OPEC Crude Oil Production, What’s Next?

Ron Patterson Uncategorized

The latest OPEC Monthly Oil Market Report is out with OPEC production data for. The data is “Crude Only” and does not reflect condensate production.

Also the charts, except for Libya, are not zero based. I chose to amplify the change rather than the total.

All Data is in thousand barrels per day with the last data point December 2014.

OPEC 12

OPEC 12 production has averaged slightly above or below 30 million barrels per day for about two years now and there is little chance it will go anywhere very fast. But what is obvious from the above chart is there has been no surge in OPEC oil production. OPEC’s December production f 30,204,000 barrels per day is still more than 1.4 million barrels per day below the peaks of 2008 and 2012.

Algeria

 Algeria is struggling to keep production relatively flat. 

Angola

Angola is holding its own… so far.

Ecuador

Ecuador increased production by 13,000 barrels per day in December, from 543,000 to 556,000 bpd. Not much but quite a jump for such a small producer.

Iran

 Nothing is happening in Iran. What just might happen in Iran is another thing altogether.

Iraq

 Iraq was where the big OPEC increase came from in December. They went from 3,331,000 bpd to 3,616,000 bpd, an increase of 285,000 barrels per day. This is considerably less than their almost half a million barrels per day increase in February but very significant nevertheless.

Libya

 Libya is still having very serious political problems and that is putting it mildly. Who knows what is going to happen there, but it is unlikely they will see these problems solved anyway soon.

Kuwait

 Kuwait’s super-giant Burgan Field is in decline so Kuwait has engaged in a massive infill drilling program to increase production in five northern oil fields—Abdali, Bahra, Ratqa, Raudhatain, and Sabriya (Kuwait’s third largest field) from around 650,000 bpd to 900,000 bpd. They were successful but now they have peaked again and production headed down.

Nigeria

 Nigeria’s political problems has been raging for years and there is little hope they will be settled within the next decade or so. Nigeria will be very lucky if they can maintain their current production level.

Qatar

 Qatar peaked back in 2008 and is now producing almost 200,000 barrels per say below that peak. From the looks of what has happened in the last fur months they may be in terminal decline. They can only hope that the decline slows. Is this their Seneca Cliff?

Saudi Arabia

Saudi Aramco to cut drilling costs, hold rig count steady

Aramco deployed 210 oil and gas rigs in 2014, marking an exceptionally busy year.

Saudi has more than doubled its rig count in recent years. Operating 210 rigs even after Manifa is complete? This this means they are drilling about 2500 new wells per year. Why? They are not increasing production, all those new wells are only keeping production flat.

UAE

 The UAE, like Kuwait and everyone else for that matter, has been doing a lot of infill drilling. They have managed to increase production from their 2008 peak by about 150 thousand barrels per day.

Venezuela

 Despite having more oil reserves than anyone else in the world, Venezuela’s oil production continues to languish. Engineers with six years experience in Venezuela make about $400 a month, 9% of the world average and one fourth what they are making just across the border in Colombia.

Iraq et al.

Which OPEC nations are holding their own and which ones are languishing? OPEC production peaked in 2012 and only four countries have held their own or slightly increased production since then, Iraq, Kuwait, Saudi Arabia and the UAE.

Algeria et al

 The other eight OPEC countries, combined, peaked in 2005 and have declined by about 3 million barrels per day since then. Of the eight, only Libya and Iran could produce very much more if their political problems were to disappear. However that is not likely to happen in the next few years.

Political problems in the Middle East, Africa and Venezuela will get a lot worse before they get better. Low oil prices will, very likely, greatly exacerbate these problems.  And who knows what might happen in Saudi Arabia?

Saudi King Abdullah’s Death Clouds Already Tense Relationship With U.S.

In the short term, the death of the king actually might ease strains in the relationship. The Saudi kingdom, as it enters a period of transition, may feel more vulnerable to external threats and eager to show the world that it still has the solid of backing of the U.S.—the country the kingdom always has seen as its ultimate protector.

But in the longer term, the transition raises questions about how the new Saudi leadership will see its relations with the region and the wider world. Most likely, it will be a period of what longtime Middle East diplomat Dennis Ross calls “collective leadership.”

That in turn may reduce the Saudis’ ability to move decisively on the difficult and contentious issues—toward Iran, Iraq and the Islamic State uprising, as well as oil policy—that the U.S. and Saudi Arabia have been trying to address together.

New Saudi king vows no abrupt policy shifts

“The Arab and the Islamic nations are in dire need of solidarity and cohesion,” the king said.

 There is a good video at that last link.

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337 thoughts to “OPEC Crude Oil Production, What’s Next?”

  1. How many active oil wells are there in KSA? How about other OPEC producers?

    1. How many active wells are there in SA? Thousands man but how do you define active? Someone said Ghawar has about 3000 production wells. But there are a few hundred water injector, observation and gas wells there too. If you include the Saudi-Kuwait Neutral Zone I’d make a wild guess and say 5000. Ron will probably know better than anyone here.

    2. Shallow,

      I believe, that is one of those questions of, “if I tell you, I will have to kill you”.

      Someone on the TOD counted SA wells using Google earth. Can any one remember who that was?

        1. Thanks Andy,

          Joules Burn’s, site is certainly worth a look for anybody.

          1. Thanks for the information. Wish we had more information about production in these countries.

  2. Ron,

    Nice summary of OPEC Crude Oil Production. As you stated with the example of Saudi Arabia, they have increased drilling rigs considerably but have not increased production. Sounds like they are dealing with their own RED QUEEN SYNDROME.

    Anyhow, as the price of WTIC falls to the $45 handle, the U.S. continues to pump shale oil as if there is no tomorrow. According tot he EIA’s weekly inventory report, build in oil inventories are the highest since 2001. Furthermore, the IEA states that if current projection of weak demand and robust supply continue, the world will BUMP UP AGAINST STORAGE CAPACITY in the 1H 2015.

    That should cause some real fun in the oil markets. Looks like the major oil producers are playing a game of CHICKEN to see who cuts and runs first.

    I imagine if global oil production continues a current, or slightly elevated levels… well then, we are heading towards $30 oil.

    steve

    1. Steve,

      Refinery runs were down nearly 1 million barrels per day from the previous week with import steady. That is a 7 mill barrel build by itself. I feel their was some technical problems with the some refineries. Export of refined products are down a million barrels per day from last year as well.
      US refined products were up a bunch as well. Probably going higher. So much for oil independence.

    2. And an additional unknown is the Condensate to C+C Ratio (for both US production and inventories).

      The most recent four week running average for net crude oil imports, as a percentage of crude oil inputs, in US refineries is consistent with what we have seen for a while, 43%. This would seem to be inconsistent with a large build in actual crude oil (45 and lower) inventories, and especially a build in 40 API and lower crude, which has the highest distillate yield.

      In other words, it’s possible, and perhaps likely, that most of the build in US inventories has been on the light end.

    1. Hi Weekendpeak,

      Good article. I imagine this is what oilmen like Rockman were referring to when they questioned if 24 hour IP is a good metric for well quality.

      1. ”
        In the Utica, the location of Range’s Claysville well, drill sites on average are on pace to produce less than half of the 700,000 barrels of oil and gas a day that was originally forecast for a period of about two years, according to a Jan. 12 review of hundreds of wells by Tudor Pickering Holt, a Houston-based investment bank.
        “

        1/2 of that or 350,000 barrels agrees with DC’s analysis. Can’t trust the oil industry playas, but the amateurs do good work 🙂

      2. Incidentally, diffusional processes have an initial strong transient that can screw up the interpretation if the modelers don’t take this into account. No wonder that they overestimated longer-term flow rates.

      3. Again, its instructive to understand how they high-balled the numbers so badly for these fracked wells.

        If they used the wrong decline model, they would have vastly overestimated the flow after a few years, but with the correct diffusive model, they would have noticed that this was just part of the initial transient and understood the longer-term flow would have been proportionally much lower.

        It’s not that the out-year prediction was statistically insignificant with the initial flow, but more than likely proportionally wrong and thus the prediction was insignificant of the actual flow. Big difference between the two modes of modeling failure.

  4. A Saudi Palace Coup
    By David Hearst
    http://www.huffingtonpost.com/david-hearst/a-saudi-palace-coup_b_6531246.html

    King Abdullah’s writ lasted all of 12 hours. Within that period the Sudairis, a rich and politically powerful clan within the House of Saud, which had been weakened by the late king, burst back into prominence. They produced a palace coup in all but name.

    Salman moved swiftly to undo the work of his half-brother. He decided not to change his crown prince Megren, who was picked by King Abdullah for him, but he may choose to deal with him later. However, he swiftly appointed another leading figure from the Sudairi clan. Mohammed Bin Nayef, the interior minister is to be his deputy crown prince. It is no secret that Abdullah wanted his son Meteb for that position, but now he is out. More significantly, Salman, himself a Sudairi, attempted to secure the second generation by giving his 35- year old son Mohammed the powerful fiefdom of the defense ministry. The second post Mohammed got was arguably more important. He is now general secretary of the Royal Court. All these changes were announced before Abdullah was even buried. . . .

    Salman’s state of health is cause for concern, which is why the power he has given his son is more significant than other appointments announced. Aged 79, Salman is known to have Alzheimers, but the exact state of his dementia is a source of speculation. He is known to have held cogent conversations as recently as last October. But he can also forget what he said minutes ago, or faces he has known all his life, according to other witnesses. This is typical of the disease. I understand the number of hospital visits in the last few months has increased, and that he did not walk around, as he did before. . . .

    The need for a change of course is all too apparent. On the very night in which the royal drama was taking place, a political earthquake was underway in Saudi Arabia’s backyard, Yemen. President Abd Rabbu Mansour Hadi, his prime minister and government resigned after days of virtual house arrest by Houthi militia. Hadi’s resignation leaves two forces in control of the country both of them armed to the teeth: an Iranian backed militia which gets its training from Hezbollah, and al Qaeda, posing as the defender of Sunni muslims. It is a disaster for Saudi Arabia and what is left of the ability of the Gulf Cooperation Council to make any deal stick. Their foreign ministers met only the day before. Yemen’s former strongman Ali Abdullah Saleh, who was levered out of power three years ago and who according to leaked telephone calls, advised the Houthis on how to grab power, is now calling for fresh elections, and there were already calls on Thursday night for the south to split away from the North.

    Yemen, in other words, has officially become the Middle East’s fourth failed state.

    1. I wonder what the rate of increase has been in high maintenance Saudi princes (and princesses) in the past 10 years?

      1. The total fertility rate or total birth rate per woman has been dropping like a stone in Saudi Arabia according to Wikipedia and the CIA for the last few decades and is now not much over two per woman ( estimated ) but I forgot what it is.

        This is an excellent indication that the preachers aren’t totally in control of social policy or else that most of them are smart enough to understand that a six or eight kids per woman birth rate is the broad smooth road to disaster.

        BUT the age distribution is skewed heavily towards young people and even at two per woman the population is going to grow fast for a long time to come. Life must have been pretty rough there until recently- there are very few old people in relation to the population.

        Right wingers in this country used to accuse women on welfare of having one kid right after another to collect benefits.

        Sometime back I saw a figure quoted that the Saudi royal family is thought to number about nine thousand. That is a a pretty good sized family.

        Personally I never bought the welfare queen argument- such women are just too dumb or ignorant to insist on birth control or to down and out to care.

        But with millions of dollars at stake with every new prince and princess born it could be that the family has a little deliberate population boom going on within the royal walls. If I were a prince of the realm and could raise kids in the lap of luxury with a small part of the treasure they would bring under my control…. I doubt I would hesitate to father a LOT of kids.

        Whether this is happening or not I have no idea but I have seen some speculation here and there in odd corners of the net that such is reality.

        Having lots of kids in that situation would be a piece of cake .Kids born to the harem count as legitimate according to what I have read. The new king himself seems to have been born to a concubine – or maybe that was the other front running guy hoping for the crown.

        1. “Personally I never bought the welfare queen argument- such women are just too dumb or ignorant to insist on birth control or to down and out to care.”

          This is an offensive comment. Which women is it you think are too dumb or ignorant?

          1. This here old redneck ain’t EVER going to knuckle under to pc bullshit.

            PC means you criticize only people on the OFFICIAL PC SHIT LIST – I am proudly on that list.

            OF COURSE it is OK OK OK FOR YOU to criticize ME for pissing on YOUR CRITERIA of who is dumb as a fence post or too down and out to care.YOU ARE PC and I AM ON YOUR SHIT LIST..

            In the cozy little pc world YOU get to decide who says what.

            Fortunately our host Ron is not afraid to criticize religions or cults or stupidity in general and until he tells me other wise I will post comments here that I believe are true.

            You ask me ” which women” are too dumb and ignorant?

            THE ONES WHO HAVE or had ONE KID RIGHT AFTER ANOTHER without the means of supporting them- other than welfare -THOSE women.

            Now I was young once and know all about raging hormones and all that stuff.

            Young women with raging hormones who get led down the primrose path and left in the briar patch all alone except for the kid ONCE who happen to have WORKING BRAINS generally learn better in choosing prospective boyfriends and mates . The ones with ONE kid are not the ones I am talking about.

            I also know a little bit about depression and hopelessness of the emotional and intellectual kind having some experience in that area with friends and relatives and a few courses in the field ( licensed special ed and agriculture teacher and got most of the way thru RN training before dropping out to look after elderly parents)

            Fortunately these down and out women are not so common as they used to be. I only know two personally at this time- both of them lily white distant cousins of mine. Twenty five or thirty years ago I knew a dozen or more personally – but I lived in the city then and worked part time in poor neighborhoods as landlords handyman while doing some grad school and thus made their acquaintance.

            Bill Clinton who I have grown quite fond of in retrospect had a good bit to do with their thinking more often once he pushed thru his welfare reforms. So maybe most of them HAVE working brains enough to think more before enjoying an unprotected roll in the hay.

            When it was in my power to do so I did what I could to help these women better themselves – mostly by providing them with the name and phone number of a local outfit that would pay for birth control for them.

            All the men are good looking and all the women are strong and all the kids are above average only in Lake Wobegone.

            Refusal to recognize reality is one path to hell on earth.

            Now if you were to ask me about my opinion of the BOYS who lied to them and lead them on and knocked them up and mostly left them to fend for themselves and their kids – well I wouldn’t actually be able to post it here. I try not to use the really bad cuss words very much in a place where too many kids might see them and be encouraged in bad habits.

            MEN in my moral world look after their kids.

            Incidentally I generally think of the entire human species as being as dumb as a fence post COLLECTIVELY in terms of behavior.

            I have at times had numerous very liberal and very well educated friends and acquaintances -professionals of various sorts. They all loved down and out people at a distance. I never noticed any of them having their yard guys and house keepers over for dinner.

            I don’t actually invite my farm help TO dinner but when we knock off for lunch if we are near the house we have it in the eat in kitchen – together – we don’t have a dining room as such.

            ONE more thing-I fully recognize and understand that environment and culture have more to do with poverty and crime than brains ever did or ever will. Just about every semiliterate redneck in or out of jail I know would be an upstanding citizen wearing a suit if he had been born into a professional family rather than to down and out farmers and laborers.

            Incidentally I come from the world of down and out people within living memory.

            My culture involves hard work and modest living and with that culture in combination with some substantial good luck my family has prospered. I was the first college grad myself.

            Now we have some doctors lawyers cpa’s engineers lots of teachers and nurses, as well as plumbers truck drivers carpenters and laborers. Some successful small businessmen. But hardly ANY pc types. Only a couple in jail that I am aware of.

            This is not to say we are all law abiding citizens but rather that most of us who aren’t are smart enough to avoid getting caught. 😉

            1. LOL…. Enjoyed your post…Now that I have the “full monty”… I found my head nodding in agreement many times.

              However, I would like to add one more thing for your considerations. Over the course of the years I have volunteered at several homeless shelters…. my preference being to volunteer to work/mentor/help with women with children. With the “privatization” of our government social safety nets what I have encountered is many of the not for profit groups are religious… and access to these social services entails following their religious dogma…… volunteering within these groups is extremely difficult for me….. and there are almost none that are not religious based even though they do not advertise it or admit it to the public…

              What I have witnessed is the not for profit religious government funded social services encouraging these young women to not access birth control and if the young women has “allowed the horse to slip out of the barn”…. well, this is the punishment for not obeying Gods laws, abstinence only…. (He works in mysterious ways….) and if “you” continue to follow Satan calling worse will happen to you than an unwanted child that you do have not ability to care for……. (like you and your child(ren) and see God has shown mercy by leading you to our door) will lose the current roof over your head that said services are providing… and your ever lasting soul will most certainly burn in the eternal flames of hell) instead of enabling and encouraging these women to have access to care….. ie…. birth control from the get go and clinics if the horse escaped the barn…… BTW… many of these women have or are “recovering” drug addicts…. the explosion is prescription, heroin and meth addiction along with extreme poverty has been frighting…. and overwhelming… in the community that I live in. Drug use permanently damages the brain…… hence the “stupidity” of many of the choices these women make……

              Sorry Ron for straying so far from OPEC production…. I enjoy reading your work and appreciate the email heads up when you post them…. but I believe the back side of Peak Oil is going to be more extreme dysfunction in our society as resources become strained and I think we are starting to see it. I am waiting for the banking oil price derivatives shoe to drop…….. it will be interesting to see if TPTB can “kick this can” again… and how far.

            2. Well said all the way Louise. My chin went up and down too reading your comment.

              We are cursed to live in interesting times- as a Chinese sage once famously put it.

        2. Macster,

          re: “Sometime back I saw a figure quoted that the Saudi royal family is thought to number about nine thousand. That is a a pretty good sized family. ”

          Hey, if you were King with billions….hell, if you simply won the lottery, you’d have a big family too. Everyone would be proud to call you Dad, Uncle, Cousin….

          1. True enough but it probably really is that big or bigger. The family clan thing has always been extremely important in that culture to the best of my knowledge and the ” family ” probably numbered a thousand or close to it even as far back as WWII. With tons of money and the women having half a dozen kids each until the mid nineties….. The birth rate is WAY down now though.

        3. Mullahs have preached family planning in several coutries, most noticeably Bangladesh after the big famines. Also after the Islamic takeover in Iran the birth rate collapsed. In fact almost all the big Muslim countries — Indonesia, India, Iran, Bangladesh, Turkey, Egypt — have fairly low birth rates. The big exception is Pakistan.

  5. The longer-term OPEC-12 chart is somewhat noisy but nevertheless illustrates an extraction regime that has changed little since 2005. There is nothing to suggest a crash in prices; no real increase in output other than brief periods in 2008 and 2012 (unadjusted for net exports which is what matters in international markets).

    The idea that oversupply (Saudi Arabia’s fault) is the reason for the ongoing price collapse is not supported by evidence.

    US output isn’t responsible, either. Drillers have not equaled flow that was gained in 1970. At the same time the energy content of current liquid fuel supply has diminished. Low price will cut output numbers from here. Safe to say US peak (output or mj) was in 1970, world peak is likely occurring under our noses.

    1. A copy of a relevant previous post:

      Re: OPEC Spare Capacity

      As annual Brent crude oil prices rose from $25 in 2oo2 to $55 in 2005, Global Net Exports (GNE*) rose from 39 mbpd in 2002 to 46 mbpd in 2005.

      As annual Brent crude oil prices rose from $55 in 2005 to the $110 range for 2011 to 2013 inclusive, GNE fell from 46 mbpd in 2005 to 43 mbpd in 2013.

      Methinks that there was a material amount of export spare capacity in the 2002 to 2005 time frame, but I have severe doubts about the 2011 to 2013 time frame. Of course, there were some recent production disruptions related to political unrest, e.g. Libya, and some sanctions, e.g., Iran, but those factors are always at play to some extent.

      In any case, depletion marches on, and in my estimation total remaining post-2005 Global CNE (Cumulative Net Exports) have fallen by about 30% since 2005 (through 2013).

      *Top 33 net exporters in 2005, total petroleum liquids + other liquids, EIA

  6. I have seen at least one article that says oil consumption is up sharply in the US in the last few weeks compared to the same period last year but I forgot to bookmark it.

    But the increase is not supposedly enough to account for production plus imports minus exports. There seems to be more oil going into storage SOMEWHERE every day.

    From my layman’s pov it seems that storage would have been all full up weeks ago. What gives?

      1. Hi Watcher,

        Oil supply has increased more than demand has increased, just look at the OPEC market report to verify. This has caused oil prices to drop, some of the supply has gone into storage and more has been purchased due to low prices.

        1. Hi Dennis,

          Who is storing? Do you have any info on that? If somebody is storing I would assume that that extra surplus oil has to be bought first? If somebody bought than that is part of the demand.

          2. I think there’s a fair chunk being stored on container vessels right now, as the futures curve currently makes that profitable. However the market’s only in contango until about January next year at present.

            1. Can you provide entity name that is storing? Who? Oil companies? Banks? Mike in his backyard?
              But if somebody says “somebody is storing somewhere” it does not mean anything.

            2. Ves, just google it, it is all over the net. Google “Contango oil being stored” or something similar.


              Crude oil seen stored on tankers in 2015 as contango widens

              Global oil traders are likely to store crude in tankers next year, as a widening contango makes large-scale storage at sea profitable for the first time since the financial crisis more than five years ago, industry sources said.

              Oil prices have plunged nearly 50 percent since June due to a global supply glut, but the economics for storing crude at sea have mostly remained unfavorable.

              However, with Brent for prompt delivery dropping sharply versus later contracts <0#LCO:> in the past week, traders are increasingly requesting to lease vessels for storage.

              This market structure, known as contango, allows traders to lock-in profits by buying oil now and selling it forward for later delivery, as long as the costs of storage are low enough.

              “The current contango on the ICE Brent market would already be sufficient to make floating storage viable based on average 2014 freight rates,” JBC Energy said in a note.

              Analysts at JBC Energy expect 30-60 million barrels of oil to be stored offshore worldwide in the first six months of 2015.

            3. If I understood correctly that article talks of possible future – short term economics of storage. What I am asking that somebody to show me where that surplus of oil went in the past, last six months.

              And anyway the article agrees with me and says in the paragraph at the bottom:

              “But so far this year, only a few tankers have stored oil at sea as the discount for the front month crude futures has been insufficient to finance chartering. Ship owners have also been resisting calls to lease out vessels for oil storage given a seasonal hike in freight rates.”

              So so far nobody is storing anything meaningful.

            4. Funny how that works.

              2 million barrels per day of oversupply!!!!!

              From June that’s 200 days? 400 million barrels.

              Cushing’s total storage is about 50 million barrels. The US SPR is 727 million barrels. So the accumulation would be over 1/2 of the largest oil storage in the world. (pssst, it was not half empty in June)

              hahaha it is hilarious that this gets attention.

            6. Look for oil storage facilities on Google Maps. You have them in every significant sea port (Houston, Rotterdam, Antwerp, Singapore …) All those cylinders are empty. You can make that up by the shadows inside and outside these cylinders. So: There is a lot of storage capacity onshore.

          3. Hi Ves,

            If the producers are storing the oil, that would not be part of demand. But if a refiner or middle man is buying oil and storing it that mught be considered demand. I tend to look at refined products and assume those mostly get consumed rather than stored and ignore the intermediate steps.

            Looking at the OPEC report shows supply growing faster than demand, these are estimates when there is no room left for storing oil, either more must be consumed or wells need to be choked back to reduce supply.

            Basically Watcher is correct that I do not have any inside information, logic suggests that oil that has been produced is either stored or consumed. I think of demand as the final use of the product, like fueling a vehicle with gasoline or diesel.

            1. For 2014 OPEC estimates about 1 mb/d of extra oil, that would be about 365 million barrels of oil that needed to be stored if the estimates are correct.

              If I am a producer of oil who has no place to put my oil, what would I do after I have choked back all my wells as far as is practical without damaging the well?

            2. Dennis, Reuters had a article dated 1/12/15 which stated only about 150 million of US 439 million bbl of oil storage was utilized. I have no clue about how any of this is determined or how it plays into weekly inventory reports, just passing along what I read.

            3. Also, have not heard that anyone was cannot sell their oil because storage is full. Cannot say the same for record grain harvest this year, when farmers were many times turned away due to local grain elevators being full. Apples and Oranges I know.

            4. If you are an oil man and find yourself in this situation you will be in the same spot local orchardists have been in for the last thirty years.

              You have excess production and NO MARKET. You HAVE to cut back. In the orchard you just push the trees out with a large tractor or dozer. You take out the oldest and worst performing trees selectively. At first.

              Eventually there is no orchard left on a lot of farms.

              I guess once you hit the point you simply cannot ship oil at any price because there is nobody WILLING and ABLE to take physical delivery you just quit pumping your worst well. Then the next worst. Then the next worst until you get production down to match your ability to ship.

              And you hope the price goes back up before you go broke.

              Most of our neighbors went broke. We ran at a loss for years to keep Daddy’s morale up. I sold many a load of apples for a lot less than I told him I got for them and ate the difference out of my own pocket.

              The market glut eventually cleared to the extent that producers with the best land and capital enough to expand to the necessary new larger scale with new equipment started making a living again.

              Oil will go up again too. But not until a lot of people go broke. I feel for the little guys. The big boys will keep right on eating a few bites out of a full pound ribeye and throwing the rest out.

              Somebody such as Rockman or Fernando with hands on experience will be able to tell us what happens to a well that has to be shut in . I hear it costs a good bit to get such a well producing again and that it may never produce as much as it did previously. But that doesn’t make it so.

            5. Old Farmer Mac.

              I assume that the reason there always seems to be space for the oil is that it does not have a season, like fruit, vegetables and grain. It is always coming, every day 24/7/365 for the most part. Therefore, I assume, it is easier to plan for its storage, there is less risk of building storage that will be rarely used, and therefore a losing proposition. They say the pipeline business is a good one to be in regardless of price of crude because there aren’t droughts where the oil just doesn’t show up unexpectedly.

              I’m not at all familiar with orchards, but live in the middle of grain farms. In 2012 there was a bad drought, harvest was finished in two weeks. This year, a lot of rain and not hot, bumper crop and the elevators would usually be full before noon. I guess the farmers in ND really suffered as they had a big crop but could not compete with the oil being railed. Stranded grain, basis was awful, corn under $2 per bushel at times.

              I’m not educated in the oil industry, but can tell you from observation that some wells are not hurt at all from being shut down, while others are. Fields that are under water flood need to be kept going, otherwise is appears the “push” through the producing zone disappears. I’m sure there are many here who can give you more accurate information about this.

              Also, the wells are subject to a lease. The lease usually has a provision that same is in effect for a period of time, “and as long thereafter as oil or gas is produced.”. The lessee, being the oil producer, cannot shut the wells down for an indefinite period of time, otherwise the lessor may file suit to cancel the lease. Saw this happen several times in the 90s, particularly 1998. The lessee would then be required to remove the equipment and plug the wells. If the lessee does not move the equipment timely, or just walks away from everything, the equipment can be forfeited to the landowner.

              You might wonder where the bank is in this situation. They usually will walk away too, rather than foreclose and end up with liability for plugging out the lease themselves.

              Living in an area where commodities dominate the local economy, I have observed the commodity price swings for many years. Plays havoc at times. Right now is not a particularly good time for either oil or grain, but there have been some good years immediately prior. The guys and gals hurt the most are ones who recently bought assets on the high end and borrowed to do so. However, if this lasts awhile, all will be hurting.

              Really enjoy your posts. Take care!

            6. Dennis, the oil is sold if it’s produced. I think buyers will buy at whatever price allows them to store and hedge while paying off an adequate return. And there’s a lot of storage which can be arranged. For example, there’s space in the Bahamas, in South Africa, and other low cost areas.

            7. How cheap would oil have to get to ship oil out of the way to the Bahamas or South Africa and store it for a few months or longer and then load it up again and haul it on to the refinery where it will be eventually be processed?

              I guess a better way of phrasing this question is to ask how much it costs to move a barrel one way by ship.

              Bermuda is more or less ” on the way ” from Venezuela and other exporters but it must still cost a good bit to load and unload a ship.

              There is obviously a LOT more storage capacity available than I ever would have guessed.

            8. Hi Fernando,

              The question I asked:

              “What will producers do of storage is full, and wells are fully choked?”

              This was intended as a rhetorical question for those who do not seem to understand that prices are determined by supply and demand.

              I know that you, Old Farmer Mac, Ron, and most others understand this, there are a few who do not.

              The answer is that the oil price will drop until all the oil can be sold (same answer as yours). The oil will be sold at whatever price they can get if oil storage is full and wells are choked as far as is reasonable.

    2. Hi Old Farmer Mac,

      Sometimes the EIA reports are inaccurate, especially the weekly data is not very good and does not get revised. The monthly reports are somewhat better, those do get revised as the data improves.

      1. Thanks everybody.

        It appears that there is a lot more storage capacity available than I would have ever guessed.If the Reuters article Shallow Sand mentions is accurate there is storage available to stash an extra million barrels a day for a long time yet.

        This brings up the question of WHY so much storage capacity should exist. Some of it may be at old closed refineries and such. Maintaining an unused tank farm wouldn’t cost much in comparison to the rent it would pull in at a time like this.

        Maybe refiners in past times liked to keep a few months supply of crude on hand in the event of supply disruptions? I know a bunch of old refineries have been closed as bigger and newer ones have taken over the work.I once worked some shut down maintenance around a couple of coal fired power plants where policy was to keep at least two months supply of coal on hand in the event of strikes in the mines or railroads or natural disasters etc disrupting deliveries.

        Some years ago at TOD iirc somebody said that in some cases if crude can be bought dirt cheap it can actually be pumped into an old oil well for storage.

        I guess that is possible but it sounds mighty iffy.If the well is depleted but still being pumped for a few barrels a day I suppose the oil sent down would come back up sooner or later. I would be afraid it would be MUCH later.

        1. Pumping oil into an old well is a pretty bad idea. The oil is de gassed, has a higher viscosity, and doesn’t get displaced out that efficiently.

          If anybody REALLY wants to store oil they can do much better using a steel tank or an old tanker.

      1. Well, the companies provide help interpreting, because they are so helpful.

        BTW, it’s not investors this is pitched to. It’s lenders. Ain’t a lot of secondary offerings being pitched.

        1. In that case the lenders can do better due diligence. I assume they don’t care because they can resell the product. I’ve seen them operate, they seem to like dark corners, make lousy deals, get their commissions, and that’s life.

          1. I believe the term during the housing bubble was “We would do this deal if it was structured by cows.”

  9. Baker Hughes: US rig count down 43, oil rigs down 49, gas rigs up 6.
    Bakken oil rig count down 13 (!), to 151.
    Eagle Ford and Permian oil rigs down 6 each

    1. Compared to October 2014 highs:
      Bakken -47 (-23,7%)
      Eagle Ford -38 (-18,4%)
      Permian -87 (-15,5%)
      DJ Niobrara -14 (-28,0%)

  10. SOME NORWAY NEWS (or TIME FOR SOME ANTI-GLOBAL WARMING COMMENTARY?)

    ARCTIC ICE CAP SLIDES INTO THE OCEAN

    http://www.sciencedaily.com/releases/2015/01/150123081723.htm

    “Satellite images have revealed that a remote Arctic ice cap has thinned by more than 50 meters since 2012 (about one sixth of its original thickness) and it is now flowing 25 times faster….over the last two decades, ice loss from the south-east region of Austfonna, located in the Svalbard archipelago, has increased significantly. In this time, ice flow has accelerated to speeds of several kilometers per year, and ice thinning has spread more than 50km inland — to within 10km of the summit.”

      1. Fernando,

        Silly Fernando… don’t you realize industrial civilization adds aerosols in the atmosphere that when stopped would push global temperatures up 1.3 C in a short period of time? Dear man… we already way above 1 C when you factor in this and all the heat that went into the deep ocean.

        We are screwed OL BOY..

        steve

        1. If the heat went into the deep ocean then I’m not worried. Why worry if it’s already down there? I’m more worried about surface temperatures.

          1. Hi Fernando,

            I assume you are joking. Eventually the ocean warms to the point where no more heat can be stored there unless surface temperatures rise. I am assuming you know some basic thermodynamics and physics.

            1. Dennis, I have an engineering degree. I also studied physical oceanography, and worked a summer internship program working for NOAA. My job aboard a research vessel involved taking ocean temperature using expendable bathythermographs. The data was being used by a PhD candidate who wrangled a large grant to model ocean dynamic processes.

              With that behind us, I suggest you look into the processes which drive surface energy into deep water, consider water volumes, heat capacities, and such factors.

              Now I have an additional angle, which I’m sure you will enjoy: just for kicks, take your estimate of remaining resources of oil, gas, NGL and coal, deduce the amounts used for plastics, and burn what’s left. Then remember the carbon cycle mass balances. Estimate CO2 concentrations over time. Then derive the surface temperatures using basic equations (or use a CGM). When you have the answer come back and tell me whether you still worry about ocean energy content below 300 meters.

            3. Fernando said:

              ”
              If the heat went into the deep ocean then I’m not worried. Why worry if it’s already down there? I’m more worried about surface temperatures.
              “

              It is pretty clear that these oil professionals do not understand how diffusion works. For thermal energy to get to the deep, the surface has to warm. The process of random walk downward ensures that the excess heat profile is maximum at the surface, i.e. at the originating location of the excess.

            5. Is introducing salty versus fresh water a randomized process?
              Thought so. Thus it adds a stochastic element to diffusion and the random walk process.

            8. sea level rise us the only serious impact from ocean energy uptake

              What about CO2 induced ocean acidification?

            9. What about hurricanes? What about changes to rainfall patterns?

              NAOM

            10. Hi Fernando,

              The ocean turns over on the order of 1000 years or so. As the ocean absorbs the excess heat from the atmosphere, its temperature will increase, when the ocean temperature is equal to the average atmospheric temperature. Then the ocean stops taking up heat from the atmosphere (on a net basis over the average year).

              I suppose one could argue that we shouldn’t worry what happens 1000 years from now, but once the ocean has warmed, it will take a long time to cool.

              To get an idea of what kind of temperature changes we might see once this happens we can look at temperature changes over land only, which are much higher than over the entire planet where the ocean is absorbing a lot of excess heat.

              A bit surprising you cannot seem to see this.

            11. Dennis, you just have to work the heat capacities to get a sense for the overall figures. By the time the ocean layer below 2000 meters warms 1 degree C the surface will be toast. But we really don’t have so much CO2. Don’t forget I was taking exams on this material in the 1970’s and I had a refresher when I worked with the Arctic projects offshore Russia. I’m not trying to drop my CV here, but I do hope you understand I usually write about things I know a little about.

            12. There are a few areas that are generally ignored in the global warming equation.

              1) equilibrium of undersea methane hydrates
              – The earth is about at a maximum for methane hydrate storage. A portion of that will be near temperature boundaries that allow release of methane with small warming of deeper ocean layers. Thus releasing a very potent greenhouse gas without much change in ocean temperature.
              2) albedo effects – Since visible light is not intercepted by the atmosphere other than by cloud formations and can pass both inward and outward without heating, snow and ice cover on this planet control about 14 watts/m2 of insolation at the surface. The losses of snow cover (mostly in spring and summer), loss of sea ice in the arctic, and loss of ice caps control as much heating of the surface and ocean than do the greenhouse gases. Since the trend is increasing loss of ice and snow, they will soon control more solar energy than the greenhouse gases.
              As boreal forests progress northward into the tundra, the albedo is reduced by the darker trees compared to tundra surface, further increasing the rapid heating in the Arctic and eventually globally.

              3) Planned reductions in industrial pollution will have another warming effect, about 1 to 1.5 degrees C total possible.

              4) Rapid deforestation has increased the plume of CO2 into the atmosphere and ocean.

              5) Ocean current destabilization – It may not take much ocean heating to slow, disrupt or stop the thermohaline current, especially the Arctic current. If this happens, heat near the equator will be trapped and some northern regions will experience a severe temperature drop. In any case major climate change will occur. Environmental changes will be severe as well as agricultural. This can happen in less than a decade.

            13. Fernando,
              All you have to know is that the vertical eddy diffusion coefficient in the open ocean is about 1 cm^2/sec. This is on the same order as solid copper — and we all know what a good thermal conductor copper is!

              http://oceanworld.tamu.edu/resources/ocng_textbook/chapter08/chapter08_05.htm

              If it wasn’t for this turbulent mixing due to eddy processes, the diffusion would not be very strong, as water by itself is not a very good thermal conductor.

              The AGW deniers thrive off of misinformation so they stick to the basic principle and ignore the reality. That is the way they work and how they sucker in gullible skeptics.

            14. The ocean is primarilly heated by the sun, not the air. Dark open water can absorb 70 percent of the insolation. Conduction and infrared radiance then warms the air. Greenhouse gases such as CO2, H2O, NO2 and other asymmetrical stretching molecules intercept and reradiate the infrared radiance from ocean and land.

            15. Hi AllenH,

              Good point. My point was that the ocean takes up a lot of the excess radiative forcing due to increased greenhouse gases. The heat capacity of the ocean is much larger than land, but over time the ocean will warm and the rate of heat uptake will be reduced and the rate of temperature increase of the atmosphere will increase.

            16. IF the extra heat being trapped by the extra co2 really does make it into DEEP water then it probably won’t matter much because by the time it makes it back to the surface the fossil fuel age will be long over and the co2 will be on it’s way back down again barring massive volcanism etc.

              I have read up on this stuff – extensively, for a layman.

              It would take a VERY long time for the deep ocean waters to heat up even one degree and a very long time after that for the natural circulation to bring that ( somewhat warmer ) water back to the surface.

              But is there any good evidence the heat is making it into the deep ( meaning thousands of feet ) water?

              To the best of my knowledge it seems that the upper few hundred feet of sea water as opposed to deeper water is where the heat is winding up.

              If this is true then that ( extra ) heat will find it’s way into the atmosphere in the not too distant future as the surface waters warm some more and gradually turn over. Near surface waters turnover takes place on a time scale measured in years or decades at the most unless I am mistaken.

              I am not an engineer but I do know a bit about probability. A person with deep technical expertise I lack might just do well to examine the elephant from another perspective?

              If the last few years prove there is no warming trend-WHERE ARE THE COOL YEARS that should be intermingled with these warm ones?

              The ABSCENCE of cool years is evidence in and of itself of a warming trend.

              Every where I look I see positive feedback effects emerging that will contribute to more warming but very few clearly identifiable negative feed back effects emerging. Far northern waters will less ice and more bio mass will darken and absorb heat far far faster than just recently exposed water with low bio activity for instance.

            17. Yes, ocean surface heating is a large factor in world weather. Monsoons can shift or disappear creating havoc and starvation in large parts of the world.

            18. Heat gets into the deep ocean mostly when warm salty water dives down. Saltier water is denser, and surface water gets salty from evaporation, so the oceans are somewhat unstable.

              For example there is a underwater waterfall at the Straits of Gibraltar that carries warm salty water from the Mediterranean surface to the bottom of the Atlantic.

            19. Old farmer, it always comes down to attribution of the ongoing global trend. I like to couple that to economics and to remaining fossil fuels we can exploit.

              I have a suggestion for the group. Each of you estimate the CO2 concentration we would get if Dennis Coynes shock model oil production forecast is true. Pile on natural gas and coal if you wish. Then come back and report the CO2 concentration and temperature 50 years from now.

            20. I think it is all about timetables and urgency. There are multiple reasons to move the world economy away from oil, and even from coal and natural gas. That doesn’t mean stop using them altogether, unless they become scarce, but it could mean improving efficiencies, eliminating unnecessary uses, and finding substitutions when available.

              The CO2 discussion is relevant only in terms of timetables and acceptable substitutions. It doesn’t change the main focus of this forum, which is that oil will not continue to be as plentiful as it has been.

            21. Hi Fernando,

              I have done that already and get CO2 of about 550 ppm with reasonable estimates for coal, natural gas, oil, cement production, natural gas flaring, and land use change.

              This is roughly a doubling of CO2 above preindustrial CO2 levels of 280 ppm throughout most of the Holcene.

              If we use the best estimate of equilibrium climate sensitivity of 3 C, that is the amount of warming we will see. It takes thousands of years for the CO2 levels to naturally decline with no more human carbon emissions.

              A rise in average global temperatures of 3 C may not seem significant and if it occurred over 3000 years or so we might be able to adapt more readily. Ecosystems cannot adapt readily to rapid changes over a few hundred years. This is where biologists are smarter than the average engineer.

            22. I agree. I would add natural gas and coal to it. The North Sea and Groningen sure looked huge 50 years ago, today they are old and worn down.

      2. Hi Fernando,

        Given that you are a petroleum engineer it occurs to me that you just might have a friend or two who are power plant engineers. I have been searching long and hard for any actual verifiable data on how much extra oil or coal or gas an electrical utility has to burn to maintain enough hot spinning reserve to compensate for integrating wind and solar power.

        I am well enough acquainted with the issue to know that it will be different for each utility and from area to area if the utility is a really big one that spans hundreds of miles.

        This sort of info is VERY hard to come by. Asking any organization or company involved in renewable energy gets a boiler plate qualitative answer and asking a utility directly gets you ignored.

        If you or anybody else knows where such data can be found I will be very grateful indeed for the info.

          1. Fernando,
            I wouldn’t pay attention to anything that Judith Curry says or promotes. For being a former head of an Earth Science department, she is displaying quite a political agenda and very little by the way of scientific aptitude.

            http://www.sourcewatch.org/index.php?title=Judith_Curry

            And why am I telling you this? You probably already know the situation and are just trolling to get others to read the junk that Curry promotes.

            1. Jesus, why would referring a friend to a post by an electrical engineering get you so riled up? Curry has a pretty good website. I think she’s the object of character assassination and libel, but she seems to take it rather calmly.

            2. ”
              I think she’s the object of character assassination and libel, but she seems to take it rather calmly.
              “

              No, Curry is clearly angling for a political appointment in a possible future Repub administration. So what we do is point out her weaknesses in basic math and science.

            4. How do we know this is an electrical engineer? They’re anonymous.

              I don’t mind anonymity, but it means that you can’t rely on authority. Heck, clearly people on peakoilbarrel don’t take *any* authority’s word for granted – they have to prove things. I don’t see any evidence here.

          2. I looked at the first blog post – oddly enough, it criticizes renewable advocacy for not using facts or figures, yet it uses no figures or sources at all – it just provides very political and subjective opinions.

            For instance: “you need ridiculously high valuations for carbon reduction to justify significant increases in renewable generation. ”

            That’s a strong statement, and clearly has a strong anti-climate change mitigation agenda. It needs very strong backup with facts, figures and sources, yet none are provided.

        2. Mac. I am not the guy to give a real answer, since while I spent a lifetime in energy R&D, the stuff I worked on was no bigger than I could lift.

          But I knew a lot of power company people, since I was trying to sell them the idea of distributed power scattered all over the place, an ancient concept promising lots of advantages, like great system stability, and “waste” heat to use for the laundry, etc etc.

          So I am guessing that anybody used to thinking about big stuff, including wind farms and solar fields, is fairly likely to be fixated on his own immediate pile of problems, and not much interested in other details, since his cake isn’t done yet and needs tender loving care.

          So, real answer around here, anyhow, “haven’t got around to that one just quite yet”.

          Of course, there’s the Germans, Danes and other people with some remaining sense and big hunks of wind/solar who have got around to it, but not yet quite got it actually figured out.

          So, as usual, I see a problem, don’t wait around and jsut start to think up a fix as long as the fix does not involve anything I can’t lift.

          I run my house and car on PV. but, of course, in this place and time of year, PV power can get mighty thin for a month or two, way too long for any short term storage like a battery or flywheel.

          BUT. I have and use a lot of wood. Chemical energy can store for a plenty long time, and the stove behind me here is cranking out about 10kW of heat on this chilly morn. Plenty to make up the PV deficit if run thru any mediocre heat engine-generator.

          Aha! Solution to the intermittent problem.
          Pile of wood + wood pyrolyzer + gas bag short term storage + Honda or other +battery ( can be small) +inverter and usual rest of system.*

          (Any component I can lift, reluctantly.)

          * frantic mechanic running around every hour of night and day vainly trying to keep his nest of snakes running well enough so hausfrau does not notice.

          Note same concept can scale to big bldg, community, state, country, world.

          1. What I found is simply that electrical engineers who design or optimize large power networks are highly knowledgeable and have observed real life data, and are trying to solve real life problems. There’s a significant difference between real life as it is, and the dreams of people who want us to embrace our inner peasant and live in wonderful isolation in tiny farms growing organic veggies and checking the weather in a high speed internet network.

            1. I agree, “real life” is the key. Power Engineers have enough on their plates dealing with maintaining standard transmission and distribution systems across wide networks. I talked to one guy recently, who I shared an EE class with eons ago, who said that he has more than enough work dealing with the threat of ice storms, sabotage, lighten strikes on sub-stations, monitoring hydro-water storage levels, silly inspectors who’ve never had a real job, disposing of old equipment (some of which is highly toxic), dealing with unions, planning for expanding electrical requirements for new mining projects that may or may not go ahead, etc., and no time for bothering with rinky-dink solar systems and windmills which might represent less than half of one percent of his customer’s power needs.

            2. Oh I forgot, power thieves who manage to kill themselves trying to get “free electricity” and whose death ties up a dozen people for weeks with all the stuff that goes with bodies that didn’t die naturally. He said there were about 12/year here in BC.

            3. On the other hand the planning engineer series includes very intelligent and educated comments from engineers who have to deal with power system integration in the California grid.

              You know, when I was in charge if a large technical department I used to have a group with a 30 day time horizon, a different group looked at the next six months, a different set of teams looked at up to 30 months, and I had a few geologists and a couple of engineers looking at really odd long range plans. I think a well run company delivering large amounts of energy should be doing something like that.

            4. Worldwide, solar is 1% of total power production, wind is 4%, and both are growing fast.

              Sounds like your friend’s customers are a little backward.

            5. He isn’t my friend. He’s an ee who wrote a series of educational posts for a general audience at Curry’s. One of the problems he points out are the extremely serious grid instabilities caused by intermittency. I suggest you try reading his material. I don’t know his “customers”.

            6. Actually, I was responding to Doug Leighton’s post.

              no time for bothering with rinky-dink solar systems and windmills which might represent less than half of one percent of his customer’s power needs

            7. Doug,

              That comment says it all. That engineer doesn’t care about whether conventional power is polluting or risky in the long-term – he just doesn’t want his life made any harder than it already is.

              That’s perfectly understandable, but it really isn’t a good reason to not transition away from risky and dirty power sources.

            8. The usual bullshit putdown–out of thin air. You know nothing about how I live- truth to tell, I am a russian undercover agent, reporting to directly to Putin only. My task is to subvert the entire power system of the evil capitalists, and so far I am making excellent progress.

              Lots and lots of highly competent systems designers have come to the same conclusion over the years- large numbers of distributed small power plants, down to the individual home size, plus SMALL short term storage, battery or otherwise, is a HIGHLY STABLE power system- with solar/wind, too.
              Why not used? ” We like real big central power plants”.

              I heard about distributed power advantages from my undergrad thermo prof in 1947.

              Look up CHP, and if you don’t think it is possible to make a highly efficient small power system, look up NASA isotope space power.

              The same NASA type power source, redesigned for domestic use- any combustion fuel, would be inexpensive, and like NASA’s, last a hell of a long time with NO MAINTENANCE AT ALL.

            10. Yes, that is the best piece I have seen on our changing energy and economic future and should be required reading for anyone attempting to be part of this debate.

              I think consumption and lifestyle contraction is already happening. We’ve got income inequality that reduces the middle class. We’ve got recession that further reduces economic activity. We’ve got a growing tiny house movement embraced by people who, either by choice or by necessity, are realizing they don’t need so much stuff. We’ve got more people discovering walking, biking, and public transportation (either for health reasons, convenience, or economics).

              I wish more economists would move away from trying to encourage growth. They suggestions aren’t preparing us for a no-growth future.

              So much of the world’s energy use has been wasteful because of decades of cheap oil and before that cheap coal. A lot of the waste could be eliminated.

            11. Just for fun, I quote the power company bill I just got today.

              current month total kwH-10.
              one yr ago- 110

              your average monthly use last 12 months- -minus 421KWH

              My PV max rating- 8kW.

              My house and car- all electric, all very good

              Everybody real happy.

            12. Electrical engineers have solved the problems they were given to solve. It is based on the idea that the cheapest way to produce electricity is to have a huge plant with constant output, for example a nuclear power plant.

              However, it is now cheaper to produce intermittent electricity. This changes everything. So electrical engineers will have to solve the problem.

              You argument boils down to “Twas ever thus”. But the electricity business is experiencing what they call a paradigm shift in Silicon Valley. On current trends it is unstoppable.

              In venture capital circles these days the idea of applying Silicon Valley thinking to industries like energy, transportation etc is very popular. Look at how google has invested in smart meters and self driving cars, and all big IT companies are investing in renewables. Elon Musk raises money selling the same idea.

              Anyway there is a lot of money betting that the way things used to be done in the electricity business is no longer up to date. We’ll see how that works out.

            13. ” So electrical engineers will have to solve the problem”=”let them eat cake”

              As Isaac Hayes said “Thus far the solutions are hyperbolicsesquedalimystically expensive.”

          2. frantic mechanic running around every hour of night and day vainly trying to keep his nest of snakes running well enough so hausfrau does not notice

            Great description, and often a description of my life. But, I suspect, a description of life in general.

          3. somebody is thinking distributed solar is going to be really big, soon…

            “Already, the SolarCity plant, scheduled to open sometime during 2016, would be one of the world’s biggest factories, with the annual capacity to make enough solar modules to generate 1,000 megawatts of electricity. SolarCity executives have said they need the Buffalo plant’s capacity to meet what they see as the continued rapid growth in the demand for new solar energy systems.”

            http://www.buffalonews.com/business/prospectus/solar-energy-building-a-new-industry-in-wny-from-the-ground-up-20150123

        3. OFM – two issues:

          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/

          1. Most of those studies you publish are flawed. There is a lot of bs, arm waving, and “costs will go down”, but I just don’t see anything I consider solid engineering from the solar camp. And by now the blogosphere and media is crawling with items I think are put up by people with corporate connections. The solar power industry is mostly about corporations which require heavy subsidies as part of their business model. In a sense solar power is turning out to be like ethanol from corn, an industry powered by subsidies and government diktat, which in turn was driven by intensive lobbying by Archer Midlands Company.

            Here in Spain we have a real grid with real rebewables. We also pay real electricity bills. The solar power kit is huge, cost a bundle, and it works well because the hydropower facilities are used as a counterweight to the solar intermittency and inability to generate at hours of peak demand.

            My opinion is formed by both my engineering education, the material I read (including the real world engineering discussed at curry’s), and close observation of the Spanish power grid performance and the issues being discussed in the local newspapers.

            Which takes me to the punch line…I am convinced we are running out of fossil fuels. I’m not sure about the timing, but I think we may not get the technology ready by the time we see prices zoom.

            So rather than indulge in this phantom engineering and science and the endless bs about conspiracies by oil companies, I prefer to keep my feet on the ground and see if this looming crisis can be solved by adults, and not by cartoonists drawing happy faces because solar power is such a great solution we already found.

        4. Mac,

          As you say, hard info is very hard to find. I have some somewhere, but for the moment here’s a recent thing:

          “When the second plant comes online this summer, peak solar output on Kauai will approach 80 percent of power generation on some days…KIUC has had to ask more of its diesel and gasoline-fired generators, improving their ability to ramp up during frequency droops. The heavy ramping puts wear on the machines, increases air pollution, and negates some of the petroleum savings promised by the solar plants. “I think we have lost a couple of percentage points on efficiency over the last year,” Rockwell says. “The maintenance impacts are yet to be seen.”

          http://www.technologyreview.com/news/534266/hawaiis-solar-push-strains-the-grid/

          So, maybe 2% loss of efficiency for the (much more expensive) diesel generation that the solar replaces.

          Again, they haven’t tried Demand Response, which would be much cheaper and more effective (I emailed the guy in charge).

    2. Since the Greenland Ice Cap is melting and Svalbard islands are in a similar latitude, I don’t find it unusual that that ice cap is melting also. Svalberg has lower altitude, thinner ice cap, a lot of barren rock surrounding the ice cap and much more shoreline per km2 of land than Greenland. So with all those warming factors, Svalberg’s ice cap should melt rapidly compared to the Greeenland ice cap.

      Since the Arctic ice and northern region ice cap and snow cover have more global warming potential than the input of CO2, any losses of ice there are deeply significant.

      1. Svalbard isn’t that big. I have a photo of Emma Thompson in my blog holding up a sign. She went there for a Geeenpeace propaganda tour. It seems to be a popular spot.

        1. “Svalbard isn’t that big.”

          Bullshit. Austfonna ice cap on Svalbard covers 8,105 km2 and is the second largest by volume in Europe, after the Vatnajökull in Iceland.

          1. That’s not big. Nothing in Europe is that big. I can’t even put large dishes in my new dishwasher. And when I fall asleep my feet go over the border into Belgium.

          2. Doug,

            Well hello there…. “BULLSHIT” you say!! LOL… good for you. Nice to see you throw a few choice words when necessary.

            I tell you, after reading what Mr. Lily of the Valley and that Nifty Guy Neal had to say about Global Warming and Carbon… we don’t survive what’s coming.

            We are just to DAMN STOOPID….LOL

            steve

        2. “Svalbard isn’t that big.”

          Austfonna has lost 1/6 of its depth. If that is 1/6of its volumevolume, it has lost 258 cubic kilometres out of 1550.

          A 1mm increase in sea level is a volume increase of 360 cubic kilometres.

          Austfonna has contributed 258 cubic km in two years. That would be an increase of 1.7mm or 0.35mm/year.

          The long term rate is currently 3.2mm/ year. Austfonna alone has increased that by 10%.

          https://robertscribbler.wordpress.com/2015/01/17/denying-the-neverending-heatwave-nasa-noaa-jma-show-2014-broke-new-heat-records-will-republicans-ever-listen-to-science/

            1. Most of the ice at the North Pole is floating. If it all melted, it would actually LOWER the sea level.

    3. Picture an egg in a frying pan. That is our milky way galaxy. Our sun is on the outer edges of the white part of the egg. It takes 226 million years to orbit the galaxy only once. If you look at the milky way galaxy sideways, it’s very thin. As our sun travels around, it oscillates a small amount above and below the center of the galactic plane. It takes 11000 years to go from above to below and back. When it passes through the center, the pull of the Galaxy’s gravity affects our sun in a small way. The pull of our sun affects us in a small way too. At the present time, we are dead center into the transition from above to below. This explains what is happening to the global temperatures. It’s not the end of the world. It just means more bizarre weather ahead for the next century or so. The result of that is you can’t equate anything like the ice caps melting with some kind of bizarre and desperate need for a cap’n trade or carbon credit scheme. Anybody seriously buying into these things would be a worthy candidate for a lobotomy to see what went so horribly wrong with the person’s neurons.

      1. Gosh LILY ,

        We all thank you for researching this issue for us and figuring it all out for us. I suppose it took you all of thirty minutes to find the answers for us.

        Oh to think of the YEARS we regulars here have wasted learning all about the physics of the atmosphere and such nonsense.

        Thanks to your enlightening me I want to go back and kick my physics professors asses for leading me so far astray. My biology professors too.

      2. Actually, the solar system lies several dozen light-years north of the galactic plane, possibly farther. Furthermore, we are continuing to travel northward, away from the plane of our Milky Way galaxy at roughly 0.7 km/sec. In fact, we won’t be physically passing through the galactic plane for another 30 million years, give or take. But, we get enough bullshit here without stupid stories equating galactic dynamics to eggs in frying pans. Do you think you’re talking to a collection of playschool kids?

        3. Mr. Leighton, I don’t think you are understanding me. Once again, let me emphasize the earth has become slightly warmer in the past few decades simply because we’re passing through the galactic celestial plane. This happens every 11000 years or so like clockwork. During this time the galaxy pulls on our sun and increases gravity slightly and as a result, the sun’s pull on all the planets increases. Of course here on earth we’ll feel this a bit more because we’re on one of the Inner Planets. But make no mistake, all the planets influenced by our sun have had a proportional temp. increase in the past few decades for the exact same reason. NASA is aware of this but is being bamboozled by O and his far left government in order to secure government funding. Thus NASA and other agencies are forced to continue toeing the official AGW line and to mislead the public with false claims as to the real reasons behind the global warming.

          1. NASA is aware of this but is being bamboozled by O and his far left government in order to secure government funding.

            This is the wrong place to post this. People here do read for themselves.

            You’re trying to suggest that the world’s entire scientific community is being duped by Obama? Yeah, right.

            Go peddle your theories elsewhere.

            1. I have run up on a few people who are actually as stupid as our Lily is pretending to be. But my guess is that Lily is somebody just having a little fun.

              People can actually have fairly decent intellects in just about all respects and yet be totally naive and gullible in respect to any kind of pseudo science message – if the messenger is one they look up to for some reason.

              Now I don’t actually know if Rush Limbaugh ever talks about global warming but I suspect he does occasionally and that he calls it a conspiracy of power grabbing money hungry democrats or worse.

              But he is an authority figure to a LOT of people and such people accept what he has to say as gospel.

              We like to think we are too smart ourselves to fall for such arguments from authority but in reality just about all of us HAVE to accept some arguments of this sort. I know only about as much law as most well informed laymen -I accept my attorneys arguments on the basis of his ” authority”. I know more anatomy and physiology than I do law but I accept my physician’s arguments as well.

              Most of us accept the opinion of our mechanics and plumbers as a matter of practical necessity. I can paint – not really well but well enough to get by – when I am in doubt I call up a friend who is a pro and take his advice.

              Lily – tell us please – Who are the astronomers who consider the most accomplished?I am in the mood to play games for a while if you want to play.

          2. I think we could start compiling a list of reasons given in this forum as to why no one should pay any attention to GW:

            1. The numbers are wrong. The global isn’t getting warmer.
            2. In the history of the planet, this is nothing.
            3. The galactic celestial plane

            And of course the thing that ties them all together: It’s a conspiracy to take away our stuff.

            Let’s throw something up on the wall and see if it sticks. If one of these ideas gains traction, that’s what we’ll use.

            1. Gentlemen, You have to admit that considering the seriousness of the subject we generally discuss here this lady has brought some much needed comic relief to this forum. While I will concede that thorium reactors, flying pigs, and my all time favorite, pink flying magical unicorns urinating crude and condensate while passing high BTU methane gas all over the place COULD solve a few of the problems we have….I sincerely doubt it and intend to forego a belief in magic for one in math.

            2. A functioning thorium reactor was created in the 1960s by ORNL (Oak Ridge).

              They have recently announced their intention to build another one in 10 years.

              Given that they have the intellectual property of the functioning reactor I wouldn’t be surprised if they were successful.

              China and India are pushing for them too.

              Magical unicorns and flying pigs I don’t know ….lol!!!

          3. The Greenhouse Effect seems very easy to understand at a high level. Isn’t it taught in the 6th grade? I couldn’t explain the details, but I am amazed at the number of people that can’t figure something out that is so straight forward.

            Anyone who thinks the planet won’t warm by putting more greenhouse gases into the atmosphere is a fool.

            Thorium! Thorium! Thorium!
            and
            CTL! GTL! CTL! GTL! until we get more electric cars!!!

            LOL!!!!

            1. What part of CO2 is not a true greenhouse gas do some people not understand? I bet most of the anthropogenic global warming believers have absolutely no idea what percentage of earth’s atmosphere CO2 even makes up! Also take a look at Mars. Its’ atmosphere is mostly CO2 but its ambient temperature is -110 degrees Fahrenheit. If CO2 was a true greenhouse gas Mars would be a sweltering sauna, but no, that’s not the reality.

              CO2 is one carbon and two oxygen molecules combined. Plants grow better in CO2 rich environments. Farmers even pump CO2 gas into greenhouses to stimulate growth. (yes plants grow well in CO2 in “greenhouses”…but CO2 does not cause the temperature to rise in green houses…as it the sun that warms up the panels and traps the heat, not the CO2.

              The Democrats have been chomping at the bit for years to set up a massive tax on the CO2 that is beneficial to plants, and therefore life itself since any basic science course will teach how all Oxygen on earth comes from the plants which originally took in CO2. What we really need to come to terms on is how global warming is all cyclical based on the sun, sunspot activity, and the polar magnetic fields around our planet. We are far better off adapting to the warming by growing more and better crops in areas which couldn’t support them before than we are running around screaming about some kind of imagined damage that will never come.

              Please carefully read the references I included before attempting to insult my arguments and claim they are false. I don’t appreciate people who do this without having first read the citations. Thank you.

            3. Wow! I learned so much from this post!

              Like: CO2 is one carbon and two oxygen molecules combined

              And I always thought it was composed of two oxygen atoms each covalently double bonded to a single carbon atom… I should send this post to my chemistry and botany professors, so they might finally learn how wrong they were.

              On the other hand, while it is true that most of the oxygen in our atmosphere is there because it was released by photosynthetic organisms, roughly 50% from marine phytoplankton, I confess to being a tad troubled by the fact, that these very organisms are extremely sensitive to decreases in the Ph of ocean water caused by the absorption of carbon dioxide… Neal, could you with your vast knowledge of chemistry and plant biology, help a simpleton like myself understand what might happen if we disrupt the marine ecosystem by rapidly increasing the amount of carbon dioxide in the ocean water. I just have a gut feeling, that might be a really bad thing, what do you think?

              I await your response with bated breath!
              Fred

            4. There are major food crops that are harmed by increased carbon dioxide and it can increase sensitivity to pest damage.

              NAOM

            5. My HOUND understands greenhouses better than you do Neal Giffy so help me Sky Daddy.

              It is the GLASS in a greenhouse that traps the heat. It lets in short wave sun which is the SOURCE of the heat but reflects long wave radiant heat from the plants in the greenhouse . So the heat gets IN but it is impeded getting OUT again.

              A greenhouse would still work no matter what the composition of the atmosphere might be.

              The fact that some plants will grow better in a co2 enriched atmosphere in a greenhouse is utterly irrelevant to the argument of whether global warming is happening.

              It is true that we will be able to adapt to some extent to warming but this is ALSO utterly irrelevant to whether it is happening or not.

              Four or five degrees F warming would bankrupt the orchard industry in my area.That much warming would also make it too hot to grow a lot of cool season crops we grow currently.

          4. ”
            This happens every 11000 years or so like clockwork.
            “

            These celestial mechanics that Lily refers to are sinusoidal. Therefore an 11,000 year period takes 5500 years to change phase. And of course this is nowhere near instantaneous so whatever you claim that we are suddenly seeing must not be part of this process.

            It takes just a little bit of logical reasoning to put these bizarre theories to rest.

            1. The Earth’s plane reorients itself with respect to the galactic plane during the precessional cycle, so to is Earth’s pole reorienting its angular relationship to the galactic plane. So what? Nothing to do with climate, astrology perhaps but not climate. Let’s move on and leave precessional prediction nonsense to horoscope readers.

          5. Lily,

            “Once again, let me emphasize the earth has become slightly warmer in the past few decades simply because we’re passing through the galactic celestial plane. This happens every 11000 years or so like clockwork.”

            Where do you come up with this crap? THE EARTH DOES NOT PASS THROUGH THE GALACTIC PLANE EVERY 11,000 YEARS. Earth won’t be physically passing through the plane of our galaxy for another 30 million years.

          6. ILSHIAPIMP…I laughed so hard I almost peed in my pants. Colbert’s replacement, the Nightly Show, just started on the Comedy Channel. They may still be looking for writers. If you apply, put us down for references.

            Rat

            PS.
            If you would like to explore a new idea, I’m thinking that maybe the solar wind is slowing down, and we are only experiencing a decrease in the solar wind chill effect.

          7. LilyR,

            I like the part about the galactic pull causing the Sun’s gravity to pull on the planets harder. That will change all planetary orbits and all of NASA’s interplanetary missions will miss their targets.

            What fun.

      3. https://www.youtube.com/watch?v=WnG8nOK7nqM
        Away in a madhouse
        Confined to my bed,
        From visions and nightmares
        That filled me with dread,
        The doctor has sweetly
        Inserted a probe,
        To severe completely
        My prefrontal lobe.
        Electroshock therapy
        Mind-numbing pills,
        They change my behavior
        To cure all my ills,
        I love the asylum
        My own padded cell,
        I’ll stay here forever,
        For outside it’s hell!

      4. LilyR & Neal Giffy,

        I have to say, you two are a breath of fresh air. You don’t know how much I suffer from indigestion and increased stomach bile production due to the rubbish put out by Global Warming Wackos. That’s why I wanted to thank you both by stating the following:

        LilyR.. by the way, does the “R” stand for Republican? Just wondering. Your explanation of the 11,000 year cycle and the wonderful sunny-side up Egg, Home Fries and Country Ham Analogy of the Milky Way and its impact on Global Warming was SPOT ON.

        Neal Giffy…. (commented below) your strategically placed links on the subject of carbon in your reply made me finally understand that “CARBON AIN’T GOTS NUT’N to do with the Greenhouse Effect. Of course it’s the panels in the greenhouse that trap heat, not carbon dioxide. I mean, is the earth’s atmosphere surrounded by glass panels?

        I must say, the high level of Intellect, Insight, Reasoning and Wisdom you two possess not only humbles me, but actually reminds me of an old MONTY PYTHON comedy skit discussing the theory of the large dinosaur, the Brontosaurus. One of the Monty Python chaps stated his theory on the Brontosaurus by saying, “IT’S THIN AT ONE END, MUCH THICKER IN THE MIDDLE, AND THIN AGAIN AT THE OTHER END.”

        Unfortunately, most Global Warming Nutjobs cannot comprehend the simplistic nature of climate change by the Brontosaurus Theory.

        To all the Pagan Neo-Liberal Pinko Commie Leftist Environmental Wackos who can’t comprehend what was written above, please reread the links on carbon provided by Neal Giffy below.

        steve

      5. When I see an egg frying in a pan, all I can think of is that single brain cell bouncing around in my skull. har

        What about low concentrations of CO2?

        http://onlinelibrary.wiley.com/doi/10.1111/j.1469-8137.2010.03441.x/pdf

        Far fewer studies have focused on plant responses to low
        [CO2] of the past, even though this work is crucial for
        understanding long-term responses of plants to changing
        [CO2] over geologic and evolutionary time scales. From
        the studies that have been conducted, it is clear that
        modern C3 plant genotypes grown at low [CO2] (180–
        200 ppm) exhibit severe reductions in photosynthesis,
        survival, growth, and reproduction, suggesting that reduced
        [CO2] during glacial periods may have induced carbon
        limitations that would have been highly stressful on C3
        plants (Polley et al., 1993a; Dippery et al., 1995; Sage,
        1995; Tissue et al., 1995; Sage & Coleman, 2001; Ward
        & Kelly, 2004; Tonsor & Scheiner, 2007; see Fig. 2 for a
        photo of plants from Dippery et al., 1995). In addition,
        carbon limitations at low [CO2] may have altered plant
        tolerance ranges to other stressors such as drought, heat,
        and herbivory (Sage & Cowling, 1999). Furthermore, most
        studies focusing on the full range of plant responses to past
        through future [CO2] report much greater physiological
        and growth enhancements in response to increases in
        [CO2] below modern concentrations than to increases
        above modern concentrations (Sage & Reid, 1992; Polley et al., 1993b; Dippery et al., 1995; Ward & Strain, 1997).
        Thus, plants may have already exhausted much of their potential to respond to rising [CO2], unless, for example,
        major evolutionary changes occur in the future. From these
        findings, it is clear that assessing the full continuum of plant
        response to changes in atmospheric [CO2] through geologic
        time is essential for making accurate predictions regarding
        the functioning of both past and future ecosystems.
        Studies addressing the effects of low [CO2] on plants are
        also fundamental for understanding plant evolution in
        response to changes in resource availability through time –
        primarily since changing [CO2] has been shown to have
        major implications for plant fitness (Ward et al., 2000).
        Modern plants grown at low [CO2] (150–200 ppm) exhibit
        highly compromised survival (Ward & Kelly, 2004) and
        reproduction (Dippery et al., 1995) at conditions that
        occurred only 18 000–20 000 yr ago. Such findings beg
        the question of how glacial plants survived during low-
        [CO2] periods, especially considering the lack of evidence
        for plant extinctions during these times. Furthermore, past
        work has demonstrated that low [CO2] has the potential to
        act as a strong selective agent on plants, and therefore evolutionary
        responses may have ameliorated some of the negative
        effects of low [CO2] in the past (Ward et al., 2000).
        However, the full suite of mechanisms accounting for these
        adaptive responses is currently unknown, as well as how
        adaptive processes may have been influenced by other interactions
        with climate change (for a discussion of possibilities
        see Sage, 1994; Sage & Cowling, 1999; Ward et al., 2000;
        Beerling, 2005). Furthermore, it is also important to
        consider that any genetic changes that occurred in the
        recent geologic past as a result of low [CO2] may continue
        to affect the responses of plants to rising [CO2] throughout
        the next century (Strain, 1991; Sage & Cowling, 1999).
        Overall, low-[CO2] studies are critical for understanding plant responses to past environments when carbon resources
        were most limiting, evaluating physiological and growth
        constraints for response to rising [CO2], determining the
        full continuum of plant responses to changes in [CO2] over
        evolutionary time scales, assessing the impacts of low [CO2]
        on plant community composition and ecosystem functioning,
        and understanding the influence that low [CO2] may
        have had on early human cultures via influences on the
        development of agriculture. Moreover, studying plant
        responses to low [CO2] provides information about past
        ecosystem functioning, such as estimates of glacial NPP
        (Prentice & Harrison, 2009), as well as insights into the
        availability of food resources for animals (Coltrain et al.,
        2004) and early humans (Sage, 1995; Richerson et al.,
        2001).

        http://onlinelibrary.wiley.com/doi/10.1111/j.1469-8137.2010.03441.x/pdf

        NPP – Net Primary Productivity

        A world with a CO2 concentrations lower than 180 ppm, 180 cubic meters of CO2 for each one million cubic meters of air, is going to be more catastrophic than an atmosphere with 400 ppm of CO2.

        Each exhale from a human body has 40,000 ppm of CO2.

        1. A world with a CO2 concentrations lower than 180 ppm, 180 cubic meters of CO2 for each one million cubic meters of air, is going to be more catastrophic than an atmosphere with 400 ppm of CO2.

          I suspect that might only be true with all other conditions held equal… not a very likely scenario! You are not dealing with a controlled commercial greenhouse environment here. You are dealing with planetary wide systems.

          You are dealing with numerous interacting complex chaotic systems and all their feedback loops. For example,what happens when due to increases in air temperature, prolonged high pressure ridges in the atmosphere keep atmospheric rivers from delivering rains to ecosystems that evolved and adapted over millions of years to thrive within certain levels of moisture.

          http://climatenexus.org/learn/drought/california-drought-and-climate-change

          Climate change is linked to California’s drought by two mechanisms: rising temperatures and changing atmospheric patterns conducive to diminishing rains. The first link is firmly established, and there is a considerable and growing body of evidence supporting the second.

          Or suppose it turns out that when the acidity of the ocean changes rapidly and the oceans become inhospitable to oxygen producing phytoplankton or it knocks out parts of the marine food web and destroys coral reef ecosystems.

          http://www.biologicaldiversity.org/campaigns/ocean_acidification/

          As oceans absorb carbon dioxide, or CO2, seawater chemistry changes and the water becomes more acidic. According to scientists, the oceans have become about 30 percent more acidic due to human CO2 emissions — and this spells trouble for ocean life. First of all, ocean acidification depletes seawater of the compounds that organisms need to build shells and skeletons, impairing the ability of corals, crabs, seastars, sea urchins, plankton and other marine creatures to build the protective armor they need to survive. To make matters worse, fish and other ocean organisms may be adversely affected from the rise in acidity in their ocean habitat. Fish are common ocean prey, and plankton are at the base of the ocean food chain, so when these animals suffer, so do the countless animals that eat them. Ocean acidification could disrupt the entire marine ecosystem.

          We are currently at 400 ppm of atmospheric CO2 and we could be looking at 800 to 900 ppm by the end of the century.

          http://www.ipcc-data.org/observ/ddc_co2.html

          800 to 900 ppm might be a good level of CO2 in a commercial greenhouse but the precautionary principle should be applied when we are talking about attaining that level when talking about planetary systems. Things look like they are becoming unstable at a mere 400 ppm as it is.

            1. Or we could all climb up into the clouds on giant beanstalks like Jack…

            2. Where do you think we will be in 1000 years? I’m hoping by then we can launch a mini starship loaded with some miniature sensors and a system to beam back whatever it eavesdrops from an alien civilization. We should get results in 50000 years.

            3. Where do you think we will be in 1000 years?

              Dunno bout you but I’m pretty sure I’ll be dead >;-)

              And the message our descendants will get back 51,000 years from now will be: “The Planet is fine! It’s the people that are fucked” Holographic transmission of George Carlin

    4. The biggest issue I see with increased CO2 in the atmosphere is the equivalent increase in CO2 in the ocean. As a species, we can more than likely adapt to a changing coastline a sea level rises. But as the CO2 concentration in the ocean increases, so does the pH. Many of the species that precipitate carbonate shells have a narrow band in which they are stable. If the pH changes too much, their shells begin to dissolve. Since they are near the base of much of the food chain, it is probably not great to create a situation where they can no longer make shells.

      The other issue I see is as fresh water melts into the ocean, it will inevitable alter the upwelling/downwelling of our ocean, which is essential for the growth of plankton, which again is at the base of the food chain.

      Messing with organisms at the bottom of the food chain never works out well.

        1. Hey Synapsid
          Typo: Should be pH drops as dissolved CO2 increases.

          I myself am often guilty of that very same typo so I’ll cut you some slack on that on >;-)

          However I do have a minor quibble with this statement:

          But as the CO2 concentration in the ocean increases, so does the pH.

          Actually the opposite happens as CO2 increases pH decreases, which is why we say the ocean is becoming more acidic. To be clear the ocean is a long ways from actually becoming acidic, keep in mind that a ph of 7 is neutral and we are still well above that threshold. Unfortunately many marine organisms such as corals thrive at a pH that is about 8.2 or higher and currently we are down to an average of about 8.1 since the dawn of the industrial revolution. While that may seem like an insignificantly tiny decrease we have to keep in mind that pH is a logarithmic scale. The marine environment is very finely tuned…

          1. LOL! disregard this post! I was up until 4:00 AM and got up at 8:00AM
            I posted without drinking my coffee…

            Cheers!
            Fred

            1. I would be a tidy sum that if you stop a thousand well dressed people at random on the street anywhere other than a university campus that not over two percent of them can tell you what the ACTUAL difference in H ion concentration is moving from 8.1 to 8.2 on the ph scale.

            2. I would bet an even tidier sum that your 2% guess is off by at least one order of magnitude! I’ll leave it to the readers to ponder whether they think it would be an order of magnitude more, or an order of magnitude less >;-)

              Perhaps the narrow band of pH of human blood that allows a healthy existence can give us a bit of insight as to how fragile life can be.

              It is difficult to give an exact definition of pH. A couple of simple descriptions offered are, “power of Hydrogen” and “potential Hydrogen” ion concentration. Neither are perfect descriptions. Both present a way of remembering the significance of “p” and “H”. Simply stated, pH tells us whether a solution is acid, alkaline or neutral. It does not tell us how much acid or alkali is present. It is a good “warning sign” (Proceed with Caution), but it does not establish whether the compound is corrosive or dangerous.

              pH is a critical measurement. Life depends upon it. For instance, human blood is basic with a pH between 7.3 and 7.5. If the pH of blood drops below 7.3, acidosis occurs. If the blood pH rises above 7.5, alkalosis occurs. Death will occur if blood pH goes below 7.0 or above 7.8. Our human existence depends upon a balanced and buffered blood pH.

              Now while the average current ocean pH has been measured at about 8.1 there are places where it is down to 7.5. That is a death sentence to many marine organisms.

              I love to see our current members of the house and senate being tasked with keeping living coral reef aquariums and logging (pun intended) the variation in water pH that allows the corals to stay healthy. Who knows they might even learn a thing or two and gain a new found respect for basic science…

              Cheers!

            4. Carbon means coal, a great resource to be used for energy, electricity from coal is just a better world. Ignition, combustion, voila, electricity from coal.

              CO2 + H2O , CH2O3, carbonic acid, another component in the carbon cycle. Gotta have the carbonic acid too.

              http://newscenter.lbl.gov/2014/10/22/new-insights-on-carbonic-acid-in-water/

              The first laser:

              http://www.press.uchicago.edu/Misc/Chicago/284158_townes.html

              Natural lasers have now been found in astronomical objects; for example, infrared light is amplified by carbon dioxide in the atmospheres of Mars and Venus, excited by solar radiation, and intense radiation from stars stimulates laser action in hydrogen atoms in circumstellar gas clouds.

              http://www.press.uchicago.edu/Misc/Chicago/284158_townes.html

            5. Gotta have the carbonic acid too.

              Quench your thirst…
              Drink Coca Cola and have the Carbonic Acid too! It cleans out the rust >;-)

        2. Ah!!! My Oceanography professor would probably punch me if he saw that I messed that up 🙁

      1. And apparently Boston does a pretty good job compared to them.

        1. Yes. I assume you realize the claim is that 3 % leaks. They just need to tighten their seals.

          You know, I’m used to working on gas producing platforms where the gas reaches the surface at 3000 psi and 150 degrees F. We install gas sensors to make sure nothing leaks. When the sensor sees free gas in minute quantities it fires up an alarm. I never heard an alarm go off. The key is to keep piping and seals in good shape.

          1. “The key is to keep piping and seals in good shape.”
            And therein lies the rub.

            NAOM

            1. Yes. The way it works, we seem to take care of these problems as they are seen to be a really big problem. It’s like soot from diesel engines. Or seat belts. Or being prone to invade other countries. Or subsidizing corn. We all have our lists of pet problems we want to tackle.

            2. I’m not particularly interested in solving that problem as a matter of fact. I just think the fact that nobody else is suggests that hydrocarbon fuel is less valuable than some think.

              My solution to gas problems in the Northeast would be trash incineration, which would reduce the need for gas in electricity generation and acould also be used for district heat.

            3. You will have to use natural gas to incinerate that trash. Just make sure you keep your seals real tight. If you don’t want to use natural gas you could use an old style coal fired oven.

            4. I don’t think the Germans use gas to incinerate trash. Here’s a brochure of the plant near where I live.

              http://www.swd-ag.de/medien/dokumente/mediathek/mva_broschuere.pdf

              Trash probably burns better than brown coal, which is basically just mud. I think the newer plants use the waste heat to pre-dry the fuel. Some plants mix it with coal.

              There’s a big trash shortage in Germany. They import millions of tons a year.

              I think there’s quite a bit of discussion about the fact that Mallorca does the same thing. I think it comes from Barcelona and Naples.

  12. Next act in the play is Sunday.

    Ransquawk is firing out various polls out of Greece showing various Syriza leads over New Democ.

    I’ll sally forth with this. Syriza wins and starts hunting for coalition partners. They will be reluctant to join and the EU will be bribing up a storm to try to prevent it. But, the lead will be too big and the coalition partner will not need to bring many seats to the table.

    Then Syriza says they want to open negotiations with the EU over debt terms. Note that 2011 wiped out all private bondholders so the only ones left are the Troika (EU, ECB, IMF) and it is their terms that will be at issue. The taxpayers, collectively, will thus be at risk.

    It gets pretty fuzzy then, but Tsiparas of Syriza has made his reputation as a bomb thrower and I’d guess he’ll do just that and start defaulting.

    And then . . . then . . . the pathway for that natgas pipeline coming out of Russia, no longer going through Ukraine and instead south thru Turkey — well to get to Europe to continue to bleed them, it has to go through Greece. That will be Greece’s salvation, transit fees.

    And just like that, the EU loses a country that essentially joins Russia.

    1. the other day I was little bit thinking about that Turkish Hub and how come suddenly from nowhere. and then you have Russian gas blending with possible future Syrian, Kurdish and Iranian gas right there. Oh boy that smells like gas cartel to me. that is a game changer.

      1. I’ve been nosing around to get a feel for transit quantities thru that Southstream Rev 2.0.

        As best I can tell there’s plenty of room in the pipe for Russia gas. West to Greece, and north to Europe. The countries to Greece’s north who would then get ECB threats would be Bosnia, Serbia, Macedonia, none of whom are EU members and will be happy to transit gas north to the EU members who depend on it.

        It’s quite an end run. The leverage sledgehammered into Bulgaria won’t be available.

      1. http://www.theguardian.com/world/2014/oct/21/russia-arctic-military-oil-gas-putin

        Putin is putting military bases and troops in the Arctic.

        That is a LONG term strategy. Indicating the forecast must be solid.

        Where do you think he thinks things are heading?

        1) He must believe in Climate Change or this wouldn’t make any sense.
        2) He must believe someone might try to steal his Arctic resources or he wouldn’t be putting military up there.

        Doesn’t Putin have uninhibited access to State Owned Oil Company Data and Petroleum experts?????

        Actions speak louder than words!!!

        1. If Putin were capable of long term thinking he wouldn’t have bet the farm on oil profits.

          1. All those things may be true.

            However, Russia has lots of Arctic territory, massive natural gas resources, produces lots of oil and has a shit load of nuclear weapons including submarines that can pop up off your coastline.

            No point worrying about the Arctic unless you think the ice is going to melt and you think there is something up their worth stealing.

            Me thinks Putin is a Peak Oiler. He’s been making a lot of military moves recently.

        2. It’s newspaper bs. I used to work up there, and we could see lots of abandoned radars and closed facilities. Putting a few troops in Murmansk means nothing. Troops in the Nenetsky Okrug make sense because that’s an emerging oil province.

          You know, I spent a few years in Russia, lived in the Moscow suburbs, and I have Russian friends. So I can see the story from both sides. It seems to me the Russians are reacting to very aggressive usa moves. As to why usa political elites are keen on being hostile to Russian interests…that’s not something I can discuss.

          1. I’m new at responding so my above comment was meant to be lower on this thread.

            I’ve never been to the Arctic so I don’t know. Even if I visited there I wouldn’t be given access to what the military was doing.

            I do actively follow Russian, Chinese and US Military moves via Google searches. I think it is a great leading indicator as militaries have access to the best information ( intelligence, satellite, domain experts, etc)

            Atleast as far as what is available on the internet I see a clear pattern of moves that are consistent with belief in Peak Oil and Climate Change.

            This doesn’t surprise me at all as the US Military JOE report ( I think it was 2010) had a section on Climate Change and Peak Oil. I suspect other militaries have come to the same conclusions.

            I think Putin is smarter than people give him credit for, and I guarantee you he understands the energy business and how dependent people are on oil and gas.

            Given the amount of energy he exports, he might see an opportunity here.

            1. The US military has been trying very hard to reduce dependence on fossil fuels. It’s too much trouble to haul everywhere, and they also see climate change as an international dis-stabilizing force. Of course, a lot of the “pro-military” people in Congress don’t want to hear that the US military wants use more renewable energy.

            2. Well it makes sense to know we are running out of oil. And when I worked in Russia we were focused on the Kara and Barents. The data showed the ice was getting a lot thinner and navigation would be easier. I assume you know about the Prirazlomnoye project?

            3. I know nothing about the Prirazlomnoye project.

              Would love to hear about it.

            4. Prirazlomnoye: Oil field located in the Pechora Sea, offshore a village called Varandey, in 19 meters water depth. The gravity base platform is a hybrid, the steel structure sitting on the sea floor was built by the nuclear sub industry. The top with the oil treating equipment is UK built in the 1980’s, was purchased second hand. The project is to a large extent intended to keep the sub builders busy. It’s subsidized.

  13. Rig count out and Williston Basin dropped quite a bit

    Assume 4,000 barrels of oil sold per month (close to average for all Bakken wells producing in 2014)
    Assume $10 per bbl OPEX
    Assume $2 per bbl G & A
    11.5% extraction and severance taxes
    Use Plains posted Price for Williston Light Sweet for June, 2014 and for 1/23/15.

    June, 2014 well net income before income taxes, depreciation, depletion $277,184.40

    January, 2015 well net income before income taxes, depreciation, depletion $55,297.20

    $55,297.20/$277,184.40 = 19.95%

    Bakken average production today making 1/5 of what it was in June.

    OTOH, most stripper well producers doing even worse, but not fighting Bakken decline either.

    1. Just got gas for the car at 1.799. Then I was watching an X-File filmed in 1999 and the camera caught a gas station sign, regular at 1.499. Considering inflation, that 1.799 might be equivalent.

  14. “Total U.S. petroleum deliveries (a measure of demand) rose last month by 5.1 percent from December 2013 to average nearly 20.0 million barrels per day. For the fourth quarter, total domestic petroleum deliveries gained 2.9 percent compared to the same period in 2013.”

    http://www.api.org/news-and-media/news/newsitems/2015/jan-2015/december-petroleum-demand-up-sharply-crude-production-highest-since-1972

    Seems that U.S. demand is more price elastic than was anticipated?

    1. “Gasoline demand last month rose by 5.4 percent from the prior year to average over 9.1 million barrels per day – the highest December level since 2007 – with a fourth quarter increase of 3.4 percent year-over-year. “

      1. Mild winter in the US in contrast to polar vortex. Fewer snow days preventing driving.

    2. Oil demand is extremely inelastic in the very short run as proven by the price falling off so sharply when the amount on the market got a little out of line with what end users wanted to buy.

      But now that prices have been down for a few months it seems that people have gotten used to the lower prices and started changing their habits to take advantage of them.

      I myself am using about the same in dollar terms but at least a third more gasoline in quantity by getting the last few thousand miles out of an older gas hog truck that will soon be scrapped. And I am not so careful to fill the wood stove at bedtime or to get up and fill it up early since the price of the kerosene we use to fuel our backup furnace has come down too.

      The guys with big pickup trucks and big boats are making hay getting in all the fishing trips they can now too. If you are an avid fisherman gasoline is apt to be the biggest expense involved in pursuing your hobby. A typical three day weekend trip in the south east can mean a hundred bucks for a cheap off season room and two or three times that for gasoline between the truck and the boat.

      If the weather were good I would be using my backhoe every day to clear some land while fuel is cheap -I could be saving at least forty to fifty bucks a day on fuel compared to a year ago which is serious money to me being a retired cash poor farmer type.

      It is offseason for paving but that industry really sucks up oil given that asphalt IS oil and just about everybody actually involved in paving either drives or operates and so fuel costs are about as much as labor costs. With oil down I guess paving is booming with people getting long put off jobs done while it is cheap.

      1. – Oil demand is extremely inelastic in the very short run

        Yes, but this time the demand reaction was relatively quick and quite significant. Your comment about the change in your personal driving habits explains a lot

  15. Good update Ron!

    …and to those with (bong/hookah) dreams of Saudi (and OPEC) unlimited spare capacity…still……….the following wraps it up:
    “Saudi has more than doubled its rig count in recent years. Operating 210 rigs even after Manifa is complete? This this means they are drilling about 2500 new wells per year. Why? They are not increasing production, all those new wells are only keeping production flat”

    -The days of “…poke the sand and it will gush up..” and unlimited spare GHAWAR capacity are up….way up!
    Prices are headed in the direction of 1999 again (…with the usual spike here and there), but UNLIKE then, there will be no Bakken and Eagle Ford in the world to bring them up again.
    Welcome to the Great(-er – est) Depression. There will be no “post war” miracle recovery this time around.
    …ahhhh, the Renewables…I forgot!
    Almost.

    Thanks again for the update Ron.

    Be well,

    Petro

    1. Very strange comments in my opinion, Petro
      “Prices are headed in the direction of 1999 again” meaning that we are heading towards $10? OK.

      “but UNLIKE then, there will be no Bakken and Eagle Ford in the world to bring them up again.” Meaning what? Meaning that in 1999 there were a lot of oil producers available so that the oil price could rise?
      What does it mean “there will be no Bakken….”? Does it mean that we do not have enough oil production to jack up the price?
      I thought if there is a shortage of production or a demand that cannot be met, the price goes up and not because we do not have enough producers.

  16. Oil at 321 dollars per tonne in Japan. 44 dollars per barrel. Japan bought 300,000 barrels of Bakken crude back in November.

    http://www.bloomberg.com/news/2014-11-27/japan-imports-first-u-s-oil-in-4-years-amid-shale-boom.html

    There were 22 new permits today in the daily activity report, yesterday was 12, the day before was 10. Monday’s permit count was eight. 52 new permits.

    Iran lost about 1.2 million barrels of daily production from roughly August of 2005 when it was at more than 4000 thousand barrels per day to about 2.8 million barrels per day in Sept of 2014. Must be a tough sell, the oil from Iran. Either lost business, can’t find more, decline and depletion, or just sandbagging.

    1.2 million barrels produced in the Bakken fills the void, sposeso. Nature abhors a vacuum.

    Bakken crude is in demand, shipments continue, 11,135 carloads of crude shipped by BNSF in week two. Most of the carloads are going to be Bakken oil.

    http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/pdf/20150117.pdf

    1. There still bring some rigs up from Texas to here in N.dakota. seen 2 Nabors rigs coming up yesterday. 3 vary large oil company’s got in a lock at 80-90 brl/ They keep drl unless comie obama shut them down.

      1. They keep drl unless comie obama shut them down.

        Really? You think Obama wants fuel prices to go back up? I’d say his administration is pretty happy to give voters low prices.

    2. Yo Ron, Helms consistently in Directors Cuts talks about gas production — more or less as a parenthetical aside — but it does get mention.

      Is there any NoDak delineation on oil vs gas drilling? Maybe a couple of rigs for gas / NGLs would cushion the official rig decline numbers.

      1. I don’t think there are any rigs in the Bakken area that just drills for gas. It is my understanding that all the gas there is associated gas.

        1. From what I see the Bakken TF is an undersaturated liquid system. This means it would be kinda of hard to find free gas.

          But maybe they are drilling for deep formations? What’s below?

          1. Fernando, the January 9 presentation from the North Dakota DMR site has 3-D seismic/graphics depicting all the formations in the Williston Basin. The Red River is deeper than the Three Forks and is currently producing almost 30,000bbl/d, but I do not know how much is being drilled at the moment.
            There are 17 ND counties currently producing gas, but the associated gas produced with oil (90/10 split, roughly) is considered a bit of a nuisance as it rapidly depletes along with the liquid hydrocarbons.

  18. Red Queen quote watch…

    Head West for Best Look at U.S. Oil Drillers’ Pain

    By Lynn Doan and Zain Shauk, Bloomberg Jan 23, 2015 5:18 PM ET

    “We spent a lot of money to go out and drill and use new technologies just to stop production from depleting in our mature fields,” Rock Zierman, chief executive officer of trade group California Independent Petroleum Association, said by phone. “It took us a lot of capital to basically run in place and now we’re looking at crude prices under $40 a barrel.”

      1. So the Alaska governor says they have to find more oil or develop other fossil fuel resources because that state needs the money. And Alberta says the lack of oil money is going to hurt its economy.

        If the places that are desperate for oil money and are willing to being even more aggressive about getting it all ramp up at the same time, doesn’t that just extent the pain for all of them by creating excess supply?

        I mean, as each area declines and is unwilling to adjust to a life without fossil fuel income, don’t they just continue to make it bad for all of them? When do some of these areas say, “You know, we need something other than oil money to keep us going”?

        1. When it’s all they know how to do, one should expect them to keep doing the same thing.

          Petro-states typically don’t have diversified economies.

          1. Texas is still dependent on oil, but it has diversified. Similarly, when Colorado went through its oil bust, it realized it had to guarantee that it wasn’t dependent on a single industry.

            It’s unfortunately that Alaska and Alberta aren’t acknowledging the same reality.

            And there are rust belt cities that realized they had to change. Pittsburgh comes to mind.

            Maybe both Alaska and Alberta have to hit bottom before they make plans to economically diversify.

            2. Alaska can’t really economically diversify. Implode, yes. But not diversify.

            3. Dunno. I sketched a coal to liquids scheme using gas from the new pipeline and coal, with the plant located somewhere near the ocean on the rail line going to Seward (but before the tunnel). I think a good spot would be near Anchorage, on the base grounds.

            4. So for a wild assed guess Fernando how many years do you think it will be until oil is expensive enough that people will actually be willing to put their money into coal to liquids?

            6. CTL needs $200 bbl for break even. It also very difficult to scale up a it becomes a logistics nightmare to manage hundreds or thousands of reactors. CTL is high maintenance. Third with all of the new EPA regulations, CTL is a dead parrot.

              Alaska was shipping a lot of coal to Asia (mostly China). I believe China coal imports have decline significantly in the past 12 months.

            7. Have to hit bottom before they diversify!

              Hey, how about the great majority of posters right here?

              Lotta talk, highly informed, from smart people to the effect that oil is going to be a real downer real soon, threatening themselves and all and everything.
              What to do? Is there some other place we could play with more up on the first derivative?

              Solar you say? Nah, ain’t our game. We stick with what we know about.

            8. Very good point. You tell people oil will run out. And they see no solutions. So I guess it isn’t the least surprising that Alaska can’t figure out a way to function economically without oil.

              Of course, other places have economically diversified. Similarly, other places are finding a way to use less oil. Will it be easy or maintain life as they know it? No, but given the choice of trying to continue to do what they have always done and failing or trying to do something with plans for loss of oil, doing the later is better.

            9. I wish there was an edit function.

              That should be:

              No, but given the choice of trying to continue to do what they have always done and failing, or trying to do something which plans for loss of oil, doing the latter is better.

        2. Boomer II,

          Alberta’s economy has been in the red since well before the price of oil began to drop. They weren’t paying attention to the old idea that it’s best not to spend more than you’re bringing in.

          Don’t know about Alaska. Paulo has pointed out that low- and medium-Arctic local economies are heavily dependent on petroleum products for day to day living, and that was my perception while working in NW Alaska too. Aside from heating, to leave the village you took a boat or plane or snowmobile (they used snowmobiles all year, right over the tundra) and all the fuel was brought in from down south.

            1. Also this from the article:

              Some observers have made the case that the free-market mindset that got us in this mess is actually a long-term project of powerful outside forces eager to acquire Canada’s treasure trove of resources at rock-bottom prices.

              The Kochs, perhaps?

  20. My well educated old cross-country skiing buddy in Edmonton, in correspondence.

    Stupidly warm here now, but the snow is holding (better than the oil prices at any rate).

    I asked him about the economic mood…

    the mood here is uncertain and mostly full of people praying the Saudis raise the price of oil. Good for me at the pump (69 cents today), but bad for me as someone on the public payroll. We’re expecting a 5%+ cut at work. we will see.

    1. In my town, I’ve seen $1.79 the last few days. I know it is cheaper than that in neighboring towns and at Costco but since I don’t get to either, I am not sure what those prices are.

  22. This program linked from Youtube aired on TV in Alaska on Friday evening. An hour long discussion about how dire the financial problems for Alaska are as long as the price of oil stays low. Again, politicians in the state are just about losing their minds trying to deal with this.

    Forum@360: How Tumbling Oil Prices Affect Everything in Alaska

    Oil is at the heart of Alaska’s economy, and the price per barrel a leading indicator of its health. So with the price of oil crashing, what happens now?

    https://www.youtube.com/watch?v=ymltyQ4oshw

    1. The oil crash will be followed by a population crash when people figure out the state government can’t afford to hand out free stuff any more. I predict the population of Detroit will be higher than Alaska in 2025.

      1. Census data show that, more often than not, more people move out of Alaska during any given year than move in. Nevertheless, the population has still mostly increased due to the state’s low average age and high fertility. Most years, Alaska’s birth rate is second highest of all the states and its death rate is second lowest. Only Utah routinely has a higher birth rate and lower death rate than Alaska.

    2. The observed 6.6%/year NET decline rate (net being the rate of change after new wells were added) in C+C production from the North Slope of Alaska is pretty strong support for the IEA’s estimate* that the gross decline rate from existing oil wells worldwide is on the order of 9%/year:

      http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=manfpak1&f=a

      In order to simply maintain current global oil production for 11 years** at a gross decline rate of 9%/year, the global industry has to replace the productive equivalent of every currently producing oil well in the world over the next 11 years–from the Americas to the North Sea, to Russia to the Middle East.

      *Source:

      COLUMN-Breakeven and shut-in prices for oil wells: Kemp
      http://www.reuters.com/article/2015/01/13/oil-shale-prices-kemp-idUSL6N0US2GE20150113

      Output from existing fields around the world would decline around 9 percent per year in the absence of new drilling or other capital expenditure to increase recovery, according to the International Energy Agency’s World Energy Outlook 2013.

      The IEA’s average 9 percent decline rate was calculated by analysing output from more than 1,600 conventional oilfields around the globe. Shale wells, however, exhibit much faster decline rates

      **At a 9%/year decline rate, existing production would be down to 37% of current production in 11 years, since we would be declining against a falling production level, but I am stipulating a “steady state” production scenario.

      1. For the North Slope, I was calculating the 2005 to 2013 rate of decline in production.

      2. Oooh, he’s reading this. We asked for his 9% methodology. There it is.

        1. Or rather IEA’s methodology.

          This guy may be the best oil reporter out there.

      3. Jeff, you’re amazing: All the stuff written about PO, pro and con, that could safely be ignored (and forgotten), by simply reading your impeccable analyses. My gut feeling is the 9% decline rate is a tad high, as expressed before; gut feelings are worth naught. As you say, Alaska has averaged about a 6% decline for a long time but then some (most) of the North Sea deposits declined at 10%, or more, in their later years.

        I’d bet that when the obscene exploration/development surge of late is a little further behind us a clearer picture will emerge. Personally I think the effect of “creaming” has been under appreciated but then maybe enhanced recovery programs may be under appreciated as well: They have been by me. Regardless, as always, I commend you for your contributions to Ron’s Blog.

        1. Minor clarification. The observed 2005 to 2013 decline rate of 6.6%/year on the North Slope is the net decline rate–after new wells, workovers, etc.

          The IEA is talking about the gross decline rate from existing wells–not counting new wells, workovers, etc.

        2. Incidentally, I’m really surprised that this IEA report has not gotten more attention, and as noted above, it seems that Jack Kemp may be the best oil & gas reporter out there.

          P.S. Thanks for the kind words.

        3. “My gut feeling is the 9% decline rate is a tad high, as expressed before; gut feelings are worth naught. As you say, Alaska has averaged about a 6% decline for a long time but then some (most) of the North Sea deposits declined at 10%, or more, in their later years.”

          I expect decline rates to go even much higher as infill drilling comes to its final conclusion. Infill drill has managed to postpone the natural declines. When they run out of pockets in the mature fields and the oil column drops to just a few feet, we’ll see a crash in production. It may take just a couple of years to go from mbpd to kbpd from a large field.

          It appears the laws of economics are being to kick in, as cheap interest rates has run it course in the global economy. ZIRP (Zero interest rate policy) is no longer working. Central banks are now turning to NIRP (Negative Interest Policy) to keep the system going. This is equivalent to eating your seed corn as savers are being taxed to pay for gov’t soaring debts with their savings. NIRP won’t last long and when it does fail, the global economy will plunge into a deep depression. Cap Ex on Oil&Gas production will vanish with it.

          1. Hi Techguy,

            What do you think World C+C URR will be? Jean Laherrere estimates 2200 Gb for C+C less extra heavy(XH) oil and 500 Gb for XH oil for a total C+C URR of 2700 Gb.

            1. DC asked:
              “What do you think World C+C URR will be?

              The question should be “What do you think World C+ ERR will be?” Economically Recoverable Resources. I don’t have a clue since the majority of exporters and drillers do not share their data. Its all guess work using flawed data. If you had a Gun pointed at my head I would say less then 2 Tbbls, probably between 1.4 and 1.7 Tbbls.

  23. An interesting stat about US car sales, and a rather disquieting historical parallel:

    Pricing: The extra icing on the cake in a great year (for car sales)
    http://www.autonews.com/article/20150105/BLOG06/301069998/1448

    The counting’s done, so it’s official: 2014 was a great year. We can all rattle off lots to celebrate: fifth straight year of sales growth, 13 brands setting U.S. sales records, 6 million-plus units higher than 2009 and more growth forecast for 2015.

    But for me, one feel-good factoid trumps everything. The industry’s average transaction prices are still rising. Bottom line: Automakers are netting more per vehicle than ever, even with all those frantic December closeout spiffs.

    That’s the best sign that the boom times aren’t over yet.

    As much as we all savor these good times, since the Great Recession everybody in the car biz is a bit paranoid about bad old habits.

    We love the growth, the profits and the stability of a really long economic expansion. We know the industry has earned that by matching production to demand, by self-discipline and hard work.
    But five years of growth is a long time. So forecasts for 2015 becoming a sixth straight growth year may make sense, but also make our teeth itch.

    After all, the last six-year string of U.S. auto sales increasing was 1921 through 1926.

    1. “Automakers are netting more per vehicle than ever,”

      Scaring us with deflation but it is inflation that is slowly choking us.

  24. If I were to venture any kind of guess of what will happen to Alaska’s population in the future, it will probably grow some, not diminish, not the way things are going. It’s a taiga up there.

    There’s fish and crab in the Gulf of Alaska, the coastal properties will maintain their populations. Halibut is a winner, it can be sold and people will buy it.

    The fishing in Alaska will continue, the process, logistics, to ship tons of crab from the Alaska gulf waters won’t stop.

    There are two air force bases, an army base, Alaska will remain inhabited by humans.

    735,132 brave souls take the time to be there. One out of every ten thousand live in Alaska, the other seven billion choose not to live there.

    They also have what? 500,000 barrels of oil running out of the spigot each day, so it’s not like they’re losing in the game. It has to be worth something.

    Looks like Alaska’s oil production is twenty percent of the highest daily output attained in year 1988.

    http://www.tax.alaska.gov/sourcesbook/AlaskaProduction.pdf

    Somebody can build a graph from the info on the pdf and see how the curve looks once graphed.

    If Alaska loses population, the Russians can move (return) there, the infrastructure is in place, and live there instead of Americans. I suppose they could buy the place, but they could just be squatters and find a way to get by.

    That’s the ticket, sell Alaska back to the Russians for 18 trillion dollars and pay off the debt.

    Don’t really need Alaska that bad.

    1. You don’t want to do that. Clear, Alaska has a major radar facility for strategic missile attack warning inbound over the Arctic.

    2. President Obama may declare a new wildlife refuge in Alaska soon.

      http://www.washingtonpost.com/news/energy-environment/wp/2015/01/25/obama-administration-to-propose-new-wilderness-protections-in-arctic-refuge-alaska-republicans-declare-war/?hpid=z1

      The oily men and women are fix’n to pitch a major hissy fit.

      I think it is a good idea to set aside this land…besides, I doubt that area has much oil.

      NG? Hell, last few years people have been concerned that its price is too low…not even economical to capture the gas produced along with the oil in the Eagle Ford and the Baaken…best to flare it off so no one can have it!

      Meanwhile depletion never sleeps…tock tock, tick tock.

      Watcher…your concerns explain your name…them missiles ain’t coming, son! Anyone who knows anything knows Russia’s primary concerns are: Short term: Their ‘near abroad’, especially keeping a lid on Islamic extremism, and longer term, the Chinese. If anyone wants to watch the sky for impending Armageddon, lobby your gubmit’s to fund NASA and ESA to detect, catalog, and track as many space rocks as they can, and also fund some experiments on kit and procedures to defect dangerous rocks from impacting our only planet.

    2. What is Yergin talking about? “…. China’s economy was slowing, too, and that meant SLOWING growth in oil demand.”
      China’s net import of crude oil in 2014 climbed 8.8 % through September to 6.1 Mbd.
      Imports in September were the second highest on record. In October, oil demand rose 7.4 percent from a year earlier to 10.35 million barrels per day, its strongest gain in 15 months, according to Platts.

      1. One of the things I have stocked up on rather than cash and precious metals is iron in the form of pipe angle beams and plate whenever I could find it at scrap yards and sales. I got nearly all my stash at eight to twelve cents a pound – the same stuff now costs over a dollar in small quantities new.

        Buying usable steel in usable condition involves getting to know your local scrap dealers and being ready with the cash and the truck when something good arrives. So I got into lots of conversations with scrap guys. The American country side has been picked virtually clean of old cars and trucks and farm machinery. Nearly all of it that was not recycled here went to China- train load after train load shipload after ship load every time the market price dipped especially.

        The Chinese aren’t stupid- they know that iron and coal are depleting resources and that a million tons of scrap steel is a far better investment that a two or three or four percent piece of paper.

        Given the size of their steel industry and labor force they are probably building storage as fast as we built Liberty ships back in the WWII era.They can likely save enough – or make enough as the case may be -on the contents of a super sized tank filled this month or next to pay for it within the next year or two when oil goes up.

        Somebody here may know if they have old salt mines or other caverns that can be used to store oil as well.

        There are things to be said for an authoritarian government in a time of emergency or opportunity. The Chinese can probably be pouring concrete and setting steel in the half the time it takes to arrange an environmental review in the US or western Europe.I mean ARRANGE the review- not actually conduct it.

  26. ZH has splashed a story of . .. the party getting started. Here are some juicy morsels:

    http://www.zerohedge.com/news/2015-01-24/oil-drillers-are-going-die-q2-conway-mackenzie-warns-expect-outright-liquidations#comments

    “
    Companies that drill wells and manage fields on behalf of oil producers will be the first to fall after the benchmark American crude, West Texas Intermediate, lost 57 percent of its value in seven months, said John T. Young, whose firm led the city of Detroit through its 2013 bankruptcy.

    Oil companies have slashed thousands of jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans in response to the prolonged rout in crude prices. For oilfield service providers that test wells and line the holes with steel and cement, the impact of price reductions forced upon them by explorers will start to pinch hard during the second quarter, Young said Thursday.

    “The second quarter is going to be devastating for the service companies,” Young said in a telephone interview from Houston. “There are certainly companies that are going to die.”

    Oilfield-service providers are facing a “double-whammy,” he said. Even as oil companies are demanding 20 percent to 30 percent price reductions, they’re also extending wait times before paying their bills, enlarging cash-flow gaps for the drilling and equipment firms, he said.

    …

    The amount of projected 2015 oil and natural gas output a company has hedged is a strong indicator of whether they’ll be able to pay their bills, he said. Another important metric is how much is drawn on revolver loans, Young said.

    “I’m telling them they really have to keep an eye on this stuff and you’ve got to be the squeaky wheel,” he said. “You’ve got to start filing liens if you see a company starting to go down.

    That last part is the bomb exploding. So much for already existing wells flowing. They will impound this stuff. Outright take possession and wait for a judge to declare what’s what.

    1. Last night I was at the late Christmas staff party and there were lots of oil and service people. As you can imagine there was lots of storytelling from the field. So the guy next to me is talking about drill rig being pulled right in the middle of drilling. So all the assumptions of already sunk cost, already allocated budget or let’s just drill and frack later are not valid anymore. It’s total retreat.

      1. Ves,

        Interesting stories. I know California had a number of cancelled contracts where the penalty was paid to terminate the drilling contracts. were these stories about California or elsewhere? It would be interesting just to tie the antidotes to what else we are hearing.

        1. It is just little bit north of North Dakota on Canadian side. It is fairly large company so probably they run the numbers and decided that this make more sense.

  27. Here’s an excellent article which is a fine example of the pickle humanity has put itself in:

    http://www.psmag.com/books-and-culture/save-the-honeybee-sterilize-the-earth-pollination-industrial-complex-95566

    This article provides some clues as to why it is that 45% of all invertebrates (mainly insects, but not all insects) have died since I was born. It suggests some of the reasons why that die off will continue. It also demonstrates something of just how screwed up the world is as a result of human action (more likely than not).

    Also, it’s really weird that we can’t figure out how to feed bees given that we’ve lived with them since ancient Egypt days. But then, we never had to feed them before because they could eat enough from what was available. No longer. Isn’t that something?

    Futhermore, I note that we humans are expending some effort at helping the bees survive (because of economic utility of course). The vast majority of life on earth has no such economic value to us and is simply swept aside while humans shrug. An example is the monarch butterfly, which numbered 1,000,000,000 individuals or so when I was born but is now numbers in the 10’s of millions. No one really cares (heck I only learned of this massive die off (90+% of monarch butterflies are gone) in the last few months and I actually try to keep on top of such things) or so it seems to me.

    There are millions of other species that are similarly ignored but likely facing huge pressures from humankind and the modern world humankind has created.

    It’s something worth pondering, which I know some of us (here’s looking at you Ron) have done already.

    This is just remarkable and saddening. In my view, we can’t turn this around if we wanted to. Am I wrong?

    1. “In my view, we can’t turn this around if we wanted to. Am I wrong?”

      No, I don’t think you are. It is likely that it will be our turn for a population reduction in the not too distant future. Basic biology and over-shoot I suppose.

    2. Just as an example, there are 20,000 species of bee. Many of them are disappearing.

      The world is turning into a human garden. We are harnessing the entire ecosystem to sustain ourselves. Everything else is disappearing. Will we get it right?

      1. We are European Honey Bee centric.

        An invasive species in the Western Hemisphere.

        I look for our native bee friends.

        While backpacking, I’m finding more and more feral honey bees

        Not good.

    3. I always get upset when seeing the “beautiful” truck commercials on TV. One sees a F150 of a GM equivalent racing through countryside, through little streams splashing water when crossing with high speed, cross country driving killing zillions of insect on the ground. The message is: Buy this wonder car and you can do it too.

  28. Hi all,

    I have presented Oil shock models for World C+C in the past with C+C less extra heavy of 2500 Gb and extra heavy oil of 500 Gb for a total URR of 3000 Gb. Ron Patterson has suggested a C+C less extra heavy URR of 2000 to 2200 Gb, so I created a model with C+C less extra heavy URR of 2200 Gb and an extra heavy oil URR of 500 Gb. Chart with model below

    1. Good Morning Dennis,

      Hate to say it but your latest model is actually starting to look (a little bit) Real World. Further, it’s nice to see the famous Tail-to-Infinity chopped off. Finally! 😉

      Cheers,

      Doug

      2. Hi Doug,

        Thanks!

        Unfortunately I did this a little too quickly and had to rework the model to match the producing reserves estimate with the previous (3000 Gb URR) model, which used Jean Laherrere’s proved plus probable reserve estimate in 2010 (900 Gb) and assumed about 56% of these reserves were producing reserves. I failed to take account of this with the new (2700 Gb URR) model, so that has now been corrected.
        Below I changed the horizontal scale to 1990 to 2040 and present both models for comparison (original model is dashed line). Note that the model for extra heavy(XH) oil is separate and identical for both the 2700 Gb and 3000 Gb cases (extra heavy URR is 500 Gb). The World Shock model adds the C+C-XH models to the XH model to get a World C+C model.

    1. From the article: “Not since Spindletop have there been more smiling faces …” Ye, but not for long as Yergin describes in his book The Price. Like locust, people were descending on the play and, as one producer said “you cannot even sell a barrel of crude for 2 Cents”. It was unregulated then as it is now in the Bakken and Eagle Ford, creating a drop in crude price. A rare event: History repeats itself since people have learned nothing but greed is good as always.

  30. Just because he has been in the oil biz forever doesn’t NECESSARILY make him a better forecaster than anybody else but that is probably the way to bet anyway.

    Pickens says again yesterday that oil will be back at the old price level in twelve to eighteen months.My personal opinion is that he is right.

    Since I know so LITTLE about oil markets it makes it a LOT easier for me to pontificate about selling oil like a stuffed shirt economics professor. Knowing too much inhibits the imagination.

    So here goes.

    Most of us here have probably experienced at least a couple of massive limited access highway traffic jams brought on by accidents.Depending on where you are and when in relation to the accident you may see it in the rear view mirror and escape it cleanly. Or you may be following pretty close behind the cars that wreck and sit waiting for an hour or two for the cops and wreckers to clear the road. You might even get hit from behind and become part of the wreck.

    If you are three or four miles behind the actual accident traffic starts slowing down – at first a little then a lot and finally to a crawl and then it stops. From thirty or forty miles behind you may only run into more congestion than expected if the wreck is cleared quickly. From a hundred miles behind you may not even realize there HAS been a wreck.

    Now the thing that is most interesting at this minute in my little thought experiment is that IF you are up front in the traffic jam you will have a wide open road in front of you when you do get past the wreck.

    All the OTHER cars and trucks that would ordinarily be nearby will either be gone on many miles ahead- the ones that were in front of the wreck- and just about all the others behind you are going to be waiting a good while for traffic to actually start moving at all and then it will move at a crawl for the first few miles as the cars get strung out again at highway speeds.

    IN terms of producing oil folks who are doing new projects and especially tight oil are going to lose a hell of a lot of time stuck in traffic. But the companies that are producing legacy conventional oil are going to be sitting pretty – they are not going to lose any time at all ramping up their legacy production.They are the ones up front in the jam. Ready to put the pedal back to the metal as soon as the road is clear.

    The ones back in the pack will take some time to regain their usual speed – meaning daily production -several months to a year or longer at least for a guess depending on just how they went about cutting back. BUT traffic is going to be sparse up front. The companies clogging the road with excess traffic – the tight oil guys mostly- are going to be stuck back in the pack.That means high prices for the guys who are up front.

    What I am thinking is that the price of oil is going to shoot back towards the hundred dollar level pretty damned quick once the glut clears- just like the cars up front in the traffic jam get back up to speed very quickly once the wreck is cleared. A lot of tight oil production is going to be delayed and some marginal (high operating cost ) conventional production will be shut in. So the glut may clear a lot faster than most people would guess.

    Of course a bedridden economy might not consume enough oil to get the price back up short term anyway.

    But my guess is that the world economy in general is going to do a little better rather than worse for the next couple of years.

    1. I flew on Boone’s Gulfstream from Dallas to his Panhandle Ranch last August with Amarillo friends. Other than mention of the fracking under the house there was not much talk about the oil business. I did ask him “What is going to happen in 50 years?” He seemed momentarily perplexed by the question then replied “I don’t know”. I appreciate those who are able to make that statement. Boone did lose a bundle on wind.

    2. Very good analogy OFM. What you describe in words is put in math terms by M.L.Chaudhry’s book “A first course in bulk queues.

  31. I guess all here know that I’m a bit of an astronomy buff (pulsar obsessive) and this is a PO Blog but it is Sunday morning so here’s a bit of off-topic trivia. My wife just said the pulsar thing borders on insanity! Trash it all if you want Ron.

    NEW HORIZONS PROBE EYES PLUTO FOR HISTORIC ENCOUNTER

    http://www.bbc.com/news/science-environment-30954673

    “A NASA probe is to start photographing the icy world of Pluto, to prepare itself for a historic encounter in July.”

    1. I hope this makes into production before the big crunch happens:

      http://en.wikipedia.org/wiki/James_Webb_Space_Telescope

      This telescope (if it works) could unlock some of the best discoveries of the past 70 years. I think if they do a deep space observation with it, they will find that the universe is much much larger and older than the accepted values.

  32. Spain is sky blue today, the Alps are snow covered, clear skies over northern Italy and along the French Riviera, clear above north Africa, central Africa is cloud covered, cirrus above the Nile delta. You can see the entire length of the Nile again today. There are clouds in the south Atlantic and southern Indian oceans. Madagascar, Henry Ford’s country of origin, is overcast to mostly cloudy. Extensive cloud cover over Scandinavia and Russia.

    Sun’s doing the job one more day, you can thank your lucky stars it’s here again one more day. After ten billion years since its formation, the sun’s mojo rocks, all is still well, when you’re hot, you’re hot. If anything can rise and shine, it is the sun. When it comes to energy output, lifting barges and toting bales, the sun is the winner.

    Oil can’t hold a candle to the sun, sorry.

    All of Africa, Brazil to Persian Gulf view at 12:00 hours utc, pole to pole, (requires registration, which is free):

    http://www.sat.dundee.ac.uk/geobrowse/geobrowse.php?sat=0&year=2015&month=1&day=25&slot=1200&ch=1&grid=0&size=1

    2. Unfortunately Spain has reached the máximum solar power generation that’s feasible with current technology. This was achieved by using hydro power to generate electricity when there’s no sun. But there’s a limit to hydro, this means further solar deployment requires pumped storage. And there just isn’t money for such investments.

      1. Fern,

        I’ve tried until I was blue in the face trying to explain these same reasons solar and intermittent renewables will not replace fossil fuels. You might as well try to convert Muslims into atheists. “Renewables will save the day” fanatics appear to have the same fervor to solar and wind as Muslims do to Allah. More power to you (Pun intended) if you are successful 🙂

      2. Interesting thing to say. You do realize that all power plants require backup? The Germans have been able to install quite a bit more than Spain, and they did it without using any backup that wasn’t already in place. Makes total sense since all power plants require backup. In fact, the grid operators in Germany claim wind and solar are easier to work with and they require less backup since they know when they won’t be available.

    3. Now, ladies and gentlemen, take a squint along the Red sea and all around. What to you see? Aha, factory ships/towns from every manufacturing country in the world snuggled up against all those solar power/pumped seawater/sea transport things crowding the entire length of the shores.

      Reason? Right. Mighty low cost guaranteed steady, and getting lower, electricity year around, lowest cost transport, and on the floating towns, the home you are comfortable with- to each his own.

      And ashore? VERY happy locals, as well they ought to be, each and every one of whom with a generous gob of whatever grease does it for them. They really WANT you there.

      Can’t see it? Please move over to make room for those with better vision.

  33. And so, the Greek bomb throwers won.

    GAZPROM’s Southstream 2.0 is a go. If that natgas transit fee is secured, the defaults begin.

    1. I would love to be fly in the room where they negotiate the amount of debt write off knowing that the import gas hub will be on Greek border as it looks like right now 🙂

      1. Debt write off will be very difficult. It’s the IMF, who have NEVER had a default.

        And Merkel has to stand for election. Her opponent will be sure to point out the loans she authorized to Greece, of German taxpayer money, are not going to be repaid.

        As was done with the private bondholders, the likely maneuver will be maturity extension and zero interest rate, but even that’s going to be a hard sell.

        Tsiparas is in front of the microphone right now saying he’s going to tear up all the agreements. He’s a bomb thrower. It would be useful to know if they have the cash on hand to fund the default procedure haha, to buy them time until their Russian benefactor supplies them with free oil.

        1. That “taxpayer money” rhetoric doesn’t do very well in Germany. People are more interested in doing the right thing.

          She’ll be running against The Socialists, currently her coalition partners. They are not about to attack her for too much government intervention.

          The current German policy of running a budget surplus seems questionable to a lot of people given that interest rates are so low. That will likely weaken objections to the policy.

          In the wake of the attacks in Paris, it is noticeable that right wing populists have not profited at all, even though the Islamists have lost a lot of ground. This suggests that “us vs. them” logic is unlikely to prevail in the Greek question.

          1. Okie dokie, so your read is Germany will be happy to have the billions sent Greece be gifts and not loans.

            Well hell, maybe so. They are going to be printing 1 trillion euros anyway out of nothingness so maybe it doesn’t matter if billions of euros aren’t repaid.

        2. Watcher, my gut feeling is telling me that they (whoever EU/ECB/IMF) will negotiate simply because that is in their benefit to keep debt based monetary system alive just for little bit longer.

    2. WSJ: Greece: Austerity, Relief or Exit?
      http://blogs.wsj.com/briefly/2015/01/23/greece-austerity-relief-or-exit-the-short-answer/

      Excerpt:

      What if no agreement can be reached?


      That’s a serious risk, given the chasm between Syriza and creditors, especially Berlin. Even rising doubts about whether a compromise can be found could lead to heavy deposit withdrawals from Greek banks and capital flight from the country. At that point, the ECB would have to decide whether to keep liquidity open for Greek banks or to cut them off, because of the lack of a prospective agreement and Europe’s rising financial exposure in case Greece leaves the euro. Greece and the eurozone would very likely have to impose capital controls, like in Cyprus, to stop the capital flight. But that would probably be an interim step. Either Syriza would have to give in and sign a bailout program, or Greece would have to print drachmas to keep the economy, government and financial system from collapse.


      Is Germany prepared to countenance Greek exit from the euro?


      Chancellor Angel Merkel would certainly like to avoid a Grexit. The media coverage of a financial meltdown and economic devastation in Greece that would follow Grexit would likely be deeply damaging for Germany’s standing in Europe. Moreover, Germany, like other eurozone countries, would face heavy losses on bailout loans and central-bank exposure to Greece.
But Germany can only continue to finance Greece if there’s a counterparty: a government in Athens that is prepared to run a significant primary budget surplus, and to overhaul the Greek economy to make it more viable inside the euro.


      And if Syriza refuses to meet those terms: Will Merkel blink?

      
No. German leaders fear that funding a Greece that refuses to reform would be the death knell of the eurozone. Other debtor countries could conclude that they could blackmail Berlin, refuse to cut their deficits or overhaul their economies, and still get German taxpayers’ money. The cost of lending to a recalcitrant Greece would eventually reach far higher than the cost of Grexit, German politicians are convinced. If Syriza doesn’t blink, then Ms. Merkel could reluctantly say auf Wiedersehen, Griechenland.


      Will Syriza blink?

      
Possibly, if failure to come to terms quickly with Europe leads to deposit flight and Grexit panic, battering Greece’s economy. Syriza might also split and fall from power in such a situation, triggering another election. The big question is whether Syriza will overplay its hand, realizing the weakness of Greece’s position only too late, when bank deposits are already fleeing the country.

      1. They, also, don’t realize Russia is on this radar screen. Gas transit fees to Greece change everything.

        1. It’s all garbage what can you read in papers these days. I am sure a year ago WSJ claimed that Markel would not blink and allow ECB to print. But what happened 3 days ago? The printed. and they will print again.

          1. That really is an outrage that didn’t seem to manifest. Merkel signed on to printing over a trillion Euros that only Germany can support. And those Euros aren’t going to Germany.

            It’s mind boggling what has happened since the 2008 Apocalypse whilst the collective imperative to keep the wheels turning remains — because anything else . . . ANYTHING else dare not be allowed.

            1. “Support” is an odd word. The crisis of 2008 consists of trillions of dollars worth of paper assets disappearing overnight. The problem central bankers are confronted with is that the money is too valuable, not that it is losing value at all.

              Most gold bugs grew up in the 60s and 70s when stagflation was a problem. This is not the problem we are facing today.

              The problems we are facing today (in the short term) are the deflationary effects of technical innovation, a vast increase in available labor (mostly Asian) and ever increasing optimization of production and the supply chain.

              The result is that the existing money supply is chasing an extremely rapid increase in real value, to borrow Milton Friedman’s term.

              The bursting of the oil bubble is just one of many steps in this process. As Fernando estimated, coal can be converted to liquid fuel and sold for $100. That is only one of the substitution options, the most obvious being reducing waste. There was never any real reason for the price to be above $80, it was just speculation (and timing issues).

              Both globalization and innovation are speeding up, not slowing down. Don’t expect interest rates to rise in the near future, or inflation to take off.

      2. I’m pretty sure Greece exiting the euro is not on the table. It would devastate the country for one thing, and make other euro countries targets for speculators as well, so it wouldn’t help the euro.

        Keep in mind that Greece is a small country, with <2% of the EU population. Rescuing the Greek economy is a small price to pay for keeping the euro house clean. Much too much has been written into this by sensationalist newspapers, especially those like WSJ which are actively anti-European.

      3. FWIW: A few thoughts on the issue:

        1. I suspect that Mario “Bazooka” Dragi announced QE in front of the greek exit as a means to bailout the banks when Greeks defaults. Timing sees too close to not be connected.

        2. The Greek exit isn’t the problem, Its what happens if the remaining PIIGS (Portuagal, Italy, Ireland, and Spain) follow. Defaults are like potato chips, you don’t just eat one and walk away.

        3. The EU’s NIRP (Negative Interest Rate Policy) is going to destroy whats left of the EU economy, as money started heading for the exits and the EU is forced to impose capital controls. This would be a bad time for foreigners to hold on to EU capital assets in my opinion.

  34. I wonder what percentage of global crude oil production is currently not cash flow positive, after operating costs? My guess would be something like 5% to 10%.

      1. I think that would be close. I wonder where that figure is when general and administrative costs and severance taxes are included, at least in the United States? I am not familiar with tax structures in other countries, but I have read Canada has production that is underwater on an operating basis.

        If you look at some of the smaller Bakken public companies, their most recent 10Q reports show they are underwater on their existing production as a whole assuming those expenses are included, if they are selling oil for under $30 per bbl. This gets pretty scary when one considers the decline they are fighting. Also, worth looking at the US public MLP expenses. Keep in mind, most are receiving $25-40 for their oil in places other than the Gulf area, such as EFS. I bet California is very stressed. Mid- Continent conventional producers most certainly are.

        I think the best approach to determine just how stressed things are now is to strip out just the costs for new production and workovers. In other words, what are the total expenses that are necessary just to keep existing production going?

        When one considers that no drilling or workovers results in a 6-10% decline, seems that the current price cannot last too many months, unless consumption FALLS globally.

        1. On a related note, I read the KLJ engineering report today that was released in September, 2014. I assume it has been discussed here? Commissioned by the State of North Dakota concerning the Bakken. Thought it was interesting that they analyzed economics based on well IP. Remember there being some debates about that recently and that Mr. Patterson has conducted Bakken analysis based on IP.

          Thought it is interesting that the minimum oil price they used was $35 and maximum was over $400 per barrel. It is interesting reading, in particular that wells at 500 IP or under will never pay out at $70 oil.

          1. 135,000 barrels per day of oil are produced in Kansas. The average well produces 2.54 barrels per day. Coffeyville Resources posted price for Kansas common 1/23/15 was $35.75. Definitely some underwater on an operating basis.

    2. A bit more than Friday.

      Japan futures just opened. Euro smashed. Dollar up as a result, and yes sportsfans, that means WTI just cracked under $45 to $44.40ish.

      1. Wonderful for consumers. Not for producers. As I keep telling myself, as I have during previous times being underwater, this too shall pass.

  35. I’ve said that if I were really wealthy, I’d be buying farmable land. Evidently some are doing that.

    At a packed session in Davos, former hedge fund director Robert Johnson revealed that worried hedge fund managers were already planning their escapes. “I know hedge fund managers all over the world who are buying airstrips and farms in places like New Zealand because they think they need a getaway,” he said.

    http://www.theguardian.com/public-leaders-network/2015/jan/23/nervous-super-rich-planning-escapes-davos-2015?CMP=share_btn_fb

    2. Despite a big sell off in grain prices, so far the land market has not fallen much. My understanding is that current grain prices are not enough for most US farmers to make much, if any profit. Maybe deflation will hit farmland soon too.

      1. Suppose you measure the output of your farm in calories rather than printed 1’s and 0’s.

        Profit looks better then.

      2. I was thinking in terms of usefulness rather than investment. If you have more wealth than you know what to do with anyway, you don’t really need to find ways to generate even more wealth. Having farmable land could be of value to your current and future family members.

  36. RBN latest on Break evens. The cracks are beginning to show, but still holding hope for those special wells.

    https://rbnenergy.com/it-don-t-come-easy-low-crude-prices-producer-breakevens-and-drilling-economics-part-3

    Breakevens

    In addition to IRR sensitivities we calculated breakevens for the crude basins by identifying the price at which the IRR is 0% over the 25-year life of the well with gas at $3/MMBtu. The results for typical wells in each basin reinforce the IRR analysis by indicating how close to breakeven these wells are at $45/Bbl crude price levels with the Bakken breakeven at $43/Bbl, the Permian at $40/Bbl and the Eagle Ford at $46/Bbl. However, sweet spot wells in the Bakken reduce their breakeven price by $4 to $39/Bbl, in the Permian by $12/Bbl to $28/Bbl and in the Eagle Ford by $8/Bbl to $38/Bbl respectively. In other words, sweet spot wells in these plays continue to be economically viable even at today’s low prices.

    1. Looked at several MLP 10Q. When add OPEX, severance and ad valorem taxes and G&A, they are between $20-30 per boe on an operating basis. When you figure that Henry hub is around 2.90, figure they are pretty close to break even before hedges.

      An example is one with the above costs at $24.23 per boe. Half is Nat gas. When you figure their oil at $9 off WTI per their report, use $36 per bbl for oil. Using $2.50 for gas. Realized price per hoe before hedges is $25.50 per boe. I think things for many are much more dire than most think.

      Just about all public companies have debt. If this lasts past the 2015 hedges, look out!

      1. Have any of the shale plays, announced their 4th quarter results? I see CLR and EOG are not releasing until 2nd week of Feb.
        They seem to be leaving things to the last minute.
        What is the last day before they have to report.

        1. Nah, that’s not really unusual. The shale producers have nearly always waited 4-6 weeks from the end of the quarter to release results and hold conference calls.

          Now those conference calls this quarter might be more entertaining than usual, though.

    2. Soooo what % of total wells to be drilled qualify. Getting tired and more tired of “some wells are viable” and “sweetspots are viable”. Let’s hear how many. Let’s particularly have the lenders hear how many.

    3. Quantifying unconventional production in the Permian Basin to have just one “breakeven” price is not terribly accurate. There are multiple unconventional targets, each with different pricing structures. Also, the royalty system for mineral owners in the basin is a lot different then a place like the Bakken, so I’m not sure how a universal “breakeven” price is appropriate.

      1. Hi ManBearPig,

        Can you give us an idea of the range of breakeven prices for an average well in some of the more prolific LTO formations within the Permian?

        Many of us (or me at least) have no clue about the Permian aside from the few nuggets of wisdom you have shared.

        1. Dennis,

          Like I said this is a very complex issue. Unconventional targets (currently) are as follows:

          Midland Basin (youngest to oldest) – Spraberry, Wolfcamp (A,C), Cline, Strawn, Atoka, Barnet, Miss Lime, Woodford
          Central Basin Platform (y-o) – San Andres, Clearfork, Wolfcamp, Strawn, Atoka
          Delaware Basin (y-o) – Avalon, Bone Spring (1st, 3rd), Wolfcamp

          I’m sure I missed some, but you get the general idea: its not like the Bakken or Eagle Ford, there is more than one target.

          All of these are in geographically diverse areas, with some near existing infrastructure and some distant. The ability to tie into existing infrastructure is an easy cost saving measure. On top of that, there is the issue of NRI differences between the Permian and other unconventional areas. In places like the Bakken, there was very limited existing production so all leases were signed on modern terms, generally 1/4 or 1/5 royalty (at least that’s the norm now in the Mid-Continent area, I have no direct experience with NoDak). The Permian is an old oil area, and even though many new leases are/have been signed on modern terms, there are still many unconventional wells being drilled on acreage that also produces from old conventional production. Because of this, the royalty terms are much different. many are sub 1/8 and I’ve even seen some old leases from the 30’s that are less than 10% royalty. Having a NRI of 75% vs >90% makes a huge difference in profitability of high cost wells.

          All of that being said, I don’t think $40 is economic for unconventional production. Shallow vertical wells in waterfloods can work with oil that low, but I have a hard time seeing anyone who is a fully unconventional operator happy with that. If the wells has already paid out? Then sure $40 should cover lifting costs, but if it hasn’t paid out I wouldn’t be comfortable under $75/bbl.

      1. Steven’s most recent comment:

        This from Credit Suisse Hong Kong, last night:

        “December apparent oil demand saw 6% YoY growth, rising from 4% growth seen in November. This brought 2014 total oil demand to 1.6% growth, the slowest growth pace since 2000. December crude imports saw 13% YoY growth amid sharply lower oil price, bringing 2014 total import to +10%.”

        I read that as surging Chinese demand. And guess what, I think it’s going higher, if I assume China’s not going into recession.

        Ain’t no weakness in demand there; at least not on paper.

        So, we have gasoline demand in the US up 800 kbpd and China’s oil demand up nearly 700 kbpd in the last month or two. Where’s the weakness in demand?

        1. Hi Jeff,

          Interesting thanks.

          His most recent comment suggests that the story is one of excess oil supply rather than weak demand.

          1. My followup to Steven’s last post:

            One small clarification, for the benefit of readers: When the EIA refers to “Crude oil,” they are talking about Crude + Condensate, but as I have frequently pointed out, when one asks for the price of crude oil, one gets the price of 45 or lower API gravity crude oil. The dividing line between crude oil and condensate is most commonly defined as 45 API gravity (although some sources put it as high as 50, and some use a lower number). In any case, the following graph shows the precipitous decline in distillate yield, just going from 39 AP gravity crude to 42 API gravity crude (labeled as condensate on the chart):

            http://i1095.photobucket.com/albums/i475/westexas/Refineryyields_zps4ad928eb.png

            And note that the following chart showing API gravities of global crude oils versus sulphur content tops out at an API gravity of 40:

            http://i1095.photobucket.com/albums/i475/westexas/APGravityVsSulfurContentforCrudeOils_zpsc28e149c.gif

            Condensate and natural gas liquids are byproducts of natural gas production, and as noted above, if we subtract out some plausible estimates for global condensate production, it’s quite likely that we have not seen a material increase in actual global crude oil production (45 and lower API gravity crude oil) since 2005, even as annual Brent crude oil prices averaged $110 per barrel for 2011 to 2013 (and about $100 for 2014). And of course the question is, if four years of approximately $100 or greater oil prices only kept us on an “Undulating plateau” in actual crude oil production, after trillions of dollars were spent on upstream capex, what happens to global crude oil production given the current price collapse and resulting (ongoing) decline in upstream capex? (Of course, Steven addressed this issue some time ago.)

            In any case, this does not take away from Steven’s point that we have seen a huge increase in US liquids production, and I wonder if the third quarter (2014) decline in US net imports (total liquids basis) provided a lot of the missing declining demand that we have been discussing (which in effect is what Steven was pointing out). Based on four week running average data, US overall net imports fell from 6.2 mbpd in the week ending 6/13 to 4.7 mbpd in the week ending 11/07, a decline of 1.5 mbpd in the US demand for net imports of oil.

            What I define as Global Net Exports of oil (GNE*) fell from 46 mbpd in 2005 to 43 mbpd in 2013 (2014 data won’t be available until around September). And what I define as Available Net Exports (ANE, or GNE less Chindia’s Net Imports, CNI) fell from 41 mbpd in 2005 to 34 mbpd in 2013.

            It seems to me that in effect we saw a 1.5 mbpd decline in demand for ANE in the third quarter of 2014, just due to the decline in US net imports. However, US net imports have recently rebounded, hitting 5.9 mbpd in early January, and most recently we were at 5.6 mbpd in the week ending 11/16 (all four week running average data).

            *GNE = Combined net exports from (2005) Top 33 net exporters, total petroleum liquids + other liquids, EIA data

  38. Another case of unintended consequences:

    Meant to Keep Malaria Out, (Pesticide saturated) Mosquito Nets Are Used to Haul Fish In
    http://www.nytimes.com/2015/01/25/world/africa/mosquito-nets-for-malaria-spawn-new-epidemic-overfishing.html

    BANGWEULU WETLANDS, Zambia — Out here on the endless swamps, a harsh truth has been passed down from generation to generation: There is no fear but the fear of hunger.

    With that always weighing on his mind, Mwewa Ndefi gets up at dawn, just as the first orange rays of sun are beginning to spear through the papyrus reeds, and starts to unclump a mosquito net.

    Nets like his are widely considered a magic bullet against malaria — one of the cheapest and most effective ways to stop a disease that kills at least half a million Africans each year. But Mr. Ndefi and countless others are not using their mosquito nets as global health experts have intended.

    Nobody in his hut, including his seven children, sleeps under a net at night. Instead, Mr. Ndefi has taken his family’s supply of anti-malaria nets and sewn them together into a gigantic sieve that he uses to drag the bottom of the swamp ponds, sweeping up all sorts of life: baby catfish, banded tilapia, tiny mouthbrooders, orange fish eggs, water bugs and the occasional green frog. “I know it’s not right,” Mr. Ndefi said, “but without these nets, we wouldn’t eat.”

    1. Jeff, you really have to limit yourself. How about one depressing news story per three days? I woke up this morning, brewed coffee, played with my old dog, whistled a happy tune (not really), turned on my computer, read BBC World News (still quite happy at this point), clicked on Ron’s Blog, what’s the first thing I see? “Mosquito Nets Are Used to Haul Fish”. Shit: Yes, you really must curb yourself, or maybe post later in the day. You’re even depressing my wife.

      1. Well, I actually held off for a day. The article was in the Sunday NYT.

        It’s a fascinating case history of human behavior, especially when hungry. Doesn’t the following quote pretty well summarize our predicament, as we add about 1.4 million net new people per week?

        “I know it’s not right,” Mr. Ndefi said, “but without these nets, we wouldn’t eat.”

        1. Yes, I particularly noticed that comment as well. My wife and I support a family in Africa (Uganda) to the extent of making sure all their kids get a proper education so this stuff is especially poignant to us.

    2. I guess that is called scrapping the bottom of the barrelswamp!

      If these people are only afraid of ‘HUNGER’ then then they should be deathly afraid, because they will all be starving really soon if they keep that up!

      But at the end of the day who really gives a shit anyway?!

      https://www.youtube.com/watch?v=mcdtVD8X1-A
      Tim Minchin: F*ck The Poor

    3. A lot of people think things will get better for all other species after the collapse of civilization. They are dead wrong, things will get a lot worse. People will eat everything that lives. About a hundred years or so after the collapse things will start to recover. But it will take millions of years, just like it did after the first five great extinctions. The Great Anthropocene Extinction may be the worst of them all.

  39. All hundred dollar oil does is grow the gap between the haves and havenots, not much else.

    Fetters the human mind, creates chaos, meltdowns become a threat, causes more problems than not, wars break out, just more senseless bickering. The misery index becomes more volatile.

    The time to speak up has passed, now is the time for senseless bickering.

    All fifty dollar oil does is create more volatility in the markets and cause more chaos than the chaos that hundred dollar oil caused. Thirty dollar oil will rumble the markets even more, more chaos on top of the more chaos created from the chaos that started with 147 dollar oil.

    Ninety million barrel per day oil supplies will sure be missed once those ninety million barrel per day oil supply days are gone.

    All because everybody on the planet wants some oil and will do what it takes to get it to make it all happen.

    Humanity is between a rock and a hard place.

    Off topic: one of the better movies out there is Leap of Faith with Steve Martin, Debra Winger, Philip Seymour Hoffman, Meatloaf. A great movie with killer music. Highly recommended.

    One song from the movie:

    https://www.youtube.com/watch?v=ym6NRwF9apA

    1. On a random side note, when one my father’s industry buddies retired a few years ago Don played at his retirement party.

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