All data below is based on the latest OPEC Monthly Oil Market Report.
All data is through June 2017 and is in thousand barrels per day.
The above chart does not include the 14th member of OPEC that was just added, Equatorial Guinea. I do not have historical data for Equatorial Guinea so I may not add them at all. It doesn’t really matter since they are only a very minor producer. Also, they are in steep decline, dropping at about 10% per year.
March OPEC production was revised upward by 23,000 bpd while April production was revised upward by 72,000 bpd.
Not much is happening in Algeria. They peaked almost 10 years ago and have been in slow decline ever since.
Angola peaked in 2010 but have been holding pretty steady since.
Ecuador peaked in 2015. They will be in a slow decline from now on.
Any change in Gabon crude oil production is too small to make much difference.
Iran’s recovery from sanctions has apparently peaked. I expect a slow decline from here.
Iraq is holding steady since their December peak.
Kuwait is down 154,000 bpd from their November peak. That is about 5.4%.
Libya was up 173,000 barrels per day in May and up another 127,000 in June but they still have a long way to go before they get back to their maximum possible production level, which is around 1.4 million bpd.
Nigeria was up 141,000 bpd in May and up another 96,000 bpd in June. It’s hard to tell what’s happening in Nigeria.
Qatar has been in decline since 2008. Her decline will continue albeit at a very slow pace.
Saudi Arabia cut in January, then stopped cutting. Their production was up 51,000 bpd in January. I think this is where we will be for some time unless there is a real shake up in OPEC.
The UAE is down almost 192,000 bpd since December. This is the largest percentage cut in OPEC. I don’t think it is all voluntary.
Venezuela’s problems will continue. They are now below two million barrels per day. They are at 1,938,000 bpd. They are down 430,000 bpd since November of 2015.
World oil supply, total liquids, was up 660,000 bpd in June. This is huge. Oil prices will continue to drop if this continues.
I thought I would add a chart of Russia’s production since they are now the world’s largest producer.
So? Peak Oil is also fake news it would appear, right or wrong?
Wrong
Well it would be fake news if oil production will never peak. And if you believe oil production will never peak than you are a goddamn fool. The peak oil folks are exactly right, they just had their timing a little off.
Their timing is not ‘off a little’ Ron, it’s off by a country mile. But what would I know? I’m a goddamn fool.
November 2016 appears to be the peak for total liquids based on the chart above. You see?
I have seen several, including those that said 2005 was the PEAK.
Figure it out Davebee. It’s not rocket surgery.
http://euanmearns.com/a-new-peak-in-conventional-crude-oil-production/
Pay attention to words like conventional, unconventional, crude, condensate, natural gas plant liquids, refinery gains, biofuels, and total liquids.
“The world outside the US and Canada does not produce much more crude oil than in 2005 The growth came from unconventional oil.”
http://crudeoilpeak.info/incremental-crude-production-update-august-2016
Does it matter? From a consumer’s point of view it doesn’t matter where oil came from only that it is available at an affordable price.
It seems like measuring tons, instead of barrels would make the conversation more meaningful. Weight seems like it would correlate better with energy content. Venezuela has lost a lot of heavy oil production and the frackers are pumping light stuff. Does anyone have data that shows how this affects total energy pumped out of the ground?
Just look at BP data in tonnes for consumption or production.
I think production is better because biofuels are not included (C+C+NGL only), but if you want to look at all liquids consumption in tonnes gives this data.
I absolutely agree that mass will be closer to energy content than volume and is a much better measure of energy output.
Glad you admit you are.
NAOM
The above graph is for OPEC. Not World Total.
Regarding “off by a mile”, World Total was predicted in the 60ies to be at year 2000, it was at year 2005 on the conventional oils that was produced at the time. Which was very spot on, since consumption patterns over several future decades are hard to predict with accuracy.
The non-conventional oils was not predicted, and extended the “oil grace”, but they will have the same fate. And make oil more expensive while we wait.
Eventually oil production will peak. But it matters whether it peaks due to supply constraints or reduced demand. In less than 10 years EVs will be cheaper than ICE vehicles. The demand for oil will drop and therefore supply will drop as well. This is not what peak oilers like me had in mind 10 years ago.
It’s possible that electric vehicle sales will grow fast enough to reduce oil demand.
It’s also possible that the combined effects of increasing population and increasing prosperity will result in demand for oil continuing to grow for quite some time, even if electric vehicles start selling in considerable numbers.
Oil is used for a lot more things than just gasoline for automobiles, lol.
It might be that we will not have batteries that are sufficiently powerful and cheap enough to run large trucks, farm equipment, construction machinery, etc, for another twenty years- or another century, for that matter.
Depletion is an iron clad fact.
It’s impossible to predict what the odds might be, but we could see the price of oil shoot way up within the next few years, high enough to bring on an economic recession.
For my part, I intend to burn all the diesel I can afford, to the extent I have the time and opportunity, on permanent improvements to my farm property, as fast as I can manage to burn it. I don’t believe diesel fuel will STAY cheap.
Remember Yogi.
Predictin’s hard, ‘specially the future.
OFM,
Tesla is revealing their electric semi later this year. It uses multiple Model 3 Motors and the Gigafactories 2170 cells.
They have Mercedes former head of their semi division leading the project. They’ve been working directly with customers to design it.
In a few more years, they will stop making ICE cars because EVs will be cheaper to manufacture, fuel and maintain. After that all new demand will be satisfied by EVs. I will be surprised if after 2025, ICE cars are manufactured and conventional automobile manufacturers are still in business. If Foxconn builds a $15,000 EV that is cheap to fuel and requires practically zero maintenance, who in his right mind will buy a gasoline car? All we need is a battery price of less than $100/KWhr and anyone will be able to make a $15,000 EV with a 200+ mile range. EVs are today where flat screen TV was 15 years ago. 10 years after they first appeared in showrooms, flat screen TVs grabbed 100% of the market share. All we needed for it to happen was for the price of LCD screens to drop below a certain threshold.
I agree, the EV is basically a flat sled giving a lot of room for creativity/body design and material use. It has high potential for modular construction and 3d printed parts. Break point is about $25,000 so if manufacturers can produce cars in the $15,000 to $30,000 range then the EV will take the market.
A smaller battery can be used if additional braking energy recovery is implemented. That should cut cost and weight.
Also EVs will lose their mechanical connection to the driver, making them easier to operate as self driving cars.
Self driving cars will be bi-directional, with four wheel steering, no “reverse gear” or other directional preference, and a motor on each wheel. Passengers will sit facing each other.
“In less than 10 years EVs will be cheaper than ICE vehicles. The demand for oil will drop and therefore supply will drop as well. This is not what peak oilers like me had in mind 10 years ago.”
LOL! No. EVs have a tiny market share. of the 17.55M cars sold in the USA during 2016, only 159K were EV (less than 1% of total sales). Americans also switched back to SUVs & pickups (63% of all vehicle sales in 2016 were SUVs and Pickups). Clearly Americans don’t want to by EVs.
That said, it appears that most people will no longer be able to afford new vehicles. in the USA the average vehicle loan duration is approaching 6 years. Much of the recent auto loans are in subprime terrority.
http://touch.latimes.com/#section/-1/article/p2p-92259365/
“Ford’s F-Series pickup remained the bestselling vehicle in America in 2016, with 820,799 trucks sold. That’s the equivalent of 93 trucks sold every hour.”
“Toyota’s U.S. sales chief, Bill Fay, said consumers’ shift from cars to SUVs is one of the most dramatic the industry has ever seen. Three years ago, trucks and SUVs represented 50% of the U.S. market. They closed 2016 at 63% of total sales, and analysts don’t see that changing anytime soon. Boomers and millennials both like the space and the higher ride that SUVs offer”
“Car buyers stretch loan payments to record lengths to get in pricier vehicles”
http://www.marketwatch.com/story/car-buyers-stretch-loan-payments-to-record-lengths-to-get-in-pricier-vehicles-2017-07-03
“Average auto-loan lengths are at nearly 70 months and payments are at the highest this year”
“The average amount that buyers financed was hit with the biggest uptick for the year last month, at $30,945, or up $631 from May. The financing trend also lead to the highest monthly payments for the year, now averaging $517, which increased from $510 in May.”
“It’s financially risky, leaving borrowers exposed to being upside down on their vehicles for a large chunk of their loans”
The demand for oil will drop and therefore supply will drop as well.
Supply will start declining soon. Simply because Oil Major companies stopped drilling for oil and start drilling for money in Wall Street. Shell, Exxon, Chevron, BP, Total, all cut CapEx in 2013 and continue to cut. For all of 2016, only 2.4B bbls were discovered. That less than 30 days of world demand. Sooner or later the Shale/Tight Oil will pop. Shale Drillers borrowed about $350B and can’t pay it back. Banks and pension plans continue to loan them more so they can remain operational, since if they stopped loaning the more money, the drillers would start defaulting. Its just smoke an mirrors, buying a few more years.
“Global oil discoveries and new projects fell to historic lows in 2016”
https://www.iea.org/newsroom/news/2017/april/global-oil-discoveries-and-new-projects-fell-to-historic-lows-in-2016.html
“Oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels per year over the past 15 years. Meanwhile, the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels, 30% lower than the previous year as the number of projects that received a final investment decision dropped to the lowest level since the 1940s.”
“Shale Oil Drillers Cannibalize Themselves While Debt Bombs Loom On The Horizon”
https://seekingalpha.com/article/4081588-shale-oil-drillers-cannibalize-debt-bombs-loom-horizon
“Shale oil drillers who generally couldn’t deliver positive net income at $100/bbl oil continue drilling campaigns easily funded by debt and equity issuance. But while presentations by many of these companies show decent shale oil well rates-of-returns, or IRRs, with WTI at $50/bbl and even $40/bbl and below, these presentations typically omit such all-in costs as infrastructure build (gathering, water disposal, etc. etc) and, of course, the big one: interest payments on debt.
“But the point is that some of the shale oil companies have taken on large debt obligations in order to keep drilling. And all that drilling puts more oil on an already over-supplied market. And that pushes down the price of the commodity that they have to sell in order to service the debt. It is a vicious circle, and it will be the debt-and-equity holders that get caught holding the (empty?) bag when the music stops.”
I agree that there will be factors in play other than just EV adoption which will affect oil demand.
I think depletion, recession, global economic slowdowns, strategic commitment to use less oil, etc. will all play a role.
people had been rolling from one loan to the next, but with car prices dragging, loan terms extending, and credit weakening, this process is slowing way down. in addition, inventories have been riding historic highs.
so once the next bottom drops out there will be a huge overhang of used and unsold new cars which will take another set of years to clear out, very similar to the housing crises where foreclosure inventories took years and years to clear up.
I think this whole dynamic will be a massive blow to EV adoption. It might very well mimic New Housing Starts in the Us following the financial crises.
https://www.theatlas.com/charts/4JTYjf6U
Figure a number of years to clear out the dead-weight.
New technologies do not enter a broad market directly, but by finding early adopters in niches , and spreading from there. So the question is not whether Joe Sixpack thinks he wants an electric car. The question is which niches will be first to be filled. Taxis are good candidates. City buses are very good candidates, as are delivery vans. Large fleets of cars that travel in a fixed radius are also attractive — and given the superior performance of EVs over combustion vehicles, police cars make a lot of sense.
alimbiquated Wrote:
“New technologies do not enter a broad market directly, but by finding early adopters in niches , and spreading from there. So the question is not whether Joe Sixpack thinks he wants an electric car. The question is which niches will be first to be filled.”
Technology is been pouring into ICE vehicles for a 100 years, get the prices to own and maintain them increases almost every year. I cannot recall when new technology made a significant reduction in vehicle costs. If People are struggling to afford lower cost ICE vehicles it seems unlikely they will be able to afford EVs.
My guess is that many people will be forced to do without or hang on to their older cars until the fall apart. I believe the average vehicle age is creeping up since newer vehicles are becoming increasing more expensive. Its very likely this trend will continue and grow.
Suyog Wrote:
“EVs have a tiny market share today because batteries are still expensive and not available in sufficient quantities. ”
This is not going to change. The cost is because of the high cost of sourcing & refining the materials that go into batteries, as well as the processes need to manufacture them. People tend to corrorate Moore’s Law (electronics) to Battery develop. About every 18 monthes electronics double in performance. Batteries take more than two decades of R&D to double the performance. At it stands, Battery chemistry has reached its limit. You can only squeeze so much lemon juice from a Lemon. The only way to make any dramatic battery energy density is to abandon the standard battery chemistry and develop something completely difference. Yes there will be a few minor improvements, by using better electrolytes, and additives to the anodes, but they will only offer tiny improvements.
The other issue is that EV are still fossil fuel vehicles since the power grid is 68% fossil fuel plants. In the US the only significant change is construction of more NatGas power plants, but at the cost of shutting down coal and nuclear power plants. To switch US transportation over to EV is has some challenges since the Grid would need major investments to handle the extra capacity. About every joule currently provided by ICE will need supplied on the Grid instead. Another issue is that there is going to be a severe shorted of GRID workers as the boomer retire. Few workers in Gen-X or the millennials pursued careers in the power industry.
Odds are that EV will never take off and consumers will drive much less than they do today. Due to a combination of higher vehicle costs, lack of employment as automation replaces about 1/3 of all workers, higher energy costs, and technology that allows workers to work from home.
That said, Its seems likely that the demographic and debt problems will be coming home to roost in the near future. Worldwide Debt is about $220T which is more than double worldwide GDP (about $107T). Plus industrialize world has a mountain of unfunded entitlements and pensions that are beginning to hit gov’ts and companies. We are on track for a dystopian future as all these problems become more present.
Actually, the cost of a *comparable* car has been falling steadily for years. Think of a 1968 Beetle for $2k – it was about 30HP, with no AC, no nothing. The same vehicle now would cost much less, adjusted for inflation which has risen by about 5x. Heck, you could probably still make it for $5k, which is half the price.
Car prices have risen because cars have been adding various features, and lately “cars” have become, more and more, SUVs which are larger and more profitable.
“Actually, the cost of a *comparable* car has been falling steadily for years.”
Nope. In the 1960s and 1970s Americans largely purchased their vehicles without auto loans. if what you stated applied, then the majority of americans would not be using car loans an the size and duration would not be increasing if cars were become more affordable.
Growth of Auto loans in the US:
https://2.bp.blogspot.com/-lmfS9nJmemI/Vs-RMaS4s2I/AAAAAAAAUe4/m5DfKm-ZLxY/s1600/Screen%2BShot%2B2016-02-25%2Bat%2B7.05.24%2BPM.png
It does not matter that newer vehicles have more stuff, the cost of vehicles compared to take home pay is making them unaffordable. Regardless of what you believe, the fact is that very few Americans buy vehicles with cash (no debt) and the size of the loans and loan duration is increasing. Presuming this trend continues over the next 10 years, very few Americans will be able to afford new vehicles. Its likely that Americans with long duration loans make be stuck paying off their old auto loan after their vehicle kicks the bucket.
Trying to spin to state this is incorrect, is just plain wrong. Math does not lie.
Of course math can lie, if you use it wrong.
Please note: I said “comparable”. The very cheapest car on the road, a Nissan Versa, costs about $12k. Adjusted for inflation that’s about the $2k you would have paid in 1968 for a VW Beetle. The Versa is far better than the Beetle – faster, heavier, more powerful, safer, longer lived, with many more features.
The average new car costs about $34k. That’s about 3x as expensive as the cheapest car on the road. We can see that most people don’t buy the cheapest car on the road.
Affordability isn’t the problem, it’s people’s willingness to borrow money when they shouldn’t, to buy stuff they shouldn’t. They have more credit than sense.
>If People are struggling to afford lower cost ICE vehicles it seems unlikely they will be able to afford EVs.
An EV is a significantly simpler vehicle. Not ICE, no transmission, simple drive train, tiny cooling system, etc. The only question is the price of the batteries, and it is falling quickly.
EVs have a tiny market share today because batteries are still expensive and not available in sufficient quantities. I was talking about the future. I think the tipping point will be around 2022 when EVs will be cheaper to manufacture than ICEs. By then you may also have new entrants such as Mahindra, Foxconn, BYD, etc.
If Americans cannot afford new cars, that will make transition to EVs faster. In a few years they will be cheaper to make, cheaper to fuel, and have low total cost of maintenance. That is exactly the kind of vehicle someone who doesn’t have a lot of money will buy.
Rather than just throwing out the “fake news” buzzwords, why don’t you provide a factually supported argument as to why worldwide crude oil production will never peak?
Further, what is “off by a country mile?” Pretty vague statement.
Hey shallow Sand
I thought you lived in the “country”.
where I live a country mile is slightly more than a mile. ?
Lol. True Dennis.
I guess the poster was using the phrase to describe time, whereas I am more familiar with it being used to describe other measures, primarily distance.
You and Ron both tend toward posting sourced data, so I am just wondering about the reference to fake news.
I suppose $2 gasoline today means the chance of a supply crunch in future is zero = fake news?
Hi shallow sand,
That went right over my head (time vs distance).
I don’t get the fake news either.
Ron thought the peak might be in 2015, he has admitted he missed that (for trailing 12 month average), but I think he nailed it if we look at the centered 12 month average (which is the correct measure imo).
I think that previous peak will probably be surpassed, but I don’t know Ron’s current opinion. My opinion is a peak between 2020 and 2030 for the 12 month centered average of World C+C output.
“Ron thought the peak might be in 2015, he has admitted he missed that (for trailing 12 month average), but I think he nailed it if we look at the centered 12 month average (which is the correct measure imo).”
FWIW: a delayed peak likely just means a steeper decline in the future. Better technology has just make it possible to extract a finite supply faster. My guess is that if a recession is avoided, that Oil prices will start increasing and working back up above $80/bbl in the next 12 months which cut demand. That said I think we are teetering on the edge of another major recession, which would drive demand down and lower prices.
It really depends one what the Worlds Central banks do. The world is 100% dependent on cheap debt and liquidity. Take away the punchbowl and it starts to collapse. refill with a bigger punchbowl and the party goes on.
Regardless, CB can’t print energy, and even if CBs let the party continue for the next few years, eventually physics will force a crisis.
I believe the CBs collectivity printed about $1T for 2017. But with the Fed raising rates and planning to start selling its MBS holdings its seems that are going to start draining the punchbowl.
My guess is that either 2016 will be the peak (recession begins this year and cuts demand and shale drillers go bust) or very latest 2019 when lack of reserve replacement begins to impact supply. Also I am not entirely sure that the statistics for world production are accurate. It could be that real peak has already happened and we just don’t know it yet.
Hi Tech guy,
You are correct that statistics could be revised either higher or lower. It is possible the peak might be before 2020 especially if your recession prediction is correct.
I also agree that the later the peak the steeper decline rates will be.
My best guess is 2025 with 2% decline by 2030.
Perhaps by 2035 demand falls due to high prices and more EVs sold worldwide.
We will see what happens when the model 3 has greater volume in 2018.
EVs can be SUVs.
It’s off topic , but I think it’s justified to mention here at this time that those of us ( I’m aiming this at YOU in particular NICK) who habitually present the case for renewables by way of rose tinted comments and articles, etc, should speak in more measured, sober tones.
Otherwise, we help set the stage for political backlash against the environmental movement.
In particular, what I have in mind at the moment is that just about all of us at the old TOD, and here now, and environmentalists in general, ridiculed the right wing “drill baby drill ” argument on a daily basis for years.
Well, Baby got busy drilling HERE in Yankee Land.
And peace broke out, in practical terms, in Sand Country,at least to the extent that just about everybody over there could get back to pumping oil.
And them there free market,awesomely stupid, flag waving, right wing trumpster types turned out to be RIGHT.
We have two dollar gasoline again, and anybody who thinks the average or typical guy or girl on the street doesn’t know this is a goddamned fool, to borrow Ron’s latest description of those who think peak oil is a joke.
The country as a whole tends to be simple minded, when it comes to politics, and the first and often the ONLY thing that many voters have on their mind when they enter the voting booth is the state of the economy.
Right wing websites are LOADED with old quotes made by people like us- like me- who ridiculed the idea of a growing oil supply a few years ago. Such quotes are powerful weapons in the hands of the fossil fuel industry, and the bau establishment.
So THESE DAYS I for one try to talk about renewable energy, peak oil, and related topics in measured tones, so as not to see my words thrown back at me as foolish jokes a few years down the road.
Mac,
I think you’d have to look quite hard to find the kind of quote you’re thinking of in my comments here or on TOD (not that it would be impossible….just rare, I think). I don’t remember ever suggesting that the return of $2 oil was impossible, though I did think it was unlikely. I was one of the very first people on TOD to ask about the Bakken, much to the skepticism of most (“Westexas” did provide the kind of quote you’re thinking of, when he answered my question about the Bakken with the comment that the US would never surpass it’s 1970’s peak).
You’ve misinterpreted several of my comments in the past as meaning something they didn’t, to make this kind of argument, about such things as the continuing use of FF, or the economics of EVs. I’ve tried to correct those comments several times. Uhmm…isn’t poking people for their reaction called “trolling”, and isn’t that considered somewhat impolite in online society?
I try, in fact, to not make predictions, optimistic or otherwise – I try to stick to statements of cold hard fact, such as that EVs with medium range are currently cheaper to own and operate than otherwise comparable ICE’s (without subsidies, and even without considering the considerable external costs of oil); that renewables are cheaper than FFs when *all* costs are considered; that FFs are not irreplaceable for any functions of modern society; and that FF’s *could* be replaced relatively quickly and that would be an optimal economic path for society, even from a pretty conservative approach to inclusion of external costs. That’s not a prediction, it’s just a statement of what I consider sober reality – the tech currently exists to transition away from FF – that transition depends more on human choices than geology or physics.
Finally, the idea that progress should be limited in order to prevent “backlash” is entirely unrealistic. The FF industry and it’s allies are ruthless about fighting for their narrow, short term benefit. They are manipulating those who are uncomfortable with social change to maximize their resistance, and reducing the pressure for change either in the area of energy, or the area of civil rights would never, ever, ever, ever be rewarded by greater progress. The sad thing is that it’s just a game to them – if advocates for change were to give up on a hot button topic, these manipulators would simply move on to another. If guns were made mandatory for every child and adult, then abortion would be the thing. If abortion were made illegal in every corner of the land, then drugs, or communism, or gay marriage, or reckless dog walking would become the trigger topic.
I do agree that respect, careful listening and civil discussion is always a good idea.
Let me say that again – respect, compassion, dialogue and understanding are always a good idea. Any mediator or negotiator of conflict will tell you that.
Y’all do realize peak is not required for widespread death and war?
All that needs to happen is consumption overwhelm output, regardless of if it is still rising.
Considering how much is wasted, market prices should deal with this pretty easily.
Saudi Aramco’s Manifa oilfield production hit by technical issue: report
KHOBAR, Saudi Arabia (Reuters) – Output from Saudi Aramco’s massive Manifa oilfield has been hit by a technical problem, the International Oil Daily reported on Tuesday, citing unnamed sources.
Manifa is one of state-run Aramco’s biggest oilfields and latest expansions, with a production capacity of 900,000 barrels per day. Aramco brought the field online in two phases.
The industry publication reported that it was unclear how much production was removed as a result of corrosion of the water injection system used to maintain pressure in the reservoir.
It added, quoting sources, that the losses were likely to be in the “millions of dollars”.
Saudi Aramco did not immediately respond to an emailed request for comment.
The offshore oilfield – made of rigs on manmade islands linked by 41 km (25 miles) of causeways and bridges over the Gulf – was discovered in the 1950s.
“Corrosion control in the water injection system is not a technical challenge but it can be expensive to repair the water injection lines. They will probably have to shut down the field for maintenance,” said Sadad al-Husseini, a former executive vice president at Saudi Aramco.
“It may have an impact on maximum sustainable capacity but will not affect Aramco’s share of exports,” said Husseini, now an energy consultant.
Reporting by Reem Shamseddine; Editing by Dale Hudson
Wonder what LOE per barrel is for Manifa? Does it produce heavy crude?
Sounds like maybe they have to spend a lot of money on both chemicals and repairs due to corrosion. That doesn’t sound like low cost oil to me, especially when one includes offshore and man made islands.
Everyone seems to assume all OPEC oil is very low cost in terms of both CAPEX and OPEX. I suspect that is not the case.
The Manifa oil field was discovered in 1957. Development of the reservoir was executed under the Manifa Arabian Heavy Crude Programme from 1964 until it was stopped in 1984 because of the heavy nature of the crude. The programme was restarted in 2006 to offset the 6-8 per cent annual decline in output from some of Saudi Arabia’s older fields, equivalent to 700,000 barrels a day (b/d).
The Manifa field is about 45 kilometres long and lies partly onshore. Its production capacity is 900,000 b/d of oil, 90 million cubic feet a day of gas and 65,000 b/d of condensate.
Copied from the net.
Read some about this field online
Says estimated cost $10 billion.
Very rough estimate of money spent on Bakken wells would be $100 billion?
Manifa produces 900,000 BOPD, with no private royalty owners. Inject 1.35 million BWPD for water flood project.
Bakken wells produce just shy of 1 million BOPD, with rough estimate of 20% of oil being the property of private royalty owners, so operators get about 800,000 BOPD. Also, need to spend over $10 billion per year in CAPEX and OPEX to maintain that production level, again very rough estimates on my part.
Haven’t seen OPEX information for Manifa.
Heavy oil which is refined and goes primarily to US.
If it’s just a question of getting the chemical dosing right, or maybe fixing deaerator operations, then it will be fairly simple. If they’ve got the wrong reservoir chemistry or wrong metallurgy for the piping, or the reservoir has started to sour they are in big trouble.
It’s manageable, I’ve seen a large field go sour, we had to overhaul the oil treating system, put in h2s removal, and overhaul the water injection system. But I believe Manifa was already somewhat sour anyway?
So world production is up 660.000 bpd. But OPEC is just up about 400.000 bpd and Russia is roughly flat. Where do those 260.00 bpd come from? US fracking? Canadian tar sands? China? Brasil? India?
Mostly US some Brazil. India and China are in decline.
Hi,
I have not posted any Bakken graphs for a couple of months. But today I have quite a lot of graphs to share. You usually don´t have separate Bakken posts anymore, so I´ll put them here.
First production grouped by year. Most notable is the increase in production the last few months for the 2007-2009 curves. Also 2010 production has been flat since the beginning of the year. This happens at the same time there has been a relatively high increase in water cut for most years which I will show later. So something is going on. It´s propably because of the “halo effect”, where communication with newly fracked wells cause increase in water and oil production for nearby older wells (or possibly refracking).
Here is the water cut grouped by year graph. A bit hard to see around 50% as it is quite crowded there. But the curves appears see higher increases lately. It´s more noticeable for the 2007 to 2009 curves except that 2008 started increasing already late 2015. I have included 2017 for the first time in this graph. Water cut is a bit higher than previous years, but be aware that the data is incomplete and a lot of confidential wells are not included. The data is best from 18 months and later.
So what can cause this general increase in water cut?
Freddy
Thanks, as always, for your posts.
Although actual refrac activity is taking place in the Bakken, it is still not very widespread and gets very little publicity.
In addition to the hydraulic communication between wells during new fracturing (halo effect), there are increasing number of operators actually pumping water down into existing wells (pressurizing) prior to original fracturing of new, nearby wells so as to prevent damaging frac ‘hits’ that emplace unwanted proppant into the older wellbore.
Marathon is doing a lot – relatively speaking – of Bakken refracs and they put online (can’t find it at the moment) a paper describing different steps they take to protect older wells when new ones are frac’d.
The vintage that tends to show this – 2007 to 2010 – correlates to the early sweet spot wells that are now the area of recent development.
Quick edit:
Paper is 13 page pdf ” Ben Ackley Marathon Frac Operations WBPC 2014″ brings up the quick, wonky info.
Thanks coffeeguyzz. I think the halo effect theory is more likely as it also explains why older wells see increased production and why the new wells are so productive. But if the increased water cut is because of water being pumped down then it should only be temporary. So we will know within a few months if water cut goes back to previous levels or not.
Thanks for the graph Freddy. Notice the trend for new wells that begins in 2010 wells. Every year, the first year’s water cut gets progressively higher. In 2010 it was about 32 percent. In 2011 it was about 35 percent. In 2012 it was over 40 percent. In 2016 it looks to be around 47 percent. This is a clear trend, it is not something temporary.
There can be only one reason for this trend. As the average new well gets further and further away from the sweet spot, the water cut just gets higher and higher.
Yes more wells further away from the sweet spots is one reason for the increase in water cut historically. That is probably a big contributor for the high water cut and low oil production for the 2012 wells. Other reasons for the increase is more wells in three forks which contains more water and as I said more proppants when fracking causing longer cracks reaching deeper where there is more water. If you look at 2014 to 2015 they have similar water cut. It increases in 2016 and even more so far in 2017. There are fewer wells in three forks in 2016 and 2017 than in 2014 to 2015 , so that is not the reason for the increase. Most of the new wells now come from McKensey. I had a look in my data for Grail and water cut there has increased from around 25% to around 45% for the 2012 wells for example. The 2016 wells also has a water cut of 45% now. The increase seems to mainly have happened in 2016. Grail is one of the very best areas and also quite small. So something seems to have happend there.
Activity in the Bakken has coalesced around the sweet spots as the years have passed since the first modern horizontal wells were drilled there. This has been particularly true since the price crash in 2015. Almost all drilling since then has been in the sweet spots, not farther and farther away from them, as that would make little economic sense. In light of that, perhaps the better thing to say is that the sweet spots are becoming less and less sweet for one reason or another.
Here is the production profile. Here we can see that the 2016 wells has much higher production than before and 2017 even higher so far. But how can they be that much higher? Well, increasing water cut for older wells and much higher production for new wells suggests to me that they must be using much more proppants and water when fracking than before. This will cause longer cracks which both reach longer down to lower Three forks (and possibly bellow) where there is more water and also reach older wells causing increased communication between wells.
Freddy
The single biggest factor in increased output, as all the operators are saying this, is the implementation of diversion material in the proppant mix.
The ‘near wellbore’ diversion material temporarily plugs larger fissures, thus enabling pressure buildup and prompting many new fissures to form.
The ‘far field’ diversion material limits the unwanted extent – vertical as well as lateral – of the fractures giving operators far more control of the process.
Historically, only 60% of the perforation clusters would be productive.
Now, it is claimed to approach 100%.
In addition, the reduction of ‘stress shadowing’, ie., interference between stages during fracturing, is allowing an increase in both number of stages as well as perf clusters.
All this causes a big increase in the stimulation of the reservoir.
Final note … the recent introduction of VERY small (200/400 mesh) proppant is expected to significantly boost production further.
Better proppants could explain some of the increases in production. But I dont think all of it as the increases have been quite large.
200/400 mesh proppant is some more internet dribble being used to imply the shale oil industry has yet a “new”handle on things. I am quite certain that nobody repeating this shale propaganda even knows what it looks like and does not even have a clue the practical aspects of its use in frac technology (its like talcum powder). The short term productivity gains observed have more to do with longer laterals and just stuffing more sand into shale wells, not proppant size. The proppant stuff is just more techno wizardry for those that need a hobby. As I have said before, its causing immense production problems and horrendous increases in incremental lift costs per BO and we have not even seen the effects of overburden, frac closure and proppant embedment yet.
GOR increases then decreases in various stages of depletion of a tight shale. Think about a nearby well getting frac’ed with 300K BW and creating something similar to a water flood front for other nearby wells. That’s the stupid ‘halo’ effect that makes people want to have sex with themselves over the wonders of shale. It speeds up the rate of withdrawal (depletion) in nearby wells; that’s it. It does not increase UR.
Indeed, where is all this water coming from? Well, its not good, wherever its coming from, and high grading is taking its toll, IMO. Who in the Bakken has turned the corner and started making money?
I didn’t think so.
Thanks, Freddy; that’s some big work you’ve done there.
Yes, the CEO of Core Lab is completely clueless about this ceramic material that has been used primarily as additives in lacquers and industrial coatings until some bright individual decided to try it in fracturing.
The scouring/sandblasting effect as the fissures form enable this tiny material to open more of the formation for the larger size proppant.
Naturally, know nothings such as the engineers at Haliburton spew non stop dribble because … well, because that’s what they do, I suppose.
Anyone with the least familiarity with the Bakken knows that 2 mile long lateral have been the norm for many years, now.
Likewise, all the sand going downhole must be going somewhere.
And it is.
It’s going into the vastly expanded network of complex fissures.
(Last two months production from ND still over 1 MMbld?) Hmmm.
Maybe just more unknowing bluster.
coffee. Is all this technology going to make ND work at sub $50 WTI?
I am beginning to think 2005-2014 was just an aberration, like the late 1970s-early 1980s. Combination of Middle Eastern war and explosive Chinese demand. Extraordinarily high CAPEX spent in response, resulting in oversupply.
I am wondering if we will be sub $50, on average for another decade?
Shallow
Very short answer, most probably not.
For many reasons, contractual supply for pipelines being but one, new production continues up there.
But, ss, VERY minimal new drilling is occurring, which is the big ‘tell’ – to me – of how the operators up there respond to $36 ATW.
With very few exceptions, the only economically justifiable new shale production is in the heart of the Permian.
At $60 WTI, perhaps $55 range, an acceptable, if not optimal revenue stream might exist.
BTW, Rockman started an informative thread on the other peak oil site about the real world bankruptcy situation with the shale companies.
Enlightening stuff.
Biggest, yet underrated factor in the hydrocarbon world, IMHO, is the precarious political and financial status of KSA.
There are increasing signs of instability in both actions and strategies.
Fallout could be huge,
I suppose some think money can still be made in the Bakken, as private equity is buying HK’s 29,000 BOEPD in the Bakken, plus undrilled acreage, for $1.4 billion.
I suspect this is a bet on higher oil prices in the future, plus starting out without debt? HK has had some decent wells over the years on Fort Berthold.
NASDAQ earnings calendar shows HK is expected to earn .06 per share in Q2. So after Chapter 11 they appear to be getting by.
coffeeguyzz,
The Luddites believed that technolgical progress could, and should, be held back.
The central planners believed that the business cycle could be tamed if only there were more, and then some more, and then even more, government intervention.
These may sound like fantastical creeds, and so they are.
But what is even more fantastical is that, after 400 years of evidence to the contrary, these creeds are still widely believed.
Hi Glenn,
You have posted on several occasions that government intervention is necessary.
Very few here suggest there should be no technological progress, but people who know how oil is produced (shallow sand, Mike, and Fernando) point out that technology is not magic and will not lead to unending growth in oil production which is often implied by you and Coffeguyzz.
Every oil field that has ever started producing increases output at first, eventually reaches a peak and then declines.
Often technology enables us to produce oil faster and sometimes results in a marginal increase in the percentage of oil in place that is recovered (considered on a Worldwide average basis).
The US is likely to produce no more than 50 Gb of LTO output (total URR) based on USGS experts, the rest of the World perhaps 100 Gb (Russia is not likely to produce LTO until their considerable conventional reserves deplete), other nations (China and Brazil) may not have the success that the US has had.
In any case even 200 Gb of World LTO (an optimistic estimate in my view), is not very significant compared to World conventional reserves of 1700 Gb. These unconventional reserves (extra heavy oil and LTO) may reduce the decline rate of World oil output after 2030, but they will not be enough to stop the decline in oil output.
••••Dennis Coyne said:
Where have I posted that “government intervention is necessary”?
What I have posted is that the government intervention you and Mike advocate — that allowables be resurected and imposed on shale producers, reducing supply and driving up oil, natural gas, gasoline and electricity prices — is completely outside the realm of political possibilities.
••••Dennis Coyne said:
Sure they do, at least when it comes to the shale industry. Many here frequently cast dispersions upon the remarkable technological innovations that have unleashed the shale revolution. Case in point: Mike’s comment above.
••••Dennis Coyne said:
But technology is magic when it comes to renewables?
And can you point to exactly where I said or implied that “technology will lead to unending growth in oil production”? Is it possible for you to make an argument without alleging absurd absolutes?
••••Dennis Coyne said:
Is stating the obvious supposed to be some great new insight?
••••Dennis Coyne said:
Sometimes new technology unlocks oil that was not economical to produce before, and the increase in reserves is completely new and is far from “marginal.”
The rest of your comment is nothing more than speculation about the future, and who can argue with that? As Hannah Arendt observed in The Origins of Totalitarianism, “demagogically speaking, there is hardly a better way to avoid discussion than by releasing an argument from the control of the present and by saying only the future can reveal its merits.”
Glenne said:
What is this guy, some character from the Bowery Boys or the Three Stooges? Or Archie Bunker, LOL
FYI, we are actually doing some very interesting applied mathematics in applying dispersional probability profiles to the models of fossil fuel discovery.
BTW, Dennis this would be a great insert comment for the book, if it wasn’t for the fact that they want to keep it straight and narrow on the technical path.
Glenne says:
So, what do you call people that apply advanced stochastic analysis techniques to quantify the dispersional 🙂 properties of wind speed? Are these people Luddites because they are using their math brains to best understand how to harness wind energy?
Glenne is nothing but a blow-hard windbag. setup#punchline#lol
@whut,
By all means, if you can’t attack the message, then attack the messenger.
Glenne, I am confused now. Are you the Luddite, because you refuse to believe in rather obvious scientific facts?
@whut
So just exaclty what are those “rather obvious scientific facts” that I refuse to “believe in”?
Your comment sounds much more like something a preacher would say than a scientist, but please enlighten us as to what those “rather obvious scientific facts” are.
Umm, like the scientific fact that crude oil is a finite and non-renewable resource? Luddites like yourself are oblivious to such knowledge.
@whut,
So I’ll ask you the same question I asked Dennis: Is it possible for you to make an argument without accusing your opponent of absurd absolutes?
Everyone recognizes the existence of certain analytic truths, that is, truths in which the predicate can be be derived from an analysis of the subject. Such truths — such as “crude oil is a finite and non-renewable resource” — are a priori, because they do not require recourse to experience.
Everyone also recognizes the existence of empirical truths, or truths in which the predicate can be known through perception. These are a posteriori truths.
Science, however, depends on the possibility of synthetic truths a priori, that is, truths which the predicate cannot be logically deduced from the subject but which also do not depend on the testimony of the senses. Empiricists (e.g., Hume) believe that there are no such truths.
Synthetic truths a priori include statements such as, “The US is likely to produce no more than 50 Gb of LTO” and “the rest of the World perhaps 100 Gb.” The fact that these synthetic truths are predicted to occur in a highly complex and chaotic global system does nothing to improve their chances of actually coming true.
Glenne, Is it possible for you to make a comment w/o calling them Luddites, etc?
Hi Glenn,
Ok.
You seem to imply now that you do not believe that oil will never peak.
Some progress, I guess.
Would you like to narrow it down to the nearest 20 years.
I have suggested 2020 to 2030.
Dennis,
Oh, I think I’ll leave the job of manufacturing synthetic truths a priori up to you.
Go for it. Knock yourself out.
Glennee said
“Go for it. Knock yourself out.”
I think we are knocking other people out by actually doing the math.
You are that variation of former-high-school-debate-loser who refers to philosophers such as Hume instead of a real physicist and mathematician such as Laplace. A couple of days ago I wrote this pieces about Laplace:
http://contextEarth.com/2017/07/18/deterministic-and-stochastic-applied-physics/
@whut,
Well aren’t you the fan of reductio scientiae ad mathematicam? It’s not difficult to see why you would want to crown Laplace philosopher king.
However, as this article originally published by the Mathematical Association of America notes, Laplace couldn’t even convince his fellow determinists, like Leo Tolstoy, of math’s ability to predict the future
“An issue for Tolstoy is unknowability and uncertainty.”
Tolstoy concluded that the future “is deterministic and determined precisely, but practically and possibly in principle unknowable by humans.”
“[T]o the imperfect human mind not all information can be available in a snapshot and so it is reduced to ignorance or at best probabilistic reasoning.”
https://www.sciencenews.org/article/tolstoys-calculus
Hi Glenn
I am simply agreeing with peer reviewed research on a peak in conventional oil between 2020 and 2030.
CAPP estimates only a 2 Mb/d increase by 2030.
Using data, models and USGS estimates I have shown no more than a 3 Mb/d increase in LTO output is likely in the US or 7.7 Mb/d by 2025.
It is easy to criticize when you make no predictions of your own.
How likely do you think the EIA’s high technology and high resource case is?
I would put the probability at less than 1%.
No doubt you will say this is speculative.
Absolutely correct. Most predictions are speculative, though the future mass of a carbon atom with 6 protons and 6 neutrons
and 6 electrons can be predicted fairly accurately.
Dennis said:
“It is easy to criticize when you make no predictions of your own.”
Ain’t that the truth!
One thing poor Glenne doesn’t understand is the difference between stochastic projections and deterministic predictions. That is the problem statement that Laplace thought a lot about and pioneered the math for. He didn’t necessarily get everything right, but established many of the foundations.
OTOH, Glenne thinks I care what Tolstoy had to rhetoricize about the topic. Fat chance.
So, as a summary:
1. An oil production analysis is a stochastic projection
2. An ocean tidal analysis is a deterministic prediction
Can we go further with deterministic projections for seemingly random or chaotic phenomena? Sure, in the case of something like ENSO, which is responsible for El Nino, it is highly likely that it is caused by the same mechanism as ocean tides, and therefore amenable to Laplace’s tidal equations:
http://contextearth.com/2017/06/23/ensoqbo-elevator-pitch/
Dennis,
The reason I don’t make predictions about when peak oil will occur is because it is extremely hard, to the point that it is a fool’s errand.
You are aware, are you not, that reserve estimates are based on 1) the price of oil at the moment the reserve estimate is made, 2) the technology that exists at the moment the reserve estimate is made, and 3) the amount of geological knowledge that exists at the moment the reserve estimate is made?
These are factors that are constantly changing. Therefore peak oil will take place in a highly complex system where making predictions about future events is exceedingly difficult, and not some highly reductionist mathematical model that omits most of the important factors. Predicting future oil reserves, and peak oil, is far more complicated than merely calculating the known amount of oil in place in the world and applying the percentage of that oil that has been economically recoverable up to that moment. With a high enough price of oil, and enough technological breakthrougs, there are vast amounts of oil out there that can, and will, be recovered.
The cluster of associated ideas whose co-occurrence establishes some common
intellectual terrain among researchers who study complexity — “system”, “interactions”, “emergence”, “selforganization”,
“learning and adaptation”, “evolution and coevolution”, “positive feedbacks”,
“networks”, “distributed control” — is notably, and quite astonishingly, absent from the peak oilers’ theories and predictions.
Glenne says:
“.. the amount of geological knowledge that exists at the moment the reserve estimate is made? These are factors that are constantly changing. “
That’s basically all amateurish double-talk when somebody says “don’t do the analysis because geological knowledge is always changing”
It’s like saying “don’t do computer science because technological knowledge is always changing”. LOL
@whut,
No, it’s like saying it’s hard to predict the future of “computer science because technological knowledge is always changing”
So tell me, can you show me where you predicted the cell phone revolution back in the early 1980s? The shale revolution back in 2000 or 2005?
If not, what with your your flawless command of physics and math, why not?
With your infallible crystal ball, by now you should be the richest man on earth. If not, what’s the problem? What possibly could have gone wrong?
Glenne, You’re just plain weird with your Luddite-like anti-math attitude. Go look up the math of the Oil Shock Model, Dispersive Discovery, and Dispersive Diffusion. They all predict the production of oil and explain the historical flow better than anything since the heuristic Hubbert curve.
Hi Glenn,
For an empiricist, I suppose the future does not exist. And of course you believe all predictions of the future are speculative, and I think in most cases you are correct (physics and chemistry would in some cases allow pretty good predictions of the future in controlled experiments).
My “scenarios” make a set of assumptions about the future based on the knowledge of what has happened in the past.
The assumptions are indeed speculative, but I always invite people to provide alternative assumptions, but few have the courage to offer any.
Clearly nobody knows the exact path future production will take.
We can only speculate or we can sit on the sidelines and critique the guesses of others.
One could suggest that it is absurd to expect absolute precision about when peak oil might occur.
When the peak does arrive it will be both peak supply and peak demand as they tend to match if the market determines prices.
Hi Glenn
Yes I am aware oil reserves depend on prices, technology.
, and geology and that these change over time.
The experts who have studied this expect conventional oil resources to be between 2000 and 4000 Gb (C+C+NGL).
Unconventional resources will be between 400 and 1000 Gb (LTO and extra heavy oil with API gravity of 10 or less.)
Peak oil is likely to be between 2020 and 2030, where likely means a probability of more than 84%.
Dood, they are all losing money.
Proppant isn”t free. If you use more of it, it costs more. If you add a different kind it costs more.
And the executive bonuses are production based, not profit based. If they can get other people to fund via loans those bonuses then of course they will do it.
You want evidence the proppant pays for itself in production? You can find it. It appears in the earnings per share number. If it doesn’t then there is no evidence.
This is no different than drilling holes to recover pores of oil amounting to 20 barrels, total. At $45/b you get $900 from that. If someone else pays the $7 million for the hole, why not drill?
http://wolfstreet.com/2017/07/17/2-billion-private-equity-fund-collapses-to-almost-zero/
“Investors who’d plowed $2 billion four years ago into a private equity fund that had also borrowed $1.3 billion to lever up may receive “at most, pennies for every dollar they invested,” people familiar with the matter told the Wall Street Journal.”
It is the same WSJ that last 4 years were writing about “resilience of shale” like parrots, every day. Of course it is resilient with Gran Ma and Gran Pa money if you look that it was mostly pension funds that are invested.
From the WSJ article.
“Only seven private-equity funds larger than $1 billion have ever lost money for investors, according to investment firm Cambridge Associates LLC. Among those of any size to end in the red, losses greater than 25% or so are almost unheard of, though there are several energy-focused funds in danger of doing so, according to public pension records.”
Ves,
So now those evil shale people are screwing Grand Pa and Grand Ma out of their hard-earned savings?
After all, we have it straight from WolfStreet. Wolf Richter blasts the unscrupulous shale industry when he writes:
“The renewed hype about shale oil – which is curiously similar to the prior hype about shale oil that ended in the oil bust – and the new drilling boom it has engendered, with tens of billions of dollars being once again thrown at it by institutional investors, has skillfully covered up the other reality: The damage from the oil bust is far from over, losses continue to percolate through portfolios and retirement savings, and in many cases – as with pensions funds – the ultimate losers, whose money this is, are blissfully unaware of it.”
There’s a problem, however, with using EnerVest to bash the shale industry. And the problem is very easy to spot for anyone who has even the most rudimentary knowledge of the oil and gas industry (which of course leaves Richter out): EnerVest’s portfolio has very few shale assets.
• EnerVest is the largest conventional oil and natural gas operator in Ohio
• EnerVest is the largest producer in the Austin Chalk, another conventional field.
• EnerVest is the fifth largest producer in the Barnett Shale, which is the only shale holding listed in the company’s list of core areas.
• EnerVest has spent $1.5 billion purchasing assets in the Anadarko Basin since 2013, again in conventional fields.
• EnerVest is a top 20 producer in the San Juan Basin, again a conventional field.
https://www.enervest.net/operations/locations-map.html
So Richter uses the implosion of EnerVest, a company that is predominately a conventonal oil and gas producer, to bash shale? That really makes a lot of sense. ?
Glenn,
shale/no shale, they lost every single penny. and btw wsj lied to you every single day for the last 4 years about milk & honey in oil patch. how do you feel about it?
Ves,
For me it is has been “milk and honey in the oil patch.” So here’s how I feel about it….
https://m.popkey.co/e975d7/JmXzE.gif
Hi Mike.
Another update on the HRZ shale well Alaska.
Icewine#2 Operations Update
The Icewine#2 well was shut-in on the 10th July for a six week period to allow for imbibition and pressure build up to occur. Prior to shut-in, 16% of the stimulation fluid had been recovered from the reservoir under natural flowback, with trace hydrocarbons returned at surface.
Imbibition, or “soaking”, allows for absorption of frac water into the formation, which may displace reservoir water molecules that are restricting hydrocarbon molecules from flowing into the created fractures. The pressure build up data will provide insights into the permeability created by the stimulation. Ultimately, the post shut-in well performance will determine the next steps required, such as continuing to flowback naturally or the introduction of artificial lift (eg swabbing).
The HRZ shale shares several characteristics with other successful shales in the Lower 48; however, there is no blueprint or benchmark against which it is meaningful to measure performance as there are also many differences. At this juncture, the Joint Venture is of the view that further analyses are required to determine what impact the performance of the well to date has on the probability of success for the play. These analyses include, but are not limited to;
comparison of the flowback rate against the expected flowback rate based on reservoir parameters and the successful execution of the fracture stimulation;
reconciliation of the petrophysical model, and the apparent in-situ hydrocarbons, with the hydrocarbons recovered to surface to date.
These analyses are ongoing and will be communicated once complete.
Further updates will be made as and when appropriate throughout the testing program.
I had a deeper look into individual well data for the 2016 well. It turns out that the vast majority of the very best wells are in Bear Den, Croff, Spotted Horn, Pershing, Blue Buttes, Westberg, Twin Valley, Banks and eastern part of Camp. Those areas are the sweet spot areas of McKensey and many of those areas still have a relatively low well density. Grail also still has some good wells, but not as good as the very best ones. The well density in Grail is now about 4,9 wells per section. So it looks like the high well density start to affect the productivity of the wells. Hughes, in his report, assumes the average drill density in Bakken will be 2 to 3 wells per section with of course a higher density in the core areas. Middle Bakken and Three Forks are both productive in Grail and there are about the same amount of wells in both formations in that area. It should allow for a higher well density than for example Parshall which is very productive in Middle Bakken but not very productive in Three Forks.
So we will probably continue to see very good wells coming from those areas untill the well density has increased some more.
The GOR graph shows that GOR has started to increase again after being flattish for some time. 2014 to 2016 see very high increases and should now be in the territory where gas suppresses oil production (around 2,2). I wonder for how much longer they can increase this fast.
The older wells from 2007 to 2009 continue to look flattish. Are they running out of gas?
I have included 2017 for the first time here too. It has started off around the same level as 2016. It´s too early to say anything more than that and also remember that it the data is incomplete with many confidential wells not included.
Here is graph I made last months showing how GOR distribution has changed over time. It doesn´t happen much from one month to the next, so I didn´t bother creating a new one for this month. It shows three dates; 6/2014 just before GOR started to increase a lot, 8/2016 just before GOR entered the flattish phase and the latest date when the graph was created 4/2017. From 8/2016 to 4/2017 the groups 0,0 to 0,7 has increased, 0,7 to 1,3 has decreased, 1,3 to 2,3 has increased and unclear for 2,3 and higher. So there are possibly 3 groups of wells, one group where GOR is decreasing, one group where GOR is increasing and possibly one group where GOR doesn´t change much.
And my final graph showing production over time for wells that are 6 months old. It essentially shows what we have seen in the other graphs. Water cut has increased and the wells now start to produce more water than oil, the wells are flowing much much more liquids than before and gas production has increased much more than oil production. The gas production curve actually has an exponential look to it. Again, I wonder for how much longer it can increase like that.
Anyone have info on average Bakken water disposal costs?
They are all losing money, but beyond that water costs usually determine the production level below which cap and abandon.
Freddy, I doubt you can get this data, but a gassy geology flows liquid that isn’t oil. The relentless march upward of API speaks of NGLs rather than oil. If people just ignore API degrees and flow liquid that is API 47 or even 51, but still call it oil, the numbers will all be corrupted and no one will know.
I gotta go research NoDak’s taxation regulation on liquids that are not crude.
No sorry, I don´t know of any such data. They just call it oil and gas.
Nigeria:
“LONDON, July 14 (Reuters) – Nigerian trade was limited with tender awards coming out and force majeure declared on Bonny Light exports while the market was also looking ahead to September schedules due to emerge next week.
* Total declared force majeure on exports of Djeno crude oil in the Republic of Congo, traders said on Friday, after a collision.
* Traders said exports went down after a ship collided with a single point mooring. One said the vessel was the DHT Sundarbans chartered by Vitol.
* Shell’s Nigerian subsidiary declared force majeure on Bonny Light crude oil exports effective on Thursday, the company said in a statement on Friday, after the Nembe Creek Trunk Line was shut down, one of two pipelines transporting the grade. “
Financial Times 4/2/15-
“Not only do oil and gas account for more than 90 per cent of Nigeria’s export revenues, which have roughly halved in the past six to eight months, the government relies on them for 70 per cent of fiscal revenues.”
Hi all,
Below is a chart with updated ND Bakken/Three Forks data through May 2017 (985 kb/d), also a model roughly matching the data through May 2017 (80 new wells assumed for May 2017) and two future scenarios through Jan 2020. The lower scenario assumes 80 new wells per month and no change in future well profiles through 2020 and a higher scenario assumes an increase of 5 new wells per month (80,85,90, … , 135, 140) until 140 new wells per month are reached (May 2018) and then 140 new wells per month until Jan 2020.
My expectation that actual output will fall between these two scenarios.
Hi all,
Enno Peters has a new post up
https://shaleprofile.com/index.php/2017/07/17/north-dakota-update-through-may-2017/
He reports that 87 new wells were added in the North Dakota Bakken/Three Forks in May 2017.
I adjusted my low scenario to 87 new wells per month (7 higher than the scenario in the chart above.)
The high scenario mostly has changed in May 2017 from 80 new wells to 87 new wells and then goes (90, 95, …. , 135, 140) and remains at 140 new wells per month until Oct 2026. The high scenario is about an 11 Gb URR.
Texas Drilling Permits and Completions Statistics for June 2017 released July 11th 2017
Total well completions processed for 2017 year to date are 3,872; down from 6,429 recorded during the same period in 2016.
Texas RRC News: http://www.rrc.state.tx.us/all-news/071117a/
coffee: Thanks for the heads up on Rockman BK discussion on PeakOil.com. I had quit looking at that site because it seemed to have become very radical. Rockman is a good poster, however, lots of knowledge, and a down to earth guy too.
What he describes there is why this is probably going to play out like 1986-1999. Takes years for US onshore upstream to be placed in the category of “not investible”. So $40s or lower, on average, until mid-2020’s, unless there is a prolonged major supply disruption, which necessarily means a major Middle Eastern war lasting for years.
The possibility of $90 WTI has to be erased from memory, just like $30 WTI had to be erased from memory from 1986-1998.
Over the course of the history of mankind, more assets have changed hands at a price completely absent any effect of supply and demand than those that might have cared about such things. Vastly more. Let’s count a few.
1) Every single inheritance. In the history of mankind, every single inheritance.
2) All gifts.
3) All conquests.
4) All manifestations of economic predation. Predatory pricing established those levels.
5) All monopolies
6) All thefts
7) All taxation
8) All govt decreed excise or tarrif
Want more proof? How about the ultimate:
The purchase of about 2 Trillion dollars of mortgage backed securities by the Federal Reserve from 2009 to 2015. The pricing of those securities was 0 at mark to market, so mark to market was disallowed, but even with that, the Fed specified the price to be whatever they wished, and the sellers didn’t have any reason to complain. The price paid was far above supply and demand (aka 0). $2 Trillion. That probably exceeds amounts for assets from all history that someone imagined was taking place at a free market price. Not to mention the ongoing buys from the ECB in progress today.
So the price of oil will be what the lowest priced large sellers want it to be, and they have no reason to imagine that their victory should be measured in a whimsically created substance.
There is nothing anyone can do about it.
Shallow
The upside potential might be stronger than appears at present for many reasons.
Although the Enervest situation has been conflated with the shale industry, the exact opposite reality might prove to your (smaller operators) collective benefit as you ride out this current storm.
Time was, ss, that some camel upwind in the desert somewhere would fart and global oil markets would reverberate for days.
Now, in hydrocarbon producing countries from Nigeria to the Philippines, including Iraq, Libya, Yemen, Syria, KSA and others there is conflict raging from low level to all out warfare. Heck, there were reports the other day of a thwarted attack on a Saudi offshore facility.
Qatar is virtually quarantined.
Russia is battling international sanctions.
And … $46 WTI???
You kidding me???
We ain’t in Denmark (most of us), but something’s sure is rotten,
SS – It has been my experience that concerning financial matters, nothing “plays out” like the past. Consider the period 1986-1999: No one was concerned that the world was near peak oil. OPEC spare capacity was at least 4 times what it is today, [ask Ron], at a time when final demand was much less. Iraq invaded Kuwait, and then we went to war to get them out – remember the oil well fires. Russia collapsed. The “BRIC” countries [Brazil, Russia, India and China] were inconsequential. The Dow Jones was down 22.6% in ONE DAY in 1987. The International Monetary system almost collapsed in 1997. The world was transitioning from a period of high inflation to much lower inflation. Japan was booming [until 1990].
You can probably add a dozen significant happenings to the list without thinking too hard. The point is, so many variables have changed that something as significant as oil is going to “play out” based upon today’s factors, not “like” 1986-1999. Some people are still trying to analog to the 1930’s in order to predict the next great depression in the stock market – do not listen to them.
I know things never play out exactly as in the past.
However, one has to prepare for the worst, and prices will be low for awhile IMO.
The Rockman BK discussion helped put it in focus for me. The wells will be drilled, and only when it is clear all large US shale oil basins have hit their limit, will prices begin to rise. That might not take 12 years, but I think at least 5 is likely.
The only intervenor would be a supply shock from the Middle East.
Another poster on another site also has given me some clarity. He states there has not been enough suffering experienced yet in the US oil patch by those responsible for the production boom.
We just went through two bad years of prices in 2015-2016, and at the first sign of light, the industry was able to raise a ton of cash and go back with guns a blazing. There were no consequences to the powers that be from the 2015-2016 low prices. Heck, the strip was higher this time last year, yet we are still adding rigs.
It will take a minimum of five years, until it is universally believed that prices will be low forever, that supply will be abundant forever, and that the sector is a bad investment.
Once that happens, look out, price could rocket. But it will be awhile IMO.
Shallow,
good paper by mr ray dalio “deleveraging” – worth the time to read …….
as you say – history doesn’t repeat ……
rgds
simon
Some difference between now and 86-99: i) decline rates are higher, ii) Spare capacity is _much_ lower (oil stocks are high which apparently is what traders observe) – back in 86 KSA could flood the market, iii) not much new big projects in the pipe after 2019 and North Sea is declining this time while it was increasing back then.
Rebalancing should go faster this time if (!) demand continues to increase.
Will there be a north dakota post? Seems interesting, considering the drop in oil production vs increase in gas production and number of producing wells. Or does anybody already have some thoughts?
Initial Texas production for May available on statewide search query today. Usually, it is posted close to the seventeenth. Last month was the 24th.
Oil 76,381,908 and condensate 8,209,446.
June completions down from May. Completed mwd reports through June 30, 2016 equals almost 2620.Mwd reports through June 2017 equals close to 4050. Where’s the beef?
EIA – Drilling Productivity Report – Release Date: July 17, 2017
https://www.eia.gov/petroleum/drilling/#tabs-summary-2
Permian – New-well oil production per rig
chart: https://pbs.twimg.com/media/DE9UOizUMAAjbhn.jpg
The DUC Count is growing larger
EIA numbers are basically worthless, as far as the Permian goes. To analyze it like they are trying to do, you would have to separate conventional production from horizontal production. Take more gathering tools than they are using to accomplish that. Until 2015, they were still drilling 800 a month or so vertical wells, which dropped down to 100 to 150 a month since then. Looking at district 8A, that production is dropping like a rock. Combining the two, production appears to be pretty flat for Texas since the first of the year.
Rig count is high, but it appears there must be a lot of down time in between drills.
The EIA drilling report came out yesterday revealing the tragedy, which unfolds now in the shale industry.
Below chart depicts new production (blue line) and depletion rate (red line ‘legacy decline’) and resulting net growth (yellow bars).
As the massive 5 mill bbl/d of new production looks like topping out due to financial exhaustion of shale companies, the depletion rate of equally staggering dimensions of 4.3 mill bbl/d follows the new production rate like a shadow leaving the net growth at a mere 0.5 mill bbl/d. As the depletion rate soared to 91% of total production – much faster than new production – over the latest months from 2.5 mill bbl/d to 4.3 mill bbl/d, the red line will soon cross the blue line and net production will decline steeply towards the end of the year.
As this will bring down share prices of shale companies even further in the near term, the consequences of lower US production, increasing US trade deficit and a much lower dollar will be a steep rise of the oil and gas prices in the mid term.
Again, using simplistic models to project how a complex animal like Texas production will behave crosses the border of stupidity. The Permian until 2014 was primarily a dying conventional field, propped up by a massive number of vertical wells. Yes, there was some horizontal drilling being performed, but the mass of production was conventional. Which is not profitable to bolster now with million dollar wells. You can’t use conventional numbers and horizontal numbers, with no separation, to project the future. Texas producing oil is not just Eagle Ford and several fields in the Permian. If you look at the other districts outside of 1,2, 7c, 8, and 8A, they are declining. Actually, 8a (Permian) is declining, too. It was, and still is, primarily conventional. Just as stupid is their projection of what the GOM will produce. US production will probably be close to flat by the end of this year, and whatever the price of oil will be, it will struggle to increase next year.
Conventional production should have a yearly decline rate of about 6% if everyone stops investing – not this steep one.
But mixing up conventional / fracking production in Permian doen’t make it easy to analyce it.
The big days of permian tight oil still will come – it’s a very new field, and the sweetspots are almost untapped so there’s a lot space for growth.
How many money is made there is another thing with low oil prices and sky high land costs – owning a few hundred acres there is definitly no mistake.
I am pretty sure it is greater than 6%. Look at district 8A production around July of 2014. It was about 284,500 a day. Despite the fact that they continued to drill horizontal and vertical wells there, it is now only about 248,000 a day ( in preliminary figures). Most wells had a fairly low EUR. They just needed enough EUR to make a profit on a million dollar well at $100 a barrel, or thereabouts. That doesn’t require too much. Agree about the future of the Permian, but it won’t lift Texas production as quick as their stupid models project.
http://www.newsbusters.org/blogs/business/aly-nielsen/2017/07/18/soros-gave-207-million-alleged-russia-funded-climate-groups-us
From the article:
Ha ha ha! It looks like Putin and Mike have something in common: a hatred of fracking, that is when the shale industry is doing it. And their hatred is rational, at least if we use the neoclassical economists’ definition of rational.
Glenn,
Russia’s production reached post Soviet peak despite of 5mbd of new shale development so you got wrong (again) on logic that anyone is threatened for their oil demand. Oil price is not that great but oil demand is still growing year after year.
Ves,
So you think Putin is happy about this?
Or this?
Or this?
Or this?
The US frackers (along with all other high-cost producers around the globe) will go bust before the end of the decade.
That makes no difference if finance is still available. Case in point Japan.
.
Glenn,
It is garbage articles. Only trading oil shares on stock market is zero sum game so when Mr Buffet makes $1 million many others lost a little bit each to the tune of $1 million. But country producing oil and exporting is not stock market. It is life and life is not zero-sum game. If oil companies in one oil producing country lost 10-20-30 billion it does not mean that oil companies in other oil producing country gained 10-20-30 billion. Glenn, this is so basic.
Look this way, very simple way, if you and your neighbour are earning oil royalties on your Texas land in US$ with exactly same interest and he has to live in Texas (and has to pay living expense in $US) and you live in Mexico (paying expenses in pesos) it is not the same. For you “It’s morning in Mexico” but for your Texas neighbour is so so.
Ves,
Revenue = number of units sold x price per unit
A lease that produces 12,000 BO per year at $100/BO generates $1.2 million in revenue.
A lease that produces 120,000 BO per year at $50/BO generates $6 million in revenue.
Most people consider $6 million in revenue to be better than $1.2 million.
It depends on your costs whats the best –
If you have 49$ costs, the first least will still generate 612.000$ profit, the second only 120.000$ despite pumping the 10 fold amount.
If you have only 1 piece of land and can wait(it’s your land, and you have the money), the first option is the best – if you are a shale company with 1 zillion in debt, the second option is the best to dish out all your assets to hit your payment rates.
Someone here described at a rule of a thumb you should earn the 3 fold price of drilling costs to make a good fortune since you have additional costs – so waiting a bit before calling for the fracking pump can pay out here.
Let the Saudis, the Russians and the cheap money wallstreet companies shoot out their battle – when the first topples (perhaps SA running out of money first, Venezuala soon goes bottom-up) prices will be north of 70$ again.
Northsea-oil is another candidate for going bottom-up, the same with old giant fields like chinese super fields where they stopped injecting at 60$. Together with a healthy 1.4 mb demand growth there will be times when even a wide deveoloped Permian can’t sustain all demands at 40-50$.
Eulenspiegel said:
I sure hope you’re right, and that the competitors “go bottom-up,” or at least blink, sooner than later.
This is from Pioneer Resources’ June investor presentation.
Why only 2.31$ productions cost for permian horizontals, I think the pipelines are the same as for the verticals direct in the spot beneath?
All other shales have higher production costs, too – which doesn’t make the thing better at the momentary depressed oil prices.
Looks like they have big red numbers in Eagle Ford even at top locations.
Looks like they are capitalizing a large chunk of their overhead and admin cost. That should be reflected in an anomalous well and facilities CAPEX, in turn reduces return on capital employed. What’s that indicator for Pioneer? I bet it’s less than 7%
But if the total BO from the lease is the same whether it comes out slowly or quickly, then getting the oil out quickly at a low price is not as good as getting the oil out slowly at a higher price.
Your lifetime return on your lease would be the most important number.
BoomerII,
Well that certainly is the conclusion that the Pure and the Humble (aka John D. Rockefeller) came to in the 1930s after the discovery of the East Texas Field.
But just exactly how do you propose that those “higher prices” be achieved in a competitive, free market economy?
Or do you advocate for the re-cartelization of the market place for oil, the way it was between 1936 and the 1970?
Financing in the oil industry will take care of it. If loans and investments dry up as lenders and investors find better deals to make, there will be less drilling.
It’s the oil industry itself to blame for low prices.
Boomer II,
That’s how the business cycle works in a competitive, free-market economy. The down-cycle is unkind to many, but some make it through and go on to fight another day.
Do you prefer a system where the government picks the winners and losers?
Between depletion and increased production costs and a temporary glut of oil, the market is making oil and gas investments less attractive.
The government IS stepping in, to the industry’s detriment, by selling more leases right now and encouraging what might be overproduction at the moment.
If market conditions hasten the decline of gas and oil, I won’t be sorry because I think we need alternatives anyway.
Boomer II,
Why do you believe the “alternatives” will necessarily make it through the down-cycle?
They may be some of the first to “go bottom-up,” especially as the subsidies for wind and solar begin to be phased out in the next few years.
we could always make Mike president?that should be good for a couple of hundred $$$ increase per barrel
Countries that don’t want to be dependent on fossil fuel imports have an incentive to find alternatives. Even if they pay a bit more for them (which doesn’t appear will be the case), renewables offer them more energy independence. If that is America’s goal, it is likely to be other countries’ goal as well.
Alternative energy sources also provide an economic advantage for some countries because they can become energy players even without their own fossil fuels.
Think of alternative energy the way you do military preparativeness. There is value to countries which taxpayers and governments will support even if there is no direct financial benefit. However money spent for alternative energy WILL have more economic benefit than military spending.
“A lease that produces 12,000 BO per year at $100/BO generates $1.2 million in revenue.
A lease that produces 120,000 BO per year at $50/BO generates $6 million in revenue.”
Glenn,
The only problem is that FEW 120.000 BO cannot pay MANY 12,000 BO. So, picking 120.000 BO wells is losing game in long term. It is like a stock picking vs indexing in investing. Indexing always wins. Shale carpet drilling is like trying to find that one 120.000 BO well that will pay for all losers that are 12,000 BO. Losing game in the long term.
I am tired of this debate. I need a break. Bye-Bye.
LOL
Interesting comments from Allen Gilmer, co founder and chairman of Drillinginfo.com. Comments in The American Oil and Gas Reporter, July 2017 page 104-105.
1. Much of US oil industry’s transportation infrastructure was built from 1950s-1970s. Big need for more pipelines, especially in West Texas.
2. Over abundance of 50-65 gravity oil. So much so that he has heard of a new grade being created, West Texas Superlight. He foresees the spread for 50-65 v 25-40 gravity crude widening, with the higher grade fetching a lower price, contrary to pricing history in the US favoring the highest gravity crudes. He anticipates shale tech will be used to produce more lower gravity crude from old, higher water-cut fields. He points to San Andres hz wells as an early example. A couple of his quotes,
“Industry players will re-examine older conventional fields for the 25-40 gravity crude our refineries hunger for more every day in order to be able to make their crack spreads.”
“If I was buying production today, I would be trying to buy production that is in that sweet spot 25-40 gravity crude.”
I would note OXY is among those drilling hz San Andres wells presently.
I would also note where I am it is estimated as much as 70% of the original oil remains in place, despite over 100 years of primary production and over 60 years of secondary production.
Maybe Mike and I are not through yet? I am all for our 31-36 API getting a $20 premium, or alternatively LTO getting a $20 discount. LOL!!
shallow sand
RBN Energy has written extensively about this. It’s latest:
The EIA publishes Texas crude oil production data broken down into various API gravity categories.
–
,
RBN deriving from an EOG report:
As we have discussed previously in RBN Energy blogs, condensate is lighter than crude oil. Whereas a conventional light sweet US crude like the US Midwest pricing benchmark West Texas Intermediate (WTI) crude has an API gravity of 39 and heavy crudes like Mexican Maya have an API gravity of 20, condensates have an API gravity between 45 and 70.
Now you need to understand this. This is a matter of condensate middle distillate content. It’s not about money, nor should it be . . . because, of course, this is not an investment blog.
https://www.statoil.com/en/what-we-do/crude-oil-and-condensate-assays.html
Bakken assay measured in February this year as API 43. For years and years Lynn Helms told us Bakken oil was API 39, which used to be WTI’s number. WTI API is now over 40 (and I’ve forgotten the link where that was found, sort of thought it was that link above, anyone remember?) But . . . Bakken is thus no longer 39, if it ever was 39.
This means middle distillates will be scarce in this near condensate.
Another quote:
How about EOG? Last week one of the largest producers in the Eagle Ford, EOG Resources, presented a chart at their quarterly earnings conference call implying that 7 out of 10 production companies surveyed were actually producing 100 percent condensate in the Eagle Ford –i.e. no crude oil. The data EOG presented (originating from a survey carried out by IHS) said that for these 10 producers condensate represents 70 percent of their total crude and condensate production.
EIA will report crude and condensate, which worked historically because condensate was only about 10-12% of the total. But shale has lifted that to 25+% and that liquid is not well supplied with middle distillates.
At the time of that report the suggestion was the best thing to do with the shale condensate was export it to Canada to use as diluent for oil sands output and simply endure the barbell refinery profile.
The situation hasn’t improved. Those green lines are the majority of production and they are probably mostly or at least half condensate with API 45+
http://www.ogj.com/articles/print/volume-92/issue-33/in-this-issue/refining/benchmark-west-texas-intermediate-crude-assayed.html
Voila. WTI is now almost API 41. Have to look it up, but suspect WTI was ,39 for what . . . 100 yrs?
Watcher,
I have revenue interests in Wolfberry wells that produce a crude that is pretty close to WTI in gravity, and Devonian wells that produce a much higher API gravity crude.
In my most recent run checks, the Devonian oil sells for about $0.60 per barrel more than the Wolfberry oil.
So even though the blog you quote says “It’s not about money, nor should it be . . . because, of course, this is not an investment blog,” for me it is about the money.
Then you should be on an investment blog, and those words didn’t come from RBN.
You don’t seem to understand the consequence of most output being condensate rather than crude, not to mention a slide upwards API degrees for the standard.
Watcher
Of course I “understand the consequence of most output being condensate rather than crude.”
You, on the other hand, apparently do not.
If the light crude is sent to Canada to serve as diluent it will be a detour for USA crude, & refineries will have to swallow it or split it. I look into this over 10 years ago, it’s feasible but it’s not the perfect solution.
Chevy Forced To Extend Shutdown Of Bolt Plant After Realizing That Literally No One Wants A Bolt
http://www.zerohedge.com/news/2017-07-18/chevy-forced-extend-shutdown-bolt-plant-after-realizing-literally-no-one-wants-bolt
“As AOL Finance points out today, GM has managed to sell just over 7,500 Chevy Bolts through the first six months of 2017. Moreover, since dealers are sitting on about 111 days worth of inventory, we’re going to go out on a limb and say the Bolt launch slightly underperformed expectations. All of which has resulted in GM’s decision to extend the shutdown currently in effect at it’s Orion plant for just a little while longer.”
maybe the world we need oil in the future after all
texas tea,
When all the beautiful dreams about peak oil supply didn’t come true, a substitute was necessary, and peak oil demand became the new dream.
We choose to, but we don’t need to.
I don’t know. I think real patriots would like to cut our addiction to oil, and never again send our children to die or become disabled in oil wars.
If you like oil, then expanded domestic oil production is one solution. But, reduced oil consumption has to be a very large part of the solution.
A question for the oil guys here. Say crude oil production suddenly ended what would happen with lubricants? Can oil(as in lubricant) or grease be synthesised?
NAOM
Absolutely. There are a lot of ways to lubricate with or without hydrocarbons, and a lot of ways to synthesize hydrocarbons.
Chemical engineers just need hydrogen, carbon, and some trace elements, and they can build just about anything. It might not be quite as cheap as starting with natural hydrocarbons, but it would be quite affordable.
But how practical would it be? The raw materials need to be sourced and then forced together in the right way. In theory, you just need to take the right stuff and wave a magic wand but what would be needed to set up production facilities turning out thousands or millions of tons a year?
NAOM
They need all that stuff plus a huge amount of energy if low concentration sources are all that’s available – i.e. CO2 from air or trace elements from sea water. Assume the energy needed goes up as the inverse of concentration as a starting point. Plus if there is no oil suddenly I think most engineers will be out looking for food or weapons rather than figuring out how to make lubrication.
It would be very practical.
First, the cost of entirely synthetic hydrocarbons is on the same order of magnitude as fossil fuels – current technology can produce them for less than $2.50 per liter. Cost reductions of normal manufacturing scaleup are extremely likely to reduce that to less than $1.50.
2nd, current cost estimates are based on current energy costs, as energy inputs are the primary cost. As wind and solar grow, the cost of “off-peak” electricity is highly likely to go down sharply for applications like this, that can use “off-peak” power.
3rd, there’s no problem with using fossil fuels for non-combustion applications like lubrication. If we only use FFs for stuff like this, we have many hundreds of years of supply. We can worry about substitutes then…
“2nd, current cost estimates are based on current energy costs, as energy inputs are the primary cost. As wind and solar grow, the cost of “off-peak” electricity is highly likely to go down sharply for applications like this, that can use “off-peak” power.”
That is IMHO not correct. The costs of the chemical reactor is substantial, what I have found for P2G (methane) from CO2 (air) and water around 50%. Low FLH of the reactor increase these costs or from a diffent POV: a real baseload power generator would be the best source. 🙂
The costs of the chemical reactor is substantial
Are you saying that the capital costs are 50% of the overall cost? All of the cost analyses for synthetic fuel that I’ve seen have found that the cost of energy inputs were by far the largest component of the overall cost.
Can you share any analyses that clearly show the costs of capital/hardware vs operating costs/energy?
The only detailled compilation I saw for P2G (methane from air) was:
Costs of electricty: 5 cent/kWh
Costs of reactor 5 kW/kWh with 6300 FLH
As chemical reactors are a mature technology I do not expect spectacular cost reduction like we saw for PV.
If we assume that the electricity comes from written-off PV and wind (1-2 cents/kWh) and we see a 50% cost reduction for the reactor we are in the 4 cent/kWh range for the fuel, i.e. 40 cents/liter, 60 USD/barrel.
Do you happen to have a link to a source?
Thanks.
We can turn old furniture and dead horses into oil. But it’s expensive.
The latest from Berman.
Permian Reserves May Be Much Smaller Than You Think
http://www.artberman.com/permian-reserves-may-much-smaller-think/
The Permian LTO producers PUD is understated in SEC reports, IMO. Still haven’t had someone in the know explain why.
Example I routinely give is PXD. Possibly this is because the resource is generally uneconomic at the 2016 SEC prices? But, no way they just spend $600 million in development costs in the next five years. It will be more like $10 billion, and they will move all the new wells to PDP. Once the well cost has been spent, the engineering will be such that only future LOE and production taxes will be included in PV10 calc.
I wish Art would explain how a growth company like PXD has 93% of SEC reserves categorized as PDP.
Berman is mistaken on so many levels it’s hard to know where to begin.
First, contrary to Berman’s claim, Rystad was talking about reserves and not recoverable resources. Here’s Rystad’s press release:
Second, the EIA estimate that Berman uses is for reserves on December 31, 2015. Reserves are dependent on oil price, and WTI on new years eve 2015 was selling for $36.59. Also Permian Basin operators have experienced greatly improved rig productivity and well productivity since December 2015, both which greatly enhance reserves.
Third, Berman conflates energy independence with oil independence. Energy includes a lot more than just oil.
I could go on, but from those examples one can get the gist of what Berman is doing. There’s a lot more tiger in that Permian tank than what Berman would have one believe.
Hi Glenn,
So you agree with the EIA that oil independence for the US is highly unlikely?
Coal has never been a problem, so perhaps we can set that aside.
I agree that the US may be natural gas independent for a decade (2015 -2025) or perhaps 15 years, though it will depend in part on natural gas and coal prices.
Mostly when people talk about energy dependence in the US, they are focused on oil and maybe to a small degree on natural gas.
The US has never imported significant quantities of coal in the last 100 years, so including coal in an energy independence argument is a red herring.
Dennis Coyne said:
As the link texas tea provided below demonstrates, coal is far from being a “red herring.”
https://www.oilandgas360.com/u-s-coal-finds-market-europe-gas/
The plan is to greatly increase coal exports, which so far seems to be working. We’ll see if it pans out in future, whether the Trump administration can keep it up or not.
.
Hi Glenn,
Then you agree we are not dependent on imported coal.
The energy independence argument is about energy imports, how much coal does the US import? In the past the US has imported quite a bit of natural gas from Canada and of course we have been importing oil since the 60s.
The US has been coal independent (meaning we import very little coal on a net basis) for most of our history, likely for over 150 years.
Most people are really talking about oil independence when they mention energy independence.
Oil is much more expensive than coal, per BTU/joule. I was surprised to see that Mexico is no longer a net energy exporter, when the various energy flows are weighted by price.
The US makes a fair amount from refining – imported crude costs less than exported refined products. It would be interesting to see an economic analysis…
Dennis Coyne said:
No, when most people mention energy independence, they are talking about energy independence.
And when most people mention oil independence, they are talking about oil independence.
Believe it or not, Dennis, most people realize there’s a difference between a solar panel and an oil well. Both produce energy, but only one produces oil.
They also know the difference between an EV and ICE vehicle.
Hi Glenn,
You posted a quote from an article where the author said energy independence would free us from entanglements in the Middle East.
Does the US import a lot of coal from the Middle East?
How much natural gas do we import from the Middle East?
Is there some form of energy that the US imports from the Middle East and several other places?
Hint, three letters.
Dennis,
So “most people” don’t know the difference between oil and energy?
I believe they do. The entire push for EVs, after all, is to find an alternate form of energy besides oil to propel automobiles. If this endeavor is successful, would it not help us achieve “energy independence” and “free us from entanglements in the Middle East”?
Electricity to propel EVs doesn’t have to come from oil. It can come from other sources, including coal, natural gas, wind, solar, and hydro. So if we increase production from these other sources to the point that we become energy independent, would this not also mean we become oil independent, assuming the EV experiment is successful?
Or you believe the EV experiment is destined for failure?
Hi Glenn,
I agree EV’s will reduce the US dependence on foreign oil.
In addition, at some point (likely by 2030) oil output may peak and oil prices are likely to increase unless demand decreases for some reason (such as greater energy efficiency).
So no I do not assume EVs will be a failure, when oil prices rise and as battery cost falls due to economies of scale, it is likely that oil demand will be reduced, this will be apparent within 10 years in my view.
Are companies still drilling for reasons of near-term lease obligations, that would explain some of the DUCS? BHT doesn’t see its production increasing until 2019 (due to low oil price?)
BHP Operational Review for the year ended 30 June 2017 – July 19th, 2017
Onshore US liquids volumes decreased by 29 per cent to 34 MMboe as value accretive deferral of activity in the Black Hawk and natural field decline across all fields were partially offset by increased production from the Permian.
In the Permian, the current rig will focus on near-term lease obligations while an additional one to two rigs will continue to focus on completion trials that will inform a transition to full pad development as early as the 2019 financial year.
A link to the pdf file on their news page: http://www.bhp.com/media-and-insights/news-releases/2017/07/bhp-operational-review-for-the-year-ended-30-june-2017
The more reasonable explanations for increased DUCs is dearth of frac capability. Also, no one is willing to pay a premium to frac at these prices.
Also, the easiest way for anyone to confirm my explanation that Permian conventional is pulling down the effects of Permian horizontal shale is to peruse the Texas RRC site at oil and gas statistics/monthly crude oil production by district and field. Permian area is district 7c, 8, and 8A. April 2017 is slightly skewed up due to preliminary figures being pulled a week late (my guess). EIA gets a lot of their information from the RRC. It’s primary data. What they do with it, is sometimes wrong. It’s estimates. They are far in error on their projections, in my opinion. Probably close on Eagle Ford and Bakken. Not even in the ballpark with the Permian.
Oil Fields Pumping a Third of Supply Die Fastest in 24 Years
http://www.rigzone.com/news/article.asp?hpf=1&a_id=150946&utm_source=DailyNewsletter&utm_medium=email&utm_term=2017-07-11&utm_content=&utm_campaign=feature_2
Kemp: US Uncompleted Well Backlog Hangs Over Oil Market
http://www.rigzone.com/news/oil_gas/a/151054/Kemp_US_Uncompleted_Well_Backlog_Hangs_Over_Oil_Market
IEA, DOE leaders see Mexico’s global energy role growing quickly
http://www.ogj.com/articles/2017/07/iea-doe-leaders-see-mexico-s-global-energy-role-growing-quickly.html
Flexibility makes rail a better option than pipelines.
https://www.forbes.com/sites/ucenergy/2017/07/19/why-the-oil-industry-might-prefer-rail-to-pipelines-in-turbulent-times/#6fe9032d358c
“Flexibility makes rail a better option than pipelines.”
Sure, if you don’t mind exploding tank cars in your backyard, or worse, derailed tank cars rolling down near vertical banks into fish spawning rivers like the Thompson & Fraser, for example. If you’re going to send oil across a continent, sane people would insist on pipelines, I’d say.
But if you expect those fields to be depleted, building pipelines to them may not be necessary.
“But if you expect those fields to be depleted, building pipelines to them may not be necessary.”
The Canadian oil sands comprise more than 98 percent of Canada’s 173 billion barrels of proven oil and won’t be depleted any time soon.
The article was about the Bakken.
Hi Boomer.
While the article was about the Bakken, those tank cars have to go someplace. Maybe not as far as the Thompson or Fraser rivers, but I’m sure that a massive derailment and explosion or spill would piss off somebody no matter where it occurs.
-Lloyd
There are people who would take an explosion over a pipeline leak. It’s a matter of whose property gets messed up in the process.
As people are finding out, pipelines usually require contracts, and with unpredictable prices and possibly decline rates more rapid than expected, pipeline infrastructure may not be the best option, or at least not the most flexible option.
I’m not sure what the reason is for continuing to post OPEC production information when it’s always an overall total within a tight range. Maybe it’s only news if the overall total markedly changes?
To see long term trends evolving and be able to spot when the “tight range” is starting to be tested.
https://www.oilandgas360.com/u-s-coal-finds-market-europe-gas/
As Pruitt Guts Water Rules, EPA Will Allow Fracking Waste Dumping in the Gulf of Mexico
http://www.truth-out.org/news/item/41296-as-pruitt-guts-water-rules-epa-will-allow-fracking-waste-dumping-in-the-gulf-of-mexico
Last week had one of the biggest combined drops for US stocks in recent years by EIA TWIP – crude down 4.7 mmbbls, gasoline down 4.4 and diesel down 2.1 (11.2 combined or about 1.2%). The overall trend seems to be moving down faster, even beyond normal seasonal effects. Still oil up only 1.6%, maybe all the traders are on vacation.
JODI update for May is out.
https://www.jodidata.org/oil/
For Saudi, stocks continue to fall, maybe a bit faster. Down 8% y-o-y, 1.1% on the month.
The reason why peak oil people like Ron got the peak oil date wrong is quite simple.
They did not know what they were talking about.
http://www.theoildrum.com/node/9840
Was this just a one month anomaly or the beginning of a trend? We will know in a few months. However I expect Russian production will be down in 2013 from 2012 and that 2012 will prove to be the all time high for Russia.
Ron P.
All over the oil drum self appointed know not very muchkins told us Russia had hit peak in 2011 or 2012 did Saudi Arabia in 2005 or 2006.
Ten years later these people do not have the sense stop making uneducated predictions. What qualifications do they have?
Getting stuff wrong is not a reason to stop making predictions, projections, forecasts whatever you want to call them. The interesting stuff is trying to figure out why they were wrong (for peak oil a lot was to do with not figuring out just how much the PTB could and would do to maintain BAU through ZIRP and QE). If you don’t think such forecasts add much maybe you’d be happier on some safe youtube sight looking at kittens being kittens.
George Kaplan
As was the case with Ptolemy’s epicycles, any irregularities or facts which challenge the validity of the larger picture can be explained away with increasingly tortuous narration.
At some point the mind rebels against more and more contortions.
Hi Glenn,
The idea that oil will not peak and decline is more in tune with the astronomy of the Catholic church. Peak Oil before 2030 is more similar to Galileo.
Of course you do not believe Galileo, Newton, Einstein or any theory, as it might always be proven incorrect in the future. In most cases the better older theories are correct for the sphere in which they were developed and are subsumed as a special case within newer theories.
It is essentially correct that any theory will be rejected if it is proven false in the future.
At non-relativistic velocities Newton’s Laws of motion still work as well as they did in 1687 when first published in Principia and as far as I know are still taught in introductory Physics. Perhaps they will be proven false at low velocities (those velocities typically attained by particles of a gram or larger) in the future, but I am skeptical.
Dennis,
Yours is a touching testimony to an entire generation of scientists enamored of a doctrine that the Nobel laureate in physics, Phil Anderson, called the “constructionist hypothesis.”
Phil Anderson’s short 1972 Science article, “More is different: Broken symmetry and the hierarchical structure of science,” has become one of the classics in the complexity literature.
“More is different” is a manifesto in opposition to the constructionist hypothesis, which is the doctrine that one can start from elementary particle physics and from this fundamental knowledge “reconstruct the universe.”
In his agrument against the constructionist hypothesis, Anderson formulated a hierarchical ranking of sciences that looked like this:
Anderson then concluded:
And likewise the social sciences which play such a major role in determing when peak oil will occur — polititcal science and economics — are not applied physics, regardless of your beliefs.
Hi Glenn,
Almost any opinion can be found in philosophy, I don’t really put a lot of stock in philosophers opinions.
I agree the social sciences are far more problematic than the physical sciences, experiments are nearly impossible, and knowledge of the social science theory changes behavior and makes the theory obsolete.
I have never said peak oil will be determined by physical theory alone, it will be the interaction of physical science and social science (mostly physics and economics in my view). That is why when I analyze future LTO output I use both physical science and economics while making reasonable assumptions about future prices, costs and number of wells drilled.
I note that in the past you have ridiculed the notion that oil fields peak and decline as self evident, so I will assume you agree with that proposition.
In my models I assume that as sweet spots in any LTO play become saturated with wells that less prospective areas will need to be drilled and new well EUR will decrease.
This is the main reason that oil fields peak and decline as this behavior is relatively universal in oil and natural gas fields.
You seem to assume that technology advancement will stop this physical process. It might enable a slower decline or perhaps a longer plateau near the peak. You seem to be optimistic about LTO and pessimistic about EVs, wind, and solar relative to my views.
The growth in EVs, wind and solar are based on past growth of other technology (oil and natural gas, personal computers, and smart phones.)
Oil output grew by over 6% per year on average from 1900 to 1973, where the growth has slowed from 1982 to 2016 to under 2%/year on average.
What is your expectation for the future average growth rate in oil output (say C+C+NGL production in metric tonnes as reported by BP) for the next 15 years?
Dennis Coyne says:
“Reasonable assumptions”? In other words, you make a bunch of wild assed guesses about the future of oil prices, costs, etc. and then plug them into your hallowed mathematical models.
The problem is that the outputs of those mathematical models are no better than the assumptions that went into them.
Hi Glenn,
And I often link to spreadsheets of the models where other assumptions can be used. The costs, prices, wells drilled, and EUR of new wells are based on the data of the past and the future is indeed unknown as I always clearly state.
You can wave your hands all you like, I give a range of assumptions in every case.
The costs and prices are typically based on expert estimates such as those on the EIA’s Annual Energy Outlook, you may think those are wild ass guesses, but I do not.
Dennis Coyne said:
Being in the oil business, I have followed the EIA predictions for decades. The problem with hanging your hat on what the EIA predicts is that the EIA’s track record for predicting future oil prices, costs, supply, demand, etc. is every bit as dismal as yours is.
Hi Glenn,
The future is indeed difficult to predict, the EIA predictions of the future are indeed far from perfect.
Hindsight is far more precise.
Usually for a few years into the future, EIA high and low price predictions bracket actual oil prices pretty well, in many cases EIA predictions have been far too optimistic for World Oil Supply.
My 2012 high and low scenarios for World Oil supply have bracketed actual crude plus condensate supply fairly well so far.
See
http://oilpeakclimate.blogspot.com/2012/07/an-early-scenario-for-world-crude-oil.html
Glenne said:
Very funny you should mention that, oh Mr. OutgunnedWhenItComesToTechnicalLiteracy ! What was I doing in the early 1980’s, but working on GaAs semiconductors, which was the only high speed material that enabled the cell-phone requirements at the time, and we all knew it. And then towards the end of the 1980’s I worked in a research lab developing the first SiGe material that has since also been incorporated into 5G applications. You just have to Google scholar search for my name to verify.
The point is that we all knew what technology was needed to produce the high-speed (millimeter-wave) signal processing of cell phones, via high-mobility HEMTs — just like technologically-literate people know that fossil-fuels are finite and non-renewable, which you don’t seem able to get through your head.
Since you seem to be good at making claims, Glenne, what were you doing in the early 1980’s?
@whut
All that chest thumping and esoteric jargon may help you pump up your ego, and I suppose some may be impressed with it. But what does it have to do with whether or not you predicted the cell phone revolution back in the early 1980s, and had sufficient conviction in your own predictive abilities to act on them and cash in?
“esoteric jargon”
says Glenne, who pretentiously cites David Hume and Leo Tolstoy on a science blog. Yet, he also imagines scientific progress as the ability to “cash in” LOL#ScratchHead
@whut,
You’re the one putting on all the airs about how you can predict the future with mathematical models, not me. So just who in the hell do you believe you are, Laplace’s demon?
And if the purpose of science isn’t to deliver material benefits to real, live, flesh and blood human beings, then what is it for you? A religion?
Glenne is the one putting on the pretentious suspenders and crowing about Leo Tolstoy and David Hume. That’s what Glenne is known for — name-dropping of old philosophers. There aren’t a lot of participatory science blogs out there and shame that a troll such as Glenne is infesting this one.
@whut,
Well you certainly seemed eager enough to play that “name-dropping of old philosophers” game too.
I just took you up on the challenge.
When that didn’t turn out the way you had planned, you reverted again to ad hominem and name calling. But I must hand it to you, that is the one thing that you’re quite good at.
I wrote that before you started citing Hume and Tolstoy. You are so deficient in math and science that you can’t tell the difference between the accomplishments of a mathematician such as Laplace and that of a writer such as Tolstoy. It’s just so bizarre.
@whut,
Nah. You did not write about Laplace before I “started citing Hume and Tolstoy.” Here’s the sequence. The thread is there for everyone to see.
First I played my jack of Hume, here:
http://peakoilbarrel.com/opec-june-production-data/#comment-609029
It was in response to my jack of Hume that you played your queen of Laplace, here:
http://peakoilbarrel.com/opec-june-production-data/#comment-609113
Then I played my king of Tolstoy, here.
http://peakoilbarrel.com/opec-june-production-data/#comment-609141
And then I played my ace of Laplace, here:
http://peakoilbarrel.com/opec-june-production-data/#comment-609383
You seemed to have missed it when I played the ace of Laplace. That’s when I said, “So just who in the hell do you believe you are, Laplace’s demon?”
Do you even know what Laplace’s demon means? Or do you not want to acknowledge what it means, since to do so would be to admit that even Laplace recognized there were limits to mathematical modelling?
It was after I played my ace of Laplace that you reverted back to the type of argumentation you’re best at: name calling and ad hominem.
Glenne doesn’t seem to understand that Laplace’s tidal equations were developed in 1776 and still serve to form the basis of all the general circulation models (GCMs) that scientists use to project climate patterns.
I solved Laplace’s differential equations for equatorial flow and fit the ensuing time-series profiles for ENSO (i.e. El Nino Southern Oscillation) and the QBO of stratospheric winds as described here:
http://contextearth.com/2017/07/06/confirmation-bias/
I have no idea why Glenne brings up the writers David Hume and Leo Tolstoy, who I bet couldn’t distinguish between a DiffEq and a magical potion.
@whut,
Anyone who has studied Laplace knows that even he recognized the limits of mathematical modelling, something which you are wont to acknowledge.
That’s the subtext of the article I previously linked, originally published by the Mathematical Association of America:
https://www.sciencenews.org/article/tolstoys-calculus
Here’s a link to Paul Vitanyi’s article in The Mathematical Intelligencer, which is the article that inspired the Mathematical Association of America’s piece:
Tolstoy’s Mathematics in War and Peace
http://homepages.cwi.nl/~paulv/papers/tolstoy.pdf
Is this guy Glenne serious? The fact that Tolstoy sprinkles some word math over the course of 1000 pages of fiction makes his case?
Compare that to Laplace:
And read this howler from Glenne:
As if Laplace would want to convince Tolstoy even if he even could. Laplace died
about when Tolstoy was born. See, this is how a manipulative rhetorician such as Glenne operates — he makes it sound as if there is a lively debate between an author of fiction and a talking dead guy.
@whut,
The articles I have cited, which refer to both Laplace and Tolstoy, were published by the Mathematical Association of America and The Mathematical Intelligencer.
Your attacks are directed at them, not me. Why don’t you write an article setting out your counterarugments and get them to publish it, if you feel so strongly about it?
Just saying.
LOL at glenne with his strawmen army
Box: Essentially, all models are wrong, but some are useful.
The usefulness of mathematical models to understand phenomena should not be understated. Mathematics forces rigor. If you can write down a mathematical model of what you are saying, with all the assumptions, then you really know what you are talking about.
Peter Turchin is rigorously carrying the torch of Tolstoy’s idea of history. He calls it cliodynamics http://peterturchin.com/cliodynamics/.
I agree with George that getting stuff wrong is no reason to quit trying. To do so would be stupid. To look back at why projections were wrong is a much more interesting thing. To that end, I have been looking back at predictions from the 2005 to 2010 period, starting with Simmons and progressing to the oil drum and some others. I do not have the technical expertise that many of these people had, but looking back is a lot easier than looking forward.
In my opinion, there are two big reasons the projected decline hasn’t come about yet. First, most of the work done was based upon inferred data. Because, the GCC countries don’t release much, most of the folks making these projections took whatever info was available and ran with it. I don’t blame them for this, as I believe they did what they could with what was out there, but I think they went too far in some instances, and confirmation bias is evident.
A part of Mr Simmon’s efforts to deal with the lack of hard data was his review of many SPE papers dealing with various issues. I believe one of these papers is a key to understanding how KSA and others have exceeded projected production. Paper (SPE 88986) deals with well “Shaybah-220 A Maximum Reservoir Contact (MRC) Well and its implications for developing tight-facies reservoirs.” https://www.onepetro.org/download/journal-paper/SPE-88986-PA?id=journal-paper%2FSPE-88986-PA
This paper by N.G. Saleri describes the efforts to develop the Shaybah Field. After some initial efforts to produce there were unsatisfactory, Aramco kept on trying and came up with the Shaybah 220, a well with eight laterals of around 40,000 feet of reservoir contact, and producing around 12,000 bbls per day for its first year. Saleri describes this as a “disruptive technology”.
Simmons devoted a lot of attention to Shaybah, calling it “The difficult last Giant”. He included a discussion of horizontal and MRC wells including the aforementioned paper, but I don’t think he fully appreciated these MRC wells. They have allowed KSA to produce lots of oil in many fields that were in decline. Another example is shown by the 2008 paper by Mr Asaad Al-Towalib on “Advanced completion technologies in successful extraction of attic oil reserves in a mature giant carbonate field.” In this paper they describe how this technology was adapted to produce the attic oil of Abqaiq, KSA’s oldest giant. To summarize, Abqaiq had been produced since the 40’s, and had produced about 57% of the original oil, but had around 25 feet of attic oil in poorer reservoir that they had not been able to produce. They tried to produce this attic oil via vertical and conventional horizontal wells with little success. They improved their technology and eventually completed many successful MRC wells with geosteering which allowed them to follow structure, and intelligent completions which delay the effects of coning.
So, much as most of us would have underestimated how successful our light-tight frac oil has now become, many underestimated how successful MRC, and associated technology has been for many gulf nations.
I think the next question is what happens next, so using Abqaiq as an example, after successfully producing that attic oil is there another encore or does it become just a depleted field? They have also used this technology to get more out of Ghawar and many other fields, do they have room to run, or are they done?
dclonghorn
That is simply an outstanding display of, and description of, a serious effort in understanding what is unfolding in the world of hydrocarbon production.
I would suggest that the entire concept of MRC is being currently applied in this ‘shale revolution’ primarily in the area of maximizing recovery rates, aka better fracturing/completion processes.
Not only will enhanced recovery affect the economics of present unconventional operations, it has the potential to greatly expand the application to numerous, older conventional sources as well as undeveloped – yet recognized – formations with hydrocarbons within them.
Great post.
But the problem isn’t so much whether oil is still in the ground, but how much it costs to get it out.
New technologies that don’t reduce costs to make oil profitable to drill aren’t all that helpful in keeping the oil flowing. Right now we have LTO because the system accepts financial loss. That could change if alternatives promise a better financial return.
Boomer
To see the lowered cost of drilling is one way technological improvements make for better economics.
2nd quarter results will be announced shortly industry wide and early indications are – just as in 1st qtr – financials may have hit an inflection point.
Conversely, recovering far more oil/gas for the same amount of investment, which was the thrust of my response to dc’s post, would make future development much more economically viable.
So far we haven’t seen more oil for the same investment. We’ve gotten more oil from more investment.
What makes me think it hasn’t gotten easier/cheaper is that big oil has cut investments, and much LTO investment has shifted from other areas to the Permian.
Suggest you view production profiles from 2016/2017 vintages from Enno’s fine site.
While factors such as lateral length, proppant amount, etc. are not easily known, as well as ultimate recovery versus near term, it is simply indisputable that a 5,000″, 10,000′ foot lateral costs far less to drill and complete than its earlier predecessors if the same, weighted parameters were able to be applied.
I’ll have to let knowledgeable industry people weigh in on this. I am basing my thoughts in where the oil industry is/isn’t putting its money right now.
coffeeguyzz,
The way I understand the term Maximum Reservoir Contact (MRC) is that it refers to multiple laterals being drilled from a single vertical wellbore.
I’ve seen this done in the Devonian in west Texas, but that is a conventional reservoir. Has it ever been tried in US shale?
The only thing I’ve heard of that sounds like MRC is this project (see attached graphic), but it is still in the pilot stage.
Oxy believes it can lower cost per lateral by between $0.5 and $1.0 million, and reduce operating cost by over 50% with this technology.
https://seekingalpha.com/article/4069021-occidental-petroleum-corporation-2017-q1-results-earnings-call-slides
Glenn
I kind of ‘flipped’ the MRC concept in dc’s post of ‘more iron meeting’ oil to ‘more oil meeting iron’ via the greatly enhanced fracturing/conductivity recently taking place in the shales.
Regarding multilaterals, the early (2007-2009) Bakken wells regularly contained 2 or 3 lateral from one vertical.
They used the term “turkey legs’ and can still be easily seen on the ND DMR Gis map.
Virtually no one except Slawson still does this and even then, only rarely.
(Correction, might still be done in Madison formation, especially Bottineau county. Would have to check. Gis map is easiest way to literally see this).
BHP said a year ago that they would attempt to try this in the future, but I’ve not kept close track of their efforts.
One of the heavy oil projects in Venezuela uses this approach. We called them fishbones (those laterals come out with curves, can’t be drilled perpendicular).
The fishbones have had some problems with sand production, and it’s impossible to know which are open and which are collapsed (but I have a trick to figure this out I can’t discuss here).
Thank you very much coffee, I appreciate your kind words. From what I have read MRC technology is a great fit for a number of fields in the gulf countries and may be practical in other places including USA. Of course one of the problems applying it here is that I think you need a unitized field, or at least a very large area to be implemented.
Do you know if other areas have adopted this?
dc
I’m pretty sure you know a whole lot more about this stuff than I do.
I started digging into it a few years back when the series of stunningly high IPs started to emerge from the Deep Utica.
Big buzz developed about feasibility of sharing hardware/facilities to develop Marcellus and Utica together.
At that time, I was amazed to learn of the multi lateral, extended reach drilling using ultra sophisticated whipstocks in the mid east, offshore, and – if memory serves – Sakhalin.
Probably do need large reservoir to be viable.
Time will tell if this approach makes sense in the shales.
Like everything else, economics will be the ultimate determinator.
jan,
The reason I don’t make predictions about when peak oil will occur is because it is extremely hard, so much so that it has become a fool’s errand.
Reserve estimates are based on 1) the price of oil at the moment the reserve estimate is made, 2) the technology that exists at the moment the reserve estimate is made, and 3) the amount of geological knowledge that exists at the moment the reserve estimate is made.
These are factors that are constantly changing. Therefore peak oil will take place in a highly complex system (where making predictions about future events is exceedingly difficult), and not some highly reductionist mathematical model that omits most of the important factors.
Predicting future oil reserves, and peak oil, is therefore far more complicated than merely calculating the known amount of oil in place in the world and applying the percentage of that oil that is economically recoverable at the moment. With a high enough price of oil, and enough technological breakthrougs, there are vast amounts of oil out there that can, and will, be recovered.
The cluster of associated ideas whose co-occurrence establishes the common intellectual terrain among researchers who study complexity — “system”, “interactions”, “emergence”, “selforganization”, “learning and adaptation”, “evolution and coevolution”, “positive feedbacks”,
“networks”, “distributed control” — is woefully absent from the peak oilers’ theories and predictions.
After two decades of making predictions — peak oil is always imminent the peakists constantly admonish us — that have consistently proved to be wrong, one would think that the peakists would have learned a little modesty and humility. But they haven’t.
The creation of positivist social sciences has led peak oilers, and many others, to proudly consider themselves to be the most Galilean of all. The reality, of course, is the very opposite.
Yes, but the time is right now.
There are alternative energies around the corner, opposite as in the 70th or in the 80th.
At 100$+ peak oil can be delayed to the 2050th – but nowadays nobody will be willingly pay the 200$ oil when they are splitting kerogen with nuklear heating power or other desperate measures. Before that even natural gas cars and declining oil usage will be an option.
So it will be a mixture of rising prices of oil, and adding more and more technology is a rising cost from the early “drill a hole and enjoy” oil, and first the existence and more and more cheaper price of alternatives.
Electric cars for commuters? Possible under current technology development, give it 10 more years to ripe a bit. Even that is enough to have a peak oil and nobody notices, no Mad Max.
Every single oil field has its own “Peak oil”, so rising oil productions means bringing more new fields online than old ones phasing out.
New technology helps here a lot – and rising oil price. At the current price we’ll see peak oil soon, no prophet needed for that. Almost no new field development besides Permian and a few Iran/Iraq fields worldwide while reducing advanced recovery in old fields has written desaster all over it. At the moment we still have all the investments of the 100$-years going online, but there are few of these projects left.
So the highest acceptable oilprice will define peak oil – and that’s a race between oil technology and oil free transport – with dirt cheap natgas truckers will change to gas soon.
Hefty oszillating oilprice will bring peak oil nearer, too – because nobody will invest in something like a tarsand mine then that needs 30 years time to pay out.
I’m no prophet here, too, but I thing it will be about 2030-35, after this it will be a peak demand thing. Nobody needs 150$ oil. Depends on natural gas price, too.
Glenn
I agree the world is very complex and Peak oil predictors are totally incapable of taking into account any other factors which could impact us far more than peak oil.
I am interested in events such as the great depression. There was plenty of oil left to be extracted, plenty of people who were in need of cloths, food etc. There were plenty of people who were willing to work to make clothes and produce food. Plenty of coal in the ground yet many miners laid off, while millions were desperate for coal to heat their homes.
Plenty of everything yet, shortage of everything.
So long as the few who run banks can make money out of thin air, they will be able to steel anything they want.
https://www.peakprosperity.com/video/85831/playlist/92161/crash-course-chapter-6-what-money
Hi Jan,
Thanks for the link.
I watched segments 6 – 11 and the beginning of segment 21 titled “Shale Oil.”
I certainly agree with his description of the way in which banks’ endogenously create money. (It looks like he’s not in the MMT school, but closer to the NCT school. Both the MMT and NCT schools, nevertheless, remain in a different universe from Paul Krugman, who still subscribes to the neoclassical belief that the private banks don’t create money.).
I disagree, however, with the claim that “Inflation is everywhere and always a monetary phenomenon.” Inflation can also be caused by a nation’s productive capabiity being destroyed. This can happen because of some political or natural disaster which destroys a nation’s productive capacity, but also by years of economic mismanagement and malinvestment. The thing to watch is not a nation’s absolute amount of debt or money supply, but the debt (both public and private) to GDP ratio.
I would have agreed with his assessment of shale oil and peak oil a couple of years ago. But with what has happened in the last couple of years, I no longer agree. I have changed my mind. It looks like the advent of peak oil has been postponed to some unknown time in the future, and is no longer imminent.
Hi Glenn
Yes I agree, inflation can also be caused by destruction of the factories and farms that produce what people need.
My first thought is, the kind of destruction you are talking about is more prevalent in state run economies, where centralized decisions can never take into account a multitude of circumstances and ever changing demands and needs of millions of people.
In capitalist economies for all it’s faults, inefficient businesses and bad ideas are removed through natural selection.
Peak oil has been postponed, very few Oildrum writers would have imagined the world today would be producing 12 million barrels a day more total liquids and 7 million of crude than 2005.
When will it peak? I will leave that guess to Ron
Jan,
I watched several videos, and didn’t see any mention of the petrodollar:
How Petrodollars Affect The U.S. Dollar
http://www.investopedia.com/articles/forex/072915/how-petrodollars-affect-us-dollar.asp
What do you think about the petrodollar?
Some believe that it is the petrodollar which gives the US dollar value, allowing the US to continue to spend beyond its means, running perennial current account deficits and with no drastic devaluation of the dollar.
In essence, the US switched from a gold standard to a petroleum standard. The petroleum standard is maintainted by keeping contol over the world’s flows of oil by the use of diplomacy, but always backed up by the threat of U.S. state violence. The end result: if a country wants to import oil, it has to pay for it with U.S. dollars, which means that country has to obtain U.S. dollars, giving the U.S. dollar value.
Maintaing the petrodollar is the reason that the US continues to involve itself in the middle east, spending enormous amounts of money, blood and moral capital to control that region’s oil, even though it could now get by without oil from that region. It can now obtain its oil domestically and from the Americas without this enormous expense. The US, however, needs to maintain the petrodollar, and it enforces the petrodollar system upon the world by controlling the world’s flow of oil, often by means of state violence.
If the U.S. does not control the flow of the world’s oil, assuring it is bought and sold in dollars, then the value of the dollar goes away, and with it the ability for the US to spend beyond its means. If the petrodollar goes away, the US’s massive current account deficit will not be possible to finance without severe inflation in the US, meaning the US will have to learn to live on what it produces.
What is your opinion about all this?
The conundrum is how the US has been able to maintain the value of the US dollar, in spite of massive and perennial current account deficits. The petrodollar provides one explanation. I would like to hear others.
Glenn,
The simple explanation is that the dollar is still the world’s trading and reserve currency, allowing the US to export dollars instead of the normal “tradeables” that other countries must have to pay for imports. The fact that oil is priced in dollars has something to do with that, but it’s hardly the most important. After all, if Saudi Arabia didn’t like dollars, it could easily exchange them for other currencies after receiving them in payment.
There is a real benefit to buying stuff and not having to pay for it. On the other hand, it does create some real “Dutch Disease”.
Hi Jan,
The peak in conventional oil is likely to be between 2020 and 2030, perhaps oil sands and LTO might delay the peak a bit, but I believe it will mostly reduce decline rates. US LTO is likely to peak around 2025 the rest of the World may be slow to develop LTO (China may be an exception) and the Canadian Association of Petroleum Producers (CAPP) estimates that Canadian output will only increase by 2 Mb/d between 2017 and 2030. So it is doubtful that extra heavy oil output from Canada and Venezuela will develop quickly enough to offset declining conventional oil.
For this reason I expect the World peak in C+C output will be within 1 or 2 years of the peak in conventional output.
I agree with Glenn that attempting to predict the peak in oil output within a couple of years is impossible due to the complexity of the problem, but based on past data, the window can be narrowed to about a decade in my view. High oil prices are likely to reduce oil demand, low oil prices are likely to reduce the growth rate in oil output.
http://oilprice.com/Energy/Energy-General/The-Natural-Gas-Boom-Shows-No-Signs-Of-Slowing.html
Oh well, so much for peak demand.
The peak demand prediction has proved to be no more valid than the prediction from a decade ago that crude oil production was about to peak for geological reasons.
From the article:
.
The article says this: “On the supply side, global oil production advanced by 0.5 percent to reach 92.2 million BPD.”
You know, factoring in both population growth and world economic growth, this isn’t much. There might be a crunch coming.
Hi Glenn,
For BP oil consumption in tonnes of oil from 1982 to 2016 the rate of growth has been 1.39% per year on average.
Perhaps that rate of growth will continue for the next 34 years, but I am skeptical.
Note that from 1965 to 1979 oil consumption grew at 5% per year, so it is clear that the growth rate in oil demand does not remain constant and the rate of growth has been decreasing (when 1965-1979 is compare to 1982 to 2016).
So we can speculate that history will repeat and that oil demand may decrease further in the future.
It will be difficult for unconventional oil (oil sands and LTO) to stem the coming decline in conventional oil resources for the next decade, especially if oil prices remain low.
Dennis,
It’s amazing the deftness and ease with which you switch from talking about the past and the present — that is, the many predictions the peakists have make over the past two decades and how these have invariably proved to be wrong — to talking about the future. And in this future, your predictions of course could come true.
But, as Daniel Yankelovich reminded us in Coming to Public Judgment, “mainly we judge experts on their records on being correct.”
“The distinction between knowledge and opinion is largely a matter of validation,” Yankelovich goes on to explain. “The validation is carried out by empirical methods, more or less casual or scientific depending on the occasion.”
“What we want above all from expert opinion is that it be correct,” Yankelovich concludes. “The best criterion for judging the quality of expert opinion is whether it proves to be right or wrong.”
And when it comes to being proved “right or wrong,” the peakists “record on being correct” is far from acceptable.
don’t know how that could be said any better
Hi Glenn,
The cornucopians have also been wrong.
I have never claimed my predictions are “true”. That is silliness.
I have made some lucky guesses in the past. And like Paul Samuelson I adjust my thinking based on evidence.
The fact is that from 1900 to 1973 World oil output grew at an average annual rate of over 6% per year. From 1982 to 2016 the average rate of growth in oil output was about 1.4% per year on average. Full stop.
I don’t know what the future growth rate will be, my expectation is that by 2030 the centered running 12 month average of World C+C+NGL output will have an annual growth rate of close to zero. (12 month centered average minus 12 month centered average from one year earlier divided by the average of the two times 100 would be the growth rate in percent)
Dennis Coyne said:
So two wrongs make a right?
Glenne doesn’t seem to understand that crude oil is a finite and non-renewable resource, yet is also one of the most concentrated AND convenient sources of energy known to man.
Therefore, society is dependent on some sort of crude-oil-like liquid (i.e. BOE) for the near future and so will do whatever is necessary to produce near-facsimiles of the material.
Some of us are here to track the evolution of the evolution of fossil fuels and to monitor the transition to a new paradigm.
Or maybe Glenne does understand all this, but that it interferes with his investment trolling.
And the increase in natural gas use is bad news for coal.
“Almost every region of the world saw a decline in coal consumption. In the Organization for Economic Co-operation and Development (OECD) countries — primarily the world’s developed countries — coal consumption fell by 6.4 percent. In the European Union, it declined by 8.9 percent.
U.S. coal consumption continued to fall sharply. The 8.8 percent decline in consumption took U.S. coal demand to its lowest level since 1978. U.S. coal production followed, with a 19.0 percent decline to levels also not seen since the 1970’s.”
Boomer II,
The increase in natural gas is not necessarily “bad news for coal.”
The plan is to greatly increase coal exports, which so far seems to be working. We’ll see if it pans out in future, whether the Trump administration can keep it up or not.
.
Exports may be up, but the article you cited said coal consumption has declined in most areas of the world.
Also, according to the BP Statistical Review of World Energy, “Global coal consumption fell by 53 million tonnes of oil equivalent (mtoe), or 1.7%, the second successive annual decline. The largest declines in coal consumption were seen in the US (-33 mtoe, an 8.8% fall) and China (-26 mtoe, -1.6%). Coal consumption in the UK more than halved (down 52.5%, or 12 mtoe) to its lowest level in our records.”
NG storage dropping:
https://www.investing.com/economic-calendar/natural-gas-storage-386
Hight trekker…. The current storage levels are 5 % above the 5 year average but 10% below last year levels. This weeks injection was 1/2 of the 5 year average and was less than last year. We are now going into the heat of summer so i expect that trend to continue for the next several weeks.
r.eia.gov/ngs/ngs.html
http://americanoilman.homestead.com/GasStorage.html
I’m just exploring NG, and the learning curve is interesting.
This might have something to do with the injection rates.
Net imports have fallen precipitously and went negative in April, 2017.
Could this be because of soaring demand from Mexico?
Thanks!
Handy info—
The 1973 so-called “oil embargo” which reduced oil supply to the USA by somewhere around 3% or 4%. It slammed the US economy, caused the largest stock market crash since the great depression,doubled gasoline prices, severely damaged US industry and caused a 55 MPH national speed limit which remained in effect for ten years. Just wait until we experience a 10% or 20% drop in oil supplies. In a few years or sooner we certainly will. When it hits the economic and social damage will be catastrophic. The end of Western Civilization, from China to Europe,to the US, will not occur when oil runs out. The economic and social chaos will occur when supplies are merely reduced sufficiently. As former Saudi Oil Minister Sheikh Yamani once said “The Oil Age may come to an end for a shortage of oil”.
For environmental reasons, I do want consumption to decrease. Am I worried about the economic repercussions? Not really. I don’t think our lifestyle is sustainable, so something has to give. I would have much preferred for the economy to have made permanent adjustments starting in 1973, so that the eventual transition to loss of petroleum supplies would have been gradual and as seamless as possible.
Since we didn’t take that opportunity, now our transition will be more severe and painful. But that was our choice or lack of vision. And that pain and disruption is likely the only thing to get some Americans to pay attention. They have to personally feel the pain to make adjustments or at least accept them.
I know if Americans would just give up eating meat like Leo wants us all to. Those damn cows farting all day will stop causing so much global warming!
Actually, cows feeding on perennial grasses actually sequester CO2, even while farting.
But I doubt if we will be changing a grain monoculture back to range land.
Who would want all those bison and predators anyway?
Nah. The 1973 stock market crash started before the embargo, the decline in GDP in 1974 was only .5%, and the US was able to reduce oil consumption by 18% from 1979-1982 while still showing some GDP growth.
We don’t need oil. A sudden shortage would certainly put stress on the system, which would have the potential to cause recession if we were near the end of a business cycle, or the economy was badly managed. But in the medium long term, we’re far better without it.
Nick, when it comes to wearing a cheerleader skirt for the end of the oil age, you do a great job and look real pretty.
When it comes to passing through the reality gate, you stay on the fantasy side of this topic just about all the time.
Its OK, we do need dreamers. Just don’t confuse that with whats real.
For example- Just try to stand up on the soapbox and tell 1.6 Billion people who live on the Indian subcontinent that they don’t need any oil. Any idea how many millions of water buffalo and mules they’d have to come up with to replace tractors. And how much land those beasts of burden would need to for their forage.
Oh, good lord, we’re not going back to mules. One horsepower is about a small mule (horses were smaller in 1782, I guess) – that’s only 745W. An electric tractor with a PV roof would be infinitely cheaper and more effective.
Not that electric tractors are going to be big soon – I suspect liquid fuels will rule farming for a while yet. But hybrid tractors will come soon, I’m sure.
The oil for tractors and airplanes is still available even 30 years after peak oil – it’s the oil for cars and trucks that has to give second, and heating/powerplants first.
Public transport in chinese megacities can already be handled by electric bikes / busses / underground railways – that’s todays technology. We have 20 years to develop better.
Even buying cars with 60 mpg or better would make the USA oil import independent, when these pickup trucks and SUVs only would be used by people who have to transport something important.
The SUV-cancer infests Europe at the moment, too – despite gas prices from 5$ / gallon and more due to taxes.
Yamani did not say that and you should stop too (unless you can give an actual link to a reliable source). I think you have incorrectly read this:
Peak Oil Trajectories: Same Crisis, Different Responses, by Jörg Friedrichs
Note the important word in that is “contra”, which is a negation, i.e. “against”, and not “according to”.
What Yamani said exactly, according to the Telegraph interview in 2000, was:
He is probably going to be shown to be wrong, he was in other things – for instance he also predicted we’d all be driving fuel cell cars, but he did get the collapse of oil price correct, though maybe for the wrong reasons.
As an aside the Stone Age and lack of stones is probably incorrect as well, there is a lot of evidence that the specialist flints and obsidian used in the Stone Age did run out in some areas. The pit mines are preserved, and what’s under some of them is copper ore, hence the bronze age.
FWIW, fuel cell cars are just a slight variation on electric cars: they have an electric drive train, a battery, and an onboard generator in the form of a fuel cell. Switch out the fuel cell and put in a small ICE and you have a Chevy Volt. Switch out the fuel cell and put in a diesel and you have a freight train. Expand the battery and you get a pure EV.
The automotive industry promoted fuel cell vehicles because they knew that the fuel cell part was very unlikely to be competitive anytime soon, but that R&D effort still moved the industry towards electrification.
Automotive electrification depends on recognition of the very high costs of oil that are still not in the pump price – external costs like pollution and oil wars.
Those costs are real, but the process of recognizing them and internalizing into the price of oil is entirely political. So, the future of oil depends on politics.
Which brings us to the reason why the Koch brothers are working very hard to cripple democracy and government: they are the channels through which the end of oil will happen.
Trump is the direct end result of the Koch campaign to cripple democracy, and stifle the transition away from oil & FF.
I don’t know why but I used to think that the EIA must adjust its measure of productivity for things like the variation in the number completions. They don’t…
EIA – This Week in Petroleum – Release date: July 19, 2017
Based on EIA’s Drilling Productivity Report, productivity in the Permian, as measured by new-well oil production per rig in barrels per day, is forecast to decrease month-over-month for the 10th consecutive month in June (Figure 2). Output per rig is likely decreasing because operators are drilling more wells than they are completing.
https://www.eia.gov/petroleum/weekly/archive/2017/170719/includes/analysis_print.php
chart on twitter: https://pbs.twimg.com/media/DFMmq15W0AU1Pnm.jpg
Limits to Growth won’t allow us the time needed for our species to evolve intellectually
to the point that we alter our behavior. The majority of homo saps are not rational; in
fact they take pride in their ignorance, (see deplorables). We must be forced to change by our circumstances, not by our enlightenment. The MSM has done an excellent job calming the cattle before they are slaughtered. And once the massive energy shortages hit the world economy soon. The sheep and Wall Street will panic. The elites will need a place to hide. But as they say “You can run but you can’t hide”.
“We must be forced to change by our circumstances, not by our enlightenment.”
Absolutely agree, Mastermind. That’s it in a nutshell. Humans being as a whole have to suffer to penetrate the density of their unwillingness to see beyond simple ignorance. It has to be pounded into them like pounding out a steel sword on an anvil. Bang, bang, get it? No. Bang, bang…
At this point, the survivors (if any) will need to figure survival out on the other side of the wall we are about to crash into (or not).
Y’all still don’t get it.
Look, begin your analysis with one somewhat inescapable reality.
Distribution of oil won’t be uniform.
No, not in the context of it already being non uniform. In the context of some parties . . . countries, enduring a sharp decrease in their current imports despite urgent orders they placed for more, all while seeing abundance for others on TV.
Now then. Proceed to do your analysis of what is likely.
What massive energy shortages?? Oil is not the same as “energy”. And, as much as Glenn can be annoying, he’s got a point about the difficulty of forecasting peak oil, let alone peak coal or gas. Much more importantly, it’s very clear that we have more than enough resources for generating electricity into the indefinite future, and electricity can be used to do whatever we need. Peak Liquid fuel could be very inconvenient (or even dangerous, if managed very badly), but oil is not necessary in the longer term.
http://oilprice.com/Energy/Energy-General/Dirty-Difficult-And-Dangerous-Why-Millennials-Wont-Work-In-Oil.html
“A total of 14 percent of Millennials say they would not want to work in the oil and gas industry because of its negative image—the highest percentage of any industry, McKinsey said in September 2016.
Young people see the industry as dirty, difficult, and dangerous, according to an EY survey published last month. EY’s survey polled Millennials—the 20-to-35-year-olds today—as well as Generation Z coming after them, and found that younger generations ‘question the longevity of the industry as they view natural gas and oil as their parents’ fuels. Further, they primarily see the industry’s careers as unstable, blue-collar, difficult, dangerous and harmful to society.'”
“Moreover, Millennials don’t see the oil and gas industry as innovative – a major driver of career choice among this generation. According to a recent report by Accenture, ‘Despite evidence to the contrary, many Millennials believe the sector is lacking innovation, agility and creativity, as well as opportunities to engage in meaningful work. In fact, only 2 percent of U.S. college graduates consider the oil and gas industry their top choice for employment.'”
I dare say most people will never work in o&g. What’s the direct o&g employment figure for the whole population? Less than 1% I’m guessing. Sometimes you wonder why they bother even rewriting these press releases.
It’s not that insignificant as it looks – it are good paying jobs, as in the prime time of car producing in Detroit.
And with these jobs come lawyers, house builders, car sale and makers, steel industry, even fast food sellers – a whole chain of jobs.
Here in Germany is every car job brings about 7 secondary jobs – this is a about the same in oil, I think.
The more stable jobs are midstream and downstream in oil and gas.
Also, in midstream and downstream the skills are more easily transferable to other industries. At least that is my observation having been friends and neighbors with those working in all three.
What I got from the article is that younger generations don’t see gas and oil in their future. They see it as an old, dirty process. Politically that will have an impact. It’s not an industry they consider worth preserving.
Ah yes, the idealism of youth. After a few encounters with the school of hard knocks and the realization that all the beautiul dreams aren’t going to come true, however, many young people start to change their tune.
To bad the human IQ peaks at age 25 then goes into permanent decline. This is why so many older people are or become conservative.
MASTERMIND,
So that’s the cause! That’s what causes people to become more conservative as they grow older! Their brains have atrophied.
And that’s why they should be required to attend chapel and told what it is proper to think, to feel, and to believe by people like you. And ths is to be done not by means of civil discourse and persuasion, but via intimidation and intellecutal decree.
That is so unbelievably brilliant! ?
Why didn’t I think of that? ?
Glen there are dozens of sites that do nothing but debunk conersvative media and political lies. (FactCheck.org-RightWingWatch-Politifact-MediaMatters) etc. etc..There are ZERO sites debunking liberal media and political lies. I wonder why? Maybe because you uneducated imbeciles live in a Jesus Fantasy world?
is that the best you got…name calling, I hope you contribute a bit more to your everyday life then you just did here, some how I doubt it?
“…ZERO sites debunking liberal media and political lies”. ????
Wow. I am certain that I have never read a more disconnected-from-reality statement on the net as that one right there.
For the adults in the room,
yesterday’s short interview by NY Daily News with Katie Couric (Fake News Tearing Country Apart) tragically nails several salient components of the present political/social dysfunction.
Money line … people are seeking affirmation not information from their chosen sources of data.
I thought conservatism was a desire for careful, gradual change.
The current crop of “conservatives” not conservatives, they are radicals. They’re trying to undo basic things like Social Security, affordable higher education, voter rights, and regulation of campaign contributions.
They’re trying to subvert democracy itself. That’s not conservative.
In the case of energy and transportation, probably not. Anyone who ever lived in a smog-filled doesn’t wish for coal fired plants and polluting cars to come back.
As new technologies become available and are cheaper, more efficient, cleaner, etc., people don’t usually revert to the past.
This kind of image problem isn’t new.
After WWII, rail was no longer “in”. In fact, engineering was no longer fashionable after roughly 1970 – finance was where the money was. Engineering became the realm of “geeks”. It’s nice to see computer science (like Bill Gates) help reverse that image somewhat.
Bakken NGLs.
http://badlandsngls.com/uploads/1/BadlandsPresentationforBakkenConfMay16.pdf
They are talking about 25-30% and the verbage talks about it being in railcars . . . the suggestion is it’s part of the total Bakken flow of 1 million bpd. 25-30% of that is ethane?
What a scam this would be.
Think of the earth as a living organism that is being attacked by billions of bacteria whose numbers double every forty years. Either the host dies, or the virus dies, or both die.
-Gore Vidal
How old is that quote?
The New Face Of Big Oil: How Vicki Hollub Made Oxy The Top Player In The Permian
https://www.forbes.com/sites/christopherhelman/2017/07/18/touring-the-permian-with-occidental-petroleum-ceo-vicki-hollub/#3aa252192ed0
Good article that deserves some closer reading.
$28 is BOE, not BO.
At $60 WTI (my preferred oil price) OXY earns approximately $1.5 billion, or $1.96 per share. Still would be a 30+ PE ratio and earnings would be less than current dividend payments.
OXY spun off its California assets (California Resources Corporation) and loaded it with $6 billion of debt at the height of oil prices. In my opinion this was the most strategically important decision made by OXY. Take a look at what CRC shares are worth.
Whaaaa? This is hype.
Occidental Petroleum produces less than 1/4 of its oil and gas output in the Permian, and some of that is labeled South Texas conventional. This silliness is all small potatoes. Hell, just about 1/2 OXY’s BOE output is not even in the US. And it would be even more than 1/2 but for a service outtage in Columbia and planned maintenance (during that quarter) in the Middle East.
Their chemical business made them $170 million that quarter, and their total oil/gas income was $220 million, most of which was from international flow.
Oh, and pssst, oil price was higher Q1 than Q2.
OPEC, Russia to Stand Pat on Oil Deal Even as Glut Persists
http://www.rigzone.com/news/oil_gas/a/151101/OPEC_Russia_to_Stand_Pat_on_Oil_Deal_Even_as_Glut_Persists
Three Years Into Cheap Oil, Gulf Is Still Depending on a Rebound
https://www.bloomberg.com/news/articles/2017-07-19/three-years-into-cheap-oil-gulf-is-still-depending-on-a-rebound
.
–
,
Stumbling around the web, I ran across the record of a hearing in 1996 by the House sub-committee on energy and the environment. Part of it has predictions from the EIA’s Annual Energy Outlook 1996, which apropos to this post by Ron, predicted that OPEC in 2015 would be producing just over 52 million bpd in the reference case, 61 million bpd in the low-price case, and 47 million bpd in the high price case.
See page 7 of:
https://www.eia.gov/outlooks/archive/aeo96/pdf/038396.pdf
Well, they only blew that prediction by a factor of about 2.
(Russia-OPEC thinks the price is too low, so 61 million bpd predicted vs. 33 actual.)
Their predicted price is about right – inflation adjusted, but no hint of the 2008 spike.
The congressional hearing record has Michael Lynch predicting 2020 world demand at 122 million bpd,
and call-on-OPEC at 57 million bpd.
pg 137 of:
http://ia600300.us.archive.org/11/items/usenergyoutlooki00unit/usenergyoutlooki00unit.pdf
People that extrapolate always get their long term predictions wrong. A lesson not learned despite overwhelming evidence.
“Well, they only blew that prediction by a factor of about 2.”
but don’t forget at least they were “courageous” enough to make that failed prediction, right Dennis. All it takes is courage not accuracy. I would be curious for those among us who have the courage, how may failed prediction does one get to make before you are no longer courageous and are a compete fool? not that applies to any body here…. but for profit doomsayers seem to be able to go on for decades either being courageous or foolish and get by with it. Al Gore comes to mind Michael Mann likewise…..and any and all who continue repeat and support these complete freking fools
Actually, Mann and Gore have underestimated their predictions.
https://www.voanews.com/a/who-global-warming-happening-faster-than-predicted/3429127.html
They were wrong– they underestimated the acceleration.
https://wattsupwiththat.com/2017/07/22/autopsy-of-an-excuse/
texas tea,
Uh oh! Now you’ve gone and done it.
You’ve pointed out the inconvenient truth: The prophesied Apocalypse didn’t happen as predicted, so had to be rescheduled for sometime next century.
That’ll get the hounds of hades sicked on you.
Here’s one for the shale poodles to gnaw on:
“I had shorted shale producers and the related MLP stocks before, and I knew there was something wrong with the industry, but I failed to find the trigger for the US shale industry to fail. And like most other investors I was continually swayed by the statements from the US shale drillers that they have managed to cut breakeven prices even further. However, I have taken a closer look at the data from EIA and from the company presentations. The rising decline rates of major US shale basins, and the increasing incidents of frac hits (also a cause of rising decline rates) have convinced me that US shale producers are not only losing competitiveness against other oil drillers, but they will find it hard to make money. If US rates continue to stay low, then it is possible that the high yield markets may continue to supply these drillers with capital, but I think that this is unlikely. More likely is that at some point debt investors start to worry that they will not get their capital back and cut lending to the industry. Even a small reduction in capital, would likely lead to a steep fall in US oil production. If new drilling stopped today, daily US oil production would fall by 350 thousand barrels a day over the next month. (Source: EIA).”
http://www.zerohedge.com/news/2017-07-22/i-have-taken-closer-look-data-eia-why-horseman-global-aggressively-shorting-shale
Mike,
So let’s see. If I read the article correctly, your citation comes from Horseman Capital Management’s July Monthly Newsleter.
The article says Horseman Global had a -24% return last year, and through June of this year lost its investors another 8.31%.
All of this happened during a time when the DJIA rose from 17,149 to 21,350, a 24% gain.
Well I’ve got to hand one thing to you Mike. you sure know how to pick ’em.
Why is this in an oil thread?
Plus Glenne references a blog post that the author has since admitted is full of errors :
lol
@whut,
“Why is this in an oil thread?”
Didn’t you get the latest memo from Apocalypse Central?
Now that would make peak oil happen on Dennis’ predicted timetable.
Glenne cited the blog posting of someone that works as a carpenter/house builder for 12 hours of the day and then spends the rest of his 12 hours getting confused by the difference between the Fahrenheit and Celsius temperature scale. Tamino has the full story here:
https://tamino.wordpress.com/2017/07/22/does-willis-eschenbach-have-any-honor/
texas tea,
Didn’t I warn you? Now those killer canines are after you.
Commenters such as Texas Tea and coffeeguyzz are OK in my book, even though I don’t necessarily agree with their assertions.
But Glenne is on the Trump-scale of obfuscation and bad mojo.
Yea-
What is my head doing up my ass?
Comedy at best.
Strange, I get 0.5 W/m2 when I do his calculation. Hansen probably calculated for an accelerating melt.
Hi Texas Tea,
I have not been off by a factor of 2, but it has only been 5 years since this chart was posted.
http://oilpeakclimate.blogspot.com/2012/07/an-early-scenario-for-world-crude-oil.html
If World C+C output is 144 Mb/d (or 36 Mb/d) in 2032, then the medium scenario in the chart below will be off by a factor of two. Also note that this scenario did not consider LTO and oil sands output which would tend to mitigate decline rates after the peak in conventional oil output in 2020.
Probably 65 to 85 Mb/d is a reasonable guess for World C+C output in 2032, with about a 66% probability output will be in this range for annual C+C output in 2032.
hey Dennis, for personal financial reasons I hope you are right in your projections. I think to get to the world that you hope for, carbon free, oil prices will need to rise and stay high for a considerable time. That is just my opinion. However saying that, is not a profile in courage just like your chart above is not…it’s just a wild ass guess based on my life experience and understanding of people and our economic and political system. ?
Yes, oil prices need to rise. On the other hand, the best way for that to happen would be raising taxes on oil, not raising prices for producers. For example, if the US raised fuel taxes, that revenue would go to the US. If oil prices rise, vast amounts of income and wealth would transfer to oil exporting countries.
Hyperloop, HyperSPEED, HYPERMADNESS!
https://www.youtube.com/watch?v=wQXqeWKY2Fc&feature=share
Modern agriculture is the use of land to convert petroleum into food. Without petroleum we will not be able to feed the global population.”
Professor Albert Bartlett, University of Colorado, USA
But too much of commercial agricultural in the US produces food we don’t need, like corn for corn syrup.
It’s Time to Rethink America’s Corn System
http://www.scientificamerican.com/article/time-to-rethink-corn/
“Only a tiny fraction of corn grown in the U.S. directly feeds the nation’s people, and much of that is from high-fructose corn syrup.”
Bartlett was working in a period when you had to know quite a lot about engineering and technology to be aware that oil was not likely to be essential. It was fairly clear even then that wind, solar and nuclear could provide all the affordable energy we needed, but at that time it could not be demonstrated with commercial devices beyond a reasonable doubt.
We no longer have that excuse.
Nick
Two months ago I knew less than squat about wind power.
Now, I’m inclined to think that – east of the Mississippi – the US will never embrace wind to any significant degree.
Factors leading to that conclusion …
1. Falmouth Massachusettes legal/political saga
2. Ice throws
3. Flickering shadows
4. Easement restrictions for takeaway power lines
5. Infra sound
6. 1/4 mile setbacks proposed from ROADS?
7. Legislation to move Maryland offshore out to 20 miles
8. Windham/Grafton Vermont vote which, supposedly, led to a Republican winning Vermont governorship
9. Blade throw
10. 20 year lifespan
12. 45 decibel noise, 5 mile distance hearing the whirleys
13. View shed spoilage. I really got a kick out of this one. Environmental ju jitsu at its finest.
14. Operations/Maintenance requires blade repair from some kind of rope-trained guys who semi-dangle while doing epoxy repair (temperature, humidity, and wind permitting)
Blade repair is #3 breakdown issue after gearbox blowups and lightening strikes. Seems like bats and birds cause leading edge damage when they are getting chopped up.
15. Won’t even get into the particulars of offshore repairs (which was the original impetus for my research). Suffice to say it is bokoo expensive.
Dunno, Mr. G, but I think the huge supply of natgas fueled plants will be the favored choice far off into the future.
Our cousins down in South Australia and – shortly, New England – may provide us a glimpse of what a carbon-diminished society has to offer.
Could be. Local politics can be…ahem…idiosyncratic. A few thoughts:
Anti-wind propaganda is widespread. Be very skeptical of websites that talk about things like bird strikes or noise problems.
Wind and solar are local. Some people care about import independence. Germany is farther north than New England, and at least as dense population-wise, but they’re willing to push hard on wind and solar, in part because they put a high value on domestic production. Maybe Boston doesn’t care about getting power from Pennsylvania gas. But, I suspect they do – why else would they consider off-shore wind, when they could get power from Iowa’s wind farms, which are much cheaper, and fairly close to the western edge of the PJM grid?
Finally, a key question for natural gas is the same as for other fossil fuels – what are the external costs, and when will we recognize these real costs in our official accounting? Let me ask you – what do you think the costs of pollution are for NG?
Nick
Much food for thought in your post.
To be clear, I have always been neutral regarding wind, although perhaps a bit more wary of claims by proponents, more so when emanating from industry connected sources. (Kinda like you guys in relation to shale company-produced info).
Still, I was somewhat taken aback at the real world operational challenges this industry faces, to say nothing about the political.
Nick, as I mentioned to Mr. Mason, the US has the natgas option for juice generation and you better believe that industry is poised to attack the whirley boys at every opportunity.
Regarding ‘external costs’ of natgas consumption … you kiddin’ me?
I’d readily choose three non anesthetized root canals listening to Taylor Swift acapella before I attempted to engage in that topic on this site.
Regarding ‘external costs’ of natgas consumption … you kiddin’ me?
LOL.
Still, it’s a key question…
There are already a number of wind farms east of the Mississippi. Have been there for years. New ones due to go up soon.
Studies on blade throw limit the distance to about 1.6 diameters.
Have been near operating turbines and not heard them, or when very near was not disturbing.
Using actual wind speeds versus a national average wind speed a UK study found wind turbines much more durable than previously thought.
Wind turbines can produce electricity for 25 years before needing an upgrade, according to new research out of the United Kingdom. That’s considerably longer than previously thought.
The U.K. boasts 4,246 individual wind turbines across 531 wind farms. The paper, produced by researchers at Imperial College Business School, carried out a comprehensive and nationwide analysis of that fleet, and covered about two decades worth of data. They found that the oldest turbines, which were built in the 1990s, are still producing three-quarters of their original output 19 years later. Furthermore, the turbines should last about 25 years before needing an upgrade, which is on par with the lifespan of the turbines used in natural gas power plants.
https://thinkprogress.org/study-wind-turbines-are-much-more-durable-than-previously-thought-10fcf3c52127
As we become more dependent upon renewable energy, the technology will advance to meet the need. There are already plans to build even larger turbines, up to 15 MW.
http://www.telegraph.co.uk/business/2017/05/16/worlds-largest-wind-turbines-may-double-size-2024/
And down on the small scale:
http://www.electronicproducts.com/Sustainable/Wind/For_the_cost_of_an_iPhone_you_can_buy_a_wind_turbine_to_power_your_entire_home.aspx
GF
Just spent a bit of time going over your above link from the telegraph and found it extraordinarily informative … most tellingly the final sentence in the piece about the 85 GBP (pounds) per Mw.
Must be Mwh, I’m guessing, as the time duration of the juice delivered as well as the amount is needed in evaluating costs ongoing.
Anyway, using the current 1.3 ratio of pounds to dollars, that equates to 110 US bucks per Mwh wholesale – I’m guessing. Not at all an expert.
Tomorrow, the New England wholesale price is 24 bucks and change … less than one forth the Burbo Bank farm the Telegraph article describes.
Going further, an Oct. 2, 2016 Telegraph piece by Ambrose-Pritchard describes the very low, for offshore wind power, price of US$94 Mwh for the Borssele wind farm juice … unsustainably low, in his opinion.
So, what I am getting at, is if one looks into the numbers being put forth, US electricity is WAY lower than many other places and is apt to continue this way for the foreseeable future.
I am paying about $135 per MWh in Mid-Atlantic area.
The average US levelized long-term price from wind power sales agreements has now dropped to around 2c/kWh.
https://arstechnica.com/science/2017/01/cost-of-offshore-wind-power-in-uk-has-dropped-32-percent-in-four-years/
GF
I’ll be the first to acknowledge that when numbers get beyond my fingers and toes, I tend to get a little muddled.
Best leave that to Mr. Webb, Dennis, and others gifted in mathematics …
But …
According to PJM’s day ahead pricing, aggregate pricing tomorrow runs from $19 to $45 Mwh according to time of day.
That’s wholesale price of electricity.
The very first sentence of your linked article states pricing of $121/Mwh which is $12.10 per kilowatt hour.
That, GF, is exorbitant as it is the wholesale price which can then be quadrupled, quintupled at the retail level when you and I must pay our bills. (13.5 cents per kilowatt hour in your case, perhaps?)
I believe Watcher was going to do an in depth analysis on the interrelationships between juice producers, transmitters, utilities, administrating bodies, and local, state and federal regulators and present his findings to all of us.
We’ll see.
End of the day, GF, there are a lot of terms, measurements, sources of electricity, differing currencies and billing protocols that can be tedious to wade through.
For the folks who are favorably inclined towards renewables for electricity generation, or – actually, all of us – it might be highly advisable to understand the data that is presented and the context versus the bigger picture.
To paraphrase Katie Couric, perhaps better to seek information rather than confirmation.
…quick add-on …
Your 2 cents kwh sales would equate to $20/Mwh which, if this is wholesale price, is pretty much in range of wholesale pricing depending upon time of day and demand, amongst other factors.
CG,
Yes, offshore wind is more expensive. Onshore wind is much cheaper. So…why do Olde England and New England pursue offshore??
They both want local power, and they’ve both bought the FF industry propaganda that wind turbines are ugly. So they pay a big premium for offshore wind that is out of sight, out of mind.
Places like Pennsylvania, Denmark, Germany, Iowa and Texas are happy to have energy infrastructure in their backyard, and as a result their energy is much cheaper (especially PA, Iowa and Texas, which are lucky enough to have especially good energy resources).
Oh, I see you got the conversion right, here.
Cheers
Nick, offshore wind has a much higher rating than onshore, about 50%, which gives it better long term economics and higher reliability than on shore (usually). They also can install larger turbines which are both more efficient and more cost effective, canceling out the downside of the ocean environment and maintenance.
Right now it’s an economic balancing act but I bet as soon as FF gets scarce all that will get blown away.
Hi Coffee, you’re right about your difficulty with numbers past your fingers and toes. You said ”
The very first sentence of your linked article states pricing of $121/Mwh which is $12.10 per kilowatt hour. That, GF, is exorbitant”. I think you meant 12.1 CENTS per kWh. Not quite as exorbitant.
Cheers.
coffeeguyzz says”The very first sentence of your linked article states pricing of $121/Mwh which is $12.10 per kilowatt hour.”
Afraid you got your decimal points mixed up there, it’s $0.121/kilowatt hour not $12.10. The ratio of million to thousand is one thousandth not one tenth. Back to the chalk board for you. 🙂
P.S. That does throw a monkey wrench into your assertions and condescending manner telling others they need greater understanding, doesn’t it old chum?
No, GF, no monkey wrench whatsoever in my assertions regarding the gross economic challenges for US offshore wind.
Nor – especially – the greater understanding from which all of us could benefit regarding these matters.
Any condescending manner a reader may perceive is wholly erroneous as an occasional wry tone is never put forth by me in an insulting fashion.
I spent considerable time before that math-incorrect post delving through the differences between UK, German and Danish protocol regarding transmission costs of said generated electricity.
Currencies were quoted in various articles in Euro, Pounds, US and Australian dollars (when I kept cross referencing the SA situation).
Measurements were quoted in kilowatt, megawatt, and gigawatt as well as the time duration, nameplate capacities, capacity factors, and energy conversion factors.
Warranty contracts vary as to specific hardware, covered operations, time frame, as well as if they are included in the quoted pricing.
Various government taxes, regulatory policies, subsidies and, in the case of DONG, even ownership, play a prominent role in attempting to get a true sense of cost.
My main interest has always been how the heck do these guys keep these things running.
So, my error in computation is both noted and, by me, certainly filed away.
Good luck in thinking wind power will take hold any better than recent Hong Kong and Denmark Tesla sales display when market conditions prevail.
Your statements only make sense if no time factor or economic changes occur. They are already occurring and the mere convenience of a FF low price allows one to possibly assert that FF power is less costly than wind or solar power. But only if one uses pseudo-economics and thinks hard line politically.
Also one needs to see the improving economics of alternatives as a continuing process. Do most people think that FF will fall by 20% or more in price in the next few years?
Academic Collapse of Civilization
https://www.reddit.com/r/collapse/comments/6g2d7j/collapse_of_global_civilization_by/
A random collection of URLs doesn’t seem helpful. If there’s something useful in there, you might want to highlight that, maybe pulling out a paragraph or two.
For I have become death, the destroyer of worlds -Bhagavad Gita
??
I was given a free copy of the Bhagavad Gita in a Colorado airport once, by Hare Krishna evangelists. They gave it to me, and then when I tried to give them something of my own to read they tried to take it back.
I kept it. Beautiful illustrations…
Batman i’m not a monster these civilized people will eat each other
https://www.youtube.com/watch?v=_3RWGwzzYT0
After false dawn, Big Oil to double down on cost cuts
https://www.reuters.com/article/us-oil-preview-idUSKBN1A61UT
As I keep saying, the pipeline of projects started in the high price years doesn’t run out until the second half of 2018 – it’s really difficult to fight that momentum, when combined with the LTO producers red queen dash to meet growth visibility, debt and dividend requirements. With the delays to Khurais, Kaomba (Angola), Big Foot (GoM) and Kashagan the crash isn’t going to be as sudden as it might have been but it will be fairly quick and, despite three years notice, the media will no doubt be expressing surprise. The GoM is really the first basin where the big projects have run down (only Stampede early next year and then Big Foot, which should have been three years earlier but for the equipment failures), so it’ll be interesting to see how production evolves there.
At the same time through 2018 I think global storage levels will just be starting to see significant undershoot, assuming OPEC cuts (voluntary or, more likely, not by then) continue. Predicting prices is a mugs game but I think low and falling stocks and a sudden evident lose of long term supply increases will have very significant upward pressure. Of course the demand side might still dominate: most GDP forecasts seem to be continually downgraded at the moment, we’re due for something big and negative concerning world finances (or maybe just in the UK, but things definitely not looking good here), and the impact of renewables might start to show up in oil consumption figures (despite everything written here I fail to see it at the moment).
George Kaplan said:
If the red queen prediction had been validated by empirical methods, what would the oil rig count need to be now in order to achieve the current production? 2000 rigs? 2,200 rigs? Instead there are 765 oil rigs running.
So much for the red queen theory.
Glenne can’t see that oil is a finite, non-renewable resource. The oil rig count should be graphed as a cumulative, and then one can see that production is leveling off even though supposedly “long-lasting” wells are being fielded.
Hi Glenn,
It is the Horizontal oil rig count that matters for LTO and the important number is the number of wells completed, or better yet the number of lateral feet completed (as a well with a 10,000 foot lateral will produce twice as much oil as one with a 5000 foot lateral ceteris paribus.)
The bottleneck in completions is often frack crews rather than rigs.
Using data from
http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother
This is compared with tight oil output (the Red Queen is about tight oil).
Note that wells can still be completed from DUCs (drilled uncompleted wells) even with a low rig count, only completed wells affect output.
Right on Dennis, This graph is instructive in how to convince people that listen to reason (which does not include Glenne) how the Red Queen effect works. The Red Queen effect is only about being able to keep up the numbers by adding a certain amount of new wells. So, as we can see at the start of 2015, there was a drop in rig count and even though the count didn’t go to zero, production started to decline. That means there is a critical level in count that defines the Red Queen threshold.
What’s kind of interesting is that I worked out some of the math for this in 2012, a few months before Rune Likvern wrote about the effect in The Oil Drum.
http://theoilconundrum.blogspot.ch/2012/05/bakken-growth.html
vs
http://www.theoildrum.com/node/9506
Unfortunately, I didn’t use the term “Red Queen” when describing the math. At the time, I thought it was much like what happens with gold rush dynamics, where even a huge influx of new prospectors (as in the Klondike) won’t stem the decline of strikes. So give credit to Rune for coining the phrase Red Queen Effect, which is perfect.
OTOH, poor Glenne does his usual hatchet job to convince who-knows-who that the idea has no merit.
@whut,
How do you define the red queen effect?
Here’s how the PeakProsperity blog defines it, which is the definition that I am using:
Let’s let that sink in a bit:
• “To increase production in a shale field requires that constantly more new wells are drilled this year than last year.”
• “You have to run faster and faster just to stay in place!”
That, however, is not what happened.
What happened in the real world is that the number of shale completions declined, at times to a monthly rate less than a third of what they were when the red queen theory was formulated, and LTO production remained fairly constant. The claim that “You have to run faster and faster just to stay in place!” has empirically been proved to be false.
And currently the monthly rate of shale completions is running only about a half of what it was back in 2014, yet shale oil production is very much on the increase again. And in fact, in June LTO production increased to 4,650,000 bopd, only 50,000 bopd from breaking through the previous high of 4,700,000 set in March, 2015. I’m pretty sure that by now LTO production has increased to a point where it is greater than what it was in March, 2015. So the claim that “to increase production in a shale field requires that constantly more new wells are drilled this year than last year just to outrun the decline profiles of the prior wells” has empirically been proved to be false.
This is not rocket science, despite all your rhetorical flourishes to make it seem more complicated than it really is.
See http://peakoilbarrel.com/oil-field-models-decline-rates-convolution/
to increase production in a shale field requires that constantly more new wells are drilled this year than last year just to outrun the decline profiles of the prior wells
Hmmm. I don’t think the people who wrote that definition managed to capture what they were trying to describe.
That would only make sense if the current rate of drilling was only able to maintain level production. If the current rate of drilling is raising production, then fewer wells would still likely be able to maintain level production.
Hi Glenn,
Under the assumptions of the model (new well EUR remains fixed) the model is correct.
Now if each new well sees an increase in lateral length, number of frack stages, and proppant, then the assumptions of the initial model (which was a simplification), are invalid.
So no, the model was not proven false.
You just seem to not understand the model.
One way to adjust this would be to include the number of frack stages, lateral feet, and pounds of proppant used on average per well.
Unfortunately, we don’t have good data on all of these factors so using average new well EUR and number of wells is the best we can do.
Chart below uses data for tight oil from the EIA
https://www.eia.gov/petroleum/data.php
and data from shaleprofile.com
https://shaleprofile.com/index.php/2017/07/11/us-update-through-march-2017/
Note how fewer wells completed resulted in the increase in LTO output stopping and then decreasing.
Texas well data is incomplete for at least 6 months so well counts after Oct 2016 are probably too low.
Dennis Coyne said:
Exactly. Garbage in, garbage out.
What your highly reductionist mathematical models yield is a caricature of reality (i.e., the red queen syndrome), not the messy, chaotic reality that exists in the natural world.
What is interesting is the short term delay between rig count dropping like a rock and production starting to fall, confirming just how fast these wells decline. Good work Dennis.
I agree that the fast decline response validates the model.
Dennis Coyne said:
I fail to see how bringing up the drilled but uncompleted wells (DUCs) issue behooves your argument. You seem to be arguing againt yourself.
If not for an extra 1,000 DUCs in the Permian Basin, LTO oil production would be several hundreds of thousands of bopd greater than what it currently is.
If not for an extra thousand DUCs in the Permian Basin, we’d be looking at something like this, and the red queen theory would become even more detached from factual reality.
And that’s just the DUCs in the Permian Basin.
If we look at the number of DUCs in all the shale basins, they’re up about 1,800 since the oil price crash began in December, 2014.
Hi Glenn,
The red Queen model does not use rig count, it uses the number of wells completed and assumes constant new well EUR.
The Permian basin wells have seen an increase in lateral length and proppant and number of frack stages per foot of lateral length.
If we adjusted the number of wells for these changes so that a well with 2 times the productivity of older wells is counted as 2 wells rather than one well (10k lateral vs 5k lateral) then the red queen model assumtions would no longer be violated and would prove correct.
Also note that longer laterals reduce the potential number of wells that can be drilled in any given area, increasing lateral length by a factor of two reduces the number of wells that can be drilled in a given area by a factor of 2.
Hi Glenn,
You miss the obvious point that it is well completions that matter more than the number of rigs.
So indeed when the uncompleted wells are completed output will increase, though the average well productivity may decrease, we will have to see what the wells produce when they are completed, this cannot be predicted accurately in advance.
Generally an oil company will complete the wells they expect to perform best earlier, the DUCs may have a larger proportion of low productivity wells.
Dennis Coyne said:
But if we look at completions instead of rig count, the red queen theory becomes even more detached from factual reality.
Here’s the bottom line: what your highly reductionist mathematical model yielded was a caricacture of the natural world (i.e., the red queen syndrome), not the messy, chaotic reality that exists in the natural world. It failed to predict.
Boomer II,
I view low oil price more like sophisticated financial scam than the result of cost cuts.
For the USA dumping shale oil on the market at below cost prices makes perfect sense.
In 2016 the USA imported 3,681,395 thousand barrels or 10 million BPD. That means the subsidizing domestic production just in order to drop the prices of imported oil (dumping) makes perfect sense up to the same number.
That’s probably why they are trying to increase shale oil production as if there is no tomorrow. And the money are still flowing unabated, although the stupidity of investors can’t be completely discounted taking into account the amount of propaganda in WSJ and the USA MSM in general. Critique of shale oil is suppressed. Articles about shale oil in WSJ do remind me Soviet propaganda about successes of socialism.
That also helps to explain the EIA optimism. After all, the agency was created in order to keep prices low, not to propel them high 🙂
From the Reuters article:
Well this little firm — Encana — certainly managed to “eke out profits when oil has failed to recover, as hoped, to $60.”
Encana concentrated its investment activities in four shale plays: Montney, Duvernay, Permian and Eagle Ford. Late last year it announced it was shedding most of its conventional assets.
Core assets will produce more than 90% of 4Q2017 production, the company says.
Encana reported that its D&C cost in the Midland Basin during 2Q2017 was slightly less than $5 million per well.
And that’s why I come here for info about depletion rates. If the focus for companies is primarily on the Permian, to the extent that they are selling off other assets or postponing projects in other areas, then the question becomes how long the Permian will be a good source of oil.
As I have said, I am happier that so much is happening in the Permian and stifling activity elsewhere. How long this can go on, I don’t know.
In other words, is everything so good in the Permian that companies can abandon other areas or projects? Or is everything so bad elsewhere that it isn’t worth it to stay involved elsewhere?
Or is the only way to keep getting investments and loans is to say you are cutting everything but the Permian?
Boomer II says:
Encana’s five-year plan calls for drilling 200 wells per year in the Permian Basin, which it believes will grow current production by more than three-fold over the next five years.
At 200 wells per year, Encana currently has enough “premium” locations to last it over 17 years.
In addition to these 3,450 “premium” locations, Encana has another 8,450 locations located in non-core areas of the Midland Basin. At a 200 well per year clip, that gives Encana a 60-year drilling inventory. However, these non-core locations are not economical to drill with current prices and technology, since their productivity is much less.
I prefer the official records posted here. What companies tell the public is for PR and to keep investors and potential investors happy. It’s as much BS as they can legally get away with.
The earnings number I see is different?
Encana stock price is improving, still off about 90% from 2008 high. Seems like oil is about like the weather in Kansas.
BTW, 2008 was a record year for us, despite oil prices dropping over $100 per barrel in the second half.
This looks like it will be one of those deals where operators keep spending more, ramping up production, and keep driving the price down. They will keep driving down the cost to produce, but won’t make much headway because oil and gas prices will keep heading lower too.
Should have sold out in 2013. Always easier to know when to buy then when to sell. At least I haven’t held Encana shares since 2008.
Wonder how much more KSA and Russia can take before political unrest sets in?
Why would you expect political unrest in Russia? The economy is relatively healthy, and the sanctions have provided quite a boom to the local economy, replacing imports. GDP growth is estimated at 2-3% for 2017:
https://www.awaragroup.com/blog/russian-economy-2014-2016-the-years-of-sanctions-warfare/
I expect Venezuela to get even worse as the coup de etat being carried out by Maduro with Castroite assistance reaches its apex around August 2. After that all bets are off. I don’t have any idea of what may happen, but civil war remains a possibility.
I heard from a Venezuelan source that Castro has 47 thousand Cubans in Venezuela, including military, secret police, “administrators”, medical personnel, etc. They were called in for very long meetings on Saturday, and in Cuba we hear they are making plans for a bus fleet to take them from Santiago to the rest of the island. I think it’s contingency planning, they don’t want their forces taken prisoner.
Credit swamp drying up for Zombie Shale?
http://www.zerohedge.com/news/2017-07-22/i-have-taken-closer-look-data-eia-why-horseman-global-aggressively-shorting-shale
Same response I made to Mike above.
http://peakoilbarrel.com/opec-june-production-data/#comment-609390
Interesting, read an article on Seeking Alpha about QEP, by Richard Zeits. Article noted that HK sold its operated Bakken production and acreage for $1.4 billion and would be deploying everything towards the Permian. HK stock went from $4 to almost $7 on the news.
Article argued that QEP, which has some of the most productive Bakken acreage, should sell all of that now and deploy it in the Permian, to boost its stock price.
Would be interesting to know how much HK spent on land and CAPEX in the Bakken. I assume more than $1.4 billion. Would need to review 10K for HK to figure that out.
Likewise, article estimated $2.3-2.5 billion is what QEP could get for its Bakken production and acreage. Same thing, wonder what QEP invested in the Bakken?
Granted, would need to also consider net income on the Bakken assets to see how this worked out for HK and how it would work out for QEP at estimated selling price.
In any event, shale time horizons are very short it appears? Or maybe just hard to predict the future as things evolve?
Will be very interesting to see how private firms operate in the Bakken. Suspect returns will matter more to them than growing production?
Permian could grow 20+ years. Or maybe not. Will be interesting to watch this play out.
Easy to get caught up in short term, especially when last 2 1/2 + years have been tough. However, interesting that last major left our field 86 years after discovery. Not saying majors are leaving Bakken, but would argue shale speeds things up and it appears there is no time to try to earn income from shales to pay dividends. Instead have to move to the next hot play to keep the stock price up.
Maybe CLR and WLL made a mistake not getting into the Permian? CLR is in OK, which is still being touted, though.
Finally, interesting that it is private equity, and not the majors, that are buying this production from the public companies. That seems to be a switch too?
‘Will be very interesting to see how private firms operate in the Bakken. Suspect returns will matter more to them than growing production?’
Interesting indeed. One would like to think that the ‘private firms’ have done their due diligence before putting down their money. The smoke must be obscuring the mirrors, again.
If they want ‘returns’ without the fuss of investing in bringing all those Drilled not Completed wells on, and drilling and fracking and completing more, then is it nor probable that they will find that LTO’s Red Queen decline rates will soon inform them of the error of their ways? Suddenly a ‘sure thing’ investment will turn into a black hole for their limited equity to flow into, and their real returns go negative big time, no?
I really enjoyed your black hole metaphor.
Shall we call the moment of realization of bad investment as crossing event horizon?
One thing the pro gas and oil folks have to factor in is that private investors have a variety of places to put their money. So if gas and oil look like poor investments, they will go elsewhere.
The financial press coverage of the industry is much different now than it was during the Bakken boom. Yes, the Permian activity did give things a boost, but now the financial press sees additional production as a mixed blessing. More oil = lower prices. So gas and oil still don’t look like great investments compared to other industries.
Also, gas and oil are no longer considered “the future.” The glory days of gas and oil are in the past. There may be ways to keep production up for awhile, but even the industry is warning of shortages because of declining discoveries.
Gas and oil are no longer being billed as transformative industries. They are moving into coal territory: maybe a necessity, but one people hope to replace as they can.
I was also thinking about margins. The cost of finding and getting oil out of the ground is just too high to provide a good margin unless oil prices are high. And as long as we have commodity pricing, one company can’t command much higher prices than other.
Here’s a good chart I just found comparing net margins in all sorts of industries. Look at how coal, gas, and oil compare to other industries.
If you have investment money to allocate, fossil fuels may not look all that attractive.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html
Exactly, once across the mental event horizon there is no going back for the investors.
Rystads latest news for global conventional exploration…
Rystad Energy – Publisher: Oil & Gas Financial Journal – July 24, 2017
As the oil industry entered into the oil price crisis, operators were forced to re-think their future budgets. One of the affected areas were the investments dedicated to new exploration.
https://www.rystadenergy.com/NewsEvents/PressReleases/beyond-the-short-term
VIDEO: Today could be make or break time for OPEC
http://www.cnbc.com/video/2017/07/21/could-be-make-or-break-time-when-opec-ministers-meets-in-russia-john-kilduff.html
Oil shortages and climate change may lead to refugee camps even in the U.S. and Europe
http://energyskeptic.com/2017/oil-shortages-and-climate-change-may-lead-to-refugee-camps-even-in-developed-world/#comment-40100
It’s not very likely that oil shortages would cause that kind of disruption in the US. If oil prices rise, consumption will be rationed by price and freight will certainly be able to afford to bid for the oil it needed (while it moved away from oil).
The rest of the world isn’t quite as well managed, but consumer price caps and subsidies would be eliminated pretty quickly – that process is already underway in places like China and India – and individual consumers would reduce their consumption long before trucks, rail and container ships.
Socioeconomic adaptation would be more difficult for people in Western countries, where
individualism, industrialism and mass consumerism have held sway for such a long time that a smooth regression is hard to imagine. But don’t worry there are very smart people in Washington they would warn us before we ran out of resources. LOL
I’m not thinking of some kind of deep “adaptation”. I’m saying that if oil prices jump, people will drive a little less, they’ll use the sedan instead of the SUV, they’ll shop online, they might even carpool more (carpooling is 11% of commuting, even now).
If oil prices jump a lot, they’ll do these basic things more. Carpooling alone could reduce oil consumption for personal transportation by 50% pretty easily – the average car only carries 1.2 people…
https://www.oilandgas360.com/north-american-animal-spirits-back-vengeance-halliburton-exec-chairman-dave-lesar/
“The industry consists of ‘thousands of entrepreneurial, smart and motivated risk takers’”
Our customers are smart and adaptive, and they do learn from the past. Their business DNA is to be survivors, and they are. Look at the reaction in the past several weeks. Today, rig-count growth is showing signs of plateauing, and customers are tapping the brakes. This demonstrates that individual companies are making rational decisions in the best interests of their shareholders.”
“I said several quarters ago that customer animal spirits were back, and they are, with a vengeance, and they are now running free through North America. Here’s my last piece of wisdom for you: Do not bet against the animal spirits that our North America customers embody. I never have, and I never will, because that is a bet that you will lose.”
makes me proud to be a part of it. ??
Those animal spirits are alive in other industries, too, and they’ll do what it takes to disrupt traditional industries. There’s actually more opportunity in new energy models because there can be more players. You don’t have to own oil leases to get into the game.
The idea that every home can potentially generate its own electricity has appeal for both survivalists and sustainability people.
.
When energy use exceeds new energy finds, the end is certain.When consumption rate exceeds net investment rate, the end is certain. This is what I call the Keynesian Singularity:
The sun dumps 100,000 terawatts continuously on the earth, and humans only use about 10 to 15 TW.
We have a way to go before energy use exceeds new energy finds…
Oil Rises 1% After Saudi Vows To Cap Crude Exports Next Month
http://www.rigzone.com/news/oil_gas/a/151134/Oil_Rises_1_After_Saudi_Vows_To_Cap_Crude_Exports_Next_Month
Why is the House of Saud happy to hold its exports to 6.6Mbpd? Can it be that they cannot, in fact, pump more?
The aim is to diversify the economy away from dependence upon oil export money.
OPEC Moves To Cap Nigerian Oil Output, Boost Compliance
http://www.rigzone.com/news/oil_gas/a/151118/OPEC_Moves_To_Cap_Nigerian_Oil_Output_Boost_Compliance
The bible quotes oil consumption growth globally last year at 1.6% or nearly 1.7 mbpd.
That 1.6% is above the 1.2% average consumption growth rate 2005-2015.
Interesting list of huge consumption growers:
South Korea 7.2%
Pakistan 12% They are essentially coming online with huge population.
India 7.8% (nearly double their 2005-2015 consumption growth rate)
Philippines 9% 120 million people HAVE to get their per capita consumption up
Slovakia 8.5%
Poland 8.8% former Soviet states striving toward the noble goal of higher oil consumption, from
which advanced society derives
But it also says global primary energy consumption increased by just 1% in 2016, following growth of 0.9% in 2015 and 1% in 2014. This compares with the 10-year average of 1.8% a year.
Anadarko cuts drilling plan
https://www.bloomberg.com/news/articles/2017-07-24/anadarko-cuts-drilling-plan-as-oil-explorers-bow-to-price-slump
Anadarko becomes first U.S. oil producer to slash 2017 capex
http://www.reuters.com/article/us-anadarko-petrol-results-idUSKBN1A92IK
Two expensive dry wells off of the Ivory Coast, and they’ve cancelled the drilling program their – they were one of the few larger operators still looking quite aggressively at frontier plays. With the earlier Ayame well there dry as well the Ivory Coast might be finished before it really got started.
For Anadarko not exactly great performance in the GoM either, I wonder if they are regretting the Freeport MacMoran purchase now.
Goldman Sachs warns global oil demand could peak as early as 2024
http://www.businessinsider.com/goldman-sachs-oil-demand-expectation-2024-2017-7
Calm the sheeple! Peak oil is nothing to worry about.
Peak Oil would be a good thing. We need to kick the oil habit ASAP. Better if we do it by planning ahead a little, but PO would be better than nothing.
Unexpected and large loss for Saipem:
“In the second quarter Saipem fell to a net loss of 157 million euros on asset writedowns, missing a Thomson Reuters consensus forecast for a 51 million euro profit.”
http://www.dailymail.co.uk/wires/reuters/article-4727444/Saipem-warns-profits-falling-Q2-loss.html
They might be another like AMEC that overreached themselves in the good years and relied too much on continued offshore growth, and may go the same way. Saipem cut numbers earlier and deeper than AMEC but still not enough it looks like. And like AMEC and, more so, Petrofac, there are corruption questions and increasing investigation about more than a few of their contracts.
Texas RRC Total Oil + Condensate Production, 84,591,354 b/day for month of May. It seems a bit low at 2,728,753 b/day. Later revisions would have to add 617 kb/day just to equal EIA Aprils production number 3,345 kb/day. I’ve not been following the numbers every month but even I can see that revisions have averaged lower than 600 kb/day in 2016.
http://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/texas-monthly-oil-gas-production