Why Bahrain needs to adjust its economic strategy

On occasion I watch videos from the youtube channel VisualPolitic. Although the channel is a bit too centre-right in their analyses I haven’t been able to find a channel with similar production value and presentation style. Their research seems to be adequate on inspection of their sources, I often find that I form a completely different opinion from the same sources. This generally seems to apply to productions where host Simon Whistler is involved with in general. 

Today I am not writing about forming differences of opinion based on the same observations, but rather a comment on their video on Bahrain.

Please watch the video and return here.

According to a Moody’s Investor Services study most hydraulic-fracking requires oil prices above $50/barrel, consistently, for decades to reach Return on Investment. 

We can see that automakers with offerings in the same price-range as Tesla offerings have taken a massive hit on sales this year. Range anxiety might still be a major hurdle for mass market adoption under 500km ranges and of course the big hurdle there, is price. Many automakers are investing in solid state batteries. Renault/Nissan have stated that they believe the technology will be mature enough to put in Zoes and Leafs by 2023/4.  With solid state batteries the price of the car goes down and the range goes up. The charge time can also be much faster than Li-ion. There are reports that Toyota has developed Solid State to the point that they will launch a Solid State EV in 2022/3. You're looking at 800km+ ranges. By then enough people in developed countries would have had a neighbour or colleague with an electric car (probably a Model 3) that the viability of owning an EV would have been proven first hand.

With proven smart grid technology and proven load balancing tech no base-load is required. So no need for gas turbines. Institutional Investment world wide is shifting from fossil fuel to renewables, simply because its crossed a point where its becoming more profitable with shorter ROI than fossil fuel or nuclear. Renewables are becoming visibly cheaper every year and fossil fuels have minute or no improvement on cost of production.

So thats personal transport and the electric grid which will be visibly declining markets for fossil fuels before the end of the decade. You might say that there will still be massive demand for industrial needs and shipping (by ships on water, not transport freight in general). I agree to an extent, but there are inroads being made here too. There are fuel-cell ferries and a lot of RND investment going into developing fuel-cell container ships. 

Offshore wind is ideally suited for electrolysing water into hydrogen. Like EV charging infrastructure being rolled out in developed countries and China it will probably become an attractive investment to construct such hydrogen refuelling depots on the worlds busies shipping routes. 

Then there is also many other fossil fuel investment opportunities. For example, potential and confirmed oil and gas fields from Angola all around the southern coast of Africa (Namibia, South Africa, Mozambique) that have very limited operations because of the high investment required to exploit these resources. 
Many African countries have not had the efficient stability to attract investment for exploration wells in areas where deposits for conventional onshore drilling are likely. African governments are stabilising and attracting investment from China and to a lesser extent western nations. Australian-listed Invictus has now invested in explorative drilling in Zimbabwe stating: “Although the Cabora Bassa Basin possess all the elements for a working petroleum system, a discovery can only be confirmed through drilling of an exploration well”.

Then there is the historically overestimation, for example in 2015 South Africa’s “technically recoverable shale gas resource” was placed at 390 tcf, making it the 8th largest in the world according to U.S. Energy and Information Administration. However, in 2018 the South African Journal of Science published a study by geologists from 4 institutions including the University of Johannesburg that revised that estimate down to 13 tcf. It seems that shale gas estimates across the world have been over estimated over and over again.

Plastic is an important by-product of the fossil fuel industry. However, the sale of fuel have cross-subsidised the manufacture of plastic. It is likely to become more expensive with higher fuel prices. How much more if a barrel of oil is solely used for plastic production? Increased knowledge on health risks associated with certain “plastic” compounds is also increasing costs as more expensive compounds need to be used. The price of manufacturing cellulose-based biodegradable plastics are also decreasing. Political pressure and consumer demand is also likely to increase the use of biodegradable polymers at the expense of non-biodegradable fossil-fuel plastics.

Air transport and rocket fuel will most probably still require fossil fuels for decades to come. However, the decrease in demand from other markets mentioned here-above and over-investment in drilling will surely result in lower prices, unless Russia, Canada and the US become adherent OPEC members.

I simply don’t think shale is a very risky investment at this stage. I wouldn’t make any long term strategic decision on it before electrification of transport has matured. This looks likely to only happen towards the end of the 2020s.

The well known hedge fund manager Jim Chanos told Bloomberg when asked why he shorted some drillers “Because the wells deplete so quickly, they constantly need to raise money to replace the assets.”

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