The Bakken and North Dakota production data is out. Big surprise. The Bakken was down 69,420 barrels per day in April while all North Dakota was down 70,414 bpd.
Largest drop ever in North Dakota production. The Bakken is now under one million barrels per day.
This gives you some idea of the erratic nature of North Dakota production. But as you can see, the decline is accelerating.
The EIA’s Drilling Productivity Report gives past Bakken production numbers, which includes the Montana portion, and future estimates for the next couple of months. The average difference between North Dakota production and total Bakken production has been about 27,500 bpd. However for April the difference is almost 63,000 barrels. So it looks like for once the DPR estimate is way too conservative. The DPR estimate is through July while the north Dakota data is only through April.
In April Bakken barrels per day per well fell by 7 to 94, North Dakota bpd per well fell by 5 to 82.
From the Director’s Cut
Producing Wells
March 13,052
April 13,050 (preliminary)(all-time high was Oct 2015 13,190)
Permitting
March 56 drilling and 4 seismic
April 66 drilling and 0 seismic
May 42 drilling and 0 seismic (all time high was 370 in 10/2012)
ND Sweet Crude Price
March $26.62/barrel
April $30.75/barrel
May $33.74/barrel
Today $38.25/barrel (all-time high was $136.29 7/3/2008)
Rig Count
March 32
April 29
May 27
Today’s rig count is 28 (lowest since July 2005 when it was 27)(all-time high was 218 on 5/29/2012)
Comments:
The drilling rig count fell 3 from March to April, 2 from April to May, and increased 1 from May to today. Operators remain committed to running the minimum number of rigs while oil prices remain below $60/barrel WTI. The number of well completions fell from 66 (final) in March to 41 (preliminary) in April. Oil price weakness is the primary reason for the slow-down and is now anticipated to last into at least the third quarter of this year and perhaps into the second quarter of 2017. There was 1 significant precipitation event, 15 days with wind speeds in excess of 35 mph (too high for completion work), and no days with temperatures below -10F.
Over 98% of drilling now targets the Bakken and Three Forks formations.
Estimated wells waiting on completion services is 892, down 28 from the end of March to the end of April. Estimated inactive well count is 1,590, up 67 from the end of March to the end of April.
Crude oil take away capacity remains dependent on rail deliveries to coastal refineries to remain adequate.
Low oil price associated with lifting of sanctions on Iran and a weaker economy in China are expected to lead to continued low drilling rig count. Utilization rate for rigs capable of 20,000+ feet is 25-30% and for shallow well rigs (7,000 feet or less) 15-20%.
Drilling permit activity increased from March to April then fell back in May as operators continue to position themselves for low 2016 price scenarios. Operators have a significant permit inventory should a return to the drilling price point occur in the next 12 months.
Dennis Coyne posted the above chart. He adds:
New wells added in the Bakken/Three Forks are assumed to drop to 25 new wells in April and remain at that level until Jan 2017. Last month about 64 new wells were added.
Just one more chart, US weekly C+C production. It looks like US production has been pretty much in free fall since the middle of January.
The last graph indicates domestic production is down close to nine hundred thousand barrels a day. This is free fall sure enough.
I wonder how long it will take the rest of the world’s producers, most of them not nearly so nimble as American businessmen, to shut in another, additional million or two million barrels of high cost production. If they DON’T shut in some production, then the decline of legacy oil will take that much off the market anyway before too long.
At that time, we will find out how high a price the world economy will pay for crude.
In the meantime, the planetary heat wave continues.
https://www.yahoo.com/news/may-goes-down-earths-hottest-record-nasa-183959784.html?ref=gs
We are living in interesting times.
A couple of days ago, Ron said, paraphrased, in response to a question from me, that he thinks it will take at least a year or two of clearly falling oil production before peak oil is back in the news.
I am thinking that it will take maybe another four or five years of steadily increasing average global temperature for the reality of global warming to sink in between the ears of the typical man on the street.
By then even cubicle dwellers will start noticing the difference.
Just a note to correct a popular misconception; production DID NOT drop in Bakken due to SHUT IN wells. The production drop is 100% DEPLETION of existing wells. This is a critical distinction because if wells were shut, they could be turned back on. If wells deplete, generally, new ones must be drilled to replacement them, implying radically different time, service intensity and capital requirements. The popular press is ate up with the concept that when prices rise, all this production will magically reappear, once again swamping the market with excess supplies. The reallity is that the only way this production comes back (or stops decreasing) is the application of massive amounts of new capital, the redeployment of tens of thousands of service workers laid off during the crash, and billions of dollars of equipment. This is even more true internationally. As large mature projects deplete, of which there are thousands in decline, new large projects must be developed to replace them.
“The production drop is 100% DEPLETION of existing wells. This is a critical distinction because if wells were shut, they could be turned back on.”
Brad,
Yes. So essentially oil price does not matter at this point at the end of the game for these marginal and high depletion plays. Price could go even higher but drop in production will just continue.
I think it’s a mix. I’ve been in these circumstances before. The typical approach would be to shut in low rate high water cut producers, and any other wells that have been experiencing high costs. When prices rise and wells have been shut in for months they will have built up some pressure. And some of them will come in at 100 % water due to self injection. It can be a real crap shoot.
Hedge your bets, get a high mpg car now.
https://www.yahoo.com/news/toyota-prius-hybrid-cheapest-car-over-10-years-112500832.html
Old Farmer,
When Miami, New Orleans and Atlantic City are wrecked and Manhattan has been washed over for the third time in storm surges, then global warming will be taken seriously. Before that, it will be only partly paid attention to since there are so many other problems happening at the same time.
It’s hard to fight on all fronts all the time. Some places will be sacrificed.
Mileage is not everything. For example RAV4 hybrid is much more interesting and important then Prius, due to the US population current obsession (should we call it love story?) with SUVs. 2006 model is also heavily discounted. It gets just around 33 miles per gallon (which still beats all compact SUVs). But its AWD drivetrain ( with rear wheels driven electrically ) is really innovative.
Similarly, Prius V is much more interesting, more practical car then the “classic” Prius now, despite worse mileage. Rear visibility of classic Prius is simply horrible.
Both cars do not use lithium batteries which is another huge plus, safetywise.
I have driven an AWD 6 cyl RAV4. Very sporty, hangs turns well and accelerates very well. It had many feature to increase mpg, such as shutting off some cylinders when not needed but still wasn’t that good. Great ride, but the hybrid sounds like a better mpg option. Will attract the northern crowd for snow handling and the outdoor crowd who like to get way out there.
MPG similar to a Camry and a lot more expensive.
now thats what i call a trend line ?
More like a roller coaster ride and gravity just took over.
⛽️ ?
I remember Lynn Helms predicting a sharp drop in production for March.
In fact, in March Bakken output declined only 8 kb/d, but was down 69 kb/d in April.
April number for ND Bakken is down 6.6% vs. March, 10.9% vs. April 2015 and 15.2% (176 kb/d) from the peak reached in December 2014.
Average output for January-April 2016 is 1044 kb/d, down 6.9% year-on-year.
As CLR’s Harold Hamm and several other E&P CEOs are saying, $50 is a trigger for increased completion of the DUCs.
Rig count has also bottomed, but significant increase in drilling activity is unlikely until WTI reaches $60.
Nonetheless, it seems that we will see further declines in LTO output in the next several months due to delayed impact of low oil prices.
Alex,
While oil prices will definitely reach $60 at some point and shale is still doomed at the current price range, there are some contrarian tendencies visible now. If the world economy slows down considerably the rise of oil prices will slow down even more. Let’s hope for the best and prepare for the worst.
likbez,
The world economy may be slowing down, but global oil demand growth is stronger than was expected in the beginning of the year.
From Reuters:
Vehicle sales in China rose 9.8 percent to 2.1 million units in May, the China Association of Automobile Manufacturers said on Monday, in the strongest year-on-year growth since December 2015.
In the first five months of 2016, sales were up 7.0 percent.
“Against the backdrop of low international oil prices, Chinese crude oil demand will remain well supported this year as demand continues to gain traction from stockpiling activities and refining use,” energy consultancy FGE said.
“We expect Chinese crude oil imports to grow by 730,000-760,00 bpd this year,” it said.
http://www.reuters.com/article/us-global-oil-idUSKCN0YW03V
India has become another very important driver of global oil demand.
U.S. gasoline consumption is set to reach a new record this summer (see chart below)
Even in some large European countries demand is increasing this year.
“Britain’s consumption of road fuel is growing at the fastest rate for more than a decade as the impact of economic growth and lower prices more than offsets improvements in vehicle efficiency.
Britain’s motorists consumed 36.0 million tonnes of motor spirit (gasoline) and road diesel in the 12 months ending in March, up from 35.2 million tonnes in the prior 12-month period.
Fuel consumption has been rising since 2013/14 and the increase predates the collapse in oil prices from mid-2014 ”
http://www.reuters.com/article/us-britain-driving-kemp-idUSKCN0YW21Y
The world economy may be slowing down, but global oil demand growth is stronger than expected in the beginning of the year.
Still looks like it all fits within the notion of an undulating plateau to me! I highly doubt these demand growth trends you cite can continue.
Even if we are seeing some current spiking, does anyone seriously believe these are signs that demand growth is in any way shape or form sustainable?
Given recent massive capex reductions by the major oil producers is it realistic to assume that supply can continued to be maintained at current cheap prices without severe damage to producers?
The flip side of the coin should prices spike as demand continues to eventually outstrip supply will almost certainly crash many of these economies and hurt consumption. I see all of this as just a temporary blip in the growth curves.
Maybe we need to revisit the infinite abiotic oil theory…
“New wells added in the Bakken/Three Forks are assumed to drop to 25 new wells in April”
According to NDIC data, the number of producing wells in the Bakken/TF increased by 24 in April vs 61 in March.
Interestinly, NDIC data indicate that the number of producing wells in ND outside Bakken/TF declined by 30.
Thanks for the post Ron & Dennis.
For those who missed the link in the last post, I also updated my presentation on ND production, here.
Hi AlexS,
Based on data from Enno Peters, the new wells added in North Dakota were 63 in March 2016 and 44 in April 2016. Based on the spreadsheet that Enno Peters graciously shared last month, all 63 new wells added in March were Bakken/Three Forks wells, if we assume all the confidential wells3were Bakken Three Forks wells. Helms usually says 98% of drilling targets the Bakken/Three Forks, so if we assume 98% of completed wells are Bakken/Three Forks, it would be 62 new wells in March and 43 new wells in April 2016. The sharp decline was due to fewer wells being completed and perhaps to some older wells being temporarily shut in (a net of roughly 20 wells). The shut in older wells would only amount to 200 to 400 barrels per day, but the 19 fewer new wells this month vs last month would (if they were all average wells) drop output by 6 kb/d.
If 62 wells had been completed in April, we would have expected a drop of only 10 kb/d, with 43 wells in April the model predicts a 17 kb/d drop in Bakken/TF C+C output. Note that the model was 39 kb/d lower than actual output in March 2016. So the errors from previous months got corrected in April, with the model giving a result of 1001 kb/d in April 2016 (or 13 kb/d too high).
The model assumes all wells are average, which is false, some months have better than average wells, other months the wells are worse than average (also wells can be temporarily shut in for mechanical failures and such and this varies month to month).
The chart that Ron posted was before I had gotten information from Enno Peters. The corrected chart below assumes new ND Bakken/TF wells completed falls to 35 wells per month in May and remains at that level until Jan 2017. The model predicts 871 kb/d in Jan 2017 if this guess at completion rate is correct (not very likely).
Paraphrasing the A-Team, I love it when a model comes together.
I think the important lesson learned in all this is that these are not magic wells, but finite reservoirs with very limited lifetimes. Just amazing how well these can be tracked statistically.
Alas, I doubt this will ever be taught in a textbook, because the profs that would teach this would rather not explain to students their own demise.
FED total US production data for May are out, basically confirming the trend for Bakken.
The current cycle lasts roughly two times longer than the cycle in 2008/9. As the oil price recovers much slower this time (green line in below chart), drilling (red line in below chart) responds accordingly much slower. As a consequence the production decline is much steeper than in previous cycles (blue line in below chart) and stands currently at – 8% year over year and -2% per month. Given the slow drilling and price recovery, US total production will very likely not recover until mid 2017. At a monthly decline rate of – 2%, my goal of -30% US total oil production decline looks more and more realistic.
My view is also supported by a recent article:
http://www.naturalgasintel.com/articles/106753-staggering-us-ep-reserve-revisions-in-2015-eliminated-40-tcf-41-billion-bbl
This article suggests in a review of the main US producers a reduction of natgas (-40 Tcf) and oil (-4 bn barrels) reserves at a gigantic proportion. Reserve replacement stands at up to – 200% which results in a significant reserve reduction and reserve life stands at a little bit more than 10 years for gas and oil. As companies have reduced drilling furthermore this year, more reserve and production reductions are likely in 2016.
The good news is that in mid 2017 oil prices are very likely to increase substantially. So, if investors are patient, this patience will be rewarded.
Heinrich Leopold,
Nice chart. However, here is my forecast for U.S. oil production:
2020 = Down 30-40% from PEAK
2025 = Down 70-75% from PEAK
steve
steve,
Thanks for your reply.
US oil production in 2020 to 2025 will depend in my opinion on how much oil prices will recover in 2017/2018. Lower US production in 2016/2017 will result in a lower US dollar and speed up oil demand. This is a catapult effect which can drive oil prices and the USD to extreme levels in 2018.
This could increase US production again in a very short time. However, it will very likely not reach the level of last year.
” This is a catapult effect which can drive oil prices and the USD to extreme levels in 2018″
Oil prices and the USD tend to be negatively correlated.
Oil prices at extremely high levels in 2018 are incompatible with the rise of the USD.
AlexS,
I did not say the dollar will be extremely high. Of course I did mean the dollar will be extremely low in about two years.
I have to imagine that the tails of Bakken wells decline much, much faster than the touted 6%. The hype of the shalies is finally being exposed. Borrowing 2X cash flow to drill covered up a lot. There was an article today on Bloomberg about the SEC taking a harder look at reserves booked by companies. I believe it will take a longer time for the US drillers to recover as I don’t think unsecured (junk bond) lending will come back anytime soon.
John Keller:
Just been looking over Enno’s site
One example of steep decline.
12/14 production from wells with first production in 2014 = 590,483 bopd.
4/16 production from wells with first production in 2014 = 216,671 bopd.
I have a feeling from looking at Enno’s data that 2015 wells will decline more quickly yet.
So more interesting information from April, 2016:
Wells with first production year average bopd:
2007: 20.5 bopd.
2008: 34.21
2009: 38.68
2010: 43.57
2011: 51.77
Wonder if the SEC should take this data and analyze company EUR projections?
It seems 2008 had strong wells. After 100 months, average well has produced 260,210 BO per Enno’s data.
So, if one says such well’s EUR is 750,000 BO, shouldn’t they also be required to disclose that will take around 75 years to achieve?
What is the PV10 of oil produced in years 20-75?
Wonder how much reserves will have to be written down?
This is such a joke.
Hi Shallow sand,
My guess is that the reserves in the 10K are very different from investor presentations where there are disclaimers that say, essentially, that they stretch the truth.
So a “typical well” in an investor presentation is not an “average well”.
In North Dakota at the end of 2014 proved reserves were 6 Gb in the Bakken Three/Forks and 1.2 Gb of C+C had been produced to that date.
A very conservative URR projection would be 7.2 Gb, if probable reserves were included (another 3 Gb would be a conservative estimate), then URR might be as high as 10.2 Gb if oil prices rise to 2014 levels or higher in the future.
I use a well profile with 400 kb of C+C output, 266.6 kb are produced in the first 5 years, output falls to 10 b/d in 19.4 years. I also assume the sweet spots get saturated with wells by June 2018 and EUR starts to decrease. The rate of decrease in new well EUR gradually increases over 12 months reaching a maximum rate of 7% per year by June 2019, by June 2025 the new well EUR falls to 250 kb (166 kb at 5 years), and to 127 kb by August 2036 when wells are no longer added to the ND Bakken/TF (at a total of 36,250 wells). Thus model assumes oil prices rise to $154/b in 2016$ and remain at that level until 2033.
Dennis. You note that you guess the 10K estimates differ from the investor presentation estimates.
Seems like if companies would provide us with the reserves reports themselves, it might help see if your guess is correct?
Also seems claiming roughly double is a little too much to take care of with a mere disclaimer?
I wish the SEC letters to companies requesting them to restate reserves would be made public immediately. We are just now finding out about many of these, after the companies have already BK.
Hi Shallow Sands,
Aren’t the reserves reported in the 10K checked by outside accounting firms? You are no doubt correct that some reserves will no longer be profitable to developed at current oil price levels.
I imagine this will change when oil prices increase.
The oil is there, but it requires higher prices.
Eventually the debt will be paid, or companies will go under.
Hi shallow,
We do a regular chart showing gains in average cumulative production month by month benchmarked to 2010. It clearly shows steeper decline rates for wells with higher early production. 2013 wells were 10% or more above 2010’s cumulative production in month 6 – by month 33 they are just 2.5% above 2010’s cumulative production. 2015 wells were 31% above 2010’s cumulative production in month 7 – they are now in month 17 and are 20% above, and falling.
I’d post the image but it refuses to work.
Hi gwalke,
If you can get the image under 50 kilobytes it will work, sometimes gif format is more compact. If not just post a link to the image. Or you can email it to me.
First initial and last name at gee male (trying to avoid bots).
This is only a little surprise. This decline takes away the surplus that was built up during the last two months (Fabruari and March) compared to the Season Effect Model. I was rather surprised by the modest declines those last two months.
I try to attach the graph once more to this comment (or I will ask Ron for support).
You can clearly see the dataset crosses the modelled line for the sixth time now. The first derivative of the model and the change of the data are still within the same error range as prior to the moment the model was built.
Difference between the model and the data is -2.4% now. The age of the model is 29 months now.
Verwimp,
Excellent chart. Just wanted to let you know that you were one of the few who presented the CORRECT Bakken chart in this blog. There may have been others, but well done. Jean Laherrere and Tad Patzek both have the same Bakken production profile as yours.
By 2025, the United States will be pumping 75% less oil than it is today. It will be interesting to see how we run the LEECH & SPEND SERVICE ECONOMY on that little amount of oil. Americans who think we will be able to exchange worthless paper dollars or Treasuries for oil at that time, better stop sniffing the glue.
steve
Thanks! It’s an honour to find myself in company as good as Tad Patzek and Jean Laherrere.
Hi Verwimp,
As long as the oil price remains low, your chart will be correct, it will be interesting to see what happens to Bakken Production when oil prices rise.
In Jan 2019 your model predicts approximately 420 kb/d, my scenario below suggests about 770 kb/d in Jan 2019, up to that point the models are relatively similar. My model assumes oil prices will reach $88/b by Jan 2019 and that the oil price will rise to $115/b by Oct 2020. ND Bakken/TF output reaches a secondary peak of 1280 kb/d in 2023.
Rolling in the floor, laughing my ass off. 😉
Let’s be honest, you never got out of your chair
Okay, you got me. But I was sitting in my chair laughing my ass off. 😮
…and yet somehow, you thought he will be a wise steward of/for your blog…..
Be well,
Petro
Naw, I knew he had a totally different outlook for the future than I did. It’s just that I did not really give a shit.
I know, full well, that damn few people can fact the actual future that faces humanity. And I understand that… and accept that. Reality is not for the masses, it is only for the tiny few that truly understands reality.
One can only accept reality as it is, not as we would like it to be.
Hell, that is not true, what the hell am I saying? The vast majority can only accept reality as they would like it to be. And that is exactly what they believe, and that is the argument they make.
Sorry, I have had one too many toddies tonight. I am going to bed now. I will be 78 in just a few days. And I am showing my age.
Now, that is my “The Grand Illusion” guy….and that is why I visit this blog….still!
Happy and healthy year to you and yours brother!
Be well,
Petro
Oh my god. That last chart is truly ‘Coynecopian’
Verwimp’s chart, OTOH, is the true situation we face IMO.
I second SRSrocko’s comment and commend Werwimp on his excellent chart!
Hi Mike,
The USGS estimated undiscovered TRR at about 7.4 Gb for the ND Bakken/ Three Forks in April 2013. About 79% of these undiscovered resources were believed to be in North Dakota (the rest are in Montana). So that is roughly 5.8 Gb in the ND Bakken/TF of undiscovered technically recoverable resources.
We would add to this proved plus probable reserves at the end of 2012 which were 4.8 Gb (3.2 Gb proved plus 1.6 Gb probable reserves), there was also about 0.6 Gb of cumulative production at the end of 2012 from the ND Bakken/TF.
So we have 5.8+4.8+0.6=11.2 Gb for the F50 estimate (meaning there is a 50% probability that reserves might be higher). The F95 estimate was about 2.3 Gb lower or 8.9 Gb for the TRR, this means they expect there is only a 5% probability that the technically recoverable resources will be lower than this.
The model I presented has a URR of 8 Gb.
Also not that at the end of 2014 proved plus probable reserves in the ND Bakken/TF were about 8 Gb and cumulative output was 1.2 Gb, suggesting a minimum URR of 9.2 Gb if oil prices return to the 2014 level ($93/b in 2014$).
So we will have to see which model proves correct, if oil prices remain low (under $50/b) forever, my scenario will be incorrect.
My bet is that oil prices will rise to $75/b at minimum by June 2018. If Ron is correct that 2015 is the peak, do you believe that oil prices will remain under $50 /b long term (until 2021)?
The E&P companies stopped drilling wildcats starting in 2013, and haven’t applied for such a permit for months, I’d suggest that means there are no undiscovered reserves, all wells are in known areas now.
Hi Dennis
Thank you for your excellent reply, and as Cracker says the extensive work you’ve done provide a constructive counter to the less optimistic among us, of which I am one.
I am with Cracker in that I think your charts are chronically optimistically lopsided, but held my opinion on this for a long time until now.
The resources amounting to URR 8-9.2GB of oil as you surmise may indeed be there, however I remain highly skeptical of this reported volume for a variety of reasons.
At the end of the day, whether the URR of 8-9.2GB is there or not, I am of the opinion that only a fraction of it will ever be recovered and the true amount never realized. The reason is that the condition of the world economy won’t support anything higher than $50 based on what I’ve seen this year. To wit;
1. Student and consumer debt is at an all-time high, compounded with the problem that most highly paid jobs are disappearing for the middle class. The June 2016 jobs report was pretty lackluster, with a +38,000 nonfarm payroll jobs increase reported. It is to be noted that the civilian long term unemployed has changed little at about 7.4 million.
2. Most driving is of itself for non-productive activities, and includes travel to jobs that are generally non-productive. If fuel gets more expensive, I expect that much of this non-essential travel will drop off. Some commentators have asserted that the 2008 financial crises was due to high fuel costs, and not necessarily due to the cascading collapse of Wall Street financial legerdemain (although this undoubtedly helped fan the flames).
3. The FED has pumped over $4 trillion of cash into the US economy, but the net benefit is estimated to be less than $1 trillion to GDP. It is unknown how the FED is going to unload this pure dreck on its books, and I suspect that it will not comport with higher oil prices in the cogs and wheels of the economy;
4. US debt is at a fantastic level of $19.3 trillion, with another $67 trillion of unfunded liabilities on the books. It’s hard to see how this debt will be reduced to manageable levels with higher oil prices.
5. An Internet 2.0, or some other economically transformative technology, doesn’t appear to be on the horizon. Currently, all we know how to do is burn fuel, heat a working fluid, and use it to drive a piston or turbine. The alternatives, such as solar and wind, will only come on as oil heads into it’s retirement party.
6. Related to point #1; if the current trend to transfer jobs over to automation continues, it’s hard to see how there will be people driving to their (former) employment, and for that matter afford things that are (of course) produced by petroleum;
7. For what it’s worth, I think that the 2008 crises hasn’t gone away despite massive money printing efforts. They’re trying to keep demand artificially supported with easy money and the incurring of unrepayable debt, which is terrifyingly criminal as it is simply passed unto the very young and the unborn. How can we expect them to pay our debts and then go out and buy fuel, when their jobs have been outsourced and/or automated? The whole thing has gone far over the top and is way beyond the point of no return. As mentioned previously, I see no significant industrial (i.e inventive) development or for that matter, improvements in demographics that will turn this around.
So at the end of all this, I think that baring hyperinflation the prospects for oil over $50-$55 for the next couple of years is looking fairly dim. Hence, that claimed 8-9.2 GB UR is not going to be realized in real production.
Hi Mike,
There are many that are very pessimistic about the economy. Unfunded liabilities are not the same as debt, so I don’t count those.
The retirement age can be raised and eventually the US will follow the rest of the advanced economies and reform the health care system to control costs.
(First we need to exhaust all other possibilities, before doing the right thing.)
Note that my scenario has oil prices rising very gradually. Also oil prices were over $100/b for 3 years with the World economy continuing to grow.
All that money printing has had very little positive or negative effect, mostly the velocity of money has slowed because most of that money is just sitting in bank accounts. Inflation is not high, if it were the Fed would simply reduce the money supply.
A debt of $19 trillion for an economy with an income of $18.2 trillion is not really a problem. A debt free consumer with a good credit rating and a 20% down payment in savings can typically borrow up to 3 times their income for a mortgage. The US government debt is at 104% based on fred data.
According to BIS for the US total non-financial sector debt is about 250% of GDP.
For all counties that report to the Bank for International Settlements (BIS) the total non-financial sector debt to GDP was 235% in the fourth quarter of 2015 (most recent data point) at market weighted exchange rates. (220% using PPP weighted exchange rates.) See
https://www.bis.org/statistics/totcredit.htm
Dennis- you say that
“Unfunded liabilities are not the same as debt, so I don’t count those.”
I’d like to point out that both of these things act as a dead weight on a chain that must be carried by those who are working and generating income, as we go forward in time.
And income, or savings derived from it, must then be used to service the debt and pay for the liabilities/entitlements.
This is money that then cannot go towards buying fuel, or funding innovation and transition- things like EV, solar, etc.
A dead weight is a dead weight.
And going into a crisis you have a better chance of surviving it if you are lean and mean, not if you have this ugly balance sheet. It doesn’t help that most of the worlds countries are in poor shape in this regard as well.
I have to agree with Mike Sutherlands view that these factors could very well decrease the URR significantly.
On the other hand, the other 7 Billion people of the world will keep increasing their demand and ,along with depletion, this will leave less cheap oil for the USA to import. This will tend to raise the price here.
These are conflicting forces, and I think we will end up with a scenario with both lower URR of these domestic sources, and yet also higher prices. Good for solar/wind I suppose- if we can afford it.
Very tough on the average family and local businesses.
Hickory,
Social Security is a big part of the “unfunded liabilities”. That’s a transfer. It’s not available to the working person who gets it deducted from their paycheck, but it’s available to the retiree who gets it. And, the retiree is more likely to spend it.
So, SS doesn’t slow down the economy, it helps it.
Nick,
Transferring money from a working family to a retired one doesn’t help the economy, it helps the elderly person, and hurts the working family (in the here and now).
Its overall pretty neutral, but it surely takes resources that could go towards energy infrastructure and development and shifts it towards the pharma industry, for example.
I’m not trying to make a value judgement here, just pointing out that in the scope of our prior discussion, this is fairly neutral and doesn’t change the conclusions.
Currently, all we know how to do is burn fuel, heat a working fluid, and use it to drive a piston or turbine. The alternatives, such as solar and wind, will only come on as oil heads into it’s retirement party.
Well, no, we know a lot more than that. We have superior alternatives for most of the uses for oil, and adequate ones for the rest.
The single biggest use is personal transportation, and EVs will work fine for that. We don’t need turbines for that, electric motors will do just fine.
And…we don’t need wind or solar to get rid off oil. Not at the moment. All we need is electricity, and we have plenty of that, right now.
Mike S and Dennis,
Hilarious! Coynecopian really fits.
My humble apologies, Dennis, just too funny, and appropriate. I do appreciate your charts, but I wish you would occasionally plug is some other values to provide a contrast to your ever-optimistic assumptions. My reaction to your chart was the same as Ron’s.
Make your chart reflect lower and fluctuating oil prices, instead of coynecopian, steady-state high prices and it might make more sense. Add a factor for debt restraining new wells at higher oil prices (see SS’s comment about $75 without debt below). Your assumptions just seem too optimistic to be realistic. Maybe I just underestimate BAU’s ability to fund stupidity and you don’t:-)
It will be interesting to see what really happens.
Thanks to all for your comments. Always educational.
Jim
Hi Jim,
What do you think will happen to oil prices when oil output decreases?
The scenario is optimistic and assumes high oil prices, note that output does not start to increase until 2019 in this scenario, when oil prices have risen to $88/b (2015$).
The high oil price for this model is $116/b in 2016$ which is reached in late 2020, does that seem unreasonable? The number of wells added is 1800 per year starting in 2021 with a gradual ramp up to that level over a 2.5 year period from mid 2018 to the end of 2020.
I think it likely that if oil prices rise and remain over $100/b for a few years that oil output will expand rapidly.
Note that at $90/b at the wellhead, the average 2014-2015 Bakken well pays out in 27 months.
The net discounted cash flow for that well, a 10% annual discount rate is $12.6 million with a well cost of about $8.5 million that leaves $4.1 million for profit or to be used to pay interest and debt.
I doubt we will be seeing more oil surpluses in the near future. Perhaps if people start to move to EVs in 20 years or so we might see demand fall faster than supply, but it will probably be 30 years or more before we get there so 2045, beyond the scope of my scenario.
At some point there could be a financial crisis, but I will leave it to others to predict when that will occur. In that case demand for oil will fall along with oil prices and supply.
Dennis,
You asked “What do you think will happen to oil prices when oil output decreases?”
I agree the initial reaction will be higher oil prices, but I don’t expect the stability in high prices, oil markets, and free money that existed in the last cycle will ever be repeated. And you need those conditions to ramp up shale again to production levels that can overcome the inertia of decline.
I think the stability expected is the root of our separate views. You foresee (and hope) for it while I don’t see it (but hope for it).
I think the only reason the global economy seemed to be able to afford $100 oil is because abundant cheap money (from central banks) reduced interest costs, which were able to help pay for higher energy costs. It bought time, but I’m still seeing its effects, in the form of activities and businesses that just aren’t productive enough to continue, and shut down, without being replaced. The effects of the last round of high oil prices are still slowly but surely creeping around in the US economy.
Sure, oil prices will go back up soon enough. But can they go up and stay stable at high enough levels to overcome the memories of shale ponzi financials? And can the rest of the world avoid instability that affects oil demand and supply for that same period?
Seems unlikely from here.
I’m glad I’m not making your models because I would go nuts trying to figure out how to build in some of my variables of instability. It can’t be easy or you would have done because I (and others) have suggested it in recent past.
Thanks for putting some numbers and graphics on these things. We may not all agree with you, but you sure make us think. Thank you for that.
Jim
Hi Jim,
Thanks.
I don’t expect the price will be stable, I don’t know how the instability will manifest.
When you look at my models just imagine the real values will wiggle above and below the trend line, prices are very hard to predict. Also if we look at the 36 month centered running average of monthly WTI prices since 1986, prices look somewhat less volatile. I expect prices will rise to the 80 to 90 dollar range and perhaps stabilize (if we looked at future 36 month running average). I also don’t predict oil prices well so perhaps it will be $60 to $70/b, in that case there will be less LTO wells drilled, or perhaps none.
There is no reason at all for Dennis to post anything contradictory to his own thinking.
There are plenty of others here to take care of THAT little chore, lol.
He seems to have a much better grasp of the true fundamental nature of debt than just about anybody else commenting.
I am not personally well versed in the intricacies of banking and finance, but I know enough to understand that debt is not the same thing as resources, either physical or human. Debt is merely a bookkeeping device, a score card, used to keep track of ownership.
Hence debt is not intrinsically an unmanageable problem- a problem without any possible solution.
The REAL problem, in a nutshell, is that we are in overshoot, and we will be running critically short of a lot of ESSENTIAL resources within the foreseeable future.
We may be able to innovate and substitute our way out of some resource problems, but I very strongly doubt we will be successful in every case.
Hence we will necessarily have to give up a huge chunk of BAU as we know it today.
But so far as DEBT itself goes?
Well, there IS this thing known as a POLITICAL REVOLUTION, and a political revolution may very well WIPE OUT most or nearly all of the existing debt in this old world.
The thing about such a revolution is that it will most likely wipe out a substantial portion of the people as well. 🙁
It would probably take a generation or longer to recover from such a revolution, but a generation or two is merely a yawn in terms of human history, and NOTHING in terms of biological history.
But except for the portion that gets used up as munitions, or destroyed in the fighting, all the REAL resources remaining to us will still be available when things settle down again.
Debt is a super useful tool, but like any tool it can be and HAS BEEN abused and misused, especially in recent times.
Revolution isn’t necessary to wipe out vast amounts of debt.
Have you read the authoritative book on the subject? It’s “This Time Is Different – 8 centuries of financial folly”.
We see that countries, companies and individuals go insolvent all the time, repeatedly. Greece, for instance has gone bankrupt every 25 years for the last 200 years!
Every country in the world has reneged on it’s debts, except for the US. That’s why US Treasuries are considered so safe.
Wouldn’t it be a lot more prudent to just ration oil and move to EV’s and renewables as fast as possible?
Putting in another 15,000 wells that are mostly not in sweet spots will make most of the players even more vulnerable to a downturn in oil prices than they were the last time.
Hi Gone Fishing,
At high oil prices wells will be drilled. If oil prices stay low because we move quickly to EVs, the scenario will be incorrect. I would love to be wrong, unfortunately this is fairly likely to occur. Note that 10,000 wells were drilled over an 8 year period from 2008 to 2016.
My scenario has another 14,000 wells drilled over 11 years, possibly too optimistic, but similar to past history.
Dennis, I don’t see any way that low oil prices can occur again for any period of time. We are entering the final descent phase of LTO, exports will be falling worldwide and prices will stay high.
Rationing is just around the corner anyway, so why not be sensible about it and start it sooner. People can put up with being transport limited or they can switch to EV’s.
15.000 more wells in the Bakken saturate it and there is no more room. End of story. Probably stop drilling long before that as they will be far off the sweet spots and profits will not be there, even at high oil prices.
‘Rationing’ the remaining affordable oil supply will ONLY work as intended if the entire world does it together and the same time simultaneously and harmoniously.. . Not a snowballs chance of that is there.
So if say UK and USA ration, all it will do is reduce the price (due to reduced demand) which will encourage other unconstrained users to increase their consumption.
In the absence of a One World Govt and its associated Inspired Benevolent Dictator we are screwed either way. The yeast is running our of sugar, we are heading down the back of the resource supply curve, and everybody here knows what a bumpy horrid ride it is going to be.
(That’s my cheerful appreciation of our predicament for today! Carry on!)
When you have a shortfall, rationing what you do have has no effect on world demand or use. It is merely a way of controlling distribution of product in hand and product you can get hold of. If you can’t get more, how does that change anything.
Demand reduction will occur as alternatives and lifestyle changes take over. That is going to happen anyway. Let the ROTFW fight over the last dribbles if they are stupid.
Hi Gonefishing,
Usually rationing causes more problems than it solves, it usually is best to let the market handle it, high prices will reduce the quantity that people are able to purchase and behaviors will change. More efficient vehicles, car pooling, use of public transportation where available, etc.
Most people don’t fully understand the yeast and the sugar.
If there is ENOUGH sugar in the water, then the yeast die of alcohol poisoning as the result of fouling their own environment even though there is still plenty of sugar around.
If we Yankees were to REALLY work at it, we could get by just fine using only our own domestic oil for many decades to come. Of course we AREN’T going to really work at it, until after the shit hits the fan hard and fast.
Once oil is in truly short supply, it is reasonable to expect that it will be hoarded by countries well enough off to get by without the export revenue.
Once he truly understood overshoot, after many long discussions with me, the reddest of my redneck conservative buddies opined that the obvious thing for us Yankees would be to buy every drop we can from any body fool enough to sell it to us on credit, and save our own oil until the last possible minute.
He always understood that most of the debt in the world will NEVER be paid, being a student of history.
He was quite a capable thinker in some respects, but he died of cancer almost for sure as the result of his heavy consumption of tobacco and beer.
On his deathbed, he finally came to understand that the freedom to smoke and drink are also the freedom to kill yourself, and that the nanny state is not all bad. Too late for him, but a great cautionary tale.
The truth of the matter is that we simply do not know how long bankers and financiers working in collusion with central banks and sovereign governments can juggle the debt balls. Maybe they can keep them in the air for a long time yet.
I am reasonably confident my own old age welfare check will make it to the bank for another twenty years if I live that long.
Hi Dennis,
Again: Time will tell.
Still, I stick to my model as I have been doing for 29 months now. Especially because price is not a parameter in the model.
In june 2010 the average well production was 145 barrels per day, with a total of 1663 wells. Now the average well production is 94 barrels per day with a total of ten thousand five hundred and six wells. That’s a lot of wells. All of them declining from day one. There is an enormous amount of inertia built in into the system now. It will take another ten-, twenty- of even fiftythousand wells to make the red queen recover. She will not. In the mean time companies go broke and the whole thing comes to a grinding halt.
That’s my take on it.
Verwimp,
I like your analyses and, subject to unexpected crises, suspect you’ve pretty well nailed it. Of course, expired (and expiring) hedges will serve to exacerbate decline as well.
Hi Doug,
The average Bakken well pays back drilling and completion costs in 60 months at about $75/b. The resources are there, if oil prices are high enough the oil will be recovered. the F50 technically recoverable resources are about 11 Gb based on USGS estimates and the F95 estimate is about 8 Gb.
I will go with the USGS and the likelihood that as oil output decreases oil prices will increase.
We will see who has the last laugh.
“The average Bakken well pays back drilling and completion costs in 60 months at about $75/b.”
That is impossible to happen in short term because business cycle (real economy) has to grow at least the same rate or higher then finance cycle of shale drillers (money that shale borrowed) and that went exponential in the last 8 years.
“Again: Time will tell.”
~Verwimp
-We can say that about your chart, but for Dennis’ there is nothing to tell!
The curbs on that chart cannot coexist together mathematically.
Whether one believes that projections for 2020, 2030 or 2040 and beyond shall materialize, or not is besides the point – we can argue that forever (as we have been).
-Dennis’ chart cannot be, both logically and mathematically.
Unless one believes that they used the wrong narrow pipes from 2010 to 2015 and the large correct ones from 2020-2025 to get the oil out of the ground (I am joking, of course!), for that chart to make sense, either production curb 2020-2025 has to come down below the level of that 2014-2015, or the line representing wells during 2020-2025 has to be way above the level of that representing wells from 2012-2015…or both.
Or, here’s a third ” bright” scenario for you:
one has to believe that some very advanced (not known today) way of fracking will exist by 2020 in order to “squeeze” far more oil than we do today from a, by then – for all practical intents and purposes – totally exhausted oil field (i.e.: Bakken, circa 2025).
I am surprised some of you “well versed on charts guys” did not see that.
Be well,
Petro
No Petro,
The output has decreased because fewer wells have been added each month, if the number of wells completed per month increases, output also increases.
Do you see a logical reason that the number of wells completed per month cannot increase if oil prices increase to a level which makes wells profitable?
Shallow sand has shown very clearly that $75/b is enough to make an average Bakken well profitable.
Also my scenario has 8 Gb from 24,000 wells, and average EUR per well of about 330 kb. The average well from 2008 to 2015 gas a well profile with a URR of about 350 kb.
The model is very straightforward, but could overestimate the well profile for recent wells.
We do not know what the wells will produce in the future,
I have estimated future well output on the performance of past wells, future well could be worse (or better than I have estimated). The scenario below assumes higher oil prices ($154/b) and fewer wells added per month (a maximum of 130 new wells per month), a more conservative well profile for 2015 and later is used (EUR=369 kb), ERR is 8.5 Gb with 33,000 total wells completed. That is fairly close to the USGS F95 estimate.
Dennis. $75 using cash.
How many in the Bakken shale are using cash?
Also, $75 assumes service companies continue to agree to low to no profit from services provided.
Bakken wells were north of $10 million per in 2011-14.
Again, CLR $11 million cash, $7.3 billion debt.
WLL over $5 billion debt.
HRC is bankrupt.
From memory QEP, SM, HES, EOG, MRO, etc. All have billions of debt. PDP PV10 is less than long term debt at current prices.
Hi Shallow sand,
The wells will generate cash at $75/b, if they can be financed at less than the discount rate, net cash flow will be positive.
Dennis.
One thing, it appears that only equity markets are open to shale drillers.
That, of course, is the best approach IMO. Promoters usually make money if investors pay for the well, regardless of whether the well pays out.
Issuing gobs of debt turned out to be a big mistake. Think how much $$ shale could have gotten 2011-14 by just issuing shares.
Break even would certainly be less.
I have estimated future well output on the performance of past wells, future well could be worse (or better than I have estimated).
They could be better? Really? You think perhaps they drilled the worst spots first, saving the sweet spots for last?
No, the sweet spots have already been drilled. Future wells will, almost certainly, produce less oil than those already drilled. Drillers just don’t think that way Dennis. They would never save the sweet spots for last.
Hi Ron,
My projection of future output from recent wells has much steeper decline than older wells, so I could have overestimated or underestimated what the future output will be from a well that was drilled in 2015.
In 2005 to 2007 the EUR of the average well was much lower than 2008 to 2013, so it is possible that improved techniques might increase output, the first 12 months of output was higher in 2013 wells and 2014 wells than the earlier 2008 to 2012 average well. At some point this will reverse and my model has new well EUR decreasing after June 2018, this guess could be too early or too late.
So basically I am not assuming anyone is saving the sweet spots, just that my estimate could be low or high, we won’t know until we have more data.
Dennis, in the early days of Bakken fracking the wells had short laterals and fewer fracking stages. They got better with much longer laterals. They also got better at locating the sweet spots.
But now the laterals and number of stages has maxed out. And the sweet spots are all drilled up.
There is no doubt whatsoever that the very best and most productive wells have already been drilled.
Hi Ron,
I will wait for the data that confirms you are correct. So far the productivity of the average well for the first 12 months of output has been increasing, later months we can only guess at for the wells that were recently drilled (wells starting production after May 2015 we don’t have data for production beyond month 12).
I thought we would see new well EUR decreasing by 2014, so far the data shows little evidence of that.
Dennis, this is just what Lynn Helms says was happening at a news conference back on May 4th.
Next Round Of ND Oil Production Figures ‘going To Be Bad,’ Helms Says
Low oil prices are forcing operators to focus drilling activity only in the core areas of the Bakken where wells have the greatest production. As oil prices recover and drilling expands to other areas of the Bakken, those high-producing wells will be declining, Helms said.
“It’s really kind of doubtful that we’re going to make that (2 million barrels per day) because we’re drilling everything in the core where the best wells are,” he said.
He said he thinks North Dakota production will eventually reach 1.8 million barrels per day. I wonder if he said that with a straight face, especially after just admitting that all the good spots will soon be gone.
Hi Ron,
I repeat, I do not expect the well profile will increase. When I said it may be better or worse than my estimate of the well profile, it simply means that we do not know what the well profile is, we have to estimate and sometimes the “best guess” is too high and other times it is too low, just like any other guess.
When you make an estimate is it always too high? My estimates may be different, about half the time they are too high, and the other half they are too low. 🙂
That is all that I meant.
Also, my “funny model” uses exactly the same well profile that I have been using since Enno suggested I should correct my model because it consistently was under predicting Bakken output.
Maybe new well EUR will start to decrease sooner than I have predicted (June 2018), but with only 980 new wells completed in the model over a 28 month period and that for the past 2 years the well profile has been increasing, I think the June 2018 guess is reasonable.
The eventual number of wells was 150 per month which is 21% less than the high 12 month rate of 186 wells per month, only 80 wells per month are needed for 1000 kb/d with the current well profile.
If i understand Verwimp’s chart correctly, he started it when the price of oil was over 100. So Verwimp, did you know something the rest of us didn’t or was this just a good educated guess.
At any rate your chart has nailed it to date. Congrats.
You do understand correctly. The model was built before the price collapse. It’s a Hubbert analysis basically. The dataset prior to the moment the model was built was a Hubbert poster child and it still is. When linearised according to Hubbert Linearisation, the data is still a straight line. There is no drop in that line. A sudden policy change coinciding with lower prices would have generated a drop in that line. That would also be visible in the change in daily oil shifting away from the first derivative of the model. Both are not occuring. So the only resulting conclusion is: ND Bakken is running out of oil, despite the high USGS EUR estimate.
I may stand corrected in the future. If prices rise and production rises again, I missed something. Until now (today’s WTI prices are almost double the WTI price in Februari ! ) that is not the case, as you can see.
So you’re confirming that it was a guess. Thanks.
Which only makes sense. A simple Hubbert analysis would never have predicted the surge in LTO production of the last 10 years.
A Hubbert analysis only makes sense when a lot of data on the upgoing side of the curve already exists. 10 years ago there was virtually no LTO. So no Hubbert analysis could have been made.
To the contrary, people have been drilling for oil in N. Dakota, and the Bakken, for many decades. Production grew, peaked, and then declined.
Then…prices rose, and LTO became economic. And we’re seeing a second peak.
Hubert Linearization would never, could never have caught that, because it wasn’t designed to take price into account.
Prices matter. Ask any oilman.
No, it wasn’t a guess. It’s just the nature of things that what goes up must come down. The Hubbert analysis provides a tool to calculate the altitude and the timing of the top, as well as the steepness of the decline. These calculations are more accurate when the top is closer by (or past). Apparently 29 months after the calculations were done, the reality is still in line with the modelled curve.
(I also added a seasonal correction to the Hubbert Curve, that as proven to be pretty accurate, but that is a minor feature of the curve compared to the underlying Hybbert Curve.)
The only guess was that ND Bakken would stay being the Hubbert poster child it was prior to the calculations. Apparently it still is. That guess was based on the fact Lower48 and Alaska production are also pretty Hubbert-like curves, just like earlier smaller booms in North Dakota. It’s in the ‘genes’ of Americans, I presume, to go for it as soon as possible, as hard as possible and as fast as possible when it comes to earn money extracting a resource, until the show is over. A Hubbert curve is the result then…
Lower48…also pretty Hubbert-like curves, just like earlier smaller booms in North Dakota
The curve for the lower 48 isn’t at all Hubbert-like, unless you arbitrarily subtract LTO.
Hi Verwimp,
Try a Hubbert curve on US lower 48 output from 1900 to 1940 and see what you get for a URR.
Short answer, far less than the cumulative production to date.
A Hubbert analysis of the ND Bakken/Three Forks is similar in nature.
It will underestimate future URR by a factor of 2 at minimum.
“Naw, I knew he had a totally different outlook for the future than I did.” …… ~ R. Patterson
…oh, if only that was the case….dear Ron.
Dear Dennis,
do you even look (and possibly think) at your charts after you finish them….and before “broadcasting” them to the world (key word: “before”)?
Now:
-I know that you visited this site a few times here and there over the years to know that “first they dig the sweet spots” (…don’t we all?);
-I know that you visited this site a few times here and there over the years to know the average decline rate of a shale well;
-I know that you visited this site a few times here and there over the years to have learned that the amount of investment/leverage shale players received by Wall Street from 2010-2014 is extremely unlikely to be repeated (and I am being generous with “extremely unlikely”)
……and yet, somehow you decided to show us a chart on which Occidental and Chesapeake and… (you put the name here) …. …whatever, that could not get 1.2 mbrl/d out of Bakken when Bakken was an “unspoiled virgin” while digging >200 holes/month financed by virtually unlimited credit – WILL GET >1.3 mbrl/d out of it via 20%-30% less holes/month financed by what is very likely to be non existing “junk bonds” credit by 2020-2025 ………………………………………………………………………………………………….
……and you want me to consider your “model” seriously?
-I know we have vertical and horizontal hole-poking, but did they invent some type of circular and/or “in-out” f***ing ………. errr, sorry I meant fracking, I do not know about?
Please enlighten me!
Be well,
Petro
Well, I’m going to put my wooden nickel down on the Dennis side of things, mainly because I’d rather have his chart be true.
I’m a sucker for gradual change, and really not so eager to hit the brick wall at high speed.
And I do think that if the oil prod #’s are cratering, the oil price will skyrocket and money will flow to the drillers once again- hot and heavy.
Some of us will be around to see.
You have absolutely no idea what my comment to Dennis’s chart is about!
Even if the price per barrel is $1 billion his chart makes no sense.
Price and “…some of us being around to see….” are irrelevant to what we are talking about :
Dennis’ chart.
Be well,
Petro
Slight aside, but just a comment on the public understanding of energy issues-
I engaged with a senate candidate recently regarding a comment she made at a public debate.
She exclaimed that one way the USA should work to contain Putin was to export energy to Europe so they are not hostage to Russian energy supply.
I later pointed put to her that she ought to study up on energy some more, since we are big importers of energy. She said she had been hearing that we are approaching independence on energy.
I was very surprised by her lack of understanding of this critical issue, since in other respects I found her to be very smart and well studied.
Goes to show that people generally hear what they want to hear, or they simply swallow the most convenient truth. And this includes our policy makers, our voters, and ourselves.
[Hi Petro- this also explains my wooden nickel vote, wrong though it may be]
Hi Petro,
When 180 new wells per month were being added output was increasing, when new wells added fell the output flattened. New well EUR has been going up in 2014 and 2015, the current wells have been performing better over the first 12 months of output than earlier wells so fewer wells are needed to increase output. With current average wells about 105 new wells per month is enough to increase output.
Hi Petro,
The EUR of the average well increased from 2013 to 2015, especially over the first 24 months of output, the well profile was adjusted upwards to reflect this (and to get the model to match actual output), it had been running “low” for several months. A steady 150 new wells per month using the 400 kb well profile I had constructed would result in 1300 kb/d.
The well profile could be too high, an alternative scenario uses a 366 kb well profile (which matches pretty well the 12 month increase in output we see with recent wells compared to the 2008 to 2015 average well with EUR of 350 kb). That alternative is up thread. When oil prices go up, financing will be available.
Hi Petro,
The model is very simple see
http://oilpeakclimate.blogspot.com/2014/06/oil-field-models-decline-rates-and.html
The data one would need to develop the model is in the spreadsheet below:
https://drive.google.com/file/d/0B4nArV09d398VzAydU0zN0VKeTg/view?usp=sharing
In a wider spot below I will explain further.
Hi Petro,
The average 12 month completion rate was 177 new wells per month (centered average) in Dec 2014 when ND Bakken/TF output peaked at 1163 kb/d. This was enough to raise output by 300 kb/d from Dec 2013 to Dec 2014, if fewer wells had been completed (for example and average of 150 new wells per month), the rate of increase in output would have been smaller. By July 2015 the centered 12 month average completion rate had fallen to 148 new wells per month, but output had only fallen by 13 kb/d (1150 kb/d).
Only 105 new wells per month after July 2015 would have been enough to keep output rising. A scenario with 105 wells added after 2017 shown below. You won’t believe this, but only 105 wells per month are needed to increase output, at least for a time.
Sweet spots run out and EUR falls after mid 2018.
See, even if I new nothing of what we are talking about, this last chart makes “more” sense than the first one – visually speaking, for the production curb 2020-2025 has come down a bit….
Find my answer at the bottom…
Be well,
Petro
Hi Petro,
The difference is simply the number of wells added per month. There is no a priori reason that the number of new wells will be limited to 105 new wells per month, perhaps there will be no financing available, but I doubt this would be a problem for Statoil or Exxon Mobil, they can do this out of cash flow if needed.
I also doubt that oil prices will remain under $80/b long term (more than 5 years). I expect by 2021, oil at $80/b(2016$) will be considered cheap.
A different view from a Total engineer, looks to be using proprietary modelling software. Seems to capture the possibility of a fatter tail than the logistic curve does, but has already missed the flat peak area:
http://aspofrance.viabloga.com/files/PCharlez%20_ResilienceNon-conv.pdf
Look at the second to last slide “Resilience of the three american gas plays (UFDsim)” decline around 15% durring the first four years for shale gas. We live in interesting times.
Thanks George.
I am affraid those flat tails are engineered according to the engineer’s wishfull thinking.
Goldman Sachs declares end to oil price recovery
Goldman Sachs has dismissed what’s been described by some analysts as a recovery in the global oil markets.
The uber bear said it expects a “modest” deficit in the coming months due to current prices, before the market returns to surplus early next year.
Rising demand, falling US oil output as well as supply disruptions have helped the black stuff recover from below $28 per barrel in January to just under $50 today.
Read more: North Sea to warn MPs subsea sector risks losing world-leading position
But Damien Courvalin, an analyst at Goldman Sachs, said that this was, at best, the first signs of a turnaround.
“Canadian production is finally restarting, production from other Organisation of Petroleum Exporting Countries’ members continues to beat our expectations.”
Courvalin continued: “The recent recovery in prices risks that non-Opec production declines less than we expect, especially in the US.”
What is it they say? A sucker is born every day? This should be illegal!
as to GS public statements relating to oil and gold, the money has been by taking the other side of the trade, I have little doubt that what their trading desk does.
I tried to post this graph in a prior comment, but it did not work. So, here is a link:
https://srsroccoreport.com/wp-content/uploads/2016/05/U.S.-Energy-Sector-Interest-Payments-On-Debt-.png
I find it interesting that the U.S. Energy Sector now has twice as much debt as it did ten years ago at $370 billion… as production declines.
Furthermore, the U.S. Energy Sector is paying at least 50% of its operating profit now to just pay the interest on the debt. Q1 2016, it was 86% of their operation income just to pay the interest on the debt.
Unless Uncle Sam comes in and BAILS OUT the U.S. Energy Sector, it’s in serious trouble.
steve
Has anyone here considered that the reason we are in this energy position is because of the failing of the “free” market system? Instead of doing what we should do, we allow the market and the price to determine what is done.
Maybe we should stop following the market down the tubes and start just doing what works.
What works better?
Getting off the fossil fuel hamster wheel of death.
If you want to see the innovation needed to do that, I would be cheering capitalism on.
It’s not the banking or monetary system that is the problem, it is the choices made by people and businesses down the line. The banks have no power we don’t give them, just make better choices and be prepared to act differently. The businesses won’t make stuff if we refuse to buy it. We control the reigns then blame the system for doing what we tell it to do.
Make better choices.
Fossil fuels are what makes our civilization possible. So getting off fossil fuels isn’t a wise thing to do.
90+% of people posting here in comments are clueless. I visit this site only for oil news, but every time I have to go thru load of bullshit comments. Dennis Coyne is the dumbest here.
Hi ktos,
Very gracious, and highly intelligent. Thanks.
Dennis, between ktos, Ron and others, you take a lot of flak. Thanks for handling it so well, I’m impressed.
let me second that, Dennis you are always gracious and that is hard to do for someone who is frequently wrong?
any body with a opinion will be wrong, perhaps a sign of intelligence is one’s ability to recognize they can be wrong and then learn for it, most progressive do not show that level of intelligence.?
Well, I’m curious.
Do you believe in evolution?
Are you clear that “progressives” are much more likely to be comfortable with the idea of evolution, while “conservatives” are much less likely?
What does that tell us about their respective grounding in reality?
Hi Texas Tea,
There are conservatives and liberals that are not willing to think about things, there are smart people and less smart people and their political views are not a deciding factor.
“any body with a opinion will be wrong”
“perhaps a sign of intelligence is one’s ability to recognize they can be wrong and then learn for it”
So Tex, what were you wrong about the last time here at POB and what did you learn ?
Huntingbeach,
to your question below, let me say I am frequently wrong. I do believe however, if I was proven wrong in over 99% of my beliefs, I would statistically beat out a number of contributors to this blog and 100% of the climate scientist. The reason I started posting was it became apparent that this blog was becoming a goal seeking support group for anti oil, anti free market, anti free speech/thought. I do think all informed opinions enhance debate and provides the necessary intellectual check and balances we ALL need. I have said before, all scientist get it wrong it is the very nature of science, finally someone gets something right, civilization advances, while other scientist begin to build upon the NEW understandings. Climate scientist and their mental midgets in the media and in government are truly the worst case scenario for the advancement of us as a species.
anti oil, anti free market
Nah. We just want free markets that incorporate good accounting.
If you don’t account for something, the markets can’t optimize for it. For instance, you need to account for the cost of executive stock options. You need to account for the cost of pensions.
And…you need to account for the cost of pollution: mercury, NOX, particulates, CO2, etc., etc.
Even the most conservative of libertarian economists agree with that. They may argue about the exact values to place on those “externalities”, but they all agree on the basic concept.
I have said before, all scientist get it wrong it is the very nature of science, finally someone gets something right, civilization advances, while other scientist begin to build upon the NEW understandings.
Sorry Tea, this is the 21st century and while that might have been true even a century ago, we now have a very extensive and solid body of scientific knowledge to work with and therefore all scientists do not in any way shape or form get it wrong ALL THE TIME! That isn’t how science works today.
While great minds like Galileo, Newton, Pasteur, Darwin may have broken into completely new paradigms of scientific thinking leading to great advances and completely revolutionized scientific fields, that isn’t quite the same as suggesting we today don’t know enough physics and chemistry to understand what is happening with our atmosphere. Einstein didn’t make Newton wrong. Calculus still works and we launch spacecraft into orbits on Mars based on that, even though we now understand relativity.
We aren’t talking quantum thermodynamics or cutting edge particle physics here.
Climate science is based on some pretty basic science and the consensus among climate scientists is in. This is not up for debate. To suggest otherwise is simply denial of reality. The MSM’s misunderstandings of basic science notwithstanding.
Only a complete idiot would engage in climate science thinking they would get rich through grant money!
As for being anti oil, you’ll have to submit your complaints to Mother Nature’s ‘Peakoil Department’ and petition for an extension.
The free market is doing just fine ask all the oil companies and governments that are going bankrupt with no help
from anyone in particular.
Well Tex should I assume the fact that you rambled on about climate change denial and didn’t answer my question, that you don’t realize when your wrong and you are not intelligent?
Here is a hint for you of the most recent wrong comment I’ve seen you made before you started rambling on again today.
“Dennis you are always gracious and that is hard to do for someone who is frequently wrong?”
At least you got the “always gracious” part right.
Hi Hickory,
Thanks for the vote of confidence, but I am afraid that Texas Tea is correct, I am often wrong (just ask Ron P, Doug L, Freddy W, Rune L, Enno P, Petro, and many others).
Differences of opinion make life interesting. 🙂
The worst of the climate scientists are Richard Lindzen, Murry Salby, etc who are both AGW deniers and messed up their own research badly.
Fossil fuels aren’t necessary.
EVs get you to work just fine. And, they’re cheaper, cleaner, and have better performance on the road.
“Fossil fuels aren’t necessary.”
That is the most naive statement I’ve ever read.
In this world of 7.3 B, it is absolutely necessary for the sustenance of somewhere north of 80% of all the protein and calories consumed by living people. They are not just numbers, they eat every day.
Inconvenient truth for your your makebelieve Nick.
I don’t like it either, but it is real.
So, you don’t believe EVs can take commuters to work just as well as ICE’s?
Where did EV’s versus ICE’s come from?
Is your agenda showing?
Hickory, if recalled correctly, Nick G admitted hereon some time ago that they own an ICE, take the train in to work and don’t actually own an EV.
Also, if the (un)economy was predominantly built and designed with, and/or to run on, fossil fuels and then it somehow becomes powered by (low EROEI) ‘alternatives’…
(using fossil fuels and of what EROEI qualities [and from where? KSA? Russia? Venezuela? USA?] for build-out as if it’s not already too late)
…how would that affect the uneconomic engine and what jobs– initially formed in a complex, high-energy uneconomy that ran on cheap oil– would we all be going to? Also, that asked, how much of the planet currently ‘enjoying’ this Western lifestyle would manage to build out and at what costs? USA and Canada? Iran? China?
Apparently, according to Jeju-Islander, who comments hereon periodically, Jeju Island– alone– ‘needs’ 400 000 electric vehicles. Multiply that number by how much? Energy requirements? Mining, manufacturing, shipping, maintenance? All’s successfully said and done; places to go with EV’s within a significantly different energy-level society?
Ok, so we have 7+ billion all happily transitioning/building out to a ‘BAU Lite’ lifestyle of EV’s and PV’s and so on… Anyone see any concerns with that? At all?
Nick, I totally agree that we have to get off fossil fuels, as you are wont to write, but of course continue to question and doubt your position and perspectives about that.
And as I’ve previously requested from Javier, I’d feel better if we had your full and real name. That way, it’s less likely you’re trying to hide something, like an agenda, or put one over on us, and can answer to it like a responsible adult. I think it’s part of what is called, ‘transparency’. Otherwise, like many, you’re in the shadows and can say practically whatever you want without the responsibilities or repercussions.
No, I believe fossil fuels do a lot more than just power ICE
HB wrote: “No, I believe fossil fuels do a lot more than just power ICE”
Sorry, that argument is weak: Only a small percentage of oil and NG goes into chemical industry, most is indeed fuel for cars. Therefore, to focus on the exception and ignore the rule is a strange way to make an argument that survies in a serious discussion.
Ulenspiegel, you have a point there. Outside of jurisdictions like my island nation and other islands, the lion’s share oil oil is just being used to move shit (and people) around, from one place to another. The lion’s share of the other fossils fuels, gas and coal, is being used to generate electricity. I am sort of cementing the idea in my mind that, the true value of oil is largely it’s ability to facilitate the movement of large numbers of people and huge amounts of goods.
If other means of generating electricity and moving shit around existed, then in fact, FF would not actually be necessary! 😉
When it comes to moving people around, here’s a somewhat novel idea.
What if some car company decided to build an electric car, a fancy, expensive, 200 plus mile range one at first, in order to finance development of further models and scale up the required technology? What if this company, while scaling it’s manufacturing to say 2,000 plus units per month, started development of a special fast charging network along major interstate routes, sort of like the one shown below? What if this car company was able to develop a more affordable car and make, say half a million in 2018, by which time the fast charging network to which the car has access, has blanketed the entire US?
The map below, shows the Tesla “Supercharger” network. The first location was opened in Barstow, CA on November the 19th, 2012. As of 9:00 am EDT June 18, 2016, there are 276 locations in operation with 12 under construction and 14 permitted but not yet under construction. There is no fee to charge at these stations for most of the “Supercharger capable” cars that Tesla has sold (the service is “free”). This network is owned and operated by Tesla Motors Inc. and is being built without any government subsidies that I am aware of.
A paradigm shift is underway!
Hello Ulenspiegel.
Let me clarify. I responded to the comment because Nick made a huggggge jump form “Fossil fuels aren’t necessary.” to “you don’t believe EVs can take commuters to work just as well as ICE’s?”. Also, I don’t think the”chemical industry” for the most part use oil as energy, but as feed stock to make plastic, etc.
Today, humans really don’t have a viable replacement for all fossil fuel electricity, farm tractors, ocean shipping, jet aircraft, heavy duty trucking and steel production. I admirer Nick’s contributions here to make the reads aware of the possibilities that are coming and can be done.
If humans can reduce 90% of their burning of fossil fuels and keep 90%(maybe improve) of their quality of life in the next 40 to 50 years. That would be a fantastic achievement.
I will stick to my belief that fossil fuels are necessary today. We can’t get to the future of no fossil fuels without using them today.
Nick made a huggggge jump form “Fossil fuels aren’t necessary.” to “you don’t believe EVs can take commuters to work just as well as ICE’s?”.
Well, I was trying to make a point. One has to be succinct, rather than writing a novel. Here’s a slightly more extended comment:
We have superior replacements for the majority of fossil fuel consumption: EVs for personal transportation; rail for long-haul ground trucking; concrete for asphalt.
We have adequate replacements for the remainder of about 15% of oil consumption (aviation, seasonal agriculture, long-haul water shipping), in the form of biofuel and synthetic fuel. Biofuel isn’t scalable very much above current levels, but synthetic fuel will cost between $5-10 per gallon (closer to $5, probably). Steel can and is recycled with renewable electricity. Virgin iron can be smelted with renewably generated hydrogen. Those aren’t currently competitive with subsidized oil/coal, but they’re certainly viable.
And…if we don’t burn fossils as fuel, but use them as petrochemical feedstocks or building/manufacturing materials, in principle they don’t create nearly as much pollution. So, there really isn’t a compelling pressure to eliminate them, I think.
I will stick to my belief that fossil fuels are necessary today. We can’t get to the future of no fossil fuels without using them.
No one’s suggesting banning fossils overnight.
Horses transported the first oil barrels. Oil is now transporting EVs. That won’t be the case forever.
Ok, so I’m going to come full circle on this discussion and say- you are right Nick, we don’t need fossil fuels.
That is, once we have completed a massive global downsizing, down to maybe 700 million or some such number. And if those left are all well-intentioned, cooperative, smart and live in a simple manner (permaculture for example).
Until then we are massively dependent on fossil fuel.
Keep in mind the world isn’t just where you live- for example according to the UN “the population of Nigeria is projected to surpass that of the United States by about 2050, at which point it would become the third largest country in the world.”
http://www.un.org/en/development/desa/news/population/2015-report.html
Hi Hickory,
As far as constraints on energy resources you are correct that over the short term we need fossil fuels to transition to something else.
Do you see any logical reason that most energy cannot be provided by wind, solar, hydro, geothermal, and nuclear power at some future date (say 2050) as the fossil fuel resource depletes and fossil fuels become much more expensive? The relative cost of alternatives to fossil fuels will be much cheaper than fossil fuels as they deplete and demand for those alternatives will increase.
we don’t need fossil fuels. That is, once we have completed a massive global downsizing, down to maybe 700 million or some such number.
Why?? Humans “consume” very roughly 20 terawatts of power, on average. How much does the sun provide?
10 terawatts?
100 TW?
1,000 TW?
Actually, all of those are wrong. It’s 100,000 TW.
24 x 7.
365 days per year.
No, Dennis- I do not see why we theoretically couldn’t make a complete break w fossil fuel by 2050.
But it would take an epic effort, and frankly I just don’t trust that mankind will gracefully wean themselves from the massive energy trough from which we have been drinking. For one thing, I believe we are in for a massive downsizing in population and I think that will be a very disruptive process. Disruptive to not only a huge number of people, but also to smooth functioning of economies. And without a smooth functioning economy, efficient political systems (w/ effective decision making) and an educated populace, the chances of navigating the mess is poor.
And lastly, and likely most important- I just don’t trust people to behave themselves- oh little things like wars, holocaust, ethnic cleansing of continents, and stuff like that. The risks of anarchy are huge, w failed states around each corner.
I do think that OFM is right in predicting that some locales have a chance to fair relatively well, but that still might not look to pretty.
I’m sure we could say a thousand more things on this, but enough for my opinions.
Some would say I’m very pessimistic, but I think its more like realistic.
HuntingtonBeach,
only a small part of the primary energy is used as chemical feedstock, oil can in principle be replaced with biofuels, synfuels or with coal for these applications. All the process heat can be electric. Oil is not essential.
I, too, disagree, that we can switch to REs within two decades, I would be happy with 70% REs in 2040, but in the long run it is possible.
Hi Hickory,
I think we are on the same page.
I agree transition will not be easy and there is much that can go wrong. Fossil fuel output is not likely to decrease sharply, more like 1 to 1.5% per year. Fossil fuels become more expensive, more wind, solar, and EVs are produced and energy is used more efficiently and with difficulty a transition might be accomplished.
The disruption is likely to lead to another Great Depression and if the World recognizes the mistakes made in response to the Global Financial crisis (a re-read of Keynes would help here) it might not be as bad as 1930 to 1945, hopefully WW3 is avoided.
ktoś,
The first prize in a certain contest was a week in Poland with you. The second prize was two weeks in Poland with you.
Hi Gonefishing,
Many market failures are in part the failure to deal with pollution and public goods properly, economic theory deals with these problems just fine, but policy makers fail to heed the advice of economists.
Support for public transportation, and an HVDC grid and proper pollution taxes or “fees” would go a long way to solving much of the energy problem. Legislators refuse to take action.
Legislators refuse to take action.
True. I suppose we can fault them for not having a little more courage to do the right thing.
But, mostly, it’s the fault of the legacy industries that make the campaign contributions and fund the “think” tanks and media that make it impossible for the legislators to do the right thing.
And the voters, who don’t pay enough attention to counterbalance the special interests that are buying the politicians and the media message.
Of course, the information this blog provides is an important part of the pushback against these legacy industries.
The truth will make us free…
http://www.huffingtonpost.com/entry/mammal-extinct-climate-change-bramble-cay-melomys_us_57616c6de4b09c926cfdb41c
First climate change came for the Bramble Cay melomys. Next climate change is coming to take your coastal shoreline. Than climate change is coming for deniers, but it won’t be to change their minds.
climate change giveth and climate change taketh away, as it was in the beginning so it will be in the end
tt
HuntingtonBeach,
The Climate Deniers will be forced to realize it when they get bypassed to heaven and head to hell. As the walk through the door to hell, the Devil will say , “Wasn’t HOT ENOUGH for you up there… AYE?”
steve
Steve, It won’t be the heat that makes red state christian Republican climate deniers cry in hell. It will be the fact that they will have to check their guns at the door before their endless incarceration for their selfish environmental sins.
The devil Toby welcomes you to hell…
https://goo.gl/ijscrv
just curious in your alls world view regarding the after life, will democratic homosexual wife beating Islamist mass murders also go to hell or just law abiding red state conservatives with some small degree of objective critical thinking skills.
Both, obviously.
But I only believed in reincarnation in another lifetime, not now.
Thanks for the laugh Fred
“The Jews were right… ” precious
a little context;
http://theconversation.com/australian-endangered-species-bramble-cay-melomys-18036
“Bramble Cay is by no means stable. Between 1958 and 1987, the cay decreased in size; but in 2011 it had returned to a size comparable to 1958.”
“While the size of the cay varies, the vegetation on it is shrinking, and this might be the main cause of the melomys’ decline.
Bramble Cay also serves as a rookery to marine turtles and seabirds. The vegetation is disturbed by nesting seabirds throughout the year and by turtles between October and March. In our December 2011 survey the area disturbed by turtles was quite extensive, and many turtles were nesting towards the centre of the cay.”
Is there a number for wells P&A each month? and the type (conventional vs HZ)? And how much they were producing when they were plugged? And year they were completed?
I have no idea if that information is readily available, but it would tell you alot about the Bakken wells, life span, and their profitability at certain price points.
I took a quick look at the ND P&A’d well completions. There aren’t many with that status added on a monthly basis and none since December. P&A isn’t a simple process. It might be better to look at TA and shut-in wells. I think most of your P&A wells would start there.
On my website, on the “Well Status” tab, you can see the total number of PA’d and inactive wells over time.
You have a cute handle. ^u^
Global oil industry’s retrenchment tops a staggering $1 trillion
http://www.cnbc.com/2016/06/15/global-oil-industrys-retrenchment-tops-a-staggering-1-trillion.html
Copied from a GULF TIMES article:
“The record for the world’s cheapest solar tariff was set in Dubai last month in an auction. MEED reported that a consortium including Masdar Abu Dhabi Future Energy Co and Saudi Arabia’s Abdul Latif Jameel bid 2.99 cents per kilowatt-hour, 15% cheaper than the previous record.
It also undercut the price of power from a new coal-fired power plant that was commissioned by Dubai last October, which is expected to feed power to the grid at 4.501 cents per kilowatt-hour.”
Of course Dubai has one of the world’s driest and sunniest climates, and it will probably be five or ten more years before places with more typical climates can hope to see solar electricity sell this cheap.
It seems rather likely to me that most of the Middle Eastern countries that can afford to build out solar on the grand scale are VERY likely to do so over the next decade or two.It will be cheaper for these countries than importing oil and gas, or burning their own domestic production, which can be sold on international markets.
I wonder how much it will cost to super insulate a house in that part of the world, and incorporate enough thermal mass that additional electricity for air conditioning will be unnecessary in the evening and thru the night. This approach might work out more economically than using batteries or ramping up gas and oil fired generating plants to handle the overnight ac load.
Actually, superinsulation is not that necessary. Build the house partly underground, make the walls solid and very thick, add insulation to the interior where necessary. A well insulated attic space would help a lot too. The outside should be white or some other highly reflective color. Some PV and a heat pump, heat transfer placed well underground, will do the rest. Large overhangs for shading are needed also.
Up in Massachusetts, a traditional house was built double walled and very well insulated seated. The roof PV and heat pump provide all the needed energy/heating. Apparently they never turned on the cooling side since the house stayed fairly cool in the summer. Most of the cost of extra insulation was offset by the lower cost of the heat pump versus a full sized heating system used in a normal house.
Going underground is great, but doing so requires a substantial change in the way people think about their homes. Even Hobbit fans with a ton of money seldom build underground.
We have a large two story masonry barn, with the bottom or basement story about eighty percent underground, since it is built into a hillside with only one wall exposed. It never gets hot, and never goes below freezing, ever when we have the rare week of zero F weather. I am thinking about converting it into some sort of living space, since we no longer use it for crop storage.
What I am thinking about in terms of super insulation and thermal mass in such places as the Middle East is that this would be a practical way to store solar electricity in THERMAL form. I don’t like the word coolth but it does fit the bill.
If this strategy were employed in hot climates over large areas, such as the American south, it could go a long long way toward solving the overnight solar power intermittency issue.Combined with a high efficiency heat pump, it can cut heating and cooling costs by as much as eighty or ninety percent.
Super insulation and thermal mass are easy sells, in terms of acceptance, if not in terms of the customers willingness to pay for them.
At first glance it would seem that a country such as Saudi Arabia could go for solar and well insulated houses and buildings with lots of thermal mass and SELL a hell of a lot more oil, rather than burning it to produce electricity, and come out smelling like a rose.
Oil is sure to go up again, depletion guarantees it.
“At first glance it would seem that a country such as Saudi Arabia could go for solar”
from Bloomberg:
Saudi Arabia Scales Back Renewable Energy Goal to Favor Gas
http://www.bloomberg.com/news/articles/2016-06-07/saudi-arabia-scales-back-renewable-energy-target-to-favor-gas
• Kingdom cuts renewables target to 10% of energy mix from 50%
• Gas and renewables to free up more Saudi crude for export
Saudi Arabia is curtailing renewable-power targets as the world’s biggest oil exporter plans to use more natural gas, backing away from goals set when crude prices were about triple their current level, according to Energy Minister Khalid Al-Falih.
The kingdom aims to have power generation from renewable resources like the sun make up 10 percent of the energy mix, a reduction from an earlier target of 50 percent.
“Our energy mix has shifted more toward gas, so the need for high targets from renewable sources isn’t there any more,” Al-Falih said. “The previous target of 50 percent from renewable sources was an initial target and it was built on high oil prices” near $150 a barrel, he said.
Saudi Arabia, which holds the world’s second-largest crude reserves, will double natural gas production, according to Al-Falih, and the government will expand the distribution network to the western part of the nation. Generating more power from gas and renewables should make more crude available for export, which would otherwise be burned for electricity for domestic use.
Saudi Arabia has for years sought to develop gas resources to provide fuel for power plants and industries and to free up more oil to sell overseas. Saudi Arabian Oil Co., the state-run producer, set up several ventures with international partners to explore for gas, but results were disappointing and most of the companies withdrew from their ventures. Production of dry gas, or fuel for use in power plants or factories, will rise to 17.8 billion cubic feet per day from 12 billion, according to the plan.
“Gas currently makes up around 50 percent of the energy mix in Saudi Arabia, and we have an ambition to see this grow to 70 percent in the future, either from local sources or from abroad,” Al-Falih said.
Achieving the targets will be a challenge, said Robin Mills, chief executive officer at consultant Qamar Energy in Dubai. Gas projects usually require a lead time of at least three to four years before production begins, said Mills, a fellow at the Brookings Institution in Doha.
Saudi Arabia is seeking to increase renewable-energy production to 9.5 gigawatts, according to a plan announced in April. Saudi Aramco has a 10-megawatt solar installation on the roof of a parking lot at its headquarters in Dhahran.
The Persian Gulf nation has previously scaled back its ambitions for renewables. In January 2015, it delayed by nearly a decade the deadline for meeting its solar-capacity goal, saying it needed more time to assess technologies. The kingdom’s earlier solar program forecast more than $100 billion of investment in projects aimed at generating 41 gigawatts of power by 2040.
A quick search on “underground homes” revealed way to many types, styles and designs to discuss here. I would say most all the problems have been worked out and I do not think that lifestyle changes would be that dramatic other than saving one heck of a lot of money and not being dependent upon a failing resource.
Greetings. I have lived in a small earth sheltered house for 33 years. It’s about halfway ubderground. It’s easy to heat a cool, and never shakes in the wind. It was also quite inexpensive to build. I highly recommend underground or in the ground building!
According to some, for example, earthship literature, it looks possible, using passive solar, good glazing (sun-facing window area) and houses’ insulation/thermal sinks alone (perhaps with some creative air circulation implements), to keep it cool enough in the summer and warm enough in the winter in fairly high latitudes, such as, if recalled, Montana and/or Colorado.
If this is the case, the general concept should be relatively or somewhat transferable to other forms of residences, such as earth-berms, straw-bales and the like.
There’re other factors that can be involved, such as building within desirable microclimates (wind-blocking/shade trees and pond sun-reflections) compost heat(ing), and building smaller.
Fernando, if you are reading this; I appreciated your ancestors’ animals-in-the-basement thing such that you had mentioned before some months ago, but have wondered about allergies, dust/air-borne particulates, noises, smells, vermin, upkeep, and so forth.
I’ll just throw out a wild ass guess that light and tight construction with PV and heat pumps will win out in the future over Earth Ships, high thermal mass, underground homes, straw bale, and compost heating.
Not everyone is attracted to the troglodyte lifestyle, and few find the idea of living in a house made of earth filled tires and repurposed beer bottles appealing, or aesthetically pleasing. For the most part, H.O.A’s, A.R.C’s aren’t enthusiastic about them, and R.C.’s tend not to accommodate them.
It’s not that complicated really. Balloon frame construction performs well, is conservative of materials, and most builders know how to do it.
Sure it’s a bit challenging to convince some folks that the way they’ve always done it – R-19 batts in a leaky wall, flex ducts through the attic – is inadequate, but it’s an order of magnitude easier to specify R-10 under slab, R-20 basement wall, R-40 above grade wall, and R-60 roof insulation, air tightness, triple glazing, a heat pump, and an energy recovery ventilator than it is to spec a cob building that is going to perform in a cold climate. It’s easier to retrofit them also.
Those who for ideological reasons eschew any technology developed after 1720 may have to resort to non-standard construction or goose down filled stud cavities, but most people feel okay about central heating and cooling and find thermostats convenient.
“I’ll just throw out a wild ass guess that light and tight construction with PV and heat pumps will win out in the future over Earth Ships, high thermal mass, underground homes, straw bale, and compost heating.”
Yep. A passive house is possible in both, urban and rural areas, without any problem. The proposed alternatives do usually not work in cities very well.
Great point. One of the things I regret most about the end of BAU is the smells; and they haven’t even started yet.
I post this info as it relates to yesterday discussion and to highlight the risk of people make snap judgements about media stories actually being fact based and unbiased this also of course relates to media stories on climate change.
“A law enforcement source said that the shooting suspect legally purchased recently the two weapons used in the attack at the shooting center in Port St. Lucie near his Fort Pierce home. He had a Glock 17 handgun purchased on June 5, a Sigsauer MCX assault rifle purchased on June 4 on his person during the shootout, and investigators later found a .38-caliber weapon in his vehicle.The rifle used by the Islamist terrorist in Orlando was instead a Sig Sauer MCX carbine, a modular, multi-caliber (able to swap to different calibers, including 5.56 NATO, 300 BLK, and 7.62×39) rifle system that sometimes utilizes STANAG magazines common to more than 60 different firearms, but otherwise has no major parts that interface with AR-15s in any way, shape or form.
This of course will make no difference at all to the anti-gun politimedia, who don’t particularly care about factual accuracy and who likely wouldn’t be able to tell an AR-15 from a toaster oven if their lives depended on it.”
This of course will make no difference at all to the anti-gun politimedia, who don’t particularly care about factual accuracy and who likely wouldn’t be able to tell an AR-15 from a toaster oven if their lives depended on it.”
Oh yeah, tks so much Tea, that makes all the difference in the world! It’s like saying we should allow for more lenient drunk driving legislation because some drunk involved in a fatality, at the wheel of what the media have described as a Mercedes, was really driving a BMW! I’m sure the families and friends of the dead will rest much easier knowing the truth!
My sympathy is with the victims, but the truth still matters.
Lying and or otherwise misrepresenting the facts is not a morally acceptable policy in any situation, within my personal value system.
Perhaps I am at heart an unreconstructed redneck, but I don’t believe multiculturalism is a permanent possibility in cases involving some religions.
I am not a religious person personally, but I AM a Christian in the nominal sense.
Everything I have ever learned about biology basically can be boiled down to one line.
Darwin rules.
This does not mean group cooperation is impossible, it merely means group cooperation is part and parcel of competition with OTHER groups.
Some cultures are never going to mix, long term, EXCEPT at the business end of weapons, and the existence of such incompatible cultures is an iron clad fact.
We have the occasional individual (usually a hard core Christian ) who takes his belief that abortion is murder seriously enough to burn an abortion clinic, and we have our occasional hard core guy who believes homosexuality is a sin deserving of murder and that he will go to paradise for carrying it out.
We need as few of each sort as possible. Inviting more of either kind into the country is UTTER STUPIDITY. This is a practical rather than an intellectual argument. We have many times more problems, and more urgent problems, than we can hope to solve.
The thing about religions is that they are EVOLVED behavior systems that confer substantial survival and or fitness value on the people that practice them. They aren’t necessarily going to go away, they just evolve with the times.
As Lord Chesterfield, IIRC, put it, when men cease to believe in God, they do not henceforth believe in NOTHING. We WILL have our leaders, and if they are not Sky Daddies and Sky Mommies, then they will be Gandhis, or MLK’s, or Hitlers, or whoever manages to emerge on top of the heap.
In terms of my own deep family history, at times Prods and Papists have enthusiastically murdered each other, and at times one or the other faction was successful enough to win near total control of the local resource base, and thus GO FORTH AND MULTIPLY, lol.
We current day yankees murdered almost all of the native Americans here before us, excepting the ones that died of our contagious diseases even before we had an opportunity to shoot them.
Talking about this sort of thing in terms other than Darwinian behavior is simple minded, if you want to UNDERSTAND naked apes.
If the shooter had been a Christian, there is essentially ZERO doubt in my mind that there would be TSUNAMI outpouring of anti CHRISTIAN rhetoric from ninety nine percent of the people who are defending Islam, etc.
There is an old saying in farm country. Be damned sure you know what lives on the other side of a gate, before you open it.
Other people say you should be careful what you wish for, because you may get it.
Opening the gates of this country to lots of immigrants from societies with incompatible cultures is going to prove to be one of the DUMBEST FUCKING MISTAKES we have ever made.
Assimilation used to be the name of the game, but it no longer works very well.
We have a problem, sure enough, and guns are more a SYMPTOM of the problem than the problem itself.
And so far as immigration in and of itself goes, if we want to truly preserve what we can of what is left of the environment, then immigration needs to be VERY SHARPLY CURTAILED across the board. That’s the shortest and most effective possible route to a domestic population peak and eventual decline, although I don’t expect it to be implemented, until the political backlash grows large enough to force it thru.
As overshoot really starts taking a bite out of the world economy, migration and immigration is going to be a bigger problem every year. People are already piling up by the millions at borders in Europe. Any body who does not anticipate ENORMOUS problems involving immigration within the easily foreseeable future simply has no conception of what overshoot and runaway climate change are all about. The manufacturers of barbed wire are going to be in the tall cotton.
I am most adamantly not a Trump fan, but if anybody has any problem understanding what I am trying to say, perhaps it would help them to get the point if they think HARD a while about WHY Trump might actually be the next president of this country.
B A C K L A S H.
I detest sounding like a Trump supporter by pointing this sort of stuff, but it is almost impossible for any politician to be wrong about EVERYTHING, and at least screening immigrants very closely indeed would be a very good policy for now and probably for the fore see able future.
The reason Sanders would have won the D party nomination as easily as taking candy from a baby, except that Clinton had a ten year head start and owns the D party apparatus, is also backlash, but of a DESIRABLE sort.
In the case of the Sanders camp, the backlash is mostly against the control of the government and the country by the existing moneyed elite, the Wall Street kraken that has its arms wrapped around society in the same fashion as a spider wraps up a bug. I am fully in favor of THIS backlash, but otherwise sympathetic to the Clinton camp.
Let us pray to the Sky Daddy or Sky Mommy of our choice that we get away from oil as fast as possible. By doing so, we will mostly wipe out one of the biggest sources of trouble in the world today in two fold fashion.
One, we deprive the troublemakers of the revenues necessary to make trouble,and two, we will no longer have any reason to be “over there” intruding against their wishes on their home turf , thereby quite justifiably from their pov enraging them and inciting them to do us as much harm as they possibly can.
FBI: US Homicide Rate At 51-Year Low
“The US homicide rate in 2014, the most recent year available, was 4.5 per 100,000. The 2014 total follows a long downward trend and is the lowest homicide rate recorded since 1963 when the rate was 4.6 per 100,000. To find a lower homicide rate, we must travel back to 1957 when the total homicide rate hit 4.0 per 100,000.
Homicide rates were considerably higher in the United States during the 1970s, 80s, and 90s, but over the past 25 years, have fallen nearly continuously:”
there are a number of reason for this but it should be noted the above reduction in homicide rates occurred simultaneously with the expansion of the numbers of guns in circulations as well as right to carry laws across the country.
http://www.zerohedge.com/news/2016-06-16/fbi-us-homicide-rate-51-year-low
FBI: US Homicide Rate At 51-Year Low
http://www.bbc.com/news/world-us-canada-34996604
Here is how the US compares to Canada, the UK and Australia.
Source the BBC
Compare that to 815 deaths per year per 100,000 for all causes in the US.
Hi Gonefishing,
Nobody is claiming people won’t die, the planet would get crowded pretty quickly if the death rate went to zero. 🙂
How in the heck did you come up with that interpretation???? Mind boggling.
Hi Gonefishing,
What was your point? That the death rate from homicides is 0.55% of Deaths from all causes?
Not sure how you intended you comment to be interpreted.
My mind reading skills are appalling 🙂
Certainly had nothing to do with immortality.
Hi Gonefishing,
And I still miss whatever point you were trying to make. As I said my mind reading skills are just not very good.
Well, actually, if the fertility rate is 50% of replacement, then it takes very few generations for population to become stable, even with a zero death rate.
It’s the series: 1, 1/2, 1/4, 1/8, 1/16, 1/32….
That series adds up to only 2.
I have little doubt a “climate scientist” would look at the charts and data in the article I linked and conclude homicide rates in the US will fall to zero in less then 10 years if as guns ownership continues to increase at current rates. Of course every alarmist would be lapping it up like an ice cream sunday.
There are a number or reason homicide rates have been cut in half in 10 years while guns in the US have tripled. It is a fair point to conclude the issues is not the gun. I am not a fan of Howard Stern but he made a decent point. Some folks are sheep and they think they can best be protected by a benevolent government, others know the flock must always be protected from the wolves and are willing to stand up and serve their family, communities and country.
http://dailycaller.com/2016/06/15/howard-sterns-epic-gun-rant-the-wolves-are-attacking-and-the-sheep-are-disarming/
Of course, the “wolves” tend to kill themselves, either accidentally, through suicide, or exchanging gunfire with other wolves, much more than they save their lives using guns in self defense.
So, the sheep are going to do quite well in this wolf vs sheep scenario.
“Homicide rates were considerably higher in the United States during the 1970s, 80s, and 90s, but over the past 25 years, have fallen nearly continuously:”
Yes, after the banning of lead from gas and paint.
http://www.motherjones.com/environment/2016/02/lead-exposure-gasoline-crime-increase-children-health
A graphic:
Bob,
Thanks for posting what I was thinking. Similar numbers for Europe, IIRC.
More than anything else, actions of the US Govt. have contributed to increased firearms ownership in the US. People bought guns because they felt insecure and did not trust their government to protect their best interests, concluding that was something best taken care of by oneself. Once armed, folks discovered how much fun it is to shoot. Ammunition manufacturers are reaping the benefits, with lots of small and niche companies helping meet demand.
Knowing many more potential victims are now armed has changed the face of violent crime from the criminal perspective, but getting lead out of gasoline and paints has reduced violent behavior. Nothing is simple.
I do feel safer when I enter a business and see armed law enforcement officers there as customers, and I know others are lawfully carrying their concealed weapons. Anything bad that starts will most likely be over quickly and decisively.
I avoid gun free zones like the plague. Killers are often cowards. They want victims who can’t or won’t defend themselves, and part of their preparation is finding easy victims. I won’t be there.
People are the problem. Weapons are just tools. When things break down, having the right tool can be comforting, and more.
Jim
….thanks for making it “appear” again!
Petro
Psssst. US 10 yr paper this moment is at 1.5447% in Asia. German 10 yr paper is negative. Repeat. German 10 year bonds are negative. You lend them money, you pay them to do so.
Lets be clear here. This is not “real” aka inflation adjusted. This is the nominal interest rate. Negative. You pay them to lend to them.
This is not the future. This is now. This is the destruction of the integrity of the concept of money, worldwide.
trala trala
What a marvelous thing it will be for shale drillers to borrow money to drill, discover that the bank is quoting that negative interest rate and decide, rightly, to just collect that risk free inflow and not bother with oil.
I don’t think any shale guys are borrowing at negative rates.
Not sure about XOM corporate paper, but assume it isn’t negative as none of the US government paper is.
Shale guys are not borrowing at negative rates.
They were borrowing at 4-12% and have accumulated debt that most of them will never be able to repay.
Now they are issuing new equity and diluting existing shareholders.
That’s another way to get free money in order to be able to drill new wells.
AlexS. Only the Permian guys seem to be able to issue shares, mostly at least.
Wonder when anyone will figure out most of those wells will never produce near the rate of the average middle Bakken well?
I have read several claims of $35 WTI profitability in the Permian for those wells.
I cannot make that work outside a small percentage of them.
http://www.cnbc.com/bonds-france-treasurys/
Negative out to 8 yrs. Maybe Total can issue commercial paper overnight and collect. The gubmint is getting 1/2% out to 2 yrs.
http://www.cnbc.com/bonds-germany-treasurys/
shallow sand,
“Only the Permian guys seem to be able to issue shares”
One of them, Pioneer, is planning to offer 5.25 million new shares at about $827 million. Part of the proceeds will be used to buy Devon’s upstream assets in the Permian.
Pioneer Goes ‘Bold’ as Devon Retreats in Top U.S. Oil Field
http://www.bloomberg.com/news/articles/2016-06-15/devon-raises-858-million-in-asset-sales-including-pioneer-deal
It just might be that people willing to lend to the Germans at negative interest rates are pretty confident the safest way to store their money is to loan it to Germany at a slight loss of face value.
If they get back ninety nine percent of it, face value, and the German notes have more purchasing power than any other fiat money when mature , they will come out ok, compared to other folks who loaned in other currencies that depreciate.
Such lenders might actually gain quite a bit in a deflationary environment. Suppose the price of bread goes down by half, or rent goes down by half? Such lenders will close to double their bread and rent purchasing power while having had safe ( in some folks opinion at least ) storage of their money.
If the American dollar depreciates in terms of buying bread and paying rent at five percent per year, then the person getting two percent interest on dollars is losing steadily due to inflation and taxes.
Some people have very little faith in any fiat currency. My opinion is that all of them will eventually depreciate to just about nothing, given time. I have a few old silver dimes that would buy me two cokes each when I was a kid. Now each one is worth a few bucks for the silver content, but used as currency, I would need at least ten or twelve of them to buy a small soft drink.
If I had a LOT of money , I would own a significant amount of gold coins just to be on the safe side. But buckshot and centerfire rifle ammo are easy to buy and store, and keep well enough, and will probably be just as good as a barter medium IF the shit hits the fan hard during my lifetime, but I think the odds are at least twenty to one to one that OLD MAN BAU will out last OFM, lol.
The cost of damned near everything that matters has gone up at least ten to twenty times in terms of fiat money over the course of my lifetime, from bread to gasoline to health care to shotgun shells to property taxes to rent to keeping a mistress, which at least is no problem for me since I am too old now to want one.
Anybody who has any significant amount of money loaned out at one or two percent in my estimation, for any length of time, is at very high risk of losing a good bit of purchasing power.
I would far rather have a truck load of lime in a pile than the money equivalent in the bank at two percent. Ya need a little money easily accessible, no more should be held as cash, except for having some handy to buy up any bargains that come available.
Just my monthly 2c worth on GORs.
Oil price up, cash flows more comfortable, Oil production down a whopper, GOR also down and against the trend!
I wonder if someone fiddled with those chokes just a little to more conservative settings?
I was thinking exactly the same. I would think the damage is done though
Daniel,
I believe you are in the patch? Do you have any on the ground experience you can relate?
As for damage, that will be the final proof of what has been happening. I will be watching Rune’s graphs to see if the recent years start to drop below previous years totals.
There was a great summary by somebody else a few posts back. The big issue is that you have condensate get into gasphase inside the reservoir. This in turn will result in more “stranded” oil. I fear we will only see the results later this year/2017. I would expect the production rates to drop of steeper than before and result in lower ultimate recoveries (but i know conventional plays much better). Maybe somebody with more knowledge can chime in?
Daniel,
You raised an interesting point. Everybody that bothers to write on these blogs, that have any hands on experience, all seem to be from the conventional oil field. Either the shale players, are not interested, or are keeping a big secret. Smiles.
I would really love to hear some real inside info. I am sure a lot of speculation could be put to rest very quickly.
As for damaged wells. We will just have to wait for the data to come in. April’s decreasing GOR has given me confidence in my original suspicions of over producing wells. Not sure how keen Shallow will be pumping dead oil from 10,000 ft TVD and 20,000 ft MD. At least there will be plenty of wells to experiment with, until you can make it work! lol
Toolpush.
Although it intrigues me, don’t worry, we will leave the deep stuff to someone else.
Low volume wells that produce little to no water can work even in a low price environment.
Besides the costs in the event of a down hole failure being down right frightening, it has not been determined where these wells will settle out in years 10-30+.
Toolpush.
Keep in mind, this is April production.
One thing, ExxonMobil completed a lot of the wells in the first four months, maybe look at shaleprofile and see how their declines compare.
Maybe they aren’t pulling on them as hard?
Reminder:
Number of wells completed in a month has failed to explain NoDak production many times over the past several years. There have been numerous months with production higher than others when wells completed totals were lower, and vice versa.
The choke corrupts all attempts to analyze.
Hi Watcher,
Yes there will be variation due to choke as well as the fact that not all wells are the same, also there are maintenance issues, weather, and lot of stuff I don’t know about.
Despite all these reasons why the model will be wrong, once we know the actual number of new wells completed each month (instead of my guesses of future well completions), the model does quite nicely.
The Bakken total production is over 1,100,000,000 barrels to date.
https://www.dmr.nd.gov/oilgas/stats/statisticsvw.asp
6.2 billion projected total production, five point one billion barrels to go.
Under general statistics at the NDIC click on cumulative production by formation.
The Madison is a close second at 946,000,000.
In ten months at a 70,000 barrel per day drop, the total drop in production will approach 700,000 barrels per day, that’s all. Nobody will notice.
Total cumulative for the Williston Basin in North Dakota, 2.9 billion barrels of oil.
65 years of oil production for about 35 days of supply.
It took 8 years to produce 1.1 billion barrels of oil? That is eight years to produce 2 months of oil demand.
You mean the whole field only has less than a year worth of demand in the US? It will take forty years and a half trillion dollars to get all that out. Forty years for less than one year of demand. Tsk.
Anybody have 39 other Bakkens?
I hope you are not in the “since it is so small, it just is not worth it” crowd. Just think – 200 years ago, someone took a first step to walk across North America. I can just see the crowds saying, why bother. That is only one step. Over 5 million more to go – so why bother trying?
McDonald’s has spent 61 years establishing over 33,000 restaurants. Yet they serve one meal per day to less than 1% of the population. So, it is pointless to start a new restaurant. Might as well let everyone starve.
If a well is capable of supplying 1 million bbl [or any number] of oil at a profit. It is worth it.
As a homework assignment: Please compute the number of windmills, and the cost thereof, that would need to be constructed to produce the same amount of energy as the Bakken during the same period of time.
I belong to no crowd, clueless. Just pointing out the reality of the situation. It’s nice to put things in perspective. Or don’t you like to deal with reality?
And why don’t you like electricity? Electricity made modern times and makes everything else possible.
As far as costs of windmills goes (what that has to do with Bakken oil, I don’t know) it’s been discussed before.
It takes about 1.4 wind turbines to put out the equivalent useful energy of a Bakken well over a ten year period for a cost of 7.35 million dollars.
However, the well is done, kaput, the wind turbines are not nor is the wind. How much does it cost to create the new oil underground when it is gone?
“200 years ago, someone took a first step to walk across North America. I can just see the crowds saying, why bother.”
This comparison doesn’t make much sense. There was an unimaginable amount of resources and wealth to be gained from the colonization of America, so of course it made sense to bother. When there is relatively little to gain, then it may not be worth it. I’m really fed up with this comparison being used for a lot of activities recently which make zero sense from a “return on investment” point of view.
Actually the crowds were saying “Put that gun down, we are out of here. ” as the landowners forced them west at gunpoint to find their own land.
Facing private landowners and their governments to the east and angry natives to the west, they chose angry natives and very uncomfortable situations.
As a homework assignment: Please compute the number of windmills, and the cost thereof, that would need to be constructed to produce the same amount of energy as the Bakken during the same period of time.
I can just see the crowds saying, why bother. That is only one windmill. Over 5 million more to go – so why bother trying?
Har!
And keep in mind that the wind produces pure available energy, while the oil has to go thru a thermal machine, where 60% of its energy is tossed into the waste bin.
So wind needs to produce only 30% of the oil energy to match it.
Hi wimbi,
I already included the inefficiency of the ICE in the calculation as well as the losses between oil field and consumer. I did not include any upstream energy or materials for either energy source.
Another great thing about wind turbines is one can farm around them without the chance of polluted food or one could put PV around them also giving a double energy bang.
I did a post on May 15, 2016 in which I tried to work out what the difference would be if the money being spent on shale oil (LTO) was instead spent on solar PV. I looked at the return on investment and it sucked relative to LTO . I also looked at the vehicle miles that could be fueled over the long term with a similar investment in either option.
My conclusion was that, over the very long term (25 years) solar PV would provide significantly more VMT than an equivalent investment in LTO. With wind the situation would be even more in favor of wind since dollar for dollar, an investment in wind should produce more total energy than a similar investment in solsr PV.
AFAICT most of the value of oil is in it’s use as a transportation fuel so, if what we want to do is move stuff around, electrified transportation and renewables should eventually be able to do most of the work.
Your earlier post found a return of 3.2% for PV. On the other hand, for LTO it assumed an oil price of $35. I thought there was a pretty strong consensus that LTO loses money at that price.
So, isn’t PV a better investment?
Maybe I should have said the short term gross revenues of PV suck compared to those of LTO but, yes, you could say that at $35 per barrel at the wellhead, PV is a better investment.
I found this article to be a reasoned and balanced view of where we are in the cycle.
hang in there SS.
http://oilprice.com/Energy/Energy-General/Expect-Much-Higher-Oil-Prices-As-The-Cycle-Comes-To-An-End.html
Cycles ended in 2009.
TT. I read that.
Not too happy to see prices are headed back down in the face of what appears to be strong demand and falling production. Strong dollar, negative rates. Ouch.
Petro. Are all commodities doomed, or just energy? How about grain?
I am going out on a limb here and say food and energy and precious metals will see money flow and the government will print money to make sure we have food and energy. Folks can do with out a lot but the streets will fill without food and energy. With respect to who will be right about US seeing past highs in C+C production, I have my doubts under normal business conditions, but i can envision that it could happen, but it would be under a “emergency” type all hands on deck scenario. Unlikely but possible, our industry has surprised doubters in the past in our ability to get the job done for the American people. lets make america great again??
Crude traders following Fibonacci rules. That’s all. They took out the stops around 51, made their profits then went short. Pretty soon they’ll go the other way again. Third quarter they’ll go long and stay there. Guys already taking options on 100 a barrel. WTI will probably retest a 42 handle before it starts a steady climb. In the sixties in three months or so. Better dollars next year.
We just have to keep starving for a few more months. Oil in storage isn’t helping much either. By the end of the year, we should have a couple of reasons to smile for a change.
Cheers gentlemen, keep a stiff upper lip!
Petro.
One other thought.
I take it you see major deflation on the horizon?
So, if both crude price AND operating costs deflate, what is the difference, unless one has debt?
If one only has plugging liabilities, in a highly deflationary scenario, those liabilities also deflate (cost of labor and cement) in relation to cash on hand. Further, those with plugging liabilities and cash with no debt will, in my view, at least, have high leverage with state agencies as to negotiating a long term P & A agreement.
The US has over 1 million wellbores, if there is a “royal flush” of E & P’s, due to massive deflation + high long term debts, I’d say anyone who agrees to P & A a few wells per year will be looked on favorably. 3/4 or more of the well bores will be abandoned and thrown on the backs of state governments if WTI and nat gas prices persist or go lower.
At some point, there will be a rapid reversal, commodities become scarce, prices rocket up?
One thing for sure, 1980s university finance professors never envisioned the kind of stuff going on. Crazy times. Hard to change long held views.
Shallow Sand – Here is the clueless take on things.
In general: Low interest rates are deflationary; High interest rates are inflationary. But, they are used to fight the opposite problem. Inflation rising: raise interest rates. Deflation on the horizon: print money and lower interest rates to cause inflation. However, at the extremes, eventually the desired result is obtained.
In the 1970’s they kept raising interest rates to fight inflation. Result, more inflation – until we got to 14% annual inflation and 18% interest on a home mortgage. Then a recessionary collapse, and inflation was killed. Now we are in the reverse position – including negative rates in Europe, and everyone printing money. Result, deflation becoming more of a worry. At some future breaking point, likely a SURGE in inflation.
Why is this? Because if you have debt, when interest rates rise, you have NO choice. You must raise prices to pay it . There are no productivity gains; better way of doing things; more efficiency, etc. to solve the problem. If you have debt and interest rates rise, generally you HAVE to raise prices to pay the interest.
Now the reverse. Suppose long-term interest rates go to zero. You want to build a restaurant. You borrow the total cost of $2 million for 20 years. No interest, just a balloon payment at the end of 20 years. Okay, you can build your restaurant for zero cost of capital. For 20 years, you just have to cover the variable costs – food, labor, utilities and insurance. So, for 20 years, you can undercut the price of anybody that does have a cost of capital. Your restaurant is a booming success for 20 years, until you declare bankruptcy, since you have taken all of the profits as your salary and have no money to pay back the debt. Meanwhile you have lowered the cost of eating out in your market area for 20 years.
SS,
“One thing for sure, 1980s university finance professors never envisioned the kind of stuff going on. Crazy times. Hard to change long held views.”
-YES!
I have been trying for almost 1 year with you now and here you are…………which brings us to the second point:
“At some point, there will be a rapid reversal, commodities become scarce, prices rocket up?”
-NO! Not this time!
This time is different and the system (i.e.: economy, finance, society…and ultimately mother nature)
shall not allow us a reversal.
That is why I told you before that they are ALL wrong: Keynes, Mises, …..Fridman….ALL.
Not because they were not knowledgeable – au contraire! They forgot more than I would ever know about economics and finance…..but they were thinking WITHIN the system when the system was well within its buffering capacity (read for simplicity: “supply-demand” worked magic).
That is NOT the case today…. ………………………………………………………………………………………….. ….which brings us again to the first, above point…..which in turn puts us in a “circulus vitiosus” path to nowhere.
I will try (time permitting) to write a more detailed answer later.
Be well,
Petro
P.S.: as I told you numerous times already: this time good, hard working and responsible guys like you will not be rewarded on the other side of the cycle……. for there shall be no upside to this one!
This time their shall be nobody left for you to outlast, but you said it your self above:
“Hard to change long held views”
Hi Petro,
A mini model illustrating how the simple oil model works in chart below.
Basically well profile times number of wells added and add it all up.
Note that the well profile changes over time it is not fixed. Before 2008 there was a lower well profile, it increased and remained relatively stable from 2008 to 2013, the well profile increased in 2014 and 2015.
All of the well profiles and number of wells added each month from 2005 to 2016 (April), we don’t know what the future well profile will be. All of this information is in the spreadsheet I linked earlier.
The minimodel is in the link below and illustrated in the diagram below.
https://drive.google.com/file/d/0B4nArV09d398ejQzek9Bem0yalU/view?usp=sharing
Hi Petro,
Chart that goes with spreadsheet above is below, shows a dual peak scenario, it is all about the number of wells completed, the peak only occurred because the number of completions fell from 200 per month to 45 per month in the ND Bakken/Three Forks.
An open truly clueless question. For many years, much of the gas in the Bakken was flared. During that time, was measurement of gas as accurate and complete as when flaring no longer allowed and it is now being sold?
The reason that I ask, is to assess if historical gas/oil ratios are meaningful.
Clueless,
If you read the ND govt reports, you will see oil and gas figures per well each month. Yes gas produced has been counted all the way though. Gas captured and sold, is a separate number.
Higher borrowing costs and tighter lending standards will act to restrain growth in the Bakken going forward and along with continued advances in alternatives may well make it unlikely to peak higher. Prices however can go substantially higher before restraining U.S. growth than they could in 2008 since the economy has changed. New vehicle efficiency alone increased 25 percent: http://www.umich.edu/~umtriswt/img/EDI_mpg_May-2016.png
At least half the old farts around here that didn’t have good windows and heat pumps ten years ago have installed the same over the last ten years. A good many more have indicated that they plan on doing so the same year they no longer feel up to dealing with firewood, or whenever an existing oil furnace needs replacement.
I have advised the ones who asked me to delay getting their heat pump because they will get more bang for the dollar every year, and every year they delay means one more year the new heat pump will be under warranty later on.
Almost everybody here switched to cfl lights ten years ago, and now just about every body is replacing their cfl lights with LED lights as the cfls go out.
People who have just enough money to afford upgrades are usually pretty quick to make any upgrades that save a substantial amount of money over time.
Energy efficiency is actually improving pretty fast in a lot of ways, and it will improve much faster once there is another spike in gasoline prices. There are still a lot of full size nineties vintage cars and trucks on the road here, but hardly any of them are used on a daily basis. They now serve as the second or third vehicle, or belong to retirees who don’t drive much.
All the new school buses are diesels. Ditto just about every new farm tractor, highway truck, bulldozer, etc.
You can’t even buy a single pane replacement window locally anymore, unless you have it custom made. Nobody stocks them.
Yes, a lot of good things are happening to lower resource and energy use. Probably in ten to twenty years we will be no longer dealing with efficiency changes as the prime driver of reducing resource depletion, but will be finding ways to actually have our daily activities produce energy and increase resources. Efficiency gains are limited and increasingly complex (usually), modifying and innovating culture and technology changes has few bounds.
I look around and see so many people that are overweight, especially older people. Only 31 percent of adults are in the normal and underweight category according to the NIH NDDK. We don’t just overuse resources we force our bodies to carry the excess use around.
When you look at the cost of starches versus other foods, starches and sugars are the cheapest calories, yet so bad for us. So much for the market forces working.
Technology as provided by the current culture is working against us also, taking over the work and allowing us to not exercise. A real pain and early death plan.
We are so efficient it takes 32 miles of walking to burn off a pound of fat. We are designed to be efficient and store fat to overcome periods of low resources. Now we have too many resources and we are not well designed for that. So efficiency can kill or at least muck us up.
A diet heavy on starches and sugars is just about the worst possible diet, other than a starvation diet, and the primary reason we Yankees and so many other western nations are fat and diabetic, and dying of heart disease and cancer etc, like flies.
Of course this sounds like the worst kind of heresy, but I know whereof I speak, having taken more courses in nutrition as an ag undergrad than are usually taught in med school. I have kept up with the field ever since.
The long and the short of it is that the science of human nutrition advances one funeral at a time, and the companies that control the MANUFACTURE of food, and the distribution of food, captured the government agencies that are supposed to regulate them many decades ago, and they also exert substantial undue influence on organizations such as the Heart Association and the ADA, the diabetic association.
( The stuff that leaves a farm is merely industrial feed stock to the modern food industry, the way logs are feedstock for a paper mill. )
If you want to live a long healthy life, the three key things to do are
ONE:
Avoid tobacco altogether and severely limit alcohol consumption if you MUST drink it at all.
Two:
Get at least half an hour of fairly vigorous exercise at least three times a week.
Three:
Avoid highly processed foods as if they were rattlesnakes, and eat at home, consuming lots of FAT, PROTEIN, FIBER, LOTS OF FRUITS and VEGGIES. Go LIGHT on the carbs, and above all avoid added sugar as if it were pure poison,which IT IS.
You can take this little rant to the bank, because it is what the leading doctors at places like the Cleveland Clinic are advocating these days after having researched the question for their entire careers.
Here is a single paragraph from a book by Mark Hyman, who is a senior researcher at the Cleveland Clinic copyrighted this year.
“Jostin Diabetes Center at Harvard, one of the top diabetes centers in the world, was named after Elliot P Jostin. In the 1920’s he recommended a diet of 75 percent fat , twenty percent protein, and five percent carbohydrates to treat diabetes. After fat became demonized in the fifties and sixties,a low fat, high carb diet ( fifty five to sixty percent carbs) was recommended by the scientists and doctors of the day. For decades, the American Diabetes Association promoted this diet as the diabetes epidemic worsened year after year. Now researchers at the Joslin Center are once again recommending diets of up to seventy percent fat for the treatment of type 2 diabetes.” !!!!!!!!!!!!!! Added baseball bat emphasis MINE.
ANOTHER paragraph:
xxxx
For years scientists pulled out their hair trying to understand the so called French Paradox. Why could the French eat so much butter and fat and still be so thin and have lower rates of heart disease? They should have been paying attention to what I call the American paradox: how could Americans eat less and less fat and yet get fatter and fatter? How did they not wonder why Americans were eating less fat and yet getting more and more heart disease? Our paradigm ( FAT IS BAD, OFM) was so entrenched we couldn’t see it. The psychiatrist R D Laing said “Scientists can see the way they see with their way of seeing.”
xxxx
There is no reason a truly well informed person should be surprised that the health care profession has been so wrong so long about so many things. People don’t want to admit they are wrong, and the occasional individual who points out the errors of his bosses and the heavy weights in his field is generally steamrollered into keeping his mouth shut, forced to choose between working and getting paid , or being unemployed, especially in academia. You have to work your way to the top before you can truly say what is on your mind.
We spend enormous amounts of time discussing the parallel situation in the fields of energy and sustainability here in this forum.
The food processing and distribution industry is dominated by only a few big firms that turn out literally tens of thousands of name branded products, and that industry has succeeded in brainwashing us quite as successfully as GM and the rest of the auto and oil industry ever did, even more so.
The correlation between added sugar and highly processed food and our increasing health problems over the last few decades is so tight there can be no question at all that the food we are eating is the problem. When the industry took the fat out, it was immediately replaced by enormous amounts of SUGAR and highly refined starches.
The industry has at least two hundred fifty seven names for sugar, so as to keep you from realizing what it is selling you. Fruit juice extract equals sugar. Corn syrup solids equals sugar, etc.
Enuf said.
Anybody truly interested can buy himself a few books written by researchers at leading hospitals copyrighted first edition over the last couple of years and decide for himself.
Valuable comment Mac, totally agree.
There’s hope though. Now ALL canned cat and dog food must be heat treated for a very good reason: now they can (have) removed the “Unfit For Human Consumption” warning.
This came to me via a public health nurse about two months ago who claimed half the old people she visits basically survive on cat food. Speaking of sacrilege.
the companies that control the MANUFACTURE of food, and the distribution of food, captured the government agencies that are supposed to regulate them many decades ago, and they also exert substantial undue influence on organizations such as the Heart Association and the ADA, the diabetic association.
Sadly, organizations such as the Heart Association and ADA have been captured by the great majority of doctors who aren’t interested in putting themselves out of business with crazy ideas like better eating. There is a small minority that truly try to help their patients, but most have taken a strong lesson from dentists, who killed their business by encouraging more preventive care.
The majority would prefer to do “procedures”: stents, cardiac ablations, etc., etc.
Hi Nick, I agree to a substantial extent.
You have pointed out another serious interlocking problem. I would have included it but I my comment was already too long for the sound bite portion of the forum readership.
But the medical profession itself is FAR FAR more ethical than the food processing and distribution industry.
The dental industry has managed to control the supply of new talent to the extent that every single one within a hundred miles of here who has been practicing for more than a year or two is booked up solid for months ahead. Even getting in to see a new one is problematic and may take a month or longer.
the medical profession itself is FAR FAR more ethical than the food processing and distribution industry.
Can’t disagree with that. They’ve also done a good job of capturing the dietition profession.
The dental industry has managed to control the supply of new talent
Hmmm. Are you sure that isn’t mainly a rural problem? AFICT, dentists in general are oversupplied.
It all comes down to human biochemistry. About 60 percent or so of people can produce large amounts of insulin. When the starch (which breaks down quickly to sugar) or sugar loads up the bloodstream, large amounts of insulin are produce. The insulin, along with cholesterol form the sugars into long chain fatty acids. If one can produce an excess of insulin, the process is far faster than the uptake needed by the cells, so the fat is stored as fat cells and along the interior of blood vessels.
So every time those people eat a roll or bagel, or some sugary snack, much of the food turns to fat rather than food for the cells.
Much like oil, it’s a rate thing. Which is why one should pay attention to the glycemic index.
I recently went back toTwo books on the automotive stirling- walker and walker&senft – to review the auto stirling efforts of the’80’s. I found buried in their effort was one gem of opportunity long ignored.
Diesel manufacturers at that time tried hard to get the 4 alpha stirling engine to compete on costs with diesel, and they failed for only one reason – the kinematic crank was complex, short lived, expensive and slow to respond to load even tho he thermodynamic performance was quite good enough.
They made only a gesture toward the real solution, free piston driving hydrostatic pump. with that mod all the problems of kinematic went away, making that fpse a success vs diesel.
This opportunity is still there to solve the diesel particulate problem and also make an auto engine capable of running on any fuel with very low pollution.
4 alpha stirling scales from 1 kW to megawatt sizes.
Wimbi,
What do you think of that new rotary diesel design by LiquidPiston?
Over and over people come up with rotary engines.
Every time I say the same; what diesel problem does rotary solve?
A piston in cyl is very hard to beat for sealing, and free piston engines have such light side loads that standard gas bearings can give it very long life.
There’s free piston stirlings been orbiting sun for about 14 years. Pretty good life?
Very light and very efficient. Military is running them now.
which? fps or rotary?
Rotary.
I was looking for a package that runs on pyrolyzer gas and gets the PV over the cloudy weeks. Stirling will do it, if rotary better, fine with me. Time will tell.
Dennis,
you get entangled so much in numbers, data and lines that you miss and/or confuse the logical big picture.
-Before we enter price/brl/oil and financing of drillers into the equation and, well before we then discuss if your’s or somebodyelse’s (i.e.: virwimp’s) are the more plausible scenarios and more likely to materialize, we have to see if your chart stands logically and mathematically.
And looking at it, that can be only if the following conditions are met:
-1. The “sweet spot/s” of Bakken has not yet been found and it will be in 2019-2020.
-2. The “i-gadgets” of fracking technology have gotten so advanced by 2019-2020 that we can expects wells then to have 30-50-70% more output/day than the comparable well of 2014-2015 (% are for illustration only, I have not crunched the numbers to be precise).
-3. Judging by that almost plateau-ish curb top you have on your production line 2020-2025, the decline rates of wells in 2020-2025 are far, far. far less than those of comparable wells of 2014-2015.
-4. All of the above
Now, can you (or anyone who knows a thing, or two about oil and mathematics for that matter) explain and defend the above scenario logically and scientifically?
Don’t you see to much magic and wishful thinking?
If you can do that (explain logically and scientifically), then and only then I will engage in the price/financing debate with you and after that, in the one that discusses which is the most plausible to represent reality 10-20-30 years in the future.
Be well,
Petro
P.S.: You and SS (and others) have quite the inaccurate idea about shale company financing and the role of oil price on that.
This type of linear/classical thinking (i.e.: “…price rose, so the banks must lent to the drillers now…”) does not represent the reality today when loans to the drillers are used as futures’ derivatives’ bets and far, far, far exceed the ability of some of these companies to pay back their debt even if oil was to be $1.000/brl for the next 20 years.
But that is a very complex matter which you (and I am not being offensive here…believe me!) and almost all here cannot understand easily, so I will leave that for another day.
Much higher oil prices would give the shale folks the ABILITY to pay debt.
Question is, wouldn’t they drill more wells instead, and roll over the debt?
So, what would happen if US, Europe and Japan just coordinated .25 rate hikes each quarter for the next three years?
Would that result in a catastrophe?
Shallow,
What most oil companies [other companies/entities as well] did as they assumed more debt was in reality to enter into a bet that consumers would be able to access more credit/go deeper into debt to enable the oil companies to retire their debts which was assumed to pay for development of costlier oil. [Rollovers are not retirement.]
Central banks lowering the interest rate [described as interest suppression by many] served several purposes like easing services of existing debt overhang and allow for further debt expansion in an effort to bring our economies back on the [economic] growth trajectory.
Debt is borrowing from the future.
Increasing the interest rate as described by a quarter percent over 3 years would introduce severe strain on the system as it becomes harder to service the present huge debt overhang and make it hard for anyone to assume more debt [it would likely blow out many balance sheets].
The Fed now keeps deferring further increases to the feds funds rate. The Fed is worried about what an increase could entail.
In short a higher interest rate would bring the oil price down as more income becomes diverted to servicing debts and thus less available to pay for amongst other things higher priced oil.
Rune: I am not so sure.
There is a very sizable population of retired individuals in both US and Europe who are spending much less because they have less income.
Ultra low rates have caused a lot of misplaced investments, leading to capital destruction.
Well said, and true from my observations.
Shallow, thanks
First you described the interest rate with raising it a quarter percent each quarter over 3 years. (Something became omitted in my reply, but it looks like the objective of the discussion was sustained.)
What you describe about those who live on income from their own savings or pension funds I agree with, lower interest rates now wreaks havoc with many pension plans and also the insurance industry.
I also agree that ultra low rates have caused misallocation of capital. Yield starved investors started chasing riskier projects/investments.
To me this illustrates that there is no easy fix to the interest dilemma.
Damned if interest rates are raised and damned if they are not.
Low rates have led to capital destruction, I agree.
Some describes this process as transforming wealth into income.
“Some describes this process as transforming wealth into income.”
Or perhaps it’s just transforming billionaires into trillionaires and leaving the rest where they are (or worse).
Or, perhaps we simply have too many wealthy investors, who save rather than consume.
If the income and wealth were in the hands of middle or lower income people, we wouldn’t have so much excess capital pursuing unrealistic returns.
“Much higher oil prices would give the shale folks the ABILITY to pay debt.”
-NO.
Debt is at unsustainable levels. You seem to have missed the P.S. section of the comment of mine you replied to. I suggest you revisit it.
“Question is, wouldn’t they drill more wells instead, and roll over the debt?”
-That is NOT the question. That is the ONLY thing they can do with higher oil prices at this point.
“So, what would happen if US, Europe and Japan just coordinated .25 rate hikes each quarter for the next three years?
Would that result in a catastrophe?”
Folks who say: “ahh, what’s a .25% increase to our economy? Nothing…let the FED do that…” know nothing about the economy and finance. Do not waste your time listening to them.
As I said this is a very complex matter, but for now let me tell you that the economy and finance work NOT on nominal rates (the famous FED rate, or BOJ rate or ECB rate you hear about on TV and how they manipulate it…ha, ha, ha…), but on REAL interest rates …which are totally a different beast.
If the FED, BOJ and ECB did what you suggest and in a coordinated matter increased the nominal rate .25% every quarter we would literally plunge into the dark ages in short, very short order!!!!
Who tells you otherwise is an idiot.
Forget about the “PONZI FIAT money scheme” and the “FED MANIPULATION” you hear from obviously “experts” on the matter here and elsewhere….
FED, BOJ and ECB have NO choice but to lower the rates and print digits/money.
Again, I cannot stress this enough:
who tells you otherwise, and who tells you that (at this point in time) we can go to a gold standard, or some kind responsible debt reduction economy knows nothing of today’s economy and finance and is an idiot.
And NO, this has nothing to do with some kind of Marxist redistribution of wealth.
Even if we somehow did that, we would still be in the same place in the near future.
It is human nature and the behavior of our inner human animal.
That is why a while back – when everybody was saying that FED is increasing rates and rates will go up – I told you: ” 10year note is going to 1% BEFORE going to 3% like everybody says….”
….and perhaps is going to 0% soon.
Expect no more rate increases and going back to QE (with other names perhaps) – NOT because the FED is evil (as you hear here all the time) but because there is NO other choice!
Rates shall spike up in the future, but when they do is time to go underground with our loved ones, a loaf of bread, a gun and pray….if you believe that is’
Pay, pray, pray that Yellen, Kuroda and Draghi go each month on TV and bullshit us some more, for if they do not …..well let’s just say that we will not have computers to reply to each other anymore…..
Be well,
Petro
“Rates shall spike up in the future, but when they do is time to go underground with our loved ones, a loaf of bread, a gun and pray….if you believe that is’”
Petro ….’a’ gun come now. all things being equal i think I will have a couple of semi auto, as well as revolvers, pump action and double barrels. Ironic so many here can make a reasoned case for civil breakdown and at the same time want to restrict guns of law abiding citizens. I suspect your analysis posted here is more realistic than many others, the timing issue is the real question. Next up more QE and then helicopter money!
Agreed 100% Petro. Awesome comment, a few more years of monetizing and ‘whatever it takes’ comments. We’re in trouble.
Houtskool,
I hope by “Awesome comment” you meant accurate….for there is Nothing “Awesome” about my comment.
Indeed, is sad…very sad!
We are counting our last few days not only as civilization, but as species….
And even though there are those akin to I spelling it out in simple terms (granted: very, very few!!!), the dominant “wandering” is still:
“…when prices per barrel will rise…, or …when the new electric car, or lower cost PV is introduced…we will be fine…”
“Everyday above grass is a Great day…” ….”Scar face” proclaimed.
I say:
not only is great, but shall be one of your last……so enjoy it in a sensible way!
Be well,
Petro
We are counting our last few days not only as civilization, but as species
Why? Just too much debt? Or, civilization is doomed by Peak Oil??
Or are you primarily worried about climate change?
Nick,
I am a father and I am on my 3rd cuban (can you believe : more than $120 burned already?!?) …..and I have had quite a few “after dinner”ones following my “Margaux” bottle……. so, please bear with me!
Not only I do not despise you (as you might think by my comments), but I admire you!
I really, really do! Please believe me!
You are a noble, noble man….you not understanding physics and thermodynamics…and finance… notwithstanding!
…..but you are tooooooooooo fucking late man,……… toooooooooooooooo…fucking late!
In a reply of mine to you (and the island boy) a while…quite a while ago, I said that: ” I wish I had voted for you in the EARLY ’70s…… we probably’d be in a different place today!
I AGREEEEEEEEEEEEEEEEEEEEEEEEEE with you 1005% ….IT’S JUST THAT YOU ARE TOOOOOOOOOOOO LATE.
Love and be well,
Petro
P.S.: please don’t hate me whe I say something about a commet of yours….I in NO WAY mean it personally!!!!!
I wissh we had more of you earlier….I Really DO!
I mean it!
…..ohhhhhhhhhhh, how I really mean it……
Petro.
If oil went to $100 WTI, and stayed there for 5 years, and gas went to $6 per mcf, and stayed there for five years, and if the shale companies determined to only spend enough CAPEX to maintain flat production, I think they could generally pay off, or at least substantially pay down debt, in that 5 year period. Some are better off than others.
I suspect costs would rise, both LOE and CAPEX, but I will do an example.
Shale R Us has 200,000 BOE per day, 80% oil 20% gas. So, lets say after well head discounts, they get $85 per BOE. LOE is $8. G & A is $3. They have to spend $20 per BOE in CAPEX to keep production at 200,000 BOE per day ($1.46 billion per year). Severance tax is 10%. They have $3 billion of debt, interest rate is 6%.
By my calculations, over five years, Shale R Us generates $16.6075 billion of pre-tax and pre-interest cash flow in this scenario. There is $900 million of interest that has to be paid, plus the $3 billion of principal. Assuming income tax of 35%, subtract about $5.5 billion for income tax.
I come up with Shale R Us having $7.2 billion left in this scenario, at the end of five years after payment of income tax, principal and interest.
I did this quickly, so if there are computational errors, let me know and I will correct them.
Now, my example is of a strong company. Most wont work out that well, but they can pay the debt off at $100 WTI plus $6 gas.
Petro, you are either talking over my head and/or we are talking past each other. I am not considering what those prices do to the world economy, demand, etc., only whether Shale R Us can eliminate their debt.
Sorry if I am too dense to follow how $1,000 oil for 20 years would not cause all the LTO companies to mint money. Again, not talking about the economy, etc. Just doing math, really.
Dear Shallow,
you are falling in the same trap as Dennis: getting entangled in too much data.
Yes indeed, as you say, I am talking way above your head here.
Now before you hate me, trust me I mean no disrespect.
But the subject is such….so please stay with me.
What you are asking me is another difficult and long answer.
I either have to do that post I mentioned about debt and money, or stop answering and replying.
First of, you have the wrong idea as to how the financing of shale drillers happens.
The way you think it happens (i.e.: they go to bank, present their business model and oil price expectations and blah, blah , blah and bingo….Goldman gives them the money!) does not exist anymore.
It indeed happened that way (more or less, of course I am simplifying) PRIOR to 2000 – not today.
Goldman (or any bank…put the name you like here) uses the oil price and business model of the sale player ONLY to bullshit the shareholders into voting it…..it does not give a crap what the company does and how it does it and at what price.
Here where the “beauty” starts:
that loan then, which on bank’s balance sheet is considered an asset, is re-hypothecated dozens, upon dozens, upon dozens of times as a futures’ OTC derivatives’ bet with businesses that have nothing to do with shale players and are half a world away – china let’s say.
So, if one too many of them fail, driven out of business by responsible guys like you – even though their combined debt size is nothing compared to….oh, lets say JP Morgans’ assets, the avalanche it starts buries us all.
You are thinking in terms of only one good company – that my friend is linear/classical thinking.
Is like this: the risk increased by 2 times so the outcome shall be 2 times worse or maybe 4.
That to you (and most) is manageable if you tighten your belt and plan well.
-But our economy and our energy/finance system is a COMPLEX INTERCONNECTED SYSTEM.
That means that small stimuli, bring about exponentially worse and uncontrollable outcomes.
Its like Lehman Bros. in 2008.
Their assets and liabilities were nothing compared to the whole economy…..but the cascade they would have started would have plunged the entire global finance/economy into dark ages within hours…literally.
So, contrary to what you have learned by “experts” here that: “…the Evil FED helped their crony bodies and destroyed the economy…ha, ha , ha…”, if the 1st QE aka TARP did not happened, we literally would have eaten each other as food by now (walking dead type thing….ish).
DEBT cannot be eliminated.
It has to increase more and more if you would like to continue the life you have.
If we eliminate debt, we eliminate money including that $100 that you like to get per barrel of your own oil…………it cannot be!
Stick that in your head.
Be well,
Petro
Petro. I’d like to see a post from you. I doubt you’d get blasted, and if you do, so what? If anything, I kind of enjoy debating this stuff with someone on the other side.
Couple of questions.
First, you talk about shareholders approving loans. I am assuming you just misspoke, as shareholders of banks do not approve of anything, except voting on directors, some compensation issues, and sometimes stuff put on proxy cards by activists (i.e. divest of fossil fuel loans LOL!)
Second, I did not think that reserve based energy loans were being packaged and sold in derivative markets, at least not like home mortgages were. I also was unaware banks were insuring them to a large extent with CDS’s.
My understanding is there is a consortium of banks on most of these, with one bank as lead, the others each taking a participating percentage. The note is secured by a first lien on the shale company assets. The size of the loan is based on the PV10 (or PV9) of the assets, with PDP valued at 100% and with PDNP, PDBP and PUD possibly being given some collateral value, but being greatly discounted, say for PUD, maybe assigned only 20-30% of PV10.
The maximum amount that may be extended should be no more than 65% of PV10 or PV9. If the value of the reserves drops, the borrowing base is cut.
Petro, you probably know all this stuff, maybe more in depth than me. I’m posting this for other’s benefit.
The game the shale guys played in 2010-2014 was to fill up the first lien bank line, then float an unsecured bond to pay it off. Most shale guys did this several times. I assume it is on these unsecured bonds, where credit default swaps (insurance) was likely sold, where you think there will be a black swan event? My understanding is this junk is a small fraction of what the mortgage derivative market was and still is. Many of these bonds have defaulted, or are at extreme stress levels already.
Would seem to me, given oil cratered to the $20s in early 2016, we would have seen signs of the black swan, maybe we did, as the markets fell, almost perfect correlation with oil, which has now, somewhat broken.
However, if we take my hypothetical $100 WTI and $6 HH per mcf, how do those CDS on shale bonds cause any problems?
Also, back to the horse and pony show with regard to bank loans, I am not so sure how much puffery there has been. It really depends on how the engineering firm did the reserve report, and if the bank’s price deck utilized was realistic.
I will say, unlike the mortgage meltdown, where there were fraudulent appraisals all over the place, there are not a lot of petroleum engineering firms, and they are not fly by night outfits.
I will also say, it seems to me energy lending is pretty specialized, there weren’t energy loan brokers setting up shop on every street corner and advertising on late night cable TV. Mostly big banks, or large regionals, in this market.
Finally, these loans are not of the $150K mortgage variety. When the bank examiners come, they look into the big loans much more closely. Easier for OCC to examine 10 billion $ worth of 10 reserve backed energy loans than $10 billion $ of home mortgages, of which there would be 50-100K individual loan files, appraisals, etc.
Where the OCC screwed up was by not figuring in the junior debt when they examined the bank loans. But, they finally are now, and that is a big deal IMO.
The way I see it, if WTI hits $100 2017-2021, and gas is $6 during the same time, and the shale knuckleheads have learned something from the most recent Arab OPEC “good sweating” and don’t overdo it, they mostly pay down substantially/payoff debt.
I’m talking Newfield, QEP, OXY, PXD, EGN, EOG, COP, MRO, WPX, SM, HES, APA, APC, XEC, FANG, MTDR, DVN and a few others. CLR and WLL would pay down, but not off. Same with OAS. CHK too. The few MLP that have survived thus far, would also at least pay down, but think they are required to distribute most cash flow.
Oil at $125 for five years, they about all get out of debt IMO.
And, in the event this happens, these guys would be well advised to just issue equity to grow, going forward. Where price wont help them is when the locations run out. Especially the good ones. Better to have little to no debt when that happens, which is probably by 2021, even if these dudes are more sane about development.
Keep in mind, in my example, the pre-tax, pre-interest profit margin is $45.5 per BOE. Right now, and pretty much since Thanksgiving, 2014 unhedged profit margin has been less than zero.
I agree, the world economy is screwed up. But, I think I am going to need some more detail to figure out what you are saying. I also do not think TARP was bad. Clueless described TARP very well recently.
Don’t worry about offending me, I’m called a lot of stuff and don’t care. Know who I am pretty well. Would really like a post, but understand if you don’t. Its kind of daunting.
Shallow,
I am just going to touch a couple of points only.
First, as far as offending you:
yeah, you might have been called names and have a thick skin, but I do not want to go that route to begin with.
Not because you don’t care, but because I do not offend people…intentionally that is.
So, I said that to warn you that if it comes out that way, it is not my intention.
Second, I did not misspeak.
I already spent too much time comenting and I went short, obviously way short.
I meant they’d have it on the books in order in case something happened, or somebody inquired, or to present their “strategy” at their shareholders or their newsletters for investors (i.e.: Goldmans’ outlook on the oil market….and BS like that)
Most of the big guys repackaged and resold those loand to greater fools way, way before oil price rout started.
They own very little directly……
However – and this is the important part – they are affected by them indirectly by other companies derivatives which have direct exposure to the loans presently.
Think of it as: you fire a gun at a target in front of you, but it makes 10 ricochets at the walls and trees and what not around and comes back and kills you.
Third, as the result of the repeal of Glass_Stegal in 1999 – thank you very much R. Rubin, L. Summers and most importantly our dear B.Clinton who signed it into law
(don’t fuss democrats. For me there is NO difference between republicrats and democlicans. Reagan and Bush were as bad, or worse!) – commercial and investment banking became one and all and turned to what’s called TRANSACTIONAL banking.
Meaning: everything, without exception is repackaged and resold multiple times to grater fools.
Forth, the task of a post is not daunting!
heck, I have posted here in the last 2-3 years to last me for 3 posts.
It is first that, even knowledgeable, well meaning people have preset concepts that they are not willing to change.
I mean, look at the amount of time I am spending replying to you and you ask me the same things…..does “linear/classical” thinking ring a bell?
You wrote it yourself: “Hard to change long held views”.
and second, some people act as experts in things they know nothing about….and they are going to reply to me with stupid: “evil FED” , “Real Gold Money vs. Fiat” and ” Rockefeller- Rothchild cospiracy” bull shit…………………………………….
and I am not sure I can handle that politely…………………..
…and then you have Nik Gs and the rest who think that oil and energy are just like any other commodity and we somehow can do without them and so on and so on…..
You get my point….
But, I am thinking about it….
Be well,
Petro
” repeal of Glass_Stegal in 1999 – thank you very much R. Rubin, L. Summers and most importantly our dear B.Clinton who signed it into law
(don’t fuss democrats. For me there is NO difference between republicrats and democlicans.”
Petro, you are one heap big smart fella, or else I am a mental midget. I just can’t see any way you are wrong.
The key problem with our current two party political set up is that both parties were long ago captured by Wall Street type interests.
Political reform on the grand scale would help immensely, but political reform is not enough to solve the overshoot problem.
Why, thank you OFM!
I do enjoy reading most of your posts here, as well.
I think you are probably the most well versed guy here in the broad sense of practical matters.
Keep writing’em and I will keep reading and learning from them.
“…Political reform on the grand scale would help immensely…”
-We sooo passed that on our ’70s-’80s decades Mac…… we are beyond repair: financially, socially, culturally and most importantly with regard to resources, nature and climate.
Any change now will bring the whole thing down….forever.
Pray that system holds as is a little while longer….is bonus time. ENJOY IT!
Be well,
Petro
P.S.: i still laugh when recall your “…money and virginity…” comment.
Good one!
Petro.
I agree with you about Glass Stegal.
Also, I should point out my banking experience is with a small, local bank, privately traded shares, less than 500 shareholders. The stock price barely moves, however it has slowly ground upward over time. Has always paid a dividend which has been 4-5% of share price.
The bank makes fixed rate mortgages, which it sells off to Fannie or Freddie, but retains all servicing. It retains all other loans in house, such as auto, Ag, small business, rental real estate. It has a few larger customers where it has to participate with others, and occasional will participate with other banks on loans the others originate.
The 2008 financial crisis did not affect it. No one sold their shares anymore than usual, the stock price didn’t drop.
The only real thing they do which was prohibited by Glass Stegal is they have an in house stock broker, where customers hold brokerage accounts. I don’t see that as a problem, and that service ties in well with the primary duty of being a trust officer.
The primary problem in the aftermath of 2008 is the banks cost of compliance went up.
So, you can see, my background in this area is very foreign. I am coming from a totally different view, so yours, or any other serious and on topic views are appreciated. My views are very 1980s, I remember when a bank in one town could not open a branch in the next town over.
I continue to be surprised that interest rates “have not risen on their own”.
Petro,
Thanks for your interesting contributions and viewpoints to this debate.
I believe we are headed for some non linear events and the thing is the human brains are NOT evolved/trained to think in non linear terms. We tend to extrapolate past experiences into the future with some noise around a constructed [wished for] trend line.
Looking forward to your future elaborations on this subject.
“I believe we are headed for some non linear events and the thing is the human brains are NOT evolved/trained to think in non linear terms.”
Mind is logical but Life is always illogical so they never meet. 🙂
“We are all delusional!” [The degree varies]
We perhaps like to think about ourselves as logic, but are we really?
How can we be sure that our interpretation of our surroundings is THE reality?
How many plans for 10, 50, 100 years ahead or even into deep time?
Planning is proven difficult, but what are our long term objectives as a species?
How many plans for 10, 50, 100 years ahead or even into deep time?
Not many that I know of. The only really long term plan that comes to mind is the Onkalo nuclear waste depository in Finland.
…In Finland, the world’s first permanent repository is being hewn out of solid rock – a huge system of underground tunnels – that must last the entire period the waste remains hazardous: 100,000 years.”
Everyone else seems to only be focused on the next quarter’s earnings.
Rich people and many politicians are ardent practitioners of long term planning. They can’t plan in DETAIL , but they spend enormous amounts of skull power on figuring out how to maintain their position, and the position of their kids, at the top of the social and economic power structure.
At the opposite end of the power structure, people like my folks also plan for the long term, as best they can. Just a couple of days ago I was talking to an ancient relative who is planting a new orchard that will not be mature before he leaves this vale of tears. It’s for his grandchildren. He HOPES one of them at least will want to live on the farm he started when he was only sixteen years old on rented land.
” How many plans for 10, 50, 100 years ahead or even into deep time?
Planning is proven difficult, but what are our long term objectives as a species?”
Rune,
I will share some of thoughts on this one question for now.
Our Minds planning is just symptom of fear. The original fear is the fear of death. All other fears derive from that original fear – fear of death. The basic premise about life is that there is no security. There is no external security, no internal security. Insecurity is the very stuff that life is made of.
If we think about rose flower in the morning that starts thinking about being secure, then what will happen? If the rose flower really becomes secure it will become a plastic flower; otherwise insecurity is there. A strong wind may come and petals will be gone. A child will come running and will pick the flower. Even if nothing out of the ordinary happens, then too it will be gone one day. But that is the beauty of the rose flower, that’s why it is so beautiful – because it live surrounded by death, it challenges death, it challenges the wind. When we share our love for someone we give them real roses, not the plastic one. A real rose represents life with all challenges. Plastic one represents death. If someone wants 100% security they better start digging the grave for themselves. That is the most secure place of all.
So we should drop any planning. Who bothers about security? The idea arises out of greed, the idea arises out of ego.
The planning and search for security is to be worldly. To live in insecurity like rose is to be beyond worldly, almost divine.
we should drop any planning
That’s one way to take a road trip…
What is wrong with a road trip? Road trip would be the best thing to do at any point. You “solar fixing” is the same as “shale oil fixing” just the other side of the same coin. It is the ego trip. It is always better to do kayaking trip then ego trip.
It is always better to do kayaking trip then ego trip.
Now kayaking’s something I know quite a bit about, I’m willing to bet not many people can handle it, because their egos generally get the better of them …
Road trips are great. It’s just that I find that I enjoy them more when I plan just a little before hand.
Yes, solar is better than coal.
Clean is better than dirty.
Do you wash your hands before preparing food?
What exactly do you do in terms of planning of moving the world of 7 billion people from fossil fuels to solar? Probably nothing.
So that proofs that your problem is not reality.
Your problem is your psychology. Reality is not a problem – when it is there, it is there; when it is not there, it is not there.
A problem arises for you when something is not there and you want it to be there. Like you want everyone to buy EV’s – now. But that is psychological problem not reality problem.
Or when something is there and you don’t want it to be there. Like coal production. Then you type zillion times here “Coal is bad”. Those kinds of problems are always psychological.
Ves, generally speaking I find your comments to be rational.
You said:
Or when something is there and you don’t want it to be there. Like coal production. Then you type zillion times here “Coal is bad”. Those kinds of problems are always psychological.
I hope you are not suggesting that Coal is good! It is about as bad as it gets. In terms of pollution for one, and I’m not even talking about CO2 emissions. If all that weren’t enough it is no longer economically viable and is therefore just plain bad as an investment. The the non judgemental market is clearly showing that to be the case.
http://www.bloomberg.com/view/articles/2016-06-17/coal-isn-t-dying-because-there-s-a-war-on-it
Coal Isn’t Dying Because There’s a War on It
The decline of the American coal industry has been driven by many forces. Yes, the regulatory burden has increased, but it is hardly the main factor — and it’s well justified, based on the harm coal does to the environment and human health. The reality is that coal is the victim of competition from cheaper natural gas, from green-energy sources like solar and wind, and too much debt taken on to pay for costly and ill-timed acquisitions.
Having an agenda only gets in the way of understanding this.
Fred,
There are benefits and drawbacks to everything. If you think in terms of, I like this or I don’t like that, you end up trapping yourself. By looking at experience from broader perspective you can easily see that everything has two or more sides and then it is problematic to take a personal position. That way you are not investing in the “I, Me and mine” . That is ego and it always fear based.
And let’s assume that you are “right”, even though “right” and “wrong” are just labels that our mind attaches to everything, what exactly do you get by being “right”? You only gain something by being in peace.
You don’t get anything by being “right”. If you have someone that loves the benefits of coal like Mr. Walter. And let’s assume you manage to convince Mr. Walter that you are “right” about coal after few years of posting on POB.
Then someone else would come along and say ” I love Coal too”. Then you are in trouble again. Your being “right” worked only for brief time and you have to start convincing someone else about you being “right” again. And there are 7 billion of people that you have to convince. You can spent all you life convincing people that you are “right”. So here is a proof that you don’t gain anything about being “right”. Being “right” is useless. It is minds fear based talk.
what exactly do you get by being “right”? You only gain something by being in peace.
There is a real, objective world out there. It’s very useful to have an accurate, realistic model in your head that actually maps to the real world.
In other words, it’s good to be “right” about the world.
I don’t debate ideas with people to gain inner peace, though I do often enjoy it. I gain inner peace in other ways. I can tell you about that, if you want.
Your “realistic model” of the world is where political parties are completely captured by corporate oligarchs, with more than 50 million people on food stamps, with impoverishment of middle class, with the Biotech Conglomerates which increasingly control agriculture and the food chain; with Big Pharma holding a racquet on health care, with crumbling infrastructure. where Fed just mercilessly prints money just to squeeze the last drop of oil before lights are turned off and all you can talk is kiwi Leafs with no less than 100 posts a day. You are going to have a very rude awakening.
do you live in colorado??
Thank you, Mr. Likvern!
-I am honored that a man of your knowledge in the field is looking forward to my comments.
One of these days, perhaps I’ll ask Ron for a post on money, debt and rates.
They are the least understood and by far the most complex subject in economics and finance today and reading this blog (and others), just because they saw C. Martenson’s Crush Course and M. Maloney’s money creation videos and have heard of C. Ponzi, everybody seems/thinks to have an “expert” opinion on the matter and discusses deflation/inflation here with the ease of a dinner conversation with kids at home.
Without wishing to sound like an arrogant p***k, I am confident I know these subjects quite well and far more in depth than most.
Be well,
Petro
A little confidence is healthy and might beat feigned humility. If an accusatory finger is to be pointed, then so be it, but that in itself would seem arrogant.
In any case, Dennis has a bit a job running POB now on top of everything else, so I can imagine once and awhile getting mired in ‘numbers, graphs and lines’, which is not to necessarily suggest that I agree that that’s what’s happening, since much of this is outside my understanding. This is in part why I’m here and why I appreciate these kinds of discussions, and those that attempt to hash out the truth as a group (and then present it in ways that are easily digestible to the general readership [which is why, for example, I appreciate Ron Patterson’s article digests]).
Hi Petro,
I second Rune’s remarks. We are certainly headed for a time when linear thinking will no longer result in even remotely accurate forecasts of future conditions.
You may be ahead of your time, but whatever you have to say is worth listening to.
Barring near miracles, people are going to be dying slow and hard, by the millions and tens of millions, in many parts of the world within the next few decades. Machine gunned bodies are going to be piling up at the fences at national borders in some places.
Future Iron Curtains will be built to keep people OUT rather than IN.
The best place to ride out the coming storm will be North America. Anyplace else that has sufficient remaining resources and relatively low population is apt to be overrun in the course of aggressive resource wars.
Hi petro
I for one would very much enjoy a comprehensive post from you, or at least look forward to it
I have read all your past links to your past posts and I should have the ability to understand it but I am not all the way there
I hope you decide to spend the time
Thank you
Petro, thank you.
I for one would very much welcome such a post (but that is not for me to decide).
I think it is useful to widen the debate to also look at the interconnections between money, the financial system, debt and energy.
Do not strive for the perfect for a starter, but for what is of use.
Hi Petro,
I can be contacted at my first initial last name at gee male dot kom (trying to avoid bots). I would welcome a post, just send it along if you are interested.
Thank you for your kind and prompt invite Dennis.
I do indeed appreciate it!
I have not decided yet however, but if and when I do, I will certainly contact you.
Be well,
Petro
Thanks for the kind words guys.
I have not decided about it yet and most importantly, even if I decide to do it, it is up to Ron and not I.
The subject is extremely complex and making it interesting and digestible for a wider audience is quite a task and requires a lot of time….so…I will think about it.
Plus, it seems that some of our friends here are eager to give expert replies on such subjects and I am not sure I can handle that with the calm necessary for polite answering.
Be well,
Petro
Hi Petro,
Ron is letting me make those decisions, but you are welcome to let Ron decide.
As I said, I would welcome your post and believe that Ron would concur.
That was an earlier comment, Dennis.
I wrote to you above and thanked you for your generous offer.
I knew that Ron is letting you do that and in no way I intended to question it.
But you know, I am used to thinking of this as Ron’s blog for years now so was an automatic: ” …it is up to Ron….” type of writing/answer.
Again, no questions of your authority to decide about postings here intended and thank you again for your kind offer.
I will contact you if and when ready.
Be well,
Petro
Concur with your thoughts Petro,
In Oz, we have lots of juniors with positions in several of your shale basins. Just about all of them have been forced to raise additional equity capital. All have significant hedging in place (rolling 18-months). there doesn’t appear to be any that have had their borrowing base extended.
rgds
simon
Hi Petro,
The shape of the well profile has changed over time.
See http://shaleprofile.com/index.php/2016/06/15/north-dakota-update-until-2016-04/
and click on well quality tab. Chart is below.
I have used the same well profile from May 2015 to the future because the shape of the well profile changed and the model needed to be changed to reflect the data, I have also assumed the wells become less productive in 2018 as the sweet spots become saturated with wells.
I have not assumed the new well EUR gets any better only that more new wells per month will be completed in the future than in April 2016 (when only 44 new wells started producing).
Perhaps that will never occur, but I believe that oil prices will rise higher and that there are people that understand debt and finance as well as you who believe that things will play out differently than you believe. If the economy comes crashing down and no more wells are drilled, output will decrease.
I don’t think the World economy is on the verge of collapse. I also believe that oil scarcity will cause the oil price to increase.
So point 1,
no, well profile remains the same from May 2015 until June 2018
Point 2
no new technology assumed, well profile unchanged.
Point 3
The plateau arises as the new well EUR starts to decrease from June 2018. The new well EUR (estimated ultimate recovery) decrease starts slowly and gradually increases to 8% per year after 12 months and then continues at this rate until wells are added more slowly (fewer new wells per month).
A point you seem to miss is that when more new wells per month were being added output was increasing. From Jan 2013 to Dec 2014 output increased at a 27% annual rate while the new wells added per month increased at about a 14% annual rate. From Dec 2014 to July 2015 the new wells added per month decreased at about a 68% annual rate while production decreased at only a 1% annual rate.
With the current well profile (which is used in the model starting in May 2015) only 80 wells added per month are needed to keep output at current levels (around 1000 kb/d in ND Bakken/TF).
Hi Petro,
The chart below shows what future output would look like with several different wells per month added from May 2016 to Jan 2017. Well profile is not changed (EUR=369 kb at 18 years, 267 kb@ 5 years) from May 2015 to June 2018.
Cases covered are 20 new wells per month, 40 new wells per month, 80 new wells per month, and 100 new wells per month.
I think Petro believes that oil has supernatural qualities such that when it depletes, the world economy will crash.
I imagine coal producers felt the same way, 100-250 years ago.
Hi NickG,
No I think it has more to do with the structure of the economy that Petro is concerned with, it may be kind of a Marxian argument where labor’s share of income becomes lower and lower so that aggregate demand is inadequate. It seems to me that eventually there needs to be redistribution through a larger share of taxes being paid by the wealthy, and/or larger estate taxes. It is difficult to get such measures passed as the wealthy control the legislature, threat of revolution due to a severe recession might get that done. If not, eventually there will be a revolution as life gets worse for the average person, we are a long way from that at present in my view, but in 30 years, who knows?
That broadly makes sense. In fact, I said roughly the same thing in a comment to Petro elsewhere (at 11:19, for reference).
But…I don’t see it in Petro’s comments. An argument based on income inequality doesn’t seem related very much to oil or energy, and Petro’s argument seems related to oil/energy.
Petro may or may not be right.
Engineers and gearheads often refer to disastrous outcomes of projects and experiments as RUD’s, rapid unscheduled disassemblies.
I have been at the drag strip a few times when my friends car engines suffered RUD’s with broken connecting rods emerging thru holes in the engine block.
It is certainly POSSIBLE that the entire Business As Usual world economy could suffer a R U D event brought on by shortages of affordable energy. This potential catastrophic result might come about as the result of a sharp shark fin decline in oil supplies, or it might come about as the result of MISMANAGEMENT of a much less serious energy shortage.
Let’s not forget that one of the most important reasons Hitler started WWII was that he wanted to seize other countries oil fields, since Germany had no ( significant) domestic oil reserves.
Politicians are rightly famous for turning manageable problems into major disasters. California generally does a better job than most states in managing environmental problems, but Californians brought most of the their current troubles on themselves by encouraging too much growth, and now the state has a super serious water problem.
A few years back at the old TOD site, there were lots of knowledgeable people who were convinced peak oil would destroy the BAU economy with catastrophic consequences.
I was one of them, and I have only recently grown to be cautiously optimistic that at least some of us will pull thru the depletion of natures one time fossil gifts more or less whole.
Consider a bunch of old time sailing ships on the broad ocean, all of them running seriously short of food and water. Some of them would make it to port, some would not. It could be that if they were becalmed, or subjected to contrary winds, most of them would not, and the people on them would perish.
This is the way I see the future playing out for the world as a whole. A lot of countries are already too short of essential resources to make it to port, even with the best of luck, as I see things. Miracles are to be hoped for, but not EXPECTED.
This puts me in Ron Patterson’s doomer camp, with the caveat that I am far more optimistic than he is.
Some other ships/ countries will manage to struggle into port with a substantial portion of their people dead.
A few, such as the USA, Canada, may and imo will likely pull thru skinnied down and gaunt but more or less whole, given that they still have very substantial natural resources, peaking populations, etc, and the muscle to seize even more from less fortunate countries.
We will have to give up pickup trucks as beer fetchers in exchange for shoe leather, bicycles, and electric minicars but we probably won’t starve or die of exposure or contagious diseases, barring disastrous mismanagement.
Basically I believe our business as usual energy hog way of life is doomed, but that some of us will adapt successfully to peak fossil fuel and other fossil resource problems, so that our descendants, some of them anyway, will be able to live more or less modern dignified lives not TOO different from the lives we live today.
So far as I can tell, Petro and I are barking up more or less the same tree. He seems to think the crisis will arrive any month or year. I am reasonably confident we have another decade or two of BAU, at least in respect to energy supplies.
If we make good use of this window of opportunity, we Yankees and some other people have a decent shot at pulling thru peak fossil fuels with our economic ribs sticking out but still on our feet.
Well, EVs and hybrids are already as cheap or cheaper than the cheapest ICEs, even with oil prices low.
There’s a large excess of unnecessary consumption which could be discarded very quickly to cope with supply reductions in the short term.
Wind and solar are more evenly and widely distributed than fossils. And, they’re cheaper.
And coal is likely to keep getting cheaper as we use less of it, and it will be around, in the background, as a reserve if desperately needed.
To me, the only question seems to be: why aren’t we transitioning faster from this expensive, risky, polluting set of fossil energy sources?
Nick, about 28 states have mandatory renewable energy standards. some of them quite strong. NJ has 24.5% requirement by 2020. California is shooting for 50% by 2030, NY has 50% by 2030.
http://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx
Some of the sunniest have low standards or no standards and others are voluntary or no standards. The fed should start pushing minimum standards for all states.
Yeah, politics rules.
For example, Florida, the sunshine state, is way behind on solar because of Republican control.
Sigh.
Renewables are catastrophically expensive and impractical. That’s why everyone is fighting over the Middle East and that’s why NATO is encircling Russia. Intelligence agencies, deep state apparatuses and mega corporations all know this. The entire Renewables story is there to deceive the public and also help the well connected to some extremely lucrative and state-subsidized corruption.
Renewables are catastrophically expensive and impractical. That’s why everyone is fighting over the Middle East and that’s why NATO is encircling Russia.
I’m sure that a lot of people in the Middle East and Russia are telling themselves that.
The truth is that both are in a lot of trouble, as oil becomes more and more obsolete.
Hi Petro,
I decided to present a more pessimistic outlook for Bakken future output.
The scenario below assumes 40 new wells per month are added from May 2016 to June 2018, then the number of new wells added each month increases by 2 each month from July 2016 to Feb 2021, reaching 104 new wells per month at most. From Feb 2021 to Nov 2024 104 wells are added each month and new well EUR steadily decreases at 4% per year from June 2019 to June 2020, the rate of decrease gradually slows after June 2020 as fewer new wells are added. In June 2020 the new well EUR has decreased to 346 kb. The new wells added then decreases by 2 wells per month until wells are no longer added in April 2029 (EUR=154 kb). Total wells completed is 21,780, the economically recoverable resources are 7.1 Gb by Dec 2040. The secondary (lower) peak output is 1064 kb/d in mid 2024, about 100 kb/d less than the Dec 2014 peak.
I doubt oil prices will remain this low ($93/b in 2016$) in the face of peak oil, so I believe output from the North Dakota Bakken-Three Forks will be higher than 7.1 Gb of cumulative output.
Oil prices are no higher than $93/b (2016$) from Oct 2020 to 2029. It is assumed the economy muddles along without collapse.
“A point you seem to miss is that when more new wells per month were being added output was increasing. From Jan 2013 to Dec 2014 output increased at a 27% annual rate while the new wells added per month increased at about a 14% annual rate. From Dec 2014 to July 2015 the new wells added per month decreased at about a 68% annual rate while production decreased at only a 1% annual rate.”
~D. Coyne
Ron said it better than I can in an earlier reply to you:
“Dennis, in the early days of Bakken fracking the wells had short laterals and fewer fracking stages. They got better with much longer laterals. They also got better at locating the sweet spots.
But now the laterals and number of stages has maxed out. And the sweet spots are all drilled up.
There is no doubt whatsoever that the very best and most productive wells have already been drilled.”
~R. Patterson
…..and Lynn Helms on May 4th:
“Low oil prices are forcing operators to focus drilling activity only in the core areas of the Bakken where wells have the greatest production. As oil prices recover and drilling expands to other areas of the Bakken, those high-producing wells will be declining.
It’s really kind of doubtful that we’re going to make that (2 million barrels per day) because we’re drilling everything in the core where the best wells are,”
I particularly like that last paragraph of Helms’. Don’t you?
Be well,
Petro
Hi Petro,
As I have explained mathematically and logically why my scenario makes sense, given the assumptions, Ron’s comment (which I anwered) is not really relevant.
Ron assumed I was saying there would be some magical increase in output of new wells in the future, much as you are assuming.
I gave a very simple mathematical model showing that with no change in the well profile output will decrease when fewer new wells are added and then increase if the number of new wells increases.
In earlier comments you suggest that because 186 new wells per month (highest 12 month average for new wells added per month), only resulted in 1163 kb/d at most, that 150 new wells per month could not result in higher output.
It takes some time for the higher number of new wells to fully affect output, which is why the decrease in wells added from Dec 2014 to July 2015 had very little affect on output.
In any case a model of the Bakken is in the spreadsheet at the link below.
https://drive.google.com/file/d/0B4nArV09d398LV9VbkZpSEdtelE/view?usp=sharing
This model uses a single well profile from Jan 2009 to Sept 2019 based on the average well from 2008 to 2015. Output from wells before 2009 are from my more complete model which uses a lower well profile from 2005 to 2008 and this output is on the line “older wells”.
Note how this model underestimates output starting in Jan 2014, this is due to improving productivity from 2014 to 2016 relative to earlier wells, this model also does not have new well EUR decreasing after June 2018 as in my bigger models. No wells are added after Sept 2019 to keep the file size small.
Anyone can download and adjust the new wells after May 2016 to create their own model. I use a scenario that has new wells added increasing to 150 new wells per month and then decreasing to 80 new wells per month for illustration only.
Dennis I think you as usual are way too optimistic. Ultimate recovery may actually have peaked in 2008. See my post bellow. Perhaps UR may be higher in 2015 and 2016 as they only drill in the core areas. But the well density there is high and will get higher. So I´m not so sure about that.
Freddy
The scenario is for illustration.
The model is very simple check it out and present a realistic scenario .
I was referring to “EUR decreasing after June 2018”.
Hi FreddyW,
The assumption of only 35 new wells per month until late 2017, leads me to that guess, note that the “simple model uses a lower well profile)., consistent with the 2008 to 2015 average well (which has a lower EUR than my “2015 well” estimate).
So far there is little evidence of any decrease in new well EUR, this will happen, but we do not know when.
When do you believe new well EUR will decrease?
My model can easily be changed to reflect that estimate.
Dennis,
I am sure, you know that EUR is estimated ULTIMATE recovery. It will be known only when wells stop producing 25-30 years from now.
It seems that what your call EUR is average production per well in the first few months or a couple of years.
As charts by FreddyW, Enno Peters and others show, higher IP (initial production) rates of the wells drilled in 2015-16 may not result in higher EURs, as new wells have steeper decline rates.
The “improved” completion technologies enable to produce higher percentage of the well’s EUR in the first year or two at the expense of future production levels.
As I wrote bellow, UR may actually have peaked in 2008. But it´s not as easy as it declines by as certain percentage every year. It goes up and down. Also the oil price crash has made it even more uncertain. But what the curve will look like is more dependant on how many wells that are drilled than UR and that is very uncertain.
Hi AlexS,
Yes you are correct we do not know future output of any well we can only estimate.
My intitial estimate for the 2015 well profile was probably too optimistic.
Bottom line is that we do not know what the future output will be.
We do know that after 100 months the average 2008 well had produced about 250 kb. A reasonable EUR for the average 2008 well is about 350 kb. For the average 2008 to 2015 well I get a similar estimate. We could assume newer wells will produce less than this, but there is little evidence for that.
If we do assume newer wells have a somewhat lower EUR (340 kb) we get a different scenario.
Hi Dennis,
looking at this LAST chart of yours, now we’re talking!
Now we can start considering price and financing and long term debt of the drillers into equation.
This is a FAR more visually pleasing chart than the first one.
We could not discuss whether you were right, or wrong on your prediction(s) for Bakken before – now we CAN and I am happy to participate.
Be well,
Petro
Hi FreddyW and AlexS,
I have revised the well profiles for 2014 and 2015, the average well for 2008 to 2015 (these estimates are done by fitting a hyperbolic well profile to the data we have) has an EUR of 352 kb (C+C only), the 2014 well profile I have estimated at 311 kb (C+C), and the 2015 well at 326 kb (C+C). In addition, I have assumed new well EUR starts to decrease (from 2015 well profile) in June 2016 and gradually increases to a maximum rate of 3% per year by June 2017.
With 40,000 wells drilled and the above assumptions URR would be 10.5 Gb (slightly lower than the USGS mean estimate for TRR).
When profitability is considered with oil prices as shown in chart, only 31,000 wells are profitable to drill (with price assumptions and a well cost of $8 million in 2016$), ERR is 8.5 Gb.
No doubt people will still think this is too optimistic, my guess is the USGS estimate is likely to be correct. Time will tell.
Hi Freddy W,
An alternative that uses the 2013-2015 average well profile after April 2016, in chart below. Note that the drop in output at the end of the scenario is because no new wells are added after Feb 2027 (limit to the size of the model to keep it compact).
Link to spreadsheet at link below.
https://drive.google.com/file/d/0B4nArV09d398czJOM1hIUUtVekU/view?usp=sharing
Scenario below assumed new well EUR decrease of 5% per year starting in Dec 2018, all other assumptions the same as scenario above.
Yesterday the older of the two daily newspapers in my neck of the woods published an editorial, complaining about a impending hike in electricity rates as a result of a tax being levied on heavy fuel oil, the primary fuel for electricity generation on this island.
Editorial | Heat, but no light on HFO
It is urgent that the Ministry of Finance, and more important, its senior minister, Audley Shaw, clarify this matter of the application of the special consumption tax (SCT) to the electricity sector lest it be accused of policy flip-flop or breeding uncertainty, which is bad for business confidence.
On May 12 when Mr Shaw told Parliament how he intended to finance this fiscal year’s Budget, he announced a J$13.5-billion tax package to compensate for J$12.5 billion in income tax giveback to workers. That package, based on the minister’s parliamentary statement and finance ministry documents, included an increase in the SCT on heavy fuel oil (HFO) to J$2.0006 per litre, while the ad valorem SCT would rise by 0.395 per cent. Overall, the SCT on HFO would, on average, be 6.5 per cent, against 3.7 per cent for liquefied natural gas (LNG), whose use for electricity generation in Jamaica will start later this year.
At present, upward of 80 per cent of the HFO used in Jamaica is in the power sector, so the finance minister’s announcement immediately raised fears of rising electricity prices, halting a trend of lower rates that has proved a fillip to Jamaican enterprises. However, at a press conference the day after the Budget pronouncement, Mr Shaw told journalists that the increased SCT on HFO would not apply to the Jamaica Public Service Company (JPS), the private electricity transmission and distribution company.
“It is only related to SCT for fuel for road transport only,” he said.
The expectation among electricity consumers, therefore, was that any increase in their energy costs would be driven by any uptick in the price of petroleum, such as the market has been experiencing in recent months, and adjustments in the value of the Jamaican dollar to reflect relative inflation between Jamaica and its main trading partners. It is understandable, therefore, that electricity consumers, including many firms, were surprised that in explaining a 12.8 per cent increase in the price for electricity for this month, listed among its drivers was “the impact of the recent increase on the special consumption tax charged on heavy fuel oil”.
Some dude using the screen name “Peak Oiler” posted a comment that started, “The graph below from the most recent post on the Peak Oil blog peakoilbarrel dot com, shows US Crude and Condensate production since December 2014, just after oil prices began to decline.” I hope he doesn’t get in trouble with Ron since, attribution was given! 😉
Peak Oiler concluded “We must not fool ourselves, the cost of our electricity rises and falls with the cost of the fuels. We are just along for the ride if we do not switch to renewables.”
Today. the minister responded to the editorial;
Shaw says SCT on heavy fuel oil will affect light bills, suggests he never said otherwise
Finance Minister Audley Shaw has confirmed that the Special Consumption Tax (SCT) on heavy fuel oils will affect the Jamaica Public Service (JPS) suggesting that he never said otherwise.
Responding to The Gleaner/Power 106 News today, a statement from the ministry said when the Finance Minister was speaking at the Post- Budget Press Conference on May 13, he was responding to a question posed on the impact of the $7 increase in SCT on fuel used for the purposes of ground transportation.
However, a review of the recording of the press conference indicates that Shaw made the remark in his opening presentation and not when questions were being posed.
The whining has started. Note that according to this web page the price of oil for May 2016 is up 12.83% over the price for April 2016, almost the same as the expected 12.8% hike in electricity rates. What a coincidence!
The exchange rate is also slipping, having gone from JMD120 to the US dollar to 125 in just a few weeks.
Shallow
This company has a presentation out today giving projected costs and production from the newly discovered HRZ shale on the north slope of Alaska.
http://m.asx.com.au/m/announcements.xhtml?issuerCode=88E
Looks impressive can you see any reason not to invest 🙂
Lightsout,
I feel your comment is slightly tongue in cheek, so I am sure you realize that shale oil is marginal in areas where the work force can actually live near where they work, thus keeping labour costs down. Start fly in fly out and the wages to attract workers to such a “spectacular” climate, plus the logistics to move all the drilling supplies, and you have some very expensive oil.
I will give the point they have a method of moving the oil to market, but it will have pipeline charges and shipping cost.
I am sure you spotted the smiley face. I just cant believe anybody buys in to this myth anymore just look at their quoted costs and 1 million barrels cumulative at 60 months.
But I guess they will find backers they already got bank of America for crying out loud.
Especially with fracking where you need huge amounts of liquid water, and not icecubes – fracking will be possible only in 4-5 months / year and the rest of the time the expensive equipment will sit in winter shelters.
Disposal of used fracking liquids, when there are any enviromental laws, isn’t as easy like in Texas, too.
I don’t see any possibility of making money there under an oil price of 100+ Dollars/Barrel – even when the wells produce better than in Texas.
I came across this article on over population and population growth. Amazingly not one thing was said about energy, oil, coal, natural gas; nothing. Climate change was mentioned but apparently no one is very concerned about energy, it will just be there.
https://www.washingtonpost.com/news/wonk/wp/2014/10/27/stop-pretending-we-can-fix-the-environment-by-curbing-population-growth/
So for people who think the market actually works, our current dilemmas and predicaments are a direct result of letting the market run the world. With the current market and monetary system there is a huge lack of economic incentives to form a sustainable culture and world. So what to do with these lack of economic incentives?
Reducing Resource Consumption A Proposal for Global Resource and Environmental Policy
“On average, more than 90% of the resources lifted from nature are turned into waste before goods reach the market. And yet, a vast range of technical options exists to achieve radical dematerialization. But systematic eco-innovation remains largely unimplemented because of a lack of economic incentives
to do so.
In addition to concerns about diminishing ecosystem stability through resource
consumption, an emerging resource scarcity is increasingly driving technological change.
Globalizing the current patterns of Western consumption and resource use is not possible
because of insufficient availability of natural material resources, useable water and land on
planet earth.”
http://www.gws-os.com/discussionpapers/gws-paper09-5.pdf
our current dilemmas and predicaments are a direct result of letting the market run the world.
I’d frame that differently: incumbent industries have distorted markets, by preventing the proper accounting for all costs. If pollution, supply uncertainty, etc., were included in all accounting, the market would work just fine.
If pollution, supply uncertainty, etc., were included in all accounting, there would be NO market period.
If you mean that we’d very quickly see how expensive fossils are, and transition away from them ASAP, then I agree.
We are just a part of the natural order of things, no more, and no less. As such, we behave mostly like all other living organisms, doing whatever works for us to go forth and multiply, for as long as doing it WORKS.
When “whatever” QUITS working, well, we will do something ELSE.
So long as living high on the hog as if there will be no tomorrow WORKS, most of us will continue to do so.
Darwin rules, and Mother Nature, not being a sentient entity, is incapable of giving a crap. If every last one of us perishes, maybe ten or twenty million years from now a newly evolved highly intelligent species will be digging thru the fossil record and trying to figure out how we came to dominate the earth so fast, and why we disappeared so fast and so suddenly, after only ten thousand years or so.
This is not to say that we might not be able to do better in the future than we have in the past, lol.
Somewhere between 100,000 and 70,000 years ago, Homo Sapiens, the big headed ape, changed. A mental revolution occurred and shortly after that the last of the other Homo genus disappeared. The high order of communication, internal visualization and imagination had never been seen before. We are truly different. Different and highly capable predators, yet still very fearful and emotional.
We are definitely special, as Mother Nature would call us. Maybe we are a great leap forward or a great mistake.
Doesn’t matter anyway, if we don’t kill ourselves off our new technologies and science will allow us to eventually genetically change ourselves. Either way, Homo Sapien is not here to stay, not for very long.
That is if the AI doesn’t get us first.:-)
There is currently a boat load of production for sale on the energy net auction site, including many Bakken non-operated working interests, plus large public companies selling interests in conventional fields which they have held for decades.
A great way to see some REAL economics of US onshore production.
Great article this morning on Ft Fac and Global Warming. Well worth the read.
http://thetyee.ca/News/2016/06/17/Oil-Sands-Workers-Climate-Change-Casualties/
Alaska shale / fracking stuff:
https://www.doi.gov/news/pressreleases/USGS-Releases-First-Shale-Oil-and-Shale-Gas-Resource-Potential-Assessment-for-the-Alaska-North-Slope
from 2012
For the first time, the U.S. Geological Survey has estimated the potential of undiscovered, technically recoverable onshore shale oil and gas resources in Alaska’s North Slope. The estimates range from 0 up to 2 billion barrels of oil and from 0 up to 80 trillion cubic feet of gas – representing technically recoverable oil and gas resources, which are those quantities of oil and gas producible using currently available technology and industry practices, regardless of economic or accessibility considerations.
blah blah
Three source rocks of the Alaska North Slope were assessed in this study – the Triassic Shublik Formation, the lower part of the Jurassic-Lower Cretaceous Kingak Shale, and the Cretaceous pebble shale unit-Hue Shale.
These shale formations are known to have generated oil and gas that migrated into conventional accumulations, including the super-giant Prudhoe Bay field. However, these shales also likely retain oil and gas that did not migrate.
The Baker Hughes Rig Count is out. Oil rigs up 9, gas rigs up 1. Canada oil rigs down 1, gas rigs up 4.
Barnett and Cana Woodford rigs being classified as oil.
LOL.
Can you please enlighten the rest if us?
the Barnett shale does not produce oil, the wells being drilled could be in the Barnett shale area and be targeting a different zone, hard to say without looking at actual permits. Cana wood ford is also a dry gas play but the Stack area overlaps and there are “oil” wells in that area being drilled in various formations.
Daniel. Sorry for the short post.
My review of Cana Woodford wells is that primarily they produce gas, and that those with a high % of oil IP quit producing oil 12-24 months from IP.
Barnett is primarily gas. However, as TT says, maybe they are drilling oil wells in other zones. Marble Falls is one I have read about.
In any event, I don’t think adding rigs in these areas will add a lot of oil production.
Permian, Bakken, EFS and Niobrara are the oil shales IMO, with Bakken being superior to all but Delaware in terms of oil production, except when discounts to WTI and LOE are included, the Bakken suffers. Further, although Delaware has some prolific wells, they are much more varied than Bakken.
The other issue with both Bakken and EFS, the best areas have been heavily drilled. Sanish and Parshall appear to be near full development, and Mike seems to think the same holds in Karnes and DeWitt Cos, TX.
Shallow, I see 7 of 10 rigs added are vertical. Are a few conventional operators able to get a bit more money at 50, or is something else going on.
dc.
Couldn’t tell you. Could be SWD wells?
See one of those in ND is.
Dclonghorn,
some folks “have money” and don’t need to go to the bank, the cost of a drilling all wells including vertical wells is down significantly. My best guess is that the boys are teeing up their best ideas, taking advantage of the low cost with the expectation that higher product prices we have seen are here to stay and that even higher prices are just around the corner.
Texas tea
As a followup to your observation, Enervest has drilled a half dozen successful wells targeting the Clinton Sandstone these past several months in Ohio.
The TVD is about 4,000′ and the laterals 1,500’/2,000′.
Cost is under two million per (twice vertical cost) with output expected to be ten/twenty times conventional well.
There are a great many innovations and novel approaches being implemented in the O&G field right now.
http://www.rigzone.com/news/oil_gas/a/145084/Pioneer_CEO_60_Oil_Needed_for_US_Shale_Industry_to_Grow_Production
“I think the world is going to need Permian Basin oil production, and it’s not going to grow until you get to $60 long term,” he said. “When oil moves toward $60 per barrel, I believe a good $10 of it for a lot of companies will go toward paying off debt, or they’ll start selling assets at decreased divesture prices. That extra $10 will be a huge difference for companies that have great balance sheets today. That’s why I’m a firm believer we’re in a $60 long term oil price environment.”
Seems to have changed his tune somewhat. But $60 does not get in done in most LTO plays. PDX’s production may be able to grow in the $60(60-69) but elsewhere not so much. But of course I will take 69 over $48 anyday?
PXD smart moves.
Hedging better than most.
Issuing shares as opposed to incurring more debt.
Still not convinced Spraberry is superior to Bakken/EFS.
As I recall, only 11% of PV10 is in PUD per 2015 10K, despite 600,000+ acres which supposedly have multi stacked pays.
Here is a happy thought for the global warming alarmist:
http://www.oilandgas360.com/renewable-energy-replace-fossil-fuels-power-gen-2066-oag360-exclusive-interview-nrel-director-martin-keller/
“If Martin Keller’s prediction comes true, in 50 years the U.S. won’t be using nearly the amount of crude oil, refined petroleum products, natural gas or coal as the legacy energy industry has been supplying for the past 100 years”
50 years, gotta laugh! ?
As the windmills march across the landscape and the panels cover roofs and waste lands, will people still be tilting at windmills in the future? The young ones have accepted them already and by a decade or two from now, they will be nothing special, old tech. Part of the scene, as ignored as power plants used to be. The march is on, it is inevitable.
The big question is, will we have set aside enough space for the natural world to continue forward or will we insanely keep running amuck like a twisting tornado?
Gone fishing,
the article i thought was very reasoned. The funny part in these old eyes is the 50 years part. At the rate technology develops 50 years is like an eternity, who the hells knows what what we will be using in that time frame. Also, like many here i don’t know that we have 50 years of oil and nat gas and the current rate of demand (not to mention the increasing rate of demand). Last point that made me chuckle is the fact many climate change alarmist continue to say in 50 years we will already be doomed, hell thats what they have been saying that for 20 years, but in any case I continue to read that we only have a few years to get off fossil fuels or the damage is irreversible. And here we have the man leading the US scientific effort on alternative energy saying it will be 50 years.
Hi Texas T,
We have hundreds of years of fossil fuel left, since renewables will be taking most of the load by 2030’s. Personally, I think fossil fuels are much better used for chemicals, pharmaceuticals and polymers. California and New York are on track to have half their energy be renewable by 2030. Several other states are fast tracking too, 29 have mandatory renewable programs in place.
My personal studies have led me to the conclusion that even fast tracking off fossil fuels will not stop global warming. Natural feedbacks are taking over. But that does not stop me from conserving and switching to solar energy.
As I said in a post earlier, the majority will take global warming seriously when some cities have been sacrificed and Manhattan has been washed over for the third time by storm surges. We just have far too many problems and predicaments to face to spend a lot of time and energy dealing with all of them.
As oil and other fossil fuels descend in production, we will deal with that first.
Of course, many of the solutions also will slow down global warming. Convenient.
Fred, what the hell’s going on in Brazil?
RIO STATE DECLARES ‘PUBLIC CALAMITY’ OVER FINANCES
In a decree, Mr Dornelles said the state faced “public calamity” that could lead to a “total collapse” in public services, such as security, health and education.
http://www.bbc.com/news/world-latin-america-36565901
Here is news on Rio’s bankrupt and corrupt state of affairs from two months ago. Teachers, police and other services not getting paid. Rio looking for loan from federal government to get services back.
“There are facilities lying unused because the money is not available to pay for doctors and nurses to staff them. Hospital pharmacies are short of drugs and people are being turned away from long queues seeking to get preventive injections against flu for the forthcoming “winter” season here. Research into the Zika virus in one research facility in Rio was being continued only because the lead researcher was recycling his own money into the project to pay for research materials for which the State should have been paying.
It seems that Rio State and Rio City have prioritised the Olympics over many public funded areas which are required by law, the health service, the Police and Education.”
“It is also clear from TV news reports last night and today that the health service cannot perform any kind of elective surgery, only emergency surgery. Also the police service is trying to use only the internet for transfers of information simply because they cannot afford even to buy any paper, the budgets are completely out of cash for such purchases.”
https://keithmelton10.wordpress.com/2016/04/07/corruption-in-brazil-4-rio-state-bankrupt/
The Olympics is supposed to bring nations and peoples together.. How do you think the local people are going to feel about the Olympics after this ordeal?
How do you think the local people are going to feel about the Olympics after this ordeal?
GF, the locals lost faith in the Brazilian government a long time ago. The Olympics will not change much about their views of the world.
Corruption has always been a problem in Brazil and the current crisis is just a consequence of business as usual and the fact that a large part of the Brazilian government’s revenue depended on natural resources such as oil. Peak Oil is having its effect on Petrobras and the Brazilian government, the pie has shrunk and scraps that used to fall off the table for the poor are no longer available… Brazil ain’t quite Venezuela but similar dynamics are at work. (and no, it doesn’t have anything to do with communism). Keep watching Mexico to see what happens there with their government and Pemex!
Same shit, different flies. Left wing, Right wing, North wing, South wing, Socialist, Communist, Military Dictatorship or corporate capitalism, non of them will work anymore if they continue to try pushing economic agendas based on fossil fuel economies. Beating a dead horse won’t make it get up and pull the cart. There’s an awful lot of dead and dying horses out there right now.
The Olympics are pretty much irrelevant in the big picture.
Thanks for the perspective.
Doug, See my comment to Gone Fishing.
Basically a combination of corruption, gross mismanagement and peak oil, it’s no coincidence the headquarters for Petrobras is located in Rio. 🙂
Give us this day our Roman Holiday! Thank you, Jesus!
http://www.worldometers.info/world-population/brazil-population/
If the population of Brazil was 72,000,000 in 1960, is now 209,000,000, almost triple, and the population of the United States was 180,000,000 in 1960, now at 315,000,000, an increase of 135,000,000, not even double, one can deduce that Brazil has more overall appeal for human habitation than the United States. Hedonics and all that jazz.
Better climate, more economic activity, greater potential for an unfettered existence, rather than being hounded to ennui by a government that knows you need to be taxed to death if the government can possibly survive.
Good place to provide a venue for the Summer Olympics, enough Tempo will be applied before hand, Zika doesn’t have a chance.
Party on!
Coal is ancient sunlight, therefore solar energy is filthy, dirty, nasty stuff formed by the earth, a wicked place in the universe. har
Good place to provide a venue for the Summer Olympics, enough Tempo will be applied before hand, Zika doesn’t have a chance.
Har, har, har!
Sounds like a bit of a sticky problem in Canada!
http://www.downstreamtoday.com/news/article.aspx?a_id=52580
Clogged Pipeline Delays Restart of Suncor’s MacKay River Facility -Sources
June 15 (Reuters) – An Enbridge Inc pipeline connected to Suncor Energy Inc’s MacKay River oil sands facility near Fort McMurray, Alberta, has clogged after heavy oil cooled in the system, prolonging a shutdown of the site, three sources familiar with the matter said on Wednesday.
Natural gas continued to soar last week, up 30% over the last four weeks, despite the shoulder season and doubts about a further recovery:
http://www.investing.com/analysis/it%E2%80%99s-not-the-time-to-be-bullish-natural-gas-200136703
Power burn stands at an all time high and up over 20% from last year. In addition, huge write downs of the industry of 40 Tcf for 2015, which – including oil – brought overall impairments to over 10 bn boe (or USD 500 bn loss for investors in 2015) reduced investors appetite for new investments. How many investors are left ready to lose another 500 bn on write downs alone?
http://www.naturalgasintel.com/articles/106753-staggering-us-ep-reserve-revisions-in-2015-eliminated-40-tcf-41-billion-bbl
The third force driving up prices is a significant change of electricity generation mix in the US.
In below chart, the market share for coal in electricity generation fell below 25% in March 2016.
http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_1_1
On the other hand, the growing market share for wind and solar triggered massively demand for natural gas which reached an all time high market share of 35%.
If there is a hot summer this year, power burn could go over 40 bcf/d and maybe even reach 50bcf/d for some days. The conequence would be the first significant stock draw over the summer, which for sure will have an impact on prices.
January to March 2016 coal production (USA) is down 27 percent from the 2015 first quarter. down 37% from 2011.
GoneFishing,
This is exactly what I have wanted to say as the trend intensifyed very much in the first few months of the year. It is showtime for renewables – and also natgas.
Heinrich, looking at your graph something struck me as very familiar, so much so I had to look at my most recent annual electricity mix graph (Shown below). As most here should be aware, every month I post an electricity mix graph whenever the EIA releases new data for their “Electric power monthly”(my most recent update). I don’t post the annual mix graph every month, choosing to wait instead till the full year’s data is out before updating but, up until Jan 2016 both our graphs are basically identical. Leads me to conclude that you are using the same spreadsheet software that I am (LibreOffice), in addition to using the same data source. Are you just using the “Year to Date” for 2016 figures? I never thought of that!
edit: I’ve just noticed an error in the labelling of the graph, in that the y-axis label is “GWh” when it should be “Percent”.
On the other hand, the growing market share for wind and solar triggered massively demand for natural gas which reached an all time high market share of 35%.
Are you talking about last year, when NG share of the mix was over 35% for the months of July through to October? (All time high 35.295%, August 2015)
If there is a hot summer this year, power burn could go over 40 bcf/d and maybe even reach 50bcf/d for some days.
I beg to differ. One of the reasons I am doing my monthly updates, is to try and catch the point where renewables, wind and solar in particular, start to make a material difference. Solar is a very useful electricity resource from the point of view that, the available resource matches the demand reasonably well during the summer in the US, when the primary reason for increased demand is air conditioning. I am watching keenly to see when the “heavy lifting” during the summer months starts to be done primarily by solar. If this is the year, you might not see your anticipated increased gas burn.
My next update should be this coming Thursday, if the “Electric Power Monthly” is updated on schedule.
islandboy,
Thanks for your reply. Yes I have used the same data (and also the same software) as you. However, I have mixed yearly data with monthly data in 2016 as I cannot wait until 2017 to collect the 2016 yearly data in order to detect the trend – the opportunity would have been already missed in 2017. The EIA does not publish monthly data beyond 2014, yet the monthy data alone would have not shown the bigger picture. In the title of my chart I have indicated March 2016 as the last data point. It is important to include timely data as I want to get a glimpse on the future trend.
I strongly believe in detecting trends by observing initial changes, which will lead to even bigger changes in the future. Where there is smoke there is also fire.
The transition to wind and solar energy will be in my view very disruptive. The reason is that wind and solar are not steady energy sources, yet can lead to vast oversupply of electricity in a short time span followed by extreme shortages (during the night or when there is no wind). This environment is not suitable for coal electricity generation as the increased market share of solar and wind can lead to negative electricity prices – yes after negative interest rates we will be also paid to use energy – and this scenario is very unprofitable for coal generation as coal boilers cannot be switched on and off in a short period. This is in my opinion the main reason coal is kicked out of the electricity market.
Natural gas is here much better positioned than coal as natgas turbines can switch on and off the grid much easier. So, natgas can profit from high electriciy prices and just go off the grid when prices are negative.
I can see this market tensionalready from natgas prices, which sould be very low now as we have the shoulder season and inventories are high. Nevertheless, the way like natgas pierced through resistance at USD 2.5 for Henry Hub and did not look back and stormed further tells me that the market is very tight.
Also the record high power burn in the spring time:
http://www.eia.gov/naturalgas/weekly/archive/2016/06_02/img/20160602_itn1.png
is a sign of market tightness.
Anyway, I have placed my bets and we will see in about three months how this will evolve.
Coal fired generation can be ramped up and down but it costs in terms of pollution, greater wear and tear on the equipment, and the coal itself. Utilities have been ramping coal fired generation up and down since the first coal burning plant went online back when the grid was first established. The load has always varied over the course of the day and the week.
With weather forecasts getting better and better, and the wind and solar power achieving greater market penetration,over longer transmission lines, the need to keep extra coal fired generators hot and ready to roll is gradually diminishing.
Gas IS displacing coal anyplace gas is readily available and cheap, but I think coal will probably still be the main backup fuel in large parts of the world for the simple reason that gas is NOT cheap or readily available, and probably never WILL be.
Coal fired generation can be ramped up and down but it costs in terms of pollution, greater wear and tear on the equipment, and the coal itself.
That depends on the design, too. Old coal plants weren’t designed for much dispatching/load following, but I believe new designs can handle it pretty well, for better or worse.
Of course, the US isn’t building many new coal plants.
“Natural gas is here much better positioned than coal as natgas turbines can switch on and off the grid much easier. So, natgas can profit from high electriciy prices and just go off the grid when prices are negative.”
This is only true if you look at individual turbines, however, in reality only the sum of all generation capacity counts, i.e. are all NG turbines or coal power plants able to provide the required power gradient.
If you read the papers of the German VDE you get an expert opinion that contradicts your thesis, BTW the reality (2010-2015) in Germany too. As long as coal is cheaper than NG coal is used, NG was the real victim of the huge number of wind turbines and PV in Germany.
The EIA expects natural gas to dominate U.S. power generation for the whole period to 2040 in both of its 2 scenarios:
Do we have that much natural gas?
GoneFishing,
The oil and natgas industry has made dramatic impairments on reserves last year, which came down by 10 bn boe ( 4 bn for oil and 6 bn for natgas).
http://www.naturalgasintel.com/articles/106753-staggering-us-ep-reserve-revisions-in-2015-eliminated-40-tcf-41-bi
According to the BP statistical review US oil reserves stand at 55 bn boe and 370 Tcf natgas.
http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html
As production adds up to 4 bn boe and 27 Tcf per year, the reserve life stands at around 13 years for both oil and gas. However, BP did not account for the latest impairments in 2015 and there will be some reserve impairments as well this year due to lower average prices. As a consequence it is save to say that US reserves last around 10 years, unless dramatic new discoveries are made.
So, in theory there should be no oil and gas production anymore in the US in 2030. In practice, this will not happen as production decline will set in much earlier and the reserve life will last longer. This very much depends on prices, which are stronly linked to reserves.
The EIA forecast scenarios for renewables have historically been absurdly inaccurate (they’ve been far too low).
Why do we think that’s different now??
AlexS,
The above chart about the future electricity generation mix seems to be already outdated by now.
March 2016 electricity from coal is down to 72 kTWh which implies that it will be below 1000 kTWh this year. This is what the EIA predicted for the year 2030. On the other side natgas will be likely above 1500 kTWh for the total year, a generation which the EIA predicts for the year 2025.
This supports my view that the market for electricity generation has changed dramatically over the last years and we see already now a scenario which the EIA has predicted for 2025- 2030.
Low natgas prices have also played a role, yet the fast ascent of renewables are a driving force as well. President Obama has promised change. This is certainly true for the electricity generation market.
Heinrich Leopold,
“The above chart about the future electricity generation mix seems to be already outdated by now.”
Yes, I have noticed that.
The EIA assumes a significant increase in natural gas prices, which could temporarily deter (but not stop) growth in its consumption
Natural Gas Spot Price at Henry Hub
(2015 dollars per million Btu)
source: EIA Annual Energy Outlook 2016
Alaskan shale will save us from peak oil they even have a video to show us how 🙂
http://88energy.com/
The video makes it sound like they really do not know much about this field.
Is it normal for the oil to be in gaseous form as the video states?
I am sceptical but the man behind it all is Paul Basinski he claims that oil is present in the vapour phase and thats what gives the exceptional (for shale) flow rate, recovery factor and makes it commercial.
Anybody who knows anything about shale should know who this guy is.
Oil as a vapor that far underground? This all sounds very fishy to me. This is likely to be a hard sell to investors.
Hi Ron
I am not sure what to make of it but the claims for flow rate and recovery factor all look too good to be true for a shale play. They claim 1 million barrels cumulative at 60 months.
Still UK and Austrailian investors have bought in and Bank of America has given them a loan.
The latest company presentation makes for very interesting reading.
Just when we all thought shale needed $60 oil.
http://m.asx.com.au/m/announcements.xhtml?issuerCode=88E
I response to a comment further up. I posted the following. It is sort of a new thought so I thought I should post it down here. My aplogies to thosee who may read it already up top. Following a post in which I wrote, “I am sort of cementing the idea in my mind that, the true value of oil is largely it’s ability to facilitate the movement of large numbers of people and huge amounts of goods.”, I posted the following;
When it comes to moving people around, here’s a somewhat novel idea.
What if some car company decided to build an electric car, a fancy, expensive, 200 plus mile range one at first, in order to finance development of further models and scale up the required technology? What if this company, while scaling it’s manufacturing to say 2,000 plus units per month, started development of a special fast charging network along major interstate routes, sort of like the one shown below? What if this car company was able to develop a more affordable car and make, say half a million in 2018, by which time the fast charging network to which the car has access, has blanketed the entire US?
The map below, shows the Tesla “Supercharger” network. The first location was opened in Barstow, CA on November the 19th, 2012. As of 9:00 am EDT June 18, 2016, there are 276 locations in operation with 12 under construction and 14 permitted but not yet under construction. There is no fee to charge at these stations for most of the “Supercharger capable” cars that Tesla has sold (the service is “free”). This network is owned and operated by Tesla Motors Inc. and is being built without any government subsidies that I am aware of.
A paradigm shift is underway!
A paradigm shift is underway!
There is no doubt EVs are coming faster than most imagine, though the real paradigm shift in my mind is in batteries for energy storage and electric propulsion for aircraft.
http://www.investors.com/news/siemens-boeing-rival-airbus-seek-to-develop-e-aircraft/
Boeing (BA) rival Airbus (EADSY) and Siemens (SIEGY) have agreed to work together on developing an electrically powered aircraft, with a plan of “demonstrating the technical feasibility” of hybrid or electric propulsion systems by 2020, the companies said Thursday.
Boeing has also put its weight behind efforts to develop electric aircraft, and Tesla (TSLA) CEO Elon Musk has also entertained the idea of making an electric jet.
Airbus in 2014 ran its first public test flight of the E-Fan, a two-seat electric aircraft intended for pilot training. Siemens has been at work on an electric aircraft engine since sometime around 2011, when Airbus, Siemens and Austrian aviation company Diamond Aircraft introduced a hybrid aircraft.
For automobiles and light trucks, gasoline is dispensed at the rate of about 10 gallons per minute. For larger diesel trucks, somewhat faster.
Just doing a Google search, it appears there are about 114,000 retail gas stations in the US, which support over 1 million individual gas pumps. The number of gas stations has been decreasing, while the number of pumps per station has been increasing.
Some statistics from the 2015 NACS Fuels Report:
Nearly 40 million Americans fill up their gas tanks on a daily basis.
The average US vehicle travels 32 miles per day and is 11.4 years old.
85% of Americans get to work by driving or carpooling.
5% take public transportation to work
3% walk to work
4% work at home
Huge advantage EV’s have is they can be charged at home.
I am with OFM, to make a rapid switch from gasoline to EV quickly is going to be difficult as Americans generally drive older, inexpensive vehicles.
I am driving a 6 year old truck with over 100K miles on it. It is my third one in over 20 years. With it, and the prior two, I had several people ask me to contact them when I was ready to trade to a newer model.
EV’s may take over someday, but it is going to take a couple decades IMO, at least, absent a government warlike effort.
Americans generally drive older, inexpensive vehicles.
No, they tend to own older vehicles, but they drive newer ones. According to the Federal Highway Administration, the median age of light vehicles on the road is 6 years (50% of Vehicle Miles Traveled are traveled by vehicles less than 6 years old).
So, think 6 years for 50% turnover, not 11.4.
If the price of gasoline goes up sharply within the next few years, electric cars will sell like ice water in hell and Nick may be right about the resulting fast sharp fall in gasoline consumption.
On the other hand, conventional cars can be made, and WILL BE made, to be more fuel efficient, cleaner,reliable and safer from year to year.
And if electric sales take off, the market will be glutted with cheap relatively new conventional cars for a LONG time.
The outcome will be mostly determined by two variables, the price of gasoline, and the price of electric cars. If gasoline goes up fast, and electric cars come down fast, electrics will rule new car sales within ten years or so.
Given that depletion never sleeps, that the world economy is still growing overall, that population is growing, and that batteries aren’t likely to serve in heavy trucks and machinery such as farm tractors anytime soon, there is plenty of reason to believe oil will go up and stay up within the next decade.
I wouldn’t bet against Nick.
Some amazing and AFFRODABLE Battery tech evolving for Drones. I have a 20 channel – 50 amp ICharger that will Activally charge, balance, test cycle all cells of any pak – any chemestry . Planes may not be so far away once EV scales up.
http://www.nytimes.com/2016/06/18/science/nasa-electric-plane-x57.html
For the most part I agree with Nick’s opinions, but I can’t let his subjective opinion about road trips go unchallenged. I love unplanned road trips, and once my brother takes delivery of the Tesla Model 3 that he reserved, I look forward to the U.S. road trips where we flip a coin at every crossroad Supercharger to determine where our trip heads next.
Can’t wait to do it in Europe either in a Tesla rental car.
EV’s are getting better but the combination of lack of charge points in many regions along with the much shortened range in winter conditions will still put off a lot of drivers. The story will probably change within the decade, but still good to keep that spare 4 wheel drive vehicle for winter trips. Getting stuck along the road at night in rural Vermont can be deadly in the winter.
The EV is still a limited mobility vehicle, as was the gasoline ICE in it’s early days.
Read about the first car trip across the USA. https://en.wikipedia.org/wiki/Horatio_Nelson_Jackson
At least the Tesla does not take 60 days to cross the US.
“At least the Tesla does not take 60 days to cross the US.
If you look at the map above (The zoom-able, interactive map is at http://supercharge.info), there is a route from LA to NY that will soon open up that I predict, will facilitate a Tesla doing the trip in less than 48 hours with at least two drivers. As soon as construction is completed on the charger under construction in Tulsa, the one granted a permit in Springfield Missouri and the one granted a permit in Rolla Missouri, I expect the sub 48 hour attempts to begin.
That is way too fast for me. I like to explore off the beaten path, which right now is tough with electrics.
the combination of lack of charge points in many regions along with the much shortened range in winter conditions will still put off a lot of drivers…I like to explore off the beaten path, which right now is tough with electrics.
Which is why I expected the Chevy Volt to be a much bigger hit relative to pure EVs than it has been. It has the best of both worlds: 50 mile range, EV acceleration, and liquid fuel backup. It’s the ultimate dual-fuel vehicle. I thought that EREVs (extended range EVs) would be far more popular than pure EVs.
Not so much.
I’m afraid the story is simple: GM simply isn’t fully committed to alt-energy vehicles. Too many of their engineers and managers are afraid of their ICE-related knowledge being made obsolete; and their dealers are afraid of losing the majority of their service revenues. There is a minority of people within GM who are enthusiastic about EVs, but the overall corporate culture just isn’t there yet.
GM’s advertising apologizes for electrification, instead of promoting it as an advantage. It’s not surprising very few are selling.
That’s Tesla’s secret. They actually make their vehicles beautiful, instead of the very, very odd designs we see in the Nissan Leaf, or the BMW i8. Tesla invests in a supercharger network. They actually want their vehicles to sell, and that’s an enormous advantage versus companies that are simply building the absolute minimum in order to comply with regulations.
BMW, Toyota or GM could blow Tesla away if they really overcame their fear of cannibalizing their ICE sales.
There’s no sign of that yet, for better (for Tesla investors) or worse (for the rest of us).
I agree the Chevy Volt is a very good car with an acceptable electric system and decent range overall. They actually did a great job of integrating the two types of motors and give the driver several options on how it runs.
Not sure why the Chevy Volt is not selling very well, maybe it is price point for a car that looks fairly normal on the outside. Maybe the low gas prices are stunting the sales.
It should sell. If you lease, you get the benefit of the tax credit and you can enjoy the overall very low annual total cost of ownership.
Seriously, have you seen GM’s advertising for the Volt? You’d never, ever know it was a superior car.
“The map below, shows the Tesla “Supercharger” network. …. There is no fee to charge at these stations for most of the “Supercharger capable” cars that Tesla has sold (the service is “free”). ‘
This will not apply to Tesla 3.
From Bloomberg:
Musk Says It’s ‘Obvious’ Model 3 Owners to Pay for Superchargers
http://www.bloomberg.com/news/articles/2016-06-01/musk-says-it-s-obvious-model-3-owners-to-pay-for-superchargers
Tesla Motors Inc. will likely charge owners of its forthcoming Model 3 sedan to use the company’s network of Supercharging stations, which is free to owners of current models, Chief Executive Officer Elon Musk said Tuesday.
“Free Supercharging fundamentally has a cost,” Musk, 44, said Tuesday during Tesla’s annual shareholders meeting, held at the Computer History Museum in Mountain View, California. “The obvious thing to do is decouple that from the cost of the Model 3. So it will still be very cheap, and far cheaper than gasoline, to drive long-distance with the Model 3, but it will not be free long distance for life unless you purchase that package.”
That is why I worded the following sentence very carefully;
There is no fee to charge at these stations for most of the “Supercharger capable” cars that Tesla has sold (the service is “free”)
most – not all, some configurations of the Model S sedan did not come with free charging standard. It was an extra cost option, hence the quotes around the word free.
has – sold, not will sell. Maybe I should have added that “free Supercharging” will not be standard on the Model 3 but, deliveries do not start till late next year.
Here is a zoomed in graph showing monthly production independent of age, but grouped by year. It´s not as accurate as the production profile, but it gives you the very latest data. Very interesting to note is how fast 2013 wells are declining. Around month 25 production is about the same as 2010-2011. Only production for 2008 is considerably higher. In month 40 production has declined much faster and is even slightly bellow 2012. 2014 starts off higher than 2013 but seems to decline even faster. In the last datapoint it has reach the 2013 level of production. So the higher initial production for the latest years does not seem to result in higher UR. The 2013-2014 wells have only recovered around 10-20 k barrels more than 2008-2012 during the first few years, so it´s quite possible that UR peaked in 2008.
Here is the corresponding GOR graph for the production graph above. GOR is still increasing, but maybe not as fast as before.
Thanks Freddy for posting your graphs, as it made me recheck my earlier calculations and found i was in error about the direction of Bakken GOR. I now see it is continuing to increase with the declining oil production. April is not the big inflection point I thought it was.
The way 2013 wells are dropping below all bar 2008 production numbers is enlightening. now if 2014 and 15 follow the same the game will over.
Yes it will be interesting to follow. So far 2015 looks much better that previous years. We will have to wait and see much higher the decline rate is.
Here are the production profiles as a comparison for the production graph above. The month data in this graph is roughly 6 months less than the month data above. So for example month 26 above roughly represents months 20 in this graph.
Charts by the EIA for 4 key LTO plays
Eagle Ford wells that started production in 2015 had much higher IP rates than older wells, but declines are much steeper
There was a sharp increase in IP rates in the Permian, but declines rates are also steeper
Same trend in the Niobrara
Thanks for the graphs Freddy,
Lynn Helms mentioned some time ago that a major factor for the increase in GOR was the move to the core of the Bakken, which is more gassy.
However, as the following graph shows, within most counties, there was a significant increase in GOR as well.
Well I don´t take anything Helms says seriously. He may be right, but the graph clearly shows that GOR is increasing in old wells. So more gas in new wells is not the main reason.
Hi Freddy W,
What would be interesting is the cumulative well profile.
Ok sure. 2013 is still higher than previous years, but the other ones are closing in. This is based on the production profile graph, so it does not have the very latest data.
Hi Freddy,
Thanks.
It is possible that 2008 will be the highest well profile, it is clearly better than 2009 and 2012, we will have to wait and see on 2010, 2011, 2013, and later wells to see what the cumulative is.
Also note that the steepness of the early part of the well profile does not necessarily continue after month 24. The slope of the cumulative curves look pretty similar after about month 24 for most years after 2008 (2012 seems to be an exception). Perhaps in 2012 a lot of wells were completed outside of the sweet spots to hold leases.
Daily CO2
June 17, 2016: 406.68 ppm
June 17, 2015: 401.63 ppm
Fred from way up thread.
“Sorry Tea, this is the 21st century and while that might have been true even a century ago, we now have a very extensive and solid body of scientific knowledge to work with and therefore all scientists do not in any way shape or form get it wrong ALL THE TIME! That isn’t how science works today.”
I will not shove words into you mouth and I will ask that you don’t try it with me. No one said all scientist get it wrong all the time. What was said is that most scientists have ideas that will later be proven wrong. In the field of climate science the models developed and played up in the media that were used to promote all kinds of false assumptions and alarming predictions have been frequently and objectively proven to be wrong. Most intellectually honest scientists would agree that we do not have the information needed for the models to fully understand all the variables that influence earths climate. Which of course includes sun cycles and the natural earth processes such ocean cycles, tectonics (volcanoes) ect (not to ramble on?). To take one possible influence, the increase or decrease of CO2 and make predictions as to what the climate will be in 50 years is not science, it is at best guess work, it is one part of a jigsaw puzzle and it is dishonest to present in any other way.
It does not matter what field of science one works in, but to chose one for an example, medical science and drug development. Billions of $$$ are spent on drug development, more times than not the drugs and the research behind them are thrown into the trash because they do not work. The “science” relating to human diets and the epidemic of obesity and diabetes, another great example where they just flat got it wrong for over 30 years. I could ramble on but the point is made, good people often get it wrong, bad people do not care and evil people profit from it. ??
most scientists have ideas that will later be proven wrong.
And…that’s misleading to the point of just being wrong.
Yes, almost all scientists are working with concepts that can be improved in some way. But are they just flat out wrong? No.
Why is this important? Because your argument above uses this idea to frame climate science improperly: climate science can certainly be improved, in many, many ways. But it’s good enough to identify serious risks in what we’re doing now, and tell us that we need to take some action to mitigate those risks.
Of course, climate science mostly tells us what we already know for other reasons: fossil fuels are expensive, risky and polluting, and we should move away from them as fast as we can.
And, of course, that’s why the Koch brothers and Exxon want to throw doubt on climate science: it’s bad for their business.
Nick,
“But it’s good enough to identify serious risks in what we’re doing now, and tell us that we need to take some action to mitigate those risks.”
this is a statement i can agree with as it attempts to understand the limitations we are struggling with but also why further study and research is needed. Now include that idea with a cost benefit analysis of our current energy mix and all of a sudden we have someone who at least correctly frames the issues. ?
Tell the Chinese and Indians I doubt that any of them have ever heard of the Koch brothers. It isn’t about doubt created by Exxon or Koch brothers, those doubt exist on the merits of the science itself it is about maintaining civil order in their own countries.
Yes, the layman looks on scientific results as indeterminate and without confidence, couched in error limits and probabilities, and subject to correction or change. Of course the reality is far different, just look around you.
The very simple statements of the non-scientific populous seem so confident, so definite. Mostly they are wrong or misleading but they are not couched in terms of the reality of the situation and are generally one-sided and agenda based. We call that propaganda, I call it deceit.
The scientist understands the limitations of his investigations and puts them honestly out front for public viewing, being heavily checked by his peers. Probably about as honest as you can get in this world.
Again, if you think science is wrong and does not work, look around you, even as you type or read on the electronic inventions derived from all the “wrong” science. You sound like you have no idea how knowledge is gained or grows. Nor do you know how to interpret scientific results. Best to leave that to others.
And if you are thinking about global warming, the physics are rock solid, the details of climate change are fuzzy, mostly because of lack of funding for enough research teams and sensors. But it is only fuzzy, not wrong. If some of those rich businessmen and their puppet governments would actually spend enough money and effort on the science effort, we might know with greater certainty the details of climate change.
But they do not want to know, because it will force inconvenient action and change. Throughout history, the search for knowledge has been directed and throttled by the powers that be. We are still medieval in many ways.
But I guess today’s profit and power are far more important than the world or our future generations.
Now include that idea with a cost benefit analysis of our current energy mix.
Sure. The thing is, a good cost/benefit analysis of our current mix tells us that it’s needlessly expensive, and can be made cleaner, cheaper and more reliable by moving away from fossil fuels.
Coal, for instance, has unaccounted-for costs of about 18 cents per kWh, even excluding green house gases.
Oil has many costs: war, pollution (particulates, NOX, sulfur, etc., etc).
Tell the Chinese and Indians I doubt that any of them have ever heard of the Koch brothers.
The Chinese are very, very aware of the costs of fossil fuels – FF pollution kills millions of chinese annually.
The Chinese certainly aren’t going to endanger their economic growth with a transition away from FF, but there is no conflict here: a pedal-to-the-metal transition is good for their economy.
The Chinese are moving away from FF faster than the US – the US is in serious danger of losing economic competitiveness because of it.
Nick,
You are way too quick to dismiss TT concerns. He has some strong points.
Moreover I think you never heard about Lysenkoism, right ?
http://www.forbes.com/sites/peterferrara/2013/04/28/the-disgraceful-episode-of-lysenkoism-brings-us-global-warming-theory/#764db80841e4
http://www.softpanorama.org/Skeptics/lysenkoism.shtml
https://en.wikipedia.org/wiki/Lysenkoism
Science and scientists are now heavily politicized. A lot of them are just political charlatans spreading nonsense for money and abusing mathematics, using it as smoke screen to hide their disgraceful actions. Take for example neoclassical economists.
Many scientists now have connections and receive funding from military industrial complex or other industrial lobbies which also affects objectivity.
Scientists with integrity of Rutherford are extinct. Now this is “He who pays the piper calls the tune” all over the science.
As such most of them (outside few fields yet not politicized enough, like pure mathematics ) became the same prostitutes for the elite as journalists.
That does not exclude objectivity, but it now can never be taken for granted. Scientific schools struggles can now well be the struggles of influence groups standing behind particular groups of scientists. The attitude should be like in the Russian proverb that Reagan used to love so much: “Trust but verify” 🙂
You’ve got things reversed.
Scientists make mistakes, and they’re certainly vulnerable to political pressure.
But…when it comes to fossil fuels, the political pressure is coming from the fossil fuel industry, to suppress the truth about it’s problems.
NickG
“But…when it comes to fossil fuels, the political pressure is coming from the fossil fuel industry, to suppress the truth about it’s problems.”
I believe that to be just flat out wrong. The fossil fuel industry will get along just fine, it is baked in the cake from the standpoint the entirety of our worlds civilization is based on fossil fuels. The advancement of our civilization required it, the continuation of our civilization requires it
(at least in the short and medium terms.) That may/will in change in time because of the depletion of resources and the increasing cost to recover, but as Ron and others have pointed out, not until we have consumed every last drop of recoverable oil, nat gas and coal. Best case it will be photo finish to see if the world can roll out renewables before the impact of peak oil to seriously wreck havoc on the worlds economy and standard of living for those around when it happens. To the degree there is political pressure, I would suggest you try to understand the business side of the issues as they relate to the tax structures for local and state finances and even on a federal level. I suppose you have paid the gasoline tax that keeps roads in repair? I think you understand that oil and gas held in private hands are considered real property right? Everyone who owns minerals, just like the lands the oil and gas sits under, have a vested interest in the value and are taxed providing income to a great number of people including school systems all across our state. The business interest and employment in all aspects of the production, transportation, refining, and distribution. The motor car companies, the mechanics, the quick stops all across the country. The vested interest in the status quo are far reaching and are seen widely as a benefit. The idea that if just exxon and the Koch brothers would just shut up everything would be hunky-dory is beyond naive! ?
The fossil fuel industry will get along just fine, it is baked in the cake from the standpoint the entirety of our worlds civilization is based on fossil fuels.
So, you must have made a lot of money going long on Peabody coal (the largest coal company in the US) as it’s stock crashed, knowing it was going to be just fine.
But wait…it did go bankrupt.
How about Samson Resources? You knew it would never go bankrupt…
The US oil & gas sector has lost a $trillion in valuation lately. You must be buying up oil stocks on margin!
The vested interest in the status quo are far reaching and are seen widely as a benefit.
Yes, many will be hurt by the decline of oil & gas. But most aren’t willing to lie and subvert democracy like Koch and Exxon.
TT, I apologize for giving the impression that I was quoting you verbatim.
However when you say this:
What was said is that most scientists have ideas that will later be proven wrong.
I have to agree with Nick below. That statement is flat out wrong! Science does not operate in a vacuum and most scientists today build on a very solid scientific foundation of accepted scientific theories. They don’t just pull ideas out of their asses!
It does not matter what field of science one works in, but to chose one for an example, medical science and drug development. Billions of $$$ are spent on drug development, more times than not the drugs and the research behind them are thrown into the trash because they do not work.
Ok I’ll run with that! While a particular drug may not work as expected the scientific research they engage in does not overturn germ theory or the theory of evolution!
http://www.wired.com/2015/02/scientists-wrong-time-thats-fantastic/
https://www.theguardian.com/science/occams-corner/2013/sep/17/scientific-studies-wrong
http://rationalwiki.org/wiki/Science_was_wrong_before
LOL! You really should read the rationalwiki link you posted! From that link:
When people thought the earth was flat, they were wrong. When people thought the earth was spherical, they were wrong. But if you think that thinking the earth is spherical is just as wrong as thinking the earth is flat, then your view is wronger than both of them put together.
As for the Wired link, Meh! And for the Guardian link I suggest you watch this to at least dispel some common myths about Einstein.
https://origins.asu.edu/panel-einsteins-legacy-100-years-general-relativity
Warning it will take up about two hours of your time. Well worth it in my opinion…
How about such thing as Lysenkoism? Is not this a cancer for science, from which there is essentially cures are as difficult to obtain and are as destructive as for regular cancer.
IMHO you can view neoclassical economics as a cancer or a modern version of Lysenkoism (and a very successful, dominant one), if you wish (with due apologies to “strict” supply-demand equilibrium believers; of course, in a long run everything comes to equilibrium, but in a long run we all are dead ;-).
How the existence and success of Lysenkoism ( let’s say in the form of neoclassical economics ) correlates with your optimism about modern science and scientists ? That is the question to be answered.
See also the post above
http://peakoilbarrel.com/north-dakota-down-over-70000-bpd-in-april/#comment-573372
How the existence and success of Lysenkoism ( let’s say in the form of neoclassical economics ) correlates with your optimism about modern science and scientists ? That is the question to be answered.
Surely you jest!
Lysenkoism is the antithesis of modern science! And while I’m no fan of neoclassical economics and think this Sciam piece says all that is necessary to be said about it:
http://www.scientificamerican.com/article/the-economist-has-no-clothes/
The Economist Has No Clothes
Unscientific assumptions in economic theory are undermining efforts to solve environmental problems
I’m really at quite a loss in trying to grasp how Lysenkoism and neoclassical economics might have any correlation whatsoever to modern science or even to each other for that matter!
Perhaps I am missing something?! Are you perhaps suggesting that science has no chance in a world where neoclassical economic views prevail?
Fred your take?
http://louderwithcrowder.com/climate-scientists-admit-climate-models-are-wrong/#.V2ctK6vndeU
The climate scientists that have been wrong are the contrarians such as Richard Lindzen and Murry Salby. They are highly qualified but because of their hidden agenda generated lots of misinformation. Peak Oil watchers know all about contrarians.
My take?
To be frank, ‘Louder with Crowder is not exactly what I call a reputable source for unbiased scientific discussion regarding climate change.
So instead I will let Sciam fill in the blanks for you. Please read the entire article and then let’s discuss on the scientific merits.
http://www.scientificamerican.com/article/did-global-warming-slow-down-in-the-2000s-or-not/
The climate scientists on the grants will try to explain that as the ice caps melt less sunlight gets deflected and the earth warms. However the scientists actually studying the data, going over the data multiple times and asking the questions any reasonable person would ask have noticed a huge factor in controlling earth’s temperature is the series of Earth Global Conveyor Belts. Further with these belts, if the ice at the poles reaches a specified amount of melting it means that the belts become stagnant causing many places on the planet to actually cool down. So to the actual scientists studying this matter all they can really conclude is happening is the same thing that’s been happening all the time before and that is the weather is being unpredictable just as always.
For those interested in Venezuela, this is the best book mark I know of.
http://www.bbc.com/news/world/latin_america
The shit is now hitting the fan there on a regular basis, in steadily increasing volume.
IF I were a Brazilian patriot, I would be running guns into the country.
Maduro is obviously willing to use the captive military and police forces for his own ends.
This is NOT likely to end well, but there may still be some hope for a peaceful resolution.
IF I were a Brazilian patriot, I would be running guns into the country.
Are you saying running guns into Brazil or into Venezuela?
For the record Brazil happens to be the only country in the southern hemisphere that is a major manufacturer and exporter of arms.
http://www.coha.org/brazil-weapons-industry/
Hi Fred, brain fart on my part.
I was thinking Venezuela and typed Brazil for some reason.
So far as I am concerned, it’s time the people there started taking things into their own hands, by any means necessary. Fighting back against oppression by the cops and the army appears to be necessary from here on out, or else Maduro will simply go for an outright police state.
Maybe enough cops and soldiers will switch sides to enable the people to kick Maduro and his cronies out without a civil war.
Maybe I have read too much history, but I could recite examples from now till next week of instances wherein governments have turned rogue and oppressed and murdered their own citizens.
I can’t see any possible reason WHY I should give up the option of defending myself from anybody determined to do me harm, in uniform or otherwise.
It comforts me a GREAT deal to know that virtually every one of my neighbors is armed, and that anybody who attempts a home invasion in my neck of the woods is apt to need a preacher worse than he needs a lawyer.
When we lived in the city, I felt more or less compelled to escort my hot young blossom wife on the streets after dark even though we lived in the hippest most desirable part of town, the so called Fan District,adjacent to VCU , where all the trendiest bars and restaurants were within walking distance of each other. One of our friends was robbed at knife point of a nice new leather jacket within a hundred yards of our apartment in broad daylight. Back then I was young, and tough, but even so, I found it prudent to carry concealed in town, or else give up my freedom of the streets for fear of robbers and certain other pesky low life types. Personally I find it hard to respect anybody who is easily intimidated into giving up the freedom of his neighborhood.
I own a couple of pistols, but I can’t even remember the last time I carried one of them. About once every five to ten years I find it necessary to escort lost folks from the city off the premises. It’s amazing how such people can find their way by accident to the places where the most valuable portable items are stored, lol.
A double barrelled shotgun is the tool of choice on burglar patrol because the bores look like eyes from the business end. Good for everything from squirrels and rabbits to deer and black bear, burglars included. 😉
This is not the place to debate guns and such, except maybe as the question relates to energy. Venezuela is an oil producer fixing to fight a civil war.
So I am posting some quotes about what our so called founding fathers thought about the ownership of weapons at the tail end of the last open topic thread.
BP 2016: Global Energy Production at a Glance
“Figure 9 While the growth in new renewables looks spectacular (Figure 6) they remain insignificant in the global energy mix amounting to 2.8% of the total in 2015 compared with 2.4% the year before.”
http://www.oilvoice.com/n/BP-2016-Global-Energy-Production-at-a-Glance/afc57be499ff.aspx
just the facts
For Nick,
A reply up thread wouldn’t fit in.
You may occasionally confuse reality and your political prejudices. I certainly don’t pretend to be any better in this respect, lol.
It is true that Florida ought to be a solar power leader, but perhaps this has less to do with Republicans than it does with the conventional utility industry owning BOTH parties in political terms.
North Carolina and Texas are two of the reddest states in the union ,and both of them are leaders in the renewables field, NC in solar and Texas in wind. I expect solar to grow like crazy in Texas within the next few years, once solar power costs come down some more.
But NC does not have a first class wind resource,except along the coast. The very powerful NC tourist industry will prevent NC from becoming a leading wind state for the easily foreseeable future, but there might EVENTUALLY be a robust off shore wind industry in NC waters.
Iowa is another state where wind is going gangbusters, with bipartisan support. The reddish flyover states are home to most of the national wind industry.
There’s certainly a lot of variation at the state level.
Louisiana democrats are oil-stained wretches. Texas republicans never saw an energy source that they didn’t like.
But…on the national level, republicans have sold their soul to fossil interests. You simply can’t find a republican senator or rep that will say that climate change is a serious problem that deserves serious action.
There’s absolutely no question, there’s a real and meaningful difference between the two parties.
“There’s absolutely no question, there’s a real and meaningful difference between the two parties.”
I agree.
Generally speaking, the R’s maintain political solidarity on this and some other issues, regardless of the actual facts involved. The D’s are not entirely without fault in this respect. LOL
Taken all the way around, the D’s are indisputably much better positioned when it comes to environmental issues.
But there are exceptions to just about every rule in politics.
“future candidates like Sanders will face same dilemma: Lose, & party apparatchiks dance on your grave. Win, & they’ll try to put you in one.”
WARNING LONG TOTALLY OFF TOPIC POPULIST RANT.
Caelan may find it interesting and some others may find it amusing since it is quite anti establishment.
It does have to do with long term sustainability.
As an aside, there are a number of fair sized cities within a hundred miles of my home, including Charlotte, Roanoke, Winston Salem, Greensboro, etc, as well as some nice small cities with large universities such as such as Blacksburg.
It takes weeks on average to get an appointment with a dentist in any of these cities. So far as I know, the dental industry takes such good care of itself that there is not a single dentist within driving distance of my home that maintains even a couple of hours a month of openings to accomodate emergency patients.
Basically the dental industry attitude is fuck you, go to the hospital and pay the hospital a couple of thousand for an emergency visit for an antibiotic and pain killer, and come see us next month.
There are walk in medical clinics in every city around here, where you can see physician on short notice, from eight am till nine pm including weekends. The last time I had an infected tooth, I was able to get an antibiotic from one of them first thing Saturday morning, but the clinic refused to write a prescription for a pain killer of any sort worth bothering to have it filled, even though I was obviously in agony. My customary MD wrote me one within ten minutes of opening his office on Monday morning.
My dentist finally had a cancellation the following week. I have given that xxxx a hell of a lot of money, but he wouldn’t stay over half an hour for his own mother in my estimation. He’s at least more ethical than most, since he seems to be satisfied to make three or four hundred net a year from his semi rural practice. He insists on cash on the spot, no problem, but he makes no bones about charging ME an average of ONLY fifty bucks more for a procedure than he charges insurance companies.
He has four employees, receptionist bookkeeper, chair side assistant, and two full time techs who clean teeth and nothing else. He pays them about a grand a week, total including bennies, each, and he takes in not less than twelve hundred per day in cleaning alone . His own rate is not less than two hundred bucks an hour under ANY circumstances and often three hundred or more. He owns the office, and I know the contractor that built it. It cost him less than two hundred fifty grand including the lot about ten or fifteen years ago. I don’t know what the assistant makes, but all she does is hand him things, shoot automated x rays, and run the suction as needed. I think I could learn her job in a week or two, given my background. I have run into the receptionist shopping for clothing at Goodwill a couple of times. I buy a lot of books there.
We trust novice drivers to stay on their side of the road and not kill people after a few hours training as drivers. Is it any bigger a deal to trust a helper to maintain sanitary protocols or observe X ray protocols to protect HERSELF from excessive radiation?
Granted a dentist must know some stuff, but insisting that it takes ten years to train a dentist is about as big a bullshit argument as saying it ought to take ten years to train an auto mechanic , based on the argument the mechanic ought to be a fully qualified engineer and physicist. There is very little for a dentist to do in terms of solving life and death problems. Pulling and filling teeth is pretty straight up mechanics work. My Dad “fixed ” hundreds of animals over his career as a farmer, with never a problem, with zero formal training. We delivered pigs in distress, cows in distress, etc. Diagnosis can be subtle, but it is not hard to recognize a raging infection, etc.
I sure wouldn’t mind getting together with all the other orchardists and controlling the sale of apples along similar lines. LOL
OFM, aspirin is the best pain reliever and the least expensive. An aspirin on a sore tooth will relieve the pain. Dentists are a pain, unless you are the dentist in MASH, Captain Walter Koskusko Waldowski, then your nickname is Painless.
A mechanic is more valuable than a dentist, the mechanic can find the problem with your car and fix it, a dentist won’t have a clue. A good mechanic is worth eighty dollars an hour at a GM dealership. All they do is turn wrenches and if you need a tool that costs a couple of hundred bucks, the mechanic will have it and you won’t.
More than likely, the car will be out of gas. har
Aspirin is the recommended pain reliever in all instances.
As a reminder, today the earth’s inhabitants called humans will burn 20 million tonnes of coal and ten million tonnes of oil plus.
Just so everyone knows how it all goes day in and day out.
How the media gets science wrong
this is funny if you have 23 minutes to kill.
http://mind.ofdan.ca/how-the-media-gets-science-wrong/
Yeah, John Oliver is a comedian and an entertainer, it’s his job to be funny!
The Journal Nature on the other hand? Not so much!
http://www.nature.com/nclimate/index.html
Dennis,
I wrote a comment above on your latest “revised” Bakken TF chart .
I am giving you the link, for you might miss it. It is below your reply to Alex and FreddyW.
http://peakoilbarrel.com/north-dakota-down-over-70000-bpd-in-april/#comment-573409
The chart I like is right above me reply.
Be well,
Petro
All the baloney on here that Obama and pollution standards are killing coal is getting quite thick.
The real cause for coal’s diminishing production is natural gas. Also look in the article at how old many of those coal burners are, they are due for retirement anyway.
NatGas is Killing Coal in Electric Generation Market – 2015 is Proof
http://marcellusdrilling.com/2016/03/natgas-is-killing-coal-in-electric-generation-market-2015-is-proof/