"The Immutable Principles of Energy" Jim Halloran

1. Never confuse reserves with production.

2. The biggest, best fields are discovered first.

3. Commodities are priced at the margin – the last 1% dictates the price.

4. E&P companies are serial destroyers of capital. Any appearance to the contrary is a temporary aberration, usually due to hoped-for, unsustainable pricing gains.

5. More than any other sector, time is money with respect to Energy.

6. The more efficient we become in our use of energy, the more we will use (Jevons’ Paradox).

7. The more society expands and demands greater access to energy, the more it will create roadblocks to its delivery.

8. We desire six qualities in our energy sources: 1) Affordability (cheap); 2) Abundance; 3) Reliability; 4) Purity; 5) Universal access; 6) Environmentally friendly. There is no set of circumstances under which all of these can exist simultaneously.

9. There exists at least a “$2 differential” between crude oil and competing sources of energy, regardless of the price of crude oil.

10. In dealing with OPEC, pay attention to what its members do, and give little heed to what they say.

11. Governments look at energy fields as sources of revenue, not as sources of energy:
· Governments have a disincentive to promote efficiency/conservation
· Income streams will be protected as to magnitude
· Long-term energy planning is incompatible with political realities

12. Once a field goes into decline, it will not increase production beyond this peak in the future without capex infusions that will prove to be uneconomic.

13. Crude oil is universal. The price you pay for gasoline is determined more by the small producer in Colombia than by the Wal*Mart on the corner

14. Natural gas is local. The price will continue to be set by continental production even after the lawyers have given up fighting the LNG terminals.

15. The media know nothing about the oil business. The more strident the published predictions of a price extension above (below) extreme levels, the closer the oil market is to a temporary top (bottom)

16. “It’s always something” - Roseanne Roseannadanna