US Production and Imports and an Essay

Even before the shale revolution got underway, US net imports were falling. The data below is from the Weekly Petroleum Status Report and is in thousand barrels per day.

Net Imports

This chart shows net crude oil and petroleum products imports. Net imports peaked in 2006 and started to fall in earnest in 2008. They continued to fall until 2010 when the three month average increased sharply and the annual average leveled out for about a year. Then as the Light Tight Oil revolution got underway in 2011, net imports started to fall again.

The chart above shows net imports bottom out in late spring, March and April and heads back down again in June. Below is the last year of that chart amplified.

Weekly Net Imports

But in December of 2014 net imports broke their trend and headed sharply up, about four months earlier than normal. Much of this increase in imports had to be caused by declining US production though part of it could be caused by increased consumption because of low prices.

The EIA’s Petroleum Supply Monthly is out with US and individual states production numbers for November 2014. Below are some charts from that data. The data is in thousand barrels per day with the last data point November 2014.

US C+C

US, down 31 kbd to 9,020,000 bpd. This is the first time the US has had a monthly decline that wasn’t blamed on a weather event in quite a while.

Texas

Texas, up 48 kbd to 3,403,000 bpd. Because of Texas’s reporting procedures the EIA  has to guess at their oil and gas production. And their guess is that Texas oil production is behaving as if oil were still $100 a barrel. I believe there will be some big revisions in this data in a few months.

North Dakota

North Dakota, up 3 kbd to 1,187,000 bpd. At least they get North Dakota right.

Alaska

Alaska, up 17 kbd to 517,000 bpd. Alaska always bottoms out in August, for summer maintenance, and peaks in December. The spike down in January 2011 was due to the pipeline leak and had to shut down for several days

Gulf of Mexico

GOM, down 62 kbd to 1,383,000 bpd. They had expected a lot more out of the Gulf of Mexico by now. The EIA predicted 2 million barrels per day from the GOM by 2016. I just don’t think that is going to happen

Below is a short essay by Tom Giesen a Natural Resource Policy instructor at the University of Oregon. He calls it: A Primer on the Oil Situation

Oil has been relatively inexpensive, energy intensive, portable, relatively safe, convertible to myriad uses – an incredibly useful substance, especially in regard to transportation. In the US, and globally, oil powers virtually all movement of people and goods, and is the source of many products. It appears to many people to be essential.

Oil comes in at least these categories:

  • Conventional oil: vertically drilled wells on land or shallow continental shelf. Conventional oil, worldwide, is past its peak of production (it peaked in 2005-8 per the International Energy Agency), and oil production is declining at an average rate of 5.8% per year (Whall and Nelson. Investec. “Global oil supply: the decline rate problem” 2/2014, page 11).
  • Unconventional oil comes from oil-laden shale, requiring vertical and horizontal drilling, and also requiring hydraulic fracturing, or “fracking”. It is more expensive to produce than conventional oil. Unconventional oil appears to be in a state of transition. Oil prices were high (~ $100/barrel) from about 2011 to mid-2014. Those high prices supported rapidly expanding new shale oil production, adding nearly 5 million barrels/day of unconventional shale oil to American production, and more than off-setting the worldwide decline in conventional oil.

However, the price of all oil has been dramatically declining (today it is about $45/barrel) – more than a 55% decline – and, in most cases, the price is insufficient to cover shale oil production costs plus profit. Some shale wells are shut in; only very productive shale oil wells will continue to be operated. Conway Mackenzie Inc., a liquidator, predicts large losses in shale oil production-related businesses in the next quarter, especially if prices continue to fall.

Shale oil production has slowed due to low prices. Shale oil operators are cutting the numbers of operating drilling rigs and laying off employees as losses accumulate. Reservations for rail tank cars are off by 30%. Shale wells have a short economically productive life, with the first year typically good, and production then diminishing dramatically by the end of year 2 or 3.

  • Tar sands are a mixture of sand and bitumen. Heat is used to separate the bitumen from the sand, and the bitumen is then cut with lighter hydrocarbons and refined to be similar to crude oil. It is generally more expensive than shale oil to produce, but much of the cost is related to building the initial plant. It seems likely that on-going production will be continued for a time as all but operating costs were covered in the initial investment. Production is relatively small.
  • Ultra-deep oceanic wells are expensive and high risk. For example, the Macondo well in the Gulf of Mexico, which blew out, was a major ecological/financial disaster for BP. However, some deep drilling is continuing. Arctic drilling has not been successful and instead has caused huge losses for Shell.

The long decline in oil prices from July 2014 to the present has several causes. Due to faltering major economies (e.g., EU, Japan, Russia, and a slowing of growth in China), the demand for oil diminished. At the same time, American shale oil production was booming. The result was abundant oil in a depressed market for oil, and those circumstances led to a long tumble in oil prices, which may continue. Many enterprises, profitable at $100/bbl., were unable to continue at substantially lower oil prices.

The extent of fracking is declining for economic reasons. However, the only because Richard Cheney, VP under President George W. Bush, pushed through laws in 2005 which exempted oil and gas production from these existing laws:

Clean Air Act, Clean Water Act, Safe Drinking Water Act,
National Environmental Policy Act, Resource Conservation and
Recovery Act, Emergency Planning and Community Right-to-Know
Act, the Superfund act, and from various toxic reporting requirements

(Source Exemptions for hydraulic fracturing under United States federal law

Without those exemptions, fracking would not have been possible.

Fracking is horribly polluting via many carcinogenic agents (e.g., benzene and formaldehyde) and a laundry list of other toxics. Fracking sites are not monitored for environmental degradation, as they are exempt from regulation.

Fracking is also water-intensive, using an average of about 20 million gallons of water (plus as many as 50 different chemical additives) per well. The water – now more toxic – must be removed from the well and disposed of safely – though there are no known purification processes.

People who live and work near fracking sites are often chronically ill from the fumes, and families are often unable to sell and move – most people these days won’t buy a home near a fracked well because of toxics, so families essentially become prisoners in their homes.

That we permit fracking is testimony that, as a nation, we value using shale oil more than we value protecting our families from living and working in extremely toxic/carcinogenic conditions.

To summarize, production of conventional oil is declining at 5.8%/year (about 5.3 million barrels a day). Unconventional oil is declining because the current price of oil is too low in most cases to make fracking profitable. Tar sands oil may continue for a time – but future projects are on hold. Ultra-deep wells and Arctic sources are risky and expensive relative to current prices.

The global production of oil is declining.

Oil, unlike sunlight, is available only in finite quantities, and the flow of oil is diminishing. Oil, like coal and natural gas, produces carbon dioxide when burned; CO2 is a greenhouse gas, and is the major cause of global warming. The decline in oil production is a clarion call for renewable energy. We need the remaining oil to create the infrastructure for a base flow of renewable energy.

Our future is in renewable energy sources, not fossil fuels.

Tom Giesen is an Adjunct Instructor in Planning Public Policy and Management at the University of Oregon, teaching Natural Resource Policy.

Tom Giesen
212 Pearl #8 97401
giesentom@gmail.com
541-554-4162

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284 Responses to US Production and Imports and an Essay

  1. Cave Bio says:

    My apologies if this was posted in the last thread, but I thought the price discussion was interesting.

    http://www.cnbc.com/id/102377233

    Best,
    Tom

    • Danlxyz says:

      Good article but I think that the comparison of the current price of oil to the 25 year average price was particularly clueless. Who cares that the average price over 25 years was $48.00? A rational investor would compare today’s costs for a specific well against today’s expected revenues to determine if drilling the well made sense.

      • Well the average price, adjusted for inflation, over the past 25 years was $48 a barrel. What that tells me is that, if drillers cannot make a profit at $48 then it is costing a lot more than it used to to produce a barrel of oil. After all, the oil companies used to make huge profits at that price. It means oil is just a lot harder to produce these days.

        • Cave Bio says:

          That is my take away also Ron. It was also interesting to listen to the discussion regarding those plays that they felt were >$60-$70/ barrel.

          Best,
          Tom

    • Oleg Malentyev has the right idea but his analysis is backwards: credit market problems have caused the oil prices to crash. Right now the fuel price says the world’s economies have lost half of their borrowing capacity over the past 9 months.

      The customers for oil products must borrow to bid … when they cannot borrow for any reason there is no bid = prices collapse. Customers must borrow because they cannot pay for the fuel generally by burning it.

      A consequence of long-term monetary easing (Quantitative Easing or QE) is the shifting of purchasing power away from customers toward lenders and their big business clients. Businesses use the borrowed funds to buy shares and bid the price higher. This pauperization process leaves customers unable to borrow … they are as a consequence unable to take on the loan exposure of oil drillers (who are observed as being heavy borrowers at very high cost).

      Indeed, some American customers are doing well enough to buy a new SUV and fuel it with cheaper gasoline, but the marginal customer is not necessarily an American; he is likely to be Japanese or European, whose purchasing power has been cut by currency depreciation by 15% or more. When the marginal customer loses his job there is little or no fuel buying at all; this feeds on itself.

      Right now it is too early to feel the effects of reduced drilling and shortages. However, if last summer’s price action is indicative, shutting in of supply and accelerated depletion will adversely affect customers = more price declines.

      The price will fall ultimately to the level that can be supported by actual, remunerative use of the fuel rather than loans = about $8/barrel or less. It will be interesting to see how much economy we have w/ $8 fuel.

      • Ilambiquated says:

        A consequence of long-term monetary easing (Quantitative Easing or QE) is the shifting of purchasing power away from customers toward lenders

        Reducing interest rates shifts purchasing power from borrowers to lenders? Could you describe the mechanism?

        • Old farmer mac says:

          I struggle mightily to follow Steve’s reasoning and occasionally I get it in part. But I am coming to the conclusion that he is a WHOLE lot smarter than I am or else ….. just maybe he has his credit cart in front of the more fundamental supply and demand horse.

          His insisting that you cannot pay for a car by driving it is on the surface just not going to wash with me across the board. I know tons of people who own a car than is used exclusively to get back and forth to work. Having that car is part of the de facto qualifications for that particular person holding that particular job just as much as the ability to read and write or follow instructions.

          Now I do realize there is a great deal of truth in what he says about credit propping up demand.An enormous amount of truth.

          I also concluded long ago that barring collapse of the business as usual economy coming very suddenly due to a violent black swan event that financial troubles would be the first unmistakable sign that things are falling apart.

          Now let us look at the elephant from the other end. Maybe there is a problem with credit because there is a more fundamental problem with resources and productivity and spending on people and things that contribute little or nothing to productivity.

          Without that productivity —- borrowers are not looking like good credit risks.

          I am not making this comment and claiming it is a BETTER explanation or theory but rather that it is ONE MORE valid way of throwing some light on the overall problem.

          We have outsourced the jobs that used to make us rich leaving our working people stuck flipping hamburgers and peddling dope and thus also putting our selves in the position of having to have a vastly expanded welfare state with a law enforcement/ judicial/ legal / prison sector that is getting so big it shows some indication of perhaps growing from the seedling ( the acorn stage is history now) it is into a mighty Big Brother oak.

          But while the little folks tighten their belts the big companies are now few enough in any given industry and able to shed employees enough – what with being able to scarf up the printed money that mostly winds up as corporate welfare- I am with Steve on this point- WELL, big biz is sitting pretty and doesn’t really have any problem at all taking market share from smaller outfits or just swallowing them whole while also raising prices, exporting more real industry, getting rid of employees etc etc etc.

          This general scenario has come to pass as the result of the nature of competition between individuals and businesses when political conditions are such that it CAN happen. The ” can happen” conditions are in place and have been in place for a good while now.

          Now let’s see how this can play out in a given industry such as the furniture industry which is not a really hard one to get into and uses a lot of semiskilled or unskilled labor.

          A manufacturer with a couple of thousand employees scattered thru a few towns in the Carolinas even though he is not paying very much in terms of wages or benefits bites the bullet and moves his production overseas.

          It is necessary and proper to note that as a general thing this hypothetical manufacturer is either compelled to do so or exit the business altogether given the cutthroat competition.

          He will wind up firing seventeen hundred and keeping three hundred in warehousing shipping sales bookkeeping and various other marketing types of jobs.

          From his pov he has lost one thousand seven hundred potential customers out of the three hundred million population of this country.He is in the black again- perhaps deep dark rich black for a while.

          But when one company after another off shores work that used to pay Americans a livable wage – well after a while that handful of lost potential customers morphs into several tens of millions of lost customers. It also means that the people at the very bottom of the employment totem pole – burger flippers – are in competition with millions more potential burger flippers. Wages crash or stagnate across the board.

          In the meantime the professional and managerial and entrepreneurial and bureaucratic classes keep right on raking it in just about as fast as ever. In my neighborhood two supposedly underpaid teachers can easily become millionaires in ten to fifteen years if they choose to live on one’s salary and invest the other salary. Most families around here live on less than one teachers salary and somehow yet manage to live respectable dignified lives.

          It is very hard indeed for somebody like me to compete with my cousin the mail carrier who has an orchard too and hires three people in the field for every hour he drives his car- and only a fool would consider delivering the mail to be more than semiskilled work. The place to be in my part of the world is on a government payroll if you can manage it.

          (I am not bitching about this as much as simply pointing out realities. My dentist seems to average about two hundred bucks an hour gross out of which he pays his assistant and maintains a small rural office building that didn’t cost more than fifty grand when he bought it twenty years ago.He is in fact a very decent guy and charges only half as much as a lot of other local dentists. I once had an opportunity to stay in a classroom for forty years but made other choices after a while. )

          Cousin mail carrier will collect at least half a million bucks in retirement bennies while the post office recedes farther and farther into irrelevance.

          I see our troubles as being mostly due to resource shortages and government mismanagement on the grand scale. Politicians get elected and stay elected by promising stuff that will not have to be delivered except in small part while they are still around.

          Please be advised that this is NOT an antigovernment rant but merely an observation of what I perceive as reality. I fully recognize that government is more necessary than ever and that we are facing numerous problems that can ONLY be solved at the government level – if they can be solved at all.

          I fully support just about all environmental legislation for instance and while I see it as the biggest political fumble and bumble in my lifetime I support the IDEA behind OCARE – getting control of the cost of health care and making sure everybody has access. Etc

          • Boomer II says:

            Please be advised that this is NOT an antigovernment rant but merely an observation of what I perceive as reality. I fully recognize that government is more necessary than ever and that we are facing numerous problems that can ONLY be solved at the government level – if they can be solved at all.

            The reason I get so frustrated with the political discussions against government entitlements is that I know the politicians who campaign against them will never cut them. Look, in the interest of energy conservation and saving the planet, severe austerity might be a good thing. It will force a great more people into poverty, but it would stop a lot of consumption.

            However, consider what would happen if the government stopped government payouts, stopped government jobs, and stopped government contracts. The US would collapse and even the most rabid anti-government people know that. They wouldn’t dare do it. They support government money just as much as the rest of the politicians. What I see is just a difference in who they want the money to go to: military contractors, prison operators, border patrols, and so on. Politicians on the right have long supported money going to those folks. A few Libertarians have supported drastically cutting back on our military budget, but you won’t find many conservative politicians to embrace that. Cutting veterans benefits, yes. Cutting military hardware purchases, no.

          • Ilambiquated says:

            On the other hand, my grandfather was a lumberman who went broke in the 20s when his specialist wood business in Chicago died with the custom furniture business — it was replaced by furniture factories in the Southeast with cheap labor.

        • Ves says:

          Reducing interest rates are symptoms that capacity to pay interest has been falling for decades. A declining rate of profit goes hand-in-hand with a falling rate of interest. When you have burger doing IPO like today than you know that we are even running out of illusionary businesses that can pretend you can still make a profit in this debt based economy. Time wasting businesses like FB, Twitter did for a while create illusion of sustainable business but now you cannot even create illusion so you resort to damn burger 🙂

          • Ilambiquated says:

            The big change came in the mid seventies with the invention of the container. Container ships radically reduced the cost of transporting manufactured goods across borders. That widened the labor market beyond imagination.

            Asia is a giant deflation machine. The amazing developments of recent decades are just the beginning.

      • Ves says:

        ”The customers for oil products must borrow to bid … when they cannot borrow for any reason there is no bid = prices collapse. ”

        Steve,
        Don’t we borrow for the most of the things in order to bid?
        Why just Oil in just 6 months and at 62% decline and not car sales(they are back at pre 2008 17 mil), or house sales or smartphones?

        • It isn’t just the oil markets: retail sales and revenue are being hammered. So are leading indicator commodities such as lumber, copper and iron ore. The Baltic Dry Index has fallen to its 2008 level; home ownership is at a multi-decade low. There are alarms going off in China and Japan, also Latin America including oil producer Venezuela; also Russia, Zimbabwe, Nigeria, Libya, Ukraine … The world’s customers are broke; it only looks like a glut in the oil patch because drillers are stuck with unsold inventory and the media is willing to lie about it.

          The marginal customer — whose purchase sets the price for all the others — is not necessarily an American, he is most likely Japanese or Chinese.

          Constrained supply will cause prices to increase as an outcome of competitive bidding … provided the bidders are solvent. There is no universal law that requires prices to rise in the event of a shortage: when customers are unable or unwilling to borrow prices will decline, even as the ability to meet the price declines faster. This occurs during deflationary recessions as the result of deleveraging.

          Again, deleveraging does not have to occur in the US, it is occurring elsewhere right now. Many Americans are not feeling any pain, they appreciate the low price for fuel but the effect of low prices on drilling have not emerged, that’s all.

          • Old farmer mac says:

            This comment is clear as a new washed window and there is hardly anything in it that I would dispute. Dead on in the bullseye.

            But I don’t know if the marginal oil customer is located mostly in any particular country.

          • I'd rather walk says:

            steve from virginia, this is the first coherent explanation or attempt at explanation I’ve seen of the actual causes of the overall drop in commodity prices globally.

      • nNgass says:

        “…. shutting in of supply and accelerated depletion will adversely affect customers = more price declines. ” I always thought that shutting in supplies will slow down depletion. I also though shutting in supplies or accelerated depletion will increase the oil price rather decrease it as Steve says.

      • gerry from piedmont says:

        Steve is spot-on with this analysis, but I can see that many people find the idea that prices can fall in times of shortage hard to understand, so here’s my take on it. At the beginning of the 20th century, the EROEI (Energy Return on Energy Invested) was around 100:1 or more. The 100 there was mostly waste, but that didn’t matter: there was plenty of capacity to pay for the cost of extraction. It is generally accepted that EROEI is falling as oil becomes harder to extract. It’s when EROEI falls to 2:1 that things start to get interesting. At that point, the non-oil oil economy starts to struggle to pay for the oil economy: the non-oil economy has to be able to generate an increase in GDP in order to pay for the oil, and as that becomes increasingly difficult, the price starts to fall. Demand destruction between 2:1 and 1:1 is in reality the destruction of waste – “conservation by other means”. At 1:1, all oil producers can do is to create the product in the refinery: there’s not even enough resources to shift it to the gas stations. At that point, oil becomes an energy carrier: still useful (like a battery), but economically irrelevant in anything other than a command-and-control economy – which is what we are likely to get, because modern agriculture is almost literally a process that turns oil into food.

        My understanding is that we passed 2:1 in 2012, we are currently at around 1.7:1, and will reach 1:1 in 2021. Meaning: in 2021, even $8 a barrel looks optimistic.

        • I got lost. Do you believe the oil price will rise or drop from the price prevailing at this point?

          • Hey guys, let’s us not get too complicated. Sure prices can fall during times of shortage but only if people do not have money to buy. That is if we are in a recession. And since oil is fungible and traded on a world market, if enough countries are in a recession, world oil prices can fall, even during a shortage.

            That is a simply a demand driven price fall. Both supply and demand determine the price of oil.

            But let us not get ridiculous, oil is not going to fall to $8 a barrel. Well, not before a worldwide economic collapse anyway.

          • gerry from piedmont says:

            Very short term: no idea
            Medium term : rise
            Long term (2-3 years) : fall
            Very long term (10 years): oil ceases to be fungible, so “price” becomes meaningless.

            • What do you mean by “ceases to be fungible”? Do you have an opinion or thesis about oil prices in 20 years?

            • Old farmer mac says:

              Very long term (10 years): oil ceases to be fungible, so “price” becomes meaningless.

              Oil will continue to be sold on world markets and so long as commerce exists oil will be fungible to a major extent.

              To the extent that fungible means anything as ordinarily defined the lack of it can only be the result of a big enough shortage of oil to mean it is no longer freely bought and sold.

              The price of it will go thru the roof when that happens and price will certainly mean something although I understand your point.

              Price will vary wildly from one country to the next depending on politics and who has domestic oil and who doesn’t.

              • Boomer II says:

                My interpretation of Gerry’s comments were that when the energy or the value used to get oil is the same or more than the energy/value created, then there becomes no reason to get it.

                Yes, we have talked about how when oil becomes scarce, there will still be consumers of oil because it will add value to whatever it is purchased for. However, it isn’t totally inconceivable for there to be a time when oil doesn’t add value to anything because there are alternative energy and chemical compositions that are either cheaper or work better.

        • Boomer II says:

          Great explanation.

        • I'd rather walk says:

          I don’t know where you got the 2 to 1 eroei number, I’ve never seen anyone give a number that low, I think that’s a pure fiction.

          My understanding was that tarsands, the worst by far in terms of energy required, ran at around 6 to 1, which from my readings on TOD over the years, was frequently cited as being quite close to the minimum energy return for that type of resource if you used EROEI as your metric.

          Since those days however, I’ve come to completely ignore the academic notion of EROEI because I think it’s a hopeless abstraction, now I prefer to use money, which is far more reliable. For example, a society doesn’t seem able to pay ongoing 100 a barrel for oil, that pulls too much away from other areas, ie, too many resource chits are being used to aquire one resource, but if it costs greater than the price that society will pay over time, then new oil simply will not get developed.

          This allows you to bypass the hopelessly synthetic EROEI which nobody but academics have ever used, guys like ROCKMAN have always noted that it’s money/capital costs, always, that determines when something gets drilled. Money is more reliable in my opinion, though it won’t get you as many published papers as an academic and doesn’t sound as fancy, but I really think it is a better metric than something that is virtually impossible actually create like EROEI. No modern drilling happens without the entirety of the modern industrial/extractive infrastructure, capital allocation, etc, and that system uses money/capital as its metric, and I think it’s right to do so, it’s already built in that is how the entirety of resource flows, not an artificially separated and isolated component like energy alone, are allocated. It’s useful to consider money as a claim on the totality of the social resource flows. So if it takes say, 70 dollar units per barrel to justify a certain tight oil or super deep water project, the entirety of resource/capital costs is already included in that calculation, which is of course why that is how drillers decide to drill or not drill.

          Oil / Coal / Natural gas fossil fuels are the primary energy source for a totality built out of cement, steel, copper, and all the other resources we are sustainably using. You can’t just pick one element and say that is key when it can’t really exist without all the others as a social resource, maybe the problem is poor system thinking skills now that I think about it?…

      • I'd rather walk says:

        steve from virginia, to expand slightly, I would suggest that the process you are describing is a direct result of actual cessation of real expansion of economies globally, which indicates a basic maxing out of resource extraction rates globally. What you’re talking about here is the process of sending resources/money to the elites to allow them to keep trying to ‘grow’ their various enterprises, which can only happen using things like stock buy backs, buying other companies, etc, since actual growth has pretty much stopped. Then as you note, there is no longer debt available for other pursuits, like buying oil at the prices required to produce new resources of oil, or copper, or whatever other commodity that everyone has been ignoring when looking at the overall decline in price of almost all key industrial resources globally.

        Nothing else I’ve seen actually explained how all primary resources decided to drop globally, just because the US produced a few million more barrels of one resource, all domestically consumed. But your observation about debt being held back does in fact explain how they could all be dropping at the same time, at similar rates. I forgot completely that when you buy resources globally, you have to have that loan in place before it’s shipped, that was one of the details that seems irrelevant until you realize it’s not.

        Once the globalized system starts to see, as I think it has for a while now, that growth per se only is happening by expanding individual enterprises at the cost of legions of smaller ones, it’s easy to see why that’s where capital would go, since capital always seeks out areas that can provide return on investment.

  2. Jeffrey J. Brown says:

    If you look at the four week running average data, total US net imports are up by one mbpd from early November, from 4.7 mbpd in early November, 2014 to 5.7 mbpd, for the four week period ending on 1/13/15.

  3. Jeffrey J. Brown says:

    . . . four week period ending on 1/23/15.

    • Toolpush says:

      Jef,

      The other thing about the US net imports of oil and oil products, is the decrease in the net export of petroleum product exports. In the last 12 months they have dropped 900mmbpd, nearly half of what they were last year.

      http://www.eia.gov/petroleum/supply/weekly/pdf/highlights.pdf
      Net Imports (Thousand Barrels per Day)
      Four Weeks Ending
      ……………………………..1/23/15……1/16/15…. 1/24/14
      Crude Oil……………….. 6,831 ……..6,769 ……..7,552
      Petroleum Products.. -1,142…….. -1,171 …….-2,021
      Total……………………… 5,689……. 5,598……… 5,531

      And what is getting counted as export is quite a laugh. Nearly 500mbpd of those highly refined exports is Petroleum Coke!!
      http://www.eia.gov/dnav/pet/pet_move_exp_a_EPPC_EEX_mbblpd_m.htm

      It was a surprise to me to see how they measure Petcoke, a solid in barrels, but seemingly that is what they do. So close on half of the US export of refined oil, consists of black powder, literally scrapped out of the bottom of the refinery.
      I can only assume that the pollution regulations in the US restrict the burning of this Petcoke in power stations.

      http://en.wikipedia.org/wiki/Petroleum_coke
      Large stockpiles of petcoke also existed in Canada as of 2013. China and Mexico were markets for petcoke exported from California to be used as fuel. As of 2013 the EPA was declining permits to use petcoke as fuel in the United States but markets existed in India and Latin America where it was used to fuel cement manufacture.

      So that is something I have learnt today. Half of the current US refined oil exports consist of a waste product too polluting to be consumed in the US. I don’t think we will hear too much of that on MSN when the talking heads are raving about US oil exports?
      It is also great to see how the EPA is saving the world from all that CO2. They won’t allow it to be burnt in the US, where it may be counted, but put it in a ship, send it around the world, burning more heavy fuel, and burn it is Asia, where it will not be counted. I see a major victory against CO2 generation has just been won, sarc.

      • Old farmer mac says:

        Maybe somebody who knows more about the oil refining process and the design of large boilers and so forth will explain why pet coke is dirtier than plain old coal if burnt in a well designed power plant.

        I am guessing that the problem is mostly that pet coke contains high levels of metals or maybe a lot of sulphur. But generally speaking it sure ought to burn just fine and have plenty of energy per ton.

        It would also be interesting to hear something about just what the differences are between pet coke, asphalt, and heavy fuel oils or bunker oils and how much of each of these products are produced on average from a barrel of crude.

        • Allan H says:

          Petroleum coke is mostly carbon but contains numerous volatile compounds. It also can have high levels of sulfur compounds and has vanadium.
          Here are some analyses. http://docs.housedems.com/district/006/CokeAggregrateCombined.pdf
          http://education.afpm.org/refining/petroleum-coke/
          http://www.epa.gov/hpv/pubs/summaries/ptrlcoke/c12563rr2.pdf

          And from the environmentally astute:
          http://planetsave.com/2013/12/04/pet-coke-4-top-10-toxic-ingredients-used-fossil-fuel-industries-series/

        • Old farmer, quite often crude oil contains asphaltines. These are extremely heavy molecules. Resins are A slightly lighter class of heavy molecule. These mole percent of asphaltines and resins increases as oil gets heavier.

          Refineries separate the heavy oil fraction and eventually the really heavy molecules are fed to a coker unit. This unit uses a batch process, cooks the heavy oil and turns some of it into a solid material (coke). The vapours from the coker are mixed with hydrogen, this stabilizes the molecules, and builds lighter refinery products.

          Asphalt is the extra heavy components, but they are mixed to make the gooey mess which turns solid.

          Bunker oils are heavy, but not as heavy. My impression is that bunkers were developed because refiners lacked the economic incentive to destroy those molecules, hydrogenate them, and make lighter fuels.

          Today we have technologies to take almost 100 % of the oil and turn it into a lighter product. Somewhere in the process the sulfur and the metals do have to be removed. A Coker does that pretty good.

          By the way, the coke is taken out of the Coker drum using a small drilling rig which sits on top of the drum. The process is fairly simple, but coke drum construction is a very delicate process.

  4. Zirbat says:

    Ron i think you should see this Ali al-Naimi of Saudi Aramco acknowledges peak oil
    http://money.cnn.com/video/news/2014/12/22/saudi-arabia-oil-minister.cnnmoney/

    • No, he is saying that “Peak Oil is a theory now that is dead.” At least that is what I think I heard.

      • Zirbat says:

        Hmm could be English is not my first language

        • John B says:

          I think the important quote there is he said the KSA will never cut production.

          • Frugal says:

            Probably a veiled admission that they’ve got no spare capacity and will continue producing all out forever. Now’s the time to watch the Saudi production curve — it should start declining soon.

            • John B says:

              I think it’s more of a jab at Iran. Iran controls 4 Arab countries now, BTW.

              • Ilambiquated says:

                Parts of four anyway. Try still aren’t making much progress in their old stamping grounds, central Asia. Looks like China will beat them to it. But looking back over the past 5,000 years, it’s a mistake to underestimate the Persians.

    • Jeffrey J. Brown says:

      There was an interesting admission about oil exports.

      The following item was posted in the prior thread, and Watcher noticed the key quote:

      Saudi Aramco CEO (Khalid al-Falih): “Our exports are gradually declining”

      http://www.reuters.com/article/2015/01/27/saudi-oil-aramco-idUSL6N0V60Z320150127

      “The math will tell you that our exports… are gradually declining. So the reason for the imbalance in the market absolutely has nothing to do with Saudi Arabia.”

  5. Anon says:

    I’m going to call November-December as the peak of US production. For a variety of reasons I don’t believe that North Dakota production will be able to (a) overcome the winter decline before no-drilling decline takes its toll, or (b) overcome the enormous hit it will take from no-drilling decline followed by 15-16 winter decline.

    US as a whole is flat even with the estimated Texas production (not right) so I strongly suspect the US is down as of this moment and about to go real far down.

  6. Lars says:

    “To summarize, production of conventional oil is declining at 5.8%/year (about 5.3 million barrels a day).”

    I am asking all you experts out there, is this true? It sounds unlikely to me because on the one hand Giesen is stating that peak of conventional oil took place between 2005-8, on the other hand we are now in 2015 at least 6-7 years from the peak and we haven`t seen those declines yet as far as I know. Or is he talking about gross declines from existing wells and not counting new (conventional) production coming online?

    • It’s hard to tell. The discussion is a bit sketchy. I would lump crude oil and gas condensate in a single class because the statistics separating them are hard to come by.

      It also depends on how one defines conventional oil. For the sake of argument let’s say we limit ourselves to crude oil, exclude offshore deeper than 1000 meters, anything above the Arctic circle, any oil heavier than 10 degrees API or viscosity higher than 1000 cp, syncrudes from gas to liquids, and so on…then it’s true this “conventional” class hit peak in the recent past.

      But there’s no way to be sure unless you get access to the full IHS data base. I wouldn’t put decimals or imply much accuracy in such projections using public data. Lets say it’s like a slowly disappearing shrinking woman.

      • Old farmer mac says:

        People – human beings- are animals and for the most part we act like the animals we are- although we can display an amazing degree of flexibility in our behavior when necessary.

        ” Like a slowly shrinking disappearing woman” is an apt analogy and as likely as not may prove out as an accurate description of oil depletion.

        But we are also much like a bunch of rats protected from predators inside a well constructed grain silo.THe rats all eat until there comes a day when there is almost nothing left for any of of them to eat. Then things get hairy very quickly.

        Unless we manage some sort of miracle and free ourselves from oil dependency there may well come a day when the available daily production is such that personal or national survival depends on actually shedding blood for a portion of it.

        Whether this comes to pass depends mostly on how fast production declines, how fast we adopt effective conservation measures, how fast we adopt non oil based transportation, and how fast the population and world economy grow.

        Let’s hope we move quickly towards electrified transportation and that somebody really does get the ball rolling on such alternatives as fueling heavy trucks with natural gas. If we had just ten percent of the cars on the road running on electricity this would reduce domestic oil demand substantially.

        We are going to HAVE to get used to using noticeably less oil per capita per year year after year over the next couple of decades.

        But it is also possible for us to change our habits and life styles substantially within that time frame.

        I believe we will build a LOT of high voltage long distance transmission lines and that electric cars and light trucks will be the norm in twenty years. We will learn to live with range problems- if they persist- the same way we learned to live with all the other problems we deal with on a daily basis.

        Just about every body in my community used to own a full sized pickup truck and a full sized car. Maybe half the better off guys are still buying new full sized trucks but the other three quarters are buying smaller trucks- and so far as full sized cars are concerned- well they hardly even sell what used to be a full sized car anymore. Even the well off folks are mostly driving what would have been a mid sized car twenty five years ago.We got used to smaller cars and trucks and we will get used to smaller ones yet that don’t go as far as we might like without having to charge the battery.

        The REAL transition to electrics will probably start with people with money enough to buy one to save on fuel and maintenance while also still owning a conventional car.

        There is no real reason not to keep a conventional car at least ten to fifteen years these days and drive it at least a couple of hundred thousand miles- assuming you maintain it well and select a make and model with a reputation for dependability.

        A person who owns such a car that is fairly new can keep it more or less for the rest of his life if he also owns an electric and uses it for nearly all his day to day driving.

    • Frugal says:

      Today C+C is around 77 million barrel/day so 5.8% is 4.5 million barrel/day. Maybe he’s counting all liquids.

    • Dennis Coyne says:

      If the rate of decline is 5.8%/year (I think this is incorrect), that would be 4.2 million barrels per day (mbpd) for the next 12 months from the roughly 72 mbpd of “conventional” C+C being produced as of Sept 2014 (12 month trailing average C+C output based on EIA data). I have assumed the 5 mbpd estimate of unconventional C+C in the essay is correct.

      The 5.8%/year must assume that there would be no further investment in conventional C+C production, which is not a good assumption. If that is not the assumption and if overall C+C output had been flat (rather than slowly rising), it would imply that unconventional output must have been increasing by 4.2 mbpd each year since conventional peaked in 2006/2007, that is pretty amazing, it’s been 7 years so that would be an increase to 28 mbpd of unconventional oil over the past 7 years.

      Clearly that is not the case, so the 5.8% decline in conventional output must assume no investment in conventional oil output, a highly unlikely scenario. The investment needed to keep oil output flat is huge and is the reason that oil is expensive and will become more so. We will likely be back to $75/b by June or July, then price increases will moderate to a 10% annual rate for 3 years and the rate will slow to 4 % when we get back to $100/b in 2018, by 2028 we will be at $150/b, at that point the rate of increase in prices slows to 2% per year and real oil prices reach $182/b in 2038. All oil prices are in 2014$ and these are general oil price trends, the oil price will be volatile and will oscillate ramdomly above and below these trendlines depending on above ground factors such as recessions, wars, etc.

      • Johnny says:

        The scenario you describe above in which prices will gradually increase from $75 next year to $182 in 2038 seems quite optimistic (I’m not necessarily disagreeing with it).

        If the price of oil is $180 in 23 years from now then surely this suggests that it will likely be a rather gentle decline down the back slope rather than a shark-fin. This raises the possibility that we could mitigate it somewhat by basic energy saving measures like more fuel efficient cars.

        I had always anticipated that the decline would cause more price volatility than the above. I know none of us have a crystal ball and can predict the economic future, but do you really expect price to increase that slowly?

  7. The material by Giesen could use some editing. There are small mistakes, confused terminology, in a couple of items the statements are wrong, and there’s also quite of bit of propaganda. If this is being taught to college students they will come out a bit misinformed.

    • Watcher says:

      Adjunct instructing is a tough racket.

      • Old farmer mac says:

        This is also typical of the quality of science instruction in classes out side the ones that are core courses for science majors.

        The author seems to be somewhat lacking in composition and grammar skills but he is at least in the ballpark in terms of the subject matter considering that he is necessarily painting very fast with a very small brush and that oil is only one aspect of the general subject he is teaching.My own composition and grammar are not what they could be. No disrespect intended. Top flight writing is a time consuming specialty.

        The instructor and the institution are faced with the just about impossible problem of teaching what necessarily takes years to learn in days to students who are mostly just barely motivated by necessity to get their ONE science survey course finished so as to meet the institutions requirements for graduation.

        The entire idea of educating everybody well is about as big a pipe dream as controlling co2 emissions world wide. It just ain’t gonna happen because under our clothes every last one of us is a NEKKID APE, a monkey with hypertrophied brain hard wired to compete for food sex territory status etc etc.

        Evolution did not provide brakes as part of this hard wired programming because brakes have never been needed.Overshoot has served perfectly well in solving any problems associated with EXCESS SUCCESS. Overshoot extinguishes excess very efficiently indeed.

        We are in overshoot and we are going to pay the usual price – a massive die off.

        You can fix things so every kid gets a high school diploma but you can’t fix them so that every kid gets one and the diploma is still worth something.

        A hell of a lot of kids understand that when a teacher insists on performance – the teacher will not be around next year because teachers are subject to being fired and laid off. The law compels the school to keep the student enrolled. The choice is no choice at all when the principal and the school board meet in closed session.

        Assigning homework in a vocational school setting in this country is an exercise in futility.

        Assigning homework to students in the middle track is possible and sometimes a teacher with great persuasive skills can persuade her students to actually do it.

        If you want to assign homework and see it done you must be teaching the academic track kids – the ones sorted out as potential real students at real universities. School systems often deny the existence of tracking but it is just about universally practiced.

        ”We don’t need no education. We don’t need yer discipline. ” Pink Floyd understands.

        Teacher!!! Leave them kids alone.!!!!!

        You can use a whip to drive a mule to water but there is no known way to make it drink unless it is thirsty.

  8. clueless says:

    With all due respect to Tom Giesen’s editorial [from the Oil Capital of the USA – Oregon], with respect to fracking: fracking disclosures are required by some states and are voluntarily provided by some oil companies in every instance. What has actually been published that shows “families are prisoners in their homes,” “carcinogenic agents,” “toxins” and “no known purification processes?” Do the oil companies “create” carcinogenic agents” that they then inject? Or do they use ordinary materials that are present everywhere and then are described that way? By the way, I believe that sea water is toxic. You drink it you die. Well that is 70% of the Earth. Be wary of the use of the word “toxic.” It is inflammatory and does not convey useful information. I also believe that oil itself contains “toxins” and “carcinogenic agents.” So, in his mind, everyone in the oil industry is trying to kill everyone else because (we/you) “value oil” “more than we value protecting our families from living and working in extremely toxic/carcinogenic conditions.”
    Since I am in my 70’s, I plan on dying before his ilk takes over.
    Ron – I hope that you are not a member of his cult.

    • Give the guy a break. It’s better to use constructive criticism.

      • Anonymous says:

        This from the guy who reels out negative generalities like “confused,” “wrong,” “propaganda,” “mistakes” without offering a single example? LMAO

        • That was my introductory paragraph. I spent all night editing it and making corrections out of habit. Then I realized I was retired and this wasn’t a paper draft, and went to sleep for two hours.

    • Clueless, I have seen these things in fracking documentaries. They have found illegal dump sites in North Dakota where radioactive filters have been dumped by the ton. Are you a member of that cult?

      Really, there are two sides to every story.

      • clueless says:

        Why do the frackers put radioactive materials in? Is it because it is like sunlight – radioactive??

        • clueless says:

          PS: A truckload of bananas will set off a Geiger counter.

            • Toolpush says:

              The radiation is from the subsurface rock. It is called NORM Naturally Occurring Radioactive Material. Like the bananas, it is not normally a problem unless it is concentrated. Like Ron says, in filters and the like. Completion strings that have been in the hole many years can also build NORM to high levels that require special treatment.
              Much focus is placed on the BTEX and NORM, with frac fluids, but the simple salt content, is probably should be the greater concern.

              http://en.wikipedia.org/wiki/BTEX
              http://en.wikipedia.org/wiki/Naturally_occurring_radioactive_material

              And there is the other major component of frac fluids nobody want to talk about.
              Warning, Please only read this reference while smiling!

              http://www.dhmo.org/facts.html
              What is Dihydrogen Monoxide?
              Dihydrogen Monoxide (DHMO) is a colorless and odorless chemical compound, also referred to by some as Dihydrogen Oxide, Hydrogen Hydroxide, Hydronium Hydroxide, or simply Hydric acid. Its basis is the highly reactive hydroxyl radical, a species shown to mutate DNA, denature proteins, disrupt cell membranes, and chemically alter critical neurotransmitters. The atomic components of DHMO are found in a number of caustic, explosive and poisonous compounds such as Sulfuric Acid, Nitroglycerine and Ethyl Alcohol.

              • Dennis Coyne says:

                Don’t drink that stuff it rusts your innards. 🙂

                Stick with beer and moonshine.

                • Old farmer mac says:

                  When I was working in containments at nukes the health sciences guys made a point of telling us to be sure to avoid eating a number of foods for couple of days previous to getting a whole body check out scan.

                  One of my very favorite foraged foods – we call it KRESSY salad – a green that grows wild here and is simply beyond compare in terms of it’s intense flavor – grabs just about every natural and man made radioactive atom or molecule within reach of it’s roots.

                  Some guys about to get laid off figured out that eating some would sometimes get you an extra couple of days work so the contractor could run another PASSING scan after you passed the greens. Most likely though you had to wait around on your own time in order to get cleared. If you didn’t pass it meant all sorts of bureaucratic work for everybody and that you would not be hired next time around.

              • coffeeguyzz says:

                Push, I realize you are knowledgeable about the All Bidnezz, but revealing info about frac ingredients such as Dihydrogen Monoxide (known to cause fatalities if 100% contact is maintained to the human body for as brief a time as ten minutes, causing an annual fatality rate measured in the thousands per year), is jes gonna cause more problems.
                The silicon dioxide – also commonly used in the fracturing process – is likewise harmful if a human is covered in an abundance of this compound. (Curiously, some cultures reverentially place their deceased’s remains under a layer of this suspect frac’ing component).

                • Toolpush says:

                  Yeah Coffee,

                  It sure is a dangerous world out there. But it does show how so many people are willingly to go along with the latest disaster, with no knowledge of what they are talking about. The Snopes link below has some wonderful examples.
                  http://www.snopes.com/science/dhmo.asp

    • Allan H says:

      Greed generally trumps decency, morality and good sense, at least in the business world. Good thing law suits have kept some of them in check. Human life has very little value to many in industry. Of course they would never admit that directly but one only has to look at their actions.

      The sad part is that science and engineering has put very dangerous tools in the hands of sociopaths, madmen and infantile self-centered minds.

      • Boomer II says:

        Human life has very little value to many in industry. Of course they would never admit that directly but one only has to look at their actions.

        Yes, I would agree that human life is expendable to many people. They may not frame it that way, but they are willing to cut back on support to big chunks of the human population and let economics and nature take its course.

        Businesses in general feel no obligation to create jobs to give people work. If a machine can do it as well as a human and is less hassle, the machine is a better option in their eyes.

        Handing more money to the rich and to companies on the assumption that they will goose the economy hasn’t proven to be the case. The rich will invest in art and property rather than in growing companies if they believe the returns will be better for them. Companies have been buying back their own stock rather than expanding their businesses.

        What keeps me from being more distressed by the growing income inequality is my belief that recession is probably better for the environment. Wipe out the middle class and you eliminate a lot of consumption. When people say how much we’ll have to downsize in order to conserve energy and use less of it, I see the lack of economic growth throughout the world as a unpleasant, unequal part of the process. We may not be able to convince the American middle class to cut back their lifestyles, but if we take away their jobs and we take away their government entitlements, we are accomplishing the same thing. It doesn’t have to be this way, but it may end up being this way.

        • Allan H says:

          Much of modern society was due to the foresight of the rich and well off and their charity. Hospitals, schools, colleges, libraries and much more can be directly linked to the wealthy trying to improve society in general. Our conservation of forests and national parks is the result of the wealthy taking up the banner.
          The middle class of long ago made sure services such as fire departments were in place. Industry built schools to educate the young.

          Sure, some of it was a little self serving but on the whole they did what was needed to improve the lot of the general population. So what has happened now? Are we so improved that further improvements can’t be made? I think not. Why did new generations of benefactors not rise up and push society forward toward a grander more sustainable life? Do they think a bank account is going to protect their descendants?

          • Boomer II says:

            Much of modern society was due to the foresight of the rich and well off and their charity. Hospitals, schools, colleges, libraries and much more can be directly linked to the wealthy trying to improve society in general.

            I think what may have been changed is that we need fewer people to work for us now. In the past, if you ran a business, manufacturing plant, or a farm, a lot of the work was provided by people or animals. So it made sense to take care of your “investment” in them. Now so many jobs don’t need people that I don’t think the very wealthy think in terms of “their people.”

            You still do see some of the very wealthy setting up charities and non-profits and I think they become aware of their legacies at about the same age as philanthropists in the past (i.e., as they get on the other side of middle age), but in terms of what the wealthy do to provide jobs and take care of their employees, not so much.

    • The Dude says:

      So because sea water is “toxic” any sort of environmental regulations are useless? Clueless, there is some very cheap property along Love Canal, you could sell your house in South Florida or maybe Phoenix, and move there. You make John McCain sound like friendly, and the two of you are equally harebrained.

  9. SouthLaGeo says:

    Regarding Gulf of Mexico oil production – I have to agree with Ron in that I don’t think it will ever reach 2 mmbpd, and it may be challenged to even reach 1.5 mmbpd. A good year ago or so I challenged Ron on the 1.5 mark – I thought it would exceed that amount of production, but I am starting to have 2nd thoughts. A couple new fields have come on since November – Tubular Bells, Jack-St.Malo and Lucius, but will those new fields offset existing decline rates and push total production over the 1.5 mark?

    Jack-St.Malo is the 2nd complex of fields to produce from the Lower Tertiary (Petrobras’s Cascade-Chinook complex is the 1st). Is the Lower Tertiary going to be the savior of the GOM? A lot of Lower Tertiary discoveries have been made (most recently are Chevron’s Anchor and Guadalupe discoveries) and a lot of projects are in the queue. These are long term projects that, while they may be delayed a bit by near term low oil prices, will still probably go forward, I think!

    • That should read Lower Tertiary in the Gulf of Mexico. This section is Paleocene-Eocene-Oligocene.

      The age itself isn’t that important, what counts is the rock fabric, burial history, and what it looks like today. And the fluids. But if we are going to use the age to name them, there are very large Lower Tertiary fields in Colombia and Venezuela. And their properties can vary a lot.

      I think the best way to lump them is to say they are very deep and high pressure reservoirs located in very deep water? I hope I’m wrong but I suspect those fields will be much harder to produce than they expect.

      • SouthLaGeo says:

        Correct, sometimes also called the Wilcox. Very thick gross reservoir sections, often over 1000′, but not-so-great rock properties because of the great burial depths of 25,000′ and deeper. The concern to me is the long term producibility of these reservoirs – they may start out at reasonable rates (for deepwater wells) of 10-15000 bopd, but one year later they are producing half that amount. Somewhat similar to the LTO plays, in my opinion.

    • Dennis Coyne says:

      Hi SouthLaGeo,

      I assume you have seen the BOEM estimates for undiscovered technically recoverable resources (UTRR) for the Gulf of Mexico. I think their F95 estimate is about 30 Gb, what is a reasonable guess in your view for GOM URR (US only), so far cumulative production and 2P reserves are about 25 Gb, so a 30 Gb UTRR would suggest a URR of about 55 Gb?

      • Dennis, that comment sure confused me. I used to work in the GOM many years ago, but I’ve been asked to look over some of the really deep discoveries (just an eyeball so I could make some general remarks). They seem to be very large accumulations, but the long term performance is hard to define.

        • SouthLaGeo says:

          In BOEM’s 2011 assessment for the US Gulf of Mexico the F95 UTRR estimate is 39 Gb (+ 194 tcf gas). (That is, they have a 95% certainty that at least 39 Gb of technically recoverable oil is yet to be discovered) Their F50 UTRR estimate is 48 Gb.
          In that same assessment, they state that 16 Gb have been produced and that there are 19 Gb of what they call “reserves” and “reserve appreciation” in existing producing fields and sanctioned projects.
          So, 39 + 16 + 19 = 74 Gb high confidence URR. Do I believe that? That is saying the Gulf is going to produce more than 4 times more oil that is has already produced. I think that is very unlikely.
          Even your estimate, Dennis, of 55 Gb, seems a stretch, but certainly more reasonable than 74 Gb.
          In my opinion, if there is any hope of a US GOM URR over 50 Gb, industry is going to have to be able to achieve more than 10-15% recoveries from the Wilcox, and that is going to mean massive EOR projects (water floods, gas injection, polymer floods, you have it).
          Now, what may end up being the ultimate savior of the GOM is offshore Mexico – now that is an entirely different story. There we have an extremely underexplored basin with a few deepwater discoveries, and a government that is finally looking to take advantage of the technical expertise of the international oil companies.

          • the Mexican legislation and contract terms aren’t that good. I wouldn’t touch those blocks they are going to offer. I think we are about to see a lot of winner’s curse.

          • Dennis Coyne says:

            Solageo,

            Thanks! I thought 55 might be too high. What seems reasonable to you? 40 Gb does the 25 Gb sound right for cumulative plus 2P reserves?

            • SouthLaGeo says:

              40 to 50 might be a good range. One of my concerns is – how long of a time frame is reasonable? For example, if you assume the cum oil from the GOM right now is about 17 Gb, which is probably about right, and assume another 45 years of activity, going until 2060, at an average of 1.5 mmbpd for that entire 45 years, you get a cum of 42 Gb. Is that reasonable?
              If you add another 20 years to that, going out to 2080, at an average of 1.2 mmbpd for that entire 20 years, you get a cum of about 50 Gb. Does anyone really think we will be producing over a million barrels a day from the GOM in 2075?

              • assume another 45 years of activity, going until 2060, at an average of 1.5 mmbpd for that entire 45 years, you get a cum of 42 Gb. Is that reasonable?

                Good Lord no! 1.5 million bpd for another 45 years is totally unreasonable. Only a Dennis Coyne would think that reasonable. 😉

                The smiley face is for Dennis. I am totally serious about the unreasonableness. The GOM is not producing 1.5 Mbd today, (M is for Million), and will not be producing that in five years, not to mention 45 years.

              • Dennis Coyne says:

                Hi SouthLaGeo,

                You would have a better idea what is reasonable. An average of 1 mmbopd for 45 years on average, say starting at 1.5 mmbopd and decreasing to 0.75 mmbopd over 45 years would give a URR of 33 Gb, you would know better than I what may be possible.

  10. I have done now 4 posts with stacked graphs on the US crude and product import/export history. Agreed that imports dropped long before the tight oil boom started.

    27/1/2015
    40% of US petroleum exports didn’t grow since 2011
    http://crudeoilpeak.info/40-of-us-petroleum-product-exports-didnt-grow-since-2011

    13/1/2015
    Tight oil boom can explain only part of drop in US oil product imports
    http://crudeoilpeak.info/tight-oil-boom-can-explain-only-part-of-drop-in-us-oil-product-imports

    3/12/2014
    US crude imports from Non-OPEC countries peaked 10 years before tight oil boom
    http://crudeoilpeak.info/us-crude-imports-from-non-opec-countries-peaked-10-years-before-tight-oil-boom

    6/11/2014
    US oil dependency on Middle East has hardly changed since 2007
    http://crudeoilpeak.info/us-oil-dependency-on-middle-east-has-hardly-changed-since-2007

  11. Re families becoming prisoners in their own homes near fracking sites due to environmental problems

    Question: when the acreage is leased do the owners of the land not agree to all this? Or are these families renting and their landlord has made decisions they don’t like. Or are these conflicts between neighbors where some would lease and some won’t?

    • Matt, there are fracking sites in some very highly populated areas. There are thousands of homes in these areas occupied by people who get nothing from the drillers or oil companies. They don’t have to rent, most of them own their homes, sitting on quarter acre sites in the burbs.

      Look at the chart below. Pick out a place in the Marcellus or Utica where people don’t live unless they own land leased to frackers. Way over 99% don’t own any fracked land.

    • Boomer II says:

      In places like Colorado the land rights and the mineral rights are split. Most land owners don’t own the mineral rights and get nothing when the land upon which they live and farm is fracked. Aside from whatever environmental issues there might be, they are subjected to noise, traffic, etc. Since they get no money from the fracking, but they do get inconvenience, there is little incentive for them to support it.

      Also a problem is that in places like Colorado fracking is moving closer and closer to populated areas. There has been fracking across the street from schools and parks. It’s one thing when then drilling occurs out in areas where no one lives. It is another when it is done in a suburb.

      I am wondering if the current low prices will discourage companies from moving into areas where they aren’t wanted anyway.

      • I own land in Texas on top of a shale field. The price has been increasing because taxes are collected from oil company facilities. There are people objecting to the industry, but I find their objections are mostly driven by ignorance and watching those propaganda films like “Gasland”. I work with them to show them where to aim their complaints, because there are areas which can be improved, but the radical greens with the tin foil hats take over meetings and mouth off the same endless bs. How do I know? Because I have two sons who live in that area and go to those meetings.

        • SW says:

          We’ve had gas wells on our land for generations now. Receive royalty checks. Rather not. Noisy smelly things that freak out the horses. Just a fact of life I guess.

          • SW, my advice to the people my sons are dealing with is to focus on the noise and the smell. THAT is something you can deal with. Record the sound, AND have the air sampled. Then talk to a lawyer.

      • Regex Wald says:

        The exact same thing is true for North Dakota and Montana as well. A majority of the farmers and ranchers whose fields are being used to drill Bakken wells don’t own the mineral rights on their land and so can do little to stop the wells from going in. The rights were quite often sold to interested parties many states away (oftentimes Texas) during the Great Depression to get some desperately needed cash. Plus, oil had not yet been discovered in the region at that time, so the true value of the mineral rights wasn’t fully known.

      • Boomer II says:

        What I have been concerned about is having fracking going into places like the Colorado suburbs, disrupting life there, and then going bust, with the communities left with the mess.

        That’s why I started to follow this forum. And as things play out with oil prices, it will be interesting to see what happens to communities which haven’t asked oil companies to pay enough for damage and which haven’t budgeted themselves for life post-oil boom.

        Also, along those lines, I spotted this article. Lots of oil-industry related earthquakes in Oklahoma and discussions about what to do about them.

        http://www.washingtonpost.com/business/economy/oklahoma-worries-over-swarm-of-earthquakes-and-connection-to-oil-industry/2015/01/28/eca21234-a71a-11e4-a2b2-776095f393b2_story.html

        • A. You CAN have local regulations to make the drill sites unobstrusive. And the earthquake issue arises due to water disposal. What they need is improved water disposal well regulations.

          I don’t want to get people riled at me, but it seems the American states have a very cowboy approach towards regulation. There’s no need to kill the industry, nor do they have to behave like Bulls in the China shop.

          • Ilambiquated says:

            I think this is a very good point.

          • Boomer II says:

            Yes, I agree with you. Some of the push back from local communities against fracking is that the industry hasn’t done a good job of working with the communities.

            If you are lax about how you treat the areas where you drill, and you start drilling in areas with affluent, college-educated homeowners who have cameras and know how to post photos and complaints online, you’ve got a PR problem.

            And when Colorado communities can read about the living environments in the Bakken, some of them don’t want to go down that same route.

            • coffeeguyzz says:

              I am as bullish towards the E & P gys as can be, and I also agree 100% to all the above few comments. Industrialization/ heavy-duty commercial activities have been, should be zoned, moderated so as not to cause unwanted intrusion to the surrounding populace. Nobody retiring to the bucolic hills of rural Pennsylvania would be thrilled to see thousands of big trucks constantly rumbling by. Whereas business establishments can be placed in designated areas, minerals are where they are, and that can cause problems, greatly exacerbated if there is little to no financial reward/incentive to endure that stuff.
              To approach these issues with as fair and open-minded perspective as can reasonably be hoped for could go a long way to reduce the acrimony.

              • shallow sand says:

                I have always thought it makes a difference if the homeowner moved to the nuisance or if the nuisance came after the home was built.

                Have a couple of situations where people built closer to an existing well than they should have. My opinion is they don’t have a complaint in that situation.

                I have heard good lawyers say homeowners should always have the mineral title checked, but almost none do because of the cost. However, I know in some areas almost all the minerals were severed long ago, so it is not easy to find a home where you own the minerals underneath also. Also, that doesn’t take care of effects from activity in the neighborhood.

                There are usually laws or ordinances that protect homeowners in these situations, but I’m aware of horror stories. We have leased our own land for others to drill on, and made sure the lease was very strict on change of operator, given we wanted to avoid a big headache. Ended up with the lease after they produced the cream off the top, so it all worked out.

                I personally would never drill in someone’s back yard. Too many headaches, even for guys like us that make tiny footprints.

                • Boomer II says:

                  I have heard good lawyers say homeowners should always have the mineral title checked, but almost none do because of the cost. However, I know in some areas almost all the minerals were severed long ago, so it is not easy to find a home where you own the minerals underneath also. Also, that doesn’t take care of effects from activity in the neighborhood.

                  In Colorado, before fracking moved closer to the suburbs, most home buyers weren’t aware of mineral rights. They didn’t ask about them and realtors didn’t bother to mention them.

                  With the new focus on fracking I suspect people are more aware of mineral rights. Homes still don’t usually come with them, but now home purchasers are more likely to know in advance how much at risk they might be of living next to a future drilling site.

    • ezrydermike says:

      “It comes amid a growing body of research suggesting that the country’s ballooning oil and gas production — cheek-by-jowl with homes and schools — could be endangering the health of people nearby.”

      http://www.publicintegrity.org/2014/10/07/15890/new-five-state-study-finds-high-levels-toxic-chemicals-air-near-oil-and-gas-sites

      • ezrydermike says:

        “The Eagle Ford Shale region of South Texas is in the midst of a massive drilling boom that’s generating billions of dollars for oil companies. But a months-long investigation in partnership with InsideClimate News and The Weather Channel finds some residents saying emissions of dangerous chemicals are making them sick, and state regulators have offered little help.”

        http://www.publicintegrity.org/environment/big-oil-bad-air

    • Allan H says:

      I was talking to some land owners north of Scranton Pa a few years back. These were basically large acreages, mostly farmers. They had been approached with gas drilling offers and were deciding whether they would accept or not. One said his neighbor was going to accept so that put pressure on him (downsides and no money). Since the drillers can go under unleased lots, they only have to get a few landowners in an area to run their wells.
      The area was about as quiet and rural as one could get in that region. I wonder what it was like during and after the drilling.

  12. thrig says:

    Infinite sunlight? Alas poor Yorick, I knew this claim well. From only like every thread here, ever. This week, we shall assign Monarch-brand butterfly nets to help collect on that infinity. Go, go, quick! All the sunshine is getting away! Oh, what, the nets won’t do? Maybe this job calls for Heroic Materialism Man, whose talents—besides the ability to poop out unprecedented amounts of concrete and steel, and to look somewhat good in tights, or at least stun his enemies with the muffin top—include staying one step ahead of the credit card company, owning several cars, a hinterlands home (or two? They’re so like Pokémon cards…), maintaining storage for durable goods from China, et cetera.

    Solar optimist narrative control in 3, 2, … hey! If we’re entertaining a collapse back to the new, improved! electric car, we could then also have Carbon fibre hansoms, and the blinkers can go back on the horse? Nay! Onwards, as futurist Brin says.

    • Watcher says:

      Ya get more power from orbit. Ya get about 1360 watts/sq meter but that’s non spectral specific so you throttle back power in the budget somewhat on day 1.

      It depletes. The gallium arsenide junctions start getting hit by gamma particles and die. So the same surface area gives you less power over time. Worse for high equatorial inclination orbits than purely equatorial because other particles can do some damage at the unshielded poles and also the south atlantic anomaly. It’s like barrels/day decline. Relentless stuff.

      Those particles . . . some of ’em . . . reach the surface, too. They hit keyboards hard and cause typos.

  13. Watcher says:

    Singapore says $44.59, up a few pennies. Dollar flattish to up a tad. Quiet over there.

    • shallow sand says:

      Maybe the traders are adding together all the CAPEX cuts and wondering when the short squeeze will hit?

      • Watcher says:

        shallow guy, this stuff really isn’t about trading. This is about death. Coming. Soon.

        The destruction of the narratives is going to do ugly things. Permanence to the end of shale does even worse things.

      • Toolpush says:

        Shallow,

        Looks like the rig count got the shorts burning. I said a couple of weeks ago we needed a 100 rig drop to get peoples attention. It seems 94 may have been enough, but as the 4th results get released, and we have yet to see any of the highly concentrated shale plays report, I feel the real message is going to get through to the market. Then we can start to see what is going to be left and if anyone can put all the pieces back together again.
        Maybe a few shallow stripper will be able to make a wind fall and save the day, lol.

        • shallow sand says:

          Ha ha. Not going to be able to save the day toolpush. Just hoping for enough of a rebound to stop the sleepless nights. It seems to me maybe if we get back in the 70s the small conventional producers can make a decent return without the shale guys drilling like crazy again.

          However, its just one day. Big inventory build will knock it back down in a hurry. But at least its Friday and we ended on a positive note. Now if we have no operational problems tomorrow or Sunday morning will be in even a better mood! Our guys have been great through this so far. Most of them started out in the 80s boom and so they’ve been through this before. Worried about when they want to retire, hard to find young ones who will stick with it.

  14. Frugal says:

    Canadian Oil Sands to Further Slash Dividend and Spending

    Syncrude has struggled to cope with a series of unplanned outages at its surface-mining operations, the largest oil-sands project in the world. Its average cost per barrel is about C$47.75, which is higher than every other major oil sands mine in Canada, according to TD Securities Inc.

    The tar sands carnage continues ….. and it’s taking the whole Canadian economy down with it, just like in Russia.

    • Ves says:

      with exception that CAD$ unfortunately did not depreciated as much as Ruble.

    • Who else has a major surface mining project?

      • Anonymous says:

        Suncor, Shell, ExxonMobil

        • Doug Leighton says:

          Plus: Imperial Oil, Statoil, Sinopec, Total S.A., Nexen, CNRL, Petro Canada, Tsck-Cominco

          • Are they all using SURFACE mining? I’m trying to see if we can clarify the different types of project.

            • Doug Leighton says:

              No, about 80% is in situ extraction owing to overburden thickness so only 20 percent of bitumen can be extracted by open pit mining methods. In situ extraction uses a steam-assisted gravity drainage (SAGD or “Sag-D”) process.

              And, although Anonymous above claimed ExxonMobil is a player in the Alberta Athabasca oil sands play I don’t think this is correct.

              • That’s what I thought. There seems to be some confusion about this topic.

                We also have an “untouchable” resource in the intermediate depths between the surface mining and the deeper steam recovery projects. I’ve worked a bit on this technical problem. I’m hoping the ConocoPhillips experiment in Alaska will give us some leads.

            • sunnnv says:

              check out the official oil sands project map at:

              http://www.energy.alberta.ca/LandAccess/pdfs/OilSands_Projects.pdf

              You will have to enlarge it a bit to see the names and “thermal” or “mining”. Surprised to find many are listed as “primary”, e.g. “These projects utilize the natural energy available in the reservoirs (in some cases supplemented by non-thermal EOR processes) to produce bitumen.”

              All kinds of good info at:
              http://www.energy.alberta.ca/OurBusiness/oilsands.asp

              the DMR of far northern north dakota 😉

              BTW – I find no double cross company (eXXon) listed in the tar^H^H^Hoil sands projects.

              The latest quarterly update:
              http://www.albertacanada.com/files/albertacanada/AOSID_QuarterlyUpdate_Winter2015.pdf
              has mining numbers to Jun 2014, other numbers to Dec 2014.
              Mined = 600,000 bpd (but was a million bpd in March – ?weather?).
              Primary = about 240,000 bpd
              In situ thermal = a million bpd.

              So roughly half mined, a bit more than half primary or in-situ.

              Detailed list of projects follows that, with company, site, capacity, technology, status. Past quarterlies at:
              http://www.albertacanada.com/business/statistics/oil-sands-quarterly.aspx

              • Excellent overview links. I think it’s important to have this information aired out. I read a lot of erroneous information. The authors blend mining with SAGD, and most ignore primary recovery. Primary recovery requires moveable oil, sometimes the wells are made to produce sand to create flow channels known as “wormholes”. The wormholes coupled to other effects can increase recovery rates and recovery factor.

  15. Dennis Coyne says:

    Hi all,

    Does it look like Brent crude may have found a bottom around $48/b?

    Chart below from this webpage:

    http://www.nasdaq.com/markets/crude-oil-brent.aspx?timeframe=1m

    • Dennis Coyne says:

      Hi all,

      Looking at Brent spot prices rather than futures prices, the recent EIA weekly data shows about $46/b for the past two weeks (last data point is week ending Jan 23). The last time we had an oil price crash prices bottomed at just under $40/b on a weekly basis in Dec 2008 and had rebounded to $70/b by June 2009 during a severe recession. I would expect oil prices will recover at least this fast under current economic conditions so we might see $75/b by July. Chart for weekly Brent spot prices from Oct 2008 to Oct 2009 using data from the EIA. Link below

      http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=rbrte&f=w

    • Dennis Coyne says:

      Below is chart for recent Brent Spot prices using the same EIA data set over a different time frame from Feb 2014 to Feb 2015. The horizontal and vertical scales are similar to the chart above (12 months on horizontal axis and $80 on vertical axis from minimum to maximum. Both charts are in nominal dollars so the vertical scales are different in terms of real dollars.

      • I want to thank you guys for preparing all these graphs and writing your analysis. I decided the market does indeed have to turn around, so I invested a little bit to see if I can time this right over the next few years.

    • SRSrocco says:

      Dennis,

      If we look at the 20 year monthly chart of WTI Crude, the current candlestick shows no sign of a bottom. For a bottom to be in, there needs to be a nice wick or long stem at the bottom. If WTIC does close in the red again today, I would imagine we will continue to see a lower price in Feb.

      steve

      • Dennis Coyne says:

        Hi Steve,

        Brent or LLS would be the preferred bench mark. Bakken mostly competes with Brent and Eagle Ford with LLS (Louisiana Light Sweet). I doubt that oil prices will go much lower, I doubt WTI will break through 40 and Brent will stay above 45 for month ahead futures contracts.

        • SRSrocco says:

          Dennis,

          Nice assumption. However, all bets are off if NO ONE CUTS PRODUCTION. Global demand continued to decline in Q1 2009 after the collapse of the U.S. Investment Banking and Housing Industries. It wasn’t until the Saudi’s cut 2 million barrels of oil production in Q2 2009 did the price start to recover.

          If the Saudi’s don’t cut….. we see $30 Buck oil.

          steve

          • Porlock says:

            Except that crude just rallied 6% in the last hour of trading on the big drop in the BH rig count. Market may finally be waking up to the fact that the US shale-oil model has a fundamental design flaw. The Saudis won’t have to cut if market starts to reappraise the long-term outlook for US shale-oil supply, and that might just be about to happen.

            • Watcher says:

              There are often market events followed by the word “as”.

              “Equities fell today as housing was reported weak.”
              “Bond yields fell today (and prices of them thus rose) as GDP reports were weaker than expected.

              None of that has to mean anything. The as phrase is usually massaged optimistic in whatever way. When oil prices were $100+ it always was derived from the US booming economy that, despite reporting sometimes negative (Q1 2014) would still be “booming”.

              That rig report was out for quite a while before the end of month short alignment move today. More importantly, the yen drove the dollar down all day. Regardless, the price becomes what it was a few days ago.

              • shallow sand says:

                Think we finally got to a price where the shale “efficiency” and “sweet spot” crowd could not convince the traders all is well and the rig count declines are backing that up. Also, the earnings reports for Q4, which before hedges have an average oil price of DOUBLE the recent price before just today, have been disappointing.

                I think the US peak will be coming soon absent an immediate swing to back over $90. I think the debt line to the shale guys is being cut off.

                • Watcher says:

                  The price could get to $100 next week.

                  Lots of places for the US to bomb to make that happen. Or Iran. Or hell, Venezuela. They can probably make truck hauled bombs.

                • JohnKeller says:

                  Spot on. The spigot of easy money is shut off. Banks will start looking very carefully at individual well results. I imagine that what they see will not look like what they have been told. I have been of the opinion that a lot of these shalies are Ponzi Schemes. They tap the credit line to drill then pay that off with stock and debt issuance and then tap the credit line again. Well, that game is over for a while. I am looking forward to seeing shalies living within their cash flow and what their production looks like then.

              • Porlock says:

                Fair point that correlation does not mean causation, as is your point about it being the last hour of the last trading day of the month. But still — and as Ron said in his observation lower down the thread — for 94 rigs to be taken out (and 61 of them horizontals) in one week “is one hell of a drop”.

                I guess all I’m saying is that the market can’t ignore this fast-approaching train wreck for ever, and on top of that US demand is rebounding very sharply as well, up 0.8mbd in Jan 2015 versus Jan 2014, so maybe some traders have read the EIA’s latest demand data from Wednesday as well.

                The really interesting question all of this raises, though, is this: given that the Saudis’ policy of holding production has produced exactly the effect they were hoping for (namely a full-blown crisis in the US shale-oil sector), would they actually be willing to INCREASE production in coming months if prices started to rise again and the pressure on the shale guys started to ease? After all, another few months of the kind of pain being experienced now and the US shale plays would likely suffer permanent and maybe irreparable damage (certainly from an investibility standpoint), so why would the Saudis stop short of dealing the killer blow now that they have their foot on the shale guys’ throats?

                It’s just a speculative question at the moment, but if WTI were to rally back to say $65/bbl by the end of Q1 then I think it would be a real question in the market’s mind.

                • Watcher says:

                  If the market acknowledges the train wreck, it means HY debt won’t roll over and it all stops anyway. It’s only the facade of survival that persuades HY lenders to write one more check.

                  • Porlock says:

                    Maybe — but (i) money is still dirt cheap, (ii) the liquidity cheap money gives rise to has to go somewhere, and (iii) if the banks and bond investors were too lazy to do their homework first time around on shale oil then would they really be any better a second time if oil prices were to pop back up again in the next few months?

                    Wall St is even now doing its best to keep the investor dream alive even at current prices — to give just one example, the GS piece from two weeks ago is one of the most daring exercises in suspended disbelief I have ever read (and in my 20 years in investment banking I have read an awful lot of fairy tales). If you haven’t seen it, they downgraded their average WTI price forecast for 2015 to $47/bbl, but nonetheless still see shale output increasing by 0.7mbd in 2015, and by 0.5mbd in 2016 (and even the EIA now expects shale growth to fall back to 0.22mbd in 2016).

                    The real dream factory is not Hollywood but Wall Street.

                  • Old farmer mac says:

                    I don’t believe it really matters if every operator in the Bakken goes busted in terms of the tight oil industry being permanently crippled.

                    When the forensic accountants aka known as lawyers specializing in bankruptcy and the accountants they hire as helpers are done the actual cost of producing Bakken oil will be an open book to anybody with the ability to read and pay for court transcripts .

                    If the REAL books say a particular area is break even to profitable at let us say seventy bucks there will be plenty of people with pockets deep enough to pay as they go once they are confident the price of oil will stay above let us say ninety bucks for a while.

                    Banks will eventually resume lending to such operators as are clearly making money.If they don’t there are other people who will for a share of the profits.Ten million bucks is beer money in places such as Silicon Valley and Wall Street.

                    It must be possible by now to predict with decent accuracy what the AVERAGE PRODUCTION profile looks like on any large lease that has already been drilled at a few spots.

                    Now I don’t really have a clue as to just how much it really costs to produce oil in the Bakken but I will hazard a guess that with reasonably cheap money it would be profitable to drill there at eighty bucks or more. It might be more but it is obvious that the drillers have reduced well costs down a good bit over the last couple of years so I will guess eighty bucks is enough.

                    Plus lease owners and the tax folks may be willing to negotiate some too. Money in the hand NOW is worth a LOT more than potential money years down the road.

                    Most rural land belongs to older folks who would like to spend some money before they die.

              • Ilambiquated says:

                Even better, “Equities falling today as housing was reported weak.” Reporters in the financial beat have lost the ability to conjugate English verbs. Comes from staring at those blinking charts too much I guess.

                The human brain works best with narratives. Ask a serious economist why the stock markets changed today and he’ll show you a big matrix representing a hundred linear equations in a hundred variables and say, “It just happened that way”. Most people find that counter intuitive.

                The Australian aborigines, who had no maps, used to navigate around Australia by singing songs. Each “songline” was a narrative that contains clues about how to get from one place to another.

                Modern man has navigation software to get around the physical world, but still uses narrative songlines to navigate the complexity of the increasingly abstract world around him. That’s how the human brain works. We can’t accept the idea that the market simply jiggled, or that the real mechanism is beyond our comprehension. We need a story.

                • Doug Leighton says:

                  “The human brain works best with narratives.”

                  So true. My wife has a photographic memory to the extent she can glance at a phone book page and a week later tell you X’s phone number is Y, for every person listed on the page! My brain just creates narratives, she says, amazed that this isn’t a universal talent.

                  So maybe if I were to create a narrative based on vegetables I’d be able to remember what I had for breakfast. Maybe. I did manage to create a very successful narrative involving a blonde working behind the checkout counter yesterday. But to stay on topic, the cornucopia narrative seems to be hard wired in most human brains irrespective of contrary evidence. Now that blonde……

                • coffeeguyzz says:

                  Old Farmer Mac, that is exactly what will happen as one scenario was just outlined on Seeking Alpha by some Sahara Investing group using ExxonMobile as the potential buyer.
                  The hydrocarbons are fairly well identified both to amount and location in most of the US shales. If some of the companies are unable to produce in the future due to financials (100% certainty as it is already starting), other companies with strong financials – and they sure do exist – will be in a position to purchase the assets of distressed companies on the cheap. The infrastructure, the technology, the personnel to further develop the shales already exist … only a viable price for the product is lacking.
                  (A new shale play seems to be in the early phase of existence in the eastern counties of Kentucky – the Rogersville shale. Small armies of landman have signed up a few thousand leases for potential future development. This may become an example of the second and third tier shale play development described by a Wood Mackenzie report last year saying smaller plays may become viable with the application of the newer technologies. Could be instructive however it plays out).

                  • shallow sand says:

                    Coffee. Or will just need much higher oil and Ng prices.

                    Read about New Albany shale in S. IL, S. IN and W. KY. Big leasing push starting in 2010 or 2011. Big controversy in IL over fracking. Took a long time to pass legislation for high volume frack. Only one company has registered to apply for permit under new law, and no permits have been requested.

                    Appears may be more of a gas play, and with gas under $3 and no infrastructure, may not get off the ground.

                    I believe will need to see oil and/or Nat gas much higher to get these off the ground.

                  • coffeeguyzz says:

                    Shallow, absolutely agree about the higher prices being necessary for production to proceed. The last two/three months, a number of new wells in the Bakken are having their output significantly choked back. There is no incentive to produce at 30 bucks per.
                    BTW, shallow, big news out of Russia … Gazprom just announced two successful test wells in the Brazhnov, hydraulically fractured directionals. In the coming months, they plan on multistage fracturing of horizontal laterals extending hundreds of feet in length.
                    The Brashnov covers an area bout the size of Texas and California combined, with a thickness ranging from 30 to over 100 feet.

                  • Try pages 22 to 26 in this USGS report, it covers the Bazhenov formation. Most of the Western Siberian oil and gas reserves are found in Cretaceous sands. The Jurassic Bazhenov sits underneath, it’s the source rock. There are areas where the Bazhenov is really over pressured (this is similar to what happens in the Mountrail sweet spot in the Bakken).

                    http://pubs.usgs.gov/bul/2201/G/B2201-G.pdf

                  • coffeeguyzz says:

                    Fernando, thanks for the link. Total Organic Content ranges from 9% to over 15% in much of the central part of the basin. That is an incredible amount of hydrocarbons.
                    In a somewhat related note, the current issue of Drilling Contractor online magazine has an article – dated Jan. 27, I think – touching upon the cutting edge developments in fracturing/well completions. Takeaway seems to be the increasing array of sophisticated diagnostics joining with efficient hardware and processes so operators are no longer doing cookie cutter, 300 foot stages with evenly spaced perforation clusters. Stages vary in length throughout the lateral (stages as short as 65′ to 100′) targeting the richest payzone.
                    The ongoing introduction of various ‘diverting agents’ (engineered proppant to temporarily plug the bigger fissures) seems promising to the burgeoning re-frac’ing activities.

              • That rig report was out for quite a while before the end of month short alignment move today.

                Watcher, there is never a short alignment move due to the calendar month ending. Any short alignment, if caused by contract expiration, will occur near the end of expiration of the contract which occurs around the 20th to 23rd of each month. The move up in futures prices was caused by the Baker Hughes Rig Report.


                Oil surges 8 percent as U.S. rig count plunges, shorts scramble

                The late-session surge was primed by Baker Hughes data showing the number of rigs drilling for oil in the United States fell by 94 – or 7 percent – this week. Earlier gains were fueled by reports of Islamic State militants striking at Kurdish forces southwest of the oil-rich city of Kirkuk.

                Crude Oil Futures Contract Specs

                Trading in the current delivery month shall cease on the third business day prior to the twenty-fifth calendar day of the month preceding the delivery month. If the twenty-fifth calendar day of the month is a non-business day, trading shall cease on the third business day prior to the last business day preceding the twenty-fifth calendar day. In the event that the official Exchange holiday schedule changes subsequent to the listing of a Crude Oil futures, the originally listed expiration date shall remain in effect. In the event that the originally listed expiration day is declared a holiday, expiration will move to the business day immediately prior.

          • nNgass says:

            The Saudis will not cut since their annual oil production declines since several years. However, there will be an involuntary cut by the US shale oil producers preventing oil from going down much further.

            Since last July, people falling over themselves competing in projecting lower and lower oil prices. Some say $30, no $20, but beaten by another saying, hell no, it will be $10, like Gartman says. The price, however, goes to a member of the Hill Group who predicts that oil will cost $0.00 in 2030-2035 (shortonoil, 26th Oct 2014, peakoil.com). People will look forward to this when driving cars and will whistle the old song “Happy times are here again”.

      • Heinrich Leopold says:

        All time high oil inventories make it highly unlikely for prices to recover anytime soon. Usually oil inventories go up until June each year, so the peak for inventories will be much higher. The damage of low oil prices to the US economy is already visible in the recent GDP numbers and lost investments http://www.bloomberg.com/news/articles/2015-01-30/oil-plunge-puts-390-billion-hole-in-investors-pockets. In my estimate GDP will be at least USD 500 bn lower due to lower investments in equipment and infrastructure as well as lost revenue from oil sales. The benefit of low oil prices for consumers goes mostly into consumer goods, which are imported. This translates into a higher trade deficit, which in turn decreases GDP even further.

        • Boomer II says:

          The damage of low oil prices to the US economy is already visible in the recent GDP numbers and lost investments

          I don’t think it had to be this way, but we have economists and politicians who create conditions that result in booms and busts. And our investment community focuses more and more on the short term, so long term thinking doesn’t happen much.

          I wish we could focus more on the “new normal” rather than looking for ways to get us back to where we used to be.

          • Heinrich Leopold says:

            Economists and politicians think they are in charge. However, despite all the media spinning, nature has its own way of finding solutions.

        • nNgass says:

          “All time high oil inventories make it highly unlikely for prices to recover anytime soon. ” I don’t think so. Storage in Cushing with the subsequent setting of the oil price at the NYSE has only little relevance for the whole world where the Brent price is the index. As shown above, the world production is declining since years and the IEA said that 2005 was the peak production of conventional crude. Also, haven’t you heard that the drill count in the shale plays are decreasing that will impact the oil inventories soon?

          • Heinrich Leopold says:

            nNgass,

            It all depends on the behaviour of oil producers. So far producers have indicated that they want to produce more in 2015. Even if drilling is reduced now, the following slowdown of the US economy will bring more oil to the markets. It is just a matter of time and in my view it will take much more time than many think.

            file:///media/mint/60D85852D8582914/invest/OilInventory.PNG

            • Toolpush says:

              Heinrich,

              We have all read the optimist forecasts and hopes of the shale players. We are yet to see if they can produce what they promise, but what nobody is counting, is all the small producers that make independent decision and decide not to repair a broken pump or defer maintenance that will lower oil production a very small amount per well. This small amount spread over ??? million wells will add up.
              Even the shale plays, the big boys in the best areas are publicizing how they are going to cut their rig fleet in half, double their drilling rate and increase production, but there are many of the smaller companies shale companies in lesser areas that have not said too much. Where is there production going?

              Texas was predicted by the EIA that they will be increasing their oil production well into 2015. Yet only a Ron post or two back, he shows October production to be flat to down. So what will it be by February? We will have to wait a few months to find out the answer to that one, but I have a funny feeling it will not be in an upward trend?

              • Heinrich Leopold says:

                Toolpush,

                Even if shale producers can reduce production by 1 mill bpd this year – which would be a lot – it will not influence oil prices very much in my view. The main influence on oil prices comes from the dramatic reduction of residual fuel oil (RFO) consumption worldwide. So far already 5 mill bpd came out of the market over the last five years. Around 8 mill bpd will come out of the oil market over the next three years. Take the Chinese oil market – published recently by IEA – which increased just 3% yoy, yet jet fuel increased by 11,9 % and RFO decreased 21% yoy to a multiyear low. There are significant changes of segmentation in the oil products market, which have a much bigger influence on oil prices than oil supply. Therefore I do not expect an oil price recovery over the next two years. It is in my view better to go out of any oil related investments over the next two years and invest in emerging markets, which are already enjoying low oil prices (India, Vietnam, Philippines… are booming and outperforming the DOW by 100%).

  16. Toolpush says:

    Storage Report Anyone?

    http://www.noodls.com/viewNoodl/26728360/genscape-inc/crude-futures-near-six-year-low-market-looks-to-genscape-cu
    “Stocks at Cushing, OK have officially pushed capacity utilization past the 50 percent mark after another 2 million barrel build the week ending January 23,” according to Genscape’s Brian Busch. “With the 12-month WTI contract spread approaching $10/bbl, barrels are flooding to Cushing in every way possible, including rail.”
    As of January 28, 2015, Genscape reports that eleven trains have unloaded at the EOG – Stroud rail terminal since the beginning of the year, sending over 750,000 barrels of Bakken crude to Cushing via EOG’s 90,000 bpd Hawthorn pipeline.
    “Given the current rate at which Cushing inventory is building, primarily based on storage plays by merchant traders because of double-digit contango, maximum operational levels could be reached by late spring,” Busch continues. “When that happens, those volumes will have to re-enter the refinery supply market, or find another home for storage in PADD III.”
    – See more at: http://www.noodls.com/viewNoodl/26728360/genscape-inc/crude-futures-near-six-year-low-market-looks-to-genscape-cu#sthash.vESWQbCr.dpuf

    • Old farmer mac says:

      Does anybody have a good handle on who owns the oil going into storage? I presume it is a game anybody with the cash on hand can get into but on the other hand maybe you have to have industry connections in order to play storage ball.

  17. Moody’s downgrades Petrobras’ ratings to Baa3; maintains review for further downgrade

    The Baa3 rating reflects the deepening scope of the investigation of improper payments, which Moody’s believes heightens uncertainty about the timely delivery of audited financial statements and could lead to significant liquidity pressures.

    Cheap oil is just one worry for Brazil’s Petrobras

    The battered oil company, also known formally as Petroleo Brasileiro Petrobras, took another hit on Tuesday when Moody’s placed contractors for its offshore drilling operations under review for downgrade. More than $4.7 billion in debt linked to Petrobras projects sits in limbo as pressures, including a shock to global oil prices and an ongoing corruption investigation, have constrained the state-backed company’s ability to float the projects.

  18. Oil crash: ‘Drill, baby, drill’ loses momentum

    A short video here correctly blames the oil crash on high US production and economic problems in Europe and China. It also correctly states that OPEC has kept production steady, not increasing production at all.

    Hey, this is a great little short video, only 2 minutes long, and it is the first I have seen lately that correctly hits the nail on the head.

    • Watcher says:

      BTW when you went to the store and bought a bottle of Coke, was the price you paid dependent on how many bottles were on the shelf? I also notice when one goes to Subway at 3 PM when there’s nobody in line for a sandwich, you pay the same price for it as you do at lunchtime when there’s a long line of demand for sandwiches.

      • Fred Magyar says:

        Perhaps, but in the new world order when I drive to Miami on I95, the express lane toll when there is little or no traffic, can be as low as 25 cents but at rush hour with maximum congestion I’ve seen it as high as $11.50 and people have told me it can be even more…

        Actually I’ve heard that food, water, beer, fuel and even toilet paper also suddenly becomes more expensive after a hurricane.

        • Watcher says:

          I’ve also heard that if 3000 people sign up for Amazon Prime in a week vs 30 the prior week, they all pay the same price for it.

          Oh and as for water post hurricane, Millar Brewing/Bottling, a subsidiary of Phillip Morris, provides it for free. Regardless of demand.

    • nNgass says:

      The video parrots the same false statement one hears everywhere: Demand is falling. No, it is not. Demand is increasing but not at the same speed previously announced by the IEA. Demand in 2014 was higher than in 2013, and 2013 was higher than 2012. Demand in 2015 will be higher than 2014, according to the IEA.

      • Baloney, you simply don’t understand what falling demand is all about. Demand for $100 oil definitely fell and that was largely why prices fell. Likewise, demand for $90 oil fell and demand for $80 oil fell and so on until we get to $50 oil and below. There demand is not falling. Demand depends, to a very large extent, on price.

        The video is spot on and I do mean spot on!

        The IEA demand prediction is just a wild guess and that guess has to assume a price. If their price estimate is off then their demand estimate is off, and the odds are they will get them both wrong.

      • My guess is that price fell because the USA and Iraq increased production too fast. I mentioned those two because they sure had pretty large increases. I don’t think saying demand dropped is right. One could tepheiretically argue that, if the price had been $10 per barrel lower over the last 12 months, demand would have been a bit higher. Also, I don’t think demand will drop if price increases to $100 per barrel. It will keep increasing. But it will be higher at $90 per barrel.

        The biggest potential hit I can visualize is escalation of war in Ukraine driven by dumb USA and EU moves. Ukraine may be the last blunder a president will ever get to make, because after that war is over the USA may be known as the Radioactive States of America.

        • Ilambiquated says:

          USA and Iraq increased production too fast.

          Not a moment too fast for consumers. Whose apocalypse are we celebrating here?

  19. Jeffrey J. Brown says:

    As Oil Drops, Venezuelan Shelves Lie Bare

    http://www.nytimes.com/2015/01/30/world/americas/strict-rationing-in-venezuela-as-plunging-oil-prices-hurt-economy.html?hp&action=click&pgtype=Homepage&module=photo-spot-region&region=top-news&WT.nav=top-news

    CARACAS, Venezuela — Mary Noriega heard there would be chicken.

    She hated being herded “like cattle,” she said, standing for hours in a line of more than 1,500 people hoping to buy food, as soldiers with side arms checked identification cards to make sure no one tried to buy basic items more than once or twice a week. But Ms. Noriega, a laboratory assistant with three children, said she had no choice, ticking off the inventory in her depleted refrigerator: coffee and corn flour. Things had gotten so bad, she said, that she had begun bartering with neighbors to put food on the table.

    “We always knew that this year would start badly, but I think this is super bad,” Ms. Noriega said.
    




    Venezuelans have put up with shortages and long lines for years. But as the price of oil, the country’s main export, has plunged, the situation has grown so dire that the government has sent troops to patrol huge lines snaking for blocks. Some states have barred people from waiting outside stores overnight, and government officials are posted near entrances, ready to arrest shoppers who cheat the rationing system.

    Because Venezuela is so dependent on oil sales to buy imports of food, medicine and many other basics, the drop in oil prices means that there is even less hard currency to buy what the country needs.
    Even before oil prices tumbled, Venezuela was in the throes of a deep recession, with one of the world’s highest inflation rates and chronic shortages of basic items.

    • Old farmer mac says:

      I guess Venezuela is getting pretty close to outright revolution. The government may manage to hang on for another year or two but it does not seem likely to me that it will last that long.

      • Fred Magyar says:

        I guess Venezuela is getting pretty close to outright revolution.

        Revolution: 1. An overthrow or repudiation and the thorough replacement of an established government or political system by the people governed. 2. Sociology. a radical and pervasive change in society and the social structure, especially one made suddenly and often accompanied by violence.

        I have no doubt there will be revolution in Venezuela and probably a few more countries and societies that have placed all their eggs in the fossil fuel basket.

        Question is what will they put in place of the old system? They will need energy and there is no government that can continue to provide that if their oil loses value or becomes too expensive to produce. Basically it is the same old shit with new flies, still stinks! This is why I find any comment about about Conservative vs Liberal, Communist vs Capitalist to be moot it does make any difference whatsoever.

        People keep bad mouthing alternative energy such as wind or solar because these sources of energy are intermittent and can’t keep the current system running.
        Well, I’d still rather some energy, as opposed to nothing at all, which is where we all seem to be heading at full throttle!

        • wimbi says:

          And I’d rather see the current system NOT running. It has given us what we got-which is very bad indeed.

          A sane system would not be trying its damdest to get me to buy stuff I don’t need. It would be doing the EXACT OPPOSITE.

          In which case, we might get along within our current income of energy.

          Meanwhile, out in the shop, I am teaching the locals to make electricity with what we have. Actually, pretty easy to get not much with simple tech which would have been familiar to Watt, Edison and Diesel

          But I think we all can agree that not much is FAR better than none at all.

      • Old farmer, Venezuela’s defense ministry just issued an illegal resolution in the National Gazette authorizing itself to use deadly force as it sees fit.

        Here’s a link to Miguel Octavio’s blog, “the devil’s excrement”, this post describes the emergency measures they are taking in preparation for peaceful protests.

        http://devilsexcrement.com/2015/01/29/the-maduro-dictatorship-legalizes-military-repression/

        • clueless says:

          I remember when Russia fell. People standing in lines for everything and most shelves bare. They said it cost one year’s wages to buy a cloth coat. Then, the people figured it out. “I can make a cloth coat by hand in 1 month, and get a year’s wage.” Capitalism.
          In the US (and most of the world) if ice cream rose to $100 per dip, most people would say – “the government needs to regulate the price of ice cream.” The rest of us would be up all night making ice cream.

        • SW says:

          Christ, Texas I heard is considering a law to allow teachers to use deadly force against students to protect school property. Just think about that. They’d rather kill their kids than have some windows broken.

        • Old farmer mac says:

          It is possible for an authoritarian government that is operated top down by extremely competent bad guys to sieze and hold power more or less indefinitely as in the case of North Korea.

          Some how I don’t think the Venezuelan government is as competent as the North Korean one when it comes to holding on and things are probably still better in Venezuela for most people there than for most people in NK.

          When things get bad enough the country will simply collapse with nobody being in charge but that sort of collapse as a rule seldom lasts very long it historical terms. A new government usually emerges and consolidates power within a fairly short time frame at least on a regional basis.

          I have no direct experience with this sort of thing but localized collapse is nothing new.

          There will be a coup of some sort and the existing power structure be replaced. It might stand several more years or a few more weeks .If the price of oil goes back up again soon the government has a good shot at surviving a long time.

          I am going to read up a bit on the country and the resources it has other than oil and get a better idea.

          Sometimes the government in a failing country will wise up enough to permit the reforms necessary to restore stability and thus give up some power in order to retain the rest of it’s power.

          In communist countries this has taken the form of allowing small scale independent farming as opposed to collective farming for instance.

          Cuba in recent years has also started allowing some small businesses to exist in competition with state operated businesses.

          I don’t expect the Cuban government to fall anytime soon but it might have had it not started allowing some small scale economic liberalization.

  20. Old farmer mac says:

    Change of subject

    The local people who live in rural Canada will eventually succumb to the lure of a higher standard of living to be paid for with mineral revenues.

    http://www.thestar.com/news/canada/2015/01/29/northwest-territories-to-study-northern-energy-corridor.html

    It is not in my estimation a question of whether roads and rail and pipelines will be built but how big the local cut will be and when.

    It may take another generation for old folks who are opposed to pipelines to die off but die off they surely will and their grandkids are already hooked on glossy magazines filled with advertisements for hot rod snowmobiles, four by four trucks ,wide screen tv sets, washing machines and all the other trappings of modern urban and suburban life.

  21. The full (free) IEA Oil Market Report is out today. Below is what they are saying about 2015 supply. I think they are more than a little overly optimistic.

    Global production rose by 155 kb/d month-on-month (m-o-m) in December to 94.2 mb/d, with non-OPEC and OPEC contributing roughly equal shares. Total supplies were a robust 2.1 mb/d higher than a year earlier.

    The rapid decline in oil price, reduced capex and political factors have cut non-OPEC supply growth for 2015 by about 350 kb/d since the last Report. So far, the effect of lower prices on North America’s production is marginal, with downward revisions to the US and Canada at 80 kb/d and 95 kb/d, respectively. Other notable revisions include Russia (-30 kb/d) and Colombia (-175 kb/d).

    A downward revision of 450 kb/d to the 2H15 non-OPEC supply outlook raises the ‘call’ on OPEC to an average 29.8 mb/d – just shy of OPEC’s official target of 30 mb/d. For 2015 as a whole, the ‘call on OPEC crude and stock change’ for 2015 has been adjusted up by 300 kb/d to 29.2 mb/d.

    Non-OPEC total liquids supply is forecast to expand by 950 kb/d in 2015, following growth of 1.9 mb/d in 2014. As in 2014, North America will provide most of the growth, offsetting declines elsewhere. Latin America is expected to contribute meaningful volumes (+150 kb/d), with non-OECD Asia also growing (+50 kb/d). Russia’s oil output will fall by about 140 kb/d year-on-year (y-o-y).

    OPEC output rose by 80 kb/d in December to 30.48 mb/d, with a surge in Iraqi supply to 35-year highs offsetting new losses in Libya due to an escalation in armed conflict. Top producer Saudi Arabia kept output steady.

    • Anon says:

      >>>Non-OPEC total liquids supply is forecast to expand by 950 kb/d in 2015, following growth of 1.9 mb/d in 2014. As in 2014, North America will provide most of the growth, offsetting declines elsewhere <<<

      To that I would say…how? They're expecting Russia to drop 140k (probably low) on top of legacy decline in the US and the US is still somehow going to force 1 million in gain??

      Also, who in Latin America is going to net grow 150k? Venezuela is heading for economic collapse, Mexico has been going off a cliff in production and Petrobras (Brazil) is arguably in credit default. And NET +150k???

      • Watcher says:

        They, also, probably have a price projection of $100 by next week or something.

      • They seem to be betting on Brazil increasing production. Don’t forget Venezuela and Ecuador are Opec members.

      • Synapsid says:

        Anon, as to Latin America:

        You haven’t heard the Good News? Argentina! The Vaca Muerta! LTO for the future with ExxonMobil hot on its tail. Worries are over, I’m told.

        (Sighs of relief all round)

        • You would have to lay out a better explanation. Somewhere in my blog I have a story called : “I almost died in Llancanelo”. I was looking for oil in southern Mendoza and northern neuquen, and I had a close call. The Vaca Muerta play could have some pitfalls. But time will tell.

          • Synapsid says:

            Ah, Fernando,

            Not an, um, explanation. Did you notice the !s? The Capitalization?

  22. ezrydermike says:

    came across this….a different take on things. I think the headline is misleading…

    excerpt
    “Critics contend that given ever-increasing thirst for hydrocarbons historically, any assumption about future usage based on current supply is dicey. That’s true, but “proven reserves” of oil and natural gas, which is the most conservative category, keep rising. One figure that has remained consistent over decades is the “reserve-to-production” ratio. In 1995 the world had an estimated 51 years of oil supply based on consumption that year. After burning through half-a-trillion barrels of oil since then, the global reserve-to-production ratio in 2013 was at 53.3 years.”

    http://www.telesurtv.net/english/opinion/Crash-in-Oil-Prices-Should-Bury-Peak-Oil-Once-and-For-All-20150129-0034.html

    • ezrydermike says:

      mentioned in this article is Thomas O’Donnel and The Global Barrel. Interestingly enough the website links to the blog The Devils Excrement that Fernando referenced to above…

      http://globalbarrel.com/

  23. The Baker Hughes Rig Count is out. The oil rig count was down 94. That is one hell of a drop. The biggest drop was in Texas, down 58, Oklahoma, down 10 and North Dakota down 4. The Permian was down 27.

    • Ilambiquated says:

      Why is the change so much bigger in Texas than in North Dakota? It suggests that the oil is more expensive to drill there, or at least that a higher proportion of the potential sites are too expensive for the current oil price.

      • clueless says:

        This reply is really a vague, uninformed reply (laying myself wide open). But, I seem to remember Pioneer (PXD) about 1-2 years ago touting a “stacked” play in the Permian (Cline?). At any rate, they were claiming initial production of over 10,000 bbls/day. Their stock was a WS darling. Then, their quarterly reports came in and showed no massive (not even moderate) increases in production. The stock started falling. That is my recollection (right or wrong). What went wrong? I do not have a clue. But, I may start researching it.

        • MBP (ManBearPig) says:

          The Wolfcamp D is still not terribly well understood in the Midland Basin. It is still not targeted heavily, and the A and C tend to get much more attention currently. There may be potential in the D, but I don’t think its extent is known very well yet.

          • shallow sand says:

            MBP. Don’t know much about Permian horizontal production.

            Is it correct that some is from zones that have not produced in the past and others are in zones where vertical holes have been successful, but horizontal wells, “get the oil out faster” to be simple about it?

            • MBP (ManBearPig) says:

              In some cases, yes. Most of the unconventional formations are virgin reservoirs, with the exception of the Spraberry that was discovered in the 50s. There is also horizontal production out of many of the conventional waterflooded and CO2 flooded reservoirs. They have been drilling horizontals in these fields since the early 90s. I would say its not “get the oil out faster” for the conventional fields, but its cheaper to have a single surface location and a long lateral then a bunch of wells on 10 acre spacing. You have to remember that a lot of the conventional horizontals are not frac’d, and if they are its a baby frac compared to the unconventional horizontals.

      • MBP (ManBearPig) says:

        There are more overall rigs in Texas. The % change is probably pretty similar in both states.

        • Ilambiquated says:

          The breakdown in the table is

          TX: 695/753 =93% Down 7%.

          ND: 143/147=97% Down 3%.

          • Toolpush says:

            Last week ND Bakken, down 9 out 156, 5.8%
            Texas was a lot less
            So, just call it fluctuations. The one thing that is constants, nearly all states, and basins are down.

  24. Frugal says:

    Chevron puts brakes on Kitimat LNG project

    California-based producer is significantly slowing spending amid a crash in crude prices and global competition

    Layoff shock: How employers can soften the blow

    After recent announcements that scores of employees would be laid off from Target Canada and Tim Hortons across the country, controversy boiled over how management made their decisions.

    Major layoff notices happening every week in everyting from retail, to oil, to banking. The Bank of Canada just reduced its lending rate to 0.75% to stimulate spending, but I don’t think it’ll do much good. Canadians are already over their ears in debt. It looks like Canada is heading into a reccession.

  25. Jeffrey J. Brown says:

    This is one of the oddest, and most error filled articles I have ever read, starting with the title. When they talk about prices, I think that they mean stocks of crude oil. Incidentally, I didn’t know that inventory data were available for the 20’s and 30’s.

    In any case, no worries, the US alone produced 407 million barrels of oil on January 23, 2015.

    Crude Oil Prices Hit Highest Levels Since 1931

    http://insidetrade.co/crude-oil-prices-hit-highest-levels-since-1931/

    U.S. commercial crude oil stocks hit the highest level since 1931 last week when the giant oil fields opened in the United States coincided with the Great Depression and created a gigantic glut. This sent prices of crude oil tumbling to as low as 13 cents per barrel. Stocks of commercial crude oil at the refineries and tank farms all over the country rose to approximately 407 million barrels on 23rd January. This is up from 398 million barrels that were produced the week before. . . .

    Production and consumption of crude oil are higher than they were in 19930s thus, the parallels are not exact. In 1931, the stocks of 407 million barrels were almost equivalent to 160 days of nationwide production of crude oil, while presently, the same stocks account for just 44 days of production. Monthly records that stretch to 1920 show that the inventories have returned to levels that are near to levels seen in April 1981 but were not seen since the years between 1924 and 1931. . . .

    Since that time, it is now in present that the oil production has soared to such high levels. United States produced 407 million barrels of crude oil on 23rd January alone which has brought the production of crude oil to the highest levels since 1930s.

    • They forgot to factor in the batteries. Or maybe they don’t realize the earth spins on its axis?

      • Fred Magyar says:

        Or maybe they don’t realize the earth spins on its axis?

        Maybe starry nights without so much damn light pollution aren't half as bad as you seem to make them out to be. Granted a lot of city folk are deathly afraid of being out alone in the dark with just their own thoughts…

        • Fred, it’s just a matter of how we use our imagination. I assume you don’t REALLY expect steel mills and airports to light up bonfires after sun set?

          • Shuffling Along says:

            If the total amount of energy available to civilization falls significantly, certain adjustments will be made in energy demand.

            Not to the same extent in different regions and countries and specific localities, and not evenly across the spectrum of energy uses (airports, steel mills, all the rest)…but rest assured total demand will not be more than total energy supplied.

            This is straightforward.

            The details of who gets what energy when/where if the total energy available shrinks will be interesting.

          • John B says:

            I doubt if a steel mill could operate on rooftop solar with battery backup. What they need is a solar, or wind farm producing hydrogen. Pipe the hydrogen to some on site storage facilities and voila.

            Nice rally today BTW.

            http://hosted.ap.org/dynamic/stories/E/EU_SPAIN_PODEMOS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-01-31-08-00-52

          • Fred Magyar says:

            Hey Fernando,

            No I don’t! However I don’t think you are using much imagination when you make comments about life with a lot less oil in it.

            I actually wrote a long detailed response but it seems to have gotten lost while posting. I’m not going to rewrite it right now.

            However a part of it was about my experience with helping set up a metals recycling business and what I learned about mini mills. My point has been about a new paradigm. To be clear I’m not interested in ideological debate. I’m not a communist or a liberal or a ‘Greenie’ I don’t have much time for any of that.

            I do think we all have to start thinking and doing things very differently than we have in the past.

            • Fred, the new paradigm seems to be the survivors get to sit in the dark.

              I think you either have a very gloomy outlook or are unaware of what goes on after dark. Or do you think everybody will move to Ecuador?

              • Shufling Along says:

                Fernando,

                I do not interpret that your response above is what Fred meant, and is not what I meant.

                Are you willing to entertain outcomes along a spectrum of possibilities between BAU and Mad Max or Olduvai Gorge?

      • wimbi says:

        Or maybe oil people just can’t face up to the obvious- their time on center stage is over.

        Interesting that when ever such a reminder comes up, it gets either no response at all or just empty silly ones. But, after all, this is the peak OIL barrel.

        What else can I expect?

        • Doug Leighton says:

          I don’t see how you conclude fossil fuels are “off center stage” and everyone who doesn’t immediately embrace your views is a moron. Even Norway where virtually all electricity comes from hydro fossil fuels remain a vital part of the economy and will remain so for decades. The question is: will a transition to renewables happen fast enough to make any significant difference. I remain skeptical but not without hope because it would be nice to think the planet remains a liveable place for my grandchildren.

          • Watcher says:

            Renewables require transport of spare parts for when they break.

            Renewables don’t provide significant bulk transport.

            Ain’t gonna work.

          • wimbi says:

            Doug. That is a non-silly comment to which I am happy attempt an answer.

            The views regarding relative costs of ff’s and solar are not mine, they are those of people who have money to make a difference and are looking at data. I just go along with that view.

            I do not say people who do not embrace that view are morons, in fact, I assume a simple explanation- they are so close to oil in all its detail that they don’t have any emotional room for stuff that threatens their expertise/income. That’s common and expected, and would fit here easily.

            Sure oil is a vital part of economy, mine as well as anybody’s. My attitude comes from the scientists who say we MUST get off of it fast, and, also from that drop in solar cost that seems to point in a direction to do it.

            My remark about people here is prompted simply from their extreme (in my view) attention to minute detail of the oil market, at the same time ignoring the far more momentous potentials from the drop in solar costs.

            • Watcher says:

              Maybe you should hang out at peaksolarpanel.com to find discussion of what you demand be discussed.

              • Fred Magyar says:

                Watcher, I highly doubt anyone here is demanding anything be discussed and I think your comment suggesting that, is way out of line, especially suggesting that Wimbi post elsewhere. A few of us who hail from the old TOD site used to follow some basic rules when commenting there. We at least tried to treat members of the community with civility and respect. And Ad hominem attacks were not considered acceptable. If you disagreed with someone, you were encouraged to refute their statements rather than insult them. It would be nice if we could do the same here, just a suggestion.

              • wimbi says:

                No command= no demand.

                Can make a whimpy little comment every now and then.

                Or can I?

            • Bryce Schuler (U.S. Chamber) says:

              A source that produces what is basically 1/225 of the power needed for home use in the country and that takes up so much space is now supposedly to be looked at as a rising star in the energy sector? How is that? Is this an ultra left-wing liberal wet dream that completely overlooks reality or am I missing something? There are miles and miles of desert covered with solar grids and they produce diddly squat in terms measured against real needs…so…can we just put some more of these farms in places like..oh Boston, or Philly or NYC, or heck even Trenton NJ that they won’t take up the entire state to produce the needed electricity – and keep in mind – we need it rain or shine, winter or summer, day AND night. How are you going to centralize this and get the power to the houses and businesses as needed to fulfill your wet dream?

              Anyone remember reading the articles of the grackles and numerous other birds – including critically endangered ones – being fried alive almost instantly as they flew over the giant farms in the desert? Just saying. I would’ve thought the “mother earth” environmentalists would be jumping all over this problem, if they had any integrity anyway…

              https://www.uschamber.com/blog/carbon-regulations-make-power-outages-more-likely

              • Nice that the AGW activists can take some of the heat off the Peak Oil crowd:
                http://www.dailymail.co.uk/news/article-2934540/What-happens-dare-doubt-Green-prophets-doom.html

                Hint: you might not want to call attention to yourself … doth protest too much.

              • John B says:

                The birds were killed by CSP plants. The big rise in solar power is PV. PV is also cheaper than CSP, and doesn’t kill birds.

                Solar now provides 1%, (or 1/100th if you like), of total world power production. That’s not much, but the numbers have been doubling every 2 years, for the past 20 years. 10 more doublings (20 years), and solar will produce 100% of current worldwide power production. That’s what you’re missing.

                Also, solar isn’t really a “left-wing” industry. Many Conservatives, and Libertarians have solar businesses, work in the industry, and use solar power.

                You should try an educate yourself a little.

                • Boomer II says:

                  Well, if we are going to respond to this guy, here’s something about the conservative groups pushing for solar in Florida.

                  The advantage of roof top solar is that it gives homeowners more control over their own energy. It doesn’t matter if solar is ready to replace the country’s system of electric grids. It is ready to allow individual home owners to generate their own electricity and lock in prices without worrying what the utility company will charge down the road.

                  Let the consumers/voters decide whether or not they want solar.

                  http://cltampa.com/politicalanimal/archives/2015/01/14/conservatives-team-up-with-libs-in-solar-energy-amendment-effort

                  • Boomer II says:

                    Also, for those of you not familiar with this group, TUSK, here’s a link.

                    Tell Utilities Solar won’t be Killed.
                    Started by Barry Goldwater, Jr.

                    Monopoly utilities want to extinguish the independent rooftop solar market in America to protect their socialist control of how we get our electricity. They have engaged in class warfare and tried to sabotage net metering, a billing method that gives individual homeowners fair credit for power produced on their own rooftops. They would like to deny us Americans energy choice and maintain their monopoly status.

                    http://dontkillsolar.com/tusk/

                  • John B says:

                    Arizona is #1 per capita for solar power production. Iowa is #1 in ethanol production by volume, and on track to produce 50% of it’s electricity from wind in 2016. Both are red states.

        • Buddy, I’m not worried about being in center stage. I’m really worried because renewables can’t pull their weight. Today, this is similar to being in an American football team with an aging first team and watching the 200 lb weaklings sitting on the bench blow drying their hair and comparing their newest tattoos.

          • Boomer II says:

            I’m really worried because renewables can’t pull their weight.

            And we have a variety of scenarios from people speculating about that, from total collapse (and even human extinction), to eking out an existence with the energy that we will have, to living well with the energy we will have.

            My feeling is that if renewables can’t pull their weight, then the world will adjust to that reality. I doubt that everyone in the world will have an equally painful downsizing. I’m guessing that some won’t make it at all and a much smaller number will have a very good life.

            Rather than fighting the concept of renewable energy, I like seeing what can be done with it. The more experiments we have now, the better we will know what we can do with it down the road.

          • Watcher says:

            haha 200 lbs is very light for a football player.

          • wimbi says:

            When I was a high school kid I played football. I told people I weighed 160 lbs. Truth was I weighed about 8 pounds less. And I was one of the BIGGER kids. We were all skinny then. We spent our days running over plowed fields carrying 100lb sacks of lime, etc.

            Today. Everybody all blubber, and that sack is now down to 50 pounds.

            Pulling weight? What kinda weight? Hell, how about dropping the blubber and pulling just the weight that does something?

            When I started buying PV, I was using 1/5 the electricity my neighbors were. And I was NOT in pain.

            And I betcha most people here have spent time in places where the average usage is way less than mine.

            Our real problem is not energy, it’s wits.

            • My grandson played split end for a Texas high school. He was about 6 ft 4″ and 210 lbs. And he wasn’t fat at all. But they make them hit the weights.

              • coffeeguyzz says:

                Yo, Fernando, With your technical background, and the obvious concern about renewables/sustainability, I would be real interested in your take on the whole LENR field … especially this Brillouin Energy outfit.
                People with seemingly limited knowledge and/ or strong prejudice seem to dismiss this concept out of hand. It appears there are some heavy hitters who give this field some credence, even if it is only dimly understood. Thoughts?

  26. Ronald Walter says:

    Oil gained yesterday afternoon to 48 and change, up 3.71 usd, 1710 yen per tonne increase to 39,530 yen per tonne, 45.93 usd per barrel.

    Uranium deposits in North Dakota:

    https://www.dmr.nd.gov/ndgs/uraniummaps/pdf/GI-40%20rev.pdf

  27. Ves says:

    Hi gerry from piedmont,

    I will post here because your post was all the way up there but I think it is very thought provoking.

    I agree with your and Steve post, with good part of it.
    Regarding the future price: I agree that price of oil likely go down as time of shortage. but it will not be in straight line. Nothing goes in straight line. It will have lower highs and higher lows: $147, $110 … and so on. How many of these cycles we will have? Who knows?

    The part that I am not sure I agree is when you say “At the beginning of the 20th century, the EROEI (Energy Return on Energy Invested) was around 100:1″ and ” The 100 there was mostly waste”.
    If we assume that we passed 2:1 in 2012 as you say my question is why I feel that we still mostly waste that oil?
    So where is that destruction of waste from 100:1 to 2: 1? I would see that destruction of waste if one morning NASCAR and Formula 1 say: “Folks we are cancelling next year season because anyway it is dumb car circling around and precious oil waste” But that did not happened yet. So I don’t see it that waste destruction.

    I do travel around from developed to poor countries and I don’t see that destruction of waste. Yes there is a smaller waste per capita in the poor countries then in developed countries but it is also still mostly waste. Majority of our jobs are still just shuffling the paper, so pure waste. So I don’t see that destruction of waste yet.
    I will tell you how I look at the things about that waste. I was last year in Paris and went to stroll along Champs-Élysées (like 5th Ave in NY) and stopped for cup of espresso in average, non-fancy coffee shop. The bill for one espresso was 10 Euros (12 US$, 13 CAD$)!! And then I am thinking why 20 ml of coffee cost $12? Why? The reason is that there is lot of today society’s waste in that price of 20 ml of coffee. Inflation hides the waste. You can take this example apply it wherever you see ridiculous valuations: 10 million dollar apartment in Manhattan or Tokyo, $40k just average sedan these days….

    So when that price of that Paris espresso comes down to $2 than I will know that there is destruction of waste. So it is not yet. It did not happen in 2008 when oil price dropped 50% either. But when it happen sometime in future, after few of these oil price boom/bust cycles, majority of people will not have even these $2 to pay for it.

    • That coffee costs 10€ in Paris because you guys pay for it. Last Sunday I was visiting Sella in the Valencia community mountains just west of Benidorm. I had a lunch (salad, soup, fish and chips, coffee, soda water) served in a nice restaurant with very good service for 10€.

      • Ves says:

        Fernando,
        You will have a problem fully understanding what is really happening until you start looking at things outside the box. One thing to help you look outside the box is to stop thinking through “labels”. Supply/Demand are just labels that we attach to everything that really we don’t understand. It is the same labels that we humans attach to pretty much everything. How was your day? I had a “good” day. I had a “bad” day. No. Day is a day. “Good” and “Bad” are just LABELS that we attach to a day.

        Go back to Paris coffee. You said: ” That coffee costs 10€ in Paris because you guys pay for it.”
        No. No. No. You have to understand this: If the coffee owner marked the price at 9 Euros for espresso he probably would not make profit on that coffee. At 10 Euros he makes some little profit. So with 9 Euros he has to cover all the costs and wastes that come with that location (Champs-Élysées, Paris, Europe). So there is no orthodox Supply and Demand how you guys are interpreting. It is Cost + Profit. That price of coffee does not go half price in the winter when there are half tourists. So there is no Supply and Demand.
        Let’s talk of the costs. Some of you would interpret some costs as a waste. I am not going into discussion what would be considered the cost and what would be considered waste. But just to put out there so people can have some ideas. That coffee owner definitely is baring some indirect costs associated with location and I don’t mean just because it is on Champs-Élysées. That could be anything from subsidized health care, to 6 week vacation, to efficient public transport, to free entrance to all museums in Paris for students, inflation, taxes and so on and so on. These are all the costs (or wastes) that go into the first 9 Euros of that coffee. That 1 Euro on the top is the profit.

        • That’s right, he charges 10€ because you pay it. The rest of the story is just a theory. If you guys don’t pay 10 € then the local prices drop. And nobody goes out of business. Paris would be like a large Sella with unfriendly people who get upset if your french has an African accent.

          • Ves says:

            I don’t really understand how you don’t get this. He charges 10 Euros because he is forced to charge. If he does not charge he goes bankrupt. Than what usually takes place another poor soul comes with idea that can succeed and put some collateral and banks create rest of the money from the thin air and the whole cycle starts again. But the new guy also has to charge 10 Euros because nothing changed in the cost structure.

            Lowering the price does not work when the system has targeted inflation of at least 2% annually by CB. It’s just math. Austerity (lowering prices and automatically wages) does not work in this monetary system because mathematically cannot work. I mean you live in the country that is experiencing that, so actually you have court side seats in Spain to witness that.

    • Ronald Walter says:

      They’re probably using Illy Cafe espresso beans, which are expensive at 24 dollars per pound, a buck fifty per ounce. You can’t buy a better espresso coffee bean, Illy Cafe is the world standard. You have to pay for quality, not quantity.

      However, Starbucks does a good job at roasting coffee beans and Starbucks Sumatra is a close second at half the price.

      • Watcher says:

        Wow, maybe local cost of coffee is not supply and demand determined. Imagine that.

        • Lloyd says:

          Hi Watcher.(and the rest of you.)
          Gimme a break. I know you know that Paris coffee costs that much because of Paris real estate costs and wages(particularly on the Champs-Élysées.) You’re not paying for a coffee- you’re paying for a coffee on the Champs-Élysées. And Ves, if you don’t want to pay 10€, I suggest you go a few blocks over.

          -Lloyd

          • Watcher says:

            Last time I was transiting CDG enroute Austria I recall paying $7 for a Coke or Pepsi or something. I was jetlagged just enough not to care.

          • Ves says:

            Yes, Loyd. I went few blocks over and it was 9.50 Euros. It must be Supply/Demand that knocked that 50 cents. 🙂

      • Longtimber says:

        Anyone have a patent on making JOE from Crude/Refinery trailings?

    • gerry from piedmont says:

      Ves – I agree that even at 1.7:1, we still mostly waste the oil, which is why we are already in an economic crisis. If we used most of the oil for productive purposes, we could probably still have an expanding industrial economy with an EROEI just over 1:1. I think I understand where Steve gets his $8 a barrel figure from: it represents an estimate of the proportion of the fundamentally-justified price (which I believe is currently around $80, but is declining each year) that governments will be willing to subsidise when oil becomes an energy carrier – things like diesel for tractors, fuel for food deliveries, emergency services, etc. If that is right, it means that 8/80 * 100 = 10% of current usage is “productive”, the other 90% is waste. Seems about right to me.

      • Ves says:

        Hi Gerry,

        Why do you think it is $80 right now ? and Why do you think it has to be 10% of productive usage?
        I have no idea, just first time I read this assumption.

        • gerry from piedmont says:

          The $80 comes from a graph here: http://www.thehillsgroup.org/depletion2_022.htm. I realise that this source is at the far end of the doomer spectrum, but there’s something that to my mind gives it a lot of credibility : it appears to predate the July 2014 price fall, which it predicts. How many models achieved that? As for the 10% “productive usage” estimate, that’s just a snapshot: I expect the proportion will increase in the future as oil waste is driven out (pun intended) of the economy.

          • Watcher says:

            I thought the Hills dood has offered up some bright future stuff in the past.

  28. steviek says:

    What do you guys think about this comment by Noriel Roubini ( he is economist that predicted 2008 financial crisis ).

    Jan 13th, On Saudi Arabia not cutting production:

    “Their behavior is like a typical oligopoly using predatory pricing. If you keep prices low for long enough, you get rid of those who are high marginal-cost producers, whether it’s shale gas and oil, or Russia, or Venezuela, you name it. Secondly, you commit to your fixed investment schedule and continue to increase capacity. That’s going to lead to everybody else to underinvest in increasing capacity. In the short term, you have lower oil prices, but in the medium term you’ve flushed out your competition … you take the pain for the next 12 to 18 months, but the result is higher prices and market share down the road.”

    • Watcher says:

      “Predatory pricing”. Imagine that. Supply and demand is not determinant in an environment where that phrase gets invented.

      You have the goods. You price it how you please, no matter how much or how little of it is in demand.

      Price it too high and no one places an order? Shrug and note it will be there longer for your own citizens.

      Price it too high and drive everyone else out of the supplier business? They can print money and stay in the business if they want to reveal the loss of normalcy narrative and how meaningless their currency is

      It’s genius.

      • Watcher says:

        Err 2nd one is price it too low.

        • Jef says:

          Think Amazon?

          • Watcher says:

            Alibaba has pockets deep enough.

            But that’s not thinking in the right context. It’s not about money you have in reserve. It’s about product you have in reserve.

            And product that civilization completely depends on.

            So no. Not like Amazon.

    • The Saudis don’t have the oil reserves to flush out the competition. They are only trying to hang on to their share of the market.

  29. nNgass says:

    http://deutsche-wirtschafts-nachrichten.de/2015/01/31/wegen-oelpreis-sturz-us-finanzmarkt-verliert-390-milliarden-dollar/

    Translated by Google translator from German into English. (Not so bad I must say. Just a few corrections)
    Because oil price crash US financial market loses $ 390 billion.

    In recent years US investors have invested $ 1.4 trillion in the oil and gas industry. Due to the oil price decline since June 2014 they have suffered 390 billion dollars in losses.
    76 companies that are listed on the Bloomberg Intelligence North America Exploration & Production Index have suffered losses of 353 billion since June 2014. In the high-yield bond energy market loss is 40 billion dollars. These bonds are issued by companies in the slate industry.
    In the past five years, the money that has flowed into the global oil and gas industry comes from different sources. $286 billion were in joint ventures, spin-offs and equity investments. $353 billion were collected through IPOs and stock sales. $786 billion were bank loans and bonds. Hence, US banks fear their loans will not be repaid since the credit default risk is high.

    I say that the banks should not fear anything since Continental Resources Inc., the largest leaseholder in North Dakota’s Bakken shale formation, can weather low oil prices “forever,” the company’s chief executive officer, Harold Hamm, said.

    • Watcher says:

      One wonders how many wells-to-be-drilled are profitable at these prices — and prices that STAY at these prices, or maybe decline. Well, let’s not be extreme. We’ll say they rise. $1/barrel.

      One suspects . . . nearly zero such wells. Which is what lenders can expect their payback odds to be.

      Time to pull the plug. You can get 3% from Verizon dividends. Better than losing all your principal.

    • That translation refers to slate. Europeans have really quaint ideas about these rocks. Here in Spain some newspapers use the word “esquisto” (schist). The problem arises because they are using Google translate.

  30. Longtimber says:

    http://www.bloomberg.com/news/articles/2015-01-30/chevron-profits-fall-to-lowest-since-2009-as-oil-prices-collapse
    “Chevron doesn’t have quite the flexibility of some other companies to cut spending in the near term because they are still finishing some mega-projects,” said Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis. “Beyond 2015, their flexibility will improve.”
    “Also Friday, Chevron said it was abandoning natural gas exploration in Poland’s shale formations, joining at least four other international energy producers, including Exxon Mobil Corp., that quit the nation because of disappointing results. The departure deals another blow to Poland’s ambition to join the shale revolution and help free itself and its central and eastern European neighbors from dependency on Russian gas supplies.”
    Perhaps a factor in Obama’s attempts to cool downAmerican-Russian relations?

  31. Jeffrey J. Brown says:

    An interesting October, 2014 article on the topic of condensate:

    U.S. oil industry’s billion-dollar question: What is condensate?

    http://marcellus.com/news/id/109294/u-s-oil-industrys-billion-dollar-question-condensate/

    The Energy Information Administration (EIA) is now trying to remove that uncertainty by defining condensate and quantifying its output.

    “We hope to have this sorted out so that policymakers will know what the numbers are,” EIA’s chief Adam Sieminski said late last month in New York.

    The agency, the independent statistics branch of the Department of Energy, aims to launch by mid-2015 a new survey that would capture the quality of oil from each well.

    It also held a closed-door “Condensate Workshop” for officials from several agencies and energy experts last Friday, one of its first efforts to produce a firm definition, according to two participants.

    U.S. export regulators may wait for such a definition before they issue any more rulings on exports of “processed” condensate, the attendees said. The first two rulings rattled the industry earlier this year.

    The term refers broadly to any type of oil that “condenses” into a liquid after being freed from high-pressure wells, where it often lurks in gas form, or separated from gas.

    But once it becomes a liquid, there is no agreed way to tell condensate from ordinary crude. Most state regulators do not even measure it; those that do, only measure gas-related condensate, not that from the hydraulically fractured oil wells.

    Most industry insiders expect the definition to revolve around API gravity, a standard measure of density with higher readings produced by lighter grades. Condensate is the lightest of light.

    However, deciding where to draw that line is likely to be a contentious process. . . .

    Available data is more misleading than helpful, probably dramatically understating condensate production.

    For example, the Texas Railroad Commission, which oversees the Eagle Ford and Permian basins that account for most condensate output, publishes monthly production data, but only counts condensate that comes from natural gas wells.

    Most states, including North Dakota, do not report it at all.

    • Watcher says:

      Well on our way to redefining oil even more so than has already been done.

      I don’t see how, chemically, condensate can be much different than NGL for the same API rating.

      One thing would seem sure, the 45 number will be under attack in general.

      • Toolpush says:

        Watcher,

        You do realize NGL are gaseous at room temperature, whereas condensate by definition is a liquid. NGLs contain, Ethane bp -88deg C. Propane bp -42 deg C, Butane bp 0 deg C and there isomers.
        Condensates are Pentane bp 36 deg C and above. Of course some of the lighter fractions can be dissolved in condensate, which results in higher vapour pressures as the Bakken producers have discovered to there detriment.
        The stabilization process that the Bakken processors are now required to use, will be extracting these NGLs out of the Bakken oil/condensate.
        If the definition for Condensate sets a high hurdle, the US “oil” production may take a massive dive.

        • Jeffrey J. Brown says:

          Of course, the common connection between condensate and NGL is that they are both byproducts of natural gas production (mostly from gas wells, and note that according to the above article, the RRC only counts condensate that is associated with gas wells).

          The EIA shows that global Crude + Condensate (C+C) increased from 74.3 mbpd in 12/05 to 76.6 mbpd in 12/13, an increase of 2.3 mbpd.   What we don’t know are the respective global condensate to C+C ratios for 12/05 and 12/13.  

          What we do know is if we take the (OPEC, EIA and RRC) data bases at face value, the combined condensate production from Texas and OPEC, which accounted for 45% of global C+C production in 12/13, accounted for 1.1 mbpd (48%) of the reported 2.3 mbpd increase in global C+C production from 12/05 to 12/13.   Texas alone, which accounted for 3.5% of global C+C production in 12/13, accounted for 11.7% of the increase in global C+C production from 12/05 to 12/13.   
           
          The combined rate of increase in Texas + OPEC condensate production from 12/05 to 12/13 was 7.4%/year, versus a 0.5%/year rate of increase in combined C+C production.  Therefore, a sampling of global production, accounting for 45% of global production in late 2013, showed that their rate of increase in condensate production was 15 times the rate of increase in combined Crude + Condensate production (if we take the data bases at face value). 

          I would argue that there may be no more important issue facing the world economy than the probability that despite annual Brent crude oil prices averaging $110 for 2011 to 2013, versus $55 in 2005, we have–in all likelihood–not seen a material increase in global crude oil production (45 and lower API gravity crude oil) since 2005. 

          Even if Cornucopians admit that there has been little or no increase in actual global crude oil production (45 and lower API gravity crude oil), most Cornucopians would argue that substitution–e.g., NGL, condensate and biofuels–will save us.  But that has not been the key argument. The key argument has been that there is no possibility of any kind of peak in sight, for at least decades to come. 

          In regard to the focus on global C+C data, as a proxy for global crude oil production,  I’m reminded of the old joke about a man who was walking in circles below a street light late at night, trying to find his car keys.  He lost his keys down the street, but the light was better under the street light. 

        • Jeffrey J. Brown says:

          Note that EIA/BP data show a 22% to 23% increase in global annual natural gas and NGL production in eight years (2005 to 2013), versus a 3% increase in global annual crude + condensate production.

          As noted above, crude is not a byproduct of natural gas production, but condensate is. So, why the gap between global gas/NGL production and C+C production? What changed after 2005, versus 2002 to 2005?

          • Watcher says:

            Actually Ron has this right. If it doesn’t push freight of whatever kind, it’s not a hydrocarbon of significance. This stuff isn’t “fuel” for trucks or ships or jets.

            Electricity stops, even if you have nat gas to spin the turbines, if you can’t get spare ball bearings to replace the ones that burn out.

            • Old farmer mac says:

              I sort of doubt there will ever be a significant shortage of parts to keep the grid up – or liquid fuel to run equipment to keep it maintained – barring a catastrophic fast collapse of the overall economy. Not within the next few decades at least.

              The doomer element seems absolutely determined to BLIND itself to society’s ability to take SOME useful actions in the face of a problem or a crisis.

              It doesn’t take very many trucks and cranes etc to maintain the grid and we are NOT going to SIMPLY RUN OUT OF OIL for the foreseeable future.

              There will be SOME oil available for at least as far out as the eye can see and ENOUGH of it will be set aside to maintain critical infrastructure and services such as delivery of food from farm to store, water and sewer, etc.

              Industry needs a lot of oil it is true – so long as industry operates the way it does today.

              But as oil gets to be a bigger problem industry will use less and less oil and start using oil substitutes such as synthetic diesel made from coal and natural gas.

              Except for actual digging in the dirt mining operations and hauling stuff from place to place industry actually doesn’t run on oil anyway. Industry runs on natural gas, coal, hydro and nuclear plus a little wind and solar.. It will continue to run MOSTLY on coal until we either run out of coal or die off. Die off will come first and it will be greatly ENHANCED by global warming.

              Railroads are going to come back. Keeping stocks of spares on hand as opposed to ordering spares as needed for overnight delivery is going to come back. I live far enough from town that it is far better for me to keep a thousand dollars worth of nuts and bolts and other small generic hardware items on hand than it is to drop what I am doing and go to town to get something- and I live only twenty minutes from town.

              The maintenance department at the nearby furniture factory has nearly every part on hand needed to fix nearly anything in the factory that is apt to break. It is far far cheaper to keep this stuff on hand than it is to lose hours or days waiting for delivery even if it goes on a truck or plane within minutes of being ordered.

              We lived without ”just in time” before it became possible and we can live without it again.

              Back in the thirties ”UNCLE CHRIS” – a fat jolly old fellow I knew as a child – used to make a regular run to town with his truck and pick up people all along the way for a dime.They would be waiting for him along side the road just like a regularly scheduled bus.

              There was also an actual BUS that ran on the dirt road from within a mile of our house to town every day at six am and three pm which took people to work and brought them home again.

              And at least one person related to me WALKED over twenty miles round trip to town and back on a regular basis to a sweatshop job in a furniture plant. This made his day about thirteen or fourteen hours of steady humping -eight on his machine and the rest ” commuting”. He worked out a deal with my maternal grandfather to look after his farm work hour for hour including ” commuting” for half his actual wage after taxes which were trivial at that time.

              Fuel will be available for critical needs but folks who are in the habit of driving three ton trucks to fetch a six pack are going to have to change their ways.Leviathan will help them out by refusing to register their vehicle for highway use unless it is needed for a specific commercial purpose and confiscate it if the owner is caught using it to fetch beer.

              How a person with a brain can possibly fail to understand that government has the power to do something as simple as ration fuel is beyond me.

              Government has the power to enslave a million young men- pry them loose from sex with their hot young wives at the time when the hormones are raging- and put guns in their hands and ship them to the other side of the world to kill people in order to maintain access to oil .

              I have yet to meet any body who does not recognize that government has this power.Yet for some reason lots of people believe that same government is incapable of organizing and administering an oil rationing program. (The fact that such a program will take a little while to organize and implement is NOT evidence that it can’t be done.)

              Peak oil is not going to be the end of the world.

              But overshoot is going to mean die off for a substantial portion of the human race and peak oil is a key factor in overshoot.

          • Global gas production increased. Producers tend to target liquids rich gas reservoirs if prices are high.

            Another factor is the Eagle Ford. I understand the reservoir targets were increasingly gas condensate as gas prices fell and oil prices increased.

            Most STABILIZED condensates can be considered to be a light oil. They are very nice refinery feedstock, and will yield a lot of gasoline and diesel. The key word is stabilized. Some operators keep a mix of condensate and NGL under pressure and sell it by pipeline. This condensate is inflated. And we really shouldn’t be using an NGL made up of ethane propane and butane as “oil”. Some NGL streams are allowed to carry pentane, or natural gasoline, for tax reasons. But I think that’s cheating.

    • shallow sand says:

      Oil quality from each of the over one million wells in the US? That will be a lot of data.

      OTOH, all of our run statement have the gravity printed on it. Probably not too difficult for all the crude purchasers to provide this to EIA.

      • shallow sand says:

        Tried to find info on number of wells in US.

        Last thing I could find from EIA was in 2009.

        Oil wells. 363,459. Producing 15 bbl day or less 310,552. Avg per well 12.9 bbl per day. Avg gas per oil well 12.7 mcf per day.

        Gas wells. 461,388. Producing 90 mcf or less 338,058. Avg per well 148.5 mcf per day. Avg oil per day per gas well 1.8.

        Would be interested to see updated information on this. Either I cannot find it, or EIA quit keeping track of it.

        • Watcher says:

          From a military standpoint, all those wells producing nearly nothing makes them poor targets. Gathering places would be superior. It’s a lot like how the Iranians spread their nuclear program out widely. No target or handful of targets can do serious damage.

          The superior targets are clearly refineries.

          England’s biggest 330K bpd. The Netherlands have two 400K bpd refineries. Not that big a country so that’s 800K packed together. Going thru the list, those are the largest, though there is a 300K bpd and a 360K bpd not just in Belgium, but both in Antwerp.

          The US Gulf complex is really vulnerable, in range of not very challenging SLBM launches from Venezuelan waters.

          We’ve gone through the inevitability of all this before. Just didn’t realize Europe had packed theirs together as well.

          • Why would anybody launch a missile from venezuelan waters?

            I would also caution not to be writing information about potential terrorism targets. There are quite a few lone wolf types running loose, and you don’t do anybody a favor writing this material.

            • Old farmer mac says:

              Amen and thank Sky Daddy in all his various incarnations that terrorists are so far underachievers except for the nine eleven crew.

              Anybody with a brain and the desire to do so could take out a good sized town or small city with half a dozen helpers and stuff available at any convenience store..And they would have a pretty good chance of getting away.

              Every engineer and every mechanical tradesman or oil field pro who comments here regularly could figure out how in a few hours.IF anybody got stuck then he could look it up in old military training manuals readily available in second hand book stores and at yard sales.

              Even the worst sort of under achievers can generally read a little and the locations of such things as oil refineries cannot be kept secret but as a general thing I agree – it is best not to speculate much about this sort of thing in an open forum. One thing we aren’t short of is idiots who might decide to go for the virgins.

              • Lars says:

                I have wondered for a while why terrorists don`t target Western infrastructure like the grid, high voltage transformers and the like or refineries for that matter. A transformer can take months to replace or repair and a lot of them are out in the open just fenced in. Even though a single attack wouldn`t turn out to be extremely successful it would open up a new “terror frontier” in the fight against the West and force us to spend a lot of resources to guard our facilities better. Economic warfare is almost as good as anything else. Take the fruitless wars in Afghanistan and Iraq as an example of extremely costly wars, and how much has 9/11 cost US taxpayers really?

    • Condensate only comes from wells which produce natural gas AND condensate. The Texas definition is better. Maybe we need a brief review:

      Hydrocarbons are found as multi component mixtures. These range from methane CH4 to very heavy asphaltines which have 200 carbon atoms. The reservoir fluid composition, pressure, and temperature, cause these fluids to be found as a liquid (oil), or a gas phase (gas). In a few cases the fluid is in supercritical condition. In some cases the hydrocarbon column is very tall and the fluid phase changes as we move vertically.

      The fluids in the oil reservoirs include gas dissolved in the liquid. That is, as the pressure is reduced these liquids “boil” and a gas phase evolves. The gas phase in turn is a multi component mixture. In some cases the liquids arrive at the surface at high temperature (I’ve personally seen wells flow at 100+ degrees C). This means in some cases the “gas” includes heavier molecules which condense from the gas phase when the fluids are cooled. The extremely high temperatures aren’t a requisite, but in general well fluids are hotter than ambient conditions.

      Thus we can have a bona fide condensate which condenses from fluids originating in a gas phase reservoir. And we can have a condensate which condenses from the solution gas evolving from the fluids in a liquid phase reservoir. But this second class of condensate is the result of fluid handling equipment design.

      The classical fluid handling system cools down wellhead fluids to avoid enriching the associated gas, treats the associated gas to recover the stable liquids which are returned to the oil tanks, and recover the NGL, which have to be kept under pressure and/or cold conditions.

      The way these fluids go from liquid to gas to liquid, how they are separated and stabilized is the result of facilities design and how they are operated. This means two facilities handling identical well fluids can deliver different volumes of liquids, NGL, and gas. And their compositions will be different.

      Because the government is a bureaucracy and they are mostly concerned over exemptions for exports, I would call exportable anything that has been stabilized so it can be loaded in a crude oil carrier and has more than 45 degrees API. I would also allow Propane and butane exports as LPG, and ethane in whichever form it can be handled safely.

  32. Boomer II says:

    Okay, so I am not responding directly under the latest troll post. But I hope it is deleted or at least the poster is blocked.

  33. Carl Wilson says:

    First, I’ve a question. One hears a lot about how Saudi Arabia is such a low cost producer. But what is their cost and how do we know? Their production seems to be holding up better than many at old TOD predicted. Seems like they have great big oil fields that have been pumping a long time. What extreme measures might they be taken (at what cost) to keep production levels above expectation?
    Second. From the old TOD I get many a lead to strange ideas so (despite the likelihood of any of you taking this seriously), I’ll pass along this one. “2015 could be year of LENR breakout and legitimacy. Cold Fusion vindication possible ” From the nextbigfuture Web site.
    I’ve held a pretty steady (if evolving) view of the world since “Limits of Growth” days, But the resurrection of “cold fusion” has (for me) changed the picture. There’s something that’s been kicking around called the E-Cat by Andrea Rossi. Sometime back I heard that there would be something coming out (which is now referred to as the Lagano test). I said to myself – “Another Rossi no-show”. On the contrary. Since I’m not used to having my expectations so rudely refuted, I’ve been digging hard ever since.

    • Watcher says:

      The Saudis flow oil. Probably a lot of water drive is going on there. Not probably. For sure a lot of water drive is going on there. But there are a lot of wells that just flow because they happen to have amazing permeability in their rock.

      More importantly, they produce far more than they need. So they can flow oil at a “loss” if it will defeat their enemies because a loss is not a loss if your food transport and food acquisition works to sufficiency for your citizens. So you lose money? Money isn’t calories. Just borrow more of it, buy food with it and then maybe negotiate maturity extensions or just forget to make payments. There will be someone willing to trade food for oil.

      • Watcher says:

        Oh, and save yourself some trouble on cold fusion. Go read about methanol in intergalactic space. It is more interesting.

    • Old farmer mac says:

      Cold fusion is an interesting laboratory phenomenon that probably does exist. As such it is something interesting to researchers in physics and might conceivably be used for some practical purpose at some future time.

      But as a practical matter there is just about a zero chance cold fusion can be used to generate energy in any useful fashion within the lifetime of anybody reading this forum. There is only a very very slim chance any of us here today will ever turn on a light powered by hot fusion.

      This comment summarizes what I have read about it within the last year or two at reputable web sites. There is no clear proof that it even exists according to a lot of reputable people in the field but they readily admit proving a negative is impossible.

  34. Ronald Walter says:

    Subsurface ice on Mars, evidence of glaciation on Mars:

    http://www.ifa.hawaii.edu/~norb1/Papers/2012-iceages2.pdf

    Nothing new under the sun.

  35. Jeffrey J. Brown says:

    Some comments I sent out to some industry partners last week (in this missive, I used the industry standard of MM for million).

    Low Oil and Gas Prices Forevermore? Maybe Not

    The Supply Side

    Global Crude Oil Production Probably Peaked in 2005. Based on some plausible estimates for global condensate production, it’s quite likely that actual global crude oil production (45 and lower API gravity crude oil) has not materially exceeded the 2005 annual rate, even as annual Brent crude oil prices averaged $110 for 2011 to 2013 (and averaged about $100 for 2014). In other words, global crude oil production probably peaked in 2005, while global natural gas production and associated liquids–condensate and natural gas liquids–have so far continued to increase.

    High Decline Rate in Existing Global Oil Production. The IEA puts the underlying gross decline rate in existing oil wells worldwide at about 9%/year. At a 9%/year gross decline rate, to just maintain existing oil production for 11 years, the global industry would have to put on line the productive equivalent of every currently producing oil well in the world, over the next 11 years.

    High Decline Rate in Existing US Natural Gas Production. Citi Research puts the underlying gross decline rate in existing gas production in the US at about 24%/year. At a 24%/year gross decline rate, in order to just maintain existing US gas production for four years, the US would have to put on line the productive equivalent of about 100% of current gas production over the next four years. As an example of why this is a reasonable estimate, the observed year over year decline in Louisiana’s marketed natural gas production from 2012 to 2013 was 20%; this was the net decline, after new wells were added. The gross decline rate from existing Louisiana wells in 2012 would be even higher.

    High Decline Rate in Existing US Crude + Condensate (C+C) Production. Given the high and rising percentage of US oil production coming from high decline rate tight/shale plays, a plausible estimate is that the underlying gross decline rate from existing US oil wells may be on the order of about 20%/year, which would be consistent with the Citi Research gas estimate. In any case, at a 20%/year gross decline rate, in order to just maintain existing US oil production for five years, the US would have to put on line the productive equivalent of about 100% of current C+C production over the next five years.

    Global Net Exports of Oil (GNE) Probably Peaked in 2005. GNE, defined as combined net exports from the (2005) Top 33 net oil exporters, have been below the 2005 annual rate of 46 MMBPD (million barrels per day, total petroleum liquids + other liquids, EIA data) for eight straight years. GNE fell to 43 MMBPD in 2013.

    The Demand Side

    China & India (Chindia) Consuming an Increasing Share of GNE. The volume of GNE available to importers other than China & India fell from 41 MMBPD in 2005 to 34 MMBPD in 2013.

    Surge in Chinese Oil Imports. Credit Suisse reports that Chinese oil imports were up 10% overall for 2014, with late 2014 oil imports surging to a 13% year over year increase, from December, 2013 to December, 2014.

    Possibly Temporary Decline in US Net Oil Imports Contributed to Oil Price Decline. Based on four week running average data, US overall net oil imports fell from 6.2 MMBPD in the week ending 6/13 to 4.7 MMBPD in the week ending 11/07, a decline of 1.5 MMBPD in the US demand for net imports of oil over a five month period, putting considerable downward pressure on oil prices, However, US net imports have recently rebounded, hitting 5.9 MMBPD in early January, and most recently US net oil imports were at 5.7 MMBPD in the week ending 1/23 (all four week running average data). A significant increase in US liquids consumption has probably contributed to a rebound in net oil imports. The most recent EIA data show that US liquids consumption is up by almost one MMBPD from the same time a year ago.

    Record Global & US Car Sales in 2014. US and global light vehicles sales hit record levels in 2014, and a plausible estimate is that the net increase in global light vehicles is running at about one million new vehicles per week (net being new vehicle sales less vehicles scrapped). In contrast, during the 2008 to 2009 oil price decline, global vehicle sales fell from 2007 to 2009, before rebounding in 2010.

  36. Ronald Walter says:

    http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/pdf/20150124.pdf

    1000 plus more carloads of coal, 346 fewer carloads of petroleum, down 3.1 percent. Reduce the inventory of oil pumped out of the ground and sell less of it, prices will gain in the future. Looks like a strategy there somewhere, just a intuition, hunch.

    About 1900 more grain carloads than in the same ending week of 2014. Grain buyers out there buying grain at prices that are lower.

    http://www.nasdaq.com/markets/corn.aspx?timeframe=4y

    Lower grain prices increase demand close to twenty percent. High prices for grain, that eight dollar corn, creates a grain glut. Farmers can just sell at depressed prices to decrease the glut to help a price increase as grain in the bin declines due to sales and shipping. A market. Don’t sell all of it, just some of it, voila, price increase.

    High oil prices created an oil glut.

    Kind of like milk dumping. Better to make cheese. Refine the milk to cheese.

    Keep pumping the oil, gotta milk the cow to get the milk.

  37. coffeeguyzz says:

    Carl Wilson, I just directed a LENR question to Fernando on this thread a few hours ago.
    The fact that laboratories such as SRI, SPAWAR, NASA and others find ‘anomalous’ readings in their cold-fusion type experiments … companies like Mitsubishi and Toyota, likewise … The Swiss company STMicroelectronics (50,000 employees/$8 billion annual revenue filed for a US patent in Feb., 2013 for their ‘cold fusion’ process … the fact that MIT is offering a course in this field … the fact that Rossi’s apparatus was recently tested by experienced observers – some of whom were originally skeptics – and found to actually emit far more heat than the input would allow as per conventional physics … all lead me to conclude that sumptin’s up.
    I have superficially followed this field the last few years and find Brillouin Energy particularly intriguing as their chief fuzzy head – a guy by the name of Godes – seems to be the only one with an explanation of what is occurring. As such, his outfit seems to be the only one to consistently, repeatably conduct demonstrations.
    Fascinating stuff.

    • notanoilman says:

      The Rossi eCat test has been heavily faulted as it did not measure total energy input. There was a distinct ‘cheat path’ through the ground connection. The only “sumptin’s up” is Rossi’s history of fraud.

      NAOM

  38. rjs says:

    according the 4th quarter GDP report, US consumption of gasoline and other energy products increased at a 12.3% annual rate…i explain here: http://www.economicpopulist.org/content/real-gdp-grows-26-rate-4th-quarter-deflator-turns-negative-5675

  39. Pingback: Turning point for oil, and us at Forget the Rest

  40. daniel says:

    would it be possible to have a new post with updated numbers. if the us really imported nearly 8 mm bbl/day then this would be a huge chqnge to tbe trend.

    • Daniel, that’s exactly what I try to do. Every time there is an update to the OPEC numbers I have a post. Every time there is a Bakken update I publish a new post. I am waiting on the Texas numbers right now. The Petroleum Supply Monthly will be out the 3oth of March with US production and the production for each individual state for January. I will have a new post with those numbers. But you can check the December numbers right now just by clicking on the above link. I published those numbers, or the ones with big changes, when they were published in February.

      I cannot get the production numbers before they are published by some agency. But as quick as I get them I publish them.

      Or perhaps these are the numbers you are looking for. The data is in thousand barrels per day:

      Crude Oil Imports			Net Protroleum Imports
      				
      1/16/15	6,830			5,608
      1/23/15	6,920			5,749
      1/30/15	6,885			5,371
      2/6/15	6,784			5,106
      2/13/15	6,603			4,955
      2/20/15	6,801			5,136
      2/27/15	6,890			4,968
      3/6/15	6,315			3,917
      3/13/15	7,018			5,303
      
      
      • daniel says:

        really appreciate all your work. Very fascinating what is going on at the moment – should be quite a show later this year

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