The Bakken, What the Data Tells US

I have been supplied an Excel spreadsheet of all North Dakota wells back to 2006, thanks to Enno Peters and Dennis Coyne. I only used the data back to 2007 however. This is a wealth of information for if we want to know how many wells came on line in a given month, we simply count them. We are given the monthly production data for each month. And since we have the monthly production data we can very easily figure the decline rate of each well, or any group of wells for any month or year.

A note on the data. The first month data was almost always for a partial month. Sometimes the well came on line near the first of the month and sometimes near the end of the month. To get around this problem I have started with the second month, which is the first full month, and used that month as the first month of all my data. All data and charts below include all North Dakota wells, not just the Bakken.

NDIC Production Decline

Production per well has gradually increased each year. 2014 was the highest first month production but also the highest decline rate. Note that on the first month 2014 production is 29 barrels per day above 2013 1st month and 131 barrels per day above 2008 1st month.  But the 2014 10th month was 7 bpd below the 2013 10th month. And by the 13th month only 7 barrels per day separated the 2008 data and the 2013 data.

Bottom line is, though the new wells produce more, they decline a lot faster.

NDIC 1st Year BPD

 Barrels per day per well, for the entire year, discarding the first partial month and measuring the 2nd through 13th month, averaged 230 BPD for 2013 and 241 BPD for 2014. The first-year barrels per day per well has increased every year except for 2012.

NDIC Wells per Month

The average number of rigs per month peaked in 2012 at 218 yet wells per month continued to increase. This is wells completed, not wells drilled. Yet wells drilled have increased even more than wells completed. At the end of 2013 there were 635 wells awaiting fracking. At the end of 2014 there were 750 wells awaiting fracking. Below is the Year – Wells per Month data represented in the chart above.

Year  – Avg. # of Wells per Month
2007 – 24
2008 – 43 
2009 – 41 
2010 – 68
2011 – 108 
2012 – 157 
2013 – 172 
2014 – 187

NDIC Rigs & Wells

There is close to a 1 to 1 ratio between wells per month and active rigs per month. But remember there is a lag between when a well is drilled and when it is completed.

NDIC 2014 Change & Wells

There is only a very rough correlation between production increase, (left axis) and wells completed, (right axis).

2014 Bakken Data

The above is the data used for the previous two charts. The production change is in barrels per day.

Now lets deal with decline rates.

NDIC Annual Decline

The first year decline rate has continued to increase. One reason is the vast majority of new wells in 2014 are horizontal fracked wells where many of the 2007 through 2009 were conventional wells. But I doubt that this is the only reason.

NDIC Monthly Decline

First year monthly decline rates jumped to a whopping 8.33% in 2014 versus 7.97% in 2013. However the 2014 decline rate is only for the first 10 months as December had only a partial months data so the decline for November could not be calculated.

Also, the monthly decline rate is erratic and not exact. Some months are shut down for part of the month causing the figures to jump around. The Annual decline rates are much better but still not exact.

The question still remains is how many wells must be completed each month for production to remain flat. I have figured it every way possible and I come up with 130 wells using the data above but using the EIA’s legacy decline rate I come up with 143. But it is the number of wells fracked each month that counts, not the number of wells drilled.

There were 730 wells awaiting fracking crews at the end of December. At the end of December 2013 there were 635. From the Directors Cut for February 2014:

We estimate that at the end of Dec there were about 635 wells waiting on completion services, an increase of 125.

And it jumped 50 the previous month, November 2013. Apparently this was because of the weather. When it gets very cold it slows fracking down rather dramatically, far more than it does the drilling crews. From what I can tell February 2015 will be a very slow fracking month. I am not so sure about January.

But the point is, they could drill only 120 wells per month and but frack 150 and keep production increasing. And with 750 wells waiting to be fracked they could continue at this pace, fracking just 30 more wells than drilled, for about two years before production starts to drop. But the rig count may drop much lower. And are fracking crews suffering the same attrition as drilling rigs and crews?

On another subject, this was emailed to me a couple of days ago:

I wanted to pass on to you that a friend in management at a local NYSE listed company told me last week that wells may have to be shut in if some storage capacity doesn’t open up soon. Every tank battery, truck, tank farm, and pipeline is full.

Storage reported today, for Friday February 20, was up another 8.427 million barrels to 434.071 million barrels.

Take away from that what you will.

And then there is this. We talked about this a month or so ago but now new information and pictures are available.  And be sure to go to the link below. They have a lot more pictures there:

Are Siberia’s mysterious craters caused by climate change?

Scientists find four new enormous holes in northern Russia

Siberian Crater 

  • Four new craters have been spotted by scientists in the Yamal peninsula, in Siberia
  • May be caused by gas from underground and fear craters becoming more common due to rising temperatures
  • Bright flash of light seen close to one crater which led to theories that buried gas pockets in the soil may be igniting 
  • Another new crater has been found less than six miles from a major gas plant and experts have called for an urgent investigation into the phenomenon 

Until now, the existence of only three Siberian craters had been established when great caverns in the frozen landscape were spotted by passing helicopter pilots.

‘We know now of seven craters in the Arctic area,’ Professor Bogoyavlensky told The Siberian Times.

‘Five are directly on the Yamal peninsula, one in Yamal Autonomous district, and one is on the north of the Krasnoyarsk region, near the Taimyr peninsula.

‘We have exact locations for only four of them.

‘The other three were spotted by reindeer herders.

‘But I am sure that there are more craters on Yamal, we just need to search for them. I would compare this with mushrooms.

‘When you find one mushroom, be sure there are few more around. I suppose there could be 20 to 30 craters more.’

______________________________________

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515 Responses to The Bakken, What the Data Tells US

  1. The IEA Medium Term Oil Market Report assumes that US growth will practically be zero by 2017
    See slide 5 in:

    https://www.iea.org/newsroomandevents/speeches/150210_MTOMR_slides.pdf

    • Jef says:

      GDP is a joke on so many levels.

      “Ex-Plunge Protection Team Whistleblower: “Governments Control Markets; There Is No Price Discovery Anymore”

      http://www.zerohedge.com/news/2015-02-23/ex-plunge-protection-team-whistleblower-governments-control-markets-there-no-price-d

      • Jef, I listened to the entire 38 minutes and 24 seconds of the Dr. Pippa Malmgren interview. She never mentions the Plunge Protection Team and her comments on “Governments Control of the Markets” is entirely misleading. Her entire argument is:
        It is all done with Quantitative Easing!

        She argues that quantitative easing influences interest rates and inflation rates and thereby influences the market. I cannot disagree with that but I would argue that this is a far cry from controlling the markets. Quantitative easing may indeed affect the long term trends in the market but that is not the same thing we think of when we talk about “controlling the market”.

        I also watched the entire 6 minutes and 20 seconds of the CNBC video at the same link. And I must say this one was really great. I laughed my ass off at the poor damn fool they had on there claiming the Plunge Protection Team was influencing the S&P movements. And the whole CNBC crew laughed their asses off at him as well. They made the poor fool look like the idiot he was. Art Cashin called the entire PPT – S&P rumor “A pile of crap”.

        What I really can’t understand is why the author of the piece, one Tyler Durden, posted this video to support his argument. What it really did was make him look like a complete fool just like the poor fool on the CNBC video.

        And one more point. I have heard at least one poster over on the “Peak Oil Discussion Group”, as well as a few others elsewere, comment that the ZeroHedge web site posted a lot of crap and should not be quoted because of their tendency to exaggerate and print lies. I never agreed with them… until now.

        • Watcher says:

          Tyler Durden is a psuedonym for the staff of people who usually forward articles rather than write them.

          ZH has a history of error. They also have a history of excellence. And they have a history of paying their bills with sensationalism.

          They are the best financial blog going. Certainly the most widely read. Not much different from DrudgeReport, but with a focus on money. In contrast, CNBC’s viewership numbers are falling.

          • In contrast, CNBC’s viewership numbers are falling.

            In contrast, CNBC’s audience would be a huge multiple of ZH’s readership.

            CNBC shares a a viewership with Bloomberg Business Chanel. I don’t know which one is gaining or losing audience but Bloomberg is a late comer to the business and did trail CNBC by a wide margin. I don’t know where they stand now but I see CNBC quoted and linked to far more often than Bloomberg.

            • Watcher says:

              The recent numbers are 215,000 total and 40,000 (for the 25-54 demographic) for daytime CNBC viewership — the lowest recorded viewership since 2005. Can’t be good for ad rates.

              No idea of ZH ad rates. Eyeballs are stickier reading articles, one supposes, than glancing up at a ticker walking to an airplane gate.

              Just scrolled down the ZH list and found most read count for articles in the single digit thousands, no nothing is on there of a blockbuster subject today, and the articles scroll off in a few hours. Given everyone uses ad block, no idea what this means for revenues.

          • Brian Rose says:

            Watcher nailed it here.

            Zerohedge is incredibly useful so long as you read it with the knowledge they have an agenda. It is the penultimate site for bearish news. The data is accurate, but selective and with narrowly defined analysis.

            Prime example: recent posts on the Bulk Dry Index. The data is there, but the analysis leaves out factors such as overproduction of ships, radically reduced fuel costs (the primary cost of shipping), and other nuanced factors that reveal it is largely, although not fully, explained by factors unrelated to immediate global economic Armageddon.

            Combine an oversupply of ships with significantly reduced costs and you get a competitive collapse in shipping rates through competition. Since these factors go against Zerohedges agenda, your perspective will be highly flawed if you:

            A) Use Zerohedge and websites with similar agendas as your only sources of info (likely due to an innate desire for what psychologists call confirmation bias)

            B) Take the info and analysis presented at face value without seeking equivalent amounts of data and analysis from websites with opposed agendas

            Zerohedge points out legitimate data and nuances in that data that you will not hear from any other news source, and does it in real time, as it happens. This is only beneficial if it is a small, knowingly biased, piece of your own personal daily research.

            As a side note, Tyler Durden is a reference to Fight Club. “Tyler Durden” does not exit as an individual, but as an idea. The book ends much differently than the movie (thank you test audiences), but Zerohedge and its use of Tyler Durden is appreciably comical (or insanely brilliant depending on how self-aware they are of their bias) to anyone who knows how it all ends.

            The character Tyler Durden rips you from your facile, complacent understanding of the world. Tyler Durden changes you; there is no going back – typical Joseph Campbell hero’s journey stuff . BUT his worldview is revealed as being just as displaced as the real main characters complacent view.

            Tyler Durden ends up being just as ideological and irrational as the main characters original materialistic life. The truth lies in-between. I cannot figure out for the life of me if the crew behind Zerohedge gets this and runs with it, or is completely oblivious to the fact that they fulfill that narrative.

            That being said, Zerohedge and Tyler Durden are incredibly useful, but only from a skeptical distance.

            Hopefully others can expand on or reveal their misgivings with this view of Zerohedge and its role. I sincerely wish I knew if the sites content contributors, collectively known as Tyler Durden, see the irony.

            • Bob Valiant says:

              I hung out there for five years, although I’m not part of the typical ZH demographic – in any way.

              The “articles” with hard statistical information can sometimes be interesting; everything else is pretty much either sensationalistic click-bait, or repetitive essays on how economics and society “really” work.

              The comment section is inane.

              • coffeeguyzz says:

                Mr. Rose, of the several thousands of comments I have read over the years, yours ranks, IMHO, at/near the top in lucidity, comprehensiveness, and accuracy.
                As a longtime ZH follower, the past few years – particularly after the sale of the site – have seen a decline in quality and a drift towards commercial (monetary return) bias.
                Still, it is an up to the moment source for financial happenings.
                As to your comment on ‘confirmation bias’, it is so true of so many sites on the net with the seeming result of more entrenched positions being “validated” by readers as opposed to differing views prompting a continual evaluation of affairs.
                To have the internet promote the growth of a worldwide, cyber version of the two grumps in the balcony from Sesame Street would be a tragic/comedy of vast proportions.

        • Jef says:

          I am sure you understand that corporations borrowing near 0% money and buying back record amounts of shares, driving up share price then selling high is not productive.

          “Claims about the Working Group generally propose that it is an orchestrated mechanism that attempts to manipulate U.S. stock markets in the event of a market crash by using government funds to buy stocks, or other instruments such as stock index futures—acts which are forbidden by law[citation needed]. In August 2005, Sprott Asset Management released a report that argued that there is little doubt that the PPT intervened to protect the stock market.[11] However, these articles usually refer to the Working Group using moral suasion to attempt to convince banks to buy stock index futures.[12]”

        • Futilitist says:

          Hi Ron.

          I don’t believe in authoritative sources like CNBC pretends to be. All so called authoritative sources have an underlying BAU agenda. I think Zerohedge is a good source for lots of unfiltered news. Finding the truth is work, but at least there is some truth to be found there.

          For example, here is something I posted about a zerohedge story:

          Here is something really interesting:

          War And Petroleum Reserves

          http://www.zerohedge.com/news/2015-02-2 … m-reserves

          In the interest of analytical balance, we would do well to consider the possibility of war strategies when it comes to the global stockpiling of petroleum reserves. In the years leading up to the German invasion of Poland, the world witnessed dramatic decreases in the price of oil as well as massive increases in petroleum inventories, especially as the Texas fields began to produce.

          These shifts in the global oil markets ran parallel to the deflation which had begun in October, 1929, and as such, we can see the same pattern repeating today as oil prices collapse, inventories are growing, and world wide deflation is deepening.
          Whether by design or not, the lack of reduction in crude production around the world, and the growing stockpiles which isn’t slowing down, will only mean further decreases in the price of oil.
          The growing deflation will obviously drive down the demand for petroleum products even further, while at the same time decreasing oil prices will continue to feed the deflationary pressure from the opposite macro position.”

          It looks like Old farmer mac’s Leviathans are gearing up for war! The historical parallels are chilling. I love the part about US production leading the way into a glut back then too.

          Lots of automatic mechanisms are lining up to set the stage for WWIII:

          Exponential Growth ->
          Overproduction ->
          Crash ->
          Massive Productive Capacity Overhang Prevents Growth ->
          Deflation ->
          Oil Glut ->
          Lot’s of Excess Fuel for War ->
          War ->
          Productive Capacity Overhang Eliminated ->
          Exponential Growth Resumes

          It seems that WWII averted a collapse by eliminating the overhang in productive capacity, creating room for economic growth. Can WWIII do the same thing for us today? I think peak oil will mean that history only repeats itself up to a point. But who knows? I don’t think we will have to wait much longer to find out.
          ———-
          The short article basically takes Catton’s ecological perspective and applies it to what we can see developing in the world right now. I think it is totally fascinating. And you will never see anything like that on CNBC.

          • Futilitist,

            You are right, I won’t see anything like that on CNBC. And the folks at CNBC don’t know a lot of things. There are just a whole lot of things they are not authorities on. But there is one thing they are authorities on. And that is how the market works. They know what the Standard & Poor’s Index is and how it is traded.

            And in particular, there is one person at CNBC who knows everything there is to know about the S&P Index and how its futures are traded. That person is Art Cashin who has, for many years, traded the index, on the floor of the exchange, himself. And when Art Cashin says that the idea that some Plunge Protection Team can run the index up and down at will is a pile of crap it, by God, is a pile of crap. And when some yahoo who has never set foot on the floor himself claims that the index can be manipulated by a bunch of guys in the White House, then that yahoo is full of crap.

            When ZeroHedge agrees with that yahoo, they are way, way out of their league. And, they are full of crap also.

            • Brian Rose says:

              Gotta say, as I read this I was hoping you would name Art Cashin as that guy. He is 90% of the reason is ever tune in to CNBC. He never gives ultimatums, and generally has a “we’ll see what happens with this” attitude. A true pro who understands no one will ever truly understand day to day, week to week, and even month to month moves in the markets.

              Instead of saying “this means this and WILL DEFINITELY lead to this” he says “I’d figure this likely means that, but my knowledge is as limited as the next guys, so I’m probly just as wrong as everyone is”.

              He has a monk-like appreciation for the understanding that he’ll never understand it, and doesn’t get his jollys from having to validate his often wrong (as is true of everyone) interpretation. In that sense, he doesn’t ever really have a solid interpretation, mostly a “this is interesting, let’s see what happens” king of mentality. Love that man.

            • Futilitist says:

              Hi Ron.

              I think you and Art Cashin are right about the whole plunge protection team thing. It is a pile of crap.

              • Thanks Futilitist and Brian,

                The S&P Index is an index of 500 stocks. The index is computer generated from the price of those 500 equities, several times a second. Of course the S&P futures trades either at a premium or discount to the actual index, by a few points, depending on the sentiment of the market.

                If the futures price moves too far from the actual index then computer generated arbitration programs kick in and pulls the futures and the index back closer together. That is the computer will either buy or sell a basket of stocks on one side and the futures on the other side, and close the deal out a few seconds later when the two come back together, locking in a profit. It is computer generated programmed trading. Nasty but it happens all the time.

                Now the point is, there is no way in holy hell that a group of nurds in the White House can manipulate the index because it is tied to the price of 500 different equities. They would have to buy or sell many millions of dollars worth of stocks then unload their positions at some time or another, and very likely losing a few million in the process. It would be almost impossible to make a profit under such circumstances.

                The government is not allowed to buy stock, except in certain bailout cases which are authorized by Congress. So there is no way in hell any “Plunge Protection Team” could possibly run the S&P index up or down, or stop a plunge if one happens. That is just a stupid rumor created by people who don’t know diddly squat about how the market operates.

  2. Jeffrey J. Brown says:

    The Refinery Yield chart, showing the product yield as API gravity increases, is shown below. As I have previously pointed out, note the large decline in distillate yield, just going from 39 API to 42 API (labeled as “Condensate” on the chart). It looks like the distillate yield drops from about 25% at 39 API to about 10% at 42 API.

    I have previously wondered if condensate and light crude represents an increasing percentage of US C+C inventories, and I think that ratio of the condensate price to WTI spot price would tell us a lot about the US demand for condensate, if anyone has the data.

    For the week ending 2/14/14, C+C inventories were 362 mb. Four week running average C+C inputs were 15.2 mbpd. Estimated four week running average US C+C production was 8.1 mbpd, and net crude oil imports were 7.5 mbpd.

    For the week ending 2/13/15, C+C inventories were 426 mb. Four week running average C+C inputs were 15.5 mbpd. Estimated four week running average US C+C production was 9.2 mbpd, and net crude oil imports were 6.8 mbpd.

    The question is, why are net crude oil imports imports still so high, given the inventory build? If condensate represents an increasing percentage of C+C inventories, one would presumably expect to have seen condensate prices dropping more than WTI, percentage wise.

    • Jeffrey J. Brown says:

      Because of declining production, Mexico no longer has sufficient domestic light/sweet crude oil production to meet the domestic demand from refineries designed to process light crude, so they are going to have to start importing light/sweet crude, although they remain a net oil exporter.

      And the question I have asked before is, wouldn’t the following comment by the Pemex CEO be representative of the feedstock needs of refiners in the US too?

      Mexico’s Pemex aims to start importing light crude this year (2014)

      http://uk.reuters.com/article/2014/08/28/mexico-pemex-idUKL1N0QX2TL20140828

      Aug 28 (Reuters) – Mexican state-owned oil company Pemex wants to launch light crude oil imports later this year, potentially reaching up to 70,000 barrels per day (bpd) and aimed at boosting refinery output, the head of its commercial arm said.

      The imports would mark an abrupt shift from a decades-old devotion to crude oil self-sufficiency in Mexico, long a major exporter to the United States. It also comes after a sweeping energy sector overhaul which seeks to reverse many years of declining output and export volumes.

      “Our objective is that (crude imports) will begin this year,” said Jose Manuel Carrera, chief executive officer of PMI Comercio Internacional, Pemex’s oil trading arm. His comments are the strongest signals to date on both the timing and potential volumes of light crude imports to Mexico. . . .

      While U.S. companies Pioneer Natural Resources and Enterprise Products Partners have secured permission to ship a type of ultralight oil known as condensate to foreign buyers, Carrera all but ruled out the possibility.

      “Condensate is not necessarily what Mexico needs. It needs crude,” he said.

      • Dennis Coyne says:

        Hi Jeff,

        I believe the Canadians need some of the condensate to dilute the bitumen so it will flow in pipelines, it may be that Venezuela also needs condensate to dilute their extra heavy oil from the Orinoco.

        • Jeffrey J. Brown says:

          The net crude (C+C) import number would incorporate condensate exports.

          • Dennis Coyne says:

            Hi Jeff,

            I wonder how the dilbit is counted by the EIA. In other words if all condensate that goes to Canada is mixed with bitumen and then comes back to the US, then the net imports of condensate would be zero.
            My main point was that there is some demand for this condensate from the Canadians, though we are probably producing more condensate than they need. The Eagle Ford alone produces roughly 300 kb/d of condensate, for all of Texas C+C about 11% is condensate and if we assume that applies to all of the US (it is likely to be lower than this for all US output) then there is about 990 kb/d of US condensate output.

            If we assume about 2 Mb/d of bitumen are produced and the diluted bitumen requires about 40% condensate, then all of the condensate currently produced in the US would have a market in Canada to be mixed with bitumen to produce dilbit (diluted bitumen). This assumes the condensate is not recycled but gets used in the refining process along with the bitumen.

            • Dennis Coyne says:

              Hi Jeff,

              Texas condensate is about 14% of Texas C+C output(not 11% as I mistakenly said above) so if we assume this also applies to the US as a whole we would have 1270 kb/d of condensate output rather than the 990 kb/d, I calculated before. The actual US condensate output is unknown, but may be between 1000 and 1200 kb/d. If 2 Mb/d of bitumen is produced, Canada would need about 1300 kb/d of condensate if all of the bitumen was shipped as dilbit in pipelines.

              • Doug Leighton says:

                Well with the Keystone XL pipeline vetoed we won’t need as much dilbit.

                • toolpush says:

                  Doug,

                  Even most of the railed Oil Sand oil, is Dilbit. Some is railbit, with less condensate, but very little is strait Bitumen, as these require heated and insulated tankers, though some capacity is/was being built.

                  • Blaine says:

                    But shipping dilbit by rail is so simple and efficient! All you need to do is drop the concentration by up to 33%, for up to 50% more total volume shipped, and when you get to the refinery spend vast amounts of energy boiling this 50% out of solution in a very expensive high-tech refinery, and then you can ship that 50% back to where it came from and put it back in again! Simple and efficient!

                    All very much more simple and efficient than, say, heating up the rail cars before you unload them.

                  • toolpush says:

                    Blaine,

                    I note a lot of sarcasm in you note. But I will ignore that.
                    Most of and all of the the large projects are north of the Athabasca River. As I understand it there are several pipelines under the river but no railway bridge over it. So the vast amount of the oil is shipped south to Hardisty Al. which is use as a distributions point such as Cushing Ok is used in the US.
                    Some of the smaller player truck their oil to rail sidings, but these are for manifest loads, not unit 100 car trains. There are plans to strip the condensate out of dilbit at Hardisty. From memory I believe that one is actually under construction. I am not sure of the separation process, but I am sure some form centrifuge would be used.
                    Unless a rail bridge is built over the river, then raw bitumen to rail car is not possible.

                  • Took push, there are several options, but the most efficient scheme involves using a very light diluent. In Venezuela’s large projects (technically led by Exxon, Total, Arco, and ConocoPhillips) the agreed solution was light naphtha diluent to achieve 18 degrees API using the 8 degree API field crude. The naphtha is separated using a distillation tower, and shipped back to the field.

                    I heard PDV is purchasing Algerian light crude to blend, but this is shipped all the way to the refineries abroad.

                    A centrifuge can’t separate a hydrocarbon stream. We can separate the asphalt using a pentane or similar light hydrocarbon mix, but that yields a product that looks more like a black piece of glass.

                  • toolpush says:

                    Thanks Fernando,

                    I was only guessing at the process, but I know they are actually building a plant to strip out the diluent in Hardisty.
                    http://navigator.oilsandsreview.com/blog/diluent-and-crude-rail-dilbit-railbit-or-neatbit/

                    I am not finding it easy to actually find information on the process, except for DRU for upgraders and refineries.

            • The optimum heavy blend (diluted bitumen) is 18 to 19 degrees API. This requires ~20 to 30 % diluent (it depends on the diluent API gravity).

              Depending on the refinery or upgrading design the feed stream can be introduced into a pipe still and the light ends removed to be shipped back to the field. The heavy ends (the pipe still bottoms) can be fed to the coker. The coker cracks the crude, turns about 20 % into petcoke and the remaining 80% is taken on to hydrogenation and cat cracking as needed.

              The long term answer for the Canadian crude is to upgrade it using a nuclear powered upgrade heater with cogeneration. But that’s exotic technology.

              • Old farmer mac says:

                Just how hot does most of the equipment at an oil refinery run? I am guessing at anywhere from ambient to maybe five or six hundred F.

                I know about the enormous amount of heat dumped into cooling water or towers at nukes but not if a nuke can be operated in such a way that the coolant is hot enough to use it to run a heavy oil refinery.

                It seems to me that you are saying the coolant IS or CAN BE sufficiently hot by mentioning cogeneration.

                In that case the nuke could generate electricity to support local nearby communities and maybe some more for the oil companies plus some for transmission to any city near enough to build a transmission line.

                But maybe the tar sands operations use enough electricity to make full use of a nukes output of BOTH electricity and heat?

                • sunnnv says:

                  OFM – how hot???

                  On this wiki page:
                  http://en.wikipedia.org/wiki/Fluid_catalytic_cracking#Reactor_and_Regenerator
                  they have a nice schematic of a fluid catalytic cracker, with the temps and pressures (in deg. C and bar gauge – 1 bar approx. 1 atmosphere).

                  cat feed is a high boiling fraction from distillation,
                  boiling at around 340 deg. C (644 deg. F).
                  Distillation isn’t much hotter, or you start to clog your distillation column, etc. with coke due to thermal cracking.
                  The regenerator runs the hottest, as it is making heat by burning coke off the catalyst = 715 deg C is 1,319 deg. F.
                  The main part is at 535 deg. C (995 F).

                  There’s a schematic with some temps of the primary distillation at:
                  http://en.wikipedia.org/wiki/Oil_refinery#The_crude_oil_distillation_unit

                  It shows firing the crude oil feed at 398 C (748 F).

                  Note that an oil refinery typically has enough junk, either like butanes (4 carbon molecules) at the light end or really heavy crap (>= 30 carbons per molecule) to burn to power the process; and they do a lot of heat exchanger use to optimize things.
                  (one of the issues with refineries is the “turn around” where they do, among other maintenance items, cleaning all the heat exchangers).

                  But a tar sands bitumen upgrader is more of a cracking plant (thus the expense), since the bitumen is “all” heavy stuff,
                  mostly too heavy to distill at atmospheric pressure (to boil it would require heating above cracking -> coking temperatures), so they have to use vacuum distillation in upgraders, then crack the different heavy streams into something useful.
                  http://en.wikipedia.org/wiki/Upgrader
                  http://en.wikipedia.org/wiki/Vacuum_distillation#Vacuum_distillation_in_petroleum_refining

                  An ok schematic-ish drawing of what the innards of a tray type industrial distillation column (that would make up the main distillation step at an oil refinery) is like is all the way down at the bottom in fig. 5 of:
                  http://en.wikipedia.org/wiki/Fractionating_column

      • Blaine says:

        … wouldn’t the following comment by the Pemex CEO be representative of the feedstock needs of refiners in the US too?

        Umm, no.

        What happened was that as Mexican production expanded, they mostly built refineries to use the light oil, and exported most of the heavy and more difficult oil to the US. Hence the decline of Mexican production leaves Mexico with a shortage of light crude oil and the US with a shortage of heavy crude oil. Additionally, the US built refineries to use Venezuelan extra heavy crude, of which output has been declining as well, although there is still plenty of that in the ground.

        The US has a glut of light sweet crude, especially on the Gulf Coast and in in the Midwest. This is exactly what Mexico needs for their refineries.

        You can run light sweet crude through a refinery designed for heavy crude, but you end up being choked waiting for the distillation column, with the rest of the refinery mostly sitting idle. It’s not economically efficient. So the US has kept importing heavy crudes to the Gulf Coast, even though it’s illegal to export the light sweet crude which is piling up there.

        • Jeffrey J. Brown says:

          So, some refiners need light/sweet crude and some need heavy/sour crude. Do ya think?

          The question is, who needs more condensate?

          Your comment is totally irrelevant to the point I was making (as evidenced by the Pemex CEO’s comment about condensate), to-wit, refiners really don’t want or need more condensate (generally defined as liquid over 45 API gravity).

          “Condensate is not necessarily what Mexico needs. It needs crude,” he said.

          Interesting chart of API gravity versus sulphur content for global crude oils (note the API cutoff):

          • Blaine says:

            Those light condensates still have only a few percent lighter than C5, and are just about perfect feedstock for making gasoline. Yes, as has always been the case, you lose some to C4 and lighter when running catalytic reforming of the heavier components when improving octane. Yes, there’s a glut of C4 and lighter at the moment, but condensate is still selling for around 80% of what gasoline sells for, meaning that someone at least doesn’t find the condensate useless, even if one not especially nimble national oil company doesn’t want it.

            Yes, there’s currently a glut of gasoline relative to diesel, but this is a sharp reversal of the long-term trend, and unless oil from shale continues to grow very rapidly is unlikely to continue at the same rate. Extra-heavy oil converts to a high fraction of diesel when the residual fuel is coked, and the long-term trend in conventional crude is definitely towards heavier.

            We’ve seen a lot of diesel cars in Europe, and fuel efficiency has gone up more for gasoline engines because they were less efficient in the first place. However, longer-term gasoline is still a perfectly acceptable motor fuel, even for large trucks.

            • Jeffrey J. Brown says:

              Which brings us back to the same point, t0-wit, that refiners like Pemex need crude oil feedstock, not condensate.

    • Philip Backus says:

      Jeffrey, Can you explain cat feed ? Petro chemical feedstock?

      Thank You for your work and best regards,

      Philip

    • Watcher says:

      Since you first posted this chart some months ago, I don’t think people really understood that it is more important than just about all else we examine.

      You don’t even have to get above 45 to lose your food growing and transporting diesel.

      • canabuck says:

        Can you explain why it is important?
        All that I can see is that condensate (higher API) produces a lot of gasoline, and that heavy oil has a low API.

    • Jonathan Madden says:

      Jeffrey,

      I have been asking myself this question too. Your suggestion that LTO and condensate do not satisfactorily replace imported crude seems reasonable. If so, then once US storage becomes full one would expect LTO and condensate price to fall relative to WTI and equivalents. Presumably this could lead to a rapid reduction in new shale oil well production and subsequent fracking.

  3. Thirunagar says:

    These charts show that fracking is turning into an exact science. Whatever resources that can be extracted is getting extraced as fast as possible. My guess is that while EUR of each well is improving, the improvement is only marginal.

    Companies are not completing the wells maybe because of this reason. If you frack it, you will get most of the oil in the first few months which you have to sell into a low priced market. they would wait for the prices to recover. This also means the rig count is going to drop pretty fast to the 50 – 60 range (in ND); and stay there for a while till oil prices rebound.

    Having made these observations on topic, I am now open for some generic doomer porn.

    • Watcher says:

      As noted, the backlog of drilled-awaiting-completion well totals has been increasing for a period of time predating the price fall.

      • Thirunagar says:

        It is one thing for it to be increasing when the driling crews are working at breakneck speed and an entirely different thing for it to be increasing when the rig count is crashing. If the completion crews were working as fast, we would be seeing a rapid decline in the wells awaiting completion. At the very least, it should remain constant.

        • Thirunagar, not much was changing in December. The rig count was 181 and fracking crews were still working full force. 213 wells were completed in December!

          Why don’t you just wait until the January and February numbers come in then start spouting your cornucopian bullshit.

    • yt75 says:

      Yes very interesting data indeed, thanks a lot to Ron for that, and was asking myself the same question about the EUR or the evolution of the total production of each well.

      New ones start higher decrease faster but for instance the 2013 curve goes below the 2014 one around the eight month, would be interesting to also have the total production on 2 or 3 years (or longer for the older ones) per “starting year”.

    • clueless says:

      As a retired accountant, I think that unless there is some law of physics that overrides [such as a drilled well HAS to be fracked within X # of days, or it is worthless], it is pointless to frack wells in ND at these prices.

      • toolpush says:

        I have read, that in ND they have 12 months to complete the well after drilling. Not sure what the penalty is?

  4. Rick Munroe says:

    “The barrels per day per well has increased every year except for 2012.”

    Hi, Ron.
    Excellent article, as usual.
    One detail: I presume that you meant to say, “The first-year barrels per day per well has increased every year except for 2012.”
    According to ND-DMR, the average barrels per day per well has decreased to around 130 from the high of 144 bpd in mid-2012.

  5. Dennis Coyne says:

    Hi all,

    A small clarification on the data from the NDIC which Ron used. Enno Peters is the person who should be thanked, my involvement was simply to forward the data file that Enno provided to Ron.

    Thank you Ron, for your excellent analysis of the NDIC Data provided by Enno Peters.

    One question:

    Is the data in your post for all North Dakota wells or did you separate the Bakken/Three Forks wells from the rest of the North Dakota wells in your analysis?

  6. pochvennik says:

    Apache’s comments on completing drilled but uncompleted wells from Q4 2014 Transcript (Feb. 12 – Not very fresh though)

    “We will come into 15 with a pretty deep backlog of wells and we have pushed a lot of those completions back, because quite honestly, we’ve got to get the completion cost to come in line as well. So we are going to very methodically push those back. If I can defer those, see the benefits of lower completion costs and then bring those back on and potential higher price environment and later there is a big win there. So we’ve got the benefit this year of having a backlog of completions and we can spread those out and it’s kind of how we planned it.”

    “Well in terms of completion backlog we’ve got – that’s kind of at our disposal as to when we would complete those wells and obviously if we’re an under 50 and prices have come on down and we will probably get some of those on and may choose to wait and see an increase in price when we go ahead and complete some of those wells.”

    http://seekingalpha.com/article/2913806-apaches-apa-ceo-john-christmann-on-q4-2014-results-earnings-call-transcript

    • islandboy says:

      This is something I have been wondering about for a while now. If fracking is so expensive why would anybody in their right mind bother to “complete” a well unless they absolutely had to? After drilling has been completed, what is the maximum length of time that can be allowed to elapse before it is fracked? If I were in the business I would slow down all drilling and completion activity to the minimum rrequired to hold on to the leases or whatever, until the price rises to a level where I can realize a profit. That assumes that existing assets can generate enough cash to keep me afloat.

      That’s what I interpret Apache to be saying.

      Alan from the islands

      • pochvennik says:

        And, for example, EOG on same regard
        Q4 2014 Results – Earnings Call Transcript
        (Feb. 19, 2015)

        I will now explain in further detail how we plan to prepare for the oil price recovery. First, we will reduce average rigs 50% down to 27% for 2015 and intentionally delay any of our completions, building a significant inventory of approximately 350 uncompleted wells. This allows EOG to use rigs under existing commitments and when prices improve we will be poised to ramp up completions.

        Oil price improvement of even a few dollars generates incremental MPV. So delaying completions and wait for improved prices as evidenced by the forward curve will add significant value. Please see Slide 8 of our investor presentation for a play specific example.

        Yes certainly, we’re deferring these completions because we do believe that prices will be better in the future and even at $10 increase in oil price gives us a significant additional return on our investment and NPV upside. So, really our rate of return focus and our capital return focus is really what’s driving the deferral. And let me kind of walk you through, there is two parts of this deferral, one is as Gary said we’re starting out 2015 with about 200 uncompleted wells in our inventory and that uncompleted well inventory will grow throughout 2015. And if oil prices improve and they look something like the forward curve in the $60 range then we would begin completing many of those wells starting in the third quarter of 2015 and that would reflect additional growth in the fourth quarter heading into 2016.

        http://seekingalpha.com/article/2931896-eog-resources-eog-ceo-bill-thomas-on-q4-2014-results-earnings-call-transcript

        • Watcher says:

          In other words, they can stiff the fracking companies more easily than the could the drill rig companies. The frackers must not have had the same magnitude of cancellation penalties in their contracts.

          What does the spreadsheet look like if there is an oil price decline for a few years? Suppose Russia and KSA want them destroyed and underprice their oil, regardless of quantity? There is nothing novel or unusual about a big competitor under pricing his products to destroy competition. Happens all the time.

          • Old farmer mac says:

            They might not have contracted as far ahead on Fracking as they did on drilling.

            The big boys might bankrupt the little ones but they are not going to be able to keep people from working the tight oil patch AND keep prices up at the same time.

            The amount of money it takes to get into drilling and Fracking a few tight oil wells say half a billion to a billion is peanuts in terms of the big picture. The drillers will be back with either borrowed money when the price goes back up – or else they will be working AS EMPLOYEE of people who don’t NEED to borrow money.

            There is a very successful furniture company still operating near my home after eighty percent or ninety percent of the domestic competition has folded.

            The OWNER often has meeting and tells his employees that since his family has ALWAYS put the profits back in the company rather than chasing other opportunities the company doesn’t owe ANYBODY a dime except for whatever it has bought within the last thirty days.His philosophy is that if somebody else can make money renting a warehouse to a furniture manufacturer then he can save money by owning his own warehouse.

            There will be plenty of people out there who have enough money in hand to go back into the tight oil fields when the prices go high enough.

            And this time around – most of the smoke hiding the real costs of operation and the real production figures will have blown away. The new people going back in won’t be idiots unable to work up a budget. If they were then they would not HAVE half a billion or more on hand.

            • Nathanael says:

              OK, but you haven’t looked into the issue of financing ehough

              The companies holding leases for the shale oil are mostly heavily leveraged; a bunch of them are about to default on their debt. So, assume that they go under due to temporary low prices. And since they aren’t paying the drilling rig guys, and they aren’t paying the frackers, a bunch of those companies will lay off workers and shut down.

              Now, who’s going to replace the leveraged leaseholders? New borrowed money? No. The investing world is starting to wake up to what a risky, dangerous, and generally bad bet these companies are.

              New equity? Sure, a few people will go into the tight oil fields the next time prices spike… but a lot of people will be more sensible, because they know that *prices can crash again before they finish the wells*.

              And here’s the kicker: with the drill rig operators and the frackers having laid off a bunch of their skilled workers, who will have gotten other jobs, the price for going back in is going to go UP.

              Yes, the smoke and mirrors of the shale oil boom will have blown away. But when the wealthy look at what’s left… the sensible will have the sense not to invest. ExxonMobil’s entire exploration expenditures for the past decade have been unprofitable!

              Basically, the shale oil boom depended on fly-by-nighters taking advantage of the wishful thinking of oilmen. This was actually the explicit business plan of Cheseapeake Energy.

  7. gwalke says:

    Hi Ron,

    I’ve been working on this exact dataset for my job since the latest release of Director’s Cut. Our numbers are in broad agreement – we solved the ‘first peak month’ problem by searching for the peak month then multiplying by the average ramp-up factor to provide a first month figure with peak in the second month. All this means our average well has a higher initial production – the profiles look basically the same.

    What is interesting to note is that if completion rates remain the same as last year, but rig rates hit Lynn Helms’s estimates (average rigs for 2015: 140 – we make this ~1500 producing wells for the year), average daily LTO production will rise less than 50kbpd this year (presumably as ND conventional sinks), and will be essentially flat in 2016 (assuming an average WTI of $55 this year and recovery to $75 next).

    We know, as another poster has stated, companies expect to radically slow their completion rates to preserve production for higher prices. This may well mean a sharper drop in the early part of this year – I have no data on just how quickly completions can be done, other than the max month for completions was last year with 270 in one summer month.

    It is also interesting that the dataset shows Harold Hamm’s promises to his investors to be difficult to achieve, to put it mildly. He recently promised them 188 wells with an average 30 day initial production of 855 – if you search by operator, you’ll see that less than 5% of CLR’s existing wells fulfil this criterion, for a grand total of 41 wells. CLR has consistently performed below Bakken average wells.

    • Dennis Coyne says:

      Hi gwalke,

      Is it possible to post the average well profiles that you have or is it proprietary?

      Thanks for the information. Does Ron’s 130 new wells per month estimate to keep output relatively flat sound reasonable? I get something a little lower (about 120 new wells per month if the 2014 average well profile does not decrease in 2015).

      • gwalke says:

        Hi Dennis,

        It’s proprietary I’m afraid. But, yes, Ron’s 130 is definitely in line with what we have – our estimate of ~1500 wells in a year is an average of ~125 a month, and remember “our” wells have better 30 day IP than Ron’s (and maybe yours). This accounts for the fact that we see a slight growth in 2015 average bpd, and very small decrease in 2016 despite assuming a price recovery, whereas your 2015 is flat. I assumed that our 1500 wells in 2015 follow the 2014 profile that we have.

        It is also worth noting, if you are attempting a production forecast for the whole Bakken, that you will need to make an allowance for confidential wells, if you haven’t already.

        • The dispersive diffusion decline model applied to Ron’s data chart

          http://imageshack.com/a/img661/4388/MCcfLm.gif

          DC, so much for the “proprietary” analysis — no need for that stuff, as it is likely substandard in any case.

            • Dennis Coyne says:

              Hi Webhubble telescope,

              If you are interested in the data file, just shoot me an email. The dispersive diffusion works quite well especially after 12 to 24 months, the early part of the well profile matches the hyperbolic a little better, but the high b needed eventually must give way to an exponential decline when the well decline reaches about a 10% annual decline. Nice chart.

              • DC, The tail-end is when we the Ornstein-Uhlenbeck process gets invoked. This cuts the tail into an exponential decline.

              • Talking about “proprietary”, look at this comment from a climate blog today


                Its not like the oil industry is well know for its open research ways. We are very very very backwards compared to pretty much any industry. We do not research, and we do not share what we know.

                http://andthentheresphysics.wordpress.com/2015/02/25/willie-soon-saga/#comment-49346

                No wonder we can clean up in the analysis realm. No one else is doing it, and if they were they wouldn’t be sharing!

                • Mike says:

                  Mr. Web, it will most likely come as a big shock to you, sir, but 99.9999% of the oil and natural gas industry does not have a lot to share with you, or the rest of the world, about the peak oil analysis “realm” because it simply does not give a rats ass about it. We are in the business of finding the nasty, 80-150 million year old stuff down there in the dark, miles below the surface. Once we find it, then we have to get it out of the ground, economically and safely, so people like yourself can sit at the computer all day long and predict the end of oil. Guessing about the future is not our gig. That’s YOUR gig.

                  Who are you to be getting in a chicken fight with a reservoir engineer with 40 years of worldwide experience, like Fernando, about diffusional flow, whatever the hell that means? How many barrels of oil has that “theory” gotten you into the stock tanks over the years?

                  My industry does lots of research. We are not “backwards.” We are full of brilliant, highly educated, imaginative men and women who make things happen.

                  I could not do what you do, sir. I respect you for that. On the other hand, with only a high school education, I would embarrass you in about 5 minutes with the things I know, that you don’t know, about the oil business. I mean flat out, red face, embarrass you. I’d have you back in the pickup by 9 am in the morning wanting to go home to mama.

                  So what?

                  Humble up, man. Don’t look down your nose at my industry. You don’t know shit about it.

                  Mike

                  • Paulo says:

                    Needed to be said.


                  • On the other hand, with only a high school education, I would embarrass you in about 5 minutes with the things I know, that you don’t know, about the oil business. I mean flat out, red face, embarrass you.

                    Oh please, spare me. As long as this is all proprietary info, it’s all talk and no action.

                    This is a numbers game and unless you know how to do the math and physics, you won’t get anywhere with hand-waving.

                    Yet, it is also entertaining to see someone get so defensive about seeping black goo.

                  • AnOilMan says:

                    I know shit.

                    What research have you done? Do you have any examples of industry led research?

                  • Puffalar (Your Five-Alarm Puff) says:

                    “Col. Jessep: *You can’t handle the truth!*

                    …You see Danny, I can deal with the bullets, and the bombs, and the blood… What I do want is for you to stand there in that faggoty white uniform and with your Harvard mouth extend me some fucking courtesy…” ~ A Few Good Men

                  • Brian Rose says:

                    Mike,

                    An excellent insight regarding the oil and gas industries focus on production in the micro, not the macro.

                    The industry and its suppliers spend money on engineers to analyze data to locate reserves, do a cost analysis, and produce them. It’s R&D focuses on refining current technology and creating novel groundbreaking tech for more precisely locating and more cheaply exploiting resources.

                    From your perspective this is probably so obvious that it doesn’t even bear mentioning.

                    People on the outside, especially people like me and this community, look at the overarching macro trend in cumulative data, and tend to think each player INSIDE the industry MUST see where this leads. When really your average petroleum geologist is spending their days researching very small, specific geological formations, and pinpointing a cost/benefit analysis on that micro scale.

                    The industry on the individual, person to person, level finds snowflakes and their unique structure. Us outsiders look at a field of snow and see a completely different reality.

                    We tend to ignore all the nitty gritty details you insiders know, and you insiders tend to ignore the overall picture because it is a waste of time and money for an oil company to pay people to research the prospects of peak oil. They pay people to find and exploit reserves and refine the technology to better accomplish that goal, not to hypothesize about the machinations of industrial civilization, global decline rates, exports, etc.

                    We have much to learn from you – we looked at the past data and said “look, peak must be happening!”

                    Your industry said “The past should not be used to define the future, new tech does happen, and higher prices do bring tremendous quantities of reserves into production”

                    The future always lies in between the two: Past trends should act as a starting point for anticipating the future, but the bulk of our conclusions should be dependent on analyzing the myriad of reasons why the future of production will be detached from the historical trend.

                  • Mike says:

                    No, Nick, I am not insulted by the possibility of climate change; I have no idea where you got that. I am concerned about it, same as you, actually. Forgive me but anybody getting their feathers ruffled about cartoon depictions of Al Gore needs to get out of the house more often.

                    I don’t like snooty people who feel they might be intellectually superior to others. Its a particularly annoying form of arrogance to me. Most of those kinds of folks can’t close a wire gap without getting confused. I like doers, not dooes and most of the doers I know are humbled up about life. I took offense to the insults directed at my industry, then towards me, personally. If the initial implication was that the oil and gas industry is “backwards” with regard to climate change “research,” that may indeed be right. I did not get the memo that says I have to research climate change just because I produce hydrocarbons. I don’t understand the association. Like guns, I guess, the oil business does not cause climate change, people do.

                    The same holds true for peak oil analysis; I did not get that memo either. Why is it the oil and gas industry’s responsibility to society to research and predict peak oil? Its not, of course; its our business to keep producing the stuff. I am quite certain that EOG does not have a peak oil research division.

                    I think that lots of smart people have determined that the shale oil industry embellishes the truth with regards to EUR’s, etc. The shale oil industry’s business plan was flawed from the start (the # 2 rule in the oilfield is never borrow money to drill wells) and then the unthinkable happened, oil prices went down. Now they are sucking hind tit. What’s the rocket science in that? If Americans are feeling duped all of a sudden, they shoulda been paying attention.

                    Shale oil production represents less than 5% of worldwide production. The probable ultimately recovering from shale resources in America was never going to have an enormous impact on peak production rates and it absolutely was never, ever going to keep us out of a bind. Yet, that’s about all anybody can focus on is shale oil decline and shale oil rig counts and shale oil this and shale oil that. People take all this shale oil stuff way too seriously. CLR cutting their Bakken budget, or whether it takes 19 days or 23 days to drill one of those stinking shale wells, means squat in the big scheme of things.

                    By the way, Nick, I am all the above kind of guy with regards to energy.

                    Mike

                  • Nathanael says:

                    I know more about the industry than you do, Mike.

                    Hands down, I could embarass you in five minutes.

                    This is not intended to be rude; take it in the spirit in which you gave your comment.

                    And I have nine words of advice for you, since you seem like a decent guy:

                    Get out. Your industry is dead in 20 years.

                    (Make sure you can provide for your family by moving into an industry which isn’t dying.)

                    The problem is, indeed, that “oilmen” think of their job in a very micro fashion, as being finding and extracting oil. This is gonna bankrupt all of your companies. Basically every dollar ExxonMobil spent on exploration in the last 10 years was wasted. Investors *notice* this sort of thing. And from the financial end, the companies collapse *suddenly*.

                • ManBearPig says:

                  Web,

                  I assume you have no direct interaction so I’ll allow your ignorance to to slide, but to those in the industry calling it “seeping black goo” is as silly someone getting defensive about it. The exploration and production of hydrocarbons is a science. I am a scientist, not a witch. The seeping black goo doesn’t power your life because I put a spell on the ground to make it rise, it is a viable source of energy because thousands of geologists, engineers, and chemists devote their lives to the SCIENCE of hydrocarbon production.

                  As you said, there is some information that the industry keeps proprietary for the sake of competition, just like every other industry on the planet. But there are also thousands of papers that are available to those outside of the industry. OnePetro.org, AAPG.org, PetroWiki.org, and many others provide scientific papers on geological and engineering data from the industry.

                  If you don’t understand stuff about the industry then fine, I’m sure I don’t understand most of what you do. But insulting people like Mike, who has a vast amount of knowledge that he is providing people on this site for free, is not the way to expand your knowledge of the industry.

                  If learning about the industry is something that you want, then ask. There are plenty (or at least a couple?) of industry people here that I am sure would take the time to go into more detail then a simple comment can do. But being rude will give you the exact opposite result and turn the people who actually have experience with what is discussed here away.


                  • If you don’t understand stuff about the industry then fine, I’m sure I don’t understand most of what you do. But insulting people like Mike, who has a vast amount of knowledge that he is providing people on this site for free, is not the way to expand your knowledge of the industry.

                    Oh, and I am sure that you using the handle ManBearPig is not insulting to Al Gore.

                    Spare me the threat that some dude will leave this site because he was indirectly offended by locker room talk on my part.

                  • Dennis Coyne says:

                    Hi Mike and ManBearpig,

                    I am happy that both of you and gwalke, Fernando, and others share your knowledge here at Ron’s blog and I enjoy learning from you guys. Thanks.

                  • MBP (ManBearPig) says:

                    Web,

                    My name stems from the fact that I happened to be watching that particular episode of South Park the first time I commented on this blog. It has nothing to do with my views on Al Gore, climate science, or anything else. I have often thought about changing it since I know it could be taken to mean something that it doesn’t, but have decided not to so it was easy to tell what I have said in the past and who I was. If you honestly find my name insulting, I can easily change it.

                    But all of that is besides the point. You are insulting the work and knowledge of people who are contributing to this site, and it is unneeded. There is nothing anti-science about people keeping company information confidential so they can keep their jobs. As I said before, there are plenty of sources of information that you can look to for data that are in the public domain. If you find the information provided to be unsatisfactory, then do the research yourself. And if your aren’t going to, at least tap the breaks on the rudeness. If you are a jerk about what you say, even if it contains good content, no one is going to listen to it.

                  • I simply referenced a comment from another site by someone called AnOilMan, who I know to be an analyst in the oil industry.. The extent of my criticism was that unobtainable proprietary research results are worthless to me.

                  • Nick G says:

                    If you honestly find my name insulting, I can easily change it.

                    I’d guess that’s a good idea. You don’t want to wear a political sign if you don’t have a strong desire to send that message.

                    You could imitate corporations that buy other companies and change their name: transition with a new name on the back, then move it to the front, then drop the old one.

                  • Mike says:

                    Nick, what difference does it make how ManBearPig refers to himself when he posts? He is clearly a learned geologist who has found his way around the Permian Basin in W. Texas, one of the richest producing oil basins in the entire world, in good fashion and who is occasionally willing to share his knowledge with all of us. What he contributes here is important to a better understanding of our hydrocarbon energy future. Its a peak oil blog, not a peak battery blog.

                    It is unusual to have someone like ManBearPig, who is actually in the oil business, with real life experience, engaged in a peak oil blog. I am sure you if you were to ask him he would say he is not an “oil analyst,” whatever the hell that is, just a guy who has found a lot of black goo in his career. How could anybody with an ounce of brain matter not respect, or appreciate that?

                    I knew a mud engineer down in Cameron one time by the name of Al Gore. Wasn’t much of a hand, really. Couldn’t keep his viscosity funnel unplugged. Claimed he invented top drives. We use to have to duck tape his hard hat on his head so they would quit blowing over the rail. He was bad about polluting the Gulf with his hard hats; must have lost a dozen over the rail the couple of wells I worked with him on.

                    Last I heard he was shucking oysters in Morgan City and living in a double wide. If that’s the guy y’all are yaking about, good grief.

                    Mike

                  • Nick G says:

                    what difference does it make how ManBearPig refers to himself when he posts?

                    It makes a difference to him. He said so: “If you honestly find my name insulting, I can easily change it.”

                    WebHubTelescope thought that it was insulting. He said: “I am sure that you using the handle ManBearPig is not insulting to Al Gore.”

                    And, I think any reasonable person can see that there’s a strong political statement to the name ManBearPig. I actually hadn’t heard about it before yesterday, but the Southpark episode it came from is clearly meant to insult Al Gore and the whole concept of Climate Change. Imagine if it was a something similar aimed at someone you respect – for instance, if you like Ronald Reagan how would you react to a name like “Ronnie Raygun”?

                    So, if the person going by ManBearPig doesn’t want to insult anybody, he should change his name.

                    —————————————————————–

                    Now, I think there’s a different question here, which is that I get the impression that you’re feeling insulted by the idea of Climate Change.

                    All I can say is that I don’t think any of the people here who feel that Climate Change is an important problem harbor any disrespect for hardworking oil industry people like you.

                    Of course, they’d prefer that the oil industry had an open mind about things like Climate Change – some companies and people do, of course, but not all.

                  • Brian Rose says:

                    MBP,

                    I’m eager for your thoughts on something I’ve been debating with myself. I’d really appreciate any insight you might have.

                    We often have all this talk about the price at which fracked oil can be produced. What are your thoughts on how much the “break even” price point is dropping through the combination of better tech, economies of scale (on both the “fixed cost” of infrastructure now being in place and variable costs such as larger contracts with equipment suppliers driving down prices per well, rig, water truck, rail car, etc), and any other factor you think adds to this.

                    All new industries start with high costs that decline significantly over time. A reasonably comparable example would be falling costs of TVs even as they become more advanced.

                    Feel free to speak a bit loosely since this is all theoretical. It seems like this will combine with the consolidation of less efficient companies as they’re bought out by larger, more efficient ones during this lower price period.

                    To me it seems like the cost of fracking could decline significantly over the next few years, and we may be shocked to find a situation where we can frack the less fruitful non-sweet spots for $45.

                    That being said, just because the fracking boom may draw out for longer than many here expect that certainly doesn’t mean total barrels produced will keep growing, just plateau and decline at a slower than expected pace.

                    Please, anyone and everyone give your thoughts on this line of reasoning. Thank you all!

                  • MBP (ManBearPig) says:

                    Brian,

                    That is the billion barrel question. If you create a situation where the process of fracing is economic at $45/bbl, you move hydrocarbons from resources to reserves. As far as exact amounts of reduction, I’m not sure I’m qualified to quantify that. My job is finding the hydrocarbons, I leave it up to the engineers to get it to surface.

                    Now, obviously that is an exaggeration as I have some insight into the engineering world, but I would not call it my area of expertise; so take what I say with respect to it with a grain of salt.

                    Processes like changing from geometric to engineered fracs, optimizing the proppant, understanding maximum stress and preferential permeability of the formation for horizontal placement, more accurate geosteering, better contracts with service companies, new technologies, as well as many others increase the value to the producer and decrease relative break even price. Will these costs continue to decrease over time? Yea, I’m sure they will to a certain extent. I just have a hard time seeing $45/bbl be economic for unconventional wells. You would need basically a 50% reduction in cost, which may happen, but someone smarter then I will have to tell you where that could come fr0m. I’m sure in the future economic costs could be lower then they are now, but if $45/bb is your goal we have a long way to go.

                  • coffeeguyzz says:

                    Mr. Rose, a couple of data points …
                    Whiting announced yesterday that they intend to keep drilling AND fracturing/producing wells throughout 2015. They indicate that their efficiency will allow profitable extraction even at current low prices, something no other operator appears to be able to do. The specifics of their completion process includes using a Coiled Tubing conveyed Bottom Hole Assembly Tool that may be starting to ‘revolutionize’ this aspect of the frac process.
                    The current, online issue of drillingcontractor.org has a piece -dated 1/27/15 which describes several cutting edge technologies that are enabling so-called ‘intelligent fracs’ when operators effectively employ them.
                    The North Dakota DMR site’s main page has a link to their several presentations. (The ‘North Dakota Update’ presentation, dated 8/6/14, is a wealth of info, easily taken in with numerous graphics and aerial photography – some of which was displayed recently on this site by Mr. Nolan).
                    The 1/9/15 presentation has, on slide 29, an extremely informative view of the Bakken’s entire 60 day IP output displayed in short color-coded dashes. (In his Drilling Deeper work, Mr. Hughes used a similar graphic but his oversized dots were not nearly as clear as the DNR’s slide).
                    If one were to look at that slide 29, Mr. Rose, and extrapolate BOTH a reduced cost to drill and complete, AND a much more extensive recovery from each well, the number of bright yellow/white dashes would increase significantly.
                    One final note, and on this Mr. Patterson has clearly expressed a contrary view from my own … EOR.
                    The Bakken, and other shale formations are in the process of having a massive infrastructure consisting of tens of thousands of wellbores – each being one to two miles long, and located within 300′ to 1,000′ from one another – being built right this moment. The research work being done by the EERC folks in ND, as well as many, many more throughout the world, will definitely show results in years to come, with this upcoming summer’s pilot test being eagerly awaited by many.

          • gwalke says:

            Thanks for judging my work sight unseen. I happen to agree with you re: the closed nature of research in the oil industry – see my comments on CLR, for example. If I was running the consultancy I’m working for, I’d be at liberty to release the work I’ve done. As I’m not, and I like my job, it remains under wraps. Saying the work is substandard without seeing it is hilariously prejudicial though.

            • Of course it is substandard because it is not visible to us. If I had a bunch of research findings and I had to rank them, yours would go into the circular bin. That automatically makes it on the bottom 50% and by definition makes it substandard, where the standard is being able to actually apply the research.

              Kind of humorous that “roughnecks” are so sensitive to mild banter on my part.

              • gwalke says:

                Just because it is not visible to you, it does not follow that it is substandard. Kind of humorous that that’s your idea of logic.

              • Mike says:

                I produce something people in the world need, Mr. Scope. I am fiercely proud of that.

                We are intellectual equivalents, you and I. In the future you may please address me as Mr. Roughneck.

              • If it wasn’t for the inscrutability of those that work in the oil industry, this forum would be unnecessary.

                In the case of a tie, the winner is the guy that gives away the stuff for free. Google The Oil Conundrum

                • SW says:

                  Clearly I don’t have a dog in this fight, but it is a complex world out there and becoming more complex by the day. I work for a government agency and once upon a time I thought that because of that my employer was the American Taxpayer and I my highest duty was to make everything that I did available to the general public as efficiently as possible. Then sometime in the mid nineties and accelerating after the turn of the century there have been rather large budgetary constraints put on the research infrastructure and funding forcing us to look to ‘industrial partners’ to fund a significant fraction of our work. This funding always comes with strings usually regarding disclosure. But I can say from personal experience that the quality of the work done under the cloak of non disclosure agreements is just as good as that done in an open environment. At least from our end. Painting proprietary work with a broad brush questioning its quality is a mistake. Living on both sides of the issue involved in both proprietary and peer reviewed research I must point out that the peer review process is not without profound flaws that are evident to anyone who is a participant. I would certainly prefer that we lived in a world where there was an open sharing of scientific information. But we don’t. That is in my view a bad thing. But it is not the fault of the researchers nor is it a signal that the research is inherently flawed. It is just an impediment to general scientific advancement.

                • Old farmer mac says:

                  I find the whole discussion about names and handles highly amusing and given that I gave up the idiot box cold turkey about forty five years ago I had no idea at all about MBP being an insult directed at Al Gore who is probably actually a pretty decent guy and one who does have a working brain.

                  All those evenings spent reading good books for the last forty five years plus a few hundred more as a child HAVE resulted in my having a somewhat exaggerated opinion of my own intellect no question. But not such an exaggerated opinion that I chose a handle like WHT. 😉

                  Gore would be a lot better spokesperson for environmental responsibility if he would walk the walk to a greater extent.

                  It does occur to me that a guy who decides to use a handle like WHT just might have somewhat of a high opinion of his own abilities and just might as a result get ribbed a little when he presumes to question somebody else’s internet handle.

                  I am unable to judge myself in this case(having mostly forgotten what calculus and statistics I learned close to fifty years ago and which might not have been enough in any case ) but I remember what Yogi had to say about Mickey waving his bat at the outfield fence.

                  ” It ain’t bragging if you can do it.”

                  Maybe WHT really can see to the far corners of the universe as well as a few miles down into the Earth. I am reserving judgement.

                  But so far all the actual predictions I have seen made using his stuff -just here and at the old TOD site – seem to indicate than the people using the same old same old are predicting pretty much the same thing.

                  But new knowledge of any sort may well turn out to be extremely useful at some point. NO research is ever wasted if it is placed in the public domain and I salute Mr Telescope for doing so.

                  Honestly.

                  Some of us will remember what Edison said about his work on the electric light bulb after approaching ten thousand failed experiments.

                  paraphrased

                  I know eight (?) thousand things that DON’T work.

                  Even if the oil shock model turns out to be fatally flawed it will still be useful work in that it will save somebody else from having to repeat the same mistakes.

                  • The origin of the name is a merging of the lawyer Webster Hubble and Hubble Telescope. A nonsense name that goes back over 10 years ago.

                  • Mike says:

                    ‘It ain’t braggin’ if you can’t do it.” That’s exactly right, OFM; well said. That comes from cracked hands and lots of callouses, I know.

                    We have a saying about Texas weather, which I am sure is the same in your pasture; if you don’t like it, wait a minute and it will change. After 50 years of making a living producing oil and gas, the minute you think you have something figured out, you don’t. It will change, then confuse you for the next 3 years. It’s dark down there, and hard to see. Nobody has Mother Nature figured out. Nobody. Trying to make the oil business an exact science is like pissing into a strong north wind. It always ends up on your boots.

                    Thanks, Brian. And Gerd. SW.

                    Y’all don’t run the guys off like MBP and Push and Fernando; there the ones that keep it in real. If you want to know about the future, listen to them. Its not anything like you read on websites, trust me.

                    Mike

          • Dennis Coyne says:

            Hi Webhubbletelescope,

            Gwalke’s analysis may be excellent, it agrees, as far as I can tell with the analysis that Ron and I have done, and hopefully the work I have done is not substandard, and in my opinion, Ron’s work is outstanding.

            The trash talk really is not helpful. Gwalke is bound by the agreements with his employer and I am happy he is sharing what he can here.

            On the subject of petroleum engineering Fernando Leanme has likely forgotten more than I will ever know about the subject.

            Clearly he is not an expert on climate change, but then I am not either.

            • Gerd says:

              Put me in the “lets hear more from Mike, toolpush, man bear pig et al and less from webhubble” camp too. Unfortunately on the web one person with an attitude can ruin things for everyone else. Personally I have learned to read some posters and tune others out, that’s the only way to survive on the web.

              • The anti-science faction has always been strong, going back to the TOD forum.

                • Gerd says:

                  I prefer to call it the anti-a***ole faction.

                • coffeeguyzz says:

                  Mr. Web, Gotta thank you for being the spark for a somewhat humorous preceding ten minutes of reading comments.
                  Pretty much any regular reader must recognize the extent of your negativity coupled with the targeting of the hydrocarbon industry in particular. Mr. Roughneck, MBP, gwalke and others not only work – and I’m certain labor long and hard – in a field that you view askance, they have chosen to give time to this site for the educational benefit of us all.
                  Setting aside any ‘psycho babble’ regarding what lies behind your demeanor, I would like to see, if possible, more details of your work in that it apparently aligns with real world results. While I can guarantee that my understanding would be limited, there are many here far more gifted than I who could possibly benefit from seeing your work. Unless, of course, there may be some proprietary restrictions.

                • coffeeguyzz says:

                  Mr. Web, I just read and re-read your two links from down below. The exchange between you and Luke H on TOD link was fascinating as, to a non-science bumpkin such as moi, his clear as drill mud description of flow NOT being random (although the fractures/paths may be), it rather MUST flow to the lower pressure area provided by the horizontal wellbore seems kinda self-evident. If those guys standing near the well head 10,000 above the enclosed production tubing let’er rip with no choke restriction, my understanding is the approximate 8,000 or so psi differential from topside to bottomhole would kick those little oil molecules in the ass towards the wellbore with no randomness whatsoever.
                  All seeming frivolity aside, sir, your final response to Luke H was a little perplexing … to wit
                  “Without direct evidence that the flow is not random, the best we can do is look at the empirical flow rate of a typical well”.
                  Way above my paygrade to pass judgement on your work, Web, but the legions of oil-industry fuzzy heads may boast a fair degree of proficiency of their own.

                  • Diffusional flow, no doubt. The flow is a random walk through a maze.

                    Lithium ion batteries are also largely diffusional flow because of the enclosing random matrix that the ions have to travel through.

                    That’s the way nature works.

      • Dennis, my “130 wells to keep production flat” was based on an initial first months 2014’s increased production of 25,000 barrels per day above legacy decline. In other words, how many wells does it take to produce 25,000 barrels per day. I come up with 130, give or take 5 or so. I have 2014 first months production at about 407 barrels per day. But notice I was using the first full months production, which was actually the second month.

        The unknown here is the actual legacy decline in barrels per day.

        But Gwalke states: “our average well has a higher initial production”. This means that it would take more wells to overcome the legacy decline and therefore fewer wells to produce the 25,000 barrels per day above the legacy decline. Therefore my estimate of 130 barrels per day is too low. I should have realized that and inserted it into the post but then again, I am not perfect. Surprise, surprise!

        Gwalke, could you tell us what figure did you come up with for 2014 first months barrels per day? My figure was 407 for the second month, or the first full months production.

        • gwalke says:

          Using the second month will result in too low a level, as peak is sometimes as far as 6 months from the first month. When producing a total Bakken profile, we took the peak level, then averaged prior months to produce a single “pre-peak” ramp-up month. 2014 average peak month was more than 500, less than 550.

          • Using the second month will result in too low a level, as peak is sometimes as far as 6 months from the first month.

            I did not look that close, far too many wells to examine individually, but I think there would preciously few wells that peak that far out. Certainly the average well peaked the first full month of production by a wide margin.

            Using your figures, and assuming the average 187 wells per month for 2014, it would took about 47 wells to produce the 25,000 barrels per day production gain and 140 wells to overcome the legacy decline. Therefor, by your approximate first months barrels per day, it would take an average of 140 wells completed each month to keep production flat. That is, of course, assuming the same level of production per well as we saw in 2014. And there is no guarantee of that.

            In the chart below I left out the word “Average”. It should “Average Barrels per day dating from the first full month’s production”

            • Dennis Coyne says:

              Hi Ron,

              Let’s use 407 b/d for the first month and 187 new wells added per month, we get 76 kb/d and since output rose about 25 kb/d, this suggests a legacy decline of 51 kb/d, I believe that 51,000/407 would be about 125 new wells to keep output flat.

              • Yeah, that’s about right. But I am using the second month’s production because the first months data is only for a partial month. So I think we can be assured that the 407 bpd was too low. See my post below.

                • Dennis Coyne says:

                  Got it, we agree for the most part, and we certainly can’t predict either how many wells will be added in the future or what the future well profile will look like, so anywhere from 120 new wells to 140 new wells may be the correct number depending upon the well profile of future wells.

                  I, of course, may be more optimistic about the future well profiles, I expect they will remain at Dec 2014 EUR levels until June 2015 and then will the new well EUR will gradually decrease over 12 months to a 9% annual rate of decrease by June 2016. This results in a URR in line with the USGS mean estimate for the North Dakota Bakken/Three Forks of about 9.8 Gb which you would not agree with. I would note that at the end of 2013 proved reserves in North Dakota were 5.7 Gb and 0.9 Gb had been produced in the Bakken/Three Forks, and about 5.3 Gb of North Dakota reserves are Bakken/Three Forks reserves so at least 6.2 Gb of oil is likely to be produced in the Bakken/Three Forks of North Dakota.

                  If 120 new wells per month are added until Jan 2030, there will be 31,000 producing wells and total oil output will be 7 Gb by Jan 2030 and by 2050 output will be 9.7 Gb, if we assume no more than 37,600 wells are completed in the Bakken from Jan 2005 to Jan 2036.

                • Dennis Coyne says:

                  Whoops I clicked on wrong chart. Ignore chart above.

              • Dennis Coyne says:

                If we use 525 for the first month of output we get 98 kb/d from new wells (187 of them) and legacy decline would be higher at 73 kb, and you are correct that more wells (139) would be needed to keep output flat.

                In my analysis I look at only Bakken/Three Forks wells and there were about 175 per month added in 2014. First month output was about 462 b/d so about 81 kb/d with legacy decline of 56 kb/d and 121 new wells per month would offset the legacy decline.

                Note that to match actual NDIC output data the well profile must increase to 577 b/d for first month output by Dec 2014. With new wells added per month decreasing from 173 in Dec 2014 to 120 in July 2015 (about 8 less each month) and with a new well EUR decrease starting in June 2015 (as explained in chart), I get the following if 120 wells per month are added from July 2015 to Jan 2017.

                • Okay, but we only get the total North Dakota rig count, not just the Bakken. Of course all the wells awaiting completion are in the Bakken – Three Forks layers as conventional wells are not fracked.

                  But everything is so uncertain it seems foolish to argue over the very fine points. I think the rig count will go well below the break even level but do not know how many wells per month will be fracked.

                  Looking at the Daily Activity Reports, which I check daily, it looks like January will at best be a break even month and February looks for sure like a down month.

            • gwalke says:

              It looks like we have slightly differing decline rates too, Ron. While, as you say, we don’t know the actual legacy decline, we can take a pretty decent stab at it by using the previous year’s average decline as a baseline for each subsequent year. I also added in an estimate for confidential wells, which also makes a difference.

              • Dennis Coyne says:

                Hi Gwalke,

                I believe Ron also has an estimate for confidential wells based on the “runs”. Do you separate out the Bakken/Three Forks from the other North Dakota wells or analyze the entire state as Ron does? (I separate out the Bakken/Three Forks wells and assume 95% of the confidential wells are Bakken/Three Forks wells).

        • Dennis Coyne says:

          Hi Ron,

          Can’t you use your data for number of wells and the average well’s first month production to estimate legacy decline? I think you will find it to be a little lower than the EIA estimate (which includes both North Dakota and Montana).

          • Dennis Coyne says:

            Also you say “my estimate of 130 barrels per day is too low”.

            I may have misunderstood your post, I thought you meant 130 new wells per month would be adequate to keep output flat.

            When I use the average well profile for the 2010 to 2013 period, I get 130 new wells per month as being enough to keep output relatively flat, if the new wells added per month decreases from Dec 2014 levels by about 10 wells per month (200, 190,…,140,130). If I use the higher 2014 average well profile, then fewer wells are needed (about 120 new wells per month).

          • Dennis Coyne says:

            Hi Ron,

            You also say you are not perfect, which is undoubtedly true, but you are pretty awesome, imo.

          • Yes, if you know the first month’s actual production. But that is just a guess. And the increase in production jumps around so you just have to use the average for the year. Using 407 barrels per day for the first month’s average, and assuming 187 wells per month, and 25,000 barrels per day increase in production per month, then…

            407 barrels per day per well first month
            187 wells per month
            76,109 barrels per day of first months production
            25,000 bpd production increase
            51,109 bpd legacy decline

            Assuming my figure of 407 bpd is too low because I used the first full month instead of the first true month then we get:

            525 barrels per day per well first month
            187 wells per month
            98,175 barrels per day of first months production
            25,000 bpd production increase
            73,175 bpd legacy decline

            That second figure of 73,000 barrels per day legacy decline agrees very closely with what the EIA estimates as the legacy decline. If that is the case then it would take about 140 new wells per month to keep production flat.

            • Dennis Coyne says:

              Hi Ron,

              I get the same thing. One suggestion is that the 525 b/m would be an estimate of the Bakken/Three Forks wells rather than all North Dakota wells. Helms often says 95% of drilling targets the Bakken/Three Forks so lets use 95% of your 187 well estimate or 178 wells per month.

              output from new wells is 93450 b
              legacy decline is 68450
              130 new wells would be needed to keep output flat.

              Note that for my model the average 2014 well profile has a first month output of 509 b/d.

              output from new wells is 90,602 b
              legacy decline is 65,602 b
              128 new wells needed.

              The reason why the model comes out differently is that new wells added are gradually reduced from 173 to 120 over 7 months. In that scenario only 120 new wells are needed to keep output flat even with decreasing new well EUR starting in June 2015.

    • Watcher says:

      “CLR has consistently performed below Bakken average wells.”

      And yet they were supposed to have the sweetest of the sweet spots.

      • Dennis Coyne says:

        Hi Watcher,

        I don’t think I have heard many say that CLR has the best areas leased.

        Chart with 54 month cumulative output by company in the North Dakota Bakken/Three Forks.

        • Dennis Coyne says:

          Chart with cumulative well profile by company

        • Watcher says:

          They’ve claimed it all along.

          • Dennis Coyne says:

            Hi Watcher,

            Does anybody really believe the hype in the investor presentations?

            I have shown in the past that the data shows CLR is worse than average in the ND Bakken.

            • TechGuy says:

              DC Wrote:
              “Does anybody really believe the hype in the investor presentations?”

              Yes, Their Investors do!

              FWIW: Future production decline will really depend on how well these companies can manage the debt loads and control costs. As debt payments come due, its likely to get much more difficult. Drillers are less likely to be able to borrow more which the need more than ever to pull through. It appears that frack drillers used a lot of high yield debt to fund expansion:

              http://www.businessinsider.com/energy-companies-making-up-high-yield-bonds-2014-10

              This was of course modeled on that Oil prices will never dip, especially in the $50 bbl range. I suspect that most drillers continued expanding, expecting the price dip to be short lived which explains the high number of drilled but unfracked wells.

              My Best guess is that if oil priced do not rebound in the next 30 to 45 days well start to see some panic take over with these companies and some failures (bankruptcies) in 60 to 90 days. I doubt we will see any significant price in Oil increase until the summer (barring another significant geopolitical event). By then it will probably be too late for at least some drillers.

              • Dennis Coyne says:

                Hi Techguy,

                Your analysis may be correct. I think we will see oil prices start to rise in June 2015 at the latest.

          • The same dispersive diffusional decline function as shown earlier,
            but this time in a cumulative format.

    • Gwalke, I’ve suggested it may be possible to separate well populations using water cut. Do you have the water data with sufficient detail to see if the wells with higher water cut have different decline rates?

  8. Doug Leighton says:

    Another very impressive post Ron with thanks extended to Dennis and Elmo. I suppose the hold-back on completions is established (and logical) now and lack of storage capacity is a potential new variable.

    The multiple Yamal crater news effectively kills off any possibility that meteorites are responsible. Methane discharges are the only idea that really makes sense to me but I guess we can’t rule out some variation on sink holes, possibly sinkholes related to methane?

    • Dennis Coyne says:

      Hi Doug,

      Elmo? No doubt a typo, you meant Enno Peters I think.

      • Doug Leighton says:

        Yes, my apologies Enno. Keep doing bad stuff before my second cup of morning coffee.

        • Watcher says:

          How does this data support the “voluntarily holding back completions” for price?

          The article says backlog of drilled awaiting completion has been growing for a long time, predating price decline. And it notes that a sharp increase in that recently is seasonal.

          The data doesn’t support the conclusion. It might in 6 months. But not yet. It might not in 6 months, too.

          • Doug Leighton says:

            Never said it did. But was thinking: A general CONSENSUS expressed in various comments over the past week or so. Thinking being, why pump into a low price environment when you have a high decline rate well(s) if you don’t have to. Don’t be so Goddamned picky Watcher, I’m having a bad day.

            • Watcher says:

              Still waiting on your overdue assessment of % of the Russian shale that is frackable.

              • Doug Leighton says:

                Actually I have to give you a lot of credit Watcher: It’s an excellent question. Russians concluded quite a long time ago Bazhenov still holds as much oil and gas as has been produced in Russia to date. Meanwhile, you keep asking: What portion of it can be recovered.

                Currently Russians are in the middle of a study to answer to your question, though maybe its not entirely for you.
                This study includes a few (vertical) wells, 3D seismic, and coring-logging within the Upper Salym field. They also have West Salym and Vadelyp fields; Large-scale 3D seismic has been completed over most of the territory of all three fields and guys involved in this are convinced they can reliably identify viable source rock: I’ve been out of the loop too long to have an opinion on that however geophysics is an extremely advanced tool now. It’s also worth noting that Shell is a big player here and, assuming pilot phases are successful, I expect the region will be able to significantly increase volumes (both oil and gas) and ultimately benefit not only oil production of the Yugra Region but all of Russia.

                Fracked oil is expensive oil BUT I’ve seen Russians (and Chinese) do stuff at a fraction of typical Western costs. Don’t know. That’s another topic and one Fernando may answer for you (for us).

                • Watcher says:

                  Is there a completion time estimate on the study — which may not matter if they won’t release results.

                  There’s no magic to low costs if you use semi-slave labor — which the US would use in its shale fields if the cities are starving.

                  Ask Apple how semi-slave labor improves profit. (BTW ZH is reporting Steve Jobs had 5 million shares of Apple and 100+ million shares of Disney, both of which keep big offshore cash numbers, and thus so did he as the unpatriotic hero, imagine that).

                  In the overall scheme of things, Russia has the upper hand. They are not going to run out first.

                  • Doug Leighton says:

                    It’s a three year study and, believe it or not, I might be able to get a copy. If the results are in Russian I might be able to get my wife fix up what will be my crappy translation: Stand By.

                  • Watcher says:

                    Yo Douglas, See page 18

                    https://duckduckgo.com/l/?kh=-1&uddg=http%3A%2F%2Fwww.indmin.com%2Fdownloads%2FChinas%2520Proppants%2520Market%2520MODriscoll%252020%2520Bauxite%2520Alumina%25202014.pdf

                    Big Russian ceramic proppant production. They’ll have no problems with the raw materials.

                  • Watcher says:

                    The guar gum comes from India as I recall, now that could get interesting if they outbid NoDak.

                  • Watcher says:

                    There is a photo in the .pdf that explains labor.

                    I recall flying into Bangkok once and looking outside. There were 50 guys waiting to come on the plane. Their job was just to clean the trash from the flight. They did it in 15 seconds, accelerating aircraft turnaround, vs 30 minutes with 2 guys paid US wages.

                  • clueless says:

                    watcher –
                    “semi-slave labor — which the US would use in its shale fields if the cities are starving. ”

                    Why make statements like that which are utterly, totally, completely without merit unless and until such a scenario arrives. The oil industry is the top paying industry for the average working “Joe/Joan.” If the cities are “starving” then maybe the farmers, doctors, lawyers, dentists, etc. will also be working for semi-slave wages. As my deceased father would say – “wake up.”

                  • Watcher says:

                    Wait, what? So . . . one cannot fund a deterrent force until a scenario of attack takes place?

                • Watcher says:

                  Link above fails, this should fix it for the .pdf

                  http://tinyurl.com/n4zy63v

    • but I guess we can’t rule out some variation on sink holes, possibly sinkholes related to methane?

      Yes we can rule out sinkholes completely. Sinkholes don’t throw out debris. The debris, judging from the people standing atop them, appear to be about 15 feet or so high. These are definitely blowout holes. My guess is there was oxygen along with the methane in the ground. Somehow it ignited and blew the everything out. Static electricity could possibly cause a deep underground spark.

      Perhaps not, but I can think of nothing else. It had to be an explosion because methane itself would never have caused such a blowout. Slowly rising gas just don’t do such things.

      • Doug Leighton says:

        Didn’t I say sinkholes combined with methane? Guess my thinking (wording) wasn’t clear but it never is first thing in the morning, ever really. We did some seismic work in the arctic eons ago and surmised cavities identified in refraction surveys were possibly related to methane hydrate (clathrates) decomposition voids: potential bombs. So voids are potential sinkhole locations as well and my obviously fuzzy thinking was that environments that contained subsurface voids and methane accumulations may be analogous to the Siberian crater situation. I still think that. Regardless I’d certainly bet methane gas is the key culprit because as the article reported “….it was a gas-explosive mechanism .. a concentration of 5-to-16% of methane is explosive. At 9.5% methane is a perfect potentially self detonating bomb.

        • Doug Leighton says:

          Thinking back I remember we tried to talk the Canadian Coastguard into drilling a couple of holes into our so-called “methane voids”. At the time the Coastguard were investigating pingos by drilling shallow holes into them and we figured, what the hell. One guy liked the idea but his boss said: “Yeah right buddy, like we set off bombs under our own feet. Bloody cowards!

        • notanoilman says:

          I get hung up on there being an ignition source, plus getting enough oxygen there. It looks like there was a big underground chamber, like a sink hole. Now if that pressurised it could cause a blow out as is seen. One tell tale would be if there is any burnt matter there. No burnt, no bomb.

          NAOM

      • Futilitist says:

        Hi Ron.

        Here are three of the best explanations of the ‘mysterious’ holes that I found:

        https://robertscribbler.wordpress.com/2014/07/30/the-arctic-methane-monster-exhales-third-tundra-crater-found/

        Add salt, sand, and thawing methane pockets buried beneath scores of feet of warming permafrost together and what do you get? Massive explosions that rip 200-300 foot deep and 13-98 foot wide holes in the Siberian earth.

        The name for the place where this strange event first happened, in Russian, is Yamal, which roughly translates to mean ‘the end of the Earth.’ Now, three holes of similar structure have appeared over a 700 mile wide expanse of Siberian tundra. The most likely culprit? Catastrophic destabilization of Arctic methane stores due to human-caused warming.

        A Tale of Dragon’s Breath: How the Yamal Event Likely Unfolded

        About 10,000 years ago, as the great glaciers of the last ice age gave up their waters in immense surges and outbursts into the world ocean, a broad section of Siberian tundra was temporarily submerged by rising seas. But with the loss of the great glaciers, pressures upon the crust in these zones subsided and, slowly, the newly flooded tundra rose, again liberating itself, over thousands of years of uplift, from the waters.

        The land remained frozen throughout this time, covered in a layer of ice — solid permafrost hundreds of feet deep. But the oceanic flood left its mark. Salt water and sand found its way into cracks in the icy soil, depositing in pockets throughout the frozen region’s earth.

        And there this chemical brew remained, waiting to be deep-frozen and sequestered as the glaciers of a new age of ice advanced over the Earth.

        But this event, foretold and anticipated in the bones of Earth, did not come to pass. Instead, human beings began dumping billions of tons of heat-trapping carbon into the atmosphere. They dug up mountains of ancient carbon and burned it. And now those mountains of carbon lived in the air, thickening it, trapping heat.

        For Siberia, this meant rising temperatures. At first, the increase was slow. Perhaps a tenth of a degree per decade. But by the time the 20th Century was closing and the 21st Century emerged, the pace of warming was greater than at any time even the Earth could remember — an increase of 0.5 degrees Celsius or more every ten years.

        Now, the glaciers will probably not return for hundreds of thousands of years, if ever. And now, the brew that was waiting to be buried is instead thawing and mixing. A deep, heat-based cracking of the frozen soil that flash-bakes an alchemical mixture deposited over the ages. The result: dragon’s breath erupting from the very soil.

        Explosive Eruptions From Smoking Earth

        One Taz District local described the day the crater formed–

        The earth was first observed to smoke. This continued for some time and then a bright flash followed by a loud bang exploded above the tundra. After the mists and smoke cleared, a large hole surrounded by mounds of ejected soil was visible. The hole tunneled like a cone more than 200 feet down. Its walls were frozen permafrost.

        A single event of this kind might be easy to overlook as an aberration. A freak case that might well be attributed to unique conditions. But over the past two weeks not one, not two, but three large holes, all retaining the same features, have appeared within the same region of Yamal, Russia.

        http://www.huffingtonpost.com/james-grundvig/methane-blowholes-the-nex_b_5688019.html

        The Early Start of Climate Change

        What few people realize is that our carbon footprint began to altar the earth’s geological clock 12,000 years ago. When Jesus Christ lived, he was supposed to walk on ice, not water.

        In BCE, our ancient ancestors clear-cut the land for rice cultivation in Asia and farming in Europe and the Mid East. Their scorched earth living removed hundreds of thousands of square miles of forests. Those forests were carbon banks that have kept the earth balanced in a cycle of 90,000 years Ice Age and 10,000 years of warmth for the last four such epochs, according to geologist Kirsten Peters in her book, The Whole Story on Climate Change.

        Now add the explosion of human population the past century combined with the burning of fossil fuels, and it’s evident to see how we have impacted the planet.

        Permafrost is melting in Siberia and in the tundra of Canada and Alaska. Scientists have seen an increase of frozen or trapped methane being released to the air.

        The methane blowholes act line mini volcanoes. The buildup of stored methane gas — dormant for millions of years — being awaken by the warming earth has blown its “frost caps” off the top of the holes, ejecting layers of soil and sediment around the rims, while releasing tons of methane to the air.

        The giant ice plug melts with the heating of the permafrost, as the methane builds up to a tipping point and then erupts blowing open the soft ground.

        http://www.nature.com/news/mysterious-siberian-crater-attributed-to-methane-1.15649

        A mystery crater spotted in the frozen Yamal peninsula in Siberia earlier this month was probably caused by methane released as permafrost thawed, researchers in Russia say.

        Air near the bottom of the crater contained unusually high concentrations of methane — up to 9.6% — in tests conducted at the site on 16 July, says Andrei Plekhanov, an archaeologist at the Scientific Centre of Arctic Studies in Salekhard, Russia. Plekhanov, who led an expedition to the crater, says that air normally contains just 0.000179% methane.

        Hubberten speculates that a thick layer of ice on top of the soil at the Yamal crater site trapped methane released by thawing permafrost. “Gas pressure increased until it was high enough to push away the overlying layers in a powerful ejection, forming the crater,” he says. Hubberten says that he has never before seen a crater similar to the Yamal crater in the Arctic.

        Larry Hinzman, a permafrost hydrologist at the University of Alaska in Fairbanks and director of the International Arctic Research Center, says that such craters could become more common in permafrost areas as the region heats up.

        In Siberian permafrost, large deposits of methane gas are trapped in ice, forming what is called a gas hydrate. Methane remains stable and frozen at certain temperatures, but as the permafrost warms, and its internal strength decreases, it may be less able to withhold the build-up of sub-surface gases, he says, leading to a release.

        It’s pretty simple, really. I will be very interested to see what wacky theories are put forth by those determined not to accept this for what it is.

        (Sorry for the length of this post, Ron. I could have just put up the links, but just like with the Korowicz paper, people won’t even look if they don’t want to. I place the obvious answer to the mystery here in one single post so it is harder for people to raise stupid objections one by one, or propose endless alternate ‘sciency’ explanations, and just uselessly (?) create more confusion around the issue. And now, I am off down the page to diagnose patterns of denial.)

        • Thanks Futilitist,

          I thought all along it was connected to global warming, now I am convinced. If all these were just a natural phenomena then we would have thousands of them dating back hundreds or thousands of years. But they are recent, something in causing them and the only possible thing is warming in that area.

          • Ron, the story quoted by futilist is a bit simplistic, and I’m not sure it’s a true account of what happened in Yamal over the last 200 thousand years. I don’t think the account is right, nor do I see enough site description detail to be able to judge what goes on in these particular cases. I used to have access to extremely detailed geotechnical information about Yamal, focusing on the railroad corridor and the sector from Bovo to Kharasavey. I also have close friends who worked in the area, but I can’t pump them for information because that’s an ongoing development. I think we will just have to wait to see if they publish a decent report in the future.

            • Well Occam’s razor says the hypothesis with the least assumptions, (simplest), is the most likely to be correct. What could be simpler than methane explosions. And, even though this is in a a very remote location, planes and helicopters have been flying over all of Siberia for decades. This is a new phenomena so it has to have a recent cause. Try global warming.

              I will stick with that one until a better explanation comes along.

              • AlexS says:

                Ron,

                Here is the link to the paper from a Russian scientific journal on the first Yamal crater written by researchers who explored it (p 68): http://www.rgo.ru/sites/default/files/gi214_sverka.pdf

                Their main hypothesis is indeed that it is related to the global warming:
                “The origin of this crater is attributed to the anomalously warm summer of 2012, the increased ground temperature and amount of unfrozen water in the permafrost, expanding of cryopegs, formation of a pingo-like mound and its outburst due to high pressure produced by gas hydrate decomposition within permafrost. Similar temperature anomalies may increase in number in the future decades, presenting risks for human activities in the region.”

                http://www.rgo.ru/sites/default/files/gi214_sverka.pdf

              • Well, Alex mentions gas expansion rather than an explosion. That’s a bit different. If the result is tied to a hot summer then they may have a lead. But as I commented, the previous discussion was likely flawed. For example, most field work tends to show that Yamal wasn’t covered by glaciers during the last ice age. It lost the glacial cover in the Eemian or a few years before. This in turn allowed the ground to freeze a lot deeper. And the post glacial rebound took place in the Eemian.

                By the way, the Russians found frozen mammoths dated such that we can preclude the existence of glaciers in over 140,000 years.

                • Really Fernando, mammoth remains have been found in hundreds of places in the New World that was covered by ice during the last glacial period. They existed long after the last glacial period. They could have very easily migrated north after the ice melted.

                  From Wiki Last glacial period

                  In Britain, mainland Europe, and northwestern Asia, the Scandinavian ice sheet once again reached the northern parts of the British Isles, Germany, Poland, and Russia, extending as far east as the Taimyr Peninsula in western Siberia.[4] The maximum extent of western Siberian glaciation was reached approximately 16,000 to 15,000 BCE and thus later than in Europe (20,000–16,000 BCE).[5] Northeastern Siberia was not covered by a continental-scale ice sheet.[6] Instead, large, but restricted, icefield complexes covered mountain ranges within northeast Siberia, including the Kamchatka-Koryak Mountains.

                  From Yahoo answers

                  So all told, the woolly mammoth species itself survived from 150,000 years ago until 3700 years ago.

                  • That Yahoo answers answer is wrong. I linked a paper which shows the most likely glacier boundaries. I realize a mammoth can be found in frozen sediment. But mammoths don’t climb glaciers, nor do they dig. if the sediments and animals are dated to post Eemian then a glacier didn’t exist on top of Yamal. The glacier was on top of the Kara and further away over Novaya Zemlya.

                • Futilitist says:

                  Fernando,

                  “Well, Alex mentions gas expansion rather than an explosion. That’s a bit different.”

                  No, it isn’t. That is what the articles I referenced were saying, too. The ‘mystery’ holes are not a mystery. Quit trying to pretend that they are.

                  It seems like you are just trying to create the impression that there is confusion around the subject.

                  And mammoths are irrelevant.

                  At the end of the last ice age, that area flooded and became a shallow sea. That former seabed is buried under the permafrost. Methane hydrates form in the salty, sandy layer. As the permafrost begins to thaw, the methane hydrates destabilize and blow holes in the permafrost. Simple.

                  By the way, you mentioned the proximity to gas fields in one of your posts. That is also consistent with this explanation. Think about it.

            • Futilitist says:

              Hi Fernando.

              It’s Futilitist. And you are grasping at straws.

              • Nah. I’m just trying to have an intelligent discussion about a fascinating subject. I worked approximately one decade planning or reviewing Russian Arctic projects. This forced me to learn a little bit about permafrost.

                • Futilitist says:

                  Fernando,

                  How much do you know about gas hydrate decomposition within permafrost?

                  • A lot. If you think the problem is bad from global warming try operating a well producing oil and water at 80 degrees C for 20 years through 1000 meters of permafrost with a rich permafrost layer just underneath, and random hydrate lenses all the way to the surface. And I think I must have seen my first hydrate sample before some of you were born.

                  • Futilitist says:

                    Fernando,

                    I’m not sure what to make of your comment.

                    Are you trying to suggest that drilling activity in the region is responsible for destabilizing the methane hydrate? Do you think that makes more sense than, oh say, for example, global warming?

                    If so, you are in denial.

                    If you are just telling people about your personal experiences, why? It sounds like an attempt at an argument from authority.

                    Good science doesn’t resort to such tactics.

                    Good science should make logical sense to any non-scientist with a decent science background.

                    Present your theory.

    • Old farmer mac says:

      HI Doug

      I can’t think of any mechanism involving a sink hole that would leave a very obvious ring of APPARENTLY ejected material around the perimeter and I have read just about every thing you can find in a couple of hours looking for info on these craters. I mean two hours of looking for links the reading consumed a lot more time.

      There are only two things about them that seem to be almost totally for certain to me . ONE is that the temperature barring some unknown mechanism raising it must have been pretty low in the bottom of the crater at the time the contents were ejected. Nobody has proposed any mechanism for how it could have gotten hot enough down there to just cause an explosion closely analogous the one that occurs if you over inflate a tire or gas bottle.

      I made a couple of wild ass suggestions such as a plume of hot water from very deep down or natural gas having some unstable components which could dissociate expecting them to be shot down.

      But methane hydrates so far as I have been able to discover do decompose at temperatures around freezing about 0 C and some other regulars have been kind enough to share their knowledge of the density of soils in Siberia. They are much lighter than I would have guessed but I used a specific gravity of four or five to be sure I would have a pressure high enough in my scenario to generate a blast sufficient to clear the crater.

      Two things seem pretty obvious. One is that the contents of the crater must have been fairly solid. A crater full of water or mud would not be emptied except by a VERY powerful explosion – the gases would just bubble and percolate up thru mud or wet soil unless the ” bullet in the gun” were a solid shot. You can shoot a rifle without a wadding because the bullet fits the barrel bore tightly enough to seal the hot gases behind the bullet. But you cannot shoot a shotgun without a wad ( usually a disk of paper or plastic ) between the powder and the pellets. The gases pass between the pellets and they are not accelerated enough to go more than a few feet from the muzzle.

      So the soil in the hole must have been frozen or else the explosion must have been VERY powerful.

      Right now given that others have pointed out that it would not have taken very much pressure at all to eject the contents I am guessing that the explosive mechanism involved is the decomposition of methane hydrates.

      This could easily happen here and there because there is very likely some hydrate close enough to the surface that even a very minor warming would be enough to allow it to decompose to the constituent water and methane. It would be stable so long as it is BOTH COLD ENOUGH AND UNDER ENOUGH PRESSURE.

      Taking away some of the pressure would seem to require something prior to the explosion removing some of the over burden. That doesn’t seem likely at all.

      But even a very modest increase in temperature could be enough to bring about the decomposition of methane hydrate at the border line of the hydrate stability envelope.

      I am thinking the borderline conditions I am hypothesizing probably exist over a very wide area and that even a temperature change as small as tenth or maybe even a hundredth of a a degree is enough at a spot on the ragged edge of the methane stability envelope to tip it into decomposition.

      So far I am not finding anything written by engineers or scientists that goes into any detail about whether methane hydrate decomposition could be the answer but I am putting my money in it eventually being the accepted explanation.

      My immediate impression is that nobody who really knows very much about methane hydrates is saying a whole lot.It also occurs to me that perhaps nobody has done enough research to even know with any real accuracy PRECISELY the conditions under which methane hydrates can exist and cannot. The answer would be probably be complicated by how much sediment and how many kinds and how much other stuff is dissolved or trapped in the methane hydrate. The water almost for dead sure has some stuff dissolved in it in addition to methane before it freezes into a hydrate.

      It follows that if this is the case then the soil / permafrost is warming up enough that the extra warmth has penetrated down to whatever depth of the deepest of these craters.

      My money is on there being more of these craters discovered and more discovered on average every year year after year.

      Sometimes I am glad I am an old fart. Times are going to be very interesting indeed in a few more decades.

      • A sinkhole can be a natural phenomenon if the underlying sediment is limestone and it is leached away by water. Otherwise sinkholes are caused by human action. These could not be sinkholes because the underlying sediment is not something that could leach away, leaving a void for the earth to sink into.

        Look at Futilitist’s post above. That explains it. I think that should settle it.

      • Mac, as a general rule Yamal has a thin zone of mushy soil which freezes in winter and thaws in the summer. I don’t think the thaw zone extends more than say one meter. I have landed on an Mil8 on a wooden landing pad and the ground surface can roll as if it were jello. But underneath the ground is rock solid and frozen hard. The frozen zone can range down to say 3000 feet, but I’ve seen data with thinner and thicker permafrost.

        There are gaps in the frozen permafrost, in what is called a thaw bulb. These happen underneath lakes. And in that terrain the lakes can move over time. Thus it gets pretty complicated. But there’s no way for “hot water” to move up from below. There just isn’t any hot water migrating.

        The permafrost can have embedded ice lenses and gas hydrates mixed in with the soil. In some cases water draining from a lake can melt a section of an ice lens so it’s possible to have running water underneath the frozen soil. It’s conceivable the running water may have slowly undermined the terrain above, thus causing a round cavity. This may be associated with an old thaw bulb, or an ancient pingo remain. To know for sure we would have to locate an ice channel leading to and from the hole (because presumably once the hole is exposed to the air the bottom has to be frozen solid).

        As to what could cause the roof to blow, that’s an excellent question. I tend to think it could be gas but the whole phenomenom is very puzzling. Also I know Russians, and they tend to play along with foreigners, sometimes as an inside joke, sometimes for the money angle.

        We also have to factor the fact that Gazprom has a huge increase in activity over Yamal, they are building a railroad and pipelines, and carrying out a huge field development at Bovanenkovo. There’s also a small center with camps at Kharasavey, and there’s a satellite project over by the Ob gulf at Novy Port.

        • Futilitist says:

          Hi Fernando.

          Are you suggesting the Russians are creating these holes? Are they trying to scam us somehow? What for?

          “As to what could cause the roof to blow, that’s an excellent question.”

          And we have an excellent answer: methane hydrates are destabilizing due to rising temperatures.

          • I think the holes are natural, but the Russians will sell whatever you are buying. If you want exploding methane bombs they’ll play along.

            I’m also wondering if the Bovo project activities aren’t altering the environment. The rail road construction activities carried out by Gazprom could be changing lots of things. When we prepared the project we had hundreds of pages warning about how it would screw up the environment if it wasn’t done right.

            • Futilitist says:

              Damn Fernando,

              Just more grasping at straws (after Ron has made a new post and everyone has moved on). Cute.

              No one said they were exploding methane bombs. You keep trying to imply that so as to create a straw man argument. And general confusion. The holes are the result of gas pressure from destabilized methane hydrates. Please stop mentioning “exploding methane bombs”.

              You say you think the holes are natural. So do I. I think they are caused by gas pressure from destabilized methane hydrates. Instead of trying to poke holes in the scientific consensus, what do you think is the cause?

              As far as some project screwing up the environment, you are thinking too small. The project that screwed up the environment was civilization.

              This is what denial looks like.

              I’m on to you.

        • Old farmer mac says:

          Thanks Fernando,

          Personally I know hardly anything at all about permafrost or the Arctic when you get down to the details. I didn’t realize for instance that the permafrost extends so deep. I did know about the surface melt every summer and what it is like trying to travel or work in the resulting mess since there are many first hand accounts of that sort of thing available.

          I thought there might be hot water in some spots possible because there are hot spots in lots of places on this planet where hot springs actually flow at the surface. So hot water some distance down could be a possibility depending on the geology of the area.

          When it comes to engineering I am acquainted with most of the bare bones physics and principles involved and can generally make good sense of a well reasoned and clearly articulated argument coming from an engineer if he is careful to avoid to much jargon and use as much ordinary English as possible.

          Now as it happens I have a profession of my own and as a consequence I understand that things are seldom so simple as they may appear to be to a layman who has read a few books or articles about a given profession.

          The average ” sustainability ” advocate who talks about getting away from industrial farming frustrates me as much as amateurs must frustrate you when they say you don’t understand renewables.

          The typical sustainability advocate you run into on the internet hasn’t got the faintest clue when it comes to the difficulties involved with so called sustainable farming even if they happen to hold a doctorate in a related field.

          Truly sustainable farming might be within the realm of the possible if we were to totally reorganize society around the food and fiber industry but not otherwise.

          The gap between the ” here and now ” and the envisioned promised land makes the Grand Canyon look small enough to jump across it.

          It is perfectly obvious to me that you do understand renewables quite well and that you understand the issue and difficulties of PAYING for them in REAL TIME a lot better than most people.

          I myself know a hell of a lot about anatomy and physiology having gotten the core courses in biology as an ag major and having gone back to school for a career change (aborted) hoping to become a registered nurse so as to look after family members who would otherwise have to be put in a nursing home.

          SO- when I visit my physician and get into a discussion of complicated issues he just sits back and laughs and says one of his biggest problems is that patients read up on their problems and come in determined to explain the problem TO HIM instead of LISTENING.

          And in my case both my physician and my lawyer laugh and tell me that although I know a hell of a lot more than most of their clients I know ” just enough to be dangerous” meaning to myself.

          There might be a whole lot we don’t know about the Siberian craters and the Russian’s themselves as you have pointed out may not tell the whole story even if they have all the answers already.

          Skepticism is ALWAYS good because while the simplest explanation of a puzzle IS often the best one this is by no means a hard and fast rule.

          True believers always believe in skepticism when somebody proposes possible alternate beliefs or explanations.

          But if you question their beliefs you can expect to be labeled a mouth piece of some enemy faction, or a heretic, or a liar.

          I have been messing around in many various lines of work and business for over half a century being the sort of person who never wanted a ” career”.

          People like me have a few rules of thumb that we follow religiously that generally keep us alive and out of bankruptcy court and even out of jail.

          ONE of them is that you ” Never mess with a man in his own line of work.”

          I don’t trade cars with a professional car salesman. I don’t shoot pool with Minnesota Fats. I don’t play high stakes poker with people I don’t know. They might be professionals. I am a world class jack of all trades but a true MASTER of not a single one.

          However much you may know about the stability of methane hydrates the answer to a question regarding your expertise can probably be put this way –

          A hundred times as much as you do unless perhaps you work in the field of petroleum engineering or you are research chemist.

          Now it occurs to me that a working oil man might not have much occasion to make use of WHT’s modeling of oil supplies and decline rates etc – because oil guys have probably put just about everything they could think of from dynamite to pixie dust down wells already in every conceivable combination hoping to discover a few new tricks.

          BUT IF I were a top level manager at a company manufacturing BATTERIES for instance I would try to get somebody to talk to WHT and maybe hire him on as a consultant or even a regular employee. Guys in factories can mix and match and manipulate materials literally tens of millions of ways.

          A very deep knowledge of diffusional processes might turn out to be the key to the kingdom.

          • Futilitist says:

            Hi Old farmer mac.

            “Now as it happens I have a profession of my own and as a consequence I understand that things are seldom so simple as they may appear to be to a layman who has read a few books or articles about a given profession.”

            An attempt to render everything as too complex for a layman to understand.

            “There might be a whole lot we don’t know about the Siberian craters and the Russian’s themselves as you have pointed out may not tell the whole story even if they have all the answers already.”

            An attempt to create doubt where none really exists.

            “Skepticism is ALWAYS good because while the simplest explanation of a puzzle IS often the best one this is by no means a hard and fast rule.”

            An attempt to make denial sound like ‘reasonable’ skepticism.

            True believers always believe in skepticism when somebody proposes possible alternate beliefs or explanations.

            But if you question their beliefs you can expect to be labeled a mouth piece of some enemy faction, or a heretic, or a liar.”

            Playing the victim.

            “It is perfectly obvious to me that you do understand renewables quite well and that you understand the issue and difficulties of PAYING for them in REAL TIME a lot better than most people.”

            Endorsing Fernando’s expertise is just an argument from authority.

            “I don’t trade cars with a professional car salesman. I don’t shoot pool with Minnesota Fats. I don’t play high stakes poker with people I don’t know. They might be professionals. I am a world class jack of all trades but a true MASTER of not a single one.

            However much you may know about the stability of methane hydrates the answer to a question regarding your expertise can probably be put this way –

            A hundred times as much as you do unless perhaps you work in the field of petroleum engineering or you are research chemist.”

            A confusing attempt to rationalize the argument from authority.

            These are all common tactics of denial. These types of patterns are very obvious to anyone who is paying attention. It is anti-science rhetoric.

  9. shallow sand says:

    Thank you very much for all the work you do in providing this information.

    I have read that, including wells already drilled, there are approximately 48,000 well locations in the Williston Basin for Middle Bakken and Three Forks formations. I assume this means quite a bit of down spacing. Are you able to tell from the data the affects of down spacing on well productivity?

    Also, when I skim through the public well data, it appears that EOG’s wells in the Parshall field produce 2-3 times the other wells. If those wells are removed, is there a substantial difference in the overall numbers? I wonder if those wells skew the overall data to the high side? It appears EOG plans only 25 wells in ND in 2015, which seems like small number. Is it known how many locations they have left to drill in Parshall?

    I agree with the gwalke. I don’t see how CLR will achieve what they claim they will in the Williston Basin in 2015.

    Again, I thank you for the informative posts!

    • shallow sand says:

      Also note todays active rig count on ND state website is 121, with 7 on active list to stack (or to yard-same thing) so will be down to 114.

      • toolpush says:

        The two Denbury rigs are gone of the top of the list, the count is down to 119, with 4 to stack /yard.
        And it is only early in the morning.
        I wonder what BakerHughes will be reporting, as they are always lower than the ND gov numbers?

        • toolpush says:

          I see the 2014 spudded wells have dropped to 6. Last week it was double figures, but also we had quick drop in rig numbers a few days ago. Looks like a bit of housekeeping to me?
          EOG, the so called wonder driller, has 5 rigs drilling, and three of those are dated 2014. I believe our ex-Enron company still has a few old Enron employees, or just operating from the Enron code of reporting practices?
          It will be interesting to see if the ND gov numbers are closer to the Baker Hughes this week. We will know in a few hours.

  10. Storage reported today, for Friday February 20, was up another 8.427 million barrels to 434.071 million barrels.

    • Watcher says:

      Is there any difference between storage above ground and storage in the fields? Why would this be so?

      • Watcher says:

        In fact, we might be able to make a case for no particular difference in access rate.

        • Watcher says:

          Hmm. Given global production of 85ish million bpd, access to field storage is faster than, for example, Strat Petroleum Reserve access, which has a maximum flow of 4ish million bpd.

          • Given global production of 85ish million bpd,

            Your “ish” is a little off. According to the EIA, C+C production in October was 78,967,000 barrels per day. Bottled gas is not stored in the same tanks as crude oil. That requires pressurized containers.

            The vast majority of world field production does not use field tanks at all. The oil goes directly from well to pipeline. Field storage tanks are used where it is not economical to lay a pipeline from the well to the main pipeline or the tank farm.

            • Watcher says:

              Which is not the point. Storage of produced oil vs unproduced oil doesn’t really have any difference in the magical supply / demand imaginings when you can access the unproduced oil faster than the produced oil in storage.

            • Ron, it depends on the site. We typically lay a gathering network, the network takes fluids to a plant. The plant usually has oil tanks used to feed the pipeline pumps. We also keep at least one “bad oil” tank we use to divert production if water cut is above the sales limit.

              In quite a few places it’s common practice to build at least three days’ worth of storage, but I have seen field plants with seven days.

              We also build lined pits we can use for emergencies ( say if bad guys blow a pipeline or if a tanker buoy gets run over and damaged).

              Because many fields are now below peak production I’ve found we usually have a lot of storage and we don’t use it. This causes a headache because those tanks do have to be painted and maintained, or they have to be taken apart and the site restored.

              I think the usa is a bit different because things are repaired faster and the oil eventually does move by pipeline to a refinery. Because the oil surplus seems to be light crude and condensate in the USA I suspect they are indeed filling every tank they can. I also wonder if refineries aren’t playing games with light molecules so they can be labeled “refined products”.

      • There would be no difference but I think the government is the only one that uses underground salt mine storage for the SPR. All storage around Cushing is all tank farms. Storage in tanks in the field, I don’t believe, is counted in the weekly storage numbers. That’s oil that is awaiting delivery and is not counted as production until it is moved from the field, either to the pipeline or the rail head and is not counted as storage until it reaches the tank farm.

        • learner2 says:

          Per EIA, as best as I can tell, the US has total capacity of 525MB, excluding SPR which is already 95% full. At current 434MB, that leaves about 11 weeks of storage at about 8MB/week of inventory additions.

          That doesn’t make much sense to me. Why would anyone in the US be importing anything, when the storage is going used up? Also, if production continues going up, are we getting set up for another leg down in WTI prices?

          • The USA is producing too much light crude, not enough medium grade. The Obama regime seems interested in choking production down by refusing to allow the light crude exports. This may be a rather subtle way to have the USA bend over and in a sense cooperate with the Saudis. If the tanks fill then usa producers shut in, and we should see two markets emerge, one internal usa and the other international. I’m just speculating but it’s possible these guys want to control prices using a coarse throttle: choking light crude production within the USA?

    • clueless says:

      As you noted above, apparently most of the US readily available storage is full. With respect to the US only, I believe that we have been importing about 7 million barrels/day for the last 120 days and adding 1 million/bbl/day to storage. So, we can [and obviously will] cut to 6 million/bbl/day if our storage is full. If that causes Brent prices to fall further, I just cannot help but think that China, Japan, India, Indonesia etc. will start building storage like crazy. We might again start adding to our strategic reserve which I know is not full. Maybe someone here knows how much more it can hold without a further capital expense.

      • Old farmer mac says:

        I have commented before that – to the best of my knowledge- China has a simply enormous stockpile of salvaged steel ready for reprocessing – and we all know enough about Chinese heavy industry to know they now dominate in steel and cement and have labor costs about as low as any country in the world capable of doing things on the grand scale.

        They have been getting rid of their dollars for years buying as much scrap steel as they could .. knowing ( in my opinion ) that steel is one of the very most energy intensive essential commodities and that it has and almost for sure will go up in price far faster than interest payments will accrue on dollars held as debt.

        And nobody can default on a hundred million tons of scrap steel ready for the mill once it is inside Chinese borders.

        I don’t know but I bet they are building and stocking storage at a pretty fast pace. Environmental impact statements and labor unions and other such considerations aren’t apt to slow the Chinese up much.

        I would not be too surprised to see some engineer who knows about such things post a comment to the effect that a really big oil tank can be paid for in just ONE year if it is filled at fifty today and the oil sold at eighty or ninety a year from today.

        The capacity goes up proportional to the square of the radius while the cost is not much more than proportional to the circumference of the tank. It might be even less than proportional due to economies of scale in labor engineering etc.

        The bigger the tank the cheaper the per barrel cost by a mile.

    • AlexS says:

      Some clarification about total potential storage capacity in the U.S.:

      “Here’s Why Rising U.S. Oil Supplies Aren’t Overflowing Tank Tops

      http://www.bloomberg.com/news/articles/2015-02-25/here-s-why-rising-u-s-oil-supplies-aren-t-overflowing-tank-tops

      (Bloomberg) — It looks like there’s more space to store crude oil in the U.S. than previously thought.
      The Energy Information Administration pegged crude storage capacity at refineries and tank farms in the U.S. at 521 million barrels at the end of September. With inventories rising 8.4 million barrels last week to a record 434 million, it may appear at first glance like supplies from the shale boom are on a collision course with tank tops.
      Not so, says the EIA. The weekly storage numbers include a few sources that aren’t included in the capacity report, such as crude in pipelines and at well sites, that can add up to more than 100 million barrels.
      “We still have a way to go before we can consider ourselves to be full,” Rob Merriam, the EIA’s manager of petroleum supply statistics in Washington, said by phone. “Once you correct for line-fill and lease tanks, we’re pushing about 60 percent capacity utilization.”

  11. Do these spreadsheets have the cumulative oil production versus time?

    • Dennis Coyne says:

      Hi Fernando,

      The most recent detailed analysis that I did on this data was from Oct 2014, chart below for cumulative average well by year for first 18 months.

      • i see 2013 and 2014 are performing better. I assume they are drilling longer horizontals, use more stages?

        • Dennis Coyne says:

          Lateral length is same maybe more stages.

          • coffeeguyzz says:

            Many incremental improvements have, and continue to have, taken place. Some, far from all, include much more precise placement of the wellbore throughout the 8/10k foot long lateral, much of which may pass through payzones as narrow as ten feet thick. The placement of the perforations/sleeves is targeted to the most promising areas. The fracturing is continuously improving by moderating the pressure and volume of the fluid so as to keep the fissures more completely within zone and yet maximize the connectivity to the formation.
            Using various types and sizes of proppant, the most distant fractures may be propped with slickwater-conveyed “small” (200/100 mesh?) proppant while crosslinked conveyed larger proppant is being used for a final ‘rubbilization’ near the wellbore. (One of the company’s suits described this as ‘tailing in’ the end of each stage’s frac.
            If the coil tube conveyed tools that are being adopted by more companies becomes the de facto industry norm, extremely fast, productive frac’ing – as well as re-frac’ing – may well prompt a dramatic revision in projected output.

            • toolpush says:

              Coffee,

              I am not what you call totally up to speed on all of the latest fracing procedures, but I would have thought coil tubing would be an ideal system to use for fracing, and surprised that it hasn’t been used earlier and more widely that it has. It just seems to be a natural fit for the process. So I would expect using Coil would grow quite quickly. Please correct me if I wrong, but I suspect the coil needs to quite large and large coil units may not be easy to come by? I am sure that would fixed in time.

              • coffeeguyzz says:

                Hey, Push. I’ve not had spare time to do much reading on this stuff lately, but the NCS Multistage site has some of the specs on their operation. I do recall that the Bottom Hole Assembly Tool originated with Coal Bed Methane recovery about 8/10 years ago. One of the company’s engineers realized the tool could be modified for multistage fracturing in horizontal oil/gas wells. This was shortly after EOG’s engineers introduced fracturing in stages, whereas before it was the whole enchilada in one go.
                I first heard about it (along, apparently, with many others), at Whiting’s conference call last May, 2014. At that time, they described the results of a four well test on one pad …one of which was drilled a year earlier and was used as a baseline. Long story short, the CT conveyed BHAT had significantly higher (33%?) output and the 60 stages were done quickly.
                The 104 stage done for Whiting this fall (60 day IP 110k – say again – 60 day IP 110 thousand barrels), had about 95 or so stages frac’d with the BHAT, the farthest towards the toe done with NCS’ sleeves due, I think, to the distance.
                I need to read up on this more as the huge increase in output may overshadow the time savings/efficiency aspects. NCS sez they did 80 stages in one trip, push. One frigging trip. Doing 40 stages in a day now seems somewhat routine.
                Of the many ramifications of this process, stages can be spaced as close as 60 to 100 feet, thereby focusing all the fracturing in a single, small area, nearly eliminating the current 30% unproductive entry points.
                This is a big time step change that is still in the early stages of being implemented.
                As you may appreciate, the companies are keeping a lot of this data close to the vest cuz, just like a good fishing hole, no need to invite your in-laws to the fun.

                • toolpush says:

                  Coffee,

                  Yeah, using coil solves quite a few operational issues. one you don’t have to break any connections and there the contents can be out of balance, or under pressure, how ever you want to think about it. There are no tool joints that have to be avoided through the bop therefore the whole formation would be available for fracing.
                  As for fracing a heap of stages in on run by coil. I can;t see why more than one run would be required as valve and packers would all be functioned mere pressure changes on the annulus or coil tube pressure. But I imagine they must use quite large coils, around 2 1/2″ at a guess.
                  I know I am lazy, but I would be interested in any useful links you may have.

                  • coffeeguyzz says:

                    Push, talk about a timely exchange! Yesterday, at its conference call, Whiting just announced it was NOT delaying frac’ing of any of its wells in 2015 – the ONLY operator yet, AFAIK, to proceed thusly, and a big reason is the cost has come down dramatically along with much higher output. I started to listen to the 60 minute webcast but fell asleep. At the 37:30 minute mark, though, the CEO stated the uniform, thorough placement of proppant along with high stimulation near the wellbore is giving very high returns PLUS allowing high density down spacing (6+6 wells in Bak/TF).
                    I will do some more detailed checking on the specs, but awhile back I think I read the length of the CT was a limiting factor, (2 1/2″ was used) but plans were afoot to overcome that. Will let you know when I find out.
                    Whiting’s actions are a big, BIG validation of CT as well as a sign of future operational direction industry-wide.

                  • Dennis Coyne says:

                    Hi Coffeguyz,

                    How much did that well cost with 100 frac stages? At some point you reach diminishing returns where the extra cost is not worth the extra oil gained. No doubt this was experimental, but from a financial perspective, the extra frack stages are not free and at some point there will be an optimal configuration established which will not change much over time. Any oil man will tell you that eventually the sweet spots will run out of room for further drilling and output from the field will peak and then decline. We don’t know when this will be, the pessimists think it will be soon, the optimists think it will be far in the future because of technological progress. I think the increase in new well EUR will stop by the end of 2015 at the latest and before long he average new well EUR will begin to decrease at some unknown rate (my guess is it will eventually be about 10 to 15% per year) which will depend in part on how many wells per year are drilled. More wells means a higher rate of decrease if we assume the amount of oil that can be recovered is not unlimited.

                  • coffeeguyzz says:

                    Dennis, little time now to respond, but the OPPOSITE cost-wise appears to be the case as increased speed, relatively reduced amounts of water/proppant, etc seem to come into play.
                    I will listen/read yesterday’s transcript later, but I think the CEO said the cost for a Bak well may approach the 6/6 1/2 million per range.

                  • Dennis Coyne says:

                    Hi Coffeeguyz,

                    CLR had costs rising due to increased frac stages and more proppant by about $2 million per well, if it were less expensive and resulted in greater output, then all wells would be fracked with 100 stages or maybe even 200 stages, or 1000 stages.

                    In fact if more stages resulted in lower well costs, the number of stages would be infinite, so clearly lower well costs with more stages does not make sense.

                    Perhaps you meant the cost per stage is less, but that was not the question.

                    Let’s say the standard Bakken/Three Forks well has a 10,000 foot lateral and 40 stages (one every 250 feet if evenly spaced). Now someone tries 80 frack stages with the same lateral length (a stage every 125 feet), clearly this second well will be more expensive, though not by a factor of 2 for the fracking (if costs per stage are lower). My point is the well cost will go up from maybe $7.5 million to $10 million.
                    If the npv of the incremental oil output is more than $2.5 million then such an investment makes sense, if not a rational company will not do it.

                    Wells with 100 frack stages will not cost $6.5 million any time soon, they were talking about the standard well design with 35 to 40 frack stages possibly reaching $6.5 million and that may be because of all the slack rig demand.

                  • coffeeguyzz says:

                    Dennis, I don’t know if you will see this response (I just saw your post a few minutes ago, sorry).
                    But all the points you raise are both accurate and valid. HOWEVER, the differences in frac’ing processes is so profound, a step change in a big way, that an understanding of what Whiting (and others are now doing as well) is crucial to ‘get’ how Continental’s methods are already obsolete.
                    I will try and catch up with you on the current post.

  12. Political Economist says:

    Dennis, this is in response to your follow up under Ron’s previous post.

    The California solar capacity data are from the California govenrment (website given). They did not give generation/consumption data.

    http://californiasolarstatistics.ca.gov/

    The US total capacity and solar electricity consumption data are both from BP Statistical Review of World Energy.

    In any case, I am surprised that as of 3rd Quarter 2014, solar is still costing 5 dollars per watt in California. Maybe you want to take a look at the website yourself and let me know what you think.

    • Dennis Coyne says:

      Hi PE,

      The data from the website is not very clear, but a NREL report in 2014 suggested 2013 reported costs at $5/W installed including financing costs for residential solar, for large utility projects it is under $3/W (all costs including WACC) in 2013 $. From slide 5 link below. There are big variations in installed cost from state to state, California tends to have higher costs than Texas for example (cost is $5/W in California and $3.50/W in Texas for residential systems less than 10 kW).

      http://www.nrel.gov/docs/fy14osti/62558.pdf

      • Political Economist says:

        Yes, large-scale solar project is about $3/watt

      • Political Economist says:

        Below is the world average observed capacity utilization rates for non-hydro renewables. I posted this and several other graphs about world electricity a few weeks ago. Here I am posting it again for reference. This is EIA data.

        In 2012, the observed world average capacity utilization rate for solar power was 12 percent.

    • ezrydermike says:

      PE the numbers you found are surprising me also…

      I did find this article from PV Magazine…

      “Tracking the Sun VII finds that median installed prices in the United States fell 12-15% from 2012 to 2013 to US$4.70 per watt for systems under 10 kW, $4.30 per watt for the 10-100 kW, and $3.90 for the 100 kW – 5 MW range.

      Prices for PV plants above 5 MW completed in 2013 remained steady at $3.00 per watt. There was little variation in pricing for larger projects, and projects using thin-film technologies were slightly less expensive at $2.70 per watt.

      This is the fourth year of sharp declines for the residential and commercial sectors, and prices for systems under 5 MW fell another 5-12% in key markets during the first half of 2014. This is despite a flattening of module prices since 2012, which indicates a reduction in balance of system costs, but could also be impacted by delays in module cost reductions to the end-consumer.

      Despite these impressive declines, the United States still has the highest prices among major PV markets where data is available for residential and commercial solar. U.S. installed PV prices are more than double German prices for systems under 100 kW, but also much higher than prices in the UK, Italy and France.”

      http://www.pv-magazine.com/news/details/beitrag/us-installed-solar-pv-costs-continue-to-fall_100016490/#axzz3Sn98meRT

      Here is the pdf of the Berkeley report. Lots of info in this.
      “Tracking the Sun VII
      An Historical Summary of the Installed Price of Photovoltaics in the United States from
      1998 to 2013

      http://emp.lbl.gov/sites/all/files/lbnl-6858e.pdf

    • John B says:

      $5/watt installed.

      5 watt hours / day average in California x 365 = 1.825 kwh/yr

      1.825 kwh/yr x 25 year guarantee = 45.625 kwh over the life of the panels

      $5 divided by 45.625 kwh = $.109 /kwh

      But like I posted on the other thread, panels have been lasting much longer than 25 years. Early Kyocera panels are still working after 60 years.

      • Political Economist says:

        I think the actual capacity utilization rate is more like 10%, so the annual output is around 876 watt-hours (at least that’s the US average).

        5 dollars is just the capital cost. You implicitly assumed a depreciation rate of 4 percent. If interest rate is 4 percent (the mortgage rate), then interest and depreciatio is about 8 percent. Add in maintanence/cleaning/storage etc, say, 2%. Annual fixed cost would be 10% of 50 cents.

        $0.5 / 0.876 kwh = $0.57 / kwh

        • wimbi says:

          In the real world, the only thing that matters is the potential purchaser’s own decision as to whether solar is a better choice- ALL things considered- than alternatives.

          Around here, the numerous installers are too busy, even in the recent unusual cold, to satisfy the demands of those who have decided to buy solar.

          From that, I conclude that whatever the calculated $/watt, it’s good enough.

          I am certainly happy with that buy decision I made a couple of years ago.

        • Dennis Coyne says:

          Hi Political economist,

          The $5/W for residential includes all costs depreciation, financing, etc. so you are double counting. And I believe your 10% estimate is incorrect is that based on BP data ( that data is incomplete)? A better estimate for newly installed PV solar is 13% capacity utilization at minimum. Though this is variable because it depends on where the panel is installed, solar panels in Seattle or other places where average annual insolation is low will reduce the capacity utilization. For a grid tied system storage is not needed, natural gas spinning reserve can be used when the sun doesn’t shine, which can be predicted pretty well with weather forecasts.

          • Dennis Coyne says:

            In addition a widely dispersed interconnected wind and solar renewable power system can provide up to 90% of load hours with very little backup needed, natural gas can be used for now, eventually this will be replaced with a combination batteries, fuel cells, and vehicle to grid. Demand management and peak power pricing will also help.

        • Nick G says:

          Let’s say that one more time: solar capacity factors are enormously dependent on location, and world averages aren’t very useful. Germany, for instance, struggles to achieve 10%, but they’re a big portion of world statistics.

          California, Nevada and Arizona, on the other hand, can achieve 25% or very close, and they have an enormous amount of resource that could be exported to elsewhere in the US (if other states are willing to import it).

          A similar thing: Iowa is planning to build long-distance transmission to sell wind power to states to the East, like Illinois and the grid that includes the East Coast.

          • Old farmer mac says:

            Nick’s predictions are so uniformly sunny that I am ALMOST tempted to think he is working for the renewables opposite number of the Koch Brothers team.

            In reality I think he is telling it as he sees it with the caveat that he never strays off message indicating an excellent grasp of the rules of political advocacy and advertising.

            There is no rule that anybody has to admit the shortcomings of their arguments in a forum such as this one. There are always plenty of other people eager to take care of THAT detail.

            But even if he were on the Koch payroll it would not NECESSARILY mean his arguments are bogus.A lot of idiots tend to forget that everybody has a piece of the truth.

            The truth as I see it is that it is very hard to argue with his optimism except for the killer question of time scale. I fear that Old Man Business As Usual will keel over before most of his predictions come to full fruition..but I also believe that just about all of them are going to yield some decent fruit…just not soon enough in enough quantity to maintain the current business as usual world.

            Having said this much I cannot over emphasize how important it is that he is DEAD on about a number of things regarding renewables – one of the most important being that pv properly sited and installed in places with an optimum climate can get close to twenty five percent capacity factor.

            (Everybody has a piece of the truth.This observation should be written in stone in just about everybody’s mind to keep them from wandering too far out into la lad land.The Koch brothers and their ilk are of course lying their asses off about climate and pollution BUT not EVERYTHING they have to say is a LIE.

            Getting away from business as usual IS going to be very painful.It IS going to cost a lot of people their jobs and lower the living standards of a lot more people in the short run and medium run too probably.

            Current environmental regs not yet implemented but on the books are going to take twenty percent of my farm without compensating me a dime -the very BEST twenty percent leaving me to pay taxes on it and unable to split it off and sell it and even if I could nobody would buy it as it will be worthless except as a place to hunt rabbits.The entire countryside around about is open to rabbit hunting in these parts. This is in my own eyes at least sort of unfair to me LOL but when I bought this last tract of land I already knew these regs were in the works and might eventually be enforced.

            More than likely I will be able to do to suit myself for another ten years or longer and by then I will be in a wheel chair if I am still around and doing nothing except the equivalent of preaching on a street corner by means of a keyboard- assuming I can remember my name etc.

            The failure of people who are environmentalists- and in spite of certain idiots who accuse me of being an undercover guy for the bau crowd -I AM an environmentalist-to be HONEST about the costs of fixing things can backfire. A lack of honesty about OCare and the Keystone had a hell of a lot to do with the business as usual crowd taking over both houses of congress and the middle of the road and right wing voter has NOT YET cooled off about it. Lingering anger over these two issues may put the repugs in control of the White House as well.

            I am going to get even on my bottom land by getting another few years of welfare checks- social security – and a couple of new knees or something out of the same state that is taking that chunk of my bottom land without paying me for it so in the end I don’t really have much to bitch about. LOL two working knees are worth more than the whole place. )

            The solar naysayers tend to overlook just how well solar CAN WORK and DOES WORK already when it is properly sited in a place with an optimum climate. I see comments all over the net to the effect that Germany’s investment in solar is a boondoggle of the worst sort because the German’s get only ten percent or so given their climate. I don’t agree. They are buying less imported fuel and will be buying less imported fuel more or less forever as the result of their solar investment and the national security implications alone for a nation in Germany’s situation may well be enough to justify the investment and there is the unquestioned fact that they may still win out over the cheap Asian producers and maintain a big chunk of their economy long term by exporting solar goods and technologies.

            Suppose we were to have a German level of dedication to renewables here in the US and we had a hard nosed engineer like Fernando to pass judgement on the siting of the solar farms?

            I cannot speak FOR him but if I were an engineer and given authority to site the farms then they would FOR NOW go almost exclusively in the very sunny southwest given that is where they would actually WORK WELL.

            Do we hear anybody bitching about the space program being almost all of it located down south?Absolutely not because it WORKS BETTER down south given the physical realities of a rotating earth helping get rockets and satellites into orbit. Nobody to my knowledge in Texas objected to big hydro projects being built by the TVA in my neck of the woods given that there are no rivers of any consequence in TEXAS ..

            The issue of federal subsidies would have to be settled or at least SHOULD be settled in a way that would be fair to taxpayers in other states-which could be a problem without an easy solution.

            But I am sure somebody could come up with a solution that is at least workable.

            The economics of solar doing twenty percent are VASTLY different from solar doing only ten percent when it comes to the cost and benefit issue.

            AND about those long distance transmission lines-I often point out that the modern battery industry is barely out of diapers – still wearing short pants is the usual term- and that battery prices are going to come WAY down within the next few years. I have not read anything specific about the benefits of lowering the costs of hvdc power lines as the result of scaling up the production of the special equipment needed at each end but the cost of electricity delivered long distance is probably going to be cheaper in the long run than long distance rail transport of coal . A power line once built actually requires very little maintenance for many years . The cost of hauling coal from Wyoming to Atlanta was four or five times the actual mine gate cost of the coal the last time I checked.

            Can anybody who is not afraid to take a realistic look at the possibilities involved ever honestly conclude that Iowa wind is not going to out compete Wyoming coal in terms of supplying affordable electricity in the eastern part of the country?

            Personally I believe it is a cinch that wind will be cheaper within the next ten years or so at the outside – assuming the nimby’s don’t succeed in blocking the construction of the needed power lines.

            They will not succeed in the long run. SOME lines will get built and the lower cost of juice in the places they terminate will eventually be SO OBVIOUS to enough people that the nimby crowd will be shoved aside at the polls.

            Barring an economic collapse within the next couple of decades which hopefully is long enough for it to happen – wind farms are going to sprout like mushrooms in a cow pasture after a spring rain along with lots of new transmission lines.

            All these new wind farms -and solar farms as well- will not STOP the depletion of fossil fuels but they sure will go a long way towards slowing it down.

            The same idiots who say we can’t afford to spend the money to just SLOW DOWN fossil fuel depletion are invariably willing to spend a million bucks of tax money and their own last dime to live just another year -or another week!!!

            The most often overlooked point in the debate about renewables versus fossil fuels is the timeline involved and the implications of the time line.

            Every year we get a little better at efficiency and we are probably every year on the individual level getting a little better at conservation as well. The worst old houses finally rot down. The worst old cars are finally scrapped or at least relegated to a pleasure drive on a sunny afternoon.

            Mandating the adoption of led lights could cut the total demand of electricity TEN PERCENT according to some authorities in Japan. Just one simple step – affordable as hell LED’s , actually a world class bargain for the consumer- will get us ten percent of the way in terms of electricity.

            When time of day pricing arrives on the grand scale -and I believe it will but cannot predict yet WHEN- we will learn how to shift loads just like we have learned how to deal with traffic jams by modifying our driving habits. It will just happen all by itself when the price signal is there and large enough.

            A damned WASHING MACHINE- a cheap one – for chris sake cost a thousand bucks these days. Adding the one more little command into the on board computer to run when the signal for cheap juice arrives isn’t going to cost anymore than a few hours of programmers time.The signal will come thru a signal piggybacked onto the grid ac supply or if not thru a wireless signal of some sort. An internet connection may be eventually MANDATED just like water and sewer connection is MANDATED in order to get an occupancy permit.

            The four percent of our yankee supply of electricity we are ALREADY getting from wind will not only grow every year – it will have an enormous positive cumulative effect in SLOWING DOWN the inevitable long term rise in the price of coal and gas.

            It is something of a paradox but the longer business as usual lasts the better the chances that business as usual will cure it’s own ills. Taking advantage of new technology is part and parcel of business as usual. Everybody I know is now buying compact fluorescent lights although a few years ago hardly anybody would except early adapters. In three or four more years just about everybody will be buying LED’s.

            LESS that more years of business as usual will in my opinion see electric cars selling faster than batteries for them can be manufactured. The naysayers forget how many tens of millions of people will be able to hang onto their conventional car for the occasional longer trip or tough day all day running errands at random. A Leaf is sufficient to the EVERYDAY needs of just about everybody NOW.

            Tens of millions of people can afford TWO or THREE cars right now. When the price of gas spikes and you have to either pay five bucks or slide your ration card to fill up then an old raggedy assed LEAF will sell like a classic Camaro and get run thru the paint shop in a flash.

            A new one will mean waiting six months for delivery with no discount and maybe no subsidy as well.

            Business as usual is a term which has been abused to the point it is like the words fascist , liberal and conservative. They have all been used to paint the opposition up like the devil until they have lost all useful meaning. I am guilty myself in this respect. LOL

            • Ilambiquated says:

              Renewables are like fracking because they use advanced technology to exploit energy sources that used to be considered too marginal to worry about. The difference is the price of renewables is falling much faster, and depletion is not an issue.

              I flew in from the US to Germany this morning and as I was driving out of the underground parking garage I was struck how dark and rainy it was — I knew I was back in Germany. I’m sure the fact that Germany has the world’s largest solar installation skews the capacity factor a lot.

              The stated goal of Germany’s solar policy is to bring down the price of solar, not to provide cheap energy. This goal is succeeding very well. whether that solve the world’s energy problems is an interesting question, but there is no doubt is is going to make the electricity business much more complicated.

            • Futilitist says:

              Old farmer mac,

              “Business as usual is a term which has been abused to the point it is like the words fascist…”
              ~Old farmer mac

              I did not choose the term ‘Fascist’ casually.

              From the wiki:

              “Fascism (/fæʃɪzəm/) is a form of radical authoritarian nationalism…combining more typically right-wing positions with elements of left-wing politics…

              …(Fascists) regard total mobilization of society led by a totalitarian single-party state as necessary for a nation to be prepared for armed conflict and to respond effectively to economic difficulties…

              …such a totalitarian state is led by a strong leader as a dictator and a martial government composed of the members of the governing fascist party to forge national unity and maintain a stable and orderly society.”

              “Suppose we were to have a German level of dedication to renewables here in the US and we had a hard nosed engineer like Fernando to pass judgement on the siting of the solar farms?”
              ~Old farmer mac

              “Fascism rejects assertions of violence automatically being negative in nature and views political violence, war, and imperialism as means that can achieve national rejuvenation.”

              Old farmer mac, I will now research all of your posts to find more indications of your underlying Fascism.

              • Old farmer mac says:

                Suit yourself. Your are still a fucking idiot and I will not bother to DEBATE you.

                Argueing with people like you is a total waste of time.

                But I am not busy and will gladly explain my positions to people who do not attack me personally and call me a liar.

                This reply from here on down is for the remainder of the readership.

                First off I wish to apologize for offending anybody who has a problem with harsh language but I REALLY am a Scots Irish southern mountain hillbilly by ancestry birth upbringing and culture. We are either FAMOUS – if you like us- or INFAMOUS if you don’t – for being short fused and violent.

                I am however too old to get violent these days unless somebody brings problems directly to my door. I hardly ever get off the place anymore. Too old too decrepit.

                And too street smart to do or say anything that could be interpreted in court as a threat to anybody. I am merely explaining who and what I am and why I am offended enough to cuss a little.

                Back when I was a kid there were as many shootings and stabbings and fights around here on a per capita basis as any in any ghetto city in the country these days.

                We redneck mountaineers tend to take such remarks as futilista is making about me personally. Can ya tell? ? LOL

                If he pleases then Ron can ban me. He would be well within his rights as the owner of this blog. Being a right winger sort in SOME RESPECTS I believe in property rights and would not hold it against him at all.

                Pretty soon I will be talking about Nazi Germany- as I have quite often in the past- for a couple of very good reasons – one of them being that I spent a couple of years almost every evening trying to understand how and why Germany fell into the Nazi sinkhole. That involved reading a couple of dozen rather thick history books about Germany starting back when the country didn’t even have a central government. Lots of other books as well.

                Then I got interested in doom and gloom and for a while I was a devout member of the Church of Doom myself.

                After that I got to wondering if maybe things were not as bad as all that and started looking at the other side of the question.

                Then a light went on and I realized that probably the best real world laboratory that has ever existed in respect to the power of LEVIATHAN was Nazi Germany, at least for sure the best among well documented cases.

                So I went back and rather than focusing on the ROOTS of Nazi power I focused on the mechanisms of their power, the techniques they used to build a war machine that had the cards fallen only a little differently could have whipped the Russians the Limeys and the Yankees silmantaneously.

                Since that study I flatter myself that perhaps I have some real insight into the nature of LEVIATHAN when full aroused.

                Somebody once said the difference between traditional modern and post modern philosophy can be explained this way as a baseball metaphor.

                A traditional umpire calls balls and strike AS THEY ARE.

                A modern day umpire calls them AS HE SEES THEM.

                A post modern umpire sez they don’t even EXIST until he calls them.

                Like ’em or lump’ em the Nazis accomplished some utterly amazing things which I will not take time to recount here.

                I may not call the balls and strikes as they actually exist but I do call them as I see them and my goal is to know the ultimate answers to all the riddles to the extent that such answers exist and can be known.

                So I will never knuckle under to left liberal pc bullshit— or right wing bullshit.

                The fact that the Nazis did some things that were basically considered impossible by most economic and political experts of the era is highly relevant to the doom versus survival debate and I will mention them as I please.

                We have all sorts of economist and monetary theorists and banking experts telling us all about what and how the economy is totally tied up and siamezed to the current banking status quo and that without it we die.

                But the Nazis didn’t die did they? The big fellas there , the bankers and the industrialists thought they could use the Nazis. The Nazis used THEM might be a better way of describing what actually happened.

                Now I am pretty sure futilista will label me a Nazi the next time he /she / it happens to feel like it. I will continue to respond to such personal attacks the same way.

                People who read my comments at the old TOD site and who have really good memories will know that I first mentioned having a Jewish wife years and years ago. I first mentioned being a card carrying long haired liberal back in the dark ages as well–years ago. .

                So I guess this means that the Nazi underground planted me as a sleeper back when I was still and undergrad at the latest. IF futilista could put his paws on me I bet he could make me speak perfect German in ten seconds with a pair of pliers yanking out some fingernails.LOL

                Knowing about Nazis makes me a Nazi and that having a Jewish wife makes me a hypocrite as well in the mind of such a cretin.

                Or maybe futilista will just decide I am a liar all the way around. That would be very kind of him / her /it.

                This sort of thing either amuses me or pisses me off depending on the mood I am in. Right now I am cabin crazy and pissed off.

                A VACATION would be very nice but I don’t have anybody I trust to look after my old Daddy who unfortunately is unable to look after himself and my nerves are like bango strings.

                Pretty soon there will be a nice warm spring day and I will get outside on the tractor a few hours and get to feeling more reasonable.

                Then I will just call futilista an idiot rather than a fucking idiot if he keeps it up. 😉

                • Don’t worry Mac, I would never ban you but I do think you are overreacting quite a bit. You should argue your point instead of name calling.

                  Like Futilitist, I happen to believe that collapse also. I happen to believe that collapse is inevitable. And I don’t believe there is anything the government can do to stop it.

                  • Dennis Coyne says:

                    Hi Ron,

                    You sometimes resort to name calling when you don’t agree with someone and get frustrated by their arguments.

                    I think OFM has been fairly restrained given the abuse thrown at him by Futilitist.

                    I guess you only see this when people disagree with you. From my perspective it is Futilitist who is way over the line.

                    Not quite sure how you would react to being called a fascist, which you are not, but I imagine the response would be less than polite. Is it the F word you object to, because I believe you have used it on occasion and the I word (five letters) you use a fair amount.

                    I agree these words should be avoided, I also think Futilitist pushes people in hopes of such a reaction.

                    I just try to ignore him.

                    I am not the one he is calling names (or to a lesser degree.)

                    He reminds me of Nony, just from the doomer side rather than a more Cornucopian perspective.

                  • Nathanael says:

                    Partial collapse is inevitable (but arguably desirable). Total collapse can be avoided… though whether we do or not is basically a matter of sheer luck.

                    At the moment the massive increase in solar deployments has nothing to do with deliberate policy choices and everything to do with capitalist economics. It’s an unstoppable juggernaut. The only question is whether it will move *fast* enough to counteract some of the global-warming-related disasters which are coming.

  13. Old farmer mac says:

    About the craters in Siberia:

    So far as I know nobody has yet discovered any record of other such craters but that would not be too surprising given how thinly Siberia is populated even today. And the oldest high resolution arail surveys are probably not very old either.

    Hawaii is a place that had a substantial number of people living there in well organized societies and yet ( again to the best of my knowledge ) there is no oral or written record of a very large tsunami that apparently occurred only about three hundred years ago – the evidence having only recently discovered.

    So – this may or may not be something relatively new.

    It is hard for me to imagine methane exploding at about the freezing temperature of water without substantial oxygen being present but it has been ages since I took a chemistry class and it occurs to me that methane may possibly dissociate under certain conditions although this seems VERY unlikely.

    If the pressure builds up high enough then the gas could blow the over burden out explosively in the same way an air gun works.

    How about one of you guys with an engineering reference book handy doing a back of the envelope calculation of how high the pressure would have to be to lift a couple of hundred feet of over burden?

    A very rough guess on my part is that the soil would not be more than four or five times as dense as water and it takes very very roughly fifteen pounds of air pressure ( measured as vacuum) to lift water ABOUT twenty five feet.

    So – if the crater bottom is one hundred fifty feet six times that or ninety pounds. Times four or five that to account for the density of the over burden. Maybe five hundred pounds psi would be in the ball park ?

    How much heat would it take to raise the pressure of trapped methane to 500 psi?

    Are there other molecules that might explosively disassociate commonly found in natural gas ?

    I know that an acetylene molecule is unstable and bottled acetylene has been known to explode without getting really hot or having any oxygen to support combustion.

    Could it come from a plume of hot water finding its way up from way down deep?

    • Watcher, all non-nuclear explosions require oxygen or so I have been told. So if it is methane explosion there must be a source of oxygen. Yet some minerals contain an abundance of oxygen, saltpeter for instance. If you have saltpeter in the presence of methane, then all you need is a spark or some other source of heat to have an explosion. Or so I would assume. But black powder is basically saltpeter, sulfur and charcoal. The sulfur and charcoal are the fuel and the saltpeter is the oxidizer.

      Now I am not a chemist, I am just surmising how an underground explosion could happen if you have a huge amount of methane present. And the presence of methane is the one thing I think they are sure of.

    • Jonathan Madden says:

      OFM,

      Pure Acetylene gas is explosive at a relatively low pressure and is sensitive to shock. For this reason it is sold commercially as a solution in Acetone, which stabilises it. Its reactivity rules its presence out in nature, even at low concentrations.

      Methane is very stable and will only decompose into Carbon and Hydrogen catalytically at high temperature. So how to get air to mix with it underground? The Upper Explosive Limit (UEL) for Methane/Air is about 28% at 10 Bar and 25C, implying the presence of a high proportion of Air if the sinkholes have an explosive origin, although the UEL Methane % rises gradually with pressure. This is a puzzle.

    • Doug Leighton says:

      Mac,

      I don’t know of course but there are millions of small roundish lakes scattered throughout the Arctic so depending on how long it takes to fill with water, a crater, whatever its origin, it would likely soon just become one of them. I’ve probably flown across Arctic terrain a hundred times staring at the seemingly endless pattern and often wondered how many were in fact meteorite scars, but why not methene explosion scars as well? Doubt we’ll ever have a clue.

      • ManBearPig, I apologize but I had to delete this post with the graphic. It was causing some problems for people viewing the comments section.

        Again, my apologies,

        Ron

        • MBP (ManBearPig) says:

          Not a problem Ron. As long as the blog works I’ll be good.

          But so I still have a response to Doug’s post, another alternative to impact or methane craters is kettle lakes. They are glacial geomorphologic features that are quite prevalent in Siberia as well as North America.

    • The average density of the shallow Yamal sediments is about 2.1 grams per cc. An explosion has to lift the overlying layer, which appears to be very thin (not as thick as you postulated), and also shear it. But the sheared zone is probably above the permafrost.

      I don’t see sufficient data in these articles. The authors don’t really know much about Arctic terrain, and the Russians aren’t showing all the information. Whatever you imagine, don’t forget that Yamal soul is a mix of permafrost and ice lenses, and the areas where these things appear are on or very near to giant gas fields.

    • sunnnv says:

      OFM – you may be onto something here.

      An explosion like over-pressurizing a ballon or gas cylinder.

      Density of frozen soil ~= 1.5 g/cm^3 (e.g. 1.5 x as dense as water).
      from:
      http://prod.sandia.gov/techlib/access-control.cgi/2002/020524.pdf

      Soil has lots of voids, so isn’t very dense like rock, and most rock is only 2 to 4 g/cm3.
      (lots of oxides in rocks).

      Depth = to bottom of crater 34 feet (10.5 meters), from:
      http://www.dailymail.co.uk/sciencetech/article-2831238/Descending-depths-Siberia-s-mystery-crater-Experts-explore-98ft-wide-hole-learn-origins.html

      Actually, an atmosphere of pressure is 14.7 pounds per square inch (101 kPa),
      or 33.8 feet of water.

      In addition, the tensile strength of frozen soils falls with increasing temperature:
      http://research.iarc.uaf.edu/NICOP/DVD/ICOP%202003%20Permafrost/Pdf/Chapter_181.pdf
      (see tables pg 1037)

      Furthermore, increasing pressure at constant temperature can cause a transition from Ice I
      to liquid, see fig. 12 phase diagram, page 19 of:
      http://research.iarc.uaf.edu/NICOP/DVD/ICOP%202003%20Permafrost/Pdf/Chapter_181.pdf

      Further, methane clathrates will decompose into gas and water when the temperature is raised, and/or the pressure is reduced.
      http://en.wikipedia.org/wiki/Methane_clathrate

      So, if we have methane leaking from below, building up in water ice as clathrate with some bubbles, the water ice warms (in springtime and/or from below) to weaken the soil and release more methane, which causes expansion, enough to blow the soil out of these structures. After it blows out, the cloud of methane might ignite due to sparks from bits of flint flying around or static electricity in the cold/dry climate.

      So, we only need a few atmospheres to blow things up from 34 feet deep.
      My take from the frozen soil strengths on page 1037 is that something around 3 – 5 Mega Pascals of pressure is needed to start the process, but that’s only up to 50 atmospheres (700-ish psi).

      Hmm – reading more in the Daily Mail, I guess when new it was more like 200′ (60 meters).
      So, at a density of 1.5 g/cm3 that would have resisted 130 psi, much closer to the yield strength of the frozen soil.

      There are no other molecules associated with natural gas besides (very trace, if any) quantities of acetylene which are unstable.
      Acetylene is unstable because of the triple bond between two carbons. I doubt any natural gas has enough acetylene in it to decompose, as the decomposition pressure is 29 psia, which is almost certainly exceeded in any gas well.

      Ron, Watcher –
      Dynamite carries it’s own oxygen in the form of the nitrate (NO3-) radicals.
      http://en.wikipedia.org/wiki/Nitroglycerin
      These radicals are fairly unstable, and easily decompose to nitrogen and oxygen, often releasing enough heat to start combustion of anything that can combine with the oxygen.
      Remember the fertilize blast not so long ago in Texas?
      There was an even bigger one back in 1947:
      http://en.wikipedia.org/wiki/Texas_City_disaster

    • sunnnv says:

      These guys say the shallow gas at Yamal is microbiological in origin,
      though there ‘s a lot of it.
      http://epic.awi.de/28435/1/Polarforsch1998_26.pdf

      It has caused many shallow blowouts while on the way to get the deeper, thermogenic gas.

    • Futilitist says:

      Hi Old farmer mac.

      “So far as I know nobody has yet discovered any record of other such craters but that would not be too surprising given how thinly Siberia is populated even today. And the oldest high resolution arail surveys are probably not very old either.”

      Yep, it figures that this would be your first reaction.

      “Hawaii is a place…”

      Yes, it is.

      “So – this may or may not be something relatively new.”

      But it really almost certainly is. Why are you working so hard to disprove the obvious?

      “…it occurs to me that methane may possibly dissociate under certain conditions although this seems VERY unlikely.”

      Why on earth would you say it was VERY unlikely? That is exactly the opposite of what is true.

      In your whole post, this is the one sentence fragment that comes closest to the right answer, and you deem it VERY unlikely. And with VERY in capitals, no less. That’s like very, very unlikely. Wow. You are working overtime, Old farmer mac.

      Here is the truth:

      http://www.nature.com/news/mysterious-siberian-crater-attributed-to-methane-1.15649

      In Siberian permafrost, large deposits of methane gas are trapped in ice, forming what is called a gas hydrate. Methane remains stable and frozen at certain temperatures, but as the permafrost warms, and its internal strength decreases, it may be less able to withhold the build-up of sub-surface gases, he says, leading to a release.

      “How about one of you guys with an engineering reference book handy doing a back of the envelope calculation…”

      That sounds like a lot of fun. And real ‘sciency’, too.

      “How much heat would it take to raise the pressure of trapped methane to 500 psi?”

      You wouldn’t be asking this kind of irrelevant question if you didn’t already have your mind made up.

      “Are there other molecules that might explosively disassociate commonly found in natural gas?”

      No.

      “I know that an acetylene molecule is unstable and bottled acetylene has been known to explode without getting really hot or having any oxygen to support combustion.”

      Reaching for straws.

      “Could it come from a plume of hot water finding its way up from way down deep?”

      Not likely.

      To me, your whole post is filled with obvious knee jerk denial. It resembles general climate change denial. You seem to be working very hard to sow the seeds of confusion, Old farmer.

      But that is just my opinion.

    • Mac, here’s a paper about the glacial age ice extent. Check figures 15 and 16. When I reviewed the Yamal projects i was told the peninsula wasn’t covered by glaciers during the latest ice age.

      The regions exposed to the Arctic cold during the ice ages usually have really thick permafrost. I believe the permafrost thickness may be around 900 meters in the Yamal peninsula around Bovanenkovo. This means the section is usually a fairly solid mass of icy terrain with interbedded ice lenses.

      The information we see in these articles is usually very sparse and lacks detail. I think I would just wait until these holes are investigated. The seem to be very round holes in permafrost.

      http://folk.uib.no/ngljm/PDF_files/Svendsen_et_al_2004,_QSR.pdf

      • Futilitist says:

        Hi Fernando.

        We have a very good idea what is causing the holes.

        “The information we see in these articles is usually very sparse and lacks detail. I think I would just wait until these holes are investigated.”

        So, in the meantime, please stop suggesting alternative theories that don’t have as much merit as the obvious answer.

  14. Rune Likvern says:

    Ron, thanks for an interesting post.

    Presently I am viewing the additions of producing wells in Bakken from the perspective of companies’ net organic cash flows.
    For Bakken(ND) several analysts (including myself) estimates that it takes the net additions 130ish producing wells each month to sustain present extraction levels.
    Total extraction is now around 35 Mb/month and the wellhead price $35/b (including nat gas).
    Assuming taxes and royalties totals 25% and OPEX at $8/b (including financial costs) these nets the companies about $20/b.

    Companies organic (net) cash flow amount to about; $20/b * 35Mb/month = $700Million/month.
    If these $700M went unabridged (no dividends and no deleveraging!) for manufacturing wells and assuming fracking comes at $5M/well and drilling, completion and fracking comes at an average of $9M/well, it becomes possible to make an estimate of how far this cash flow from operations will get the companies.
    If an average of 30 wells/month of the inventory of drilled wells is fracked this would take about $150M, which leaves $700 – 150Million = $550Million/month to drill new wells for (from spud to production).
    Assuming $9M per well these $550Million/month would buy about 60-65 wells/month.
    The net organic cash flow (from operations) would thus fund a total of 90 – 100 new producing wells each month.

    This suggests that to sustain a monthly addition of 130ish wells requires some kind of external funding (either burning through cash and/or debt).

    • Watcher says:

      That’s interesting and I’m cool with no divvies, since those guys largely pay none.

      Not cool with no deleveraging. Lenders have a higher claim than common so why are you presuming they don’t make debt payments?

      • Watcher says:

        It’s an interesting look. But this HY paper wasn’t written for 30 yrs. If it’s 5 yr paper, and that’s reasonable, then 9 million / 5 is going to require deleveraging of 1.8 million per well per year plus interest (which I think you put in OPEX, which is okay).

        I think your mountain is a bit higher to climb to get wells completed, but it’s probably a better measure of potential than rig count.

    • Dennis Coyne says:

      Hi Rune,

      Under current conditions with a lot of excess rigs, costs may decrease to about $8 million per well, and higher well productivity might also affect the calculations. It also seems that oil prices will rise at some point, Brent is at about $59/b and at $12/b transportation costs the refinery gate minus transport would be $47/b, using your assumptions the net would be $27.25/b. Using your other assumptions with the change that well cost might be $8 million would allow 130 new wells per month, only 120 per month are needed and there are a fair number of wells waiting on completion so 50 per month could be completed rather than 30, if there were short term cash constraints.

      If prices fall further things change, I would expect prices will rise as output from LTO plays stops rising (or falls). If not, then output will fall as 100 new wells per month is not enough to keep output flat.

      • Rune Likvern says:

        Hi Dennis,
        I used wellhead prices for ND from Plains
        http://www.paalp.com/fw/main/default.asp?DocID=1363
        And I stated the wellhead price used in my comment!

        Using your other assumptions with the change that well cost might be $8 million would allow 130 new wells per month, only 120 per month are needed and there are a fair number of wells waiting on completion so 50 per month could be completed rather than 30, if there were short term cash constraints.

        So how many monthly net additions of producing wells (by your estimate) will the net organic cash flow allow for?
        Fracking those wells (awaiting for such) costs still money!

        If prices fall further things change, I would expect prices will rise as output from LTO plays stops rising (or falls).

        Well, everyone has an opinion about the future direction of the oil price.
        I believe the primary driver for the oil price for the near future will be demand developments.

        • Gerd says:

          Excellent analysis Rune. Essentially this is how the companies will look at it.

          I have one comment. In the short term I understood that approx. 25% of production was hedged at around $90. Assuming this oil has to be delivered, lets say the companies will get $80. That is $45 more than your $35. So $45 * 35 m/b *25% gives us an extra $390M. These hedges are in place through Q1 at least and some of them continue into Q2.

          Those hedges are helping sustain production in the short term.

          • Rune Likvern says:

            I did not take into the effects from hedges and this is a valid point.
            If I had good estimates on the portion of total production was hedged that would be helpful.
            I am aware some companies have hedges in place…and others have sold them.

          • Jeffrey J. Brown says:

            Based on a prior discussion, it’s my understanding that price hedges and drilling, completion and production decisions are not directly related to each other, i.e., if a producer had a fixed volume of production hedged at $90 for 2015, the producer is not obligated to produce that amount of oil.

        • Rune, I think a better approach is to segregate the industry players. A while back somebody showed which companies were the most active and produced the most oil in North Dakota. Exxon is present in the basin, I suspect they wanted to learn as well as pump up their production figures. Others are smallish companies with a lot of debt. I don’t think their behavior will be the same.

          A large oil company would probably try to negotiate a 20 % cut in well CAPEX, check the routing of oil reduce transport costs, and use a price forecast close to $70 per barrel WTI. They wouldn’t worry about financing costs because they run economics on internal hurdle, and that’s at least 8 %, to which they add risk asumptions. A typical approach is to run something like $50 WTI and see if it pays out in say five to eight years. A large company won’t keep marginal wells, only want to sell the property and move on.

          I hope this helps.

        • Dennis Coyne says:

          Hi Rune,

          In your past analyses you have used Brent minus transport costs as the price that Bakken producers will receive for their oil. Why the change?

          Using the exact same 30 wells fracked per month, that you used and changing the price assumption to Brent minus $12/b (for rail transport to the refinery) and a well cost of $8 million which seems reasonable due to slack rig demand, I get 100 wells per month drilled and fracked plus the same 30 wells fracked using organic cash flow. If you look at what various companies report for price received per barrel it does not correspond with the reported wellhead prices, so this is not a very good metric.

          • Rune Likvern says:

            Dennis,
            For tight oil in Bakken I have either used WTI (which is stated in the assumptions) or wellhead prices as posted by Plains or NDIC.

            • Dennis Coyne says:

              Hi Rune,

              For Bakken oil that is shipped to the east cost refineries for about $12/b, the refinery gate price tracks better with Brent than WTI, so it makes more sense to use Brent prices. In fact the EIA uses Brent prices for most of its analyses these days as WTI no longer represents World crude prices very well.

              • Rune Likvern says:

                Dennis,
                So what about using wellhead prices as posted for North Dakota?
                What about using a weighted average wellhead price reflecting variances in qualities (sour and sweet)?
                What about using weighted average prices related to the destination (east coast, Gulf area, west coast) of the LTO?
                Some companies will be able either through hedging or end destination to net back a higher price at the wellhead. This premium is then subject to some taxation.

                • Dennis Coyne says:

                  The wellhead prices posted for North Dakota do not reflect what the producers receive for their oil.

                  You can use any number you wish.

                  As you had explained in the past the refinery gate price minus transport costs probably reflects what the producers receive for their oil. For east coast refineries the refinery gate price tracks fairly closely with the price of Brent crude.

                  I guess I did not understand you correctly when you taught me about this in the past.

    • AlexS says:

      CLR recently released 4Q14 results and presentation.

      Here are their numbers for cash costs and realizations per barrel:

      Average oil equivalent price (ex. derivatives) $51.11
      Production expense $5.31
      Production tax and other $4.36
      G&A $2.00
      Interest $4.20
      Total cash costs $15.87

      So with the wellhead price at $35/b the company gets indeed about $20/bbl (more exactly, $19), but taxes and royalties are lower than 25% and cash OPEX (ex taxes) is $11.5/bbl.

      Their current completed well cost is $9.7 MM, but they expect at least ~15% or more reduction in
      cost during 2015

      http://investors.clr.com/phoenix.zhtml?c=197380&p=irol-presentations

      Also, as most other U.S. LTO producers, they expect an increase in their average 2015 output (+16-20%), but end-2015 output rate almost equal to end-2014.
      “Continental’s Output to Stop Growing by Midyear

      THU, FEB 26, 2015
      http://www.energyintel.com/pages/eig_article.aspx?DocId=878143

      Continental Resources said it expects its production to stop growing by the middle of this year as the company postpones completion work on its wells in the Bakken tight oil play in North Dakota and Montana as it waits for a recovery in US oil prices.
      The Oklahoma City-based independent reiterated its full-year 2015 production growth guidance of 16%-20% despite its previously announced plans to slash capital spending budget for the year by over 40% in response to the slump in oil prices (OD Dec.23’14).
      However, Chief Financial Officer John Hart said the company’s 2015 exit rate would only show single-digit growth over the 2014 exit rate due to a slowdown in activity as the year progresses.
      “We expect 2015 production to rise through midyear and level off in the second half of the year,” said Hart.
      Continental founder and Chief Executive Harold Hamm said that during the first quarter of this year the company plans to defer a quarter of its well completions in the Bakken, where the company holds over 1.2 million net acres in North Dakota and Montana.
      “A large percentage of our key assets are held by production, with the remainder [protected] by contractual provisions, so we can defer a significant amount of activity to await a better commodity price environment and lower oil-field service costs,” said Hamm.
      Continental would start ramping up its activity in the Bakken again if West Texas Intermediate (WTI) crude oil prices recover to about $70 per barrel, he added.
      US oil prices were already starting to head back up again after bottoming out around $40 per barrel, Hamm said, adding that he anticipates prices will recover to $60 to $70 “in the future.”

      “Continental currently has a backlog of 127 gross wells awaiting completion in the Bakken. In December the company said that it plans to complete 188 net wells in the play this year while drilling another 191 net wells (OD Dec.23’14).
      Continental has almost halved its active rig count in the Bakken from an average of 23 during the fourth quarter of 2014 to its current total of 12. It expects to further reduce that number to 10 by March, a level which it will maintain through the remainder of 2015.”

      Source: “Continental’s Output to Stop Growing by Midyear”
      http://www.energyintel.com/pages/eig_article.aspx?DocId=878143

      • shallow sand says:

        Thank you Alex S for the post which verifies Rune Likvern’s post that, at current Williston Light Sweet posted prices, producers clear about $20 per barrel, before the effect of income taxes.

        So in my very simple way, I take this information and combine it with that provided above by Dennis Coyne, that over a 54 month period, the average cumulative oil production for a CLR well is 167,000 barrels.

        167,000 x $20 = $3,340,000

        The current completion cost is $9,700,000 per well.

        So, if oil price remains constant, after 54 months CLR is still $6,360,000 from payout.

        If they achieve a 15% cost reduction, well cost is $8,245,000.

        So, if we assume the 15% cost reduction, after 54 months CLR is still $4,905,000 from payout.

        I agree I have not included natural gas sales.

        What is the explanation for why CLR would drill any wells in the current price environment?

        I cannot figure out how they convince people much smarter than me that this plan makes any sense. They are valued at around $150,000 per flowing boe by the market. In a hugely bearish oil and gas price environment. Where I am from, $150,000 per flowing barrel is an extremely high price when oil is $100+ WTI. If I am not mistaken, Devon paid $6 billion to GeoSouthern for 53,000 flowing boe plus a lot of undrilled acreage in the EFS in the fall of 2013, which was considered a premium price in a high oil price environment. Yet CLR is valued above that with 2/3 of their production in the geographically constrained Bakken in this price environment? I don’t know as much about SCOOP, but I do know it is more gassy, which can’t help economics.

        I guess the price of oil is headed to $120 WTI per barrel soon. Otherwise none of this makes sense to me. Oh well, $120 per bbl will put our little company in a heck of a position, so I will just wait for the soon to come “good times”.

        Most of the regular posters here are of higher intelligence than me, so please explain what I am missing. The only thing I see is that the market is anticipating $100+ WTI over the long haul.

        Mike, do you hear of any production + acreage selling for $150,000 per flowing boe at the present time?

        • shallow sand says:

          One further thing I note, then I am giving up.

          CLR PV10 is $22.7 billion, which is less than its enterprise value. However, PV10 is calculated using an oil price of $84.56 and a gas price of $6.05. Those are SEC parameters, but are no where near the present cash price. Further, only half of PV10 is PDP. PDP PV10 is less than $12 billion.

          A rule of thumb for valuing PDP oil production is .7 x PDP PV10.

          I will never understand the valuation, or how this company survives a long term bout of sub $70 WTI and sub $4 Henry Hub. At least the first of the $6 billion of long term debt does not come due until October, 2020.

          I give up.

          • shallow sand says:

            Sorry for the rant. I just do not understand the valuation pass CLR and other shale companies are getting. Using their own numbers and past production history, after 54 months they are still short over $6 million per Bakken well at constant oil prices.

            I wish I had the ability to calculate PV10 for CLR using $39 for an oil price. I think that would be a shockingly low number.

            Also note CLR ended year with just $24 million cash. Company with $ 6 billion of long term debt, $17 billion plus market cap having just $24 million cash?

            On a final note, Brent WTI spread is nearing $12. Gasoline prices are rising, which will lower demand. I predicted the possibility of $80 Brent with sub $60 WTI this summer. Almost all shale is priced off WTI. In fact almost all oil sold in US is priced this way. Add that to strong dollar, I think this year will really hit US based producers very hard.

            Again, I’m not that smart, so please tell me where I’ve screwed up in my posts.

            • Enno says:

              From Continental Resources’ latest 10Q (see risk factors):

              At December 31, 2014, the PV-10 value of our proved reserves totaled approximately $22.8 billion.

              If crude oil prices decline by $10.00 per barrel from those used in our year-end estimates, our PV-10 as of December 31, 2014
              could decrease approximately $3.2 billion, or 14%.

              Commodity prices have decreased significantly in recent months. Holding all other factors constant, if commodity prices used in our year-end reserve estimates were decreased by $40.00 per Bbl for crude oil and $1.00 per Mcf for natural gas, thereby approximating the pricing environment existing in
              February 2015, our PV-10 at December 31, 2014 could decrease by approximately $13.8 billion, or 61%.

              • shallow sand says:

                Enno. Thank you! This is huge and is being missed by the MSM IMO.

              • Dennis Coyne says:

                Hi Enno,

                The Oil Price in Dec 2014 is used for PV10 estimates (not the average price for the year). In Dec 2014 the WTI price was about $60/b (average for the month).

                Does a fall in the oil price to $20/b seem reasonable?

        • Dennis Coyne says:

          Hi Shallowsand,

          CLR gets more than the wellhead price, the net is about $35/b. The general trend for the Bakken has been higher new well EUR so if we assume CLR 2014 wells will get 200 kb over 54 months, they would be at $7 million at 200 kb and $35/b. My guess is that they expect that oil prices will rise over the next 54 months. If oil prices average $75/b over those 54 months, then the net rises to $50/b and they have $10 million plus the money they will get from the next 150 kb of oil that will flow from the well, the ROR will not be very good, but I think they are just trying to survive until oil prices rise. By completing the wells already drilled they create some cash flow, it is not clear why they would do a lot of drilling, that is probably why so many rigs are being stacked.

          • shallow sand says:

            Dennis. I’m pretty busy, but later I am going to look at their SEC filings because I think they are over $10 discount to WTI company wide on oil sold in 2014. Keep in mind a good portion of oil sold comes from SCOOP, which would be priced close to WTI, so I estimate they are getting $3-4 above Plains posting for Williston Light Sweet. They are
            Definitely not getting $15 above Plains posted price.

            So assume 200,000 x 25. We are at 5 million dollars after 54 months, still 3-5 million short.

            If Brent WTI spread goes to $20, US producers are in serious trouble. Gulf OPEC and Russia will produce all out and bury US producers. MSM is missing this too.

            At current prices, CLR PV10 is only $9 billion? Market enterprise value 3 times PV10? Wow!

            • shallow sand says:

              More balance sheet liabilities than PV10 I might add.

            • AlexS says:

              shallow sand,

              “In fourth quarter 2014, Continental’s average realized sales price excluding the effects of derivative positions was $61.53 per barrel of oil and $4.36 per thousand cubic feet of natural gas (“Mcf”), or $51.11 per Boe. Based on realizations without the effect of derivatives, the Company’s fourth quarter 2014 oil differential was $11.35 per barrel below the NYMEX daily average for the period.”

              Bakken Sweet Crude average for the quarter was $56,76 (according to ND DMR), WTI $73.21, Brent $76.43 (according to the EIA)

              • shallow sand says:

                Thanks AlexS. For full year 2014, appears WTI Cushing was $94.99. CLR North Dakota Bakken was $80.22 and SCOOP was $87.58. Per their 10K.

            • DuaneX says:

              SS, that’s your second reference to MSM “missing” something. Please point me to a mainstream media source that actually tries to analyze company reporting and underlying fundamentals.
              Certainly not newspapers, no time for that and far too specific. TV/cable? heavens no. You’re really asking for, dare I say it, investigative journalism. That’s what it takes to dig into an industry, it’s cost structure, economics that vary by region, company, technological and other factors. So that role is filled by blog posts and comment sections such as these, at their best.
              Dig on.

              • shallow sand says:

                DuaneX. What upsets me is the financials for many of the shale drillers are not that complex, yet apparently no one reads them. Wish I had more time to.

                Many things about this deal are upsetting me now, though. I’m biased, and freely admit it,

                Just like the claim that soon storage will be full, when EIA says we are just shy of 60% capacity. Yet they let guys from Citi and GS, who are clearly short, claim we are about full on storage. And we are still importing crude in the millions of barrels per day.

                I just need to go offline I guess.

      • toolpush says:

        Alex,

        Continental has almost halved its active rig count in the Bakken from an average of 23 during the fourth quarter of 2014 to its current total of 12.

        Continental’s report, once again raises the point of how accurate the ND Rig report is. As per the ND gov, Continental has 13 rigs, while Continental company report, states only 12. It really appears companies are rather lax in their reports to the ND gov, at best. I would hate to read anything more sinister into it than that.

    • Rune Likvern says:

      Hello all,
      The example I posted above admittedly is both simplistic and static. The point being to illustrate that going forward additions of new LTO wells is likely to be funding constrained.

      Doing a more in depth, dynamic analysis of the situation (in an environment that WTI/Bakken wellhead prices remains at present levels) will reveal that the funding situation is more dire and thus the financial capacities of the companies to add producing wells.

      While building production in the Bakken (ND) I estimated that in 2011 companies used $4.6Billion of external (inorganic) funding and for 2012 $5.4Billion. Most of this funding likely debt of some kind.
      The use of debt explains the rapid growth in LTO extraction starting back in 2009.

      When this debt will be retired varies, but as some was acquired years back it should be expected that some of it is reaching the age of retirement. Companies may either roll over the debt and/or retire it.
      Retiring debt requires the cash is there. This cash comes from revenues from extracting and selling oil and gas. For those who decides (or are forced) to retire their debt they need to put away cash to be in a position to retire their debt.

      ON DIVIDENDS
      I assumed in my estimate (just to keep it simple) that NO dividends were paid. Dividends comes from the cash flow. I know that some companies are paying dividends and this may be as high as 35% of their net organic cash flow from LTO extraction. These days some companies solve their liquidity issues by going deeper into debt.

      ON RIGS
      Ron in one of his charts in this post showed that one rig on average drills one well per month. Assuming this is from spud to spud and the well drilled is ready to be fracked.
      If one further assumes that drilling and preparing one well for fracking on average comes at a cost of $4M and with about 120 rigs in operation, this would add roughly 120 wells/month (ready for fracking) at a total cost of: 120 * $4M = $480M/month.
      These drilled wells needs to be paid for!
      This payment comes from the organic cash flow and/or more debt.
      By now it should become apparent that (in general) many companies will in the near future find themselves between a rock and a much harder place if present prices are sustained.

      • shallow sand says:

        Thank you and Amen!!

      • Mike says:

        Howdy, Rune; I hope this finds you well.

        I am in receipt of my 3rd AFE in as many weeks for reversionary back-in WI in Eagle Ford wells in S. Texas. One of these was from a different company; all 3 AFE’s indicate a 22% decline in estimated well costs from 8 months ago. It appears most of these cost reductions are coming from the completion side, mostly pumping services. These AFE’s confirm the word in the “hood” about cost reductions and what I am actually experiencing in my operations. Costs have come down, big time. I believe we will see further cost reductions, these on the drilling side, in coming months as more and more rigs are going to the barn. This is EF but the same cost reductions must be happening in ND as well.

        By the way, 1.5 to 1.8 million dollar cost reductions is not chump change. The economics still do not work for me, however, and I am non-consent on all three. I like my IRR’s in triple digits, thanks.

        Stay warm!

        Mike

        • Rune Likvern says:

          Mike, hope all is well.

          Thanks for your input.

          One poster further up suggested that each well on average may come down to $8.2M in Bakken. That certainly helps. Still companies will not be able to spend more than they have available (or projected available) from cash flows and external funding.
          If the portion between drilling and fracking remains this suggests about $3.5M for drilling and ready to frack and about $4.5M for fracking. (I will stick to round numbers.)
          You refer to estimates, I do not know if there is any clauses in the contracts for elements “not foreseen”. The service companies are there to make some profit.

          One of the things that occurred to me with the high number of added producing wells in December in Bakken was AFE (Approvals For Expenditures). The companies may have thrown whatever they had left on AFE’s at completing wells, before year end . (Just speculating.)
          The other thing you point out is to earn a decent return. Why spend money if the outlook for returns are dire?

          The two nexuses the companies face, one being what their cash allows them to do the other thing is projected returns from the expenditures.
          “We have the cash, but the returns are not bright. The returns looks great, but we do not have the cash.”

          Smoothed temperatures in my neck of the wood have in recent weeks been 6 degrees Celsius above “normal”. 
          – Rune

          • Mike says:

            Rune, actually in S. Texas there was a tremendous flurry of shale drilling and frac’ing activity at the end of the year that carried all the way into late January. You are absolutely correct in the fact that would be related to year end budgets and money that had already been borrowed, that had to be spent. Year end spending sprees are also often related to federal income tax calculations; intangible drilling and completion cost deductions can offset taxable income in a big way. Things are slowing way down now, however.

            No service is rendered in the oilfield on a fixed basis, unless its say, Porta Potty rentals. A shale operator might think the well will cost 4.25 M to frac but then 39 things go wrong and it ends up being 4.9 M. Whatever happens down hole, out of sight, is 100% on the operator and all you get in the way of an explanation from the service provider is a shrug of the shoulders. Its been that way for a 150 years. Its not like building a tract home, in spite of what people think. You know that, sir. Real costs are often all over the map. I have been watching a rig drilling a single shale well for 5 weeks and they have not even set the long string yet. They’ll be 30% over AFE on that puppy.

            The frivolous spending in shale plays would stun you, Rune. I am quite certain all service providers will cut costs 30% or more and still make money. My neighbor is a safety engineer for a major drilling contractor and they cut his salary in half the other day. I asked him if he was still alright and he smiled and said sure, no problem.

            Mike

            • Mike: my company provided incentives and risk sharing to drilling and service contractors. For example we paid a combination day and footage rate, turnkey contracts for drlling to the 9 5/8 casing point with a valid shoe test, turnkey flowlines, and so on.

              I also saw a medium sized company give turnkey contracts to Forex and Schlumberger overseas. I hated those bacause we, as partners, were being overcharged.

              I think you could conceivably ask partner/operator to give you a guaranteed price and hedge the price. I don’t know if they’ll go for it, but I tried to talk my bosses into offering something like it to our smaller partners. But I got tossed out of the conference room, and that was it.

          • Sam Taylor says:

            Rune,

            Assuming that you’re still in Norway, I hope that those temperatures don’t persist! I’m visiting Oslo soon to see ski jumping at Holmenkollen, and I want there to be snow!

            • Rune Likvern says:

              Oslo have had warmer than normal temperatures (about 5 Deg C above “normal”) and the forecast is for more mild weather.

              Hopefully the Norwegian snow has mutated to become adapted to warmer weather. 😉
              Spring in Oslo is nice!

  15. Watcher says:

    Dollar is getting hit hard today, by the GBP — which has been the recent vehicle of choice to moderate things. This, of course, has elevated oil a bit.

  16. Doug Leighton says:

    FIRST DIRECT OBSERVATION OF CARBON DIOXIDE’S INCREASING GREENHOUSE EFFECT AT EARTH’S SURFACE

    http://www.sciencedaily.com/releases/2015/02/150225132103.htm

    “Scientists have observed an increase in carbon dioxide’s greenhouse effect at Earth’s surface for the first time. They measured atmospheric carbon dioxide’s increasing capacity to absorb thermal radiation emitted from Earth’s surface over an 11-year period at two locations in North America. They attributed this upward trend to rising carbon dioxide levels from fossil fuel emissions.”

    • Doug Leighton says:

      “The results agree with theoretical predictions of the greenhouse effect due to human activity. The research also provides further confirmation that the calculations used in today’s climate models are on track when it comes to representing the impact of CO2.”

      • Doug Leighton says:

        Of course this all comes from pinko-commie Obama loving tree-hugging hippies and red liberals who’ve infiltrated all government agencies throughout the entire world and its all there to steal from hard working God fearing folk — or maybe not.

        • Jay Thompson says:

          Agree. It is interesting how the UN’s warmists talk about the increase in temperature since the mid 1800’s while also agreeing that the “Little Ice Age” ended in 1850. One would hope global temperatures would be on the rise or else there would be massive starvation today from the COLD temperatures of an Ice Age.

          • Doug Leighton says:

            You nailed it Jay. Thirteen Nobel prizes associated with Berkeley Lab. Seventy scientists members of the National Academy of Sciences, one of the highest honors for a scientist in the United States. Thirteen scientists who’ve won the National Medal of Science, the nation’s highest award for lifetime achievement in fields of scientific research. Eighteen engineers elected to the National Academy of Engineering, and three scientists elected into the Institute of Medicine. Now they’ve come out with this; What a bunch of morons: Glad there’s guys like you around to keep things honest for us.

            • MBP (ManBearPig) says:

              I’ve wanted to use this for a while now.

            • Old farmer mac says:

              Here is a link that just about every body in this forum should watch twice at least with as open a mind as possible.

              https://www.youtube.com/watch?v=6ledD81ofy0

              Muller explains why a lot of sophisticated people are indeed skeptical of warming and what can be done – what his team did – what he is doing – how to talk to a SOPHISTICATED skeptic.

              Muller is of course the most famous of former skeptics -and a man who is not afraid to admit he is wrong.

              Of course there are people around who no doubt believe Muller is like me and is a involved in some sort of disinformation campaign, that he is still some how covertly working for a right wing business as usual cabal.

              We ALL know that Berkeley professors all go around quoting Anne Rand like a backwood’s Baptist quoting the KJB don’t we?

              There is just NO WAY this man could be honest. He MUST be working for the Koch Brothers and his coming home to Jesus on warming MUST be a ruse of some sort , a Trojan Horse gambit to get inside the walls and do mischief on the grand scale.

              I would like to say he is just like me but that would be highly presumptuous given that he is a physicist with accomplishments on his resume whereas I am merely an armchair hillbilly redneck who who can barely read and write.

              It is probably even too presumptuous of me to say I am like him in that I took a hard look at the evidence to the best of my own ability and changed my mind about the INEVITABILITY of collapse in the general sense.

              There is no record in history anyplace of anybody ever changing their mind about a fundamental question or issue.

              IMPOSSIBLE!!!

              As our eminently sensible court jester RW would put it har har.

              • Futilitist says:

                Old farmer mac,

                I don’t exactly know what you are getting at with the comparison to the climate scientist. He went from skeptic to believer, and you went the other way. But I am trying to understand. Perhaps it might help if you answered a few questions:

                “…I took a hard look at the evidence to the best of my own ability and changed my mind about the INEVITABILITY of collapse in the general sense.”

                What EXACTLY changed your mind?

                1) Describe how you first came to believe in the inevitability of collapse. What evidence in particular convinced you?

                2) Describe how you then came to change your mind. What evidence did you encounter that reversed your opinion?

                3) Do you think there could possibly be evidence that could cause you to change your mind again? Can you imagine what might constitute a conclusive proof for you?

                Thanks.

                • Old farmer mac says:

                  You are still an idiot who either has not read what I have posted here from day one, two are too stupid to comprehend my overall comments.

                  I have answered all your ignorant gotcha questions quite sufficiently.

                  Now as far as your being an idiot you can’t possibly help that so I am sorry I called you a FUCKING idiot.

                  If I were PC I would refer to you as intellectually challenged . If I were still teaching I would refer you a reading specialist. Your comprehension leaves something to be desired to put it mildly.

                  Insofar as the paper you think is the last word on collapse I read it last night and I did indeed read it previously.

                  I am not rich but I am pretty much free to do to suit myself and I have read a whole library full of books papers an magazine articles on such subjects. Reading serious stuff of all sorts is my primary pastime.I have consistently spent about forty to eighty hours a week reading serious shit for well over half a century now.

                  This paper is chock fucking full of stuff that is entirely consistent with everything I have ever posted here with relatively few things that might be considered incompatible with my body of comments here.

                  NOWHERE does the author say collapse is inevitable at least not more than once or twice after positing other things happening FIRST that he say COULD happen.

                  I doubt you are bright enough to understand why he consistently uses COULD instead of saying WILL or MUST.

                  And he makes some assertion or assumptions that are clearly proven to be in error by people in various other fields.

                  But it is overall an excellent paper. I agree with the authors conclusions as a general thing.

                  I hereby invite anybody interested to read the overview and the conclusion to ” get it” in terms of my arguments and their actual compatibility with this paper.

                  If any body who I have some respect for in terms of having a brain is concerned asks then I will post some quotes from the paper and the evidence to the contrary.

                  It has often been said that a foolish consistency is the hobgoblin of a small mind.

                  I think you have just taken a dislike to me personally and are determined to talk trash about me.

                  I am not very busy and since I really am a right wing neanderthal redneck in some respects I am more than happy to swap insults.

                  It is an us and them world after all.

                  I am not going to ARGUE with you because it is also a staple of folk wisdom that nobody with a brain ever argues with a fool in public. The public is not generally able to distinguish which is the fool.

                  Fortunately the large majority of the people who comment here are not fools and can tell the difference.

                  • Mac, and everyone else, please stop the insulting language. We can carry on a discussion without calling people vile names.

                    I had a post where I asked you a few questions also but I deleted it in fear that I would get called a fucking idiot also.

                  • Futilitist says:

                    Old farmer mac,

                    Me thinks you protest too much.

                    “If any body who I have some respect for in terms of having a brain is concerned asks then I will post some quotes from the paper and the evidence to the contrary.”

                    I know you don’t consider me qualified to ask, but…

                    That is exactly what I am asking for.

                    So please go ahead and post some quotes from the paper and the evidence to the contrary. Just pretend you are posting them to somebody else if it helps.

                    “This paper is chock fucking full of stuff that is entirely consistent with everything I have ever posted here with relatively few things that might be considered incompatible with my body of comments here.”

                    Please list the relatively few things that might be considered incompatible with your body of comments here.

                    Especially with respect to the role of Leviathan.

                    “And he makes some assertion or assumptions that are clearly proven to be in error by people in various other fields.”

                    Please elaborate on EXACTLY which assertions or assumptions are clearly proven to be in error by people in various other fields.

                    Thank you.

                  • Futilitist says:

                    And one more thing:

                    “NOWHERE does the author say collapse is inevitable”

                    That is correct. I never said he did. I said David Price makes that argument. So do many others.

                    There are really three basic arguments on collapse.

                    1) Collapse is inevitable.

                    2) Collapse is soon.

                    3) Collapse will be rapid.

                    We are now having argument #3.

                    Thanks again.

          • chilyb says:

            did not read past “warmists”

    • Tonya.Borel says:

      Our food supply all depends, ultimately, on plants. We eat plants and plant products. We eat meat, but the meat comes from animals who ate plants. Without plants — or with greatly decreased numbers of plants — all or most of us would starve.

      Plants take in CO2 and can’t survive without it. By itself, it’s not a pollutant. Wouldn’t a significant decrease in CO2 result in a decrease of plants? With a few billion more people than the earth had a century ago, wouldn’t millions die if CO2 reduction decreases plant availability?

      The facts are, there’s no government grants or salaries to scientists to research whether CO2 increase may in fact be beneficial, or even the warming itself (which could open up hundreds of thousands of square miles of worthless frozen tundra to agriculture to feed a growing population). No, our taxes go to those scientists who cry doom and gloom. People like Jamie Henn have it right: “don’t bother me with facts; my mind is made up. Who are you going to believe, me or your own lying eyes?”

      • Jimmy says:

        You’ve obviously never taken a physics class.

      • sunnnv says:

        Tanya – why did you post this LIE?
        “…there’s no government grants or salaries to scientists to research whether CO2 increase may in fact be beneficial…”

        The NSF and other funding agencies have been doing work in this area for decades.

        Or maybe you like poison ivy?
        http://www.pnas.org/content/103/24/9086.abstract
        ” … In this 6-year study at the Duke University Free-Air CO2 Enrichment experiment, we show that elevated atmospheric CO2 in an intact forest ecosystem increases photosynthesis, water use efficiency, growth, and population biomass of poison ivy. The CO2 growth stimulation exceeds that of most other woody species. Furthermore, high-CO2 plants produce a more allergenic form of urushiol. Our results indicate that Toxicodendron taxa will become more abundant and more “toxic” in the future, potentially affecting global forest dynamics and human health.”

        6 years – means this experiment started in 2000, 15 years ago.

        The actual Duke FACE setup started in 1994.
        http://en.wikipedia.org/wiki/Free-air_concentration_enrichment

        Dare you read skepticalscience?
        http://www.skepticalscience.com/co2-plant-food.htm
        Note there is an “advanced” setting for more detail.

        More CO2 is not an unalloyed benefit for plants, particularly those in agriculture, especially in a warming world. In particular, protein content of grains typically falls with increasing CO2 and temp, and output in general falls with increasing temps.

        • John B says:

          skepticalscience has to be the most Orwellian weblog out there.

          And the FACE experiments clearly showed more plant growth with increased CO2:

          “The effect of eCO2 was to increase crop biomass at maturity by 20% and anthesis root biomass increased by 49%”

          I for one, would like to see more experiments in the climate field, and fewer GCMs with arbitrary variables.

          • Sam Taylor says:

            John,

            It’s not that simple, it’s never that simple. Ecosystems are complex and interrelated things, and simply upping CO2 isn’t necesarilly going to lead to bumper harvests.

            As an example, I read a paper (http://libgen.org/scimag/index.php?s=10.1111%2Fj.1365-3040.2005.01367.x) a few years ago looking at the symbiotic relationship between grass and a fungus that lives with it. The fungus lives with the grass, and produces a toxin which helps stop cattle overgrazing the grass. Under elevated CO2, the fungus produced much more of the toxin (ergovaline). Moderate amounts of this toxin are sufficient to cause animals to produce less milk, and generally impact their health.

            Out current agricultural pratices are very well tuned to a very specific set of variables, CO2 concentration being one of them. We CANNOT know in advance the ultimate effects on agriculture of changing this variable, and saying “oh it’s plant food” and assuming everything will be fine is idiocy of the very highest order.

        • I don’t pay much attention to anything quoting skeptical science. It’s a very political site.

          When it comes to vegetation I like to look up the NASA observations of vegetation cover (they report an increase in the last 30 years).

          The other item I find very interesting is the difference between emssions and atmospheric concentration. Thus far it seems the carbon sinks keep removing a bunch of CO2 from the air.

    • Watch this short you tube video: “CO2 Surface Forcing Time Series”. It was put up by Berkeley Lab yesterday.

      The graph shows the CO2 concentration increasing gradually, with seasonal oscillations. The forcing also oscillates seasonally.

      Look at the Alaska time series and stop the video at 18 seconds. Focus on the last four forcing oscillations…use a ruler and check the slope. It seems the Alaska CO2 concentrations are increasing over those 4 years but the forcing increase seems to be flattening? The effect appears to be more pronounced during the seasonal minima (the lowest pont in the forcing curve appears to be descending, but the lowest point in the CO2 concentration keeps increasing).

      I suspect their corrections may need a bit of fine tuning.

  17. Ronald Walter says:

    On July 4, 2008, the price of oil was priced at 145.29.

    It would seem that would be about the time frame when the Bakken began to boom, intensive drilling and development of oil fields. Had the price remained at a 30 measly dollars or some figure that made more sense than 145.29, the Bakken play probably would have never occurred or it would have been delayed another 20 years.

    The whole hog drilling and pumping in the Bakken was price driven, nothing else.

    They aren’t doing all of that drilling for oil just for practice.

    • Chris M. says:

      All I know is that I am enjoying Not Paying 80 Dollars to fill my Pickup weekly. Our Families Monthly Gasoline bill total was second only to our Mortgage at the height of the Oil and Gas Greed Grab. I’d wager to believe the Gas companies would Still be making profits if the Price for a Gallon of Gas were to go to $1.20. When Companies are making Multi Billion or Trillion Dollar Profits yearly, and it is causing the average household consumer to go Broke, or have to choose between putting Gas in the Car or paying for Groceries and Medicines like was happening, the Industry needs to be reeled in.

      • Jeffrey J. Brown says:

        Unfortunately, it appears that you, like many Americans, made poor decisions regarding their energy consumption and lifestyle based on the false promise of virtually unlimited supplies of cheap oil.

        My “ELP Plan” advice, originally posted in 2007:

        http://www.resilience.org/stories/2011-08-08/elp-plan-economize-localize-produce#

        • Jeffrey J. Brown says:

          Excerpt from “ELP Plan” article:

          Daniel Yergin, chairman of Cambridge Energy Research Associates (CERA), in 2004 predicted that the long term oil price would be $38 per barrel, because rising crude oil production would force oil prices down in order to equalize supply and demand. In reality, flat to declining crude oil production since May 2005 has forced prices up in order to equalize supply and demand.

          Those who listened to the false promises of energy abundance made by CERA, et al, have had considerable reason to regret it.

          What have I and others been advocating? Let’s start with Economize.

          Note that the average annual price of Brent crude averaged $78 for 2006 to 2014 inclusive, within a range of $62 to $112, versus Yergin’s predicted long term index price of $38.

          • Caelan MacIntyre says:

            It seems like the price of oil is fundamentally going up, like the average global temperature, while both are undergoing increasing volatility.

            Your ELP plan makes good sense.

        • Philip Backus says:

          Gee Jeffry, You must be a really big and tough guy. When I spout what I an told is this “nonsense” the crowd chases me with tar and chicken feathers while crying “kill the messenger”!! I have long given up on depletion evangelism. People would rather believe in magic than math. The crowd cares nothing for exponents or percentages.

          • Jeffrey J. Brown says:

            From my ELP Plan article:

            Two responses (to my ELP Plan), from recent years, are illustrative.

            First, the West Texan. After outlining my plan, a friend of mine from West Texas thought about it for a moment and then said, “But if we stop borrowing and spending, what will happen to the economy?”

            Second, the Dallas socialite. Again after outlining my plan, this lady said, “You’re not from Dallas, are you?” I replied that I was not. To which she said, “No one raised in Dallas would ever talk about living below their means.”

            So, living below one’s means, at least in years past, was somehow considered vaguely un-American and socially unacceptable.

        • SRSrocco says:

          Jeff & Phillip,

          Today, the world is made up of folks who are trained to look at life in a 2 week time-period. This is basically the amount of time a good percentage of Americans have before going broke. So, they don’t really seem to care much about items that may happen in a month, year or decade.

          Another analogy of this type of thinking is seen in the new social network called TWITTER. I use Twitter from my website, SRSrocco Report, but I have to tell you, the statistics are horrible.

          When I write say, a 3-5 page article, including a few charts, and then post a link on twitter, here are the results for some of my higher viewed articles:

          15,000 article reads
          3,000 twitter views of article link
          80 links to article from Twitter

          People don’t have the time to read 3-5 pages anymore, all they can handle are 2 sentence tweets.

          Collapse comes because the world has its FOREHEAD & EYEBALLS pressed firmly against the chalkboard. All they can see are a few letters or words. The entire message and meaning can’t be seen as their focus is on a few words.

          steve

          • Old farmer mac says:

            Steve I will never be a gold bug for reasons I have posted here previously but once in a while you have something to say that is absolutely DEAD ON.

            ” Collapse comes because the world has its FOREHEAD & EYEBALLS pressed firmly against the chalkboard. ”

            DEAD ON.

            • SRSrocco says:

              Farmer Mac,

              Glad we agree on something. However, I am not a so-called “Gold Bug”. I am a believer in physical assets to protect wealth. Gold and silver happen to be some of the best quality and historic examples.

              Actually, I distance myself from many in the Gold Bug Community due to their inability to understand energy.

              Anyhow, Gold and Silver will revert themselves as HIGH-QUALITY stores of wealth, regardless if I believe it, or you don’t.

              steve

              • Old farmer mac says:

                Sorry I mistook you for a gold bug.

                I guess it comes from you posting a lot of comments about gold.

                And to be honest I might not even know what a gold bug is according to your definition of the term.

                English is a rather imprecise language especially in terms of knowing what a term may mean to another person.

                I agree wholeheartedly in storing wealth as hard physical assets and believe that energy intensive physical assets are especially the best choice.

                I have no argument at all with storing some wealth as gold and have a rather small stash of gold myself.

                I just don’t believe it can ever effectively backstop banking again. There is not enough of it and if you tie a dollar or a mark or whatever to a fixed quantity of gold then you are there after unable to inflate the dollar or mark because the folks who have them will insist on swapping them for actual gold.

                Bankers believe in inflation above and beyond everything else except their own salaries and bennies.They don’t want it to happen very fast of course but if it doesn’t happen their business model is toast.

              • Caelan MacIntyre says:

                While gold and silver have intrinsic properties that make them valuable to some extents, I have concerns about their use and misuse as symbols of wealth. One concern, for example, is with regard to the majority gold/silver-holders and, as such, the kinds of potential and disproportionate power and controls they might have and exert.
                Another is that they require mining.

                “The only viable solution of solvency and prosperity is a free market in private currencies– a solution without the state and its central planners– one voluntarily determined by market participants.” ~ Tim Swanson

                “One way to promote local spending is to introduce a local currency… Eventually, in a period of sufficient upheaval, a money monopoly may be impossible to sustain, then local currencies would be freer to operate… Any initiative which reduces our dependence on national currency in circulation is going to be useful in this regard… Holmgren points out that holding cash under one’s own control, outside of the banking system can greatly increase resilience by reducing dependency on the solvency of middle men…” ~ Nicole Foss

          • Philip Backus says:

            Steve, I Wish that I could say that you are dead wrong but I know that you are dead right. Both of my late parents and my uncle are/were psychiatrists. I also have a brother in law, a sister and a cousin who are clinical psychologists though my sister is not now practicing. If you don’t even consider the enormous volume of literature I’ve consumed on the subject over the years, through simple osmosis I’ve received a very thorough education on human behavior and mental illness. my life has been much different than my parents and siblings. I feel that you gave a very apt description of modern short term thinking and there seems to be no perceived need by most to change from short term delusion to longer term reality based deliberation. I find your twitter stats truly disheartening as I have found your articles as well as your posts here interesting and informative. I still find people’s reliance on magic absurd, sad and frightening.

          • Rune Likvern says:

            Steve,
            May a way around that be to only use max four (4) letter words to get the message out? 😉

          • clueless says:

            I know that a collapse can occur at anytime. But, have you read some of the most popular books from say 1965 – 1975? In case you have not, they had the entire world collapsing 40 years ago. I for one, am glad that I never paid them any attention. But, on the other hand, if I had gone “chicken little” (as opposed to “going postal,” which I did not do either) I could have probably made more money writing doomsday books. Carter had congress ban the use of natural gas for electric generation because the world had run out. I am almost old enough to have been petrified of running out of whale oil. Geez – look at the world today compared to 150 years ago. Many have no faith in future inventions. I do not know what such inventions might be. But, for one example, maybe Lockheed will be successful in commercially making a graphene filter that makes changing sea water to fresh water extremely economical.

            • Concerning “doomsday books”.

              Only the living can write about death. The dead cannot write. Likewise we can only write doomsday books prior to doomsday. So those who point to the fact that collapse has never happened so therefore it is not going to happen could just as well point to the fact that death, to themselves, has never happened so therefore it is not going to happen.

              In fact, just as every day brings us one day closer to death, every day brings us one day closer to peak oil and soon thereafter to the serious consequences of peak oil. But we won’t have to worry about that because by the time the price of oil reaches $40 a barrel “renewables” will kick in and simply replace oil. Or at least that’s what I read once back around 2000 or so.

              • Futilitist says:

                Hi Ron.

                I want to write a doomsday book but I can’t bring myself to start a project like that. One reason is that I really don’t think I could get one done before the collapse overtakes us all. But that isn’t the main reason I don’t write such a book. The main reason is that such a book has no real purpose. People believe what they want to believe. And nothing we do can substantially alter our course anyway.

                And clueless doesn’t give me a clue which books he is referring to specifically.

                “But, have you read some of the most popular books from say 1965 – 1975? In case you have not, they had the entire world collapsing 40 years ago.”

                I doubt he even knows that any serious work that came out around then, and specifically Limits to Growth, did not predict that we would collapse 40 years ago. That book came out in 1972, and it forecast that we likely faced collapse in 40 years or so. From then. Basically right now! Dennis Meadows spent the rest of his career trying to get people to understand our dilemma. So we could do something about it and avert our now certain destiny. He didn’t succeed, but he didn’t really fail either. We did. Many people here are just starting to get the message.

                40 years too late.

                But in the big picture, I guess we didn’t really fail either. We couldn’t have actually done anything 40 years ago anyway. That is why we didn’t. Evolution didn’t shape to us to be able to think about this kind of stuff. It just made us real good at exponential growth. And collapse has always been at the end of the road of exponential growth.

                • ezrydermike says:

                  how do you know that we aren’t evolving right according to plan?

                  • There is a plan? Who’s plan?

                  • ezrydermike says:

                    Ron,

                    I have a copy of the plan around here on my desk or somewhere or….

                    From what I remember, you can’t really tell whose plan it is, it lacks specifics and it is heavily redacted.

                    Plus it is in a foreign language that is no longer spoken, so it was translated into English by somebody I don’t know and is no lounger around to explain the translation.

                    Other then that, it’s a pretty good plan.

        • wimbi says:

          Your plan is well accepted around here, and lots of good people are doing things like it. You were not shouting into a desert by any means. Thanks!

  18. Nick S says:

    This is very good data and helpful. The per well productivity has clearly been improving.

    This by well analysis also ignores an important point – the per rig improvements. The same rigs are drilling more wells. Combined with improved wells, the per rig productivity improvements are significant.
    I think you really need to look at these numbers are on a per rig basis instead of a per well basis to get a better understanding of production growth as the per rig numbers drive costs and IRR. This will help you understand production growth and how a smaller number of rigs can maintain production.

    • Dennis Coyne says:

      In the Bakken the per rig improvements in the EIA’s DPR are overstated, rigs are not the bottleneck, it is fracking crews and equipment. We do not have numbers on that. We do have the number of wells completed each month and the average well productivity and these can be used to model output pretty closely as Rune Likvern showed us long ago in his famous Red Queen post at the Oil Drum.
      If we can guess at future new well EUR and the future number of wells completed by creating various scenarios we can estimate future output, but it will only be accurate if our guesses are correct and they never are. Below is a model created in Nov 2012 (among many incorrect models produced since this lucky guess). Predicting the future correctly is difficult.

      • Futilitist says:

        Dennis,

        “…we can estimate future output, but it will only be accurate if our guesses are correct and they never are.”

        So what is the point?

        • Dennis Coyne says:

          Make a range of “reasonable” guesses and you may be able to bracket the likely outcome. The “guess” will never be perfect but as the example above shows it might be close. A lot of the time my estimates were too pessimistic to please the doomer crowd, mostly when they were too high they were intended as an optimistic high case or as an April fool’s joke.

          Predicting the future is difficult and only Futilitist knows what it will really look like. 🙂

          (See my blog post from April 1st 2014). My name takes you to my blog.

  19. Andy Hamilton says:

    Transocean just posted a massive Q4 net loss of $740m. Ouch. things can’t be good in their line of business
    (offshore contract drilling services for energy companies in case you did not know).

    • toolpush says:

      Yep Andy,

      You are correct, things are not good in the international offshore business. Everyone is concerned about the US land rig count. It is certainly much easier to get good numbers on these, but the international offshore market is also getting hammered. The rigs that are being cut are the rigs doing the extra wells, platform extension campaigns. As these rigs get taken out of the market, they will also have a fair;y fast reaction on expected oil production.

    • clueless says:

      Ensco wrote off more than $3 billion of “goodwill” on its balance sheet.

  20. KL says:

    I find it is interesting that in this week Weekly Petroleum Status Report. The domestic production for lower 48 stays flat at 8,784 thousand barrels per day. It was up 30 last week and 74 two weeks ago. Alaska production slightly increase though.
    http://www.eia.gov/petroleum/supply/weekly/pdf/table1.pdf

  21. Political Economist says:

    China’ National Bureau of Statistics published the annual statistical communique today.

    According to the communique, China’s coal production declined by 2.5% in 2014. But the reported coal production level in 2014 (3.87 billion tons) is actually 1.9 billion tons higher than the reported coal production leve in 2013 (3.68 billion tons)

    According to the communique, China’s coal consumption declined by 2.9% in 2014, oil consumption rose by 5.9%, natural gas consumption rose by 8.6%, electricity consumption increased by 4.8%. Given the dominant role of coal consumption in CO2 emissions, China’s CO2 emissions are likely to have fallen in 2014 by about 1%.

    • Ronald Walter says:

      1.9 million tons higher, not billion.

      “Coal provides around 30.1% of global primary energy needs, generates over 40% of the world’s electricity and is used in the production of 70% of the world’s steel.”

      US coal production is 904 million tons, China produces 3561 tons coal.

      • Ronald Walter says:

        Must correct the number, it would be 0.19 billion tons, not 1.9 million.

        Or, 190 million tons higher.

    • Watcher says:

      oil consumption rose by 5.9%

  22. toolpush says:

    What happens when the sun goes out, and you rely heaps of solar?

    We are about to find out!

    What happens when a solar eclipse takes 30GW of solar off-line?

    Europe has an estimated 90GW of PV capacity on line (almost twice Australia’s entire generation capacity) and it is estimated that as much as 30GW of capacity will be lost during the eclipse, assuming clear sky conditions. Obviously, taking 30GW out of supply fairly rapidly has the potential for some serious consequences but the boffins are able to measure timing, ramp down and ramp up very accurately.

  23. Ronald Walter says:

    The CEO at Transocean lost his job. Depressed oil prices, not low prices, can cause unintended consequences.

    “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.” – Warren Buffett

    Warren has a knack for wise investing and making a lot of money.

    With RIG at 17 usd this morning, Warren might have an eye on buying some Transocean.

  24. Jeffrey J. Brown says:

    Shell Canada withdraws regulatory application for (200,000 bpd) Pierre River Mine

    http://www.shell.ca/en/aboutshell/media-centre/news-and-media-releases/2015/pierre-river-022232015.html

    23 Feb 2015

    Shell to focus attention on its existing oil sands operations.

    Shell announced today it is withdrawing its regulatory application for the proposed Pierre River Mine north of Fort McMurray, Alberta to focus attention on its existing oil sands operations.

    “The Pierre River Mine (PRM) remains a very long term opportunity for us but it’s not currently a priority,” said Lorraine Mitchelmore, Shell Canada President and Executive Vice President of Heavy Oil. 

    “Our current focus is on making our heavy oil business as economically and environmentally competitive as possible. We will continue to hold the leases and can reapply in the future when the time is right.”

  25. Longtimber says:

    Front Page of WSJ this am : GAS BOOM GONE BUST LEAVES ORPHANED WELLS
    Wyoming is now stuck cleaning up these de- serted wells from a bygone boom, and thou- sands more owned by Mr. Presley and others, at a cost state regulators estimate will be tens of millions of dollars. State officials say the re- sponsible parties never paid enough in regula- tory fees to reclaim the wells.
    http://www.wsj.com/public/resources/documents/pageone022615.pdf

    • The Wet One says:

      Privatize profits. Socialize costs.

      Nicely done.

      Whichever companies pull that one off, paid off their investors and gave their CEO’s golden handshakes, did a marvelous job.

      The people of Wyoming must be so proud of them!

    • clueless says:

      They have to look no further than Oklahoma. Years ago, the state established a cleanup fund that is funded by the oil & gas companies. Anyone can call the state to have an old well site cleaned up. It seems to be working very well. No lawsuits, no blame – just clean it up. Well sites from over 100 years ago have been cleaned up.

  26. Jeffrey J. Brown says:

    Steven Kopits has a very interesting post, and graphs, on global liquids supply & demand:

    http://www.prienga.com/blog/2015/1/20/supply-minus-demand-explained

    • Jeffrey J. Brown says:

      Note that one reservation I have about gross global supply and demand estimates is that they don’t address net exports of oil.

      For example, let’s assume we have a situation where all oil production is in oil exporting countries, and the oil exporting countries produce 80 mbpd and consume 40 mbpd, thus net exporting 40 mbpd to oil importing countries. If consumption in the oil exporting countries went up to 50 mbpd, with no change in production, net exports would fall to 30 mbpd, and consumption in the oil importing countries would have to fall to 30 mbpd.

      There would be no change in gross global consumption or production numbers, but the importing countries would have to bid among themselves for the reduced supply of net exports of oil.

      Of course, the key assumption is that the oil importing countries would not be able to bid the price up enough to reduce the consumption in the oil exporting countries. But what if the price received by the oil exporters doubled, due to competition among the oil importing countries? Exporters’ cash flow from export sales would have gone up by 50%, even with a 25% reduction in export volumes (without accounting for the internal price in the oil exporting countries). And of course, many oil exporting countries subsidize domestic consumption. In any case, the consistent pattern we have seen is that domestic demand in oil exporting countries tends to be satisfied before oil is exported.

  27. If you can’t answer a man’s arguments, all is not lost; you can still call him vile names.
    Elbert Hubbard, American Journalist

    People please calm down and stop calling people vile names. If you cannot answer a man’s argument without calling him vile names then please remain silent. I know, I am sometimes guilty myself, but at least I do try to keep my names slightly less vile. But I never use such language directed at regurlar posters on this list. Exceptions can sometimes be made for nut cases not regurlar posters here. 😉

    Ron

    • The Wet One says:

      Wowsers Ron.

      Someone must be working mighty hard at pissing into everyone’s cornflakes here.

      I can’t say I can recall ever seeing the civility fall this low here (or at TOD for that matter). I may not be remembering correctly of course.

      Then again, maybe the hurt in the oil industry is spilling over onto the forum. There’s tough times for a lot of folks. Hell, I’ve had some of it land in my lap just yesterday (domestic issues compounded by job loss directly related to the collapse of oil prices) and I myself am looking at a pay cut in the near future.

      It’s just odd that things are so huffy here this week. Maybe because it’s February? I dunno…

      • Caelan MacIntyre says:

        At the risk of insulting the good month of February, weather-wise, it has been quite the crappy one out east here…
        But, in all fairness to February, you may have noticed that I didn’t insult February directly, just its weather. ‘u^

    • Dennis Coyne says:

      Hi Ron,

      The definition of nut case is different for different people.

  28. AlexS says:

    Bakken oil drillers retreat to the core: Kemp

    By John Kemp
    http://www.reuters.com/article/2015/02/26/us-usa-crude-bakken-kemp-idUSKBN0LU10020150226

    LONDON (Reuters) – North Dakota’s oil producers have pulled back to the core areas of the Bakken formation to cut costs and maximize output amid the slump in prices.
    The number of active rigs in the state has fallen to just 121, from 190 a year ago, according to an active rig list published by the state’s Department of Mineral Resources (DMR) on Wednesday.
    The rig count is now below the threshold of “at least 130” DMR Director Lynn Helms identified last month as needed to sustain output at the current level of just over 1.2 million barrels per day.
    But more important than the raw number is their distribution across the state, with drilling now increasingly concentrated in only the most promising areas.
    Of the 121 rigs active on Wednesday, 115 are drilling in just four counties at the heart of the Bakken – Dunn, McKenzie, Mountrail and Williams.
    The number of rigs operating in the core has fallen by 30 percent from 165 on Dec. 12, according to DMR records.
    The four core counties accounted for 89 percent of the state’s oil production in December, a little over 1 million barrels per day.
    Only six rigs are operating outside the core counties, down from 17 in mid-December, a decline of 65 percent.
    Non-core counties produced just 128,000 barrels per day in December, so they account for a trivial amount of output on a national scale.
    Some analysts argue that producers will be able to offset the smaller number of rigs by concentrating them in only the most prolific parts of the Bakken.
    But with the number of rigs in even the core areas down by 30 percent in just over two months, it seems more likely production will begin to plateau or fall in the coming months.
    Once the backlog of well completions inherited from 2014 is worked off, which will take another two to three months, decline rates from existing wells should match or overtake production from the smaller number of new wells being drilled.
    ——————————-

    The number of active rigs is indeed 121, according to DMR
    https://www.dmr.nd.gov/oilgas/riglist.asp

    Isn’t the concentration of drilling activity and production in the Bakken’s core one of the reasons for rising IP rates for the play in general?

  29. Watcher says:

    The Euro is hit hard today, driving the dollar up and oil down. A bit of reversal from yesterday. Not clear why the Euro should be down so sharply. There is talk the Greeks will renege. That would do it, though there should also be a theory that the Euro is stronger without the Greeks.

    And . . . there is that 1 trillion in Euros QE scheduled to start next month. This will be a drag on oil to some degree lasting til Sept 2016.

    • Bryan says:

      Not a Euro move. US 10year sold off today. yields back above 2%. USD up across the board.

      • Watcher says:

        That followed the Euro. You have to watch it happen in real time. The 10 yr didn’t move up until after the 7 year auction tailed, which was hours after the Euro’s move.

        • Bryan says:

          With Japan (BOJ) exporting deflation and now the ECB exporting deflation mostly to the USA. It’s not just oil that’s been hammered. Just about all commodities are sharply lower everything priced in dollars. Wait till China is forced into cutting interest rates to zero or near zero. A tsunami of deflation is headed out of China an on it’s way here. Just a matter of time. I see oil going lower much lower regardless of supply and demand, cause what it’s priced in, dollars, they are going sky high. Now i totally see the FED backing away from any interest rate hikes which will slow the dollar down but will that be enough? I don’t think so. I see more QE and negative interest rates in the future.

          • Watcher says:

            You understand. Good man.

            But predictions are pointless. The 10 yr dropped to 1.65 just a couple of weeks ago as oil was scaring sub 40, because it was and maybe still is apparent than oil production is the only source of organic GDP in the US, organic meaning non stimulated.

            And thus, should oil wind up sub 40, which it may, there will be intervention. There may be intervention even before sub 40, on presumption some smart folks at Eccles have figured it out. Why would they not? Who would complain?

            And thus, again, forget predictions. The Fed no longer has any reluctance whatsoever about anything. They could backstop shale loans and presto, oil production.

            • Bryan says:

              Smart folks at the Eccles building might decide it’s better to import oil at $10-$20 than it is to produce oil at $100. At $100 how long would it take to blow right through all the shale oil? Why not just increase imports, give the dollar some value, buy oil from the rest of the world on the cheap.

  30. shallow sand says:

    Regarding CLR from 10K 2014, which I read while eating lunch.

    Average 2014 WTI Cushing $94.99
    Used in CLR PV10 calc. $84.52
    Realized by CLR in 2014 $81.26

    Oil gas mix 70 oil 30 gas & products

    Expenses used to determine net income from continuing operations $3,824,277,000
    BOE sold 2014 63,579,000

    $3,824,277,000/63,579,000 = $60.15 BOE need to break even on income from cont. operations in 2014.

    If plug in $40 oil and $4.40 gas/products, get BOE of $35.92 with 70/30 mix

    $35.92 – $60.15 = -$24.23

    -$24.23 x 63,579,000 = -$1,540,519,000 (What CLR would have lost on continuing operations in 2014 with realized oil price of $40 and realized gas/products price of $4.40).

    Also note: Annual revenue decreases $445,000,000 for each $10.00 decrease in oil price and $114,000,000 for each $1.00 decrease in gas price.

    • Watcher says:

      Looks like borrowed money.

      What’s the maturity schedule?

      • shallow sand says:

        $6 Billion, most comes due between October, 2020 and end of 2023. Some in 2044.

        • Watcher says:

          Oh I’m okay with most. I’m not okay with all. I’m pretty sure there’s a lot of 5 yr paper on the balance sheet, and it’s not being shown in breakeven calculations because debt retirement is shareholder neutral event. Debt disappears and so does cash.

          But the maturity frame has to be serviced regardless of how the balance sheet looks. In terms of cash for operations, it is a cash drain, and for the purposes of breakeven it should be included.

          • shallow sand says:

            Plan on spending $2.7 billion in CAPEX in 2015. CLR will need to borrow a billion dollars or so if price remains constant.

            • shallow sand says:

              I agree the $60.15 does not include all of CAPEX or land acquisition costs. Only includes portion taken as a depreciation, depletion or amortization deduction in 2014.

              I will try to back out 2014 deduction and add back in CAPEX and land acq. spent in 2014 and come up with another number. Busy now, just taking a ten minute break. Very cold here again today. Ready for spring for sure.

              • shallow sand says:

                Ok. CLR depreciation deduction taken (DDA & A to be more accurate) was $1,358,669,000 in 2014.

                CAPEX in 2014 was $5,015,600,000.

                So if you substitute CAPEX for DDD&A, Continental spent a total of $6,896,511,000 versus $4,203,022,000 of oil and natural gas income in 2014, excluding income taxes. Clearly borrowing significant amounts of $$ to drill and complete wells. Spent $108.47 per BOE in 2014 on expenses and CAPEX. That is not per barrel of oil but per barrel of oil equivalent. 30% of BOE is gas and products.

                We have never borrowed to drill a well. All drilling out of cash flow. However, we have borrowed to buy settled production. But we are very small and conservative.

                Pretty interesting stuff. Hard to see how they can spend 2.7 billion more in CAPEX without borrowing more, but we will see at end of 2015.

                • shallow sand says:

                  In other words, I figure they needed $140 WTI to drill out of cash flow in 2014.

                  Please poke holes in this, that can’t be right, can it??

                  • shallow sand says:

                    I probably look like I’m picking on CLR. I focus on them because I find their financials straightforward and because they are almost strictly a “shale” oriented company focusing on just two primary areas, Bakken and SCOOP.

                    I also follow them because I remember HH from the save domestic oil days. 1998-1999 is a time I will never forget, just like 2008-2009 and now.

                    I just wish they and their cohorts would slow down and say, yes, we need $100 oil to make this work.

                    We have not cut any pay or laid off anyone, except we continue to take out nothing. It is not fun. Somehow, with top notch employees, we are in the black after two months in 2015, but barely for those two months. No workovers and no drilling. Not fun. But that’s how it goes.

  31. Old farmer mac says:

    Here is the overview of the paper in question:

    This study considers the relationship between a global systemic banking, monetary and solvency crisis and its implications for the real-time flow of goods and services in the globalised economy. It outlines how contagion in the financial system COULD set off semi-autonomous contagion in supply- chains globally, even where buyers and sellers are linked by solvency, sound money and bank intermediation. The cross-contagion between the financial system and trade/production networks is mutually reinforcing.
    It is argued that in order to understand systemic risk in the globalised economy, account must be taken of how growing complexity (interconnectedness, interdependence and the speed of processes), the de-localisation of production and concentration within key pillars of the globalised economy have magnified global vulnerability and opened up the POSSIBILITY of a rapid and large- scale collapse. ‘Collapse’ in this sense means the irreversible loss of socio-economic complexity which fundamentally transforms the nature of the economy. These crucial issues have not been recognised by policy-makers nor are they reflected in economic thinking or modelling.
    As the globalised economy has become more complex and ever faster (for example, Just-in-Time logistics), the ability of the real economy to pick up and globally transmit supply-chain failure, and then contagion, has become greater and potentially more devastating in its impacts. In a more complex and interdependent economy, fewer failures are required to transmit cascading failure through socio-economic systems. In addition, we have normalised massive increases in the complex conditionality that underpins modern societies and our welfare. Thus we have problems seeing, never mind planning for such eventualities, while the risk of them occurring has increased significantly. The most powerful primary cause of such an event would be a large-scale financial shock initially centring on some of the most complex and trade central parts of the globalised economy.
    The argument that a large-scale and globalised financial-banking-monetary crisis is LIKELY arises from two sources. Firstly, from the outcome and management of credit over-expansion and global imbalances and the growing stresses in the Eurozone and global banking system. Secondly, from the manifest risk that we are at a peak in global oil production, and that affordable, real-time production will begin to decline in the next few years. In the latter case, the credit backing of fractional reserve banks, monetary systems and financial assets are fundamentally incompatible with energy constraints. It is argued that in the coming years there are multiple routes to a large- scale breakdown in the global financial system, comprising systemic banking collapses, monetary system failure, credit and financial asset vaporization. This breakdown, however and whenever it comes, is likely to be fast and disorderly and could overwhelm society’s ability to respond.
    We consider one scenario to give a practical dimension to understanding supply-chain contagion: a break-up of the Euro and an intertwined systemic banking crisis. Simple argument and modelling will point to the likelihood of a food security crisis within days in the directly affected countries and an initially exponential spread of production failures across the world beginning within a week. This will reinforce and spread financial system contagion. It is also argued that the longer the crisis goes on, the greater the likelihood of its irreversibility. This could be in as little as three weeks.
    This study draws upon simple ideas drawn from ecology, systems dynamics, and the study of complex networks to frame the discussion of the globalised economy. Real-life events such as United Kingdom fuel blockades (2000) and the Japanese Tsunami (2011) are used to shed light on modern trade vulnerability.

    Notice the qualifying words which I have CAPPED since I can’t otherwise emphasize them. This guy is agreeing with me that collapse is likely but he is not saying it is a foregone conclusion.

    Here is a very reasonable line about complex automobiles:

    Consider that a modern auto manufacturer has been estimated to put together 15,000 individual parts, from many hundreds of screw types to many tens of micro-processors.

    The author makes no mention of the indisputable fact that most of this complexity is entirely unnecessary. I have a friend who drives a 1928 model car on a regular basis and even that car could be substantially simplified and still get the job done. He gives very little consideration to the possibility of effectively and economically reducing complexity. As a matter of fact we would be JUST FINE in terms of automobiles if they were only build in different sizes with a very few variations to adapt them to different localities. No need for a heater in the tropics.

    I can’t prove it but there is little doubt in my mind that I am safer in my old truck at forty five with drums all around and no braking assist at forty five than I would be in a brand new truck with the latest antilock at fifty five.

    Again:

    As the protest evolved over about ten days, the UK’s Just-in- Time fuel distribution system started to break down. Supermarkets, which had also adapted to Just-in-Time re-supply, began to empty. Supplies and staff could not reach
    5

    hospitals, forcing emergency-only admission. If it had gone on for only a few days longer, large parts of UK industry would have shut down as the normal operation of re-supply ground to a halt. One of the most advanced and complex societies on the planet was within days of a food security crisis.

    Does anybody here think in the case of the UK that the government would not have started throwing truck drivers in jail or worse and none too gently if the strike had continued? The author is out to make his case of course and can be forgiven for glossing over this extreme likelihood.

    Again

    Supply-chain contagion would feedback into deepening and spreading financial system contagion, which would in turn feedback into further supply-chain contagion. It would impact on the various key-stone hubs we shall consider later including critical infrastructure. It MAY mean that if the keystone-hubs were not re-stabilised, within weeks an irreversible global economic collapse could be underway.

    My caps for emphasis of the may.

    The author and I agree But WHAT IF the damage was sufficiently severe, or hit just the right ‘spot’ in the globalised economy, so that not only was any process of repair undermined, but also normal functioning across the system became impossible?

    CAPS are mine for emphasis as usual.

    While we are open to the idea of businesses failing and stock markets collapsing, they are after all familiar features of our world: we generally assume systems respond proportionally to changing conditions. It is often a good assumption. However, there is a intuition that the whole of our globalised economy, under the prospective effects of energy and resource depletion, climate change, biodiversity loss, or debt deflation (the current condition within much of the Eurozone and elsewhere) will undergo a gradual if grinding contraction. THIS MAY BE SO.

    Caps again mine for emphasis.

    ONE LAST TIME.

    Finally, neither wealth nor geography is a protection. Our evolved co-dependencies mean that we are all in this together.

    • John B says:

      The argument that a large-scale and globalised financial-banking-monetary crisis is LIKELY arises from two sources. Firstly, from the outcome and management of credit over-expansion and global imbalances and the growing stresses in the Eurozone and global banking system. Secondly, from the manifest risk that we are at a peak in global oil production, and that affordable, real-time production will begin to decline in the next few years.

      Firstly, there was no credit mismanagement worse than handing out mortgage loans to borrowers with no income, no job, no job skills, no credit, no credit management skills, and no down payment. Yet this went on for several years, until the collapse of 2008. Lehman Bros. ended, but the world didn’t.

      Secondly, oil supply declines have been predicted since the early 1900s. They didn’t happen the last few years, they likely won’t ever happen until demand declines.

      • Secondly, oil supply declines have been predicted since the early 1900s. They didn’t happen the last few years, they likely won’t ever happen until demand declines.

        You are implying, of course, that the oil supply is infinite and will continue to increase as long as demand increases. If that be forever then so be it because we have a forever supply of oil.

        Supply always equals demand. And demand will drop. Demand will drop when high prices drive demand down far enough. When the production of cheap oil declines far enough, as it already has, then they must go after more expensive oil, oil like shale oil and tar sands oil. But there is a limit to the price of oil in any economy. If the price of oil gets too high then the economy gets sick and the price of oil falls. When that happens then all the producers of expensive, those that produce shale oil and tar sands oil, get sick.

        What you see then John, is exactly what you are seeing right now.

        • Watcher says:

          “And demand will drop. Demand will drop when high prices drive demand down far enough. ”

          Well, demand won’t drop. Consumption will drop.

          In fact, consumption may drop because the supply isn’t there to consume, and this may happen regardless of price.

          • You are wrong because you are using your own definition of demand. Demand is not what people want but what they demand with full payment. You can never demand what you cannot afford to pay for.

            Supply always equals demand. But like everything else, they sometimes get out of balance. When that happens either demand drops or supply increases until the two are equal again. Price is always the arbitrator between supply and demand.

            • Watcher says:

              Ain’t me that’s wrong. Must be dictionary.com that’s wrong.

              Economists created this equivalence of words some decades ago because it is a critical underlying precept to their bullshit. It rests on the presumption that there will never be scarcity of anything whatsoever if the price is high enough.

              Obviously not true, but something they can’t bear to face. Good ole Scott of the Antarctic had huge demand for food and was willing to pay any price for it, but he consumed too little and died, because it wasn’t available.

              This is the fundamental horrific concept faced by all economists. It is handled by contortion and denial.

              tra la tra la

              • Every word has several definitions. Therefore the definition depends on in which context you are using that word. In market jargon, that is when talking supply and demand, demand equals what is purchased, not what people want to purchase but can’t afford.

                And people cannot purchase what is not available to purchase, what is supplied. And what they purchase is what they consume. Therefore what they demand is what they consume.

      • John B says:

        Well, Clive Mather says oil supplies are infinite. A former Saudi Aramco chief estimated 13 – 16 trillion URR.

        I would only say that I don’t think the oil supply will decline until demand does, perhaps sometime between now and 2030.

        Clive Mather:

        https://www.youtube.com/watch?v=4iAiONBhkTA

        • He says there is enough oil in Alberta to supply the entire world for 100 years. Do you believe that? And at what price.

          Again, supply always equals demand with the price as the arbitrator. If oil were $200 a barrel you would see an oil glut because few could afford that price. But if oil were $10 a barrel there would be a dire shortage because no one would produce oil at that price.

          When demand falls depends on the price of oil. An oil scarcity will cause the price of oil to rise. Then very high priced oil will cause demand to fall. Demand depends on the price of oil. How hard is that to understand?

          • John B says:

            I wouldn’t be surprised if there is that much oil there. But I don’t believe we will be using much oil past 2050.

            Alan had posted a link to a presentation from Tony Seba in an earlier thread. Seba’s vision is more in line with my thinking than Korowicz’ vision. I’ll posted it below for anyone that’s interested.

            • islandboy says:

              John B, unlike you, I concur with Ron and others that global oil production will very likely peak this year and if not, by 2017. I really believe that there is a strong likelihood that it will happen this time, especially with the prevailing prices wreaking havoc in the oil patch.

              The point is Seba predicts that within the next fifteen years three things will change the face of BAU profoundly, to the point that.
              1) EVs will render all ICEs obsolete by virtue of being superior by just about every metric including price.
              2) Most, if not all, cars will be able to drive themself and car sharing will replace car ownership.
              3) Solar, in particular PV prices will decline to the point where no other electricity generating technology will be able to complete. This coupled by improvements in batteries along with hugely increased volumes and decreases in cost, he says will mean ALL new generating capacity will be renewable by 2030.

              One key point he makes is that, this is inevitable based on current trends and claims that, if anything, these things will happen faster than he predicted and not slower since he does not take into account any possible big breakthroughs in technology. If you follow his reasoning, the fossil fuel age will not end for want of fossil fuels but, because something superior(cheaper?) is about to supplant them. Before anybody starts ripping me to shreds, I am only stating my interpretation of his reasoning. These are not my thoughts and I do believe he has dangerously left out the possibilty that black swan events could slow or even, abruptly halt the progess he speaks of.

              I get weekly newsletter from a publication called North American Clean Energy and this week’s edition carries a story about a a study by the Fraunhofer ISE that supports Seba’s reasoning.

              Solar Energy Emerging as Cheapest Power Source in Many Parts of the World
              ” By 2025, solar power in sunny regions of the world will be cheaper than power from coal or gas. Success depends on stable regulatory conditions

              In a few years, solar energy plants will deliver the most inexpensive power available in many parts of the world. By 2025, the cost of producing power in central and southern Europe will have declined to between 4 and 6 cents per kilowatt hour, and by 2050 to as low as 2 to 4 cents, according to a study by the Fraunhofer Institute for Solar Energy Systems commissioned by Agora Energiewende. Agora Energiewende is an independent German think tank dedicated to research on the future of the electrical power system. The study uses only conservative assumptions about technological developments expected for solar energy. Technological breakthroughs could make electricity even cheaper, but these potential developments were not taken into consideration.”

              Finally I am going to make another attempt to embed a video I tried to embed in a comment to Ron’s previous blog entry. I consider him the single biggest threat to the established electricity generation companies and believe that there was a collective, huge sigh of relief from those quarters the day he died. He, in his own way, believed what Seba is portraying. Give him two minutes of your time!

              https://www.youtube.com/watch?v=wXRw2E9v1os

              Alan from

              • Islandboy, whenever I hear someone say that the scientists who say climate change is man made is on the payroll of those who wish to destroy the fossil energy industry I stop listening because I know he is spouting bullshit.

                Likewise Hermann Scheer makes that claim about scientists who say renewables cannot replace fossil fuels. He says they are on the payroll of the fossil energy companies. He makes no other argument. All he says is that it is a lie. He says that renewables can replace fossil energy and those who say it cannot are lying. That’s it, he makes no other argument.

                Simply stating that something is a lie is not an argument, it is an opinion and nothing more. Everyone has an opinion.

                Now Mr. Scheer may make an argument in other places. If so you should post that link.

            • islandboy says:

              I am sure embedding videos in post is not rocket science but, using the embed code from youtube doesn’t work and niether does the forst method that pops up doing a search on “how to embed a youtube video in a wordpress blog post”. If anybody can give me a heads up, I’d appreciate it.

              Alan from the islands

              • Aws. says:

                I think you only need to place the youtube link on its own line and WordPress automatically resolves it.

          • Doug Leighton says:

            So far 21 projects have been defined to exploit the Athabasca oil sands. If all were to reach fruition on schedule and achieve maximum production rates than about 5 million barrels of oil production per day would result by 2028. That’s pretty well the ultimate conceivable with current technology. However, at the rate projects are being shelved this will not happen. There are a number of issues that must be addressed other than oil prices. These include: pipelines and environmental considerations. I’ve no idea what is realistic but Alberta will not be supplying all the oil the world needs, ever.

            • Dennis Coyne says:

              Hi Doug,

              You are absolutely correct. I imagine they can eventually go beyond 5 Mb/d sometime after 2030, if oil prices rise.

              Do you think oil prices will remain at $60/b long term? I expect by 2018 (or sooner) Brent will be back to $100/b in 2015$, unless we are back in a major depression at that point (not inconceivable, but not highly likely until after 2025 in my opinion).

              • Dennis Coyne says:

                Actually I take that back, I think extra heavy oil (both Canadian tar sands plus Orinoco belt oil) will be around 7 Mb/d in 2030 (with maybe 4.5 Mb/d from Canada) and will peak around 2050 at about 10 Mb/d. So it is not going to get us anywhere near 77 Mb/d.

              • Doug Leighton says:

                “You are absolutely correct. I imagine they can eventually go beyond 5 Mb/d sometime after 2030, if oil prices rise.”
                Well, production could go beyond 5 Mb/d however most projections here seem to envisage a more-or-less endless plateau at 3,5 Mb/d. Oil sands are hugely attractive to oil companies but there is serious opposition from many areas as well. These include: your president, the EU and almost every Tribal Council in Canada. Regardless, the oil sands projects combined are the largest engineering project on the planet and this won’t change for a long long time in my opinion.

                “Do you think oil prices will remain at $60/b long term?” Christ Dennis, I’ve no bloody idea. Maybe Fernando is right when he says price volatility will become the norm. My economic opinions are worthless but I can’t imagine oil staying under a $100 for more than 1.436 years.

            • I guess we will have to move on beyond coker technology and start upgrading the full crude stream into lighter products. Otherwise there’s going to be a problem with the petcoke stockpiles.

              I mention it because I looked into a large scale expansion and the resulting petcoke just couldn’t find a market. We do have technology to use the full stream but it needs to have a bit of time for companies to learn how to use it.

    • Sam Taylor says:

      OFM

      Korowicz’s work generally frames the issue of collapse as a risk management problem, which is fundamentally how it should be treated. He doesn’t think collapse is a foregone conclusion, or that it’ll happen tomorrow, but he does think it is a serious enough risk that it should be analysed and taken seriously, and appropriate precautions taken. After all, even if the probability of a collapse is low, the damage would be extremely large, so from a risk management perspective it’s worth taking precautions.

      Imagine, for example, playing a roulette wheel where 99 times out of 100 you win $100, but on the 100th spin you’re bankrupted and have your legs broken. This is a game no rational gambler would play, since the negatives so outweigh the positives. But if you were forced to play it, you’d damn sure buy yourself a wheelchair first.

      As for cars, yes you’re right, we don’t need more complex cars, but it’s what we have. The infrastructure for building less complex cars isn’t there, which is the problem. The more complex cars we build today also have advantages such as greater fuel efficiency, safety and other features. Complexity brings benefits as well as costs. I must admit that I’m skeptical that we could move to a less complex state without severe hardship. Looking at biology, I’m unaware of any life form which has ever evolved to be less complex (they tended to go extinct instead), and I wonder if a similar truth would hold for societies.

      • Old farmer mac says:

        HI Sam,

        I understand what the paper is about quite well. There is not a whole lot in it I disagree with.

        I ESPECIALLY AGREE that we need to learn all we can about the various problems the author mentions and make the best plans we can manage to deal with them as some of them will inevitably occur. Maybe most of them.

        I was well read up on this sort of thing YEARS before this particular paper was written. So was anybody else who religiously followed the old TOD site and read most of the links about stuff OTHER than oil.

        I was pretty much a true blue doomer most of the time I was a member there.

        You can learn all you need to know to know to understand that evolution works in both directions by reading about just two basic kinds of creatures- whales and blind cave fish.

        There is no reason at all to believe that a society cannot evolve towards reduced simplicity.

        It has happened countless times. Of course at some point we arbitrarily decide that whatever is left is no longer the SAME society. But both complexity and simplicity exist on a continuum rather than a discrete separate states strung out along a line.

        How much of our modern economy and lifestyle would we have to lose before in YOUR opinion modern Germany or Italy or Canada has ceased to exist?

        The Romans went from controlling most of the known world to the collapse in about four centuries. Some people would argue that the collapse was a lot faster or slower. There were still people around but a lot of complexity was lost halfway thru the first two of the four centuries in question.

        Whereever you put the cutoff point I will wager that the next five guys you ask will put it a far piece up or down the simplicity / complexity scale.

        Whales have vestigial rear limbs and cave fish have vestigial eyes. The whales once had working rear legs and the cave fish once had working eyes. We humans have vestigial canine teeth although we hardly ever bite anybody these days. Things were no doubt different a few hundred thousand years ago. We probably bit each other occasionally as well as gladly chewing a hole thru the hide of any animal that fell into our clutches before we invented stone choppers. 😉

        One of my neighbors raises cattle that are known as polled Herefords. A couple of the ancestral cows in this line once upon a time were born without horns due to a mutation. This simplifies a cow quite a bit but it is not a good thing for a WILD cow that NEEDS her horns.

        It is a good thing for cattle guys though because hornless cows convert more feed into salable meat. And although hornless cows can and have occasionally killed farmers they are safer than the horned variety by a wide margin if you upset one by let us say trying to take away her calf or trying to load her on a truck. I got knocked silly and stomped by a runaway cow once trying to stop her. If she had had horns I would not have tried so hard to block her path but not everybody is as cautious as I am around cows. They have JUST ENOUGH brains to do something crazy once in a while.

  32. Old farmer mac says:

    The only thing in the entire paper that I really disagree with is that last final line.

    Talking about sheep parts is fine .

    But the author does not address how many parts are non essential to the survival of the sheep.

    There is a substantial possibility that some countries CAN disengage from world trade and that they either have or can acquire by fair means or foul any resources they MUST have to avoid collapse.

    Now it occurs to me that I ought to say what I PERSONALLY consider collapse. To me collapse is no grid no hospital no internet no water no sewer no food in stores people shooting each other right and left on the street.

    So long as the grid is up and the water and sewer are working and people are not dieing in large numbers from exposure epidemic starvation or violence it is not collapse in my mind.

    I agree with ninety nine point nine percent of the paper. But there is little or nothing in it of any consequence that a regular at the old TOD for a few years would find new.

    • Mac, it would help a lot if you would inform the readers of what paper you are talking about, and to whom you are addressing your comments to. I am sure most of them have absolutely no idea.

      • Dennis Coyne says:

        Hi Ron,

        I knew exactly which paper and who Mac was talking to, I am thinking that Futilitist knew as well.

        • Dennis, you did and I did but it is extremely doubtful that everyone did. You always start each post by naming the person you are addressing. This is a very good and thoughtful process. I wish everyone did this. And if you are talking about a paper or link, you always name it. You need to do this especially if your post is a new post, not right below the post you are responding to. That is extremely courteous of you. I really wish everyone was as courteous.

          Dennis, I am only requesting clarity in peoples posts. Things are confusing enough without people starting a new post and just assuming everyone knows who he/she is addressing and what publication they are talking about. Some do, some don’t. It only takes a little extra effort to make sure everyone does.

          • Dennis Coyne says:

            Hi Ron,

            I agree. I also think we should give Mac a little leeway cuz I like his posts.

            In fact I like most of the people who post here regularly even if I don’t always agree with everyone. In this particular case I thought it was pretty clear who Mac was addressing and what he was talking about, but sometimes people are not very clear (especially me.) So your point is well taken.

            • Futilitist says:

              Dennis,

              I think comments here should be judged on their merits.

              “In fact I like most of the people who post here regularly even if I don’t always agree with everyone.”

              But you clearly don’t like me.

              You want to treat this like some kind of social club. It isn’t. Social clubs may be lots of fun and all, but they aren’t very good at figuring stuff out.

              Social clubs are very good at Groupthink.

              • Dennis Coyne says:

                Hi Futilist,

                Think of this as a face to face conversation. If you speak to people the way you speak to Old Farmer Mac on a regular basis, you must be very lonely. Try to be polite.

                • Futilitist says:

                  Hi Dennis.

                  “Think of this as a face to face conversation.”

                  No. Because it really isn’t one.

                  This is about trying to understand reality.

                  “Try to be polite.”

                  Try to understand collapse.

                  You can’t run away from it.

  33. BC says:

    http://www.platts.com/latest-news/oil/newyork/hollyfrontier-expects-cushing-crude-storage-to-21051116

    Gents, lots of high-cost supply there that required producing and then consuming 65-80% of incremental production since 2012 at $75-$100/bbl to achieve the unsustainable production of 6-9Mbd. Oops!

    The net energy cost of energy production became uneconomical in 2011-12, and the energy sector borrowed hundreds of billions of dollars in the meantime, including surging bank C&I loans, to produce that incremental supply that the US economy outside of the energy sector did not need, and could not afford, at the necessary price to be profitable to produce.

    Definition: Peak Oil, gents.

    That is, we can’t afford to produce 9Mbd, consume 19Mbd, AND grow real GDP per capita at a rate sufficient to permit the further growth of unprofitable production of costlier, lower-quality light crude substitutes, which further implies that we can’t afford to build out a “renewables” infrastructure AND simultaneously maintain the liquid fossil fuel infrastructure required to permit growth of real GDP per capita AND “renewables”.

    • Caelan MacIntyre says:

      “Post 2008, nothing works…

      …Everything you see is unprecedented…

      …growth is measured in parameters created from thin air. They don’t have to mean anything at all…” ~ Watcher

      “…there is an avalanche of pontificating babble from people who don’t know anything, but sense a departure from their lifetime’s norm…

      They can’t trace it back to oil scarcity because the sheer quantity of obfuscating BS…

      In the old normal, there were no glaring, screaming items of evidence so profoundly at odds with a prevailing narrative of sunny skies and booming prospects…

      Why was all that money printed… with the EU about to embark on another trillion over the next 16 months… if everything was recovered?

      We are denied legitimate data for analysis of most things. Simply that. The definitions are being smashed. ~ Watcher

      “It seems a bit like a catch 22…

      …where renewables might need a certain complexity-level of BAU for manufacture, distribution, maintenance, repair, replacement and disposal, but they won’t sustain that complexity-level of BAU. This may be what Nicole Foss and others might have described as a ‘receding horizon’.
      In any case, I welcome a simpler life, where work means doing things simply, locally and with/for true community and stuff like that.” ~ Caelan MacIntyre

      A smooth descent appears less and less like PV’s, EV’s and zombie-happy motorings to the, often, relatively-useless, wage-slave/government-tax/cash-cow jobs, and increasingly about extricating people from the Platoesque (Plato’s Cave) shackles of the crony-capitalistic plutarchy (symbiotic government-cum-industry coercive people-pimping).

      • Caelan MacIntyre says:

        “Central government — the Central State — has been in the expansion mode for so long that the process of contracting government is completely alien to the nation, to those who work for the State, and to those who are dependent on the State.” ~ Charles Hugh Smith

        IOW, it appears as though large-scale, centralized government– but I would add, large-scale industry– are going to have to chop off a few limbs in keeping with peak oil… How does that work? How does one perform that kind of operation on oneself?

        Possible answer: They don’t. They (postpone the inevitable by) simply print(ing) lots of money to keep themselves in business/intact.

        If correct, what are the results? An orca-fin-like curve on collapse/decline?

        An undulating plateau of peak centralized government?

        • Caelan MacIntyre says:

          “Possible answer: They don’t. They (postpone the inevitable by) simply print(ing) lots of money to keep themselves in business/intact…”

          …And lie, deceive, distract, etc..

          “An undulating plateau of peak centralized government[/industry]?”

          Thanks, OFM, for the brain comment, but this is looking pretty simple, and to echo Ron’s recent mention, Occam’s Razor.

    • Dennis Coyne says:

      The renewables are a part of real GDP per capita. As fossil fuels deplete, financial capital previously used for fossil fuel extraction, will be used to build renewables. If private industry cannot get the job done, the government will step in.

      • I imagine some oil companies will start building biofuel pipelines to gather the fuel and fake it to blending centers. But they won’t get into the agricultural sector.

  34. Old farmer mac says:

    we can’t afford to build out a “renewables” infrastructure AND simultaneously maintain the liquid fossil fuel infrastructure required to permit growth of real GDP per capita AND “renewables”.

    The odds in my estimation is that you are probably right if you are speaking in global terms. This is not to say that transitioning to a renewables based economy is going to be IMPOSSIBLE but rather that actually doing it is going to be a very very tough job that most likely (again in my estimation) is going to require a lot of ”’ blood , sweat and tears” meaning of an effort organized on a war time economy footing and even then I strongly doubt most countries are going to manage it successfully.

    A few countries most particularly the US and Canada might pull it off due to being big enough strong enough and still well endowed enough with depleting resources to ”giterdone”.

    Our best hope is that a series of Pearl Harbor wakeup events will smack us hard upside our collective head – hard enough to get the gravity of the situation thru to the average man or woman on the street before it is too late.

    • BC says:

      Mac, I sympathize with your perspective, but I think we’re 40-50 years too late to the prospect of achieving what you describe, not by happenstance but by design by the rentier Anglo-American, German, Dutch, Swiss, and Milanese Power Elite and their “Plan” that goes back at least as far, if not a century or more.

      As for a Pearl Harbor-like “wakeup event”, what the rentier Power Elite top 0.001-0.1% have in mind as part of “The Plan” is infinitely larger in global scale than Pearl Harbor, 9-11, or 2008-09 for the next act. None of us can prepare for “it”, but we won’t know that until “it” occurs, which makes “it” largely unspeakable, literally.

      • Caelan MacIntyre says:

        If we, OFM, etc., are talking about PV’s and EV’s, but at the same time, more localized economies, where do EV’s and PV’s and resources come from? China? All over the world in/predicated on a global BAU economy? That sounds contradictory.
        Also, it would seem ‘growth’ is needed for those. Post peak oil, where does growth come from? Renewables? Where?
        I think I see contradiction and the writing on the wall.
        You?

        Many keep talking about WW3, but with regard to BC’s mention of the .01%, and the unspeakables, and in the contexts of population-control and psychosociopathology, I wouldn’t put it past the implications.

        “The tragedy of modern war is that the young men die fighting each other – instead of their real enemies back home in the capitals.” ~ Edward Abbey

        “Control the oil and you control entire nations; control the food and you control the people.” ~ Henry Kissinger

        …Precariousness everywhere one looks…

        • Old farmer mac says:

          Caelan you are without doubt a man possessed of a working brain and willing to use it.

          Abbey is one of my favorite writers although I seldom mention him in this forum.

          You are right that the situation looks very very dark indeed from lots of different vantage points.

          There is a substantial possibility maybe even a probability that even the US and Canada will collapse.Avoiding it is going to take some cosmic scale luck but they say God looks after little kids drunks and the USA.

          If only it were true …..

          But maybe our luck will hold and we will get the leadership and the Pearl Harbor wakeup events necessary to get us started before it is too late and we will pull thru.

          As I see things the real value of a blog such as this one is that there are an unknown number of people with brains reading it -some of them young people who will eventually wind up in positions with power and influence . One of them might eventually be a key congressman or the head of a visionary company such as Tesla.Maybe even a dozen of them.

          Some people keep their mouth shut and work within the system until they have power enough in the system to change things. The OLD GAURD eventually retires and dies and the new blood can then after a fashion emerge from the closest as for example demonstrated by some hard core right wingers coming out in favor of legalization of pot and renewable energy recently. I don’t see any young republican staking his political career on pot prohibition from here on out. A good many tea party types believe in pv not because they believe in renewables but because they believe in controlling their own lives to the extent possible rather than being at the mercy of big business.

          I don’t think it is realistic to hope for most of the world avoiding a collapse in the medium term .I do take what you have to say seriously. Whatever disagreements I might have with you are mostly a matter of opinion as to time and scale and random events rather than fundamental.

          IF everybody had the same opinions about all the horses in the grand race of existence then life would be unbearably dull.

          • Caelan MacIntyre says:

            For the past few summers, I have been casually studying on my own, wild edibles and medicinals. It has made my bike rides and rollerblades in the countryside more fun and interesting. Very recently, I’ve developed a growing curiosity with natural antibiotics, anesthetics and pain-killers, (and old apothecaries).
            Serious talk here and there about lifestyles, post collapse/decline, inevitably leads to issues surrounding medical care and prevention.

            Some of you might have a decorative bush on your property known as barberry. Apparently, its roots and other facets contain a reasonably-potent antibiotic, called ‘berberine’ that is even used in the western medical establishment. There are other plants that have it too…

            “Berberine is a quaternary ammonium salt from the protoberberine group of isoquinoline alkaloids. It is found in such plants as… Berberis vulgaris (barberry)… Hydrastis canadensis (goldenseal), Xanthorhiza simplicissima (yellowroot)… (prickly poppy), and… (Californian poppy). Berberine is usually found in the roots, rhizomes, stems, and bark…

            Berberine is considered antibiotic. When applied in vitro [it] inhibits growth of Staphylococcus aureus and Microcystis aeruginosa, a toxic cyanobacterium.

            Berberine is a component of some eye drop formulations. There is some evidence it is useful in the treatment of trachoma, and it has been a standard treatment for leishmaniasis.

            Berberine prevents and suppresses proinflammatory cytokines, E-selectin, and genes, and increases adiponectin expression which partly explains its versatile health effects. Berberine is a nucleic acid-binding isoquinoline alkaloid with wide potential therapeutic properties.” ~ Wikipedia

            That said, I have been toying with the idea of a self-administered natural medicine medical curriculum. As it is said about knowledge of various forms of fermention/distillation, for example, it could come in handy. Maybe even integrate the two…

            “Here, try this with this and, if you’re still alive and coherent, call me in the morning…” ‘u^

            • ezrydermike says:

              now this is some good stuff. i’m definitely interested. I have some friends that are doing something similar with wild plants including edibles, ag supplements such as insect supports. ever eat thistle?

              • Caelan MacIntyre says:

                Hi ezrydermike,
                I have not tried thistle, but hear it’s edible… Have you? How did you have it if so, and are there any medicinal properties beyond the usual nutritional value?
                I have tried a fair bit, including stinging nettle, which is fine after cooking or as a tea. I seem to recall it as being mildly medicinal as well.

                Here in Nova Scotia, which I am relatively new to, I found that they have a low-lying plant called wintergreen that grows like a weed in the woods all over. Apparently, wintergreen has something like the active ingredient of aspirin. In any case, one summer, I went crazy with it and electric-blended/sieved the hell out of it into a semi-frozen milk-custard concoction (essentially the base for ice cream) for a delicious wintergreen milkshake.

                “Thirty ml (about 1 fl oz) of oil of wintergreen is equivalent to 55.7 g of aspirin, or about 171 adult aspirin tablets (US). This conversion illustrates the potency and potential toxicity of oil of wintergreen even in small quantities.” ~ Wikipedia

                This is the oil, though, as opposed to the plant. Still, this illustrates the caution one must exercise with regard to this kind of thing. I would also advise caution when picking plants in the wild. With wintergreen (and other plants), I would only pick a couple of leaves per plant and never uproot them. After a couple of weeks, the same plants demonstrated surprising new growth. (Naturally, it is important to always consider sustainable/regenerative practices.)

                • ezrydermike says:

                  no, I am a real novice at this, more at the sassafras tea / dandelion wine level. I have a good friend up near Olympia who is really into this stuff. However, she sold me on kale and I have not been able to prepare that in any way that tastes good to me. She often does woodland walks and wild harvests and comes up with all kinds of stuff. She is a bit of a role model for me, but really miles ahead of me in her knowledge.

                  I still have a long way to go in the nettle and thistle department.

                  http://www.eattheweeds.com/thistle-touch-me-not-but-add-butter-2/

                  • Futilitist says:

                    Hi ezrydermike.

                    “I still have a long way to go in the nettle and thistle department.”

                    We all do. Transitioning to a simpler lifestyle is extremely non-trivial.

                  • Caelan MacIntyre says:

                    Green Deane’s fun and I have his episode 9 cider video and accompanying text on my laptop. Still have yet to make cider.

                    How I do it is just pick something that grabs my curiosity. Maybe it’s simply something I haven’t yet identified. I take it (and maybe a few other specimens if I am motivated) home and try to look them up online. It’s hit or miss, but mostly hit, and sometimes something will be recognized online that was recalled being seen in the field, so sometimes identification happens in reverse.
                    Anyway, it’s enjoyable enough that one can ‘suddenly realize’ that they’ve accumulated a fairly large body of knowledge and feel less of a novice ‘overnight’ (even though I myself still feel like one).

                    Here is my first-ever wintergreen tea. It was not an appropriate pestle-and-mortar for my purposes and I broke the mortar shortly thereafter. ‘u’

                • Old farmer mac says:

                  Some very nice old lady out there somewhere in rural America is still growing black and white poppies from seed handed down from her grandmother five or six times removed.

                  I have been looking for some black and white poppies for years without finding them though.

                  It is perfectly legal to raise poppies so long as you do not MANIPULATE them in any way intended to manufacture opium.

                  And so far is it goes you can apparently get some opium from the common red variety which is quite common . Seed can be bought legally just about anywhere. The yield is supposed to be pretty low though compared to the black and white ones.

                  In the event of collapse nobody will give a damn if you have opium poppies except to either murder you for it or offer you their virgin daughters for some of the poppy seed.

                  Opium poppies along with plain old pot are probably the two most useful medicinal herbs in the world.

                  It is a truly tragic that both of them are illegal to the extent that a physician cannot prescribe them without taking a chance on going to jail for doing so most places.

                  Anybody who is a hard core doomer certainly needs to know all he can about both pot and poppies.

                  • Caelan MacIntyre says:

                    Agreed, OFM. I looked cursorily into poppies and if recalled some potent anesthetics come from them. Morphine?
                    You may be able to find seeds for any kind of variety online if you fiddle around.
                    Monolithic centralized governments and their unethical legal structuress are no match for decentralized networks of strong, close-knit communities.

        • Dennis Coyne says:

          Hi Caelan,

          Those can be manufactured in the US and Canada, EVs, PV, Wind Turbines, the US and Canada are capable of manufacturing. None of this would happen overnight, but in a crisis it could happen pretty quickly.

      • Old farmer mac says:

        I don’t have time to properly compose a good reply right now but I will put one up tonight unless something prevents me.

        My fault probably but I am not quite getting the message about your “IT” the global elite has planned for the world.

        I am not so foolish as to believe that the elite is going to give a shit about anything except their own interests but on the other hand there ARE many highly intelligent people among the elite and they are also mostly smart enough to listen to their own personal lawyers doctors accountants engineers etc.

        So maybe the elite is at least partially awake and thinking to the extent that they will treat a good portion of the rest of us well in the sense that my Old PA fed his mules well. You have to take good care of draft animals in order to get the most work out of them.

        And in the long run the things that enable the elite to really enjoy life and their wealth are scale dependent. A hypocritical Pope can have a dozen mistresses and fifty kids if he wants. Nubile young virgins are a sort of wealth that money will always be able to buy.

        But air travel and highways in the modern sense are probably impossible without economies of scale that mean the elite can have them only if a substantial number of the rest of us have them as well.

        Beyond that I do not personally believe that the elite actually do totally control political action or that they will be able to control politics totally.

        We have just recently witnessed a HUGE chunk of the elite get its ass handed to it on a platter in the form of a big move toward socialized medicine here in the US for instance. The insurance industry loves it since that industry is has a big hog’s position at the trough but that WILL NOT LAST. Eventually we are going single payer, aka govt funded and ” FREE ” ha ha you can bet your last can of beans on it.

        Serves the industry right and ha ha is in my favor given that I am old. Better for every body in the end except the people getting rich out of health care. The elite could not stop it. Good intentions but lousy execution for OBUMBLER and his team and it has turned out to be a Phyrric victory. The democrats will arise from the ashes again but it will probably take a decade or maybe even longer.

        A comment on possible Pearl Harbor events will be forthcoming soon.

    • not clever says:

      Mac,

      I’m a longtime lurker here and at the old TOD. I’ve been following your thesis of “uneven collapse with USA/Canada possibly (probably?) hanging together as a police-state that builds up renewables thru WWII-type effort in time to avoid collapse”, as well as the harsh back-and-forth between you & futilitist’s “fast, soon, unavoidable global collapse to the Olduvai Gorge (OMG its the OG, my apologies in advance for the bad joke…)

      Your last paragraph sparked my curiosity and “how might that work?” brain. You said:

      “Our best hope is that a series of Pearl Harbor wakeup events will smack us hard upside our collective head – hard enough to get the gravity of the situation thru to the average man or woman on the street before it is too late.”

      Thinking through that analogy, Pearl Harbor was a clear case of aggression by an expansionist enemy, with no entrenched powerful allies within the USA that I know of. It clearly sparked the strong human tribalist “us vs them” instinct that you talk about, which is how the “average person on the street” quickly and clearly got the message.

      Peak Oil, though clear to me and most on this site, is about as clear as mud to the “average…”, and although a fairly simple concept (I think), still an order of magnitude more complex and nuanced than “us vs them”. I’m racking my brain to imagine what type of event or events could galvanize a populace to drastically change course economically. The only obvious catalyst would be some sort of Middle East war or oil embargo, which would seem to lead to the more obvious war for oil (us vs them) rather than the culturally introspective “retool for renewables” push.

      Bottom line, I’d love your analysis to be basically correct vs futilitist’s. Can you flesh out any of these “Pearl Harbor wakeup events” and how they might actually wake up more than 1% of the populace? Or perhaps if that 1% is the top 1% then they just go ahead and do whatever they want… But it appears likely to me that almost all fossil fuel industrialists (large entrenched interest within the top 1%) would oppose any WWII style “retool for renewables” push to the point of a new civil war if necessary.

      Thanks,
      not clever

      • Dennis Coyne says:

        Hi Clever,

        The obvious crisis is another Great Depression brought on by peak fossil fuels or a financial collapse (or both together). Once it is clear that energy constraints are a big problem and a crisis has made it clear, the government can wield a lot of power to affect the appropriate changes that need to occur. It will not be smooth, it will not be easy, there will be huge suffering, but I think there is a chance that it can be done.

        This does not mean getting back to BAU, it means we transition to something different, more energy efficiency, less waste, durable well made goods, a simpler life style with less travel and a more localized economy.

        • Caelan MacIntyre says:

          And many working for industry and government to give themselves pink slips, yes? How does economic contraction work in the land of greed and vested interests?

          • Dennis Coyne says:

            Economic contraction never works very well for the majority. For individuals with no debt, deflation is nice, but that usually goes hand in hand with low employment and general misery.

            • Caelan MacIntyre says:

              My point was that contraction is also going to affect government and industry– maybe the most in some ways; they won’t like it; and they will do things to avoid it.
              So, what happens when we get contraction in a context where it is resisted by TPTB?

        • Futilitist says:

          Hi Dennis.

          “Once it is clear that energy constraints are a big problem…”

          It is already very clear that energy constraints are a big problem. Because of this, you have proposed that we transition to solar, etc. But that transition will take some years by your own estimations. If you now expect a severe economic crisis, you should go back and make some new projections that account for it.

          “…and a crisis has made it clear,…”

          We had an oil spike, a stock market crash, a credit freeze, a bailout, a recession, and endless QE. That sounds like a pretty big crisis to me. We are in the middle of that crisis right now. Where is Leviathan? Still sleeping and waiting for a bigger crisis to wake it up. A potential financial collapse will make Leviathan’s job that much more difficult.

          “….the government can wield a lot of power to affect the appropriate changes that need to occur.”

          Since the government has chosen not to inform us of the seriousness of the current crisis, and instead decided to keep us uninformed and maintain BAU, the sudden morphing of our perceived to be democratic government into all powerful Leviathan may not have the effect you think it will.

          It feels like a war sometimes in this very discussion. Everyone has a different picture of reality. Some people don’t think there is anything to worry about at all. Some people think we are doomed. We can’t even come to a reasonable voluntary consensus on this page about the nature of the dilemma, let alone how to react to it.

          If Leviathan suddenly rears it’s ugly head and tries to force us to cooperate, how do you think people might react? People will resist. And violence will be Leviathan’s response. Further resistance will be the answer. And so on. Meanwhile, the economy (the metabolism of the super-organism called Leviathan) is failing, and other Leviathans are making war on our Leviathan. War + Civil War + Economic Collapse = Dead Leviathan

          Many here won’t be as glad to see the coming of Leviathan as Old farmer mac will be. But that is okay with Old farmer mac. Leviathan will destroy us.

          I hate to say this out loud, but I am coming to think that Old farmer mac is a Leviathan lover. That loosely translates to: Fascist.

          • The Wet One says:

            While this discussion does very much mirror the current hullabaloo over the dress (is it white and gold or black and blue) in certain respects, I can’t help but wonder if this post was just a clever cover for a drive by ad-hominem.

            Merely pointing out the fact that when roused the Leviathan can do a great many things doesn’t make on a fascist. After all, the Chinese regularly demonstrate what Leviathan can do and I’ve never heard that accusation leveled at the Chinese.

            OFM, as I’ve understood him, seems to say that if things get bad enough, American and Canadian governments, by taking a very firm hand on the economy (and it’s happened before. See WWII economic controls by the same two governments for example), can prevent or seriously mitigate collapse.

            You seem to want to call that fascism for reasons I can’t fathom. I’d call it a realistic appraisal of the pragmatic responses governments can take in reaction to the event of collapse. Or do you really think the governments are going to sit around and do nothing? I suppose it’s possible, but I rather doubt it. Governments got pretty bloody active in a sluggish sort of way in the Great Recession. When facing full on collapse that can’t be handwaived away by anyone, I’m pretty sure our governments are going to be doing a whole lot of things trying to mitigate or stave of collapse or any one of its many attendant ills.

            • Futilitist says:

              The Wet One,

              I don’t doubt the rise of totalitarianism as a response by governments to peak oil. I believe that is already happening.

              I feel quite certain that Leviathan, like renewable energy, will fail. This dilemma is just too much for anything humanity has to throw at it.

          • Old farmer mac says:

            You are still a fucking idiot attacking me personally rather than what I have to say. Suit yourself.

            The weather forecast is bright and sunny and I have the day off and will enjoy it immensely . In the meantime you are such a miserable little worm that you will be peeking furtively out of your hole trying to make yourself feel better by knocking down somebody else.

            I will be out enjoying myself even if it is a bit chilly.

            I might even legally murder Bambi and EAT her as well if I can catch her chewing on my young fruit trees. What does THAT suggest to you ?

            • Futilitist says:

              Hi Old farmer mac.

              The thing between us is not personal. We each have different reasons for being here. I may seem a bit aggressive at times, but that is because I think the world is going to end soon. I don’t want to waste valuable time. That is just how I see it.

              I care a lot about science and ideas. I don’t like bullshit.

              Speaking of bullshit, your rebuttal of Korowicz was pathetic. I can tell that you really didn’t read it. That’s okay. I don’t really care to pursue it further with you.

              Like I said, I just care about the ideas. We don’t have to have any further conflict from here on out. Just be ready to back up what you say here.

              “I might even legally murder Bambi and EAT her as well if I can catch her chewing on my young fruit trees. What does THAT suggest to you ?”

              That suggests that you care about your fruit trees and also enjoy venison. It suggests you know how to hunt. It suggests that you like to be efficient and get the maximum benefit from your environment. It suggests you are a darwinian thinker. Having young fruit trees suggests you plan ahead. It suggests that you are independent and own property; i.e. you are tough and self sufficient. It suggests that you might be fishing to find out if I have certain sensitivities or ideological leanings. It suggests that you think that eating Bambi might seem shocking to some, but you don’t give a damn what people think. It suggests that you feel free to say whatever you want. It suggests that you think liberals are pussies. The phrasing “legally murder Bambi” suggests that you are a big believer in the right to bear arms. It suggests you are fishing for people who believe in the things you do. It suggests that you might be a libertarian. It suggests I hit a nerve.

              I could go on, and that’s just what a couple of lines suggest to me. Imagine what I might find if I were to analyze an entire post of yours, or start cross referencing your posts for these sorts of cues all the way back through the TOD database. But who has time for that shit.

              Anyway, go ahead and bag a deer, and light a bowl. Sounds like fun to me. If I weren’t so busy peeking furtively out of my hole, I’d consider joining you, but I’m afraid you might shoot me. 😉

  35. aws. says:

    Capex Tracker. A lead indicator of global warming

    What is Capex Tracker?

    Building on our Carbon Supply Cost Curve reports, Carbon Tracker are now launching a new tool to monitor changes in capex flows and ultimately their impact on carbon and global warming: Capex Tracker.

    Capex Tracker 1.0 will start tracking the aggregate value of capex changes – at this point in time the focus is on cuts and deferrals in company 2015 budgets, giving us a broad overview of the investment direction. It will also dig into more analytical detail monitoring the evolution of capex projections over time. For example, the chart below shows that, since the first quarter of 2013, 2015 capex budgets for some of the major oil and gas producers have been revised downward by $32.7 billion (i.e. 10%). The Background Paper contains more detail.

    Some relevant considerations can already be made based on the first findings.

    Spurred by the need to conserve cash amid a sharp decline in oil prices, the last quarter of 2014 alone saw $12.4 billion stripped away from the 2015 capex budgets of some of these companies.

    • D.Blakely says:

      Drill baby drill, I need more heating oil to fight off all this global warming we’ve been having here in Rhode Island this winter.

    • John B says:

      A couple of key points from the article:

      We know that renewables are already becoming competitive with fossil fuels.

      We also know that energy-efficiency solutions such as battery storage and electric vehicles are improving and becoming more accessible. All these trends are likely to shrink fossil fuel demand and the capital invested today into future oil, coal and gas production projects is at risk of becoming stranded.

  36. Allan H says:

    At the current time WTI is priced at $48.75 and Brent at $60.05. Down 2.82 and 1.58 respectively. It appears the storage glut is having an effect greater than the loss of drilling rigs.

  37. Ronald Walter says:

    Good morning. Just for fun, all in jest, read the following and take it with a grain of salt, comic relief. Don’t take it seriously, it’s sarcasm (with some truth mixed in with lies).

    A crater formed by a meteorite smashing into the earth’s surface will have a unique pattern and physical evidence contrary to the surrounding geology will be present, i.e. space born material, possibly nickel, possibly steel, could even be one million metric tons of pure gold, material in one spot foreign to what surrounds it, i.e. native soils, parent material, bedrock. Heat fusion and facts observed to conclude that a meteorite from outer space formed the impact crater.

    Methane pockets that explode and form a crater are earth originated. Probably some heat source beneath the subseafloor, like magma flows, volcano action.

    The arctic subseafloor is losing its permafrost due to the earth’s crust being subject to some warming down there, but that is another lie. Global Warming from anthropogenic origins causing subseafloor permafrost melt is the next lie to be disseminated as truth. You just watch, it’ll happen. Climate Change supporters know no bounds of chicanery, subverting the dominant paradigm is their job. If they can lie all of the time, they will, and so can I.

    It is with great joy that I can make up stuff using facts, not some fiction, a lie from some liar. My own lies are better, even better than the truth. Can’t beat lies, especially when you believe them. Amounts to propaganda, but don’t tell anybody.

    Repeating lies over and over again is better, much more convincing than telling the truth, nobody will believe the truth, just the lies. When you want power, lie. Snake oil sells. Just ask Jack Crab.

    The outside temperature today is doing the job of making global warming just another prevarication broadcast far and wide by know-nothing pinheads. The current weather stats report cold that is as cold as ice, no mercy, take no prisoners in your face deal with it reality stubborn as a mule facts cold. If I’m lyin’, I’m dyin’.

    Those pigheaded stupid fools acting like ostriches with their heads in the sand, calling themselves, of all things, scientists, have no clue, and bad goes to worse which goes to worst, all because politicians believe those scientists and their blatant lies, the junk science.

    When politicians listen, they will listen to every lie and accept it as truth, be hoodwinked believers, which is no big surprise to anyone. Can’t blame politicians for their stupidity, they just repeat lies to the voters back home, they can’t help it. You end up with someone like Owl Gore, so it is easy to see what really happens.

    Look at the windy wind industry, it habitually applies lies to get what it wants, profits, money. The wind lobby lies all of the time about bird kills and efficiencies, uses science as a crutch and a tool to promulgate the profligate lies and makes money to boot, all supported by lies and nothing else. The same for PV, lies about efficient systems and efficiencies are measured only when the sun shines, lies stacked on lies that reach the moon.

    There is corruption in anything.

    Follow the money, backed by lies.

    The lie meme never dies. No amount of science can stop the lie meme.

    With any luck, Peak Oil will rise above the propaganda and lies, for its own good.

    Truth is Lies

    War is Peace

    Ignorance is Strength

    Freedom is Slavery

    math is math

    Pavlov’s dog was at Peak Drool, Slobber Syndrome.

    Sarcasm over.

    The first casualty of war is the truth. Ask Brian Williams, he knows. Everybody was believing his lies as truth, until truth willed out, then the lies were just lies. Bad propaganda, real bad.

    When you lie, make sure the lies remain lies, accepted as truth, and the truth remains hidden.

    It works until it doesn’t. Fools never learn.

  38. Old farmer mac says:

    ”It works until it doesn’t. Fools never learn.”

    Another great job Ronald , you are getting really good at your trade. I can’t remember seeing a more entertaining and informative mix of fact fiction sarcasm humor and kitchen sinks anywhere else.

    I never quibble or debate you because I can never be sure exactly what you really mean and what you are merely saying for effect.

    That ambiguity was the very essence of the court jesters success and longevity. He was generally the only person who could say just about anything in the face of power back in the days of kings. This made him a very useful guy because it allowed everybody present to watch everybody else and figure out a lot about which way the wind was blowing without necessarily speaking out personally and risk going to the dungeon.

    • Allan H says:

      It is very obvious what he means.

      • Dennis Coyne says:

        Care to explain it, not obvious to me by any means.

        • Dennis, it’s a statement about a guy named Pavlov who had drooling dogs and a windmill surrounded by birds. Or something like that.

        • Allan H says:

          Read paragraphs 3, 4, 7, and 9. Forget the rest, it’s flim-flam to confuse and pretend otherwise but the message is strong climate-denier, science-denier and renewable energy denier. No reality to it but much like the conservative radio stations, constant propaganda to sway the weaker, less informed minds.

        • Futilitist says:

          “Care to explain it, not obvious to me by any means.”

          ‘math is math’

          Use some and figure it out.

    • Futilitist says:

      Old farmer mac,

      This comment section works better if you respond directly to comments with the reply button instead of going for the widest possible format for your answer.

      That way your answer actually appears next to the comment you are answering.

  39. Longtimber says:

    Meanwhile back in Texas. We don’t need no stinking LTO for our GTO.
    http://www.zombie222.com/

  40. Old farmer mac says:

    Here is a somewhat off topic link that does relate very well to the debate about collapse and it contains some of the most impressive photos and video I have ever seen- that ANYBODY except space program insiders has ever seen.

    http://www.businessinsider.com/sdo-amazing-pictures-of-the-sun-2015-2

    There is one little paragraph right in the middle about a CME in 2012 that came within a week of REALLY stopping all the cars with stick shifts going up the long grade of industrialism. One part in fifty two of our orbit around the sun. I forget how fast the sun rotates on its own axis. Around once every three or four weeks?

    We came very close to a more or less instantaneous mad max scenario and this would have been one where Leviathan would have been nearly helpless. Without electronics and without motor vehicles even Leviathan is pretty much helpless in modern times. I don’t see much hope of changing this situation beyond the fact that the military establishment has managed to harden up a significant amount of it’s own dedicated infrastructure.

    If I hear about a killer solar storm on the way quick enough I can get SOME of my stuff into an impromptu Faraday cage consisting of an enclosed detached barn with a steel frame and aluminum siding and roof. I don’t really have any idea if that will be enough to help or not.. I have read that a cage must be shaped properly just like an antenna in order to be effective.

    Hopefully somebody with expertise will comment about this possibility.

    Incidentally the ONE politician in this entire country who has put more effort into getting something done in terms of protecting us from a CME or an EMP nuclear attack is Newt Gingrich.

    Every body has a piece of the truth.

    • Allan H says:

      First of all, most of the charged particles of even a massive CME would be deflected by the magnetic field of the earth. Great Auroras but I doubt if local electronics will be effected, the charge density would have to be really high at the surface. The reason that some power grids might get overloaded is that there are thousands of miles of wire strung that can collect the charge, like giant antennas.

      Anyone putting a satellite up in space without hardening the electronics is stupid and risking a huge investment.
      All in all there might be some damage, some loss of power. I don’t see transformers being blown all over the country, they have circuit breakers. There would be some communications loss, but nothing that will kill us or send us back to the stone age.

      • Watcher says:

        low altitude semi equatorial spacecraft do okay non hardened. Only the processor needs it, and there are bit correcting circuits that can minimize even that. blah blah

        • Futilitist says:

          Old farmer mac,

          Many apocalypses are ‘possible’. Only one is inevitable and likely very soon. It makes more sense to focus on that one.

  41. Dennis Coyne says:

    Hi All,

    I have a new post at my blog called “The Oil Shock Model with Dispersive Discovery -Simplified” which lays out a variation on WebHubtelescope’s Oil Shock Model.

    http://oilpeakclimate.blogspot.com/2015/02/the-oil-shock-model-with-dispersive.html

    An excerpt:

    The Oil Shock Model was first developed by Webhubbletelescope and is explained in detail in The Oil Conundrum. (Note that this free book takes a while to download as it is over 700 pages long.) The Oil Shock Model with Dispersive Discovery is covered in the first half of the book. I have made a few simplifications to the original model in an attempt to make it easier to understand.

    Link to The Oil Conundrum below
    http://entroplet.com/ref/foundation/TheOilConundrum.pdf

    • DC, very smart move on your part to try to separate the extra-heavy oil as a distinct process. The Shell Oil discovery data appears to combine the two sets of data, leading to a much larger URR than Laherrere gets. What you are doing is one way to reconcile the lighter-crude Laherrere discovery data and the reality that there are likely ~500 GB of extra-heavy crude waiting to be exploited. Whether this effectively happens is the big question.

      • Dennis Coyne says:

        Thanks WHT,

        This is by no means original thinking on my part, I am just following Jean Lahererre’s example of modelling the extra heavy oil separately, and I believe that you had suggested this to me long ago as well.

        • DC, Have to give you a lot of credit for slogging through the math and dealing with all the suboptimal data that is scattered everywhere.

        • sam Taylor says:

          Dennis

          Did you code up a convolution function in excel? That must have been some serious legwork. I believe there are some free packages like r or octave which make such operations much easier. I’m currently trying to learn R myself. It’s useful but has some annoying tricks

          • Doug Leighton says:

            Sam, what’s wrong with Mathematica with its friendly Wolfram Language or MATLAB with Python or FORTRAN? And Mathematica works OK with Excel if you’re addicted to MS. 😉

            • Yes, you can do convolution in Excel but it is not out-of-the-can. I think DC has come up with his own macro. Mystery to me why it isn’t part of the Excel functionality.

            • sam Taylor says:

              Most of those you have to pay for, don’t you? Matlab in particular costs a bomb. I used to be a dab hand with Fortran in my undergraduate days, but the fog of time has obscured that all. Scilab is a fairly good free version of Matlab, though.

              I’m half thinking of going back to school to do a PhD so really should brush up on my coding!

              • Doug Leighton says:

                Hi Sam, Yeah, Mathematica Standard Edition is a bit pricy. I think it costs about 3 grand, I’m embarrassed to say. Forget that my wife (University associated Mathematical Physicist) gets this stuff for free and I’ve come to take it all for granted. You get a significant reduction if you’re a student, I think.

            • Dennis Coyne says:

              Hi Doug,

              Thanks for the tip.

          • Dennis Coyne says:

            Hi Sam Taylor,

            I am not nearly that sophisticated and have not learned to write decent code in Excel. If you look at my post on convolution you will see that I simply added up stuff in a spread sheet.

            For example if for Maxent k=.75 and we had 5 years where 100 million barrels was discovered in consecutive years. The graphic below shows just the first 7 terms of the new producing reserves from each of these five separate 100 million barrel discoveries (note that I have changed k from o.o5 to 0.75 so this is very different from my model) in years 1 to year 5. The 5 by 11 cells are added up to get the bottom row.

            The short answer is I am no programmer, I used brute force. In the model there are about 500 rows and 700 columns, but a spreadsheet makes the adding easy.

            • Nothing wrong with a bit of brute force. It allows audits by others as well as easier editing five years later.

              There are boutique packages in the oil industry to perform this type of work, some of them can take five man years to gather and input the data. But in the end they all suffer from fuzzy data and our inability to model the human factor.

              This last item is really important. I used to poll our managers to see what their reaction would be to some inputs, because they don’t necessarily behave as if they were sane. Our models had to include this insane behavior.

            • sam Taylor says:

              Dennis,

              In a programming such as R it’s actually very simple, if you can do it in excel then you’d be capable of running a fairly simple time series analysis no problem. Definitely a time saver.

  42. Pingback: The Oil Shock Model Simplified | context/Earth

  43. Watcher says:

    Hey sportsfans, Greenspan was interviewed yesterday and despite his age is still coherent, and is off the narrative reservation.

    He is focused on productivity. Output per hours worked. All the part time work is hours that don’t do much and the hours are growing a lot, and thus productivity isn’t. “It portends a smaller economy for the US over time, and this causes fiscal and monetary policy unsolvable problems.”

    If you push the gauze of economics BS away from your eyes, you can think more in terms of physics and say . . . this is what happens as EROEI falls. There is no end to it or fix for it. The only solution is take things from your enemies.

    • Watcher says:

      btw oil rig count just out and the algorithms have decided there is information to be found in 1st derivative, and since the count decline shallowed a tad, they took oil down 50 pennies. $48.xx. Apparently low $48s will be an 8th consecutive monthly decline, this being the end of Feb.

    • Watcher says:

      Spock would have understood.

    • BC says:

      Yes, Watcher, and productivity is directly affected by the record low for labor’s share of GDP and little or no growth of real, after-tax and -debt service earned income for the bottom 80-90% for 50 years.

      Moreover, if one sums total gov’t spending, private health care and education spending, and debt service, the total is an equivalent of ~54% of GDP. The sectors combined are a net cost to the remaining 46% of the private sector. The former sectors have to grow for the economy to grow, but if they do grow they drag on the rest of the economy: Catch-22.

      Health care spending is 18% of GDP, which is $10,000 per capita and $26,000 per household, and that’s against the average yearly earnings of $42,000 and the median US household income of ~$50,000. Absolutely appalling.

      Finally, total net annual flows to the US financial sector equal the annual output of US GDP. Therefore, the financial sector (and its top 0.001-1% owners) has (have) a net rentier claim on all value-added US output in perpetuity.

      The US has become a kind of neo-feudal, hyper-financialized, banking oligarchical, rentier-parasitic society/economy in which all wealth and income is pledged to the rentier top 0.001-1% forever.

      If one is a direct or indirect recipient of the rentier flows from the myriad sources, conditions have never been better in the history of the West.

      However, for the bottom 80-90% or so, it’s one paycheck or gov’t transfer check away from privation and homelessness.

      • clueless says:

        Does anybody on this site really think that you can compare “wages” today with “wages” 30 years ago. I do not.
        Thirty years ago: No family medical leave act; no mandatory “sick time” (some states). A small fraction of what an employer now pays to subsidize employees health care; many of the younger people today have a “free” cell phone paid for by the employer; most have access to a computer at work where they are free to play fantasy football, set up final four brackets, watch their favorite college team’s coach presser for the upcoming big game; pick-up trucks for millions of salespersons; increased average vacation time; free coffee has morphed into free beverages, donuts, etc.; exercise facilities; subsidized cafeterias; trips to vacation places for educational seminars (even the government!); off the books rewards – tickets to concerts; shows, theatre. NOT EVERYWHERE!! But, in total it all adds up to a much larger % of “income” [cost to the company] not on the W-2. And, yes 30 years ago these were the “perks” that were mostly reserved for the “executives,” but now are commonplace in the rank and file.

        • Fred Magyar says:

          Sounds more like ‘Bread and Circus’ to me. Just keep the masses entertained and off balance. A lot more fluff as opposed to real income, eh?

      • Watcher says:

        There are political overtones to all that, so it somewhat can’t matter, because that which is inevitable is inevitable. In addition to which if numbers on a screen say people are going to starve, you just print some money and change the numbers.

        Only oil stops all this, and pretty soon.

  44. The Baker Hughes Rig Count is out. Oil rigs down 33. Williston took the biggest hit, down 12. Eagle Ford down 3. Canada down 30 to 330, 296 below the same week last year. February is usually the month Canadian rigs peak.

  45. Risto Päivänsalo says:

    Canadian situation look quite interesting. Down almost 50% vs. last year. A huge drop, and the lowest peak month (feb usually the yearly peak) in at least 15 years. As a Finnish guy I don’t really have any knowledge about situation there, but would be nice to hear if someone knows 1) how much of the drop is weather/road condition related 2) What are they drilling for. I.E is it production or exploration and is it vertical or horizontal. What I’m getting at is what will be the impact to production and with how long a lag? 3) drilling vs. Canadian production. What is the split between sand etc. production and drilling-based production. Again the question here is that what kind of conclusions can be drawn from the huge drop in rig count? Anybody?

    • AlexS says:

      Risto,

      Near term impact of low oil prices on Canadian production will be minimal, longer-term impact will be slower growth in oil sands output as several projects have been postponed or canceled.

      Excerpts from an article in Bloomberg:
      “Even with crude down 52 percent since June, output will grow 3.5 percent this year from the world’s fifth-biggest producer. The Canadian dollar is near a six-year low and materials cost less, helping oil sands producers cut costs and keep pumping. Oil would have to stay between $30 and $35 a barrel for at least six months, down from about $50 now, before wells and mines are shut, according to the Canadian Energy Research Institute.
      “We are above the price where existing projects” get shut down, Robert Johnston, chief executive officer of risk consultants Eurasia Group, said in Calgary Feb. 4. “Even projects that are under construction will continue.”
      Canadian production will rise to 3.89 million barrels a day this year, according to the National Energy Board. Conventional crude and condensate will drop 3 percent, while output of oil sands and upgraded synthetic crude will grow 8.3 percent.
      Break-even costs have fallen 18 percent from a year ago and range between $25 a barrel for producers who use steam and $40 for the mining operations, according to Bank of Montreal estimates.
      While starting an oil sands project now wouldn’t be economical, companies will push ahead with those under construction and projects already operating will continue, Jackie Forrest, vice president of Calgary-based ARC Financial Corp., said in a Jan. 29 e-mail.
      While it can take years for a new oil sands operation to ramp up to full production, a total of 423,000 barrels a day of new capacity is under construction and scheduled to be in operation this year, up from 116,000 barrels added last year, according to data published in Alberta’s winter 2015 Oil Sands Industry Quarterly update.
      Most of the oil sands companies are “global players” and “they can afford to operate at a loss within the oil sands area,” Dinara Millington, a vice president at CERI, said by phone yesterday.
      Oil sands miners would have to spend billions of dollars on reclamation of tailing ponds if they shut, she said. “It’s not as simple as turning off a truck or shutting in a well.”

      http://www.bloomberg.com/news/articles/2015-02-20/canadian-oil-sands-output-growth-defies-plunge-in-prices-energy

      • Risto Päivänsalo says:

        Thanks AlexS. I understand that current on-line projects will keep running and are long term, but is there more accurate figures or facts? 50% drop seems too big not to have any real impact. Is there drilling involved in oilsand projects? Or is that for ‘conventional’ side only? and what’s the ‘conventional’ productions’ share of production in Canada? At least that should be impacted if drilling is cut, shouldn’t it? (depending on production/exploration drilling split in cuts, and on depletion ratio).

        I have invested quite a lot on Norwegian oil services names and demand/supply balance is a very interesting topic…

        • Doug Leighton says:

          Risto,

          Try to be a specific with your questions. If you are interested in oil sands start by looking up Athabasca oil sands on web then reading the Wikipedia story and then follow up with individual companies which you can click on; if that’s what you’re interested in. Respecting drilling, very little is required because the productive horizon is pretty homogeneous. The main concern is overburden thickness. But, if you do the above and still have questions then come back here: We’ll try to help.

          • Doug Leighton says:

            Risto, The first love of my life was a Finnish girl called Lisa Saari. I always assumed this was a good Finnish name but discovered her dad Sam Saari was originally Soloman Saarenpaa. You see I’m often (usually) confused. Sam was a blacksmith and no one was good enough for his daughter. You didn’t argue with Sam.

            • Risto says:

              Doug, that’s a nice story. Let me know if you ever come to Finland I’ll have sauna ready waiting for you.

              I’ve had my share of disappointments with foreign girls as well. Had a crush/affair with a Kentucky girl called Melissa during my student exchange year 15 years ago. She had to have a local guy. I still remember the perfect smile she had…

              • Caelan MacIntyre says:

                Maybe Funland gets one of those Russian ‘methane-bomb craters’ too and you can help fill it with water and put a whole lot of saunas around it. If I go over, we could call Vesterinen Yhtyeineen and invite them to play live in one of the larger saunas while we eat salted licorice. ^u^

                Kiitos

          • Risto says:

            Thanks Doug. What I’m really trying to get at is the significance of the rig count drop in Canada. I’m not interested in oil sand industry as such, rather the link, or effect of the rig count drop to production. It’s not easy to know where to start or not even to be very specific because I’m only learning the logic of different production methods.

            What I would like to learn to be able to see the link is the following:
            -How much of Canada’s oil production is from oil sands and how much is from conventional wells?
            -What are the rigs been used for? Oil sands, conventional production drilling or conventional exploration drilling.

            I hope that would help me to assess the rig count drops’ effect on (future) production. Still I’m doubtful that I will be able to make the right conclusions. So the best outcome would be if someone could explain, based on facts and expertise what should be expected from Canada following the steep rig count drop.

            I promise to study the Athabasca oil sands though, thanks for the tip 🙂

            br
            Risto

            • AlexS says:

              Risto, here Canadian crude oil and condensate production by type (2013 data):
              Conventional Light 26,6%
              Conventional Heavy 13,1%
              Synthetic Crude Oil 27,0%
              Crude Bitumen 28,9%
              Pentanes 4,4%

              Source: CAPP ( http://statshb.capp.ca/SHB/Sheet.asp?SectionID=3&SheetID=233 )

              • Risto says:

                Ok, thanks, so conventional light is clear, that’s conventional, and conventional heavy as well I guess. But Crude bitumen and synthetic crude oil, are those from oil sands? So ~56% in 2013? Don’t know about Pentanes but that’s been there since 70s, so I guess relates to conventional production.

                That would leave about 45% for conventional. If rigs are down to half, I would expect that production to start to edge down. (even if cuts are tilted to exploration).

                To promote argumentation I will guess there’s 8% depletion, that has been countered by drilling (production flat recent years), and now that rigs are down 50%, let’s assume production drilling down ‘only’ 40%. New production will only balance 60% of depletion. So, conventional production would decline by 3,2%. Do I make any sense?

                It’s getting late. 1:40 am here. Need to continue tomorrow.

  46. ezrydermike says:

    California..the land of watermelons and “overregulation”…

    “Water officials in Kern County discovered that oil producers have been dumping chemical-laden wastewater into hundreds of unlined pits that are operating without proper permits..

    Inspections completed this week by the Central Valley Regional Water Quality Control Board revealed the existence of more than 300 previously unidentified waste sites. The water board’s review found that more than one-third of the region’s active disposal pits are operating without permission.”

    http://www.latimes.com/local/lanow/la-me-ln-pits-oil-wastewater-20150226-story.html

    “The local water board says it’s prepared for pushback on their enforcement actions. The board’s work plan says, “It is anticipated that many of these orders will be controversial and petitioned by dischargers.”

    Officials estimate the enforcement orders will continue through the end of 2016.

    Then they will deal with the hundreds of idle or abandoned pits across the county that likely will require some remediation.”

    http://www.latimes.com/local/lanow/la-me-ln-water-board-planning-to-address-illicit-oil-wastewater-pits-20150227-story.html

  47. ezrydermike says:

    Way off topic, but Leonard Nimoy has passed away.

    Life long and prosper.

    http://www.latimes.com/local/obituaries/la-me-leonard-nimoy-20150227-story.html#page=2

  48. Watcher says:

    http://headlines.ransquawk.com/headlines/ecb-s-constancio-says-central-bank-will-look-at-other-forms-of-monetary-stimulus-if-pool-of-bonds-is-insufficient-27-02-2015

    This is pretty big for dollar strength and thus oil decline.

    The talk has been floating for a week or two since Super Mario said he was going to uncork 1 Trillion Euros between Monday and Sept 2016 — that the bonds don’t exist to do this. The banks in Europe have regulatory minimums for sovereign bond holding and they are near those minimums, and thus if Mario wants to buy bonds there may be no sellers, by law.

    So this bozo offers forth “other measures”. One wonders how Germany reacts to such a thing after fighting just bond purchases for 3 yrs.

    And so . . . diluting Euros may be dicey. If you dilute those, you drive dollars up, but if you don’t dilute them . . . . . . . . .

    • Watcher says:

      Note btw that if this is not too extreme, Draghi is not obligated to pay the market price for bonds. He can just bid them up. If you want to inject a trillion pieces of paper but the puchase instrument for doing it doesn’t exist in quantity, you can just pay more for the instrument.

      (No one has ever really asked what the Fed paid for those bonds. Audit the Fed . . . is a very dangerous thing in that context. Those guys elected for 14 year terms would not like that light of day being shone on them.)

      • Watcher says:

        Oh and btw rev 2.0, if you bid up bonds, you drive rates down. They are already negative in Europe. Of course, that means it’s cheap to borrow money and buy oil.

        Mindboggling that oil producers sell for this BS.

        • Bryan says:

          What’s mindboggling to me is most of the bonds that the Fed bought have a maturity date of 10 years or less. So as these bonds on the Fed’s balance sheet mature, Fed will likely hold all these until maturity date. The US Treasury will have to issue new bonds to pay the Fed back the $2.8 trillion it owes the Fed. Who’s going to buy all this new debt and at what price? Fed has to buy from the secondary market by law. So someone else has to buy this debt first. With yields across the curve headed towards zero and negative currently and bond prices at record highs. The answer is nobody! Bond bubble Pops.

          • Bryan says:

            Also as those bonds mature. Fed’s balance sheet will start to shrink, every month it will shrink. While the ECB’s balance sheet will expand every month. Without further QE the dollar is going to strengthen massively. Not good for the price of oil.

          • Watcher says:

            No. No. And no. You don’t fully grasp the absurdity.

            So the Fed’s balance sheet bonds mature. Were they a private lender, Treasury would be obligated to redeem those, to repay the loan.

            But they are not a private lander. It’s entirely easy to manufacture some new terminology (like Quantitative Ease, go back and see how often that phrase was used in the 1990s, i.e., never) and using that terminology in effect simply not demand that Treasury redeem them. Each month Treasury sends the Fed a check for the interest on the balance sheet bonds. The Fed just sends it back to Treasury, and calls it return on investment.

            It’s all bullshit. Bullshit enshrouded in an aura of manufactured terminology. Do you really think the Fed is going to demand that Treasury redeem those bonds? Why would they? They’ll just tear them up . . . or hit the delete key on the numbers on the screen. The Fed is never going to drain cash from the system to redeem those bonds. Don’t be silly.

            But congrats on understanding the minutiae of the logistics. The Fed can’t buy from Treasury by law. They have to buy from Primary Dealers, and just imagine how much more they paid the PDs than the PDs paid Treasury.

            • Watcher says:

              BTW there is . . . or was . . . a hilarious tidbit in the QE wiki. It went like this:

              Quantitative Ease is not monetizing debt when the purpose of the purchases of sovereign bonds is to stimulate growth. If a central bank announces this as its purpose, then the purchase of bonds is not monetizing debt. In contrast, a central bank who announces that a government deficit must be funded through the purchase of bonds by the central bank is indeed monetizing debt.

              So hahahaah the difference between monetizing debt and QE is an announced purpose. Exactly the same action is taken, but some guy gets in front of a microphone and says different words and thus makes it . . . respectable. hahahah

              • Bryan says:

                If the Fed tears those bonds up. Or hits the delete button. That’s the same thing as canceling the debt. Fed isn’t going to cancel or drain $2.8 trillion in bond debt. Treasury will have to issue new debt. Or else $2.8 trillion will be drained out of a debt is money monetary system. Fed is not going to erase the debt.

                • Bryan says:

                  Fed can’t cancel debt. If it could they could simply buy all the debt and hold it till maturity. $18+ trillion national debt would simply disappear. If it worked like that japan would be totally debt free by now with all the rounds of QE they’ve done. Every QE dollar, yen or euro is just rolling over current debt which it’s self will have to be rolled over at some time in the future. On another note China’s central bank cut interest rates today. Thats twice it’s cut rates in the last 3 or 4 months. They still have a long way to go before they reach zero. But eventually they will get there. Things will get interesting as their deflation starts washing up on our shores. With the amount of deflation spewing out of Asia and Europe. Oil prices will be depressed for a very long time. Or until Fed reopens the money flow.

  49. Doug Leighton says:

    Ron,

    I see Alaska’s North Slope managed to produce 500,000 bbl/d in December, down 28 bbl/d y-o-y. I’d almost be willing to bet that Alaska’s North Slope never manages to see 500,000 bbl/d across any one month interval again.

    • Doug, Alaska will have to move on to export LNG. Maybe make liquid fuel from coal. But the coal to liquids will be a Fairbanks play.

      • Doug Leighton says:

        I agree. I also think they should have used some of their oil revenue to prep the scene for gas rather than piss it away.

        • Old farmer mac says:

          Doug Fernando and anybody else who knows a lot about the tar sands,

          I understand that it takes a LONG time to develop any one tar sands mining operation so that any one company working in any one given area can only increase production from that particular spot rather slowly.

          BUT I do not quite understand why the twenty odd companies working the Canadian sands are not able to just double up on men and machinery and start working in AS YET untouched areas. Assuming they have the money of course.

          Is this a matter of capital and manpower or is it that they are actually out of elbow room and in each others way already? It hardly seems possible but maybe they ARE rubbing elbows.

          I understand that roads and houses and pipelines and rail must be built and that doubling the money will not necessarily double the rate of construction but it would sure as hell increase it substantially.

          In layman’s terms – why can’t the tar sands be developed FASTER if enough effort is put into it? WHAT is the limiting factor?

          • Ronald Walter says:

            A relative of mine had a small sample of Athabasca tar sands bitumen. He placed a small amount between his thumb and index finger just to see what happens.. As the tar warmed the tiny sand particles separated from the bitumen concoction and the tar sand was pure white.

            That’s how is was described to me, other than that, I know absolutely nothing about the Athabasca Tar Sands.

            What the hell do I know?

            I am the first to admit how damn dumb I am, so it won’t do any good to call me a fucking idiot, that is axiomatic. Everybody knows it by now.

            Go ahead a call me all the names out there, use expletives, shithead, dumbass, dumbfuck, and, above all, fucking idiot works the best. All apply, so it will be a waste of time to state the obvious.

            You’ll never get my goat, my goat can’t be got.

            I keep my goat well fed, well groomed, and my goat is happy as a lark.

          • John B says:

            The limiting factor is OPEC, the Gulf of Mexico, tight oil in the US, Biofuel, alt vehicles, etc. In other words, there is no demand for any more oil.

            I suppose if tar sands’ competitors production fell, then the tar sands production could be ramped up just how you envisioned.

  50. Old farmer mac says:

    Here is an interesting link that about purported chicanery in academia and wind power.

    I am not acquainted with the author but he seems to be a right wing type who is in favor of wind power and a permanent wind power tax credit.

    http://thehill.com/blogs/congress-blog/energy-environment/234027-effort-to-stymie-wind-is-long-on-rhetoric-but-short-on

  51. Ron Short says:

    I lurk here for educational purposes. I have a lot to learn, and there is a wealth of knowledge and analysis here. Thank you Ron and contributors.

    Yet there is little here that is of practical use to me.

    I have no professional expertise, no investments, no gold, no hideaway, no stockpile, no guns.

    My income is about a fifth of the national average in my part of the world. I hope the worst of the coming challenges will pass me by; after all, I can only expect a life span of another 20 years or so.

    Apparently the average income world wide is around $18,000, calculated in Purchasing Power Parity (PPP) dollars. The US average is over $50,000, (which is skewed by a proportion of very high earners).

    It is instructive to observe the hubris and sometimes the anxiety of some, (repeat – some), posters, many of whom are likely to be among the richest 10% on the planet, (said to be those with an income over $25,000), with carbon footprints to match.

    In the event of a breakdown of society, I am vulnerable to being swept away. In the mean time I try to live life one day at a time.

    I do enjoy a certain schadenfreude at the spectacle of a privileged minority peering into the crystal ball, not with a view to putting the brakes on our rush towards chaos, but in order to protect their own private interests – very human and no doubt inevitable.

    The burning of fossil fuels, the atmospheric CO2, the warming, the consequences – these things are interesting. The threatened individuals scrabbling to position themselves – not so much.

    • Nathanael says:

      “I do enjoy a certain schadenfreude at the spectacle of a privileged minority peering into the crystal ball, not with a view to putting the brakes on our rush towards chaos, but in order to protect their own private interests – very human and no doubt inevitable.”

      Elites have done this forever. Some of them have helped millions of other people while doing so, from FDR (who saved the capitalists from themselves) back through Earl Grey (who saved the English nobility from themselves). I tend to admire these practitioners of “enlightened self-interest”, as it is known.

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