Thursday, May 22, 2014

New World Order - but not the one certain parties envisioned ? May 22 , 2014 --- WHO NEEDS THE UNITED STATES? NOT RUSSIA AND CHINA Russia and China have just signed what is being called "the gas deal of the century" ......... As China and Russia lock arms together with not only their massive long term natural gas supply deal and massive CapEx commitments ( as well as planning together in the international arena ) , Note how China is leveraging its financial heft - check items on Afghanistan and Africa ! Meanwhile , Russia is moving forward despite sanction regimes ...... And on the subject of energy , pay close attention to US shale Oil ( not all that it has been fracked up to be )

Creating the New World Order - led by China and Russia .....

Info Wars......




WHO NEEDS THE UNITED STATES? NOT RUSSIA AND CHINA

Russia and China have just signed what is being called "the gas deal of the century"
Who Needs The United States? Not Russia And China
by MICHAEL SNYDER | ECONOMIC COLLAPSE BLOG MAY 22, 2014
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Russia and China have just signed what is being called “the gas deal of the century”, and the two countries are discussing moving away from the U.S. dollar and using their own currencies to trade with one another. This has huge implications for the future of the U.S. economy, but the mainstream media in the United States is being strangely quiet about all of this.
For example, I searched CNN’s website to see if I could find something about this gas deal between Russia and China and I did not find anything. But I did find links to “top stories” entitled “Celebs who went faux red” and “Adorable kid tugs on Obama’s ear“. Is it any wonder why the mainstream media is dying? If a particular story does not fit their agenda, they will simply ignore it. But the truth is that this new agreement between Russia and China is huge. It could end up fundamentally changing the global financial system, and not in a way that would be beneficial for the United States.
Russia and China had been negotiating this natural gas deal for ten years, and now it is finally done. Russia is the largest exporter of natural gas on the entire planet, and China is poised to become the world’s largest economy in just a few years. This new $400 billion agreement means that these two superpowers could potentially enjoy a mutually beneficial relationship for the next 30 years
Russia reached a $400 billion deal to supply natural gas to China through a new pipeline over 30 years, a milestone in relations between the world’s largest energy producer and the biggest consumer.
President Vladimir Putin is turning to China to bolster Russia’s economy as relations sour with the U.S. and European Union because of the crisis in Ukraine. Today’s accord, signed after more than a decade of talks, will allow state-run gas producer OAO Gazprom (GAZP) to invest $55 billion developing giant gas fields in eastern Siberia and building the pipeline, Putin said.
It’s an “epochal event,” Putin said in Shanghai after the contract was signed. Both countries are satisfied with the price, he said.
Of course countries sell oil and natural gas to each other all the time. But what makes this deal such a potential problem for the U.S. is the fact that Russia and China are working on cutting the U.S. dollar out of the entire equation. Just check out the following excerpt from a recent article in a Russian news source
Russia and China are planning to increase the volume of direct payments in mutual trade in their national currencies, according to a joint statement on a new stage of comprehensive partnership and strategic cooperation signed during high-level talks in Shanghai on Tuesday.
“The sides intend to take new steps to increase the level and expansion of spheres of Russian-Chinese practical cooperation, in particular to establish close cooperation in the financial sphere, including an increase in direct payments in the Russian and Chinese national currencies in trade, investments and loan services,” the statement said.
In my recent article entitled “De-Dollarization: Russia Is On The Verge Of Dealing A Massive Blow To The Petrodollar“, I warned about what could happen if the petrodollar monopoly ends. In the United States, our current standard of living is extremely dependent on the rest of the world continuing to use our currency to trade with one another. If Russia starts selling natural gas to China without the U.S. dollar being involved, that would be a monumental blow to the petrodollar. And if other nations started following the lead of Russia and China, that could result in an avalanche from which the petrodollar may never recover.
And it isn’t just the national governments of Russia and China that are discussing moving away from the U.S. dollar. For example, the second largest bank in Russia just signed a deal with the Bank of China “to pay each other in domestic currencies”
VTB, Russia’s second biggest lender, has signed a deal with Bank of China, which includes an agreement to pay each other in domestic currencies.
“Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions,” says the official VTB statement.
The deal underlines VTB Group’s growing interest in Asian markets and will help grow trade between Russia and China that are already close trading partners, said VTB Bank Management Board Vasily Titov.
You can almost feel the power of the U.S. dollar fading.
A few months ago, when I wrote about how China had announced that it no longer planned to stockpile more U.S. dollars, I speculated that it may be evidence that China planned to start making a big move away from the U.S. dollar.
Well, now China’s intentions have become even more clear.
The Chinese do not plan to allow the United States to indefinitely dominate the globe financially. In the long run, the Chinese plan to be the ones calling the shots, and that means that the power of the U.S. dollar must decline.
These days, instead of piling up mountains of U.S. currency, China has started accumulating hard assets instead. In the past, I have written about how China is rapidly stockpiling gold, and it turns out that the Chinese have also been very busy stockpiling oil as well
China is stockpiling oil for its strategic petroleum reserve at a record pace, intervening on a scale large enough to send a powerful pulse through the world crude market.
The move comes as tensions mount in the South China Sea and the West prepares possible oil sanctions against Russia over the crisis in eastern Ukraine. Analysts believe China is quietly building up buffers against a possible spike in oil prices or disruptions in supply.
The International Energy Agency (IEA) said in its latest monthly report that China imported 6.81m barrels per day (bpd) in April, an all-time high.
Once upon a time, China was extremely dependent on the United States economically. The same was true with most of the rest of the world.
But now economic power has shifted so dramatically that nations such as Russia and China are realizing that they don’t really need to be dependent on the United States any longer.
And with each passing year, the relationship between Russia and China is becoming stronger. As Pepe Escobar recently observed, this emerging alliance is causing quite a bit of consternation in Washington…
And no wonder Washington is anxious. That alliance is already a done deal in a variety of ways: through the BRICS group of emerging powers (Brazil, Russia, India, China, and South Africa); at the Shanghai Cooperation Organization, the Asian counterweight to NATO; inside the G20; and via the 120-member-nation Non-Aligned Movement (NAM). Trade and commerce are just part of the future bargain. Synergies in the development of new military technologies beckon as well. After Russia’s Star Wars-style, ultra-sophisticated S-500 air defense anti-missile system comes online in 2018, Beijing is sure to want a version of it. Meanwhile, Russia is about to sell dozens of state-of-the-art Sukhoi Su-35 jet fighters to the Chinese as Beijing and Moscow move to seal an aviation-industrial partnership.
Meanwhile, the relationship that the U.S. has with both nations is quickly going sour. The crisis in Ukraine has caused relations with Russia to drop to the lowest point since the end of the Cold War, and now China is deeply offended by charges that Chinese military officers have been involved in cyberspying on the United States
China on Tuesday warned the United States was jeopardizing military ties by charging five Chinese officers with cyberspying and tried to turn the tables on Washington by calling it “the biggest attacker of China’s cyberspace.”
China announced it was suspending cooperation with the United States in a joint cybersecurity task force over Monday’s charges that officers stole trade secrets from major American companies. The Foreign Ministry demanded Washington withdraw the indictment.
The testy exchange marked an escalation in tensions over U.S. complaints that China’s military uses its cyber warfare skills to steal foreign trade secrets to help the country’s vast state-owned industrial sector.
The divide between the East and the West is growing.
But the Obama administration has not figured out that we need the East more than they need us.
Right now, the number one U.S. export is U.S. dollars. Our massively inflated standard of living is very heavily dependent on the rest of the world using our currency to trade with one another and lending it to us at super low interest rates.
If the rest of the world quits playing our game, our debt-based financial system will quickly fall apart.
Unfortunately, nobody in the Obama administration seems to have much understanding of global economics, and they will probably continue to antagonize Russia and China.
In the end, the consequences for antagonizing them could end up being far greater than any of us ever imagined.



Zero Hedge ......


China Halts US Dollar Transactions With Afghan Banks

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The de-dollarization escalates. As Reuters reportsChinese banks have halted dollar transactions with most Afghan commercial banks. Whether this is related to the terrorist operations in the Muslim-dominated Uighur region is unclear... also unclear is whether the Chinese banks will accept transactions with Afghan banks in CNY?


Chinese banks have halted dollar transactions with most Afghan commercial banks, the central bank governor said on Thursday, making it difficult for businesses to pay for imports with one of the Afghanistan's biggest trading partners.

"China is a major country that was handling those bank transfers, and now they have told the banks they can't do it," governor Noorullah Delawari told Reuters.

The impact on business had been felt immediately, he said.
De-Dollarization or Anti-Terrorist action? The official story is as follows:
The Chinese move was part of the trend in which it was increasingly difficult for Afghanistan's commercial banks to execute international transactions, Delawari said."Some of our banks cannot do any direct transactions because their correspondent banks in the U.S., Europe, Germany, or Turkey (have halted transactions)," he said.

"Now even transferring money to China to import goods has been affected."

The Afghan government's failure to pass key measures means that it could in June be blacklisted by Financial Action Task Force (FATF), an international body that sets standards on how countries combat money laundering.

Banks have been struggling since FATF threatened Afganistan with the blacklist early this year.

"That has been affecting our banks ability to transfer money for anything," Delawari said, describing how students abroad were unable to receive money from there parents as an example.

Chinese banks and officials were not immediately available for comment.
Because, apparently, now even the Chinese banks are suddenly very concerned about money laundering compliance. In the meantime, Afghanistan: meet gold.




The Battle For Africa: Chinese Investments Vs US Military

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We have been vociferously following the 'battle for Africa' - the last untapped Keynesian credit growth economic region of the world - for a few years. One common theme has emerged China and the US are aggressively chasing down 'assets' - especially in the equatorial region. However, as the following two charts indicate, the two nations are engaged in very difference tactics for that 'takeover' - China's investment versus US brute force and military intimidation(and fake vaccination programs).
Africa is huge...


While those in the power and money echelons of the "developed" world scramble day after day to hold the pieces of the collapsing tower of cards in place (and manipulating public perception that all is well), knowing full well what the final outcome eventually will be, those who still have the capacity to look, and invest, in the future, are looking neither toward the US, nor Asia, and certainly not Europe, for one simple reason: there is no more incremental debt capacity at any level: sovereign, household, financial or corporate. Because without the ability to create debt out of thin air, be it on a secured or unsecured basis, the ability to "create" growth, at least in the current Keynesian paradigm, goes away with it.

Yet there is one place where there is untapped credit creation potential, if not on an unsecured (i.e., future cash flow discounting), then certainly on a secured (hard asset collateral) basis. The place is Africa, and according to some estimates the continent, Africa can create between $5 and $10 trillion in secured debt, using its extensive untapped resources as first-lien collateral.
But the two major combatants for power over Africa - China and the US - appear to have very different approaches...

China - via Investment...



As Stratfor explains:
In late July, Beijing hosted the 5th Forum on China-Africa Cooperation, during which China pledged up to $20 billion to African countries over the next three years.China has proposed or committed about $101 billion to commercial projects in Africa since 2010, some of which are under negotiation while others are currently underway. Together, construction and natural resource deals total approximately $90 billion, or about 90 percent of Chinese commercial activity in Africa since 2010. These figures could be even higher because of an additional $7.5 billion in unspecified commitments to South Africa and Zambia, likely intended for mining projects. Of the remaining $3 billion in Chinese commercial commitments to Africa, about $2.1 billion will be used on local manufacturing projects.

While China has proposed $750 million for agriculture and general development aid and about $50 million to support small- and medium-sized business development in addition to the aforementioned projects, it has been criticized for the extractive nature of its relationship with many African countries, as well as the poor quality of some of its construction work. However, since many African countries lack the indigenous engineering capability to construct these large-scale projects or the capital to undertake them, African governments with limited resources welcome Chinese investments enthusiastically. These foreign investment projects are also a boon for Beijing, since China needs African resources to sustain its domestic economy, and the projects in Africa provide a destination for excess Chinese labor.

and The USA - by brute force and intimidation
This map shows what sub-Saharan nations currently have a U.S. military presence engaged in actual military operations.
It should be noted that in most of these countries, there is a pretty small number of troops. But it is a clear sign of the U.S. Africa Command's increasingly broad position on the continent in what could be described as a growing shadow war against al-Qaeda affiliates and other militant groups.
It also shows an increasingly blurred line between U.S. military operations and the CIA in Africa.



Russia economic activity......



Itar Tass......




Russia, India sign deal on Kudankulam NPP second stage

 May 22, 20:20 UTC+4
In early May the Kudankulam nuclear power plant's first unit reached 90% of its operating capacity
© AP Photo/Rafiq Maqbool
ST PETERSBURG, May 22. /ITAR-TASS/. Russia and India have signed a general framework agreement to build the third and fourth units of the Kudankulam nuclear power plant, Rosatom director-general has said.
Earlier, Indian mass media reported on the signing of the agreement.
“We’ll be able to settle all disagreements. On April 19 the agreement was signed,” Sergei Kiriyenko said on Thursday.
In early May the Kudankulam nuclear power plant's first unit reached 90% of its operating capacity.
After the permission is gotten it will reach full capacity (1,000 MWt).
India has approved a large-scale programme for developing nuclear power engineering. Till 2017 nineteen nuclear power plants’ units with the capacity of 17,400 MWt are planned to be built. Eight units will be constructed with the participation of other countries.
In 2010 Russia and India signed a roadmap for building up to 14-16 Russian-design power units in India.
The Kudankulam nuclear power plant being built with Russia’s assistance can withstand a strong earthquake or tsunami, members of the government committee for the evaluation of the nuclear power plant's safety said.
However the commissioning of the first stage of the Kudankulam nuclear power plant scheduled for late 2011 was delayed by mass protests that demanded its closure.
India is planning to build 19 nuclear power units with a combined capacity of 17,400 MWe by 2017. Eight of them will be built in cooperation with other countries. Russia will help to build units 3 and 4 at the Kudankulam nuclear power plant. Each will have a capacity of 1,000 MWt.
The construction of Unit 2 is almost completed. Rosatom Head Kiriyenko said earlier that Unit No. 2 would be commissioned by the summer of 2013. “All the rest depends on when the Indian side makes the decision,” he added.
He also said that the coordination of commercial terms of building units 3 and 4 at the Kudankulam nuclear power plant had been completed. “We earlier signed an agreement on a loan to India to build Units 3 and 4. The technical parameters have also been approved,” he said.
The Kudankulam NPP will supply electricity not only to the state of Tamil Nadu, where it is located, but also the whole south of India.



Sanctions spur Russian economy — official

 May 22, 19:58 UTC+4
Serious sanctions against Russia bode ill for Europe, Vladimir Putin’s advisor Sergey Glazyev says
© ITAR-TASS/Ruslan Shamukov
ST. PETERSBURG, May 22. /ITAR-TASS/. Current Western sanctions can have a positive influence on Russian GDP dynamics, believes Vladimir Putin’s advisor Sergey Glazyev.
What the West is presenting now is threats, not real sanctions, he believes.
“Too little time has passed to estimate the scale of the impetus that the West’s attempts to isolate Russia have given the Russian economy but I have no doubt this will be a positive impetus,” the economist told ITAR-TASS behind the scenes of the St. Petersburg International Economic Forum. Economic sanctions certainly boosted Russian GDP, he added.
The reasons are import substitution previously postponed for different reasons, as well as the need for the Russian monetary authorities to increase domestic lending for economic development in the place of reducing foreign lending. Besides, the situation would spur de-offshorization, he added.
To some economic sectors, sanctions could deliver a blow, “as we have lost a considerable portion of our technological base, which will be highly difficult to restore in the foreseeable future”. Russia had partners in the East, he said, and the world market learnt to circumvent sanctions long ago but it would “cost Russia more”.
At the same time, serious sanctions against Russia bode ill for Europe, believes Putin’s advisor. Sanctions like those introduced against Iran - trade and financial embargo - would mean 1 billion euro losses for European partners: “Germany would suffer most, Benelux will lose much, while for the Baltic states looms an economic disaster”.


As these developments occur , note a big disappointment for US shale Oil .....

Zero Hedge.....

The US Shale Oil Miracle Disappears

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Submitted by Chris Martenson via Peak Prosperity,
The US shale oil "miracle" has about as much believability left as Jimmy Swaggart. Just today, we learned that the EIA has placed a hefty downward revision on its estimate of the amount of recoverable oil in the #1 shale reserve in the US, the Monterey in California.
As recently as yesterday, the much-publicized Monterey formation accountedfor nearly two-thirds of all technically-recoverable US shale oil resources.
But by this morning? The EIA now estimates these reserves to be 96% lowerthan it previously claimed.
Yes, you read that right: 96% lower. As in only 4% of the original estimate is now thought to be technically-recoverable at today's prices:
EIA Cuts Monterey Shale Estimates on Extraction Challenges
May 21, 2014

The Energy Information Administration slashed its estimate of recoverable reserves from California’s Monterey Shale by 96 percent, saying oil from the largest U.S. formation will be harder to extract than previously anticipated.

“Not all reserves are created equal,” EIA Administrator Adam Sieminski told reporters at the Financial Times and Energy Intelligence Oil & Gas Summit in New York today. “It just turned out it’s harder to frack that reserve and get it out of the ground.”

The Monterey Shale is now estimated to hold 600 million barrels of recoverable oil, down from a 2012 projection of 13.7 billion barrels, John Staub, a liquid fuels analyst for the EIA, said in a phone interview. A 2013 study by the University of Southern California’s Global Energy Network, funded in part by industry group Western States Petroleum Association, found that developing the state’s oil resources may add as many as2.8 million jobs and as much as $24.6 billion in tax revenues.
From 13.7 billion barrels down to 600 million.  Using a little math, that means the hoped for 2.8 million jobs become 112k and the $24.6 billion in tax revenues shrink to $984 million.
The reasons why are no surprise to my readers, as over the years we've covered the reasons why the Monterey was likely to be a bust compared to other formations. Those reasons are mainly centered on the fact that underground geology is complex, that each shale formation has its own sets of surprises, and that the geologically-molested (from millennia of tectonic folding and grinding) Monterey formation was very unlikely to yield its treasures as willingly as, say, the Bakken or Eagle Ford.
But even I was surprised by the extent of the downgrade.
This takes the Monterey from one of the world's largest potential fields to a play that, if all 600 million barrels thought to be there were brought to the surface all at once, would supply the US' oil needs for a mere 33 days.
Yep. 33 days.
And along with that oil come tremendous water demands, environmental, infrastructure and air pollution damages.
So if you do go for it California, the rest of the country will be your best buddy for a little more than 4 weeks. But don't keep calling us afterwards, as we'll be off to the next oil party (if there are any other ones to be had). But know that, sure, we still respect you.
Of course I'm being sarcastic here. But if I lived over or near a shale formation, I would be putting up a hell of a fight to prevent the many long-term damages and airborne pollutants that inevitably accompany such short-lived fracking operations.
At this point, you might be wondering just how the EIA got its estimate so badly wrong. The answer is that the EIA relied on a private firm, one now scraping corporate relations and PR egg off its face:
U.S. officials cut estimate of recoverable Monterey Shale oil by 96%
May 20, 2014

Federal energy authoritieshave slashed by 96% the estimated amount ofrecoverable oil buried in California's vast Monterey Shale deposits, deflating its potential as a national "black gold mine" of petroleum.

Just 600 million barrels of oil can be extracted with existing technology, far below the 13.7 billion barrels once thought recoverable from the jumbled layers of subterranean rock spread across much of Central California, the U.S. Energy Information Administration said.

The new estimate, expected to be released publicly next month, is a blow to the nation's oil future and to projections that an oil boom would bring as many as 2.8 million new jobs to California and boost tax revenue by $24.6 billion annually.

The 2011 estimate was done by the Virginia engineering firm Intek Inc.

Christopher Dean, senior associate at Intek, said Tuesday that the firm's work "was very broad, giving the federal government its first shot at an estimate of recoverable oil in the Monterey Shale. They got more data over time and refined the estimate."
Wait a minute. The 2011 California shale oil estimate that launched a flotilla of excited "shale miracle" headlines, led the EIA to publish an estimate of the Monterey at 13.7 billion recoverable barrels, and helped to form a national narrative around potential US "energy independence" was done by a Virginia engineering firm?
Okay, well who are they exactly?
Looking at their website, clearly put together using cheesy stock photos, early Internet font formats, and touting the fact that they've been a business "since 1998" doesn't quite project the hoped-for aura of gravitas and seasoned competency:
Seriously? A clock in an arch? Typing fingers? A woman gesturing in a meeting and a guy on a phone?
I mean, does anyone other than me have a "no lame stock photos" requirement of the businesses they use to generate the data used to justify a major geopolitical energy realignment? It's the closest thing I have to a hard rule.
Okay, just kidding again....sort of.
At any rate, the bottom line here is that the EIA relied on this firm's back-of-the-envelope calculations which turned out to be -- surprise! -- unreliable. And now, Occidental Petroleum is scrambling to get its assets out of the Monterey and deployed somewhere more promising.
The lesson to be learned here is: don't believe every headline you read. Consider the source, and more importantly -- stock photos or not -- always question the data.

Price, It's Always About Price

However, I cannot completely write off the entire 96% as 'gone' because the media has left off the most important part, as they always do: the role of price.
Without having access (yet) to the latest well data to know exactly what sort of potential disaster we're dealing with, the correct way to write-down an oil resource is to say: at today's oil prices, this asset can yield (or is worth) $X.
At higher prices, it is certainly true that more of the resource will be 'worth' going after.
But as you and I know, the price mechanism is just a means of obscuring the most important variable: the net energy that will be returned from a given play. Generally speaking, the higher the price (which is often a function of the energy required to extract), then the less net energy will come from that play.
So anytime we hear that a given play is being 'written down', as the Monterey is in rather spectacular fashion, what's really being said is that the net energy from the play is a lot less than prior and/or existing plays, and will not be useful to us until higher oil prices come along. In the case of the Monterey, much higher prices.
Whether we have an intact, functioning and highly complex economy of the sort necessary to develop and deliver the technology required to prosecute such low-yielding plays is another matter entirely. My best guess as of today is, 'probably not.'

Conclusion

Today's write down of the Monterey shale asset is a huge blow to Occidental Petroleum specifically, to California's energy and employment dreams more broadly, and to the US's energy dreams at a national level.
This is not surprising at all to anybody following the shale story with a critical eye. We always knew that the best plays were being prosecuted first for obvious reasons; it's human nature to go after the easy stuff first. And this is especially true for the folks in the oil patch.
The best plays were tapped first, not by some accident of technology or lucky holes plunged into the ground, but because they were cheapest to prosecute. The remaining shale deposits are less rich, more costly to explore, and the profitable pockets much harder to find.
Your main take-away is this: the US has a lot less shale reserves on the books today than it did yesterday. Look for future downward revisions as the other remnant shale plays are poked and prodded and found to be wanting.
Investors need to be wary here too. The hype about shale prospects are wedded to a Wall Street cheap capital machine that is showing clear signs of over-heating:
Shale Drillers Feast on Junk Debt to Stay on Treadmill
Apr 30, 2014

Rice Energy Inc. (RICE), a natural gas producer with risky credit, raised $900 million in three days this month, $150 million more than it originally sought.

Not bad for the Canonsburg, Pennsylvania-based company’s first bond issue after going public in January. Especially since it has lost money three years in a row, has drilled fewer than 50 wells -- most named after superheroes and monster trucks -- and said it willspend $4.09 for every $1 it earns in 2014.

The U.S. drive for energy independence is backed by a surge in junk-rated borrowing that’s been as vital as the technological breakthroughs that enabled the drilling spree. While thehigh-yield debt market has doubled in size since the end of 2004, the amount issued by exploration and production companies has grown nine-fold, according to Barclays Plc. That’s what keeps the shale revolution going even as companies spend money faster than they make it.

“There’s a lot of Kool-Aid that’s being drunk now by investors,” Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management LLC. “People lose their discipline. They stop doing the math. They stop doing the accounting. They’re just dreaming the dream, and that’s what’s happening with the shale boom.”
I guess there's a little less dreaming going on in the Monterey shale patch this morning.
Not to pick on RICE here, because they are more typical than not, but when you are spending $4 to earn $1, somebody ought to be asking some hard questions. Especially the investors.
More broadly, I have been clearly concerned by the recent reports indicating that the shale operators have been spending far more in CAPEX than they’ve been generating in operating earnings.
That's a larger subject that I've covered in more detail in recent reports, but the summary is this: over the past four years, free cash flow (FCF) has been negative for most of the major shale players.
Which leads us to the really big question:When will all these shale drilling efforts actually generate positive FCF?
In the case of the Monterey, and at today's prices, the answer looks to be 'Never.'