History does not repeat, but it does rhyme

In 2000, one of the biggest discoveries in the oil sector was made, the Kashagan field in Kazakhstan. This discovery is considered the largest in over 30 years, as the field has estimated reserves of 13 billion barrels of oil.

Following this discovery, several industry consultants believed the world would be flooded with cheap and plentiful oil from Kazakhstan, and OPEC members reduced CAPEX substantially in their fields. For sure, if a big producer were to step in and make prices go down, it makes no sense to invest to increase production.

Unfortunately, this field only started to produce in late 2013, many years after those expert’s estimates. Technical and operational difficulties caused a much longer delay than many thought possible. The lack of investments in CAPEX was one of the causes that contributed to the rise in oil prices between 2005 and 2008.

I always hear people say that they are going to renovate their houses and expect to complete the work in X amount of time and have a budget of $Y. In the end, the time ends up being 2X longer than forecasted and the actual spending 3$Y or more. This in a residence, which is a controlled environment and people have extensive knowledge of the details of the place. Now imagine a mine.

Mines are famous for taking much longer than expected (and also costing way more than forecasted). The example of Cigar Lake is important. Cigar Lake is one of the largest uranium mines in the world and was discovered in 1981. Production start-up was estimated for 2007, then 2008, then 2010, then 2011, 2013 and finally, in 2014, the mine actually started operating – a delay of 7 years!

There are no major uranium projects expected to come online in the next few years, but industry consultants are still talking about Arrow and more Kazakh product. As a result, several uranium producers are drastically reducing CAPEX, which will impact production in a few years. Even Kazatomprom is cutting down spending.

Today less than 140 million pounds of uranium is produced per year, while more than 190 million pounds is consumed. The situation is unsustainable and we are seeing several consultants discouraging investment in the industry by saying that new mines can come to production very soon and there will be no surprises. We have seen already this movie with oil a few years ago. As the old adage goes, history does not repeat, but it sure rhymes.


Leave a Comment

All fields are mandatory
Recent Publications

Private Equity

Much is said about private equity (PE) funds and the excellent results they have presented.

Read More

PODCAST – Jesse Redmond – Cannabis

In this episode, Marcelo Lopez had a very interesting conversation with Jesse Redmond, Head of Cannabis at Water Tower Research. Jesse discussed the current situation of the cannabis market in the USA, the potential triggers and the investment perspectives. Redmond also explained the role states play in this universe, the existing political catalysts, including SAFE Banking Act, schedule review, tax-related issues, and what to expect from the Garland memo.

Read More


Vila da Serra, Nova Lima - MG
CEP: 34.006-053
North Sydney, NSW
Data Processing - DPO
Bruna Massud
By submitting your data, you declare that you agree with the Privacy Policy Terms

Dev by

Investors are advised to carefully read the prospectus and the regulations when investing their funds. L2 Capital Partners does not sell shares in investment funds and / or clubs or any financial asset. Get to know our Voting Policy ..