While everyone else is talking about the Baltimore Bridge fiasco, Sam Bankman-Fried sentenced to 25 years over FTX’s collapse, and Trump’s Truth Social (NYSE: DJT) adding a few billion to his net worth…
Here are the stories you haven’t been hearing much about:
- The Destruction of a Massive Texas Solar Farm Highlights the Fragility of “Renewable Energy”: The recent destruction of a massive solar farm in Texas highlights the fragility of “renewable” energy infrastructure, and has raised concerns about the negative environmental impacts of supposedly “environmentally friendly” energy sources
That’s why today, we’re going to be talking about Texas, oil, and renewable energy.
-Equifund Publishing
P.S. Interested in investing in oil and gas? Pytheas Energy – an AI-powered, early-stage oil and gas producer operating in Texas – is raising capital on the Equifund Crowd Funding Portal.
P.P.S. In case you’re looking for the weekly update on the biggest story no one in the mainstream media seems to care about…
Gold continues to hit new highs with Chinese demand going absolutely berserk (and still, almost no one is talking about it): Exceptional strong gold demand from both the Chinese central bank and private sector has been driving up the gold price over the past two years, by which they have taken over control of the gold price from the West.
China net gold imports through January 2024. The purple bars show exceptional strong demand coinciding with an escalating price. None of the publicly disclosed gold imports are destined for the PBoC. The Chinese central bank buys gold abroad and repatriates that gold outside the scope of customs statistics.
For our own sanity, we’re just going to send you to the other several issues we’ve already published on gold, if that’s a topic you’re interested in.
Otherwise, we’ll save the gold updates for another issue and stay focused on oil for this one.
The Myth of Renewable Energy
I believe we can all agree that, in principle, we all think renewable energy is a good idea…
Especially when it can be produced in large amounts, at low cost, and in an environmentally friendly way.
Had we all decided to bet on nuclear power – instead of wind and solar – we might have achieved one of the most important milestones of our civilization: abundant and incredibly low-cost energy.
But instead, what we got was a massive, government-mandated shift into expensive, unreliable, and potentially environmentally toxic power sources…
According to the U.S. Environmental Protection Agency damaged or “retired” solar panels are considered hazardous waste, and can cause environmental harm when their materials are released in large quantities.
Not to mention, these projects often require 300-600x more land than a natural gas plant, don’t last as long as projected, and don’t actually reduce carbon emissions compared to fossil fuels (or at least not nearly as much as claimed).
Even worse, they can be easily damaged by severe weather incidents – which are happening more and more often.
To follow up last week’s issue about Texas, thanks to a massive hail storm…
A large solar farm about an hour southwest of Houston – the 3,300 acre Fighting Jays Solar project, capable of producing 350 megawatts of electricity, enough to power 70,000 homes – got wrecked.
For reference, the Fighting Jays began construction in February 2021 and became operational in July 2022.
- Total cost to build: ~$350 million
- Expected life of facility: 35 years
- Total time in operation: Less than 2 years
- Current value today: worthless?
Who’s going to pay for repairs? Probably the taxpayer.
This is far from the only large-scale solar project to be walloped by hail.
According to GCube’s 2023 report “Hail No! Defending Solar from nature’s cold assault,” hail claims now average around $58.4 million per claim and account for 54.21% of incurred costs of total solar loss claims being attributable to hail.
So how much would it have cost to build a 350 MW natural gas plant – which, by all accounts, produces cleaner and more reliable power?
According to the EIA, in 2021, wind cost ~$1,428/kW vs natural gas at ~$920/kW – about 35% less.
But hey, it’s not like the Texas energy grid has a history of problems, especially during hot summers and arctic winters, right?
But hey, it’s Texas. They’ve got tons of oil and gas, and are producing at record rates.
They’re totally going to be fine, right?
Ok, so in theory, there’s plenty.
But most of our production comes from recently drilled wells… of which, thanks to the hostile posture towards the oil and gas sector by the Biden administration, we’re not doing much new drilling.
Good thing we’ve got that strategic petroleum reserve thing, right?
Okay, so we don’t have a lot left in that either.
So I guess we’re just going to have to rely on buying oil from hostile foreign nations – like Saudi Arabia and Russia.
Let’s see what’s going on in Russia right now.
Okay, so Ukraine is bombing the Russian oil industry, and even Joe Biden is like “yo, please don’t?”
I guess it’s all up to Saudi Arabia to make sure we’ve got enough oil to not cause a massive supply shock that sends prices through the roof.
So what do we have left?
As it turns out, America has a LOT of what’s known as stripper wells: – by IRS definition, an oil or gas well with a maximum daily production below 15 BOED – which is 15 barrels of oil or 90,000 cubic feet of gas per day – over any consecutive 12-month period.
That means, of the roughly one million active oil and natural gas wells in the United States, 76% are low production stripper wells.
Combined, these stripper wells make up over 7.8% of the total of all oil and natural gas produced domestically (7.4% oil and 8.2% natural gas).
In addition to this, researchers estimate that there are between 2-3 million abandoned (a.k.a. “orphaned”) oil and gas wells in the United States, which may have producible reserves, but simply aren’t in operation.
From 1993 to 2000, about 150,000 of these marginal oil wells were abandoned, costing the nation more than $3.5 billion in lost economic output and leaving about 150 million barrels of crude in the ground.
Any new idea that bolsters efficiency and cuts costs has the potential to keep tens of thousands of wells pumping and improve the bottom line of thousands of small, independent American producers.
According to a 2009 report published by the Interstate Oil and Gas Compact Commission:
Another way of understanding the importance of marginal wells to the United States’ economy is to examine the hypothetical scenario of abandoning all such wells.
The losses, both in terms of production volumes and revenue, are staggering, serving to underscore the importance of these wells.
If all marginal oil wells were abandoned during 2008, this would have reduced domestic production by more than 260 million barrels of oil and would eliminate more than $26 billion in revenues.
Likewise for natural gas, we see that production would be cut by 2.1 trillion cubic feet, which corresponds to a loss of $16 billion.
The combined effect on lost state and national revenues of this hypothetical abandonment of marginal wells comes to $42.6 billion.
In the oil and natural gas industry alone, actual abandonment of stripper wells could result in almost 110,000 job reductions with a resultant loss of workers’ earnings (that could be spent on other goods and services locally or regionally) totaling $7.5 billion.
This means that if all of these wells could be brought under management, and production could be increased by one BOED, that could mean hundreds of thousands – if not millions – of additional barrels per day could be produced each year.
Interestingly enough, many of these wells are plugged without undergoing any sort of enhanced recovery effort, even though they could still be economically viable.
Why? Because many of the new technologies that can be used to extend the life of their wells – and increase production rates – are often too cost prohibitive for smaller operators.
However, with the prospect of oil prices staying higher for longer, this could be exactly what we need to finance the revitalization of a major source of domestically sourced oil and gas.
Want to learn more about the hidden opportunity in stripper wells? Go here to read the full story.
