JODI, the EIA and Their Data

There has been very little new data to report lately. The JODI, Joint Organizations Data Initiative, data for March came out a few days ago. JODI is very good as far as the data it reports goes. The problem is there is a lot of data they just don’t report. If a country does not report their production for a given month then JODI just leaves it blank. And some countries they can’t seem to get any data from, so JODI just gives them zero for every month. For those countries I just substitute EIA numbers.

As far as OPEC goes JODI is very political, reporting the inflated numbers that Iran and Venezuela report. I use instead the EIA data for those two countries.  Anyway here is what I have from JODI. The Data is in kb/d, last data point March 2014:

JODI World Total

But for a few countries JODI is a pretty good data source. Russia is a good example.

JODI Russia

JODI has Russia peaking, so far, in November at 10,127 kb/d and now about 100 kb/d below that point. Analysis have, for years, been expecting Russian production to decline but new fields in Siberia have kept inching up a little bit each year. But with over 60% of their production still coming from Western Siberia’s giant, largely depleted, fields it looks like that long overdue decline may have finally arrived.

This from 5 years ago: Russian Oil and Gas Industry Surprises Analysts

There are plenty of projects in Russia, both, new projects and existing brownfield projects. Russia is a very mature producer. If you exclude all the drilling activity taking place every year, then Russian organic decline in production is close to 19%. To compensate for that organic decline, Russia drills somewhere between 5,000 and 6,000 wells every year.

5,000 to 6,000 wells is a lot of wells. Most of that was just infill drilling. But they did bring on line their last giant in 2009, Vankor. Vankor is almost at full production of 500 kb/d. But with very little new oil coming down the pike, and infill drilling in their old giants beginning to peter out, it looks like the long expected decline in Russian oil production has finally arrived.

Jodi Non-OPEC

Here I have the EIA Non-OPEC C+C production versus JODI Non-OPEC production. Part of the huge difference between the two can be explained by a few very small producers that do not report to JODI. But only half a million bp/d or less can be explained because of that discrepancy. But…. this discrepancy is getting worse. The last data point here is December 2013:


Through 2007 the difference was averaging about 1,500 kb/d but since it has increased to around 2,400 kb/d. I don’t know if this is the EIA over reporting or Jodi under reporting.

But the JODI data is two to three months ahead of the EIA data. The EIA data may be out next week with the January numbers. Then again those numbers may not be out next week. But one can get an idea of what some countries will do in the next three months. The last data point this and the next chart is March 2014.

JODI Canada

The EIA has Canada up 133 kb/d in November and up another 354 kb/d in December. But JODI shows no such increase. Jodi shows Canadan production jumping in February then dropping back to even lower levels in March. Apparently there are some tar sands production that JODI does not count.

JODI China

China appears to be on a plateau, not up and not down. But they are 110 kb/d below their peak in November of 2010.

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102 Responses to JODI, the EIA and Their Data

  1. canabuck says:


    I think 100 kb/day decline in Russia is far too little to see any decline trend. I would say that 300 – 500 kb/day for several months would be the first indication of any decline.

    • Of course it is too little to see any trend. I wasn’t going by that but instead reports I have seen over the last couple of years. Analysts have been expecting Russian decline for years but Russia has always fooled them. But it can be explained by 5 to 6 thousand new wells of infill drilling and Vankor coming on line.

      One does not have to wait for a downward trend to predict the peak. No definite trend has yet been set but nevertheless I am predicting that Russia is currently at peak.

      • Watcher says:

        Of course, if this is gov’t reported data, Russia has reason to report declines.

        It can influence the price upward.

      • canabuck says:

        I agree, that is a lot of new wells.
        Isn’t some infill drilling required as an oil field ages due to some wells watering-out?
        But if their active wells increase over time, then they are just sticking more straws in the milk shake, so to speak.
        On the other hand, one cannot dismiss some disruptive technology coming along, like nano particles in EOR, that will give the TRR and ERR numbers a boost.

        • Anon says:

          It is more straws. The Google map satellite of Samotlor is stunning this way. There are drill sites every 200 feet in places, no more than 500 in most.

    • Anon says:

      When Russia goes down, they will go down big and they will go down fast. They’ve only been sustaining output by cannibalizing years of remaining productive life at their Soviet-era Western Siberia fields. Once that infill is done, it’s done. There’s nothing significant coming online on the horizon; their Arctic and tight oil ideas are in the survey stage and there are serious questions of economic viability on both.

      It’s certainly worth watching their trend, but the end will be obvious.

      • Jeffrey J. Brown says:

        In my opinion, based on the Six Country Case History*, a declining ECI Ratio (Ratio of production to consumption) in a net oil exporting country, despite rising production, is an early warning sign of problems ahead for net oil exports.

        For the Six Country Case History, as their production rose by 2% from 1995 to 1999, they had already shipped 54% of post-1995 CNE (Cumulative Net Exports).

        *The major net oil exporters (100,000 bpd or more of net exports, total petroleum liquids) that hit or approached zero net exports from 1980 to 2010, excluding China.

      • Jeffrey J. Brown says:

        Russian net oil exports (so far, through 2012) stopped increasing in 2007, when they hit 7.2 mbpd (total petroleum liquids + other liquids, EIA). For 2008 to 2012 inclusive, Russian net exports were at or below 7.2 mbpd. Their ECI Ratio fell from 3.7 in 2007 to 3.3 in 2012. At an ECI Ratio of 1.0, a country is no longer a net oil exporter.

        Based on a simple mathematical model and based on the empirical Six Country Case History, a declining ECI ratio correlates with a rapid rate of depletion in remaining CNE (Cumulative Net Exports).

        Based on the 2007 to 2012 rate of decline in the Russian ECI ratio, I estimate that post-2007 Russian CNE are about 72 Gb (billion barrels), with 13 Gb having been shipped from 2008 to 2012 inclusive, implying that Russia may have shipped about 18% of post-2007 CNE in only five years (through 2012). A similar approach to estimating post-1995 CNE for the Six Country Case History (based on the initial five to seven year rate of decline in their ECI Ratio) was too optimistic.

    • Perk Earl says:

      “I think 100 kb/day decline in Russia is far too little to see any decline trend.”

      May be too soon to call it a peak, but 5-6k new wells drilled annually, many of which are infield is a ‘tell’ they are desperately trying to keep flow rates at current levels at the expense of very high decline rates. A sign peak is either imminent or not far off.

      Ron, it would be great to see an article sometime indicating all the giant old fields with infield drilling. Maybe some updated aerial pics (if available) to indicate what areas have been drilled with areas are yet to be drilled, for UAE, Ghawar, Kuwait, Russia, etc. Not trying to add to your list of projects but would be potentially illuminating.

    • Anon says:

      China is trying to build a SPR like the US has. Right now they are woefully short of stocks for any disruption. Plus there is no way they can flog their domestic fields any harder, so they might as well grab while the getting is good. It’s not like world prices are likely to get much cheaper with legacy giant conventional production being replaced by tight oil and tar sands.

      If there was any way possible for the Chinese to get more production out of their reserves, you would see it on that graph. Talk about a country with no constraints beyond technology and how much is in the ground…

    • canabuck says:

      The SPR for China is supposed to be 684 Mbbl.
      And they plan to add 204 Mbbl by 2020.

      If they are really buying during the oil dips, they could add 30 – 40 Mbbl each month at this rate.

      • Old farmer mac says:

        I think the Chinese leadership is sufficiently competent to operate their existing oil fields according to accepted ” best practices” in terms of getting the most oil out of them over the long term.

        The Chinese have almost always made their decisions based on the long term in comparison to other countries. There are some things to be said for a technically competent authoritarian government.

        Any country that imports oil that has competent leadership should be building a substantial SPR. History ain’t over. There will be more wars.

        Furthermore rust, depletion ( courtesy of Matt Simmons ) and inflation (courtesy of OFM) never sleep.

        There is a time coming when the enormous store of dollars the Chinese are holding will be essentially worthless.

        All fiat currencies will eventually become worthless, not necessarily at the same moment of course.The question is not if but rather when.

        The dollar is still be biggest and the meanest dog on the planet but it is showing ominous signs of old age and its days are probably numbered.

        I have long believed that the Chinese are totally aware of these facts and that they take every opportunity to get rid of as many dollars as they can- without causing a panic in the banking and finance sectors– by buying up hard natural resources such as copper and steel scrap on price dips.

        The price of these commodities can only be expected to go up barring economic collapse- in which case electrons in an electronic account will be worth very little indeed ANYWAY.

        A mountain of steel and copper is another thing altogether considering depletion of ores in the ground and the increasing amount of energy necessary to mine and process a ton of ore to finally obtain a few hundred pounds of steel or a few paltry pounds of copper.

        I have been doing the same basic thing for a couple of decades as an individual and every once in a while I go into my scrap pile- err , my strategic reserve, I mean- and fetch out a piece of angle iron or hot rolled plate that I paid a nickel or a dime a pound for at the local scrap yard.

        It is not quite as handy as new of course but if I find a piece that is suitable it means something I bought for maybe five bucks a few year ago saves me spending forty or fifty bucks today.

        The only reason I can see to hold onto a substantial amount of cash is that it might be handy as bug out funds or to take advantage of an opportunity to buy some hard assets for a relative song in the event of a panic.Since I have never been able to accumulate any substantial amount I buy whatever non perishable hard assets I can in small quantities that will definitely come in handy some day, ranging from nuts and bolts to shotgun ammo to bags of ten ten ten.The prices of all these things have gone up at least as fast as the stock market on average for the last decade or two and far faster than interest on money in the bank accumulates.

        • canabuck says:

          You could be right there.
          I have heard that the leadership of china is made up of 9 men.
          And all of them are engineers.

          What a great way to have an authoritarian leadership that plans for the future.
          (However, the downside is a focus on economic growth at all costs. ie. the environment)

          • Old farmer mac says:

            I am a sort of rule of thumb amateur engineer but not a real one myself. I do know a few real ones though and although they tend to think they know everything that matters and can solve any problem – given a free hand- I don’t think engineers as a group necessarily buy into the constant growth forever model- that is the province of economists and engineers tend to think of people in the ” soft sciences” as intellectually handicapped by ignorance and arrogance.

            But there is always a bigger box than the one we are living and working in if one can envision that box.In my own line of work for instance it is almost impossible to find a real working pro who is willing to even think about the utter unsustainability of industrial agriculture and with good reason- there is simply no existing alternative to it even though it cannot last as it exists today.

            The only choice as a practical matter is to try to keep the current system up and running as long as possible and hope something comes up in the future.

            My opinion is that the Chinese leadership is savvy to the limits of growth but they nevertheless must survive and lead the country in the short term while growth – and political stability – is currently possible.

            China has had the world’s most aggressive population control policies and the worlds most aggressive renewable energy initiative after Germany and in my opinion barring a bad downturn the Chinese will soon be by far the biggest builders and users of renewable energy infrastructure.

            China is moving aggressively so far as I can tell on all fronts to lock up such resources as farmland and minerals in the ground- indicating a leadership acutely aware of future supply limitations.

            But as far as this year and this decade and the next few decades are concerned- the leadership must survive and keep the country placated in the short term. They must also consider the security implications of not being a major economic and military power.

            They are above all realists and in my estimation determined to have both major military and economic power in the short term.

            Now even if the Chinese leadership has had its own meetings in its own smoke filled rooms and has called in its own economic experts of the new sort- the kind that take nature into consideration- and have come to the conclusion that growth will not be possible too much longer- as a practical matter they will not mention this conclusion in public.

            Politicians are compelled to avoid mentioning unpleasant truths to the extent possible by the realities of their own profession.This does not mean they are unaware of these truths and in the case of an authoritarian government dominated by engineering and military type thinking and culturally based on Confucianism and the long term.

            It is reasonable to think the Chinese leadership is giving considerable thought to what things will be like in twenty years and in fifty years.They expect to be around and if not they expect their own handpicked successors and children to be around.

            In our country our leaders in government are mostly focused on the next three or four years at the upper limit and more often on the next year or two because of our frequent elections.

            • Woody says:

              OFM, growth is still possible in China if they can figure out how to suppress other countries demand.

      • Watcher says:

        “And they plan to add 204 Mbbl by 2020.

        If they are really buying during the oil dips, they could add 30 – 40 Mbbl each month at this rate.”

        Hmm, 204 mbbls in 6 yrs is 33 million barrels/year, not per month. 90K bpd. That ain’t gonna move price.

        And hard to see how $110 Brent would be thought a dip.

        It’s good to hear about their SPR, but attributing a demand spike to it and consequent oil price issues . . . nah. That sounds like CERA narrative — that all will be well as soon as this little temporary glitch passes.

          • Watcher says:

            Excellent article, but like most NYT stuff the value is in the middle rather than the reporter message.

            When one starts seeing talk of “energy” instead of “oil”, you know right away the meat of the text is heading off into never never land. NO ONE, repeat, NO ONE is going to opt for environmental concerns when that person is starving for lack of food transport or freezing for lack of heat in the winter.

            But the article does address the core realities. OPEC apparently says China is pumping 4.2 mbpd and burning north of 10, with that consumption rising explosively. Then it goes on to use gentle phrasing like:

            “While it consumed 10.1 million barrels of oil a day last year — one-ninth of the world’s total — the country produced only 4.2 million barrels a day, according to a recent OPEC report. China has had mixed results drilling offshore, and it has been slow to develop what many energy experts believe to be vast shale gas resources on land, ”

            Notice how the reporter sashayed from oil, for which there was no answer, to something that let him push some familiarity buttons?

            “In Ecuador, China has become effectively the government’s banker, providing roughly 60 percent of Ecuadorean borrowing needs in return for oil shipments. Chinese companies sell the Ecuadorean oil around the world, including to the United States. Venezuela’s state-owned oil company is repaying China for $40 billion in loans procured over the last six years with a large share of its 600,000 barrels a day in oil shipments.”

            See, that’s meat. That is what pays the piper. The inclusion of dollars in the matter is sheer convenience. It’s oil for government function financing. Pretty easy to transition that to Yuan because no banking network really has to be involved.

            It’s about oil. Oil feeds life. You will opt for oil every single time rather than starvation or hypothermia.

            • Old farmer mac says:

              ”Pretty easy to transition that to Yuan because no banking network really has to be involved.”

              As I noted up thread the dollar is still the meanest fiat dog on the planet but it is showing signs of old age.

              The yuan is an up and coming dog.

              • Woody says:

                Reason being is that China can do these kinds of deals. If it was anyone else besides maybe Russia, the US would squash a non dollar deal in a hurry. Who knows, maybe Ecuador is about ready for some more democracy?

                • Watcher says:

                  Just went thru the Ecuador entry at the EIA site. As recent as 2011, China was a non player.

                  Also Ecuador is expanding its quoted reserves as of Jan 2013. Up 14% year to 8 GB, despite pumping 500K bpd (182 million barrels on the year). So from 7 to 8 GB in one year. No idea what their exploration expenditures were.

                  Pencil reserves.

  2. Joe Clarkson says:

    Isn’t it true that the bulk of the difference between the EIA and JODI non-OPEC production is their differing treatment of Canada’s tar sands production? I believe that EIA reports everything from the tar sands as part of their C+C tally, whereas JODI does not.

    • Yes, thanks Joe. I have changed the chart to reflect the difference between what JODI and the EIA reports for Canada.

      • Mike says:

        Peculiar isn’t it. Clearly the upswing in the JODI data reflects increased tar sand production though. There isn’t any other growth in Canadian production–at least not of any large scale.

        • Are you looking at the wrong line on the chart? The upswing appears in the EIA data.

          • Mike says:

            Yes, I totally get your clarification of the last data point or two. I was wondering more about the general spread between the two over the whole series. Given the JODI data alone, I would have to guess that they are including at least some of the oil sands production, as the JODI data, excluding the last data point, has been moving up. My understanding has been that the only expanding Canadian oil production has been from the oil sands, and so JODI must be reporting some of the oil sands. No?

            • Well I don’t know, in the summer of 2013, according to this report, tar sands production was about 1 million barrels per day.


              Both SAGD and CSS are used in the Cold Lake and Peace River deposits, while SAGD is the in situ technology of choice in the Athabasca deposit. The selection is based on a number of factors, including geology. The technologies combined currently produce just over one million barrels per day.

            • KLR says:

              Indeed Canadian conventional production for 2012 was only 1.31 mb/d: Basic Statistics – Canadian Association of Petroleum Producers If that were all JODI were reporting it wouldn’t even register on Ron’s chart.

              Turns out Euan Mearns and Rembrandt Koppelaar solved this mystery for us last fall: The Oil Drum | Oil Watch: Reconciliation of JODI and EIA C+C Production Data

              The curious case of Canada

              While JODI C+C data for the vast majority of OECD countries is closely aligned with the equivalent EIA data (see above). Somewhat surprisingly this is not the case for Canada where the EIA estimates are considerably higher. Since January 2009, JODI have reported an additional category of “other” defined as “Refinery feedstocks + additives/oxygenates + other hydrocarbons” and adding this to the JODI C+C figure produces alignment with the EIA C+C.

              That article exhaustively examines the discrepancies between EIA and JODI numbers, too. Great work, fellows.

  3. B says:

    Hamm: Bakken will double production by 2020

    “I still think we will reach 2 million barrels a day,” said Harold Hamm, CEO of Continental Resources at the Williston Basin Petroleum Conference. “I don’t think that’s over the top, folks.”

    The Oklahoma-based Continental Resources is the largest leaseholder in the Bakken, and Hamm has become known for his bullish stance on the shale formation, predicting 24 billion recoverable barrels — more than double the estimates of the U.S. Geological Survey.

    But as the darling of the American energy revolution continues to grow, the industry can expect to be under careful review for another major safety event.

    One more could signal the green light to halt development, warned the billionaire oilman.

    “So many people want to stop fossil fuel use and production,” Hamm said. “They don’t have anything to take its place, but they want to stop it. We’re in the crosshairs.”

    The oil companies, Hamm said, need to operate in a safe manner and work together from the top down to make things work.

    “If we have anything, they’re going to shut us down,” he said. “We need to make it count and do everything right. We’ve seen what happened to coal. We’re next.

    Director of Mineral Resources Lynn Helms told the industry earlier Thursday to keep in mind the future impacts of oil development on North Dakota. What is being produced now, he said, will be felt for generations to come, and pleaded with the companies to use best practices for the best possible outcome down the road.

    Hamm said he had a clear vision for the Bakken’s growth when joined by CEOs from Whiting Petroleum and Oasis Petroleum. They have 20 more years of drilling, followed by decades of production.

    “We’ve got a resource life here that’s 50 to 60 years,” said Tommy Nusz of Oasis. “It’s not your father’s oil boom anymore. This is going to be part of life in North Dakota for a long time.”

    Backing that up, Whiting CEO Jim Volker said companies are recovering at a 20 percent rate and there’s an expectation the industry could reach 40 percent in 10 years.

    • Watcher says:

      This sounds a lot like a guy who has been hearing NoDak gov’t anger about flaring, and maybe rail car explosions.

      Fairly careful phrasing, too. The part about “not your father’s boom” is shaky. The boom areas of Texas are “in production” for 50 years, too. 20 barrels/day per ranch.

  4. Just another guy says:

    Some news about hostility towards journalists inquiring about Canada’s Bitumen Sand operations:

    Oh, Canada.

    • Old farmer mac says:

      People with a lot of money at stake don’t want much daylight thrown on the processes used to make it.

      If I were a footloose young man you can bet I could and would find a job on a fracking crew and smuggle out plenty of samples of the stuff used and provide it to various environmental organizations capable of having it properly analyzed.

      I expect I could do this for at least three or four years on various sites before I got caught and prosecuted or beaten to a pulp or thrown in front of a fast moving truck.

      • Watcher says:

        You think small.

        Take the samples and inform the company via an offshore shell corporation that those samples can be returned or destroyed for a modest fee.

        If you have some sort of noble purpose in mind, draining money from the company will probably accomplish it better than some envirowackos that will use it mostly for fund raising of their own, while the company claims to have gone to an environmentally friendly array of practices now and robs the enemy of any chance for a fine.

        • Old farmer mac says:

          I must disagree.

          I am personally acquainted with one environmental activist that I met thru forums such as this one( The Oil Drum to be specific) who knows how to get such samples analyzed and to get the public thoroughly riled up and get disclosure laws passed.

          There are no doubt plenty of organizations other than his own able to do so such as GreenPeace and so on.

  5. Jeffrey J. Brown says:

    Re: Occidental’s plan to spinoff California operations (interesting statistic about Venoco’s results).

    Occidental Plan to Split off California Seen as Early (October, 2013)

    Chief Executive Officer Stephen Chazen, who began talking to investors and analysts in April about the possibility of turning Occidental’s California operations into a stand-alone company, is facing skepticism as the promise of tapping one of the biggest U.S. oil reservoirs has yet to be realized. While Chazen hasn’t made any specific proposal public, shareholders including Cambiar Investors LLC and Frost Investment Advisors LLC are questioning whether more patience is needed to realize the best value from a spinoff or initial public offering. . . .

    Venoco Inc., which has 46,000 net acres in the Monterey, drilled 29 wells in the formation from 2010 to 2012 and as of June hadn’t seen any production, according to a company filing. It’s now reduced spending in the region. . . .

    Since 2010, Occidental hasn’t been able to increase production there beyond an average 1 percent in any three-month period — far below the expectations of analysts such as Bank of America Corp.’s Doug Leggate, who said in 2011 that the company could be worth $200 a share once it realized all the benefits of its California assets.

    A slow permitting process and high costs have held Occidental back from boosting production more rapidly, CEO Chazen has said. The company’s business in the state will generate free cash flow of $1 billion this year based on a $1.5 billion capital program. Occidental’s California operations can raise output by 5 to 8 percent a year while generating a rate of return higher than 20 percent, according to a company presentation in July.

    Monterey Shale Is A Bust – Negative For Occidental Spin-Off And Other Implications (May 23, 2014)

    • The EIA wrote down 96% of the estimated recoverable oil from the resource.
    • This could negatively impact the anticipated spinoff of OXY’s California operations.
    • Other companies are affected, including CHK’s acreage position and VQ’s LBO debt.
    • Could in theory negatively affect California muni bonds.

    • Watcher says:

      “The company’s business in the state will generate free cash flow of $1 billion this year based on a $1.5 billion capital program. ”

      That’s hilarious. I wonder if the reporter realized it.

      “A slow permitting process and high costs have held Occidental back from boosting production more rapidly, CEO Chazen has said. ”

      Unheard of to have a CEO say “the company has had bad performance because of bad decisions by senior management.” Chazen wasn’t going to break that mold.

      This Monterrey thing really is a killer. Even if Eagle Ford and Bakken got to a total of 4 mbpd, there is nowhere else now to get the 12 mbpd for oil independence.

  6. Allan H says:

    The JODI World C+C graph is rather telling. the first few years have a steep positive slope until ’04. From late 04 to 08 world production is plateaued then drops during the recession. From there it has a small positive slope that rises above the previous plateau period, until the present. It could easily be construed that north American fracking of continuous shale has been the primary cause for the rise, but it is much more complicated than that. A few countries are increasing output that has slightly more than compensated for falling production in a number of other countries. So it appears that overall, oil production is on the rise, albeit slowly and at a great cost. Add to this the tar sands production of synthetic fuels and the overall production is up, though not anywhere near the rate in the past.
    The major question has always been, when will overall crude production take a permanent downturn, a peak and descent as has been seen in some oil fields and countries around the world? Since there are a number of undeveloped continuous fields and deep water undeveloped fields, as well as few land based one; the true geologic peak is probably up to a decade or more away. At this time, price, the availability of capital and demand seem to be just as strong a factor in production as the geologic factors (see the drop in 2008-2009). Throw in some political turmoil and significant drops in production could occur, since the system appears to be entering it’s period of maximum effort and production.
    More significant to the near future is the availability of imports to countries and regions that do not have adequate internal production capability. Imports may slowly curtail to these regions, or they may have significant drops due to crude being diverted to the highest bidders or political shifts. Economic shifts will and have played a role in the local availability of petroleum (Greece and Egypt for example). The exporters now have no problem finding consumers, as long as their are no market disruptions.
    It appears that the world is entering a period of vulnerability that will cause serious oscillations in production as well as reductions of imports to certain countries/regions.
    The latest EOR technique that could produce significant amounts of crude from old fields, flooding the well with up to 5 times the normal amount of C02, is currently impractical due to lack of available CO2 and to increased expense. So it is not a factor, now.

    So in your given nations or regions, what groups do you think will still be supplied as import and production is curtailed? What groups will be reduced or left out.?

    • Jeffrey J. Brown says:

      Global Net Exports (GNE) = Combined net oil exports from (2005) Top 33 net oil exporters, total petroleum liquids + other liquids (EIA)

  7. Interesting comment posted by Shortonoil under this post which was reposted on

    Most of this data results from self reporting by the producing countries; but there are huge political, and economic consequences for a nation that is dependent on oil production to report a decline. For that reason we believe that the production data being reported is optimistic by several million barrels per day. Our model places conventional world crude production at 64 mb/d.

    The Hills Group

    I cannot really agree with this as most countries are showing a decline in production. World C+C, according to the EIA, was 76 million barrels per day last year. I fail to see how it could be 10 million barrels lower and no one really notice.

    • Jeffrey J. Brown says:

      Of course, the two key phrases are “conventional” and “crude oil.” Depends on whether he is talking about actual crude oil or C+C. My estimate is that 2012/2013 actual crude oil production (45 or lower API gravity crude oil) was probably flat with the 2005 rate, at perhaps about 67 mbpd, with lower values in intervening years.

    • Anon says:

      Not possible. Consumption is too transparently reported, and by people (governments collecting tax on fuel) who mean business. If oil production was that far below consumption, prices would be crazy.

      Where OPEC lies is in spare capacity (known), quota compliance (known) and reserves (most likely). On net, the ones who can understate their production with the cheating. Venezuela of course grossly overstates for political reasons, but everyone knows about that. The Saudis are insular but again, their actual exports are pretty well tracked; they are most likely lying about reserves and the health of Ghawar.

      The Iraqi reserves are probably fictitious and their goals are ridiculous, but again, we do know what comes out of them.

      Russia is the one who might be able to try to hide a production decline, since all the Russian oil companies are in bed with the government, they run the show in that country, and Russia also has large domestic consumption that is not very well tracked because of the size and lack of law compliance of that country. And they have a motive (their geopolitical clout). But not on the order of millions of barrels per day.

    • Watcher says:

      That hills group guy posted here now and then.

    • BW Hill says:

      Hi Ron,

      Commented back the next day, guess you missed it. Our figures come from a model, we are not counting barrels per se, so it’s good to have someone like West verify our projections. Thanks WT.

      What was quoted was conventional crude, not C+C. We do not use condensate in our calculations because the energy content of it (about 107,000 BTU/gal) is too low to make much difference in the powering of the economy. Even West Texas is quoted as putting conventional crude at 67 mb/d. We think that even that is a little high. With the US, and Russia mainstreaming condensate into their refinery input, 3 mb/d would be quite easy to hide.

      • No, I saw your comment BW. I just accepted your explanation as valid and left it at that. Because you had, in my opinion, adequately explained your position and the reason for your assessment of 67 mb/d for crude oil, I felt it needed no further comment on my part.

        Thanks for your input. It is appreciated.

      • Watcher says:

        Condensate energy content 42 gallon barrel: 4.5 million BTUs

        Crude energy content 42 gallon barrel: 5.6 million BTUs.

  8. Andy Hamilton says:

    Apparently there is a European energy crisis looming:

    You don’t say.

  9. Russia targets shale oil boom by next decade

    Russia is now pumping near its capacity of around 10.5 million barrels of oil per day (bpd), with the bulk of production coming from depleted western Siberian deposits, highlighting an urgent need to look for new oil resources.

    Some Western companies are refraining from new investment in Russia because of political tensions, potentially threatening Moscow’s goal of keeping oil production at least stable in the coming years…

    “Traditional reserves are depleting, there are some forecasts that production will decline … This all creates a stimulus for our country.” The U.S. Energy Information Administration estimates Russian recoverable shale oil resources at 75 billion barrels, more than the 58 billion barrels held by the United States, now the leader in shale oil production.

    Is there any doubt that Russian oil production is peaking?

    Lukoil’s Kuzyaev estimated the cost of one horizontal well in Russia at $15-20 million, compared to around $3.5 million in the United States — a figure which dropped from around $8 million recently due to the highly competitive environment among drilling companies.

    They obviously got some bum information here. I just don’t believe the cost of one horizontal well has dropped nearly that far. But at $15 to $20 million per well Russia is going to have a tough time luring investors to their frozen north.

    • Old farmer mac says:

      Costs should be lower in the US than they are going to be in Siberia far some good reasons including competition and climate.

      But the competition will probably come after a while.

      In the long run is there any reason to think Russian costs will be higher than any where else after allowing for the harsh climate and the necessity of building some roads and housing and so forth that already exist in Texas and North Dakota?

      • after allowing for the harsh climate and the necessity of building some roads and housing and so forth

        As if that was not enough? These places are likely in the frozen tundra hundreds of miles from the nearest town. Everything would have to be trucked in on roads that do not yet exist. And remember no rail reaches these areas either. Everything that comes in or out by rail in North Dakota would there have to be trucked in. Everything would also have to be trucked out.

        New roads would have to be built to every drill site. Building thousands of miles of roads through the frozen tundra is not an easy or inexpensive task. And building whole new living camps… All this would take many years and cost a fortune. And no one yet knows if there is very much oil there anyway. They may be no sweet spots at all. This could be another Monterey shale. Each well would have to yield a lot of oil to make it economical.

        • Jeffrey J. Brown says:

          It seems to me that in terms of actual crude oil production (not crude + condensate), the Bakken Play is pretty much a best case scenario for shale plays.

          And even in the Bakken Shale Play, in 2013 while total production was still on an upslope, the average production rate was a little over 100 bpd, with a median production rate less than 100 bpd, with a very rapid per well decline rate.

          I just have a hard time believing that production numbers like this will work in much higher cost operating areas around the world. And then we have the fact that shale plays tend to be more gas prone, plus factors like the Monterey Shale Play experience, e.g., 29 completions by one operator that resulted in zero production.

        • Old farmer mac says:

          I agree that if the oil is actually there the investment in roads and housing and other infrastructure will be enormous.

          But somehow I don’t think these expenses are going to double the actual cost of producing Siberian oil when the price of a single well is well into the tens of millions of dollars. You can build a good bit of rough highway across tundra for ten million bucks – highway good enough for Russian trucks and Russian drivers.

          The Russian are quite capable engineers and can build roads and railroads as well as anybody and people must have housing wherever they may be.

          Going into an empty country in a semi authoritarian state such as Russia to build a rail road or pipeline is not going to be comparable to doing so in the US or Western Europe.

          The Russians will survey a route and build a road or pipeline without much lost motion at all. We would spend three quarters or more the total time and a substantial portion of the total cost on just selecting a route and obtaining a right of way and issuing permits and the roads and railroads will have value beyond just what is involved in getting out the oil.

          There is a potential for farming in Siberia- the season is very short of course but on the other hand the sun shines hot and bright for many hours during that short season.

          There is timber and there are other minerals to be extracted too.

          So the cost of the roads and other infrastructure won’t have to be borne entirely by the oil industry.

          But unless the oil really is there in enormous quantities …… the costs of getting it out may well be double or more what they are in easier climates closer to markets.

          Now if global warming turns out to be as bad as some of us think it will, and as soon as we think, Siberia may boom without needing to produce huge amounts of oil.

          I have never looked into the nature of Siberian soils but I will do so soon. The breadbaskets of the world are going to be either moving north or vanishing with climate change.

          • Okay, we have two arguments here. One from Lukoil’s engineers who say:

            Lukoil’s Kuzyaev estimated the cost of one horizontal well in Russia at $15-20 million,…

            And the other from Old Farmer Mac who questions the logic of Lukoil engineers:

            In the long run is there any reason to think Russian costs will be higher than any where else after allowing for the harsh climate and the necessity of building some roads and housing and so forth that already exist in Texas and North Dakota?

            Hmmmm, now whom should I believe has the most expertise in Russian oil well drilling and costs? Which one is in a position to really know the true cost of of drilling in the Siberian wilderness? What a quandary, whom should I believe? 😉

      • Doug Leighton says:


        This cost business is interesting and one where I’ve had some experience. It’s not uncommon to be called upon to certify (in an independent report), publicly raised money is being spent “properly”.

        At one time I had an office in Harbin, Northern China, so it was easy for me to visit operations (China, Mongolia and Siberia) and provide an opinion on operation costs: Any accountant could have done a better job in a 10th the time but for some reason they always needed an Engineer’s seal affixed.

        Once I needed an attaché case to hold papers that wouldn’t be destroyed immediately by airline staff and told my secretary (a Chinese girl) I was going to the local market to grab one and she said: “No, no: You’ll be overcharged. I’ll come and after you pick one out, I’ll buy it for you”. She later returned to my office, apologized, said the guy (seller) realized what we were up to and charged a ridiculous amount: About $3.00 instead of $2.25. No, I wasn’t trying to save 75 cents; I was just trying to keep her happy!

        The point is, the case was EXACTLY the same as top a Name Brand that would have cost $100 plus in America or Europe – they’re all made in China after all. The same thing applies to an oil field holding tank or an aircraft carrier. This is something many people don’t realize when they generalize. A welder, or whatever, isn’t going to get $250,000 per year in Siberia or China like he might on a rig in the North Sea in Fort Mac Murray Alberta.


        • Doug Leighton says:

          Ron and Jeff,

          My comments directed toward Mac above are in no way meant to contradict yours w.r.t. Bakken type shale plays in other countries: especially Siberia. In fact,
          I agree with your observations and conclusions. The US seems almost uniquely placed for these developments.


        • Watcher says:

          “Bakken wells cost an average $10 million to drill and complete in the fourth quarter, Hess Corp., which holds 800,000 acres in the region, said in a slide presentation March 4. ”

          That article is dated March 5 (of 2013).

          Hell, 6 million pounds of proppant alone costs about $2 million.

          • Dennis Coyne says:

            Hi Watcher,

            The cost of completing a well in the Bakken varies from company to company. Continental Resources claims $8 million per well at year end 2013 in their annual report. They also talk about enhanced wells with more proppant and say that the enhanced wells will cost 2 million more than the standard completion (100,000 lbs of proppant per stage and 30 stages so 3 million pounds per well). So for Continental well costs are between 8 and 10 million per well depending on completion technique. All these enhanced designs will tend to increase well costs over time and will increase the rate of recovery and increase the depletion rates.

            • Watcher says:

              Sounds right and rebuts the bozo writing for Reuters in Ron’s article linked.

              6 million is a number from somewhere. Probably 3 million is, too.

              Lemme see:

              Whoa, heads up, huge upgrade to the hydraulic fracturing proppant wiki, good stuff on radioactive tracers of diff sort for diff stage number, to help study output.

              Okay that is 2012 pre stage count increase and here’s the quote:

              “However, Murphy says a typical Bakken oil well uses between 3 million to 5 million pounds of proppant. ”

              Oooh this is good:

              5 million pounds and premium sand will total $680K pre shipment costs. Ceramic more. Ceramic gets better output.

              The numbers for just proppant are going to be between 1 and 2 million bux delivered. I’m starting to see numbers for water way above 1 million pounds. That 1 million was maybe pre stage count expansion. Hope they aren’t paying walmart bottled prices.

              • Wes453 says:

                That FracFocus website (actually mentioned in that Drillinginfo link is a good free place to find data regarding the amount of water and proppant used in fractured shale wells.

                The PDFs containing individual well data usually give the total amount of water used in the frac job, in US gallons, as well as the percentages by mass of each component in the fracturing fluid. Assume that the density of water is 1 g/mL, or 8.35 lbs/gal. With that and the mass percentages, you can determine a rough estimate of the weight of the proppant. 3-5 million pounds of sand seems to be common for many Bakken wells, though in some of the best spots up to 10 million pounds is not unheard of.

                • Watcher says:


                  • Watcher says:

                    ” How much water is used in hydraulic fracturing?

                    This varies from well to well and depends upon the well configuration (vertical or horizontal), the number of stages fractured, and the specific characteristics of the formation being fractured. In vertical wells with a single fractured stage it is not uncommon to use less than 50,000 gallons of water during a fracture job, while a multi interval fracture job in a horizontal well can use several million gallons of water.”

                    8 pounds per gallon. Better book more trucks.

  10. Old farmer mac says:

    All it takes to make a construction trucker’s road over flat ground is a bulldozer and a motor grader and in the case of tundra in the summer about three or four feet of very coarse crushed stone to the best of my knowledge.

    Wages and salaries are a pittance in Russia compared to the US or Europe for the sort of work done in oil fields and you can run a two hundred ton truck on a graveled road if it has dual wheels at every corner a and tires eight feet high and over two feet across.Things can be done differently in Russia.

    Such a truck operated at an average speed of fifteen to twenty miles per hour will deliver more gravel or sand than four or five trucks operated at sixty that can only weigh forty tons gross. With one driver instead of four or five.

    The housing will be prefabbed and hauled in and erected in a matter of days almost for sure.I would be willing to lay a bet that couple of million bucks will put housing for a hundred men in place- keeping in mind that this housing will be on the line of basic military barracks.

    We ain’t talking Mcmansions for Russian labor.

    I have been on a big construction job in the boonies and one kitchen and dining hall running flat out can serve a thousand men on shifts. One shower stall is adequate for fifteen men if they are on around the clock shifts.One toilet for every twenty men is adequate.People on such jobs eat and wash and sleep and maybe play a hand of cards- seven twelves takes the starch out in a big hurry.

    The cost of housing on a per well basis over a period of years is not going to be a deal breaker.

    I don’t know how many feet of gravel you have to dump on tundra to make a road that doesn’t turn to soup in the summer time but crushed stone is cheap and that is all that is required along with a couple of big dozers to build a road capable of supporting any construction or mining type vehicle at low speeds.

    I will hazard a guess that five or six feet is more than enough stone even for the heaviest trucks.

    Bridges are another matter altogether.I guess that a lot of bridges will be needed- but water for tracking won’t be a problem – at least not in July and August!!!

    There is probably plenty of stone available in Siberia very close to the surface and it need not be crushed fine except for the top foot or so. Pieces as big as basketballs mixed with smaller stone is perfect for a deep road bed.

    The issue is not how much the roads will cost but how much they will cost per well -if there are four or five wells drilled at ten million bucks per well per mile of road the costs of the roads is not going to be a major issue.

    If somebody is planning on building a thousand miles of road they will be planning on drilling a lot of wells at the far end of it.A rough road suitable for heavy mining type trucks can be built at a mile or more per day with a few big dozers followed by mining trucks loaded with stone to finish the road.

    Railroad tracks were laid mostly by hand at rates of miles per day across the North America in the nineteenth century.There were plenty of train wrecks as a result of the shall we say questionable sturdiness of that track but the trains moved on it on a regular basis.

    I will hazard a guess that a crew of military engineers tasked to build a railroad in Siberia can lay track that will give good service at a rate of ten miles per day with a thousand men and machines.An occasional train wreck is not going to be a big deal in Russia.There aren’t going to be any lawyers disputing every detail of the route or filing environmental suits.

    And not all the costs of roads and other development are going to have to be allocated to the oil industry.

    I am not trying to prove that drilling for tight oil in Siberia is going to be cheap…… or cheaper than tight oil drilling in say North Dakota or Texas.

    I am merely pointing out that it might not be as expensive as people used to thinking in American or Western European terms think it will be.

    There is an ancient Russian saying that goes to the effect that better is the enemy of good enough.

    • Syndroma says:

      Some Russian trucks do not need roads at all:

      • Old farmer mac says:

        The primary use of trucks such as the ones pictured in these videos has so far been to haul out timber.

        There are thousands of videos on the net showing logging operations in progress in the far north – as far as the trees exist apparently.

        Timber is not nearly so valuable as oil.

        But while this kind of vehicle can actually travel cross country in tundra even in the summer time they must still have roads to operate on a regular basis. The soup under the wheels or tracks gets softer and deeper every trip and after a few trips on a given path the vehicle simply bottoms out and is well and truly stuck.

        Crushed stone is necessary in huge quantities to make a road solid enough for regular traffic especially in the summer.

        I had a job driving an off road heavy hauler back in the seventies on a road job. It would run in mud three feet deep so long as there was a hard bottom under the mud.It had over three feet of ground clearance of course. The floorboards were about eight feet above the ground.That was a big truck in those days but now it would not even be considered for use in a mining operation nowadays.The new ones now haul four times as much.

        We did not work when it was really wet as a rule but there were bad muddy spots to be driven thru especially during the early stages of the job while the trees were just being cleared off the right of way and so forth.

        There are already a lot of people living in some parts of Siberia and there are already some roads and at least a few railroads already. Lots of very productive farms in thoe western and southern portions.

        But the potential oil fields may still be located a thousand miles from the nearest stretch of existing highway.

        No doubt the engineers at Lukoil know their business- I didn’t know where the figures were coming from.Maybe that potential oil will stay in the ground until it is worth a hundred and fifty bucks a barrel.That time is coming in my estimation.

        Time frames matter in such discussions as this one.Siberia may be a well developed place in a few decades depending on what the climate does.

      • Perk Earl says:

        One metric of the height of humankind’s insanity – driving through the forest.

      • Fred Magyar says:

        Wow! Looks like some Russians still have way too much oil for their own good… They sound like a bunch of drunken thugs on a binge. Hope they get what they deserve and die slow miserable deaths of starvation in an ecological wasteland of their own making!
        BTW, to be clear, I have nothing against Russians in particular, only A Holes such as these! And there are plenty of similar idiots in the US and Canada as well. I know it is pointless to rant against this kind of behavior but it still makes me extremely angry whenever and wherever I see it!

        • Old farmer mac says:

          It’s good to see you here ,Fred.

          I won’t argue with your sentiments but you realize of course that the current generation of Russians is going to eat well as they exploit whatever they can of nature’s one time gifts.

          Russia is such a rich country in some respects that it may take three or four generations to run thru the national inheritance.

          It is the following generations that will pay the piper.

  11. Perk Earl says:
    Max and his cohort Stacy talk about US shale oil, the 1.50 to get a 1 dollar return, and the 96% reduction in Monterey shale oil nixing the much MSM hyped idea of an energy independent US. Max actually uses the term ‘peak oil’.

    • Fred Magyar says:

      Yikes, while you are there check out the music video from Portugal on Max’s page.

      It leaves absolutely nothing to the imagination and directly targets (no pun intended) all the classes that the workers who are now unemployed think are to blame for the current economic crisis. Not that any of them are innocent, bankers, members of the MSM, politicians, academia, etc… The people are not going to understand peak resources they are looking for scapegoats. The official unemployment rate in Portugal is roughly 15% but youth unemployment is about 35% That’s a lot of angry young people… there are a lot of places in Europe that aren’t much better.

      • Watcher says:

        All they need is guns.

        • Old farmer mac says:

          We have plenty of guns here in the US.

          I wonder sometimes how many people might lose their lives in a mad max scenario in this country but I just can’t bring myself to believe such a scenario is more than a remote possibility.

          Leviathan is not going to just roll over and die when tshtf. Martial law will be instituted and it can get to be pretty harsh in and of itself. If things don’t stabilize in a relatively short time martial law will become the more or less permanent paradigm and it will probably morph into a flat out police state.

          But I don’t see warlords and mad max happening in this country or in Western Europe unless maybe there is a war that is so destructive no government is left standing.

          In that case there won’t be very many people left either.In my estimation this big a die off would require at least a hot nuclear war and maybe biological and chemical war on top of that or some combination of the three.

          The ones that are left will have to figure out a way to survive without a working industrial economy meaning diesel fuel and gasoline and a thousand other necessities of modern life will not be available.

          Not many would make it very long.

          The handful that would be left would necessarily be well armed and proactive in defending themselves from raiders or they won’t last more than a few weeks or months at the longest.

          I could grow enough food to survive and get along ok for a while…..but not too long at my age…… if I were left alone.

          But I doubt I would last very long out in a cornfield with a hoe in my hand and well armed people sneaking thru the woods hoping to take over a working subsistence farm.

          I will take the police state over the mad max scenario given a choice.

          One good (?) thing about a mad max scenario in country with as many guns around as this one is that it won’t last very long. It will burn itself out like a grass fire.

          Whoever gets to a supermarket or warehouse with a lot of food inside first is going to fort up and defend his treasure to the last round.

          If I were to get to thinking WWIII is about to start I would hurry to town and buy a big truckload of mixed grains live stock feed which is edible in a pinch and will keep for years in a good dry barn. Second trip non perishable household stuff such as soap aspirin toothpaste whatever I
          might want for the next four or five years.

          The stuff necessary to keep the farm running as a subsistence operation is already on hand.

          It doesn’t take much land to support a handful of people if they are willing to get out in the field and work at growing it.

          A couple of acres per person can easily be worked by hand and that is enough to provide plenty of food per person in my part of the world barring really bad luck with bugs or drought or thieves.

          When I say a person can easily work a couple of acres by hand I don’t mean the doing of it is easy but rather that it is well within the capabilities of a healthy not too old or young person to work a couple of acres of ground by hand if he has to in order to eat.

          And while it may seem strange and paradoxical a typical person forced to give up a typical current day American lifestyle and assume subsistence farming might actually have a better shot statistically at a long healthy life than he did commuting to an office and chowing down on fast food and getting fatter every year.

          Subsistence farmers get a LOT of exercise and while their diets may not be as well balanced as one would like they are not overloaded with sugar and salt and fats to excess and questionable additives on top of that .

          All my grand parents and great grandparents and aunts and uncles I know about prior to my parents generation ate such a diet for the most part and mostly lived such a lifestyle.

          Just about every one of them that didn’t die in an accident or as a child lived to a very healthy old age and remained physically active right up to the end as a rule.

          The current generation cannot say the same. Cancer, diabetes, heart disease, and a bunch of other lifestyle related diseases are getting us as early as our fifties.I hear about a kinsman dieing every few months and attend a lot of funerals.Not many of us will make it into our late seventies or eighties hale and hearty and able to hike in the mountains all day without giving it a thought as my grandfathers did.

          Lifestyle diseases won’t get you in a post industrial world if living in such a world is your fate.

      • wadosy says:

        pretty hard to take max keiser seriously, seeing as how he’s such a good buddy of alex jones…

        you know alex, dont you? …of abiotic oil and chemtrail fame? …this “guilt by association” also applies to ron paul, who i think was damaged pretty badly by his association with jones

        but you have to take people like jones and keiser seriously in one respect, and that is this…

        how do they rise to national prominence more-or-less overnight?

        are we supposed to think that the american public is stupid enough to buy into such lunacy overnight?


        well, nevermind… the abiotic oil and chemtrail disinfo campaigns have petered out, despite …whoever’s… best efforts

        • wadosy says:

          there’s that genre of websites and radio programs… global wrminng deniers, peak oil deniers, chemtrial promoters, etc etc etc…. alex jones, mike rivero, jeff rense

          where do they come from?

          they seem to be Department of Mindf*ck operations… if there was such a thing as the Department of Mindf*ck

          well, we know there’s a Department of Mindf*ck… it usually is referred to as “the mainstream media”… i guess these little niche operations are aimed at the certifiable idiots

        • wadosy says:

          well, i guess we all can agree that the certifiable idiots are “unfit”.. .”unfit” in darwin’s sense of “survival of the fittest”… except they’re fit for one thing…

          you divide them into factions, arm the factions (if necessary), then pit them against each other

          when they’ve killed enough of each other, you can do a “humanitarian intervention”, impose martial law, and save them from themselves

          good deal

        • wadosy says:

          some companies would keep you on all winter, busywork, paperwork, sweeping the hanger… once in a while some weird little job would pop up, some off-the-wall thing that was hazardous to human life, mostly your own… the company, in a cash flow bind, would take them

          so i’d quitl, write songs in the winter until flying season cranked up again… usually took like a hundred bucks on the phone to find a job

          but there were those winters… holed up in a trailer, drinking my brains out, trying to write and listening to late night radio

          art bell, poisoning american minds for over 30 years

  12. TechGuy says:

    First Oil, Now Seafood:

    “A Chinese vessel attacked and sank a Vietnamese fishing boat in disputed waters”
    “Vietnamese ship DNa 90152 operating out of Danang was encircled by 40 Chinese fishing vessels in what Vietnam regards as its exclusive economic zone”

    [Want to bet this is only the beginning? As the Oceans have become depleted of seafood, fishermen are going to war. ]

  13. Dean Fantazzini says:

    Shakeout Threatens Shale Patch as Frackers Go for Broke:

    “The U.S. shale patch is facing a shakeout as drillers struggle to keep pace with the relentless spending needed to get oil and gas out of the ground.
    Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.”

    • Thanks Dean, this is very important. I wish they would they would give a better separation between oil and gas however. In one place they seem to be talking oil however:

      Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells. At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that can’t afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin.

      It is going to be very interesting to see how this plays out. This could be the beginning of the end of the shale game. Also an interesting play on words there. 😉

      • Old farmer mac says:

        I suppose everybody here knows I am a pessimist when it comes to tight oil but nevertheless I am not so sure that the business is inherently unprofitable.

        We keep hearing about wells costing ten million bucks or so and oil coming out at rates somewhere in the general neighborhood of a hundred barrels a day. The actual cost of the well can apparently be recovered without too much risk before the production tails off to stripper status of a few barrels a day.

        I have no idea what the actual day to day operating costs of a well may be once it is completed but it seems unlikely these costs amount to more than a very small percent of the gross sales revenue.

        So the question is this:

        Maybe the industry is losing money in some cases mostly because the operators paid too much for drilling rights and other expenses not directly associated with punching holes in the ground?

        If this is the case then when a company goes broke and sells out at considerably less than what it paid to get in then maybe the next operator will be able to operate profitably on the same ground?

        It seems unlikely that interest rates can stay as low as they are too much longer and rising interest expenses may make it very hard or maybe impossible for any company to make a go of tight oil , at least at current prices.

        What portion of total operating expenses on average is interest in case anybody happens to know?

        • I don’t think interest rates or low for these guys, they are get junk bond ratings.

          “Interest expenses are rising,” said Virendra Chauhan, an oil analyst with Energy Aspects in London. “The risk for shale producers is that because of the production decline rates, you constantly have elevated capital expenditures.”

          Chauhan wrote a report last year titled “The Other Tale of Shale” that showed interest expenses are gobbling up a growing share of revenue at 35 companies he studied. Interest expense for the 61 companies examined by Bloomerg totalled almost $2 billion in the first quarter, 4.1 percent of revenue, up from 2.3 percent four years ago.

          • Watcher says:

            This is a hmmm.

            I wonder if they weighted small, fly-by-night firms equivalent to EOG or CLR.

            “A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.””

            Hmmm. Gonna spend some time with the CLR and EOG reports. There may be 60 companies involved, but output is pretty concentrated, and if Exxon was included in the study because of XTO and gas, this will pull results severely.

            • Watcher says:

              Okay, quick look complete.

              CLR debt is up 25% in the past year. That’s a lot for a mature company. It didn’t necessarily get spent. Total assets are also up 25%, but the SEC rules on lease/land valuation for oil companies can be part of that in a favorable aspect (and ditto the price of oil influencing how that computation happens). Meaning, the land doesn’t have to have a constant value per acre and the 25% rise in assets doesn’t mean they took the debt and bought more land/leases. They may have increased the valuation of land already held. So . . . best to just note that yup, debt is up 25ish% in a year.

              EOG assets up 14% on the year. Debt decreased. They are doing something with deferred taxes, which rose about 25% and affected how they list total liabilities, but what is categorized as debt outright decreased. They are the primary Eagle Ford
              player, as I recall, and they do show a contrast with CLR.

              This btw is something google does well. Here’s where to go to get this stuff all in one place:

              There’s a subtle link up top for income statement vs balance sheet and statement of change in financial condition or cash flow.

            • Doug Leighton says:

              Watcher (Or Anyone),

              I’ve got a question: First some background.

              Many years ago I had some spare cash and decided to invest in an oil play (based on financial statements which looked wonderful to me). My accountant glanced at the information and said: They’ll be bankrupt within three months. He was wrong, it took six months. Needless to say, that was the last time I tried to read financial statements. It turned out the (main) problem was that costs incurred in drilling a hole(s) were counted as an asset – even if the hole(s) was dry. Obviously my math skills are defective.

              So, my question: When you’re looking at these Oil Company financial statements do you take the above accounting procedure into account? If not perhaps there is an accountant within Ron’s readership who might chime in on this matter, and provide an opinion. Perhaps I’m out to lunch here but based in my extremely limited experience, it seems important.


              • Enno says:

                Hi Doug,

                I belief some Bakken companies expense dry holes directly, so these costs aren’t added to assets. However, it is common to add all other drilling and completion costs, e.g. for exploratory wells, or seismic, to the assets, and slowly expense them through “depreciations”. How fast you have to depreciate those ‘assets’ depend on either the expected lifetime, or the fraction of barrels that you are producing compared to what you estimate is in the ground. So guess what, if you estimate there’s lots in the ground, you can depreciate less(slower), and count more earnings! I am sure that should have no effect on the quality of those estimates;)

    • Byron Walter says:

      The North Dakota Department of Mineral Resources has production data through March for Sanish, Three Forks, and Bakken/Three Forks which I’m sure that everyone here has probably seen. While the number of producing wells and overall production is up, the numbers for daily production per well look like the chart below (well, I hope that it is below). BTW, as a first time poster, I really appreciate the time and effort put into this site.

      • Jeffrey J. Brown says:

        Can you do a similar chart for median production?

        • Byron Walter says:

          Sure… but I might wait out the next monthly update. Here’s where the numbers come from:

          Most commentators view the LTO production as being a reprieve from peak oil whereas I see it as delay of execution (but imagine where we would be without it).

          • Enno says:

            I see the average well production in bpd regularly mentioned, but I don’t see the value in this number. Given the typical average production profile of a well (starting high, and declining rapidly in the first few years), and given that every year many additional wells are being drilled, for sure the average well production will go down. I don’t see which conclusions we can draw from it, other than that lots of new wells are required to keep production up.

            • Byron Walter says:

              Well, I would agree that you might not be able to draw any conclusions from the obvious and expected decrease in the average well production.

              Anyhow production per well was increasing up to around 2010 after which it entered a bumpy plateau (with the exception of the first half of 2011). It appears to me that starting in 2013 that plateau began its termination and makes me wonder if the inertial drag of so many mature wells declining will be too much for new wells to offset.

              It would also be interesting to see the trend on BPD from new wells. Assuming that the drillers have tried to hit the sweet spots first, I would expect that to start trending down as well.

              In all it’s just an attempt to get a feel for how long the Bakken production will keep trending up… one year?… two?… three at tops? So far it’s made for a great party in ND.

              • Enno says:

                Hi Byron,

                Just to be sure, I was not critizing your post, but merely stating my doubt about the usefullness of the average production per well. To elaborate, this average depends on 2 known factors(current number of wells, decline in current wells), and
                2 unknown factors(new number of wells, inital production of the new wells). I think it is more useful to measure those 2 unknown factors, which are being revealed each month, directly. I belief that a declining average production will not tell us anything new, also not how long the party might still last.

                Therefore, I do agree with you that the bpd of new wells (and the number of new wells) are what matter. The data luckily allows us to do that (see also my comment in
       So far there is no clear decline yet in initial production, but also no growth, for the last 4 years. If the USGS estimates are correct, I personally do expect that we should see a decline in either one of those 2 numbers in the next few years.

                • Byron Walter says:

                  Sorry in a late reply but I really hate attempting to respond on my phone.

                  Anyhow I agree with your comments and, I must confess, put up that post as a test as I have never posted here before and have never attempted to slap in a simple chart. At least I now know it works.

                  I was also hesitant to post as this site has a very high signal to noise ratio and I don’t want to screw with that. The general level of brain power invested here is something special. I follow just about every article posted (and the discussions).

                  Thanks for the reply.

                  • I was also hesitant to post as this site has a very high signal to noise ratio and I don’t want to screw with that.

                    Why thank you, that is a fine compliment. But go ahead and post anytime you like. Your post are far more signal than noise and will not lower the signal to noise ratio.

  14. Old farmer mac says:

    I am still looking for any good data on the net fuel savings in fossil fuel usage by electrical utilities as a result of integrating wind and solar power into the mix if anybody has any sources. Thanks in advance as usual.

  15. Doug Leighton says:

    Steve, Guys & Gals,

    I’ve got some really good news — finally: Earth organisms survive under Martian conditions.

    “New research suggests that methanogens — among the simplest and oldest organisms on Earth — could survive on Mars.”

    So there, put that in your pipe and smoke it. PO/Global Warming won’t be anywhere near as bad as Steve (and Ron) is always blabbing on about, maybe. Well, gee, It’s a quiet day isn’t it?


  16. The decline of oil, the rise of gas – a viable response for SA

    Every now and again, the concept of Peak Oil, the idea that we have passed or are about to pass the physical peak of oil production, comes back into fashion. But that is unlikely – for the foreseeable future, anyway. Enormous amounts of money are being invested into exploring and extracting more oil to meet new demand, principally from Asia.

    Well now, I guess that settles it then, peak oil is out for the foreseeable future. It wont happen because enormous amounts of money is being invested in exploration and extraction. Damn, I should have figured that out a long time ago.

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