OPEC Production Still Increasing

The July OPEC Monthly Oil Market Report is out with all OPEC Crude Only production data for June 2015.

OPEC 12

Crude Only production for the entire OPEC 12 as up 283,000 barrels per day in June to 31,378,000 bpd. But that was after May production had been revised up by 120,000 bpd. So counting May’s revisions and June’s numbers, OPEC production was up 403,000 bpd from what was originally reported last month.

Iraq

The biggest gainer, by far, was Iraq, up 198,600 barrels per day over May to 4,007,000 bpd. It is interesting to note that Iraq via “Direct Communication” say they only produced 3,591,000 bpd in June, 416,000 bpd less than what “Secondary Sources” said they produced.

Saudi Arabia

Saudi Arabia was up 48,400 bpd in June to 10,235,000 bpd. That is just over one half million barrels per day above their 2014 average.

UAE

The United Arab Emirates barely increased production in June, up 6,800 bpd to 2,855,000 bpd.

Kuwait

Kuwait was the only one of the big four to decline in June. They were down 9,000 bpd from May to 2,703,000 bpd and down 41,000 bpd from their peak September of 2013.

Iraq et al

I call Iraq, Kuwait, the UAE and Saudi the big four because since the first half of 2008 they have been responsible for keeping OPEC production almost flat since 2008. The first half of 2008 these four countries averaged 16,626,000 barrels per day. For the first half of 2015 they averaged 19,201,000 bpd for an increase of 2,575,000 bpd.


Algeria et al

The other eight also rans have been in a steady decline since 2008. In the first half of 2008 these eight countries averaged 14,615,000 bpd. In the first half of 2015 they averaged 11,531,000 bpd for a decline of 3,083,000 bpd.

All OPEC nations, during the first half of 2008, averaged 31,240,000 during the first half of 2008. During the first half of 2015 all OPEC nations averaged 30,732,000 bpd for a decline, so far, of 508,000 bpd. But OPEC production dropped significantly after July 2008 and ended the year averaging 31,066,000 bpd. Their high, since 2000, was 2012 when they averaged 31,143,000 bpd. I think it highly unlikely they will reach that average this year.


Secondary Sources

Here are the data for OPEC as reported in their Monthly Oil Market Report.

Non OPEC Supply

Just one other item of note. OPEC expects Non-OPEC total liquids to increase by just 300,000 bpd in 2016. They expect the US to be up 380,000 bpd.

The page OPEC Charts has been updated with the June data for all 12 OPEC nations.

The below link was sent to me by Joel Kopel and I am extremely thankful to him for the effort. It is a 1 hour 27 minute video lecture by Mr. Vladimire Milov, founder and president of Russia’s Institute of Energy Policy. The lecture lasts 40 minutes and the rest is a question and answer period. I found that part even more interesting than the lecture.

I think this is the most rewarding video I have watched in many months. It is a real eye opener about the workings of Russia’s oil and gas energy policy. Some parts were a real surprise, even a little shocking for me. And for what it’s worth, Mr. Milov says 2015 will be the year Russian oil production begins to decline.

Russia’s Energy Market: Under Sanctions and Confronting a Low Price Environment

Mr. Vladimir Milov, Founder and President, Institute of Energy Policy
The Center on Global Energy Policy and the New York Energy Forum hosted a presentation and discussion with Mr. Vladimir Milov, founder and president of the Institute of Energy Policy. Mr. Milov has served in Russia as Deputy Minister of Energy (2002), adviser to the Minister of Energy (2001-2002), and head of department at the Federal Energy Commission (1999-2001). Since leaving the Russian Government in 2002, Mr. Milov has become active in Russian politics, serving as Chairman of the “Democratic Choice” opposition party.

The lecture was taped in January 2015. Mr. Milov mentions that Russia hopes that the sanctions would be lifted in July of this year. They were not: Russia and “Crimea & Sevastopol” sanctions renewed and Russia slams EU sanctions renewal as pointless ‘blackmail’.

If you are at all interested in Russian oil and gas production, or even peak oil in general, you should definitely watch this video. (The podcast is just an audio of the same lecture.) I would like to get some input from some of the Russian experts here. I imagine opinions will vary. But I loved it and saw no reason to question any of Mr. Milov’s opinions.

__________________________________________________________

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442 Responses to OPEC Production Still Increasing

  1. MarbleZeppelin says:

    So is increasing OPEC production a precursor to another year of low oil prices?

  2. Steve in CO says:

    So to summarize: Bakken up, Texas up, OPEC ‘big four’ up. Growth-oriented producers are doubling down across the board, into the teeth of negative fundamentals and an associated poor pricing environment. The only significant demand driver is China, which is furiously trying to prop up what is universally recognized as an asset bubble. Wow.

    It is almost as if producers are trying to catch that wave while it lasts. But OPEC will catch it better than LTO producers, because OPEC is closer to China than we are. I think it’s really that simple.

    What kind of reckoning are we in for when China well and truly comes off? China was actually sort of the starting gun for the 2008 implosion when their flood of Olympics-driven buying came to an end. Are we ready for global financial crisis 2.0?

    EDIT — On Texas, I was referring back to the yoy increase that was widely reported last week, and which Ron covered with well-considered qualifications. Not an actual increase, and so my comments above are less pertinent. I remain surprised at the resiliency of global production.

    • AlexS says:

      Steve in CO says: “The only significant demand driver is China”

      The most significant, but not the only driver

      Annual change in oil demand by region (mb/d)
      Source: OPEC MOMR July 2015

      • Steve in CO says:

        AlexS —

        Excellent point which adds nuance to my ‘instant reaction’. US producers can be seen to double down against US demand, while OPEC doubles down against China demand.

        US scaled back economic stimulus last year, and it has achieved a modicum of steady growth domestically. But if China’s QE implodes, it looks like they will need to, in effect, hand the baton back to the US to sustain the global economy. The US presumably would prefer not to go back to the stimulus well, but the first to benefit would be LTO producers, ironically.

        • BC says:

          Steve in CO, if one looks at real GDP per capita for 65-70% of the world economy, the rate decelerated below the historical “stall speed” not coincidentally after the point that the price of oil peaked and commenced the crash to date.

          China’s “alleged” ~6% real growth per capita has contributed 45-75% to incremental global growth since 2008-09, but China’s growth is decelerating (I submit that growth is no faster than 2-3% and well below 1% potential real GDP per capita), whereas US growth is not poised for “escape velocity” but rather trending at ~1% real per capita and ~0% real per capita since 2007-08.

          That is to say, world real GDP per capita is at a permanent post-2007 structural trend rate of less than 1% and eventually 0% to negative for the post-Oil Age epoch hereafter.

          Most of us are still missing the reality of the global situation in terms of the decelerating per-capita rate of change of growth of real GDP and oil production and consumption.

          The net liquid fossil fuel energy costs of extracting energy to maintain real GDP per capita are now prohibitive.

          Therefore, growth per capita is over, therefore, growth of real revenues, profits, debt to wages and GDP, purchasing power of labor, gov’t spending for social goods, and capitalism is over; we just don’t collectively know it yet, and we’re not supposed to know it.

          • Steve in CO says:

            Agreed.

            But if (to paraphrase) ‘we can’t handle the truth’, why tell the truth? You will just end up like those poor saps in Greece who succumbed to Syriza because Syriza, you know, had a ‘secret way out.’ Except they admitted last week they don’t have a secret way out.

            Channeling Gail Tverberg (and a few others) the end of growth really means the contraction of credit. It’s hard to lend at interest if the underlying asset has declining productivity/value.

            It seems to me the US & China can pass the baton for a couple more cycles at best.

            • BC says:

              Steve in CO, rather than the US and China passing the baton, the historical precedent and the imperial imperative is more likely that trade and diplomatic relations between the US and China will further deteriorate and collapse as China’s domestic financial, economic, political, and social conditions worsen, providing the eventual rationalization for engaging the last-man-standing contest between the West and China for the world’s remaining scarce resources.

              IOW, the baton will look more like a big Anglo-American imperial stick wielded in the Pacific, Middle East, Central Asia, and Africa.

              • old farmer mac says:

                Hi BC,

                There is a very real possibility that you are right about an East West confrontation on the grand scale. I personally think it is actually likely.

                This brings us to a point often made by generals for as far back as we have records.

                If a country is going to start a war , during a time of declining power and resources it must do so while it is still strong enough to hopefully bring the war to a successful conclusion.

                No major power will directly and deliberately attack another nuclear armed major power unless things get to be very desperate indeed.

                So most or maybe even all the fighting baked in will be with conventional weapons.

                China is the home now to the heavy industry that enables a country to fight a large scale protracted conventional war but she lacks a blue water navy and the ability to project conventional power long distances – for now.

                I fear we live in very interesting times.

            • Ves says:

              “You will just end up like those poor saps in Greece who succumbed to Syriza because Syriza, you know, had a ‘secret way out.’ Except they admitted last week they don’t have a secret way out.”

              Steve in CO,

              And why do you think Sryzia was actually doing anything, besides talking, for a way out? If the party that you are negotiating knows that you are not doing anything, besides talking, then they put you back to “freezer”

              • cytochrome C says:

                “Germany just killed its golden goose. And boy, is that ever stupid. They could have had -again, relative, we’re in a recession- peace and prosperity, and they’re blowing it all away.

                Tsipras for obvious reasons cannot talk about the threats he’s been receiving, but he did give up some hints early this morning:

                • “We took the responsibility for the decision to avert the most extreme plans by conservative circles in Europe..”

                • “I promise you that as hard as we fought here, we will now fight at home, to finish the oligarchy which brought us to this state.”

                • “We resisted demands for the transfer of state assets abroad and averted a banking collapse which had been meticulously planned.”

                • “… decision to avert the most extreme plans by most extreme circles in Europe”

                The Italians and Spanish and French have noted every word of this, and more. Europe as it is, is already over. Everything from here on in is a mere death rattle. “

                • Ves says:

                  Is that writing something from Obama’s “hope & change” speech files 🙂

                  cytochrome, don’t believe bullshit rhetoric that we are fed daily. Greece is unfortunately financial corpse of current debt based monetary system that is put back into freezer for the next 3 years.

                  • cytochrome C says:

                    True, as long as you stay in small enough box.
                    However, that is not a given.

                • Here in Spain the majority is feeling very upbeat. The tourist season is booming, the economy is growing, and the threat posed by the extreme left seems to be subsiding. It was very good to see the way the Greek problem was handled.

                  • Declan says:

                    What’s the unemployment rate in Spain, 24%?

                    What’s not to feel good about?

                    I guess this is what happens when things fall apart slowly, we just get treat the new position as ‘normal’ and feel upbeat about absurdly high levels of unemployment because things are improving (until the next crisis comes along).

                    I also find it amazing that anyone in Spain would feel positive about the idea of countries leaving (being forced out of) the Euro moving from unthinkable to official policy!

                  • People feel upbeat because unemployment is going down, and the economy is growing. They can see it’s getting brighter.

                    Right now I’m listening to the parliamentary debate about the Greek rescue. I’ve heard the extremist ultra radical Podemos type spout his nonsense, inflame hatred, and skip over Tsipras’s irresponsible behavior. The UPyD leader was very critical of Tsipras, but also said it was evident the Greeks are not to be trusted, and she wants to hear from the government what’s going to be done about the Greek mess in the future, because it’s going to get worse. The overall trend expressed by deputies is support for Spain to give €10 billion to Greece, but they want guarantees that Greece will straighten out. The only ones trying to undermine the European project are the extreme left and extreme right. The key is to take them out.

              • ezrydermike says:

                An historic betrayal has consumed Greece. Having set aside the mandate of the Greek electorate, the Syriza government has willfully ignored last week’s landslide “No” vote and secretly agreed on a raft of repressive, impoverishing measures in return for a “bailout” that means sinister foreign control and a warning to the world.

                Prime Minister Alexis Tsipras has pushed through parliament a proposal to cut at least 13 billion euros from the public purse – 4 billion euros more than the “austerity” figure rejected overwhelmingly by the majority of the Greek population in a referendum on July 5.

                These reportedly include a 50 percent increase in the cost of health care for pensioners, almost 40 percent of whom live in poverty; deep cuts in public sector wages; the complete privatization of public facilities such as airports and ports; a rise in value-added tax to 23 percent, now applied to the Greek islands where people struggle to eke out a living.

                http://www.truth-out.org/opinion/item/31842-the-problem-of-greece-is-not-only-a-tragedy-it-is-a-lie

                • The Greeks need to reform and abandon their left wing tendencies, or they need to leave the eurozone and learn to live as a third world workers’ paradise. But they can’t be in the eurozone and keep on gobbling up aid.

                  If they reform the rest of Europe will kindly consent to debt rescheduling. But reforms have to be turned into law.

                  Greece is a democracy, so it’s their choice. If they don’t like it they can change Tsipras and get out of the euro.

                  • It is their choice. I think its better for the EU if they leave. We can tale the middle class and those who don’t like being ruled by communists. The communists can stay and rage and destroy the country. It’ll serve as a lesson, to remind people in Europe what communism is like.

                  • Sick of You says:

                    The Greeks need to curb graft,fraud,waste and abuse. Sorry but these problems have no political stripes. I’d go into the horror of the Franco regime but I don’t have a few hours to spare…

                  • You got to be living in an alternate reality to mention the Franco regime, this reminds me of Spanish communists who call me worm and try to justify Castro’s crimes by mentioning Batista.

                  • DuaneX says:

                    Fern, you keep saying “they have a choice, it’s a democracy.” Well it seems pretty clear they already voted their choice, only they didn’t get it.
                    How ironic that the EU is printing 60 billion euros per MONTH, and could have covered the pending debt repayment with the mud off their boot, but instead chose to grind that boot into Greece’s neck.

                  • The vote was sheer irresponsibility by the Syriza types, who failed to explain it was a little bulkshit quickie referendum by people asking for money. The ideas being put out by the left are sheer buffoonery. We don’t have to pay the Greeks a dime. If they don’t like it they can leave. Good riddance.

                • old farmer mac says:

                  I am mostly just listening to the Greek debate rather than commenting since I don’t really know a whole lot about it IN DETAIL.

                  But so far as I can tell , the Greeks have in the words of Margaret Thatcher, paraphrased, run out of other peoples money.

                  The reflexive response of any liberal is to make fun of anything said by a conservative ( and vice versa ) but the undeniable fact is that they have been borrowing too much too long and they are fucking busted.

                  There comes a day when you just can’t ask other people to support you ”after your accustomed lifestyle ” any longer and that day is past for the Greeks. I do not know WHY , precisely , they borrowed so much, but it appears the rest of the Euro community was eager to lend it to them- up until recently at least. So the blame is perhaps not one hundred percent their own. To my way of thinking barkeepers are partly responsible for alcoholism.

                  Even the simplest thought experiment illustrates that the argument made by people who say it is only magically printed pixie dust in question is complete bullshit.

                  If governments could just create money out of thin air any time to any extent then there would be no IRS in the USA or any need for tax collections of any sort anywhere anytime.

                  When money is printed it flows first to SOMEBODY – whoever is first in line with his beggars cup out. (Beggars include megabanks and multinational corporations worth billions. ) That person gets full value for it. The people who get it second get less value. Eventually the money circulates widely and the value gained in the early stages of this circulation is negated by the small loss suffered by the entire citizenry as individuals.

                  If the Germans decide to print a few hundred billion Euros, they have a CHOICE as to where they spend them- on GERMANS OR on GREEKS.

                  I paid taxes all my life supporting people who refused to behave as if they have any fucking sense. One of my nearest neighbors bought a DOZEN new cars over the years and beer and cigarettes on a daily basis.LOTS of beer and cigarettes. When he had a heart attack on top of his lung cancer he went to the hospital I go to in an emergency and the hospital had to write of the entire bill. The last time I set foot inside it before getting on old age welfare they charged me eighteen hundred bucks for scan that took thirty minutes using a ten year old machine operated by a community college trained technician – and by fucking sky daddy I had to pay every DIME out of my own pocket. That million dollar machine operated by forty thousand dollar technicians has taken in from four or five thousand bucks a day on up to twenty thousand some days for the entire ten years.

                  So the hospital can afford to write of some beggars bills- because they overcharge people like me. Because you see, I am an ant rather than a grasshopper. I have NEVER owned a new car or truck.

                  There IS A REAL LIMIT to what can be paid for when it is being given away. If the rest of the Euro community wants to give away more then they have the choice as to WHO they give it to. They in their own clearly stated opinion have given the Greeks ENOUGH.

                  I feel some compassion for the Greeks , given hat they do not seem to understand WHY they are between the devil and the deep blue sea.

                  But they are going to have to live within their means because the rest of the world is not able to support them living beyond their means without setting the example for the next hard up country in line expecting charity on the same level – then the next one after that.

                  FER SKY DADDY’S SAKE , this is a PEAK OIL forum, and the large majority of the regulars who comment here, as well as our host, understand the VERY real limits to growth and that the ENTIRE world is bumping hard into those limits.

                  It will not be too much longer before the Germans themselves are having a tough time. It won’t be too much longer before the USA is in deep financial shit. We are already as a matter of fact but so far we are like WILEY COYOTE , and continue to be able to walk on air- SO LONG AS WE DON”T LOOK DOWN..

                  Most of our American ACTUAL government obligations are not even OFFICIALLY acknowledged. The regulars here generally understand this undeniable fact. The kindest thing I can think of to say about the ones who do not is that they somehow found their way into a discussion above their grade level and need to listen rather than talk when it comes to government finances.

                  And we Yankees are generally acknowledged as being the worlds richest and most powerful country- although a few small countries are richer per capita. I for one do not expect their riches to last anymore than I expect it to always be a bright sunny morning in America.

                  The whole world is head on for a hard crash into the concrete bridge abutment of resource limitations. Greece just happens to be the first casualty among modern western nations. There will be a lot more such casualties within my remaining years if my own luck holds.

                  Buckle your seat belts and put out your smokes and understand that we are in for a rough ride and that a LOT of people are not going to make it thru the next hundred years without suffering REAL hardships. A lot of people are not even going to survive.

                  I am with Fernando on this one.

                  • Nick G says:

                    Mac,

                    Just so you know: hospitals markup tests by 5x to 10x. Then insurance companies discount them by 80% to 90%.

                    People without insurance get hurt, badly, by this system. It’s a very good idea to get insurance, to protect yourself.

                    Now, of course, you have Medicare. You might want to consider getting a Medigap policy.

                  • Dennis Coyne says:

                    Hi Old Farmer Mac,

                    On Greece, I disagree with you and Fernando.

                    The fault lies with borrower and lender. The lender should be careful when lending, the German banks were not very careful before the financial crisis because of a false sense of security from the Euro.

                    The response of the European Union and the IMF was to impose policies which just made the debt situation worse, when an economy contracts due to unemployment rising to 25% due to austerity measures, the government will not be able to pay down debt. The economics is very simple, but Europeans (and conservatives) seem not to understand this.

                    The Euro was a very dumb idea, it only works if there is a political union first, creating a monetary union without a political union puts the cart before the horse.

                    The idea of transferring money from an area which is doing well to an area that is doing badly economically happens all the time in the United States.

                    For example, during the savings and loan crisis from 1986 to 1995 in the US about 132 billion of taxpayer money was used to bailout failed banks (about 1000 out of 3200 banks nationwide). About 40% of total bank failures occurred in Texas in 1988 the peak year of the crisis.

                    About 29% of the assets of failed US banks from 1980 to 1994 were from Texas banks(about 44% of all Texas Bank assets were in Banks that failed over the period).

                    A substantial portion of the 132 billion dollars used to bail out the 5 states with the highest asset value failed banks (75% of US total). These states were Texas, Illinois, New York, Pennsylvania, and Massachusetts with 60, 35, 32, 17, and 10 billion dollars in failed assets of a $206 billion US total.

                    In the US where there is both a political and monetary union the banks in these states could be bailed out without anybody questioning the character of Texans or New Yorkers.

                    If Greece was not a member of the Eurozone, it would have control over both its fiscal and monetary policy and could decide democratically how best to deal with an economic crisis.

                    On one point I do agree with Fernando, Greece should leave the Eurozone, but not because Europe would be better off, simply because it would be better for Greece. Its leaders would be smart to secretly prepare to reintroduce a Greek currency.

      • coffeeguyzz says:

        Alex

        I want to thank you for your ongoing contributions to this site.
        Your charts regularly ‘get’ and convey different, relevant aspects in the oil/gas world.

        Muchos gracias.

        • AlexS says:

          ¡De nada!

        • shallow sand says:

          I second that motion. I always make sure I read AlexS posts. Filled with facts. Thanks!!

        • Doug Leighton says:

          Totally agree, Alex’s contributions are always excellent.

        • AlexS says:

          Тhank you gentlemen. It’s a privilege for me to post in Ron’s excellent site. And I always enjoy reading your informative and thought-provoking posts.

      • The ned.org link includes the following:

        “Russia, Venezuela, China, and Saudi Arabia are among the most influential authoritarian states that are seeking to reshape the international order. These regimes may disagree on many things, but they share the objective of obstructing the advance of democracy and weakening the influence of democratic principles in the world.

        The established democracies have been slow to recognize the increasingly determined challenge from today’s authoritarians, perhaps because they hope that these regimes will be undone by their flaws.

        But given the resilience that the authoritarians have displayed so far, it would be imprudent for the democracies to underestimate the seriousness of the dangers that they pose. …… Corrales, Andrew J. Nathan, Lilia Shevtsova, and Frederic Wehrey discussed the multifaceted challenges presented by these regimes.”

        The close relationship between the Cuban dictatorship and the Venezuelan Chavistas seems to escape these gentlemen. Cuban agents and mentors are what enables Maduro’s survival and controls his behavior.

        • Boomer II says:

          The established democracies have been slow to recognize the increasingly determined challenge from today’s authoritarians, perhaps because they hope that these regimes will be undone by their flaws.

          I think countries do recognize various international threats. But having the tools to deal with those threats is limited.

          We haven’t been able to control the world with either wars or economic sanctions.

          • Im not into controlling the world. Nor am I into preemptive wars like Iraq 2003. But sanctions seem to have worked on Iran. The key is to have European, Canadian, Japanese, and other key countries’ cooperation.

            Here’s a recent post I put up discussing the view within the US War College about Venezuela:

            http://21stcenturysocialcritic.blogspot.com.es/2015/07/opinion-about-venezuela-within-us-war.html

            • Boomer II says:

              The key is to have European, Canadian, Japanese, and other key countries’ cooperation.

              Wasn’t that the principle behind forming the United Nations? And yet you have US right wingers who are very suspicious of the UN.

              Getting global cooperation on anything seems to lead to thoughts of conspiracies on the part of some folks.

              • I’m not a right winger. I do like the Iran deal, and I watch Fox News when I’m sick and need to throw up.

                On the other hand, I think it’s better to squeeze the Castros. That one eyed psychopathic princeling they got lined up to inherit power from his father is pretty dangerous.

  3. shallow sand says:

    Interesting to me is how KSA’s projected deficit for 2015 keeps growing. If I am not mistaken, they started out estimating $39 billion. Per recent CNBC article, their estimate is now $130 billion. They just issued some bonds also. If war with Yemen drags on, this will cost KSA big $$. Commentator states by 2018 or 2019, reserves will be gone, unless they decide to continue to borrow.

    Before someone blinks, there will surely be a record amount of deficit spending by oil producing nations and companies.

    As a small producer, just have to keep telling yourself that the huge jump in world wide production is not coming cheaply. Can’t last forever, and low price will stoke demand to the point it can’t stay ahead.

    Could be over two years though.

    • coffeeguyzz says:

      Shallow

      The house of Saud has many enemies, some mortal and implacable.
      In any type of conflict, from the macro to one-on-one, if an opponent senses a vulnerability (ie., a boxer knowing his opponent was hurt by that last punch), a huge, concerted effort may arise to press home the advantage.

      Although the western media is pretty much ignoring it, the KSA seems to be faring very poorly in their conflict in Yemen. Should reports of attacks within KSA prove true – and continue to grow – the next few months may be very interesting, indeed.

      • shallow sand says:

        coffee. I have read much of the KSA military are from Yemen.

        I wonder how that works.

        I readily admit I know little about KSA, but have had the feeling if anyone attacked them, without another county’s help they would be in big trouble.

      • Jeffrey J. Brown says:

        Article on palace intrigue in Saudi Arabia:

        http://www.usnews.com/news/articles/2015/05/04/saudi-palace-intrigue-sparks-speculation

        King Salman bin Abdul-Aziz Al Saud’s unprecedented changes in the Saudi line of succession that benefit his son is raising questions about what might come next in the royal family. A traditional and conservative institution, the House of Saud has seen more personnel changes in the last 100 days than at any previous time. These shifts come as Salman pursues the most assertive foreign policy in recent Saudi history, projecting military power as no king has tried since the 1930s.

        Without warning, Salman removed the sitting crown prince, Muqrin, his half brother, and promoted the third in line, Prince Mohammed bin Nayef, his nephew, to No. 2. Salman made his own son, Mohammed bin Salman, the new No. 3 despite a lack of experience as a senior policymaker. Muqrin has since publicly proclaimed his allegiance to the new team, but without providing any explanation for his removal.

        And an excerpt from “On Saudi Arabia,” published in 2012:

        What scares many royals and most ordinary Saudis is that the succession, which historically has passed from brother to brother, soon will have to jump to a new generation of princes. That could mean that only one branch of this family of some seven thousand princes will have power, a prescription for potential conflict as thirty-four of the thirty-five surviving lines of the founder’s family could find themselves disenfranchised. Saudis know from history that the second Saudi state was destroyed by fighting among princes. Older Saudis vividly recall how this third and latest Saudi state was shaken by a prolonged power struggle between the founder’s two eldest sons after his death in 1953.

        Today’s Saudi Arabia is reminiscent of the dying decade of the Soviet Union, when one aged and infirm Politburo chief briefly succeeded another—from Brezhnev to Andropov to Chernenko—before Gorbachev took power with reform policies that proved too little too late. “They keep dying on me,” Ronald Reagan famously said of the four Soviet leaders he dealt with in less than three years. The next U.S. president almost surely will have the same experience with ailing Saudi rulers.

        • BC says:

          Jeffrey, as you well know, the State Dept., Pentagon, and Israelis have numerous contingencies in place to rationalize invasion and occupation of the Saudi peninsula to “protect the sacred sites of Islam” in order to maintain “order and stability” in the oil-rich kingdom and her emirate neighbors.

          But we all know the real motivation and which countries the West wants to prevent taking our place “protecting” the oil emirates.

          • TechGuy says:

            BC Wrote:
            ” the State Dept., Pentagon, and Israelis have numerous contingencies in place to rationalize invasion and occupation of the Saudi peninsula to “protect the sacred sites of Islam” in order to maintain “order and stability””

            Iran, Iraq, Yemen, Libya, Lebanon: Pillars of Stability after western occupation/regime change. 🙂

            KSA is spending boatloads of cash in order to defer an Arab spring. Of course if KSA runs out of cash, they could begin to liquidate US and EU investments to support KSA state spending.

  4. I put in a link to an article about Saudi Arabia borrowing money because they were running short at current prices. This tells me they won’t have the ability to hold prices down for years like they did in the mid80s.

    I also noticed the OPEC secondary sources say Venezuela is producing at the same rate, but everything I read and hear tells me production is dropping. For example, a few days ago I read a letter from a mid level pdvsa employee who reported pdvsa isn’t paying its contractors, and that some haven’t been paid in about a year. The guy wrote he was providing the information because production was hurting, equipment was falling apart, and he didn’t want pdvsa employees to have a terrible reputation in the industry when the truth is revealed.

    Finally, Milov is good, but he knows a lot he didn’t discuss. That talk was aimed at a USA audience, and some of it was material intended to please them. For example, when he discussed Crimea he failed to explain the fact that Russians think it’s Russian, they have been taught for centuries it was Russian territory, and that it has very nice beaches (as far as Russians are concerned). Maybe he should have explained that Russia won’t give it up.

    • AlexS says:

      Fernando,

      You are right about Milov. He is now much more an opposition politician than an expert.
      He is a fierce critic of Putin, and is clearly biased

      • Clearly biased? What the hell does that mean? Isn’t Alex biased with his opinions? And Fernando is one of the most biased people I have ever read. And yes, I am politically biased, I am a liberal democrat. When politics is involved every human being on earth is biased. We all have our political opinions and when we read something that goes against our politics, we scream “Bias, bias, bias”.

        But when you say a person is biased you are just giving an excuse for not giving an argument to counter that persons argument. When you cannot muster an intelligent counter argument you just scream bias and hope that sways the argument that the guy doesn’t know what he is talking about.

        But since he gave his argument and you did not, I am far more swayed by the argument that was given instead of the one that was not given.

        Edit: I think he was spot on about Putin. But not being an egotist like Putin or a supporter of his plans to take over the Ukraine I am clearly biased.

        • Strummer says:

          Milov is a neoliberal. Nothing wrong with that, it’s just that Russia has had its experience with neoliberal economics (large scale privatization, destruction of state authority, creation of the oligarch class, etc…) in the 1990s, and it was those neoliberal economics that nearly destroyed Russia. After this experience and suffering, no sane russian would want to go back to that. That’s the reason why these figures like Milov or the late Nemtsov have essentialy zero public support. It’s easy to look at Russia from thousands of miles away and declare Putin a “dictator” without the knowledge of what happened in the 1990s and the consequences. And you don’t need to read russian sources… just read this piece by Jeffrey Sachs, one of the main architects of the russian economic reforms, on how Russia was betrayed by the west:

          http://jeffsachs.org/2012/03/what-i-did-in-russia/

          That betrayal is now embedded in the russian collective memory, and ordinary russians will never again trust the west and they will never support someone like Milov who clearly represents western interests.

          • JR_Ewing says:

            I don’t know how anyone could possibly declare a democratically elected president with an approval rating of 89% as a dictator, but they keep trying.

            • BC says:

              JR, :-D.

              As the old saying goes, in a dictatorship, everyone “votes” for a dictator, and it isn’t how many “votes” a candidate receives but who counts the “votes”.

              In western “democracies”, it’s not how many “votes” are cast or who counts the “votes” per se but who can afford to “buy” the “votes” or the “best gov’t that all the money of the top 0.001-1% can afford”.

              The US has a plutocratic-oligarchical system in which there is “no representation without taxation (of the top 1-10% who pay 70-75% of all federal, state, and local income taxes).”

              JR, among y’alls’ awl-industry peers, do you prefer Range Rovers or Bentleys?

              http://money.cnn.com/2015/03/30/autos/most-expensive-suv/

              http://bentayga.bentleymotors.com/en/the-new-bentley-suv.html

            • Don Wharton says:

              Putin has stolen all major media resources. That means the Russian people don’t have a clue other than what Putin’s agents tells them.

              • Aleksey says:

                I dunno, perhaps I’m a Russian with no clue, but I don’t see Putin’s agents around me, and I can read any English media resource. Are all of them stolen by Putin?

                • Don Wharton says:

                  Alexsey, If you are literate in English and spend substantial time accessing media outside of Russia then you are likely to very much have a clue. However, my understanding is that there is very little diversity of major media within Russia in the Russian language. Putin’s reported popularity is in the order of 80% because the average Russian does not have a clue about the magnitude of mismanagement within Russia or the misrepresentations about what is real with the various military efforts or the reasons why so many sanctions are being imposed on Russia. I presumed that you can have an informed discussion about any or all of these issues. But I doubt that the average Russian is well informed at all. There needs to be a richly diverse media establishment with very little fear of reprisals for stories that contradict the propaganda from the central government. That very much exists here. My understanding that it does not exist in Russia.

                  • Aleksey says:

                    It would be pretty naive to presume that by mere virtue of English literacy I would agree with dominant Western narrative on Russia. If your idea about Russia comes from “richly diverse media establishment” you enjoy, then I would take the liberty to advise you to closely follow Fernando’s comments. As he says he worked in Russia for some time, and it shows, he knows a little bit beyond what you can find in major media.

          • cytochrome C says:

            Sachs’s policy’s and reforms was one of the factors Russia lost millions of people after the fall of the Soviets.

            It was not very street smart of Jeffery, and quite naive, as he drunk the neoliberal Kool Aid. He let the rape and scrape looters have full reign.

            It is a good character trait that he now recognizes this.

            The population of Russia peaked at 148,689,000 in 1991, just before the breakup of the Soviet Union. Low birth rates and abnormally high death rates caused Russia’s population to decline at a 0.5% annual rate, or about 750,000 to 800,000 people per year from the mid-1990s to the mid-2000s.

          • Russia never implemented neoliberal policies. I was there at the time, and I could only glimpse a small piece, but it was evident that Yeltsin didn’t understand what he was supposed to do.

            I asked a close Russian friend what the hell was Yeltsin thinking when he allowed the oligarchs to steal so many companies, and he told me Yeltsin was focused on ensuring communism never returned, but he actually believed the soviet school lessons he had received, so he set out to create a new class of oligarchs who would invent Russian capitalism.

            At the same time he allowed a surge in corruption and never dared privatize most properties, nor create the legal framework and independent judiciary neoliberalism requires. So the oligarchs stole everything they could, murdered anybody who opposed them, and the people got screwed.

          • Opritov Alexander says:

            “That betrayal is now embedded in the russian collective memory, and ordinary russians will never again trust the west and they will never support someone like Milov who clearly represents western interests.”-
            You’re absolutely right.

        • AlexS says:

          I don’t want to discuss politics here, but I agree with all that said Strummer, JR_Ewing and clueless

    • shallow sand says:

      Fernando, I read your link about KSA borrowing money.

      I agree with you about Venezuela. I don’t see how oil production there could be flat given the how poorly the government functions.

      What companies are helping PDVSA with technical matters? Can Venezuela go it alone with its oil and gas industry in the event the foreign help is not paid?

      • Shallow, there are several tiers of help. The most effective is delivered by outfits such as Halliburton, Schlumberger and Wood Group. But I understand they aren’t getting paid.

        The second tier is delivered by smaller companies, many owned by Venezuelan boligarchs. There are also Chinese, Russian, and Cuban outfits providing some services, but those tend to be low quality and involve huge surcharges (there’s a tremendous amount of corruption).

        The third tier is delivered by companies such as Repsol and Chevron Texaco, which continue to help out hoping the government will fall. Most foreign companies don’t generate real cash flow in Venezuela, they have paper profits but they can’t get the money out. This is one reason why the official rate isn’t devalued. And why the black market rate is running at 617 bolivars to the $.

        Regarding the chaos, I’m going to see if I can load an exhibit shown by the interior ministry last night, they were briefing the media about efforts by security forces to retake the Cota 905, an area near downtown Caracas. They mobilized 200 national guard (they say the total manpower used was 2800). The firefight lasted several hours, and by the end of the day the government reported 17 dead. However, there was a report the gang in control of Cota 905 had moved their weapons towards El Cementerio, and last night there was a firefight there with five killed.

        • shallow sand says:

          Thanks Fernando. I did some Internet reading on the Venezuela oil industry. A few topics include:

          ExxonMobil obtained a 1.6 billion dollar judgment concerning the confiscation of their assets by the government.

          HP was not getting paid, shut down their rigs. The government confiscated the rigs.

          An engineer in Venezuela is now effectively making $400 per month. Most have left.

          I know all of the above is old news and that you have referred to these stories or similar many times.

          Hard to see how production is not falling there.

    • clueless says:

      Fernando. You said that Russians were “taught” that it was part of Russia. In a like manner, Americans are “taught” that the New England states are part of America. Catherine the Great made the Crimea a part of Russia many years before the American Revolution made the New England states part of America. Khrushchev, for their valor in WWII, illegally “gave” [no vote in Russia, no vote in the United Nations] Crimea to the Ukraine [a part of the USSR] not knowing, of course, that the Ukraine would not always be Russian. So, with Crimea having the only Russian warm water port for the military, what would any competent leader do? I know what the US would do. Just read about the Civil War.

      • Yes clueless. I happen to agree with the Russians in this case, Crimea is Russian. But what I tried to convey was the idea that no matter what the U.S. elites think and their media propaganda says, they are going to run into a solid wall. The Russian people are taught at a very young age about Russian history, and what their borders are supposed to look like.

        And I don’t think a Russian leader can allow key Russian territory to fall in the hands of people allied with France, UK, and Germany. These nations invaded Russia in the past.

    • old farmer mac says:

      Where is the link? Please post it again.

      It makes good sense for the Saudis to borrow if they can get the money at near zero interest. There is really no doubt whatsoever that they will be able to repay it selling oil at substantially higher prices later on – and with money that is depreciating as well. So in effect by borrowing NOW they are getting a higher price for their oil.If oil is back to say eighty bucks in two or three years then the interest will be trivial in comparison to the extra income.

      If oil only goes up ten bucks in three years the Saudis will still probably make out ok on this strategy.

      And there is a real possibility that loaned money will NEVER be repaid anyway.

      But I have never bought the argument that they are deliberately holding the price down MOSTLY to break the American tight oil industry.

      That won’t work any longer than it takes the price of oil to go backup unless they are able to come into this country and buy up the industry physically plus maybe a year or two at the outside. Yankee oil men will be back after tight oil like a duck after a june bug once the price goes back up. If nobody will loan money to the industry then people with money will buy it up and run it with their own money.

      I think the Saudis are more interested in hurting their oil exporting enemies than anything else. The blood bath in Yankee oil is more icing on the cake than the cake itself in my view.

  5. Enno says:

    Fascinating speech and Q&A indeed by Mr. Milov, it was very revealing.

  6. There is a very interesting article in the Wall Street Journal today.

    Oil Production Shows Signs of Flagging

    Confronted with the plunge in prices, companies in these regions are delaying and canceling projects. Across the world, just six major oil projects received the green light in 2014, compared with an average of more than 20 a year from 2002 to 2013, according to Deutsche Bank.

    The International Energy Agency said Friday that non-OPEC supply growth would “grind to a halt” in 2016, with output due to fall in Russia, Mexico, Europe and elsewhere.

    Oil companies need to replace between 5% and 8% of crude output each year just to offset shrinking production from old wells, analysts estimate. Currently, that amounts to at least five million barrels of daily output. Falling production in areas that have been outside the spotlight in recent months could send prices shooting up in the coming years, hurting consumers and damping economic growth, once the market works through the current overhang, investors and industry officials say.

    “When you start cutting exploration budgets and you stop developing the next frontier…the seeds have been sown for the next bull market,” said Virendra Chauhan, analyst at London consulting firm Energy Aspects.

    • Jeffrey J. Brown says:

      Several majors, e.g., ExxonMobil, were cutting upstream capex prior to the recent oil price decline.

      In the comments section following the WSJ article, I added my usual 2¢ worth about actual crude versus C+C. Following is an interesting comment by Mike Walker:

      I agree with Pickering’s last comment that there is going to be a supply decline in many countries around the world where the pace of activity has virtually halted to levels that cannot sustain existing production rates.

      This has not yet been factored into the market where the emphasis is on a few players in the Gulf, US Shale and to some extent Russia – who is drilling flat out to just to try and keep up.

      Some snapshots from Sub Sahara Africa.

      Nigeria – drilling has stopped except for a few deepwater fields who are already to far along the development process not to proceed to completion (Egina, Agbami, Usan, Erha, Bonga N.).

      Ghana – drilling stopped except for Tullow’s TEN deepwater development.

      Congo – Total has stopped drilling except the Moho deepwater project. ENI at two or three rigs drilling their shallow water sub salt play.

      Gabon – Rig count has crash from twenty rigs to three and most companies have released their drilling departments.

      • old farmer mac says:

        Hi JB,

        I have seen it mentioned many times that some of the biggest players were reducing capex well before the price crash. To me this is about as dead certain an indication they expected excess supply to depress the price as I can imagine. Maybe they foresaw excess production. Maybe they foresaw a weak world wide economy. Probably some of both?

        I have not seen any good reporting about why the big oil companies apparently saw the over supply arriving whereas all the major banks and other big players seem to have missed it- unless just maybe some did see it coming and were busy very quietly arranging their own trading operations to take advantage of it.

        Hopefully somebody will have more to say about this.

        My own guess is that given their ultimate insider status the big oil companies that cut back early saw supply increasing faster than projected consumption rather than being better economic forecasters than all the big banks.

        But the banks have a huge incentive to down play bad news if they think it is coming in the form of an economic slowdown. It has often been said that making a fortune in a crash is just as easy as making one in a boom.

        • Jeffrey J. Brown says:

          IMO, the (pre-oil price crash) decline in upstream capex expenditures had less to do with an expectation of a future oil price decline, and more to do with poor returns on capex expenditures, due to the rate of increase in upstream capex costs (and due to the declining number of large quality conventional prospects), versus the plateau in oil prices that we saw from 2011 to early 2014–especially when we focus on actual crude oil production (45 and lower API gravity crude).

          The global oil industry has spent trillions of dollars on upstream capex since 2005, with probably little, if any increase in actual crude oil production.

          Steven Kopits had a great presentation on what he called capex compression.

        • daniel says:

          Hi. A bit late but anyway. All oil companies were suffering from extreme price inflation and saw their profits drop despite high oil prices. They had to cut down costs…. oilprice crash soon after only accelerated this development.

  7. ezrydermike says:

    retail gasoline market going crazy in SoCal

  8. dmg555 says:

    Thanks for the Russian video reference Ron. For me Milov’s major point concerned the substantive declines that are occurring the old Russian brown field reserves. If you add in his references concerning decreased financing, it seems clear to me that within a year or two, Russian production should show major measurable declines.

  9. dmg555 says:

    Look who is reading your site Ron:

    Chris Nelder ‏@nelderini 9m9 minutes ago

    Vladimir Milov, President, Institute of Energy Policy says Russian oil production will begin to decline this year. http://bit.ly/1UVoLde

    • Got a link to Nelder’s comment? I found his blog but there was nothing current there.

    • Misha says:

      In Russia every year talking about falling. The old Soviet school, conservative thinking. But oil production is growing every year.

  10. AlexS says:

    In its new Drilling Productivity Report, the EIA has lowered its estimates for the Bakken oil production by 35 – 80 kb/d from January to June 2015. The new DPR numbers for April are still about 85 kb/d higher than the combined numbers for North Dakota and Montana from the NDIC and Montana Board of Oil & Gas. The numbers for March are 60 kb/d higher. Historically, the discrepancy between the DPR and state agencies’ numbers was between 40 and 50 kb/d. Note, that the DPR data is for “Bakken area”, which includes some conventional production.
    According to the new DPR numbers, Bakken production has peaked at 1252 kb/d in December and is expected to decline to 1182 kb/d by August

  11. AlexS says:

    There were no significant revisions in estimates for Eagle Ford. The DPR expects a fall in EFS oil production from the peak of 1709 kb/d in March to 1538 kb/d

    • AlexS says:

      Estimates for the Permian were lowered by 15-20 kb/d from November to July.
      The EIA still projects a very slow growth from 2010 kb/d in March to 2046 kb/d in August

  12. MudGod says:

    Ron you stated that Mr. Vladimir Milov’s presentation and discussion was a real eye opener about the workings of Russia’s oil and gas energy policy and some parts were a real surprise, even a little shocking for you. Could you elaborate on those statements. Other bloggers feel free to chime in as well.

    • I was shocked to learn that Russian big oil was depending borrowed money from Western banks to finance their operations. And that money had been shut off because of sanctions. And that even if sanctions were lifted that money was not likely to return because those Western banks would not know what stunt Putin might pull next.

      That was the one thing that shocked me most. Other things was how political the whole thing was. When a small private company becomes successful, the state just takes them over.

      And there were other things which I will comment on later.

      • AlexS says:

        “I was shocked to learn that Russian big oil was depending borrowed money from Western banks to finance their operations. And that money had been shut off because of sanctions. And that even if sanctions were lifted that money was not likely to return because those Western banks would not know what stunt Putin might pull next. ”

        This is complete bullshit, Ron.
        Russian companies have been indeed heavily borrowing from Western banks. But when Western capital markets were effectively closed for them because of sanctions, they were able to repay their debts from internal sources. As a result, the combined foreign debt of the Russian non-financial sector decreased by $89bn, from $451 in mid-2014 to $362bn now.

        Foreign debt of the Russian non-financial sector ($bn)
        Source: Central Bank of Russia ( http://www.cbr.ru/statistics/?Prtid=svs&ch=itm_47538#CheckedItem)

        • AlexS says:

          Even with conservative oil price assumptions, Russian oil companies and other companies in other sectors will be able to repay or refinance their debt from domestic sources. The amount of the debt maturing in 2016-17 is significantly less than in the second half 2014 and in 2015.
          ——————————————–

          Russia faces $100bn corporate debt mountain
          Moody’s says Russian companies will be able to repay or refinance their debt in domestic markets, despite difficult sanctions

          18 Jun 2015
          http://www.telegraph.co.uk/finance/globalbusiness/11683564/Russia-faces-100bn-corporate-debt-mountain.html

          Russian companies outside the financial sector face a $100bn debt mountain that will need to be refinanced, or repayed, over the next two years, according to a leading ratings agency.
          Moody’s Ratings Service has said that large Russian corporations have $40bn worth of debt maturing this year and a further $60bn of repayments due between 2016 and 2017.
          But these companies should be able to meet their debt obligations, despite expectations that Russia’s real gross domestic product (GDP) will contract by around 3pc this year and remain flat in 2016, the ratings agency said.
          ————————————

          External Debt of the Russian non-financial corporate sector by maturity ($bn)
          Source: Central Bank of Russia (http://www.cbr.ru/eng/statistics/?Prtid=svs&ch=itm_11905#CheckedItem)

          • MarbleZeppelin says:

            Isn’t the pay down of debt just due to borrowing less? With less money coming into the system there should be some future effects on oil field development and production.

            • Syndroma says:

              “Isn’t the pay down of debt just due to borrowing less?”

              No. Russian corporate sector got a huge boost from the rouble devaluation. It’s like a hidden tax&bailout, the population indirectly finances the corporations. And the anger of common man is redirected to the West and the sanctions. A win-win for the government.

              • MarbleZeppelin says:

                So you say the ruble is worth less and that paid down the foreign debt? Or are you trying to say that the government paid it down?

                • The government pays it. They can also offer tax relief if they wish. They have already given up a huge chunk of the tax pie. This reduces government income.

                  I think the key is to understand that lower oil production is good for Russia. It helps the rest of the economy, makes them more self sufficient. This seems to be ignored by short sighted Russian elites. They are sort of stupid in this area.

  13. Watcher says:

    Re KSA sovereign wealth fund aka reserves.

    If you were lending to KSA, what interest rate would you demand? As if this means anything anymore. 1 Yr KSA paper quotes at 0.9%. 1 Yr German paper quotes at -0.257%. That’s a minus sign, sportsfans, re: As if this means anything anymore.

    And so, if your SWF is getting you 5% / yr, and you’re paying 1% for money, you borrow. It doesn’t have to have anything to do with desperation or politics.

    (Note shenanigans. Super Mario Draghi is QE printing 1 Trillion by Sept next year. The instrumentality for this is individual country Central Banks. He sends them money he prints and they buy their own country bonds. Germany proportionally the majority, of course, but while other countries are hitting the long end of the yield curve, the Bundesbank has been buying the short end, which lowers rates, of course, or . . . used to, and still does, until someone decides it doesn’t.)

    • Watcher says:

      Forgot to note sometimes the KSA deficit is quoted in Saudi currency and sometimes USD. Lots a variance when so.

  14. Kam says:

    Please notice that in recent weeks USA coal extraction rate is down about 17% yoy, which is equivalent of about 2mb/d of oil.

    • MarbleZeppelin says:

      Demand is low mostly due to natural gas and prices are low. Mines slow and shut down then until times get better.

  15. BC says:

    https://www.youtube.com/watch?v=_2aE2gdvM0U

    http://stanford.edu/dept/france-stanford/Conferences/Risk/Nur.pdf

    http://eslectures.stanford.edu/endofoil/docs/OilWarRevistingHubbert.pdf

    A last-man-standing war for oil and the remaining finite resources on a spherical planet is inevitable if history and human nature are a guide.

    • MarbleZeppelin says:

      Don’t worry, most likely your neighbors will have killed you for your resources or just out of anger before the world Armeggedon gets going. Can you imagine how cranky people will be when their cable fails, they have to wait in line for gasoline at high prices and half their favorite brands are no longer available? People act dangerously crazy now just to get home and watch the news or get down the road to go shopping. Imagine what extra stresses will do to them.

      And if you still have a job, the jobless will be breaking in while your away and taking your stores of stuff. It will unravel long before major war. All we need is another deep depression. The whole system is so spread across the globe now and so dependent upon on-time arrival; it’s unstable.
      Global trade starts to collapse and we will soon be up to our necks in local troubles.

      • old farmer mac says:

        ”And if you still have a job, the jobless will be breaking in while your away and taking your stores of stuff. It will unravel long before major war. All we need is another deep depression.”

        It is never too early to make good friends with your neighbors. When I lived in the city one of the things that bothered me most was that hundreds of people I could never hope to meet lived within a hundred yards of my apartment. A third were the salt of the earth, a third university students, the last third questionable, to put it politely, in respect to their morals.

        You will not be able to count on the police in a collapsing society unless you are very well connected. Once collapse is well under way, the last people you want to talk to may be the police.Cops are just more tailless monkeys. Expecting them to look after you in preference to looking after their own families during extended emergencies is naive.

        I don’t expect collapse here in the USA – except in some cities- within my remaining personal lifetime. But if it comes before I depart, then I am prepared to do my part helping guard the immediate community..

        In THIS community we mostly all know each other by reputation and by sight and our parents and grandparents and kids and wives are all buried together in the same churchyards where most of us got married.

        Local lawlessness will not be our major problem. The failure of the water and sewer systems will not be our problem. We all use wells and septic systems. If the grid goes down we are going to be in a real fix, but it won’t be a tenth as bad as the fix city folks are in.

        So long as we can put our hands on SOME fertilizer, diesel fuel, pesticides, spare parts and so forth we will be able to eat and ”export” a substantial amount of food – enough that such authorities as are in power will likely try to make sure we have access to these things in exchange for the excess food.

        If we have to go back to the sort of farming my great grandparents did, we will most likely be able to scratch enough food out of the ground to live – but we won’t have any trouble fitting into thirty inch waist pants after a year. That sort of farming done by hand doesn’t leave much time for anything else in this part of the world but otoh not much is more important than eating.

        Any body who has a house in the suburbs or out in the country should give serious consideration to installing a chimney if the house doesn’t have one already. The odds of intermittent grid failure will be rather high once things start downhill. Frozen water pipes can be quite a problem. Keeping a stock of firewood on hand is not that big a deal.

        • Why not build a bunker and fill it with butane bottles? It’s better than wood. And it’s one hell of a self defense weapon.

          • old farmer mac says:

            Most of us can’t afford a bunker nevertheless one filled up with butane bottles. LOL. I understand this suggestion is tongue it cheek or dry style humor.

            But a chimney is not out of reach of most home owners.

  16. ezrydermike says:

    Not meant to cause any more of a ruckus.

    just info wrt the ongoing discussion of IPCC and carbon emissions. lots of references.

    “How much carbon can we safely emit into the atmosphere without the planet suffering dangerous climate change? It would be good to know. The world’s governments have agreed that “dangerous” should mean any warming above two degrees Celsius. And in recent reports, the Intergovernmental Panel on Climate Change (IPCC) has tried to translate that into a future carbon budget.

    But too many different numbers are still floating around. We could have more than 500 billion tons of carbon that we could safely emit, or the real

    figure might be close to 100 billion tons — it depends on whose estimates you decide to accept.

    The carbon budget looks to be one of the most critical single metrics for keeping planet Earth a safe place to live through the coming century. So it would be a good idea to get to the bottom of the discrepancies, especially since the countdown to dangerous climate change may be shorter than the lifetime of a new coal-fired power plant.

    Here is an attempt to cut through the statistical fog. ”

    http://e360.yale.edu/mobile/feature.msp?id=2825

    • ezrydermike says:
    • MarbleZeppelin says:

      Ezry, we are well past the point of safe right now. This whole arbitrary carbon/temperature limit is a crock of shit. There are multiple interdependent forces at play. We don’t even have a hope of controlling the one we could control and we certainly cannot control all the other “feedbacks” in the system.
      The gun was loaded and fired. We are just waiting for the bullet to hit now. Firing more bullets will only accelerate the problem.
      Of course we could get lucky for a while, reflective cloud cover could increase, the sun could emit less radiation, the thermohaline circulation could keep burying the heat for a while longer. But any of those will only cause people to think they can get away with more carbon pollution when in reality all those modifiers I just listed are temporary and only put off the major consequences.

    • Dennis Coyne says:

      Hi Ezrydermike,

      It all depends on how safe one wants to be. We could build a bridge that will handle 20 times more weight than it is likely to ever carry, but most people would think that is wasteful spending.

      The 1000 billion metric tonnes of net carbon emissions from 1750 to 2300 including fossil fuels, cement production, natural gas flaring, and land use change should keep us under the 2 C limit (above the holocene average global temperature up to 1750) if the equilibrium climate sensitivity(ECS) is about 3C.

      If we assume the ECS might be 3.75 C (if the probability distribution is normal there is about an 84% probability it will be lower than 3.75C) we would need lower carbon emissions (maybe 750 billion tons of carbon after 1750).

      About 550 billion metric tonnes of carbon were emitted from 1751 to 2013 from fossil fuels, cement production, and land use change. So this leaves us 200 to 450 billion metric tonnes of carbon emissions. In 2013 we emitted about 10 billion tonnes of carbon, if we assume emissions remain the same we reach 750 billion metric tonnes by 2033, we will be lucky if we keep carbon emissions below 1000 billion metric tonnes, peak fossil fuels may help.

      • ezrydermike says:

        so I am picking up a distinction between rates of emissions vs cumulative emissions.

        Does this leave open the possibility that mitigation efforts might be more helpful then previously thought?

        Should we be seed bombing trees on a massive scale?

        • I’m for geoengineering research. For example, grinding up rocks, and tossing iron in the ocean. Or burning a bit of sulfur with jet fuel. Things like that.

          • Fred Magyar says:

            I’m for geoengineering research. For example, grinding up rocks, and tossing iron in the ocean. Or burning a bit of sulfur with jet fuel.

            You are familiar with Pandora’s Box from Greek mythology, right?
            Because opening that box is precisely what geoengineering is like! It is the very last thing we need!

            Granted we have been geoengineering the planet for the last 100,000 years or more or less the time in which modern man has existed. As I look around at the results I am ever more convinced that humanity should not be deliberately doing experiments with the planetary systems. We have neither the knowledge nor the expertise to do so safely!

            And the absolute worst people of all to be allowed to do this are engineers who have zero understanding of complex ecosystem dynamics. I want them to keep their hands off the levers and dials of the ecosystem controls because they are not competent or qualified to operate them!

            • Nick G says:

              Certainly it’s better to stop rocking the boat, rather than try to have someone jump up on the other side of the boat to balance things out.

              OTOH, let’s not put down engineers: they’re not the problem. It’s business interests who don’t want their investments threatened, that are the problem.

              And, there’s a hidden assumption here that renewables are more expensive than fossil fuels. They’re not. We only gain by eliminating fossil fuels, in every way.

              • Doug Leighton says:

                “We only gain by eliminating fossil fuels, in every way.”

                If it were only that simple; large hydroelectric facilities (Geo-engineering) have caused significant damage across the planet. Dams have led to extinction of many fish and other aquatic species, the disappearance of birds in floodplains, huge losses of forest, wetland and farmland.

                • Nick G says:

                  Certainly, dams have caused much harm (though I think calling them “geo-engineering” is a bit distracting, as they’re not related to what we’re talking about here).

                  But AFAIK existing dams are a net benefit, environmentally. And wind and solar are much better than the FFs they’d replace.

                • Synapsid says:

                  Doug L, Fred M,

                  Another little aspect of reservoirs that I rarely see mentioned is that they are sources of methane. Organic material carried into reservoirs settles out and provides the requisite anaerobic environment for methanogens. Some of the gas makes it into the atmosphere; I admit, though, that this is a fairly new area of study to me.

                  I’d expect the big reservoirs in Brazil would be important methane sources. Fred! Fred M! Check on this while you’re down there, OK? Thanks.

                  • Fred Magyar says:

                    I’d expect the big reservoirs in Brazil would be important methane sources. Fred! Fred M! Check on this while you’re down there, OK? Thanks.

                    Yep, just arrived in Brazil last night… but have been aware of the methane issue at many large Brazilian hydroelectric projects for a long long time!

                    Whenever you flood hundreds of square Kms of tropical rain forest you have massive release of methane due to the decomposing organic matter underwater.

                    However that is, IMHO, a relatively minor concern compared to wholesale wiping out of ecosystems and an indigenous way of life to promote the infinite growth paradigm which is what our current consumer society is all about.

                    https://goo.gl/qX3xFB

                    The full movie
                    https://goo.gl/BZ8NIj

                    As for engineers, I’m willing to discuss geoengineering only with those of them who can show they have an understanding of ecosystem dynamics. Otherwise they are simply not qualified.

            • So are you going to make a coherent and logical statement about geoengineering or limit yourself to discussing Greek mythology?

              • Fred Magyar says:

                If you can show that you have an understanding of ecosystem dynamics, I’ll be more than willing to eschew Greek mythology and talk straight science with you.

      • MarbleZeppelin says:

        Dennis
        Then of course there are the wild cards, cloud cover, water vapor, natural methane emissions, and vegetation loss.
        Do those estimates include non- CO2 greenhouse gases?

        • Dennis Coyne says:

          Hi Marblezepplin,

          Yes those estimates are based on the mainstream climate science view from around 2009. This may have changed a little since then, but the ECS range in the latest IPCC report is 1.5 to 4.5C with a best guess of 3C, so the mainstream view has not changed by much.

          Note that the range of ECS includes those wild cards, the uncertainty about clouds and aerosols and their effect on climate in the future is the main reason for the large uncertainty.

          As I said 1000 Gt C asumes ECS is 3C with the usual scenarios for other green house gases and land use change and feedbacks and 750 Gt of C emissions assumes an ECS of 3.75C (plus one sigma assuming a normal probability distribution).

          If you are referring to earth system sensitivity(ESS), that is even more uncertain than ECS, but many mainstream climate scientists think that Hansen’s 6C estimate is too high, also those will take 500 to 1000 years to be realized. As population falls in the future and land use change is reversed some carbon will be removed from the atmosphere and we may be able to keep global temperature increases close to 2 C, I agree though that this is highly uncertain and it would be best to keep carbon emissions as low as feasible.

          If ECS and ESS are on the low side, the carbon can be emitted at a later date when we understand the earth system better. This course of action is unlikely to be taken, but it would be the prudent course.

          • Dennis, do the turkeys who work out these carbon budgets account for plastics and asphalt? Do they have the right molecule accounts? I ask because I’ve seen so much shoddy work in the past I wonder if they documented what they do in a detailed fashion?

            • Nick G says:

              Heck, plastic either gets recycled or (mostly) gets sequestered in land fills.

              Asphalt is 99% recycled, at least in the US.

            • A fraction of fossil fuel production is used for plastics. Another fraction is used as asphalt. These materials aren’t oxidized. I assume we can have a discussion about the subject without irrelevant clutter.

          • MarbleZeppelin says:

            If the population falls slowly some carbon may eventually be removed from the atmosphere, except then the ocean will lose carbon dioxide to equilibrate. The long tail of equilibration goes on for over 5000 years if there are no other sources of CO2 such as melting permafrost, soil degradation and methane releases. Then the long tail might not occur for a million years.
            Hansen and others who predict a potential 6C are taking into account the various feedbacks and the methane clathrate potential. If one chooses to ignore the past record and the present potential then the lower values around 3C rise make sense.

            If population falls fairly quickly, as from war and societal collapses, vegetative losses (burning) and infrastructure losses (burning) will make a temporary particulate chill then an increased radiative input from the excess CO2 injected from the losses.

            In both cases the permafrost and methane clathrate problem still exist. My own calculations on albedo changes give a much higher positive forcing than the IPCC range. The reduction of albedo forcing is dependent upon continued or increased cloud reflectance and lack of vegetative growth. I would not bet my planet on cloud cover levels remaining the same or increasing. The problem with vegetative growth in tundra areas as they warm is already being seen. Snow is shadowed and vegetation is dark, thus reducing the reflectance of snow as the plants grow larger and extend northward.

            Right now we are enjoying a period of heavy cloud cover in the Arctic, yet the warming still continues. Once those clouds reduce, the Arctic and tundra areas will control the radiative forcings well beyond any gain or reduction we can effect. So it is imperative we make the carbon and nitrogen input reductions now, not wait and play a game of how much we can get away with.

            http://earthobservatory.nasa.gov/Features/ArcticReflector/arctic_reflector4.php

            • Dennis Coyne says:

              Hi Marblezepplin,

              Some of the high estimates of Earth System Sensitivity(ESS) are based on the ice age cycles, but in those cases there were significant ice sheets which led to a very large albedo change. Ice sheets are much smaller now and though I agree there will be some albedo change, I do not think it will be as large and the ESS will likely be lower than the Hansen estimate. I do not think the methane issue will be as much of a problem as some propose, I agree with David Archer on that point and also agree with his estimates of the very long tail of atmospheric carbon.

              On clouds there is a lot of uncertainty, along with aerosols, this could lead to either higher or lower ECS, more research is needed, in the meantime less carbon is the safer path.

  17. ezrydermike says:

    pretty good paper from The Royal Society Philosophical Transactions Series….Jan 2014 “The Future of Oil Supply”. Part of a Theme series

    Like a primer of many of the subjects discussed here. Lots of references.

    http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3866387/

  18. Toolpush says:

    Info for OFM,

    Who was interested in hydraulic hybrid systems for trucks and buses.

    http://www.greencarcongress.com/2015/07/20150711-lightning.html

    • old farmer mac says:

      Thanks TP,

      I am glad to see the tech is now actually being sold, but I have not yet heard of anybody buying it. Usually I run across press releases about such things. It ought to work out just fine on trucks used on a regular basis in stop and go , such as garbage trucks.

  19. wiseindian says:

    So if it’s all related to supply and demand why is everyone producing flat out ? Prices have been low for around 8 months now.

    • Watcher says:

      Imagine that.

    • Dennis Coyne says:

      Hi Wiseindian,

      The market price is determined by the interaction of supply and demand. Individual firms will try to maximize their profits and take the price as given (under the assumptions of a perfectly competitive market). The low oil price tends to increase the amount of oil demanded, the producers are producing flat out to meet that demand and hoping that some of their competitors will go out of business at these prices. Eventually those bankruptcies will occur, then supply goes down and oil prices start to rise.

      It takes some time for the market to adjust, we have been fooled by OPEC and before that the RRC, into thinking that the oil industry reacts quickly and easily to changing oil prices, but that was an illusion. We would need to go back to before the RRC started controlling Texas oil output in 1930 to remember how difficult this adjustment is.

      See https://en.wikipedia.org/wiki/Railroad_Commission_of_Texas#Expansion_to_oil

      As I have said before, OPEC has decided to no longer regulate World oil output so perhaps the RRC and NDIC need to step in and start restricting output. The RRC already has the power to do this, the NDIC could be given that power and just follow the lead of the RRC. They could simply hold output flat in Texas and North Dakota until oil prices start to rise and the industry gets back to health.

      • wiseindian says:

        Thanks, the oil price cuts are a blessing to my country where 80% of it is imported. I would wish it stays there for a long time but I know that’s not possible.

        • Dennis Coyne says:

          Hi Wiseindian,

          Low oil prices are only a blessing if oil supply remains adequate at those prices.
          We need to find a price where long term supply and demand for oil match. My guess is that this would be about $85/b to $100/b at present if there were some institution controlling output (OPEC, RRC, and/or NDIC). Volatile oil prices help no one, that is the reason the RRC controlled oil output from 1930 to 1970 and that OPEC controlled it from 1975 to 2014. It will be interesting if OPEC continues to stand on the sidelines to see how volatile oil prices become.

          If the RRC, NDIC, and OPEC refuse to step up then maybe the EIA or IEA need to attempt to regulate oil output. A couple of million barrels per day (higher or lower) can make a huge difference in oil prices.

          • Rune Likvern says:

            ”If the RRC, NDIC, and OPEC refuse to step up then maybe the EIA or IEA need to attempt to regulate oil output.
            Good luck with that one!

            • Dennis Coyne says:

              Hi Rune,

              I agree, a very unlikely scenario. Only after a period of very volatile oil prices is this even remotely possible.

          • I got a better idea. We can create the “Commodity Price Fixing Administration”. It will include the “Office of Oil and Natural Gas Price Optimization”, the “Production and Reserves Information Agency”, and a “Oil production enforcement Agency”. This last one has the “Lease Product Transfer Bureau” with armed deputies.

            • Dennis Coyne says:

              Hi Fernando,

              Well the Texans preferred the RRC regulating output over oil at 25 cents per barrel in the 1930s. Those crazy communists down in Texas. 🙂

              • The RRC regulations also helped increase recovery factor. Implementing a price cartel isn’t really a communist idea. Communists seem to like price and currency exchange controls, nationalizing industry and commerce, building large, extremely powerful and centralized bureaucracies and entrenching themselves in power, which they achieve via media censorship, a very well funded secret policy able to torture and murder as they please, a supine judiciary, and the elimination of any vestige of democracy.

          • Nick G says:

            Volatile oil prices help no one

            Volatility is a cost. Just one of the many costs of oil that are badly accounted for.

            If governments want to reduce those costs, the sensible solution is to push hard on the transition away from oil. For instance, much higher CAFE MPG regulations. That’s both easier and more productive than price fixing.

            • Dennis Coyne says:

              Hi Nick,

              Note it is not price fixing, it is restricting output and letting the market determine the price. Quantity is adjusted, prices respond to demand. Carbon taxes are much better policy than the government choosing the MPG in my view. Internalize the external costs using taxes, then let the market work.

              • Nick G says:

                It’s price fixing, just using output controls instead of direct price controls.

                Raising prices increases the transfers of income and wealth from consumers to producers. Consumers will object, and rightly so. Plus, of course, it will only affect a minority of producers. KSA has refused to make that sacrifice, and so will Texans and N. Dakotans. FInally, it increases incentives for oil production, which probably aren’t a good idea – we need to leave it in the ground.

                I agree that carbon taxes are the best instrument. The problem is that the oil industry seems to have succeeded in making the idea politically toxic. MPG regulations exist, and have had great success (despite the problems caused by automakers succeeding in creating a light truck/UV loophole).

          • wiseindian says:

            $85-$90 is affordable here, even $100 is not an issue

            • Dennis Coyne says:

              Hi Wiseindian,

              Oil prices should be in the $85-100 window, but only regulation of oil output will allow that to happen.

  20. Osakar DiSilvo says:

    Fernando, what say you?

    Story on the Washington Post web site:

    Why Venezuela wants to annex two-thirds of the country next door.

    For some reason I cannot copy and paste the link…it is secured by Entrust.

    I agree with this comment on that story:
    ————————————————————————————-
    C’mon oldest trick in the book.

    Argentina did the same in 1982. When the military government of the time faced local unrest, they invented the war for the Malvinas (Falklands to England) in order to divert the public opinion.

    Ring a bell? Invading Iraq after 9/11 anyone?

    • MarbleZeppelin says:

      He is right, we need more people trained in how to handle epidemics and the authority to quarantine.

      I think that a much bigger problem with more deaths would occur if availability of medications was interrupted and the pipeline of illegal drugs got cut-off. Imagine millions of addicts running around looking for drugs that are not there or trying to get more money because the local drug prices have sky-rocketed due to lack of supply? Chaos.
      With almost half of our population on some kind of prescription drug the hospitals and clinics would be overflowing shortly as problems cropped up. Add to that the illegal drug problems and we do not have enough police force to handle that kind of crisis.

      Forget about food shortages, keep the drugs flowing or the whole thing starts to come apart.
      What a way to live, way too many dependencies.

  21. Delmy says:

    ‘Mini Ice Age’ on the way in 15 years, say scientists
    http://www.rawstory.com/2015/07/mini-ice-age-on-the-way-in-15-years-say-scientists/comments/#disqus

    “A study by researchers at Great Britain’s Northumbria University say that competing physical cycles within our sun will cancel each other out in the next solar cycle, resulting in a “mini Ice Age” like one that gripped the Northern Hemisphere from 1645 to 1715.

    According to the Telegraph, a team of solar researchers led by Professor Valentina Zharkova say that they have cracked a riddle that has long puzzled scientists and enabled them to predict solar activity with 97 percent accuracy.

    In a meeting of the National Astronomy Meeting in Llandudno, Zharkova said two dynamic fluid plumes within the sun will be working in opposite hemispheres, effectively canceling each other out and bringing about a rare period of extremely low solar activity.

    “[In the cycle between 2030 and around 2040] the two waves exactly mirror each other — peaking at the same time but in opposite hemispheres of the sun,” she explained.

    “Their interaction will be disruptive, or they will nearly cancel each other,” she said. “We predict that this will lead to the properties of a ‘Maunder minimum.’”

    The Maunder Minimum is the 70-year period from 1645 to 1715 when North America and Europe experienced very cold winters due to lower solar temperatures and minimal sunspot activity.”

    • Greenbub says:

      That is going to throw a monkey wrench into everybody’s calculations and predictions.

      • Andy Hamilton says:

        I doubt that very much. To consider:

        1. Firstly the source. The ‘findings’ were presented at a talk at a national meeting. Such talks are not peer reviewed science (as for example is a paper submitted to a recognised scientific journal with a high impact factor). They are simply oral presentations based on a submitted abstract. As it is a local meeting there might be, at best a couple of hundred on-lookers (so one wonders how this even got reported – but see below). We have no idea what their response was, but the acid test of whether a scientific observation has merit is the submission and acceptance of a peer reviewed paper. As it stands then the data presented can only be ranked as yet untested, low grade ‘opinion’.

        2. The scientist concerned holds a position at the less than prestigious University of Northumbria – which I daresay most people have never heard of. Not Oxford, not Cambridge, nor any of the top 20 UK universities, but Northumbria. She is originally a Ukrainian scientist, who’s less than stellar scientific career just about justifies a position at a very small provincial UK university.

        3. If it seems very strange how such a minor presentation should suddenly attain such prominence (see point 1 above), one perhaps need only realize that it was first ‘revealed’ by the UK’s Daily Mail (subsequently picked up by the Daily Telegraph). Both publications pander to the virulent climate change denialism of the right wing. Both are prepared to run with anything they can lay their hands on in an attempt to prevent action against climate change.

        4. As regards the ‘ice age hypothesis’. Some will recall the often quoted claims(by the denialist camp) in the 1970’s that ‘scientist say ice age is coming’ which is used to suggest that scientist change their mind about climate as often as people change underwear. In fact these claims refer to work by a handful of scientists at the time who were suggesting similar developments to our Northumbrian scientist quoted above. The vast majority of climate scientists in the 1970’s held to the view that nothing of the sort was going to happen – just as 97% of climate scientists in the present support the view of man made climate change occurring as we speak.

        • Delmy says:

          This sounds like desperation by trying to cling on to the official government sanctioned narrative of manmade climate change even after the real science has uncovered better evidence and moved on to the natural causes.

          About that 97%, that’s just a political talking point. Even the Wall Street Journal pointed that out…

          The Myth of the Climate Change ‘97%’
          http://www.wsj.com/articles/SB10001424052702303480304579578462813553136

          By JOSEPH BAST And ROY SPENCER
          May 26, 2014 7:13 p.m. ET

          “Last week Secretary of State John Kerry warned graduating students at Boston College of the “crippling consequences” of climate change. “Ninety-seven percent of the world’s scientists,” he added, “tell us this is urgent.”

          Where did Mr. Kerry get the 97% figure? Perhaps from his boss, President Obama, who tweeted on May 16 that “Ninety-seven percent of scientists agree: #climate change is real, man-made and dangerous.” Or maybe from NASA, which posted (in more measured language) on its website, “Ninety-seven percent of climate scientists agree that climate-warming trends over the past century are very likely due to human activities.”

          Yet the assertion that 97% of scientists believe that climate change is a man-made, urgent problem is a fiction. The so-called consensus comes from a handful of surveys and abstract-counting exercises that have been contradicted by more reliable research.

          • MarbleZeppelin says:

            Hey Delmy, why can’t both global warming and solar variation be occurring at the same time? This ain’t religion you know. See the actual abstract and journal reference below.

          • Don Wharton says:

            The Wall Street Journal was purchased in order to present right wing propaganda. No one should ever presume they are honestly reporting anything on global warming.

          • Nick G says:

            That’s not a Wall Street Journal article, that’s an op-ed commentary.

            WSJ articles are (or were, before they were bought by Murdoch) very reliable, but the opinion page has always been flat out insane.

          • ezrydermike says:

            he consensus among climate scientists on anthropogenic global warming is not “97%,” as has become widely believed.
            Instead, over 99.9% of publishing scientists accept that humans are causing global warming.

            http://www.jamespowell.org/index.html

        • MarbleZeppelin says:

          Abstract from Astrophysical Journal
          PREDICTION OF SOLAR ACTIVITY FROM SOLAR BACKGROUND MAGNETIC FIELD VARIATIONS IN CYCLES 21-23

          Simon J. Shepherd1, Sergei I. Zharkov2, and Valentina V. Zharkova3

          A comprehensive spectral analysis of both the solar background magnetic field (SBMF) in cycles 21-23 and the sunspot magnetic field in cycle 23 reported in our recent paper showed the presence of two principal components (PCs) of SBMF having opposite polarity, e.g., originating in the northern and southern hemispheres, respectively. Over a duration of one solar cycle, both waves are found to travel with an increasing phase shift toward the northern hemisphere in odd cycles 21 and 23 and to the southern hemisphere in even cycle 22. These waves were linked to solar dynamo waves assumed to form in different layers of the solar interior. In this paper, for the first time, the PCs of SBMF in cycles 21-23 are analyzed with the symbolic regression technique using Hamiltonian principles, allowing us to uncover the underlying mathematical laws governing these complex waves in the SBMF presented by PCs and to extrapolate these PCs to cycles 24-26. The PCs predicted for cycle 24 very closely fit (with an accuracy better than 98%) the PCs derived from the SBMF observations in this cycle. This approach also predicts a strong reduction of the SBMF in cycles 25 and 26 and, thus, a reduction of the resulting solar activity. This decrease is accompanied by an increasing phase shift between the two predicted PCs (magnetic waves) in cycle 25 leading to their full separation into the opposite hemispheres in cycle 26. The variations of the modulus summary of the two PCs in SBMF reveals a remarkable resemblance to the average number of sunspots in cycles 21-24 and to predictions of reduced sunspot numbers compared to cycle 24: 80% in cycle 25 and 40% in cycle 26.

          http://iopscience.iop.org/0004-637X/795/1/46

          If this model is correct it will give us a little more breathing space but will not have enough magnitude to counteract the total effect of GHG. Global dimming from pollution is already a greater effect than the solar variations.
          The danger here is if the relative amount of cloud cover changes, a much bigger swing factor.
          Well it should be interesting and we are going to learn a huge amount about the earth system and the earth – sun system during this century.
          I would say that with all these opposing and variable forces in play that weather will become even more variable and unpredictable. So prepare for just about anything.
          So far I have a local temperature range of 130 degrees F to deal with. Rainfall has been very variable but mostly on the plus side. Storms seem to be more frequent with more cloud cover. Temperatures were above average for several years and now are below average for two years.
          A shift in the jet stream and a change in cloud cover will cause local temperature changes far in excess of global warming or solar variations. However the global warming and or the solar variations can effect the jet stream and cloud cover, so there is not getting away from the source problems.

          • Osakar: Venezuela has had a longstanding border dispute with Guyana (ex British colony) for a long time. Before that they had it with the British. The contested territory is called Essequibo.

            The dispute has been getting handled in a very low key way forever. But when Chavez got in power he started making big moves in the geopolitical front, doing so mentored by Fidel Castro, who has always had very big ideas about spreading communism in Latin America.

            Part of their plan involved neutralizing the OAS and replacing it with alternate forums willing to go along with Castroite dictatorship and human rights abuses (CELAC, UNASUR). To accomplish this they needed the CARICOM (Caribbean islands) vote in the OAS. So Chavez in a sense traded benign neglect of the Essequibo dispute, to get the Caribbean nations’ vote.

            This benign neglect included not saying anything when Guiana (or Guyana) gave Exxon Mobil and the Chinese an offshore oil concession, clearly in “Essequibo waters”. Exxon and the Chinese ran seismic, and drilled a well. And announced a decent sized deep water discovery.

            So Maduro, whose foreign minister is pretty stupid, started bitching and saying all sorts of imbecile comments. Meanwhile the Guyanese elected a former general for president, the guy knows most of the Venezuelan military isn’t issued bullets (Maduro is afraid they’ll bail him), so he responded with pretty nasty language, even said “Venezuela is a monkey on our backs and we are going to shake it off”.

            Then Maduro issued an executive order putting Guyanese waters all the way down to Surinam under Venezuelan navy patrol jurisdiction. And he added territory claimed by Colombia in the West. Colombia’s foreign minister responded they expected that to be corrected. Guayana responded by calling the UN and advising them the Venezuelans had claimed ALL of their waters.

            Maduro backed off, changed his executive order. Then he said it was all an Exxon and USA military conspiracy.

            Maduro’s regime is in full meltdown. He’s irrational. And he’s trying to avoid congressional elections because his support us down to 20 % and dropping. He has the power to cheat, has been putting opposition leaders in jail, but the people are really sick of him. So right now anything goes. The only thing keeping Maduro in power is about 30 thousand Cubans they got placed in key posts and control points.

            I didn’t read that article, but it seems to me Obama is letting Maduro stew in his own pot. Problem is people are suffering enormously. And Obama is winking at Castro and trying to hand over nearly everything the dictatorship wants, knowing very well who is keeping Maduro on top.

            So you see, this is setting up a really dangerous situation. I don’t think Maduro is about to attack anybody, but the Venezuelan people are in extreme pain. And it’s bound to get worse. We could see tens of thousands killed over a short period of time. Plus women get raped by the thousands, and all sorts of terrible things.

            • Osakar DiSilvo says:

              Fernando,

              Thank you very much for your insights.

              I hope the Venezuelan people people pull together and make themselves a better future.

      • cytochrome C says:

        Not really—-
        http://co2now.org
        Noise in the system.

      • Greenbub, I have seen US agency climate model runs which show a Maunder Minimum will cause regional cooling over the northern hemisphere, and some parts of North America and Eurasia may see 5 to 6 degree C cooler temperatures. Even if we cut this in half it sure looks like solar activity could be a black swan, considering how we are running out of fossil fuels.

    • ezrydermike says:

      A new study and related press release from the Royal Astronomical Society is making the rounds in recent days, claiming that a new statistical analysis of sunspot cycles shows “solar activity will fall by 60 per cent during the 2030s” to a level that last occurred during the so-called Little Ice Age, which ended 300 years ago.

      Since climate change deniers have a particular fascination with sunspot cycles, this story has predictably been picked up by all manner of conservative news media, with a post in the Telegraph quickly gathering up tens of thousands of shares. The only problem is, it’s a wildly inaccurate reading of the research.

      http://www.slate.com/blogs/future_tense/2015/07/13/sunspot_cycles_won_t_cause_a_mini_ice_age_by_2030.html?wpisrc=burger_bar

      • MarbleZeppelin says:

        See my post of the abstract of the actual research above Fernando’s misplaced post, 8:28 AM. The 60 percent activity change is change in sunspot activity not output radiation. The research may be valid which does throw a negative forcing into the mix but is temporary and not of a large magnitude. Just gives us a little more time.
        We are not using our time very well now and solar radiation decreases keeping things below prediction will illicit the typical human response to relax and do less.

        • The “temporary effect” could last two decades, or two centuries. This is going to require a very close eye.

          Meanwhile I read Sue Burundanga has ordered her followers not to discuss the subject. It’s supposed to be settled. Tee hee hee.

      • By the way, the sun spots are an outdated yardstick. Satellites show the UV spectrum changes much more than the visual spectrum. As it turns out the lower UV leads to less stratospheric ozone (ozone is a GHG). The stratospheric temperature changes alter wind patterns and cool down the northern hemisphere’s continental regions. This is the result of a NASA model run to understand the impact of a Maunder type event.

        • MarbleZeppelin says:

          In terms of energy, sunlight at Earth’s surface is around 52 to 55 percent infrared (above 700 nm), 42 to 43 percent visible (400 to 700 nm), and 3 to 5 percent ultraviolet (below 400 nm). So when you say bigger change you mean bigger percent change not total.

          The total solar output variation is 0.1% over the 11 year cycle. Not significant and a general constant. When that is compared to the annual variation of solar irradiance due to orbital eccentricity of plus minus 3.3 percent, I don’t see any point in your “argument”.
          You are talking about a 1.5 percentage variation on 4 percent which is a .06 percent energy change from UV over the 11 year solar cycle. Not significant compared to the annual changes due to orbital eccentricity.
          Please actually look at the magnitudes of energies involved before presenting. Otherwise you look foolish and divisive to anyone with knowledge.

          BTW The changes we see in the northern jet stream were predicted due to global warming a couple of decades ago.

          • That’s not what the models show. The UV reduction seems to be highly enhanced by the ozone and wind pattern feed backs. You should go study the subject in depth.

            • MarbleZeppelin says:

              Did you even comprehend what I wrote? You are talking about small changes in a small amount. Percentages are not quantities or energy levels. You need to understand basic concepts.

              • Yes Marble, I comprehend why you think I don’t understand. You are focusing on changes in total solar irradiance. I’m also including the associated feed backs. According to climate models the change in the UV spectrum has feedbacks which cool down the northern hemisphere land masses. Focus on the feedbacks, and don’t pay attention to the clutter.

                • MarbleZeppelin says:

                  Apparently you missed the point a bit, I am not concentrating on total solar, I am trying to get you to understand that the change in UV energy is very small in actual terms. Also the change you are talking about is much smaller than the normal annual variation.
                  I don’t know what particular reference you are referring to since you keep it to yourself. The truncated slower jet stream was predicted a while ago. The only reference I found to the UV involvement was another unreferenced claim in a comment. So until I actually see the research paper it is all just clutter and chatter. Explain to me why larger UV changes have not caused this claimed UV feedback effect.

                  UV and ozone:
                  UVA: Wavelength: 315-399 nm. Not absorbed by the ozone layer.
                  UVB: Wavelength: 280-314 nm. Mostly absorbed by the ozone layer, but some does reach the Earth’s surface.
                  UVC: Wavelength: 100-279 nm. Completely absorbed by the ozone layer and atmosphere

  22. Watcher says:

    Factoid:

    Cruise ships move at a speed of about 22 knots. Fuel burn is 45 gallons per mile. 100 plus tons a day.

    Fuel capacity 10 days on Queen Mary 2 , at 30 knots.

    • MarbleZeppelin says:
      • Watcher says:

        Doesn’t exist. You may want to recheck the registries. All BS.

        • MarbleZeppelin says:

          It exists as all things exist, as a plan and vision, as engineering and modeling calculations. Do you actually think all this stuff from lasers to cell phones existed back in the 1950’s. Yet it is all here. Things must be thought of and thought out to come into existence. With your point of view, every technological invention would be all BS. Look in front of you, you are using BS (your definition) to communicate crap.

          • Watcher says:

            The Dominican Republic was a harsh, hurricane lashed, swamp infested, fever infested locale in 1500. The first city of the new world was established there in 1496. That’s just 4 yrs after Columbus landed.

            It’s been almost 50 years since the first moon landing.

            The world no longer has a commercial supersonic transport.

            This is decline.

            • MarbleZeppelin says:

              What has that got to do with it? I could list millions of examples of advances just in the last decade. I myself worked on hundreds of advances in my career.
              Huge advances in computing, medical technology, transportation, satellite technology, communication, polymers, bio-technology, genetics, materials technology, batteries, motors, …. ad infinitum
              All just recently.
              Moon colonies can wait, not important and too expensive.
              There were only few supersonic passenger transports and it was a commercial loss. Apparently flying just below the speed of sound is plenty good enough.
              Do you realize that you have handheld TV, phone, internet communication now? Right now nanotechnology is being developed that will let your phone sense the environment and also work with sensors that sense your environment (blood and body parameters).
              Just a few hours ago New Horizons passed close to Pluto, the last large body to be explored by us. We have satellites around Mars and Jupiter. We have probes crawling around Mars.
              Fiber optics, nano-particles. Spun aluminum. Aluminum ion batteries.
              Decline? You really need to pay attention.

              • thrig says:

                Prometheus the fortunate whose progress through the biosphere is well marked by the superfund site and other such externalities may pause from time to time to reflect on the damage done–Conservatives In Label Only meanwhile remain ever eager to defund the EPA. As to the advances, note the downsides: computing suffers from spam and a quite dubious record on security (die, Flash, die), all that medical technology can be rather costly for what it offers (why not instead address root causes?), your much vaunted transportation network smells to me like an open air sewer (inactive car-sitters who breathe carcinogens year in and out might just possibly develop expensive medical needs) and a Bueller… Bueller… Bueller… on how to maintain all that costly stroad: Congress shall boldly raid the General Fund to continue the facade that $50 billion in road spending on the balance of $34 billion in revenue makes any sort of sense, given the continued and ongoing insolvency of the Highway Trust Fund. And so on, ad absurdum.

                For the future, one might expect nanotechnology to have its asbestos moments, expensive oopsies as delightful downsides are discovered, and a Fitbit seems a silly way to earn other people money. Put the gadget down and walk–speaking of which, here’s Ray Bradbury on progress:

                “In writing the short novel Fahrenheit 451, I thought I was describing a world that might evolve in four or five decades. But only a few weeks ago, in Beverly Hills one night, a husband and wife passed me, walking their dog. I stood staring after them, absolutely stunned. The woman held in one hand a small cigarette-package-sized radio, its antenna quivering. From this sprang tiny copper wires which ended in a dainty cone plugged into her right ear. There she was, oblivious to man and dog, listening to far winds and whispers and soap-opera cries, sleep-walking, helped up and down curbs by a husband who might just as well not have been there. This was not fiction.” — New Maps of Hell: A Survey of Science Fiction (1960)

              • TechGuy says:

                Marble Wrote:
                “Decline? You really need to pay attention.”

                We are are in long term economic decline. The only reason why we are not “yet” in a full blown depression is because of global QE, and ZIRP (Zero Interest rate policy) which is transforming into NIRP (Negative Interest Policy). All these economic “gimmicks” are to delay the inevitable collapse. Once NIRP has run its course, their will be no further gimmicks to play and the global economy will begin to collapse. Oil is about to peak which is going to add even more chaos to an unstable global economy.

                All of the technology you discuss is dependent on an unsustainable system. It is dependent on cheap and abundant fossil fuels, as most of the material made using, or containing fossil fuel compounds. All of those tech advances happened in the past, when there still was abundant and cheap resources. The US no longer has space launch system for manned missions. The US is dependent on Russia to transport personnel to its space station.

                The Space Shuttle was intended as step to development of Single stage to Orbit space planes which never happened. Fusion was going to be energy system of the future, never happened.

                As far as medicine, people still get sick, get cancer, heart disease, strokes, you name it. We are also seeing a resurgence of “cured” diseases, such as TB that have become drug resistant. We aren’t too long off from seeing a resurgence of the top 19th century diseases, as they become drug resistant and a new swarm of 21st century diseases begins to affecting populations. Life expectancy has flatlined is going to start declining soon as healthcare become unaffordable/unobtainable and because people consume too much unhealthy (processed) food or food that has been contaminated with toxins (ie all seafood contains significant levels of toxics since humans turned the oceans into a giant septic tank, crops laced with pesticides/herbicides, livestock injected with growth hormones, and consume high calorie, low nutritional feed)

                • MarbleZeppelin says:

                  Very nice, we talk about tech improvements then you jump in and fall back to some economic collapse argument. If you really want to know the dollar has been collapsing since after the Civil War. Look at the real value, not the cash.

                  Way too much wrong with what you say to bother spending a lot of time. If you only look at the negative and amplify it in your mind it will exclude all the positive.
                  We all know the situation in general, the bad stuff is all low level, those tech advances depend on energy, doesn’t have to come from fossil fuels.
                  We are so far ahead from 50 years ago it is phenomenal. If we shit-canned the sociopaths that keep us from applying the progress we have made, then we might just get things straightened out.
                  If we take your attitude and view, well I won’t say it. Just go get some help. The world is not that dismal, there are lots of wonders and beauty and hope out there. If you open yourself to it.
                  Negative thinking gets you negative results and narrows one’s vision.

                  • Futilitist says:

                    Hi MarbleZeppelin.

                    Regardless of all of the fabulous technical advances we have made, our unsustainable civilization now faces near term total collapse due to depletion of resources and environmental degradation. That is not negative thinking, it is realistic thinking. Talking about tech advances seems trivial and non sequitur to me.

                    Negative thinker: “We are facing near term social collapse and rapid die-off.”

                    Positive thinker: “But look at all these cool gadgets! They never even imagined nanotech 50 years ago. And cell phones and 3D printers. Come on, quit being so negative.”

                    Negative thinker: “I don’t see how cool tech gadgets have anything to do with the topic of social collapse. All the cool tech stuff will be totally useless soon.”

                    Positive thinker: “That dismal attitude of yours will get you nowhere. You need psychological help.”

                  • TechGuy says:

                    Marble Wrote:
                    “If we take your attitude and view, well I won’t say it. Just go get some help. The world is not that dismal, there are lots of wonders and beauty and hope out there”

                    Nope, Not negative, just being realistic. Better have a Plan B, since its very unlikely Plan A, world of rose colored glasses is going to happen.

                    I suspect that many people take a rose colored view, because its easy. It takes absolutely, no effort or planning, You just go with the flow. On the other hand, Plan B, becoming self-reliant, and avoiding dependence on unstable and dependence on unsustainable systems, takes effort, education, and planning.

                    I gotta ask: If you really believe the world is all peaches & cream, why visit a peak oil site and bother posting? Why not just play with your gadgets? There is nothing to be concerned about, why waste your time?

                  • Boomer II says:

                    On the other hand, Plan B, becoming self-reliant, and avoiding dependence on unstable and dependence on unsustainable systems, takes effort, education, and planning.

                    I think you can do both: plan for the worst, but take advantage of the scientific and technological advantages while they work for you.

                    There are many things people can do with relatively little adjustment and pain: grow gardens rather than lawns. Reduce energy use so that you can survive even when there isn’t a grid. Move into a passive solar house.

                    But you can use today’s advancements (e.g., mobile phones, the Internet, solar panels) while they are available.

                  • MarbleZeppelin says:

                    Futilist, I agree with the environmental degradation but completely disagree with the lack of resources. There is plenty of energy to be had and many of those high tech changes you and others so ridicule are not only creating sources of more reliable, less deadly energy but are providing far more efficient ways to use energy and eliminating wasteful use of energy.

                    People talk about societal collapse here but really what they talk about is the collapse of the fossil fuel industry. Society is much more than oil, coal or natural gas. In fact those are a general negative for society.
                    As far as environmental degradation goes, the scientific and technological prowess we have can ease us into a better slower transistion that will allow us to save many more species and regions.
                    If we have a fast collapse, as is so often touted here as the only way things will happen, then I can guarantee there will be little left of the natural environment and species loss will accelerate tremendously.

                  • Futilitist says:

                    MarbleZeppelin,

                    “There is plenty of energy to be had…”

                    If only it were that simple.

                    “…and many of those high tech changes you and others so ridicule are not only creating sources of more reliable, less deadly energy but are providing far more efficient ways to use energy and eliminating wasteful use of energy.”

                    When a civilization begins to need to rely on technological advances and improved energy efficiency just to get by, that civilization is experiencing diminishing returns on complexity. And don’t forget Jevon’s paradox. Gains in efficiency tend to lead to more overall energy use, not less.

                    “Society is much more than oil, coal or natural gas. In fact those are a general negative for society.”

                    I don’t see how you can say that. Before the widespread use of fossil fuels, the world population was under 1 billion. All of the technological advancements you speak of would never have even happened without fossil fuels.

                    “…the scientific and technological prowess we have can ease us into a better slower transition that will allow us to save many more species and regions.”

                    Oh, I seriously doubt that. So far, all of our scientific and technological prowess has led to ever greater species loss, not the other way around. You are suggesting that we have suddenly reached a stage of development where we can now use our formerly destructive technology for the ‘good’ of the natural world.

                    And ease into a slower transition to what? A sustainable civilization? Dream on.

                    “If we have a fast collapse, as is so often touted here as the only way things will happen, then I can guarantee there will be little left of the natural environment and species loss will accelerate tremendously.”

                    The rate of species loss is currently so high because of high tech human dominance and overpopulation. I think a rapid human die-off will significantly reduce the pressure on other species.

                  • Nick G says:

                    When a civilization begins to need to rely on technological advances and improved energy efficiency just to get by, that civilization is experiencing diminishing returns on complexity.

                    Not at all. The Romans didn’t know how to use coal. Finding ways to mine and use coal was…..high tech. It was technology. Nothing new in developing new energy sources: we’ve been doing it for millennia.

                    I agree that species loss is a tragedy, and that it creates serious risks for humanity. But, it’s unrealistic to suggest that humanity can’t and won’t do better, expecially, if, as Mac puts it, BAU continues and grows.

                    For instance, read this:

                    http://phe.rockefeller.edu/docs/Nature_Rebounds.pdf

                  • thrig says:

                    Positive thinking needs to dial it up a notch, there’s tech down on the ropes.

                    http://www.extremetech.com/computing/178529-this-is-what-the-death-of-moores-law-looks-like-euv-paused-indefinitely-450mm-wafers-halted-and-no-path-beyond-14nm

                    “EUV is the follow-up to 193nm lithography that’s used for etching wafers, but it’s a technology that’s spent over a decade mired in technological problems and major ramp-up concerns.”

                    “To put this simply — no one, including ASML, has yet demonstrated an EUV tool capable of reaching anything like the necessary power concentrations or of sustaining production volumes”

                    “If EUV and 450mm wafers don’t happen at 10nm, the “what happens next?” roadmap is a grab-bag of unresolved difficulties and potentially terrible economics.”

                    “This is what you have to understand: Up until now, the cost per transistor of a new technology has *always* been cheaper. Always. Now we face a scenario in which the cost of new transistors will be more expensive.”

                    “Graphene is decades away. So are carbon nanotubes. SiGe doesn’t scale well; InGaAs is fragile and has poor manufacturing characteristics, a host of other problems dog every other alternate substrate”

                    Fun times! You were saying, something about nanobots, or twitter… ?

                • MarbleZeppelin says:

                  Yes, we have advanced to the point where we realize we must take care of the environment and other species. That cannot be argued and has only happened relatively recently. There are thousands of organizations working toward that end. State and federal governments have also implemented many laws and set aside large areas.

                  If as you want, we head toward a fast collapse, well we don’t have to go that far even. One large step backward and all our progress forward will be erased. Species loss will accelerate and conservation will cease. The only sane way is to preserve our knowledge, preserve our forward momentum and grow our abilities to care for the world. Otherwise, it’s all lost. It’s back to shoot them all, eat them all, poison them all if they get in the way.
                  There will be no magical removal of humans from the earth like that one show that was produced. It will take time and in that time, nature will be very much destroyed.

                  • Futilitist says:

                    “Yes, we have advanced to the point where we realize we must take care of the environment and other species. That cannot be argued and has only happened relatively recently.”

                    We have finally advanced to the point that we realize we must take care of the environment and other species. But we haven’t advanced enough to realize this simply isn’t possible. That is why it has taken us so long to advance to the point that we realize we must take care of the environment and other species.

                    “10,000 years ago humans and their animals represented less than one tenth of one percent of the land and air vertebrate biomass of the earth. Now they are 97 percent.”
                    ~ Ron Patterson

                    “If as you want, we head toward a fast collapse…”

                    First off, I don’t want a fast collapse. My personal preference would be no collapse.
                    I just don’t think it matters what anyone’s preference might be.

                    “Species loss will accelerate and conservation will cease.”

                    Conservation will cease at the same time that the organized industrial rape of the natural world ceases. People will sure try to kill everything else off to avoid dying themselves, but they won’t be as effective at wholesale destruction as they are with a fully functioning industrial civilization.

                    “The only sane way is to preserve our knowledge, preserve our forward momentum and grow our abilities to care for the world. Otherwise, it’s all lost.”

                    That is so true. We cannot stop our forward momentum or we will collapse. But we must stop our forward momentum or we will collapse. Catch-22. We really don’t have the choices you think we do.

                    It will all be lost anyway. No matter what we ‘choose’.

                • wiseindian says:

                  I am going to quote a para from Ran Prieur

                  “It’s funny how optimists and doomers have the same blind spot: they cannot imagine a world without economic growth. So optimists ignore the math and think growth is permanent, while doomers think the end of growth means the end of the world”

                  I think predictions of decline are correct just that they tend to be widely off the mark in terms of speed, impact and timing. People in PO community have been predicting a world wide economic collapse for 10-15 years now and I bet they will be doing it 10-15 years hence, a stairstep collapse is what is going to happen. I am going to safely bet that 20 years from now there will still be stock market, central banks and a functioning government.

                  • Boomer II says:

                    That’s a great quote. And that’s the main reason I discount the doomers who think that economic collapse will happen when lenders aren’t paid back. So they won’t get their money back. They have more than they know what to do with now, or they wouldn’t be making so many risky loans to begin with.

                    Mankind has survived far worse conditions than the collapse of current business as usual. Sure, economic disruption will be hard on a lot of people. But survival isn’t tied to loans. We’ve got people surviving in the world with barely any food and water. The idea that everyone in the world is going to give up and die because they can’t buy stuff anymore seems unlikely.

                  • TechGuy says:

                    WiseIndian Wrote:
                    “. People in PO community have been predicting a world wide economic collapse for 10-15 years”

                    We are already in an economic collapse (in the West). The US lost over 20 million job since 1999. I am sure the EU has lost a similar amount. The collapse is in slow motion, but its relentless like rust. We haven’t even hit Peak Oil yet and we are already in long term economic decline, There are major economic meltdowns every 7 or 8 years (on average). For the time being the global economy has been propped up with ZIRP and lots of QE. When the global economy encounters an energy crisis, it very likely to be the tipping point that destabilize the economy from which it cannot recover (at least for a century or more).

                    Boomer wrote:
                    “We’ve got people surviving in the world with barely any food and water. The idea that everyone in the world”

                    Humans are not keen on losing their standard of living. I am sure Boomer, you would get very upset if there was a Bank Holiday and you lost all of your savings and your pension/SS was wiped out. What would you do? What would you do if your already retired and/or can’t find employment? People get angry and violent. You’re assuming the majority of people are rational. They are not. When crisis comes they switch on full irrationality.

                    Those living in poverty have grown up, and have the means to provide for themselves with in their environment.
                    Take a stock broker, a school teacher, Throw them into an unfamiliar environment, for instance a hut in a third world region, with no useful skills for that environment, the odds are they are going to die pretty quickly. Its is not if you going to turn stock brokers and most white collar workers, into farmers, or laborers, or other skills when their industries go poof! When these people are not able to find jobs and support themselves they will turn to the streets, as the people do everywhere (Greece, Spain, Portugal, Argentina, China, etc). What ever stability that remains breaks down when society is unable to support itself as whole.
                    Maintaining system will be difficult too. Just about every machine contains parts or materials supplied overseas. What happens replacement parts cannot be obtained? What would happen in the West if economy collapses and fell into Civil war and the West suddenly stopped getting its Chinese Manufactured goods anymore.

                    Raising Taxes to provide living benefits for the largely unemployable population, won’t work long term either. Those that have the means will not slave away while other take 95% of their labor away. They will either quit or simply become less productive.

                    War is very likely. Its already broken out in the Middle East and quite possible will break out in Asia too when China’s economy falls apart. There will be civil wars and regional wars that merge into a global war. It won’t happen overnight and not the day or year after Peak Oil, but slowly, region by region will destabilize.

                  • Boomer II says:

                    Humans are not keen on losing their standard of living. I am sure Boomer, you would get very upset if there was a Bank Holiday and you lost all of your savings and your pension/SS was wiped out.

                    If everyone around me also had their savings wiped out, we’d all be the same boat together. The money itself doesn’t matter. It’s important to the extent that it allows some people to buy and perhaps prevents some people from buying. But if it all disappears, then money becomes irrelevant.

                    Loss of resources will have a huge impact. Loss of money doesn’t have to have the same impact. You can barter if you’ve got the resources to barter with.

                    And I have thought about me getting old and not being able to survive. So be it. I know I will die. If I am starving to death in my 70s or 80s, perhaps I’ll just take a pill to hasten my leaving.

                  • wiseindian says:

                    Edit

                  • MarbleZeppelin says:

                    Very good wiseindian. And I will just add that the future will not be like anything that most people predict or imagine. I know just in my lifetime so much is different now that when I listen to 1960’s radio I feel a culture shock even though I was there.
                    If I go back to my grandfather’s time the difference is even vastly greater. Starting life with no electricity, running water was a stream, no indoor plumbing,no cars just an oxen, deep in the woods. Ending life in the nuclear age with TV and ICBM missiles and computers.
                    I have experienced both worlds and have no problem imagining a world where humans emulate nature. In nature growth and death are equal. There is always growth as long as it is balanced by death. Overall changes happen slowly.
                    I can tell you now, most people would be happier living a hunter gatherer life than what modern civilization has given us. Most people are unhappy and fill their life with various distractions instead of interactions.

                  • I can tell you now, most people would be happier living a hunter gatherer life than what modern civilization has given us.

                    I am not so sure. Just because most people are unhappy with their lot in life does not mean they would be happier living a life in the wilderness, making their homes from the sticks in the forest and their clothing from animal skins and suffering from every malady found in the wilderness with no medical help.

                    But hunter-gatherers had a lot less time to be either happy or unhappy.

                    Human longevity in prehistory

                    A 30-year-old hunter-gatherer has the same probability of death as a Japanese person today who is 72 years old, the study found. At 15, a hunter-gatherer has a 1.3 percent probability of dying in the next year; Swedes hit those odds at age 69.

                    Hunter-gatherers had an extremely high infant mortality rate. And if they did make it to their 30s, they could not expect to live much longer than that.

                  • MarbleZeppelin says:

                    Ron,
                    Averages do not determine end points. When so many die before 5 years old, the average lifespan is low.

                    Hunter-gatherers had community and family and were very involved with the real world. Not the isolated electrical machine driven society we live in.
                    I walk the neighborhood every day. No one is outside except to cut the lawn or get in the car. No community.

  23. Greenbub says:

    People claiming to be in the shale business commenting on this article:
    http://seekingalpha.com/article/3310735-shale-producers-cant-make-money-at-an-oil-price-of-60?v=1436602686&commenter=1
    Apologize in advance if this is a repost.

    • shallow sand says:

      Green. I think this has been posted but I do not think the people in the business comments were there.

      The only way we will know how the economics fare will be hindsight, looking at 10K and 10Q. 2nd quarter 10Q will be out next month. Should give us some ideas on cost savings.

  24. Fabio says:

    Iran nuclear deal reached.
    Iraq surging.
    SA, UAE on the rise.
    Russia and China extremely resilient, despite years of peak calls proved to be wrong.

    Hard to see a 2014-2015 peak materializing.

    • Enno Peters says:

      I agree. I would pose that the data is not available to anybody to make such a prediction with an accuracy of 1 year. Nor is an exact prediction of any importance, and nor is in my mind global oil production a useful metric (the oil intensity of GDP and per capita production are much more relevant).

      • Mike says:

        I agree, Enno.

        Mike

      • old farmer mac says:

        Hi EP,

        I am willing to bet that Ron is right in calling the peak but I also agree with you that the oil intensity of the economy and oil consumption per capita are more important- so long as the peak is protracted over several years. My impression right now is that the top of the world production curve will be relatively flat for at least two or three more years , just as it has been relatively flat for the last few years.

        The overall economy has adapted to higher oil prices more easily and faster for the last fifteen years or so than most people would have guessed possible.

        It could be that given increasing efficiency and changing lifestyles peak oil will not be a critical issue for a few more years – maybe as many as four or five in my own opinion. I live in an economic backwoods as the USA goes but it is still remarkable how fast the old oil guzzling cars and trucks are disappearing.

        Ten years ago it was rare that I would see a motor scooter on local roads. I see a dozen any trip to town now and there are quite a few Toyota Prius autos around.Diesel pickups are very popular among folks who can afford new ones and compact trucks are the invariable rule now among the less well off folks who must drive and still need a truck.

        And less of us are driving lots of miles. The countryside is still well populated , with extremely few empty houses, but the clear trend is to build nearer to town and jobs.

        The building code is not very strict compared to California or Germany for instance but if you build a new house year it will be very economical to heat and cool compared to a typical house built no more than twenty years ago.

        Personally I think the Yankee economy at can function ok on one percent less oil each year for at least the next four or five years. Most of western Europe can probably manage this trick as well.

        But ” what goes around comes around” in the local vernacular and the current oil glut is probably setting the stage for the next oil supply crisis, which may be a real killer, given that it will be brought on both by much reduced ” upstream ” spending AND depletion which never sleeps.

        I have not yet seen much speculation about how long it might take for a supply crisis to come about but hopefully some of the regulars here will have a few things to say about it.

        With the depletion rate of legacy oil fields being at the very least four percent a year and more likely five to eight percent according to everything I read the likelihood of a price war lasting very long in historical terms seems to be very slim indeed.

        Iran and Iraq together may be able to mostly stave off peak oil for a very few years if both countries are politically lucky and thus able to produce and sell all they can without being held up by sanctions and domestic strife.

        Ron is almost for sure dead right about a LOT of old fields being sucked dry fast using enhanced recovery techniques. When these fields do start to decline the decline is apt to be fast and steep.

        • wimbi says:

          I live in the same economic backwater, but even more so, being 40 north in played-out coal mines.

          I see as astoundingly rapid shift to solar, EV’s and small cars, as well as real community projects such as a pretty big town-owned PV farm close by on “waste” land.

          All this is apparently spontaneous, with multiples of reasons and groups- church and schools and municipal bldgs, etc.

          I like to think that all my op-eds over the years have had an effect, but I doubt it. Too heavy on the tech/science side of things for most people to get close to.

          This site, IMO, tends to belittle such efforts, but from here, it is big and obvious, and I can’t believe we here are very far away from normal from a great swath of middle america.

          • Dennis Coyne says:

            Hi Wimbi,

            I think the work you do is important. Have you ever put together a website(or blog) to share what you have been doing?

            I would be interested and my guess is there would be many others.

            • wimbi says:

              Thanks Dennis. My business son is so paranoid about the silicon valley kind of sneaky shenanigans he lives in that he demands I stay under my rock at all times, so I have to construct a web site once removed. A work in progress.

              Besides, I don’t really dig all that digital stuff. Slide rules, wild guesses and rules of thumb are my style.

              When this stuff finally does get on the web, people will be horrified at the mess and poverty, but the results may be interesting.

              • Dennis Coyne says:

                Hi Wimbi,

                It is probably better to stick with what you know. Maybe you can find some young person that likes to do internet stuff to get something up. Just call it wimbi’s web and nobody will connect it back to you if you want to be anonymous. It would be great to share what you have learned with the wider world.

      • I disagree. There is a mountain of evidence on Russia’s Western Siberian fields as well as upstream projects that are scheduled to come on stream. Russia is not a closed book like Saudi Arabia. More and more oil people, both inside and outside Russia, are saying the same thing. Is it possible that all of them haven’t a clue as to what they are talking about?

        As for me, I will put my money on the many folks who are all singing the same tune as the below article that just came out this morning.

        Fitch Forecasts Drop in Russian Oil Production in 2016 Over EU-US Sanctions

        One other note. There has always been about .3 to .4 million barrel per day difference between what the EIA says Russia produces and what the official Russian web site CDU TEK says Russia produces. But as of late the gap has begin to widen. The difference for March 2015 is over .6 million barrels per day.

        Russia C+C photo Russia CC_zpsyipujuxr.jpg

        • Mike says:

          Thank you, Ron. I respect that opinion. With regards to domestic production in the US? over the hill and down we go.

          Mike

        • Enno Peters says:

          Ron,

          I much appreciate all the data you keep showing, and your insights.

          But, I don’t take predictions too seriously, and I think you are wrong in doing so yourself. Of course there are people who know what they are saying about “Western Siberian Fields” in Russia. That is just an utterly small part of the global oil demand and supply picture (and especially in the change thereof), for the coming 2-3 years or so.

          Just in the last post, Marmico holds you on to a peak prediction you made before in 2012. You said you neither remembered it, and if you made it you were just mistaken. It is clear you made it, so you were just mistaken. You did not even respond to Dennis’ comment in which he pointed you to where you made it. I am not blaming you that you were mistaken, which happens very often to people who make predictions, but more that you seem to be so serious about it again, despite that you don’t take your own earlier predictions seriously.

          So, this time, if you turn out to be wrong again (which I don’t say you necessarily will, just that you are likely to be so), is there anything at stake, or will you just say again that you don’t remember it, and that you were just mistaken? You (and Old Farmer Mac) say you are willing to put your money on it? How about a donation to a charity if you are wrong? 🙂

          Nobody likes to being hold to past failed predictions. I think the solution to that is making less predictions, or making sure that there is a bigger chance that you are right.

          I think people who have an overly simplified model of the world in their mind are more likely to make predictions, and be confident about it, especially if there is not really anything at stake.

          • Of course there are people who know what they are saying about “Western Siberian Fields” in Russia. That is just an utterly small part of the global oil demand and supply picture (and especially in the change thereof), for the coming 2-3 years or so.

            But the subject here was not the global supply and demand picture. It had nothing to do with the global picture. It was about Russian production. An Western Siberian fields are over 60 percent of Russian production.

            As for past predictions, I have posted on that before: Peak Oil and the Blibbit Principle If you have a five pound bag and people predicted it would it would burst if you put ten pounds of shit in it, you did and it did not burst. From this you conclude that predictions about the bursting of the five pound bag were simply wrong and therefore no new predictions about the bursting of the bag will have any credability. So you conclude that you could easily get 11 pounds in the bag, then 12 pounds, then…

            The truth is that simply because the bag did not burst at ten pounds of shit makes it even more likely that it will burst at 11 pounds of shit. Therefore the peak shit prognosticators become more likely to be correct as more shit is piled into the bag.

            That passing prediction back in 2012 or whenever was something I just wrote off the cuff and simply failed to remember it. But I am very adamant this time. But what the fuck, if I am wrong I am wrong. And if I am wrong it therefore becomes even more likely that the next prediction will be correct.

            One more point about Russia. Why are you guys so timid about Russia. The handwriting has been on the wall for many years that Russia was struggling to keep production up. From six years ago:
            Russian Oil and Gas Industry Surprises Analysts

            Russia is a very mature producer. If you exclude all the drilling activity taking place every year, then Russian organic decline in production is close to 19%. To compensate for that organic decline, Russia drills somewhere between 5,000 and 6,000 wells every year.

            And they have kept it up until now. But reports out of Russia say they are drastically cutting back on those 5,000 to 6,000 new wells each year. But even if they did not, there is a limit as to how long massive infill drilling can keep those old brown fields alive. That was what my last post about China was all about. That is even with massive infill drilling in Daqing, eventually the decline rate has to catch up.

            Also, I would not be so quick to discount what people like Fitch Ratings are saying. After all, that is their job to get things right. That is what their clients are paying them to do. I have no money on my predictions but they do. They have a lot weighing on their prediction that the five pound bag is about to burst. All I am doing is agreeing with them.

            • Enno Peters says:

              Fabio concluded with: “Hard to see a 2014-2015 peak materializing.” He was definitely not only talking about Russia.
              I started with: “I agree”
              You replied with: “I disagree”
              And now you say it was not about the global peak, but about Russian production? I belief that was not what we were talking about, nor the main topic of your post.

              I have no idea about Russia, and I didn’t say anything about it; from what I have read I would not be surprised to see a small (<3%) decline, but nothing that would have a major effect on global production.

              "Therefore the peak shit prognosticators become more likely to be correct as more shit is piled into the bag."

              Yes, exactly in the same way as a broken clock is twice right every day, and more likely to be right next, every second it is wrong.

              This is exactly the kind of reasoning that makes these seemingly very precise predictions useless in my opinion. Almost (as long as there is no way to generate oil in a major way) by definition peakoil will happen. Just give yourself the margin to be right the first time.

              • He said, copied and pasted here:

                Russia and China extremely resilient, despite years of peak calls proved to be wrong.

                Now he may not have been talking about Russia here but Russia is what he said. So I just naturally assumed he was talking about Russia, and China which I also spoke of in my previous post about a week or so ago.

                If I am not allowed to make a prediction then I will just quit. I have posted many posts explaining why I think 2015 will be the peak. China is one of them. Russia is one of them. Other nations seem to have peaked, Kuwait, Colombia, Brazil and so on. My prediction is not just a will of the wisp nonsense but is based on some very serious study of every large producing nation and most of the small ones.

                I have picked 2015 as the year world Crude + Condensate will peak. Consider that worthless if you wish.

                • Javier says:

                  I agree with your prediction for a C+C peak oil in 2015. I did my own independent analysis about 9 months ago using a different approach to yours based not only in oil production but also in market dynamics and economic cycles and came to the conclusion that C+C peak oil has a very high chance of taking place in the 2015-2016 window.

                  Nothing that I have seen or read in the past 9 months has made me change my opinion. Steven Kopits prediction at Prienga that oil demand should experience a strong increase in the second quarter of 2015 did worry me a little, since my model did not anticipate that, but he turned out to be wrong about that prediction.

                  We are probably already past peak oil exports and I believe that many of the present world’s economic problems are due to that fact on top of the world’s over-indebtment.

                  • Jeffrey J. Brown says:

                    We are probably already past peak oil exports and I believe that many of the present world’s economic problems are due to that fact on top of the world’s over-indebtment.

                    No argument from me.

              • Dennis Coyne says:

                Hi Enno,

                One could certainly be safe and make no prediction, or a very safe prediction such as peak oil will happen in the future. Ron has certainly gone out on a limb by predicting a peak in C+C output within a one year time frame and perhaps he will be correct. The peak in C+C per capita is 1978 and so that peak has occured already.

                For oil intensity I used IMF GDP data (2014$) and EIA output data (barrels per year) to plot $GDP (2014$) per barrel of oil production (on right axis) and barrels of yearly oil output per million dollars of GDP(2014$).

                I don’t have older GDP data for the World, but perhaps barrels produced per dollar of GDP also peaked in 1978 around the time of peak per capita oil output. GDP per barrel of oil output has not peaked yet and this will only happen if real GDP falls.

                • Enno says:

                  Thanks Dennis.

                  If you extrapolate your grey trend, it looks as if in 35 years we no longer need any oil to run the economy. However, please don’t see this as a prediction. 😉

                  • Dennis Coyne says:

                    Hi Enno,

                    Yes I agree that is not a prediction I would make, the gray line will likely be hyperbolic in shape so we may approach zero output in the future, but not in 35 years, maybe 135 years. As oil becomes very expensive we will use less of it, but there will likely be continued low levels of oil use in the 22nd century.

                  • Futilitist says:

                    Hi Dennis.

                    Ha ha. What do you figure the world population will be in 35 years? 135 years?

                • Ok, I’m going to put on my Nostradamus hat, shake my portable’s excel macros, and predict 2016 crude oil and condensate production will be within 0.5 % of 2015 production. Coal production will be lower than 2015 production, but gas production will increase to cover the gaps. It’s the new “business as usual” case, and won’t have much to do with the Paris meeting.

                  I won’t dare make a prediction on methane emissions from rice fields. That’s not measured very accurately.

              • Futilitist says:

                “Therefore the peak shit prognosticators become more likely to be correct as more shit is piled into the bag.”
                ~Ron Patterson

                “Yes, exactly in the same way as a broken clock is twice right every day, and more likely to be right next, every second it is wrong.”
                ~Enno Peters

                Wrong. Terrible analogy. I really hate bad analogies in service of denial. A broken clock is right twice a day, but peak oil can happen only once. How does your dumb analogy even fit? Give me a break.

                A much better analogy would be the straw that broke the camel’s back. When the cumulative weight of all of the many pieces of straw exceeds the camel’s load capacity, the camel’s back must eventually break, just like the overloaded bag of shit in Ron’s more colorful analogy. How could it be otherwise?

                When the camel’s knees are beginning to visibly shake as ever more straw is loaded on it’s back, what was once a daring prediction becomes a startling glimpse of the obvious to all but the most willfully blind.

          • Fabio says:

            “people who have an overly simplified model of the world in their mind are more likely to make predictions, and be confident about it”

            Wise words, quote of the day IMHO

            • Futilitist says:

              People who have an overly complex model of the world in their mind are more likely to miss the obvious patterns. Complex systems fail for the simplest of reasons.

              • Fabio says:

                “Complex systems fail for the simplest of reasons”

                Agreed, but identifying the primary cause of failure, as simple as it is, is not the same as predicting the time of failure.

                Take Girard for example: his theory is formidably simple and at the same time powerfuly comprehensive, and yet he wisely would never dare to frame the future with dates.

                • Futilitist says:

                  Hi Fabio.

                  “Agreed, but identifying the primary cause of failure, as simple as it is, is not the same as predicting the time of failure.”

                  I was cautioning against equating a system’s complexity with stability. What goes up, must come down, and the bigger they are, the harder they fall, and all that.

                  Yes, precise timing of any inevitable future event is impossible. But why should that be any cause for comfort? It does not necessarily mean that things will unfold slowly. It could also mean that things could happen much faster than even the most dire forecasts.

                  “Take Girard for example: his theory is formidably simple and at the same time powerfuly comprehensive, and yet he wisely would never dare to frame the future with dates.”

                  Who is Girard and what theory are you referring to?

                  • Fabio says:

                    My point was theories may be simple (and the best ones are), but, since the world is complex (read too many variables with multiple degrees of freedom), decent models end up being complex as well.

                    As for Girard never mind, apparently I’ve mistaken you for another Futilitist, one that used to post here till a few months ago.

                  • Fabio, I think it’s the same Futilitist. But he seems to be behaving a lot better now. So I will let him stay until he starts insulting everyone again… Perhaps he won’t do that this time around.

                  • Futilitist says:

                    “As for Girard never mind, apparently I’ve mistaken you for another Futilitist, one that used to post here till a few months ago.”
                    ~Fabio

                    You weren’t mistaken. I thought you might have meant Rene Girard. I was just curious as to the form of your statement, since mimetic theory has nothing to do with predicting the future of anything. I was also wondering if the mirroring structure in my post possibly caused you bring up Girard. And thanks for noticing what I was talking about before my recent sabbatical.

                    “Fabio, I think it’s the same Futilitist. But he seems to be behaving a lot better now. So I will let him stay until he starts insulting everyone again… Perhaps he won’t do that this time around.”
                    ~Ron Patterson

                    Thanks for the opportunity to rejoin this fine discussion, Ron. The future is impossible to predict with any absolute certainty, but I will try my best to behave.

    • I think iraq’s figures are partially fake. And Iran isn’t about to start increasing production that fast. They may dump crude out of storage, but Iranian fields are pretty beat up, and it takes time to mobilize equipment and get work done.

    • TechGuy says:

      Fabio Wrote:
      “Iraq surging.”

      Must raise an eyebrow with this one. ISIS controls half of Iraq. The country is a civil war. Hard to believe “production is surging in Iraq”. I suspect the figures for Iraq production are bogus or contain errors.

      Ron wrote this about Iraq production:
      It is interesting to note that Iraq via “Direct Communication” say they only produced 3,591,000 bpd in June, 416,000 bpd less than what “Secondary Sources” said they produced.

      Fabio Wrote:
      “Hard to see a 2014-2015 peak materializing.”

      CapEx for Oil production\Exporation has declined. CapEx was a leading driver for employment as millions had been hired. Now Oil companies are laying off.
      Global economy is falling into recession (despite gov’t propaganda/cheerleading). US/EU/ASIA consumer consumption is falling. US/EU unemployement continues to rise (for the US look at the labor force participate rate, not the monthly data provided by BLS)
      Debt bubble is beginning to pop: Greece, Puerto Rico, South America, Asia, etc.
      LTO drillers are insolvent and likely to be forced to default or liquidate assets (too much debt and not enough revenue) LTO Price hedges end this year.
      Oil is in bear market. Demand is weak. No need to expand production further.
      Oil production could flatline for a period before declining, but that still will be a peak.

      Looking at charts with rising lines, is looking at the past. CapEx spending, rising prices (increase demand) is forward looking at future production. Take the the Stock Market for example, In most cases it rises fast before it begins to collapse. Looking at Business CapEx and hiring, is indicator of future growth.

      • AlexS says:

        TechGuy,

        production is increasing in the Southern part of Iraq, not affected by ISIS.
        Most of production in Kurdistan was also not affected by ISIS

  25. Chris Nelder, Get Real List Great Podcast, a must listen.

    Chris Nelder picks 2015 as the year of peak oil. How dare he? Don’t he know he might be wrong? What if he is wrong? Would that be a disaster?

    Get real people. There is nothing wrong with making a prediction. If you are so damn afraid of being mistaken then you have the problem, not me, or Chris Nelder.

    • MudGod says:

      Will you all cut Ron some slack. It is difficult making predictions, especially about the future. I think we can all agree that nobody knows the future, but when it comes to peak oil we need as many brilliant minds as we can get trying to predict the peak. I consider this the biggest event in the history of mankind. It may very well be the beginning of the end of civilization. We have built our whole civilization around one resource and there is no discussion about what happens when it starts to run out. I say that the more predictions there are the more awareness there will be. You go Ron.

      • Thanks MudGod, but I am in good company. Chris Nelder, link in my post above, and even ASPO USA says there are good reasons to believe that oil is peaking right now in 2015.

        ASPO USA Is Production Peaking Now?

        Actually this ASPO report was written some years ago, they just predicted it would happen in or about 2015.

        I am glad a few people have the courage of their convictions.

      • MarbleZeppelin says:

        With most of the oil sources owned by national governments, it is difficult to know how accurate information is, especially about reserves. So we make best guesses dependent upon our knowledge, experience, abilities and vision. Ron says 2015, my prediction was between 2017 and 2022. Not a lot of difference and I think not that important.

        We all know the direction things are going. The key is not how much oil, or coal or natural gas we manage to squeeze out of the ground but how much alternative energy, conservation, and societal change we can make.
        The choices going forward into the next 50 years can determine the future of the world and the planetary ecosystem for up to thousands of years into the future.
        Whether we switch to more biomass is a big choice with huge ramifications. How much we implement wind and solar power and how we use them will make big differences. How much and what kind of nuclear power will be used can produce a dream or a horrible nightmare in the future.
        Another big question is will we be smart enough to design buildings, commerce and society in general away from energy use?
        Can we learn self-control and reduce our consumption and population without having to resort to drastic measures or reach a point of collapse?
        Peak oil and peak other fossil fuels are inevitable whether chosen voluntarily or through economic/geologic constraints. Most of the other choices that we make now and in the future are not inevitable. We actually have a lot of leeway to choose different paths.
        There are different ways to say it but the simplest right now is “It’s time to man up”. Make your best guesses then act upon them.

    • Futilitist says:

      Collapse denial works by making people afraid to try to speak the truth for fear that their reputation might somehow be hurt.

      You are 100% right, Ron. Keep up the good work. The deniers are cowards.

      “The truth is that simply because the bag did not burst at ten pounds of shit makes it even more likely that it will burst at 11 pounds of shit. Therefore the peak shit prognosticators become more likely to be correct as more shit is piled into the bag.”
      ~Ron Patterson

      Best quote ever on the physics of irreversibility and why some predictions must eventually come true.

    • marmico says:

      Chris “Bobblehead” Nelder on the boob tube in 2008 calling all liquids peak of 90 mb/d in 2010.

      http://www.dailymotion.com/video/x5bzco_chris-nelder-called-a-peak-freak-on_news

    • Don Wharton says:

      Ron, I think you are almost certainly correct in the near term given the current financial backdrop. Investment has declined and will stay below the point required to maintain current production. My recollection is that you have also talked about how and why we might get a subsequent higher peak. Obviously we would either need much higher prices for product (to justify the required investment) or an additional technology revolution that is not seen at this time.

      I think the fact that you have mobilized such a wonderful community to follow your posts says everything that needs to be said about how much your wisdom is valued. Keep up your most excellent work.

  26. clueless says:

    Off topic analogies:
    1. Watchers of TV in the US during the past several years have seen a series of beef jerky commercials with the same theme. A group of irresponsible teenagers in the forest come across a sleeping Bigfoot. They play a prank to taunt Bigfoot. Bigfoot gets pissed, and, e.g., turns their automobile upside down. In real life, Bigfoot is the European Union led by Germany. The Greek Prime minister is the reckless teenager. And, Greece is the automobile.
    2. A couple gets married and immediately one spouse, in addition to overspending the budget every month, starts verbally attacking the other. Worthless, no good, a crook, etc. Finally, after over 10 years of abuse the victim spouse says: “Why don’t you file for a divorce?” The other spouse replies: “Why would I ever do that? You are the only one making any money.”

    • Watcher says:

      Entirely valid comedy, back before it became so visible that “money” is a substance created from thin air on a whim.

  27. ezrydermike says:

    I started following TOD during the Deepwater Horizon blowout and that led me to this site.

    It seems that now we have reached another milestone at least in terms of major litigation.

    It seems that BP escaped with lower fines than I expected wrt gross negligence.

    Thoughts?

    http://www.theguardian.com/environment/2015/jul/02/bp-will-pay-largest-environmental-fine-in-us-history-for-gulf-oil-spill

  28. AlexS says:

    According to the Russian Energy Ministry, the country’s crude and condensate production reached 10.66mb/d in June, up 1.4% year-on-year.
    Average production in the first half of 2015 was 10.64 mb/d, an increase of 1.1% over the same period of last year.
    I used the 7.3 barrels to ton rate to convert the ministry’s numbers. Some sources (including Energy Intelligence) use 7.33 rate for the Russian oil. In that case, June output was 10.71mb/d

    The EIA C+C numbers for Russia are incorrect. Also note that the EIA apparently use 7.1 conversion rate.

    The Energy Ministry recently revised up its forecast for Russian oil production in 2015 to 530 million tons (10.6mb/d), an 0.6% increase from last year average.

    Russian crude and condensate production
    Source: http://www.minenergo.gov.ru/activity/statistic/12721.html (in Russian)

    • Alex, both JODI’s and the EIA’s number differ from those of the Russian official web site CDU TEK which matches the data from the Russian Energy Ministry. And the difference between the JODI-EIA data and the Russian data is widening. I think there is some political padding going on there. The CDU TEK web site gives Russian oil production data daily. Is daily production possible?

      In the chart below, the EIA data is through March and the Jodi data through April. Notice how the EIA has Januay 2015 data at peak then a sharp decline in February and an even sharper decline in March. Your Russian chart shows an increase in February and March.

      Also notice that both the EIA and JODI have Russian production at about half a million barrels per day below what the Russian site has.

       photo Russia CC_zpst1ls2dzz.jpg

      • AlexS says:

        Ron,

        CDU TEK (“Central Dispatching Department of the Fuel and Energy Complex”) is a statistical unit of the Energy Ministry (although not as big and influential, as the US EIA). So they use the same database.
        They report daily production numbers based on company daily reports to the Ministry, and based on that data they publish preliminary monthly numbers, usually on the second or third day of the next month. Revisions of these preliminary numbers are generally quite small.
        I know that JODI’s numbers for Russia differ from the Ministry’s numbers and are more in line with the EIA C+C numbers. The discrepancy in relative terms was fairly stable (about 4%). My guess is that both the EIA and JODI are using a different conversion rate, given that the Russian crude mix is heavier than Brent. Besides, the EIA and JODI numbers are published with a time lag. For example, the numbers that are currently on JODI site were unchanged since early June. In any case, I do not see political conspiracy in all these numbers
        Below is a table comparing numbers from different sources:

        • Alex, thanks for the data chart. It confirms what I was said earlier. In February 2014 the difference in the EIA data and the Russian data was .41 million barrels per day. In March 2015 the difference was .6 million barrels.

          I do not see political conspiracy in all these numbers

          Alex, the term “political” does not mean a “political conspiracy”. Just about anything the government, any government, touches is political. That does not imply it is a conspiracy. If you check the OPEC data chart I posted in the original post you will see OPEC production figures from “secondary sources” and production figures from “direct communication”. Direct communication means they picked up the phone and called them. You will always see a huge difference between what secondary sources say, Platts and others, and what Venezuela and Iran say they produced when called. The difference is political. Not a conspiracy, just a damn political lie.

          And recently Iraq has joined the liars club. While Iran and Venezuela are reporting far more than they actually produced, Iraq is lowballing their numbers. They are likely setting themselves up in anticipation of future quotas.

          Of course Russia’s numbers may be due to using different conversion numbers for tons to barrels. There is no way Russia is getting 7.33 barrels per ton, which is the number most folks are using. 7.33 implies very light oil. I don’t think Russia’s oil is that light. I would guess between 7 and 7.2 would be much closer. But on the other hand there just might be a political input there also. Putin just might want to show that sanctions are having no effect.

          • AlexS says:

            The EIA has problems with oil production data for its own country. Do you think their estimates for Russia are more accurate than the Russian Energy Ministry’s?
            I just think the EIA estimate for March is too low. Note, that the IEA has higher Russian production in March compared to February.

            • AlexS says:

              By the way, the IEA has been gradually increasing its estimate of Russian oil+NGL production in 2015 since the beginning of the year. Their latest estimate is 190 kb/d higher than in January

              • Alex, those are pretty low figures for crude + NGLs. Looks like the IEA figures for C+C, if they had any, would be very close to those of the EIA, perhaps a little lower.

                And the JODI figures are very close to those of the EIA. So now we have JODI, the EIA and the IEA saying one thing and Russia saying another. What may we imply from this?

                Edit: The EIA says Russia’s average total liquids production for 2014 was 10,853 thousand barrels per day.

                Total Petroleum and Other Liquids Production – 2014

              • AlexS says:

                Unlike the US, Russia produces very small quantities of NGLs, as most of the gas produced is dry gas.
                There is no “other liquids” production, and an insignificant volume of ”refinery gains”

                • Synapsid says:

                  AlexS,

                  In Russia “…most of the gas produced is dry gas.”

                  This surprises me; what accounts for it? Is no wet gas produced, or is it flared, or what? The region is so huge that I’d expect more variability in NG sources.

                  Puzzled, I am. Help?

                  • AlexS says:

                    Synapsid,

                    The resource base is diverse, but most of the currently produced natural gas is gas with very high methane content (95-96%) from the super-giant fields in the North of Western Siberia (Urengoy, Yamburg, Zapolyarmoye. Medvejie and others). As these fields are gradually depleted, the share of wet gas in total production will increase. Wet gas is currently produced in Astrakhan region (north of the Caspian Sea) and Orenburg regions.
                    Russian NGLs production is now aroung 750kb/d, about 1/4 of the U.S. output. But NGL volumes are expected to increase, not least because of higher utilization of associated gas.

                  • Synapsid: the supergiant gas reservoirs are Cenomanian age, relatively shallow, located under very cold layers (the gas prone sector has or had extensive permafrost).

                    The reservoir is found at very low temperature, this condensed the liquids, even the NGL, and left behind a very dry methane plus some ethane fluid.

                    The Cenomanian reservoirs can have deeper Jurassic gas condensate underneath. If the Russians decide to develop it the Jurassic can produce about 1 million BOPD of condensate. But those reservoirs are low quality.

              • AlexS says:

                this table compares monthly numbers from the EIA and the IEA

              • AlexS says:

                Below is a table showing annual estimates and forecasts of Russia’s C+C+NGL production from various sources
                Each organization has its own numbers, some of them are periodically revising historical numbers.
                The numbers differ for other countries as well. I do not know what are their methodologies and how they “process” the data from local sources.
                The IEA is the quickest to revise their data. Therefore, in the July OMR the IEA is now projecting modest growth in Russian output this year, while the EIA and OPEC are still expecting flat volumes.
                You may enjoy the fact that 3 organizations project a ~1% decline in 2016. However, until very recently all of them were forecasting a decline in 2015, and now they had to admit that Russian oil production is showing resilience.

      • Ron, in other countries it’s very common to require a daily report issued to the ministry. The production facilities are usually much more centralized, it’s fairly easy to measure tank levels and read meters. In my case I’ve seen operations run production estimates at 6 and 18.

        We also run a very tight account of well expenses as well as committed expenses. The daily engineer report is cross checked against the well spending plan, and the accounting department uses those dailies to cross check and audit service company billing. The last operation I worked had everything loaded and visible on my computer screen by 7am every morning.

        • Watcher says:

          Recall Russia imposes taxes on Rosneft and Lukoil and those would be per barrel relevant.

          Both are are least partially publicly owned. If more oil is claimed pumped than is really pumped and sold, those companies could get taxed more than the revenue they generate selling oil would support.

          For that big an exporter, kind of doesn’t make any sense to falsely inflate the output number. The companies declaring an amount of output can pay tax on that amount because they sell that much. It would be another one of those secrets with too many involved to stay secret. Rather a lot of visibility shone on this stuff for it to happen.

          Now of course the Russian Central Bank can print money and obfuscate it all. Imagine that.

          • AlexS says:

            All of the large Russian oil and gas companies are listed public companies have foreign investors and report IFRS accounts. A large stake in Rosneft is owned by BP. There are western representatives in the boards. There are several JVs with participation of large foreign companies.
            A major part of Russian oil is exported in the form of crude or refined products. Export volumes are growing and are expected to increase further this year.
            None of the serious international experts have ever questioned the accuracy of the Russian oil statistics.

            • I don’t like the way they allocate back to individual wells, and the use of tons sure seems bassackwards. They measure a volume then have to convert it to tons but sell volumes.

              • Dennis Coyne says:

                Hi Fernando,

                If we are interested in energy output, isn’t mass a better approximation of the energy content of the output than volume?

                I think mass makes more sense than volume from an energy perspective. The UK also reports its oil output in tonnes rather than by volume, but Norway and Canada use volume. Clearly people have different opinions on this.

                • Dennis, the stuff is bought, sold, metered in volume units. Production isn’t weighed. We get what we need from the oil assay, not from the mass. I had long discussions with the Russians about this. Even set up a committee to deliver a study showing them how a modern oil quality bank works in a common carrier transport system. But Transneft is full of dinosaurs.

                • TechGuy says:

                  DC wrote:
                  “If we are interested in energy output, isn’t mass a better approximation of the energy content of the output than volume?”

                  Is just simply easier to measure volume. its not easy to measure the mass of a moving liquid. Volume can be easily measured using a flow gauge. To measure Mass would require extra measurements such as measuring the density of the liquid in real time as it flows through a pipeline.

    • Boomer II says:

      I hadn’t thought about this before.

      For example utilities facing the much discussed death spiral triggered by solar, will find the motor vehicle fuels market very appealing. This would then unleash a huge political and commercial driver for growth in electric cars with the utility sector providing infrastructure to use their product, locking in customers with long term supply deals backed by renewable power and lobbying for electric cars (to also protect the grid).

      But it is true that there will be an economic and political tipping point at which fossil fuel industries will no longer have clout and newer technologies will.

      • Nick G says:

        Utilities love, love, love EVs.

        They’re a source of new demand, and a nice buffer for wind/solar variance. There’s a very nice synergy between EVs and wind/solar.

        • wimbi says:

          And yet another tilting domino- EV buyers are very likely to demand renewable juice to charge their cars. The power companies supply it, so the market for renewables goes up, so the relative amount goes up, so the cost goes down—-

          And so on. I see exactly that going on here and now.

          And, of course, like me, EV owners see an incentive to get their own PV and—.

          All that is why I predict a far faster adoption of wind/solar than usually assumed.

          • Stephen Hren says:

            Most homes east of the Mississippi are poor candidates for solar. There are simply too many trees and other obstructions, including many on the roofs themselves like chimneys and dormer windows. Installing solar on residential roofs really isn’t that great of an idea for most folks (although many commercial and retail businesses have excellent resources). Therefore, the utilities will be the ones to build the large solar farms, where economies of scale in terms of installation bring the truly great savings that make solar competitive. Residential customers will still rely on the utilities (again, speaking for the wooded eastern half of the country) to provide electricity, imo. So I don’t see any great danger of a “death spiral” for utilities. But utilities will love EVs, and I can even see them subsidizing their adoption to help with renewable energy variance.

            • wimbi says:

              Too many trees. True for lots of homes around here, a hilly place, but lots of them are like mine, on a ridge top, which often gives an ideal south slope.

              I could put any amount of PV on the south face of my ridge, and we are dickering with the local utility to let us ship the extra juice we already generate to our friends in the valley so they can have PV too.

              I just heard back from the power company that they would do that with one condition, surprise to me, that all of us have an EV!

              We were planning just that anyhow. So there we go-saved.

              http://cleantechnica.com/2014/04/27/whats-greenest-car-brief-guide-vehicle-emissions/

              http://www.fastcoexist.com/3048259/visualizing/what-and-who-are-actually-causing-climate-change-this-graphic-will-tell-you

            • ezrydermike says:

              too many trees? visit Florida.

              For that matter almost all of the coastal eastern US does not “suffer” from too many trees.

              • old farmer mac says:

                Except out in the real hills and hollow boonies I have seldom been in a spot on the east coast that doesn’t have ample open ground that could be used for a solar farm. Lots of individual houses are indeed shaded by trees and hills but in actuality given the that the cost of solar power is mostly in the installation —–

                It will probably turn out to be cheaper to have COMMUNITY solar farms just as we have community fire departments and rescue squads. This would greatly simplify the permitting and substantially reduce the cost per watt of the installation. A larger installation means economies of scale. Homeowners who sign up and help pay can get a credit on their juice bill. Those who do not wish to participate can do without the credit.

                Compared to the cost of burning depleting coal and gas the loss of a few acres – or a few thousand acres of woodland harvested and permanently cleared to be used as a solar farm or farms is trivial although the religious tree huggers will refuse to recognize this obvious fact.

                I mean to say it is obvious to those who understand the BIG picture.

                • Boomer II says:

                  I’ve read articles which suggest that many roof tops (especially in cities) offer enough solar exposure to make it worthwhile to put panels upon them.

                • wimbi says:

                  Here, no need to mow down any forest. Plenty of almost bare “reclaimed” coal waste dumps.

                  The community did in fact plant a pretty big town PV farm on one.

      • MarbleZeppelin says:

        Money loves growth. Solar and wind have a huge potential for growth. Energy storage has a huge potential for growth. Fossil fuels have limited potential for growth and great potential for loss attaining that growth. Fossil fuel industry money will shift toward those sectors as they mainstream. It’s the owners (investors) that count. The corporation is just a set of paper agreements and some used infrastructure.

        As the anthracite industry and railroad industry failed in the northeastern US, the infrastructure was sold for scrap or just left sit. Same thing will happen to the fossil fuel industries. I can imagine future students and historians visiting old refinery, mining and production sites. Just as we today visit abandoned coal mines and abandoned railroads.

        • Boomer II says:

          Fossil fuels have limited potential for growth and great potential for loss attaining that growth.

          Yes, that’s why the economic and political clout will shift away from them. The only thing that is in question is the timetable.

          And Silicon Valley, with its billions, has no interest in propping up fossil fuel-related industries just to do it.

          As I have mentioned before, although I believe the scientific research on global warming, I don’t really pay too much attention to it. Those who are trying to pick apart the data in hopes of stopping legislation which is unfavorable to fossil fuels are fighting a losing battle. The energy changes are coming anyway. Two primary reasons: 1. Pollution (in the case of coal) and 2. declining resources (in the case of oil).

    • Jef says:

      Yes and the yeast in the petri dish are switching to splenda too.

  29. Toolpush says:

    Saudi’s new oil refineries must really be cranking out the goods.

    http://www.downstreamtoday.com/news/article.aspx?a_id=48411http://www.downstreamtoday.com/news/article.aspx?a_id=48411

    Saudi Arabia’s Aramco Trading Offers Diesel for July

    SINGAPORE, July 14 (Reuters) – Aramco Trading Company, a subsidiary of oil giant Saudi Aramco, has offered 2.1 million barrels of diesel for loading in late July, tender documents showed on Tuesday.

    The company has offered two cargoes of 700,000 barrels each of 10ppm sulphur diesel for loading over July 29 and July 31 in a tender that closes on July 15 and is valid until July 16.

    The middle of summer, Saudi normally is importing diesel to run their generators for the air con demand. Unless they are doing some sort of arbitrage and selling diesel, and buying fuel oil?

    • Toolpush says:

      It look like the Saudis are starting to affect the diesel market.

      http://www.downstreamtoday.com/news/article.aspx?a_id=48442

      Saudi Arabia Triggers Potential Fuel Price War; Flooding Market with Diesel

      SINGAPORE, July 16 (Reuters) – The world’s top crude oil exporter Saudi Arabia has turned itself into a major power of refined fuels, offering customers millions of barrels of diesel and potentially triggering a price war with Asian competitors as its exports feed into a glut.

      snip

      Saudi Arabia opened its newest 400,000-barrels per day refinery in Yanbu in April, reaching full capacity within two months.

      “Yanbu has become a distillates monster,” a shipbroker said, referring to the hike in exports from the Red Sea port.

      At least seven long-range vessels have been provisionally booked to load diesel from Yanbu headed for Europe, shipping fixtures showed.

      One of them is the 120,000-tonne Suezmax tanker Atina, carrying diesel to Europe, an unusually big ship to transport the fuel that showcases the scale of the new Saudi operations.

      Exports from the Gulf are expected to rise further as its own demand is set to fall at the end of summer when power generation drops.

  30. Bakken oil production to stay flat for two years?

    Oil production returns to 1.2 million daily barrels

    “We really can’t compare 73 rigs to 190 even a year ago,” Helms said. “We’re unlikely to ever get back to 190 drilling rigs.”

    Helms said when factoring in things such as the estimated 925 wells waiting on completion from hydraulic fracturing operators could keep production at or close to 1.2 million barrels per day for the next two years.

    • Jimmy says:

      Two words:
      cognitive dissonance

    • coffeeguyzz says:

      Mr. Patterson

      From all the readings I’ve done on the Bakken these past several years, I would say that Mr. Helms’ appraisal is accurate.
      Should the ATW price increase substantially, output will also ramp up.
      If pricing declines, output will diminish, but to no vast degree.
      The bulk of the infrastructure is in place. The best practices have, in the main, been identified and are continually being refined.
      Future consolidation – as is already taking place – will further strengthen the remaining operators.

      • Watcher says:

        Wait. What consolidation? Who has merged in the past 3 months?

        • coffeeguyzz says:

          Watcher

          WPX just bought out a small outfit, RKI, for almost $3 billion. RKI has some great acreage in the Permian and the Powder River Basin.
          Marathon, through it’s subsidiary, MPLX, just pulled off what may be an amazing feat, by buying out Mark West, the midstream company who practically singlehandedly has enabled the development of the Utica/Marcellus formations through its frenetic buildout of gas related infrastructure in the northeast.
          MDU has been unsuccessful so far in selling off Newfield, but that may occur in the near future.

          Financial matters, as has been discussed by many on this site, are now more pressing to these companies than simple output. Rather than taking the form of falling dominoes, the strong will devour the weak … and production will continue apace.

          • Mike says:

            “Should the ATW price increase substantially, output will also ramp up.
            If pricing declines, output will diminish, but to no vast degree.

            …and production will continue apace.”

            I would then say that we can just about be assured that the price of oil is going to remain at 43.00 dollars a barrel gross, <20.00 dollars net per barrel for the Bakken shale industry, a little bit better for the entire rest of the country's oil industry…with a great deal of price volatility going forward and 150,000 young men and women now out of work, still out of work. Happy days.

            I appreciate your love affair with the shale industry, that you are so enamored with the fluff, Coffee. Its fun to read about it. Impressive. You should see it up close and personal. The reality of it, however, is that it is failing economically. It will never be able to pay its debt off and it is piling on more. Mergers are just swapping spit. LNG projects for your mighty Marcellus are going down the tube.

            Mike

            • shallow sand says:

              Yes, I still haven’t figured out why the shale guys and wall street think more production is good.

              Just look at the cash burn and GAAP earnings.

              Mike and we sell the same product these guys do for the same price, subject only to basis differentials due to location, plus some volume premiums. We are telling you all things in the upstream oil industry suck at these prices, and we do not owe anyone nor are we burning through cash.

              I can’t speak for Mike about profitability, but we went from making very good money to making very little.

              Since we sell the same product as shale, and they are the one’s who owe billions, how are things so great for them, if they stink for us?

              Answer, they are not. They are just trying to spin it IMO. None of them, or us, were prepared to sell oil for under $50 at the well this year. HH cashed his hedges and said oil would soon return to $80-90 range.

              Again, we will see how profitability has improved in 10Q very soon. Maybe I will be corrected by the numbers?

              • Dennis Coyne says:

                Hi shallow sands,

                Wouldn’t you think they are just doing enough to reduce their cash burn? Maybe without bring on new wells the cash burn is even greater and there is not enough cash flow to pay the bills. I imagine the weaker companies are playing a last man standing game with other weak companies and eventually companies will sell out to XTO, EOG, and some of the other stronger companies.

                I agree that in the Bakken the economics is not good with oil prices under $75/b, for the Eagle Ford, $65/b is break even, I have no idea in the Permian or other LTO plays.

                • shallow sand says:

                  Dennis. What kind of wells do companies need to drill and complete in the Bakken at $40 well head oil and $2.50 well head gas to reduce cash burn? Productivity wise, I mean?

            • John S says:

              Mike,

              How are the crime statistics in South Texas? In the Permian Basin, crime statistics look like a lunar launch.

              Desperate people who have moved here from all over the country now out of work with no family network to help and no financial cushion.

              A lot of these people will have to steal something just to get a tank of gas money to leave town.

              • Mike says:

                Mr. S, I am sure it is going to be even more of a problem than it has been, but I have not heard anything out of the ordinary. The closer operations get to the river the more potentially problematic they are, but not for unemployment reasons.

            • Dennis Coyne says:

              Hi Mike,

              You are correct that it is failing economically at these oil prices. For the Bakken at 70 new wells per month (using Rune Likvern’s estimate) output falls to about 900 kb/d by Jan 2017 and to 800 kb/d by Jan 2019 if they can make money completing 70 new wells per month (about one third of the maximum rate of 186 new wells per month over 12 months). This may be too optimistic at $60/b, but if oil prices gradually rise to $80/b as output declines it might happen, especially if they can pinpoint the better locations and drill the higher EUR wells.

              • Mike says:

                Dennis, the shale industry has been zeroed in on its sweet spots for several years. Ron poses a good question, how many more straws can they cram into that good stuff?

                I am up to my eyeballs in shale oil bullshit: Halli say’s 4,500 wells in both the Bakken and EF awaiting frac’ing; that’s 20 billion dollars of borrowed money sitting there doing nothing. Gimme a break. To defer the pressing issue of profitability, and debt, the shale oil industry is now splashing re-frac’ing. Which by the way costs MORE money (borrowed), makes a nice big EUR spike for a couple of months, but has not proven to be economical yet, not by a long shot. The hype never ends.

                The price of WTI NYMEX at the moment is just north of 52 dollars, not 60 dollars. What on earth makes you believe oil prices are going to 80 dollars anytime soon?

                Another thing regarding cost reductions…day rates for typical 1500HP shale rigs, down 12% since January according to Rigdata. The drilling phase represents approximately half the total cost of a shale well.

                America needs the shale industry to succeed. Hoping for an 80 dollar oil miracle again is not going to get it done.

                Mike

                • Watcher says:

                  Psssst.

                  It doesn’t have to fail if banks don’t require loan repayment on schedule. Profit margin is infinite if repayment is not demanded.

                  Extend and pretend.

                • Dennis Coyne says:

                  Hi Mike,

                  If oil supply decreases oil prices may increase.

                  Only the average Bakken/Three Forks well needs $77/b to break even, if they cut the number of completed wells per month in half, would you expect the average EUR of completed wells to remain the same? I would expect it to increase, if one assumes they choose to complete wells in more productive areas.

                  Does zero sound like a reasonable number of wells to complete? That scenario can easily be done, but over the long term it is not very reaslistic. Oil prices will not remain under $60/b forever.

                  In fact, a wise man told me he expected oil to be around $65/b at least over the near term. I will check back with him and see if he has changed his view on oil prices.

                  I agree with you that the economics are very bad at present. You imply that you think this will continue for a long time (though you never really say what you mean by “long” is it 2 years, 5 years, 10 years?). I think that if you think this will continue for more than 2 years, that you will be wrong.

                  Note however you are never very specific so it is not clear what you think, probably you think it is silly to guess about the future, but you do it every time you invest in a well.

                  Maybe you just don’t want to share too much about what you think will occur.

                  ND Bakken/Three Forks with no wells added from Dec 2015 to Jan 2017 (new wells per month on right axis dotted line). Output falls to 660 kb/d by Jan 2017, I don’t think this scenario is very realistic, but seems to be what you are suggesting may happen.

                  • Mike says:

                    Dennis, lower production may result in higher prices, correct.

                    Simply breaking even, whatever that means, is irrelevant to me, sorry. Profitability is relevant. At 40% annual decline rates for LTO production, profitability is even more critical than it is at 5% annual decline rates for conventional production. The shale industry appears to be ignoring profitability.

                    I don’t know what the optimum density is for Bakken wells. Neither does anyone else yet. I am quite certain we won’t get the straight skinny from the shale oil industry about optimum density and I don’t know how long it will take to discern that from data. I suggested that well costs are not down as much as I might have guessed 2 months ago after confirming the Rigdata data and speaking with some service companies. Down, but not 30%.

                    I have indeed lowered my oil price scenario for the 4th quarter.

                    I don’t think it is silly to make guesses. We all do. As Andy DuFresnes say’s, hope is a good thing. Hoping for the best and being prepared for the worse are two different things. I tend to worry about things that I can directly control, so I don’t have a lot of use for models and predictions with lots of caveats in them. That’s just me.

                    At 50 dollars a barrel 3 days seems like a “long” time to me right now. I think it is going to be 18 months before we might see a higher price plateau that is somewhat sustainable that will help the shale oil industry. I am however not sure that most of the shale oil industry has that much time.

                    Mike

            • coffeeguyzz says:

              Mike

              I am neither ‘enamored’ with the shale industry nor non-empathetic with those negatively impacted by its fallout, especially folks such as you, shallow, push and the many others who are affected by this turn of events.

              As much as I respect the work you do and the contributions you make to this site, I am not impressed by the evaluations you constantly bring to this discourse.
              While the LNG projects most assuredly will be scaled back, (grossly optimistic from the get go), the numerous other midstream/downstream projects are, if anything, ramping up significantly. There are now five ethane crackers contemplated being built to process mainly Utica/Marcellus gas. Total investment will reach the tens of billions of dollars.

              By dint of your decades in the patch, your determination and moxie have been displayed. I appreciate that. If you have concern for the economic well being of your colleagues – especially the younger ones – tell them to man/woman up, pack their woolies and head north. Despite the reports of the know nothings, western North Dakota is still thriving. Drug addled layabouts, as you know, need not apply.
              The inaugural graduating class from a WV community college targeting oil field work had 100% employment, average starting salary over 75k.
              There is not a qualified pipeline welder in the country, willing to travel, unemployed except by choice. Most make over 100k/yr, some hard working folks double that. There are/will be several tens (hundreds?) of thousands of miles of pipeline installed in the coming years. The PA state government people project over 25,000 there alone.

              Don’t like the cold, as you’ve stated? Well, I and my fellow divers were none too thrilled to having our knees frozen solid to the mats (14″ x14″ wooden ‘rafts’) as we exited the ice filled Hudson river to remove our masks and wipe the snot from our faces in the winter of ’75. Steam guns were set up so we could stand. No one forced us to continue, the $2k/week salary was a primary motivation.

              The ‘fluff’ I post on this site may be unpalatable to many, but no amount of hand wringing will alter the facts or offer clarity to those who choose to see things differently.

              • Mike says:

                Coffee, of the 150,000 or so that have lost their jobs in the shale oil industry the past 9 months a bunch of them are from North Dakota. I am worried about them too.

                I’ll send all the pipeline welders on standby for Keystone to Pennsylvania so they can go on standby there.

                Yes, it gets cold up there. Down here, on a limestone pad, its minimum 120 degrees right now, so hot it will make your plastic hard hat droop. So what.

                http://fuelfix.com/blog/2015/07/14/most-u-s-lng-projects-wont-cross-the-finish-line-new-study-says/#27079101=0

                The shale oil industry has been misleading the American public for almost 8 years. It’s filled confused heads with notions of energy independence and 2 million shale wells. It took money from grandmas and grandpas in the way of stock purchases, and lost just about all of it for them. Its 300 billion in debt. I am tired of the lies, the half truths and skating around the truth the shale industry is constantly guilty of.

                I would actually like to be impressed with your grand outlook for the shale oil and shale gas industry, all you have to do is explain to me how its all going to get paid for and who is going to do the paying.

              • shallow sand says:

                coffee. Are there still a lot of open positions in the oil patch in Western ND? If so, what kind? We have a lot of decent rig operators/hands that were fired recently. I know a few. Maybe a good idea for them to inquire up there?

                • coffeeguyzz says:

                  Shallow

                  There are still ongoing openings in a whole array of construction, pipeline building, support services work both in western ND and the Fargo area.
                  Actual rig work, probably not. Any networking type of communication may smooth the start of your guys’employment up there. Hell, give it a shot.

                  Mike/shallow
                  Part of my motivation in posting on this and other oil/gas related sites is to convey accurate, timely, relevant info … whether perceived as good, bad, or indifferent.
                  I get back WAY more than I put in from the hosts and other commentators.
                  In that spirit, you all may not want to hear this, but just yesterday, the University of West Virginia released the results of a comprehensive, two year long study that was conducted by a fifteen member consortium on the Utica Shale.
                  Results were a TWENTY fold increase in recoverable gas from USGS 2013(?) appraisal. Total recoverable is projected at about 800Tcf … comparable to the Marcellus.

                  • In that case we will see USA oil companies building GTL plants.

                  • Mike says:

                    Coffee, what is accurate, timely and relevant is subjective, of course, but I assure you that your very articulate “fluff” about the shale oil and gas industry is far more palatable to people reading this blog than my gruff, country skepticism of it. So to be clear, I am the only one that gives you grief here.

                    I do only because if makes no sense to me to be constantly touting the wonders of shale oil and shale gas when it is failing so miserably financially. That is the oil operator in me; it must make money to succeed. I am concerned about the role this shale stuff is going to play in our future. Its not a game to me, not simply a way to pass the time.

                    Please carry on. I’ll start cutting back on the mud weight.

                    Mike

          • Watcher says:

            So no Bakken then, where ATW prices are lowest. How amusing.

          • shallow sand says:

            Note Marathon separated upstream, midstream and downstream. Upstream is bleeding cash.

    • Dennis Coyne says:

      Hi Ron,

      Let’s assume Rune’s estimate of 140 new wells per month needed for flat output is correct (I think he is spot on). If we also assume 70 rigs drill 100 wells per month, then we use up 40 wells from the frack log each month to get 140 wells per month and the frack log would last about 23 months.

      The problem with such a scenario is that at such a low oil price this rate of well completion will not be sustainable from a financial perspective. It is more likely that the rate of well completion will fall to 100 wells per month or lower and output will slowly decline until oil prices rise to $80/b or more.

      This decline will likely begin by September (assuming oil prices remain under $60/b). Scenario with 100 wells per month until June 2022 below (this is likely too pessimistic after oil prices rise to $80/b in 2017, at that point the new wells added per month will rise and decline in 2022 would begin earlier (maybe 2020) in that case), so the scenario for years beyond 2017 should be ignored.

      • Dennis, this is all very well but it is obvious that the frackers are cherry picking from the inventory of unfracked wells. That is they are fracking only what they believe are the very best unfracked wells. So the question must be asked, how long can this last?

        So you say 140 wells are needed to keep production flat. I think this obviously depends on the quality of those 140 wells. Yes, 140 good wells will definitely keep production flat. 140 of the also ran wells will not.

        You say the decline will begin in September. I am saying it will begin, in earnest, in July. But we will just have to wait and see.

        • Dennis Coyne says:

          Hi Ron,

          Actually in the scenario above decline begins in June, I agree that they may be cherry picking the best wells, it is impossible to guess accurately how long this can continue, it is also impossible to know in advance how many new wells will be completed each month, when the new well EUR will decline (as the sweet spots become fully drilled) and what future oil prices will be. Only the past is known (and even that is not great in some places), profitability in Texas may be better due to lower transport costs so the Eagle Ford and Permian basin could take up some of the slack from the Bakken/Three Forks.

          Can you define an “earnest decline”? How much of a decline do you expect in July? The model suggests about 20 kb/d lower output in July compared to May if new wells completed fall to 130 in June and 120 in July.

          • I think the Bakken, in July, will decline by about 40,000 barrels per day. But that’s just a guess of course. It could be down less but the Bakken will decline in July.

            • Dennis Coyne says:

              Hi Ron,

              The 100 new well per month scenario has Bakken/Three Forks output at about 1070 kb/d in Dec 2015 and the 70 new well per month scenario suggests 1050 kb/d in Dec 2015. Note that these two scenarios only differ from Oct to Dec 2015 where the lower scenario has new wells per month decreasing by 10 wells per month over those 3 months where the 100 new well per month scenario has new wells at 100 per month from Sept to Dec 2015.

              In Dec 2016 the difference is greater with the 100 well scenario at 1020 kb/d and the 70 well scenario at 920 kb/d.

              Clearly each of these scenarios could be too optimistic, at 50 new wells per month from Feb 2016 to Dec 2016 (earlier months are identical to the 70 well scenario) output in Dec 2016 would be 860 kb/d.

              A more pessimistic scenario has new wells falling to zero (10 fewer wells each month) by July 2016 and output would be 730 kb/d in Dec 2016. I don’t think such a scenario is realistic at all, I think Rune Likvern’s suggestion of 60 to 70 new wells per month is much more realistic. So at low oil prices 850 to 920 kb/d for ND Bakken/Three Forks in Dec 2016 may be a realistic estimate.

        • Heinrich Leopold says:

          Ron,

          AAR weekly rail transportation for petroleum fell 8% from last year. This is the first significant decline and reached the level of 2013. If this number is confirmed today there should be a real trend for lower production and maybe higher prices.

          • Heinrich, it’s a bit worse than those figures would indicate. This same week last year production was still rising and rail traffic was still rising. Rail traffic did not peak until September last year. So we are comparing rail traffic with the same week in 2014 when both production and rail traffic was quite a ways below peak.

            • Toolpush says:

              http://www.downstreamtoday.com/news/article.aspx?a_id=48394

              North Dakota Oil-loading Hub Lays Off 10 Percent of Staff -Source

              TRENTON, N.D., July 10 (Reuters) – One of the largest facilities in North Dakota that loads oil onto railcars laid off 10 percent of its staff this week as it pares operations in an environment of lower oil prices, a source familiar with the company’s operations said.

              snip

              The layoffs occurred as demand for railcars to transport North Dakota’s Bakken crude oil is at the lowest it has been in three years. The breakneck pace at which oil-by-rail transport grew since the U.S. shale boom began in 2008 has been tempered by the gradual construction of new pipelines.

              • coffeeguyzz says:

                Push

                Thanks for the info. Hope all is well with you.
                The pipeline build out has been widely hampered by opposition of all stripes. While pipeline companies have taken a somewhat conciliatory approach up till now, that is changing in an ugly way as it becomes more apparent that corporate/governmental/institutional influence is being exerted by those who stand to be financially damaged as this product comes to market.
                Eminent domain status as well as counter suits have already started. (The counter suits are partially an effort to bring to light the funding sources for many of these oppositional efforts).

                Unrelated note/followup on that Utica well with the 59mmcf IP we discussed months ago …
                The Claysville Sportsmen Unit 11H went online late January, has produced 1.6 bcf first 109 days (almost 300,000 boe in energy equivalent.). Admittedly this is considered little more than a popcorn fart in some areas of the country, but a large, Texas-sized bowl of popcorn would be needed.
                (The pad has six other Marcellus wells which have produced 5bcf over two years).

              • Dennis Coyne says:

                Thanks Toolpush,

                I have pointed out before that more pipeline capacity for transporting oil came on line in North Dakota and rail terminals in Canada in 2014. The North Dakota effect is obvious, the Canadian oil was being trucked to rail terminals in North Dakota previously and is now being loaded onto Canadian rail in Canada, both effects reduce oil loadings on rail cars in North Dakota. This was covered in a previous Web cast by the NDIC (in May I believe.)

      • Dennis Coyne says:

        An alternative scenario will new wells added decreasing from 136 new wells per month in May 2015 to 70 new wells per month in Dec 2015 and remaining at 70 new wells per month until Jan 2017. All other assumptions similar to 100 new well per month scenario above. Output for ND Bakken/Three Forks falls to 920 kb/d in Jan 2017.

    • Rune Likvern says:

      It is possible to sustain or even grow LTO extraction, it all comes down to CAPEX and profitability.

      Grail and Parshall are 2 pools that frequently has been discussed/referred to.
      Grail and Parshall have some of the best wells in Bakken (there may be other pools as well, but I would like to see data from 100 wells or so for a pool.
      As of May 2015 there were 148 producing wells in Grail about equally distributed between the Middle Bakken and Three Forks formations.
      Using the GIS map it was estimated that Grail covers an area of about 45 square miles.
      1 square mile = 640 acres.
      I am not sure about optimum well spacing in Grail, but the numbers now suggests quite a high well density.

      • AlexS says:

        Thank you, Rune, very interesting information.
        Your numbers for Grail imply ~3.3 well per sq. mile, or 195 acres per 1 well spacing.
        The EIA’s technically recoverable resource estimate implies 2.5 well per sq mile spacing, but this is for the entire play. I would guess that, in sweet spots, wells could be placed at least twice as densely

    • Rune Likvern says:

      From Bismarck Tribune, June 25 2015 (ND newspaper);

      ”The trigger ends Tuesday, but in the meantime, oil companies fracked 586 wells and Rauschenberger expects another 20 could be added by the deadline.
      The small trigger went into effect Feb. 1 because of low prices, lowering the extraction tax from 6.5 percent to 2 percent. Overall, oil companies will realize somewhere around $120 million in total tax savings on those wells. The tax break is only on the first 75,000 barrels and ends at the end of this year.”


      ”He said other factors besides the trigger encouraged companies to complete the wells, including the state’s one-year deadline to complete wells after drilling and reduced service costs as the number of drilling rigs continues to decline in a low-price market .”
      http://bismarcktribune.com/bakken/oil-companies-save-million-from-oil-tax-trigger/article_0e21f469-52eb-542b-88d8-d543d2e50cba.html

      Note the part about the one year deadline to complete wells after drilling.
      This should give some hints about the numbers of Drilled UnCompleted (DUCks) wells in Bakken.

      • Dennis Coyne says:

        Hi Rune Thanks.

        The high 12 month period for completions was about 2200 wells. So the completions are continuing to meet the 12 month deadline for completion, I had not realized that.

        Perhaps that explains (along with tax breaks) the continued high numbers of completed wells in the Bakken/Three Forks?

        From June to Dec 2014 about 223 wells per month were spudded, but we don’t know how many of these wells have already been completed, there were 155 wells per month completed from Jan 2015 to May 2015, and only 126 new wells per month were spudded from Jan 2015 to May 2015. If we assume they try to frack the older wells, then there are about 70 extra wells per month which need to be completed. Another way to look at it is to take the frack log plus wells spudded minus completions to figure the avergae number of completions over the next 12 months. If the frack log is 1925 wells, then there are 1827 wells that need to be completed over the next 12 months which is 152 new wells per month.

        Maybe they can file paperwork for more than 12 months to complete a well?

        • AlexS says:

          Dennis,
          the fracklog in the Bakken is 925 wells, according to the latest Director’s Cut

          • Dennis Coyne says:

            Thanks AlexS,

            I remembered incorrectly. Then it is 872 wells that need to be completed over the next 12 months, which is 72 new wells per month on average, though we do not know the distribution of the age of the wells in the frack log (or DUC log), but because 872 is less than 925, this implies that the average age is less than 6 months.

            Another way to look at the likely future completion rate is to look at the number of wells spudded per month over recent months. For the past 3 months it has been 100 wells spudded per month and in 2015 it has been 123 wells per month, so this gives some indication of future completion rates, probably in the range of 100 to 123 new wells per month.

            Scenarios with new wells per month lower than 70 over the next 12 months are quite unrealistic and possibly anything less than 100 new wells per month is unrealistic in the near term.

            • Rune Likvern says:

              Dennis,
              You apparently have a very, very big blind spot.
              Manufacturing of LTO wells is about CAPEX and profitability. PERIOD.
              It is not subject to wishful thinking and specualtion(s).

              • Dennis Coyne says:

                Hi Rune,

                Yes it is about profitability mostly(which is determined by many factors such as CAPEX, borrowing costs, taxes, royalties, transport costs and oil price.

                I must have misunderstood your comment, the implication was that the number of drilled wells would give some indication of the number of wells that might be completed in the future.

                So far it looks like at least 72 new wells per month will be the average number of wells which must be completed over the next 12 months in order for all DUCs to be completed within 12 months of the spud date.

                Lately companies have been spudding about 100 wells per month in North Dakota and I assume most of these are Bakken/Three Forks wells.

                I thought I read a comment where you suggested some number of wells might be able to be drilled if financing was still available, I remembered 60 to 70 wells.

                I hoped to find this on your blog but could not, did I imagine this, or maybe remember incorrectly?

                The comment was probably from a time when oil prices were $60/b and so may no longer apply.

                Does a scenario with new wells added each month decreasing from 136 to 70 over a 7 month period (10 fewer wells each month) and then remaining at 70 new wells per month until 2017 seem unreasonably optimistic?

                • Rune Likvern says:

                  ”Yes it is about profitability mostly…”
                  A big fat NO!

                  All companies operating in shales are there for one thing, and one thing only and their raison d’être is to make a financial profit from extracting LTO from the shales. PERIOD.
                  Break even does NOT cut it.
                  A return on all capital employed is the objective.
                  Those who does not, goes out of business.

                  ”So far it looks like at least 72 new wells per month will be the average number of wells which must be completed over the next 12 months in order for all DUCs to be completed within 12 months of the spud date.”
                  ????????????????????????????

                  ”I thought I read a comment where you suggested some number of wells might be able to be drilled if financing was still available, I remembered 60 to 70 wells.”

                  What I have said/written is that net cash flows (from operations) at present prices ($60/b WTI) may unabridged fully finance 60 – 70/wells per month.
                  Net cash flows do not equate to CAPEX.
                  CAPEX may become higher or lower and that will affect the addition of the number of producing well.
                  I suspect several companies are about to find themselves in a race with the Financial Red Queen and she is the twin sister of the Physical Red Queen and those two are not comparable.
                  The race with the Financial Red Queen will all be about financial deleveraging, and what remains to be seen is what companies will outrun her.

                  The above is an answer to your question.

                  • Watcher says:

                    Suppose they are there to defeat the enemy.

                  • shallow sand says:

                    If one will soon complete a well this month in the Williston Basin and calls a counterparty to lock production for five years, it looks like around $46 at the well head will be the average price per barrel over the five year period, given the front load of production.

                    I figure a well will need to gross about 400,000 barrels over the five years to break even if the money is borrowed at 5% to drill and complete it.

                    What percentage of wells look to gross 400K barrels in five years?

                  • TechGuy says:

                    Rune wrote:
                    “All companies operating in shales are there for one thing, and one thing only and their raison d’être is to make a financial profit from extracting LTO from the shales. PERIOD.”

                    I am not so sure that is accurate. Most of the shale drillers are drilling wall street for money, much as the dot-coms did back in the late 1990’s. If they were interested in making a profit from the sale of LTO, then they would have limited debt, and cash burn. It seems to me the best way shale drillers profited is to continuously show production growth, no matter what the economics are, in order to receive more investors money. LTO sales were just a side show. Wall street isn’t concerned about profits in “growth” companies. They assume that rising production will eventually turn to record profits, but we been down this road many times.

                    Shale drillers aren’t the only ones drilling in downtown wall street. Consider that none of the big social media businesses make a profit. They lose money selling services, but collect investor money with dump trucks, as dumb investors can’t give them their money fast enough. Facebook has perhaps a billion “customers”, but none of them pay facebook a dime. Same with twitter, instagram, etc. Of course there are the Amazons that have made a profit in more than a decade, yet continue to persist 🙂

                    It will all end when they run out of dumb investors money to play with, which probably isn’t very long now.

                  • Dennis Coyne says:

                    Hi Rune,

                    I use a 10% nominal rate of return when finding a break even oil price, so the profit is not zero, it is 10% if the oil price remains fixed at the break even price over the life of the well.

                    I had misunderstood your 60-70 wells, which I had understood as being a reasonable number of new wells that might be financed at oil prices of $60/b.

                    If new wells are added at 70 wells per month and the probabilty distribution of the 6 month cumulative output of Jan 2012 to Sept 2014 ND Bakken/Three Forks wells represents the future well probability distribution, new well EUR might increase by 50% at this lower completion rate.

                    This was estimated by taking the highest 40% of the probability distribution because 70/185=38%, where 185 was the 12 month rate of well completions from Feb 2014 to March 2015. The highest 40% of the probability distribution had a 6 month cumulative average output about 50% higher than the entire distribution’s average 6 month cumulative output. If we assume the EUR follows the 6 month cumulative average then the EUR would be expected to increase at the lower completion rate.

                    Using this higher EUR estimate the break even oil price falls to $58/b and the well earns a 15% nominal rate of return. The original well profile with average EUR of 390 kb over 30 years requires an oil price of $81/b to earn a 15% nominal rate of return over its life.

                    Oil prices are not $58/b so even this optimistic scenario would lead to unprofitable wells. As I write this WTI futures are at $51/b, or $39/b at the wellhead, nobody is making money in the Bakken/Three Forks at that price.

                  • Dennis Coyne says:

                    Hi Shallow sand,

                    Only about 4.5% of Bakken/Three forks wells starting production from Jan 2012 to Sept 2014 (5344 wells total is 100% of wells) would produce about 400 kb in 5 years, if we assume 6 month cumulative output is linearly related to 5 year cumulative output.

                    If we assumed the oil companies knew which wells would produce this levelof output in advance and further that the probability distribution of new well EUR is unchanged over time (both assumptions are probably wrong), we might drill about 8 new wells per month.

                    No new wells would be smarter at these prices, but they continue to drill ore wells.

                    I don’t get it either.

                  • Rune Likvern says:

                    There are several break evens floating around. And one of these are about getting your investment back, no return/profits some refer to it as pay out.

                    ”If new wells are added at 70 wells per month and the probabilty distribution of the 6 month cumulative output of Jan 2012 to Sept 2014 ND Bakken/Three Forks wells represents the future well probability distribution, new well EUR might increase by 50% at this lower completion rate.”
                    Are you saying that the probability distribution for well productivities/EUR will change with 50% if fewer wells are added?

                  • Dennis Coyne says:

                    Hi Rune,

                    Yes, I understand break even is not always used in the same way, and I have used it incorrectly in the past, which you corrected me on and I appreciate.

                    I am suggesting that if the probability distribution for wells drilled at the 2100 new wells per year(175/month) rate does not change and that at the lower rate of 70 wells/month wells are drilled from the high end of the probability distribution (the higher EUR wells) that the EUR of the average well will go up by roughly 50%.

                    The 6 month average cumulative output of the highest 40% of the wells is 81 kb vs 54 kb for all wells starting production from Jan 2012 to Sept 2014. This is about a 50% increase in the 6 month cumulative output.

                    If the EUR tracks the 6 month cumulative in a linear fashion then EUR may also rise by about 50%.

                    In practice, this is too optimistic an estimate, but I would expect EUR to increase at lower completion rates, 25 to 30% would be more reasonable.

                    I really don’t understand why the drilling continues at these oil prices and I am trying to find some explanation.

                    I agree the companies are trying to make a profit, but their behavior does not seem rational, especially if they expect oil prices to remain at $60/b or less long term.

                    On where I got 72 wells per month it is 872/12=72.7.

                    I took the wells spudded over the past 12 months and added the DUC wells from the most recent Director’s cut (925 wells) and then subtracted the wells completed over the last 12 months.

                    This results in 872 wells that need to be completed over the next 12 months to meet the 12 month deadline for completing a drilled well. (I have assumed the 12 months starts with the spud date).

                    So 872/12=73 new wells per month (I rounded incorrectly to 72 wells per month initially).

                    This was based on your hint that the 12 month deadline should tell us how many wells might be completed in the future, though I may have misunderstood your hint.

  31. Toolpush says:

    JP Morgan, saving a little extra in preparation of bad loans in the Oil & Gas field.

    http://fortune.com/2015/07/14/jpmorgan-chases-earnings-beat-expectations-as-lending-jumps/

    JPMorgan Chase’s earnings beat expectations, as lending jumps
    But there were some bad signs from JPMorgan’s lending division as well. The bank upped its reserves for bad commercial loans by $252 million, citing likely defaults from energy companies.

    Someone’s crystal ball is telling them, the oilfield companies are not too healthy! But that should not come as a surprise to anybody here, with Shallows Sands figures that he posts!

    • shallow sand says:

      ToolPush. The first quarter
      of 2015 was awful. I guess we will soon see how the second quarter went. We should see much better results than the first quarter, given higher oil prices and reports of much lower expenses.

      Despite this, reserve write downs should be coming at year end. As I have noted previously, PV10 will be cut in half, unless production figures for companies increase significantly from 2014 and/or expenses fall significantly. Or the oil price improves significantly. Once August 1 hits, 2/3 of 2015 SEC prices will be locked in, which will be around $40 oil and $2.50 gas in my estimation, for Bakken production. EFS and Permian will be better, as we know.

      I am sure the companies have been on top of figuring out what to do, as ability to borrow is tied primarily to PDP PV10.

      The first 6 months of 2015, Bakken producers realized less than $40 per barrel. This is in contrast to averaging around $91 per barrel the first 6 months of 2014. These are well head figures.

      I hope they have figured out a way to become wildly profitable at these low prices. We sure have not.

      Our expenses are almost all OPEX, and it is tough to cut that much. Electricity is the same. Chemicals are the same, which burns us as these prices doubled since 2005. Labor is fixed unless you let people go or cut their pay. Have cut on OT. Rig rates have dropped slightly for down hole repairs. Electrical contractor paid the same. So I suppose the shale producer does have an advantage in that the major expense right now is drilling and completing, and those rates are reported to be way down.

      Will be interesting to see those 10Q. Whiting scheduled for 7/29.

      • Watcher says:

        Actually if the major expense is drilling and completing, it is the completion companies whose financial results would be most important.

        • shallow sand says:

          Watcher. For an example, check out the earnings and share price
          performance of Basic Energy Services. Their
          territory is limited to onshore lower 48, I think. 52 week high $29. Currently $6. Projected to lose over $1 per share Q2 I do believe.

          • Watcher says:

            Shrug. It’s the completion costs that are supposed to be falling. So the completion companies should be seeing smashed earnings.

            tra la tra la

  32. AlexS says:

    BHP Says Will Take $2B Charge On US Onshore Energy Business

    7/15/2015
    URL: http://www.rigzone.com/news/oil_gas/a/139630/BHP_Says_Will_Take_2B_Charge_On_US_Onshore_Energy_Business

    SYDNEY, July 15 (Reuters) – BHP Billiton on Wednesday said it will take a $2 billion impairment on its U.S. shale operations – the third writedown in three years.
    The gas-focused Hawkville field in Texas accounts for the substantial majority of the charge to be included in results for the fiscal year that ended on June 30, which BHP estimates will be around $2.8 billion on a pre-tax basis.
    BHP announced a $328 million write-down on the Permian field in February and a $2.84 billion impairment on the gas component of the shale division in 2012.
    BHP’s annual spending on its overall U.S onshore operations, which was set at $3.4 billion in fiscal 2015, will drop to $1.5 billion in the current year, BHP’s petroleum division president Tim Cutt said in a statement
    “While the impairment of the Hawkville is disappointing, it does not reflect the quality of our broader onshore U.S. business,” Cutt said.
    At an oil price of $60 per barrel and a gas price of $3.00 per thousand standard cubic feet per day (Mscf), overall, the onshore operations should be cash flow positive in the 2016 financial year, according to the company
    BHP said efficiency gains in onshore drilling have reduced costs, which should help offset future price volatility in oil and gas prices.
    The dramatic drop in spending is likely to lead to revised production guidance for the year, which BHP said it will disclose in its July 22 quarterly operations report.
    Shale drilling is much easier to shut than conventional oil and gas wells as individual wells are smaller, making it a logical target for cuts.

    • shallow sand says:

      AlexS. Do you look at Russian public oil and gas company financials?

      Would be interested on how they compared in Q1 2015 to US shale.

      • AlexS says:

        shallow sand,

        Like other oil companies, the Russian oils have suffered significant declines in earnings, but none of them was loss-making in 1Q and all remained cash-positive.
        They felt positive effect of the sharp depreciation of the ruble, as the revenue base is mostly in dollars, and the cost base is in local currency. In addition, the Russian tax system for the oil & gas sector is designed such as taxes other than income tax (oil production tax and export duties on oil and refined products) depend on the level of oil prices. So these taxes are now significantly lower than when oil price was above $100. Despite having reduced capex for 2015, the Russian oil sector was able to increase drilling activity by 10% in January-May vs. the same period of last year
        Will post key numbers for a couple of Russian companies

        • shallow sand says:

          Thanks AlexS. Are there integrated v non integrated Russian companies? Looking at US refiners, they are absolutely printing cash. So I assume Russian integrated much better than upstream only.

          Dollar strength is a huge deal, as you point out.

          • AlexS says:

            All large Russian oil companies are vertically-integrated. Exposure to refining & marketing improves profitability at current oil prices, but not as much as in the U.S.
            There are also dozens of small and medium-sized E&P independents, only few of them public. With the current upstream economics they can still make profits

    • Toolpush says:

      Interesting how the large companies with money, fess up and write down the value of their shale assets, meanwhile the smaller more shale focused companies, just keep rolling out the same propaganda on the wonders of shale?

  33. The US Weekly Petroleum Status Report is out. Stocks were down by 4,346,000 barrels to 461,417,000 barrels. US C+C production was down by 42,000 barrels per day but Alaska was up 24,000 bpd so the lower 48 was down by 66,000 bpd. All data is for the week ending July 10.

    Looks like the EIA thinks the low rig count is finally starting to hit.

    US Weekly C+C photo US Weekly CC.jpg_zpshrhaaqx4.png

    • Dennis Coyne says:

      Also 4 week average C+C for lower 48 below. In my view the 4 week average is more interesting the weekly estimates are too noisy.

    • AlexS says:

      After the EIA has revised its models, the weekly production numbers are now unlikely to be significantly lower than subsequent monthly data?

      • Dennis Coyne says:

        Hi AlexS,

        I am always suspicious of the 4 week averages, sometimes they are fairly close to the Petroleum supply monthly, sometimes not and it is impossible to predict in advance.

        The weekly data points are even less reliable, too much noise to be useful in my view.

    • Toolpush says:

      Ron,

      Interesting that crude stocks are down, while imports increased. Many of the reported changes in crude stock levels recently have been a mere change in import levels, this one looks real.
      Gasoline usage is way up from last year, 6.5%, while Jet-A1 is down 4.7% along with diesel, down 2.3%. These trends have been going on for a few weeks now, so they are not just one offs. It appears the US holiday maker is choosing to drive rather than fly. As for diesel, I wonder if the drop in drilling is affecting the usage numbers?

      http://ir.eia.gov/wpsr/wpsrsummary.pdf

      Summary of Weekly Petroleum Data for the Week Ending July 10, 2015

      U.S. crude oil imports averaged about 7.4 million barrels per day last week, up by 38,000
      barrels per day from the previous week. Over the last four weeks, crude oil imports
      averaged over 7.2 million barrels per day, 1.3% below the same four-week period last
      year.

      snip

      Total products supplied over the last four-week period averaged 19.9 million barrels per
      day, up by 3.6% from the same period last year. Over the last four weeks, motor gasoline
      product supplied averaged 9.6 million barrels per day, up by 6.5% from the same period
      last year. Distillate fuel product supplied averaged 3.7 million barrels per day over the
      last four weeks, down by 2.3% from the same period last year. Jet fuel product supplied
      is down 4.7% compared to the same four-week period last year.

      • clueless says:

        Toolpush -“As for diesel, I wonder if the drop in drilling is affecting the usage numbers?” No need to wonder. A land rig will use 1,000 gal/day; 30,000 gal/mo. That is about 175 bbl./week for a rig. A rig count of down 700 = 122,000 bbl./week down in usage.

        • Toolpush says:

          Clueless,

          Thanks for the calculations, but that 1000 gal per day at best is to run a “small” land rig. One Cat 3516 can use this by itself working hard. The larger drilling rigs come with three. We used that on one V16 EMD just idling, Plus you need to add in Watcher’s truck traffic, frac pumps and other service company usage.

          So as the diesel usage is down 85,000 bpd from last years numbers, drilling accounts for all the decrease plus a lot of growth in usage in other areas of the economy!

  34. Doug Leighton says:

    Regarding Alaska,

    “Pipeline operators restricted oil flow from the North Slope to keep the tanks in Valdez from becoming too full, an Alyeska spokeswoman said. Oil flow in the pipeline dropped from 550,000 barrels a day on May 1 to 355,000 barrels on May 9, according to state records. The flow began increasing Sunday and had climbed to 463,000 barrels by Wednesday.”

    “The temporary slowdown will not have a major impact on the fiscal year totals for oil production, but it will add somewhat to the decline seen in production numbers compared to the previous year. So far this fiscal year, which began in July, oil production is down about 5 percent, compared to the fiscal year that ended last summer.”

    “Average production in fiscal year 2014 was 531,000 barrels per day, while this year it has dropped to about 502,000 barrels a day.”

    http://www.rcinet.ca/eye-on-the-arctic/2015/05/15/alaska-alyeska-says-oil-flow-returning-to-normal-after-200000-barrel-drop/

    And, BP Exploration (Alaska) Inc. ceased reporting condensate for Prudhoe Bay after June 2014 due to the fact that the reserve of condensate in the gas cap was totally depleted in June, 2014. Condensate continues to be produced, but condensates are considered oil for reporting purposes. Beginning in July 2014 condensates are included in the reported oil volume.

    • Watcher says:

      Looked back at historical.

      Probably about 35K bpd is condensate now. 1 million barrels per month and falling.

      • Doug Leighton says:

        Yes, and ExxonMobil has restarted drilling at the Point Thomson gas-condensate field 60 miles east of Prudhoe Bay. This project is expected to produce 10,000 barrels per day of NG condensate plus 200 million cubic feet of natural gas per day to be fed into the TAP. More trivia.

  35. Longtimber says:

    Of Interest – Shall we ever find out who the insolvent Lenders are. Is it possible to trace money flowing
    into a black hole?
    http://peakoil.com/publicpolicy/the-secret-bank-bailout
    What do central banks have to do with the Economy anyway?

  36. Enno Peters says:

    I noticed the ND Directors’ cut webinar for July is available.

    Some highlights:
    – Helms expects more completions at a sustained level of $65 (WTI) and more rigs at $70 (WTI), based on industry feedback.
    – rigs are now capable of drilling 2 wells per rig per month
    – May vs May a year ago , wells are 25% better than a year ago (based on IP), and (later in Q&A) that EUR rates are also 25% better.
    – He expects production up in June (quite many wells had to be completed), followed by several down months. At the end of year many wells have to be completed.
    – He expects that with 80 new wells a month (based on 73 rigs, and somewhat contradicting his earlier statement that rigs can drill 2 wells per month), and the fracklog of 925 uncompleted wells, production can be maintained at 1.2mbd for 24 months. Exit rate at the end of the year should be on a similar or higher level than current production, due to the many wells that will have to be completed year end.
    – He explains the procedure when uncompleted wells are not completed within the 1 year deadline.
    – More water and oil will be moved by pipeline vs trucks; pipeline construction has not slowed down.
    – fracking costs are much higher in the winter (>$200000), e.g. to heat the water

    The most surprising statements to me are:
    1) rigs drilling 2 wells per month. Although this may happen on occasion, the average so far, also recently, has been much lower (1.1-1.3 wells/rig/month).
    2) May wells being 25% better than a year ago. So far the data has really not supported that, especially not on the EUR, but we can probably verify that better in the coming months. It would be an amazing development, although of course some high grading effects are to be expected as drilling on the fringes has stopped.
    3) Being able to keep production at 1.2mbod for 2 years with the current fracklog and 73 rigs. This just doesn’t add up, unless he is right about wells being so much better. If we assume the fracklog can be reduced with 600 (which I think is about the maximum number, as a working level is still required), and use Helms’ own projection of 80 new wells per month from the current rigs, the maximum number of well completions a month is 105. So far several simulations, including Helms own, have shown that a higher level of new wells are required to keep production at 1.2mbd.

    • AlexS says:

      Thank you, Enno, for the link and your comments

      • Enno Peters says:

        You’re welcome Alex, I much appreciate your excellent posts as well.

    • Watcher says:

      This concept of having to frack drilled wells because of a time limit . . . what would a lender think of that?

      The loaned money is already spent drilling. Not clear it was loaned money, vs capital, that paid for the lease and started the clock. Meaning, when someone goes in to pitch for a loan their pitch would be stronger if they already have the lease. But the completion money will be loaned money and the oil that flows will not be priced high enough to repay the loan? So why do I, if I’m a lender, want that well completed with my money?

      This completing time constrained wells to get oil to flow at a loss seems pretty shaky to me as a lender. The company gets to claim “we are still producing oil even at these prices” and elevate their stock price, or try to, but for me as a lender, how can I want that well completed until it pays me back?

      “But the company will go under and you’ll lose your loan money!” It’s already lost. If you go under, everyone knows that oil is there. Someone else will come along knocking on my door for loans when price is better. Why do I care if it’s you?

  37. old farmer mac says:

    Back to Venezuela for a minute.

    I copied this from Fernando’s blog. He copied it from a military think tank publication. Being our resident hard core right winger ( LOL ) I tend to find such sources more creditable than some others who hang out here.

    xxxxx

    The author, Dr R Evan Ellis is a research professor at the Strategic Studies Institute. I’m going to quote a couple of paragraphs from his study so you can see what experts within the U.S. Military intelligentsia are seeing:

    “The current regime in Venezuela is locked in an economic and political death spiral from which multiple reinforcing dynamics make it difficult to escape calamity. During 16 years of “Bolivarian socialism,” anti-business policies including expropriations, price and currency controls, government corruption, and skyrocketing crime have destroyed virtually all productive activity in the country outside the oil sector. In agriculture, where producers battle government-encouraged land invasions and outright expropriations, difficulties in obtaining foreign currency to purchase supplies, and demands from government purchasing agents for kickbacks that must be paid in scarce dollars, production has collapsed, and the agriculturally rich, tropical country must now import almost three-fourths of the food that it requires to feed its people, with the result that, as the government’s foreign currency runs out, Venezuela’s poor find it even harder to eat.

    xxxxx

    Change is coming to Venezuela in the not too distant future. What this means to international oil markets over the next few years is one huge question mark. A revolution in Venezuela is baked in, but it might yet be a few years arriving. And after that, it will take a while to work out the deals that will be necessary to get investment flowing into the country again. And after THAT, it will take some substantial amount of time to actually DO SOMETHING in the oil fields..

    I know nothing more than I read in such forums as this one about actual oil field ”hands on” work but it appears to me that it will take at LEAST three years to get things back on track and working properly again in the Venezuelan oil industry AFTER the political problems are solved.

    It seems unlikely to me at least that Venezuelan oil production can be increased substantially in less than five years under even the most optimistic scenarios.A decade appears to be a more realistic estimate.

    • Jeffrey J. Brown says:

      It seems unlikely to me at least that Venezuelan oil production can be increased substantially in less than five years under even the most optimistic scenarios.A decade appears to be a more realistic estimate.

      It’s interesting to review Iran’s production before and after the Iranian Revolution and the Iran/Iraq War. They were producing 5.7 MMBPD (total petroleum liquids, BP) in 1977, and they fell to 1.3 MMBPD in 1981. By 1987, they were only up to 2.3 MMBPD.

      This would also be a scenario to keep in mind for some other countries, e.g., Saudi Arabia.

      • Anon says:

        Iran is different in that the Shah pursued an utterly insane extraction strategy. It’s hard to say what a properly exploited Iran could sustain since that was such a blow-off followed by a revolution and rock-bottom prices. Obviously this is why everyone is bullish on the IOC’s going back into Iran.

        Venezuela has never produced to its maximum capacity because of the repeated industry and political upheaval down there. Two disastrous nationalizations, a lengthy oil bust with them being high-cost, and the current deluded socialist mismanagement. Their reserves are both huge and unconventional/expensive. I have no idea what a proper capitalist extraction at sustained high prices would achieve. It might get to those 4m+ bpd targets they like to claim in their glorious socialist media. Tellingly, the IEA never has them contributing much more than they already do to future global supply.

        Future supply (excluding Kashagan, which was supposed to be CURRENT supply…) is always coming from three sources:

        — North American unconventional (tar sands and fracking)
        — Iraq
        — Brazil

        With prices in this coffin corner (need high-cost production but economy can’t justify it), North America is going to slow down and US fracking will outright peak. Tar sands won’t peak because of how that is extracted (almost indefinate low amount extraction and you can’t crash build it).

        Brazil is basically a bust. The pre-salts are too technically difficult and Petrobras is the epicenter of a huge corruption scandal. No new production expected through 2020.

        Iraq…well, ISIS. And they don’t have virgin reserves that will allow them to surge to Saudi Arabia in size like some garbage predictions had.

        So where’s it gonna come from?

  38. shallow sand says:

    coffee. I’m not upset with you, you are not interested in $$ and cents stuff that much.

    Oil and gas has been boom and bust since it began.

    The industry had a really good run from late 1999 to mid 2014, interrupted by just a few bumps in the road.

    I do not know anything about gas, nor LNG. I do know for many years oil and gas traded at about a 6 to 1
    ratio. That means gas has been stuck between $12-$30 since 2008 on that basis.

    If oil were to do that, we and almost all other US based producers will be out of business. At sub $30 we would shut down almost all our leases down after a couple months of trying to figure out what happened to the price. After a few months of that, I guess we would have to start plugging out the field, which would be a shame. There is still many years of oil in those wells.

    I am amazed at the ability of gas production in this country to increase at such low prices.

    Maybe oil will keep increasing too at low prices and we will have to live with sub $50 prices for many years.

    I guess those of us who own oil wells hoped that we would not return to the late 1980s and 1990s, which were a very bad time for the upstream oil industry.

    There is a drive I make from time to time and have since I was a kid. In the early 1980s a lot of wells drilled there. Must have been high LOE because in the late 1980s most were shut in. Some plugged. Some were not.

    In the last few years, I saw that area come back to life. Mostly abandoned wells being put back on.

    Drove through there recently. Most of the wells are shut down again. Hate to see that, but this is one of the most risky businesses around.

    The community college near here really pushed their oil and gas tech recently. They had the program during the 1980s boom, only to see it fall apart. Looks like that will happen again.

    Commodities are a tough business due to price swings and cycles. I have followed the price of oil closely since 1997. I did not see this coming. If I did, several leases I would have sold a year ago for a very high price, and then would be in much better shape with the low cost ones left. But I’m not alone. The rest of my family didn’t see it. Nor did shale. The majors did, but I’ll wager not to this extent.

    We will be ok. If we drop below $40 in the field for more than a couple months we will talk to land owners, see if they will work with us. We could then maybe lay off a couple guys if we shut enough in. Hate to do that.

    2008 was a much bigger drop, a record that will likely stand for decades. This one looks like it will be much worse.

    • AlexS says:

      shallow sand

      You say that “2008 was a much bigger drop, a record that will likely stand for decades. This one looks like it will be much worse.” Do you mean that this time low oil prices could stay lower for longer than in 2008-09?
      Also, how, on your estimate, operating and drilling/completion costs for US conventional oil producers compare with the 2008-09 period? Are they significantly higher today?

      WTI oil price in 2014-15 vs. 2008-09

      • AlexS says:

        I personally think that this time prices will stay at relatively low levels (below $75 for Brent and $70 for WTI) for several quarters. But they are unlikely to test this year’s lows again. And eventually, most probably from 2017, the market will tighten again. By 2020, the market will be significantly tighter. The US conventional oil producers and most producers worldwide will survive, as they did in 2008-09. But a lot of costly projects will be postponed or canceled. I am much less certain about LTO producers.

        Below is the chart comparing monthly-average WTI oil prices in 2008-10 and 2014-15, with EIA forecast to Dec. 2016

        • shallow sand says:

          AlexS. I should have been more clear.

          2008-2009 was a much steeper drop, from an all time high of over $140 per barrel WTI to a low near $30 WTI. However, OPEC cut production considerably and prices rose quickly. 2010 price average was in the high 70s WTI. I don’t foresee that.

          No OPEC cut this time and instead OPEC rapidly increasing. US millions of BOPD over 2008-2009. No sign of significant production cuts in US yet.

          Duration is why this time will be much worse.

          I care about the P & L. OPEX is up from 2008-2009. Down from 2014, but not much.

          Looking at things annually. For us at least, this year set to be worse on P & L than 2009. Likely will be worst since 1999, if prices stabilize or fall from here.

          OPEX is about 4 times what it was in 1999. Maybe we are just bad operators, but I did compare OPEX for Exxon from 1999 to 2014 from 10K and found per BOE it went from the $3 range to $12 range.

          • AlexS says:

            This is not your fault, this is cost inflation.

            Oil & Gas drilling and extraction cost index (January 2000 = 100)
            Source: U.S. Bureau of Labor Statistics

            • daniel says:

              Worrying/Interesting that the extraction COSTs are aleady on the rebound. Anybody have a good explanation for this?

            • shallow sand says:

              AlexS, once again thanks! What do extraction costs include? Wish we experienced a drop like that shown. Must include more than what I consider OPEX or LOE.

              Does look like around 400% since 2000 till the recent drop.

        • shallow sand says:

          Did read article in WSJ this morning that shale oil producer secondary offering shares are generally below the issuing price and institutional demand for more has dried up. Article also stated US bank regulators have deemed many energy loans substandard.

          • clueless says:

            SS – I am convinced that patience will win out – even if it is forced patience. About 1 1/2 years ago, Bloomberg had a list of the top 25 future oil projects that were planned. Virtually every one required a price over $100/bbl., and in some cases substantially over, to have economic viability. [Jeffrey Brown is the best resource for why, even if demand falls, supply will fall faster.]
            There will be another shock. Commodity pricing is different, and almost no one understands it. Suffice it to say, that if there are four gold shops on the four corners of an intersection, they all have the same price for gold [in fact, everyone in the world on a specific day has the same price. Price collusion -NO! Commodity pricing.] Analogy: You are taking 4 billionaires on a 7 day camping trip. You made an error, and only have 3 rolls of toilet paper for the 4 of them. So, you decide that the only fair way to give them out is to auction them off. I have no idea, but assume each roll is worth $1. What would be your guess as to what the last roll goes for?
            So, you are working for a major oil company, and you are in charge of an offshore drilling a prospect that is costing $600,000/day to run. It uses 5,000 gallons/day of diesel drilling. At what price for diesel fuel do you shut it down? $5/gal? – $$10/gal? $15/gal? Answer: Never! You are the highest cost marginal user, and since everything that the project discovers is getting more valuable by the day, you will never substitute electric, wind or solar power.
            Good luck.

            • shallow sand says:

              clueless. Yes. I just complain here to spare family, etc. Hope it’s not wearing too thin.

          • John Keller says:

            Well, something else happened yesterday. Swift Energy tried to float a Second Lien Offering to pay off their credit line. The deal didn’t fly and the stock is now trading like the company is going to go BK. I think this is a watershed moment. A giant bell is ringing. The window for oil and gas financing from non-pe guys is officially closed. The stocks are now reflecting that. I think we will see an acceleration of bankruptcies as companies can no longer sell subprime paper to keep drilling. Plus, the October redeterminations should be much tougher than last April’s. The bankruptcies should prove to the banks that their senior position is not so secure when it is backed by worthless shale acreage. The recoveries in bankruptcies will be minuscule. Shale was subprime 2.0. Wall Street pumping and dumping worthless paper. Investors are finally learning that they were sold 100’s of billions of dollars of wampum.

  39. old farmer mac says:

    Off the immediate topic, but relevant to the larger discussion:

    http://newsdaily.com/2015/07/genetically-modified-diamondback-moth-offers-pest-control-hope/

    I hope and pray to sky daddy that the environmentalists of the world wake up and quit believing in a religious sense that genetic engineering is an intrinsically dangerous technology. In actuality it is one of the relatively few technologies that offer some real hope of softening up the inevitable crash headed our way.

    A person would have to be optimistically naive to believe that GMO’s and pest control tech based on GM is perfectly safe. Only an idiot would ever argue that ANYTHING is perfectly safe.

    Safety is always a relative concept. Driving eighty is very risky but justified if you are transporting an accident victim about to bleed out to a hospital.

    GM tech is our very best hope for cutting back on the use of chemical pesticides which are doing PROVEN enormous harm to the overall environment, and will not only continue to do so but probably do even MORE damage as time passes and we grow collectively more desperate in the race between population and food production.

    Such technologies as are collectively referred to as ” sustainable ” are not going to work when it comes to feeding seven billion plus people in the near to midterm. They might work like a charm AFTER the crash headed our way – but the crash it self is sure to do more irreparable harm to the environment than GMO foods ever will – I say this as a pro when it comes to agriculture and semi pro when it comes to the environment.

    Environmentalists can be incredibly stupid- or devious – when it comes to recognizing the reality of the cards on the card table of our collective existence. NATURE DOES NOT DO REDEALS, redeals are not included in the rules. WE play the cards IN OUR HANDS.

    So – we are NOT going to quit industrial farming because that would mean literally insoluble social troubles, starting with running out of pet food and ending with wide scale human starvation. We are not going to quit using synthetic fertilizers and pesticides- although in principle WE COULD – if we were willing to pay high enough prices for food and eat way down the food chain pyramid – doing with very little meat etc.

    BUT that would mean VASTLY expanding the acreage under cultivation – and every additional acre put to the plow in means one less acre of forest or undisturbed savanna or jungle. Pesticides and synthetic fertilizers are paradoxically the better deal for the environment -FOR NOW at least, given the cards in our hand. Later on with the population declining, there will be hope of using less of both. Right now our only real hope of using these nasty chemicals in lesser amounts is mostly dependent on genetic engineering – like it or not.

    Biologists and environmentalists tend to thing inside a goddamned box limited to strictly environmental inputs and generally think half the time as if human beings are not part of nature. Hence a lot of our regulars poke fun at religion – which is ironic and amuses the hell out of me as they do not poke fun at our tendencies toward territorialism or nepotism etc etc etc.

    The larger box generally overlooked ( deliberately ?) by anti GM forces includes everything bad right up to a flat out NBC WWIII that will wipe out most of the larger animal and plant species on this planet as well as millions of smaller ones confined to particular geographical areas. Such a war might even wipe us tailless monkeys out but given that we are so widely dispersed and adaptable if any mammal survives it will be the tailless monkey.

    Some people laugh at me sometimes when I say the continuation of business as usual is an absolute necessity, but WITHOUT business as usual, outright collapse happens TODAY. WITH bau, we have some hope of deploying enough renewable and sustainable tech on a wide enough scale save a substantial part of the environment, not to mention industrial civilization, that will otherwise be destroyed in the process of collapse -IF WE WORK FAST enough.

    The TIME FRAME, the window of opportunity , is the KEY single variable in my estimation. We have a little time left. With business as usual , we have an opportunity to make use of that time before the fecal matter hits the fan hurricane fashion.

    I am not happy about the possibility of being taxed to rebuild millionaires beach houses but it would be a wonderful Pearl Harbor wake up event if the biggest hurricane in known history were to take out about four or five hundred miles worth of waterfront vacation houses and hotel rooms. With todays weather forecasting there would not be many lives lost- and nearly all of the ones lost would lose due to losing the Darwinian lottery, not being smart enough to evacuate.

    ( On the flip side , I would go to EXPERIENCE the storm if free to do so but I would be damned careful in selecting my vantage point and in taking along enough food and water etc . )

    Bricks of this size up against our collective head may be the smallest ones big enough to get our collective attention.

    • MarbleZeppelin says:

      Hey OFM, that hurricane already happened, it was called Sandy. Huge amounts of damage along the coast and inland. It did very little to change the general attitude toward things. Just some plans to spend huge amounts of money to try and save the city areas from storm surges, and very little of that was done.

      • clueless says:

        Sandy WAS NOT a hurricane. It just showed the amount of damage that can be done by a storm that hits areas that built to close to the ocean.

        • MarbleZeppelin says:

          Clueless you are talking out of your ass. The freaking National Weather Service predicted it to lose strength but it didn’t. Much of the damage done was way above sea level, far from the ocean. I was there. Trees that had stood since colonial times were knocked down. Houses and cars crushed.

          Hurricane Sandy (unofficially known as “Superstorm Sandy”) was the deadliest and most destructive hurricane of the 2012 Atlantic hurricane season, and the second-costliest hurricane in United States history. Classified as the eighteenth named storm, tenth hurricane and second major hurricane of the year, Sandy was a Category 3 storm at its peak intensity when it made landfall in Cuba.[1] While it was a Category 2 storm off the coast of the Northeastern United States, the storm became the largest Atlantic hurricane on record (as measured by diameter, with winds spanning 1,100 miles (1,800 km)).[3][4] Estimates as of May 2013 assessed damage to have been over $68 billion (2013 USD), a total surpassed only by Hurricane Katrina.[5] At least 233 people were killed along the path of the storm in eight countries.[2][6]

      • old farmer mac says:

        YES. ”The ” hurricane already happened. Now we need two or three more in short order to get the attention of the monkeys. ONE brick is NEVER enough to get the attention of stupid people, and humanity is collectively as stupid as a fence post.

        If we are to experience a collective awakening, we need lots of bricks upside our collective head. Hopefully we will get them without any particular one hurting us so bad we cannot respond in a useful fashion once we wipe the blood out of our eyes.

        • MarbleZeppelin says:

          Changes in society are now dictated by business and government. Don’t look to the citizens to make mass changes. That power was removed over the last six or seven decades. Stick with trying to make smaller local changes.

        • MarbleZeppelin says:

          I have a really good one for you old farmer.
          https://archive.org/details/JeanShepherd1965Pt1
          Go to #27 (Rise of the Neanderthal) and move the slider to 24 minutes once it starts.

    • TechGuy says:

      OFM wrote:
      “GM tech is our very best hope for cutting back on the use of chemical pesticides which are doing PROVEN enormous harm to the overall environment”

      Unfortunately most of GM tech is making crops herbicide resistant so more crops are more tolerant to chemicals and more disease resistant using immunity genes from humans and mammals. There is also the risks of Klebsiella planticola happening in the wild:
      http://www.donabee.com/health/klebsiellaplanticola.htm

      As far as pest control via GM’s pest. I doubt it will work and very likely back fire causing more problems. I remember in the late 19th and early 20th century, Human deliberately introduce foreign species to control another species that was deemed a pest. I am pretty sure in every deliberate foreign species introduction case, it completely back fired causing long term harm and problems that still persist to this day. Its very likely the pests will mutate in the wild that have unforeseen consequences. Its very easy to release new species into an environment, but damn near impossible to remove them.

      There are ways to control pest without the use of pesticides are herbicides, but they are more costly and labor intensive to implement. Human’s simply prefer quick, easy and cheap solutions to problems.

      • old farmer mac says:

        Hey Tech Guy,

        I am NOT argueing that genetic engineering is entirely safe – or that the many chemicals we use are safe in any absolute sense or even safe ( necessarily) in terms of our own health.

        You raise some valid points.

        My argument is that COMPARED to our currently existing REAL WORLD alternative options , they are our best options going forward for the foreseeable future.

        I can and have personally grown just about every thing that grows locally using zero manufactured inputs, but only on an extremely small scale. Half a dozen cantaloupe seed dropped in the ashes of a brush wood fire for instance. (We burn brushwood to get rid of it. I sometimes get a few lopes that way. Sometimes you plant a small patch of something and just never get back to it due to being too busy or too lazy as the weather heats up.) The PROBLEM with this sort of farming is low productivity per acre and per man hour invested.

        In the real world where most of us live in places unsuitable for farming and have zero interest in moving to the boonies and adapting to the impoverished peasant lifestyle, we will continue to do it the way we do it now – until we can’t anymore. I certainly acknowledge that time is coming – eventually. It won’t come anytime soon in the western countries.

        My personal opinion is that GMO foods are on the way on the grand scale and that NOTHING will stop their adoption due to the coming food crisis – which is going to be brought on by resource depletion and growing population. Fertilizers, insecticides, machinery etc are already out of reach for lots of third world farmers supporting populations on the ragged edge of starvation – one really bad year would put tens of millions over the edge and sooner or later that year will come, on a continent wide basis. Two in a row would mean starvation by the hundreds of millions.

        PESTS ALWAYS EVOLVE RESISTANCE…. This is a fact of life and we live with it in my industry. A farmer is sort of like a sailor. A sailor can NEVER DEFEAT the sea. He can only fight it to a draw one voyage at a time. We will go back to older strategies when we have to- but not until we have to.

        Few laymen or lay environmentalists really understand the BIG picture when it comes to a question such as the use of herbicides. It is TRUE that they are bad for the environment – but SOIL EROSION IS WORSE. Herbicides and herbicide ready crops conserve water and soil and fertilizers to an astounding degree. And the fact that a weed evolves resistance to a particular herbicide means virtually NOTHING beyond the fact that the herbicide will not control that particular weed any longer. Such weeds are NOT ” super weeds” in any other sense.

        Take away my ( rhetorical sense, I AM RETIRED ) herbicides and I will be plowing and cultivating four times as much, burning four times as much depleting oil and losing topsoil to erosion many times faster.

        Introduced species virtually always cause problems sometimes extremely bad problems. But we introduce a thousand by accident or design ( pet and ornamentals trade for instance ) for each one introduced intentionally by farming interests.

        We do what we can and must to survive as businessmen one day at a time. If any body is interested in paying me ENOUGH I can provide some of their food, anything that grows in my geographical area, using no fossil fuels or chemicals at all excepting what is needed to manufacture some hand tools.

        Such food is extraordinarily expensive.

        Any thing we do to live the good civilized life destroys some part of nature. Hydro electricity wipes out fisheries in some cases. It floods a valley killing everything in it except whatever lived originally in the stream impounded perhaps.

        It’s all one big trade off. Pesticides , tractors, herbicides and ten ten ten are among your best friends. This doesn’t mean they are harmless by any means. It does mean you get to be whatever you are rather than spending your life grubbing in the dirt within a mile of your birthplace and dieing all crippled up from extreme hard labor in your thirties. 😉

        • TechGuy says:

          OFM Wrote:

          “PESTS ALWAYS EVOLVE RESISTANCE…. This is a fact of life and we live with it in my industry. A farmer is sort of like a sailor. A sailor can NEVER DEFEAT the sea. He can only fight it to a draw one voyage at a time. We will go back to older strategies when we have to- but not until we have to.”

          I agree with most of what you wrote. I suspect that Pests are quick to develop resistant because farmers use the same pesticides over and over because it easy and convenient, also making easier for the pests to adapt. I believe if the rotated crops and rotated pesticides more often it would keep the pests tripping and make it much more difficult for them to adapt. I don’t think we can total eliminate pesticides, but I suspect they could be reduced significantly, with a better planning and implementation. Most crops also rely on pollinating insects which are harmed by the pesticides too so there are limits to the use of pesticides. I believe is matter of moderation and common sense. Applying excessive amounts of agra-chemicals is like a person gorging themselves into obesity.

          That said, the West has a huge problem with farming. No Young people to replace aging farmers. I believe the average age of farmers in the West is now above 60 years. I’ve bumped into farmers that are 80+ and still farming (simply amazing!). Kids left to go find “easier” jobs. I can’t imagine a lot of these guys hanging in there, especially with the increase use of herb/pesticides that has to be affecting their health. I suppose the West could import farmers from overseas, but its likely farming immigrants may decide to switch to easier occupations once they arrive. 100% of humans are dependent on food supplied by less then 2% of the population that is reaching retirement age or is already past retirement age.

          FWIW: I thought about designing a machine that can travel down crop rows and apply MQP (Minumim Quantity pesticides). and spray under the leafs so that the pesticide is retained longer on the crops instead of going into the ground after the first rain storm. I think insects can be detected using Infrared (more research needed). Perhaps its possible to set up a system that can detect plant infestations and spray affected areas instead of saturation spraying.
          It make be possible to use the same robotic platform to harvest some crops. For instance beans can produce multiple harvests per season if they are hand picked.

  40. MarbleZeppelin says:

    OFM says “Some people laugh at me sometimes when I say the continuation of business as usual is an absolute necessity, but WITHOUT business as usual, outright collapse happens TODAY. WITH bau, we have some hope of deploying enough renewable and sustainable tech on a wide enough scale save a substantial part of the environment, not to mention industrial civilization, that will otherwise be destroyed in the process of collapse -IF WE WORK FAST enough. ”

    I agree completely with that point. However much I try and pound that point home here, it falls on deaf ears.

    • Dennis Coyne says:

      Hi OFM and MZ,

      I also agree we need to maintain some level of BAU, but would like to see less wasteful consumption and a gradual shift to something more sustainable. On GMO’s etc, I think we should be careful, often there are unintended consequences that make problems worse, so that the cure is worse than the disease.

    • clueless says:

      My ears are almost deaf, but not quite gone yet. I also agree with OFM. I think that it is because of the “O” in OFM. Maybe we should have been born Chinese or Japanese where they listen to the “O” people [or, at least they used to].

      • wimbi says:

        Yep, and before we quit talk about GMO, pest control , artificial fertilizer and all that,etc etc, we should take a hard look at East Asia ag, which fed lotsa people for a couple of millennia with nothing else but hard work and using/recycling everything.

        We have been on this ridge for 65 yrs, our big garden is very productive. Never any ff’s in any form on it. Ever. Lotsa hard work.

        And we ain’t dead yet.

  41. Ronald Walter says:

    Sandridge Energy is at 70 cents per share today. It had a 7 dollar share price a year ago or so. It’s off some ninety percent. One stellar stock, one heck of a buy. It just don’t get no better. They’re in disposition mode, nobody wants any of it.

    WLL, Whiting, is under 30, CLR is at 37, STO is at 17 and change.

    No one is generating any sympathy for the oil companies.

    A few crocodile tears for those debt-laden profligate oil companies need to be shed.

    Oil at 51 is a good thing. More oil from OPEC is good, helps lower the price some more.

  42. ezrydermike says:

    The Rockefeller Foundation–Lancet Commission on Planetary Health

    Safeguarding human health in the Anthropocene epoch: Report of The Rockefeller Foundation–Lancet Commission on Planetary Health

    http://www.thelancet.com/pdfs/journals/lancet/PIIS0140-6736%2815%2960901-1.pdf

  43. ezrydermike says:

    STATE OF THE CLIMATE IN 2014

    Special Supplement to the
    Bulletin of the American Meteorological Society
    Vol. 96, No. 7, July 2015

    http://www2.ametsoc.org/ams/index.cfm/publications/bulletin-of-the-american-meteorological-society-bams/state-of-the-climate/state-of-climate-in-2014/

    • Ricky Monon says:

      Oh no, is that a Michael Mann Tree Ring Circus hockey stick graph I see on page 3? Oh, lordy, lordy, the sky is falling and we’re all gonna die from the climate change. Unless we all tunnel under those mountains of coal where it’s safe. Don’t forget your SPF-15 CO2 blocking lotion.

      What is your point in posting this political propaganda? Typical mindset of these climate change researching scientists in the report: O <– this is a square, O <– this is a square, O <– this is a square, O <– this is a square. What is this "O"? Did it work yet? Are you buying it? 99.99945% of all scientists in the entire American Meteorological Society universe agree with the "science" they made up, so it must be true. "If they know, so shall it be!" And the frightening thing is they can convince 51% of the electorate to listen to them…

  44. Rune Likvern says:

    For reasons of space I have moved the continuation of a discussion further up into a new thread.

    The chart below shows the probability distribution for 12 months LTO totals (Bakken, MB/TF) for wells by vintage (2014 wells started as of June 14 (data as per May 2015), and this distribution is expected to move slightly upwards as data for the remaining year are published).
    It clearly shows some improvements in well productivities with time.

    Question is will this distribution improve (future curves move upward) as fewer wells are added as the companies target the remaining of the sweetest spots? And if so, by how much?

    Looking at the data for 15 of the biggest companies (by production in Bakken), quality of their acreage, developments in their well productivities and how many rigs these now operates (in Bakken) raises my expectations that the probability distribution will not change much.

    The distribution shown for vintage 2014 show that at present prices ($52/b WTI, and provided these remain) around 10% of the wells should be expected to become profitable.
    So far the wells started in 2015 performs very much like the 2014 vintage.
    What also remains to be seen is how the newer wells perform as they age.

  45. Rune Likvern says:

    Some time back someone asked for a plot of monthly LTO versus total LTO.

    Below is a chart where 7,700 wells have been divided into categories (first 12 months totals) of productivity.
    These kind of charts may be helpful to understand total EUR from LTO (and other) wells/fields.
    There is an economic cut off for all wells (where revenue from production does not cover OPEX, taxes and royalties).
    For Bakken, and as of now, around 7-8% of all the wells may go beyond a total EUR of 400 kb LTO.

    • Mike says:

      Mr. Likvern, thanks for all this. Statistically then it does not appear that weighted EUR for the play will increase with fewer wells. This seems to contradict Helm’s statements, as Enno points out, above. I do not fully understand from an operational standpoint how a simple retreat to core areas could result in a 25% increase in 2015 IP’s, but we have been able to say in the past that higher IP’s don’t necessarily translate into better EUR’s. I would suggest that the remaining rigs now running in North Dakota are hammering the very sweetest of sweet spots very hard.

      Lastly, I concur with Shallow’s assessment regarding the BO that must be produced to pay out drilling and completion costs of a typical Bakken well. It is 385-400,000 BO, no way around it. The fact that only 8% of wells currently being drilled might reach that recovery rate, at current prices, is astounding.

      Though completed wells in the Eagle Ford are generally cheaper, their EUR’s, at current prices, are far less than Bakken wells, in my opinion. So I believe the picture down here is even bleaker.

      Thanks again for your efforts.

      Mike

    • Rune, I wonder if the rate of change at any time (dQ/dT) versus Q is similar for all of these wells? I’m just wondering, don’t bother to answer if you think the question is stupid.

      • Rune Likvern says:

        Fernando,
        One observation (estimates) I made from producing the monthly versus totals is that “poor” wells decline slower than “good” wells. This has been observed over several years using other approaches.

        This may be of interest for anyone who ponders buying “old” LTO wells which companies want to get off their books. This may appear counterintuitive, but comes with a lot of financial logic and at the end of the day it is about profitability.

        Anyone understanding the workings of Net Present Value, NPV, should also be able to identify what I refer to as “added magical” barrels and sort the wells according to their potentials for such.

  46. Frugal says:

    Anybody dare to guess what will happen to Iranian production once the sanctions are lifted?

  47. old farmer mac says:

    I would also like to make one more response to Nick who commented up thread someplace about my insurance problems. I have coverage now and the last time I was at the hospital I had coverage THEN- this was some years ago. The job was a poor one but all I could find at the time, and very easy, so I took it.Daddy was still able to look after Momma and himself for ten hours or so at that time and some income was better than none. It paid peanuts but it did have insurance – with a two thousand five hundred dollar annual deductible.

    If I had not been so dumb as to inform the hospital I had insurance they would have cut the bill in HALF due to my piddly income at that time. If I had told them I was unemployed they would have cut it even more without even checking.

    BUT SINCE I HAD INSURANCE THEY WOULD NOT GIVE ME A DIME OFF.

    The reason I bring this sort of stuff up occasionally is to try to get those on the leftish end of the political spectrum to walk a mile in the shoes of working class people who vote the right wing ticket.Calling names except when every body is laughing together accomplishes nothing except hardened attitudes all around.

    Laughing at somebody who is ignorant -if that person grew up in an environment that encouraged and allowed him the opportunity to be well educated is somewhat justifiable but maybe not very wise.

    Laughing at people who lacked this opportunity is just plain stupid. They know they are being laughed at and resent the hell out of it.They vote accordingly – to their own material detriment a good deal of the time but at least to their personal satisfaction.

    I know of half a dozen of my neighbors every year going in and getting actual treatments for free. I got only a test for almost two grand. It pisses me off because in terms of free time and small luxuries they mostly live better than I do.

    Now let us change the subject a bit to the public relations machinations of big business -including advertising and the ownership of the media all interlocked with the companies that are fucking up everything except the lifestyles of the owners and management of said companies.

    As a general rule just about all of the regular commenters here see thru corporate bullshit as easily as we see thru a WELL WASHED WINDOW on a bright sunny day.

    NOW JUST THINK A MINUTE ABOUT THIS.

    Suppose each of us happened to be pretty much totally ignorant of the actual workings of the physical sciences, suppose we were just about totally ignorant of the way evidence is accumulated in the sciences , and things are debated long and hard until there is finally consensus on things that are accepted as FACTS based on experiments that are repeatable – for the most part.

    If we were ignorant after such a fashion, then we would just as naturally as the sun coming up ASSUME that climate scientists are as unethical as bankers, lawyers, car salesmen, corporate raiders , pickpockets, television preachers etc etc.

    Because when you get right down to the nitty gritty , how many of us have any REAL respect for just about any of the people who control any particular industry or business ?In my entire life I have managed to meet only about three physicians who impressed me as having any REAL concern for their patients – meaning concern that outweighed considerations of their own lifestyles. Certainly I met some who performed some procedures for free occasionally – but the next dozen times they charged enough to make up the freebies and still drive six figure cars and live pretty high on the hog all around.

    Life is a Darwinian affair. Working poor people who do not possess a technical education UNDERSTAND that life is a Darwinian affair, that the dentist who charges them two weeks take home pay to extract a tooth in thirty minutes or less is NOT their friend but rather more like an an enemy demanding weregild.

    WHY should they assume or believe that climate scientists are any less concerned with their own livelihood than a dentist or car salesman or criminal lawyer?

    As usual I am painting fast with a broad brush but anybody willing to THINK about what I am saying should get the point.

    • Nick G says:

      Mac,

      A couple thoughts.

      1st, I’m not sure how the question about insurance raised thoughts about party politics. Basically, you had terrible insurance – it pretended to provide coverage, but really didn’t. The hospital just assume that your insurance would do what any normal insurance does, which is heavily discount the bill, and then charge you a small co-pay. Cash discounts are a compromise – they’re always smaller than insurance discounts.

      The only partisan angle I see is that the Affordable Care Act (called Obamacare by Republicans, who incorrectly assumed that it would be a PR nightmare for Obama) tried to do away with bad, fake insurance policies like the one you had. The Business Community objected, of course.

      As for uneducated people assuming climate scientists are unethical….no. Really no. This whole conspiracy angle is just propaganda, made up out of whole cloth and propagated by Fox News, radio talk shows, etc. Uneducated people in other countries don’t think this way, for instance.

      I don’t blame uneducated folks for this. Heck, I know a lot of very educated folks who buy the propaganda. In fact, wealthy people tend to be far more misinformed than middle or working class, in my experience.

  48. Futilitist says:

    Hello Ron.

    I made a graph, but it will not post.

    I cannot seem to post any pictures. If I try to post a picture, it fails. After that, all further posts (no picture) also fail. I have to close peakoilbarrel and open it again in a new window just to be able to post anything at all.

    I tried to edit my picture into my previous post using [img] and now that post has been marked as spam and can no longer be edited. In fact, that post has now disappeared entirely.

    Please help. Thanks.

  49. Toolpush says:

    The EIA have just released the June numbers for Shale gas.

    http://www.eia.gov/naturalgas/weekly/img/ShaleGas-201506.xlsx

    Date,Antrim Bakken Woodford Barnett Fayetteville EF Haynesville Marcellus Utica Rest

    Apr-15 0.251 0.879 1.922 3.828 2.564 5.094 3.8 15.036 2.51 5.036
    May-15 0.25 0.876 1.933 3.794 2.536 5.09 3.804 15.058 2.583 5.055
    Jun-15 0.25 0.867 1.945 3.759 2.509 5.06 3.779 15.092 2.627 5.064

    I know the formatting will be dreadful, so it will be easier to download the excel file.

    My point is the two shale oil production zones, Bakken & EF with associated gas, rather than the dry gas areas, both show a decrease across the last 3 months. As these are associated gas numbers, you would expect the oil numbers to be following fairly closely?
    The reason I find this source interesting, is they are June numbers, where as most of the other official numbers, not projections, currently being released, are for May.
    These numbers are sourced from Drillinginfo inc, for what it is worth.

    • I would expect oil to decline a bit more than gas. In general, gas to oil ratio increases as the reservoir depletes. In extremely depleted reservoirs the trend reverses. But I haven’t seen a reservoir with such a reversal in over 30 years.

    • Rune Likvern says:

      Tool,
      Thanks!
      I would monitor how the Gas Oil Ratio (GOR) develops in Bakken.
      From the data you presented it appears to be on a downward trend.

  50. shallow sand says:

    Jotted down some historical debt and PV10 information re Contintental Resources, which some may find interesting.

    It is pretty amazing how both debt and PV10 grew for CLR. It is also interesting how low debt to PV10 ratio was at the end of 2007 and also much PV10 dropped due to price drop at end of 2008. At that time PV10 was calculated using the oil and gas price the last day of the year.

    Debt is total long term debt. PV10 is all categories standard measure, which means the effects of income taxes are included.

    2007. Long term debt $165.0 million. PV10 $2,582.4 million

    2008. Long term debt $376.4 million. PV10 $1,277.4 million. (Oil price used in 2007 was $85 and in 2008 was $39, which should give clue as to 2014 v 2015. 2014 was $95. )

    2009. Long term debt $523.5 million. PV10 $1,841.5 million.

    2010. Long term debt $926.0 million. PV10 $3,785.3 million.

    2011. Long term debt $1,254.3 million. PV10 $7,505.4 million.

    2012. Long term debt $3,537.8 million. PV10 $11,180.4 million.

    2013 Long term debt $4,713.8 million. PV10 $16,295.8 million.

    2014. Long term debt $5,995.8 million. PV10 $18,433.0 million.

    I also find it interesting that CLR has on it’s website 10K which go back to 1998 and that contains info back to 1994, even though it was a private company owned 100% by Harold Hamm at that time.

    In 1997 long term debt was $79.6 million PV10 $241.6 million. Oil price was $18 and change. In 1998, with oil price of just below $11, PV10 was $107.7 million. However, that included much more production as Mr Hamm made a gamble and bought a big chunk of Wyoming production, and borrowed to do it, increasing long term debt to $167.6 million, or well over PV10. Of course, his bet oil prices would rise was correct.

    I know I am critical of this company, at times, but actually I find it’s growth and story pretty remarkable.

    As can be seen, almost no debt in 2007 when went public. They had a large presence in MT and ND starting prior to 1998. Unfortunately, they didn’t lease the acreage EOG did.

    They key to where they are is the ability to acquire large acreage position in Bakken for low $$. Also,
    had very low debt at time went public, or more likely paid down debt with proceeds of money raised going public.

    Would be interested in any thoughts on this data. Appears to me they will have over $7 billion in long term debt when Q2 10Q is examined. Also believe PV10 will be about half at year end.

    To me, this data confirms the Bakken cannot be successful at current oil prices, and a few years of low oil prices will put the hammer to companies who are primarily based there.

    • Enno Peters says:

      Interesting ShallowS,

      Based on your data, if you divide PV10 by LT debt, you get 3 for end of 2014, which is the lowest since years (=>highest leverage). As you say, that doesn’t even include the major recent price drop yet, and Continental doesn’t seem to be eager to write does reserves down before it has to.

      Continental had a major increase in production in May in the Bakken (140 kbopd from 120kbopd in operated wells). With still 10 operated rigs running currently, I very much doubt they are already cash flow neutral, which was their aim by mid-year, but we’ll learn more about that in 3 weeks.

      I can’t help but think that Hamm increased his wager to an all-in on a bail-out, either by higher oil prices (which looks increasingly unlikely in the near-term), or by raising more equity. I think he is planning for the latter, as the number of authorized shares has been increased, and the increase in production together with some good new wells (target EUR: 800 kbo (call me skeptical), which also raises reserves) may wow investors. More debt doesn’t seem to be an option anymore. It’s pretty surprising to me that shares are still valued 2.85 times book value, despite the doubtful nature of that value. Increasing speed while heading for a wall apparently does count for something 🙂

      At least investors are recognizing Emerald Oil for what it is, and shares have dropped by 80% in the last 3 months (about the time I mentioned this company and the CEO who was still earning a nice 2 million $/year), and 99,9% since the high 10 years ago. It seems the company started as a media company with a focus on poker, which should have given investors some pause. I don’t think Continental R. is in the same dubious league though.

      I think this downturn will lead to some interesting business stories later.

    • Mike says:

      Shallow, you are very good at these kinds of analyses.

      I thank myself a lot for having sense enough to not get myself in the predicament these shale folks are in, then ask myself how I would get out of it if I had. It seems they are almost past the point of being able to deleverage much; I am not sure how much 100 dollar oil could help a lot of these guys anymore. I guess I would pray that Exxon came along and put me out of my misery.

      I have a favor, please. I recall 4 years ago Chesapeake being the poster child for over leveraged shale players with massive amounts of debt. The captain of that ship, you will recall, got put in a lifeboat and was set adrift. CHK then started selling stuff like crazy and I believe was retiring a lot of that debt. It has gone from 33 rigs running in the EF down to 2.

      Did stopping the cash outflow and deleveraging help them become a stronger company (PV10 to total debt) today than they were 4-5 years ago, or are they just as likely to eat the big enchilada as the rest of the gang? Thanks.

      Mike

      • shallow sand says:

        Mike. I’ll look it up sometime when I get a chance.

      • AlexS says:

        Mike,

        Chesapeake’s financials significantly improved over the past 4 years (before the drop in oil prices).
        The company:
        • Increased the share of liquids in total production,
        • Sharply cut capex, which helped to reduce negative free cashflow from $8.7bn in 2012 to $0.7bn in 2014
        • Reduced spending on acquisitions from $5.0bn in 2011 to $1.3bn in 2014
        • Sold assets worth $28.5bn in four years
        • That helped to reduce net debt from $11.8bn in 2012 to $7.4bn in 2014 and sharply reduce leverage ratios

  51. AlexS says:

    Saudis Pump Record Oil as OPEC Sees Stronger Demand in 2016

    July 13, 2015
    http://www.bloomberg.com/news/articles/2015-07-13/saudis-pump-record-crude-as-opec-sees-stronger-demand-in-2016

    Saudi Arabia told OPEC it raised oil production to a record as the organization forecast stronger demand for its members’ crude in 2016.
    The world’s biggest oil exporter pumped 10.564 million barrels a day in June, exceeding a previous record set in 1980, according to data the kingdom submitted to the Organization of Petroleum Exporting Countries. The group sees “a more balanced market” in 2016 as demand for its crude strengths and supply elsewhere falters.
    “Saudi Arabia is still pursuing a market-share strategy,” Torbjoern Kjus, an analyst at DNB ASA in Oslo, said by phone. “They need more oil domestically for air conditioning in the summer, so they could choose to either produce more or reduce exports. Clearly they choose to produce more.”

    • Watcher says:

      Ghawar vs the Federal Reserve.

      Who will win?

      Not really allowed to say “my money is on the Fed”. Too bizarre.

    • Synapsid says:

      AlexS and all,

      I like to remind myself that the amount of crude produced does not necessarily equal the amount available for export.

      Toolpush posted some information about Saudi Aramco suddenly (to me, anyway) putting up for sale a whole lot of diesel, and noted that this reflects refinery activity; that is likely to be activity at those new refinery JVs that SA has been engaged in setting up for some years now–they’re coming online. Saudi crude going into Saudi refineries is crude not available to go onto the world crude market, so it seems to me that it will not be contributing to putting pressure on oil price and thus on other exporters of crude, which is called Saudi Arabia’s approach to gaining and holding market share.

      Does the above make sense?

      • Saudi crude going into Saudi refineries is crude not available to go onto the world crude market.

        No, that doesn’t make sense. Saudi crude going to refineries would be able to go on the world market if it didn’t go to their refineries. But Saudi would very much rather the crude go to their refineries for two very important reasons.

        One, they make a lot more money off refined products than they do from crude oil. And two, the bunker fuel they have left can be burnt in their power stations. Bunker fuel is what they have left after al the good stuff, diesel, gasoline, jet fuel, etc., has been refined from the crude. Every barrel of bunker fuel they burn is a barrel of crude they do not have to burn.

        Saudi Arabia, in the past, has actually imported bunker fuel. They can buy bunker fuel for a lot less than they get for their exported crude oil.

        • Synapsid says:

          Hi Ron,

          My point was that the crude that SA refines will not be available to put on the market as crude–and the crude market is the one where they are supposed to be trying, in the name of market share, to suppress other producers such as US shale types.

          Sure, they’ll make more money selling refined products, as I think they should have been doing for decades, but that wasn’t what I was addressing.

  52. Homo Fossilfuelus says:

    Coal use is waning in the United states…for now.

    http://www.slate.com/articles/business/the_juice/2015/07/coal_vs_fossil_fuels_and_renewable_energy_why_the_dirty_fossil_keeps_losing.html

    NG is ascendent.

    Nuke seems to be on track to die a prolonged death over the next 40 years.

    Solar and wind electricity generation are growing.

    We in the U.S. could do a lot more to increase efficiency and manage demand to be lower.

    With the Iranian nuclear weapons deal, the potential exists for oil prices to stay at a moderate level.

    CAFE is programmed to increase as the years march on.

    If Vz can throw out the dictators and clean up its act, perhaps that could be another moderating influence on oil prices down the road.

    The financial system, really a proxy scorekeeper for the LTG, is overextended…’growth’ (even the fictional kind reported by the government/financial colossus) will likely be low in the coming years.

    Ay some point the Baaken and Eagle Ford etc. will decline…with no more salad daze on the horizon.

    Kind of looks like a confusing, low/no/de-growth muddle to me.

    Tis a shame about the population inertia and the parts of the World that still have not gotten the ZPG/managed population decrease program memo from nature.

    Japan’s population evolution is on the right track.

    Europe would do well to hold the line against ruinous levels of immigration, as would NorthAm.

    • Jeffrey J. Brown says:

      Italy PM threatens to ‘hurt’ Europe if other countries refuse to take more migrants – Telegraph

      http://www.telegraph.co.uk/news/worldnews/europe/italy/11673643/Italy-PM-threatens-to-hurt-Europe-if-other-countries-refuse-to-take-more-migrants.html

      Matteo Renzi, the Italian prime minister, has vowed to “hurt Europe” if other EU countries including Britain do not help tackle its migrant crisis. The warning came as Italian riot police were deployed to the Alps to disperse hundreds of men, women and children who were turned away from the French border.

      Mr Renzi said the EU’s response to the arrival of tens of thousands of migrants on Italy’s shores had “not been good enough”, describing a plan to redistribute less than half of those rescued this year as “almost a provocation”.

      He warned that the crisis “should not be underestimated”. “It is a serious issue and, let me be clear, Europe’s answers so far have not been good enough,” Mr Renzi told Corriere della Sera.

      “Redistributing just 24,000 people is almost a provocation,” he said. “If Europe chooses solidarity, good. If it doesn’t, we have Plan B ready. But it would first and foremost hurt Europe.”

      He did not elaborate on the details of the alternative plan.

      It comes as riot police were deployed on Saturday night along the Italian-French border after a group of around 200 migrants were denied entry into France. The migrants began blocking traffic, while others went on hunger strike in protest at the decision by French authorities.

      • This is exactly the thing that was discussed in the book The Camp of the Saints

        In one scene thousands of Chinese are massed on the Russian border wanting to immigrate to a far less crowded country. One of the Chinese is using a bullhorn to yell at the Russians guarding the border. The Russian General to one of his underlings:

        “Come, Zackaroff, let’s drink! And close up that peephole. I don’t want to have to hear that loudmouth! He sounds like a priest, and he’s getting on my nerves. Now that every last padre has his pen or his mike, you can’t even hear yourself drink anymore. Yes, it’s padre time, Zackaroff, that’s what it is. All over the world. They’re oozing out of every country. Thousands of everyday priest, ready and willing to poison the minds of millions of idiots. Bleeding hearts puking out gospels galore.”

        Jean Raspail, “The Camp of The Saints”.

  53. Watcher says:

    http://www.bloomberg.com/news/articles/2015-07-15/sabine-files-for-bankruptcy-in-new-york-amid-falling-oil-prices

    2.9 billion smackeroos.

    Interesting addendum. They merged with Forest Oil, giving rise to the presumption that the Apocalypse will mean companies merge together to be strong.

    Then AFTER the merger they declared bankruptcy. hahaha That is a twofer, two bankruptcies for one.

  54. Ronald Walter says:

    Increased production translates to more consumption. A price decrease, consumption increase, more production.

    I suppose as some wells are shut, some of those 925 wells to be frac’d will then be completed. A schedule will have to be on paper, follow a plan.

    Production of Bakken/Williston Basin is probably going to another new record and likely to be maintained as the wells in the line to be completed are in the hundreds.

    If the wells drilled have a doubled initial production, 73 rigs will be doing the work of 146 rigs that have low numbers for oil and high numbers for water, those days are over.

    The numbers the BNSF has on paper are about 1100 cars lower than what was on paper one year ago. Warren needs to invest some of that money and buy a pipeline or two, some of those petroleum cars fall off the track. Probably a broken rail or the expansion of the steel on a ninety degree day will make 550 miles of ribbon rail start to stretch some, it will bend severely.

    Warren helps get the oil to the destination by rail 35 to 40 thousand cars each month, 22 fall off of the main line and suddenly Warren has more trouble then has to handle the problem looking at losses and lost business. He might want to re-evaluate the priorities. Most of the time, Warren has good days, today isn’t one of them.

  55. Guy Minton, CPA says:

    I expected Texas production to be down significantly by April, in which estimation I did not include enough of those well still permitted in 2014. Based upon review of what, so far, has posted for May, it appears May will be a shocker when reported probably by Monday. Not nearly as much as a shocker that will sneak up on the world by the end of the year. The following are permits for the Permian and Eagle Ford through May of this year off the RRC site. No permit, no drill.
    Permitted 2014 Eagle Ford 5,613, permitted through May 2015 1,155
    Permitted 2014 Permian 10,966, permitted through May 2015 1,901
    Somewhat misleading as there has been a huge drop off in permits in the later months, especially for the Permian

  56. Enno Peters says:

    I make a call that the Middle Bakken formation in North Dakota peaked in Dec 2014. The Three Forks formation will probably not peak yet. It was already clear from the number of new wells per formation that the ratio of Middle Bakken vs Three Forks wells was declining over the last few years.

    Below you can see all of North Dakota’s production by formation (kbopd). Confidential production can be any formation, but even if it was all Middle Bakken, the peak was still last December.
    Three Fork wells produce on average about 15% less than Middle Bakken wells.

    • Enno Peters says:

      New wells per formation per year in ND

      • Watcher says:

        Oh look, no significant change to the slope of % of drilling going on MB vs TF (which one might call sweeter) over the past 2 years.

        So much for the companies retreating to the best areas.

  57. Watcher says:

    Semi curious question:

    There is talk of time constraints on getting wells completed lest, I guess, there are fines.

    But there is also talk about not just cheaper but more efficient drilling that is getting more than expected numbers of holes drilled with a declining number of rigs.

    I am suspicious of technological miracles that arrive at just the right time. And so:

    Question: Is there some tiered layout of development timing requirements. Like so many days after lease signature that you must drill a hole and then on top of that another requirement for oil flow so many days after that.

    Meaning, these increased numbers of holes drilled with fewer rigs . . . because companies have gotten efficient . . . is there a definition of “hole” in play? Can they satisfy tier 1 requirement with a 200 foot hole, and call the remaining 1.5 miles “completion”? Versus 2 years ago drilling the hole meant the entire 30 stage length.

  58. MarbleZeppelin says:

    Ron and others
    HUNTER GATHERER LONGEVITY
    Since this topic seems to come up a lot here and in many other places, I am posting the URL to a paper that clears a lot of the erroneous thinking. Most people think that a 40 year old primitive hunter gatherer was old, past the normal death point. Not true, the modal longevity is around 65 to 75 in the hunter gather types. Most of the error comes from averaging in child deaths, making the average lower than it is today and that is what people look at. Longevity back then was almost what it is today, with no modern medicine or other luxuries.
    Longevity Among Hunter-Gatherers: A Cross-Cultural Examination
    http://www.anth.ucsb.edu/faculty/gurven/papers/GurvenKaplan2007pdr.pdf
    I have only skimmed it but I hope this will promote some discussion down the line.

    Much of the modern life expectancy from birth gains come from lower child mortality, although lately an increase seems to be coming from life extending medications, at least in developed countries.

    The real question I have is what was the healthy lifespan of hunter-gatherers? Did they spend little time being unhealthy? So many of the ancient agriculturalists were diseased, as assessed from their skeletal remains, they may have unhealthy most of their life.

    • MarbleZeppelin says:

      As an adjunct to the longevity paper above, I finished Spring Chicken, Live Forever or Die Trying.
      A very good book that examines many of the myths about aging cures and discusses much of the modern scientific attempts to understand aging and increase healthy longevity. Well worth the read.

      He just missed one major point concerning a bimodal distribution involving insulin response in the population. I came across this problem over a decade ago and if doctors did testing for it we might just reduce the rate of several of the degenerative diseases.

    • Pretty good paper but you did not read it too thoroughly. Page 326:

      There is some variability among groups. Among traditional huntergatherers, the average life expectancy at birth (e0) varies from 21 to 37 years, the proportion surviving to age 45 varies between 26 percent and 43 percent, and life expectancy at age 45 varies from 14 to 24 years

      That’s about the lifespan I would expect.

      • MarbleZeppelin says:

        Exactly, life expectancy at birth averages in the children which is the one most quoted. Life expectancy is different than longevity. Take a look at Figure 3. For a number of the tribes it doesn’t zero out until 80 years old. Take a look at Figure 4 where frequency of death for accultured hunter gatherers crosses USA rates at 75 years of age.

        So the longevity of hunter gatherers is not far off from many modern countries and not far behind the USA. So to find 70 year old hunter gatherers would not be an unusual event, it would be fairly common. Which is much different than the erroneous myths promoted to the public through misunderstanding simple statistics and distributions.

        As I stated above I only skimmed the paper. It will take some time to fully absorb all the implications of this landmark paper.

        • MarbleZeppelin says:

          To possibly make it clearer, each of those life expectancy numbers is in itself representative of a distribution. The average male life expectancy in the US is now 75.9 years. That doesn’t mean you drop dead at 75.9 years, or my 86 year old neighbor who still gardens and does carpentry would have passed ten years ago. The 75.9 years is an average of individual longevities. So some other people had to die in their fifties and sixties to compensate for those that live into their 80’s and 90’s.
          Things are changing quickly though.
          “More Americans are living to 90 and beyond, and by 2050 their ranks could reach almost 9 million, a new U.S. Census Bureau report finds.

          In fact, the number of nonagenarians has nearly tripled — from 720,000 in 1980 to 1.9 million in 2010, researchers found.
          • Average life expectancy for a 90-year-old today is 4.6 years vs. 3.2 years in 1929-31. Those who live to 100 have a life expectancy of another 2.3 years.
          • Most (85 percent) of those 90 and older say they have one or more physical limitations. About 66 percent have difficulty walking or climbing stairs.
          • Nearly 20 percent of those aged 90 to 94, 31 percent of those aged 95 to 99 and 38 percent of those aged 100 or older live in nursing homes, compared with about 3 percent of those aged 75 to 79.
          • Women 90 and older outnumber men by almost three-to-one. From 2006 to 2008, women made up about three-quarters of those aged 90 and older.
          • Whites make up 88.1 percent of those aged 90 and older. Blacks make up 7.6 percent, Hispanics 4 percent and Asians 2.2 percent.
          • The annual average income for people aged 90 and older was $14,760. Men had a higher income than women — $20,133 vs. $13,580. Social Security made up about 48 percent of total income.”

          So if you can’t walk or move much, it’s best not to be a hunter gatherer. Or maybe it is.

  59. Ronald Walter says:

    clothes food shelter fuel is all that is required to exist, what really counts.

    Money doesn’t count anymore, it’s worthless.

    If you want to believe that 19 trillion in debt is normal, you’re nuts; you’re brainwashed, the propaganda works.

    Pronghorn and Lewis and Clark

    Fernando is a 21st century Joe McCarthy.

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