 Good afternoon. It's my pleasure actually to have Dan and I have been talking about this since we rolled out the first IHS report. And looking at it at a different granular level and you actually have taken it down to new sites by being able to go through into congressional districts and see what the economic impacts. But this is also the first one of that wave that looked at a lower price environment as well because the world has markedly changed over the last eight months or so. What we decided to do with this is to have participatory to the extent that we're going to let our presenters walk through the highlights of the report first. We found a few folks that we wanted to tee up to make some initial comments but then I would actually welcome commentary because the exports issue and the production issue has been extremely important to a lot of people, not without controversy. And the timing of this is terrific. So again, we can have seats on here. There's copies of the report that we will distribute as soon as the presentation is done and they're out in the back and Annie will make sure that you have them. And so joining Dan Jurgen today. Dan is the vice chairman of IHS. He's a familiar face to many of you, to all of you I suspect and that's probably why you're here. Pulitzer Prize winning author, good friend and supporter of CSIS. He's joined today by Kurt Barrow. Kurt is the vice president of oil markets and downstream for IHS. Kurt was here when we talked about the export study the first go round. He's got extensive experience in the downstream. He began his career at Exxon at the Baytown refinery and was a VP for Pervin and Gertz. And Rick Botte who's sitting to Kurt's right. Rick is currently a senior advisor with IHS and we were just talking about his experience in the oil industry as well. He was president and CEO of Continental Resources. He was VP of international exploration for Devin and held a number of other positions over the last 30 years. So this is an extremely knowledgeable group and we're actually interested in not only the discussion but we're gonna let you do the presentation first and then we'll move to that point and Dan the floor is all yours. Well thank you Frank want to thank UN CSIS for hosting and as you say it's extremely knowledgeable group which I think you mean the whole group that's here. So we'll have I think a very good discussion after we take you through this all. It was last May then we presented the first phase of our study. We've been working on this issue for a little almost like a year and a half now and it's only grown more urgent as we have been working on it. When we did the first report there were two key themes which want to reiterate today. One is the extraordinary growth in US oil production as we all know up more than 80% since 2008 and that has led to this the basic point the mismatch between the quality of the crude and the refining capacity in the Gulf Coast and that's leading to the discounts that because the market has great difficulty in absorbing it. The second thing and we've actually gotten very curious and remember discussing with Senator Johnston it. I mean where did this crude oil ban come from and just to remind you obviously came out of the tumult of the 1970s but there's a very specific reason for it and the specific reason is because we had price controls and if you had price controls you didn't want to be able to allow people to export oil because that would circumvent and undermine the price controls. So but the price controls were abolished in January of 1981 less well known there were also a ban on the export of products and of course today on a gross basis the US is the largest exporter of products that was abolished in October of 1981 and we went back into the archives. We couldn't find the emails we tried. But it was very interesting because it just seemed to have been done almost kind of casually just not casually but thoughtfully but done on the basis that it was in the national interest not to have the ban and there's no big kerflunkle about it in terms of products and of course the ban and crude oil remain there and it didn't matter for a couple of decades that it was there. Well it matters now and so the two themes of the new report are first is the impact of the price collapse makes it much more urgent now than it was when we did the first report to lift this ban because of the impact that the discount creates for domestic production and secondly and that the difference between world prices and US prices can be the difference between the viability and non viability of a great deal of investment. The second point and this is what we got very interested to understand is the nature of the supply chain. How does it reach into the whole country does it and here we brought together both the energy and the economic analysis capabilities of IHS and I think we were surprised to find out how dense these supply chains are and they reach into every part of the country virtually every state even those with marginal or no production and I think Kurt will talk about them it's New York state you wouldn't think about Florida, Washington state and of course the manufacturing Midwest is a very big beneficiary of these supply chains and we analyzed that it's not in the report but if you go on the website down actually to the congressional levels. But in a way you know is it surprising or it's not surprising if you go from producing 40% of your oil as we were in 2005 to 73% as we're doing today that is a lot of economic activity that has to be behind it and in this we're only looking at the supply chain in terms of of tight oil and oil not in terms of natural gas and I think maybe one third conclusion we came to there can be efforts to create regulatory half houses let's say call it that way to kind of facilitate or let take some of the pressure off but in our view creating kind of regulatory pretzels in order to just avoid dealing head on with the issue is really counter productive and and really works against the market adapting to the situation. So in terms of the impact of the price collapse with the price collapse it increases the sensitivity to the discount over the last 30 days the discount has been between nine and ten dollars that's very that's a very big discount and when prices are lower the negative impacts on jobs and the economy are more not less and as we'll talk about a three dollar change in a fifty dollar environment can have the same effect as a ten dollar change in a hundred dollar environment and this brings us back to the export ban because of course because of the export ban that's why we have the discount it reduces US oil production supply chain activity as we'll discuss job growth but it also raises and we can get into it gasoline prices. Right now and astonishing if you kind of compare it to a few years ago to think that US production now is up with Saudi production and Russian production but this growth that we've seen will certainly be imperiled by continuing this outdated policy. We've seen the cuts in budgets and the discounts add to those cuts we'll talk about that some more and I think it's important if policymakers on the national level legislators are looking to take some of the pressure from the collapse reduce the pressure then one of the most concrete action that people can take is to remove this ban and that is important not only for policymakers at the federal level it's also important for policymakers at the state level to understand that. There's another element which I want to comment on that doesn't figure so much in the study but we talk about it but I think it's really important to have on the table and that removing this ban will strengthen US national security and US influence in the world. It obviously restores incentives to invest at lower prices it continues our ability to partner with Mexico and Canada in this new foundation that we have for regional and hemispheric security and I think the basic point is the US benefits from open markets not from regional monopolies of one kind or another and I would go so far as to say Iran would not be at the negotiating table today on nuclear weapons were it not for the increase in domestic US oil production because going back to 2011-2012 the Iranians like many others thought the world market would not be able to withstand the withholding of their supply from the world market but very significant the increase in US production made those sanctions work and what I wanted to do was actually quote our new colleague Carlos Pasquale he's known to many of you he was the US energy envoy he started the the energy bureau in the State Department had been ambassador to Mexico and ambassador to to Ukraine and he was testifying last week Senator Johnson to your old committee the Senate Energy Committee and I just want to read two quotes from him that I think actually present this dimension of it very clearly he notes that the US and Europe impose sanctions on Iran's oil exports and that we engage the whole host of countries to curtail their imports and diversify sources Carlos would not to say as the person who's coordinating those negotiations indeed he was a person who did a lot of those negotiation he said I can assure the committee that the US negotiating position would have been far stronger if we were not protecting US oil export restrictions when we were asking others to risk higher oil prices for national security then he went on to say that the maintaining the export ban and this comes from his experience of dealing with a host of countries around the world he went on to say maintaining the export ban increasingly undercuts US credibility in his three decades endeavor to persuade other nations to permit free flows of energy trade and not constrained trade in strategic commodities with political restrictions and resource nationalism which in effect this export ban is and then he added and many people don't know this the United States has launched numerous complaints under the WTO against China exactly because of these kind of restrictions unnatural resources that China imposes it would be against our interest to see Russia use such precedence today to curtail gas supplies to Europe so I wanted to leave those thoughts with you because I think it's an important additional element of this particularly as the US is looking about what do we do about sanctions on Russia what do we do with the continuing Ukrainian crisis so US benefits from global markets where all major producers allow global markets to drive resource availability and basically the point is it's harder to get other nations to agree to action if the US is seen as protecting in this antiquated way this archaic way with this antiquated and antique ban oil exports so I think in today's challenging world US foreign policy and our influence in the world needs to be part of the discussion on exports so I'm gonna leave that part of it I think maybe we'll come back to in discussion but I want to turn to Kurt Barrow who led this study to explore what we learned about the economic realities with lower prices and the extent and the depth of the supply change okay thanks Dan now take take a little time here and go kind of down to the study I'm gonna use some slides here you know as Dan said this really builds on the work you know that we presented back here last summer and extend really the analysis down through down through supply chain that we defined as 60 separate supply industries using various NACE codes and subcodes and then also cutting the other way geographically down into the states and and congressional levels and there's a Dan mentioned a web tool I'll show you the link to it later that allows you to go on and really pull up whatever congressional district or supply chain you're interested in and see the actual data for you know at that granular level so so what is a supply chain right it's it's it's sometimes hard to kind of articulate what we mean by supply chain it's pretty it's pretty amazing once we got into this because we there's a you know kind of what you think of as the first tier suppliers you know the the companies that are actually in the labor that's being supplied directly to oil companies but there's a multi-tiered supply chain behind that if you will the suppliers who supply that so you know the drill rig has a lot of you know engines manufactured engineered equipment IT computer you know services on it you know there's there's a lot of depth of analysis and a lot of depth of inputs if you will in that supply chain that go far beyond what you think of as drill pipe and and plates and sand and you know the labor that's out on the out on the drill rig and we'll get into that a little bit more as we as we look at you know one of the key takeaways that we found from this and it made sense it was a bit counterintuitive when we first started but once we got into it and started looking at data it made a lot of sense is that there's a there's a very large multiplier effect from jobs created in the oil and gas sector and essentially if for each job it gets created in the oil and gas sector from you know opening of the export policy you get three jobs in the supply chain and another six in the broader economy from from it income effects and so a lot of this a lot of the numbers and things I'll be talking about here over the next 10 minutes or so are the three little gray guys there on the on the figure so a lot of the data and analysis is is looking at just the supply chain so keep in mind and there are I've got some of the broader economy numbers in here as well which you know would include all 10 all 10 little icons here on the slide but it's important to remember that when you're looking at a number 124,000 jobs created in the supply chain for the base case we are looking specifically at the supply chain and not not the total impact that we really expect from this similar multipliers in government income GDP and the so forth that you know that we'll get into maybe I'll step back just a little bit to put this in context of the basis and and what we're looking at here on the numbers so we did two different production cases for the original study and we stuck with those production cases for this study as well to tie these together and I'll talk a little bit about how those outlooks have changed because of the change in in the pricing environment but also major changes in the productivity that we're seeing in the field a base case production was our central planning case this is a you know what you might use to to plan out your business very conservative assumes that we just take what we know today we don't get any better faster smarter and I don't have a lot of improvements the potential case was more of an upside case where we continue to see learnings in the upstream space and we've we've seen those in space we've seen a lot of productivity gains really since we put our study out that are counteracting a lot of a lot of the price signals what we did in the study it's important to remember that all the numbers that I'm going to show you and we're looking at are the delta between a current policy restricted trade and free trade that's the way we that's where we do our modeling and so what you'll see is that it's really this trade policy decision between the base and potential cases so it's really a change in the trade policy under those two different production scenarios the impact on the supply chain shown here the supply chain ends up making up about a 30% you know give or take of the total impact you can see here the numbers that are there on the slide that's the percent of the total impact that's in the supply chain for the base and potential case the 31% of the employment impact for the base cases in the in the in the supply chain 28% for the potential case and so on and so forth for labor income GDP and and government revenue the bars on the right show the show the you know the total overall impact over a couple different time frames right so the impact is most immediate early on you know when you get this initial decision and you take away the uncertainty and allow the investment but we model this out over 15 years this is a fairly long term impact that continues on over the longer term time frame and just for reference again to kind of pull this back you know going with that 124,000 jobs in the supply chain is 394,000 jobs in the broader broader overall economy and 86 that 86 billion in the in terms of GDP one of the other key findings that again makes a lot of sense once you think about it is we did a pretty deep analysis looking at you know essentially the supply curve for tidal production or total production in the US 39,000 wells we analyzed for the 2013 time frame estimated the cost of all those and developed out break evens and then what I'm showing you here is is the change in the investment and production as the price moves across different bands and so I'm taking an average over $20 price range you can see there that that supply curve is is relatively steep out at the upper end so the you know from the 90 to $110 price range you get one response but as you move down that cost curve down that supply curve you know the cost flattened out and so that's what leads to the statistic that Dan quoted a $3 impact in a $50 world is the same as a $10 impact in a $100 world which makes any discount associated with this policy or others that much more impactful and so it's it you know it's a double chilling effect you've heard us say from the the dual impact of lower global prices and then a price discount you know for the US market additive to that so I said we kept with the base and potential production outlooks from our original study we put those together as a band to show what possible outcomes there might be we were tracking before the price decline as we were getting additional data in through 14 now we were pretty confident we were tracking at that old price level up along that potential supply curve maybe even exceeding that potential supply curve as a result of the decline in price we're clearly going to have a response in in the in the production outlook that we get IHS's current view I've got here tracks right around that that base production level so in order to tie these two studies together we thought that the the base and potential production cases are quite reasonable and we stuck with those and it really is some moving kind of from that potential down toward the base but then also it's really the production gains efficiency gains and the cost cutting you know that we're seeing the cost not the cost reduction by the not so much by the company but the cost deflation that we're seeing in the service sector that allows us to you know stay on that track the chart on the left is some analysis we did looking at the percent of change in the budgets in the total spend versus I think it's a 2013 base I can't quite see that far with my eyesight but you can see there that you know depending on really the outcome in production really does depend on on how that spending is pulled back and then also you know what kind of cost savings the companies get with that spending if we get cost deflation in the in the upstream sector so I'll go through the next couple slides you know relatively quickly I won't I won't get into all the numbers all these tables and figures are in in our report that why don't you hit it since it is kind of small hit the main number sure a few of the main numbers just to tell people what they are no no actually I'll flip to my if you give me just a second to get to the right page I've got it here but anyway so the circle the numbers you know that I pointed out in a previous slide so 124,000 jobs in the supply chain 394 in the in the overall broader impact you know the numbers I talked about before and then it's similar numbers similar ratios with the potential case so you know we were pushing up close to you know well over 900,000 jobs total impact in the potential production case from the original study about 240,000 of those that are in the actual actual supply chain you can see there you know the impacts you know start out big in the beginning and then taper a little bit as the as the economic model reaches equilibrium again but it does have an impact really over the full full time frame domestic GDP we talked about you know 25 billion dollars just in the supply chain 86 billion in the in the total economy potential case you know 47 and 107 billion so and again all this is just from the policy change this is just from lifting the policy you're making the change and just to the oil sector right as Dan alluded to and then government revenues that are quite impressive you know because of the you know the federal taxes you know 333 sorry billion in in federal taxes adding up to you know 428 billion in the in the base case and you know pushing again close to close to 900 million in the in the in the potential case so substantial amount of government income that you know that comes comes from this so I'll talk just a little bit about the some of the state impacts here this is just a heat map that shows of the supply chain benefits kind of where they where they reside some are you know quite intuitive Texas for example some or less intuitive like North Dakota but you know North Dakota again we're looking at just the supply chain not the not the overall impact states like Texas of course benefit from having both you know a lot of production as well as a lot of the suppliers and a lot of the industry that supports the you know the production side you know states like New York show up on here you know despite having a drilling ban on on fracking New York the financial services sector that fund a lot of this a fair bit of high tech if you get kind of down in start looking a little more granular database management big data some of the visualization technology some of those companies are based in New York New York's also benefiting from some of the logistics kind of across the border in Pennsylvania trucking companies welders things of that nature and so you know New York is a beneficiary Dan mentioned you know Washington, Oregon you know no surprise high tech a lot of the software and technology equipment that's that's supplied into the industry and then in Florida I'm gonna get to Florida Dan hold on I got a script here working down my sleeve so California you know popular state obviously it has you know substantial crude oil production of its own it is not actually a tight oil or shale play player for the most part but because of its size and because of the technology and the various industries that it supports it's you know it's a winner out of this you know Illinois has production has fairly sizable this is the Midwest manufacturing base that Dan was talking about a lot of durable manufacturing construction equipment for a bit of construction equipment goes into you know clearing the pads making the roads and and so forth machine tools some sand is being supplied from the from the Mississippi River just a just a diverse manufacturing base that plays into Illinois New York Ohio the Marcellus play Florida is is an interesting one so if you look at the which sectors which of these supply chain sectors contribute to these to these benefits will take just Texas and Florida and it's first off it's kind of interesting that you know Florida is almost half the size of impact you know 6,000 supply chain jobs in Florida versus 13,000 and change in in Texas but a much different set of sectors that you know that feed into that right so Texas you know construction and well services materials you know logistics industrial equipment machinery pretty diverse pie chart whereas if you go into Florida a lot of it is industrial equipment and machinery it's being manufactured assembled there some professional services and financial services you know very little in materials obviously almost almost nothing in terms of construction well services right there's no there's no well service contractors based in Florida they're based they're based in Texas so it just goes to show the the kind of the diversity and the nature of the supply chain once you start looking at at the results you know behind this before you leave it just to make clear again this is showing these are not the absolute numbers these are the difference between the two cases in terms of the of the jobs absolute numbers of course would be considerably larger yeah so it's the difference between the you know between the the two cases between production between that free and restricted trade the congressional districts I don't have time I don't want to take everybody's time and go through each congressional district but you know the majority of the of the congressional districts benefit you know from this and there's there's some there's some nice nuance in there if you go to the website again and kind of look up your particular district or districts you know that you're interested in you can see you know which sectors and and what the different contributions are from the different parameters so one thing I'll come back to real quick and I've got just another slide or two was the this this concept and this misconception that's still out there today I still read it from time to time in papers that you know a change in the export policy that allows the U.S. crude oil prices to come up to global prices will somehow have a negative impact on U.S. gasoline prices right and there's been a number of studies including ours that the refute that the thing to remember is the U.S. gasoline and refined products is widely traded you know the U.S. is now the largest exporter of refined products you know a net number of something like three million barrels a day including in gls of of exports also imports so we export out of the Gulf Coast we import gasoline into the east coast very active market that's very closely tied to international international prices and so any change that you know that we expect from allowing the export of crude oil that would re equalize you know WTI to brand or or to you know U.S. domestic crude prices to international crudes would really have no impact on gasoline prices and actually could would likely decrease gasoline prices because of adding the additional production the additional supply of crude or onto the international international market and at the same time we really think the refining industry will remain quite vibrant and robust because of cheap natural gas and and the fact that we'll be exporting crude oil and they'll be getting you know an export parity export parity price so to conclude the impact of the export ban it's it's really honest today you know we've got stocks that are record levels and we've got you know accrued a WTI to Brent price differential it's you know nine to ten dollars so it's it's here today for all the efforts the BIS made and role in clarifying the condensate exports that doesn't appear to be helping you know otherwise we you know we don't see that in the price spreads you know that we had today part of that maybe because the infrastructure required to actually move the that condensate process condensate which has to be kept completely segregated really to the shoreline to to export and and so the lower prices really magnify the the price discount this is a double chilling effect and putting you know a large number of wells viability and in in question and I guess you know just a final point is the infrastructure to export crude oil today is in place I mean this is what you might call a shovel ready project you know if we had this policy change you know we would yeah if the prices were there though the price differentials you know the the crew it could be exported quite quite quickly so with that I'll leave it there I just that the link to the website for for anybody who doesn't have it again it's the report the appendixes are there as well as a link to this web tool that that we mentioned and hopefully we've got enough copies for everybody we we've got some copies outside so pick up one why don't you just read the website oh okay sorry so it's www.ihs.com slash crude oil supply chain all one word that's so uh Kurt talked about the double chill or what you call the double whammy that comes from both the low prices and then the impact of the export ban and so we want to just take a couple minutes before we open it up to explore it I'm gonna just ask Rick bought a couple of questions Frank introduced him he's acting as a senior advisor to us as Frank said he'd had a lot of experience in the independent sector I can't remember if you mentioned also in the independent sector in India because he ran the largest independent in India that went from producing nothing to producing 25 percent of India's oil however we're not going to talk about India we're going to talk about the United States and first just Rick say a word about it kind of if you put your old hat on as an independent kind of how you looked at the supply chain before and after this study how you look at it now sure Dan well I think if you can hear me I think yeah hopefully the benefit of my 30 plus years of international experience will help give you some some context about what the industry looks like now um I think a lot of us view it as the wildcatter who's out there taking big risks and doing new things and certainly that is important to unlock and discover new resources to supply the energy for the for the global economies but what has really become due to a couple factors I'll talk about but a tremendous advances in the industry the real value and all this growth that Dan and Kurt talked about in terms of US production has really come from a very efficient industrial process and the now the well pad the work out in the field is really also become due to a lot of the models that the independent the independence use as well as the supply chain has really become the R&D laboratory if you will because every well is a little bit different and you're engineering these things to continue to improve on the efficiency the cost and the environment and reduce the environmental impact so it's a very very very dynamic process and it is really at the as you take it up to the highest level it's based on the two key dynamics I think and there's been over the past years a lot of discussion about the technology dynamic but I think what this report does even maybe as a surprise to the producer type companies is it really gave us takes an in-depth view of all of the intertwining interconnected interdependent resources that are brought to bear that ends up in that well pad so you know we used to drill I mean these wells cost between five and eight million dollars to drill and complete them and we used to think about single wells now we everything is done on a well pad when at least in the development phase and so now we're talking about four and eight well standard but a lot of these things are now happening at 20 and 30 wells so four times you know eight times eight is 64 million dollars add a little bit of infrastructure you're in 75 to 80 million dollars of investment in that one area and so an opportunity for a lot of continued ingenuity so I think the point of that is that that supply chain dynamic is really kind of one of the driving forces that has allowed this revolution to take place whether it's in oil or in gas and has really unlocked the supply so us is now able to compete because of technology not necessarily because we had the best reservoirs certainly the conventional reservoirs are much better but we have this technology advantage that we've developed and allows us then to compete and so that supply chain dynamic is really critical to that hopefully that just gives you some experience about how that reinforces kind of what the experts are here telling you when he roll it up to a macro level so the second thing because you're know the community very well the producer community uh how's the mentality change from say early November the worldview well the worldview is probably changed drastically um I think that it really the perception if you will the the mindset of the producer is really depends on probably two key factors first of all is whether or not um the quality of their inventory and that's going to help them with the long-term view and the second one is really a short term and that's how well they're hedged so how much pain are they enduring right now but that's going to translate into critical decisions that everybody's wrestling with about how do you reduce cost and the first is going to be looking at focus so you're going to focus on that high value low cost inventory that you have and then the second one is going to be how do I get these costs out of this truck how to out of the system and the first place you turn is supply chain so the supply chain takes the immediate brunt of that cutback because when as you just look at the numbers Kurt talked about the the supply chain brings critical technology critical innovation uh the labor force is tremendous that they bring the logistics the infrastructure the materials and that that expertise is brought by the supply chain so I'll just give you kind of one number is that on the well pad there's probably a handful to a dozen producer employees but there are hundreds and hundreds of supply chain employees that are out there actually doing the work and so that's the place that they look you know to to for cutbacks in the in the initial phase what is the hierarchy of cutbacks I mean just as once you've done that cutting would you well I would say you probably look at the way I would look at it is you look at sort of the three big buckets the first big bucket is what is discretionary and growth so that would be your exploration type efforts that's de-risking your new plays that is your land leasing and of course then there's all the internal gna all the people that you're paying for within on your own payroll and you're looking at that because that is the thing that has the least near-term impact to your profits secondly is when you start to cut into the meat and that is the development that is what resources you are out there choosing to drill and again that's kind of focusing on what you have that's really good so you're moving to your core you're moving to what's low cost and what's highly productive and then probably when you as you continue to cut depending on what your your future view is you'll then start cutting into the real meat which is producing capex producing opex and and just just well maintenance and things like that just to get a handle on that difference of that discount if because of the discount people cut more than they would cut otherwise i mean and i think it's a big question for everybody how quickly if you can generalize do you respond when the market starts to improve again i mean some people think you know now sort of think the u.s responds twit turns on a dime yeah i think that's a hopeful expectation i don't know that it turns on the dime it certainly turns on the dime on the way down and again it comes back to those perspectives of how the producer views the future and so the cuts will come very quickly a lot of people are still as we see storage and uncompleted wells continuing to ramp up on inventory because people are still optimistic that it won't be that deep of a downturn when it becomes a deep downturn those cuts are very very deep 2008 is a great example most drillers went from 20 30 40 50 rigs to less than 10 so that cut happened in depending on how long term their contracts were that happened in 68 months the challenge then for us as we started to get better price signals to come bring that back on was probably 18 to 24 months to be able to hire the people move them back get the logistics going and get everything back into the field so it's it's quite a lot of a intensive process to try to build back up those workers go away i think that underlines the kind of urgency that exists in this current price environment frank will turn it back to you now and thanks for excellent presentation so i'm gonna actually we've teed up a couple of folks to start this discussion although i suspect that you're not going into a lot of stimulation to get things going let me ask just two quick questions so um rick i guess first one to use so downturn up to and i mean one of the things we're hearing from some of the the independents right is that in a lot of cases they've cased the wells haven't fracked the well so our our estimate of inventory is above ground inventory there actually might be more inventory below ground right and i've been using the analogy of the oh i guess the busboy right so they're opportunistic to the extent they have people in the field and the rigs are still operating that when the glass gets half full and there's more opportunity to fill supply some of this stuff can come back relatively quickly if they if they've got the right balance sheet and the people in place right so that's first piece the the downturn it strikes me depending on whether you start you know last summer i would argue that this is different from 2008 just because of the unconventionals right and we saw a lot of this in the natural gas production held by least you kept producing to keep it going and the question is right you hope that the price comes back at some point but we got down to gas prices were like a buck 89 which didn't make a lot of sense and at some point the you decide which resource to keep the ground which resource to produce what you do with condensate so i mean the analogies that we draw whether it's to 86 or 2008 aren't we in a bit of different space yeah that's a very very good point and that goes to uh Dan's earlier question about how long it takes to cut and how long it takes to come back you're exactly right in that the the the unconventionals has really changed the game and while you can stop drilling very quickly and you have a very steep decline much more so than conventional wells and so but the more production that the U.S. builds the more i'll call it maintenance capex that you need just to keep that production flat and that of course impacts that's sort of that middle area that i was talking about where you would cut you don't really want to cut that because that's really hard to bring it back but it is different in that a lot of the 2008 was economically driven this is really more of a supply driven uh sorry yes oversupply driven because um all this technology and then the supply chain dynamics has then allowed us to be can become competitive and use technology to produce these resources that that other countries haven't been able to produce yet so it kind of puts the U.S. in in in that game and on the research side and i know we've got folks like roger and lee and bill icor and other people here that can talk about this for their companies but are we drilling research wells anymore i mean at some point yeah i mean no okay you want to be brief about that pioneer natural resource yeah done with research done with research because we're an hour at the bone house we were in the development mode we spent a lot of a lot of time and money and energy on research and use my okay we spent a lot of time and energy and money on research research uh three or four years of past three or four years but we've announced even last year before the the downturn that we were really moving into the development phase and the permeant and we really have two just essential assets that are very active the permeant and the eagleford okay and then procured and then we'll turn it open um i'm refining so uh dan you talked about stocks in us stocks and clearly we're at 85 year high levels as far back as we've actually been recording but internationally we're also high and so my thought is at some point when we and we talked about this last time on on quality um not just volume but on quality that as we produce a lot more light oil it strikes me that that the angolans the algerians the nigerians that we've displaced from the us that have now found new markets presumably in asia um at lower prices they're under pressure to keep producing and selling too so if they discount and we discount now we have transport how much more light oil gets into the market to displace i think iea uh eia was using 30 percent of global supply now is light relatively and 15 percent of refining capacity is light so investments can be made and i talked to joanne shore before he out here so the refining side they would argue that there's there's capability out there as well as additional to absorb it um but but isn't there a global marketplace out there as well that has some limitations yeah absolutely right so you know when folks say that there's refining capacity in us to refine more light tidal oil that's that's absolutely correct but there's a price signal has to go with that right and so you know we looked at this really as tiers right and the the first tier in from the us perspective the first year was to displace the similar light sweet crudes right we did that quite quickly um and then the next year was to um you know displace some of the lighter imported barrels that were sour but also fairly light right and then you kind of work your way up through the refining system that we that you know that we are articulated but each one of those steps has some economic penalty associated with it right and we think today we're in tier three out of four effectively and tier four is quite painful because tier four you actually have to derate the refinery you can't actually run as much crude in it the international market you know is is an interesting one because there is additional markets out there for light sweet crude i mean the whole european refining system was built a large portion of it was built around north sea crude that was produced at you know much higher rates than it is today they've reconfigured into you know the sour year olds barrels but they still have a lot of flexibility to run some more sweet um they actually don't need a lot of the real rich naphthalm molecules that are actually in it so they actually the best you know after you put some barrels into europe um actually the best market is actually your asia from a quality perspective because they need the naphthalm molecules they have a you know growing gasoline demand and also a very vibrant naphthalate petrochemical industry uh that you know that needs those barrels so the other thing is is that um i mean the refinery at the end of the day is just the you you build the refinery uh to match demand with supply um you know you've got a certain demand for products and you got a certain crew that you know you know it's wherever rick found when he punched a hole in the ground or a pioneer found when they punched a hole in the ground and you you build a refining system to match that right so if it's if it's heavy sour of ends of whaling crude you build a very sophisticated refinery with a lot of uh a lot of capital to upgrade it if you find like tidal oil it's something smaller but in asia um the advantage they have is they're building new refineries right and so they can build those refineries specifically for the crude that's there today whether that be angolan or you know or us right of course that may mean that we rationalize and take out some of the urofine refineries that also would buy like right yeah yeah that's a complex thing so um just for the purpose of discussion on april second we're actually going to do a little refining 101 and an exports piece after that because we need to discuss this we're getting to the point now where the quality is important the volume has been so stark the increase that's coming out of the ground how do you accommodate that and then when you look at certainty of investment climate because you don't want this to be a stranded investment you want to be able to operate this for a while the economics of the input and the economics of the output looking at product demand globally is really important yeah well I think that's made a very key point there frank and that is the policy certainty right and the stranded investments right because um what we see today really is a gridlock between the upstream and the downstream where essentially you know every barrel of new production that comes on needs a barrel of refining investment to go with it right but that refining investment oftentimes relies on at least in part a discounted crude price in order to make that economic uh it make that investment economic particularly if it's a fairly simple condensate uh processing so you know the the upstreams relying on the downstream the downstreams kind of relying on the upstream or the market to be oversupplied and so you get this gridlock that retards in our our opinion the the investment in both industries right it's not that we won't eventually get there but it's suboptimal well on the whole notion on the foreign policy benefits that you talked about you know we can't really tell other countries that we want them to produce if we're not producing and exporting as well and then we may bring in more of a certain kind of crude export more product export excess crude now we have Mexico coming up the market is dynamic gonna change for 40 years the United States has been telling other countries we should have free flow of energy trade and free flow of investment and oops it turns out that uh we have this little obstacle ourselves absolutely um once like now i've so i've been saying and i would argue that sweaty increases helped offset the loss of iranian us like wouldn't have replaced iranian that's we're nitpicking out um senator johnson so we talked about this whole thing about how the epka got started and this policy that we thought we were running out you want to give a little historical context and where you are now had we known if u s gs told us different things in the 70s we might be in a different place it really was not debated very much in the 70s sort of taken for granted it was not a big deal to restrict exports i mean we didn't talk about it very much at that time let me make a couple of points if i may first of all csis has done a wonderful job and ihs and sarah and kevin and the rest of you on researching this question the case is overwhelming the arguments against doing exports are bogus i mean it's going to raise the price of gasoline that's been totally disproven it's going to the independent refiners are going to have to lay off people all that it's just everybody who knows anything about this subject knows that's not so and yet we look at what is the status of this legislation at the present time well they had a good hearing on thursday ryan lance who is a wonderful spokesman made a great case and others and uh but they're just uh you know over in the house you've got a farm lotion subcommittee who's considering a bill you don't even have a bill introduced in the uh in the senate why is that if this is an overwhelming case if the national interest is strong why is it well let me tell you about members and money i hope i don't offend anybody or shock you but members think about campaign contributions all the time 24 hours a day seven days a week now this is a fight between independence and producers now how would you like to buy at uh at at wti prices and sell at Brent prices ten dollars difference that's what they're doing ten bucks difference can you imagine the amount of money well yes you can the amount of money involved now you got a member who's pro oil but he's pro independence and he's pro producer so what does he do he says you know this i mean yeah refining uh so what does he do he says we need to study this you know we need to have some more hearings uh because we want to be sure that the price of gasoline does not go up we don't want to lose any jobs in refining and that's where we are right now you don't even have a bill introduced in the senate and that's the way and my judgment is going to be for the rest of this congress it's just too easy to do that you don't want to pick sides between two of your friends now what would you do well i know what i would do if i were running the energy committee right now i would i would find a way and i think there are ways to have a half a loaf of three quarters of a loaf and i got some language that would do that but on my own not on behalf of anybody else but i think that's really what needs to be discussed i've shared that with ron lance um because it just ain't gonna happen now we are being webcast you realize that i i do now the did we miss a window of kind of february january february march the prices are low some people feel they bought and refinery maintenance has been strung out a little bit more but now we're going to be into the gasoline driving season in the not too distant future the politics of of gasoline prices you know inching their way back upward is is that such a big consideration that no one will touch this no i don't think it's i don't think that's it i mean you know the spread makes a difference but it's it's basically that politics of refiners versus producers and your districts and you yeah and uh i mean that that's just the way it is and they're just ways to avoid it by continuing to study it okay lee i wanted to tee you up to talk about the independent perspective i'm not sure i want to follow senator johnson uh i i i mean obviously from our standpoint uh we're wholly committed to the need to try to expand the export market now how do you do that in this environment political environment that's the that's the huge challenge i would add to what senator johnson said in in the sense that the other dynamic you've got in this case is that you do have authority within the administration to make changes that could expand exports now it doesn't necessarily have to do it all at one time it can peel the onion it can it has done some of that we've seen the provisions on allowing for condensates to be exported there's a swap possibility from p-max that's i think under consideration each of those incrementally move the process forward when we are dealing with this issue in a in the political arena i think the two issues that we tend to see i get the most attention on the one hand which is negative to us is gasoline price fear there's just a lot of people that don't want to jump into that dynamic and it can be for for both the reasons of not wanting to deal with that consumer backlash if prices go up and the constituent dynamic that they're dealing with on the flip side of it is the international security international energy security play which draws a lot more appeal among both democrats and republicans i think to see us in a role that can be a value to our allied countries the question then is how do you how do you developed that aspect of it in a much more cogent and an active way i think the studies that are coming out are excellent they keep making those points we'll see what happens with the iranian negotiations because clearly that could either mean that there's further constraint on iranian production or substantial potential for iranian production to come back in the market which would have a further suppression in a very potentially devastating one so we're trying to essentially keep the forward motion slow that it may be at this point in time going by educating people on gasoline prices being based on international marketplace not us that refineries are going to be a continuing part of the us manufacturing tool and and this is not a threat to their employees and it's not a threat in fact it may even enhance their need to expand and then to look at the benefits that the country gains by getting into the energy security world internationally in a way that both helps the us but also can help our allied and friendly nations power on that topic so this is lee fuller from IPAA just oh okay um kevin book so um while you're moving the microphone down one question since lee you opened up the international side prices stayed in a band because there was concern about how much demand was robust in 2010 to 2013 but then the geopolitical risk we we took three million barrels a day offline from the syria randarac nigeria venezuela libya right if some of those were to come back or if there's a deal with Iran that adds 500 000 barrels a day of production or libya stabilizes we continue to have an over supplied market so there's still got to be price pressure to keep oil prices lower which means netback for us producers are still lower and i'm going to ask you guys to weigh in on this as well well so the iran deal is uh as you say 300 500 000 barrels libyas half million barrels blinking on and off like a bad light bulb these are not easy times to make good price forecasts but one thing it's clear is that inventories are at all-time highs so you know what down looks like if any of this blinks back on in terms of uh you know there are a couple of points i'd want to touch also that i can think of no better person than the the senator from louisiana to talk about this sort of conflict louisiana is a state which has about 2.67 percent of domestic onshore oil production about 18 percent of refining capacity there are two senators both republicans from the state of louisiana right now i'm not that i mean not there's anything wrong with republicans sir but the the one of them is running for governor and he is not weighed in on this issue at all probably very savvy to his local politics the other recently elected to the senate senator cassidy has six years before he has to go back to the voters has taken a strong stance in favor of the upstream when we look at your study uh dan this is this is the sort of thing this is i love this stuff because i love getting into the decision processes of politicians the data that inform those decisions and uh there there is as as been mentioned there's a policy debate going on right now by people on the hill who are moving slowly and why why are they moving slowly when they can see all this hardship well part of the problem is that there's 10 states responsible for about 94 percent of onshore production and if you look at who the senators are who represent those states there's a couple of them from california who apparently aren't big fans of oil production and california's widely diversified economy if you look at two data points we have now it's sort of in the last month on february 18th 21 senators signed a letter senator rickowski put out saying let's treat mexico the same as canada of those 21 senators 14 were from producer states seven had some sort of ideological disposition that probably took them there one of them is marco rubio who's probably running for president so we'll count six but it's still pretty good uh what wasn't in that number there were producer state democrats who didn't decide to sign the letter most notably michael bennett who uh is from colorado three percent of gdp comes straight from the upstream why is he when he's facing reelection not picking a side on this yet i don't know maybe there's some partisan pressure there uh last thursday the hearing that the senator mentioned a very uh strong set of comments from seven republicans uh all from producer states uh and one democrat uh who was kind of cautiously for export senator mentioned from a 29 basis point of us onshore production producer state west virginia uh and you start to think well this is where the supply chain argument starts to come in here i mean if the decision processes are all about what's in the ground at home and they're only looking at the upstream then their decisions are pretty rational in terms of their caution in terms of their their unwillingness to engage this political firestorm and perception maybe not fact uh and so it starts to make sense just one uh one final point though about i think where you started frank dan began with the the economic arguments right he started with the economic case and then he moved to foreign policy uh the debate on capitol hill started with the economic arguments and it too has now moved to foreign policy i think i think lee is absolutely right i think you're absolutely right uh dan that this is this is going to be something that resonates much more with folks uh as the debate goes there so i think it'd be very interesting to see how it evolves uh now that that lair has been added as well no so we're um we're not out of the woods yet frank yeah so um yeah we think uh for all the countries you mentioned and the supplies that might come back into the market um there's kind of an opposite list of things that could go wrong as they on any given day um yes we're looking closely at you know not only the break evens but the the market sentiment the willingness of uh wall street and others to fund um you know the the producers in the u.s but uh you know we think it's going to be a pretty tough you know pretty tough year um you're going forward for sure yeah one one quick point then to kurt's point what really changed yes the price um signals were we're heading downward but what really changed is that to kevin's point there was that a geopolitical decision or uh global macroeconomic decision by opec to abandon price and go for market so now you're in the first time probably in 40 years you're in an you're in an environment where you have a free market um accepting these sorts of constraints and so and u.s producers have been able to compete up until now and it is that technology in that supply chain that is driving this whole these are the dynamics that are making this work for us i love the point that's exactly right the the supply chain will bear the brunt but they will also receive the benefit and as dan's initial points there that reaches all parts of the country that we never thought about so this intertwined interdependent system has got incredible levels of technology i mean as as kurt said i mean to to the producer we see you know um it's fairly trans it's fairly simple to us we see maybe the first tier maybe the second tier and i think one of his authors counted up 50 independent tiers within one or one section so it's so complex and reaches so much of the of the country that i think that's probably the critical point but the whole point here is that if america has become competitive because of the technology and because of the supply chain um it's a competitive environment let's get real it is competitive for for that price and more supply is going to bring prices down the way to be more competitive is to not have an additional burden an additional handicap of a differential that is artificially induced it's artificially imposed and you have that choice whether or not you remove it in five years but as kurt's report shows a lot of this benefit really takes off in the next five years we really have an opportunity here with a lot of the benefit that if you look at that report in terms of the time frame from it so that's sort of the uh and he bracketed it well you've got the what's the size of the price that's his potential case but what are the jobs at risk that's his base case so that brackets it really well in terms of production in terms of investment in terms of resources in terms of jobs it's very very well bracketed by that so i think it gives you you can go away and study that it gives you the independent look and it shows you how intertwined and complex and how far reaching i was very very surprised that it's an interesting little fact i saw in there that that north carolina is going to benefit benefit tremendously because of all the transport all the trucking and all of all those industries that go through and operate through there so it's just you'd never think that's pretty far away from north to north dakota and texas oil fields so it is interesting as a way to just conceptualize it that you know if you go back to 2005 we were importing 60 percent of our oil and the only question was what rate was us oil imports going to go up to and then basically we said technology disruptive technology just took the u.s. from being uncompetitive to making the u.s. very competitive and it's kind of a useful way to conceptualize it i know there are other comments i'd just like to leave a question at some point to come back to kevin on the foreign policy if we're kind of be a little more precise will it do you think on the foreign policy side it's mainly the stalemate about around ukraine and what to do about russia is the main foreign policy issue that highlights the the disadvantages of the ban from a political point of view where you have a test case dan is that the ukraine issue provided a catalyst for the the congress to embrace the idea of lng exports and projecting diplomatic force through energy that was that was really the the prototype and there's many differences of course between gas and and oil the way it's seen here in our policy framework as well as politically russia's role as a producer i don't think yet is fully understood politically i don't think it's power it's westward hegemony over europe on an oil and products basis is properly internalized i don't think that i mean i think people are starting to get that lower prices hurt russia a lot but they're not necessarily thinking about the same ways they were about gas yet i think it's a separate piece right so there's a difference on the foreign policy side between making a consistency on free trade policy and when we ask other people whether it's Saudi Arabia or someone else to increase production that we ought to be willing to put that in the market and that's secure kind of crude i think where people tend to go overboard a little bit is the leverage piece on the bottom we're still a net importer right and we'll probably continue to be and we have a certain kind of oil if we want to use the spr different set of circumstances but that's a whole different discussion but but from a volume basis and i um while i appreciate the point i you know as a nation we don't seem to want other countries to use uh energy trade as foreign policy leverage i'd hate to see us say well we will give it to country x but not country y right so we want to supply to a global market that's fine because we've had hurricanes in the Gulf of Mexico and we need supply from everywhere when that happens so i just think we need to be a little bit more open mind but let me let's open this up because we've got about 20 minutes left um we only have a few rules uh one is that you have a mic so find a mic close to you identify yourself and your affiliation and you can make a comment but if you want to ask your question in the form of a question that would be helpful while we have this group here so please go ahead hi it's Emily Meredith from energy intelligence and my question is just um you brought up senator Manchin's comments from the hearing last week and he brought up the site oh sorry he brought up this idea of like maybe there's some kind of trigger mechanism we could put in place that would be an effective policy for you know reforming exports without going all the way what do you guys think of that is there a is there a way that something like that could work as an incremental step or does that seem tough well i think two things one it introduces even more uh in decision into the investment process uncertainty and secondly i think you get you uh i mean sentiment is well respected but the practice gets you even more into the regulatory pretzel hi i'm bob linden from pace global consulting there seem to be two elephants in the room that we're ignoring uh one concerns the dimensions of the domestic debate and the other concerns the changing circumstances of international oil and and pricing and production dynamics on the domestic debate we've ignored the the carbon coalition and the the pervasive impact they have on decisions at by the administration on oil exports the keystone xl pipeline which was accused of being an export tool and other things and it just doesn't seem to me that looking at produced producers versus refiners captures all the elements of the debate and i'll step back here as long as i'm allowed point out the second elephant well yeah so um thank you uh mentioning the keystone by the way just a factoid there seems to be this as you suggest this uh people seem to think that the keystone would be an export line and well at least when we do our numbers at least 70 percent of the supply that would go through the keystone would be used in the united states uh and it would displace oil from venezuela i think at the carbon side i mean others can no i don't know if there's anybody here from the administration but i think on balance the administration uh you know the the president at the end of march in 2011 i think it was uh you know basically endorsed shale gas and he certainly talked very positively in several of the last state of the unions about what's happening and elsewhere about our oil production as well so i think interest the interest in it among other things is for some of the reasons that are in our study is the job creation has been has been so important yeah the well let me just i agree that that's an offsetting consideration but there's a rather adamant no carbon movement in this country that i think has some valid points but i'm generally on the other side of the issue um that i i don't think is going away the second elephant uh is on international supply management and pricing uh i keep hearing people say that opec decided not to uh cut production and as a matter of fact it was saudi arabia and the gulf states that decided they were not going to cut production and part of that was directed at you know generally the non opec production levels coming up as well high prices and that of course highlighted the united states but the other side of it is the the sunni shi'i geopolitical part of uh battle that's going on and the iranian negotiations with uh you know the western powers about uh about their military nuclear program and i it's my belief that the first time in my 40 years in the in the business that we've seen a break a real clear break in opec and we no no longer going to have this this leveling mechanism um now we can take that to say that that has some implications for us producers and i've been telling just trying to tell that's my parent company but um it also has produced implications internationally and when you think about nuclear policy and what all this might mean that's that's beyond the scope of this discussion but clearly i think we've had a break a breach in in opec uh diplomatic norms among amongst the membership that we haven't seen well in the history of opec and i was wondering about comments on that so we're going to take a couple court i i think that the administration's position has changed that kevin i have done a lot on give her a little take a little and i would say that 2011 we were in a certain place i think we moved beyond that place now natural gas was helpful uh but they're going to ratchet down on fossil fuels and ratchet up on emissions commitments right um and the second piece i totally agree with you i saw the arabia no other country non opec opec came with an offer to cut production and they decided that this wasn't worth it and they believe that there's um higher priced production and lower price production and that lower price producers ought not subsidize higher price producers if i can get that accurately um let me go ahead to sarah and bill ask questions and then we'll try to combine them this is sarah baxter from svb energy international my question is about condensate um do you think that like lower they could like see this as a solution that like lower grade of like higher crude oil would be exported just like vis-a-vis the policies of iran i mean now iran is it it's not anymore following the policy of producing crude oil and exporting crude oil they're building small refineries in yemen and iraq for their crude i mean they're crude oil but they're having a priority of expanding their condensate production i mean they recently uh inaugurated phase 12 of south parse they're having 170 000 uh barrels per day extra of condensate and they're going to look for expanding their condensate even in their massive energy plant they're looking in exporting condensate to mexico to blend with their heavy oil it might not be practical but that's what they're looking in their grand strategies is this going to be something to consider for us uh crude oil well i was going to make three three quick points and and and maybe ask for observations about them um the three are this technology i think one of the things that struck me about what rick said earlier is you know look production of light tied oil is in its infancy relatively speaking you know look at what was learned about shale gas development in in over the last decade and a half versus light tied oil which is basically five years in and you know the production returns the the yield curves on on um light tied oil are there's room to grow and i think that one of your points was that one of the places that to be cut back is on the technology development i think that's an incredibly important point secondly timing senator johnson talked about members naturally sort of wanting to defer the decision when i think right now the question is why not now and and i think this is where this the study comes in and why it's so important 30 years ago when i was a young staffer at the senate and sitting behind your your dais senator um you know we tended to divide the world in terms of consuming states and producing states and what that map that you showed earlier why it's so important is that basically so many more states are now producing states i mean some are actually producing the energy but when you look at the technology you know california north carolina florida texas you know you you can look and you look at ohio pennsylvania new york all these these different states that were traditionally in the consuming arena only are now really producers and i think that's the key political point but you combine that with the opportunity going forward to change the dynamic of the united states as an energy producer with technology development we stay in the lead we stay in the lead in many many respects because of that so i'll just ask people to comment on that thank you uh great study and uh i'm uh it's to be commended for putting out anything that that tries to to do any forward looking analysis of the u.s. oil market at this point my question is related to that it's it's on price price assumptions that uh underpin these two cases uh and a related kind of point is how much of the discount the wt i brent discount do you attribute to the export restrictions and how much to to others i mean do do i haven't read the report but does it does it take the discount uh to zero does it does it equalize brent and lls is that how is that how you get to the to the kind of two different scenarios and one i guess observation is you know that these are compelling uh conclusions for the differential between export case non export case through the supply chain i was wondering at at at any point in the study did you did you look at the the effects of the on the supply chain of of the much bigger price differential between where we were this time last year and where we are now as in the the the supply chain effects of the of the price collapse seem to by far outweigh anything that we're talking about here and i wonder if you've got any thoughts on that okay uh so maybe i'll pick up a couple and leave the tough ones for everybody else here so um so uh your question on condosates you know is it is an interesting one because uh i mean condosates uh we generally think of like south pars is really a by product of the natural gas production right and so condosate production and condosate refining um is you know it's it's somewhat a means to an end i mean it produces refiners refine it to make ultimately at the end of the day you want and you know refined product demand right but in certain cases we find where uh producers find uh you know advantageous to focus more on the condosate production versus versus crude oil i mean my own thought is is that really an open trade policy for the us is is kind of the best way to go and doesn't put in the regulatory pretzel if you will um in there i think you were referring maybe to an api split right of you know 51 api you can export 49 you can't um that creates a a whole another series of complexities and incentives to blend different products and inefficiencies if you would in the system there's nothing there's no magical breakpoint kind of between like crude and condosate it just uh just kind of the nature of the the mix of the the molecules that are in there so um you know on your question to brent wti spread there's a i mean there's a couple different things i mean brent wti are not identical right so if you put them at the refiner's gate and you said okay you know you can have a cargo of brent and you can have a cargo of wti we think wti is worth about a dollar 50 dollar 70 more just because the quality wti is a better quality crew than than 40s which is the the stream that sets the the bfoe price it used to be the the split yeah wti was higher right right right um and then of course you got logistical differences wti sits in the mid in the mid continent um the end of the day if you opened up the spicket and allowed exports we think uh uh brent would be probably two dollars three dollars higher than the the wti um in a free market scenario and that's that's what's underlies our um underlies our study so and that's really quality and logistical uh differences right i missed anything i'll go ahead well i was going to say on the price you know basically the difference between um you know 49 and 59 dollars is difference between breakeven and up breakeven i mean when we divide the universe uh we did a look at 39 000 wells in our database and you saw that um you know a big spread between those that would be economic at say around 50 and those economic at 60 so it does have an impact on investment um uh bill you're one point about the map i was really thinking about it because as you as you said you know one used to see maps producing consuming and in a sense this work really redraws the map and shows you a very different uh in a different message and i think even as as you were saying it that kind of map became more sharply etched in my mind one question this is a methodology question so um and your point raised it so it's one of these ideas that um if oversupply in the domestic market right helps widen the spread as you as you get past the refinery maintenance season into the gasoline season when presumably you'll want to take more light oil into the refinery make a higher yield of gasoline right so if that compresses but then the offset seems to me is that the oversupply in the amount of oil that we have in stocks right it counteracts that a bit and i'm actually more concerned about the fall that if refinery maintenance was delayed in the spring and it gets heavier in the fall just as we may be coming out of this we have a depressing effect on domestic production again right yeah and i think it's um even as refineries come out of the maintenance season it's going to be a pretty steep climb to get back i mean we've built essentially about a million barrels a day um of storage since the beginning of the year every day um and our refinery runs i think last week uh we're about a million barrels a day below the peak in 14 right so in theory if our refineries all came back online and we're just now coming out of kind of the the bottom of the maintenance season but we've we've got several more weeks until we get all the refineries back on everything comes back on and they all run full um we could effectively balance you know the market and that's without any new production increases from uh you know from the upstream sector right so i think you're absolutely right i mean i think as we get through the driving season and then go back kind of depending on what happens to the upstream producer side right depending on how um you know what we see there if we start to see i mean but we continue to see month after month right increases in production um and we think um you know middle of this year that probably flattens out but is that graph i showed there it really depends on a number of factors you know both uh you know how much uh capital spending is is cut back how much efficiencies are gained in the cost side of the business um you know how bullish wall street is uh in funding companies uh it's you know how much hedging there is it's a multi-dimensional problem right but uh we see markets pretty fundamentally over supplied uh going out you know six nine twelve months do you want to answer that technology question so to your question about the technology and what does that lack of investment do in the supply chain um i think it's it's an interesting point because yes you need to look at the flip side of that in terms of where will the supply chains investment go and clearly you'll have a you will still have a price signal for those guys to try to come up with technologies that will reduce cost and improve efficiency so that will always be there but it really comes down to kind of what the size of the price is and how much investment is put into that and then the time frame that's expected on a payout you know how long you're going to amortize that for and so just a couple things if you think about downhole i mean there are some tremendous material science research going on to you're dealing your two miles down and three miles out you're you're dealing with some very harsh uh mechanical and operating environments down there and so there's a lot of work that goes into that if you're cutting your wells from 30,000 to 10,000 then that investment that's going to follow that is going to be you know two-thirds reduced or will you pick your number um same it's been amazing i one of the things i'm amazed about it that's happened in the last five years is is you take a 400 ton rig and some engineers some mechanical engineers said well what if we can make this thing walk and so they've developed these incredible walking packages where this rig 400 tons can pick up and move in any direction and because it can do that that rig time that move time and that overall cycle time has come down from two months down to 20 15 days really because of that incredible and it's been iterative it's over and over and over again with lots of these competitive companies in the supply chain looking at these individual problems investing in that putting their money behind it and solving that problem and so i think the real risk there is that you and i don't know that the certainly the technology that we do in the producer is probably pretty relatively reproducible in other basins around the world but that supply chain isn't necessarily reproducible around the world and so the ability for the u.s to benefit from that and keep that going in the supply chain not only benefits what we do in the energy industry but it's benefiting in a lot of those other ancillary applications that i think nasa's been so good at showing how all that space investment is really translated into decades worth of investment in the u.s in advances in the u.s. Good afternoon ladies and gentlemen my name is rosemary we focus on energy from Kenya but i'm past here in the u.s looking at what he mentioned on international market you mentioned about angola nigeria and other african producing countries like tanzania and kenya now what do you think of the competitiveness and the pricing and now that they are having their pipelines direct to china to export their crude oil can you how are they going to collaborate into the united does united still think they are going to work with them one day looking at their protection or how is it going to be or comparing to their threat to their direct export to china and other international companies thank you countries well i mean at the end of the day our demand growth outlook for refined products is around a million barrels a day every year right and so you know the world needs energy and you know there's a a lot of diversification of of energy of the engine technology and different different types of of cars and mobility but at the end of the day you know gasoline and diesel is is going to become a is will remain a big part of the transportation fuel we see really with the arrival of of more production out of the u.s. that the west african production much of the african production that was split kind of east to west you know we used to bring a bunch of west african crude into the u.s. that's really more shifted over into asia right which is you know a logical market because there's that's where a lot of the demand is in the emerging markets is the you know east of east as soon as if you will so there'll still be you know a big demand for for crude oil and we see you know a need for a lot of different suppliers you know including many of the countries you mentioned so they're all being impacted of course the speed at which some of that production is affected is much slower than the u.s. because you've got you know these offshore projects have got very long lead times and are much move much slower in response than than kind of laying down land rigs in the u.s. but you know there's a there's a continued role there for for many of the producers that that we've traditionally seen. I last summer I went on the conference that secretary moniz organized an adis ababa in african energy and you certainly saw that the prospects you know east africa had been ignored or people just thought it wasn't perspective and of course now it's seen as very perspective however i think in this new environment we're talking here about north america what happens to tide oil but at the same time you see a postponement of a lot of projects slowing down of projects a reconsideration of projects and i think there's going to kind of be the view that it's a it's going to be much more competitive among countries in terms of attracting investment it's not so much a seller's market as it was before just because companies will be much more selective so i think the timing of new projects in development in many parts of the world not speak about kenya but many parts of the world will not happen necessarily at the pace that might have been anticipated a year or two ago okay so our time is drawn to a close here i just want you to join me in thanking rick and kurt and dan a phenomenal discussion we could have gone on i was just telling dan you know we could talk about oranarax saudi arabia nigeria venezuela in a post maduro environment figure out what's happening in libya house sanctions and are you are you going to tell us when the post maduro environment will start so uh yeah well unfortunately we're out of time but we would urge you to join us on april 2nd and then please join me in thanking our speakers it's been a terrific