OPEC is sending a clear message to Wall Street banks and big investors: If Washington passes legislation that would allow the U.S. government to sue the cartel, the first victim will be shale.

The Organization of Petroleum Exporting Countries will once again become a nemesis for U.S. shale if the U.S. Congress passes a bill dubbed NOPEC, or No Oil Producing and Exporting Cartels Act, Bloomberg reported this week, citing sources present at a meeting between a senior OPEC official and U.S. bankers.

The oil minister of the UAE, Suhail al-Mazrouei, reportedly told lenders at the meeting that if the bill was made into law that made OPEC members liable to U.S. anti-cartel legislation, the group, which is to all intents and purposes indeed a cartel, would break up and every member would boost production to its maximum.

This would be a repeat of what happened in 2013 and 2014, and ultimately led to another oil price crash like the one that saw Brent crude and WTI sink below US$30 a barrel. As a result, a lot of U.S. shale-focused, debt-dependent producers would go under.

Bankers who provide the debt financing that shale producers need are the natural target for opponents of the NOPEC bill. Banks got burned during the 2014 crisis and are still recovering and regaining their trust in the industry. Purse strings are being loosened as WTI climbs closer to US$60 a barrel, but lenders are certainly aware that this is to a large extent the result of OPEC action: the cartel is cutting production again and the effect on prices is becoming increasingly visible.

Indeed, if OPEC starts pumping again at maximum capacity, even without Iran and Venezuela, and with continued outages in Libya, it would pressure prices significantly, especially if Russia joins in. After all, its state oil companies have been itching to start pumping more.

The NOPEC legislation has little chance of becoming a law. It is not the first attempt by U.S. legislators to make OPEC liable for its cartel behavior, and none of the others made it to a law. However, Al-Mazrouei’s not too subtle threat highlights the weakest point of U.S. shale: the industry’s dependence on borrowed money.

The issue was analyzed in depth by energy expert Philip Verleger in an Oilprice story earlier this month and what the problem boils down to is too much debt. Shale, as Total’s chief executive put it in a 2018 interview with Bloomberg, is very capital-intensive. The returns can be appealing if you’re drilling and fracking in a sweet spot in the shale patch. They can also be improved by making everything more efficient but ultimately you’d need quite a lot of cash to continue drilling and fracking, despite all the praise about the decline in production costs across shale plays.

The fact that a lot of this cash could come only from banks has been highlighted before: the shale oil and gas industry faced a crisis of investor confidence after the 2014 crash because the only way it knew how to do business was to pump ever-increasing amounts of oil and gas. Shareholder returns were not top of the agenda. This had to change after the crash and most of the smaller players—those that survived—have yet to fully recover. Free cash remains a luxury.

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March 16, 2019 at 04:06AM

From The Financial Post Special to Financial Post  Gwyn Morgan Canadians watching Robert Mueller’s investigation into Russian interference in the 2016 U.S. election might be tempted to find comfort in their certainty that such foreign interference could never happen here. Except it already has. And while the Russian government at least denies interfering in American…

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March 16, 2019 at 04:04AM

The BBC has formally upheld Paul Homewood’s complaint about their African penguin story. It’s the eighth climate-related complaint which has been upheld against the BBC in the last two years.

They say once is an accident, twice is a conspiracy. I wonder what eight times is?

As I revealed yesterday, the BBC has formally upheld my complaint about their African penguin story. I am pleased to see then that The Times has now picked it up.

This complaint is now the eighth climate-related one I have been involved with which has been upheld against the BBC in the last two years. There may of course be others that I am not aware of.

• In March 2017, World at One made the ridiculous claim that sea levels at Miami were rising at ten times the global mean.

The BBC were subsequently forced to admit that sea levels there showed “little divergence from the global mean”

• Then in October 2017, the BBC broadcast an episode of “Russia with Simon Reeve”, which linked the deaths of “tens of thousands of reindeer” to climate change.

After a complaint was submitted, the BBC accepted that reindeer populations were in fact stable or increasing.

• In December 2017, a supposedly factual online article appeared on BBC News, called “Is climate change making hurricanes worse?”.

Written by Chris Fawkes, the BBC meteorologist, it categorically stated  that “A warmer world is bringing us a greater number of hurricanes and a greater risk of a hurricane becoming the most powerful category 5”

The actual data shows this is simply not true, as the IPCC themselves have made perfectly clear.

Eventually, the BBC printed a correction that their claim was based on “modelling and not historical data”

• In May 2018, Roger Harrabin wrote an article on the Report of the Environmental Committee, which criticised the government’s clean energy policies.

Harrabin claimed that investment in clean energy had slumped following a fusillade of policy changes, including a ban on new onshore wind farms.

There has been no such ban, only the removal of subsidies.

The BBC Executive Complaints Unit accepted that the article was materially misleading, and that there had been a serious lapse of editorial standards.

• In June 2018, John Humphrys interviewed Lord Deben, allowing him to get away with wildly inaccurate claims about wind power unchallenged. In particular, Debenstated that “even where a community wants to have an onshore wind farm, it can’t have it.”

In fact there is no such ban, and the Government has actually devolved the decision to approve onshore wind turbines to local councils.

As a result, the BBC Executive Complaints Unit found that Deben should have been challenged on this point to ensure listeners were not left with a materially misleading impression.

• December 2018 saw an episode of the BBC Weather World programme, which was little more than a free puff for onshore wind farms.

At one stage, the presenter casually commented that “Already about 30% of the UK’s power is produced by wind energy”. The actual figure is 15%.

Following a complaint, the BBC accepted their claim was wrong, and have now withdrawn that segment of the programme from their website.

• In February 2019, Roger Harrabin covered the newly published from the IPPR, “Facing up to the age of environmental breakdown. “

Central to the IPPR’s case was this statement:

“Since 2005, the number of floods across the world has increased by 15 times, extreme temperature events by 20 times, and wildfires seven-fold. “[“Since 2005”, was subsequently amended to “since 1950”.]

Harrabin made absolutely no attempt to challenge or query this statement, or some of the other contentious claims in the IPPR report, despite the fact that it was patently absurd.  Instead his article was effectively just a cheerleading exercise.

The IPPR claim is in reality a totally fake one, as they misinterpreted the International Disasters Database used for their analysis. As the organisation which maintains the database makes totally clear, many disasters occurred in past decades but were never officially recorded in the database, purely because of better methods of reporting nowadays.

After considerable controversy, the IPPR made substantial changes to that section of their report, accepting that the original claims were false. The BBC then withdrew the fake claims and issued a correction.

• Finally we come to the story about the decline of African penguins, which was broadcast on the BBC News Channel last October.

Introducing a video report from South Africa, the presenter baldly stated that:

The next report is about the African penguin population and how it’s rapidly declining. Conservationists are saying their habitat is being hit by rising tides caused by climate change.

And it’s interesting that since that report by the UN last week on climate change, so many different organisations have been coming forward to emphasise the importance it has on their work.

Amazingly the video which followed made no mention of climate change or rising tides at all. Zilch! Nada! Instead, the local ranger, who was interviewed, categorically blamed the decline on overfishing.

This is actually very well understood by experts, such as those from the Organization for the Conservation of Penguins.

Despite the efforts of the BBC to fob off my complaint, the Executive Complaints Unit agreed that there was no evidence for the presenter’s claim and criticised their journalists’ failure to check claims.

I have no doubt that these eight cases relating to climate change are just the tip of the iceberg. Many other such fake reports are broadcast and go unnoticed.

It is also true that the BBC regularly try to fob off complainants with spurious replies, leading many to simply give in. This is even the case when their inaccurate claims are obvious, easily proven and factual.

Indeed, one of the things which continue to astound me is how the BBC continues to broadcast so many claims about climate change which are so utterly preposterous that even my dog would find them suspicious. Are their reporters and presenters so absorbed by global groupthink that they believe every bit of tripe and junk science put before them?

Are they more interested in propaganda than facts?

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March 16, 2019 at 03:51AM

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March 16, 2019 at 02:30AM