"Q: Let’s start by asking your opinion, Dr. Bustin, on the sinking of the Deepwater Horizon rig off the coast of Louisiana and the impact that could have on oil exploration in the U.S.

Bustin: It’s an environmental ecological disaster, and everything else pales besides that fact. That said, I think what we’re looking at is a major shutdown in offshore exploration off North America."

Katusa, the "dealman": "Also, the deep offshore rigs in the Gulf of Mexico are going to need to find new waters to work in. The Gulf of Mexico makes up roughly 25% of the worlds deep/ultra deep offshore oil sector, and these drillers are going to be under extreme pressure to keep their utilization rates high, with the 6 month moratorium on all offshore drilling in the US."

"Q: So this is clearly going to be a setback to offshore drilling. What are the implications from a supply perspective? Are you guys believers in the whole Peak Oil thing?

Bustin: Fundamentally, I’m a believer in the concept of Peak Oil. Yet, with the new accessibility to reservoirs made possible by technologies that allow us to drill horizontally and release petrocarbons unconventionally through fracking, I am not sure we have actually seen Peak Oil. Ultimately, however, we are burning through an awful lot of what is undeniably a finite resource.

Katusa: David, the problem with the Peak Oil theory is, it doesn’t take into account the increase of production and supply and the economic value of the reserve using unconventional technologies, which are always improving. Moving forward, we are long-term bulls on the oil price, but we’ve been consistent in telling our subscribers to stick to the fundamentals – that the companies they should be investing in are those that are able to produce at the lowest costs. Viewed from another angle, if a company in your portfolio needs $150 oil to make a profit, you should be a seller."

So both the Doctor and the Dealman figure that so much pressure will come from needing oil they figure any technology that gets it is ok.
Despite the evidence of what "fracking" entails/does and with a complete disregard about the need/consumption of water for those "unconventional technologies".

And speaking of water -a bit off topic but not much-, "Up to 77 million people in Bangladesh have been exposed to toxic levels of arsenic from drinking water in recent decades, according to a Lancet study."; "Bangladesh was chosen for the study because nearly 90% of the population uses groundwater as its primary source of fresh water." And don’t miss the right side bar articles dated 15 November 09 and 30 August 07.

( I was watching a DemocracyNow program where a woman from India was pointing that wars/conflicts often get phrased in terms of religion when, in fact, they are wars/conflicts about resources. A statement that is close to being a "whole truth". And such is evidenced by the latest government propaganda about mineral resources in Afghanistan (gotta "stabilize" the country so corporations feel safe in their ‘development of resources"). BUT, back to water. )

"In Afghanistan’s Kabul Basin, at least half the shallow drinking water wells supplied by groundwater are likely to become dry or inoperative within 50 years as a result of climate change, according to new research by U.S. and Afghan scientists." ; "In some areas of the basin, such as in the north along the western mountain front and near major rivers, water resources are generally adequate for current needs. In the east and away from major rivers, the available water resources may not meet future needs." ; "Groundwater in the basin’s less widely used deep aquifer may supply future needs, yet the sustainability of this resource for large withdrawals, such as agricultural uses, is uncertain. The study also warned that contamination in Kabul’s shallow drinking water sources also is a concern. (see Bangladesh above)

And now back to the topic.

"Q: For the readers who are not familiar with the term, can you define "netback"?

Katusa: Netback is basically the difference between your production costs and what you sell your oil for at the well head. Let’s say the spot oil price you are receiving is $75 and your all-in costs are $40, your netback would be $75 minus $40, for a netback of $35."

Now think about that. "all-in costs are $40"; "all-in" means EVERYTHING (taxes,lease fees,etc.). Such is called ‘margin of profit" or "markup". Even the HCR, a business giveaway (see http://seminal.firedoglake.com/diary/55674), only indicates a "markup" of less than 20 per cent. Even "angel investors" don’t have such a ‘markup" ; "Current ‘best practices’ suggest that angels might do better setting their sights even higher, looking for companies that will have at least the potential to provide a 20x-30x return over a five- to seven-year holding period[10]. After taking into account the need to cover failed investments and the multi-year holding time for even the successful ones, however, the actual effective internal rate of return for a typical successful portfolio of angel investments is, in reality, typically as ‘low’ as 20-30%[11]. While the investor’s need for high rates of return on any given investment can thus make angel financing an expensive source of funds, cheaper sources of capital, such as bank financing, are usually not available for most early-stage ventures, which may be too small or young to qualify for traditional loans."

( And a 20x-30x return over a five- to seven-year holding period means that the average yearly return(markup) is 4 per cent for the 20 per cent holding over 5 years. Contrast that with the Oil companies -and those that invest in such- desire for an over 46 per cent return.)

"Katusa: The oil sands have too big of a production profile for them to be banned as a source. Already, one out of every six barrels of oil consumed by a U.S. citizen comes from the Canadian oil sands. We’ll almost certainly see increased taxes, however, that assure that oil sands are not going to be our cheap source of oil, though it will continue to be a sure source of oil.

Q: Won’t that ratchet overall prices higher?

Bustin: The overarching problem is that the oil sands projects are so capital intensive – we’re talking about 60-80 billion dollars already invested, with potentially another 300 billion dollars yet to be invested to maximize the resource. You can’t put together projects with a capex of that magnitude unless you have a predictable price of oil.

Katusa: It’s worth noting here that the existing production is profitable at a cost of around $40-$45 per barrel. But of course, that doesn’t take into account any new taxes.

For the time being, taking into account the netbacks being earned by both conventional and unconventional producers – with even the oil sands operators currently operating at margins of close to 100% – we see the potential for some downward pressure in the price of oil in the short term. Remember, for years and years, the big oil companies were running at 10-15% margins."

( See what I mean? "with even the oil sands operators currently operating at margins of close to 100%" !!)

"Q: I know you guys like coal, which is kind of counterintuitive, seeing how most people view it as dirty and dangerous. What’s driving your outlook on coal – again from a fundamental standpoint and also in terms of finding investment opportunities?

Katusa: Start with the big picture. As much as 75% of China’s electricity generation currently comes from burning coal. That’s not going to change anytime soon. In fact, 2009 was the first year ever that China actually imported coal. Not so long ago, it had been a big exporter. But already half of the coal in the world that is produced is used by China.

On top of that, and this is pretty ironic given the popular view of coal, is that the U.S. is the second largest consumer of coal in the world, after China – with India being a distant third. Everyone is saying coal is dirty, coal is ugly, coal is smelly. It’s done. We’re going green. Even Obama said so. Yet if you’re careful, it’s where the profit is to be made. In fact, coal has been the biggest winner of all the energy subsectors over the last 12 months. "

From here

But the hearings about the Massey mine disaster are closed to the media and public(and neither Obama or anyone in his Admin has said squat about them, opening the doors to the hearings) I guess because such might scare ‘investors’ and reduce the earnings of such.

"And I think what I really want to point out, too, is, since the mining disaster, over 180 coal miners in America have died from black lung disease. And no one is talking about this aspect, that this is just another situation of regulatory failure, that MSHA is not stepping up to the plate to crack down on the regulations and making sure we have proper enforcement just with coal dust inhalation, that the coal industry itself is continuing to operate in a state of lawlessness." (and who knows what happens in China though they- and Columbia now- have had such mine disasers).

"You know, the BP oil disaster is horrific, and it’s catastrophic, but it’s in the millions of gallons. And if you look up just a few miles up from the Upper Big Branch coal mine, there’s a billion-gallon coal slurry impoundment held back by an earthen dam. And right now Massey, in massive violations, is blasting with a mountaintop removal operation, a strip mining operation, that is once again compromising and jeopardizing the earthen dam that is holding back almost six billion gallons of toxic coal sludge. And if that earthen dam broke, as it did ten years ago in eastern Kentucky, when not one single mainstream news media covered it, then the people below, the same coal miners who have just lost twenty-nine people in the Upper Big Branch, they will have less than fifteen minutes to flee a seventy-foot tidal wave of toxic coal slurry."

"AMY GOODMAN: And President Obama’s position on mountaintop removal?

JEFF BIGGERS: Is that, once again, we somehow can regulate this, we have to find a way to do it safely. And it really points to the fact that they don’t understand the crisis at hand, that—why are we waiting for another disaster? We have hundreds, if not thousands, of coal slurry impoundments and coal ash ponds, of course, that broke like in Tennessee, that are waiting to happen. Why are we waiting for these ticking time bombs to go off before we finally moved toward a clean energy policy?"

It should be evidently clear to everyone that our government’s efforts to "make things like they were before" is not only unrealistic and beholden only to those who have money, but actually dangerous and threatening to life on this planet. And I haven’t even mentioned foreign policy.

So what to do?

"ROBERT REICH: Amy, I think that there are a couple of things. And, you know, I scratch my head to try to figure it out. I mean, one is that he is confronted with a requirement in the Senate of getting sixty votes, and he barely can summon sixty votes. Now, that raises another interesting question: why doesn’t he and why don’t the Democrats and the leadership say, "Look, the sixty-vote supermajority is not in the Constitution, there is no reason we have to continue to subscribe by it"? But let’s just take, for at least now, the stipulation that he’s got to get sixty votes.

Also, the big corporations, you know, have never, never, in my experience—and I’ve been in and out of Washington for thirty years—have never had the clout, the power, that they have right now. I mean, they are inundating Congress and members of Congress, Senate and representatives, with money, campaign money. They’re distributing campaign money all over the place. Their lobbyists are all over the place. There is not counter-veiling power in Washington of a sort that we saw, let’s say, forty years ago, when you had big corporations, but you also had very powerful unions, when you had very powerful environmental groups that really could take on big corporations, head to head, toe to toe. Right now, you’ve got a situation in Washington such as I have never seen, I think that probably we’ve not seen since the late nineteenth century, when the robber barons of oil and finance and the great trusts ran roughshod over democracy. "

And the latest example of corporations rule: "The nuclear industry could end up facing no risk under massive tax break subsidies in the Kerry-Lieberman climate bill, according to an important new analysis conducted for Friends of the Earth by the research organization Earth Track. These tax breaks totaling $9.7 billion to $57.3 billion (depending on the type and number of reactors) would come on top of the Kerry-Lieberman measure’s lucrative $35.5 billion addition to the more than $22.5 billion in loan guarantees already slated for nuclear power."

From here

Well, if someone who knows the in and outs of our system is stumped, what can I say? I’ve taken an action -diary coming- and the experience and results of that lead me to the conclusion that all hell is going to have to break loose and the U.S. become irrelevant in world politics for anything to really change.

http://seminal.firedoglake.com/