Oil Shock Models with Different Ultimately Recoverable Resources of Crude plus Condensate (3100 Gb to 3700 Gb)

This is a guest post by Dennis Coyne

The views expressed are those of Dennis Coyne and do not necessarily reflect the views of Ron Patterson.

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The post that follows relies heavily on the previous work of both Paul Pukite (aka Webhubbletelescope) and Jean Laherrere and I thank them both for sharing their knowledge, any mistakes are my responsibility.

In a previous post I presented a simplified Oil Shock model that closely followed a 2013 estimate of World C+C Ultimately Recoverable Resources (URR) by Jean Laherrere of 2700 Gb, where 2200 Gb was from crude plus condensate less extra heavy oil (C+C-XH) and 500 Gb was from extra heavy (XH) oil resources in the Canadian and Venezuelan oil sands.

In the analysis here I use the Hubbert Linearization (HL) method to estimate World C+C-XH URR to be about 2500 Gb. The creaming curve method preferred by Jean Laherrere suggests the lower URR of 2200 Gb, if we assume only 200 Gb of future reserve growth and oil discovery.

Previously, I have shown that US oil reserve growth (of proved plus probable reserves) was 63% from 1980 to 2005. If we assume all of the 200 Gb of reserves added to the URR=2200 Gb model are from oil discoveries and that in a URR=2500 Gb, oil discoveries are also 200 Gb, then 300 Gb of reserve growth would be needed over all future years (we will use 90 years to 2100) or about 35% reserve growth on the 850 Gb of 2P (proved plus probable) reserves in 2010. I conclude that a URR of 2500 Gb for C+C-XH is quite conservative.

A problem with the Hubbert Linearization method is that there is a tendency to underestimate URR.


HL Analyses from 1998, 2005, and 2015 shown in the chart below give URRs of 1600 Gb, 2000 Gb, and 2500 Gb respectively, so this leads one to suspect the HL estimate is the minimum of future URR.

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The United States Geological Survey gives an optimistic World C+C-XH URR estimate of 3100 Gb, I believe this is too high and think the average of the HL and USGS estimate may be reasonable at 2800 Gb for World C+C-XH URR.

A second reason that a World C+C-XH URR may be higher than the HL estimate is to consider the United States at its peak in 1970. The HL estimate for 1950 to 1970 pointed to a C+C URR of 208 Gb. In 2007, the HL estimate for 1950 to 2007 pointed to a URR of 226 Gb. After 2007, the large increase in US light tight oil (LTO) output no longer follows the linear trend and the US C+C URR is likely to be higher than 226 Gb. US HL Chart below:

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Simply using the 226/208 ratio indicates that the URR estimate at peak output is likely to underestimate URR by at least 9%, so if we increase the World URR HL estimate by 9% (2500*1.09) we get 2700 Gb for the World C+C-XH URR estimate.

Another perspective is to consider that at the 1970 peak for US C+C output, the cumulative C+C output (Q=96 Gb) was about 42% of the current (1950-2007) HL URR estimate (96/226). If we assume 2014 is the peak for World C+C-XH output and that the current cumulative C+C-XH of 1240 Gb is 42% of the eventual URR, then the World C+C-XH URR would be (1240/0.42) 2950 Gb.

As before, I would choose to average these two estimates of World C+C-XH URR to 2825 Gb and then round to two significant digits, the final estimate is 2800 Gb.

What about extra heavy (XH) oil from the oil sands of Canada and Venezuela? Jean Laherrere‘s estimate for the XH URR is 500 Gb and the USGS estimate is 1000 Gb. Initially, I was tempted to estimate the XH URR at 750 Gb, but conversations with Fernando Leanme (who is familiar with production problems in the Orinoco belt) led me to reduce the XH URR estimate to 600 Gb.

The XH output scenario is shown below, it is assumed that this scenario is unchanged by changes in the C+C-XH scenario. This scenario is more conservative than previous XH scenarios I have used, which were more similar to those of Jean Laherrere. Peak output is about 10.3 Mb/d in 2056 vs earlier scenarios which peaked at 14 Mb/d in 2070.

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For comparison Jean Laherrere’s XH scenario is in the chart below, peak of 15 Mb/d in 2070.

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Jean Laherrere has provided the best data I have seen for World proved plus probable (2P) reserves for C+C-XH. His Feb 2013 estimate for the end of 2010 for C+C-XH 2P reserves was 850 Gb. The Oil Shock model estimates proved producing reserves for the World. By using United States data from the EIA and assuming that 2P reserves are 1.5 times higher than proved reserves, we find that over the 1996 to 2008 period in the US, 52% of 2P reserves are producing reserves. For the World, I have assumed the ratio of producing reserves to 2P reserves is 50 to 51%, so in my Oil shock models I aim for this ratio in 2010 where 2P reserves are well estimated at 850 Gb.

I present 3 different scenarios below where the XH output scenario is the same (600 Gb), but the C+C-XH URR varies from 2500 Gb to 3100 Gb, with an intermediate scenario of 2800 Gb. In an earlier post, I presented a simplified oil shock model where the maximum entropy probability distribution was defined by a constant “k”, where 1/k is the mean time between oil discovery and first production for the average oil field. For the models presented below, 1/k is different for each of the models in order for the ratio of producing reserves to 2P reserves in 2010 to remain similar as we change the URR of the C+C-XH models over a range of 600 Gb.

URR of Model 1/k
2500 Gb          29 years
2800 Gb          34 years
3100 Gb          38 years

For all three models the percentage of producing reserves to 2P reserves at the end of 2010 is between 50 and 51%. The extraction rate was chosen so that the model matched EIA C+C output from 1960 to 2014, for years earlier than 1960 a single extraction rate was chosen so that the 1959 output level was consistent with 1960 output. We do not know what extraction rates will be after 2014, we can only guess.

I used the increasing trend of extraction rate over the 2009 to 2014 period and fit a line to the extraction rates for these 5 years, I assumed the trend would continue unless output was above 80 Mb/d, or the extraction rate was above the previous maximum rate in 1979, or output had peaked. If any of these three things occurred the extraction rate would gradually level off and then would begin to decline, these are guesses and are merely suggestive of what could occur.

I expect that future high oil prices will cause economic growth to slow and oil demand will decrease and thereby reduce the extraction rate. There will also be some substitution away from oil use for transport as oil prices rise which will also reduce oil demand. It is not possible to forecast these changes with any degree of accuracy.

The Scenario with URR=3400 Gb (including 600 Gb of XH oil) is below, peak is 79 Mb/d in 2018. Annual decline rates are 1% or less until 2032 and remain below 1.5% until 2040 and stay between 1.5% and 1.83% until 2100. Cumulative C+C output is 2900 Gb in 2100.

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The Scenario with a World C+C URR of 3100 Gb (600 Gb of XH oil included) is presented below, the peak is in 2014 at 78 Mb/d and annual decline rates remain below 1.75% from 2015 to 2100 and are less than 1.5% until 2028. Cumulative C+C output is 2600 Gb in 2100.

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The final scenario has a World C+C URR of 3700 Gb (with 600 Gb of XH oil), peak is 80 Mb/d in 2023. Annual decline rates remain below 1% until 2042, under 1.5% until 2047 and remain under 1.62% until 2100. Cumulative C+C output is 3000 Gb in 2100.

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The three scenarios can be compared in the chart below.

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If there were no future oil shocks due to economic crises or major wars and World C+C URR is in fact between 3100 Gb and 3700 Gb, then future C+C output could follow an output path between the green and red curves in the chart above. It is unlikely that there will be no severe oil shocks in the future, though predicting the timing of such shocks would be difficult.

The three excel files with the three scenarios presented above can be found at the links below. By adjusting the extraction rates to higher or lower values than I have chosen you can create any scenario you choose. Optimists can have extraction rates go to 20% if they choose and pessimists can make the extraction rates go to zero (which would mean no output) if they wish. One would have to explain why either of these would occur. We don’t want to assume a collapse in order to have a collapse in oil output, and we shouldn’t assume that resources are infinite to prove that there will be no peak in oil output. Each spreadsheet is about 3.5 megabytes (the order is 3400 Gb, 3100 Gb, and 3700 Gb).

A pessimistic scenario is presented below with an “oil shock” beginning in 2035 and similar in magnitude to the 1980-5 oil shock (extraction rate falls by a similar percentage), we could envision a war in the middle east where oil supplies from Iran, Iraq, Kuwait, and Saudia Arabia are reduced to zero and the resulting recession reduces oil demand even further, the URR is assumed to be 3400 Gb for this scenario. Peak is 79 Mb/d in 2018, annual decline rate is less than 1.1% until 2035.

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An optimistic scenario is presented below where extraction rates increase at the 2009-2014 trend until they are 10% higher than the highest rate previously reached in 1979, then extraction rates remain at this level until 2100. The C+C URR is 3400 Gb. Peak is 81 Mb/d in 2023 and annual decline rate remains below 1.1% until 2035.

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A final “realistic”scenario has a less severe oil shock in 2035 with extraction rates decreasing only half as much as the “pessimistic” scenario and with extraction rates continuing to decline, but less steeply after 2045. This might result from a severe financial crisis in 2034 with a depression following. Peak is 79 Mb/d in 2018 and annual decline rates stay below 1.1% until 2036. Chart below.

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The chart below compares the optimistic and pessimistic scenarios with my “realistic” scenario for a World C+C URR of 3400 Gb. Cumulative output of the optimistic scenario is about 2900 Gb in 2100 and the pessimistic and realistic scenario has lower cumulative output at about 2800 Gb in 2100.

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Excel files for realistic, pessimistic, and optimistic scenarios respectively are below.

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340 Responses to Oil Shock Models with Different Ultimately Recoverable Resources of Crude plus Condensate (3100 Gb to 3700 Gb)

  1. “I am of the firm conviction that the world is at the peak of world oil production right now, or was at that point three or four months ago.” Ron Patterson 1/9/15

    Maybe a little PE

    • And I am now even more convinced that 2015 will be the year of peak oil. The likely 12 month high average will be September or October 2014 through August or September 2015. But the high calendar year will be 2015.

      And though my wife does now suffer from serious short term memory loss, I do not, as of yet, suffer from that malady.

      Maybe a little PE

      PE…?
      Professional Engineer?
      Physical Education?
      Seventeenth letter of the Hebrew alphabet?

    • denns coyne says:

      Hi Short term memory loss,

      Note the top of the post where it says that the post does not necessarily reflect the view of Ron Patterson.

      Ron is very gracious to allow views that are different from his to be posted at his blog. Note that the Scenario with a C+C URR of 3100 Gb peaks in 2014, I think 2018 is more likely, but surely could be incorrect, if 2015 is the peak, I think output will stay on a plateau until at least 2018 and possibly until 2023. A lot depends on factors that are hard to predict such as oil prices and the state of the World economy.

      • Oil prices are dropping due to euro loss and crisis risk triggered by Greek regime. This may put a nail on quite a few marginal projects, reducing feasibility of future production rate recovery to 2015 peak. If market continues to react negatively as Greece begins to exit the euro and falls into deep recession oil prices aren’t likely to go above $60 fast enough to change outcomes.

        On the other hand, this price drop is breaking the commie regime’s neck in Venezuela, it’s now very likely to default its future bond payments.

        This should hurt Castro dictatorship cash flow and send it to hell, as long as the pro Cuban people forces can block Obama’s move to get cozy with the two monsters in Havana. Who would have thought a Greek communist would push Maduro and Castro over the cliff?

        • TechGuy says:

          Fern wrote:
          “Oil prices are dropping due to euro loss and crisis risk triggered by Greek regime.”

          More likely due to the Collapsing Chinese stock market.

          China’s May crude oil imports drop, knocked off top buyer spot
          http://www.reuters.com/article/2015/06/08/china-crude-imports-idUSL3N0YR3F320150608

          The World is slipping back into recession and demand for Oil is falling. If the Fed actually follows through and and raises rates in the next 60 days, I would expect a mini-Lehman type crash in Late August or September.

          Fern Wrote:
          “This should hurt Castro dictatorship cash flow and send it to hell”

          I doubt it. Cuba will go on limping along as always did. Cuba Survived the collapse of the Soviet Union when it suddenly lost access to it’s Soviet Subsidies.
          Venezuela may crash and burn. I suspect a civil war will happen in VZ is ideologies battle it out.

          • Greenbub says:

            Did we forget that the Saudis were denying the Chinese oil in May?

          • Tech Guy, this isnt the 1990’s. Fidel Castro is senile (his appearances are shams intended to deceive the population), and Raul Castro is introducing capitalism, trying to bring in multinational investment after laying off hundreds of thousands of state employees.

            A communist party trying to implement a capitalist economy governed by a military dictatorship doesn’t have any legitimacy whatsoever. And this is clearly understood by the people. What keeps the two monsters in power is sophisticated repression.

            Compounding the problem is the high level of penetration using small compact memory devices. We are flooding the island with hard drives loaded with videos and other material, which get copied and redistributed. Thus the regime censorship and pervasive lies and propaganda are being defeated.

            The fight for freedom has to be relentless, and relentless is what we will be, until the dictatorship is destroyed.

            We are living in interesting times, the Castro family dictatorship is wobbling, and its best friends are Venezuelan mafias, a red Pope, and USA and European multinationals.

            • Ralph says:

              “A communist party trying to implement a capitalist economy governed by a military dictatorship doesn’t have any legitimacy whatsoever. And this is clearly understood by the people.”

              As was clearly understood by the people of China. They also understood that given the choice between capitalist consumerism or tanks on the streets, they would take the trinkets.

              • Yes. But we Cubans aren’t Chinese. And we have political power we can try to use to stop the capitalist Yankee Empire Elite from making a deal with the Castro family neofascist dictatorship. The amount of repressive acts by dictatorship security agents is increasing. This is caused by restlessness in the population. These are interesting times.

            • TechGuy says:

              Fern wrote:
              “A communist party trying to implement a capitalist economy governed by a military dictatorship doesn’t have any legitimacy whatsoever. And this is clearly understood by the people. What keeps the two monsters in power is sophisticated repression.”

              Sounds exactly like China, doesn’t it? Cuba will probably outlast the United states since it hasn’t made a boat load of unfunded promises to its people. The only way for regime change in Cuba is a revolution and that’s unlikely to happen. I suspect that just about all of the Cuba dissident already fled to the US and stated new lives and families few will have any interest in starting or participating in a Cuban revolution, and its very unlikely that the US gov’t would support a revolution in Cuba.

              “The fight for freedom has to be relentless, and relentless is what we will be, until the dictatorship is destroyed.”

              Freedom and liberty is dying globally. the US is socialist and so is the EU, most of Asia, South America, Australia, etc. There are only a few pockets left of real capitalism left and even fewer that still support liberty, and they have no global impact. The world wants big gov’t and gov’t handouts. We are head right back to crisis of the 1920’s and 1930’s, and it will end with a bang with another World war, As gov’ts start invading neighbors to acquire resources.

              “We are living in interesting times, the Castro family dictatorship is wobbling, and its best friends are Venezuelan mafias, a red Pope, and USA and European multinationals.”

              LOL, yes, Cuban “Government” has friends everywhere as you stated (USA, EU, even the Pope). I very much doubt the Cuban gov’t is wobbling. Cuba isn’t significant and is the mouse in a room, The bigger (elephants in the Room) are the USA, EU, and China, all on the brink and preparing for war. China could vanish from the map over night and it would not matter to the world. However the demise of the economy in the EU,US, or China will have dramatic impact on the world.

              https://www.foreignaffairs.com/articles/china/2015-03-19/chinas-double-digit-defense-growth

              http://www.nytimes.com/2015/06/14/world/europe/us-poised-to-put-heavy-weaponry-in-east-europe.html

              • clueless says:

                Tech Guy writes in his last paragraph: “China could vanish from the map over night and it would not matter to the world.” Certainly, he must have meant to write Cuba, not China?

                • TechGuy says:

                  To “Un”-clueless:
                  yes, Thank you, Cuba could vanish and nobody would notice. Too many four letter communist countries that start with ‘C’! 🙂

                  Fern Wrote:
                  “I’m pretty sure every dictatorship in history expected to last forever.”

                  Unfortunately history shows that democracies or republics don’t last. Greece, Roman, etc last about 200 to 250 years before they fell into dictatorships. On the other hand, Dictatorships last a long time. Monarchies have lasted thousands of years. Rome lasted longer as a dictatorship under emperors than as a republic. Also before the demise of the Roman republic it expanded under military expansionism, which likely doomed itself into a dictatorship.

                  Fern Wrote:
                  “The key is to keep chewing at its leg tendons, make it fall, and then cut its head off.”

                  That pretty much what happens to republics. Their success leads to there destruction and they become decadent and over extended. They decline and either collapse or fall under a dictatorship. Static nations under authoritarian\theology rule can last very long times, if they do not go on a expansive growth. The Chinese Empire lasted about 2000 years. It probably lasted a long time by avoiding expansion and isolating itself from the rest of the world. Cuba has outlasted communism’s founding nations (Russia, China, and lots of small comunist gov’t fell) ,probably by isolating itself and avoiding expansion. On the other hand Neo-Communist China has seeded its own destruction with unsustainable economic expansion.

                  That said, I do not wish to live under an authoritarian gov’t, but I can’t not ignore history and brevity of republic systems. It appears the US is slowly morphing into a authoritarian gov’t as the US federal gov’t continues to seize power well beyond what is granted in the US constitution and has adopted fascist policies (merger of corporate and gov’t). The US gov’t bailouts big mega corporations and has created a system of corporate wealthfare.

                  • Nick G says:

                    The expansionist periods of Greece and Rome were inherently unsustainable, regardless of the form of government: the underlying growth rate of their agricultural economies was about .01% per year. So, anything more than that was a Ponzi scheme of stealing from their neighbors, a scheme that had to end when they ran out of neighbors close enough to control.

                    The current growth rates of roughly 3% are indeed sustainable (until they reach a plateau), though oil and other fossil fuels certainly need to be replaced with EVs and non-FF power sources.

                  • Futilitist says:

                    “The current growth rates of roughly 3% are indeed sustainable (until they reach a plateau)…”~Nick G

                    Seriously?

                    sustainable adjective [sə-ˈstā-nə-bəl] —- capable of being maintained at a steady level without exhausting natural resources or causing severe ecological damage

                    : able to be used without being completely used up or destroyed

                    : involving methods that do not completely use up or destroy natural resources

                    : able to last or continue for a long time

                    All exponential growth is inherently unsustainable. Greek and Roman exponential growth was unsustainable. Current exponential growth is also obviously unsustainable.

                    So, Nick, what are you saying?

                  • Nick G says:

                    I’m saying that “The current growth rates of roughly 3% are indeed sustainable (until they reach a plateau).”

                    For instance, US car sales reached a plateau about 40 years ago. So did US steel production. So did TVs, washer dryers, etc., etc.

                    OECD economies have reached a plateau in terms of consumption of hard goods and the hard commodities needed to manufacture them, and have started to reduce their consumption of fossil fuels (in a good way).

                    We don’t need infinite exponential growth in hard commodity consumption in order to have economic growth, and we don’t need fossil fuels – we have better and cheaper alternatives.

                  • Futilitist says:

                    Rome fell when their period of exponential growth ended. They were constrained by available energy. All systems in the universe are.

                    Last time I checked, so are we.

                    So, clearly you are not suggesting perpetual growth. You seem to be suggesting instead that a steady state of sustainability can be achieved, maintaining our civilization and our living standards. Unfortunately, this is just not physically possible. In all biological systems, the end of exponential growth is shortly followed by collapse.

                    “We don’t need infinite exponential growth in hard commodity consumption in order to have economic growth…”

                    Really? Then why is overall economic growth slowing with commodity consumption? We have always had growth in hard commodity consumption up till now. It has always gone hand in hand with both rising population and living standards.

                    So now, suddenly, our economic system based on consumption growth no longer needs consumption growth? How could that be possible?

                    Since civilization must constantly use precious resources and degrade the environment, it is simply not sustainable on a finite planet. Period. How could it be otherwise?

                    “I’m saying that “The current growth rates of roughly 3% are indeed sustainable (until they reach a plateau).””

                    Translation–Current growth rates will be maintained until they can’t be. I guess we agree on that.

                    But once a plateau is reached, the system cannot possibly sustain that plateau indefinitely, since that would be prevented by the laws of thermodynamics and our very nature as reproductive biological organisms.

                    The fact that consumption growth is slowing is not a good thing. It is a sign that we are reaching limits to growth. We are nearing collapse, not nirvana.

                  • Nick G says:

                    In all biological systems, the end of exponential growth is shortly followed by collapse.

                    That’s not true at all. There are many biological systems in which exponential growth is followed by a plateau. Overshoot does happen, but it’s not what always happens.

                    We have always had growth in hard commodity consumption up till now. It has always gone hand in hand with both rising population and living standards.

                    No, we haven’t. For instance, we’ve seen decades long plateaus in US car sales, steel consumption, home sales, washer/dryer sales, etc.

                    Translation–Current growth rates will be maintained until they can’t be.

                    They’ll be maintained until growth is no longer desired or needed, as we’ve seen in the US.

                    once a plateau is reached, the system cannot possibly sustain that plateau indefinitely, since that would be prevented by the laws of thermodynamics

                    Which laws? The Earth isn’t a closed system, remember.

              • I’m pretty sure every dictatorship in history expected to last forever. The key is to keep chewing at its leg tendons, make it fall, and then cut its head off.

          • cytochrome C says:

            Cuba is not going back to 1959, to being a rightwing dictatorship and client State of the US, and a headquarters for US organized crime.

            Why do you think the revolution was so easy for Castro and Che?

            My girlfriend , living in Coral Gables then, had to deal with the elite that escaped, in school, dripping with gold.

            I’m not fan of the Castro Government (too conservative and socially tight)

            Venezuela, while dangerous and corrupt, is not going back to being a US client State either– Only Columbia is left on the whole Continent.

            • clueless says:

              Why is every regime that is disliked [Nazi Germany (national socialists); Communist Russia; Castro’s Communist Cuba, Facist Italy; Communist China; Iran; etc.] called “conservative” and/or “right Wing.”
              I think that they are all are left wing/liberal.

            • That’s right, Cuba is not going to go back to 1959. We will execute the high level communist oligarchs, jail the torturers and murderers, build a monument to the dictatorship victims, and fund a yearly prize for the outstanding fighter against communism. It won’t look like 1959 at all.

        • Der Blitz says:

          Gott im Himmel! Did you walk out of the year 1953? Let’s just say that your anticommunist credentials are very well established. Congratulations, you are the most ardent anticommunist, John Birch himself is in fits of rapture over you. Don’t worry though, soon Cuba will be back to the Batista days; crime, oligarchy, prostitution, and gambling. Then you can blame Obummer for that also.

          • I suggest you educate yourself. Visit my blog and read

            http://21stcenturysocialcritic.blogspot.com.es/2015/06/cuba-under-fidel-castro.html

            http://21stcenturysocialcritic.blogspot.com.es/2015/06/the-us-civil-war-slavery-and-revisionism.html

            http://21stcenturysocialcritic.blogspot.com.es/2015/03/the-new-poor-working-class-will-destroy.html

            http://21stcenturysocialcritic.blogspot.com.es/2014/12/president-obombo-opens-relations-with.html

            I don’t like to clutter Ron’s blog with educational material about dictatorship and human rights abuses, but I see a gathering crisis and future decay of human rights, and I can’t be silent reading the pro communist garbage one reads nowadays.

          • cytochrome C says:

            1953 was the coup in Iran by he CIA.
            The conditions today are a result of that in the region.

            But our friend Fernando must of been traumatized as a child when the the Revolution came, and had to leave (possibly because of Batista connections?- speculation)

            In the collective I lived in the 70’s, many of my comrades went with the Venceremos Brigade to help with the sugar cane harvest, and help build in villages.
            https://en.wikipedia.org/wiki/Venceremos_Brigade

            I found Cuba, with its vertically organized, socially conservative, Party controlled situaton a bit tight.

            • Read the link I left you. I don’t bother to read Wikipedia about Cuba. When it comes to Cuba I’m a primary source.

              • cytochrome C says:

                So you don’t know about it?

                • Fidel says:

                  Fernando was 14 years old at the time.

                  What do your remember of your life before the age of 14 ? Go ahead and put it in a post. Feel free to double space.

                  Nothing ? There’s got to be a couple of things.

                  But, I do believe Fernando must have been traumatized as a child, because he has been carrying around a lot of baggage for over 50 years.

                • I remember. I remember extremely well. And I spent years discussing events with family members and friends.

                  The audience should take from this exchange a clear understanding that resistance to communist abuses and crimes is blowback. We refuse to bow down to enslavers and criminals. This isn’t about Batista, this is about 55 years of getting pounded, abused, insulted and murdered by the regime and its foreign acolytes. We choose peaceful resistance, but it should be clear reseistance is relentless, and it will not stop until the regime has been erased from the face of the earth.

                  There are new generations emerging who understand very well the nature of the Castro’s monster, and will serve as terminators who will put an end to the Castro family dictatorship.

                  • Boomer II says:

                    You have to keep in mind that most of the US and the world has other priorities. There are problems in many places in the world and with limited resources to deal with them, we pick and choose which issues we feel we must deal with.

                    I think the general feeling is that normalizing relations with China and Vietnam was better for both them and the US than refusing to deal with them. So many of us feel opening up commercial and political relationships between Cuba and the US has been long overdue.

                  • Yes, I understand the main priority for the USA is Israel. They have an extremely powerful lobby. Cubans have modeled theirs after Israel’s, and whatever political move can be used to slow down Obama’s surrender will be used.

                    We realize that, as far as the Anerican elites are concerned, the Cuban people is disposable. But the key is not to march quietly into the night.

                  • Boomer II says:

                    Cubans have modeled theirs after Israel’s, and whatever political move can be used to slow down Obama’s surrender will be used.

                    We realize that, as far as the Anerican elites are concerned, the Cuban people is disposable. But the key is not to march quietly into the night.

                    Based on what happened with China and Vietnam, many people feel Cuban people will be better off when we normalize relations with Cuba. Now, it could be argued that giving the people a taste of capitalism isn’t actually doing them any favors, but I think most believe the best way to end communism is to give people something else rather than continuing to block trade with communist countries.

                    Plus you have a lot of companies eager to get a piece of business with Cuba. Those companies have lobbyists, too.

                    These days we have many multi-national companies that are more loyal to their own business opportunities than to any particular political persuasion.

                  • Fidel says:

                    Fernando,

                    Is your Cuban experience any worse than what happened the American Indian, Mexican-American War or the Slavery of the African-American?

                    “We refuse to bow down to enslavers and criminals.”

                    “it will not stop until the regime has been erased from the face of the earth.”

                    Should the same hold true for the United States?

      • Brian Rose says:

        Well I have to say, at least for myself, I did not think the price collapse of the last week would lead to further drops today.

        Granted, breaking a strong, narrowing trend between $57-$62 would lead to a strong response. However, I was not expecting such a strong, continued trend today.

        I figured that market apprehension for a possible Iran nuclear deal was baked in the cake, and that Greek concerns were also priced in. I still feel that any Greek drama will have little global impact aside from week to week events.

        I also am of the conviction that there will be no agreement with Iran due to the fact that their strongest points of discontent are also the only ones not yet resolved – IAEA access to all nuclear related military sites at any time, and full access (albeit, not publicly) of info about Iran’s history of military development of their nuclear program.

        I will be surprised if their is an agreement with Iran. I assume that a no deal will cause upward pressure on oil prices. Then again, my thoughts are all speculative, and, especially today, not reflecting reality. Time will tell…

        If last week’s inventory build it reaffirmed this week we’re firmly set into a lower price range for oil. If that build was primarily due to delayed shipments from whether conditions, then prices will be supported.

        • TechGuy says:

          “Well I have to say, at least for myself, I did not think the price collapse of the last week would lead to further drops today.”

          China is recession (unofficial). Its not just Oil that is plunging, but Copper. Copper is often refered to as “Dr. Copper” when the price of copper drops it means the global economy is falling

          http://www.businessinsider.com/great-fall-of-china-oil-copper-shanghai-composite-2015-7
          “We’re seeing the same impact in other commodity markets. Copper has fallen to a 5-year low over the past 2 trading sessions and iron ore has fallen for the last 9 sessions in a row. Iron has fallen below $50 (£32.39) a tonne for the first time since mid-April.

          “The Great Fall of China” doesn’t look like it will stopped anytime soon either. The Chinese government’s numerous attempts to prop up prices haven’t done much so far…”

          “I will be surprised if their is an agreement with Iran. I assume that a no deal will cause upward pressure on oil prices. ”

          Iran doesn’t have any impact the current change in Oil prices. Demand for Oil is falling as the worlds major consuming nations enter another recession. Recall that on average, nations have recessions about every 7 to 8 years. The last one began in 2007 (with the housing bubble pop). We are due for another recession. If the Fed follows through with an actual rate hike (in the next 60 days as promised) be prepared for a Mini-Lehman crisis. Oil “might head into the low 40’s). China’s stock market is close to a full collapse, Coupled with the fallout of the greek default and the US rate hit and its queued for a perfect financial storm.

          • JW says:

            During 2014, commodity prices of everything dropped. Iron ore fell 50%, and everything I bothered to look at lost much of its trade value that year. I wondered who it was that was buying less of everything, and the only answer I ever got on that was “China”.
            I still wonder when the recession will come.

          • Brian Rose says:

            To be fair, the Shanghai stock market is still up 80% from 12 months ago, and up 11% from just 6 months ago. In fact, the Shanghei index is only down 6% from where it was at the beginning of April.

            Long story short, Chinese stocks are collapsing down 27% from their peak, but they’re still up 80% from July 2014 levels. The Shanghei index could drop another 35%, and still have better 12 month returns than the U.S. stock market.

            Obviously this is an oversimplified way of looking at finance since it doesn’t take into account all the leveraged positions losing money and the feedback loop of insolvencies that can cause, but the vast majority of the money being lost is by government backed, owned, and operated hedge funds in China. Any financial damage will be absorbed by the Chinese govt that owns and operates these “businesses”.

            In reality, China’s consumers are still consuming, buying vehicles, using more oil. Chinese construction is down as their building boom winds down (and it is winding down intentionally by govt policy). This has a huge impact of demand for copper, steel, concrete, and, yes, oil, but Chinese consumers are still buying vehicles hand over fist, and each person buying their first vehicle creates a permanent new demand for oil.

            Look up recent (2015) videos of China’s famous “ghost cities”. Vice has a great recent documentary where they visit several of these “ghost towns”. Turns out they’re no longer empty; they’re populated, and vehicles and filling the roadways.

            The European economy is recovering strongly, the U.S. economy is growing (recent housing data in the U.S. has been very strong, vehicle sales at new record highs, job creation marches along, even incomes, the long time laggard in the job market, is consistently rising). Japan’s economy is strongly recovering, and India is booming economically.

            The major pressures on oil prices lately are the strong U.S. dollar, rising supplies from the Middle East, anticipation for increased Iranian oil exports, and the EIAs “data” that says U.S. production isn’t falling.

            The short of all of this is that oil prices are low, and have remained low, due to increasing global supply, not due to falling demand. Demand is increasing from every major economic region, and increasing faster than predicted just a few months ago.

            Anyone who thinks the world economy is falling into recession has probably been repeating that same line for the last 6 years. Recession will come with the next oil price spike, but we may have to wait until 2016 or 2017 for that.

            Stock markets could certainly peak in 2016 as QE from Europe and Japan wind down, but there is no recession on the horizon until the next oil shock. Monetary policy is too accommodating, growth is stable, and low oil prices give the entire global economy a significant stimulus.

            • TechGuy says:

              Brian Wrote:
              “To be fair, the Shanghai stock market is still up 80% from 12 months ago, and up 11% from just 6 months ago. In fact, the Shanghei index is only down 6% from where it was at the beginning of April.”

              The Chinese Stock market is likely the last gasp and does not reflect fundamentals of the Chinese economy. When you have the very poor, very young and very old investing in Stocks its a bubble looking for a pin. A poor Chinese farmer was quoted having switched from farmer to daytrader, because stock trading was easier. I presume this is true.

              When the US stock market crashed 2000, the Fed set up the housing bubble by dropping rates. In China its the opposite. People were exiting real estate investments and piling into stocks.

              Just because Chinese stock markets are still up does not mean the Chinese economy is in recession. What matters in a real economy is not paper investiments, but real tangiblies. The decline in energy imports (Oil & coal) and raw materials (Iron, Copper, etc) says the Chinese economy is recession. That said, Its possible that the Chinese gov’t will find a way to re-inflate its bubble and delay a crash. However at this moment, China is very very likely in a recession. If we see import stop falling and increasing again than perhaps the chinese managed to catch a falling knife, but I am not betting they’ll manage to catch it this time!

              Clueless Wrote:
              ” – The job of capitalism is to produce an over supply of everything, including copper. ”

              Capitalism is about providing goods and services at the most efficient means and providing the means for productive people to be rewarded for their effort. These is absolutely no such thing as real capitalism in any industrialize nation at this time.

              You confusing “crony capitalism” when gov’t “interferes” with natural capitalism with subsidies, and un-neccessary regulations that causes bubbles and creates mega-corporations.

              The reason for the excesses is that interest rates are at rock bottom lows and easy credit (provided by gov’t policies). This enabled consumers and business to go on buying binges. If rates were normal and weren’t subsided by gov’t we would not be in this mess. Yes, there would be booms and busts, but they would not be anywhere as excessive. If the cost of borrowing was around 8% to 10% (what real markets would dictate), business and consumers would be much more reluctant to go on buying binges and lenders would be much more selective on who they loan money to, if the real risks of losing their money (ie no gov’t guarantees on deposits, no banker bailouts and jail time for bankers that commit fraud). The issue is that the system has been twisted and perverted that no one remembers what capitalism is about. You cannot have a democracy/republic, freedom and liberty, without capitalism

              In a real capitalism system, businesses and consumers likely be more consumption efficient, buy purchasing the goods they need and forgoing instant gratification (no cheap credit to buy an SUV or, hot-tub, monster TV, etc). This would also mean less energy consumption, as consumers would have purchased smaller energy efficient vehicles and energy efficient appliances.

              If the world was serious about oil depletion and global warming, all that needs to happen is to normalize interest rates. almost overnight after the rates were normalized global, the excesses would be removed from the global economy and people would be forced only purchase what they need and purchase within their means. However, because of the excessive of the past 40+ years and the massive amount of debt now owed, it would mean the greatest depression since the dark ages. So its very likely the system will be propped up until oil depletion begins to impact the economy. then the depression begins no matter what financial gimmicks gov’ts try to do. Its also possible that the depression will begin before oil depletions affects the global economy, if the collective world gov’ts can’t adopt a policy to need to prop up the global economy. With every passing year, it will be increasing more difficult to prop up the debt saturated global economy. If one major power falls (China, EU, or the US) than they are all likely to fall down together (US & EU gets a lot of Production from China), China is dependent on exports to the US and EU.

              I am a firm believer that we’ll see another world war and modern civilization will come to a end in a matter of week after the war breaks out and the nukes start flying. When the depression begins there will be civil wars and nations with military assets will look abroad to seek resources and utilize nationalism to starve off internal civil disobedience.

          • clueless says:

            Tech Guy – The job of capitalism is to produce an over supply of everything, including copper. And, it does a miraculous job of doing that. I have not looked, but my guess is that there is probably a record amount of copper being sold and used, offset by an even greater record supply. Check out iron, probably the same thing. Using corn [a food source that the world certainly could use] to run your car, has now resulted in a glut of corn.

  2. When we were working the models during The Oil Drum days, a few of us, including notably Robert Rapier, weren’t happy with Hubbert Linearization, as it requires a tidy symmetry which doesn’t actually exist in the real world . In particular, look at that second figure that Dennis posted, and you can see how the URR keeps creeping out over time, which essentially falsifies the model.

    The Oil Shock Model was an antidote to that kind of static model and its neat to see where Dennis is taking it. The other alternative is to do “multi”-peak HL, but that is stretching the original intent quite thin.

    • Caelan MacIntyre says:

      What kind of software do you guys use for the graphs, modeling, data and computations and whatnot?

      • The computations are not that difficult to implement. Last I heard Dennis was using Excel to do everything.

        You don’t want to know about the concoction I have brewed up.
        http://entroplet.com/context_shock_model/navigate

      • denns coyne says:

        Hi Caelan,

        I have implemented the Oil Shock model using Excel, but I have also copied Paul Pukite’s code from The Oil Counundrum in the past, the Excel version is a simplified model that was presented in an earlier post.

        • Right, the book has shock model code written in Ada, but other versions are in Python, and the most recent version that I am using is in Prolog.

        • Caelan MacIntyre says:

          Cool… Hey, Dennis, I noticed that you misspelled your own name in the same way (‘denns’) a few times– like maybe 5 or more(?)– under this article. Are you ok?

      • TechGuy says:

        “What kind of software do you guys use for the graphs, modeling, data and computations and whatnot?”

        MatLab and Mathematica are also tools you can used to create models and graphs. Although MatLab is pretty expensive. You can by the consumer version of Mathematica for about $200 USD which is the full version.

        The advantage of using a math tool like matlab or mathematic is that you can create equations from datapoints and then change the equation parameters to create large number of models. matlab and mathematica also support scripting and programming. so it possible to set up scripts that work off data files and create new graphs instead of manually recreating them each time you get new data.

        • I use Mathematica to do things like solving differential equations, where I am applying it for modeling El Nino. However, Mathematica is overkill for something like the Oil Shock model where the math is straightforward.

      • Caelan MacIntyre says:

        Ok, cool, thanks guys. I had thought/heard of Matlab and Mathematica and imagine there are some open source and free/libre software out there that are similar.

        • Dennis Coyne says:

          Hi Caelan,

          I believe there is open source spreadsheet software that can do these simple models. Such as

          https://www.openoffice.org/

          I haven’t tried it but believe it will work with Excel spreadsheets.

        • TechGuy says:

          Caelan Wrote:
          “Ok, cool, thanks guys. I had thought/heard of Matlab and Mathematica and imagine there are some open source and free/libre software out there that are similar.”

          There are “Free” linux math and graph tools, like gnuplot, plotutils. Python (scripting language) also has a lot of math libraries and plotting capabilities. For Linux Spreadsheets there is Gnumeric (Gnome desktop) . Calligra office for KDE, and libre-office.

          You may also be able to utilize the GNU Radio companion (for software defined radio) as a math GUI interface. Its essentially a math program. I believe you can use the most of these linux tools on windows (cygwin) and perhaps mac.

          That said expect to spend more time setting them up and learning to use them, with a commercial tool. if your a student you can buy the student version for $140. http://www.wolfram.com/mathematica/pricing/students.php

          • Caelan MacIntyre says:

            Thanks, TechGuy…
            Incidentally, I am inclined to agree with one of your other comments (that included something about politicians having limited degrees [i.e., law, liberal arts] for what they actually do and/or are supposed to know.) and seem to have read something similar elsewhere before.
            (Software defined radio sounds intriguing, btw.)

        • sam Taylor says:

          Caelan,

          Scilab is a free open source clone of Matlab, and for most applications should work equally well.

          • Caelan MacIntyre says:

            Good to know, sam, thanks. I might have heard of it.
            I have a background in computer graphics and a long time ago had even entertained specializing in scientific/medical/geographical/etc. 3D (with some realtime) modeling and imaging. Plotting graphs and charts seems cool too though, especially where there is some future predictions or projections involved.
            Anyone ever heard of or use GRASS?

  3. Watcher says:

    heads up . . . mazamascience has updated their graphs to BP’s 2015 numbers we discussed here last week.

    There is China’s steep consumption curve, showing no signs of flattening.

    And there is Greece consumption at about 290K bpd (X 365 ->> 106 million barrels (X $65 —> $6.9 billion).

    6.9 billion. Drained yearly.

    China’s uptick 3.3%. US uptick 0.5%. Why conserve oil in the US so that China can burn it?

  4. I think it is better to do the Hubbert Linearization oil province by oil province and then add up all the curves. The world’s oil supply system is too in-homogeneous to do an HL for the world.

    In the meantime, we have to work on peak exports/imports and how that may impact on e.g. Asia as it tries to eat up more and more of the cake

    1/7/2015
    Asia depends on Middle East for 66% of its oil imports
    http://crudeoilpeak.info/asia-depends-on-middle-east-for-66-pct-of-its-oil-imports

    • I worked with a small group several years ago, trying to understand whether exploration was worthwhile. I can’t discuss much about what we did, but the eventual result led to the layoff or transfer of roughly 50 % of the exploration deparment’s personnel.

      That job and a few other projects I’ve worked on showed me the oil resource potential was very limited, and that an oil company should strive to lock in oil in place, in tight rocks, heavy oil, whatever, and work on technology/operating methods and practices to squeeze that hard to extract oil.

      We didn’t use the linearization methods, and we had a wide range of outcomes but the figures were within the numbers Dennis mentioned.

      A related factor is replacement energy sources. As oil prices rise something else emerges to nibble market share, and eventually it may even compete in some areas. For example, Brazilian ethanol is very competitive. This is what keeps the total oil resource such an unknown. We don’t know how energy replacements will emerge and improve in time. Right now somebody could be working on a truly workable fusion power system, artificial photosynthesis, or something similar.

      • old farmer mac says:

        Hi Fernando,

        Right now GM, TESLA, FORD, CHRYSLER, TOYOTA, and NISSAN, plus a bunch more companies, are working on cars and soon on light trucks that run on either batteries or hydrogen. There are enough pure electrics on the road TODAY that the practicality of BEV tech is well proven in the case of very expensive oil.

        And while you don’t seem to believe that wind and solar renewable power can giterdone as a general rule , others are of a different opinion.

        I anticipate the building of solar and wind farms on a massive scale, and that various industries will find a way to make good use of the excess energy produced when the sun is bright and the wind is brisk. Electricital energy CAN be moved very long distances, even across time zones , if we are willing to pay for the HVDC transmission lines and I don’t think we have any choice, eventually, except to pay for them.

        CHEAP electricity means that electrolysis of water will be profitable at some point if the fuel cell tech proves to be practical but my money is on batteries given the existing electricity grid .

        • Yes Mac, but those technologies don’t really compete at this time. And I don’t see any signs that they will. You see, when it comes to technology I see a lot of fads and fashions based on pretty much nothing. It’s like the USA ethanol industry, when you get down to it it’s not that useful. But it sure has lots of companies and a big lobby pushing it.

          • Dennis Coyne says:

            Hi Fernando,

            I agree the US ethanol industry was a mistake, nothing is ever perfect in the real world. The best option would be to tax fossil fuels heavily and let the market decide what is the best solution. Unfortunately (or fortunately), you and I do not rule the world.

            • clueless says:

              “The best option would be to tax fossil fuels heavily and let the market decide ”
              Okay, tax of $1000 per watt produced by fossil fuels. Then, the market will decide not to use any. Great idea! But, is that the market deciding or some ideologue with an agenda?

              • TechGuy says:

                “Okay, tax of $1000 per watt produced by fossil fuels. Then, the market will decide not to use any. Great idea! But, is that the market deciding or some ideologue with an agenda?”

                Who gets the tax revenue? More Gov’t bureaucrats? Subsidies for companies that end up committing fraud?
                Taxing won’t solve any problems, but exacerbate them.

            • I could be Chief Ruler and you could be Deputy Ruler. What would be the first thing we should do?

              • Dennis Coyne says:

                Hi Fernando,

                The first order of business would be to make me chief and you the deputy 🙂

                To Techguy on carbon taxes:

                The carbon tax could easily be revenue neutral, or could even be a “feebate” that is simply returned to the citizens of the nation collecting the tax.

                Do you think that no taxes would be a good idea? Certainly there are many different options for how the carbon tax revenue could be used. For those that don’t like government debt, it could all be directed toward paying off debt, for those that like military spending it could be used for that.

                The idea is to raise the price of fossil fuels and let the market decide how best to move to alternatives.

                Do you think we would be better to just wait until fossil fuel output decline finally becomes painfully obvious to everyone and then let the market work?

                The carbon tax is intended to give the market more time to come up with viable solutions.

                Carbon tax and free birth control and women’s health and free education for all women would be the first orders of business.

                • TechGuy says:

                  “Do you think that no taxes would be a good idea? Certainly there are many different options for how the carbon tax revenue could be used.”

                  Yup, Taxes just lead to more mismanagement as those that collect them, us it to benefit themselves or friends. ie Subsidies for their “friends” running mega-corps. Its plain stupid to put billions in the hands of a small group of bureaucrats that make the decision on how tax revenue is spent. The majority of gov’t bureaucrats do no not have either a STEM or accounting background (mostly political science, law or other liberal arts degrees). You want the least educated and least qualified people to make financial decisions?

                  Taxes just make offshoring more attractive. For instance, a lot of manufacturing left the US for Asia, where there are no pollution regulations. The world is worse off because China is now the worlds biggest and worst polluter, all made possible by western gov’t taxation and regulation. It would have been better to keep production here since US/EU companies would have produced far less waste and pollution that China does, and the products made in the US would have better quality and last much longer. I think the average product made in China has a life of just a couple of years before it breaks. Most American/EU made products last ten years or more. Americans also replace their cars about every five years or less. Mostly because they don’t want to be seen driving a old car (keeping up with the jones) and made available by cheap and easy credit. Car companies are incentivized to produce inferior lower quality vehicles since consumers replaced them frequently.

                  If you want to make the economy more efficient and prevent excesses, all that need to happen is to normalizing interest rates and let the market dictate interest rates instead of gov’t. People would purchase what they need and avoid the instant gratification, “throw-away” consumerism that is fueled by cheap and easy credit. Might I add, which was created by the gov’t by manipulating interest rates and bailing out wasteful, corrupt big businesses.

                  Also the gov’t needs to stop bailing out failing businesses. Failure is necessary to clean out waste, fraud, and improve efficiency. Companies that are innovative, efficient and thrifty survive. Those that stagnate, waste, quickly fail and are replaced by better companies. Subsidies and bailout prolongs stagnation, waste, and fraud. Want to see better batteries and more efficient products? Stop the bailouts and subsidies so that the innovators can step up and take over. Only the viable new products will survive in the market economy.

                  “Carbon tax and free birth control and women’s health and free education for all women would be the first orders of business.”

                  Not really. Carbon tax will just send more production and jobs overseas where there is no carbon tax. Countries like China will simply expand pollution.

                  As far as birth control, the best contraceptive is education. Birth rates for western educated women is below replacement rate. Its the uneducated women, that are having the most children. Latin American women will not use contraceptives because they been “un-educated” by the church that its a sin. This true of Muslims and Christians and perhaps hindu’s too.

                  Of course the most effective way to reduce births globally would also to normalize interest rates, and reverse policies that make it financially easier for women to have children out of wed-lock.

                • old farmer mac says:

                  Hi Dennis,

                  ”Do you think we would be better to just wait until fossil fuel output decline finally becomes painfully obvious to everyone and then let the market work?”

                  I am philosophically inclined to keeping government as small as practicable but of course it has to be big enough to take care of the things ONLY government can manage – such as national defense.

                  When it comes to energy I do not believe the market will work fast enough to solve the problem. It is likely we will find ourselves VERY SHORT of oil and gas and maybe even coal someday, and stuck with an economy and infrastructure system that simply can’t be quickly converted to either nuclear or renewable energy within any workable time frame – UNLESS we do all we can to support the growth of renewables and increase efficiency FROM NOW ON. Even then we may not manage a successful transition.

                  So – considering this question from the pov of a REAL conservative with an A B C understanding of the basic science of geology ( meaning fossil fuels deplete, in essence ) the only rational thing to do is encourage the growth of renewables and increase energy efficiency by any practical means we can.

                  This means subsidies as a practical matter, and renewables mandates.From my vantage point, this question is basically a national security question.

                  We need renewables for all the same reasons we need armored divisions and hospitals and universities. The safety and welfare of the country are dependent on these things – WE WILL be dependent on renewables in particular in coming decades.

                  When the fecal matter hit the fan in the late thirties, nobody in Europe or Asia had time to build a war machine capable of dealing with the NAZI machine.

                  In that case we Yankees were able to bail out or friends in the nick of time because we WERE able to build a war machine fast enough.

                  ONCE fossil fuels are VERY scarce and expensive even a country as rich in resources as the USA is today will be unable to manage a successful transition- UNLESS the ground work is already in place and the job well started.

                  As I see things our only real and best hope is that we suffer a SERIES of ” Pearl Harbor” like wake up events that force us to collectively face up to the coming day when oil and gas are too scarce and too expensive to support our economy.

                  Of course you know my opinions already.

                  But I like to point out that real conservatives and republicans are generally separate species.

                  • Dennis Coyne says:

                    Hi Old Farmer Mac and Techguy,

                    The way to solve the “China will just produce it” argument is to implement the carbon tax on fossil fuels at the well, minemouth or when imported and on any goods imported from countries that don’t have an equivalent level of carbon taxes. To make it simple to calculate you simply estimate the carbon emissions of China per unit of GDP and then impose the carbon tax on any imports relative to overall carbon emissions.

                    Clearly you have never heard of the concept of “feebate”. The carbon tax is collected and then just sent back to the citizens, if one hundred billion in carbon taxes are collected and there are 300 million citizens, then everyone gets a check for $333. No increase in government spending.

                    As far as subsidies etc being the best way to do things, this would be far less efficient than letting the market decide. That is why free market advocates think taxes are a much better solution for externalities than regulations and/or subsidies.

            • Caelan MacIntyre says:

              Dennis,

              If ‘everything’ runs on oil, would heavy taxation on it be like self-sabotage? (To say nothing of relinquishing it to China, as Watcher has mentioned.)

              Also, how does the crony-capitalist plutarchy ‘uneconomic model’ that seems to favor increasing disparities manage decreasing energy?

              My intuition is nagging me about this as being another kind of knitting red queen that knits faster and faster just to maintain her uneconomic/dystopian sweater-of-equilibrium, until she can’t at some critical threshold, and then the yarn just runs in various places and speeds beyond her capacity to knit all the holes closed again. This is what is probably happening right now as the queen creates, relatively successfully, if increasingly less so over time, a uniform mirage of ‘everything’s fine/nothing’s really changed’. The emperor queen has no clothes.

              I don’t see a smooth transition because the model is based on getting more so that some have power over others that cannot get as much — from primeval motivations of fear and status maybe. Same with weapons. The logic of, ‘if you don’t do/get it first, others will’ (to your potential disadvantage).

              For a smooth transition, it would seem that this kind of logic or instinct would have to somehow invert itself… Like, ‘Ok, we’ll give it up/stop doing it first’; put our heads in your lions’ mouths and hope they don’t bite (exert power).

              And that dovetails into what some have been saying for some time now about the USA, and other western nations, about ‘setting an example’.

              At the same time, though, efficiency and electrification would save fossil fuel for the military, but again, there are competitors, and this efficiency and lower-energy would seem to threaten high-energy-based vested (and power) interests.

              Energy is power; and high energy is high power.

              This is again why a smooth transition looks highly unlikely.

              It may be feasible at the grass roots level, but there would have to be mass and fast adoption of opting out. But then there’s the issue of fast and chaotic collapse from masses opting out quickly, unless it is highly organized. (This is why I think Permaea might have a chance, as it is exactly that.)

              “POLITICS: n 1: social relations involving authority or power.
              We swim in ‘politics’ like fish swim in water; it’s everywhere, but we can’t see it!

              in fact, telling primates (human or otherwise) that their reasoning architectures evolved in large part to solve problems of dominance is a little like telling fish that their gills evolved in large part to solve the problem of oxygen intake from water. ~ Denise Dellarosa Cummins” ~ Jay Hanson

          • old farmer mac says:

            From day one I have always described the corn ethanol industry as a boondoggle born of cynical republican businessmen – mostly farmers and farm state politicians – taking a bunch of leftie leaning ignorant and naive environmentalists to bed promising them happiness and leaving them barefoot and pregnant and stranded.

            Of course a lot of farmers are stupid enough and unthinking enough to believe we could run the country on moonshine. Farmers are naked apes and a typical human can and will and does believe any goddamned thing that suits his cultural agenda. The typical farmer can instantly and utterly forget all about the free market he supposedly holds so dear when somebody offers him a chance to make a buck sucking on the government tit.

            We would have been as Fernando points out WAY better off to simply tax oil more and or to have tightened up fuel economy standards a little faster.

            The righty tighty anal wing is always and forever bitching at full volume about government taking over every thing on the grand scale, it is perfectly willing to have government take over any particular thing in order to profit from the takeover.

            Corn ethanol is an environmental mistake of monumental proportions but the goddamned environmentalists were COLLECTIVELY stupid enough to actually collectively promote it like a dumb inexperienced girl out on her own for the first time sucking down one beer after another with a boy with just one thing on his mind.

            It IS an indisputable fact that Fernando is pointing out some unpleasant truths that most of us would rather be left OUT OF SIGHT in a dark corner.

            But in the end what we wasted on ethanol refineries and other such boondoggles is no bigger a deal than what we waste on football stadiums and city orchestras and Sky Daddy alone knows how many billions of earmarked pork each and every time any and every government body with taxing and spending authority creates the next annual budget.

            It has been so far impossible for me at least to get Fernando to directly answer a question about how long he thinks oil and gas will remain cheap and plentiful but anybody who actually READS for COMPREHENSION knows he is a fully committed peak oiler.

            To the best of my knowledge he never posts anything about nuclear power – at least not in this forum. SO – HE IS NOT quite leveling with us about what he thinks the world is going to be like ten or twenty years down the road.You can’t be a committed peak oiler AND a bau forever guy too- not if you are thinking things all the way thru.

            AND while I do firmly believe in forced climate change being a literally existential risk for most of humanity, I hereby acknowledge that Fernando is basically right about the politics involved – ANYBODY who believes in biological overshoot and geological limitations is EITHER telling less than the truth if he says politics has nothing to do with the scenarios the IPCC uses which involve totally unrealistic oil production in the future – or ELSE he is cynically doing exactly what Fernando is accusing the establishment of doing – GOING ALONG TO GET ALONG. You do not have to be an actual employee or paid researcher to be guilty – all you have to do is be politically aligned with the leftish wing.

            There are such things as white lies told by omission as well as black ones told by commission and every shade of grey between the blackest lie and the brightest and whitest truth.

            WHEN it comes to climate issues I hereby declare for Bernie Sanders for the moment or anybody BUT Hillary. Hillary is a crook and while she would probably do better by the environment than which ever clown the republicans eventually settle on, I would rather vote a third party or independent than vote for her.

            I am guilty of this going along to get along to some extent myself but I also get sort of tired of not acknowledging obvious truths for political reasons.

            ANOTHER THING that I believe is that even though some of the assumptions used are asinine , the risks involved are non linear in nature and the climate could possibly tip into an extremely undesirable new equilibrium state far sooner than the models predict.

            So – I totally disagree with Fernando about the relevance of the precautionary principle in the case of climate.

            When it comes to the art of the politically possible one must understand that there will always be countless questionable compromises made to get the most important things done.

            Remember Churchhill saying that under some circumstances he would at least mention the Devil himself favorably in Parliament ?

            If we want climate taken seriously then we have to take the general public for a collective fool – and this DESPITE the science itself being SOUND.

            If the issue isn’t presented in alarmist tones it will not even register on the radar of the typical man or woman on the street.

            • Nick G says:

              the corn ethanol industry as a boondoggle born of cynical republican businessmen – mostly farmers and farm state politicians – taking a bunch of leftie leaning ignorant and naive environmentalists to bed promising them happiness and leaving them barefoot and pregnant and stranded.

              The environmentalists didn’t have much to do with it. It’s agribusiness all the way.

              On the other hand….

              What would happen if we slapped a $3 per gallon national security tax on oil? Wouldn’t ethanol get the same kind of boost that it got from the 10% blending requirement??

              • Possibly. Corn ethanol production uses fossil fuels. This means the cost to produce corn ethanol tracks oil and natural gas prices. The question is whether the tax is limited to gasoline or includes natural gas.

                Another issue we should consider is USA restrictions on ethanol imports. Sugar ethanol is much more competitive and will displace USA corn ethanol if imports were allowed. But the USA system is the result of business lobby pressure coupled to environmental chic.

                A similar solar and battery lobby has emerged, we see non sense technology receiving enormous subsidies as a result of the marriage of business interests with the green lobby.

                • Nick G says:

                  About 20% of the Fossil Fuel input to ethanol is diesel, and 80% is natural gas. So, ethanol isn’t forced to track the price of oil because cost pressure.

                  There would be no reason to tax nat gas for security reasons: we’re not dependent on imports. If domestic supply were to drop below, say, 80% of consumption, that might change.

                  As for sugar ethanol – what about the arguments you’ve made about favoring domestic energy supplies??

                  A similar solar and battery lobby has emerged, we see non sense technology

                  You’ve been repeating these unrealistic, unsupported ideas quite a lot – it does you a disservice. You’ll remember, when you quantified the cost of European wind power, we found that it was less than 7 cents per kWh. Wind is cheaper than new, moderately dirty coal.

                • Dennis Coyne says:

                  Hi Fernando,

                  All fossil fuels should be taxed based on their carbon emissions, so gasoline, diesel, jet fuel, propane, natural gas, and coal would all be included.

                  I agree on allowing ethanol imports and also think the ethanol mandate should be removed.

                  That is about as likely to happen as a carbon tax.

                  • Nick G says:

                    Every fuel has a unique set of externalities that should be internalized through revenue neutral taxes.

                    Oil has carbon, particulates, sulfur, NOX, and security of supply costs.

                    Coal has carbon, sulfur, mercury, radioactive particles, etc., etc., etc.

                    Gas has carbon, and it’s own GHG impacts.

                    Coal and oil have much higher external cost than does gas.

                  • Dennis Coyne says:

                    Hi Nick,

                    That may be correct on coal vs natural gas, but woouldn’t most of that difference be covered by the fact that per joule of energy content, coal has nuch higher carbon emissions than natural gas. So wouldn’t a carbon tax based on carbon emissions per joule of energy output would impact coal much more heavily than natural gas?

                    I have not looked carefully at a comparison of the external costs of each particular fossil fuel, but a straight carbon emissions tax would surely move us in the right direction, no?

                    Lets not let perfection be the enemy of the good.

                  • Nick G says:

                    Dennis,

                    I agree. A good stiff carbon tax would be a dramatic improvement, and would get us most of the way to where we need to be.

                    The point here is that oil has very large national security costs – think $2 trillion oil wars. That means that ethanol has a real advantage when all costs are considered.

          • old farmer mac says:

            ”Yes Mac, but those technologies don’t really compete at this time. And I don’t see any signs that they will.”

            I recognize that for the moment it is still cheaper to buy and run a conventional car than a TRULY COMPARABLE electric or plug in hybrid due to the conventional car being cheaper initially and the opportunity cost of the money involved.

            Fernando your comments here indicate you believe oil will on average get to be more expensive year after year.

            Given that you are an engineer, surely you must recognize that virtually every major industry gradually finds ways to operate more efficiently, an that this is especially true of an immature industry such as the battery powered auto industry.

            Furniture is an industry that has been mechanized for well over a century now and yet the one local furniture plant still running in the nearest town has managed to raise it’s output per man hour every year for the last twenty years- in the meantime getting more pieces of finished furniture out the door per thousand board feet of lumber purchased. The company has managed to continuously reduce its inputs per piece of furniture right across the board, using less kilowatt hours, less packaging, less warehouse storage time, less scrapped defective production, on and on.

            The rechargeable battery industry is still in short pants,figuratively speaking. With costs falling FAST and durability increasing, I personally believe the cost of a battery plus an electric motor is going to fall to no more than the cost of an ice engine plus an automatic transmission within ten years at the most.

            The fast ( in historical terms ) declining oil resource in the ground is driving up the price of oil on average MUCH faster than improving drilling methods can get it out.

            Millions of tight fisted Scots Irish hillbillies are going to be driving battery electric or plug in hybrid cars and charging them with home grown juice from their own personal little pv farms within a decade or so.

            Explain to me where I am wrong, if you can.

          • John B says:

            Yes Mac, but those technologies don’t really compete at this time. And I don’t see any signs that they will. You see, when it comes to technology I see a lot of fads and fashions based on pretty much nothing. It’s like the USA ethanol industry, when you get down to it it’s not that useful. But it sure has lots of companies and a big lobby pushing it.

            There’s a whole lot of people that think Ethanol is “not that useful”. Reality is a much different thing – to the tune of 2 million barrels/day and still growing:

            http://ethanolrfa.org/pages/World-Fuel-Ethanol-Production

            Add to that Biodiesel, 15 million CNG vehicles, 10 million electric, and hybrid electric vehicles, and you have a very big dent in oil demand. A bigger dent than any decline in shale oil production could match.

            Do the math.

        • MarbleZepplin says:

          Old Farmer,
          Since most oil is burned for transportation, switching over to electric vehicles, electric trains, and increasing mpg where we don’t switch over could force Dennis’s “unrealistic” scenario with no problem. Wouldn’t need the oil production.

          And if the designs using liquid fuel were converted to hydraulic hybrids the fuel usage would fall dramatically, especially in city areas.
          I am all for the autonomous cars, not because I particularly want one or would like to have to call to get picked up but because from what I observe driver distraction is at a an all time high. It’s not just drugs and alcohol, its cell phones and other gadgets along with the typical distractions already present. Add to that the drivers who think they are privileged and think they make rules because they are in a hurry. Robots would at least make driving more consistent.

          Air causes a lot of fuel use:
          http://cleantechnica.com/2014/01/09/aerodynamic-trailer-design-doubles-fuel-economy/

          • old farmer mac says:

            HI MZ,

            What is a ”hydraulic hybrid” ?

            Otherwise I am on the same page. Mostly.

            I don’t think autonomous cars will be very plentiful within the next decade or two due more to political resistance than technical issues but my belief is that pure electrics and plug in hybrids are going to more or less OWN the automobile and light truck markets within twenty years. They will be VERY common in ten years.

            DEPLETION NEVER SLEEPS – courtesy of Matt Simmons.

            The biggest thing holding up electric vehicle sales imo is NEITHER range NOR price but rather the reluctance of the typical new car buyer to sign on the dotted line for a car he does not trust to last and be reliable.There are tens of millions of American households that could make good use of a LEAF right NOW, given that so many of us own two or three cars per household.

            That lack of familiarity and confidence will dry up and blow away soon and within five or six years the cost of a new hundred mile range battery is going to be down to not much more and maybe less than the cost of a ”fully dressed ” ice engine and automatic transmission. Electric motors are inherently dirt cheap.

            Electrics and or plug in hybrids WILL rule once the public learns to trust them.

            Shell is not drilling up near the North Pole for the fun of it.. Depletion never sleeps and barring miracles the population is going to keep on growing for at least three or four decades and most likely twice longer than that.

            Every body talks about cheap oil as if four or five years is FOREVER. I expect the next oil supply crunch to hit sooner than that barring the overall economy being on life support.

            I do believe business as usual is a dead man walking – in historical terms- and that a hard economic crash is inevitable – but I try to remember that the world does not run on naked ape time. Five or ten years is no more than a yawn in historical terms. The crash will come but it may not arrive for two or three decades or conceivably even longer. I am not talking about a recession or a depression but a CRASH- necessary stuff not available not because of a lack of money but because of physical limits.

            I also believe that dead serious climate troubles are most likely already baked in as well. But my guess is that these troubles are not going to become really critical short term problems within the next decade or two-except for people who have the bad luck to live in places where the troubles first arrive.California for example is looking like a prime early arrival candidate, but California can survive by sacrificing irrigation agriculture which consumes the boss hogs share of the states water.

            You are dead on about trucks and aero.

            Some time back a friend of mine used his Ford ten wheeler dump truck and equipment trailer to haul stuff for me a day. We set the governor on the three hundred horse power Catepillar so it would not exceed fifty mph for the day as an experiment. This extremely large and heavy truck towing an eight wheel trailer hauling an eight ton backhoe got almost nine mpg for the day.

            Ordinarily with the governer set to limit top speed to seven two mph this truck gets about five and a half to six mpg hauling the same load.

            You can get around JUST FINE with driving an eighteen wheeler with ” ONLY ” three hundred horsepower.

            Of course it is much more profitable to drive it as either as fast as it will go or as fast as he can without getting speeding tickets. Diesel fuel is still dirt cheap in comparison to drivers wages, total ownership and operating costs, and the extra gross revenue gained by making more load miles.

            Folks who buy new similar trucks are finding it profitable to order them with four hundred and fifty horse power engines. The newer engines are both more efficient AND faster.

            I expect to live to see a forty five mph universal speed limit that will be ENFORCED.

            • MarbleZepplin says:

              OFM,
              The hydraulic hybrid has two sources of power like the electric hybrid. Usually the hydraulic pump motor is attached directly to the drive shaft or are wheel hub motors. A pressure accumulator tank (equivalent to the battery in an EV) stores energy and stores the regenerative braking energy. The ICE runs or assists the car by pumping up hydraulic pressure to the motor (s).
              The hydraulic hybrid has several advantages. The pressure tank (accumulator) is lightweight, cheaper than batteries and much less expensive to replace if it ever needs replacement.
              Hydraulic hybrids recapture braking energy at about 70 to 75% efficiency making them extremely efficient in stop and go traffic. EV’s only recapture about 20 to 25% of braking energy.
              Peugeot was planning hydraulic hybrids:
              http://www.greencarcongress.com/2013/01/psabosch-20130122.html

              Some actual production examples:
              http://www.greencarcongress.com/hydraulic_hybrid/

              Just another way to save fuel. Although we might drive to the grocery store or farmers market and not find enough food. But that is for the future and right now we can conserve and prepare.

              • old farmer mac says:

                Ah yes,

                I read about this possibility some years ago but forgot about it. I don’t think this tech will ever fly except maybe on a commercial vehicle that starts and stops quite often all day long day in and day out.

                Building such a system is simple in concept but actually building one strong and gas tight enough to work reliably appears to be a really tough nut.The pressures involved are apparently too high to manage with affordable components.

                Ford iirc had an experimental unit mounted in a commercial truck that could save enough energy stopping it from fifty five to accelerate it back up to thirty five. This thing was also for some reason not explained awesomely noisy.

                I have never heard about anybody actually marketing a hydraulic hybrid, at least not successfully.

                • MarbleZepplin says:

                  Having worked with high pressure liquid systems for years, I think the major reason we don’t see these systems on the road are the typical horsemen for many great ideas, lack of motivation, financial inertia and the general fear of failure. Once the EPA gets some teeth again and oil supply diminishes hydraulic and electric technology will be strongly desired and supported.
                  We shall soon see. The early efforts in Europe for hydraulic cars are failing due to lack of financial backing. But a UPS delivery truck with hydraulic technology was built and used in the US that got up to 50% reduction in fuel use. They make a lot of sense in fast delivery situations and the dense urban/town regions (where most of the people are anyway). The ICE would hardly come on when in congested stop and go traffic – a situation that wastes a large amount of fuel.

      • denns coyne says:

        Hi Fernando,

        Thanks for the vote of confidence. I absolutely agree that substitutes are a wild card, the optimist in me thinks that rapid development of substitute sources of energy (biofuels, hydro, geothermal, nuclear, wind, solar, tidal, wave, and others I may have missed) may lead to rapid declines in the demand for oil so that the low URR case (3100 Gb) could result due to oil being replaced.

        The realist in me says that there will be many unforeseen problems trying to transition away from oil and other fossil fuels and that it will take longer than the optimists believe.

        The pessimist version of me thinks we are toast, but many others here have that view well covered.

        • I’m in the same boat. I like to bitch about renewables because I think we got business lobbies and marketers peddling stupid “solutions”. Like a $80,000 luxury vehicle loaded with a ton of electric batteries.

          • Dennis Coyne says:

            Hi Fernando,

            The Tesla S is a marketing tool to show that an EV can be a very nice car, for Americans, the Volt probably is a more logical choice (though I don’t care for Chevrolets.)

            Wind and solar only make sense where the wind blows a lot or the sun shines a lot, currently Wind is pretty cost competitive, solar will get there before long for many places (UK and US Pacific northwest are not great places for solar.)

            I agree there is much work to be done and we should choose the lowest cost non-fossil fuel option, but we must look at both internal and external costs when deciding what is least expensive for society as a whole.

            • clueless says:

              Chevrolet is just a name they put on it. GM should call it a “Peach.” Then maybe you might like it. Apple worked out pretty well for a computer, smartphone, watch, music device, etc.

          • Bob Nickson says:

            Fernando, you know fully well that the $80,000 luxury electric vehicle is a strategic path to mass market affordable EV’s.

            Meanwhile, Wimbi and many others are already affordably and comfortably driving around solely (:^) on photons they harvest themselves.

            That must be utterly terrifying to the fully FF invested.

            • No Bob, I don’t “know” that. I tend to think it’s bulkshit. Industrial strength marketing for rich folk who want to flash their green credentials. The Tesla is like the international space station, pretty to look at, expensive as hell, and fairly worthless.

              By the way, I’m not “fully fossil fuel invested”. I’m retired. I just bought about 3 % of my net worth in oil related stocks after Ron convinced me we were hitting peak oil. Other than that I got zilch.

      • Fernando Leanme says:
        ” I worked with a small group several years ago, trying to understand whether exploration was worthwhile. I can’t discuss much about what we did”

        And that points out yet again how useless oil insiders are to the analysis world.
        Sheezus!

        • Dennis Coyne says:

          Hi Paul,

          I have learned quite a bit from Fernando about the oil business. Sometimes there are non-disclosure agreements which Fernando takes seriously.

          • No kidding. The problem I got is my confusion over what’s locked in my head and what’s publicly available. That’s why I have to fudge a little bit.

            • Fernando Leanme says:
              “No kidding. The problem I got is my confusion over what’s locked in my head and what’s publicly available. That’s why I have to fudge a little bit.”

              You are deluding yourself. All you have locked in your head are a collection of “just-so” stories that are essentially worthless in a statistical context.

          • Mike says:

            Mr. Scope, the data the oil and gas industry derives from it’s research always comes with a very high financial cost. Reservoir performance gained thru exploration, for instance, is often extremely confidential. Logic would suggest then, for some anyway, that this data, this information is indeed often very proprietary. It is sometimes a necessity in a free-enterprise system.

            Non-discloser statements are very common, but so is loyalty to former employers, fuducurary responsibilty to working interest joint ventures, production sharing agreements, areas of mutual interest between parties and express convenants in mineral leases and concession agreements. Some of these obligations regarding disclosure are merely implied. Folks in the industry, retired or active, do whatever we must to honor those obligations, even at the expense of the “analysis world,” whatever the hell that is.

            Nobody knows within 30% what the proven reserve base is in Russia. May I suggest a trip to Moscow to get them straightened out first?

            “Oil insiders” are rare on peak oil blogs; its ignorant to insult them, for any reason.

            Mike

            • Mike, im not sure the Russian reserves commission has a good handle on reserves. The soviets had a very aggressive technical booking system, and I didn’t see anybody willing to rock the boat.

              While I’m at it:

              USA SEC reserves are too low because they haven’t incorporated modern technology in their methods, the Russian system doesn’t consider economics, and the OPEC reserves are inflated (?). Maybe this yields a good overall estimate and the 3000 curve Dennis shows is just about right.

              By the way, look at this about Chinese coal to liquids, and take note of their comment about non commercial depleting coal mines:

              http://newsdaily.com/2015/07/china-sets-new-standards-for-coal-conversion-projects/

              • Misha says:

                About Russia funny.
                The economy is taken into account. Reserves are taken with a positive NPV. The only way.

              • Did the GKZ get replaced? Or did they change their soviet ways?

                • AlexS says:

                  Fernando, independent proved reserve estimates, such as BP’s or Oil & Gas Journal, are nor based on the Soviet/Russian reserve classification.
                  In the past, they were pure guesstimates.
                  Today they are largely based on independent reserve audit made for the key Russian oil companies by western firms (such as Miller and Lents ), in accordance with the SEC or SPE standards

                  • Mike says:

                    So, Alex, do you then believe those proven reserve estimates made by independent companies in Russia are accurate?

                  • Doug Leighton says:

                    “In the past, they were pure guesstimates.”

                    If you’re talking negatively about Soviet reserve estimates, you are wrong. I have recalculated many of these into “Western” standards and the Russian numbers were normally quite conservative and always accurate. Downplaying engineering skills of other countries may be fashionable but, in my experience, is almost always wrong.

                  • AlexS says:

                    Doug, I was talking about western estimates of Soviet/Russian reserves made in the past.
                    They were pure guesstimates, given that the USSR did not disclose its reserve numbers
                    As regards the Soviet/Russian estimates, they were indeed quite accurate, but reserve classification is totally different form the SEC standards. In particular, Russian system did not take into account oil prices and other economic considerations. Therefore, reserves estimates for individual fields under Russian A+B+C1 category are, on average, about 15-20% above audited numbers under SEC standards.
                    According to the Russian Ministry of Natural Resources, the country’s oil reserves as of the beginning of 2013 were
                    17,8 bn tons, or 129,9 bn barrels. This is 23,7% above BP’s estimate (105bn bbls)

                  • Mike says:

                    Thank you, Doug. If not Russia, KSA, whomever. Company or country, everyone generally has some kind of motive for the reserve estimates it reports to the rest of the world. I’ve seen 30% differences in reserve estimates in Russia. I chose Russian reserve estimates to make a point regarding the definition of usefulness to the “analysis world.”

                    Mike

                  • Doug Leighton says:

                    “but reserve classification is totally different form the SEC standards” I guess I’d know that, it being the reason I was asked to redo them.

                  • AlexS says:

                    Mike, I do not know how accurate these estimates are. But they were made by renowned western consultants/reserve auditors, such as Miller and Lents (http://www.millerandlents.com/default.aspx), DeGolyer and MacNaughton (http://www.demac.com/), etc. for Russian companies listed on international stock exchanges, including LSE and NYSE.

                  • Mike says:

                    Alex, all those reservoir engineering firms are very reputable. You have inadvertently helped me make my point about usefulness of information provided, or withheld, by the oil industry to the analysis world; a 23.7% discrepancy in Russian reserve estimates makes it hard to model.

                    Thanks.

                    Mike

                  • AlexS says:

                    Mike,
                    The Russian estimate I mentioned is based on the Russian standards.
                    Estimates by M&L, D&M and other auditors are made according to the SEC and/or SPE stardards.
                    BP’s estimate for total Russia is based on existing western estimates for
                    individual Russian companies, which account for the bulk of Russian oil production.
                    That explains the 23.7% difference.

                  • Yup, while you guys diddle, we can figure out the statistical decline.

                    Research for profit is completely different than fundamental research for understanding. We have the latter covered.

                  • I remember having breakfast with a Miller and Lents type and discussing oil reserves south of the Ob. I think it was the area with the leftovers after Mr K stole Yuganskneftegaz. I had the impression he was threading very carefully and avoiding a conflict with the GKZ. But maybe they improved over the years.

                  • Futilitist says:

                    “Yup, while you guys diddle, we can figure out the statistical decline.

                    Research for profit is completely different than fundamental research for understanding. We have the latter covered.”
                    ~WebHubTelescope

                    That is just awesome! I love fundamental research for understanding.

                    What understanding have we gained from Dennis’ graphing exercise?

                • Misha says:

                  Communism is no more 🙂
                  Instead GKZ now the CKZ (Central Commission for reserves). And the CKZ next year will be disbanding. I have many times defended the reserves in GKZ and the CKZ. And field development projects in the CKR. It’s my job.

                  In 2016, moving to a new classification of reserves.

    • denns coyne says:

      Hi Matt,

      You may be correct, but there are many parts of the World where the HL does not work well. Also it is much more work. If you have already done this do you have a link? What is your estimate of World C+C URR?

      Note that Jean Laherrere’s creaming curve approach points to a C+C-XH URR of 2200 Gb, if we assume 300 Gb of oil discoveries from 2011 to 2100 and 500 Gb of reserve growth after 2010 this would be about 60% 2P reserve growth for the World over 90 years. The United States had this level of reserve growth in estimated 2P reserves over a 26 year period (1980-2005), the US is a much more mature oil province than the rest of the World so an estimate of 60% reserve growth over 90 years or more is conservative in my opinion.

  5. BC says:

    I continue to assert that Peak Oil and “Limits to Growth” (LTG) in per-capita terms are already history, i.e., in the rear view mirror going back to 2005-08.

    I suspect that we will collectively and retrospectively look back from 2017-20 to the mid-2020s and unequivocally concede this fact, as well as experience evidence of the end of real final sales/GDP growth per capita, and end of capitalism (or the end game for a Marxian rate of growth of profits from hyper-financialized rentier-socialist corporate-statism).

    I also expect that these once-in-history, global, superstructural factors increase the risk (probability) of a last-man-standing contest between the West and China-Russia for the remaining scarce resources of our finite, spherical planet. I suspect that the first signs of same, i.e., deterioration and collapse of US-China diplomatic and trade relations, will occur sooner rather than later.

    • cytochrome C says:

      I say sooner.
      Equilibrium is being harder to maintain.

      And this will be a last man standing issue from a bunch of global elite’s.

    • denns coyne says:

      Hi BC,

      Certainly oil peaked in per capita terms long ago (1978). On limits to growth things are less clear, if one uses Gross World Product (GWP) in constant dollars per capita we have not reached peak yet.
      Has real final sales/GDP growth per capita fallen to zero for the World?

      • BC says:

        Dennis, take out China’s fictitious reported growth (contributed to 45-80% of growth since 2007-08), especially since 2008-12, and real growth per capita peaked in 2007-08 to date and has decelerated to within the margin of error of 0% for the estimates for the deflator, inventories, and import prices.

        One can quibble about whether growth is 0% or ~0.5-0.7%, but that is against the long-term average rate of ~2-2.25%, which was a compounding doubling time of 27-30 years vs. the post-2007 structural trend rate of a doubling time of 100-140 years.

        The 9-year change rate for the largest share of the world economy is growing at the rate of the 1930s and about half the rate during the agrarian 19th century (using the best available data) before full industrialization through before WW I.

        The post-2007 trend rate of real growth per capita is as good as it gets with a significant permanent drag from peak demographics, excessive debt to wages and GDP, extreme inequality, and, of course, Peak Oil.

        China’s growth is no faster than 2-3%, and any positive growth is being artificially created by state-directed lending for non-productive fixed investment, as well as now a desperate attempt to create financial bubbles and prop them up with leverage when they inevitably crash and risk the financial system.

        • Dennis Coyne says:

          Hi BC,

          Interesting. It would be interesting to get Political Economist’s perspective on China’s “real” GDP growth rate, he follows thing closely and I believe is fluent in Mandarin and has access to much information that I do not.

          Do you have sources for your assertions?

    • wiseindian says:

      The overall idea behind LTG is rock solid but it’s implications are not very clear, and without practical advice on how the whole thing will pan out it’s a useless topic for most people. Also not everything is attributable to LTG, a lot of what’s happening in Europe and the rest of the developed world is just regular collapse of the old kind (cyclical), demographics, debt accumulation etc.

      PO folks have been wrong year after year in their predictions regarding the state of the world and economy, this much I have understood after getting introduced to the topic 4 years ago and after reading through archives of last 10 years. I think the PO community needs to have some humility here if they are to be taken seriously. I was wrong myself on so many aspects.

      By this I don’t mean to say that no important work has been done on this topic but if this has to go beyond academic circles then certain short comings need to be addressed

      Most of PO advice anyway boils down to age old themes of
      1. Living below your means
      2. Not accumulating debt
      3. Saving a significant portion of your salary
      4. Continuous investment of savings in conservative instruments

      If someone was just schooled properly in these thoughts they would do well, irrespective of whether they know about LTG or not.

      • Ves says:

        “Most of PO advice anyway boils down to age old themes of
        1. Living below your means
        2. Not accumulating debt
        3. Saving a significant portion of your salary
        4. Continuous investment of savings in conservative instruments”

        Unfortunately even these suggestion hardly apply anymore:
        1) Living below your means = means living in poverty.
        2) Not accumulating debt = there is no that option. Only options are debt or more debt 🙂
        3) Saving a significant portion of your salary = with raising inflation and stagnant wages for decades that becomes impossible. Paycheque to paycheque is reality.
        4) Continuous investment of savings in conservative instruments = return on those ones are right now 0% so actually you are losing money on those because of inflation.

        • wiseindian says:

          I agree with some of your points but I think there is a lot of scope for improvement. I’ve been to US and Europe, the wastage is enormous. And it’s not about saving the planet, every unit of energy or penny wasted comes from someone’s earnings. As far as savings go the savings rate is very poor, I don’t buy the argument that people in developed countries have no means of saving. When poor people in third world countries can save 20% of their income at third world salaries why do people earning 60k $ have savings rate of 4% ? That is not at all an excuse. It’s a matter of attitude. I sometimes read a blog called “money mustache” for amusement, I think that guy hits the nail on the head as far as lifestyle choices go.

          • Ves says:

            “I’ve been to US and Europe, the wastage is astounding, you guys can easily live a superb life with half of what is currently used.”

            Yes, wastage is astounding. It is even encouraged. But there is a reason for that. If majority would live with less than the whole debt based financial system collapses. It is just mathematics.

            • wiseindian says:

              “But there is a reason for that. If majority would live with less than the whole debt based financial system collapses. It is just mathematics.”

              Yes but that’s not the reason people waste, do you honestly think that people do what they do because they consider it as some sort of duty ? They do it because it’s a habit.

              What I meant to say is that if you need to get through to people, the correct strategy is not to show that the world is doomed if they keep doing it because honestly no one cares about the world (the concept is too abstract). The right approach is to say that wastage costs money and it makes them poor.

              • Boomer II says:

                The right approach is to say that wastage costs money and it makes them poor.

                Yes. Why spend your money on stuff you waste? You could plan better and then use your money to buy stuff that ultimately is more important to you.

          • You are right. I keep three garbage cans. Organic, paper, plastic. What’s really amazing is the huge amount of plastic we throw away. And it’s not like we buy junk food. But the darned fresh fish comes in a plastic tray, same with the steaks. The pizza bases come in plastic and cardboard. And on and on. I really hate taking out the garbage!

            • wiseindian says:

              And the worst part is that the rest of the world is copying the west. Wastage and Debt are increasing here as well, relative to the west it’s still small but we are getting there.

            • Synapsid says:

              Fernando,

              Is that all garbage?

              We have three bins, supplied by the city: a large one (weight limit 200 pounds), picked up (emptied) every other week, for recycling of paper, metal, and almost all plastics; a medium-sized one for compostables (yard and kitchen waste) that is emptied every week; and a small one, emptied each week, for garbage–it’s illegal to put food waste in the garbage–for everything else. A couple of weeks ago the driver of the garbage truck asked me why I hardly ever put out the garbage container, and I said that I produce very little garbage because most everything recycles.

              The recycling program grew over a couple of decades. It’s pretty good now.

      • BC says:

        Some “PO folks” have not been wrong. I know at least one.

        LTG is not a cause; it’s the cumulative effect of once-in-history factors coalescing and self-reinforcing on a finite spherical planet.

  6. Dr. Don says:

    Everybody believes that oil is driven by supply and demand, well demand must of had a couple of really bad days. This is The Matrix and nothing is as it appears and price hits like the last couple of days just destroy future supply. Oil is about .08 cents a cup right now (cheaper than water) so oil is cheap and paper money is expensive but my bet is that Ron is right and we will only see the peak as we look in the rear view mirror.

    • Dr. Don, you have just not been paying attention when people, on this list, say what they believe about what drives the price of oil. Yes, supply and demand drives the long term trend, the average price of oil over several weeks and months. A couple of days is definitely not a long term.

      Market sentiment, news stories, a collapsing stock market in China or a bad day for the Euro can most certainly affect the price of oil. And also, these things can affect the demand for oil. The demand for oil depends on the state of the economy.

      You just cannot look at a two day price swing, or an even longer price swing, and say “supply or demand had nothing to do with that”.

      Here is an example I often use. Consider a water skier being pulled by a boat. The skier can swing far and wide of the boat, first to the left then to the right but in the long run, he must follow the boat. The boat is like supply and demand but the wide swings depend entirely on the sentiment of the skier, or the sentiment of the market, whichever the case may be.

      • Dr. Don says:

        I get it Ron but you underestimate the power of the repeal of Glass-Steagall and the control that banks and the fed have over the price of everything. You don’t have to agree with me you will see for yourself at some point. It took me a lot of years to understand how corrupt markets are and you will learn the same lesson at some point. Gibson’s Paradox rules until it ruins America and we are pretty close.

        • Nurse Jackie says:

          Dr. Don,

          “Oil is about .08 cents a cup right now (cheaper than water) so oil is cheap”

          Water sells for a few hundred dollars an acre foot. It is just ignorant to be comparing the price of unrefined oil delivered by a supertanker to a half liter bottle of drinking water sold at the supermarket.

          “money is expensive”

          Only if you are unskilled, uneducated or have poor history of management with money. Interest rates have been at record lows for 6 years here in America with Europe and Asia currently lowering theirs.

          “This is The Matrix and nothing is as it appears”

          The facts are real. The way you analyzed them needs work. The next time you look in the rear view mirror. It would be best you take a long hard look at yourself.

      • Watcher says:

        BTW, does the price of a dollar vary with supply and demand?

        And I don’t mean priced in Euros or Pounds or Yen. Or even in ounces of gold or barrels of oil.

        Price it in dollars.

        • Dennis Coyne says:

          Hi Watcher,

          Usually people do not “buy” US dollars with US dollars, maybe you do.

          Supply and demand for dollars usually would be in terms of another currency.

          Otherwise, what the “price” is that you are talking about is not clear at all.

        • Watcher, when you, or anyone, speaks of price they are talking about what something cost in a given currency. Dollars are a currency and therefore are the “price” in the “price is determined by supply and demand” equation.

          So it makes little sense to speak of the “price” of dollars. It does make sense to speak of the “value” of the dollar versus another currency. Right now the dollar is worth .91 Euros. Or to put that another way, one Euro is worth 1.10 dollars.

          Euros per Dollar

          The long term trend in the value of any currency, or the Dollar versus the Euro, is the rate of inflation or deflation of the Dollar versus the inflation or deflation of the Euro. However short term swings in the Dollar versus the Euro are based on the sentiment of the market just like anything else. If there are massive buying or selling of either currency on the FOREX, that can cause in a sudden rise or fall in either currency.

          • Watcher says:

            You guys need to go think carefully about the price of a dollar.

            It is priced, for example, (1 + marginal tax rate), and is measured in dollars. Or better, it is priced $$ * ((1 + prevailing interest rate) – ($$ * risk adjusted premium), and of course that is measured in dollars.

            And btw how do you measure the NPV of an annuity flow if that flow can be changed at any time to any amount per day? It’s all measured in dollars.

  7. shallow sand says:

    If there is a major US stock market correction this year, where do we think US independents’ share prices will be? Most are at or nearing 52 week lows.

    Emerald is down to 17 cents pre 1/20 reverse split.
    Sandridge is down to 76 cents.
    Halcon is down to 1.05.
    Goodrich is 1.20.
    Samson is 19 cents.

    The supposed financially strong are all down. XOM hit a 52 week low. COP did too. Whiting nearing multi year low. CLR same. EOG the same. On and on.

    My point, are banks really going to continue with the charade when the shorts go after the equity of these companies. Every one I mention above is still drilling as I type this, all but maybe XOM with borrowed money. COP will soon be looking at either issuing more debt or cutting the dividend.

    Had an online discussion with a contributor on seeking alpha. Kind of reminds me of coffee. Very big talk about new tech, big IP’s, etc. Also like coffee, seems like a heck of a nice guy, willing to listen to a naysayer like me.

    He says he has access to a lot of Bakken data and that most places need $80+ to break even. Only in a few core places does $60 oil and $3 gas work in the Bakken.

    Well, now producers are at about $41-43 oil and $2.50 gas in the Bakken. They were just $31 and change per BOE first quarter.

    Unless every well you drill is QEP in Grail or EOG in Parshall, you are losing money. So almost all of the wells completed in the Bakken since about September are flat out underwater and will be losers if we stay here through 2016.

    So, therefore, US production just has to fall. Same in Canada.

    Maybe gulf OPEC can raise production to offset North America? I don’t think anyone else can.

    I think Ron is on the money.

    • Dennis Coyne says:

      Hi Shallow sand,

      In June, 192 new oil wells were added to the oil schedule in the Eagle Ford according to the RRC:

      http://www.rrc.state.tx.us/oil-gas/major-oil-gas-formations/eagle-ford-shale/

      See the graphic on the right, last month’s graphic had 8448 oil wells on schedule.

      We don’t get this kind of information for the Permian basin, but I can do a quick estimate of Permian output based on Dean’s estimates at some point, eventually things have to slow down, it is not clear when this begins, maybe in July.

  8. A. Yeats says:

    What do the points shown as ‘Data’ on the ‘World Extra Heavy Oil Model URR = 600 Gb’ mean – they go to 2030 so can’t be actual measurements?

    With the recent announcement of $100 billion (plus) cuts by PetroBras I’ve seen about $500 billion total cuts announced since late 2104 (starting about with the Voyageur upgrader). Some of this might be double dipping and some gas, but this is going to hit production pretty hard over the next five to ten years, most noticeably maybe on Canadian heavy oil – a few developments have recently come on line but I think maybe only one major on e (Fort Hills?) is still under development. Therefore irrespective of the URR I think we will get a local maximum this year, and possibly a quick drop in supply before 2020 (although recognizing that the tight oil plays may be able to wind up quicker than conventional projects if they have the right oil price, and supply of funding and resources).

    I don’t know what URR we will get and general global warming concerns and/or early social collapse in some areas (e.g. where is KSA going) might impact the number as much as geology and technology, but I doubt there will be nice smooth curves like those given (might look a bit more like the roller coaster in the 80’s).

    People criticize the Hubble curve but I think more impressive than his prediction of peaking was how he explained what influences would change his predictions (e.g. by explicitly excluding tight oil and tar sands from the analyses and predicting how environmental concerns and creations of cartels such as OPEC would tend to flatten the curve and fatten the tail).

    • The global warming issue will have to be revisited using a properly documented and reviewed fossil fuel resource range. There’s a need for large nations to create a task force to study the subject and deliver a resource distribution. These distributions can be used to run emissions models which include appropriate climate feed backs. The emissions from these integrated assessment models should be fed into climate models with a range of climate sensitivities, which in turn can be used to prepare improved climate change projections.

      This work flow is a no brainer, but it isn’t being used. Instead we are seeing the UN use a really crappy projection using an oil production curve that peaks at 160+ MMOPD in 2070 or thereabouts. This exaggerated (and unsupported) oil production forecast is what the turkeys in the IPCC say is “business as usual”.

      • denns coyne says:

        Hi Fernando,

        There are cornucopians that take those forecasts seriously, I agree that the RCP8.5 scenario is not realistic, it is probably in there for the cornucopian crowd, note that that view is fairly mainstream so it is not surprising that it would be one of the cases considered. The RCP6.0 case is more realistic and there is plenty to worry about based on that scenario, if the mean estimate by the climate experts on equilibrium climate sensitivity is correct (3C for a doubling of atmospheric CO2).

        • Dennis, rcp8.5 is there to drive climate hysteria. They never even discussed fossil fuel resources or feasible extraction rates when the forcing was selected.

          Whether other cases should make us worry is water under the bridge. I’d rather see studies done from the ground up with a well documented section on fossil fuel resources. I guess you do realize this will lead to more transparency on OPEC reserves (which I believe are high).

          • Dennis Coyne says:

            Hi Fernando,

            I have never looked at it in great detail, perhaps they think the resources will come from kerogen or gas to liquids or coal to liquids, it all depends how one defines “oil”, is it only petroleum or all liquids.?

            I agree with you that the RCP8.5 scenario does not make sense, but Leo Maugeri, Michael Lynch, and Daniel Yergin might argue that the RCP8.5 is reasonable, I think they are wrong.

            • Dennis, the subject was never considered. Please recall the forcing was picked by a committee. The committee had forcings from the literature picked by an anonymous committee member. The forcings were spotted in a graph, they eyeballed the forcings, and picked four forcings.

              Each of the four forcings was delivered to four different teams with a request to prepare emissions forecasts which yielded the desired forcing. The team preparing the 8.5 forcing case had to assume an extremely high oil production forecast (they had other unreal inputs, but let’s limit the discussion to oil).

              I looked over RCP8.5 in detail, but if you propose 6.0 I would need to spend several weeks staring at that study. You see, one technique they use to jack up forcing is to introduce a lot of methane and other gases. These are usually ignored in the debates, but they jack up the temperatures.

              As you can imagine, once I saw the way this was done I had a cow. It convinced me the IPCC was doing very unreliable work. And that’s why I decided to dig as far down into everything they do. I don’t think they can be trusted.

              • Boomer II says:

                You keep pointing out the flaws in the climate discussions as if anything is actually happening because of the climate discussions.

                Few, if any, lifestyle changes have resulted so far. More than likely, whatever changes that will happen for energy generation, energy distribution, and energy use will happen because of economics.

                If the CO2 arguments were having a huge impact right now, there would be more discussion of nuclear power. But one reason nuclear power isn’t moving faster is because of cost. When you have gas-fired plants being favored over nuclear plants, you can see that CO2 arguments haven’t transformed the world yet.

                I believe you have said that you think peak oil will become a factor before climate change. So I think it is logical for countries to be thinking about how to wean themselves off of fossil fuels anyway.

                Seems to me you are fighting a fight and I’m not sure what your concern is. And you see Communist everywhere, but I’ve been hearing about the “communist threat” since the 1950s. So what else is new?

                For all its apparent relevance to me, you could be talking about Satan taking over the world. I just don’t see what concerns you as being a concern for me.

                Resources are being depleted. That’s really happening and people do need to address that sooner or later no matter what happens with climate.

                • Dennis Coyne says:

                  Hi Boomer II,

                  I think Fernando thinks that peak fossil fuels will mean that AGW is not a problem and that we should focus on energy issues and not be distracted by AGW, I think he is likely to be incorrect.

                  I agree that it doesn’t really matter much and that a focus on energy constraints may solve both problems anyway. Knowledge of AGW has done little to change behavior, high fossil fuel prices are more likely to have an impact.

                  • Boomer II says:

                    I think Fernando thinks that peak fossil fuels will mean that AGW is not a problem and that we should focus on energy issues and not be distracted by AGW, I think he is likely to be incorrect.

                    But I’m one of those who is focusing on energy issues and not paying too much attention to AGW.

                    Here’s my thinking. I have no reason to doubt the science and the warnings, so I am not suspicious of them. But telling me to change my behavior now for something off in the future is not motivating to me, who believes the data.

                    However, I have changed my behavior to use less fossil fuel for the following reasons:

                    1. Pollution. I don’t want bad air.

                    2. Environmental damage. I don’t want drilling in certain parts of the world.

                    3. Economics. Once gas hit $4 a gallon, I greatly curtailed my driving and I continue to do so even though the price has come down.

                    4. National defense. I don’t want to fight more wars in pursuit of oil.

                    I just don’t see the point of Fernando’s arguments because I think there are other reasons for us to change how we generate, distribute, and use energy. As I said, his arguments are as pointless to me as telling me Satan is planning on taking over the world.

                • I’m interested in seeing the results of a study done with a bit more honesty by a properly staffed organization.

                  I realize the climate models are clunky, they need lots of improvements, etc. But they are what we got. And I can’t stand seeing the crap they get fed.

                  • Boomer II says:

                    You have suggested the data has been manipulated or is inaccurate for political reasons.

                    But I don’t see the connection. What would be accomplished? If there is some sort of intentional plan by scientists or “communists” to take over something, why on Earth bother with climate change data? There are far easier ways to hoodwink the public. And to what end?

                    Communists and conspiracy theories just don’t impress or convince me.

            • ezrydermike says:

              RCP 8.5—A scenario of comparatively high greenhouse gas emissions
              Keywan Riahi, Shilpa Rao, Volker Krey, Cheolhung Cho, Vadim Chirkov, Guenther Fischer, Georg Kindermann, Nebojsa Nakicenovic, Peter Rafaj

              http://link.springer.com/article/10.1007/s10584-011-0149-y/fulltext.html

        • ezrydermike says:

          IPCC SPECIAL REPORT
          EMISSIONS SCENARIOS

          http://www.ipcc.ch/pdf/special-reports/spm/sres-en.pdf

          • This link is obsolete. You need to focus on the rcps. The srs are old, they don’t get used.

          • ezrydermike says:

            The Beginner’s Guide to Representative Concentration Pathways

            By G. P. Wayne

            http://www.skepticalscience.com/rcp.php

          • ezrydermike says:

            IPCC 5th Assessment Report

            https://www.ipcc.ch/report/ar5/

          • ezrydermike says:

            This Synthesis Report is based on the reports of the three Working Groups of the Intergovernmental Panel on Climate Change (IPCC), including relevant Special Reports. It provides an integrated view of climate change as the final part of the IPCC’s Fifth Assessment Report (AR5).

            https://www.ipcc.ch/pdf/assessment-report/ar5/syr/AR5_SYR_FINAL_SPM.pdf

          • Here’s a quote from your earlier link:

            “Fossil fuel technologies remain thus economically more attractive in RCP8.5. Secondly, availability of large amounts of unconventional fossil resources extends the use of fossil fuels beyond presently extractable reserves (BP 2010). The cumulative extraction of unconventional fossil resources lies, however, within the upper bounds of theoretically extractable occurrences from the literature (Rogner 1997; BGR 2009; WEC 2007).”

            They assume coal production increases 10 fold, oil production goes up to 160+ million BOPD, and then Jack in very high methane emissions to juice up the model so it can achieve the very high forcing requested by the IPCC.

            When I look over their products I see very little effort to understand fossil fuel extraction economics. They assume oil prices double in real terms, and limit renewables because they have to be limited to achieve the target.

            The key is to understand they didn’t really model what they thought was a coherent outcome. They modeled a bizarre world where population increases to 12 billion, the atmosphere is full of methane and CO2, sea level rises, land temperatures increase at very steep rates, drought and extreme weather become the norm, but the world economy keeps on rising nicely and everybody seems to be happy.

            Hell, if you look at this model we should all be running around burning trees and driving large SUVs to make sure this future comes to pass

    • denns coyne says:

      Hi A Yeats,

      The “data” on that chart is estimated through 2014 (because Orinoco belt data is not easily available) based on the work of Jean Laherrere (I copied his estimates through 2012 and I guessed for 2013-14 for Orinoco output). From 2015 to 2030 I used the EIA’s 2014 AEO and the 2014 Canadian Association of Petroleum Producers (CAPP) forecast to estimate future output.

      The chart should be labelled “data+forecast” for the Extra Heavy Oil Chart that I created.

      Thank you for pointing this out.

      I agree that the real curves will not be smooth, think of these as general trend lines, nobody can predict the little wiggles up and down, there are an infinite number of thing that can happen to change oil output up or down. I could easily add artificial noise to make the lines wiggle up and down, but the trend is what is of interest to me.

      If output goes down due to a cut back in CAPEX, then oil prices will recover. A near term peak looks very plausible, but if oil prices recover to $85/b or higher, then output may return to current levels.

      To me an undulating plateau until 2020 +/-2 years with output +/- 2% of 78 Mb/d is the most likely scenario, after 2025 I think my “realistic” scenario is most likely but the crash could happen any time from 2020 to 2040, the choice of 2035 was arbitrary.

      • Pdvsa president Eulogio del Pino reported Orinoco oil belt (Faja) production at 1.34 mmbopd at this time.

        In 2006 I sat at a large meeting in which Eulogio was present. (He was a pdvsa vp at the time) to discuss plans to expand Orinoco production, the full system capacity at the time was roughly 800 thousand BOPD (that’s the undiluted 8 degrees API coming out of the reservoir). Seeing what went on in that meeting made it clear pdvsa lacked the personnel to manage large scale projects to increase production.

        I can’t go over the issues here, but the overall sense you should get is an organization plagued with red appointees, most of them incompetent, distracted by government requests to focus on political events and propaganda.

        I remember a separate meeting held at the operations center for Lake Maracaibo, which had to be held with open windows because the building AC didn’t work as they held a pro Chavez rally beating on drums just outside the window. The meeting ended with the pdvsa general manager insulting me, because I refused to have our company build minor facilities…. unless pdvsa submitted written documents requesting the work, and agreed to pay the budgeted costs (he thought he could beat me down into spending several million U.S. Dollars because he said so).

        I’m writing these examples to give you an idea about the anarchy, imbecility, lack of professional behavior and ignorance within pdvsa which are going to limit their ability to get much done to increase extra heavy oil production, even though the fields are world class, the climate is mild, and the only barrier to increasing production in due course is the government.

        The bolivar hit 545 to the U.S. Dollar in the black market. I keep reading reports about “Peace Zones” emerging in cities where the population is ruled by what one could call “warlords” armed with automatic weapons, grenades, and a sophisticated communication system. One of these zones is 23 de Enero, in Caracas, which has been a self ruled communist stronghold for many years. But another self administered zone is emerging at Cota 905, which overlooks downtown and adjoins 23 de Enero. In recent weeks there have been firefights with automatic weapons used within this territory. As of this week the official police and national guard have surrendered control of that zone to the warlord who has been extending his influence in the zone.

  9. Ian Cooper says:

    So basically, I will be dead before traffic is light enough that cycling on the road again becomes a viable proposition, as it was in my youth. Thanks, oil industry.

  10. Jeffrey J. Brown says:

    As I have frequently opined, the only reasonable interpretation of the global gas, natural gas liquids (NGL) and Crude + Condensate (C+C) data is that actual global crude oil production (generally defined as 45 and lower API gravity crude oil) peaked in 2005, but global gas production and associated liquids, condensate & NGL, have so far continued to increase. Based on EIA + BP data, the 2014 values on the following chart would be 124% for gas, 126% for NGL but only 105% for C+C (as a percentage of 2005 values).

  11. Jeffrey J. Brown says:

    Based on the following chart, it appears that the EIA* is estimating the US 45 API and lower crude oil production, as a percentage of US C+C production, fell from 87% in 2011 to 80% in 2014. And it appears that the EIA is estimating that US 40 API and lower crude oil production, as a percentage of US C+C production, fell from 77% in 2011 to 52% in 2014.

    If we subtract out estimated US 40+ API gravity C+C production from global C+C numbers, there was no increase in remaining global C+C production from 2011 to 2014.

    *The EIA defines “Crude oil” as C+C.

    • Jeffrey J. Brown says:

      Following is a link to an excellent article by Kurt Cobb. The following excerpt is very interesting, “For the purpose of this contract, condensates are excluded from the definition of crude petroleum.”

      Kurt Cobb:

      http://www.resilience.org/stories/2014-04-13/did-crude-oil-production-actually-peak-in-2005

      • denns coyne says:

        Hi Jeffrey,

        What is important is liquid fuel in energy terms, if we use mass to estimate the energy content of liquid fuel then liquid fuels have not peaked in terms of mass.

        http://mazamascience.com/OilExport/

        • Jeffrey J. Brown says:

          Which doesn’t alter the fact that actual global crude oil production has almost certainly peaked, while global natural gas production and associated liquids has so far continued to increase.

          In addition, condensate cannot be used to make delivery on a oil market exchange crude oil contract, it is of very little use for producing distillates, and according to Reuters US refiners are increasing rejecting “toxic” blends of heavy crude + condensate, because they are deficient in distillate content:

          http://www.reuters.com/article/2015/03/23/us-usa-refiners-trucks-analysis-idUSKBN0MJ09520150323

        • Dennis, did you add NGL to the “liquid fuel”?

          • Dennis Coyne says:

            Hi Fernando,

            If I understand your question correctly, no.

            That is in my models in the post the focus is on crude plus condensate which is the only category that we have good data on (and it is far from perfect).

            The point that I was trying to make to Jeffrey Brown was that the energy content of liquid fuel should be the focus and clearly that has not peaked based on data in BP’s Statistical Review of World Energy.

            The second point is that perhaps crude only peaked in 2005 as Mr. Brown suspects, this makes sense because the condensate is a by product of Natural Gas output and that has increased since 2005. If the condensate output per cubic meter of natural gas output were known over time we could calculate this, but as far as I know such data is unavailable. We do not know what the condensate output for the World actually is, therefore it is better to stick with crude plus condensate data, IMO.

            • Got it. Condensate and NGL are both associated with gas reservoir production, and it seems the line between the two is blurred. Sometimes it depends on the surface equipment layout.

              I know this may be a surprise, but I recall a Middle East production system which had no way to handle ethane, the gas stream could not take it, the NGL was only propane and butane, so the ethane was used as boiler fuel. It was a huge waste.

        • Jeffrey J. Brown says:

          What US and global refiners want and need are crude oils that fall somewhere on the following chart, and when we ask for the price of oil, we get the prices of crude oils with average API gravities that fall on the following chart.

        • Doug Leighton says:

          I know you (Jeff and Dennis) know this but it’s useful to keep in mind that one barrel of oil is generally deemed to have the same amount of energy content as 6,000 cubic feet of natural gas. I seem to recall reading it takes about 100,000 cubic feet of natural gas to heat an average Canadian house per year. So I agree with Dennis on at least one point: In gross energy terms, liquid fuels are the key.

          • Dennis Coyne says:

            Hi Doug,

            There is a first time for everything. 🙂

            The reason for the “liquids” focus is that that is usually what we need for transportation (at least until we transition to more electricity in rail, light rail, buses on overhead wires, and plug in hybrids and EVs).

            I realized the energy data browser has a nice feature I had missed (note the scale on the right).

    • Watcher says:

      I should start bookmarking things I know will come up again.

      I found mention maybe within the last month of condensate existing with API as high as 150.

      • Dennis Coyne says:

        Hi Watcher,

        According to this page:

        http://www.glossary.oilfield.slb.com/en/Terms/c/condensate.aspx

        The API gravity of condensate is typically 50 degrees to 120 degrees.

      • A 150 degree API condensate isn’t feasible. Let’s go over it:

        API= (141.5/specific gravity)-131.5

        (API+131.5)=141.5/sp.gr.

        Sp.Gr.=141.5/(API+131.5)=141.5/(150+131.5)=141.5/281.5=.502

        That would be a bit lighter than propane’s specific gravity if it were a liquid at standard conditions.

        I hope the above is useful.

        • Watcher says:

          Might be. I probably smushed 120 with 150 in my memory.

          Should bookmark this stuff. Or Ron, we gotta upgrade search on this blog. Could find it there.

          • A. Yeats says:

            0.5 would be the heavier end for LNG (i.e. with a good amount of ethane) – not sure if that can count as condensate though.

            • Dennis Coyne says:

              Hi A. Yeats,

              I believe Fernando was showing algebraically that an API of 150 would have a specific gravity close to that of propane, under normal atmospheric conditions propane does not condense. Basically 120 API is the upper limit of where gases will condense in most places (Alberta in January might be an exception as temperatures get to about -30 C and methane might condense) 🙂

              Most people would not call those conditions normal, typically it is about 15C and 1 standard atmosphere of pressure.

    • Dennis Coyne says:

      I found an interesting quote on Tapis Crude at the page below:

      http://www.petroleum.co.uk/benchmarks

      Tapis is often referred to as the “World’s Costliest Oil” and comes from a single field in Malaysia. Its value comes from the fact that WTI and Brent Crude are difficult and expensive to export to Asia and because it is of extremely high quality. Tapis has an API gravity of 45.2 degrees and a sulfur content of 0.0343%. These are exceptional numbers, indicating that Tapis is very light and very sweet. Unfortunately, output from the Tapis field has been falling steadily since 1998.

      Bold added by me.

      Based on this information, it is not clear why we would consider liquids above an API of 40 as not being “crude oil”, it seems an API of 45 would make more sense as the cut line between crude and condensate.

      • Jeffrey J. Brown says:

        . . . it seems an API of 45 would make more sense as the cut line between crude and condensate.

        I agree, and an excerpt from my comment up the thread:

        As I have frequently opined, the only reasonable interpretation of the global gas, natural gas liquids (NGL) and Crude + Condensate (C+C) data is that actual global crude oil production (generally defined as 45 and lower API gravity crude oil) peaked in 2005

        But distillate yield starts dropping off over an API gravity of 40 or so , and as noted above what US and global refineries want and need is primarily a feedstock of 40 API and lower crude oil.

        I suspect that late last year US refiners hit the limit of how much very light crude (40 to 45) and condensate (45-120) that they could take, if they wanted to maintain their distillate output.

        • Dennis Coyne says:

          Hi Jeffrey,

          You say different things in different places, the implication was that we should treat everything above 40 API as condensate, for example you say:

          If we subtract out estimated US 40+ API gravity C+C production from global C+C numbers, there was no increase in remaining global C+C production from 2011 to 2014.

          My question is why would we do that, rather than subtract out US 45+ API gravity C+C production? Using 40+ does not make sense, this is very high quality crude that can be exported to Mexico or Canada if the US refineries cannot handle it. I believe the problem is with the API 50+ condensate being too plentiful, this can be lightly processed and then exported.

          • Jeffrey J. Brown says:

            Where did I say that the Crude/Condensate cutoff was 40?

            My point is that just going from 39 API to 42 API, the distillate yield + cat feed goes from about 56% to 20%, and as an illustration of where the supply growth has been, if we exclude US very light crude and condensate production (40 API plus), the entire remaining supply of global C+C production did not increase from 2011 to 2014.

            And incidentally, where did I say that China & India’s rate of increase in oil consumption would stay the same as 2005 t0 2013?

            • Dennis Coyne says:

              Hi Jeffrey,

              You said in the quote that I gave that we should only count the liquids that are 40 and below as crude,

              You said (bold added by me):

              “If we subtract out estimated US 40+ API gravity C+C production from global C+C numbers, there was no increase in remaining global C+C production from 2011 to 2014.”

              This was in order to argue that crude oil had peaked in 2005 and that all increases in C+C since that time were merely increases in condensate output, clearly the implication is that we should only count as crude API 40 or less as crude.

              You say one thing and then imply that there is something special about crude between 40 and 45 API that we should not count it as part of the increase in global crude output.

              The fact is that these super light crudes are very easy to refine and trade at a premium, so not counting them makes very little sense to me.

              The problem with your available net exports category is the implication the somehow China and India are immune from a decline in net exports.

              You are correct that you have never said that the rate of increase of oil consumption in China and India will never change.

              Your best case scenario is that their oil consumption remains constant. I submit that your GNE/CNI is unlikely to reach 1.0 in 2030 as you show on your famous chart. As this ratio (GNE/CNI) approaches one, it is unlikely that the oil consumption of China and India will remain constant.

              As in most things the amount of oil that every oil importing country consumes will be determined by supply and demand for oil.

              If I understand the GNE/CNI concept correctly, this would mean that in 2030 all global net exports will go to China and/or India.

              Is that correct? Does that seem like a realistic scenario to you?

  12. Karen Fremerman says:

    Thank you Jeffrey for all the explanations. There are so many ways of looking at this but you cut right through all the details and get to really ultimately the only thing that matters – Oil for cars, trucks, ships and airplanes. Without that our world slows down. Aside from what the main stream media wants us to think, we have been on the undulating plateau since 2005 for C+C and no amount of ‘other liquids’ will change that fact. One week of reading on this site has cleared my head! Thank you Ron, Jeffery and all the other commenters!

    • Dennis Coyne says:

      Hi Karen,

      C+C output has increased by about 4 Mb/d since 2005, about a 5% increase. There was a plateau at an average output of about 73.8 Mb/d over the 2005 to 2011 period. So if we consider the plateau to be done at the end of 2011 there has been a 5% increase over the 2012 to 2014 period or about a 1.6%/year increase in C+C output over that 3 year period. For the entire 2005 to 2014 period the C+C increases have been very small at only 0.5% per year. For total liquids in millions of tonnes of oil equivalent the increase over the 2005 to 2014 period was 7.5% or 0.8% per year.

      Basically you are correct that output has been pretty flat. If we use a zero scale chart this is more apparent.

      • Dennis Coyne says:

        It occurred to me that the “realistic” scenario from my post could be included in the chart above with a line indicating the 2005 to 2011 plateau. Output of C+C remains above the plateau until 2029.

    • Watcher says:

      Without that the world slows down?

      Without that you die. In a few days.

      • Dennis Coyne says:

        What are you talking about Watcher?

        • Watcher says:

          Thank you Jeffrey for all the explanations. There are so many ways of looking at this but you cut right through all the details and get to really ultimately the only thing that matters – Oil for cars, trucks, ships and airplanes. Without that our world slows down.

          Clicked reply, this is where it wound up.

          • Dennis Coyne says:

            Hi Watcher,

            Got it, I think she meant with less of it rather than without it, you are correct without any liquid fuel, things do more than just slow down in the short term, eventually we will have to get by with less (where we is humans on planet earth).

  13. AlexS says:

    China’s oil production is still rising, adding to global supply glut

    CNOOC’s new output to lift China’s oil production from 2014 record

    Jul 6, 2015
    http://www.reuters.com/article/2015/07/07/us-china-oil-output-idUSKCN0PH04G20150707

    China’s crude oil output looks set to rise this year from a record in 2014 as new production from third largest producer CNOOC helps to counter reductions from its two bigger rivals.
    Output growth from China would add to a global glut even as exporters such as the Organization of the Petroleum Exporting Countries (OPEC) and Russia produce at near record highs and U.S. shale producers keep ramping up output.
    With the global oversupply as much as 2.6 million barrels per day (bpd), international crude prices have been nearly cut in half over the past year.
    While there is no official Chinese production outlook, information from the biggest state oil companies indicates the nation’s output will rise slightly in 2015, largely due to increased production from CNOOC Ltd.
    Despite recent cost cuts, CNOOC has said it has already added at least 40,000 bpd of crude output this year. And it aims to increase daily domestic oil and gas output in China by at least 135,000 barrels of oil equivalent by the end of 2015, according the company’s 2015 outlook.
    China, the world’s fourth biggest oil producer, raised its output in the first five months of this year by 1.8 percent from a year ago to 4.25 million bpd, compared with growth of just 0.1 percent over the same period in 2014.
    In 2014, China produced an annual record 4.2 million bpd.
    “I think Chinese crude output is going to maintain its current levels … and go higher before the end of the year,” said Priya Narain Balchandani, director of global research for Standard Chartered.
    The bank expects China’s production to rise 1.6 percent this year, although growth could stall or decline in 2016.
    Other analysts, including one that had forecast a decline for this year, said they are going to revise their production outlooks for China upwards.
    Combined output from CNOOC and smaller producers was up 16 percent from a year ago by end-April, according to a biweekly report from the official Xinhua news agency.
    China’s two largest producers, PetroChina and Sinopec Corp, have both announced cuts.
    PetroChina plans to shrink its worldwide output by 1.5-1.6 percent in 2015 – about 40,000 bpd – with more than 70 percent of the cuts to come in China.
    Sinopec’s output in China is set to fall 30,000 bpd, or about 3.5 percent, to around 820,000 bpd this year, according to its annual report.

    • Watcher says:

      Doesn’t really deserve the splash, unless destruction of shale as an agenda has spread past Russia and KSA. The mazama chart shows the difference in consumption vs production slope. It’s not even close, and the production ramp is pretty darn shallow by itself.

      Anddddd this is a bunch of guys who goal seek from the time their eyes open in the morning til they close at night. It’s EASY to get more oil production with redefinition and reclassification of API.

  14. shallow sand says:

    Ed Morse of Citi on Bloomberg this morning. Said in five years the US will be the largest hydrocarbon exporter in the world.

    Also said that US oil production will continue to grow because extraction costs are rapidly coming down. Cited reports from EOG and PXD that in one year dropped the cost of 50% IRR on wells from $90 to $65.

    Not saying I agree, just reporting what I heard.

    • Jeffrey J. Brown says:

      Re: Mr. Morse

      I don’t know about coal, but last year the US was still a net natural gas importer, and based on the most recent four week running average data, the EIA shows net total liquids imports of 5.1 MMBPD.

      In regard to gas, let’s assume that the US is self sufficient in natural gas production over the next five years. Using a 24%/year decline rate from existing production, in order to maintain about 75 BCF/day (roughly current US consumption) for five years, the US would have to put on line about 90 BCF/day of new production over the next five years. In round numbers, we would have to put on line the virtually the productive equivalent of Canada +Mexico’s gas production every single year.

      Saudi net exports of total petroleum liquids were about 8.4 MMBPD last year.

      Let’s assume that the target for the US, to become the world’s largest energy exporter, is to hit 10 MMBPD net liquids exports in 10 years, while being self-sufficient in gas.

      Assuming that liquids production from existing US wells is declining at about 20%/year, we would have to offset declines plus add a net 3.0 MMBPD or so of new liquids per year, in order to become self-sufficient and to hit net exports of 10 MMBPD in 10 years.

      US total petroleum liquids + other liquids was about 13 MMBPD in 2014.

      So, going forward, we would need (to offset declines + add new production) 2.6 + 3, then 3.2 + 3, then 3.8 + 3, then 4.4 + 3, then 5.6 + 3. So, in total we would need around 35 MMBPD of new liquids production over the next five years, in order to offset declines from existing wells and add a net new 15 MMBPD. In five years, we would be producing 28 MMBPD.

      Based on foregoing, it seems to me we need to put on line, over the next five years, the productive equivalent of the gas production of five Canadas and five Mexicos, and the productive equivalent of the total petroleum liquids production of three Saudi Arabias.

    • Maybe Mr Ed thinks a cubic foot of gas is equal to one cubic foot of oil?

  15. Karen Fremerman says:

    Thanks Dennis for that chart.
    I am curious what you all think about the possibility of a steeper decline curve? I am very obviously a lay person but it seems like drilling in older fields now is done with multiple straws from one well. (As opposed to how drilling was done with one straw/drill bit in one well in the past). Wouldn’t that change the rate of depletion? Wouldn’t that mean that declines will be more steep?

    • Karen, it depends. Old reservoirs usually have much less energy to drive the oil out, or the remaining oil clings more to the rocks, and this requires more energy to drive it towards the producing wells.

      The statement above is a giant oversimplification. Now we have to factor human behavior and economics. What evolves over time is a limit on the number of wells we can afford to drill, and/or the size of the surface equipment we install. And this leads to an interesting result: in most cases the mature field decline rate seems to land in the 5 to 10 % range. This happens to be a result of what we do (it’s not “natural”). We CAN accelerate the decline rate by drilling more wells, injecting more water, more chemicals, more steam, whatever. But when we run economics we face a wall and most of us don’t try to get around it.

      Deep water developments have steeper declines, driven by well cost and the overall economic environment (we simply fail to develop deep water reservoirs which produce at “low” oil rates and will have gentler decline rates, because the economics don’t work).

      So in general the decline rates we see in mature fields today should apply in the future. There won’t be that much incentive to accelerate production if the oil price is supposed to increase.

      • Dennis Coyne says:

        Hi Karen,

        In case you are not already aware, Fernando knows his stuff, so his guess on matters of oil production are far more educated than my own.

        I learn much from his comments on the oil industry. Thanks Fernando.

    • Dennis Coyne says:

      Hi Karen,

      If we assume there are no severe economic shocks (severe financial crisis) or World Wars or a major War in the Middle East that shuts down oil supplies fro Saudi Arabia, Iraq, Iran, and Kuwait, then no I expect that if the World C+C URR is 3400 Gb (Gb=billion barrels) the decline rates will not be steep.

      New reserves are constantly being developed world wide and as long as new wells continue to be drilled and the extraction rate from producing reserves remains high decline rates will stay under 1% until 2040 and under 2% until 2100. I expect oil prices will rise to $150/b by 2020 (in 2015 $) and the World economy will begin to move away from oil for transport, using more EVs, rail, light rail, busses, and plug in hybrids. Such a transition will not be easy and will eventually lead to a depression within 15 years of the peak in oil output. That is my guess, and that is all it is.

  16. AlexS says:

    World total liquids supply by type (mb/d)
    Sources: EIA, CAPP

    • AlexS says:

      World C+C supply, 2005-2014 (mb/d)

      • AlexS says:

        World C+C production, less US light oil, 2011-14 (mb/d)
        Source: EIA

        • Dennis Coyne says:

          Note that generally condensate is considered the stuff above 50 API and that crude with an API of 45 is considered a “premium” crude, as in Tapis crude being the most expensive oil per barrel in the World.

          • AlexS says:

            Exactly. Which means that even excluding US condensate and ultra-light oil (API 45-50) global C+C production has not yet peaked.
            Conventional production, though, has indeed peaked in 2005

            • Dennis Coyne says:

              Hi AlexS,

              Yes it all depends how we define conventional, if we exclude deep water off shore and polar oil we could probably get an even earlier peak. I think it is simpler to just look at C+C as Ron Patterson does. Looking at total liquids the barrels need to be converted to their energy content.

              • AlexS says:

                Dennis,

                I define conventional as C+C, excluding tight oil and oil sands. Deep water offshore and Arctic oil are conventional reservoirs, although are difficult and costly to extract and located in remote areas

                • Dennis Coyne says:

                  Hi AlexS,

                  Based on what some people have told me the LTO is not much different from the Austin chalk, some would lump it in with conventional oil, but if you want an earlier peak, you can call it unconventional.

                  I classify by API gravity, less than 10 I call extra heavy and leave it at that, following the example of Jean Laherrere.

                  • coffeeguyzz says:

                    Dennis/Alex

                    You gentlemen may have unknowingly broached a topic that could loom large in the near term regarding conventional/unconventional designations in hydrocarbon production.

                    A July 30, 2014 article by Stephan Tramell on the IHS site described the growing receptivity for operators to apply unconventional techniques (long horizontals, multistage frac’ing) to ‘not so tight’ formations … the multi stacked Powder River Basin being a case in focus.

                    The methodical approach being taken by the Operators Group up there bodes well for both output as well as positive economics.

                  • Mike says:

                    Coffee, I give that a 5.5.

                    Horizontal drilling is 40 years old or more. So is stage frac’ing in vertical wells. We called them Pine Island fracs back then, after Pine Island, LA. Horizontal drilling has been attempted in numerous types of reservoirs for a long time, even clastic sandstones along the Gulf Coast. Whatever they think they are doing new in Wyoming has already been done.

                    I don’t mean to get on ya’ but I am determined to keep a proper historical perspective on my industry here. People are already messed up in the head for the crap they are getting fed. All this technology BS on the internet the unconventional shale boys think then “invented” is starting to upset me a great deal. It takes away from all the innovative, ground breaking work that millions of good men before me have already done. We thought of most of that stuff, and tried to make it work, at 12 dollar oil prices.

                    Now the shale industry wants to take credit for it. Essentially because they had 100 dollar oil for 4 years to work with. It’s damn plagiarism is what it is. You of all people should know that.

                    Tell your beloved shale industry they are a bunch of weenie necks, please, sir.

                    Mike

                  • coffeeguyzz says:

                    Mike

                    I figured as I was typing in the above post on my ‘stupid phone’ that presenting both horizontal drilling and multi stage frac’ing as unconventional processes would/could be called into question, so be it.
                    I got into a couple of back-and-forths with Rockman about this, as well as only high price would enable the continuation of shale development. Just NPT for me in a big way for so many reasons …
                    Sure, horizontals were getting underway in select areas in the early ’90s (Oryx?), but to put a 4 inch drill bit up a constipated gnat’s ass two miles down and two miles away in two to three weeks time, half that time in the shallower wells, like they do routinely now is a degree of change that is paradigm shifting.
                    The 87 stage Frac done in 85 hours by Devon in the PRB a few weeks back – one trip, BTW – bears so little resemblance to the historical fracs of yesteryear as needing to be recognized for what they are … evolutionary changes of huge, self perpetuating magnitude … to say nothing about the proppant particulars.

                    I’ll pass on to Harold, next time we meet, the weenie neck observation. Chances are, Mr. Roughneck, a chuckle may emerge ( I laughed. You got a good way of expressing stuff).
                    This would be a recognition of the eternal ‘passing of the torch’, through all times, places, arenas of human endeavor.
                    Back when you were little more than a gleam in your daddy’s eye, Mike, OFT were proud to boast of the ‘good old days’ when the rigs were made of wood and the men of steel.

                    Stay safe, Mike.

                    Gerard

    • Dennis Coyne says:

      I prefer to look at total liquids in terms of mass which reflects their energy content better.

      The chart below compares energy in millions of barrels of oil equivalent (Mboe) with the volume of liquids.

      Why are these different?

      NGL and ethanol contain 60 to 70% of the energy per barrel as a barrel of crude. I do not think AlexS’s chart takes this into account and simply reports volumes of liquids.

  17. A. Yeats says:

    This relates more to the previous post concerning global warming. This year appears to be shaping up a bit differently than previous years in the Arctic and Greenland. Greenland melting started slowly because there were strong easterly through May, but is now going at close to 2012 record highs – and the reason may be similar, smoke from wildfires (this year in Alaska and Canada, but in 2012 from Siberia) has settled out and lowered the Albedo by up to 10% over the whole area:

    http://polarportal.dk/en/groenlands-indlandsis/nbsp/isens-overflade/

    In the Arctic the ice extent has held up well but there appears to be in-situ melting over the whole ice surface compared to previous years where melting has been mainly at the edges and sea ice has also been lost to outflow through the Fram strait. The conditions are very calm so the ice is not being compressed meaning the concentration (area / extent) is getting lower and there are many melt pools which have low albedo. There is very little multi-year (thick) ice left. The next two weeks are supposed to be extremely warm (over 35 degrees Celsius in parts of Siberia) and with high pressure leading to clear skies. I haven’t seen any comments on the Arctic ice albedo being affected by the fires but maybe the smoke is having a similar effect there as in Greenland. It’s therefore possible there will be a dramatic collapse of the ice area in the near future (as this is a previously unseen condition this is just supposition but maybe worth keeping an eye on).

    http://neven1.typepad.com/blog/2015/07/asi-2015-update-4-massive-heat.html#more

    • Ronald Walter says:

      More fresh water for beer, Greenland should build a brewery and/or ship the fresh glacial melt-water to breweries across America and Europe, none to Canada, they can’t make beer.

      The waste of fresh water emptying into the north Atlantic from Greenland glaciers is unconscionable.

      More beer, less oil.

      The electricity market is more stable and the beer market continues to grow.

      The oil market can stay ebbed and go even lower, more disposable income for more beer.

      More fresh water from Greenland is desirable, it can make more beer.

      Less use of oil is even more desirable. The Chinese will see the light and come to their senses. They’ll brew more beer.

      Give TSINGTAO Brewing Company the water from the Three Gorges Dam.

      Less oil, more beer.

      No such thing as Peak Beer.

      10,000 gigabarrels of beer is the way to go. There is no beer in heaven.

      The potato bugs have yet to reach Peak Procreation and their numbers are dwindling fast, the irrepressible force met the immovable object.

      Global Warming is a win win, more fresh water, more beer.

      You have to look on the bright side, accentuate the positive, attenuate the negative.

      Use less oil, drink more beer.

      It’ll make you happy.

      • MarbleZepplin says:

        Ron W.
        Why waste all that protein, cook up the potato bugs. Potato bug pie sounds delicious.

        Ever try planting trap crops in and around your potatoes to keep the infestation limited?

        • Ronald Walter says:

          That would include egg plant and tobacco, and I have tried both, but it doesn’t work. Just provides more room for the overcrowded conditions where the potatoes are.

          They like to eat and the appetite those potato bugs have is insatiable.

          Therefore, ergo, they must also endure massive reduction in numbers.

          I am considering a new invention, a potato bug sweeper, that is powered by batteries and has the capability to harvest potato bugs non-stop. It will free me of the dreaded drudgery of the work of controlling potato bugs.

          It might cost an arm and a leg to build it, but it is probably worth it.

          I do have a nice stand of tobacco plants that the potato bugs never touch. After I harvest the tobacco, I’ll use the best leaves for the cured tobacco. Might as well make good use of the tobacco, make some nicotinamide.

          • Cracker says:

            Ronald, et al

            Forget the pie, just kill the potato beetle larvae. Potatoes are better.

            I’ve found that potato beetles seem to be killed at the larval stage by the organic control I use for caterpillars. It is called BT (Bacillus thurengiensis, in italics) or Thuricide, a brand name.

            I only use it as a last resort when the lizards, birds, and I can’t pick enough to keep the caterpillars under control. When it looks like I’ll probably lose it all, I spray with BT. It only works until the next heavy rain, but it kills our problem caterpillars, and larval (before they make a hard shell) potato beetles within hours!

            I use it very sparingly, usually only once or twice in late spring or summer, as I don’t want the bugs to have many chances to develop resistance (seems to be 100% effective, for now). For small gardens, make a small batch in a hand sprayer for spot treatments as plant damage shows up where caterpillar or potato beetle eggs have hatched.

            BT was an important factor in allowing the garden to produce some delicious potatoes this year in central Florida, and cabbage, cucumbers, spinach, and tomatoes. My wonderful wife deserves most of the credit. I just provide the know how and a little help.

            Jim

    • I bet €100 sea ice extent fails to go below the minimum observed in 2012.

      • MarbleZepplin says:

        Sea ice extent means only 15% ice surface in a given area, rest is exposed water.
        I would go for a mass measurement, specify the region and the year. Much better measurement.

        The lake I live near can be totally covered by ice only a half inch thick. It can also be covered with ice over one foot thick. Ice extent even if it means full coverage is a very poor measurement of the energy exchange. The fact that ice extent means only 15% coverage makes it a very poor measure.

        • I bet ice volume doesn’t break a minimum this year. And I bet Antarctic ice extent will be one of the top five in the last 20 years.

          • MarbleZepplin says:

            Sure it will break a minimum, just probably not the lowest minimum. I get your point. The minima must proceed in an orderly fashion one following the next as if there were no natural variation in the system. That is the condition you require for global warming to be valid. Of course that is only a condition in your own mind and has little to do with science or the way things actually operate.

            • You are right. I should have written the record minimum won’t be broken this year. Anyhow, those articles about Greenland are hype. The 2012 record is safe. Neven at typepad is showing a lot of anxiety ever since the 2012 record failed to be broken in 2013, 2014, and now 2015.

              By the way, did you read the recent paper about a NEGATIVE greenhouse gas effect over Antarctica? It seems they have found one mechanism which works to cool Antarctica, and partially induces the increasing ice extent and cooler temperatures observed south of 60 S latitude. This planet’s climate sure gets complicated.

              • MarbleZepplin says:

                Now don’t get over-excited on this one. The cold deep thermohaline currents from the arctic region surface below 60 degree south diffusely in the Antarctic Circumpolar Current. That makes things a bit cooler there. Combine that with the lack of land surface and things will be different in the southern hemisphere than the north. A lot less pollution too.

                Sea ice extent near Antarctica should be increasing since the ice is leaving the land. More ice cubes in the water, eehhh? The real mass to watch is the the land based glaciers and the ice shelves. When they break off you can really say the sea ice extent has increased. :-}
                Global warming makes everybody right, in some way or other.
                Again Fernando, there is a natural variability to the system. While the northwest coast, Alaska and the central Arctic are getting heated the jet stream is lately carrying that now chilled air south to northern Greenland so Greenland won’t melt as much this year. Local variations are fun to watch.

                • I don’t think you get it. They have identified a negative GHG effect operating over Antarctica. As co2 increases the outgoing long wave radiation is increasing beyond what would have been expected.

                  Most of your comment happens to be wrong. Observations show temperatures are dropping, but not because “ice is leaving the land”. That’s a really zany idea. Where did you get it?

                  • MarbleZepplin says:

                    Define negative GHG effect and who are “they”.
                    I get my zany ideas from climate scientists and geophysicists.
                    Fernando, I am really getting suspicious that you don’t know where the sea ice comes from.

                  • MarbleZeppelin says:

                    The melt off land based ice is fresh water. It reduces the salinity of the ocean which then allows freezing at a higher temperature. So melting causes increases in sea ice. Increased calving from faster moving glaciers also increases sea ice.

                  • MarbleZeppelin says:

                    “Observations show temperatures are dropping”

                    Ha,ha. I get it. Temperatures are dropping because it’s winter down there. Very funny.

  18. shallow sand says:

    For those interested in oil and gas lending parameters, a read of the Office of the Comptoller of the Currency’s April, 2014 handbook is very instructive.

    Maybe if someone could provide a link to it.

    I think after reading it, you might find out why the OCC issued its recent warning and why the credit should begin to dry up for US shale.

    It is technical and boring, but not that long.

  19. shallow sand says:

    From page 18 of the Comptroller’s Handbook, Oil and Gas Production Lending.

    “Ideally, the borrowing base will be based primarily on PDP properties. These properties should be producing satisfactorily for a period-typically six months or more-that is sufficient to generate reliable production results (run data). The proceeds of this production should be sufficient to amortize debt over a reasonable amount of time (three to seven years) with some portion of reserves remaining. Maximum advanc rates vary by bank for PDP reserves (typically 50% to 65% of the present worth of future net income [PWFNI]), with much lower advance rates for PDNP reserves, such as shut in and behind the pipe, and PUD.

    When banks advance on PDNP or PUD reserves, it is particularly important to fully support the risk factors used to determine the discount rate. Banks should not advance on unproved reserves. ….

    The Office of the Comptroller of te currency has sent out the warning. I presume that borrowing bases will need to be cut substantially as we be using a WTI price in the low 50s, assuming 8/1 and 9/1 oil prices are in the present range.

    What intrigues me is the ability to amortize the debt over a reasonable period of 3-7 years. Shouldn’t the high early decline require a short amortization, say 3 years?

    Banks were able to give them a pass in the spring because there were only 4 months of low prices, 12/14-3/15. In the fall there will be 10 of 12 months being low, and 10/14 and 11/14 wont be enough to help much.

    If lines of credit are not substantially reduced this fall, I will be surprised.

  20. shallow sand says:

    Of course, above I am referring to SEC pricing, first day of each month. Banks arrive at their own price decks. They should be based largely on the futures strip. We go from $52.33 8/15 to $63.09 8/18.

    Also, the same should be used for PUD. I would think if PUD is being properly calculated, most Bakken PUD will disappear, as there will be no stream of cash flows given many of the wells cannot payout at $40-55 well head prices.

    The drilling party should be over, at least with bank borrowed funds. Whether private equity steps in is a whole different matter. I am sure, however, private equity terms will be much less desirable. Witness CHK short sale last week on 250K acres to their private equity partner.

      • shallow sand says:

        I think the author has the story right.

        When oil was high, the bond issuances for shale had some weak terms re priority. Basically unsecured loans.

        The most recent bond issuances have taken a second lien on the company assets, behind only the bank lines of credit. The previously issued bond holders got the shaft, but deservedly, as they lost out on priority to the new debt issuance due to weak credit terms. It appears to me, that the game of fill up the credit line and issue bonds to pay it off, may be ending for many companies, as there is already a first and second lien on most assets.

        Whiting, for example has a borrowing base currently of $4.5 billion, which matures in 2019. Whiting intends on drawing $3.5 billion. Assuming this is drawn, Whiting would need to be able to amortize this amount over 4 years 2016-2019. They likely cannot issue more bonds to pay it off. So their PDP cash flow would need to be able to pay around one billion per year for the next four years, plus pay the interest on the $6 billion plus they have in bonds, plus get in a position to roll those bonds since they will not be paying them down due to the $1 billion annual line of credit payments.

        Of course, the repayment of the line of credit assumes Whiting cannot float bonds, issue more equity, to pay the line off. Maybe I am underestimating them.

        And that is a simple situation. The more complex are like the stuff Chesapeake got into. A bunch of drilling partnerships, where, when things go south, the partner just takes the assets.

        I bet some banks may start selling the debt to private equity, who cut off all future lending when the first covenant is breached, then foreclose. The shareholders get $0.

        All in the name of energy independence.

        • Mike says:

          That’s more good stuff, Shallow. I don’t see private equity picking up all the slack, however. Without much, much higher crude oil prices, occurring very, very soon, the shale oil industry is the walking dead.

          M.

          • old farmer mac says:

            The shale industry will be back like the dead folks in the zombie movies within a year or maybe two of the time the price of oil rises enough to justify the rise of the dead.

            Let’s not forget how much of the essential work is already done.. The existing infrastructure associated with the industry is not going to vanish.

  21. B says:

    Refracking Is the New Fracking

    [Excerpt from article]
    If the word fracking has carved out a spot in the lexicon of Americans as the nation advances toward energy independence, then refracking, as roughnecks have begun calling it, could be next. And for an industry that has been hammered by the 50 percent drop in crude prices over the past year, the finding on the technique’s potential — at a fraction of the cost of the initial well — provides a much-needed sense of hope.

    The risks abound — from inadvertently siphoning oil from an adjacent well to ruining a whole reservoir — and the sample size so far isn’t big enough to be conclusive, but oil giants like Marathon Oil Corp. and ConocoPhillips aren’t waiting to incorporate refracking into their shale operations.

    Mike Vincent, a well-completion engineer who teaches the technique to industry workers, said he’s been overwhelmed by the sudden interest in the class. He even had to abandon plans he had been making to spend a week fly-fishing in the Rocky Mountains over the summer. “I’m booked every week teaching refrack classes out to November,” said Vincent, who runs a Denver-based firm called Insight Consulting. “It’s amazing how much passion there is.”

    Years of working on traditional wells have shown that they can be restimulated multiple times, Vincent said. In the industry’s lingo, a well that has been blasted five times is a “Cinco de Fraco.” Eight times gets you an “Octofrac.” When done right, the procedure not only boosts the flow of crude, but can also increase the estimate of reserves held in the well. Vincent said it’s common to see oil recovery climb 60 percent or more.

    “I’ve seen a well get 10 fracs through the same perfs, and it appears that we’re adding reserves every time,” he said.

    A study by Bloomberg Intelligence of about 80 wells that were originally tapped in North Dakota’s Bakken formation in 2008 or 2009 and then refracked again years later shows a clear pickup in output. The wells on average produced more than 30 percent more oil in the month after the refrack than they did after the original completion, according to analysts William Foiles and Peter Pulikkan.

    While these kinds of increases are important to traditional drillers, they’re crucial in the shale industry, where output can start falling within days of a well being tapped. Companies such as EOG Resources Inc., the largest shale oil producer, have long acknowledged that they generally are recovering just a small fraction of the oil and gas in place in the biggest and most prolific reservoirs.

    “We’ve seen big changes in completion technology, and it looks like that’s only going to continue,” said R.T. Dukes, an upstream analyst at Wood Mackenzie in Houston. He estimates that there are about 100,000 horizontal wells that could be restimulated. “At that point, it becomes significant.”…

    [In] an industry that is desperately trying to cut expenses after oil fell below $60 a barrel from over $100 a year ago, the technique’s low cost has great appeal. Because the first step in the fracking process is already done — the drilling of the wellbore — the outlay is just a fraction of the $8 million or so it costs to tap a new well.

    Sanchez Energy Corp., a Houston-based oil producer, expects to spend between $1 million to $1.5 million per well when it starts carrying out its first horizontal-well refracks later this year. The extra oil and gas it will pull out from each one as a result, meanwhile, could have a value, when measured in today’s dollars, of as much as $2.5 million, according to Chris Heinson, the company’s senior vice president and chief operating officer.
    [End of excerpt]

    • Handle with rubber gloves and keep away from your face.

      • King Joffrey says:

        I thought I removed Ned Stark’s head as one of my first orders of business as king

    • shallow sand says:

      I was able to look at lease operating statements for two refracs that occurred in early 2014 on Bakken wells that we’re completed originally in 2008. Production was increased on each from 30 barrels per day to about 375 barrels per day.

      Very small sample. Question is whether that holds up or is back down to 30 in a year or two. Looked like those cost closer to $3 million per.

      Mike, Fernando or others may be able to answer this question. I assume a well fracked at 100+ stages in 2014 is not as good of a refrac candidate as a 30 stage well from 2009?

      It still comes down to economics and needing to borrow part or all of the millions to do these.

      These guys digging the debt hole deeper are fighting a losing battle, IMO.

      Maybe they can stand $30 oil up in the Bakken for another couple years with all the new tech? Maybe $40 oil in EFS and Permian? I didn’t think survival was the goal of a business, but to make a decent return.

      • Mike says:

        Referencing the article, first and foremost it was written by the shale industry for the benefit of vanishing capital. Its misleading. We performed multiple dentritic (water) frac’s on fractured carbonates in vertical wells many years ago and I can just about guarantee that is where the Octofrac BS comes from. For re-frac’s to work in horizontal laterals in dense, low perm shale I think they will have to go back in between previous stages looking for new stuff to perforate. I suppose that’s possible in a 6000 foot lateral that had 30, 200 foot perforated intervals originally, I don’t know. How much more oil can be recovered between old stages that were originally frac’ed for optimum recovery in the first place? Since 2014 they have been frac’ing shale stages with 500,000 pounds of sand and each of those stages was draining LOTS of shale; how much more sand can you shoved in behind that? Not much.

        My observations of “re-frac’s” in the Eagle Ford have been economic failures. A bump in initial post frac production does not mean it works. A 2 million dollar re’frac will now require 100,000 more barrels of recoverable oil just to get to payout. Let’s see if that happens before dancing in the street. I will watch Sanchez like a hawk to see.

        Mike

        • shallow sand says:

          I do not know anything personally about Sanchez Energy, however I do note:

          per 2014 10K

          PV10 PDP $1.411,300.000
          PV10 PUD $512,000,000
          PV10 all categories $1,923,300,000

          Per 10Q first quarter, 2015
          Long term debt $1,746,490,000

          Long term debt to PV10 PDP ratio 124%

          Projected long term debt to PV10 ratio 12/31/15 with a 50% PUD PV10 reduction 248%

          It must be a requirement that to be a player in US shale you have to have at least $1 billion dollars of long term debt?

          • MarbleZepplin says:

            If a well was not profitable originally how can pouring more money into it make it profitable at a lower initial rate of output?
            The only answer I can come up with is that it attracts more investment and justifies more loans.
            The fracking companies are doing fine on this one along with the quarries, chemical companies, railroads and truckers.

  22. Adam Ash says:

    Another useful perspective, thanks. To check the implication of the oil production in the final chart in the post, I divided global population by daily CnC production at billion population marks from 1974 thru to 2060.

    Population 4 billion in 1974. 80 people shared a barrel of oil.
    Population 7 billion in 2011. 92 people used each very expensive barrel of oil.
    Population 9 billion in 2042. 138 people circling each barrel, if they could get it near home.
    Population 10 billion in about 2060. 222 people fightling like mad cats over each barrel, waving fistfulls of useless currency.

    A. It will not be pretty.
    B. Even tho the curve of the global consumption may be smoothish, country by country the ride down could be very bumpy and abrupt for some, as they loose the ability to pay for oil imports at any price.

    Oh what a tangled web we have woven!!

    • old farmer mac says:

      A A , you get a double A from this old farmer who used to try to teach kids to THINK.

      Either we keep the pedal to the metal on renewables or else we are for DAMNED SURE looking at war on the global scale. There is SOME CHANCE that countries that are still well endowed with natural resources and still relatively speaking, thinly populated, can pull thru the resource bottleneck-IF renewables AND conservation and efficiency are pushed for all they are worth, full speed ahead and damn the ( cost ) torpedoes.

      ONE key is getting renewables scaled up enough NOW that they CAN be scaled up FAST later on. That will depend on having lots of existing well trained and experienced people to expand the industry in the way the USA was able to expand its shipbuilding industry back in WWII.

      Another key is that people need to become thoroughly familiar with renewables technologies so that they will be ready to invest heavily in them when the time comes that there is no other choice except to do without.

      The sweetness of quality remains long after the sting of high initial price is forgotten.

      A nice short hot little war – if it could be kept from escalating – that would STOP the international blue water trade in oil for a few weeks and severely curtail it for a few months would be the best possible thing that could happen to humanity right now.

      Every factory on the planet that makes battery powered vehicles would be running full tilt from that time forward.

      Naked apes must have a boot in the backside every few years to remind them of reality.

      • wimbi says:

        I was in that first generation of engineers who had formal academic training in what we then called jet propulsion and is now alluded to as rocket science.

        We had a very narrow assignment- stay ahead of Ivan. We were given gobs of money and never gave a thought to any lack of it. We also had all the latitude we could ask for to try and fail. Some of the things we tried were flat-out stupid, but, no matter, just keep at it.

        Very soon both we and Ivan had plenty of what we knew was what it took to kill each other for certain sure.

        “A curious game, the only way to win is not to play” That was in fact a win, of sorts.

        Now, I am looking straight into the eye of a far, far, more serious adversary- addiction to the deadly drug called ff’s and absolutely nothing in way of a proportionate response to save us.

        For me, it’s torture to see what we very well could be doing instead of what we are in fact doing. The sustainable energy side of the equation is quite simple in comparison to what we did all those decades ago.

        Far fewer resources than we had then could get us where we would have a chance at survival. But the government just ain’t working here.

        So, my personal response condenses down to the super simple and the immediately possible right here and right now, with the hope that if any of it works, somebody, somewhere, might pick it up and turn it into something effective.

        And, the astonishing fact is that I find quite a few others, right here, doing the same thing, But the resources they have are pitiful in comparison to the need.

  23. shallow sand says:

    Question for all who were around then.

    Were debt levels of US independents in 1985-1986 as high as they are now?

    • clueless says:

      SS – Debt levels were pretty high back then and it took a fair amount of time for it to be recognized. You like to do numbers, so I will “give” you a Mission [like a project from the TV and movies Mission Impossible, you can reject]. But, you have time to get set up. Next year, when the 10-k’s come out, you look up the company’s PV10’s number [include all categories]. Then go to the audited balance sheet and find all of the capitalized Oil and Gas assets. Take those assets off the balance sheet and substitute the PV10 number, and recalculate the company’s equity. It can be really revealing. By the way, I am NOT saying that PV10 is a “true value” but, it is very good at giving you clues.
      For example, suppose a company next year has a PV10 value of $2 billion. And, suppose that the balance sheet shows $3 billion of capitalized Oil and Gas Assets. And, assume that the company’s balance sheet equity is $1 billion. If you substitute PV10 values for capitalized assets, then the equity goes to zero and the stock should be worthless [based upon PV10 value].
      I worked for a large independent oil & gas company in the 1980’s and I did that calculation for it. Using PV10 as their oil and gas assets, the net worth was negative. The stock was selling at $10/share. I sold all of my stock, and changed jobs. Several years later, the controlling shareholder sold the entire company for about 50 cents per share.
      Past experiences of mine should not be used as a prediction of future results!

      • clueless says:

        To clarify: Oil and Gas assets on the balance sheet should be “net” of accumulated depletion/depreciation/amortization.

      • shallow sand says:

        Clueless. Thanks for the suggestion.

        My review of long term debt to PV10 ratio is pretty much a shortcut version of what you suggest. For almost all of the shale companies, the large asset is property, plant and equipment, less accumulated depreciation, depletion and amortization. The large liability is long term debt (although deferred income taxes is also a big number).

        As I have typed many times Continental Resources disclosed in the 2014 10K that, using oil and gas prices in February, 2015, PV10 would be only 39% of the number reported for year end 2014.

        I have looked at many 10K and find that, if PV10 is divided by 2, long term debt is greater than PV10, meaning to me, negative net worth.

        What is worse, is if one uses only PDP PV10, divided by 2. I think about all have negative net worth.

        I assume maybe the companies will try to convince the engineering firms to plug in lower expenses and capital costs, due to the much touted efficiencies.

        You make a very good point. If the appraised value (PV10) is less than net p,p &e, the business is not creating net worth. Kind of like if I build a $400,000 business building, which after 5 years has a net asset value of $350,000. If it only appraises for $250,000, due to low capitalization rate, I have a bad investment on my hands.

        The good thing about the apartment, though, is the long life. Hopefully I can wait out the bad economic time.

        With a rapidly depleting asset like oil and gas, it is more difficult to wait out a bad economic period.

        What is interesting to me is that some companies (Whiting and Continental being two examples) are still trading at a market cap equal to 2014 PV10 all categories. I assume investors think low prices are short term.

        I hope so.

        • shallow sand says:

          More on my boring PV10 topic

          From Newfield Exploration 2014 10K

          2014 12/31/14 PV10 $8.8 billion
          Standard measure PV10 $6.21 billion (including effect of income taxes)

          Using SEC pricing of $94.99 oil and $4.30 gas, of course.

          Newfield states that if average price for the first of each month were $60 for oil and $3.50 for gas:

          PV10 $4.5 billion
          Standard measure $3.8 billion

          Of course, the problem is the average price for both oil and gas will struggle to be $60 and $3.50 for 2015, as seven months have went by at a much lower average price.

          Also, of course, the PV10 above is all categories, PDP is about 2/3 of the total.

          By the way, Newfield, which is considered stronger than many, has $2.9 billion of long term debt.

          • shallow sand says:

            There are 16 US based public companies with rigs running in the North Dakota Bakken. Assuming PV10 all categories is cut in half in 2015 from 2014 (which is a strong possibility) and assuming no long term debt is added in 2015 (which is a weak possibility for many), here is how the projected long term debt to all categories PV10 fares under those assumptions:

            200% or more: Halcon, Triangle
            100%-200%: Denbury, Whiting, WPX, Oasis
            75-99%: SM Energy, Newfield, QEP,
            50-74%: ConocoPhillips, Hess, Continental, Marathon
            25%-49%: EOG, Abraxas
            under 25%: ExxonMobil

            It will be interesting to see how the PV10 and long term debt numbers actually turn out when released in 2/16.

            • Synapsid says:

              shallow sand,

              Please post this over at PO.com. I’d like to see the response.

              Please?

            • shallow sand says:

              The point I am trying to tie together is that under current pricing, only 3 of 16 producers qualify to have all of its debt with banks per Office of the Comptoller of the Currency guidelines.

              I do realize I have made some assumptions about PV10 to reach this point. However, I did not discount PDNP nor PUD reserves, either, as the OCC guidelines require.

              I will say XOM is solid as a rock financially. Only $11 B of debt and they still have all of their mid stream and down stream businesses, which have high profit margins right now. Even discounting reserves by half, their debt to PV10 ratio is only 11%. That, of course, would mean no debt encumbering any other business segment.

              I guess I am just trying to illustrate how dire things are at $50ish WTI and sub $3 natural gas.

              I’d further say Russia is not having fun with these prices. Looking at the bleeding foreign reserves likewise indicates things are not as rosy for KSA as they pretend.

              I can see why few think oil prices will stay low for more than 2-3 years at most.

              • Toolpush says:

                Shallow,

                On the bright side, the longer it goes, the bigger the rebound! smiles.

                Just on a side note, the Saudis seem to be manning up for their shale hunt. They are holding an employment drive in Houston early next month. Requesting experience on wells of 4,500 to 9,000m (15 to 30,000ft), based out of Al Khobar, Saudi Arabia, looking for the laid off American drill crews.

                I believe if the Saudis think shale is their next best thing, then the days of “cheap” Mideast oil is certainly coming to an end!

              • Synapsid says:

                shallow sand,

                Thanks for your post over at PeakOil. Your work plus ROCKMAN’s thoughtful and informative comment make up a powerful contribution.

                We’re all lucky to have you here.

  24. AlexS says:

    Despite the recent sharp upward revision of oil production estimates for the first 4 months of the year, the EIA has only slightly revised its forecasts for the rest of 2015 and 2016. They exstimate C+C production to have declined from 9,70 mb/d in April to 9,65 mb/d in May and 9,61 mb/d in June. The EIA expect further gradual decline to 9,19 mb/d by February 2016.

    Source: EIA STEO, July 2015

    • AlexS says:

      The EIA projects increasing production in the GoM, as “A total of 13 projects are scheduled to come online in the Gulf of Mexico in 2015 and 2016, pushing Gulf of Mexico production up from an average of 1.4 million b/d in the fourth quarter of 2014 to almost 1.7 million b/d in the same period of 2016, an increase of 17%.”
      However the EIA estimates production in the 48 Lower states to decline starting from April 2015.
      New projections are actually slightly lower than in June STEO

      Oil production in the Lower 48 States (excl GOM) (mb/d)

      • It’s the post Macondo bottleneck. When activity resumed there was a lot of work lined up. Future developments won’t be nearly as good. I think they’ll reach 1.85 mm BOPD if prices recover in a hurry. If they don’t then it’ll be a struggle to stay above 1.5.

        You know, a couple of the projects starting production were under appraisal and study over 10 years ago. Look up the discovery date and you’ll see they were around for a long time.

  25. Toolpush says:

    There seems to a lot of articles lately, on how well the shale oil plays are doing.

    http://www.breitbart.com/big-government/2015/07/08/second-wave-of-u-s-oil-boom-will-bankrupt-opec/

    SECOND WAVE OF U.S. OIL BOOM WILL BANKRUPT OPEC

    U.S. crude oil prices have plunged by 11 percent over the last two days to a low of $50 a barrel before settling at $52. The mainstream-media blames the fall in prices on the turmoil in China and Greece, but the real driver is the outbreak of discounting by U.S. oil-rig operators.

    The resulting fall in the average U.S. “break-even” cost necessary to sustain domestic oil production is now around $32 per barrel. America’s new hyper-competitive cost structure has launched a second wave of an oil boom that threatens to bankrupt OPEC.

    snip

    The U.S. “fully burdened exploration and production “break-even” cost is now $51 per barrel, and falling fast. Furthermore, with hundreds of American oil companies having already paid the exploration lease acquisition costs to accumulate tens of thousands of drilling sites, the production-only break-even cost for positive cash-flow is about $29 a barrel. After tacking on a 9 percent profit, U.S. domestic oil companies are now incentivized to produce domestic oil any time the price is above $32 a barrel.

    I think the author forgot, they borrowed the money to buy the leases, as well as the fact that many of these leases require drilling and producing, which the oil companies do not have the money at current prices to drill, to hold the lease?

    Yergin on CNBC, all assorts of these stories. Is someone getting worried with this last price drop?

    • Watcher says:

      Airlines breakdown costs to fuel and labor and depreciation.

      What’s the breakdown for shale companies? The point being . . . the absurdity of these articles claiming cratering costs so all is well . . . okay, so who was fired? They do spend money on proppant, and drill pipe, but what is the % of their costs attributed to THAT vs people?

      Mike says little or no automation is going on, so there are people being paid to drive trucks, ship proppant, insert drill pipe, etc. Are they most of the cost? If so, then these cost reductions are getting the work done with no people?

    • Ves says:

      ” the production-only break-even cost for positive cash-flow is about $29 a barrel.”

      So did they start paying these drilling costs in drachmas 🙂

    • shallow sand says:

      Anyone who owns shale debt or shale equity should be very worried, IMO.

      Part of the point of my post about the Office of the Comptroller of the Currency guidelines is that none of the debt raised for shale, outside of maybe XON, COP and a couple other companies, could have been lent by a bank, other than first lien existing lines of credit.

      Practically all of the bonds are junk, and the amount of junk debts appears to outweigh the bank debt substantially.

      So, is it good to make a $200,000 80% first mortgage loan on a house to a consumer who owes $400,000 in unsecured credit card debt, even if they have the income to support the $200,000 loan.

      Folks, I am not exaggerating here when it comes to where shale debt is. Very easy to find in the 10K and 10Q. Many owe $2 or more in bond debt for every $1 of bank consortium borrowing base.

      So I think surely the banks will shrink the borrowing bases substantially in the fall. But I have been surprised by the level of irresponsibility already, so it could very well increase I suppose.

      • Watcher says:

        Old normal thinking.

        If the lenders are systemically decisive, losses will be absorbed by the Fed. How could they not?

        • shallow sand says:

          This administration is anti fossil fuels. That is primary reason I see for no oil/oil loan bailout.

          • Watcher says:

            The Fed is independent. The Administration would have no say in the matter.

            If the banking system is at risk, it would happen. There would be no other choice.

    • old farmer mac says:

      Breitbart is a bad joke at best. They seem to exist to keep their readership in the dark.

  26. Ronald Walter says:

    RIG, Transocean has a stock price of 15.44 today, down from a high of 45. There it was, gone.

    WLL, Whiting Petroleum, had a 52 week high of 92.92 and is at 30 and change today. STO, Statoil, had a high of 30 is now under 17, CLR, Continental, 89, is at 39, OAS, Oasis, 13.70, a high of 52. EOG is at 85, was 118. ConocoPhilips, COP, was in the 87 dollar per share range, now is 58. Purdy much all across the board of oil stocks, all down 30 to 60 percent and the small operators are looking at a stock price disaster.

    A harbinger of what is in store for the rest of the market?

    If the Dow Jones follows the free fall of oil company stock prices, it will be in the 6000 range before it reaches the 20,000 number.

    And……….. it’s gone.

  27. Jeffrey J. Brown says:

    Cyber Attack Wednesday?

    United Airlines computer system down this morning (now back up). NYSE trading halted due to technical issues and WSJ website currently down (now back up). NBC is reporting that the feds say it’s not a coordinated cyber attack, but one can’t help but wonder.

  28. Enno says:

    Quite a good article about shale well declines and economics, though no surprises:

    http://seekingalpha.com/article/3310735-shale-producers-cant-make-money-at-an-oil-price-of-60

    • shallow sand says:

      Enno, I have found the author to be very balanced, using real company financial numbers, not projections.

  29. Jeffrey just posted me the below CNBC video link which was posted to him by Mark Lewis who actually did the interview on CNBC. It seems I am not the only one who is beginning to doubt those EIA production numbers.

    Bottom line: We do not see material extra Iranian supply coming to market this year even assuming a JCPOA is reached and we therefore stick with our year-end price target
    for Brent of USD75/bbl. We think that US shale-oil production will show a more marked decline by Q4, and that following Petrobras’ cutting of its 2020 production forecast by
    1.4mbd last week other signs of medium-term supply pressures will also be apparent by Q4.

    Oil likely to stabilize: Economist

  30. AlexS says:

    The EIA doesn’t believe in its own numbers
    The article below was published by Reuters in late May, after a sharp revision in EIA’s production estimates

    What jump? Record U.S. oil output due to revisions, not rigs, EIA says

    May 28, 2015
    http://www.reuters.com/article/2015/05/28/crude-production-weekly-idUSL1N0YJ2KE20150528

    NEW YORK – A reported jump in weekly U.S. crude production data that set oil traders atwitter on Thursday was chiefly caused by revisions to two-month-old figures, not a surge in immediate output, a U.S. official said.
    On Thursday, the Energy Information Administration’s Weekly Petroleum Status Report showed field production of crude oil rose by 304,000 barrels per day (bpd) to 9.57 million bpd last week, the highest in weekly records going back to 1983. Monthly data show U.S. output peaked at 10.04 million bpd in November 1970.
    While skepticism over the EIA’s model-based weekly production estimates is not new, the dramatic increase still surprised traders and investors from London to Houston, causing some to question whether the years-long shale boom was petering out. Oil prices vacillated after the data, first falling before ending 17 cents higher on the day.
    Robert Merriam, EIA’s manager of petroleum supply statistics, cautioned against reading too much into the figures, since they are based largely on forecast models and historical data rather than real-time information – unlike data on inventories or refinery operations.
    “At the end of the day, the crude production numbers are a modeled number. We don’t and no one really has real time information,” he said. “There’s a long delay.”
    The latest figures were sharply higher because the EIA incorporated detailed data from states including Texas showing that production in March was higher than earlier estimated.
    As a result, the agency raised its baseline for March by some 130,000 bpd, Merriam said. It then increased the growth trajectory to account for the higher-than-expected rise, adding another 75,000 bpd to last week’s figure.
    About a third of the increase was due to a rebound in Alaskan production, based primarily on near-real time volumes delivered to the Trans-Alaskan Pipeline System. Output rose some 95,000 bpd after falling by 112,000 bpd previously due to maintenance.
    Over time the EIA’s weekly figures have tended to lag behind monthly data. For instance in March, weekly data showed an average of 9.4 million bpd; but official data released separately on Thursday in its Petroleum Supply Monthly report showed field production reached 9.53 million bpd.
    The comparison underscores the risk for investors of taking weekly numbers at face value.
    In a note on Thursday, Citigroup said this week’s data “might seem to indicate production growing at low rig counts,” but added that weekly data estimates “need to be treated carefully.”

  31. shallow sand says:

    Very off topic, but where I am in middle America, it is raining (flooding) and the temperature has not gotten to 70 degrees F. Very strange.

    However, weekend forecast calling for 95 degrees F, which is pretty normal for middle of July.

  32. Doug Leighton says:

    BIGGEST EXPLOSIONS IN THE UNIVERSE POWERED BY STRONGEST MAGNETS
    http://www.sciencedaily.com/releases/2015/07/150708133900.htm

    This is the first time that such an unambiguous connection between a supernova and a magnetar has been possible. [A magnetar is a type of neutron star with an extremely powerful magnetic field, a special pulsar].

    PLEASE DON’T RESPOND SO RON CAN DELETE THIS TOTALLY OFF-TOPIC POST.

    • I never delete off topic posts just because they are off topic. I rather enjoy posts on astronomy.

      • Doug Leighton says:

        Well, I guess it’s true that there is an energy component. 🙂

      • clueless says:

        Ron – With respect to astronomy, I know only a little bit, but it does give me an opportunity to give an analogy. As you know, I do not believe that CO2 is the cause of global warming. For which I am labeled a denier and not in the mainstream. My bad, – strike one.
        On to astronomy. Who believes in the “big bang theory?” Almost all of the astrophysicists do [and, they are plenty smart]. For the ones that do not believe in the big bang, they are deniers and not in the mainstream.
        As you know, there are many, many problems with the big bang theory. To give two examples. If you throw a pebble into a small pond that is calm, the ripples propagate out in 360 degrees uniformly. So, the big bang theory expects that the universe should have matter dispersed outward uniformly. It is not. Not by a long shot. There are trillions upon trillions of miles where there is no matter. The believers do not have any acceptable explanation. Second, and more dramatic. The stars at the outer edges of any galaxy are travelling at tremendous speeds, far faster than can be explained by any of the forces in the known universe. The big bang explanation: – well maybe almost 90% of the universe is made up of dark matter and dark energy that we cannot “see” in any physical way. They compute that is what would be needed to produce the energy that would speed those stars up. Hmmmm – seems like grasping at straws to me.
        Okay, I do not believe that the big bang theory is an accurate explanation for the above reasons [along with many other reasons]. So, once again, I am a denier and not in the mainstream. Strike two on me, if you are counting.

        • Doug Leighton says:

          “So, the big bang theory expects that the universe should have matter dispersed outward uniformly.” Not really, in fact, Cosmological Principle states: Viewed on a sufficiently large scale, the properties of the universe are the same for all observers. Matter is certainly not dispersed outward uniformly.

          “The stars at the outer edges of any galaxy are traveling at tremendous speeds, far faster than can be explained by any of the forces in the known universe.” The existence and properties of dark matter are inferred from its gravitational effects on visible matter. Dark Matter is currently being mapped out in various surveys. No, we don’t know what it is – yet.

        • Clueless, for all the reasons one might have for disbelieving in the Big Bang Theory, the uneven distribution of matter throughout the universe would seem to be the least among them. There is no reason to believe that in the big bang explosion that matter would be perfectly and smoothly distributed. In fact I would expect the opposite. And even tiny differences in distribution would, after almost 14 billion years, gravity would have turned turned all small uneven distribution into very large differences.

          Also dark matter explains far more than the speed of stars in the galaxies. It is what keeps the galaxies from flying apart. Also there is a lot of other evidence for dark matter in the universe.

          My point is I really don’t see the need to disagree with most astronomers simply because I don’t understand some of the things they find evidence for. For instance I had serious doubts about black holes for a long time. But when stars at the very center our own Milky Way Galaxy were observed, in infrared light that can pass through the dust, whipping around a center point where nothing could be seen, I became a believer. It was a super massive black hole.

          But perhaps you don’t believe in black holes either.

          • clueless says:

            I think that they have found a super massive black hole in the center of every galaxy. It is integral to having a galaxy in the first place.
            With respect to your comment: “And even tiny differences in distribution would, after almost 14 billion years, gravity would have turned [sic, turned] all small uneven distribution into very large differences.” The reason I made that point is that articles by astrophysicists have claimed that the universe is not nearly old enough for the vast emptiness to be the result of gravity, or anything else now known to man, creating the distances .
            And, as I said that there a many problems with the big bang. So, thanks for listing another one. The big bang does not explain dark matter, or whatever is keeping galaxies from flying apart. Never mind trying to answer the question: “What would cause a singularity to become unstable and blow?” And, where does a singularity exist? Before the big bang, there was no space. So what existed, and where, to have a singularity in the first place? Maybe dark matter.
            The CERN accelerator simulated the big bang effects and apparently found the “God” particle that “gives” the other particles mass. How that happens is still a mystery. And that achievement, i.e., simulating the big bang, did not produce any “dark matter” or “dark energy” that I know of.
            My point is that astronomy is interesting, complex, and actually no one on earth fully understands it. Similar to global warming, climate change or whatever. So that terms like denier and not in the mainstream are pointless. It took many years and many experiments to prove Einstein correct. And, I think that at the end, some of his findings do not work at the quantum level. Steven Hawking had to retract one of his findings, etc.

        • Jef says:

          Clueless – I like how you keep illustrating why you chose your handle.

          To compare Earth science and the study and understanding of our biosphere to the understanding of the universe is beyond clueless.

          • old farmer mac says:

            Plenty of intelligent and well educated people really do have serious reservations about climate and environmental science.

            The problem is that most of us are pretty close to scientifically illiterate even if we happen to have a law or accounting degree from a good university.

            In a minute I will come back and post a link to a video by a former doubter who is a dead serious scientist – the video being all about explaining the science to the knowledgeable skeptic.

            Human communication is as much about lies and disinformation and scoring points for partisan purposes or advancing an agenda as it is about the truth.

            Most laymen instinctively understand this basic fact.

            So they ”know” the repuglithans are lying about welfare queens if they are liberals and they ”know ” the demo rats are lying about the environment if they are conservatives.

            Asking a layman to take the word of a scientist about any given issue is basically the same thing as asking him to believe in the Tea Party if he is a liberal or asking a conservative to believe in socialized medicine.

            Laymen simply do not understand that science is evidence based rather than agenda based.

            Laymen are quite used to the entire establishment lying its ass off at every opportunity. The scientific community is just about the ONLY portion of the business as usual establishment that DOESN’T lie by habit and by design. And even scientists are human and prone to exaggerate and lie a bit when it suits their own ends or a larger agenda.

            I am a firm believer that forced climate change is actually an existential risk for most of humanity BUT I have yet to see a scientist who is a climate specialist point out what Fernando points out here so often – that the IPCC projections most commonly cited are based on totally unrealistic estimates of future fossil fuel production.

            This failure is a collective case of telling a brazen lie by omission even by the most lenient standards in my opinion. Given that the public is so ill informed and apathetic about such issues I am generally willing to go along myself in the case of this particular lie and never mention it in any other forum.

            Here we are collectively smart enough to understand such nuances but Joe and Suzy Sixpack are confused enough as it is. We are NOT going to convince Joe and Suzy with abstract arguments. They are not capable of understanding such abstractions because they do not WANT to understand them.

  33. old farmer mac says:

    Euan Mear has posted an EXCELLENT article about Greece that focuses mostly on Greek energy problems. Lots of great charts.

    http://euanmearns.com/greek-tragedy/

  34. MarbleZepplin says:

    Doug
    That does add a new dimension to neutron stars and pulsars. I wonder how much energy release would be involved if the proton superconduction quenched. Probably blow the star apart.
    Still it does show how tough hadrons are to still exist under those extreme circumstances. Speaking of high energy systems, I wonder what the LHC is up to lately now that it is running near peak energies and has an upgraded ATLAS detector.

  35. MarbleZepplin says:

    US coal production is down about 25% from it’s peak back in 2000. Has anyone noticed any societal collapse issues from the fall in coal production?
    Graph below is monthly production indexed to 2007 = 100.

    • Don’t forget coal is being replaced by natural gas and wind turbines.

      • MarbleZepplin says:

        Exactly Fernando, since dirty coals (non-mettalurgical) are the bulk of mined coal and are used to produce electricity; any other energy source that produces electricity can substitute and society will barely notice. Coal can be almost completely substituted.
        In the same way, oil is primarily burned for transport and alternative transport systems reduce the need for oil. Insulation in houses reduce the need for oil, better efficiency and planning reduces the need for oil. Oil makes great lubricants and chemicals but can eventually be eliminated as a transport fuel.
        Progress is also being made in substitutions for polymer feed stocks.
        Here CO2 from power generation flue gas is used to make polyurethanes. The CO2 is recaptured into a product and the chemistry is more efficient. Less need for fossil fuels.
        http://www.rsc.org/chemistryworld/2014/05/polyol-polymers-greenhouse-gas-emissions-polyurethanes-fossil-fuel-depletion
        Just one example.

        So how much coal do we really need? How much oil do we really need?
        The right now answer is dependent upon the past, the future answer is very little.

        • wimbi says:

          My guess- in near future we need no coal at all, somewhat later, no oil.

          Reasons- carbon tax nearly certain, solar/wind /efficiency overwhelm ff’s in cost. Public shifted by things like Pope’s ethics stance and

          http://www.sciencemag.org/content/349/6243/7.full
          from science community.

          And, word of mouth from enthusiasts like me, speaking from direct,immediate experience .

          • My guess- in near future we need no coal at all, somewhat later, no oil.

            Reasons- carbon tax nearly certain, solar/wind /efficiency overwhelm ff’s in cost. Public shifted by things like Pope’s ethics stance and…

            And in the near future no less. However we are nowhere near solving the energy storage problem. How you suppose we will get around that one? Or haven’t you thought about that?

            • Dennis Coyne says:

              Hi Ron,

              As the cost of solar power comes down it will be cheap enough to create excess power that can be used to create hydrogen which can be stored and used in fuel cells for back up. Natural gas can be used for back up power in the mean time as a backup for a widely distributed wind power system tied together with HVDC transmission. Excess electricity from wind or solar could also be used to heat water that is stored in large insulated tanks and used later for home heating or other low heat processes. Excess electricity could also be used for making ice for cooling needs during times of low energy output.

              There are other forms of energy such as hydro, geothermal, tidal and wave power which may improve over time. There is also nuclear power, but I think we need more research on pebble bed and/or thorium reactors, this is my least favorite choice, but if efficiency, reducing consumption, and recycling along with alternative energy are not enough, we should at least do the research on better nuclear (safe shut down with no power).

      • old farmer mac says:

        Not to mention photovoltiacs and even a bit of biofuel here and there.

        I have seen an article that sounds reasonable which says yankee pv production is fifty percent higher than the ” official” statistics indicate because the statisticians make no effort to include small scale pv.

        I am still looking for any data on the AMOUNT of gas and or coal and oil that must be burnt SOLELY for purposes of load balancing grid tied wind and solar power.SOMEBODY must have this data, at least for a given utility or iso.

        It seems obvious that the quantity burnt for this purpose is falling ( in relation to wind and solar generation) as weather forecasts improve and as more fast ramping peaked plants are built and as more long distance interconnections are made.

        But there are still anti renewable folks out there in blogger land who insist that wind and solar on the grid actually INCREASE the consumption of gas and coal.

        • MarbleZepplin says:

          I think I posted some European grid data on that. I will see if I can dig it out for you.
          The Danes have a neat system going. They send electricity up to Norway where there is a lot of hydro storage. This then comes back when the wind isn’t blowing.

          As wind and solar (combined) penetrate the power grid in regions, the need for back-up fossil fuel generation will diminish. Again, the whole system can be designed around the variability.
          Wind and solar can provide their own backup through pumped storage, heat storage and hydrogen generation storage.

          • wimbi says:

            And, solar pyrolyzing of any sort of organic material to cook out a fuel gas and carbon, which can go thus from the air to the ground, a carbon NEGATIVE energy store.

            I visualize some sort of highly productive hydroponics producing biomass from sewage, going thru the solar cooker, and hence to a giant towngas storage tank.

            On call day or night to run a gas turbine load matching thing of conventional design.

            I am having great fun trying a micro version of that system with help of my two appalachian junk monks- ignorant but enthusiastic.

        • MarbleZepplin says:

          OFM
          Here is the European power info.
          http://peakoilbarrel.com/bakken-april-production-data/comment-page-1/#comment-521540

          Looks like right now wind turbines are supplying 90 percent of Denmark’s power.

          • Doug Leighton says:

            “Looks like right now wind turbines are supplying 90 percent of Denmark’s power.”

            Not quite. “Denmark has long been one of the world’s leaders in wind power. The country of 5.6 million has set a goal of generating 50 percent of its power from clean energy sources by 2020 and aims to be ff free by 2050.”

            http://www.triplepundit.com/2015/01/denmark-sets-new-wind-power-world-record/

            • MarbleZepplin says:

              “Not quite” my solar panel.

              I just looked at the current graph, “right now” means the present, real time right now. Right now does not mean some long term average or some long term goal. Look at the website, real time.

            • Lars says:

              Denmark`s wind power “success” has been discussed on several occasions over at Energy Matters. I`ll try to tell briefly why the Danish scheme cannot be copied successfully everywhere with the same relative penetration of wind power:

              – On a per capita basis Danish electricity consumption is about half of that in the US and on par with consumption in countries like Germany, the UK etc. With 5,6 mill. people it`s a very small system. Most heating needs + hotwater is done with central and district heating or natural gas.

              – The Danes are fortunate enough to be sorrounded by 3 much bigger power systems (in terms of annual production) with which they are interconnected: Germany (17 times bigger), Sweden (4 times bigger) and Norway (3,5 times bigger). In fact the interconnectors between Denmark and these countries have the capacity in theory to supply the Danes even with peak power which is about 6 GW. Without these interconnectors the present wind penetration in the power system would be almost impossible to match, at least at a reasonable cost.

              – From Norway and to a lesser extent Sweden they have access to reservoir hydropower in abundance, covering both surplus and shortfalls of wind power with export and import. And the large German system can also of course cover a lot of slack for the Danes.

              – The increasing amount of wind power and imports threatens the economy of the traditional Danish CHP plants, especially the decentralized smaller ones, just like natural gas plants are squeezed from the market in Central Europe.

              – The Danes have the most expensive electricity in Europe, before the Germans. But the CHPs run too few hours to be economical, and since they supply much of the district heating one can wonder where heating is going to come from in the future if they are not economical?

              For live Danish power and the Nordic market these links are available:

              http://www.statnett.no/Drift-og-marked/Data-fra-kraftsystemet/Nordisk-produksjon-og-forbruk/

              http://www.statnett.no/Drift-og-marked/Data-fra-kraftsystemet/Nordisk-kraftflyt/

              http://energinet.dk/DA/El/Sider/Elsystemet-lige-nu.aspx

              • MarbleZepplin says:

                OK, feel free to give up.

                • Lars says:

                  It`s not about giving up but being realistic. The Holy Grail of large scale energy storage isn`t here yet apart from reservoir hydro and pumped storage, but that`s limited in locations.
                  It`s ok to be idealistic but it must be coupled with realism.

                  • wimbi says:

                    Don’t need large scale, lots of small scale adds to same thing.

                    Besides, hydro storage is available anywhere there’s a big hole in the ground. That’s lots of places. Don’t need a mountain.

                    After all, so-called civilization has spent the last few centuries digging big holes in the ground.

                  • MarbleZepplin says:

                    Texas
                    Current Wind Generation
                    In 2014, wind energy provided 9.00% of all in-state electricity production.
                    • Equivalent number of homes powered by wind: 3.6 million
                    Wind Generation Potential
                    Wind power is capable of meeting more than eighteen times the state’s current electricity
                    needs.
                    • Land based wind potential at 80 meters (m) hub height: 1,901,530 MW (source:
                    National Renewable Energy Laboratory)

                • Lars says:

                  Ok, 9% wind for Texas now, that`s a number that can be handled in a grid it seems no matter where it is. I haven`t educated myself on the Texan grid and don`t know how it works. For instance I have no idea if they have access to pumped storage, but I suppose most of the balancing of wind power is done with gas turbines. The problem of intermittency however will increase as wind power is expanded.

          • old farmer mac says:

            Hi MZ, and thanks for the links.

            Great info but I have found tons of this sort of data on my own.

            Specifically what I am looking for is the amount of EXTRA hot spinning reserve that is necessarily kept hot and spinning when substantial amounts of wind and solar power are added to the grid.

            To make an extremely simplified example let us consider a self contained utility ( no interconnections to other utilities) that has been using nothing but coal. If this utility adds twenty percent wind power, the usage of coal will NOT fall by the FULL twenty percent due to the need for MORE hot spinning reserve than usual. So the net savings of coal could conceivably range from near ZERO if the wind is extremely fickle on any given day to ALMOST the full twenty percent if the wind is highly consistent for the whole day and the utility has great faith in the weather forecast.

            My guess is that ten percent of added wind or solar power reduces the need for coal or gas by eight or nine percent on average. The savings could range up to almost the full ten percent in some cases where the wind and sun are highly predictable.

            Surely the utilities themselves know the answer and the larger manufacturers of wind and solar also know the answer in my opinion.

            But nobody is saying.

        • sunnnv says:

          OFM – I’ll try again – you never seem to catch this:

          1) spinning reserve to deal with short term transients
          This is about 1 – 1.5% of the power, so a percent or two of what the added renewables are – ASSUMING one hasn’t used batteries, flywheels or in some cases pumped hydro for this.

          2) longer term reserves (different names in different places) to deal with intermittancy.
          Depends on the ramp rate and inefficiencies at partial loads of the fossil fuel systems, looks like a few percent to maybe 10%, but very situation dependent.

          I would start with the Western Wind and Solar Integration Study,
          and references therein, and things that refer to it.
          http://www.nrel.gov/electricity/transmission/western_wind.html

          And on that page there are some other studies up in the sidebar.

          “Key Findings
          The integration of 35% wind and solar energy into the electric power system will not require extensive infrastructure if changes are made to operational practices.

          Wind and solar energy displace fossil fuels. A 35% penetration of solar and wind power would reduce fuel costs by 40% and carbon emissions by 25%–45%… ”

          You will actually get some numbers, instead of the hand-waving at judithcurry’s blog.

          There is a lot of propaganda out there against wind and solar,
          because they are causing fossil fuel interests big losses in revenues.
          Wind energy, backup power, and emissions
          http://www.awea.org/Issues/Content.aspx?ItemNumber=5454
          The beacon study referenced therein is now at:
          http://energystorage.org/system/files/resources/beaconemissionreport_1_8_07.pdf

          http://aweablog.org/blog/post/correcting-fossil-fuel-industry-misinformation-about-germanys-success-with-renewable-energy

          This paper says 6% of the wind power is needed as gas turbines, for
          a 500 km diameter area.
          http://www2.hawaii.edu/~mfripp/papers/Fripp_2011_Wind_Reserves.pdf

          How about 99.9% renewables penetration?
          If you have access to a university library, you could dig in to this:
          Cost-minimized combinations of wind power, solar power and electrochemical storage, powering the grid up to 99.9% of the time
          http://www.sciencedirect.com/science/article/pii/S0378775312014759

          More high penetration studies at:
          http://cleantechnica.com/70-80-99-9-100-renewables-study-central/

  36. ezrydermike says:

    from Union of Concerned Scientists

    The Climate Deception Dossiers

    For nearly three decades, many of the world’s largest fossil fuel companies have knowingly worked to deceive the public about the realities and risks of climate change.

    Their deceptive tactics are now highlighted in this set of seven “deception dossiers”—collections of internal company and trade association documents that have either been leaked to the public, come to light through lawsuits, or been disclosed through Freedom of Information (FOIA) requests.

    Each collection provides an illuminating inside look at this coordinated campaign of deception, an effort underwritten by ExxonMobil, Chevron, ConocoPhillips, BP, Shell, Peabody Energy, and other members of the fossil fuel industry.

    http://www.ucsusa.org/global-warming/fight-misinformation/climate-deception-dossiers-fossil-fuel-industry-memos#.VZ6E8flVhHy

    • wimbi says:

      That’s why I keep urging the young people to sue those sob’s, charging them with grand larceny and murder. Sue the bosses, not the troops.

    • Jef says:

      Careful there ezry that sounds a lot like a conspiracy and we don’t talk about those here.

    • Don Jensen says:

      ezrydermike, read the bold in this extraordinary news article that came out yesterday. Now even the people who were once true climate change believers are saying it’s religion, just as i’ve been telling you, except now the mainstream news organizations in the US are picking up on it. How much longer do you think these charades can keep going? 😉

      Nobel Prize-winning scientist says Obama is ‘dead wrong’ on global warming
      By Michael BastaschPublished July 08, 2015
      http://www.foxnews.com/politics/2015/07/08/nobel-prize-winning-scientist-says-obama-is-dead-wrong-on-global-warming/?intcmp=latestnews

      In 2008, Dr. Ivar Giaever joined over 70 Nobel Science Laureates in endorsing Barack Obama for president, but seven years later the Nobel Prize winner now stands against the president on global warming.

      “I would say that basically global warming is a non-problem,” Giaever, who won the Nobel for physics in 1973, told an audience at the Lindau Nobel Laureate meeting earlier this month.

      Giaever ridiculed Obama for stating that “no challenge poses a greater threat to future generations than climate change.” The physicist called it a “ridiculous statement” and that Obama “gets bad advice” when it comes to global warming.

      “I say this to Obama: Excuse me, Mr. President, but you’re wrong. Dead wrong,” Giaever said.

      Giaever was a professor at Rensselaer Polytechnic Institute’s School of Engineering and School of Science and received the Nobel Prize for physics for his work on quantum tunneling. Giaever said he was “horrified” about the science surrounding global warming when he conducted research on the subject in 2012.

      Ironically, just four years earlier he signed a letter with more than 70 other Nobel winners saying the “country urgently needs a visionary leader” and that “Senator Barack Obama is such a leader, and we urge you to join us in supporting him.”

      But by 2011, Giaever left the American Physical Society because it officially stated that “the evidence is incontrovertible … [g]lobal warming is occurring.” The Society also pushed for reducing greenhouse gas emissions.

      “Global warming really has become a new religion,” Giaever said. “Because you cannot discuss it. It’s not proper. It is like the Catholic Church.”

      Giaever argued that there’s been no global warming for the last 17 years or so (based on satellite records), weather hasn’t gotten more extreme and that global temperature has only slightly risen — and that’s based on data being “fiddled” with by scientists, he said.

      “When you have a theory and the theory does not agree with the experiment then you have to cut out the theory. You were wrong with the theory,” Giaever said.

  37. The Wet One says:

    Just a little contribution to add to the discussion:

    http://www.esquire.com/news-politics/a36228/ballad-of-the-sad-climatologists-0815/

    Of course, all of these people are clearly weak kneed sissies who were taken off the breast too late in life, but there it is all the same. P.S. the previous sentence was sarcasm for the sarcasm detection impaired.

    For my part, I’ve gotten past my depression (mostly) and learned to love the bomb. Or something…

    🙂

    Quite honestly, I think I’m relying on a hope born of the nothing that we don’t know everything and that we could very well turn out to be wrong about how dire things actually get. Plus for now, I’m able to hope that I’ll be dead before thing get really and truly terrible. I hope that OFM’s views of North America hunkering down to survive the coming crisis becomes true and that the Republican clown car finally explodes entirely and is swept aside so that action can be taken. Eh. Mostly I try not to despair about it and simply accept that like all other lifeforms, we were never destined to last forever.

    I find solace in the fact that the world has basically been destroyed many times before and that life went on. Short of this planet being consumed by the sun (a fate which awaits it billions of years from now) life will go on. Planet wide destruction on a near total scale is normal and natural and has happened before and will happen again. The Great Dying, the end of the dinosaurs, and other mass extinction events, along with the change in the atmosphere (the single most massive change that ever occurred on this planet) have all come before us and life went on. Life will undoubtedly survive whatever depredations humans can inflict on the planet, upto and including full scale thermonuclear war.

    Humanity may pass, but with any luck coelocanths will carry on, just like other lifeforms, as they have for over 200 million years. And if they don’t, other lifeforms (bacteria for example) all but certainly will.

    Something will arise from the ashes. In this, I find hope.

    • wimbi says:

      Better to think on the bright side, after all, why not, since all is possible?

      Then, think of the paradise on earth we could create, if we just went ahead and did it instead of what we are doing–filling our stores with totally unneeded junk funded by ruining the biosphere as fast as the money-lenders can persuade us to do it.

    • Jef says:

      Whats worse saying we are all fucked or lying about how dire the future is?

      • MarbleZepplin says:

        The second part will get listened to by most people. The first one will be mostly ignored as all end of the world claims are. Doesn’t matter much where the truth lies.

      • Futilitist says:

        “I believe that it is better to tell the truth than a lie. I believe it is better to be free than to be a slave. And I believe it is better to know than to be ignorant.”
        ~H. L. Mencken

  38. ezrydermike says:

    Munich, 6 July 2015. Clean and quiet transport across Munich: from today on, the 100% electric trucks from the BMW Group and the SCHERM group will be in service. This means the BMW Group will be the first automobile manufacturer in Europe to use a 40-ton electric truck for material transport on public roads. It was launched at the BMW Group Plant in Munich by Bavaria’s Minister of Economic Affairs, Ilse Aigner.

    https://www.press.bmwgroup.com/global/pressDetail.html?title=travel-through-munich-in-a-vehicle-that-is-100%25-electric-clean-and-quiet-the-bmw-group-and-scherm&outputChannelId=6&id=T0224983EN&left_menu_item=node__4092

    • old farmer mac says:

      About that truck:

      ”The truck battery takes three to four hours to charge. When fully charged, the vehicle has a range of up to 100 kilometres. Thus, the electric truck can theoretically complete a full production day without any additional recharging.”

      The battery appears to be a dual battery mounted just in from of the rear wheels of the tractor. So no space would be lost in the cargo box. No net cargo capacity is given but in the USA a similarly sized truck could legally haul about twenty to twenty five tons.

      If the batteries give good service this is going to be a dirt cheap truck to run on short local routes. The range is given as up to a hundred kilometers with charging time of four hours. Such a truck loading at the same dock or unloading at the same dock could easily get a partial recharge while loading and unloading. High capacity electrical service is typically available at such locations.

      But my guess is that very few will be sold for the next four or five years. By then the price of batteries will likely come down enough to make such trucks start looking good to European businessmen.

      • Toolpush says:

        OFM,

        When you say could be used for short distances. You are very correct.

        http://www.greencarcongress.com/2015/07/20150706-bmw.html

        The BMW Group and the SCHERM group have put a 40-ton electric truck for material transport into service on public roads in a one-year pilot. The truck, a Terberg YT202-EV electric tractor, has successfully completed its first test drives. The truck will travel a 2km route (1.2 miles) eight times a day between the SCHERM group logistics center and the BMW Group plant in Munich, transporting different vehicle components such as shock absorbers, springs and steering systems.

        They seem to have left off the little bold part out of the other reference. Of course this is an experimental model, and maybe useful for some very small nitch markets, but I do not expect to see it running general delivery run soon, especially in the longer routes encountered in the US.

  39. Thanks Dennis for this post.

    I would urge people to take earth sciences models seriously. The oil shock model took some time to develop but it is paying off in greater understanding.

    I am currently doing El Nino modeling and the effort is also starting to pay off. Studying the data over the past 130+ years, I have discovered that the oscillations of El Nino can be modeled with some precision just by applying routine physics to the problem. The figure below is a match between the wave equation operating on the data with the simple forcing model:

    http://imageshack.com/a/img673/1896/ZEgbTy.gif

    That is uncanny agreement and something no one thought was possible due to the thinking that El Ninos are a consequence of a chaotic process. Definitely not the case! Check my blog for more info.

  40. walter says:

    Dennis

    Thanks for all the good work! I wonder if you could expand a little on your choice of decline rates. There is a lot of talk about declines expected to be 5- 8% but I can’t tell whether that is merely for the wells that have peaked or for the whole system including pre as well as post peak. I assume at some point they are all post peak.

    Walter

  41. I’m gone to tell my little brother, that he should also visit this weblog on regular basis
    to obtain updated from most recent reports.

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