oil/gas the crisis looming beyond 2020, page-36

Dynofish,

Yep I agree of course.
Any sustained rise in prices will benifit the producer.
Now unless someone has a contract or contract discussions that have been published on the ASX for say another partner, I have based my assumptions on the accounts and comments released regarding contracts in the past. With GAS the contracts need be of such a long term nature the actual price paid is worked out on a very long average.

In the end it doesn't matter. Not one little bit. If oil goes to USD $100- for all this year it wil be paid by the consumer eventually. The impact for the current year depends on how long the tail for the average price is.
If the tails average is 5 years, and the rise is 100% for this year well the increase will show up 20% this year 40% next 60 % ect.

Now this tail is evidenced with the sensitivity studied of WPL running an unhedged production book at the end of 2003. It was at 4.9% ... just to make matters easy say WPL produced 50 mio barrels a year. Unhedged if oil rose USD$1- the profit change would be USD$50- mio.
Now WPL states in the 2003 annual report with a 5% hedge ... thats roughly 2.5 mio barrels if the US price of oul moves $1- the change in p/l will be USD$23- mio not the remaining 47.5 mio. From that I have presumed 24.5 mio barrles of production are covered this sort of way.

Bottom line the tail for the price paid is way way longer than 12 months. Suggest 5 years maybe more. In the end it really doesn't matter. If the contract is for 25 years eventually all the spikes and dips are covered.
This way both parties the producer and consumer dont have the massive rises and dips associated with the market.

I agree with your view. Prices go up, producer will benifit. But its a matter of time. For the Gas portion in this case, I would roughly expect revenues to go up by 20% of the rise on a 1 year spike, and going forward to get the rest.

And to the other gent.
I agree.

There is no guarnatee short term they will go up.
In fact with the ASX 200 at all time highs I would urge caution. The market is a funny thing. People have been calling this sort of thing for years. When I went to school I was taught by now we would be out of oil.
And since then every few years this sort of thing crops up.

I only mentioned this whole thread for a few reasons.
Australian oil producion between 1999 and 2010 will have gone from 800,000 barrels a day to roughly 150,000 barrels per day and the effect right now on our balance of payments is running around 10 billion P/A.

Between 2005 and 2020
Oil production will fall ....
Russia 9.1 mio per day now down to 4.7 mio per day
USA 3.8 mio per day down to 1.3 mio p/d
Norway 2.7 mio per day to 0.7 mio p/d
UK 1.9 mio per day down to 0.6 mio p/d

You get the drift.

There just isn't any more oil left for these countries to produce.

Fun and games