an extensiveoil sandsproduct.

View more quality content fromEvaluate Energy

A focus on East Africa'sunior oil and gas

companies

Written by Ilda SejdiafromEvaluate Energy

The importance of Africa as an emerging new source of oil and gas can hardly beunderestimated; the region had a total of 132.4 billion barrels of oil and 513.2 Tcfproved gas reserves in 2012. Historically, oil and gas reserves have been associatedwith North and West Africa, where countries such as Algeria, Angola, Egypt, Libyaand Nigeria accounted for 84% and 91% of Africas oil and gas production in 2012,respectively. In recent years, however, the East African region has become hotproperty for energy investors, following huge gas discoveries in Tanzania andMozambique and oil discoveries in Uganda and Kenya. With the increase in reserves

and frequency of large discoveries, the region has attracted not only majors andnational oil companies, but also junior and independent oil and gas players. Onesuccess story here is Cove Energy, a small London-listed oil explorer that was partof large gas discoveries made in the Rovuma Area 1 field during 2010-2011 (8.5%stake in the Anadarko led consortium exploring offshore Mozambique andTanzania). Following the discoveries, Cove Energy was acquired in February 2012for 1.22bn by Thailands PTT Exploration and Production, after a bidding war withShell.

This acquisition by PTTEP has attracted great interest into other companies ofCoves size in the region. TheEvaluate Energydatabase provides a detailed insight

into how these companies have been performing, and how much they are spending.The graph below shows the capital expenditure by region for 34 small and mid-cap
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used in this report, which included Afren, Beach Energy, Chariot Oil & Gas, Circle Oiland Pancontinental Oil & Gas, amongst others. In total, the database covers over300 companies worldwide, delivering efficient data solutions foroil and gas companyanalysisandbenchmarking,with 20+ years of financial, operating data andperformance ratios, along with global assets, refinery andM&Adatabases.

View more quality content fromEvaluate Energy

Insight: 2014 oil andgas industry planningcycle - Getting it right

Written by Peter ParryfromBain & Company

Energy executives will consider macroeconomic issues, industry trends and tactical

specifics as they plan their budgets for the coming year. As commercial and national

oil and gas companies work through their annual planning cycles for next year, they

are assessing the macro business environment and making careful assumptions

about the industry and their companies positions in it. These insights define the

coming years performance targets, confirm priorities, and set board and shareholder

expectations. Done well, they serve as a robust backdrop for establishing effectiveplans, budgets and rolling five-year operating plan updates.

This checklist of 10 key issues for the 2014 oil and gas planning and budgeting cycle

covers macroeconomic trends, industry themes and specific tactical considerations.

We recommend using this kind of structured framework to challenge thinking and

ensure a highly effective planning process, contributing to high-quality, accurate

results.
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Deepwater oil (Brazil, West Africa and a full restart in the USs Gulf of

Mexico);

Onshore oil (East Africa, India, California and Egypt);

Unconventional oil and gas (US, Argentina and Australia).

The number of focus areas required by an oil company depends on its size. But withexploration budgets of $500 million per year for the independents and as much as $5billion per year or more for the supermajors, there seems to be no shortage ofinvestment dollars targeting emerging trends and new opportunities.

8. Gas. Gas was once the stable part of the portfolio, but mid-term planning hastaken on a challenging degree of uncertainty. Unconventional gas in the US hascaused major swings in market prices and the value of gas assets. Recent examplesinclude the write-downs by companies that had built up big resource positions, suchas Anadarko, BHP Billiton, Encana, Noble, Statoil, Shell and Total; cost escalationfor mega offshore projects, as experienced by Chevron Australia; and large newdiscoveries in East Africa, India, Argentina, the eastern Mediterranean and Australia.

Gas remains a very strong part of the mix and will drive a large part of the volumegrowth for the international oil companies (IOCs) over the next decade. But projectdelivery is likely to be slow, with commercialization subject to greater gas-to-gascompetition. The best projects will still yield solid returns and support growingdemand. But it is more important than ever to hold advantaged assets to deliverstrong results.

9. Major projects start up. Large conventional projects face two main performancechallenges in addition to cost: Will they start up on time, and will they perform toexpectations? The larger the project, the more susceptible it is to slippage. Once upand running, most see lumpy performance during the first six months rather than asmooth ramp-up, as the facility transfers from project to operations.

Unconventional projects are different,, more like a long-running manufacturingprogram with a moving work site. For planning effectiveness, the measure is howmany wells can we complete and hook up, how quickly and at what unit cost. For the2014 plan, it will be vital to know if these criteria are escalating, steady or declining.

10. Realistic operational delivery. The operational reliability of the oil and gasindustry continues to be a major challenge and a huge opportunity to realize value.For example, in the North Sea the average oil production asset performs well belowits theoretical potential and has a large backlog of maintenance work (see Figures 1and 2). From a planning perspective, it is critical to have a clear view of historicalperformance, as well as reasons to expect stronger or weaker future delivery and theextent to which planned programs and interventions will increase operationalperformance.

Summary: Getting 2014 right

We see a greater premium than ever in getting forecasts and guidance right, not onlyfor internal performance management but also for IOCs to meet stock market


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infrastructure already in place. The region already has pipelines, refining capabilitiesand people with experience in the industry. That reduces development costs.

And there is no severance tax on hydrocarbons recovered using horizontal wells inLouisiana or Mississippi for two years or until the producer recovers their costs of the

wellthat sure helps economics.

A third is how close it is to the St. James terminal located on the Gulf Coast ofLouisiana. Oil sold to the St. James terminal has received a premium to WTI whichreached $10 to $20 in 2012. That premium has since shrunk, but could return ifpipeline and rail infrastructure cant keep up with the pace of production growth.

And I keep coming back to thisfourth, this is very oily production. Wells drilled sofar in the TMS are 90% to 95% black sweet oil. And that 5% associated gas has ahigh BTU content with approximately 80 to 100 barrels of NGLs per million cubic feetproduced.

While the TMS has been compared favorably to the Eagle Ford, the play is deeperand therefore has more expensive wellsthe Big Negative. The oily part of theEagle Ford is 5,000 to 10,000 feet deep, and wells cost $7 to $8 million.

Meanwhile, wells targeting the TMS which is at depths of 11,000 to 13,000 feet,costs for single wells are running at $13 million and higher.

That means that for the TMS to match the economics of the Eagle Ford, either wellcosts have to come down or production has to outperform.

Goodrich Petroleum (GDP) believes that the cost per well could be shaved downfrom $13 million for a single well to closer to $10 million if a full development drillingprogram was to be rolled out. A full development plan brings with it economies ofscale and improvements in drilling efficiency through experience.

Goodrichs competitor Halcon Resources also believes that a well cost of $10 millionis a reasonable target that could be achieved.

Both Goodrich and Halcon are operators with considerable experience in the EagleFord and have a good idea of gains that can be made as drillers become more

experienced with a play and more efficient.

Assuming a base case type curve that allows for 600,000 BOE (barrels of oilequivalent) to be recovered (thata the EURthe Estimated Ultimate Recovery) and a$10 million well cost, a TMS well has an IRR of 75% (at $100 WTI). At a highcasetype curve that predicts 800,000 BOE will be recovered the IRR jumps to 156%.Thats a little bit bigger than the Bakken.

In its last quarterly conference call Goodrich Petroleum indicated that its recentCrosby well had produced in excess of 100,000 barrels equivalent in 5 months, andthat it is still producing approximately 375 BOE per day at the end of 6 months of

production.


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According to Goodrich, plotting that 375 BOE per day of production on their 800,000-barrel equivalent high case type curve at the 6 month point puts them above thecurve.

That is encouraging obviously as that well would be considered very economic.

But it is just one well.

Normally that wouldnt get me too excited.

But there is more than just one well. Several operators have hit strong wellsso theindustry has a bit of tweaking to do, but they have already cracked the nut on thisplay; they know how to produce from it.

Goodrich which has a market capitalization of under $900 million just acquired anadditional 185,000 acres in the TMS. That is a big commitment for a company of this

size. They now have 300,000 net acres.

The other big player in the TMS? Canadas Encana (ECA-NYSE/TSX)the 5thlargest natural gas producer in the US. The wells they are drilling and operatingactually have the best IP rates I see in the TMS. (I own ECA)

Sanchez Energy (SN-NYSE) just spent $78 million to get what I calculate from acomplicated press release to be 40,000 net acresor just under $2000 an acre.

Conclusiondeeper wells mean more expensive wells, but that can also meanhigher EURs to compensate for that.

And infrastructure is in place and being close to the Gulf Coast Refinery Complexmeans lower transport costs and for now high pricing.

The Bakken in North Dakota and the Cline Shale in Texas have been the hotmoney oil plays in the US (the Eagle Ford is more gassy), and the TMS could be the2014 play.

View more quality content fromOil & Gas Investments Bulletin
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Geology beatstechnology: Shell shutsdown oil shale pilotproject

Written by Kurt CobbfromResource Insights

The belief that technology can always overcome natural limits just took a big hit thisweek whenRoyal Dutch Shell PLC decided to shut down its pilot oil shale project inwestern Colorado after 31 years of experimentation.The ostensible reason is thatthe company has opportunities elsewhere. Shell says it wants to shift resourcesaway from the intransigent rock and move it to profitable opportunities. That soundslogical. But, it might have sounded logical in any of the last 10 years as oil pricesrose to historic heights while oil shale projects languished. Even todaythe averagedaily price of crude oil hovers near its historic highs set in 2011 and again in 2012.

The prize for anyone who profitably unlocks these deposits is huge,an estimated800 billion barrels of recoverable resources.So why isn'toil shaleyielding to the

mighty combination of deep pockets, sophisticated technology and high prices?

A clue comes from one sentence incoveragein The Denver Post: "Full-scaleproduction would probably have required building a dedicated power plant." In simpleterms, it takes energy to get energy. Shell's process requires copious amounts ofelectricity to heat the rock in place through boreholes in order to release the waxyhydrocarbons embedded in it. In this pilot project, the subterranean rock was heatedfor three years before liquids were captured and brought to the surface for furtherprocessing.

(Oil shale is a promotional term. Oil shale is neither shale, nor does it contain oil. It is

better characterized as organic marlstone. It containskerogen,a waxy, long-chainhydrocarbon that must be extensively processed to make it into a synthetic form ofcrude oil. Oil shale is often confused with oil taken from deep shale formations suchas the Bakken in North Dakota, oil properly called "tight oil.")

The ratio of energy outputs to inputs for oil shale is estimated to be about 2 to 1,according toa studyby Cleveland Cutler who has long examined energy return onenergy invested. Shell claimed a ratio of around 3 to 1 (though that claim no longerappears on theproject site). That seems good until you realize that we are currentlyrunning the world on crude which has a ratio around 20 to 1.

Furthermore,the need for water to cool power plants associated with oil shaleextraction and for processing the extracted liquids is considerable.And, water is
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increasingly difficult to secure in an area that has seen growing demand combinedwith more than a decade of drought.

Proponents of oil shale claimed in 1981 that it would be economical to processif oilwere to reach $38 per barreland stay there. The threshold price kept escalating

along with the price of oilall the way up to $80in a 2008 study by the U.S. Bureau ofLand Management.

And, yet here we are. Brent Crude, the de facto world benchmark, hovers around$108 dollars. The average daily price for the past three years has remained above$100. In the face of these consistent record high prices, Shell is abandoning oil shaledevelopment. And, Shell isn't the only one. Another international major, ChevronCorp.,pulled out of its project last year.

There are others who soldier on in the oil shale deposits, and they may eventuallyfind ways to produce a synthetic crude from this rock at a profit. But 30 years of

failure suggests that such a development remains far off. And, in a world that istrying to wean itself from fossil fuels because of climate change and the risks ofdepletion, time may run out.

The path of oil shale is reminiscent of atomic fusion research. Twenty-five years ago,fusion was supposed to be just 25 years in the future. Earlier in the same decade, oilshale was touted as the future of oil. Today, fusion remains the energy source of thefuture (just as oil shale does), and researchers at the world's main fusion researchfacility, theInternational Thermonuclear Experimental Reactor (ITER),say thatfusion will perhaps be ready for commercial use by mid-century.

To be fair, the challenges for fusion researchers are daunting. For example, theymust build and run a device that operates at interior temperatures of 150 milliondegrees centigrade--which is 10 times hotter than the core of the sun. And, theymust do it safely and in a way that produces more energy than the device consumes.

But, because the challenges are so daunting, it may turn out that fusion will alwaysremain the energy of the future. We already know how to fuse two atoms. And, weknow how to process oil shale to produce synthetic oil. But, we don't know how to doeither of these things at an energy or financial profit sufficient enough to make thempractical for widespread deployment. There is a strong possibility that we may not

learn how to succeed with either in a time frame that matters to anyone living today.

That means we must get on with other technologies, energy projects and energypolicies that have a more realistic possibility of addressing our energy needs and theclimate change caused by our current energy regime.

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