USA – Emerging LNG Giant: October Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is for subscribers and purchasers only.

From this month’s issue:

TerraJoule.us remains firm with its call that global oil prices will reprice to $150/barrel by the year 2020. In the chart below, which equalizes various energy sources using the unit of a million btu, that translates to $25.86—per million btu. Notice, also, that the forecast does not make radical pricing changes for the other energy course outside of oil. CApp Coal (Central Appalachian coal) and PRB Coal (Powder River Basin coal) are only about 25% higher than today’s prices—which are currently at extreme lows. The most important pricing relationship, however, can be found between the price of N.A. NG (North American natural gas) and Asian LNG. Sourced at $6.00 per million btu and sold into the robustly growing Asian LNG market at $14.00, this arbitrage marks a substantial improvement in the price paid to producers in North America, and better still, the price paid by buyers in Asia. Indeed, the era of ridiculously high wintertime LNG prices in Asia near $20.00/million btu are coming to an end. Australia and the US together are in the process of dismantling the Middle East’s price gouging of Asian buyers. And although profit margins for Australian LNG will be lower, that country does have the advantage of its closer proximity to the whole of Southeast Asia. Overall, the prospect of substantial new LNG supply to Asia is bullish, economically, for that region. This adds another piece to the view of a global economy very much recovered by 2020.

Forecasted Prices Million btu in the Year 2020

Also in this month’s issue:

The model portfolio as of 30 September 2014 is up +1.62% since inception. The portfolio declined along with the broader market, during the month of September. There are no changes this month to the portfolio’s composition.

“TerraJoule.us eBook – USA: Emerging LNG Giant – October 2014″ by Gregor Macdonald – Editor on Ganxy

Uber and Oil: September Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is for subscribers and purchasers only.

From this month’s issue:

The supertrend in which Uber is already taking part is the transition of vehicle use from one that concentrates on distance, to power. In the post-automobile growth era, the culture has become re-acquaninted with the fact that the highest and best use for vehicles is the short-distance hauling operation, in which concentrated energy (oil) is employed to ferry improbably large loads that would otherwise take many human hours of labor. In order to control uniformity of the ride-service to users, and to reduce exposure to upward volatility in oil prices, it seems inevitable that Uber is going to continue to concentrate on the short-distance market, and will eventually have to invest in capital equipment: namely, electric vehicles. Whether Uber builds a fleet of EVs (electric vehicles), or helps drivers purchase their own, is an open question. The important point here is that global transportation will become increasingly bifurcated between long and short-distance travel. Governments, as previously discussed, will increasingly take over the responsibility to provide interstate high speed rail, commuter rail, and light-rail. That leaves a fairly large and enduring market around the great urban sprawls: not only in the OECD, but in the Non-OECD. Given that the spread between a gallon of gasoline and an eGallon (see graphic below, from doe.gov) will continue to widen, it’s inevitable that Uber will have to eventually embrace EVs. The prospect that Uber will eventually own a lot of depreciating capital equipment may take the shine off its current business-model and attractiveness of its prospects as a growth company, but there would seem few ways Uber can control costs during the next repricing of oil—which is also likely to not be accompanied by an advance in wages. The good news is that the prospects for significantly higher electricity prices, at least in the US, are low. While Terrajoule.us remains firm that global oil supply has permanently entered a constrained era, the growth of inputs to global electricity has no constraint—just yet. North America has enormous reserves of natural gas; coal reserves globally are gargantuan; and best of all the growth of renewables will continue at its astonishing pace.

Also in this month’s issue:

The model portfolio as of 31 August 2014 is up +11.92% since inception, having recovered  nicely since the market declines of summer. This month will see the cash level taken down to zero, as we head into Autumn fully invested. Using the last bit of cash left in the model portfolio, we are going to become heavily weighted this month in oil…

“TerraJoule.us eBook – Uber, and Oil – September 2014″ by Gregor Macdonald – Editor on Ganxy

The New Dependency on US Oil: August Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is opened up, and is freely available at SoundCloud.

The United States has been a commodity producing giant for over a century. And so, in one sense, there is nothing new in its latest emergence as a major energy exporter. The US contains the world’s largest coal reserves, with exports nearly tripling in the decade from 2002-2012. And even at the low points of US natural gas and oil production—approximately in the year 2005—the US was still the single largest producer of natural gas globally, and, produced more daily oil than Iran, or Iraq, or Canada. However, it’s been the remarkable change in the country’s oil balance sheet that has grabbed headlines the past several years. Growing oil supply by a million barrels per day each year, while reducing oil consumption at the same time, has greatly reduced the US call on global oil.

Accordingly, the world has become unwittingly dependent on this the strong rate of US supply growth, reflected mainly in the stable price of oil. Should US oil supply growth slow, however—and we think it will—the price sensitivity to such a change will be far higher than global oil markets currently anticipate.

“TerraJoule.us eBook – The New Dependency on US Oil – August 2014″ by Gregor Macdonald – Editor on Ganxy

Combined Global Wind+Solar

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Dear Reader,


Thankyou for your interest in TerraJoule.us. If you’ve not had a chance to read the latest issue, Big Trends in Global Energyit’s available now.

Single issue sales at Ganxy.com | Annual Subscription at Gumroad.com

Model Portfolio: Up +9.48% Since Inception

The TerraJoule.us model portfolio, at mid month, is currently up +9.48% since inception (April 1, 2013). The portfolio’s cash level is currently at 14.37%. We will continue to deploy this cash in August, and September.

Annual Subscription

All annual subscribers to TerraJoule.us, using the Gumroad platform, receive their latest issue automatically on the first day of the calendar month. Subscribe today.

Free Issue

To understand better the TerraJoule.us call for the next repricing of oil, the May issue, Here Comes Oil, is available at no charge. Thankyou for your support and readership.

Mid-Month Data Update

As discussed in this month’s issue, Big Trends in Global Energy, combined Wind+Solar composed over 12% of the total growth of global energy consumption last year. This is unquestionably impressive.

However, we must remember that combined Wind+Solar still form a very small part of the ongoing global power mix. In 2013, total global electricity generation stood at 23,127 TWh (terawatt hours). Of this, total generation from combined Wind+Solar stood at 753 TWh, or just 3.25% of the total

That said, TerraJoule.us is forecasting that by 2025 combined Wind+Solar will provide at least 10% of total global power generation. To see which countries are in a leadership position already, see the below chart of Global Wind+Solar Consumption in TWh 2013. The US consumed 178.7 TWh of combined Wind+Solar in 2013, with China just following at 143.8 TWh. The US and China are unquestionably on the verge of supersizing their Wind+Solar resources further, with enormous project pipelines building quickly. As discussed in last month’s issue, India Unleashed, the third main country to watch now is India. (click on image for larger chart hosted at Tableau.)



Next Issue of TerraJoule.us

The next issue of TerraJoule.us will be published Friday August 1, 2014.

Thanks so much for reading TerraJoule.us, and we hope to see you again next month.

-Gregor Macdonald


____________________
Gregor Macdonald
Editor, of TerraJoule.us Monthly ebook
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Big Trends in Global Energy: July Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is for subscribers and readers, only.

TerraJoule.us is pleased to announce we are now working with Blue Terminal of Vancouver, BC to bring you the highest quality data, and data visualization. The core theme discussed in this month’s issue, Big Trends in Global Energy, is of course the transition from oil to power. In this regard, the growth in global electricity generation has strongly outpaced global oil production for the ninth straight year. |  see: Global Growth Rates: Electricity Generation vs. Crude Oil Production 2003-2013. (click on image to enlarge)

Global Growth Rates - Electricity Generation vs Oil Production

Also in this month’s issue:

The TerraJoule.us Model Portfolio, as of the close on Monday, 30 June 2014, is up +13.62% since the inception date, April 1, 2013. The portfolio is currently enjoying its best performance so far, even with cash levels above 20%. We remain, however, in the typical accumulation phase of Summer. More cash will be deployed, therefore. As of the close of trading on Tuesday, 1 July, we will make further changes to the model portfolio, increasing exposure to two (2) separate ETFs.

“TerraJoule.us eBook – Big Trends in Global Energy – July 2014″ by Gregor Macdonald – Editor on Ganxy

BP Statistical Review of Global Energy Use

A copy of this post is sent directly to all readers and subscribers of TerraJoule.us

Dear Reader,

Thankyou for your interest in TerraJoule.us. If you’ve not had a chance to read the latest issue, India Unleashedit’s available now. Single issue sales at Ganxy.com | Annual Subscription at Gumroad.com | And more detailed information at the TerraJoule.us website.

Model Portfolio: Up +10.98% Since Inception

The TerraJoule.us model portfolio, at mid month, is currently up +10.98% since inception (April 1, 2013). Since raising cash in April, we have increased positions in GRID and TAN, and also started a new position in FCG. We will continue to deploy cash in July, August, and September.

Annual Subscription

All annual subscribers to TerraJoule.us, using the Gumroad platform, receive their latest issue automatically on the first day of the calendar month. Subscribe today.

Free Issue

Because of sudden geo-political risk to the oil complex, due to the destabilization of Iraq, the May issue, Here Comes Oil, is being released at no charge. It’s very important that TerraJoule.us readers be informed as to the structural tightness that was already forming in the global oil market, before recent events transpired. Thankyou for your support and readership.

Mid-Month Data Update

The BP Statistical Review of World Energy has just been released overnight, June 16, 2014. As always, there’s a massive amount of new data to examine, and TerraJoule.us will select highlights over the next few issues.

The big picture of global energy use is a great place to start however, and below is a chart of Global Energy Use by Source, in 2013. The notable change is that coal has now reached over 30% share of total global energy use, and continues to challenge oil for the top position. The spread between use of the two fuels is slightly narrower than the chart suggests, however, because BP data combines oil use with other liquids. Against crude oil only, coal is now less than 2 percentage points from returning as the top energy source of the world.



Next Issue of TerraJoule.us

The next issue of TerraJoule.us will be published Tuesday July 1, 2014.

Thanks so much for reading TerraJoule.us, and we hope to see you again next month.

-Gregor Macdonald


____________________
Gregor Macdonald
Editor, of TerraJoule.us Monthly ebook
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India Unleashed: June Issue of TerraJoule.us

c3574680-946c-4c1b-860b-0e97942f421dEach issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Free link to this month’s podcast: India Unleashed at SoundCloud.

For nearly twenty years the world has watched the command economy of China sprint through a massive industrial revolution while India, a fractious democracy, has largely stagnated. The landslide victory of the pro-growth BJP Party in last month’s elections, however, signals the most important new direction for India in over half a century. Consider that India has 90% of the population of China, but only 20% of the energy consumption, and the scope of the growth potential becomes more clear. This month, we consider two energy scenarios for a broadly growing India. One path leads to an All of the Above strategy, with India increasing energy inputs from all sources. The other emphasizes renewables, enough so to kick the trajectory of global wind and solar power to even higher levels of growth. Regardless of which path India takes, the potential new call on energy resources is roughly equal to the 400M Indians currently unserved by any energy at all: a veritable new country arriving on the world stage. The direction India takes will become, in effect, the energy path of the world.

A newly ascending India is going to have its greatest impact on coal, natural gas, wind and solar. The All of the Above scenario would rely heavily on coal; with natural gas, wind and solar filling in the gaps. Should India take this path the Second Age of Coal will last long after the year 2025. The other direction, the Strong Wind+Solar path, leads more forcefully towards natural gas, wind, and solar. Indeed, using natural gas as a growth anchor, (and yes, increased oil use as part of a broader economic expansion) India could restrain its own coal growth to just a 10% total increase to 2025. In such a scenario the new global call on coal is light, while the call on natural gas and renewables is enormous. Our task is to ultimately project how these two very different directions would impact the global energy mix.

Also in this month’s issue:

Model Portfolio Update: The TerraJoule.us Model Portfolio, which began April 1, 2013, is up +9.28% since inception. Cash levels remain elevated after selling down positions this Spring. We will continue to use the summer months to add back exposure.  Accordingly, we will make two changes to the model portfolio as of the New York close, on Monday June 2, 2014. 

Data Brief:

In 2008, the Non-OECD passed two historic milestones. As of that year, more than 50% of Non-OECD persons became city-dwellers. And in the same year, the five billion people in the Non-OECD for the first time consumed slightly more than 50% of total world energy. We have been anticipating therefore the next crossover point: when Non-OECD demand for oil would also outdistance OECD demand. While data on crude oil alone is hard to come by, according to the EIA, this crossover point occurred this April, when the Non-OECD consumed more oil, natural gas liquids, and other petroleum products, than the OECD. Alas, we cross another threshold.

“TerraJoule.us eBook – India Unleashed – June 2014″ by Gregor Macdonald – Editor on Ganxy

Starting to Fight Declines, in the Bakken

A copy of this post is sent directly to all readers and subscribers of TerraJoule.us

Dear Reader,

Thankyou for your interest in TerraJoule.us. If you’ve not had a chance to read the latest issue, Here Comes Oilit’s available now. Single issue sales at Ganxy.com | Annual Subscription at Gumroad.com | And more detailed information at the TerraJoule.us website.

Model Portfolio: Up +8.59% Since Inception

The TerraJoule.us model portfolio, at mid month, is currently up +8.59% since inception (April 1, 2013). This is a decline of about 250 basis points since the March high. Cash heavy coming into May after greatly reducing exposure in April, we increased the core position in the solar ETF, TAN, on May 1. Currently, just as we did last summer, we will use the coming seasonal weakness to slowly build back positions, favoring oil and gas. As a reminder, the TerraJoule.us model portfolio is playing not for an all-renewable world by 2025, but rather, a re-weighting of the global energy mix from oil to the powergrid.

Annual Subscription

All annual subscribers to TerraJoule.us, using the Gumroad platform, receive their latest issue automatically on the first of the calendar month. Subscribe today.

Mid-Month Data Update

The Drilling Productivity Report from EIA in Washington is a relatively new product, and despite some discrepancies between how the EIA defines “The Bakken” and the State of North Dakota defines The Bakken, there are some useful metrics contained therein.

As detailed in the current issue of TerraJoule.us, Here Comes Oil, we have begun to undertake a running tally of the age of wells in The Bakken. The reason: wells age quickly in this shale region; and they age predictably, losing (on average) over 50% of their initial production rate by the third year. In the current issue of TerraJoule.us, we laid out the age progression already underway, and estimated that sometime later this year, or early next year, more than 50% of Bakken wells will turn three or more years old.

The IEA helpfully keeps an account of the effects of this aging well population, and as of April of this year, the decline from legacy wells was averaging 67,596 barrels per day. | see: Monthly Decline from Existing Bakken Wells in bpd 2008-2014

Monthly Decline from Existing Bakken Wells bpd 2008-2014

Let’s make a simple observation here: in a resource that is presently producing roughly 1 million barrels a day, a decline rate from existing wells is pushing towards 70 thousand barrels a day, and will absolutely reach 100 thousand barrels a day. It’s inevitable therefore that in order to fight these declines, the industry is going to have to significantly step up their game. Adding 1800 new wells per year in the Bakken is not going to be sufficient, as it was the past two years. And given that the industry only added 403 new wells in the first three months of 2014 further adds support to this theme.

Next Issue of TerraJoule.us

The next issue of TerraJoule.us will be published Sunday June 1, 2014 and will address the emerging issue of carbon risk as the global resource extraction industry runs into serious profitability challenges.

Thanks so much for reading TerraJoule.us, and we hope to see you again next month.

Gregor


____________________
Gregor Macdonald
Editor, of TerraJoule.us Monthly ebook
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Here Comes Oil: May Issue of TerraJoule.us

Slide1Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

While oil prices are overdue for a typical Springtime pullback, the May issue of TerraJoule.us addresses the more important point that oil is finally ready to reprice. The next advance higher will not be as dramatic as the last, which took oil out of its long, historic level below $25 a barrel and delivered us to today’s $100 level. No, this next repricing will instead be smaller in percentage terms and less volatile. That said, a move to a world of $150 oil by the year 2020 will share many of the same characteristics as the price advance which began a decade ago. The repricing should begin later this year.

OPEC spare capacity, as we have discussed previously, is not expected to improve at all in 2014. Plodding along at the low level of 2 mbpd, this means the global oil market is, definitionally speaking, tight. Meanwhile, as you are probably aware, the global supermajors have thrown in the towel on their failed attempt to extract further volumes of oil by investing enormous capital each year. We are left to wonder: from what region, from what company, from what country will fresh oil supply emerge to satisfy our call for an uptick in global demand?…Without the new, post-2008 production from the United States, the world would be muddling along at the exact same production ceiling which first appeared way, way back in 2004. Remember, only one country came to the rescue of world oil supply coming out of the circa 2000 recession, and that was Russia which poured out over 3 mbpd of new supply to world markets. That heroic supply addition kept the oil futures market in a calm state until 2005, when Russia’s supply growth finally faltered. The analogy should not be lost on us, now. For today it’s the US which is the lone contributor to global oil supply growth, thus allaying fears in the futures market and helping to keep prices restrained. The call from TerraJoule.us is that period of calm is about to end.

The TerraJoule.us Model Portfolio, which began April 1, 2013, is up +10.34% since inception, and after raising cash levels to 37% last month, is ready to start accumulating positions again, as we move through summer. Accordingly, we will make changes to the model portfolio in May.

The TerraJoule.us model portfolio is cash heavy coming into the beginning of May. Last month, we reduced the position in JXI, and closed out the positions in IXC and PXJ. We did so in anticipation not only of typical Spring weakness in Oil and Gas, but the growing concern that the supermajors (IXC) have fully entered decline, and therefore,  the growing prospect that they will spend much less on services (PXJ). This selling and trimming brought cash levels to 37% of the portfolio’s mix. Interestingly, however, energy was the one sector to escape broad equity market declines in April. We retained our position in XOP (independent oil) which had an excellent month, gaining nearly 8%.

“TerraJoule.us eBook – Here Comes Oil – May 2014″ by Gregor Macdonald – Editor on Ganxy

Going To Grid – Energy Transition Update

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Dear Reader,

Thankyou for your interest in TerraJoule.us. If you’ve not had a chance to read the latest issue, The Energy Transition Portfolio, it’s available now. Single issue sales at Ganxy.com | Annual Subscription at Gumroad.com | And more detailed information at the TerraJoule.us website.

Model Portfolio: Up +10.0% Since Inception

The TerraJoule.us model portfolio, at mid month, is currently up +10% since inception (April 1, 2013). In anticipation of weaker market action, and seasonal weakness in oil and gas, equity exposure was greatly reduced on April 1, 2014. The cash level of the model portfolio currently sits at over 35%. The recent decline in global indices has taken a single percentage point off the portfolio’s high (+11%), seen at the end of March, 2014. Looking ahead, seasonal weakness from May through August will be a time of new accumulation of equity positions, in preparation for the next energy sector advance later this year.

Annual Subscription

All annual subscribers to TerraJoule.us, using the Gumroad platform, receive their latest issue automatically on the first of the calendar month. Subscribe today.

Mid-Month Data Update

As a courtesy to you, the TerraJoule.us Mid-Month Data Update takes a look the progress of energy transition, as the world continues to re-weight its energy consumption from liquid fossil fuels to the powergrid.

As explained in the April 2014 issue of TerraJoule.us, The Energy Transition Portfolio, the secular shift of global energy demand to electricity has profound implications for investment, over the next decade. Power generation has fully recovered from the 2008-2009 global financial crisis, and is running at rates previously associated with normal, global growth. Oil production, on the other hand, remains stagnant. In 2013, global crude oil production advanced by an insignificant 0.22%.

We mark the start of our current energy transition to the year 2005. That is the crossover year when global oil production growth faltered, and the rise of industrial Asia set the course for a global economy tied to the powergrid. In every year since 2005, global electricity generation has significantly outpaced global oil production. Notable years are 2006-2007, when global oil production actually fell, as global power generation advanced by 3.8% and 4.69% respectively. Note also the big, global recovery year of 2010: while oil production rose (finally) to meet recovering oil demand, global power generation soared by 6.36%.

2013 was yet another, strong year of global electricity generation growth as China power demand, contrary to market perceptions, rebounded. As emerging markets are now recovering, we expect 2014 will provide yet another high-contrast year  between electricity generation and oil production. Indeed, we may even seen global oil production fall, if only a little, by the time this year has completed. | see: Global Growth Rates: Electricity Generation vs Oil Production 2005-13. (click on image to enlarge)

Global Growth Rates- Electricity Generation vs Oil Production 2005-2013

Next Issue of TerraJoule.us

The next issue of TerraJoule.us will be published Thursday May 1, 2014 and will offer an update to the impending repricing of oil. For background, please see the September, 2013 issue: Road Map to the Next Repricing of Oil.

Thanks so much for reading TerraJoule.us, and we hope to see you again next month.

Gregor


____________________
Gregor Macdonald
Editor, of TerraJoule.us Monthly ebook
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