Thread: No free lunch!!!

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Good questions 37, I have no particularly unique insight into North Slope production or the pipeline. Just what I can learn on the internet and figure logically. For any others interested here's a link to the pipeline site; http://www.alyeska-pipe.com/about.html

In other reading it's claimed that the North Slope is responsible for 17% of U.S.domestic production, and that they spend (2001 dollars) $150 million a year on maintenance alone. There are 20 state and federal agencies that regulate operations! But then, that shouldn't surprse me as businesses in our state are regulated by 28 agencies under 58 sets of regulations. The last few years they've been fighting to get a 30 year renewal of the land lease for the route the pipeline takes. Predictably, the local working population is in favor of it, the environmental types are scratching for the slimmest negatives they can find. Even though the pipeline has a remarkable record over the past 27 years.

Why they aren't producing at 100% capacity, I don't know. I'm not even sure they aren't from what I've been able to read. I can tell that they're producing at about half what they did at first, but not sure what that means. Did they take advantage of the "easy", high producing wells first, and now they're into the higher cost, higher effort, lower producing part of the field? I didn't find any commentary on that. Perhaps there's a clue in a story on OPEC I read this morning. Some of the Opeckerheads are concerned that the price is getting too high when it gets to that $42.00 area. Is this because they have such a love and concern for the folks in the rest of the world? No, because at that level it becomes economically feisible for Russia and Mexico to up their production. Since the article was written by your typical news service writer, they didn't go into the kind of detail I'm interested in, but if I had to decipher that comment, that tells me that Russia and Mexico don't start making money on some part of their reserves until the price goes over that point. There's probably a lot of oil around the world that's in that range. So it could be the same for the North Slope. Production costs have to reach a certain point before it's worth pulling the oil out. Or, maybe they're just shrewd. Pump enough to keep the system going, but use up the foreign stuff first. Nah, that would make sense. Interesting idea to contemplate though. What would the Arabs sell if they didn't have oil? Sand? Camel dung? Old loped off body parts? Hmmmmm. Maybe they've figured that out too and that's why they're spreading themselves around the world. The latest figures I've seen indicate that middle easterners make up about 10% of the population of Europe. Maybe they have a long range plan.

As for there being an "unlimited supply of money" I don't think so. Just thinking about basic investment philosophy, investors need to be assured of a return within a period of time. The lower the return, or the longer the time, or combinations of the two and it gets real difficult to find people to pony up money. There are too many other places to put their dough that pay better and sooner. Speculative investing is a small part of the total investment world. And heavily regulated industries/operations make investors nervous because of the uncertainty of somebody changing the rules "tomorrow" and killing the investment. There's competition for everything. Resources, dollars, old hot rod parts..................rational people go where they get the best deal (maybe I should take the hot rod part thing out of there...........I'm not so sure we're really rational.)