A new book entitled
Mathematical GeoEnergy: Oil Discovery, Depletion and Renewable Energy Analysis by Paul Pukite, Dennis Coyne, and Dan Challou
will be published late next year by Wiley as part of their AGU Book Series.
We are looking for potential reviewers of the manuscript. As the title implies, the contents are math intensive, and suitable for a college-level science or engineering curriculum. If interested, please send an email to peakoilbarrel@gmail.com .
Table of Contents
Part 1 – Depletion
Chapter 1. Introduction
Why we need to understand oil depletion. Rationale for our analysis and a motivation for analysis beyond oil.
Chapter 2. The Problem
Who has tried to qualitatively model oil depletion? An analysis of how the current models fall short.
Chapter 3. The Premise
What fundamental ideas do we apply? Mathematical groundwork and premise for the analysis.
Chapter 4. The Facts in the Ground and Finding Needles in a Haystack.
Where do we find oil reservoirs? Basics of modeling discovery.
Chapter 5. The Analysis of Growth and the Shock Model.
When does the extraction kick in? Basics of modeling production and depletion.
Chapter 6. Applying Dispersive Discovery and Reserve Growth
How discovery affects production. Combining discovery and production as an integrated model. How estimates of oil evolve.
Chapter 7. The Context of Discovery and Oil Production.
How do we simplify the search model and verify the extraction model? Supplemental analysis for modeling discovery and production.
Chapter 8. The Results.
Which data sets support the model? Lengthy chapter on applying models to regional data.
Chapter 9. The Discussion: Alternate Consensus Approaches and Cornucopian Conundrums
Which conditions can impact the model? Caveats to the analysis with comparison to other models. How do other pessimistic projections fit in? And how do we reconcile against optimistic analyses?
Chapter 10. An Oil Level Check and Diagnosis
While we have gotten this far, what can we conclude? What current situation do we find ourselves in? How do recent and evolving developments figure in?
Chapter 11. The Implications and Prognosis
Why should you believe in scientific models? Addressing concerns over modeling. What can we extrapolate for the future?
Part 2 – Renewal
The second section explains what was learned from the oil age which can be used to create a post-fossil-fuel world. This includes analysis of the most important considerations for renewable energy, alternative energy carriers, and of smart energy conservation.
Chapter 12. Introduction and Energy Transition
Application of stochastic math beyond oil depletion. Projection of future energy demands
Chapter 13. Wind energy
How to characterize the statistics of wind variability.
Chapter 14. Solar energy
Physics of mass-produced photovoltaics.
Chapter 15. Battery technology
Physics of Lithium-ion batteries
Chapter 16. Thermal sources
Transport of heat
Chapter 17. Wave energy
Characterizing waves
Chapter 18. Climate
Models of climate prediction
Chapter 19. Travel and Terrain
Statistics of travel. Statistics of elevation
Chapter 21. Resilience and Durability
Building things to last, models of failure and corrosion
Chapter 22. Pollution
Dispersion and half-life in the context of nuclear energy and pollutants
Chapter 23. Noise and Uncertainty
How to characterize imperfect information
Chapter 24. Econophysics and Information Science
The statistics of humans in the loop, how disseminate information
Note that this thread will be for Petroleum related comments, any discussion of topics not directly related to oil or natural gas or the book should be in the non-Petroleum thread. Even comments discussing Part 2 of the book would be better to discuss in the Non-Petroleum Thread.
Eagle Ford – update through June 2017
Oil production in the Eagle Ford appears to have slowed significantly during the 2nd quarter, although part of this decline will disappear once revisions are in.
https://shaleprofile.com/
East-MiddleEast-West Petro Milestone event – Putin teaches King to play chess?
“The visit … is considered to be historic, as this is the first visit of the head of the [Saudi] Kingdom to Russia. A number of important documents are expected to be signed,”
https://www.rt.com/news/405637-saudi-king-arrives-moscow/
EIA twip shows US stocks back to general decline: down 7 mmbbls overall (.08%), with crude down 6, gasoline up 1.6, distillate down 2.6.
Gazprom Neft discovers new offshore field in Okhotsk Sea
http://www.worldoil.com/news/2017/10/4/gazprom-neft-discovers-new-offshore-field-in-okhotsk-sea
Could be a new giant given the resources. Not any easy place to develop though.
Incredibly difficult place to develop an oil field. Requires designing for ice loads AND very large summertime waves, when I looked at it we found the sea floor near the island was scarred by ice keels, it gets really cold, and Sakhalin is in the middle of nowhere.
There are major articles making the rounds about the Saudi king presently visiting Moscow. First time ever a Saudi monarch has made that trip.
First off, congratulations on your book!
This will be the sort of book that will be must reading in the higher circles of places such as the Pentagon, the super banks, and hopefully the inner circle of technically educated advisors to presidents, prime ministers, kings and dictators. Most of the smarter and or more powerful political leaders seem to have such advisors on their teams, although they may ignore them as often as they heed them.
I’m hoping it won’t cost two hundred bucks a copy.
I won’t be able to make sense of the math, too many years have gone by, and I didn’t take enough math courses.
But if you put in some summaries for laymen at the end of chapters , I’m going to read it, and I’m hoping to gain quite a lot of insights from the second half of it in particular.
Between the two of them,Putin and the Saudi king, they could easily cut back oil production enough to put the price back in the range that’s EXTREMELY profitable for themselves and profitable for most of the major oil producing countries.
The amount of political leverage this would give them in such countries is hard to estimate, but it would be substantial.
The world order is changing, and the USA is no longer in a position to control what happens in the Middle East or Asia. Lots of people like to make fun of Russia, but the Russian government, the Russian economy, and the Russian people have proven themselves to be incredibly tough and resilient, and depending on how the government evolves, Russia could develop into an entirely modern country, economically at least, within another couple of decades.
I for one have never subscribed to the argument that either or both Russia and Saudi Arabia have been producing and selling oil dirt cheap in order to destroy the Yankee tight oil industry. My view is that they consider any damage done to Yankee tight oil producers as a happy by product, a sort of collateral damage they are happy to see. They’ve been out to cut each others throat in my opinion, partly as deliberate policy, partly as the result of being determined to protect their market share and so forth.
It’s always been obvious, to me at least, that the nature of the tight oil industry in the USA is such that it can recover very quickly anytime the price of oil goes high enough to make it profitable. AFTER ALL, the preliminaries are all in place, or ready to be put in place on very short notice, from surveying and exploring, buying mineral rights, establishing the regulatory and permitting processes, etc. The housing, roads, pipelines ( enough for immediate needs anyway ) and rail roads etc are all in place, there are plenty of men here who may not be all that well trained in oil extraction, but they learn damned fast, and bring nearly all the skills they will need with them anyway, when it comes to running machinery, laying pipe, welding, erecting any sort of infrastructure, etc. I don’t see any bottle necks there, except maybe for the guys who actually DO the actual fracking operation itself, which takes only a few days or weeks at the most.
Hence it CANNOT be destroyed by other oil producers , it can only be kept down by keeping the price of oil down low enough to make it unprofitable. (That it IS unprofitable is not relevant, so long as it can get money to continue to operate, and so far that money is there. )
Long time enemies can and occasionally do make common cause, when both parties perceive it to be in their own interest to do so, especially once they have bled themselves to the point of near exhaustion, economically and politically. Putin understands that his power depends on providing a rising living standard for his people, and the Saudi king understands that his power depends on maintaining the current standard of living of his own people.
The Saudis in my estimation now perceive that the Russians are PLAYERS on the international stage, especially in any places near Russian borders, and that it is probably to their advantage to build some political bridges to Russia, considering the relative decline of the USA in terms of dominating the world political scene.
So now the Saudis are hedging their bets, and the Russians are collecting on some of the ones they have made and won, such as in the Ukraine, the Syrian conflict, and so forth.
The leadership of both countries may well be aware that if they want to get a high price for their oil, they need to get it within the next couple of decades, because after that……… demand for oil may be falling off as fast or maybe even faster than depletion reduces the supply.
There’s no question that both the Saudi king and Putin have at least SOME advisors who tell them, privately, that this is a VERY real possibility. Both of them appear to have working brains, lol, and people with working brains consider the possibilities, and know how fast the world and technology can change.
There are numerous estimates or maybe just guesses from various people indicating that it would take only a couple of million barrels a day of withheld production to push the price of oil back up to eighty dollars or more. They could cut two million each, and going by what I read here, there’s a near zero chance any other producers could make up this reduction any time SOON, if ever.
Nobody in his right mind would want to put all his country’s security eggs in a basket carried solely by the USA, considering our own domestic political and economic troubles these days.
People in positions of power will work WITH somebody like Trump, or Putin, because they MUST, if they have no better choice, but they generally have better sense than to TRUST a Putin or a Trump.
It’s bet hedging time, all over the globe. I wouldn’t be too surprised if I live long enough to read about a nuclear armed Japan, lol. The Japs could build a bomb in no more than a couple of years and maybe in as little as six months, and they might, if NK fires off one too many.
We went from isolationists to war with them over the period of a few days once upon a time. People and countries can reverse course in a flash given sufficient incentive or provocation.
The Japanese people have PLENTY of reason to fear the Chinese, just as the Germans have plenty of reason to lie awake at night wondering if someday the Russians will simply turn of the pipelines that supply the gas and oil that keep the lights on in Western Europe.
It’s been forty years since I read all the classic antiutopian novels and my memory attic is so full of old furniture and lumber it takes me a while to connect names and titles with plots, but in one or another of them, the world evolves into three camps. This tripolar world is always either at the brink of war, or actually at war.
Some of us here might live to see such a world, with Russia, China, and the USA dominating in each camp. A fourth camp would be a likely possibility with Brazil leading that one. I’m not predicting it, I’m just pointing out the possibility.
History ain’t over. The study of chaos is essential to any real understanding of how the world really works.
Thanks Glen.
Noise and Uncertainty
How to characterize imperfect information
Sounds fascinating–
Congratulations on the book.
“I’m hoping it won’t cost two hundred bucks a copy.”
It will cost around that much. It’s categorized in a technical specialty niche and not mass-market, so it follows textbook pricing.
TRI POLAR — well said — I guess we find out if a 3 legged stool is more stable than a 2 legged.
I didn’t say it, the credit goes to Orwell.
http://bigthink.com/strange-maps/66-the-world-in-george-orwells-1984
If have an advantage over most professionals, in terms of understanding the BIG PICTURE, it’s due to the fact that I have never confined myself to working and thinking within the confines of a single field or profession.
A typical engineer seems to have a rather limited grasp of what makes the world go around,meaning the human and political element, which exist outside the technologies that define his work.
The typical person seems to have only a child’s conception of where his food comes from and how it’s produced. The typical psychologist when I was an undergrad seemed to have never heard of biological evolution, etc, and therefore put humanity on a pedestal outside all the rest of the biosphere.
I have read papers written by economists on the faculty of my own university who don’t believe in the concept of peak oil. They seem to believe that the Earth has old West Texas’s “creamy noughat center”, that there’s an INFINITE quantity of oil available for us to burn so as to choke ourselves to death on the pollution, lol.
Today’s typical social worker seems to be utterly incapable of grasping the simple concept that a person on welfare may be SATISFIED to be on welfare, and thus not at all motivated to better himself.
I know better, because I have read the classic novels, and because I know several people personally who are on welfare and happy to STAY on welfare, permanently, if they can manage it. Some of them are close enough kin to me that I avoid having my own name associated with them, publicly, to the extent I can.
People who despise the military seem to think generals and admirals are incapable of thinking, and that they always re fight the LAST war, and there is some truth in this observation, but if I remember correctly, when the first of the Yankee and Rebel Ironclads shelled each other at point blank range for a few hours, and both ships remained afloat, the British Admiralty abruptly halted the construction of wooden warships, knowing the now fabled days of ENGLISH OAK were over.
On the other hand, ill educated people who watch too much television are apt to believe in the Mad Queen’s six impossible things before breakfast…….. things known to be impossible to anybody who understands the basic physical sciences.
Specialization is for insects.
Humans should be able to program computers, butcher hogs, deliver babies, etc. That’s Heinlein, from Time Enough for Love, paraphrased.
The biggest reason I hang out in this forum is that HERE there are some unusually intelligent regulars who are not only capable of thinking, they DO think, and maintain a long term conversation about possible future realities.
The conversation is priceless. I have discovered numerous blind spots and errors in my own thinking as the result of following the conversation here.
Neither I nor anybody else knows for sure what the future may hold, but one thing’s just about dead sure. Any detailed predictions are apt to be very wide of the mark, because countless disruptions can be counted on, ranging from unforeseen new technologies to super volcanoes erupting, lol.
Apparently, the US and its proxies (ISIL?) has been doing poorly in/with Syria and surrounds; the petrodollar is increasingly coming under fire; while the US appears to be shifting strategies and aiming more for Iran, while targeting media outlets like Russia Today, sabre-rattling with North Korea and ‘conscripting’ Morgan Freeman in another fine role of fiction as, to quote Black Agenda Report, ‘War Whore’, etc….
USA is a failing empire that may increasingly fail along an exponential curve.
ZH reporting sharp increase in China oil consumption this YTD.
BP bible lists last year all liquids at 12.4 mbpd. Quoted crude consumption increase is on a 6.6% growth rate for this year. That would put BP’s report next June at 13.2 mbpd.
TransCanada Announces Termination of Energy East Pipeline and Eastern Mainline Projects: http://www.energyeastpipeline.com/
Will be interesting to see what happens with Keystone XL and the Trans Mountain expansion. Trans Mountain seems to have low acceptance. Some have said that there was at least one pipeline to many that was planned, from a business perspective that is. From a climate perspective none of these should be constructed.
About the price of oil, over the last decade or so…….
As I see it, the very high price brought on the following price collapse, as the economy adapted and slowed, reducing demand, even as production of oil and substitutes grew,with just about everybody producing flat out, including even the moonshine/ corn and palm oil and soybean guys.
And after that……… well, governments are not noted for making decisions on the basis of profit and loss, but rather on the basis of political expediency, with profit and loss relegated to a back burner. This is NOT the way BUSINESSMEN operate.
And of course businessmen are prone to hunker down and fight, to the death,if necessary, to maintain their market shares.
So ……… Painting with a broad brush, the price of oil in recent years has not been determined by market forces in the sense that classical economists theorize about markets.
Political considerations have in my opinion just about steamrollered the usual market signals that would have otherwise lead INDEPENDENT oil producers to do things differently. The thing is, most of the oil we have been using for the last few decades is produced by GOVERNMENTS, rather than independent oil companies that are at least theoretically run by more or less at least theoretically rational managers.
I’m still waiting for anybody who believes otherwise to make his case.I’m ALL EARS.
And while I’m not much on conspiracy theories , I don’t have any problem believing that everybody in Washington DC is happy with the low price of oil, and that nobody in the various regulatory agencies with his CAREER on his mind is much interested in starting a real investigation of the reasons banks and other investors continue to throw money at the tight oil industry, when it looks as if so little of it is going to be repaid.
It doesn’t take an ACTUAL conspiracy to result in RESULTS similar to those of a possible real conspiracy every time.
In this case,maybe unspoken but deliberate benign neglect is enough to allow the tight oil industry to continue to get tons of money on terms not available to anybody else.
The people who market sugar water, beer, tobacco, and dozens of other things get what they want from government via buying politicians, etc. And given that the BUSINESS COMMUNITY, and the POLITICAL COMMUNITY taken as wholes obviously LOVE cheap oil……… well, the tight oil industry continues for one reason or another to get dirt cheap funding…………
And I can’t really think of any other reason than that there is an unspoken consensus at the top that this is what is wanted.
Hi Old Farmer Mac,
I think in the short term the market will not adjust perfectly to market signals, especially for a capital intensive industry (takes longer for a multinational oil company or NOC to adjust to prices than it does for an apple farmer). In the long run, lower prices will lead to higher quantity of demand and a lower quantity of supply until the market is in balance.
In the case of the oil market, oil stocks are gradually being reduced and when they reach some optimum level (or less) output may increase, especially if oil prices increase.
Yes, even oil companies run by states will cut back investing in the medium time horizont – money gets tight with lower oil prices, and there are more important bills to pay then exploring and connecting new oil fields where you have to invest a few years before money comes in.
Infill drilling like crazy and other short term investing, producing flat out will be done to further lower the prices ehhm get more money by governments.
Hi Dennis,
I agree so long as you specifically define the long run as being a decade or more.
Price wars between nation states can last that long, as evidenced by it actually happening since oil crashed back below a hundred bucks.
I am a firm believer in supply and demand. I’m just arguing that extraneous factors, namely political factors, have indeed overwhelmed the usual supply and demand signals for a decade now.
And it actually does take an apple farmer about as long as it does an oil company to start a scratch job and bring it up to profitable production levels, or at least it used to.
Ten years up until recently was the usual time frame we considered in terms of netting any actual income over what we spent in putting in a new orchard.
With modern varieties of trees, we can now go from planning to production adequate to break even in as little as five or six years, depending on market conditions. The flip side is that these newer trees are like race horses, fast but finicky, prone to problems, and relatively short lived.
Hi Old Farmer Mac,
Sounds roughly correct, I think 5 to 10 years would be the long run. Note that the “price wars” you seem to see, have been maybe from 2014-2017, though I would simply say the high prices led to overinvestment and overproduction and it is hard to turn the supertanker that is the oil industry. By 2020, high oil prices will be back and this time no matter how much investment there is it is unlikely to lead to oversupply in the following 5 years and high oil prices will only subside due to a severe recession (maybe around 2030) or due to the optimistic Tony Seba-like scenarios proving correct and the rapid transition to EVs and autonomous vehicles causing demand to fall faster than supply.
I doubt this will occur in time to avoid a recession in 2030, but it might occur by 2040.
Back to you Dennis,
We’re basically in the same book, although we aren’t necessarily on the same page all the time.
I do believe in basic supply and demand theory.
I do not believe that the long run up in the price of oil to a hundred bucks plus was the result of shadowy middlemen inserting themselves like parasites between ( my own old words ) great white shark companies such as Exon and Walmart and sucking their blood like ticks, stealing their revenue and profits.
I believe the price went up that high simply because the oil industry couldn’t supply enough oil fast enough to KEEP IT from going up, with the world’s end users wanting more and MORE, in spite of everybody producing flat out and many countries and companies investing like mad.
And I believe the price crashed because the industry FINALLY caught up, and managed to produce more than enough oil to result in the price crash.
I believe that in the END, the upper limit to the price of oil is determined by what the collective END USE customer is able and willing to pay, short to middle term. I believe that what the collective customer is willing to pay varies over time with the state of the overall economy and various adjustments the collective customer makes in USING oil, as the result of it being either cheap or expensive, and also emerging new tech such as electric cars, etc.
I believe that in the end, long term, the LOWER limit to the price of oil is determined by the cost of production of the last few million marginal barrels , but economic and political conditions are so troubled / chaotic these days that this rule does not apply short or medium term.
I should have said my argument about price wars applies only to the price SINCE the crash, instead of using the word decade, my bad.
If I’m right ( and just about everybody else as well ) about the price elasticity of oil, and the consensus opinion here concerning the spare capacity of the industry world wide is correct, then if Russia and Saudi Arabia were to cut production a million barrels per day each, both countries would realize close to double the net income, roughly, from selling LESS oil, at least for a while, because it would take a while for any other producers to ramp up production enough to offset the cuts.
Nobody in the entire world has the power to prevent them from doing so.They are not subject to Yankee law, or European law, lol.
( BUT maybe Saudi’s believe that if they don’t cooperate with UNCLE SAM, when the chips are down, they will shortly be living in exile, rather than as oriental princes in their own land. And the chips ARE down. Political alliances don’t necessarily have to be formalized by written treaties to be real. My belief is that Saudi Arabia would cease to exist as a country within five years without the Yankee/ Western European military umbrella protecting the country from other Middle Eastern countries and political movements.
Cooperating with Uncle Sam may be a very large part of the reason the Saudi’s haven’t cut production unilaterally. )
They ( Russians and Saudi’s ) haven’t DONE IT, which is what rational business men would do, if in their position. The cuts that have been made are yakety yak token cuts.
PRICE WAR is the reason, additionally compounded by the fact that the Saudis are probably enjoying the spectacle of the rest of OPEC ( which cheated like hell overproducing in the past, leaving it to the Saudis to do all the REAL cutting) bleeding out economically.
The Saudi’s probably believe or at least hope that in the event the cartel regains power, the smaller OPEC countries will have learned a VERY painful lesson, and will be less prone to cheat AGAIN, since the Saudi’s have not bailed their sorry asses out THIS time around.
I ‘m all ears hoping somebody will present any argument that holds water proving me wrong. I want to know NOW, rather than later, when I’m wrong.
LATER, my name will be on a book.
But I suppose I will have to give mine away, rather than getting two hundred bucks a copy.
But I can put a tip jar on a website, and likely collect two hundred bucks TOTAL. So I might net a nickel an hour for my work writing it, lol.
Hi Old Farmer Mac,
I think I would agree with your price story for oil. Eventually the high price of oil may lead to a transition to alternatives to oil in land transportation, this could lead to a long term fall in the price of oil, but I doubt this will arrive until 2040 or later. This could potentially occur without a major recession, but I believe that the odds are low (under 15% probability) that the transition to alternative transport will be smooth and trouble free, I expect high oil prices (over $130/b in 2017 $) between 2025 and 2030 will lead to another financial crisis or possibly a Great Depression 2 in the 2030s.
Thus sums up the message to Wall Street. Maybe we should now be talking about peak investment.
https://www.morningstar.com/news/dow-jones/TDJNDN_201710051811/us-shale-juggernaut-shows-signs-of-fatigue.html
Bloomberg – energy companies returning to credit markets at fastest pace in 3 years
Chart on twitter https://pbs.twimg.com/media/DLZnNUrWAAAF5du.jpg
https://twitter.com/BloombergBriefs
Here’s the article that goes with it. It’s not really reassuring.
https://www.bloomberg.com/news/articles/2017-10-05/oil-at-50-has-energy-companies-selling-debt-like-it-s-2014
Reminding folks of recent presented discussion of credit ratings and the utter lack of proper spread over riskless returns, from that article:
“Amid their enthusiasm, the extra interest that junk-rated bonds offer over risk-free Treasuries has dropped to a three-year low.”
This is what happens when a world knows central banks will bail them out.
I’ll put my hand up as a reviewer. Just send me the pdf at the appropriate time.
David Archibald, Sorry, that’s a no to you.
ENI NORWAY RAPPED OVER ‘SERIOUS’ SAFETY FAILINGS ON FPSO
Eni Goliat hasn’t been doing too well since start up and is now shut in, maybe for some time. This is a pretty serious safety breach – basically their electrical equipment in hazardous areas -i.e. where there might be gas if there is a leak – could not be guaranteed not to be an ignition source, as is required by all offshore codes (although maybe not in USA once Trump gets finished).
Hi George
Offshore Guyana is throwing up a few good results.
http://www.worldoil.com/news/2017/10/5/exxonmobil-announces-fifth-discovery-offshore-guyana
Have looked around. Can’t find projected flow rate.
So, sub $49. Shouldn’t be long before the “market is rebalancing” nazis announce data revision.
Baker Hughes international rig count down 21 in September, 15 oil, 5 gas, 10 land, 11 offshore. Offshore is now the lowest since February 2000, when oil price was starting to come off lows around $12 in 1999. Most declines in South America but also 5 down in the North Sea. USA and Canada each down 4 for last week.
I had a look at the offshore rig count
“Offshore is now the lowest since February 2000”
When the hell is that going to affect production? I think it’s weird that offshore isn’t already in major decline.
3 to 5 years after it started falling and for 2 to 7 years after if or when it starts rising again. If the USA and Canada offshore rigs are included I think we are probably at a new low.
Some years ago there was a parameter called something like gasoline sales from owned retail outlets. It went into free fall and people thought it was a result of the financial apocalypse of 2008/9.
Then it became clear the operative word was “owned”. The parameter measured sales from gas stations owned by major producers. The “Chevron station” or the “Shell station”. The majors divested themselves of their retail outlets. They no longer owned any so the parameter crashed, but it meant nothing.
This rig count smells like that. Maybe Baker Hughes doesn’t measure the same thing anymore.
I have no idea what the relevance of the gas retail story is. As far as drilling rigs Baker Hughes count what they have always counted: rigs turning to the right. Current MODU utilisation is about 60% worldwide and that is after most of the older vessels have been stacked and scrapped over the last few years (and more go that way every week as contracts expire). Several drilling firms have gone bust, a couple merged and the remainder living on debt at the moment (except maybe TransOcean).
Well, look. These are 1995 levels. 3% inflation over the 20 yrs would be a 1.8 factor — from today’s $49. So 1995 $27 in 2017 dollars equivalence yielded the same rig count — and the price was 5 bucks higher than $27 in 1995.
Either the rig count says there is some measurement error, or they aren’t drilling because there is no oil. There is no sign of trend reversal at all. If there’s no oil to find, the wars are coming very soon.
Apart from the inflation rate, though I don’t know why you’ve picked 1995, none of that makes any sense at all, and still has nothing to do with retail sales in gas stations.
The point of the owned retail sales of gasoline example was that the measurement of it became obsolete. For years after the major oil companies divested ownership of retail sales outlets people were pointing at that measurement having crashed as evidence of many different things from ongoing recession to an undocumented collapse of miles driven and other things.
The parameter had become useless. It no longer measured what it used to measure. It had been used as an assessment of gasoline consumption. It ceased to be that. The people pointing out that those sales figures had collapsed we’re claiming that this meant that miles were not being driven or the economy had failed. It was no longer a valid measure of gasoline consumption so their claims had no basis.
Similarly, the graph looks as if Baker Hughes is not measuring what they used to measure. The rig count is approximately what it was in 1995. The 2014 start of its crash certainly suggests a price dependency but the price of oil in 2009 during the financial crisis was about what it is now and the rig count was far higher.
1) Offshore rigs are contracted for months and years, the deeper the water the longer the period in general. The numbers wouldn’t respond very fast to the fast price changes around 2008 and 2009. 2) The numbers shown are for gas and oil and don’t include GoM (if GoM, especially gas, are included the number before 2014 is much more constant. 3) The type of rigs and day rates in 1995 were a lot different than what is being seen now (almost no DP then). 4) I don’t think anybody has specifically said the offshore numbers only respond to oil price, at the moment the numbers continue to fall despite a relatively constant price.
Hi George,
This may be where something similar to Schintzy’s price model is helpful.
Perhaps rig count responds to both the price level and the rate of change of the price level (perhaps there is a 2 to three year lag as well due to the long contract time for the deepwater rigs).
Also the fact that the offshore rig count includes both oil and natural gas rigs confounds the analysis.
I added North American offshore oil rigs to International Offshore oil rigs from June 2012 to Sept 2017 (left axis of chart) and compare with the Real US Imported oil price for the trailing 12 month (TTM) average using constant Sept 2017 $.
Pivot table data (allowing a count of offshore oil rigs) only goes back as far as June 2012 for International data. Note that real oil prices (TTM) rose from $82/b in June 2010 to $99/b in June 2011 and then to $112/b in June 2012. Click on chart for larger view.
Hi George,
A second chart with real oil prices (TTM) extended back to 2011 suggests there may be a roughly 18 month delay between a rise in oil prices (Jan 2011-Jan 2012) and a rise in the offshore rig count (from June 2012 to June 2013). Though there are undoubtedly other factors and this in only one case.
As always, clicking on the chart will bring up a larger view.
Maybe a way to model supply vs price would be to go through an intermediate step: price->rigs->supply with first (and second?) order derivatives (do they act the same as explicit lags over a long enough time?)
Hi George,
I think in this case we are assuming price affects the number of rigs turning. It looks like there may be a bit of a lag between changes in the price level and the rig count, but the first derivative of oil price with respect to time may also be a factor. My guess is that the second derivative is probably less important. Unfortunately we only have about 5 years of offshore oil rig data (or that is all I have). If we used international and North American oil rigs (and don’t try to do the land/offshore split) then we have a longer database to work with. It might make more sense to use nominal rather than real oil prices because business decisions are not really made in terms of “real” dollars, I am not sure if these businesses take inflation into account, though in the 1980s inflation was high enough that perhaps this was considered, especially for long term projects.
In any case, real oil prices can be found at link below, back to 1968.
https://www.eia.gov/outlooks/steo/realprices/
2017-10-06 Tropical Storm Nate ~ 71.1% of current oil production in the Gulf of Mexico has been shut-in, which equates to 1,243,753 barrels of oil per day.-BSEE
Looks like it’ll miss New Orleans, but direct hit on Mobile, with impacts from Biloxi to Pensacola, category 1, lots of rain. Also 5 (of 20) jackups shut in and 11 (of 18) DP rigs moved off, which will take longer to get back and have longer term effects. 53% of gas production offline – there are some big gas plants on the coast where it’s going to hit so the number may go up and for longer than if it’s just an offshore facility shutdown.
It has been previously stated: “My only complaint is that fuel taxes are supposed to cover road maintenance and they do not. ”
So who is the recipient of the so called subsidy?? The consumers that get more/better roads than they deserve? The highway construction industry that gets to build more roads? The workers who work for the construction companies, like caterpillar etc., that would not have jobs building roads and/or jobs manufacturing road construction equipment? The businesses that can establish large, centralized factories because the workers have roads available to drive long distances to work? The shopping malls that replaced the neighborhood markets? The citizens that can receive emergency medical care at the site of a medical emergency because first responders can readily get to them? Homeowners that benefit from fire department rapid response? etc., etc.
Or, greedy oil companies?
Hi clueless,
I would say the oil industry benefits when fuel taxes are low.
Consider cigarette taxes, if they were zero, who would benefit? I would say the tobacco industry. Likewise a zero level of fuel taxes would benefit the oil industry.
The roads get built anyway, they just are paid for out of general revenue. It is better for the user to pay in economic theory. Generally most motor fuel use coincides with use of roads (unless the fuel is for a boat, jet ski, ATV, lawn mower, etc) and the revenue from the fuel tax is used to pay for roads and bridges.
I suppose one could say the subsidy goes to the drivers of motor vehicles that are used on roadways as a fuel tax that is too low to cover maintenance of roads and bridges means those drivers are under paying for the use of roadways.
DC says: “I would say the oil industry benefits when fuel taxes are low.”
Okay, suppose fuel taxes were zero, then oil companies would receive the maximum fuel tax benefits possible, even though there might be no roads? That would not score debate points in my world.
I think that I could make a better case that higher fuel taxes benefit the oil industry. They fund massive road projects, leading to an urban sprawl that is sometimes breathtaking [North Dallas, e.g.], all connected with super highways that are construction marvels. In areas like that, it is virtually impossible to exist without a car and driving substantial distances on a daily basis.
Hi Clueless,
As I said the road get built anyway, the question is who pays for the roads. If fuel taxes were appropriate, the user would pay. I think it makes sense if those who benefit from a good were required to pay for that good, you may think differently.
The roads benefit everyone, so it should be a more general tax. The fact that someone drives to work means goods and services are then provided to the community at large by that person, whether they drive or not. The movement of materials, service vehicles, food etc. benefits both drivers and non-drivers.
So having a tax that supports a portion of the road maintenance makes sense. Having a driving tax that supports it all is just bad accounting, poor economics and a lack of seeing how things actually work. The non-driver can benefit just as much or more as the driver. In fact, much of driving is actually a service to society, so the costs should be spread across all the taxpayers.
If you allocate costs properly, then resources are allocated properly.
In this case, big trucks cause most of the wear and tear for roads. If they were charged properly for this, some freight would move to rail, which would be cheaper overall.
If drivers were charged for the full cost of driving, they’d switch to SOME extent to carpooling, mass transit, online shopping, etc., and society would be better off overall.
Proper allocation of costs incentivizes optimal allocation of resources.
“If drivers were charged for the full cost of driving”
I want to see the fossil fuel industries charged the full cost of their products to society and the repairs needed to correct them, plus fines for non-correctable damage.
You wouldn’t have to worry about gas taxes, it would be costing over $20 a gallon!
I bet those non-driving city dwellers would be screaming bloody murder when the trucks didn’t show up to bring them their food and goodies. They depend on vehicles just as much as anyone else, probably more since their massive infrastructure needs constant maintenance and repair.
People can only pretend to be not dependent upon vehicles and fossil fuels at this point. They can isolate themselves somewhat and reduce their personal use of fuels sometimes. Somewhere along the line they interact with society and need it’s goods and support.
So they need to share in the general costs that support them.
If you charged both fuel consumers and vehicle drivers for their actual costs…people would still use fuel, and drivers would still drive. And, they’d pass along their costs to their customers, never fear.
But…they’d start paying very, very close attention to efficiencies and alternatives. Freight would move from trucks to rail. Trucks would become twice as efficient. Short-haul trucks would electrify.
Things would start changing quickly.
Sure would change fast at $20 plus a gallon.
You could run a city mostly on train transport – as done to the first megacities like New York, London or LA in the beginning of 20th century. Only commercial short range transport needs to be motorized (or was done by horses).
But you can’t run modern farming on trains – the country people will bleed most money on high gas prices.
Big cities can increase their public transport, or people in cities could buy cheap chinese electric scooters to drive to work if gas would be at 20$ – but getting Daisytown in the middle of nowhere supplied is no option without roads and motor vehicles(of some kind).
Taxpayers without children have to support public education expenses.
Hi watcher
Yes it was once decided the public benefit of education was such that everyone should pay.
The same argument could be made for roads and fuel taxes. Note that most people use roads but typically heavier vehicles do more damage to roads and those heavier vehicles also use more fuel.
Probably a better system would use mileage and gross vehicle weight to calculate a road use tax. In that case fuel taxes could be reduced to zero, if one assumes carbon dioxide emissions should not be taxed. I do not make that assumption, but some people do.
CO2 emissions will fall when fossil fuels peak around 2030.
Hi Gonefishing,
In that case, the fuel tax should be zero.
I don’t agree however. It makes more sense from an economics perspective for the user to pay in my opinion, it generally leads to a more efficient allocation of scarce resources.
Let’s see, mileage deduction of 56 cents per mile on income tax and a 300,000 mile use would give a deduction of about $50,000 over the lifetime of the vehicle, effectively eliminating any tax on fuel and more for people with a business. It just moves money around. The mileage deduction will rise if fuel gets more expensive.
Which means that the tax is really only on the employee who does not have a home office and needs to commute to work. On the people that keep the system running by giving their personal value to the businesses and society they support.
And they too can avoid the tax with a high mpg car which does not get the roads or bridges repaired but does move some to a higher efficiency vehicle. More likely the person will find a higher paying job if possible and commute as far as is necessary, defeating the whole idea of efficiency and actually adding inefficiency to the system.
The only efficient method is to mandate efficiency and then mandate no further ICE’s after a certain time as some countries are doing. In the US the politicians are generally afraid or unable to take strong positions against fossil fuel so the result is chaotic and half-measures.
Hi Gone fishing,
The business gets the mileage deduction regardless of fuel tax levels. Again your argument seems to lead to the conclusion that low fuel taxes are better.
People will get the highest paying job they are qualified for and they will move to a different location if the commute is too long, these are personal choices that people make.
I disagree that mandates are more efficient. Higher taxes are a better way to allocate efficiently according to economic theory.
Economic theory? Better way to allocate efficiently?
I guess you are right. Mandates would actually solve problems.
We live here in Germany with more than double your gas prices. It works.
Farmers get a tax break, depending on their land size, on Diesel fuel.
The incentive to buy more efficient cars is there – but you’ll see enough big limousines and in the last years even medium sized SUVs.
Only the mega gas guzzlers like Ford F350 or US muscle cars aren’t there.
It makes sense – there is no sense to waste a ressource we must import here in Europe – best thing would be to use no oil at all if possible. It’s always another thing if you own the ressource.
Hi Gone fishing,
The Soviet Union used mandates, with government bureaucrats deciding on the best allocation of scarce resources, it really causes more problems than it solves.
Properly regulated free markets with a small measure of government tinkering to solve problems of externalities and public goods are the best system in my view. There is no perfect system.
So the European system did not work very well. They are still using a lot of ICE’s although they drive somewhat less distance, that may be due to the fact the countries are much smaller than the US and travel is limited.
Eulenspiegel do you have any graphs or data showing the reduction in fuel use with increasing taxation?
For such a small country the VMT per capita is quite large in Germany more than half the US value when Germany is just the size of one US state.
Why so much travel?
Dennis, right now road taxes are about 2 cents per mile for cars. What would you set it at? If it’s a nickel a mile, that kills the cost advantage of an EV. That is $625 average per year per car. That is $625 the driver is taxed on so the driver has to make almost $1000 to pay that tax.
Now if we double the cost like in Europe that would take $2000 out of the yearly paycheck.
So people will just have to make more money and do a lot more business driving.
Hi Gonefishing,
I drive a Prius and get about 50 MPG, the Federal Fuel tax is $0.184/gallon. At 12,000 miles per year that is $44/year. I am proposing we go to the 1993 rate (25%) which is about 50 cents per gallon for a Federal fuel tax. That would raise the tax to $120 per year at 12,000 miles per year.
Note that in Europe the tax is in part a carbon tax, not just a road tax.
If we had a carbon tax it should be imposed on the fuel where it is consumed (gas tax for fuel) or taxes on natural gas or coal where it is burned (at home for heating of home and water) or at the power plant in the case of electricity. Taxing at the electric meter is tricky because the electricity comes from varied sources with different carbon intensity (coal, natural gas, nuclear, hydro, wind, solar, and geothermal).
Note that although I think carbon taxes are a great idea, I am realistic enough to know these are unlikely in the US for the next 10 years. Peak oil (2025), peak coal (2028), and peak natural gas (2032) and the high prices that are associated with these events may enable us to wind down carbon emissions by 2060. A population peak by 2070 followed by population decline will help make a transition possible.
It is encouraging that for my family and my spouse’s (with 11 children in the two families combined) there are only 6 grandchildren, thus a TFR of only 1.1.
Too small a sample of course, but a big TFR change in one generation from 5.5 to 1.1.
If the World can go from a TFR of 2.5 (in 2005) to 1.5 or less (in 2050), we will be in better shape.
My total taxes on a gallon of gas is $0.56. I think you are forgetting state taxes which go to road repair also. You are also talking about carbon taxes which just confuses the issue.
Eulenspeigel says:
We live here in Germany with more than double your gas prices. It works.
Most of the newer ICE cars I have driven in Germany automatically shut off the engine when you come to a traffic stop.
There are these reminders for the rest of the driving public.
.
As I said the road get built anyway, the question is who pays for the roads.
Not really. Many roads are badly maintained, causing delays and wheel damage. Many bridges are badly maintained, causing real risks of big delays and killing people.
Been quite a number of bridge replacements in my region in the last couple of years. Still doing more this year. They are small country road bridges.
Big one though is the Tappen Zee Bridge Replacement.
http://www.newnybridge.com/about/
Hi Gone fishing,
Just to be clear, my argument is not that road maintenance should not be done. I am arguing that Federal fuel taxes should be higher than 18.4 cents per gallon of gasoline which was last increased in 1993 when it was about 25% of the pre-tax retail price of gasoline.
I think that at minimum the Federal fuel tax for a gallon of gasoline should be at least 25% of the pre-tax retail cost of gasoline (currently about $2/gallon where I live in New England). Though a gradual increase in this rate from 25% to 50% over a 5 or 10 year period would be even better. If this is more money than is needed for roads and bridges the revenue could be used for public transport (light rail or railroads) or other infrastructure or even to reduce income tax rates.
No one said road maintenance should not be done, though ways to decrease the amount of roads need to be looked into for the future.
Hi Gone fishing,
I agree that nobody has implied that road maintenance should not be done, but judging from the responses, it was not clear if others understood that I did not mean to imply that road maintenance should not be done.
My problem is simply the source of the funds. I think it would be better if a larger proportion of the maintenance funds came from higher fuel taxes. In the US there was a time when fuel taxes were enough to pay for most of road maintenance.
In 1993 there was about 21 million in Federal fuel tax revenue and if we assume an average of 3% inflation per year, that would be about 42 million in 2017 $. In 2016 federal tax revenue was about $26.3 million, even if we assume there was no increase in total miles of roads from 1993 to 2016 (highly unlikely), Federal fuel tax revenue in constant dollars fell by about 37% from 1993 to 2016.
I think there are many reasons that fuel taxes should be higher rather than lower and believe that they should be at least as high in percentage terms as they were in 1993 (though a higher tax would be ok with me, I doubt it is politically feasible in the US.)
Decrease the number of roads?
Hovercraft?
Hi shallow sand,
I think Gone fishing means fewer multilane highways into and out of cities. I assume you have seen the highway system in places like the New York metro area or perhaps LA or Houston. When peak oil arrives and gasoline costs $10/gallon or more, there may be fewer cars on the road.
Also when autonomous vehicles become commonplace everyone may use a car service for travel (in urban areas) where it will be easy to car pool and fewer cars will be needed. In that case fewer travel lanes will be needed in cities, thus fewer “roads”.
Where we’re going we don’t need roads. 🙂
Shallow sand.
Aircraft and trains for long and medium distances.
Hi Nick,
I guess you are missing the point. Low fuel taxes are a political decision about who pays for road maintenance.
How much is spent on road maintenance is a separate political decision as there is no law that requires that only fuel taxes can be used to pay for road maintenance. Governments decide how high taxes will be and how the tax revenue is allocated.
Nobody is arguing that there should not be road maintenance, the question I am focused on is who pays. Is it mostly the users of the roads (paid in part by fuel taxes on non-toll roads) or does it mostly come from general tax revenue.
I think it makes more sense for the user to pay and that the Federal fuel tax rate (which was about 25% in 1993) should be set at 25% of the pre tax cost of gasoline (retail price minus federal, state and local fuel taxes) at minimum.
Do you believe fuel taxes should be zero?
The roads benefit everyone, that’s a fact. EV drivers for sure, so when EV traffic is predominate, who should pay then? We keep raising taxes on the gas? Or, do we keep track of mileage at inspection time? What about bus riders, should they be taxed per fare? Extra tax on emergency vehicles called on? Extra tax on food, because is was transported over the highway?
Guym No need to worry about crossing that bridge till we get to it. In the meantime the components and energy source of the ev is basically still fossil driven so if the fossil fuels are taxed the price of the ev and its energy source will reflect that.
Hi Guym,
The solution is simple for EVs, they can be taxed at registration (or inspection) based on odometer readings. This would be true of any EV, whether it is a bus, ambulance, truck, or motorcycle. The tax should be based on odometer readings, gross vehicle weight, and number of wheels and axles of the vehicle.
That could be a solution. City tax for city expenditures, county for county expenditures, state for state expenditures, and Federal for Federal expenditures. Be lots of arguments going around when you try to tax the city buses for their share, or when the city or ambulance service gets their fire equipment or ambulance taxed by all the entities. Then would it really be equitable for the eighteen wheeler located in the country to escape all the road taxes in the cities it delivers to, or travels through? Or, are you addressing only the Federal expenditures which far from includes all of the costs for the roads?
Vehicles will be so smart they will fill out the forms and send in the proper amounts as they go, all electronically. No hassle, no bills, just done. They will also find the cheapest low tax routes and calculate all the costs before starting on a trip.
Do we do away with form 2290 for heavy vehicle use? Supposed to go for highway maintenance.
According to the budget, the tax should be over $5 a gallon. That would only cover the Fed part, not state, county, and local. Fed budget was at around 54 billion. Roughly 110 million barrels of production, 42 gallons per barrel, which is roughly, except for the 42 gallons per barrel part. That doesn’t cover all the budget parts. But, how does this relate to the oil companies? It’s a use tax (sales). No other company in the US is taxed for sales at the manufacturing point. Only when the product is sold to the end consumer. The end consumer is benefiting from the roads, not the oil companies. Plus, giving the Federal government extra money for a particular purpose is not too wise. They haven’t treated Social Security with any respect. You can also try to estimate how about $5 a gallon would equate to an EV owner. At my gallons of usage, it would be an extra $7000 a year. Of course, maybe they would reduce other taxes to balance it (smile).
Hi guym
I am suggesting 25% of pretax cost of gasoline, currently about 50 cents per gallon. If an EV drives 15,000 miles they would pay 150 dollars the equivalent of assuming 50 mpg for a prius. Not sure where the 5 dollar per gallon estimate comes from.
Note that this proposal puts fed fuel tax back to 1993 rate.
The $5 comes from the cost that would cover the Fed budget for highways. But, I see now you are only trying to go back to 1993 rates. Not trying to cover the cost.
Hi Guym,
The 2016 budget request for the Fed Highway Administration was 51.3 billion. The taxes from the fuel tax were about 45 billion.
So we would need to add about 14% to fuel taxes to cover the Federal highway budget.
So the federal gas tax could be raised to 21 cents per gallon and the diesel tax to 27.8 cents per gallon.
Maybe you forgot there are 42 gallons in a barrel?
My proposal more than covers the cost for the 2016 Federal Highway budget as I am proposing an increase of 270% in Federal fuel taxes.
Hi GuyM,
Remember that we import oil as well as produce it.
In 2016 there were 3.41 billion barrels of gasoline supplied or 143 billion gallons at 18.4 cents per gallon that is 26 billion dollars. There was also 1.35 billion barrels of diesel fuel or 57 billion gallons of diesel at 24.4 cents per gallon or about 14 billion dollars from diesel fuel taxes for a total of 40 billion so the shortfall is 14 billion using your numbers. If we had taxed the 200 billion gallons of fuel sold at an additional 14.3 cents per gallon (32.7 cents per gallon for gasoline and 38.7 cents per gallon for diesel), the budget would be balanced. You need to include the imported oil (about 2.5 billion barrels per year).
I used the page below to get my product numbers.
https://www.eia.gov/dnav/pet/pet_cons_psup_dc_nus_mbbl_a.htm
Not sure about where your 110 billion production comes from, crude was about 132 billion gallons in 2016.
Oh its 110 billion not million.
Oops, durn decimal points. Your right.
And that explains why I get roughly 50 cents (a little less because there are imports, but also some crude becomes stuff besides diesel and gasoline) rather than 500 cents, 500/1000=0.5. There was actually about 200 billion gallons of gasoline and diesel fuel consumed in 2016, if it was all taxed at the same rate per gallon we would need a tax of 54/200 or 27 cents per gallon to cover the federal highway budget.
About the book,
It would be very helpful to include some essays or summaries at the end of each chapter exploring the MEANING of the highly technical arguments in terms accessible to reasonably well educated laymen.
I will volunteer too, but I doubt if I could do more than perhaps suggest adding an additional explanatory footnote or link here and there to make the contents more accessible to us lesser mortals such as myself, lol.
“It would be very helpful to include some essays or summaries at the end of each chapter exploring the MEANING of the highly technical arguments in terms accessible to reasonably well educated laymen”
Most of the meaning will be obvious to the layman. One chapter will describe the math behind the impact of the moon on various phenomena. Everyone should be able to appreciate how the moon drives the ocean tides. Likewise, we have a section in that chapter on how the moon drives the El Nino cycles. The moon’s influence works the same way as with ocean tides.
What kind of meaning are you thinking about?
Has Javier volunteered to review?
I don’t think so. It’s not part of his political agenda.
‘u^
Hi WHUT,
Consider for example:
I like just about everybody else do understand how the moon drives the tides, in general terms, but I can’t do the math involved in calculating the tides. I did two years of real math at university, but that was fifty plus years ago, lol, and two years is probably only a good start on what you need to do orbital calculations and so forth. I have never needed any math, personally, beyond high school level trig , algebra, and geometry, since then.
So I wouldn’t be able to make a set of assumptions, and then calculate how likely it is that there might be a major methane release from the Arctic permafrost, or a warm current scouring away the sediments covering a frozen deposit on the sea bed, etc.
What are the odds of a major volcanic eruption, someplace, on an annual basis? On a ten year basis? What are the odds of a major new communicable disease evolving on an annual or decadal basis? Even the roughest sort of estimates will enlighten me, since I’m almost totally in the dark in respect to such questions.
So I’m hoping you will include some actual predictions, as to when for instance the average temperature in the USA will be one, two and three degrees higher than at present, based on assuming the CO2 level rises at an assumed rate such as is actually happening, an assumed rate higher than the actual present rate, at three quarters the present rate, etc.
I understand very well that oil production must eventually peak, any moron can understand that much. Now if you run some actual calculations assuming we use thus and so amount of oil next year, the year after, etc, and tell us that using these assumptions, we are eighty percent likely to have X millions of barrels a day available in say 2035, that would be very helpful to me as a layman.
Do this three or four times, using various sets of assumptions, at the end of the chapters on various topics. Nobody will be able to fault your math, I’m sure, and the people who read this sort of book will understand that you ARE simply working out possible future scenarios based on the stated assumptions, rather than making actual PREDICTIONS.
Of course if you make actual predictions that include dates and numbers, that would be even better, from my point of view.
The book is about more than just making predictions. The editors that work for the technical publishers will tell you that those kinds of books have a short half-life. It’s more about describing the science behind the topics in the Table of Contents that Dennis listed so that others can either build on them or apply them outright.
Some of the stuff we will include in the book is astonishing, and based on what other scientists have remarked will reset the research models to square one. I don’t believe that is necessarily true, because there is still too much that is correct. We are simplifying and filling in the huge gaps in understanding.
Back to you, WHUT,
I understand now that your book is to be about basic science, about NEW basic science, or at least new ways of looking at existing science, and using it.
So making predictions in it would NOT be a good thing to do, you’re right about that. Making predictions would be a mistake, leaving you open to charges of editorializing at the very least.
And even if your premises are correct, your thinking sound, your math perfect, etc, it’s obvious that any assumptions you use to make any actual predictions are apt to be faulty, and thus make you and your book look bad.
Some editorializing is ok in a freshman level biology book, just about all the authors of such books do it these days, pointing out the rates at which wild lands are being developed, etc, and the consequences. And of course the shelf life of a new freshman biology text is only a couple of years. Gotta keep them presses rolling, rotfl.
So…….. I should be asking if the three of you will run some scenarios such as I suggested in my previous comment and publish them here in this forum, with each one accompanied with the caveat that it’s simply provided to assist laymen into developing deeper insight into possible future realities, rather than being an actual prediction.
“So…….. I should be asking if the three of you will run some scenarios such as I suggested in my previous comment and publish them here in this forum, with each one accompanied with the caveat that it’s simply provided to assist laymen into developing deeper insight into possible future realities, rather than being an actual prediction.”
We can do anything we want outside of the context of the book.
For example, we can make an interactive web site that contains all the mathematical models configured in such a way that users can adjust the parameters and see for themselves how the scenarios will change.
Or we can use the models in a college class and educate students on how to do scientific programming for earth sciences.
Lots of possibilities for this, but this requires a solid foundation from which to draw from, and that’s what a technical book is for.
Congrats on the book, guys, and best with the reviewing and critical response once it’s published.
Feel free to let us know how it goes.
thanks. The reviews will be fun.
Azerbaijan production decline looks to be getting going in earnest now – down to 750mbpd in August, 11% y-o-y decline, and over double the NOPEC cuts they agreed at the end of last year. Some of it might be maintenance, though I haven’t seen any particular news for major planned turn-arounds.
George
I saw this the other day.
https://www.azernews.az/oil_and_gas/119950.html
Malaysia Sungai Linggi Port, the level of oil being stored in tankers is drawing down a little. But is it a sign of normal seasonal demand or market rebalancing or a bit of both 🙂
http://tankertrackers.com
USA barrels waiting offshore, updated to Friday October 6th
Chart on Twitter: https://pbs.twimg.com/media/DLjQZnMWkAAw6C1.jpg
Singapore, the barrels at anchor around Singapore have been drawing down too – Bloomberg
Chart on Twitter https://pbs.twimg.com/media/DLrL33xXUAAoE18.jpg
ARA Europe, onshore fuel hub
Reuters https://pbs.twimg.com/media/DLcWMZqUQAEQyQA.jpg
And it seems that Iran has sold its spare barrels – TankerTrackers.com
What happens to the vessels that used to be storing oil? Do they go back to trading? Scrap? Just sit there empty?
I’ve not heard anything, I don’t know much about shipping.
I heard that a lot of them were not sea worthy, and not worthwhile to make them seaworthy. But, I am only stating someone else’s opinion, which is usually not too wise. New casinos, maybe? Nah, too smelly.
Shut-ins for Nate on Saturday (from BSEE):
Platforms Evacuated – 302 (40.84%)
Rigs Evacuated – 13 (65%)
DP Rigs Moved-off -16 (88.9%)
Oil Shut-in – 1,615,966 (BOPD) (92.34%)
Gas Shut-in – 2,479.64 (MMCFD) (77.01%)
Overall it looks like they will lose about 250,000 bpd for the month, plus some longer term production delays for drilling (and they are assuming maximum capacity at the moment is 1,750,000 bpd).
If it is anything like the last hurricanes, EIA will show a decrease of 400k, and then back up to 9.5 million the next week for its weekly reports. I think they are determined to stay at 9.5 million until production actually reaches that. Damn the torpedos, full steam ahead. Having worked in various governments before, there is a widespread breed of managers, who can’t accept making a mistake. The State of Texas and the BOEM are in error, we can’t be. Because we have taken their figures and transformed them with our perfection. Oil production is not decreasing, its increasing, because we said so.
Hi,
Does any of you clever guys have any knowledge about free statistics for selling or rental prices for HE jack-ups (depth more than 350 ft)? Its for my Master thesis. The older and cheaper the more interesting. BTW. Is is possible to roughly guestimate how large the drilling module with derrick is of the total cost in average?
Cheers
IHS usually has stuff. For UK: https://oilandgasuk.co.uk/wp-content/uploads/2016/02/Oil-Gas-UK-Activity-Survey-2016.pdf
Norway might have some data as well, through NPD or their trade organisation (forgotten the name , I think starts with INxxx).
Wood-Mac sometimes publishes stuff, you could also try emailing them and seeing what they’t give out for free for a paper.
Transocean agreed to sell all their jack-up fleet earlier this year, so the price might be available. Old jack-ups are being sent for scrap so they might be free if you are prepared to take on the maintenance and can find a contract (I don’t think anybody can though).
Hi George
The Verbier side track came in this morning.
Oil Discovery at Verbier Sidetrack Well
9October 2017
Jersey Oil and Gas plc
(“Jersey Oil & Gas”, “JOG” or the “Company”)
Oil Discovery at Verbier Sidetrack Well 20/05b-13Z
Jersey Oil & Gas (AIM: JOG), an independent upstream oil and gas company ?focused on the UK Continental Shelf (“UKCS”) region of the North Sea, is pleased to announce an oil discovery in the Verbier sidetrack well, 20/05b-13Z. The well has been drilled safely and within budget to the planned total depth of 3811m and a suite of log data has been acquired via Logging While Drilling (“LWD”), including pressure data.
Preliminary analysis indicates:
The well has proven a hydrocarbon accumulation in good quality sands, up dip of the water bearing sands encountered in the initial well
Evaluation of the well results, together with the existing 3D seismic data is ongoing
Initial Operator estimates of gross recoverable resources associated with the Verbier discovery are between 25 and 130 million barrels of oil equivalent, with a minimum proven recoverable volume in the immediate vicinity of the wellbore of 25 million barrels of oil equivalent
This from the Wellslot column last week:
So I guess 25 mmbbls (probably around 50 with that range) is something if it is commercial. Would have to be a tie back or repositioned FPSO I’d guess
Here’s some other info about jack-up sales (same company who bought the TransOcean ones buying some more – mostly from previously cancelled orders so going cheap):
https://www.epmag.com/borr-drilling-adds-fleet-13-billion-sembcorp-deal-1661846
Looks like they cost around $130 million each
You could try this
http://www.ship-broker.eu/tag/jack-up-rig/
Nowhere near enough attention is being given to the Saudi visit in Moscow. The Saudis have clearly decided that America as an ally no longer is overwhelming in value to them.
From out of nowhere Russia has become probably the leading power in the Middle East. They were the ones that supported Iran and provided a mechanism for export of oil from Iran’s north coast during the sanctions and thereby generate revenue. They were the ones that decided there would be no regime change in Syria, despite that regime change being desired by Saudi Arabia and the United States.
There’s an article floating around right now that speculates on a Saudi Arabian desire to import natural gas from GAZPROM being partial impetus for the trip. The scenario or justification for this seemed poorly thought through, but the premise of importing natural gas from new sources would seem to have merit in the context of the tensions with Qatar.
One must wonder how Saudi Arabia and Russia will cooperate while competing for China’s oil business. Recent numbers on Chinese oil consumption heading towards 6.6% growth this year suggest that they are really the great customer prize.
Another blurb. Speaking of oil consumption growth there are interesting things happening with India.
Apparently India sent a consortium of oil companies to Iran to compete for the award of developing work in some new Iranian (Farzad B) gas fields. An Iranian Minister said that they would go ahead and waste time and give the award to the Indian consortium but did not expect them to be able to do the work.
This appears to have pissed off New Delhi. They have reduced oil imports from Iran by 33% and elevated their imports from Iraq. Iraq is now the number one source of oil to India, surpassing Saudi Arabia.
Supportive stuff.
“China imported 281.1 million tonnes of crude in the first eight months of this year, equivalent to 8.44 million barrels per day (bpd), according to customs data.
This is up 12.3 percent on the same period in 2016, or about 950,000 bpd.”
Russia and Angola 1 and 2 suppliers, KSA 3rd. KSA sourced oil down 1.6% from last year (while China import growth 12%). Russia grew export to China over 13%.
That report some weeks ago of Chinese consumption growth of 6.6% looks legit.
There is an article out there about the Indian Navy developing contingency plans for choking down the Straits of Malacca to shut off Chinese oil imports. At that time 80% of Chinese imports went through those Straits. Probably less now, but not a lot less.
Seems like Dramatic oversimplification on the impact of US Oil Exports.
” But this is also resulting in changes to foreign expectations. Some of these are having spillover effects in other quarters… Including sending Saudi Arabia and Russia into each other’s arms… At least for now.”
http://oilprice.com/Energy/Energy-General/The-Geopolitical-Consequences-Of-US-Oil-Exports.html
US Oil Exports… don’t really exist.
For US oil exports the frackers have to boost output for another 5 mb/day, without other producers declining. Pages like oilprice.com dream of the big US oil imperium delivering to all the world while the reality is a big heap of junk bonds of questionable quality until now.
And exporting oil for 5$ cheaper as WTI while having to import the same amount 5$ more expensive for Brent prices doesn’t sound like a good deal in my ears.
It makes sense to export some oil grades and import others, or export oil at bad locations and import to another location. But this doesn’t make you an oil exporter.
The most important event for US oil debt is unfolding with Puerto Rico.
You have to understand what it would mean. This would be the ultimate swamp drainage. Zero PR debt and all the holders are wiped out. The alternative is Greece. The ECB carries Greece to prevent the nihilism that debt erasure would mean. But “carry” means lending more and more money that won’t ever be repaid. It’s not really giving more loans. It’s just keeping the wheels turning systemically and enshrouding it with financial complexity. The same will be tried with PR. Float them more loans in a “compassionate action” from Wall Street, to arrange perpetual enslavement.
If PR debt is erased, lots of other debt will want to be erased. Illinois’ pension system. California’s. Fracking companies won’t be far behind, especially if scarcity asserts and gasoline station lines form.
“But if you erase debt, no one will lend anymore!” Sure they will, if they are backstopped.
Just one more tearing of the cover off the process of money creation from thin air at central banks.
To Eulen – No, US will probably never be a net exporter. However, it is helpful to clear out the inventory of oil that the refineries would not buy for years, and other countries like it. Especially, at a big discount. US is not causing much damage, elsewhere, or it wouldn’t be sold like it is. US has the last big surplus of oil, from what I can tell.
On another note, September production will probably drop more than August. Completions for oil in Texas were at 318, almost half of the May completions. August was less than a hundred more than September. Safe to say that US production is going down, at this point. EIA is still in Never Never Land. What really irks me about that is, the head EIA guy is a Texan, I think.
With completions in Texas plunging, I am CLUELESS as to why I keep seeing the stories concerning the shortage of completion crews. I think that I read that there are fewer wells being completed than last year.
My total speculation is: (1) the service companies are not about to staff up completion crews to complete wells at a discounted price; and (2) the oil companies cannot borrow money to complete wells in this oil price environment.
You are correct. As of September 2017, the RRC reports 4235 oil completions. The same time last year, the count was 6596. You may add another reason being that completions are waiting for a better price. At least to confirm they won’t drop, again. Ok, better make it number 4 reason: companies are finding it hard to staff up. Not cool to be in the oil field.
Texas RRC, a new low for the number of oil well completions, not been this low since summer 2011.
Thanks, knew it was low, but not a new milestone.
Wow, more than half them completed in District 8 (Permian) were vertical, too. “Vertical” are usually very low monthly output. Lower output but lower cost. There is about twice as much drilling, as completions. They are not expected to match, but DUCs are definitely increasing. I would be quite surprised if the drilling continued this high toward the end of the year, based on budgets. For the same reason, I would not expect completions to pick up much before year end. Not much production would be expected from two months, or less. Like the beginning of 2016, I imagine a lot of the capital budgeting will be allocated to completions, and less to drilling and completions in 2018. Then again, it depends on the oil price.
Energy, it looks like you are using total permits, including gas and service wells.
If that were true, the going rate for HY paper would be a spread of 5 or 7 or 9% over treasuries instead of 2 or 3%.
Interesting how the price of money also doesn’t reflect supply and demand.
WINNING?
EPA To Repeal Obama-Era “Clean Power Plan”
When natural gas prices rise this may be bad for natural gas producers as coal may take back market share.
If I were in the natural gas industry I would see this as bad news.
Hello Dennis You say “If I were in the natural gas industry I would see this as bad news”, but I am american before I am oil man. I think like a capitalist not a fascist. all energy competing in the market place is what is best for our county both internally and externally in terms of competitiveness. I if I need the power of government or of lobby groups (environmental wackos) to limit or bankrupt my competition, that says a lot about my business model.
Hi Texas Tea,
Many capitalists hire lobbyists to get legislation passed that gives them an advantage. Fascists were supported by capitalists as well as nationalists.
It is low natural gas prices that has hurt the coal industry, the Clean Power Plan has had very little effect.
Many nationalists think clean air and clean water (passed into law under the Nixon administration) is a good idea, though no doubt you might think this is something that only environmental wackos are in favor of.
I posted this in the non-petroleum thread, but it fits here, too.
Seems like the coverage about the EPA rolling back regulations on power plant emissions focuses on the wrong stuff. Trump and Pruitt are doing this as part of a culture war, but economics say coal plants are being phased out because they are old and not price competitive with natural gas and renewables.
But environmentalists and the media seem to be taking the bait on this issue, making it a bigger deal that it may be. I’d emphasize that this is more of a political dog and pony show than impactful legislation.
Dennis Says, “though no doubt you might think this is something that only environmental wackos are in favor of.” you have no frekin clue what I think comrade. being in favor of clean air and water has nothing to do with the current environmentalist agenda. you are a terrible debater, classically you bait and switch the subject to attack you opponent with false equivalence. not cleaver not accurate and not original. bet your book offers the same level ineffectual stimulation between the layers upon layers of leftist propaganda, tax raising cheerleading, and spread the wealth, lets protect the planet by killing or enslaving half the population for the good of mother earth bullish!t ?
tt says:
No it won’t. The book is all math and probability&statistics related to geophysics and energy. It’s actually very hard to propagandize via mathematics.
Capitalism has always had a Strong State to enforce its rules, often violently, from its emergence in the 14th Century Italian City States, to its current neoliberal form.
It needs a strong government.
Great comment ! Thank you.
You can add that neoliberalism needs to enforce oil prices too (energy prices in general). Often violently (Iraq, Libya, Syria). It does need cheap oil to function properly with its emphasis of globalization and extended global supply chains, as well as “low inventories” mantra.
With over $60 per barrel oil price permanent stagnation of global neoliberal economy is a real threat. For the USA it is given. With over $100 for several years it might produce the global stock market crash, and another Great Recession (although the previous one did not actually ended).
So naturally the power of the major neoliberal state (the USA) and its diplomatic and military machine will be applied not to allow this scenario unless this is short term and serves some distinct purpose.
For example the direct or indirect decision to fuel shale oil boom under Obama might well be one of reasons for the previous over $100 per barrel period; I always asked myself — why money were flowing so freely at very questionable enterprises? Which have tiny chances of paying them back outside the “evergreen” loans mode (constant refinancing). Why this boom in shale junk bonds, kind of micro housing bubble, occurred when experience of 2008 was still very fresh; why nobody understood the inevitability of the coming bust? Or creation of such a bust was in the plans ?
That’s why probably we now see such a prolonged period of low oil prices. And for the US shale industry in less then $50 dollar per barrel environment, Germans have a nice phase: “The Moor has done his duty, the Moor can go”
We might also view the current situation as a kind of Hail Mary pass by financial oligarchy which understands that neoliberalism shelf life is coming to the end and tries to prolong it. I don’t know.
But “paper oil” phenomenon definitely plays an important role in the suppression of the oil prices. Subsidies (direct and indirect) and naked shorting has the power to manipulate the prices down, if you can compensate losses at one area, by gains in another. Which is the case for the US economy as a whole. And neoliberal economy globally.
All that means that people who still provide naïve supply/demand curves here and talk about the balance of supply and demand based on EIA figures need to think about it ;-).
The experience of 2014-2017 strongly suggests that in casino capitalism the balance of supply and demand for oil can be achieved at wide range of prices, depending on Wall Street agenda. And if this means ripping of producers, so be it. They can’t stop producing, as their balance of payment depends on oil revenues and they are part of global neoliberal economy and dollar system. Considerable part of them have foreign debt that needs to be serviced, which also helps to put them in the situation of Wall Street hostages. So they can be taken and were taken for a ride.
So power of Saudi to influence the oil prices is definitely exaggerated (not that Saudi are independent nation in any case; they are the USA vassal). Currently I think it is the USA which has most say in setting of global oil prices and even can “overrule” the decisions by OPEC it does not like, at least for a year or more (at the end, paper oil can’t fuel cars or planes)
The role of finance in setting of oil prices creates problem with the applicability of neo-classical economics to the casino capitalism environment. Neo-classical economics denies the existence of the financial sector and the possibility of price manipulations by this sector.
As such it is completely detached from reality. Which makes it another example of voodoo science (with nice graphs though 😉
Then the governments need to dig deep into their pockets to provide funds for capital expenditures for oil, because at $60 oil there won’t be enough to keep the economies going for long. Tip: Saudi Arabia, who has one of the lowest costs to produce oil, needs over $80 oil to keep their economy at close to breakeven. Most of the rest are much worse. They make a lot of noise that other countries need to up capex greatly, but they are not doing it either. So what will? Hint: oil price.
In a perfect world, a low priced oil would be what we need. Unfortunately, we are limited by the geology of the earth, and the technology we have to work with. At present, $60 oil price will not bring enough out of the earth to keep the economies growing for very long. At a much higher price, it has the same effect. So, at present, we are stuck with an imperfect world, and an oil price that won’t generate sufficient capital investment to keep the world moving.
With multiple natural disasters to clean up after and a desire by some to pump more money into defense, I can’t see business as usual in the US continuing.
I think demand will change. Why focus our efforts on getting more oil if we don’t have an economy to support? Lose a ton of cars in floods and fires, and what do you replace them with?
Platts – October 2, 2017 – Permian pipelines key to production growth: Fuel for Thought
Five pipelines have been proposed by leading midstream players from the Permian basin to the Port of Corpus Christi in the US Gulf Coast, potentially offering a total of some 2.14 million b/d of new takeaway capacity starting in stages from late 2019/early 2020.
There is currently 300,000 b/d of excess pipeline takeaway capacity from the Permian and midstream players are careful of an over-build.
Wood Mackenzie said in a recent report. Eagle Ford sweet spots ended up being much smaller than originally modelled, WoodMac said.
http://blogs.platts.com/2017/10/02/permian-pipelines-production-growth/
Definition of “sweet spots” is strongly determined by the oil price. At $40 a barrel, it is very limited. At $100 a barrel, the majority of the Eagle Ford is a sweet spot.
Saudis to Make Deepest Cut to Crude Supply Despite Demand, -0.560mbd for November supply.
https://www.bloomberg.com/news/articles/2017-10-09/saudis-to-make-deepest-cut-to-oil-supply-despite-strong-demand
The market is “balancing”, stocks are drawing down, demand is healthy, US rig count/LTO does not increase, Nigeria and Libya have a very small upside in the short term, Venezuela is a pretty big downside risk, offshore is not too healthy. And the Saudis cut _voluntarily_ because…?
Because, frankly they know more about the oil market than most of the “anal ists”. Rather than fighting them, and claiming no more need for “cuts”, they are playing along with the crowd. When the shortage hits, they can claim surprise and blame the EIA for over reporting. Better price for the IPO.
If true, it seems likely to me that the Saudi’s [and Russia?] are going to push the oil price issue and the best interests of the West be damned.
Looks to me like SS might get back in the money next year.
I wonder if Trump will realize that now is not the time to have Exxon’s ex-CEO as Secretary of State. I think that Trump really wanted better relations with Russia [and Russia wanted better US relations], but politics has totally destroyed that idea – and I think that Russia now knows it.
I don’t think the Saudis or Russians would be concerned too much about what happens in the west. The upcoming supply shortage will happen, anyway. There is a lot of talk by the Saudis of making sure prices don’t rise too much, but I am sure that is fake concern. They make it look like they are concerned shale production will gear up, which goes along with what the pundits are saying. They are playing us like a violin. Much like their purported “cuts”. Jack production up several months, take it back to where it was before, and call it a cut. We bought it, hook line and sinker.
I am sure this post does not apply to shale, because shale is a Wall Street phenomenon.
However, for us, a price spike will not immediately lead to drilling wells. First, after what we have been going through the last three years, I would want to make sure the price is going to hold. Yes, no way to know that really, but I can guarantee we would not be rushing out to get permits.
Second, after this crash, we would want to heal some. Get cash balances higher, then maybe actually take some decent draws. After all, we are in this for the income, not to see how much we can produce. That is what always blows me away about Wall Street. They analyze every metric imaginable when it comes to E & P’s except the bottom line. I’d rather own 50 BOPD and make $50K per month than own 500 BOPD and lose $50K per month.
Third, there are some much cheaper things we can do to boost production than drilling new wells. Workovers may not yield as much, but they cost 1/5 or less that of a new well.
I wonder, outside of shale, if we would see this type of attitude if there is a supply crunch? Will all those high cost projects suddenly come back on line.
Finally, everyone and their dog is proclaiming the end of oil anyway. Everything is going to electric in terms of transportation. Countries abolishing ICE vehicle production. Never mind that is in 2040 mostly.
Now, why would I want to drill more wells knowing oil is nearing the end? Might as well just try to make what I can off this existing ones. No reason to spend a bunch of CAPEX. Is it possible that all of the end of oil talk actually helps cause a supply crunch? Believe me, it is going through our minds now that maybe we need to be worried about decreasing demand in our lifetimes due to EV’s.
Best to ignore the EV wackos and watch Chinese and India oil consumption data.
Missing my point watcher.
EV push is causing companies such as Shell to say peak oil demand is coming soon. If Shell believes that no reason to be putting a lot of CAPEX into oil exploration.
But demand has increased over 3 million combined the past two years it appears. With the price staying low because high decline LTO can make up any short fall, just ask Wall Street traders and the business media.
I may be completely wrong, but no reason traders can’t keep prices low for a lot longer yet. And the suddenly world inventories hit new lows as demand continues to increase 1.5+ million yoy.
Car numbers are expected to double by the 2040’s. In order for EV’s to take over by then they would have to be built at the rate of over 100 million a year starting right now.
Even if there were 1 billion EV’s on the planet by 2045 the other 1 billion vehicles would have to be ICE driven in some form.
That is not happening, so I think the EV threat to oil is way overblown.
If EV production can reach 130 million cars per year by 2045 it will have reached the replacement rate of ICE’s and take another decade or more to complete the takeover.
Those are huge numbers and it is doubtful that EV’s will be produced that fast unless oil becomes scarce.
If oil prices go up, EV’s become even more desirable, so keeping prices somewhat low is better for the oil companies.
Maybe the real reason that companies are not exploring and developing more oil is that there is not a lot left worth developing and not a lot of places left to explore with current technology. They will concentrate on higher profit plays while shifting to other business models.
Yo SS, from fishing dood:
“Maybe the real reason that companies are not exploring and developing more oil is that there is not a lot left worth developing and not a lot of places left to explore with current technology.”
Remember that the majors own fewer and fewer reserves, not just in the context of geology, but because NOCs have bought them up — or the stuff may be forbidden. Iranian fields and Russian fields are largely forbidden to US companies. Libya’s oil is probably the best oil in the planet and you’re not going to see much of a queue of companies bidding.
But geology is the primary concern. That’s why Ron made the blog. This stuff CAN run out or run short, and we see very clearly now after 3 yrs that price doesn’t greatly affect production.
We can all rest assured that geology WILL affect production. If there’s not much left, then it won’t flow, regardless of investment.
Price affects production – you only don’t see it. It’s only 3 years cheap now. Lots of the projects coming online now have been planned and financed before this time.
And if you already started the project, and sunk the first billions it’s difficult to impossible to stop.
The same thing will happen when prices are high again. When is seen that Permian fracking alone can’t supply the whole world, projects have to be started, investors have to be found … and then it will take years until the oil from “extra deep sea under salt antarctica extra heavy” flows.
When the pipeline is filled, it can keep long time flowing. This is the thing that drives pork cycles – the time lag of investing and result.
Even shale needed a ramp up of several years – all these service companies needed to be founded, pipelines build. This apparatus now can keep going, but won’t increase by much without additional tripple digit billion $ investing.
40$ oil wasn’t enough to stop many production directly, because it’s above most production costs. Even infill drilling old fields to boost production still works – but without exploring (is there still enough stuff) and bringing new fields online this will decline soon.
Hi Eulenspiegel,
I agree there is quite a lag between changes in oil prices and changes in oil output.
Why are you talking about shale? We’re 3 years in and price hasn’t affected Russia output. Well maybe it did. It increased it.
Here is a list of countries producing more oil today than in 2014:
USA
Russia
Canada
Brazil
Ecuador
Norway
Turkmenistan
UK
Iran
Iraq
Oman
Qatar
KSA
UAE
Libya
Angola
Indonesia
Malaysia
Thailand
You might be able to find a handful of those that had a long term project come online. The majority achieved it with infill drilling or politics, that didn’t take 3 yrs to plan and fund.
The price didn’t affect it. Nor should it. If you HAVE to have it, you will get it.
Every one of those except Libya had many long term projects come on line – I’d guess at over 10 mmbpd worth when totalled.
That’s interesting. I assume you checked.
Turns out Ecuador didn’t belong on that list, but you must have found the long term projects for Ecuador.
Iran’s big uptick must have been one of those long term projects that happened to coincide with sanction drop. Yes, that must be it.
New projects coming online should show a sharp uptick in one of the 3 yrs in question one would think . Angola rose in 2015 and declined in 2016, but not down to the 2014 level. Odd new project online behavior.
Qatar’s increase is very gradual and only a few K bpd. I guess not a very successful new project coming online. In fact, they had been declining from 2012, and reversed post 2014, but only by a few K bpd. Definitely not a very successful new project.
Ecuador had new projects from China funding (ITT fields), still going on, Qatar had Pearl (ramp up) and Bul Haneen, Angola had West Hub, Mafimura, Kizomba satellites, and others. Iran had long term projects that had been stalled by the the sanctions.
Actully Pearl might have been a bit earlier, though they had only one train running for a long time. But Qatar had Barzan ($10 billion and several years) in 2016, a gas project but added a lot of condensate. Angola alos had CLOV in 2014 which would have been ramping up through 2015. Projects do not come on line all at once, they ramp up. Even if they have high well capacity initially they have low availability in the first year so average production comes up more slowly. The fact that some countries decline doesn’t mean they don’t have projects coming on line, just that decline was higher than new production.
Hi Shallow sand,
I think Gonefishing is correct, there is little chance demand for oil will fall faster than the supply of oil before 2050.
Imagine WTI is $100/b by the end of 2018 and remains there (or higher) for all of 2019. Nobody here is claiming that oil prices are not likely to remain high (until a recession hits anyway) probably until 2030 in my opinion.
I imagine there are a lot of locations that might payout over 60 months at $100/b, everything after that is profit, waiting will just be a lost opportunity to cash in while oil prices are high.
The transition will be necessary because it is unlikely that supply will ever be able to satisfy demand at a low (under $75/b) oil price after 2019 and before 2040 unless a severe recession hits.
Between 2020 and 2030 will be the sweet spot for making a tidy profit in the oil biz.
Hopefully you and Mike can retire early in 2025 to 2030.
SS-I think you are mostly right. It will take the fact that inventories are a lot lower to overcome most of this nonsense. My guess is they will begin to question in 2018, and by 2019 they will be standing in pretty shallow oil. Backwardation should take effect for WTI sometime in 2018, so we should get some rise by then.
http://oilprice.com/Energy/Energy-General/Indias-Urban-Explosion-Boosts-Oil-Demand.html
They have to do $100 B Armaco IPO in 2018, they will make sure curde oil prices remain strong till that point!
Why do they have to?
I can assure you that if they schedule it for, say, September and equities are down 20% at that time, there will be no IPO.
Jeff – I think I’m on the same page as you: it might not be voluntary. They had 5% decline rates from mid 2015 until they bought on Al Shaybah extension. They started to have something similar from mid 206 until they made their cuts in October. If you extend natural 5% decline rate from then till now on their pre-cut rate you’d just about get their current production. During the past year they have been drawing down stocks of crude and products for exports, and have announced no new greenfield developments. Khurais expansion was due about now but is going to be next year now, and was announced by the Aramco CEO that it would only replace decline, not increase capacity. They lost a water injection line on one major field to corrosion, I can’t remember the replacement time, but a couple of years I’d have thought. All their major investment announcements have been to do with anything but oil in Saudi – petrochem, tight gas (I think a failure), maybe Russian gas, now India – that’s what companies do when they’ve run out of options with their traditional business – the managers in oil companies don’t take high risk decisions like that voluntarily.
If nothing else they might not have any spare capacity so any maintenance (planned or unplanned) will not be able to be replaced. But maybe they are now back to natural decline and want to get ahead of the numbers so it looks like they can still control production rather than being dictated to by depletion.
Over my head. That’s why I ask you the questions (smile).
I really appreciate this site, and wish Dennis and the rest good luck with the book, but I don’t think you need luck. You make it.
Thanks.
George: Yes, that is pretty much my view too.
Sorry, that went over my head. Makes sense now. So, we can probably expect Saudis to pretty much ram through the extension to year end. Not that it means much.
Hi George and Jeff,
People have been saying KSA will decline soon for quite a while. At some point it will be correct.
I think higher oil prices may enable KSA to maintain output levels for a couple of years, but I have been wrong in the past and history repeats.
Though on re-reading George’s comment he is not saying he necessarily expects continued decline at higher oil prices, I think he expects decline may continue at about 5%/year at current oil price levels, which sounds reasonable if my interpretation is correct (I often misread what is implied, my apologies if I have done so here.)
Aleklett wrote in his book that Saudi can maintain their current production up until around 2030 but they need to invest a lot more in new projects. I don´t remember his assumptions on P2 but he is usually on the conservative side.
There can be several reasons for the IPO but I think their motives are: i) need to invest a lot more than what is publicly disclosed, ii) P2 is lower than what is officially stated, iii) use the money to diversify the economy. Everything you read in the MSM is about iii) but I think that i) & ii) are more important.
BTW. Norway privatised Statoil just when their production peaked.
October 9th – Statoil’s Arctic, UK drilling campaigns yield disappointing results
OSLO (Reuters) – Norway’s Statoil (STL.OL) reported disappointing outcomes from three oil and gas exploration wells on Monday, one in the Norwegian Arctic and two in the British North Sea, while a fourth well in British waters found only moderate quantities.
https://uk.reuters.com/article/uk-statoil-exploration-arctic/statoils-arctic-uk-drilling-campaigns-yield-disappointing-results-idUKKBN1CE1L8
NPD http://www.npd.no/en/news/Exploration-drilling-results/
Big write downs on foreign investments announced today, and they’ve been called in to meet the government ministry to explain. In the past when they messed up like this the entire board was sacked. I think they had a few billion in write downs on US shale a couple of years ago, but they were still in profit then and/or the low oil price was not expected to last as long.
OPEC SECRETARY GENERAL: ‘WORLD CAN’T AFFORD SUPPLY CRUNCH’
https://www.energyvoice.com/video-2/152718/watch-opec-secretary-general-world-cant-afford-supply-crunch/
(Possible paywall, I can’t quite figure out how it works on Energy Voice)
“This is particularly evident when we look at investment. While investments are expected to pick up slightly this year and in 2018, it is clear that this is not anywhere close to past levels and it is more evident in short-cycle, rather than long-cycle projects, which are the industry’s baseload.
It’s noticeable that OPEC, IEA and drillers/service companies, even the Aramco CEO are raising the lack of investment more and more, but they all stay away from discussing the fall in discoveries and lack of attractive prospective projects. Part of it is real concern, though it’s noticeable they don’t offer much in the way of solutions, and definitely none that might impact their bottom lines in the short term, but part is pre-emptive arse-coverage.
A lot of factors seem to be lining up for an economic bust next year, but then they have looked like that for a few years (maybe the low oil price has contributed to staving off the problem), if it happens a supply crunch might go unnoticed for some time, and only come appear as the real problem it will be when there is some sort of recovery expected.
Hi George
Just for fun this is the latest from the weald basin saga.
Operational Update
Oil & Gas Recovered to Surface, Revised Flow Test and Workover Programme Planned,
Broadford Bridge -1z Kimmeridge Limestone Discovery, PEDL234, Weald Basin, UK
UK Oil & Gas Investments PLC is pleased to announce that it has recovered measurable volumes of light oil and solution hydrocarbon gas to surface from the Kimmeridge reservoir section during well clean-up operations, at its 100% owned Broadford Bridge-1z (“BB-1z”) exploration well, located in licence PEDL234. The well has also free flowed for short periods during the well clean-up sequence in which spent completion fluids mixed with hydrocarbons were returned to surface. Well clean-up operations, utilising a high capacity linear rod pump, continue. Further developments will be reported in due course
To ensure that the flow testing of Kimmeridge reservoir zones is fully optimised, the Company will proceed ahead to workover the well and implement a revised testing programme. The well clean-up operation will continue, then the current multi-zone completion assembly will be retrieved, the well worked over and flow tested sequentially over multiple, individual reservoir zones. Additional perforated zones will be added to the existing 1064 ft aggregate perforated section.
This operationally more flexible test operation will utilise a similar methodology to that successfully undertaken at the Horse Hill oil discovery, albeit with a much-increased initial lifting capability. The rig-less test will involve both nitrogen lifting and pumping as permitted under BB-1z’s current regulatory consents.
The decision to workover the well follows receipt of two independent cement-bond analyses by Premier Oilfield Laboratories in Houston, USA and Xodus in the UK. These analyses, together with the Company’s own internal evaluation, demonstrate that the quality of the cement-bond over some of the reservoir zones within the current BB-1z well is less than optimal. The findings conclude that, due to the cement-bond condition over segments of the reservoir section, the current completion programme has not effectively connected the wellbore to much of the best open natural fractures. Therefore, the testing to date has not properly evaluated the full flow potential of the overall Kimmeridge reservoir sequence.
Rectifying poor cement bonding in a wellbore is standard oilfield practice and is carried out by squeezing further fresh cement slurry through new or existing perforations in the well’s heavy-gauge steel casing. Consequently, following the removal of the current BB-1z well completion assembly, the Company plans to carry out a short sequence of cement-squeezes through the 7-inch casing to rectify sections of the reservoir zone’s cement-bond.
Ongoing analysis of electric logs has also revealed further Kimmeridge reservoir zones of interest and these will be perforated and included in the new forward testing programme.
The cement-squeeze and new flow test programme is planned to commence upon the completion of well clean-up operations and delivery of the necessary equipment. The commencement of the programme will be announced in due course.
I don’t see where the investment money is going to come from. There are better investments than gas and oil. Even if prices for gas and oil increase, this is an industry on the decline. Why throw money at this if growing companies and industries promise better returns?
Boomer says: “I don’t see where the investment money is going to come from. There are better investments than gas and oil.”
Answer: Maybe the same place that investment in electric vehicles is coming from. Between state & federal, taxpayers pay between $5,000 and $10,000 per vehicle THAT THEY DO NOT DRIVE. Second, just as an example, the head of the Ferrari conglomerate of auto manufacturers said that they currently lose $20,000 per EV.
However, I believe that we are nearing the end of the trail for investments in oil and gas at current prices. So, in my view, prices will rise enough to attract investment. I would guess $80 bbl by end of 2018 [but, I have been humbled by my predictive capabilities many times].
US product stocks
North Dakota oil production averaged 1.085 million b/d in August, up 36,591 b/d from July: State – Platts
OPEC is requesting US producers to cut back on production. Dude, I think you got your wish.
I am quite sure I am not the only one, but at constantly looking at the commercial inventory number on the EIA weekly report, I am absolutely convinced it is not real. The only time I have seen it adjusted is when they decided to discontinue reporting of lease storage oil. As if they had any idea of what that amount was. In accounting, it is required to take an annual inventory. Only one other company I know of actually attempts to do a physical count of stored oil inventory, and they only do some areas. I’ve never heard of EIA ever doing a physical inventory of that number.
When I know the production figure is way off each week, it make me keep looking at that funky looking, stagnant number. The rest of the world’s inventory is dropping fast, but we still use a decades old funky number. And calculate to its upward or downwards movement with completely false numbers.
Yes as you were saying last time the weekly numbers are estimated. The FAQ says they come from the STEO…
EIA Petroleum Markets Analyst
Production is modelled in the weekly, more accurate when things are stable, less so when things move quickly. Prob least important number in WPSR. Adjustment is used to make things balance across supply types. Respondents not reporting or other variances in the data happen.
Tweet: https://twitter.com/T_Mason_H/status/913806682127552512
WPSR = STEO
The Weekly Petroleum Status Report (WPSR) is a weekly publication that provides data for the preceding week and largely uses estimates from the STEO.
https://www.eia.gov/petroleum/production/faqs.php
Then according to that explation, EIA is reporting weekly information fairly accurately. So, why should I question it? Silly me. They use a regression analysis on less complete data than the incomplete data supplied to the State. Should make it far more accurate.
Art believes falling inventory will result in price support.
http://www.artberman.com/higher-oil-prices-likely-early-2018/
He seems on the mark with this one, but he changes hats, frequently. One week he is lower for longer, the next week prices are going up or down. Whatever is a hot topic.
New from Laherrere (2 Oct): https://aspofrance.files.wordpress.com/2017/10/jmj-jr7271.pdf
It’s in French but the figures speak for themselves (and google translate works too). He expects US LTO to decline.
P5. Global oil creaming curve
P.17 forecast of US LTO
It will decline, naturally. How fast will depend upon price. If it stays at $50, may be right, or looks reasonable. At $100, a low EUR well would be profitable, and there is an over abundance of those areas, which would make his graph far off.
New posts are up.
Opec at link below (for comments on oil and natural gas)
http://peakoilbarrel.com/opec-september-oil-production/
Electric Power Monthly at link below (for Non-Petroleum related comments)
http://peakoilbarrel.com/open-thread-non-petroleum-oct-11-2017/