OPEC released its Monthly Oil Market Report on August 10, 2016, I have pulled some items of interest from the report.
World Oil Demand
World oil demand growth in 2016 is expected to average 1.22 mb/d, some 30 tb/d higher than last month. For 2017, world oil demand is forecast to grow by 1.15 mb/d, unchanged from the previous report. While the OECD will contribute positively to oil demand growth adding some 0.10 mb/d, the bulk of the growth in 2017 will originate from the non-OECD with 1.05 mb/d.
World Oil Supply
Non-OPEC oil supply is expected to contract by 0.79 mb/d in 2016, following an upward revision of 90 tb/d since the previous report, driven by higher-than-expected output in 2Q16 in the US and UK. In 2017, non-OPEC supply is expected to decline by 0.15 mb/d, following a downward revision of 40 tb/d. OPEC NGL production is forecast to grow by 0.16 mb/d and 0.15 mb/d in 2016 and 2017, respectively. In July, OPEC production increased by 46 tb/d to average 33.11 mb/d, according to secondary sources.
Balance of Supply and Demand
Demand for OPEC crude in 2016 is estimated at 31.9 mb/d, unchanged from last report and 1.9 mb/d higher than in the previous year. In 2017, demand for OPEC crude is forecast at 33.0 mb/d, in line with the previous report and 1.2 mb/d higher than in 2016.
Forecast for 2016
Demand for OPEC crude for 2016 remains unchanged from the previous month to stand at 31.9 mb/d, representing an increase of 1.9 mb/d from last year’s level. Within the quarters, 2Q16 and 4Q16 remained unchanged, while 1Q16 was revised up by 0.1 mb/d. In contrast, 3Q16 was revised down by 0.1 mb/d. 1Q16 and 2Q16 rose by 1.0 mb/d and 2.3 mb/d, respectively, versus the same quarters last year; while 3Q16 and 4Q16 are estimated to show growth of 2.1 mb/d and 2.0 mb/d, respectively.
Forecast for 2017
Demand for OPEC crude for 2017 remained unchanged from the previous report and is projected to increase by 1.2 mb/d to average 33.0 mb/d. Within the quarters, both the 2Q17 and 3Q17 were revised up by 0.1 mb/d, while 4Q17 was revised down by 0.1 mb/d and 1Q17 remained unchanged from the previous report. 1Q17 and 2Q17 are expected to increase by 1.8 mb/d and 0.8 mb/d, respectively, while 3Q17 and 4Q17 are projected to increase by 1.3 mb/d and 0.7 mb/d, respectively, versus the same quarters this year.
If the non-OPEC + OPEC NGL and NCO supply estimate and World demand estimates are accurate, it seems unlikely that OPEC will be able to meet the required crude level in 3Q17 of 34.43 Mb/d. If that assessment is correct and the World economy continues to grow at around 3% in 2017, my expectation is that oil prices will average $85/b or more during the month of October 2017 and perhaps even by September.
Ron Patterson kindly shared monthly OPEC data that he has compiled.
OPEC crude output increased by 49 kb/d in July to 32,875 kb/d.
Most of the increase in OPEC output has come from Iraq, Kuwait, Saudi Arabia, and UAE, though production from Iran has increased as well. These four countries as a group increased output by 125 kb/d in July to 20,523 kb/d.
Iranian output has increased by 742 kb/d since January to 3629 kb/d, but in July output increased by only 12 kb/d.
The other OPEC nations have seen mostly decreasing output (Gabon data is not included) since 2005, but since 2015 output has been relatively flat. In July, output in these 8 nations fell by 75 kb/d to 12,352 kb/d.
My expectation is that output from OPEC will be relatively flat for the next 12 months, when oil prices rise, further increases from OPEC might be possible, but it is not likely to be much (1000 kb/d or less) unless Libya, Venezuela, and Nigeria solve their political problems. I doubt those political problems will be solved in the short term (next 3 years). The World will either struggle to remain near current output or will decline slightly (1% or less) until 2018, after that oil prices will rise and output will remain on plateau or rise to near the previous peak, after 2022 (possibly sooner) there will be permanent decline in oil output even if oil prices are high($150/b in 2016$.)
Dennis.
When the oil price crashed in 1986, OPEC eventually cut and oil prices rose. (Cheating on quotas in 1988 by OPEC members resulted in low prices again).
When the oil price crashed in 1998, OPEC cut in 1999 and oil prices rose.
When the oil price crashed in 2008, OPEC cut in 2009 and prices rose.
WTI fell into the 20s earlier this year until OPEC talked of a production freeze. It very recently fell below $40 until more freeze talk again surfaced.
IMO there will not be a significant rise in prices until OPEC acts, absent a major supply shock.
If OPEC is wanting to wait out US shale, they will be waiting awhile. IMO better to cut and let US deplete their shale more quickly, than to suffer many years of low prices.
Hi Shallow Sand,
I believe the increase in OPEC output needed in 3Q2017 will not be met and oil prices will rise.
I could be wrong of course.
Dennis. Supporting your view is Ron’s OPEC chart dating back to 2005.
For pumping all out, OPEC production has not risen greatly from prior levels.
Traders move on news, a 2 million barrel cut proportionately across all of OPEC and Russia could cause a 50%+ rally in oil prices within a short time, especially if US inventories had a few large weekly drops.
Again, I could be wrong about that too.
More concerning oil consumption.
KSA is up there per capita. But they are only 1/2 Singapore’s per capita consumption. With Singapore’s consumption growth in 2015 a very healthy 1.6%. Expect more, of course.
So not even close. (and Kuwait has higher per capita consumption than KSA)
As has been noted before, China MUST lift their per capita consumption a factor of 6 to equal the US (lifestyle and social benefits). Ditto India. And both are charging forward nicely in that pursuit.
China growth last year 6.3% and India 8.1 (!!!) %.
China growth last year 6.3% and India 8.1 (!!!) %.
So lets round that off and say Chindia is growing at 7% per year. If true, what that would mean in rough terms is that Chindia’s economy will double in the next decade! In other words they will need twice the amount of resources in the next ten years as compared to all the resources they have consumed during their entire previous existence as a modern economy.
I would like to suggest that anyone who believes that is even remotely possible, should get themselves a chessboard and place one grain of rice on the square in the upper left hand corner of the board then place two grains of rice on the next square, four on the next and keep doubling the number of grains until they get to the 64th square in the lower right hand corner of the chess board.
That would come to: (2^64) – 1 = 18,446,744,073,709,551,615 grains of rice…
“The greatest shortcoming of the human race is our inability to understand the exponential function!”
Dr. Albert Bartlett
I’m willing to bet a considerable quantity of rice that, China and India will not continue to grow their economies at anywhere near 7% per year over the next decade!
The quoted growth numbers above are of oil consumption.
China’s double would be to 24 million bpd. India’s to 8.3 mbpd.
Note KSA’s economic growth last year was between 2 and 3%. Oil consumption growth 5%.
In the old days, this is where Jeffery Brown would cut and paste an explanation of the Export Land model.
Methinks these days that would fall on deaf ears, or should I say blind eyes given this is a written medium… 🙂
Is Jeffrey still around? I enjoyed his stuff.
If China used the same amount of oil per capita as either Thailand or Brazil, its demand would double.
It’s demand is already higher. It is the consumption that would double.
If it used the same per capita as the US, the consumption would increase X6. That would be an additional 60 mbpd that has to come from somewhere.
Why should they want X6? To achieve US standards, and there’s no reason they should settle for less in pensions and healthcare expense and . . . military spending — with which to get that 60 mbpd.
Watcher,
The numbers from the EIA, IEA, OPEC and other similar reports are all for oil consumption, even if it is called “demand”.
They do not include increase or decrease in oil and refined product inventories
Not really the point, but no matter.
Storage is just one mechanism making demand different from consumption. Clearly the gasoline lines of the 70’s was another instance of people demanding more than they consumed.
I guess the variance is always that demand can be greater than consumption. Though given time maybe we can envision reverse circumstances. Hmmm.
Some sort of force feeding. Oh, of course. Bombing the Gulf coast refinery complex and setting it all ablaze. That is clearly consumption in excess of demand.
Watcher
Demand only is counted if it is backed up by both ability and willingness to purchase.
If you want a new f150 but you have no job and no money that “demand ” is just wishful thinking.
>Chindia’s economy will double in the next decade! In other words they will need twice the amount of resources
This is not correct. Efficiency will continue to improve. Still, it is a scary number.
But I seriously doubt the rest of the world will ever get as wasteful as America was in the 80s.
Hi Dennis, it could be interesting to update the chart in the “OPEC charts” section of the site.
Hi Chris,
I will do that eventually. On the World charts, the EIA has discontinued the international data, so that will have to change at some point.
The EIA still publishes the same international energy data, it has just moved it to a new interface on their website (http://www.eia.gov/beta/international/).
Monthly data for crude+condensate has been updated up to march 2016.
Something sure as hell must give in the not too far distant future.
The odds look to me as if a substantial chunk of the “give” will have to be growth of consumption in India and China.
There just isn’t any way substitutes can grow fast enough to allow us to get away from oil fast enough to compensate for BOTH depletion AND growing per capita consumption in such large countries.
If I had any spare cash laying around, I would bet some of it on oil futures.
The international security scene is looking worse and worse from year to year, maybe even from month to month.
https://www.yahoo.com/news/germans-asked-stockpile-food-water-044757109.html
The number of economic, climate, and political refugees will be growing dramatically over the next decade or two.
Venezuela still HAS oil, although not much oil revenue with prices what they are. Venezuela is the red headed poster child showing us what will be happening as depletion and domestic consumption eat away at exports.
Times are going to get to be very tough indeed in countries that are depending on oil revenues to keep the lid on the domestic pressure cooker.
Which countries are going to flip from net exporter to net importer status soonest?
Substitutes absolutely can grow fast enough. More accurately… they have to, since there isn’t enough oil.
China’s government isn’t stupid — they’re pushing electric cars and trucks and buses and penalizing oil-based cars and trucks and buses. As the world’s leading producers of solar panels, they can also make the needed electricity with no difficulty.
LOL! http://xkcd.com/1721/
Don’t forget to hover your mouse over the cartoon for the rest of the message…
For R Walters:
http://xkcd.com/556/
Outages – world oil production outage chart – updated on Twitter
Reuters, Goldman Sachs: https://pbs.twimg.com/media/CqiMQBNWAB8bxMl.jpg
Does anybody have the historic data for this? Looks like we are now below the average for this year
Foind it myself and it lools like we have historically low disruptions….should be interesting times ahead
Yes interesting indeed as surplus capacity is historically low too…
EIA – Short-Term Energy Outlook (STEO)
outages: https://s10.postimg.org/k8u9cpnqh/EIA_STEO_August_2016_Crude_Oil_Production_Outa.png
OPEC surplus crude oil production capacity, which averaged 1.6 million b/d in 2015, is expected to be 1.5 million b/d in 2016 and 1.3 million b/d in 2017. Surplus capacity is typically an indicator of market conditions, and surplus capacity below 2.5 million b/d indicates a relatively tight oil market. However, high current and forecast levels of global oil inventories make the forecast low surplus capacity less significant.
http://www.eia.gov/forecasts/steo/
Lets hope they find peace. No one knows how long the repairs will take…
Nigeria has recorded 1,600 cases of pipeline vandalism since January. Force majeures persist for Qua Iboe, Forcados, Bonny Light and Brass River…
LAGOS, Aug. 23 (Xinhua) — Militancy in the oil-rich Niger Delta region had destabilized Nigeria’s oil industry, Minister of State for Petroleum Resources Ibe Kachikwu has said.
Speaking at the 2016 Annual Conference of National Association of Energy Correspondents in Lagos last week, the minister said Nigeria has recorded 1,600 cases of pipeline vandalism since January, noting that the country recorded over 3,000 pipeline vandalism cases from 2010 to 2015.
The impact of attacks on oil and gas pipelines was that there was no money to fund the 2016 budget, he added.
http://news.xinhuanet.com/english/2016-08/23/c_135627768.htm
ClipperData – Crude oil loadings of OPEC members ex-Middle East – July 2016
Oil exports are down from last year, for these 8 OPEC members
https://pbs.twimg.com/media/CqjuEphVYAAzMKt.jpg
Chart Monkey, thanks for all your excellent posts.
For comparison…
ClipperData, Twitter – OPEC Crude Exports July – Total OPEC crude oil loadings are at 25 million barrels per day, increase led by Saudi, Iraq & Iran
https://pbs.twimg.com/media/Cp_PdWGWEAA19YF.jpg
ClipperData, Twitter – OPEC Middle East Crude Exports July
https://pbs.twimg.com/media/Cp7jWDuWAAAqbmU.jpg
(ClipperData is a subcription service, I’ve not seen this many free samples before)
Venezuela seems to be gradually spiraling into a violent outcome. The latest event
“OAS Secretary proclaimed the “end of democracy” in Venezuela”
on August 23, 2016 in News
The Secretary General of the Organization of American States (OAS), Luis Almagro, today proclaimed the “end of democracy” in Venezuela, whose government he called “regime” and the situation in the country of “tyranny”.
in a letter to opposition Leopoldo López, whose sentence of nearly 14 years in prison was recently ratified, Almagro said that in Venezuela “today does not apply any fundamental freedom or any civil or political right “.
” it has crossed a threshold, which means it is the same end of democracy. the international community is clear by asking ‘no more tyranny in heaven’. a sky that no longer exists, “said Almagro in his letter, which has reported on his Twitter account.
http://archyworldys.com/oas-secretary-proclaimed-the-end-of-democracy-in-venezuela/
I believe the violence will climb steeply as of September 1. There’s a call for peaceful but forceful protests on that day. The call mentions article 350 of the Venezuelan constitution, which legalizes armed revolt against a tyrant. If other nations don’t lean hard on Raúl Castro (Maduro’s boss) over the next week, I’m afraid Venezuela will be a narco state/terrorist heaven/satellite dictatorship receiving orders from the Cuban dictatorship. This is the result of obama’s lame brained friendly attitude towards the Castro Mafia.
The impact on oil production should be noticeable. If the call to protest under article 350 is heeded, it will be “legal” to blow up or sabotage oil pipelines, oil wells, and oil production facilities.
Ven’s oil consumption is at 678K bpd. That has to increase.
Interesting scan of the wiki’s. Agriculture has been in decline since the 1940s. Has nothing really to do with the present govt. It seems to have coincided with oil discovery there. People went to oil employment and left the farms. Ag is a lower % of total industry than in any other South America country. Ven imports most of its food.
They have almost no debt.
The popular presumption that capitalism is the cure to all their ills is likely propagated by some people who see a way to profit themselves from it, no doubt at Ven’s expense.
Seems to me the best thing to do is order farming done. They have oil. Don’t really need to worry about printed pieces of paper from outside. Should be able to order farming done at gunpoint from nationalized farms, ship the food to the cities and done.
That would be the shortest term solution that doesn’t involve taking out unrepayable debt loaned by outside forces who intend to take full control.
Watcher says: “Should be able to order farming done at gunpoint from nationalized farms, ship the food to the cities and done.”
Russia and China tried that and it did not work. Why do you think that it would work in Venezuela?
So it didn’t work in China, or rather, our media said it didn’t work in China. Here is a graph of China’s historical population. I don’t see a food failure.
https://en.wikipedia.org/wiki/Demographics_of_China
And more of a glitch in Russia . . . but it only occurred after the forced farming stopped:
https://upload.wikimedia.org/wikipedia/commons/7/77/Population_of_Russia.PNG From 1950 to 90, 40 growing seasons . . . . . .
Note that China is the #1 agricultural country on Earth. It feeds 20% of the world’s population. Much of that is not their own.
True, Mao’s “iron rice bowl” actually worked when they weren’t actively breaking it with things like the Great Leap Forward and The Great Proletarian Cultural Revolution.
The communists vastly improved agriculture in China by abolishing rural debt and redistributing land. Also little measures like tearing up 1500 years of graveyards and farming them helped.
The Green Revolution came in handy as well.
But by the end of the 70s the reforms were a mess, because the peasants were all standing around in the rice field getting political “education” instead of raising chickens or weaving baskets or whatever. Maoism had completely failed by then, it was a useless ideology. Deng got off it and started the boom China is still experiencing.
But that was the 70s. I really don’t like the Chinese Communists, but Mao nailed it with rural land reform, no doubt about it. He figured it out when he was a young commie in Shanghai in the early 20s, and when he left town on the lam it was all he took with him. It was a political weapon strong enough enough to conquer the world’s biggest country.
Governmental management of an industry such as farming is always going to be terribly inefficient, for many many reasons, not the least of which is that every individual farm has a somewhat different set of problems to be solved.
But it can or could work, after a fashion, in a country with well established RULE of LAW, or a strong and efficient authoritarian government.
Venezuela has neither rule of law, nor a capable and efficient authoritarian government.
Any thing managed by the Maduro regime is sure to turn out to be a disaster, since the regime has only one overriding goal, namely to stay in power by way of directing any available goods and services to its supporters.
An idiot farmer wannabe supporting the regime will get seed and fertilizer and feed the seed to a chicken or eat it, and waste the fertilizer. A competent farmer who is a member of the opposition will get nothing.
You dont have a clue about what you write.
Unlikely. Do they have much debt?
Do they not burn 678K bpd?
Did the fall of agriculture employment start in the 1940s?
They owe a huge amount of money. This includes bonds, the Chinese Fund, billions they owe for food shipments, for services, for awards given to companies for expropriations, to airlines, shipping companies, drilling companies, etc.
The collapse of agricultural production has been quite steep over the last 15 years, to the extent that items which were previously exported are now mostly imported.
They no longer consume 678 kpd. Their production and consumption data is all fake. The economy has collapsed and in the last three months economic activity is at least 15 % lower than last year.
Figures are hard to come by, but it seems inflation is running at 500 % per year.
The latest move made by General Padrino was to order a general to each large food market, and 18 generals to each of 18 foodstuffs.
Meanwhile there are starting to be deaths from starvation. And there’s a large number of deaths from lack of medicine.
As I wrote above, you are thoroughly clueless.
They owe a huge amount of money. This includes bonds, the Chinese Fund, billions they owe for food shipments, for services, for awards given to companies for expropriations, to airlines, shipping companies, drilling companies, etc.
If you owe a small amount it is your problem but if you owe a huge amount and can’t pay, it becomes your creditors’ problem…
Well, “huge” is relative to the size of the creditors, not the borrowers.
Fernando I know you have many friends there. Has it come to the point where people are trying to get out. What hope do these people have.
The problem is that Maduro is a lead-poisoned idiot. Whatever he does is going to be…. stupid. This transcends ideology. 🙁
OK, you’ve descended into fantasyland by claiming that Maduro takes orders from Castro. Castro’s *much* smarter and would never order Maduro to do all the stupid stuff Maduro did.
Most likely Maduro will be overthrown by some even worse dictator (probably right-wing) and we’ll see sequences of rotating dictators for decades. The whole country of Venezuela is especially severely lead-poisoned, which means everyone (over the age of 28, anyway — they started reducing the lead levels on the gasoline in 1988) is significantly more violent, impulsive, paranoid, and stupid than they should have been genetically and according to how they were raised. The country’s going to be nothing but violent uproar until the generation born after the elimination of leaded gasoline takes power. And that generation is currently *11 years old* at the leading edge, so it’ll take a while.
Thanks for the update, Dennis. To my eye the most significant graph is the one that shows incessant demand growth, the bulk of which is coming from non-OECD countries. Not that this should be surprising, but it does underscore that the world is far from weaning itself from oil. It also highlights that any efforts to conserve on the part of OECD nations will have little impact on world oil demand.
So, what does that imply for the future? All are my opinions of course, but demand is based on what people want (I’m referring to the demand function, not the quantity demanded at a given price). People are going to continue to want the things that run on oil like cars, airplanes, home heating, and to some extent electricity generation. But it seems clear that supply growth isn’t going to keep pace. And if production decline actually kicks in hard, as has been predicted for a long time but has yet to happen, prices must go up and economies must go down. That kind of thing makes people cranky. And when people get cranky, bad things happen. I call that SVO’s law.
Many things will happen as a result but I think the most dangerous impact will be relations between China and the U.S. We are already on a slow motion collision course. China is stocking up on oil, making friends with oil producing countries without asking pesky questions about human rights, and is aggressively flexing it’s military muscle in the South China Sea. I expect the China-U.S. relations will heat up as the supply curve marches leftward. And when push comes to shove I think the U.S. is going to lose.
“China is stocking up on oil, making friends with oil producing countries without asking pesky questions about human rights…” Are you implying the West in general and the US in particular gives a hoot about human rights in oil producing countries?
To give but one example: “The very strict regime ruling the Kingdom of Saudi Arabia is consistently ranking among the “worst of the worst” in Freedom House’s annual survey of political and civil rights.” Or perhaps two: when I worked in Oman (briefly) I never once saw ANY human rights afforded to women.
Hi Silicon Valley Observer,
Oil prices will increase and other forms of transport will become more desirable such as public transport and Uber car pools in cities. Less densely populated areas will use plug in hybrids, eventually everyone will realize peak oil has arrived and the move to alternative types of transportation will accelerate. The race will be between the decline in demand and the decline in supply, it is difficult to predict which will fall faster, if it is supply prices may rise to levels that cause a depression, my guess is 1930+/-3 years for the start. The crisis may be the spur for an aggressive transition or WW3, hopefully the former.
Dennis says: “prices may rise to levels that cause a depression, my guess is 1930+/-3 years for the start”
Is that a joke? Were you just being sarcastic with Silicon?
Hi clueless
No that is my guess
Well, 1930 was about the start of the world-wide Depression 86 years ago. So no guessing required.
If you meant to “guess” 2030, I could understand your comment.
Correct should have been 2030.
If I was a country highly reliant on the US for defense in a supply constrained area I would be seriously worried.
Think Japan,Taiwan Phillipenes etc etc.
I would think Australia would head that list.
DDD
Do you think that Australia is a “supply constrained area” for energy??
Too backward in electronic networks to secure energy. I find this ‘supply constrained’ list to be useless.
I agree.
Look at Australia and New Zealand on a map.
Huge area, with lots and lots of resources. But no military to defend against china.
I am not knocking the militaries of these countries ( they are proud and honorable and have done great good in the world), but china is an exponential juggernaut.
If they don’t find energy and/or food they are in for a rough ride.
I think you will see an alliance between Oz, India and Japan.
Some guys is lucky, and some guys aint!
Australia’s defense posture points mostly at Indonesia.
Unless China suffers a major economic collapse, Australia has about the same long term chances as a snowball on a red hot stove, except for remaining allied with the USA.
And as far as collapse goes, a lot of times, when collapse is inevitable, and the economic situation is desperate and getting worse, the solution is a war of aggression.
Success is not guaranteed in such wars, but given the power China will have, militarily and economically in a couple more decades, Australia is toast. Black burnt. Except for us imperialistic Yankee bums.
They could build their own missiles and nuclear weapons. About 50 nukes should keep the Chinese at bay.
yep don’t bother with the rest of the armed forces just build some nukes and relax.
For those interested in a more insightful and nuanced assessment of Australia and its security interests I recommend the following
https://youtu.be/3MkZsvrxXxI
Needing to ‘keep the Chinese at bay ‘ is not a very well thought out assessment of Australia’s situation. Nor is the recommended solution of 50 nukes. Frankly, it’s indicative of 50’s fundamentalist thinking and a poor grasp on the reality of ballistic missle defence technology.
That analysis sounds good for WWII. But we live in the 21st century. The French accent analyst doesn’t seem to be aware of Peak Oil either.
Has the guy that made that video heard of submarines?
The idea that troops have to march across the OUTBACK and maintain supply lines seems silly to me.
One nuclear submarine could decimate Sydney and Melbourne, easily.
Australia needs a nuclear deterrent. Otherwise, in deep shit.
Not to mention, can Australia defend the maritime supply lines. Not against China they can’t (without the help of USA).
China could cut off supplies to Australia and guys would be eating each other in about 2 weeks.
Hi Fernando,
The problem with nukes is that you have to actually use them, if you are Australia, in order to prevent China from taking over more and more nearby economic and physical territory, a little at a time.
Neither the USA, nor Australia, nor anybody else in the Western alliance, is actually going to fire off a nuke, except maybe by accident, at any country taking over another smaller country, or piece of international waters.
A nuclear deterrent will not prevent China from effectively isolating Australia economically from nearby countries.
Hopefully NOBODY at all will deliberately resort to using nukes aggressively, with the possible exception of the NK Doughboy. He might, but even he is not so stupid he can’t figure out the consequences.
This is why in part we have such enormous conventional forces, so as to be able to use something OTHER than nukes as necessary.
Australia, given the country’s small population, will never be able to support conventional sources on a scale adequate to prevent a Chinese takeover, or even an Indonesian take over, if Indonesia gets to the point that country finds it expedient to wage a war of aggression, and has developed sufficiently to either build or buy the necessary hardware. Cannon fodder is plentiful in Indonesia.
Here and there somebody objects to “Cold War” type thinking.
So far as I am concerned, this sort of objection displays an abysmal ignorance of the history of our species, and the way we have always behaved, so far back as we have any records.
If the person who talks about Cold War thinking is awake enough to know a little history and a little about the nature of naked apes, then he is generally in my opinion simply displaying his political prejudices, and thus compelled to disparage any position, strategy, or belief ever held by the conservative wing of the American political establishment.
In direct confrontations with such people, I usually asked them about the Iron Curtain, and how many countries behind it were holding free elections and allowing free travel in and out. They generally got VERY red in the face, and changed the subject.
What do you think of Pinker’s argument that violence is decreasing quickly (The Better Angels of Our Nature)?
Hey Fernando,
I have a geologist in my family, but I am an unqualified idiot.
What is your assessment of Australia’s hydrocarbon potential (Natural Gas, Coal, Shale, etc), and that whole area (oceans, etc) at large.
The coober pedy looks like a monster but I think Rockman said it is hype as it is uneconomical to produce.
http://www.adelaidenow.com.au/news/south-australia/trillion-shale-oil-find-surrounding-coober-pedy-can-fuel-australia/story-e6frea83-1226560401043
Ridiculous. China has decided to use economic power to create a mercantile empire. They will simply envelop Australia in their velvet glove and integrate them into their trading system. And Australia will *welcome it*, as the cheap solar panels and other merchandise keeps flooding in.
The US is one of the few countries being crazy enough to antagonize China for no good reason.
The 1995 Australian-Indinesian security agreement leads me to believe that your statement is incorrect. In fact I believe such a public display of closeness between the two nations and the confidence that both countries have in the future of the relationship indicates increased developing common interests.
Did you just make up that statement about Australia or do you perceive any evidence that what you say is true?
The US Military base in Darwin points at China.
Some of the countries most at risk- Japan (94), Taiwan(?), S. Korea (83), Singapore (98), Israel (73), Lebanon (97), Ireland (83) and many other European countries (ex Germany 62%).
For comparison USA (14%).
These numbers represent 2013 data on net energy imports (% of use)
http://data.worldbank.org/indicator/EG.IMP.CONS.ZS?year_high_desc=true
Not pretty (unless you are a seller of crude).
Dean sent me his estimate for the most recent Texas crude plus condensate output.
Month, EIA, Dean
Jun-15, 3460, 3460
Jul-15, 3460, 3452
Aug-15, 3436, 3413
Sep-15, 3438, 3415
Oct-15, 3438, 3404
Nov-15, 3443, 3409
Dec-15, 3408, 3348
Jan-16, 3454, 3361
Feb-16, 3448, 3315
Mar-16, 3432, 3295
Apr-16, 3442, 3250
May-16, 3413, 3199
Jun-16, 3435,
Should be month, Dean, EIA in comment above.
Dean & Dennis,
Thanks for the update on this.
Dennis- ? direct email contact.
Thanks.
Hi Hickory,
peakoilbarrel@gmail.com
If you were looking toward ways to produce a large disruption in oil over the next five years (say) what scenario would lead to the largest supply crash? I’d suggest:
1) A period of huge overproduction generated by easy credit and other behavior from central banks and governments trying to prevent an economic contraction.
2) A lot of oil becoming available from the application of new technologies over the previous 10 to 15 years.
3) A sudden price drop causing all suppliers to suddenly cut capital costs in the near future while maximizing production from online assets while significantly increasing borrowing to pay dividends and salaries (for companies) or social programs (for nationalised oil exporters).
4) Major suppliers coming online at full capacity after extended periods where political issues have produced major deferments, especially if they are in conflict with each other.
5) A period where accelerating natural decline rates have been combated increasingly with in fill drilling and intelligent completions on existing, mature fields rather than development of new fields.
6) Any new fields developed are expensive and have either very high decline rates or low EROI (or both).
7) An industry which might already have seen the writing on the wall when prices were high judging by their move to share buy backs rather than organic investment, increasingly adverse to risk and with an aging work force producing rising concerns about loss of experience and suddenly hit with 30% layoffs and no recruitment.
8) A sudden and continuous decline in discoveries to very low levels due to falling success rates in frontier territories, a lack of reserve growth on newer fields and a surge of discoveries from new technology and high prices in the previous ten years.
9) A growing ecological opposition and increasing competition from other energy forms.
10) A complete misunderstanding among investors and the general population about why there is oversupply (or under demand) an overestimate of how much all remains at reasonable cost and a complete lack of knowledge of the impact of oil and gas on the world economy (i.e. not 5% of GDP but more like 60 to 75%).
11) A world economy under stress that could easily fall rapidly, and with it would go oil demand.
Sound familiar? The only thing that could be added, short of deus ex machina type events, would be a truly disruptive new technology, which I don’t think is coming.
On item 1 I’d add also: a large build up of stored inventory which could be drawn down to mask any supply shortfalls and delay mitigating actions.
Hi George Kaplan,
Can you explain what you mean by 60 to 75% of World GDP? Your expectation is that if oil supply falls short of demand and oil prices rise above some price level (call it P) in 2016$, that World Real GDP will fall by about 67.5%? I doubt it, but may not understand you correctly.
Note that when I suggest 5% of World GDP for an upper limit of money spent on crude oil before a recession might be caused, this is simply the oil price in US $ times all oil(C+C) consumed. Clearly oil affects many things, but it will be used more efficiently as price increases (hybrids, plugin hybrids, EVs, car pools, trains, light rail, busses, biking, walking, and less travel).
Dennis – Mostly it comes from arguments in this book:
The Second Law of Economics: Energy, Entropy, and the Origins of Wealth
by Kümmel, Reiner; and partly reiterated in: Energy and the Wealth of Nations: Understanding the Biophysical Economy, by Charles Hall with Kent A. Klitgaard.
Kummel has a lot of maths that equate oil/gas supply to what it really represents in the economy, but a simple argument would be if oil disappeared tomorrow how much economy would be left – maybe 2% (so if it declined by 10% the economy would decline by 9.8%). If it declined to nothing slowly with nothing comparable to replace it the economy would decline by 60 to 75%.
Hi George
Does an assumption that there will be no energy sources to replace Oil seem reasonable?
How about an assumption of no oil production tomorrow?
One needs to create reasonable scenarios in my opinion.
I have a background in both physics and economics.
When considering second law of thermo arguments all energy sources need to be included.
I was trying to summarise a 300 or 400 page book, actually two of them, which argue in great detail against conventional economics and how it underestimates the value of cheap energy, and the relationship with GDP at 5%. I’d suggest reading them rather than me trying to explain them, but they certainly made much more sense to me than conventional economics books ever have.
Dennis the 5% comment isn’t aimed at your viewpoint, it comes from the comments in the books I referenced, which are partly critiques of traditional economics. I assume they coincide as you have been through a traditional economics education.
Sure there is wasted energy in any process, that is what the 2nd Law implies. However, when the input energy to the earth makes the output from fossil fuels look miniscule (Solar energy >>>>Fossil Energy) then waste is not the point. The point would be our inability to harness and use the most abundant source of energy available to us. There is no lack of energy, merely lack of using that energy.
Hi George
Perhaps you have not read the right economics books.
First price is is not value, there is no objective measure of value. Value is subjective.
The concept of objective value has been discarded by economics.
If an objective theory of value was created using labor as the measure of value, linear algebra can easily be used to switch the measure to any other good, the choice of measure is arbitrary.
Oh, there are perfectly good objective theories of value, it’s just that the value of different things is not *commensurate*. What is the value of breakfast vs. the value of a good night’s sleep? Uh, they’re complements, not substitutes… you can’t just slap numbers on them, you have to look at value more qualitatively.
it declined by 10% the economy would decline by 9.8%
US oil consumption declined by about 18% from 1979 to 1982, while it’s economy grew by 2%.
Switching from a Chevy Tahoe with one passenger to a Prius with two passengers reduces fuel consumption by 90%. Overnight.
The average number of people in US cars is 1.2. The average of the US fleet is 22MPG.
There’s a lot of room for easy reductions.
And then, after that, you move to plug-in hybrids like the Chevy Volt to reduce fuel consumption by 90%, and to EVs to get that last 10%.
Oil is not necessary. It’s expensive, polluting and risky.
I take your point but 3 years is a lot different from one day for a sudden crash – i.e. the speed of change is relevant, and the faster the change the more relevant the speed is (a hyperbolic function I’d guess). I think we can handle slow transition, although lifestyles would change significantly (not necessarily for the worse) but sudden, large shocks will be the potential killer, and the ongoing denialism of resource limits, overpopulation, overconsumption and climate change makes those shocks much more likely.
the ongoing denialism…makes those shocks much more likely.
Yes – better planning would help enormously. But it’s important to be clear that the problem of adaptation even in the short term is primarily social and political, not based in physics.
The US could reduce fuel consumption by 25% virtually overnight with carpooling, with relatively modest inconvenience (just doubling the average number of people per car from 1.2 to 2.4, mostly through carpooling in dense urban areas).
The US reduced domestic fuel consumption by something like 90% in WWII, while the economy grew dramatically. WWII rationing wasn’t convenient, of course, but it worked, and such dramatic reductions are unlikely to be needed.
Whether or not we move as quickly as we should now (or make it more expensive and painful by waiting), the transition is possible and will make us better off.
It appears that very few people have a large enough view of the problems. Certainly we can be resilient, but always at a cost. So why are we not planning ahead all this time, the first oil shock happened over four decades ago?
In the words of our President:
“We cannot keep going from shock when gas prices go up to trance when gas prices go back down. We can’t rush to propose action when prices are high, then push the snooze button when they go down again.””
There is no technological reason or resource reason at this point to be dependent on foreign oil. America has been on “snooze button” way too long.
It appears that very few people have a large enough view of the problems.
They’re getting bad information, in large part due to conservative media.
why are we not planning ahead all this time, the first oil shock happened over four decades ago?
A very few people – the Koch brothers and Rupert Murdoch, seem to be very large parts of the reason. Weird, but true.
Another large part appears to be a problem with American Southern rural culture: religious, violent, anti-intellectual, and recruited by the Kochs and Murdoch as a very big part of the Astroturf Tea Party.
Jihadist revolt in Saudi Arabia against the Saud dictatorship.
Yes I missed out popular (or not so popular) uprisings – Angola, Algeria, Nigeria, Venezuela, Brazil, Azerbaijan, China(?), Colombia, Ecuador, UAE. Although I think to have a real impact countrywide they have to involve a split in the elites – i.e. one group thinking they aren’t getting their, rather large by most standards, fair share – rather than just lower level resentment amongst the hoi polloi or hormonally challenged and easily radicalized nut jobs.
It doesn’t have to be country wide. I can organize 5-6 small teams to hit 50 % of Venezuela’s infrastructure. It doesn’t even take military grade weapons or explosives.
September 1st is the day when the feces may hit the fan in Venezuela. I anticipate the Internet and communications should go down by 1200 hours Zulu, after that it’s going to be hard to figure out what’s going on.
Here’s a link to a report that gives you about 10 % of what’s going on http://oilprice.com/Energy/Crude-Oil/Is-Doomsday-Inevitable-For-Venezuela.html
Always good to read your comments Fernando
Myself i would have chosen the conditional tense or “could” organize 5 teams rather than the stronger “can” that you used when talking about acts that could be perceived as hostile or terr$&tic
Probably you are a non native speaker so I am only suggesting
Um, the disruptive new technology is already here too. On the demand side, oil is used in significant quantities for:
— cars (electric cars are here, will be as cheap as gas cars in a couple of years)
— trucks (ditto)
— buses (ditto)
— trains (ditto)
— heating (damn near every alternative to oil is cheaper, including electric heat pumps)
— airplanes (OK, no good alternatives here)
…and various things which use inconsequential volume.
I’ve been trying to model the oil market following the disappearance of gasoline and diesel demand — driven by jet fuel as the primary product. It’s kind of hard to model.
Iran Likely to Grant Development of 2 Oil Fields to China’s CNPC, Sinopec
“State-owned National Iranian Oil Co. (NIOC) reported Tuesday that Iran planned to grant the development of 2 major oil fields in the country’s southwestern Khouzestan province to 2 Chinese firms, according to a company executive.
China National Petroleum Corp. (CNPC) is likely to be awarded the development of the second phase of the North Azadegan project, while China Petroleum & Chemical Corp. (Sinopec) will take over the development of the second phase of the Yadavaran project, NIOC Deputy Director for Engineering and Development Affairs Gholam-Reza Manouchehri said.
He added that CNPC and Sinopec possess “vast financial resources” to develop the North Azadegan and Yadavaran projects, respectively, with the decision on the award of projects to the Chinese companies in accord with Teheran’s strategy to promote economic relations with Beijing.
http://www.rigzone.com/news/oil_gas/a/146313/Iran_Likely_to_Grant_Development_of_2_Oil_Fields_to_Chinas_CNPC_Sinopec
The STACK has emerged as one of the most economic plays in the US and is currently ranked the second best play by Bentek’s IRR analysis, at 17.8%, falling just behind the Permian Delaware, which came in at 18% for August. Although gas is not the primary phase being targeted in the STACK, it does play an important role in economics and can have a large impact on rates of return. Breaking the STACK down by county and reservoir it’s quickly seen why much of the focus has been centered around this play – the four major counties being Blaine, Canadian, Dewey, and Kingfisher and the two major producing formations, the Meramec and Woodford. The Meramec formation in Blaine county yields the highest IRR, largely due to the high oil IPs and gas-oil ratio. For more on the STACK, please visit this week’s Weekly Midcon Observer Report.
http://www.bentekenergy.com
Could be a major hurricane into the gulf next week. Watch out for Hermine , might be nasty.
Major Hurricane?! Highly doubtful. However tropical storm conditions with lot’s of rain and flooding could happen.
Disclaimer, as a South Florida resident I may have a slightly different definition of ‘Major Hurricane’ than most.
New pipeline to feed Marcellus gas to a power station, built on the site of a former coal plant.
https://stateimpact.npr.org/pennsylvania/2016/08/24/construction-begins-on-sunbury-pipeline/
I find figure 11 from this post interesting.
http://euanmearns.com/oil-production-vital-statistics-july-2016/
I’m sure some of the Middle East OPEC drilling was in new fields, like Manifa for example, but I would guess a lot is infill drilling. They’re drilling at record levels to keep production flat to bumpy-up. Anyone have guesstimates on if, how, and when this might lead to steeper decline rates in the future?
Anyone have insight into how much of the drilling represented in figure 11 is infill and how much is on new fields?
I guess infill drilling accounts for at least 90%
Thanks for the reply. I appreciate it. Any guesses on the timing/shape of the decline curve? From what I understand infill drilling reshapes a production curve from one representing a bell to one that stays flat at the top for a bit longer then declines more steeply. Are there any comparisons from the past that might give a rough indication of what Saudi Arabia might look like?
The IEA OMR for August is now generally available.
https://www.iea.org/oilmarketreport/omrpublic/currentreport/
They have all non-OPEC countries/areas except Brazil and Canada (and probably some small ones that they don’t break out) in decline after primary or secondary peaks, although Russia is due for a small increase again next year. I read somewhere and now can’t find it that Russia has greatly increased horizontal in-fill drilling in the last few years which suggests to me they are battling significant prodcued water breakthrough (and like everywhere will eventually lose).
Horizontal drilling in Russia (million meters)
Alex is there a source on the horizontal drilling in Russia ?
Thank you
Wake
https://rogtecmagazine.com/PDF/Issue_036/03_Horizontal Drilling Russia.pdf
http://www.indpg.ru/nefteservis/2016/01/92439.html
Thanks again, that pdf was a great read
Do you happen to know, I had thought that Russia doesn’t show up in the BH rig counts owing to higher use of local equipment
Is that changing with the new rigs discussed in the article? Which is to say, am I correct that most of the existing fleet is locally made, and higher spec Rigs might not be?
Have you seen good data on their rig fleet by size and capability?
More evicence of rapid slow down towards stop in GoM exploration:
‘Lowest Bidding Ever in “Milestone” GoM Lease Sale”
‘On Wednesday, the Bureau of Ocean Energy Management sold 140,000 acres of oil and gas exploration leases in the Western Gulf of Mexico for a total of $18 million – the lowest bid take for the region ever.
‘The bids covered just 0.5 percent of the 24 million acre “milestone lease sale,” which put up for auction “all available unleased areas in the Western Gulf of Mexico Planning Area.” ExxonMobil, BHP Billiton and BP bid for a combined 24 tracts. None of their bids overlapped and each tract received only one offer.
‘Last year’s sale was the previous record low: it brought in 33 bids totalling to $23 million.’
http://www.maritime-executive.com/article/lowest-bidding-ever-in-milestone-gom-lease-sale
From an exploration standpoint, the GOM is rather mature (the pessimist might say quite mature)- even the deepwater GOM, and, especially offshore Texas. The leases that BP, BHP and Exxon acquired, I am quite sure, are in pursuit of very frontier opportunities – perhaps they are trying to extend the Wilcox plays that are being made further east and south, or, pursuing some new play like the Cretaceous Tuscaloosa.
Leases acquired in the most recent western Gulf sales (in August – 2015) have been in similar areas. 33 single bids leases were awarded in that sale. To my knowledge, no exploration wells have been drilled based upon leases picked up in the 2015 sale.
SLG – what do you think the chances are for Vito, Mad Dog II, Kaskida, Hopkins, Shenandoah in the next couple of years. Shell seem keen on Vito again at the moment. Hopkins was going to be fast tracked and then suddenly wasn’t. Same with Shenandoah to some extent. Mad Dog was expensive and then a lot less which I always think is a bit suspect and might end up in delays and overruns (or maybe a Big Foot repeat). Are there particular reservoir issues with these developments that you know of?
Here’s what I believe the be the case with the above developments – Vito is a Shell Miocene discovery that was at one time thought to have enough reserves to support a stand-along development, but I think Shell and partners (I think Statoil) are reconsidering and may proceed with a tie-back to some other host facility. I suspect low oil prices had a impact on that decision.
Haven’t heard any updates on BP’s Wilcox discovery at Kaskida. At one time BP was planning an FPSO, and that my still be their official position, but I haven’t heard any recent updates.
I believe Anadarko is still planning the Shenandoah Wilcox development, but they have not sanctioned anything yet. They are still appraising, and, I believe, continue to be encouraged by well results.
Hopkins is a BP Wilcox discovery that they were going to fast track, but then put the skids on the project. I believe they had disappointing appraisal well results that impacted that decision.
Mad Dog 2 will, I am quite sure, go ahead. I believe the subsurface story is still quite encouraging. The project was recycled back in 2013 not because of new subsurface information, but, the project scope had just become too large. Now the project scope is more manageable. Even at that smaller project scope, Mad Dog 2 will probably be one of the biggest deepwater GOM projects going forward both in terms of well count, total cost, and EUR.
By the way, I am planning an extended deepwater GOM post in a few weeks discussing production history, exploration and EUR estimates.
SLG – thanks. Look forward to the post. One other thing out of curiosity, do you know anything about La Femme discovery. It seems to be the one lease that isn’t going anywhere (good or bad) at the moment.
Had to check on La Femme. It was a 2004 Upper Miocene discovery in Mississippi Canyon 427. BOEM lists it as having contingent resources, which, in this case, probably means it was a non-commercial discovery.
WSJ articles showing issues in oil industry that have been discussed here over the last several months.
China:
http://www.wsj.com/articles/chinas-decline-in-oil-production-echoes-globally-1472122393
Debt:
“Eventually something will give,” said Michael Hulme, manager of the $550 million Carmignac Commodities Fund, which holds stakes in Shell and Exxon. “These companies won’t be able to maintain the current dividends at $50 to $60 oil—it’s unsustainable.”
http://www.wsj.com/articles/largest-oil-companies-debts-hit-record-high-1472031002
(I think you may need to go via google to avoid the pay wall or there may be a limited number of articles free per month.)
What are your thoughts on Iran? I’ve thought that a lot of the increase in production was really coming out of floating storage. But today I read that a big reason for the surge in Iranian production was the build up in pressure from the shut in wells which suggests that production will probably decline soon.
They need foreign money and input and seem to be looking to China. But I think one Chinese company either walked off in a huff or got the boot last time around (2010 maybe?) on South Pars because they didn’t perform as expected, which I think was to do a whole lot of work for not much money. The big Iran producers are very mature carbonate fields with fairly low recovery factors. They need gas injection to maintain production and maybe EOR (like miscible gas) to increase it. None of that is cheap. The newer fields, which look to be where Iran is starting for new developments with JV with foreign firms, are similar in needing gas flood, and I think some are offshore. I don’t think it is going to be a bonanza for anyone, but fairly hard slog – and likely not what Iran need to meet their fiscal expectations.
This one from the first link was interesting:
“The decline in domestic oil production stems from a dearth of new discoveries. Even if oil prices unexpectedly rebounded, China would unlikely be able to quickly ramp up its output.
“It doesn’t matter what the oil price is,” said Gordon Kwan, head of Asia-Pacific oil-and-gas research at Nomura in Hong Kong. “There has been no oil discovery.””
They’ve found quite a bit of gas, but no oil really since at least 2010, and not for want of trying – they run about 800 rigs and at least a few must be exploratory. PetroChina today said they were going to go for 50% gas by 2020, as if this was a proactive business decision rather than forced on them.
In 10 years we’ll be talking about the “gas industry” rather than the “oil and gas industry”.
One more from WSJ:
Banks Have Had Enough of Oil’s Wild Ride
Despite oil’s rebound, lenders remain wary of energy companies
http://www.wsj.com/articles/banks-have-had-enough-of-oils-wild-ride-1472149205
When oil fell below $30 a barrel earlier this year, banks turned away from lending to energy companies. The price of crude has bounced back more than 80% from its February low, but banks are still wary.
Big banks cut loans to the energy sector by about 3% in the second quarter over all and some individual lenders pulled back much more, according to an analysis of July and August securities filings by Barclays analysts.
Moreover, there is increased regulatory scrutiny of energy-sector lending and exposures at banks.
At large U.S. banks…, a median 42% of energy loans were considered criticized in the second quarter, Barclays said. This means they are at higher risk of default.
Bankers and their advisers say a tougher regulatory stance is playing a role: The Office of the Comptroller of the Currency in March published an updated manual for energy lending. While the OCC said in a statement that the “handbook imposes no new restrictions on oil and gas lending,” banks say this has effectively established stricter guidelines for such loans.
Banks have said the new manual has led them to classify more exploration-and-production borrowers as higher risk, or criticized. Using one key measure in the handbook, 91% of a sample of independent exploration and production companies would merit a criticized rating in 2016, according to an analysis of such companies’ financials by law-firm Haynes and Boone LLP.
Over all, large banks cut loans to exploration and production companies about 8% in the second quarter, Barclays said.
While banks are cautious, other categories of investors and creditors continue to fund the shale sector.
From Reuters:
Distressed-debt investor Ross bets on troubled energy debt: report
Sun Aug 21, 2016
http://www.reuters.com/article/us-energy-debt-wilburross-idUSKCN10W0SG
Distressed-debt investor Wilbur Ross is taking a large bet on troubled energy debt amid a two-year global price slump, according to a Wall Street Journal report citing people familiar with the matter.
Ross’ investment firm WL Ross & Co. has purchased hundreds of millions of dollars in troubled energy debt in a bid to take control of distressed oil and gas companies if they have to turn over ownership to creditors, according to the report on Saturday.
It said the firm sat out in the early downturn when others jumped on perceived bargains that continued to lose value.
WL Ross is angling to swap debt for ownership in Breitburn Energy Partners LP, which filed for Chapter 11 protection in May and has been buying debt of Permian Resources LLC, the report said.
The plan is to take control of energy companies through debt investments and acquire companies or individual assets in traditional buy outs, according to the WSJ report citing reviewed investor materials
AlexS,
An article yesterday reported that Blackstone has committed $1 billion to acquiring acreage in the Delaware Basin of the Permian, and $500 000 for acreage in the Midland Basin–this one may increase.
There’s money on the loose in West Texas.
U.S. LTO production projections by key plays from the EIA
Annual Energy Outlook 2016, Reference Case.
Source: http://www.eia.gov/todayinenergy/detail.cfm?id=27612
Key points:
• U.S. LTO production is expected to reach 7.08 million barrels per day by 2040 (b/d).
From the report:
“Production from tight oil in 2015 was 4.89 million barrels per day, or 52% of total U.S. crude oil production. From 2015 to 2017, tight oil production is projected to decrease by 700,000 barrels per day in the Reference case, mainly attributed to low oil prices and the resulting cuts in investment. However, production declines will continue to be mitigated by reductions in cost and improvements in drilling techniques. The use of more efficient hydraulic fracturing techniques and the application of multiwell-pad drilling, as well as changes in well completion designs, will allow producers to recover greater volumes from a single well. As oil prices recover, oil production from tight formations is expected to increase.”
LTO production is expected to recover from 2018. In 2019, it is projected to reach 2015 levels and in 2020 to exceed 5 mb/d.
• Projections for the Bakken have been revised significantly upward.
From the report:
“By 2019, Bakken oil production is projected to reach 1.3 million b/d, surpassing the Eagle Ford to become the largest tight oil-producing formation in the United States. The Bakken, which spans 37,000 square miles in North Dakota and Montana, has a technically recoverable resource of 23 billion barrels of tight oil that can be produced based on current technology, industry practice, and geologic knowledge. Bakken production is projected to reach 2.3 million barrels per day by 2040, almost a third of the projected U.S. total tight oil production.”
To note, in AEO-2015 assumptions, Bakken TRR were estimated at 22.7 million barrels, and area with potential resource potential at 41,100 square miles.
• By contrast, the EIA believes that LTO production in the Eagle Ford has already peaked and by 2040 will decline to about a half of 2015 levels
• The EIA expects significant growth from the Wolfcamp and Spraberry plays in the Permian basin, although in the case of Spraberry output will peak in 2020.
• Considerable growth is projected for the Austin Chalk, currently producing only 40 kb/d.
• Significant contribution to overall growth is expected from other shale plays, which include Delaware, Bonespring and other plays in the Permian
U.S. LTO production in 5 alternative cases
From the report:
“Two oil price side cases illustrate the effect of higher or lower global crude oil prices on production from tight formations. By 2040, the global benchmark Brent crude oil spot price averages $73/b in the Low Oil Price case, $136/b in the Reference case, and $230/b in the High Oil Price case. In the High Oil Price case, drilling activities increase tight oil production through 2026, after which it begins to decline. The opposite is true in the Low Oil Price case, where tight oil production declines slightly before increasing after 2026.
In the resource and technology side cases, the estimated ultimate recovery for shale gas and tight oil wells in the United States is 50% higher or 50% lower than in the Reference case. Rates of technological improvement that reduce costs and increase productivity in the United States are also 50% higher or 50% lower than in the Reference case. By 2040, these cases result in the greater differences from Reference case production values than do the alternative oil price cases.”
This is a heat map for permitted wells (see comments below as well – I clicked on the wrong reply button). Note the core area with greater than 100 wells per grid square are highlighted with border and white text. There is one grid with over 100 permits, which is where I think they drill to the noth and east under the Missouri. All permits are really in areas well drilled which suggests to me there isn’t that much oil at the periphery, at any price.
Following Enno Peters’ suggestions I managed to separate out confidential wells producing, non-completed and un-drilled for the Bakken. The four charts below show the results. I thought there may be more info. discernible, but one thing I’m fairly confident of is there is no way that EIA prediction is going to be met – unless there is some totally undeveloped layered reservoir hidden under all the others. I’d say at most there are the DUCs to be completed and then another 5000 wells, the last 2 or 3 thousand of which are likely to have reducing EUR. The first chart shows DUCs by company and month. The additions have flattened out. It might be more interesting to check changes in a few months.
This shows the well locations – note there are far more permits shown than previously, from confidential wells, especially in the area between the two rivers. I think a lot are concentrated as they are drilling under the Missouri and Lowe Missouri from here.
This is a heat map for the active wells (doesn’t add much to the layout above except to highlight the core areas and how little is being produced outside of them).
Nice work George,
How big are these grid squares?
0.1 degrees latitude and longitude which is about 11 km each side or 30000 acres (slightly reducing bottom to top).
Hi George,
So your expectation is about 17,000 total wells drilled. I think it will be about 32,000 wells (similar to David Hughes estimate), the NDIC expects 60,000 wells will be drilled (but if they include non-Bakken in that estimate then Bakken/Three Forks would be about 45,000 wells.) Your estimate implies no more than 5.1 Gb from the North Dakota Bakken/Three Forks (assuming the average well produces 300 kb over its life).
My expectation is the URR for the ND Bakken/Three Forks will be at least 8.5 Gb.
Dennis – I don’t really know to that detail – the EIA was an easier call as they are so high. If I had to guess I’d say 5.1 was an upper limit. With the wells, drilling and permitting so concentrated in the centre it must indicate reservoir quality drops off quickly to the periphery (although there may be some above ground factors as well such as access and problems with gas handling within flaring limits). Also the final recoveries from even the best wells seems to be unproven to some extent – e.g. what is the end of life flow, how does increasing well density impact, how does increasing GOR impact – and I think these would have higher influence as a percentage of total recovery for the poorer quality wells that would be increasingly needed to give the maximum possible recoveries.
Hi George,
Proved reserves are about 5.5 Gb as of Dec 31, 2014 in the ND Bakken/Three Forks. I think 8.5 Gb for URR is pretty reasonable because typically in the US probable reserves are about 50% of proved so that 2P reserves would be 8.25 Gb.
Dennis – there is absolutely no history that indicates how reserves grow in tight oil plays. The growth you quote came from old, large, on shore conventional reservoirs that were found pretty much by luck and delineated over a long time – they are nothing like tight oil, and not much like newly found conventional reserves that are well understood from the outset because of modern seismic and drilling methods. If they are quoted as proven then the E&P company should have definite plans in place to develop them within 5 years – I don’t see anything like that reported.
Hi George
The 5.5 Gb is EIA data., not a forecast.
In the UK north sea the historical ratio of 2p to 1p reserves is 1.7.
Do you expect probable reserves are zero?
I agree the EIA estimate is too high.
The USGS estimate of 9 to 13 Gb seems reasonable, but I like the low end
Multi well pad drilling doesn’t allow more recovery per well. Depending on pad and well layout it can actually drop per well recovery a little bit. What it does is allow for easier permitting, more efficient use of facilities, and sometimes lower well costs. I’m not sure it lowers per well OPEX that much. On the other hand the turns needed to make the forks can lead to hassles with artificial lift performance.
Indeed Fernando. Also, it allows for the booking of more reserves.
Non-operating working interest holders appear not so happy about this overdrilling, as returns per well are going down. See the comments of deadshot7 on SA.
Bump in the LTO Road or Buffett’s Dream come True?
http://www.zerohedge.com/news/2016-08-24/dakota-access-pipeline
A Clinton Presidency should be oil friendly, if this is any indication:
https://shadowproof.com/2016/08/17/hillary-clintons-transition-team-headed-by-tpp-and-fracking-lobbyist/
Australia:
Pop 23 million and rising
Consumption (from mazama and therefore BP) a bit over 1 million bpd and rising. (per capita 0.04 barrels/day/person, which is not too far from US 0.06. They are doing nicely and hopefully will rise more)
Production about 400K bpd and falling.
The oil is in the west-northwest. The sedimentary rocks are called the Carnavon basin. This is not the only source, but it’s the major one. Some others are farther north. The farther north, the closer to the largest Muslim country in the world, Indonesia.
Indonesia at closest approach to the northeast of Australia is only about 100 miles away. Think Cuba/Florida.
Nat gas storage added 11 Bcf last week vs. 18 estimated, vs. 64 Bcf – 5-year average. Seventeenth week of below average build. More of the surplus disappearing, and the Gulf is getting interesting!
Injection season has looked worse as the year goes on.
East is down to 6% above 5-yr-avg. I doubt this winter will be as mild as last (though I could be wrong). I invest in gas but also heat my home with it, so I keep hoping for some golden mean…
Quantifying atmospheric methane emissions from oil and natural gas production in the Bakken shale region of North Dakota
“We present in situ airborne measurements of methane (CH4) and ethane (C2H6) taken aboard a NOAA DHC-6 Twin Otter research aircraft in May 2014 over the Williston Basin in northwestern North Dakota, a region of rapidly growing oil and natural gas production. The Williston Basin is best known for the Bakken shale formation, from which a significant increase in oil and gas extraction has occurred since 2009. We derive a CH4 emission rate from this region using airborne data by calculating the CH4 enhancement flux through the planetary boundary layer downwind of the region. We calculate CH4 emissions of (36 ± 13), (27 ± 13), (27 ± 12), (27 ± 12), and (25 ± 10) × 103 kg/h from five transects on 3 days in May 2014 downwind of the Bakken shale region of North Dakota. The average emission, (28 ± 5) × 103 kg/h, extrapolates to 0.25 ± 0.05 Tg/yr, which is significantly lower than a previous estimate of CH4 emissions from northwestern North Dakota and southeastern Saskatchewan using satellite remote sensing data. We attribute the majority of CH4 emissions in the region to oil and gas operations in the Bakken based on the similarity between atmospheric C2H6 to CH4 enhancement ratios and the composition of raw natural gas withdrawn from the region.”
Full study:
http://onlinelibrary.wiley.com/doi/10.1002/2015JD024631/full
Once again it looks like NOAA scientists are trying to push an agenda. If these taxpayer-funded researchers would’ve actually bothered to take a look out the windows of their taxpayer-funded airplane as they were taking their taxpayer-funded ride over NW ND/SE Sask, they would’ve observed that a large part of the region, taking up more land than the overall relatively small area taken up by oil wells, is ranchland dotted with cattle. And what do cattle emit as part of their digestive process? That’s right, methane. Evidently, NOAA is going to have to go back to the drawing board if they still want to tank the economy and livelihoods of the people out in this part of the country.
Your ranting comment shows clearly that you did not read the study.
Those are smart people, do you really think they don’t know that?? Read, read, read, then think. You are making yourself look silly.
What agenda? If you read the study at all, you would know that by using an aircraft and taking measurements near the sources, they got lower readings for methane output as compared to satellite measurements. They also can tell the difference between cattle and fossil fuel methane, but that would involve reading and comprehension.
Not everything is a conspiracy or a political agenda.
People in this region are deeply distrustful and skeptical of anything the federal government does. We just want it to stay away and keep out of our lives. Most of the things the feds get involved in, like this one about the supposed methane in the air, are issues best left up to the states to oversee anyway. In any case, what was NOAA’s justification for even performing this study? Based on the text you posted, sure sounds like they have some kind of motive to “stick it” to the O&G industry as is usually the case with environmental groups.
Hi Paul Helvick,
I really and truly do understand where you are coming from, having grown up ignorant in farm country, using deadly chemicals as if they were toys, ignoring the warnings on the labels. We never owned a protective suit, the most I ever used spraying parathion, benzene hexaclhoride, arsenic of lead insecticides, etc, was a hat, back when I was a kid. I did wash up afterward, but we thought the people who issued the warnings were just pussies, you see.
I got away with it, but otoh, I also got away with driving drunk on occasion back in those days too. Not everybody was so lucky.
There wasn’t a fish in the creek running thru the neighborhood, nor one for many miles downstream.
I was lucky in the genetic lottery, school came easily to me, and got lucky again, and there was welfare state money for poor kids like me to go away and learn all about reality at a real university.
So I went, and learned better.
You are in about the same position as the folks who made (and still make) their living growing tobacco, meaning you are denying what is obvious to anybody who actually KNOWS the relationship between tobacco and cancer, heart disease, emphysema, etc.
It has taken thirty or forty years for the local guys who grow tobacco to more or less come to understand that smoking kills. They have learned the hard way, by watching each other die on average a decade or more YOUNGER if they smoke, and noticing that they don’t know ANYBODY who does not smoke who has lung cancer, but two or three who smoke and DO have that awful disease.
We are paying a VERY steep price, in terms of public health, environmental damage, and political risks, due to our dependence on oil and gas and coal.
Only a fool thinks we can do without fossil fuels, but only a fool thinks we can continue to depend on them long term, if for no other reason, they come out of holes in the ground and don’t grow back like potatoes.
Regulations forced us to change our ways farming, but I could still be growing apples without killing the fish in the creek and poisoning the water for downstream users if I weren’t too old.
The evidence is perfectly clear, as obvious as the sun at high noon, that fossil fuels are at best a necessary evil, if you are well enough acquainted with the sciences to understand it.
Hopefully we will succeed in figuring out ways to get by with less of them, as they run short, and eventually run out.
You will have to make some rather expensive changes in the way you do business, in order to comply with existing and new coming regulations, but the feds are not going to put the fossil fuel industries OUT of business, any more than they put farmers out of business.
Best of luck to you, hopefully you will survive and thrive. The oil and gas industry isn’t going away for at least a few more decades. 😉
There are trout in the creek now and there are still orchards on both sides of it, lol.
And you better believe that as soon as I learned better, we got the proper protective gear, etc.
I have a house on top of a “shale” field in Texas, and I do worry about emissions from tank batteries placed on multiwell pads. As it turns out, if those tanks have methane and ethane emissions, they also have other hydrocarbons, and these can cause cancer. I don’t want my property to lose value simply because the operators are too shoddy and stupid to make sure they recover the darned vapors. I’ve been in the oil business for over 40 years, and North Dakota has one of the most primitive and poorly thought out regulations and control systems. I wouldn’t be asking for these issues to be left to the states when in some cases they are clearly incompetent.
Hi Fernando,
I will add to what you have said that wind and water are like honey bear, and don’t give a shit about political boundaries, be they local, state, or national.
LOL, “stick it to the O&G industry”, what a bunch of crap. The O&G industry is doing a great job sticking it to everybody and everything else, including themselves. How dare we monitor those activities and try and find out what is really going on.
I didn’t hear much moaning and groaning from them when they were charging three times as much and suckering the investors. No, it was the “black gold rush” into ND and other places. A wild west scenario, all fun and games. Now you flinch when someone even looks your way.
I remember when the rivers ran black, the air was blue and gray (not the sky, the air), when there was a brown ring around the horizon and all cities had big grey domes of pollution around them. When all different colors of waste just poured from industry right into the rivers, the air and onto the ground. Soot and ash falling from the sky.
That enough justification for you?
yeah things were very very bad for humans during those times when the oil and gas industry were taking advantage of us. Life was so bad in fact that life expectancy only increased for males living in the US from 67 in the 1960’s to 77 in 2010. Geez things must have been really bad, oh never mind. I been in Texas all my life, I have never seen a “river running black” or “soot” falling from the sky. To my knowledge “ash” is not a by product of oil and gas production or use. Maybe you have lived in a democrat run eastern city and burned wood for heat?
ww.chegg.com/homework-help/questions-and-answers/9-life-expectancy-birth-estimated-lifespan-baby-born-particular-year-given-conditions-time-q9139529
Lead and mercury have been enormously useful for many things, but…they’re poisons in the wrong place. We didn’t know that, and we suffered a great deal of harm, together with the benefits they brought.
We can have the benefits without the harm. We’ve greatly reduced how much lead and mercury we use. We’ve found better things.
We’ll do the same with fossil fuels.
You do realize that life expectancy is merely a statistical calculation, unless all of that population is already dead. It is easily shifted by the death of young children, and the major shift in life expectancy has been less young children dying and less death at birth. Better vaccines, antibiotics, clean air and clean water (after the early 70’s), all promote longer and better lives.
Think about it, how can you determine the actual life expectancy of a person who was born in the 1960’s since most have not died yet? It’s a guesstimate based on historical data, an extrapolation.
The ash was coming from the smokestacks of big industry.
Sounds like you never went near a city or industrial area in the 50’s, 60’s or 70’s.
Which color is the river today?
You of course are looking at the period of time when everything started to get better in the US, not when it was a living nightmare.
http://www.history.com/news/the-killer-fog-that-blanketed-london-60-years-ago
https://www.washingtonpost.com/news/capital-weather-gang/wp/2013/10/25/u-s-once-had-air-pollution-to-match-chinas-today/
So now in the US, a lot of the pollution can’t be seen because we took steps to curb the visible pollution in the air. Tiny particles the size of bacteria or smaller from fossil fuel burning are choking young lungs and the older ones too. Sulfur compounds in the air cause lung problems and heart disease, death. Ozone, methane, NOx, CO2, all cause local and global problems. You can’t see them, but that does not mean they are not there. Burn oil and natural gas and you get lots of invisible particles and gases that are major threats.
That is why we monitor them. They are a threat to human health and the health of the planet.
You think this is plot to destroy business? The democrats make their money from business too.
Natural gas burns pretty cleanly very little SOx or NOx, most comes from burning liquids or solids both fossil fuels and biomass.
Dennis, we were talking about the justification for environmental oversight and laws, which includes all fossil fuels and industrial processes. Yes, as we all know, natural gas burns “cleaner: than oil or coal. It still produces NOx, but more importantly it is a very strong GHG, burns to another GHG and the associated compounds leaking from wells along with the gas are a health risk. Do you remember all the sick people from the natural gas leak in California recently?
Hi Gonefishing,
The burning of methane produces less SOx and NOx per unit energy than coal, oil, and most biomass burning. You focused on particulates in your earlier comment, there is very little from the burning of natural gas.
I think it best to focus on the problem areas which is coal first, then oil, and then natural gas. Methane leaks as large as the one in California in a densely populated area are quite rare.
I am not arguing for no regulation, simply pointing out facts.
At some point less fossil fuels will be burned because depletion will make alternatives more competitive, economies of scale will drive down the costs of alternatives so that in 50 years most fossil fuel use (as an energy source) may be eliminated.
In the mean time, I agree particulate emissions and GHG emissions should be regulated.
At some point less fossil fuels will be burned because depletion will make alternatives more competitive, economies of scale will drive down the costs of alternatives
Dennis,
I’d add that it’s likely that at some point, sooner or later, the cost of pollution and insecurity of supply (ELM, oil wars, etc) will be internalized to a greater degree with carbon type taxes, efficiency regulations, or simple bans on ICEs and/or or FF burning.
I say ” internalized to a greater degree” because, of course, we have fuel taxes and efficiency regulations now, to greatly varying degrees. Such things will, eventually, become much more numerous.
Um, you dope, the period when the oil and gas industry was really taking advantage of us was BEFORE the 1960s. The regulations started kicking in in the late 1960s early 1970s.
So your comment was totally off-target and non-responsive to the comment you were purportedly replying to.
In any case, what was NOAA’s justification for even performing this study?
In case you missed the memo, changes in atmospheric chemistry and temperature rise impact global climate and are directly connected to both changes in oceanic pH and sea level rise!
NOAA’s Mission statement:
To understand and predict changes in climate, weather, oceans, and coasts, to share that knowledge and information with others, and to conserve and manage coastal and marine ecosystems and resources. Dedicated to the understanding and stewardship of the environment.
Now why would anyone in the O&G industry have a problem with any of that?
If NOAA were actually faithful to the mission statement shouldn’t they -you know- actually be flying around the coasts & marine areas to make the measurements? Instead they fly around just about as far away from the ocean coasts they can get! At least now I know some more of the “science” my tax money is being spent on by yet another fed institution that has nothing to do with the powers given to the fed gov’t by The Constitution. Time to shut em down…
National Oceanic and Atmospheric Administration
Note the “and” in NOAA’s title.
Instead they fly around just about as far away from the ocean coasts they can get!
I think most of that flying happens in the atmosphere…
So what is the long term plan for North Dakota and the Bakken? Ten to fifteen years from now the oil production will be falling fast and all that infrastructure will be leaking methane into the atmosphere as it gets abandoned.
We better have the oil producers set aside a fund for the cleanup now or it will be another big public expense.
500,000 wellbores leaking in Canada
http://thetyee.ca/News/2014/06/05/Canada-Leaky-Energy-Wells/
Hi Raymond,
The constitution gave the power to legislate to Congress.
The EPA was created by an act of Congress and it can be shut down by an act of Congress, all in accord with the Constitution.
Air and water move from one State to another so are covered by the Commerce clause and are regulated by the Federal Government. Climate and weather occur in North Dakota, just like everywhere else. It is not only the ocean and coastal areas that the NOAA is concerned with, it is the environment (which covers the entire nation, even North Dakota).
Not sure where my last went to, but obviously not here.
http://www.bentekenergy.com/
Well inventory continues to decline in the Northeast.
Thursday, August 25, 2016 – 6:20 AM
Producers in their quarterly earnings over the past month have indicated a widespread effort to maintain or increase production from current levels, supported largely by drawing on inventoried wells. The most recent well data in the Northeast supports this narrative, as estimated well inventories declined to 1,415 for June from 1,538 in May, putting 123 wells previously in inventory into service across the region. Most of this inventory declines were observed in the PA Central Dry and PA SW Wet reporting areas, which pulled 55 and 67 wells out of inventory, respectively. While overall production between May and June remained relatively flat, with some intra-regional increases offset by declines elsewhere, there was nonetheless an increase on average of 75 MMcf/d from the PA Central Dry and PA SW Wet regions combined. Since the Northeast began drawing down on inventories in October, an average 160 wells/month have been brought online, supporting the flat output through the summer even as producers have run bare-bones drilling programs. Second-quarter earnings, though, signalled a likely increase of at least six drilling rigs to the region for the second half of the year.
Push
The 1,400 wells waiting to be frac’d and turned inline is about a year’s worth from the 2012 timeframe.
One interesting development is the re-emergence of some Upper Devonian interest in western PA.
Recent wells targeting the Genesee formation are producing Marcellus-like numbers with several already surpassing the Bcf mark after being online only a few months.
The site marcellusgas.org has comprehensive numbers on all the PA unconventional wells.
Good Morning Coffee,
On your advise, I visited the website “marcellusgas.org”. It seems to be a commercial site that offers information for sale to the public that is mined from state natural resource regulatory agencies or other commercial oil and gas organizations.
I don’t have much computer literacy but my impression is that a site using a “.org” domain address is principally for “issue awareness, online collaboration, and advocacy”.
Marcellusgas .org offers several products for sale such as well reports, drilling maps, well packets, frac fluid reports and that it requires a requires a general membership ( which is created by registering your e-mail address) to purchase its products.
Do you know who owns this site and how it mines the information that it resells to its “membership”? Are the e-mail addresses sold or transferred to any other commercial or advocacy organizations? Do you work for this organization or own an interest in the organization or website.
I ask only because you seem to recommend sites like this from time to time on POB and Shaleprofile.com.
Thanks in advance,
John S
My experience with this site goes back about three years when I grew curious about the seemingly prepostrous claims/ production numbers coming from the Appalachian Basin area. There seemed poor resources online to verify the information, and – in my researching – this site proved to be exceptionally data rich in exactly what I was seeking, namely, who was producing how much via unconventionals in Pennsylvania.
I paid my 20 bucks and got unlimited access for a year, including asking them questions which were promptly answered.
Following years are only ten bucks per.
I have no idea who is behind the site, but I suspect they may be affiliated either with the DEP or, perhaps, academia (Penn State?) because the main thrust of the site seems to involve accurate accounting of royalty payments.
In addition, the search functions seem to imply a user’s familiarity with the Pennsylvania area (mine is minimal).
So, while I have no more knowledge of these guys than you or anyone, I highly recommend the site to anyone wishing to get comprehensive, up-to-the-moment data on Pennsylvania’s unconventional industry.
As an aside, those folks have more charts and graphs than this site, hard to believe as that may be.
… And a quick follow-up …
After I posted a reply to Push, I went to the site and checked production histories for both the Middlesex and Genessee formations in Greene and Washington counties for EQT (huge, recent upsurge).
Took me about ten minutes to scan the data for about 30 wells.
My familiarity has come about after years of interaction, but, all in all John, it’s a prettyt effective information gathering tool.
Ok, Thank you Coffee!
We just got another one of those phone calls, within the hour, that we all learn to dread as we get older. Daddy’s baby brother, the youngest in his family, and not a lot older than I am, since I am the oldest of my generation, died last night of cancer.
Now the reason I mention this here, since he was never a participant in this forum, is that he spent a large part of his life in the fields using the same dangerous pesticides I used so recklessly as a youngster, along with my Dad and HIS Dad my grandfather and just about every body else in the farm biz around here. He also spent a good many years working in and around petroleum products as a mechanic.
We have had a scary number of early deaths in my family in my generation, and too many in the last one, and in each and every case of these early deaths, the individual had a lot of contact with environmental toxins. None of us without this exposure have died young. My only brother died in a house fire, but he had a really bad hacking cough, gonna die serious lung troubles, as the result of smoking and working in a stone quarry where the state and feds didn’t enact serious dust control measures until he was a middle aged man. My next to baby sister worked with dyes and other chemicals in a textile mill, for a couple of decades, before she got her kids raised and was just graduated from college as a middleaged adult when she was diagnosed with a rare cancer strongly associated with industrial chemicals, and died a couple of years later of it.
One of my aunt’s husbands worked in the same place my Dad worked, and got a brain cancer, which lead him to committ suicide. I have a living uncle who is nerve dead from the knees down, which his neurologist thinks is the result of long term pesticide poisoning, since he can’t come up with any other reason. This guy sprayed the orchards too.
I could go on for a while, listing a dozen or more known relatives gone under the same circumstances.
My POINT is that with the exception of those of us who have been exposed to these environmental toxins, we are all either still alive and healthy, or have died in our mid eighties or older of natural causes, excepting a couple who have died as the result of accidents.
Now I know about random statistical clusters, and realize these early deaths COULD be random bad luck.
But I also have AMPLE reason to believe they are bad luck associated with tobacco, pesticides, and industrial chemicals.
I tell it like it is, or at least like I believe it is, regardless of party or personal or business interest. I get pissed when anybody refers to me as a big R republican, lol, because I support curbing immigration so as to help out my local community members live better and to help reduce population growth. When I take a position,such as this one, I don’t pretend to be holding the high moral ground, or wrap myself in the flag.
I call myself a conservative, but I am a follower of the Humpty Dumpty School of Linguistics, and so free to define the term to suit myself, lol. I also get testy when somebody occasionally refers to me as a big D Democrat, although that has not happened more than once in this particular forum.
The R party has got it mostly wrong compared to the D party when it comes to environmental issues, but this is not to say the D’s get environmental regs and policies right all the time.
My condolences OFM. It is an all too common theme; a confluence of the unregulated use of chemicals and environmental toxins and increasing life expectancy. Whoever argues against better regulation of those chemicals and toxins is an ignorant fool.
Thanks Doc,
I mistakenly put this comment here. It should have gone into the open topic thread where there is an ongoing discussion of health and environment. I am going to copy it over there.
We all gotta go, but there’s no need rushing it.
Global Oil Politics
Hofmeister: The Issue of Low Oil Price has Nothing to Do with Shale
“Shale is essential to the global oil picture. I don’t accept any of the nonsense that Saudi Arabia is trying to shut down U.S. shale.
“The Saudis, the Russians and the Iranians [are] continuing to ship money with every barrel of oil they produce, [money] that otherwise could and should be spent on running their countries. Somewhere between $50 and $70 per barrel is being shipped out of the national treasuries of those three countries to maintain this artificial quest for market share. It is pure political pettiness and fear—let me emphasize fear—fear that the Iranians are on a mission and the Russians are helping them, and the only safety valve is Saudi Arabia trying to protect particularly the Sunni world from being devastated by the Shia world.
“I admire the Saudis for what they’re doing but it’s costing them hundreds of billions of dollars to maintain this so-called ‘market share strategy’ when really they’re trying to protect the Middle East from its own self destruction. “… We will see this continue until Russia, Iran and Saudi Arabia have no money left, because they will have spent it all on so-called market share.”
http://www.oilandgas360.com/the-saudis-will-chase-market-share-until-russia-iran-and-saudi-arabia-run-out-of-money-an-exclusive-interview-with-john-hofmeister/
Keep it in the Ground
“The people who swear by keeping it in the ground want to see an end to the oil and gas age. They will impoverish, sicken and ultimately see to it that the world’s quality of life is diminished and deteriorated … . But this notion of putting a burden on the oil and gas companies to change quickly, to think that they’re doing something immoral or wrong, that’s just not real—that’s not the way the world works. There are more people better off because of oil and gas today than who are worse off.”
Gosh, the former president of Shell thinks that we’ll go to hell in a handbasket without his company’s product.
What a surprise.
Which is a very good example of what I’ve been saying: the idea that we’ll be worse off without fossil fuels is simply the FF companies (and their investors, employees, suppliers, etc) trying to protect themselves.
We don’t need FF in the long run, and we should be transitioning away from them as fast as we reasonably can: they’re expensive, polluting and risky (compared to the alternatives).
In summation, a scenario of oil production becoming 0 barrels per day TOMMOROW results in SPR drainage in about 8 months with rationing. Even the EV wackos will agree 6 billion will starve and die in the next, say, 4 months thereafter.
But it’s not going to be tommorow. It won’t be until the laws of physics are defeated so that all will be well. The schedule is thus, because it just is.
“scenario of oil production becoming 0 barrels per day TOMMOROW”
Not relevant
“The people who swear by keeping it in the ground want to see an end to the oil and gas age. They will impoverish, sicken and ultimately see to it that the world’s quality of life is diminished and deteriorated … . But this notion of putting a burden on the oil and gas companies to change quickly, to think that they’re doing something immoral or wrong, that’s just not real—that’s not the way the world works. There are more people better off because of oil and gas today than who are worse off.”
Says a guy who makes his living in the oil business… however you are fractally wrong about what will happen if we get off fossil fuels sooner rather than later. One thing is for sure, the longer we stay with fossil fuels more of humanity will be much worse off in the long run. Fossil fuels may have gotten us to where we are in terms of civilization today and I certainly don’t dispute all the benefits. However we are now in a downward spiral of diminishing benefits and the negatives are certainly beginning to outweigh the positives.
It is difficult to make a man understand something when his salary depends on his NOT understanding it!
Upton Sinclair
What does run out of money mean?
They do have their own CBs.
Printing more money will result in prices rising such that their no better off
For Saudi Arabia, they manufacture basically NOTHING and have basically NO agriculture. They need foreign currency to import EVERYTHING. Except dates, IIRC.
By contrast, Iran is a real country, with agriculture and manufacturing. And exports lots of stuff other than oil. They’d do OK without oil money.
Canada +25 rigs this week, 19 oil + 6 natural gas
Baker Hughs Rig Count – monthly figures to July 2016 + August 26th the latest weekly figure
International Rig Count for July – with the Middle East highlighted
https://s22.postimg.org/mu40i2dk1/Baker_Hughs_International_Rig_Count_for_July_Mid.png
US vs Permian Rig Count – monthly figures to July 2016 + the latest weekly figure – August 26th
https://s22.postimg.org/6qwjs78j5/Baker_Hughs_US_vs_Permian_Rig_Count_August_26th.png
That would seem to fit in with the normal seasonal changes in Canada – if anything a few less than expected.
Yes according to the spreadsheet Canada has had an average of 353 rigs in July, going from 2002 to 2014
(US vs Permian Rig Count – U.S. minus Permain is down -78.7% – on the chart I posted earlier) https://s22.postimg.org/6qwjs78j5/Baker_Hughs_US_vs_Permian_Rig_Count_August_26th.png
This image hosting site seems to be ok if you want to upload larger charts
https://postimage.org/
Choose the chart and then copy and paste the direct link.
(I use Nortons Firewall)
August – Canada has had an average of 379 rigs in August, from 2002 to 2014
“Yemeni forces have fired ballistic missiles at the facilities belonging to the Saudi state oil giant Aramco in the kingdom’s southwest.
The retaliatory attack took place on Friday, hitting targets in Saudi Arabia’s Jizan region and causing considerable damage to the Aramco facilities there, Yemen’s al-Masirah television reported, according to Press TV. ”
http://www.tasnimnews.com/en/news/2016/08/26/1168714/yemen-missiles-hit-facilities-of-saudi-oil-giant-aramco
Alex
Dramatic display of our current Bizzaro world …
Tell me that two/five years ago, the oil price market would shrug off a direct missile attack on KSA’s oil infrastructure … unpossible.
Yet, here we are. Go figger.
coffeeguyzz,
As long as the market remains oversupplied, it tends to ignore such events, especially as they did not affect Saudi output.
Besides, most of KSA’s upstream facilities are in the eastern province and nobody believes that the Yemenies are able to cause any real damage.
You guys will find life much more clear if you simply accept the evidence that there are no markets defining things.
In a free market central banks would not be directly buying company stock.
In a free market you would not have negative interest rates in two of the largest four economies of the world.
In a free market there would be no HFT engines defining about 70% of daily trading volume.
It’s really obvious.
“there are no markets defining things.”
A market is a regular gathering of people for the purchase and sale of provisions, livestock, and other commodities.
A free market is a system in which the prices for goods and services are determined by the open market and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.
Apparently Watcher you don’t know how to define or understand the difference between a market and a free market.
Not really relevant.
Tape bombs about OPEC have been dropped almost daily all year long.
And yet the markets continue
HFT is more of a flea on the dog’s back than the dog of the market itself. This is not to say the flea can’t suck a lot of blood for itself, but in the end, supply and demand, working over time, determine price.
The thing is, there are some REALLY powerful non market type forces in play, namely political power struggles between some major oil exporting countries, wherein oil is being used as a blunt economic weapon.
Furthermore, most of the oil in the world is controlled by national oil companies, or companies under the heel of an authoritarian government, as is the case in Russia.
Government agencies are not noted for being rational when it comes to managing their responsibilities.
The key to survival as a manager in a government operated company is to NEVER ROCK THE BOAT. So expecting nationalized oil company managers to do the rational thing, at least in the short term, approaches absurdity.
Add in the fact that the oil industry is probably by its very nature the slowest moving of all the large heavy industries in the entire world….. nothing other industry, excepting maybe the nuclear power industry, has longer lead times. And even in today’s anti nuke climate, a nuke can be built about as fast as a new oil field can be brought online.
Even so, in the end, given time enough, supply and demand will determine the price, remembering that the price of oil is extremely inelastic in the short to medium term.
It only takes a little “too much ” coming to market to crash the price, and a minor shortfall “not quite enough ” to bring on a big price increase.
Shipbuilding is very slow. Not as slow as nukes (about 20 years from agreeing to build one to bringing it online) but slower than oil.
I have a new post on the Eagle Ford, here.
I have a question on Bakken (and maybe relevant to Texas). If there is an answer already on your site please point me there. On confidential wells they can report that they are producing but do not give production numbers. How does this initially and finally get picked up in your figures. Are the numbers corrected or back dated in some way when they are released from tight hole?
George,
Good question.
Of all the six states I currently cover (North Dakota, Montana, Colorado, New Mexico, Texas & Pennsylvania), for all but North Dakota, every month I accessed the full production history of all wells. So any incomplete reports in the past, are corrected over time.
North Dakota used to be the exception to this, until this week. Although initial production numbers from North Dakota are not revised much later on, some revisions happen. Also, as you say, for confidential wells, I did not have access to the final oil & gas production numbers, after they came off confidential status.
In the beginning of this week however, I’ve updated the interfaces with the North Dakota data. Every July, ND releases an annual production report, that covers the final production numbers in the year before. Now, I’m also using these reports, and I will start showing these numbers from the new US update in 2 weeks onwards.
Therefore, I am currently able able to show the final numbers until end of 2015, and in the future (every August), this will include the numbers for the previous year.
Besides that, I’m now using the newly released excel versions of the monthly production numbers. In the past the column “runs” was a close proxy for oil production, for confidential wells. Now a new column “gas sold”, is also available for confidential wells, and this is a close proxy for gas produced. So until the final numbers are available in the annual reports, I’ll be using these proxies for oil & gas production of confidential wells.
Enno,
thanks for all your works.
One question: do the numbers for average well performance in ND change considerably when statistics for confidential wells are finally released?
Thanks Alex,
“One question: do the numbers for average well performance in ND change considerably when statistics for confidential wells are finally released?”
I have not checked the difference yet, but I expect it to be small. The reason is that in the past, the total production from all wells (incl confidential wells) I had, came very close (<2%) to the total production reported by the NDIC.
Also, the "runs" I used as a proxy is a very good one, as it is the official number of barrels that were sold from the well. Only the oil that stayed behind in the oil tanks on the well site isn't counted, which is a one-time occurrence. I estimate the size of this is in the order of 1000 bo on average. So I did probably under report confidential well productivity by this amount. There is even something to be said for excluding this oil, as this amount of produced oil will not be sold until the end of the live of the well I guess.
In 2 weeks, with my new US update, if you select North Dakota, you'll be able to see for yourself the final well productivity for production in the years <= 2015, and you can compare the results with one of my past ND updates.
Thanks!
Typical Bakken tank size seems to be 400 barrels. Another tank for production water.
It’s hard to imagine things getting better in Venezuela before they get even worse.
This article has some good info on what’s going on in the oil industry there.
http://www.usatoday.com/story/money/markets/2016/08/27/doomsday-inevitable-venezuela/89335716/